QUESTION 1 (Chapter 16 effective international distribution)
I am preparing for exam and I need explanation and examples of :
Global Distribution Issues GREY MARKETS
Involves unauthorized distributors that circumvent authorized channel arrangements by buying the firms products in low price countries and selling them in high price countries at lower prices.
Takes Three forms :
Parallel Importation ) explanation and
Re-importation ) give
Lateral importation ) examples
Examples of Grey markets
Parallel Importation
Sony/BMG A Singapore
Sony/BMG X Singapore (Small shop)
Export product (CD) to an existing export markets (Singapore) by a party X other than the one authorized by the manufacturer A.
A cost in Singapore: $25; X cost in China: $5. X sells in Singapore for $20.
Re importation
Sony/BMG A Singapore
USA X
Importing the product back into the home market (USA) by unauthorized party X.
A cost in Singapore: $25; X cost in China: $15. X sells in USA for $20
Lateral imporation
European manufacturer A USA (dearer)
European manufacturer B Canada (cheaper)
European manufacturer Generic-RX.net (Bahamas) USA (cheaper)
Lateral importation
Moving a product from one overseas market to another e.g., prescription drugs made in Europe are sold cheaper in Canada than USA (30% – 50% cheaper). Those living near Canada border drive to Canada to buy their medicine. Recently Canadian firm, Canada Generic-RX.net set up warehouse in Freeport in the Bahamas, buys European drugs, ships at lower prices directly to USA, bypassing traditional intermediaries.
QUESTION 2 (Chapter 12- Modifiying products for international markets)
A product is a collection of attributes – physical, service or symbolic – which yield satisfaction to the buyer or end user. Products can be classified based on their local versus international appeal. Products can be conceptualized at five different levels or as consisting of five elements.
Product classifications:
Local products: potential in only one market.
International products: potential to be extended from domestic market to several overseas markets.
Multinational products: in many international markets but adapted to suit the needs of each market.
Global products: meets the needs of market segments that are the same the world over.
Five Product Elements
Core Product : benefit or service the customer is buying )
Basic Product: Item actually purchased and its functional features. )
Expected product: attributes the buyer expects to receive ) explanation and
Augmented product: items that exceed customer expectations ) give examples
Potential product: possible changes in the future )
Modifications required? )
Tag Heuer – Swiss watch maker since 1860.
Core benefit – fundamental benefit or service that the customer is really buying i.e, knowing time with reliability.
Basic Product – item actually purchased and its functional features i.e., time piece.
Expected product – attributes and conditions that the buyer expects to receive when purchasing the item i.e brand name, trademark, guarantee, quality style used in diverse situations – business formal, sports, diving, etc.
Augmented product – items that exceed customer expectation and may also involve installations, warranty, repair and maintenance, spare parts and credit facilities i.e., free maintenance for first year.
Potential product – possible augmentations and transformations that the product might undergo in the future i.e., make it a jewellery item by adding diamonds, make it more functional item by adding a computer and USB connections.
Modifying products: Adaptation
Discriminating customer markets: Variation in needs and tastes; Differing conditions for use; Variations in affordability; Influence of government; Legal requirements; Physical environment; Level of support systems.
Modifying product for overseas markets: Product standards and regulation; Measures; Trademarks; Climate and Usage; Language and symbolism; Style, design, taste; Technology issues and performance standards; Warranty and service issues.
QUESTION 3 (Chapter 4 – Avoiding the pitfalls of the international political and legal environment)
Political stability and risk ( BRICs and PIGs)
Parliamentary governments
Citizens interact via voting
Industrialised nations – parliamentary democracies
Absolutist governments
Dictate government policy without considering citizens opinions
Other governments
Most governments fall in between the two extremes
Some monarchies and dictatorships have parliamentary elections.
Government’s role in economy: Participator
The most extreme form of involvement is the state trading company (STC) which was a feature of communist governments.
Businesses need to establish the degree of government involvement
Potential areas of commercial activities undertaken by governments include:
State owned enterprises
Statutory marketing, authorities
The pace of privatization
Government’s role in economy: Facilitator
Governments facilitate at the macro level via national industry policies including :
National economic plan
Harnessing the resources of the private sector
The public sector
External sources through bilateral and multinational aid.
They can also facilitate international marketing at the micro level via:
Tax incentives
Subsidies
Concessional loans or grants
Government’s role in economy: Regulator
Government regulation involves:
Taxes in the domestic market:
Payroll tax
Road and haulage taxes
Inspection fees
Embargoes or boycotts on other countries
Sometimes approved by the UN
Sometimes imposed by one country alone
Detrimental to all countries involved
Controls on imports and exports
Nationalism and Marketing
Australian has the Australia Made campaign to encourage the purchase of local products.
Some international marketers perceive the nationalism inferred by the campaign as a potential threat to their imports.
Political Stability and RISK
Political stability refers to gradual and non violent change. )
Indicators of political instability: )
Degree of social unrest ) Explanation and
Frequency of changes in the regime ) give examples
Extent to which the country is divided culturally )
Religious division )
Linguistic diversity )
Sources of political instability
Political sovereignty: Government seeks to exert influence )
over foreign operations often through increases in taxes )
Political conflict: )
Turmoil – generally an unanticipated upheaval on a )
major scale e.g., military coup. )
Conspiracy – an instant planned act of aggression )
against those in power e.g., assassination ) Explanation and
Internal war – organized violence on a larger scale ) give examples
against a government )
Political intervention: occurs when government action )
forces the firm to change its strategies, policies or operations)
Expropriation – the official seizure of a foreigner’s )
Property supposedly in the public interest )
Domestication – a process in which control and )
restriction are designed to reduce the influence of )
the foreign firm on the company. )
Nature of Political Risk
Political risk varies from country to country and includes: )
General instability risk: revolutions, invasions )
Ownership risk: property, lives of expatriates ) Explanation and
Operating risk: interference in operations of the ) give examples
Company overseas )
Transfer risk: restrictions on repatriation of profits, )
Capital, dividends. )
Assessing risk: Jain’s 4 methods
The “grand tour” – send an executive team to gain first )
hand appraisal. )
The “old hand” – employ an expert on the country to )
give advice. ) Explanation and
Delphi technique – ask a group of experts on the country ) give examples
to share their opinions independently. )
Quantitative methods – )
discriminant analysis – a mathematical technique ) Explanation and
which uses quantifiable methods in order to predict ) give examples
the likelihood of certain events. )
QUESTION 4 (Chapter 3 – Catering for the cultural and social environment of international marketing)
Given the below chart, we are required to do a Cross-Cultural Comparisons. (explanation and examples)
Five underlying dimensions measure cultural differences across countries.
PDI -> Power Distance Index IDV-> Individualism
MAS-> Masculinity UAI-> Uncertainty Avoidance Index
LTO -> Long-Term Orientation
Low and High Context Cultures
Hofstede’s dimensions of cultural differences
Measuring culture on a global basis
Hofstede (1980) & Hoftstede & Bond (1988) (1991, 2001)
Five underlying dimensions measure cultural differences across countries.
Power Distance
Degree to which inequality is accepted
High in countries that let inequalities grow into inequalities of power and wealth.
Low in countries that play this down.
Uncertainty avoidance
Degree to which people feel threatened by uncertain or unknown situations.
High: places premium on job security, career patterns, rules, trust.
Low: greater willingness to accept risks and less emotional resistance to change.
Indidualism/Collectivism
The extent to which people in a culture look after their own interests and those of their immediate family.
Individualism: ties are loose, achievements valued.
Collectivism: groups, ties are tight, people born into collectives.
Masculine and Feminine
Relationship between gender and work roles.
Masculine cultures: strong minded, individualistic, assertive
Feminine cultures: modest, relational, concerned with quality of life.
Long-term vs. short-term orientation
Long-term – thrift,
perseverance, trust
Short-term – chase
Immediate returns, competitive, opportunism, price focus.
Culture and Communication
Cultural adaptations
Open tolerance
Flexibility
Humility
Justice/fairness
Adjustability to varying tempos
Curiosity
Knowledge of the country
Liking of others
Ability to command respect
Ability to integrate into the environment.