Chapter 22 Marketing Strategy

Question 1

Define economic globalisation

Answer 1

the increasing economic integration and interdependence of national, regional, and local economies across the world through an intensification of cross-border movement of goods, services, technologies and capital.

Question 2

Benefits of economic globalisation (5)

Answer 2

Greater opportunity for entering new markets, especially when domestic markets are saturated => higher sales, economies of scale
Pan global marketing strategies can be used to create a global brand identity
Increased competition gives firms incentives to improve quality
Wider choice of locations
Possible cheaper labour costs

Question 3

Limitations of economic globalisation (6)

Answer 3

The drive for international competitiveness might wipe out some businesses that operate on a local/national level
Pan globalisation strategies can fail to consider the cultural and taste differences between consumers of different nations
Communication/legal problems due to language barrier, difference in cultures and laws/regulations
Businesses are now increasingly at risk of foreign takeovers
Increasing activity of anti-globalisation pressure groups may result in bad publicity of multinationals (environmental concerns)
Governments will have less influence on business decisions

Question 4

Define international marketing

Answer 4

Selling products in markets other than the original domestic market

Question 5

Why sell products in other countries? (5)

Answer 5

Saturated home markets
Profits - rapid sales growth may be combined with low costs operation
Spreading risks - sales and profits of a business are much less dependent on economic and legal constraints in the home country
Decrease in trade barriers, more international free trades
Access to more potential consumers

Question 6

Why international marketing is different?

Answer 6

Political differences
Economic and social differences
Legal differences
Cultural differences
Differences in business practices

Question 7

Political differences

Answer 7

Changes of governments can cause instability in some countries and this can increase the risk of doing business there. Acts of terrorism or threats of civil violence, which might lead to destruction of a company’s assets, will all add to the problems of marketing abroad.

Question 8

Cultural differences

Answer 8

often difficult to define and measure
can exercise as powerful an impact on people’s behaviour
failure to recognise cultural and language differences can have a disastrous effect on a firm’s marketing strategy. e.g. use of male and female models in advertisements would not be acceptable in some countries with strong religious traditions

Question 9

Economic and social differences

Answer 9

Location decisions about a firm’s marketing activities will need to take this into account as well as differences in tax rates, interest rates and the age structure of the population.

Question 10

Legal differences

Answer 10

Some goods, such as guns, can be sold in the USA, but are illegal in other countries.
It is illegal to advertise directly to children below the age of 12 on Swedish TV – and there are other restrictions in other countries.
Other countries outlaw the targeting of junk food commercials or pharmaceutical medicines.
Product safety and product labeling controls are much stricter in the European Union (EU) than in some African states.

Question 11

Differences in business practices

Answer 11

Accounting standards and rules can vary in different parts of the world. The ease of setting up a limited company varies widely – it can take a few days in the UK, yet the formalities and form filling can exceed one year in Sierra Leone.

Question 12

Key methods for entering international markets (8)

Answer 12

Exporting
International franchising
E-commerce
Joint ventures
Strategic alliances
Acquisitions and takeovers
Licensing
Direct investment in subsidiaries

Question 13

Exporting

Answer 13

Exporting can be undertaken either by selling the product directly to a foreign customer – perhaps the order has been placed via the company website – or indirectly through an export intermediary, such as an agent or trading company based in the country.

Question 14

Benefits of exporting directly (3)

Answer 14

Has complete control over the international marketing of the product
Agents and traders may represent several other companies exporting goods => gives no priority
No commission is taken by intermediaries

Question 15

Limitations of exporting directly (3)

Answer 15

Business will have to dedicate sales personnel dealing with foreign buyers and company management may have to travel abroad to meet customers
Lack important local knowledge due to lack of local agent/trader
Exporting business has to handle the logistics of transporting and storing the product

Question 16

International franchising

Answer 16

International franchising means that foreign franchisees are used to operate a firm’s activities abroad. This can either take the form of one foreign company being used as a franchisee for all the branches in their own country or individual franchisees are appointed to operate each outlet.

Question 17

Joint ventures/Strategic alliances

Answer 17

These are agreements between at least two companies to own and operate a new business venture. No new business is formed and control is shared.

Question 18

Takeovers

Answer 18

A business will buy a controlling stake in a company that already operates in the country of interest

Question 19

Licensing

Answer 19

A licensor (i.e. the firm with the technology or brand) can provide their products, services, brand and/or technology to a licensee via an agreement.
allowing the licensor affordable and low risk entry to

Question 20

Takeovers

Answer 20

A business will buy a controlling stake in a company that already operates in the country of interest

e.g. The licensor is a company involved in energy health drinks.

Question 21

Licensing

Answer 21

A licensor (i.e. the firm with the technology or brand) can provide their products, services, brand and/or technology to a licensee via an agreement.

allowing the licensor affordable and low risk entry to a foreign market while the licensee can gain access to the competitive advantages and unique assets of another firm.

Question 22

Direct investment in subsidiaries

Answer 22

A partially or wholly owned company that is part of a larger corporation with headquarters in another country. Foreign subsidiary companies are incorporated under the law’s of the country it is located.

e.g. Toyota in the EU and South America

Question 23

Benefits of foreign subsidiaries (3)

Answer 23

Head office has control of operations and may decide to decentralise this control to allow local manager to take decisions that reflect local decisions

All profits after tax belong to the company - no commission or sharing of profits

Question 24

Limitations of foreign subsidiaries (3)

Answer 24

Expensive to set up operations in foreign countries - senior staff will need to visit and may need to be based in the country, can be more expensive than exporting

Foreign operations may be subject to changes in government policy

Question 25

Define pan-global marketing

Answer 25

adopting a standardised product across the globe as if the entire world were a single market - selling the same goods in the same way everywhere

Question 26

Advantages of pan-global marketing (3)

Answer 26

A common identity for the product can be established => aids consumer recognition

Cost reduction can be substantial since there are economies of scale. One marketing strategy to be used for the whole world or region

Question 27

Disadvantages of pan-global marketing (4)

Answer 27

Might be still necessary to develop different products to suit cultural/religious variations

Legal restrictions can vary between countries and this does not apply just to product restrictions

Question 28

Define global localization

Answer 28

adapting the marketing mix, including differentiated products, to meet national and regional tastes and cultures

Question 29

Benefits of global localization (4)

Answer 29

Local needs, tastes and cultures are reflected in the marketing mix => higher sales and profits

No attempt to impose foreign brands/products/advertisements on regional markets

Question 30

Limitations of global localization (3)

Answer 30

The scope for economies of scale is reduced

The interational brand could lose its power and identity if locally adapted products become more popular