IB Module: 5

Prepared By: Prof. Vijay Bhatu

International marketing
• International marketing involves all the activities that
form part of domestic marketing.
• An enterprise engaged in international marketing has to
correctly identify, assess and interpret the needs of the
overseas customers and carry out integrated marketing
operations to satisfy those needs.
• In other words, the basic functions are the same in
international marketing as well as in domestic
marketing.
Marketing Strategies
• Overall international marketing strategies should depend
on the company’s:
• Marketing orientation
• Target market
Market Orientation
• Production Orientation
• Sales Orientation
• Customer Orientation
• Strategic Marketing Orientation
• Social Marketing Orientation
Targeting Markets
• Three Approaches
▫ By Country
▫ By Global Segment
▫ By Multiple Criteria
• Mass Markets versus Niche Markets
Why Firms Alter Products
• Legal Considerations
• Cultural Considerations
• Economic Considerations
• Alteration Costs
• Product Line Extent and Mix
Determining International Marketing Strategies:
Factor
• To do this, the international marketing manager must
become aware of any factors that would limit
standardization.
• Factors limiting standardization can be categorized into
four major groups:
1. Market characteristics,
2. Industry conditions,
3. Marketing institutions,
4. And legal restrictions.
Market Characteristics
• Market characteristics can have a profound effect on
international marketing strategy.
• The physical environment of any country-determined by
its climate, product use conditions, and population size
often forces marketers to adjust products to local
conditions.
• Many cars in Canada come equipped with a built-in
heating system that is connected to an electrical outlet to
keep the engine from freezing while turned off.
Industry Conditions
• Industry conditions often vary by country since products frequently are in
varying stages of the product life cycle.
• New product introduction in a country without prior experience might
affect the extent of product differentiation since only one or two versions
of the product might be introduced initially.
• Also, a company might find itself in a situation where limited awareness or
prior experience of a country will require a considerable missionary sales
effort and primary demand stimulation, whereas in more mature markets
the promotional strategy is likely to concentrate on brand differentiation.
• In countries where competitors control channels and maintain a strong
sales force, the strategy of a multinational company might differ
significantly from that in a country where the company holds a
competitive advantage.
Marketing Institutions
• For historic and economic reasons, marketing
institutions have assumed different forms in different
countries.
• Practices in distribution systems often entail different
margins for the same product, requiring a change in
company pricing strategy.
• Availability of outlets is also likely to vary by country.
Legal Restrictions
• Legal restrictions also require consideration for the
development of an international marketing strategy.
• Product standards issued by local governments must be
observed.
• To the extent that they differ from one country to another,
unified product design often becomes an impossibility.
• Tariffs and taxes may require adjustments in pricing to the
extent that a product can no longer be sold on a high
volume basis.
• Specific restrictions may also be problematic.
Other Factor
• Government intervention
• Market diversity
• Fluctuations in currency value
• Relations with suppliers
International Marketing mix
• The international marketing mix consists of 4Ps,
1. Product
2. Price
3. Place
4. Promotion
Product strategies used in international markets
• Product standardization – The company introduces an
unchanged product on the foreign market. Such action makes
sense when the product due to its nature, has similar utility for
customers in various markets. The use of this strategy is
comfortable and not very expensive. Product adaptation –
involves the adjustment of the product and its properties to the
conditions prevailing on the particular market. This includes
packaging, size, symbols (depending on the culture prevailing
in the country concerned), color.
• Gradual changes in the product – used in the situation
where there is no danger of the emergence of competition.
Pricing policies in the international marketing mix
• Usually, the company introduces separate
pricing policies on foreign markets (due to differences in
wealth, competition, etc.),
• The development of modern communication technology
makes distant markets more similar to each other, which
makes it harder to lead a separate pricing policy at home
and abroad.
• In this case, the company carries out a global pricing
strategy, when the processes of internationalization blur
the differences between the various markets.
Pricing Strategy
• Cost-plus pricing: Calculate your costs and add a mark-
up.
• Competitive pricing: Set a price based on what the
competition charges.
• Price skimming: Set a high price and lower it as the
market evolves.
• Penetration pricing: Set a low price to enter a
competitive market and raise it later.
• Value-based pricing: Base your product or service’s
price on what the customer believes it’s worth.
Distribution policy in international markets
• On the international market distribution activities are related
to the offering on the market of products in an appropriate
form, place and time.
• The activities must, however, be adapted to other instruments
of the marketing mix and change along with them.
• The main goal of distribution policy is to overcome ownership
barriers to distribution separating the manufacturer and the
final customer.
• International logistics plays a major role in international sales
and production activities.
Distribution Strategy
• Direct distribution: Direct distribution involves the manufacturer taking orders and
sending its products directly to the consumer.
• Indirect distribution: Indirect distribution involves working with intermediaries to
distribute your products. These can be retailers, wholesalers, franchisors or distributors,
depending on your needs.
• Intensive distribution: This distribution type involves placing your products in as many
retail locations as possible, and only really applies to inexpensive products that customers
purchase routinely.
• Selective distribution: This distribution strategy involves distributing your products
to more than one retailer, but being very selective about which ones you work with.
• Exclusive distribution: An exclusive distribution strategy involves selling your product
to one specific retailer, or only through your own website or physical storefronts.
Promotion policy as a marketing mix instrument
• Promotion policy involves transferring information to new potential buyers
about the company, its products to make them buy these products. Selection
and use of the instruments needed to achieve these objectives depend on
factors such as:
1. The objective of promotion on the international market,
2. Financial resources and experience in foreign markets,
3. Provisions of the law which regulate promotional activities in each country,
4. Cultural factors – Eg. Language, habits, religion, symbols, associations
related to the color,
5. Competition on the foreign market,
• The company may take similar actions as experienced competitors or, if it is
lacking in resources, cooperate with the participants in the distribution
channel and jointly carry out promotion.
New Product Development
“A new product is one, which differs significantly from the products
available in the market in forms of qualities, features, or both. ”
Reasons for developing New Product
• Changes in Market
• Changes in Technology
• Increasing Competition
• Diversification of Risk
• Utilization of Excess capacity
• Seasonal Fluctuations
• Growth & Development
New Product Development Process
I. Idea Generation:
• New product is a result of new idea.
• The sources of idea generation can be,
• Top level management
• Current employees
• Sales force or salesman
• Marketing research firms, etc.
II. Idea Screening:
• Also called as scrutinizing ideas.
• Aimed at reducing the no. of ideas.
• In this step company tries to materialize one or two out
of highly feasible and profitable ideas.
III. Concept Development & Testing:
• For each of the selected ideas, concept is developed and
tested to find out degree of success.
IV. Marketing Strategy Formulation:
• When market testing produces favorable results,
marketing manager moves to formulate marketing
strategy for proposed product.

• It develops a preliminary marketing strategy statement

for introducing a new product.
V. Business Analysis:
• In this stage manager tries to measure the business
attractiveness of the proposal.

• Attempts are made to know what extent a proposed

product is economically viable.
VI. Product Development:
• When business analysis shows positive results, the
company will move further in developing a new product
for selected proposal.

• A company will not directly jump into mass production,

but it concentrates on preparing a prototype of the new
product.
VII. Market Testing:
• If prototype satisfies all expectations, a company
proceeds further in new product development process.

• An attempt to try the entire marketing program for the

first time in a limited no. of well-selected markets, test
cities or different areas.
VIII. Commercialization:
• This is the stage of large-scale production and full-
fledged marketing.

• This step is followed only if test marketing produces

desirable results.
• Commercialization calls for two sub-steps:
• Production
• Marketing
PRODUCT - LIFE CYCLE
• “The concept that studies the life span of product in
relation to the demand is known as product life cycle”

• PLC states relationship between sales volume and

profits.
I. INTRODUCTION STAGE:
• It starts when a new product is, for the very first time
made available for purchase.
• Characteristics:
• Hugh selling & promotional cost
• Price is high to cover cost
• Sales is low
• Loss or negligible profit
• No competition
Strategies:
• Introduction stage is marked with slow growth in sales
and a very little or no profit.
• Basic constituents include price and promotion, both can
be high or low depending upon market situation.
II. GROWTH STAGE:
• Stage of rapid market acceptance
• Characteristics:
• Sales increase
• Can earn maximum profit
• Competitors enter the market due to attractive profit
• Price is reduced to attract more consumers
Strategies:
• Product quality and feature improvement
• Enter in to the new market segments
• Shifting advertising and other promotional efforts from
increasing product awareness to product conviction,
• Reducing price at the right time to attract price –
sensitive consumers
• Preventing competitors to enter the market by low price
and high promotional efforts
III. MATURITY STAGE:
• Characteristics:
• Sales increase at decreasing rate
• Profits start decline
• Customer retention is given more emphasis
• Product, market and marketing mix modification are
undertaken
Strategies:
• Company adopts offensive or aggressive marketing
strategies to defeat the competitors.
• To do nothing
• Market modification
• Product modification
• Marketing Mix modification
IV. DECLINE STAGE:
• Characteristics:
• Sales fall rapidly
• Profits fall more rapidly than sales
• Product modification is adopted
• Company prefer to shift resources to new products
• Most of sellers withdraw from market
• Promotional expenses are reduced to realize a little
profit
Strategies:
• Continue with the original products
• Continue products with improvement
• Drop the product
Factor affecting international Pricing
• Cost
• Competition
• Product Differentiation
• Exchange rate
• Economic condition of importing country
• Government factor
International HRM
• Human resource management refers to activities
necessary to staff the organization.
• HRM is more difficult for the international company than
its domestic counterpart due to:
▫ Environmental differences.
▫ Organizational challenges.
Global selection approach
• Ethnocentric approach - Ethnocentric staffing means
to hire management that is of same nationality of parent
company.
• Polycentric approach - When a company adopts the
strategy of limiting recruitment to the nationals of the
host country, it is called a polycentric approach.
• Geocentric approach - When a company adopts the
strategy of recruiting the most suitable persons for the
positions available in it, irrespective of their
nationalities, it is called a geocentric approach.
Expatriates
• Expatriates are those living or working in a foreign
country.
• Expatriate is a term used to describe an employee who is
temporarily or permanently assigned to work in a foreign
country.
Expatriates
Why Expatriates Fail?
• Inability of spouse to adjust to foreign environment
• Family Problem
• Difficulties with new environment
• Unsafe living
• Working condition in host country
Training to Expatriates
• Training and predeparture preparations can lower the probability of
expatriate failure. Increasingly, preparation activities include the
spouse.

• Training and predeparture preparations often includes:

▫ General country orientation
▫ Cultural sensitivity
▫ Practical skills

• Usually aim of training programs to transfer specific information

about the host country as well as improve the executive's cultural
sensitivity.
Compensating Expatriates
• Compensation must neither overly reward nor unduly
punish a person for accepting a foreign assignment.
• The most common approach to expatriate pay is the
balance sheet approach.
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What is Supply Chain Management?

• Supply chain—the coordination of materials, information,
and funds from the initial raw-material supplier to the
ultimate customer.

• Logistics—part of the supply-chain process that plans,

implements, and controls the efficient, effective flow and
storage of goods, services, and related information from
the point of origin to the point of consumption in order to
meet customers’ requirements.
 17-51

Global Manufacturing Strategies

• Four Key Factors:
Compatibility
Configuration
Coordination
Control
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Compatibility
• Company managers must consider the following
strategies:
Efficiency/Cost
Dependability
Quality & Innovation
Flexibility
 17-53

Manufacturing Configuration
• Centralized manufacturing in one country
• Manufacturing facilities in specific regions to service
those regions
• Multidomestic facilities in each country
 17-54

Coordination Control
• Control systems, such as organizational structure and
performance measurement systems, ensure that
managers implement company strategies.
Thank
You