2 Three Basic Considerations Markets targeted.Product and its characteristics.Company resources and policy.
3 Defining a ProductA product is anything that can be offered to a market for attention, acquisition, use or consumption; it includes physical objects, services, personalities, places, organisations and ideas.Philip Kotler
5 Product Variables The Core Product The Tangible Product a product or services that is essentially the same as that of competitors.The Tangible Producta product or service that is differentiated composition, origin, or tangible features from competing products.The Augmented Producta product or service which is serviced after the sale and carries a warrantee from the producer, producing a continuing relationship with the seller.
6 Standardisation and Adaptation The fundamental international product decision after the decision to internationalize.International market approach alternatives to adaptation.Sell the product as it is internationally.Modify product for different countries or regions.Design new products for foreign markets.Incorporate all differences into one product and introduce it globally.
7 Standardisation and Adaptation FACTORS ENCOURAGING STANDARDIZATIONEconomies of scale in productionEconomies in product R&DEconomies in marketing“Shrinking” of the world marketplace/economic integrationGlobal competitionsFACTORS ENCOURAGING ADAPTATIONDiffering use conditionsGovernment and regulatory influencesDiffering consumer behavior patternsLocal competitionTrue to the marketing concept
8 Strategic Adaptation to Foreign Markets LowHighIndustrial/ Technology IntensiveConsumerNeed for AdaptationDegree of Cultural GroundingNature of ProductSource: Adapted from W. Chan Kim and R. A. Mauborgne, “Cross-Cultural Strategies,” Journal of Business Strategy 7 (Spring 1987): 31; and John A. Quelch and Edward J. Hoff, “Customizing Global Marketing,” Harvard Business Review 64 (May-June 1986):
9 Factors Affecting Adaptation Decision to AlterDomesticProductSOURCE: Adapted from V.Yorio, Adapting Products for Export (New York; Conference Board, 1983), 7. Reprinted with permission
10 The Market Environment Government RegulationsPolitical and social agendas often dictate regulatory requirements.Nontariff BarriersProduct standards, testing, subsidized local products.Customer Characteristics, Expectations, and PreferencesPhysical size, local behaviors, tastes, attitudes, and traditions.Consumption patterns, psychosocial characteristics, and general cultural criteria.
11 The Market Environment Economic DevelopmentThe stage of economic development affects the market size and demand characteristics. Backward innovation of the product may be required to meet local requirements.Competitive offeringsMonitoring competing local products is critical in adjusting the product for competitive advantage.Climate and geographyLocal climatic conditions and terrain features can make products vulnerable to damage.
12 Product Characteristics Product ConstituentsBrandingPackagingAppearanceMethod of Operation or UsageQualityServiceCountry-of-Origin Effects
13 Product Constituents and Branding Product ingredients must not violate local legal regulations and social or religious customs.Care must be taken that the brand in name, symbol, sign, or design does not offend the local customer. Trademarks are especially vulnerable to counterfeiters.Selecting the global brand nameTranslationTransliterationTransparencyTransculture
14 Packaging and Appearance Packaging serves three major functions:ProtectionImproper handling and pilferagePromotionLanguage and symbolsUser conveniencePackaging aesthetics- color and shape, overall size, and purchase quantityAdaptations in styling, color, size, and other appearance features play an importance role in how a consumer perceives a product.
15 Method of Operation and Usage The product that is operable in in the domestic market may not be operable in the foreign market.Electrical voltages and connectors vary around the world. English and metric standards are not comparable.Software may have to be translated into the local language.
16 Quality and ServiceQuality is essential to marketing products internationally, especially in markets where price is an important competitive factor.ISO compliance may be required by buyers.Servicing products in international markets requires producers to develop local repair staffs.
17 Country-of-Origin Effects The origin of a product may have a strong effect on consumer perceptions and biases about foreign products.“Mad Cow”SwissFrance
18 Company Considerations Organizational capabilities?Is it worth it?Can we afford not to do it?Can a specific return-on-investment (ROI) be attained?Quality, price, and user perceptions?Warranties?Managerial talent?
19 Product Counterfeiting Costs U.S. firms over $60 billion a yearIn 2001, losses to software piracy were more than 11 billion dollars.Counterfeiting is estimated at 2% to 5% of total world trade annually.The largest number of counterfeit goods come from:ChinaBrazilTaiwanKoreaIndia
20 Fighting Product Counterfeiting Secure valuable intellectual property rightspatent applicationsregistration of trademarksmask worksAct to enforcelegislative actionbilateral and multilateral negotiationsjoint private sector actionindividual company measures
21 Four Product Alternatives for International Markets Selling the product “as is”, in the international marketplace.Modifying products for different countries and/or regions.Designing new products for foreign markets.Incorporating all the differences into one product design and introducing a global product.
22 Four Product Categories: Local products: perceived as having potential only in a single national marketInternational products: Products having potential for a number of national marketsMultinational products: Products adapted to the perceived unique characteristics of national marketsGlobal products: Products designed to meet the needs of a global market segment
23 The Role of BrandsA brand is a distinguishing name and/or symbol (such as a logo, trademark or package design) intended to identify the goods or services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors. A brand thus signals to the customer the source of the product, and protects both the customer and the producer from competitors who would attempt to provide products that appear to be identical.
24 The International Brand: Four Approaches Translation.Transliteration testing existing brand name for connotative meaning, e.g., “flic” pen.Transparency, i.e., meaningless brand name to minimize complexities.Transculture. Foreign language name forms a brand, e.g., vodka or perfume.
25 Brand Name Selection Criteria Easy to learn and memorize.Suggest a product class.Support a symbol or logo.Suggest associations.Be credible.Be distinctive.Be available and legally protectable.
26 What Is Brand Equity?The set of brand assets and liabilities linked to the brand - its name and symbols - that add value to, or subtract value from, a product or service. These assets include brand loyalty, name awareness, perceived quality and associations.
27 Brand Equity Assets Brand Loyalty. Awareness of Brand Name and Symbols.Perceived Quality.Associations.Others, e.g., patents, trademarks, channel relationships.
29 Export Pricing Price Dynamics Pricing is the only revenue generating element of the marketing mix.Pricing is a means of attracting and communicating an offer to a potential buyer.Pricing is a competitive tool.Pricing can be used to position the product or service in the marketplace.
30 Price Dynamics Skimming Market Pricing Penetration Pricing Using high-priced unique products to achieve the highest possible contribution in a short initial time period, then gradually lowering the price as the market.Market PricingFollowing competitive pricing in the target market; adjusting production and marketing mix to competitive conditions.Penetration PricingOffering low pricing to generate volume sales which hopefully will compensate for low margins
31 The Setting of Export Prices ASSESSMENT OF PRICING ENVIRONMENTSINTERNALMarketing MixProduct (e.g., old/new; standardized/differentiatedDistribution system (e.g., length)Promotion needs (e.g., sales efforts)Company characteristicsExtent of internationalizationCountries exported toManagement attitudesImportance of exportsOverall price position of firmEXTERNALMarket-related factorsNature of demand/target audience characteristicsGovernment regulations (e.g., duties)Exchange rate stabilityIndustry-related factorsCompetition intensityNature of competitionPricing Policy SelectionPricing Strategy DeterminationSetting of Specific Price
32 The Setting of Export Prices Customer Purchase Factorsability to payprice-quality relationshipreaction to marketing mixmarket supportPricing Policies Factorsprofit maximizationmarket sharesurvivalreturn on investmentcompetitive policiescopy competitive pricingfollow competitive pricingprice to discourage competitive entry
33 Export Pricing Strategy Cost-oriented pricingStandard worldwide price- regardless of buyer’s location in the market(s)Dual pricing differentiates between domestic and export pricesCost-plus method allocates domestic and foreign costs to the product.Marginal cost method considers direct costs of producing and selling exports as floor (lowest) price.Market-differentiated pricingbased on the dynamics of the marketplacechanges in competition, exchange rates, etc.
34 Export-Related Costs Export-related costs Cost of modifying a product for a foreign marketOperational costs of exportingCost incurred in entering the foreign marketPrice escalation for exports results fromClear-cut and hidden costsMethods for combating price escalationReorganize the channel of distributionProduct adaptationChange tariff or tax classificationsOverseas assembly or production
35 Terms of SaleIncoterms are the internationally accepted standard definitions for terms of sale set by the International Chamber of Commerce (ICC) since 1936.Incotermsexworks (EXW)free carrier (FCA)free alongside ship (FAS)free on board (FOB)cost and freight (CFR)delivered duty paid (DDP)delivered duty unpaid (DDU)
36 Negotiating Terms of Payment ConsiderationsThe amount of payment and the need for protection.Terms offered by competitors.Practices in the industry.Capacity for financing international transactions.Relative strength of the parties involved.
37 The Risk Triangle BUYER’S PERSPECTIVE SELLER’S PERSPECTIVE Source: Adapted from Chase Manhattan Bank, Dynamics of Trade Finance (New York: Chase Manhattan Bank, 1984),5
38 Terms of Payment Types of Payment Cash in Advance Letter of Credit Not widely used except for first time transactionsLetter of CreditPromise to payIrrevocable, confirmed, revolvingDraftsSimilar to personal checkMust obtain shipping documents prior to deliveryDocumentary collectionBank acts as collection agentDraft may be sold at discounted rate for immediate cash
39 Managing Foreign Exchange Risk Forward rate exchange market“the exchange of currencies on a future date at an agreed upon exchange rate”Spot rate transaction“the exchange of currencies for immediate delivery”Possible price manipulation responses to currency movementsMake no change in the dollar price (pass-through).Decrease the export price (absorption).Pass-through only a portion of the increase.
40 Exporter Strategies Under Varying Currency Conditions WEAK POSITIONStress price benefitsExpand product lineShift sourcing to domestic marketCash-for-goods tradeFull costingSpeed repatriationMinimize expenditure in local currencySTRONG POSITIONNon-price competitionImprove productivity/ cost reductionSourcing overseasPrioritize exportsCountertrade with weak currency countriesMarginal-cost pricingSlow collectionsBuy needed services abroad
41 Price NegotiationsBe aware that price is only one part of a comprehensive package. Avoid early price concessions.Carefully consider concessions that reduce price or profitability.discounts, payment terms, product featuresKnow conditions in importer’s market.Focus negotiations first on substantive issues (quality and delivery), then on price.
42 Dumping Ranges of dumping Remedies for dumping Predatory dumping is intentional selling at a loss to increase market shareUnintentional dumpingoccurs when market factors cause the import’s selling price to fall below prices in the exporter’s home marketRemedies for dumpingAntidumping dutyare levied on imported goods sold at less than fair market valueCountervailing dutiesare imposed on imports which are subsidized in the exporter’s home country