International Marketing Summary PDF

**Summary International marketing** **Class 2** A **foreign market** refers to a market outside of a company\'s home country where it sells its products or services. It\'s a market in a different country or region, where the company might need to adjust its strategies to meet local consumer needs,...

**Summary International marketing** **Class 2** A **foreign market** refers to a market outside of a company\'s home country where it sells its products or services. It\'s a market in a different country or region, where the company might need to adjust its strategies to meet local consumer needs, preferences, and regulations. **Marketing** is the process of creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society. The core elements of marketing are the 4 P's: **Price, Promotion, Product, and Place**. **International Marketing** applies these 4 P's but is broader and more challenging because it involves multiple markets and various influencing factors. It focuses on promoting and selling products and services to a global customer base, taking into account cultural, political, and economic differences. **Differences between International and Domestic Marketing**: - Language barriers, cultural differences, and varying customer behaviors complicate international marketing compared to domestic marketing. **Reasons to Go International**: - Offers new opportunities for companies to increase profits. - Companies reach a larger audience. - Offers businesses valuable foreign market insights. - Enhance the living standards of customers in the countries that participate in it. - Promotes international cooperation between businesses in different countries. - Helps businesses build a global reputation, forming world- recognizable brand identity. - Promotes cultural and social exchange. **How to Go International**: - Adjust messages, product features, distribution, and pricing to align with local practices and preferences, which differ across international markets. - International marketing strategies cater to the unique needs and regulations of each market. **Strategies**: - **Product Adaptation**: Localizing products (e.g., pastel de nata in Portugal, macarons in Paris, croquet burger in Holland). - **Adaptive Marketing Strategy**: The same advertisement can be used with small cultural adjustments (e.g., changing character appearance to reflect local culture). - **Local Sponsorship**: In many cases, businesses require local partners or sponsors due to varying economic conditions and regulations. **Class 3** **Marketing Evolution**\ Marketing traditionally focuses on the **4 P's**: Price, Promotion, Product, and Place. Over time, the focus expanded to include **People** (5 P's), and then further to understanding the customer in a broader **context** (including competition, government policies, economic, social, and political forces). In the 1980s, marketing began to evolve as global trade and cooperation between nations increased. **Key Developments in the 1980s:** - **End of the Cold War**: Shifted global politics. - **International Economics**: Triggered by industrial and consumer revolutions. - **Global Governance**: Enhanced cooperation on international issues (e.g., health, peace, and security). - **Advances in Transportation and Communication**: Made global interactions easier. **International Marketing Definition**\ International marketing is the process of planning, pricing, promoting, and directing the flow of goods and services to consumers across multiple nations for profit. **Location, Tasks, and Objectives in International Marketing:** - **Location**: The key difference between domestic and international marketing is that international marketing involves multiple countries, which adds complexity. - **Tasks**: Marketing principles remain universal, but challenges arise when applying them in different countries. - **Objectives**: The goal is to make a profit by marketing products that meet demand in foreign markets. **The Main Difference Between Domestic and International Marketing**: - The primary difference lies in the **environment** in which marketing activities take place, not the tasks or objectives. International marketing deals with more levels of uncertainty due to various uncontrollable environmental factors. **International Marketing Environment**\ The international environment affects all businesses, even those that are not involved internationally. For example, changes in foreign markets---such as economic shifts in the EU, China, or political decisions in the Middle East---can impact companies worldwide. **International Marketing Tasks**\ International marketers must navigate **two levels of uncontrollable uncertainty**: 1. **Domestic Environment**: Factors like political decisions, economic climate, and competition at home. These are factors within your home country that can impact your business. Examples include local politics (government policies), the economy (inflation, labor costs), and competition from other companies in your home market. 2. **Foreign Environment**: Factors in the international market, such as political, economic, and cultural factors. These are factors in the international markets where you want to operate. They include foreign politics (trade laws, regulations), economics (currency fluctuations, local wealth), and cultural aspects (language, traditions, consumer behavior). **Controllable vs. Uncontrollable Elements** - **Controllable Elements**: Price, product, promotion, and distribution can be adjusted according to market conditions and corporate goals. - **Uncontrollable Elements**: Factors like political decisions, economic climate, competition, cultural differences, and legal issues that are beyond the marketer's control. **Example**: - **Kodak**: Faced strong competition from Fuji in the US and had to adjust its international strategy in response. - **Huawei**: Could not sell its phones in the US due to political decisions but found success in other markets. **Domestic Environment Uncontrollable Factors**: - **Political Decisions**: Domestic foreign policies can impact international marketing, such as trade bans. - **Economic Climate**: Factors like inflation and labor rates influence a company\'s ability to invest in international markets. - **Competition**: Home-country competition can affect a company\'s ability to expand internationally (e.g., Kodak\'s competition with Fuji). **Foreign Environment Uncontrollable Factors**: - **Political/Legal Issues**: Laws and regulations can vary greatly in foreign markets, complicating business operations. For instance, Coca-Cola faced challenges in China due to evolving laws and political objections. - **Cultural and Economic Shocks**: Operating in foreign markets may involve overcoming cultural misunderstandings and adapting to new legal and economic systems (e.g., Coca-Cola's struggles in China). **Significant Uncontrollable Elements in International Marketing**: - **Political and Legal Forces**: Including government regulations and international trade restrictions. - **Economic Forces**: Such as inflation, recession, or economic growth in different countries. - **Cultural Forces**: Cultural differences and cross-cultural misunderstandings can lead to challenges in marketing (e.g., gestures or business etiquette). - **Technological Forces**: Variations in technological infrastructure can impact how products or services are marketed. **Cultural Misunderstandings**: - Different countries interpret gestures or symbols differently (e.g., a hand gesture in the US may mean \"okay\" but in other cultures, it may be offensive or have an entirely different meaning). - Failing to understand and adapt to cultural norms can lead to significant issues, as seen in Coca-Cola's challenges in China. **Conclusion**: The **international marketing environment** presents a much more complex set of challenges compared to domestic marketing. Marketers must navigate uncontrollable elements such as political decisions, economic climates, cultural differences, and technological variances in each foreign market. Adapting to these uncontrollable elements is essential for success in international marketing. **Class 4** **Key Obstacles: Self-Reference Criterion (SRC) and Ethnocentrism** 1. **Self-Reference Criterion (SRC)**: - An unconscious reliance on one\'s own cultural values, experiences, and knowledge when making decisions. Unknowingly using your own culture to judge others. - Can cause marketers to misinterpret foreign markets and fail to recognize cultural differences. 2. **Ethnocentrism**: - The belief that one's own culture or methods are superior to others. - Leads to inappropriate actions in foreign markets due to overconfidence in domestic approaches. Thinking your culture is better than others. **Why Are These Obstacles Significant?** - They prevent marketers from recognizing cultural differences and acting appropriately. - Example: Refusing hospitality in Asia may offend the host, whereas it's acceptable in the U.S. **Solutions to SRC and Ethnocentrism** 1. **Recognize Their Impact**: - Acknowledge how SRC and ethnocentrism affect decision-making and marketing actions. 2. **Conduct Cross-Cultural Analysis**: - **Steps**: 1. Define the problem in terms of domestic norms. 2. Reframe the problem using foreign cultural norms (with local input). 3. Isolate SRC's influence. 4. Redefine and adapt the problem without SRC bias. 3. **Adaptation**: - Adjust products and strategies to meet local needs and preferences. - Example: 1. \"Vicks\" changed its name to \"Wicks\" in Germany due to negative slang meanings. 2. McDonald\'s in India replaced beef patties with mutton for cultural sensitivity. **Developing Global Awareness** - **What Is Global Awareness?** - A mindset that understands and respects global cultural, historical, and economic contexts. - Includes knowledge of world trends, tolerance for cultural differences, and building personal relationships. - **Why Is It Important?** - Identifying global trends and opportunities early gives businesses a competitive advantage. - Understanding history and culture helps marketers avoid mistakes and build strong relationships. **How to Build Global Awareness**: 1. Learn (**knowledge**) about different cultures, histories, and global market trends. 2. **Tolerate** and respect cultural differences without viewing them as inferior. 3. Cultivate **personal relationships** and partnerships in international markets. **Stages of International Marketing Involvement** 1. **No Direct Foreign Marketing**: - Products reach foreign markets indirectly, often without the company\'s knowledge (e.g., through distributors). No effort. 2. **Infrequent Foreign Marketing**: - Excess inventory is occasionally sold abroad due to fluctuating domestic demand or production. Extra products are occasionally sold abroad when there's excess inventory. 3. **Regular Foreign Marketing**: - Permanent capacity is allocated to serve foreign markets. - Marketing becomes a regular and planned effort. The company regularly plans and produces for foreign markets. 4. **International Marketing**: - Fully committed to foreign markets. - Products are designed specifically for international markets. 5. **Global Marketing**: - The world is treated as a single market with segments based on factors like income or usage patterns, not national borders. - Example: Coca-Cola's global marketing strategy aligns all regions equally. **Key Takeaways for International Marketing** 1. **Adaptation** is critical for success; marketers must tailor products and strategies to different cultural contexts. 2. **Global awareness** ensures sensitivity to cultural differences and helps identify opportunities. 3. **Controllable and Uncontrollable Factors**: - Marketers can adjust controllable elements (e.g., price, promotion, product) but must adapt to uncontrollable elements (e.g., political decisions, economic conditions, cultural norms). 4. **Practical Examples**: - Packaging chocolate as a gift in Japan due to local preferences. - Modifying detergent for Brazilians based on washing habits and economic constraints. By recognizing and overcoming SRC and ethnocentrism, marketers can effectively navigate international markets, minimize errors, and foster long-term success. **Class 5** **What is Culture?** Culture shapes how people think, behave, and consume. It includes shared beliefs, values, customs, and traditions passed from one generation to the next. **Characteristics of Culture**: 1. **Prescriptive**: Defines (tells people) acceptable behaviors in society. 2. **Socially Shared**: Common beliefs and values shared within a group. 3. **Learned**: Acquired through teaching, not inherited genetically. 4. **Subjective**: People interpret culture differently, even within the same society. 5. **Enduring**: Passed down across generations but can evolve. 6. **Cumulative**: Builds over time, incorporating new ideas, growing. 7. **Dynamic**: Continuously changes with new influences. **Elements of Culture** 1. **Social Organization**: Small groups like families, friends, and social classes define individual behavior. 2. **Customs and Traditions**: Vary widely and influence consumer decisions (e.g., eating habits or marriage norms). 3. **Language**: Essential for communication, but differences can lead to misinterpretations. 4. **Art and Literature**: Reflect and preserve cultural values. 5. **Religion**: A sensitive element that dictates behaviors and taboos. 6. **Government**: Systems like democracy or dictatorship are influenced by cultural values. 7. **Economic Systems**: Traditional, free-market, command, or mixed economies shaped by cultural practices. 8. **Traditional Economy**: Based on old customs and practices. Relies on people, with little technology or specialization. Example: Haiti, Amish communities in the U.S. 9. **Free Market Economy:** No government control; businesses operate freely. Example: United States. 10. **Command Economy:** Government controls all economic activities. Example: Communist countries. 11. **Mixed Economy:** Combines free market and government control. Most countries, like the United States, have mixed economies. **Culture's Influence on Consumer Behavior** - **Consumption Patterns**: Culture dictates what people buy and avoid. - Example: Hindus avoid beef; Swiss non-alcoholic beer thrives in Saudi Arabia. - **Lifestyles and Needs**: Needs and priorities vary (e.g., dog meat in China vs. pets in the West). - **Marketing Challenges**: Products must fit cultural norms to succeed. **Culture's Influence on Thinking** - **Cultural Differences**: - Beauty standards (e.g., fat as beauty in Africa vs. slimness in the West). - Superstitions influence decisions (e.g., Brazilians avoid fire insurance out of fear it might attract fire). - **Universal Needs with Different Expressions**: - People everywhere seek fun, beauty, and music, but their preferences vary widely. - Example: Asians value fair skin, while tanning is a sign of beauty in Portugal. **Communication and Culture** - **Verbal Communication**: Language barriers can lead to misunderstandings. - Example: Multilingual countries like Belgium require tailored marketing. - **Non-Verbal Communication**: Gestures and symbols have different meanings across cultures. - Example: Certain hand signs can be offensive in one country but neutral in another. **Cultural Universals and Similarities** - While some traits (e.g., love for music) are universal, behavior and interpretation differ by culture. - Example: The pandemic created shared values like prioritizing well-being but affected cultures differently in how they adapted education, work, and socializing. **Takeaways for Marketers** - Understand the **elements and characteristics** of culture to adapt products and strategies effectively. - Respect cultural differences in thinking, behavior, and communication to avoid mistakes and connect with customers. - Remember: **What works in one culture may fail in another.** **Class 6** **1. Culture and Communication Context** Countries can be categorized as either high-context or low-context cultures: - **High-context cultures** (e.g., Japan, France, Spain) rely on indirect communication where nonverbal cues, tone, and context are essential. - **Low-context cultures** (e.g., USA, Northern Europe) emphasize direct, explicit communication focused on the words themselves. Cultural approaches to information processing also differ: - **Monochronic cultures** (e.g., Germany, Netherlands): Value punctuality, focus on one task at a time, and prioritize schedules. - **Polychronic cultures** (e.g., Japan, Latin America): Handle multiple tasks simultaneously and value flexibility. **2. Verbal Communication** - Language is a cornerstone of culture, with over 6,000 spoken languages worldwide, many of which are endangered. - In Western countries like the USA, there is often an overreliance on English as a \"universal language,\" which can create barriers in non-English-speaking markets. - Marketers must adapt to how different cultures process language: - Chinese consumers favor **visual representation** (e.g., logographs). - English speakers respond better to **phonological cues** (e.g., jingles). - Brand names and advertisements should reflect these preferences for maximum impact. **3. Nonverbal Communication** - Nonverbal cues, such as body language, eye contact, and gestures, are culturally specific: - In the US, sustained eye contact is polite, while in Asia, it can be seen as disrespectful. - Gestures like waving differ in meaning across regions. - Time perception varies: - **Linear time** (e.g., Europe, USA): Time is valuable and linear; planning and efficiency are key. Past, present, future. - **Circular time** (e.g., Middle East, Asia): Time follows a cycle; planning is less critical. No need to plan bc the circle works. - **Procedural time**: Task completion matters more than schedules (e.g., India). **4. Time and Space** - **Space** plays a significant role in communication and personal interactions: - Latin Americans are comfortable with close proximity, while Asians prefer more personal space. - Office layouts also reflect cultural priorities (e.g., executives on the ground floor in Japan). **5. Friendship and Negotiations** - **Friendship** in business varies by culture: - Americans often focus on deals first, then friendship. - In China and Turkey, building personal relationships is a prerequisite for business discussions. - Addressing someone by their first name is common in the US but may offend in more formal cultures. - **Negotiation styles**: - Silence is a tactic in Japan and China but can make Americans uncomfortable. - Russians and Chinese are patient negotiators, while Americans prefer quick conclusions. **6. Religion and Colors** - **Religion** significantly influences behavior and consumption habits: - Islamic countries restrict alcohol and depictions of women in ads. - Hinduism and Buddhism emphasize tranquility and minimalism, reducing consumerism. - **Colors** carry different meanings: - Red signifies luck in China but represents lust in Spain. - White is for mourning in India but symbolizes purity in the US. **7. Subcultures and Market Segmentation** - **Subcultures** are distinct groups within larger societies with unique traits: - Examples include ethnic groups, religious communities, or demographic clusters. - Subcultures provide opportunities for niche marketing. For instance: - Spanish-language ads in the US foster solidarity with the Latino community. - Avon's bilingual catalogs cater to Latinas with tailored products and imagery. - **Homogeneity vs. diversity**: - Countries like Japan are relatively homogenous, which simplifies communication. **Homogeneity** means a population shares similar traits like language and culture, simplifying communication (e.g., Japan). - Others, like Canada or the US, have diverse subcultures with varied consumption patterns. **Diversity** refers to varied cultural and demographic groups, requiring tailored approaches (e.g., Canada, USA). **Class 7** **1. Importance of History in International Marketing** - **Understanding History**: History reveals a nation's mission, values, and relationships with others, helping explain business and political behavior. Future is linked with the future. - **Historical Examples**: - Panama Canal: Geography and history shaped its strategic trade importance. - Opium War: China\'s historical experiences influence its modern political actions. - Mexico-US Relations: Different historical perspectives explain cultural and economic tensions. - Historical viewpoints vary, shaped by biases and cultural contexts. **2. Geography and Global Markets** - **Geography's Role**: It shapes market environments, resources, and trade strategies. - **Climate and Topography**: - Climate affects product functionality (e.g., RPM variations in washing machines for different countries). - Topography, like mountains or oceans, can hinder trade, requiring infrastructure (e.g., the English Channel tunnel). **3. Trade Routes and Communication** - **Trade Routes**: Historic routes, like those linking Europe, Asia, and the Americas, remain crucial today, facilitating global trade. - **Communication Advances**: Innovations (telegraph, internet, 5G) revolutionize commerce, enabling instant global connectivity and creating new business models. **Class 8** **The Political Environment** - Politics and economics are interrelated, though they don't always mix well. Political decisions, such as economic sanctions, can affect trade and investment, but countries may still find economic benefits despite political restrictions (e.g., Vietnam and Iraq). - The political environment is dynamic and can change, impacting businesses. Governments may take actions such as imposing economic sanctions or enacting policies that influence foreign investments. - Political risk can arise from social unrest, attitudes of nationals towards foreign companies, and the policies of the host government. **Political Systems:** 1. **Parliamentary System**: In these countries, the government regularly consults citizens to make decisions (e.g., the UK). 2. **Absolutist System**: One leader or group makes all the decisions without asking the citizens for their opinion (e.g., Saudi Arabia). Governments can also be categorized by the number of political parties: - **Two-party system**: There are two main political parties that compete for control (e.g., the USA). - **Multi-party system**: Several political parties exist, and one of them forms the government (e.g., Israel). - **Single-party system**: Only one political party is allowed to control the country (e.g., Egypt). - **Dominated one-party system**: One political party controls everything, and no opposition is allowed (e.g., China). **Economic Systems:** 1. **Communism**: The government owns and controls all industries and resources. 2. **Socialism**: The government controls the most important industries, but small businesses can be privately owned. 3. **Capitalism**: The economy is driven by private businesses and competition, with little government interference. **Political Risks** - Risks such as confiscation, expropriation, nationalization, domestication, and creeping expropriation affect foreign businesses, with varying levels of compensation or control by the government. - To minimize political risk, businesses can stimulate the local economy, employ locals, share ownership, maintain political neutrality, and avoid getting involved in local political disputes. **Indicators of Political Instability** - Factors include social unrest, attitudes of nationals (e.g., hostility toward foreign enterprises), and unstable government policies. - Political risks can escalate into conflicts involving neighboring countries or internal unrest that disrupts business operations. **Measures to Minimize Political Risk** - **Stimulation of the local economy** by purchasing local products and using local suppliers. - **Employment of nationals** to build local support. - **Shared ownership** through joint ventures to integrate with local companies. - **Civic-mindedness** by investing in community projects. - **Political neutrality** to avoid getting caught in political conflicts. **Behind-the-Scenes Lobbying** - Companies can lobby to influence government decisions that affect their business interests. Lobbying can be subtle to avoid public political conflicts. For instance, US businesses have influenced trade policies through lobbying efforts. **Class 9** **1. Why Nations Trade:** - Nations trade to gain mutual benefits, not at the expense of another. Trade is a \"positive-sum game,\" meaning both countries gain something from it, even if not equally. - For example, countries like Portugal and China trade to make a profit or access different products. The idea that one country loses when trading is incorrect, as both nations benefit. **2. Trade Theories:** There are several economic theories to explain why and how trade happens: - **Production Possibility Curve (PPC)**: Shows a country\'s ability to produce different products. Each country has a unique curve, depending on its resources. Specialization can improve efficiency, and countries trade to benefit from others\' production. The **Production Possibility Curve (PPC)** shows the maximum amount of two products a country can produce using all its resources. It helps a country decide how much of each product to make. If a country specializes in producing one product, it can trade with others to get what it needs. Without trade, the country would have to produce everything itself, which might be less efficient. Each country has its own PPC, depending on its resources. Specializing in one product and trading for others is a way to improve efficiency and gain more benefits. The principles of **absolute advantage** and **comparative advantage** help countries decide what to export and import based on their ability to produce efficiently. The country may elect to specialize or put all its resources into making either computers (point A) or automobiles (point B). At point C, product specialization has not been chosen, and thus a specific number of each of the two products will be produced. - **Absolute Advantage**: A country has an absolute advantage if it can produce a good with fewer resources than another country. For example, if the USA can produce more computers than Japan, it has an absolute advantage in computers. Countries should specialize in what they produce most efficiently and trade with others. Case 1 for example (image): 2 nations that make computers. USA and Japan. US 20. Japan 10. Automobile US 10 , Japan 20. Dus bijv. Japen can better quit computers and just trade. Japan will produce the AUtombole and Us the computer and they trade witch each other. US absolute advantage computers. Japan automobiles. (OTHER WAY: disadvantage. The **Principle of Absolute Advantage** says that countries should focus on producing what they can make most efficiently and at the lowest cost. For example, if the **USA** can make **computers** more efficiently than **Japan** and **Japan** can make **cars** more efficiently than the **USA**, they should specialize in what they do best. Then, the **USA** can export computers to **Japan** and **Japan** can export cars to the **USA**. This way, both countries use their resources efficiently and benefit from trade Afbeelding met tekst, schermopname, Lettertype, nummer Automatisch gegenereerde beschrijving - **Comparative Advantage**: This theory goes beyond absolute advantage. Even if one country is better at producing all goods, it should still trade based on comparative advantage. A country should specialize in what it can produce most efficiently relative to other goods. For example, the USA may be better at both computers and automobiles, but it should specialize in the product where its advantage is largest and trade for the other. - **For computers:** The USA can produce **20 computers** for **10 cars**. So, the ratio is **20:10**, which simplifies to **2:1** (for every car the USA makes, it can produce 2 computers). - **For cars:** The USA can produce **30 cars** for **20 computers**. So, the ratio is **30:20**, which simplifies to **1.5:1** (for every 1.5 cars the USA makes, it can produce 1 computer). - **Exchange Ratios**: The relative value of products in trade. - **Factor Endowment Theory**: A country's resources (land, labor, capital) influence its trade patterns. - **Competitive Advantage**: A country can have a competitive edge based on factors like technology, skills, or infrastructure. **Conclusion**: - Trade theories, including absolute and comparative advantage, explain why countries should specialize in certain products and trade with others. By focusing on their most efficient production areas, countries can maximize benefits and improve prosperity. **Class 10** **Trade Theories** 1. **Production Possibility Curve**: Shows the possible combinations of two products a country can produce, illustrating trade-offs and opportunity costs. 2. **Absolute Advantage**: A country has an absolute advantage if it can produce a product using fewer resources than another country. 3. **Comparative (Relative) Advantage**: Even if one country has an absolute advantage in both products, trade can still be beneficial if each country specializes in producing the good in which it has a comparative advantage (lower opportunity cost). 4. **Exchange Ratios, Trade, and Gain**: The exchange ratio (how much of one good must be given up to produce another) affects trade decisions. Countries trade to maximize efficiency and benefit from differences in production costs. 5. **Factor Endowment Theory**: The ability to produce goods depends not just on labor but on the availability of other factors like land, capital, and raw materials. Countries will specialize in goods that use their abundant factors efficiently. 6. **Competitive Advantage of Nations**: Nations develop competitive advantages based on factors like labor quality, technological knowledge, and government policies. Michael Porter identifies key factors for competitiveness: - **Factor conditions** (resources like labor and capital) - **Demand conditions** (consumer demand for products) - **Related and supporting industries** (the presence of supporting industries) - **Firm strategy, structure, and rivalry** (the way firms compete and innovate) **Key Points on Exchange Ratios, Trade, and Gain:** - Trade happens when a country can produce a good at a lower opportunity cost than another. If a country has an absolute advantage (can produce more), it might still not trade if both countries have the same domestic exchange ratio (the cost to produce goods within the country). - **Case Example**: If the US and Japan both produce computers and automobiles, and the US has an absolute advantage in both, trade may not happen if both countries have the same domestic exchange ratio (e.g., 1 computer = 2 automobiles). - Trade benefits arise when countries specialize in the good they produce more efficiently, leading to a gain from trade. **Exchange Ratios and Trade** - **Exchange ratios** show how much of one good you need to give up to get another good. For example, if a country needs to give up 2 cars to make 1 computer, its exchange ratio is 2:1. - Trade doesn\'t always happen just because one country has an advantage in producing more of something (absolute advantage) or can produce something at a lower cost (relative advantage). Other factors like **domestic exchange ratios** (how much of one good a country can produce compared to another) also matter. **Case 3 Example:** - Let's assume the **USA** and **Japan** both make **cars** and **computers**. In this case, the USA has a **better** ability to make both products than Japan (an **absolute advantage**). - However, the **exchange ratio** (how many cars a country needs to give up to make a computer) is the same for both countries. So, the USA and Japan don\'t have an **incentive to trade** because the cost of producing and exchanging the goods is the same for both. - **Why trade may not happen**: Even though the USA is better at producing both products, the cost to exchange them is the same for both countries (e.g., 1 computer = 2 cars), and adding extra costs like shipping and paperwork could make trade too expensive. **How Trade Helps:** - In **Case 2**, Japan gives up **2 cars** to make **1 computer**. But when Japan trades cars with the USA, it only gives up **1.5 cars** for the same **1 computer**. This means Japan can get **more computers** by trading than if it made them itself. - The **USA** also benefits because, by trading, it can get **cars more cheaply** than producing them itself. In the USA, **1 computer** gets it **1.5 cars**, but in Japan, the same computer would cost **2 cars**. So, the USA can make computers and trade them for cars, which is the best way to use its resources. **The World Market Exchange Ratio:** - Over time, the exchange ratios between countries will **balance out** and create a **world market exchange ratio** (terms of trade). This ratio is a compromise between the two countries\' initial exchange ratios. - **Example**: If in **Country A**, 1 unit of **X** is exchanged for 1 unit of **Y**, and in **Country B**, 1 unit of **X** is exchanged for **1.33 units of Y**, the new **terms of trade** will be somewhere between these two exchange ratios. **Key Point:** - The exchange ratio helps determine whether trade is beneficial for both countries. If a country can get more of one good by trading, then trade will happen.  Handel is voordelig wanneer een land **meer kan krijgen** door te ruilen dan door zelf te produceren. **Factor Endowment Theory:** - Absolute labor cost is not the only factor determining competitiveness. Countries with higher labor costs (e.g., Japan, Germany) can still be competitive if other factors like capital, land, and technology are used efficiently. - Countries have different factor endowments (resources like labor, capital, etc.), and these determine the goods they can produce most efficiently. A country with abundant labor but limited capital may have a comparative advantage in labor-intensive goods. Afbeelding met tekst, cirkel, schets, Lettertype Automatisch gegenereerde beschrijving **Factor endowment theory** is the idea that the resources a country has---like land, labor, capital (equipment), and entrepreneurship---affect its ability to produce goods. Countries with more resources tend to be wealthier, but this depends on how well they use those resources. Here\'s a simple breakdown: 1. **Labor costs and competitiveness**: - Older theories said that if labor is expensive, a country can't compete in trade. - But in practice, countries like **Japan** and **Germany**, with high labor costs, still do well in trade. This is because **labor quality** (like skills and productivity) matters too, not just labor costs. 2. **Other factors matter too**: - Besides labor, countries also need **land** and **capital** (like factories and equipment) to produce things. - So, a country with skilled workers and good equipment can still produce things at a competitive price, even if labor is expensive. 3. **Comparative advantage**: - Countries export things they have a lot of (like cheap labor or land) and import things they don't have much of (like capital or high-tech equipment). - For example, **China** is good at making **textiles** because it has lots of cheap labor, but it needs to rely on other countries (like the US and Europe) for more **capital**-intensive industries like oil exploration. In short, countries export products that make the best use of their **abundant resources** and import products that need resources they don't have much of **Competitive Advantage of Nations (Michael Porter):** - Nations succeed in specific industries when their environment encourages innovation, investment, and competition. This includes having specialized factors like skilled labor and efficient industries. - **Additional Factors**: Chance (unpredictable events like technological breakthroughs or wars) and government policies (which can either promote or hinder competitiveness) also play significant roles in a nation\'s competitive advantage. In essence, economic development and international trade are shaped by how countries leverage their resources, manage costs, and adapt to dynamic global conditions. The principles of comparative advantage, factor endowment, and competitive advantage provide frameworks for understanding why trade occurs and how nations benefit from in **The Competitive Advantage of Nations** is about why some countries do better than others in specific industries. Michael Porter explains this through his theory, focusing on four key factors: 1. **Factor conditions**: This refers to a country's resources like skilled labor, technology, and natural resources. Countries with the right factors (like knowledge or land) are more likely to succeed in certain industries. 2. **Demand conditions**: If there is strong demand for products or services in a country, companies will be pushed to innovate and improve. For example, if there's high demand for technology, companies in that country will work harder to meet that demand and stay competitive. 3. **Related and supporting industries**: When industries are connected, they can help each other grow. For example, if a country has a strong car industry, it will also need strong industries for parts and materials, creating an overall competitive environment. 4. **Firm strategy, structure, and rivalry**: Companies in a competitive country are often challenged by other companies, which forces them to be innovative and efficient. A healthy level of competition helps companies improve. Two other factors also play a role: - **Chance**: Unexpected events like new inventions, wars, or sudden changes in market demand can affect a country's competitiveness. - **Government**: The government can either help or hurt a country's competitiveness. Good policies and support for innovation help companies thrive, while bad policies or too many restrictions can make it harder to succeed **Class 11** **Critical Evaluation of Trade Theories** 1. **Should vs Actual**: Theories before tell you what a nation should do but not what is actually happening. 2. **A mirror image**: Someone who lives in the same climate, why do they have to trade? Direct investments with someone equal to you is done more, no heavy investments with developing countries. Developed one will trade with the developing one, but in reality this is not happening. Developed countries often trade with each other, even though classical theories suggest they shouldn\'t, as they have similar resources and no clear advantages over one another. 3. **Trade patterns**: All the theories don't touch upon other factors. Real trade patterns differ from theory because factors like high-income nations\' demand for quality products aren\'t addressed in the theories. 4. **Trade restrictions**: Didn't mention trade restrictions (like tariffs and quotas). These are not constant, they are changing but none of the theories address this. *Limitations and suggested refinements* Assume what they are stating are assumptions. Traditional theories consider/ assume that trade is: 1. Trade is Bilateral: only happens between 2 countries. 2. Trade involves products originating primarily in the exporting country: originates from exporting country. 3. The exporting country has a comparative advantage 4. Competition focuses primarily on the importing country's market. However, today's realities are quite different. 1. trade is a **multilateral process**. Dubai-China-Europe 2. trade is often based on products assembled from components that are produced in **various countries**. Dior 3. it is **not easy to determine a country's/producer comparative advantage,** as evidenced by the countries that often export and import the same product from different sources. 4. Competition usually extends beyond the importing country to include the exporting country and third countries as well Limitation that the factors of production are assumed to remain constant (land, capital, labour, and marketing activities). Not true, we use so it becomes less. 1. [For example], early years countries were able to take **Land** (The Netherlands putting sand to higher the level). They were ways to extent the land. Ways to acquire lands now isn't the same anymore.\ [Example] economic crisis Egypt: sell land to United Arab Emirates. They invested in the land and were able to acquire it. 2. Possibility to move **capital**, many restrictions but also many ways to do it. Borrowing money from other countries, capital can move from one country to another. Some countries impose an exit tax: keep money longer, lower exit tax but still it can move. 3. **Labour** can also move, can be restricted but they can move. They can move legally by immigrants/ job offers, but countries try to limit it. [Example], Chinese need permission to move from job in one city to another. 4. **Marketing activities** is one of the most important limitations of trade theories. No attention to the marketing activities, completely ignored. Economics focus on communities, what I'm going to produce and how (money). Marketers focus on building a brand, etc. No attention to the psychological attributes; why do they buy a brand? *Economic cooperation* Best policy for trade doesn't exist. If first policy doesn't exist, you go for the second. Nothing will stop trade from happening. ***Second best theory***: if you can't have the trade you want, maybe you can have a trade to remove barriers and improve the trade. Five levels of economic cooperation: 1. **Free trade area**: Countries trade without taxes between them but still have taxes for countries outside the group. **Example**: NAFTA (now USMCA). 2. **Customs union**: Like a free trade area, but countries also agree on the same taxes for outside countries. **Example**: MERCOSUR. 3. **Common market**: Countries remove all trade barriers and allow free movement of goods, services, workers, and money. **Example**: The European Union. 4. **Economic and monetary union**: a. **Irreversible currency convertibility**: Currencies can be exchanged freely without restrictions. b. **Freedom of capital movement**: Money can move freely between countries with integrated financial markets. c. **Fixed exchange rates**: No fluctuation between member currencies, leading to a single currency. - **Example**: The Euro in most European countries. 5. **Political Union**: Countries combine their economic and political systems. **Example**: The United States. *Economic development* Means an increase in production, increase in production means increase in profit and in salary. Stages of economic development: 1. **MDCs** (more-developed countries): industrialized countries with high per capita income. [Examples]: US, Canada, Germany, France, England, Japan 2. **LDCs** (less-developed countries): industrially developing countries that are just entering world trade. [Examples]: countries in Asia and Latin America. 3. **LLDCs** (least-developed countries): industrially underdeveloped, agrarian, subsistence societies with rural populations, extremely low per capita income levels, and little world trade involvement. [Examples]: found in Central Africa and parts of Asia. *Economic growth factors* Why have some countries grown so rapidly and successfully while others with similar or more plentiful resources languished? Why have some countries grown quickly while others haven't? The success of rapidly growing countries can be explained by several factors: - **Political Stability**: Consistent government policies that support development. - **Economic and Legal Reforms**: Strong laws to protect businesses and property, encouraging investment. - **Entrepreneurship**: People starting businesses and driving economic growth. - **Planning**: Clear development goals and policies to guide growth. - **Outward Orientation**: Focus on both local and international markets to improve products and efficiency. - **Factors of Production**: Ability to attract land, labor, capital, and technology from outside the country. - **Targeted Industries**: Focused policies to help specific industries grow and compete globally. - **Incentives**: Encouraging savings to fund infrastructure, education, and development. - **Privatization**: Selling state-owned businesses to raise capital and improve efficiency. - **Large, Accessible Markets**: Easy access to big markets like the US, Europe, and other countries, with low trade barriers. *Information Technology, the Internet, and Economic Development* **1- An important key to economic growth**: IT, like mobile phones and the Internet, is key to economic growth. It helps emerging economies catch up with richer ones and supports a sustainable future. **2- Accelerates the process of economic growth:** The Internet speeds up the spread of new technologies. Unlike older technologies (railways, telephones), the Internet is rapidly reaching countries like those in Latin America. **3- From high levels of illiteracy to computer literacy:** IT can help countries quickly move from low literacy to computer literacy, boosting their economies. **4- Innovative services:** In developing countries, telecentres offer low-cost access to phones, faxes, computers, and the Internet. These centres help students and local businesses access online resources and connect with potential partners. *Marketing's contribution to the growth and development of a country's economy* **Marketing is at the hearth of it:** Marketing plays a central role in balancing production capacity and consumer demand. It connects what is produced with what consumers need and want. **How important is marketing to the achievement of a nation's goals?** Marketing is often not given enough importance by economic planners, who focus more on production and finance rather than distribution. This leads to marketing being undervalued as a key economic activity. **Marketing is an economy's arbitrator between productive capacity and consumer demand:** Marketing helps balance higher production with higher consumption, ensuring that resources match consumer needs, wants, and purchasing power. **Marketing in a Developing Country:** Marketing strategies must be tailored to each specific situation in developing countries. A one-size-fits-all approach won't work, as conditions differ greatly from those in developed economies. **A marketer cannot superimpose a sophisticated marketing strategy on an underdeveloped economy**: Marketing efforts in underdeveloped economies must be adapted to local conditions, considering factors like literacy rates and market development. **Strategy and pricing:** Pricing in developing countries differs from pricing in affluent societies. Marketers must assess the local market's development level, receptiveness, and their own capabilities before setting prices. **Class 12** **Nature of marketing research.** Marketing research involves the "systematic gathering, recording, and analysing of data about problems relating to the marketing of goods and services." You don't research once. More and more. This describes marketing research process. You will think first! Not just jump. Maybe there is a opportunity, maybe I can make profit etc. so u do a marketing research. Always consider pre research and research. Ex: pre master and master. Carefull planning is important. Whatever data u collect, as student, marketer, if u don't do a proper evaluation, u lose. **Marketing information sources, where we get data from?** Lack of market knowledge increases risk. Toyota\'s research helped them adjust their marketing strategy, understand consumer habits, and succeed in the U.S. market. Classification of data. The two major sources of information are: **Primairy data:** provides results specifically about your company. But cost more. Ex: u need to offer something for the participants. Information gathered directly through original research. It is specific, relevant, and up-to-date, but it is time-consuming and costly to collect. **Secondarity data:** whats available in the market?? involves applying results of previously completed studies to your situations. Information that has already been collected for other purposes. It is readily available but may not be as specific or current. It is often used first because it is easier and cheaper. **The rule** We always go for the secondary option. Ofcourse u go to google and find whats available. But u do need to observe, talk to the company. Researchers should always start by looking for secondary data, using it when appropriate, and ensuring it meets the necessary criteria for the research. So u have to consider do them both! **Secondary Data Collection Sources** **Public Sources** - **Libraries**: Start with public or university libraries for business information. Books, magazine - **World Trade Centers Association (WTCA)**: Provides global trade information with centers in 89 countries. Specific information. - **Chamber of Commerce**: Local business insights and helpful advice. **Private Sources** - **Foreign Governments & Trade Agencies**: Embassies, consulates, and trade promotion agencies provide valuable market info. - **The World Bank**: Offers publications for market analysis, trend assessments, investment strategies, and risk analysis in emerging markets. - **Specialized publics? The web?** **Primary research** U need sources, this is the most difficult one. Difficult to be collective, developed, it consumes effort and money, Some advices for marketers to consider before: go ahead and hire someone. Firs look at news papers of the market, go to the country, trade first. pre research!!. First go to the website, its not enough, maybe u need local news. It is not easy. But it will give you the data that you look for. Observation very difficult. When secondary data is unavailable or outdated, marketers must conduct primary research. They must decide whether to gather the data themselves or hire external agencies. If they DON'T hire, options include: 1. **Competitor\'s home country newspapers** for market insights. 2. **Visiting the foreign market** personally or joining a trade mission. 3. **Attending trade fairs** to observe competitors and interact with potential customers and **Basic methods of primary data collection** There are two principal methods for the collection of primary data: 1. **Observation.** Is used because u don't predict the answer. It minimized bias. Provides more objective data since it doesn\'t rely on what people say or their biases. No interviewer influence is involved. 2. **Questioning:** U cant observe that, just the current situation. Helps you to understand insides. Faster and cheaper than observation. It allows researchers to gather diverse information about the past, present, and future, including consumer motives and attitudes. Methods include personal interviews, phone interviews, and mail questionnaires. **Main differences between primary data and secondary data?** Primary data: data collected for selective purpose. - Highly relevant - Comes from first hand sources: interviews - Time consuming - Expensive Secondary data: gathered by someone else for another purpose - Less relevant, intendent for a different purpose than ur own. Maybe u come close - Less time consuming - Varied sources - Inexpensive Evaluate secondary data 1. Whats the objective or purpose? Should be unbiased 2. What information was collected? 3. How was the information obtained? 4. How current is the information? You have to make sure the data u collecting will lead u to succes. How do u make sure the data u collect is relevant? **Measurement** Why u collect it, how, the variety of the data, the reliability of the data. Always questions that will be asked. - The Best research design / sample are useless without proper measurements. U don't go to wikipedia - Special care must be taken if the reliabiliy and validity of the measurement are to be ensured - **Validity** is an indication of whether a measuring instrument is able to measure what is purports to measure. 3 kg is really 3kg. - **Reliability** is a prerequisite for the existence of validity. Every time it measures 5 kg (even tho it might be 7 kg) **Conceptual Equivalence**\ This ensures a concept is understood the same way across cultures. Some ideas are culture-specific. For example, dating is normal in Europe and the U.S. but may not exist in cultures with arranged marriages. Marketers must consider this. Pizza Hut struggled in Thailand initially because locals didn't know what pizza was. 1. **Functional Equivalence**\ Objects serve different functions in different countries. A bicycle is a sport in some places but basic transportation in others. 2. **Definitional or Classification Equivalence**\ How objects or terms are defined or categorized varies. For example, legal adulthood can range from early teens to 21, and in India, boys as young as 13 can marry. **Instrument equivalence**. 3. **Instrument Equivalence**\ Measuring instruments can be **emic** (culture-specific, 1 culture, insider) or **etic** (culture-independent/universal, outsider). Etic instruments, like the CETSCALE for consumer ethnocentrism, can be used across cultures if properly translated and tested. **Content Validity** is crucial when using a test across populations. A valid test must represent the knowledge or skills relevant to the group being studied. Standardized tests may not work equally across cultures, as identical questions might not provide comparable data. Adjustments may be needed for cultural differences. 4. **Linguistic equivalence** Poor translation can ruin a study's results, especially with literal translations that ignore meaning or context. To ensure **linguistic equivalence**, researchers must address idioms, grammar, and cultural differences in language. For example, in a study on Latin America, surveys were translated into Portuguese and Spanish by native experts, then revised to ensure accurate meaning and purpose. A **Marketing Information System (MIS)** is an integrated network designed to give marketing managers the **right information** at the **right time and place** for planning, decision-making, and control. - **Misconception**: Many think an MIS must be computerized, but manual systems can work just as well and later be automated. The system's **design quality** is more important than whether it's computerized. - **System Development**: Developing an MIS involves **system analysis, design, and implementation** to ensure it meets business needs effectively. - **Desirable Characteristics**: A good MIS is **user-oriented, systematic, expandable, comprehensive, flexible, integrated, reliable, timely, and controllable**. - **Purpose**: The MIS helps managers **organize and use collected data** effectively and ensures the system is improved over time to avoid past issues and perform optimally in the future. **Class 13** **Introduction- the strategy to enter new markets** Generally, strategy means the 'Plan of Action'. This plan of action is to be taken for organisational growth. 1- **Market exploration** is the phase where research is done to know opportunity and scope in local and global market. 2- **Strategy formulation**, the strategy is made on the basis of product, pricing, positioning and segmentation. 3- **Strategy implementation phase** gives the shape to formulated strategy. the most crucial part of any organization because it gives the shape. **Foreign market entry strategies** 1- Exporting 2- Licensing 3- Management contract 4- Joint venture 5- Manufacturing 6- Assembly operations 7- Turnkey operation 8- Acquisition **1.Export** Exporting is a strategy in which a company without any marketing or production organization overseas, exports a product from its home base. Often, the exported product is fundamentally the same as the one marketed in the home market. The **main advantage** of an exporting strategy is its **ease of implementation**. Risks are minimal, as the company exports its **excess production capacity** when receiving orders from abroad. Consequently, the company\'s international marketing effort is **casual** at best. Exporting is the **most common overseas entry approach** for small firms. Many companies adopt this strategy when they first engage in international business and may continue to rely on it as a **long-term approach**. **2- Licensing** Licensing is an agreement that permits a foreign company to use **industrial property** (e.g., patents, trademarks, copyrights), **technical know-how and skills** (e.g., feasibility studies, manuals, technical advice), **architectural and engineering designs**, or a combination of these in a foreign market. It allows a foreign company to manufacture and sell a product in the licensee's country and sometimes in other specified markets. Licensing is not limited to tangible products; **services** can also be licensed. When exporting is ineffective, but a company is hesitant about direct investment abroad, **licensing offers a reasonable compromise.** **Advantages of Licensing** - Helps a company spread out research, development, and investment costs. - Provides **incremental income** with minimal additional expenses. - Protects patents and trademarks from cancellation due to non-use. **Disadvantages of Licensing** 1. Lower profit potential compared to other entry strategies, as **reduced risk** often means **reduced profit**. 2. May create **future competition** by granting a foreign firm access to technological and product knowledge. **3.Management contract** Management contracts can be a solution in situations where **government pressure or restrictions** force a foreign company to sell its domestic operations or relinquish control. In some cases, the company may choose not to engage in **foreign direct investments (FDI)** and instead look for alternative ways to generate revenue. One effective method is signing a **management contract with the government** or the new owner. This allows the company to manage the business on behalf of the new owner, who may lack **technical and managerial expertise**. During this time, the foreign company helps train local employees to take over the management of the facility. **Advantages of Management Contracts** - Offers a way to enter a market with **minimum investment** and **minimal political risks**. - Provides a revenue stream while assisting the local owner with operational and managerial expertise. 4\. **joint venture**\ = a business formed by two or more investors for a specific purpose, sharing ownership and control. **Advantages:** - **Reduced resources**: Both parties share costs and responsibilities. - Can meet **social, economic, and political** needs. - Useful in markets with **high legal restrictions** or **investment risks**. **Challenges:** - **Slow decision-making** if clear policies aren't set. - **Control issues**: Partners with less than 50% ownership must accept decisions from the majority partner. **5- Manufacturing** =the process of making products from raw materials using tools, machinery, or labor. Manufacturing can involve complete, contract, or partial manufacturing in a foreign country. For example, IBM has plants in both the USA and other countries. One form of manufacturing is **sourcing**, where a company manufactures in a host country mainly for export purposes. **Benefits for host countries**: - **Job creation** - **Technology, management expertise**, and access to **export markets** **Reasons for companies to invest abroad**: - Access to **raw materials** - Lower **labor costs** - Avoidance of **import taxes** and trade barriers, making products more competitive. **6- Assembly operations** Assembly operations involve fitting or joining together fabricated components using methods like welding, soldering, riveting, gluing, laminating, and sewing (screen daar, knopje daar). In this strategy, components are produced in different countries to take advantage of each country\'s strengths. It is commonly used by manufacturers of consumer electronics. As a product matures and faces intense price competition, companies may move labor-intensive operations to less developed countries. This helps reduce costs and makes the product more competitive against cheap imports. Unlike manufacturing, which creates parts from raw materials, assembly focuses on putting these parts together in a specific way. **7- Turnkey operation- Franchises** A turnkey operation is an agreement where the seller provides the buyer with a fully equipped facility, ready for operation. The seller also trains the buyer's staff. This concept is often seen in fast-food franchising, where the franchisor selects the site, builds and equips the store, trains the franchisee and employees, and may even arrange financing. **8- Acquisition\ =** process in which a company buys or takes control of another company Acquisition allows rapid entry into a foreign market with maximum control. Benefits include diversification and acquiring expertise. However, it can be seen as exploitation, leading to rejection. International acquisitions are complex, costly, and risky, with challenges like finding a suitable company, fair pricing, and managing cultural differences. **Conclusion** Each market entry strategy has its own unique strengths and weaknesses. A manufacturer may use multiple strategies in different markets as well as within the same market. No single market penetration is ideal for all markets or all circumstances. The appropriateness of a strategic option depends on corporate objectives, market conditions, and political realities. **Class 14** **LG Electronics:** To target 1.1 billion Muslims, LG introduced a mobile phone with an electronic compass and location software to help with daily prayers facing Mecca. **KFC in China:** KFC's Chinese name is *kendeji* (Kentucky). To appeal to local tastes, KFC offers Beijing duck, a dish with fried chicken wrapped in a pancake with traditional Beijing accompaniments. By adjusting products to local needs and preferences, [both companies show the importance of cultural sensitivity when expanding into international markets.] **What is a product?** A product is often considered in a narrow sense as something tangible (can be touched or measured physically) that can be described in terms of physical attributes. Intangible (financial services or insurance) products are a significant part of the export market. [Both tangible and intangible products must be combined to create a single, total product. ] A multinational marketer must look at a product as a total and complete offering. Since a product can be bundled (additional benefits), it can also be unbundled (removing extra features for price-sensitive consumers). There are six distinct steps in new product development. **1- The generation of new product ideas**: For example, Japanese food companies found that baby food characteristics appealed to elderly people, leading to products like diapers for seniors. **2- The screening of ideas:** Ideas are reviewed to check feasibility. This may involve showing concepts to potential users or focus groups to gather feedback and ensure they meet company goals. **3- Business analysis**: This step estimates product features, costs, demand, and profit: prototype, test **4- Product development**: This involves lab tests and producing small batches. Feedback from customers and dealers helps refine the product. **5- Test marketing:** Products are tested in real markets to identify potential marketing issues and the best marketing mix. **6- Full-scale commercialization**: If successful, the product is fully produced and marketed. In Japan, for example, Coca-Cola launches up to fifty new drinks annually by reducing development time. To develop and successful product strategy we should take into consideration the following:\ **\ 1- Market segmentation.**\ The process of dividing a consumer or business market into meaningful sub-groups of current or potential customers known as segments. Its purpose is to identify profitable and growing segments that a company can target with distinct marketing strategies. Geographic segmentation is not enough. The total market at once. **2- Product adoption process.**\ Product adoption is the process by which people learn about your product or app and start using it to accomplish their goals. In breaking into a foreign market, marketers should consider factors that influence product adoption. As stated by diffusion theory, at least six factors have a bearing/ influence on the adoption process: -**Relative Advantage**: A product must show it's better than alternatives. For example, wool coats aren't useful in hot countries, and dishwashers won't sell where cheap manual labor is available. -**Compatibility**: The product should fit local customs. Freezers, for instance, are less popular in Asia, where people prefer fresh food. -**Trialability**: Products that can be tested in small quantities, like trying fabric or test-driving cars, have an advantage. -**Observability**: Products that are seen in public, like luxury bags or cars, gain faster acceptance. A clear logo adds value. -**Complexity**: Complicated products are adopted more slowly. For instance, instant coffee is preferred over filter coffee in some countries due to ease of use. -**Price**: High prices slow down adoption. Canon succeeded by introducing affordable personal copiers under \$1000, quickly dominating the market. **3- International products life cycle** **Theory of international product life cycle (IPLC)** The moral of the story. An advanced nation becomes a victim of its own creation. : As production shifts to less developed countries due to cost advantages, the initiating country loses its efficiency and begins importing the product it once exported. This process illustrates how an advanced nation can become a **victim of its own creation**. Three life cycle curves for the same innovation. **1- One for the initiating country:** Starts as a net exporter but eventually becomes a net importer. **2- One for other advanced nations:** Follow a similar pattern, but at a later stage. **3- One for LDCs (less developed countries):** Begin as importers but transition into exporters as they develop production capabilities. Net export results vs. net import results. As the innovation moves through time, the directions of all three curves change. **Time is relative**: The duration of each stage varies depending on the product type and market dynamics and The curves and trade positions change over time for all countries involved For each curve, net export results when the curve is above the horizontal line; if under the horizontal line, net import results for that particular country. Finally, **less developed countries (LDCs)** produce the product, often at lower costs. **International product life cycle stages and characteristics** There are five distinct stages in the IPLC. USA as the developer of innovation in question. **Stage 0 -- Local Innovation**:\ The product is developed and sold in its original market (e.g., USA).\ Innovations happen in advanced countries due to high consumer demand and technological resources. **Stage 1 -- Overseas Innovation**\ The product is introduced to similar advanced nations to expand sales (e.g., UK, Canada).\ Production costs decrease as demand grows. Competition is minimal, mostly from the innovating country. **Stage 2 -- Maturity**\ Advanced nations start local production, often with government support.\ Exports to less developed countries (LDCs) help maintain sales despite competition in advanced markets. **Stage 3 -- Worldwide Imitation**\ Other nations produce the product at lower costs, reducing the innovating country's exports.\ The product becomes widely available, and the innovator\'s role declines, focusing mainly on local consumption. **Stage 4 -- Reversal**\ The innovating country loses its advantage as production shifts to LDCs, which offer cheaper labor.\ The innovating country becomes an importer of the product it created (e.g., color TVs produced in Asia). **Summary**: As a product moves through its life cycle, production and trade shift from the innovating country to other advanced nations and eventually to LDCs. **Slide Validity of the IPLC** The IPLC model explains how the production and trade of a product shift between countries as it progresses through stages. It applies best to emerging technologies meeting universal functional needs, like semiconductors and washing machines. Products like dishwashers, tied to local conditions like labor costs, fit less well. The U.S. example shows how an exporter can become an importer over time, especially for simpler products. **Notes docent general** The 8 Ps of marketing is product, price, place, promotion, people, positioning, processes, and performance. The focus will be on the 4 Ps: Product. Price. Place. Promotion **Class 15** **IPCL and Marketing strategies** The importance of cost advantage: **1- Cut labor costs**: Keep product costs competitive despite low wages abroad, e.g., China's 0.5-cent labor costs. **2- Eliminate unnecessary options;** Simplify products by removing unnecessary options, offering standardized versions for lower-priced markets. **3- Use local manufacturing** to reduce costs, minimize barriers, and slow local competition, while leveraging these regions for broader market access. **4- Examine the traditional vertical structure. Outsourcing.**or production to reduce costs and use the most efficient resources globally. **Standardization vs. product adaptation** **Standardization** [Product standardization means that a product designed originally for a local market is exported to other countries with virtually no change, except perhaps for the translation of words and other cosmetic changes.] Arguments for standardization:\ -Simplifies production and distribution, making it cost-effective but: Minimizing production costs does not necessarily mean that profit increases will follow. When appropriate, standardization is a good approach. While cost reduction is important, the primary goal should be maximizing profit. Standardization works well when a consistent company image or product quality is essential, like McDonald's, where strict quality controls are maintained globally. **Arguments for adaptation** [Product adaptation is the process of changing a product to meet the needs of customers in a market other than the one in which it is made]. This can be an important part of a company\'s strategy for selling in a foreign country. The "big-car" and "left-hand-drive" syndromes. Product adaptation is necessary under several conditions. Some are mandatory, whereas others are optional. **Mandatory product modification** Mandatory product modification means making changes to a product to follow rules or standards set by governments or other authorities. These changes are needed to make sure the product is safe and works in the market. 1- Government's mandatory standards. 2- Electrical current standards. 3- Measurement standards. **Optional product modification** The more complex and difficult decision is optional modification. Mandatory product modifications are changes required by rules to enter a market or function properly. These changes are easy decisions because companies must comply or stay out. Optional modifications are based on the company\'s choice and are more complex to decide. 1- The physical distribution. 2- Local use conditions. 3- Consumer demographics. 4- Environmental characteristics. 5- Historical preference, or local customs and culture. **Marketing of services** Importance of services: like banking, insurance, tourism, healthcare, education. Services account for one-fifth of world exports and are growing due to technology In Hong Kong, the services sector is accounting for 85 percent of GDP. The USA, The service sector is the largest component of the US economy. It accounts for 79 percent of the private sector output **Types of services** There are two major categories of services: [consumer] and [business] services. **Consumer** services are for individuals, like insurance or hairdressing. **Business** services are for organizations, like advertising, banking, or consulting Services have several unique characteristics. Services also require adaptation from time to time for foreign markets: adding subtitles Services are intangible, person-oriented, and perishable, but marketing strategies for physical products apply to services too. **E-services** A business activity of value exchange that is accessible through electronic networks, which include the internet and mobile networks. It involves distributing and personalizing resources in real-time over the internet. What makes e-services different? The internet has changed consumer behavior and created new needs. E-services combine technology with traditional services, offering intangible products through online interactions. An example is Booking.com **Class 16** Price is the only area of the global marketing mix where policy can be changed rapidly without large direct cost implications. Price usually is higher than the cost. The 4Ps work all together to achieve success. **The role of price in the marketing mix** Price is an integral part of a product; a product cannot exist without a price. Price is important because it affects demand. From a cost standpoint, the price can be extremely high. Price affects the larger economy. Consumers do not object to price. **Factors influencing international pricing decisions** Internal factors: **1- Firm- level factors:** International pricing is influenced by past and current corporate philosophy, organization, and managerial policies. **2- Product factors:** Key product factors include the unique and innovative features of the product and the availability of substitutes. **External factors:** **3- Environmental factors:** The environmental factors are external to the firm and thus uncontrollable variables in the foreign market **4- Market factors:** One of the critical factors in the foreign market is the purchasing power of the customer and most importantly, competition **International pricing strategies** **1- Pricing level. First -- time pricing** **Skimming**: This strategy sets a high price to make as much profit as possible from the top customers. The price is lowered later to reach more customers. It works best when the product is unique and no competitors are around yet. **Market Pricing**: This strategy sets the price based on what competitors are charging. It's good when similar products are already in the market, but it can be risky if sales don't meet expectations. **Penetration Pricing**: This strategy offers low prices to quickly attract many customers. It works when you want to grow fast, but it can fail if competitors also lower their prices or if customers think the product is cheap and low quality. **2- Price changes over PLC** **The PLC and its strategic marketing implications** Price changes happen when a new product is launched or market conditions change, like currency fluctuations. As a product matures, its price may drop due to more competition and less differentiation. **Product-Service Bundle Pricing**: This involves selling a product with services as a package. If the product price is a barrier, services can be priced higher to make the product more affordable, which is common in businesses like software. **3- Pricing across products (product line pricing)** With across-product pricing, the various items in the line may be differentiated by pricing them appropriately: setting different prices for different versions of a product to show their quality or features. For example, a phone might have an economy version, a standard version, and a premium version, each with a different price. **4- Pricing across countries (standardization versus differentiation)** Two basic approaches appear: **1- Price standardization**: setting one price for a product worldwide, adjusted for factors like exchange rates and regulations. It\'s a low-risk approach but doesn\'t maximize profits because it doesn\'t account for local conditions. **2- Price differentiation**: allows local branches to set their own prices based on local needs and conditions. However, it gives the main company less control over prices in different countries. **Class 17** **Pricing decisions** One problem with an investigation of pricing decisions is that theories are few and vague. When pricing a product, a company must consider a number of factors. **1- Supply-demand:** The law of supply and demand shows that as demand increases, prices rise, which can reduce demand. Higher prices can lead to more supply, lowering prices and boosting demand again. Product image can also affect pricing, sometimes making price less important. **2- Cost**: Pricing a product involves various costs, such as market research, travel, translation, and packaging. The main question is which costs to consider and how much they should affect the pricing strategy What kind of cost is considered and to what extent? **Pricing methods for international markets** **1- The cost-plus method** The price is set by adding a fixed percentage (markup) to the total cost of producing the product. It includes both fixed and variable costs. **2- Marginal-cost pricing method** The price is set based on the additional cost of producing one more unit of the product, ignoring fixed costs that don't change with production volume. **3- Alternative pricing methods** There are several strategies for making price changes, such as timing, frequency, and scope of changes. These include using discounts (e.g., cash, quantity), adjusting credit terms, and bundling or unbundling products to moderate the price effect. The price is determined by competitors\' prices or market conditions, rather than by the cost of production. **Class 18** **Introduction** All products need competent distribution to gain market acceptance. Various channels of distribution. In foreign markets, it is far more common for a product to go through several parties before reaching the final consumer. **Channels of distribution** Companies use two principal channels of distribution when marketing abroad: 1. **Direct selling:** The manufacturer sells directly to foreign (outside home country) markets, without using intermediaries. They handle all export tasks themselves, giving them more control and better market engagement. However, it\'s expensive and time-consuming, and challenging if the manufacturer doesn\'t know the foreign market. 2. **Indirect selling:** The manufacturer sells through a local intermediary, like a middleman, who handles export and marketing. It\'s cheaper and simpler but gives the manufacturer less control over the product\'s success in the foreign market. **Types of intermediaries: direct channel in a foreign country** 1- **Foreign distributor**: A foreign distributor is a company in another country that has the exclusive right to distribute a manufacturer's products. They buy products at a discount and sell them to retailers or consumers. 2- **Foreign retailer**: A foreign retailer is a store in another country, like Walmart, that sells products directly to consumers. Manufacturers can contact them by visiting or sending catalogs and brochures. 3- **State-controlled trading company**: Some products, especially in industries like utilities and telecommunications, must be sold through state-run companies. 4- **End user**: Sometimes, manufacturers sell directly to foreign consumers (end users). This works well for expensive industrial products, but for consumer goods, issues like import regulations and customs problems can make this approach difficult. **Types of intermediaries: [indirect channel]** Although there are many kinds of local sales intermediaries, all may be grouped under two broad categories: 1. **Domestic agents** do not own the goods. They just represent the manufacturer. 2. **Domestic merchants** own the goods, even if they don\'t have physical possession of them. 1. **Agents** represent the manufacturer, while **merchants** represent the product itself. 2. **Agents** can sign contracts on behalf of the manufacturer, but **merchants** cannot. **1- Domestic agents** **Domestic agents** can be classified based on who they represent: the buyer or the manufacturer. Those who work for the [manufacturer] include: **1- Export brokers:** The function of an export broker is to bring a buyer and a seller together for a fee. The export broker is useful due to its extensive knowledge of the market supply, demand, and foreign customers. **2- Manufacturer's export agents or sales representative:** Independent agents who sell for the manufacturer, but work under their own name and can decide how, when, and where they sell. **3- Export management companies (EMC):\ **They handle all of a manufacturer\'s export activities. **4- Cooperative exporters:** Manufacturers with their own export team who sell other manufacturers\' products in foreign markets to share costs and expertise. Agents who look after the interests of the [buyer] include: **1- Purchasing (buying) agents/offices:\ **They represent a foreign buyer and find the right product in the exporter\'s country. **2- Country-controlled buying agents:** Similar to purchasing agents, but they are operated by a foreign government or its agency. **2- Domestic merchants** **Domestic merchants** are independent businesses that aim to make a profit, and they all own the products they sell. Here are different types of domestic merchants: 1. **Export merchant**: This business buys products from local manufacturers and sells them in foreign markets, using its own name and contacts. 2. **Export drop shipper**: The drop shipper arranges for the manufacturer to send products directly to the foreign customer, usually owning the goods for a short time. 3. **Export distributor**: This distributor has exclusive rights to sell a manufacturer's products in specific foreign markets. 4. **Trading company**: This is a major type of intermediary in international marketing, playing an important role in business volume and influence. **Class 19** **Channel development** The suitability of a particular channel depends greatly upon the country in which it is used. Litvak and Banting - country temperature gradient. This classification system is based on many environmental characteristics. **Channel decisions** in international marketing are about how products move from the manufacturer to the final consumer. There are three main decisions: 1. **Length**: This refers to how many times a product changes hands between intermediaries/middlemen(businesses or individuals that help move a product from the manufacturer to the final consumer ) before reaching the consumer. 2. **Width**: This is about how many middlemen are involved at each step of the distribution process. There are three types of coverage: - **Intensive coverage**: Using many different intermediaries to reach as many consumers as possible. - **Selective coverage**: Choosing a limited number of intermediaries for each area. - **Exclusive coverage**: Using just one intermediary in a market. 3. **Number of channels**: Deciding how many different distribution channels to use for the product. **Determinants of channel types** Choosing the right distribution channel depends on various factors: 1. **Legal Regulations**: Some countries have laws that limit certain channels, like France banning door-to-door sales. 2. **Product Image**: The way a product is sold affects its image. Low-price products need wide distribution, while luxury products may not. 3. **Product Perception and Customer Characteristics**: The target customer's preferences, income, and local market conditions affect channel choice. For convenience products, wider distribution is needed. 4. **Local Business Customs**: Local habits and geography can influence distribution. Shopping habits and transportation infrastructure are important. 5. **Middlemen's Loyalty and Conflict**: Channel members must be satisfied. Conflicts may arise if channels compete for the same customers. 6. **Power and Coercion**: The party with more resources often has more control in the channel, forcing other members to follow its plan. 7. **Control**: If a manufacturer wants more control, they may choose a narrower, shorter distribution channel. **Managing and controlling distribution channels** Arnold (2000) proposes a guidelines to the international marketer in order to anticipate and correct potential problems with international distributors. 1- Select distributors -- do not let them select you. 2- Look for distributors capable of developing markets rather than those with a few obvious contacts. 3- Treat the local distributors as long-term partners, not temporary market entry vehicles. 4- Support market entry by committing money, managers, and proven marketing ideas. 5- From the start, maintain control over marketing strategy. Get highly involved 6- Make sure distributors provide you with detailed market and financial performance data. 7- Build links among national distributors at the earliest opportunity. **Implications of the internet for distribution decisions** The internet changes the power dynamics between consumers, retailers, distributors, and manufacturers. Some benefit from this shift, gaining more power and profits (intermediation), while others lose out as they are bypassed (disintermediation). As manufacturers sell directly online, they may compete with resellers, leading to conflicts. However, new types of intermediaries are emerging, called reintermediation, which fit the online world. The cycle of **intermediation → disintermediation → reintermediation** happens because technology changes relationships between buyers, suppliers, and middlemen. In this cycle: - **Intermediation**: A new middleman enters the market. - **Disintermediation**: Traditional middlemen are removed. - **Reintermediation**: New middlemen emerge to fill the gaps created by disintermediation. **Class 20** **Introduction. Marketing and communication** The purpose of marketing is both to communicate with buyers and to influence them. Understanding the persuasion process and how environmental factors influence it is essential for effective marketing. To communicate with and influence customers, several tools are available. Two important strategic considerations. **The seller -- buyer relation in the communication process** In the communication process, we usually think of the manufacturer (the sender) sending a message through media to a target audience. In this case, the seller starts the communication. However, if the buyer and seller already have a relationship, the buyer may take the lead. If the buyer has a good experience with a product, they might decide to buy again in the future and even make inquiries or place orders themselves. This is called reverse marketing. **The communication process** All effective marketing communication has four principal elements: a sender, a message, a communication channel, and a receiver (audience). 1. To communicate well, the sender needs to understand the message, the audience, and how they will interpret it. 2. \"Noise\" (distractions) from competitors can make it hard for the audience to understand the message. The sender must focus on the audience's needs, interests, and expectations. 3. The message should be clear and use words or images the audience can relate to. Also, the medium (e.g., press, TV) should match the message---for example, complex messages work better in print than in visual media. ''the degree if fit between medium message'' **Factors affecting communication:** 1. **Language differences**: A slogan or ad that works in one language may not translate well in another. Translation and adaptation are needed for foreign markets. 2. **Economic differences**: People in developing countries may have radios but not TVs. Low literacy areas may prefer visual or oral communication over written. 3. **Sociocultural differences**: Cultural factors like religion, social conditions, and education shape how people interpret messages. For example, in some cultures, white symbolizes grief, so ads need to be culturally sensitive. 4. **Legal and regulatory conditions**: Advertising regulations differ by country. Rules can affect content, language, and even which products can be advertised, such as alcohol or tobacco. 5. **Competitive differences**: Competitors vary across countries, so a company may need to adjust its promotion strategy and timing based on the local market. **Typical communication tools :** Avertising: newspaper, PR: annual reports etc. **Advertising in International Markets** 1. **Objective setting**: The goal is to increase sales from existing and new customers. While methods differ across countries, the objectives remain the same. 2. **Budget decisions**: Firms set advertising budgets using methods like the percentage of sales, competitive parity, or objective and task approach. 3. **Message Decisions (creative)**: Creative strategies focus on the unique selling proposition (USP) and how it influences consumer behavior. This affects the choice of media. 4. **Media Decisions**: Choosing the right media (TV, radio, newspapers) depends on reach, frequency, and impact. It also involves whether to use mass media or target a specific audience. **Types of Media**: - **Television**: Expensive but reaches large audiences. Some countries have strict regulations on TV ads. - **Radio**: Cheaper, local, and effective for national campaigns. - **Newspapers (print)**: Many countries have multiple newspapers with national reach, and some are in English. - **Magazines (print)**: Best for targeting specific groups, especially for technical or industrial products. - **Cinema**: Effective in places like India where many people attend cinemas. - **Outdoor Advertising and other media** : Includes billboards and signs. Useful in areas with high illiteracy rates. 5. **Agency Selection**: Many companies turn to advertising agencies for help with international campaigns. Agencies have the expertise needed for global advertising. 6. **Advertising Evaluation**: Measuring ad effectiveness in foreign markets can be tough due to differences in conditions. Sales results and brand awareness are common ways to evaluate ads. **International Advertising decisions** Advertising decisions in international markets are subject to a number of challenges. **Class 21** **Typical communication tools** adL newspaper, PR: annual reports, sales: discounts etc. **Public relations** Public relations (PR) seeks to enhance corporate image-building and influence favourable media treatment. The range of target groups is far wider in public relations than it is for the other communications tools. Table 17.3 Several methods can be used to gain PR. The degree of control of the PR messages is quite different. How material is used will depend on the journalist and the desired storyline. Therefore, it is important to maintain good relationships with media outlets and journalists. Furthermore, PR activity includes anticipating criticism. Criticisms may range from general ones against all multinational corporations to more specific ones. **Sales promotion** Sales promotion is a short-term effort directed primarily at the consumer and/or retailer in order to achieve specific objectives. In markets where the consumer is hard to reach because of media limitations, the percentage of the total communication budget allocated to sales promotions is also relatively high. The success of sales promotion depends on local adaptation. **Direct marketing** Any direct communication (physical or digital) to a consumer or business recipient that is designed to generate a response in the form of an order, a request for further information, or a visit to a store or other place of business for purchase of a specific product or service. **Personal selling** The differences between advertising and personal selling are that advertising is a one-way communication process that has relatively more 'noise', whereas personal selling is a two-way communication process with immediate feedback and relatively less 'noise'. Expensive!! **A- Types of international sales force** The salespeople hired for sales positions could be: **1- Expatriates**: These are employees from the home country who already know the company's products and policies. They just need to learn about the foreign market. **2- Host-country nationals:** These are local employees who know the market, culture, language, and business practices of their country. **3- Third-country nationals**: These are employees from one country, working for a company based in another, in a third country. For example, a German working for a US company in France would be a third-country national. **B- Trade fairs and exhibitions** A **trade fair (TF)** or **exhibition** is an event where businesses show their products or services to potential customers, suppliers, and the media. It's a chance for companies to promote their offerings and build connections with others in the industry. **International advertising strategies in practice** Standardization in advertising helps companies reduce costs and increase profits by producing the same materials for multiple markets. However, advertising is influenced by local language and culture, so it's important to consider both standardization and localization. For international companies, the balance between the two is key. **Examples of adaptation (localization) strategies** 1. **Courvoisier Cognac**: In China, drinking cognac is a social and visible activity, linked to the concept of \"face\" (status). In Europe, people enjoy it more privately, like relaxing on the couch with a drink. 2. **Prince Cigarettes**: In the UK, the ad invites people to try the product and targets those with higher education and income. In Germany, the focus is on Prince as an \"original import from Denmark.\" 3. **Lego Freestyle**: In Asia, the ad emphasizes building children\'s minds and academic success. In Europe, it highlights creativity, asking what a child can create with the bricks. **Implications of the internet for communication decisions** Unlike traditional shopping, online marketing covers the entire buying process from start to finish. New strategies, like social media marketing, are being used to promote products and engage customers on platforms like Facebook and Instagram. However, standing out online can be difficult due to the \"noise\" of many messages. Online marketing strategies, like website links, banner ads, and email marketing, have evolved and will continue to change as the internet grows. **Online marketing communication** Global selling and buying are part of a social process. Global buying and selling involve not just company-to-customer interaction but also influence from the people around the customer. Consumers trust friends and colleagues more than ads, with word-of-mouth being much more effective than print ads in influencing brand choices. Online, people openly discuss their experiences with brands, giving consumers more power. For