MAR 3023 Exam 3

Distribution Economics
specifically considers how products get from where they are manufactured to where they are purchased
Marketing Channel
consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. Allow for flow of goods from producer through intermediaries and to buyers.
Time Utility as Created by Channel Strategy
Channels provide
-convenience (having product available when consumers want to buy it, ex. store open 24 hours a day)

-speed (getting the product to the consumer in a timely manner, ex. fast food, amazon shipping)

Place Utility as Created by Channel Strategy
Channels provide
-convenience (store is easily accessible, ex. ATMs)

-prestige (how exclusive or upscale a location is, ex. high-end retailers located in prestigious areas with elaborate atmospherics)

Logistical Functions (Channel Distribution)
deal with movement + storage of goods.
-Assorting: channel members decide on the selection of goods the channel will offer, thus creating an assortment that is valuable to customers

-Transporting: physical movement of products using trucks, trains, boats, etc.

Transactional Functions (Channel Distribution)
-Selling: manufacturers sell to wholesalers, who sell to retailers, who sell to consumers

-Risk taking: retailers assume risk when they buy products with the intent to sell them, bc they’re not 100% sure they will be able to sell all of these products

Facilitating Functions (Channel Distribution)
-Financing: channel members sometimes offer consumer financing (ex. retailers offer credit cards)

-Market Research: channel feeds information back to the manufacturer about how things can be done better, what modifications to make, + what new products to introduce

Logistics Management
organizing the cost-effective flow of raw materials, in-process inventory, finished goods, and related information from their points of origin to their points of consumption to satisfy consumer requirements
Logistics
those activities that focus on getting the right amount of the right products to the right place at the right time for the lowest possible cost
Expenses Included in Total Logistics Costs/Functions of Logistics Management
transportation, materials handling, warehousing, inventory, stock-outs, order processing, and return goods handling
Transportation as a Function of Logistics Management
physical movement. Often involves use of third-party logistics (contracts with outside vendors, ex. FedEx + UPS)
Warehousing and Materials Handling as a Function of Logistics Management
holding and maintaining goods after they are produced. Materials Handling specifically involves moving goods over short distances into, within, and out of warehouses and manufacturing plants
Cross docking
process of streamlining the logistics process. Setup in which a warehouse has loading docks for trucks to bring in products from manufacturers on one side, and loading docks for products to be put on trucks to go to stores. Conveyor belts in the middle and computer systems that accurately split the products for each truck. Reduces time that inventory sits in storage
Oder Processing as a Function of Logistics Management
facilitated by Electronic Data Interchange: combines proprietary computer and telecommunication technologies to exchange electronic invoices, payments, and information among suppliers, manufacturers, and retailers. (ex. store’s computer system automatically reorders an item that is low on inventory)
Radio Frequency Identification Tag (RFID Tag)
helps with just-in-time inventory. Can help bypass checkout (ex. Amazon Go commercial) and with inventory management (ex. Zara placing tags on every item to better track inventory)
Inventory Management as a Function of Logistics Management
-Just-in-Time Inventory management: Advantage: minimizes inventory holding costs, Disadvantage: one interruption stops whole assembly line (ex. automobile manufacturers use it so component parts arrive at the assembly line just in time to be used)

-Vendor-Managed Inventory: retailer turns over part of its store to suppliers, who are in charge of delivering the items and stocking the shelves bc they have a better understanding of the specific category of product (ex. Walmart allowed Brunswick to manage sporting goods section)

Supply Chain
sequence of firms that performs the activities required to create and deliver a good or service to consumers or industrial users
Supply Chain Management
integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering goods and services the provide value to consumers. Takes on a broader scope than logistics management.
Intensive Distribution (Degree of Supply Chain Channel Coverage)
products offered in every place a consumer could conceivably get them (ex. chewing gum, soft drinks)
Selective Distribution (Degree of Supply Chain Channel Coverage)
products are available in just a few locations around town (ex. perfume manufacturer only sells through upscale department stores)
Exclusive Distribution (Degree of Supply Chain Channel Coverage)
products sold only through one outlet per geographic territory (ex. Coach building its own stores instead of selling through department stores)
Direct Channel
producer and ultimate consumer interact directly; no middlemen (ex. Dell rarely sells products through Best Buy/other retailers)
Indirect Channel
rely on marketing intermediaries to reach the ultimate consumer (ex. Wholesalers, retailers)
Dual/Mixed Distribution
when a company uses both direct and indirect channels
Channel Conflict
when one channel member believes another member is engaging in behavior that prevents it from achieving its goals (vertical and horizontal)
Vertical Channel Conflict
occurs among actors at different levels in a channel (ex. between wholesaler and retailer, Miller-Coors canceled ad campaign bc distributors did not like it)
Disintermediation (Vertical Conflict)
when a manufacturer bypasses a channel intermediary and sells directly to the customer, price competition)
Wholesalers (Type of Channel Member)
intermediaries that sell to other businesses. Merchant wholesalers, agents, and manufacturer-owned wholesalers.
Merchant Wholesalers
majority of all wholesalers. Take title and possession of the products they distribute.

-Distributor (general merchandise wholesaler): performs all functions a channel is expected to perform such as stocking merch, carrying inventory, offering credit, market research, etc

-Jobber (limited merchandise wholesaler): performs a subset of channel functions for which physical possession and ownership are involved such as sales calls, cataloging, inventory, etc

Agents (Wholesalers)
aka Brokers. Look more like salespeople than wholesalers because they don’t take title or possession of the goods, but they represent the company, take orders, negotiate transactions, and transfer the orders back to the manufacturers.
Manufacturer-Owned Wholesalers
-Manufacturer’s sales branch: manufacturer-owned equivalent of a distributor bc it carries inventory and performs all the functions of a channel

-Manufacturer’s sales office: manufacturer-owned equivalent of an agent bc it doesn’t carry any inventory

Retailers (Type of Channel Member)
companies that sell, rent, or provide goods and services to ultimate consumers for personal, family, or household use. There are store retailers and non-store retailers.
Types of Store Retailers
-Specialty Stores: most stores in a mall. Small and specialize in a particular area (ex. clothing stores, shoe stores)

-Department Stores: large “anchor stores” that have multiple departments under one roof. (ex. Macy’s, Belk, JC Penney)

-Power Retailers: “grown-up” versions of specialty stores because they offer large selection of a narrow range of products (ex. Lowe’s, Best Buy, Office Depot)

-Discounters: offer a number of different product categories at relatively low prices (ex. Walmart, Costco, Sam’s Club)

Non-Store Retailers
move products to consumers through something other than a physical location (ex. Catalogs, TV shopping channels, internet stores)
Contractual Channel (Channel Type)
legal agreement binds the parties to certain obligations and functions (ex. franchising)
Franchising
corporate franchisor contracts with an individual franchisee to sell its product in a given territory.

-Advantages: franchisor receives initial franchise fee and royalties on all of the franchisee’s sales, franchisor’s business can grow rapidly, better odds for franchisee to stay in business

-Disadvantages: franchisor loses control over its business, franchisee also loses control bc they must adhere to franchisor’s rules

Administered Channel (Channel Type)
operate informally and casually just based on a “handshake agreement.” Has become less popular.
Vertically Integrated Channel (Channel Type)
a single company owns more than one channel member
-Forward VI: channel member moves down the channel, towards the consumer (ex. Pepsi acquired all of its North American bottlers)

-Backward VI: channel member moves up the channel towards manufacturer (ex. Netflix started as just streaming then began creating their own shows)

The Key Trade-off in Choosing a Channel Type is between…
cost and control. Complete control is expensive, but less expensive means less control
Channel Captain
most important channel member that controls the activity of the channel by coordinating, directing, and supporting other channel members
Relationship Marketing
emphasizes long-term relationships with suppliers, distributors, and customers
Retailing
includes all activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use
Ways in which Retailing Adds Value
Providing assortments, breaking bulk, holding inventory, other services (financing, carrying groceries to your car, gift wrapping, fitting rooms, etc)
Positioning (Retail Strategy)
based on merchandise mix and the level of service it offers to its customers
Location (Retail Strategy)
-Macro Factors in choosing location: economic climate, demographic/psychographic profile, competition, business climate
-Micro factors in choosing location: accessibility, visibility, traffic congestion, parking availability, rent, cannibalization, store image and atmospherics
Racetrack (Store Layout)
utilizes a large aisle that takes the customer around the entire perimeter of the store, exposing him/her to every aisle (ex. Supermarkets)
Power Aisle (Store Layout)
a main aisle that runs the length of the store with other aisles that branch off from it
Meandering Layout (Store Layout)
set up to make customers move more slowly through the store (ex. Ikea)
Net Sales per Square Foot
measure used to compare departments within a store or to compare stores within a chain of stores
Net Sales=Total Sales – Returns

Net Sales / Sq Ft of Store or Dept

Stockturn Rate
measure of hos fast items move onto and off the shelves

Average Inventory= (Beginning Inv + Edning Inv)/2

Cost of Goods Sold / Average Inventory (at Cost)

Same-Store Sales Growth
basic measure of retail store performance which adjusts for expansion in the growth of the overall chain

[(Total Sales1-Sales from New Stores1)-Total Sales0] / (Total Sales 0)

Brand Management
reflects the manufacturer’s perspective and has the goal of maximizing the profit performance of the brand
Category Management
reflects the retailers perspective and has the goal of maximizing profit performance of the entire mix of brands in a product category
Recreational Shopping
many consumers get some sort of intrinsic satisfaction from being in a shopping environment
Retailtainment
combination of retail and entertainment that helps capitalize on recreational shopping (ex. lululemon provides free yoga classes, PetSmart Pet Spas)
Omnichannel Retailing
involves the integration of all of the different marketing channels to create synergy for customers (ex. JCP is brick and mortar, but has strong catalog presence)
Administered Pricing
system in which prices are predetermined. The consumer does not participate in setting the scales price
Participative Pricing
pricing system in which the consumer participates in setting the price through haggling. Prominent in business-tobusiness transactions
Value
Ratio of perceived benefits to price. When benefits exceed price, customers perceive a high value, and vice versa.
Two Ways Marketers can Increase Perceived Value
Price competition and non-price competition
Price Competition (Way that Marketers Increase Perceived Value)
simple decreasing one’s prices to compete. Prominent in very competitive industries. It is easy to duplicate, however, so it should be used as a last resort.
Non-Price Competition (Way that Marketers Increase Perceived Value)
increasing perceived benefits instead of lowering prices. (ex. airplane with seats that unfold into beds)
Reference Price
price a consumer thinks he or she will have to pay for a product. Internal: based on memory, external: provided by an outside company usually to change internal reference price
Predatory Pricing
Illegal practice; when a large firm deliberately sets its prices low in the short-term in order to drive smaller competitors out of business, and then raises prices once the competition is gone.
Price Fixing/Price Collusion
Illegal practice; when competitors join together to agree on a price
“Bait and Switch”
Illegal approach to false advertising; retailer advertises and item that it has no intention to sell just to lure customers into the store, and then trying to sell a more expensive product to the lured customer
The Five Basic Pricing Approaches
cost-based, profit-based, demand-based, competition-based, value-based
Break-Even Analysis (Cost-Based Pricing)
BEP: (Total Fixed Costs/# Of Units) + Unit Variable Costs
-assumes that every unit produced is sold
-total revenue line is steeper than the total cost line
-point where total cost intersects vertical axis is the fixed cost
-slope of total cost line is the unit variable cost of production
-slope of total revenue line is the price
Markup Pricing (Cost-Based Pricing)
adding a fixed percentage to the cost of all items in a specific product class. The percentage markup refers to percentage of the SELLING PRICE (ex. if you buy a candy bar for $2 and mark it up 50%, you sell it for $4)

Markup is equal to ___% of the selling price.

Markup Price= Cost of Goods / (100%-%markup)/100

Target Profit Pricing (Profit-Based Pricing)
when firms want to ensure that they earn a specified level of profits through sale of a specified number of units

Price= (TFC+TVC+Total Desired Profit) / Total # of Units

Target Return-on-Investment Pricing (Profit-Based Pricing)
Price= (TFC+TVC+(total investment*ROI))/Standard # of Units

Total Investment * ROI= Target Profit

Problems with Cost- and Profit-based Pricing
-Internal focus: doesn’t consider external market conditions
-Ignores demand and competitive factors
-Assumes that all products are sold at full price: firms often must discount product to liquidate inventory
-Fails to account for economies of scale: as a firm produces more of a good, it may be able to reduce variable cost bc of increased experience
Market Skimming (Demand-Based Pricing)
firm starts at a high price and gradually brings it down. Used when demand for the product is inelastic (ex. High end consumer electronics bc people “have to have it”)
Market Penetration (Demand-Based Pricing)
firm starts at a low price (discounts + rebates) and gradually raises it. Used when demand for the product is fairly elastic.
Prestige Pricing (Demand-Based Pricing)
use of price to add value to the product in the mind of consumers. Used for luxury goods in markets characterized by a backward-bending demand curve
Price Lining (Demand-Based Pricing)
setting the price of a line of products at a number of specific pricing points
Odd-Even Pricing (Demand-Based Pricing)
setting prices a few dollars or cents under a whole number (ex. $11.99 instead of $12)
Bundle Pricing (Demand-Based Pricing)
bundling together complementary products and services and pricing them accordingly, cheaper than if purchased separately (ex. Gators Meal Deal: ticket, hot dog, + soda for $35 instead of $55)
Target Pricing (Demand-Based Pricing)
estimating the price that the ultimate consumer would be willing to pay for a product, working backward through markups
Yield Management Pricing (Demand-Based Pricing)
charging of different prices to maximize revenue for a set amount of capacity at a given time (ex. airline tickets)
Demand-Minus Pricing (Demand-Based Pricing)
Manufacturers arrive at their wholesale price using a desired retail price and percent markup

Wholesale Price= Retail Price * (100-%markup)/100

Chain Markup Pricing (Demand-Based Pricing)
similar to demand-minus pricing, but includes longer channel than just manufacturer>retailer>consumer.

Mfg’s Price= Retailer’s P x (100-%ret’s markup)/100 x (100-%distributor’s markup)/100

Dynamic Pricing (Demand-Based Pricing)
changing prices based on market conditions, consumer behavior, and competitive intelligence (ex. Sport’s teams jack up prices when they’re playing well, Uber surges)
Price Leader/Follower Pricing (Competition-Based Pricing)
used in an oligopolistic market in which there are just a few firms that are able to observe each other’s pricing and marketing activities. Firm with large market share is the price, and other firms follow them if they change their price
Competitive Bidding (Competition-Based Pricing)
price is determined by bidding, either by customers or suppliers
Value-Based Pricing
simultaneously increasing product and service benefits while maintaining or decreasing price
1. understand how product is going to be used
2. analyze the benefits of the product in the particular usage situation
3. analyze the costs associated with the use of the product
4. create a cost/benefit tradeoff
Critical Strategic Pricing Ratio (Value-Based Pricing)
Value = Total Perceived Benefit / Price
Unbundling (Value-Based Pricing)
helping customers understand the value they are receiving from the product in exchange for the price they’re paying
Corporate Mission
statement that clearly defines the markets in which a firm competes and seeks to deliver value to its customers. Defines who the customers are and what kinds of benefits the organization is trying to deliver
Marketing Myopia
a focus on the immediate future without a consideration of the long term. Firms must avoid this and rather define themselves broadly to allow room for flexibility and change (ex. Pickett and slide rulers)
Corporate Goal
a specific, measurable objective that can be used to measure an organizations performance (ex. target revenue, profit, sales growth, market share, etc)
Two Dimensions of the Boston Consulting Group Matrix
Market growth rate (how much the relevant market is growing, >10% is considered high) and relative market share (firm’s market share relative to the market share of its largest competitor, >1 means dominant firm)
Relative Market Share (RMS)
Firm’s raw market share / raw market share of the firm’s largest competitor
Question Mark on BCG Matrix
product with low relative market share in a high-growth market
Star on BCG Matrix
dominant brand in a high growth market. Firm must continue investing to maintain high market share
Cash Cow on BCG Matrix
dominant brand in a low-growth market. Competitors don’t threaten it bc it’s a low growth market, so the firm backs off its investment to start investing in question marks
Dog on BCG Matrix
low-share brand in a market with a low growth rate
Experience Curve
the relationship between unit production cost and total units produced. As the total number of units produced increases, the cost involved in creating an additional unit falls
Strategic Marketing Process/Strategy Formulation
an approach whereby an organization allocates its marketing mix resources to reach its target markets. Three Steps:
1. Planning
2. Implementation
3. Control (Evaluation)
Annual Marketing Plan
one-year written document that the marketing team puts together in conjunction with other members of the organization. Includes:
-Executive Summary
-SWOT Analysis
-Objectives
-Strategy
-Tactics
-Budget
-Timing
-Contingency Plans
Situation (SWOT) Analysis (Planning Phase of Strategy Formulation)
taking stock of where the firm or product has been recently, where it is now, and where it is headed in light of the organization’s plans and the external factors and trends affecting the firm or product. Stands for Strengths, Weaknesses, Opportunities, and Threats
Identification of Product/Market Segments (Planning Phase of Strategy Formulation)
Segmentation, Targeting, and Positioning
Objective Formulation (Planning Phase of Strategy Formulation)
Focus on sales revenue (increasing sales by a certain percentage), focus on profit, focus on market share (aka master marketing objective),
Market-Share Strategies
Grow (increase share), Maintain (common with market leaders), Harvest (allowing share to decline), Divest (giving up on the brand)
Sales Force/Promotion as a Market Share Tactic
hiring more salespeople, training them better, or paying them better
New Products/Product as a Market Share Tactic
introducing new products can help increase market share
Product Quality/Product as a Market Share Tactic
higher perceived quality often leads to larger market share
Advertising/Promotion as a Market Share Tactic
fourth most important tactic in increasing market share
Sales Promotion/Promotion as a Market Share Tactic
usually effects the short-term, so doesn’t play a big role on effecting market share
Price as a Market Share Tactic
one of the last effective tactics. It’s only effective long-term for the firm with lowest cost structure (ex. Walmart)
Place as a Market Share Tactic
one of the least effective tactics.
Affordable Approach (Budgeting)
companies spend what they think they can afford to spend on marketing. Involves setting a desired ratio of marketing expenses to sales. Little investment into advertising under this approach
Percentage of Sales Approach (Budgeting)
company devotes a certain percentage of its sales dollars to advertising, promotion, and marketing expenditures.
Problem: presupposes what sales will be to determine how much to invest in marketing. (ex. Low sales would mean firm should invest less in marketing, but this is not reasonable– they should invest more to increase sales)
Optimization Approach (Budgeting)
marketers use economics principles to determine how much to spend on marketing, such as point at which marginal revenue=marginal cost. Rarely used because it is timely and requires a costly set of data.
Objective and Task Approach (Budgeting)
marketer’s consider the company’s objectives, strategy, and tactics and assign marketing costs to each. Uses zero-based budgeting (involves starting from zero instead of using last year’s data)
Problem: it’s labor-intensive and it’s sometimes difficult to accurately estimate all of the costs involved
Competitive Parity Approach (Budgeting)
firms base their budget decisions on the collective wisdom of competition. Assume that their competition is on target
Two approaches: Maintenance Objective and Growth Objective
Maintenance Objective (Comparative Parity Budgeting)
firm wants to maintain its market share and not lose any to the competition, so it should have a “share of voice” equal to its market share.
Share of Voice = Firm’s Marketing Expense/Industry Marketing Expense
Growth Objective (Competitive Parity Budgeting)
firm wants to increase its market share , so the firm’s share of voice must be larger than the amount by which it wants to expand its market share. Uses 1.5 rule of thumb.

ΔShare of Voice=1.5*ΔMarket Share

Implementation Phase (Strategic Marketing Process)
includes establishing the marketing organization, developing timetables, obtaining and allocating budgets, and executing the marketing program
Brand Manager
responsible for the overall marketing effort for a particular brand
Program Evaluation and Review Technique (PERT Chart)
used to schedule a complicated process, like tracking the activities involved in a new product launch
PERT Critical Path
the longest possible path that will allow us to get from prototype to launch; determines minimum time it will take to launch the product
Share Point Analysis
refers to thinking in terms of the overall market and dividing it up into market share points
-Estimate Industry Sales
-Estimate the firm’s market share
-Compute gross margin per share point
Share Point
equivalent to one percent of the overall market. Often used as a basis of comparison to allocate marketing resources effectively
Contribution
aka gross margin; covers selling costs, administrative costs, and other expenses
Ways to Improve Implementation
communicate, assign a product/program champion (person who is able and willing to cut red tape and move a product/program forward), reward performance, schedule tasks, avoid “paralysis by analysis”, and seek external/internal feedback
Control/Evaluation Phase (Strategic Marketing Process)
phase during which we measure results, identify deviations from the plan, and make adjustments as needed
Sales Analysis (Control/Evaluation Phase)
comparing actual results to sales goals and identifying areas of strength and weakness.
Sales Component Analysis
type of sales analysis (control/evaluation phase) that traces sales revenues to their sources, such as specific products, sales territories, or customers
Profitability Analysis (Control/Evaluation Phase)
compares actual and expected profits. Enables firms to measure the profitability of their products, customer groups, sales territories, channels of distribution, and even order sizes
Marketing Audit
comprehensive, unbiased, periodic review of the strategic marketing process of a firm or strategic business unit. Firm looks at entire set of activities that makeup the marketing effort and assesses whether the activities are benefitting the company & whether the company can improve on them
E-commerce
refers to commercial transactions that take place over the internet
Two categories: Business-to-consumer and Business-to-business
Reverse Actions (B2B E-commerce)
suppliers of a good or service “bid” against each other to provide their products to another business. Bids get lower and lower as time goes on
Cloud Computing (B2B E-commerce)
storage of data on remote servers (ex. Netflix stores its data through Amazon Web Services)
The Major Uses of the Internet in B2C E-Commerce
-Facilitating sales by serving as an information source
-Virtual communities (ex. TheKnot.com)
-Brand Building (promotional websites that show how a product can be used + provide other activities that might interest consumers, ex. KraftRecipes.com)
-Selling Merchandise (ex. eBay, Amazon)
Promotional Website
provides information about the company and its products
Transactional Website
allows people to purchase products directly on the site
Reasons People Visit Brick-and-mortar Stores
-Merchandise assortments
-Service (ex. associates help consumers find what they want/give suggestions)
-Price (consider total costs: going to the store, buying it, potentially returning it)
-Entertainment
-Social Interaction
Benefits of Electronic Retailing
-Many alternatives
-Narrowly Tailored Information
-Full-Motion video
-Entertainment (ex. virtual dressing room)
-Convenience (ex. products shipped directly to their home, no crowd, open 24/7)
Sharing Economy
examples include Uber (company doesn’t own cars, rather drivers “share” their cars) airbnb
Issues Facing the Internet and E-commerce
-Bandwidth
-Security of Transactions (ex. phishing, evil twin, farming)
-Need for a “smart” search engine (for finding best deals)
-Disintermediation: when manufacturers sell directly to consumers and bypass retailers
-Price competition: consumers can easily compare prices online, manufacturers & retailers can respond to that
Mobile Marketing
involves the use of 3rd generation cell phones that have access to broadband internet
Balance of Trade
difference between the value of a nation’s exports and the value of its imports
BRIC Nations
Brazil, Russia, India, and China: countries that are experiencing rapid economic growth and that will be serious competitors to the United States in the future
Sectors to Consider in a Cross-Country Analysis
-Demographic
-Social/Cultural
-Economic
-Technological
-Natural Environment
-Legal/Regulatory
International Marketing
Extends the domestic approach to international markets without any adjustments
Multinational/Multi-Domestic Marketing
the company views the world as being made up of different regions (either individual countries or closely related groups of countries) and treats those regions differently
Transnational/Global Marketing
the company sees the world as one big market and looks for segments that cut across national boundaries (ex. Segmented not based on region, but rather likes/preferences)
Pure Standardization
company uses the same business model everywhere it operates. Easiest and cheapest way to expand from country to country (ex. Dorito’s same packaging and marketing efforts)
Mixed Approach/Glocalization
company goes into each market and decides which aspects of the company’s standard marketing approach can be kept and which ones need to be adjusted (ex. Oreo’s different flavors in different countries: dulce de leche in Argentina)
Pure Non-Standardization
the company does everything differently in every market
Different Global Market Entry Strategies
-Exporting
-Licensing
-Joint Ventures
-Direct Investment
Exporting (Global Market Entry Strategy)
producing a product in a home country and shipping it to another country. Least risky
Indirect Exporting
selling domestically produced goods in a foreign country through an intermediary
Direct Exporting
selling domestically produced goods in a foreign country without an intermediary
Licensing (Global Market Entry Strategy)
selling another firm in the foreign country the right to manufacture the product (ex. franchises like McD’s)
Joint Ventures (Global Market Entry Strategy)
when a domestic firm teams up with a foreign firm to do business
Direct Investment (Global Market Entry Strategy)
actually buying or building a manufacturing plant in a foreign country. The costliest and riskiest global market entry strategy
For-Profit Organizations/Business Firms
privately owned and service customers to make a profit
Nonprofit Organizations
nongovernmental organizations that serve customers but do not aim to make a profit
Strategy
an organization’s long term course of action designed to deliver a unique customer experience while achieving its goals
Levels of the Organizational Structure
Corporate leve, strategic business unit, and functional level
Corporate Level (Organizational Structure)
top management directs overall strategy for the entire organization
Strategic Business Unit Level (Organizational Structure)
where business unit managers set the direction for their products and markets to exploit value-creating opportunities
Strategic Business Unit
subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined target group of customers
Functional Level (Organizational Structure)
groups of specialists actually create value for the organization (ex. marketing, sales, operations)
Cross-Functional Team
small number of people from different departments in an organization who are mutually accountable for a common set of performance goals
Core Values
fundamental, passionate, enduring principles that guide an organization’s conduct over time
Mission/Vision/Mission Statement
statement of the organization’s scope, identifying its customers, markets, products, technology, and values. Lately has included more social elements
Organizational Culture
set of values, ideas, and attitudes that is learned and shared among the members of an organization
Goals/Objectives
convert the mission into targeted levels of performance, often with specific time deadlines. Some include:
-profit
-sales
-market share
-quality
-customer satisfaction
-employee welfare
-social responsibility
Marketing Dashboard
visual display on a single computer screen of the essential information related to achieving a marketing objective
Competencies
organization’s special capabilities (skills, technologies, and resources) that distinguish it from other organizations
Benchmarking
discovering how other companies do something so that they can imitate or leapfrog the competition
Diversification Analysis
the search for growth opportunities in current and new markets as well as current and new products (ex. market penetration, market development, product development, diversification)
Points of Difference
characteristics of a product that make it superior to competitive substitutes
Action Item Lists
organizes
-the task
-person responsible for completing that task
-the date to finish the task
-what is to be delivered
Marketing Strategy
means by which a marketing goal is to be achieved, usually characterized by a specific target market and a marketing program to reach it
Marketing Tactics
detailed, day-to-day operational decisions essential to the overall success of marketing strategies
Countertrade
the practice of using barter rather than money for making global sales
Gross Domestic Product (GDP)
monetary value of all goods and services produced in a country during one year
Trends in Global Marketing
-decline of economic protectionism
-rise of economic integration + free trade
-global competition among global companies for global customers
-development of a networked global market space
-increase in global economic espionage
Protectionism
practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas, in hopes of saving jobs, protecting national security, encouraging economic independence, or encouraging development of domestic industries
General Agreement on Tariffs and Trade (GATT)
international treaty aimed at tariff reduction that has helped us increase free trade
Global Competition
exists when firms originate, produce, and market their products and services worldwide
Economic Espionage
the clandestine gathering of competitor’s trade secrets or proprietary information
Economic Espionage Act of 1996
makes the theft of trade secrets by foreign entities a federal crime in the United States, punishable by significant fines and jail time
Values (Cross-Cultural Analysis)
personally or socially preferable modes of conduct or states of existence that tend to persist over time
Customs (Cross-Cultural Analysis)
practices of a specific country that are considered normal and expected
Foreign Corrupt Practices Act
make it a crime for a U.S corporation to bribe an official of a foreign government or political party to obtain or retain business in that country
Cultural Symbols (Cross-Cultural Analysis)
concrete representations of abstract ideas and concepts that have meanings attached to them
Semiotics
Field of study that seeks to understand the correspondence between symbols and their assigned meanings
Back Translation
a translated word or phrase is retranslated back into the original language by a different interpreter to identify any errors
Consumer Ethnocentrism
tendency to believe that it is inappropriate or immoral to purchase foreign-made products
Economic Infrastructure (Cross-Cultural Analysis)
communication, transportation, financial, and distribution systems in a country which can affect the level of economic development
Product Extension Strategy (Selling a Product Globally)
selling the product in the same form as in the home market. Works best when customers in all countries and cultures have the same desires, needs, and uses for the products
Product Adaptation Strategy (Selling a Product Globally)
selling the product with some adaptations that make it more appropriate for the customer preferences, culture, or climate in a particular country
Product Invention Strategy (Selling a Product Globally)
Selling a totally new product to satisfy common needs across countries
Communication Adaptation Strategy (Selling a Product Globally)
advertising the same product in multiple countries in different countries in different ways
Dual Adaptation Strategy (Selling a Product Globally)
both the products and the promotion messages are changed form country to country
Dumping (Pricing)
when a firm sells a product in a foreign country below its domestic price or below its actual cost to build the company’s market share
Price
money or other consideration )including goods and services) exchanged for ownership or use of a good or service
Barter
the practice of exchanging goods and services for other goods and services
Price Equation
Price= List Price – Incentives and Allowances + Extra Fees
Value Pricing
practice of simultaneously increasing product and service benefits while maintaining or decreasing price
Pricing Objectives
specifying the role of price in an organization’s marketing and strategic plans (ex. profit, sales revenue, market share, unit volume, survival, social responsibility
Pricing Constraints
factors that limit the range of prices a firm may set
-demand for the product class, product, and brand
-cost of producing and marketing product
-newness of the product
-cost of changing prices
-single product vs product line
-type of competitive market
-competitor’s prices and consumers’ awareness of them
-legal and ethical considerations
Marginal Analysis
refers to a continuous concise trade-off of incremental costs against incremental revenues; if marginal revenue > marginal cost, people will take the action
Break-Even Analysis
technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output
Fixed-Price/One-Price Policy
setting one price for all buyers of a product or service
Dynamic Price/Flexible Price Policy
setting different prices for products and services depending on individual buyers and purchase situations (ex. Yield Management, ubers surcharge)
Dual Distribution
arrangement wherein a firm reaches different buyers by employing two or more different types of channels of the same basic project (ex. GE sales uses both retail stores and direct sales)
Strategic Channel Alliances
use one firm’s marketing channel to sell another firm’s products
Vertical Marketing Systems
professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximize marketing impact