Exam 2 Flashcards
(100 cards)
1
Q
What are the four sets of factors an organization needs to know before selecting a market entry mode?
A
Internal factors
Industry/competition factors
Market factors
Entry barriers
2
Q
Why do governments encourage exports and discourage imports?
A
- To protect nascent industries
- To fortify national defense programs
- To support domestic employment opportunities
- To combat aggressive trade policies
- To protect the environment
3
Q
What do governments do to discourage imports/encourage exports?
A
First and foremost, governments can impose duties on imports.
In addition, most governments utilize nontariff trade barriers (NTB) that serve as deterrents or obstacles to imports from other countries.
NTBS include quotas, discriminatory procurement policies, restrictive customs procedures, arbitrary monetary policies, and restrictive regulations.
4
Q
What are export selling and export marketing? How do they affect the marketer’s job?
A
- Export selling basically presents an extension strategy whereby products are offered for sale outside the home country without adaptation. The mindset of export selling is, “Here’s the product, take it or leave it.” One symptom of export selling would be providing sales literature in the home country language only.
- Export marketing, by contrast represents willingness to adapt one or more of the marketing mix elements as required by the characteristics of the target market.
The marketer will play a different role in each because in export selling, the marketer is basically just handing the product off to the people in the host country whereas in export marketing, the marketer has a crucial role to play in figuring out how to make the product more marketable to these specific individuals
5
Q
When should a company select direct market representation vs an independent intermediary?
A
Choose direct market representation when you want control and communications.
Choose independent intermediary when control isn’t as important such as when you are in situations with a small sales volume.
6
Q
What is global sourcing? What factors need to be considered when making sourcing decisions?
A
A procurement strategy in which a business seeks to find the most cost efficient location for manufacturing a product, even if the location is in a foreign country. (i.e. outsourcing and offshoring)
Factors Affecting the Sourcing Decision:
- Management vision
- Factor costs and conditions
- Customer needs
- Supply chain management
- Country risk
- Exchange rates
7
Q
Global mindset
A
The typical context for globalized marketing is not the usual “close to customer” mindset.
Rather, the point is usually to coordinate marketing activities across a wide variety of markets where the firm does business.
8
Q
Product Category
A
A product category is all the products offering the same general functionality
9
Q
Product
A
an object or system made available for consumer use; it is anything that can be offered to a market to satisfy the desire or need of a customer
10
Q
Brand
A
a type of product manufactured by a particular company under a particular name
11
Q
Segmentation
A
Represents an effort to identify and categorize groups of customers and countries with homogeneous attributes who are likely to exhibit similar responses to a company’s marketing mix.
Often two tiered: Country first, segments second
12
Q
Targeting
A
The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond
Focus on the segments that can be reached most effectively, efficiently, and profitably
13
Q
Positioning
A
Positioning is required to differentiate the product or brand in the minds of the target market.
Uses the 4 P’s to differentiate the product in the consumer’s mind in significant ways
14
Q
Segmentation is important because
A
- You don’t need everyone in a market to buy your product – you just need a large enough market to purchase your product or service
- How and how much you adapt your marketing mix depends on the market that you are targeting in a market
15
Q
Conventional Wisdom
A
- Assumes heterogeneity between countries
- Assumes homogeneity within a country
- Focuses on macro level of cultural differences
- Relies on clustering of national markets
- Less emphasis on within-country segments
16
Q
Unconventional Wisdom
A
- Assumes emergence of segments that transcend national boundaries
- Recognizes existence of within-country differences
- Emphasizes micro-level differences
- Segments micro markets within and between countries
17
Q
Macro-segmentation
A
to identify clusters of more similar countries
18
Q
micro-segmentation
A
local segments which are similar across the countries are identified
19
Q
How and how much you adapt your marketing mix depends on
A
the segment that you are targeting in a market
20
Q
Three basic criteria for Assessing Market Potential
A
- Current size of the segment and anticipated growth potential
- Potential competition
- Compatibility with company’s overall objectives and the feasibility of successfully reaching the target audience
21
Q
What makes a desirable segment?
A
Identifiable Measurable Reachable Able to buy Willing to buy
Favorable political conditions
Market similarity
Growth potential
22
Q
Marketing model drivers
A
key elements or factors required for a business to take root and grow in a particular country market environment (a company’s sources of competitive advantage, transferability).
23
Q
Enabling conditions
A
structural market characteristics whose presence/absence can determine whether the marketing model can succeed (Model of national competitiveness)
24
Q
First mover advantages
A
- proprietary, technological leadership
- Preemption of scarce resources
- Establishment of entry barriers
- Avoidance of class with dominant firms at home
- Relationships and connections with key stakeholders
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Late mover advantages
- Opportunity for free ride on first mover investments
- Resolution of technological and market uncertainty
- First mover’s difficulty to adapt to market changes
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Standardized or Undifferentiated Targeting
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Mass marketing on a global scale
Standardized marketing mix
Minimal product adaptation
Intensive distribution
Lower production costs
Lower communication costs
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Concentrated Targeting
- Single segment or similar segments of global market
- Look for global depth rather than national breadth
- Niche marketing
- segments can be given more attention and markets positions fortified
- particularly advantageous when the country or segment competitive rivalry is intense.
- - Ex.: Chanel, Estee Lauder
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Differentiated (Focus) Targeting
- different countries and different market segments
- Wider market coverage
- Difficulties in one market segment or country can be offset by gains elsewhere.
- Particularly useful to counter political and financial risk
- Multi-segment targeting
- Two or more distinct markets
- - Ex.: Mont Blanc pens
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Positioning Decisions: Two Major Factors
- Degree of globalization in the market
- - Benefits sought
- - Customer preferences
- PLC stage
- - Later stages of PLC = sophisticated customers
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Positioning Strategies
- Global consumer culture positioning
- Foreign consumer culture positioning
- Local consumer culture positioning
31
Selecting a Mode of Market Entry: Internal Factors to Consider
- Competitive advantages
- corporate strategy and objectives
- marketing strategy and objectives
- costs
- international experience
- company size, financial and marketing resources
- product/market fit (adaptation needed?)
- strategic flexibility vs resource commitment
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Selecting a Mode of Market Entry: Industry/Competition Related Factors
- global industry structure
- - globalization drivers
- nature of competition
- - domestic, foreign, global
- - competitive advantages
- - relative size and resources
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Selecting a Mode of Market Entry: Market Factors
- Market potential
- Competitive environment
- Host/Home country entry barriers
- Country risk
- Exchange rates
- Marketing infrastructure
- National competitive advantages
34
Selecting a Mode of Market Entry: Entry Barriers
Artificial entry barriers
- Enacted to protect the market
Natural entry barriers
- Conditions in the marketplace
35
Export selling vs export marketing
- Export selling involves selling the same product, at the same price, with the same promotional tools in a different place.
- Export marketing tailors the marketing mix to international customers.
export marketing you are involved; export selling you hand it over on the loading dock and then you are done with it
36
Offshoring
refers to moving work to another country
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Outsourcing
means letting someone else do that value creation activity
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Licensing
A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation
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Franchising
Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies
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Licensing Advantages and Disadvantages
Advantages:
- Low initial investment
- Additional revenue
- Avoids trade barriers
- Potential for utilizing location economies
- Access to local knowledge
- Easier to respond to customer needs
Disadvantages:
- Lack of control over operations
- Difficulty in transferring tacit knowledge
- Need to capture returns
- Potential for creating a competitor
- Lack of coordination among units
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When Is Licensing Appropriate?
- Well codified knowledge
- Strong property rights regime
- Location advantage
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Joint Ventures
Entry strategy for a single target country in which the partners share ownership of a newly-created business entity
Form of foreign direct investment
Two or more companies share ownership of a third commercial entity
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Joint Ventures Advantages and Disadvantages
Advantages:
- Facilitate entry into market
- More knowledge about new market
- Reduces investment and operating costs
- Reduces economic and political risks, increases control
- Synergy
Disadvantages:
- More investment than licensing
- Potential loss of proprietary technology
- Limits ability to implement global coordination
- Unable to realize economics of scale
- Conflict among partners
- Creates potential competitor
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When Is a Joint Venture Appropriate?
- Both partners contribute hard-to-measure inputs
- Large expected mutual gains in the long-run
- Trade secrets can be walled off
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Wholly Owned Subsidiary
Full-fledged manufacturing
Assembly (screwdriver plants)
Sales and distribution
R&D
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Acquisition Advantages and Disadvantages
Pro:
- Quick to execute
- Preempt competitors
- Possibly less risky
Con:
- Disappointing results
- Overpay for firm
- optimism about value creation (hubris)
- Culture clash.
- Problems with proposed synergies
47
Greenfield Advantages and Disadvantages
Pro:
- Can build subsidiary it wants
- Easy to establish operating routines
Con:
- Slow to establish
- Risky
- Preemption by aggressive competitors
48
Modes of Entry to International Markets
- Exporting
- Licensing
- Franchising
- Contract manufacturing
- Joint ventures
- Wholly owned subsidiaries
- Acquisition
- Greenfield
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Contract manufacturing
Company provides technical specifications to a subcontractor or local manufacturer. Company purchases results of production.
Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities.
50
Contract manufacturing Advantages and Disadvantages
Advantages:
- Lower production costs
- Reduced capital and assets
Disadvantages:
- Loss of control over manufacturing process
- Loss of control over working conditions
- Poor Publicity
- Financial Damage to Brand
51
4 Factors to consider when selecting a market entry strategy
Internal factors
Industry/competition factors
Market factors
Entry barriers
52
4 Factors to consider during standardization/adaptation decision
Organization
Industry
Market
Political/Legal
53
4 Factors to consider during standardization/adaptation decision: Organization
Strategy, objectives, resources, market entry, product mix, time to market, strengths & weaknesses
54
4 Factors to consider during standardization/adaptation decision: Industry
Competitors’ competitive advantages and product differentiation, technology and type of product
55
4 Factors to consider during standardization/adaptation decision: Market
- Environment: Economic development, conditions of use, legal requirements, marketing infrastructure, local partners’ competencies, REAs
- Buyer: Decision process, product familiarity, cultural specificity, ability to buy, income, education, trends
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Conditions of use
Product familiarity
Cultural specificity of product
Legal requirements
Local partner competencies
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4 Factors to consider during standardization/adaptation decision: Political/Legal
Artificial entry barriers: tariffs, taxes, quotas, product standards, pricing controls, switching costs, govt protection of domestic industry
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Global Product Planning: Strategic Alternatives
Strategy 1: dual extension
Strategy 2: Product extension, communication, adaption
Strategy 3: Product adaption, communication, extension
Strategy 4: dual adaptation
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Strategy 1
- Same communication, same product
- Common for B2B
- dual extension
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Strategy 2
- Different communication, same product
- Low-cost because the product is unchanged, communication is adapted
- Product extension, communication, adaption
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Strategy 3
- Same communication, different product
- Cadillac wanted to sell 20,000 autos outside the U.S. by 2010; will adapt to local market requirements
- Product adaption, communication, extension
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Strategy 4
- Different communication, different product
- Combines local market conditions recognized in Strategies 2 and 3
- dual adaptation
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Core product
Core benefit or service
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Actual product
Quality level, brand name, packaging, features, design
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Augmented product
installation, delivery & credit, warranty, after-sale service
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Product Warranties: Standardization versus Adaptation
Domestic warranty valid worldwide?
Tailoring warranties to countries/markets?
Issues to consider
Actual product use
Local competition: Warranties can be used as a competitive tool
Spillover effects to other markets
Express Warranty is a written guarantee that assures the buyer is getting what they paid for or provides a remedy in case of a product failure
66
Local Products/Brands
- Brands that have achieved success in a single national market
- Represent the lifeblood of domestic companies
- Entrenched local products/brands can be a significant competitive hurdle to global companies
67
Global Brand
- asset
- Gives product credibility
- Enables consumers to identify the product
- Helps consumers make choices faster and more easily
- 70% of Nestle’s total sales
- Nestle brand = 40% total sales
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Product Lines
Not all products are suitable for all markets
- History
- Acquisitions
- Local market preferences
- Capacity to produce needed quantities
- Channels of distribution
69
Product Line Planning
Frequently smaller than the domestic line because of financial and market limitations.
Introduce a limited product line into foreign markets to test the market
70
Benefits of Product Standardization
Cost reduction
- Economies of scale
- Volume purchases of inputs
- Elimination of additional adaptation costs
Global brand and image
Easier planning and control, including product rollouts
Global customers and local customer preferences
Product quality
Easier to manage
71
Benefits of Product Adaptation
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Vulnerability to trade barriers
- Legal issues
- Differences in technical standards
Avoids off-target and lack of uniqueness
Product performance
Lower costs
- local inputs
- eliminate unnecessary features
Motivation of local managers
Global versus local competition
Global versus local customers
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72
Mandatory adaptation
Governmental regulations
Technological & compatibility considerations
Measurement standards
Product use conditions
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Discretionary adaptation
Match customer’s product preferences
customer’s use conditions & situation
Income & education differences
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Market Skimming
- Charging a premium price
- Introduction stage of product life cycle
- Luxury goods marketers use price to differentiate products
- Financial Objectives
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Penetration Pricing
- Charging a low price in order to penetrate market quickly
| - Saturate market prior to imitation by competitors
76
Dumping
Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin
imports sold in the host market are priced at either:
- levels that represent less than the cost of production plus an 8% profit margin or
- at levels below those prevailing in the producing countries
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How to prove dumping?
To prove, both price discrimination and injury must be shown
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Objectives that potentially lead to dumping claim:
- gain market share
- economies of scale
- excess production
- currency shifts
- eliminate competition (predatory pricing)
79
Government responses to dumping
Antidumping duty:
- are levied on imported goods sold at less than fair market value
Countervailing duties:
- are imposed on imports which are subsidized in the exporter’s home country
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Avoid the dumping
- differentiate the product sold from that in the home market
- Circumstances of the sale
- Raise the price
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Global Pricing: Three Policy Alternatives
1. Extension or Ethnocentric
2. Adaptation or Polycentric
3. Geocentric
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Extension Pricing
- Ethnocentric
- Per-unit price of an item is the same no matter where in the world the buyer is located
- Importer must absorb freight and import duties
- Simple
- Fails to respond to each national market
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Adaptation or Polycentric Pricing
.
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parallel import
(gray trade) is a non-counterfeit product imported from another country without the permission of the intellectual property owner
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gray market
is the trade of a commodity through distribution channels that are legal but unintended by the original manufacturer. Gray market products are sold by a manufacturer or their authorized reseller outside the terms of the agreement between the reseller and the manufacturer
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black market
is where people traffic in goods that are strictly controlled or illegal
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Counterfeit products
are fake replicas of the real product. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product
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Gray Market Goods
Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations
Pharmaceuticals, computer games and hardware, automobiles, and even toothpaste can fall prey to the trade.
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Gray Market Conditions
- Sales of genuine branded goods through unauthorized channels.
- Products must be available in multiple markets
- Low trade barriers (tariffs, legal restrictions, transport costs)
- Price differentials must be great enough (so that gray marketers can make a profit)
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Gray Market Issues
- Dilution of exclusivity
- Free riding
- Damage to channel relationships
- Undermining segmented pricing schemes
- Reputation and legal liability
91
Geocentric Pricing
- Intermediate course of action
- Recognizes that several factors are relevant to pricing decision
- Local costs
- Income levels
- Competition
- Local marketing strategy
- global marketing strategy
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Coordinating prices across the globe is difficult because…
- Exchange rates fluctuate
- Local retail prices can only be “recommended”
- Local distributors are independent
- Import prices to subsidiaries have to consider tariffs, taxes.
- Local competition varies across countries.
93
The firm’s internal ability to coordinate pricing across multiple markets depends on:
- Degree of centralization
- Relationship between HQ and local subs
- Corporate orientation (ethnocentric, regiocentric, geocentric)
- International experience
- Sub’s ownership structure
- Channel independence
94
Price Corridors
the limits of prices between which the local price may vary without interference from headquarters
95
Transfer Pricing
- Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction
- Government’s objective: correct duties & related fees must be paid
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Company objectives of Transfer Pricing
- Company might attempt to:
- relocate revenue/profits to the firm’s benefit
- support a subsidiary’s local competitive position
- repatriate profit
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Strategies for Transfer Pricing
1. Cost-based transfer pricing
2. Market-based transfer pricing
3. Negotiated transfer pricing
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Countertrade
- Transactions in which all or part of the payment is made in kind rather than currency.
- Forms of Countertrade:
- Barter
- Counterpurchase
- Offset
99
Motives Behind Countertrade
- Gain access to new or difficult markets
- Overcome exchange rate controls or buyer’s lack of hard currency
- Overcome low country credit worthiness
- Increase sales volume
- Generate long-term customer goodwill
100
Shortcomings of Countertrade
- No “in-house” use for goods offered by customers
- Timely and costly negotiations
- Uncertainty and lack of information on future prices
- Transaction costs
