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Global Marketing Test 4

Key Concepts:

Terms in this set (26)

1) A low-cost approach to market research and data collection begins with desk research. There are a lot of secondary sources which are a good place to start. Data from census bureaus; government and private agencies; trade associations; chamber of commerce; published reports; academic institutions; and public libraries are not only extensive but can provide valuable information in a very cost-effective manner. All of these are considered as secondary sources since the data already exist and is not based on the research conducted by the company. Data obtained by conducting research by the company is considered as a primary source. This may also include the company's unpublished reports and other financial data. Other secondary sources include the U.S. Government's National Trade Data Base (NTDB), an online resource from the Department of Commerce. Similarly, there are other data which are published by almost all of the federal government agencies. Most countries compile data related to the gross national product (GNP), gross domestic product (GDP), consumption, investment, government expenditures, price levels, and import/export expenditures. Demographic data are available from the United Nations' agencies as well as other international agencies. The Statistical Yearbook of the United Nations contains global data on agriculture, mining, manufacturing, construction, energy production consumption, internal and external trade, health, housing, education and lots of other services. Similar data are collected by the U.S. Central intelligence Agency which publishes the World Fact book. Other sources are the World Bank and the International Monetary Fund. The Economist and Financial Times regularly compile comprehensive surveys of regional and country markets and include them in their publications. Data from many of these sources are generally available in both print and electronic forms. There are also different country Web sites which also provide some useful information. Syndicated studies published by private research companies are another source of secondary data and information.
7) Marketing channels exist in order to create utility for customers. These utilities can be place utility, time utility, form utility, or information utility. Thus, the selection of a marketing channel depends on the target market which a manufacturer is planning to reach. Various companies have used innovative channel distribution methods. Distribution channels are systems that link manufacturers to customers. Although channels for consumer products and industrial products are similar, there are also some distinct differences. In business-to-consumer marketing (B2C) consumer channels are designed to put products in the hands of consumers. In the case of business-to-business (B2B), industrial channels deliver products to manufacturers or other types of organizations that use them as inputs in the production process or in other types of operations. Agents and distributors are commonly used as intermediaries. With the increased use of technology, peer-to-peer (p-to-p) marketing is becoming popular, whereby individual consumers market products to other individuals. eBay pioneered a form of online commerce which has gained popularity, and many companies are using it as a channel for distribution. Door-to-door selling has been a traditional channel which is also currently in use. For example, in Japan, auto manufacturers use door-to-door selling. Another direct selling alternative is the manufacturer-owned store or independent franchise store. In many countries where manufacturers cannot own stores, franchising is a very popular method. Other channel structure alternatives for consumer products include various combinations of a manufacturer's sales force and wholesalers calling on independent retail outlets. Piggyback marketing is another channel innovation whereby one manufacturer obtains product distribution by utilizing another company's distribution channels.
8) Selection of agents is very important in the success of a channel strategy. These agents sometimes engage in what is called cherry picking, the practice of accepting orders only from manufacturers with established demand for certain products and brands. Cherry picking can also take the form of selecting only a few choice items from a vendor's product lines. The cherry picker is not interested in developing a market for a new product, which is a problem for an expanding international company. Manufacturers should provide leadership and invest resources to build the relationship with a desired distributor. A manufacturer with a new product or a product with a limited market share may find it more desirable to set up some arrangement for bypassing the cherry-picking channel member. In some cases, a manufacturer must incur the costs of direct involvement by setting up its own distribution organization to obtain a share of the market. When the company's sales finally reach critical mass, management may decide to shift from direct involvement to a more cost-effective, independent intermediary. An alternative method of dealing with the cherry-picking problem does not require setting up an expensive direct sales force. Rather, a company may decide to rely on a distributor's own sales force by subsidizing the cost of the sales representatives the distributor has assigned to the company's products. This approach has the advantage of holding down costs by tying in with the distributor's existing sales management team and physical distribution system.
11) There are four market entry expansion strategies available to retailers that wish to cross borders. These strategies can be visualized by a matrix that differentiates between (a) markets that are easy to enter versus those that are difficult to enter; and (b) culturally close markets versus culturally distant ones. The upper half of the matrix encompasses quadrants A and D and represents markets in which shopping patterns and retail structures are similar to those in the home country. In the lower half of the matrix, quadrants C and B represent markets that are significantly different from the home country market in terms of one or more cultural characteristics. The right side of the matrix, quadrants A and B, represents markets that are difficult to enter because of the presence of strong competitors, location restrictions, excessively high rent or real estate costs, or other factors. In quadrants C and D, any barriers that exist are relatively easy to overcome. The four entry strategies indicated by the matrix are organic, franchise, chain acquisition, and joint venture. Organic growth occurs when a company uses its own resources to open a store on a greenfield site or to acquire one or more existing retail facilities from another company. Franchising is the appropriate entry strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures. In global retailing, acquisition is a market-entry strategy that entails purchasing a company with multiple retail locations in a foreign country. This strategy can provide the buyer with quick growth as well as access to existing brand suppliers, distributors, and customers. Joint ventures, the final entry strategy, are advisable when culturally distant, difficult-to-enter markets are targeted. The strategy is to collaborate with some local company as a joint venture.
14) The main reason for this scandal was the detection of horse meat in meat which was labeled as beef. Other than that, there are many other factors which the general public, particularly those outside Europe may not realize that it is customary to eat horse meat in many countries. The meat is lean and high in iron and other nutrients. It is also much less expensive than beef. In Italy, there is a traditional stew which is prepared from horse meat. In Europe alone, 60,000 tons of horse meat was sold in 2012. Also it was the number of foods in which horse meat was detected such as in frozen lasagna sold in Great Britain and frozen beef burgers in Ireland. In Europe, horse meat is available from a variety of suppliers. The supply chain includes a network of slaughterhouses, brokers, and traders. Italy, for example, imports 50 million pounds of horse meat from Ireland, Poland, and a dozen other European countries. Although it is illegal to produce horse meat in the United States since 2006, horses are shipped to Mexico and Canada for slaughter. It can then be shipped to export markets such as Europe.
With the scandal gaining traction, several global food companies, restaurant chains, and retailers scrambled to respond. Taco Bell was forced to withdraw its beef products from its stores in the United Kingdom. Swedish furniture retailer IKEA pulled meatballs from its cafeterias and grocery sections in several countries after inspectors found some samples that contained horse meat. Nestlé pulled some beef pasta products from stores in Italy and Spain.
15) Sales promotion refers to any paid consumer or trade communication program of limited duration that adds tangible value to a product or brand. In a price promotion, tangible value may take the form of a price reduction, coupon, or mail-in refund. Non-price promotions may take the form of free samples, premiums, "buy one get one free" offers, sweepstakes, and contests. Consumer sales promotions may be designed to make consumers aware of a new product, to stimulate nonusers to sample an existing product, or to increase overall consumer demand. Trade sales promotions are designed to increase product availability in distribution channels. The reason why worldwide there is an increase in the popularity of sales promotions as a marketing communication tool is due to several of its strengths and advantages. Besides providing a tangible incentive to buyers, sales promotions also reduce the perceived risk buyers may associate with purchasing the product. From the point of view of the sponsoring company, sales promotions provide accountability; the manager in charge of the promotions can immediately track the results of the promotions. Overall promotional spending is increasing at many companies as they shift available allocations away from traditional print and broadcast advertising. Also, sweepstakes, rebates, and other forms of promotions require consumers to fill out a form and return it to the company, which can then build up information in its database for use when communicating with customers in the future. A global company can sometimes leverage experience gained in one country market and use it in another market.
17) A coupon is a printed certificate that entitles the bearer to a price reduction or some other special consideration for purchasing a particular product or service. In the United States, marketers rely heavily on newspapers to deliver coupons. Most of the coupons are distributed in a printed ride-along vehicle referred to as a "free-standing insert (FSI)." "On-pack coupons" are those that are attached to, or part of, the product package; they can frequently be redeemed immediately at checkout. "In-pack coupons" are placed inside the package. Coupons have flexibility since they can also be handed out in stores, offered on a self-service basis from on-shelf dispensers, delivered to homes by mail, or distributed electronically at the checkout counter. Also, the number of coupons distributed via the Internet is growing. "Cross coupons" are distributed with one product but redeemable for a different product. The United States leads the world in the number of coupons issued by a wide margin. The goal of couponing is to reward loyal users and stimulate product trial by nonusers. In the EU, couponing is widely used in the United Kingdom and Belgium. Couponing is not as prevalent in Asia where saving face is important. Although Asian consumers have a reputation for thriftiness, some are reluctant to use coupons because doing so might bring shame upon them or their families. Thus, couponing also depends on the culture of a particular country. There are also regulations in many countries pertaining to the use of coupons by manufacturers.
18) Many companies are very selective in targeting their sampling programs. In the case of coupons, retailers must bundle the redeemed coupons together and ship them to a processing point. Many times, coupons are not validated at the point of purchase; fraudulent redemption costs marketers hundreds of millions of dollars each year. Sometimes the code on packaging can be read easily and used without purchasing the product. Thus, the formulation and execution of sales promotion requires planning in addition to creativity. In some emerging markets, sales promotion efforts can raise eyebrows if companies appear to be exploiting regulatory loopholes and lack of consumer resistance to intrusion. Sales promotion in Europe is highly regulated, whereas it is very popular in Scandinavia. In the Nordic countries there are regulations pertaining to sales promotion. A recent study examined coupon usage and attitudes toward both coupons and sweepstakes in Taiwan, Thailand, and Malaysia. The study has particular relevance to global companies that are targeting these and other developing nations in Asia. All three countries in the studies were collectivist, and the researchers found that positive attitudes of family members and society as a whole influence an individual's positive attitude toward coupons and coupon usage. However, the three nations show some differences in value orientation. For example, Malaysia has a higher power distance and lower uncertainty avoidance than the others. For Malaysians, the fear of public embarrassment was a constraint on coupon usage. In all three countries, media consumption habits were also a factor; persons who were not regular readers of magazines or newspapers were less likely to be aware that coupons were available. Consumers in Taiwan and Thailand look more favorably upon coupons than sweepstakes. Thus, one implication for marketing in developing countries is that, despite cultural differences, increased availability of promotions will result in higher levels of consumer utilization.
19) Dietrich Mateschitz, Red Bull's creator, trusted his entrepreneurial instincts instead of relying on traditional marketing research. As Mateschitz recalls, "When we first started, we said that there is not an existing market for Red Bull, but Red Bull will create it. And this is what finally became true." In other words, Mateschitz succeeded at accomplishing one of the most basic goals in marketing: He discovered a market segment with needs that weren't being met by any existing product. Today, Red Bull's blue-and-silver cans emblazoned with the iconic charging bulls logo are recognized around the globe. With typical entrepreneurial flair, Mateschitz pursues alternatives to orthodox advertising strategies and tactics. The Red Bulletin is a monthly magazine produced by Red Bull Media House. Red Bull distributes more than 3 million copies of each issue through newsstand sales, subscriptions, and as a free iPad app. The magazine is available in Austria, Germany, Great Britain, Kuwait, New Zealand, Poland, and South Africa. In 2011, The Red Bulletin was launched in the United States; 1.2 million free copies were distributed in major newspapers such as The Los Angeles Times, The Chicago Tribune, and The New York Daily News. The first U.S. issue featured San Francisco Giants pitcher Tim Lincecum, one of hundreds of athletes who are sponsored by Red Bull. Since 1998, Red Bull has been involved in another high-profile initiative. The Red Bull Music Academy is a series of concerts, workshops, art installations, and other cultural events that rotate from year to year among different international cities. Red Bull Music Academy also sponsors stages at international music festivals such as Montreaux Jazz; RBMA Radio is a Web resource where listeners can access new music, live concerts, interviews, and other content. Needless to say, the Red Bull logo is visible everywhere, and coolers filled with the drink are placed in strategic locations.
20) The five forces in the model by Porter are the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers, and the competitive rivalry among current members of the industry. New entrants to an industry bring new capacity, a desire to gain market share and position. They also bring new approaches to serving customer needs. New players mean prices will be pushed downward and margins squeezed, resulting in reduced industry profitability in the long run. According to Porter, there are eight major sources of barriers to entry, the presence or absence of which determines the extent of threat of new industry entrants. (1) Economies of scale, which refers to the decline in per-unit product costs as the absolute volume of production per period increases. Although the concept of scale economies is frequently associated with manufacturing, it is also applicable to R&D, general administration, marketing, and other business functions. (2) Product differentiation is the barrier that depends on the extent of a product's perceived uniqueness. Differentiation can be achieved as a result of unique product attributes or effective marketing communications, or both. (3) Capital requirement is another barrier. This may include fixed as well as the working capital. Some industries require enormous capital for various activities. (4) The one-time switching costs caused by the need to change suppliers and products are another barrier. These might include retraining, ancillary equipment costs, the cost of evaluating a new source, and other related aspects. (5) The access to distribution channels is another barrier. If channels are full or unavailable, the cost of entry is substantially increased because a new entrant must invest time and money to gain access to existing channels or to establish new channels. (6) Government policy is frequently a major entry barrier. (7) Established firms may also enjoy cost advantages independent of scale economies that present barriers to entry. Access to raw materials, a large pool of low-cost labor, favorable locations, and government subsidies are several examples. (8) Competitor response can be a major entry barrier. If new entrants expect existing competitors to respond strongly to entry, their expectations about the rewards of entry will certainly be affected.
23) An alternative framework for understanding competitive advantage focuses on competitiveness as a function of the pace at which a company implants new advantages deep within its organization. This framework identifies strategic intent, growing out of ambition and obsession with winning, as the means for achieving competitive advantage. Major theories related to this were presented by Gary Hamel and C.K. Prahalad. The basic approach is founded in the principles of W.E. Deming, who stressed that a company must commit itself to continuing improvement in order to be a winner in a competitive struggle. Many firms have gained competitive advantage by disadvantaging rivals through competitive innovation. Hamel and Prahalad define competitive innovation as the art of containing competitive risks within manageable proportions. They identify four successful approaches used by Japanese competitors. These are building layers of advantage, searching for loose bricks, changing the rules of engagement, and collaborating. Building layers of advantage refers to having a wide portfolio of advantages thereby reducing risk in any competitive encounters. A second approach takes advantage of the "loose bricks" left in the defensive walls of competitors whose attention is narrowly focused on a market segment or a geographic area to the exclusion of others. A third approach involves changing the so-called "rules of engagement" and playing by the rules set by industry leaders. A final source of competitive advantage is using know-how developed by other companies. Such collaboration may take the form of licensing agreements, joint ventures, or partnerships.
24) Domestic rivalry in a single national market is a powerful influence on competitive advantage. A good example is the PC industry in the United States which created a strong domestic rivalry. It keeps the industry dynamic and creates continual pressure to improve and innovate. The rivalry between Dell, HP, Gateway, Compaq, Apple, and others forces all the players to develop new products, improve existing ones, lower costs and prices, develop new technologies, and continually improve quality and service to keep customers satisfied. Rivalry with foreign firms may lack this intensity. Domestic rivals have to fight each other not just for market share, but also for employee talent, R & D breakthroughs, and prestige in the home market. Eventually, strong domestic rivalry will push firms to seek international markets to support expansions in scale. The absence of significant domestic rivalry can lead to complacency in the home firms and eventually cause them to become noncompetitive in the world markets. The intensity of the competition is more important rather than the number of domestic rivals. Also, the quality of the competitors makes a difference. It is also important that there be a fairly high rate of new business formations to create new competitors and safeguard against the older companies becoming comfortable with their market positions and products or services. New industry entrants bring new perspectives and new methods. They also find pockets of markets that were not explored by the incumbent companies. Differences in management styles, organizational skills, and strategic perspectives also create advantages and disadvantages for firms competing in different types of industries. The intensity of domestic rivalry also depends on them.