International Business

MBAC14/MBAIBIC14
Course Outcome Covered: 4

References:
1. Daniels John D., Radebaugh, L.H., & Sullivan, Daniel P.:
International Business, Pearson Education, 2004.
2. Joshi R. M.: International Business, Oxford University Press,2009
3. Dana-Nicoleta Lascu: International Marketing, Atomic Dog
Publishing, 2006.
International Marketing
 Global Product Strategies

Local and International

Environment

Product Firm’s
Competitive Internal
Situation Strategies
Situation

Customer Needs &

Price
Elasticity
 The Product Offering
Potential Product

Augmented Product

Expected Product

Generic Product

Core Benefit

Source : Adapted from: P. Kotler, Marketing Management, 1994

 Global Product Development

• Standardization- developing same product

for multiple countries
– Premise-- consumers share some common
values, beliefs, and consumption patterns
– Advantages: economies of scale and
scope, price competitiveness, uniform
image
Reasons for Product Standardization
• Economies of scale : Production, R&D, Marketing
• Common Consumer
needs : Drinking patterns, car sizes

• Consumer Mobility : Customer retention & Loyalty

• Home Country Image : US jeans, French Perfumes,...

• Impact of technology : B to B Markets

 Global Product Development
• Product Adaptation- modifying product to
reflect characteristics of a market
– Premise-- consumers are not the same
– Advantages: improved fit between product
and consumer, expanded penetration
 Global Product Development
• Mandatory product adaptations
– Governmental regulations
– Technological considerations (e.g., voltage, level of
technology infrastructure)
– Cultural imperatives - is it acceptable to
consumers?
– Measurement standards: volume, length, weight,
quantity
 Reasons for Product Adaptation
• Climate: US Air-conditioning equipment
• Skill level of users : Computers in Africa
• National consumer habits :
- front-loading/top-loading washing machines
• Government regulations on products,
packaging, and labels.
 Strategy and the company’s
orientation
Geocentric company Global Standardization
orientation

Regiocentric company Regional

orientation Standardization

Polycentric company Local adaption

orientation

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 International Product Strategies

Straight Product Product

Extension Adaptation Innovation

The firm adopts The company caters The firm designs a

the same policy to the needs and wants product from scratch
used in its home of its foreign customers. for foreign customers.
market.
 International Advertising/Promotion
Decisions
1. Decide whether to standardize or adapt
advertising.
2. Develop the most effective message(s) for
the market segments selected.
3. Select effective media.
4. Compose and secure a budget.
 Standardize or adapt advertising?
• Standardize?
– Reduce costs
– Accelerates product launches
– Consumers preferences and product references
may becoming more similar
– Increases control, especially where local resources
are questionable
 Barriers To Standardization
• Communication infrastructure
• Agencies might not serve a particular market
• Consumer literacy
• Attitudes toward product country of origin
• Differing culture, values and purchase motivations
• Differing language
• Legal restrictions and self-regulation
 Message
Standardize or Adapt?

“Cavity reducing fluoride toothpaste sells well in

the U.S. where healthy teeth care perceived as
important, but has limited appeal in markets
such as Great Britain and France where the
reason for buying toothpaste is breath
control.”
 Message / Positioning: Standardize or Adapt?

• Differing culture, values and

purchase motivations affects
advertising message
– E.g. In Germany, bicycle is
primary source of
transportation; promote it as
reliable, optimal performance
regardless of weather
– In U.S., primarily used for
recreation, focus on weekend
fun.
 Language?
Standardize or Adapt
• Problems with translation, pronunciation
• Idioms
• Multiple languages in country
 Factors influencing International Marcom
decisions
• Culture: Parker pen co. used the slogan ‘Avoid
Embarassment-use Quink’ in the USA.
(Problem in Latin America with Spanish
translation- ‘Evite Embarazos’)

• P&G used an animated stork delivering

Pamper diapers in the USA.(Makes no sense in
Japan)
 Misfires in Advertising
• Phonetic Problems with Brand Names

- Coca Cola (Sounds like bite the Wax Tadpole)

- Misair (Sounds like Misery in French)

• Translations
GM translated its slogan ‘Body by Fischer’ to ‘
Corpse by Fischer’ in Belgian
• Intent Translation
- Stepping Stone - Stumbling Block
- Car Wash - Car Enema
- Highly Rated - Over Rated
• Symbols
- Owl - Bad Luck in India
 Areas of Advertising Legislation
• Mandatory Use of Language (Belgium, Canada,
France, Mexico only).
• Price Advertising
• Sales
• Prohibition of Misleading Advertising.
• Comparative Advertising
• Advertising Using Product Tests.
• Environmental Claims
• Protection of Children
 Advertising Legislation
 Varies by country; examples:
- France: Requirement to keep the French language pure
- Islamic countries: Ban the use of sex in advertising
- European Union Directive does not permit advertising that directly
exhorts minors to buy a product; that directly encourages minors to
persuade their parents to purchase the goods advertised, show
minors in dangerous situations
- European Union Directive prohibits television advertising for tobacco
products and prescription drugs
- European Union is attempting to harmonize broadcasting laws
- The Italian government limits television advertising to 12 percent of
airtime per hour and four percent over a week on state channels, and
18 percent per hour and 15 percent per week on commercial
stations.
- In addition, the top Italian television stations do not guarantee that
advertising shown on their stations will reach the target audience.
 Media Planning Considerations
• Availability- some too few; others too many
• Cost-prices not fixed; susceptible to
negotiation
• Coverage-wide variety of media required to
reach majority of market
• Lack of Market Data
 Media Selection
• Newspapers
• Magazines
• Radio & Television
• Satellite and Cable Television
• Direct Mail
• Internet
• Other Media
 Media Spending
• Outdoor - important in Japan and South Korea - exposure
in large cities
• Cinema - Argentina and India where films are popular
pastimes
• Print - high literacy rates e.g France, Germany, and
Sweden
• Radio - lack of opportunity in Europe with government
ownership
• Television - Strong in USA, Asia, and South America
 Organising and co-ordination of advertising
effort
• Domestic agency
• familiarity/trust/relationship/knowledge
• no international experience
• Appointing local agency
• (local to the market) understand local cultures/relevant
contacts/experience
• Centralising the effort
• Saatchi & Saatchi claimed to be the first global advertising agency -
‘one sight, one sound, one sell’
 Personal selling
• Generally the marcom thrust where
• wages are low: Philip Morris in Venezuela employs 300 sales
people and assistants
• Linguistic pluralism exists e.g India
• Literacy level is low
• One to one contact is important in oriental cultures
• Business etiquettes : being late is inexcusable in Hong Kong but it
is common in many countries.
• Formal and informal business meetings.
 Role of Personal selling in Japan
• Individuality & independence are not as highly
valued in Japan as they are in the West.
• Japanese firms rarely use non-financial
incentives to reward sales persons.
• Loyalty to one’s employer is fundamental to
Japanese society.
 International Fairs and Exhibitions
• Provide an opportunity to assess the
competition
• Help in knowing customer’s response
• Meeting place for clients, importers, agents
and distributors
• Provide publicity and generate goodwill.
 Important issues for trade fairs
• Visit the overseas market in advance
• Carry out a market/environment analysis
• Prepare a detailed plan of displays
• Prepare exhibition material
• Immediate follow up after the participation.
 Sales promotion
• To solicit trade enquiries
• To generate trials for new products
• To generate additional sales
• To motivate customers for repeat purchase
 International Pricing Decisions

Pricing is especially important in international

marketing strategy decisions, due to its effect
on product positioning, market segmentation,
demand management, and market share
dynamics.
Multinationals also face the challenges of how
to coordinate pricing decisions across
different countries.
 Environmental Considerations

International
companies must react
effectively to changes
in the
• competitive
environment,
• political and legal
environment
• economic and
financial 32
 Competitive environmental
Influences
• Competition
– Retail challenges difficult to identify
– Competition from unauthorized channels, grey
markets/Parallel Imports
– Cheaper prices in countries with weaker
currencies
– Competition offers legal “copycat” products

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 Political and Legal Influences
• Political and Legal:
– Setting limits on gross margins.
– Setting price limits.
– Local government subsidies to manufacturers.
– Tariffs
– Restricting repatriation of profits by multinationals.
– Taxing and/or encouraging reinvestment of profits.

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 Economic and Financial Influences:

• Economic, Financial, Monetary:

– Inflation
• Sometimes companies must low prices only to stay in
the market
• Fluctuating exchange rates
– Percentage that covers the exchange rate
• Binding to strong currency
– Hard versus soft currencies
– Countertrade

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 Inflationary Environment
• Defined as a persistent upward change in price
levels
– Can be caused by an increase in the money supply
– Can be caused by currency devaluation
• Essential requirement for pricing is the
maintenance of operating margins
 Government Controls, Subsidies, and
Regulations
• The types of policies and regulations that
affect pricing decisions are:
– Dumping legislation
– Resale price maintenance legislation
– Price ceilings
– General reviews of price levels
 Competitive Behavior
• If competitors do not adjust their prices in
response to rising costs it is difficult to adjust
your pricing to maintain operating margins.
• If competitors are manufacturing or sourcing
from a lower-cost country, it may be necessary to
cut prices to stay competitive
• Marketers of domestically manufactured finished
products may move to offshore sourcing of
certain components to keep costs down and
prices competitive. This may be used as a
strategic pricing tool.
 Global Pricing Objectives and Strategies

• Determine the objectives for the pricing objectives

– Unit Sales , Market Share , Return on investment.
• Develop strategies to achieve those objectives
– Penetration Pricing: Price lower than competitors in order
to quickly penetrate the market at competitors' expense.
Appropriate to saturate market prior to imitation by
competitors
– Market Skimming: Pricing above competitors’ prices when
competition is minimal. May occur at the introduction
stage of product life cycle. Focus on quality, uniqueness
and status
Basic Pricing Approaches in the International
Markets
• Cost-based pricing: Full cost pricing, Marginal
cost pricing.
• Market based pricing: Leadership positioning,
follow the competition positioning, below the
competition positioning.
Standardized vs. Local Pricing
Local Pricing
– Prices set to meet purchase power of consumers
and to account for differences in distribution
systems, market position and taxes. This is also
known as the tailor-made pricing strategy to suit the
market differentials of each country and segment.
Standardized Pricing
– Uniform price worldwide . Such strategy is possible
only for those firms that have achieved similar
levels of customer acceptance and quality
perception the world over.
 Pricing Practices
Higher Home Market Prices & Lower
International Market Prices
Justified by:
– Lower labor or raw material cost in the international
market
– Strong local competition in the international market
– Lower buying power of host-country consumers
– Goal: increase market share via penetration pricing
 Pricing Practices, continued
Lower Home Market Prices & Higher International
Market Prices
Justified by:
– No cost advantages to producing overseas
– Few or no challenges from international competition
– Limited market potential
– International buyers can afford higher prices