An international marketer goes through the same steps in designing a marketing program as domestic marketer. However, the international marketer must decide whether to use a global or customized approach. Careful marketing research must be done to help the international marketer decide whether to modify or maintain domestic product, price, place, and promotion strategies.
We start with the product. The following options can be considered here.
- Extension: Selling the same product in other countries is an extension strategy. It works well for products like Coca-Cola, Wrigley's gum, General Motors cars, and Levi's jeans.
- Adaptation: Changing a product in some way to make it more appropriate for a country's climate or preferences is an adaptation strategy. For example Exxon sells different gasoline blends based on each country’s climate.
- Invention: Designing a product to serve the unmet needs of a foreign nation is an invention strategy. This is probably the strategy with the most potential, since there are so many unmet needs, yet it is actually the least used.
Price. Most foreign countries use a cost-plus pricing strategy. For international firms this can mean their products are priced higher than the local goods. Why? International products must include not only the cost of production and selling, but also tariffs, transportation and storage costs, and higher payments to intermediaries.
Dumping is when a firm sells a product in a foreign country below its domestic price. This is most often done to build a share of the market by pricing at a competitive level. Another reason is that the products being sold may be surplus or cannot be sold domestically, and are therefore already a burden to the company. The firm may be glad to sell them at almost any price.
Some U.S. pharmaceutical firms have sold penicillin, for example, at a lower price in foreign countries than at home. They justify this by saying that R&D costs are not included in foreign prices. Japan has been accused of following a dumping strategy for some of its products in the United States. Its response is that the volume sold here allows economies of scale, the savings of which are passed on to U.S. consumers.
An unusual pricing dimension of international marketing is countertrade, using barter rather than money in making international sales. Although countertrade accounts for only about 10 percent of the world trade, it is growing in importance. An unpleasant aspect of pricing is bribery, the practice of giving or promising something of value in return for a corrupt act. This is a common practice in many countries to reduce red tape and make sales. Although in many countries bribery is an accepted business practice in some international sales, it is officially illegal in all countries.
Place. An international marketer must establish a channel of distribution to meet the goals it has set. The first step involves the seller; its headquarters is the starting point and is responsible for the successful distribution to the ultimate consumer.
The next step is the channel between the two nations, moving the product from the domestic market to the foreign market. Intermediaries that can handle this responsibility include resident buyers in the foreign country, independent merchant wholesalers who buy and sell the product or agents who bring buyers and sellers together. Once the product is in the foreign nation, that country's distribution channels take over. Foreign channels can be very long or surprisingly short, depending on the product line.
1. Give your own examples of product extension, adaptation, and invention.
2. Describe some international marketing price policies.
3. What steps does product placement involve?
4. Three Ps have been mentioned in the text. Using your knowledge from previous texts describe the way the fourth P works in International Marketing.
