International Marketing 03 (1)

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UNIVERSITY OF GOCE DELCHEV

SHTIP

FACULTY OF ECONOMICS

SUBJECT:

ENGLISH LANGUAGE 3

THEME:

INTERNATIONAL MARKETING

Mentor: Made by:

Prof. Dragan Donev

Shtip, 2011


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CONTENTS:

Abstract3

Introduction....4

1. History of international marketing..5

2. What is Globalization ?.........................................................................7

3. Stages in the international involvement of a firm....8

4. Marketing definition8

4.1. Differences between domestic marketing and international

marketing10

4.2. Organizational orientation of international companies.10

4.3. Marketing research....11

4.4. Marketing environment..12

4.5. Market segmentation.....13

5. Product issues in International Marketing.14

6. Pricing Issues in International Marketing...17

7. International marketing mix.20

7.1. International Product Strategies Standardisation Vs

Adaption......20

7.2 International Promotion

Strategy.....................................................21

7.3 International Pricing

Strategies21

7.4. International Distribution

Strategies..22

7. 5. Global Marketing Strategies..23

8. Ethical Problems in International Marketing...24

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Conclusion.26

References27

Abstract

The process ofglobalization leads to the increasing integration of the

production of goods, services, ideas, culture, communication and environmental

pollution on a world-wide scale, imparting locality of populations and labor.

Marketing is the process by which companies advertise products or

services to potential customers. With the customer as the focus of its activities, it can

be concluded that marketing management is one of the major components of

business management. . An International company typically operates in, for

example, the U.S. but sell or exports worldwide or Internationally. A domestic

company will be a company that is within the country of it's own origin.

While many of the products that businesses sell are targeted at a global

audience using a consistent marketing mix, it is also necessary to understandregional differences, hence the importance of international marketing. Organisations

also have to consider different languages, customs and health and safety

regulations. The goods must be in the right place at the right time. Making sure that

the goods arrive when and where they are wanted is an important operation.

Key words: international, marketing, globalization, products,

business, process, customers.

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Introduction

International marketing involves recognising that people all over the

world have different needs. Companies like Gillette, Coca-Cola, BIC, and Cadbury

Schweppes have brands that are recognised across the globe. While many of the

products that these businesses sell are targeted at a global audience using aconsistent marketing mix, it is also necessary to understand regional differences,

hence the importance of international marketing. Organisations must accept that

differences in values, customs, languages and currencies will mean that some

products will only suit certain countries and that as well as there being global markets

e.g. for BIC and Gillette razors, and for Coca-Cola drinks, there are important

regional differences - for example advertising in China and India need to focus on

local languages. Just as the marketing environment has to be assessed at home, the

overseas potential of markets has to be carefully scrutinised. Finding relevant

information takes longer because of the unfamiliarity of some locations. The potential

market size, degree and type of competition, price, promotional differences, product

differences as well as barriers to trade have to be analysed alongside the cost-

effectiveness of various types of transport.

The product must possess characteristics that make it acceptable for

the market - these may be features like size, shape, design, performance and even

colour. For example, red is a popular colour in Chinese-speaking areas.

Organisations also have to consider different languages, customs and health and

safety regulations.

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1. History of international marketing

Marketing abroad is not a recent phenomenon. In fact, well-established

trade routes existed three or four thousand years before the birth of Christ. Modern

international marketing, however, can arguably be traced to the 1920s, when liberal

international trading was halted by worldwide isolationism and increased barriers to

trade. The United States furthered this trend by passing the Smoot-Hawley Tariff Act

of 1930, raising the average U.S. tariff on imported goods from 33 to 53 cents. Other

countries throughout the world imposed similar tariffs in response to the United

States' actions, and by 1932 the volume of world trade fell by more than 40 percent.

These protectionist activities continued throughout the 1930s, and the Great

Depression, to which many say protectionism substantially contributed, was deeper

and more widespread than any other depression in modern history. Furthermore,

according to the United Nations, this protectionism undermined the standard of

living of people all over the world and set the stage for the extreme military buildup

that led to World War II.

One result of the Great Depression and World War II was strengthened

political will to end protectionist policies and to limit government interference in

international trade. Thus, by 1944 representative countries attending the Bretton

Woods Conference established the basic organizational setting for the post-war

economy, designed to furthermacroeconomic stability. Specifically, the framework

that arose created three organizations: the International Trade Organization (ITO),

the World Bank, and the International Monetary Fund (IMF).

Although negotiations undertaken for the ITO proved unsuccessful, the

United States proposed that the commercial policy provisions that were originally be

included in the ITO agreements should be temporarily incorporated into the General

Agreement on Tariffs and Trade (GATT). In 1947, 23 countries agreed to a set of

tariff reductions codified in GATT. Although GATr was at first intended as a

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temporary measure, because ITO was never ratified, it became the main instrument

for international trade regulation. GATT was succeeded by the World Trade

Organization (WTO), which was established in January 1995 after GATT officially

ended in April 1994. The WTO's main function has been to resolve trade disputes,

and it developed procedures for handling trade disputes that were much improved

over the GATr procedures. In its first 18 months the WTO settled more than 50 trade

disputes.

In the 1960s and 1970s, world trading patterns began to change. While

the United States remained a dominant player in international trade, other less

developed countries began to manufacture their own products. Furthermore, the

United States became more reliant than ever on imported goods. For example, by

1982 one in four cars sold in the United States was foreign-made and more than 40

percent of electronic products were produced or assembled abroad. To make matters

worse, the United States consistently imported a sizable portion of its fuel needs from

other countries. All of these elements created a U.S. dependency on world trade.

As free market policies continued to be the dominant political force

concerning trade around the world, a host of new markets opened. Specifically, in the

late 1980s, Central and Eastern European markets opened with the dissolution of the

Soviet Union. By the 1990s, world trade began with China, as well as with countries

in South America and the Middle Eastnew markets that looked quite promising. In

spite of the changes in the world trade arena, the United States, Japan, and Europe

continued to play a dominant role, accounting for 85 percent of the world's trade.

Interestingly, while the trend of opening new world markets continued,

there was another trend toward regional trade agreements. These agreements

typically gave preferential trade status to nations that assented to the terms of a pact

over those nations that did not participate. Two examples are the creation of a unified

European Market and the ratification of the North American Free Trade Agreement

(NAFTA). Created in 1958, and renamed most recently in 1993, the European

Union (EU) is a regional organization designed to gradually eliminate customs duties

and other types of trade barriers between members. Imposing a common external

tariff against nonmember countries, EU countries slowly adopted measures that

would unify and, theoretically, strengthen member economies. Member nations

include Belgium, France, Germany, Great Britain, Italy, Luxembourg, theNetherlands, Denmark, Ireland, Greece, Spain, and Portugal.

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Comprised of Canada, the United States, and Mexico, NAFTA was

passed by the U.S. House and Senate in November 1994. In total, 360 million

consumers are subject to the agreement, with spending power of about $6 trillion.

Therefore, NAFTA is 20 percent larger than the EU.

With non-European multinational corporations facing tariff barriers put up

by the EU, the most attractive international markets were those emerging in the

developing countries of Asia, Russia, and Latin America. According to Christopher

Miller, professor of international marketing at the Thunderbird Graduate School of

International Management, "There's nowhere else to go. With the advent of the EU,

it's harder and harder for non-European companies to get into Europe. Anyone within

the boundaries has no tariffs, and those outside it have more barriers." In emerging

markets, companies could expect to achieve 30 to 40 percent growth rates,

according to Miller.

2. What is Globalization ?

Globalization is a process that has been going on for the past 5000

years, but it has significantly accelerated since the demolishing of the Soviet Union

in 1991. The many meanings of the word globalization have accumulated very

rapidly and recently. the verb globalize was first attested by the Merriam Webster

Dictionary in 1944. In considering the history of globalization, some authors focus on

events since the discovery of the America in 1492, but most scholars and theorists

concentrate on the much more recent past But long before 1492, people began to

link together disparate locations in the world into extensive systems of

communication, migration, and interconnections. This formation of interaction

between the global and the local has been a central driving force in the world history.

Roughly, Economic Globalization means that world trade and financial markets are

becoming more integrated. According to Friedman (1999), globalization is: The

inexorable integration of markets, nation states, and technologies to a degree

never witnessed before- in a way that is enabling individuals, corporations and

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nation-states to reach around the world farther, faster, deeper and cheaper

than before, the spread of free-market capitalism to virtually every country in

the world. On the other hand, a great number of economists assert that

globalization, as an on-going historical process that reached its apex toward the end

of the 20th century. This process leads to the increasing integration of the production

of goods, services, ideas, culture, communication and environmental pollution on a

world-wide scale, imparting locality of populations and labor.

3. Stages in the international involvement of a firm.

We discussed several stages through which a firm may go as it becomes

increasingly involved across borders. A purely domestic firm focuses only on its

home market, has no current ambitions of expanding abroad, and does not perceive

any significant competitive threat from abroad. Such a firm may eventually get some

orders from abroad, which are seen either as an irritation (for small orders, there may

be a great deal of effort and cost involved in obtaining relatively modest revenue) or

as "icing on the cake." As the firm begins to export more, it enters the export stage,

where little effort is made to market the product abroad, although an increasing

number of foreign orders are filled. In the international stage, as certain country

markets begin to appear especially attractive with more foreign orders originating

there, the firm may go into countries on an ad hoc basisthat is, each country may

be entered sequentially, but with relatively little learning and marketing efforts being

shared across countries. In the multi-national stage, some efficiencies are pursued

by standardizing across a region (e.g., Central America, West Africa, or Northern

Europe). Finally, in the global stage, the focus centers on the entire World market,

with decisions made optimize the products position across marketsthe home

country is no longer the center of the product. An example of a truly global companyis Coca Cola.

Note that these stages represent points on a continuum from a purely

domestic orientation to a truly global one; companies may fall in between these

discrete stages, and different parts of the firm may have characteristics of various

stagesfor example, the pickup truck division of an auto-manufacturer may be

largely domestically focused, while the passenger car division is globally focused.

Although a global focus is generally appropriate for most large firms, note that it may

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not be ideal for all companies to pursue the global stage. For example,

manufacturers of ice cubes may do well as domestic, or even locally centered, firms.

4. Marketing definition

Marketing is the process by which companies advertise products or

services to potential customers. It is an integrated process through which companies

create value for customers and build strong customer relationships in order to

capture value from customers in return. Marketing is used to create the customer, to

keep the customer and to satisfy the customer. With the customer as the focus of its

activities, it can be concluded that marketing management is one of the major

components of business management. The evolution of marketing was caused due

to mature markets and overcapacities in the last decades. Companies then shifted

the focus from production to the customer in order to stay profitable. The term

marketing concept holds that achieving organizational goals depends on knowing

the needs and wants of target markets and delivering the desired satisfactions. It

proposes that in order to satisfy its organizational objectives, an organization shouldanticipate the needs and wants of consumers and satisfy these more effectively than

competitors.

Marketing is defined by the American Marketing Association [AMA] as

"the activity, set of institutions, and processes for creating, communicating,

delivering, and exchanging offerings that have value for customers, clients, partners,

and society at large."The term developed from the original meaning which referred

literally to going to a market to buy or sell goods or services. Seen from a systemspoint of view, sales process engineering views marketing as "a set of processes that

are interconnected and interdependent with other functions, whose methods can be

improved using a variety of relatively new approaches." The Chartered Institute of

Marketing defines marketing as "the management process responsible for

identifying, anticipating and satisfying customer requirements profitably." A different

concept is the value-based marketingwhich states the role of marketing to contribute

to increasing shareholder value. In this context, marketing is defined as "the

management process that seeks to maximise returns to shareholders by developing

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relationships with valued customers and creating a competitive advantage."

Marketing practice tended to be seen as a creative industry in the past, which

included advertising, distribution and selling. However, because the academic study

of marketing makes extensive use of social sciences, psychology, sociology,

mathematics, economics, anthropology and neuroscience, the profession is now

widely recognized as a science, allowing numerous universities to offer Master-of-

Science (MSc) programmes. The overall process starts with marketing research and

goes through market segmentation, business planning and execution, ending with

pre and post-sales promotional activities. It is also related to many of the creative

arts. The marketing literature is also adept at re-inventing itself and its vocabulary

according to the times and the culture.

4.1. Differences between domestic marketing and international

marketing

To understand the differences between the domestic marketing and

international marketing, we must first distinguish and explain the terms domestic

and international businesses. An International company typically operates in,

for example, the U.S. but sell or exports worldwide or Internationally. A multinational

firm will typically have offices and branches in many different countries and will

operate within each country as a local or national firm. An example of an international

firm might be Omaha Steaks which operates within the US but exports worldwide. An

example of a multinational might be Microsoft or Ford Motors Co.

A domestic company will be a company that is within the country of it's own origin.

Trade is increasingly global in scope today. There are several reasons

for this. One significant reason is technologicalbecause of improved transportation

and communication opportunities today, trade is now more practical. Thus,

consumers and businesses now have access to the very best products from many

different countries. Increasingly rapid technology lifecycles also increases the

competition among countries as to who can produce the newest in technology. In

part to accommodate these realities, countries in the last several decades have taken

increasing steps to promote global trade through agreements such as the General

Treaty on Trade and Tariffs, and trade organizations such as the World Trade

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Organization (WTO), North American Free Trade Agreement (NAFTA), and the

European Union (EU).

4.2. Organizational orientation of international companies

In this sense, a firm's marketing department is often seen as of prime

importance within the functional level of an organization. Information from an

organization's marketing department would be used to guide the actions of other

departments within the firm. As an example, a marketing department could ascertain

(via marketing research) that consumers desired a new type of product, or a new

usage for an existing product. With this in mind, the marketing department would

inform the R&D department to create a prototype of a product/service based on

consumers' new desires.The production department would then start to manufacture

the product, while the marketing department would focus on the promotion,

distribution, pricing, etc. of the product. Additionally, a firm's finance department

would be consulted, with respect to securing appropriate funding for the

development, production and promotion of the product. Inter-departmental conflicts

may occur, should a firm adhere to the marketing orientation. Production may oppose

the installation, support and servicing of new capital stock, which may be needed to

manufacture a new product. Finance may oppose the required capital expenditure,

since it could undermine a healthy cash flow for the organization.

A further marketing orientation is the focus on a mutually beneficial

exchange. In a transaction in the market economy, a firm gains revenue, which thus

leads to more profits/market share/sales. A consumer on the other hand gains the

satisfaction of a need/want, utility, reliability and value for money from the purchase

of a product or service. As no one has to buy goods from any one supplier in the

market economy, firms must entice consumers to buy goods with contemporary

marketing ideals.

4.3. Marketing research

Marketing research involves conducting research to support marketingactivities, and the statistical interpretation of data into information. This information is

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then used by managers to plan marketing activities, gauge the nature of a firm's

marketing environment and attain information from suppliers. Marketing researchers

use statistical methods such as quantitative research, qualitative research,

hypothesis tests, Chi-squared tests, linear regression, correlations, frequency

distributions, poisson distributions, binomial distributions, etc. to interpret their

findings and convert data into information. The marketing research process spans a

number of stages including the definition of a problem, development of a research

plan, collecting and interpretation of data and disseminating information formally in

form of a report. The task of marketing research is to provide management with

relevant, accurate, reliable, valid, and current information. A distinction should be

made between marketing research and market research. Market research pertains

to research in a given market. As an example, a firm may conduct research in a

target market, after selecting a suitable market segment. In contrast, marketing

research relates to all research conducted within marketing. Thus, market research is

a subset of marketing research.

4.4. Marketing environment

The term marketing environment relates to all of the factors (whetherinternal, external, direct or indirect) that affect a firm's marketing decision-making or

planning and is subject of the marketing research. A firm's marketing environment

consists of two main areas, which are:

Macro environment: On the macro environment a firm holds only little control. It

consists of a variety of external factors that manifest on a large (or macro) scale.

These are typically economic, social, political or technological phenomena. A

common method of assessing a firm's macro-environment is via a PESTLE (Political,

Economic, Social, Technological, Legal, Ecological) analysis. Within a PESTLE

analysis, a firm would analyze national political issues, culture and climate, key

macroeconomic conditions, health and indicators (such as economic growth,

inflation, unemployment, etc.), social trends/attitudes, and the nature of technology's

impact on its society and the business processes within the society.

Micro environment

A firm holds a greater amount (though not necessarily total) control of the

micro environment. It comprises factors pertinent to the firm itself, or stakeholders

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closely connected with the firm or company. A firm's micro environment typically

spans:

Customers/consumers

Employees

Suppliers

The Media

By contrast to the macro environment, an organization holds a greater

degree of control over these factors.

4.5. Market segmentation

Market segmentation pertains to the division of a market of consumers

into persons with similar needs and wants. As an example, if using Kellogg's cereals

in this instance, Frosties are marketed to children. Crunchy Nut Cornflakes are

marketed to adults. Both goods aforementioned denote two products which are

marketed to two distinct groups of persons, both with like needs, traits, and

wants.The purpose for market segmentation is conducted for two main issues. First,

a segmentation allows a better allocation of a firm's finite resources. A firm onlypossesses a certain amount of resources. Accordingly, it must make choices (and

appreciate the related costs) in servicing specific groups of consumers. Furthermore

the diversified tastes of the contemporary Western consumers can be served better.

With more diversity in the tastes of modern consumers, firms are taking noting the

benefit of servicing a multiplicity of new markets.Market segmentation can be defined

in terms of the STPacronym, meaning Segment, Targetand Position.

Segmentation involves the initial splitting up of consumers into persons

of like needs/wants/tastes. Four commonly used criteria are used for segmentation,

which include:

Geographical (e.g. country, region, city, town, etc.)

Psychographic (i.e. personality traits or character traits which

influence consumer behaviour)

Demographic (e.g. age, gender, socio-economic class, etc.)

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Behavioural (e.g. brand loyalty, usage rate, etc.)

Once a segment has been identified, a firm must ascertain whether the segment is

beneficial for them to service. The DAMPacronym, meaning Discernible,Accessible,Measurable and Profitable, are used as criteria to gauge the viability of a target

market. DAMP is explained in further detail below:

Discernable - How a segment can be differentiated from other

segments.

Accessible - How a segment can be accessed via Marketing

Communications produced by a firm.

Measurable - Can the segment be quantified and its size determined?

Profitable - Can a sufficient return on investment be attained from a

segment's servicing?

The next step in the targeting process is the level of differentiation involved in a

segment serving. Three modes of differentiation exist, which are commonly applied

by firms. These are:

Undifferentiated - Where a company produces a like product for all of

a market segment.

Differentiated - In which a firm produced slight modifications of a

product within a segment.

Niche - In which an organisation forges a product to satisfy a

specialised target market.

Positioningconcerns how to position a product in the minds of consumers. A firm

often performs this by producing a perceptual map, which denotes products

produced in its industry according to how consumers perceive their price and quality.

From a product's placing on the map, a firm would tailor its marketing

communications to suit meld with the product's perception among consumers.

5. Product issues in international marketing

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Some marketing scholars and professionals tend to draw a strong

distinction between conventional products and services, emphasizing service

characteristics such as heterogeneity (variation in standards among providers,

frequently even among different locations of the same firm), inseperability from

consumption, intangibility, and, in some cases, perishabilitythe idea that a service

cannot generally be created during times of slack and be stored for use later.

However, almost all products have at least some service componente.g., a

warranty, documentation, and distributionand this service component is an integral

part of the product and its positioning. Thus, it may be more useful to look at the

product-service continuum as one between very low and very high levels of tangibility

of the service. Income tax preparation, for example, is almost entirely intangiblethe

client may receive a few printouts, but most of the value is in the service. On the

other hand, a customer who picks up rocks for construction from a landowner gets a

tangible product with very little value added for service. Firms that offer highly

tangible products often seek to add an intangible component to improve perception.

Conversely, adding a tangible element to a servicee.g., a binder with information

may address many consumers psychological need to get something to show for their

money.

On the topic of services, cultural issues may be even more prominent than

they are for tangible goods. There are large variations in willingness to pay for

quality, and often very large differences in expectations. In some countries, it may be

more difficult to entice employees to embrace a firms customer service philosophy.

Labor regulations in some countries make it difficult to terminate employees whose

treatment of customers is substandard. Speed of service is typically important in the

U.S. and western countries but personal interaction may seem more important in

other countries.

a. Product Need Satisfaction

We often take for granted the obvious need that products seem to fill in

our own culture; however, functions served may be very different in othersfor

example, while cars have a large transportation role in the U.S., they are impractical

to drive in Japan, and thus cars there serve more of a role of being a status symbolor providing for individual indulgence. In the U.S., fast food and instant drinks such

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as Tang are intended for convenience; elsewhere, they may represent more of a

treat. Thus, it is important to examine through marketing research consumers true

motives, desires, and expectations in buying a product.

b. Approaches to Product Introduction

Firms face a choice of alternatives in marketing their products across

markets. An extreme strategy involves customization, whereby the firm introduces a

unique product in each country, usually with the belief tastes differ so much between

countries that it is necessary more or less to start from scratch in creating a product

for each market. On the other extreme, standardization involves making one global

product in the belief the same product can be sold across markets without significant

modificatione.g., Intel microprocessors are the same regardless of the country in

which they are sold. Finally, in most cases firms will resort to some kind

ofadaptation, whereby a common product is modified to some extent when moved

between some marketse.g., in the United States, where fuel is relatively less

expensive, many cars have larger engines than their comparable models in Europe

and Asia; however, much of the design is similar or identical, so some economies are

achieved. Similarly, while Kentucky Fried Chicken serves much the same chicken

with the eleven herbs and spices in Japan, a lesser amount of sugar is used in the

potato salad, and fries are substituted for mashed potatoes.

There are certain benefits to standardization. Firms that produce a

global product can obtain economies of scale in manufacturing, and higher quantities

produced also lead to a faster advancement along the experience curve. Further, it

is more feasible to establish a global brandas less confusion will occur when

consumers travel across countries and see the same product. On the down side,

there may be significant differences in desires between cultures and physical

environmentse.g., software sold in the U.S. and Europe will often utter a beep to

alert the user when a mistake has been made; however, in Asia, where office

workers are often seated closely together, this could cause embarrassment.

Adaptations come in several forms. Mandatoryadaptations involve

changes that have to be made before the product can be usede.g., appliances

made for the U.S. and Europe must run on different voltages, and a major problemwas experienced in the European Union when hoses for restaurant frying machines

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could not simultaneously meet the legal requirements of different

countries. Discretionary changes are changes that do not have to be made before

a product can be introduced (e.g., there is nothing to prevent an American firm from

introducing an overly sweet soft drink into the Japanese market), although products

may face poor sales if such changes are not made. Discretionary changes may also

involve cultural adaptationse.g., in Sesame Street, the Big Bird became the Big

Camel in Saudi Arabia.

Another distinction involvesphysical product v.s. communication

adaptations. In order for gasoline to be effective in high altitude regions, its octane

must be higher, but it can be promoted much the same way. On the other hand,

while the same bicycle might be sold in China and the U.S., it might be positioned as

a serious means of transportation in the former and as a recreational tool in the

latter. In some cases, products may not need to be adapted in either way (e.g.,

industrial equipment), while in other cases, it might have to be adapted in both (e.g.,

greeting cards, where the both occasions, language, and motivations for sending

differ). Finally, a market may exist abroad for a product which has no analogue at

homee.g., hand-powered washing machines.

c. Branding

While Americans seem to be comfortable with category specific brands,

this is not the case for Asian consumers. American firms observed that their

products would be closely examined by Japanese consumers who could not find a

major brand name on the packages, which was required as a sign of quality. Note

that Japanese keiretsus span and use their brand name across multiple industriese.g., Mitsubishi, among other things, sells food, automobiles, electronics, and heavy

construction equipment.1

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6. Pricing Issues in International Marketing

There are several ways that the price can be changed:2

"Sticker" price changesthe most obvious way to change the price is the price

tag you get the same thing, but for a different (usually larger) amount of

money.

Change quantity. Often, consumers respond unfavorably to an increased

sticker price, and changes in quantity are sometimes noticed lesse.g., in the

1970s, the wholesale cost of chocolate increased dramatically, and candy

manufacturers responded by making smaller candy bars. Note that, for cash

flow reasons, consumers in less affluent countries may need to buy smaller

packages at any one time (e.g., forking out the money for a large tube of

toothpaste is no big deal for most American families, but it introduces a

greater strain on the budget of a family closer to the subsistence level).

Change quality. Another way candy manufacturers have effectively increased

prices is through a reduction in quality. In a candy bar, the "gooey" stuff is

much cheaper than chocolate. It is frequently tempting for foreign licensees of

a major brand name to use inferior ingredients.

Change terms. In the old days, most software manufacturers provided free

support for their programsit used to be possible to call the WordPerfect

Corporation on an 800 number to get free help. Nowadays, you either have to2http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Marketing.html

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call a 900 number or have a credit card handy to get help from many software

makers. Another way to change terms is to do away with favorable financing

terms.

Reference Prices. Consumers often develop internal reference prices,

or expectations about what something should cost, based mostly on their experience.

Most drivers with long commutes develop a good feeling of what gasoline should

cost, and can tell a bargain or a ripoff.

Reference prices are more likely to be more precise for frequently purchased and

highly visible products. Therefore, retailers very often promote soft drinks, since

consumers tend to have a good idea of prices and these products are quite visible.

The trick, then, is to be more expensive on products where price expectations are

muddier.

Marketers often try to influence people's price perceptions through the use

ofexternalreference pricesindicators given to the consumer as to how much

something should cost. Examples include:

Manufacturer's Suggested Retail Price (MSRP). This is often pure fiction. The

suggested retail prices in certain categories are deliberately set so high that

even full service retailers can sell at a "discount." Thus, although the

consumer may contrast the offering price against the MSRP, this latter figure

is quite misleading.

"SALE! Now $2.99; Regular Price $5.00." For this strategy to be used legally

in most countries, the claim must be true (consistency of enforcement in some

countries is, of course, another matter). However, certain products are put on

sale so frequently that the "regular" price is meaningless. In the early 1990s,

Sears was reported to sell some 55% of its merchandise on sale.

"WAS $10.00, now $6.99."

"Sold elsewhere for $150.00; our price: $99.99."

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Reference prices have significant international implications. While

marketers may choose to introduce a product at a low price in order to induce trial,

which is useful in a new market where the penetration of a product is low, this may

have serious repercussions as consumers may develop a low reference price and

may thus resist paying higher prices in the future.

Selected International Pricing Issues. In some cultures, particularly where retail

stores are smaller and the buyer has the opportunity to interact with the owner,

bargaining may be more common, and it may thus be more difficult for the

manufacturer to influence retail level pricing.

Two phenomena may occur when products are sold in disparate

markets. When a product is exported, price escalation, whereby the product

dramatically increases in price in the export market, is likely to take place. This

usually occurs because a longer distribution chain is necessary and because smaller

quantities sold through this route will usually not allow for economies of scale. "Gray"

markets occur when products are diverted from one market in which they are

cheaper to another one where prices are highere.g., Luis Vuitton bags were

significantly more expensive in Japan than in France, since the profit maximizing

price in Japan was higher and thus bags would be bought in France and shipped toJapan for resale. The manufacturer therefore imposed quantity limits on buyers.

Since these quantity limits were circumvented by enterprising exchange students

who were recruited to buy their quota on a daily basis, prices eventually had to be

lowered in Japan to make the practice of diversion unattractive. Where the local

government imposes price controls, a firm may find the market profitable to enter

nevertheless since revenues from the new market only have to cover marginal costs.

However, products may then be attractive to divert to countries without such controls.

7. International marketing mix

When launching a product into foreign markets do you standardise or

adapt your marketing mix to the foreign market? A company can adopt to use a

standardised marketing mix around the world or an adapted marketing mix in eachcountry.

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7.1. International Product Strategies Standardisation Vs

Adaption

So what should an organisation do? Adapt or sell a standardised

product? Basic marketing concepts tell us that we will sell more of a product if we aim

to meet the needs of our target market. In international markets ,we have to take into

consideration consumers cultural background, buying habits, levels of personal

disposable income etc in order to deliver a tailored marketing mix program to suit

their needs.

The arguments however for standardisation suggest that if you go

through the process of adapting the product to local markets it does little but add to

the overall cost of producing the product and weakens the brand on the global scale.

In todays global world, where consumers travel more, watch satellite television,

communicate and shop internationally over the internet, the world now is becoming a

lot smaller. Because of this there is no need to adapt products to local markets.

Brands such as Coca-Cola, MTV, Nike, Levis are all successful global brands where

they have a standardised approach to their marketing mix, all these products are

targeted at similar groups globally.

In many circumstances a company will have to adapt their product and

marketing mix strategy to meet local needs and wants that cannot be changed.

Mcdonald is a global player however, their burgers are adapted to local needs. In

India where a cow is a sacred animal their burgers are served with chicken or fish. In

Mexico burgers come with chilli sauce. Coca-cola is some parts of the world taste

sweeter then in others. Yes we can argue that standardisation is better for the

organisation because it reduces cost, however many organisations will have to think

global, but act local if they are to successfully establish them selves in foreign

markets.

7.2. International Promotion Strategy

As with international product decisions an organisation can either adapt

or standardise their promotional strategy and message. Advertising messages in

countries may well have to be adapted because of language barriers or the current

message used in the national market may be offensive to overseas residents.

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The use of certain colours may also need to be thought about. In India

red is the colour worn by the bride in weddings, white is the colour for mourning in

Japan. The level of media development has to also be taken into account. Is

commercial television well established in your host country? What is the level of

television penetration? How much control does the government have over advertising

on TV and radio? Is print media more popular then TV? Many organisation go for a

strategy of adapting advertising messages to local markets to best meet consumer

demand.

7.3. International pricing strategies

Pricing on an international scale is difficult. As well as taking into account

traditional price considerations3

1. Fixed and variable costs,

2. Competition,

3. Company objectives ,

4. Proposed positioning strategies,

5. Target group and willingness to pay,

The organisation needs to consider the costs of transport, any tariffs or

import duties that may be levied on their product(s) when they are sold on the

international scale. Also what currency do you expect to be paid in? Will it be home

or international currency? Exchange rate fluctuation will also impact profitability and

influence pricing decisions.

Other factors to consider include local incomes, what are income and

PDI levels. What is the general economic situation of the country and how will this

influence pricing?

The internet is now making pricing more transparent for consumers.

Goods can be purchased online from any overseas organisations at local currency

prices, a prime examples is dvds which are purchased from sites like

www.dvdsoon.com which deliver internationally.3http://www.learnmarketing.net/internationalmarketingmix.htm

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7.4. International distribution strategies

A standard distribution channel in the UK may go from a Manufacturer,

wholesaler, retailer to consumer or direct from a manufacturer to a retailer. In an

overseas market there may well be more intermediaries involved. For example in

Japan there are approximately five different types of wholesaler a product goes

through before the product reaches the final consumer. In your international market ,

is it dominated by major retailers or is the retail sector made up of small independent

retailers? Is internet distribution common for your product.

7.5. Global marketing strategies

Although some would stem the foreign invasion through protective

legislation, protectionism in the long run only raises living costs and protects

inefficient domestic firms (national controls). The right answer is that companies must

learn how to enter foreign markets and increase their global competitiveness. Firms

that do venture abroad find the international marketplace far different from the

domestic one. Market sizes, buyer behavior and marketing practices all vary,

meaning that international marketers must carefully evaluate all market segments inwhich they expect to compete.

Whether to compete globally is a strategic decision (strategic intent) that

will fundamentally affect the firm, including its operations and its management. For

many companies, the decision to globalize remains an important and difficult one

(global strategy and action). Typically, there are many issues behind a company`s

decision to begin to compete in foreign markets. For some firms, going abroad is the

result of a deliberate policy decision (exploiting market potential and growth); for

others, it is a reaction to a specific business opportunity (global financial turmoil, etc.)

or a competitive challenge (pressuring competitors). But, a decision of this magnitude

is always a strategic proactive decision rather than simply a reaction (learning how to

business abroad). Reasons for global expansion are mentioned below:

a) Opportunistic global market development (diversifying markets)

b) Following customers abroad (customer satisfaction)c) Pursuing geographic diversification (climate, topography, space, etc.)

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d) Exploiting different economic growth rates (gaining scale and scope)

e) Exploiting product life cycle differences (technology)

f) Pursuing potential abroad

g) Globalizing for defensive reasons

h) Pursuing a global logic or imperative (new markets and profits)

Moreover, there can be several reasons to be mentioned including

comparative advantage, economic trends, demographic conditions, competition at

home, the stage in the product life cycle, tax structures and peace. To succeed in

global marketing companies need to look carefully at their geographic expansion. To

some extent, a firm makes a conscious decision about its extent of globalization by

choosing a posture that may range from entirely domestic without any international

involvement (domestic focus) to a global reach where the company devotes its entire

marketing strategy to global competition. In the development of an international

marketing strategy, the firm may decide to be domestic-only, home-country, host-

country or regional/global-oriented.

Each level of globalization will profoundly change the way a company

competes and will require different strategies with respect to marketing programs,

planning, organization and control of the international marketing effort.

8. Ethical problems in international marketing

The moral question of what is right or appropriate poses many dilemmas

for domestic marketers. Even within a country, ethical standards are frequently not

defined or always clear. The problem of business ethics is infinitely more complex in

international marketplace, because value judgments differ widely among culturally

diverse groups. That which is commonly accepted as right on one country may be

completely unacceptable in another. Giving business gifts of high value, for example,

is generally condemned in the United States, but in many countries of the world gifts

are not only accepted but also expected (www.business-ethics.org).

Upon examination of existing ethical frameworks in the field of

international marketing from a macro marketing perspective, it is argued that

marketers cannot always rely on universally accepted ethical norms, such as hyper

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norms or core values that have been suggested by a deluge of marketing literature

(Dunfee,1995; Dunfee, Smith, and Ross, 1999: 14; DeGeorge, 2000). Some basic

moral values could be used in evaluating international marketing ethical issues.

Violations of basic moral values in international marketing settings should be

accepted as ethical problems.

After studying the literature related to international marketing, it is easily

seen that most of the marketing ethics studies involve the use of scenarios as

research instruments and relate to the following marketing sub-disciplines

(Armstrong, 1992: 167): market research, retail management, purchasing

management, advertising management, marketing management, industrial

marketing, and marketing education. Few studies relate to International Marketing

Ethics have been most prominent (Armstrong and Everett, 1991:61-71; Armstrong,

Stening, Ryands, Marks, and Mayo, 1990: 6-15; Armstrong, 1992). Major

International Marketing Ethical Problems derived from applied researches by

Armstrong (Ibid) are presented with their short definitions as follows4:

Traditional Small Scale Bribery - involves the payment of small sums

of money, typically to a foreign official in exchange for him/her violating some official

duty or responsibility or to speed routine government actions (grease payments,

kickbacks).

Large Scale Bribery - a relatively large payment intended to allow a

violation of the law or designed to influence policy directly or indirectly (eg, political

contribution).

Gifts/Favours/Entertainment - includes a range of items such as:lavish physical gifts, call girls, opportunities for personal travel at the company`s

expense, gifts received after the completion of transaction and other extravagant

expensive entertainment.

Pricing includes unfair differential pricing, questionable invoicing

where the buyer requests a written invoice showing a price other than the actual

price paid, pricing to force out local competition, dumping products at prices well

4http://www.eurojournals.com/irjfe_26_08.pdf

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below that in the home country, pricing practices that are illegal in the home country

but legal in host country (eg, price fixing agreements).

Products/Technology includes products and technology that are

banned for use in the home country but permitted in the host country and/or appear

unsuitable or inappropriate for use by the people of the host country.

Tax Evasion Practices - used specifically to evade tax such as

transfer pricing (i.e., where prices paid between affiliates and/or parent company

adjusted to affect profit allocation) including the use of tax havens, where any profit

made is in low tax jurisdiction, adjusted 101 International Research Journal of

Finance and Economics - Issue 26 (2009) interest payments on intra-firm loans,questionable management and service fees charged between affiliates and /or the

parent company.

Illegal/Immoral Activities in the Host Country practices such as:

polluting the environment, maintaining unsafe working conditions; product/technology

copying where protection of patents, trademarks or copyrights has not been enforced

and shortweighting overseas shipments so as to charge a country a phantom

weight.

Questionable Commissions to Channel Members unreasonably

large commissions of fees paid to channel members, such as sales agents,

middlemen, consultants, dealers and importers.

Cultural Differences between cultures involving potential

misunderstandings related to the traditional requirements of the exchange process

(e.g., transactions) may be regarded by one culture as bribes but be acceptable

business practices in another culture. These practices include: gifts, monetary

payments, favours, entertainment and political contributions.

Involvement in Political Affairs- related to the combination of

marketing activities and politics including the following: the exertion of political

influence by multinationals, engaging in marketing activities when either home or

host countries are at war and illegal technology transfers (Armstrong, Ibid).

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Concluding remarks

When marketing their products firms need to create a successful mix of:

the right product, sold at the right price , in the right place , using the most suitable

promotion. To create the right marketing mix, businesses have to meet the following

conditions: The product has to have the right features - for example, it must look

good and work well. The price must be right. Consumer will need to buy in large

numbers to produce a healthy profit. The goods must be in the right place at the right

time. Making sure that the goods arrive when and where they are wanted is an

important operation. Changes in the world market and in technological conditions in

the world economy in the recent past, in particular in the last decade, pose new

challenges to industrialization and the development of a competitive manufacturing

sector in Africa. Three main categories of changes are most relevant: changes in

market conditions, in technology hardware and software and in the organization of

production.

In many respects the conventional advantage of low labour cost is being

undermined by the increasing importance of competitive characteristics other thancost of production, notably product/service quality and just-in-time delivery. To cope

with these requirements, greater effort will be required to develop design, marketing

and new organizational and linkage capabilities, in addition to selectively acquiring

new manufacturing technologies.

These market and technological changes are likely to have considerable

implications for the shift in the direction of knowledge-intensive production and for the

kinds of capabilities that must be developed to cope with the changing situation. First,greater effort will be needed to monitor these changes with a view to adapting to the

new situation. This will often imply selective adoption of new technologies in

production and marketing at the right time and in the right applications according to

the dictates of quality, precision, speed and productivity requirements. Second,

greater effort will be needed to create a conducive environment for the creation and

development of core capabilities within firms and in the institutions that interact with

those firms so as to cope with the changing conditions.

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References:

Internet researches:

http://www.consumerpsychologist.com/international_marketing.html

http://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-

Marketing.html

http://www.learnmarketing.net/internationalmarketingmix.htm

http://www.eurojournals.com/irjfe_26_08.pdf
http://www.consumerpsychologist.com/international_marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Marketing.htmlhttp://www.learnmarketing.net/internationalmarketingmix.htmhttp://www.eurojournals.com/irjfe_26_08.pdfhttp://www.consumerpsychologist.com/international_marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Marketing.htmlhttp://www.referenceforbusiness.com/encyclopedia/Int-Jun/International-Marketing.htmlhttp://www.learnmarketing.net/internationalmarketingmix.htmhttp://www.eurojournals.com/irjfe_26_08.pdf

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