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Principles of Marketing

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Principles of Marketing ­ MGT301
VU
Lesson ­ 41
Lesson overview and learning objectives:
Discuss the global marketing environment, the international trade system and the economic,
political-legal, and cultural environments that affect marketing decisions. Outline the key elements
of deciding whether to go international, deciding which markets to enter, and deciding how to
enter the market, either through exporting, joint venturing, or direct investment. Explain the
primary issue of deciding on the global marketing program, whether to use a standardized or
adapted marketing mix, or some combination of the two. Distinguishing among the ways
companies manage their global marketing organizations, through export departments, international
divisions and becoming a global organization.
A. GLOBAL MARKETING
Companies today can no longer afford to pay attention only to their domestic market, no matter
how large it is. Many industries are global industries, and those firms that operate globally achieve
lower costs and higher brand awareness. At the same time, global marketing is risky because of
variable exchange rates, unstable governments, protectionist tariffs and trade barriers, and several
other factors. Given the potential gains and risks of international marketing, companies need a
systematic way to make their international marketing decisions. The company must understand
the international marketing environment.
The l990s mark the first decade in which companies around the world must start thinking globally.
Time and distance are shrinking rapidly with the advent of faster communication, transportation,
and financial flows. Products developed in one country are finding enthusiastic acceptance in
other countries. Domestic companies that never thought about foreign competitors suddenly find
these competitors in their own backyards. The firm that stays at home to play it safe not only
might lose its chance to enter other markets but also risks losing its home market. A company
faces six major decisions in international marketing.
a. Getting involved in international marketing:
Before getting involved in
the international marketing
some  important  aspects
should be considered by the
organization, these include
the basic decisions that why
should we go international
HOW MUCH
DO WE GET
IF YES,
COMMITMENT
INVOLVED IN
than in which specific market
WHICH
IN EACH
INTERN ATIN AL
M ARKETS?
to enter, how to reorganize
M ARKET?
M ARKETING?
the resources and the impact
of
the
international
operations  on  local  or
HOW SHOULD
IMPACT ON
WE
DOMESTIC-
domestic operations should
REORG ANIZE
B ASED
also be considered major
OUR
M ARKETING?
OPER ATIONS?
decisions that company takes
in
involving
into
international marketing are:
Major International Marketing Decisions:
1. Understanding - comes from looking at the international marketing environment.
Multinational companies operating in many countries have proliferated and in a global
economy more companies must consider international markets if they are to grow.
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2. Deciding - whether to go abroad may be the best growth opportunity, even for relatively small
companies. More foreign markets can increase volume.
3. Which Markets - to enter is also based upon environmental conditions.
4. How to Enter - involves choices about how to compete.
5. The Marketing Program - appropriate to international markets includes variations on the
product and promotion.
6. The Marketing Organization - choices available in international marketing include export
department, international division, and global organization.
b. LOOKING AT THE GLOBAL MARKETING ENVIRONMENT
i.
Globalization
A myriad of forces are coming together in the late 1990's which are triggering the globalization of
industries, companies and individuals. Trade blocks are forming which are consolidating market
regions; global communications and media are bringing information, services, cultures and brands
to all corners of the world. Industries such as finance, computers, telecommunications and media
have become global.
ii.
International Trade System
Trade system concerns identify opportunities and obstacles for US firms abroad. Companies
should investigate tariffs (taxes on imported goods), quotas (which restrict import amounts), and
other obstacles such as non-tariff barriers that may affect ability to compete.
1. The General Agreement on Tariffs and Trade - GATT: This is a 45-year-old treaty designed to
promote world trade by reducing tariffs and other international trade barriers.
2. Regional Free Trade Zone: Certain countries have formed free trade zones or economic
communities­groups of nations organized to work toward common goals in the regulation of
international trade. One such community is the European Community (EC)
When selling aboard, the firm faces various restrictions. Examples are:
1). A tariff is a tax levied by a government against certain imported products, which is designed
to raise revenue or to protect domestic firms. This is the most common barrier. The tariff may
be designed either to raise revenue or to protect domestic firms.
2). A quota is a limit on the amount of goods that an importing country will accept in certain
product categories. It is designed to conserve on foreign exchange and to protect local industry
and employment.
3). An embargo is a ban on the import of a certain product (the strongest form of quota).
4). Exchange controls are limits placed by a government on the amount of its foreign exchange
with other countries and on its exchange rate against other countries.
5). Non tariff trade barriers are no monetary barriers to foreign products, such as biases against a
foreign company's bids or product standards that go against a foreign company's product features.
c. Looking at the Global Marketing Environment
i.
Economic Environment.
Concerns relate to the industrial structure of the host country. Subsistence and raw-material
exporting countries may be limited markets for some kinds of consumer goods.
ii.
Political/Legal Environments.
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Regulations and government attitudes vary from country to country and in each country in their
attitude toward foreign firms. Scrutiny of legal regulation is a must. At least four political--legal
factors should be considered when considering whether to do business in a given country.
1. Attitudes towards international buying: Some nations are quite receptive to foreign firms and
others are quite hostile.
2. Political Stability: Stability is another issue. Governments change hands, sometimes violently.
Even without a change a government may decide to respond to new popular feelings.
3. Monetary Regulations: Firms need to assess the government and currency regulations within a
country to determine if any restrictions exist and if they will play a negative role in the
international business in that country. Besides currency limits, a changing exchange rate also
creates high risks for the seller. International trade usually involves cash transactions; however
in some instances a barter system can be developed, this practice has been called counter trade
and now accounts for about 25% of all world trade.
iii.
Cultural Environment.
Cultural differences are very important in international marketing. Most advertising and even
product images are culturally based and may be inappropriate, ineffective, and even offensive in
another culture. Care is required.
d. DECIDING WHETHER TO GO INTERNATIONAL
Not all companies need to venture into foreign markets to survive. For example, many companies
are local businesses that need to market well only in the local marketplace. However, companies
that operate in global industries, where their strategic positions in specific markets are affected
strongly by their overall global positions, must think and act globally. Any of several factors might
draw a company into the international arena.  International competitors might attack the
company's domestic market by offering better products or lower prices. The company might want
to counterattack these competitors in their home markets to tie up their resources. Or the
company might discover foreign markets that present higher profit opportunities than the
domestic market does. The company's domestic market might be shrinking, or the company
might need an enlarged customer base in order to achieve economies of scale. Or it might want to
reduce its dependence on any one market so as to reduce its risk.  Finally, the company's
customers might be expanding abroad and require international servicing.
e. DECIDING WHICH MARKETS TO ENTER
Before going abroad, the company should try to define its international marketing objectives and
policies. First, it should decide what volume of foreign sales it wants. Second, the company must
choose how many countries it wants to market in. Third, the company must decide on the types of
countries to enter. Possible international markets should be ranked on several factors, including
market size, market growth, and cost of doing business, competitive advantage, and risk level.
f. DECIDING HOW TO ENTER THE MARKET
i.
Exporting.
Exporting may be of two kinds.
1. Indirect Exporting: works through independent international intermediaries and involves less
investment by the exporter.
2. Direct Exporting: involves more risk and investment as the firm sets up its own presence in
the host country but the potential return is also greater.
ii.
Joint Venturing.
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Firms have four types of joint venture available to them.
1. Licensing: occurs when a company enters into an agreement with a licensee in the foreign
market. Licensing means little risk but also little control.
2. Contract Manufacturing: arranges for a foreign producer to make products in the host country
for that market.
3. Management Contracting: has the exporting firm provide the management team with the host
country supplying the capital.
4. Joint Ownership consists: of one company joining with another in the host country to create
a local business in which they share owner ship and control.
iii.
Direct Investment
Direct investment occurs when the exporting firm enters a foreign market by developing foreign-
based assembly or manufacturing facilities.
g. DECIDING ON THE INTERNATIONAL MARKETING PROGRAM
Global or multinational?
Although the issue
has been vigorously
F iv e In te r n a tio n a l P r o d u c t a n d
debated,  there  is
P r o m o tio n S tr a te g ie s
increasing recognition
that a global strategy
P ro d u c t
can possess sufficient
D o n 't C h a n g e
Adapt
P ro d u c t
P ro d u c t
flexibility to have a
S t r a ig h t
P ro d u c t
D o n 't
standardized business
Change
E x te n s io n
A d a p ta t io n
P r o m o tio n
strategy and yet still
market and deliver
C o m m u n ic a tio n
D ual
Adapt
A d a p t a tio n
A d a p ta t io n
P r o m o tio n
products adapted for
many
different
P r o d u c t In v e n t io n
markets.
D e v e lo p N e w P r o d u c t
i.
Product Strategies.
1. Straight Product Extension: involves marketing a product in the foreign market without
making any changes. Some products may have very strong brand awareness and already be
desired as is in the new market.
2. Product Adaptation: involves changing the product to meet local conditions or wants. Often
product forms need to be altered. Size and tastes, for example, are usually at least partially
preferred on some culturally related dimensions.
3. Product Invention: consists of creating something entirely new for the foreign market.
ii.
Promotion
1. Communication Adaptation: is often required. Although some companies can use a single
theme and meaning internationally, it is often the case that the local variation on even a
universal theme may require some modification.  Also, media vary in the reach and
effectiveness, even their availability.
2. Dual Adaptation: involves a combination of promotion and product alternations for the
foreign market.
iii.
Price
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International pricing: Regardless of method used to calculate prices, they will probably be higher
than domestic prices. Issues relate to transfer pricing, dumping (The controversial trade practice
of selling a product in a foreign market at a lower price than it commands in the producer's
domestic market.) and grey market.
iv.
Distribution channels
1. Whole-channel view: This view involves designing channels that take into account all
the necessary links in distributing the seller's products to final buyers, including the
seller's headquarters organization, channels between nations and channels within
nations.
h. THE GLOBAL STRATEGY FRAMEWORK
i.
Three Step Global Strategy
Every industry has aspects that are global or potentially global - global meaning that there are inter
country connections. A strategy is global to the extent that it is integrated across countries. George
Yip suggests that a total global strategy usually has three separate steps or components:
1. Step one is the development of a core strategy which is the basis of the firm's competitive
advantage.
2. Step two involves the internationalization of the strategy through expansion of activities and
adaptation of the core strategy to several country markets.
3. Step three integrates the strategy across countries. At this stage globalization is achieved. This
involves managing for worldwide business leverage and competitive advantage.
ii.
Globalization strategy
1. Market participation relates to the choice of country markets and the level of activity in these
countries.
2. Product/Service standardization involves the extent to which standardization or differentiation
exists in each country.
3. Location of value adding activities requires choices of location of each of those activities in the
business's value chain from R & D to service back-up.
4. Marketing involves choices about worldwide use of brand names, advertising, sales strategies
and service.
5. Competitive moves relate to the extent to which moves in specific countries form part of a
global competitive strategy.
i. DECIDING ON THE MARKETING ORGANISATION
i.
Export Department.
During early international marketing efforts, companies typically just create a new department to
coordinate international operations. The sales manager may take on larger staff if and as the
international business grows in importance and more marketing services are needed to support it.
ii.
International Division.
As the level of involvement in and complexity of international operations increases, companies
commonly organize an international division. In addition to running international operations, the
division oversees strategic growth and investigates different types of foreign entry opportunities in
new countries. Operating units in foreign markets under division control may be organized by
geographical organization, world product groups, or international subsidiaries.
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Principles of Marketing ­ MGT301
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iii.
International Organization.
For many large companies, the scope of operations grows to the point where they are no longer a
firm involved in many foreign markets, they are a truly a multinational company. Recruitment,
management, suppliers, manufacturing, and financing are no longer linked to a single-country
mentality. The entire world becomes a single market whose segmentation is base upon strategic
and tactical competitive advantage, not national affiliation.
j. BASIC COMPETITIVE STRATEGY PROFILES
i.
Global Leader Strategy
Innovator in technologies, products and markets with high global share and wide country market
coverage
ii.
Global Challenger Strategy 1
Frontal or encirclement attack on the leader in all markets with increasing country market coverage
and high global share but less than the leader.
iii.
Global Challenger Strategy 2
Flanking or bypassing world leader with increasing country market coverage and high global share
but less than the leader.
iv.
Global Follower Strategy
Rapid imitation of leader or challenger with moderate country market coverage and emphasis on
price sensitive markets. The result is overall moderate share with high shares in selected country
markets.
v.
Global Niche Strategy 1
Rapid penetration of narrow market segments by selective targeting of country markets and small
share of overall market.
vi.
Global Niche Strategy 2
Infiltration - slow penetration of selected narrow markets with focus on selected country markets
and low share of the overall market.
vii.
Global Collaborator Strategy
Innovations in research and development of technologies, products and markets, set standards and
shares them with other firms. This shows small or moderate country market shares but high shares
when all strategic "standards users" are included.
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Table of Contents:
  1. PRINCIPLES OF MARKETING:Introduction of Marketing, How is Marketing Done?
  2. ROAD MAP:UNDERSTANDING MARKETING AND MARKETING PROCESS
  3. MARKETING FUNCTIONS:CUSTOMER RELATIONSHIP MANAGEMENT
  4. MARKETING IN HISTORICAL PERSPECTIVE AND EVOLUTION OF MARKETING:End of the Mass Market
  5. MARKETING CHALLENGES IN THE 21st CENTURY:Connections with Customers
  6. STRATEGIC PLANNING AND MARKETING PROCESS:Setting Company Objectives and Goals
  7. PORTFOLIO ANALYSIS:MARKETING PROCESS,Marketing Strategy Planning Process
  8. MARKETING PROCESS:Analyzing marketing opportunities, Contents of Marketing Plan
  9. MARKETING ENVIRONMENT:The Companyís Microenvironment, Customers
  10. MARKETING MACRO ENVIRONMENT:Demographic Environment, Cultural Environment
  11. ANALYZING MARKETING OPPORTUNITIES AND DEVELOPING STRATEGIES:MIS, Marketing Research
  12. THE MARKETING RESEARCH PROCESS:Developing the Research Plan, Research Approaches
  13. THE MARKETING RESEARCH PROCESS (Continued):CONSUMER MARKET
  14. CONSUMER BUYING BEHAVIOR:Model of consumer behavior, Cultural Factors
  15. CONSUMER BUYING BEHAVIOR (CONTINUED):Personal Factors, Psychological Factors
  16. BUSINESS MARKETS AND BUYING BEHAVIOR:Market structure and demand
  17. MARKET SEGMENTATION:Steps in Target Marketing, Mass Marketing
  18. MARKET SEGMENTATION (CONTINUED):Market Targeting, How Many Differences to Promote
  19. Product:Marketing Mix, Levels of Product and Services, Consumer Products
  20. PRODUCT:Individual product decisions, Product Attributes, Branding
  21. PRODUCT:NEW PRODUCT DEVELOPMENT PROCESS, Idea generation, Test Marketing
  22. NEW PRODUCT DEVELOPMENT:PRODUCT LIFE- CYCLE STAGES AND STRATEGIES
  23. KEY TERMS:New-product development, Idea generation, Product development
  24. Price the 2nd P of Marketing Mix:Marketing Objectives, Costs, The Market and Demand
  25. PRICE THE 2ND P OF MARKETING MIX:General Pricing Approaches, Fixed Cost
  26. PRICE THE 2ND P OF MARKETING MIX:Discount and Allowance Pricing, Segmented Pricing
  27. PRICE THE 2ND P OF MARKETING MIX:Price Changes, Initiating Price Increases
  28. PLACE- THE 3RD P OF MARKETING MIX:Marketing Channel, Channel Behavior
  29. LOGISTIC MANAGEMENT:Push Versus Pull Strategy, Goals of the Logistics System
  30. RETAILING AND WHOLESALING:Customer Service, Product Line, Discount Stores
  31. KEY TERMS:Distribution channel, Franchise organization, Distribution center
  32. PROMOTION THE 4TH P OF MARKETING MIX:Integrated Marketing Communications
  33. ADVERTISING:The Five Mís of Advertising, Advertising decisions
  34. ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion
  35. PERSONAL SELLING:The Role of the Sales Force, Builds Relationships
  36. SALES FORCE MANAGEMENT:Managing the Sales Force, Compensating Salespeople
  37. SALES FORCE MANAGEMENT:DIRECT MARKETING, Forms of Direct Marketing
  38. DIRECT MARKETING:PUBLIC RELATIONS, Major Public Relations Decisions
  39. KEY TERMS:Public relations, Advertising, Catalog Marketing
  40. CREATING COMPETITIVE ADVANTAGE:Competitor Analysis, Competitive Strategies
  41. GLOBAL MARKETING:International Trade System, Economic Environment
  42. E-MARKETING:Internet Marketing, Electronic Commerce, Basic-Forms
  43. MARKETING AND SOCIETY:Social Criticisms of Marketing, Marketing Ethics
  44. MARKETING:BCG MATRIX, CONSUMER BEHAVIOR, PRODUCT AND SERVICES
  45. A NEW PRODUCT DEVELOPMENT:PRICING STRATEGIES, GLOBAL MARKET PLACE