International Marketing Channels

International Marketing Channels

What are the three major components of a product? Discuss their importance to product adaptation. The three major components of a product are: (1) its core, the physical product and all its functional features; (2) the packaging component that includes the physical package in which the product is presented, as well as the brand name, trademark, styling and design features, price and quality levels; (3) the support services component, which completes the product buyers receive and from which the bundle of satisfactions received are derived. This support services component includes repair and maintenance services, installation, delivery, warranty, spare parts, training and instructions, credit, and any other services related to the use and purchase of the product. The importance of each component, as well as the perceived component attributes are functions of culture. What may be desirable in one culture may be unimportant in another. A product is, in a large part, a cultural phenomenon; that is, culture determines the individual’s perception of what a product is and what satisfaction that product provides. Therefore, in developing products for international markets, adaptation of that bundle of utilities or satisfaction received may be necessary to bring the product in line with the culture’s needs. Such adaptation may require changes of any one or all of the product components as defined above.

  1. How can the knowledge of the diffusion of innovations help a product manager plan his international investments?

Knowledge of the diffusion of innovation provides the international marketer with several important pieces of information; for example, a knowledge of the concept may provide the marketer with an estimate of the time it will take before his innovation would be accepted by a culture, and therefore help him decide whether or not to make the necessary investment. It can also give him insights into how to accelerate the rate of acceptance of his product and the steps that he as a marketer can take to eliminate some of the “newness” thereby gaining more rapid acceptance of his product. In preparing characteristics of innovations study of the new product, he or she might determine a product profile which could be extremely useful as a model for planning product strategy. By analyzing the product in terms of those attributes which contribute to its newness (or innovativeness) the marketer’s attention is focused on those factors which give rise to resistance; thus, the marketer can estimate the possible rate of adoption and perhaps effect the rate of adoption of an innovation by changing its characteristics through physical modifications, advertising, and/or sales promotion efforts.

  1. Old products (that is, old to the U.S. market) may be innovations in a foreign market. Discuss fully.

It is important for the marketer to appreciate that a product which has gained acceptance and is now at the top or perhaps even in the declining stage of the product life cycle, may be perceived in another culture as a new and, in fact, very innovative product. The marketer must guard against assuming that an “old hat” in one market which has achieved acceptance after many years of exposure and learning and adaptation on the part of the culture toward the product can be transferred to another culture with its learned acceptance intact. In fact, the “old hat” may be so outside the experience of the new market that the marketer will have to start at the beginning of the assimilation process.

  1. “. . . If the product sells in Dallas, it will sell in Tokyo or Berlin.” Comment.

Basically, the needs and hence the demand for a product are the same in all markets. Similarities in wants are universal and, as income increases, practically everyone desires the “good life.” The important aspect to consider is that in crossing one culture to another, separate characteristics of nationality and stages of economic and industrial development determine consumer behavior to a great extent. Hence, each group’s interpretation of the “good life” as reflected in consumer behavior relates heavily to cultural heritage. Thus, the statement can be very wrong and represents an attitude which has frequently led to international market failures.

  1. How can a country with a per capita GNP of $100 be a potential market for consumer goods? What kinds of goods would probably be in demand? Discuss.

A country with a low GNP can have a large demand for consumer goods because of the need that exists for certain products and because there are no production facilities or very limited ones within the country. India, for example, has a per capita income of $58/year, yet its imports were about $2.4 billion in 1963. The type of goods that likely are in demand are the more basic type of consumer goods, such as clothing or basic housing needs.

  1. Discuss the characteristics of an innovation which can account for differential diffusion rates.

The characteristics of an innovation which can account for differential diffusion rates are: (1) relative advantage, (2) compatibility, (3) complexity, (4) trialability, and (5) observability. Relative advantage is the degree to which an innovation is better than the products it replaces or with which it competes. Compatibility is concerned with how consistent a product is with existing value and behavior patterns. Complexity refers to how difficult it is to understand and use the new product. Trialability is the degree to which a product may be tried, on a limited basis, without complete commitment to the product. And, observability refers to the ease with which the results of an innovation may be communicated to others.

  1. Give an example of how a foreign marketer can use knowledge of the characteristics of innovations in product adaptation decisions.

An answer to this question should be based on the 5 characteristics (listed just above) that influence diffusion rates of new products: relative advantage, compatibility, complexity, trialability, and observability. For example, consider selling smart phones in India. For the urban, high-income segment that frequently uses the computer and Internet, little adaptation would be necessary. However, for the rural population the relative advantages of the product (apps, etc.) may not be useful, signals may be weak reducing compatibility, complexity may be too great, and infrastructure for product trial inadequate. Substantial product adaptations would be necessary for all these reasons. Similar problems would be encountered for introductions of the latest medical equipment and instruments in several markets around the world.

  1. Discuss “environmentally friendly” products and product development.

Germany has a strict Eco-labeling program to identify, for the concerned consumer, products that have a lesser negative impact on the environment than similar products. Under German law, a manufacturer is permitted to display a logo, called the “Blue Angel,” on all products that comply with certain criteria that make it environmentally friendly. More than 3,200 products in 58 product categories have been examined and given the Blue Angel logo. While it is difficult to judge the commercial value of a Blue Angel designation, manufacturers are seeking the eco-label for their products in response to growing consumer demand for environmentally friendly products. Similar national labels are under discussion in France, Denmark, the Netherlands and the United Kingdom. The EC Commission issued guidelines for eco-labeling that became operational in October 1992. Under the EC directive, a product is evaluated on all significant environmental effects throughout its life cycle, from manufacturing to disposal, a cradle-to-grave approach. Companies will be encouraged to continuously update their environmental technology because eco-labels will be granted for only a limited period. As more environmentally friendly products come onto the market, the standards will become tougher, and products that have not been improved will lose their eco-label.

The “Blue Angel” and similar eco-labels are awarded on the basis of a product’s environmental friendliness, that is, how “friendly” when used and when its residue is released into the environment. A detergent formulated to be bio-degradable and not pollute would be judged more friendly than a detergent whose formulation would be harmful when discharged. Aerosol propellants that do not deplete the ozone layer are another example of environmentally friendly products. No country’s laws yet require products to carry an “eco-label” to be sold. The designation that a product is “environmentally friendly” is voluntary and its environmental success depends on the consumer selecting the “eco-friendly” product. However, laws that mandate systems to control solid waste management, while voluntary in one sense, do carry penalties in that consumers may not select their products.

Chapter 15 – International Marketing Channels
Teaching Objectives
In some markets the distribution system may be the single biggest impediment to successful marketing. An inadequate distribution system may make the cost of reaching some consumers so high that it puts the price of the product out of reach of the market. In China, for example, the market for a product that exists in areas outside the major urban centers is often inaccessible because of a lack of a viable distribution system. In others, the distribution system may be so structured and difficult to enter that is serves as a major non-tariff barrier. Although beginning to show signs of weakening, the hold that wholesalers and manufacturers have over many small retailers and laws that protect the system make the distribution network almost inaccessible to an outsider. The broad focus of this chapter is to present an overview of a range of distribution systems that confront an international marketer. The teaching objectives are to:

1) Present the variety of distribution channel structures and show how they affect cost and efficiency in marketing.

2) Examine the Japanese distribution system as it exists today, changes that are rapidly occurring, and speculate on the eventual changes that will come about there.

3) Detail both the home country and foreign country middleman alternatives available to an international marketer.

4) Discuss the factors affecting the choice of a channel.

5) Review the methods of locating, selecting, and motivating channel members.

Comments and Suggestions

  1. To illustrate the extreme channel structures that can confront an international marketer, I like to begin the discussion of this chapter with a comparison of a channel structure with a minimum number of middlemen (import-oriented distribution structure), the channel structure found in the United States, and the Japanese distribution system. This discussion provides students with a comprehensive view of some of the types of channel structures confronting the international marketer.

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