International marketing to China

INTERNATIONAL MARKETING TO CHINA

LEZ. 2 GIOVEDI 17/09 CREATING VALUE

Creation of value:

1. why we need to create value

2. how companies create value

When you buy something as a consumer in your mind there is always the valuation if this

price is a good price and usually it is a good price is if the price that you pay is equivalent

to the value that you buy. Always there is correspondence between the price that you

pay and the value that you perceive every time there is no let's say link between the price

that you pay and the value that you perceive.

Marketing is the activity for creating, communicating, delivering and exchanging offerings

that benefit its customers, the organization, its stakeholders and society at large, making

profit.

To serve both buyers and sellers, marketing seeks:

1. To discover the needs and wants of prospective customers

2. To satisfy them

The key yo achieving these two objectives is the idea of exchange, which is the trade of

things of value between a buyer and a seller so that each is better off after trade.

The problem of value is that you have to create value in order to communicate to

consumers the quality of the product, the innovation that is behind the product they, the

experience that there is behind the product and then you have to set a price that is

corresponding to that value.

In which way you create value? Developing marketing activities and marketing activities

are activities that are not only related for example to advertise it sometimes some people

they think that marketing is advertising, the creation of value is not only communication,

is a lot of activities where you really have to analyze needs of consumers, you have to

create a product that is fitting the needs of your consumer. First of all you need to create

a product or you need to create a service, you need for example to create a special

features that differentiate your product from the product of your competitors and so they

are willing to pay a little bit more or they are willing to choose your product instead of

competitive product, you need to communicate otherwise if nobody knows about the

existence of your product, delivering so think about the distribution, if you ask managers

which are the criticalities of doing marketing for example in foreign markets and if you ask

them for example doing marketing in China they will tell you distribution is a big issue for

my company because you can communicate you can say that your product is the best

but then if the consumers do not find the product in the store and in the right way nobody

would buy your product.

When you do marketing you do not do marketing only with final consumers for example

you do marketing with retailers, with distributors so you offer a product, so you have to

develop a lot of activities to create value and you work not only with final consumers, final

consumers are only one of the stakeholders of the company there are other stakeholders,

first of all there are employees and managers that are of the company so they are market

stakeholders but they are internal, then there are the external, you had another group of

stakeholders that are market stakeholders because they are really connected to your

company but they are external.

Is important for stockholders that you created value for the products of your company?

Yes, they look at profitability and they look for long term profitability of the company,

they're very worried if they see that the product of the company in the marketing losing

value.

But then we have also suppliers, buyers, consumers, creditors all of them are the targets

of marketing activities. For example, the price index of Illy is about 230. The price index

is, for example in Italy, Lavazza is the company mass market brand, it's in the average for

Lavazza we say that the price index is 100 it is the number that we take into consideration

when we consider the average price, when you consider Illy that is with the price index of

230, it means that if you compare the price of Illy and the average price of Lavazza, the

price of Illy is more than double the price of Lavazza, means that it is more than double

the average price in the market.

For example, you have to pay attention that the supplier is let's say following the rules of

your company in order to guarantee quality so you have to deal with supplier and

involving them in the creation of value.

So obviously buyers think about the distribution and it's not easy to convince retailers to

put your product in the shelf, to convince the buyer to buy you have to develop marketing

activities because you have to demonstrate that your product is of higher value than the

product of the competitors also for the company, for the retailer so you have to

communicate, you have to convince them that the product is a good product, you have to

convince them that there is a price for the retailer and also remember this concept the

price that is used for the calculation of the revenues of the company is the price that the

company is doing to the buyers, how many times you sell for example to a distributor and

then the distributor is charging 20% of markup is selling to retailers, the retailers are again

increasing the price because they want margins so many times what you pay it can be

100% higher.

For example 3 euros is your selling price, but then there is a sellout price that is the price

you pay in the supermarket that can be 10 euros. The difference between the sellout price

and the selling price so 7 euros are the margins of the channel of distribution.

We also have the non-market stakeholders that are competitors that are a source of

information, they can make some choices that I have to take into consideration (for

example advertising campaign), in some cases I can consider other companies and I can

do agreements with them, agreements in terms of for example selling together in terms of

sharing resources.

The government can have an impact on the marketing activities especially because of

taxation.

When we talk about international marketing to China do you think we will talk about the

government? Absolutely yes, think about bureaucracy, authorizations that you need for

example to set up companies there, to open stores, to deal with certifications; this will be

an important stakeholder.

Another important external stakeholder is media, journalists and these are they are very

very important also for marketing, for the image of the product.

The goal of the company and the big problem when you develop, when you will be a

marketing manager for example will be to deal with all the stakeholders trying to reach a

good balance between on one side the customer satisfaction and on the other side profit.

When you want to increase customer satisfaction you have to increase the quality and to

increase the quality is money, to satisfy consumers is very important, there is an informal

law that is saying customer satisfaction that is 1 3 1 10 if you satisfy a consumer this

consumer will develop positive word of mouth with other three consumers, if you do not

satisfy one consumer this consumer will develop negative word of mouth with other ten

consumers.

In marketing activities our goal is to create value to guarantee profitability and customer

satisfaction that means a value that consumers recognize it is worth to pay and that

create also profits, but obviously there is a cost for that.

Things a firm should do in producing and marketing a product

- Analyze needs and estimate demand: what do you have to do to sell a product? You

have to analyze needs, so to give you a value to create customer satisfaction, I need a

lot of information that's why when talking about foreign markets what we need is to

understand how important is to analyze information in foreign markets, when we

analyze China we need to know what is the size of our segment in the Chinese market,

I have to measure in a quantitative way how many people will ask, will buy my product

and why I have to do that in advance? Because I risk to invest too much to create the

marketing activities and then many companies discovered that your estimation of the

market that was like was like that and then when you go there you find that the market

is very small.

- Estimate competition: you have to estimate competition, when we make an analysis in

order to decide which kind of marketing activities and especially which kind of segment

for example you want to reach, because in some cases you can analyze the market and

you can say that would be nice to enter the Chinese market because there are a lot of

consumers that ask for that product but then you make an analysis and you see that all

the big competitors are already there and you are small competitor, you are a small

company, so you had to estimate competition and see if there is a space for you, so if

there is the possibility to enter the market.

- Determine what (product): you have to determine what product.

- Determine where (distribution): you have to determine where.

- Estimate price

- Decide promotion

- Provide service

These are all the activities that we have to develop in order to crate value and then we

have to develop customer engagement because only in that way you can create brands.

Who performs marketing functions?

• Producers is my company (marketing from producers to consumers)

• Consumers, also consumers do marketing, with review for example

Intermediaries:

• Wholesalers

• Retailers

• Other specialists like dealers, online wholesalers

Other actors that can be involved in your marketing activities:

• Transport firms can have an impact, can destroy your product if they are not high quality

courier

• Product testing firms when you create a product for China you have to deal with

product testing companies in China that will do a product test for you for see if the

product is suitable or not for Chinese market

• ISP’s means Internet service providers, also technology is important when you deal

especially with someone technological products

• Research firms, when you do marketing you have to organize needs that means also

that you have to involve research firms in your activity, the choice of a good research

company will assure that you get a reliable data that are important because you take

decision, you make investments so research firms are important

• AD agency (Advertising agency) also these are important especially when you target the

market in countries that are culturally far like China, you can have a national company

with subsidiaries in all these countries, also with the experience dealing with other

foreign clients that can support you in your market

External face of marketing In marketing you have external face and

internal face.

- Companies dealing is creating relations

with suppliers

- Competitors, are not really internal, they

are external but they had to be taken into

consideration because everything I do

when I think about marketing, you have

to think that a companies is able to sell if

it is able to convince, to make promises

to final consumers, to their target to buy

their product instead of competitive

product it means that I need to know

exactly what competitors are offering, are doing and I have to change also my

marketing strategies considering what competitors are doing.

- Channels of distribution, retailers I had to persuade a retailer to put my product in the

shelf, you have to do marketing with retailers that involved also a payment.

LEZ. 3 VENERDI 18/09

There are some macroeconomic variables:

1. Technological aspects, technology is something that you have to take into

consideration when you develop a product, is my product fitting with the local

technology?

2. Physical aspects because the product in some cases has to be modified, a lot of

products you have to modify or you have to sell only part of the assortment taking into

consideration the weather of the country so the weather is part of the physical

geographical aspects, have to take care of the packaging to protect for example the

product so where there are physical aspects that are not favorable for transportation

you have to take care to have a good package that protect your products.

3. Political aspects are important to be taken into consideration in general because for

example in the case of China the model entry depends a lot on the problem of laws,

bureaucracy, certifications that you need, sometimes entering China especially for

some industries is so complicated that you prefer to develop in a marketing plan, it is

better to choose a model entry where there is a local partner that will help you with all

the bureaucracy obviously there are a lot of advantages of doing for example a joint

venture or other agreements. The government is important because in some

industries you have to develop relations with the government tried to persuade the

government too to write some laws that make your products compulsory.

4. Economic aspects, is price so also when you target China for example with specially

the case of rural China, you need to target them with the products with a lower price

because the averaging income is lower, so you have to for example modify the

product.

5. Social aspects, social is related to education for example.

6. Cultural aspects, we will see how many cultural aspects will be taken into

consideration when especially targeting countries like China where the culture is very

different.

Internal face of marketing

If you want to become a marketing manager you have a lot of possibilities, there are a lot

of jobs that you can do inside the company, you can work as a product or a brand

manager. Was it different from a product manager or a brand manager? Brand manager

that is in charge of the brand, the image, the architecture of the brand, everything about

the brand, but then there are many products you can buy shampoo, you can buy soap,

you can buy the cream, so there are different product managers. It's like a matrix where

you have a manager that is responsible of the same product that is sold by the company

with different brands and it's also paying attention that the brand is not cannibalising the

sales of other brands. The product management is pay attention that the competition is in

a way controlled, they try to avoid competition. The brand manager is pay attention that

the image of the brand for example dove soap is coherent with the brand dove for cream

the brand dove for shampoo, there is a sort of control in terms of same products with

different brands of the company and same brand that is used to sell different products.

Manager marketing research for example you see here in obviously there is the president

the vice president then everything because you have obviously the information system

Department the research and development accounting human resources

The green area (vice president information system department, vice president research

and development department, vice president manufacturing department, vice president

accounting and finance department, vice president human resources department) is

identify all the functional area of a company, they do a sort of planning for their area in

order to reach the goal that are defined by the CO.

When we talk about marketing so Marketing Department, there is a manager that is in

charge of marketing research this is obviously typical of multinational company because if

you go in a small company there is one marketing manager that is doing everything,

sometimes they do marketing and sales but in the multinational company there is a

manager there is an area that is doing research for the company so you have the

marketing research manager then you have sales that is different from marketing

managers, from product and brand managers because they take more strategic

decisions, they develop the product, they sell the product so they are in charge of all the

sales network and then if the company is a big company they have also the

communication Department, so you have the manager for advertising and promotion,

usually multinational company they use advertising agencies but in any case even if they

use advertising agency, they also charge advertising agency, it is important to deal with

the advertising agency because you can imagine when you have an external agency that

is working for a company they can be very expert, they have a lot of expertise, more than

the company obviously because they are focused on developing advertising but the

problem is that they have to deal with the product of the company so it's very very

important to have inside someone that is in a way controlling the advertising agency

dealing with them try to see that for example if the new commercial is coherent with the

vision, the mission of the company, with the symbols ,with the history of the company,

with the culture of the company.

For becoming a manager you start from become a marketing assistant or you support a

product manager or you work in the sales in new geographical area.

Requirements for marketing to occur

At least for factors are required:

1. Two or more parties with unsatisfied needs, a consumer need a book, a seller has a

book in his bookstore.

2. Desire and ability to satisfy these needs: you have the money and the time to buy the

item, the seller has the desire to sell the item.

3. A way for the parties to communicate: if you receive an email or a magazine about the

item, the communication barriers are overcome.

4. Something to exchange: the buyer gives something (money), the seller gives

something (item).

Needs and solutions

We have to satisfy consumers and when you think about satisfying consumers it means

that you have to take into consideration needs and solutions, you have to consider needs

to provide solutions and when we analyze needs we have to analyze the Maslow pyramid

where there are different level of needs, when we could see the different countries we

have different level of needs, in for example emerging markets they are still at these level

of physiological and safety needs, if you consider mature markets we are in esteem and

self actualization, so a lot of products we sell in the companies sell in mature markets are

satisfying the need of status, for example I want this product because in this way the

other people will res