Explain the decisions taken on 4P’s for segmenting the international market.

Management decisions on 4P’s for international market –

The marketers need to decide at this stage the extent to which changes should be made to the existing 4P’s – Product, Price, Promotion, and Place (distribution) to adapt to the market in the new country. The organisation can implement the same strategy as part of Global Marketing, but there should be some adaptation done to suit he local needs and make profits.

Product decision –
There are 3 options for product decisions in international markets.
First, Product extension, in which the same existing product is introduced in the international market. For example, Coca-Cola drink, electronic items like laptops, etc. This strategy not always successful for all products because of lifestyle, religious and cultural differences in different countries. In India, cow is revered by Hindus so beef products are rarely sold by international food chains. Product extension requires less R&D, investment in newly designed equipment, staff training, etc. The transfer of knowledge to the staff is also easy.

Second, Product adaptation is making changes to the product to suit the needs of the new market. Needs, preferences, culture, habits, and attitudes vary from country to country. In Japan people use small refrigerators and microwaves because of space constraints as compared to US. Similarly, metric system also requires product redesign.

Thirdly, Product Invention is introducing a new product for the market in the new country of operation. McDonald’s introduced Veg-burgers in Indian markets as majority of the population is vegetarian. Similarly, packaging of the product is changed suiting the country’s beliefs, culture, climate, etc.

Pricing decision –
The conditions in foreign markets is mostly different from domestic markets. The cost structure, demand, competition, tax structure, and economy of the foreign market have direct effect on pricing of the products in the foreign market. Pricing is mostly affected by costs related to taxes, transportation, promotion, product innovation, tariffs and profit margins for intermediaries, etc. The Organisations set the price basis the

– cost based pricing
– market based pricing, or
– uniform pricing

Cost based price involves pricing done basis the costs. Market based involves setting a prices basis the affordability of the market. If the economic condition is good the price is set high and vice-versa. Third is Uniform pricing where the price is set uniform for all international markets. In this strategy, the price will be considered too high in a developing country and if the price is kept low then the developed nations markets may consider the product of low quality.

Environment takes into consideration inflation, monetary exchange rate fluctuations, pricing policies of the government, etc. The last option of setting a uniform price is risky as the product will be considered very expensive in a developing country or low priced in a rich country where people may consider it of low quality. An organisation has to analyse all the factors and arrive at pricing of the product to meet its set objectives.

The challenge that organisations face at times is existence of Gray market. This happens when the same product is sold in different geographies at different prices. For example, a dealer may find a way of selling the product in a different country where it may earn high profits. Usually the dealer will charge less for the product with respect to the original price of the product that is available legally. Dealers take advantage of the price differences in different countries. The firms try to counter this by bringing in policies, changing service warranties for different countries, etc. For example, a mobile phone bought in one country has its warranty null and void in a different country.

Promotion decisions –
The organisation has the option of using the same promotion message or adapting it to the new international market. Similarly there are factors like availability of media which affect the promotion strategy. The barriers to using the same communication are usually related to language, government policies, culture, media availability, and agency availability. In most of the Asian countries, partial nudity in advertisements is not ok while in European countries people are open to partially nude females in message campaigns. In Arabic countries women cannot work in ads, in some countries children cannot promote products. Advertisements on cigarettes and alcohol are banned in India. Language is a barrier in country where majority of people are not literate. Similarly, where people feel pride in using their local language, organisations have to crate message campaigns in the local language. Translating the same message in the local language can have many problems. For example, KFC in late 1980’s translated its slogan “Finger-licking good” as “Eat your fingers off”. HSBC’s “Assume Nothing” campaign was scrapped when it was brought overseas and was translated in many countries as “Do Nothing”.

The media availability such as Print, radio, television, direct mail, etc. also has great impact on promotion in foreign countries. A country with poor mail service will impact direct mail. In most Muslim nations, personal selling cannot be done with the women of the hose.

Distribution decisions –
The distribution channels are in international markets is more complex than the domestic markets. This is basically because of the existence of Exporters and Importers in the channel.

The organisation has to study how the products are distributed to the final consumers once they are produced at the manufacturing facility. Major decisions are made to ensure channel efficiency, level of control on distribution, and the engagement of the channel partners. The channel structure varies from country to country due to various geographic, technological, channel availability and economic condition.

In one country, like Japan, Procter & Gamble sells its soap through a complex distribution network. The product moves from 4 kinds of wholesalers before actually being sold to a retailer. While in developing countries like Iran or Philippines, the same kind of product is sold door-to-door. The product storing capacity of retailers, the buying habits of the buyers also affect the distribution strategy. In some countries, people like to buy in small quantities. Similarly, unlike US or UK, most of the developing countries have small retailer shops serving a neighbourhood where people buy in not very large qualities. So bulk breaking is an important function of intermediaries that has to be taken into account for the country of operation. Changes in packaging of product basis the quantity needed and weather conditions for long and quality storage adds to the costs.

The organisation should analyse all the relevant factors associated with distributors and work closely for a long term relationship with them for successful channel functioning.

With change in environmental factors the preferences of consumers change. Basis this the marketers have to constantly make changes of the marketing program generating maximum sales.