Description
In marketing, a product is anything that can be offered to a market that might satisfy a want or need. In retailing, products are called merchandise. In manufacturing, products are bought as raw materials and sold as finished goods.
INTERNATIONAL PRODUCT LIFE CYCLE
? Introduction & Growth Stages MNC manufactures product in developed countries: export to developing countries. ? Early Maturity MNC moves production to developing country,begins importing to home country. ? Late Maturity Developing country competitor exports product to MNC Home country:competes with MNC in imports. ? Decline Developing country targets remain viable target markets for MNC. MNC home country market is diminishing. ? PRODUCT INTRODUCTION STAGE ? Products are developed and marketed in developed countries
? THE GROWTH STAGE ? ? ? Increasing competition and rapid product adoption Marketed primarily in developed countries Product is exported to developing countries
? THE MATURITY STAGE Product is adopted by most target consumers ? ? ? Sales are leveling off Profits decline due to intense competition Manufacturing operations move to developing countries to take advantage of cheap labor New competitors: firms from developing countries
?
? THE DECLINE STAGE Products are rapidly losing ground to new technologies and product alternatives ? ? Decrease in sales and profits Product lifecycle is extended through sales to consumers in developing countries
? ?
1. Introduction A new product is introduced onto the Marketplace, few people know about it, and its success is rarely guaranteed. Much time and money is invested in promoting this product, and there is either no profit or even a net loss during this period. 2. Growth The product starts to grow in popularity, sales increase as advertising starts working and others start to imitate your product. Profits increase, and your product steadily becomes a success. 3. Maturity Your product becomes an established part of the Market, but sales start to increase slowly as competition and pricing factors take place. At this stage advertising costs are at their highest, whilst profits may start to drop. The market for your product could reach saturation point. 4. Decline Sales start to fall, as your product loses its appeal. Profits drop as production is often cut, competition in the marketplace gets stiffer as advertising is cut and plans are made to shelve the product in the future. 5. Innovation Innovators take your product and may incorporate it into a new product. This has happened to the humble FM radio and Camera which you find as a basic feature on most hand phones. The decline of the original product has just lead onto the use of it on a very new product. The product Life Cycle may not end it changes, especially in this century of fast moving technology. Traditionally products faded away into the memories of their users, but have often become part of a new product, that faces the same decline in the future.
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METHODS OF ENTERING ? ? Trading overseas There are a number ways an organisation can start to sell their products in international markets. 1. Direct export. The organisation produces their product in their home market and then sells them to customers overseas. 2. Indirect export The organisations sells their product to a third party who then sells it on within the foreign market. 3.Licensing Another less risky market entry method is licensing. Here the Licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. 4.Franchising Franchising is another form of licensing. Here the organisation puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. 5.Contracting
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Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organisation to produce the product on their behalf. Clearly contracting out saves the organisation exporting to the foreign market. 6.Manufacturing abroad The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organisation some form of tax advantage because they wish to attract inward investment to help create employment for their economy. 7.Joint Venture To share the risk of market entry into a foreign market, two organisations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of company, of course profits will have to be shared out also.
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? ?
? Deciding on the International Entry Mode ? Indirect Exporting ? Company uses home country intermediaries, who in turn sell product overseas Lowest risk, lowest control Companies can use cooperative exporting, also known as piggybacking and mother-henning Involves using the distribution system of exporters with established systems for selling abroad who agree to handle the export function of a non-competing company on a contractual basis
? ?
? Direct Exporting
?
Own in-house exporting department handles the exporting function
? LICENSING ? Licensor offers know-how, shares technology, and shares brand name with licensee Licensee pays royalties Lower-risk entry mode; limits exposure to economic, financial, and political instability Permits the company access to markets that may be closed or that may have high entry barriers
? ?
?
DISADVANTAGE: Can produce competitor in the licensee ? FRANCHISING ? Franchisor gives franchisee right to use brand name, trademarks and business know-how • • Less risk, higher level of control Very rapid market penetration
DISADVANTAGE: Can create future competitors who understand the operations of the franchise ? JOINT VENTURE ? Preferred entry mode of governments of developing countries Help develop local expertise If production is exported, helps with country’s balance of trade
?
Foreign company and local company establish a jointly-owned new company Parties share capital, equity, labor 70% of all joint ventures break up within 3.5 years
? ?
DISADVANTAGE: Joint-venture partners can turn into viable competitors; and 70% of all joint ventures break up within 3.5 years. ? CONSORTIA ? ? ? Involve three or more companies Monopoly effect Allowed where expensive R&D is involved in underserved markets in markets where the government and/or the marketplace can control its activity
? WHOLLY OWNED SUBSIDIARIES ? Can be developed by the company – greenfielding – or can be purchased (acquisition or merger) Involve long-term market commitment High cost High control of operations Greatest level of risk
? ? ? ?
? BRANCH OFFICES ? Entities are part of the international company, rather than a new company (as in the case of the subsidiary) Involves substantial investment ? ? sales office showroom
?
Engages in a full spectrum of marketing activity High level of control
?
IMPORTANT ENTERING STRATEGIES
? Licensing And Franchising ? No Capital Required Testing ? Avoid Competition ? Exporting ? Low Volume ? Government Regulation ? Contract Manufacturing ? Low Commitment Give Freedom To Quit Any Time ? Immediate Return Government Support ? Management Contract ? Sale of products Commercializing Know How High Cost Of Production Poor Infrastructure Avoiding Government Market
Return on Obsolete product
Tested Success
No Permanent Interest
? Difficulty in adaptation ? Turnkey Projects ? Third Country Location ? M&A ? Strategic Alliance ? Fully Owned Manufacturing ? Trade Barriers Competitors ? Assembly Operations Support ? Less Risk ? Joint Ventures ? Dealing With GovernmentPublic SupportManaging Cultural Bridge To get complete control Avoiding Potential
Import Duty Structure
Government
? Sharing Risk ? Counter Trade Types Barter Buy back Compensation Deal Counter Purchase Reasons ? Central Planning ? Forex Problem ? Obsolete Products ? Market Testing
Domestic marketing is the marketing practices within a marketer's home country. Foreign marketing is the domestic operations within a foreign country (i.e., marketing methods used outside the home market). Comparative marketing analytically compares two or more countries' marketing systems to identify similarities and differences. International marketing studies the "how" and "why" a product succeeds or fails abroad and how marketing efforts affect the outcome. It provides a micro view of the market at the company level. Multinational, global, and world marketing are all the same thing. Multinational marketing treats all countries as the world market without designating a particular country as domestic or foreign. As such, a company engaging in multinational marketing is a corporate citizen of the world, whereas international marketing implies the presence of a home base. However, the subtle difference between international marketing and multinational marketing is probably insignificant in terms of strategic implications. Advantages to consider:
• • Enhance your domestic competitiveness Increase sales and profits
• • • • • • • •
Gain your global market share Reduce dependence on existing markets Exploit international trade technology Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for expansion of your business Sell excess production capacity Maintain cost competitiveness in your domestic market
Disadvantages to keep in mind:
• • • • • • • • • You may need to wait for long-term gains Hire staff to launch international trading Modify your product or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait long for payments Apply for additional financing Deal with special licenses and regulations
Difference 1. Outsourcing is a general term for a business function done by non-employees while offshoring is also, and in most cases, outsourcing but the function is done outside the country or area of the client. 2. Outsourcing is an option often selected by big companies to get rid of particular routine work which could be performed by third parties for money. Offshoring is often opted because the overhead for business process costs less in other places. 3. Outsourcing is usually done to preserve human resources to focus their energies on the companiesí core competencies. Offshoring is basically the same but more concentration on costcutting. 4. Outsourcing can be done in the same locality therefore it doesnít damage local labor market. While in offshoring, since labor is done outside of the country, it may pose some detrimental effects on the local labor market. 5. Outsourcing in local premises poses no real communication drawbacks while offshoring can have significant communication and language barriers.
Process of negotiation This is a unique combination framework that puts together the best of many other approaches to negotiation. It is particularly suited to more complex, higher-value and slower negotiations. 1. Prepare: Know what you want. Understand them. 2. Open: Put your case. Hear theirs. 3. Argue: Support your case. Expose theirs. 4. Explore: Seek understanding and possibility. 5. Signal: Indicate your readiness to work together. 6. Package: Assemble potential trades. 7. Close: Reach final agreement. 8. Sustain: Make sure what is agreed happens. There are deliberately a larger number of stages in this process as it is designed to break down important activities during negotiation, particularly towards the end. It is an easy trap to try to jump to the end with a solution that is inadequate and unacceptable. Note also that in practice, you may find variations on these, for example there may be loops back to previous stages, stages overlapping, stages running parallel and even out of order. The bottom line is to use what works. This process is intended to help you negotiate, but do not use it blindly. It is not magic and is not a substitute for thinking. If something does not seem to be working, try to figure out why and either fix the problem or try something else. Although there are commonalities across negotiations, each one is different and the greatest skill is to be able to read the situation in the moment and adapt as appropriate. The process comprises of five core steps: 1. Prepare: This phase involves composition of a negotiation team. The negotiation team should consist of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase both the employer’s representatives and the union examine their own situation in order to develop the issues that they believe will be most important. The first thing to be done is to determine whether there is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and intimate knowledge of operations, working conditions, production norms and other relevant conditions is required. 2. Discuss: Here, the parties decide the ground rules that will guide the negotiations. A process well begun is half done and this is no less true in case of collective bargaining. An environment of mutual trust and understanding is also created so that the collective bargaining agreement would be reached.
3. Propose: This phase involves the initial opening statements and the possible options that exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The exchange of messages takes place and opinion of both the parties is sought. 4. Bargain: negotiations are easy if a problem solving attitude is adopted. This stage comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of agreements take place.
5. Settlement: Once the parties are through with the bargaining process, a consensual
agreement is reached upon wherein both the parties agree to a common decision regarding the problem or the issue. This stage is described as consisting of effective joint implementation of the agreement through shared visions, strategic planning and negotiated change.
doc_840215584.doc
In marketing, a product is anything that can be offered to a market that might satisfy a want or need. In retailing, products are called merchandise. In manufacturing, products are bought as raw materials and sold as finished goods.
INTERNATIONAL PRODUCT LIFE CYCLE
? Introduction & Growth Stages MNC manufactures product in developed countries: export to developing countries. ? Early Maturity MNC moves production to developing country,begins importing to home country. ? Late Maturity Developing country competitor exports product to MNC Home country:competes with MNC in imports. ? Decline Developing country targets remain viable target markets for MNC. MNC home country market is diminishing. ? PRODUCT INTRODUCTION STAGE ? Products are developed and marketed in developed countries
? THE GROWTH STAGE ? ? ? Increasing competition and rapid product adoption Marketed primarily in developed countries Product is exported to developing countries
? THE MATURITY STAGE Product is adopted by most target consumers ? ? ? Sales are leveling off Profits decline due to intense competition Manufacturing operations move to developing countries to take advantage of cheap labor New competitors: firms from developing countries
?
? THE DECLINE STAGE Products are rapidly losing ground to new technologies and product alternatives ? ? Decrease in sales and profits Product lifecycle is extended through sales to consumers in developing countries
? ?
1. Introduction A new product is introduced onto the Marketplace, few people know about it, and its success is rarely guaranteed. Much time and money is invested in promoting this product, and there is either no profit or even a net loss during this period. 2. Growth The product starts to grow in popularity, sales increase as advertising starts working and others start to imitate your product. Profits increase, and your product steadily becomes a success. 3. Maturity Your product becomes an established part of the Market, but sales start to increase slowly as competition and pricing factors take place. At this stage advertising costs are at their highest, whilst profits may start to drop. The market for your product could reach saturation point. 4. Decline Sales start to fall, as your product loses its appeal. Profits drop as production is often cut, competition in the marketplace gets stiffer as advertising is cut and plans are made to shelve the product in the future. 5. Innovation Innovators take your product and may incorporate it into a new product. This has happened to the humble FM radio and Camera which you find as a basic feature on most hand phones. The decline of the original product has just lead onto the use of it on a very new product. The product Life Cycle may not end it changes, especially in this century of fast moving technology. Traditionally products faded away into the memories of their users, but have often become part of a new product, that faces the same decline in the future.
? ?
? ?
? ?
? ?
?
METHODS OF ENTERING ? ? Trading overseas There are a number ways an organisation can start to sell their products in international markets. 1. Direct export. The organisation produces their product in their home market and then sells them to customers overseas. 2. Indirect export The organisations sells their product to a third party who then sells it on within the foreign market. 3.Licensing Another less risky market entry method is licensing. Here the Licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. 4.Franchising Franchising is another form of licensing. Here the organisation puts together a package of the ‘successful’ ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. 5.Contracting
? ?
? ?
? ?
? ?
?
?
Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organisation to produce the product on their behalf. Clearly contracting out saves the organisation exporting to the foreign market. 6.Manufacturing abroad The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organisation some form of tax advantage because they wish to attract inward investment to help create employment for their economy. 7.Joint Venture To share the risk of market entry into a foreign market, two organisations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of company, of course profits will have to be shared out also.
? ?
? ?
? Deciding on the International Entry Mode ? Indirect Exporting ? Company uses home country intermediaries, who in turn sell product overseas Lowest risk, lowest control Companies can use cooperative exporting, also known as piggybacking and mother-henning Involves using the distribution system of exporters with established systems for selling abroad who agree to handle the export function of a non-competing company on a contractual basis
? ?
? Direct Exporting
?
Own in-house exporting department handles the exporting function
? LICENSING ? Licensor offers know-how, shares technology, and shares brand name with licensee Licensee pays royalties Lower-risk entry mode; limits exposure to economic, financial, and political instability Permits the company access to markets that may be closed or that may have high entry barriers
? ?
?
DISADVANTAGE: Can produce competitor in the licensee ? FRANCHISING ? Franchisor gives franchisee right to use brand name, trademarks and business know-how • • Less risk, higher level of control Very rapid market penetration
DISADVANTAGE: Can create future competitors who understand the operations of the franchise ? JOINT VENTURE ? Preferred entry mode of governments of developing countries Help develop local expertise If production is exported, helps with country’s balance of trade
?
Foreign company and local company establish a jointly-owned new company Parties share capital, equity, labor 70% of all joint ventures break up within 3.5 years
? ?
DISADVANTAGE: Joint-venture partners can turn into viable competitors; and 70% of all joint ventures break up within 3.5 years. ? CONSORTIA ? ? ? Involve three or more companies Monopoly effect Allowed where expensive R&D is involved in underserved markets in markets where the government and/or the marketplace can control its activity
? WHOLLY OWNED SUBSIDIARIES ? Can be developed by the company – greenfielding – or can be purchased (acquisition or merger) Involve long-term market commitment High cost High control of operations Greatest level of risk
? ? ? ?
? BRANCH OFFICES ? Entities are part of the international company, rather than a new company (as in the case of the subsidiary) Involves substantial investment ? ? sales office showroom
?
Engages in a full spectrum of marketing activity High level of control
?
IMPORTANT ENTERING STRATEGIES
? Licensing And Franchising ? No Capital Required Testing ? Avoid Competition ? Exporting ? Low Volume ? Government Regulation ? Contract Manufacturing ? Low Commitment Give Freedom To Quit Any Time ? Immediate Return Government Support ? Management Contract ? Sale of products Commercializing Know How High Cost Of Production Poor Infrastructure Avoiding Government Market
Return on Obsolete product
Tested Success
No Permanent Interest
? Difficulty in adaptation ? Turnkey Projects ? Third Country Location ? M&A ? Strategic Alliance ? Fully Owned Manufacturing ? Trade Barriers Competitors ? Assembly Operations Support ? Less Risk ? Joint Ventures ? Dealing With GovernmentPublic SupportManaging Cultural Bridge To get complete control Avoiding Potential
Import Duty Structure
Government
? Sharing Risk ? Counter Trade Types Barter Buy back Compensation Deal Counter Purchase Reasons ? Central Planning ? Forex Problem ? Obsolete Products ? Market Testing
Domestic marketing is the marketing practices within a marketer's home country. Foreign marketing is the domestic operations within a foreign country (i.e., marketing methods used outside the home market). Comparative marketing analytically compares two or more countries' marketing systems to identify similarities and differences. International marketing studies the "how" and "why" a product succeeds or fails abroad and how marketing efforts affect the outcome. It provides a micro view of the market at the company level. Multinational, global, and world marketing are all the same thing. Multinational marketing treats all countries as the world market without designating a particular country as domestic or foreign. As such, a company engaging in multinational marketing is a corporate citizen of the world, whereas international marketing implies the presence of a home base. However, the subtle difference between international marketing and multinational marketing is probably insignificant in terms of strategic implications. Advantages to consider:
• • Enhance your domestic competitiveness Increase sales and profits
• • • • • • • •
Gain your global market share Reduce dependence on existing markets Exploit international trade technology Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for expansion of your business Sell excess production capacity Maintain cost competitiveness in your domestic market
Disadvantages to keep in mind:
• • • • • • • • • You may need to wait for long-term gains Hire staff to launch international trading Modify your product or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait long for payments Apply for additional financing Deal with special licenses and regulations
Difference 1. Outsourcing is a general term for a business function done by non-employees while offshoring is also, and in most cases, outsourcing but the function is done outside the country or area of the client. 2. Outsourcing is an option often selected by big companies to get rid of particular routine work which could be performed by third parties for money. Offshoring is often opted because the overhead for business process costs less in other places. 3. Outsourcing is usually done to preserve human resources to focus their energies on the companiesí core competencies. Offshoring is basically the same but more concentration on costcutting. 4. Outsourcing can be done in the same locality therefore it doesnít damage local labor market. While in offshoring, since labor is done outside of the country, it may pose some detrimental effects on the local labor market. 5. Outsourcing in local premises poses no real communication drawbacks while offshoring can have significant communication and language barriers.
Process of negotiation This is a unique combination framework that puts together the best of many other approaches to negotiation. It is particularly suited to more complex, higher-value and slower negotiations. 1. Prepare: Know what you want. Understand them. 2. Open: Put your case. Hear theirs. 3. Argue: Support your case. Expose theirs. 4. Explore: Seek understanding and possibility. 5. Signal: Indicate your readiness to work together. 6. Package: Assemble potential trades. 7. Close: Reach final agreement. 8. Sustain: Make sure what is agreed happens. There are deliberately a larger number of stages in this process as it is designed to break down important activities during negotiation, particularly towards the end. It is an easy trap to try to jump to the end with a solution that is inadequate and unacceptable. Note also that in practice, you may find variations on these, for example there may be loops back to previous stages, stages overlapping, stages running parallel and even out of order. The bottom line is to use what works. This process is intended to help you negotiate, but do not use it blindly. It is not magic and is not a substitute for thinking. If something does not seem to be working, try to figure out why and either fix the problem or try something else. Although there are commonalities across negotiations, each one is different and the greatest skill is to be able to read the situation in the moment and adapt as appropriate. The process comprises of five core steps: 1. Prepare: This phase involves composition of a negotiation team. The negotiation team should consist of representatives of both the parties with adequate knowledge and skills for negotiation. In this phase both the employer’s representatives and the union examine their own situation in order to develop the issues that they believe will be most important. The first thing to be done is to determine whether there is actually any reason to negotiate at all. A correct understanding of the main issues to be covered and intimate knowledge of operations, working conditions, production norms and other relevant conditions is required. 2. Discuss: Here, the parties decide the ground rules that will guide the negotiations. A process well begun is half done and this is no less true in case of collective bargaining. An environment of mutual trust and understanding is also created so that the collective bargaining agreement would be reached.
3. Propose: This phase involves the initial opening statements and the possible options that exist to resolve them. In a word, this phase could be described as ‘brainstorming’. The exchange of messages takes place and opinion of both the parties is sought. 4. Bargain: negotiations are easy if a problem solving attitude is adopted. This stage comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the drafting of agreements take place.
5. Settlement: Once the parties are through with the bargaining process, a consensual
agreement is reached upon wherein both the parties agree to a common decision regarding the problem or the issue. This stage is described as consisting of effective joint implementation of the agreement through shared visions, strategic planning and negotiated change.
doc_840215584.doc