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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