International Strategy: The Four Ps

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Chapter 5-

• International Strategy The Four Ps

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Introduction

• Due to the fact that nations cultures has the
  biggest affect on global standardization, a need
  for international Strategy of the Four Ps is
  crucial.
• International Product/Service Strategy
• International Place/Entry Strategy
• International Price Strategy
• International Promotion Strategy

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Issue of Unconscious reference to ones own
culture

• Self-reference criterion (SRC)
• example of IKEA
• To avoid SRC the following questions are to be
  asked
• In what ways are the targeted foreign buyers
  similar to or different from domestic buyers?
• What are the values of the people in the foreign
  market?

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• What changes in the product services need to be
  made to meet the foreign customers needs?
• What are the signals that indicate change in the
  market?
• Does the market accept foreign ideas?
• Are there cross-cultural trends?
• How can the firm increase market share?
• How much disposable income do consumers have?

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PRODUCT/SERVICE STRATEGY CUSTOMIZATION vs
STANDARDIZATION

• Market the same product or service everywhere
  (standardization)
• Adapt the product or service for foreign markets
  (customization)
• Develop a totally new product or service
• In developing product/service strategy,
  international managers need to be concerned with
  the look and performance of a product.

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FIVE APROACHES OF PRODUCT/SERVICE STRATEGY

• Standardize product (service) and standardize
  message
• Standardize product (service) but customize
  message
• Customize product (service) but standardize
  message
• Customize product (service) and customize message
• Entirely different product or service
• International Managers must determine whether
  their product or service can be sold in standard
  form or if it must be customized to fit differing
  foreign market needs.

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Viable alternatives when entering a foreign
market

• Standardization is marketing the same product or
  service everywhere
• Customization is adapting the product or service
  for foreign markets
• New product or service development for a foreign
  market.
• The combination of these three alternatives with
  promotional efforts, the following strategies can
  be developed.

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Standardize product/Standardize message Strategy

• This is a strategy whereby the same product and
  message used for the home market is viable in the
  foreign market or globally.
• Coca-Cola, Pepsi-Cola, Avon are examples of
  global products that need little or no
  customization.

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Standardize product/Customize message Strategy

• This is a strategy whereby the same product sold
  at home market is also sold at foreign market
  with the exception of message.
• Promotional message is customize to reflect the
  economic, social and cultural norm of the country
  where the product is being marketed.

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Customize product/Standardize message strategy

• A company does not generally realize high profits
  right away when it introduces a brand new product
  in a foreign market without undergoing diffusion
  process.
• If a company changes the products form to meet
  the needs of a specific market, but promotes the
  same use as it does in the domestic market, it is
  sending a message of customize/standardize
  Product strategy.

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Customize product/Customize message strategy

• This strategy is meant to differentiate both the
  product and the message to fit the needs of the
  users in the foreign country.
• It is sometimes take some efforts to diffuse new
  product/service in some cultures.
• Generally, the more disruptive the innovation is,
  the longer the diffusion process will take.
  Diffusion of new products or services is also
  affected by technological structure of the
  country.

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PRODUCT/SERVICE STRATEGYTHREE TYPES OF SERVICES

• People Processing Services
• Customers become part of the production process.
  Such as passenger transportation, health care,
  food services, and lodging services.
• Possession-Processing Services
• Services of this nature involve tangible actions
  to tangible objects to enhance their value to
  customers. Such as transporting freight,
  installing equipment, and maintenance.

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• Information-Based Services
• The provision of these services involves
  collecting,manipulating, interpreting, and
  transmitting data to create value. Such as
  accounting, banking, consulting, education,
  insurance, legal services, and news.

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Technological structure of a country

• Use of current information technology such as the
  Internet, may enable businesses to benefit from
  favorable labor costs or exchange rates by
  consolidating operations of supplementary
  services (such as reservations) or certain office
  functions (such as accounting) in just one or a
  few countries.

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• A dualistic technological structure of a country
  is the simultaneous existence of a modern
  industrial sector and a sector which is involved
  in a traditional agrarian and craft production.
• An international manager should be aware of this
  dualism and the necessities at time.

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PRODUCT/SERVICE STRATEGY DIFFUSING INNOVATIONS

• Definition The process by which innovation is
  communicated through certain channels over time
  among members.
• Quick diffusion in a culture
• Types of innovations congruent, continuous,
  dynamically continuous, and discontinuous
  innovations
• Dualistic technological Structures IT refers to
  the simultaneous existence of a modern industrial
  sector and a traditional sector involved in
  agrarian and craft production.
• Adaptive transformative innovation
• Transformative technological innovations

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International Place/Entry strategy

• Manufacturing Enterprise
• Manufacturing the product at home and exporting
  it to the foreign country for distribution in the
  local (host) market.
• Manufacturing parts at home and exporting them to
  then foreign country (for assembly), for
  distribution in the local market, and/or for
  export to other markets (including back to the
  home market).
• Manufacturing the product in the foreign country
  for distribution the local market and/or for
  export to other markets (including back to the
  home market).

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• Service Enterprises
• Some, such as consulting companies, can provide
  the services from their home country or they can
  set up subsidiaries in the foreign country.
• Others, such as insurance and baking companies,
  generally must establish subsidiaries in the
  foreign country.

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• For a multinational corporation, or a company
  considering entry into the international arena, a
  more specific set of strategic alternatives,
  often varying by targeted country, focuses on
  different ways to enter a foreign market.
• Managers need to consider how potential new
  markets may best be served by their company in
  light of the risks and the critical environmental
  factors associated with their entry strategies.

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Various entry and ownership strategies

• The various entry and ownership strategies
  available to firms include
• Exporting Strategy
• Indirect Exporting
• Direct Exporting
• Manufacturing in Foreign Country Strategy
• Licensing/Franchising
• Management Contracts
• Joint Ventures/Contractual Alliances
• Wholly Owned Subsidiaries

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• These alternatives are not mutually exclusive
  several may be employed at the same time.

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Exporting -Indirect Vs Direct

• Exporting is a relatively low-risk way to begin
  international expansion or to test out an
  overseas market. Little investment is involved,
  and fast withdrawal is relatively easy.
• Indirect exporting is the most logical entry
  strategy when a domestic company decides to
  internationalize its operations.
• Indirect exporting is when a company other than
  the owner of the products export goods to another
  country. It less risky than direct exporting.

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• Direct exporting With Direct Exporting, a company
  is directly responsible and involved with
  exporting its goods to other countries.
• An advantage of direct exporting is that the
  staff has greater knowledge of the product line
  of the firm than an indirect exporter.

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Licensing

• An international licensing agreement grants the
  rights to a firm in the host country to either
  produce or sell a product, or both.
• This agreement involves the transfer of rights to
  patents, trademarks, or technology for a
  specified period of time in return for a fee paid
  by the licensee.
• Anheuser-Busch, for instance, has granted
  licenses to produce and market Budweiser beer in
  England, Japan, Australia, and Israel.

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Franchising

• Similar to licensing, franchising involves
  relatively little risk.
• Franchising entry strategy is when a company
  internationalizes its operation by granting a
  foreign company permission to use a certain
  product and incorporates a set of procedures for
  making the product.
• Franchises are well known in the domestic fast
  food industry McDonalds for example, operates
  primarily on this basis.

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• For a large up-front fee and considerable royalty
  payments, the franchisee gets the benefit of
  McDonalds reputation, existing clientele,
  marketing clout, and management expertise.
• The big M is well recognized internationally,
  as are many other fast-food and hotel franchises
  such as Holiday Inn.

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Strategic alliance

• A strategic alliance is a viable entry mode for a
  company which has decided to internationalize its
  operations and whose managers lack international
  experience.
• Joint ventures are one form of strategic global
  alliance. It involves agreement by two or more
  companies to produce a product or service
  together.

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Other forms of strategic alliances

• Other forms of strategic alliances may be based
  on contributions other than financial ones, a
  firms technology, for example, in return for a
  foreign partners manufacturing capacity, access
  to low-cost labor, and marketing channels.

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International Price Strategy

• International pricing relates to the managerial
  decision of what to charge for goods produced in
  one nation and sold in another.
• In international pricing, a firm must develop
  strong international money management skills
  because fluctuating exchange rates force periodic
  adjustments in price.

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Advantages of international pricing method

• Some Multinational corporations use the
  international pricing method to avoid high local
  taxes, mandates to increase local wages, local
  mandates to lower prices and getting around
  currency restrictions.
• Fluctuating Exchange Rates and Costs
• Countertrade
• Barter
• Compensation
• Switch
• Counterpurchase

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International Promotion Strategy

• Advertising indicates attitudes, beliefs, images,
  symbols, and presence. Most of these are
  intimately tied together by culture, and
  marketers err when they make mistakes about
  global similarities and real national
  differences.
• France and the US, while sharing a common western
  civilization, differ in their visual print and TV
  ads as they reflect the old world and new world
  respectively.

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• Todays advertising signals tell us to combine
  global commitment with local vision and to make
  promotion appeals compatible with international
  and national life styles.
• Global marketing firms need to scan the
  environment for advertising signals i.e. purchase
  behavior or brand opinion based on cultural
  attitudes, purchase situations or brand
  associations tied to I symbols - unitarianizm,
  country of origin, for opportunities in the
  global promotions arena.

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Why International Promotional strategies Fail?

• Insufficient Research
• Overstandardization
• Poor Follow-up
• Narrow Vision
• Rigid Implementation

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Developing an Effective International Promotional
Strategy

• the promotional mix
• the extent of worldwide promotional
  standardization
• the most effective message
• the most effective medium
• the necessary controls

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