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MKTG 440 > Exam 2 > Flashcards

Exam 2 Flashcards

1
Q

What are the four sets of factors an organization needs to know before selecting a market entry mode?

A

Internal factors
Industry/competition factors
Market factors
Entry barriers

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2
Q

Why do governments encourage exports and discourage imports?

A
  • To protect nascent industries
  • To fortify national defense programs
  • To support domestic employment opportunities
  • To combat aggressive trade policies
  • To protect the environment
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3
Q

What do governments do to discourage imports/encourage exports?

A

First and foremost, governments can impose duties on imports.

In addition, most governments utilize nontariff trade barriers (NTB) that serve as deterrents or obstacles to imports from other countries.

NTBS include quotas, discriminatory procurement policies, restrictive customs procedures, arbitrary monetary policies, and restrictive regulations.

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4
Q

What are export selling and export marketing? How do they affect the marketer’s job?

A
  • Export selling basically presents an extension strategy whereby products are offered for sale outside the home country without adaptation. The mindset of export selling is, “Here’s the product, take it or leave it.” One symptom of export selling would be providing sales literature in the home country language only.
  • Export marketing, by contrast represents willingness to adapt one or more of the marketing mix elements as required by the characteristics of the target market.

The marketer will play a different role in each because in export selling, the marketer is basically just handing the product off to the people in the host country whereas in export marketing, the marketer has a crucial role to play in figuring out how to make the product more marketable to these specific individuals

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5
Q

When should a company select direct market representation vs an independent intermediary?

A

Choose direct market representation when you want control and communications.

Choose independent intermediary when control isn’t as important such as when you are in situations with a small sales volume.

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6
Q

What is global sourcing? What factors need to be considered when making sourcing decisions?

A

A procurement strategy in which a business seeks to find the most cost efficient location for manufacturing a product, even if the location is in a foreign country. (i.e. outsourcing and offshoring)

Factors Affecting the Sourcing Decision:

  • Management vision
  • Factor costs and conditions
  • Customer needs
  • Supply chain management
  • Country risk
  • Exchange rates
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7
Q

Global mindset

A

The typical context for globalized marketing is not the usual “close to customer” mindset.
Rather, the point is usually to coordinate marketing activities across a wide variety of markets where the firm does business.

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8
Q

Product Category

A

A product category is all the products offering the same general functionality

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9
Q

Product

A

an object or system made available for consumer use; it is anything that can be offered to a market to satisfy the desire or need of a customer

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10
Q

Brand

A

a type of product manufactured by a particular company under a particular name

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11
Q

Segmentation

A

Represents an effort to identify and categorize groups of customers and countries with homogeneous attributes who are likely to exhibit similar responses to a company’s marketing mix.

Often two tiered: Country first, segments second

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12
Q

Targeting

A

The process of evaluating segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond

Focus on the segments that can be reached most effectively, efficiently, and profitably

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13
Q

Positioning

A

Positioning is required to differentiate the product or brand in the minds of the target market.

Uses the 4 P’s to differentiate the product in the consumer’s mind in significant ways

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14
Q

Segmentation is important because

A
  1. You don’t need everyone in a market to buy your product – you just need a large enough market to purchase your product or service
  2. How and how much you adapt your marketing mix depends on the market that you are targeting in a market
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15
Q

Conventional Wisdom

A
  • Assumes heterogeneity between countries
  • Assumes homogeneity within a country
  • Focuses on macro level of cultural differences
  • Relies on clustering of national markets
  • Less emphasis on within-country segments
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16
Q

Unconventional Wisdom

A
  • Assumes emergence of segments that transcend national boundaries
  • Recognizes existence of within-country differences
  • Emphasizes micro-level differences
  • Segments micro markets within and between countries
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17
Q

Macro-segmentation

A

to identify clusters of more similar countries

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18
Q

micro-segmentation

A

local segments which are similar across the countries are identified

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19
Q

How and how much you adapt your marketing mix depends on

A

the segment that you are targeting in a market

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20
Q

Three basic criteria for Assessing Market Potential

A
  1. Current size of the segment and anticipated growth potential
  2. Potential competition
  3. Compatibility with company’s overall objectives and the feasibility of successfully reaching the target audience
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21
Q

What makes a desirable segment?

A 
Identifiable
Measurable 
Reachable 
Able to buy
Willing to buy

Favorable political conditions
Market similarity
Growth potential

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22
Q

Marketing model drivers

A

key elements or factors required for a business to take root and grow in a particular country market environment (a company’s sources of competitive advantage, transferability).

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23
Q

Enabling conditions

A

structural market characteristics whose presence/absence can determine whether the marketing model can succeed (Model of national competitiveness)

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24
Q

First mover advantages

A
  • proprietary, technological leadership
  • Preemption of scarce resources
  • Establishment of entry barriers
  • Avoidance of class with dominant firms at home
  • Relationships and connections with key stakeholders
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25
Q

Late mover advantages

A
  • Opportunity for free ride on first mover investments
  • Resolution of technological and market uncertainty
  • First mover’s difficulty to adapt to market changes
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26
Q

Standardized or Undifferentiated Targeting

A 
Mass marketing on a global scale
Standardized marketing mix
Minimal product adaptation
Intensive distribution
Lower production costs
Lower communication costs
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27
Q

Concentrated Targeting

A
  • Single segment or similar segments of global market
  • Look for global depth rather than national breadth
  • Niche marketing
  • segments can be given more attention and markets positions fortified
  • particularly advantageous when the country or segment competitive rivalry is intense.
    • Ex.: Chanel, Estee Lauder
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28
Q

Differentiated (Focus) Targeting

A
  • different countries and different market segments
  • Wider market coverage
  • Difficulties in one market segment or country can be offset by gains elsewhere.
  • Particularly useful to counter political and financial risk
  • Multi-segment targeting
  • Two or more distinct markets
    • Ex.: Mont Blanc pens
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29
Q

Positioning Decisions: Two Major Factors

A
  • Degree of globalization in the market
    • Benefits sought
    • Customer preferences
  • PLC stage
    • Later stages of PLC = sophisticated customers
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30
Q

Positioning Strategies

A
  • Global consumer culture positioning
  • Foreign consumer culture positioning
  • Local consumer culture positioning
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31
Q

Selecting a Mode of Market Entry: Internal Factors to Consider

A
  • Competitive advantages
  • corporate strategy and objectives
  • marketing strategy and objectives
  • costs
  • international experience
  • company size, financial and marketing resources
  • product/market fit (adaptation needed?)
  • strategic flexibility vs resource commitment
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32
Q

Selecting a Mode of Market Entry: Industry/Competition Related Factors

A
  • global industry structure
      • globalization drivers
  • nature of competition
      • domestic, foreign, global
      • competitive advantages
      • relative size and resources
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33
Q

Selecting a Mode of Market Entry: Market Factors

A
  • Market potential
  • Competitive environment
  • Host/Home country entry barriers
  • Country risk
  • Exchange rates
  • Marketing infrastructure
  • National competitive advantages
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34
Q

Selecting a Mode of Market Entry: Entry Barriers

A

Artificial entry barriers
- Enacted to protect the market

Natural entry barriers
- Conditions in the marketplace

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35
Q

Export selling vs export marketing

A
  • Export selling involves selling the same product, at the same price, with the same promotional tools in a different place.
  • Export marketing tailors the marketing mix to international customers.

export marketing you are involved; export selling you hand it over on the loading dock and then you are done with it

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36
Q

Offshoring

A

refers to moving work to another country

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37
Q

Outsourcing

A

means letting someone else do that value creation activity

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38
Q

Licensing

A

A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation

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39
Q

Franchising

A

Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies

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40
Q

Licensing Advantages and Disadvantages

A

Advantages:

  • Low initial investment
  • Additional revenue
  • Avoids trade barriers
  • Potential for utilizing location economies
  • Access to local knowledge
  • Easier to respond to customer needs

Disadvantages:

  • Lack of control over operations
  • Difficulty in transferring tacit knowledge
  • Need to capture returns
  • Potential for creating a competitor
  • Lack of coordination among units
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41
Q

When Is Licensing Appropriate?

A
  • Well codified knowledge
  • Strong property rights regime
  • Location advantage
42
Q

Joint Ventures

A

Entry strategy for a single target country in which the partners share ownership of a newly-created business entity
Form of foreign direct investment
Two or more companies share ownership of a third commercial entity

43
Q

Joint Ventures Advantages and Disadvantages

A

Advantages:

  • Facilitate entry into market
  • More knowledge about new market
  • Reduces investment and operating costs
  • Reduces economic and political risks, increases control
  • Synergy

Disadvantages:

  • More investment than licensing
  • Potential loss of proprietary technology
  • Limits ability to implement global coordination
  • Unable to realize economics of scale
  • Conflict among partners
  • Creates potential competitor
44
Q

When Is a Joint Venture Appropriate?

A
  • Both partners contribute hard-to-measure inputs
  • Large expected mutual gains in the long-run
  • Trade secrets can be walled off
45
Q

Wholly Owned Subsidiary

A

Full-fledged manufacturing
Assembly (screwdriver plants)
Sales and distribution
R&D

46
Q

Acquisition Advantages and Disadvantages

A

Pro:

  • Quick to execute
  • Preempt competitors
  • Possibly less risky

Con:

  • Disappointing results
  • Overpay for firm
  • optimism about value creation (hubris)
  • Culture clash.
  • Problems with proposed synergies
47
Q

Greenfield Advantages and Disadvantages

A

Pro:

  • Can build subsidiary it wants
  • Easy to establish operating routines

Con:

  • Slow to establish
  • Risky
  • Preemption by aggressive competitors
48
Q

Modes of Entry to International Markets

A
  • Exporting
  • Licensing
    • Franchising
    • Contract manufacturing
  • Joint ventures
  • Wholly owned subsidiaries
    • Acquisition
    • Greenfield
49
Q

Contract manufacturing

A

Company provides technical specifications to a subcontractor or local manufacturer. Company purchases results of production.
Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities.

50
Q

Contract manufacturing Advantages and Disadvantages

A

Advantages:

  • Lower production costs
  • Reduced capital and assets

Disadvantages:

  • Loss of control over manufacturing process
  • Loss of control over working conditions
  • Poor Publicity
  • Financial Damage to Brand
51
Q

4 Factors to consider when selecting a market entry strategy

A

Internal factors
Industry/competition factors
Market factors
Entry barriers

52
Q

4 Factors to consider during standardization/adaptation decision

A

Organization
Industry
Market
Political/Legal

53
Q

4 Factors to consider during standardization/adaptation decision: Organization

A

Strategy, objectives, resources, market entry, product mix, time to market, strengths & weaknesses

54
Q

4 Factors to consider during standardization/adaptation decision: Industry

A

Competitors’ competitive advantages and product differentiation, technology and type of product

55
Q

4 Factors to consider during standardization/adaptation decision: Market

A
  • Environment: Economic development, conditions of use, legal requirements, marketing infrastructure, local partners’ competencies, REAs
  • Buyer: Decision process, product familiarity, cultural specificity, ability to buy, income, education, trends
	Conditions of use
	Product familiarity
	Cultural specificity of product
	Legal requirements
	Local partner competencies
56
Q

4 Factors to consider during standardization/adaptation decision: Political/Legal

A

Artificial entry barriers: tariffs, taxes, quotas, product standards, pricing controls, switching costs, govt protection of domestic industry

57
Q

Global Product Planning: Strategic Alternatives

A

Strategy 1: dual extension
Strategy 2: Product extension, communication, adaption
Strategy 3: Product adaption, communication, extension
Strategy 4: dual adaptation

58
Q

Strategy 1

A
  • Same communication, same product
  • Common for B2B
  • dual extension
59
Q

Strategy 2

A
  • Different communication, same product
  • Low-cost because the product is unchanged, communication is adapted
  • Product extension, communication, adaption
60
Q

Strategy 3

A
  • Same communication, different product
  • Cadillac wanted to sell 20,000 autos outside the U.S. by 2010; will adapt to local market requirements
  • Product adaption, communication, extension
61
Q

Strategy 4

A
  • Different communication, different product
  • Combines local market conditions recognized in Strategies 2 and 3
  • dual adaptation
62
Q

Core product

A

Core benefit or service

63
Q

Actual product

A

Quality level, brand name, packaging, features, design

64
Q

Augmented product

A

installation, delivery & credit, warranty, after-sale service

65
Q

Product Warranties: Standardization versus Adaptation

A

Domestic warranty valid worldwide?
Tailoring warranties to countries/markets?

Issues to consider
Actual product use
Local competition: Warranties can be used as a competitive tool
Spillover effects to other markets
Express Warranty is a written guarantee that assures the buyer is getting what they paid for or provides a remedy in case of a product failure

66
Q

Local Products/Brands

A
  • Brands that have achieved success in a single national market
  • Represent the lifeblood of domestic companies
  • Entrenched local products/brands can be a significant competitive hurdle to global companies
67
Q

Global Brand

A
  • asset
  • Gives product credibility
  • Enables consumers to identify the product
  • Helps consumers make choices faster and more easily
  • 70% of Nestle’s total sales
  • Nestle brand = 40% total sales
68
Q

Product Lines

A

Not all products are suitable for all markets

  • History
  • Acquisitions
  • Local market preferences
  • Capacity to produce needed quantities
  • Channels of distribution
69
Q

Product Line Planning

A

Frequently smaller than the domestic line because of financial and market limitations.

Introduce a limited product line into foreign markets to test the market

70
Q

Benefits of Product Standardization

A

Cost reduction
- Economies of scale
- Volume purchases of inputs
- Elimination of additional adaptation costs
Global brand and image
Easier planning and control, including product rollouts
Global customers and local customer preferences
Product quality
Easier to manage

71
Q

Benefits of Product Adaptation

A 
Vulnerability to trade barriers
    - Legal issues 
    - Differences in technical standards
Avoids off-target and lack of uniqueness
Product performance
Lower costs
     - local inputs
     - eliminate unnecessary features
Motivation of local managers
Global versus local competition
Global versus local customers
72
Q

Mandatory adaptation

A

Governmental regulations
Technological & compatibility considerations
Measurement standards
Product use conditions

73
Q

Discretionary adaptation

A

Match customer’s product preferences
customer’s use conditions & situation
Income & education differences

74
Q

Market Skimming

A
  • Charging a premium price
  • Introduction stage of product life cycle
  • Luxury goods marketers use price to differentiate products
  • Financial Objectives
75
Q

Penetration Pricing

A
  • Charging a low price in order to penetrate market quickly

- Saturate market prior to imitation by competitors

76
Q

Dumping

A

Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin

imports sold in the host market are priced at either:

- levels that represent less than the cost of production plus an 8% profit margin or 
- at levels below those prevailing in the producing countries
77
Q

How to prove dumping?

A

To prove, both price discrimination and injury must be shown

78
Q

Objectives that potentially lead to dumping claim:

A
  • gain market share
  • economies of scale
  • excess production
  • currency shifts
  • eliminate competition (predatory pricing)
79
Q

Government responses to dumping

A

Antidumping duty:
- are levied on imported goods sold at less than fair market value
Countervailing duties:
- are imposed on imports which are subsidized in the exporter’s home country

80
Q

Avoid the dumping

A
  • differentiate the product sold from that in the home market
  • Circumstances of the sale
  • Raise the price
81
Q

Global Pricing: Three Policy Alternatives

A
  1. Extension or Ethnocentric
  2. Adaptation or Polycentric
  3. Geocentric
82
Q

Extension Pricing

A
  • Ethnocentric
  • Per-unit price of an item is the same no matter where in the world the buyer is located
  • Importer must absorb freight and import duties
  • Simple
  • Fails to respond to each national market
83
Q

Adaptation or Polycentric Pricing

A

.

84
Q

parallel import

A

(gray trade) is a non-counterfeit product imported from another country without the permission of the intellectual property owner

85
Q

gray market

A

is the trade of a commodity through distribution channels that are legal but unintended by the original manufacturer. Gray market products are sold by a manufacturer or their authorized reseller outside the terms of the agreement between the reseller and the manufacturer

86
Q

black market

A

is where people traffic in goods that are strictly controlled or illegal

87
Q

Counterfeit products

A

are fake replicas of the real product. Counterfeit products are often produced with the intent to take advantage of the superior value of the imitated product

88
Q

Gray Market Goods

A

Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations

Pharmaceuticals, computer games and hardware, automobiles, and even toothpaste can fall prey to the trade.

89
Q

Gray Market Conditions

A
  • Sales of genuine branded goods through unauthorized channels.
    • Products must be available in multiple markets
    • Low trade barriers (tariffs, legal restrictions, transport costs)
    • Price differentials must be great enough (so that gray marketers can make a profit)
90
Q

Gray Market Issues

A
  • Dilution of exclusivity
  • Free riding
  • Damage to channel relationships
  • Undermining segmented pricing schemes
  • Reputation and legal liability
91
Q

Geocentric Pricing

A
  • Intermediate course of action
  • Recognizes that several factors are relevant to pricing decision
    • Local costs
    • Income levels
    • Competition
    • Local marketing strategy
    • global marketing strategy
92
Q

Coordinating prices across the globe is difficult because…

A
  • Exchange rates fluctuate
  • Local retail prices can only be “recommended”
  • Local distributors are independent
  • Import prices to subsidiaries have to consider tariffs, taxes.
  • Local competition varies across countries.
93
Q

The firm’s internal ability to coordinate pricing across multiple markets depends on:

A
  • Degree of centralization
  • Relationship between HQ and local subs
  • Corporate orientation (ethnocentric, regiocentric, geocentric)
  • International experience
  • Sub’s ownership structure
  • Channel independence
94
Q

Price Corridors

A

the limits of prices between which the local price may vary without interference from headquarters

95
Q

Transfer Pricing

A
  • Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction
  • Government’s objective: correct duties & related fees must be paid
96
Q

Company objectives of Transfer Pricing

A
  • Company might attempt to:
    • relocate revenue/profits to the firm’s benefit
    • support a subsidiary’s local competitive position
    • repatriate profit
97
Q

Strategies for Transfer Pricing

A
  1. Cost-based transfer pricing
  2. Market-based transfer pricing
  3. Negotiated transfer pricing
98
Q

Countertrade

A
  • Transactions in which all or part of the payment is made in kind rather than currency.
  • Forms of Countertrade:
    • Barter
    • Counterpurchase
    • Offset
99
Q

Motives Behind Countertrade

A
  • Gain access to new or difficult markets
  • Overcome exchange rate controls or buyer’s lack of hard currency
  • Overcome low country credit worthiness
  • Increase sales volume
  • Generate long-term customer goodwill
100
Q

Shortcomings of Countertrade

A
  • No “in-house” use for goods offered by customers
  • Timely and costly negotiations
  • Uncertainty and lack of information on future prices
  • Transaction costs

MKTG 440 (3 decks)

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