GMS 522 Review.pdf

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Ryerson University
Global Management Studies
GMS 522
Jian Guan

GMS 522 Exam Review The Promotional The tools the global marketer has available to form a total Mix communications program for use in the targeted markets. - Advertising - Publicity & PR - Sales promotion - Sponsorship Global Advertising Advertising that is fairly uniform across many countries. Multidomestic Advertising deliberately adapted to particular markets and Advertising audiences in message and/or creative execution Publicity Any form of nonpaid, commercially significant news or editorial comment about ideas, products, or institutions. Public Relations Public relations is the marketing communications function charged with executing programs to earn public understanding and acceptance. Sponsorship The practice of promoting the interests of the company by associating it with a specific event (typically sports or culture) or a cause (typically a charity or a social interest). Audiences Suppliers, intermediaries, government, the local community, bankers and creditors, media organizations, shareholders, and employees. Global Distribution Channels - The firm sells directly to customers through its own field sales force or through electronic commerce. - The company operates through independent intermediaries, usually at the local level - The business depends on an outside distribution system that may have regional or global coverage. McCain Foods/AmeriCold in US Channel Design Length – the number of levels or different types of intermediaries in the channel. Width – the number of institutions of each type in the channel. 11Cs Customer characteristics Demographics and psychographics Distribution culture Japanese keritsu system Competition Channels in the country may be blocked by domestic competitors. Company Objectives Must meet objectives for profitability/ market share Character Nature of the product Capital Financial requirements to set up channel. Resources determine degree of channel ownership. Cost Cost involved in maintaining the channel once established. Coverage Number of areas where product is represented and quality of representation. Control Use of intermediaries is associated with loss of control. Continuity Distributor relationships need to be nurtured for the long term Communication Distance complicates communication in international channels. Need to consider: Social distance – familiar with partner’s ways of operating Cultural distance – working method differ because of differences in national culture Technological distance - product or process technologies of the partners may differ Time distance – time between initial contact and delivery of product or service Geographic distance – physical distance Grey Trade The grey trade, or parallel distribution, refers to the sale of authentic and legitimately manufactured trademarked items by intermediaries other than authorized channel members. Range of products affected: Inexpensive consumer items e.g. watches Expensive capital equipment e.g. earth moving equipment Supply Interference Engaging in relationship building with distributors and requesting the careful screening of orders and careful disposal of surplus inventory Dealer Interference Searching for gray imports at the gray traders’ outlets in the importing country, then asking the dealer to help dispose of the inventory Demand Using advertising to educate customers about the Interference drawbacks of gray goods. Strategic Attack Creating stronger reasons for customers to patronize authorized dealers Corporate Financial Objectives Targeted ROI Marketing related Increase/defend market share Pricing situation Nature of product – innovation/standard Adjustments due to customers and competition Price controls Max. price that can be charged set by gov’t. Polycentric pricing The firm sets prices in each country market independent of headoffice involvement. Advantages? Disadvantages? Subsidiaries are completely free to make pricing decisions based on the unique market and competitive conditions in their country. Downside – arbitrage opportunities Geocentric pricing The firm establishes a minimum floor price below which the strategy product cannot be sold by its subsidiaries in any country. Managers are, however, allowed to add a country markup to better reflect demand and competitive conditions in their national markets. Advantages? Disadvantages? Pricing is responsive to local market conditions Price arbitrage is still possible▯ Ethnocentric Single worldwide price is set and country managers have pricing strategy no latitude to tailor these set prices to local conditions. Advantage? Disadvantage? Pricing no longer responsive to local market conditions No arbitrage possibilities Transfer Pricing: The pricing of sales to members of the extended corporate family. Also referred to as intracorporate pricing. - Minimization of the firm’s global tax burden - Offset rampant inflation in country in which subsidiary operates - Competitiveness - Motivation of subsidiary managers Standard worldwide One price for foreign importers/intermediaries regardless of price country. Dual pricing Domestic and export prices differentiated. Cost-driven Export prices based on: approaches Full allocation of all domestic and foreign costs (cost plus method) – Competitiveness? Marginal cost – considers only the direct cost of producing and selling for export. Disregard FC and all other costs associated with selling domestically. ▯ Market- Export pricing according to the dynamic conditions of the differentiated marketplace. Price varies based on: pricing Price Escalation The combined effect of export related costs is that export prices will usually be higher than domestic prices Cash in advance The most favorable term for the exporter because it relieves the exporter of all risk and allows for immediate use of the money. It is not widely used. Letter of credit An instrument issued by a bank at the request of a buyer. The bank promises to pay a specified amount of money on presentation of documents stipulated in the letter of credit, usually the bill of lading, consular invoice, and a description of the goods. Open Account The normal manner of doing business in the domestic market. Exporter is at risk for non-payment but favorable for the importer. Consignment sales The most favorable term to the importer. Allows the importer to defer payment until the goods are actually sold. Countertrade The term for transactions in which all or part of the payment is made in kind rather than cash. Reasons: - Exchange controls in some developing countries - Debt problems - Inability to obtain trade financing Barter goods are exchanged directly for other goods of arrangements approximately equal value Counterpurchase The participating parties sign two separate contracts that specify the goods and services to be exchanged. Some amount of cash will be involved as products are not of equal value. Buyback - One party agrees to supply technology or equipment that enables the other party to produce goods with which the price of the supplied products or technology is repaid Offset Company agrees to offset a hard currency sale to a country by making a hard currency purchase of an unspecified product from the country at some time in the future Localization Changes required for the product to function in the specific foreign country. Telephone jacks in NA, Eastern Europe and Africa are different. Localization avoids having potential customers reject the product out of hand. In many products, localization is accomplished by building in compatibility with multiple systems at the outset. Adaptation Changes are made to the product in order to better match consumer tastes and preferences. Adaptation provides consumers with a reason to purchase the foreign product over the domestic. Fade-in/fade-out Gradual option is the most common. Here the global brand is linked to the local brand for a time, after which the local brand is dropped Summary axing The firm simply drops the local brand name and introduces the new brand Focus groups Offer the development team a chance to hear spontaneous reactions to a new concept and hear suggestions for improvement Counterfeit Defined as any product bearing an unauthorized Products representation of a trademark, patented invention, or copyrighted work that is legally protected in the country where it is marketed Foreign Market Assessing the market potential of prospective countries Entry Requirements Evaluating and selecting a mode of entry Assessment of the firm’s capability to operate in the selected environment. Systematic Market Systematic market selection involves formal strategic Selection planning, market research, consideration of many country options and entry mode options, developing contingency plans and setting long term objectives. Cultural distance Anything which disrupts the flow of information and knowledge between host and home countries). Country Selection ( a ) Macro-segmentation ( b ) Preliminary screening – markets/countries assessed based on external screening criteria. ▯ ( c ) Secondary (fine grained) screening – firm’s relative competitive advantage in each market is taken into consideration. ▯ ( d ) Final country selection Macro-segmentation Involves the development of segmentation criteria that can be applied to group countries for marketing purposes. Internationalization Indirect exporter Stages Direct exporter Foreign sales subsidiary Foreign assembly Foreign production
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