Marcela Gómez

Paola González
Iván Ponsoda
Marisol Londoño

INTERNATIONAL MARKETING
QUESTIONS AND EXERCISES

1 The selection of the appropriate timing strategy represents an important marketing

decision within the field of “going international“. Pag 110 a 119.

1.1 State and describe the two existing timing strategies.

The Waterfall Strategy: This strategy let companies take a gradual advantage of the
markets; it is usually convenient form small organizations that don’t have enough resources
to cover several markets at the same time. The phased rollout in a waterfall strategy occurs
as follows: typically introduce the new product first in the company’s home market, then in
other advanced markets and finally in less advanced markets.

After the introductory phase, the company must evaluate the new places that is going to
use to sell its products; the introduction to each market will be done gradually, taking into
account the fact that this market should have similarity to the marketplace that currently is
located the product.

The main advantages of using waterfall strategy are:

• Allows companies with few resources to start their internationalization process in
a phased manner and determine the best way to reach new markets based on
the experience in each market.
• The level of risk is reduced because the company will address each market in a
phased manner and if they notice any disapproval of the product market may
decide to quit.
• The gradual introduction of the product markets, increase product life cycle:
Products that are finishing their cycle in the domestic market may enter into other
markets, thus generating a higher turnover and prevents product storage.

Some disadvantages with this strategy are:

• Difficulties in the first stage in case of a low success level
• Early imitation of the introduced product innovation(s)

Shower strategy: This strategy is known as simultaneous strategy, contrast to the waterfall
strategy it has into account that the time used to reach different markets is short, looking for
the advantages offered by each country simultaneously. Some individual country groups
can, none the less, be entered before others.

This type of strategy is somewhat complex because it is not easy to align branches in other
countries to generate a successful entry of the product in a short period of time; additionally
the short cycle of the product, requires more investment in R&D, the consequence is that
the company has less time to amortize these outlays.

Features of shower strategy:

• Simultaneous entry into the markets
• Entry into the markets within a relatively short time span
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

• Differentiated entry timing arising from operative problems,

• Founding subsidiaries

Advantages with this strategy:

• Successful entrance into markets (“amortization”) for:
o short product and technology cycles (e.g. semiconductors, computers)
o long research and development (R&D) times
• Possibility to create market barriers for competitors (e.g. to establish an image
profile)

The main disadvantages:

• Emerging need for co-ordination (“maximum” coordination problem)
• Necessity to develop co-ordination instruments relatively rapidly

The following picture, illustrate the two existing timing strategies:

Illustration 1 Waterfall and shower approach (K. Backhaus, et al, 2005)

1.2 Are the timing strategies two strategic alternatives that are mutually exclusive?
Explain your answer briefly.

No, the timing strategies are not mutually exclusive, because if company wants, it could
take advantage of both strategies. For example as first step the company could apply the
waterfall strategy in order to introduce their products gradually and in a longer period of time
reach different markets step by step and slowly, and depending on the results or the market
that the company decides to use, the company could go for the second step, so it could at
the same time or after the first strategy, go inside other markets with the use of the shower
strategy; allowing the company to reach many markets in short periods of time, achieved
positioning the product immediately and in more countries.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Illustration 2. Strategy implementation between countries (K. Backhaus, et al, 2005)

1.3 Assume that in a specific situation an enterprise’s selection of its timing strategy
is dependent upon which strategy increases the probability that the enterprise
will be able to avoid arbitrage. Which timing strategy should the enterprise
choose and under which two conditions can the selected timing strategy really
avoid arbitrage?

In this specific situation the most convenient timing strategy selection for the enterprises
is the Shower Strategy. First of all it is important to introduce fist the product in the
country were the product has higher price, but after a period of time, gradually the price
of the product will decrease, and when the product has a lower level of price, the
company could introduce the product in a second market, in order to look for avoid as
much as is possible the arbitrage between markets. The result of such a delayed
introduction would be a convergence of prices in both markets. If substantial price
reductions have already been planned for the individual country markets, small delays
in the timing of market introductions may be sufficient to achieve a given reduction in
price differences.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Illustration 3. Strategy introduction between countries. (K. Backhaus, et al, 2005)

As is possible to see in the graphic, if the company make a simultaneous introduction in

different markets, the price difference will be bigger and them will exist more arbitrage, if the
company use the water fall strategy, like is possible to see in de second graphic the
differences of prices will decrease, between country A and B, and the company will avoid
arbitrage in a better way.

2 The determination of the organizational form for foreign business is of major

importance within the field of “going international“.

2.1 State and briefly describe the four criteria for the systematization of the
organizational forms for foreign business activity.

The four criteria for the systematization of the organization forms for a foreign business
activity are:

1) Control: Control is based on the degree of influence that the enterprise exerts over the
activities of intermediaries and business partners in the target market. Effective quality
control is important yet difficult. The challenges for original supplier are referent to act as
guardian of overall process.

2) Capital transfer and participation: it measures the capital that has been transferred to
the country where the operation has been performed.

3) Value creation focus: Locate where the focus of value-creating activities is, that can be
located at home or outside it (outsource).
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

4) Transaction costs: the transaction cost concept could be understood in the following
way:
1. As all the costs entailed in initiating, securing and controlling transactions for a
market entry, i.e.
2. As all costs entailed in achieving the desired market presence in the target
market.

The key feature for deeply understand the transaction cost concept is the assumption that
different market-entry strategies lead to different levels of transaction cost. Transaction
costs should be understood in this context as all costs entailed in initiating, securing and
controlling transactions for a market entry.1
As consequence, on one hand it is possible to enter markets through totally dependent
institutions (integration), on the other it is possible to operate through institutions that are
foreign to the company (external partners).
2.2 Describe the configuration of the four criteria for the systematization of the
organizational forms for foreign business activity, as mentioned in sub-task 2.1, for
independent export agents / traders on the one hand, and subsidiaries on the other
hand.
The organizational forms for foreign business could be classified as follows:
1) Company with production in home country and indirect export.
2) Company with production in home country and direct export.
3) Company with production in foreign country and without direct investment.
4) Company with production in foreign country and direct investment.

The organizational form that we will explain is the one that develop a foreign business with
production in home country and indirect export: their main agents and participants in
this kind of business are

a) Export traders: the export traders market the products of manufacturers in foreign
markets on their own account and generally in their own name. They are normally
specialized in particular types of goods (e.g. red wine) or in country markets.
b) Export agencies.
c) Export co-operatives.

The organizational form for foreign business with production in foreign country and
direct investment is:
a) Capital participation.
b) Joint Venture.
c) Subsidiary: some of the characteristics of the subsidiaries are:

Establishing of independent subsidiaries.

They are legally autonomous and liable for the capital invested in foreign
countries.

≠ Branch: parent company is liable.

1
Williamson, 1991; Backhaus et al., 1994.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Therefore, the configuration of the four criteria for the Systematization of the organizational
forms for foreign business activity in each case will be:

Export traders:

1) Control: It is necessary to establish the business boundaries. With this the intermediaries
will not take control of the business, also it avoids the mismanagement of the company and
a possible destruction of it change on the license, on the contract production…

2) Capital transfer and participation: In this case, the capital moved to foreign countries is
the cost of the export or the intermediary fee, it will depend on where the business is
located, its laws and rules.

3) Value creation focus: The value of the activity is located at the business, because the
company generates the object or service and outsource the distribution and customer
contact

4) Transaction costs: the main costs are distributed on the searching of export merchants
and the costs of create legal documents that will control the markets where they are in.

Subsidiaries:
1) Control: In this type of organizational form, communication is essential. The production in
another country involves a very high level of control, with continuous feedback on what is
happening, so you know what results are obtained by the investments that have been
made, with the main objective of seek solutions to problems.

2) Capital transfer and participation: As production is outside the country of origin, the
capital moved because of the operation is 100%, with the crucial participation of the
subsidiaries.

3) Value creation focus: The value of activity is located outside home, the participants only
invest money. They see the opportunity, and search in other country the best company that
can generates the object or service.

4) Transaction costs: These are comparatively higher than those obtained with the export
traders, since the beginning of the business is more complicated by all the factors that are
involved in the process and due to the company do not know the culture, the market and
the people involved in the process.

2.3 Do independent export agents / traders represent a useful organizational form for
foreign business in a situation where there is a high extent of interdependencies
between different country markets?

The export traders market the products of manufacturers on their own account and
generally in their own name in foreign markets. On the other hand the export agencies
operate under their own direction, but not on their own account.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Therefore, even when there is interdependence between the different country markets, the
strategy may not be the same; although they both should be coordinated in order to meet
the needs of clients at minimum cost.

3. The determination of the degree of standardization respectively the degree of

differentiation for the instruments of the marketing mix, for example within the
product policy, is a necessity in the field of “going international” as well as in the
field of “being international“.
3.1 Are the strategy of standardization and the strategy of differentiation (of the
instruments of the marketing mix) two strategic alternatives, which exclude each
other in general? Explain your answer briefly. (2 points)
Nowadays the competition between companies is increasing, consumers demand better
products and services and technology develops go very rapidly, so companies have had to
change their management and operation; improving their efficiency in their processes,
reducing their costs and adding value for survival. For doing this in a proper way they must
know their strategies to focus on domestic markets and the international ones.

Differentiation strategy: The differentiation strategy creates a product or service

characteristic that is perceived throughout the industry as unique. It tries to select one or
more attributes that many buyers in an industry perceive as important and are exclusive to
meet those needs. Exclusivity is satisfied and paid with a higher price. Differentiation can
be based on the product itself, in the delivery system by the mean which the product is sold,
the product marketing approach and a wide range of factors.

The strategy of differentiation should be followed only after a careful and deep study of the
buyer’s needs and preferences, in order to determine the feasibility of different feature
incorporation or the creation of a unique product that includes the desired attributes.

A danger to follow a differentiation strategy is that customers might not appreciate the
product uniqueness enough to justify its high price. When this happens, a cost leadership
strategy easily exceeds a strategy of differentiation. Another risk of using a differentiation
strategy is that competitors could develop ways to copy the features of differentiation
quickly, so companies must find sustainable sources of exclusivity that rival firms cannot
replicate rapidly or at lower cost 2

Standardization Strategy: The standardization strategies based on reducing the number

of different products launched or acquired by a company in question: as first step the
company should list all items that are similar or that the company acquires and as second
step the experts can decide whether to cut the number of existing products. After a period
of time, a company can eliminate a multitude of items that are totally unnecessary and
useless, when the company is able to have one product in several countries.

Unlike differentiation, standardization is very useful in consumer products, because

consumer expectations are very similar if not identical. Its purpose is to reduce costs and to
maintain satisfactory levels of quality and performance. Determining how the marketing mix
tools should be applied in the new markets is one of the consequences that the company

2
(Michael Porter 1982)
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

must take as part of the decision to go to international markets, international companies

have to do this process in order to define the tools adaptation requires that its product in
different markets and different conditions. To make these decisions the company must take
into account the role of the buyer, seller and competition and the relationships between new
and old markets.

Finally the decision of standardization / differentiation depends on the information that is

related to the competition, i.e. between nearest is the company's relationship with the
network of international competitors more that enables you to define your strategy will. Also,
the decision between standardization and differentiation must be made in the context of:
seller-related feedback, demand-related feedback, competitive feedback and / or
institutional feedback.

According to the selection of markets to which the company wants to determine the
international strategy to be followed, an international strategy is essentially the direction that
should have the management activities in international markets. You can have three types
of guidelines for the possible markets according with the internationalization strategy. Those
factors are clearly explained in the flowing graphic and bullets:

Illustration 4 Selection of country markets depending on the type of internationalization strategy. (K.
Backhaus, et al, 2005)

1. Ethnocentric orientation

• Operation in foreign markets in a manner characterized strongly by the domestic market

• Relevance of similarity of foreign markets and domestic market (“looking for similarity”)

• In general operation only in a few selected country markets

2. Polycentric orientation

• Consideration of the particular characteristics of foreign markets (differentiation)

• Development and implementation of country-specific strategies / measures

Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

• Possibility of entry in all country markets with a corresponding demand

3. Geocentric orientation

• Analysis of individual country markets as a uniform market (standardization)

• Development and implementation of standardized strategies / measures, i.e.

• No taking into account of national needs (“least common denominator”)

• In general, entry in less country markets than in case of polycentric orientation

3.2 Mention and describe the four basic types of product-core standardization
(respectively differentiation), which can be considered in the field of „going
international“. (8 points)
Core products are a company's products which are most directly related to their core
competencies. These products are then integrated into a variety of end products, either by
the company holding the core product or by a second company to which the core product is
sold to, and the end products are sold to users. The aim of the product core is to complete a
function requires by buyers because the buyer purchases the entire product with the
objective of using it to suit some particular need. The standardization depends on the level
of homogeneity of consumer needs. The more similar needs and preferences have the
customers, the more able standardization of the product core become. The degree of
product-core standardization can be broken down into four basic types:
1. Differentiated products: On these products -for different reasons- the consumer
perceives the products as unique and therefore is willing to pay a premium for
purchasing them. These products have to be somewhat different from those offered by
competitors and the consumer must perceive that difference, if not the customer would
not pay the surcharge. These products show a high level of adaptation in specific
markets, there are products such as foods, which tend to be tailored to the needs and
preferences of the market. For example: Coca Cola and McDonalds are companies that
are making adaptations to local markets. The range of products, packaging and even
the taste of Coca Cola varies from market to market. In the case of McDonalds is a very
standardized, but the products offered vary in some markets and some products could
not be offered in other markets (beef or pork).
The product attributes are disparate (quality, reputation, brand image, packaging, etc).
So when it comes to differentiating the product, the company can choose any of these
alternatives. The differentiation of these alternatives can be grouped into two classes:
The first is to enhance the inherent characteristics of the product, among which are the
quality and degree of innovation which has the product. The second is to use the
marketing variables, among which are production, distribution and so-called extrinsic
characteristics of the product, which is the brand, packaging, image, or social prestige
and breadth of the range. Both alternatives for differentiating cause high costs. Enhance
the inherent characteristics of the product requires a large R & D, extensive quality
controls and better components. On the other hand, differentiation based on the
variables of marketing requires high investments in advertising, sales channels, etc.
Because differentiated products have a higher price, it was believed that these
companies would Differentiating small market shares, but there are examples which
show that in reality this does not have to be so.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

2 Modular design When customer in different countries has similar product

requirements the modular design might to be used, this in case only certain products
need to be varied country by country in order to fulfill legal systems or technical
standards. The product can be designed for a new market with new specifications.
3 Built in flexibility The aim is to make sure that the product can be used in several
countries; there is require of Integration of the necessary adaptation potential, the task
of adaptation is frequently transferred to buyers.
4 Standardized products When the products are sold under the same conditions in
different country markets, the product does not need to change its specifications to be
able for selling it in different markets. Some factors that promote the standardization
are:

• Economies of scale: Depending on the technology that is available for each sector,
there are some economies of scale. It means that between certain margins, and
increasing the quantity produced the cost per unit manufactured will be reduced,
• The homogenization of consumer tastes: To match the tastes of consumers and their
buying behavior facilitates manufacture and sell the same products in multiple
countries.
• The convergence of the laws: In recent years there has been a significant
liberalization and harmonization of markets in many countries. Equally noteworthy is
the best treatment for legal and investment products.
• The processes of economic integration: The processes of economic integration
promote international trade between member countries by eliminating tariff barriers,
restrictions on free trade and encourage the exchange of goods and services.

Illustration 5 Standardization sequence of product policy elements. (K. Backhaus, et al, 2005)
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

3.3 Select an instrument of the marketing mix as desired and demonstrate with this
instrument the “continuum” of possibilities between complete standardization
and “complete” differentiation with an example from international marketing
activities of any desired enterprise. (2 points)

The instrument of marketing mix that we have chosen is the Publicity:

Complete standardization Complete standardization means that the

procedures of one country should be adopted by all others, There are
plenty of other obstacles to adopting a completely standardization.

The fact of selling a product beyond the borders of the domestic market
poses a number of difficulties which include all kinds of marketing issues
(from the market structure through the positioning, pricing policies, channels of distribution
and promotion), not to mention the language-culture combination that opens another wide
range of international restrictions on advertising. Among the different strategies employed
by multinationals seeking to sell the same product in different markets emerge as a leading
solutions, especially from the cost-benefit, the standardization of advertising strategy that
also seems supported by a consumer more homogeneous in terms of habits and tastes
standardized advertising strategy as it relates.
Today, the general consumer allows to make a run of standardized advertising style of
communication, there may be global products, but consumers should be feel identify as an
individual while the publicity company is using a universal message. So it is established
that the publication of the same advertisements (with their respective variations verbal)
means that the international publicity, especially since more standardized approach is not
only possible, but it works. Ex: the worldwide advertising of brands of
cosmetics.

Complete differentiation The complete differentiation strategy is

based on adaptation of a product or a service to the diverse needs
and conditions in each market. When this type of strategy is been
chosen is because the market is going to two or more countries that
behave totally differently. For example, there are legal differences in each country on
product, packaging that require adaptations in order to introduce and sell products.
Differences in language, aesthetics, in customs, beliefs and values are important factors to
be considered in international marketing and forcing the adaptation of the product to
market.

We must also bear in mind that consumers do not behave exactly the same in all markets,
even though the media seems to consolidate. Despite of this, the differentiation in the uses
of the product, how and when they are helpful to adaptation. Finally, the main reason for
choosing the adaptive strategy is because the barriers become more important for the
marketing of products.

So as there are products for which we can standardize the communications or advertising,
there are many others to whom the communication strategy should be unique according to
the preferences and tastes of that particular consumer.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

4. Arbitrage is playing a major role concerning the coordination task within the field
of international marketing.
4.1 Describe the difference between complete arbitrage and incomplete arbitrage in
the field of arbitrage-tendency functions. Additionally you have to show within the
following illustration, which functions represent functions of complete arbitrage and
which represent functions of incomplete arbitrage. (4 points)
Arbitrage is the simultaneous purchase and sale of the same securities, commodities, or
foreign exchange in different markets to profit from unequal prices. Tendency towards
arbitrage is the tendency of buyers, with a sure profit level, to have a preference for
acquiring a particular product through the “grey market” beyond the regular distribution
channels (Arbitrage profit: price difference – transactions costs).The arbitrage tendency of
buyers depends not only on their general price sensitivity, but depends on factors like
product complexity or credence attributes as well.
The complete arbitrage is the scenery where the buyer, who is in a high price country,
satisfies completely his demand through reimports and has not negative arbitrage profits;
the incomplete arbitrage is when the share of buyers are willing to undertake arbitrage
rises monotonously with increasing profits.

Illustration 6 Alternative arbitrage-tendency functions. K. Backhaus, et al, 2005)

4.1 Two different strategic business units are related with the two different arbitrage-
tendency functions (c) and (d). In which case of those two functions do you
already have to be careful in case of a small degree of country-specific price
differentiation? Explain your answer briefly. (2 points)
The ideal function for all the strategic business units is the function “e”, as is the ideal
movement market, price vs. quantity, step by step.
The strategic business unit “c” is a product which is increasing rapidly its price trying to get
the complete arbitrage state, its product can has a high attributes, at the begging is putting
in risk his profit but to the long term can get good ones. On the other hand the strategic
business unit “d” is a product whit high complexity and low attributes which is increasing the
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

quantity despite the profits but on the long term they can raise the prices and get good
profits.
The both function’s work in opposite way, trying to get the same ideal state, good profit.
5 The field of “being international “represents the dynamic decision problem within
the field of international marketing.

5.1 State and describe in detail the two key problem areas in “being international“. (4
points)

The two main problematic areas in being international are related with the market dynamics.
The first of them is the level of the market dynamics associated with the form that the
market has and the second is the one linked to the nature or the direction that drives the
market. The following paragraphs will explain and describe in detail those problems. It’s
important to bear in mind that those problems have so many involved variables and that
each variable has a pretty important role in the market dynamics, also is important to keep
in mind that each country is correlated with other countries and depending on those
variables, that relation creates independencies in terms of other countries markets.

Fist able, the levels of market dynamics problem is divided in two basic issues: The fist is
the change in institutional related to environmental conditions, so depending on the national
borders (natural, economical, or cultural regions) the institutional environmental conditions
could change: if a homogenization is happening its central characteristics is that the rules
are unify, not only in the political aspects but also in the social and economical factors. On
the other hand if heterogenization is taking place those aspects are not unique. The second
issue is related with the change in the behavior of transactional partners. Some factors as
Demand, Sales level and environmental condition could change in relative the competitive
position that make all the chain components (competitors, buyers, the company and in
general the market) change. That is why the companies should be prepared to those
changes with the objective of going according with the market dynamic.

The second problem area is the one that is trying to avoid the problems related to the
nature or the direction that drives the market. This problem is explained and can be
supervised by a big number of variables mostly related with the coordination of the
problems. The most important variables are:

The variety of coordination problems: the selection, extension and the all coordination of
the coordination strategy is pretty important to acquire the desired coordination. That could
be explained by two strategies: The standardization is a strategy that could be applied if the
country markets are becoming homogeneous: on the other hand the differentiation strategy
could be applied in the case where the markets are becoming heterogeneous.
Other aspects about coordination problem: it is important to keep in mind other factors
that could make a successful coordination. Fist able the extremes should be controlled, the
market should avoid the complete homogeneity and the complete heterogeneity.

The following graphic summarized what it has been exposed at this section:
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Ilustración 7 Detailed description of the two key problem areas of being international. (Own made)

5.2 The description of the two key problem areas gives the possibility to categorize
incidents, which change the extent of interdependencies between country markets
systematically. Draw an illustration of the two key problem areas in „being
international“, mentioned in subtask 5.1, with its four quadrants. (1 point)
The two main problem areas in being international could be drawn in a two dimensions
Cartesian plane. As is seen in the graphic as each of the axis get a higher position the
situation could be classify as follows:

On the y axis, it will be find the level of the market dynamics related with the form that the
market has, so when this axis is in its higher level it means that the market dynamics are
mostly dominated by the government or state institutions and at the lowest level it is say
that the market dynamics levels are dominated by the behavior of the people and the
companies.

On the x axis it will be find the nature or the direction that drives for the market dynamic, so
the minimum point of the x axis means a complete homogenization and that analyzed
markets converges. When the maximum point at the x axis is reached it means a complete
grade of heterogenization where the markets are completely fragmentized.
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Complete homogenization and heterogenization of

Level of market
operational country (theoretical extremes) markets
dynamics

Homogeny (Converging Heterogeneity (fragmenting

markets) with a high level of markets) with a high level of
market dynamics of institutions market dynamics of institutions

Homogeny (Converging Heterogeneity (fragmenting

markets) with a high level of markets) with a high level of
market dynamics made by market dynamics made by
companies and people companies and people

Nature of market
Homogenization Heterogenization dynamics
(Converging markets) (fragmenting markets)

Illustration 8 Two key problem areas of being international. K. Backhaus, et al, 2005)

5.3 Classify the following incidents according to the four quadrants within the two
key problem areas in „being international “as illustrated in subtask 5.2. Therefore,
just write the number of each incident into the adequate quadrant. (4 points)

INCIDENTS:
1) Private consumers in Iran refuse to buy products from Denmark. The reason therefore is the
illustration of caricatures about the prophet Mohammed in Danish newspapers, about which the
people in Iran were informed via information exchange through modern mass media.

2) The United States of America reduce the import quota for textiles from China. Therefore less textiles
from China can be imported into the United States

3) A manufacturer of consumer goods in the branch of food receives interesting information due to his
activities in the field of market research. According to this information the needs of private
consumers in the European country markets the manufacturer already entered are becoming more
and more similar. Especially products like Tiramisu and Panacotta, which have their origin in Italy,
are becoming more and more popular in all of these European country markets.

4) A couple of country markets decide on the way to a common market the realization of unlimited
mobility of factors of production. In connection with this they eliminate all customs duties between
the country markets.

If we clasiffy the further incendents in the problem cuadrant the result will be seen in
braquets:
Marcela Gómez
Paola González
Iván Ponsoda
Marisol Londoño

Level of market
dynamics Homogeny – institutions Heterogeneity –institutions

(2) (4)

Homogeny dynamics made by Heterogeneity - dynamics made

companies and people by companies and people

(1) (3)
Nature of market
Homogenization Heterogenization dynamics
(Converging markets) (fragmenting markets)

Illustration 9 Exercise Development. Incidents Causes Classification of being international.

5.4 State and explain briefly four further examples from reality for each of the four
quadrants within the two key problem areas in “being international” as demonstrated
in the illustration in sub-task 5.2. (4 points)

Homogeny (Converging markets) with a high level of market dynamics of

institutions
1. The European Union is a huge example of a institution working for
homogeneity. Even though each country preserve its customs and it language, what
governments try to make was a homogenization of prices, coins and acquisition level
between different countries.
2. English as communication language. After recognized to United States as world
potency at the end of the 90´s the English language was institutionalized as trade
and communication language around the world.
3. By 2009 the Venezuelan government reduces the importation quota of rice from
Colombia and other countries; as a result the Colombia rice was cheaper for other
countries and makes the Venezuelan market less diverse that it used to be.
4. Spanish local government has continuously tried to promote a public health care
system ensuring proper attention to everyone despite their economical condition.
Homogeny (Converging markets) with a high level of market dynamics
made by companies and people
1. Office programs are an example of homogeneity due to the 90% of the
computers have the office program and people around the word no
matters the language and the part of the world where they are use this tool when
they are studding, working and they are in their free time. (this development were
introduced by Microsoft)
2. The introduction of the mp3 technology where the people around the world changed
its portable music device for this technology that is more flexible and it has more
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Paola González
Iván Ponsoda
Marisol Londoño

capacity that the previous products had. (This development was introduced by apple
and was spread around the world by common people)
3. Some years ago Renault create a different concept car (The logan), a cheap car for
Easter Europe countries, as so many people was going there and was buying the
car, they took the decision of produce it for the all world, avoiding arbitrage and make
a profit of the homogeneous price and model.
4. Mac Donald’s is a good example of homogeneity in food. Although they try to adapt
to local market, their methodology and strategy are based on have the same flavor,
smell, and taste without care where the person is.
Heterogeneity (fragmenting markets) with a high level of market dynamics
of institutions

1. The antimonopoly policies of certain governments are currently trying to prevent

Microsoft of installing internet explorer by default by all of its operational systems.
That means heterogeneity in this kind of explorers
2. In Colombia the government has pretty bad eyes to waste collection companies in
order to improve the service, several different companies try to be the best in this
business.
3. China is trying to increase its local regions development giving some taxes reduction
and some advantages to new inversion factories and companies that will invest in
those regions.
4. Governments try to have several different phone companies operating. With this
prices are regulated by the market and better service are given to the
customers
Heterogeneity (fragmenting markets) with a high level of market dynamics
made by companies and people
1. In Colombia people from Medellin and the regions near to there used to buy alcohol
(Aguardiente) made by an specific brand, if a bar doesn’t have that brand they will
not drink that kind of alcohol. People from other regions try to buy their own made
region alcohol.
2. In Spain, people from Valencia prefers to buy food with Valencia made brands even
if those brands are more expensive due to the fact that they want to promote their
owns brands, factories and region. In the other hand people from Cataluña also used
to buy products from its own region avoiding and hating products from other regions
as Valencia.
3. The electronic companies that manufacture digital cameras are used to differentiate
their models in different regions, offering different accessories and models
depending on the preferences, electricity levels of the region and seasons that the
region has.
4. DVD is one of the concepts that tries to differentiate its market by regions even if the
regions where not existing before, therefore they have 4 main zones where people
can not easily watch other zones DVDs in its DVD device.
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Paola González
Iván Ponsoda
Marisol Londoño

5.5 Being responsible for international marketing you determined the optimal degree
of standardization for all instruments of the marketing mix within the strategy of
instrumental adaptation right now. According to your observations now a longer
period without any change concerning the relationship between those countries
markets starts. Are in this period without any change in the extent of any
interdependency coordination efforts necessary from your side? Explain your
answer briefly. (2 points)

Yes, the efforts are necessary. Maybe the efforts should not be focus on the same aspects
that if the market weren’t as stable as its supposed to be at the moment but its clear that the
company should care of other aspects.

The reason why company should care about these aspects is because some difficult factors
as the marketing mix and the strategy are not stable factors, they can vary and that
variation depends in different factors and decisions. People from the company should be
aware of those factors that in any moment could change the marketing mix or the strategy
that the company is following. The only way to be aware of that issue is managing and
coordinating, because coordination problems can arise in any moment, therefore the
coordination efforts must be continuous.

It is important to bear in mind that the coordination problem solver should be aware of so
many factors and actors inside and outside of the country, due to if some of the
environment actors change even a small rule, despite constant buyer behaviour, stable
environmental conditions and unchanged market operations and company should be
prepared for that changed.

6 In the field of “being international “the application of strategies covering the need
for co-ordination and optimizing their market operation with respect to the new
market conditions strategies for reducing the need for co-ordination is of major
importance.

6.1 Can co-ordination strategies change the extent of interdependencies on

converging markets? Answer this question separately for strategies covering the
need for co-ordination and for strategies for reducing the need for co-ordination.

Taking into a count that the co-ordination strategies are used for adapt markets operations
and optimize international process, if is known that the interdependence of country markets
are increasing; it is possible to say that the use of strategy to covering the need for co-
ordination, will not change the extent of interdependencies. If a company decides to make
an instrumental adaptation (for example in the pricing policy), it does not mean that the
interdependency in the involved countries will change, maybe it could give benefits for the
company, but the interdependencies level will be the same. The reason why it happened is
because they are following a common policy.

In the case of the strategies that could reduce the need for co-ordination, if a company
implement a policy for the reduction of seller related feedback, reduction of buyer related
feedback or the reduction of competition related feedback, it is obviously that the
interdependence decrease, because these are strategies to reduce the control of the
market and continue operating but with less intervention.
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Iván Ponsoda
Marisol Londoño

6.2 Is the strategy of product modification a strategy covering the need for co-
ordination or a strategy for reducing the need for co-ordination and– if applicable –
for which type of interdependency the extent will be reduced? (2 points). Pag 348 -
349

The strategy of product modification is used for reduce the necessity of co-ordination and to
reduce of the buyer feedback, as consequence it will be reduced the demand feedback.

A good example for understand the context is the Dacia case where a product modification
strategy could be applied by factory guaranties; it only works in a specific country market.
The idea of Renault resides in oriented the whole process of conception in the direction of
trustworthiness and economic actions by using some cautiously checked solutions, the use
of the same elements on several models by a manufacturer is a guaranty of reliability for
customers and a source of savings and the job of acting as a highly incorporated, low-cost
production base, skilled of producing entry-level cars that are modern, high quality and
robust and of meeting the needs of customers in countries where car ownership is still a
remote dream. Logan was a successful project in all ways; Renault could conquer markets
in diverse parts of the world, giving a solution from people how need a good transport
solution with low cost.

6.3 Mention and describe the two types of product modification, which can be used
within the strategy of product modification. (4 points)

It is possible to differentiate two types of product modification:

1) Actual product modification (Material functional qualities):

a. Modification of physical product elements or supplementary services
b. Primarily packaging and / or services (functional qualities)
c. Product-core modification playing a lesser role (advantages of
standardization)
2) Informational product modification (Product appearance):
a. Communication-policy differentiation in general
b. Primarily labeling, (packaging)

They will be explained and an example of the modification will be enounced:

Material functional qualities:

• Packaging: the whiskey in Spain is sold in a litter bottle, in Venezuela is sold
in bottles of 0.75 liters.
• Product core: DVD in Spain are sold with a region
specification “Zone 3” in France it has gotten
different specifications and features and its named
“Zone 2” that is why the costumer could only buy the
product and the movies from the country that he is
from.
• Service: one example is the refrigerator or electronic
devices where the company must give specific guaranties to the costumer
from each country. This technique helps to acquire the product in the country.
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Paola González
Iván Ponsoda
Marisol Londoño

Another example is the alcohol that is sell at the supermarket with other
product as a give (a glass or some souvenirs) it will get the customer
attention.
Product appearance:
• Labeling: Leonisa is a lingerie Colombian company that sells its products with
one label in its country, and sells with another different label in Mexico.

7 In the field of “being international” the co-ordination task can be executed using
the strategy of instrumental adaptation. pag301- 302

7.1 Will the extent of existent interdependencies be changed through the application
of the strategy of instrumental adaptation? Explain your answer briefly. (2 points)

With the application of this strategy the company could change their own environmental
conditions but I will not changed or influence the extent of existent interdependencies,
because the interdependency depends on a special agreements between countries, no for
the individual company strategies.

The meaning of an instrumental adaptation is that the company should use instruments for correctly
adapting itself to the environment and avoid coordination problems at its internalization process.

7.2 Describe the tendency of change concerning the international marketing mix
through the application of the instrumental adaptation strategy. Describe the
changes that would be present in converging markets and those which would be
present in diverging markets. (2 points)

The meaning of an instrumental adaptation is that the company should use instruments for correctly
adapting itself to the environment and avoid coordination problems at its internalization process.
The marketing mix definition is an important instrument of decision due to the fact that depending on
the company strategy (standardization /differentiation) the marketing mix should be identified, so the
decision takers will set the way that the product policy, price policy, communication policy and
distribution policy should be mixed and applied. In addition, it is fundamental the feedback received
from the different actors (demand, competence and institutions) for improve the marketing mix and
the communication levels around the company. Another instrument it’s the interdependency of the
actors, which means that it is important to analyze the interdependency of the actors and to
increase it (if it exists).

The tendency of change concerning the international marketing mix through the application
of the instrumental adaptation strategy is different if it is presented in diverging markets or in
converging markets.

The changes of diverging markets are set according with the heterogenization of different
factors, they could be increased or decreased according with the company situation, the
increase or the decrease will have an effect in the company and in the company
environment. The first of the factors is the analysis of the heterogenization of the
institutional conditions; another factor is the heterogenization of the behavior of market
partners (differentiation of market operations according with the heterogenization of actors
(buyers/competence/partners) preferences.

On the other hand the changes of converging markets need another changes for avoid the
coordination problems. Problems could be independent or dependent and according to it
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Paola González
Iván Ponsoda
Marisol Londoño

company must set its strategy. In the definition of the problems it is important to include the
market participants and the institutional condition. An additional factor to keep in mind is
that the adaptation process should increase standardization. Here is important to point out that
the fundamental decision-making problem in would be independent from the orientation of market
changes (homogenization and heterogenization). The following graphic would summarize the key
factors of the changes on converging markets.

Illustration 10 Coordination problems in converging markets. (K. Backhaus, et al, 2005)