INTERNATIONAL MARKETING

CHAPTER 9 - GRIFFIN

CASE: WAL-MART COURTS EUROPEAN SHOPPERS

Wal-Mart

The Mission With sales of $193 billion in the home

market, the next step was international expansion

In the early 1990’s internationalization efforts focused on Mexico and Canada (NAFTA)

By 1999, Wal-Mart had a new target:EUROPE

Acquiring AsdaEntry mode: Take-over

In 1999, Wal-Mart entered the UK by buying the Asda retailing chain

The advantages:1. Asda had 230 operating stores2. Firms were alike (stressed aggressive

growth and low prices)Strategy:

1. To build 6 super-size new Asda outlets2. To establish a dozen new facilities to

cut distribution costs

Acquiring AsdaGoal

Expand its British operations to replicate the efficient, low-cost logistics system that forms the basis of its competitive advantage in the United States (Home

replication)

Competitive StrategyCompetitors: Tesco, Safeway, Sainsbury and smaller

stores Initiate price wars in food and other categories, forcing

competitors to meet or beat its prices British retailers are used to high-profit margins and

this is putting pressure on them, especially the small stores (Oligopolistic Reaction)

The resultIn 1999, Asda earned about $715 million on sales of $13

billion

Taking-over Wertkauf & Spar Handels AG

Entry mode: Take-overA similar method was used to enter

Germany. Wal-Mart took over the 21 store chain Wertkauf and Spar Handels AG with its 74 stores! They also hung an American

flag outside each store to indicate the change in management and style

Competitive advantage and Marketing Larger variety of goods (food, toys,

clothes, appliances and so on) than German rivals

Great customer service

Next Step: Renovation

Marketing strategy Renovate to enlarge and modernize each outlet to help boost sales Customer assistance Low prices In order to appeal to German customers, it considered their

preferences and culture (ex: using the pictures of dogs that Germans like)

Some Problems in the German Market Fear of regulators that Wal-Mart’s low prices may force out local

retailers from the market The German Cartel Office has forced Wal-Mart to raise prices of

some of its goods Many believed that Wal-Mart needed to expand more quickly if it

hoped to achieve cost-cutting advantages through volume distribution

There is hope in Germany but in the meanwhile, many experts believe that Wal-Mart lost around $120 to $150 million in Germany

Marketing“ The process of planning and executing the conception, pricing, promotion, and

distribution of ideas, goods, and services to create exchanges that satisfy

individual and organizational objectives”The extension of these activities over

international boundaries is – International Marketing

Of course, where there is international, there is international culture, laws, politics,

economics and other such considerations!

And…..Two more tasks for international Marketing

Managers: Capturing synergiesImportant because they provide opportunities for

additional revenues

Coordinating marketing activities in the new market

Is important because it can help lower marketing costs and create a unified marketing effort.

International Marketing activities must mix with the firm’s corporate strategy , business strategy,

and other functional strategies

Marketing

Accounting

Human Resource

Management

Finance

Operations Management

International Marketing and Business Strategies

Differentiation Cost leadership Focus strategyWhich strategy did Wal-Mart utilize?

Must Remember:That the international marketing

strategy, choice of location / country must match the business strategy!

Marketing Mix

Business Strategies

.Differentiation .Cost leadership .Focus

PRODUCT

Develop the tangible and intangible

features that meet

customer needs in diverse markets

PRICING

Develop policies that

bring revenue and strategically

shape the competitive environment

PROMOTION

Devise ways to enhance

the desirability

of the product or service to potential buyers

PLACE

Get products and services

into customers’ hands via

transportation and

merchandising

(logistics)

Standardization vs. Customization

EthnocentricSame like home

PolycentricCustomize the marketing mix for each foreign market

GeocentricAnalyze the needs of customers worldwide and then

adopt a standardized marketing mix for all its markets

Ethnocentric and geocentric favor standardization (but geocentric considers the needs of customers

worldwide)

The degree of standardization or customization depends on:

Product type Cultural differences Legal system Organizational structure Firm’s perception of the global marketplace

Standardization vs. Customization

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May adopt a two step process:1. The decision to standardize some elements of the marketing

mix, such as product design, brand name, packaging, and product positioning is done centrally

2. Local managers can critique the global marketing program and can develop plans to implement customized elements of the marketing such as promotion and distribution

Standardization International Marketing

AdvantagesEconomies of scale and cost-saving in production, distribution and marketing

Simple and streamlined operations

Facilitates centralized control of marketing

Reflects the trend toward a single global marketplace

DisadvantagesIgnores different conditions of product use

Ignores local legal differences

Ignores differences in buyer behavior patterns

Inhibits local marketing initiatives

Ignores other differences in individual markets

Customized International Marketing

AdvantagesReflects different conditions of product use

Acknowledges local legal differences

Accounts for differences in buyer behavior patterns

Promotes local marketing initiatives

Accounts for other differences in individual markets

DisadvantagesIncreases marketing costs

Inhibits centralized control of marketing

Creates inefficiency in R&D

Reduces economies of scale in production

Ignores the trend towards a single global marketplace

Strike a balance between the two

Key decisionThe extent to which their firm’s products should be

standardized across markets or customized within individual markets

Toyota: standardization in product quality and customization in name, warranty and right or left-

hand driveUnilever: discovered that they used 85 chicken

recipes and 15 different Cornetto cone shapes and so they standardized the cone shape and

reduced the chicken recipes

“Think Globally, Act Locally”

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Standardization vs. customization Legal forces Economic factors/income levels Exchange rates Target customers (industrial or

individual) Culture Brand name Competition

Key Decision-Making Factors

Applies to product, pricing, promotion and place

Pricing Issues and DecisionsPricing: affects the revenues directly

(For Wal-Mart, pricing was one of its main marketing weapon)

Pricing policies:1. Standard price policy: geocentric – “one price fits

all”2. Two-tiered pricing: ethnocentric – one price for

home, another price for sales abroad3. Market pricing: polycentric – most complex, most

common & customized to each market – goal is profit maximization in each market

Remember brand image!

Brits angry over higher vista prices

Conditions for Market Pricing

Firm must face different demand and/or cost conditions in the countries in which it sells its products

Firm must be able to prevent arbitrage

Market PricingAdvantages

•Price according to country’s price tolerance

•Allocate costs according to sales thus allowing better assigning of a firm’s resources

•Flexibility

Costs •Close monitoring needed to make adjustments when necessary

•Headquarters must be willing to delegate to local managers

•Expose a firm to complaints of dumping

•Risk of damage to brand name if not handled carefully

•Development of a gray market for its products

•Consumer resentment against the discriminatory pricing

Promotion Issues and Decisions

Promotion mix Advertising Personal selling Sales promotion Public relations

Factors affecting Advertising Strategy

The message it wants to convey - different message for different country (depending on the product and the way it is used)

The media available for conveying the message

The extent to which the firm wants to globalize its advertising effort

A customer entering this domino parlor in Egypt encounters no language barriers in knowing that the establishment serves Coke

Advantages of Personal Selling for International Firms

Local sales representatives understand local culture, norms, and customs

Personal selling promotes close, personal contact with customers

Personal selling makes it easier for firm to adopt valuable market information

Distribution Issues

Physically transporting its goods and services from where they are created to the various markets in which they are to be sold

Selecting the means by which to merchandise its good in the markets it wants to serve

Advantages and Disadvantages of Different Modes of Transportation for

Exports

Mode Advantages Disadvantages Sample Products

Train Safe, reliable, inexpensive

Limited to rail routes, slow

Automobiles, grains

Airplane Safe, reliable, fast

Expensive, limited access

Jewelry, medicine

Truck Versatile, inexpensive

Small size Consumer goods

Ship Inexpensive, good for larger products

Slow, indirect Automobiles, furniture

Electronic Media

Fast Unusable for many products

Information

International order cycle time: time between placement of order and a customer’s receipt

Basic Parts of a Distribution Channel

The manufacturer A wholesaler The retailer The actual customer

Distribution Channel Options

Finding appropriate

distributor is the key and adopting

to a channel suitable to

international markets

Channel length: the number of stages in the distribution channel

Direct sales: selling directly to the customer The challenge

Finding the optimal distribution channel to match the firm’s strengths and weaknesses with the

requirement of each international market

Distribution can be an important component of its promotional strategy: expensive product –

exclusive outlets

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International Sponsoring