Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Chapter 14 – Products and Services for Businesses
Discussion Questions
1. Define the following terms and show the significance to international marketing:
2. What are the differences between consumer and industrial goods and what are the implications for
international marketing? Discuss.
The committee on definitions of the National Association of Marketing Teachers has broken down the
differences between consumer and industrial goods by four areas. They are:
a. Nature of the market or buyer – this typically means that consumer goods are used by the end
3. Discuss how the various stages of economic development affect the demand for industrial goods.
Perhaps the most significant environmental factor affecting the market for industrial products is the
14-1
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
A country in stage five has reached the point of complete industrialization which generally denotes
world leadership in the production of a large variety of goods. Even though these countries have
achieved the highest level of industrialization, there is still a market for industrial products because a
“Industrialization is typically a national issue, and industrial goods are the fodder for industrial
growth.” Comment.
The main points in the solution of this problem center around the desire of the underdeveloped
countries to industrialize. This industrialization is not a haphazard, natural growth, but a planned
growth, and as a consequence the sale or purchase of industrial goods both to help industrialize a
4. “. . . The adequacy of a product must be considered in relation to the general environment within
which it will be operated rather than solely on the basis of technical efficiency.” Discuss the
implications of this statement.
14-2
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
The statement really refers to a major problem faced by many U.S. marketers in that the industrial
goods they intend to sell abroad are the same ones which have a market in the United States. The
United States, being a highly industrialized nation, obviously has need for equipment of the highest
technical standards and technical efficiency. For example, highly technical automotive equipment that
Why hasn't the United States been more helpful in setting universal standards for industrial
equipment? Do you feel that the argument is economically sound? Discuss.
It seems that the main reason why the United States has not been more helpful in setting universal
standards is that a rather large demand still exists for products or replacement parts which are based
5. What role do service, replacement parts, and standards play in competition in foreign marketing?
Illustrate.
Service, replacement parts, and standards are an important aspect of competition in foreign
marketing. These aspects all rate high with the foreign customer; and the company which can meet
these demands, and several others, is the company which will profit and will be more competitive. It
6. Discuss the part industrial trade fairs and trade centers play in international marketing of industrial
goods. What is the difference between industrial trade fairs and trade centers?
14-3
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
A trade fair is a government-sponsored attempt to facilitate foreign trade with the “host” country.
Foreign-based companies are invited to exhibit their goods within the “host” country at a particular
location. Trade fairs are scheduled periodically and any interested manufacturer can reserve space to
exhibit his goods.
14-4
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
7. Describe the reasons an MNC might seek an ISO 9000 certification.
One research report examining the purchase decision variables of importer managers found that
product quality, including dependability of suppliers and timely delivery, were the most important
variables influencing purchase decisions.
With quality becoming the cornerstone of global competition, companies are requiring assurance of
standard conformance from suppliers just as their customers are requiring the same from them.
Outside of regulated product areas, the importance of ISO 9000 registration as a competitive market
tool in the EC varies from sector to sector. In some sectors, European companies may require
suppliers to attest that they have an approved quality system in place as a condition for purchase. ISO
9000 may be used to serve as a means of differentiating different “classes” of suppliers (particularly
in high-tech areas) where high product reliability is crucial. In other words, if two suppliers are
competing for the same contract, the one with ISO 9000 registration may have a competitive edge.
If a company practices Total Quality Management (TQM), the system probably meets ISO 9000
standards but it would have to be audited and certified as such.
8. What ISO 9000 legal requirements are imposed on products sold in the EC? Discuss.
ISO 9000 is not a legal requirement for access to the EC market but ISO 9000 certification is required
under EC law for product certification on a few highly regulated, high-risk products such as medical
devices, telecommunications terminal equipment, gas appliances, and personal protective equipment.
Although ISO 9000 is voluntary, except for regulated products, the EC Product Liability Directive
puts pressure on all companies to become certified. The directive holds that a manufacturer, including
an exporter, will be liable, regardless of fault or negligence, if a person is harmed on an object that
has been damaged by a faulty product. Thus, customers in the EC need to be assured that the
components of their products are free of defects or deficiencies. A manufacturer with a
well-documented quality system will be better able to prove that products are defect-free and thus
minimize liability claims.
9. Discuss the competitive consequences of being ISO 9000 certified.
A strong level of interest in ISO 9000 is being driven more by “marketplace” requirements than by
government regulations and ISO 9000 is becoming an important competitive marketing tool in
Europe. As the market demands quality and more and more companies adopt some form of TQM
(total quality management), manufacturers are increasingly requiring ISO 9000 registration of their
suppliers. Although a legal requirement in only a small number of directives, ISO 9000 is becoming
increasingly important commercially for gaining access to EC markets. As of 1991, 42 countries had
adopted the ISO 9000 standards as national standards.
10. Discuss how the characteristics that define the uniqueness of industrial products lead naturally to
relationship marketing. Give some examples.
Two basic factors account for greater market similarities among industrial goods customers than
consumer goods customers. First is the inherent nature of the product: industrial goods are goods and
services used in the process of creating other goods and services. Consumer goods are in their final
form and are consumed by individuals. And second, the motive or intent of the user differs: industrial
consumers are seeking profit whereas the ultimate consumer is seeking satisfaction. These factors are
manifest in specific buying patterns, demand characteristics, and a special emphasis on relationship
marketing as a competitive tool.
14-5
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
The characteristics that define the uniqueness of industrial products discussed above lead naturally to
relationship marketing. The long-term relationship with customers which is at the core of relationship
marketing fits the characteristics inherent in industrial products and is a viable strategy for industrial
goods marketing. The first and foremost characteristic of industrial goods markets is the motive of the
buyer—to make a profit. Industrial products fit into a business or manufacturing process and its
contributions will be judged on how well it contributes to that process. In order for an industrial
marketer to fulfill the needs of its customer, the marketer must understand those needs as they exist
today and how they will change as the buyer strives to compete in global markets that call for long-
term relationships.
Relationship marketing ranges all the way from gathering information on customer needs to
designing products and services, channeling products to customers in a timely and convenient
manner, and following up to make sure the customer is satisfied.
The industrial customer's needs in global markets are continuously changing and suppliers' offerings
must also continue to change. The need for the latest technology means that it is not a matter of
selling the right product the first time but one of continuously changing the product to keep it right
over time. The objective of relationship marketing is to make the relationship an important attribute
of the transaction thus differentiating oneself from competitors. It shifts the focus away from price to
service and long-term benefits. The reward is loyal customers that translate into substantial profits.
Relationship marketing can often give a company the competitive edge when a customer's ultimate
success depends on more than technical expertise.
11. Discuss some of the more pertinent problems in pricing industrial goods.
Pricing industrial goods in a foreign market is a problem which domestic manufacturers find to be
shaded oftentimes with political overtones. That is, political rather than economic reasons may often
be the backbone of a country's pricing policy with respect to certain goods. Such is the case in many
of the underdeveloped, yet industrializing, nations. Russia is able to undercut American prices by as
much as 50 percent because of the degree of government control over industry and the desire to build
goodwill in these countries.
Another area where pricing policies led to a problem is that many American manufacturers insist on
payment in cash. Credit terms are often lacking for other countries, especially the underdeveloped
ones. Thus, those manufacturers in competition with American manufacturers oftentimes have a
competitive advantage when they extend more liberal credit terms to various countries.
12. What is the price-quality relationship? How does this affect a U.S. firm's comparative position in
world markets?
The price-quality relationship is a factor related to standards of various products a country will
produce. Typically, the higher the quality of a product, the higher the ensuing price. This relationship
oftentimes has an adverse effect on the marketability of American products in their competitive stand
against products of another country. That is, the standards for American products are too often
domestic standards and are not commensurate with the needs of a foreign country whose standards
are not as high as ours. Hence, our high-quality products are more costly and less needed than lower-
quality, lower-priced products.
13. Select several countries each at a different stage of economic development and illustrate how the
stage affects demand for industrial goods.
Library project.
14-6
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
14. England has started the process of shifting from the inch-pound system to the metric system. What
effect do you think this will have on the traditional U.S. reluctance to such a change? Discuss the
economic implications of such a move.
With England's recent indication of changing from the inch-pound system to the metric system, the
American reluctance to such a change will probably be softened to a certain extent. That is, with
pressures from competing countries and the search for new markets for U.S. products, the inch-pound
system is slowly but surely being pushed out of competition with the metric system. England realized
that the demands for products measured by the metric system in foreign countries is greater than
demands for inch-pound measured products. America, to a large extent, is not following the basic
marketing concept; we insist on making a product and then looking for the market instead of the
reverse. Even though such a change is one of a large scale, American industry will probably have to
make it eventually if it expects to grow by marketing industrial products to foreign countries,
especially since England's move will leave the United States virtually alone with the inch-pound
system. This should put added force behind those in the United States who have advocated that the
United States shift to the metric system. If the decision is made to adopt a metric system, the period
of changeover will be at least a decade, and the cost will be very high. In the long run, the United
States cannot afford not to convert.
15. Discuss the importance of international business services to total U.S. export trade. How do most U.S.
service companies become international?
International trade in services is becoming more important in the economies of both the United States
and other countries. It is the fastest growing sector of international trade. It is estimated that services
account for about 1/4 of the value of all international trade. Currently international trade and services
are estimated to be 650 billion dollars compared to $1,870 billion in global merchandise exports. The
United States portion of services and merchandise export is 35–40 percent of overall trade. These
figures, however, may be underestimated since such services as advertising, accounting, management,
consulting, legal services, most insurance, and most of the new computer and communications
services are omitted from the balance of payments figures from which the service portion of trade is
determined.
Most U.S. service companies' initial entry into the international market is to follow their American
customers to overseas markets. However, as they became established in these countries, they began to
expand their services to local companies. Many firms established branches and acquired local
affiliations to serve both U.S. as well as local clients.
16. Discuss the international market environment for international business services.
Service firms face most of the same environmental constraints and problems confronting merchandise
traders. Protectionism, controls on transborder data flows, competition, and the protection trademarks
processes and patents are probably the most important problems confronting multinationals in today's
international service market. Protectionism looms because U.S. business service firms are threatening
local companies. Many local companies have developed as a result of foreign service companies
operating in their countries and are now seeking direct and indirect trade barriers to restrict foreign
companies from domestic business service markets. A study of U.S. service firms reported that
ownership restrictions or prepaid royalties, discriminatory tax policies, and barriers to transborder
data flow were the most frequently encountered barriers to trade.
14-7
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
Chapter 14 – Products and Services for Businesses
Restrictions, however, are not generated only by foreign firms. The U.S. government also creates
problems for service firms. The biggest domestic headache is U.S. export controls. Getting a U.S.
export license is the greatest domestic barrier foreign selling services abroad face. Not only is it time
consuming but it is frequently not clear which of the many U.S. agencies are involved in approving
the request. A last issue of importance facing the business services is protection of property rights.
Since most business services can be duplicated with ease, there is a major problem in protecting
services from piracy. In many cases, laws are not clear and as a result, it is difficult to enforce laws to
protect processes, trademarks, etc.
14-8
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use.
Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part.
