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A Review of Marketing

A Review of Marketing. The International Marketing Task. 7. Foreign environment (uncontrollable). 1. Economic forces. Political/legal forces. Domestic environment (uncontrollable). 2. 7. Competitive structure. Political/ legal forces. Competitive Forces. (controllable).

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A Review of Marketing

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  1. A Review of Marketing

  2. The International Marketing Task 7 Foreign environment (uncontrollable) 1 Economic forces Political/legal forces Domestic environment (uncontrollable) 2 7 Competitive structure Political/ legal forces Competitive Forces (controllable) Cultural forces Environmental uncontrollables country market A Price Product 3 Channels of distribution Promotion Environmental uncontrollables country market B 6 Level of Technology Geography and Infrastructure Economic climate Environmental uncontrollables country market C 4 5 Structure of distribution

  3. What is Marketing? • Marketing is much more than advertising and selling • For individual organizations, marketing is as all decisions and activities involved in getting and keeping customers • Comparative Advantage: The Basis for Exchange

  4. Comparative Advantage: The Basis for Exchange • Land of shirts and shorts - David and Hugo • David spends all his day making shorts - 6 pairs a day • David spends all his day making shirts - 6 pairs a day • Hugo spends all his day making shorts - 6 pairs a day • Hugo spends all his day making shirts - 10 pairs a day

  5. Comparative Advantage: The Basis for Exchange • Hugo has absolute advantage in shirt production (10/6) • Neither person has absolute advantage in shorts production (6/6) • Comparative Advantage for shorts • David - ratio of shorts to shirts = (6/6) = 1.0 • Hugo - ratio of shorts to shirts = (6/10) = 0.6 • David has relative, or comparative, advantage in shorts production • Comparative Advantage for shirts • David -ratio of shirts to shorts = (6/6) = 1.0 • Hugo - ratio of shirts to shorts = (10/6) = 1.6

  6. Comparative Advantage: The Basis for Exchange • When Comparative Advantagesin production exist, total production will be higher if everyone specializes in their areas of comparative advantage. • E.g. If Hugo and David each spend half their time on shorts and half on shorts, and can produce half the goods in half the time, they will produce: Shirts Shorts David’s production 3 3 Hugo’s production 53 Total Production 8 6

  7. Comparative Advantage: The Basis for Exchange • If Hugo and David completely specialize in their area of comparative advantage, they will produce: Shirts Shorts David’s production 0 6 Hugo’s production 100 Total Production (+2) 10 6

  8. Comparative Advantage: The Basis for Exchange • But Hugo has no pants!! • To realize higher production and still be fully clothed, they need to exchange shirts for shorts. • The terms of trade must be mutually beneficial to motivate both David and Hugo to participate. E.g. if the exchange rate is set at 3 pairs of shorts for 3 shirts David starts with 6 pairs of shorts David trades 3 pairs of shorts for 3 shirts David finishes with 3 pairs of shorts and 3 shirts Hugo starts with 10 shirts Hugo trades 3 shirt for 3 pairs of shorts Hugo finishes with 7 shirts and 3 pairs of shorts Why incur cost of trading?

  9. Comparative Advantage: The Basis for Exchange David starts with 6 pairs of shorts David trades 3 pairs of shorts for 5 shirts David finishes with 3 pairs of shorts and 5 shirts Hugo starts with 10 shirts Hugo trades 5 shirts for 3 pairs of shorts Hugo finishes with 5 shirts and 3 pairs of shorts • Change exchange rate to facilitate trade • Half the shirts are traded for half the shorts - 5 shirts for 3 pairs of shorts Why incur cost of trading? • We can expect this market to move to an exchange rate somewhere around 4 shirts for 3 pairs of shorts • That exchange rate will produce: Hugo starts with 10 shirts Hugo trades 4 shirts for 3 pairs of shorts Hugo finishes with 6 shirts and 3 pairs of shorts David starts with 6 pairs of shorts David trades 3 pairs of shorts for 4 shirts David finishes with 3 pairs of shorts and 4 shirts Both David and Hugo end up with one shirt more than they would have it they worked alone.

  10. Principles of Economics Illustrated • Comparative advantage in production motivates specialized production (to achieve higher total production). • Specialized production results in “discrepancies of assortment” which must be resolved through trade. • The exchange rate in trade must benefit all parties to motivate participation

  11. Barriers to Trade • Comparative advantage lays a foundation for economic exchange but it does not guarantee trade (even if the proper exchange rate is set). • Hugo and David might refuse to trade for social, moral, or political reasons. • International Business - Tariffs, quotas, embargoes • Even if Hugo and David are willing to trade, the costs of trade may exceed the benefits. If the costs of trading exceed the value of two shirts, Hugo will not trade.

  12. Sources of Trading Costs • Trading costs stem from various “market making” activities that are needed to arrange and complete economic transactions. • Communication • Negotiation • Transportation • Storage

  13. Marketing: Micro and Macro levels • Macro Level: • Marketing is the process by which buyers and sellers are brought together and discrepancies of assortments, place, and time are resolved. • Marketing activities include: • Communication to inform buyers and sellers about each other. • Negotiation and consummation of transactions • Transportation of goods from the point of production to the point of purchase. • Storage of goods from the time of production to the time of purchase

  14. Marketing: Micro and Macro levels • Micro Level (The individual organization) • Marketing is all the decisions and activities involved in getting and keeping customers. Marketing Strategy vs. Marketing Operation Marketing Strategy – Organization sets its general direction and objectives Marketing Strategy: • Which product or services should be offered? • Which potential customers are targeted for selling efforts? • How will the organization position itself against competitors? Marketing Operations – Organization attempts to implement its strategy and meet its objectives Marketing Operations • How are the organization’s product or services designed? • How are these products or services priced? • How are these products or services distributed? • How are these products or services advertised and sold?

  15. 4 Ps - Product • Product decisions are all decision which relate to the physical product and/or service offering, including its name, packaging, warranty, and availability. Product dimensions include: • Size of the product • Color(s) of product • Scent of the product • Materials/ composition of the product • Design of the product • Packaging materials • Package colors and package design • Brand name • Warranty • Availability of options • Customizing services • After-sale service offerings • Inventory levels

  16. 4 Ps - Price • Price decision are all decisions which relate to the price of the product, price negotiation, and payment terms. Pricing dimensions include: • Price to end user • Price to distribution intermediaries • Fixed vs. negotiated pricing • Negotiation policies • Credit policies • Credit charges • Payment terms (the amount of time allowed for payment and any discount given for payment on time) • Volume discounts • Introductory allowances • Trade-in policies

  17. 4 Ps - Place • Place (distribution) decisions are all decisions which relate to the places at which the product or service is made available to buyers and the methods by which the product or service reaches those places. Place dimensions include: • Selection of geographic markets • Types of outlets from which end-users buy • Level of competition among end-use outlets • Number of end-use outlets • Required qualifications for end-use outlets • Specific identities for end-use outlets • Types of intermediaries which service end-use outlets • Level of competition among intermediaries • Number of intermediaries which service end-use outlets • Required qualifications for intermediaries which service end-use outlets • Specific identities for for intermediaries which service end-use outlets • Push v. pull policy

  18. 4 Ps - Promotion • Promotion decisions are all decisions which relate to communication with buyers about the product or service, solicitation of purchases, and short-term purchase incentives. Promotion dimensions include: • Size of advertising budget, if any • Selection of all ad media (television, radio, magazines, etc.) • Selection of ad vehicles (Time, Sports Illustrated, etc.) • Ad Scheduling • Ad appeals • Ad executions • Ad allowance (co-op advertising) programs • Size of sales force • Levels of sales force compensation • Method of sales force compensation • Sales quotas at which commissions or bonuses activate or change • Sales territory definitions • Sales force selection and training • Size of budget for consumer promotions • Types of consumer promotions to be used. • Size of budget for “trade promotions” • Types of trade promotions used.

  19. Principles of Marketing Management • Before making any marketing decisions, analyze the buyers – segment the market. • Consider how the market is changing. • Evaluate your strengths and weaknesses, both in absolute terms and relative to your competitors. • Given buyer characteristics, market segments, market trends, and your strengths and weaknesses, choose a marketing strategy that will allow your organization to reach its objectives. • Make product, price, place, and promotion decisions that are consistent with buyer analysis and marketing. • In developing your marketing strategy and programs, share ideas within the organization, study other successful organizations to see how they do it, and pick the best ideas. • Make sure your program is legal and ethical • As part of the implementation process, make sure that everyone in your organization knows your marketing strategy and the role s/he plays in making that strategy work.

  20. The International Marketing Task 7 Foreign environment (uncontrollable) 1 Economic forces Political/legal forces Domestic environment (uncontrollable) 2 7 Competitive structure Political/ legal forces Competitive Forces (controllable) Cultural forces Environmental uncontrollables country market A Price Product 3 Channels of distribution Promotion Environmental uncontrollables country market B 6 Level of Technology Geography and Infrastructure Economic climate Environmental uncontrollables country market C 4 5 Structure of distribution

  21. International Marketing Concepts Concept EPRG Schema Domestic Market Extension (Ethnocentric) Multi-Domestic Market (Polycentric) Global Marketing (Regio/Geocentric)

  22. Examples of Global Marketing Product Design Canon photocopier/McDonalds/Toyota/Ford Brand Name Marlboro/Coke/Pepsi/Mercedes/Caterpillar Product Positioning Colgate toothpaste/Unilever fabric softener Packaging Gillette razors Advertising Strategy Coca-Cola/British Airways/Benetton Sales Promotion IBM Distribution Benetton/United Distillers American Express/Hertz Customer Service

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