BUS-M370 Icore Marketing FInal Exam Study Guide
BUS-M370 Icore Marketing FInal Exam Study Guide BUS-M370
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This 23 page Study Guide was uploaded by Sara Chamberlin on Monday November 16, 2015. The Study Guide belongs to BUS-M370 at Indiana University taught by Kitzmiller in Fall 2015. Since its upload, it has received 200 views. For similar materials see Icore Marketing in Business at Indiana University.
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M-370 Final Exam Study Guide Chapter 7 Reducing pricing unnecessary can lead to lost profits and damaging price wars. It can cheapen a brand by signaling to customers that price is more important than the customer value a brand delivers Companies should sell value, not price Price- the amount of money charged for a product or service; the sum of the values that customers exchange for the benefits of having or using the product or service Customer value-based pricing- setting price based on buyer’s perceptions of value rather than on the selling cost Good value pricing- offering the right combination of quality and good service t a fair price o Part of this is EDLP- Everyday Low prices- involves charging a constant, everyday low price with few or no temporary price discounts Value- added pricing- attaching value-added features and services to differentiate a company’s offers while charging higher prices Cost-based pricing- setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk Fixed costs- costs that do not vary with production or sales level Variable costs- costs that vary directly with the level of production Total costs- the sum of the fixed and variable costs for any given level of production Cost plus pricing (markup pricing)- adding a standard markup to the cost of the product Breakeven pricing (target return pricing)- setting the price to breakeven on the costs of making and marketing a product, or setting price to make a target return Competition-based pricing- setting prices based on competitors’ strategies, prices, costs, and market offerings Demand curve- a curve that shows the number of units that market will buy in a given time period, at different prices that might be changed Price elasticity- a measure of the sensitivity of demand to changes in price Market skimming pricing (price skimming)- setting a high price for a new product to skim max revenues layer by layer from the segments willing to pay the high price; the company makes fewer buy profitable sales (i-phone) Market penetration pricing- setting a low price for a new product to attract a large number of buyers and a large market share Product line pricing- setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitor’s prices. Optional product pricing- the pricing of optional or accessing products along with a main product Captive product pricing- setting a high price for products that must be used along with a man product, such as blades for a razor and games for a console Product bundle pricing- combining several products and offering the bundle at a reduced price Discount- a straight reduction in price on purchases made during a stated period of time or in larger quantities Allowance- a reduction from the list price for buyer actions such as trade-ins or promotional and sales support Segmented pricing- selling a product or service at two or more prices, where the difference in prices is not based on differences in cost Psychological pricing- pricing that considers the psychology of prices, not simply the economics; the price says something about the product Reference prices- prices that buyers carry in their minds and refer to when they look at a given product Promotional pricing- temporary pricing products below list price, and sometimes even below cost to increase short run sales Dynamic pricing- adjusting prices continually to meet the characteristics and needs of individual customers and situations Class 14 Pricing Price-the amount of money charged for a product or service or the sum of all the values that customers give up in order to gain a benefit, or having or using a product or service If price= or < PV and Price > price floor, exchange may happen Price floor is cost of going to markup to provide that service 3 major pricing strategies o Customer value based pricing- good value- Wal-mart o Cost based pricing- (Costco) old school, not many things o Competition based pricing Major pricing formulas Price$ =MU$ + C$ MU$= Price$ -C$ C$= Price$-MU$ MUp%= MU$/Price$ MUC%=MU$/Cost$ BEST FORMULAS TO USE o Cost= Price X (1-MU%) o Price = Cost/ (1-MU%) Skimming- good for no completion, no alternatives, luxury products, inelastic demand, you go in and sell to a few customers at a high price (appropriate in early stages of product) Penetration pricing- appropriate in elastic marker, convenience type products, don’t go too high Penetration- new vortex bottle for miller lite Skimming- new watch by Apple What price is right? o In a world of perfect info, that price which maximizes profit o More research o Elasticity testing o Alternate fulfillment mechanisms o Competency o Channel choice Power of price o Very powerful influencer of consumer behavior o Flexible o Easy to change o Easy to communicate differences relative to competitor- easy to differentiate Price communicates perceptions of quality as well and other content People don’t barter or negotiate prices on things such as big macs, but they do on houses Elastic demand for big macs, inelastic demand for houses Inelastic markets are for specialty/luxury products Key points o Price is key element of mix that is used to quickly adjust consumer perception of a market offering o Several different brand strategies marketers must consider when pricing o Price should be set by accessing consumer perceived value not cost o Elasticity of an offering can guide strategy o Penetration and skimming are plans for products Class 15 Pricing Strategies Goal of pricing is to optimize the margin dollars across all product lines Product line pricing- communicates the difference between products within a product line Optional product pricing- incorporates accessories or additions made to a product Captive product pricing- when one product requires another product to be used Product bundle pricing- offers a reduced price for a set of products that are used together Product line- iphone types Captive product- razors and razor blades, golf clubs and balls, swifter and wipes, printer and ink Optional- automobiles, flying Product bundle- value menu, game console, washer and dryer How do psychological factors influence consumers and pricing? o People think that if a product cost more it is better, Managing product lines o Most firms have multiple products in a given category o This requires strategic thinking about the relationships of the products o Price is a key factor in conveying differences to consumers Product line pricing strategies o Goal is to optimize the profits on the product line not on individual products Typical approach: products with variable features at increased price points Captive product pricing o Two or more products that work only when used together o Low entry price, margin on repeat purchase Optional Product Pricing o Leather seats o Upgraded audio o Custom wheels Product bundle pricing o Pricing tactic when two or more items work well together Fries and Big Mac Small increases in prices have a huge effect on the bottom line What price is right? o Psychological pricing- quality associated with price/ High prices create a quality signal, Smirnoff example o Reference prices- pricing well known products very low to create perception that all prices are low Promotional Pricing o Loss leaders (does it work?) o Special event pricing o Cash rebates o Low interest financing o Longer warranties/free maintenance Price adjustments o Why do we change price? Competition, inventory liquidation, end of season, broken assortments, change in macro-economic conditions Dynamic Pricing o Adjust price to demand Stocks Airlines Hotels Football tickets Accessing individual price elasticity Geographic pricing o Pricing based on location Apple prices their phone by region Target takes markdowns based on performing by particular region Price Adjustment o Consumers interpret price in their own way Types Discounts Allowances Taxes Rebates Other types of promotion o Alternates to price promotion BOGO GWP- Gift with purchase PWP- Purchases with purchase Service Location Price completion is a slippery slope unless you are Wal-Mart Reading 5 If Brands are built over Years, why are they managed over quarters? Main point of reading o Investing in marketing communications is a less expensive longer method of driving higher priced sales than regular promotions What is scanner data? o Refers to data collected at point of sale Based on reading what comes with a long-term view? o Long views generate a price premium that improves profitability Firms should focus on what key factor? o Don’t focus on accounting or short-term profit. Take CLV approach to drive profitability over the life of the customer with brand Reading 6 How to Stop Customers from Fixating on Price? What are the four strategies from this reading? o Clarifying your strategy: Pricing for better mileage o Price to reflect quality- Apple o Partitioning like optional product pricing o Single Price Point- Music Downloads Reading 7 What is a free customer worth? What are key elements of this reading? o Two sided models require both sides of the market place: example App UBER o Direct effects- UBER drivers protesting in San Fran o Indirect effects- Ads driving viewers away What comes from knowing CLV according to the reading? o Allow firms to assess the value of an additional non-paying customer in a two sided model. Ex: auctions Chapter 8 Promotions mix or marketing communications mix- the specific blend of promotion tools that the company uses to persuasively communicate customer value and build customer relationships Advertising- any paid form of non personal tools that the company uses to persuasively communicate customer value and build customer relationships Sales promotion- short-term incentives to encourage the purchase or sale of a product or service Personal selling- personal presentation by the firms sales force for the purpose of making sales and building customer relationships Public relations- building good relationships with the company’s various public by obtaining favorable publicity, building up good corporate image and handling or heading off unfavorable rumors, stories, and events Direct marketing- direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships Integrated marketing communications- carefully integrating and coordinating the company’s many communication channels to deliver a clear, consistent, and compelling message about the organization and its products Push strategy- pushing the product through marketing channels to consumers Pull strategy- the producer directs its marketing activities toward final consumers to induce them to buy the product Advertising objective- a specific communication task to be accomplished with a specific target audience during a specific period of time Advertising budget- the dollars and other resources allocated to a product or a company advertising program Affordable method- setting the promotion budget at the level management thinks the company can afford Percentage of sales method- setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price Competitive-parity method- setting the promotions budget to maintain competitive outlays Objective and task method- developing the promotion budget by 1. Defining specific objectives 2. Determining the tasks that must be performed to achieve these objectives 3. Estimating the costs of performing these tasks. He sum of all these costs is the proposed promotion budget Advertising strategy- the plan by which the company accomplished its advertising objective. It consists of two major elements: creating advertising messages and selecting advertising media Creative concept- the compelling big plan that will bring the advertising message strategy to life in a distinctive and memorable way Execution styles o Slice of life o Lifestyle o Fantasy o Mood or image o Musical o Personality symbol o Technical expertise o Scientific evidence o Testimonial evidence or endorsement Advertising media- the vehicles through which advertising messages are deleved to their intended audiences. o Steps 1. Determining the reach, frequency, and impact 2. Choosing among major media types 3. Selecting specific media vehicles 4. Choosing media timing Return on advertising investment- the net return on advertising investment divided by the costs of the advertising investment PR Departments perform o Press relations or press agency o Product publicity o Public affairs o Lobbying o Investor Relations o Development Class 16 Promotions- Communicating Customer Value Only way for a brand to succeed is for the target market of current and potential customers to know and appreciate the brand offering. The communication and offering through various means is promotion. Communication of brand and product differences effectively is a job of an integrated marketing communication strategy. Advertising- paid promotion of ideas, paid media form Sales promotion- coupon at point of sale, tools or mechanisms that surround product at transaction PR- management of broad communications that may or not be directed at consumers Personal selling- interpersonal communications involving a sale Direct marketing- catalogues were original direct marketing tool (used in CRM to optimize relationships) Where do firms spend most money? o PERDONAL SELLING 3X ADVERTISING Why do firms substitute the concept of digital marketing for direct marketing? o Easier to use, more interactive, not so mass-feeding Traditional marketing is still the biggest What are key forms of digital marketing today? o Company website o E-mail o Text o Tweets or other social media o Blogs New devices are also changing IMC- (iphones, ipaid, iwatch, tablet) Push strategy- pushing the product through marketing channels to final consumers o Providing the retailer with right tools and incentives to sell products o Putting a thing at the end of an aisle, helping customers find products Pull strategy- producer directing its marketing activitis toward final consumers to induce them to buy the product (drives consumers into outlets by using buying knowledge and buying behavior insights) creates demand to bring in- APPLE Which method of promotion budget setting is the most logical for a modern business? o Objective and task method budget setting Facts about marketing communications o Research In print size matter Color ads enhance recall Shorter headlines= better recognition Belief isn’t essential to remembering AD Advertising and Market Share o Advertising more effective for low market share brands o For established products advertising does not increase sales (advertising is defensive) Response o Changes in product will increase sales o Advertising elasticity- .05 o A 100% increase in advertising results in 5% increase in sales Tools of Promotion for IMC o Advertising o Sales Promotion o PR o Personal Selling o Direct Marketing IMC= strategic utilization of all points of communication o single creative direction and message o PR o Advertising o Web o Brick and Mortar o Personal Selling o Promotion o Any other touch point Example of IMC- Geico 15 mins can save you 15% on car insurance Direct marketing o Marketing communications are changing rapidly and direct designed two way communication in real time is the newest form of communication o Particularly well in managing customers buy also important for acquisition o Most direct marketing is digital in nature New Devices are also changing IMC o Integrating devices and methods o Marriage of creative and technical o Analytics drives creativity o Speed/relevance/Reach- company can locate us within a few feet Affordable method- advertise by whatever we can afford Objective and task method- sets promotion based on what it wants to accomplish Percentage of sales- setting budget at a percentage of current or forecasted sales Competitive parity- setting the promotion budget to match competitor’s outlays Budgeting o With increased connections the effectiveness of advertising must be measurable o Media with clear measurability are acquiring favor Class 17 4 types of advertising campaigns o A word hook- a repeatable catch phrase from ad to ad. Examples include the Verizon guy, can you hear me now? “Just do it” “15 mins can save you 15 % or more” o A character hook- uses a hero, villain, or victim to embody a key attribute of a brand. Examples include Ronald McDonald, Mickey Mouse, Captain Morgan, FLO, Mayhem Guy, Keith Stone, Old Spice guy o A repeatable theme is a situation that plays out again and again calling out the need for a company’s product. EX: got milk? Absolut vodka ad o Consistent layout- uses a unique, design look and repeats these elements at each touch point. EX: Apple iphone ads, target and red icon What is replacing newspapers, tv, and radio? o The internet PR builds relationships with different groups or publics that affect an organization o EX of Press relations- press release about a news story o EX of product publicity- Harry Potter and Deathly hallows and the great speculation on how it would end Types of Promotion in order of money spent o Personal Selling 3X advertising o Advertising o Sales Promotion o Direct to consumer o PR Creative communication elements o Word hook o Character hook o Repeatable theme o Consistent layout Effective communications o Geico – great story of truly effective mass marketing o Geico did not exist in consumer mind 8 years ago Advertising ROI o Advertising ROI is dependent on design messaging that incorporates some or all of these elements o Effective IMC delivers these measures consistently across media, physical plants, and personal selling o Need to be able if it measured bottom line for company Media: Reaching consumers o Breaking through the media/message clutter 1950’s: three or 4 channels and a few major magazines Today: a number of major channels and hundred of cable choices Over 20,000 magazines Contextual e-mail, text, social media messages, apps You used to have a group that created stuff and a group that found places to put these ads o Today these departments are attached at hip Consumer choice in Advertising o What’s an advertiser to do? o Entertain: Old Spice Show consumers ads they chose to see Opt-in e-mails Consumer created media Social engagement and Dialogue Media and Message o Old model Develop creative approach Decide on medias and spend based on desired consumer impact o New Model Evaluate media based on consumer preference Measuring effectiveness o Communication goals- reach/awareness/sales profitability o Customer lifecycle approach PR o Press relations Managing the message to media inquirers Investors Product publicity o Managing the message about products to make them newsworthy and gain positive placement and attention o Focus on innovators and early adopters: Blogs Chapter 9 Marketing channels- downside stream of supply chain Value delivery network- made up of the company, supplies, distributors, and ultimately, customers who “partner” with each other to improve the performance of the entire system Marketing channel- a set of interdependent organizations that help make a product or service available for use or consumption by the consumer of business user Channel level- a layer of intermediaries that performs some work in bringing the product and its ownership closer to the final buyer Direct marketing channel- a marketing channel that has no intermediary levels Indirect marketing channel- a marketing channel containing one or more intermediary levels Multi channel distribution- a distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments Disintermediation- the cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by racial new types of intermediaries Marketing channel design- designing effective marketing channels by analyzing customer needs, setting channel objectives, identifying major channel alternatives and evaluating those alternatives Intensive distribution- stocking the product in as many outlets as possible Exclusive distribution- giving a limited number of dealers the exclusive right to distribute the company’s products in their territories Selective distribution- the use of more than one but fewer than all of the intermediaries who are willing to carry the company’s products Marketing logistics/ physical distribution- planning, implementing, and controlling the physical flow of materials, final goods, and related info from points of origin to points of consumption to meet customer requirements of a profit Supply chain management- managing upstream and downstream value added flows of materials, final good, and related info among suppliers, the company, resellers and final consumers Distribution centers- large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver foods to customers as quickly as possible Intermodal transportation- combining two or more modes of transportation Class 18 Marketing Channels Distribution All suppliers and distributors who handle a product contribute to a value delivery network where firms must each play an important role to the distribution of the product What is a distribution channel? o A set of interdependent organizations that help make a product or service available for use or consumption by the consumer of business user What is a value delivery network? o A VDN is made up of the company, suppliers, distributions, and ultimately customers who partner with each other to improve the performance of the entire system. (Supply chain and marketing channel) What is direct distribution? o Manufacturer builds product and has relationship with customer. EX: Dell selling computers to people What is multi channel distribution- Fossil to web, fossil store, macys, and outlets o Distribution system in which a single firm sets up two or more marketing channels to reach one or more intermediary levels What is disintermediation? o The cutting off of marketing channel intermediaries by product or service procedure or the displacement of traditional resellers by radical new types of intermediaries. Ex: Netflix and blockbuster What is reintermediaiton? o Bringing in more channels to sell things Intensive distribution (multi channel on steroids)- wherever consumer wants to buy me I should be EX: consumer goods, Kraft P&G Coke Exclusive distribution- places that sell luxury goods (Products with high info needs) Tessla, Rolex Selective distribution- make different levels of products for price value and high end profit products Distribution metrics o Numeric distribution Stores our brand in 10- how many stores in town? 100 10/100 = 10% o All commodity volume Total $ sales of stores carrying our brand/total $ sales of outlets available o Price category volume Total category $ sales of stores carrying our brand/ total $ category sales of outlets available Supply Chain Management o Managing the VDN to create customer value Communication integration Virtual companies Tech RFID GPS Distribution channels may include o Wholesalers- manufacturing to retail stores o Brokers or agents- reduce friction within the channel (Faciltate interaction between buyer and seller) o Retailers-front end of channel o Etc Converted Distribution Channel o Producer > wholesaler > retailer> Consumer VDN o Supplier>supplier>Retailer>Consumer VDN’s o Tend to be dominated by one link o Power shifted towards the activity that owns customer o Vastly different power relationships are dangerous for weak partners Direct vs. indirect o Direct- manufacturer straight to consumer o Indirect- anything else Intermediaries- someone between marketer and consumer Chapter 10 Retailing- all the activities involved in selling goods or services directly to the final consumers for their personal, nonbusiness use Retailers- a business whose sales come primarily from retailing Shopper marketing- using point of sale promotions and advertising to extend brand quality to the “last mile” and encourage favorable in store purchase decisions Specialty store- a retail store that carries a narrow product line with a deep assortment within that line Department store- a retail store that carries a wide variety of product lines, each operated as a separate department managed by specialist buyers or merchandisers Supermarket- a large, low-cost, low margin, high volume, self- service store that carries a wide variety of grocery and household products Convenience store- a small store that carry a limited line of high turnover convenience goods Superstore- a store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, non food items, and services Category killer- a giant specialty store that carries a very deep assortment of a particular line Service retailer- a retailer whose product line is actually a service; includes hotels, airlines, banks, colleges, and others Discount store- a retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume Off-price retailer- a retailer that buys at less-than regular whole sale prices and sells at less than retail Independent off-price retailer- an off-price retailer that is either independently owned and run or is a division of a larger retail corporation Factory outlet- an off-price retailing operation that Is owned and operated by a manufacturer and normally carries the manufacturer’s surplus, discontinued, or irregular goals Warehouse club- an off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing, and other goods at deep discounts to member so pay annual fees Wheel-of-retailing concept- a concept that suggests new type of retailers usually begin as low-margin, low-price, low status operations but later evolve into higher priced, higher-service operations eventually becoming like the conventional retailers they replaced Wholesaling- includes all the activities in selling goods and service to those buying them for resale or business use Wholesalers- firms engaged in primarily wholesaling activities Merchant wholesaler- an independently owned wholesale business that takes title to the merchandise it handles Broker- a wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation Agent- a wholesaler who represents buyers or sellers on a relatively permanent basis, performing only a few functions, and does not take title to goods. Manufacturers sales branches and offices- wholesaling by sellers or buyers themselves rather than through independent wholesalers Reading 8: IMC Idea in brief o Persuading through interruption and repetition is a bad idea o Context matter o Spheres of human experience Public sphere- what public is doing Social sphere- who you’re connected to Tribal sphere Psychological sphere- state of mind Class 19 What is retail? o Taking bigger chunks and reducing it o The sale of commodities of goods or services in small quantities to ultimate consumers Chili’s gets large chunks of food and sells it so it is a retailer Banks take large loans and mark it up to customers making it a retailer Hypermarket- known through Europe, like Wal-Mart, had groceries and other products at low prices Specialty retailer- focus on narrow consumer niche Department store- traditional form, macy’s and Nordstrom Discounter- k-mart and Wal-Mart Off-price retailer- buy clothes and inventory and sell it for a better deal like TJ Maxx Category killer- pet smart, best buy, etc Evolution of retail o Lazarus> Wal-Mart > Big Box retailer like Toys R US, Best Buy, Dicks >Macy’s and department store consolidation> now the internet What are dark assets now used in retailing? o Things people didn’t think of using when selling things such as video, internet, mobile wi-fi, self-monitoring skills with RFID monitoring, trends, behavior, engaging staff with headphones etc, loyalty data What is retail convergence and why is it significant? o Stores expanding into one or more categories of stores. Is target a discounter or grocer? Pop-up shops- small stores to help get name out and going in new marker Show-rooming- cant buy product at store, but you can try it on and order it to your house Clicks and mortar- amazon is opening a physical store Speed- technology is helping, ability to be faster to get goods moved etc. Managing VDN to create customer value o Communication integration o Virtual companies o Tech RFID GPS o Enormous opportunity for financial gain Warby: a new way to distribute eyewear o The problem Glasses are expensive because there are only a small number of frame suppliers and the distribution of prescriptive lens is tightly controlled. Only 2 suppliers or companies o Solution Develop direct relationships with frame producers in China Go around the doctors and straight to lens producing labs Create a store for everyone- the web Deploy innovative customer engagement mechanisms to reduce barrier trial o How? Online try on tool Home-try on Excellent customer support o What does consumer get? Right product Well priced because expensive elements of VDN Are eliminated Ability to increase purchase frequency for personal style Chapter 11 Global firm- one that, by operating in more than one country gains marketing, production, R&D, and financial advantages that are not available to purely domestic competitors Substitute economies- the vast majority of people engage in simple agriculture. Consume most of output and barter for simple goods and services Raw material exporting economies- these economies are rich in one or more natural resources but poor in other ways Emerging economies- fast growth in manufacturing results in rapid overall economies growth. (BRIC Countries) Industrial economies- major exporters of manufactured goods, services, and investment funds. Trade among themselves and export them to other economies for raw materials and semi-finished goods Exporting- entering foreign markets by selling goods produced in the company’s home country often with little modification Joint venturing- entering foreign markets by joining with foreign companies to produce or market a product or service Licensing- entering foreign markets through developing an agreement with a license in the foreign market Contract manufacturing- a joint venture in which a company contracts with manufacturers in a foreign market to produce the product or provide the service Management contracting- a joint venture in which the domestic firm supplies the management know-how to a foreign company that supplies the capital; the domestic firm exports management services rather than products Joint ownership- a cooperative venture in which a company creates a local business with investors in a foreign market, who share ownership and control Direct investment- entering a foreign market by developing foreign- based assembly or manufacturing facilities Standard global marketing- an international marketing strategy that basically uses the same marketing strategy and mix in all of the company’s international markets Adapted global marketing- an international marketing approach that adjusts the marketing strategy and mix elements to each international target market, which creates more costs buy hopefully produces a larger market share and return Straight-product extension- marketing a product in a foreign market without making any changes to the product Product adaptation- adapting a product to meet local conditions or wants in a foreign market Product invention- creating new products or services for foreign markets Communication adaptation- a global communication strategy of fully adapting advertising messages to local markets Whole-channel view- designing international channels that take into account the entire global supply chain and marketing channel, forging an effective global value delivery network Class 20: Global Marketing Key factors that differentiate marketing globally or the environment o Economic Environment- the different economies of target countries Subsistence- the vast majority of people engage in simple agriculture. Consume most of output and barter for simple goods and services Raw material and exporting- these economies are rich in one or more natural resources but poor in other ways Emerging- fast growth in manufacturing results in rapid overall economies growth. (BRIC Countries) Industrial- major exporters of manufactured goods, services, and investment funds. Trade among themselves and export them to other economies for raw materials and semi-finished goods o Political-legal environment Consider factors such as the country’s attitude toward international buying, Gov. bureaucracy, political stability, and monetary regulations o Cultural environment- Understand how culture affects consumers reacting in each of its markets. Each country has its own folkways, norms, and taboos. Market Entry Strategies o Exporting- Indirect- using agents or intermediaries Direct- where the company has the risk of getting goods to country o Joint venture- Find a partner that works together to enter market. Key is finding right partner o Licensing- Rights to produce under a brand and or know how to produce a product. Having the right partner is essential. Typically longer term arrangement governed by license contract o Management contracting- hotel or food service What are risk factors for each above? Risk is enhanced through stages- exporting>joint>direct investment o Exporting- least risky, indirect- agent o Joint- licensing, contract manufacturing, joint ownership, management contracting o Direct investment- assembly facility, manufacturing, sales offices Standardized- use the same mix if you go into international market (Heineken or Starbucks) Localized-adjust the market strategy and mix elements to each international market (Ford or Nokia) Straight extension- marketing a product in a foreign market without making changes (Heineken or L’Oreal) Product adaption- adopting a product to meet local conditions or wants in foreign markets (Nokia or Micky DS) Promotion adaptation- changing promotions of product to meet want or needs in international markets (Drakkar Noir) Dual adaptation- Modifying product and promotion to fit needs or wants of international markets (Soft drinks, clothing) Reading 9 How Global Brand Compete Think in cultural terms- People are forced to see themselves in relation to other cultures as well as their own. All cultures participate in a shared conversation of national brands. Consumers ascribe certain characteristics to global brands and use those attributes as criteria while making purchase decisions. Dimensions of global brands- Consumers all over the world associate global brands with 3 characteristics (Quality Signal, Global Myth, and social responsibility) o Quality signal- People think of brands being quality if people all over the world buy it o Global myth- Global myths are created in all industries now from information tech to oil. Myths make people feel a part of something bigger o Social responsibility- People expect companies to address social problems linked to what they sell and how they conduct business Global consumer segments- 4 segments o Global citizens- relies on global success of a company as a signal of quality and innovation. Care if companies behave responsibly on consumer health, environment, and workers rights o Global dreamers- See global brands as quality products and buy into myths. o Antiglobals- Dislike companies that preach American values and dons trust global companies to behave responsibly o Global agnostics- Evaluate a global product by the same criteria they use to judge a local brand and don’t consider global approach Opportunities- Global brands compete with other global brands. Must strive for superiority on basics like price, performance, features, and imagery; at the same time, they must learn to manage brand’s global characteristics. Global marketing o Since 2003, global trade has grown 6 to 11% annually. While global FDP has only increased 2.5 to 5%. o China accounted for 25% of global exports o Few industries are now same from international competition Governing Global Trade o International trade is governed by the WTO which enforces GATT (General Agreement on Tariffs and Trade) o Regional agreements like NAFTA and the EU Protectionism o Tariffs or duties vs. Embargoes o Quotas- certain number allowed in o Non-tariff barriers Bureaucracy Product content rue Environmental laws Doing Business Internationally o Yes or No? o Where? o How- export, joint, direct investment? o Strategy? Standardized or localized Global Marketing Operations o Firms can export products to new markets o Firms can use international markets to improve their market offering Outsource customer service (AT&T) Lower cost manufacturing (GAP) Expertise and development (Lenovo) Culture affects preferences o Language- literal translation o Sizes o Taste preferences o Communication tools o Mores and traditons o Political environment Something better than others: Watches o Low shipping cost relative to value o No sizing o Culturally homogenous o Unique sourcing o Lack of local suppliers o Below political radar
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