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International Strategy: The Four Ps

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Due to the fact that nations' cultures has the biggest affect on global ... example of IKEA. To avoid SRC the following questions are to be asked ... – PowerPoint PPT presentation

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Title: International Strategy: The Four Ps


1
Chapter 5-
  • International Strategy The Four Ps

2
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

3
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?

4
  • 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?

5
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.

6
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.

7
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.

8
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.

9
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.

10
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.

11
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.

12
PRODUCT/SERVICE STRATEGY THREE 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.

13
  • 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.

14
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.

15
  • 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.

16
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

17
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).

18
  • 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.

19
  • 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.

20
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

21
  • These alternatives are not mutually exclusive
    several may be employed at the same time.

22
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.

23
  • 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.

24
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.

25
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.

26
  • 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.

27
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.

28
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.

29
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.

30
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

31
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.

32
  • 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.

33
Why International Promotional strategies Fail?
  • Insufficient Research
  • Overstandardization
  • Poor Follow-up
  • Narrow Vision
  • Rigid Implementation

34
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

35
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