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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