BBB4M – Grade 12 International Business – Chapter 7 – 8 Test

Chapter 7 – 8 Notes

 

Chapter 7: Marketing

 

Marketing Activities

  • Marketing: the sum total of all the activities involved in getting goods and services from original producer to the ultimate consumer
    • Includes market research, product development, pricing, advertising, promotion, sales, and logistics
    • Purpose is to sell the output of production.
  • Market Research
    • Finds data to solve marketing problems
    • Primary Data: data collected first hand. Secondary Data: data collected by a third party
    • Statistics can be used to help determine how well a product will sell given different ways it could be produced
  • Product Development
    • Companies use data as well as additional research to refine their products so it will appeal to the largest audience when released
  • Pricing
    • Using data collected throughout the stages, companies can determine the best pricing for products to be sold attractively to the most amount of people
  • Advertising and Promotion
    • After producing the product, companies will need to convince consumers that their products are worth their price
    • Ads can outline unique creative designs, environmental concerns, and other special features
    • It can take many forms like internet ads, billboards, posters, TV radio ads, newspaper ads, sponsorships, endorsements
  • Sales
    • A company must know where to sell their products
      • Craft Shows attract alot of people to one location at once where products can be shown off
      • Retailers can be dealt so they’ll carry and sell your product
      • Own store can be setup to exclusively sell your product, although one can be expensive
      • Online mediums can reach a great audience and have transactions done easy and cheap
  • Logistics
    • Management of the flow of goods and services both in and out of an organization
    • Companies must worry about packaging, warehousing, inventory, and management of goods

 

4 Ps of International Marketing

  • Product: modifications must be made to adapt a foreign culture
    • Packaging weights: units must be converted
    • Packaging colours: some colours are more appealing or have special meanings in different countries
    • Legal Requirements: some countries require materials or restrict materials from being in products.
    • Label Requirements: Special product labeling rules may also apply
    • Language Requirements: translate your packaging
    • Ingredients: Some countries restrict the consumption of certain foods due to religious or other reasons. Also, some countries restrict the amount of harmful ingredients like MSG or salts in their imports
    • Style:
      • Some countries may have different styles or more advanced than others
      • Companies need to be aware of different traditions and current trends in foreign country before adapting or selling products there
  • Place: Where to manufacture or sell specific products
    • Centralized Strategy: all manufacturing and marketing is performed in one location
      • This strategy limits foreign expansion as the central plant may become overly large
    • Decentralized Strategy: means they will setup manufacturing plant in another country, or hire sales force there to do everything in foreign country
    • E-Commerce: online distribution of goods make it the fastest way by far to carry out sales
      • E-Distribution: companies can use online distribution channels like EBay and Amazon to host their products for sale globally online
      • Customers can quickly and easily pay with methods like PayPal
      • E-commerce transaction types:
        • B2C: business to consumer operated by major retailers
        • B2G: business to government sells things to various governments
        • B2B: business to business sells things online to other businesses
    • Sales Agents: combines centralized strategy with decentralized one
      • Hire someone to go to foreign country with stocks and sell there
      • Sales agents go with customized marketing and sales processes suitable for foreign market
    • Trade shows: collection of manufacturers and distributors of similar products rent a space and display a booth
      • Attracts thousands of potential customers in and often quickly sells fast and make money
      • Between businesses, one can also get attention and make deals within a trade show
    • Branch Plants: most expensive way, but includes staffing a foreign location to do all it’s operations
      • Adv: Lower shipping costs
        • Import regulations and tariffs are no longer an issue
        • Product modifications are easier
    • Licensing Agreements
      • Companies can sell rights to use a patent or trademark for a fee as they take it to do other things with it
      • A Royalty is often paid as a percentage of the products sold
      • Manufacturing Agreement: anyone in a foreign country can have a contract to manufacture products of another company under their license
        • Some manufacturers can rebrand the product or market it as their own with more fees
      • Distribution Agreements: Retailers can pay royalties to carry someone else’s products and sell them in a foreign country.
        • In return, the retailer will promise not to sell a competitor’s product in the same store
        • If interest is high, the 2 can negotiate agreements for selling these products
      • Franchising Agreements: are a form of licensing agreement that turns the ownership of a manufacturing or distribution company over to a local franchisee.
        • Under certain restrictions and fees, a franchisee can use all the brands and products of the parent company
      • Acquisitions: To remove competitions in a foreign country, a larger company can choose to buy out a smaller company to make it part of them
        • Acquisitions may also be used to acquire new skills, patents, or key people
  • Price: when picking a price for a product to sell in a foreign country, it’s important to consider the following factors
    • Labour Costs: when products are manufactured in foreign locations, it’s often lower than if it were to be produced in Canada
    • Shipping Costs: When shipping products to farther locations, it may be very expensive to do so if the distances are farther
    • Duties and Tariffs: taxes and fees when importing to another country can hike up the prices
    • Legal costs: Modifications for adaptation to foreign country and foreign country approvals may have taken some money so it’s good to consider those in as well
    • Competition and consumer interest in foreign country should also be considered
  • Promotion: When doing ads in a foreign country, you should consider the following methods
    • Using existing ads: some companies may get away using the same ads for foreign nations because both countries are very similar in culture (Ie US & Canada)
    • Translating Ads: The same ads may work, but require some tweaking to translate the language or units to the foreign country
      • Companies should be careful translating slogans to foreign countries as translations often make them not mean the same thing
    • Creating the ads: it may be worthwhile just to scrap the old ads and make new ads unique for the foreign market

The 2 Cs of International Marketing

  • Consumers: Companies must know about the foreign target market before they do business there
    • Canadian businesses should avoid Ethnocentrism
      • Ethnocentrism: is a belief that your own culture is the right way of doing things and the values of others aren’t important
      • To avoid it, you should visit the foreign country and feel how it’s like to live there
      • Read country profiles on the Internet to see how it’s like there
      • Offer products in language to suit their demands
    • Market Size: tells companies if it’s worthwhile to sell products there to enough people
    • Demographic Information: is information about the people living in target country should also be considered before selling there
    • Culture, spending habits, and income levels should also be known
  • Competition: It’s important to consider who you’ll be competing with in the foreign country
    • Direct Competition: are those who provide products or services that are almost identical to the products or services you provide
    • Indirect Competition: Any other product of service that is geared towards getting money from your target consumers are considered your indirect competition
    • Competitive Advantage: refers to the ability of one company to produce a product more cheaply than another company.
      • The following factors may cause a company to create products at a lower cost
      • Lower cost production: a competitor might have economies of scale that allows them to make products far cheaper
      • Lower distribution costs: companies may be more ahead and already has manufacturing plants in foreign country so they can do things cheaper
      • Product differentiation: Difference in flavour, quality, and packaging, colour, scent, and so on can deter a customer to their product
      • Brand equity: is the value of a product’s brand in the market, essentially the number of consumers who can identify the brand.

Foreign Marketing and Canadian Shopping Habits

  • Canadian Consumers shop globally
    • Canadian consumers choose products from all over the world
    • This allows international businesses to be able to take advantage of Canadian consumers
  • Opportunities for Canadian Businesses
    • People starting a new retail business needs to be careful when selecting merchandise in their stores
    • To guarantee uniqueness, an owner should visit a trade show to see what’s fresh and new
  • Canadian consumers also shop locally
    • Canadian also like to look for local brands for buy from Canadian retailers.

 

Chapter 8: Logistics

 

Logistics Defined

  • Logistics: consists of the acquisition, transportation, and storage of materials from the point of origin to the point of consumption
  • Military Logistics: refers to the science of planning, organizing, and managing the movement and maintenance of military forces.
    • French used foraging: taking foods and supplies from people they defeated
  • Production Logistics: refers to logistic processes within a company, usually a manufacturing business.
    • It ensures all the materials arrive correctly in sync to be manufactured
    • Works in part with supply chains to make this happen
  • Business Logistics: is responsible for ensuring a steady flow of needed materials and information, transportation, storage facilities, all move to the end consumer

 

Supply Chain

  • Supply Chain: is the sum total of all activities involved in moving raw materials, processed goods, and finished products into an organization, moving them out to be processed, and eventually to the consumer
    • Vertical Integration companies who own the entire supply chain (shipping, raw materials etc.)
      • Vertical integration requires lots of resources and attention that takes away from the quality
      • Many companies prefer to use third party logistics (3PL) so they can spend more time correcting problems instead of managing the huge animal
  • Inventory Management: refers to the way inventory is gathered and used
    • SKU (stock-keeping units) are used to number and manage stocks
    • Retails often have point-of-sales terminal to get products out the door
    • Large companies need to coordinate the availability of product inventory from hundreds of suppliers as well as store inventory in hundreds of locations
    • If a company designs it’s own clothing, it also needs to find out if these materials are available before they choose to use that design
  • Storage
    • Stored in 4 locations: place where it’s made, a warehouse, a distribution centre, or place that receives the goods
    • Companies often use third party warehouses instead of their own to reduce costs
    • Due to high costs, many companies use Just In Time Inventory Systems so that everything arrives just in time to eliminate the need to store them for too long
    • Online retailers require a lot of warehouse space, but since warehouse spaces are cheaper than retail, online retailers smart with their Just In Time systems can compete with brick and mortar stores
  • Cash-Flow management
    • They only need cash-flow management if the transaction take place between 2 businesses in 2 different countries
    • Involves negotiating payment terms, method of payment, and exchanging funds of the supply chain .
    • Often for large payments for products, machinery, transportation, and legal fees
    • A Letter of credit can be used to hold some money and guarantee that the funds will arrive once the deed is done.
      • However, in places where banks and financial institutions aren’t developed, this may be difficult
  • Supplier Management
    • Refers to the sourcing and finding reliable sources for products and services a business needs
      • Using electronic data interchange (EDI), suppliers and businesses can monitor the amount of resources as they are being used and get to work to make more in time
    • Supply Managers also evaluating the supplier’s response and economic benefits of suppliers
      • Finding the cheapest and best suppliers can be beneficial to companies
  • Outsourcing: refers to using outside resources to perform activities
    • Nearsourcing: employing companies nearby to do things smaller tasks for them
    • Insourcing: when companies use part of the company from within to do a certain task
    • Most companies focus on the things that give them the most competitive advantage (Ie efficiency, managing supply chain) and outsource the rest
    • Offshoring: does not contract out major business functions, but transfers that branch of the company to another country
    • Inshoring: Offshoring but putting functions out to other businesses within their own country
  • Information Management: Software can be used to analyze large amounts of data which can be vital to monitoring and making decisions
    • Many companies use enterprise resource planning software to plan resources and connect global suppliers for them
  • Physical Distribution: the movement of the finished product to customers
    • Inbound Distribution: deals with receiving the goods that are sent to the company
      • Responsibility rests to the buyer
      • At this point, the buyer takes possession of goods since it passed the FOB point
      • Receiving process: a process in which a company follows when shipments arrive
        • Check for damages, count them, assign SKUs, record location
      • Outbound Distribution: refers to arranging the shipment of goods for shipment
        • It’s a seller’s responsibility to arrange shipping the goods to customers
        • Ex Works (EXW): where the buyer responsible for all shipping related charges and chores
        • The shipping company, carrier, must present a bill of lading indicating that the company has accepted these good for shipment
      • FOB Point: defined by the ICC, is the point in which the costs, and risks with the shipment passes from the seller to the buyer
        • FCA: free carrier: the seller hands the goods, cleared for export into the name of the buyer
        • FOB: free on board: where seller must load goods on ship nominated by the buyer, then it will be given rights to the buyer
        • CIF: cost, insurance, and freight: seller pays all costs including insurance to bring goods to the port of destination
        • CFR: cost and freight: same as CIF but risk is transferred once the goods have crossed the ship’s rial
        • CIP: carriage and insurance paid to: seller pays all insurance to the point but risk is transferred once the goods are handed to the carrier
        • DDU: delivered duty unpaid: Seller delivers goods to the buyer at destination named in contract of sales. Goods are not cleared for import or unloaded at the place of destination. Buyer is responsible for risks thereafter
        • DDP: delivered duty paid: seller pays for all transportation and bears all risk until goods have been delivered any pays the duty. Most advantageous to buyer as seller pays all shipping costs

 

Methods of Physical Distribution in the supply chain

  • The method depends on (1) what is being shipped, (2) Weight of shipment, (3) Speed of delivery required, (4) Cost of carrier, (5) Destination of shipment
  • Motorized Carrier: Trucks, cars, vans, motorcycles, bikes
    • Full truck load is less expensive than less than truckload
    • Freight Consolidation: places goods in a warehouse until a FTL is accumulated
    • Motor carrier is often most versatile
  • Rail
    • Slower but can effectively carry for large distance and feasible for bulk items
    • Raw materials are often transported with rail
  • Ocean Freight
    • Helps move things across oceans to different continents
    • Landlocked places may face problems as boats need to navigate into them
    • Cheap and bulk transfer is good
    • However they’re slow and often needs another transportation method as ships cannot go door to door
  • Air freight:
    • Very fast international movement
    • Bulk cannot be carried, and very expensive
  • Containerization:
    • Uses standard-sized metal boxes to ship freights
    • Cuts down on damage and limitations as the box is shipped and untouched generally
  • Intermodal Shipping:
    • Means more than 1 mode of transportation may be used
    • This can take advantage of all the benefits from each method

 

Issues in the supply chain:

  • Reliability of sources:
    • If problems occur with one part of the chain, then the entire system may be interrupted and the operations delayed
  • Oil Prices
    • As transportation requires oil, fluctuations with the oil prices can cause transportation costs to go up
  • Unstable political climate
    • New taxes or political turmoil can cause conflicts and delayed with operations and customs inspections in other countries
  • Piracy
    • Hijacking of shipments from Africa and other places can put seamen and goods at risk
  • Optimization
    • Using full truck loads may be good but shipping more products mean they’ll need to produce more products and have warehouses.
    • Companies will need to balance and optimize the costs to the best of their abilities

 

Getting help with the supply chain

  • Department of foreign affairs and international trade
    • Helps assisting businesses in preparing to enter international markets
  • Canadian Trade Index: is a buyer’s guide of thousands of companies in Canada. This helps businesses look for suppliers and supply chain members to incorporate into their business
  • Frasers: online directory that helps companies search terms, help, and companies to aid their supply chains
  • Customs Broker: is an expert in navigating the complicated rules when importing to Canada or other countries.
  • Industry Canada: department of the government that helps businesses compete and succeed internationally with tools and analysis data to help them
  • Canadian Border Services Agency (CBSA)
    • Operates border inspection operations around Canada and does inspection of goods as the come in
    • Promotes safety, prevent diseases, economic and businesses benefits, protection of Canadian industries from being dumped, and collecting tariffs and duties