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Distribution Economics

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specifically considers how products get from where they are manufactured to where they are purchased

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Marketing Channel

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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.

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Time Utility as Created by Channel Strategy

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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)

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Place Utility as Created by Channel Strategy

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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)

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Logistical Functions (Channel Distribution)

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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.

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Transactional Functions (Channel Distribution)

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-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

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Facilitating Functions (Channel Distribution)

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-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

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Logistics Management

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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

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Logistics

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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

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Expenses Included in Total Logistics Costs/Functions of Logistics Management

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transportation, materials handling, warehousing, inventory, stock-outs, order processing, and return goods handling

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Transportation as a Function of Logistics Management

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physical movement. Often involves use of third-party logistics (contracts with outside vendors, ex. FedEx + UPS)

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Warehousing and Materials Handling as a Function of Logistics Management

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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

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Cross docking

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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

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Oder Processing as a Function of Logistics Management

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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)

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Radio Frequency Identification Tag (RFID Tag)

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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)

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Inventory Management as a Function of Logistics Management

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-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)

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Supply Chain

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sequence of firms that performs the activities required to create and deliver a good or service to consumers or industrial users

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Supply Chain Management

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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.

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Intensive Distribution (Degree of Supply Chain Channel Coverage)

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products offered in every place a consumer could conceivably get them (ex. chewing gum, soft drinks)

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Selective Distribution (Degree of Supply Chain Channel Coverage)

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products are available in just a few locations around town (ex. perfume manufacturer only sells through upscale department stores)

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Exclusive Distribution (Degree of Supply Chain Channel Coverage)

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products sold only through one outlet per geographic territory (ex. Coach building its own stores instead of selling through department stores)

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Direct Channel

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producer and ultimate consumer interact directly; no middlemen (ex. Dell rarely sells products through Best Buy/other retailers)

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Indirect Channel

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rely on marketing intermediaries to reach the ultimate consumer (ex. Wholesalers, retailers)

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Dual/Mixed Distribution

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when a company uses both direct and indirect channels

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Channel Conflict

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when one channel member believes another member is engaging in behavior that prevents it from achieving its goals (vertical and horizontal)

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Vertical Channel Conflict

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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)

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Disintermediation (Vertical Conflict)

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when a manufacturer bypasses a channel intermediary and sells directly to the customer, price competition)

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Wholesalers (Type of Channel Member)

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intermediaries that sell to other businesses. Merchant wholesalers, agents, and manufacturer-owned wholesalers.

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Merchant Wholesalers

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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

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Agents (Wholesalers)

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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.

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Manufacturer-Owned Wholesalers

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-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

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Retailers (Type of Channel Member)

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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.

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Types of Store Retailers

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-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)

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Non-Store Retailers

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move products to consumers through something other than a physical location (ex. Catalogs, TV shopping channels, internet stores)

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Contractual Channel (Channel Type)

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legal agreement binds the parties to certain obligations and functions (ex. franchising)

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Franchising

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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

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Administered Channel (Channel Type)

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operate informally and casually just based on a "handshake agreement." Has become less popular.

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Vertically Integrated Channel (Channel Type)

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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)

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The Key Trade-off in Choosing a Channel Type is between...

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cost and control. Complete control is expensive, but less expensive means less control

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Channel Captain

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most important channel member that controls the activity of the channel by coordinating, directing, and supporting other channel members

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Relationship Marketing

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emphasizes long-term relationships with suppliers, distributors, and customers

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Retailing

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includes all activities involved in selling, renting, and providing goods and services to ultimate consumers for personal, family, or household use

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Ways in which Retailing Adds Value

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Providing assortments, breaking bulk, holding inventory, other services (financing, carrying groceries to your car, gift wrapping, fitting rooms, etc)

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Positioning (Retail Strategy)

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based on merchandise mix and the level of service it offers to its customers

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Location (Retail Strategy)

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-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

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Racetrack (Store Layout)

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utilizes a large aisle that takes the customer around the entire perimeter of the store, exposing him/her to every aisle (ex. Supermarkets)

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Power Aisle (Store Layout)

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a main aisle that runs the length of the store with other aisles that branch off from it

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Meandering Layout (Store Layout)

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set up to make customers move more slowly through the store (ex. Ikea)

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Net Sales per Square Foot

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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

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Stockturn Rate

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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)

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Same-Store Sales Growth

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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)

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Brand Management

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reflects the manufacturer's perspective and has the goal of maximizing the profit performance of the brand

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Category Management

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reflects the retailers perspective and has the goal of maximizing profit performance of the entire mix of brands in a product category

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Recreational Shopping

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many consumers get some sort of intrinsic satisfaction from being in a shopping environment

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Retailtainment

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combination of retail and entertainment that helps capitalize on recreational shopping (ex. lululemon provides free yoga classes, PetSmart Pet Spas)

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Omnichannel Retailing

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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)

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Administered Pricing

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system in which prices are predetermined. The consumer does not participate in setting the scales price

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Participative Pricing

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pricing system in which the consumer participates in setting the price through haggling. Prominent in business-tobusiness transactions

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Value

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Ratio of perceived benefits to price. When benefits exceed price, customers perceive a high value, and vice versa.

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Two Ways Marketers can Increase Perceived Value

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Price competition and non-price competition

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Price Competition (Way that Marketers Increase Perceived Value)

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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.

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Non-Price Competition (Way that Marketers Increase Perceived Value)

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increasing perceived benefits instead of lowering prices. (ex. airplane with seats that unfold into beds)

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Reference Price

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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

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Predatory Pricing

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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.

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Price Fixing/Price Collusion

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Illegal practice; when competitors join together to agree on a price

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"Bait and Switch"

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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

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The Five Basic Pricing Approaches

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cost-based, profit-based, demand-based, competition-based, value-based

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Break-Even Analysis (Cost-Based Pricing)

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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

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Markup Pricing (Cost-Based Pricing)

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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

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Target Profit Pricing (Profit-Based Pricing)

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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

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Target Return-on-Investment Pricing (Profit-Based Pricing)

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Price= (TFC+TVC+(total investment*ROI))/Standard # of Units Total Investment * ROI= Target Profit

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Problems with Cost- and Profit-based Pricing

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-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

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Market Skimming (Demand-Based Pricing)

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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")

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Market Penetration (Demand-Based Pricing)

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firm starts at a low price (discounts + rebates) and gradually raises it. Used when demand for the product is fairly elastic.

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Prestige Pricing (Demand-Based Pricing)

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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

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Price Lining (Demand-Based Pricing)

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setting the price of a line of products at a number of specific pricing points

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Odd-Even Pricing (Demand-Based Pricing)

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setting prices a few dollars or cents under a whole number (ex. $11.99 instead of $12)

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Bundle Pricing (Demand-Based Pricing)

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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)

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Target Pricing (Demand-Based Pricing)

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estimating the price that the ultimate consumer would be willing to pay for a product, working backward through markups

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Yield Management Pricing (Demand-Based Pricing)

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charging of different prices to maximize revenue for a set amount of capacity at a given time (ex. airline tickets)

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Demand-Minus Pricing (Demand-Based Pricing)

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Manufacturers arrive at their wholesale price using a desired retail price and percent markup Wholesale Price= Retail Price * (100-%markup)/100

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Chain Markup Pricing (Demand-Based Pricing)

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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

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Dynamic Pricing (Demand-Based Pricing)

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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)

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Price Leader/Follower Pricing (Competition-Based Pricing)

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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

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Competitive Bidding (Competition-Based Pricing)

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price is determined by bidding, either by customers or suppliers

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Value-Based Pricing

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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

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Critical Strategic Pricing Ratio (Value-Based Pricing)

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Value = Total Perceived Benefit / Price

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Unbundling (Value-Based Pricing)

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helping customers understand the value they are receiving from the product in exchange for the price they're paying

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Corporate Mission

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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

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Marketing Myopia

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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)

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Corporate Goal

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a specific, measurable objective that can be used to measure an organizations performance (ex. target revenue, profit, sales growth, market share, etc)

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Two Dimensions of the Boston Consulting Group Matrix

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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)

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Relative Market Share (RMS)

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Firm's raw market share / raw market share of the firm's largest competitor

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Question Mark on BCG Matrix

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product with low relative market share in a high-growth market

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Star on BCG Matrix

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dominant brand in a high growth market. Firm must continue investing to maintain high market share

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Cash Cow on BCG Matrix

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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

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Dog on BCG Matrix

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low-share brand in a market with a low growth rate

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Experience Curve

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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

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Strategic Marketing Process/Strategy Formulation

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an approach whereby an organization allocates its marketing mix resources to reach its target markets. Three Steps: 1. Planning 2. Implementation 3. Control (Evaluation)

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Annual Marketing Plan

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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

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Situation (SWOT) Analysis (Planning Phase of Strategy Formulation)

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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

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Identification of Product/Market Segments (Planning Phase of Strategy Formulation)

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Segmentation, Targeting, and Positioning

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Objective Formulation (Planning Phase of Strategy Formulation)

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Focus on sales revenue (increasing sales by a certain percentage), focus on profit, focus on market share (aka master marketing objective),

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Market-Share Strategies

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Grow (increase share), Maintain (common with market leaders), Harvest (allowing share to decline), Divest (giving up on the brand)

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Sales Force/Promotion as a Market Share Tactic

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hiring more salespeople, training them better, or paying them better

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New Products/Product as a Market Share Tactic

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introducing new products can help increase market share

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Product Quality/Product as a Market Share Tactic

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higher perceived quality often leads to larger market share

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Advertising/Promotion as a Market Share Tactic

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fourth most important tactic in increasing market share

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Sales Promotion/Promotion as a Market Share Tactic

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usually effects the short-term, so doesn't play a big role on effecting market share

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Price as a Market Share Tactic

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one of the last effective tactics. It's only effective long-term for the firm with lowest cost structure (ex. Walmart)

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Place as a Market Share Tactic

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one of the least effective tactics.

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Affordable Approach (Budgeting)

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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

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Percentage of Sales Approach (Budgeting)

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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)

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Optimization Approach (Budgeting)

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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.

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Objective and Task Approach (Budgeting)

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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

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Competitive Parity Approach (Budgeting)

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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

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Maintenance Objective (Comparative Parity Budgeting)

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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

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Growth Objective (Competitive Parity Budgeting)

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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

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Implementation Phase (Strategic Marketing Process)

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includes establishing the marketing organization, developing timetables, obtaining and allocating budgets, and executing the marketing program

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Brand Manager

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responsible for the overall marketing effort for a particular brand

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Program Evaluation and Review Technique (PERT Chart)

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used to schedule a complicated process, like tracking the activities involved in a new product launch

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PERT Critical Path

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the longest possible path that will allow us to get from prototype to launch; determines minimum time it will take to launch the product

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Share Point Analysis

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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

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Share Point

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equivalent to one percent of the overall market. Often used as a basis of comparison to allocate marketing resources effectively

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Contribution

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aka gross margin; covers selling costs, administrative costs, and other expenses

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Ways to Improve Implementation

answer

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

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Control/Evaluation Phase (Strategic Marketing Process)

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phase during which we measure results, identify deviations from the plan, and make adjustments as needed

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Sales Analysis (Control/Evaluation Phase)

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comparing actual results to sales goals and identifying areas of strength and weakness.

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Sales Component Analysis

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type of sales analysis (control/evaluation phase) that traces sales revenues to their sources, such as specific products, sales territories, or customers

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Profitability Analysis (Control/Evaluation Phase)

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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

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Marketing Audit

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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

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E-commerce

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refers to commercial transactions that take place over the internet Two categories: Business-to-consumer and Business-to-business

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Reverse Actions (B2B E-commerce)

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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

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Cloud Computing (B2B E-commerce)

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storage of data on remote servers (ex. Netflix stores its data through Amazon Web Services)

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The Major Uses of the Internet in B2C E-Commerce

answer

-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)

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Promotional Website

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provides information about the company and its products

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Transactional Website

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allows people to purchase products directly on the site

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Reasons People Visit Brick-and-mortar Stores

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-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

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Benefits of Electronic Retailing

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-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)

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Sharing Economy

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examples include Uber (company doesn't own cars, rather drivers "share" their cars) airbnb

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Issues Facing the Internet and E-commerce

answer

-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

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Mobile Marketing

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involves the use of 3rd generation cell phones that have access to broadband internet

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Balance of Trade

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difference between the value of a nation's exports and the value of its imports

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BRIC Nations

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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

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Sectors to Consider in a Cross-Country Analysis

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-Demographic -Social/Cultural -Economic -Technological -Natural Environment -Legal/Regulatory

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International Marketing

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Extends the domestic approach to international markets without any adjustments

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Multinational/Multi-Domestic Marketing

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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

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Transnational/Global Marketing

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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)

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Pure Standardization

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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)

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Mixed Approach/Glocalization

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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)

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Pure Non-Standardization

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the company does everything differently in every market

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Different Global Market Entry Strategies

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-Exporting -Licensing -Joint Ventures -Direct Investment

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Exporting (Global Market Entry Strategy)

answer

producing a product in a home country and shipping it to another country. Least risky

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Indirect Exporting

answer

selling domestically produced goods in a foreign country through an intermediary

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Direct Exporting

answer

selling domestically produced goods in a foreign country without an intermediary

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Licensing (Global Market Entry Strategy)

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selling another firm in the foreign country the right to manufacture the product (ex. franchises like McD's)

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Joint Ventures (Global Market Entry Strategy)

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when a domestic firm teams up with a foreign firm to do business

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Direct Investment (Global Market Entry Strategy)

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actually buying or building a manufacturing plant in a foreign country. The costliest and riskiest global market entry strategy

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For-Profit Organizations/Business Firms

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privately owned and service customers to make a profit

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Nonprofit Organizations

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nongovernmental organizations that serve customers but do not aim to make a profit

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Strategy

answer

an organization's long term course of action designed to deliver a unique customer experience while achieving its goals

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Levels of the Organizational Structure

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Corporate leve, strategic business unit, and functional level

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Corporate Level (Organizational Structure)

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top management directs overall strategy for the entire organization

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Strategic Business Unit Level (Organizational Structure)

answer

where business unit managers set the direction for their products and markets to exploit value-creating opportunities

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Strategic Business Unit

answer

subsidiary, division, or unit of an organization that markets a set of related offerings to a clearly defined target group of customers

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Functional Level (Organizational Structure)

answer

groups of specialists actually create value for the organization (ex. marketing, sales, operations)

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Cross-Functional Team

answer

small number of people from different departments in an organization who are mutually accountable for a common set of performance goals

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Core Values

answer

fundamental, passionate, enduring principles that guide an organization's conduct over time

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Mission/Vision/Mission Statement

answer

statement of the organization's scope, identifying its customers, markets, products, technology, and values. Lately has included more social elements

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Organizational Culture

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set of values, ideas, and attitudes that is learned and shared among the members of an organization

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Goals/Objectives

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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

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Marketing Dashboard

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visual display on a single computer screen of the essential information related to achieving a marketing objective

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Competencies

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organization's special capabilities (skills, technologies, and resources) that distinguish it from other organizations

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Benchmarking

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discovering how other companies do something so that they can imitate or leapfrog the competition

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Diversification Analysis

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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)

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Points of Difference

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characteristics of a product that make it superior to competitive substitutes

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Action Item Lists

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organizes -the task -person responsible for completing that task -the date to finish the task -what is to be delivered

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Marketing Strategy

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means by which a marketing goal is to be achieved, usually characterized by a specific target market and a marketing program to reach it

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Marketing Tactics

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detailed, day-to-day operational decisions essential to the overall success of marketing strategies

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Countertrade

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the practice of using barter rather than money for making global sales

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Gross Domestic Product (GDP)

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monetary value of all goods and services produced in a country during one year

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Trends in Global Marketing

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-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

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Protectionism

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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

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General Agreement on Tariffs and Trade (GATT)

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international treaty aimed at tariff reduction that has helped us increase free trade

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Global Competition

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exists when firms originate, produce, and market their products and services worldwide

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Economic Espionage

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the clandestine gathering of competitor's trade secrets or proprietary information

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Economic Espionage Act of 1996

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makes the theft of trade secrets by foreign entities a federal crime in the United States, punishable by significant fines and jail time

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Values (Cross-Cultural Analysis)

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personally or socially preferable modes of conduct or states of existence that tend to persist over time

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Customs (Cross-Cultural Analysis)

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practices of a specific country that are considered normal and expected

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Foreign Corrupt Practices Act

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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

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Cultural Symbols (Cross-Cultural Analysis)

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concrete representations of abstract ideas and concepts that have meanings attached to them

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Semiotics

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Field of study that seeks to understand the correspondence between symbols and their assigned meanings

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Back Translation

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a translated word or phrase is retranslated back into the original language by a different interpreter to identify any errors

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Consumer Ethnocentrism

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tendency to believe that it is inappropriate or immoral to purchase foreign-made products

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Economic Infrastructure (Cross-Cultural Analysis)

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communication, transportation, financial, and distribution systems in a country which can affect the level of economic development

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Product Extension Strategy (Selling a Product Globally)

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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

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Product Adaptation Strategy (Selling a Product Globally)

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selling the product with some adaptations that make it more appropriate for the customer preferences, culture, or climate in a particular country

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Product Invention Strategy (Selling a Product Globally)

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Selling a totally new product to satisfy common needs across countries

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Communication Adaptation Strategy (Selling a Product Globally)

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advertising the same product in multiple countries in different countries in different ways

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Dual Adaptation Strategy (Selling a Product Globally)

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both the products and the promotion messages are changed form country to country

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Dumping (Pricing)

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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

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Price

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money or other consideration )including goods and services) exchanged for ownership or use of a good or service

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Barter

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the practice of exchanging goods and services for other goods and services

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Price Equation

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Price= List Price - Incentives and Allowances + Extra Fees

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Value Pricing

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practice of simultaneously increasing product and service benefits while maintaining or decreasing price

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Pricing Objectives

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specifying the role of price in an organization's marketing and strategic plans (ex. profit, sales revenue, market share, unit volume, survival, social responsibility

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Pricing Constraints

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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

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Marginal Analysis

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refers to a continuous concise trade-off of incremental costs against incremental revenues; if marginal revenue > marginal cost, people will take the action

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Break-Even Analysis

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technique that analyzes the relationship between total revenue and total cost to determine profitability at various levels of output

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Fixed-Price/One-Price Policy

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setting one price for all buyers of a product or service

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Dynamic Price/Flexible Price Policy

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setting different prices for products and services depending on individual buyers and purchase situations (ex. Yield Management, ubers surcharge)

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Dual Distribution

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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)

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Strategic Channel Alliances

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use one firm's marketing channel to sell another firm's products

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Vertical Marketing Systems

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professionally managed and centrally coordinated marketing channels designed to achieve channel economies and maximize marketing impact

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