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MCS 3000 > Chapter 2: Marketing Foundations > Flashcards

Chapter 2: Marketing Foundations Flashcards

1
Q

What is Corporate Social Responsibility (CSR)?

A

A firm’s behaviours and strategies that are undertaken in order to have a positive impact on the world

○ A firms that values CSR operates in a way that enhances the global society & environment
○ Creates greater loyalty & satisfaction w/ the organization by employees & customers
○ Increases firm performance

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2
Q

What is the Global Experience Learning Curve?

A
  • Moves a company through 4 distinct stages as the company become more international over time

○ Non-linear process
○ Time spent in each stage varies

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3
Q

GELC - Describe Stage 1

A
  • Stage 1: Companies W/ No Foreign Marketing

○ No formal international channel relationship or global marketing strategy

○ Small w/ limited product range

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4
Q

GELC - Describe Stage 2

A
  • Stage 2: Companies W/ Foreign Marketing

○ Follow existing customers into foreign markets

○ Involves developing local distribution & service representation in a foreign market in one of two ways

i. local intermediaries & create relationships

ii. direct sales force in key markets

○ Key activities (product planning, developing, & manufacturing) done in home market; products modified to fit international requirements

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5
Q

GELC - Describe Stage 3

A
  • Stage 3: International Marketing

○ Firms that market & manufacture outside their domestic market

○ Company creates an international division/unit that is responsible for growing the business in foreign markets

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6
Q

GELC - Describe Stage 4

A
  • Stage 4: Global Marketing

○ Company believes that all world markets (including domestic market) are in reality a single market w/ many different segments

○ Occurs when a company generates more than half of its revenue in international markets

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7
Q

When analyzing global markets, what are the 5 basic types of information that research focuses on?

A
  1. Economic - GDP, growth, Inflation
  2. Cultural & Societal Trends - cultural practices & values
  3. Business Environment - Ethical standards, management styles, degree of formality
  4. Political & Legal - government relationships, laws, policies
  5. Specific Market Conditions - market trends, competitors & unique market characteristics
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8
Q

In which markets are the most significant economic growth found?

A

Emerging Markets - China, India

  • Small economies; significant percentage growth is due to this
  • Traditional marketing methods deemed ineffective within these markets
  • Challenge - demand for products may be strong, but there is insufficient income to purchase the product and inadequate infrastructure to support sophisticated market programs
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9
Q

What are Regional Market Zones?

A

consist of a group of countries that create formal relationships for mutual economic benefit through lower tariffs and reduced trade barriers

○ E.g., European Union
○ influence extends beyond economic concerns to political and social issues

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10
Q

What 4 forces result in regional market zones?

A

a. Economic - small/medium-sized countries believe growth in their country will be enhanced by forming alliances

b. Geographic Proximity - to other alliance partners is advantageous in the development of a market zone

c. Political - Closely related to increased economic power is increased political clout, particularly as smaller countries form broad political alliances; general agreement on policies

d. Cultural Similarities - shared cultural experiences encourage greater cooperation and minimize possible conflicts from cultural disparities

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11
Q

What is NAFTA?

A
  • most significant market zone in the Americas is the alliance of the United States, Canada, and Mexico
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12
Q

What is MERCOSUR?

A

most powerful market zone in South America, was inaugurated in 1995 and includes Argentina, Brazil, Paraguay, Uruguay, and Venezuela

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13
Q

How are global markets selected?

A
  1. Identify Selection Criteria - incorporate the nature of the competitive environment (local and global competitors), target market size, future growth rates
  • interested in knowing the size of the investment and the length of time it will take before the company can expect to be profitable in a new market
  1. Evaluate Opportunities - evaluate global market opportunities against key company characteristics to look for markets that maximize the company’s strengths while minimizing weaknesses
  • Moving into new foreign markets brings greater risk to the company
  • Decision makers must consider whether their company philosophy, personnel skill sets, organizational structure, management expertise, and financial resources support the move into new countries
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14
Q

Why is it hard to make a decision regarding which global market to enter?

A
  • risk of failure is very high
  • Targeting the wrong country can lead to very high costs and unprofitable long-term investments
  • moving too slowly into a market can hamper growth and limit profit potential in the future
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15
Q

What is a mistake that companies often make when developing global market strategies?

A
  • Often mistakenly believe they can adapt existing market strategies to new international markets
  • Unfortunately, successful market tactics in the company’s home market often fail to translate well into foreign markets
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16
Q

What are Market Entry Strategies?

A
  • Framework for entering a new global market
  • This decision affects all other marketing decisions
  • Has long-term implications - difficult and expensive to change
  • 4 Basic Strategies - exporting, contractual agreements, strategic alliances, & ownership
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17
Q

Market Entry Strategies: Exporting

A
  • Most common method - minimal investment & risk

*considered an initial entry strategy and not a long-term approach to global marketing

  • Can be done through the internet - easy payment and credit terms offered by global credit companies
  • as well as direct sales force & distributors
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18
Q

What is the difference between and exporter & distributor?

A

A. Exporters - international market specialists that help companies by acting as the export marketing department

○ Minimal contact w/ the company
○ Provide a valuable service w/ their knowledge of policies & procedures for shipping to foreign markets

○ Small companies - exporters help expedite the process of getting the product to a foreign customer

B. Distributors - represent the company & many others in foreign markets

○ Face of the company in the country - service customers, sell products, receive payments

○ Take title to the goods & resell them

○ Advantage - know their own local markets and offer a company physical representation in a global market, saving the company from committing major resources to hire and staff its own operations

○ Disadvantage - lack of control; do not work directly for the company

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19
Q

What is a direct sales force?

A
  • Significant step for company’s moving into the global market
  • Expensive to staff & maintain
    ○ companies will often make the commitment because of the level of control and expertise offered by company-trained salespeople
  • For some industries, creating a direct sales force is required because customers will demand that company salespeople be in the country
    ○ E.g. Tech & high-end industrial products
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20
Q

Market Entry Strategies: Contractual Agreements

A
  • Allows a company to expand participation in a market by creating enduring, nonequity relationships w/ another company (often local in that market)
  • Transmit something of value - technology, a trademark, a patent, or a unique manufacturing process in return for financial compensation in the form of a licensing fee or percentage of sales
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21
Q

Describe two types of contractual agreements

A

A. Licensing - Chosen when local partnerships are required by law, legal restrictions prohibit direct importing of the product, or the company’s limited financial resources limit more active foreign participation

  • Companies seeking to establish greater presence in a market without committing significant resources can choose to license their key asset (patent, trademark) to another company, effectively giving that company the right to use that asset in that market
  • Licensing doesn’t offer high profit potential & can limit long-term opportunities

B. Franchising - enables companies to gain access to a foreign market with local ownership

  • The franchisor, usually a company seeking to enter a foreign market, agrees to supply a bundle of products, systems, services, and management expertise to the franchisee in return for local market knowledge, financial consideration (franchisee fee, percentage of sales, required purchasing of certain products from franchisor), and local management experience
  • Franchisors exert a great deal of control with extensive franchise agreements that dictate how the franchisee will operate the business
22
Q

Market Entry Strategies: Strategic Alliances

A
  • In some industries, strategic alliances now dominate the competitive landscape
  • International Joint Ventures - enables many companies to enter a market that would otherwise be closed because of legal restrictions or cultural barriers
23
Q

Market Entry Strategies: Ownership/Direct Foreign Investment

A
  • Greatest long-term implications; risks increase when a company moves manufacturing into a foreign market
  • Must consider:
    ○ Timing-unknown political or social events, competitor activity.
    ○ Legal issues-growing complexity of international contracts, asset protection.
    ○ Transaction costs-production and other costs stated in various currencies.
    ○ Technology transfer-key technologies are more easily copied in foreign markets.
    ○ Product differentiation-differentiating a product without increasing cost.
    ○ Marketing communication barriers ~ local market practices vary a great deal.
24
Q

Before a company decides on its organizational structure, what two critical decisions must it make?

A
  1. Decision of Authority - clearly defined protocols regarding which decisions are made at each level of the organization
  2. Degree of Centralization - affects resource allocation and personnel
  • Centralization - include greater control and, as a result, more consistency across the organization
    □Decentralized organizations - offer a hands-on management approach that facilitates rapid response to changing market conditions
    □regional organization - seeks to combine advantages of both approaches by centralizing key functions while pushing decision making closer to the global market
25
Q

Organizational Structure - Global Product Lines

A
  • work for companies w/ a broad range of products
  • based on the global functionality and appeal of the products and enables companies to target similar products to customers around the world
  • Disadvantage - some organizational functions such as the direct sales force may be duplicated in markets where the company believes there is significant market opportunity
26
Q

Organizational Structure: Geographic Regions

A

○ Divides international markets by geography, building autonomous regional organizations that perform business functions in their geographic area

○ Works particularly well when local government relationships are critical to the success of international operations as it affords company management a closer connection to local customers

27
Q

Organizational Structure: Matrix

A
  • combination of first two
    ○ most companies today use some form of matrix structure that encourages regional autonomy while building product competence in key areas around the world
28
Q

What 3 basic product options must a company choose from when expanding into the global market?

A
  1. Direct product extension: Introduce a product produced in the company’s home market into an international market with no product changes.
  • Advantages include no additional R&D or manufacturing costs.
  • Disadvantages are that the product may not fit local needs or tastes.

2.Product adaptation: Alter an existing product to fit local needs and legal requirements.

  • Adaptation can range from regional levels all the way down to city-level differences.
  1. Product invention: Create a new product specifically for an international market.
  • Sometimes old products discontinued in one market can be reintroduced in a new market, a process known as backward invention
29
Q

What 4 specific product issues do international consumer marketers face?

A
  1. Quality - perception varies differently across the globe
  • Consumers are knowledge about quality & what they are/are not willing to pay for
  1. Filling the Product to the Culture - Cultural differences influence consumer product choices
  • Colours and features of a brand are dependent on the culture in foreign market
  • need to adapt to fit (e.g. Ikea; Coke)
  1. Brand Strategy - often seek to create a unified brand strategy around the world
  • Local brands offer companies distinct awareness and built-in market loyalty
    -E.g. Nestle - follows a local branding strategy for individual products; promotes company globally
  1. Country of origin - influence of the country of manufacture, assembly, or design on a customer’s positive or negative perception of a product

-e.g. Made in Italy - positive, expensive; Made in China - cheap, poor quality
- People in developed countries prefer products manufactured in their own country
- allows for brand association (e.g. Bud Light = American)

30
Q

What is a major issue global marketers face in getting their product to the customer?

A

Establishing Channel Structures/logistics

  • Many companies have to rethink their distribution strategy when they enter global markets and find inadequate transportation networks
  • High Stakes - decision in the short run, difficult and expensive to adjust
  • Successful channels = competitive advantage & limits competitions
31
Q

Six C’s of Channel Strategy: Cost

A
  1. Cost - estimations include (1) the initial investment in creating the channel and (2) the cost of maintaining the channel
  • As companies expand into new markets, many search for ways to increase the efficiency of local distribution systems by eliminating unnecessary middlemen, thereby shortening the channel to the customer
32
Q

Six C’s of Channel Strategy: Capital

A
  • An inadequate global market distribution system is expensive in terms of both adding cost to the product and creating long-term damage to the brand and the company’s reputation

-If a channel network is already in place, the investment is low; however, if the company needs to develop or greatly improve an existing system, the cost can be very high

33
Q

Six C’s of Channel Strategy: Control

A
  • The more control the company wants in the channel, the more expensive it is to maintain

-As a result, companies generally look for a balance between channel control and cost

34
Q

Six C’s of Channel Strategy: Coverage

A

Local distribution networks around the world may lack full exposure to a given market

As a result, it is necessary to evaluate which distribution network best reaches the target customers, which may not necessarily be the network with the widest distribution

35
Q

Six C’s of Channel Strategy: Character

A
  • The capabilities, reputation, and skills of the local channel partner should match the company’s characteristics

-A service-oriented company should look for local channel partners with a reputation for excellent service and high customer satisfaction

36
Q

Six C’s of Channel Strategy: Continuity

A

-Changing a distribution system creates anxiety among customers and gives competitors an opportunity to take advantage of inevitable inefficiencies and disruption of service

-Identifying channel partners with a long-standing presence in the market provides some security

  • the best local partners are also the most difficult to establish a relationship with as they frequently already have established involvement with competitors
37
Q

What are the four basic approaches to global market advertising?

A
  1. Global Marketing Themes - adjusting only the colour and language to local market conditions; ad template remains unchanged throughout the world
  2. Global Marketing w/ Local Content - keeps the same global marketing theme as the home market but adapts it with local content
  3. Global Advertising Themes - related but distinct ads built around several marketing messages are generated; local marketers select the ads that best fit their specific market situation
  4. Local Market Ad Generation - create local ads that do not necessarily coordinate with global marketing messages; expensive
38
Q

T/F: salesperson-customer relationship is dramatically different around the world

A

TRUE

E.g.
- In the United States, the relationship is very business-focused and less personal
-In Latin America and Asia, the relationship is much more personal

  • Actual business negotiations often do not begin until a personal relationship has been established
    -Sensitivity training required
39
Q

How has the expansion of global communications increased the importance of international public relations?

A
  • Companies realize that dealing with crises must be done quickly and effectively as global news organizations move instantly on stories around the world

-When companies introduce new products, they frequently schedule them to coincide with press conferences and news cycles in other countries

40
Q

What are the 3 approaches to global pricing?

A
  1. One Global Price
  2. Local Market Conditions Price
  3. Cost-based Price

-No single pricing strategy accommodates every local foreign market, so most companies follow a combination of cost-based and market-conditions-based pricing in setting a final price to market

41
Q

Global Pricing Strategy: One Global Price

A
  • One price for products in every market
  • allows for standardization of marketing mix & simplifies financial forecasting
  • not common; the cost to produce, distribute, and market the product varies dramatically, creating wide fluctuations in profit margins
42
Q

Global Pricing Strategy: Local Markets Conditions Price

A
  • Price based on local market conditions with minimal consideration for the actual cost of putting the product into the market
  • local conditions may not reflect the reality of bringing the product to market for an international company
  • Local competitors do not incur the transportation costs, potential tariffs, and other related expenses of bringing a product to a foreign market
  • As a result, companies must be particularly sensitive to local market pricing when setting their price
43
Q

Global Pricing Strategy: Cost-based Price

A
  • considers cost plus mark up
  • doesn’t consider market conditions
  • If costs are high as a result of tariffs or transportation, the final price may be too high for the market
44
Q

What is Price Escalation? What are the 4 primary forces driving higher costs?

A

Costs of doing business globally are often higher than in their home market

  1. Product Export Cost - Differences in the product configuration, packaging, and documentation raise the cost of many products for international markets.
    - Transfer Pricing - cost companies charge internally to move products between subsidiaries or divisions
  2. Tariffs, Import Fees, taxes - protect industries in their home market and increase their revenue.
  3. Exchange Rate Fluctuations
  4. Middlemen & Transportation Costs - extends the number of channel members and increases costs
45
Q

What is price dumping?

A

refers to the practice of charging less than actual costs or less than the product price in the company’s home markets

  • Outlawed
46
Q

What is the Gray Market?

A

involves the unauthorized diversion of branded products into global markets

-Gray market distributors (who are often authorized distributors) divert products from low-price to high-price markets

47
Q

What is Marketing Ethics?

A

encompasses a societal and professional standard of right and fair practices that are expected of marketing managers in their oversight of strategy formulation, implementation, and control

48
Q

What is the core concept in marketing?

A

Value - net benefits (or costs) associated with a product or service

-The buyer considers all the benefits, then subtracts all the costs, and arrives at a value for the product

49
Q

What impacts all elements in the marketing mix?

A

Ethics - has legal & financial consequences

Companies have a code of ethics that defines the company’s values

Code has 6 values: honesty, responsibility, fairness, respect, transparency, and citizenship

50
Q

What is the triple bottom line?

A

metric for evaluating not only the financial results of the company but the broader social equity, economic, and environmental considerations as well

51
Q

What is foreign marketing?

A

occurs when a firm develops local distribution & service representation outside its home market

§ Either through local intermediaries or its own marketing & sales force

MCS 3000 (6 decks)

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