Marketing Management Of International Trade

1. Marketing Management Of International Trade October - December 2011 Ing. Ilona Bergquist, MBA

2. LESSON 3: INTERNATIONAL MARKETING • Unit 1: Segmentation and positioning • Product portfolio planning • Segmentation • Branding strategies • Positioning • Unit 2: Applying 4Ps in foreign operations • Product and packaging strategies • Pricing strategies • Placement / distribution strategies • Promotions / communication strategies

3. LESSON 3: INTERNATIONAL MARKETING • Strategic product portfolio planning • Analysis to select key brands (key segments) the company will support abroad Boston Consulting Group Matrix High MARKET GROWTH RATE 10% Low 1x 0,1x 10x RELATIVE MARKET SHARE (m.s. of your firm/m.s. of largest competitor)

4. LESSON 3: INTERNATIONAL MARKETING • Strategic product portfolio planning GE Multifactor Portfolio Matrix High Maintain current status-quo Good potential, invest (or selectively) MARKET ATRACTIVITY Avg. Not good potential,needs to be either improved or dispose of Low Strong Avg. Weak COMPETITIVE STRENGHT of the firm

5. LESSON 3: INTERNATIONAL MARKETING 100 96 97 95 95 90 +5% 90 85 81 +9% 80 75 +19% 70 62 65 60 55 50 +SKU 4 +SKU 2 +SKU 3 +SKU 6 SKU 1 +SKU 5 • PORTFOLIO MANAGEMENT: • Brand priorities and life cycle • BUILD – launch and build brand, high marketing support • GROW – sharegrowth, average marketing support • SUSTAIN – sharemaintanance, low marketing support • HARVEST – minimal /no marketing support, max. leverageofsales • Line Optimalization • TURF analysis (opt. Reach) • Distribution limits Optimalnumberandcombinationofitemsin the line

6. LESSON 3: INTERNATIONAL MARKETING • SEGMENTATION • Dividing the market into homogenic groups of customers which can be targeted through our communication mix • Basic Segmentation: B2C, B2B, Public sector • Consumer products segment (B2C) • Geographical (regions, size of cities, climate zones…) • Demographic (age, sex, family situation, ethnicity…) • Socioeconomic (education, income, structure of HH expenditure…) • Psychographic (social class – top managers, state employees, entrepreneurs,introverts vs. extroverts) • Attitudinal (values and lifestyles, hobbies/interests, opinions, media watching habits….) • Attitudes towards brands / category • Behavioral (purchase and usage habits, benefit expectations, motivations, loyalty to brands) Better targeting with relevant offers Secondary sources Primary sources

7. LESSON 3: INTERNATIONAL MARKETING • SEGMENTATION • Business customers segment (B2B) • Characteristics of B2B • Limited number of customers, large value clients • Demand is often derived from end-product demand (i.e. building construction) andprice is less elastic • More rational purchasing behavior (large supplies can be ordered from HQ, many factors influencing purchase – tech parameters, quality…image, trust, payment terms….) • Close relationship & Personal contact • Segmentation can be according to: • Value of client (or size / potential) - Key/Priority Accounts • Business Industries • Geographical areas • Firms business dept. • Other – operational characteristics, financial situation of customers, flexibility in decision… Better targeting with relevant offers

8. LESSON 3: INTERNATIONAL MARKETING • SEGMENT SELECTION • Factors influencing target selection are: • Size of segment, growth of segment, atractivity (level of competitors, risk of new competitors entering, substitute market, strong position of buyers, strong position of suppliers) • Internal capabilities – do we have the skills, resources and image to be successful on the foreign market • SEGMENTATION STRATEGIES • Cost/Not differentiated marketing (Lidl, Private label brands…) • Differentiated marketing (different product for different segments, leveraging different distribution, price) • Niche (targeting very small segments)

9. LESSON 3: INTERNATIONAL MARKETING • SEGMENTATION STRATEGIES EXAMPLES

10. LESSON 3: INTERNATIONAL MARKETING • SEGMENTATION STRATEGIES EXAMPLES

11. LESSON 3: INTERNATIONAL MARKETING • POSITIONING reflects: • Characteristics of the products (functional and emotional benefits) • Expectations of international customers • Differentiation from competitors (USP) • Global positioning vs. Local Positioning (for local brands) • GP used in industries like electronics, cars, PC, financial services, luxury brands • A brand can has different positioning in local market vs. foreign market (Heineken) • Country of origin can have a big impact on the brand image - National Brand Index Rating (1. Germany, 2. France, 3. GB, 4. Canada, 5. Japan), BRIC improving, CR # 31 • POSITIONING TYPES: • Product benefit positioning - “Beautiful hair without dandruff” • Positioning focused on certain consumer segment – Fernet Stock, men also have their days” • Positioning according to life style… • Sometimes it is needed to adjust the brand to modern trends and do a repositioning (National Brand Index - 2008 survey in 20 countries, 1K resp. in each c., 50 countries being evaluated), Based on: exports, governance, culture, people, tourism, investment opportunities, economy trends

12. LESSON 3: INTERNATIONAL MARKETING • Personalita / hodnoty • Tradice • Aktuálnost • Nesobeckost, štědrost • Reason to believe / reason why • Stabilita, tradice (prokázaná dlouhodobá síla společnosti) • Jisté zúročení mých vkladů • Poradci, kteří znají mé potřeby Esence značky Partner pro zajištění bydlení a finanční jistoty • Emoční benefit • Pomáhá mi cítit se v klidu a v pohodě • Partner k zajištění bydlení a finanční jistoty • Funkční benefit • Výhodné a spolehlivé finanční produkty • Jednoduchost zřízení a užívání služby • Diskriminátor / USP • Pomáhá mi cítit se v klidu a v pohodě • Atraktivní produkty s nízkým rizikem • Poskytuje finanční produkty na míru • Insight • Potřeba opravdového partnera pro moje finance • Cílová skupina • Lidé se zájmem o finanční produkty • Česká populace s důrazem na mladší populaci 18 – 35 let • Konkurenční kontext • Finanční instituce poskytující produkty k zajištění bydlení a finanční jistoty (banky, spořitelny, pojišťovny, nebankovní finanční instituce)

13. LESSON 3: INTERNATIONAL MARKETING

14. LESSON 3: INTERNATIONAL MARKETING • BRANDING STRATEGIES: • Trends: • Increasing role and usage of corporate brands – trust, guarantee • Building of global brands – mktg efficiency, strong image • Growing role of private label brands – economical for consumer, growing quality of PL • Merging of brands • Growth of co-branding (payment cards, Intel inside, L’Oreal buying Giorgio Armani for men perfumes, Coca Cola…) D2 / GE and Omnitel in Italy U – end of 90ties 1 600 brands, now about ¼ of that

15. LESSON 3: INTERNATIONAL MARKETING Corporate Brands Three levels of brand architecture: • Criteriafor selectingbrand architecture: • Target group(s) • Brand elasticity • Portfolio • Geographical needs • Brand role • Ownership of brand (licence) • Distribution channels • an other….

16. LESSON 3: INTERNATIONAL MARKETING What global brand has the highest value today? 44 mld USD

17. Značky s největší hodnotou TOP 100 znacek: 50 USA GE Fr Jap Svycar (zdroj: ibid) Other sources: interbrand.com

18. LESSON 3: INTERNATIONAL MARKETING • BRANDING STRATEGIES: • Growing role of private label brands PLMS International Private Label Yearbook Younger shoppers more aware of PL and buying PL

19. LESSON 3: INTERNATIONAL MARKETING • Unit 1: Segmentation and positioning • Product portfolio planning • Segmentation • Branding strategies • Positioning • Unit 2: Applying 4Ps in foreign operations • Product and packaging strategies • Pricing strategies • Placement / distribution strategies • Promotions / communication strategies

20. LESSON 3: INTERNATIONAL MARKETING • PRODUCT STRATEGIES: • To decide whether to modify a product for the int’l market or not, we need to consider the following factors: • Basic characteristics of the product, related services, symbolic values • Needs that the product meets • Consumer habits, preferences, style of living, taste… • Legal factors, norms, technical parameters • Buying power of people, size of market • Cost of adaptation • More focus on services and image, since functionality is cost of entry Offering financing(Electra Group, ME)

21. LESSON 3: INTERNATIONAL MARKETING • PRODUCT STRATEGIES: • Packaging: most frequently adapted for int’l markets • Role of product protection + communication (legal and mktg) • Pckg has to be attractive, convenient, supporting brand’s image • Countries with small buying power – smaller packages preferred • Customer habits may effect type of material (US: beer in cans vs. EU glasses) • In poorer countries, graphical depiction of usage direction needed • Innovative packaging can drive purchase interest…… very important for gift packaging, decorative bottles, perfume flacons….and apple

22. LESSON 3: INTERNATIONAL MARKETING • PRICING STRATEGIES: • Factors influencing pricing: • Income taxes, business (CR 35% in 1999 and 20% in 2009), EU avg. 23%, Asia 28%, USA / Japan 40% • Taxes on goods and services (basic and lowered rate, 19% and 9% in CR) • Exchange rates, tariffs • Fixed and variable cost • Price strategy in other markets (standardization vs. differentiation –may be needed if low buying power, different costs etc) • Competition (developed countries punish cartel prices) • Pressure of retailers (trade support) • Demand (limiting production can create exclusivity) • Image / positioning

23. LESSON 3: INTERNATIONAL MARKETING • PRICING STRATEGIES: • Price skimming:short-term high price than lowering, typically for a completely new product/service high launch price (to return cost on development), firm gains monopoly advantage, than lowers the price as competition comes • Often for trendy, branded products …. computer games, apple iPhone • Premium pricing:long-term maintenance of higher price, high quality brand and image, association with exclusivity and prestige (Nike, Prada, Chanel…) • Penetration price strategy: low prices to quickly penetrate markets, get high market share, high volumes (results in lowering production costs/pcs). • Precondition is that the category has high price elasticity, firm has high production capacity. • Potential threat is price war with competition, or lower trust of customers • Often used by Asian manufacturers • Transfer prices: large int’l firms use internal purchasing – subsidiaries buy from mother company (global suppliers) to realize financial economies (keep profits in countries with low income taxes)

24. LESSON 3: INTERNATIONAL MARKETING • PROCESS OF SETTING PRICE: • Cost Plus pricing: cost + mark-up • Break-even pricing: cost + mark-up to gain ROI in given time period, no consideration of competition or price elasticity • Value-perceived pricing: marketing approach to prices, offering certain quality to given target segment and based on perceived value, based on positioning and product benefits/image • Value-added pricing: relatively low price for good quality product, showing continuous improvement in delivering quality and value (mobile phone co., PC makers) • Going-rate pricing: taking only in consideration the market leader price and not own cost or demand • In B2B, sealed-bid pricing: price set to win the project, more considering competition than own costs • Other: Dynamic pricing:changing price based on demand (Ryanair), Discriminatory pricing:various price for different customers (mass transit - student/senior prices)

25. LESSON 3: INTERNATIONAL MARKETING • DISTRIBUTION: • Building distribution is a longer term activity and requires lot of resources • Trend: 1. Internationalization and concentration of retailers • Growth of discount retailers (Schwarz: Lidl a Aldi) and Russian / Chinese firms • In EU, concentration highest in Scandinavia, Switzerland, France X lowest concentration inSpain and Italy (globally in Asia) • In CR, share of top 10 retailers 64% (FMCG) • Trend: 2. Effort to be the dominant power in global markets • Strong negotiating power of large retailers … pressure on price, quality, payment conditions, supply process, trade support • Markets where retailers have small share create too high cost – leaving WM in US, 30% share

26. LESSON 3: INTERNATIONAL MARKETING • DISTRIBUTION: • Trend: 3. Diversification strategies of retailers – more than one store concept • Supermarket: 400 – 2 000 m2 , 4 000 items, mostly food • Hypermarket: 10 000 m2 , 30 000 items • Discount stores: 600 m2 , 600 – 1 500 • Convenience stores, Department stores • Pharmacy, Drug stores, Direct sales • Also diversification of theirPrivate label brands • Private label share on store sales: Schwarz 60%Tesco 50%WM 40%Carrefour 36%

27. LESSON 3: INTERNATIONAL MARKETING

28. Next Session Key topic areas:  • International trade development, role in the economy, benefits for companies • Entry modes for international business and developing international strategies • International marketing • Marketing Research; Creating and leveraging knowledge + finishCommunication • Managing business plans; Managing HR Home work: Readings • Local Memoirs of Global Manager Case Studies McKinsey & Co: Managing Knowledge and Learning (Nike presentation)