(1) the decision of internationalization - scope of international

marketing strategy
development of the concept of international marketing
a new phase of globalization:
● no single geographic center
● no ultimate model for success
● no surefire strategy for innovation and growth
● competition for customers, resources, talent, and intellectual capital
● companies in emerging and developing countries are becoming integral parts
of complex global supply chains for large multinationals
● many firms intend to expand their sales into foreign markets
marketing:
● activity of a company aiming to develop sth valuable and offer it to the market
● promoting, selling, advertising
● (AMA) → the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners,
and society at large
global marketing: (Hollensen)
● the firm’s commitment to coordinate its marketing activities across national
boundaries to find and satisfy global customer needs better than the
competition
● this implies that the firm can:
○ develop a global marketing strategy, based on similarities and
differences between markets
○ exploit the knowledge of headquarters (home organization) through
worldwide diffusion (learning) and adaptations
○ transfer knowledge and ‘best practices’ from any of its markets and use
them in other international markets
EPRG-model:
four different factors which identify the orientation of organizations
● ethnocentric - extension of the marketing methods used in the home country
to foreign markets
○ e.g. horchata → if Spaniards love it, everyone will → no change in the
approach
● polycentric - based on the assumption that markets (countries) around the
world are so different that the only way to succeed internationally is to manage
 each market as a separate one with its own subsidiary and adapted marketing
mix
○ e.g. gazpacho tastes better warm → altering the products when entering
a market
○ e.g. McDonald’s offer
● regiocentric - represented by a region of the world
○ e.g. (Stellantis) advertising different car brands, based on which is
popular in which country
● geocentric - based on the assumption that the markets around the world
consist of similarities and differences and that it is possible to create a
transnational strategy that takes advantage of the similarities by using synergy
effects to leverage learning on a worldwide basis
○ e.g. mouthpiece for instruments → identifying the needs of a market
segment and designing a product that meets them → selling the product
to many countries with the same approach
○ e.g. collapsible urban cycling helmet made by students from UPV, a
Spanish ski retailer (Barrabes) operating in the whole EU and the US,
Lenovo with a campaign for laptop ownership during the pandemic
more examples → mix:
● polycentric + geocentric → a French cheese producer (Savencia)
commercializing cheese companies based on the region → if the name sounds
Spanish, it’ll be successful there (even though it’s of French origin)
● geocentric + polycentric + regiocentric → CocaCola with a general idea but
variations of the flavors and packaging (e.g. ‘light’ - ‘diet’, cherry flavor)
global marketing strategies:

● e.g. orange Fanta in Spain tastes less artificial than in the US because Spaniards
know the real taste (big producer and exporter) → adaptation to success
● mass production (global) but with cultural adaptations (local) = glocal
● a key element in glocalization is knowledge management
○ continuous learning from experience
○ keeping track of the valuable capabilities used in one market that could
be used elsewhere
 motivations for globalization
proactive reasons: (pull reasons)
● change of strategy in terms of integers of the company to operate certain skills
or market opportunities:
○ profit and growth objectives
○ managerial motivation (urge)
○ technological competence, unique product
○ opportunities in the market, market information
○ economies of scale, learning curve
■ e.g. Valencia is the no.2 exporter of ceramic tiles in the world, so
the ovens have to work 24/7 → cost is split as the quantity is larger
○ tax advantages
reactive reasons: (push reasons)
● reaction to threats or pressure in their current markets, adjusting to them:
○ competitive pressure
■ e.g. if you’re not buying Spanish ceramic tiles, then you’re buying
Chinese ones
○ small and saturated domestic market
○ overproduction, excess capacity
○ orders from abroad with no action done
○ expanding sales from seasonal products
○ proximity to international customers, psychological distance
■ e.g. Spain to Latin America
barriers and risks of internationalization
barriers hindering internationalization initiation:
● financial:
○ insufficient financial resources available
○ lack of capital to finance expansion to foreign markets
○ cost increase due to high costs of production, distribution, and financing
of the products exported (or change of the manufacture localization)
● contacts/customers/information:
○ lack of contacts in foreign markets
○ inadequate information about potential overseas customers
○ communication difficulties with distributors and customers abroad
● management/culture:
○ lac of commitment concerning the export
○ poor knowledge of global markets
○ emphasis on leadership in the development of national markets
 ● marketing elements:
○ lack of distribution channels abroad
○ additional services and distribution abroad
○ foreign business practices - competition
○ disruptions in production due to non-standardized products
● administrative:
○ payment guarantees, fees, and import duties
barriers hindering the further process of internationalization:
● general market risks:
○ competition from other companies
○ differences in the use of products in other markets
○ language and cultural differences
○ complexity of delivery services
● commercial risks:
○ fluctuations in exchange rates
○ non-payment of customers for disputes over the contract, bankruptcy, or
insolvency
○ refusal to accept a product for justified reasons or simply due to fraud
○ delays and/or damage to the shipping process
● political risks:
○ destination currency controls that limit payments
○ tariffs (customs duties) and other import taxes
○ confusing regulations and taxes on imports
○ complexity of local commercial documentation
○ civil revolutions, wars, etc.
the internationalization marketing plan
SOSTAC model:
● framework that enables managers to develop a strategic marketing plan in six
steps: (circular)
○ control, situational analysis, objectives, strategy, tactics, action
● marketing objectives (maximizing sales, minimizing costs)
● market entry strategy (how are we going to expand? all markets at once? or test
expansion in some countries and then worldwide launch?)
● marketing mix (adaptation or standardization?)
 (2) market analysis and selection
international market research and decision-making process
identifying the right market to enter is important as:
● it can be a major determinant of success or failure
○ e.g. hyperrealistic dolls → target: film industry and hospitals in
high-income countries with a low birth rate (more resources per child)
● it influences the nature of foreign marketing programs
● the location affects the firm’s ability to coordinate foreign operations
○ e.g. Spain serving the market of Morocco easily via exporting
○ e.g. Mercadona in Portugal (neighboring country, similar culture)
global marketing decision phases:
● deciding whether to internationalize → deciding which foreign market to enter
→ deciding how to enter the market → designing the global marketing program
→ implementing and controlling the global marketing program
data to evaluate market potential in country X:
 selection process of international markets
potential determinants of the firm’s choice of foreign markets:
international market segmentation:
step 1: segmentation criteria: (for effective segmentation)
○ measurability (the degree to which the size of each segment can be
measured)
○ accessibility (the degree to which the segments can be reached and
served)
○ substantiality/profitability (the degree to which the segments are large or
profitable)
○ actionability (the degree to which the organization has sufficient
resources to make an effective marketing program)

step 2: segment development:

general characteristics: (high degree of measurability, accessibility and
actionability)
○ geographic location (e.g. air conditioning needed in Arab countries)
○ technology (e.g. PCs per 1000 people)
○ social organization (nuclear/extended family, single people +
socio-economic levels: upper, lower, etc.)
 ○ religion (e.g. presents for Christmas)
○ education (the economic potential in the youth market, e.g. level of
literacy)
specific characteristics: (low degree of measurability, accessibility and
actionability → still relevant in some cases)
○ cultural (language, religion, values and attitudes, material elements,
aesthetics, education, and social institutions)
○ lifestyles (activity, interest, e.g. food consumption habits)
○ personality (specific traits)
○ attitudes, tastes, or predispositions (status symbols)
step 3: screening of market/countries:
○ stage 1: preliminary screening
■ e.g. religion, political stability, economic situation (GDP per capita)
○ stage 2: fine-grained screening
■ e.g. consumer preferences, entry barriers, consumption habits
■ key markets → the best opportunities for long-term strategic
development → companies want to establish a permanent
presence
■ secondary markets → opportunities are identified, but political or
economic risk is too high or long-term
■ tertiary markets → high-risk markets → minimal allocation of the
resources (‘catch what you can’ markets → short-term and
opportunistic)
home country environment:
● promotional activities:
○ from government (or government + business)
○ encouraging export in small companies
○ export subsidies (e.g. lower taxes on profits, refund of indirect taxes)
○ objective: dealing with internal barriers (e.g. lack of motivation to export,
operational and resource-based limitations)
● financial activities:
○ avoiding the risk of non-payment → export-credit insurance)
○ improvement of the financing conditions for clients
● information services:
○ economic, social, and political data from the government
○ aggregated global transactions
○ specific export opportunities
○ potential buyers, distributors, and agents
○ government regulations, export procedures
● export-facilitating activities:
○ trade development offices and trade centers abroad
○ government-sponsored fairs and exhibitions
● promotion by private organizations:
○ chambers of commerce
 ○ organizations for export research
○ export services (banks, freight forwarders, transport, etc.)
● state trading
○ the government assumes the trade of specific products (e.g. Cuba, China)
home country environment limitations:
● political risks:
○ ownership, operating, transfer risk
○ import restrictions (e.g. raw materials)
○ local-content laws (e.g. products must contain a share of local materials)
○ currency exchange rate controls
○ market/price/tax controls
○ change of government party
○ nationalization or domestication
○ labor restrictions related to unions
● trade barriers:
○ protection of domestic producers and generating revenue
○ tariff barriers:
■ specific, ad valorem (import price), discriminatory (one particular
country)
○ non-tariff barriers:
■ quotas (restrictions on the amount of a good that can enter or
leave a country in a time)
■ embargoes (complete ban on trade of one or more products)
■ administrative delays (regulatory controls, bureaucracy →
decreased flow of imports)
■ local-content requirements (amount of product supplied by a local
producer)
general international environment:
levels of economic integration:
● (1) economic union (harmonization of economic policies)
● (2) common market (factory mobility)
● (3) customs union (common external trade policy)

● (4) free trade area (free trade among members)

● benefits of regional integration:
 ○ trade creation, consensus, political cooperation
● drawbacks of regional integration:
○ trade diversion, shifts in employment, loss of national sovereignty
○ corruption risk (transparency)
○ BERI index (criteria such as the risk of nationalization → e.g. oil industry
in Argentina)
major trading blocks:
● EU (European Union) → political and economic union
○ Brexit changes the rules of the game → e.g. Asian branch in the UK
wasn’t profitable anymore as the country isn’t a part of the union
anymore
● ASEAN (Association of South East Asian Nations) → limited trade and
cooperation agreement
● APEC (Asia Pacific Economic Cooperation) → formal institution
● NAFTA (North American Free Trade Area) → free trade area
dimensions of market attractiveness and competitive strengths (MACS):

market/country attractiveness competitive strength

market size (total and segments) market share

market growth (total and segments) marketing ability and capacity

(country-specific know-how)

buying power of customers product’s fit to market demands

market seasons and fluctuations price

average industry margin contribution margin

competitive conditions (intensity, entry barriers) image

market prohibitive conditions (tariff/non-tariff technology position

barriers, import restrictions)

government regulations (price controls, local content) product quality

infrastructure market support

economic and political stability quality of distributors and service

physical distance (home base - foreign market) financial resources, access to

distribution channels
● country of origin effect - the influence of a product's country of origin on
consumer perceptions and purchase decisions
 ○ e.g. German cars, Spanish wine, olives, and Swiss watches (positive)
○ e.g. if Spain wanted to export cars, it would hit a highly competitive
ground
step 4: micro-segmentation:
● micro market segmentation → once we decide which product to offer in which
country, we decide which segment will be developed
● e.g. Shein opening up pop-up stores in France and Spain
○ why? → online sales statistics, market size, high fashion consumption
○ micro-segmentation criteria used: young consumers, both genders,
fashion-conscious, over 16 y.o. (they have and use money)
○ feedback: manifestations in France

conclusions:
● very important to get primary information while segmenting
● trying to get cross-segments and looking for synergies
● avoiding using only geographical criteria
● segmentation is not always applicable (sometimes companies are chosen
through e.g. lobbies)
market expansion strategies
1st decision: incremental vs simultaneous entry:
● waterfall approach:
 ○ for firms with lack of experience in foreign markets
○ the firm is entering late and faces local competition
○ the firm is small and has limited resources or is highly risk-averse
● shower approach:

○ for innovative products and services

○ rapid entry into world markets to seize an emerging opportunity
○ it facilitates early market penetration and enables rapidly building up
experience
○ economies of scale in production and marketing
● expansion strategy for SMEs (small and medium-sized enterprises):
 ○ concentration on the product and the market segment where it has a
competitive advantage
○ evolving step by step
○ new experience in each market/niche
2nd decision: concentration vs diversification:
● concentrate the resources in a limited number of countries/segments
● diversify the resources in several countries/segments

● 1 - few segments in a few countries (e.g. Patek Philippe, Ferrari)

● 2 - many segments in a few countries (e.g. Sony, Tata, Alibaba, Walmart)
● 3 - few segments in many countries (e.g. Red Bull, Lego)
● 4 - many segments in many countries (e.g. Nestle, Procter&Gamble, Amazon)
 (3) cultural environment
low-context and high-context cultures
● culture - the collective programming of the mind that distinguishes the
members of one human group from another
● because of globalization, there aren’t that many differences between
consumers from other countries (but some are strongly nationalized → e.g.
food and beverage industry)
culture characteristics:
● passed from generation to generation (learning by interaction with family
members, rewards, avoiding punishment, negotiating, causing and avoiding
conflict)
● interrelated (religion and marriage, business and social status)
● shared from members to other members (parents, institutions, schools,
friends)
visible and invisible parts of the culture:

low-context cultures:
● rely on spoken and written language for meaning
● a person who sends the messages expects the receiver to decode the words to
get the understanding correctly
 ● individualism
high-context cultures:
● use and interpret more of the elements surrounding the message to develop
their understanding of the message
● social importance and knowledge of the person and the social setting add extra
information
● collectivism
the contextual continuum of differing cultures:

elements of culture
language:
● 7-38-55 rule of communication (7% spoken words, 38% voice tone, 55% body
language)
● verbal:
○ explicit vs implicit
■ explicit-language cultures: ‘say what you mean, and mean what
you say’ + the responsibility of effective communication depends
on the speaker
■ implicit-language cultures: the responsibility of effective
communication is on both the speaker and listener
○ main roles in global marketing:
■ information gathering
■ access to local society (English → local language)
■ company communication (for local workers)
■ context interpretation (familiar, formal, tense, etc.)
● non-verbal:
○ more important in high-context cultures, in low-context may be
unnoticed
○ time (importance of being on time → e.g. in some high-context cultures
as Latin America, time is flexible)
○ space (conversational distance between people)
○ material possessions (relevance of material possessions and interest in
the latest technology → importance in both cultures)
○ friendship patterns (significance of trusted friends as social insurance in
times of stress and emergency → importance of knowing the business
acquaintance in high-context cultures)
○ business agreements (rules of negotiations based on laws, moral
practices, or informal customs → rushing business is not welcome in
high-context cultures, as the deal is made based also on trustworthiness
+ contracts may be bound by a handshake)
manners and customs:
● important in negotiations
● interpreted in one’s frame of reference may lead to incorrect conclusions
● changes (social, familiar, labor) must be carefully monitored as it indicates a
narrowing of cultural differences
technology and material culture:
● related to the availability of basic economic, social, financial and marketing
infrastructures
 ● material culture results from technology and is directly related to how a society
organizes its economic activity
● cultural convergence comes with technological advancement
social institutions:
● business, political, family or class-related
● they influence the behavior of people and how people relate to each other
● primary reference groups: family, co-workers
● secondary reference groups: professional associations
● they provide value and attitudes that shape one’s behavior
education:
● the process of transmitting skills, ideas, and attitudes, as well as training in
particular disciplines
● educational levels affect various business functions (recruiting people, potential
market for technology)
● in some cultures, loyalty is critical (staying in the country to work)
● e.g. language proficiency
values and attitudes:
● they determine what we think is right, important, or desirable
● the more rooted values in central beliefs (e.g. religion), the more cautiously the
exporter has to move
● greater reluctance to take risks in conservative societies
● e.g. McDonald's adapting the menu to vegetarian markets
aesthetics:
● what is meant by ‘good taste’ in art, music, etc. → it varies a lot across cultures
(e.g. sex in advertising)
● e.g. popularity of Christmas decorations in Western countries, the compact size
of the vacuum cleaner
religion:
● the highest importance in many countries, the dominant factor in business,
political, and educational decisions
● may affect the global strategy in many ways (religious holidays, consumption
patterns, praying habits, role of women)
Hofestede’s model
● explains why particular concepts of motivation don’t work the same way in all
countries
● the way people in different countries perceive and interpret their world varies
● dimensions: power distance, individualism (or collectivism), masculinity (or
femininity), uncertainty avoidance, time perspective (long-term or short-term
orientation), indulgence (or restraint)

● strengths: based on a large sample across the world, deep cultural values,
highly relevant connotations
● weaknesses: the assumption that national territories = cultural territories, all
respondents from one company, the definitions may differ between cultures
culture, ethics, and social marketing
● understanding the cultural differences in ethical decision-making is important
for avoiding potential business failures and for designing effective international
marketing management programs
○ e.g. Nike shoes with the US flag didn’t sell well in other countries (harmful
ethnocentric approach)
 ○ e.g. child labor is still accepted in some parts of the world
● every culture establishes a set of moral standards for business behavior = a
code of business ethics
● when does a legal fee become a bribe?
● ethics influence all decisions in a company (wages, standards of manufacture,
competition, communication, right and wrong, fair and unfair)
ethical decision-making:

social marketing:
● the application of commercial marketing technologies to understand, plan,
carry out, and assess programs aimed at encouraging specific groups of people
to make choices that enhance their welfare and benefit their community
● changing behavior → e.g. encouraging people to quit smoking, start exercising
● related to commercial marketing, but focuses on resolving social problems
● it’s not the same as socially responsible marketing
● targeting people who may not know they suffer from deficiency of a welfare
(e.g. abuse, addiction)

(4) entry forms of foreign markets

factors influencing the choice of entry mode
● e.g. Zara had hierarchical modes when entering the Chinese market
● e.g. Mango had intermediate modes (franchise agreements)
● hierarchical mode → adapting to the culture
● firm size (small firm should export through local distributors)
● international experience (export instead of setting up a store, investment; the
more experience the easier the establishment)
internal factors:
● firm size:
○ indicator of the firm’s resource availability
○ export modes are more suitable for SMEs (externalizing)
● international experience:
○ reduction of the cost and uncertainty of serving a market
○ increased probability of committing resources to foreign markets
● product/service:
○ physical characteristics and the level of service are important to locate
the production and channel selection
○ products with high value/weight are directly exported (e.g. watches,
machinery)
○ products with low value/weight determine licensing agreements
(e.g. soft drinks, beer)
○ product differentiation = higher profit, entry barriers → hierarchical does
of entry
○ the nature of the product affects channel selection (high complexity may
require service pre and post-purchase)
○ hard services (production and consumption are separated,
standardizable)
○ soft services (production and consumption occur simultaneously,
hierarchical mode)
external factors:
● sociocultural distance between host and home country:
○ the greater the distance, the more likely that the firm will use a low-risk
entry model (no direct investments), low resource commitment, and high
flexibility
● country risk, demand uncertainty:
○ high country risks favor entry modes with low resource commitment
(export modes)
● market size and growth:
○ great size and/or growth implies commitment of resources to the
development (and establishment of a subsidiary)
○ small markets will be served via exporting
● direct and indirect trade barriers:
○ tariffs and quotas on the import favor local production/assembly
(hierarchical modes)
 ○ preference for local suppliers, trade regulations, and customs → joint
venture with a local company
● intensity or competition:
○ high competition implies avoiding internationalization or low resource
commitment (less profitable market)
● small number of relevant intermediaries available:
○ results in opportunistic behaviors of these few intermediaries →
hierarchical mode
desired mode characteristics:
● risk-averse:
○ risk-averse decision maker → export modes, licensing
● control:
○ linked to the level of resource commitment
○ indirect exporting → little or no control
○ joint ventures → limited control
○ owned subsidiaries (hierarchical mode) → the most control, but require a
commitment of resources
● flexibility:
○ linked to the degree of externalization
○ hierarchical modes → the most costly, the least flexible, and the most
difficult to change in short-term
transaction-specific factors:
● tactic nature of know-how
○ if the company’s know-how is high and tactic (difficult to transfer) →
hierarchical modes
export modes
● firm’s products are manufactured in the domestic market or a third country
and then transported either directly or indirectly to the host market
● high flexibility, low cost, low control
indirect export:
● the manufacturing firm doesn’t take care directly of exporting activities
● the exporting manufacturer uses independent organizations located in the
producer’s country
● the firm doesn’t engage in global marketing (little or no contact with the
markets abroad)
● for companies with limited international expansion objectives and minimal
resources to devote to expansion
 ● risks: little or no control over the management of the product/service in other
countries
● intermediaries:
○ broker:
■ has to bring buyer and seller together in the home country
■ doesn’t handle the products
■ specialized in particular classes of products (mostly commodities)
○ trading company:
■ historical legacy from colonial days (active in Japan, Africa, Far East)
■ full range of services (shipping, warehouse) and wide range of
financial services (loans, currency exchange)
○ export management company (export house):
■ ‘export department’ for a range of non-competing companies,
acting in their names
■ costs spread across companies + reduced transport costs
■ specialized in a geographical area, product, or consumer type
○ export buying agent:
■ representative of foreign buyers who reside in the exporter’s
home country
■ operates based on orders received from the buyer
■ little or no control over the marketing of the products
○ piggyback:
■ an export-inexperiences SME uses the larger company as a carrier
(as they already operate in foreign markets)
■ non-competitive, often complementary
■ carrier may operate as an agent or distributor (and can use their
brand)
■ advantages for SMEs: learning experience, detached control
direct export:
● the manufacturing firm takes care of exporting activities and is in direct contact
with the first intermediary in the foreign target market
● the exporting manufacturer sells directly to an importer or buyer located in a
foreign market area
● they undertake: overseas contacts, market research, documentation and
transportation handling, marketing mix strategies design
● independent intermediaries:
○ they are familiar with the market and customs, have contacts
○ distributors:
 ■ exclusive representatives of the company, sole importers
■ they take the title of the goods and bear the risk
■ profit comes from the different prices of selling and buying
■ responsible for the post-purchase services
■ they manage the marketing in their areas (wholesale, retail)
○ agents:
■ exclusive, semi-exclusive (non-competing goods), or non-exclusive
(free)
■ representative of the exporter, selling to wholesalers or retailers in
the importing country
■ exclusive agents are used for entering international markets
cooperative export (EMGs):
● collaboration agreements with other firms (export marketing groups)
concerning the performance of exporting functions
● frequently used by SMEs attempting to enter export markets for the first time
(each has separate upstream functions, but they’re cooperating on downstream
functions)
● export marketing groups (EMG) → e.g. high-end furniture, Ikea, outdoor
furniture (non-competing goods)
● motive: opportunity for effective marketing of a complementary product
program to larger buyers
intermediate modes
● one company with a competitive advantage unable to exploit it transfers this
advantage to another firm (long-term)
● primary vehicles for the transfer of knowledge and skills between partners
contract manufacturing:
● enables foreign sourcing (production) without making a final commitment
● development and control over R&D, marketing, distribution, sales, and services,
while handing over responsibility for production to a local firm
● e.g. Ikea uses local producers for their products
licencing:
● establishing local production in foreign markets without capital investment
● long-term, great responsibilities for the national firm (more value chain
functions have been transferred to the licensee by the licensor)
● licensor → licensee: patent, manufacturing know-how, technical advice,
marketing advice, trademark
franchising:
 ● marketing-oriented method of selling a business service, often to small
independent investors who have working capital, but little or no prior business
experience
● product and trade name franchising (very similar to licensing, e.g. CocaCola)
● business format package franchising (franchisor transfers a business package
to a host country entity with a strategic plan, instruction, and quality control,
e.g. McDonald’s, Burger King)
● country stability is needed for a long-term agreement
● starts in the local market for testing and then develops
● advantages of the economy of scale + local knowledge of the franchisee
● success factors: integrity of the whole business system, capacity for renewal of
the business system)
strategic alliances / joint ventures:
● partnership between two or more parties based in different countries
● reasoning:
○ complementary technology or management skills leading to new
opportunities
○ speed of market entry
○ legal restrictions (e.g. China, Korea)
○ resources needed for global operations in R&D and production
● strategic alliance (non-equity joint venture) - partners don’t commit equity into
or invest in the alliance → parent firms A and B bound by a contract
● joint venture → parent firm A + parent firm B = joint venture C
management contracting:
● the contractor supplies management know-how to another company that
provides the capital and takes care of the operating value chain functions in the
foreign country
● most common in developing countries
hierarchical modes
● the firm completely owns and controls the foreign entry mode
● the degree of control depends on how many and which value chain functions
can be transferred to the market
 ● domestic-based sales representatives
● resident sales representatives / foreign sales branch / foreign sales subsidiary
● region centers
● sales and production subsidiary:
○ needed long-term market potential and political stability
○ great investments of management time, commitment, and money
○ reasoning:
■ defending existing businesses (e.g. Nissan, Toyota)
■ gaining new businesses
■ cost saving (labor, raw materials, transport)
■ avoiding government restrictions
○ assembly operations (place where components are being manufactured
or assembled)
○ retaining manufacturers in the domestic country = economic of scale,
development, concentration of production skills
● transnational organization:
○ the final stage of internationalization, coordination, and integration of
operations across national boundaries to achieve synergies on a global
scale
○ employees identify more with their company than with the country they
operate in
○ frequent relocation of human resources across the borders
hierarchical/direct entry modes:
wholly owned subsidiaries - acquisition or greenfield?
 ● acquisition:
○ rapid entry and access to distribution channels, an existing consumer
base, in some cases, established brand names or corporate reputation
○ might be the only way in if there’s high competition or entry barriers
○ horizontal (acquiring a company from the same industry)
○ vertical (acquiring a company at a different level of the value chain → e.g.
supplier or distributor)
○ concentric (acquiring a company in a related industry or market, but not
a direct competitor)
○ conglomerate (acquiring a company in an unrelated industry or sector)
internationalization in electronics markets
digital marketplace or e-market:
● advantages:
○ cost saving
○ payment management
○ positioning
○ synergy with products of other sellers
○ logistics
● disadvantages:
○ increased competition
○ need to constantly monitor and adjust prices
○ less freedom
○ complexity of branding
○ expensive if we sell a lot

(5) the marketing mix - international product decisions

factors influencing the balance between standardization and adaptation:
 developing international products

the product life cycle (PLC):

● each stage is identified by its sales performance and characterized by different
levels of profitability, various degrees of competition, and distinctive marketing
programs
● can be analyzed at the level of a whole industry, a specific product, or a single
model
● 4 stages of PLC: introduction, growth, maturity, and decline (in total these
represent Time to Market - TTM)
international product life cycle (IPLC) curves:
● macro approach:

● micro approach:

● we can still introduce the product in country B as a new, even if it’s an obsolete
product in country A (different countries at different stages)
● creating a new product for the international market is also a possibility (e.g.
portable ACs in India, square watermelons in Japan)
new products for the international market:
● key selling point - the main feature, benefit, or advantage that makes a product,
service, or company stand out from competitors
● PLCs and development time for a new product are getting shorter → key
success factor
 ● quality deployment function (QDF) - a useful technique for translating customer
needs into new product attributes and for responding to requirements of the
successful development process
compression of R&D cycles and product life cycles + new products for international
markets

product positioning
● the key element for success in marketing
● identifying the attributes (values) of the product (e.g. appearance, flavor, cost)
● the activity of creating a desirable position in the mind of a customer in terms
of the product
● products without a clear position in the consumer’s mind become commodities
process of international product positioning:
 aligning product attributes with buyer benefits and segment needs
● step 1: focusing on the key characteristics of the product (physical features,
packaging, brand name) as they have the potential to provide value
● step 2: translating the identified attributes into tangible benefits that resonate
with the buyers
● step 3: combining the identified attributes and their benefits in a way that
satisfies the segment's needs

decisions on product attributes

● name is one of the attributes (branding, identification) → brand awareness,
level of quality and satisfaction, brand equity
functions of branding:
● differentiating one product from its competitors
● creating identification and brand awareness
● guaranty of quality and satisfaction
● help with the promotion of the product
● creating new sales and inducing repeat sales
brand equity:
● it is built on brand awareness, brand loyalty, brand associations, perceived
quality, and other assets exclusive of the brand
● brand loyalty:
○ behavioral dimensions + affective dimension = brand loyalty
○ reduction of costs in the search for information related to any consumer
decision
 ○ reduced sensitivity of buyers to price changes
○ resistance to promotions of competitors (lower price sensitivity)
○ potential cross-selling
○ potential positive WOM
● brand awareness:
○ reflects how a brand is present in the mind of the consumer
○ measurements:
■ spontaneous (remember) → which brands of the category X can
you remember?
■ suggested (recognition) → have you heard of brand Y?
■ top of mind → what is the first brand to remember for that
product category?
● brand associations:
○ the set of perceptions that a consumer has about the product that is
offered
○ logos, graphics, and sounds used in the communication; country of origin
○ connected to feelings, impressions, and emotions
brand decisions:
 + -

no brand lower production, marketing, and legal severe price competition

costs, lack of market identity
flexible quality control

branding better identification and awareness, and higher production, marketing, and
chance for production differentiation, legal cost
brand loyalty and premium pricing

private label possibility of a larger market share severe price competition,

lack of market identity

co-branding adds more value to the brand, consumers may become confused,
(ingredient long-lasting relationships based on ingredient supplier is very
branding) mutual commitment, dependent on the success of the
shared production and promotion costs final product,
promotion cost for ingredient
supplier

manufacturer’s better price due to higher price difficult for mall manufacturers with
own brand inelasticity, unknown brands,
retention of brand loyalty, requires brand promotion
better bargaining power and control of
distribution

single market, marketing efficiency, assumes market homogeneity,

single brand permits more focused marketing, existing brand’s image harmed
eliminates brand confusion, when trading up/down,
good for products with good reputation limited shelf space
(halo effect)

single market, market segmented for various needs, higher marketing and inventory
multiple creates competitive spirit, costs,
brands avoids negative connotations of existing loss of economies of scale
brands,
gains more retail shelf space,
doesn’t harm the existing brand’s image

multiple meaningful names, higher marketing and inventory

markets, local identification, costs,
local brands avoidance of taxation on international loss of economies of scale,
brands, diffused image
allows variations of quantity and quality
across markets
multiple maximum marketing efficiency, assumes market homogeneity,
markets, reduction of advertising costs, problems with black and gray
global brand elimination of brand confusion, markets,
good for culture-free and prestigious possibility of negative connotations,
products, requires quality and quantity
easy identification/recognition for consistency,
international travelers, legal complications
uniform worldwide image

examples:
● co-branding → Philadelphia + Milka, McDonald’s + Oreo, Goretex + any clothing
brand
● private label → Mercadona or Dia products
● new brands → Heineken globally, Aguila in Spain
elements to be taken under consideration when registering a brand:
● long-term internationalization strategy → existing regional and international
agreements → register in both current and potential markets as well as in the
production market
Anholt-Ipsos Nation Brands Index (NBI):

country of origin effect:

● the perception that customers (current and potential, direct and indirect) hold
on the image of the country
● intangible asset → affects the image of the brands from a specific country
(investment attraction, tourism attraction)
● it affects consumer behavior
● multidimensional concept

● Interbrand is ranking the best global brands (great share of technology

companies, car manufacturers, retailers)
● it includes international brands (consumers don’t necessarily look at cultural
preferences when making purchase decisions)
internationalizing services
● most of the company’s market offerings contain an element of service and this
is illustrated by the goods and services continuum:

● despite the increasingly important role of services in world trade, cross-border

marketing and delivery of services is complex and full of obstacles
○ services remain highly protected by national regulations
 ○ services require idiosyncratic internationalization approaches (unique to
an individual)
○ services are fundamentally people-centered, so they are culture-sensitive
selecting an entry mode:
● service characteristics:
○ changes in information technologies seem to be greatly supporting the
international development of services
○ internationalization decisions depend on: the service nature (degree of
interaction) and the way the service is provided (the level of
(in)tangibility)
○ hard services - require limited or no presence of the exporter, and
consumption can be separated from production
○ soft services - production and consumption are simultaneous
● relevant variables:
○ location of the servuction process (production of the service)
■ distinguishing between entry modes where the production is
location-bound to the home country (exporting, licensing,
franchising) vs the other entry modes where production takes
place in the host country
○ degree of experience, knowledge, desired control, and perceived risk
○ situational influences, both internal and external, impacting the entry
mode at the start and switch in operations later
○ availability of resources

(6) the marketing mix - distribution decisions

● manufacturer → distribution channels → clients

 ● distribution channels typically account for 15-40% of the retail price for goods
and services in the industry
external determinants of channel decisions
customer characteristics:
● the customer (size, geographic distribution, buying habits, usage patterns)
determines the channel design
● change and trends in consumer behavior must be taken into account
● environmental concerns, search for a healthy lifestyle, hedonism, leisure,
comfort
nature of product:
● consumer goods: long channels; industrial goods: short channels
● low price and high turnover for convenience products (wide distribution
network)
● prestigious products (short and narrow channel)
● transportation and warehousing costs are critical in industrial goods (e.g. bulk
chemicals, metals, cement)
● other factors: the product’s durability, amount and type of customer service
required, unit costs, special handling requirements
nature of demand (location):
● product perceptions are influenced by the customer’s income and product
experience, the product’s end use, PLC position and the country’s stage of
economic development, transport infrastructure, and geography
competition:
● channels generally serve the same market (competing products and close
substitutes)
legal regulations:
● countries may have specific laws for particular channels (alcohol, door-to-door)
● ani-trust authorities may prohibit agreements that restrict competition
local business practices:
● may force a manufacturer to employ a channel that is longer and wider than
desired (non-tariff barrier)
the structure of the channel
market coverage:
● geographical areas or number of retail outlets
● approaches: intensive, selective, or exclusive coverage
● approach depends on the type of the product, market needs, and resources of
the company
 ● channel length (width) - number of levels (middleman, intermediaries) in the
distribution channel
○ longer channels for convenience goods and massive distribution
○ factors affecting the channel length (width):

control/cost:
● control - the ability to influence the decisions of other channel members
● using company-owned salesforce in international markets → high degree of
control (intermediaries = loss of control)
● the decision to choose either is related to balancing the desire to control global
marketing and the desire to minimize resource commitment costs
 ● supplier’s performance of more functions = more costs (demand generation,
storage, physical distribution, after-sales service, etc.)
● own distribution = high control, high cost
● intermediaries = low control, low cost
degree of integration:
● channel integration - the process of incorporating all channel members into
one channel system and uniting them under one leadership and one set of
goals
● vertical integration - seeking control of channel members at different levels of
the channel
○ isolated autonomous participating channel members
● horizontal integration - seeking control of channel members at the same level
of the channel (e.g. competitors)
○ integrated participating members with member loyalty and long-term
commitment
 main decisions regarding distribution channels
● channel selection → direct (e.g. e-commerce), indirect (e.g. local distributors)
● channel width → intensive, extensive, selective, exclusive (based on product
type and market needs)
● partner selection (reliable intermediaries and partners within a local market)
● logistics and infrastructure
● control and integration (level of control over channel activities; vertical vs
horizontal integration)
management and control of the distribution channel
main sources of conflict in international distribution channels:

● pricing (over pricing strategies), territorial (over market boundaries and

exclusive rights), performance (service, delays, failures), cultural
(misunderstanding and mishandling of local market nuances)
multichannel and omnichannel systems
● internet changes the balance of power among customers, retailers, distributors,
manufacturers, and service providers
● manufacturers are worried that if they start selling online, it might affect their
current sales through regular stores → a tough decision between keeping their
traditional sales and exploring new sales opportunities on the internet
internet distribution strategies:
● manufacturers can decide to only present product info online and not to sell
their products that way (distributors conflict avoidance)
● leaving internet business to resellers (e.g. resellers with exclusive territories)
● leaving internet business to manufacturers only (risk of channel conflicts)
● open internet business to everybody (manufacturers sell at retail price or limit
the line)
● direct-to-consumer (DTC) - brands sell directly via their websites (e.g. Nike)
● marketplace platforms (e.g. Amazon, Alibaba)
● subscription-based models - delivering products regularly (e.g. Netflix, meal
kits)
internet’s impact on distribution:
● reaching more clients, reducing costs, enhancing engagement, increasing
competition, and demand for efficient logistics
change of purchase decision process:
● before: message, now: conversation
● product search and research are more intense now
● WOM is more important than ever
● transition from multichannel to omnichannel systems
○ multichannel - separate channels for different segments (e.g. physical
stores, websites)
○ omnichannel - unified experience across channels (e.g. online research
of availability, in-store purchase)
omnichannel retailing:
● integrated sales experience that combines the advantages of physical stores
with the information-rich experience of online shopping
● seamless experience (no distinction between offline and online channels)
● synergistic management of numerous available channels and customer
touchpoints, so that the customer experience is optimized

(7) the marketing mix - pricing decisions and terms of doing

business
factors of influence in international pricing
importance of pricing strategies:
● price is the most flexible policy in the marketing mix → strategical and tactical
weapon, highly controllable, inexpensive to change and implement
● the only marketing mix tool that provides income to the company
 ● important to the consumer (in the case of services even more as it’s hard to
assess the quality of sth intangible)
● decisions in global markets are affected by the complexity of influential factors

product factors - price escalation:

● depending on the distribution chain, high price differences might appear
● if the company pays attention just to the selling price to the importer, the
product could end up out of the market prices
● options to resist price escalation:
○ rationalizing the distribution process (efficient distribution channels)
○ lowering the export price
 ○ establishing a local production abroad ( → reduced costs, but: significant
investments required)
○ pressurizing channel members to accept lower profits
○ reengineering the product ( → reduced costs, but: lower quality)

international pricing strategies

skimming:
● high price is charged to the top of the top of the market to achieve the highest
contribution in a short time
● unique product → some segments (small market share) are willing to pay the
high price
● the product is made available to other segments → price gets lower
● success depends on the ability and speed of competitive reaction
● main problems:
○ small market share = competitive sensitive (aggressive local competition)
 ○ high-quality product → promotion + after-sales service (a lot of
resources)
○ home sells the product at a cheaper price → parallel importing may
appear (gray market)
market pricing:
● when similar products already exist in the target market
● requirements:
○ complete knowledge of the product costs
○ PLC long enough to warrant entry into the market
● in the end, the company will have to accept the current world market price so
the process will involve working backward from that
○ market price → calculation of the necessary ex-factory net price →
contribution margin (ex-factory - product sold as soon as it leaves factory,
no extra costs)
penetration pricing:
● to find companies that offer products at low prices
● requirements:
○ mass markets
○ price-sensitive consumers
○ reduction of costs through economies of scale and experience effects
● risks:
○ what if the competition reduces the prices as well?
○ low prices no longer seem credible to consumers (no trust in the quality)
● argumentation behind the strategy:
○ intensive local competition (home market)
○ lower income levels of local consumers
○ extra expenses covered by home market → exporting becomes a
marginal activity that brings as much additional revenue as possible by
offering a low selling price
price changes:
● price changes on existing products make sense when a new product has been
launched or when changes occur in overall market conditions (e.g. exchange
rate fluctuation)
● the timing of the price change is nearly as important as the change itself
 ● until mid-introduction: market prices < costs (then profits arise)
● until shake-out: supply < demand (costs fall quicker than prices) → higher
profits → attracting to the new competition
● shake-out: prices fall to gain/retain market share (inefficiency)
● those with competitive prices/costs remain on the market
pricing across products:
● product line pricing:
○ various items in the line may be differentiated by pricing them
appropriately to indicate, e.g. an economy version, a standard version,
and a top-of-the-range version
○ one of the products in the line might be priced lower to compete more
effectively or to gain market share
○ ‘buy-in, follow-on’ strategy - low price to buy-in + high price to
follow-on
(e.g. Gillette razors + razor blades, Polaroid camera + film, Nespresso)
● product-service bundle pricing:
○ price bundling - total package price - a price for the purchase of several
items within the product line
○ companies can raise the value of their products by bundling
products/services into a higher-value solution
○ if the entry price is a key factor, the service can be priced higher, which
then allows lower product pricing (e.g. software companies)
 ○ source of the competitive advantage:
■ scale-based - price based on the number of units bought; volume
discounts (rappels) can be encouraging for an increase in use
■ skills-based - prices based on the costs its customers avoid or the
costs of the next-best alternative
● standardization vs differentiation:
○ two essential and opposing strategies (forces)
○ price standardization:
■ achieving a similar positioning in different markets by adopting
largely a standardized pricing
■ setting a fixed world price (considering foreign exchange rates,
regulatory context, etc.)
■ low-risk strategy for the firm
■ appropriate if the firm sells to very large customers (e.g. big
retailers)
■ potential quick launch of new products (consistent price image)
○ price differentiation:
■ maximizing profitability by adapting pricing to different market
conditions
■ this allows each subsidiary/partner to set the most appropriate
price for local conditions
■ lack of centralized control of the prices set by
subsidiaries/partners
■ if a significant difference appears → bad image + parallel imports
(gray market)
○ Europe was a price differentiation paradise when the markets were
separated → it became difficult to retain the old price differences (due to
various regulations, competition, distribution structures, and consumer
behavior)
○ two developments that might force companies to standardize prices
across European markets:
■ international buying power of cross-European retail groups
■ parallel imports (gray markets)
transfer pricing:
● transfer prices - charged for intra-company movement of goods and services
● they are internal to the company, but important externally (international
transfer of goods/services → cross-border taxation purpose)
● the price paid has to optimize corporate objectives (rather than divisional ones)
● three basic approaches:
○ transfer at cost (price set at the level of production cost → the
international division is charged with the entire profit made by the firm)
○ transfer at arm’s length (market-based pricing → the international
division is charged the same as any buyer outside the firm)
○ transfer at cost plus (the usual compromise; profits are split between
the production and the international divisions)
currency issues:
● in what currency should the price be quoted?
● options for the exporter:
○ the foreign currency of the buyer’s country (local currency)
○ the currency of the exporter’s country (domestic currency)
○ the country of a third area (USD, EUR)
● the factors affecting the currency choice:
○ a foreign currency might involve fluctuation risks
○ financing has different interest rates in each currency
● possible benefits to the exporter for quoting in a foreign currency:
○ a condition of the contract
○ access to finance abroad at a lower interest rate
○ good currency management as a mean of gaining additional profits
○ customers prefer to be quoted in their currency
 conditions of sale/delivery
INCOTERMS:
● INternational COmmercial TERMS - internationally established definitions for
terms of sale, set by the International Chamber of Commerce (ICC)
● they define the responsibilities of the buyer and seller
● contract of sale (+ proforma, commercial invoice) should define the
responsibility of both parties regarding:
○ the actual condition of the products
○ the shipping of the items
○ division of the costs
○ transfer of risk
terms of payment:
● cash in advance (the exporter receives payment before shipment of the goods
→ minimizing the exporter’s risk and financial costs)
● letter of credit (a bank agrees to pay a specified amount of money when it
receives specific documents mentioned in the letter of credit)
● documents against payment (the buyer pays immediately after receiving
shipping documents)
documents against acceptance (the buyer accepts a draft to pay at a later date
and gets the shipping documents)
● open account (the exporter ships the goods without documents calling for
payment other than an invoice → buyer can pick up the order without paying
for it)
● consignment (the exporter retains the title of the goods until the importer sells
them)
 pricing process in foreign markets

(8) the marketing mix - communication decisions (promotion

strategies)
the communication process
reverse marketing:
● present and future buyer initiatives (efforts) are shaped by all aspects of a firm’s
past market performance
● process:
○ past: customer relationship is forming → relationship development;
purchases, and post-purchase experience → present: high degree of
buyer initiative if the past experiences were positive
elements of the international communication process:
factors influencing the communication situation:
● language differences:
○ avoiding mistranslations of words and phrases

● economic differences:
○ levels of literacy and appliance availability differ across the countries (e.g.
developed vs underdeveloped countries)
● sociocultural differences:
○ cultural dimensions (religion, education, etc.) affect how individuals
perceive the environment and interpret signals/symbols
○ e.g. the use of color (e.g. white can be commonly associated with peace
and purity, but in India, it’s a symbol for grief)
● legal/regulatory differences:
○ strict regulations on content, language, and sex in advertising
○ regulations are more commonly found in developed countries
● competitive differences:
○ need to adapt the promotional strategy to the local environment
communication tools
advertising:
● TV (expensive, high reach, the most regulated)
● radio (lower broadcast cost, but still expensive, high reach, local basis)
● print: newspaper (local, daily) → magazines (specific segment)
● cinema (captive audience)
● outdoor advertising (billboards, posters, shop signs, transit)
● more important in consumer products than in B2B
the major international advertising decisions:
● objectives setting:
 ○ increasing sales from existing customers by encouraging frequent
purchases, maintaining brand loyalty, and stimulating impulse purchase
○ obtaining new customers by increasing brand awareness, and improving
corporate image among new target group
● budget decisions:
○ percentage of sales method → disadvantages:
■ historical data rather than future performance
■ ignoring the possibility of extra spending in decline stage of PLC
■ no attention to marketing goals variation across the world
■ incentive for local management to increase sales through price
(and not to carry out effective campaigns)
■ can’t be used for new product launch and market entry
○ competitive parity approach:
■ based on what competitors are spending
■ disadvantages: difficulty in monitoring foreign marketing
expenditures, no recognition of different company situations
across the world
○ objective and task approach:
■ determining the advertising objectives → developing tasks needed
to achieve them
● message and media decisions:
○ message decisions→ unique selling proposition (argument for
customers to buy the product), desirable customer behavior, design
requirements; balance between standardization and uniqueness
○ media decisions → mass vs target approach, selection of media:
■ reach (opportunity to see - OTS) - total number of people in a
target market exposed to at least one ad in a given period (product
introduction, brand awareness)
■ frequency - the average number of times in a given period that
each potential customer is exposed to the same ad (sharing
information)
■ impact (on the consumer’s perception)
■ gross rating points (GRPs) = Reach x Frequency → critical mass of a
media effort → media planning = cost / 1000 GRPs
● agency selection:
○ international agencies have instant access to experienced professionals
(copywriters, translators, photographers, designers)
 ○ outsourcing the international advertising:
local agencies for each market (for niche marketing) vs services of a big
agency with domestic overseas offices (for good corporate image)

● advertising evaluation:
○ testing advertising effectiveness is more difficult in international markets
than in domestic ones (distance and communication gaps)
○ common methods: results of sales and market shares, brand awareness
testing
one-way communication:
● public relations:
○ annual reports, corporate image, events, lobbying, sponsorship, celebrity
endorsement, product placement, ambush marketing
○ enhances corporate image and influences favorable media treatment →
earning public understanding and acceptance
○ activities include anticipating criticism
○ methods used to gain PR: contribution to prizes at events, sponsorship of
events, press releases (news about the company), lobbying (government)
○ target groups for PR:
 ● sales promotion:
○ price discounts, catalogs, brochures, samples, coupons
○ selling activities that don’t fall directly into the advertising or personal
selling category
○ short-term effort directed primarily to the consumer and/or retailer to
achieve specific objectives:
■ consumer product trial and/or immediate purchase
■ consumer introduction to the shop
■ retailer using point-of-purchase displays of the product
■ retailers stocking the product
○ important international brand strategy (and promotional strategy)
○ expansion factors:
■ competition among retailers along with more advanced retailing
methods
■ need for defining the brand’s market shares
■ improved retail technology
■ integration with PR and media campaigns
○ the success of sales promotion depends on local adaptation
○ major constraints include local laws (no premium or gifts to be given)
two-way communication:
● direct marketing:
○ SM, direct mail / database marketing, internet marketing / online
advertising, telemarketing, mobile marketing, SMS, viral marketing
■ direct mail → both customer and B2B, target segment of
promising clients, less information shared with the competitors,
easy to adapt
■ telemarketing → both customer and B2B, cold calling and market
surveys, required good soft skills
○ goals: informational purposes, asking for direct responses from current
or future customer
○ expansion factors:
■ development of mailing technology
■ rising costs of advertising and sales promotion
■ lists of prospective customers
■ information technology
● personal selling:
○ sales presentations, salesforce management, trade fairs, and exhibitions
○ more important in B2B than in consumer products
○ two-way communication process with immediate feedback
○ effective but expensive → mainly used for distribution channels and B2B
(exception: customer products such as cars or other durable ones)
○ assessment of salesforce effectiveness: effective market coverage, skills
and capabilities, provided guidance, proper motivation
○ salesforce organizational structure:

○ salesforce types:
trade fairs and exhibitions:
● a concentrated event at which manufacturers, distributors, and other vendors
display their products and/or describe services to current and prospective
customers, suppliers, and other business associates, and the press
● useful not only for selling but also for collecting information, relationship
building, and channel partner evaluation
● for long-term involvement in the market
● trade fairs marketing: product showcasing, lead generation, brand visibility,
networking opportunities, market research
online and offline communication plan

strategies for online marketing:

● website links, banners, email spamming
● viral marketing (online WOM):
○ exploiting existing social networks to rapidly grow brand awareness
○ advantages: lower cost and higher effectiveness than traditional media,
similar interests of prospective customers (algorithms)
○ disadvantages: possible barriers to reaching the customer (e.g. software
such as antiviruses or firewalls)
○ campaign development:
■ compelling content → targeting the right audience → planting the
campaign in the initial group who will spread it to others →
controlling and measuring results