THE FOUR PS: AN INTERNATIONAL PERSPECTIVE

 Product management  Price management  Promotion and advertising management  Place (channels of distribution) management

International Economics Program - Ljubljana University

PRODUCT STRATEGY COMPONENTS

Pysical Product * Style * Size * Functional Attributes Packaging * Label * Brand Name * Physical Package Services * Pre-Sale: Consulting * Installation Services * Post-Sale Services * Warranty and Guarantee * Manuals

International Economics Program - Ljubljana University

MARKETING/R&D INTERFACE EXPORT PERFORMANCE

Centralization
--

++
+

Intensity and Quality of Marketing/ R&D Interface

++

Competitive Intensity in Target Market

Performance of New Products in Export Markets

++

R&D Investment

++
Customers' Sophistication

So What?
1. It is worthwhile to invest in the marketing/R&D interface 2. It is worthwhile to invest in R&D, subject to cost/benefit analysis 3. The interface improves when centralization is reduced and it is easier when customers are less sophisticated 4. International firms tend to invest more in R&D when the markets are more competitive

International Economics Program - Ljubljana University

++

++

How to Brand? - I
 No branding  Branding
Lower production, marketing and legal costs Flexible inventory management Especially useful for commodities Better identification/ awareness More differentiation potential Higher probability of repeat sales Possible premium pricing

International Marketing Ljubljana University

How to Brand? - II
 Private brand  Manufacturer Easier dealers brand
acceptance Possibly higher market share No promotion Useful for small and/or unknown manufacturers Better product strategy control Better prices Retaining brand loyalty Better bargaining visvis-vis channels Creates channel dependency

International Marketing Ljubljana University

How to Brand? - III

 Multiple brands
Better segmentation Employee excitement Defense against a poor performing brand More retail shelf space Catering to

 Single market brand

Higher marketing impact More focused marketing Reduced advertising Less market confusion Especially for highhighquality/reputati on brands

switchers

International Marketing Ljubljana University

How to Brand? - IV
 Local brands  Global brand
Legal necessity Problematic pronunciation Meaningful names No negative connotations Allowing crosscrossmarket variations in quality/price Better marketing focus / impact Low cost advertising No brand confusion Good for cultureculture-free or prestigious brands Easily identified by consumers

International Marketing Ljubljana University

PRICING THE ECONOMIC ANGLE

 Economists argue that export is worthwhile as long as the Price > Total Costs = FC + VS. This is always true for new investments or for long-range export longcommitment  Yet, short-term exporting could shortbe worthwhile as long as the Price > Variable Costs. Feasible for penetration pricing or for a new product. Can also apply when excess capacity exists for some inputs
International Economics Program - Ljubljana University

PRICING ALONG THE EXPERIENCE CURVE

Cumulative Production Quantity 1000 2000 4000 8000 16000 Per Unit Average Production Cost 1.00 0.80 0.64 0.512 0.4096

1.00 Average Production Cost per Unit Cumulative Production Quantity 1000 2000 4000 8000

0.80 0.64 0.512 0.4096

16000

International Economics Program - Ljubljana University

CURRENCY CHOICE
The major question is whether to use the customers local currency

 Exporter Factors
Market orientation Product differentiation Customers importance and continuity Power in negotiations

 Market Factors
Competition Importance of product to buyer Legal restrictions on foreign currency
International Economics Program - Ljubljana University

CURRENCY FLUCTUATIONS
 Currencies fluctuate widelyhow widely should we manage the risks?  Forward Transactions buy another currency against the transactions currency. Exchange rate depends on
Exchange rate on day of transaction Forwards time horizon Currencies interest differentials

 Important!
Forward transactions designed to reduce fluctuation risks, they are NOT monetary gambles
International Economics Program - Ljubljana University

GETTING YOUR MONEY

 There are three major payment methods:  Open Account Open credit, hence risky. Should be used only for large and stable customers  CAD/COD Importer has to pay to get the goods against the shipping documents risks only the shipping  L/C (letter of credit) payment assured if exporter fulfilled the order obligations no risks to exporter
International Economics Program - Ljubljana University

WHEN TO USE VC+?

 At the exporters level
Low differentiation potential High export commitment Capacity to take up-front losses up High domestic profitability Available production capacity High economies-of-scale economies-of-

 Situational factors
High market growth potential High customer price sensitivity Strong competition Ability to eliminate competitors
International Economics Program - Ljubljana University

COST ASCALATION
Consider a 10% price increase from 1.00 to 1.10. With master and local distributors each on 30% mark up, the user price increases 10% from 1.69 to 1.859. However, an exporters 0.10 becomes 0.169 at the end-user level! What to do???

 Shorten the channel

Eliminate master distributor Establish a sales subsidiary

 Reduce costs
Lower costs or reduce quality

 Assemble/produce in export market, preferably at a tax-free taxzone  Compensate the channel separately for some services
International Economics Program - Ljubljana University

GLOBAL ADVERTISING MANAGERS

 Learning from and transferring successful ideas across units  Propose / encourage initiatives for special regional or global marketing events (e.g., sports)  Encourage SBUs in developing markets to use up-to-date up-toadvertising techniques  Develop and manage advertising learning seminars  Consult to SBUs  Develop methods to measure effectiveness  Coordinate local agencies
International Economics Program - Ljubljana University

INTERNATIONAL ADVERTISING THEMES

 Cases advertising a common solution to a universal problem (usually for industrial products)  High quality (e.g., BMW)  New! (e.g., WINDOWS XP)  COO (for strong COO nations)  Celebrities (e.g., Michael Jordan for Nike)  Lifestyle for luxury products  World brands (e.g., Coca Cola)  Market leadership (e.g., Marlboro)
International Economics Program - Ljubljana University

PUBLIC RELATIONS
 Always exporters responsibility
Channel might have different priorities Maintain the impact if channel changes Media people prefer producers information

 Small exporters should use small tradeshows and do prepreshow PR

Less competition for attention More accurate positioning Media is available
International Economics Program - Ljubljana University

WHY TRADESHOW?
    Sales Leads Identify new product uses Create awareness
For company For its products / brands

 New product introductions  Find/recruit new channels of distribution  Support for existing channels  Espionage
International Economics Program - Ljubljana University

TRADESHOW BUDGETS AND EFFECTIVENESS

 Major costs:
Booth cost (25%) Services at the show (22%) Building the booth (15%) Transportation (11%)

 Enhancing effectiveness without increasing booth size

Create interest (e.g., draws) Demonstrations Booth style The right people at the booth brochures
International Economics Program - Ljubljana University

WILL THEY WAIT FOR ATTENTION?

30-60" 1-3 Minutes 0 30- " 3-5 Minutes

50 40 30 20 10 0

30-60"

3-5 Minutes

The implication is that most people will wait very little and will leave if not attended to. Thus, the number of exhibitors, their preparation, and planning their time are critical considerations
International Economics Program - Ljubljana University

MAJOR CHANNEL CHOICES

 Agents. 3-10% commission, 3depending on:
Pre-sale services Pre Sales services (e.g., erection) Post-sale services Post-

 Importers/Distributors. Wide markmark-up differences (30% is typical) depending on:

Level of required services Level of risk in buying and selling

 Sales subsidiary. High exporter risk requires reasonable profitability

International Economics Program - Ljubljana University

AGENTS VERSUS DISTRIBUTORS

 Distributors (unlike agents)
Low exporter control Always exclusive at some level Buy Possess and warehouse Determine market prices Can represent competitors Advertise and promote on their own Control the flow of information from the market to the exporter
International Economics Program - Ljubljana University

IMPORTANT CHANNEL TASKS

 Identify / open up new markets  Personal relationships with buyers and potential buyers  Know the competitive landscape  Have sufficient salespeople  Be able to assess credit risks  Promote at tradeshows  Provide services for products  Select and manage sub-channel  Manage the 4 Ps
International Economics Program - Ljubljana University

CHANNEL CONTRACTS
 Territory definition  Product lines included. New product lines yes/no and under what conditions  Exclusivity yes/no, for which territory, for how long, and under what conditions  Compensation from exporter  Payments when (with sale or after payment is received)  What happens if something goes wrong (e.g., arbitration)  How and when does the contract expire
International Economics Program - Ljubljana University