978-1473758438 Chapter 17

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Instructor Manual

Chapter 17: Customers and Suppliers of the MNE

(Prepared by Klaus E. Meyer, March 2019)

Introduction to the Topic

Learning Objectives

1. Explain how companies may analyze consumer behaviour abroad

2. Articulate four Ps in international marketing (place, product, price, and promotion)

3. Articulate the three As in supply chain management (agility, adaptability, and alignment)

4. Discuss how institutions affect marketing and supply chain management

5. Discuss how resources affect marketing and supply chain management

6. Participate in two leading debates concerning marketing and supply chain management

7. Draw implications for action

General Teaching Suggestions

This chapter introduces two closely related aspects of operations, marketing and supply chain

management. To initiate a discussion, you as instructor may ask your class, “How many of

you are NOT involved in selling?”

Point out to the students that marketing involves more than just selling: it involves identifying

what customers want and then providing them the product they want at a price they are

willing to pay at the place that they want it and promotion lets them know about the product,

price, and place. That is a challenge and it is especially a challenge when trying to reach a

variety market segments around the world who have different tastes regarding the product,

who may respond differently to price and promotion and there are significant challenges in

providing that product at the place desired through an often very complex supply chain.

Opening Case Discussion Guide

The opening case (Zara rewrites the rules on Marketing and Supply Chain Management)

covers a firm that seems to have violated most of the rules for marketing and supply chain

management except for one: it has found innovative ways to give the customer what the

customer wants. Its strengths include being able to rapidly respond to opportunities. The case

should inspire those who like to “think out of the box.”

Many students, especially female students, will know Zara from their personal experience.

You may thus initiate a discussion by asking, “why do you go to Zara; what is different about

Zara?” They will probably explain that Zara often offers ‘something new’ making it

worthwhile to have a look – and then you can ask, “how do they achieve that frequent

newness?”

Chapter Outline, Section by Section

Section 1: Understanding Consumers Around the World

Key Ideas

A key challenge for those selling internationally is to understand their customers abroad, and

to avoid blunders. A Financial Times (Oct 10, 2010) article nicely complements this section

and In Focus 17.1. It discusses similar techniques of anthropological consumer research used

by major multinational enterprises. In addition to filming people in their everyday life, firm

may ‘embed’ their market researchers in social groups to understand what people do with

their products and how they talk about them. The techniques, described as highly innovative

in the text, are becoming quite common. http://www.ft.com/cms/s/0/f4a691ee-d6ef-11df-

aaab-00144feabdc0.html.

Key Concepts

marketing

Efforts to create, develop, and defend markets that satisfy the needs and wants of individual and

business customers.

supply chain

Flow of products, services, finances, and information that passes through a set of entities from a source

to the customer.

supply chain management

Activities to plan, organize, lead, and control the supply chain.

Section 2: The Marketing Mix

Key Ideas

This section introduces the four Ps of marketing. If students have taken a marketing class

before, they are likely to be familiar with these concepts, and you should focus on applying

these concepts when competing in foreign markets.

Key Concepts

marketing mix

The four underlying components of marketing: product, price, promotion, and place.

product

The offerings that customers purchase.

market segmentation

A way to identify consumers who differ from others in purchasing behaviour.

multi-tier branding

A portfolio of different brands targeted at different consumer segments

price

The expenditures that customers are willing to pay for a product.

price elasticity

How demand changes when prices change.

total cost of ownership

Total cost needed to own a product, consisting of initial purchase cost and follow–up

maintenance/service cost.

promotion

Communications that marketers insert into the marketplace.

place

The location where products and services are provided.

Section 3: Supply Chain Management

Key Ideas

Supply chain management concerns how to coordinate all the activities of a company’s value

chain. It incorporates the purchasing function and the distribution channel, but it critically

includes all the processes companies have to deliver products to customers at the desired

quality and at the desired time.

We introduce the three A’s of supply chain management: Agility deals with the ability to

quickly react to unexpected shifts in supply and demand. Adaptability refers to the ability to

reconfigure supply chain in response to longer-term external changes. Alignment focuses on

the alignment of interests of various players in the supply chain.

The case of Yihaodian (In Focus 17.3) illustrates the importance of operations and logistics

for e-commerce, and area where many innovations happen in emerging economies. Note that

Yihaodian was fully acquired by Walmart in late 2015.

Key Concepts

distribution channel

The set of business units and intermediaries that facilitates the movement of goods to consumers

inbound logistics

Purchasing and the coordination of intermediaries on the supply side

outbound logistics

Sales and the coordination of intermediaries on the customer side

intra-logistics

The effective movement of goods within a factory

agility

The ability to quickly react to unexpected shifts in supply and demand.

adaptability

The ability to change supply chain configurations in response to long-term changes in the environment

and technology.

alignment

The alignment of interest of various players.

third-party logistics (3PL)

A neutral intermediary in the supply chain that provides logistics and other support services.

Section 4: Institutions, Marketing and Supply Chain Management

Key Ideas

This section discusses some example of local institutions creating constraints on marketing

and/or SCM. The first theme is advertising standards; the second is ownership constraints, the

third concerns cultural differences.

Key Concepts

standards in advertising

Formal rules designed by governments to protect consumer

Section 5: Resources, Marketing and Supply Chain Management

Key Ideas

This section applies the VRIO criteria to marketing and SCM.

Key Concepts

No new concepts.

Section 6: Debates and Extensions

Key Ideas

The first debate introduces the challenges of marketing in business to business markets,

which may be less ‘sexy’ than consumer goods marketing, but essential for many European

businesses operating abroad. Figure 17.3 introduces a conceptual framework created based on

my own field research, In Focus 17.5 illustrates the issues for a company spun off from Bayer

in 2015 under the name of Covestro.

The second debate concerns the positive or negative effects of a country of origin image and

its impact on marketing strategies.

Key Concepts

business-to-consumer (B2C) marketing

Marketing to final consumers of a product

business-to-business (B2B) marketing

Marketing to other businesses that will further process the product

relationship marketing

A focus to establish maintain and enhance relationships with customers.

ingredient branding

Creating a brand identity for a component of a products.

country-of-origin effect

The positive or negative perception of firms and products from a certain country.

Section 7: Implications for Practice

Key Ideas

This concluding section emphasizes the need to study the relevant aspects of the local

environment for marketing and supply chain management, and to focus on agility,

adaptability and alignment of the supply chain.

Key Concepts

No new concepts.

Review Questions

Review questions are provided to students on the website accompanying the book. They

directly ask to summarize the material provided in the text. Instructors may also use the

questions to structure their lectures or review sessions.

Review Questions

(as provided to students on the website)

Material in the Book

1. Why are marketing and supply chain activities

intrinsically related in many MNEs?

2. How can companies aim to understand their

(potential) consumers in other countries and

cultures?

3. What is the marketing mix, and how can MNEs use

4. Under which circumstances are respectively global

and local brands more suitable to reach a group of

consumers?

5. How can companies combine global brand appeal

and local touch?

6. How do companies price their products abroad?

Page 473 and Opening Case

Page 474-476

Page 476-477

Page 477

Page 478-479

7. How do companies adapt their promotion strategies

to varying circumstances abroad?

8. What is supply chain management?

9. Why is agility important for supply chain

management, and how can it be achieved?

10. Why is adaptability important for supply chain

management, and how can it be achieved?

11. Why is alignment with key partners important for

supply chain management, and how can it be

achieved?

12. When is third-party-logistics (3PL) best to enhance

competitiveness?

13. How do national and international institutions

shape marketing and supply chain management

practices?

14. How do marketing and supply chain management

enhance a company’s resource and capability

profile?

15. What are the key differences between marketing in

B2C markets and in B2C markets?

16. How can companies realize the positive potential of

their country of origin image?

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Page 491-492

At the end the chapter, we provide discussion questions that aim to stimulate students

thinking beyond memorizing the material learned in the chapter. They are designed to be

used at a basis for in-class discussions, group work, or individual assignments. Below, we

provide some indicative answers of issues that may be raised in response to these questions.

Discussion Questions

(as provided in the book)

Indicative Responses

1. Consider a novel product (such as

a wearable IT device) and a

These students challenge students to demonstrate

their strategic thinking and argumentation, and

country you know very little

about (say China or Brazil). How

are you going to find the

information you need to design a

marketing strategy?

2. In Hollywood movies, it is

common to have product

placement (have products, such

as cars from sponsored

companies appear in movies

such as Facebook to promote

your product without putting off

at a UK firm. A volcano breaks

out in Iceland, disrupting air

their ability to identify appropriate approaches to

gathering information on (potential) customers)

and to structuring ethical discussions.

1. This question relates directly to three

approaches introduced on page 518.

2. If you are a marketer, you may first wish to do

some “marketing research” before deciding

how to proceed. You may want to first of all

determine whether there is either an actual

ethical problem or at least perceived ethical

be gained, you might want to avoid the use of

placement even though you and some of the

Once brand manager get profile of target

consumers, he/she can use marketing mix to

travel across Europe. On the one

hand, you are considering

switching to local suppliers in the

UK. On the other hand, you feel

bad about abandoning your Asian

suppliers, with whom you have

built a pleasant personal and

business relationship, and who –

in the long run – may be able to

delivery produce much cheaper.

Yet, your tightly coordinated

production cannot afford to miss

one supply shipment. How do

you proceed?

5. As a plant manager in a car

factory in the UK, you are

heavily relying on components

sourced through longterm

partnerships with suppliers

develop marketing strategy for chocolate bars.

Social networking can also be used to create a

community of fans sharing experiences, which

in turn may enhance the brand appeal (but also

risks losing control over the brand image).

4. It might be worthwhile to consider developing

a committee or alliance in which you and your

suppliers work together in helping to solve

each other’s problems and as a group do

contingency planning for events (flu,

hurricanes, earthquakes, etc.) that could disrupt

the flow of supplies and that might include

temporary contracts to others such as one in

Europe if any or all of existing suppliers should

encounter some disaster.

5. The question challenges students to analyse

supply chain agility in connection with policy

induced uncertainty. Solutions may include

building greater warehouses, setting up

The closing case provides further opportunities to apply ideas and concepts learned in this

chapter in a real world setting. The Closing Case for this Chapter is “Li & Fung” and focuses

on how Li & Fung build a business empire by taking care of other people’s logistics, thus

introducing recent developments in 3PL. Below are some indicative responses to the case

discussion questions.

(as provided in the book)

1. From a resource-based perspective,

what distinguishes Li & Fung from

suppliers, buyers, and other

intermediaries?

2. From an institutional perspective,

how can you explain the role of trade

intermediaries in international supply

chains?

3. Intermediaries such as Li & Fung

need to be paid. Why, after paying Li

& Fung a fee, buyers and suppliers

still find it valuable to deal through

an intermediary? In other words,

why don’t they trade directly?

1. Question 1 and 2ask students to

apply the tools first introduced in

Chapter 4 to identify and assess the

resources of Li & Fung.

2. On the basis of question 1, students

should be able to explain how Li &

Fund adds value – in a nutshell, the

fees charged by Li & Fung are still

lower than the costs businesses

would incur if they were to do all

these supplementary services in

house.

Further Learning Activities

In addition to the cases and discussion questions provided in the book, instructors may want

to use any of the following activities to further engage students with the material.

1. The Integrative Case ‘SSI Schaefer: Internationalization of Intra-Logistics’

introduces the notion that companies traditionally operating as ‘manufacturing’ are

moving to become ‘solutions provider’. This requires not only much higher degrees of

customization and after sales services, but changes how they can reach international

specific options for foreign entry (Chapter 12). The main business of the firm is to

help firms optimize their intra-logistics, and hence the case also raises many issues

discussed in Chapter 17.

student understand the consequences of the Brexit process and of different options to

design future international trade regime for companies that have to make major

(Chapter 5) with institutional knowledge of the EU (Chapter 8) and of multilateral

institutions such as the WTO (Chapter 9). While the preceding case (Negotiating

Brexit) is taking a national policy perspective, this case brings the issues down to the

corporate level. The case can also be discussed to analyse the role of subsidiaries and

unit HQ within a multinational organization (Chapter 15) and the role of pan-

European supply chains and sourcing operations (Chapter 17).

3. The Integrative Case ‘McDonald’s Reinvents itself in India’ has been written to

discuss two fundamental challenges of foreign market entry: (1) how to adapt

products and processes to a local contexts, and (2) how to manage a partnership with a

local firm or entrepreneur. The case illustrates many good practices regarding

adaptation, perhaps surprising given McDonald’s image of a global brand. However,

it also highlights problems McDonald’s experienced in the relationship with one of its

local joint venture partners, a conflict that is still ongoing, and among other highlights

challenges of contract enforcement in a ‘weak’ institutional context. The case

discussion thus requires integrating learning from entry strategy (Chapters 11 and 12)

with operational strategy in logistics and marketing (Chapter 17).

4. The Integrative Case ‘Beko Washes Clothes Across Europe’ discusses the

international growth strategy of the Turkish washing machine brand Beko. It covers

initial entry strategies (Chapter 12), development of the brands and its distribution

channels (Chapter 17), mergers and acquisitions (Chapter 14) and eventually

coordination of dispersed units across Europe (Chapter 15).

5. Your company has developed a dominant global supply network that has contact with nearly

every country in the world. However, recent internal initiatives have encouraged managers to

reconfigure your company’s supply network to increase efficiency. As a part of this process,

you must use established logistics performance metrics to identify the country that has the

highest logistics competence on each continent (Africa, Asia, Europe, North America, and

South America). Prepare a report that indicates your recommendations and rationale for each

continent. What could explain the results of your analysis?

One resource which can be used is “Logistics Performance Index”. This website can be found

by entering the search term “logistics performance” at the globalEDGE™ Resource Desk

search box located at http://globaledge.msu.edu/resourceDesk/. Once at the Logistics

Performance Index website, click on Global LPI Ranking (you may need to scroll down a

little). At this point, you have the option to download the data in Excel format (button found

on right side of screen). There are 7 attributes which encompass the LPI. The attribute this

exercise focuses on is Logistics Competence. The 2007 report indicates the following

countries with the highest level on this attribute for each continent: South Africa (Africa),

Singapore (Asia), Netherlands (Europe), Canada (North America), and Chile (South

America). Students may come to many different conclusions based on the data available.

Search Term: “logistics performance”

EMEA 2019

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globalEDGE™ Tags: Rankings

2. You are conducting an international survey concerning possible acceptance of a new leisure

activity: space tourism. One issue that can influence whether individuals in a country find this

new concept interesting is culture. Based on a data source that assesses culture around the world,

identify the cultural trait that could measure general acceptance of space tourism by country.

Then, determine which countries are ideal to target for commercialization. Be sure to support your

position thoroughly in the report provided.

One resource which can be used is “Geert Hofstede Resource Center”. This website can be

Malaysia could be analyzed as well. This provides a platform from which to discuss

marketability and viable commercialization of the concept in each country based on economic

status, population trends, etc.