GM Exam Revision (April 2014)
Transcript of GM Exam Revision (April 2014)
3 - 1
MKTG 1064
Exam Revision
Lecture NotesGlobal
Jan 2014 Semester
Note: this hand-out is provided to
help students with revision. It does
NOT constitute a forecast or
prediction of what will come out in
the exam. You are strongly
advised to read thoroughly the
core chapters taught in class and
be well prepared across all the key
topics.
There is NO guarantee provided
by reading these revision notes on
the outcome of your final exam
grade.
Good Luck
Exam Advice (posted on RMIT BB 4
March 2014)
Posted by: Kathleen Griffiths• Posted to: MKTG1064_1420 Global Marketing• Exam format .Posted on: Tuesday, 4 March 2014 13:45:33 o'clock EST
• Your exam will be held in the official exam period. The format is as follows:
• 30 MC from the whole course from he 4th edition of the prescribed textbook. Worth 20 marks. This might take you up to 60 minutes to read and complete
• 2 short answer essays from as choice of 4. You are expected to answer these in about 30 minutes each and they should therefore be about 2 pages in length each.
• Topics for the exams will come from the folowing list:
• culture, logistics, research, pricing, economy, politics and market entry.
30 MCQ covering the whole book
• Surely no one can read the whole book
• But certain topics from PES , market entry, the 4 Ps will be read in more depth
• Some MC questions you will know the answer because you have learnt the topic well
• There will be around 2-4 that you wont know the answer so you need to “guess” the best possible option
Essay Questions
• There are Seven Topics given
• But only Four Essay Questions to Choose Two
• So there is some element of RISK
• Study very well– Culture
– Market Entry
– Research
– Political
– Economic
Back up topics (contingency) : this means you skim read the materials and have a basic understanding (then you pray that you are not required to answer them!!)- Pricing - Logistics
Note of Caution!
• This set of revision slides is only meant for in-class revision.
• These notes are only a REMINDER of the key points for the different topics
• These are NOT complete revision notes• You are required to refer to the week lecture
notes given by me and discussed in class• Therefore your responsibility is still to read all the
exam assigned chapters from the text and my lecture notes (IN FULL)
Writing your answers
• Make sure you address all the parts. A question may not show sections BUT the punctuation will indicate there are sections.
• Use section headings to clearly indicate the main issues in the answer
• At different intervals use the “previously prepared examples/cases (that you should have already done by now) to illustrate your key points
• Do not write in point form UNLESS you are listing (in the middle of the main answer) some factors or advantages and disadvantages
• Cover around 2-3 pages per question to aim for Distinction!
Starting Point: All must read Chapter One (even if its not tested)
• It is after all the INTRO to GM
• Key concepts and terms :EPRG, Global Marketing
• Definition of the different forms of GM
– Export marketing
– International marketing
– Global marketing
• Why do companies go global (factors/drivers)
Culture
• Elements
• Hosfstede
• SRC
• High and Low context
• How culture affects the marketing mix
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
1
Defining Culture
The A-B-C-D of Culture
Access
Buyer Behavior
Consumption Characteristics
Disposal
3-9
3-10
Elements of Culture
3-11
Elements of Culture
Identity
Material Life
Language
Social Interactions
Aesthetics
Religion
Education
Value Systems
3-12
Read up on each one of the elements from the text/notes and
understand how they are related to decisions on marketing mix
for international marketing
Cross-cultural comparisons
High-context versus low-context cultures
High Context
A culture that communicates mostly
through implicit messages
Chinese – rich in metaphor
Low Context
A culture that communicates mostly
through explicit message
English – rich in depth of language
3-13
Cross-cultural comparisons
Hofstede’s classification scheme
Power Distance
Uncertainty avoidance
Individualism versus Collectivism
Masculinity versus Feminity
Long-term orientation
3-14
A key issue to note: Convergence or
Divergence?
This will have
implications on
the topics of
adaptation and
standardization of
the marketing
programs across
country markets
3-15
Adapting to Cultures
Self Reference Criterion (SRC)
Tendency to resort to one’s own cultural
experiences to interpret a situation
Important (but difficult) for the marketer to
divorce themselves from this
How does an American think
un-American or a Singaporean think
un-Singaporean?
‘out of body’ experience
3-16
Adapting to Cultures
Ethnocentrism
The belief that one’s own culture is superior
Perhaps even more dangerous than SRC
Introducing products with too little
adaptation in the belief that the home
culture will win out
Dr Pepper in Australia
Disney in France
3-17
Self reference criterion (SRC)
(SRC) is the cultural baggage that the business
person takes overseas.
Our perception of the needs of the overseas market is
blocked by our own cultural experience
There is a danger that many marketers try to
superimpose their home marketing strategies into host
country markets (‘what works well back home must
surely work well here”)
Recipe for disaster
‘Ethnocentric approach’ to marketing
3-18
Give examples of how the self-reference
criterion might be manifested.
The self-reference criterion is manifested in marketing strategies that fail to differentiate between the cultures of target countries and the culture from which the exports originate.
We impose our cultural values on the other countries when we assume that they will want to purchase any products that are popular domestically.
SRC often results in product failures or advertising campaigns that are perceived by the local market as being distasteful or failing to appreciate local values and customs
3-19
Culture and the Marketing Mix
Product
Pricing
Distribution
Promotion
3-20
Impact of
Culture in
International
Marketing
Context
What should the
marketer take
careful attention of?
What aspects of the
MM will be impacted
by differences in
culture?
And what changes
need to be made?
Reminder: How culture impacts on Marketing Mix
elements
(source: Kotler, Armstrong and da Silva; 2006)
3-21
Product: culture has a direct or indirect impact
on the Product element of the marketing mix
affecting areas such as
Product design, color and packaging
Brand names and symbols
Adoption behavior (or resistance) to new
product innovations
Culture and the Marketing Mix
3-22
Culture and the Marketing Mix
Product
Some products are very culturally bound
which can be both good and bad
Vegemite works well in Australia but
nowhere else
Skin whitening cream in Asia but suntan
lotion in the west
Louis Vuitton works well overseas because
it is French
The ‘country effect’
3-23
Culture and the Marketing Mix
Price Determined by the interplay of the 4 C’s
1. Customers
2. Company
3. Competition
4. Collaborators
All of which can vary across cultures
High price might emphasize quality in one culture
But emphasize status in another
Implication: don’t assume that all brands carry
the same positioning in all country markets3-24
Culture and the Marketing Mix
Distribution
There could be many aspects on the Place
element
Consider impact on retailing
Consider impact on working with distributors
in the channel (personal networking and
relationships)
Cultural implications of certain distribution
models
‘direct to customer’ versus ‘High Street
retailer’ 3-25
Culture and the Marketing Mix
Promotion
Promotion has probably the greatest impact
from culture
Promotions involve language, ideas and
symbols
Advertising will be impacted by local
languages and customs
The challenge would be to create global
advertising campaigns
3-26
Culture and the Marketing Mix
Promotion
High context versus low context language
based cultures
Inferred versus directly stated
High power distance cultures and
celebrity endorsements
Local taboos
Swearing in commercials
How appropriate is the Australian Tourism
commercial in some parts of Asia?
3-27
Personal contacts and negotiations
Impact of culture on face to face
marketing:
Personal selling in marketing
Developing market entry (partners / JV)
Negotiating with Trade channel members
Personal selling in consumer markets
3-28
When international marketers take their
products or services to overseas markets, they
need to consider all cultural elements when
investigating the new market. Two of the
elements discussed in the text-book are
education and language.
Using examples, discuss how these two
elements would affect the way a company
markets its product or service in a foreign
country.
Specimen Question #1
3-29
Specimen Question #2
Discuss four examples of how
elements of a country's culture
can affect a global marketer's
promotion strategy.
Note: this question reminds us of how a topic can be integrated
across chapters- this covers BOTH culture and its impact on
marketing communications strategies
3-30
Specimen Question #3
What is culture and why is it
important in global marketing?
Use examples to show your
understanding of culture’s
complexities
31
Specimen Question #4
What are some possible issues in
applying the Power-Distance
classification in Hofstede’s
classification scheme in a global
marketing context? Use your own
examples to discuss.
3-32
Specimen Question #5
What is the difference the difference
between high and low context cultures?
Explain how the marketing
communication mix needs to be adapted
to cater for these differences. Provide
examples that illustrate your
understanding.
3-33
Again this question covers BOTH culture and its impact on
international marketing communications strategies
Specimen Question #6
For any 3 elements of culture,
discuss why each is important in
global marketing. Provide examples
that illustrate your understanding
3-34
Specimen Question #7
The self-reference criterion has important
implications for international marketing.
Explain the self-reference criterion and
discuss its implications for each element
of the marketing mix.
3-35
Political
• Types of government systems
• Political Risks
• Legal Systems
• OR this topic could be taken from the chapter on Economic Factors relating to role of government in regulating trade and international business
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
2
Political environment
individual governments
Structure of government — ideology
Communism
system with strict regulation of private ownership
most enterprises are state owned
Capitalism
system where free enterprise and private
ownership is encouraged
Socialism
encourages ownership where the assets are
considered critical to the nation
Political Environment
Individual Governments
An important role of government is to
promote a country’s national interests
They invest in important industries
Offer incentives to a variety of industries
Restrict or block trade
National security
Develop new industries
Protect declining industries
4-38
Areas in which government policies
affect business operations
Government policy areas
Legal
What level of taxation is required?
Is it different for foreign enterprises?
What are the labor laws?
Can I lay-off staff easily if I have to?
What subsidies will the government provide?
Am I in an industry important enough to attract
government subsidy?
Will subsidies provided to local companies create unfair
advantage to the foreign firm?4-39
Political Environment
Individual Governments
Government policies and regulation
Macroeconomic policies
Macroeconomic policies determine
cost of capital
level of economic growth
rates of inflation
international exchange rates
• Managed through:
― fiscal policy and monetary policy
4-40
Protectionism and Trade Restrictions
Tariffs
Quotas
Orderly marketing arrangements (voluntary
export restrictions)
Non-tariff barriers
2-41
Implications: Marketers who want to send products to foreign
markets must think of strategies on how to overcome tariff and
non-tariff barriers
4-42
Barriers to
Trade
Instituted by
Governments
Government policy areas
and instruments43
Forms of Host Country Controls
• Expropriation
– Taking of private property with compensation.
• Confiscation
– Taking of private property without compensation.
• Domestication
– To gain control over foreign investment through
demanding partial transfer of ownership and
imposed regulations.
– Raise tax rates.
– Price controls.
4-44
Politically Sensitive Products and
Issues
• Products that have or are perceived to have
an effect on the environment, exchange
rates, national and economic security, and
the welfare of people and that are publicly
visible or subject to public debate, are more
likely to be politically sensitive.
• Health is often the subject of public debate,
and products that affect or are affected by
health issues can be sensitive to political
concern.
• The European Union has banned hormone
treated beef for more than a decade.
4-45
5-46
Political Risk
• Risk of change in political environment or government policy that would adversely affect a company’s ability to operate effectively and profitably
When perceived political risk is high, a country will have
a difficult time attracting foreign direct investment.
5-47
Political Risk
• Some examples of political risk include:– War– Social unrest– Politically-motivated violence– Transparency– Social conditions (population density and wealth
distribution)– Corruption, nepotism– Crime– Labor costs– Tax discrimination
Political environment – social pressures
and political risk
Table 3.2
Political Risks of Global Business
• Confiscation – the seizing of a company’s
assets without payment.
• Expropriation – where the government seizes
an investment but some reimbursement for the
assets is made.
• Domestication – when host countries gradually
cause the transfer of foreign investments to
national control and ownership through a series
of government decrees by mandating local
ownership and greater national involvement in a
company’s management.
4-49
Specimen question #1
For a country of your choice
demonstrating the use of a democratic
political system and a common law
legal system, and using your own
example/s, show how these systems
might affect the marketing mix for your
chosen product/service.Note : this question combines the topics of political and legal factors
and its impact on marketing mix
Specimen Question #2
List and briefly describe the three
main reasons why governments
often want to block or restrict
trade. Describe three actions a
government can take to
encourage international trade.
2-51
Why might a foreign government want
to discourage or block global
marketers, and what actions might
they take to do this?
2-52
Specimen Question #3
Specimen Question #4
Why and how would governments
restrict trade? Use examples to
illustrate.
2-53
Economic
• The different classification of economic development
• What factors would marketers look for when assessing the economic attractiveness of a country market?
• Economic risks
• Types of Regional Cooperation Arrangements
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
3
ECONOMIC VARIABLES
1. One area that the chapter does not elaborate sufficiently is that relating to discussion of the “economic variables”
2. This is important for your project since you would need to assess market potential and market demand in order to do country market screening and market entry and marketing strategies
3. The economic factors that you would normally do in a typical PEST analysis are the ones you would consider.
Lee and Carter: Global Marketing Management, 3rd edition
The Economic Environment
• Market potential can be gauged by assessing population size, growth, density, distribution, age distribution, disposable income and its distribution
• An Economic Environmental Analysis can involve asking:– How big is the population and at what rate is it
growing?
– Where is the population located and how dense is it?
– What is the population age and distribution?
– What is its disposable income and distribution?
Economic Factors considered in
International Marketing
Size of market- population and demographics
National Income (GNP)
Purchasing Power
Availability of Credit
Importance: it determines the attractiveness of
the market in terms of demand and buying
power of the local population. An international
marketing firm would gravitate towards countries
that have high disposable incomes
Economic Factors in Global Markets
Population demographics
Age distribution, life expectancies,
household size, urbanization.
Income
Distribution of low, medium, and high incomes.
Gross domestic product per capita.
Purchasing power parity.
Consumption patterns
Income spent on necessities and luxuries.
Product saturation or diffusion.
Product form differences.
Economic Factors(continued)
Availability and quality of infrastructure
Rail traffic networks for distribution capabilities.
Communication systems for marketing.
Energy (electrical and fuel) consumption.
Impact of the economic environment on social
development
Urbanization, life expectancy, literacy rates, etc.
Physical Quality of Life Index (PQLI).
Global Marketing
Mix
Product
Promotion
Place
Price
Reminder :Impact of Economic Factors on the
Marketing Mix
Types of Economies
Developed triad Economies
account for 80% of world trade
Emerging Economies
huge and growing consumer demand
government directed economic reforms
‘dual economy’
Less Developed Countries (LDCs)
low GDP, limited manufacturing base
infrastructure weaknesses
heavy reliance on one product/one trading partner
2-62
Marketing Opportunities in LDCs
• Characterized by a shortage of goods and services
• Long-term opportunities must be nurtured in these countries
– Look beyond per capita GNP
– Consider the LDCs collectively rather than individually (regional cluster)
– Consider first mover advantage (get in early)
– Set realistic deadlines
2-63
Mistaken Assumptions about LDCs
1. The poor have no money.2. The poor will not “waste” money on non-
essential goods.3. Entering developing markets is fruitless
because goods there are too cheap to make a profit.
4. People in BOP (bottom of the pyramid) countries cannot use technology.
5. Global companies doing business in BOP countries will be seen as exploiting the poor.
THERE IS MONEY TO BE MADE IN LESS DEVELOPED COUNTRIES
Professor C K Prahalad book on marketing to less developed countries could be as lucrative as more affluent countries
Refer to link for summary:
http://www.12manage.com/methods_prahalad_bottom_of_the_pyramid.html
2-65
High-Income Countries
• GNI per capita: $12,196 or more
• Also known as advanced, developed, industrialized, or postindustrial countries
• Characteristics:
– Sustained economic growth through disciplined innovation
– Service sector is more than 50% of GNI
– Households have high ownership levels of basic products
Tokyo
2-66
High-Income Countries
• Characteristics, continued:– Importance of information processing and
exchange
– Ascendancy of knowledge over capital, intellectual over machine technology, scientists and professionals over engineers and semiskilled workers
– Future oriented
– Importance of interpersonal relationships
Economic Risks
• Exchange controls
– Stem from shortages of foreign exchange held by a
country.
• Local-content laws
– Countries often require a portion of any product sold
within the country to have local content.
• Import restrictions
– Selective restrictions on the import of raw materials to
force foreign industry to purchase more supplies
within the host country and thereby create markets for
local industry
4-67
Economic Risks (continued)
• Tax controls
– A political risk when used as a means of controlling foreign
investments.
• Price controls
– Essential products that command considerable public
interest
• Pharmaceuticals
• Food
• Gasoline
• Labor problems
– Labor unions have strong government support that they
use effectively in obtaining special concessions from
business.
4-68
Forms of Economic Integration
2-69
Regional Economic Integration (summary)
Levels of economic integration
Free Trade Area
Least restrictive.
Goods and services are freely trades among all members. Each
country maintains its own trade barriers for nonmembers.
Customs Union
Members establish a common trade policy with respect to
nonmembers.
Common Market
Factors of production mobility is emphasized. A common external tariff
is adopted.
Economic Union
Integration and harmonization of economic and monetary policies is
achieved leading to political union.2-70
Benefits Trade Creation
Greater Consensus
Political Cooperation
Drawbacks Trade Diversion
Shifts in Employment
Loss of National Sovereignty
The Effects of Economic Integration
2-71
Can you write such an essay with
regards to the current situation
facing the crisis in the EU?
Describe the main forms of regional
economic cooperation. What factors
tend to promote such arrangements?
2-72
Specimen Question # 1
Think about what happens if a marketing company that exists
OUTSIDE the trading bloc wants to enter markets in that bloc; how
would it affect its marketing operations. How would a trading bloc
create opportunities and threats? How would this situation affect
the decision on MARKET ENTRY strategy?
Market Entry
• Learn all the modes of entry; be prepared to answer on any modes given
• Study the advantages and disadvantages of each mode
• The factors affecting the choice of market entry mode
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
4
Consider various criteria in choosing
the mode of entry
External criteria
market size and growth
risk
government regulations
competitive environment
local infrastructure
Internal criteria
organizational objectives
need for control
internal resources, assets and capabilities
flexibility6(B)- 74
External criteria
Market size and growth
Not just absolute size but also opportunities for
potential growth
Watch out for secondary data when comparing
across country markets- what units do we use
when we measure “size”?
Risk
Political and economic risks faced (see chapter 3)
Risks also include exit risks
6(B)- 75
External criteria (cont’d)
Government regulations
Host country policies
Affects the mode of entry- example foreign equity
participation in joint ventures
Competitive environment
How formidable are the competitors in the
domestic market?
Would acquisition be one way in to eliminate the
competition?
6(B)- 76
External Decision Criteria Market Attractiveness
Countries can be classified into several types
based on their market attractiveness
Platform: gather intelligence/network
Hong Kong and Singapore
Emerging: build presence
Philippines and Vietnam
Growth: offer early mover advantage
China and India
Maturing and Established Countries
South Korea, Taiwan and Japan
6(B)- 77
Internal decision criteria:
Organizational objectives
How aggressive is the international firm in
wanting to gain foreign market entry? What is the
time frame for gaining market penetration?
Need for control
Exporting (less); overseas
subsidiary/manufacturing operations (high
control)
Extent of centralization or decentralization in
managing overseas businesses
6(B)- 78
Internal decision criteria:
Internal resources and constraints
Small firms with limited resources tend to be more
dependent on exporting
Firms that control strong brands or have
proprietary technologies can use franchising or
licensing
Flexibility
As market conditions and the environment
changes, so will the market entry mode
6(B)- 79
The Key Options for Market Entry:
1. Exporting
2. Licensing
3. Franchising
4. Contract Manufacturing
5. Joint Ventures
6. Wholly Owned Subsidiaries
7. Strategic Alliances
6(B)- 80
Choice of Market Entry Strategies
Source: Kotler, Armstrong and da Silva (2006)6(B)- 81
Less Risky Options Greater Control Options
Exporting
Indirect Exporting
The organization uses an intermediary based on
its home market to do the exporting
Cooperative Exporting
The organization enters an agreement with
another local or foreign organization in which the
partner will use its distribution network to sell the
exporter’s goods
6(B)- 82
Exporting
Direct exporting
The company sets up its own export organization
and relies on an intermediary based in a foreign
market (e.g. a foreign distributor)
6(B)- 83
Licensing
A contractual transaction where the
organization, the licensor, offers some
proprietary assets to a foreign organization,
the licensee, in exchange for royalty fees
Giordano, one of Hong Kong’s premier clothing
retailers licenses Disney products
6(B)- 84
Licensing
Benefits
Highly profitable
penetration strategy
Local governments
may favor it
Lower exposure to
economic and
political conditions
Caveats
Revenue may be
dwarfed by potential
income earned
through outright
ownership
Lack of enthusiasm on
the part of the licensee
May own competing
products
6(B)- 85
Franchising
Franchisor
An organization that gives
the franchisee the right to
use its trade names,
business models and
know-how in a given
territory for a specific time
in return for payment
McDonald’s is possibly
the most famous
franchisor of all6(B)- 86
Franchising
Franchisee
Pays a franchisor for the right to use its trade
names, business models and
know-how in a given territory for a specific time
To the franchisee, this mode of operation gives
the business a rapid entry into the marketplace
given the reputation of the brand
6(B)- 87
International Franchise Expansion
• Reasons for the growth
– Market potential
– Financial gain
– Saturated domestic markets
• Problems in franchising
– Needs a high degree of standardization
– Protection of the total business system from copycat competition
– Government intervention
– Selection and training of franchisees
6(B)- 88
Franchising
Benefits
Organization
capitalizes on a
winning formula
Capitalizes on local
knowledge of the
franchisee
Preserves the
capital of the
franchisor
Caveats
Revenue may be
dwarfed by potential
income earned
through outright
ownership
Finding suitable and
experienced
franchisees in
developing markets
could be difficult
6(B)- 89
Contract Manufacturing
The organization arranges with a local
manufacturer to manufacture parts or
even the entire product
Often used in the apparel industry
Nike manufacturing some of its
products in Cambodia via a local
producer
6(B)- 90
Contract Manufacturing
Benefits
Cost saving
Flexibility
Contractor assumes
all infrastructural
investment risk
Caveats
Possibly nurturing a
future competitor
If the contractor
breaks the law it
reflects on the
contract partner as
well
Contract partner
may have little
control over this
6(B)- 91
Foreign Direct Investment (FDI)
• Firms invest to enter markets or assure themselves of sources of supply.
• Foreign direct investment
–An equity investment to create or expand a permanent interest in a foreign enterprise. Protection of the total business system.
• Portfolio investment
–The purchase of stocks and bonds internationally. Selection and training.
6(B)- 92
Types of Ownership
• Ownership patterns may be based on past experiences with similar ownership models.
• Full ownership
– Full control, full assumption of all risks.
– May be desirable, but is not necessary for success internationally.
• Joint ventures
– Shared control, shared investment risks.
– Reasons for joint ventures:
• governmental pressure to join with local partners.
• mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.
6(B)- 93
Joint Ventures
Cooperative joint venture
An agreement between the partners
to collaborate, that does not involve
any equity investment
Monash University and its Malaysian partner
Macquarie Graduate School of management
and its Chinese partners
6(B)- 94
Joint Ventures
Equity Joint Venture
An arrangement where the partners agree to
raise capital in proportion to the equity stakes
agreed upon
GM and the Shanghai government
No 2 car producer in China
SAI Global formed the CQC-SAI Management
Technologies, based in Beijing
6(B)- 95
Joint Ventures
Benefits
Has potential for
higher returns than
either licensing or
franchising
Reflecting the
investment risk
Higher degree of
control
Caveats
Has potential for
greater losses than
either licensing or
franchising
Reflecting the
investment risk
Lack of trust
Developing a future
competitor
6(B)- 96
Wholly Owned Subsidiaries
6(B)- 97
Owning the business outright can be
achieved via two routes
acquisitions
New Zealand based Fletcher Challenge developed
strong Asia Pacific presence through national
acquisition strategies
Greenfield operations
Westfield shopping centers and Village Roadshow
Cinemas
Strategic Alliances
A partnership between businesses with the
purpose of achieving common goals while also
minimizing risk
maximizing leverage
benefiting from those facets of their operations
that complement one another
McDonald’s and Coca Cola worldwide
6(B)- 98
Timing of Entry
6(B)- 99
Timing of entry can be critical
too early means a lost investment
Hong Kong based restaurant chain Café
de Coral’s early investment and
subsequent withdrawal from strategic
locations in China
too late means lost opportunity
Australian based Gloria Jeans Coffee’s
failure to enter the Chinese market has let
many competitors steal a march on them
Starbucks headquartered US
Costa Coffee headquartered UK
Summary of the advantages and
disadvantages of all the entry
modes
6(B)- 100
6(B)- 101
6(B)- 102
Specimen Exam Question #1
Starbucks has expanded globally
through a variety of market entry
modes including joint ventures and
company-owned stores. Explain the
benefits and limitations of each of
these strategies specifically in
relation to a company like Starbucks
6(B)- 103
If short-term profit is a major
consideration for an organisation,
what might be a preferred market
entry strategy? Use examples to
illustrate your understanding.
6(B)- 104
Specimen Exam Question #2
Specimen Exam Question #3
Compare and contrast the following two
market entry strategies – indirect
exporting and franchising, illustrating their
advantages and disadvantages. Use
examples to explain your understanding.
Specimen Exam Question #4
Compare and contrast the following two
market entry strategies – joint ventures
and strategic alliances and discuss their
their advantages and disadvantages. Use
examples to illustrate your understanding.
Research
• Focus on the problems and challenges of conducting research in international marketing
• Problems with Secondary Research
• Problems with Primary Research
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
5
International Marketing Research
Process – Special problems
Complexity of research design due to
environmental differences
Lack and inaccuracy of secondary data
Time and cost requirements to collect
primary data
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International Marketing Research
Process – Special problems
Coordination of multi-country research
efforts
Difficulty in establishing comparability
across multi-country studies
Different practical considerations
(example legal aspects, different ethical
practices, etc)
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Figure 6.1
Secondary research
Advantages
Less expensive
Less time consuming
Low level of
commitment
No constraints by
overseas customs
Speed
Disadvantages
Non-availability of
data
Reliability of data
Data classification
Comparability of data
Data privacy concerns
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Secondary Marketing Research
Problems with secondary data
sources
Accuracy of data
Age of data
Reliability of data over time
Comparability of data
Lumping data
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Primary Marketing Research
Quantitative data
Data that represents an attitude or opinion by
assigning a number that can be statistically
analyzed
Qualitative data
Data that describes attitudes, opinions
and motivations in the words of each respondent
5- 113
Collecting Primary Data
Can be collected in 3 ways:
1. Focus Groups
2. Survey Research
3. Test Markets
Covered in New Product Development lecture
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Problems of Gathering Primary Data
• Ability to communicate opinions
– It is difficult for a person to formulate needs, attitudes, and opinions about goods whose use may not be understood, that are not in common use within the community.
• Gerber
• Willingness to respond
– Cultural differences
– The role of the male, the suitability of personal gender-based inquiries, and other gender-related issues can affect willingness to respond.
• Sampling in field surveys
– The greatest problem in sampling stems from the lack of adequate demographic data and available lists from which to draw meaningful samples.
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Problems of Gathering Primary Data (cont’d)
• The kinds of problems encountered in drawing a random sample include the following:
– No officially recognized census of population
– No other listings that can serve as sampling frames
– Incomplete and out-of-date telephone directories
– No accurate maps of population centers
• Language and comprehension
– The most universal survey research problem in foreign countries is the language barrier.
– Literacy poses yet another problem
– Marketers use three different techniques to help ferret out translation errors ahead of time.
• Back Translation
• Parallel Translation
• Decentering
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Primary Market Research
Survey methods for cross-cultural marketing
research
Questionnaire Design
Most popular form of gathering data in
quantitative market research
Cross cultural research does present
problems
Comparability of survey results across
borders could be an issue5- 117
Primary Market Research
Survey methods for cross-cultural marketing
research
Construct Equivalence
The degree to which marketing constructs
have the same meaning and significance
across cultures
Bicycles mean different things in different
countries and this needs to be reflected in
the construction of the research device
Recreation in Australia
Transportation in China5- 118
Primary Market Research
Survey methods for cross-cultural marketing
research
Measure Equivalence
Calibration equivalence
US is imperial (pounds, inches)
Thailand is metric (meters, litres)
Translation equivalence
Translation from one language to another
Embarrassing mistakes can occur
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Primary Market Research
Survey methods for cross-cultural marketing research
Measure Equivalence (cont’d)
Parallel Translation
A process in which a document is translated
independently by a number of translators and
the translations compared to reconcile
differences
Scalar (metric) equivalence
The degree to which scores from subjects of
different countries have the same meaning
and interpretation
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Exam Topics to prepare for IMR
1. The objectives of undertaking IMR
2. The difficulties of conducting secondary
research in IM
3. The difficulties of conducting primary
research in IM
4. The challenges of conducting focus
groups in IMR
5. The challenges of constructing
questionnaires for IMR
121
Logistics
• What is international logistics (IL)?
• Components of IL : MM and PD
• How logistics brings competitive advantage to international marketing
• Modes of transportation
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
6
Role of International Logistics
Business operations are today globally
dispersed
When organizations start operating
internationally, mangers need to coordinate
sourcing and shipping of raw materials,
components among different manufacturing
sites at the most economical and reliable rates
Additionally they need to ship finished goods
to customers around the world
9-123
Global supply chain and the “global
factory”
9-124
Elements of International Logistics
Like domestic logistics, it encompasses
Materials management
Physical distribution
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International Logistics
Materials Management
Materials Management
The inflow of raw materials, parts and supplies
in and through the organization
Consider that over 1 billion parts are shipped
to GM’s subsidiary (Holden) in Australia every
year
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International Logistics
Physical Distribution
Physical Distribution
The movement of organizations finished
products to its customers
Covers inventory control, warehousing and
storage, materials handling, customer service,
containerization and transportation
Influenced greatly by the concept of JIT;
minimize stock holding (investment in
inventory)
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Physical distribution
Affected by:
Geography
Geographically large countries like US or
Australia- higher transport and inventory costs
Small counties in SEA or Japan- tend to incur
more costs in warehousing, customer service
because a wide variety of products have to be
stored to meet varied needs of customers in
concentrated areas
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Physical distribution factors:
Distance
Obviously greater distances are covered compared to
any domestic logistics situation
Ocean and Air become the only truly global options
Long lead time (see case of Holden on page 395
Long distances means not just higher transport costs
but also storage and insurance
Cultural differences
Storage of some food products in Islamic countries
such as Malaysia
9-129
Why is international logistics
more complex?
Exchange rate fluctuation
The potential for more than one currency to be involved in
the process creates complexity
Foreign Intermediaries
Introducing other supply chain partners into the mix; this
means more parties are involved in the distribution system
Complexity of networks and connections, especially in
Asian countries
Security
Dealing with the unknown in foreign countries
After 9/11, stepped up security at airports and container
terminals (threat of terrorist attacks)9-130
Modes of transportation
Three key factors to consider:
Value- to- volume ratio
How much value is added to the materials used to
make the product
Perishability
Degradation of product quality over time
Costs of transportation
Determined by the first two factors
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International Modes of transportation
available to companies
Ocean Relative low cost to weight and/or
bulk ratio
Good for heavy, bulky and non-perishables
Three options: linear services (regularly scheduled), bulk shipping and irregular runs
Type of cargo vessel also important, most significant are containers ships
But also RORO (‘roll on- roll off)
In some less developed countries, there are problems of port infrastructure; cant handle modern container/RORO vessels
9-132
International Modes of transportation
available to companies
Air
Only 2% of world trade
But 26% by value
Has the advantage of speed
Used for high value goods such
semiconductor chips, LCD screens,
technology based products
Perishable products such as fresh
food and flowers
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Airfreight
Increases in the carrying
capacities of new jumbo
cargo planes
Modern day logistics- speed
and ease of handling for
airfreight
Market trends like fashion-
short cycle time required in
retailing
9-134
International Modes of transportation
available to companies
Inter-modal
The seamless transfer of
goods from one mode of
transport to another
without the need for
repacking
Shipping containers are a
standard size
Easy to shift from ocean to rail
upon arrival in a country9-135
Impact of the Internet
The use of the internet has contributed to the rise of 3rd
Party logistics firms. Integration and communication is
facilitated by the role of the IT (‘extranets’ – the
customers operations systems are integrated with the
operations systems of the 3PL provider)
Eli Lilly (Pharmaceuticals) outsources logistics to
Danzas
Danzas’ ‘Market Link’ system manages seamless
logistic services driven by real time flow of data
Mostly web based
9-136
International Sourcing
Six reasons why organizations adopt an
international sourcing strategy:
1. Intense international competition
Computer manufacturers such as Dell establish global
supply chains partly in response to competitive
pressures
2. Pressure to reduce costs
Primary reason for apparel companies to source
offshore
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International Sourcing
3. The need for manufacturing flexibility
Toyota operate a manufacturing plant in Melbourne to
tap into a highly educated workforce
4. Shorter product development cycles
Spreading the development load across countries
9-138
Value Chain Concept (M Porter)
9-139
Figure 12.2 Value chain concept
Applying the Value Chain in a Global Supply Chain Context:
1. Different country markets are selected to carry out key business activities
according to their competitive advantages
2. The VCs are linked (integration) across country markets in order to produce a
global supply chain
9-140
Types of sourcing strategy
Two choices:
Intra-firm sourcing
Supplying from parent firm to its
subsidiaries
Outsourcing
From independent suppliers on a contractual
basis
4 possible types of sourcing strategies can
emerge
See Figure 12.3
9-141
Types of sourcing strategy
9-142Figure 12.3 Types of sourcing strategy
Benefits of outsourcing
Lower operating costs
Enables the company to focus on its core business competences
Access to world-class manufacturing capabilities
Better use of internal resources
Speed to market
Free up capital funds
Reduce tax liabilities
Reduce risks
9-143
Problems of outsourcing services
Negative image to company- loss of
thousands of domestic jobs
Poor service delivery / lack of reliability
Note: service has the unique characteristic of
‘variability’ or ‘heterogeneity’
Qantas has had bad press publicity
Locate cabin crew in London
IT jobs gone to India
Outsource entire maintenance to China
9-144
Sample Essay Question
The global logistics manager must understand
the specific properties of the different modes of
transportation in order to use them optimally.
What are the most important factors in
determining an optimal mode of
transportation? List and briefly describe each
of the factors and use examples to discuss.
145
9-145
Pricing
• Focus on the problems and challenges of conducting research in international marketing
• Problems with Secondary Research
• Problems with Primary Research
Here are some of the key slides from my lecture notes as a reminder of the key issues for this topic.
7
10- 147
Pricing concepts
Two views of pricing:
Cost plus (mark ups)
In exporting, imagine the number of margin uplifts
added before the product reaches the foreign
customer
Market based pricing
Use marketing research to find out what consumers
are willing to pay for the product and work backwards
down the value chain
10- 148
Complexity of pricing in
international marketing
Pricing is critical to international marketing.
Pricing can make or break international market
expansion plans
Pricing is the only element in the marketing
mix that generates revenue
Many uncontrollable factors impact on prices-
taxes, commission/ fees, local market
competition, etc.
10- 149
Complexity of pricing in
international marketing
Pricing policy is highly cross-functional; interplay of
marketing, finance, tax, logistics and other divisions.
Often objectives could be incompatible
Challenge of how to coordinate pricing policy across
country markets
Price differentials (lack of coordination) will lead to
grey or parallel trading markets
Global (one price policy- often quite difficult to
implement) may lead to too high or too low in different
markets. Profit opportunities might be missed
10- 150
Drivers of foreign market pricing
International prices are affected by the
4 Cs:
Company (costs and goals)
Customers (price sensitivity and
segments)
Competition (nature and intensity)
Channels (distribution)
Government policies are also a major factor
10- 151
Company factors
Organizational Goals
How do we set strategic marketing goals for the
company in the context of global markets?
To achieve satisfactory ROI
To maintain/ increase market share
To meet specific goal target
Goals can change over time
Enter with low price to gain penetration
Use loss leader pricing but sell other higher
margin products across the range
10- 152
Customer (demand)
Customer demand sets the ceiling for prices
Function of buying power, tastes, habits, cultural norms
and substitutes
Targeting low income countries
Target mass market
Adapt the product- lower quality or downsizing the
product (packaging)
Proctor and Gamble selling small sachets of shampoo
in developing markets due to buying power in those
countries
Cigarettes : 5 or 10 sticks a pack in less developed
markets
10- 153
Competitors
Number of competitors varies from country to
country
Differing degrees of intensity
Nature of competition
Global versus local
Competing against the preferred ‘local champion’
Competitive Position
Market leader at home/market follower abroad
10- 154
Channels
Direct
Not possible in all countries due to size of market
and/or geographic distances required
Better control is achieved, but
Makes direct representation extremely costly
Indirect
Length of channel can affect end price of
product/service (additional layers in the channel
increases price)
10- 155
Managing price escalation
The process of covering incremental costs
(e.g. shipping, insurance, tariffs, margins of
various intermediaries)
Makes the final foreign retail price higher than the
domestic retail price
10- 156
Managing Price Escalation
Strategies for lowering export price:
Rearrange the distribution channel
Shortening the channel in Japan by going directly to
the end retailer
Difficult in such a traditional market
Eliminate costly features/make them optional
Offer the ‘no-frills’ version of a Sony Vaio in Cambodia
Give the customer the option to upgrade
10- 157
Managing Price Escalation
Strategies for lowering export price:
Downsize the product
Make a smaller version of the product
Assemble or manufacture in foreign markets
BMW assemble cars in South Africa
10- 158
Managing Price Escalation
Strategies for lowering export price:
Adapt the product to escape tariffs or tax
levies
Land Rover is heavier in the US so as
to be classified as a truck rather than
car
Escapes the luxury car tax
10- 159
Managing Price Escalation
Not all strategies involve lowering the price
Position the product as super premium
Budweiser is costly internationally due to the high
cost of transportation
Entry level beer in its home market
Premium beer in Singapore
10- 160
Pricing in inflationary environments
McDonald’s sells a Big Mac meal in
Moscow for 6 Roubles in 1990
Same meal costs 1100 Roubles in 1993
10- 161
Pricing in inflationary environments
Safeguarding against inflation
Modify components/ingredients
Not all components maybe subject to the same level
of inflation
Source material from low cost suppliers
Import from low inflation countries
10- 162
Pricing in inflationary environments
Safeguarding against inflation
Quote prices in a stable currency
Dollar or Euro
Draw lesson from other countries
Otis Elevators using managers from Latin America to
advise on situation in Russia
Experience in one high inflation country can translate into
another
10- 163
Pricing in inflationary environments
Government price controls sometimes
imposed to deal with inflation
Zimbabwe freezes prices
Panic buying occurs
Stockpiling products for later sale in the black market
Very rarely overcome the inflationary problem
10- 164
Pricing in inflationary environments
Overcoming price controls:
Adapt the product line
To diversify into products that are not part of the price
control
Lobby
Negotiate with the government
Leave the country (exit strategy)
10- 165
International pricing and currency
movements
Exporters and importers are subject to the
whims of currency movements
As currencies strengthen and weaken this has
implications for pricing and margins
A strategic view of the problem should be
undertaken
166166166
10- 167
Currency Gain/Loss pass through
Should exporters pass through gains they
make from currency movements to their
customers?
Help steal business from domestic competitors
Are they more market share (pass it on) or short
term profit oriented (keep it)?
Should they pass through price rises to
customers if they suffer currency losses?
10- 168
Currency Gain/Loss pass through
‘Pricing to market’
Occurs where companies are more responsive to
specific market trends
Make destination specific adjustments of markups in
response to exchange rate movements
German auto makers like BMW more likely to take this
approach than their short-term profit driven rivals at
Toyota
10- 169
Currency Quotation
Which currency should be used in
international business transactions?
Which party should bear the risk?
Quoting a common currency could be a way of
sharing the risk
US dollar across countries with their own
currency
Trading between Australia and New Zealand
10- 170
While many of the reasons for transfer pricing
are legitimate
A primary reason is to shift the tax burden of a
global player to low tax rate regimes
A service provider based in Thailand is ‘billed’ by its
Hong Kong sister company
Profits are transferred to Hong Kong and charged at a
much lower rate
Governments are wary of this and conduct audits
to identify this behavior
Transfer pricing
10- 171
Price coordination
How similar should prices be across markets?
This depends on:
Nature of customers
Apple prices globally to cater for a global segment and
avoid parallel imports
Amount of product differentiation
Identical products probably need to be priced
identically
Nature of channels
How much control over international distributors?
10- 172
Countertrade
Unconventional trade financing transactions
based on trade and not cash
Pepsi swaps cola for vodka in the old Soviet
Union
Lack of ‘hard currency’ forces them to innovate on
price
Pepsi would not take Roubles so took Stolichnya
instead
On-sold in the US market at a profit
10- 173
Countertrade
Motives
Gain access to new or difficult markets
Overcome lack of hard currency
Overcome low country creditworthiness
Shortcomings
Timely and costly negotiations
Uncertainty and lack of information on future
prices
Specimen Essay Question
10- 174
In international marketing price
escalation can be a serious
problem. Discuss ways that
marketers may implement a strategy
to address this problem using your
own examples
Good Luck on your Final Exam
Read the questions carefully
Decide which you want to do first – MCQ or Essay (your
choice)
MCQ can allocate one hour BUT see if you can finish in
45 minutes so that you have a bit longer for essay
Essay questions try to do 2-3 pages. Plan carefully the
flow of your answers. Write definitions and theories as
close as possible to the book/notes content; do not
make up your own definitions.
Examples to be included in between relevant points. A
good answer has about 4-5 examples PER Questions.
Examples should be different for each question.
10- 175