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CHAPTER 16 International Marketing

After studying this chapter, students should be able to:

> Characterize the nature of marketing management in international

business.
> Discuss the basic kinds of product policies and decisions made in
international business.
> Identify pricing issues and evaluate pricing decisions in international business.
> Identify promotion issues and evaluate promotion decisions in international
business.
> Discuss the basic kinds of distribution issues and decisions in international
business.

LECTURE OUTLINE

OPENING CASE: Wal-Mart Courts European Shoppers

To continue growing, Wal-Mart has been forced to look at international markets. The
case describes Wal-Mart's entry into the U.K. and Germany. In both cases Wal-Mart
chose to enter using an acquisition strategy.

Key Points

• Wal-Mart entered the U.K. in 1999 by acquiring the Asda retailing chain -- which
was comprised of over 230 stores.

• Asda was a good match for Wal-Mart and Wal-Mart is working to replicate its
low-cost logistics system in the U.K.

• In 1997, Wal-Mart acquired the 21 store Wertkauf chain in Germany. In

Germany, Wal-Mart's friendly approach to its customers contrasts with the less
personalized German way of doing business.

• Wal-Mart's low prices have upset German regulators who have forced Wal-Mart
to raise prices on its "loss-leaders" (e.g., flour, cooking oil, butter). Regulators
feared Wal-Mart was engaging in predatory pricing to drive smaller competitors out
of business.
256 > Chapter 16

• Wal-Mart still needs to expand significantly in Germany before it will achieve the
critical mass needed to implement its high-volume, low cost distribution system.

CHAPTER SUMMARY

Chapter Sixteen explores the issue of international marketing. It begins with a

discussion of basic international marketing strategies, and examines the debate
between standardization and customization. Then each component of the marketing
mix (product, price, promotion, and distribution) is discussed in depth.

Marketing is the process of planning and executing the conception, pricing, promotion,
and distribution of ideas, goods, and services to create exchanges that satisfy
individual and organizational objectives. International marketing is the extension of
these activities across national boundaries.

Teaching Note:
Students, particularly those who have traveled to other countries,
are usually familiar with some products that are sold around the
world such as Coca-Cola and Levi jeans. Instructors may wish to begin the discussion
of international marketing by asking students how and why such products are marketed
differently in other countries.

Firms involved in international marketing must contend with differing political, cultural,
legal, and economic environments. In addition, they must capitalize on the synergies
among various national markets, and coordinate marketing activities in those markets.

I. INTERNATIONAL MARKETING MANAGEMENT

International marketing affects and is affected by virtually every other organizational

activity. Therefore, it is a critical component of international business success. Discuss
Figure 16.1 here.

International Marketing and Business Strategies

• International marketing strategy should support the firm’s overall business

strategy whether it is differentiation, cost leadership, or focus (see Chapter 10). For
example, if a firm is following an overall strategy of differentiation, managers should
develop a marketing strategy that differentiates the firm’s products or services from
those of competitors.
• Similarly, if a firm is following an overall cost leadership strategy, marketing
managers should focus on keeping prices and distribution costs low. Finally, if a
firm is following an overall focus strategy, managers should adjust the marketing
mix to target the needs of the various selected segments. The text provides
examples of each situation.
 International Marketing > 257

Discuss Wiring the World: Pretty Garlic

This box describes the business of a small Chinese garlic
exporter, John Huang. Given his lack of a marketing budget,
Huang decided to use the Internet to build worldwide
recognition for his company. His web site -- www.pretygarlic.com-- has allowed
Huang to market his product to his small but focused target market.

• Decisions about whether and how to enter a particular market must also be
consistent with the firm’s overall strategy. Chapter 10 discussed the various
techniques used to assess the potential of foreign markets.

The Marketing Mix

• International marketing managers must address four issues: how to develop the
firm’s product(s); how to price those products; how to sell those products; and how
to distribute those products to the firm’s customers. The elements are collectively
known as the marketing mix (and are also referred to as the four Ps of marketing).
Discuss Figure 16.2 here.
• Compared to their domestic counterparts, international marketing managers
face a more complex set of issues and decisions related to the marketing mix. One
overriding issue is whether a firm should standardize its offerings or customize its
products to each market.

Standardization versus Customization

• International marketing managers usually choose among the following

approaches when deciding the extent to which to standardize their firm’s marketing
mix: an ethnocentric approach (market products internationally the same way it
does domestically), a polycentric approach (customize the marketing mix to meet
the needs of each target market), or a geocentric approach (adopt a standardized
marketing mix for all markets based on an analysis of customer needs).
• The ethnocentric approach is easy to use, however, it may not be desirable
because sales may be lost as a result of failing to consider the needs of foreign
customers. The polycentric approach, while costly, may actually serve to
increase a firm’s revenues because the needs of local customers are being met.
Finally, the geocentric approach, because it involves the standardization of the
marketing mix, allows a firm to sell essentially the same product using essentially
the same approach in all of its markets. The text provides an example of how
Coca-Cola follows this approach.
• Most firms fall in the middle of a continuum between standardization and
customization, and follow a policy of “think locally, act globally.” The text provides
an example of how firms in the global appliance industry follow this approach.
• Standardization implies a centralized organizational design, while customization
implies that a decentralized design should be adopted (see Chapter 13). Various
factors can affect the decision to standardize or customize the marketing mix.
Discuss Table 16.1 here.
258 > Chapter 16

II. PRODUCT POLICY

Product comprises both the set of tangible factors (the physical product and its
packaging) that the consumer can see or touch and numerous intangible factors (such
as image, installation, warranties, and credit terms).

Standardized Products or Customized Products?

• Firms must decide to what extent they will standardize or customize their
product offerings across markets. The text provides an example of Toyota’s
decision regarding this issue.
• There are two broad target groups of customers: industrial users and
consumers. Industrial products are more likely to be standardized than consumer
products.

Legal Forces

• Product policies may be affected by the laws and regulations of host countries.
For example, countries may impose labeling requirements, health standards,
technical standards, and so forth on consumer products. The text provides several
specific examples of how legal forces have affected various companies’ product
policies.

Cultural Influences

• Product policies may have to be adapted to meet the differing cultural needs of
a firm’s target markets. For example, packaging may need to be changed to reflect
the local language, the ingredients of food products may need to be changed to fit
local preferences, and quality levels may need to be perfected. The text illustrates
this concept with several specific examples.

Economic Factors

• Product policies may be affected by economic factors. For example, a country’s

level of economic development might affect product feature decisions, a country’s
infrastructure might affect the design of some products, and/or product support
services available. Various examples of this concept are given in the text.

Brand Names

• Firms that are able to standardize brand names may achieve substantial
reductions in packaging, design, and advertising production costs. Firms with
standardized brand names may also benefit from spillover effects from one market
to the next. Various examples of firms with standardized brand names are given in
the text.

III. PRICING ISSUES AND DECISIONS

Pricing directly impacts a firm’s revenues, and helps shape a firm’s competitive
environment. The task of pricing is complex in international firms because the cost of
doing business varies from country to country, as do transportation costs and
 International Marketing > 259

differences in distribution systems. In addition, pricing can be affected by fluctuating

exchange rates. Various examples of how these variables affect prices are given in the
text.

Pricing Policies

• International firms typically use one of the following pricing policies: standard
pricing, two-tiered pricing, or market pricing.
• A standard price policy (the same price is charged for products regardless of
where they are sold or the nationality of the customer) is usually used by a firm that
sells goods that are easily tradable and transportable. Firms selling commodity
goods in competitive markets also frequently adopt this strategy.
• A two-tiered pricing policy (one price is set for all domestic sales, and a
second is set for all international sales) is usually adopted by firms following
ethnocentric approaches to marketing. This type of policy is frequently followed by
firms that are at the start of the internationalization process and may create a
situation whereby the firm is vulnerable to dumping charges.
• A market pricing policy (prices are customized on a market-by-market basis) is
usually used by firms following a geocentric approach to marketing.

Market Pricing

• A firm following a market pricing policy calculates and then charges the profit
maximizing price in each market it services. For this practice to be successful, the
firm must face different demand and/or cost conditions in each country it serves,
and the firm must be able to prevent arbitrage from occurring. Discuss Figure 16.3
here.
• This type of policy can enable firms to capitalize on differing price tolerances
across markets and allocate relevant local costs against local sales in each market.
However, the strategy requires that decision making be decentralized and it
requires a constant monitoring of the firm’s situation in each market so that prices
can be adjusted when appropriate.
• Firms must be aware of three additional risks associated with a market pricing
strategy. First, a firm may damage its brand name if it sells a product in the
premium category in one market, but in the economy category in another market.
Second, a gray market may develop for a firm’s products as arbitrageurs capitalize
on the difference in prices between markets. A gray market (also known parallel
importing) is a market that results when products are imported into a country
legally but outside the normal channels of distribution authorized by the
manufacturer. The text provides several illustrations of this concept. Third, a firm
may encounter consumer resentment against discriminating prices.

IV. PROMOTION ISSUES AND DECISIONS

Promotion encompasses all efforts by an international firm to enhance the desirability

of its products among potential buyers. The promotion mix--advertising, personal
selling, sales promotion, and public relations--is used to motivate potential customers to
buy the firm’s product.
260 > Chapter 16

Advertising

Teaching Note:
Students generally not only find it amusing to watch videos of
advertisements that run in other countries, but also may find them
to be a good basis for discussing advertising within the context of customization and
adaptation.

• A firm must consider three factors when developing its advertising strategy: the
message it wants to convey, the media available to convey the message, and the
extent to which the firm wants to globalize its advertising effort.
• Message. The message of an advertisement refers to the facts or impressions
the advertiser wants to convey to potential customers. A product’s country of origin
may be an important part of an advertising message. The text provides several
examples of the messages various companies try to convey via advertising.
• Medium. The medium is the communication channel used by the advertiser to
convey a message. Media must be adapted to the local, cultural, and legal
environment. Media choices may also be affected by a country’s level of economic
development. The text provides several examples of measures taken by firms to
adapt to varying media situations.

Discuss Bringing the World into Focus: Sailing for Sales

This Going Global Box discusses one of the hottest forms of
advertising currently used in Egypt. It involves the felucca, or
ancient sailboats that travel up and down the Nile. Coca-Cola
started the trend when, frustrated with the other available options, it displayed its
trademark on the large, white sails of one of Egypt’s largest felucca operators. The
new advertising medium quickly caught as other firms adopted the method. This
Box fits in well with the discussion of advertising mediums and with Review
Question 8.

• Many companies rely on international advertising agencies to handle issues

related to message and media.
• Global versus Local Advertising. The question of customization versus
standardization also affects advertising as firms decide whether to use the same
message everywhere or adapt it to local markets. The text provides numerous
examples of the results of various firms’ decisions regarding this matter. The
decision is affected not only by differences between markets, but also by the
message the firm wants to convey.

Personal Selling

• Personal selling involves making sales on the basis of personal contacts.

Firms that are in the early stages of foreign market expansion may subcontract
personal selling to local organizations, while firms that are most established in
foreign markets may hire local sales representatives.
• There are several advantages to personal selling. First, firms that employ local
sales representatives can be reasonably certain that cultural gaffes will be reduced.
Second, personal selling promotes close personal contact with customers. Third,
firms may find it easier to acquire market information from sales representatives
than from other sources.
 International Marketing > 261

• A main disadvantage of personal selling is its high cost.

Sales Promotion

• Sales promotion comprises specialized marketing efforts such as coupons, in-

store promotions, sampling, direct mail campaigns, cooperative advertising, and
trade fair attendance.
• Sales promotion activities may be well suited to international firms because they
are flexible and can be tailored to meet the special requirements of each market.
The text provides examples of how several companies have used sales promotion.

Public Relations

• Public relations consists of efforts aimed at enhancing a firm’s reputation and

image with the general public, as opposed to touting the specific advantages of an
individual product or service. An effective public relations effort results in the firm
being perceived as a good “corporate citizen.”
• Public relations can be particularly important to international companies
because as “foreigners” they may become appealing political targets. Through an
effective public relations campaign, MNCs may be able to reduce their perceived
“foreignness.” The text provides an example of how Toyota successfully employed
public relations in its effort to appear to be a good corporate citizen.

V. DISTRIBUTION ISSUES AND DECISIONS

• Distribution is getting products and services from the firm into the hands of
customers. Chapter 17 will discuss the role of distribution in international logistics
management.
• International firms face two issues regarding distribution. First, the problem of
physically transporting goods and services to the various markets in which they are
to be sold must be addressed. Second, firms must select the means by which they
will merchandise their goods in the markets they want to serve.

International Distribution

• A firm must select the mode(s) of transportation for its products from their point
of origin to their destination. The choice typically involves a tradeoff between time
and money. The text provides an example of how the choice of a particular
transportation mode can impact a firm’s inventory expenses.
• A firm’s international order cycle time--the time between the placement of an
order and its receipt by the customer--may also affect transportation mode
decisions. Furthermore, a product’s shelf life may dictate that a particular
transportation mode be used. The text notes, for example, that cut flowers are
normally shipped via airfreight because of their relatively short shelf life. Discuss
Table 16.2 here.

Channels of Distribution

• Firms must also determine how best to manage the distribution channels used
to merchandise the firms’ products in the markets they serve. A distribution channel
can consist of many parts: the manufacturer or creator of the product; a wholesaler
who buys products and services from the manufacturer and then resells them to
262 > Chapter 16

retailers; the retailer, who buys from wholesalers and then sells to customers; and
the actual consumer, who buys the product or service for final consumption. Import
agents (see Chapter 11) may also be part of the channel. Discuss Figure 16.4 here.

• Channel length is the number of stages in the distribution channel. A direct

sales approach involves selling directly to consumers, bypassing wholesalers and
retailers.
• A longer channel of distribution involves selling to retailers, who then market the
product to the final consumer. The longest channel adds a wholesaler stage to the
process. The text provides examples of each type of channel.
• International marketing managers must find the optimal distribution channel for
the firm, taking into account the firm’s strengths, weaknesses, opportunities, and
threats in each of the markets it serves. Most firms use a variety of channels.
• A firm’s distribution strategy may also be an important component of its
promotion strategy. The text provides examples of how several firms have
incorporated distribution into their promotions strategy.
• In some cases, sales or import agents (see Chapter 11) may be hired to
distribute products in other countries. The text provides examples of firms that have
followed this approach. However, firms should be cautious in using this type of
strategy because a poor distributor may damage the firm’s reputation and
performance in foreign markets. The text notes that finding an appropriate
distributor in China can be a challenging task.
• Some companies such as McDonald’s attempt to transfer to foreign countries
the distribution systems developed in their home countries. In other cases, firms
will try to adapt their distribution practices to match the local environment. The text
provides examples of both situations.
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Flour Power

The closing case describes Pillsbury's efforts to market wheat flour in India. Several
obstacles had to be overcome. The case describes several adaptations made by
Pillsbury to make their flour attractive to Indian consumers.

Key Points

• India is a huge potential market for wheat flour. India consumes 69 tons of
wheat a year, compared to the U.S. 26 million tons.

• The profit margin on Pillsbury's flour will be very thin. In order to make money
Pillsbury will have to sell huge amounts of flour and use the flour as an entry into
Indian households for other Pillsbury products.

• The Pillsbury doughboy has adopted Indian demeanor in TV spots, and speaks
six regional languages.

• Unilever is competing with Pillsbury in the Indian market.

 International Marketing > 263

Case Questions

1. Identify and describe the roles of product policy, pricing, promotion, and distribution
in Pillsbury's marketing of flour in India.

All P's of the marketing mix play a role in India. The product is tailored to Indian
preferences, prices are set low because of the low income of most Indians,
promotion is tailored to the Indian situation (e.g., the doughboy's new image) and
distribution channels are being developed to fit the shopping habits of Indian
housewives.

2. Did Pillsbury customize or standardize each of the four P's?

By and large, Pillsbury customized the four P's to adapt them to conditions in India.
Even within India language and marketing have been tailored to suit different
regions.

3. What mode of entry did Pillsbury use to enter the Indian market? Why did it choose
this mode?

Pillsbury used its Diageo unit to enter India. The unit initially considered selling
high-value products in India, but due to low disposable income levels abandoned
that approach. Instead, they decided to go with a high volume product.

4. Using Dunning's Eclectic theory, how would you characterize Pillsbury's ownership
advantage? Its location advantage? Its internalization advantage?

Ownership: Pillsbury is a world-renowned brand and an expert in developing

innovative products and packages for food. Thus it is able to offer pre-packaged
flour with a freshness guarantee that can't be matched by competitors. Location:
The size of the Indian flour market and the need to provide fresh products makes
locating in India advantageous for Pillsbury. By setting up operations in India
Pillsbury is able to internalize imperfections in the market for exporting flour (e.g.,
transportation time, barriers to importing and exporting agricultural products) in a
way the further enhances Pillsbury's advantage in the marketplace.
264 > Chapter 16

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1. What is international marketing?

International marketing is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services across national boundaries to
create exchanges that satisfy individual and organizational objectives.

2. What is the marketing mix?

The marketing mix, also known as the four Ps of marketing, consists of four issues: how to
develop the firm’s product(s), how to price those products, how to sell those products, and
how to distribute those products to the firm’s customers.

3. What are the basic factors involved in deciding whether to use standardization or
customization?

A firm following a policy of standardization simply markets its products the same way
everywhere, while a firm following a policy of customization adapts the marketing mix to
meet the needs of each target market. Standardization is attractive to firms because it
permits efficiency in R&D, production economies of scale can be achieved, it promotes
lower marketing costs, it enables a firm to centralize control of the marketing program, and
it reflects the trend toward a single world market. Customization on the other hand, reflects
varying conditions of product use recognizes local differences in laws and regulations as
well as differences in buyer behavior, promotes local initiative and motivation in
implementing the marketing program, and allows a firm to better meet the needs of
individual markets.

4. How do legal, cultural, and economic factors influence product policy?

Legal, cultural, and economic factors influence product policy in numerous ways. In some
countries for example, laws require that firms follow strict labeling and health standards for
consumer products. Similarly, a firm may find that it has to adapt its product to meet the
needs of particular cultures. Finally, economic factors can also influence a firm’s product
policy. For example, depending on a country’s level of economic development, a firm may
need to add additional features to its products or adjust the size of its packaging.

5. Why are brand names an important marketing tool for international business?

Brand names are an important marketing tool for international businesses because if a
product’s name can be standardized a firm can reduce packaging, design, and advertising
production costs.

6. What are the three basic pricing policies?

The three basic pricing strategies are standard pricing, two-tiered pricing, and market
pricing. Firms following a standard pricing policy charge the same price for their products
regardless of where they are sold. Firms using a two-tiered pricing approach set one price
for domestic sales, and a second price for all international sales. Finally, firms using
market pricing customize prices to each market.
 International Marketing > 265

7. What are the problems that a firm using market pricing might encounter?

A firm using market pricing may damage its brand name if a product is sold as a premium
product in one market, but as an economy product in another market. A firm using market
pricing may also find that a gray market develops for its products whereby entrepreneurs
capitalize on the differences in prices between markets.

8. What are the four elements of the international promotion mix?

The four elements of the international promotion mix are advertising, personal selling, sales
promotion, and public relations.

9. What are some of the fundamental issues that must be addressed in international
advertising?

Three fundamental issues that must be addressed in international advertising are the
message the firm wants to send, the media available to convey the message, and the
extent to which the firm wants to globalize its advertising campaign.

10. What is a distribution channel? What options does an international firm have in developing
its channels?

A firm’s distribution channel refers to the various stages through which a product passes as
it moves from the manufacturer to the consumer. The basic channel options include
manufacturer-import agent-customer, manufacturer-import agent-retailer-customer, and
manufacturer-import agent-wholesaler-retailer-customer.

Questions for Discussion

1. What are the similarities and differences between domestic marketing and international
marketing?

International marketing, like domestic marketing, is the process of planning and executing
the conception, pricing, promotion, and distribution of ideas, goods, and services to create
exchanges that satisfy individual and organizational objectives. Thus, international
marketing and domestic marketing both revolve around the four Ps of marketing--product,
price, promotion, and place. Unlike domestic marketing, however, international marketing
is not confined to a single market place, rather activities are extended across national
boundaries, and as a result the process of marketing becomes more complex as firms
encounter different legal, cultural, political, and economic environments.

2. Are the four Ps of international marketing of equal importance to all firms? What might
cause some to be more or less important than others?

Most students will probably agree that the four Ps of international marketing are not of
equal importance to all firms. Firms that emphasize the unique features of their products,
such as Rolex, may tend to pay less attention to price, for example, than firms that focus
on producing low cost products. Firms in the latter category, such as Bic or Timex, will
generally emphasize price and perhaps low cost distribution channels instead. Similarly,
266 > Chapter 16

firms that manufacture commodity products such as sugar will probably place less
emphasis on product and more emphasis on price.

3. Identify several products you think could be marketed in a variety of foreign markets with
little customization. Identify other products that would clearly require customization.

Students, depending on how they define “some” and “little” will probably find it easier to
identify products that would require some customization when sold in foreign countries, as
compared to products that could be marketed with little customization. Some products in
the former category include automobiles, televisions, electrical appliances, and greeting
cards. Some products in the latter category include Bic pens, Rolex watches, perfume,
and scotch.

4. How do legal, cultural, and economic factors in your home country affect product policy for
foreign firms?

For most students, the home country will probably be the United States. They will probably
be able to identify several ways legal, cultural, and economic factors in the United States
affect product policy for foreign firms. For example, many students may suggest that the
new nutrition labeling for food products will affect companies that export food products to
the U.S. Others may point out that the FDA approval that must be given to all medicines
sold in the U.S. also affects product policy decisions for foreign firms. When considering
how cultural factors affect product policy for foreign firms, students may recognize that
Chinese restaurants in the U.S. typically serve more meat and fewer vegetables than they
do in China to better suit American palates. Foreign firms that have operations located in
the U.S., such as banks, will probably find that they must extend their hours of operation to
match those of American banks. Finally, students will probably suggest that, when
considering economic factors, Americans tend to prefer lots of bells and whistles on
products such as cars, computers, and electrical appliances over stripped down models.

5. What are the pros and cons of trying to use a single brand name in different markets, as
opposed to creating unique brand names for various markets?

A standardized brand name offers a firm several benefits. First, firms using a single brand
name can reduce their packaging, design, and advertising production costs. Second, firms
using a standardized brand name may be able to capture spillover benefits from their
advertising messages in one country to another country. However, in some cases a
standardized brand name may not be feasible. For example, legal and/or cultural factors
may force a firm to alter brand names to better meet the local situation.

6. What are the advantages and disadvantages of each pricing policy? Why do most
international firms use market pricing?

The three types of pricing policy are standard pricing, two-tiered pricing, and market
pricing. Standard pricing offers firms the convenience of charging the same price for its
goods and services regardless of where they are sold. However, because it does not
recognize differences between markets, it is generally used only for commodity products
and for products or services that are highly visible and allow for price comparisons. Two-
tiered pricing, because it involves a domestic price and a foreign price, allows firms to cater
to differences between the domestic market and all foreign markets. However, because a
firm typically charges a lower price in the home market as compared to its foreign markets,
 International Marketing > 267

it may be vulnerable to dumping charges. In addition, the system may not be effective in
the long-run because, since the firm is only trying to cover the marginal costs of selling in
foreign markets, it will never develop the international skills, expertise, and outlook
necessary to be successful in the international market place. Finally, a market pricing
policy, because it customizes prices on a market-by-market basis, allows a firm to
maximize prices in each market. However, the system is a complex one, and the firm must
be able to avoid arbitrage situations and/or the development of gray markets for its goods.

7. The ethnocentric approach and the geocentric approach both suggest standardization of
the marketing mix. What is the difference between these two approaches, if both lead to
standardization?

The ethnocentric approach to marketing involves using the same marketing mix as is used
at home. It enables a firm to avoid the costs of developing new marketing techniques to
serve foreign customers. The geocentric approach also involves standardization of the
marketing mix for domestic and international customers; however, the standardization
process takes into consideration the needs and preferences of foreign customers. Firms
using the ethnocentric approach ignore these customer differences and assume that all
customers are like domestic customers.

8. What are some basic differences you might expect to see in TV ads broadcast in France,
Japan, Saudi Arabia, and the United States?

TV ads for U.S. products broadcast in France and Japan might emphasize the U.S. origins
of the products, while ads for Japanese products might emphasize the quality associated
with the product. An ad for a motorcycle broadcast in the U.S. might emphasize the fun of
riding, while an ad for a motorcycle broadcast in Saudi Arabia might focus on the reliability
and functionalism of the product. In general, one might expect ads in the developed
countries to highlight the various features of the product, but center on durability in lesser-
developed countries.

9. Why is the public relations function important to an international firm?

The public relations function of a firm is responsible for enhancing a firm’s reputation and
image with the general public. The public relations function is often particularly important
to an international firm because it generally wants to demonstrate that it is reputable and
can be trusted in spite of the fact that it is not a local firm. Through its public relations
function, a firm can gain political allies and communicate its needs to the general public.

10. What are the advantages and disadvantages of short versus long channels of distribution?

The length of a distribution channel refers to how many stages a product must go through
before it reaches the final consumer. A channel might consist of four stages: the
manufacturer, the wholesaler, the retailer, and the consumer. A short distribution channel
is attractive to firms because it allows them to maintain control over the retail distribution of
products and allows them to retain the profits that might otherwise accrue to a retailer.
However, firms using a short distribution channel must also bear the costs and risks of
retailing their products. A longer channel of distribution may make it easier to market in
countries with little retail concentration and may allow the firm to maintain a smaller retail
staff; however, profits must be shared across more middlemen.
268 > Chapter 16

eting
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Essence of the exercise
This exercise asks students to examine websites for ten different multinational corporations.
Based on the websites, students are to describe the companies' products and policies.

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Essence of the exercise
This exercise asks students to develop a marketing plan for Ajax Alarms, a mid-sized U.S.
company that sells alarm clocks.

Answers to the follow-up questions.

There are no specific follow-up questions to this exercise, rather each student or group of
students is asked to devise a marketing plan for Ajax Alarms. The company currently markets
and distributes Korean-made clocks throughout the U.S. and Canada, but wants to expand its
operations to include Mexico.

Students, in developing their marketing plans, should consider not only the marketing mix
itself, but also how cultural, legal, and economic factors might affect it, and the issue of
standardization and customization.

Other Applications
This exercise asks students to develop a marketing plan for a company that is interested in
expanding its market to include Mexico. It may also be interesting for students, working in the
same groups as in past exercises, to utilize their knowledge of other countries to develop
marketing plans for the company to go into other new markets. These marketing plans can
then be presented by each group to the company’s “board of directors” (the rest of the class)
for comment and critique.