Post on 22-Nov-2014
INTERNATIONAL BUSINESS
CHAPTER 11:
MARKETING STRATEGY
Presenter: Nguyen Thanh Huong
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CONTENTS
Active learning case: Volkswagen in the US
market
International marketing:
- International Market Assessment (P. 312)
- Product Strategies (P. 315)
- Promotion (P. 320)
- Pricing (P. 324)
- Place (P. 326)
Real case: Citigroup in China (P. 334)
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A. VOLKSWAGEN IN THE U.S MARKET
During 1960s, VW held more market share in US than all other auto
imports combine.
In the 1970s, VW sales reached 300.000 units annual.
The 1980s & early 1990s down to 150.000 units market share down
from 3% 0.5% because can’t achieve the cost advantage of Japan.
March 1998, VW introduced New Beetle with European design stunning
comeback in US.
2002, VW delivered over 420.000 vehicles to US, accounted 10.1% of US
car import market & hold 6.6% market share if combine domestic &
imports production.
However, 20% of VW’s shares are held by the government of Lower
Saxony prevent VW from cutting labor costs in Germany pay $1.700
more for each car problem when Mercedes & BMW join the market
segment.
VW purchased Skoda, SEAT, Audi, Bently, Lamborghini, Buggati bands &
set out to create synergies in manufacturing processes makes 54
models in 4 floor plants.
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VOLKSWAGEN IN U.S MARKET
1. How would VW use market assessment to evaluate
sales potential for its cars in the US?
2. Does VW need to modify its cars for the US market?
Why or why not?
3. Would the nature of VW’s products allow the
company to use an identical promotional message
world wide, or would the company have to develop a
country-by-country promotion strategy?
4. How would currency fluctuations affect VW’s profit in
the US market?
5. What type of distribution system would be most
effective for VW in the US? 4
B. INTERNATIONAL MARKETING
International marketing is the process of identifying the goods &
services that customers outside the home country want and then
providing them at the right price & location.
Similar as at home, but with some important modifications that can
adapt marketing efforts to the needs of the specific country or
geographic locale.
Some MNEs can use the same strategy abroad as they have at home.
However, in most case, a company must tailor-make its strategy so it
appeals directly to the local customer.
Five major areas:
1. Market assessment
2. Product decisions
3. Promotion strategies
4. Pricing decisions
5. Place/distribution strategies.
4 Ps of Marketing, constitute the heart of international marketing
efforts
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1. INTERNATIONAL MARKET ASSESSMENT
International marketing assessment is an evaluation
of the goods & services that the MNEs can sell in the
global marketplace to pinpoint specific offerings and
geographic targets.
Involves a series of analyses:
a. Initial screening: Basis need & potential
b. 2nd screening: Financial & Economic conditions
c. 3rd screening: Political & Legal forces
d. 4th screening: Sociocultural forces
e. 5th screening: Competitive environment
f. Final selection.6
INTERNATIONAL MARKET ASSESSMENT
a. Initial screening: Basis need & potential
- Is the process of determining the basic need and
potential of the MNE’s goods and services in foreign
markets Answer: Who might be interested in buying
our output?
- Examining the current import policies of other countries
& identifying the goods & services being purchased from
abroad.
- Determining local production.
- Examining the demographic changes taking place in the
country that will create new, emerging markets.
MNEs can target potential markets. 7
INTERNATIONAL MARKET ASSESSMENT
b. Second screening: Financial & Economic conditions
- Reduce the list of market prospects by eliminating those that fail to meet financial
& economic considerations.
- Financial considerations include: inflation rates, interest rates, expected returns on
investment, buying habits of customers, availability of credit.
- Economic considerations relate to a variety of market demand influences, including
market indicators (market size, market intensity, market growth) to measure the
relative market strengths of various geographic areas.
Quite often these data are analyzed through the use of quantitative
techniques:
• Trend analysis: The estimation of future demand by either extrapolating the
growth over the last 3 to 5 years & assuming that this trend will continue or by
using some form of average growth rate over the recent past.
• Estimation by analogy: A method of forecasting market demand or market
growth based on information generated in other countries.
• Regression analysis: A mathematical approach to forecasting that attempts to
test the explanatory of a set of independent variables.
• Cluster analysis: A marketing approach to forecasting customer demand that
involves grouping data based on market area, customer, or similar variables.
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INTERNATIONAL MARKET ASSESSMENT
c. Third screening: Political & Legal forces
- Take a look at political & legal forces by examine the entry barriers in the
form of import restrictions or limits on local ownership of business operations
identifying loopholes around the various restrictions or data that indicate
barriers are far less extensive than initially believed.
- Another consideration is the protection offered for patents, trademarks,
copyrights.
d. Forth screening: Sociocultural forces
- Sociocultural forces: language, work habits, customs, religion, value great
affects the way people live MNEs need to examine how well their operations
will fit into each particular culture.
e. Fifth screening: Competitive environment
- Companies don’t want to enter markets where there is strong competition.
- However, they often decide to enter a competitive market.
f. Final selection:
- Before making a final selection, MNEs usually enhance information by visiting
the sites & talking to trade representatives or local officials.9
2. PRODUCT STRATEGY
Product strategies vary depending on the specific good & the
customer. Some products can use same strategies, others must be
modified or adapted & sold according to a specially designed strategy.
10Selected examples of product modification in the international arena
PRODUCT STRATEGY
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Moderate to high modification: Economics, culture, local laws & product
life cycle (PLC) can compel an MNE to use moderate to high product
modification.
• Economics: Affect the decision to modify a product (how to package, cost of the
product, basic product or have extras)
• Culture:
- A product sometimes be adapted to different ways of doing things (Exp: Washing machines)
- Products that aren’t modified marketing focus is different because of different way to use it (Exp: Schweppes, hard liquors)
- Culture influences purchasing decisions on the basis of style or aesthetics (Exp: Cosmetics, beauty aids)
- Convenience & Comfort (Japanese car vs. VW Beetle)
- Color & Language
• Local laws: Require product modification in order to meet environment & safety
requirements. Food & pharmaceutical require packaging & labeling different in
different countries. Brand-name protection also require product modification.
• Product life cycle (PLC): One of the most effective strategies has been to shorten
the PLC by offering new goods & services before the demand for the old ones has
dropped significantly.
3. PROMOTION STRATEGY
Promotion is the process of stimulating demand
for a company’s goods & services through
advertising & personal selling. The specific
approach used will be determined by the nature of
the product.
Nature of the product: In promoting, a company can
choose whether to use the message worldwide or not, and
whether need to change the product or not 4 variations:
• Identical product & Identical message
• Identical product but different message
• Modified product but same message
• Modified product & modified message
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PROMOTION STRATEGY
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Advertising: is a non-personal form of promotion in
which a firm attempts to persuade consumers to a
particular point of view.
• 2 reasons that advertising must be adapted to
the local market are: (1) different way in using
product, (2) advertising massage doesn’t make
sense if translated directly.
Personal selling: is a direct form of promotion used
to persuade consumers to a particular point of view.
Some goods, such as industrial products or those that
require explanation or description, rely heavily on
personal selling. (Exp: Avon)
4. PRICING STRATEGY
Pricing often influenced by government
controls, market diversity, currency fluctuations
& price escalation forces.
• Government controls: (1) Dictate minimum & maximum
prices that can be charged to customers. (2) Prohibit
dumping (the selling of imported goods at a price below
cost or below the cost in home country)
• Market diversity: (1) Consumer tastes & demands. (2)
The perceived quality of product. (3) Tax laws & attitudes
about carrying debt.
• Currency fluctuations
• Price escalation forces14
5. PLACE STRATEGY
Place strategy involves consideration of distribution. MNEs
will spend time in examining the different system in place, the
criteria to use in choosing distributors & channels, and how to
employ distribution segmentation.
• Different distribution systems:
- Consumer spending habits can negate attempts to standardize
distribution: cash or credit.
- Location where consumers are used to buying also influence distribution:
supermarket or small stores.
• Choosing the best distribution system:
- Strong in financial wholesaler or retailer can survive the long run.
- Can keep sufficient inventory: autos, computers, electronic equipment
- Well connected knowing the right people, handling government red
tape.
- The number & types of product lines the distributor carries currently.
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VOLKSWAGEN IN U.S MARKET
1. How would VW use market assessment to evaluate
sales potential for its cars in the US?
- Look at the numbers of cars being imported into the country &
number being built locally information of current product
supply.
- Find out number of auto registrations & how fast it is growing
annually useful in predicting new sales potential.
- Examine the trend of new car sales over last couple of years &
forecast overall industry sales for the next 2 or 3 years.
- Compare the strengths offered by VW cars and by other
competitors offer for maximum market penetration.
2. Does VW need to modify its cars for the US market?
Why or why not?
- Yes. VW need to make some changes in styling & engineering:
European styling & German engineering.
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VOLKSWAGEN IN U.S MARKET
3. Would the nature of VW’s products allow the company to use an
identical promotional message world wide, or would the company
have to develop a country-by-country promotion strategy?
- In less developed countries message should be geared toward economy &
efficiency.
- In more developed countries focus on styling, handling, engineering and
non-economic factors.
4. How would currency fluctuations affect VW’s profit in the US
market?
- German Mark were to decline VW’s profit per car sold in US would rise
because these $ would buy more Marks & vice versus.
5. What type of distribution system would be most effective for VW in
the US?
- Use same type of distribution system with other car manufacturers.
- Open new dealerships increase market coverage.
- Build VWs in the US reduce the distance of transporting reduce cost and
also ensure faster delivery.
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THE END
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