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international marketing international business, 5th edition chapter 16 Chapter Objectives 1 • Characterize the nature of marketing management in international business • Discuss the basic kinds of product policies and decisions made in international business • Identify pricing issues and evaluate pricing decisions in international business 16-2 Chapter Objectives 2 • Identify promotion issues and evaluate promotion decisions in international business • Discuss the basic kinds of distribution issues and decisions in international business 16-3 Marketing Marketing is “the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.” International marketing is the extension of these activities across national boundaries. 16-4 Figure 16.1 International Marketing as an Integrated Functional Area Operations Management Accounting Marketing Finance 16-5 Human Resource Management Market Strategy Must Support Business Strategy Differentiation Cost leadership Focus 16-6 Marketing Mix Decisions • How to develop the firm’s product(s) • How to price those products • How to sell those products • How to distribute those products to the firm’s customers 16-7 Figure 16.2 Elements of the Marketing Mix for International Firms 16-8 Key Decision-Making Factors • Standardization versus customization • Legal forces • Economic factors • Changing exchange rates • Target customers • Cultural influences • Competition 16-9 Standardization versus Customization Ethnocentric Approach Polycentric Approach Geocentric Approach 16-10 Table 16.1 Standardized International Marketing 16-11 Advantages Disadvantages • Reduces marketing costs • Ignores different conditions of product use • Facilitates centralized control of marketing • Ignores local legal differences • Promotes efficiency in R&D • Ignores differences in buyer behavior patterns • Results in economies of scale in production • Inhibits local marketing initiatives • Reflects the trend toward a single global marketplace • Ignores other differences in individual markets Table 16.1 Customized International Marketing Advantages Disadvantages • Reflects different conditions of use • Increases costs/ inefficiencies • Acknowledges local legal differences/ differences in buyer behavior • Inhibits centralized control of marketing • Accounts for other differences in individual markets 16-12 • Reduces economies of scale in production • Ignores the trend toward a single global marketplace Product Product comprises both the set of tangible factors that the consumer can see or touch (the physical product and its packaging) and numerous intangible factors such as image, installation, warranties, and credit terms. 16-13 Factors Affecting the Standardization of Products 16-14 Legal forces Cultural influences Economic factors Brand names Factors Affecting Pricing Policies Business strategy Competitive environment Costs of doing business Exchange rate fluctuations 16-15 Pricing Policies Standard price policy Two-tiered pricing 16-16 Market pricing Figure 16.3a Determining the Profit-Maximizing Price 16-17 Figure 16.3b Determining the Profit-Maximizing Price 16-18 Conditions for Market Pricing • Firm must face different demand and/or cost conditions in the countries in which it sells its products • Firm must be able to prevent arbitrage 16-19 Risks to Market Pricing Policy Charges of dumping Damage to brand name Development of a gray market Consumer resentment 16-20 Promotion Mix 16-21 Advertising Personal selling Sales promotion Public relations Factors Affecting Advertising Strategy • The message it wants to convey • The media available for conveying the message • The extent to which the firm wants to globalize its advertising effort 16-22 Global Advertising A customer entering this domino parlor in Egypt encounters no language barriers in knowing that the establishment serves Coke. 16-23 Advantages of Personal Selling for International Firms • Local sales representatives understand local culture, norms, and customs • Personal selling promotes close, personal contact with customers • Personal selling makes it easier for firm to adopt valuable market information 16-24 Sales Promotion Sales promotion comprises specialized marketing efforts designed to offer an incentive for behavior such as coupons, in-store promotions, sampling, direct mail campaigns, cooperative advertising, and trade fair attendance. 16-25 Public Relations Public relations consists of efforts aimed at enhancing a firm’s reputation and image with the general public, as opposed to touting the specific advantages of an individual product or service. 16-26 Distribution Issues Physical transportation mode 16-27 Merchandising mode Table 16.2 Advantages/Disadvantages of Transportation Modes 16-28 Mode Advantages Disadvantages Sample Products Train Safe, reliable, inexpensive Limited to rail routes, slow Airplane Safe, reliable, fast Expensive, limited access Jewelry, medicine Truck Versatile, inexpensive Small size Consumer goods Ship Inexpensive, good for larger products Slow, indirect Automobiles, furniture Electronic Media Fast Unusable for many products Information Automobiles, grains Basic Parts of a Distribution Channel Manufacturer Wholesaler Retailer Customer 16-29 Figure 16.4 Distribution Channel Options 16-30