Incoterms 2010 and International Business - 101
International Business: Environments and Operations, 15e (Daniels et al.)
CHAPTER SEVENTEEN: MARKETING GLOBALLY
CHAPTER SEVENTEEN: MARKETING GLOBALLY
OPENING CASE: Tommy Hilfiger
The Tommy Hilfiger brand has been very successful since its introduction in 1988. The brand became an almost overnight success with creative advertising that created a mental association of the name with other designer brands. International sales account for approximately half of all sales and the company is seeking ways to harmonize its American and European operations and designs. But markets differ and Tommy Hilfiger recognizes some of the issues. European operations are more expensive, and prices are higher in Europe than in the United States due to the need for more design changes in Europe, and the fragmentation of the European wholesale and retail system. In the United States, the retail market is more concentrated and produces greater efficiencies that can be passed on to consumers. Also, in some cases, European consumers were demanding higher-quality materials be used for the clothing. Price differentials between Europe and the United States can bring about a few difficulties such as gray market activity and image problems.
Questions
17-1 The chapter explains five international marketing orientations. Which one applies most to Tommy Hilfiger? Explain why.
The strategic marketing orientation indicates a firm is committed to continually serving foreign target markets and to making incremental product adaptations to satisfy local customers. Similar marketing principles apply in domestic and foreign markets; however, country differences may cause companies to apply these principles differently abroad, such as offering product variations to correspond with local preferences. (LO: 2, Learning Outcome: To be aware of product alterations when deciding between standardized and differentiated marketing programs among countries, AACSB: Dynamics of the Global Economy)
17-2 The chapter explains five elements in the marketing mix (product, pricing, promotion, branding, and distribution). In which of these have Tommy Hilfiger’s operating practices been the most standardized globally? Explain why this has been possible and desirable.
Hilfiger’s promotion and branding strategies have been the most standardized globally. This was necessary as a way to convince stores to stock the products and to convince customers to want it. Because of this approach Tommy Hilfiger has become a global brand with strong recognition and a distribution network in over 90 countries and more than 1000 retail stores throughout North America, Europe, Central and South America, and Asia Pacific. (LO: 2, Learning Outcome: To be aware of product alterations when deciding between standardized and differentiated marketing programs among countries, AACSB: Dynamics of the Global Economy)
CLOSING CASE: Marketing to the Base of the Pyramid (BoP) in Bangladesh: Grameen Danone Foods
Bangladesh has millions of impoverished persons, a high illiteracy rate, poor infrastructure, high unemployment, and a high incidence of infectious disease. Nevertheless, The Grameen Foundation from Bangladesh, and Groupe Danone from France, have created a joint venture social business to assist some of the most needy citizens and consumers in the world. A social business operates differently than traditional NGO’s, corporations, or not-for-profits. The organization utilized each venture partner’s respective strength in micro-banking/finance and the delivery of food products to provide much needed products. The venture provides a socially responsible approach to assist those in need. Aside from the favorable publicity, the venture may also be a good long-term strategy for the French corporation. Today’s impoverished may be a viable market for future sales as economic, social, and health conditions in the country improve. The venture required the organizations to make all of the classic strategic marketing decisions, including branding, pricing, promotion, distribution, etc. Thus far, the joint venture appears to be operating successfully.
QUESTIONS
17-3 What advantages might Danone receive from the Grameen Danone Joint Venture?
Before the joint venture with Grameen, Danone had no operations in Bangladesh. Prior to the joint venture, Danone aimed most of its products at higher-end consumers. The demand for these products has been maturing in wealthier countries, which have been Danone’s traditional markets. The joint venture enabled them to learn about customers and ways of operating in these less than developed countries. (LO: 1, Learning Outcome: To understand a variety of international product policies and their appropriate circumstances, AACSB: Analytical Skills)
17-4 How much do you think Danone’s decision to set up a social business was motivated by wanting to be socially responsible versus believing the move would help its performance? Does the answer to this make any difference?
There are several arguments that support Danone’s decision as being motivated by a sense of social responsibility. The country did not have operations in Bangladesh; therefore it took extra effort and risk to become involved in the project. Further, the size and global nature of the organization makes it obvious that the company could have invested profits in other regions or endeavors that would have provided a greater return on income. The company must answer to shareholders. The true motivations of the organization are important when making ethical considerations and analysis, but those impoverished citizens that may benefit from the joint venture may be less concerned with intentions and more concerned with the actions. (LO: 5, Learning Outcome: To comprehend the different branding strategies companies may employ internationally, AACSB: Dynamics of the Global Economy)
17-5 What marketing pitfalls might Danone face if it tries to duplicate its Bangladesh experience to serve BoP customers in other countries?
It is dangerous for any producer or supplier of products to assume that all markets will be similar, or provide similar results. Each segment and region provides their own challenges and opportunities. Too many unsuccessful endeavors could create a misuse of resources. Additionally, as some have objected to the sale of what may be considered superfluous products in impoverished regions of the world, a different endeavor may create a negative reaction from citizens, or shareholders. (LO: 4, Learning Outcome: To be familiar with country differences that may necessitate alterations in promotional practices, AACSB: Analytical Skills)
17-6 Assume a company, such as Danone, wishes eventually to serve all income segments within a country. What advantages and disadvantages might it encounter by first serving the BoP? How might it later deal with any disadvantages?
Serving the BoP first may be an advantage if it fosters a positive long-term relationship between consumers and the organization. It is also a good step in creating a culture of social responsibility within the company. Disadvantages could include any negative press from selling objectionable products, concerns from shareholders, allegations of exploitation, or spending resources that may be used for the long-term sustainability of the organization. Disadvantages could more likely be dealt with by creating long-term strategies, a commitment to the endeavor, and clear communication with all stakeholders. (LO: 6, Learning Outcome: To discern effective practices and complications of international distribution, AACSB: Analytical Skills)
17-7 If Danone were to add products to sell to the BoP, which of its products would be the best candidates? Why?
In light of the high levels of need and poverty in the region, those products that would seem most essential to health and survival would probably be seen as the most advantageous. Non-essentials may appear to be more of an attempt at exploitation. A focus on essential products strengthens the argument for social responsibility, and would promote the best result for the health and sociological problems that are so prevalent in the country. (LO: 1, Learning Outcome: To understand a variety of international product policies and their appropriate circumstances, AACSB: Dynamics of a Global Economy)
17-8 Since establishment of the Grameen Danone Foods social business, the number of social businesses worldwide has grown so much that there is now an annual global summit in Wolfsburg, Germany. Are there types of companies that might not be good candidates to establish social businesses? If so, what are they, and why?
Any type of product or business that may be objectionable in terms of morality, a violation of the socially acceptable norms and standards of society, the creation health risks, or that would result in a form of consumer exploitation would not be a good candidate to establish a social business. However, that does not mean that such an organization could not play a role in a different capacity, such as donating funds or resources to other projects. (LO: 4, Learning Outcome: To be familiar with country differences that may necessitate alterations in promotional practices, AACSB: Multicultural and Diversity Understanding)
17-9 In 2010, Bangladeshi Prime Minister Sheikh Hasina said that Grameen had been “sucking money out of the people after giving them loans. There has been no improvement in the lifestyle of the poor so far. They were just used as pawns to get more aid.” In response, Yunus resigned from the bank, saying that he did not want to distract from its activities. Evaluate the Prime Minister’s statement. How might Yunus’s resignation affect the future of the Grameen Danone Foods’ JV?
The statement should be viewed in terms of its political and economic impact. A lack of support by the prime minister may make future ventures less likely with other corporations if there is a perception that Grameen is somehow fraudulent or ineffective. The resignation of Yunus may or may not impact the future of the joint venture, but it could have a devastating result if the replacement lacks the commitment or competency to assist in the operation of the joint venture. (LO: 1, Learning Outcome: To understand a variety of international product policies and their appropriate circumstances, AACSB: Analytical Skills)
17-10 Can you think of any other MNEs that can collaborate successfully with the Grameen Foundation and help solve specific problems in Bangladesh? How can they do this?
Grameen Intel Social Business Ltd. was founded in 2011 to create software applications on handheld computing devices that address such social problems as low agricultural output and lack of prenatal care. BASF Grameen Ltd. was formed to develop long-lasting insecticide-impregnated nets to fight the spread of malaria. (LO: 1, Learning Outcome: To understand a variety of international product policies and their appropriate circumstances, AACSB: Analytical Skills)
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