International Marketing Final

Question 1

Understand the relationship between culture and use of the Internet for international business.

Answer 1

• The website and the product must be culturally neutral or adapted to fit the uniqueness of the market
• The marketing message has to be created carefully so it is not offensive

Question 2

What the distribution process includes

Answer 2

• All consumer and industrial products eventually go through a distribution process
o Physical handling and distribution of goods
o Passage of ownership
o Buying and selling negotiations between producers and middlemen
o Buying and selling negotiations between middlemen and customers
Condition when a domestic producer has the most control with respect to a distribution channel in a foreign market

Question 3

Agent vs merchant middlemen

Answer 3

• Agent Middlemen- work on commission and arrange for sales in the foreign country but do not take title to the merchandise. By using agents, the manufacturer assumes trading risk but maintains the right to establish policy guidelines and prices and to require its agents to provide sales records and customer information
• Merchant Middlemen- take title to manufacturers’ goods and assume the trading risks, so they tend to be less controllable than agent middlemen. Merchant middlemen provide a variety of import and export wholesaling functions involved in purchasing for their own account and selling in other countries

Question 4

Complimentary marketer

Answer 4

• When companies with marketing facilities or contacts in different countries with excess distribution capacity or a desire for a broader product line sometimes take on additional lines for international distribution
• Commonly called piggybacking
• Example General Electric Company has been distributing merchandise from other suppliers. It accepts products that are noncompetitive but complementary and that add to the basic distribution strength of the company

Question 5

Export Management Company

Answer 5

• This is an important middleman for firms with relatively small international volume or those unwilling to involve their own personnel in the international function.
• These EMCs range in size from 1 person upward to 100 and handle about 10 percent of the manufactured goods exported.

Question 6

Manufacturer’s export agent

Answer 6

• An individual agent middleman or agent middleman firm providing a selling service for manufactures.
• Unlike EMC the MEA does not serve as the producer’s export department but has short-term relationship, covers only one or two markets, and operates on a straight commission basis

Question 7

Key elements in distribution decisions

Answer 7

• All consumer and industrial products eventually go through a distribution process
o Physical handling and distribution of goods
o Passage of ownership
o Buying and selling negotiations between producers and middlemen
o Buying and selling negotiations between middlemen and customers
• Each country market has a distribution structure
o Goods pass from producer to user. Channel structures range from those with little developed marketing infrastructure such as those found in many emerging markets to the highly complex, multi-layered system found in Japan

Question 8

Physical distribution systems take into account interdependence of the costs of each activity
what does this mean?

Answer 8

• A physical distribution system involves more than the physical movement of goods. It includes location of plants and warehousing (storage), transportation mode, inventory quantities, and packing.
• The concept of physical distribution takes into account the interdependence of the costs of each activity; a decision involving one activity affects the cost and efficiency of one or all others. In fact, because of their interdependence, the sum of each of the different activity costs entails an infinite number of “total costs.” (Total cost of the system is defined as the sum of the costs of all these activities.)

Question 9

Foreign freight forwarder

Answer 9

• Arranges for the shipment of goods as the agent for an exporter
o Arranges for complete shipping documentation
o Provides information and advice on routing and scheduling,
rates and related charges, consular and licensing requirements, labeling requirements, and export restrictions
o Offers shipping insurance, warehouse storage, packing and containerization, and ocean cargo or airfreight space

Question 10

Understand the relationship between culture and marketing communication

Answer 10

• It is important that marketers understand the culture that they are in so they do not offend the other culture. Language, hand gestures, symbols etc. can be offensive to different cultures.

Question 11

Factors impacting international advertising in most markets

Answer 11

• Global Advertising and the Communications Process
• Legal Constraints
• Linguistic Limitations
• Cultural Diversity
• Media Limitations
• Production and Cost Limitations

Question 12

Elements of integrated marketing communications

Answer 12

All these mutually reinforcing elements of the promotional (marketing communications) mix have as their common objective the successful sale of a product or service.

1. Advertising
2. Sales promotions
3. Personal selling
4. Public relations

Question 13

The goal/purpose of sales promotion

Answer 13

• To stimulate sales of the companies product.

Question 14

Steps in the international advertising process

Answer 14

Of all the elements of the marketing mix, decisions involving advertising are those most often affected by cultural differences among country markets.
Reconciling an international advertising campaign with the cultural uniqueness of markets is the challenge confronting the international or global marketer. The basic framework and concepts of international advertising are essentially the same wherever employed. Seven steps are involved:
1. Perform market research
2. Specify the goals of the communication
3. Develop the most effective message for the market
4. segments selected
5. Select effective media
6. Compose and secure a budget based on what is required to meet goals
7. Execute the campaign
8. Evaluate the campaign relative to the goals specified

Question 15

Components (or steps) of the international communications process

Answer 15

1. An information source. An international marketing executive with a product message to communicate.
2. Encoding. The message from the source converted into effective symbolism for transmission to a receiver.
3. A message channel. The sales force and/or advertising media that convey the encoded message to the intended receiver.
4. Decoding. The interpretation by the receiver of the symbolism transmitted from the information source.
5. Receiver. Consumer action by those who receive the message and are the target for the thought transmitted.
6. Feedback. Information about the effectiveness of the message that flows from the receiver (the intended target) back to the information source for evaluation of the effectiveness of the process.
7. Noise. Uncontrollable and unpredictable influences such as competitive activities and confusion that detract from the process and affect any or all of the other six steps.
   • Most promotional misfires or mistakes in international marketing are attributable to one or several of these steps not properly reflecting cultural influences or to a general lack of knowledge about the target market.

Question 16

Reasons that international communications may fail

Answer 16

• Most promotional misfires or mistakes in international marketing are attributed to one or several of these steps not properly reflecting cultural influences or general lack of knowledge about the target market.
• The product message to be conveyed should reflect the needs and wants of the target market; however, often the actual market needs and the marketer’s perception of them do not coincide.
• If basic needs are incorrectly defined, communications fail because an incorrect or meaningless message is received, even though the remaining steps in the process are executed properly.
• An example of the encoding process misfiring was a perfume presented against a backdrop of rain that, for Europeans, symbolized a clean, cool, refreshing image but to Africans was a symbol of fertility.

Question 17

What is one of the major barriers to effective communication through advertising?

Answer 17

• Language is one of the major barriers to effective communication through advertising.
o The problem involves different languages of different countries, different languages or dialects within one country, and the subtler problems of linguistic nuance, argument style, vernacular, and even accent.
o For many countries language is a matter of cultural pride and preservation—France is the best example, of course. Incautious handling of language has created problems in all countries.
o Language raises innumerable barriers that impede effective, idiomatic translation and thereby hamper communication. This is especially apparent in advertising materials and on the Internet.

Question 18

When a parallel market occurs

Answer 18

• Face-to-face negotiations are an omnipresent activity in international commerce

Question 19

One of the primary functions of a cartel

Answer 19

• The cartel association uses formal agreements to set prices, establish levels of production and sales for the participating companies, allocate market territories, and redistribute profits.
• Cartels have the power to control prices

Question 20

How a company that views prices as an active instrument of accomplishing marketing objectives sets prices

Answer 20

• If prices are viewed as an active instrument, the company sets prices (rather than following market prices) to achieve specific objectives, whether targeted returns on profit, targeted sales volumes, or some other specific goals.
• The company that follows the second approach, pricing as a static element, probably exports only excess inventory, places a low priority on foreign business, and views its export sales as passive contributions to sales volume.

Question 21

What is price escalation?

Answer 21

• The pricing disparity in which goods are priced higher in a foreign market than in the home market; caused be the added costs involved in exporting products from one country to another

Question 22

Foreign/free trade zone-

Answer 22

• Regions or ports that act as holding areas for goods before quotas or customs duties are applied. In the US, more than 150 FTZs allow companies to land imported goods for storage or various processing such as cleaning or packaging before the goods are officially brought into the US or reexported to another country

Question 23

Dumping-

Answer 23

• An exporting practice, generally prohibited by laws and subject to penalties and fines, defined by some as the selling of products in foreign markets below the cost of production and by others as the selling of products at below the prices of the same goods in the home market.

Question 24

Countertrade

Answer 24

• a type of transaction in which goods are imported and sold by a company from a country in exchange for the right or ability to manufacture and/or selling goods in that country. Countertrade can substitute for cash entirely or partially and used extensively in trade between US firms and the former Soviet bloc, along with others emerging markets.

Question 25

Elements include in a price quotation of goods for international sale

Answer 25

• Price quotations contracts may include specific elements affecting the price, such as credit, sales terms, and transportation.
• The quotation must appropriately locate responsibility for the goods during transportation and spells out who pays for transportation charges and from what point.
• They must also specify the currency to be used, credit terms, and the type of documentation required

Question 26

Open account-

Answer 26

• In US domestic trade, the typical payment procedure for established customers, in which the goods are delivered and the customer is billed on an end-of-the-month basis

Question 27

Forfeiting-

Answer 27

• A financing technique that may be used in an international transaction in which the seller makes a one time arrangement with a bank or other financial institutions to take over responsibility for collecting the account receivable.

Question 28

One of the most valuable negotiation tactics that can be used against American negotiators

Answer 28

• Time (stall) because Americans are impatient

Question 29

Stages of business negotiations

Answer 29

• Everywhere around the world business negotiations appear to proceed through four stages:

1. Non-task sounding (introduction)
2. Task-related exchange of information (questioning)
3. Persuasion
4. Concessions and agreement (closing remarks leading to the deal)

Question 30

The form of negotiation considered being an omnipresent activity in international commerce

Answer 30

• Face-to-face negotiations are an omnipresent activity in international commerce

Question 31

Four kinds of problems in international business negotiations caused by cultural differences

Answer 31

• Cultural differences cause four kinds of problems in international business negotiations at the levels of:

1. Language
2. Nonverbal behaviors
3. Values
4. Thinking and decision-making processes

Question 32

How Americans characterize a business negotiation

Answer 32

• To Americans business negotiations are a problem solving activities

Question 33

The single most important activity of negotiations

Answer 33

• Listening- the negotiator’s primary job is collecting information with the goal of enhancing creativity

Question 34

Checklist for ensuring proper preparation and planning for international negotiations

Answer 34

• We recommend the following checklist to ensure proper preparation and planning for international negotiations:

1. Assessment of the situation and the people
2. Facts to confirm during the negotiation
3. Agenda
4. Best alternative to a negotiated agreement (BATNA)
5. Concession strategies
6. Team assignments

Question 35

Aspects of the negotiation setting that need to be manipulated ahead of the negotiation if possible

Answer 35

1. Location
2. Physical arrangements
3. Number of parties
4. Number of participants
5. Audiences
6. Communication Channels
7. Time limits

Question 36

Non-task sounding

Answer 36

• Americans always discuss topics other than business at the negotiation table (weather, family, sports) but not for long. Usually the discussion is moved to the specific business at hand after 5 to 10 minutes this talk is called Non-task sounding
• This is much more than just friendly it helps negotiators learn how the other side feels that particular day

Question 37

Essay- Briefly describe the Japanese approach (four distinguishing features) to distribution and explain its impact on companies attempting to do business in Japan or with Japanese companies. Pg 434

Answer 37

1. A structure dominated by many small middlemen dealing with many small retailers
2. Channel control by manufacturers
3. A business philosophy shaped by a unique culture (relationships)
4. Laws that protect the foundation of the system
   • These features make it extremely difficult for new companies emerging into there market because of loyalty. The Japanese companies build relationships with other companies and if there is a new company entering the market then they will have to comply with these features.

Question 38

Essay- In many markets, the biggest constraint to successful marketing is distribution. Explain why.

Answer 38

• This can be a constraint on companies because there is a lack of control. Distribution involves other companies/middleman and it requires persuasion in order for them to carry a company’s product. In essence, a company can change there price with much ease but it require a lot of communication and work to have your product appear in companies store.

Question 39

Essay- List and define at least five frequently used types of domestic home-country intermediaries. Pg 443

Answer 39

a. Global Retailers-
i. Examples like IKEA, Costco, Toys R Us, and Wal-Mart
ii. These stores expand their global coverage; they are becoming major domestic middlemen for international markets.
iii. Wal-Mart is an attractive entry point to international markets for US suppliers. Wal-Mart offers and effective way to enter international markets with minimum experience.
b. Manufactures’ Retail Store
i. An important channel of distribution for a large number of manufactures is the owned retail store
c. Export Management Companies
i. An important middleman for firms with relatively small international volume or those unwilling to involve their own personnel in the international function.
ii. The EMC is an integral part of the marketing operations of its clients companies. Working under the names of the manufactures, the EMC functions as a low cost, independent marketing department with direct responsibility to the parent firm.
d. Trading Companies
i. Important in the development of trade between nations
ii. Trading companies accumulate, transport, and distribute goods from many countries
e. Exporting Trading Companies
i. Allows producers of similar products to form export trading companies
ii. A major goal is to increase US exports by encouraging more efficient export trade services to producers and suppliers to improve the availability of trade finance and to remove antitrust disincentives to export activities

Question 40

Essay- What components comprise a physical distribution system? When managing the physical distribution system, why is it important to consider all the components together?

Answer 40

• A physical distribution system involves
o Physical movement of goods
o Location of plants and warehousing (storage)
o Transportation mode
o Inventory quantities
o Packing
• The concept of physical distribution takes into account the interdependence of the costs of each activity;
o A decision involving one activity affects the cost and efficiency of one or all others.
o Because of their interdependence, the sum of each of the different activity costs entails an infinite number of “total costs.” (Total cost of the system is defined as the sum of the costs of all these activities.)
o Example:
 When a company compares the cost of shipping for product. The company looks at two mode of transportation; airfreight and ocean freight. When considering only the rates for transportation and carrying cost for inventory in transit, air transportation is much higher than the ocean freight. But when calculating cost for warehouse, insurance, inventory ect the air cost was much less.

Question 41

zEssay- There are many problems in communicating a firm’s product offerings to its various target markets around the world. Explain at least three constraints to conducting an international advertising campaign.

Answer 41

1. Legal Constraints to Advertising
   a. Laws vary around the world depending on the country that you are in.
   b. Some constraints include:
   i. Comparative advertising
   ii. Advertising of specific products
2. A variety of restrictions on advertising of specific products exist around the world. Advertising of pharmaceuticals is restricted in many countries.
   iii. Control of advertising on television
3. Advertising on television is strictly controlled in many countries. China is relaxing some regulations while strengthening others.
   iv. Accessibility to broadcast media
4. Advertising on television is strictly controlled in many countries. China is relaxing some regulations while strengthening others.
   v. Limitations on length and number of commercials
5. Companies that rely on television infomercials and television shopping are restricted by the limitations placed on the length and number of television commercials permitted when their programs are classified as advertisements.
   vi. Internet services
6. Internet services are especially vulnerable as EU member states decide which area of regulation should apply to these services. Barriers to pan-European services will arise if some member states opt to apply television-broadcasting rules to the Internet while other countries apply print-media advertising rules.

vii. Special taxes that apply to advertising
1. Some countries have special taxes that apply to advertising, which might restrict creative freedom in media selection.
2. Linguistic Limitations to Advertising
a. Language is one of the major barriers to effective communication through advertising. The problem involves different languages of different countries, different languages or dialects within one country, and the subtler problems of linguistic nuance, argument style, vernacular, and even accent. For many countries language is a matter of cultural pride and preservation—France is the best example, of course. Incautious handling of language has created problems in all countries. Language raises innumerable barriers that impede effective, idiomatic translation and thereby hamper communication. This is especially apparent in advertising materials and on the Internet.
b. Low literacy in many countries seriously impedes communications and calls for greater creativity and use of verbal media.
c. Multiple languages within a country or advertising area pose another problem for the advertiser. Even a tiny country such as Switzerland has four separate languages. Advertising communications must be perfect, and linguistic differences at all levels cause problems.
d. In-country testing with the target consumer group is the only way to avoid such problems.
3. Cultural Diversity Limitations
a. Cultural Diversity: Ad campaigns and product brand names being communicated may mean different things to different cultures
b. Example
i. Procter & Gamble’s initial advertisement for Pampers brand diapers failed because of cultural differences between the United States and Japan. A U.S. commercial that showed an animated stork delivering Pampers diapers to homes was dubbed into Japanese with the U.S. package replaced by the Japanese package and put on the air.
ii. A marketer’s creativity is certainly challenged when a television commercial is limited to 10 showings a year with no two exposures closer than 10 days, as is the case in Italy.

Question 42

Essay-Briefly outline the international communications process (see exhibit 16.4).

Answer 42

8. An information source. An international marketing executive with a product message to communicate.
9. Encoding. The message from the source converted into effective symbolism for transmission to a receiver.
10. A message channel. The sales force and/or advertising media that convey the encoded message to the intended receiver.
11. Decoding. The interpretation by the receiver of the symbolism transmitted from the information source.
12. Receiver. Consumer action by those who receive the message and are the target for the thought transmitted.
13. Feedback. Information about the effectiveness of the message that flows from the receiver (the intended target) back to the information source for evaluation of the effectiveness of the process.
14. Noise. Uncontrollable and unpredictable influences such as competitive activities and confusion that detract from the process and affect any or all of the other six steps.
    • Most promotional misfires or mistakes in international marketing are attributable to one or several of these steps not properly reflecting cultural influences or to a general lack of knowledge about the target market

Question 43

Essay- The five basic payment arrangements for exported goods include letters of credit, bills of exchange, cash in advance, open accounts and forfeiting. Which of these methods of payment is most beneficial to the buyer and which is most beneficial to the seller? Why?

Answer 43

• Letter of credit - buyer goes to bank and arranges for issuance of a letter of credit in which seller can then draw against at his bank (buyer’s bank notifies sellers bank that credit is available). Most common in U.S.
o Revocable - buyer can alter
o Irrevocable - once the seller accepts, buyer cannot alter without seller’s permission. Payment is guaranteed if terms of contract are met.
• Bills of exchange (dollar drafts) - seller draws a draft on the buyer and presents it with the necessary documents to the seller’s bank for collection. U.S. bank forwards documents to buyer’s bank and buyer is given draft and pays now or later.
o Drafts: Sight - acceptance and payment on presentation of the draft and often before arrival of goods; arrival - payment on arrival of goods; date - has date of payment and is not affected by movement of goods.
• Cash - not used a lot (but partial cash in advance is used– I.e., 50%).
o Most beneficial for the SELLER because the seller gets some of the money before the buyer ever gets the product
• Open Accounts – Means “send me the product and I will pay you later” like Tom’s wholesale with credit customers
o Most beneficial for the BUYER and not the seller
o Buyer gets the product but the seller has to wait for the money
• Forfeiting - the seller makes a one-time arrangement with a bank to take over responsibility for collecting the account receivable (sells the the accounts receivable note to a forfeiting institution I.e., bank, at a discount.

Question 44

Essay- Briefly describe the four stages through which business negotiations throughout the world generally proceed.

Answer 44

• Everywhere around the world business negotiations appear to proceed through four stages:

1. Non-task sounding
   a. Discussing topics other than business at the negotiation table but this does not last long. Usually the discussion is moved to the specific business at hand after 5-10 minutes.
   b. This is beneficial because it helps negotiators learn how the other side feels that particular day.
2. Task-related exchange of information
   a. A two way process
   b. When non-task sounding is completed and a trusting personal relationship is established should business be introduced.
   c. Americans are advised to let foreign counterparts decide hen such substantive negotiations begin
3. Persuasion
   a. The heart of the matter
   b. This is the stage where most debate occurs
   c. The use of persuasion varies with each country
4. Japan spends much time in the task-related exchange of information, which leaves little to “argue” about during the persuasion stage
5. US on the other hand speeds through the task related exchange and get to the persuasion. The goal of information exchange is to quickly get objections out in the open so they can be handled
   d. The most powerful tactic is asking questions
6. Concessions and agreement
   a. Americans often make concessions early
   b. Many cultures no concessions are made until the end of the negotiations. Americans often get frustrated and express anger when partners are simply following a different approach to concession making