International Business: The Challenges of Globalization PDF

International Business: The Challenges of Globalization Tenth Edition Chapter 15 Developing and Marketing Products Copyright © 2023...

International Business: The Challenges of Globalization Tenth Edition Chapter 15 Developing and Marketing Products Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Learning Objectives 15.1 Describe the factors to consider in developing international product strategies. 15.2 Outline the international promotional strategies and methods available to firms. 15.3 Explain the factors to consider when designing international distribution strategies. 15.4 Describe the two main international pricing strategies and factors to consider. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Wings for Life Red Bull – Controls 40% of the global energy drinks market ▪ Sells about 8 billion cans – Product is identical in every market in which it is sold – “Red Bull Gives You Wings” campaign – Sponsors extreme sporting events Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Standardization v Adaptation Decision ersus Theodore Levitt argued that companies should market the same products in the same way in all countries because the world is becoming standardized and homogeneous – May not always be the most appropriate strategy Consumers in different national markets often demand products that reflect their unique tastes and preferences – Rubbermaid Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Product Strategies: Laws and Culture Companies must often adapt their products to satisfy laws and regulations in a target market – European Union chocolate war Companies also adapt their products to suit local buyers’ product preferences that may be rooted in culture – Häagen-Dazs matcha tea ice cream in Japan Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Product Strategies: Brand and Product Names Brand name Name of one or more items in a product line that identifies the source or character of the items – A strong brand can become a company’s most valuable asset and primary source of competitive advantage. ▪ Lipton tea Morphemes Semantic elements, or language building blocks, such as the van in advantage – Kodak, TikTok, Lumina, Spotify Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (1 of 2) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Product Strategies: Other Product Issues Counterfeit goods Imitation products passed off as legitimate trademarks, patents, or copyrighted works – Common among highly visible brand-name consumer goods ▪ Can damage reputation Waterfall strategy Sequential introduction of a product into new markets abroad one at a time – Difficult to implement today Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 15.1 1. What issues pertaining to law and culture may affect international product strategy? 2. What factors related to brand and product names might influence a company’s international product strategy? 3. What other product issues can influence a company’s product or brand reputation in a market abroad? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies Promotion mix Activities designed to reach distribution channels and target customers through communications, such as personal selling, advertising, public relations, and direct marketing – Many people, even managers, tend to equate marketing with promotion Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Push and Pull Strategies (1 of 2) Pull strategy Promotional strategy designed to create buyer demand that will encourage distribution channel members to stock a company’s product – Direct marketing techniques ▪ Procter & Gamble Rejoice hair care in Asia Push strategy Promotional strategy designed to pressure distribution channel members to carry a product and to promote it to final users Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Global Manager: Managing an International Sales Force Here are some ways companies can improve the effectiveness of their representatives abroad: – Know the sales scene – Research the customer – Work with the culture – Learn from representatives Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Push and Pull Strategies (2 of 2) Whether the push or pull strategy is most appropriate in a given marketing environment depends on several factors: – Distribution system – Access to mass media – Type of product Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: International Advertising Cultural similarities can mean that ads need only slight modification for different nations, whereas significant cultural differences may mean that entirely new ads must be created – Coca Cola in China – Elusive Euro-consumer Try to contain costs by standardizing as many aspects of a campaign as possible Achieve consistency by standardizing the basic promotional message, creative concepts, graphics, and information content Sponsor global sporting events Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Communicating Messages Marketing communication Process of sending promotional messages about products to target markets – Can be more difficult in international business than in domestic business Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Figure 15.1: Marketing Communication Process Source: Based on Courtland L. Bovee, John V. Thill, George P. Dovel, and Marian Burk Wood, Advertising Excellence (New York, NY: McGraw-Hill, 1995), p. 14. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (1 of 6) When companies extend their marketing efforts internationally, they develop communication strategies that blend product and promotional strategies. – Product/communications extension (dual extension) – Product extension/communications adaptation – Product adaptation/communications extension – Product/communications adaptation (dual adaptation) – Product invention Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (2 of 6) Product/communication extension (dual extension) extends the same home-market product and marketing promotion into target markets – Can be the simplest and most profitable strategy – Will probably grow more popular – Better suited for brand-conscious teenagers, business executives, and wealthy individuals – Better suited for companies that use a global strategy with their products – Appropriate for global brands that have mass appeal and that cut across all age groups and social classes – Useful to companies that are the low-cost leaders in their industries Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (3 of 6) Product extension/communication adaptation extends the same product into target markets, but alters its promotion – Altoids ▪ Helps companies contain costs ▪ May be necessary to adapt to different levels of economic development – Alternative techniques: Door-to-door personal selling and regional product shows or fairs Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Culture Insights: Localizing Digital Advertising Here are a few tips for perfecting an online presence: – Choosing colors: Pastel websites in Japan and Europe – Selecting numbers: Don’t send the wrong signal – Watching the clock: 24-hour clock v. 12-hour clock – Avoiding slang: it can have different meanings – Waving the flag: use national flags carefully – Doing the math: provide conversions into local currencies – Getting feedback: talk with the customer Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (4 of 6) Product extension/communication extension to adapt the product to the requirements of the international market while retaining the product’s original marketing communication – Legal requirements in the local market ▪ Local content laws – Can be costly – Appropriate for differentiated product Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (5 of 6) Product/communication adaptation (dual adaptation) to adapt both the product and its marketing communication to suit the target market: – Product is adapted to match the needs or preferences of local buyers – Promotional message is adapted to explain how the product meets those needs and preferences Can be expensive Appropriate if a sufficiently large and profitable market segment exists Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Creating Promotional Strategies: Blending Strategies (6 of 6) Product invention involves developing an entirely new product for the target market – Many important differences exist between the home and target markets – Local buyers cannot afford a company’s current product because of low purchasing power – Lack of adequate infrastructure needed to operate certain products ▪ Freeplay windup radio in Africa Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 15.2 1. What are the two general promotional strategies that a company can use in its marketing? 2. Why might a company standardize its international advertising efforts? 3. What are the five ways that a company can blend its product and promotional strategies? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Designing Distribution Strategies Distribution Planning, implementing, and controlling the physical flow of a product from its point of origin to its point of consumption The physical path that a product follows on its way to customers is a distribution channel – Channel members – Channel intermediaries Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Designing Distribution Strategies: Designing Distribution Channels (1 of 2) Exclusive channel Distribution channel in which a producer grants the right to sell its product to only one or a limited number of resellers Intensive channel Distribution channel in which a producer grants the right to sell its product to many resellers Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Designing Distribution Strategies: Designing Distribution Channels (2 of 2) Channel length refers to the number of intermediaries between the producer and the buyer – Zero level channel – One level channel – Two level channel Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Photo and Discussion Question (2 of 2) Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Designing Distribution Strategies: Special Distribution Issues Value density Value of a product relative to its weight and volume – The lower a product’s value density, the more localized the distribution system Some companies’ products are substantially similar worldwide yet require small manufacturing adjustments in the final production stage – Caterpillar Lack of market understanding – Amway Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 15.3 1. What are the two general types of distribution channel that companies can choose from based on desired exposure? 2. How does channel length factor into distribution channel design? 3. How does a product’s value density influence the design of its distribution strategy? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Pricing Strategies: Worldwide Pricing Worldwide pricing A product has the same price in all international markets Can be difficult to implement for several reasons: – Production costs differ from one nation to another – Cost of reaching different markets may differ – Purchasing power of buyers in a target market may differ – Fluctuating currency values must be considered Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Pricing Strategies: Dual Pricing Dual pricing A product has a different price (typically higher) in export markets than it has in the home market – Price escalation – Sometimes the export price is lower than the price in the home market To apply dual pricing successfully in international marketing, a company must be able to keep its domestic buyers and international buyers separate – Arbitrage Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Pricing Strategies: Factors Affecting Decisions (1 of 2) Transfer price Price charged for a good or service transferred among a company and its subsidiaries Arm’s length price Free-market price that unrelated parties charge one another for a specific product Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Developing Pricing Strategies: Factors Affecting Decisions (2 of 2) Price controls Upper or lower limits placed on the prices of products sold within a country Dumping Occurs when the price of a good is lower in export markets than it is in the domestic market Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Quick Study 15.4 1. What are the two main types of pricing strategy that international businesses employ? 2. How do companies use transfer prices internationally and why might this practice decline in the future? 3. What do we mean by the term arm’s length price and why is it significant? Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved Copyright This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Copyright © 2023, 2019, 2016 Pearson Education, Inc. All Rights Reserved