CHAPTER 14Chapter ObjectivesI. Target Market SelectionCHAPTER 14MARKETINGChapter Objectives To suggest how markets for international expansion can be selected, their demand assessed, and appropriatestrategies for their development devised To describe how environmental differences generate new challenges for the international marketingmanager To compare and contrast the merits of standardization versus localization strategies for country markets andof regional versus global marketing efforts To discuss market-specific and global challenges facing the marketing functions: product, price,distribution, and promotion within both the traditional and e-business dimensionsOpening CaseBeing a Good Sport GloballySummary:This case describes how Coca-Cola spends $1 billion annually on sports sponsorships. Major events sponsored include the Olympics, World Cup (Soccer), Basketball (NBA, WNBA), NFL, NHL, and others.Chapter OutlineI. TARGET MARKET SELECTIONA. Identification and Screening (Figure 14.1, page 472)1. Preliminary Screeninga. Secondary datab. Product-specific factorsc. Industry-specific factorsd. Country-specific factors2. Estimating Market potential—sales available to all firms in industrya. Income elasticity of demand—the relationship between demand and economic progressb. Market audit—adds together local production and imports with exports deductedfrom the totalc. Analogy—uses proxy variables that correspond to demand for the productd. Longitudinal analysis—may be needed if there is a time lag between correlatese. Surveysf. Difference between potential sales and real sales detected by a gap analysis3. Estimating Sales Potential—the share of the market potential a firm can expect considering—a. Competitionb. Market—strength of barriersc. Consumers’ ability and willingness to buyd. Product—advantage, compatibility, complexity, trialability, and communicability4. Identifying segmentsB. Concentration versus Diversification1. Expansion Alternativesa. Concentration—small number of marketsb. Diversification—large number of markets2. Factors Affecting Expansion Strategya. Market-related factors1) Sales forecast2) Uniqueness of offering3) Spillover effects4) Government constraintsb. Mix-Related Factors—degree to which marketing mix can be standardizedc. Company-Related Factors—objectives of companyII. Marketing ManagementA. Standardization versus Adaptation1. No special provisions for international marketplace2. Adapt to local conditions in each and every target market (multidomestic)3. Incorporate differences into a regional or global strategy allowing for local implementation differences (globalization)4. Factors Affecting Adaptationa. Markets targetedb. The product and its characteristicsc. Company characteristicsB. Product Policy (Adaptation to foreign markets)1. Factors in Product Adaptation (Figure 14.2, page 480)a. Regional, Country or Local Characteristics1) Government regulations2) Nontariff barriers3) Customer characteristics, expectations, and preferences4) Purchase patterns5) Economic status of potential users6) Stage of economic development7) Competitive offerings8) Climate and geographyb. Product Characteristics1) Product constituents2) Brand3) Packaging4) Physical form or appearance5) Functions, attributes, features6) Method of operation or usage7) Durability, quality8) Ease of installation9) Maintenance, after-sale service10) Country of originc. Company Characteristics1) Profitability2) Market opportunity3) Cost of adapting policies4) Organization5) Resources 2. Product Line Managementa. Must manage local, regional and global brandsb. New-product ideas from domestic and other marketsc. Company must be sensitive to local requirements and tastes3. Product Counterfeitinga. Goods bearing an unauthorized representation of a trademark, patented invention, or copyrighted workb. Actions to combat counterfeiting1) Legislation2) Negotiations3) Joint private sector action4) Measures taken by individual firmsC. Pricing Policy1. Export Pricinga. Standard worldwide pricing—based on average unit costs of fixed, variable, andexport-related costsb. Dual pricing—one price domestically and another for export1) Cost-plus method2) Marginal cost methodc. Market-differentiated pricing—based on demand and competitive forcesd. Price escalation occurs due to extra cost of exportinge. Dumping—selling goods overseas for less than domestically1) Predatory dumping—to increase market share2) Unintentional dumping—due to time lags between date of sales transactions, shipment, and arrival2. Foreign Market Pricing—pricing within individual markets as determined by—a. Corporate objectivesb. Costsc. Customer behavior and market conditionsd. Market structuree. Environmental constraints3. Price Coordinationa. Define maximum and minimum prices a country organization within an economic union can chargeb. Gray markets/parallel importation—brand-name imports entering a country legally but outside regular, authorized distribution channels4. Transfer Pricing—intracompany pricing of sales to members of the corporate familya. Transfer at direct costb. Transfer at direct cost plus additional expensesc. Transfer at a price derived from end-market pricesd. Transfer at an arm’s length price—the price that unrelated parties would have reached on the same transactionD. Distribution Policy1. Channel Design—length and width of the channela. Customers—what they need and why, when, and how they buyb. Culture of a marketc. Competition—may use only existing system and company must use it better or create new channeld. Company objectivese. Character of the goodf. Capital—the financial requirements in setting up a channel systemg. Cost—expenditure incurred in maintaining a channelh. Coverage—number of areas covered and quality of representationi. Control—the use of intermediaries will automatically lead to loss of some control over the marketingj. Continuity—of the relationship must be maintainedk. Communication 1) About goals2) Solve conflicts3) Aid in marketing2. Selection and Screening of Intermediariesa. Sources to assist include governmental agenciesb. Private sources to assist1) Trade directories2) Telephone directories3) Facilitating agenciesc. Intermediaries can be screened1) By performance2) By professionalism3) By financial standing4) By sales3. Managing the Channel Relationshipa. Must have open