International Marketing

MODULE 5

SUBMITTED TO Dr. SABARI RAJAN

SUBMITTED BY DINESH BK VELU S GAUTAM ANJU S RAMJITH

International Marketing

INTERNATIONAL MARKETING MIX

Product policy. Product policy decisions vary with each firm`s marketing arrangement. Often firms already have a product and are willing to make some product adaptations suitable to the tastes and conditions of the prospective market. The product changes may be minor in nature, such as adding a protective coating for equipment needed in the tropics or removing extra features from a tractor so that more foreign farmers can afford it. On the other hand, some firms design products to fit a certain market instead of marketing what is already produced. Pricing policy. When a firm determines its pricing strategy it can choose between a static or flexible policy. A static policy consists of taking the domestic price and adding on charges for freight, packaging, insurance, and other factors. Any charges applicable to the product after it has left the country of origin are added and that total becomes the selling price in the foreign market. A flexible pricing strategy is necessitated by different costs, demands, and government regulations. This pricing strategy is more sensitive to consumer taste and competition in the foreign market. Firms involved in foreign trade for the sole purpose of finding an outlet for excess production (bonus exports) tend to use a static strategy; whereas a firm counting on foreign markets to enhance its profits is more inclined towards a flexible strategy. Some firms use a flexible strategy to increase penetration and to build up a clientele. Promotion policy. The promotional mix and its function of providing information should be based on the characteristics of the society in which the product is to be marketed. In some countries the alternatives available for building a strong promotional strategy are restricted by many factors. For example, the international marketer must take into consideration the literacy of the population and the availability of various communications media. A promotional mix designed to reach a consumer in Nigeria will be quite different from the mix used in the United States. This is not surprising because very few Nigerian homes have television. But television is only one tool used for promotion. Other methods can be used to reach the Nigerian consumer. For example, radio and motion picture advertising reach 5 million Nigerians each year. Another point the international marketer should consider is that the service availability connected to the product is sometimes a crucial factor when the

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purchasing decision is made in the foreign markets. Promotional messages might include information on the availability of service. Service key issues are faced in designing strategy for personal selling in foreign markets. These include design of sales territories, control systems for field sales people, and type of compensation to be paid. Displays are popular means of sales promotion. Wording and layout arrangements are selected with local conditions and cultural norms in mind. Even if restrictions make product promotion difficult at times, there is an effective promotional strategy for every country. Distribution policy. Distribution system mix makes it possible to reach mass markets and creates place and time utility. On the international level the marketer has to deal with greater time lags. The geography and distances involved between international markets can create a communications breakdown among a marketer`s awareness of a consumer`s need, the setting up of distribution mix with proper channels, and the physical delivery of the product. Setting up of effective distribution channels takes the most time. One example of what the marketer has to deal with is that in the Near East wholesale and retail outlets for light industrial goods have long been sold in the bazaar, with locations in cities, towns, and villages. Today some activities still take place there. In other places of the world supermarkets are displacing the specialty stores and the market vendor. Therefore, channel-of-distribution systems selected must fit the character of the company and the markets in which it is doing business. Before a company decides to expand internationally, it must first determine its strategy for entering foreign markets and the degree of marketing involvement desired. The process of internationalization can be viewed as a gradual evolution represented in three stages: (1) the export stage, (2) the foreign production stage, and (3) the multinational enterprise. These stages can be classified by the following degrees of marketing involvement: (1) none to infrequent marketing overseas, (2) regular foreign marketing, and (3) world marketing operations. Two major dimensions of international marketing include business activities without foreign management and those with direct management.

DECISION MAKING
International marketing activities of firms continue to assume increasing importance in the world economy. Firms of all sizes and backgrounds, especially in the industrialised countries, exhibit a

International Marketing greater degree of willingness to respond to attractive opportunities in international markets and extend their marketing activities to one or more national markets. Consequently, the decision-making processes which surround these international marketing activities and the prevailing managerial styles have been the subject of limited but significant research in several advanced economies. This article will attempt to review and interpret the pertinent literature, drawn from studies of international decision-making in different environments, for the purpose of developing a coherent understanding of the subject matter. In particular, we offer four proportions on the basis of our research and evaluation in this area. These propositions relate to: (a) motivations of firms for engaging in international marketing; (b) subjective nature of international marketing decision-making; (c) decision-making modes which apply to international marketing; and (d) the nature of decision-making over the firm's internationalisation process. The article is organised around these propositions.

International Product Life Cycle

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In 1966, Raymond Vernon published a model that described internationalisation patterns of organisations. He looked at how U.S. companies developed into multinational corporations (MNCs) at a time when these firms dominated global trade, and per capita income in the U.S. was, by far, the highest of all the developed countries. The intent of International Product Life Cycle model (IPLC) was to advance trade theory beyond David Ricardos static framework of comparative advantages. In 1817, Ricardo came up with a simple economic experiment to explain the benefits to any country that was engaged in international trade even if it could produce all products at the lowest cost and would seem to have no need to trade with foreign partners. He showed that it was advantageous for a country with an absolute advantage in all product categories to trade and allow its work force to specialise in those categories with the highest added value. Vernon focused on the dynamics of comparative advantage and drew inspiration from the product life cycle to explain how trade patterns change over time. His IPLC described an internationalisation process wherein a local manufacturer in an advanced country (Vernon regarded the United States of America as the principle source of inventions) begins selling a new, technologically advanced product to high-come consumers in its home market. Production capabilities build locally to stay in close contact with its clientele and to minimize risk and uncertainty. As demand from consumers in other markets rises, production increasingly shifts abroad enabling the firm to maximise economies of scale and to bypass trade barriers. As the product matures and becomes more of a commodity, the number of competitors increases. In the end, the innovator from the advanced nation becomes challenged in its own home market making the advanced nation a net importer of the product. This product is produced either by competitors in lesser developed countries or, if the innovator has developed into a multinational manufacturer, by its foreign based production facilities. The IPLC international trade cycle consists of three stages:
1. NEW PRODUCT

The IPLC begins when a company in a developed country wants to exploit a technological breakthrough by launching a new, innovative product on its home market. Such a market is more likely to start in a developed nation because more high-income consumers are able to buy and are willing to experiment with new, expensive products

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(low price elasticy). Furthermore, easier access to capital markets exists to fund new product development. Production is also more likely to start locally in order to minimize risk and uncertainty: a location in which communication between the markets and the executives directly concerned with the new product is swift and easy, and in which a wide variety of potential types of input that might be needed by the production units are easily come by.

Export to other industrial countries may occur at the end of this stage that allows the innovator to increase revenue and to increase the downward descent of the products experience curve. Other advanced nations have consumers with similar desires and incomes making exporting the easiest first step in an internationalisation effort. Competition comes from a few local or domestic players that produce their own unique product variations.
2. MATURING PRODUCT

Exports to markets in advanced countries further increase through time making it economically possible and sometimes politically necessary to start local production. The products design and production process becomes increasingly stable. Foreign direct investments (FDI) in production plants drive down unit cost because labour cost and transportation cost decrease. Offshore production facilities are meant to serve local markets that substitute exports from the organisations home market. Production still requires high-skilled, high paid employees. Competition from local firms jump start in these non-domestic advanced markets. Export orders will begin to come from countries with lower incomes.
3. STANDARDISED PRODUCT

During this phase, the principal markets become saturated. The innovator's original comparative advantage based on functional benefits has eroded. The firm begins to focus on the reduction of process cost rather than the addition of new product features. As a result, the product and its production process become increasingly standardised. This enables further economies of scale and increases the mobility of manufacturing operations. Labour can start to be replaced by capital. If economies of scale are being fully exploited, the principal difference between any two locations is likely to be labour costs. To counter price competition and trade barriers or simply to meet local demand,

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production facilities will relocate to countries with lower incomes. As previously in advanced nations, local competitors will get access to first hand information and can start to copy and sell the product. The demand of the original product in the domestic country dwindles from the arrival of new technologies, and other established markets will have become increasingly pricesensitive. Whatever market is left becomes shared between competitors who are predominately foreign. A MNC will internally maximize offshore production to lowwage countries since it can move capital and technology around, but not labour. As a result, the domestic market will have to import relatively capital intensive products from low income countries. The machines that operate these plants often remain in the country where the technology was first invented.

INTERNATIONAL PRODUCT POLICY AND PLANNING

Objectives After studying this unit you should be able to: understand the basic concepts of the product and the importance of this concept In international marketing explain the importance of international product life cycle explain the different product strategies used by international marketers and the Factors which shape the `standardisation' versus `adaptation' decisions explain the factors that influence branding, labeling and packaging planning Structure INTRODUCTION One of the fundamental decisions for successful international marketing relates to product policy and planning. It can be argued that product. decisions are probably the most crucial as the product is the very epitome of marketing planning. Errors in product decisions can include the imposition of a global standardised product where it is inapplicable and the attempt to sell products into a country without cognisance of cultural adaptation needs. An international marketer has the option of exporting ',he

International Marketing home market product to foreign markets, adapting the home market product to meet the needs of the foreign customers more closely, or developing new products to meet the specific needs of the customers in foreign markets. The selection process needs a careful analysis of the foreign market needs, appraisal of the market opportunity and detailed product planning. Decisions regarding the product, price, promotion and distribution channels are decisions on the elements of the "marketing mix". Many product decisions lie between the two extremes i.e. whether to sell globally standardised or adapted products. What is a product? Put simply, a product is a bundle of utilities. To be more concise, a product can be defined as a collection of physical, service and symbolic attributes which yield satisfaction or benefits to a user or buyer. A product is a combination of physical attributes say, size and shape, and subjective attributes say image or quality. A customer purchases on both dimensions. It is increasingly important that the product fulfills the image which the producer is wishing to project. This may involve organisations producing symbolic International Marketing Mix offerings represented by meaning laden products that chase stimulation-loving consumers who seek experience producing situations. So, for example, selling mineral water may not be enough. It may have to be "Gangetic" in source, and fortified. This opens up a wealth of new marketing opportunities for producers. A product's physical properties are characterised the same the world over. They can be convenience or shopping goods or durables and non-durables; however; one can classify products according to their degree of potential for global marketing: Local products - seen as only suitable in one single market. International products - seen as having extension potential into other markets. Multinational products - products adapted to the perceived unique

International Marketing characteristics of national markets. Global products - products designed to meet global segments. As a prerequisite to export marketing, it is becoming increasingly important to maintain quality products based on the ISO 9000 standard. Consumer beliefs or perceptions also affect the "world brand" concept. World brands are based on the same strategic principles, same positioning and same marketing mix but there may be changes in message or other image. The world brand names are to be built up over the years with great investments in marketing and production. Few world brands, however, have originated from developing countries like India. This is hardly surprising given the lack of resources. INTERNATIONAL PRODUCT LIFE CYCLE International product life cycle discusses the consumption pattern of the product in many countries. This concept explains that the products pass through several stages of the product life cycle. The, product is innovated in country, usually a developed country, to satisfy the needs of the consumers. The innovator country wants to exploit the technological breakthrough and start marketing the products in foreign country. Gradually foreign country also starts production and becomes efficient in producing those commodities. As a result, the innovator country starts losing its export market and finds the import of that product advantageous. In this way, the innovator country becomes the importer of the products. Terpstra and Sarathy have identified four phases in. the international product life cycle. Export strength is evident by innovator country: Products are normally innovated in the developed countries because they possess the resources to do so. The firms have the technological know how and sufficient capital to invest on the research and development activities. The need of adaptation and modification also forces the production activities to be located near the market to respond quickly to the changes. The customers are affluent in the developed countries

International Marketing who may prefer to buy the new products. Thus, the manufactures are attracted to produce the goods in the developed country. The goods are marketed in the home country. After meeting the demand of the home country, the manufacturers start exploring foreign markets and exporting goods to them. This phase exhibits the introduction and growth stage of the product life cycle. Foreign production starts: The importing firms in the middle income country realise the demand potential of the product in the home market. The manufacturers also become familiar in producing the goods. The growing demand of the products attracts the attention of many firms. They are tempted to start production in their country and gradually start exporting to the low income countries. The large production in the middle income country reduces the export from the innovating country. This shows the maturity stage of product life cycle where the production activities' start shifting from innovating country to other countries.

International Product Policy and Planning Foreign production becomes competitive in export market: The firms in low income country also realise the demand potential in the domestic market. They start producing the products in their home country by exploiting cheap labour. They gain expertise in manufacturing the commodity. They become more efficient in producing the goods due to low cost of production. Gradually they start exporting the goods to other countries. The export from this country replaces the export base of innovating country, whose export has been already declining. This exhibits the ,declining stage of product life cycle for the innovator country. In this stage, the product gets widely disseminated and other countries start imitating the product. This is the third phase of product life cycle where the products start becoming standardized. Import Competition begins: The producers in

International Marketing the low income importing country gain sufficient experience in producing and marketing the products. They attain the economies of scale and gradually become more efficient than the innovator country. At this stage, the innovator country finds the import from this country advantageous. Hence, the innovator country finally becomes the importer of that product. In this fourth stage of product life cycle the product becomes completely standardized. Exhibit 9.1 shows the international product life cycle. Exhibit 9.1 : International Product Life Cycle In simple words, the theory of IPLC brings out that advanced (initiating) countries play the innovative role in new product development. Later for reasons ofcomparative advantage or factor endowments and costs, such a product moves over to other developed countries or middle. income countries and ultimately gets produced and exported by less developed countries. Not surprisingly, therefore, thatcountries such as Taiwan, Hong Kong, Korea, Singapore and India have emerged as major exporters of growing range. of products to USA and Western Europe duringthe last decade and a half. The general pattern of a typical IPLC has been shown in INTERNATIONAL PRODUCT POLICY A firm's product policy reflects its marketing orientation. Following the framework of IPLC, a firm may begin exporting the products it sells in the domestic market. Alternatively, it may recognise the significant differences in customer needs, conditions of product use, etc., and may plan for exporting different products or product versions to meet the specific needs of each of its different global market segments. In the latter case, the exporting firm would thus offer a large product mix. The other option available to exporting firms is to develop a new product for the export markets. This new product may be the result of the firm's own R&D acquisition or joint venture with a business partner in the host country. Interesting examples, here, include Coca-Cola Corporation which having entered Japan in 1958 had added Fanta and Sprite by 1970 and still later introduced fruit drink products, carbonated orange fruit drinks and also potato chips which were not even sold by the company in its US market. Similarly, IBM developed EPABX within the U.K. An International marketer may use one of the following five strategies:

International Marketing i) Product communications extension This strategy is very low cost and merely takes the same product and communication strategy into other markets. However it can be risky if misjudgments are made. For example CPC International believed the US consumer would take to dry soups, which dominate the European market. It did not work. ii) Extended product- communications adaptation If the product basically fits the different needs or segments of a market it may need an adjustment in marketing communication only. Again this is a low cost strategy, but different product functions have to be identified and a suitable communications mix developed. iii) Product adaptation - communications extension The product is adapted to fit usage conditions but the communication may stays the same. The assumption. is that the product will serve the same function in foreign markets under different usage conditions. iv) Product adaptation - communications adaptation Both product and communication strategies need attention to fit the peculiar need of the market. Product invention This need a totally new idea to fit the exclusive conditions of the market. This is very much a strategy which could be ideal an a Third World situation. This development. costs may be high, but the advantages are also very high. This choice of strategy depends on the most appropriate product/market analysis and is a function of the product itself defined in terms of the function or need it serves, the market defined in terms of the conditions under which the product is used, the preferences of the potential customers and the ability to buy the product in question, and the costs of

International Marketing adaptation and manufacture to the company considering these product- communications approaches. Exhibit 9.3 and Exhibit 9.4 will give you an understanding of the challenges and complexities involved in international product decisions.Identifying International Markets in

Making the Export Decision

Exporting is crucial to every countrys economic health. Increased exports mean business growth, and business growth means more jobs. Yet, only a small percentage of potential exporters take advantage of these opportunities. It is critical for businesses to think globally. The division between domestic and international markets is becoming increasingly blurred. Making the export decision requires careful assessment of the advantages and disadvantages of expanding into new markets. Export Decision AdvantagesExport Business will enable you to. enhance domestic competitiveness increase sales and profits gain global market share reduce dependence on existing markets exploit corporate technology and know-how extend the sales potential of existing products stabilize seasonal market fluctuations enhance potential for corporate expansion sell excess production capacity gain information about foreign competition Export Decision Disadvantages develop new promotional material subordinate short-term profits to long-term gains incur added administrative costs allocate personnel for travel wait longer for payments modify your product or packaging

International Marketing apply for additional financing obtain special export licenses International Business Plan Identify your Products / Service to be offered for Export.[ Uniqueness, Why ? Inventory etc.] Planning---Goals Industry Analysis Region Analysis

Country / Region Analysis Demographic/Physical Environment: Population size, growth, density Urban and rural distribution Climate and weather variations Shipping distance Product-significant demographics Physical distribution and communication network Natural resources Country / Region Analysis

Political Environment: System of government Political stability and continuity Ideological orientation Government involvement in business Attitudes toward foreign business (trade restrictions, tariffs, non-tariff barriers, bilateral trade agreements) National economic and developmental priorities Country / Region Analysis

International Marketing Economic Environment: Overall level of development Economic growth: GNP, industrial sector Role of foreign trade in the economy Currency: inflation rate, availability, controls, stability of exchange rate Balance of payments Per capita income and distribution Disposable income and expenditure patterns

Country / Region Analysis Social/Cultural Environment: Literacy rate, educational level Existence of middle class Similarities and differences in relation to home market Language and other cultural

Considerations

Country / Region Analysis Product Potential: Customer needs and desires Local production, imports,consumption Exposure to and acceptance of product Availability of linking products Industry-specific key indicators of demand Attitudes toward products of foreign origin Competitive offerings

International Marketing How To Gather Foreign Market ResearchTo begin research, one should identify the most profitable foreign markets for products or services, For this we need to: Classify your product; Find countries with the largest and fastest growing markets for product that will be exported; Determine which foreign markets will be the most penetrable; Define and narrow those export markets Talk to customers doingbusiness internationally; Research export efforts competitors.

Defining Which Markets to Pursue

Do not choose too many markets. For most small businesses, three foreign markets will be more than enough, initially. Test one market and then move on to secondary markets as your "exportise" develops. Focusing on regional, geographic clusters of countries can also be more cost effective than choosing markets scattered around the globe. Getting Information

Embassies Export Promotional Councils Trade Associations Internet / Websites.

Pricing
International Marketing and Price
How should we set prices for international markets? This lesson considers the basics of pricing for international marketing. As with all of the international marketing lessons, every country and culture within it will influence price. So here we are going to look at some of the common influences upon pricing decision-making, the impact of grey markets, international approaches to pricing, and more mainstream marketing approaches to pricing that can be applied to an international context.

Influences on pricing for international marketing.

The cost of manufacturing, distributing and marketing your product.

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The physical location of production plants might influence price. For example, Toyota have plants in their European market, in the United Kingdom and Turkey.

Of course fluctuations in foreign currencies affect pricing. Many companies are benefiting

from a relatively low US Dollar price during the 2010s. This make imports to the United States expensive, but exports relatively cheap to other nations. However fluctuations make it very difficult for companies to make long-term decisions - such as building large factories in global markets i.e. costs of production are cheap today, but could be expensive in the future, impacting upon the price that your business is forced to charge.

The price that the international consumer is willing to pay for your product. Your own business objectives will influence price. For example, large international companies such as Starbucks may operate at a loss in some locations but still need a local presence in order to maintain their economies of scale, as well as their reputation as a global player.

The price that competitors in international markets are already charging. Business environment factors such as government policy and taxation.

Grey Markets
A business can expect problems with grey markets where it trades across national boundaries. So if Company Y is English it will trade in Stirling or Pound notes. If it trades in the United States during the 2010s, to be competitive it will need to sell at a reduced price in the US. However, there is little to stop an entrepreneur from traveling to the US, filling up a transport container with products, which have been exported from Company Y in England, then returning them back to England and marketing the same product at a lower price than Company Y is willing to trade. This is an example of parallel trade, which is legal - just. Therefore it is known as grey marketing.

International Pricing Approaches

Export Pricing - a price is set for by the home-based marketing managers for the international market. The pricing approach is based upon a whole series of factors

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which are driven by the influences on pricing listed above. Then mainstream approaches to pricing may be implemented - see below.

Non-cash payments - less and less popular these days, non-cash payments include counter-trade where goods are exchanged for goods between companies from different parts of the World.

Transfer Pricing - prices are set in the home market, and goods are effectively sold to the international subsidiary which then attaches its own margin based upon the best price that local managers decide that they could achieve. Then mainstream approaches to pricing may be implemented - see below.

Standardization versus adaptation - do you use a standard, common approach to pricing in each market, or do you decide to adapt the price to local conditions?

Generic Marketing Approaches to Pricing.

Premium Pricing. Penetration Pricing. Economy Pricing. Price Skimming. Psychological Pricing. Product Line Pricing. Optional Product Pricing. Captive Product Pricing Product Bundle Pricing. Promotional Pricing. Geographical Pricing. Value Pricing.

International Promotion
Promotional tools. Numerous tools can be used to influence consumer purchases:

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Advertisingin or on newspapers, radio, television, billboards, busses, taxis, or the Internet. Price promotionsproducts are being made available temporarily as at a lower price, or some premium (e.g., toothbrush with a package of toothpaste) is being offered for free.

Sponsorships Point-of-purchasethe manufacturer pays for extra display space in the store or puts a coupon right by the product Other method of getting the consumers attentionall the Gap stores in France may benefit from the prominence of the new store located on the Champs-Elysees

Promotional objectives. Promotional objectives involve the question of what the firm
hopes to achieve with a campaignincreasing profits is too vague an objective, since this has to be achieved through some intermediate outcome (such as increasing market share, which in turn is achieved by some change in consumers which cause them to buy more). Some common objectives that firms may hold:

Awareness. Many French consumers do not know that the Gap even exists, so they cannot decide to go shopping there. This objective is often achieved through advertising, but could also be achieved through favorable point-of-purchase displays. Note that since advertising and promotional stimuli are often afforded very little attention by consumers, potential buyers may have to be exposed to the promotional stimulus numerous times before it registers.

Trial. Even when consumers know that a product exists and could possibly satisfy some of their desires, it may take a while before they get around to trying the product especially when there are so many other products that compete for their attention and wallets. Thus, the next step is often to try get consumer to try the product at least once, with the hope that they will make repeat purchases. Coupons are often an effective way of achieving trial, but these are illegal in some countries and in some others, the infrastructure to readily accept coupons (e.g., clearing houses) does not exist. Continued advertising and point-of-purchase displays may be effective. Although Coca Cola is widely known in China, a large part of the population has not yet tried the product.

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Attitude toward the product. A high percentage of people in the U.S. and Europe has tried Coca Cola, so a more reasonable objective is to get people to believe positive things about the producte.g., that it has a superior taste and is better than generics or store brands. This is often achieved through advertising.

Temporary sales increases. For mature products and categories, attitudes may be fairly well established and not subject to cost-effective change. Thus, it may be more useful to work on getting temporary increases in sales (which are likely to go away the incentives are removed). In the U.S. and Japan, for example, fast food restaurants may run temporary price promotions to get people to eat out more or switch from competitors, but when these promotions end, sales are likely to move back down again (in developing countries, in contrast, trial may be a more appropriate objective in this category).

Note that in new or emerging markets, the first objectives are more likely to be useful while, for established products, the latter objectives may be more useful in mature markets such as Japan, the U.S., and Western Europe.

Constraints on Global Communications Strategies. Although firms that seek

standardized positions may seek globally unified campaigns, there are several constraints:

Language barriers: The advertising will have to be translated, not just into the generic language category (e.g., Portuguese) but also into the specific version spoken in the region (e.g., Brazilian Portuguese). (Occasionally, foreign language ads are deliberately run to add mystique to a product, but this is the exception rather than the rule).

Cultural barriers. Subtle cultural differences may make an ad that tested well in one country unsuitable in anothere.g., an ad that featured a man walking in to join his wife in the bathroom was considered an inappropriate invasion in Japan. Symbolism often differs between cultures, and humor, which is based on the contrast to peoples experiences, tends not to travel well. Values also tend to differ between culturesin the U.S. and Australia, excelling above the group is often desirable, while in Japan, The nail that sticks out gets hammered down. In the U.S., The early bird gets the worm while in China The first bird in the flock gets shot down.

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Local attitudes toward advertising. People in some countries are more receptive to advertising than others. While advertising is accepted as a fact of life in the U.S., some Europeans find it too crass and commercial.

Media infrastructure. Cable TV is not well developed in some countries and regions, and not all media in all countries accept advertising. Consumer media habits also differ dramatically; newspapers appear to have a higher reach than television and radio in parts of Latin America.

Advertising regulations. Countries often have arbitrary rules on what can be advertised and what can be claimed. Comparative advertising is banned almost everywhere outside the U.S. Holland requires that a toothbrush be displayed in advertisements for sweets, and some countries require that advertising to be shown there be produced in the country.

Some cultural dimensions:

Directness vs. indirectness: U.S. advertising tends to emphasize directly why someone would benefit from buying the product. This, however, is considered too pushy for Japanese consumers, where it is felt to be arrogant of the seller to presume to know what the consumer would like.

Comparison: Comparative advertising is banned in most countries and would probably be very counterproductive, as an insulting instance of confrontation and bragging, in Asia even if it were allowed. In the U.S., comparison advertising has proven somewhat effective (although its implementation is tricky) as a way to persuade consumers what to buy.

Humor. Although humor is a relatively universal phenomenon, what is considered funny between countries differs greatly, so pre-testing is essential. Gender roles. A study found that women in U.S. advertising tended to be shown in more traditional roles in the U.S. than in Europe or Australia. On the other hand, some countries are even more traditionale.g., a Japanese ad that claimed a camera to be so simple that even a woman can use it was not found to be unusually insulting.

Explicitness. Europeans tend to allow for considerably more explicit advertisements, often with sexual overtones, than Americans.

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Sophistication. Europeans, particularly the French, demand considerably more sophistication than Americans who may react more favorably to emotional appeals e.g., an ad showing a mentally retarded young man succeeding in a job at McDonalds was very favorably received in the U.S. but was booed at the Cannes film festival in France.

Popular vs. traditional culture. U.S. ads tend to employ contemporary, popular culture, often including current music while those in more traditional cultures tend to refer more to classical culture.

Information content vs. fluff. American ads contain a great deal of puffery, which was found to be very ineffective in Eastern European countries because it resembled communist propaganda too much. The Eastern European consumers instead wanted hard, cold facts.

Advertising standardization. Issues surrounding advertising standardization tend to parallel issues surrounding product and positioning standardization. On the plus side, economies of scale are achieved, a consistent image can be established across markets, creative talent can be utilized across markets, andgood ideas can be transplanted from one market to others. On the down side,cultural differences, peculiar country regulations, and differences in product life cycle stages make this approach difficult. Further, local advertising professionals may resist campaigns imposed from the outsidesometimes with good reasons and sometimes merely to preserve their own creative autonomy.

Legal issues. Countries differ in their regulations of advertising, and some products are
banned from advertising on certain media (large supermarket chains are not allowed to advertise on TV in France, for example). Other forms of promotion may also be banned or regulated. In some European countries, for example, it is illegal to price discriminate between consumers, and thus coupons are banned and in some, it is illegal to offer products on sale outside a very narrow seasonal and percentage range.

International Distribution
Distribution plays an important role in the implementation of the international marketing programme as it enables the products and services to reach the ultimate customer. And international marketing firm has the option of managing its distribution function either directly or indirectly through middleman or a suitable combination of the two.

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Exhibit 12.1: Examples of International Distribution Channels Due to physical distance, and also the differences in geographical, cultural andmarket quite prevalent in

characteristics of the trading countries, use of middlemen is found

international marketing. In fact, distribution is one such primary functions of marketing which makes use of the services of external independent agencies that bind the firm in a long term relationship. International Marketing Mix INTERNATIONAL DISTRIBUTION CHANNELS Distribution has two elements, the institutional and the physical. Physical distribution aspects cover transport and warehousing. The longer the channel, the more likely that producer's profits will be indirectly reduced. This is because the end product's price may be too expensive to sell in volume, sufficient for the producer to cover costs. Yet cutting channel length may be impossible, as country infrastructure requirements may dictate they being there. As already mentioned international marketers have the options of organizing distribution of their goods in foreign markets through the use of indirect channels, i.e. using intermediaries, direct channels or a combination of the two in the same or different markets. 1. Indirect Distribution Indirect channels are further classified based on whether the international marketer makes use of domestic intermediaries. An international marketer therefore, can make use of the following types of intermediaries for distribution in foreign markets. a) Domestic Overseas Intermediaries Commission buying agents Country-controlled buying agents Export management companies (EMCs) Export merchants Export agents Piggy backing b) Foreign Intermediaries

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Foreign Sales Representatives Foreign Sales Agents Foreign Stocking and Non-Stocking Agents State Controlled Trading Companies The definition and major advantages and disadvantages of the above types of intermediaries are given in Exhibit 12.2 2. Direct Distribution The options available to international marketer in organising direct distribution include sending missionary skies representatives abroad from the headquarter, setting up of local sales/branch office in the foreign country or for a region, establishing a subsidiary abroad, entering into a joint venture or franchising agreement. 43 International Distribution and Sales PolicyCompanies having long-term interest in international marketing find it expedient to deploy their own sales force in foreign markets. This helps them in increasing their sales volume through committed market development activities, better control and motivation of foreign intermediaries being used, and paving the way for smoother transition to direct distribution and marketing.
INTERNATIONAL DISTRIBUTION POLICY The international distribution policy of a firm according to Cateora, should cover the following factors:

Question of control, size of margins, length of channels, terms of sale and channel ownership. Resource (money and personnel ) commitment plans for the distribution function management keeping profit goals in a foremost position. Specific market goals expressed in terms of volume, market share and margin requirements, to be accomplished. Return on investment, sales volume and long run potential as well as guidelines

International Marketing

for solving routine distribution problems, and The relationship between long-and short-term goals, the extent of the company's involvement in the distribution system as well as the extent of its ownership of middlemen. Adapting to distribution patterns Notwithstanding, the international distribution policy of the company, the factor of flexibility to adapt the distribution policy to local conditions of the foreign markets is very crucial for effective results A clear understanding of the target market characteristics covering aspects such as traditions and conventions in the wholesaling and retail distribution patterns (see Exhibit 12.3); shopping habits of customers including customers reliance on channel members for product information and servicing; commercial terms; and legalrequirements help define the selection of channel. The following trends help to illustrate the need to the above analysis for suitable adaptation of the distribution patterns: In the US, there has been a rapid expansion of large supermarkets and other retail chains, and also the deep-vertical integration into wholesale and manufacturingby large retail houses: In Sweden, a powerful consumer-oriented cooperative movement handles a substantial business in food, petroleum, etc. In Mexico, there is a modern retail distribution for the urban people, and traditional outlets and public distribution system exists for the poor. In China, wholesalers mainly control the Chinese distribution system. In Japan, large trading companies, handle half of Japanese trade while a large number of wholesale and retail outlets help products to penetrate in its market. In Saudi Arabia, a small number of hands approved by the royal family control its manufacturer-wholesaler retailer distribution system. In Peru, importers act as distributors or wholesalers, and retaining is done typically through retail chains and street merchants.