Professional Documents
Culture Documents
Agenda
Module I: Management of Global Market Mix. (GMM) What is GMM, Business Customs in Global Marketing, Required Adaptation, Methods of doing Business, Global Market Mix. Strategy, Improved Products & Program Effectiveness.
What is GMM?
Global Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the Global market
Product Price Place (Distribution) Promotion
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Types of Customs
3 Types of Customs
1. Cultural Imperatives
Business customs and expectations that MUST be met in order to conduct successful business transactions in other countries/cultures
2. Cultural Electives
Business customs and expectations that are OPTIONAL, in which business executives may participate/conform in, but is not required. May help to establish rapport and respect when participation occurs Majority of customs fall into this category
Types of Customs
3. Cultural Exclusives
Customs that are reserved exclusively for the locals, where foreign participation is EXCLUDED
Example: Foreign business people criticizing local politicians, business practices where it is acceptable for the local to do so
Language - Low/high context Religion, Values and Attitudes, - Europeans Family first, Americans more competitive, individualistic Education, Social Organizations, - caste/class systems, role of women Technology and Material Culture, Law and Politics and - UK laws mkt based, precedence & legislation based, Iran - Islamic Aesthetics. - Traficante" an Italian mineral water found a great reception in Spain's underworld. In Spanish it translates as "drug dealer
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Standardization
Essentially the same approach to the 4 Ps in every target market
Adaptation
Marketing mix is tailored to country or to market segment within a country
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Global Product
Hybrid I Mktg Strategy ebaY.in customised for Indian audience Coca Cola Light
Ideal Global Mktg Strategy DELL replicated its direct selling Amity Business School practices globally
Nike
National Product
Haldirams - caters to Indians in India & abroad Nirma - caters to rural & low income segments in India
McDonalds - Retailing formula & mktg activities are same around the World, & product is suited to local markets
Human and financial resource constraints Costs of developing and producing distinct products
Customer considerations
Customer preferences (example: GMOs) Economic situation of customers (example: farm machinery) The total size of the market
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Bottom line: is adaptation profitable, and how long will it take for it to become profitable?
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In Russia, its slightly smaller and the chocolate is coarser In Japan, its strawberry flavored Each of these product variations is the result of thorough market research on local tastes. There is no global consumer for the food-andbeverage business. This is a deep belief we have, Brabeck says. (Peter Brabeck is the Chairman
and CEO of Nestle)
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Shelf life
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PRICE
Pricing situations
Pricing strategies
Cost-based strategies Demand-based strategies Eclectic strategies based on short- and longterm company goals
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Dual pricing
Export price is based on marginal costs rather than average costs Constitutes dumping (an example of cost dumping)
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With either exporting or producing abroad, cost-based strategies may be out of alignment with market conditions
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PLACE
Distribution choices are the least flexible choices in the marketing mix International challenges
Lack of familiarity with distribution channels Use of intermediaries means relinquishing control
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PROMOTION
Promotion mix includes
Advertising Personal selling Publicity Sales promotions
Target audience Company objectives Product or service being marketed Resources available
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INTERNATIONAL ADVERTISING
Media strategy
Which media reach your target market? May be much different from India Media regulations vary by country
Promotional message
Why would the target consumer buy the product? Emphasize those attributes How is the product positioned? Ads should be consistent with positioning Rational versus emotional appeals Be very sensitive to cultural considerations
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Annual per capita spending on advertising varies tremendously by country and region:
United States: $153 Canada: $64 Europe: $43 Latin America: $5 Asia and Pacific: $4 Middle East: $2 Africa: 80
Statistics: ad spending per capita by top 100 marketers in 2006 Sources: Advertising Age and Population Reference Bureau
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Publicity/Public Relations
To earn public understanding and acceptance Anticipate or counter criticisms Portray as good citizens of host country
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SALES PROMOTIONS
Covers all promotions except for advertising, personal selling, and publicity Includes:
Coupons Free samples Consumer education Product demonstrations Point-of-purchase materials Discounts Direct mail Prizes and giveaways
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IN-CLASS EXERCISE
In groups of 3-5 people, come up with an Indian food product that, as far as you know, isnt currently sold in the UK Outline a plan for how you would market that product in the UK Report your findings to the class
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Levels of Authority
There are three general authority patterns which describes who makes the decision in an organization:
Top-level management Decentralized Committee or group
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What level of authority does the person you are interacting with have in making decisions? What is the best way to get to the decision maker?
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Management Objectives
Understanding the managers objectives can be an important tool when doing international marketing. Management objectives can be broadly classified in the following areas:
Personal Goals Security and Mobility Personal Life Social Acceptance Power
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Communication Emphasis
Communications should be kept formal both in written and spoken form. Communication may go far beyond words.
Depending on the society you are doing business with, how you say something is as important as what you say.
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A low context language is one that is heavily dependent on explicit verbal expression what is said is what is meant
Swiss, German, Scandinavian
A high context language is one that relies heavily on the context or nonverbal communications what is said may not be meant
Japanese, Arabian, Latin American
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Communication Questions
When doing business in a foreign country, how important is the context of the language when conversing? What constitutes a confirmation or denial in the language you are doing business in?
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Formality
Formality relates to the level of respect and manners you give to your customer. As a marketer, you must know what the formal rules are for dealing with customers.
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Formality Questions
What is the proper greetings for the person you are doing business with? When and where is it appropriate to talk business? What is appropriate side discussion? What is the formal business dress?
Eg US East Coast vs the West
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Tempo is related to how you deal with time and the use of it. How cultures handle time can be viewed in the following:
Polychronic Time (P-Time) Monochronic Time (M-Time)
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P Versus M-Time
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Tempo Questions
How does the client consider usage of time? Are you coming off too hasty in your business dealings? Are you losing out because you are not following the tempo of your client/customer?
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Negotiations
Negotiation tactics differ greatly from one country to the other. Much care must be taken with someone from a foreign culture so you do not offend. By not understanding a cultures negotiation tactics, you run the risk of putting yourself at a disadvantage.
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Does the culture you are dealing with like to bargain? Does the culture your dealing with get insulted if you try to negotiate to much? What aspect of fairness comes into negotiations?
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Gender Bias
It exists both at home and abroad. There is no correct way of dealing with gender bias. The worst thing to do is go into a culture and try to change its view. The best thing to do is understand why the bias exists and try to work around it.
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Business Ethics
What people believe is right or wrong can be different for every culture. The standard issue related to business ethics in international marketing usually is related to bribery. The other major issue related to ethics is socially responsible acts.
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Bribery
Bribery is related to giving someone money to seek an unlawful advantage. Extortion is when a payment is requested for you to get an unlawful advantage. Lubrication is money being given to facilitate or expedite an event to occur.
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Social Responsibility
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Language on a website is one of the most important considerations. Since your website can be anywhere in the world, special consideration should be taken as to the colors and symbols you use on the website. Care should be taken when designing a website to make sure it is intuitive to the client.
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Agenda
Module II: Product Management(GMM) Anatomy of Global Product launch, product for Global Consumer, Managing MNC product lines, Product standardisation & world product mandate, Product alternatives and adaptation. The Industrial product Market, Product piracy, Country of Origin stereotypes, Made in India hurdle
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Clearly define launch & post launch objectives Define launch strategy Incorporate learning from past launches Have a well defined communication strategy for pre, during & post launch phases
Social media an integral part
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Introduce the Cisco 9000 for Visual Networking Telepresence Drive Service Provider awareness globally Continue cool factor for the switch Tie campaign to Ciscos overall human network campaign
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All-around campaign integration Revaluation of launch vehicles and methods Localised content available at the time of or shortly after US launch Keeping momentum going post launch
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Communication strategy for pre, during & post launch phases Channels deployed direct Email, Social mediasocial networking, part an integral traditional web &
banners
Social networking share with a friend Facebook, Twitter etc.
Standardization
Essentially the same approach to the 4 Ps in every target market
Adaptation
Marketing mix is tailored to country or to market segment within a country
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Global Product
Hybrid I Mktg Strategy ebaY.in customised for Indian audience Coca Cola Light
Ideal Global Mktg Strategy DELL replicated its direct selling Amity Business School practices globally
Nike
National Product
Haldirams - caters to Indians in India & abroad Nirma - caters to rural & low income segments in India
McDonalds - Retailing formula & mktg activities are same around the World, & product is suited to local markets
Human and financial resource constraints Costs of developing and producing distinct products
Customer considerations
Customer preferences (example: GMOs) Economic situation of customers (example: farm machinery) The total size of the market
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Bottom line: is adaptation profitable, and how long will it take for it to become profitable?
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In Russia, its slightly smaller and the chocolate is coarser In Japan, its strawberry flavored Each of these product variations is the result of thorough market research on local tastes. There is no global consumer for the food-andbeverage business. This is a deep belief we have, Brabeck says. (Peter Brabeck is the Chairman
and CEO of Nestle)
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Shelf life
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PRICE
Pricing situations
Pricing strategies
Cost-based strategies Demand-based strategies Eclectic strategies based on short- and longterm company goals
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Dual pricing
Export price is based on marginal costs rather than average costs Constitutes dumping (an example of cost dumping)
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With either exporting or producing abroad, cost-based strategies may be out of alignment with market conditions
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If price differences are too large, run into transshipment (smuggling) problems
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PLACE
Distribution choices are the least flexible choices in the marketing mix International challenges
Lack of familiarity with distribution channels Use of intermediaries means relinquishing control
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PROMOTION
Promotion mix includes
Advertising Personal selling Publicity Sales promotions
Target audience Company objectives Product or service being marketed Resources available
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INTERNATIONAL ADVERTISING
Media strategy
Which media reach your target market? May be much different from India Media regulations vary by country
Promotional message
Why would the target consumer buy the product? Emphasize those attributes How is the product positioned? Ads should be consistent with positioning Rational versus emotional appeals Be very sensitive to cultural considerations
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Annual per capita spending on advertising varies tremendously by country and region:
United States: $153 Canada: $64 Europe: $43 Latin America: $5 Asia and Pacific: $4 Middle East: $2 Africa: 80
Statistics: ad spending per capita by top 100 marketers in 2006 Sources: Advertising Age and Population Reference Bureau
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Publicity/Public Relations
To earn public understanding and acceptance Anticipate or counter criticisms Portray as good citizens of host country
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SALES PROMOTIONS
Covers all promotions except for advertising, personal selling, and publicity Includes:
Coupons Free samples Consumer education Product demonstrations Point-of-purchase materials Discounts Direct mail Prizes and giveaways
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Product Piracy
Impact is twofold
Monetary losses; eg China where $16B worth counterfeit goods sold each year; P&G estimates 15% sales are fake,leading to annual loss of $ 150M Damage to the brand name poor quality, service Sometimes the fake products are also
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Legal action
Prosecuting counterfeiters China has setup special courts to stamp out IPR piracy
Customs
Seek their assistance in seizure of counterfeit goods
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Distribution
Microsoft got Chinas 4 largest PC makers to bundle XP into their computers
Communications
Advertising, PR campaigns to educate customers, warn counterfeiters
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Some consumers use COO as a cue when unfamiliar with product brand name
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Product policy Select a brand name that disguises COO 2 of the most successful apparel retailers in Hongkong have Italian sounding names - Giordano & Bossini Pricing - Low pricing will attract customers Distribution Use big local names eg Hungarian and Chilean wines are successful in UK - they are sold by Tesco Communication 2 fold strategy Improve the Country image Improve the brand image The above may also be used to overcome Made in India hurdle
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Agenda
It is defined as the design and management of a system that directs and controls the flow of materials into, through, and out of the firm across national boundaries to achieve its corporate objectives at a minimum total cost.
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Movement across frontiers factors Amity Business School contributing to increased cost and complexity vis--vis domestic
Distance Longer distance means high direct cost of xportation & insurance Exchange rate fluctuations Eg when the Jap yen appreciated in mid 90s, Honda found it better to ship to Europe fm US Vs Japan Foreign intermediaries Addl intermediaries exist to nego border regulations & deal with local govt offcials & distis. Eg JP, CH, KR who knows whom matters Regulation US Merchant Marine Act 1920 makes it mandatory to use US owned , built & manned ships to xport to US Security Post 9/11 xportation costs have increased due to extra sec measures faced by shipping lines and terminal operators
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Movement across frontiers factors Amity Business School that determine the optimal mode of transportation
Value-to-volume ratio Perishability of the product
Quality deterioration over time or product life cycle
Cost of transportation
To be viewed along with both above factors
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Movement across frontiers Amity Business School different modes of transport and their optimal use Ocean Shipping for transport of heavy, bulky, or
nonperishable products eg crude oil, automobiles, and steel Liner Service scheduled passage on established routes Bulk shipping contractual service for pre-specified periods of time Irregular runs Container ships help cut cost due to standardised containers that help loading/unloading, and intermodal xport Some cartels do exist so to cut its costs Honda uses its own ships to ferry cars to North America & brings back us Soya
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Movement across frontiers Amity Business School different modes of transport and their optimal use growth over last Air Freight seen rapid
40 yrs
Volume of goods still < 2%, value >20% High value goods esp with high V to V ratio eg semiconductor chips, LCD screens ,diamonds etc Flowers & perishable agricultural produce Super sized export planes hv facilitated courier groth service eg Fedex, DHL, UPS
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Movement across frontiers Amity Business School different modes of transport and their optimal use Intermodal transportation
Combination of more than 1 means of xportation
Eg upto the domestic port by road / air then ocean
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The face of distribution that consumers interact with is the Retail Store Retailers have grown into the largest cos ie Walmart buys as much as JP mkt fm P&G Retailing involves very locally entrenched activities local holidays (sabse sasta din), festivals, seasonal promotion eg winter wear, as well as meeting local competition on a daily basis
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Traditional distribution model turned on its head Retailer controls the distribution chain & not the Mfr or wholesaler consumer pull wins over Mfr push Use of IT to analyse sales
Reduced Inventory enabled by Point of Sale (PoS) data automatic replenishment directly to the supplier Mkt Info at Retail Level
Knowledge of Movement of items is used to xtratct better terms fm suppliers
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Co sells its products in the foreign market thru an intermediary located in its home country
Pros little risk, no major resource requirement Cons - little or no control over marketing the product in the foreign mkt good beachhead or test mkting strategy
Cooperative Exporting
Cos uses the overseas network of another company to distribute its products Wrigleys entered India thru Parrys
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Co sets up its own exporting dept in foreign mkt, once sales become significant
Pros better control over marketing Cons more human & financial resource commitments required than indirect
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Co (licensor), offers some proprietory assets to a foreign company (licensee) in exchange for royalty Fee eg Tokyo Disneyland owned and operated by Oriental Land company under license fm Disney
Pros profitable, not demanding on resources, Cons recovering fees fm Licensee, less profitable than export, patent protection
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Franchisor gives the franchisee the right to use franchisors trade names, trademarks, business models, and/or know-how in a given mkt for a specific time, normally 10 years eg Subway, Dominos, etc., used mainly in service Industry
Pros overseas expansion at a minimum cost, easy exit Cons lack of control over franchisee operations
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The Co agrees to share equity and other resources with other partners to establish a new entity in a target country three types Majority >50%, 50-50, Minority <50%
Eg Cisco with Datacraft Pros High return potential eg licensing gives only royalty fees and not share of profits, sharing of capital and risk, more control, entry strategy-China forbids certain Industries Cons lack of complete control, partner may become a future competitor a lot of Chinas successful cos started as JV partners of multinationals; cultural issues
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Agenda
Brand Management
Branding for the world, Global or Local Brands, National Brands, Private Brands, Brand Name change over strategies, Umbrella Branding, Protecting Brand Names, Global Brands in India
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Attributes : Amul youthful image, wholesome Benefits : healthy, hygienic Values : most successful Indian co-operative, benefits many, well run, diversified food portfolio Culture : The taste of India original Indian product, made in India Personality : witty youngster User : Indian homes, local food joints / Dhabas
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Deep brand when the audience can visulaise all six dimensions eg Mercedes Shallow brand Audi is less deep esp on attributes of Benefits, Personality & User profile
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Worlds population is growing more homogeneous in their tastes BUT localisation is important Balance between a truly global brand Vs one that allows for local requirements
McDonalds, Coca Cola,Levi Strauss true Global Unilever eg HLL local flavour
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What brands will become Global mega, which should be kept Local
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Condensing of many local brands into smaller, and more manageable number of global ones Execution of changeover from a local to a global brand Building of a portfolio of global brands
P&G Pringle, Pantene, Ariel
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Brand Structure / Brand Portfolio is a firms current set of brands across Countries, businesses and product markets
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4 types of Branding
Solo Branding Each brand stands on it own with a brand manager running it
Eg Unilever Lux, Knorr, Surf , P&G Ariel, Pantene
Hallmark branding co tags one main brand no sub brands eg HSBC, banking sector Umbrella (Family) branding us corporate brand a an authority symbol eg Sony Playsation, Apple iPhone Extension branding start with one product and extend to other categories, as far as possible eg Ralph Lauren's Polo brand successfully extended from clothing to home furnishings such as bedding and towels
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Factors shaping global brand structure / brand portfolio Firm based drivers drivers Centralised firms more likely to have a global brand
Organic or in-organic growth strategy Product diversity Nokia can be fully global as fewer products than Unilever
Brand Architecture
At local level At regional level At Global level
Eg Nestle
10 WW Corporate brands Nestle, Maggi, etc. 45 WW strategic brands Kitkat, Polo 140 Regional strategic brands Vittel, Findus 7500 local brands - Nestle Everyday Ghee, Nestle Everyday Dahi
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Cost of 4 Ps Are there significant economies of scale? What local associations will be associated in global name? Is it culturally ok to use the local brand name globally? Eg Japanese drink Pokari Seat, Dutch beverage Sisi
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Local branding
Often justified by Cultural barriers
Brand names like Healthy Choice, Weight Watchers etc. may not be relevant in non-English speaking countries
Started by Shoppers Stop with their STOP brand Initially the private label was only targeted towards the non branded product range which included wheat flour, masalas and papads. Now the private label brands have grown out of proportion by entering into high technology electronic gadgets like mobiles by Univercell,
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Global brand name is tied with the existing brand, after a period local name is dropped Paris EuroDisney -> Euro Disneyland -> Disneyland
When Whirpool acquired Philips whitegoods div, kept the name Whirlpool & Philips, afterwards Philips dropped
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Brand name change over strategies Local to Global Transparent forewarning brand
Alerts the Customer to the brand name change eg Hongkong Bank of Canada / Australia -> HSBC
Summary axing
Simply drop the brand name overnight and replace with a Global one
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Slogans, jingles and visual aspects eg McDonalds Golden arches Scope of protection
What product classes should be covered
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Agenda
Brand Management
Branding for the world, Global or Local Brands, National Brands, Private Brands, Brand Name change over strategies, Umbrella Branding, Protecting Brand Names, Global Brands in India
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Apart from translation, another challenge is poor interpretation of ideas; IBMs Solutions for a small planet had to be changed to IBMs Solutions for a small world in Argentina as planet failed to convey the conceptual thrust Original slogan When I used this shirt, I felt good Translation Until I used this shirt, I felt good Second category relates to words that have multiple meanings
Eg Avoid embarrassment use Parker pens Spanish word for embarrassment also means pregnancy Parker was unconsciously advertising its product as a contraceptive
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Creative Strategy
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Creative strategy
Pros of standardisation
Consistent Image
Matters esp to the globe trotting Consumers
Creative talent
Creative talent in ad agencies is in short supply
Cross-fertilisation
Marketers encourage their affiliates to adopt or atleast consider adopting ideas that are successful in other markets
When P&G introduced Pantene in Latin America it used and ad that was produced for Taiwan
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Creative strategy
Barriers to standardisation
Cultural Differences Advertising Regulations
While Ray-Ban had a pan Asia ad, in Malaysia ads featuring Caucasians are not allowed, shot with locals
Market maturity
Products relatively new to the market need education
Laissez Faire each Country follows its own course, no centralised decision making Pepsi ads with Indian cricketers, Coke with actors Export Advertising the same positioning theme used WW BMW, ultimate driving machine Prototype standardisation Guidelines given to subsidiaries for execution of strategy Mercedes Tag Heuer, Wrigleys Regional Approach Nokia strategic decisions made by a central forum; execution local Pattern Standardisation HQ spells guidelines for positioning theme and brand identity all its global advertising showed distorted object clear thru Smirnoff
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Media Infrastructure
Abundant In Western Countries new media channels emerge continuously; not so in others, Regulations Germany TV advertising allowed only during limited timeframes of the day Japan scarce supply of ad space early planning
Media Limitations
Creative options Intel used bike reflectors in Shanghai and Beijing Intel inside, Radio Taxis, etc
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Growing commercialisation and deregulation of mass media Shift from radio and print to TV and Internet television Shopping Network Teleshop Rise of global and regional media MTV and ESPN, regional websites eg Yahoo India Growing spread of interactive Marketing Xbox with an interactive ad Growing popularity of text messaging Most popular in Asia - mobile phone penetration is highest Improved monitoring of broadcast spots Improved TV viewership measurements by using people 138
Advertising Regulations
Culture - Malaysia banned a Toyota ad with Brad Pitt humiliation against Asians why do we need to use Western faces in our Ads?, Are our own people not handsome? Advertising of Vice Products and Pharmaceuticals rules on advertising of liquor and tobacco getting more severe Comparative advertising China doesnt allow product comparisons, Use of best; US is OK
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Advertising Regulations
Content of Advertising messages
Regulated by local regulators
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Market coverage in the entire Geography Quality of coverage Japan an agency with media buying skills is preferred over one with better creative skills Expertise with developing central international campaign Creative reputation Scope & quality of support services eg Mkt Research Desirable image (global Vs local) Size of the agency imp for media buying Conflicting accounts does it work for competitors need for confidentiality agreements
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Direct mail, telemarketing, door-to-door selling, the Internet and catalogue selling DELL, AMAZON, ETRADE
Event Sponsorships the sponsored event should reinforce the brand image RED BULL daring image FORMULA ONE racing Trade Shows / Trade Fairs direct sales fm visitors at the booth, as well as indirect impact on sales
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Session VI: Cross Cultural Business Behaviour Shobhit Mathur shobhit_mathur1@yahoo.com (GMM)
+91 98101 00348
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Non-task soundings
Includes all aspects that are used to establish rapport among parties involved
Weather talk, commute for the meeting, any recent sporting event, arrival into the Country
Japanese spend much more time building rapport than Amercicans
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Japanese prefer to spend much more time on first 2 stages so that little effort is needed for the persuasion stage
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Persuasion
Give and take the deal
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Americans prefer to make concessions during the course of the negotiation while as Japanese prefer to defer this to the end
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Define the business problem or goal in terms of your own cultural traits Define the business problem or goal in terms of host cultures cultural traits Isolate the SRC influence Redefine the business problem or goal, this time w/o the SRC influence
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Ethnocentrism
More risky than SRC
Promotion: Promotion is the most visible marketing mix. Culture will typically have a major influence on a firms communication strategy. Local cultural taboos and norms also influence advertising styles.
High context cultures (Japan, Italy, Spain) subtle messaging Low context cultures (Germany, Scandinavia) more use of factual data, reasoning, etc.
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6. Organizational Cultures
Organizational Culture: Most companies are characterized by their organizational (corporate) culture. A model of organizational culture types includes the following four cultures Clan culture Adhocracy culture Hierarchy culture Market culture Most firms have elements of several types of Cultures
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Clan Culture
Cohesiveness, teamwork, sense of family Leadership style father figure, mentor Bonding Loyalty Strategic emphasis development of human resources Japanese cos Tata Group
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Adhocracy culture
Entrepreneurship, creativity Leadership style Entrepreneur, innovator, risk taker Bonding Entrepreneurship, flexibility, risk Strategic emphasis innovation Germany, US Bharti Group Telecom as well as forays into Retail, Food Products, Insurance
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Hierarchy culture
Order, rules & regulations Leadership style coordinator, administrator Bonding rules, policies,and procedures Strategic emphasis stability, predictability, operational excellence France, Japan Most Indian PSUs SBI, LIC, ONGC
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Market Culture
Competitiveness, goal achievement Leadership style decisive, goal-oriented Bonding Goal orientation, production, competition Strategic emphasis - competitive advantage, market superiority UK, US, Japan RIL, Future Group
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Enterprise Systems
Demand
Supply
Manufacturer
Wholesaler
Retailer
Consumer
Purchase
Produce
Distribute
Sell
Consume
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Management
Sales
Spreadsheet Spr eadsheet Document Document
email email
Spr eadsheet Spreadsheet
Marketing
Document Document
Customer
Support
email
Document Document
Internet
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CRM applications
Sales (synchronised, field information) Service (orders, complaints)
Warehouse
Marketing (analysis, promotions actuals)
CRM System
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1. 2. 3. 4. 5. 6.
Drivers of Foreign Market Pricing Managing Price Escalation Pricing in Inflationary Environments Global Pricing and Currency Movements Transfer Pricing Global Pricing and Antidumping Regulation 7. Price Coordination 8. Countertrade
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Introduction
Global pricing is one of the most critical and complex issues in international marketing. Price is the only marketing mix instrument that creates revenues. All other elements entail costs. A companys global pricing policy may make or break its overseas expansion efforts. Multinationals also face the challenges of how to coordinate their pricing across different countries.
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Driversthe 4 Cs
Company costs, goals Customers price sensitivity, segments Competition nature, intensity Channels distribution channels
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New Balance shoes, sold in France as premium, twice the US price Altruistic goals Merck sells its AIDS drug at 85% discount in Asia
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Company Costs
Fixed & Variable costs variable costs that change with volume, fixed costs overheads that do not change with volume Cost-Plus Pricing
Adds international cost plus markup to domestic mfg cost
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Company costs
Kelloggs on the other hand entered India with costly packaging and expensive advertising result Champion cornflakes piggybacked on their Mktg efforts and conquered the cereal mkt with one fifth the cost of mfg
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Customer Demand
It is a function of buying power, habits and substitutes Customers; willingness to pay sets a ceilingwhile Starbucks is viewed as premium in US, it faces formidable rivals in Europe and Asia who charge much lower Buying power is a key consideration
Eg Shampoo sachets in rural India 80% of sales
Niche player Haagen Dazs charges a premium price worldwide Country specific products
Have a portfolio of products that caters to every income tier HLL
Competition
Cross-Border Price Differentials
Bottomiline Companies will be price leaders in some countries and price takers in othersHeinzs policy is to cut prices in markets where its not the market leader
Nonprice Competition
Competition in advertising, channel coverage Coke vs Pepsi
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Distribution Channels
Government Policies
Even after launch of the Euro, car prices vary by 50% across European countriesreason..
Sales tax, value added taxes, tariffs, price controls Taxes have a direct impact on prices
Indirect impact huge government deficits may raise the cost of capital, hence high interest rates, Volatility, high inflation, etc. Government interference
Chinese government sets minimum prices in 21 industriesviolators slapped with hefty fines
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To byepass the notorious Japanese distribution infra, many US companies resorted to direct Mktg catalog sales, telesales
2. Eliminate costly features (or make them optional) make the products no-frills 3. Downsize the product Ariel reduced the package size fm 200 to 150 g in Egypt 4. Assemble or manufacture the product in foreign markets Japanese cars in the US
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Companies faced with price controls can consider several alternatives: 1. Adapt the product line 2. Shift target segments or markets. 3. Launch new products or variants of existing products - In Zimbabwe bakers added raisins to dough to call it raisin bread to escape price control on bread 4. Negotiate with the government. 5. Predict incidence of price controls.
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Sales transactions between related entities of the same companies are called transfer prices. Determinants of Transfer Prices:
1. Market conditions in the foreign country 2. Competition in the foreign country 3. Reasonable profit for foreign affiliate 4. U.S. federal income taxes 5. Economic conditions in the foreign country 6. Import restrictions 7. Customs duties 8. Price controls 9. Taxation in the foreign country 10. Exchange controls
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Market imperfections
High import duties may prompt Cos to lower transfer prices
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Transfer pricing
Negotiated pricing
A recent study shows that compliance with financial reporting norms, fiscal and custom rules, and anti-dumping regulations prompt companies to use market-based transfer pricing.
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5. Transfer Pricing
Government-imposed market constraints (e.g., import restrictions, price controls, exchange controls) favor nonmarket-based transfer pricing. Most firms use a mixture of market-based and non-market pricing procedures. Minimizing the Risk of Transfer Pricing Tax Audits: Basic Arms Length Standard (BALS)
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To minimize the risk of tax audits, decisions should center around the following five questions (see Exhibit 13-6): 1. Do comparable/uncontrollable transactions exist? 2. Where is the most value added? Parent? Subsidiary? 3. Are combined profits of parent and subsidiary shared in proportion to contributions? 4. Does the transfer price meet the benchmark set by the tax authorities? 5. Does the tax MNC have the information to justify the transfer prices used?
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To minimize risk exposure to antidumping Amity Business School actions, exporters might pursue any of the following marketing strategies:
Tradiing-up
Move from low value to high value products, Japanese car mfrs
Service enhancement
add support services to core products to differentiate
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7. Price Coordination
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Countertrade
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8. Countertrade
Motives behind Countertrade: Gain access to new or difficult markets Overcome exchange rate controls or lack of hard currency Overcome low country credit worthiness Increase sales volume Generate long-term customer goodwill
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8. Countertrade
Forms of Countertrade: Simple barter
Clearing agreement
2 Govts enter into agmt to import a specified value of goods from one another
Indoenesia and Iran paper, rubber for Iranian oil
Switch trading
Clearing house with a third party which uses the surplus credits to buy goods from the deficit country
Buyback (compensation)
Seller provides the equipment and is ready to receive part payment thru sales of goods produced from the equipment
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Countertrade
Counterpurchase
Similar to buyback
Offset
Seller agrees to offset the purchase price by sourcing from the importers country
MIG Corporations deal with HAL
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8. Countertrade
Shortcomings of Countertrade: No in-house use for goods offered by customers Timely and costly negotiations Uncertainty and lack of information on future prices Transaction costs
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8. Countertrade
Words of advice regarding countertrade: 1. Always evaluate the pros and cons of countertrade against other options. 2. Minimize the ratio of compensation goods to cash. 3. Strive for goods that can be used in-house. 4. Assess the relative merits of relying on middlemen versus an in-house staff. 5. Check whether the goods are subject to any restrictions. 6. Assess the quality of goods.
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Overview
1. Research Problem Formulation 2. Secondary Global Marketing Research 3. Primary Global Marketing Research 4. Market Size Assessment 5. New Market Information Technologies 6. Managing Global Marketing Research
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Introduction
Given the complexity of the global marketplace, solid marketing research is critical for a host of global marketing decisions
Walmarts Jewellery counters in Argentina stocked precious stones, while Argentine women prefer gold & silver! Hardware dept had tools at 110 Volts, standard is 220 Volts!!
Most of the cultural blunders in global marketing stem from inadequate marketing research.
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1. Complexity of research design due to environmental differences 2. Lack and inaccuracy of secondary data 3. Time and cost requirements to collect primary data 4. Coordination of multicountry research efforts 5. Difficulty in establishing comparability across multi-country studies
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Any research starts off with a precise definition of the research problem(s).
What does the motorist in a country demand of his car?
In an international context, the marketing research problem formulation is hindered by the self-reference criterion (SRC).
Local subsidiaries should be consulted to minimise this
A major difficulty in formulating the research problem is unfamiliarity with the foreign environment. Omnibus surveys are regularly conducted by
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Lumping of Data
Arising from the tendency of official data sources to often group statistics on certain variables in very broad categories
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Focus Groups
Hiring well trained moderators is critical to international MR
Survey Methods for Cross-Cultural Marketing Research: Questionnaire Design Conceptual and Functional Equivalence
Across cultures
Contact Method
Mail Telephone Person-to-person interviews (shopping mall intercepts) Online Survey Methods E-mail surveys Random Web site surveys Panel Web site surveys
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Website surveys
Visitors to a site are asked to fill out questionnaire
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Courtesy bias
Esp in Asia and Mid east, respondent feels obliged to give answers that please the interviewer
Redundancy (asking the same question in different ways) Issues of ethnographic research
Field Researchers embed themselves in target society Intel does this in India, China & Chile
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The assumption is that there is an analogy between the relationship of a factor and demand for a particular product or commodity in two countries Let
XA = demand for product X in country A YA = factor that correlates with demand for product X in country A, data from country A XB = demand for product X in country B YB = factor that correlates with demand for product X in country A, data from country B
If we assume that :
XA/YA = XB/YB
and if XA, YA, and YB are known, we can solve for XB as follows:
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Coordination of Multi-Country Research: Amity Business School Emic versus Etic dilemma
The emic school focuses on the peculiarities of each country. The etic approach emphasizes universal behavioral and attitudinal traits. In cross-cultural market research, the need for comparability favors the etic paradigm with an emphasis on the cross-border similarities and parallels. Several approaches may be used to balance these conflicting demands.
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Thank You
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Customer Insights
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Introduction
Importance of customer information ??? Not just customers but also competitors and stakeholders.
Why and how is information gathered?
Some cases Case of Pizza Hut CAT - Cab comfort in India CAT reliability vs. efficiency of the machines Lays and baseball matches (analytics) Apples iPod Touring the store with the customer (Major retail chains in the world grocery as well as departmental stores)
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Introduction
Customer needs and buying motives not obvious difficult for customers to articulate Givaudan Customer insights Understanding of customers and the marketplace derived from marketing information that become the basis for creating customer value and relationships.
Harley Davidson Customer Insights teams at IMRB
Marketing information system assess information needs, develop the needed information and help in decision making (generate and validate actionable customer and market insights)
Caterpillar, Infosys (Knowledge Management Portals on intranet of organisations)
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Some issues related to International Marketing Research: Culture Information to be communicated across cultural boundaries Case of Human Rights and perceptions of people Case of equal rights of employees irrespective of gender, Japan, France, Germany, India Environment in which research tools are applied are different Varies from country to country Use of Kiosk in case of CAT Use of internet to gather data Use of technology in market research
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Complex
Across cultures, context may be different Use of 5 point scale (Poor, Fair, Good, Very Good and Excellent) cultural context Models often used, not adapted as per country
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In terms of expenditures countries that spend a lot on research are US, UK, Japan, Germany
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Process
Data sources
Secondary data
Different data collection methods Classification differences Unit of measurement Definitional differences Case of normative databases Understanding of scales by the consumers Sensitivity
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Values are the principles and standards accepted by members of a society. Attitudes that result from a societys values. The three components are:
thoughts, feelings and actions.
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Trompenaars
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Embedded research
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Introduction
Shipping
Oldest mode of transportation Dependence on waterways Type of cargo: loose/ bulk, containerized Quantity & weight Cost fixed vs. variable
Major shipping lines in the world
Developed after changes in: technology, containersation and handling equipment, computerisation (helps in tracking)
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Introduction
Shipping
Deadweight capacity Total carrying capacity of ships Unit of measurement Types
Tankers
Liquids/ gases, 30% of all, Oil/ LNG/ Edible Oil/ Acid & Chemical Special pumps & heating and cooling units
Bulk carriers
Dry cargo, grain, coal iron ore, metal scrap, cement, feed, gravel, sugar, seeds, etc.
Container ships
Only containers, need specialised cargo handling equipment
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Introduction
Shipping
Types
Container ships
Only containers, need specialised cargo handling equipment Containers 20/ 40/ 45 ft Reefers and non reefers Tramp and Liner vessels
Shipping routes
Trans-atlantic/ trans-pacific North atlantic US/ Europe Med. Sea, Red Sea, Indian Ocean Cape route Panama canal Cape route Trade volume, Supply/ demand, weather, safety of the sea-route
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Introduction
Air transport
Advantages Disadvantages Freight
Specific commodity rate (for specific types of commodities Freight all kinds (all pooled and charged as one)
Choosing transport
Cost, Speed, Availability, Dependability, Capability, Frequency, acessibility, safety of goods/ security Fixed, variable, joint cost
Multimodal transport
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Introduction
Free Ports Time Management & Distribution
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