INTERNATIONAL

BUSINESS
Chapter 4
International marketing
 Chapter 4 - International marketing
Introduction

➢ Similar marketing principles in domestic and foreign markets: the company

should have desirable products and services, inform people of their
availability, and offer them at acceptable prices and accessible locations that
consumers favor.
➢ Environmental differences may cause companies to apply these principle
differently abroad
 Chapter 4 - International marketing
Contents

➢ Different marketing strategies to international operations

➢ Elements of marketing mix – product, pricing, promotion, branding,
distribution
➢ How emphasis within marketing mix may vary in different environments
 I. Marketing strategies

Overall international marketing strategies should depend on the

company’s:
➢ Marketing orientation
➢ Target market
 I. Marketing strategies
1. Marketing orientations

Five common marketing orientations:

➢ Production orientation
➢ Sales orientation
➢ Customer orientation
➢ Strategic marketing orientation
➢ Social marketing orientation
 I. Marketing strategies
1. Marketing orientations

1.1. Production orientation

➢ Companies focus primarily on production – either efficiency or high quality – with
little emphasis on marketing
➢ Little analysis of consumer needs
➢ Companies assume that customers want lower prices or higher quality
 I. Marketing strategies
1. Marketing orientations

1.1. Production orientation

Production orientation is used internationally for certain cases:
➢ Commodity sales, esp. those for which there is little need or possibility of product
differentiation
➢ Passive exports, esp. those that serve to reduce surpluses within the domestic
market
➢ Foreign-market segments or niches, which resemble segments to which the product
is aimed at home
 I. Marketing strategies
1. Marketing orientations

1.2. Sales orientation

➢ Companies try to sell abroad what it can sell domestically, and in the same manner
➢ Companies assume that consumers are sufficiently similar globally
 I. Marketing strategies
1. Marketing orientations

1.2. Sales orientation

Sales orientation is often used in cases that:
➢ Commodities that need almost no adaptation
➢ The target market is countries where culture and customer characteristics are similar
to those at home
➢ The target market is countries where there is a great deal of spillover in product
information
 I. Marketing strategies
1. Marketing orientations

1.3. Customer orientation

➢ An approach in which the product and method of marketing it is varied according to
the target market’s characteristics
➢ In the extreme of this approach, a company may move to completely different
products
➢ This approach may be used if the company finds the country’s size and growth
potential attractive
 I. Marketing strategies
1. Marketing orientations

1.4. Strategic marketing orientation

➢ A strategy that combines production, sales, and customer orientations
➢ Usually used by companies who are committed to continual foreign sales
➢ The most common strategy is product changes as adaptations, done by degree.
 I. Marketing strategies
1. Marketing orientations

1.5. Social marketing orientation

➢ Companies realize that successful international marketing requires serious
consideration of potential environmental, health, social, and work-related problems
that may arise when selling or making their products abroad.
➢ Companies consider the effects on all stakeholders – consumer associations,
political parties, labor unions – when selling or making their products.
 I. Marketing strategies
2. Segmenting and targeting markets

➢ Based on the above-mentioned orientations, companies must segment markets for

their products and services and then decide which segment(s) to target and how.
➢ Three approaches to segmentation: by country, by global segment, and by multiple
criteria.
 I. Marketing strategies
2. Segmenting and targeting markets

By country
➢ Companies segment the target country and decide:
• whether to target a single segment or multiple segments,
• whether to use the same marketing mix to all segments,
• whether to tailor the products separately to each segments,
• and whether to vary the promotion and distribution separately for the different
segments
 I. Marketing strategies
2. Segmenting and targeting markets

By country
➢ Pros: may lead to success in a target market
➢ Cons: overlooks the possible similarities of various target market segments with
those in other countries ➔ little opportunities of gaining economies of scales
through standardization
 I. Marketing strategies
2. Segmenting and targeting markets

By global segment
➢ Companies identify some segments globally based on some specific criteria.
➢ Each country may have some people within this same segment, but the proportional
size of each segment will vary by country
➢ Pros: may bring about economies of standardization
➢ Cons: need to prioritize by country of entry
 I. Marketing strategies
2. Segmenting and targeting markets

By multiple criteria
➢ Companies look at countries as segments, identify segments within each country,
compare these within-country segments with those in other countries
➢ Companies can determine similarities for targeting the most promising cross-
country segments, gain efficiencies through standardization, and tailor other aspects
of marketing mix according to the needs of each country’s market
 II. Marketing mix elements

➢ Product
➢ Price
➢ Promotion
➢ Branding
➢ Distribution
 II. Marketing mix elements
1. Product policies

➢ Reasons for making product alterations for foreign markets

➢ Costs of product alterations
➢ Extent and mix of product lines
➢ Product life-cycle considerations
 II. Marketing mix elements
1. Product policies

Why firms alter products

➢ Legal considerations: packaging requirements, environmental-protection
regulations, indirect legal considerations (e.g taxes), etc.
➢ Cultural considerations: religions, preferences, etc.
➢ Economic considerations: income, infrastructure, income distribution, etc.
 II. Marketing mix elements
1. Product policies

Alteration costs
➢ Some alterations, such as package labeling, are cheaper to make than others
➢ However, even packaging changes may necessitate costly research
➢ Companies can compromise between uniformity and diversity by standardizing
products a great deal while altering some components
 II. Marketing mix elements
1. Product policies

The product line: extent and mix

➢ Sales and cost considerations:
• Companies should consider the possible effects on sales and the cost of having a
large versus small family of product
➢ Product life-cycle considerations:
• Countries may differ in either the shape or length of a product’s life cycle.
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Government intervention
➢ Market diversity
➢ Export price escalation
➢ Fluctuation in currency value
➢ Fixed vs. variable pricing
➢ Relations with suppliers
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Government intervention
• Set minimum or maximum prices
• Prohibit certain competitive pricing practices
➢ Market diversity
• Consumers in some countries simply like certain products more and are willing
to pay more for them
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Export price escalation
• Channels of distribution usually include additional intermediaries because
exporters need to contract with organizations that know how to sell in foreign
markets
• Tariffs and transport are additional costs that may be passed on to consumers
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Fluctuations in currency value
• When companies sell similar goods in multiple countries, price differences
among them must not exceed by much the cost of bringing the goods in from a
lower-priced country, or spillover in buying will occur.
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Fixed vs. variable pricing
There are country-to-country differences in:
• Whether manufacturers set prices
• Whether prices are fixed or bargained in stores
• Where bargaining occurs
 II. Marketing mix elements
2. Pricing strategies

Potential obstacles in international pricing

➢ Supplier relations
• Companies with dominance over a market or close relationships with their
suppliers can get suppliers to offer them lower prices, in turn enabling them to
gain cost advantages over competitors
 II. Marketing mix elements
3. Promotion strategies

The push-pull mix

➢ Push: using direct selling techniques
➢ Pull: relying on mass media
➔ Most companies use combinations of both.
➔ Companies must determine its total promotional budget as well as the mix of the
budget between push and pull.
 II. Marketing mix elements
3. Promotion strategies

The push-pull mix

Factors in Push-Pull decisions:
➢ Type of distribution system
➢ Cost and availability of media to reach target markets
➢ Consumer attitudes toward sources of information
➢ Price of the product compared to incomes
 II. Marketing mix elements
3. Promotion strategies

Some problems in international promotion

➢ Advantages of standardization in advertising:
• Cost savings
• Better quality of marketing at local level
• Rapid entry into different countries
 II. Marketing mix elements
3. Promotion strategies

Some problems in international promotion

➢ Disadvantages of standardization in advertising:
• Translation issues
• Legality issues
• Message needs
 II. Marketing mix elements
4. Branding strategies

➢ Brand: an identifying mark for products or services

➢ Trademark: a brand that a company registers legally
 II. Marketing mix elements
4. Branding strategies

Worldwide brand versus local brand

Some problems with uniform brands
➢ Language
➢ Brand acquisition
➢ Country-of-origin image
➢ Generic and near-generic names
 II. Marketing mix elements
5. Distribution strategies

Deciding whether to standardize

➢ Citizens’ attitudes toward owning their own store
➢ The cost of paying retail workers
➢ Legislation differentially affecting chain stores and individually owned stores
➢ Legislation restricting the opening hours and size of stores
➢ The financial ability to carry large inventories
 II. Marketing mix elements
5. Distribution strategies

Choosing distributors and channels

When companies handle their own distribution?
➢ When volume is high
➢ When companies have sufficient resources
➢ When there is a need to deal directly with the customer
➢ When the customer is global
➢ When the distribution form is a competitive advantage
 II. Marketing mix elements
5. Distribution strategies

Choosing distributors and channels

Some evaluation criteria for distributors include their:
➢ Financial capability
➢ Connections with customers
➢ Fit with a company’s product
➢ Other resources
➢ Trustworthiness
 II. Marketing mix elements
5. Distribution strategies

The challenge of getting distribution

Distributors choose which companies and products to handle ➔ Companies may need
to:
➢ Give incentives
➢ Use successful products as baits to new one
➢ Convince distributors that product and company are viable
 II. Marketing mix elements
5. Distribution strategies

Hidden costs in distributions

Five factors that often contribute to cost differences among countries in distribution:
➢ Infrastructure conditions
➢ The number of levels in distribution system
➢ Retail inefficiency
➢ Size and operating-hour restrictions
➢ Inventory stock-outs
 II. Marketing mix elements
5. Distribution strategies

E-commerce and the internet

Opportunities:
➢ Easier promoting products globally
➢ Dealing more quickly with customers
Problems:
➢ Insufficient infrastructure in developing countries
➢ Legal requirements
➢ Issues of differentiating advertisements in different markets
 III. Managing the marketing mix

Gap analysis
➢ Gap analysis: a method for estimating a company’s potential sales by identifying
potential customers it is not serving adequately
➢ When sales are lower than the estimated market potential for a given type of
product ➔ the company has potential for increased sales.
 III. Managing the marketing mix

Gap analysis
Types of gaps
➢ Usage gap – less products sold by all competitors than potential
➢ Product line gap – company lacks some product variations
➢ Distribution gap – company misses geographic or intensity coverage
➢ Competitive gap – competitors’ sales not explained by product line or distribution
gap
 III. Managing the marketing mix

Gap analysis
Notes:
➢ Gap analysis may also be used to aggregating needs among countries
➢ E.g:
The product-line gap is too small in a single country to justify the expense of
developing a specific new product. Nevertheless, the combined market potential among
several countries for this product may justify the product- and promotional-
development costs.