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UF / Marketing / MAR / Where are the products sold and what are the distribution channels for

Where are the products sold and what are the distribution channels for

Where are the products sold and what are the distribution channels for


School: University of Florida
Department: Marketing
Course: Principles of Marketing
Term: Spring 2019
Tags: mar3023, EXAM3STUDYGUIDE, Chapter 15- Managing Marketing Channels and Supply Chains, Chapter 16- Retailing and Wholesaling, Chapter 13- Building the Price Foundation, Chapter 14- Arriving at the Final Price, and Chapter 2- Developing Successful Organizational and M
Cost: 50
Name: MAR3023- Exam 3 Study Guide
Description: This study guide covers the lectures and textbook information from the topics that will be addressed on the final exam. Topics include Chapter 15- Managing Marketing Channels and Supply Chains, Chapter 16- Retailing and Wholesaling, Chapter 13- Building the Price Foundation, Chapter 14- Arriving at the Final Price, Chapter 2- Developing Successful Organizational and Marketing Strategies, Chapter 22- Pulling it All Together: The Strategic Marketing Process, Chapter 21- Implementing Interactive and Multichannel Marketing, and Chapter 7- Understanding and Reaching Global Consumers and Markets. Great study tool for the final!
Uploaded: 04/18/2019
36 Pages 141 Views 4 Unlocks

MAR3023 Exam 3 Study Guide 

Where are the products sold and what are the distribution channels?

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Chapter 15: Managing Marketing Channels and Supply Chains LECTURE NOTES 

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* Creating Place and Time Utilities

o Time Utility

 Convenience

∙ Being able to get the product when we want it

 Speed  

∙ Being able to get the product quickly

o Place Utility

 Convenience

∙ Being able to get the product where you want it (e.g.  

What is material handling in warehouse?

in the privacy of your own home)

 Prestige  

∙ We try to create an exclusive image for our place of  


* Distinguishing Channel of Distribution from Physical Distribution of  Products

o Logistical Functions

 Assorting, Transporting

o Transactional Functions We also discuss several other topics like What is the general order of development stages for an organism?

 Selling, Risk-taking

o Facilitating Functions

 Financing, Market Research

* Logistical Functions

o Transportation

 Example- UPS, FedEx, and Amazon, etc. (Third Party  


o Warehouse and Materials Handling

 To streamline distribution {Cross-Docking}

What is a continuous flow process?

∙ Suppliers

∙ Receiving

∙ Sorting

∙ Shipping  If you want to learn more check out What is the full meaning of lawn?

∙ Customers  

o Order Processing

 Electronic Data Interchange (EDI)

∙ Inventory is monitored automatically If you want to learn more check out What is meant by productive efficiency?

∙ Continuous flow of products, not broken into chunks

∙ RFID chip in grocery stores, retail stores, etc.  

(inputted in individual products and debits your  

account….just like SunPass)

∙ E.g. Amazon Go

o Inventory Management

 Just-in-time (JIT) {a delicate system}

∙ The product we need shows up just in time to be  

used, no matter where it is coming from (doesn’t  

show up too early or too late)

∙ E.g. release of Harry Potter books

∙ Disadvantage: it relies on such a smooth flow of  


 Vendor-managed Inventory (VMI)

∙ Used by retailers, where they will turn over a portion  of their store to a supplier to manage that aisle, so to

speak (hence… the vendor manages the inventory)  

[requires a lot of trust]

∙ E.g. Kroger will run the grocery aisle in Walgreens We also discuss several other topics like Which are the three prohibitions by the production code administration in 1965 that would forbid a film the seal of approval?

∙ E.g. CVS runs the pharmacy inside Target

* Supply Chain Management

o The integration and organization of information and logistics  activities across firms in a supply chain for the purpose of  creating and delivering goods and services that provide value to  consumers

* Degree of Channel Coverage

o 3 Basic Options

 Intensive

∙ The product is very widely available; you can get it  

almost anywhere; convenience type goods  

(something very easy for consumers to get)

∙ E.g. soft drinks, chewing gums

 Selective

∙ Happy medium; limited number of outlets in a  

geographic area for our product  

∙ E.g. Schwinn bicycles (they’ll pick 2/3 stores in a  

certain area)

 Exclusive  

∙ Maybe one store in a particular area that carry our  

product or we sell our product only through our own  

stores (they make it difficult for consumers to get it

adds to the exclusiveness and prestige of the item) If you want to learn more check out How many binary relations are there?

∙ E.g. luxury brands, designer labels  

o 2 Basic Types of Channels

  Direct

∙ Manufacturer is selling directly to the consumer

∙ Manufacturer -> Consumer

  Indirect  

∙ There is some sort of intermediary (wholesaler,  


∙ Manufacturer -> Wholesaler -> Retailer -> Consumer o A “Typical” Channel (a supply chain includes the suppliers  Manufactur

[vendors] and consumers)





o Channel Conflicts If you want to learn more check out Can you be a social worker with a masters in psychology?

 Horizontal 

 Conflicts between 2 different channels of  

distribution at the same level (between direct and  

indirect channels)

 E.g. distribution of movies {Netflix and Movie  

Theaters}, Dell computers vs. Best Buy

 Vertical  

 Conflict within the same channel (somewhere up  

or down the line) {in indirect channel}

o Types of Channel Members (also known as intermediaries or  middlemen)

 Wholesalers (sell to retailers or somewhere else)

 Merchant Wholesalers (carry inventory of a  


∙ Distributor

o Full function (they perform all of the  

different functions that the  

manufacturer needs to have  

performed by the channel)  

∙ Jobber

o Only performs some of the functions  

(definitely have inventory)

 Agents (primarily serve a selling role) {use drop  


∙ Act as external sales organization for the  


 Manufacturer’s Sales Branch vs. Sales Office

 Inventory (Yes) Inventory (No)

 Owned by Manufacturer

Manufacturer ’s Sales  


Manufactur er’s Sales  






 Retailers (sell to  

end users)

 Store

∙ Specialty

o In the mall (clothing, toys, electronics)

∙ Department Stores

o Larger and consist of multiple  


o E.g. Nordstrom, J.C. Penney, Macy’s,  


∙ Power Retailers

o E.g. Home Depot, Best Buy, Lowes

∙ Discounters

o E.g. WalMart, Target, K-Mart

 Nonstore (TV home shopping, online, etc.)

o Channel Types

 Contractual (are governed by legal agreements)

 E.g. Franchising

 Administered

 Hand-shake basis

 Very little legal ramifications

 Vertically Integrated  

 One level of the channel own an additional level of

the channel

 Backward vertically integrated- moving from  

consumer back to manufacturer (away from the  


* Key Tradeoff

o Cost vs. Control (Channel Captain)

* The Struggle for Channel Leadership between Manufacturers and  Retailers

o Question: Why use Intermediaries?

o Answer: Transaction Efficiency

* Channel Dynamics







* Relationship Marketing Emphasizes Long-term Relationships with  Suppliers, Distributors, and Customers

o Transaction Marketing

 Short Term (e.g. buying car from dealership)

 Price Emphasis

 Product Quality

 “Arm’s Length”

o Relationship Marketing

 Long Term (doing business over a period of years)

 Mutual Satisfaction

 Interaction Quality

 Interdependent  

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Chapter 15: Managing Marketing Channels and Supply Chains TEXTBOOK NOTES 

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* Marketing Channel- consists of individuals and firms involved in the  process of making a product or service available for use or  consumption by consumers or industrial users

o Middleman- intermediary between manufacturer and end-user  markets

o Agent/Broker- intermediary with legal authority to act on behalf  of the manufacturer

o Wholesaler- intermediary who sells to other intermediaries,  usually retailers; usually applies to consumer markets

o Retailer- intermediary who sells to consumers

o Distributor- describes intermediaries who perform a variety of  distribution functions, such as selling, maintaining inventories,  extending credit, etc.

o Dealer- term that distributor can mean the same as distributor,  retailer, wholesaler, etc.

* Intermediaries Fundamental Functions

o Transactional  

 Buying, Selling, Risk-taking

o Logistical 

 Assorting, Storing, Sorting, Transporting

o Facilitating  

 Financing, Grading, Marketing Information and Research * Common Marketing Channels for Consumer Products and  Services

o Direct Channel

 Schwan’s Food -> Consumer

o Indirect Channel

 When a Retailer is large and can buy in large quantities ∙ Toyota -> Retailer -> Consumer

 Low-cost, Low-unit value items frequently purchased by  consumers

∙ Mars -> Wholesaler -> Retailer -> Consumer

 Most Indirect Channel (many small manufacturers and  small retailers)

∙ Mansar Products -> Agent -> Wholesaler -> Retailer  -> Consumer

* Common Marketing Channels for Business Products and  Services

o Direct Channel

 IBM -> Industrial User

o Indirect Channel

 Industrial dist. Performs variety of marketing channel  functions

∙ Caterpillar -> Industrial Distributor -> Industrial User

 Uses agent to serve primarily as ind. selling arm of  


∙ Stake Fastener Company -> Agent -> Industrial User

 Longest channel  

∙ Hartman Electric -> Agent -> Industrial Distributor ->

Industrial User

* Multichannel Marketing- “omnichannel marketing” is the blending of  different communication and delivery channels that are mutually  reinforcing in attracting, retaining, and building relationships with  

consumers who shop and buy in traditional intermediaries and online * Dual Distribution- an arrangement whereby a firm reaches different  buyers by employing 2 or more different types of channels for the  same basic product

* Buyer Requirements

o Information, Convenience, Variety, and Pre- or Postsale Services * Logistics- activities that focus on getting the right amount of the right  products to the right place at the right time at the lowest possible cost * Aligning Supply Chain with Marketing Strategy

o 1) Understand the Customer

o 2) Understand the Supply Chain

o 3) Harmonize the Supply Chain with the Marketing Strategy  * Logistics Management in a Supply Chain

o Total Logistics Cost Concept

 Includes expenses with transportation, materials handling  and warehousing, inventory, stockouts (being out of  

inventory), order processing, and return products handling o Customer Service Concept

 Time, Dependability, Communication, and Convenience * Reverse Logistics- process of reclaiming recyclable and reusable  materials, returns, and reworks from the point of consumption or use  for repair, remanufacturing, redistribution, or disposal  

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Chapter 16: Retailing and Wholesaling LECTURE NOTES ------------------------------------------------------------------------------------------------------------ -------------------

* Scope of Retailing

o Greater than $3 trillion annual sales

o Approximately 3 million retail stores (brick & mortar)

o Approximately 26 million retail employees (17% of U.S.  workforce)

* Retail Functions

o How retailers add value…

 Providing assortments

∙ How do you decide what you’re going to put on your  shelf

 Breaking bulk

∙ Pallet of Coke is broken down for consumers to buy  

smaller casings of Coke

 Holding inventory

∙ Stores should have what you want to buy when you  

want to buy it

 Providing services

∙ Repair services, Personalized service, etc.

* Common Types of General Merchandise Retailers

o Discount Stores

 Wal-Mart, Target (Sam’s Club & Costco)

 Very low price, low service (almost self-service  


 Broad, shallow selection (cover lots of different product  categories…but selection with each is limited) (cover lot of  territory…but not in great depth)

o Department Stores (very much tied to malls)

 Macy’s, JCPenney, Belk

 Moderate to high price, service

 Broad, average to deep selection

o Specialty Stores

 Gap, Limited, Foot Locker (Victoria Secret)

 Generally high price, service

 Narrow, average to deep selection

o Power Retailers (Category Killers) [specialty store on steroids]  Best Buy, Home Depot, Office Depot (Toys R Us)

 Low price, service varies

 Narrow, very deep selection

* Retail Strategy

o Positioning

 Merchandise mix

 Price/Service

o Location

 Site Location: Macro Factors

∙ Economic Climate

∙ Demographic/Psychographic Profile

∙ Competition

∙ Business Climate (being receptive)

 Site Location: Micro Factors

∙ Accessibility

∙ Visibility

∙ Traffic Congestion

∙ Parking

∙ Rent

∙ Cannibalization  

o Image/Atmospherics  

 Store Layout

 Merchandise Display

 Fixtures and Signage

 Lighting and Color

 Music and Scents  

* Retail Productivity Measures

o Net Sales per Square Foot

 Used to compare departments, stores

 Net Sales = Total Sales – Returns

 Example

∙ Total Sales = $350,000

∙ Returns = $50,000 

∙ Net Sales = $300,000

∙ Size of Store = 600 square feet

∙ Net Sales per Square Foot = $300,000/600 sq. ft. =  

$500/sq. ft.

o Stockturn Rate

 Used to compare products, brands

 Stockturn Rate [SR]= Cost of Goods Sold [COGS]/Average  Inventory (at cost)

 Average Inventory [AI]= (Beginning Inventory [BI] + Ending Inventory [EI])/2

 Example

∙ BI= $34,000

∙ EI= $38,000

∙ COGS= $234,000

∙ SR= COGS/ ((BI+EI)/2)

o = $234,000/ (($34,000+$38,000)/2)

o =$234,000/$36,000

∙ SR= 6.5 turns per year (helps determine shelf facing eye level and waist level are the best)

o Same-Store Sales Growth

 Basic Measure of Retail Performance

 Adjusts for Expansion in # of Stores

 Example


2006 June 2007

∙ Total # of Stores 250 331

∙ Total Net Sales $35 MM $50 MM

∙ # New Stores* 72 81

∙ Net Sales of New Stores $11 MM $12.5 MM

*Stores open less than 12 months

∙ Overall Sales Growth  

o ($50 MM- $35 MM)/$35 MM= $15 MM/$35MM=  


∙ Same-Store Sales Growth

o (($50 MM- $12.5 MM) - $35 MM)/$35MM)=  

($37.5 MM-$35 MM)/ $35 MM= $2.5 MM/$35  

MM= 7.1%

* Issues in Retail Management

o Brand Management

 Manufacturers’ perspective- maximizing profit  

performance of the brand

 Example- Colgate would like to see the sales of Colgate  maximized (they are going to want as much shelf space as  possible)

o Category Management

 Retailers’ perspective- maximizing profit performance of the entire mix of brands in a product category

 Example- Manager of Publix wants to maximize profits  across that entire toothpaste aisle  

* Key Issue for the Future of “Brick-and-Mortar” Retailing o How to add value for the consumer that cannot be delivered via  e-commerce

 Recreational Shopping

∙ Something that consumers do; people pursuing  

shopping as a hobby, almost as a sport; recreational  

sort of thing

 “Retailtainment”

∙ Actions on the part of retailers to try to facilitate  

recreational shopping (how retailers help to provide  

recreational shopping for consumers)

∙ Example- Bass Pro Shops: almost museum-like…. you can enjoy yourself in the store (and buy  


* Omni-Channel Retailing  

o Means that a given retail institution, given retail corporation, has  multiple ways in which they can reach the consumer  

 Brick and mortar stores

 Catalogs

 Online environment  

 Mobile  

o Need to use more than one channel to complement one another online & physical experience is what is most desirable to  


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Chapter 16: Retailing and Wholesaling TEXTBOOK NOTES ------------------------------------------------------------------------------------------------------------ -------------------

* Classifying Retail Outlets

o Form of Ownership

 Independent Retailer

∙ Include hardware stores, convenience stores,  

clothing stores, and electronics stores  

∙ Advantage- SIMPLE: Owner is the Boss

∙ Customer get offered convenience, personal service,  

and lifestyle compatibility  

 Corporate Chain

∙ Multiple outlets under common ownership (e.g.  


∙ Centralized decision making & purchasing

∙ Advantage- volume discounts on orders

∙ Consumers get lower prices due to buying power of  

chain; multiple outlets w/ similar merchandise &  


 Contractual Systems  

∙ Independently owned stores that come together to  

act like a chain

∙ Stores get volume discounts, which is a plus for  


∙ Franchise System- individual or firm (franchisee)  

contracts with a parent company (franchisor) to set  

up a business or retail outlet

o Business-format

 McD’s, 7-Eleven, Subway, Anytime  

Fitness, etc.

o Product-Distribution  

 Ford dealership, Coca-Cola distributor

o Level of Service

 Self- Service (e.g. Redbox)

∙ where customers perform many functions

 Limited Service (credit/merchandise return)

∙ customers are responsible for most shopping, but  

salespeople are there to assist

 Full Service (specialty stores/dept. stores)

∙ Wide variety of services (e.g. tailoring, returns, gift  

cards, customer service line, catalogs, loyalty  

program, etc.)

o Merchandise Line

 Depth of line  

∙ Small or large assortment of each item  

∙ E.g. shoe store that offers running/dress/children’s  


 Breadth of line

∙ Variety of different items a store carries

∙ E.g. appliance and books

∙ Scrambled Merchandising is offering several  

unrelated product lines in a single store (modern  


o Hypermarket consists of large stores (200,000  

+ sq. ft) that offer everything in a single outlet

* Nonstore Retailing

o Automatic Vending

 Vending machines (v-commerce)

 Serves customers when and where stores cannot

 Now have touch screens and credit card readers  

o Direct Mail & Catalogs

 “store that comes to the door”

o Television Home Shopping  

 QVC, HSM, and Evine  

o Online Retailing

 24 hr access, comparison shopping, privacy, and variety o Telemarketing

 More efficient means of targeting consumers as you use  the telephone to interact w/ and sell directly to customers  o Direct Selling

 Door-to-door retailing  

 E.g. Mary Kay Cosmetics

* Future in Retailing

o Multichannel Retailing

o Data Analytics

 Through wearable technology and scanner/loyalty  


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Chapter 13: Building the Price Foundation LECTURE NOTES Chapter 14: Arriving at the Final Price LECTURE NOTES ------------------------------------------------------------------------------------------------------------ -------------------

* Pricing Decisions are Important in U.S. because of Reliance on  “Administered Pricing”

o Administered Pricing means that prices have been set in advance where manufacturers set the price they’re selling to  

wholesalers/retailers and where retailers set the price for  


o Participative Pricing means that buyer and seller participate with  one another to arrive at the final price

* The purpose of price is not to recover cost but to capture the value of the product in the consumer’s mind REVIEW KAHN PRODUCT BOX  FROM LECTURE 39*

o Value=Perceived Benefit


* Price vs. Nonprice Competition

o Price competition is competing below the line (lazy way- easy  to change price and match it)

o Nonprice competition is competing above the line to deliver  more benefits

* Price/Quality Relationship: Price as a Communication Tool o Reference Price

 Internal

∙ One that you just have in your mind as what you  

think a product should cost

∙ Sticker shock: notion that actual prices that you  

observe are higher than your internal reference price

 External  

∙ When a marketer attempts to convey the value of  

their product that they’re offering to you at a  

particular price by suggesting the price that’s  

typically paid for an item

∙ Example- the reference price of $30 is designed to  

make the $9.99 look like a great value

o Pricing No-Nos

 Predatory Pricing

∙ We price in a certain way to deliberately drive a  

competitor out of business; used by larger firms with

D O L L A R ( R E V E N U E O R C O S T )

deep pockets in order to drive out smaller startup  


 Price Collusion

∙ When competitors get together to decide on what  price to charge

∙ Also called “price fixing”

 “Bait & Switch”

∙ Retail pricing practice where they will run an ad for a  really great price on a particular item and then when  you go to the store to buy that item, they will say,  

“oh, we’re out of that item, just sold the last one, so  we’ve got this other item, it’s $100 more, but it’s an  even better item”

∙ They bait you in with a really good item, but then  switch you (like the foot in the door approach)

o Pricing Approaches

 Cost-Based

∙ Breakeven Analysis

o Breakeven Price= (Tot. FC/ # units) + Unit VC


B R E A K -








o Example  

 What price should sleep inn charge for  one night? (hotel capacity is 250 rooms) o Two Knowns

 Tot. FC= $4000

 Unit VC= $8

o Two Unknowns  

 Breakeven Price (P)

 # Units

o Try 250 Rooms

 BE PRICE= (Tot. FC/ # Units) + Unit VC

 BE PRICE= $4000/250 rooms + $8 per  


 BE PRICE= $16 per room + $8 per room=

$24 per room 

o Try 200 Rooms (80% Occupancy)

 BE PRICE= (Tot. FC/ # Units) + Unit VC

 BE PRICE= $4000/200 rooms + $8 per  


 BE PRICE= $20 per room + $8 per room=

$28 per room 

∙ Markup  

o P=Cost of Goods

(100− Markup)/100

o *Markup is most often expressed as a % of  

selling price, not cost of goods

o Example

 Givens: Cost= $1000

 Markup= 50%

 P=$ 1000


 P=$ 1000

.5=$ 2000

∙ Key Concepts

o Fixed Cost (FC)

 Refers to costs that we have that do not  

vary with the amount of production we  


o Variable Cost (VC)

 Refers to costs that vary directly with the

amount of production

o Total Cost (TC)

 Add the FC and VC together  

 Profit-Based

∙ Target Profit Pricing

o P= [Tot. Fixed Cost (TFC) + Tot. Var. Cost (TVC)  + Tot. Profit (Π)]/Tot. # Units

o Example

 Givens: TFC= $100K

 UVC= $100

 Π= $30K

 # Units= 200

 TVC= UVC x # Units

 TVC= $100 x 200 Units= $20,000

 P= (TFC + TVC+ Π)/ # Units

∙ = $100K + $20K+ $30K/ 200 Units

∙ = $150,000/ 200 Units

∙ =$750/Unit

∙ Target Return-On-Investment (ROI) Pricing o ROI = Return on Investment




¿Units ¿


o Example

 Givens: TFC= $175K

 TVC= $825K

 Invest. = $2,000,000

 ROI= 20%

 Std. # Units= 700

 P=$ 175K+$ 825K+( $ 2 M∗.20)


 P=$ 175K+$ 825K+$ 400K


 P= $2000


∙ Internal focus

∙ Ignores demand, competitive factors

∙ Assumes all that is produced is sold at full price ∙ Fails to account for economies of scale

 Demand-Based

∙ Skimming/Penetration

o New product pricing

o What we think the demand looks like for a new  product

o Skimming – start with our price high and  

gradually bring it down over time (“skimming”  profits off the top of the market) [price  


o Penetration – start with price fairly low and  

bring it up over time (offer rebates, deals,  

premiums, etc. we don’t actually bring price  

down) [price elastic]

∙ Prestige Pricing

o The price we pay is part of the value of the  

product because of prestige

o Backward bending demand curve

∙ Bundle Pricing

o We bundle complementary products together  and charge one price (offer a special package) ∙ Dynamic Pricing

o Demand driven (based off peak seasons) ∙ Demand-Minus

o ℘=RP∗100− Markup


o ℘=Wholesale Price

o RP= Retail Price

o Example

 RP= $600

 Markup= 50%

 WP= ?

 NOTE: WP is retailer’s cost of goods

 ℘=$600∗(100−50)


 ¿$ 600∗.5=$ 300

∙ Chain Markup

o Same as Demand-Minus but includes a longer  channel

o Example  

 Chain includes a manufacturer, a  

distributor, and a retailer

 Q: What price should the manufacturer  charge the distributor?

 MP= RP x




 MP= Manufacturer Price (price charged  by mfr. To distributor)

 RP= Retail Price (price charged by  

retailer to consumer)

 %RMU= Retail Markup

 %DMU= Distributor’s Markup

 Example

∙ Givens: RP= $600

∙ RMU= 50%

∙ DMU= 20%

∙ MP= ?

∙ MP= $ 600 x100−50



∙ MP= $600 x .5 x .8= $240

 Competition-Based

∙ Price Leader/Follower

o Largest market share will be the price leader…

the rest will follow

∙ Competitive Bid

o Sealed bid auction… lowest bidder wins  

 Value-Based

∙ Understand Use

∙ Analyze Benefits

∙ Analyze “Costs”

∙ Cost/Benefit Tradeoff

* Critical Strategic Pricing Ratio

oTotal Perceived Benefit

Price = VALUE

o Example- Bike Bells

o Brand Ratings




Rust Resistant
















Weighted Tot.



Assume we are Brand Y (new brand) and we know that Brand X is priced at  $3.00. We want a “parity” price where we divide the market equally. So we  use the critical strategic pricing ratio…

Total Perceived Benefit  


201/$3.00 = 214/$3.19 (comes from 201/$3.00=214/P ~ cross multiply to  find P= $3.19)

* “Unbundling” Price

o E.g. Caterpillar Tractor

 Price of Similar Equipment

∙ Caterpillar $240K

∙ Competition $200K

 Caterpillar’s Unbundling

∙ $200K- Equivalent

∙ $30K- Durability

∙ $20K- Reliability

∙ $20K- Service

 ∙     $10K- Warranty 

∙ $280K- Total Value

∙ $40K- Discount

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Chapter 13: Building the Price Foundation TEXTBOOK NOTES Chapter 14: Arriving at the Final Price TEXTBOOK NOTES ------------------------------------------------------------------------------------------------------------ -------------------

* Step 1: Identify Pricing Objectives and Constraints o Objectives: Profit, Sales Revenue, Market Share, Unit Volume,  Survival, Social Responsibility  

o Constraints: Demand for the Product Class, Product, and Brand;  Newness of Product; Cost of Producing & Marketing; Cost of  Changing Prices and Time Period; Single Product vs. Product Line; Type of Competitive Market; Competitor’s Prices/Consumer  Awareness; Legal/Ethical Considerations

* Step 2: Estimate Demand and Revenue

o Demand Curve: Consumer tastes, price/availability of similar  products; consumer income

o Price Elasticity

 Elastic Demand 

∙ Changes in price will affect quantity sold and  


 Inelastic Demand 

∙ Changes in price will NOT affect quantity sold and  


* Step 3: Determine Cost, Volume, and Profit Relationships o Break-even Analysis

 Fixed costs/ (Unit price – Unit Variable Cost)

* Step 4: Select an Approximate Price Level

o Demand-oriented Approaches

 Skimming, penetration, prestige, price lining, odd-even,  target, bundle, yield management

o Cost-oriented Approaches

 Standard markup, cost-plus, experience curve

o Profit-oriented Approaches

 Target profit, target return on sales, target return on  


o Competition-oriented Approaches

 Customary; above, at or below market; loss leader

* Step 5: Set the List or Quotes Price

o Price Policy

 Fixed-Price  

∙ “one-price policy”

∙ Setting one price for all buyers of a product/service

 Dynamic Price

∙ “flexible-price policy”

∙ Setting different prices for products/services in real  

time in response to supply and demand conditions

* Step 6: Make Special Adjustments to the List or Quoted Price o Discounts

 Quantity (Cumulative vs. Noncumulative), Seasonal, Trade  (functional), Cash

o Allowances

 Trade-in, Promotional

o Geographical Adjustments  

 FOB origin pricing, Uniform delivered pricing (single-zone,  multiple-zone, FOB w/ freight-allowed pricing, Basing-point  pricing)

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Chapter 2: Developing Successful Organizational and Marketing Strategies LECTURE NOTES 

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* Corporate Mission

o A clear statement of the markets in which the firm competes and seeks to deliver customer value

o E.g. Google- Organizing the worlds’ information and making it  universally accessible and useful

o E.g. Boston Beer Company- We are the Boston Beer Company.  We make the best beer in America.  

* Avoid Marketing Myopia!

o Refers to being ‘near-sighted’ in terms of thinking about our  mission; might constrain ourselves to thinking about existing  technology (e.g. Pickett slide rule)

* Setting Corporate Goals

o Product Portfolio Analysis (Boston Consulting Group)

 BCG’s Growth- Share Matrix





*”Success Sequence”

*”Failure Sequence”













Relative Market Share

* Relative Market Share= Fir m's Raw Market Share Raw Market Share of Fir m's LargestCompetitor

* Example  

o Toothpaste Market Shares

 Crest 32.8%

 Colgate 22.3%

 Arm & Hammer 9.4%

 Aquafresh 8.2%

o Computing Colgate’s Relative Market Share




o Computing Crest’s Relative Market Share




o Toothpaste Market Growth Rate= 4.6%  

o Toothpaste Relative Market Shares

 Crest 1.47 (COW)

 Colgate 0.68 (DOG)

 Arm & Hammer 0.29 (DOG)

 Aquafresh 0.25 (DOG)

* Why focus on market growth rate instead of market size? o Dynamic rather than static

 Focus on where they are heading, rather than where they  have been or are currently

o Future-oriented

* Why is market share so important?

o Market Power Increases (create entry barriers)

o Production Costs Decrease

* Experience Curve  

 Unit Production Cost | Total Units Produced -- * Every time unit production doubles, the cost of production falls by  some fixed percentage (e.g. 10%)

* Marketing Strategy Formulation

o Planning [address in this lecture]

o Implementation [addressed in 4/4 lecture]

o Control (Evaluation) [addressed in next week’s lecture]  *    The Annual Marketing Plan 

o Components of a Marketing Plan

 Executive Summary

∙ Very brief summary for busy executives to read

 Situation Analysis (SWOT) {Aserta Golf Example}









 Objectives

∙ What is it we want to achieve

 Strategy

∙ How we are going to pursue those objectives

 Tactics

∙ Outline specific tactics to implement our strategies

 Budget

∙ Outlines how much money will be spent

 Timing

 Contingency Plans

∙ What if? {gives us a plan b}

* Identification of Product/Market Segments  

o Segmentation

 Example with PetSmart identifying “PetParent” as a  


∙ 52% of customers

∙ 72% of purchases

o Targeting

o Positioning

 Total Lifetime Value

* Objective Formulation

o Sales Revenue

o Profit

o Market Share

* Strategy Formulation Based on

Market Share

o Grow

 Want to expand our share of the market; have a larger  market share

o Maintain

 Keep the same market share; trying to hold market shares  steady

o Harvest

 Trying to take profits out and let market share decline  slowly over time

o Divest  

 Shut a brand down or sell it to someone else; exit it from  the portfolio; no longer own it

* Marketing Program Formulation (A Blend of Strategy and Tactics) o Product

 Product Quality (#3 factor)

 New Products (#2 factor)

o Price

o Promotion

 Sales Force (#1 factor)

 Advertising (#4 factor)

 Sales Promotion (#5 factor)

o Place  

* Budgeting for Marketing Effort

o Affordable

 Highly unsophisticated

o Percentage of Sales

 Most frequently used; encourages inertia  

o Optimization

 Most sophisticated approach; arrive at equilibrium (most  economical)

o Objective & Task

 Most logically justifiable; take a look at the objectives and  identify the tasks necessary to achieve the objectives and  then attach a cost estimate to each task (known as “zero

based budgeting”- start with a blank piece of paper= 0)

o Competitive Parity

 Relies on collective wisdom of our competition (compared  against their sales revenue {market share} and marketing  activities {share of voice})

 Market Share Growth Objective

∙ 1.5 rule= desired market share gain x 1/5=  

necessary share of voice gain

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Chapter 2: Developing Successful Organizational and Marketing Strategies TEXTBOOK NOTES 

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* Types of Organizations

o For-profit

 Business firm

o Nonprofit

 Does not have profit as an organizational goal

o Government agency

 Federal, state, county, or city unit that provides specific  service to its constituents

* Strategy in Visionary Organizations

o Organizational Foundation (why) +

 Core Values, Mission (vision), Organizational Culture

o Organizational Direction (what) =

 Business, Goals (objectives)- Long-term, Short-term

o Organizational Strategies (how)

 By level (Corporate, SBU, Functional)

 By product (Good, Service, Idea)

* Business Portfolio Analysis

o Question Marks= low share of high-growth markets; need large  portions of cash

o Stars= high share of high-growth markets; when their growth  slows, they are likely to become cash cows

o Cash cows= generate large amounts of cash, far more than they  use; dominant shares of slow-growth markets and provide cash  to cover the organization’s overhead and to invest in other  ventures

o Dogs= low shares of slow-growth markets

* Planning Phase of Strategic Marketing Process

o Step 1: Situation (SWOT) Analysis

o Step 2: Market-Product Focus and Goal Setting

o Step 3: Marketing Program

 Product  

∙ Features, Brand name, Packaging, Service, Warranty

 Price

∙ List price, Discounts, Allowances, Credit terms,  

Payment period

 Promotion

∙ Advertising, Personal selling, Public relations, Sales  

promotion, Direct marketing

 Place  

∙ Outlets, Channels, Coverage, Transportation, Stock  


* Implementation Phase of Strategic Marketing Process o Obtaining Resources

o Designing the Marketing Organization

o Defining Precise Tasks, Responsibilities, and Deadlines o Executing the Marketing Program

* Evaluation Phase of Strategic Marketing Process o Comparing Results with Plans to Identify Deviations

o Acting on Deviations

 Exploiting a positive deviation

 Correcting a negative deviation

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Chapter 22: Pulling It All Together- The Strategic Marketing Process LECTURE NOTES 

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* Strategic Marketing Process: Implementation Phase

o Establishing the Marketing Organization

 Roles and Responsibilities

 Human Resource Deployment

o Developing Timetables

 Critical Path Analysis via PERT Charts

 Critical Path Computation

∙ (A B D F)= 12 months

∙ (A B E F)= 11 months

∙ (A C E F)= 15 months*

 (PERT= Program Evaluation and Review Technique)

o Obtaining and Allocating Budgets

o Executing the Marketing Program

* Resource Allocation in Practice

o Share Point Analysis (Share Point= 1% of market)

 Estimate Industry Sales

 Estimate Firm’s Market Share

 Compute Gross Margin Per Share Point  

∙ Gross Margin= Sales Revenue- Cost of Goods Sold  

∙ Gross Margin is also called the “contribution”- to  

covering selling, administrative, and other expenses,  

as well as profit

* Key Decision: How much is the company willing to spend in additional marketing expense to increase sales by 1 share point?

* Example

o Given: Industry Sales= $39,000,000

o Given: Firm’s Sales= $12,000,000

o Firm’s Market Share= Firm’s Sales/Industry Sales= $12M/$39M=  31%

o Given: Firm’s Gross Margin= $3,100,000

o Firm’s Gross Margin per Share Point= $3.1M/31 Share Points=  $100,000

o Given: Total Industry Marketing Effort= $5,000,000

o One “ S hare o f Voice” Point= $5,000,000/100= $50,000 * Assume firm wishes to expand its market share by 2 share points, to a  total of 33%

* Applying the “1.5 rule” from competitive parity budgeting, the firm  would have to spend enough to capture three additional share of voice  points (2 pts x 1.5 = 3 SOV points)

* $50,000 per share of voice point x3 points= $150,000 additional  marketing effort required

* If successful, the firm’s market share expands by two share points * Each share point is worth $100,000 in gross margin, so two additional  share points yield an additional $200,000 in gross margin. * $200,000 - $150,000 = $50,000

* Therefore, it is worth it to the firm to pursue the additional market  share!

Planning vs. Implementation


Implementat ion





e.g. Zara

e.g. take  




e.g. price placements  “Butt Bread” “Little Ho on  the Prairie”

e.g. Burger  


* Improving Implementation

o Communicate!

o Leadership (Champion)

 Takes ownership; lots of enthusiasm  

o Reward Performance

o Schedule Tasks

 PERT Charts

o “Just Do It”

o Seek Feedback

 Internal  

∙ Asking for employees and those on the frontline what

they are observing in the marketplace

 External  

* Strategic Marketing Process: Control (Evaluation) Phase o Measuring Results

 Identify deviations from plan

∙ Whether we are overperforming or underperforming

 Sales Analysis

∙ Sales Component Analysis- breaks down sales

 Profitability Analysis

o The Marketing Audit

 Looks at the entire marketing operation for the firm

 Broad-based look  

o Corrective Action

 (Contingency Plans)

* Marketing Planning and Implementation at You, Inc.

o Want a job?

 Use a marketing approach

o Objectives?

 Money

 Experience

 Future Job or Advancement

* Your Marketing Mix

o Product (You!)

o Promotion

o Place

o Price  

* Qualities (“Product Benefits”) Sought by Employers

o 1. Motivation

o 2. Oral Communication

o 3. Initiative

o 4. Maturity

o 5. Enthusiasm

o 6. Ambition

o 7. Assertiveness

o 8. Self-assurance

o 9. Problem Solving  

o 10. Written Communication

* Packaging  

o Clothing

o Grooming  

* Promotion

o Advertising: Resume

o Publicity/PR: Social Media

o Personal Selling: Interview

 Preparation!

 Questions  

* Marketing Careers

o The Big Two:

 Sales

 Retailing  

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Chapter 22: Pulling It All Together- The Strategic Marketing Process TEXTBOOK NOTES

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* Porter’s Generic Business Strategy 

 o Cost Leadership 

 Focus on reducing expenses, lowering product prices while  targeting a broad array of market segments

 o Differentiation 

 Requires products to have significant points of difference  (product offerings, brand image, higher quality, advanced  technology, superior service) to charge a higher price while targeting a broad array of market segments  

 o Cost Focus 

 Controlling expenses, lowering product prices targeted at a narrow range of market segments

 o Differentiation Focus 

 Requires products to have significant points of difference in order to target one or only a few market segments

* Planning Phase 

o Guidelines for effective marketing plan

 Set measurable, achievable goals

 Use a base of facts and valid assumptions

 Use simple, but clear and specific, plans

 Have complete and feasible plans

 Make plans controllable and flexible

 Find the right person to implement the plans

 Work toward consensus-building

o Problems

 Plans may be based on poor assumptions in regard to  

environmental forces

 Planners and their plans may have lost sight of their  

customers’ needs

 Too much time and effort may be spent of data collection  and writing plans that are too complex to implement

 Line operating managers often feel no sense of ownership  in implementing the plans

* Implementation Phase 

o Take action and avoid paralysis by analysis

o Surface problems with open communications

o Communicate goals and the means of achieving them

o Have a responsible program champion willing to act

o Reward success but don’t punish failure

o Schedule precise tasks, responsibilities, and deadlines

* Evaluation Phase 

o Compare results with planned goals to identify deviations

 Actual Results > Goals 

∙ Act fast to exploit opportunity

 Actual Results < Goals 

∙ Make corrective action

o Take corrective action

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Chapter 21: Implementing Interactive and Multichannel Marketing LECTURE NOTES 

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* Two Classes of Internet Use

o Business-to-Business (B2B)

 E.g. reverse auctions, web services (mostly B2B- behind  the scenes)

o Business-to-Consumer (B2C)

 E.g. Dollar Shave Club

* Use of Internet

o Facilitating Sales- Information Source

 Automotive costs and prices (E.g. Edmunds.com)

o Virtual Communities

 Any type of social media  

 E.g. TheKnot.com (wedding registry, advice, etc.)

 E.g. TheNest.com (just got married)

o Brand Building  

 Create value for the brands that we offer

 E.g. Kraft foods (highest brand website)

 Promotional Website (e.g. Coca-Cola)

 Transactional Website (e.g. Nike) {you can shop directly  from site}

o Selling Merchandise  

* Internet Shopping

o Internet shopping revenues are a relatively small percentage of  consumer retail spending- but growing!

* A Very Possible Future Scenario

o Jack Jamison sits in front of his home electronic center reviewing  his engagement calendar displayed on his TV screen. He sees he has a fishing trip scheduled in two weeks and decides to buy a  new reel for the occasion. He switches to his personal electronic  shopper, ANTHONY, and initiates the following exchange:

o ANTHONY: Do you wish to browse, go to a specific store, or buy  a specific item?

o Jack: Specific item

o ANTHONY: Type of item?

o Jack: Fishing Reel

o ANTHONY: Type? (menu appears on screen)

o Jack: Salt Water, Light Tackle

o ANTHONY: Price range? (menu appears)

o Jack: $200

o ANTHONY: 121 items have been identified. How many do you  want to review?

o Jack: 5

o [Five pictures of the fishing reels appear on the screen with the  price, brand name, and the electronic retailer selling it listed  beneath each one. Jack clicks on one of the reels and it is  enlarged on the screen. Another click and Jack views the reel  from different angles. Another click and specifications appear.  Jack repeats this routine with each reel. Jack then clicks for a  comparison chart summarizing the features of each reel. He  selects the one he likes. ANTHONY knows the rod Jack will be  using with the reel and the size and fittings needed.]

o ANTHONY: How would you like to pay for this? (menu appears) o Jack: American Express

o ANTHONY: Sports Authority [the firm selling the reel selected]  suggests a new fishing glove to use with the reel.

o [Jack clicks on the glove and it appears on the screen on Jack’s  hand. He inspects the glove as he inspected the reels. He  decides to purchase the glove. ANTHONY then asks Jack about  delivery. Jack selects two day delivery at a cost of $5.00]

o ANTHONY: Just a reminder. You have not purchased dress shirts in six months. Do you wish to reorder at this time?

o Jack: Yes

o ANTHONY: Same styles?

o Jack: Yes

* Why do People Visit a “Brick & Mortar” Retailer?

o Merchandise Assortments

 Having a really good selection

o Service

 Convenience (Location)

 Information to make Good Selections

o Price- Total Cost to Consumer

 Go to Store, Find Right Merchandise, Return Merchandise o Entertainment

 People enjoy shopping experience  

o Social Interaction

 Shopping with other people

 Shopping and interacting with store personnel

* Potential Customer Benefits Offered by Electronic Retailing

o Vast number of alternatives (virtually impossible to beat the web) o Information tailored to individual consumers to help them make  easier and better purchase decisions

 Super Sales Associate

 Side by Side Comparisons

 Full Motion Video

* Merchandise Sold Successfully through Electronic Retailing o Computers & Electronics $56 BB

o Apparel & Accessories $49 BB

o Books/Music/Videos $24 BB

o Autos/Auto Parts $20 BB

o Furniture $19 BB

o Personal Care $12 BB

* Issues

o Bandwidth!

 Speed of internet connections

o Security of Transactions

 Identity theft

o Need for Search Engines like ANTHONY

 Example- Artificial Intelligence (AI)

o Will Manufacturers Sell Directly to Consumers and Bypass  Retailers (disintermediation)?

 Fulfillment centers

o Will Price Competition Increase with Lower Search Cost?  Need to have lowest cost

o M-Commerce

 “Mobile Commerce;” Only getting more prominent  

o Sales Tax

o Net Neutrality

 Principle that all traffic on the internet should be treated  equally

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Chapter 21: Implementing Interactive and Multichannel Marketing TEXTBOOK NOTES 

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* Marketing Challenges in Two Environments

o Legacy Companies

 E.g. Proctor & Gamble, Walmart, and General Motors

 Continually challenged to define the nature and scope of  their marketspace presence

o Internet Companies

 E.g. Amazon.com, Google, ETRADE

 Continually challenged to refine, broaden, and deepen their marketspace presence

* Interactive Marketing- involves 2-way buyer-seller electronic  communication

o Buyer controls the kind and amount of information received from  the seller

o Choiceboard- interactive, Internet-enabled system that allows  individual customers to design their own products and services  by answering a few questions and choosing from a menu of  product/service attributes, prices, and delivery options

o Personalization

 Per mission marketing- the solicitation of a consumer’s  consent (“opt-in”) to receive email and advertising based  on personal data supplied by the consumer

 *     Creating Online Customer Experience 

o Context

 Website’s aesthetic appeal and functional look and feel of  the site’s layout and visual design

o Content

 All digital info on a site, including presentation form (text,  video, audio, graphics)

o Customization

 Ability of a site to modify itself to, or be modified by and  for, each individual user

o Connection

 Network of linkages between a company’s site and other  sites (embedded in the website)

o Communication

 Dialogue that unfolds between the website and its users  Expectations are that it is interactive and individualized in  real time (like a personal convo)

 Increasing usage of chatbots (sophisticated computer  programs that mimic human conversation using artificial  intelligence)

o Community

 Enhances customer experience and builds favorable buyer seller relationships

 User-to-user communication hosted by the company to  create virtual communities  

o Commerce

 Site’s ability to conduct sales transactions for  


* Cross-Channel Consumer

o Showrooming

 Examining products in a store and then buying them online for a cheaper price

 Most popular categories: electronics and home appliances o Webrooming  

 Examining products online and then buying them in a store

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Chapter 7: Understanding and Reaching Global Consumers and Markets LECTURE NOTES 

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* International Environment

o Importance

 International Trade Share of U.S. GNP

∙ 1960 2000 2011

∙ 9.5% 21.5% 32.7%

 Other Factors Signifying Importance

∙ Balance of Trade

o Comparison of the value of our exports and the

value of our imports

∙ Shrinking Globe

o The world is functionally smaller

∙ Foreign Competition

o Much more foreign competition

o Sectors  

* Cross-Country Analysis

o Demographic

 World’s 65 & older population to triple by 2050 (will be a  struggle to support)

 Population will be living in cities (more urbanization)

o Social/Cultural

 Where companies have their downfall (P&G with Italian  perspective on women cleaning 21 hours a week w/ Swiffer mop; Mop Flop)

o Economic

 Exchange rates, inflation, economic stability, projections   Greater economic inequality

o Technological

 Wireless technology and smartphones

 Digital advertising spending

o Natural

 Climate change

o Legal/Regulatory

 Understanding specific law in certain countries,  

protectionism (tariffs, quotas, etc.)

* Global Marketing Approaches

o International Marketing

 Taking the same approach as domestically in the U.S. and  moving it into other countries (not favored)

 Not adjusting anything

o Multinational Marketing

 Looks at individual countries as segments

 Developing products suitable to each country’s tastes  Position a product differently

o Transnational Marketing  

 “Global Marketing”  

 We look at the whole world as our market and then we look for segments within the market (‘trans’ can cut across  

countries, doesn’t just have to be individual countries as  segments) (they cut across multiple nations)

* How much Standardization?

o Pure Standardization

 Do the same thing in every market

o Mixed (“Globalization”)

 ‘globalization’  

 Global strategy approach, but locally focused

o Pure Non-Standardization

 Look at each market from bottom up (inefficient)

* Global Market Entry Strategies (top to bottom- more risk, but also more control)

o Exporting

 Manufacture the product in the domestic country and  export it overseas to sell it in a different country

o Licensing

 Allow someone to use our brand name in exchange for  royalties

o Joint Venture

 Two companies work together on a specific product; one  domestic, one international; sometimes conflicting views o Direct Investment

 Build a manufacturing plant or facilities in the international  company you have entered

* The same basic marketing principles apply to international marketing  as to domestic, but the execution is more complex!

* Marketing Program Variables

o Product

 Often has to change (re-engineered)

o Packaging

 Has to be adjusted (e.g. no cartoon characters on cereal  boxes)

o Promotion

 Also changes, to reflect cultural differences

o Brand Name

 Different meanings in different cultures’ languages

o Pricing  

 Highly regulated

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Chapter 7: Understanding and Reaching Global Consumers and Markets TEXTBOOK NOTES 

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* United States Perspective on World Trade

o Gross Domestic Product (GDP)

 Monetary value of all products and services produced in a  country during one year

o Balance of Trade

 Difference between monetary value of a nation’s exports  and imports  

∙ Exports > Imports ~ incurs a surplus in its balance of


∙ Imports > Exports ~ deficit results  

* Marketing in a Dynamic Global Economy

o 1) Economic protectionism by individual countries

 Protectionism is shielding one or more industries within a  country’s economy from foreign competition through the  

use of tariffs or quotas

 Tariffs are a government tax on products/services entering  a country, primarily serve to raise prices on imports

 Quota is a restriction placed on the amount of a product  allowed to enter or leave a country  

 Trade war is when countries try to damage each other’s  trade, typically by imposition of tariff and quota restrictions o 2) Economic integration among countries

 European Union (EU)- 28 member countries; 16 of which  have a common currency called the euro

 North American Free Trade Agreement (NAFTA)- lifted trade barriers between Canada, Mexico, and the United States

o 3) Global competition among global companies for global  customers

 Global competition occurs when firms originate, product,  and market their products and services worldwide

o 4) The presence of a networked global marketspace

o 5) Growing prevalence of economic espionage

 Economic espionage- clandestine collection of trade  

secrets or proprietary information about a company’s  


* Global Environment Scan

o Cultural Diversity  

 Values

∙ Personally or socially preferable modes of conduct or  states of existence that tend to persist over time

 Customs

∙ What is considered normal and expected about the  

way people do things in a specific country

 Cultural Symbols

∙ Things that represent ideas and concepts in a  

specific culture

 Language  

 Cultural Ethnocentricity

o Economic Considerations

 Economic Infrastructure

o Political-Regulatory Climate

* Product and Promotion Strategies

o Product Extension

 Selling virtually same product in other countries

∙ E.g. Coca-Cola, Gillette razors, Nike apparel, Apple  


o Product Adaptation

 Changing a product in some way to make it more  

appropriate for consumer preferences or a country’s  


∙ E.g. Listerine mouthwash in different varieties;  

Wrigley’s grapefruit, cucumber, and tea-flavored  

chewing gum in China

o Product Invention

 Invent totally new products designed to satisfy common  needs across countries

∙ E.g. Black & Decker invented Snake Light flexible  


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