BUS 305

INTERNATIONAL MARKETING International Business Operations:

- International Marketing

- International Management

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INTERNATIONAL MARKETING MARKETING MIX:

Four elements constitutes an IB marketing mix

Product attributes (Product)

Distribution strategy (Place)

Communication strategy (Promotion)

Pricing Strategy (Price)

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INTERNATIONAL MARKETING Product Attributes:

A product can be viewed as a bundle of attributes

Eg:

the attributes that make up a car include:

design, quality, performance, fuel consumption,

comfort, power, etc

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INTERNATIONAL MARKETING - Products sell well when their attributes match

consumer needs and only the marketing

department can define those needs for R&D.

- Also, marketing is supposed tell R&D when to

globally standardized products or locally

customized products.

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INTERNATIONAL MARKETING Eg;

BMW cars sell well to people who have high needs

for luxury, quality and performance.

(high income earners)

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INTERNATIONAL MARKETING Distribution Channels:

The means or channel used by a firm for delivering

its product to the customer

A firm that manufactures its products in a particular

country can sell:

- Directly to the customer

- To the retailer

- To the wholesaler

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INTERNATIONAL MARKETING A firm that manufactures its products in its home

country and sells in a foreign country:

- Directly to the customer

- To the retailer

- To the wholesaler

- To an Import agent

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INTERNATIONAL MARKETING Which channel to use is based on:

- Retail Concentration:

Concentrated Retail System: Is one in which only

few retailors supply most of the markets.

Developed countries have a concentrated retail

system, consisting of large retail stores or

shopping malls eg: Tesco, Wal-Mart etc

Firms are able to sell directly to retailors

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INTERNATIONAL MARKETING Fragmented Retail system: Is one in which there

exist many retailors.

Developing countries have a more fragmented

retail system with many retail stores serving local

neighborhood.

Firms sell to wholesalers or import agents, who

then sell to retailors.

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INTERNATIONAL MARKETING Implications for IB:

Concentrated Retail System:

In countries where the retail system is very

concentrated, firms deal directly with retailors

cutting out wholesalers. (developed countries).

In US, large companies may sell directly to

supermarkets rather than going through wholesale

distributors.

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INTERNATIONAL MARKETING - Fragmented Retail System: firms should sell to

import agents or wholesalers (longer channel)

Channel length:

The number of intermediaries between the

producer and the consumer.

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INTERNATIONAL MARKETING - Channel Exclusivity:

An exclusive distribution channel is one that is

difficult for new firms to access.

It is often difficult for new firms to get access to

shelf space in supermarkets.

Retailers prefer to carry products of established

firms rather than unknown firms

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INTERNATIONAL MARKETING The exclusivity of a distribution channel varies

between countries.

Eg: Japan has a very exclusive system.

Relationship between firms, wholesalers and

retailers is often based on the understanding that

distributors will not carry products of competing

firms. Distributors in return receive an attractive

mark-up by the manufacturer.

This makes access to Japanese market difficult.

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INTERNATIONAL MARKETING

Overcoming Channel Exclusivity:

To overcome channel exclusivity, IB should use a

long distribution channel by going through either

the wholesalers or import agents.

Import agents and wholesalers may have long-

term retailers or important customers, hence would

be able to get access to a distribution channel or

sell directly to customers.

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INTERNATIONAL MARKETING - Channel quality:

Refers to the expertise, competencies and skills of

established retailers in a nation and their ability to

sell and support the products of IB.

Although the quality of retailers in most developed

nations is good, in emerging markets and less

developed nations channel quality is poor.

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INTERNATIONAL MARKETING Implications for International Businesses:

Poor channel quality may require an IB

- devote considerable time upgrading the channel

by providing extensive education and support to

retailers

- By establishing its own retail channel

Eg: Apple is opening up retail stores in several

nations, in order to provide point-of-sale education,

service and support for its popular iPod and

computer products.

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INTERNATIONAL MARKETING Communication Strategy

Communicating the attributes of the product to

prospective customers.

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INTERNATIONAL MARKETING A communicating strategy is either a push strategy

or a pull strategy

- Push strategy: uses personal selling (direct

marketing) to communicate the marketing

message to consumers

- Pull strategy: uses mass media advertising to

communicate the marketing message to

consumers

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INTERNATIONAL MARKETING Push vrs Pull Strategy

Push Strategy is used:

- For industrial products or complex products

- When distribution channels are short

- When few print or electronic media are available

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INTERNATIONAL MARKETING Pull Strategy is used:

- For consumer goods

- When distribution channels are long

- When sufficient print or electronic media are

available

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INTERNATIONAL MARKETING Pricing Strategy:

- Price Discrimination: when consumers in

different countries are charged different prices for

the same product.

For Successful Price Discrimination:

- The firm must be able to keep its markets

separate or else individuals may engage in

arbitrage

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INTERNATIONAL MARKETING Arbitrage: buying from countries where prices are

lower and re-selling in countries where prices are

higher.

Eg:

Ford practices price discrimination between Great

Britain and Belgium.

A Ford car can cost up to $3,000 more in Great

Britain than in Belguim

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INTERNATIONAL MARKETING Ford has been able to keep the 2 markets

separate because:

- Left-hand-drive cars are sold in Belgium

- Right-hand-drive cars are sold in Great Britain

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INTERNATIONAL MARKETING

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- Different Price Elasticity of Demand in

different countries

Price elasticity of demand:

is a measure of the responsiveness of demand for

a product to a change in price.

INTERNATIONAL MARKETING Elastic: when a small change in price causes a

large change in demand.

Eg:

In countries where income levels are low,

consumers with limited income tend to be very

price conscious

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INTERNATIONAL MARKETING Inelastic: when a large change in price causes

only a small change in demand

Eg:

In countries where income levels are high,

consumers are not sensitive to changes in price.

NB:

Generally, a firm can charge a higher price in a

country where demand is inelastic.

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INTERNATIONAL MARKETING Strategic Pricing:

- Predatory Pricing: when price is used as a

competitive weapon to drive other competitors

out of the market.

- Once the competitors have left the market, the

firm can raise prices and enjoy high profits

- For such a strategy to work, a firm must have a

profitable position in another national market

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INTERNATIONAL MARKETING Example:

Matsushita, a Japanese firm, was accused of

using this strategy to enter the US TV market.

- As one of the major TV producers in Japan,

Matsushita earned high profits at home.

- It then used those profits to subsidize the loses it

made in the US during its early years

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INTERNATIONAL MARKETING - Multipoint Pricing: when a firms pricing strategy

in one market has an impact on its rival’s pricing

strategy in another market

- This normally happens when two or more IB

compete against themselves in 2 or more

national markets.

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INTERNATIONAL MARKETING Example:

Fuji launched an aggressive competitive attack

against Kodak in the US company’s home market

in Jan. 1997, cutting prices by 50%.

- Kodak’s response was to aggressively cut prices

in Fuji’s largest market, Japan.

- Fuji responded to Kodak’s counterattack by

pulling back from its aggressive stance in US

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EXAMS Exams

Section A

10 questions (answer all)

Section B

2 case studies (answer 1)

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