LSM526: Distribution Strategy and International Marketing

Transcription

1 LSM526: Distribution Strategy and International Marketing Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 1

2 This course includes Two discussions One scored project in multiple parts One video transcript file Completing all of the coursework should take about five to seven hours. What you'll learn Assess the function and importance of distribution channels Analyze the effects of channel design decisions on business operations Identify the basic reasons a company enters or develops new international markets Explain the impact of a firm's organizational approach on its global marketing tactics Evaluate the customize-vs-standardize trade-offs in global marketing Course Description In this course, you investigate marketing channels and learn how to leverage them to provide value to your company and benefits to your customers. You further explore the world of international marketing and discover the nuances of global markets. You identify the types of global organizations and explore the pros and cons of globalization. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 2

3 Douglas Stayman Associate Professor of Marketing, Samuel Curtis Johnson Graduate School of Management, Cornell University Professor Stayman's teaching and research interests are in the areas of advertising and consumer decision making. He came to Johnson from the University of Texas at Austin. His research has focused on the study of emotional responses to advertising and the role of affect in decision making. His work has involved methodological and measurement issues in studying emotions. He is also interested in theoretical accounts of the effects of emotions on people's preferences. His research has been supported by grants from the Ogilvy Center for Research and Development, the Marketing Science Institute, and the American Academy of Advertising. Start Your Course Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 3

4 Module Introduction: Channel Strategy How your company delivers value to its customers and how your competitors deliver value to their customers has a lot to do with the distribution channels you both use. In this module, you explore the strategic aspects of channels and learn how to think about them as a marketer. You examine the fourth P in the strategic marketing model: place. You find out that place is not just a distribution issue or an operations issue; it's also a marketing issue. After completing this module, you will be able to: Describe the importance, function, and efficiencies channels provide Explain how the channels can help maximize a firm's value proposition Evaluate the implication of channels as partners and competitors Identify situations for which it is most appropriate to use push marketing, pull marketing, or a combination Describe the benefits of channel power and of "owning" the customer Determine the distribution intensity needed to best meet customer shopping needs Compare direct, indirect, and hybrid channel strategies Assess causes for channel conflicts and methods to minimize the conflicts Evaluate the advantages and disadvantages of a vertical marketing system Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 4

5 Watch: Strategic Role of Marketing Channels In the strategic marketing framework you'll find product, price, promotion, and place. The topic of Place is not just about your organization delivering a product to the customer. It's about your organization working with multiple partners to win against your competitors. And your competitors are also working with multiple partners to win against you. Place, the "overlooked P," refers largely to distribution or channels. What is the role channel partners play in the marketing process? Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 5

6 Read: Optimizing Your Value Proposition with Channels Key Points Price, promotion, product, and place all contribute to the value proposition The distribution chain should deliver the product to customers where and when they need it and in the form they need it Select the channel that optimizes the benefits offered to the target segment of customers over the cost of offering those benefits What contributes to the value proposition, that bundle of benefits and costs around your product or service? One contributor is Price-what consumers will have to pay. Another is Promotion-how the firm will communicate the benefits to consumers. A third is the Product or service itself. Lastly, but just as important, is Place-how the producer distributes the product or service in a way that meets the customer's needs. Value Proposition = Benefits Costs Maximizing the Benefits Associated with Place How does the company determine the benefits it needs to maximize? A strong distribution chain (sometimes referred to as a value chain) focuses on the attributes that create benefits for the customers. But producers don't focus on all customers; they are most concerned with their target segment. The distribution chain should create the optimal benefits for the target market, delivering the product to the customers where and when they need it and in the form they need it. When selecting the distribution chain for each customer segment, consider: Where does the customer want to shop? For example, Dell sells directly to customers through its Web site and a toll-free telephone center, while Apple uses a combination of direct and indirect channels to sell its computers, iphones, and ipods. When does the customer want to shop? Many Walmart Stores are open 24 hours a day to cater to shoppers who are not able or do not want to shop during the standard daytime hours. What information does the customer need, and how does she want to get the information? Does she want a salesperson calling on her or would she rather do product research on her own? For example, many online stores have various options for getting product information including , phone, and live chat. What quantity does the customer want to buy? For example, individual customers generally purchase small quantities of products, whereas in a business-to-business transaction, the quantity of the products purchased can be very large. Minimizing the Costs Associated with Place The benefits provided to the customer come with some costs to the company. Consider that a company's product or service enters the channel at a cost lower than the price at which the channel member sells to the final customer. Therefore, the company loses some potential revenue. The channel has costs that they must recoup-storage, service, product training, and other costs-in order to remain profitable. But even if the channel members are eliminated, to maintain Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 6

7 the benefits the customer wants, the company must still provide the benefits and absorb the associated costs. For example, replacement parts, customer service, and a location for the customer to acquire the product will still be needed. When the company uses a strategic approach to the channel, it can minimize these unavoidable costs-costs that are needed to create benefits for the customer and are associated with distributions. Number of Members in the Distribution Chain Ultimately channels are less about how to sell your product to customers, how to distribute your product to customers, and more about creating the optimal value proposition for your target market. Where do your customers want to shop? How do they want to shop? When do they want to shop? The illustration to the right compares the distribution channels for two producers. Channel A has more intermediaries, which makes the value chain cost more to operate. This higher cost value chain results in a higher cost to the customer. Channel B, with fewer intermediaries, costs less to operate and results in a lower cost to the customer. But which channel creates the strongest value proposition for the customers? Assume one of the benefits that the customers in the target segment want is ready access to replacement parts. Customers buying through Channel A have access to these parts from the distributor who keeps inventory on hand, thus providing value to the customer. Customers who purchase through Channel B must wait for the retailer to backorder the parts from the producer-adding time and inconveniencing the customer. In this example, customers who want ready access to parts realize a higher value from Channel A and may be willing to pay more for that service. Customers who purchase through Channel B may pay less for the product but must be willing to wait days or weeks for replacement parts. The difference in the distribution channels contributes to differences in the two companies' value propositions. Removing some or all of the services provided by the middleman should be a deliberate decision on the part of the producer. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 7

8 If your goal is to maximize your value proposition, select the channel that optimizes the benefits offered to the customers in the target segment against the cost of offering those benefits. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 8

9 Watch: Why Not Cut Out the Middleman? Imagine you cut out the middleman in your business. Let's explore the consequences this would have on a business. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 9

10 Read: Meeting Customer Needs with Channels Marketers must appraise not only the efficiency of their distribution channel but also the ability of the channel to provide customer benefits better than their competitors' channels. Here are two examples of unique channel decisions that allowed the companies to provide customer benefits in a way they could not have using a different channel decision. Saturn As General Motors began to lose serious market share to Japanese car makers, they embarked on a quest to build a new brand that could beat the Japanese in the small-car market. The company invested billions of dollars, took years to get the car to market and, in the end, produced a remarkably ordinary car. Why then was Saturn so successful? Its success was due less to the quality of the car and more to Saturn's channel strategy. The company took a look at the entire auto sales arena. What they discovered was no surprise-customers were dissatisfied with the entire car purchasing process through existing channels. Customers did not want the high pressure and price negotiations usually associated with car buying. Saturn steeped its sales force in product knowledge and paid them a flat fee for the sale of each car-not a commission. And they set up a no-haggle, posted price strategy. One of the reasons Saturn was successful was because their channel strategy required creating exclusive territories where retailers are guaranteed all consumers in that territory. There would be no dealer competition for Saturn sales. In this way Saturn could truly deliver on a promise of good service and no-haggle pricing. Saturn established a distribution channel that was different than their competition's and difficult for the competition to imitate. Starbucks Starbucks has also used a unique approach to channel strategy. First, they strive to be very available to the target customer; the customer should not have to travel far to get to a store. The company purposely opens stores near one another, even if it involves some cannibalization, in order to ensure intensive distribution in some markets. Second, they keep tight control of the customer experience. Their value proposition includes not only their high-quality coffee but also their in-store experience, from the knowledgeable employees, to the seating areas, to the entire store design. They truly believe that their competitive advantage is the place the customer purchases the coffee. How do they manage their value chain differently from other coffee firms, allowing this tight control? The channel strategy for most other coffee companies includes franchises which offers limited control to the parent company. But Starbucks wants the in-store experience to be the same across stores yet different than their competitors. To a large extent, they've succeeded in doing this by treating their employees differently and by having complete control over the in-store experience. For example, Starbucks provides over 24 hours of training to new employees and uses in-house architects and designers to ensure the stores convey a consistent image and character. This results in an Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 10

11 in-store experience that's different than the competitors' in-store experiences; however, the strategy is very expensive to oversee, especially given the intensity of their distribution. But the added value is one for which their target customers are willing to pay. Saturn and Starbucks both successfully found that by minimizing the complexity of their distribution channel, they could serve their target customers better. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 11

12 Read: Partner or Competitor? A distribution channel works with a company to create value, build a competitive infrastructure, leverage logistics, synchronize supply with demand, and other functions. The channel members are valued partners in the company's operations. But distribution channel partners are separate organizations, each trying to maximize its own profits and pursue its own strategies. As the producer, we are concerned with anyone taking a share of our profits. From the channel member's perspective, they are usually more concerned with their own profitability than the brand of product they sell or the profits of the producer. Thus, they are your partners in getting your product to the customer but also your competitor in competing for a share of sales revenue. For example, assume you work for the Watermelon Cola Company. Ralph's Retail Store sells Watermelon Cola. It also sells products from competing manufacturers, as well as many other items. In trying to maximize profits, Ralph's tries to sell as much Watermelon Cola as possible-and thus is your partner in trying to accomplish high sales. But in two important ways, Ralph's is a competitor: Ralph's wants to keep as much of the margin from each sale of Watermelon Cola as possible, paying you as low a price as possible. Ralph's Retail wants to maximize its own profits over the entire cola category. To accomplish this, they may promote other, competing colas depending on the margin and consumer preferences. Ralph's may use its ability to do this as leverage to get Watermelon Cola at a lower price from you. We can look at the issue using Michael Porter's Five Forces framework. One of Porter's insights that led to the development of his model was that it's not just rivalry amongst current companies, potential entrants, or substitutes who might take away your profitability. But there are also members of the distribution chain who are competing for your profits. Channel partners are your partners-your supply chain by which you meet customer needs. But channel partners are also competitors, and there's inherent conflict over profitability. Distributors promote your product but also may promote competitor's products to grow their own market share. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 12

13 Watch: Decision One: Push or Pull Strategy In push marketing, we give incentives to channel members to give us an advantage. In pull marketing, we go directly to end customers to try to get them to pull the product through our channel. Let's look at the pros and cons of push and pull marketing. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 13

14 Read: Decision Two: Intensive, Selective, or Exclusive Distribution Key Points Match distribution to the customer's search strategy: "Intensive" distribution for convenience goods "Selective" distribution when consumers shop around "Exclusive" distribution when effort is used to find the right product The choice of distribution intensity is a strategic one. To understand this, let's begin by looking at how marketers characterize goods based on the way customers search for them. Search Strategy Convenience goods are goods for which convenience is absolutely the most important criterion. For example, a customer stops at a gas station and wants to purchase a drink. He walks in and buys the drink that best matches his preference. If he is looking for a Coke but the store only carries Pepsi, he will buy the Pepsi rather than search for another store that carries Coke. Shopping goods are goods for which the consumer is willing to spend a small amount of time gathering information or comparison-shopping. A customer wanting to purchase a computer printer will not stop at the first store to buy whatever they carry. On the other hand, he is not willing to search extensively and travel a distance to find the best item. Search goods are goods for which the most important criteria are locating the best product to match the customer's needs. A customer wanting to buy the most comfortable, fuel-efficient car for commuting to work is willing to spend time gathering a lot of information, making a decision, and traveling to wherever he must go to buy the product. Distribution Strategy Intensive Distribution is usually required where customers have a range of acceptable brands from which to choose. In other words, if one brand is not available, a customer will simply choose another. The goal of intensive distribution is to provide saturation coverage of the market by selling through as many retailers as possible. Consumers may find the product virtually everywhere they go-supermarkets, drug stores, gas stations, etc. This often maximizes the producers' sales and lets retailers offer many brands. Competition among retailers selling the same item is high, and retailers are generally more concerned about their own profits than the producer's profits. Retailers may assign little shelf space to specific brands or not advertise them if it is to their benefit. For many products (e.g., soft drinks, candy) total sales are directly linked to the number of outlets used more than to the specific outlet. Selective Distribution involves a producer using a limited number of outlets in a geographical area to sell a product. An advantage of this approach is that the producer can choose the most appropriate or best-performing outlets and focus effort (e.g. training, promotions) on them. Selective distribution works best when consumers are prepared to "shop around." In other words, it works when they have a preference for a particular brand or price and will search out the outlets that supply it. This strategy combines some aspects of both intensive and exclusive distribution. Producers have higher sales and better market coverage than exclusive distribution, yet the retailer may sell fewer competing brands than in Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 14

15 intensive distribution. Selective distribution encourages producers to provide some marketing support and retailers to give adequate shelf space. One disadvantage to this strategy is that, because it may be difficult to find retailers that can meet the producer's requirements and goals, it may be difficult to cover the market adequately. Apple computer is one example of a company that uses a selective strategy. Exclusive Distribution is a situation where the producer makes agreements with one or a few retailers and gives those retailers exclusive distribution in a specified geographic area. This strategy encourages both parties (producer and distributor) to work together to maintain an image, assign shelf space, allot profits and costs, and advertise. It usually requires that the retailers limit their brand selection in the specified product lines; they might have to decline to sell other suppliers' brands. Both parties can benefit from this situation-retailers benefit from lack of competition in the geographic area, and producers benefit from greater sales commitment from the retailers. Some examples of companies that use an exclusive distribution strategy include Bentley, Rolls Royce, and other top-notch car manufacturers. Types of customer searches can be matched up to distribution strategies. If the product is a convenience good, and a consumer buys whatever is convenient, the company needs an intensive distribution strategy. If a consumer is shopping around and willing to go to a couple of different stores, the best strategy may be selective distribution. Whereas, if it is a search good, and a customer is willing to travel to wherever that product is for sale, the company can be more exclusive. They do not have to support as many different retailers because the consumer will come to a specific location. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 15

16 Read: Decision Three: Channel Structure Key Points Every distribution channel choice has a different value proposition Select the distribution channel that meets the needs of the target market, where you participate better than your competitors The last channel decision is how to structure the distribution channel to get the product to the marketplace. Direct Channel Using a direct channel approach, the products or services are sold directly to the customers with no middleman. Direct channels to market include any routes to market that the company controls and finances directly. This strategy is typically more capital intensive to establish but affords more control than an indirect channel. The direct approach is often used for products and services that tend to be produced at the point of consumption (for example, legal services, professional services, food products). This approach is also seen in factory outlet stores that bypass a traditional retail intermediary. In Figure 1, the top channel is a direct-marketing channel-it has no intermediary levels. In this case, the producer sells directly to customers. The remaining channels are indirect-marketing channels. Indirect Channel The indirect channel strategy includes agents, distributors, licensees, affiliates, franchisees, and other routes to market that support the product (and possibly other company's products). If a producer does not have a sales force or does not have a branded name in the market place, then partnering with a well-known reseller and/or a major distributor is a very viable option. This allows the producer to enter the market place quickly and potentially at an optimized cost. Indirect channels typically cost less to establish than direct channels and can achieve significantly more coverage (intensity) than direct distribution; however, the company has less control of their accounts, margin, and unit sales. Most resellers and distributors require a list price discount or volume discount for the products the company wants them to sell. This reduces the margin and adds other expenses in the indirect model. Items such as promotion, training, returns, trade shows/events, reseller's activities, and marketing collateral should be factored into the producer's overall financials to determine the real profitability. In Figure 1, the second channel contains one intermediary that is often a retailer. The consumer electrical goods market is an example of this arrangement whereby a producer such as Sony sells their goods directly to large retailers, who then sells the goods to the final consumers. The third channel contains two intermediary levels-a wholesaler and a retailer. A Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 16

17 wholesaler usually buys and stocks large quantities of several producers' goods and then breaks them into smaller quantities to deliver to retailers. This arrangement tends to work best where the retail channel is fragmented, not dominated by a small number of large, powerful retailers who have an incentive to cut out the wholesaler. Hybrid Channel Hybrid channel distribution is an arrangement where a producer reaches different buyers using two or more different types of channels for the same basic product. Hybrid channels may reach potential buyer segments that could not be reached by a single channel. This is clearly true for Internet and catalog direct sales that utilize two channels of distribution to get a product into the hands of a customer. The example in Figure 2 shows that LLBean distributes indirectly using their retails stores, at the same time they offer their products directly through their own website. Business to Business Business-to-business (B2B) channels operate similarly to the other channels with the difference being that channel partners normally play different roles in business-to-business channels than they do in consumer channels. There are usually no stores or wholesalers; rather there are agents who deal with the buying business unit. Consider Each distribution choice has a different value proposition. They have a different set of benefits that they provide to the end customer and a different set of costs associated with providing those benefits. The best strategy is to select the distribution channel (direct, indirect, hybrid, B2B) that meets the needs of the target market and the channel structure where you participate better than your competitors. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 17

18 Read: When Channel Partners Clash In some organizations the sales staff and the marketing staff frequently disagree, even though they're part of the same organization. The same can happen within the sales channel- producers and distributors inherently have different views of operations. Channel conflict-a situation in which one channel member perceives another channel member to be engaged in an activity that is threatening him from achieving his goals-is a natural and expected part of doing business. There are many sources of channel conflicts. They can originate from competing roles, clashing of domains, differing perceptions of reality, and differing or competing goals. Conflict is inherent in the system and, although conflict can reduce channel performance, it can also serve as a mechanism forcing channels to work harder and smarter to serve their markets. For example, a retailer responding to another channel's pricing may change its price, leading to healthy competition where the best member gains market share. It is important to remember that each member within a channel is an independent organization with different goals, experiences, and perspectives. Thus, each channel member will view a specific issue differently. In trying to best organize and build the channel, the producer must take these perspectives into consideration. In the example here (row one) the producer may want the distributor to carry its full line of products, but the distributor may only want to carry a select few. In another situation (row 3), the producer may request active involvement in selling new products and developing new markets, but may not be aware of the costs, to the channel member, in assuming these responsibilities. In another situation the channel member may be more concerned with its costs (rows 3 and 6) and less concerned with promoting a particular product. This may be because the channel member also sells competing products or the producer's product-line is not the most profitable within their product portfolio. Producer You must carry a full line of all the products we make. No 1. cherry picking. Channel Member We can try, but we can't sell "dogs". We should concentrate on our strong points. 2. We need you to concentrate on our products. We need exclusive territories. We need your active involvement in selling new products 3. and developing new markets. 4. We need to know about the customers in greater detail. It is very costly to do so. How will you compensate us for the effort? We don't keep such records (i.e. not a chance - you'll start selling direct). 5. You need to improve the sales effort. Your need to improve your sales promotion. 6. Your channel margins are too high. Your prices are too high. If channel conflict is inevitable, who should manage it, and how should it be addressed? It is the marketer's role to use a strategy that aligns the whole channel-gets them working together, competing with the competitors' channels, and meeting the needs of the customer. One mechanism to deal with channel conflict is to appoint a channel captain. A channel captain is usually the most powerful member of the distribution channel from producer to wholesaler to retailer. The captain organizes the channel and prevents or handles any issues and conflict within the channel. Creative and effective channel leadership often results in channel members moving towards shared goals. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 18

19 Watch: Minimizing Channel Conflict Within the distribution channel, there are different organizations, each having its own objectives, which can create conflict. It's important to understand the conflict and identify ways to minimize it, allowing channel members to see themselves not just as competitors but also as partners in a value chain. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 19

20 Read: Channel Conflict and Coordination Examples Sometimes producers make winning strategic channel decisions, and other times they fail to attain their goals. Below are a few success stories and stories about lessons learned. Case Study Success Stories Black & Decker offers three different categories of product. They have successfully minimized conflict by using three different distribution channels. For casual do-it-yourselfers, they market Black & Decker through Wal-Mart Stores and similar outlets. For serious enthusiasts, the Quantum brand is stocked by The Home Depot. Finally DeWalt products, designed for the professional contractor or builder, are available from trade dealers. Kendall-Jackson Vineyard Estates is a vineyard and winery located in Santa Rosa, California in the Sonoma Valley wine country. As of 2010, Kendall-Jackson was the highest-selling brand of "super-premium" wine (wines retailing for more than $15 per bottle) in the United States. When they decided to offer their wines for sales on the Internet, they chose an approach that would not compete with their retail stores. The wines they sell online are rarely sold by their retail channels and are priced at the high end of retail prices. Case Study Lessons Learned Quaker Oats bought the Snapple business in 1994 but by 1997, due to financial, marketing, and strategic miscalculations, Quaker found it in its best interest to sell the business. At the time of purchase, Quaker thought that it would use its skills in distribution to supermarkets and mass markets to boost Snapple's sales. Quaker had planned to consolidate its highly efficient grocery channel, which supported the Gatorade brand, with Snapple's channels for reaching convenience stores. Snapple distributors were instructed to focus on delivering small quantities of both brands to convenience store accounts while Gatorade distributors delivered larger orders to grocery chains and major accounts. But the Snapple distributors did not like the idea of losing their large accounts to Gatorade distributors. They saw the value of their Snapple distribution as an exclusive geographic franchise that the split-channel strategy would undermine. Several Snapple distributors took legal action against Quaker, and the company ultimately backed down. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 20

21 Toys "R" Us and Amazon signed a 10-year strategic partnership in 2000 that made Amazon.com the exclusive online retail outlet for Toys "R" Us toys, games, and baby products. The arrangement worked well for both sides for the first several years, improving the ability of Toys "R" Us to compete with etoys and Walmart.com while eliminating toy inventory problems that had been plaguing Amazon. But Toys "R" Us grew unhappy as the prominence of their virtual store was diminished, and Amazon.com signed agreements with competitive retailers. The conflict revolved around the question of whether or not the agreement also made Toys "R" Us the exclusive provider of such products on Amazon.com. The conflict eventually ended in a lawsuit, and the agreement was dissolved. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 21

22 Read: Vertical Marketing Systems In most distribution channels, the effort of one channel member to maximize profits comes at the expense of other members, resulting in some conflicts and potentially reduced profits for the entire channel. One of the ways of solving channel conflicts is by using a vertical marketing system (VMS) in which the main members of the distribution channel work together as a unified group in order to meet consumer needs. The three common types of VMS are: Corporate : One member of the distribution channel owns the other members. The production firm owns a retail chain (forward integration) or a retail chain owns a production firm (backward integration). Contractual : Independent production and distribution firms formally contract for their mutual benefit. Franchising, in which a producer licenses a wholesaler or retailer to distribute its products, is an example of this type of system. Administered : One member of the channel is large and powerful enough to coordinate the activities of the other members. Coordination between production and distribution firms is achieved by the size and influence of the dominant firm, without a formal agreement or ownership. A VMS has both advantages and disadvantages for businesses. Producers often decide to use a vertical marketing system to gain advantages like reduced product costs, more control over parts of the distribution channel, and typically less channel conflict. On the other side, a VMS generally requires a large investment on the part of the producer, and managing interoperating businesses can be difficult for a smaller producer with little management power or experience. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 22

23 Read: Franchises Franchising is one example of a contractual vertical marketing system. The goal of franchising is to have control of the brand without having to own the assets. What is a franchise? A franchise is one element in a network of interdependent businesses. The relationships between and among the businesses in the network allow them to share: A brand identification A successful method of doing business A proven marketing and distribution system From the producer's perspective, the decision to create a franchise revolves around control verses investments. How much control and ownership do we want versus the investment we can afford? From the perspective of the franchisee, this system can be thought of as paying for a business, marketing, and operation strategy, and the use of the parent company's name. Other franchisees, working with the same producer, are not competitors; they share the responsibility for establishing and maintaining the quality and consistency of the brand. Imagine you want to open a McDonald's restaurant. You'll pay an initial franchise fee to McDonald's. Then you'll go through training at McDonald's University where you'll learn about the McDonald's way of doing things-their standards for quality, service, specifications for menu items, method of operation, and inventory control. Once you've completed training and are ready to start operating the business, McDonald's will offer you a location they've already developed. The exterior of the building will be complete, but you will have to take care of interior additions such as kitchen equipment, seating, and landscaping. You'll agree to operate the restaurant following their guidelines for decor, signage, layout, and everything else that makes the location a McDonald's. You'll get constant support from a McDonald's field consultant who can advise you on details and will visit regularly. You'll pay McDonald's a monthly percentage of your sales and a rental fee. Your profits depend on many things, including your ability to manage and control the business. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 23

24 Module Introduction: International Marketing and Distribution At its core, international marketing strategy is largely the same as domestic marketing strategy but with some additional considerations and a few interesting twists. Most of what makes international marketing more complicated stems from how the company segments its international customers. Does the company segment by country, or does it segment in some other way? The firm's approach to segmentation informs its decisions regarding which markets to target, how to structure its international marketing organization, and what approach to take in implementing abroad the four Ps of product, price, promotion, and place. This module presents a strategic look at each of these aspects of international marketing. After completing this module, you will be able to: Assess the importance of international marketing to your business Identify considerations behind international market-entry decisions Determine an international market-entry strategy suitable to the needs and market realities of your firm Compare different organizational approaches to serving international markets Discuss the challenges associated with a global approach to international marketing Evaluate trade-offs between standardizing or customizing each of the four Ps with respect to international markets Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 24

25 Watch: International Expansion Many people use the terms "global" and "international" interchangeably when discussing business and marketing in other countries. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 25

26 Watch: Global Marketing Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 26

27 Watch: Entering New Markets Choosing which international markets to enter and selecting a strategy to use are central aspects of international marketing strategy. Professor Stayman introduces both of these topics in this presentation. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 27

28 Read: International Market-entry Strategies Key Points Exporting is the lowest-risk strategy for market entry. Licensing and franchising have lower costs but higher risks. Other contract types are turnkey projects, management contracts and contract manufacturing. Direct investment may occur via alliance, joint venture, greenfield venture, or acquisition. Once you have identified an international market you wish to pursue, there are a number of strategies for entering the new market. A firm's choice of entry strategy will depend on a variety of factors and conditions. Here are some of the most common entry strategies, listed in increasing order of control, risk, and financial commitment. Each of these strategies has many variations. Exporting Exporting is when a company markets and sells its domestic products to customers in another country. This is the most common and generally lowest-risk type of entry strategy. Companies entering a new market typically partner with a distributor, agent, or other intermediary in the host country, though firms may also sell their products directly to international customers (via the Internet, for example). Exporting requires relatively little investment in the new country, allowing a firm to enter the market gradually. Because the exporting firm relies on the local knowledge and marketing capabilities of its host-country intermediary, it must be very selective in choosing a partner. One drawback to this approach is that the firm is vulnerable to tariffs from the host country. A second consideration is that the firm gives up a share of profits to any intermediaries in the host country. Licensing and Franchising The expanding firm shares the right to use their brand, trademarks, proprietary technology, and expertise with a partner in the host country in exchange for money (a lease or franchise fee, and usually a share of profits). The partner manages the operations, serves the local market, and assumes the risk. While these approaches do not require much direct financial investment on the part of the firm, sharing intellectual property invites the risk that a licensee could learn the company's technology and become a competitor. In giving up operational control of the business, a firm runs the risk that a foreign franchisee or licensee may fail to maintain certain important quality standards. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 28

29 Other Contract Types A company in one country can contract with a firm in another country to provide services or expertise that may be expensive or difficult to acquire. In turnkey projects, a firm uses technology or expertise that it has developed in another market (or markets) to deliver a project to a buyer in a host country. For example, a firm that builds power plants, bridges, or buildings would likely expand into new markets using turnkey projects. A related type of contract is a management contract, in which a company agrees to use its expertise to manage the operation of a facility, such as a hotel property, airport, or factory, for a firm in a host country. In these types of contracts, the company providing the service or delivering the project does not license its technology or intellectual property to the host country firm. Instead, it maintains control of its own operations and leverages its own experience and technology investments to deliver its services to new markets. A third common type of contract is contract manufacturing, in which a large firm in a host market agrees to provide manufacturing for an international company. An arrangement like this allows a company to benefit from host-country production without taking on the full risk and long-term capital investment of a foreign direct investment. It may also result in training a future competitor. Foreign Direct Investment (FDI) A firm may choose to invest capital directly in an international market, through a strategic alliance, a joint venture, a greenfield venture, or an acquisition of a company in the host country. These approaches, also called direct entry strategies, provide the firm with much more control of its overseas operations, and the greatest opportunity for profits, along with significant learning about the local market. These strategies also bring the greatest risk, as the company invests directly in a foreign business, usually for some (or all) of the ownership of that business. A strategic alliance is a cooperative agreement between a company seeking to expand internationally and a company in the host country. In the case of a joint venture, the two firms invest in part ownership of a new, separate company. Usually the host country firm benefits from access to the experience and technologies of the expanding firm, while the expanding company obtains access to a new market without having to pay tariffs. A greenfield venture is one in which a company purchases land and develops its own facilities, such as retail locations or a manufacturing or distribution operation, in another country. Acquiring an existing company is the fastest way for a firm to enter a new market because the purchase brings control over the assets, technology, employees, brands, and distribution of the host country business. It brings risk, too, because the purchasing company also assumes the acquired firm's liabilities, organizational culture, and institutional frameworks. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 29

30 Watch: Organizational Structures for International Marketing A company's strategic approach to international marketing and the way it structures its marketing organization to support that approach are closely linked. Both depend on a number of strategic considerations, such as how the company segments its international customers and what its reasons for expanding internationally are. Some organizations centralize their marketing to realize greater economies of scale and function as truly global brands. Others see greater market success and profitability by providing a lot of marketing autonomy to managers in the target countries so those managers can respond to local-market needs. In this presentation, Professor Stayman introduces four types of organizational structures and the trade-offs associated with each. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 30

31 Read: Explore Different Marketing Structures Use your cursor to click the international marketing organizational structures below to learn more about each type. There are many variations on each of these general structures, and most firms employ some sort of hybrid of the simplified examples shown here. Generally, as a company increases its international marketing presence, it takes on increasingly complex organizational structures, and most firms' structures include some number of intermediaries or contract partners in host countries. Ultimately, most companies choose an organizational design based on the size and importance of their international business and the degree of centralization or decentralization they need in their decision making. The degree of centralization, in turn, depends on how the firm segments its international customers, the nature of its products, the competitive environment, and the needs and culture of the organization. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 31

32 Read: Challenges with Globalization Key Points Parker Pen's experiment with global marketing failed to acknowledge the unique demands of local markets The lesson is that too much rigidity leads to problems In 1888, George S. Parker invented a leak-proof fountain pen called the Parker Lucky Curve. Over the decades that followed, Parker Pen grew into one of the largest and best known pen companies in the world, specializing in stylish, premium-priced writing instruments. By the 1980s, Parker Pen was operating in 154 countries in a highly decentralized international organization. Although Parker Pen was a U.S.-based firm, 80% of its sales came from international subsidiaries, which operated with a great deal of autonomy. The company sold a wide and diverse range of high-priced pens, many of which were developed by subsidiaries for local markets, and was represented by 40 different advertising agencies around the world. In 1982, Parker Pen found itself facing a decline in profits and a profound loss of market share to brands of inexpensive, disposable pens and also to other high-end pen companies like A.T. Cross Company and MontBlanc of Germany. To turn things around, the company hired a new president/ceo and senior marketing team. Most importantly, the company decided to reverse its long history as a decentralized multi-domestic firm and aggressively pursue a global marketing strategy and structure. At the time, globalization was a relatively new concept in marketing, popularized by Theodore Levitt's McKinsey Quarterly article, "The Globalization of Markets." Parker Pen reasoned that globalizing made a lot of sense for them-pens are pretty much the same product all around the world. This would be especially true if Parker could introduce a new, inexpensive pen that could be produced and sold on a massive scale. This new $2.98 pen, the Vector, would have universal appeal, and the company would win back market share. Parker Pen's Steps to a Centralized, Global Marketing Organization 1. Cut the product line from 500 models to 100 models and reduce payroll accordingly 2. Consolidate manufacturing operations and overhaul and modernize the company's main plant in the U.S. 3. Hire Ogilvy & Mather to oversee all advertising worldwide, replacing the other 39 advertising agencies 4. Develop a common creative strategy and positioning, and apply them worldwide 5. Adopt a single advertising theme, "Make Your Mark With Parker," using similar photography and a centrally supplied typeface, logo/visual design, and materials Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 32

33 The rigidity and uniformity of this centralizing/globalizing effort met with strong resistance among Parker's international subsidiaries. These subsidiaries had always enjoyed significant autonomy and were in some cases quite profitable for Parker. At one point, the Marketing Vice President for Writing Instruments met in London with the European subsidiaries, who complained that the rigid marketing and sales plan for the Vector pen was unsuitable for their markets. The vice president allegedly stood up and responded,"yours is not to reason why; yours is to implement." Denied flexibility for their local markets, the international subsidiaries never bought in to the "one world, one brand, one advertisement" approach. The lack of flexibility in Parker's globalization effort introduced problems in each of the four Ps: Product - Low-cost pens were a new product for Parker, so they were not equally received in all markets. France and Italy were fountain pen markets; Scandinavian customers preferred ballpoint. The new $15 million plant had difficulties, increasing costs and eroding product quality. Price - In some markets, Parker needed to compete on price and required more flexibility in pricing. In other markets, Parker could retain its higher-price-for-better-quality stance. Place - New centralized U.S. manufacturing introduced significant distribution challenges to overseas markets. Distribution varied among markets, so local strategies were needed. Promotion - Uniformity of the positioning hurt Parker in many markets where competitive climates varied from country to country. In the U.S., the low-price, mass-market approach diluted Parker's image as a premium brand. "Yours is not to reason why; yours is to implement." For all of these reasons, the "Make Your Mark" campaign failed, and having lost $22 million in 1985, Parker Pen abandoned its globalization experiment. The "Yours is to implement," quote summarizes the dangers of a company trying to fully centralize all marketing decisions and to rigidly standardize its four Ps, without regard for the unique demands of local markets. Not only may a global approach be unsuited to the demands of a local market, but also the refusal to view local managers as anything more than implementers may never earn the buy-in required to succeed in local markets. Even global companies like Coca-Cola and McDonald's provide for some local flexibility. The lesson here is not that standardization or global marketing is a bad idea, but that too much rigidity leads to problems. Firms need to look at each of their four Ps and, for each one, find the balance between where it makes sense to centralize decision making and take a standard, global approach and where it is better to allow flexibility and adapt some aspects to compete better in local markets. Levitt, Theodore. "The Globalization of Markets." The McKinsey Quarterly (Summer, 1984), McKinsey & Company, Inc.. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 33

34 Watch: Customizing, Standardizing, and the Four Ps Every firm that competes internationally faces some pressures to standardize some of their marketing strategies, as well as some pressures to customize or adapt them to suit unique conditions in local markets. The question facing these companies is not as simple as whether to standardize or customize marketing efforts. Instead, firms must decide which aspects of their marketing they should standardize, which aspects they should adapt, to which markets they should adapt them, and in what way. Listen as Professor Stayman introduces some of the considerations around standardization or customization questions for the four Ps. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 34

35 Read: Competing Pressures Key Points Global standardization means providing a common set of products and marketing tactics to all of a firm's worldwide customers Local responsiveness means making adaptations to a product or to its marketing to meet the needs and conditions of individual country or regional markets Companies need to decide whether it's better to standardize or adapt and localize Global standardization refers to providing a common set of products and marketing tactics to all of a firm's worldwide customers. When a company can sell the same product to all customers in the same way, it minimizes costs while offering a consistent and uniform global brand image. Local responsiveness refers to making adaptations to a product or to its marketing to meet the needs and conditions of individual country or regional markets. Companies that operate internationally face a variety of pressures that inform how they market their products and services. Sometimes it's better for a business to standardize; sometimes it's better to adapt and localize. This decision depends on the company, brand, and product, as well as on the international customers and market conditions. The first step in making these decisions for your business is to become familiar with the competing pressures for global standardization and for local adaptation. Pressures for Global Standardization Cost reduction through economies of scale Many products and services are significantly less expensive to produce, market, or distribute when these functions can be done in a standard, large-scale way. The degree of cost savings that can be achieved through standardization will vary, depending on the nature of the product or service. Converging consumer trends and universal needs Some products appeal to, and are used by, customers everywhere in the same way. Some examples of these products are tires, phones, commodities, cameras, and consumer electronics. Global competitors When a company faces the same one or two global competitors in its markets around the world, it needs a standard and centralized strategy against those competitors. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 35

36 Global customers If customers are other global companies, then reaching these customers in all their markets will require a standard, worldwide marketing presence. To serve these global customers consistently across all their markets, a firm should standardize the product or service it sells to these customers. Global suppliers A steady and consistent supply of raw materials, parts, or energy from suppliers that are large and centralized makes it much more attractive for a firm to standardize and centralize its production. By contrast, a company that must rely on a number of different suppliers for a key part or ingredient faces higher costs and finds it much more difficult to produce a consistent, standard product. Availability of global and pan-regional media The Internet, cross-border television, and other media provide opportunities for companies to launch worldwide campaigns to promote and sell their products universally and simultaneously. Pressures for Local Responsiveness Diversity of local customer needs Certain features or attributes of a product or service may need to be adjusted in order to effectively market the product or service to new and diverse customer groups. Customer needs may vary according to differences in language, average size of living spaces; infrastructure (100- or 240-volt electrical standards, for example); and economic conditions. Differences in distribution channels Where, when, and how overseas customers purchase your product may vary by locale. For example, the prevalence of supermarkets or retailers can differ greatly between countries. The length of the channel may vary. Importance of local competitors When local competitors are strong, your marketing and product decisions must suit the local market. Local competition may force a company to compete on price, for example, or to show parity in market-specific product features. Cultural differences Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 36

37 Certain aspects of culture have an enormous influence on purchasing decisions. Cultural differences may result in different tastes and preferences, different ideas about what are acceptable sales practices, different holiday-related purchasing practices, and different literal translations of brand names and tag lines. Religious beliefs can influence customer responses to certain images, words, or foods. Host government requirements and regulations Countries have their own laws and regulations. Examples: pricing restrictions, testing or labeling requirements, tariffs, labor or tax laws, and "local content rules" requiring a certain percentage of a product to be produced locally. Country-specific resources and capabilities available to the firm Sometimes a country or region has attributes that can lead a company to market differently to customers in that country than to others. Examples: natural resources, climate, and size of local population. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 37

38 Read: Product and Promotion Adaptation Strategies When a company or business unit considers whether to customize or standardize part of its marketing strategy, it often begins with the product and the way that product is promoted in international markets. Use your mouse to explore the grid below and learn about some different adaptation strategies involving two of the four Ps-product and promotion. Table adapted from Keegan, Warren J., and Green, Mark C. (2005). Global Marketing. Upper Saddle River, NJ:Pearson/Prentice Hall. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 38

39 Read: Adapting Promotion Key Points The vast majority of advertising costs go to purchasing space and time in different media markets A standardized promotion worldwide must consider cultural, legal, and other differences between individual geographic markets Under the right circumstances, a well-crafted promotion can deliver its intended message consistently across all of the locations where targeted customers can be found, and it can do so with little more than some translated print advertising or a replacement voice-over. Such a standardized promotion can result in significant cost savings in developing and producing the advertising. Delivering that advertising, however, is a different story. The vast majority of advertising costs go to purchasing space and time in different media markets, and a company encounters these costs whether its advertising is global or locally adapted. The biggest challenge of standardizing promotion worldwide, though, is that it is very difficult to create a single promotion that can span the many cultural, legal, and other differences between individual geographic markets. Even global brands with universal appeal and a worldwide marketing strategy tailor some of their promotions and campaigns for specific international markets. Adapting promotion entails more than merely translating advertising or brand names into other languages. It means changing what you say about your product, or the way that you say it, to a specific group of customers in a particular foreign market. There are many reasons that a firm may choose to customize promotions for specific markets, but there are also drawbacks to doing so. Media Spillover Effects Travel, media, and communications are increasingly global. Every year, more people around the world are using online and mobile technologies, which bring exposure to media content, brands, advertising, and messaging about products and services from all over. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 39

40 As people and the media that they experience spill over and beyond the borders of their local market, so do a product's messages and images. In cases where promotion has been heavily tailored to the needs of a specific local market, spillover from other markets can cause a product's messaging to become inconsistent, unfocused, or dilute in the mind of the targeted customer. When companies are able to successfully standardize a promotion worldwide, they can offset - and can even benefit from - the effects of media spillover. Challenges with Adapting Promotion Higher costs associated with developing and producing more varieties of advertising and promotional materials, often in partnership with multiple advertising agencies. More coordination required to manage the different positioning, messages, and advertising across markets and with multiple promotion partners. Spillover effects of promotions from outside markets make it difficult to maintain a consistent message and image to customers within a specific market segment. Local Factors to Consider Here is a small sampling of the many important ways in which markets can differ from one country to another with respect to promotion. It is critical that you where and how to promote your products and services. know your markets, and keep factors like these in mind as you make decisions about Economic conditions - The purchasing power of customers may differ from one country to another. A restaurant chain that can be positioned in one market as inexpensive, casual food may be unaffordable to many customers in a different country. The same restaurant could be positioned and promoted in the latter country as a place for special-occasion dining. Media availability - In some countries, there may be fewer television channels, print publications, in-store locations, or sign spaces that reach the target segment. Access to the Internet or mobile data networks may be limited or restricted, or may be available only to certain segments. This could require a different mix of media or a completely different approach to promotion for that market. Local competition - Beating the local competition may mean adjusting the positioning or the message to emphasize different benefits. Language - There are many examples of brand names or taglines whose pronunciation or translation failed Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 40

41 (sometimes in funny ways) when taken to another country. Even countries that share a language may have regional variations that can cause a promotion to work in one location but not another. Local culture - This comes down to understanding the target customers: what is important to them, what types of communications will influence their decision making, and what types of language or images will be effective (or counter-productive) in conveying the value proposition of your product or service. Purchasing context - Some cultures place a high value on personal selling over advertising, for example. Another difference could be the age, gender, or role of the person making the purchasing decision. Religion - Symbols, images, themes, and even colors can have very different significance among cultures with different belief systems. Views toward advertising - Different advertising practices are more acceptable in some cultures than in others. For example, the United States is one of the only countries in which comparative advertising is seen as acceptable. In comparative advertising, a firm compares its product directly to a competitor's product, by name, for the purpose of showing its superiority to the competitive product. In most cultures, this type of advertising is considered crass, and in many countries, it is illegal. Some cultures respond to more fact-based, informational advertising, while others may prefer a less substantive, more entertaining approach. Nature of families - In many cultures, families tend to be large and cohesive, or households may include multiple generations, while elsewhere smaller, nuclear families are more common. Celebrities - Countries have their own celebrities, and this can be a valuable tool in localizing promotions. In addition, some societies place more value on celebrity endorsement than others. Celebrity advertising, while present all over the world, is especially common in Japan and China. Biases regarding country of origin - Some countries' products are seen in certain markets as being more prestigious or of higher quality than products from other countries. This affects whether a firm should highlight or downplay the product's country of origin in a particular market. Local laws - Countries differ in their laws around consumer protections, anti-competitive practices, or preservation of local culture, for example. In some countries, the use of coupons is viewed as an illegal form of price discrimination. Some countries allow sales to occur only during certain times of year, and the discounts must fall within a certain accepted range. Countries differ in what content or images are allowed in advertising and what products can be advertised to certain population groups (such as children) or in certain types of media. Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 41

42 Read: Adapting Price Key Points Factors ranging from local economic conditions, to government policies, to the retail culture of consumers, all influence a firm's decision whether to adapt or standardize its pricing for international markets Each company needs to find a pricing strategy that will best address its international markets A firm must take into account a great deal when determining whether to adapt or standardize its pricing for international markets and, in each case, how to do it. These include factors ranging from local economic conditions to government policies to the retail culture of consumers. Each company needs to find a pricing strategy that will best address the conditions that apply in its international markets. There are three main strategic approaches to international pricing: 1. Standardize pricing so that a product sells for the same base price everywhere. Benefits: easy to implement; no gray markets. Limitations: the standard price won't be the right price in all markets. In some markets, the price will be too high, while in others it will be too low. 2. Adapt pricing, allowing each country manager to set an optimal market-based price in each country. Benefits: flexibility to optimize pricing for local market. Limitations: vulnerable to product arbitrage (gray markets); limited central pricing control; ignores actual costs incurred by the company in each market. 3. Apply a cost-plus pricing system by country. The company imposes a standard markup to apply to the local costs for each market, factoring in distribution costs, tariffs, and other country-specific costs. Benefits: affords some central pricing control while allowing some country-market variation. Limitations: in countries where distribution or other costs are high, this may result in a price that is not competitive or Copyright 2012 ecornell. All rights reserved. All other copyrights, trademarks, trade names, and logos are the sole property of their respective owners. 42