Europe 1995 - What is American threat? What is Japanese threat?
o American threat - American companies already very established in Europe and have long since considered Europe to be one homogenous market
o Japanese threat - Japanese companies mold quickly to European requirements and are able to take advantage of the market
o Look for cooperation with existing companies
o Strong in capital and highly competent
Europe 1995 - Why is Germany the Internal Threat? What should do the other country companies to compete with Germany?
o German market is exposed to competition from quality products from the North and low priced products from the South and East
o Very involved in exporting
o Highest R&D investment in Europe
o Have strength and size to create pan-European companies without partners or allies
o To compete, other European companies must join together to create companies large enough to rival German ones
Europe 1995 - 4 Which industries will suffer fierce competition? Why?
o Agriculture: over-production is causing market orientation
o Subsidiaries are disappearing
o Drop in production
o Banking: no longer able to protect retail bank market against foreign invasion
o Insurance companies: in the past have had little competition and have been able to profit by keeping premium levels high rather than cutting costs
o Vulnerable to outside companies with lower costs coming in and offering cheaper premiums
Discuss the four phases of international marketing involvement:
o First phase: domestic firms that have no foreign business except for foreign customers who seek out the firm themselves
o Second phase: domestic firms that sell their temporary surpluses abroad
o Third phase: domestic firms that sell their goods abroad on a continuous basis
o Fourth phase: international company that produces a product specifically for the world market
Discuss the conditions that have led to the development of global markets:
Needs and demands converging into one global market because of communications technology, travel and increased exposure to other parts of world
Differentiate between a global company and a multinational company:
o Global company assumes that various segments throughout world have same needs and wants
o Multinational company adjusts its products and marketing practices for each market
• Differentiate among the three international marketing concepts that a company can be described as:
1. Domestic Market Expansion Concept: domestic company that wants to sell its domestic products to foreign markets
2. Multi Domestic Market Concept: company wants to market overseas and acknowledges that these markets are unique and different from the domestic market
3. Global Marketing Concept: focuses on one homogeneous global market
o Discuss the three factors necessary to achieve global awareness:
o Objectivity: in assessing opportunities, evaluating potential, and responding to problems
o Tolerance towards cultural differences: understanding cultural differences and working with people from other cultures
o Knowledgeability: about cultures, history, world market potentials, global economy and social trends
o Define and discuss the idea of global orientation:
o Global orientation: approaching all individual markets as one single global market
o Does NOT disregard cultural differences, but also does not adapt marketing mix for every single cultural difference
o Discuss the three cultural change strategies a foreign marketer can pursue
o Culturally congruent strategy: marketing products similar to ones already sold in market in a way that goes along with existing cultural norms
o Strategy of planned change: deliberately trying to change the aspects of a culture that would give resistance to product
o Strategy of unplanned change: introducing an innovation and then waiting for cultural change that would cause acceptance of the innovation
o What is the importance of "cultural empathy" to the foreign marketer? How do you acquire it?
o Importance - being culturally sensitive allows marketer to objectively see, evaluate and appreciate another culture
o Can obtain cultural empathy by studying culture and immersing oneself in it
o Outline the elements of culture as seen by an anthropologist. How can a marketer use this "cultural scheme?"
a. Material Culture: technology and economics
b. Social Institutions: organizations, education, political structure
c. Man and the Universe: belief systems
d. Aesthetics: art, folklore, music, theatre
o Foreign marketer can use:
• To evaluate a marketing plan
• To study the potential of a foreign market
• To identify things that must be learned about a particular culture
• To understand the marketing system of any society
o What is material culture? What are its implications for marketing? Give examples.
o Material culture is technology and economics
• Technology: the techniques used to make material goods - knowledge possessed by a society
• Economics: production of goods and services, their distribution, consumption, means of exchange and income
o Material culture affects level of demand, quality and type of products demanded, their functional features and means of production and distribution
o Example: availability and cost of gasoline and its effect on regulating demand for and size of automobiles
o Example: availability of electricity regulates demand for any electrical product
o What are some particularly troublesome problems caused by language in foreign marketing? Discuss.
o Obvious differences in tongues
o Idiomatic interpretations mean something different than what marketer intended
o Cultures are dynamic. How do they change? Are there cases where change is not resisted but actually preferred? Explain. What is the relevance to marketing?
o Resistance is greater when society is less interested in the change, while it is less when society is more interested in the change (inverse relationship)
o Generally little resistance if product is a status-valued imported item, fashion item or when similar local products are very inferior
o Marketers can expect resistance to their products
• Greatest resistance when products have greater deviation from cultural norm
o Innovations are described as being either functional or dysfunctional. Explain and give examples of each.
o Functional innovation: effects of innovation are neutral or positive
o Dysfunctional innovation: undesirable effects of the innovation in the social system
o How does the international marketer determine what legal system will have jurisdiction when legal disputes arise?
o No overarching judicial body that can deal with problems between citizens of different countries → foreign marketer must look at laws of both home country and country in which they want to conduct business
o Generally US citizen is subject to laws of US, AS WELL AS laws of any foreign country in which they live or work
o If there is a conflict, and unless person's home government takes up case against person in international court, jurisdiction determined:
• On the basis of jurisdictional clauses included in contract: most clear-cut and usually honored unless there is no such clause, in which case judge:
• On basis of where contract was entered into
• On basis of where provisions of contract were performed
o What is the "objective theory of jurisdiction?" How does it apply to a firm doing business within a foreign country?
• Interpretation - an American is subject to US laws as interpreted by US courts
• When operations are outside legal jurisdiction of US counts, only violations which affect US foreign or domestic trade are subject to the US legal system
• International firms must consider at least two sets of laws
• Especially important in antitrust cases or with laws governing US loyalty and citizenship (trading with enemy, political office in foreign countries, offices in political parties)
o What are intellectual property rights? Why should a company in international marketing take special steps to protect them?
o Intellectual property rights: rights to exclusive or limited use of products, processes, designs, formulas, brand names and trademarks that give a company advantages over its competitors
o Among the most important assets of a company because they symbolize quality, entice customers, and have invaluable psychological or intangible quality
o Millions of dollars are spent developing them so international marketers should take special steps to protect these properties since the rules governing them vary country to country
o In many code law countries, ownership of intellectual property rights is established by registration rather than prior use. Comment.
o Most countries follow code law principle concerning property rights: rights are established by registration - first to register product or property is its legal owner
o US uses common law principle: ownership is established by prior use
o Must understand differences to prevent pirating or loss of property rights, time/effort/money
o Firms should have a means of obtaining worldwide intellectual property rights
o Differentiate between conciliation and arbitration
o Conciliation settlement: neither side is legally bound to settlement
• Can be formal or informal
o Arbitration: both sides are bound to resolution
o Discuss how the shift from making "market entry" decisions to "continuous operations" decisions creates need for different types of information and data. What assistance does an MMIS provide?
o Market entry decisions need info to help them decide whether or not to enter a market
• Short term and long term demand
• Profitability post-entry
o Continuous operations decisions need info that helps monitor position in new market and market share to help further operations within country
• Constant/continuous information
• Need continuous system to generate, store and analyze information from sources inside and outside firm
• MMIS designed specifically to provide such a continuous flow of information
o What is the task of the international market researcher? How is it complicated by the foreign environment?
o Task of international market researcher: to answer questions about international markets with current, valid info that marketers can use to design/implement successful marketing programs
o Complicated by foreign environment because of problems with secondary data
• Lack of collected data, poorly collected data, reliability of data
• Lack of data from other periods to compare to
• Lack of current data or it has been collected on an unpredictable basis
o Discuss the stages of the research process in relation to the problems encountered. Give examples.
o Stage 1: Define the research problem and objectives
• Major problem: improper problem definition
• Major problem: failure to establish problem limits that include all relevant variables
• Researcher assumes that decision maker has certain baseline info and knowledge
o Stage 2: Determine the sources of information necessary
• Major problem: awareness of the availability of secondary data and its reliability
o Stage 3: Gather the relevant data
• Major problem: general lack of secondary data
• Major problem: reliability of secondary data
• Comparability and current-ness of available data
• Major problem: gathering primary data
• Major problem: sampling procedures in primary data collection
• Lack of adequate detail on universal characteristics
• Lack of lists from which to draw meaningful samples
• Ineffectiveness of methods of communication
o Stage 4: Analyze, interpret, and present the results
• Must take into consideration above problems and limitations
• Cannot accept information at face value
o Discuss the problems of gathering secondary data in foreign markets.
o The availability of detailed data on specific market areas:
o Reliability of the secondary data that is available:
o Comparability and currency of available data:
o Define strategic planning. How is strategic planning different for international marketing than domestic marketing?
o Strategic planning: systemized way of relating to the future
• The effort to manage the affects of uncontrollable external factors on firms strengths, weaknesses, opportunities and goals
o General principles of planning are the same between international and domestic marketing
• Difference is the specifics of each of the operating environments of the multinational corporation (home country, host country, corporate environment)
o Discuss the effect of shorter product life cycles on a company's planning process.
o Company can no longer expect to dominate market for years after product is introduced as the technology spreads slowly through world markets
o Company must maximize sales quickly to recover R&D costs and generate product by offering products globally
o To achieve flexibility and speed, many firms entering collaborative relationships to solve weaknesses in manufacturing, technology or distribution
o How will entry into a developed foreign market differ from entry into a relatively untapped market?
o Developed foreign market:
• Developed channels of distribution
• May be restrictive towards business, foreigners and industry
• Developed communication and transportation
• High amount of capital, banks and exchange rate systems
• High competition
o Why do companies change their organizations when they go from being an international to a global company?
o Three ways of organization:
• Global products division: responsible for product sales throughout world
• Geographical divisions: responsible for all products and functions within a given area
• Matrix organization: consists of either of above arrangements with centralized sales and marketing, or a combination of area operations and global product management
o Formulate a general rule for deciding where international business decisions should be made.
o International business decisions should reflect the culture of the country in which they will be implemented. Thus the decision should be made as close to the country where it is to be implemented as possible.
o Explain the popularity of joint ventures.
o To gain access to markets:
• local participation requirements
• established local distribution
• Broaden the line of available merchandise
o To gain local market information and local marketing know-how
o Financial and manpower benefits
o Gain access to local capital markets
o Combine resources and fundraising capabilities of multiple companies
o What are the three major components of a product? Discuss their importance to product adaptation
o Core component: the physical product and all its functional features
o Packaging component: physical package, brand name, styling and design, price and quality level
o Support services component: repair, maintenance, installation, delivery, warranty, instructions
o Product adaptation importance:
• Importance of each component varies with culture
o How can the knowledge of the diffusion of innovations help a product manager plan his international investments?
o Estimate how long it will take for a product to be accepted by a culture, and therefore whether or not to make the necessary investment
o How to accelerate the rate of acceptance of the product and steps marketer can take to eliminate the "newness" and gain more rapid acceptance
o Discuss the characteristics of an innovation which can account for differential diffusion rates
o Relative advantage: degree to which an innovation is better than the products it replaces/competes
o Compatibility: how consistent a product is with existing value and behavior patterns
o Complexity: how difficult it is to understand and use the new product
o Trialability: the degree to which potential customers can try out the product without commitment to purchase
o Observability: how easily the results of the innovation can be communicated to others
o Discuss the distinguishing features of the Japanese distribution system
• High Density of Middlemen: structure dominated by many small wholesalers who in turn deal with many small retailers
• Channel control: manufacturers heavily depend on wholesalers for financing, physical distribution, warehousing, inventory, promotion and payment collection
• Unique Business philosophy: emphasizes loyalty, harmony and friendship→ support long-term dealer/supplier relationships
• Laws that protect small retailers: limits and controls competition from large retail stores
o To what extent, and in what ways, do the functions of domestic middlemen differ from their foreign counterparts?
o Domestic agent usually takes possession of the goods, while foreign agent does not
o Domestic agent has authority to set prices, foreign agent does not
o Domestic agent arrange for shipping of goods, foreign agent does not
o Domestic agent does some promotion and selling
o Domestic agent occasionally extends credit
o In what circumstances is the use of a EMC logical?
o Export Management Company (EMC) is logical choice of middlemen for firms with relatively small international volume or for firms that do not want to involve their own personnel in the international function
o Review the key variables that affect the marketer's choice of distribution channels
o Availability of middlemen
o The cost of middlemen's services
o The functions middlemen perform and their effectiveness
o The extent of control which the manufacturers can exert over middlemen's activities
o Outline some of the major problems confronting an international advertiser
o Emotional appeals, symbols, persuasive approaches and other characteristics of an advertisement must coincide with cultural norms to be effective
o Legal and tax considerations
o Language limitations
o Media limitations
o Product and cost limitations
o Review the basic areas of advertising regulation. Are such regulations purely foreign phenomena?
• Legal area of regulation
• Taxation on advertising
o What special media problems confront the international advertiser?
o Varying availability: varies from country to country due to gov't restrictions
o Negotiable cost: must haggle greatly over cost since its subject to negotiation
o Lack of adequate coverage: too many or too few media to cover the majority of the population
o Why is it so difficult to control consumer prices when selling overseas?
o Price escalations differ from country to country
• Fluctuating exchange rates
o Tariffs on imports
o "Dumping" tariffs: treated differently under various laws
o Sales taxes
o Distributive channel costs
o Middlemen costs
o Shipping costs
o Explain the concept of "price escalation" and tell why it can mislead an international marketer
o Price escalation: price increases due to added costs caused by tariffs, taxes, longer lines of distribution
o High prices can mislead international marketers to think that they can make a profit by selling items abroad that are reasonably priced in domestic market
o Usually price escalation, not added profit, is reason for high prices
o Changing currency values have an impact on export strategies. Discuss.
o Exchange rate variations create risk from changing values of currencies in relation to one another
o Strong dollar produces price resistance since it takes a large quantity of local currency to buy a US dollar - must find ways to offset
o Weak dollar increases demand for US goods - cost plus pricing
o Currency exchange rate swings are considered to be huge barrier to entering foreign markets
o Explain specific tariffs, ad valorem tariffs, and combination tariffs
o Specific tariffs: charged at a flat rate per unit imported
o Ad valorem tariffs: charged as a percentage of value of goods
o Combination tariffs: include both specific and ad valorem
o Why has dumping become such an issue in recent years?
o Saturated domestic markets
o Increased competition
o Can gain marginal revenue when products are sold above direct cost into markets that they're not normally sold in
o Discuss the alternative objectives possible in setting prices for intracompany sales
o Maximizing profits for corporation as a whole
o Facilitating parent company control
o Offering management in both product and international divisions
o Basis for developing and receiving credit for corporations own profitability
o Problem of pricing is complex - awareness of variations in local conditions should be taken into account when determining a strategy
o Maintaining market initiative of international divisions is a prerequisite
o Discuss the various reasons purchasers impose countertrade obligations on buyers
o Shortage of hard currencies - low or minimal market demand for goods
• Most prevalent when country produces product in large quantities when there is low market demand
• May offer products in counter-purchases to get rid of excess supply
o Country does not have an established international market in which to dispose of goods
• May be world market for goods but country does not have ability or access to it so forces countertrade