Transcript MATHEMATICAL ECONOMICS

BUS 305
INTERNATIONAL MARKETING
 International Business Operations:
- International Marketing
- International Management
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INTERNATIONAL MARKETING
 MARKETING MIX:
Four elements constitutes an IB marketing mix
Product attributes (Product)
Distribution strategy (Place)
Communication strategy (Promotion)
Pricing Strategy (Price)
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Product Attributes:
A product can be viewed as a bundle of attributes
Eg:
the attributes that make up a car include:
design, quality, performance, fuel consumption,
comfort, power, etc
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- Products sell well when their attributes match
consumer needs and only the marketing
department can define those needs for R&D.
- Also, marketing is supposed tell R&D when to
globally standardized products or locally
customized products.
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INTERNATIONAL MARKETING
Eg;
BMW cars sell well to people who have high needs
for luxury, quality and performance.
(high income earners)
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INTERNATIONAL MARKETING
Distribution Channels:
The means or channel used by a firm for delivering
its product to the customer
A firm that manufactures its products in a particular
country can sell:
- Directly to the customer
- To the retailer
- To the wholesaler
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A firm that manufactures its products in its home
country and sells in a foreign country:
- Directly to the customer
- To the retailer
- To the wholesaler
- To an Import agent
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 Which channel to use is based on:
- Retail Concentration:
Concentrated Retail System: Is one in which only
few retailors supply most of the markets.
Developed countries have a concentrated retail
system, consisting of large retail stores or
shopping malls eg: Tesco, Wal-Mart etc
Firms are able to sell directly to retailors
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Fragmented Retail system: Is one in which there
exist many retailors.
Developing countries have a more fragmented
retail system with many retail stores serving local
neighborhood.
Firms sell to wholesalers or import agents, who
then sell to retailors.
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 Implications for IB:
Concentrated Retail System:
In countries where the retail system is very
concentrated, firms deal directly with retailors
cutting out wholesalers. (developed countries).
In US, large companies may sell directly to
supermarkets rather than going through wholesale
distributors.
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INTERNATIONAL MARKETING
- Fragmented Retail System: firms should sell to
import agents or wholesalers (longer channel)
Channel length:
The number of intermediaries between the
producer and the consumer.
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- Channel Exclusivity:
An exclusive distribution channel is one that is
difficult for new firms to access.
It is often difficult for new firms to get access to
shelf space in supermarkets.
Retailers prefer to carry products of established
firms rather than unknown firms
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The exclusivity of a distribution channel varies
between countries.
Eg: Japan has a very exclusive system.
Relationship between firms, wholesalers and
retailers is often based on the understanding that
distributors will not carry products of competing
firms. Distributors in return receive an attractive
mark-up by the manufacturer.
This makes access to Japanese market difficult.
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INTERNATIONAL MARKETING
Overcoming Channel Exclusivity:
To overcome channel exclusivity, IB should use a
long distribution channel by going through either
the wholesalers or import agents.
Import agents and wholesalers may have longterm retailers or important customers, hence would
be able to get access to a distribution channel or
sell directly to customers.
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INTERNATIONAL MARKETING
- Channel quality:
Refers to the expertise, competencies and skills of
established retailers in a nation and their ability to
sell and support the products of IB.
Although the quality of retailers in most developed
nations is good, in emerging markets and less
developed nations channel quality is poor.
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Implications for International Businesses:
Poor channel quality may require an IB
- devote considerable time upgrading the channel
by providing extensive education and support to
retailers
- By establishing its own retail channel
Eg: Apple is opening up retail stores in several
nations, in order to provide point-of-sale education,
service and support for its popular iPod and
computer products.
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 Communication Strategy
Communicating the attributes of the product to
prospective customers.
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INTERNATIONAL MARKETING
A communicating strategy is either a push strategy
or a pull strategy
- Push strategy: uses personal selling (direct
marketing) to communicate the marketing
message to consumers
- Pull strategy: uses mass media advertising to
communicate the marketing message to
consumers
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Push vrs Pull Strategy
Push Strategy is used:
- For industrial products or complex products
- When distribution channels are short
- When few print or electronic media are available
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INTERNATIONAL MARKETING
Pull Strategy is used:
- For consumer goods
- When distribution channels are long
- When sufficient print or electronic media are
available
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 Pricing Strategy:
- Price Discrimination: when consumers in
different countries are charged different prices for
the same product.
For Successful Price Discrimination:
- The firm must be able to keep its markets
separate or else individuals may engage in
arbitrage
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Arbitrage: buying from countries where prices are
lower and re-selling in countries where prices are
higher.
Eg:
Ford practices price discrimination between Great
Britain and Belgium.
A Ford car can cost up to $3,000 more in Great
Britain than in Belguim
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Ford has been able to keep the 2 markets
separate because:
- Left-hand-drive cars are sold in Belgium
- Right-hand-drive cars are sold in Great Britain
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- Different Price Elasticity of Demand in
different countries
Price elasticity of demand:
is a measure of the responsiveness of demand for
a product to a change in price.
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Elastic: when a small change in price causes a
large change in demand.
Eg:
In countries where income levels are low,
consumers with limited income tend to be very
price conscious
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Inelastic: when a large change in price causes
only a small change in demand
Eg:
In countries where income levels are high,
consumers are not sensitive to changes in price.
NB:
Generally, a firm can charge a higher price in a
country where demand is inelastic.
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 Strategic Pricing:
- Predatory Pricing: when price is used as a
competitive weapon to drive other competitors
out of the market.
- Once the competitors have left the market, the
firm can raise prices and enjoy high profits
- For such a strategy to work, a firm must have a
profitable position in another national market
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Example:
Matsushita, a Japanese firm, was accused of
using this strategy to enter the US TV market.
- As one of the major TV producers in Japan,
Matsushita earned high profits at home.
- It then used those profits to subsidize the loses it
made in the US during its early years
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INTERNATIONAL MARKETING
- Multipoint Pricing: when a firms pricing strategy
in one market has an impact on its rival’s pricing
strategy in another market
- This normally happens when two or more IB
compete against themselves in 2 or more
national markets.
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 Example:
Fuji launched an aggressive competitive attack
against Kodak in the US company’s home market
in Jan. 1997, cutting prices by 50%.
- Kodak’s response was to aggressively cut prices
in Fuji’s largest market, Japan.
- Fuji responded to Kodak’s counterattack by
pulling back from its aggressive stance in US
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EXAMS
 Exams
Section A
10 questions (answer all)
Section B
2 case studies (answer 1)
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