INTERNATIONAL MARKETING

1. INTERNATIONAL MARKETING • Culture • Consumer buying power • Product strategies

2. An Effective Billboard Advertisement?

3. LEARNING OUTCOME OBJECTIVES Appreciate the for forces impacting the marketer operating in varying cultural, legal, economic, and political environments Appreciate the increasingly competitive international market place Understand strategic opportunities for operating internationally Appreciating the interdependent nature of decisions made in the international context

4. International Marketing: Considerations and Outcomes BELIEFS INVESTMENT PARTNERSHIPS CULTURE EXPECTATIONS ENTRY STRATEGY BEHAVIOR ATTRIBUTIONS INTERNATIONAL MARKETING MARKETING MIX ECONOMICS POLITICAL/ LEGAL/ HISTORICAL PRODUCT PROMOTION PRICE DISTRIBUTION

5. Definitions Culture: “That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man as a member of society.” Alternative definition: “Meanings that are shared by most people in a group [at least to some extent]”. (Adapted from Peter and Olson, 1994)

6. Culture impacts Behavior—customs of how and when products are used Expectations Interpretation of reality Relationships between people

7. Cultural Lessons Diet Coke is named Light Coke in Japan--dieting was not well regarded Red circle trademark was unpopular in Asia due to its resemblance of Japanese flag Packaging of products is more important in some countries than in U.S. Advertisement featuring man and dog failed in Africa--dogs were not seem as man’s best friend

8. More Cultural Lessons... Cologne ad featuring a man “attacked” by women failed in Africa Food demonstration did well in Chinese stores but not in Korean ones--older women were insulted by being “taught” by younger representatives Pauses in negotiations Level of formality

9. Japanese consumers expect to see what the food looks like before ordering

10. Very Brief Review of Economics • Exchange rates • Floating (supply and demand) • Fixed • Trade balances and their impact on exchange rates • Measuring country wealth • Gross domestic product • Nominal vs. “Purchasing power parity” • Nominal: Amount of dollars that can be bought with the amount of income. Used for imported products. • Purchasing power parity adjusted: The buying power—based on a weighted average of costs—in the respective country relative to U.S.

12. Demand for Currency Depends On • Trade deficit (demand for foreign currency to fund this) or trade surplus (demand for country’s currency) • Interest rates: Higher interest rates (real) attract foreign investors (especially for “stable” U.S. bonds and equities) • Inflation: Reduces the attractiveness of holding the currency

13. Nominal vs. Purchase Parity Adjusted GDPs—Examples (2009) The U.S. figures should theoretically be equal but small differences occur because of technical issues in weighing “basket of goods” for comparison. Source: World Bank International Monetary Fund

14. GNP Per Capita by Country Source: World Bank— http://datafinder.worldbank.org/gni-per-capita-ppp

16. Cautions on Interpreting Per Capita Figures • Averages are not very meaningful! • Regional variations • Socio-economic differences • Comparison to U.S. dollar and U.S. costs is arbitrary

17. Approaches to Product Introduction ●Standardization ● Adaptation ● Localization ● Customization Not suitable for the Middle East!

18. Avoiding high costs of customization, if applicable Technological intensity Reduced confusion International compatibility among product group components Faster spread of rapid life cycle products Convergence of global consumer tastes/needs Country of origin positioning Reasons for Standardization

19. Standardization—Advantages • Benefits • Economies of scale • More resources available for development effort • Better quality • Enhanced customer preference (?) • Realistic when all cultural needs cannot be met • Global customers • Global segments

20. Standardization—Disadvantages • Unnecessary features • Vulnerability to trade barriers • Strong local competitors

21. Product Adaptations • Mandatory • Legal requirements • Infrastructure • Physical requirements • “Discretionary” • Local tastes • Fit into cultural environment

22. Legal Infrastructure Consumer demographics Culture Religious impact Cultural context of use Local traditions/ customs—e.g., Food usage occasions Aesthetic preferences Local usage conditions Pricing pressures/ tradeoffs Motivations for Adaptation

23. Mandatory Adaptation Issues • Choices in approach to mandatory conditions--examples • Power drills with noise suppression filters • “Arbitrary” standards (e.g., TV, DVD players) • Conflicting rules between countries—may not be possible to make product legal in all

24. Physical Product vs. Communication Adaptations

25. Country of Origin Effects • Perception of product • quality (e.g., Japan, Germany) • elegance and style (e.g., France, Italy) • Historical associations • Positioning strategies • Emphasis on origin (e.g., French wine) • De-emphasis/obfuscation of country of origin (e.g., French beer, American products with French language labels)

26. Market Positioning Strategies Across Countries • Häagen-Dazs—U.S. vs. Japan • Corona Beer—Mexico vs. U.S. • Mercedes-Benz—Europe vs. U.S. • McDonald’s • U.S. • Europe • Developing countries—e.g., China

27. The International Life Cycle • Market for older technology tends to exist in less developed countries • Manufacturing of older generation technology--e.g., Pentium III computers • Resale of capital equipment no longer considered adequate in more developed countries—e.g., DC 8 aircraft, old three part canning machines • Some countries tend to be more receptive to innovation than others and will adopt new technology more quickly • “Leap frogging” • Going directly from old technology to the very newest, skipping intermediate step (e.g., wireless rather than wired technology) • Shortening of product life cycles

28. Promotion: Strategic and Tactical Objectives • Awareness • Trial • Attitude toward the product • Beliefs • Preference • Temporary sales increases Emerging Markets/ New Products Mature markets /established products

29. Flops in the Transplantation of Advertising • Man and his dog • “Follow the leader--he’s on a Honda!” • Detergent ad • “Get your teeth their whitest!”

30. U.S. Laws of Interest to firms with U.S. Involvement • Anti-trust: Standards of fair competition. Not all countries have or enforce such laws. • Foreign Corrupt Influences Act: Bribery illegal for U.S. firms. • Anti-boycott laws: Illegal to boycott Israel or even certify that one’s firm does not do business with Israel. Technically illegal to participate in other non-U.S. Government sanctioned boycotts but emphasis is on Israel. • Trading With the Enemy: Illegal to trade at all (with few exceptions) with enemy states. Limits on technology that can be exported. • Extra-territoriality: U.S. courts will often take jurisdictions of cases of violations of U.S. law occurring entirely abroad.