BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 1
INTERNATIONAL MARKETING
• Culture• Consumer buying power• Product strategies
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 2
An Effective Billboard Advertisement?
VERY DIRTY
CLOTHES
CLOTHES GETS WASHED WITH
THE ADVERTISED DETERGENT
BRAND
SQUEEKY CLEAN
CLOTHES
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 3
LEARNING OUTCOME OBJECTIVES
• Appreciate the for forces impacting the marketer operating in varying cultural, legal, economic, and political environments
• Appreciate the increasingly competitive international market place
• Understand strategic opportunities for operating internationally
• Appreciating the interdependent nature of decisions made in the international context
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 4
INTERNATIONALMARKETING
CULTURE
ECONOMICS
POLITICAL/LEGAL/
HISTORICAL
ENTRYSTRATEGY
MARKETINGMIX
PRODUCT
BELIEFS
EXPECTATIONS
BEHAVIORATTRIBUTIONS
PRICEPROMOTION
DISTRIBUTION
INVESTMENT PARTNERSHIPS
International Marketing: Considerations and Outcomes
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 5
Definitions
Culture: “That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of society.”
Alternative definition: “Meanings that are shared by most people in a group [at least to some extent]”. (Adapted from Peter and Olson, 1994)
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 6
Culture impacts
• Behavior—customs of how and when products are used
• Expectations
• Interpretation of reality
• Relationships between people
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 7
Cultural Lessons
• Diet Coke is named Light Coke in Japan--dieting was not well regarded
• Red circle trademark was unpopular in Asia due to its resemblance of Japanese flag
• Packaging of products is more important in some countries than in U.S.
• Advertisement featuring man and dog failed in Africa--dogs were not seem as man’s best friend
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 8
More Cultural Lessons...
• Cologne ad featuring a man “attacked” by women failed in Africa
• Food demonstration did well in Chinese stores but not in Korean ones--older women were insulted by being “taught” by younger representatives
• Pauses in negotiations• Level of formality
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 9
Japanese consumers expect to see what the food looks like before ordering
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 10
Very Brief Review of Economics
• Exchange rates– Floating (supply and demand)– Fixed
• Trade balances and their impact on exchange rates
• Measuring country wealth– Gross domestic product– Nominal vs. “Purchasing power parity”
• Nominal: Amount of dollars that can be bought with the amount of income. Used for imported products.
• Purchasing power parity adjusted: The buying power—based on a weighted average of costs—in the respective country relative to U.S.
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 12
Demand for Currency Depends On
• Trade deficit (demand for foreign currency to fund this) or trade surplus (demand for country’s currency)
• Interest rates: Higher interest rates (real) attract foreign investors (especially for “stable” U.S. bonds and equities)
• Inflation: Reduces the attractiveness of holding the currency
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 13
Nominal vs. Purchase Parity Adjusted GDPs—Examples (2009)
Country Nominal GDP PPA Luxemburg $74,430 $57,640
Norway 86,440 56,050
United States 47,240 46,730
Japan 37,870 33,280
Argentina 7,570 14,120
Czech Republic 17,310 23,610
Mexico 8,920 14,110
China 3,590 6,770
Source: World Bank International Monetary Fund
The U.S. figures should theoretically be equal but small differences occur because of technical issues in weighing “basket of goods” for comparison.
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 14
GNP Per Capita by Country
Source: World Bank— http://datafinder.worldbank.org/gni-per-capita-ppp
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Nominal vs. Purchasing Power Parity GNPs
05,000
10,00015,000
20,000
25,00030,000
35,00040,000
0 10,000 20,000 30,000 40,000
PPA
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 16
Cautions on Interpreting Per Capita Figures
• Averages are not very meaningful!– Regional variations– Socio-economic differences
• Comparison to U.S. dollar and U.S. costs is arbitrary
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 17
Approaches to Product Introduction
Not suitable for the Middle East!
● Customization ● Localization
● Adaptation ●Standardization
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Reasons for Standardization
• Avoiding high costs of customization, if applicable
• Technological intensity– Reduced confusion– International
compatibility among product group components
– Faster spread of rapid life cycle products
• Convergence of global consumer tastes/needs
• Country of origin positioning
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 19
Standardization—Advantages
• Benefits– Economies of scale– More resources available for
development effort• Better quality
– Enhanced customer preference (?)– Realistic when all cultural needs
cannot be met• Global customers• Global segments
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 20
Standardization—Disadvantages
• Unnecessary features
• Vulnerability to trade barriers
• Strong local competitors
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 21
Product Adaptations
• Mandatory– Legal requirements– Infrastructure– Physical
requirements
• “Discretionary”– Local tastes– Fit into cultural
environment
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Motivations for Adaptation
• Legal• Infrastructure• Consumer
demographics• Culture
– Religious impact– Cultural context of
use
• Local traditions/ customs—e.g.,– Food usage
occasions– Aesthetic
preferences
• Local usage conditions
• Pricing pressures/ tradeoffs
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Mandatory Adaptation Issues
• Choices in approach to mandatory conditions--examples– Power drills with noise suppression filters
• “Arbitrary” standards (e.g., TV, DVD players)
• Conflicting rules between countries—may not be possible to make product legal in all
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 24
Physical Product vs. Communication Adaptations
Communication adaptations not needed (extension)
Communication adaptations needed
Product adaptations not needed (extension)
Some industrial equipment
Bicycle; fast food; chewing gum
Product adaptations needed
Gasoline; laundry detergent
Greeting cards
Domestic equivalent does not exist (product invention)
Compass-equipped prayer rug; hand powered washing machine
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 25
Country of Origin Effects
• Perception of product– quality (e.g., Japan, Germany)– elegance and style (e.g.,
France, Italy)• Historical associations• Positioning strategies
– Emphasis on origin (e.g., French wine)
– De-emphasis/obfuscation of country of origin (e.g., French beer, American products with French language labels)
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 26
Market Positioning Strategies Across Countries
• Häagen-Dazs—U.S. vs. Japan• Corona Beer—Mexico vs. U.S.• Mercedes-Benz—Europe vs.
U.S.• McDonald’s
– U.S.– Europe– Developing countries—e.g.,
China
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 27
The International Life Cycle
• Market for older technology tends to exist in less developed countries– Manufacturing of older
generation technology--e.g., Pentium III computers
– Resale of capital equipment no longer considered adequate in more developed countries—e.g., DC 8 aircraft, old three part canning machines
• Some countries tend to be more receptive to innovation than others and will adopt new technology more quickly
• “Leap frogging”– Going directly
from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology)
• Shortening of product life cycles
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 28
Promotion: Strategic and Tactical Objectives
• Awareness• Trial• Attitude toward the product
– Beliefs– Preference
• Temporary sales increases
EmergingMarkets/New Products
Mature markets/establishedproducts
BUAD 307 INTERNATIONAL MARKETING Lars Perner, Instructor 29
Flops in the Transplantation of Advertising
• Man and his dog• “Follow the leader--
he’s on a Honda!”• Detergent ad• “Get your teeth
their whitest!”
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U.S. Laws of Interest to firms with U.S. Involvement
• Anti-trust: Standards of fair competition. Not all countries have or enforce such laws.
• Foreign Corrupt Influences Act: Bribery illegal for U.S. firms.
• Anti-boycott laws: Illegal to boycott Israel or even certify that one’s firm does not do business with Israel. Technically illegal to participate in other non-U.S. Government sanctioned boycotts but emphasis is on Israel.
• Trading With the Enemy: Illegal to trade at all (with few exceptions) with enemy states. Limits on technology that can be exported.
• Extra-territoriality: U.S. courts will often take jurisdictions of cases of violations of U.S. law occurring entirely abroad.