BBA-IV Semester International Marketing

International Marketing
BBA 4th SEMESTER
IB Specialization
MODULE 4

International Marketing Strategy:

Contents : Product Strategies (Standardization, adaptation, developing new products)

International Product Life Cycle, Pricing Strategies (Market skimming, Penetration pricing,
Marginal Costing, Dumping etc,) Promotional and distribution strategies. (Participation in
International Trade fairs and Exhibitions, Branding., Positioning, Packaging, Labeling,
Bar-coding and supply chain logistics)

Product Strategies:
In international markets managers need to decide the level of standardization and adaptation they
have to achieve in terms of their products and related communication.

Standardization of product strategies:

Standardization means offering a uniform product on a regional or worldwide base may be with
minor changes. Customization leverages cross-border differences in needs & wants of the firm’s
target customers.

Forces that favor a globalized product strategy are:

– Common customer needs & buying behavior
– Economies of scale in production, R&D, marketing and cost savings
– Lesser time required in introducing into new markets
– Global consumers & consumer mobility
– Home country image
– Similar technical specs for industrial & consumer products
– Operating via exports of uniform products
– Better marketing performance

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– Consistency in product design & selling techniques

– Establishes a common image
– Success in one market can be duplicated in other markets
Standardization may lead to substantial opportunity lost

Product adaptation:

Product adaptation requires a brand to explore the essentials its product must comply with to
meet regional markets’ regulations and cultural differences.

Through various research procedures, suppliers observe what’s needed to become an ideal fit in a
new foreign market. That means considering cultural factors, customer behaviours, preferences
and practices, purchasing power, costs, restrictions, climate, and quality and safety standards.

There are two main ways a producer can create global products: the first is adaptation, and the
second is standardization.

Product adaptation or product standardization – which is your best option?

Adaptation delivers a modified version of the product that considers local requirements,
culturally and legally.

Adaptation allows manufacturers to create different versions of their products for each market.
By incorporating local trends, sizes, packaging styles, and features, their product will harmonise
with buyers’ expectations, appealing to tastes and requirements.

Standardization delivers a single unified product that sits comfortably in all markets.

Standardization allows manufacturers to keep costs down using one set of manufacturing tools
and the same packaging, creating a truly global product in the process.

Production is more straightforward with only one set of options, as opposed to multiple versions
of the same product creating considerable additional costs; conversely, waste is also kept to a
minimum.

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Compared to alternative versions that appeal directly to local users, standardised products have a
mass-market appeal, ideal for travellers who can immediately appreciate what they’re getting
wherever they acquire it.

Types of product adaptation: tangible, intangible, promotional, and price adaptation

Tangible adaptation requires physical changes to a product (for example, alternative menu
items in restaurants) or packaging. Colour psychology and imagery can send contrasting
messages in different marketplaces, appealing to local trends, familiarity, and retail standards.

Intangible adaptation requires changes to non-physical attributes. This includes producing

suitable alternatives to inappropriate translations, slogans, or brand positioning. Also, a brand
may adapt its status and standing, moving towards a favourable market and appealing to more
significant numbers.

Promotional adaptation requires changes to marketing and advertising methods, where local
culture has a greater coverage using specific platforms, imagery, or product representation that
isn’t typically utilized in other locations.

Price adaptation caters to pricing a product according to its new market. Manufacturers may
have to amend the product size, packaging or quantities to meet acceptable price points for
international consumers.

Adaptation of product strategies:

• Obligatory adaptation due to laws and regulations of foreign countries
• Discretionary adaptation (on the choice of the marketer)
– to better suit varying customer needs
– differing use conditions
– due to different market factors
– company’s resources / product objectives
– product life-cycle stage

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International product and communication strategies:

International marketers may choose one of the following five product and communication
strategies in the international markets:

1. Product & Communication Extension: Dual Extension

- Early entrants often opt for this strategy.

- Small companies with few resources typically prefer this option.
- Also works for the company which targets a “global” customer with similar
needs.
- Offers substantial savings coming from economies of scale.
- The downside is that it might alienate foreign customers who may switch to
another competing brand that is more tuned with their needs.

2. Product Extension – Communication Adaptation

- takes care of differences across countries in the cultural or competitive environment.

- retains scale economics on manufacturing side, the firm sacrifices potential savings on the
advertising front.

3. Product Adaptation – Communication Extension

- local market circumstances often favor or require case of product adaptation (may
be due to Govt. regulations)
- Many companies add to their product portfolio via acquisition of local companies adding
new brands as an expansion strategy
- While product may differ, cultural similarities that stretch to consumers using the
product presents an opportunity for harmonized communication.
- Within such control, clever marketing ideas can be transferred from one country to another,
despite the product-related differences.
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4. Product & Communication Adaptation – Dual Adaptation

- Differences in both cultural & physical environment across countries call for a
dual adaptation strategy.
- Many are due to different Govt. regulations regarding products as well as
communication.

5. Product Invention

- Develop new products from scratch from common need & opportunities around
the world – instead for simply adapting existing products or services to the local
market conditions.
- Produce products of global scope.
Today managers focus on degree of Globalization rather than striving for standardized or
localized products. What elements of a product should be tailored to local market needs & which
ones to leave unchanged?

Two approaches that are being commonly used in international product design are;

Modular Approach:

- This approach consists of developing a range of product parts that can be used worldwide.
- Scale economics flow from the mass-production of more or less standard product
components at a few sites.
- Popular in automotive industry

Core-Product Approach:

- Design of mostly uniform core-product

- Attachments are added to core-product to match local market needs

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Product Life Cycle Theory

Raymond Vernon, a Harvard Business School professor, developed the product life cycle theory
in the 1960s. The theory, originating in the field of marketing, stated that a product life cycle has
three distinct stages: (1) new product, (2) maturing product, and (3) standardized product. The
theory assumed that production of the new product will occur completely in the home country of
its innovation. In the 1960s this was a useful theory to explain the manufacturing success of the
United States. US manufacturing was the globally dominant producer in many industries after
World War II.

It has also been used to describe how the personal computer (PC) went through its product cycle.
The PC was a new product in the 1970s and developed into a mature product during the 1980s
and 1990s. Today, the PC is in the standardized product stage, and the majority of manufacturing
and production process is done in low-cost countries in Asia and Mexico.

The product life cycle theory has been less able to explain current trade patterns where
innovation and manufacturing occur around the world. For example, global companies even
conduct research and development in developing markets where highly skilled labor and
facilities are usually cheaper. Even though research and development is typically associated with
the first or new product stage and therefore completed in the home country, these developing or
emerging-market countries, such as India and China, offer both highly skilled labor and new
research facilities at a substantial cost advantage for global firms.

Stages of the Product Life Cycle

A company has to be good at both developing new products and managing them in the face of
changing tastes, technologies, and competition. Products generally go through a life cycle with
predictable sales and profits. Marketers use the product life cycle to follow this progression and
identify strategies to influence it. The product life cycle (PLC) starts with the product’s
development and introduction, then moves toward maturity, withdrawal and eventual decline.

This progression is shown in the graph, below

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Product Life Cycle

The five stages of the PLC are:

1. Product development
2. Market introduction
3. Growth
4. Maturity
5. Decline

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The table below shows common characteristics of each stage:

Common Characteristics

0. Product
development stage 1. investment is made
2. sales have not begun
3. new product ideas are generated, operationalized, and tested

1. Market
introduction stage 1. costs are very high
2. slow sales volumes to start
3. little or no competition
4. demand has to be created
5. customers have to be prompted to try the product
6. makes little money at this stage

2. Growth stage
1. costs reduced due to economies of scale
2. sales volume increases significantly
3. profitability begins to rise
4. public awareness increases
5. competition begins to increase with a few new players in establishing market
6. increased competition leads to price decreases

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3. Maturity stage
1. costs are lowered as a result of increasing production volumes and experience
curve effects
2. sales volume peaks and market saturation is reached
3. new competitors enter the market
4. prices tend to drop due to the proliferation of competing products
5. brand differentiation and feature diversification is emphasized to maintain or
increase market share
6. profits decline

4. Decline stage
1. costs increase due to some loss of economies of scale
2. sales volume declines
3. prices and profitability diminish
4. profit becomes more a challenge of production/distribution efficiency than
increased sales

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Using the Product Life Cycle:

The product life cycle can be a useful tool in planning for the life of the product, but it
has a number of limitations.

Not all products follow a smooth and predictable growth path. Some products are tied
to specific business cycles or have seasonal factors that impact growth. For example,
enrolment in higher education tracks closely with economic trends. When there is an
economic downturn, more people lose jobs and enroll in college to improve their job
prospects. When the economy improves and more people are fully employed, college
enrolments drop. This does not necessarily mean that education is in decline, only that
it is in a down cycle.

Marketing through the Product Cycle:

There are some common marketing considerations associated with each stage of the
PLC. How marketers think about the marketing mix and the blend of promotional
activities–also known as the promotion mix–should reflect a product’s life-cycle stage
and progress toward market adoption. These considerations cannot be used as a
formula to guarantee success, but they can function as guidelines for thinking about
budget, objectives, strategies, tactics, and potential opportunities and threats.

Market Introduction Stage:

Think of the market introduction stage as the product launch. This phase of the PLC
requires a significant marketing budget. The market is not yet aware of the product or
its benefits. Introducing a product involves convincing consumers that they have a
problem or need which the new offering can uniquely address.

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At its core, messaging should convey, “This product is a great idea! You want this!”
Usually a promotional budget is needed to create broad awareness and educate the
market about the new product. To achieve these goals, often a product launch includes
promotional elements such as a new Website (or significant update to the existing
site), a social media campaign, print or broadcast advertising, a press release and press
campaign.

There is also a need to invest in the development of the distribution channels and
related marketing support. For a B2B product, this often requires training the sales
force and developing sales tools and materials for direct and personal selling. In a
B2C market, it might include training and incentivizing retail partners to stock and
promote the product.

Pricing strategies in the introduction phase are generally set fairly high, as there are
fewer competitors in the market. This is often offset by early discounts and
promotional pricing.

It is worth noting that the launch will look different depending on how new the
product is. If the product is a completely new innovation that the market has not seen
before, then there is a need to both educate the market about the new offering and
build awareness of it.

In 2013 when Google launched Google Glass—an optical head-mounted computer

display—it had not only to get the word out about the product but also help
prospective buyers understand what it was and how it might be used. Google initially
targeted tech-savvy audiences most interested in novelty and innovation (more about
them later when we discuss diffusion of innovation). By offering the new product with
a lot of media fanfare and limited availability, Google’s promotional strategy ignited
demand among these segments.
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Tech bloggers and insiders blogged and tweeted about their Google Glass adventures,
and word-of-mouth sharing about the new product spread rapidly. You can imagine
that this was very different from the launch of Wheat Thins Spicy Buffalo crackers, an
extension of an existing product line, targeting a different audiences (retailers,
consumers) with promotional activities that fit the product’s marketing and
distribution channels. The Google Glass situation was also different from the launch
of Tesla’s home battery. In that case Tesla offered a new line of home products from a
company that had previously only offered automobiles. Breaking into new product
categories and markets is challenging even for a well-regarded company like Tesla. As
you might expect, the greater the difference in new products from a company’s
existing offerings, the greater the complexity and expense of the introduction stage.

One other consideration is the maturity of the product itself. Sometimes marketers
will choose to be conservative during the marketing introduction stage when the
product is not yet fully developed or proven, or when the distribution channels are not
well established. This might mean initially introducing the product to only one
segment of the market, doing less promotion, or limiting distribution (as with Google
Glass). This approach allows for early customer feedback but reduces the risk of
product issues during the launch.

While we often think of an introduction or launch as a single event, this phase can last
several years. Generally a product moves out of the introduction stage when it begins
to see rapid growth, though what counts as “rapid growth” varies significantly based
on the product and the market.

Growth Stage:

Once rapid growth begins, the product or industry has entered the growth stage. When
a product category begins to demonstrate significant growth, the market usually
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responds: new competitors enter the market, and larger companies acquire
high-growth companies and products.

These emerging competitive threats drive new marketing tactics. Marketers who have
been seeking to build broad market awareness through the introduction phase must
now differentiate their products from competitors, emphasizing unique features that
appeal to target customers. The central thrust of market messaging and promotion
during this stage is “This brand is the best!” Pricing also becomes more competitive
and must be adjusted to align with the differentiation strategy.

Often in the growth phase the marketer must pay significant attention to distribution.
With a growing number of customers seeking the product, more distribution channels
are needed. Mass marketing and other promotional strategies to reach more customers
and segments start to make sense for consumer-focused markets during the growth
stage. In business-to-business markets, personal selling and sales promotions often
help open doors to broader growth. Marketers often must develop and support new
distribution channels to meet demand. Through the growth phase, distribution partners
will become more experienced selling the product and may require less support over
time.

The primary challenges during the growth phase are to identify a differentiated
position in the market that allows the product to capture a significant portion of the
demand and to manage distribution to meet the demand.

Maturity Stage:

When growth begins to plateau, the product has reached the maturity phase. In order
to achieve strong business results through the maturity stage, the company must take
advantage of economies of scale. This is usually a period in which marketers manage
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budget carefully, often redirecting resources toward products that are earlier in their
life cycle and have higher revenue potential.

At this stage, organizations are trying to extract as much value from an established
product as they can, typically in a very competitive field. Marketing messages and
promotions seek to remind customers about a great product, differentiate from
competitors, and reinforce brand loyalty: “Remember why this brand is the best.” As
mentioned in the previous section, this late in the life cycle, promotional tactics and
pricing discounts are likely to provide only short-term benefits. Changes to product
have a better chance of yielding more sustained results.

In the maturity stage, marketers often focus on niche markets, using promotional
strategies, messaging, and tactics designed to capture new share in these markets.
Since there is no new growth, the emphasis shifts from drawing new customers to the
market to winning more of the existing market. The company may extend a product
line, adding new models that have greater appeal to a smaller segment of the market.

Often, distribution partners will reduce their emphasis on mature products. A sales
force will shift its focus to new products with more growth potential. A retailer will
reallocate shelf space. When this happens the manufacturer may need to take on a
stronger role in driving demand.

We have repeatedly seen this tactic in the soft drink industry. As the market has
matured, the number of different flavors of large brands like Coke and Pepsi has
grown significantly. We will look at other product tactics to extend the growth phase
and manage the maturity phase in the next section.

Decline Stage:

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Once a product or industry has entered decline, the focus shifts almost entirely to
minimizing costs. Marketing spend is reduced for products in this life stage, because
the marketing investment is better spent on other priorities. For goods, distributors
will seek to eliminate inventory by cutting prices. For services, companies will
reallocate staff to ensure that delivery costs are in check. Where possible, companies
may initiate a planned obsolescence process. Commonly technology companies will
announce to customers that they will not continue to support a product after a set
obsolescence date.

Often a primary focus for marketers during this stage is to transition customers to
newer products that are earlier in the product life cycle and have more favorable
economics. Promotional activities and marketing communications typically focus on
making this transition successful among brand-loyal segments who still want the old
product. A typical theme of marketing activity is “This familiar brand is still here, but
now there’s something even better.”

The New-Product Development Process:

There are probably as many varieties of new-product development systems as there

are types of companies, but most of them share the same basic steps or stages—they
are just executed in different ways. Below, we have divided the process into eight
stages, grouped into three phases. Many of the activities are performed repeatedly
throughout the process, but they become more concrete as the product idea is refined
and additional data are gathered. For example, at each stage of the process, the
product team is asking, “Is this a viable product concept?” but the answers change as
the product is refined and more market perspectives can be added to the evaluation.

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Phase I: Generating and Phase III: Commercializing

Phase II: Developing New Products
Screening Ideas New Products

Stage 1: Generating New

Stage 4: Business Case Analysis Stage 6: Test Marketing
Product Ideas

Stage 2: Screening Product Stage 5: Technical and Marketing

Stage 7: Launch
Ideas Development

Stage 3: Concept
Development and Testing

Stage 1: Generating New Product Ideas

Generating new product ideas is a creative task that requires a particular way of
thinking. Coming up with ideas is easy, but generating good ideas is another story.
Companies use a range of internal and external sources to identify new product ideas.
A SWOT analysis might suggest strengths in existing products that could be the basis
for new products or market opportunities. Research might identify market and
customer trends. A competitive analysis might expose a hole in the company’s
product portfolio. Customer focus groups or the sales team might identify unmet
customer needs. Many amazing products are also the result of lucky
mistakes—product experiments that don’t meet the intended goal but have an
unintended and interesting application. For example, 3M scientist Dr. Spencer Silver
invented Post-It Notes in a failed experiment to create a super-strong adhesive.
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The key to the idea generation stage is to explore possibilities, knowing that most will
not result in products that go to market.

Stage 2: Screening Product Ideas

The second stage of the product development process is idea screening. This is the
first of many screening points. At this early stage much is not known about the
product and its market opportunity. Still, product ideas that do not meet the
organization’s overall objectives should be rejected at this stage. If a poor product idea
is allowed to pass the screening stage, it wastes effort and money in later stages until
it is abandoned. Even more serious is the possibility of screening out a worthwhile
idea and missing a significant market opportunity. For this reason, this early screening
stage allows many ideas to move forward that may not eventually go to market.

At this early stage, product ideas may simply be screened through some sort of
internal rating process. Employees might rate the product ideas according to a set of
criteria, for example; those with low scores are dropped and only the highest ranked
products move forward.

Stage 3: Concept Development and Testing

Today, it is increasingly common for companies to run some small concept test in a
real marketing setting. The product concept is a synthesis or a description of a product
idea that reflects the core element of the proposed product. Marketing tries to have the
most accurate and detailed product concept possible in order to get accurate reactions
from target buyers. Those reactions can then be used to inform the final product, the
marketing mix, and the business analysis.

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New tools leveraging technology for product development are available that support
the rapid development of prototypes which can be tested with potential buyers. When
concept testing can include an actual product prototype, the early test results are much
more reliable. Concept testing helps companies avoid investing in bad ideas and at the
same time helps them catch and keep outstanding product ideas.

Stage 4: Business Case Analysis

Before companies make a significant investment in a product’s development, they

need to be sure that it will bring a sufficient return.

The company seeks to answer such questions as the following:

1. What is the market opportunity for this product?

2. What are the costs to bring the product to market?
3. What are the costs through the stages of the product life cycle?
4. Where does the product fit in the product portfolio and how will it impact
existing product sales?
5. How does this product impact the brand?
6. How does this product impact other corporate objectives such as social
responsibility?

The marketing budget and costs are one element of the business analysis, but the full
scope of the analysis includes all revenues, costs, and other business impacts of the
product.

Stage 5: Technical and Marketing Development

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A product that has passed the screening and business analysis stages is ready for
technical and marketing development. Technical development processes vary greatly
according to the type of product. For a product with a complex manufacturing
process, there is a lab phase to create specifications and an equally complex phase to
develop the manufacturing process. For a service offering, there may be new
processes requiring new employee skills or the delivery of new equipment. These are
only two of many possible examples, but in every case the company must define both
what the product is and how it will be delivered to many buyers.

While the technical development is under way, the marketing department is testing the
early product with target customers to find the best possible marketing mix. Ideally,
marketing uses product prototypes or early production models to understand and
capture customer responses and to identify how best to present the product to the
market. Through this process, product marketing must prepare a complete marketing
plan—one that starts with a statement of objectives and ends with a coherent picture
of product distribution, promotion, and pricing integrated into a plan of marketing
action.

Stage 6: Test Marketing and Validation

Test marketing is the final stage before commercialization; the objective is to test all
the variables in the marketing plan including elements of the product. Test marketing
represents an actual launching of the total marketing program, done on a limited basis.

Initial product testing and test marketing are not the same. Product testing is totally
initiated by the producer: he or she selects the sample of people, provides the
consumer with the test product, and offers the consumer some sort of incentive to
participate.

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Test marketing, on the other hand, is distinguished by the fact that the test group
represents the full market, the consumer must make a purchase decision and pay for
the product, and the test product must compete with the existing products in the actual
marketing environment. For these and other reasons, a market test is an accurate
simulation of the broader market and serves as a method for reducing risk. It should
enhance the new product’s probability of success and allow for final adjustment in the
marketing mix before the product is introduced on a large scale.

Stage 7: Launch

Finally, the product arrives at the commercial launch stage. The marketing mix comes
together to introduce the product to the market. This stage marks the beginning of the
product life cycle.

Stage 8: Evaluation

The launch does not in any way signal the end of the marketing role for the product.
To the contrary, after launch the marketer finally has real market data about how the
product performs in the wild, outside the test environment. These market data initiate
a new cycle of idea generation about improvements and adjustments that can be made
to all elements of the marketing mix.

Pricing Strategies:
Market skimming:

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Price skimming is the practice of pricing a product as high as the market will tolerate for the
initial launch period, “skimming” off maximum profits before decreasing to appeal to the mass
market. A price skimming strategy is often used in markets where a group of early adopters is
willing to pay above the market price to get their hands on the latest product first. This is the
opposite of a penetration pricing strategy, where companies change a below-market price to get a
foothold in a new market.

Gaming brands like Xbox and PlayStation notoriously use price skimming to launch each new
version of their consoles. Die-hard fans flock to stores worldwide to be the first to own the latest
model, even when new features may not represent excellent value.

How does price skimming work?

Price skimming is a pragmatic pricing strategy that allows companies to generate the maximum
profit from a new product while still appealing to the mass market over time. They do this with
an innovative offering and clever branding and marketing to justify the higher price. For
example, Apple generates a lot of hype around a new product, sometimes elevating new releases
to “cult-like” status.

First, companies must divide the potential market into segments or layers to be skimmed. This is
usually based on things like price sensitivity, key demographic indicators, and competitor
pricing. Then they can decide what price each layer will pay for the product to maximize profit
per segment, starting from the least to the most price-sensitive customers. This pricing strategy
may evolve over time as they learn more about consumer and market behavior. Manually
adjusting prices is slow, laborious, and inaccurate, so smart businesses adopt dynamic pricing
strategies with tools like Flintfox’s Omnichannel Pricing, to react quickly to market signals,
competitor activity, and new opportunities.

A skimming pricing strategy usually only works when a brand or product has a niche group of
unconditionally avid fans, and an inelastic demand curve i.e. price doesn’t have a big impact on
demand. This means customers are willing to pay higher prices, even if they know prices will
drop later.

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Once this cohort of early adopters is capitalized, prices are dropped — sometimes in stages to
“skim” off profits from each layer — appealing to the broader market. In the case of companies
like Apple that regularly use price skimming strategies, customers become familiar with this
cycle, and those that are not die-hard fans will wait until prices drop before making a purchase.

Example of a price skimming pricing strategy – Apple iPhone

Launched in 2007, the groundbreaking iPhone by Apple was a first-of-its-kind smartphone that
has gone on to change the world. The multi-touch interface, soft keyboard, and integrated iTunes
app had people clamoring to be the first to try this exciting new piece of technology, even with
its launch price tag of $599. Pitched with much fanfare and a memorable marketing campaign,
iPhone went on to sell 1.39 million units in its first year, and there are now over a billion iPhone
users worldwide.

Fifteen years later, avid iPhone devotees still form snaking queues outside Apple stores and place
pre-orders for subsequent annual releases of the device. Each new version of the iPhone might
only have a few new features, but loyal Apple early adopters still believe owning the new device
is worth the higher investment. iPhone users that like the device but are not passionate in their
devotion are happy to wait until prices come down and the phone is more accessible.

Penetration pricing:

Penetration pricing, in particular, is closely informed by competitor pricing. This pricing strategy
offers a new product or service at a lower price. The strategy allows for an initial offering to
attract new customers by luring them away from the competition. Introducing a new product or
service priced enticingly low in an established market helps a company penetrate that market.
They can quickly build awareness with potential customers. In turn, the strategy disrupts existing
businesses in the space.

Penetration pricing strategies can initially entice new customers to purchase or subscribe to a
service. However, the strategy can also result in churn or loss when the company increases the
price. Product professionals realize that a penetration pricing strategy is not a sustainable

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long-term approach without ideal price points without customer support. Companies that don’t
withstand up-front losses should steer clear of this pricing strategy.

Internet and cable providers use penetration pricing to entice new customers with a deal they
can’t refuse. Still, when prices eventually increase, it’s not uncommon for customers to jump
ship. Smartphone providers, such as Android, use a penetration pricing strategy to win new
customers and create loyalty to the brand.

Other penetration pricing examples include Starbucks and Gillette. The former often introduces
new or seasonal products at a lower price. In comparison, Gillette offers its core product at a
lower cost price. However, the company sells its razor blades at premium prices.

Marginal Costing:
Marginal costing is a method of costing that is concerned with changes in costs resulting from
changes in the volume or range of output and sales.

An increase or decrease in total costs that is caused by an increase or decrease in the volume of
production and sales is known as marginal cost, differential cost, or incremental cost.

Thus, marginal costs relate to future costs and can be determined by subtracting the total at one
level of output or sale from that at another level.

It should be noted that marginal costs refer to the increase or decrease in costs on account of the
block of units produced or sold. The marginal costs per unit remain the same.

Example:
A company produces 10,000 radios at a fixed cost of $100,000 per annum. The variable cost per
radio is $300.

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Total variable cost = 10,000 x 300 = $300,000

Add fixed cost = 100,000
Total Cost = $400,000
Extra cost of one radio = $300
Total = $400,300

Thus, the marginal cost per radio is $300. The variable cost and marginal cost are also known as
direct costs, activity costs, or volume costs.

Dumping:

Dumping is when a company sells its export products at a lower price than it charges in its
domestic market. If companies sell products below production costs, this can also be considered
dumping. In both cases, a company engaged in dumping is usually trying to eliminate
competitors and gain market share, potentially establishing a monopoly. If competitors must sell
products below production costs, it can quickly drive them out of business. The World Trade
Organization (WTO) does not ban dumping, but allows nations to retaliate against dumping
under certain circumstances. Many trade agreements between nations include anti-dumping
provisions.
Companies and governments may use dumping to secure market share. Taken to the extreme,
dumping can drive competitors out of business and allow the aggressor to establish a monopoly.
This is bad news for consumers.

If a company can establish a monopoly, it no longer has to worry about competition. This means
it can raise prices and won't have to worry about being undercut by competitors. Further, in a
competitive market, companies must innovate to survive. For a monopoly, however, innovation
is a luxury.

Even if the aggressor doesn't secure a monopoly, it can often expand market share and increase
revenues at the expense of its competitors. As companies grow, they secure economies of scale,

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allowing them to buy supplies at volume rates and otherwise lower production costs. This makes
it harder for other companies, including new entrants, to compete.

Promotional and distribution strategies:(Participation in International Trade

fairs and Exhibitions, Branding, Positioning, Packaging, Labeling, Bar-coding
and supply chain logistics)
A distribution strategy is a method of delivering goods or services to consumers or end-users.
Companies may distribute their goods and services through direct or indirect distribution
strategies. Some organizations choose to use multiple distribution methods to deliver their goods
or services to different types of consumers.

Why are distribution strategies important?

Having an established distribution strategy is important because it can help you deliver your
goods and services to consumers effectively. This is essential to complete sales and obtain
revenue. Defining your distribution strategy can benefit you by:

● Improving the consumer experience: Establishing an effective distribution strategy can

help you determine where and how your consumers prefer to purchase products. You can
share this information with your sales, marketing and transportation teams to provide a
better overall consumer experience.
● Increasing customer loyalty: Creating a distribution strategy that is easy and intuitive for
customers to use can increase the likelihood that they may choose to purchase from you
again. Having a well-developed distribution strategy can also save you time and make
delivering products more efficient, which may result in more satisfied customers.
● Reducing costs: Selecting an efficient distribution strategy that compliments your
in-house capabilities and resources can help you decrease costs. For example, you might
choose to outsource pieces of the distribution process to reduce the amount you spend on
production and marketing.

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● Opening up new market opportunities: Many companies choose which distribution

strategies to implement based on which new markets they want to expand into. Aligning
your distribution strategy with your growth objectives can help you reach new customers
and generate brand awareness.
● Increasing sales: Establishing an effective distribution strategy can help you scale your
company faster and increase sales by providing you with access to a larger target
audience of potential customers.

Types of distribution strategies:

While the main types of distribution strategies are direct and indirect, there are also several
nuanced strategies that companies may use to reach consumers. Here are five of the most popular
types of distribution strategies you can explore:

Direct distribution

In the direct distribution strategy, manufacturers sell and send their products directly to
consumers. They may accept consumer orders through an e-commerce website, catalog or over
the phone. Once the manufacturer receives an order, they ship the product directly to the
consumer's preferred address. Using the direct distribution strategy can benefit you by providing
you with access to more data about your consumers and target audience. It can also give you
more control over the entire consumer experience.

Many companies choose to use the direct distribution strategy because it can result in higher
profit margins than wholesale or retail distribution strategies.

Indirect distribution

An indirect distribution strategy involves an intermediary that assists with the logistics and
placement of products to ensure they reach customers in a timely manner and at an optimal
location based on the consumer's habits or preferences. The actual manufacturer of the product
may not have any direct interactions with the end-user or consumer. For example, a consumer

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might purchase a product from a large, third-party retailer where the manufacturer sends their
products. Using the indirect distribution strategy can benefit you by improving the overall
consumer experience, granting you access to more locations and increasing brand awareness.

Examples of intermediaries that companies may choose to work with through an indirect
distribution strategy include:

● Wholesaler: A wholesaler purchases products from a manufacturer in bulk and then sells
them to retailers. They may receive a discount for purchasing a large quantity of products
at once, which allows them to make a profit off of the products when they resell them.
● Retailer: Retailers may purchase products directly from a manufacturer or from a
wholesaler. They may resell the products directly to consumers through their physical
storefronts, e-commerce websites, social media platforms, catalogs or over the phone.
● Franchisor: Instead of building their own physical storefronts, manufacturers may sell the
rights to their product or service and their brand name to an individual so they can open a
franchise location. While the individual owns the franchise, the manufacturer still
maintains a significant level of control through contractual agreements.
● Distributor: A distributor partners with a manufacturer to help them transport their
products to retailers or other endpoint locations. Manufacturers may choose to work with
a designated distributor to save on logistics and transportation.

Intensive distribution

In the intensive distribution strategy, companies place their products in as many retail locations
as possible. Products that require minimal effort to sell typically perform the best with this type
of distribution strategy. If your company produces an inexpensive product that customers
purchase routinely, this distribution strategy may make sense for you. For example, a company
that produces breath mints may distribute to grocery stores, gas stations, vending machines and
other popular retail locations. Using the intensive distribution strategy can help you improve
brand awareness, expand into new markets and acquire new customers.

Exclusive distribution

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Through the exclusive distribution strategy, manufacturers make a deal to sell their product only
to one specific retailer. They may also choose to sell their products only through their own brand
via their website or physical storefronts. For example, if you sell luxury cars, your customers
may only be able to purchase them directly from one of your company's stores. This strategy
works well for expensive, highly sought-after items. Using the exclusive distribution strategy can
help you increase revenue margins, enhance product value and improve brand loyalty.

Selective distribution

The selective distribution strategy is a hybrid of intensive and exclusive distribution. Companies
who use this strategy distribute their products to more than one location, but they are more
selective about which retailers they work with than companies who use the intensive distribution
strategy.

For example, a high-end clothing company may choose to sell its products in its own stores and
through a handful of carefully selected boutique shops instead of distributing its products to large
chain retailers. Using the selective distribution strategy can provide you with more control over
the customer experience and brand messaging. It can also help you enhance your product's value
and increase opportunities for consumers to purchase your product.

How to select the right distribution strategy:

While there are benefits to each of the five most common distribution strategies, taking the time
to assess your company's specific needs is important to ensure you implement the best one. Here
are some tips to help you select the right distribution strategy for your organization:

1. Consider the type of product or service

The type of product or service your company provides can impact how potential customers may
prefer to make a purchase from you. There are three main types of purchase decisions to
consider:

● Routine: If your product is priced low and customers can quickly decide to purchase it,
this might be a routine purchase, such as for hand soap, toothpaste or toilet paper. An
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intensive distribution strategy often works best for products customers purchase
routinely.
● Limited: If your product in moderately priced and customers tend to put some thought
into its usability before they buy it, your product might be a limited purchase decision,
such as clothing or small appliances. A selective distribution strategy may be suitable for
these products.
● Extensive: If your product is high priced and customers tend to put a lot of thought into
their purchase before buying from you, it may be an extensive purchase, such as a car or
a house. An exclusive distribution strategy often works the best for these products.

2. Determine your target audience

Identify who your current and ideal customers are by creating a target audience. A target
audience is the portion of the population that is the most likely to purchase your product or
service. You can analyze your current customers to help you determine what key demographics,
beliefs, interests, values and goals your customers have in common. You may also choose to
research who your competitors' customers are to help you identify potential opportunities to
expand into new markets.

Understanding who your current and potential customers are can help you determine which
distribution strategies they may prefer. For example, if your target audience is primarily college
students and young adults, you might select the direct distribution strategy by selling your
products to your customers through your social media platforms. If your target audience is
primarily middle-aged adults, you might consider selling your products through an indirect
distribution strategy instead to get your products into large retail stores.

3. Assess your warehouse capabilities and logistics

Next, take the time to assess your warehouse capabilities and logistics. Consider your budget,
inventory storage space, number of employees and the skill sets of your current workforce.
Understanding what your in-house capabilities are can help you determine which distribution
strategy may offer you the most benefits.
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For example, a company that manufactures cell phones could select the direct distribution
strategy by opening its own physical store. However, after analyzing their current budget and
in-house capabilities, they might determine that selling their cell phones through an indirect
distribution strategy that allows them to partner with a wholesaler or retailer is a more
cost-effective option.

4. Define your business goals

Review your business goals to identify which distribution strategy is the best suited to help you
reach them. You might determine whether your goal is to acquire lifelong customers, increase
your profit margins, gain more sales or generate brand awareness. For example, using the
intensive distribution strategy may help you increase brand awareness and sell your products to a
wider target audience, while using the direct distribution strategy can provide you with more
control over your brand messaging and generate higher profit margins.

5. Track your progress

Identify which key performance indicators (KPIs) you can use to track the success of your
distribution strategy. This can be especially helpful if you choose to use multiple distribution
strategies since you analyze your results to determine which one performs the best. Some KPIs
you might consider using include:

● Total number of orders

● Order accuracy rate
● Average sales order price
● Distribution cost per unit shipped
● Revenue growth rate
● Percentage of on-time shipments
● Sales growth rate

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International Trade fairs and exhibitions:

Trade shows and exhibitions are designed to bring together individuals associated with a
common business or activity for the purpose of reviewing, demonstrating, marketing and selling
materials and products related to their common interest. In this Unit we will discuss what trade
fairs and exhibitions are all about. We will examine the various players and their roles in trade
shows. The Unit also addresses the management and marketing aspects of the trade fairs. Finally,
the Unit discusses the economic implications of these and mentions how globalisation will affect
the trade fair industry.

To interact, sell, buy or promote the products. H.N. Tongren and J.P. Thompson (1981) identified
three types of trade shows on the basis of this purposes:

​ 1) Industrial shows that are used by manufacturers to exhibit their products;

demonstrating new products; educating the buyers about their products; etc.
​ 2) Trade shows where sellers contact all types of buyers who are members of the trade.
​ 3) Professional or Scientific Exhibitions which are usually adjunct to the meetings of
specialized organizations.

Branding:
Branding is the process of creating a distinct identity for a business in the minds of your target
audience and the general population. At its core, branding consists of a company’s name and
logo, visual identity design, mission, values, and tone of voice. Your brand is also determined by
the quality and uniqueness of your products, the customer service experience you provide, and
even your pricing strategy.

How is branding achieved?

Actions like building a website, designing ads and marketing content, choosing a color palette
associated with your business, creating a logo, interacting with customers in live chat, and
posting comments on social media set the tone for your brand. Early interactions are already
shaping people’s perceptions of your business.

What is the purpose of branding?

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The purpose of brand building is to help your customers understand what you offer and what you
stand for, through effective positioning. Great branding communicates a unique selling
proposition (USP), your brand values and mission, and your brand’s story. These all help
customers decide if you are a business that meets their needs or aligns with their values.

Ultimately the goal of branding is to attract loyal customers, grow your position in the market,
and make sales.

Positioning:

How is branding achieved?

Actions like building a website, designing ads and marketing content, choosing a color palette
associated with your business, creating a logo, interacting with customers in live chat, and
posting comments on social media set the tone for your brand. Early interactions are already
shaping people’s perceptions of your business.

What is the purpose of branding?

The purpose of brand building is to help your customers understand what you offer and what you
stand for, through effective positioning. Great branding communicates a unique selling
proposition (USP), your brand values and mission, and your brand’s story. These all help
customers decide if you are a business that meets their needs or aligns with their values.

Ultimately the goal of branding is to attract loyal customers, grow your position in the market,
and make sales.

Packaging:
Packaging refers to the preparation of a product for appropriate transportation and storage.
Depending on the type of commodity, the packaging process may entail wrapping, bottling,
strapping, sealing, marking, cushioning, bracing, weatherproofing, or blocking.

Fundamentally, packaging protects products from damage during storage or transportation.

Additionally, different packages differentiate brand products from competitors, ensuring they are
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recognizable and marketable. In other words, packaging helps identify, describe and promote the
product.

The three types of packaging are:

1. Primary packaging — This is the first level of packaging that protects individual products
from damage.

2. Secondary packaging — is used to transport commodities in primary packages. An

excellent example is a pack of soda.

3. Tertiary packaging — is used by warehouses when shipping products in secondary

packaging. An example is the pallets that hold bulk shipments.

It is crucial to note that different types of products require different types of packaging. For
example, liquid products are stored in bottles and barrels while solid commodities are wrapped.
Companies that deal with fragile products, such as glassware, have special containers for packing
them. Practically, packaging covers the product to identify and safeguard it against
contamination, damage, dust, or leakage. For instance, milk is packaged in sachets while a
chocolate bar is wrapped in thin, attractive sheets.

Labeling:

Labelling is the display of label in a product. A label contains information about a product on its
container, packaging, or the product itself. It also has warnings in it. For e.g. in some products, it
is written that the products contain traces of nuts and shouldn’t be consumed by a person who’s
allergic to nuts. The type and extent of information that must be imparted by a label are governed
by the relevant safety and shipping laws.

Labeling is also an important part of the brand of the product and the company. It helps the
product stand out in the market, and identifies it as a part of a particular brand. This is important
in the era of high and intense competition.

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Labels on packaging serve many functions. They provide needed and desired information, such
as instructions, ingredients, and warnings. There are a number of labelling requirements as stated
by the Food and Drug Administration (FDA), the Federal Trade Commission (FTC) and
according to the Fair Labelling and Packaging Act, to name a few. These requirements are
industry specific and are modified and updated continuously. Some of the requirements can be
viewed at the National Institute of Standards and Technology’s (NIST’s) website.

Bar-coding:
Barcoding is an identification method used by a wide variety of companies to track, identify, and
manage items. You probably see barcodes every day in common places like grocery store
packaging, library books, and shipment labels.
However, barcodes also play a significant role in manufacturing, distribution, and production.
From tracking assets and equipment in a facility to managing raw materials in inventory,
barcodes can add a great deal of efficiency and accuracy to modern-day products and services.
How Barcoding Works
Barcodes are typically a set of narrow and thick vertical lines printed in a particular pattern in the
shape of a rectangle. A set of numbers or letters and numbers appear beneath the barcode itself.
These codes are one-dimensional, and the pattern of black and white spaces codes the
information into physical form.
Although most of the codes you see on a daily basis are one-dimensional codes, two-dimensional
codes are growing in popularity. The most common is the QR code that your smartphone can
scan from a sign, flyer, mailer, or product.
What Are the Different Barcode Types and Standards?
Barcode types can be categorized into three main groups: numeric, alpha-numeric, and
two-dimensional. The first two types are considered one-dimensional and include only numbers
or a combination of letters and numbers as well as bars of varying widths. The last type is most
commonly seen as a QR code: a square or rectangular shape showing a combination of short
lines and dots.

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supply chain logistics:

supply chain logistics is a network of transportation, warehousing, and inventory.

Supply chain logistics executives must know how to choose the most advantageous mode of
transportation, how to design and set up a warehousing facility, how to control and manage
inventory and assets, and how to set up an efficient logistics network while minimizing cost and
delivering top-notch customer service.

Challenges of Supply Chain Logistics

Common supply chain logistics challenges include customer service, cost control, planning and
risk management, supplier/partner relationship management, and talent. As companies become
more global, however, they face the challenges of being flexible enough to successfully grow
and expand into new markets in order to remain competitive.

Today’s supply chain logistics executives oversee and drive multiple supply chains and work
tirelessly to meet the needs and expectations of customers and suppliers. Personalized offerings
are helping them do so, but managing personalization in and of itself is a logistics challenge.

Advanced supply chain management systems, customer relationship management systems, and
Big Data are helping companies gain the visibility they need into their customers to make supply
chain logistics efficient, cost-effective, and crowd-pleasing.

How Customer Demands Affect Supply Chain Logistics

Certainly, supply chain logistics must run smoothly and efficiently enough to satisfy customers
and suppliers. The challenge comes in when customer demands become taxing on the entire
supply chain.

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In some cases, customers demand more transparency into the logistics processes themselves.
They want to know where their orders are, how they are being fulfilled, and where the inventory
is at each step of the lifecycle.

Gaining and then sharing insight into each order and its associated item detail must happen in
real time to appease customers, but doing so puts companies into binds when they don’t have
such transparency themselves.

Benefits of Inventory Management in Supply Chain Logistics

Controlling the supply chain often comes down to managing warehouses and inventory quickly
and easily. Creating dynamic, cost-effective, productive warehouse, logistics, and inventory
processes is more feasible when supply chain logistics include best practices in inventory
management. With detailed records of products and parts, organizations protect their bottom line
and keep costs in check.

The best way to manage inventory and improve supply chain logistics is to implement inventory
management practices that include tracking inventory with data on barcode labels and asset tags.

Inventory management systems virtually eliminate the data entry errors and shipping mistakes so
often associated with manual inventory tracking practices. Better yet, using an inventory
management system with barcode scanners adds the level of transparency needed to meet
customer demands and to provide personalized offers and answers to customers.

In fact, it is the insight provided by inventory management and tracking that helps supply chain
logistics executives maintain effective supply chain visibility. With good supply chain visibility,
organizations avoid shipment delays, supply chain disruptions, and revenue losses.

Collaborative processes such as data sharing and demand planning across departments and
business partners are reducing risk and closing gaps in visibility before they become issues.

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