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8/3/2019 International Marketing for Guest Lectures2
1/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
THE FOUR PS: ANTHE FOUR PS: AN
INTERNATIONALINTERNATIONALPERSPECTIVEPERSPECTIVE
Product managementProduct management
Price managementPrice management Promotion and advertisingPromotion and advertising
managementmanagement
Place (channels of distribution)Place (channels of distribution)managementmanagement
8/3/2019 International Marketing for Guest Lectures2
2/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
PRODUCT STRATEGYPRODUCT STRATEGY
COMPONENTSCOMPONENTS
Services
* Pre-Sale: Consulting
* Installation Services
* Post-Sale Services
* Warranty and Guarantee
* Manuals
Packaging
* Label* Brand Name
* Physical Package
Pysical Product
* Style
* Size
* Functional Attributes
8/3/2019 International Marketing for Guest Lectures2
3/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
MARKETING/R&DMARKETING/R&D
INTERFACEINTERFACE
EXPORTEXPORTPERFORMANCEPERFORMANCE
Centralization
Competitive
Intensity in
Target Market
Customers'
Sophistication
Intensity andQuality of
Marketing/
R&D Interface
R&D
Investment
Performance of
New Products in
Export Markets
--
++
+
++
++
++
++
++
So What?1. It is worthwhile to invest in the marketing/R&D interface
2. It is worthwhile to invest in R&D, subject to cost/benefit analysis
3. The interface improves when centralization is reduced and it is easier
when customers are less sophisticated
4. International firms tend to invest more in R&D when the markets are
more competitive
8/3/2019 International Marketing for Guest Lectures2
4/24
International MarketingInternational Marketing
Ljubljana UniversityLjubljana University
How to Brand?How to Brand? -- II
No brandingNo brandingLowerLower
production,production,
marketingmarketingand legaland legal
costscosts
FlexibleFlexible
inventoryinventory
managementmanagement
EspeciallyEspecially
useful foruseful forcommoditiescommodities
BrandingBrandingBetterBetter
identification/identification/
awarenessawarenessMoreMore
differentiationdifferentiation
potentialpotential
HigherHigher
probability ofprobability of
repeat salesrepeat sales
PossiblePossible
premiumpremium
pricingpricing
8/3/2019 International Marketing for Guest Lectures2
5/24
International MarketingInternational Marketing
Ljubljana UniversityLjubljana University
How to Brand?How to Brand? -- IIII
Private brandPrivate brand Easier dealersEasier dealers
acceptanceacceptance
Possibly higherPossibly highermarket sharemarket share
No promotionNo promotion
Useful for smallUseful for small
and/or unknownand/or unknownmanufacturersmanufacturers
ManufacturerManufacturerbrandbrand
Better productBetter product
strategystrategycontrolcontrol
Better pricesBetter prices
RetainingRetaining
brand loyaltybrand loyalty
BetterBetter
bargaining visbargaining vis--
--vis channelsvis channels
CreatesCreates
channelchannel
dependencydependency
8/3/2019 International Marketing for Guest Lectures2
6/24
International MarketingInternational Marketing
Ljubljana UniversityLjubljana University
How to Brand?How to Brand? -- IIIIII
MultipleMultiplebrandsbrands BetterBetter
segmentationsegmentation EmployeeEmployee
excitementexcitement
DefenseDefense
against a pooragainst a poorperformingperforming
brandbrand
More retailMore retail
shelf spaceshelf space
Catering toCatering to
switchersswitchers
Single marketSingle marketbrandbrand HigherHigher
marketingmarketingimpactimpact
More focusedMore focused
marketingmarketing
ReducedReducedadvertisingadvertising
Less marketLess market
confusionconfusion
Especially forEspecially for
highhigh--
quality/reputatiquality/reputati
on brandson brands
8/3/2019 International Marketing for Guest Lectures2
7/24
International MarketingInternational Marketing
Ljubljana UniversityLjubljana University
How to Brand?How to Brand? -- IVIV
Local brandsLocal brands LegalLegal
necessitynecessity
ProblematicProblematicpronunciationpronunciation
MeaningfulMeaningful
namesnames
No negativeNo negativeconnotationsconnotations
Allowing crossAllowing cross--
marketmarket
variations invariations in
quality/pricequality/price
Global brandGlobal brand BetterBetter
marketingmarketing
focus / impactfocus / impact
Low costLow cost
advertisingadvertising
No brandNo brand
confusionconfusion Good forGood for
cultureculture--free orfree or
prestigiousprestigious
brandsbrands
EasilyEasily
identified byidentified by
consumersconsumers
8/3/2019 International Marketing for Guest Lectures2
8/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
PRICINGPRICING THETHE
ECONOMIC ANGLEECONOMIC ANGLE Economists argue that export isEconomists argue that export is
worthwhile as long as the Priceworthwhile as long as the Price> Total Costs = FC + VS. This is> Total Costs = FC + VS. This isalways true for new investmentsalways true for new investmentsor for longor for long--range exportrange exportcommitmentcommitment
Yet, shortYet, short--term exporting couldterm exporting couldbe worthwhile as long as thebe worthwhile as long as thePrice > Variable Costs. FeasiblePrice > Variable Costs. Feasiblefor penetration pricing or for afor penetration pricing or for a
new product. Can also applynew product. Can also applywhen excess capacity exists forwhen excess capacity exists forsome inputssome inputs
8/3/2019 International Marketing for Guest Lectures2
9/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
PRICING ALONG THEPRICING ALONG THE
EXPERIENCE CURVEEXPERIENCE CURVECumulative Production
Quantity
Per Unit Average Production
Cost
1000
2000
4000
8000
16000
1.00
0.80
0.64
0.512
0.4096
1.00
0.80
0.64
0.512
0.4096
1000 2000 160004000 8000
Cumulative Production Quantity
AveragePro
ductionCostperUnit
8/3/2019 International Marketing for Guest Lectures2
10/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
CURRENCY CHOICECURRENCY CHOICE
Exporter FactorsExporter Factors
Market orientationMarket orientation Product differentiationProduct differentiation
Customers importance andCustomers importance and
continuitycontinuity
Power in negotiationsPower in negotiations
Market FactorsMarket Factors
CompetitionCompetition
Importance of product to buyerImportance of product to buyer
Legal restrictions on foreignLegal restrictions on foreign
currencycurrency
The major question is whether to useThe major question is whether to usethe customers local currencythe customers local currency
8/3/2019 International Marketing for Guest Lectures2
11/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
CURRENCYCURRENCY
FLUCTUATIONSFLUCTUATIONS
Currencies fluctuate widelyCurrencies fluctuate widelyhowhow
should we manage the risks?should we manage the risks?
Forward TransactionsForward Transactions buybuyanother currency against theanother currency against the
transactions currency.transactions currency.
Exchange rate depends onExchange rate depends on
Exchange rate on day of transactionExchange rate on day of transaction
Forwards time horizonForwards time horizon
Currencies interest differentialsCurrencies interest differentials
Important!Important! Forward transactions designed toForward transactions designed to
reduce fluctuation risks, they arereduce fluctuation risks, they are
NOT monetary gamblesNOT monetary gambles
8/3/2019 International Marketing for Guest Lectures2
12/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
GETTING YOUR MONEYGETTING YOUR MONEY
There are three major paymentThere are three major paymentmethods:methods:
Open AccountOpen Account Open credit,Open credit,
hence risky. Should be usedhence risky. Should be usedonly for large and stableonly for large and stablecustomerscustomers
CAD/CODCAD/COD Importer has to payImporter has to pay
to get the goods against theto get the goods against theshipping documentsshipping documents risks onlyrisks onlythe shippingthe shipping
L/C (letter of credit)L/C (letter of credit) paymentpaymentassured if exporter fulfilled theassured if exporter fulfilled theorder obligationsorder obligations no risks tono risks toexporterexporter
8/3/2019 International Marketing for Guest Lectures2
13/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
WHEN TO USE VC+?WHEN TO USE VC+?
At the exporters levelAt the exporters level
Low differentiation potentialLow differentiation potential
High export commitmentHigh export commitment
Capacity to take upCapacity to take up--front lossesfront losses
High domestic profitabilityHigh domestic profitability
Available production capacityAvailable production capacity
High economiesHigh economies--ofof--scalescale
Situational factorsSituational factors
High market growth potentialHigh market growth potential
High customer price sensitivityHigh customer price sensitivity Strong competitionStrong competition
Ability to eliminate competitorsAbility to eliminate competitors
8/3/2019 International Marketing for Guest Lectures2
14/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
COST ASCALATIONCOST ASCALATION
Shorten the channelShorten the channel Eliminate master distributorEliminate master distributor
Establish a sales subsidiaryEstablish a sales subsidiary
Reduce costsReduce costs
Lower costs or reduce qualityLower costs or reduce quality
Assemble/produce in exportAssemble/produce in exportmarket, preferably at a taxmarket, preferably at a tax--freefree
zonezone Compensate the channelCompensate the channel
separately for some servicesseparately for some services
Consider a 10% price increase from 1.00 to 1.10.
With master and local distributors each on 30%
mark up, the user price increases 10% from 1.69 to
1.859. However, an exporters 0.10 becomes 0.169
at the end-user level! What to do???
8/3/2019 International Marketing for Guest Lectures2
15/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
GLOBAL ADVERTISINGGLOBAL ADVERTISING
MANAGERSMANAGERS Learning from and transferringLearning from and transferring
successful ideas across unitssuccessful ideas across units
Propose / encourage initiatives forPropose / encourage initiatives for
special regional or global marketingspecial regional or global marketing
events (e.g., sports)events (e.g., sports)
Encourage SBUs in developingEncourage SBUs in developing
markets to use upmarkets to use up--toto--datedate
advertising techniquesadvertising techniques Develop and manage advertisingDevelop and manage advertising
learning seminarslearning seminars
Consult to SBUsConsult to SBUs
Develop methods to measureDevelop methods to measure
effectivenesseffectiveness
Coordinate local agenciesCoordinate local agencies
8/3/2019 International Marketing for Guest Lectures2
16/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
INTERNATIONALINTERNATIONAL
ADVERTISING THEMESADVERTISING THEMES CasesCases advertising a commonadvertising a common
solution to a universal problemsolution to a universal problem(usually for industrial products)(usually for industrial products)
High quality (e.g., BMW)High quality (e.g., BMW)
New! (e.g., WINDOWS XP)New! (e.g., WINDOWS XP)
COO (for strong COO nations)COO (for strong COO nations)
Celebrities (e.g., Michael JordanCelebrities (e.g., Michael Jordanfor Nike)for Nike)
LifestyleLifestyle for luxury productsfor luxury products
World brands (e.g., Coca Cola)World brands (e.g., Coca Cola) Market leadership (e.g.,Market leadership (e.g.,
Marlboro)Marlboro)
8/3/2019 International Marketing for Guest Lectures2
17/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
PUBLIC RELATIONSPUBLIC RELATIONS
Always exporters responsibilityAlways exporters responsibility
Channel might have differentChannel might have differentprioritiespriorities
Maintain the impact if channelMaintain the impact if channelchangeschanges
Media people prefer producersMedia people prefer producersinformationinformation
Small exporters should useSmall exporters should usesmall tradeshows and do presmall tradeshows and do pre--show PRshow PR
Less competition for attentionLess competition for attention More accurate positioningMore accurate positioning
Media is availableMedia is available
8/3/2019 International Marketing for Guest Lectures2
18/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
WHY TRADESHOW?WHY TRADESHOW?
SalesSales
LeadsLeads
Identify new product usesIdentify new product uses
Create awarenessCreate awareness
For companyFor company
For its products / brandsFor its products / brands
New product introductionsNew product introductions
Find/recruit new channels ofFind/recruit new channels of
distributiondistribution
Support for existing channelsSupport for existing channels
EspionageEspionage
8/3/2019 International Marketing for Guest Lectures2
19/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
TRADESHOW BUDGETSTRADESHOW BUDGETS
AND EFFECTIVENESSAND EFFECTIVENESS
Major costs:Major costs:
Booth cost (25%)Booth cost (25%)
Services at the show (22%)Services at the show (22%)
Building the booth (15%)Building the booth (15%)
Transportation (11%)Transportation (11%)
Enhancing effectiveness withoutEnhancing effectiveness without
increasing booth sizeincreasing booth size
Create interest (e.g., draws)Create interest (e.g., draws)
DemonstrationsDemonstrations
Booth styleBooth style The right people at the boothThe right people at the booth
brochuresbrochures
8/3/2019 International Marketing for Guest Lectures2
20/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
WILL THEY WAIT FORWILL THEY WAIT FOR
ATTENTION?ATTENTION?
3-5
Minutes
1-3
Minutes
30-60"
30- "0
0
10
20
30
40
50
0 30-60" 3-5
Minutes
The implication is that most people willThe implication is that most people will
wait very little and will leave if notwait very little and will leave if not
attended to. Thus, the number ofattended to. Thus, the number ofexhibitors, their preparation, andexhibitors, their preparation, and
planning their time are criticalplanning their time are critical
considerationsconsiderations
8/3/2019 International Marketing for Guest Lectures2
21/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
MAJOR CHANNELMAJOR CHANNEL
CHOICESCHOICES Agents. 3Agents. 3--10% commission,10% commission,
depending on:depending on:
PrePre--sale servicessale services Sales services (e.g., erection)Sales services (e.g., erection)
PostPost--sale servicessale services
Importers/Distributors. WideImporters/Distributors. Wide
markmark--up differences (30% isup differences (30% istypical) depending on:typical) depending on:
Level of required servicesLevel of required services
Level of risk in buying and sellingLevel of risk in buying and selling
Sales subsidiary. High exporterSales subsidiary. High exporterriskrisk requires reasonablerequires reasonableprofitabilityprofitability
8/3/2019 International Marketing for Guest Lectures2
22/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
AGENTS VERSUSAGENTS VERSUS
DISTRIBUTORSDISTRIBUTORS
Distributors (unlike agents)
Low exporter controlLow exporter control Always exclusive at some levelAlways exclusive at some level
BuyBuy
Possess and warehousePossess and warehouse
Determine market pricesDetermine market prices
Can represent competitorsCan represent competitors
Advertise and promote on theirAdvertise and promote on their
ownown Control the flow of informationControl the flow of information
from the market to the exporterfrom the market to the exporter
8/3/2019 International Marketing for Guest Lectures2
23/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
IMPORTANT CHANNELIMPORTANT CHANNEL
TASKSTASKS Identify / open up new markets
Personal relationships with
buyers and potential buyers Know the competitive landscape
Have sufficient salespeople
Be able to assess credit risks
Promote at tradeshows
Provide services for products
Select and manage sub-channel
Manage the 4 Ps
8/3/2019 International Marketing for Guest Lectures2
24/24
International EconomicsInternational Economics
ProgramProgram -- LjubljanaLjubljana
UniversityUniversity
CHANNELCHANNEL
CONTRACTSCONTRACTS Territory definition
Product lines included. New productlines yes/no and under whatconditions
Exclusivity yes/no, for whichterritory, for how long, and underwhat conditions
Compensation from exporter
Payments when (with sale or afterpayment is received)
What happens if something goeswrong (e.g., arbitration)
How and when does the contractHow and when does the contractexpireexpire