I am

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I am the one that wakes up breathing heavily on to your neck

I am the one who watches you when you think someone is there

I am the one who loves you like no one could

I am the one who you never noticed

I am your soulmate and you will never give me the light of day

I am I am and you will never be

andyblond40 MIP like minor in possession

candyblond40 thats no good

bobbersdown6 nope. kyle blevins got one. chad stockton got one. and i was sitting there. and they wanted to give me one. until i took the breathalizer.

candyblond40 and passed

candyblond40 good job

bobbersdown6 oh they started writing chad and kyle one. and they came up to me. no beer in my hand nothing. and they were like u been drinking. 10 ocock in the mourning. and i was like just sitting there. not saying nothing.

bobbersdown6 pissing them off. and one came up to me.and was like hey u been drinking. and i looked at them and was like u know u guys are fuckin ass holes. here we are sitting here doing nothing not causing a problem. nothing. and i was like fuck u guys. and they are like have u been drinking. and i was like if i was i would just sit here and say nothing. because u cant do nothing to me. and they are like well if u dont say nothing u are going to be arrested. and i was like hahahha for what may i ask. and they were like not obaying a police officer. and i was like

bobbersdown6 oh yeah well go ahead.

candyblond40 and i bet t

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Philip morris marketing strategy

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Definition of Industry Market Concept The tobacco industry consists of many competitors trying to satisfy a specific customer need. Companies such as Philip Morris, RJ Reynolds, Brown and Williamson, and Lorillard hold almost the entire market share in the tobacco industry. While each company has different advertising and marketing techniques, they all target the same customer group. Tobacco companies try their best to generate interest in their particular brand or brands. Companies market a number of attributes that usually include, but are not limited to taste, flavor, strength, size and image in order to distinguish themselves from competitors. However, all tobacco companies are satisfying the same needs. Many long-time smokers are addicted to the nicotine in cigarettes. They smoke because the nicotine is needed to help them feel normal. Many addicts go through withdraw without nicotine. All tobacco companies have nicotine in their cigarettes, which fulfills the need of long-time smokers. Other smokers depend on cigarettes in social settings. Many smoke to look sophisticated and mature. Tobacco companies make many kinds of cigarettes that target different groups. Social smokers may perceive certain brands as more sophisticated, and therefore they shy away from other lesser-known brands. For example, a person who smoked generic cigarettes at the bar may be perceived as uncultured. On the other hand, the smoker with the Marlboro Lights may be more socially accepted because they have a brand name product . Many types of cigarettes cater to the many markets of smokers who want to portray a certain image in social settings. Tobacco companies do not create the need to smoke, but try to generate interest in their particular brand. Overall, the tobacco companies satisfy consumer demand for the millions of adult Americans who choose to use tobacco by providing differentiated products to different target markets of smokers. Industry Concept The tobacco industry has developed a rather large array of products. Companies such as Philip Morris, Lorillard, RJ Reynolds, and Brown and Williamson, as well as the other smaller competitors, all provide the same product- cigarettes. The tobacco industry is filled with fierce competitors. But underneath the brand names and images, the product is relatively the same. All tobacco companies produce an inhalant that is made with tobacco, tar, and nicotine. These materials are rolled in a special kind of slow-burning paper for longer smoking time. The cigarettes are approximately three to four inches long and come in packs of twenty to twenty-five. With so many similarities, one would think that the market would resemble that of a commodity. However, through brand marketing and promotions, each cigarette is uniquely different in the mind of the customer. Boundaries The tobacco industry can be broadly or narrowly defined. Many products use tobacco as the main material. We chose to define the market by focusing on the tobacco and the way it is smoked. Companies such as Philip Morris, Lorillard, RJ Reynolds, and Brown and Williamson are the main competitors in the tobacco industry (Pollack, Advertising Age, August 0, 1). They produce cigarettes, which are lit and the smoke is inhaled to the lungs. Tobacco products such as cigars, snuff, and chew are considered close substitutes to cigarettes. Cigar smoke is just taken into the mouth, but not inhaled like cigarettes. Snuff and chew do not even contain smoke, but are put on the skin for nicotine absorption. Companies such as Imperial Tobacco, which produce a wide array of chew and snuff products, would be considered a company that provides substitutes to cigarettes. They would not fall in the cigarette industry itself. Situation Analysis Industry Structural Analysis Threat of Entry The tobacco industry has a very low threat of entry. A few powerful firms, such as Philip Morris, RJ Reynolds, Lorillard, and Brown and Williamson, control most of the industry (Pollack, Advertising Age, August 0, 1). Any new entrants would be sure to receive heavy retaliation from the other companies fighting to keep their share of the lucrative industry. For example, Philip Morris is by far the industry leader with estimated tobacco sales of $46.7 billion is 1 (Business Week 17, November , 1). They have a huge base of resources with which to attack other competitor entrants. They could easily start promotions such as buy one, get one free or offer coupons at certain times during the year to discourage entrants to the industry. Many small companies will not be able to compete with the capital requirements in the tobacco industry. The barriers to entering the tobacco industry are numerous. First, the high volume of cigarette sales gives existing firms economies of scale, which would be a disadvantage for newcomers to the market. The products currently on the market are differentiated somewhat in their design, but mostly through the large advertising budgets that are used to promote them. Tobacco companies now pour $4 billion a year into promotions and advertising- nine times what they spent in 171 (Elliot, New York Times, September , 1). These firms have finely tuned distribution channels, which include legions of sales representatives that vie for shelf space. One of the biggest obstacles to a new entrant would be finding a decent place of the shelf with such heavy-handed competition already occupying that space. Store managers may be reticent to give away prime slots for fear of losing discounts or other offers from major players. Government policy is another possible deterrent to enter the market. Large settlements against the tobacco companies have been the norm in the past several years. Although gigantic companies like Philip Morris are able to handle the charges because of their extensive monetary resources, it is difficult to imagine how a small startup company would be able to burden the expense. Switching costs are very high in the tobacco industry. Many smokers are still smoking the same brand they first started smoking (Focus group). Even if the price of their brand is raised, they would not consider switching to another brand (Focus group). Many companies who would want to come into the industry would not easily take away market share, due to high brand loyalty. Competitive Rivalry The tobacco industry is a very competitive market. As mentioned above, about four very large corporations control the entire market. Philip Morris is the biggest company in the industry, but others such as Lorillard and growing in brand name (Pollack, Advertising Age, August 0, 1). All companies battle for market share through heavy advertising budgets and slotting deals. The cigarette market is well into the maturity stage of the PLC, and some might even argue that given the recent anti-smoking campaigns and lawsuits the industry is nearing the decline phase. However, sales show that decline has not yet been reached. As mentioned before, Philip Morris has estimated tobacco sales of $46.7 billion (Business Week 17, November , 1). Apparently, brand loyalty still exists. Buyers Retailers. The stores that sell tobacco products have a moderate influence on the market. Retailers have some power over manufacturers who need prime slotting to ensure strong sales. However, manufacturers have leveraged quite a bit of power by offering retailers special incentives for giving their products good placement or for installing certain numbers of brand advertisements around the store. To some stores, such as gas stations, losing a major cigarette brand would mean large loss of revenues from customers who would rather go to another gas station to locate their favorite brand. Also, companies are trying to develop closer relationships with bars and coffeehouses. Tobacco companies offer ashtrays, napkins, and matches, saving each buyer thousands of dollars in supply costs (Heuslein, Forbes, January 11, 1). Retailers now are marketing the brand on coasters and napkins for the company. Consumers. The end-users in the industry also have moderate power. Brand loyalty is very high, and it has been shown that smokers generally chose a brand in their teen year and continue to smoke that brand the rest of their lives (Focus group). However, in the face of a dramatic price hike, consumers have been quick to notice that brands are interchangeable and then go for the lowest price. But the dearth of substitutes for tobacco products makes it difficult for the industry to lose customers all together. Suppliers The suppliers in the tobacco industry have a low level of influence, even though there is no close substitutes that the industry can use in place of tobacco. Tobacco is purchased from farmers, who essentially have to take the market-determined price for their crops. Tobacco is a commodity, so it makes no difference from which supplier a firm buys its materials. The large number of individual farms that supply the industry makes it almost impossible for anyone to raise the price. There is not a threat of forward integration from suppliers because they have none of the tools necessary to manufacture or market tobacco products. The farmers have only the land and equipment necessary to grow the leaf. If they were to try to produce cigarettes, they would probably not be able to compete with the many large companies that have economies of scale (from Threat of Entry section). Substitutes The affect of substitutes on profits is also low. Nicotine can be found in cigarettes, as well as cigars, chew, and snuff. But most people will not switch over to chew and snuff if the price of cigarettes rises. Chew and snuff do not substitute for the needs of a cigarette. Cigarettes are smoked for the nicotine and for social acceptance. Chew and snuff are not acceptable substitutes for most smokers; the nicotine is not inhaled but put on the skin for absorption. Profit Analysis Why are tobacco executives still smiling? Simple They continue to rake in the huge profits from the category despite a decade-long stagnation in dollar and unit sales growth. (Arrizza, Discount Merchandiser, p 7) Indeed, the tobacco industry has faced much opposition during recent years but still remains profitable. To be specific, there are two main reasons that the industry has continued to be prosperous addiction and management practices. Government influence and lobbying have also played a smaller role. First, the strong addiction of tobacco has allowed for a very loyal following in the tobacco industry. In fact, most tobacco users are very brand-loyal and therefore less price sensitive than most would think. Not only does this bring in revenue for the companies themselves but for the wholesalers and retailers as well. The average smoker still smokes 1. packs per day, which means strong profits for the industry as a whole (Heuslin, Forbes, p 160). Buyer power is lower because the smokers depend on the cigarettes to fulfill their addictions. On average, the industrys profit on cigarette sales is about cents a pack. When the average store sells around 5 packs per day, the industry is bound to make substantial profits (Sullum, Reason, p 18). The loyalty of customers in tobacco has allowed for a successful forecast of future profits in the industry. The management practices of the tobacco industry have also contributed to the industrys success. For example, The Retail Masters program has allowed for strong profits. Retail Masters is a multi-level program of promoting brands in the retail environment. This program has the potential to increase a stores cigarette sales by 11 percent (Arrizza, Discount Merchandiser, p ). Simply by getting better displays and shelf space, for instance, the tobacco industry could become more profitable. Buyer influence increases because they have the power to delegate displays and shelf space. Overall, if the industry were to constantly maintain better displays and shelf space, tobacco companies as a whole would have a better chance of achieving greater profits. Also, most tobacco companies are introducing new products in order to keep high profit margins. RJ Reynolds, for example, is in the final phase of conducting market studies on its latest product, Eclipse. The company claims the new product reduces second-hand smoke by nearly 0 percent, ridding itself of ash and odors ( Arrizza, Discount Merchandiser, p 8). Tobacco companies are also trying to get a better public image by producing public service announcements such as the Be Smart, Dont Start campaign. And although the industry has been under close scrutiny as of late, their customers are impressed with the message. Again, the marketing management practices behind the tobacco industry bring a promise of strong future profits. As already stated, the profits of the industry look to be good, but there are a lot of changing conditions that might affect the future of the industry. For example, the new product inventions mentioned above could either help or harm the industry depending on how well they do. For example, the new Eclipse cigarette will more than likely be imitated by other competitors, who will also have to invest a great deal of capital to get the product on the market. And finally, tobacco companies are having to pay more and more money for court settlements. Profits can be decreased greatly if money the money is spent defending the company. The government is also a very limiting factor to tobacco. Just over the past decade, the government has passed so many laws that it has forced the tobacco companies to double their prices on cigarette packs. Although the customers still seem to be buying as they have in the past, there is certainly a price ceiling that a customer will not be willing to pay above. It is highly unlikely that the same customers who are currently paying less than three dollars a pack, will pay ten dollars for a single pack of cigarettes. However, if the government keeps increasing excise tax and still allots money to the prosecution during tobacco lawsuits, the industry will be severely handicapped. Overall, as the restrictions of the government increase and lawsuits are lost, the profits of the industry are bound to decrease. Industry Environment The tobacco industry is an environment with many strong competitors that have many opportunities in the market. There are also many threats, mostly imposed by the government. The tobacco companies play off each other for market share and innovate marketing strategies to fight back and keep the smoking demand. The tobacco industry has limited media coverage due to government restrictions placed over the past two decades. The tobacco companies have been prohibited from advertising on television and radio, and even more recently from billboards and outdoor posters because of the harmful side effects their products may cause. Since so many channels of marketing are closed for the tobacco industry, magazines are the most common method of advertising (Elliot, New York Times, September , 1). Even with magazines and other legal forms of advertising, tobacco makers are still running into restrictions. In each magazine advertisement, a Surgeon Generals warning is required to appear with information about tobacco-related health risks that the product may lead toward. Companies have also been required to create advertisements solely about the harmful consequences of using tobacco products. These ads were a result of an advertising war between the tobacco industry and anti-tobacco campaigns. The tobacco companies were mocking the ads and celebrating those who continued to use tobacco. The government intervened and required the tobacco warning advertisements for all tobacco companies (Fairclough, Wall Street Journal, B1, 1). The government has also intervened with tobacco marketing by altering the slogans and gimmicks the companies use. The government wants the companies to avoid targeting vulnerable markets, such as young children and teenagers under the legal smoking age of 18 years. Since government regulations have become such a threat to the tobacco industry, companies are coming up with creative ways to advertise and appeal to consumers. Some companies are developing smokers lifestyle magalogs, a combination of a magazine and catalog. The issues come out monthly and contain articles about travel, cooking, and shopping. The magalogs do not contain articles about smoking and do not have pictures of people smoking, but they do advertise tobacco products and accessories. The idea of the magalogs is to portray an image that a smokers lifestyle is fun and exciting (Wyatt, New York Times, C5, November, 4, 1). Tobacco companies are hoping these magalogs will persuade the existing smokers to purchase more. In the past consumers have been proven to remain loyal to one company throughout their lives, but as tobacco prices have steadily increased several times, more brand switching from the premium brands to the lower priced one is occurring. The price increases are decreasing the demand for tobacco products as well. Figures show the number of smokers has decreased 10% in 1 (Heuslein, Forbes, January 11, 1). One of the main reasons for the price increases in the tobacco industry is that companies are trying to keep shareholders happy by paying them high dividends. Another reason is that companies need to cover the higher costs that they have incurred from legal settlements with state governments. The premium brand companies are also spending more money on advertising as the prices increase to keep their customers from switching to the lower-cost brands (Fairclough, Wall Street Journal, B1, 1). The tobacco industry has many strong competitors with varied portions of market share. As of now, the price leader is Philip Morris. When they increase prices, other brands will follow the lead to avoid price wars. Any attempt to take away market share from the leader will result in more harm than good for the lower companies with less share. If a price war were to be started, Philip Morris, with its extensive capital, could easily outprice all other brands (Porter). The smaller tobacco companies could not compete and would soon go out of business. This type of competitive rivalry causes threats to all competitors. The companies with less market share want to follow the trends to avoid losing share no matter how high costs are, and they are trying to gain new consumers as well. The competitors have to watch the price leader carefully to make a competitive strategy. The price leader controls the industry and sets the rules of the game. But the opportunities of the leader and the other companies can be dampened by government regulations. As more restrictions are being placed in the tobacco industry, all companies will lose consumers if they do not find successful alternatives to marketing their products. Once the tobacco gain market share, it is somewhat easy to keep it. The addictive substances in tobacco products give the industry opportunities to keep consumers brand loyal and trying their new products. The environment of the tobacco industry is constantly changing with all of the threats and opportunities. Tobacco makers rely on the key success factor of image in all that they do. The new magalogs are another attempt to create a wanted tobacco users lifestyle, and they will continue to find alternatives around regulations to keep their image up as they fight hard in the competitive environment. Competitive Analysis We have chosen Philip Morris and their brand of Marlboro. Philip Morris is the industry leader and is able to heavily promote and advertise a new product. Marlboro is one of the most well-known brands in the world. We could easily create a line extension and rely on the brand name for customer loyalty. The tobacco industry consists of many competitors striving to provide tobacco products that satisfy the consumers need to smoke. Companies such as Philip Morris, RJ Reynolds, Brown and Williamson, and Lorillard are the top four competitors in the tobacco industry that together hold almost all of the market share. While each company targets the same customer group, they have different advertising and marketing techniques. Philip Morris is by far the industry leader with tobacco sales of $46.7 billion (Business Week, 17, November ,1). The industry giant is responsible for the development of Marlboro, Virginia Slims, and Basic, three of the best-known brands on the market. Other than producing tobacco products, the company has expanded and purchased Kraft Foods in 188, the largest food company in the United States in (Business Week 186, November , 1). Krafts affiliation with Philip Morris has led to much scrutiny from anti-tobacco users and a decrease in profits. Philip Morris has a strong advantage with the Marlboro brand. Marlboro is one of the most well-known brands in the world. The brand loyalty to Marlboro will help Philip Morris keep customers. Lorillard is responsible for cigarette brand Newport, which is currently second behind Marlboro (Pollack, Advertising Age, August 0, 1). Lorillard is the fasted growing brand in the cigarette category, but is still quite far behind Philip Morris (Pollack, Advertisng Age, August 0, 1). Currently, the company is trying to introduce a new kind of cigarette that would directly compete with Marlboro. The new product would be a non-menthol cigarette, which is a first in the industry because most companies usually introduce menthol cigarettes. Lorillard's strength is shown with its creativity. As long as they try new products, they can gain some market share from Philip Morris. Also, Lorillard is undertaking a series of print advertisements to expand on their commitment to responsibility. They are trying to become a more responsible company in the eyes of the public. RJ Reynolds, currently third in the standing, has undergone some recent changes in their corporation. In March of 1, RJ Reynolds decided to sell its overseas cigarette unit to Japan Tobacco Incorporated and concentrate on its United States business (Hwang A, Wall Street Journal, March 10, 1). RJ Reynolds will use the money from the international sale to pay off large debts and to repostion in the market. RJ Reynolds is responsible for such brands as Monarch, Doral, and the ever-popular Camels. The weaknesses of our competitors are the weaknesses of the market. The lawsuits and government regulations have hindered many people from smoking. In the cigarette industry, there is not much difference within the products. Therefore, cigarette companies must market more heavily to increase brand awareness. Finally, the smaller companies must always watch that they do not compete head on with Marlboro, for fear of retaliation from Philip Morris. Competitive Analysis (Part B) As mentioned before, Philip Morris is the leader in the tobacco industry, with over twice the market share of its closest competitor, RJ Reynolds. After whom several international companies such as JTI, the Imperial Group and Brown and Williamson compete for the right to own the third spot in the industry. Much like Philip Morris, tobacco companies aim their sites through very general segmentation strategiesmen and women. Indeed, they too rely on a multi-segmented market to bring in the majority of their sales revenue. Not only that, but tobacco companies use several line extensions in order to gain market share in an attempt to overthrow the king Philip Morris. Several recent trends in competitive products have shown just that. For example, the scientific communities in both the United States and Europe have been developing new nicotine delivery systems in an attempt to transform the cigarette industry as we know it. Basically, the idea behind it all is to make a product with a controlled, gradual reduction in nicotine delivery. However, these new products are not quite that simple for companies to create. In fact, only one domestic tobacco company has attempted to commercialize a new type of nicotine delivery device. A few years ago, RJ Reynolds publicly announced a new type of cigarette called Premier. It was offered in two test markets in Arizona and Missouri. The markets did not do well and a little over one year later they closed. Premier was hard to light, did not burn down the way people wanted them to, smelled and tasted bad. But it had a number of key attributes no ashes, very little second-hand smoke, and limited fire safety problems. (Freedman, 85, 15) Maybe if those who had tried it had taken the time to acquire a taste for it, the product would have established itself as a mainstream smoke. Instead, it eventually failed. Since Premier's introduction, RJ Reynolds has continued to work on the product to try to improve the problems associated with it. This work, along with a large collection of project ideas on the way, is a strong indication that RJ Reynolds is doing its best to steal the number one position away from Philip Morris.(Freedman, 85, 15) Not only that, but RJ Reynolds is not alone in its pursuit of a better smoke. Other activity has been noted form tobacco industry companies such as JTI, the Imperial Group, Procordia A.B., and Brown and Williamson. This can be easily seen as a strong indicator that several companies have extensive interest in the development of a superior nicotine delivery device. Through all of this, the outsider can easily see that the competition of Philip Morris is trying to gain market share in the tobacco industry and eventually overthrow the strongest company in the industry, Philip Morris. (Freedman, 85, 15) Value Chain Analysis Philip Morris creates value in a number of ways, from product design to getting the product into the customer's hand. Many parts of this value chain have been strategically used to build a competitive advantage in the cigarette industry. As discussed earlier, research and design are an important part of Philip Morris' strategy. They are constantly trying to find ways to make their products better, safer, or more convenient for the customer to use. A product like cigarettes may seem impossible to improve on, but time and again they have made minor improvements that have added to their differentiation in the market, such as the flip-top box and the soon-to-be-released slow-burning paper, which should reduce cigarette related fires significantly. Even though cigarettes cause cancer and a myriad of other fatal illnesses, Philip Morris wants customers to know that they are looking out for their safety. A discussion of Philips Morris' value chain cannot ignore their operational advantages, such as the economies of scale they have achieved by being the biggest supplier of tobacco products in the market. They also have made a number of production oriented advancements that have allowed them to produce high quality products at sufficiently low cost to buffer profits. The marketing aspects of the value chain are the points where Philip Morris has related differentiated itself. Promotion, distribution, and overall marketing clout and prowess have made brands such as Marlboro industry leaders and the envy of marketers everywhere. Distribution is a function which Philip Morris has mastered. Anywhere that sells cigarettes carries most of their brands, and always carries the top brands such as Marlboro. Convenience stores, gas stations, discount stores, bars; the list goes on and on. In distribution, Philip Morris is the industry leader, and the other firms watch and learn. Most of Philip Morris' differentiation has been achieved through aggressive promotional strategies. They spend a great deal of money and effort getting out the message about their products in all (legal) media. The campaigns they use are seen as cutting-edge by customers and the industry. A powerful, inescapable message that Philip Morris brands are the best cigarettes on the market have been a key factor in the success of the company. An important ingredient to their formula success has been a clever branding strategy that seems to leave no segment without the perfect brand. With eighteen individual brands of smokes, each smoker is almost certain to be able to find one the fits his or her particular image or lifestyle. And although Philip Morris is a megabrand, it is not a powerful one. The company name is stamped on all of its products and customers often know which company produces their brand, but who can say what makes a cigarette a Philip Morris? The individual brands have much more power than the megabrand, and they are what have a vivid position in each consumer's mind. Indeed, Philips Morris' skillful branding is a major competitive advantage for the company. Philip Morris has built and deployed an effective sales force to build strong relationships with cigarette retailers, and with great success. In any given store, one is likely to notice Marlboro and the rest of the Philip Morris family in a prominent place at eye level. The company has also developed a rewards program whereby retailers actually get paid for giving them freedom in the store. Retailers get points for things like point of purchase displays, in-store advertising and prime slotting, and of course for doing the opposite with other companies' products, and the retailers get money back or credit for the points. This strategy has given Philip Morris a big advantage at the point of purchase by making retailers happy. Linkages Through the variety of effective linkages Philips Morris has carefully constructed over their years of deft marketing practices, they have built a competitive advantage that is seemingly rock solid. Philip Morris uses its large market share to help it leverage for shelf space. Although the aggressive sales tactics described above are used to get total retailer cooperation, they do not have to use such persuasive techniques to simply get good shelf space. No cigarette seller would think of eliminating Marlboro from their shelves, for instance. Due to the high demand for their products, buyer (retailer) power is limited. Not all tobacco companies have this sort of power. The strong promotional tactics that they employ give them much of the power that they have over retailers. By giving their products such appeal and differentiation, customers will not be satisfied without them. This strong demand forces the hands of retailers. Strategy At this point, it would be difficult to make very strong recommendations to Philip Morris for strategic change. The strategy that they have formulated has worked extraordinarily well for them. As the strong market leader, the most important thing for them at this point is to not fall asleep at the wheel. They must stay one step ahead of competitors at all times and resist complacency. A flexible strategy that stays in touch with changing consumer wants and needs is paramount to remaining on top of the industry. However, Philip Morris should be using a defensive strategy. From their market leader position, they should focusing much of their attention on blocking the offensive moves of competitors to ensure that market share is not eroded. At the same time, they should be constantly finding ways to improve the current product line. Brands that are weak should be repositioned or replaced with more appealing ones. Popular brands have to be monitored to ensure that they remain vital and profitable. Kotler would suggest building the total market, that is, creating a larger demand for cigarettes overall. This is a sound strategy, but may be a difficult one for Philip Morris to pursue, for social as well as legal reasons. Such efforts must be undertaken with care so as not to offend or prompt litigation. As long as Philip Morris is able to market their products carefully while avoiding stagnation, they should enjoy market leadership for a long time to come. Potential Segmentation Dimensions There are hundreds of different kinds of cigarettes available in today's market. It can be hard to choose which cigarette to buy and pinpointing the differences between brands can be even harder. Besides brand name recognition, tobacco companies look at segmentation dimensions in order to clarify whom the cigarette is for and what features it has to offer to smokers. When the first studies that indicated lung cancer was directly related to smoking came out, smokers began to look for substitutes that would provide a healthier alternative. Philip Morris was the first company to take a step in the right direction by introducing Marlboro. The filtered cigarettes were believed to be healthier and reduce the chance of developing cancer. Since then, more companies have introduced their own version of a healthier cigarette. Tobacco companies introduced such innovations as light and ultra light cigarettes. Light cigarettes are made with less tar; ultra lights have almost no tar in them. The concept of light cigarettes opens up the field of opportunity for smokers. They can now be more health conscious when choosing a cigarette, but light cigarettes can still cause cancer. Cost is another concern when it comes to smokers. Research shows that most smokers are brand loyal and do not pay attention to price, but there is a possibility that some do buy the cheapest brand available. By offering a lower priced brand, tobacco companies can help to gain market share and broaden their variety and assortment of products. Not all current tobacco companies offer a low price cigarette; they tend to focus their strength on their top brand. Gender is segmented within the tobacco industry. Brands like Misty's, Virginia Slims, and Carlton are aimed at the female population. Men have the Marlboro Man; women have slimmer and slender cigarettes. The tobacco industry has been trying to also segment ethnicity, but has failed in the past. One example is the brand Uptown, distributed by RJ Reynolds, which was aimed at African Americans. Many critics felt that the tobacco industry, as well as RJR, were exploiting and encouraging minorities to smoke. Virginia Slims is currently running ads that target many cultures by showing their brand as a cigarette to be smoked by all women worldwide. Flavored cigarettes are becoming an industry favorite. Menthol cigarettes used to be the only choice available for a different taste. In today's market, there are many alternatives to menthol and regular cigarettes popping up around the industry. Camel is currently marketing new citrus and vanilla flavored cigarettes. These cigarettes come in regular, light, and ultra light varieties and offer a different perspective on smoking. Camel also is offering different blends of cigarettes that are made with Turkish and domestic tobaccos, all giving off a different taste. Marlboro was the first brand to alter the appearance of the cigarette package by offering a flip-top box. The idea caught on quickly and now most cigarette packages do have the flip-top box. This little innovation made cigarettes less messy and easier to keep track of. Today, there are still soft and hard packages being offered to the smoking community. Each package comes wrapped in a cellophane seal to help protect the box, but can be removed for immediate use. Cigarette box designs have not really changed much since the 150s, but there is room for improvement. Targeting Strategy Philip Morris has adopted the strategy that they are committed to marketing their tobacco products to adults who choose to smoke. So what is an adult? By company standards, an adult is a person who is at least 1 years old. Philip Morris markets to adults by using a multiple-segment targeting strategy. Product specialization has worked well for the company over the last forty years. They have developed a series of brands that are very popular and well known among the smoking population. Philip Morris has also used market specialization to its advantage. The Marlboro Man is an example of how market specialization has been a success with the public. Marketing Strategy After a failed attempt to target women in the 10s and 0s, Philip Morris pulled "Mild As May" brand cigarettes off the market. At the time, the country was engulfed in WWII and people were rationing cigarettes. When the war was over, cigarette consumption skyrocketed, but new studies coupled cigarette smoking with lung cancer. Consumers were outraged and felt betrayed by their brands. There had never been much shift in brand preference before, even considering price and model differences. But consumers felt mislead and dropped their allegiances with old brands. Philip Morris saw this as an opportunity to reintroduce their "Mild As May" brand, but the product had undergone a drastic makeover. Trying to attract old smokers who feared lung cancer, Philip Morris introduced Marlboro brand to the public in 155. Marlboro was a filtered cigarette that would be safer for all consumers. There was only one problem; filtered cigarettes were viewed as sissy and feminine. Philip Morris needed to assure male smokers that Marlboro was the right cigarette for them. Marlboro launched a new advertising campaign entitled the "Tattooed Man" campaign. The "Tattooed Man" gave off the image of a new Marlboro smoker. Men were portrayed as lean, rugged, merited respect, relaxed, and outdoors oriented. Naval officers, ranchers, and airmen represented a "Tattooed Man," all showing that filter cigarettes were not at all sissy or feminine. The men's hands were calloused and rough, depicting they were hardworking and demonstrating that filtered cigarettes were not sissy. Marlboro developed full-page black and white advertisements that featured information on the filter and a new flip-top box. The campaign was a success and turned Marlboro into a top selling filtered cigarette overnight. As the campaign continued, researchers used different personalities to find the ideal Marlboro representative. The cowboy emerged as the most popular character and has gone on to represent what a Marlboro cigarette is today. When the Marlboro Man was first introduced to the public, Philip Morris had to explain him. Life ran an article on who and what the Marlboro Man was in January 157, where each frame pictured the cowboy talking about freedom, smoking, and ranching out West. The article's purpose was to draw in men and make them jealous of a lifestyle that they did not possess. This introduction led to many more educational ads over the years, which in turn has led to silent, beautiful image-filled ads featured in present day magazines. Without words, the Marlboro Man takes you to a place that many consumers have come to know very well Marlboro Country. Consumers have also become very familiar with the Marlboro flip-top box. The design is very important to Marlboro smokers, as discovered by Forbes magazine in 187. At that time, Forbes polled smokers by giving them two different packages of Marlboro cigarettes. One box was the standard red with black, bold lettering on it. The other box contained unaltered Marlboro cigarettes dressed in a generic brown wrapping and at half price. Only 1% were interested in the generic brown box, which proves that consumers prefer the bright red packaging (http//xroads.virginia.edu/~CLASS/marlboro/mman.html). The box symbolizes membership into an elite club that recognizes the Marlboro Man as their spokes-person. Currently, tobacco industry advertising standards are very harsh. Banned from television and any print media that is targeted at people under 1, Marlboro must make use of its minimal space. Marlboro Man ads can still be seen in magazines like Time and Life, and even on some billboards, but overall advertising has diminished. As stated earlier, Marlboro ads no longer explain anything because consumers are well educated and understand their meaning. Modern ads depict cattle running through a field, a mountain scene with wranglers herding cattle, or just the stereotypical Marlboro Man quietly holding his cigarette in his hand. Men understand the message and privately long to be a true Marlboro Man, which is what Philip Morris and Marlboro have been working on for over forty years. Focus group The focus group consisted of people with basically the same demographic information. Three males and three females participated in the focus group, each around the age of 1. Every person was from the Midwest, and many attended Truman State University. All the participants in the focus group now smoke Camel Lights or Marlboro Lights. Almost all the participants smoke the brand they had started with. Friends in high school were a main factor in deciding which brand to smoke. One girl had even started smoking the brand her mother used. Many started to smoke a particular brand, became accustomed to the taste, and have never changed. Price is not even a consideration. Although Camel Lights and Marlboro Lights have the highest prices compared to most brands of cigarettes, the people in the group would not switch to another brand even if the price of the competitors brand was extremely low. Apparently, the switching costs are high in the tobacco industry. Each group member feels a high emotional connection with their particular brand, and would not consider switching brands. The participants basically smoke because they believe they are addicted to the nicotine in the cigarettes. Many feel that smoking is a relaxing activity. Some agreed that social smoking was enjoyable. For example, Female 1 and Male 1 like to smoke while at the bar. (Interview, p ) The gas station was a popular place to buy cigarettes, mainly for the convenience. Some group participants liked to stop at the gas station on their way to work or school. One participant, Female , buys her cigarettes at the bar where she works, which is convenient for her. Still others, like Female 1 and Male 1, buy their cigarettes at Walmart because the price is cheaper. (Interview, p ) Male 1 sometimes has trouble getting his cigarettes from the gas station after the weekend because they are usually sold out. Also, the participants prefered hard packs, but most would but a soft pack if hard packs were sold out. Overall, the participants were satisfied with the current product. Some participants were annoyed with the amount of wrapping on the boxes, but others thought that the wrapping protected the cigarettes better. (Interview p) The price was considered to be high, but everyone would pay to get their favorite brand. The participants were dissatisfied with the soft packaging; the cigarettes were not well protected. Most group members did not like the smell that the cigarettes left on their clothing, but did not have a solution to the problem. Male had a problem with the smell, because his girl friend did not like it, and a problem with the after taste. But these complaints would not stop anyone from smoking. The severity of the problems is not great, but a few ideas have been raised. The tobacco companies need to look at the problems of aftertaste, smell of smoke, and packaging. Soft packs were not liked by any participants. More hard packs should be distributed. One point that surprised us was the excitement for prepacked cigarettes. Tobacco companies might have a marketing strategy with prepacked cigarettes. The high price of the cigarettes was noted within the group, but each was willing to pay for their particular brand. Tobacco companies do not need to lower price because the members of the group were still willing to pay. They all saw the brands of cigarettes as being very differentiated, and therefore the industry has very high switching costs. It was also noted that the participants still smoked the same brand of cigarettes that they started out with. Many have not even bothered to try different brands. This is a key point that the tobacco companies need to focus on. If they can get people to start smoking their brand first, then they have a good chance of having that person making a repeat purchase. The tobacco industry is seen by consumers to be very differentiated, allowing the companies to charge higher prices and creating high switching costs. Current Marketing Mix Philip Morris' Marlboro is currently in the mature life cycle. The cigarette industry as a whole is in this life cycle. The objectives for the mature stage are to extend the life cycle for Marlboro by maintaining the brand leader position, advertising image, and cannibalizing the product. Marlboro needs to watch competition (RJ Reynolds and Brown and Williamson), maintain high brand loyalty to keep brand leadership, and continue with creating a socially conscious company. The creating of this image as a socially conscious company is a company wide customer orientation. What has helped them remain on top is their size advantage, experience, and well-defined target. Some specific areas that Philip Morris needs to focus on are sales growth, profits, customers, and competition. These will be discussed briefly. We will elaborate on the factors product, pricing, promotion, and distribution in greater detail. Marlboro is currently in a growth maturity stage for sales growth. Although the industry is in the mature life cycle, Marlboro still controls a majority of the share and sales are increasing (1 Annual Report). With the 18 Master Settlement Agreement, where Philip Morris had to pay a large settlement to past consumers for with holding information about the harmful effects of smoking, sales still increased from 18 to 1. This is mostly due to the high brand loyalty of consumers (focus group). As mentioned above, due to the high and unusually strong brand loyalty of the market, profits have increased even with stricter laws and regulations. Pending litigation, smoking could become even more expensive than it already is. Taxes could be imposed to increase price per pack, which would hurt profits if consumers start buying cheaper brands. If government raises the price per pack as a standard and consumers remain brand loyal, profits could increase for the company. Marlboro targets adults over twenty-one and will not use anybody in an advertisement who looks younger than twenty-five. They wish to retain current customers and try to discourage youth smoking. Many smokers start smoking in high school and remain loyal to the brand they start smoking (focus group). Though reality and their strategy are incongruent, they try to target current consumers. The three big competitors in the tobacco industry are Philip Morris (market leader), RJ Reynolds, and Brown and Williamson. Philip Morris (Marlboro) and RJ Reynolds (Camels) own the two main brands. Due to the price increases delegated by the government, cheaper non-premium brands are catching price sensitive customers. If such price increases persist, competition could increase as well. That is only if the prices increase so much that brand loyalty sways. We would like to discuss how these stated strategies of Marlboro effect Porter's Five Forces. Buyers are an overall weak force in that they are so brand loyal, they will pay inflated prices for product. They do expect more from the parent company that helps explain the Philip Morris Foundation, a community service charity ran by the people of Philip Morris, and the new slogan for Philip Morris, "Working to Make a Difference. The People of Philip Morris." The main reason buyers are a weak force is because of their strong, unwavering brand loyalty. Competitive rivalry is intense in the tobacco industry. With the changing view of smoking by society from one-time glamorous to now outcast and increasing government restrictions with price increases, the consumer pool is dwindling. Luckily, Philip Morris' Marlboro has an advantage as brand leader. The three main competitors are struggling to maintain market share, and Philip Morris is succeeding in remaining the market leader. New entrants in the tobacco industry are rare. It is later in the life cycle, so many would-be new entrants are dissuaded by many factors. First is the sheer size of the established competition. They have the upper hand with economies of scale, experience curve, channels of distribution, and high brand loyalty. New entrants also are thwarted from entering the tobacco market by the uncertain future of the market. The pending legal dealings, increased restrictions, and mandated price increases makes the environment risky for new entrants. There are high barriers to entry. Being that the cigarette industry is in the mature life cycle, the number and availability of substitutes should be numerous. There are a few substitutes to cigarettes like chew, snuff, and cigars, but none truly substitute the cigarette. Unlike perfume were the smell is similar enough or clothes that fit well and look nice, the taste and experience of smoking your brand of cigarettes can not be duplicated. This inability to reproduce the experience and taste makes the substitution uncommonly weak for the mature life cycle. As mentioned in the new entrants, channels of distribution are established and the high demand from the brand loyal customers weakens the power of distributors. This is the environment for Marlboro in reference to Porter's Five Forces. Although it does not follow the text book definition of the mature life cycle, it is due mainly to the unique industry of tobacco. The competitive strategy of Marlboro is differentiation. Marlboro has a perceived uniqueness industry wide by consumers. The uniqueness of the brand name Marlboro and its image, quality, and taste, is highly valued by customers. The customers value it enough to pay higher prices for the Marlboro brand. Marlboro's strategy of differentiation has remained stable and consistent. There are three main strategies Philip Morris has chosen to help differentiate Marlboro. The company has increased the service quality of quick responsiveness to complaints and compliance to federal regulations, assurance of a quality product purchased, and empathy for consumers (smokers and non-) through the services of the Philip Morris Foundation. Philip Morris has differentiated by reputation and brand image as well. The company has remained consistent in their image as a high quality product and an American tradition. Their market expertise, as market leader, has also allowed them to differentiate their product. This strategy reinforces the image as a stable company and plays up the company's longevity and dominance in the market. The current position of Marlboro has been mentioned many times as the brand leader. As the brand/market leader, Marlboro has to defend their position and territory against competition (which as mentioned before is very intense). Luckily for Marlboro, the defensive position is the preferred position. It has becoming increasingly difficult to defend position pending legal results from numerous cases set against Philip Morris and other tobacco companies. If excise taxes ensue (which would increase price of cigarettes by federal government and state) they could lead to a decline in sales, a decline of volume for the entire industry, and a shift from the premium segment (Marlboro and Camels) to the discount segment (GPC) (1 Annual Report). Given Philip Morris' superior defensive position currently, it enables them to have defenses against environmental factors Porter identified as the Five Forces. Marlboro being a differentiated premium brand, this creates a buffer with high price and low cost. The consumers are brand loyal and less price sensitive. New entrants have barriers to entry due to Marlboros brand leader position. The barriers include the high emotional switching cost from Marlboro to a new brand due to high brand loyalty, the high product differentiation Marlboro has created and maintained, and the economies of scale and established distribution channels the com from Marlboro's experience. The buffer previously mentioned for the defense against the threat of new entrants, also is a defense against competitive rivalry. It is with this buffer that Philip Morris has the excess resources to fight, identified as the Principles of Force by Ries and Trout. The expertise of the company in the mature industry also is a powerful defense against competitors. As the market leader and the high brand loyalty, Marlboro is less susceptible to price wars. For some of the same reasons mention above, Marlboro has similar defense against buyers. Being less susceptible to price wars because of the high brand loyalty helps the company have greater control over pricing. This could change, though, with price increases and pending excise taxes. For now it does not seem to be a problem, but the future of the industry is uncertain. But for now as market leader, Marlboro can create expectations of higher quality products and service. The buffer so prominent in many of the factors defends against suppliers. The defense against substitutes is Marlboro's decreased susceptibility to a price ceiling and the brand name loyalty advantage. Due to the position of market leader, Philip Morris and Marlboro have strong defenses against factors in the industrial environment. Their defensive position allows them these perks and if the market is not too effected by litigations pending, it looks to be a very sustainable advantage. Growth strategies of Marlboro have been product development or line extensions. They have created new products like Marlboro Lights and Marlboro Menthol and introduced them in the same market. They have also employed a family of branding such as specific brands (Marlboro, Virginia Slims, and Newport) that target certain segments and offer different images. Marlboro is well positioned and successfully maintaining the leadership position in the mature life cycle stage. They have retained this position through differentiation and product development. These have helped and will continue to help, if the market stays stable, Marlboro extend the mature life cycle and remain market leader. Now we are going to focus and emphasis some major factors in the current marketing mix not yet discussed. These factors are the product, pricing, promotion, and distribution. The product strategy is differentiation and being widely available through distribution. As market leader, Marlboro has taken the Defensive Warfare. They have had the courage to attack themselves through line extensions, and have expanded the market with their family of brands. Strengths of their product position is that the company has a strong position. They are not over, under, confused, or doubtful in their positioning of Marlboro. It makes sense, is not too narrow, is stable and consistent, and consumers believe in the higher quality of the brand. The high brand loyalty and perceived higher quality help the positioning of the product to be strong. Some weaknesses of the product are mainly environmental. Society's view of smoking has changed. Smoking used to be considered glamorous and beautiful, now most buildings are smoke free. Smokers have to huddle outside in rain, sleet, and shine and enjoy their cigarettes. Restrictions on advertising for tobacco products have increased. Outdoor advertising has recently been taken away. The only traditional medium appropriate to find tobacco product advertisements is print. There have also been legal backlashes due to health risks of nicotine use. A negative view of tobacco companies that is prominent in society is one of shiftiness and shadiness. Plus in medium unavailable to the tobacco companies, there has been an influx of anti-smoking campaigns. But even with all of the weaknesses of the market, Marlboro has remained brand leader. The branding strategy of Philip Morris, as mentioned before, is family of branding. Marlboro follows a family branding strategy. Marlboro would be considered the megabrand and Marlboro Lights/ Ultra Lights/ Menthol would be considered the subbrands. This some what follows Ries and Ries' Laws of Immutable Branding. Ries and Ries say that family of branding is good, while family branding takes away from the product. Marlboro follows many of the suggestions made by Ries and Ries. Marlboro has a unique and one of a kind name that helps set it apart from other cigarettes. Marlboro also owns a word, that word is rugged. The cowboy, who embodies a sense of a great American tradition, represents this ruggedness. There are many characteristics highly valued in our society that are related directly to cowboy. Marlboro has also been continuously consistent in their brand imaging (with the cowboy) and packaging. Changes have been slight and industry wide, like the introduction to Lights, Ultra Lights, and hard packs. Some other ways in which Marlboro follows Ries and Ries' suggestions are their law of color, law of quality, and law of extensions. As mentioned above, Marlboro has followed Ries and Ries' law of consistency. They have done this not only in the handling of their brand image, but also in the look of their packaging. Marlboro does not follow all of the suggestions from Ries and Ries. One is their law of publicity. With all of the trials impending and the changed view of society on smoking and tobacco companies, publicity has not helped the product or the market. Though the Philip Morris Foundation would be an excellent vehicle for publicity, they have decided to advertise. If they would let the newspapers and reporters take the drivers seat, consumers might believe it more. Even with all of the problems the industry is seeing, Marlboro is still the brand leader. The high brand loyalty is the key factor to Marlboro's dominance in the market. They achieved brand loyalty by being first movers, becoming established, quality of their product, and consistency. This has helped them endure through the turbulent times in the industry. Brand equity is also very important to the product. Marlboro has a lot of brand equity. It has high brand loyalty that increases trade leverage, attracts new customers, and gives consumers a reassurance in you product. The high brand awareness is due in part of it being brand leader. Marlboro sticks out in the mind of consumers, including non-smokers because of familiarity, and is seen as a brand to consider. The perceived quality is very high for Marlboro. It is positioned as a premium brand and the price leader. Marlboro is also closely associated with its parent company, Philip Morris. Philip Morris is currently creating an image as a socially conscious company. This indirectly creates a positive image for Marlboro. And as the market leader, Marlboro has a competitive advantage. All of these factors increase Marlboro's brand equity. This brand equity helps the consumer by increasing satisfaction, confidence in purchase and helps them to process information by setting a reference point. Brand equity helps the firms by assisting in creating efficient and effective marketing programs, increasing brand loyalty, to independently set prices, aid in brand extensions, increase trade leverage, and competitive advantage. This is shown through the increase of shares from 18 to 1 (1 Annual Report) even though there has been an increase in restrictions. The increases help demonstrate the power of brand equity. The nineties ushered in a time of relationship marketing. Customer Services programs were the most popular way many companies played the new game. Marlboro and Philip Morris are no different. Marlboro offers Marlboro Miles to their customers. Collect a certain amount of 'miles' and order items out of a catalogue them have Marlboro written all over them. This gives current customers perk and draws in new customers. Philip Morris started the Philip Morris Foundation, a service charity and created a new slogan. Their community service relief is aiding in creating a new image for the Philip Morris company. Instead of a seedy, shady cigarette manufacture, Philip Morris is helping society and is socially conscious. Some recommendations for Philip Morris and Marlboro are to let the news organizations cover your good work. Perhaps send out press releases of activities the Philip Morris Foundation are involved in. Don't stop the advertisements, it creates awareness and since Marlboro and Philip Morris are so closely associated it helps separate them during the legal mess and hopefully will have a carry-over effect from Philip Morris to Marlboro. They need to continue the programs that are working for them. These things are the consistent image of the brand, being a first mover to comply with government regulations, and in creating the image of a socially conscious company. They also could introduce a new product, a line extension, of the brand leader Marlboro. They need to introduce a product that offers what no other cigarette offers, waterproof packaging. Pricing Strategy Marlboro is a very well known company with many subsidiaries. The pricing strategy followed by the tobacco portion of the company is one where the primary objective is to simply sell the most products possible through promotions and brand-loyalty. For the first part, demand has been proven to be inelastic. Even if the United States Government enacts bills where cigarette taxes grow even further, customer brand-loyalty will still exist strongly. In fact, history has shown that demand "…is very, very inelastic, meaning higher prices don't necessarily translate into equivalent reductions in consumption." (Kennedy, p0, June 18) Indeed, the one out of six tobacco smokers that use Marlboro products have proven their preference not to change. Secondly, Marlboro uses a fair amount of discounting in order to retain its customer base. The company, two times a year, will run promotions where consumers can buy two packs and receive a third for free. This has been shown to not only keep customers who are loyal to Phillip Morris, but will also tend to take away from the competition. According to the article, "Experts Pick Marlboro," by Nathaniel Kennedy, every time the campaign is launched, Marlboro gains a substantial portion of market share. (Kennedy, p1, June 18) However, competitors have follwed the lead of Marlboro. They too run the same promotions that, in turn, balance out the market share that Marlboro had just recently taken. Because competition is so fierce, the majority of Marlboro' pricing strategy is to promote lower prices. In fact, "Marlboro…shows that you don't have to make cars and trucks to make money. It has the second-highest profit margins among the top-ten U.S. manufacturers."(Hedden, p6, October 16) The reason being is simple. Marlboro does not sell low enough for it to be considered a generic, but it does keep its prices compatible with its closest competitors. For example, in Mexico, Marlboro and its Mexican producer Cigarrera La Tabacelera Mexicana are "temporarily reducing the price of Marlboro cigarettes in Mexico by 0%." (p, March 17) The move is an attempt to beat the competition of cigarette smugglers, who are illegally importing the cheaper U.S.-manufactured cigarettes and selling them at steep discounts. Furthermore, the company must fight in the face of many legal competitors as well. With three main competitors, RJ Reynolds, Brown & Williamson and Lorillard, Marlboro strives to keep its products at a quality level and it prices competitive with the other leaders in the industry. The aforementioned laws of the United States governments have also proved to be a stiff competitor to the company's overall successes. Through maintaining low prices, an inelastic demand and well-placed discounts, Marlboro' share of the market is more than doubling its closest rival. However, that demand could easily switch hands at any time. Marlboro relies too heavily upon brand-loyalty to assume that it would always be the leader. Newcomers are plentiful, and it will take a lot of work for the company to maintain its current market share. Indeed, with cigarette prices on the rise as much as they are, consumers are more likely to become, in the future, more price-sensitive than they currently are. If Marlboro falls into the age-old trap of incumbent inertia, there is a good possibility that the corporation will lose their number one spot in the industry. To prevent market loss, Marlboro needs to pay close attention to consumers' preferences and any new additions to the industry (such as a less harmful cigarette). Marlboro will be able to keep on top of the game. Technology is the key here, and the corporation must do everything possible to be ahead of it. Promotion Strategy The biggest problems that Marlboro faces today are health problems and advertising to children. To combat these issues, the company uses a substantial amount of promotion and goodwill to keep its high-quality name. For the first part, the company is constantly giving to charities and running television commercials to promote their image. For example, in 17, Marlboro began a concert series known as the "Dueling Diva" concerts, taking place in 10 cities over January and February. The winner at each location won a spot to open for Martha Byrne, a soap-opera actress who made her singing debut on a CD which was given away with a free pack of cigarettes. Marlboro saw this as an opportunity to not only sell their cigarettes with the promotional CD, but to benefit society as well. The company was "providing opportunities for local bands to showcase their talent." (Lerner, p6, May 17) However, Marlboro' promotion is not always offered with a purchase. Indeed, the company has done much to promote their goodwill through generous donations to various charities. For example, Marlboro Company has a long-standing relationship with National Newspaper Publishers Association. This relationship became solidified even further when the corporation gave over $5,000 for the establishment of a Black Press Institute. (Rosewater, p8, July 17) Also, the University of Memphis was the happy recipient of one of Marlboro' donations. The company awarded $100,000 to U of M for the program, "Extending the Bridge Community Colleges and the Road to Teaching" (Rosewater, p8, July 17). The program's goal is to facilitate student transfers from community colleges to universities, in order to improve teacher education and diversify the pool of prospective educators. These two situations are but a few of the several examples that Marlboro is a society-minded company. The corporation uses this publicity, through press releases and regular news, as an additional source of promotion. Marlboro is also a regular advertiser on television, but not for any of its products. Instead, the company markets its brand-name by sponsoring a program known as the "We Card" program. It simply encourages retailers to verify the age of those purchasing tobacco products. By doing so, Marlboro is trying to make known that it does not support children smoking, that only adults who chose to should be allowed to smoke. The tobacco industry has been around for quite some time, and so has Marlboro. Currently, the company's products are in the mature stage of the product life cycle. More specifically, it is currently experiencing growth maturity. In that, the company is still growing, but at a slower rate than it once was. Although most investors think otherwise, Marlboro has an "expected long-term earnings growth-rate of 16%. Also, the stock's yield of 4% is nearly three times that of the S&P" (Kennedy, p0, June 18). Marlboro is expected to remain strong for years to come. It has the best position, according to Ries and Trout, to defend against competitors Governmental regulations have increased recently, which is a big part of the reason why the growth rate is starting to decline. However, the company, through the use of the aforementioned promotions, will more than likely turn the negative growth rate into a positive one. Through this, they have maintained their market share at twice that of their closest rival. (http//www.philipmorrisusa.com, April , 000) However, Marlboro does not fit every aspect of the maturity stage to a tee. By definition, there are very few new customers during the stage. This is not the case for Marlboro. Although some of the new consumers come through the means of brand switching, an estimated 100,000 people per day become regular consumers to match about the same number that quit smoking all together. ( O'Quinn, p15, April, 1) It is for this reason that the growth rate of Phillip Morris is declining. As far as advertising itself is concerned, the company is very limited due to the constraints put upon it by the United States Government. For example, the company is not allowed to use any sort of character that might appeal to children, nor is it allowed to advertise, directly, for its products on television. Furthermore, events such as the Winston 500 are no longer allowed to be sponsored by cigarette makers. Indeed, Marlboro faces much opposition in the way of advertising. However, there are many creative individuals who work for the company. They have begun to run ads in alternative weeklies in select cities such as San Francisco to promote parties in nightclubs for smokers. Marlboro even goes so far as to buy "space over urinals and on the doors of bathroom stalls. Ads carry targeted copy such as 'Like you, we travel in packs,' and 'The latest in lip sticks." (Pollack, August 1) This is not to say that the company does not run regular ads as well, because they do. In nearly every periodical, a one to two page advertisement can be found relating to Marlboro, Virginia Slims, Benson & Hedges or other Marlboro brands can be found. Again, through the use of both traditional and creative forms of advertising, Marlboro has remained the industry leader. One of the biggest problems with Marlboro' promotional campaign is its lack of effort towards the legislation towards the company. It is well known that there are several law suits pending against Marlboro, and the company remains quiet about the whole ordeal. This silence makes customers weary of the products, and distrusting of the company as a whole. Even with all of the positive publicity toward Marlboro, very little will outweigh the negative issues in consumer's minds. Not only that, but the press seems to focus in on the bad points of the tobacco industry, forming America's consciousness. Marlboro needs to make its acts of kindness better known through America as a whole. Even if it means advertising their generosity, the United States needs to know what good the tobacco industries are doing. In this way, the customers will be more likely to remain less price and sensitive and keep with a brand which they like and which benefits the community as well. Distribution Strategy Because Marlboro has been around for such a long time, its intensive distribution system has already been established. For the domestic market, it follows the usual chain from manufacturer, being Marlboro itself, to the warehouses where they are, in turn, sold to the retailer and then the final customer. As for the foreign market, Marlboro relies solely on one companyKirgam International--to supply the rest of the world with its goods. (Business Wire, 18). However, the company does have some direct distribution channels. For example, if a customer is unsatisfied with the product, they are encouraged to send in their UPCs and receipts to Marlboro and the company will mail them directly back a coupon to redeem one (or more) pack(s) of cigarettes. Besides the direct mailing, many problems might be created by this more traditional form of distribution channels. For the first part, a delay in any one area of the system would cause delay to the final consumer that would mean fewer profits for the company as a whole. If the company had a more direct mailing promotion, where the consumer (after proving he or she is of the legal age) would be a "subscriber" to the company. They would avoid some problems. The middle-man costs, perhaps state taxes would be eliminated, and customers would definitely be more brand-loyal to the company if he or she is not given a choice on whether or not to buy Marlboro brands. Secondly, the companies international distribution definitely needs to be tweaked. Because Marlboro is relying on one distributor alone, any number of problems can develop. For one, the distributor could easily be playing favorites. That is, the company can basically charge whatever they want to in order for Marlboro to keep its distribution centers overseas. This becomes even more important because the majority of tobacco profits for Marlboro come from Europe and the Middle East. Also, using only one distributor means PM is putting all of its eggs in one basket. If something were to go wrong, than Marlboro would have to resort to a competitor of Kirgam International, which would not only be costly and inefficient. It is my recommendation that the company splits up the distribution now, before anything drastic were to happen, so that at least some profits could be made if either company were to collapse. Marlboro Outdoor The flip-top box was the last big innovation made to the cigarette box dating back to the 150s. Marlboro Outdoor is proposing a new snap-top box. In the past, the flip-tops come over the top and cover the box, but the new snap-top would seal the box. Marlboro Outdoor would protect cigarettes from any type of liquid and freshness would be preserved. The result would be a decrease in ruined cigarettes and a more resilient package. Marlboro's target market has usually been men, hence the Marlboro Man. Marlboro Outdoor would have a tendency to target men only, but could be for women as well. Society allows men and women the same opportunities for outdoor play. Today, women are participating more in activities like canoeing, hiking, swimming, and camping, activities that used to be more men orientated. The new Marlboro Outdoor is designed to cater to all smokers who participate in these activities and are tired of wasting cigarettes due to water damage. There is a lot of potential in the market for a product like Marlboro Outdoor. While talking with local students, many of them felt that a new snap-top box for outdoor activity would be ideal. Many of our group members who do smoke also expressed an interest in a product like Marlboro Outdoor due to the fact that it would be easier to protect cigarettes on camping, fishing, or canoeing trips. Also, if the box were to come into contact with water, like being thrown in a lake or stream, then the lock-top box and inside protective shell, would inhibit water from leaking into the box. The new box would cut down on the number of ruined cigarettes and save money. By introducing this new brand, Marlboro will form a niche market with the hopes of crushing competitors. Offering a new box with a snap-top lid and a waterproof coating, Marlboro Outdoor will be the first of its kind on the market. Competitors will scramble to develop a substitute, but Marlboro will ultimately have the advantage. Marlboro Outdoor would use a differentiation strategy in pursuing the market. The new box would be the first of its kind in the tobacco industry, therefore, it would be perceived as unique. The box change would not result in an increase in price per box either; Marlboro Outdoor would be the same price as other Marlboro products. But the main factor that will work to Outdoor's advantage is brand name recognition and reputation. Marlboro is currently the leading cigarette brand in the world; consequently, a new development like Outdoor will catch loyal Marlboro smokers' attention. Smokers will be willing to try the new product because only the package will have changed, not the taste. This will create a competitive advantage for Marlboro and will cause other tobacco companies to try and imitate the design. Leaving the price relatively the same as their other products, Marlboro will also develop a competitive advantage in this area as well. When others try to introduce their new design, it may be more dramatic and cost more to produce. Companies may decide to pass on the extra costs to the consumers, which could hurt sales. Marketing Objectives for Marlboro Outdoor Currently, Marlboro is in the mature stage of the product life cycle. Because of this, we are trying to create a renewed growth for the product as a whole. By repositioning to be the only outdoor, waterproof cigarette, Marlboro Outdoor will obtain the first mover advantage. This will offer us the unique position to obtain a higher level of customer loyalty, being viewed as an innovator, and the company who is responsive to consumer needs. It also allows us to increase switching costs, to further defend against competition's attacks even more easily than before which will strengthen our position in the marketplace and ultimately lead to higher profit margins. Because we are the leader in the industry and will continue to be so with the addition of Marlboro Outdoor, our best strategy, according to Ries and Trout, is the defensive strategy. As suggested by the authors Ries and Trout, it is more effective to attack ourselves than to fall into incumbent inertia. In order to do so, we have decided to use a flanking strategyto go into an uncontested area by the use of the tactical surprise of waterproof packaging. Through this strategy, our attempt is to attract non-users and encourage brand switching through this new nicotine delivery system. We are convinced Marlboro Outdoor can do nothing but aide in the success of the Marlboro name. Marketing Strategy Imagine you are out in your boat fishing, it does not even have to rain and your cigarettes get wet, and there is nothing worse than soggy cigarettes. Imagine camping and you have just eaten of wonderful meal of hotdogs and potato chips, you lean against a tree and reach for a Marlboro. Unfortunately, earlier when it had drizzled, you forgot to grab your pack of cigarettes when you hightailed it to your tent. Or put your self on the beach, it is a fun day of sun and sand. You just won a great game of volleyball, but it starts to rain. All you are wearing is that itsy-bitsy bikini that barely covers your body, let alone protect your pack of cigarettes. You need something and it is Marlboro Outdoor, the new waterproof packaging. It is designed to look very similar to the current packaging of Marlboro's. The cigarettes will stay the same, but guarded by waterproof out side and a strong flip top lid to keep maximum freshness and dryness. It allows Marlboro customers to go places and do the things they love to do with out worrying about protecting their cigarettes form water. There is no other packaging that comes close to water protection for you cigarettes, like Marlboro Outdoor. BRANDING STRAT Packaging The new Marlboro Outdoor cigarette box is designed to keep the customer's cigarettes dry. A waterproof inner shell of plastic rapping, the same that comes on the outside of current Marlboro products, is Outdoor's key element. In addition, there is a flip-top lid for added convenience and extra water protection. The package, however, is not reusable. After the cigarettes have been smoked, the package can easily be discarded, as all of its contents are disposable. From the onset, it would appear that the package is the exact same as a current Marlboro product. Upon further inspection however, the consumer is able to distinguish between Marlboro Outdoor and the regular product. The blue lettering of OUTDOOR and the aforementioned product designs, distinguish it between the brands. The reason why color blue was chosen was based on Ries and Ries's theory that it is important to differentiate your color from the competition. Furthermore, no other Marlboro product has a blue color. Green was the first color of choice; but it is strongly associated with menthol cigarettes, so blue became the obvious answer. Customer Service We at Philip Morris realize that there is a very wide market in the cigarette industry and we will do everything we possibly can to keep our customers happy. Not only will we offer the traditional brands of Marlboro, but we are also very excited to extend to ourclients an opportunity to try our new Marlboro Outdoor cigarettes. Because we are so concerned with our customer base, we will do our very best to provide superior customer service in every single case. We welcome any complaints, and appreciate all suggestions to improve our quality. As a result of this ongoing concern towards customer satisfaction, Marlboro Outdoor is guaranteed to satisfy every single customer. In fact, the consumer is given their choice of a coupon for a free pack of cigarettes or the monetary equivalent if they are not completely satisfied with their purchase. We provide a website where there is a toll-free phone number for instances such as these. In addition, we often send out surveys as well as door to door interviews to ensure post-purchase satisfaction. Our company philosophy is a very traditional one which follows the marketing concept. In other words, the customer comes first. And if for some reason one of our consumers has a question about Marlboro Outdoor, they can visit our web site at LACEY'S EMAIL, or Philip Morris at www.philipmorris.com. In addition to all of this, we will begin to offer a subscription program for our newest product. This would require a photo-ID, proof of age, and a payment in order to receive a subscription. In this way, we can ensure that our customers will always get their favorite brand while eliminating middle man costs. We also hope to increase brand loyalty through this convenient purchase process. Not only that, but Philip Morris donates to charities, minorities in particular. Over the past ten years, more money has been given by our organization to fund black colleges than any other tobacco company in the industry. Philip Morris and Marlboro Outdoor are the perfect teama great company with great customers, and now, the perfect cigarette package. Price The cigarette market is highly elastic. Although many customers are loyal to a particular brand, they are not likely to pay a much higher price for it than other brands cost. Consumers perceive different brands of cigarettes as basically the same, so they are all worth about the same amount of money to them even though they may prefer the image or look of a particular one. Therefore, Marlboro Outdoor will be introduced at around $.50, or whatever the price level is at the time of release. The price will be slightly higher at gas stations than at discount stores like Wal-Mart and grocery stores, as is the standard industry practice. A premium price will also be charged at unconventional retailers such as sporting goods stores (discussed below). A penetration introductory price should not be necessary for this introduction. Consumers are quite used to paying $.50 per pack. Whereas a low introductory price is generally used to make up for the added risk associated with buying a new product, no such risk is present for the consumer in this case. Our potential customer is a person who already smokes and knows that he or she will like smoking the cigarettes inside the new container. If a customer is dissatisfied with the new package, there will be no monetary consequence. On the other hand, a skimming strategy could possibly deter a smoker from buying the new brand. Customers would think of charging a higher price for the same cigarettes as gouging or simply not be willing to pay the additional price just for water protection. This price will convey to the smoker that the cigarettes contained in the modified package are the same cigarettes that they are used to buying that they are not something to be afraid of trying. Distribution Marlboro Outdoor will be available at all retail outlets where Marlboro cigarettes are currently sold. The brand will be added to the existing line and use all of the current channels. In addition to conventional retailers, this product will also be made available at specialty retailers, such as sporting goods stores, gun stores, fishing stores, and other retailers of outdoor products. Customers will primarily use the product on occasions where they will be participating in outdoor activities. If the product is made available to them while they are purchasing other supplies, they might pick up a few packs along with their other materials. Someone may not think ahead to a trip they are planning and buy Marlboro Outdoor when they are at the convenience store or their usual cigarette retailer, but might buy some at a Bass Pro Shop even if they already have plenty of cigarettes. Adding retailers will require that distribution channels be expanded. A few salespeople can be added to each region to get the product on the shelves of outdoor retailers. If the brand becomes successful, it can be used as an inroad for other Marlboro and Philip Morris brands at these new outlets. After retailers begin making money selling the Outdoor brand and receive good customer feedback, they may be willing to add a few other brands to the selection. This has potential to add to market share. Promotion The promotion objectives of Marlboro Outdoor are to increase brand awareness and inform consumers of the benefits of the new product. This will help extend the mature life cycle and increase occurrence of use. Since the product is not really changing, the packaging it comes in is, the target remains the same; Marlboro loyal consumers. This is a bit of cannibalization, but Marlboro is following the Defensive Warfare strategy, as stated by Ries and Trout, and the best defense is to attack your self. This will aid in prolonging the life cycle by allowing smokers to do activities they enjoy and still take their cigarettes. Magazines Due to the limited media for advertisements in the Tobacco industry, print advertisements in magazines are on of the only alternatives. The advertisements for Marlboro Outdoor will remain consistent with current ads for Marlboro cigarettes, as we do not wish to alter the image of the brand. Advertisements will be distinguished from previous Marlboro ads, by having water featured in each Marlboro Outdoor advertisement. We will place advertisements in appropriate magazines congruent to a specific type of ad. In advertisements where more fishing or hunting scenes are present, ads will be placed in related publications (i.e. Field and Stream). For advertisements that show beach scenes and the like, ads will be placed in fashion magazines or men's special interest magazines (i.e. Vogue and Maxim). Camping scene ads can be placed in either genre of publications. All magazines will target twenty-one and over age segment, as required by law. Word Count 14146

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Chapter 1 Discussion Questions

1.1Why has there been such an increase in interest by business firms in international and export marketing? Will this interest continue to increase? Why, or why not?

·International sales provide additional profits. In some instances these additional profits are all that enable some companies to entail any profits at all. In addition to domestic economics have become somewhat dependent upon international sales as a channel of foreign exchange needed for the import of goods and services to our own domestic economy.

·Yes, this trend will continue to increase. Due to the fact that world trade has continued to increase at a more rapid pace than the world gross product, which only further solidifies the importance of international markets.

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1.What is meant by internationalization and how does this relate to the global marketer?

·Internationalization may be thought of as a process, a way of thinking, or an end result. For the global marketer, internationalization is most effective when developed as a carefully planned process for increasing business within the international market. There are several ways that a company may choose to market its products within the international market. However, in the approach that they choose to, they must heavily weigh all of the advantages and disadvantages of the option that they choose to implement in order to become a volatile player within the market. In addition to a company entering the global market must understand the culture and the preferences of the culture in which they are entering the market.

1.Is taking a global view limited to companies that view themselves as global companies? Explain.

·No, while a global marketing approach could be an attractive option for some companies, most have somewhat small levels of international activities. Internationalization is by no means limited to larger "global" companies. Smaller and medium sized companies dabble in the international markets as well. Only they often do so on a smaller scale. Such as integrating into only a few international companies and often doing so in such countries that have a less extensive barrier to entry.

1.4Is it meaningful to attempt to measure the degree (or amount) of internationalization of a firm? Explain.

·Yes, measuring the degree of internationalization of a firm can be useful in the fact that it allows for management to determine how international the company is now, how international the firm can be, and how international the firm can be.

1.5What does it mean for a firm to be "market driven?" Is this really important in today's environment or can a company be successful without being so driven? Explain.

·A market driven company must be formulated with the needs of its consumers in mind. It must be structured in such a way as to integrate the customer into the company and to maintaining a solid relationship between the consumer and company. It is geared more at creating a market as opposed to controlling any particular market.

·While it is not completely necessary for a company to be "market driven" in order to prove successful, it is however very beneficial. In order for a company to be successful in this type of market, market demand has to be than is market supply. However, in most instances the company must be capable of producing products that are wanted by consumers. Which in most instances calls for a plan that allows for products as well as marketing schemes to change with the changes in business.

1.6Explain the meaning of the following statement "If a company is to be successful in foreign markets its management must have a good understanding of all aspects of the environment within which it will be operating."

·The company must understand that they are not doing business on their "home turf" and that with different cultures and world locations, come different preferences, different tastes, and different needs. All of which must be satisfied to ensure that the consumer is satisfied.

1.7Give two or more examples of how external factors (exogenous variables) in the international environment make export marketing more complex than domestic marketing.

·Strategic decisions such as which countries to target

·Tactical decisions such as product positioning.

1.8What is inward internationalization? Explain the nature of the relationship between inward and outward internationalization from an individual company's perspective.

·Inward internationalization is simply put, foreign sourcing activity.

·Inward internationalization may precede and influence the development of outward internationalization in such a way that the effectiveness of inward activities could determine the success of outward activities.

·Inward/Outward relationships can be classified as either having a direct relationship with one another or an indirect relationship. In a direct relationship the outward actions are heavily dependent upon the outcome of the inwards actions. Where as in an indirect relationship the two of them are not so dependent upon one another.

1.What are the three distinct component s of export planning and strategy development and how are they related?

·Goal, Program, and Organization

·The three components are interrelated, without one of them it would be nearly impossible to achieve the others. For example, it would be very difficult to decide upon a product mix, without first setting out a list goals that sets out what the company wants to do.

1.10 Identify the potential barrier (or obstacles) that face companies considering or expanding international marketing operations. Which are most important and which are less important? Explain.

·Communicating with foreign unit, lack of export training, lack of market information, controlling international activities, documentation requirements, foreign government and public attitudes, trade barriers, arranging transportation, packaging, etc., providing services, higher than domestic risk, financing sales, no assistance form home government.

·As far as determining which of these factors is the "most and least important," that is hard to say, b/c it is dependent upon the needs of each individual entity. For one company it could be that a lack of export training could be the most important barrier to entry, while at the same time that could be the least important barrier for another company.

1.11 When considering the ethical and moral issues underlying of an international marketer, should the manager follow the utilitarian, the rights, or the justice principle? Defend your answer.

· I personally would have to choose the "Utilitarian." Not necessarily of what it is defined as, but perhaps due to the other alternatives. In the case of the Principle of Rights, I feel as though we should try to improve and satisfy society as a whole as opposed to the "individual." In the instance of the Principle of Justice, I have a very hard time agreeing with "Compensatory Justice." It is my opinion that it is a huge "injustice" to society as a whole to "make up for past injustices." What has been in the past, should remain just there, in the past. I mean honestly? I cannot even fathom the fact that one day my grandchildren may have a more difficult time getting into the university of their choice due to the fact that minorities were treated less than equal a half of a century ago.

1.1 Is the role of the international marketer only to attempt to increase sales? Explain.

·No, while increasing sales does play an o the integral role in the job of an international marketer, it is by no means the only role that he or she must assume. There are several other things that an international marketer must concern him or herself with. Such as concerns over the environment, satisfying the needs of the society in which they have chosen to due business, adhering to the "laws and ways" of the land, and etc.

1.1 Is the use of the World Wide Web appropriate only for large companies? Explain.

·While it is not necessarily inappropriate for medium and smaller sized companies to use the World Wide Web, it is however, more difficult for them to become noticed. Even a very well designed web page will prove useless if the company is relatively small and unknown. B/C, if there is nobody looking at these "well designed web pages," there cannot possibly be any business done on the web.

1.14 What is e-business?

·Sale, purchase, or exchange of goods, services, or information over the Internet or other telecommunication networks.

1.15 Are online marketplaces useful only to businesses? Explain.

·No, while online marketplaces have proven to be the most beneficial for large businesses and corporations, they are also useful to smaller organizations and individuals. Thus, restricting online marketplaces to only large businesses is not necessary.

1.16 Does e-business present a threat or an opportunity to traditional stores and wholesalers? Explain.

·For the most part e-business can prove to be beneficial for "traditional" type businesses. While some companies opt to do all business online. Most have found that the greatest benefit comes from combining a mixture of "traditional" business practices with the emerging rise of e-commerce.

Chapter - Discussion Questions

.1 What are the benefits to consumers arising from international trade? Are they the same for industrial goods as for consumer goods? What costs to consumers arise from international trade?

·Active trade relations among countries create employment opportunities, and consumers gain as employment is their source of purchasing power for domestic and foreign goods and services.

·The nature of potential benefits of importing consumer goods are obvious namely, lower price, an increase in supply and variety of goods from which consumers can choose, an being able to access the results of technological developments and advancements. While not quite so obvious, the effect of importing goods is the same. However, it is not a direct benefit, but depends on the impact that such imports have on domestic production sector of the economy.

·Consumers have a stake in the exports of domestic firms to the extent that high volume creates economies in the production process which are then passed on. That is, selling abroad helps to gain economy in production at home, which means lower prices to consumers of domestic products. At the same time, in order to pay for imports, there must be a capital outflow. Not only does this have a negative effect upon the country's balance of payments, but there could be a lessening of much needed foreign currency. Increased competition to locally produced goods may exist, and labor could be affected if this competition led to lost sales and profits redundancy in employment.

. Discuss how exports and imports help to increase productivity and efficiency.

·Trade is a way to increase, and perhaps even maximize, productivity. Marketing and production methods are continuously changing. While old methods evolve into new, the new techniques tend to migrate from country to country.

·Another type of response to the competition from imports that leads to increases in productivity is that of cost reduction. Cost reduction is accomplished through ways of automation, economizing in personnel, elimination of parts, and product simplifications.

. The productivities of factor inputs with respect to different products are determined by a combination of natural and acquired advantages. Is the productivity of the Japanese due primarily to natural or acquired advantages? How about the French, or Chinese? Explain.

·An example of how Japan's acquired advantages were more beneficial for productivity in the instance of the silk market that they had. For example, nylon practically ruined the silk industry of Japan, while the development of synthetic materials, such as synthetic rubber, has limited the expansion of their natural counterparts and may, in some cases, entirely replace them.

.4 (a) Briefly explain the different types of economic advantage for two countries, A and B, each able to produce two products, X and Y, and discuss the conditions for trade to be advantageous (assuming no transaction costs).

·Absolute Advantage The case where one country or firm has a cost advantage in one product and another country has a cost advantage in another product. In a two-country tow-product world, international trade an specialization will be beneficial to each country when the country is absolutely more efficient than its trading partner.

·Comparative Advantage The case where one country has an absolute advantage in the production of all products and services compared to another country, but has a greater cost advantage in some products than in other ones. When this condition exists a country benefits by specializing in and exporting the product in which it has the greatest advantage, and importing the products in which advantage is less.

·Unequal Advantage A situation where one country has a relative cost advantage over another country in all products. In this case neither country has any type of advantage in trading.

.5 Find an example of a country that is exporting a product for which it has an absolute disadvantage with a trading partner but where there is a comparative advantage. Explain the nature of this trading relationship.

·If one country has an absolute advantage over another country in the production of all products, trade will be beneficial if the domestic exchange ratios in each country are dissimilar; in other words, if the country with the absolute advantage has a greater advantage in producing another. This situation is known as "the principle of comparative advantage."

·When this condition exists a country benefits by specializing in and exporting the product in which it has the greatest advantage, or a superior advantage, and importing the product in which its advantage is less, or in which it has an inferior advantage. Thus, the other country, even though it is at a disadvantage in producing all products, can benefit by specializing in and exporting the product in which its disadvantage is least.

.6 Explain the product life-cycle concept as it relates to international trade and investment. What does the concept mean to the individual firm?

·The product life-cycle theory of international trade has been found to be a useful model for explaining not only trade patterns of manufacturers but also multinational expansions of sales and production subsidiaries, that is, it has been useful explaining certain types of foreign direct investment.

·During the process, which can be described in various stages, the innovator country of a new product is initially an exporter, then loses its competitive advantage in trading partners, and may eventually become and importer of the product some years later. The introduction stage of the trade cycle begins when the innovator company establishes a technological breakthrough in the production of manufactured item.

·During the trade cycle's next stage, the innovator manufacturer begins to export profit to foreign markets, which are likely to be countries with similar tastes, income levels, and demand structures, i.e., other countries.

·As time passes, the manufacturer realizes that to protect its foreign sales and export profits it must locate production operations closer to the foreign markets. The domestic industry enters its mature stage as innovating firms establish subsidiaries abroad, usually in advanced countries first.

·Although an innovating country's monopoly position may be prolonged by legal rights it often breaks down over time. Once the innovative technology becomes fairly commonplace, foreign producers begin to imitate the production process. The trade cycle is complete when the production process becomes so standardized that it can be easily utilized by all nations, including lesser-developed countries.

·At the individual company level, a situation that leads to the breakdown of monopoly positions based on patents and intellectual property rights is counterfeiting and piracy.

.7 Export motives can be classified as internal or external and as reactive or proactive. What is meant by these terms with respect to export marketing? Give examples of each of the combinations of export motives.

·Reactive - A company responds to internal and external pressures and acts passively.

·Proactive Aggressive behavior based on a company's interest in exploiting unique competence or market possibilities.

·Examples of internal proactive measures Managerial urge, marketing advantages, economies of scale, unique product/technology competence

·Examples of proactive external measures Foreign market opportunities, change agents

·Examples of reactive internal measures Risk diversification, extend sales of a seasonal product, excess capacity of resources

·Examples of external reactive measures Unsolicited orders, small home market, stagnant or declining home market

.8 Why might some companies be willing to undertake new or additional international/export marketing even though it apparently offers only similar (or even lower) levels of profitability?

·Some countries, for example, may be able to produce domestically most kinds of products more cheaply than can be produced in foreign countries. In such circumstances, these countries will gain by importing those goods in which it has a relative disadvantage in production, and thus gain the opportunity to export goods for disadvantage in production and thus gain the opportunity to export goods for which each has a relative advantage, by reason of superior natural resources, labor, and management skills, capital resources, manufacturing processes, or technology.

. What is meant by a "change agent" in export marketing? Give examples of activities of each type of change agent.

·Change Agent A government or private organization that promotes export activities of business firms.

·Government agencies, industrial trade associations, banks, chambers of commerce, port authorities, and other organizations may be major promoters of export activities. Major export promotion activities include giving and guaranteeing loans, providing credit facilities and insurance, publishing basic market data on foreign markets, exhibiting at trade fairs and exhibitions, sponsoring and participating in trade missions, providing trade leads and reports on individual companies, and being party to trade agreement and conventions.

.10 How can a company determine how internationalized it is? Explain.

·In general, the degree has been measured by quantitative indicators, such as the number of countries in which the firm is doing business, characteristics such as foreign earnings, sales, turnover, assets, the number of employees engaged in foreign activities, and so on. These quantitative indicators maybe measured absolutely or relatively. The absolute component gives an indication of the amount of resources that a firm commits to foreign operations. The relative measure shows that a firm is strongly dependent on its foreign activities if it has committed a significant portion of its financial, technological, and human resources to foreign market activities.

·The firm's degree of internationalization can also be described by qualitative measures. Behavioral characteristics such as top management "international orientation", the degree of foreign experience, and so on, are very appealing, but the use of such indicators involves many measurement problems and they are difficult to operationalize.

.11 Find an example of a company that has expanded its export/international marketing activity, or started such activity, and determine the company's objectives for doing so and the results achieved.

·For the viewpoint of the individual firm, the internationalization process is defined in terms an evolutionary process of development in a firm's international engagement.

·Export development can be described as a stimulus-response process, in which experimental learning has been considered as an important determinant. Information activities, willingness to commit resources, and managerial risk-taking behavior are essential in describing the process.

·Structural factors have often been regarded as critical determinants in the exporting activity of a firm, but the evidence to support the effect of size, product, and technology orientation is conflicting.

·Empirical evidence indicates that as companies increase their level of international involvement there is a tendency for them to change the methods by which they serve foreign markets.

·In an early stage-theory approach, Johanson and Vahlne used the market entry form as a criterion based on extensive experience with Swedish firms. The classification of firms consists of four broad stages in which the following international take place (1) no permanent export, () export via agent, () export via a sales subsidiary, and (4 production in a foreign subsidiary.

.1 How can a company make operational use of the network model and relationship marketing in planning and implementing international marketing programs?

·Empirical research has demonstrated that firms in industrial markets establish and develop lasting business relations with other businesses. This is known as relationship marketing. In particular this is true in international markets, where a company is engaged in a network of business relationships comprising a number of different firms, export distributors, agents, foreign customers, competitors, and consultants as well as regulatory and other public agencies. Networks connect these business relationships where the parties build mutual trust and knowledge through interaction, and that interaction means strong commitment to relationships.

·When the grouping a grouping is made on the basis of national borders, different national nets can be identified. Correspondingly, "production nets" refer to relationships between those companies whose activities are linked to a specific product line.

·When relationships develop through interaction the people or companies in the local or international environment are tied to each other through a number of different bonds technical, social, administrative, legal, economic, and so on.

·In terms of networks, internationalization means that the firm develops business relationships in networks in other countries, that is, the network position.

·A basic assumption in the network model is that the individual firm is dependent on resources controlled by other firms. The companies get access to these external resources though their network positions. Since the development of positions takes time and depends on resource accumulations, a firm must establish and develop positions in relation to counterparts in foreign networks.

·In sum, the network approach offers a model of the market and the firm's relationship to that market. The model stresses the cumulative nature of the firm's activities in developing international market positions and seems especially important in understanding key issues involved in cooperation in industrial systems and global industry competition.

.1 There many who believe that "whatever is legal is ethical." Do you agree with this belief as it might apply to the international marketer? Explain your position and give examples of behavior in the global marketplace that would support your position.

·Ethical behavior is at its most basic level, is what most people in a given group view as being moral, good, and right. The judgment as to whether a decision is considered ethical is "firmly anchored and steeped in a set of individual, corporate and social values, which derive from the cultural underpinnings of a society." Stated in another way, what is considered ethical in one society may be considered unethical in another.

·Three examples that illustrate these basic differences may be seen on the varying views of the paying of interest on loans, the attitudes toward women in the workforce, and the differences regarding the payment of bribes. Lending money for the payment of interest is ethical in many societies, but considered unethical in some Islamic societies. Providing equal employment opportunities for a woman is considered morally right in many countries, but is specifically prohibited by law in other countries. There are great differences in attitudes toward the payment of bribes or gratuities between countries.

.14 Is being "right" or "wrong" about moral issues in international marketing activities an absolute or is it relative? Explain.

·The international marketer needs to understand that those in the countries in which this marketing occurs may not share his or her beliefs about what is right and wrong. Knowledge of ethics, values, and customs in the overseas markets, as well as those in the home market, is necessary for successful marketing and avoiding possible problems.

·It is important to understand that what is "right" and "wrong" is not always easy to determine, as there is no universally accepted code of behavior to aid decision makers. Knowledge of the home market and foreign market is essential to arriving at one's own behavior code for each situation faced.

Chapter - Discussion Questions

.1 Various classification schemes are sometimes used to give an indication of the potential of a particular foreign market/country. Explain why these schemes should or should not be used as a basis for deciding what markets to enter.

·Any classification scheme assumes certain homogeneity among markets in the same category, which often is not correct. Even the more traditional countries may have groups of people who, due to their income and other sets of values, will be a market for sophisticated products and services, while some of the developed countries still have portions of their population to some extent outside of the money economy.

·If complemented with the use of socio-economic, cultural, demographic, and structural data, then it becomes possible to use classifications to assess the existence of a potential market for a given product in a given country. However, the results of such an analysis may yield nothing better than the knowledge that a market exists of r the product concept without ensuring the success of any given marketing mix. At best, then, any classification schema is an indicator that further investigation is or is not warranted.

. Explain the meaning of "cultural universals." Do these provide universal guides to behavior in all societies? How can the international marketer use these universals?

·Culture can be viewed as the homogeneity of characteristics that separates one human group from another. Another way to learn about cultures is to examine cultural universals, and seek generalizations that apply to all cultures. This task is made difficult by the fact that much of the routine of living is governed by cultural characteristics of which people are only dimly aware, or perhaps even unaware.

·Learning about cultures is made even more difficult because societies or groups may share certain common culture traits, but there are also many possible subcultures with characteristic traits that explain variations in behavior within cultures. Major subcultures mat be based on nationality, religion, race, and geographical area.

. Do you agree that the international marketer does not need to study a culture from a narrow perspective but rather needs only a broad perspective to learn about general patterns and themes? Explain your answer.

·With regard to international marketing management, it seems best to study cultures not only from a broad perspective to learn about relevant patterns and themes, but also from a narrow perspective as behavior relates specifically to certain products or marketing efforts. This approach to studying culture can lead to information that will guide international marketing efforts, especially to determine when the same strategies and tactics can be employed in multiple countries and when they cannot.

.4 Explain the meaning of the following statement "People are what make international marketing exciting but frustrating."

·It is exciting that there are so many different types of people to market, which make it possible for the global economy that we are now living in. But, at the same time it can be prove to be difficult to adhere to all of the needs of all of the people in even our own domestic markets, much less the markets of the international world.

.5 What is the "silent language" of international marketing and how does it relate to the concept of "culture is communication?"

·Behavior itself is a form of communication. Each culture may differ in the was that it experiences and uses such things as time, space, relationships, and a host of other aspects of culture. This form of communication is known as the silent language.

·More specifically, Hall (160) has defined the major dimensions of the silent language as they operate within international marketing as being (1) time; () space; () things; (4) friendship; (5) agreements. These five dimensions can form the basis of a real understanding of foreign cultures. The international marketer must, if there is to be a successful and mutually profitable relationship, know how the persons whom he or she will be contacting use of each of the languages.

.6 What id the self-reference criterion and how should the international marketer apply it? Explain.

·Lee (166) coined the term "self-reference criterion" as a useful concept to avoid cultural bias. He suggested that problems should be defined first in terms of cultural traits, habits, or norms of the home society. They should be redefined without value judgments, in terms of the foreign cultural traits, habits, and norms. He indicated that the difference between these two specifications is an indication if the likely cultural bias, or SRC effect, which can be then isolated and carefully examined to see how it influences the concept or the problem. The value of this approach lies in forcing the manager posing the problem to make specific his or her assumptions about the cultural elements affecting the problem and to question whether or not they hold for another culture.

.7 Government can play many roles in international marketing. What are these roles and how does each affect individual business firms?

·As an environmental force affecting international/export marketing, government intervenes in a single country's economy by being a participator, planner, controller, or stimulator. Such intervention activities can be categorized into the following three groups (1) those that promote international/export marketing transactions; () those that impede such transactions; and () those that compete with or replace international/export marketing transactions by private business firms.

·Sub-national government agencies tend to concentrate on promoting export-marketing activities by private business firms. There are, however, some instances where sub-national governments place restrictions that act as impediments.

·At the national level, governments engage in all kinds of activities and may or may not favor one category over another. These activities bear directly on company operations and management and affect strategy formulation and implementation.

·In addition to the many international constraints there are certain local governmental constraints that come from an exporter's home country. For instance, a company may find that it cannot do business in a particular foreign market because its home government has political differences with the foreign government in question.

.8 Why is that some exporters would support voluntary export restraints agreed to by their government?

Yet there are times when quotas can work to the advantage of the export company and the organizations selling its products overseas. An illustration is the voluntary restraint that the Japanese government, under strong pressure from the U.S. government, imposed on its own exports of automobiles to the United States beginning in 18. When the number of automobiles that they could export to the United States was reduced below demand, the Japanese automobile companies responded by sending fully equipped automobiles at the top of their product lines. Because of the demand by U.S. consumers, the local retailers sold everything that was exported at a premium price. This resulted in substantial increase in profits for both the Japanese companies and their U.S. dealers. The only losers at this time were the consumers who had to pay substantially more for their automobiles.

. For a country of your choice, determine what its government does to promote exports and other international marketing activity.

·An example of joint-efforts of government and business are the so-called company grouping programs that have evolved in a number of countries, often under the label of network schemes. Encouraged and facilitated by government, these schemes are designed for small and medium-sized enterprises and are used primarily but not exclusively for export activities. In general, an export-grouping scheme provides the opportunities for member companies to spread the initial costs and risks of international market entry, to share information and experiences, and to pool resources to support stronger promotional efforts. Illustrative uses of network schemes are the "export circles" in Finland, which have the requirement that each circle be kept small and that the companies must be non-competitive.

.10 What is regional economic integration, what is its objective, how is it supposed to achieve its objective, and what impact is there on individual exporters?

·In its broadest sense, economic integration means the unification in some way of separate individual economies into a larger single economy. We can view regional economic schemes as arrangements designed to promote closer economic ties within an area comprised of several politically independent countries, which minimize the economic consequences of political boundaries.

·Various schemes for achieving regional economic integration have been attempted, are operational, or have been suggested. These range from bilateral agreements to eliminate trade barriers to complete economic integration with supranational institutions.

·Regional integration schemes typically establish Rules of Origin, which include provisions for the amount of content that must be region based in order for a tariff, or at a reduced tariff if tariffs have yet to be totally eliminated.

·Exporting business firms may be affected in two basic ways by the formation of any type of regional scheme. There may be preference effect and a growth effect. For exporters located outside any particular region a preference effect means that there will be a decrease in their exports to that region because of the preferential treatment given to competitors located within the region. Of course, up to a point the outsider can become located within the region. Of course, up to a point the outsider can become more competitive by having a superior product, lower price, entering into one or more competitive by having a superior product, lower price, entering into one or more strategic alliances, or at the extreme by developing a production base within the region.

·To an extent this preferential effect may be offset by the growth effect. Since a larger total market has been created, this together with the increased rate of economic growth means that consumers and industrial users will have more money to spend on products from abroad.

·Preference and growth effects also touch companies located within the regionally integrated area. The results of economic integration to inside companies will probably be lower costs and increased sales. Input costs should decrease since inputs of all kinds become available from larger areas and without a tariff charge.

.11 Should an economically integrated region be considered as one market area? Explain your answer. Would your answer vary for the European Union in contrast to, say, ASEAN?

·In tempting to think that, from a marketing viewpoint, a region could be treated by an exporter as a single market area. The exporter that conducts operations using such a strategy will soon find that things are not as they seem. Within a region, separate markets do not cease to exist. The relevant demographic characteristics and social, legal, and cultural influences that define a market do not change just because a country is part of an area with free internal trade and perhaps even free movement of resources. In addition to variations in consumer needs and attitudes, other factors may still lead to such market differences government regulations of marketing activities, distribution structures, and media availability, to mention just a few.

·Regional economic integration is dynamic. It is in Europe where the most dynamic events have occurred. In 187 the 1 nations of the European Union approved the Single European Act. This Act called for the implementing of 85 accords by January 1 1. The end result was to be the creation of the internal market. Although there were already gaps that needed to be closed. Moreover, all border controls and technical barriers to trade were to be removed, government purchasing was to be opened to non-nationals, and financial services were to be opened up competitively.

.1 What is really meant by a company having a differential advantage over its competitors in one or more foreign markets?

Competition comes about because business firms, in their search for a niche in the economic world, try to make the most of their uniqueness. The result, hopefully, is the establishment of a differential advantage that can give the firm an edge over what others in the field are offering.

.1 What is the social responsibility of a business firm operating in the international marketplace? Is it acceptable that these responsibilities vary by country? Explain.

·In much of continental Europe it was believed that businesses had broader obligations including specific responsibilities toward customers, employees, suppliers, and society as a whole.

·A broader concept of corporate social responsibility began to receive widespread attention in the 160's. Changing social values, therefore a changing social environment of business, led to a discussion of whether companies should go beyond legal requirements and proactively attempt to improve society and the environment. There were a number of arguments in favor of companies going beyond that is required, including the following (1) business must respond to changes in society and its demands/expectations; () profit maximization in the long run requires a socially and physically healthy requirement; () it was necessary to do so in order to avoid increasing government regulation; (4) it would provide a better corporate image, with benefits in the ability to attract better employees, increased sales, improved access to capital, and improved stock performances; and (5)it might open up additional opportunities to profitability opportunities to profitability meet existing or emerging demands.

·The definition of what is socially responsible, as with the definition of ethics varies from society to society. However, the strong tendency is for societies to demand that companies act with increasing concern for the overall societal and environmental needs, as well as economic needs.

·In free market economies, social responsibility for a company with a widespread private ownership would seem to include, as a minimum, the following objectives (1) conducting business in accordance with owners' desires, including; () maximizing profits, or at least returning a satisfactory level of profits, while; () conforming to the law in both the host and home nation; and (4) conforming to the ethical values of both the host and home nation.

·The United States leads the way in corporate giving to educational, humanitarian, and cultural organizations. European corporations have traditionally been less socially proactive, partly because the European governments tend to play a more central role. In Japan, there is no tradition of corporate giving and businesses have concentrated their efforts on protection of the company and its employees.

·The international marketer must be aware of the need to act in a way that is viewed as socially responsible in both the host and home countries.

Chapter 4 - Discussion Questions

4.1Strategic export planning requires the development of an effective marketing strategy, including market selection and direction (development). What major implications dies this have for the company's export manager?

·In ensuring an effective international and export marketing strategy, the process of market selection and direction has at least three major implications for export managers. First, the marketer should not focus only on individual products and their foreign markets; there is the need to consider the role of each product and/or market within a company portfolio. Second, in addition to the traditional focus on the detailed issues of segmentation and differentiation, the process of market selection needs to focus also on the broader strategic measures used in strategic planning. Third, export marketers have a key role in the strategic planning process, since many planning tools depend heavily on marketing concepts such as market share, market definition, and the product life cycle.

4.Explain the difference between export market selections and export market direction.

·Export Market Selection The process or opportunity evaluation leading to the selection of foreign markets in which to compete.

·Export Market Direction Decision of company whether to build, hold, divest, or abandon its position in a foreign market.

4.What is market segmentation, and why is it more complex for foreign markets than it is for domestic markets?

·Segmentation means breaking down the market for a particular product or service into segments of customers that differ in terms of their response to marketing strategies.

·The issues of segmentation are at least as important, and often more important, for export markets as for domestic markets. Because of differences in the economic, cultural and political environments between countries, international markets tend to be more heterogeneous than domestic markets. The range of income levels and the diversity of lifestyles and of social behavior are likely to be insignificantly greater when considering the world as opposed to a national market.

4.4What is the practical value to a manager of accepting the belief that there are European customers, Asian customers, and North American customers, rather than customers from Europe, Asia, and North America?

·A manager must understand that it is not the actual country that he or she is selling or marketing to, it is instead the people of that particular country. With each country come different cultures, preferences, norms, and so on. Therefore, it is completely necessary that he or she understand these values associated with each country.

4.5What is the best way for segmenting export markets? Explain.

·There are many possible ways to segment on a worldwide basis, and applying mixed criteria can create the most meaningful segments. With that said, I believe that there is not any single "best way" for segmenting a market,

·It is important to note that any decision to segment on a particular basis should be evaluated in terms of the following (1) Measurability is the degree to which segments can be identified and to which the size and purchasing power of the segments can be measured; () Accessibility is the degree to which the resulting segments can be effectively reached and served; () Profitability is the degree to which the resulting segments are large and/or profitable enough to be worth considering for separate marketing attention; and (4) Actionability is the degree to which effective programs can be formulated for attracting and serving segments

4.6Give example of global market segments and companies that are marketing on that basis.

The advertising agency Backer, Spielvogel Bates Worldwide identifies five distinct consumer segments globally, based on studying 15,000 adults in 14 countries on 5 continents. The research they conducted found global similarities in values, attitudes, and actual purchasing patterns. The consumers were then identified by demographics.

4.7Explain the difference between a proactive market selection approach and one that is reactive. Is one approach better than the other? Why?

·The reactive market selection approach characterizes a situation where the exporter acts passively in choosing markets by filling unsolicited orders or awaits initiatives on the part of foreign buyers, foreign representatives or other export change agents who indirectly select the market for the company. The selection process then remains very informal, unsystematic and purchase oriented, making export marketing more or less sporadic. With this approach, the exporter is responding to a situation that has emerged.

·The proactive market selection approach is, in contrast to the reactive approach, marketing oriented. The exporter is active in initiating the selection of foreign markets and the further customer segmentation of these markets.

·Obviously, there are no clear-cut divisions between the reactive and proactive approaches since many exporters will tend to apply the proactive strategy to what are considered primary markets and the reactive strategy to that the company considers to be secondary or marginal markets.

4.8Distinguish between expansive and contractible market selection procedures. If you were making a decision on such a favor, which would you prefer, and why?

·Expansive Market Selection An approach to selecting foreign markets that starts with the home market or existing market core as a base and expands from there on a market-by-market basis.

·Contractible Market Selection Systematic screening of all potential markets leading to elimination of the least promising and further investigation of the most promising.

·I would choose the "expansive market selection" approach, because it provides a solid foundation in which I could start from and base my decisions on.

4.Differentiate between market concentration and market spreading as expansion strategies. Is one universally better than the other for a given product?

·A market concentration strategy is characterized by channeling available resources into a small number of markets, devoting relatively high levels of marketing effort and resources to each market in an attempt to win a significant share of these markets, for example, to provide export growth by market penetration. After building strong positions in existing markets the company slowly expands the scope if its operations to other countries and/or customer segments.

·A market spreading strategy is characterized by allocating marketing resources over large number of markets in an attempt to reduce risks of concentrating resources and to exploit the economies of flexibility, for example, to provide export growth by market development.

·On the other hand, the rationale for market spreading is based on the weakness of market concentration. Market spreading offers a position of greater flexibility, less dependence on particular export markets, and a lower perception of risk and uncertainty in the international marketplace.

4.10 If sales response functions are S-curves, is it more cost effective to expand a little marketing effort in each of several markets, or to concentrate efforts on fewer markets? What if the response functions are concave?

·Conventional wisdom often argues that if a company faces an S-curve response function, a market concentration strategy based on seeking a large market share of a few markets usually is preferred. This relies on empirical evidence that shows that higher market shares are associated with high profitability. To provide a high market share often requires a strong resource commitment to a sales subsidiary in export marketing. For many small an medium-sized exporters who are not in a position to increase marketing expenditures to a level where efforts lead to increasing returns in sales response, a conctraction strategy may not be feasible. Facing an S-curve sales function, the smaller exporter may use its marketing resources more productively by spending E1 costs for sales S1 in several markets rather that spending E for sales S in one or two markets. This means that there may be advantages in accepting a low market share in a large number of markets as opposed to pursuing market concentration even in the case of an S-curve function.

·On the other hand, when a company believes that it faces a concave response function, there should be a strong motivation to follow a strategy of market spreading. Such a strategy is based on the premise that it is easy world wide to capture a small market share for very low marketing expenditures, for example by extensive use of independent agents. This is especially an attractive strategy for the small and the medium-sized exporter where efficient use of a limited marketing budget creates a great market value and gives rise to particular advantages.

4.11 Can a company in developing its foreign market portfolio use the concept of critical mass? If so, how can it be used? If not, why not?

·Critical mass means that a minimum level of size and effectiveness has been achieved. Typically, profits tend to increase once critical mass has been reached and the exporter is better able to meet the competitive demands of the marketplace.

·Companies typically have limited resources and this means that they cannot be successful in an unlimited number of foreign markets. Hence, there is, need for selectivity in choice of markets. Over the long term, Markets so selected should be developed in a sequence that will best balance resources to be used with requirements for critical mass. In order to be successful pursuing selectivity a company needs a method for selecting the right portfolio of foreign markets. One approach that has been helpful for setting priorities among markets in such a portfolio is a matrix that is based on market attractiveness and company position relative to critical mass. The result of evaluating markets is a graphic representation of current or potential foreign markets that would seem to warrant greater resources and attention, and markets that do not. This tool allows a company to access the value of each market in light of its strategic objectives, strengths, and local market conditions.

Chapter 5 - Discussion Questions

5.1 How would you respond to a person making the following statement "As a general rule, the export marketing manager has a few sources of information available for use in market selection."

While the sources available for gathering information are classified into only two categories, including internal and external sources, there is an unlimited amount of information that can be gathered from these two types of sources. So, I would have to say that the comment is very misleading.

5.For three different products that are being exported, or are exportable, list the major sources of information on competitors' activities.

Trade publications; competitors' house organs; salespeople, who are alert for information from the wholesaler or retailers they call on, and who may sometimes be given a specific task to ascertain certain information from such intermediaries; overseas-based agents and distributors; salespeople, engineers, and officers of the company, who participate in social or professional activities that bring them into contact with competitors' personnel in a way that may permit them to learn something about what competitors are doing; direct observation of competitors' activities such as the introduction of new products and advertising campaigns.

5. Select two foreign markets one a developed country and one a developing country and make a list of sources of information that might be helpful to you in your country (specify your product and country). Are web-based or nonweb-based sources preferable?

5.4 What is the market research process that the international/export marketer arises and what are the major issues that can arise to provide "complications"?

5.5 "Marketing research is beyond the capabilities and needs of the small exporter. Only larger companies doing business in many countries have need for research services." Discuss.

5.6 Explain how the Internet may be a valuable source of information, for even the smallest-sized exporter.

5.7 How can an international marketer overcome the incompatibility of research methods usable in different countries when doing a comparative study?

Chapter 6 - Discussion Questions

6.1 Explain how the flow of transactions and the flow of the physical product relate to foreign entry mode.

·The transactions flow, is an accomplished by the series of sales transactions negotiated or facilitated by the channel members that ultimately transfer ownership of the product to the final buyer. The physical flow moves the product itself to the final buyer through a series of physical movements and storage points. Throughout international marketing channels these two elements tend to coincide, but exceptions do occur. For example, the use of an export broker involves only the element of transactions; but when an export merchant is involved both elements typically coincide.

·Many specific types of organizations may be involved performing the transactions and physical flows in a given international marketing channel of distribution. Of primary significance are the marketing organizations independent companies of various types, overseas sales offices, and so on that directly participate in these flows.

·A system composed of marketing organizations that connect that manufacturer to the final users or consumers of the companies' products in a foreign market.

6. Why is the decision regarding foreign market entry mode a particularly important decision for international marketers to make?

·In a number of respects the choice of entry modes or international marketing channels is important to management.

·Decisions on international marketing channels influence the price that final users or consumers will pay.

·Policies concerning channels are related to productions decisions. In the first place, location of production base is the first channel decision that has to be made. Second, fluctuations in production may be reduced by proper selection of such channels. Greater production stability tends to eliminate or reduce problems of inventory control that face all of the channel members.

·Another reason that entry mode selection is important is that the procedure of developing international channels can be slow and costly. The time and cost required in development can hinder a company that wants to expand its international operations by entering new foreign markets.

·A typical manufacture may do business in may countries, each one having a unique state of general economic activity at any one period of time and each one exhibiting its own cyclical pattern of economic activity. The existence of such fluctuations, and their difference from country to country, makes the entry mode decision and the management of existing chemicals moist difficult.

·Entry mode is a vital part of the international marketing mix. Decisions on channels can limit the alternatives available to the manufacturer in the other activities making up the marketing mix, or at the very least constrain the tactical implementation of the other marketing variables. Also the selection of specific marketing channels reduces promotion alternatives.

·Finally, the relations between the manufacturer and marketing organizations, and between two marketing organizations at different levels such as wholesalers and retailers can create some difficult problems for both. The basic source of difficulty is the inherent conflict of interest between the two. The selling organization wants for the buyer to sell as much as possible for the minimum possible margin. In contrast, the marketing company buying for resale wants to maximize its own profits. This conflict is compounded by the complication in relations that arise because the companies involved will come from different cultures, societies, political systems, and so forth. In general, however, the area of mutual interest is far greater than that of conflict.

6. Discuss the nature of the "whole channel concept."

·Management should be striving always to select the best international marketing channel the one that comes closest to completely satisfying target customers, fits the entire international marketing mix, and still satisfies the companies overall objectives. In this endeavor, the channel of distribution should be viewed as an integrated system with the manufacture on one end and the final user on the other end. This can be called the whole channel concept.

·In the first place, it is the headquarters organization that supervises that channels used, including any intermediary marketing organizations. As such, then, it is an integral part of the channel itself. Second, the specific channel alternatives used can influence the structure of the headquarters organization. Third, companies with fairly rigid organization structures will find themselves in a position where the existing headquarters organization can limit the alternative avenues to serve foreign markets. Since a channel is only as good as its weakest link, international marketers should be concerned with all of the links in the channel.

6.4 Evaluate the use of the Internet for export and other international marketing market entry modes.

·Increasingly, some companies are turning to the Internet as a means of exporting to foreign markets. The Internet has potential usefulness for companies that can sell direct top the foreign market or direct to intermediaries within the domestic market who would then handle the export transactions.

·This is a tool that either supplants or supplements other techniques such as direct mail or telemarketing, or even personal selling. However, as with all newer technologies, the international marketer who chooses to use the Internet should do so selectively, and with caution. There are still many legal issues to be resolved that could affect relationships consummated by this means.

6.5 Governmental regulations can affect the viability and effectiveness of a company using the Internet as a foreign market entry mode. Contrast the government regulations governing e-commerce in the United States, A European Union country, and an Australian country. Is the Internet easier to use regulation wise in one of the countries? Explain.

The newness and rapid changes in technology have led to what amounts to a regulatory vacuum in many areas. In China, for example, the Ministry of Information Industry has issued many rules restricting what dot-coms can do and censoring what they can say. In Europe, companies face a patchwork of conflicting local regulations. Europe's privacy laws for instance, are much tougher that those in the United States. A digital signature may be legal in one country, but invalid in another. Thousands of different business and sales taxes are levied around the world. The globalization of the Internet is creating pressures to develop a globally accepted commercial code.

6.6 A number of alternative entry modes were identified in the chapter. Locate a company that uses export and one using overseas production or a strategic alliance. Describe their market entry strategies and determine why the companies differ in the entry mode being used.

·Contract manufacturing is a strategy that involves contracting for the manufacture or assembly of products by manufacturers established in overseas markets, while still retaining the responsibility for marketing. Under certain circumstances, for example, in the book-publishing field, the contractor firm may distribute the products though its own outlets. This method allows a company to break into international marketing without making the final commitment of setting up complete manufacturing g an selling operations; yet the way is kept open for implementing long-term development policy at an appropriate time. Often this approach is used for sourcing because of lower cost of production. Nike and other shoe producers, use Asian contract manufactures.

·Assembly operations are the establishment of assembly facilities that represents a cross between exporting and foreign manufacturing. When following this strategy, a manufacturer exports components or parts. At the foreign assembly site these parts, often with those from other suppliers, are then put together to form the complete product. When a product is exported in this manner, savings may be realized in freight charges, various foreign government fees, and in some countries customs duties. Assembly has been widely used in the global automobile industry, particularly by Japanese companies.

6.7 Identify the major factors that have a bearing on the type of market entry that an international marketer might select. Is there any one or more that are more important than others? Explain fully.

·Target markets are certain market-related factors that operate as international marketing channel determinants. These can be categorized into the following three groups (1) The nature, size, and geographical distribution of customers; () The needs, requirements and preferences of these customers; () The level of economic development of the market.

·In addition, the question of market access may arise in a given situation. The extent to which there is access to a marketer will depend upon other factors such as the location and needs of customers, the competitive situation and the infrastructure development and intermediary availability within the market. Finally, political stability and legal barriers can be significant entry mode determinants.

·If potential buyers are diverse in character, if they are widely dispersed geographically, and if they buy frequently and in small quantities, there must be broad product availability, which would require the use of wholesalers and retailers within the market. At the same time, the preferences of customers cannot be ignored. If customers expect to find products in certain types of marketing organizations, then they must be there regardless of what the size and geographical concentrations indicate.

·The level of economic development of a foreign market entry mode in a determinant in that it affects the overall organization of alternative channels that is the structure of distribution.

6.8 Why should a company make a specific channel decision for each product going to each overseas market?

The criteria for selecting export-marketing channels that have been discussed in this section, while not all-inclusive are sufficient to show the complexity of the problem. Seldom, if ever, will the international marketer find the channel determinants all pointing in one direction. Management must find a balance among them and evaluate alternative systems.

6. Select an industrially developed country (perhaps Japan or a European country) and a relatively less developed country (perhaps a Latin American or African country). Contrast the relative importance of the factors that should be taken into consideration by a foreign-based manufacturer of a low-unit priced packaged goods selling in both markets, when determining policy on selecting appropriate channels of distribution in those markets. In which case is a managerial decision easier to make? Discuss.

·The nature of the product effects channel selection because products vary so widely in their characteristics and use and because the selling job may differ markedly. For instance, the technical nature of a product must Please note that this sample paper on International Marketing is for your review only. In order to eliminate any of the plagiarism issues, it is highly recommended that you do not use it for you own writing purposes. In case you experience difficulties with writing a well structured and accurately composed paper on International Marketing, we are here to assist you. Your cheap custom college paper on International Marketing will be written from scratch, so you do not have to worry about its originality.

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