1. 7.02 Exemplify how companies develop brand images for consumer markets and the characteristics of international business markets

2. Consumer markets • Consumer needs & wants vary greatly across cultures • Therefore, consumer products companies more likely to use adaptation strategies • Local companies often have advantage over global brands because they understand local consumer market better • Consumer market promotion is moving heavily toward the internet • Web sites for global companies often have the same design across countries, even when using a different language

3. Consumer Market Pricing • Price is what is given up in exchange for receiving a product. • Bartering: Global pricing can use bartering, exchange of one product (good or service) for another product (good or service) • Prices in wealthy countries tend to be higher than in poor countries.

4. Consumer Market Pricing (cont.) • Purchasing power parity (PPP) Global pricing depends on the ability of each market to pay. Purchasing power parity (PPP) measures how much of a product a certain country’s currency can purchase. Pricing for local markets typically uses PPP to establish each price. • Companies have two methods of setting prices in global markets: • Standard global price: difficult to establish because of added distribution costs and taxes, which are different in every market • Local market price

5. Luxury markets • Luxury market would most likely use standard global pricing since individuals with high incomes are more likely to have similar needs and wants and an equal ability to pay • Otherwise, products could be purchased in cheaper markets and returned to the local market as a grey market product

6. Business Markets • Companies that purchase products for the operation of a business or for re-sale. • Five different types of products purchased in a business market: • Raw materials: unprocessed products used to produce other products such as chemicals, minerals or natural agricultural products

7. Types of Business Products • Equipment: capital equipment (land, buildings, major machinery) or operating equipment (less expensive equipment used to operate a business such as computers or telephones) • Supplies: materials consumed in the operation • Component parts: partially completed parts assembled to create a finished product such as a steering wheel or tires on a car • Services: transportation, banking, promotion, accounting, clerical, maintenance

8. How business markets differ from consumer markets • Total sales in business markets are larger than consumer markets • Business markets operate on Derived demand: the demand that comes from the end purchaser • Business markets compete mostly on price. • Exporting is more common in business to business (B2B) markets. • http://www.youtube.com/watch?v=KlnVTlRx4xA • (describes Derived Demand)

9. Industrial Markets • A specific type of business market. Distinct characteristics of industrial markets include: • Classification: markets are segmented by type of product or how products are used in a business. (i.e., automobile parts) • Industrial Buyers: Many cultural differences in motives, authority and negotiating style for industrial buyers in different countries. More complex decisions, more service needs, more value oriented. • http://www.mlb.ilstu.edu/ressubj/subject/business/siccode.htm • (Demonstrates industrial classification system) • http://www.youtube.com/watch?v=7WCA339-7Gw

10. Industrial Markets (cont.) • Characteristics include (cont.): • Relationship Development: Strong links between businesses, strong network of relationships where sellers and buyers are dependent upon each other. • International Orientation: Most industrial relationships are global. Raw materials and component parts are shipped to countries with low labor costs and final products are shipped to consumers worldwide. • Uniformity: Industrial products have much less variation than consumer products.

11. Commodity Products • Goods that cannot be easily differentiated. • Commodity products are traded in global commodity markets with set pricing based on total supply of the commodity and global demand. • Examples are petroleum, grain, minerals and chemicals.

12. Business pricing • Business to business markets are more likely to export. • Export pricing involves tariffs, taxes and expenses for necessary country specific modifications

13. Business pricing (cont.) • Companies often develop a dual-pricing system using the following methods: • Cost-plus method: All export costs are included in the price of the product and a % markup is added to the total cost which can lead to very high prices in certain countries. • Marginal-cost method: Companies look at only the additional cost of materials and labor to produce extra product to sell to that country. This method is used for more competitive markets or when total sales are low. • http://www.youtube.com/watch?v=T0Gdvq7th64 • Marginal cost explained