General Overview
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Interdependence of World Economies
Emergence of New Economic Players
Formation of More Distinct Trading Groups
Shift in Economic and Political Ideologies
Sophistication of Technology
Increase in Market Concentration
Crisis in National Identity
Greater Divergence Between Haves and Have-Nots
Greater Internationalization of Business Relations
Growth in “Global” markets
1
General Overview

Self-Reference Criterion/Marketing Relativism
– stages of involvement—foreign marketing
•
•
•
•
None
Infrequent
International
Global
– Strategic orientation
• Domestic market extension
• Multidomestic market concept
• Global market concept
– role of culture
– sociological, psychological, anthropological factors
2
General Overview

Cateora’s Int’l Marketing Task Paradism
– controllables vs. uncontrollables
– interaction between controllables &
uncontrollables
– static vs. dynamic behaviour
3
General Overview

Levitt’s Globalization Concept
– Commonality of Wants and Desires Presumed
– Marketing Program Driven by Cost Considerations
– Minimizes Adherence to “Marketing Concept”
– Provides Cohesiveness and Order for Planning
– Management Led to Believe “controllables” are
actually controllable
4
General Overview

Economic Prosperity Derives from Trade
–
–
–
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Absolute Advantage
Comparative Advantage
Heckscher-Ohlin Factor Endowment Theory
Foreign Direct Investment
– market imperfections
– market failure
– Multinational Enterprise
– internalization
– diversification
– eclectic
5
General Overview

Porter’s Comparative Advantage of Nations
– Focus on Firm’s “Value Chain”
– Highlights Government’s Role in Business Relations
– Evaluates Factors Employed to Create Value
–
–
–
–
–
unique factors
lowest production costs
maximum market potential
optimal risk-return tradeoff
importance of strategic positioning
6
Porter’s Diamond of
National Competitive Advantage
GOVERNMENT
Firm Strategy
Structure
and Rivalry
Demand
Conditions
Factor
Conditions
Related and
Supporting
Industries
CHANCE
General Overview

Govt’s Role in Creating Wealth and Value
– Balanced vs. Unbalanced Growth
– Facilitators of Trade
– Protectionism
– tariffs
–
–
–
–
quotas
voluntary restraints
monetary barriers
technical standards
– local content rules
8
General Overview

Multilateral Trade Organizations
– GATT (General Agreement on Tariffs and Trade)
– WTO (World Trade Organization)
– IMF (International Monetary Fund)
– IBRD (International Bank for Reconstruction and
Development--World Bank)
– Regional Development Banks
– Common Market Arrangements
– Free Trade Agreements
– Direct Foreign Aid Agencies
9
General Overview

Growth of Transnational/Multinational Enterprise
– Marshall Plan in the U.S.
– U.S. Foreign Direct Investment
– Development of Information Technology
– Market Failure to signal efficiencies and profits
– Desire to Diversify
– New, More Profitable Markets
– Response to Gov’t Policy which emphasized national
defense and internal market protection
10
General Overview

World Response to Multinationals and DFI
– Canada
– United States
– Western Europe
– Asia
– Developing Nations
– Newly Emerging Democracies
11
General Overview

Factors Shaping Attitudes Towards Multinationals
– Development Needs -- Pro and Con
– Technology Needs -- Pro and Con
– Risk Sharing Needs -- Pro and Con
– Market Organization Needs -- Pro and Con
– Government Policy Needs -- Pro and Con
12
Foreign Exchange


Function and Nature of Foreign Exchange Markets
– Transactions-- Currency Needs
Credit
– Hedging -Interest arbitrage
Swaps
– Speculation
Monetary Institutions
– Commercial Banks
– Central Banks
– Money Markets
– Bond and Equity Markets
13
Foreign Exchange

Foreign Exchange
– Factors Affecting Demand
– Factors Affecting Supply
Dollar
Supply (Exports)
Df
De
Demand (Imports)
Qf
Qe
Quantity
14
International Trade and Foreign
Exchange



Demand and Supply of Foreign and Local Currancies
Relationship to Terms of Trade
– Product Price (in Canadian Dollars) / Product Price (in Yen)
Factors that Impact upon Volume of Trade
– Internal Efficiencies
– Financial Strength of Nations Currency and Credit
– Dynamic Innovativeness
15
Balance of Payments

Relationship between flows of financial assets within a
country over a year’s period.
– Current Account
– Exports and Imports
– Unilateral Transfers
– Net Trade Balance
– Net Capital Account Balance
– Capital Account
– Portfolio Investment
– Foreign Direct Investment
– Net Capital Account Balance
– Official Reserve Account
– Stock of Foreign Currencies
– Gold and other precious metals
– Bank IOUs etc.
16
Balance of Payments




Relationship Between Balance of Trade and Balance of
Payments
Relationship Between Balance of Trade and Exchange
Rates
Relationship Between Interest Rates and Capital
Account
Government’s Role in Affecting Trade, Exchange Rates,
and Balance of Payments
17
Public Policy Impact Chain
Economic
Political
Cultural
Demographic
National Goals
and
Strategies
National
Policies
Policy
Instruments &
Institutions
Industries and
Firms
18
Culture

What is Culture?
– Ways of thinking, viewing, and responding to stimuli
which is learned
– socialization
– acculturation
– values (terminal and instrumental)

Core Values of Cultures
– Canadian
Asian
– American
Native Aboriginal
– European
African
Indian
Mexican
Winnipeg
19
Culture

Cross-Cultural Analysis
– A systematic comparison of similarities and differences in material and behavioral aspects of culture.
– Descriptive
– Analytical/functional
– Outline of Elements in Cross-cultural Analysis
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–
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Determine Relevant Motivations
Determine Characteristic Behavior Patterns
Determine Relevant Cultural Values
Determine Important Institutions
Determine Relevant Rules, Norms, and Laws
Evaluate all the above with respect to mix variables
20
Culture

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Group and Sub-group Identification
– Relevant In-Group Identities
– Relevant Out-Group Identities
– Boundaries Between In- and Out-Groups
Egocentrism
Ethnocentrism
– Ethnocentrism in the Extended Fishbein Model of
Consumer Behavior
Role of Country-Of-Origin in Purchase Decision
– “Made in Canada”
21
Culture

Nine Nations of North America
– New England
– The Foundry
– Quebec
– Dixie
– The Breadbasket
– The Empty Quarter
– MexAmerica
– Ecotopia
– The Islands
22
Culture

Culture and Change
– Cultural Borrowing
– Resistance to Change
– Change Congruency
– Strategies for Change
– planned
– unplanned
– Consequences of Cultural Intervention
– Examples
– Quebec
– Vietnam
Atlanta, GA
Faculty of Management
23
Political Environment


Types of Governments
– Formation and implementation of legislation
– Degree of Political Participation
– Orientation to Free Market
Nationalism
– Concept of the nation-state
– Economic Manifestations of Nationalism
– Conflict with Multinationalism
– Fear of Foreign Ownership and/or Control
24
Political Environment

Response to Nationalistic Fears
– Confiscation
– Expropriation
– Domestication
– Nationalization
– Direct Economic Sanctions
–
–
–
–
–
exchange controls
local content rules
import restrictions
tax controls
gov’t intervention into factor resource markets
25
Political Environment
– Direct Political Sanctions
– Censure for Actions in Domestic Country
– Complaint Lodged with Multilateral Body
– Violence
– Issue of Foreign Direct Investment
–
–
–
–
–
Need to Conduct Thorough Risk Analysis
Factors of Importance to Identify
Need to Consider the Method of Entry
Patterns in Canada
Canadians Investing into Other Economies
26
International Legal Environment

No Single International Law or Agency
– As Many Legal Systems as there are Nations
– Issues of Interest to Marketers
–
–
–
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
Competition Rules
Packaging Rules
Price Maintenance
Channel Agreements
Transport/Distribution
Product Quality Rules
Warranty Law Advertising
Price Regulations
Patents, Trademark, & Copyright Law
Environmental
Bases for Legal System
– Common vs Code Law
– Other Systems
27
International Legal System

Issue of Jurisdiction
– World Court
– International Court of Justice
– Determining Jurisdiction
– Jurisdictional Clauses in Contract
– Where Contract was Entered Into
– Where Provisions of the Contract were Performed

– Special Issues
Legal Recourse
– Why Not Litigate
– Why Litigate
28
International Legal Environment
– Options to Litigation
– Placate Agrieved Party
– Conciliation
– Arbitration

Protection of Intellectual Property Rights
– Difficulty of Policing Property Rights
– What is Counterfeit?
– Prior Use vs. Registration
– Conventions and Treaties
29
International Legal Environment

Marketing Laws: A Cross-Cultural Comparison
– Advertising
– Pricing
– Channel Relations
– Competition
– Extraterritoriality
– Transport/Distribution
30
Researching World Markets


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Major Source of Error is a result of faulty information
Tools and techniques remain the same regardless of
domestic vs. international basis of research -differences lie in application and the environmental
differences.
Major questions to ask:
–
–
–
–
–
–
Can the Information be Collected?
What are the Cost and Time requirements?
How Reliable is the information?
For what Purposes is the Information Being Collected?
Is the Information Primary or Secondary?
Does the Information Already Exist?
31
The Market Intelligence Gathering Process
International Issues
Identification and Definition
of the Problem
Selection of an Appropriate
Research Design
Selection of the Sample(s)
Collection of Relevant Data
and Information
Analysis and Interpretation
of
Data and Information
Dissemination of Research Results
Spatial and Cultural
Multiple Perspectives
Lack of Market Knowledge
Meaning of Concepts
Response to Measurement
Sample Equivalence
Secondary Data
Accuracy
Comparability
Reliability
Source of Data
Primary Data
Respondent biases
Researcher biases
Organizational
Complexity
Market Intelligence Gathering:
Research Design Issues





What is the Project Attempting to Accomplish?
Who are the Recipients of the Information?
What is the nature of the Management Decision?
What Length of Time is Available for the Project?
What Funds are Available for the Project?
33
Market Intelligence: Problem
Formulation Issues
Spatial and Cultural Separation
 Multiple Perspectives
 Meaning of Ideas and Concepts

–
–
–
–
–
Functional Equivalence
Conceptual Equivalence
Definitional Equivalence
Temporal Equivalence
Market Structure Equivalence
34
Market Intelligence Gathering:
Research Design Issues

Measurement Issues
– Single versus Cross-cultural Measurement
– Translation Issues
– Verbal Translation
• Back Translation
• Parallel Blind Translation
• Committee Translation
– Non-verbal Translation
– Scale Development Issues
35
Market Intelligence Gathering:
Research Design Issues

Sampling Issues
– Definition of the Population
– Representativeness of the Sample
36
Market Intelligence Gathering:
Secondary and Primary Data Issues

Data Issues
–
–
–
–
Accuracy
Comparability
Reliability
Affordability
37
Market Intelligence Gathering:
Sources of Information

Secondary Sources
– Federal Government
– Department of Foreign Affairs
– Statistics Canada
– Regional International Trade Centres
– Department of Commerce (US)
– European Commission (EU)
– Country Desks, Trade Missions, Embassies
– Trade Opportunities Program
– Overseas Business Reports
– Government Intelligence Units
38
Market Intelligence Gathering:
Sources of Information

Secondary Sources (cont.)
– Service Organizations
– Major Banks
– Investment Companies
– Public Accounting Firms
– Transportation Companies
– Advertising and Consulting Firms
39
Market Intelligence Gathering:
Sources of Information

Secondary Sources (cont.)
– Others
– Economist Intelligence Unit
– Business International
– Specialized Newsletters
– Internet
– Industrial Directories
– Universities
40
Market Intelligence Gathering:
Sources of Information

Provincial/State Governments
– Manitoba Industry, Trade, and Tourism
– Economic Development Agencies
– Various Sectoral Offices
– Aerospace
– Agriculture
– Health Care
– etc.
41
Market Intelligence Gathering:
Sources of Information

International Organizations
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–
–
–
–
–
IBRD (World Bank)
WTO (World Trade Organization)
WHO (World Health Organization)
FAO (Food and Agriculture Organization)
ILO (International Labour Organization)
OECD (Organization for Economic Coop. &
Dev.)
– Trade Groups (LAFTA, EFTA, etc.)
42
Market Information Gathering:
Sources of Information

Trade Associations
– Chambers of Commerce
– IATA (International Air Transport Association)
– OPEC (Organization of Petroleum Exporting
Countries)
– Canadian Manufacturers Association
– Foreign Trade Tribunals
43
Market Information Gathering:
Sources of Information

Organization’s Own Experience
– Foreign National Employees
– Experienced Executives
– Subsidiaries
44
Developing Markets and Market
Behaviour

Rapid Changes in National Economies
– Closed Economies
– Developing Economies
– Newly Industrialized Economies
– Socialist Developed Economies
– Capitalist Developed Economies
– New Hybrids
45
Developing Markets and Market
Behaviour

Marketing and Economic Development
– Challenges “Doing Business as Usual”
– Marketer Influences Direction and Magnitude of dev.
– Role of Marketer in Static vs. Dynamic Society
– Dealing with Expectations???
– W.W. Rostow’s Stages of Development Thesis
–
–
–
–
–
–
Traditional Society
Preconditions for Takeoff
Takeoff
Drive to Maturity
High Mass Consumption
??????
46
Developing Markets and Market
Behaviour

– Actual Experiences in Development
– Export Driven vs. Import Substitution Bases for Dev.
– Differences between Growth and Development
– Issue of Income Distribution and Marketing
– Need for Awareness of National Development Object.
Areas where Marketers can Aid in Development
– Transfer of Entrepreneurial Spirit
– Transfer of hard and soft Technology
– Development of Infrastructure--distribution
– Orient society to Demand as well as Supply Planning
– Promote Trade as a stimulus for growth in employment
47
Developing Markets and Market
Behaviour

Marketing Functions in Developing vs. Developed Econ.
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Nature of Goods & Service
Storage Activities
Means of Exchange
Production sophistication
Local vs. Out-sourcing
Transport Infrastructure
Communication Infrastructure
Sales & Promotion Methods
Pricing bases--Role of Bargaining Product Assortment
Market Organization
Customer Service Issues
Role of Planning & Analysis
Role of Credit
Status Issues
Importance of Geography
Impact of Business Cycles
Entrepreneur Orientation
Role of the Family and Other Institutions
48
Multinational Market Groups


Factors Regarding Economic/Political Integration
– Economic
Political
Legal
– Cultural
Social
Patterns of Integration
– Regional Cooperative Group
– Free Trade Area
– Customs Union
– Common Market
– Economic Union
– Political Union
49
Multinational Market Groups

Examples of Integration
– European Economic Community (EEC)
– Enlargement of EEC (6 to 9 to 12)
– Single European Act--1992
– Canada-US Free Trade Agreement (FTA)
– North American Free Trade Agreement (NAFTA)
– European Free Trade Agreement (EFTA)
– Andean Common Market
– African Integration Experiences
– Association of Southeast Asian Nations (ASEAN)
50
The Trading Blocs
European
EU
EEA
EFTA
American
Asian
Canada-US
FTA
ASEAN
AFTA
NAFTA
Mexico
EEI
NED
Former
USSR
Lome
(Africa)
CARICOM
CACM
CBI
AUS, NZ, JAP
SK, US, CD
HK, JAP, SK
TH
MERCOSUR
ANCOM
Other Pacific
Nations
51
Multinational Market Groups
– Marketing Implications
–
–
–
–
Marketing Strategy
Tactical Issues
Explicit Barriers and Potentials
Marketing Mix Implications at Operative Level
52
Global Marketing Management:
Planning and Organization

Global Marketing Restated:
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–
–
–

product life cycle
competition
product
distribution
design
production
price
segmentation
consumers
promotion
Benefits and Costs of Global Marketing
–
–
–
–
–
–
–
transfer of experience--benefit
control and coordination--benefit
uniformity--benefit
unresponsiveness to consumers--cost
inflexibility--cost
tendency toward marketing relativism--cost
control and coordination--cost
53
Global Marketing Management:
Planning and Organization


Alternative Marketing Strategies
– Exporting
Licensing
Joint Venture
– Consortia
Management Contracts
Market Planning Process
– Study Chart on Planning Process in Text
–
–
–
–

Analysis and Definition
Marketing Mix Definition
Marketing Plan Development
Implementation, Evaluation, & Control
Methods of Control
– Centralized
– Decentralized
- New Forms
54
International Product Analysis
Support Service
Components
Repair &
Maintenance
Installation
Instructions
Other Related
Services
Trademark
Warranty
Price
Core
Component
Styling
Deliveries
Packaging
Component
Physical
Product
Brand Name
Spare Parts
Quality
Packaging
Country-of-Origin
55
International Product Analysis

Degree of Standardization
– What is the aspect of the product to be made adaptable?
– What aspect of the product can be standardized?
– Which aspects of the product are critical for competitive
advantage?
– Begs the question of identification and ranking of
attributes and
consumer preferences. How should it be done? Who
should do it?
– Preference dimensions
• status
taste
material value
achievement
aspiration
56
International Product Analysis

Innovation, Adaptation, and Diffusion
– Degree of Newness
– Newness and Product Life Cycle
– Degree of Perceived Newness
Congruent
Innovation
Continuous
Innovation
Dynamically
Continuous
Innovation
Discontinuou
s
Innovation
57
International Product Analysis

Perceived Attributes of the Product
–
–
–
–
–
Relative Advantage
Compatability
Complexity
Trialability
Observability
Relativeto
tocore
Coreand
Relative
and Non-Core attributes
non-core attributes
58
Marketing Industrial Products

Who are Industrial Customers?
– Commercial Enterprises
– Original Equipment Manufacturers
– User Customers
– Industrial Distributors
– Government Organizations
– Local
– Provincial
– Federal
– Institutional Customers
– Schools
– Hospitals
– Churches
59
Why Enter International
Markets?
Domestic Market Saturation
 Life Cycle Stages
 Inherent Perceived Quality Differences
 Protect Existing Market Share

60
Why Not to Enter International
Markets
Home Country Sufficient
 Lack of Sound Marketing Information re
Foreign Opportunities
 High Costs
 Organizational Inertia

61
Information on International
Markets
Dunn & Bradstreet’s Principal International
Businesses
 Predicast’s F & S Index
 Europe’s 1500 Largest Companies
 Major Firms in Europe and Far East

62
Industrial Market Considerations

Product Strategy
– Specifications
– Licensing

R&D
Support Services New Competition
FDI Mgmt Contract Turn-Key Counter-trade
Channel Strategy
– Resident Buyers Mfg’s Reps

Distributors
Trading Companies
Promotion Strategy
– Use of Trade Fairs and Exhibits
– Expert Testimonials and Reputation

Pricing Strategy
–
–
–
–
Price/Quality Relationship Most Important
Bid System
Role of Physical Distribution and Demand Management Important
Prices Often Difficult to Determine at Time of Sale
63
International Distribution

Components of Distribution
–
–
–
–

Physical Handling
Transportation
Transfer of Ownership
Buying and Selling Negotiations
– Customer Satisfaction--GOAL!!
Alternative Distribution Channels
– Direct and Indirect Exporting
– Merchants and Agents
64
International Distribution

Critical Considerations for Merchant/Agent
–
–
–
–

Availability
Cost of Service
Functions Performed
Extent of Control Desired
Alternative 1 - Direct -- Own Sales Force
65
International Distribution

Alternative 2 - Indirect--Merchant Middleman
– Domestic Merchant Middleman
– Purchase on Own Account
– Minimum Credit Risk
– Handles Functions Outside Domestic Market
66
International Distribution

Alternative 2 - (cont.)
– Varieties of Domestic Merchant Middlemen
–
–
–
–
–
Export Merchants
Export Jobbers
Export Buyers
Trading Companies
Complementary Marketers
– Foreign Merchant Middlemen
67
International Distribution

Alternative 2 - (cont.)
– Varieties of Foreign Merchant Middlemen
–
–
–
–
Distributors
Import Jobbers
Wholesalers and Retailers
Affiliated Middlemen
68
International Distribution

Alternative 3 - Agent Middlemen
– Domestic Agents
–
–
–
–
–
Export Management Companies
Manufacturer’s Export Agent
Broker
Buyer
Export Commission House
69
International Distribution

Alternative 3 - Agent Middlemen
– Foreign Agents
–
–
–
–
Broker
Manufacturer’s Rep
Factor
Managing Agent
70
International Distribution

General Issues
–
–
–
–
–
–
–
Issue of Social Acceptance
Line Breadth
Costs and Margins
Channel Length
Maintenance of Customer Value
Channel Existence
Channel Cost and Control
– Conflict
– Cooperation
– Leadership
71
Stages of Export Development
Completely Uninterested Exporter
 Partially Interested Exporter
 Exploring Exporter
 Experimental Exporter
 Small Experienced Exporter
 Large Experienced Exporter

72
Export Operations:
Preparing for Export Markets
Set Objectives
 Determine Commitment
 Devise Preliminary Export Budget
 Determine Organizational Fit for Exporting
 Develop Export Information
 Assess Potential Markets
 Devise Marketing Plan
 Fully Assess and Reassess Company Readiness

73
Export Operations: Export
Market Strategy
Market Research and Analysis
 Product Design
 Pricing
 Distribution
 Promotion
 Packing, Marking, & Labeling
 Transportation

74
Export Operations: Export
Payment Methods
Cash with Order
 Cash on Delivery (COD)
 Open Account
 Electronic Transfer
 Bills of Exchange
 Letter of Credit (revocable, irrevocable, confirmed)
 Barter (compensation deals, swaps, offsets, counterpurchase
 Advanced Purchase Arrangement

75
Export Operations



Transportation Documentation
– Bill of Lading
– A8A Customs Cargo Control Document
Licenses
– General License
– Validated License
– Commodity Control List
Import Restrictions
– Tariffs
Import License Quotas Exchange Permits
76
Export Operations: Logistics

Choice of Transport Mode
– Domestic
– Truck Rail Water Air Freight
Pipeline
– Foreign
– Truck Rail Water Air Freight


Choice of Carrier
– Cost Dependability Timeliness Risk Service
Other Logistics Functions
– Inventory
Order Processing
Customer Service
– Packaging Storage
Materials Handling
77
Export Operations

Export Documentation
–
–
–
–
–
–
–
–
–
Commercial Invoice
Consular Invoice
Certificate of Origin
Certificate of Value
Packing List
Health Certificate
Insurance Certificate
Export Permit
Export Declaration
78
Assessing Organizational
Readiness




Capitalize on Strengths in Domestic Markets
Provide the Financial Resources for the Job
Human Resource Requirements are High
Must Possess Export-Related Skills
–
–
–
–
–
–
–
–
Ability to Speak Foreign Languages
Familiarity with Foreign Languages/Business Practices
Possess Contacts in Potential Foreign Target Markets
Develop Contacts in Canadian Export Community
Gain Experience in International Negotiating
Experience Technical Aspects of International Trade
Develop Ability to Assess Market Potential
Be Involved in Continuous Training to Acquire Expertise
79
Assessing Organizational
Readiness (cont.)

Must Have Top-Level Commitment
–
–
–
–
–
–
Any Reservations About Entering Foreign Markets?
Is Exporting Viewed as Peripheral or Sporadic?
Resistance to Developing a Strategic Export Market Plan?
Willing to Devote Many Hours to Export Development
Prepared to Trade-Off Profits in Short-Run?
Interested in Long-Term International Relationships?
80
Assessing Organizational
Readiness (cont.)

Is the Organization Structured for Expansion?
– Past Growth Experience--Foreign or Domestic?
– Young, Energetic Staff with Drive and Ambition?
– Sound Organizational Structure
–
–
–
–
–
Boundary Spanning
Interorganizational Communication
Continuous Learning Culture
Market Intelligence Sensing Capability
Flexibility, Adaptability, Viability
81
Marketing Communications



Public Relations
Sales Promotions
International Advertising
– The message
•
•
•
•
•
•
•
Information source
Encoding
Message channel
Decoding
Receiver
Feedback
Noise
82
Marketing Communications

Legal Issues
–
–
–
–
–

Puffing
Comparative Advertising
Specific Product prohibitions
Use of media
Truth in advertising
Language and symbolism Issues
83
Marketing Communications
Production and Cost Limitations
 International Control of
Information/Advertising

84
Sales Force Management

Sources of Personnel
–
–
–
–
–
Expatriates
Virtual Expatriates
Local Nationals
Third-Country Nationals
Host-Country Restrictions
85
Sales Force Management

Selection of Personnel
–
–
–
–
–
–
–
Maturity
Knowledge
Positive Outlook
Cultural Empathy
Flexibility
Tolerance
Hard Working
86
Sales Force Management

Training
– Generally poor
– Minimal criteria
•
•
•
•
•
•
Awareness of cultural setting
Cultural imperatives and restrictions
Economic reward
Good communication
Proper training re products/services
Support of family
87
Pricing in International Markets

Pricing Objectives
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–
–
–
Enhance Market Share
Enhance ROI
Manage Demand
Cost Recovery
88
Pricing in International Markets

Major Issues to Consider
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–
–
–
–
Nature of the Product
Degree of Competition
Degree of Substitutibility
Channel Efficiency
Price and Income Elasticity Considerations
89
Pricing in International Markets

Major Pricing Components
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–
–
–
–
–
–
–
–
–
Production Costs
Marketing Costs
Profit Margins
Transportation and Distribution Costs
Taxes, Tariffs, Duties, etc.
Documentation Costs
Exchange Rate Movements
Interest Rates
Insurance and Risk Bearing Costs
Inflation
90
Approaches to International
Pricing

Cost-Based Methods
– Cost Plus
– Fully Allocated Cost

Market Based Methods
– Zone Pricing
– “What the Market Will Bear”
– Incremental Cost Pricing



Transfer Pricing
Countertrade
Dumping
91
Manufacturing Price (Domestic)
Transportation to Wholesaler
$362.00
18.00
$380.00
Export Documentation
Overseas Shipping & Handling
Overseas Freight and Insurance
Import Tariff: 20% of Landed Cost
Handling at Foreign Port of Entry
Transportation form Port to Importer
Importer Margin ( to Wholesaler) 10%
Wholesale Margin: 8%
Retail Margin: 40%
FINAL RETAIL PRICE
30.40
$410.40
164.16
$574.56
$362.00
23.00
4.00
2.50
58.50
$450.00
90.00
$540.00
3.00
$543.00
17.00
$560.00
56.00
$616.00
49.28
$665.28
266.12
$931.40
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International Marketing 118.330 Slides