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For managers selling capital equipment and big-ticket industrial services, understanding the concept of derived demand, which can be defined as demand dependent on another source, is important.
· Ex) The demand for Boeing 747s is derived from the worldwide consumer demand for air travel services.
Airbus and Boeing competed for the new account.
· The Boeing plane was more expensive.
· Boeing 777 watch pitched as a revenue machine.
· Iberia decided to choose Airbus’s A340-600s.
· Boeing posted on its Website a statement that criticized Iberia’s decision.
· Airbus nosed ahead thanks to its planes’ lower price and common design.
· By offering guarantees on the planes’ future value and maintenance costs, plus attractive financing terms, Airbus edged out Boeing’s aggressive package.
· Iberia’s news release crowed about Airbus’s price guarantees on the planes—a detail Leahy considered confidential.
The study revealed that consumers use relatively few types of thoughts when discussing products made in various countries (product brand, positive quality, negative quality, high price, low price, and Fashion/style/craftsmanship) and the depth of consumers’ cognitive structures (beliefs, myths, etc.) varies greatly from country to country.
· Cognitive structures most developed in the United States. Rich cognitive structures exist for Japanese products. Cognitive structures for Russian products are product- specific, for example Vodka. Products from Japan hold a quality of uniqueness.
· In-depth personal interviews identified respondents’ knowledge, beliefs, myths, and other relevant cognitions related to a diverse set of 11 countries and their products
· The article introduces the concept of country equity as a new way of thinking about global brands and discusses managerial implications related thereto.
process includes the physical handling and distribution of goods, the passage of ownership (title), and the buying and selling negotiations between producers and middlemen and between middlemen and customers.
· always evolving and new patterns are developing and marketing channels are not the same throughout the world.
1. Middlemen Services
2. Product Line Breadth
3. Costs and Margins
4. Channel Length
5. Nonexistent Channels
6. Blocked Channels
8. Power and Competition
1. Channel control by manufacturers,
2. A business philosophy shaped by a unique culture, and
3. Laws that protect the foundation of the system—the small retailer
4. A structure dominated by many small middlemen dealing with many small retailers—high density of middlemen
1. Inventory financing with credits extending for several months.
2. Cumulative rebates
3. Merchandise returns that are allowed to the manufacturer.
4. Promotional support to intermediaries in the form of displays, advertising layouts, and management education programs.
1. Culture-The Web site and the product must be culturally neutral or adapted to fit the uniqueness of the market.
2. Adaptation (especially language)-A Web site should be translated into the languages of the target markets.
3. Local contact information-Companies fully committed to foreign markets are creating virtual offices abroad.
4. Payment form-The consumer should be able to use a credit card number—by email, by fax, or over the phone.
5. Delivery-Postal delivery can be used in the United States. For more rapid but more expensive deliveries, FedEx, UPS, and other private delivery services provide delivery worldwide.
6. Promotion-You need to advertise your presence and the products or services offered.
· The internet is an important distribution method for multinational companies.
· One of the most challenging aspects of Web sales is delivery of goods.
· It involves the direct marketing from a manufacturer, retailer, service provider, or some other intermediary to a final user.
· It is a form of direct selling; however, because of its newness and the unique issues associated with this form of distribution, it is important to differentiate it from other types of direct marketing.
· It reduces procurement costs by making it easier to find the cheapest supplier, it allows better supply chain management, and it makes possible tighter inventory control.
1. Screening based on the following: reputation, creditworthiness, markets served, products carried, number of stores, store size
2. the agreement that details terms of the contract and the functions to be performed on behalf of the foreign manufacturer
Merchant middlemen buy low and sell high. An agent works for commission and the buyer and seller work together. Agent middlemen arrange sales in the foreign country but do not take title to the merchandise. Merchant middlemen actually take title to manufacturers’ gods and assume the trading risks, so they tend to be less controllable. Merchant middlemen are criticized for not representing the best interests of the manufacturer.
· Home country middlemen are located in the producing firm’s country and provide marketing services from a domestic base.
Leaving the exporting country
3. Physical distribution---international shipping and logistics, packing, insurance
· Entering the importing country
1. Tariffs, taxes
2. Nontariff barriers
· Three barriers to exporting that face even the most enthusiastic international traders: managerial, organizational, and external.
· Export regulations may be designed to conserve scarce goods for home consumption or to control the flow of strategic goods to actual or potential enemies. Import regulations may be imposed to protect health, conserve foreign exchange, etc.
· The US requires no formal or special license to engage in exporting as a business, permission or a license to export may be required for certain commodities and certain destinations.
Products exported from the US require a general or a validated export license, depending on the product, where it is going, the end use, and the final user.
· The responsibility of determining if a license is required rests with the exporter. The exporter must select the proper classification number known as the Export Control Classification Number (ECCN), the exporter must decide from the Commercial Control List (CCL) if the items have end use restrictions, the exporter is responsible for determining the ultimate end customer, and the exporter is responsible for using the Commerce Country Chary (CCC) to see if a license to export is needed.
· The exporter must establish that the end user is not listed in the List of Denied Persons.
The inflow of raw material, parts, and supplies through the firm
· The foreign freight forwarder arranges for the shipment of goods as the agent for an exporter. The forwarder is an indispensable agent for an exporting firm that cannot afford an in-house specialist to handle paperwork and other export trade mechanics.
· The forwarder is an indispensable agent for an exporting firm that cannot afford an in-house specialist to handle paperwork and other export trade mechanics.
· A freight forwarder double-checks all assumptions made on the export declaration, such as commodity classifications, and will check the list of denied parties and end uses
The movement of the firm’s finished products to its customers, consisting of transportation, warehousing, inventory, customer service/order entry, and administration.
· the achievement of the optimum system cost consistent with customer service objectives of the firm.
It is the coordinated transport of freight using multiple methods of transportation (air, inland, water, ocean, pipeline, rail, and road).
· Airfreight has shown the fastest growth rate for freight transportation even though it accounts for only a fraction of total international shipments. Ocean shipping is least expensive for heavy bulk items. It is also the most frequently used for these items.
A relationship between a shipper and third party which, compared with basic services, has more customized offerings, encompasses a broader number of service functions and is characterized by a longer-term, more mutually beneficial relationship
the largest sector is the value-added warehousing and distribution industry
EX: UPs that can process and store inventory and then ship it withing two hours to the precise plant location where it is needed
1. Perform marketing research
2. Specify the goals of the communication
3. Develop the most effective message(s) for the market segments selected
4. Select effective media
5. Compose and secure a budget based on what is required to meet goals
6. Execute the campaign
7. Evaluate the campaign relative to the goals specified
is one of the most critical and complex issues in global marketing.
The more control a company has over the final selling price of a product, the better it is able to achieve its marketing goals
2. Variable-Cost Pricing: firms regard foreign sales as bonus sales and assume that any return over their variable cost makes a contribution to net profit
3. Skimming Pricing: This is used to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for a product
4. Penetration Pricing: This is used to stimulate market growth and capture market share by deliberately offering products at low prices
causes consumer prices to escalate and the consumer is faced with rising prices that eventually exclude many consumers from the market
swing vis-à-vis other currencies on a daily basis, which may make it necessary to increase prices
Countertrade is a pricing tool that every international marketer must be ready to employ
-counter purchase/off set trade
1. Letters of Credit---most common; know who issues and how you are going to get paid
2. Bills of Exchange
3. Cash in Advance---usually a sign for being ripped off
4. Open Accounts
Custom-privileged facilities include:
1. Foreign trade zones (also known as free trade zones)
2. Free ports
3. In-bond arrangements or Maquliadoras
Maquilladoras/ In-bond/twin plant
· Mexico permits 100 percent foreign ownership of the maquiladora plants in the designated maquiladora zone (65 miles N & S of the border).
· Most of the maquiladora plants are located along the U.S.-Mexico border, such as Tijuana across from San Diego, Ciudad Juarez across from El Paso, and Nuevo Laredo across from Laredo. Other cities include Monterrey, Mexico City, and Guadalajara.
· Mexico is an attractive location for labor-intensive assembly because of cheaper labor.
· Under NAFTA regulations, local content requirements have encouraged companies to move their operations to Mexico.
Mexico allows duty-free imports of machinery and equipment for manufacturing as well as components for further processing and assembly, as long as 80 percent of the plant’s output is exported.
Regional variations in costs
Transportation 2.79% 3.23%
Warehousing 3.03 1.98
Inventory 1.73 1.93
Customer Svc. /Order Entry
Administration 0.79 0.44
Total 9.17% 8.07%
Proctor and Gamble
General Motors Corp.
Ford Motor Co.
Toyota Motor Co.
AOL Time Warner
Criteria for successful negotiators
4 Stages of Negotiation Process:
Aids Pricing Case
· The price of a one-year supply of drugs for AIDS can run as high as $10,000 which are far beyond the prices that many AIDS victims in underdeveloped countries are able to pay
· Merck and four other major companies announced an agreement to cut drug prices in developing countries by as much as 85 to 90 percent compared to prices in the U.S.
· Elements in the fight against AIDS: pricing, strict daily regiments, cutting prices in underdeveloped countries puts pressure to cut in developed, cheaper drugs falling into the black market, threat from manufacturers of low-priced generic AIDS drugs (India)
Goals consumers vs. businesses
import regulations may be imposed to protect health, conserve foreign exchange, serve as economic reprisals, protect home industry, or provide revenue in the form of tariffs
Key research findings of COO effects:
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