Professional Documents
Culture Documents
International Marketing
Research
- Research is very important when marketing in your own country, but it is even more
important in foreign markets. This is because in your own country you can rely on
some combination of research results and your own intuition (i.e. your sense of how
people think, how they use your products, and how they will respond to certain
messages). In foreign markets, you do not have the same kind of personal familiarity
with the markets, and therefore need to make up for it with more extensive research.
- The results of this research should then be considered in light of what the firm can
deliver.
- Doing detailed research is costly; a firm would typically only do detailed research on
the countries believed to be the most promising.
A. Demand Analysis
- The firm needs to analyze and segment its customers. It should clearly identify
who are the accessible, target customers. It should understand how the country's
culture might affect demand for its product. Consider income levels,
demographics, education levels, distribution of incomes, urbanization,
consumption patterns. Moreover, consider trends in each of these issues. (e.g.
How fast are income levels rising? Is the population aging? etc.)
- Essentially, you want to spot an emerging demand for your product. It is often
easier to break into emerging markets than into saturated markets.
- Determine existing demand (based on the data and on expert opinion).
- Determine future demand (based on trends).
- Determine latent demand (demand for products not currently available in the
country).
- Determine responsiveness to marketing.
- Determine spillover effects to neighbouring countries.
- Determine what adaptations to the product customers may prefer.
- Determine customer bargaining power. (The fewer or larger the customers, the
more they will be able to bargain down the selling price)
B. Competitor Analysis
- Identify existing competitors.
- Identify potential competitors.
- Identify close substitutes to your own product.
- Anticipate competitors' responses. Price war? Calls for government intervention?
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- There are many external sources of data: home government, other governments,
international organizations, service organizations, trade associations, databases,
other firms.
- Can you think of any examples of poor research in foreign markets? Can you think of
any foreign products that failed in our markets (or in your country’s markets if you
are an international student)? Do you think the foreign company could have avoided
its mistakes through better research?
Product Design
Environmental Differences
- Geography
- Geography, for example, affects people's mode of transportation. For
example, trucks in mountainous countries need stronger axles.
- Climate
- e.g. does the product need to withstand cold winters?
- Population density
- In densely populated areas products typically need to be more compact. For
example, refrigerators need to be smaller because people’s kitchens are
smaller.
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- Population density can affect products indirectly as well. For example,
smaller refrigerators make their owners less likely to buy groceries in bulk.
Thus population density indirectly affects how food product companies
package their products.
Individual Composition
- Income
- Sellers of luxury goods need to consider how many high income people there
are.
- (Note that GDP per capita is not necessarily a good measure of this. In one
country everyone might have about the same income, while another country
with the same average income could have a wide range of income levels.)
- Age
- Age affects demand for products associated with certain stages of the human
life cycle. For example, populations with many children may have different
needs in automobiles versus elderly populations.
- Of course, tastes also tend to differ across age groups.
- Education
- Illiterate people may require product designs that allow use without reading.
- Educated people tend to be better informed on certain issues.
- Religion
- Some religions place restrictions on people’s consumption patterns or may
influence them.
- Examples include restrictions on alcohol, beef, pork or certain types of attire.
- Religions may also discourage materialism.
Group Interaction
- Formal standards (codified by law or regulations)
- Examples include what side of the road you drive on, safety standards and
pollution standards.
- Informal standards
- The classic example is the QWERTY keyboard, which is slightly different in
some European countries.
- Symbols
- Symbols in one country may be meaningless in another, or may mean
something quite different.
- For example, yellow apparently symbolizes cowardice in Anglo-Saxon
cultures, but symbolizes royalty in China.
- Manners
- Behaviour that is acceptable in one country might be unacceptable in another
country. For example, in some cultures it might be rude for a pizza-delivery-
person to knock on the door.
Tastes
- Other differences across countries are hard to classify, and could just be attributed to
taste differences.
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- Examples include:
- North American preferences for sweeter foods.
- Different countries’ preferences for different beverages.
Cost of Adaptation
- There usually are plenty of reasons to adapt a product for a local market, but a firm
also needs to consider the costs of doing so.
- Some types of costs of adaptation are listed below:
- Research and development costs
- In some cases the costs of a new design may be small (such as
Cadbury’s cost of changing its proportions of ingredients), or may be
substantial.
- Market cultivation costs
- Some product variations may necessitate a substantially different
approach to promotion.
- Line costs
- A new product line may require additional machinery or workers to
produce the new product.
- Switching costs
- In some cases, firms use the same production line to produce different
types of products. Nevertheless, there are costs associated with
frequent retooling within a plant. This process is costly both in terms
of money and time.
- On the other hand, some firms have cut such costs substantially
through flexible manufacturing processes.
- Input costs
- If the modified product requires a new input, costs could go up simply
because the firm is buying more expensive inputs.
- (Of course, in some cases, product modifications could reduce the
production cost, if the modified product uses cheaper inputs.)
Other Considerations
- Trends
- Some of the differences (such as education and tastes) can change over time.
Others (such as geography and climate) do not.
- Niche markets
- Even though a majority of people may be of one type, a company may be able
to sell an unaltered product to a niche minority.
- For example, a European chocolate producer may choose to sell an unaltered
product in the U.S. (i.e. they don’t add more sugar) to target the segment of
U.S. consumers who prefer less sweet chocolates.
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Pricing
- Like a purely domestic firm, a MNE may sell its products directly to consumers or
else to a wholesaler or retailer. When goods cross international borders additional
issues arise, such as exchange rate risk, overseas shipping and customs clearance, and
navigating the foreign environment. The firm has to decide whether to handle its own
distribution or contract part of the distribution function to other firms.
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i.e. marginal revenue = marginal cost
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A. Import Agents
- Some agents, such as trading houses, will purchase for their own account. They
usually require exclusivity if they must invest resources into market development.
- Other agents simply handle exports for a fee and do not actually buy the product.
B. Advantages of Contracting
1. They have expertise about distribution in the particular market.
2. They can realize economies of scale.
3. Export agents can match currencies and realize lower foreign exchange costs
as well as risks.
C. Disadvantages of Contracting
1. You have to pay them (or sell your product to them at a discounted price).
2. The manufacturer might lose control over market development and customer
service.
3. The manufacturer might disclose some proprietary information.
4. Incentive problem - the foreign distributor might have other agendas than just
pushing your product.
Promotion (Advertising)
- The advertising task is the same in most markets - to communicate information and
persuade.
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- There are many reasons why advertising might need to be modified for the foreign
market.
- Consumer Tastes and Preferences - Usually culture related.
- Source Effects
- Consumers’ opinion of a producer can matter. e.g. Japanese and
German-made goods are often perceived as of high quality.
- Consumers in some countries either like or dislike certain countries.
Or they simply prefer domestic manufacturers. How can a company
get around this problem?
- Regulation
- Another decision to make is whether to use a global brand name, or to develop a new
local brand name.
- Advantages to a global brand name include:
- promotes global recognition
- economies of scale in brand development
- media coverage may cross borders (e.g. in PEI we see Boston ads)
- enables standardized advertising
- Disadvantages of using a global brand name include:
- need to ensure quality remains high in foreign location
- grey market
- local prejudice against foreign brands
- names may not work well in some languages