INTERNATIONAL MARKETING

A thorough and complete commitment is needed for International Business.  The complexities of international marketing are something that is learned through experience and not in a book. International Marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit.  Such elements as political and legal forces, economic climate, and competition are the three elements found in domestic environment (uncontrollable).  Geography and infrastructure, structure of distribution, and cultural forces are part of which of the following international marketing task environment foreign environment (uncontrollable).

The key to successful international marketing is adaptation to the environmental differences from one market to another. Adaptation is a conscious effort on the part of the international marketer to anticipate the influences of both the foreign and domestic uncontrollable factors on a marketing mix and then to adjust the marketing mix to minimize the effects.  The primary obstacles to success in international marketing are a person’s self reference criterion (SRC) and an associated ethnocentrism.  SRC (self-reference criterion) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Closely connected is ethnocentrism, that is, the notion that one’s own culture or company knows best how to do things.  Ethnocentrism isgenerally a problem when managers from affluent countries work with managers and markets in less-affluent countries.  Cross-cultural analysis isolates the SRC influences and to maintain a vigilance regarding ethnocentrism.  However, the Global Marketing Concept can be used in some situations as a company adopts a concept wherein it views an entire set of country markets as a unit, identifying groups of prospective buyers with similar needs as global market segment and developing a marketing plan that strives for standardization wherever it is cost and culturally effective.

If there is one thing that I can take away from my experiences as being an International Business student—its’ culture.  Culture is the sum of values, rituals, symbols, beliefs, and thought processes that are learned and shared by a group of people, then transmitted from generation to generation.  Culture is a powerful human tool for survival, but it is a fragile phenomenon.  It is constantly changing and easily lost because it exists only in our minds.

Geert Hofstede, social scientist, is accredited with doing the most thorough, influential, and widely read work on how cultural values influence various types of business and market behavior.  Nepotism is the patronage bestowed or favoritism shown on the basis of family relationships as in business and politics.   Indexes are used to measure these cultural influences:

  1. Individualism/Collective Index refers to the preference for behavior that promotes one’s self-interest.
  2. Power Distance Index measures the tolerance of social inequality, power inequality between superiors and subordinates within a social system.  A high PDI translates to general distrust and hierarchical.
  3. Uncertainty Avoidance Index measures tolerance of uncertainty and ambiguity among members of a society.  A high UAI is absolute truth.  Marketers are constantly adjusting their efforts to cultural demands of the market, but they also act as agents of change, institutional restraints, symbolic, spiritual, and cultural critics.  Peer groups are not a social group.
  4. Power Distance Index measures the tolerance of social inequality within a social system.  It is very culturally sensitive.

The power of human potential is not realized in International Marketing though without respect to time orientation.  Polychronic time, P-time is the simultaneous occurrence of many things, human transactions more important.  On the other hand is Monochronic, M-time, whereone saves time, wastes time, bides time, spends time, and loses time.

Many conflicting things can happen in International Marketing too.  Bribery, or the voluntarily offered payment by someone seeking unlawful advantages, is one thing that has caused many to be arrested.  Extortion is the payments that are extracted under duress by someone in authority from a person seeking only what he or she is lawfully entitled to.  Lubrication is the small sum of cash, a gift, or a service given to a low-ranking official in a country where such offerings are not prohibited by law.  Subornation is giving large sums of money designed to entice an official to commit an illegal act on behalf of the one offering the bribe Electives Exclusives.

International Marketing Research is the systematic gathering, recording, and analyzing of data to provide information useful to marketing decision-making.  Information must be communicated across cultural boundaries.  The environments within which the research tools are applied are often different in foreign markets.  Research Types of information are based on needs.  General information about the country, area, and/or market are necessary.  Information necessary to forecast future marketing requirements are done by anticipating social, economic, consumer, and industry trends within specific markets or countries.  Specific market information is then used to make product, promotion, distribution, and price decisions and to develop marketing plans.  In domestic operations, most emphasis is placed on gathering specific market information because the other data are often available from secondary sources.

Types of Information:

  1. Economic and demographic: data on growth in economy, inflation, business cycle trends; profitability analysis for the division’s products, specific industry economic studies, analyses of overseas economies, key economic indicators for US and overseas, and population trends (migration, aging, and immigration).
  2. Cultural, sociological, and political climate: Non-economic review of conditions affecting the division’s business.  Covers ecology, safety, leisure time, and their impact on the business.
  3. Overview of market conditions: Analysis of market conditions the division faces by market segment including international conditions.
  4. Summary of the technological environment: Summary of the state of the art technology as it relates to the division’s business.  Needs to be broken down by product segment.
  5. Competitive situation: Review of competitor’s sales revenues, methods of market segmentation, products, and apparent strategies on an international scope.

RESEARCH PROCESS:

  1. Define the research problem and establish research objectives.
  2. Determine the sources of information to fulfill the research objectives.
  3. Consider the costs and benefits of the research.
  4. Gather the relevant data from secondary or primary sources, or both.
  5. Analyze interpret, and summarize the results.
  6. Effectively communicate the results to decision makers.

*Variations and problems in implementation occur because of differences in cultural and economic development.  See Marketing Research!

Economic Dualism: A way of conceptualizing the existence of two (sometimes more) separate but symbiotic sets of economic processes or markets within the same political or national social framework. In 3rd world societies, for example, a dual economy is formed by the coexistence of peasant subsistence agriculture and cash production of basic commodities or industrial goods for the international market. An analogous division exists in highly industrialized economies between the corporate core and peripheral firms and labor markets.

Multicultural Research: involves countries that have diff languages, economies, social structures, behavior and attitude patterns & when designing research you must take these into account.  Keep in mind when designing research to be applied across cultures is to ensure comparability and equivalency of results.  Different methods have varying reliabilities in different countries (thus different research methods should be applied in different countries).  Example: In Latin American countries its difficult to attract consumers to participate in focus groups because of different views about commercial research & value of their time.  The Japanese don’t respond to mail surveys compared to Americans.  Evidence suggests that inefficient attention is paid to non-sampling errors in improperly conducted multicultural studies and the appropriateness of research measure that have not been tested in multi-cultural context

Uses for internet research – internet privacy issues (matter of personal and legal consideration): The ability to conduct primary research is one of the most exciting aspects about the internet, but bias of a sample universe composed solely of internet respondents presents severe limitations, and firms vary in their abilities to turn data collected into competitive advantages.  Today the real power of the internet for international market research is the ability to easily access volumes of secondary data.  Different uses for Internet in International research.  Online surveys and buyer panels-have better “branching abilities” (asking different questions based on previous answers).  Online focus groups-use of bulletin boards.  Web visitor tracking-auto track time visitors travel through websites.  Advertising measurement-servers track links to other sites to assess their usefulness.  Customer identification systems-track visits and purchases over time creating a “virtual panel”.  E-mail marketing lists-sign up for direct marketing efforts via internet.  Embedded research-the internet process people go through of searching for info about products, comparison shopping, interacting w/service providers etc is the research process itself (firms that give option of custom designing products online are the ultimate in applying research for product development purposes).  Observational research -chat rooms, blogs, and person web sites monitored to assess customer’s opinions about products.  Vexing-irritate; annoy; provoke

Non-response bias

2 methods for forecasting Market demand:

1) Expert opinion: experts polled for their opinions about market size and growth rates-For market estimation problems, particularly in foreign countries new to the marketer, expert opinion is advisable.  Experts polled for their opinions about market size and growth rates.  Key in using expert opinion to forecast demand is triangulation- comparing estimates produced by different sources.

2) Analogy: assumes that demand for a product develops in much the same way in all countries as comparable economic development occurs in each country; Relationship between known situation and country in question.  Advanced techniques include multiple regression analysis or input-output analysis.

Qualities that the foreign market research must possess:  High degree of cultural understanding of the market in which research is being conducted.  Creative talent for adapting research methods.  Skeptical attitude in handling primary and secondary data.  Proficiency in using quantitative methods-Modeling.

Income Distribution affect on increase in GDP, without standard of living

We look at Per Capita GDP

In Review:

The key component in developing successful marketing strategies and avoiding major market blunders is information.  If researcher interested in a general non-economic review of conditions affecting the company’s business, the best area avenue would be cultural, sociological, and a political estimate.  If a company wants to gather information on it’s own market environment you should define the research problem and establish research objectives.  If you gather internet annual report figures from different companies to contruct cost and profit for her company she has just collected secondary data.  Consulting with customers regarding research design is not a standard step in the research process.  The availability and accuracy of recorded secondary data increases as the level of econonmic development increases.  Survey questionnaires are primary data.  Yes/No questions research format is quantitative research.  Open-ended questions research format is qualitative research.  Lack of randomness in the population is not a problem of drawing a random sample in the international environment.  The language barrier is the most universal survey research problem in foreign countries.  Back translation is when a researcher translates a questionnaire into another language and then another translator translates it back into the original language.  Parallel translation.  Analogy assumes that demand for a product develops in much the same way in all countries as comparable economic development occurs in each country

The United Nations classifies a country’s stage of economic development on the basis of its level of industrialization:

  • More-developed countries: industrialized countries with high per capita incomes.  These countries include Canada, England, France, Germany, Japan, and the U.S.
  • Less-developed countries: industrially developing countries just entering world trade with relatively low per capita incomes.  For example, Asia and Latin American countries.
  • Least-developed countries: industrially underdeveloped, agrarian, subsistence societies with rural populations, extremely low per capita income levels, and little world trade involvement.  These countries include Central Africa and parts of Asia and are often associated with violence.

Newly Industrialized Countries are experiencing rapid economic expansion and industrialization and do not fit as LDCs or MDCs, have shown rapid industrialization of targeted industries and have per capita incomes that exceed other developing countries, attracting both trade and foreign direct investment.  These countries are Chile, Brazil, Mexico, South Korea, Singapore, and Taiwan.

Growth factors include political stability, economic and legal reforms, entrepreneurship, planning, outward orientation, factors of production, industries targeted for growth, incentives to force a high domestic rate of savings, privatization of state-owned enterprises that had placed a drain on national budgets, large accessible markets with low tariffs, and regional cooperation and open markets.

Economic growth factors for newly industrialized countries includepolitical stability in policies affecting their development.  Economic and legal reforms of a country or how they enforce contracts & property rights.  These countries also tend to have a high concentration of Entrepreneurship.  The planning is a central plan with observable & measurable development goals linked to specific policies.

Outward orientation is the production for domestic & export markets with increase in efficiencies & differentiation of exports from competition.  Factors of production, if deficient in land, labor, capital, management, and technology can come easily from outside the country.  Their industries are targeted for growth and incentives exist to force a high domestic rate of savings and direct capital to update the infrastructure.  Privatization of state owned enterprises.

Infrastructure are those types of capital goods that serve the activities of many industries, includes paved roads, railroads, seaports, communication networks, financial networks, and energy supplies, important for economic growth of a country because it affects the ability of an enterprise to engage effectively in business

Bottom of the Pyramid Markets:

There exist 4 billion people across the globe with annual incomes of less than $1,200, have been relatively ignored by international marketers because of misconceptions about their lack of resources, and the lack of appropriateness of products and services usually developed for more affluent customers that they should be teeming and slake.

Big Emerging Markets (BEMS) have half the worlds population and account for 25% of the industrialized world’s GDP today.  Characteristics they share are that they are physically large, have a significant populations, represent considerable markets for a wide range of products, have strong rates of growth or the potential for significant growth, have undertaken programs of significant economic reform, are of major political importance within their regions, are “regional economic drivers”, and will engender further expansions in neighboring markets as they grow.  The Big Emerging Markets are India, China, Brazil, Mexico, Poland, Turkey, and South Africa; specifically Latin America, Eastern Europe and Baltic States, and Asia.  BEMs differ from other developing countries in that they import more than smaller markets and economies of similar size.  Most of their growth will be in the industrial sector to tout, or solicit business, employment, votes, or the like, importunately.

Four Asian Tigers

The most rapidly growing economies in the Asian-Pacific Rim region are Hong Kong, South Korea, Singapore, and Taiwan.

Newest Emerging Markets: 

The US decision to lift the embargo against Vietnam and the UN lifting the embargo against South Africa resulted in rapid expansion of their economies.  Because of their growth and potential, the US Department of Commerce designated both as BEMs.  Vietnam has an educated population and highly motivated, and a government committed to economic growth.  However, UN factors dragging on development are poor infrastructure, government restrictions, minimal industrial base, and lack of capital and technology.

South Africa’s economic growth has increased significantly now that apartheid is officially over and the UN embargo has been lifted.  Its industrial base will propel it to rapid growth and developed infrastructure.  It has a domestic market of nearly $500 billion, but has yet to develop its full potential because of years of isolation, former inward-looking trade, a low savings rate, and largely unskilled labor force with low productivity.

The Internet accelerates economic growth by new industries, lowering transaction costs, facilitating education, converging global markets, opening communication, and diffusing innovation much faster and efficiently (product life cycle becomes shorter).  For example, look at Airbus.  Healthcare (outsourcing x-rays, harder to forge scripts because they are electronic, advice to doctors more attainable).  As a country passes the 5,000 per capita GNP level, people become more brand conscious and forgo many local brands to seek out foreign brands they recognize.

Infrastructure variables that affect growth of an economy are roads, railroads, communication networks, and energy systems.  Countries begin to lose economic development ground when their infrastructure cannot support an expanding population and economy.  An economy’s arbitrator between productive capacity and consumer demand is marketing.  Information technology can jump-start national economies and allow them to leapfrog from high levels of illiteracy to computer literacy.

If a country is in the marketing phase (mass distribution sub-stage) of the evolution of the marketing process, its distribution channels are controlled by the producer or retailer.  The companies that will benefit in emerging markets are the ones that invest when it is difficult and initially unprofitable. Since the collapse of the Soviet Union, many countries in Eastern Europe have not fared well with respect to GDP (gross domestic product). However, countries that instituted market reforms have done better than those that did not.

Those groups of countries, which seek mutual economic benefit from reducing interregional trade and tariff barriers, are called multinational market regions.

Reasons for existence of Multinationals:

  • Need for trade
  • Reduce Transaction costs
  • History of Trade (East to West), but Easier to Trade North to South now,
  • Time Zones (India Coal Center has 12 hour difference in USA)
  • Political factors that work against regional (Embargo)

Factors required for successful multinational corporations:

  1. Economic-enlarged, protected markets stimulate internal economic development by providing assured outlets and preferential treatment of goods produced within the customs union, and consumers benefit from lower internal tariff barriers among participating countries
  2. Political- participating countries must have comparable aspirations and general compatibility before surrendering any part of their national sovereignty
  3. Geographic and Temporal Proximity-closeness facilitates functioning of a common market
  4. Cultural- cultural similarity eases the shock of economic cooperation with other countries.

The demise of the Latin American Free Trade Association (LAFTA) was the result of economically stronger members not allowing for the needs of the weaker ones.  Which of the following treaties formalized the European Economic Community trade group?  Of all the multinational market groups, none has been more secure in its cooperation and important with respect to economic benefits than the European Union.

5 types of multinational corporations:

1) Regional cooperation groups– most basic economic integration and cooperation arrangement, governments agree to participate jointly to develop basic industries beneficial to each economy; purpose of executing a particular project

2) Free trade area require more cooperation and integration than the RCD, agreement between 2 or more countries to reduce or eliminate customs duties and nontariff trade barriers among partner countries while members maintain individual tariff schedules for external countries; Tariffs are decreased or eliminated, Tariffs outside remain, Each country decides separately for Tariffs outside.  For example, look at NAFTA.  A free trade area provides its members with a mass market without barriers to impede the flow of goods and services. This is a lower level stage of economic partnership.  Once a group of countries has mastered the free trade area concept, the next step is to enter into a customs union.

3) Customs union enjoy the free trade area’s reduced internal tariffs and adds a common external tariff on products imported from countries outside the union, logical stage of cooperation in transition from FTA to common market; Custom tariff (Single Policy), very simplified, less paperwork Example: European Union (Political Union)

4) Common markets eliminate all tariffs and other restrictions on internal trade, adopts a set of common external tariffs, and removes all restrictions on the free flow of capital and labor among member nations, common marketplace for goods, services, and capital, unified economy that lacks only political unity to become political union Example: Big Bus Rule-Any profession could go to other countries and work

5) Political union are most fully integrated form of regional cooperation, involves complete political and economic integration – either voluntary or enforced. Commonwealth is a voluntary organization providing for the loosest possible relationship that can be qualified as economic integration (weakest of all political unions)

Major organizational cooperation’s:

  • European Union (EU): composed of 27 members expanded in 2004 to 10 more countries including Bulgaria and Romania, talks of Turkey, Macedonia, and Croatia are continuing.  The expansion of the European Union has raised fears among early members that the entry of new member countries may result in illegal immigrants surging across borders.  Single European Act-the treaty that created the European Union?  The expansion of the European Union has raised fears among early members that the entry of new member countries may result in the flood of cheap labor.
  • North American Free Trade Agreement (NAFTA): a comprehensive trade agreement among Canada, Mexico, and the United States that creates one of the largest and richest markets in the world.  The comprehensive trade agreement that addresses doing business within North America is appropriately named NAFTA.
  • Mercosur (Southern Cone Free Trade Area): When the old Soviet Union dissolved, the MERCOSUR was one of the trade groups that sought to fill the void for U.S.S.R. member states.  Argentina, Bolivia, Brazil, Chile, Paraguay, and Uruguay – second largest common market agreement in the Americas after NAFTA.  MERCOSUR is the second-largest common-market agreement in the Americas.
  • Association of Southeast Asian Nations (ASEAN) : Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, China, Japan, and South Korea.

Economic Requirements to Meet:

  • Budget Deficits
  • Must have low levels of infrastructure for certain number of years
  • Standard Regulations, banking loans.  Any current legislation after that needs to be proposed Legal/court systems needs to mach EU and other countries-can’t get in trouble for soveirgnty in 1 EU country that can’t in another.
  • Integration of infrastructure issues
  • Must meet production/productivity standard.  Norway has highest GDP; War of Georgia V. Russia.

There are reasons for some countries not joining the EU.  For example, the Swiss are natural historically more important than benefits from EU. Economic Reasons for countries like Greece, Portugal, and Spain are in trouble and don’t want to end up like them.  Companies defaulting on theme loans/bonds will cause overall value of the Euro depreciable and countries like France didn’t want this.

Standardization versus adaptation is an aged old question.  For example, the ethnocentrism of American managers and academics, by European or Japanese perspective, markets are by definition international and the special requirements of the huge American market must be considered from the beginning, only in America can international market requirements be an afterthought, it is only the manufacturing and/or finance managers in companies who argue for standardization for the sake of economies of scale.  Ideal market segment size from a marketing standpoint: 1

Benefits of global marketing:

With respect to global marketing management, the catch phrase of the 1990s was “global integration v. local responsiveness.”  From the marketing perspective, customization is always best.  Nestlé is used as an example in the text to demonstrate how major corporations are moving in a true international (global) direction. All of the following would be considered to be part of Nestlé’s international strategy EXCEPT customize all products and abandon any mass production strategy.  A matrix organization is an organizational forms characterized as being one where a centralized sales and marketing staff is run by a centralized functional staff? This form is popular with companies that reorganize for global competition. This form often overcomes the difficulties of the other formats.  The benefits of global marketing include transfer of experience and know-how across countries, global diversity of marketing talent, gaining access to the toughest customers, and financial benefits by spreading the corporate portfolio.

Adopting a European strategy cuts production costs.  The transfer of experience and know-how across countries through improved coordination and integration of marketing activities create the ability to adapt.  This ensures that marketers have access to the toughest customers- high quality products.  Diversity of markets has additional financial benefits like stability of revenues and operations to many global companies (Stable Cash Flow).  Source of Growth.  Brand Awareness.  Economies of Scales.  US domestic market is one of the markets that don’t have to operate internationally.

Strategic planning is conducted at highest levels of management and deals with products, capital, research, and the long and short-term goals of the company.  The Cybex Corporation is attempting to develop long-term generalized goals for the enterprise as a whole. Cybex is using corporate planning.  Strategic planning is conducted at the highest levels of management and deals with products, capital, and research, and long- and short-term goals of the company.  Tactical planning, or market planning, pertains to specific actions and to the allocation of resources used to implement strategic planning goals in specific markets, made at local level and address marketing and advertising questions.  Global Toys Company is making marketing and advertising plans for specific local markets within its international portfolio.  This planning form is tactical planning.

Planning Process and 4 phases of planning process:

  1. Preliminary analysis and screening – matching company and country needs In which of the following phases of the international planning process would you expect to explore home-country constraints such as the political environment?  Phase 1-preliminary analysis and screening where company/country needs are matched.
  2. Adapting the marketing mix to target markets.  The Caliber Corporation is at the stage of international planning where specific budgets need to be devised for its various markets and plans. In which stage of the international planning process would you expect to see these activities: Phase 3-developing the marketing plan.
  3. Developing the marketing plan
  4. Implementation and control.  The production manager for Aziz Nuts is measuring a recent production run against company standards for quality and consistency before the shipment is released to several international customers. In which stage of the international planning process would you expect these activities to occur? Phase 4-implementation and control.

4 Market entry strategies:

  1. Exporting accounts for 10% of global activity.  Direct exporting is when the company sells to a customer in another country.  Indirect exporting is when the company sells to a buyer in the home country, who in turn exports the product.  The Internet and direct sales are important in foreign market entry.  The Blue Flame Company (a company that sells small gas heaters) has just sold 5,000 heaters to a buyer in Northern Africa. Which of the following market entry modes has Blue Flame engaged in? Direct exporting.
  2. Contractual agreements are long-term, non-equity associations between a company and another in a foreign market, means of transfer of knowledge rather than equity 
1) Licensing-a means of establishing a foothold in foreign markets without large capital outlays a favorite strategy for small and medium sized companies; legitimate means of capitalizing on intellectual property in a foreign market.  For example, television programming and pharmaceuticals.
  3. Franchising is when the franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management.
  4. Master franchise gives the franchisee the rights to a specific area with the authority to sell or establish sub-franchises.  Provides effective blend of skill centralization and operational decentralization

Strategic international alliances: business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective, grown in importance recently as competitive strategy in global marketing management.  International joint ventures-partnership of 2 or more participating companies that have joined forces to create a separate legal identity, IJVs can be hard to manage.  Consortia-similar to joint ventures except that they typically involve a large number of participants and they frequently operate in a country or market in which none of the participants is currently active, developed to pool financial and managerial resources and to lessen risks.  Direct foreign investment: investment within a foreign country.

Difference between joint ventures and licensing:

Licensing means of establishing a foothold in foreign markets without large capital outlays.  Caliente Computers (a Mexican computer manufacturer) has just given an American company the right to build and sell computers carrying the Caliente name as long as the American company meets and upholds Caliente’s standards. Which of the following market entry modes has Caliente Computers engaged in? Licensing.  Joint ventures are partnerships of 2 or more participating companies that have joined forces to create separate legal entity, get around paying tariffs, decrease risk, give up control/profits.  Joint venturing is a market entry modes is primarily a partnership between two (or more) international companies where the result is a new legal entity.  The product life cycle is shorter these days because of a faster planning process; customers expect good quality at good price.

Dimensions of quality:

Quality can be defined on two dimensions. One of these dimensions is performance quality. Other dimension is market-perceived quality.  Performance is viewed internally from firm’s perspective, most consumers expect performance quality to be a given.  Market-perceived-consumer perceptions of a quality product often have more to do with market-perceived; these attributes are embedded in the total product.

Product as sum of utilities and satisfactions: product is more than a physical item – it is the sum of the physical and psychological satisfactions it provides the user, utilities include its form, taste, color, odor, and texture; how it functions in use; the package; the label; the warranty; the manufacturer’s and retailer’s servicing; the confidence or prestige enjoyed by the brand; the manufacturer’s reputation; the country of origin.  Nostalgia products-products reminding consumer of the past.  Green Marketing is concerned with the environmental consequences of a variety of marketing activities.  Europe is at the forefront of the green movement, with strong public opinion and specific legislation favoring environmentally friendly marketing and products.

The bundle of satisfactions (utilities) that a consumer receives is a good definition for a product the process by which an innovation spreads is called product diffusion.  The goals of the diffusion researcher and the marketer are to shorten the time lag between the introduction of the product and its widespread adoption.  Three extraneous variables affect the rate of diffusion of an object. The first is the perceived attributes of the innovation and the second is the method used to communicate the idea. Third is the degree of perceived newness.  The text lists five characteristics of an innovation that can assist in determining the rate of acceptance or resistance to a product in the market. Observability is matched to the ease with which the product benefits can be communicated.  If a company wished to reduce the degree of economic and/or social risk associated with a product’s use, they would attempt to increase the product’s trialbility.  The core component is the elements of the product component model contain the product’s design features and product platform.

Components of Product Component Model:

  1. Core component: product platform, design features, functional features
  2. Packaging component: trademark, brand name, price, quality, package, styling.  The Windsor Group is concerned that consumers will not be able to get sufficient spare parts for the company’s new line of air conditioners. Which element of product component model would be the element that contains The Windsor Group’s concern is the packaging component.
  3. Support services component: repair and maintenance, installation, instructions, other related service, deliveries, warranty, spare parts

Ways Services are different than products:

  1. Intangibility: has intrinsic value that exists only while it is being created
  2. Inseparability: its creation cannot be separated from its consumption
  3. Heterogeneity: individually produced and unique.  Each time Dr. Jonas sees one of his patients he must appreciate the unique nature of the patient’s background, medical problem, and overall health before he can make a diagnosis. Which of the following components of service is most closely matched to what Dr. Jonas must do to make a diagnosis of a patient is heterogeneity.
  4. Perishability: once created cannot be stored but must be consumed simultaneously with its creation

Protectionism: EU making modest progress toward establishing a single market for services, exactly how foreign service providers will be treated as unification proceeds is not clear, reciprocity and harmonization possibly will be used to curtail the entrance of some service industries into Europe

Four kinds of barriers face consumer services marketers in this growing sector of the global marketplace. Three of the barriers are controls on transborder data flows, protection of intellectual property, and cultural requirements for adaptation. What is the fourth barrier listed in the text is Protectionism.  Electrolux offers a cold-wash only washing machine in Asian countries where electric power is expensive or scarce. Company conforming to homologation

Global Brands have a worldwide use of a name, term, symbol, design, or combination thereof intended to identify goods or services of one seller and to differentiate them from those of competitors. The country of origin effect is any influence that the country of manufacture, assembly or design has on a consumer’s positive or negative perception of a product.  The influence that the country of manufacture, assembly, or design has on a consumer’s positive or negative perception of a product is called the country-of-origin effect

Volatility, cyclical swings: factors that exacerbate both ups and downs in demand include professional buyers that tend to act in concert and derived demand that accelerates changes in markets.  Categorization of objects.  Easterners use broad categories so brand boundaries are more fluid; more accepting of far brand extensions (would use broad category of plants to describe group of plants).  Westerners use specific categories (would use smaller sub-categories like flowers, trees, veggies, fruits to describe group of plants).

Derived demand is the demand dependent on another source.

5 stages of economic development:

1) Traditional society: most important economic demand associated with natural resources extraction

2) Preconditions for takeoff: manufacturing is beginning and primary needs will be related to infrastructure development

3) Takeoff: manufacturing of both semidurable and nondurable consumer goods has begun; goods demanded related to equipment and supplies to support manufacturing

4) Drive to maturity-industrialized economies that focus more on low-cost manufacturing of a variety of consumer and some industrial goods, buy from all categories of industrial products and services

5) Age of mass consumption-countries where design activities are going on and manufacturing techniques and being developed, mostly service economies

Global standards: good quality as interpreted by a highly industrialized market is not the same as that interpreted by standards of a less industrialized nation.  Quality differences in B2B and B2C: B2B more knowledgeable because of teams, goal is for quality long-term relationships, customer satisfaction, and profit in B2B.

ISO 9000: originally designed by the International Organization for Standardization in Geneva to meet the need for product quality assurances in purchasing agreements, series of 5 international industrial standards that are becoming a quality assurance certification program that has competitive and legal ramifications when doing business in the EU and elsewhere, relates to generic system standards that enable a company to provide assurance that it has a quality control system, does not guarantee that a manufacturer produces a quality product or service.  Importance of after sale services in B2B markets: willingness of the seller to provide installation and training may be the deciding factor for the buyers in accepting one company’s products over another’s, crucial in building strong customer loyalty and reputation that leads to sales at other companies, almost always more profitable than the actual sale of the machinery or product.  Purpose of trade shows: has become the primary vehicle for doing business in many foreign countries, serve as the most important vehicles for selling products, reaching prospective customers, contacting and evaluating potential agents and distributors, and marketing in most countries, provide the facilities for a manufacturer to exhibit and demonstrate products to potential users and to view competitors’ products, they are an opportunity to create sales and establish relationships with agents, distributors, franchisees, and suppliers that can lead to more nearly permanent distribution channels in foreign markets.  Know how glorious nation of Bulgaria will rise up again like back in the days.

Review Questions: The services industry worldwide is a growing and dynamic market. The largest component of the U.S. international services sector is travel.  There are many similarities among industrial goods customers as opposed to consumer goods customers.  The intent or motive of the user is a factor that accounts for this similarity.  Derived Demand is dependent on another source.  The majority of Central Africa would belong in the stage of economic development in the traditional society.  The countries in the age of mass consumption stage of economic development have design activities that are ongoing and manufacturing techniques that are developing. These countries are mostly services economies.  The buyer defines a product’s quality.  With respect to universal standards in the international sales of industrial products, there is a lack of any universal standards.  The Department of Commerce’s view of the metric standard is The DOC is encouraging metric by requiring that all who sells to the United States government must use it.  With quality becoming the cornerstone of global competition, companies are requiring insurance of standard conformance from suppliers just as their customers are requiring the same from them. At present, the global standard of performance is best characterized by the ISO 9000S.  Europe is the region of the world that seems to be leading all others with its adoption of ISO 9000 standard.  According to information provided in the text, for many technical products, a seller’s willingness to provide installation and training has been shown to be the deciding factor in a buyer’s decision to choose one manufacturer over another.  One of Blue Cross-Blue Shield’s big customers is Wal-Mart. Since Wal-Mart has moved into Mexico in a big way, so has Blue Cross. This type of action is characterized in the text as being what is called client following.  GATT and NAFTA were first to provide at least some rules for fair play governing trade in services.  Trade Shows serves as the most important vehicles for selling products, reaching prospective customers, contacting and evaluating potential agents and distributors, and marketing in most countries.  Because of the basic nature of industrial marketing’s closeness to its customers the marketing of industrial products and services a natural fit with relationship marketing?  Brand Name.  Middle-class: willingness to spend, don’t consider themselves farmers.  Americans spend money on experimental goods.  Easterners buy luxury goods, former communism country.  Emerging Markets.

Ultrasound Machines: GE/Toshiba not responsible for issues with ultrasound machines.  Car Argument-once sold, not responsibility how equipment used or who it is sold to.  Not selling abortion.  Taking safeguards and incurring extra costs/loss of sales even though they don’t have to.  Ultrasound doesn’t support abortion-made for health and promoting health in people.  Does more than looking at babies.  Cultural Indian Problem: their choice to monitor

Counter Arguments: Culturally incentive-GE, Ethically responsible, Government track who buys guns and monitors, India may ban ultrasound machines.  Protectionism – exchange in Czech and French government in article

BOP CASE 3-4 pg. 654

For Side: Making profit by selling to people at the BOP is not exploitation.  Microloans featuring interest rates of 30 or more % are not unethical if rates are justified by market.  Making profit from BOP consumers stimulates economic growth and improves poor people’s quality of life.  Not about making cheap stuff.  WTO improves overall health and well being of 3rd world countries.  Improves quality of life, helps people in developed countries.

Against Side: It is exploitation.  Practice is unethical.  No it doesn’t-The way numbers are represented influence the way you look at things differently.  Environment-Better than rates of 500%.  Interest Rates lower default so they can change less.

International Marketing Glossary of Terms:

Expropriated-to take (something) from another’s possession for one’s own use.  Corrugated-to draw or bend into folds or alternate furrows and ridges

Tonnage-the capacity of a merchant vessel, expressed either in units of weight, as deadweight tons, or of volume, as gross tons.

Insemination-to sow; implant seed into

*Countries begin to loose economic development ground when their infrastructure cannot support an expanding population and economy

Augment-to make larger; enlarge in size, number, strength, or extent; increase

Ubiquitous-existing or being everywhere, esp. at the same time; omnipresent

*A marketer cannot superimpose a sophisticated marketing strategy on an underdeveloped economy

Grisly-causing a shudder or feeling of horror; horrible; gruesome

Strife-vigorous or bitter conflict, discord, or antagonism

Irrevocable-not to be revoked or recalled; unable to be repealed or annulled; unalterable

Autonomy-independence or freedom, as of the will or one’s actions

Onerous-burdensome, oppressive, or troublesome; causing hardship

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