international marketing I(powerpoint).pptx

International marketing

1. Well come to the course international marketing OROMIA STATE UNIVERSITY Department of Business Management &Entrepreneurship Course outline

2. Course Overview Basic concepts of international marketing and its environment; Relationship between international marketing and international trade; theory of comparative advantage; world trade situation and international marketing, analysis of marketing across national trade blocks' 6/18/2018 2 Department of BME,set by Lemmi Tafa(MA)

3. Continued … applications of marketing principles to international marketing, analysis of marketing across national boundaries, different levels of international marketing involvement; marketing-mix element decision in international marketing process of practical international marketing; Opportunities and challenges of international marketing( Globalization) for Developing Countries like Ethiopia 6/18/2018 3 Department of BME,set by Lemmi Tafa(MA)

4. General information Course : agricultural entrepreneurship ( BME-342 ) , credit hrs =03 ,or contact hr Name of the instructor :- Lemmi Tafa (MA) Da y= Wednesday 11:50-2:50 Place =PSCO ,Room= Prerequisites =understanding of principle of marketing. Office hours for the student =Mon and Fri day Tel.No =0911757577.0919266979, email. address = [email protected] , lammumma @ yahoo.com office phone= 6/18/2018 4 Department of BME,set by Lemmi Tafa(MA)

5. Policy statement student should respect the rule, Law and procedure of the college. they are free from any academic offense i.e cheating, plagiarism , dalliance in attending the class and in submitting any project and assignment 6/18/2018 5 Department of BME,set by Lemmi Tafa(MA)

6. Learning outcome : at the end of this course student should be able to understand the concept and definition of the international market and have to relate the theoretical aspect with their environmental experiences. Specifically after completing this course the students will be able to: Understand what differentiate international marketing from domestic marketing Take an informed view of the international marketing environment 6/18/2018 6 Department of BME,set by Lemmi Tafa(MA)

7. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 7 Know and make use of the various techniques, models, strategies and factors affecting decision making in international marketing Express a reasoned view about the importance and benefits of coordinating international marketing activities and processes Define marketing and identify marketing management philosophies. Identify the marketing environment and describe their influence on marketing activities. Understand the nature of consumer and business markets. Identify market segmentation, targeting and positioning for competitive advantage.

8. Course content  Chapter 1- Introduction 1.1 International marketing 1.2. Why Internationally? Chapter 2. Economic Environment 2.1. Picture, composition and pattern of world trade 2.2 International trade theory and balance of Payment 2.3. Commercial policy 2.4. Institutions in the world economy and emerging markets 2.5. Regional economic integration 2.6. International financial system 6/18/2018 8 Department of BME,set by Lemmi Tafa(MA)

9. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 9 Chapter 3. Cultural, political and Legal Environment 3.1. Cultural environment 3.2. Political environment 3.3 Legal environment Chapter 4. International Product Policy 4.1. Product 4.2. Product strategies 4.3. New product development Chapter 5. Global Marketing strategy 5.1. Process of formulating global Strategy 5.2. Why should firm think globally? 5.3. Global marketing strategies 5.4. Alternative mark-entry strategy

10. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 10 Chapter6 Distribution in Foreign Markets 6.1. Method of foreign market entry 6.2. Managing foreign distribution 6.3. Logistics for international market Chapter 7 International Promotion 7.1. Advertising 7.1.1 Constraints on international advertising 7.2 Personal selling Marketing mix as a promotion

11. Instructional methods The instructional approach that will be used in this course are lecturing,:-delivered in the form of interactive way group assignment, project work, group work: all the students are strongly participated individually and in group 6/18/2018 11 Department of BME,set by Lemmi Tafa(MA)

12. Course materials: :International Marketing materials or document provided by the college Cateora , Philip. R and Graham, Jhon L, International marketing, 1oth ed. Terpastra , v. sand sarathy (2000) International marketing 8 th edition Any other related journal and artclle related to international marketing 6/18/2018 12 Department of BME,set by Lemmi Tafa(MA)

13. Assignment and evaluation Continuous assessment …………60%= quiz(10%) regular test after every two chapter (10%x3) assignment on project preparation and business plan and class participation (20%) Final Examination =40% total =100%( It may be amended and arranged as per the colleges grading system and schedules 6/18/2018 13 Department of BME,set by Lemmi Tafa(MA)

14. PPt 1-1 overview April 08,2017 29/7/2009 6/18/2018 14 Department of BME,set by Lemmi Tafa(MA)

15.   UNIT ONE INTRODUCTION TO INTERNATIONAL MARKETING 1.1 Marketing and Economic Development All commercials enterprises have products and service to sell and these are both the result of, and the reason for, marketing activities . Goods & Services, collectively call products, Each product can be then be targeted at a specific market segment and a marketing mix developed to support its desired positioning. 6/18/2018 15 Department of BME,set by Lemmi Tafa(MA)

16. Continued Marketing has arguably become the most important idea in business and the most dominant force in culture , Today mass media encapsulates our lives, satellite Television, broadband internet access, instant communication via web and mobile phone, all of which mean messages can reach you virtually any time and place.. Marketing defined as a combination of management tasks and decisions aimed at meeting opportunities and threats in a dynamic environment.. 6/18/2018 16 Department of BME,set by Lemmi Tafa (MA)

17. Cont… Traditional Marketing: Marketing is commonly misunderstood as simple as a colorful term for advertising and promotion . In reality however, it is far more than that. However, the term ‘marketing’ actually covers everything from company culture and positioning, through : market research, new business/product development, advertising and promotion, PR (public/press relations), 6/18/2018 17 Department of BME,set by Lemmi Tafa(MA)

18. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 18 It is systematic attempt to fulfill human desires by producing goods and services that people will buy. It is where the cutting edge of human nature meets the versatility of technology. Marketing-oriented companies help us discover desires we never knew we had,

19. Cont… Definition of Marketing : Marketing is defined as the management process responsible for identifying, anticipating and satisfying customer requirements profitably’. Thus marketing involves: focusing on the needs and wants of customers , identifying the best method of satisfying those needs and wants . ……( The Chartered Institute of Marketing ) Nowadays, marketing is at the heart of the financial success of any business , be it domestic or international business 6/18/2018 19 Department of BME,set by Lemmi Tafa (MA)

20. The reason why marketing ideas are important for the economy is that marketing is a source of: competitive ability, economic growth, and wealth creation. Successful businesses always put marketing consideration at the center of all their decisions and customer oriented fashion` ``` 6/18/2018 20 Department of BME,set by Lemmi Tafa(MA)

21. A fundamental question is: If governments can no longer fix world markets, nor guarantee national market shares, who decides what the standards of quality, service and value are? Who decides who wins and losses? The answer is obvious: the customer. 6/18/2018 21 Department of BME,set by Lemmi Tafa(MA)

22. Continued When we talk about new world competitive order it becomes obvious that customer choice, preference and demand are its exclusive driving forces Peter Drucker put forward similar sentiments forty years earlier in an essay titled "Markets and economic development”. 6/18/2018 22 Department of BME,set by Lemmi Tafa(MA)

23. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 23 Drucker says that the development of marketing, makes economic integration possible, as well as the fullest utilization of assets and For productive capacity and economy possesses . It mobilizes latent /dormant/economic energy. Marketing is essential in order to remedy the inequality among nations. As such it is interesting to note that marketing was viewed as the "under developed" part of the economy of under-developed nations.

24. therefore. Marketing ideas are important for the economy: it is a source of competitive ability , economic growth , and wealth creation Marketing Idea:- economic development is the result of purposeful, responsible, risk-taking actions of individuals as managers and entrepreneurs? 6/18/2018 24 Department of BME,set by Lemmi Tafa(MA)

25. Concepts of International Marketing International marketing is the performance of business activities designed to plan, price, promote, and direct the flow of a company's goods and services to consumers or users in more than one nation for a profit. 6/18/2018 25 Department of BME,set by Lemmi Tafa(MA)

26. 1.3. The Difference between Domestic and International Marketing Domestic Marketing – Domestic Marketing usually refers to any marketing activities performed within the territorial boundaries of one country. International Marketing – is marketing across national borders that refer to activities, interests or operations in more than one country 6/18/2018 26 Department of BME,set by Lemmi Tafa(MA)

27. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 27 The difference between domestic marketing and international marketing lies not w ith different concepts of marketing, but with the environment within which marketing plans must be implemented .

28. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 28 when a company moves from a domestic to an international market there are two main differences. First, there are different levels at which international marketing can be a pproached and, second , the uncontrollable elements of the marketing environment a re more complex and multidimensional given the multiplicity of markets that constitute the global marketplace. In comparison with domestic markets, there are many factors within the international environment which substantially increase the challenge of international marketing.

29. Domestic versus International Marketing . 6/18/2018 29 Department of BME,set by Lemmi Tafa(MA) Domestic Marketing International Marketing Relatively Homogenous culture and similar product needs and desires Heterogeneous and Culture often diverse and multicultural markets Relatively smooth sales transaction Processes The sales transactions need somewhat very complex processes The product Markets are less widespread and not more fragmented Markets widespread and sometimes fragmented Relatively easy to obtain and with least costs/ low expenses Data difficult to obtain and often expensive

30. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 30 Politics: dealing with a single country’s regime is more manageable than dealing with varying regime and stability–political risks can be easily forecasted before they are happening Politics: regimes vary in stability– political risk becomes an important variable The home country Government often provide supporting s ervices for domestic business instead of strongly influencing and strictly regulating domestic business ventures Governments: can be a strong influence in regulating importers and foreign business ventures

31. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 31 Economies: relatively similar levels of development among regions of the home country and similar and often stable currencies Economies: varying levels of development and varying and sometimes unstable currencies Finance: single finance system, and same financial policy as well very few regulatory bodies Finance: many differing finance systems and regulatory bodies Sta keholders: commercial, and home country Stakeholders: commercial, home country and host country Business: a single country’s business rules, and cultural homogeneity Business: diverse rules , cultural heterogeneity/ culturally influenced Control: Relatively easy to control and coordinate across local markets. Control: difficult to control and coordinate across markets. Markets are somewhat narrowed and less fragmented Markets are widespread and sometimes fragmented

32. 1.4. Stages in international marketing involvement 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 32 Research has revealed a number of factors favoring faster internationalization: (3) 1) Companies with either high-technology and/or marketing-based resources appear to be better equipped to internationalize 2) smaller home markets and larger production 3) firms with k ey managers well networked internationally are able to accelerate the internationalization process.

33. 1.4.1.International Marketing Orientation 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 33 Companies can be described by one of three orientations to international marketing management: (3) 1 . Domestic Market Expansion Concept: (Ethnocentric ) The domestic company that seeks sales extension of its domestic products into foreign markets It views its international operations as secondary The primary motive is to dispose of excess domestic production .

34. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 34 Domestic business is its priority foreign sales are seen as a profitable . the orientation remains basically domestic. The firm’s orientation is to market to foreign customers in the same manner It seeks markets where demand is similar to the home market its domestic product will be acceptable.

35. 2 . Multi-Domestic Market Concept: ( Polycentric) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 35 Markets are vastly different they may be, depending on the product) , market success requires independent program for each country. Firms with separate marketing strategies for each country .

36. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 36 Subsidiaries operate independently of one another in establishing marketing objectives and plans. Separate marketing mixes with little interaction among them. Products are adapted for each market with minimum coordination, Advertising campaigns are localized

37. 3. Global Marketing Concept 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 37 A company guided by this new orientation or philosophy is generally referred to as a global company, Its market coverage is the world . A company employing a Global Marketing Strategy strives for efficiencies of scale by :- developing a standardized product dependable quality, to be sold at a reasonable price to a global market.

38. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 38 Regiocentric & Geocentric . With this orientation a company attempts to standardize practical on a world-wide basis. Some decisions are viewed as applicable worldwide or local influence , The world as a whole is viewed as the market and the firm develops a global marketing strategy

39. 1.4.2. How a firm involve in outside its country markets? 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 39 Methods of Involvements in international Markets As transnational, multinational, international traders, exporters, etc. There are a variety of stages in the process of becoming involved in international marketing

40. Firms involve international marketing in 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 40 making one or more marketing mix decisions across national boundaries. establishing manufacturing/processing facilities around the world coordinating marketing strategies across the globe. by signing a distribution agreement with a foreign agent who then takes on the responsibility for pricing, promotion, distribution mkt dev’t Integrating network of manufacturing plants Eg Ford. managing on a global scale.

41. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 41 1.Domestic marketing : which involves the company manipulating a series of controllable variables such as price, advertising, distribution and the product/service attributes a largely uncontrollable external environment that is made up of different economic structures, competitors, cultural values and legal infrastructure within specific political or geographic country boundaries.

42. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 42 2.International marketing: which involves operating across a number of foreign country markets in which not only do the uncontrollable variables differ significantly between one market and another, but the controllable factors in the form of cost and price structures,

43. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 43 3. Global marketing management : it is a larger and more complex international operation. Here a company coordinates, integrates and controls a whole series of marketing programmes into a substantial global effort. The primary objective of the company is to achieve a degree of synergy ,by taking advantage of different exchange rates, tax rates, labor rates, skill levels and market opportunities , the organization as a whole will be greater than the sum of its parts.

44. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 44 International marketing manager has a dual responsibility ; foreign marketing (marketing within foreign countries) and global marketing ( co-coordinating marketing in multiple markets in the face of global competition ). Export marketing : in which case the firm markets its goods and/or services across national/political boundaries.

45. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 45   Global marketing: is in which the whole organization focuses on the selection and exploitation of global marketing opportunities and marshals (arrange) resources around the globe with the objective of achieving a global competitive advantage.

46. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 46 The world is seen as a market segmented by social, legal, economic, political and technological environmental factors groupings

47. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 47 Note: At the global marketing stage , companies treat the world, including their home market, as one market . Market segmentation decisions are no longer focused on national borders . Instead, market segments are defined by : income levels, usage patterns, or other factors that frequently span countries and regions

48. The stages of international marketing involvement : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 48 There are a variety of stages in the process of becoming involved in international marketing . Only in domestic marketing, Indirect Foreign Marketing  Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing

49. 1.5.The Difference between Domestic and International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 49 The rationales ( underlying principles/ basis/foundation) of Involving in International Markets What makes International marketing so important? Why a firm goes to the international Markets? Please try to identify a few major reasons for one firm to go to in other countries’ markets.

50. The following factors can be taken as the main reasons for a firm to go to the international markets 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 50 The emergence of new product market opportunities in other countries or outside of home market Relatively high abundance of resources (material and non-material resources) and cheap costs of resources in other countries The existence of relatively smooth and friendly business climate ( business policies , laws and regulations, etc) when comparing to a particular firm’s home country. The various investment incentives provided by different host countries’ government.

51. Forces of Internationalization and Globalization 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 51 The following factors can be taken as few of the majored forces of international and global marketing: The convergences of societies’ needs and desires living in different countries towards the same product The provision of standardized products are less costly than the provision of custom made products across different countries’ markets The production of standardized products with slight quality differences produced by different companies residing/ exixting / in different counties of the world. The advancement of transport and communication technologies for convergence/meeting/ of different countries on the glop which is merely into one global village -this is called globalization and hence contributed today’s market globalization

52. The Benefits of International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 52 The following are some of the major benefits of international trade: Increased sales. Because of the size of the global market, selling internationally offers considerably more sales opportunities than the domestic market. Increased profits . offer greater profit opportunities because the product competes very successfully in a niche area or is unique in some way. However, more often than not, the profits available in international markets are less than in domestic markets because of the competitive nature of the global market. Reduced risk. By selling in more than one market, organizations can reduce their overall risks because should something go wrong in one market (an economic slump, for example), Lower unit costs. Selling a greater number of items across a number of different markets means that the overall cost of producing a single item drops (in other words, the cost per unit falls). Economies of scale . Long-term international marketing may enable a firm to expand its production facilities in order to achieve an economic level of production.

53. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 53 Reducing seasonal fluctuations . I n the case of swimwear which sells better in summer months than in winter months. By selling these products in the northern hemisphere, which has opposite seasons to South Africa, Extending the product life cycle . When product come to the end of its life cycle, it may be possible in some cases, to extend the life cycle, by exporting the product to one or more countries where the product may gain a new lease of life. Improve efficiency and product quality. T he competitive nature of these markets forces the exporting company to improve its overall competitiveness; it becomes more efficient and adheres to higher quality standards, thus improving its competitive position not only in foreign markets, but in the domestic market as

54. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 54 Untapped markets. A company may have a unique product that is not yet available elsewhere in the world. In this instance, untapped markets are likely to drive the firm’s international marketing activities. By gain access to foreign funding ; at interest rates that are much lower than in South Africa. Status as an international marketer . For some companies, the status of being involved in international trade is very important to them-it is a matter of prestige.

55. The Challenges of International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 55 The primary obstacles to success in international marketing are a person's self-reference criterion (SRC) and an associated ethnocentrism. The SRC is an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions. Our reaction, is based on meanings, values, symbols, and behavior relevant to our own culture and usually different from those of the foreign culture.

56. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 56 Avoiding Errors International Business Decisions: The most important step in international business decisions is defining the business problem or goal in home-country cultural traits, habits, or norms is the first step provided in the analysis framework to avoid errors in business decisions owing to SRC. Not only are the environments different, but governments often taking deliberate steps to protect their domestic markets from competition from abroad .

57. The International Marketing Management Process 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 57 The international marketing process comprises of five steps which marketers have to take as part of their integrated marketing effort : 1. Situation Analysis: Situational analysis is a thorough analysis of the situation in which the firm finds itself it serves as the basis for identifying opportunities to satisfy unfulfilled customer needs. understand its own capabilities and the environment viewed in terms the analysis of: The external environment :-described in terms of macro environmental factors that broadly affect many firms, micro-environmental factors closely related to the specific situation of the firm.

58. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 58 It should include past, present, and future aspects. It should include a history outlining how the situation evolved If the situation analysis reveals gaps between what consumers want and what currently is offered to them, then there may be opportunities to introduce products to better satisfy those consumers. situation analysis should yield a summary of problems and opportunities .. There are several frameworks that can be used to add structure to the situation analysis:

59. cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 59 5CAnalysis - company, customers, competitors, collaborators, climate. Company represents the internal situation; the other four cover aspects of the external situation PESTEL analysis - for macro-environmental political, economic, societal, and technological, ecological and legal factors . A PESTEL analysis can be used as the "climate" portion of the 5C framework. SWOT analysis - strengths, weaknesses, opportunities, and threats - for the internal and external situation. A SWOT analysis can be used to condense the sit relevant problems and opportunities uation analysis into a listing of the most and to assess how well the firm is equipped to deal with them.

60. 2. Strategy Formulization for a Value Propositioning: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 60 Once the marketer has identified the potential opportunities in the first step now is the time to select the groups of potential international customers (target markets) to whom to sell the products or services. The marketing strategy then involves: Segmentation Targeting (target market selection) Positioning the product within the target market Value proposition to the target market

61. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 61 To explain it more, this step involves identifying the potential buyers , demand measurement & forecasting , market segmentation , market targeting & market positioning. Segmentation involved identifying groups of potential customers from the total potential market that are homogeneous on certain aspects of identity and behavior and are heterogeneous on the same aspects from others in the target population. This step selected target customers and on what aspects to differentiate from the competition.

62. 3.Making Tactical Decisions: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 62 This requires the firm to adopt a coherent and appropriate logic or strategy to direct and control the alignment, coordination and optimization of its business and marketing effort. Porter has concluded that successful firms have adopted one of the three strategies , i.e., 1.Cost 2 leadership, 3. differentiation or focus.

63. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 63 Other scholars have identified that successful firms adopted strategies that were aligned with their market position , i.e., 1. market leader, 2. challenger,3 follower & niche strategies . Other researchers have asserted that firms have achieved success in markets through adopting on of the three value discipline strategies , i.e., 1operational excellence, 2.customer intimacy or 3 product leadership.

64. 4. Implementing the Plan 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 64 The fourth step in the marketing process is developing the international marketing mix, product, place, price & promotion. Marketing mix identifies four key areas for developing a well-coordinated marketing strategy. To create a strong marketing impact a firm needs to develop appropriate programs in these four key areas also need to ensure that all these four aspects of a firms marketing program are well coordinated and in conformity with each other to give a clear image to the target market of the firm's brands and its products.

65. Monitoring Results: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 65 Developing a good marketing program is not good enough for success. A firm also needs to manage the international marketing effort properly . Quite often firms fail not because they did not have a viable marketing program, They failed in properly implementing their well-designed plans. Firms also need proper analysis, planning, implementation and control of their marketing program.

66. UNIT TWO ECONOMIC AND FINANCIAL ENVIRONMENT 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 66 2.1.Picture, Composition and Pattern of World Trade

67. Understanding … 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 67 Most of the firms are eyeing at the global marketplace to improve their competitiveness. They must consider both – external environmental forces and internal organizational factors , before they arrive at an international marketing strategy . 2.1.1. Understanding of Global Trends World trading patterns: According to Theodore Levitt (1983), new commercial reality – the emergence of global markets have come up because of:-- “advances in technology”, communication, transport , etc .

68. Understanding… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 68 Population growth and increased affluence /wealth, riches, prosperity/ together have helped create a ‘ global youth culture’ – teenagers now account for 30 per cent of the population globally. In many countries, more than half the population is pre-adult , creating one of the world’s biggest single markets, the youth market. When ‘virtual reality’ is commonplace, the one-world youth culture market will exceed all others as a premier global market segment.

69. cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 69 The global marketplace is no longer the summation of a large number of independent country markets but much more multilateral ( many sided, joint, mutual) and interdependent , economically , culturally and technically.. The combination of all these forces has meant that all companies need to develop a marketing orientation which is international in nature and that companies need managers who have the skills to analyze , plan and implement strategies across the globe . It is for these reasons that international marketing has become such a critical area of study for managers and an important component of the marketing syllabus of business faculties in universities

70. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 70 The international environment is commonly divided into at least Four different sub-categories the socio-cultural environment, the legal environment, the economic environment, and the technological environme nt”. ( Political environment )

71. . 1.2.Developing a Global Awareness … 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 71 The Two Main Dimensions for Global Awareness or the mechanisms for developing a global awareness. ( 1)Tolerant of Cultural Differences , and ( 2)Knowledgeable of : (a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends .

72. Understanding the Stages of International Marketing Involvement- 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 72 five different phases in going international : The first phase includes those domestic firms which have no foreign business activity except those sales made to foreign customers who come directly to the firm. The second phase includes domestic firms which have temporary surpluses which are sold abroad . or no intention for continuing market representation . The third phase includes the domestic firms that have permanent productive capacity which is utilized to produce goods which are sold on a continuing basis in foreign markets. The fourth phase includes the international company that produces a product for the world market.

73. : Conditions that have led to the development of global markets: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 73 According to Professor Levitt new communications technology , travel and other factors segments that have had similar experiences and have common needs. These common needs are described as a demand for high quality, reasonably priced , standardized products. There is a strong feeling that within each country’s market- There is a strong feeling that being driven toward a converging commonality of taste and needs leading toward global markets .  

74. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 74 Difference between a global company and a multinational company : “ Global company assumes there are segments across countries which have the same needs and wants and designs a standardized, high quality, reasonably priced product for those segments and markets it as if there are no differences among the country markets”

75. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 75 “ Multinational company operates:- in a number of countries and adjusts its products and marketing practices for each market. The multinational company has a specific marketing plan and adapts products for each country market. The philosophy for the multinational company is that there are cultural differences among countries that require specific adaptations for those markets”

76. 2.1.3.The Trend in Economic and Financial Environments 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 76 international marketer has an understanding of the trend in economic and financial understanding important world level in terms of : world trading infrastructure , world institutions and trade agreements developed regional level regional trade integration and at a country/market level.

77. 2.1.3.1.The Trend in Economic Development 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 77 A country’s economy and the factors that affect the economy may have a dramatic impact on the successful export of goods to a particular country. Factors: The general economic outlook , :-is the economy expanding or contracting; The size of the economy , measured by the country’s gross domestic product (GDP), as well as the size of the population; Disposable income (how of the income that citizens receive is available for spending after income tax has been deducted);

78. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 78 The GDP per capita income (in other words, the income of the country shared among its citizens; this provides a good indication of how well-off the average citizen is); Demographic variables , including gender, race, religion and education comparisons;

79. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 79 Employment levels- ( do people have jobs in order to afford to buy your products); The distribution of income (is it evenly distributed or are there distinct groups of very wealthy and very poor citizens ); Competitive and complementary products , highlights the potential market that already exists in a country (this would include the size and distribution of competing firms);

80. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 80 The political and economic environments are greatly intertwined and, some- times, difficult to categories. It is important, that a firm operating in international markets assesses the countries in which it operates . Firms need to be aware of the economic policies of countries and the direction in which a particular market is developing economically To make an assessment as to whether they can profitably satisfy market demand and compete with firms already in the market

81. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 81 Challenges and problems in International Marketing: how they can develop an integrated strategy across a number of international markets when there are divergent levels of economic development. Such d isparities often make it difficult to have a cohesive / unified, solid/ strategy, especially in pricing. The international business issues are not so narrowly focused ,

82. the host country’s 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 82 economic situations and how they affect business operations , about products and services how they vary over time, how they can be produced efficiently, about monetary policies and governing bodies of financial intuitions and what regulates financial resource availabilities , how it produces profit, how their policy affects business operations, customers' income and needs etc

83. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 83 Economic Classification and analysis of Countries of the World: Another economic challenge for a firm in international markets is the economic development disparities among different countries of the world .

84. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 84 The usefulness of economic classification of countries for International Marketing. 1.The Developed Economies (DEs): the leading economies that include the developed economies of :- the North American Free Trade Area (NAFTA), European Union (EU) and Japan account for 80 per cent of world trade. In the European Union nearly 70 per cent of the international goods traded are traded within the European Union ; in NAFTA, 50 per cent of goods exported are to other members of NAFTA.

85. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 85 2.The Emerging Economies(EEs): in countries such as Brazil, Russia, India and China, (the BRIC economies) there is a huge and growing demand for everything from automobiles to cellular phones and all are viewed as key growth markets where there is an evolving pattern of government-directed economic reforms, lowering of restrictions on foreign investment and increasing privatization of state-owned monopolies.

86. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 86 All these emerging economies herald significant opportunities for the international marketing firm. Such markets often have what is termed as a ‘dual economy ( imbalance b/n economic sectors)= economies in different sectors are growing at different rates) . Income distribution tends to be much more skewed ( uneven , unsymmetrical)) between the ‘haves’ and the ‘have not’s than in developed countries . From negligible numbers a few years ago, China now has a middle class of 100 million which is forecast to grow to 500 million in the next century. Brazil and Indonesia have middle classes of 25 million each

87. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 87 3. Less Developed Countries (LDCs): this group includes underdeveloped countries and fewer developing countries. The main features are a low GDP per capita , a limited amount of manufacturing activity and a very poor and fragmented infrastructure . Typical infrastructure weaknesses are in transport, communications, education and healthcare . In addition, the public sector is often slow-moving and bureaucratic.

88. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 88 It is common to find that less developed countries (LDCs) are heavily reliant /dependent/ on one product and often on one trading partner . In many LDCs this product is the main export earner . In Angola, for instance , the sole export is oil and in the Sudan oil accounts for 99 per cent of their exports. In addition, three-quarters of LDCs depend on their main trading partner for more than one-quarter of their export revenue. The risks posed to the LDC by changing patterns of supply and demand are great.

89. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 89 The strategic market implications of the economic classifications of countries of the world. What do you think about the strategic marketing implications of classifying countries of the world into the Developed Economies (DEs), Emerging Economies (EEs), and Less Developed Countries (LDCs)?

90. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 90 2.1.3.2.The Trend in International financial System Whilst we have examined economic factors within markets, we also need to bear in mind that in international marketing transactions invariably (always, habitually) take place between countries, so exchange rates and currency movements are an important aspect of the international economic environment

91. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 91 World currency movements , stimulated by worldwide trading and foreign exchange dealing, are an additional complication in the international environment . In Europe, the formation of the European Monetary Union (EMU) and the establishment of the Single European Payments Area (SEPA) have led to greater stability for firms operating in the market . The formation of the European Monetary Union and the introduction of the single currency across Europe have had important implications for company strategies

92. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 92 A. Exchange rate systems Exchange rate is the price of one country’s currency in terms of another country’s currency . Three types of exchange rate systems are give in the following; Fixed exchange rate system ( the exchange rate is fixed) Flexible (floating) exchange rate system (the exchange rate is determined by market forces and changes freely) Managed exchange rate system ( the exchange rates are allowed to move only within limits if the exchange rate is moving out of the desired limit then central banks buy or sell the currencies to control the exchange rate)

93. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 93 B. Price Logic Dominates-Reverse PPP Prices need to be established in the context of local consumers’ purchasing power, rather than in relation to international standards. Purchasing Power Parity (PPP) exchange rates estimate the value of a currency in terms of the basket of goods. It buys ( compared with the cost of a similar basket in a reference country and currency) rather than in terms of the existing market exchange rates. .

94. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 94 By this measure, most emerging market currencies are severely undervalued relative to hard currencies, This meaning that they actually buy more than one would expect, given the market exchange rate. International firms are attracted to many emerging markets precisely because of the size of the market in PPP terms.

95. Pros and Cons of Fixed & Flexible Exchange-Rate Systems Fixed and flexible exchange rate systems have their pros and cons that are listed below; 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 95 Fixed exchange-rate system Flexible exchange-rate system Pros Cons Pros Cons Reduces riskiness of international trade and it is important anti-inflationary tool Wide swings ( move forth and back) in the values of key currencies can disrupt/Disturb/ sound international investment decision making Represents true state of economy With BOP equilibrium, domestic policy makers can concentrate on domestic economy

96. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 96 Factors influencing exchange-rates: businesses in international markets are strongly affected by exchange rates of host and home countries ’ currencies as well as with other exchange rates . The major factors that affect exchange rates are discussed in the following: Capital controls on any foreign currency would often work to increase its exchange rate as its trading gets restricted. Higher exchange-rate spreads ( difference between buying and selling rate of a currency) allows more flexibility to buyers and sellers to change exchange rates. Strong balance-of-payments statistics of any country affect that country’s currency to strengthen. Factors influencing exchange-rates:

97. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 97 4 . Higher foreign-exchange reserves of any country influence that currency of that country to appreciate in value 5. Direction and strength of economic growth any country also affects its currency’s exchange rates 6 . Government spending increases money in circulation and also affects growth ot certain sectors of a country’s economy and may also affect exchange rates. 7. Relative inflation rates (purchasing power parity - higher relative inflation leads to lower purchasing power of currency & hence lower exchange value ) also affect exchange rates with pressure on the currency of the country with higher inflation to depreciate overtime. 8. Large money-supply growth increases inflation and accordingly affects the value of a country’s currency.

98. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 98 9. Interest-rate differentials (investors will arbitrage to keep exchange rates in equilibrium) also work like the relative inflation rates in affecting the currency of a country. 10. Trends in exchange-rate movements also impact the direction of exchange rate movements, at-least in near-term future. 11. In time of economic turmoil in the regains of the world investors move their capital in the currencies that are strong (safe haven) and with increasing demand their exchange rates may increase. 12. Technical factors (i.e. seasonal, release of statistical data) also affect exchange rates in near-term.

99. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 99 Business implications of exchange rates: Changes in exchange rates of international currencies impact business decisions in many ways . Business Implications of Exchange Rates: A. Marketing Decisions Changes in exchange rates affect demand for products (home & abroad) Marketer may need to change prices of products and services B. Production Decisions Changes in exchange rates may affect production costs in various countries C. Financial Decisions Changes in exchange rates affect sourcing of funds by firms Also affect cross-border remittances of funds reporting of financial results into home country accounts

100. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 100 2.2.International trade theory and balance of Payment the world economy and its interrelationship, comparative advantage and essence and advantage of economies of scale. 2.2.1.The Reasons Countries Trading Each Other To expand sales of the firm To acquire resources / technology / skills from foreign countries To diversify their sources of sales and supplies To capitalize on incentives from governments, local and foreign To follow existing customers who have moved overseas

101. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 101 Reasons for recent growth of business in international markets: International business has increase on a rapid pace, especially after the 2nd world war of 1940’s. Expansion of technology that results in a quicker and cheaper transportation, and communications enable controls from afar Liberalization of cross-border movements of goods, services and factors of production, such as labor, capital and technology etc. Development of supporting institutional arrangements for international exchange of goods and funds

102. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 102 4. Increase in global competition forcing firms to expand in international markets 5.Support from national governments for internationalization of local firms and for attracting foreign direct investments . 6. Growth of resources available to MNC’s and with large pool of funds ands and other resources firms could easily expand businesses in world markets.

103. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 103 Reasons for Internationalization: Growth of the company Access to new markets Access to resources Survival Against competitors with lower costs (due to increased access to resources) Leveraging Key Success Factors Abroad Follow Customers Abroad Pursuing Diversification Taking Advantage of Different Growth Rates of Economies Exploiting Product Life Cycle Differences Internationalizing for Defensive Reasons

104. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 104 Means(ways) of Engaging in International Markets : Merchandise Exports and Imports : Merchandise exports and import are tangible products (goods) manufactured in one country and sent out /brought in of that country to another one. Service Exports and Imports : Service exports and imports are international earnings that do not come from a tangible product which physically crosses a border. Tourism and Transportation: When an American flies to Germany on Lufthansa (a German airline) and spends a few days in a German hotel, the payments made to Lufthansa and the hotel are service exports for Germany and service imports for the United States

105. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 105 4). Performance of Services: Fees in banking, insurance, rentals etc., turnkey operations, management contracts etc. When an American engineering firm receives a payment for designing a plant in France, it is a service export for the United States and a service import for France. 5.) Use of Assets : International licensing agreements and franchising allow foreign entities to use another firm’s trademarks, patents, or technology. Payments for the right to use these assets are a service export for the country receiving those payments and a service import for the country making the payments. 6.) Licensing : Use of assets such as trademarks, patents, copyrights, or expertise under contracts

106. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 106 7. Franchising: Franchiser sells/leases the use of assets and also assists the franchisee on a continuing basis in operations 8. Investments: Foreign investment means ownership of foreign property is exchanged for a financial return (example, interest and dividends). It can be direct investment or portfolio investment 9. Direct Investment: Foreign direct investment (FDI) occurs when an investor gains a controlling interest in a foreign company. That controlling interest can be 100% or much less. Direct investment - with controlling interest (at least 10% of voting or ownership control) such as wholly owned, joint venture, mixed venture (when a government joins as a partner), etc. 10. : Portfolio investment is a non-controlling investment . It is usually a purchase of stock in a foreign company or loan to (bond purchase) a foreign firm. This non-controlling interest portfolio investment can be made as equity investment, stock market, investment – funds, bonds & loans, money market investment, etc .

107. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 107 B. International Companies and Terms to Describe Them: The term “collaborative arrangements ” between international companies comprises joint ventures, licensing, and manufacturing contracts. “Strategic alliances” importance to the competitive viability of one or more of the collaborating firms . Multinational enterprise (MNE), multinational company (MNC), transnational company (TNC) organizations operating in multiple countries A “global company” tends to integrate its international operations in order to efficiently produce a globally standardized product. A “multi-domestic company” tends to be locally responsive and tailors its products to each national market where it operates

108. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 108 2.2.2.Theoretical Background of International Trade & Investment Trade theories are essentially explanations of business between domestic firms or regions, as well as international firms. They explain "multi domestic" investment and intra-national trade. Empirical studies have distinguished international from domestic business strategies and operations. The lack of a proper theoretical focus has diverted the discipline from an emphasis on policy and on conflicts and cooperation among corporations and Governments

109. 2.2.2.Theoretical Background of International Trade & Investment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 109 A framework for constructing such a theory can be built on existing bargaining theory.  1) Classical Country Based Theories 2). Mercantilism 3) Theory of Absolute Advantage 4) Hecksher -Ohlin Theory 5) Comparative Advantage and Gains from 6) Absolute advantage 7) Country Similarity Theory : 8) Modern Firm Based Theories 9)international product life cycle

110. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 110 A ) Classical /traditional/ Country Based Theories Exports spark /flash, a factor or device that act as stimulant/ additional economic activity in domestic economy as companies of country can expand their sales and profits by selling to foreign markets . Imports can pressure domestic economy as foreign products flood domestic markets and result in closing down of non-competitive local businesses. Some countries in the world are successful in exporting manufactured and non-manufactured goods as well as services to other countries and have become prosperous. While there are other countries that have ton been so successful and hence have remained poor

111. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 111 = B. Mercantilism This is an old 16th century economic philosophy that attempted to explain how countries may become prosperous and strong. Salient /most important, main/ points of this philosophy are in the following; Country’s wealth is measured by its holdings of gold & silver (reserves of modern era) Country’s goal should be to enlarge those holdings To do this a country should maximize difference between its exports & imports

112. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 112 A country should then promote exports & discourage imports - if exports are more than imports foreigners have to pay the difference in gold & silver Today’s “ unfavorable balance of trade ” when exports of any country are less than its imports, is the extension of the same idea With larger holdings of gold and silver kings could have more wealth – and hence could afford larger armies to expand kingdoms This approach would make exporters happy and domestic manufacturers of export products would also be happy as their businesses grow

113. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 113 Arguments against ‘Mercantilism’ Approach are: country more members of society are at loss as export subsidy is paid by taxpayers and import restriction leads to higher domestic prices In the age of imperialism the burden of the subsidy was shifted to colonies Mercantilism actually weakens a country as the subsidized and protected export sector fails to become efficient and the domestic economy suffers to provide support to the exports. Country’s true wealth is in fact measured by the wealth of all its citizens not just that of its king or only the exporters

114. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 114 Country’s real wealth is dependent on production of goods & services rather than accumulation of gold reserves More wealth of more citizens will provide more tax base & hence a wealthy king Mercantilism causes inefficiencies , some special interest groups may benefit , reduces wealth of country as a whole Free trade among countries enlarges a country’s wealth (specialize in production of some goods & services while import others)

115. Some Implications of Traditional Trade Theory 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 115 Trade should be greatest between countries with the greatest difference between them. Gains from trade should be greatest between countries with the greatest differences. Trade should cause countries to specialize more in production and to export goods distinctly different from what they import. Countries should export goods that make relatively intensive use of their relatively abundant factors.

116. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 116 5 . Factor prices should be more similar between countries with more liberal trade policies between them. 6. Free trade should equalize factor prices being countries with similar enough relative factor endowments but not between countries with very different factor endowments. 7. Domestic interest groups should be identified by factors rather than industries. 8. International investment should be stimulated by differences in factor endowments. 9. International trade and international investment should be negatively correlated.

117. C: Theory of Absolute Advantage: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 117 This theory was forwarded in 1776 by Adam Smith . The Salient features of this theory are in the following ; It advocates free trade among world countries to maximize citizens ’ wealth Free trade enables a country to expand the amount of goods and services available to it by specializing in production of some goods and services and trading of others A country can have certain advantages over other countries

118. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 118 Natural advantage : climatic conditions, natural resources, abundant cheap labor-force etc Acquired advantage : development of product or process, skills development etc A country should export those goods & services for which it is more productive than others Import those goods & services for which other countries are more productive What if a country has absolute advantage in all products? Large countries like USA and China

119. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 119 Comparative Advantage and Gains from Trade Comparative advantage is one of the most fundamental ideas in trade theory. Forwarded in early 19th century, the theory of Comparative Advantage resolves the above issue . A country should produce and export such products where it has comparatively more advantage and hence can earn better margins .

120. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 120 A country has comparative advantage in a good if it has a lower opportunity cost of producing the good than another country. Countries are expected to export goods for which their autarky (economic self-sufficient) relative prices are lower than other countries. Countries gain from trade when they have different autarky relative prices of goods. The theory of comparative advantage is an economic theory about the potential gains from trade for individuals, firms, or nations that arise from differences in their factor endowments or technological p rogress.

121. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 121 D . Hecksher -Ohlin Theory One of the reasons why a country might have comparative advantage in a good is that countries differ in their factor endowments. There are two factors capital and labor . The home country is the capital abundant one , the one with more capital per unit of labor. One of the goods is more capital intensive than the other: it uses more capital per unit of labor than the other good. Countries have access to same technologies - factor endowments only deference between countries.

122. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 122 Under free trade, the capital abundant country (home) is expected to produce relatively more of the capital intensive good than the other country. Capital abundant country (home) therefore is expected to export the capital intensive good if no strong bias in consumption. Owners of capital in the capital abundant country (home) benefit due to seeing their rents ris e relative to prices of goods, As long as capital endowments in the two countries are not too different and which good is capital intensive is the same in both countries, the wage and rent will be the same across countries under free trade with no transport costs.

123. Cont. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 123 Salient Features of this Theory are: A country should produce & export those goods & services for which it is relatively more productive than other countries Implement concept of opportunity cost (what a country gives up to get / produce a certain good) in determining which goods a country should produce Factor – Proportions concept (identifies which products may offer comparative advantage to a country ) Factor (resources) vary among countries i.e. Oil cheaper in Saudi Arabia, china has cheaper labor ,Singapore has capital and funds

124. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 124 E. Country Similarity Theory: Most trade today occurs among apparently similar countries Same per-capita income Similar infrastructure / distribution systems Same language / culture / religion / tastes etc. Similarity among countries on the above aspects allows their products and services to be sold easily in each other’s markets

125. Cont .. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 125  F. Modern Firm Based Theories Explore the firm’s role in promoting exports and imports. These theories incorporate additional factors i.e., quality, technology, brand names, customer loyalty, product life-cycles etc. into explaining success

126. Cont. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 126 G. International Product Life - Cycle Theory: This theory attempts to explain the impact of a product’s life-cycle stage on flow of its trade (where a product would be manufactured and where it would be in demand ). According to this theory shifts in manufacturing and trade flow of a product goes through four phases (New Product Stage, Growth Stage, Mature stage , and Decline stage )

127. Pictorial Presentation of the Product Life Cycle 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 127

128. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 128 1. New product stage A product will be initially produced & sold mostly in the country in which it is . For most advanced and technology products these will initially be conceptualized in developed countries and sold in these markets 2. Growth stage At the next stage, the market for the successful product would start to rapidly grow. In this stage the product would be produced in the innovating and other industrial countries – and sold in many industrial countries

129. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 129 Mature stage product would become competitive and buyer would become experienced . competitive pressured would require the manufacturers to seek lower production costs. At this stage production of the products shifts from industrialized countries to countries where costs are lower – the innovating country may stop producing & start importing

130. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 130 Decline stage At this stage demand for the product declines, especially in advanced countries, as other more effective technologies and products are introduced . At this stage production and market of the product is mainly in less developed countries

131. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 131 H . Global Strategic Rivalry Theory This theory was forwarded in 1980 by Paul Krugman . He studied firms that were successful in competing in international markets and concluded that; I. Firms struggle to dominate world markets by Owning intellectual property rights Investing in research & development Achieving economies of scale & scope Exploiting the experience curve Such firms could become more efficient with time were able to succeed in international competition.

132. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 132

133. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 133

134. .International Trade and Balance of Payment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 134 Trade is a powerful driver of productivity growth through a dynamic process of market competition, as it enables exporters to grow and gain market share, while causing weaker firms to shrink Foreign Trade connects national economies together. The reason for foreign trade is the domestic production of certain goods is not possible. The economic relationships with other countries are very important for all of us. The export of the country’s goods and services is the precondition for specialization that in turn increase the total output the world production

135. Defining Foreign Trade 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 135 Foreign Trade : by foreign trade we mean a national economy’s cross-border traffic in goods and services . Import describes the importation of goods and services from other counties. Export is the exportation of goods and services to other countries In this connection foreign trade encompasses both the purchase foreign goods and services (import) as well as the sale of domestic goods and services abroad (export).

136. The Importance of Exporting: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 136 Exports of quality products and services increase country’s economic growth create better jobs It diversifies a country’s economy has significant positive effects on the productivity, innovation, and R&D of the exporting firms. Exporting stimulates productivity growth through scale economies, through learning, and through re-allocation of resources across products Exporting stimulates innovation and R&D through exposure to new ideas and competitors,

137. The Importance of Importing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 137 Consumers gain from lower costs , create essential competition for local companies Keep levels of prices and hence inflation low as with open imports prices of products The balance of payments is a record of all of the economic transactions between residents of a country and the rest of the world. The balance of payments is divided into a so-called “current “and “capital” account.

138. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 138 The current account is a record of all of the recurring trade in merchandise and service, between countries. The capital account is a record of all long-term direct investment, portfolio investment, and other short- and long-term capital flows. In general, a country accumulates reserves when the net of its current and capital account transactions shows a surplus; Balance of payment:- the system of account that record a nation’s international financial transaction is known as Balance of Payment .

139. Commercial policy and Government involvement 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 139 Nearly all governments today play active roles in their countries’ economies.. government’s attitudes and policies towards foreign business are its ideas about how best to promote national interest in light of the country’s economic and political resources and objectives. Foreign products and investment seen to be vital to the growth and development of the economy. treatment from the government in the form of the reduced tax, exemption from quotas , etc.

140. Commercial Policy 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 140 Commercial policy: is the term used to refer to government regulations bearing on foreign trade. The principal tools of commercial policy are tariffs, quotas, exchange control, and administrative regulation (the “invisible tariff “

141. Barriers to world trade 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 141 The different actions that governments take to restrict trade with other countries are referred to as trade barriers . Imposition of import tariffs , import licenses, quotas, subsidies, voluntary export restraints, local content requirements, standards, embargos, labeling requirements and more. Trade barriers generally have the effect of increasing the cost and hence the price of the imported goods,

142. 1. Tariff:- 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 142 Tariff:- is a schedule of customer duties levied on traded goods or commodities as they pass over a national boundary in order to enter a particular country The tariff regime applicable in a country (developed countries generally have a more open, less protectionist economy, while emerging markets generally protect their local economy more through the use of tariffs .

143. The role of home country government in Foreign Investment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 143 Strengthening the social networks which underpin international trade and investment flows, Strengthening the internationalization capabilities of innovative and high-growth businesses; Providing access to information and advice which the private sector alone would not or could not provide, both to inward investors Facilitating beneficial co-operation among a country’s international businesses, enabling them to work together to overcome barriers and develop potential overseas business opportunities, Overcoming legal or regulatory barriers to market access which affect particular firms or sectors

144. Institutions in the world economy and emerging markets 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 144 The International competitive landscape International and Regional Institutions and Their Impacts on Trades Rethinking Marketing Programs for Emerging Markets Africa as an Emerging Market

145. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 145 pattern of international competition shifts towards globalization, regional economic integration In a global business industry, functions of finance, marketing, business and Government relationship change according to global configuration and co-ordination .

146. 2.4.1. The International competitive landscape 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 146 A major difference for managers operating on international markets is the impact all these currents and cross-currents have on the competitive landscape. The task of achieving a competitive environment where firms are subject to local, regional and global competition can be immensely challenging..

147. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 147 Across international markets, advanced countries are seeing significant competition from both emerging markets and less developed countries who are exploiting modern technology and their own low labor costs to compete in markets no longer so protected by tariff walls.. Competitiveness depends upon internal as well as external factors.

148. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 148 Nine cross cultural management in competencies are identified as core in competencies which led to failure across a spread of country markets and they are defined as ‘ the bundle of activities. The first three are interrelated and relate to the failure to be market driven Inability to find the right market niches. Unwillingness to adapt and update products to local needs. Not having unique products that are viewed as sufficiently higher added value by customers in local markets .

149. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 149 A vacillating commitment . It takes time to learn how to function in countries such as Japan. Assigning the wrong people . Picking the wrong people or the wrong top team in an affiliate. Picking the wrong partners . There is a list of difficulties in building alliances; Inability to manage local stakeholders . Developing mutual distrust and lack of respect between HQ and the affiliates at different levels of management. Inability to leverage ideas developed in one country to other countries worldwide.

150. 2.4.2. International and Regional Institutions and Their Impacts on Trades 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 150 The Development of the World Trading System Up until the Great Depression of the 1930s, most countries had some degree of protectionism. Eg UK in 1930 the US enacted the Smoot-Hawley tariff, which created significant import tariffs on foreign goods.. After WWII, the US and other nations realized the value of freer trade, and established the General Agreement on Tariffs and Trade (GATT). [Referred to sometimes as the General Agreement to Talk and Talk. The approach of GATT was to gradually eliminate barriers to trade. Over 100 countries became members of GATT, and worked together to further liberalize trade.

151. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 151 5 . During the 1980s and early 1990s the world trading system as “managed” by GATT underwent strains. First, Japan’s economic strength and huge trade surplus stressed what had been more equal trading patterns, eg . Japan’s Second, the persistent trade deficits by the US , the world’s largest economy, caused significant economic problems . Thirdly, many countries found that although limited by GATT from utilizing tariffs 6. Against the background of rising protectionist pressures, in 1986 GATT members embarked on their eighth round of negotiations to reduce tariffs (called the Uruguay Round).

152. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 152 7. The agreement, however, left several important matters unaddressed: financial services, broadcast entertainment, environmental matters, worker’s rights, and foreign direct investment.. 8. When the WTO was established, its creators hoped the WTO’s enforcement mechanisms would make it a more effective policeman of the global trade rules than the GATT had been. 9. Under the WTO, 68 countries that account for more than 90% of world telecommunications revenues pledged to open their markets to foreign competition and to abide by common rules funfair competition in telecommunications. 168 10. Substantial work still remains to be done on the international trade front.

153. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 153 In global business today, four stand out as the most dynamic, the ones that will influence the shape of international business beyond today's "rough road s" and far into the future: (1) the rapid growth of the World Trade Organization(WTO ) and regional free trade areas such as the North American Free Trade Area (NAFTA),and the European Union(EU); ASEAN Free Trade Area (AFTA), and the Asian–Pacific Economic Cooperation (APEC); (2) the trend toward the acceptance of the free market system among developing countrie s in Latin America, Asia, and eastern Europe; (3 ) the burgeoning impact of the Internet, mobile phones , and other global media on the dissolution of national borders; and (4) the mandate to manage the resources and global environment properly for the generations to come.

154. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 154 Implications for Business(4)   Clearly, trade barriers negatively impact the ability of firms to locate activities in the economically optimal location or source materials from the best producers. Even if specific quotas, tariffs, local content , etc. regulations do not specifically require that certain actions be taken,. Certain trade barriers may even make some operations no longer viable, and force a firm to give up particular markets or production sites. In general international firms have an incentive to lobby for free trade,

155. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 155 Emerging markets Explain what developing or emerging markets are? Emerging markets or emerging economies are nations with social or business activity in the process of rapid growth and industrialization. The seven largest emerging and developing economies by either nominal GDP or GDP (PPP) are China, Brazil, Russia, India, Mexico, Indonesia, and Turkey .

156. 2.4.3. Rethinking Marketing Programs for Emerging Markets 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 156 . Marketers identify three key factors that characterize emerging markets: Low incomes, Variability in consumers and infrastructure, and The relative cheapness of labor, which is often substituted for capital. Multinationals bring to emerging markets not just their products, technology, and skills, but also implicitly, their understanding of market structures from developed-country contexts.

157. 2.4.4. Africa as an Emerging Market 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 157 Africa as an emerging economy is a sleeping giant. Africa has resources in abundance. Africa has young people to its benefit . All over, emerging economies such as China and India are looking towards Africa to solve their resource scarcity problems. Developing nations have an unrelenting hunger for learning, improvement, achievement, success and recognition. Developing countries are hurrying to catch up , grab hold of opportunities, improve their fortunes, and help their countries to take their deserved place in the global society.

158. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 158 marketing in Africa The so called seven struggles for developing nations in which most of these struggles relate to marketing: “reaching deep into the markets; pinpointing, thinking big, acting fast, going outside” and the embracing of “bottom of the pyramid markets , the embracing of ‘ manyness ’”.

159. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 159 The challenge for marketing in Africa, however, is to understand the culture of so many nations and peoples, the politics and the role of power within the different nations, t he importance of infrastructure development and technology.

160. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 160 2.5.The Development of Regional Economic Integration Forming series of trade blocks-based on the regional economic grouping of countries-or what is generally known regional economic integration seems to have been the pattern of the world economy is increasingly taking. Economic integration is the process of eliminating restrictions on the international t rade payments and other factor mobility and result from uniting of two or more regional economies in a regional trading arrangement.

161. Cont…. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 161 The World Trade Organization has led negotiations on a series of worldwide agreements to expand quotas, reduce tariffs and introduce a number of innovative measures to encourage trade amongst countries .

162. 2.5.1.Trade Blocs and Agreements in Europe , North and South Amirica and Asias 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 162 The development of world institutions to foster international trade and the development of world trading groups such as (EU, (NAFTA), the Asian Pacific trading region and countries that make up BRIC are playing major roles on the decisions international marketers .

163. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 163 these reforms constitute a move to a more politically stable international trading environment. Trading bloc reduce trade restrictions and tariffs among themselves in order to develop closer links But it leave restrictions in place against the rest of the world) . in the country’s membership of multilateral organizations such as the World Trade Organization (WTO), the International Monetary Fund (IMF) and the World Bank, etc

164. 2.5.2. Africa – Trade Blocs and Agreements 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 164 This summary of African Trade Blocs and Agreements was prepared by Whitehouse & Associates for the African Resource Network. There are essentially 6 key trading blocs in Africa: the Southern African Development Community (SADC), Southern African Customs Union (SACU) and Common Monetary Area (CMA) Preferential Trade Area for Eastern and Southern African States (PTA) and Common Market for Eastern and Southern Africa (COMESA), Economic Community of West African States (ECOWAS), Union Douaniere et Economique de l’Afrique Centrale (UDEAC) (Customs and Economic Union of Central Africa), and the East African Community.

165. Southern African Development Community (SADC) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 165 Originally known as the Southern African Development Co-ordination Conference (SADCC), one of the ironies of SADC is that the organization was launched in 1980 with the original objectives of reducing dependence on apartheid South Africa and creating a channel for donor aid to the region. Development Community (SADC) which replaced the Co-ordination Conference was signed in August 1992. The organization currently has 14 member states namely Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe

166. The aims of SADC are: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 166 The promotion of economic co-operation and integration amongst member states with a view to becoming a fully-fledged common market. These aims are achieved through the application of eight basic fundamentals. Preservation of democracy, peace and security in the region; Investment in infrastructure and spatial development corridors;

167. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 167 Investment in human resources; Conservation and management of natural resources; The pursuit of market economic principles; The creation of a large market; Investment protection; The promotion of science a nd technology.

168. Southern African Customs Union 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 168 SACU is a customs union comprising Botswana, Lesotho, Namibia, Swaziland (the BLNS states) and South Africa. There are no duties payable on goods traded between SACU members. Import tariffs imposed on goods from outside of SACU generally discourage the switching of the BLNS imports to alternative sources of supply, even where the cost of South African products is higher than for comparable items sourced elsewhere. As a result, the BLNS states depend on South Africa for the majority of their imports. .

169. Common Monetary Area 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 169 Allied to SACU is the Common Monetary Area (CMA) which links South Africa, Lesotho and Swaziland into a Monetary Agreement, Southern African equivalent of the Franc Zone in West Africa. Namibia automatically became a member upon independence but withdrew with the introduction of the Namibian dollar in 1993. The same is true with the lilangeni of Swaziland and the loti of Lesotho. Although the rand is no longer legal tender in Swaziland and Lesotho, it still circulates freely in both countries. Foreign exchange regulations and monetary policy throughout the CMA continue to reflect the influence of the South African Reserve Bank .

170.   UNIT THREE CULTURAL, POLITICAL AND LEGAL ENVIRONMENT 3.1 The Environmental Influences on International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 170 By marketing environment, we mean both the macro-environment and micro enviroment The macro-environment or forces are normally divided into economic-demographic factors, technological factors, political-legal factors, and social-cultural factors.

171. . The Environmental Influences on International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 171

172. Socio-Cultural Environment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 172 The social/cultural environment is an important area for international marketing managers It follows that the key problem faced by the international marketing manager is that of coming to terms with the details and complexities of the international environment . An international firm needs to work to maintain its advantage by manipulating the controllable functions of marketing within the largely uncontrollable marketing environment such as Social, Economic, Political& Legal, and Technological environments.

173. Impacts of socio-cultural factors on international 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 173 The social and cultural influences on international marketing are immense(huge). Differences in social conditions, religion and material culture all affect consumers’ perceptions and patterns of buying behavior. In this case, as international marketer you should perform the following important efforts

174. major impacts socio-cultural factors on your international marketing performances : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 174 Understand the impact of culture on international marketing; Apply key cultural concepts when evaluating international MKt Evaluate ways in which cultural differences impede international communication; Recognize the importance of social sensitivity Recognize the need for cultural sensitivity.

175. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 175 The task of adjusting to a new cultural environment is probably one of the biggest challenges of international marketing. International marketing attempts are frequently unsuccessful because the marketer – either consciously – or unconsciously – makes decisions or evaluations from a frame of reference that is acceptable to his or her own culture, but that is unacceptable in a foreign environment

176. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 176 Cultural differences and especially language differences have a significant impact on the way a product may be used in a market, its brand name and the advertising campaign. Example: Initially, Coca-Cola had enormous problems in China as Coca-Cola sounded like ‘Cooke Koula ’ which translates into ‘A thirsty mouthful of candle wax’. They managed to find a new pronunciation ‘ Kee Kou Keele ’ which means ‘ joyful tastes and happiness’.

177. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 177 The dominance of a number of world brands such as Microsoft, Intel, Coca-Cola, McDonald’s, Nike etc However, it is important not to confuse globalization of brands with the homogenization of cultures. There are a large number of global brands but even these have to manage cultural differences between and within national country boundaries.

178. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 178 There are also a number of cultural paradoxes which exist. For example, in Asia, the Middle East, Africa and Latin America there is evidence both for the westernization of tastes and the assertion of ethnic, religious and cultural differences. The social/cultural environment is an important area for international marketing managers

179. 3.4.1, Cultural Environment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 179 Culture is the human-made part of the human environment the sum total of humankind’s knowledge, beliefs, art, morals, laws, customs and other capabilities and habits. In this way, the members of a particular society become conditioned to accept certain ‘truths’ about life around them. The inability or unwillingness to do so could become a serious obstacle to success.

180. The Sub-Division of Culture 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 180 The concept of culture can be divided into several sub-components: Language Within each cultural group, the use of words reflects the lifestyle, attitudes and many of the customs of that group. Language is central to the expression of culture. Language is not only a key to understanding the group; it is the principal way of communicating within it.

181. Cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 181 A language usually defines the parameters of a particular culture. Thus, if several languages are spoken within the borders of a country, that country is seen to have as many cultures. In Canada , for instance, both English and French are spoken; in Belgium , French and Flemish; South Africa there are 11 official languages – different dialects, accents, pronunciations and terminology may distinguish one cultural group from other,

182. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 182 The importance of being able to understand other languages cannot be over-emphasized – this is particularly relevant when executives travel abroad and are negotiating with people of different language groups. Because English I a predominant language of business in the Western world, people with English as a home language are usually reluctant to learn foreign languages and tend to expect others to converse with them in English.

183. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 183 If international marketers do not speak the language of the country they plan to visit, they should be least establish the extent to which their own language is spoken there and,. Thus, translations should be undertaken in the country concerned or at least by a native of the country in question.

184. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 184 Material culture The material culture of a particular market will affect the nature and exte nt of demand for a product. Example, the many shades of green The significance of different colors may vary considerably from one culture to another Green, a popular color in many Muslim countries, is often associated with disease in countries with dense, green jungle.

185. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 185 Material culture relates to the way in which a society organizes and views its economic activities. The material culture of a particular market will affect the nature and extent of demand for a product. The material culture of a country may also necessitate modifications to the product. To illustrate this, most people in the United States consumes hamburger/cheeseburger in contrast to Ethiopian people that most of the time consumes ‘ Enjera ’ with ‘ Doro Wote ’.

186. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 186 Electrical appliances, for example, may have to be adapted to cater for differences in voltage levels. For Example, the United States operates under a system of 110 V in contrast to South Africa’s 220 V, alternatively, weights and measurements may have to be converted to those applicable in the importing country (again, the United States uses measures such as miles, gallons and pounds

187. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 187 Material culture an also have a significant effect on the proposed marketing and distribution strategies. While highways and rail transport are the principal means of moving goods in the United States, rivers and canals are used extensively in certain European countries.

188. C. Aesthetics 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 188 A culture’s aesthetics refer to its idea concerning taste and beauty as expressed in the fine arts – music, drama and dance – the appreciation of color and form. Insensitivity to aesthetic values can not only lead to ineffective advertising and package design for products, it can also offend prospective customers

189. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 189 . Aesthetics also embrace people’s dress and appearance, Distinctive national attire, for instance, includes the cultural dressing styles of Ethiopian women and the reflection of art and design on different statues found in different regions within Ethiopia, “A culture’s aesthetics refers to its ideas concerning good taste and beauty as expressed in the fine arts- music ,arts ,drama and dance-and in the appreciation of color and form.”

190. D. Social organization 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 190 Social organization refers to the way in which people relate to one another, f orm groups and organize their activities, teach acceptable behavior and govern themselves. If the consumers are largely illiterate, advertising materials or packages labels may have to be adapted to the needs of the market.

191. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 191 . there are unspoken signals which identify cultural differences, from certain taboos to less obvious practices like the time taken to answer a letter. In some societies, for instance, an important issue is dealt with immediately; in others, promptness is taken as a sign that the matter is regarded as unimportant, the time taken corresponding with the gravity of the issue.

192. Religious beliefs, attitudes and values 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 192 While language, material culture, aesthetics and social organization are outward manifestations of a culture , it is a society’s religious beliefs, attitudes and values that dictate the behavior of its members.

193. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 193 A religious belief system refers to the spiritual side of a culture or its approach to the supernatural. Western culture is accepted as having been largely influenced by the Judeo-Christian traditions, while Eastern or Oriental cultures have been strongly influenced by Buddhism, Confucianism, Taoism and Hinduism.

194. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 194 Although very few religions influence business activities directly, the impact of religion on human value systems and decision making is significant. Thus, religion exerts a considerable influence on people’s actions and outlook on life, as well as on the products they buy. In certain parts of the world, such as Latin American, the influence of religion extends even beyond the individual or family and is manifested in an entire community’s deep involvement in, and devotion to, the church. .

195. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 195 A society’s religious belief system is often dependent on its stage of human or economic development. Primitive tribesmen tend to be superstitious about life in general, while people in technologically advanced cultures seem to have dismissed the notion of traditional religious worship and practice in favor of a more scientific approach to life and death. To disregard the significance of religious beliefs or superstitions evident in a potential international market could result in expensive marketing mistakes

196. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 196 A religious system refers to the spiritual side of a culture or its approach to the supernatural.” “Attitudes are psychological states that predispose people to behave in certain.” “Stereotypes are sets of attitudes in which one attributes qualities or characteristics to a person on the basis of the group to which that person belongs.

197. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 197 Attitudes are psychological states that predispose people to behave in certain ways. Attitudes may relate, for example, to work, wealth, achievement, change, the role of women in the economy, etc. Western cultures, for example, value individualism and promote the importance of autonomy and personal achievement needs. In contrast, in many Eastern and developing countries, there is a strong sense of collectivism and the importance of social and security needs. For instance, the Hindu religion imparts a type of work ethic that considers work central to one’s life but maintains that it must be performed as a service to others, not for one’s own personal achievement.

198. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 198 Stereotypes are sets of attitudes in which one contributes qualities or characteristics to a person on the basis of the group to which that person belongs. An international businessperson’s tendency to judge others by his or her personal and cultural standards instead of attempting to understand others in the context of their unique historical, political, economic and social backgrounds could, for example, be termed an undesirable attitude.

199. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 199 Values are judgments regarding what is valuable or important in life, and they vary greatly from one culture to another. On the one hand, people who are operating at a survival level will value food, shelter and clothing. Those with high security needs, on the other hand, may value job security, status, money, etc. from its value system; a culture sets norms – in other words, acceptable standards of behavior. The concept of space is different wherever one goes. In Western corporate culture, the size and location of an executive’s office is usually determined by his or her level of seniority in the company. The locality and size of an Arab business executive’s office, however, are a poor indication of the person’s importance .

200. Cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 200 Conversation distance between two people is learned early in life – almost completely unconsciously. A Western business executive, conditioned to operating within a certain amount of personal space, may feel uncomfortable or alarmed at the closeness and physical contact displayed in the Middle East or Latin America, for example. Time also has a different meaning in each country. Western cultures tend to perceive time in terms of past, present and future. They are orientated towards the future and in the process of preparing for it; they save, waste, make up or spend time

201.   3.2.2.1 The concept of the self-reference criterion (SRC) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 201 In dealing with unfamiliar markets, marketers must be aware of the frames of reference they are using in making their decisions or evaluating the potential of a market, because judgments are derived from experience that is the result of acculturation in the home country.One the major obstacles in the international marketing is the self-reference criterion(SRC) which is an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions. Closely connected is ethnocentrism, that is, the notion that people in one's own company, culture, or country know best how to do things.

202. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 202 When faced with a problem in another culture, our tendency is to react instinctively and refer to our SRC for a solution. Our reaction, however, is based on meanings, values, symbols, and behavior relevant to our own culture and usually different from those of the foreign culture. Such decisions are often not good ones. To avoid errors in business decisions, the knowledgeable marketer will conduct a cross-cultural analysis that isolates the SRC influences and maintains vigilance regarding ethnocentrism. SRC is an unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions. The concept is closely associated with ethnocentrism.

203. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 203 Mechanisms to avoid international business decisions errors To avoid errors in business decisions, it is necessary to conduct a cross-cultural analysis that isolates the self-reference criterion influences. The fourkey steps are: define the business problem or goal in home-country cultural traits, habits, or norms; define business problem or goal in foreign-country cultural traits, habits, or norms through consultation with natives of the target country--make no value judgments; isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem; and, Redefine the problem without the SRC influence and solve for the optimum business goal situation

204. 3.2.2.2. Social factors 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 204   Growth and movement in populations around the world are important factors heralding social changes . Please take a look at recent information identified from United Nation Development Programme - UNDP, given to you as exemplary indicators of social factors below . Nowadays , there are also visible moves in the population within many countries, leading to the formation of huge urban areas where consumers have a growing similarity of needs across the globe. In this case, urban dwellers require similar products ( packaged conveniently and easy to carry ).

205. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 205 Similarly, they demand services, telephones and transportation of all kinds and modern visual communications . It also means, for the incoming company , that customers are accessible . They are identifiable and firms can communicate with them efficiently via supermarkets, advertising and other marketing communication tools.

206. The political and Legal Environment: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 206 The political and legal environment in international marketing is more complicated than in domestic marketing . The greater the level of involvement in foreign markets is, the greater is the need to monitor the political climate of the countries in which business is conducted. Nearly all governments today play active roles in their countries’ economies.

207. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 207 The following aspects must be taken into consideration: It is important, therefore, for the firm to know - the political and legal environments in each of its markets : Identify those aspects of the political-legal environment that affect a firm’s international marketing;

208. Cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 208 Determine how the international political-legal environment impacts on each element of the marketing mix ; Outline which options are available to minimize political-legal risk; Appreciate the way legal systems differ and the impact of these differences on the drawing up of contracts and resolving disputes; and Identify the ways in which the impact of national laws might be minimized in the international environment

209. The impact of the “alien status” of a company : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 209 Political and legal issues face a business, whether it operates at home or in a foreign country. However, the issues abroad are often amplified by the "alien status" of the company, which increases the difficulty of properly assessing and forecasting the dynamic international business climate. Political and legal issues a business faces abroad are often amplified by the "alien status" of the company, which increases the difficulty of properly assessing and forecasting the dynamic international business climate. The alien status of a foreign business has two dimensions: It is alien in that foreigners control the business and in that the culture of the host country is alien to management .

210. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 210 The alien status of a business means that, when viewed as an outsider, it can be seen as an exploiter and receive prejudiced or unfair treatment at the hands of politicians, legal authorities, or both. Political activists can rally support by advocating the expulsion of the "foreign exploiters," often with the open or tacit approval of authorities. The "alien status" of an International Firm: The alien status of a business means that, when viewed as an outsider, it can be seen as an exploiter and receive prejudiced or unfair treatment at the hands of politicians, legal authorities, or both.

211. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 211 The alien status of a foreign business has two dimensions: It is alien in that foreigners control the business and in that the culture of the host country is alien to management. The alien status of a business means that, when viewed as an outsider, it can be seen as an exploiter and receive prejudiced or unfair treatment at the hands of politicians, legal authorities, or both.

212. 3.2.5.Political environment 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 212 The political environment in which the firm operates (or plans to operate) will have a significant impact on a company’s international marketing activities. It includes any national or international political factor It affect the organization’s operations or its decision making. Politics has come to be recognized as the major factor in many international business decisions

213. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 213 The greater the level of involvement in a foreign market is, the greater is the need to monitor the political climate . Changes in government often result in changes in policy and attitudes towards foreign business., the government can either encourage foreign activities by offering attractive opportunities for investment and trade, or discourage activities by imposing restrictions such as import quotas, etc.

214. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 214 A loss of confidence in this respect could lead to a company having to reduce its operations in the market or to withdraw from the market altogether. One of the surest indicators of political instability is a frequent change in regime. Although a change in government needs not to be accomplished by violence, it often heralds a change in policy towards business, particularly international business.

215. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 215 Politics is intrinsically linked to a government’s attitude to business and the freedom within which it allows firms to operate. Unstable political regimes expose foreign businesses to a variety of risks that they would generally not face in the home market. This often means that the political arena is the most volatile area of international marketing. The tendencies of governments to change regulations can have a profound effect on international strategy, providing both opportunities and threats.

216. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 216 Lesser developed countries and emerging markets pose particularly high political risks, even when they are following reforms to solve the political problems they have. The stringency of such reforms can itself lead to civil disorder and rising opposition to governments, as has been seen recently in various countries specially, in Asian and African countries, for example the recent constitutional reform about the term presidential election made in Brandi in 2015.

217. cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 217 Types of Political Risks political risks to firms fall into three main areas: Operational restrictions - These could be exchange controls, employment policies, insistence on locally shared ownership and particular product requirements. Discriminatory restrictions - These tend to be imposed on purely foreign firms and, sometimes, only firms from a particular country .

218. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 218 Such barriers tend to be such things as special taxes and tariffs, compulsory subcontracting, or loss of financial freedom. Physical actions - These actions are direct government interventions such as confiscation without any payment of indemnity, a forced takeover by the government, expropriation, nationalization or even damage to property or personnel through riots and war. Investment restrictions : are a common way governments interfere politically in international markets by restricting levels of investment, location of facilities, choice of local partners and ownership percentage

219. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 219 3.2.6.The legal environment The legal environment is derived partly from the political climate in a country and has three dimensions: The domestic laws of the international marketer’s country; The domestic laws of each of the exporting country’s foreign markets; and International law. Legal systems vary from country to country. Legal systems vary both in content and interpretation. A company is not just bound by the laws of its home country but also by those of its host country and by the growing body of international law..

220. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 220 Local Domestic Laws Different Legal Systems “Common law is generally based on precedents or past practises .” Then legal systems of most of the non-socialist countries can be grouped into common law and code law. Furthermore, English cases are regularly cited as authority in our courts in situations where there is no domestic decision on the point and the particular case concerns an area of our law (such as insurance or negotiable instruments) which derives from, or was considerably influenced by, English law.

221. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 221 Contracts “The principal legal arrangement underlying an international transaction is the international sales contract.” Central to all commercial activities is the contract. The purpose of a contract is to specify the respective rights and obligations of the parties to an agreement and to outline specific procedures or actions that must be take place. The principal legal arrangement underlying an international transaction is the international sales contract . 34

222. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 222 If the dispute cannot be settled among the parties involved, resolution can possible be obtained through arbitration (in other words, through negotiations facilitated by an independent third party). Where the process of arbitration fails, for one reason or another, the option of litigation (in other words, going to court) may be considered. Disputes that go to court usually involve large monetary transactions or the ownership of patents, copyright or physical property. Court actions can take from a few months to several years and can involve large expenditure in legal fees and lost avenues

223. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 223 International law There are a number of international laws that can affect the organization’s activity . These laws constitute the ‘rules of the game ’ for business activity. Some are international laws covering piracy and hijacking ; others are more international conventions and agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organization (WTO ) treaties, patents and trademarks legislation and harmonization of legal systems within regional economic groupings,

224. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 224 Domestic laws in the home country The organization’s domestic (home market) legal system is important for two reasons. First, there are often export controls which limit the free export of certain goods and services to particular marketplaces, and second, there is the duty of the organization to act and abide by its national laws in all its activities, whether domestic or international.

225. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 225 It will be readily understandable how domestic, international and local legal systems can have a major impact upon the organization’s ability to market into particular overseas countries. Laws will affect the marketing mix in terms of products, price, distribution and promotional activities quite dramatically .

226. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 226 Technological environment: The Internet and the World Wide Web (WWW) World-wide Learning and Its Outcomes The dual technological/cultural paradox Technological environment Technology is a major driving force both in international marketing and in the move towards a more global marketplace . The impact of technological advances can be seen in all aspects of the marketing process..

227. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 227 Satellite communications, the Internet and the World Wide Web, client–server technologies, ISDN and cable as well as email, faxes and advanced telephone networks have all led to dramatic shrinkages in worldwide communications. Note: The level of technology is an uncontrollable element that can often be misread because of the vast differences that may exist between developed and developing countries.

228. UNIT FOUR GLOBAL MARKETING STRATEGY Introduction to Global Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 228 The growing importance of global marketing is one aspect of a sweeping transformation that has profoundly affected the people and industries of many nations during the past 160 years.

229. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 229 Interrelated factors such as the Internet, e-commerce, digital communications and the lessening barriers to movement of product and currency all contribute to globalization: the trend towards a single, integrated and interdependent world. Given this, a successful global marketing strategy is a key to attaining competitive advantage.

230. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 230 global marketing framework built upon three elements: assessment, strategy and development of the marketing mix.

231. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 231 Marketing is the set of activities and processes that (along with product design , manufacturing , and transportation) comprises a firm’s value chain. Decisions at every stage of the process – from idea conceptualization to customer support after the sale – should be assessed in terms of their ability to create value for customers . The core of marketing is to surpass the competition in creating perceived value for customers. The value equation is the guide to this: Value = Benefits / Price (money time effort etc.)

232. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 232 The marketing mix is central to this equation because benefits are a combination of the product, promotion, and distribution components of the mix. Value to the customer can be increased in two ways – (1) an improved bundle of benefits or (2) a lower price (or both). Marketers may improve the product, design new channels of distribution, communicate better – or a combination of all three.

233. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 233 Marketers may seek ways to cut costs or lower the price. Nonmonetary costs may be lowered by decreasing the time and effort customers must expend to learn about or acquire a product. If a company is able to offer a combination of superior product, distribution, and promotion of the benefits and offer lower prices than its competition, it should enjoy an advantageous position.

234. How Global Marketing differs from “regular” marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 234 Marketing activities center on an organization’s efforts to satisfy customer wants and needs with products and services that offer competitive value. The marketing mix (product, price, place, and promotion) comprises a contemporary marketer’s primary tools.. An organization that engages in global marketing focuses it resources and competencies on global market opportunities and threats.

235. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 235 A fundamental difference between “regular” marketing and “global” marketing is the scope of activities. Global marketing may also take the form of a diversification strategy in which a company creates new products or services and introduces them into new geographical markets. Companies that engage in global marketing frequently encounter unique or unfamiliar features in specific countries or regions of the world.

236. Competitive Advantage, Globalization, and Global Industries 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 236 Global localization The phrase “global localization” represents an attempt to capture the spirit of the rallying cry for organizations in the 21 st century, namely, “think globally, act locally, and manage regionally.” Most students will agree that Coca-Cola is a global product by virtue of the fact that it is available in more than 195 countries, including in Ethiopia, in red cans bearing the distinctive signature style Globalization can be defined generally as the growth of economic activity spanning politically defined national and regional boundaries Globalization- generally defined as the growth of economic activity spanning politically defined national and regional boundaries.

237. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 237 Global marketing is essential if a company competes in a global industry or one that is globalizing. The process of globalization is the transformation of formerly local or national industries into global ones. A global industry , as noted by Michael Porter, is one in which competitive advantage can be achieved by integrating and leveraging operations on a worldwide scale. An industry is global to the extent that a company’s position in the industry is interdependent with its industry position in other countries. part of the world.

238. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 238 Achieving competitive advantage in a global industry requires executive to maintain focus. Focus is the concentration of attention on the core business or competence. However, focus can change as a part of an overall strategy shift. Value, competitive advantage, and focus are universal in their relevance and they should guide marketing efforts in any

239. Global Marketing: What it is and what it isn’t 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 239 The discipline of marketing is universal. It is natural, however, that marketing practices will vary from country to country, for the simple reason that the countries and peoples of the world are different. A successful marketing approach in one country may not necessarily succeed in another. To what extent marketing plans and programs can extend worldwide and to what extent they must be adapted is one of the important tasks of the global marketing manager. The way a company addresses this task is a reflection of its global marketing strategy (GMS).

240. The Two core issues of a firm’s GMS 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 240 Just as in single-country marketing, choosing a target market and developing a marketing mix are the two core issues of a firm’s GMS. Global market participation – the extent to which a company has operations in major world markets. Standardization versus adaptation – the extent to which each marketing mix element can be standardized (used the same way) or must be adapted (used in different ways) in different country markets.

241. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 241 Concentration of marketing activities – the extent to which activities related to the marketing mix (such as pricing decisions) are performed in one or only a few country locations. Coordination of marketing activities – the extent to which marketing activities related to the mix are planned and executed interdependently around the globe. Integration of competitive moves – the extent to which a firm’s competitive marketing tactics in different parts of the world are interdependent

242. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 242 Global marketing does mean widening business horizons to encompass the world in scanning for opportunities and threats . Some brands are found in virtually every county of the world. Coke is an example. The issue of standardization versus adaption has been at the center of a long-standing.

243. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 243 The “homogenized global market” view didn’t work. Even those companies that have become global successes have not done so through total standardization of the product. The fundamental Premise here is companies that understand and engage in global marketing can offer more overall value to customers than companies that do not. Global marketing may also take the form of a diversification strategy in which a company creates new products or services and introduces them into new geographical markets. Companies that engage in global marketing frequently encounter unique or unfamiliar features in specific countries or regions of the world.

244. Process of Formulating Global Strategy 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 244 The aims for planning and formulating global marketing strategy are to gain international Competitive Advantage. The formulation of global strategy process includes: Identify the key elements and drivers of national advantage that contribute to competitive advantage of an industry; Determine the relevant bases of competitive advantage at the firm level and how they relate to generic(general) competitive strategies in international markets;

245. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 245 Evaluate the significance of an industry value chain and how customer value can be created through restructuring it; Conduct a systematic step process of competitive analysis in order to determine a firm’s international competitiveness and most relevant positioning; and Follow a process of competitive intelligence gathering with particular reference to the Internet as an information channel Improvements in global market effectiveness cannot be achieved if performance is not measured

246. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 246 The four pertinent factors in this assessment include market measures, consumer measures, measures of innovation, and financial results. As critical as all these elements may be to a successful global endeavor, without an understanding and codification of your company’s global vision and mission, success will be difficult to achieve.

247. Why Should Firm Think Globally 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 247 1. trade Globalization Drivers 2. Strategic Implications of Globalization Global localization: Think globally, act locally. Global marketing may include a combination of standard and nonstandard approaches. Global marketing requires marketers to think and act in a way that is both global and local by responding to similarities and difference s in world markets Due to the impact of the Internet, e-commerce, digital communications, information transparency and increasing freedom of movement of product and currency, domestic organizations find that global business opportunities are more easily exploited than ever.

248. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 248 Growth is one key reason firms decide to ‘go global,’ particularly if the company’s domestic marketplace has been fully tapped. The increased sales and profits resulting from global expansion serve to strengthen the company’s domestic position It enabling it to win market share and capture and retain current and prospective customers in all markets. Globalization is not limited to international sales and operations, however. The purchase of components and materials from global sources can also contribute to a more profitable operation.

249. Trade Globalization Drivers 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 249 An industry/trade does not globalize on its own and every industry cannot be a global one . There are four broad groups of trade globalization drivers (STRONG FORCES ) market, cost, Government and competition. Drivers are primarily uncontrollable by the worldwide business.

250. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 250 Market Drivers Cost/ Economic drivers Convergence of lifestyles & taste Increased travel creating global consumer Growth of global and regional channels Establishment of world brands Push to develop global advertising Shortening product life cycle Continuing push for economies of scale. Accelerating technological innovation Advances in transportation Emergence of NIC (COMPUTER NETWORK INTERFACE) Increasing cost of product development Government Drivers Competitive Drivers Reduction of tariff barriers Creation of trading blocs Decline in role of government Reduction in non-tariff barriers Shift in open market economies Increase in level of world trade Increase in foreign acquires of corporation Companies becoming globally centered Increased formation of global strategic alliances Globalization of financial markets

251. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 251 The strategic implication global forces impact of, internal versus external drivers. You should understand that internal drivers are generally controllable factors that the firm is able to alter as needed for global market success . reflect the firm’s organizational structure You should note that external drivers are not controllable, but are manageable with an appropriate strategy.

252. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 252 Strategic Implications of Globalization International Alliances: Organizational Challenges Government Relations: Competition: As pattern of international competition shifts towards globalization, there are many implications for strategy formulation. In a global industry, implications related with functions of finance, marketing, business and Government relationship change according to global configuration and co-ordination.

253. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 253 International Alliances: International coalition, union, partnership linking firms of the same industry based in different countries Organizational Challenges: organizational structure, reporting hierarchies, communication linkages and reward mechanisms.

254. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 254 Government Relations: In the globalized era, the selection of foreign market depends on the negotiations with the foreign Government, and the ‘muscle power’ of the global firm can be crucial in deciding the shift of power equilibrium. A global firm must ‘manage’ its relationship with the foreign Government to its advantage .

255. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 255 Competition: A global firm may be in a better position to compete with its global rival as it can augment its resources globally. And formulate an appropriate strategy to handle them

256. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 256 Global Marketing Strategies Strategy for Global Competitiveness Competitiveness Strategy for Global Competitiveness(3) depends upon internal and external factors. However, there is lack of a single model for measuring global competitiveness.

257. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 257 It also depends on the macro-environmental factors such as 1 . the policies of the home country Government (whether favoring competition, in terms of taxation, rebates and incentives, fiscal and credit policies, etc.), 2. the degree of consumerism in the home country, 3. the nature of competition.

258. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 258 Competitiveness Competitiveness depends upon internal as well as external factors . When a company succeeds in creating more value for customers than its competitors, that company is said to enjoy competitive advantage in an industry. Competitive advantage is measured relative to rivals with whom you compete in the industry – whether that is on a local, national, or global level

259. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 259 Alternative markt -entry strategy The four “global” management orientations Management Orientations The different types of alternatives of entering the international market may include: Export sales. Licensing. Joint Venture. Co-operative distribution . Local sales organization .

260. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 260 As a general rule, one would assume that an SME would be most likely to exhibit an ethnocentric orientation when taking steps to go global. However , it is important for students to understand that the size of the organization is not the only driver of an EPRG orientation .

261. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 261 large domestic organization with limited global insights can be prone to an ethnocentric orientation; a small, entrepreneurial organization may exhibit a polycentric , egocentric or even a geocentric approach to global markets. For each dimension, a multi-domestic strategy seeks to improve worldwide performance by maximizing local competitive advantage. revenue or profits. On the other hand, a global strategy seeks to maximize worldwide performance through sharing and integration.

262. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 262 Dimensions Setting for Pure Multi domestic Strategy Setting for Pure Global Strategy Market Participation No particular pattern Significant share in major markets Product offering Fully customized in each country Fully standardized world wide Location of Value-added Activities All activities in each country Concentrated one activity in each (different) country Market Approach Local Worldwide uniform Competitive Moves Stand-alone by country Integrated across country Global Marketing Strategies

263. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 263 Management Orientations The form and substance of a company’s response to global market opportunities will depend greatly on management’s assumptions and beliefs – both conscious and unconscious - about the nature of the world.

264. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 264 In implementing these activities the global firm deals with the paradox of standardization versus adaptation. In most cases, neither option can be successful in and of itself, nor most elements of standardization and adaptation be combined to effectively harvest the opportunities available in each global market.

265. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 265 Although the world and its cultures are becoming increasingly homogeneous, differences in consumer preferences between markets still exist. These distances can be ‘measured’ using the CAGE Distance Framework, (Cultural, Administrative, Geographic and Economic circumstances.)

266. Three major differences separate domestic and global marketing . 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 266 1. when dealing in global markets, conditions are apt to change rapidly. Many global strategies do not succeed because the business environment changes. 2. the global marketer does business within economic, legal, social and cultural

267. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 267 The differences can generate competitive advantages if they result in new perspectives on the marketplace not previously considered by competition . 3.. global markets are separated by greater geographic and psychological distance .

268. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 268 These geographic distances are becoming more manageable via technology . Psychological distance is far more difficult to transcend and refers to cultural and psychic elements. Both cultural and psychic distances affect how management formulates global marketing strategy, as well as management’s world view of the firm. This perspective can be analyzed within the EPRG Framework .

269. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 269 The EPRG Framework ( Ethnocentric, Polycentric, Regiocentric , and Geoentric ) defines an organization’s approach to global marketing and commerce. Ethnocentric firms focus on the home market . Polycentric firms approach global markets with individual strategies. Regiocentric organizations create strategies that target entire regions , while geocentric orientations view the world as a single market.

270. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 270 Mass-customization , the process of customizing products at the assembly stage of operations with the input of the customer, is seen as a bridge between standardization and customization, offering the benefits of both lower cost production and localized market and individual appeal.

271. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 271 Three options are available for global marketers to optimize their competitive position. They can compete in their home market , in the competitor’s home market or in third markets where both firms are active .

272. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 272 The decision will be made within the scope of the firm’s global marketing management framework, which evolves from a firm’s understanding of, and response to, both market and internal drivers.

273. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 273 The EPRG Framework ( Ethnocentric, Polycentric, Regeocentric , and Geocentric ) defines an organization’s approach to global marketing and commerce. Ethnocentric firms focus on the home market. Polycentric firms approach global markets with individual strategies. Regeocentric organizations create strategies that target entire regions, geocentric orientations view the world as a single market .

274. The four “global” management orientations 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 274 an ethnocentric orientation is that home country products and management processes are superior. company that neither sources inputs from, nor seeks market outside the home country A company that does business abroad while still presuming the superiority of the home country Such a company would rely on an extension strategy whereby it would export, without adaptation, products designed for the domestic market This may be classified as an international company. (as ethinocentric )

275. Ethnocentric: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 275 A person who assumes that home country is superior to the rest of the world. Associated with national arrogance or feelings of national superiority. opportunities outside of the home country are routinely ignored (DC). companies conduct business outside their home country are known as international companies – they believe products that succeed in the home country are superior. Leads to a standardized or extension approach – the belief that products can be sold everywhere without adaptation. Foreign operations or markets are viewed as inferior or subordinate to the home market. Headquarters knowledge is applied everywhere ; local knowledge is viewed as unnecessary.

276. Polycentric: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 276 The opposite view of ethnocentrism . The belief that each country in which you do business is unique. This assumption allows each subsidiary to develop its own unique marketing strategies in order to succeed. The term multinational company is often used to describe such a structure. Leads to a localized or adaptation view that assumes products MUST be adapted to succeed.

277. Regiocentric : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 277 The region becomes the relevant geographic unit. Management ’ s goal is to develop a regional integrated strategy (e.g. NAFTA or the EU ). May be viewed as a variant of the multinational view (polycentric).

278. Geocentric: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 278 Views the entire world as a potential market and strives to develop integrated global strategies. These companies are known as global or transnational companies. Serves world markets from a single country or sources globally for the purposes of focusing on select country markets. Tend to maintain their association with a particular headquarters country .

279. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 279 Transnational companies serve global markets and utilize global supply chains. Transnational companies both serve global markets and utilize global supply chains global and transnational companies from international or multinational companies is mind-set:

280. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 280 At global and transnational companies , decisions regarding extension and adaptation are not based on assumptions but rather on made on the basis of ongoing research into market needs and wants. It is a synthesis of ethnocentrism and polycentrism – it is a “world view.”

281. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 281 The ethnocentric company is centralized in it marketing management; the polycentric company is decentralized ; the regiocentric and geocentric companies are integrated on a regional and global scale, respectively.

282. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 282 The key challenge facing organizational leaders today is managing a company’s evolution beyond an ethnocentric, polycentric, or regiocentric orientation to a geocentric one.

283. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 283 Forces Affecting Global Integration and Global Marketing The remarkable growth of the global economy over the past 65 years has been shaped by the dynamic interplay of various driving and restraining forces. Regional economic agreements, converging market needs and wants, technology advances, and pressures to cut costs, pressures to improve quality, improvements in communications and transportation technology, global economic growth, and opportunities for leverage all represent important driving forces.

284. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 284 Forces of globalization (example regional economic agreements such as NAFTA, converging market needs and wants, technology advances such as the Internet and global TV networks, transportation improvements, the need to recoup high product development costs in global markets, the need to improve quality through R&D investment, world economic trends such as privatization , opportunities to use leverage, corporate culture, and the continuing presence of national controls that create trade barriers.

285. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 285 Forces Affecting Global Integration and Global Marketing The Development of Multilateral Trade Agreements Converging Market Needs and Wants and the Information Revolution Transportation and Communication Improvements Product Development Costs and Quality World Economic Trends Restraining Factors The Future of Global Marketing

286. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 286 The remarkable growth of the global economy over the past 65 years has been shaped by the dynamic interplay of various driving and restraining forces. Regional economic agreements, converging market needs and wants, technology advances, and pressures to cut costs, pressures to improve quality, improvements in communications and transportation technology, global economic growth, and opportunities for leverage all represent important driving forces.

287. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 287 Forces of globalization The dynamic involving driving and restraining forces are discussed below. Driving forces include regional economic agreements such as NAFTA , converging market needs and wants, technology advances such as the Internet and global TV networks, transportation improvements, t he need to recoup high product development costs in global markets, the need to improve quality through R&D investment, world economic trends such as privatization and finally, opportunities to use leverage, corporate culture, and the continuing presence of national controls that create trade barriers.

288. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 288 The Development of Multilateral Trade Agreements NAFTA (North American Free Trade Agreement) has expanded trade among the US, Mexico, and Canada. GATT (General Agreement on Tariffs and Trade) has created the WTO (World Trade Organization) to promote and protect free trade. EU (European Union) is lowering boundaries to trade within the region.

289. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 289 Converging Market Needs and Wants and the Information Revolution A person studying markets around the world will discover cultural universals as well as differences. Most global markets to not exist in nature – marketing efforts must create them. (For example, no one needs soft drinks.) Evidence is mounting that consumer needs and wants around the world are converging today as never before. This creates an opportunity for global marketing.

290. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 290 Multinational companies pursuing a strategy of product adaptation run the risk of falling victim to global competitors that have recognized opportunities to serve global customers. The information revolution is one reason for the trend toward convergence. Thanks to satellite dishes and globe-spanning TV networks (CNN and MTV), it seems as though almost everyone has the opportunity to compare their lives against everyone else’s. The Internet is an even stronger driving force. When a company establishes a presence on the Internet, it is automatically a global company.

291. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 291 Transportation and Communication Improvements Time and cost barriers associated with distance have fallen tremendously over the past 100 years. The jet airplane revolutionized communication by making it possible for people to travel around the world in less than 48 hours. The newest communication technologies, such as e-mail, video teleconferencing, and Wi-Fi, means that managers, executives, and customers can link up electronically from virtually any part of the globe without traveling at all.

292. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 292 Product Development Costs and Quality The pressure for globalization is intense when new products require major investment and long period of development time. The pharmaceutical industry provides a good example of this driving force . For example, today, the process of developing a new drug and bringing it to market can span 14 years and exceed $400 million .

293. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 293 Global companies “raise the bar” for all competitors in an industry. When a global company establishes a benchmark for quality, competitors must quickly make their own improvement and come up to par. Global marketing strategies can generate greater revenue and greater operating margins , which, in turn, support design and manufacturing quality.

294. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 294 World Economic Trends Economic growth has been a driving force in the expansion of the international economy and the growth of global marketing for three reasons. 1.Economic growth in key developing countries has created market opportunities that provide a major incentive for companies to expand globally.

295. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 295 2.Economic growth has reduced resistance that might otherwise have developed in response to the entry of foreign firms into domestic economies . (When a country such as China experiences rapid economic growth, policy makers are more likely to look favorably on outsiders.) 3.The worldwide movement toward free markets , deregulation, and privatization is the third driving force . (Telephone company privatization is an example.)

296. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 296 The meaning and the types of leverage Webster’s New World Dictionary defines “leverage” as an “increased means of accomplishing some purpose.” A global company can take advantage of several types of leverage in pursuit of corporate goals such as profit or revenue growth. These include experience transfers, scale economies, enhanced resource utilization, and global strategy Leverage means some type of advantage that a company enjoys by virtue of the fact that it has experience in more than one country. Leverage allows a company to conserve resources when pursuing opportunities in new geographical markets.

297. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 297 Four important types of leverage exist: Experience Transfers – A global company can leverage its experience in any market in the world by drawing on management practices , strategies, products, advertising appeals , or sales or promotional ideas that have been market-tested in one country and applied to another.

298. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 298 Scale Economies – The global company can take advantage of its greater manufacturing volume to obtain traditional scale advantages . Finished products can be manufactured by combining components manufactured in scale-efficient plants in different countries. Re source Utilization – A global company has the ability to scan the entire world to identify people, money, and raw materials that will enable it to compete most effectively in world markets.

299. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 299 Global Strategy – The global company’s greatest advantage is its global strategy. A global strategy is built on an information system that scans the world business environment to identify opportunities, trends, threats, and resources . A global strategy is a design to create a winning strategy on a global scale. Note: A global strategy is NO guarantee of ongoing organizational success. (

300. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 300 Restraining Factors Despite the impact of the driving forces previously discussed, several restraining forces may slow a company’s efforts to engage in global marketing. Luckily, in today’s world the driving forces predominate over the restraining forces. That is why the importance of global marketing is steadily growing .

301. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 301 Important restraining forces include: Management Myopia and Organizational Culture – Management may simply ignore opportunities to pursue global marketing. A company that is ethnocentric (or “nearsighted”) will not expand geographically. Myopia is a recipe for market disaster if headquarters attempts to dictate when it should listen. Successful global marketing requires a strong local team “on the ground” to provide information about local markets.

302. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 302 National Controls– Every country protects the commercial interests of local businesses by maintaining control over market access and entry in both low- and high-tech industries. Today , tariff barriers have been largely removed in high-income countries. Still , nontariff barriers (NTBs), such as “Buy American” campaigns, make it difficult for companies to gain access to local markets.

303. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 303 Opposition to Globalization – To many people, globalization represents a threat. Globaphobia is used to describe an attitude of hostility toward trade agreements or global brands. Opponents of globalization include labor unions, university students and nongovernmental organizations (NGOs).

304. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 304 The Future of Global Marketing The future of global marketing will reflect five major changes in world growth but with some major new directions. The growth of Southeast Asia has been interrupted. That region now offers exceptional risk and reward equations for global markets that are willing to make a bet on the long-t6rm potential of the region.

305. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 305 The cost of market entry has dropped as dramatically as the decline in values of national currencies. For companies with a stomach for risk, there is an opportunity to invest, building market positions in countries that most experts believe will soon return to long-term growth

306. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 306 In the mean-time, other world regions will continue to grow, and world wealth will become more evenly distributed. The trade cycle has not eliminated manufacturing as a source of employment and income in the high-income countries. By investing in capital equipment and by designing products for manufacturability, rich countries have proven that they can continue to successfully compete as manufacturing locations.

307. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 307 Global markets will continue to grow in importance as global marketers continue their quest to identify and serve globalsegments . This growth will enhance and expand the value of global experience for managers and executives worldwide. Finally , marketing is at the threshold of a new and exciting era : e-business , e-commerce , and e marketing, for the first time in history, marketers have the tools to address the needs of the individual customer.

308. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 308 We will try to see to what extent Multi-National Companies (MNCs) to go in either standardizing or adapting a product in international markets find out if there are any differences between markets in which the MNCs operate.

309. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 309 Products and Services: Product:-refers to the goods and services that are offered to a company’s customers from the physical product itself ,

310. UNIT FIVE INTERNATIONAL PRODUCT POLICY 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 310 INTERNATIONAL PRODUCT POLICY Product Issues in International Marketing The aim of this international product policy is to explain the concept of product development strategy for international markets.

311. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 311 Other product attributes /characteristics, features / include: quality; Options ; physical features; supporting services; brand name and warranties offered Product:- refers to the goods and services that are offered to a company’s customers.

312. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 312 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 ,

313. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 313 frequency among different locations inseparability from consumption, intangibility, perishability  

314. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 314 perishability —the idea that a service cannot generally be created during times of slack (loose) and be “ stored ” for use later .

315. Marketing mix 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 315

316. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 316 The marketing mix A marketing mix is all about the concept of the 4P's-product , price, promotion and place marketing mix . Collectively these are called the marketing mix . Marketing Mix:- A marketing mix that consists of the 4 Ps; Product, Price, Place and Promotion as marketing strategies formulated . Further, "the elements that are more affected by adaptation in foreign markets are:- the quality , the features , and the namely design .

317. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 317

318. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 318 A marketing mix - includes those controllable factors that have been chosen to satisfy customer needs . The eight controllable factors are : product , price , place, promotion , packaging, programming , partnership , and people . These are also know as the 8 Ps.

319. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 319

320. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 320 The logic is marketers have four tools to use to develop an offering to meet the needs of their targeted customers. Collectively they are called the marketing mix. The "four Ps" of marketing are: p roduct, p rice, p lace, and p romotion. More comprehensively they are viewed as:

321. Product 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 321 Goods Services Ideas Information Digital Products People Places

322. 322

323. 323

324. 324

325. 325

326. 326

327. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 327 Product, service , or program ­ something of value you are offering the customer, client, or park visitor Price ­ what the customer, client, or park visitor pays ( direct costs are financial, indirect or alternative costs are such things as time it takes and the things people give up if they choose your offering) Place, distribution, location, or accessibility ­ where the transaction takes place , perhaps in a park Promotion or communication ­ this is how you inform the target market about the benefits in your marketing mix

328. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 328 The marketing mix should be viewed as an integrated and coordinated package it reflect the characteristics of customers and various targeted publics and satisfy their needs, wants, and expectations .

329. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 329 Note that the elements of the marketing mix should be integrated because each element of the mix usually has some impact, direct or indirect, on the other thre e .

330. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 330 Although you may not have to change where the product is delivered to the customer , you will almost certainly have to change the promotion or communication with the customer because you need to tell the customer about the changes you have made in the product and how the changes will make it more desirable and satisfying.

331. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 331 Product: The product, service, or program includes both tangible and intangible The tangible, of course, are those things that the customer can see, touch, feel, taste, or smell. The intangible- include such things as the image of the offering ... which includes the image of the organization making the offering, the psychological aspects of pricing (high price to many customers is equated with high quality ­ and vice versa).

332. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 332 Price: The price is what the customer pays. It includes direct and indirect costs as well as opportunity costs. The benefits of the product have to be great enough to warrant the price . Price includes all costs associated with the product, service , or program .

333. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 333 Place: The place is where the customer receives the product, service, or program. The place of delivery , including all of its resources , is part of what the consumer buys . A place that meets his or her needs better may be worth more.

334. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 334 The place may be a park, a visitor center in the park, or an interpretive exhibit along a trail . In setting its strategy, the organization must determine how much the target market is willing to pay for atmosphere and physical resources of place .

335. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 335 Promotion: Promotion includes all forms of communication you use to communicate the benefits of your offering to the target market(s). The objective is to persuade the customer in such a way that he or she recognizes that your offering is uniquely qualified to meet his or her needs.

336. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 336 The term promotion mix is commonly used to refer to the types of communication that are available: advertising, public relations , personal selling, publicity , and sales promotion. Some authors include direct marketing. Word of mouth, though seldom discussed, is powerful promotion

337. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 337 Product: A part of the marketing mix: Product is actually a complex, multidimensional concept. It is defined broadly enough to include- services, programs, and attitudes and includes whatever you are offering the target market in an effort to meet their needs. It involves all tangible and intangible aspects of the good or service you offer your target market . Product can also be interpreted as programs, activities , interpretation, as well as services. There are five product levels

338. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 338

339. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 339 Core product ­ what the buyer is really buying for the problem-solving services or core benefits that consumers are really buying when they obtain a product Generic product ­ a basic version /account, description, story/ of the product Expected product ­ attributes that combine to deliver core product benefits   quality level , features, design, a brand name , packaging Augmented product ­ additional consumer services and benefits built around the core & actual products · Potential product ­ all the augmentations and transformations that the product might undergo in future

340. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 340 Product Mix (assortment- ie , Varity, collection ): the set of all product lines and items that an organization offers its target market(s ). Packaging Labeling ­ identifies the product ­ grades the product ­ describes the product (price, features, contents, methods of usage, expiry-date ­ promotes the product Product-support services ­ augment actual product

341. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 341 Product Item: A distinct unit within a product line that is distinguishable b y size, price, appearance , function, or some other attribute . A guided hike along a particular trail might be a product item. Product Line: a group of products within a product mix that are closely related , either because they meet the same need , function in a similar manner , or share some other characteristic. Product line decisions: a product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups , are marketed through the same types of outlets, or fall within given price ranges .

342. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 342 Product-line length : stretching downward , stretching upward or stretching both ways . Filling in the product : refers to line-product-line modernization , product-line featuring or product-line pruning. Product mix decisions : product mix (or product assortment) is the set of all product lines and items that a particular seller offers for sale to international buyers ( width, length, depth, and consistency).

343. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 343 Developing Products for International Markets The decision concerns firms commencing to market their products in foreign countries as well as those already operating internationally and is considering expanding into further markets . One of the most important tasks in international product decision is the proper exploration /examination/ of the relationship between consumer perceptions of products and culture

344. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 344 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 A product is the heart of whole marketing mix , which is the most influential competing element of the marketing mix in the hands of the marketing manager. Thus if the product is not attractive and/or appealing to the customers, then no amount of sales promotion, appropriate channel of distribution or reduction in price will help to achieve the marketing target . Hence, physical design, brand name, quality, packaging

345. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 345 A product’s appearance, function, and support make up what the customer will actually buy . Further, in managing product components , product planning and development entails careful planning with the customer in mind. product range, packaging, branding, quality, labeling and other features of the product. In the question as to whether to standardize or adapt, a product manufactured for market should be according to the needs and expectations of consumers.

346. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 346 Product Mix : Every organization has a product mix that is made up of product lines . Product lines contain product items . Each product item is a product or service as well as the brand , package , and services associated with it.

347. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 347 There are six components product item as follows: Services: Interpreters in visitor centers are providing an information service. Package: In the product world this is the container. Branding : -a brand is the identity of a product (like a name or symbol or any other form) and all of the product image attributes are associated with this identity.

348. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 348 Brand It is a collection of images and ideas representing an economic producer ; more specifically, it refers to the concrete symbols such as name , logo , slogan , and design scheme .

349. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 349 Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service , A brand is a symbolic embodiment of all the information connected to a company, product or service. A brand serves to create associations and expectations among products made by a producer . A brand often includes an explicit logo , fonts, color schemes, symbols, sound which may be developed to represent implicit ( understood, hidden, implied) values, ideas, and even personality.

350. Branding : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 350

351. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 351 Branding : - a brand is the identity of a product (like a name or symbol or any other form) and all of the product image attributes are associated with this identity The brand , and "branding" and brand equity have become increasingly important components of culture and the economy , now being described as "cultural accessories and personal philosophies". a product or service.

352. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 352 Some marketers distinguish the psychological aspect of a brand from the experiential aspect . The experiential aspect consists of the sum of all points of contact with the brand and is known as the brand experience . The psychological aspect , sometimes referred to as the brand image , is a symbolic construct created within the minds of people and consists of all the information and expectations associated with

353. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 353 Marketers engaged in branding seek to develop or align the expectations behind the brand experience, creating the impression that a brand associated with a product or service has certain qualities or characteristics that make it special or unique . A brand image may be developed by attributing a "personality" to or associating an "image" with a product or service , whereby the personality or image is "branded" into the consciousness of consumers.

354. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 354 A brand is therefore one of the most valuable elements in an advertising theme , as it demonstrates what the brand owner is able to offer in the marketplace. The art of creating and maintaining a brand is called brand management . This approach works not only for consumer goods B2C (Business-to-Consumer) , but also for B2B (Business-to-Business).

355. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 355 A brand which is w idely known in the marketplace acquires brand recognition . Where brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the marketplace, it is said to have achieved brand franchise . One goal in brand recognition is the identification of a brand without the name of the company present.

356. Brand equity 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 356

357. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 357

358. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 358 Brand equity measures the total value of the brand to the brand owner , and reflects the extent of brand franchise . The term brand name is often used interchangeably with "brand", although it is more correctly used to specifically denote written or spoken linguistic elements of a brand. In this context a "brand name" constitutes a type of trademark , if the brand name exclusively identifies the brand owne as the commercial source of products or services. A brand owner may seek through trademark registration. to protect proprietary rights in relation to a brand name

359. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 359 Brand energy is a concept that links together the ideas that the brand is experiential , that it is not just about the experiences of customers/potential customers . Economic value comes from businesses' transactions between people whether they are with customers , employees, suppliers or other stakeholders. But for such value to be created people first have to have positive associations with the business and/or its products and services and be energized to behave positively towards them ­ hence brand energy .

360. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 360 It has been defined as: ` The energy that flows throughout the system that links businesses and all their stakeholders and which is manifested in the way these stakeholders think The act of associating a product or service with a brand has become part of pop culture . Most products have some kind of brand identity, from common table salt to designer clothes. In non-commercial contexts, the marketing of entities which supply ideas or promises rather than product and services (e.g. political parties or religious organizations) may also be known as "branding ".

361. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 361 Consumers may look on branding as an important value added aspect of products or services, as it often serves to denote a certain attractive quality or characteristic. From the perspective of brand owners , branded products or services also command higher prices. Where two products resemble each other, but one of the products has no associated branding (such as a generic, store-branded product), people may often select the more expensive branded product on the basis of the quality of the brand or the reputation of the brand owner.

362. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 362 Importance of product branding International consumers view brand as an important part of a product & branding can add value to a product. A brand is a name, term, sign, symbol, or design, or a combination of above A brand is a seller's promise to deliver consistently a specific set of features, benefits &services to buyers. A brand can deliver up to six levels of meaning : attributes, benefits , value. Culture, personality, and user).

363. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 363 5.3.International Product Development Strategies the process of management responsibility requires a company’s marketing manager for identifying, anticipating and satisfying customer requirements across international boundaries. Consequently, companies wishing to enter international markets are faced with the challenge of considering the options of whether to standardize or adapt the elements of their marketing mix, that is, four “Ps” (product, price, place and promotion).

364. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 364 Why a firm needs to develop products for international markets An increasingly larger share of corporate profits are generated by international operations Till last decade competition for the company comes from the local market only , now it is not so. It comes from all the country

365. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 365 5.3.1.Approaches to Product Introduction  Since the time of globalization, business in general has increased and most companies have extended their product offerings across national boundaries and cultures respectively.

366. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 366 it is vital to note that companies have four basic alternatives when deciding to internationalize their products : Selling the same product everywhere; Make changes and adjustments on already existing products for different markets; Creation of new products for foreign markets; Merging all differences from the markets into one product where this will be introduced as a global product.

367. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 367 There are two models in introducing new products to the world markets : Waterfall Model: Global phased roll out ­ new products tickle down in a cascade like manner. Sprinkler Model: simultaneous worldwide entry; growing prominence of universal segments; and concerns about competitive pre-emption in the foreign markets.

368. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 368 The waterfall strategy of segmentation entry is preferable over the sprinkler model when; The lifecycle of the products is relatively long Non-favorable conditions govern the foreign market, such as: Small foreign markets (compared to home market),· Slow growth, and· High fixed cost of entry. Weak competitive climate exists in the foreign market, because of such things as very weak local competitors, competitors willing to cooperate and no competitors

369. Water fall strategies 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 369

370. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 370

371. Cont.. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 371

372. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 372 5.3.2. Theoretical foundations of product standardization / adaptation strategies Product standardization strategy:- refers to a uniform representation of all aspects of the product such as the quality, the materials been used, product name, and packaging for all markets, regardless of location around the world. Product adaptation:- is when changes and special modifications are made in order to adjust to each market in question

373. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 373 5.3.3.Product Standardization Strategy The standardization of products across cultures is increasingly becoming an important issue that the managers of global firms are today facing. As international marketing in the 21st century receives significant research attention, it seems the cost benefits and administration of standardization strategies has simplified the international marketing approach as well as being an attractive choice for many firms.

374. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 374 aspect for Multinational Corporations (MNCs. However, with the emergence of homogeneous ( identical ) markets worldwide, it is still a question of whether MNCs will or will not intermix both the standardization strategies and adaptation product strategies.

375. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 375 To that effect it would perhaps be more interesting to look beyond the dichotomy of standardization and adaptation as product strategies, that is not necessarily comparing which is the better option of these two comparisons. Understand that, even though the total product or service may not be able to be standardized, many companies are finding they can standardize the core platform which contains the essential technology,

376. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 376 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 brand as less confusion will occur when consumers travel across countries and see the same product.

377. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 377 5.3.4. Standardization and adaptation of different elements of the product A daptations come in several forms.  Mandatory adaptations involve changes that have to be made before the product can be used —for example., appliances made for the U.S. and Europe must run on different voltages, and a major problem was experienced in the European Union when hoses for restaurant frying machines could not simultaneously meet the legal requirements of different countries. 

378. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 378 “ Discretionary ” changes are changes that do not have to be made before a product can be introduced (for example., 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 adaptations —for example., in Sesame Street , the Big Bird became the Big Camel in Saudi Arabia.

379. Product Adaption 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 379

380. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 380

381. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 381 Main Approaches Detail Activities Standardization of product strategie s Offering a uniform product on regional or worldwide base may be with minor: changes Customization leverages cross-border differences in needs & wants of the firm's target customers. Forces that favor a globalized product strategy are: ­Common customer needs & buying behavior ­ Economies of scale in production, R&D, marketing and cost savings ­ Lesser time required in introducing into new markets ­ Global consumers & consumer mobility ­ Home country image ­ Similar technical specs for industrial & consumer products ­ Operating via exports of uniform products ­ Better marketing performance ­ Consistency in product design & selling techniques ­ Establishes a common image ­ Success in one market can be duplicated in other markets Standardization may lead to substantial opportunity lost Table 5.1. Summary of International Product Strategies :

382. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 382 Adaptation of product strategies Obligatory adaptation due to laws and regulations of foreign countries Discretionary adaptation (on the choice of the marketer) to better suit varying customer needs differing use conditions due to different market factors company's resources / product objectives product life-cycle stage

383. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 383 International product and communication strategies: International marketers may choose on of the flowing five product and communication strategies in the international markets: Product & Communication Extension: Dual Extension Early entrants often opt for this strategy. Small companies with few resources typically prefer this option. Also works for the company which targets a" global" customer with similar needs. Offers substantial savings coming from economics of scale. The downside is that it might alienate foreign customers who may switch to another competing brand that is more tuned with their needs.

384. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 384 Product Extension ­ Communication Adaptation Takes care of difference across countries in the cultural or competitive environment. Retains scale economics on manufacturing side, the firm sacrifices potential savings on the advertising front.

385. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 385 Pro duct Adaptation ­ Communication Extension local market circumstances often favor or require case of product adaptation (may be due to Govt. regulations ) Many companies add to their product portfolio via acquisition of local  companies adding new brands as an expansion strategy While product may differ, cultural similarities that stretch to consumers using the product present an opportunity for a harmonized communication. Within such control, clever marketing ideas can be transferred from one country to another, despite the product-related differences .

386. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 386 Product &Communication Adaptation ­ Dual Adaptation Differences in both cultural & physical environment across countries call for a dual adaptation strategy. Many be due to different Govt. regulations regarding products as well as communication Product Invention Develop new products from scratch from common need & opportunities around the world ­ instead for simply adapting existing products or services to the local market conditions

387. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 387 Produce products of global scope: today managers focus on degree of Globalization rather than striving for standardized or localized products . Two approaches that are being commonly used in international product design are : Modular Approach and Core-Product Approach. Modular Approach This approach consists of developing a range of product parts that can be used worldwide. Scale economics flow from the mass-production of more or less standard productcomponents at a few sites. Popular in automotive industry Core-Product Approach Design of mostly uniform core-product Attachments are added to core-product to match local market needs

388. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 388 Balancing act between Standardization and adaptation: Balancing act between Standardization and adaptation is very tricky. It is: Too much standardization (over standardization) stifles initiative &experimentation at the local subsidiary level Too much customization may lose the foreignness appeal of imported brands hence becoming me-too brands

389. Branding decisions an international marketer Major branding decisions an international marketer needs to take are summarized as follows in the table below : 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 389 Alternative Decisions Decisions outcomes Actions to be taken Brand ­ no brand Brand name selection Brand sponsor Manufacturer's brand ­Private brand ­Licensed brand Co-branding Brand strategy New brands Line extensions Brand extensions Multibrands Brand repositioning

390. Cont… 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 390 In relation to product branding, while Americans seem to be comfortable with category specific brands , this is not the case for Asian consumers.  Note that Japanese keiretsus span and use their brand name across multiple industries—e.g., Mitsubishi, among other things, sells food, automobiles, electronics, and heavy construction equipment.

391. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 391 A model showing International Product Branding decisions

392. model showing International Product Branding decisions 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 392 Factors favoring localization Factors favoring standardization Packaging, Labeling and Warranties

393. A)Product packaging: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 393 Product packaging is the art and science of creating boxes, covers, tubes, bags and other containers that are sturdy ( strong, powerful) enough to protect the product inside and that are effective promotional pieces in themselves . To a very large degree, the quality of design work on the package affects how well your products sell .

394. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 394 When shopping, you reach for products whose packaging are attractive and it looks professional, and you instinctively shy away from unattractively packaged products. The design of the container along with the images, logos, marketing text, ingredients and fine print, all go into creating something people will feel confident to buy.

395. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 395 Issues in packaging in international markets: International marketers need to take into account the following factors for deciding appropriate packaging in various international markets; changes in climates across countries lengthy & difficult transportation lengthy periods on shelves varying sizes of packaging different consumer preferences in packaging some standardization needed to make the product recognizable growing environmental consciousness different types of channels of distribution different cost pressures environmental concerns

396. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 396 Issues in labeling: International marketers also need to design appropriate labeling for various markets , to cater for the market differences as well as to adhere to regulations. issues marketers face in labeling in international markets; different languages of foreign markets information details to be provided instructions for use different price or currencies different promotions Consumer in various markets (color, wording style etc.) preferences rules and regulations of foreign countries

397. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 397 Issues in warranty and service policies : International marketers also face issues, Factors favoring whether to standardize or to localize warranty and service policies in international markets

398. B. Factors favoring standardization 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 398 presence of multinational customer goods purchased in one market but consumed elsewhere products affecting human health and safety s tandardized products

399. C)Factors favoring localization 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 399 different competitive situation different quality levels in different markets different use conditions lack of international service network stronger guarantees when the company is entering in new market (marketing tactic)

400. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 400 barriers to import of replacement parts and traveling o f foreign staff availability of human resources & ability of local distributors Strategies to cope with negative country of origin (COO) stereotypes: 

401. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 401 There are ways in which international marketers attempt to address to import or replacement parts though product policy, pricing , distribution and communication ;

402. 5.3.5. Advantages and Disadvantages of Product Standardization 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 402 A/Advantages of Standardization International uniformity has its own advantages. to get from different corner of the countries. You will be same and that it will have the same, standard benefits. This could mean the components that they buy from you in different local markets as they themselves become global.

403. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 403 Standardization reinforces positive consumer perceptions of your product. One of the payoffs of great quality for a single product category is that the reputation of your product will help you sell more of it. Positive word-of-mouth pays dividends for brand owners.

404. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 404 Cost reduction will give economies of scale . Since you are making large quantities or the same, non-adapted product – you benefit from the advantages associated with manufacturing in bulk ., There are other benefits relating to economies of scale, including improved which reduce the cost-per-unit . research and development, marketing operational costs, lower costs of investment, and in an age where trade barriers are coming down – standardization is a plausible product strategy.

405. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 405 Quality is improved since efforts are concentrated upon the single product. Staff can be trained to enhance the quality of the product and manufacturers will invest in technology and equipment that can safeguard the quality of the standardized product offering . B/ Disadvantages of Standardization Since the product is the same wherever you buy it, it is wholly undifferentiated . It is not unique in anyway . This leaves the obvious opportunity for a competitor to design a tailor-made, differentiated or branded product that meets the needs of local segments.

406. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 406 5.4.Introducing New Products in International Markets In business and engineering, new product development (NPD) is the term used to describe the complete process of bringing a new product or service to market . There are two parallel paths involved in the NPD process: 1 . one involves the idea generation, product design, and detail engineering;

407. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 407 2. the other involves market research and marketing analysis . Companies typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.

408. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 408 Categories of new products: Six categories of new products in terms of their newness to the company and to the market place : ­ New-to-the-world products new products that create an entirely new market New product-lines new products that allow a company to enter an established market for the first time ­ Additions to existing product-lines- new products that supplement a company's established product lines (package sizes, flavors, so on)

409. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 409 4. ­ Improvements or revisions to existing product-new products that provide improved performance or greater perceived value and replace existing products 5. Repositioning existing products that are targeted to new markets or new market segments 6. Cost reductions · new products that provide similar performance at lower cost

410. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 410 5.4.1.The International Product Life Cycle (IPLC) and Adaptation  Consumers in different countries differ in the speed with which they adopt new products, Thus, it may be possible, when one market has been saturated, to continue growth in another market while somewhere between one third and one half of American homes now contain a computer, the corresponding figures for even Europe and Japan are much lower

411. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 411 Note that expensive capital equipment may also cycle between countries e.g., airlines in economically developed countries will often buy the newest and most desired aircraft and sell off older ones to their counterparts in developing countries.  While in developed countries, “three part” canning machines that solder on the bottom with lead are unacceptable for health reasons , they have found a market in developing countries.

412. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 412 5.4.2.Theoretical Background of International Product Life Cycle (IPLC) In 1966, Raymond Vernon published a model that described internationalization patterns of organizations. He looked at how U.S. companies developed into multinational corporations (MNCs) at a time when these firms dominated global trade, the international trade model, known as International Product Life Cycle ( IPLC).

413. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 413

414. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 414

415. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 415 The intent of his International Product Life Cycle model (IPLC) was to advance trade theory beyond David Ricardo’s static framework of comparative advantages. In 1817 , Ricardo came up with a simple economic experiment to explain the benefits to any country that was engaged in international trade even if it could produce all products at the lowest cost and would seem to have no need to trade with foreign partners. He showed that it was advantageous for a country with an absolute advantage in all product categories to trade and allows its work force to specialize in those categories with the highest added value . Vernon focused on the dynamics of comparative advantage and drew inspiration from the product life cycle to explain how trade patterns change over time.

416. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 416 According to Vernon, the IPLC international trade cycle consists of three stages: A/ New Product The IPLC begins when a company in a developed country wants to exploit a technological breakthrough by launching a new, innovative product on its home market. Such a market is more likely to start in a developed nation because more high-income consumers are able to buy and are willing to experiment with new, expensive products ( low price elasticity ).

417. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 417 Furthermore, easier access to capital markets exists to fund new product development. Production is also more likely to start locally in order to minimize risk and uncertainty: “a location in which communication between the markets and the executives directly concerned with the new product is swift and easy, and in which a wide variety of potential types of input that might be needed by the production units are easily come by”.

418. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 418 Export to other industrial countries may occur at the end of this stage that allows the innovator to increase revenue and to increase the downward descent of the product’s experience curve. Other advanced nations have consumers with similar desires and incomes making exporting the easiest first step in an internationalization effort. Competition comes from a few local or domestic players that produce their own unique product variations.

419. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 419 B/Maturing Product Exports to markets in advanced countries further increase through time making it economically possible and sometimes politically necessary to start local production . The product’s design and production process becomes increasingly stable. Foreign direct investments (FDI) in production plants drive down unit cost because labor cost and transportation cost decrease.

420. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 420 Offshore production facilities are meant to serve local markets that substitute exports from the organization’s home market. Production still requires high-skilled, high paid employees. Competition from local firms jump start in these non-domestic advanced markets . Export orders will begin to come from countries with lower incomes.

421. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 421 C/ Standardized Product During this phase, the principal markets become saturated . The innovator's original comparative advantage based on functional benefits has eroded. The firm begins to focus on the reduction of process cost rather than the addition of new product features . This enables further economies of scale and increases the mobility of manufacturing operations.

422. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 422 Labor can start to be replaced by capital. “If economies of scale are being fully exploited, the principal difference between any two locations is likely to be labor costs ”. To counter price competition and trade barriers or s imply to meet local demand, production facilities will relocate to countries with lower incomes . As previously in advanced nations, local competitors will get access to firsthand information and can start to copy and sell the product.

423. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 423 the IPLC described an internationalization process wherein a local manufacturer in an advanced country Production capabilities build locally to stay in close contact with its clientele and to minimize risk and uncertainty. As demand from consumers in other markets rises, production increasingly shifts abroad enabling the firm to maximize economies of scale and to bypass trade barriers.

424. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 424 As the product matures and becomes more of a commodity, the number of competitors increases. In the end, the innovator from the advanced nation becomes challenged in its own home market making the advanced nation a net importer of the product. either by competitors in lesser developed countries or, if the innovator has developed into a multinational manufacturer , by its foreign based production facilities

425. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 425 The model can be used for product planning purposes in international marketing. New product development in a country does not occur by chance. A country must have a ready market, an able industrial capability and enough capital or labor to make a new product flourish. No two countries exist with identical local market conditions. Countries with high per capita incomes foster newly invented products. Countries with lower per capita incomes will focus on adapting

426. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 426 The IPLC model was widely adopted as the explanation of the ways industries migrated across borders over time , e.g. the textile industry. According to Vernon, most managers are “myopic”. Production is only moved outside the home market when a “triggering event” occurs that threatens export such as a new local competitor or new trade tariffs. Managers act when the threat has become greater than the risk in or uncertainty from reallocating operations abroad.

427. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 427 The model is best applied to consumer-oriented physical products based on a new technology at a time when functionality supersedes cost considerations and satisfies a universal need. Vernon’s main assumption was that the diffusion process of a new technology occurs slowly enough to generate temporary differences between countries in their access and use of new technologies. By the late 1970’s, he recognized that this assumption was no longer valid.

428. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 428 Income differences between advanced nations had dropped significantly, competitors were able to imitate product at much higher speeds than previously envisioned and MNCs Investments in an existing portfolio of production facilities made it harder to relocate plants.

429. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 429 The model assumed integrated firms that begin producing in one nation, followed by exporting and then building facilities abroad. The trade-off between export or foreign direct investments was too simplistic: more entry modes exist. The model assumed that technology can be captured in capital equipment and standard operating procedures. This assumption underpinned the discussion on labor-intensity, standardization and unit co st.

430. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 430 The model stated that the stages are separate and sequential in order. Vernon’s Harvard Multinational Enterprise Project that took place from 1963 through 1986, was a massive study of global marketing activities at US, European, Japanese and emerging-nation corporations. The study found that companies design strategies around their product technologies. High-technology producers behave differently from firms with less advanced goods. Companies that invested more R&D to improve their products and to refresh their technologies were able to ‘push’ these products back to the new product phase.

431. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 431 5.4.3.Diffusion of innovation The crucial elements in the diffusion of new ideas are (1) an innovation, (2) communicated through certain channels (3) over time, (4) among the members of a social system

432. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 432 Product innovations have a varying rate of acceptance. Some diffuse from introduction to widespread use in a few years; others take decades. For example, the contraceptive pill was introduced during that same period and gained acceptance in a few years Good new innovations often do not spread as quickly as one might expect— for example, although the technology for microwave ovens has existed since the 1950s, it took nearly 20 years to become widespread they really did not take off in th e United States until the late seventies or early eighties,

433. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 433 At least three extraneous variables affect the rate of diffusion of an object : The degree of perceived newness, the perceived attributes of the innovation, and the method used to communicate the idea . Each variable has a bearing on consumer reaction to a new product and the time needed for acceptance. An understanding of these variables can produce better product strategies for the international marketer.

434. Certain characteristics of products make them more or less likely to spread 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 434 One factor is relative advantage Another issue is compatibility Complexity refers Trialability observability

435. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 435 One factor is relative advantage .  While a computer offers a huge advantage over a typewriter, for example, the added gain from having an electric typewriter over a manual one was much smaller.  Another issue is compatibility , both in the social and physical sense.    A major problem with the personal computer was that it could not read the manual files that firms had maintained, and birth control programs are resisted in many countries due to conflicts with religious values.  Complexity refers to how difficult a new product is to use—for example, some people have resisted getting computers because learning to use them takes time.  

436. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 436 Trial ability refers to the extent to which one can examine the merits of a new product without having to commit a huge financial or personal investment— for example, it is relatively easy to try a restaurant with a new ethnic cuisine, this has to be bought and installed in one’s car before the consumer can determine whether it is worthwhile in practice. 

437. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 437 Finally, observability refers to the extent to which consumers can readily see others using the product — for example., people who do not have ATM cards or cellular phones can easily see the convenience that other people experience using them; on the other hand, VCRs are mostly used in people’s homes, and thus only an owner’s close friends would be likely to see it.

438. At the societal level, several factors influence the spread of an innovation 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 438 cosmopolitanism , Modernity physical distance ,

439. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 439 cosmopolitanism , the exten t to which a country is connected to other cultures, is useful.  Innovations are mo re likely to spread where there is a hi gher percentage of women in the work force; these women both have more economic power and are able to see other people use the products and/or discuss them. 

440. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 440 Modernity refers to the extent to which a culture values “progress.”  In the U.S., “new and improved” is considered highly attractive; in more traditional countries, their potential for disruption cause new products to be seen with more skepticism . 

441. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 441 Although U.S. consumers appear to adopt new products more quickly than those of other countries, we actually score lower on homophiles, the extent to which consumers are relatively similar to each other, and physical distance , where consumers who are more spread out are less likely to interact with other users of the product.  Japan , which ranks second only to the U.S., on the other hand, scores very well on these latter two factors.

442. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 442 Success of new products: successful new products are the ones: that have relative advantage have compatibility w ith other technology and distribution systems allow trial-ability / divisibility for buyers to try and learn can be j udged through observation just right in terms of complexity of technology and use offer value for the price

443. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 443 five characteristics of an innovation can assist in determining the rate of acceptance or resistance of the market to a product. A product’s ( 1) relative advantage (the perceived marginal value of the new product relative to the old); (2) compatibility (its compatibility with acceptable behavior, norms, values, and so forth) (3) complexity (the degree of complexity associated with product use); (4) trial-ability (the degree of economic and /or social risk associated with product use); and (5) observability (the case with which the product benefits can be communicated) affect the degree of its acceptance or resistance .

444. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 444 In general the art of diffusion can be postulated as positively related to relative advantage compatibility, trial-ability and Observability but negatively related to complexity. By analyzing a product within these five dimensions a marketer can often uncover perception s held by the market that if left unchanged would slow product acceptance.

445. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 445 Conversely if these perceptions are identified and changed the marketer may be able to accelerated product acceptance The evaluator must remember that it is the perception of product characteristics by the potential adopter not the marketers that is crucial to the evaluation.

446. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 446 A market analyst’s self-reference criterion (SRC) may cause a perceptual bias when interpreting the characteristics of a product. Instead of evaluating product characteristics from the foreign user’s frame of reference the marketer might analyze them from his or her frame of reference leading to a misinterpretation of the product’s cultural importance. Once the analysis has been made, some of the perceived newness or causes for resistance can be minimized through adroit marketing . The more congruent that product perception are with current cultural values, the less resistance there will be and the more rapid product diffusion or acceptance will be

447. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 447 5.4.4. Innovation Diffusion and New Product Adoption In new product marketing, one has to understand the process of innovation diffusion and new product adoption: how an innovation/new product idea spreads and gets adopted by the different segments of a society/market over time. New product diffusion/innovation diffusion is actually defined as the spreading of a new idea from its source of invention to the ultimate users. As the innovation spreads, adoption of the product by the consumers picks up

448. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 448 All consumers in a given market are not responding to a new product in the same manner. The speed and enthusiasm with which different consumers respond to a new product are seen to vary widely. Some are quick in trying out the product and even in adopting it as a regular item of consumption. Some others take more time to embrace the product. Some others hesitate for a longer time and yet others are willing to try it at all.

449. Innovation Diffusion and New Product Adoption 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 449 Innovators: Early adopters: Early majority Late majority: Laggards :

450. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 450 Innovators: Innovators are consumption pioneers who are ready to try out an innovation. And for any product, there will be some pioneers. The job of the marketer is to locate and identify this group and target the new product at them initially . Since volume-wise, these groups will not be big, the marketer has to simultaneously cover the next group in the adopter category —

451. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 451 Early adopters: The early adopters are the opinion leaders in their respective community and usually constitute a sizeable segment. the venturesome nature of its members plus its size, make it the ideal market segment to target. The task involved is to locate, identify and reach the segment through appropriate marketing programs /

452. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 452 Early majority: The next group in the adopter category to try out the new product will be the early majority. Though this group is not that venturesome like innovators or that fast in adoption like the early adopters, they are positive in their approach to new things and try them out earlier than an average person of their community

453. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 453 Late majority: Now comes the late majority in the adopter category who by and large skeptical in their approach to new things and generally try them only after a lot of people around them have adopted it. Laggards: The last category is the laggards who are tradition-bound and will generally take to a new product only after it becomes a known ad accepted product throughout the market .

454. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 454 for a particular product, need not behave in the same way in all new-product situations. This is true of all categories. And that is why the marketer’s job is difficult. He has to decide every time that for this particular product.

455. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 455 A new product marketer must understand thoroughly the diffusion process and the diffusion rate, and get a correct indication of the size of early adopters of the product, whowill give him the initial sales. In fact, in launching a new product, most attention is given for attracting the innovators and early adopters .

456. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 456 The product life cycle is generally considered to have four stages: Introduction: a period of slow program growth as it is introduced to the target market. Growth: a period of rapid market acceptance . Maturity: a period of a slowdown in sales growth due to acceptance by most of the potential buyers. Decline: the period when sales turn downward because the offering no longer meets the needs of the target market as it once did.

457. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 457 . 4.5.1.Screening Products for Adaptation An important first step in adapting a product to a foreign market is to determine the degree of newness as perceived by the intended market .

458. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 458 How people react to newness and how new a product is to a market must be understood. In evaluating the newness of a product, the international marketer must be aware that many products successful in one country having reached the maturity or even decline stage in their life cycles, may be perceived as new in another country or culture and thus must be treated as innovations.

459. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 459 The companies need the development of original products, product improvements, product modifications & new brands on a consistent basis to survive competition but most new products fail. New-product failure nearly 80% of new packaged consumer goods & line extensions fail nearly 33% of new industrial products fail at launch . New successful products are unique superior products higher quality, new features & offer higher value and have well-defined concept by carefully defining and assessing the target markets, product requirements & benefits .

460. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 460 5.4.5.2.Critical Success Factor in International Product Management Superior quality can reduce a customer's life-cycle ownership costs, enhancing customer loyalty , repeat buying, and word-of-mouth advertising ISO 9004 suggests the roles that marketing should play: 1. Take the lead in establishing quality requirements for the company by determining customer needs and communicating them throughout the company

461. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 461 2. Translate customers’ needs into specifications including performance and sensory characteristics, installation configuration, statutory and technical standards, packaging and quality standards Set up an information system to monitor customer satisfaction and dissatisfaction, and feedback such pertinent information to facilitate design and manufacturing changes

462. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 462 3. Develop early warning systems to spot performance problems with new-product introductions; continuously monitor product performance against quality specifications such as reliability and safety , and track and analyze customer complaints so that corrective action can be taken in design .

463. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 463 Use appropriate mix of the 4ps of marketing for your Marketing strategies: Product Policy:   Select a brand name that disguises the country of origin or even involves a favorable country of origin and, sheer innovation & drive for superior quality also help firms to overcome country of origin biases in the long run.

464. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 464 Pricing: -  Selling the product at a relatively low price will attract value-conscious customers who are less concerned about the brand's country of origin.  For product categories where price plays a signal of quality - high price may help. Distribution: Companies could influence consumer attitudes by using highly respected retailers. Communication:  Firm can use communication strategy to improve the country image and bolster the brand image

465. UNIT SIX DISTRIBUTION IN FOREIGN MARKETS 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 465 International Market Entry Decision The International Market Entry Evaluation Process Assessment of Firm Specific International Environment

466. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 466 The International Market Entry Evaluation Process .The International Marketing Entry Evaluation Process is a five stage process, and its purpose is to gauge which international market or markets offer the best opportunities for our products or services to succeed. The five steps are Country Identification , Preliminary Screening , In-Depth Screening , Final Selection and Direct Experience .

467. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 467 S tep One – Country Identification You can choose any country to go into. So you conduct country identification – which means that you undertake a general overview of potential new markets. There might be a simple match – for example two countries might share a similar heritage e.g. the United Kingdom and Australia, a similar language e.g. the United States and Australia, or even a similar culture, political ideology or religion e.g. China and Cuba. Often selection at this stage is more straightforward.

468. How does an organization enter an overseas market? 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 468 With rare exceptions, products just don’t emerge in foreign markets overnight—a firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available. Depending on the nature of foreign markets the suggested modes for entry are as follows;

469. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 469 Type of markets Entry Modes Platform countries ­ Establish a base to learn, collect information and set up contacts ­ an office perhaps Emerging markets Agents ­ representative office Growth markets ­ Joint venture ­ local subsidiary Maturing markets ­ Joint venture ­ local operations

470. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 470 Established markets Joint venture ­ acquisition Alternatives of International Market Entry Techniques So having considered the key factors in modes of entry into international markets, The next step is identifying alternative international market entry techniques by considering various issues in the Stages of Internationalization process.

471. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 471 Some will go through each stage as summarized below: Indirect exporting or licensing Direct exporting via a local distributor Your own foreign presences Home manufacture, and foreign assembly Foreign manufacture

472. Cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 472 Entering International Market through Export Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential.

473. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 473 The major modes of entry into international markets include: Exporting International Licensing and Franchising Trunkey Project Management Contract Direct Entry Strategies

474. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 474 There are direct and indirect approaches to exporting to other nations. Direct exporting is straightforward . Essentially the organization makes a commitment to market overseas on its own behalf. This gives it greater control over its brand and operations overseas, over an above indirect exporting.

475. con 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 475 . On the other hand, if you were to employ a home country agency (i.e. an exporting company from your country – which handles exporting on your behalf) to get your product into an overseas market then you would be exporting indirectly. Indirect exporting occurs when a firm sells its products to a domestic customer, who in turn exports the product , in either its original form or a modified form . Examples of indirect exporting include : Piggyback marketing and Exporting combinations.  

476. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 476 Direct Export : As the name indicates, direct export refers to the sale in the foreign market directly by the manufacturer . Piggybacking : is an indirect export system whereby your new product uses the existing distribution and logistics of another business.

477. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 477 Export Management Houses (EMHs) that act as a bolt on export department for your company. They offer a whole range of bespoke or a la carte services to exporting organizations. Export management companies a firm which acts as a client's export department – An EMC's staff is typically knowledgeable about the legal, financial and logistical details of exporting and importing. It can be commission agents or may take title of goods by profiting from the difference between local buying price and selling price to the foreign customer

478. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 478 Exporting is Simple mode of internationalizing a domestic business that has its own advantages and disadvantages: Advantages ­ allows a firm to quickly enter the foreign market ­ often involves less financial exposure ­ permits a firm to enter a foreign market gradually, and in this way allows it to assess local conditions and fine-tune its products to better suit the needs of the customers in the host country

479. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 479 Disadvantages ­ little control over marketing and distribution in the host country ­ can quickly lose market to other firms ­ in case of many goods , transportation costs may be high rendering the exported products too expensive for host markets

480. International Licensing and franchising 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 480 Licensing and franchising are also low exposure methods of entry —you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk.

481. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 481 Licensing is where your own organization charges a fee and/or royalty for the use of its technology, brand and/or expertise. Licensing includes franchising Franchisin g = involves the organization (franchiser) providing branding, concepts , expertise , and in fact most facets that are needed to operate in an overseas market, to the franchisee. Management tends to be controlled by the franchiser. Examples include Caldis Coffee in Addis Ababa.

482. Turnkey Contracts and Contract Manufacturing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 482 Turnkey Projects Turnkey contracts are major strategies to build large plants. A firm uses knowledge and expertise it has gained in one or more markets to provide a working project —example,  a factory , building , bridge, or other structure—to a buyer in a new country.  

483. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 483 Management Contracts  A firm agrees to manage a facility — example , a factory, port, or airport—in a foreign country, using knowledge gained in other markets.  Again, one thing is to be able to transfer technology— another is to be able to work in a new country with a different infrastructure, culture , and political/legal environme nt.

484. Direct Entry Strategies 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 484 Direct entry strategies , where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits . The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment.

485. Overseas Manufacture or International Sales Subsidiary 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 485 A business may decide that none of the other options are as viable as actually owning an overseas manufacturing plant i.e. the organization invests in plant, machinery and labor in the overseas market. This is also known as Foreign Direct Investment (FDI). This can be a new-build, or the company might acquire a current business that has suitable plant etc

486. Foreign direct investment (FDI): 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 486 Foreign direct investment is defined as investment in which the foreign investor gains control over the investment asset.

487. Types of Foreign direct investment (FDI): 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 487 FDI is the international movement of capital for specific investment purposes where the foreign investor establishes a lasting interest in an enterprise which is resident in another country. This interest implies a long term relationship between the direct investor and the enterprise , and significant influence on management of the enterprise. FDI contrasts with “portfolio investment”, which is investment in financial assets without managerial control .

488. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 488 FDI occurs when overseas companies set-up or purchase operations in another country. FDI can be new projects , expansions of existing projects, or mergers and acquisitions activity.

489. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 489 This suggests that a firm will enter a market using FDI if it has ownership, location and internalization advantages (OLI): Ownership advantages occur when a firm has competitive advantages over its competitors through knowledge capital such as technology, patents, and human capital and if these advantages can be transferred to, and replicated in, other countries.

490. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 490 The OLI model thus relates to “technology exploiting” motivations for FDI. FDI is associated with higher costs of market entry than exporting, licensing, or franchising

491. Factors Influencing FDI 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 491 Foreign direct investment not only brings in capital, it also brings in latest technologies and modern management practices . Such investments are crucial to ensure that any country's industries would be able to create products and services in future that can be sold in international markets. As such FDI is important not just for the developing countries, it is also equally important for developed nations . Industrialized nations are among the largest recipient of FDI.

492. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 492 Supply factors: Lower production costs for certain products / industries compared with other countries attractforeign investment in those industries Better logistics, warehousing and transportation infrastructure and systems (by air, sea or over land) also attract foreign direct investment Abundant availability of natural resources and other factors of production lead to cheaper prices ­of these resources and may attract foreign direct investment Firms also make foreign direct investment in foreign countries to access to key technologies  

493. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 493 Demand factors: Closer and good customer access also factors to bring in foreign direct investment Advantages in marketing, being closer to customers, may also bring in FDI Firms may need to establish operations in foreign markets for exploiting of competitiveadvantages Companies that have strong global brands may want to have full control over their brands inworld markets and my engage in FDI for preservation of brand names and trade marks

494. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 494 Customers of firms are also often traveling / moving to foreign countries. Firms may also need to establish operations in foreign countries due to their customers mobility Political factors: Firms may also invest in foreign countries for avoidance of any trade barriers posed by the homeof host countries Home country or foreign country government may provide economic development incentives forFDI , encouraging firms to invest overseas

495. Joint Ventures (JV) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 495 Joint Ventures tend to be equity-based i.e. a new company is set up with parties owning a proportion of the new business . There are many reasons why companies set up Joint Ventures to assist them to enter a new international market: Access to technology, core competences or management skills. To gain entry to a foreign market. For example, any business wishing to enter China needs to source local Chinese partners . Access to distribution channels , manufacturing and R&D are most common forms of Joint Venture.  

496. International Agents and International Distributors 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 496 Agents are often an early step into international marketing. Put simply, agents are individuals or organizations that are contracted to your business, and market on your behalf in a particular country. They rarely take ownership of products , and more commonly take a commission on goods sold. Agents usually represent more than one organization. Agents are a low-cost , but low-control option . If you intend to globalize, make sure that your contract allows you to regain direct control of product.

497. Strategic Alliances (SA) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 497 Strategic alliances are a term that describes a whole series of different relationships between companies that market internationally. Sometimes the relationships are between competitors . There are many examples including: Shared manufacturing e.g. Toyota Ayago is also marketed as a Citroen and a Peugeot. Research and Development (R&D) arrangements

498. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 498 Marketing agreements. Essentially, Strategic Alliances are non-equity based agreements i.e. companies remain independent and separate.

499. The Internet 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 499 The Internet is a new channel for some organizations and the sole channel for a large number of innovative new organizations. The e-marketing space consists of new Internet companies that have emerged as the Internet has developed, as well as those pre-existing companies t hat now employ e-marketing approaches as part of their overall marketing plan.

500. Managing Foreign Distributions 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 500 we hope now you have very good understanding of marketing mix elements(4Ps of marketing) and place, i.e., placing the product , is one of the four P’s of marketing and it refers to the distribution of the product covering channels of distribution and physical distribution .

501. International Distribution 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 501 The international distribution system consists of two subsystems, namely, the domestic system and the foreign system. There are broadly two ways of exporting , namely, direct exporting and indirect exporting. Indirect Exporting - The indirect method is more popular with firms which are just beginning their exporting activities and with those whose export business is not considerable. Two alternative channels for indirect exporting.

502. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 502 Two alternative channels for indirect exporting: International marketing middlemen that includes Export merchants , export/trading houses , trading companies, export drop shipper and agents/brokers; and Co-operative organizations - the co-operative exporting organizations which represent a cross between indirect and direct export , carries on exporting activities on behalf of several producers , and is partly under the administrative control of the manufacturers.

503. Types of Foreign intermediaries: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 503 Importers Distributors Wholesalers Retailers multiple channels Government Departments State buying organizations Joint-ventures and licensees/franchisees. Factors Influencing Channel Selection include: Product characteristics , Market and customer characteristics. Middlemen characteristic , Company characteristic and objectives, Competitors characteristics and Environmental characteristics

504. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 504 Distinguishing characteristics a distribution system The four characteristics are (a) a structure dominated by many small middlemen dealing with many small retailers, (b) channel control by manufacturers, (c) a business philosophy shaped by a unique culture, and (d) laws that protect the foundation of the system—the small retailer.

505. Effectiveness of international distribution channels 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 505 The Five C's Framework can be used by international marketers to determine the effectiveness of their international distribution channels;  Coverage -Ability of channel to reach targeted customers to achieve market share and growth objectives Character -Compatibility of channel with the firm's desired product positioning

506. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 506 Control- Ability of the firm to control total marketing program for the product or service Cost- Investment required establishing and maintaining the channel-variable associated with sales level. Fixed costs required to manage the channel: inventories, facilities, training of sales force.   Continuity - Loyalty of the channel to the firm

507. Unit 7: International promotion 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 507 Once the international business has made all the necessary decisions with regard to product design, pricing and distribution, a communication strategy needs to be developed, and coordinated with rest. Promotion is the presentation of messages intended to help sell a product or service. The types and direction of messages and the method of presentation may be extremely diverse, depending on the company, product, and country of operation.

508. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 508 Promotion may be characterized as - push , which uses direct selling techniques, or pull, which relies on mass media . To what degree a company should rely on push or pull depends in part on: Type of distribution system Cost and availability of media to reach target markets Consumer attitudes toward sources of information Price of the product compared to income

509. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 509 Promotion Mix: promotion mix is traditionally defined as the total marketing communications program and comprises of five major promotional tools, that are; Advertising - any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor Personal selling - personal presentation by the firm's sales force for the purpose of making sales & building customer relations

510. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 510 Sales promotion - short-term incentives to encourage the purchase or sale of a product or service Public Relationship - building good relations with the company's various publics, building up a good "corporate image" & handling unfavorable events Direct marketing - use of mail, telephone, internet, and other non-personal contact tools to communicate with customers and prospects

511. International Communication (Promotions Mix) 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 511 Successful product or service means nothing unless the benefit of such a service can be communicated clearly to the target market.

512. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 512 Types of Promotion Explanation Advertising Any non-personal paid form of communication using any form of mass media. Sales Promotion It is short-term incentives to encourage the purchase or sale of a product or service. Commonly used to obtain an increase in sales short term. Could involve using money off coupons or special offers. Personal Selling Personal presentation by the firm's sales force for the purpose of making sales & building customer relations. It is a Selling of a product service one to one basis. Direct marketing /Direct Mail Is the sending of publicity material to a named person within an organization? It can be done with the use of mail, telephone, internet, and other non-personal contact tools to communicate with customers and prospects. Direct mail allows an organization to use their resources more effectively by allowing them to send publicity material to a named person within their target segment. By personalizing advertising, response rates increase thus increasing the chance of improving sales.   Listed below are links to organization who's business involves direct mail. Internet Marketing Promoting and selling your services online using various forms of online marketing techniques such as banner advertisements, videos or social media.

513. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 513 Public Relations It is building good relations with the company's various publics, building up a Good "corporate image" & handling unfavorable events. Involves developing positive relationships with the organization media public. The art of good public relations is not only to obtain favorable publicity within the media, but it is also involves being able to handle successfully negative attention Sponsorship Where you pay an organization to use your brand or logo. This organization usually has a high profile so that you know that your brand will be seen by a large audience. Most common use of sponsorship is with sporting events.

514. Developing Effective International Communications 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 514 An effective communication campaign should comprise of a well thought out message strategy. What message are you trying to put across to your target audience? How will you deliver that message? Will it be through effective branding? Logos or slogan design ? Or Striplings?  

515. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 515 The message should reinforce the benefit of the product and should also help the company in developing a positioning strategy for the product. Companies with effective message strategies include identifying first the target audience ( individuals, groups, special publics or general public) . ­

516. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 516 Target audience will heavily affect the communicator's decision: ­ on what will be said ­ how it will be said when it will be said ­ where it will be said who will say it

517. Promotional Objectives 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 517 Promotional objectives - involve the question of what the firm hopes to achieve with a campaign —“increasing profits” is too vague an objective , since this has to be achieved through some intermediate outcome (such as increasing market share,) which in turn is achieved by some change in consumers which cause them to buy more). 

518. Some common objectives that firms may hold: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 518 Awareness .   This objective is often achieved through advertising, but could also be achieved through favorable point-of-purchase displays.   Note that since advertising and promotional stimuli are often afforded very little attention by consumers , potential buyers may have to be exposed to the promotional stimulus numerous times before it “registers .”

519. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 519 Trial .   Even when consumers know that a product exists and could possibly satisfy some of their desires, it may take a while before they get around to trying the product — especially when there are so many other products that compete for their attention and wallets.  Thus, the next step is often to try get consumer to try the product at least once , with the hope that they will make repeat purchases.  Continued advertising and point-of-purchase displays may be effective.  Although Coca Cola is widely known in China , a large part of the population has not yet tried the product .

520. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 520 Attitude toward the product .  A more reasonable objective is to get people to believe positive things about the product — example, that it has a superior taste and is better than generics or store brands .  This is often achieved through advertising.

521. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 521 Temporary sales increases .  For mature products and categories , attitudes may be fairly well established and not subject to cost-effective change.  Thus, it may be more useful to work on getting temporary increases in sales (which are likely to go away the incentives are removed).  for example, fast food restaurants may run temporary price promotions to get people to eat out more or switch from competitors , but when these promotions end, sales are likely to move back down again (in developing countries , in contrast, trial may be a more appropriate objective in this category).

522. Promotion through the Product Life Cycle 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 522 As products move through the four stages of the product lifecycle different promotional strategies should be employed at these stages to ensure the healthy success and life of the product.

523. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 523

524. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 524 Understanding which promotion technique/s is appropriate for each stage of the product lifecycle. The stages in the product lifecycle and suggested promotion strategies employed are presented as follows: Introduction stage when a product is now the organization’s objective will be to inform the target audience of its entry. Television, radio, magazine, coupons etc . may be used to push the product through the introduction stage of the lifecycle. Push and Pull Strategies will be used at this crucial stage.

525. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 525 Growth: - as the product becomes accepted by the target market (at this stage of the lifecycle) the organization will employ strategy to increase brand awareness and customer loyalty. Maturity: - at this stage of the lifecycle the product will be experiencing increased competition and will need persuasive tactics to encourage consumers to choose their product over their rivals. Any differential advantage/benefit will be need to be clearly communicated to the target audience.

526. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 526 Decline: as the product reaches the decline stage of its life cycle, all the organization can do is use strategy to remind consumers about the product in a bid to slow the inevitable.

527. Constraints on International Communications Strategies 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 527   Although firms that seek standardized positions may seek globally unified campaigns, there are several constraints: Languagebarriers :  The advertising will have to be translated, not just into the generic language category (e.g., Portuguese) but also into the specific version spoken in the region (e.g., Brazilian Portuguese).  Cultural barriers .  Subtle (understand) cultural differences may make an ad that tested well in one country unsuitable in another—e.g., an ad that featured a man walking in to join his wife in the bathroom was considered an inappropriate invasion in Japan. 

528. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 528 Symbolism often differs between cultures, and humor (comedy , Funniness ) which is based on the contrast to people’s experiences , tends not to travel well.  Values also tend to differ between cultures — in the U.S. and Australia, excelling above the group is often desirable , while in Japan, “The nail that sticks out gets hammered down.”   In the U.S., “The early bird gets the worm” while in China “The first bird in the flock gets shot down.”

529. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 529 Local attitudes toward advertising.  People in some countries are more receptive to advertising than others.   While advertising is accepted as a fact of life in the U.S., some Europeans find it too crass (thoughtless, vulgar) and commercial. Media infrastructure.   Cable TV is not well developed in some countries and regions, and not all media in all countries accept advertising.  Consumer media habits also differ dramatically; newspapers appear to have a higher reach than television and radio in parts of Latin America.

530. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 530 Advertising regulations .  Countries often have arbitrary rules on what can be advertised and what can be claimed .  Comparative adve rtising is banned almost everywhere outside the U.S.  Holland requires that a toothbrush be displayed in advertisements for sweets , and some countries require that advertising to be shown there be produced in the country.

531. Major factors influencing the setting international promotion mix: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 531 type of product / market size / dispersion of marke t push versus pull strategy buyer readiness stage product lifecycle stage

532. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 532 availability of media market sophistication nature & level of competition / clutter company's market position / objectives company's resources regulations

533. Cultural Issues and International Marketing Communications 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 533 There are a whole range of cultural issues that international marketers need to consider when communicating with target audiences in different cultures. Language will always be a challenge. One cannot use a single language for an international campaign.

534. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 534 Of course language choice could affect branding choices, and the names of products and services. Hidden messages and humor would be especially tricky to convey.

535. Some cultural dimensions include the following: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 535 Directness vs. indirectness :   U.S. advertising tends to emphasize directly why someone would benefit from buying the product.    Comparison :  Comparative advertising is banned in most countries and would probably be very counterproductive , as an insulting instance of confrontation and bragging, in Asia even if it were allowed.   In the U.S ., comparison advertising has proven somewhat effective (although its implementation is tricky) as a way to persuade consumers what to buy. Humor .  Although humor is a relatively universal phenomenon, what is considered funny between countries differs greatly, so pre-testing is essential.

536. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 536 Gender roles .  A study found that women in U.S. advertising tended to be shown in more traditional roles in the U.S. than in Europe or Australia.  On the other hand, some countries are even more traditional—e.g., a Japanese ad that claimed a camera to be “so simple that even a woman can use it” was not found to be unusually insulting. Explicitness.   Europeans tend to allow for considerably more explicit advertisements , often with sexual overtones , than Americans. Sophistication .  Europeans, particularly the French, demand considerably more sophistication than Americans who may react more favorably to emotional appeals —e.g., an ad showing a mentally retarded young man succeeding in a job at McDonald’s was very favorably received in the U.S. but was booed at the Cannes film festival in France.

537. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 537 Popular vs. traditional culture .  U.S. ads tend to employ contemporary, popular culture , often including current music while those in more traditional cultures tend to refer more to classical culture. Information content vs. fluff(nonsense) .   American ads contain a great deal of “puffery,”(exaggerated) which was found to be very ineffective in Eastern European countries because it resembled communist propaganda too much. 

538. Media Choices in International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 538 Media strategy refers to how the organization is going to deliver its message. What aspects of the promotional mix will the company use to deliver their message strategy. Where will they promote it? Clearly the company must take into account the readership (readers of particular publications) and general behavior of their target audience before they select their media strategy.

539. Influences upon International Media Choice 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 539 There are a number of factors that will impact upon choice and availability of media such as: The nature and level of competition for marketing communication channels in your target market. Whether or not there is a rich variety of media in your target market. The level of economic development in your target market (for example, in remote regions of Africa there would be no mains electricity on which to run TVs or radios ).

540. cont 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 540 The availability of other local resources to assist you with your campaign will also need to be investigated (for example, sales people or local advertising expertise). Local laws may not allow specific content or references to be made in adverts (for example, it is not acceptable to show naked legs in adverts displayed in Muslim countries).

541. Advertising in International Marketing 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 541 Advertising is paid communication through a non-personal medium in which the sponsor is identified and the message is controlled. Variations include publicity , public relations , product placement , sponsorship, underwriting, and sales promotion . Every major medium is used to deliver these messages: television, radio, movies, magazines, newspapers, the internet, and billboards .

542. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 542 Advertisements can also be seen on the seats of grocery carts, on the walls of an airport walkway, and on the sides of buses, or heard in telephone hold messages or in-store public announcement (PA) systems

543. Pros and Cons of Advertising 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 543 Advertising has a number of pros and cons: When considering press advertising try to anticipate the levels of literacy within the nation in question. Where literacy levels are lower, perhaps you could use a more visual campaign. Which language(s) is the press written in ? What is the split between regional and national press in your target market?

544. Basic Steps in Planning the Advertising Campaign 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 544 1- Appraise your advertising opportunity: Analyze your market : Do I have sufficient information to define closely the target market? Am I aware of the factors of that affect demand for my product? Determine your advertising objectives -- should contain: What is the basic message I want delivered? Who is the audience I want reached

545. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 545 Establish you budget and the necessary control systems: What kind of balance between reach, frequency, and continuity will be most effective? Develop your strategy: Which media will deliver the most effective advertising messages to the greatest number ofprospects at the lowest possible cost? What kind of message should be created?

546. 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 546 Coordinate advertising with other promotional and marketing methods: What other types of advertising and marketing efforts am I currently involved in? How will these other activities affect my ad campaign? Evaluate advertising results: Have I done adequate pre testing before investing substantial money in a major campaign?

547. Advertising in Developed and Developing Countries 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 547 Advertising in developed countries: Emphasize consumer goods , their retailing and advertising through mass media Heavy advertising and economic development go hand in hand Restrictions in some countries

548. Advertising in developing countries: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 548 Many less developed countries are sellers' market Most product markets are geographically limited Media not highly developed Advertising plays a less significant role in marketing Do not have many resources to allocate for advertising

549. International advertising environment: 6/18/2018 Department of BME,set by Lemmi Tafa(MA) 549 Involves complexities of cross-cultural communications Consumer values and behavior patterns vary from one country to another ( language, level of context needed, life styles, values, norms & customs, ethics & moral standards, taboos). Differences in media and their availability . Differences in regulations and market environment (economic, cultural, demographic, political/legal).