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Executive Master of Business Administration (International Business)(5sem /3year) International Marketing 1. Write short notes on any two of the following : (a) Social and cultural environment of international marketing Ans- Social and cultural aspects of a society form its very nature. As "culture" is the essence of a society, this chapter will concentrate on a discussion of it only. Of all the so called "environmental uncontrollables", culture, or at least the study of it, is one of the most difficult to comprehend, take account of and harness to advantage. This is particularly so when the product or service is "culture bound". Such products and services include those which are generally indigenous by nature and/or of relatively small value and very common. This is particularly true of foodstuffs. Sadza in Zimbabwe, a staple food made from maize meal, would not go down well in Beverley Hills, California. Neither would Middle Eastern sheeps eyes menus. Products of a more technical nature, like computers, on the other hand, have a universal appeal. However there is plenty of evidence to suggest that, with shrinking communications and with more people than ever travelling, even the most culture bound product or service can, and is, finding a world market niche. So even the infamous Veldschoen footwear of the South African pioneers has found its way into most corners of the world. What is culture Much has been written on the subject of culture and its consequences. Whilst on the surface most countries of the world demonstrate cultural similarities, there are many differences, hidden below the surface. One can talk about "the West", but Italians and English, both belonging to the so called "West", are very different in outlook when one looks below the surface. The task of the global marketer is to find the similarities and differences in culture and account for these in designing and developing marketing plans. Failure to do so can be disasterous. Terpstran9 (1987) has defined culture as follows: "The integrated sum total of learned behavioral traits that are manifest and shared by members of society" Culture, therefore, according to this definition, is not transmitted genealogically. It is not, also innate, but learned. Facets of culture are interrelated and it is shared by members of a group who define the boundaries. Often different cultures exist side by side within countries, especially in Africa. It is not uncommon to have a European culture, alongside an indigenous culture, say, for example, Shona, in Zimbabwe. Culture also reveals itself in many ways and in preferences for colours, styles, religion, family ties and so on. The colour red is very popular in the west, but not popular in Islamic countries, where sober colours like black are preferred. Much argument in the study of culture has revolved around the "standardisation" versus "adaption" question. In the search for standardisation certain "universals" can be identified. Murdock7 (1954) suggested a list, including age grading, religious rituals and athletic sport. Levitt5 (1982) suggested that traditional differences in task and doing business were breaking down and this meant that standardisation rather than adaption is becoming increasingly prevalent. Culture, alongside economic factors, is probably one of the most important environmental variables to consider in global marketing. Culture is very often hidden from view and can be easily overlooked. Similarly, the need to overcome cultural myopia is paramount. (b) International product standardization Ans- Components o Standardize the basic components of all your products. Look at your product line and determine where you can create similar component sections across several products. If necessary, modify your products so similar components can be used. For example, if you produce light fixtures, standardize the socket and ceiling attachment mechanisms across all your products. Make your product according to standards that designers use when designing different models. Not only will you save on production costs, you can standardize installation instructions and decrease testing costs. When you have a high number of similar components, you can quickly introduce new products to the market to capitalize on changes in customer preferences. Packaging o Slight changes in packaging can help you standardize your product offers globally. Without needing to make changes to your actual product, you can alter your product packaging to reflect differences in legal requirements such as warnings, language, promotions and branding. Products shipped to international destinations may also require additional protection against moisture, extreme temperatures and harsher sales conditions. For example, if you sell candy in the U.S. and want to expand to Spain, change your existing packaging to Spanish and change colors to be more appealing to a Spanish consumer, but sell the same candy you sell in the U.S. Quantity o Sell your standardized product in different quantities. Make large packages for warehouse stores and small packages for international markets. Most international customers do not buy products in bulk due to lack of space, transportation limitations and monetary differences. You can take advantage of product standardization savings by selling different quantities in different marketing channels. Consider selling your product in different quantities in the same store to capitalize on consumers that want a volume discount. For example, if you sell potato chips, sell a snack-size package and a family-size package. Sponsored Links Are You an Entrepreneur?www.EONetwork.org Looking for a Professional Entrepreneur Group? Join Today! Read more: Product Standardization Strategy | eHow.com http://www.ehow.com/way_5379387_product-standardization-strategy.html#ixzz1nTI0Tf35 (c) Counter-trade (d) Inter-depend ence of products and services 2. Distinguish between any two of the following : (a) Licensing and Contract manufacturing Ans- If you start a small business that markets your product designs, you will most likely begin by manufacturing the items yourself. However, growth will quickly make that impossible. Demand for your products will be higher than your ability to hand-manufacture them. At that point, you may have to contract with someone else to do the manufacturing. However, if demand becomes too high, you may need many thousands of units. In that case you may have to license your design to a manufacturer. Contract Manufacturing You should always seek to contract for the manufacture of your product before considering licensing. Contracting maintains your complete ownership of the product. You simply agree on a price for manufacturing the product, and the manufacturer delivers the number of units you request. You will pay cash upfront for this. Licensing If you need a large number of units, you should consider licensing. This arrangement puts all the risk on the manufacturer. Under a licensing agreement, you agree to let a manufacturer make as many copies of your product as it can, and you get paid a licensing fee. The manufacturer will expect to make money on the product as well, so you must be prepared to make less on a percentage basis than you would if you retained full ownership of the rights to the product. However, large volume can make up for the lower percentage per unit you receive. Distribution Manufacturers are not always distributors. If you license your product to a manufacturer that also distributes products, your licensing agreement should pay you even if the manufacturer can't sell the product. However, if you have a separate distributor from the manufacturer, you can use the distribution agreement to entice the manufacturer, which will see a ready market for the product. Time Limits You can limit the amount of time a manufacturer has to make your product. At a date in the future, you can regain full rights to your product, which will allow you to find a new manufacturer or to alter the product into a follow-up product. (b) Local brands and Global brands Ans- Quality Signal. Consumers watch the fierce battles that transnational companies wage over quality and are impressed by the victors. A focus-group participant in Russia told us: "The more people who buy [a] brand…the better quality it is." A Spanish consumer agreed: "I like [global] brands because they usually offer more quality and better guarantees than other products." That perception often serves as a rationale for global brands to charge premiums. Global brands "are expensive, but the price is reasonable when you think of the quality," pointed out a Thai participant. Consumers also believe that transnational companies compete by trying to develop new products and breakthrough technologies faster than rivals. Global brands "are very dynamic, always upgrading themselves," said an Indian. An Australian added that global brands "are more exciting because they come up with new products all the time, whereas you know what you'll get with local ones." That's a significant shift. Until recently, people's perceptions about quality for value and technological prowess were tied to the nations from which products originated. "Made in the USA" was once important; so were Japanese quality and Italian design in some industries. Increasingly, however, a company's global stature indicates whether it excels on quality. We included measures for countryof-origin associations in our study as a basis for comparison and found that, while they are still important, they are only one-third as strong as the perceptions driven by a brand's "globalness." Consumers all over the world associate global brands with three characteristics. Global Myth. Consumers look to global brands as symbols of cultural ideals. They use brands to create an imagined global identity that they share with like-minded people. Transnational companies therefore compete not only to offer the highest value products but also to deliver cultural myths with global appeal. "Global brands make us feel like citizens of the world, and … they somehow give us an identity," an Argentinean consumer observed. A New Zealander echoed: "Global brands make you feel part of something bigger and give you a sense of belonging." A Costa Rican best expressed the aspirations that consumers associate with global brands: "Local brands show what we are; global brands show what we want to be." That isn't exactly new. In the post-World War II era, companies like Disney, McDonald's, Levi Strauss, and Jack Daniel's spun American myths for the rest of the world. But today's global myths have less to do with the American way of life. Further, no longer are myths created only by lifestyle and luxury brands; myths are now spun by virtually all global brands, in industries as diverse as information technology and oil. (c) Promotion mix and Marketing mix (d) Export house and Export broker 3. Explain various steps involved in the international marketing process. Ans- Notwithstanding all the benefits of exporting, it remains a complicated process that is fraught with risks. It is not a question of simply becoming an exporter from one day to the next. There are many steps involved in becoming an exporter and each of these steps may have several sub components to it. The 20 steps to exporting are highlighted below: Understanding and preparing for exports 1. Considering exporting? - If you are considering exporting, you should get yourself up to speed by understanding why you want to export, what the difference is between domestic marketing and export marketing, what the various environments are that you will encounter in international trade and the trade barriers you may face in the international marketplace. 2. Current business viability - If you are not managing to survive in your current business, then don't consider exporting. 3. Export readiness - Besides for having an existing base (i.e. a viable business) to build on, there are several other factors that contribute to your readiness to export. 4. Set a broad export mission statement and initial research budget for your firm - If you're ready to export, then you need to set a broad statement indicating that intention to export (which you may revise later), and you will also identify a small budget that will allow you to do the research and preparation necessary to plan and implement an export strategy. 5. Confirm management's commitment to exports - probably one of the main reasons why firms fail with their export endeavours is because management only pay lip service to the firms' export efforts. This is not enough! Get management to commit on paper to the firm's exports efforts and have them approve the budget you submitted for your export research (see step 4). B: Researching and segmenting export markets 6. Undertaking an initial export SWOT analysis of the firm - as it is important to understand what the export capabilities of the firm are, as this knowledge is used as an input to the export marketing research process (see the next step), it is necessary at this point in the export process to undertake an export SWOT analysis. But as you do not yet have the foreign market information at your disposal, this SWOT analysis will need to be reviewed again later in the export process as an introduction to the export plan. 7. Selecting and researching potential countries/markets abroad - It is a fact; you cannot export to all the countries in the world. Indeed, even established companies can only concentrate on two or three countries at most (and usually only those that are close to each other either geographically, culturally or in terms of language or some other factor). Smaller companies will barely be able to cope with one additional country (over and above the domestic market). The question is which country? At this point in the export process your firm must evaluate the many potential countries open to you and narrow the list down to no more than three to five countries with the greatest potential to look at more closely (a shortlist of countries). Once you established a shortlist of countries, the next step is to do some desk research and inmarket research to identify the most suitable country (or perhaps two countries) from your shortlist. In the case of large countries such as the US, Germany, the UK, etc., you may also want to segment the country into more accessible segments (such as males under 30, or households with an income of $50 000 or more per annum) that you can focus your marketing efforts on. The purpose of this research will be to understand the foreign environment you intend to enter and to identify potential foreign customers and their needs so that you can plan an export marketing strategy that will meet your potential customers' needs. 1. C: Compiling an export plan 8. Preparing your export plan - This is one of the most important steps in the export process and will incorporate a situational analysis (export SWOT), your export objectives and an export marketing strategy. D: Implementing the export plan 9. Obtain financing/resources for your exports - You will almost certainly need to finance your export efforts in some way and you will have to give thought to how much you need and where you will find the money. You may also need to find the staff and facilities necessary to support your export activities (which, in turn, will cost money). 10. Managing your export risk - When you negotiate and eventually sign an export contract, you need to be aware that you are committing your firm to certain responsibilities (such as delivering on time and according to a certain standard) and that you are making certain assumptions about your business partner (that they will pay, for example). These responsibilities and assumptions represent a serious risk for your firm and you need to be aware of what these risks are and you need to take steps to manage these risks as best possible. 11. Promoting the firm and its products abroad - This involves letting the world know about your firm and what it offers and there are many promotional channels that you could use (such as advertising in trade magazines, e-mail marketing or participating in a trade fair). The channel you use will depend on what your promotional strategy is that you outlined in your export plan. 12. Negotiating and quoting in export markets - You need to approach your customers, convince them to buy from you, negotiate a deal and price that that find acceptable, and present them with a quote (usually in the form of a proforma invoice). 13. Revising your export costings and price - Following your negotiations, you will in all probability have to consider lowering your price or other sales terms. This may require you to revisit your costing exercise and pricing strategy. 14. Obtaining the export order - This is all about closing that sale and signing the contract! 15. Producing the goods - With the export order in hand, you now have to get down to producing the goods that you have promised to deliver. This will mean securing raw materials and components from your suppliers, and producing, packaging and labelling the goods for export. 4. Briefly discuss the bases of international market segmentation Ans- With the increasing globalization of the business world, international segmentation becomes an ever more important concept in marketing. The globalization forces now at work push many companies to extend or reorganize their marketing strategies across borders and target international segments of consumers. It is the purpose of this paper to review the international market segmentation literature and to identify its future prospects and threats. We critically assess the current status of international market segmentation research and provide a systematic overview of 25 previous empirical studies with respect to the samples used for segmentation, segmentation bases and methods, geographic configuration of segments, and validation efforts. We discuss a number of conceptual and methodological issues that deserve more attention if international market segmentation is to fulfill its high potential. The conceptual issues include construct equivalence of the segmentation basis used, level of aggregation in the segmentation process, and choice of the segmentation basis. The methodological issues include measure equivalence and sample equivalence of the segmentation basis, segmentation methods employed, and whether national sample sizes should be proportional to population sizes. We describe a case study to illustrate and integrate the various issues and conclude with suggestions for future research to stimulate further advances in the area. International market segmentation has become an important issue in developing, positioning, and selling products across national borders. It helps companies to target potential customers at the international-segment level and to obtain an appropriate positioning across borders. A key challenge for companies is to effectively deal with the structure of heterogeneity in consumer needs and wants across borders and to target segments of consumers in different countries. These segments reflect geographic groupings or groups of individuals and consist of potential consumers who are likely to exhibit similar responses to marketing efforts. A natural form of international segmentation is to adopt a multi-domestic strategy where each country represents a separate segment (Jeannet & Hennessey, 1998). A multi-domestic strategy amounts to selection of countries on the basis of their local advantages. Traditionally, multinational companies implemented such multi-domestic strategies by tailoring national brands to the needs shared by groups of consumers International segmentation becomes a particularly challenging issue when companies adopt a global or pan-regional strategy, that is, a strategy integrated across national borders. In many industries, national borders are becoming less and less important as an organizing principle for international activities, rendering multi-domestic strategies less relevant (Yip, 1995). Developments accelerating this trend include regional unification, shifts to open economies, global investment, manufacturing, and production strategies, expansion of world travel, rapid increase in education, literacy levels, and urbanization among developing countries, convergence of purchasing power, lifestyles and tastes, advances in information and communication technologies, the emergence of global media, and the increasing flow of information, labor, money, and technology across borders (Gielens & Dekimpe, 2001; Hassan & Katsanis, 1994; Hassan & Kaynak, 1994; Parker & Tavassoli, 2000; Yip, 1995). Many global companies such as Coca-Cola, McDonald’s, Sony, British Airways, Ikea, Toyota, and Levi-Strauss have successfully integrated their international strategies. The forces that are now at work drive many 5. State the relationship between international market targeting and positioning. Describe international market targeting strategies. Ans- Market segmentation involves grouping your various customers into segments that have common needs or will respond similarly to a marketing action. Each segment will respond to a different marketing mix strategy, with each offering alternate growth and profit opportunities. Some different ways you can segment your market include the following; Demographics which focuses on the characteristics of the customer. For example age, gender, income bracket, education, job and cultural background. Psychographics which refers to the customer group's lifestyle. For example, their social class, lifestyle, personality, opinions, and attitudes. Behaviour which is based on customer behaviour. For example, online shoppers, shopping centre customers, brand preference and prior purchases. Geographical location such as continent, country, state, province, city or rural that the customer group resides. Targeting After segmenting the market based on the different groups and classes, you will need to choose your targets. No one strategy will suit all consumer groups, so being able to develop specific strategies for your target markets is very important. There are three general strategies for selecting your target markets: Undifferentiated Targeting: This approach views the market as one group with no individual segments, therefore using a single marketing strategy. This strategy may be useful for a business or product with little competition where you may not need to tailor strategies for different preferences. Concentrated Targeting: This approach focuses on selecting a particular market niche on which marketing efforts are targeted. Your firm is focusing on a single segment so you can concentrate on understanding the needs and wants of that particular market intimately. Small firms often benefit from this strategy as focusing on one segment enables them to compete effectively against larger firms. Multi-Segment Targeting: This approach is used if you need to focus on two or more well defined market segments and want to develop different strategies for them. Multi segment targeting offers many benefits but can be costly as it involves greater input from management, increased market research and increased promotional strategies. Prior to selecting a particular targeting strategy, you should perform a cost benefit analysis between all available strategies and determine which will suit your situation best. Positioning Positioning is developing a product and brand image in the minds of consumers. It can also include improving a customer's perception about the experience they will have if they choose to purchase your product or service. The business can positively influence the perceptions of its chosen customer base through strategic promotional activities and by carefully defining your business' marketing mix. Effective positioning involves a good understanding of competing products and the benefits that are sought by your target market. It also requires you to identify a differential advantage with which it will deliver the required benefits to the market effectively against the competition. Business should aim to define themselves in the eyes of their customers in regards to their competition. 6. A company wants to enter international markets by involving another company in the foreign country. Discuss various modes of international market entry where the scope for involvement of a foreign company is possible. Critically evaluate in which situations each of those modes is suitable. 7. Describe the international product life cycle theory. Explain various life cycle stretching strategies. 8. Differentiate between personal selling and sales prornotion. Explain different sales promotion tools in international marketing.