Unit 3: Marketing strategy (Chap 14)

Question 1

What are the common legal controls on businesses that affect the marketing function?

Answer 1

• Protect consumers from faulty and dangerous goods
• Prevent businesses from using advertising to mislead consumers
• Protect consumers from being exploited in industries where there is little or no competition

Question 2

What is the impact of legal controls on marketing strategy?

Answer 2

• Costs will be increased
• This is because products may need to be changed to meet minimum quality standards
• Or prevent any health and safety issues
• A large company that dominates a market may face legal controls, such as anti-trust or competition laws if it’s considered to be exploiting consumers by charging high prices/providing poor-quality goods/services

Question 3

What is the impact of legal controls on advertisements?

Answer 3

• May have to be withdrawn and redesigned if they are found to contain misleading/inaccurate information
• Business may have to advertise its product again
• May be required to issue statements of apology in the newspapers
• Worst case - might be fined for deliberately misleading consumers
• All these actions increase costs

Question 4

What is one reason why businesses expand into new markets in other countries?

Answer 4

The market in their own country has reached maturity, or might even be in decline. Other countries can offer huge marketing opportunities for increased sales, revenue and profits.

Question 5

How have some of the barriers to trade been reduced between foreign countries?

Answer 5

The increase in international marketing has been made possible because of developments in technology e.g. the internet, better transport and communication links/agreements between different countries.

Question 6

What is a quota?

Answer 6

A limited quantity of a particular product which under official controls can be produced, exported, or imported.

Question 7

What are 5 problems of entering foreign markets?

Answer 7

• Differences in language and culture
• Economic differences
• Social differences
• Differences in legal controls to protect consumers
• Lack of market knowledge

Question 8

Differences in language and culture

Answer 8

• Some words don’t translate form one language to another
• Or may have a completely different meaning in another language
• Cultural differences e.g. colours, numbers and symbols have different meanings and importance in different places
• In some countries, for religious or other reasons, it wouldn’t be appropriate to use certain images in advertisements

Question 9

Economic differences (Card 1)

Answer 9

• Average income of consumers differs widely between countries
• Cost of selling goods and services in foreign markets is often higher because of transport and other exporting costs
• This might mean that the price charged to overseas consumers is higher than those in the domestic market e.g. clothes flying in from America are more expensive since we’re in the UK

Question 10

Economic differences (Card 2)

Answer 10

• Therefore, consumers must have the income to afford the prices charged
• This problem is most noticeable when a business in a developed economy wants to sell its goods/services into a developing economy

Question 11

Social differences

Answer 11

• In some countries social factors such as the age structure of the population, the importance of family and the role of women all have an impact on business activity
• E.g. countries where the population has a higher proportion of young people (Indonesia), will have different needs and wants from countries where the population has a higher proportion of older people, such as the UK

Question 12

Differences in legal controls to protect consumers

Answer 12

• Countries have their own laws/regulations to protect consumers from unfair or dangerous business activity
• These might be very different from he legal control in the business’s own country
• Before entering foreign markets a business must make sure its products and the way it conducts its business satisfy the laws of countries it’s looking to expand into
• May mean changing its product, packaging or advertisements, increasing costs

Question 13

What are two problems when entering foreign markets? (Lack of market knowledge)

Answer 13

• Business doesn’t know the market
• Consumers (the market) does not know the business

Question 14

What problems need to be fully understood if a business is to succeed when entering a new market in another country?

Answer 14

Knowledge about:

• Market size
• Competitors
• Brand image
• Customer loyalty to existing products e.g. me and Nike
• Sources of media for promotion
• Channels of distribution

Question 15

What are 3 methods to overcoming problems of entering foreign markets?

Answer 15

• Franchising (benefits/limitations of this is in Chapter 4)
• Licensing
• Joint ventures

Question 16

What is a benefit and limitation of licensing?

Answer 16

• The goods are produced in a country by a firm that understands the local marketing. All of the problems of entering foreign markets are removed, except maybe the lack of consumer knowledge about the product

The risk of poor quality or other problems that could damaged the reputation of the business whose product it belongs to

Question 17

What are the benefits of joint ventures?

Answer 17

• Reduces risk and cuts costs
• Each business brings different expertise to the JV
• Market potential for all the businesses in the JV is increased, especially if each business operates in different geographical regions/countries
• Market and product knowledge can be shared to the benefit of the businesses in the JV

Question 18

What are the limitations of joint ventures?

Answer 18

• Any mistakes made will reflect on all the parties to the JV
• May damage the JV’s reputation, even if they weren’t the cause of the mistake
• Decision-making process may be ineffective due to different business culture/different styles of leadership within each of the JV partners