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EMILIO AGUINALDO COLLEGE

Manila
School of Business Education

An Executive Summary

Of Global Marketing Mix

As Partial Requirement in the Subject

International Marketing

S.Y 2018-2019

Submitted by:

Maria Devorah B. Bagadiong

BSBA Major in Marketing Management

14-1-95953

Submitted to:

Mrs. Julieta M. Rodelas, MBA

Faculty-In-Charge

[i]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

INTRODUCTION
The Global Marketing Mix

Developing the global marketing mix is a great challenge and an attractive


opportunity. While market conditions may warrant changes in individual product
features, products and product lines should be managed for the greatest possible
effect globally, regionally, and locally as shown in The Global and regional
products have to utilize best practice across borders, while local products should
be monitored for possible use in other markets. This chapter is divided into two
parts to highlight these issues. The first part will focus on how the product
development process can take into account the globalization of markets without
compromising dimensions considered essential by local markets. To a large
extent this means that the process is market-driven rather than determined by
cost or convenience of manufacture. For example, Germany’s Volkswagen
operated for years under the philosophy that one car was good enough for the
whole world, while U.S. marketing executives tried in vain to secure items such
as cup holders or seatback release levers in cars destined for the U.S. market.
Similarly, Japanese product-development engineers fought against the concept
of a third row of seats for a sport utility vehicle, which is preferred by U.S.
customers.1 The second half of the chapter features a discussion of product
management, especially how marketers can utilize resources on a worldwide
basis to exploit opportunities in product markets. Unilever, one of the world’s
largest food companies, often has to take a local view, given differences in the
daily diet. Similarly, detergent formulas may have to differ between markets
because washing habits, machines, clothes, and water quality vary. However,
many strategic product decisions, such as branding, will benefit from worldwide
experience and exposure applied to the local context. Some categories cross
national borders quite well, such as ice cream, tea, and personal wash products,
and translate to opportunities with a standard approach.2 Unilever has cut the
number of its brands from 1,600 to 400, and will focus efforts on 25 global
brands, such as Axe.

[ii]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

CHAPTER 11
PRODUCT MANAGEMENT AND GLOBAL BRANDING

Global Product Development

Product development is at the heart of the global marketing process. New


products should be developed, or old ones modified, to cater to new or changing
customer needs on a global or regional basis. At the same time, corporate objectives of
technical feasibility and financial profitability must be satisfied. To illustrate, Black &
Decker, manufacturer of power tools for do-it-yourself household repairs, had done
some remodeling of its own. The company earlier was the consummate customizer: the
Italian subsidiary made tools for Italians, the British subsidiary for the British. At the
same time, Japanese power tool makers, such as Makita Electric Works Ltd., saw the
world differently. Makita was Black & Decker’s first competitor with a global strategy.
Makita management did not care that Germans prefer high-powered, heavy-duty drills
and that U.S. consumers want everything lighter. They reasoned that a good drill at a
low price will sell from Baden-Baden to Brooklyn. Using this strategy, Makita effectively
cut into Black & Decker’s market share. As a result, Black & Decker unveiled 50 new
models—each standardized for world production. The company’s current objective is to
“establish itself as the preeminent global manufacturer and marketer” in its field.4 With
competition increasingly able to react quickly when new products are introduced,
worldwide planning at the product level provides a number of tangible benefits. A firm
that adopts a worldwide approach is better able to develop products with specifications
compatible on a worldwide scale. A firm that leaves product development to
independent units will incur greater difficulties in transferring its experience and
technology.

The Product Development Process

The product development process begins with idea generation. Ideas may come
from within the company—from the research and development staff, sales personnel, or
almost anyone who becomes involved in the company’s efforts. Intermediaries may
suggest ideas because they are closer to the changing, and often different, needs of
international customers. In franchising operations, franchisees are a source of many
new products. For example, the McFlurry, McDonald’s ice-cream dessert, was the
brainchild of a Canadian operator. 9 Competitors are a major outside source of ideas. A
competitive idea from abroad
may be modified and improved to suit another market’s characteristics.

[iii]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

The Organization of Global Product Development

The product development activity is undertaken by specific teams, whose task is


to subject new products to tough scrutiny at specified points in the development cycle,
to eliminate weak products before too much is invested in them and to guide promising
prototypes from labs to the market.33 Representatives of all the affected functional
areas serve on each
team to ensure the integrity of the project. A marketing team member is needed to
assess the customer base for the new product, engineering to make sure that the
product can be produced in the intended format, and finance to keep costs in control.
An international team member should be assigned a permanent role in the product
development process and not simply called in when a need arises. Organizational
relationships have to be such that the firm’s knowledge-based assets are easily
transferable and transferred.

The Testing of New Product Concepts

The final stages of the product development process will involve testing the
product in terms of both its performance and its projected market
acceptance.Depending on the product, testing procedures range from reliability tests in
the pilot plant to minilaunches, from which the product’s performance in world markets
will be estimated. Any testing will prolong fullscale commercialization and increase the
possibility of competitive reaction. Further, the cost of test marketing is substantial—on
the average, $1 to $1.5 million per market.

Management of the Product and Brand Portfolio

Most marketers have a considerable number of individual items in their product


portfolios, consisting of different product lines, that is, grouping of products managed
and marketed as a unit. The options for a particular portfolio (or multiple portfolios) are
to expand geographically to new markets or new segments and add to existing market
operations through new product lines or new product business. The marketer will need
to have a balanced product and market portfolio—a proper mix of new, growing, and
mature products to provide a sustainable competitive advantage.

Analyzing the Product Portfolio

The specific approach chosen and variables included will vary by company, according
to corporate objectives and characteristics as well as the nature of the product market.
A product portfolio approach based on growth rates and market share positions allows
the analysis of business entities, product lines, or individual products. Exhibit 14.2
represents the product-market portfolio of Company A, which markets the same product
line in several countries. The company is a leader in most of the markets in which it has

[iv]
EMILIO AGUINALDO COLLEGE
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School of Business Education

operations, as indicated by its relative market shares. It has two cash cows (United
States and Canada), four stars (Germany, Great Britain, France, and Spain), and one
“problem child” (Brazil). In the mature U.S. market, Company A has its largest volume
but only a small market share advantage compared with competition. Company A’s
dominance is more pronounced in Canada and in the EU countries.

Disadvantages of the Product Portfolio Approach

The application of the product portfolio approach has a number of limitations.


International competitive behavior does not always follow the same rules as in the firm’s
domestic market; for example, the major local competitor may be a government-owned
firm whose main objective is to maintain employment. With European integration, many
believed that the continent’s $20 billion appliance business would consolidate into a
handful of companies. Whirlpool was the major non-EU company that wanted to take
advantage of the emerging opportunity and was expected to gain 20 percent of the
market. However, its 12 percent share is testimony that local companies are not
standing still while foreigners invade their turf. They have shifted their orientation from
local and regional to global by laying off workers, building up core businesses, and
focusing on profits.

Managing the Brand Portfolio

Branding is one of the major beneficiaries of a well-conducted portfolio analysis.


Brands are important because they shape customer decisions and, ultimately, create
economic value.

Brand Strategy Decisions

The goal of many marketers currently is to create consistency and impact, both
of which are easier to manage with a single worldwide identity.58 Global brands are a
key way of reaching this goal. Global brands are those that reach the world’s mega-
markets and are perceived as the same brand by consumers and internal
constituents.59 While some of the global brands are completely standardized, some
elements of the product may be adapted to local conditions. These adjustments include
brand names (e.g., Tide, Whisper, and Clairol in North America are Ariel, Allways, and
Wella in Europe), positioning (e.g., Ford Fiesta as a small car in Germany but a family
vehicle in Portugal), or product versions sold under the same brand name (e.g., 9-13
different types of coffee sold under the Nescafe name in Northern Europe alone)

Private Brand Policies


The emergence of strong intermediaries has led to the significant increase in private
brand goods, that is, the intermediaries’ own branded products or “store brands.”

[v]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

CHAPTER 12
GLOBAL MARKETING OF SERVICE

Differences between Services and Goods

We rarely contemplate or analyze the precise role of services in our lives.


Services often accompany goods, but they are also, by themselves, an increasingly
important part of our economy, domestically and internationally. One writer has
contrasted services and products by stating that “a good is an object, a device, a thing;
a service is a deed, a performance, an effort.”1 This definition, although quite general,
captures the essence of the difference between goods and services. Services tend to
be more intangible, personalized, and custom-made than goods. Services are also often
marketed differently from goods. While goods are typically distributed to the customer,
services can be transferred across borders or originated abroad, and the service
provider can be transferred to the customer or the customer can be transferred to the
service territory. Services also typically use a different approach to customer
satisfaction. It has been stated that “service firms do not have products in the form of
preproduced solutions to customers’ problems; they have processes as solutions to
such problems.Services are the fastest-growing sector of world trade, far outpacing the
growth in the trade of goods. These major differences add dimensions to services that
are not present in goods and thus call for a major differentiation.

Linkage between Services and Goods

Services may complement goods; at other times, goods may complement


services. Offering goods that are in need of substantial technological support and
maintenance may be useless if no proper assurance for service can be provided.
For this reason, the initial contract of sale often includes important service
dimensions. This practice is common in aircraft sales. When an aircraft is purchased,
the buyer often contracts not only for the physical good—namely, the plane—but also
for training of personnel, maintenance service, and the promise of continuous
technological updates. Similarly, the sale of computer hardware is critically linked to the
availability of proper servicing and software.

Stand-Alone Services

Services do not always come in unison with goods. Increasingly, they compete against
goods and become an alternative offering. For example, rather than buy an in-house
computer, the business executive can contract computing work to a local or Foreign
Service firm.

[vi]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

The Role of Services in the U.S. Economy

Since the industrial revolution, the United States has seen itself as a primary
international competitor in the area of production of goods. In the past few decades,
however, the U.S. economy has increasingly become a service economy, as Exhibit
15.3 shows. The service sector now produces 80.5 percent of the U.S. GDP and 66.7
percent of the GDP throughout the world.5 The service sector accounts for most of the
growth in total nonfarm employment. Only a limited segment of the total range of
services is sold internationally. Federal,
state, and local government employees, for example, sell few of their services to
foreigners. U.S. laundromats only occasionally service foreign tourists, yet many service
industries that do market abroad often have at their disposal large organizations,
specialized technology, or advanced professional expertise. Strength in these
characteristics has enabled the United States to become the world’s largest exporter of
services. Total U.S. service exports grew from $6 billion in 1958 to $373 billion in
2005.6 The contribution of services to the
U.S. balance of payments is highlighted in Exhibit 15.4. It shows that the U.S. services
trade balance is producing a substantial surplus and makes up for a part of the huge
deficits in merchandise trade.

Global Transformation of Services

The rapid rise in international services marketing has been the result of major
shifts in the business environment and innovations in technology. One primary change
in the past decade has been the reduction of governmental regulation of services. This
deregulation is clearly seen within the United States. In the mid-1970s, a philosophical
decision was made to reduce government interference in the marketplace,

Data Collection Problems

The data collected on service trade are quite poor. Service transactions are often
“invisible” statistically as well as physically. The fact that governments have precise data
on the number of trucks exported, down to the last bolt, but little information on
reinsuranceflows, reflects past governmental inattention to services.

Regulations and Service Trade Negotiations

Typical obstacles to services trade can be categorized into two major types:
barriers to entry and problems in performing services. Governments often justify
barriers to entry by referring to national security and economic security. For example,
the impact of banking on domestic economic activity is given as a reason why banking
should be carried out only by nationals or indeed be operated entirely under
government control.

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EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

Services and E-Commerce

Electronic commerce has opened up new horizons for global services reach and
has drastically reduced the meaning of distance. For example, when geographic
obstacles make the establishment of retail outlets cumbersome and expensive, firms
can approach their customers via the World Wide Web. Government regulations that
might be prohibitive to a transfer of goods may not have any effect on the international
marketing of services.

Services and Academia

In the context of international services, it makes sense to briefly review the


position of higher education. Academia has staunchly resisted accepting the notion of
being part of any services “sector.” University presidents, deans, and professors from
around the world consistently assure the trade community that the problems they face
are so specific and unique that wholesale approaches to anything in higher education
would be heresy. However, academia is not exempt from influence by the same factors
as other global services, such as demand and supply.

Starting to Market Services Internationally

For many firms, participation in the Internet will offer the most attractive starting
point in marketing services internationally. Setting up a Web site will allow visitors from
any place on the globe to come see the offering. Of course, the most important problem
will be communicating the existence of the site and enticing visitors to come. For that,
very traditional advertising and communication approaches often need to be used.

Strategic Implications of International Services Marketing

To be successful, the international service marketer must first determine the


nature and the aim of the service offering—that is, whether the service will be aimed at
people or at things, and whether the service act in itself will result in tangible or
intangible actions provides examples of such a classification that will help the marketer
to better determine the position of the services effort.

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EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

CHAPTER 13
ADVERTISING, PROMOTION AND SALES

Elements of Communication
The word communication has its root in the Latin word Communicare, which means to
share. Communication is a two way process in which there is an exchange and
progression of ideas towards a mutually accepted direction or goal. For this process to
materialize, it is essential that the basic elements of communication be identified .these
elements are:

1. Sender/ Encoder/Speaker: The person who initiates the communication process is


normally referred to as the sender. From his personal data bank he selects ideas,
encodes and finally transmits them to the receiver. The entire burden of communication
rests upon the encoder or the sources. His choice of images and words, and the
combination of the two is what goads the receiver to listen carefully. It is, therefore,
necessary in accordance with the expectations of the receiver,the level of acceptance is
going to be higher.
Receiver/decoder/Listener: The listener receives an encoded message which he
attempts to decode. This process is carried on in relation to the work environment. If the
goal of the sender is envisioned as similar to the receiver, the listener becomes more
receptive.

3. Message: Message is the encoded idea transmitted by the sender. The formulation
of the message is very important, for an incorrect patterning can make the receiver lose
interest. The sender has to carefully decide on the order in which he would like to
present his ideas. The ordering should be based on the requirements of the listener so
that its significance is immediately grasped. The minute the receiver finds his goals
codified in the message, he sits up, listens and responds.

4. Medium/Channel: Another important element of communication is the medium or


channel. It could be oral, written or non-verbal. Each medium follows its own set of rules
and regulations. In oral communication one can afford to be a little informal, but when
using the written mode, all rules of communication need to be observed.

Feedback: This is the most important component of communication. Effective


communication takes place only when there is a feedback. Feedback puts the message
back into system as a check against misunderstandings. Miscommunication results in
typical responses like ‘This is not what I meant’ or ‘This was not my intention’. If
feedback is solicited on all occasions, these errors can be minimized. Fallacious
statements or erroneous conclusions are made because of lack of confirmation through
feedback and discrepancy between the message transmitted and understood.
Feedback indicates whether communication has attained its goal. It helps the sender to
know if there are corrections to be made and ensures the receiver has understood the
communication as intended.

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Process of Communication

The sender encodes the message and sends it through a channel. The
channel is the language used – words, actions, signs, objects, or a combination
of these. The receiver receives the message, decodes it, and acts on it. If the
message received is the same as the message sent, there will be a response; if
not, there has been a breakdown of communication. This may happen because
of noise. The transmission of the receiver’s response to the sender is called
feedback. If you are sending a message to somebody, your communication cycle
is complete only when you get a response from the recipient of your message.
Otherwise you need to resend the message. Communication takes place in a
well-defined set up called the communication environment. Messages
themselves are transferred through a medium, the channel. Language is the tool
we use through these channels to exchange information.
In brief, the essentials of effective communication are:

. A common communication environment


. Cooperation between the sender and the receiver
. Selection of an appropriate channel
. Correct encoding and decoding of the message
. Receipt of the desired response and feedback

Main objective of advertising is to achieve both Marketing and Advertising


objectives. So, as communication tool it fulfills communication objective and as
well as marketing objective. First we have to know the communication process.
To communicate effectively, marketer needs to understand the fundamental
elements underlying effective communication. The communication model shown
below has nine elements.

Role of Source

As we saw in the earlier diagrams, communication begins with source (both in


case of advertising communication and simple communication processes). At the time
of inception every advertiser is trying to enhance awareness level and increase sales
but, with the passage of time it changes. Source may be the Advertiser, agency,
endorsers, music, story, voice, voice-over, etc. They convey this message through
conventional media and that would be received by receiver. This receiver may be true
receiver in terms of consumption (consumer/user) or it may be the person who will
influence the main consumer. In case of very good product receiver may be the first
time satisfied user who will convey his/her experience to next consumer and convinced
them to buy it.

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School of Business Education

Media

After choosing the message, the advertiser’s next task is to choose media to
carry it. The steps, here, as following: Deciding on Reach, Frequency and Impact:
Media Selection involves findings the most cost-effective media to deliver the desired
number of exposures to the target audience. The effect of exposures on audience
awareness depends upon the exposures’ reach, frequency and impact.

Choosing Among Major Media Types:


The major conventional advertising media include Newspaper, Television, Radio,
Direct mail, Magazines, Hoardings, and Brochures etc. Among the modern emerging
media, one may choose from the Internet, Mobile messaging, Digital Magazines, Mobile
hoardings etc. Media Planners make their choice among media categories by
considering the following variables: Target-audience and media habits, Product,
Message and Cost.
The other steps of deciding on media are:
Selecting specific vehicle
Deciding on Media Timing and
Deciding on Geographical Allocation

Promotion Mix or Communication Mix

Marketing Mix is the set of marketing tools that the firm uses to pursue its
marketing objectives in the target market. McCarthy classified these tools into four
broad groups that he called the four P-s of marketing: Product, Price, Place and
Promotion. From a buyer’s point of view, each marketing tool is designed to deliver a
customer benefit. Robert Lauterborn suggested that the sellers’ four P-s correspond to
the customers’ four C-s.

Advertising Functions

Advertising is any paid form of non-personal presentation and promotion of


ideas, goods or services by an identified sponsor. Main ideas and elements of
advertising are:

Paid form: Advertising is published or broadcasted because the advertiser has


purchased space or time in the media to tell the story of his product or service.
Non personal presentation: Advertising is done in a non-personal manner through
media where there is no scope of directly interacting with the target
group of customers to influence them or clear their doubts. Ideas, goods or services:
Advertising is concerned with the promotion of tangible goods as well as intangible
services. Identified sponsor: Advertising discloses or identifies the source of the
opinions and ideas it represents.

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EMILIO AGUINALDO COLLEGE
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CHAPTER 14
PRICING STRATEGIES AND TACTICS

Use of Transfer Prices to Achieve Corporate Objectives

Three philosophies of transfer pricing have emerged over time: (1) cost-based
(direct cost or cost-plus), (2) market-based (discounted “dealer” price derived from end
market prices), and (3) arm’s-length price, or the price that unrelated parties would
have reached on the same transaction. The rationale for transferring at cost is that it
increases the profits of affiliates, and their profitability will eventually benefit the entire
corporation. In most cases, cost-plus is used, requiring every affiliate to be a profit
center. Deriving transfer prices from the market is the most marketing-oriented method
because it takes local conditions into account. Arm’s-length pricing is favored by many
constituents, such as governments, to ensure proper intracompany pricing. However,
the method becomes difficult when sales to outside parties do not occur in a product
category. Additionally, it is often difficult to convince external authorities that true
negotiation occurs between two entities controlled by the same parent. In a study of 32
U.S. based multinational corporations operating in Latin America, a total of 57 percent
stated that they use a strategy of arm’s-length pricing for their shipments, while the
others used negotiated prices, costplus, or some other method.

Transfer Pricing Challenges

Transfer pricing policies face two general types of challenges. The first is internal
to the multinational corporation and concerns the motivation of those affected by the
pricing policies of the corporation. The second, an external one, deals with relations
between the corporation and tax authorities in both the home country and the host
countries.

Performance Measurement

Manipulating intracorporate prices complicates internal control measures and,


without proper documentation, will cause major problems. If the firm operates on a profit
center basis, some consideration must be given to the effect of transfer pricing on the
subsidiary’s apparent profit performance and its actual performance. To judge a
subsidiary’s profit performance as not satisfactory when it was targeted to be a net
source of funds can easily create morale problems.

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Taxation

Transfer prices will by definition involve the tax and regulatory jurisdictions of the
countries in which the company does business, as is pointed out in The International
Marketplace 17.1. Sales and transfers of tangible properties and transfers of intangibles
such as patent rights and manufacturing know-how are subject to close review and to
determinations about the adequacy of compensation received. This quite often puts the
multinational corporation in a difficult position. U.S. authorities may think the transfer
price is too low, whereas it may be perceived as too high by the foreign entity,
especially if a less-developed country is involved. Section 482 of the Internal Revenue
Code gives the Commissioner of the IRS vast authority to reallocate income between
controlled foreign operations and U.S. parents and
between U.S. operations of foreign corporations.

Pricing within Individual Markets

Pricing within the individual markets in which the company operates is


determined by (1) corporate objectives, (2) costs, (3) customer behavior and market
conditions, (4) market structure, and (5) environmental constraints.26 Because all these
factors vary among the countries in which the multinational corporation might have a
presence, the pricing policy is under pressure to vary as well. With price holding a
position of importance with customers, a market driven firm must be informed and
sensitive to customer views and realities.27 This is especially critical for those
marketers wanting to position their products
as premium alternatives. Although many global marketers, both U.S.-based28 and
foreign-based,29 emphasize nonprice methods of competition, they rank pricing high as
a marketing tool overseas, even though the nondomestic pricing decisions are made at
the middle management level in a majority of firms. Pricing decisions also tend to be
made more at the local level, with coordination from headquarters in more strategic
decision situations.30 With increased trade liberalization and advanced economic
integration, this coordination is becoming
more important.

Costs

Costs are frequently used as a basis for price determination largely because they
are easily measured and provide a floor under which prices cannot go in the long term.
These include procurement, manufacturing, logistics, and marketing costs, as well as
overhead. Quality at an affordable price drives most procurement systems. The decision
to turn to offshore suppliers may often be influenced by their lower prices, which enable
the marketer to remain competitive.

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Demand and Market Factors

Demand will set a price ceiling in a given market. Despite the difficulties in
obtaining data on foreign markets and forecasting potential demand, the global
marketer must make judgments concerning the quantities that can be sold at different
prices in each foreign market. The global marketer must understand the price elasticity
of consumer demand to determine appropriate price levels, especially if cost
structures change. A status-conscious market that insists on products with established
reputations will be inelastic, allowing for far more pricing freedom than a market where
price-consciousness drives demand. Many U.S. and European companies have
regarded Japan as a place to sell premium products at premium prices. With the
increased information and travel that globalization has brought about, status-
consciousness is being replaced by a more practical consumerist sensibility: top quality
at competitive prices

Market Structure and Competition

Competition helps set the price within the parameters of cost and demand.
Depending on the marketer’s objectives and competitive position, it may choose to
compete directly on price or elect for nonprice measures. If a pricing response is
sought, the marketer can offer bundled prices (e.g., value deals on a combination of
products) or loyalty programs to insulate the firm from a price war. Price cuts can also
be executed selectively rather than across the board. New products can be introduced
to counter price challenges. For example, when Japanese Kao introduced a low-priced
diskette to compete against 3M, rather than drop its prices 3M introduced a new brand,
Highland, that effectively flanked Kao’s competitive incursion. Simply dropping the price
on the 3M brand could have badly diluted its image. On the nonprice front, the company
can opt to fight back on quality by adding and promoting value-adding features.

Causes of the Crises

Both the Mexican and Thai cases of currency devaluation led to regional effects
inwhich international investors saw Mexico and Thailand as only the first domino in a
long series of failures to come. For example, the historically stable Korean won fell from
Won 900/US$ to Won 1,100/US$ in one month. The reasons for the crises were largely
in three areas allowing comparison: corporate socialism, corporate governance, and
banking stability and management. In 1997, business liabilities exceeded the capacities
of government to bail businesses out, and practices such as lifetime employment were
no longer sustainable. Many firms in the Far East were often controlled by families or
groups related to the governing party of the country. The interests of stockholders and
creditors were secondary in an atmosphere of cronyism.

[xiv]
EMILIO AGUINALDO COLLEGE
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CHAPTER 15
GLOBAL DISTRIBUTION AND LOGISTICS

Supply Chain Management

The integration of these three concepts has resulted in the new paradigm
of supply chain management, which encompasses the planning and
management of all activities involved in sourcing and procurement, conversion,
and logistics. It also includes coordination and collaboration with channel
partners, which can be suppliers, intermediaries, third party service providers,
and customers. In essence, supply chain management integrates supply and
demand management within and across companies.

The Impact of International Logistics

Logistics costs comprise between 10 and 30 percent of the total landed


cost of an international order.5 International firms experience ongoing increases
in their logistics cost. Surging fuels costs show no signs of dropping.
Globalization has stretched the length of the value chain. Transportation
providers have boosted their prices, both to offset fuel costs but also as a result
of growing demand for their services and constraints in capacity. Increased
security requirements for freight also have increased costs.

The New Dimensions of International Logistics

In domestic operations, logistics decisions are guided by the experience of


the manager, possible industry comparison, an intimate knowledge of trends, and
the development of heuristics—or rules of thumb. The logistics manager in the
international firm, on the other hand, frequently has to depend on educated
guesses to determine the steps required to obtain a desired service level.
Variations in locale mean variations in environment. Lack of familiarity with these
variations leads to uncertainty in the decision-making process. By applying
decision rules developed at home, the firm will be unable to adapt well to the
new environment, and the result will be inadequate profit performance. The long-
term survival of international activities depends on an understanding of the
differences inherent in the international logistics field.

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Transportation Infrastructure
In industrialized nations, firms can count on an established transportation
network. Internationally, however, major infrastructural variations may be
encountered. Some countries may have excellent inbound and
outbound.transportation systems but weak transportation links within the country
as shown in The International Marketplace 16.2.

Availability of Modes

Even though goods are shipped abroad by rail or truck, international


transportation frequently requires ocean or airfreight modes, which many
corporations only rarely use domestically. In addition, combinations such as land
bridges or sea bridges frequently permit the transfer of freight among various
modes of transportation, resulting in intermodal movements. The international
marketer must understand the specific properties of the different modes in order
to use them intelligently.

Ocean Shipping

Water transportation is a key mode for international freight movements. An


interruption of ocean-based transportation can have quite serious consequences
for an economy. Three types of vessels operating in ocean shipping can be
distinguished by their service: liner service, bulk service, and tramp or charter
service. Liner service offers regularly scheduled passage on established routes.
Bulk service mainly provides contractual services for individual voyages or for
prolonged periods of time. Tramp service is available for irregular routes and is
scheduled only on demand.

Air Shipping

Airfreight is available to and from most countries. This includes the


developing world, where it is often a matter of national prestige to operate a
national airline. The tremendous growth in international airfreight is shown in
Exhibit 16.3. The total volume of airfreight in relation to the total volume of
shipping in international business remains quite small. Yet 40 percent of the
world’s manufactured exports by value travel by air.9 Clearly, high value items
are more likely to be shipped by air, particularly if they have a high density, that
is, a high weight-to-volume ratio.

[xvi]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

Choice of Transport Modes

The international marketer must make the appropriate selection from the
available modes of transportation. This decision, of course, will be heavily
influenced by the needs of the firm and its customers. The manager must
consider the performance of each mode on four dimensions: transit time,
predictability, cost, and noneconomic factors.

Transit Time

The period between departure and arrival of the carrier varies significantly
between ocean freight and airfreight. The 45-day transit time of an ocean shipment can
be reduced to 12 hours if the firm chooses airfreight. The length of transit time will have
a major impact on the overall operations of the firm. A short transit time may reduce or
even eliminate the need for an overseas depot. Also, inventories can be significantly
reduced if they are replenished frequently. As a result, capital can be freed up and used
to finance other corporate opportunities. Transit time can also play a major role in
emergency situations. If the shipper is about to miss an important delivery date because
of production delays, a shipment normally made by ocean freight can be made by air.

Predictability

Providers of both ocean and airfreight service wrestle with the issue of reliability.
Both modes are subject to the vagaries of nature, which may impose delays. Yet
because reliability is a relative measure, the delay of one day for airfreight tends to be
seen as much more severe and “unreliable” than the same delay for ocean freight. But
delays tend to be shorter in absolute time for air shipments. As a result, arrival time via
air is more predictable.

Cost

A major consideration in choosing international transportation modes is the cost


factor. International transportation services are usually priced on the basis of both cost
of the service provided and value of the service to the shipper. Because of the high
value of the products shipped by air, airfreight is often priced according to the value of
the service. In this instance, of course, price becomes a function of market demand and
the monopolistic power of the carrier.

[xvii]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

CHAPTER 16
SOCIAL NETWORKS AND COMMUNICATION

The Target Audience

Global marketers face multiple audiences beyond customers. The expectations


of these audiences have to be researched to ensure the appropriateness of campaign
decision making. Consider the following publics with whom communication is
necessary: suppliers, intermediaries, government, the local community, bankers and
creditors, media organizations, shareholders, and employees. Each can be reached
with an appropriate mix of tools. A multinational corporation that wants to boost its
image with the government and the local community may sponsor events.

Campaign Objectives

Nothing is more essential to the planning of international promotional campaigns


than the establishment of clearly defined, measurable objectives. These objectives can
be divided into overall global and regional objectives as well as local objectives. The
objectives that are set at the local level are more specific and set measurable targets for
individual markets. These objectives may be product- or service-related or related to the
entity itself. Typical goals are to increase awareness, enhance image, and improve
market share in a particular market. Whatever the objective, it has to be measurable for
control purposes.

The Budget

The promotional budget links established objectives with media, message, and
control decisions. Ideally, the budget would be set as a response to the objectives to be
met, but resource constraints often preclude this approach. Many marketers use an
objective task method, as a survey of 484 advertising managers for consumer goods in
fifteen countries indicates (see Exhibit 18.2); however, realities may force compromises
between ideal choices and resources available.13 As a matter of fact, available funds
may dictate the basis from which the objective task method can start. Furthermore,
advertising budgets should
be set on a market-by-market basis because of competitive differences across markets.
When it comes to global image campaigns, for example, headquarters should provide
country organizations extra funds for their implementation.

[xviii]
EMILIO AGUINALDO COLLEGE
Manila
School of Business Education

Media Strategy

Target audience characteristics, campaign objectives, and the budget form the
basis for the choice between media vehicles and the development of a media schedule
Media Availability

Media spending, which totaled $385 billion in 2004 (with $403 billion expected for
2005, and $427 billion for 2006), varies dramatically around the world, as seen in
Exhibit 18.3. In absolute terms, the United States spends more money on advertising
than most of the other major advertising nations combined. Other major spenders are
Japan, the United Kingdom, Germany, Canada, and France. The mature U.S. market
anticipates continued growth in the future, but European integration and the
development of the Pacific Rim’s consumer markets are likely to fuel major growth.

Product Influences

Marketers and advertising agencies are currently frustrated by wildly differing


restrictions on how products can be advertised. Agencies often have to produce several
separate versions to comply with various national regulations. Consumer protection in
general has dominated the regulatory scene both in the European Union and the United
States.Changing and standardizing these regulations, even in an area like the EU, is a
long and difficult process. While some countries have banned tobacco advertising
altogether (e.g., France), some have voluntary restriction systems in place. For
example, in the United Kingdom, tobacco advertising is not allowed in magazines aimed
at very young women, but it is permitted in other women’s magazines. Starting in 2003,
tobacco companies were required to print vivid pictures of lung cancer victims and
diseased organs on cigarette packets sold in the United Kingdom. The EU has
developed union-wide regulation and has banned all forms of cross-border tobacco
advertising effective 2005. This means no tobacco advertising in print, as well as on
radio, the Internet, and Formula One racing. Existing regulations ban TV advertising.
Tobacco marketers would be allowed to advertise on cinema, poster, and billboard
sites, but can still be banned by national laws.

Global Media

Media vehicles that have target audiences on at least three continents and for
which the media buying takes place through a centralized office are considered to be
global media. Global media have traditionally been publications that, in addition to the
worldwide edition, have provided advertisers the option of using regional editions. For
example, Time Europe covers the Middle East, Africa, and, since 2003, Latin America.
An Asian edition (Time Asia)
is based in Hong Kong and a Canadian edition (Time Canada) is based in Toronto. The
South Pacific edition, covering Australia, New Zealand, and the Pacific Islands, is based
in Sydney.

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