1. Identify the main advantages and risks associated with the introduction of products and services to international markets.
Introduction of goods in the international market causes faster growth. Firms, which operate in the international market, tend to have a quicker pace of growth as compared to the ones that operate locally. Fast growth is realized because of the consistent market force offered there. This is advantageous because fast growth translates into profitable investments that deliver results. International interactions bring about other new market opportunities. This market has a large population that is in need of service, therefore, they create a market demand for a particular item. It is through this large number that more opportunities for income making and expansion of a firm are realized. In essence, the international market has a bigger market that has more customers, an increased profit margin allowing the business to realize the economies of scale.
It increases domestic competitiveness. Many who are in the field want profit making, thus they tend to produce more and unique products in order to keep their demands up. With such a scenario, the competition promotes the affected nation too. Other individuals are challenged to get involved in this venture.
Insisting on quality and efficient products is crucial in the international business. Through this exposure to the foreign competition, increased efficiency is acknowledged. Selling goods in the global market has to have higher quality compared to the locally produced; this contributes towards advantage in the market. Customers will not buy substandard items, therefore, products must meet the needed standards for competitive purposes.
There is accessibility to cheaper labor and raw materials. It is always beneficial that the firm cuts down on costs like labor force expense and raw material too. Obtaining labor from here means that a number of workers want the jobs, thereby this cuts down on their demands due to the competition within themselves. Raw materials are key in many firms and industries the fact that this global market is there providing a source of cheaper raw materials. For instance, the availability of timber in the international scene is quite extensive giving options to the buyer.
There is diversification in goods and products sold. It is imperative that the local demand is cancelled because a wide variety of products is produced. This means that as times and seasons change, there is the buying of products of different types and not just one product. The risk of producing only one or few is that when the demand is low the firm suffers loss or stalled growth. The company, therefore, does reduce swings in their sales and profit through diversification.
Participation in the international business has got risks that go along with it. These risks do not hinder the investment in the field whatsoever. There are increased costs for the firm. Whenever a firm wants to join the international world they run the risk of spending too much on reestablishing the whole system. These usually range from more laborers to information and communication. These operating expenses are a strain to the company’s financial ability.
With the global market, there is a risk of delayed payments. Dealing with this payment process is a little cumbersome and slow, for payment delays the company has to wait for a long time away from the date for transactions. This is common in countries that have a lower GPO, they cannot access their money until proper transactions are made this is due to development challenges. Delayed payments will affect the firm’s planning thereby derailing their agendas.
There is a risk of complex structure systems. For indulgence in the business, the firm has to change their current structure to suite the international requirements. This usually demands a whole retraining or training on management so as to facilitate structuring. Foreign and new regulations and standards are implemented. Firms and companies may need to adapt to the new standards of the market. These changes are production process of the firm, packaging and inputs and also incurring additional costs. Thus, it is possible that a total conformity might render the firm unstable in the initial stages thus failing in the venture.
2. Identify the main types of barriers to entry evident in international markets and explain how they can affect international marketing activities.
Barriers to entry are those factors that are responsible for inhibiting other party involvement in marketing. First, advertising is a barrier to entry in the international market. This is because other prosperous firms tend to spend exorbitantly on their advertising such that smaller ones cannot beat their records. Known as the market theory of advertising, the incumbent firms thus make it hard for new firms to afford this. It is through this that a particular brand of a firm becomes popular, thereby new brands from new firms cannot be substituted with the loved one. In this case, it becomes hard to gain the consumer acceptance.
The capital is needed for establishment. For a successful business investment the need for sufficient capital is vital. The point is that without capital, the involvement in the international market cannot be achieved. Taking into account the example of buying building material and labor payment too, it becomes obvious that without it no progress can be realized, because this involvement has high costs of establishment. With such a barrier, it is clear that the expected growth of the market is not realized, so other firms struggle then fail. This results in reduced marketing activity, thus poor market growth is realized.
Another barrier is the control of resources by a firm. One particular firm is responsible for the material (resource) needed for the industry rendering others helpless. It is true that many will monopolize the resources to the disadvantage of others, creating an imbalance among them. These new firms cannot kick off their work without the resource for an industry hence does not compete in the field.
Customer loyalty is also a barrier towards entry. The large and well-doing firms might have their own customers who are dedicated to only buying their products. This loyalty does not extend to other firms; therefore, the new firms find little or market force for their products. Collapsing of the new companies is due to lack of an even ground to compete.
It becomes difficult for the new companies to establish that customer bond, therefore, it discourages them from the business. This gesture results in the trusted firm developing while the others deteriorate, thus the general market strength falls. The economy of scale is another barrier. This is the ability of experienced, large companies making products at a lower cost than the small counterparts. The cost advantages are sometimes reversed by the technological advances. This is where for instance, small companies utilize the products once frightfully expensive like the personal computer, only owned by the large companies now is being used by all firms.
Government’s regulations and policies constitute another barrier. With the involvement of the government in this venture, it becomes difficult or even impossible to join the global market. Through ways like the introduction of licenses and tax, the government may make the initial process so expensive that it becomes difficult for entry. This move can be done through illegalizing competition and establishment of statutory monopoly that hinders entry into the market. Such a move would translate into complicated system of the market that will only pull a few hence reduced rate of trading thus poverty in some cases.
Predatory pricing is another barrier. This setting of loss prices for large companies for a long time so that to capture the customer. This cannot be done by the small companies due to the fact that it will cause loss unlike the large firms that can live with the loss. The common name for this is damping, nevertheless it is an illegal business gesture but possible to carry out.
3. Distinguish between differentiated, undifferentiated and concentrated market segmentation strategies and summarize their value to Marketing Management.
Differential marketing strategy is when a particular company creates its campaign, which at least appeals to two market segments or rather target groups. For instance, a company produces goods that appeal to at least two age sets. The differentiated strategy can target more than two parties more to this is that this strategy can also use different messages in the same campaign. Undifferentiated marketing strategy is set to focus on the whole target and not a segment. This uses the employment of a single marketing mix that reaches the most number of customers in the market. With this market strategy, the marketer has to posses the ability and skill to reach out to a large group of people.
On the other hand, concentrated market strategy targets one specific market audience. For instance, a company offers to produce boy’s shirts and sells them at a particular town. They are directed to a small group of people because of the small segment. In comparison with undifferentiated strategy the use of the same message for all market segments is implemented. The message here is aimed at appealing everyone which is similar to mass marketing but simpler. The significance of these strategies is to help in identifying which services are more successful. It is conducted through the analysis of the market and through the division into segments that offer an insight to this. One is able to understand where they should expand their investments for a segment. In addition, it offers precision on how to deal with the prospectus and the efforts to reach them.
4. Discuss THREE pricing methods widely used by Marketing Managers for products and services in highly competitive markets.
Cost–based pricing strategy is made up of three methods:
· The mark-up pricing (this includes a profit percentage that goes with the production cost)
· The cost-plus pricing (done through adding a percentage to an unknown cost)
· The planned-profit pricing (a blend of the total profit obtained and production cost)
All types of cost-based pricing add up accurately if there is the use of a complete cost subtotal. Ensuring that all the cash and noncash costs are all included in the product cost subtotal. Using land or capital must also be added along with the depreciation and these values are summed up in the product cost subtotal. Mark-up pricing, is favored tremendously by business because it is easy to calculate. The percentage obtained is the profit level for the business that is added to the cost of production in order to set product price. Taking into consideration the Band Wild company case, the company makes up to fifteen different jams and jellies, furthermore, they decide to set up a shop in the near mall to market their goods along side others. Wild blueberries go for $1.50 in a jar per 250ml to produce. Mark-up pricing has forty per cent as the percentage, eventually the jam costs $2.10 in the same shop.
Cost-plus pricing is known to work well where the production cost is unknown. It is similar to the mark-up pricing though cost-plus pricing involves both the buyer and seller settling on the profit and agreeing that the production is unknown. It is known to reduce the risks in cases of custom order products for individuals. Taking into account this example, an employee agrees to work as a co-packer in a snack food joint. He is expected to purchase required ingredients, but he is unsure of the input costs, he signs a contract to pay for the material costs and also a processing amount of $25.
Planned-profit pricing is the blend of production cost and the total profit earned. This method serves to ensure earning of the total amount of profit. Quite different from the others which focus only on per unit basis while this caters for the general profit amount. It combines output projections with per unit costs to obtain product price. Demand controls the production , thus the manufacturer sometimes tend to lower or increase it.
Customer-based pricing has got penetration, predatory pricing and psychological pricing in it. Looking at penetration pricing, it purposes to share the market for the product in turn providing an opportunity to boost the price. It is termed as a technique of setting low entry price at first for the attraction of new customers. Penetration is associated mostly with a marketing objective of boosting market sales volume. A favorite for the introduction of new products to the market with the aim of acceptance by the buyer thus lower price is used. Predatory pricing that is illegal is done through setting prices deliberately low by dominant firms so that then element of competition is eliminated. Psychological pricing is setting up of prices that appear to be unusual prices, for instance, a commodity is marked $4.99 in order to cause the perception of a little cheaper than $5. The price being one penny lower is still perceived cheaper.
Competitor-based pricing involves a critical assessment of the prices of commodities brought by competition. Customers will only purchase products if the prices are cheap or reasonable in the market. While competing, most firms cannot set there prices above others but tend to rotate around the mean, this is done to pull customers because no customer will buy expensively. It is considerate to the whole group because the prices are almost the same.
5. Explain what you understand by the following marketing terms:
a) Intensive distribution strategy
Intensive distribution is the marketing strategy where a firm sells through as many outlets as they can. Therefore, the products get distributed everywhere; the customers encounter them a lot in supermarkets, malls and shops too. Good examples of products that are sold intensively are soft drinks.
b) Exclusive distribution strategy
Exclusive distribution strategy is the marketing strategy which offers the power to sell products in specific geographical areas. It is mostly used for high-priced merchandise like cars where territorial rights are granted to the manufacturers for selling the product. This is beneficial to both the retailer and the manufacturer; retailer does not meet competition while he offers commitment. Additionally, this gives greater control for the manufactures ability to control products.
c) Physical distribution
Physical distribution is defined as the planning, control and planning of activities involving procurement and the distribution of commodity. It is majorly concerned with the supply of goods to the consumer from the production operation. This mostly occurs within retailing, and wholesaling channels; inventory control, protective packaging, order procession and customer service are significant areas. Physical distribution is part of a bigger process called distribution including the physical movement of goods.