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Against Standardized Advertising
O) There are two main arguments against globally standardized advertising. 1) Cultural
differences among nations are such that a message that works in one nation can fail miserably in
another. 2) Country differences in advertising regulations may block implementation of
standardized advertising.
Dealing with Country Differences
P) Some firms have been experimenting with tactics that allow them to capture some of the
benefits of global standardization while recognizing differences in countries’ cultural and legal
environments.
Pricing Strategy
A) International pricing strategy is an important component of the overall international
marketing mix. Issues to consider include the case for pursuing price discrimination, strategic
pricing, and how regulatory factors influence prices.
PRICE DISCRIMINATION
B) Price discrimination exists whenever consumers in different countries are charged different
prices for the same product. Price discrimination can help a firm to maximize its profits.
C) For price discrimination to work, the firm must be able to keep national markets separate and
different price elasticities of demand must exist in different countries. The price elasticity of
demand is a measure of the responsiveness of demand for a product to changes in price.
Demand is said to be elastic when a small change in price produces a large change in demand.
Demand is inelastic when a large change in price produces only a small change in demand.
D) The elasticity of demand is determined by a number of factors, of which income level and
competitive conditions are probably the most important. In general, price elasticity tends to be
greater in countries with lower income levels and greater numbers of competitors.
STRATEGIC PRICING
E) The concept of strategic pricing has three aspects, which we will refer to as predatory
pricing, multi-point pricing, and experience curve pricing.
Predatory Pricing
F) Predatory pricing involves using the profit gained in one market to support aggressive
pricing in another market. The objective is to drive competitors out of the market.
Multipoint Pricing Strategy
G) Multipoint pricing strategy becomes an issue in those situations where two or more
international businesses compete against in two or more distinct (national) markets.
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H) The concept of multipoint pricing refers to the fact a firm’s pricing strategy in one market
may have an impact on its rival’s pricing strategy in another market. In particular, aggressive
pricing in one market may elicit a competitive response from a rival in another market that is
important to the firm.
I) The managerial message in all of this is that pricing decisions around the world need to be
centrally monitored.
Experience Curve Pricing
J) Many firms pursuing an experience curve pricing strategy on an international scale price low
worldwide in an attempt to build global sales volume as rapidly as possible, even if this means
taking large losses initially. Firms using experience curve pricing believe that several years in the
future, when they have moved down the experience curve, they will be making substantial profits
and, moreover, have a cost advantage over less aggressive competitors.
REGULATORY INFLUENCES ON PRICES
K) Firms’ abilities to engage in either price discrimination or strategic pricing may be limited by
national or international regulations.
Antidumping Regulations
L) Dumping occurs whenever a firm sells a product for a price that is less than the cost of
producing it. From the perspective of an international business, the important point is that
antidumping rules set a floor under export prices and limit firms’ ability to pursue strategic
pricing.
Competition Policy
M) Most industrialized nations have regulations designed to promote competition and to restrict
monopoly practices. These regulations can be used to limit the prices that a firm can charge in a
given country.
CONNECT
Click and Drag
Pricing Strategy
Summary
This activity focuses on the pricing strategy in the international business. Pricing is an important
part of the marketing mix. Pricing can be influenced not only by the competition but also by a
range of other variables including regulatory factors, demand, and more.
Activity
Students are asked to match various description to the correct category of price discrimination,
strategic pricing, and regulatory influence.
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Class Discussion
Pricing is a critical element in the marketing mix. Discuss the different issues firms face when
choosing price.
Configuring the Marketing Mix
A) Standardization versus customization is not an all or nothing concept. In reality, most firms
standardize some things and customize others. When looking at the overall marketing mix and
message, one often finds some aspects of standardization and some aspects of customization in
all products depending on local requirements and overall cost structures. Table 16.1 illustrates
issues that should be evaluated to determine the marketing mix.
Did You Know Video Clip
The video clip asks: “Did You Know ‘Pure Michigan’ is a global brand?”
Discussion Questions
1. Have you ever heard of “Pure Michigan”? What is the purpose of “Pure Michigan”?
2. Explain why “Pure Michigan” is a global brand. Who was the first voice of “Pure Michigan”?
3. How does it help Michigan companies that want to sell products in the U.S. or worldwide?
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CONNECT
Video Case
Rolls Royce Conquering the World
Summary
This activity focuses on international marketing and configuring the marketing mix. International
businesses face a complex set of decisions when configuring the marketing mix, choosing which
elements can be kept the same and which need to be adapted to better fit the target market.
Activity
Students are asked to watch a video on international marketing and then respond to a series of
questions related to the video.
Class Discussion
Configuring the marketing mix involves assessing each element and selecting the optimal
balance between standardizing and adapting product, price, promotion, and distribution. Discuss
how Rolls Royce has achieved its marketing mix.
CONNECT
Video Case
Pure Michigan Brand
Summary
This activity focuses on international marketing and how to assess and analyze target markets to
identify differences that could impact the marketing mix. In making this assessment,
international businesses consider a range of variables including culture, economic systems,
competitive conditions, government regulations, and so on.
Activity
Students are asked to watch a video on international marketing and then respond to a series of
questions related to the video.
Class Discussion
Understanding how to successfully configure the marketing mix—product, price, promotion, and
distribution—for global markets is critical to the success of an international company. Discuss
which variables might encourage a company to customize the marketing mix to better suit a
foreign market.
Product Development and R&D
A) Firms that successfully develop and market new products can earn enormous returns. Firms
need to build close links between R&D, marketing, and manufacturing because in today’s world,
competition is as much about technological innovation as anything else.
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THE LOCATION OF R&D
B) Ideas for new products are simulated by the interactions of scientific research, demand
conditions, and competitive conditions. Other things being equal, the rate of new-product
development seems to be greater in countries where:
• More money is spent on basic and applied research and development.
• Demand is strong.
• Consumers are affluent.
• Competition is intense.
INTEGRATING R&D, MARKETING, AND PRODUCTION
C) The need to adequately commercialize new technologies poses special problems in the
international business, since commercialization may require different versions of a new product
to be produced for different countries.
D) A firm’s new product development efforts need to be closely coordinated with the marketing,
production, and materials management functions. This integration is critical to making certain
that:
• Product development projects are driven by customer needs.
• New products are designed for ease of manufacture.
• Development costs are kept in check.
• Time to market is minimized.
CROSS-FUNCTIONAL TEAMS
E) One means of achieving cross-functional integration is to have cross-functional product
development teams. Effective cross-functional teams should be led by a heavyweight project
manager with status in the organization, include members from all the critical functional areas,
have members located together, have clear goals, and have an effective conflict resolution
process.
BUILDING GLOBAL R&D CAPABILITIES
F) The need to integrate R&D and marketing to adequately commercialize new technologies
poses special problems in international business because commercialization may require
different versions of a new product to be produced for various countries.
G) Integrating R&D, marketing, and production in an international business may require R&D
centers in North America, Asia, and Europe that are closely linked by formal and informal
integrating mechanisms with marketing operations in each country in their regions, and with the
various manufacturing facilities.
H) Some companies allocate product development responsibilities using a global network of
R&D centers that develop the basic technologies for new products which are then picked up by
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R&D units attached to global product divisions and used to generate new products to serve the
global marketplace.
Global Business Today Eleventh Edition Chapter 16
End-of-Chapter Resources
Critical Thinking and Discussion Questions
1. Imagine you are the marketing manager for a U.S. manufacturer of disposable diapers. Your
firm is considering entering the Brazilian market. Your CEO believes the advertising message
that has been effective in the United States will suffice in Brazil. Outline some possible
objections to this. Your CEO also believes that the pricing decisions in Brazil can be delegated to
local managers. Why might she be wrong?
2. Within 20 years, we will have seen the emergence of enormous global markets for
standardized consumer products. Do you agree with this statement? Justify your answer.
3. You are the marketing manager for a food products company that is considering entering the
Indian market. The retail system in India tends to be very fragmented. Also, retailers and
wholesalers tend to have long-term ties with Indian food companies, these ties make access to
distribution channels difficult. What distribution strategy would you advise the company to
pursue? Why?
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4. Price discrimination is indistinguishable from dumping. Discuss the accuracy of this
statement.
5. You work for a company that designs and manufactures personal computers. Your company’s
R&D center is in Michigan. The computers are manufactured under contract in Taiwan.
Marketing strategy is delegated to the heads of three regional groups: a North American group
(based in Chicago), a European group (based in Paris), and an Asian group (based in Singapore).
Each regional group develops the marketing approach within its region. In order of importance,
the largest markets for your products are North America, Germany, Great Britain, China, and
Australia. Your company is experiencing problems in its product development and
commercialization process. Products are late to market, the manufacturing quality is poor, costs
are higher than projected, and market acceptance of new products is less than hoped for. What
might be the source of these problems? How would you fix them?
globalEDGE™ Research Task
Use the globalEDGE™ site (globaledge.msu.edu) to complete the exercises in the text.
Exercise 1
Search phrase: Best global brands
Resource Name: Interbrand: Best Global Brands
Website: http://interbrand.com/best-brands/best-global-brands/2016
globalEDGE™ Category: Rankings, Company Level
Additional Info:
Best Global Brands is an annual ranking that has been published by Interbrand since 2001. It
provides a breakdown of the brands by sector and by region, and features several other insightful
charts and graphs to discuss how branding has been evolving globally.
Exercise 2
Search phrase: Global Competitiveness Report
Resource Name: World Economic Forum: Global Competitiveness Report
Website: http://reports.weforum.org/global-competitiveness-report-2015-2016
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globalEDGE™ Category: Global, Country Level, Rankings, Publications
Additional Info:
The Global Competitiveness Report assesses the competitiveness landscape of about 150
economies, providing insight into the drivers of their productivity and prosperity. The report tries
to analyze sustainable competitiveness by looking at basic requirements (infrastructure, health,
education, and institutional framework), efficiency enhancers (market size, technology, financial
markets, and labor efficiency, etc.), and innovation and sophistication factors.
ACSI and Satisfying Global Customers
closing case
Summary
The closing case explores the American Consumer Satisfaction Index, or ACSI. Modeled after a
similar index in Sweden, the ACIS index measures the satisfaction of consumers across the U.S.
economy, providing regular assessments of the health of the national economy. The Global
Customer Satisfaction Indices help organizations understand customer satisfaction around the
world. Companies like Amazon use the indices to ensure that they are meeting the needs of their
customers. Amazon has been the number one ranked company on the ASCI for several years
running. The indices also provide a peek at cross-cultural satisfaction, allowing companies to
better serve their customers.
Case Discussion Questions
1. Customer satisfaction is a “soft measure” of what customers think of a product or service. We
already know that people from different cultures have a tendency to answer surveys and these
“soft” questions differently based on their cultural background. In general, how would we expect
someone from the United States, China, Japan, Canada, and the United Kingdom (the top five
countries with the largest number of Starbucks stores worldwide) to answer how satisfied they
were with a recent Starbucks visit?
2. Jeffrey P. Bezos, founder and Chief Executive Officer of Amazon.com, Inc., says, “One thing
I love about customers is that they are divinely discontent. Their expectations are never static—
they go up. It’s human nature.” Do your expectations constantly go up? Is this fair to companies?
Why or why not? And do you think it is true that customers expect more today than before?
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3. Proponents of the customer satisfaction–stock market relationship make a simple, intuitive
argument that is highly relevant to both customers and investors: Companies that do better by
their customers also do better in the stock market. Describe a company you have bought from in
the last couple of years, and discuss how satisfied, or not, you were with the experience, and how
that affected the company’s stock price in the same time period.
Responses to this question will vary by student. Companies that consistently rank high in
customer service include Amazon, Apple, Toyota, and LG.
Teaching Tip: To learn more about ACSI, go to https://www.theacsi.org.
Lecture Note: To extend this discussion, consider exploring Amazon’s customer service ranking
at https://www.amazon.com/gp/feature.html?ie=UTF8&docId=1001924291.
CONNECT
Geography
Summary
This activity is designed to test the student’s knowledge of geography. Questions related to
chapter material are asked, requiring students to understand the topics and the locations of the
countries involved.
Activity
Students are asked to respond to a series of question related to the geographic location of several
countries.
Class Discussion
Understanding the geographic location of countries is essential to the understanding of
international business. Ask students to discuss the implications of the geographic locations of the
countries in this exercise on the subject matter.
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Continuous Case Concept
As automakers seek to expand their market share in foreign countries, they are challenged by the
age-old question of whether they can sell the same model everywhere or whether a new model
must be developed to meet the needs of each individual market. Some companies like BMW and
Mercedes believed, when they made North American expansion a priority, that they needed to be
closer to the market in order to get a real feel for local design preferences, and so consequently
moved their production to the United States. Other companies, like Hyundai and Kia, have
established design centers in Germany to take advantage of like minds and knowledge of the
local market. VW is hiring 200 engineers in the United States for its new location in Tennessee.
The company believes that it has been too slow in the past to recognize and respond to changes
in demand in the United States. Yet at the same time, Ford is finding success with its One Ford
platform.
• Ask students to discuss how Ted Levitt would view the world’s auto markets. Would he
believe that standardization of the marketing mix is possible, why or why not? Did Henry
Ford have the right idea (you can buy the car in any color as long as it is black)? Who is
right? VW or Ford?
• Next, develop a list of attributes that might be important in a car. What do Europeans
consumers want in a car? How does this compare to the average American or Japanese
consumer? For example, does the rugged pick-up truck driver image work in Japan? Does
the sleek, powerful European car work in China? Then, consider the notion of a world
car—a car that could be successful in any market. What factors could prevent the
development of such a product? Consider issues related to culture, distribution, a
country’s level of economic development, and so on.
• Finally, consider mistakes foreign automakers could make when designing their cars for
foreign customers. How could the presence of a joint venture partner help the company
avoid these mistakes?
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Additional Readings and Sources of Information
Virgin Atlantic first in world to use wearable technology to serve passengers
https://www.sita.aero/pressroom/news-releases/virgin-atlantic-first-in-world-to-use-wearable-
technology-to-serve-passengers
Zara Looks to Technology to Keep up With Faster Fashion
https://www.businessoffashion.com/articles/news-analysis/zara-looks-to-technology-to-keep-up-
with-faster-fashion
How Mercedes Established Itself As A Global Luxury Car Brand
https://www.referralcandy.com/blog/mercedes-marketing-strategy
In KFC’s China Ads, Nuggets Are Served With Patriotism
https://www.nytimes.com/2018/09/27/business/china-kfc-economic-reform.html
What Apple is getting wrong in India
https://www.washingtonpost.com/news/innovations/wp/2017/03/16/what-apple-is-getting-
wrong-in-india
Video: Burberry’s Bailey on Handing Over CEO Reins to Gobbetti
http://www.bloomberg.com/news/videos/2016-07-11/burberry-s-bailey-on-handing-over-the-
reins-to-gobbetti
Burberry Puts Trenchcoat Factory on Ice Amid Brexit Fallout
http://www.bloomberg.com/news/articles/2016-07-14/burberry-puts-u-k-trenchcoat-plant-on-ice-
amid-brexit-fallout
China’s Virtual Reality Market Will Be Worth $8.5 Billion and Everyone Wants a Piece
http://www.bloomberg.com/news/features/2016-05-15/china-s-virtual-reality-market-will-be-
worth-8-5-billion-and-everyone-wants-a-piece