INTERNATIONAL

BUSINESS

CHAPTER 11:

MARKETING STRATEGY

Presenter: Nguyen Thanh Huong

 CONTENTS
 Active learning case: Volkswagen in the US market

 International marketing:

- International Market Assessment (P. 312)

- Product Strategies (P. 315)

- Promotion (P. 320)

- Pricing (P. 324)

- Place (P. 326)

 Real case: Citigroup in China (P. 334) 2

 A. VOLKSWAGEN IN THE U.S MARKET

 During 1960s, VW held more market share in US than all other auto imports
combine.
 In the 1970s, VW sales reached 300.000 units annual.
 The 1980s & early 1990s down to 150.000 units  market share down from
3%  0.5% because can’t achieve the cost advantage of Japan.
 March 1998, VW introduced New Beetle with European design  stunning
comeback in US.
 2002, VW delivered over 420.000 vehicles to US, accounted 10.1% of US car
import market & hold 6.6% market share if combine domestic & imports
production.
 However, 20% of VW’s shares are held by the government of Lower Saxony 
prevent VW from cutting labor costs in Germany  pay $1.700 more for
each car  problem when Mercedes & BMW join the market segment.
 VW purchased Skoda, SEAT, Audi, Bently, Lamborghini, Buggati bands & set
out to create synergies in manufacturing processes  makes 54 models in 4 3
floor plants.
 VOLKSWAGEN IN U.S MARKET

1. How would VW use market assessment to evaluate sales

potential for its cars in the US?
2. Does VW need to modify its cars for the US market? Why
or why not?
3. Would the nature of VW’s products allow the company
to use an identical promotional message world wide, or
would the company have to develop a country-by-
country promotion strategy?
4. How would currency fluctuations affect VW’s profit in
the US market?
5. What type of distribution system would be most
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effective for VW in the US?
 B. INTERNATIONAL MARKETING

 International marketing is the process of identifying the goods & services that
customers outside the home country want and then providing them at the right
price & location.
 Similar as at home, but with some important modifications that can adapt
marketing efforts to the needs of the specific country or geographic locale.
 Some MNEs can use the same strategy abroad as they have at home. However,
in most case, a company must tailor-make its strategy so it appeals directly to
the local customer.
 Five major areas:
1. Market assessment
2. Product decisions
4 Ps of Marketing, constitute
3. Promotion strategies the heart of international
marketing efforts
4. Pricing decisions
5. Place/distribution strategies.
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 1. INTERNATIONAL MARKET ASSESSMENT
 International marketing assessment is an evaluation of the
goods & services that the MNEs can sell in the global
marketplace to pinpoint specific offerings and geographic
targets.
 Involves a series of analyses:
a. Initial screening: Basis need & potential
b. 2nd screening: Financial & Economic conditions
c. 3rd screening: Political & Legal forces
d. 4th screening: Sociocultural forces
e. 5th screening: Competitive environment
f. Final selection.
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 INTERNATIONAL MARKET ASSESSMENT

a. Initial screening: Basis need & potential

- Is the process of determining the basic need and potential
of the MNE’s goods and services in foreign markets 
Answer: Who might be interested in buying our output?
- Examining the current import policies of other countries &
identifying the goods & services being purchased from
abroad.
- Determining local production.
- Examining the demographic changes taking place in the
country that will create new, emerging markets.
 MNEs can target potential markets.
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 INTERNATIONAL MARKET ASSESSMENT

b. Second screening: Financial & Economic conditions

- Reduce the list of market prospects by eliminating those that fail to meet financial &
economic considerations.
- Financial considerations include: inflation rates, interest rates, expected returns on
investment, buying habits of customers, availability of credit.
- Economic considerations relate to a variety of market demand influences, including
market indicators (market size, market intensity, market growth) to measure the relative
market strengths of various geographic areas.
 Quite often these data are analyzed through the use of quantitative techniques:
• Trend analysis: The estimation of future demand by either extrapolating the growth
over the last 3 to 5 years & assuming that this trend will continue or by using some
form of average growth rate over the recent past.
• Estimation by analogy: A method of forecasting market demand or market growth
based on information generated in other countries.
• Regression analysis: A mathematical approach to forecasting that attempts to test
the explanatory of a set of independent variables.
• Cluster analysis: A marketing approach to forecasting customer demand that
involves grouping data based on market area, customer, or similar variables. 8
 INTERNATIONAL MARKET ASSESSMENT

c. Third screening: Political & Legal forces

- Take a look at political & legal forces by examine the entry barriers in the form of
import restrictions or limits on local ownership of business operations 
identifying loopholes around the various restrictions or data that indicate barriers
are far less extensive than initially believed.
- Another consideration is the protection offered for patents, trademarks,
copyrights.

d. Forth screening: Sociocultural forces

- Sociocultural forces: language, work habits, customs, religion, value  great
affects the way people live  MNEs need to examine how well their operations will
fit into each particular culture.

e. Fifth screening: Competitive environment

- Companies don’t want to enter markets where there is strong competition.
- However, they often decide to enter a competitive market.

f. Final selection:
- Before making a final selection, MNEs usually enhance information by visiting the
sites & talking to trade representatives or local officials.
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 2. PRODUCT STRATEGY
 Product strategies vary depending on the specific good & the customer.
Some products can use same strategies, others must be modified or
adapted & sold according to a specially designed strategy.

Selected examples of product modification in the international arena 10

 PRODUCT STRATEGY

 Moderate to high modification: Economics, culture, local laws & product life
cycle (PLC) can compel an MNE to use moderate to high product modification.
• Economics: Affect the decision to modify a product (how to package, cost of the
product, basic product or have extras)
• Culture:
- A product sometimes be adapted to different ways of doing things (Exp: Washing
machines)
- Products that aren’t modified  marketing focus is different because of different way
to use it (Exp: Schweppes, hard liquors)
- Culture influences purchasing decisions on the basis of style or aesthetics (Exp:
Cosmetics, beauty aids)
- Convenience & Comfort (Japanese car vs. VW Beetle)
- Color & Language

• Local laws: Require product modification in order to meet environment & safety
requirements. Food & pharmaceutical require packaging & labeling different in
different countries. Brand-name protection also require product modification.
• Product life cycle (PLC): One of the most effective strategies has been to shorten the
PLC by offering new goods & services before the demand for the old ones has 11
dropped significantly.
 3. PROMOTION STRATEGY
 Promotion is the process of stimulating demand for a
company’s goods & services through advertising &
personal selling. The specific approach used will be
determined by the nature of the product.
 Nature of the product: In promoting, a company can choose
whether to use the message worldwide or not, and whether
need to change the product or not  4 variations:
• Identical product & Identical message
• Identical product but different message
• Modified product but same message
• Modified product & modified message 12
 PROMOTION STRATEGY

 Advertising: is a non-personal form of promotion in

which a firm attempts to persuade consumers to a
particular point of view.
• 2 reasons that advertising must be adapted to
the local market are: (1) different way in using
product, (2) advertising massage doesn’t make
sense if translated directly.
 Personal selling: is a direct form of promotion used to
persuade consumers to a particular point of view. Some
goods, such as industrial products or those that require
explanation or description, rely heavily on personal
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selling. (Exp: Avon)
 4. PRICING STRATEGY
 Pricing often influenced by government controls,
market diversity, currency fluctuations & price
escalation forces.
• Government controls: (1) Dictate minimum & maximum
prices that can be charged to customers. (2) Prohibit
dumping (the selling of imported goods at a price below cost
or below the cost in home country)
• Market diversity: (1) Consumer tastes & demands. (2) The
perceived quality of product. (3) Tax laws & attitudes about
carrying debt.
• Currency fluctuations
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• Price escalation forces
 5. PLACE STRATEGY
 Place strategy involves consideration of distribution. MNEs will
spend time in examining the different system in place, the criteria
to use in choosing distributors & channels, and how to employ
distribution segmentation.
• Different distribution systems:
- Consumer spending habits can negate attempts to standardize distribution:
cash or credit.
- Location where consumers are used to buying also influence distribution:
supermarket or small stores.

• Choosing the best distribution system:

- Strong in financial wholesaler or retailer  can survive the long run.
- Can keep sufficient inventory: autos, computers, electronic equipment
- Well connected  knowing the right people, handling government red tape.
- The number & types of product lines the distributor carries currently. 15
 VOLKSWAGEN IN U.S MARKET

1. How would VW use market assessment to evaluate sales

potential for its cars in the US?
- Look at the numbers of cars being imported into the country &
number being built locally  information of current product
supply.
- Find out number of auto registrations & how fast it is growing
annually  useful in predicting new sales potential.
- Examine the trend of new car sales over last couple of years &
forecast overall industry sales for the next 2 or 3 years.
- Compare the strengths offered by VW cars and by other
competitors  offer for maximum market penetration.

2. Does VW need to modify its cars for the US market? Why or

why not?
- Yes. VW need to make some changes in styling & engineering: 16
European styling & German engineering.
 VOLKSWAGEN IN U.S
MARKET

3. Would the nature of VW’s products allow the company to use an identical
promotional message world wide, or would the company have to develop a
country-by-country promotion strategy?
- In less developed countries  message should be geared toward economy &
efficiency.
- In more developed countries  focus on styling, handling, engineering and
non-economic factors.

4. How would currency fluctuations affect VW’s profit in the US market?

- German Mark were to decline  VW’s profit per car sold in US would rise
because these $ would buy more Marks & vice versus.

5. What type of distribution system would be most effective for VW in the US?
- Use same type of distribution system with other car manufacturers.
- Open new dealerships  increase market coverage.
- Build VWs in the US  reduce the distance of transporting  reduce cost and
also ensure faster delivery.
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THE END

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