Marketing Chapter 10-16 Asian Country only Percent The Landed Costs Tires

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ESSAYS FOR CHAPTERS 10-16

Case II.1: Trouble in Turkey

Ans: Below

Dif: Difficult

Ref: Chapters 11, 12, 14, 15 and 16

Nat: Analytic, Reflective, Diversity, Communication

Helen Treadwell is Vice President-Sales USA and Global Brand Champion for

Hello Watches, USTime’s elite line of watches. She recently heard from Tamer

Gençturk, the General Manager of USTimes’s Turkish marketing subsidiary. Tamer

What advice would you give Helen for dealing with Tamer’s requests?

ANSWER:

Global theme advertising: Many students will agree with adaptations to a Muslim

market, though some will note that Hello’s customer may not be the average Turk. A

Raise the price in Turkey to keep elite positioning: This isn’t immediately or directly

Parallel Imports: This is not brought up in the case but students should see the

Transfer price: It is true that “it isn’t fair!” But it is no fairer for manufacturing

operations in Hong Kong to bear the brunt of the devaluation. The corporation should

Comments from earlier chapters: Some students might mention that Islam disallows

Case II.2: Cappel Corporation

Ans: Below

Dif: Difficult

Ref: Chapters 10, 13, 14 and 16

Nat: Analytic, Reflective, Communication

You are interviewing for a job at a Cappel Corporation, a U.S. multinational firm.

During an interview with Elaine Hauser, Vice-President of International Operations, Ms.

Hauser describes the industry in which Cappel competes:

Based on the nature of the industry in which Cappel competes, please give Ms. Hauser

advice on product development, pricing, promotion, and organizational structure.

Explain your answers. Remember to keep focused on the nature of this industry.

ANSWER

Answers will vary, but students might note:

Product development:

Since this is an industrial product and has high economies of scale, this likely

Pricing:

Pricing more likely will need some adaptation by market (Chapter 13).

Promotion:

This industry calls for personal selling adapted for culture (Chapter 14).

Structure:

The structure of this firm currently sounds like an international division (e.g., VP

Case II.3: Elite Sunglasses

Ans: Below

Dif: Difficult

Ref: Chapters 11, 12, and 16

Nat: Analytic, Ethics, Reflective, Communication

Mr. Shaw is General Manager-USA for Elite World Sunglasses (EWS) a firm that

designs and manufactures fashion sunglasses well-known for their high quality eye

Brazil, in which she remarked:

You have to do something about the subsidiary in Uruguay! They sell our

sunglasses to wholesalers for $4 a pair while we sell them for $10. We have

Mr. Shaw is considering what actions he can take. He has an appointment with the

company’s CEO and executive committee this afternoon and is wondering whether he

should mention this problem.

What actions would you suggest concerning the problem between Brazil and Uruguay?

What would you suggest concerning the global organization of this company. Explain

your answers.

ANSWER

Brazil v. Uruguay

Raising the transfer price to Uruguay could make it more difficult for that

Global Organization

The company is organized in such a way to give a lot of authority to local

management in each country. This allows for great cultural adaptation—perhaps

too much. There are some issues that require more centralization:

oTransfer pricing (Chapter 12).

If the current organization is kept (and changing structures is expensive and

disrupting) then global teams should be assigned to these issues (Chapter 16).

Some students might suggest that the company adopt a global functional

Case II.4: ABC in Trouble at Home

Ans: Below

Dif: Difficult

Ref: Chapters 11, 12, 13, and 16

Nat: Analytic, Reflective, Ethics, Diversity, Communication

Elinor King, the CEO of ABC Corporation, was horrified when the U.S. State

Department invited her to Washington D.C. to explain why her company’s laptop

computers were appearing on the Black Market Peso Exchange (BMPE). The BMPE

involved money launders who bought large amounts of products in the United States with

illicit drug money and then smuggled them into Colombia where they were sold for

pesos. These pesos were then used to grow more illicit drugs for export to the United

States. The U.S. government definitely wanted it to stop. Three of Elinor’s managers

offered their advice:

Manager A (General Manager of ABC Colombia): This is just another example of the

problem we are having with parallel exports. We have been flooded with unauthorized

imports from the USA. If we raised prices in the USA, this would help shut down this

illegal market.

Manager B (Director of Marketing for the USA): I disagree. You Latin Americans are the

cause of this problem. The foreign subsidiaries have too much power. We need to change

our organizational structure from a country-based structure to a product-based global

structure and centralize power back here in America. With better global oversight we can

shut down this peso smuggling.

Manager C (Head of Corporate Planning and New Business Development): Let’s not

fight over this. We can’t do anything about the smuggling. And even if we could, we

wouldn’t want to.

Comment on the comments.

ANSWER

Manager A

Similar to parallel imports, smuggled goods enter markets through unauthorized

Manager B

Centralizing power in the global marketing organization could make surveillance

of this problem easier. Headquarters could demand that the U.S. organization

Manager C

The company should cooperate with authorities and take this seriously—even if it

Case II.5: China v. Indonesia

Ans: Below

Dif: Difficult

Ref: Chapters 11, 12, 13 and 16

Nat: Analytic, Reflective, Ethics, Diversity, Communication

Mohammed Slamet was the general manager of the Indonesian marketing

subsidiary of Ti-Corp, a U.S.-based multinational that produced several brands of tires in

12 countries and marketed them in 60 countries. These tires were sold to car

manufacturers and were offered at retail as replacement tires. Ti-Corp’s Indonesian

subsidiary imported tires from the firm’s production facilities in China. The transfer price

that the Indonesian subsidiary was charged by the Chinese subsidiary was the same as the

price charged to wholesalers in China. Both the Chinese and the Indonesian subsidiary

reported to Ti-Corp’s Asia-Pacific regional division headquartered in Singapore.

What advice would you give Mr. Slamet? Would Ms. Campbell’s proposed organization

change help solve the problem? Why or why not?

ANSWER

Parallel imports

Chinese wholesalers could purchase the tires ship them to Indonesia at about the

same cost that Ti-Corp’s marketing subsidiary pays for having the tires delivered

Smuggling

If smuggling is occurring the company should try to work with the Indonesian

Global marketing organization

A structure with more centralized power could better oversee issues such as

transfer pricing and parallel imports. The brand champion is likely to argue for

Case II.6: LifeFit in China

Ans: Below

Dif: Difficult

Ref: Chapters 10, 12, 14, 15 and 16

Nat: Analytic, Reflective, Diversity, Communication

LifeFit is a U.S.-based corporation that produces and markets health food bars,

(65 percent of sales), gym equipment (20 percent of sales), and cosmetics made from

plants from the Amazon rainforest (15 percent of sales). Lifefit markets in 24 different

countries and 20 percent of sales are outside the USA. The company recently abandoned

an international division structure for a global regional structure.

Richard Talbot is Vice president (VP) of the North American Division and is very

enthusiastic about launching globally a new fitness machine developed and produced in

the USA. Although Caroline Chan, the general manager of LifeFit-China, has not refused

to consider marketing the product in China, no LifeFit gym equipment is currently sold

there. Mr. Talbot is concerned that she will not support his proposed advertising strategy

aimed at young professionals, including a 30-minute infomercial to air on television. He

even suggested that China use the same advertisements developed in the USA as a way of

saving the Chinese subsidiary money. He is also concerned about the proposed price in

China. In the USA the machine will retail for $2500, but Ms. Chan insists that it can only

sell for $800 in China. Even at that price, the fitness machine could only be sold to gyms

not individuals. Mr. Talbot figures that little profit can be made at that price and only if

no R&D or production overhead costs are charged to China. Nonetheless, he estimates

the Chinese market to be about one-tenth that of the USA. If LifeFit-USA can expect to

sell 2 million machines the first year, why can’t China commit to selling 200,000?

What advice would you give Mr. Talbot and LifeFit? Explain you answer.

ANSWER:

Promotion:

The target market and thus the message will probably not be the same in China as

Pricing:

The company could consider product adaptation to lower cost of products in

China. They could also switch production to China to possibly lower costs

Organization:

Is 20 percent foreign sales high enough to abandon an international division? This

means the USA market still dominates all others—even if a global regional

Case II.7: Tropiburguer

Ans: Below

Dif: Difficult

Ref: Chapters 11, 12, 13, 14, 15, and 16

Nat: Analytic, Reflective, Ethics, Communication

Silvia Hernandez, president of Tropiburguer, groaned. The subsidiaries in

Argentina and Brazil were at it again. Tropiburguer is a Mexican fast-food chain whose

sales are only 10 percent those of MacDonald’s. Tropiburguer is located in 10 Latin

American countries and has experienced excellent growth. All its stores are wholly-

owned by the company. Tropiburguer has a country geographical organization.

Tropiburguer’s Argentine subsidiary, which accounts for 8 percent of

Brazil was already angry that Argentina refused to pay its share of a joint Mardi

Gras commercial developed in Brazil. Tropiburguer Argentina claimed that the

commercial looked too Brazilian. Even with a Spanish translation, the commercial would

look silly if aired in Argentina. Given the disagreements between her biggest South

American subsidiaries, Silvia wondered if Tropiburguer should adopt an international

division structure. That way, more decisions could be made in Mexico City.

What advice would you give Silvia? Why?

ANSWER:

Transfer pricing:

Advertising:

The idea of a regional (global) theme advertisement is not outlandish. But such

Organization:

Food is largely culture bound and this would suggest a country organization—

Case II.8: BFF

Ans: Below

Dif: Difficult

Ref: Chapters 10, 11, 14, 15 and 16

Nat: Analytic, Reflective, Diversity, Communication

U.S. company Best Friend Found (BFF) produces and sells microchips that are

inserted under the skin of a dog or cat. Veterinarians or pet shelters can scan the chip of a

lost pet and find the owner (via an online registry). BFF’s exact technology is patented

but other competitors have similar products based on slightly different technologies. The

product is sold through veterinarians who insert the chip, and all BFF products are made

and sold in the USA. There are several competitors worldwide but none are very large.

BFF is the largest competitor in the U.S. market.

BFF has recently purchased CanineCall, a company half its size based in

global? In fact, how should promotion differ among countries? Should the BFF brand

replace the CanineCall brand? And finally, how should BFF reorganize itself now that it

has purchased CanineCall?

Please give Linda advice on these issues.

ANSWER

Promotion

If the current advertisements work, the company could consider extending

advertising to other markets. However, they should be careful about standardizing

Brand

Replacing one brand with another is problematic and should be done only after

careful consideration.

Organization (Chapter 16)

Now that BFF a domestic organization has bought another company with

international operations, it needs to decide how to reorganize