Czinkota 10 Ed Answers to Case Questions 1

ANSWERS TO CASE QUESTIONS PART 1 Super Foods: Camu Camu in Peru

1.

If no immediate change regarding the Novel Nov el Food Regulation (EU) is foreseen, what could be an alternate use of camu camu? Camu camu, a small tree or shrub that grows in the Amazon regions of Peru, P eru, is considered a novel food in the European Union (EU) according to Regulation EC258/97. The regulation covers all exotic foods coming from countries cou ntries that have a rich biodiversity. This regulation represents a considerable challenge to any company that wants to sell novel foods or beverages in any EU country as the company must prepare p repare a dossier with evidence of the product’s safety, which is an expensive undertaking. However, the novel food regulation does doe s not cover uses of specific ingredients or o r products such as camu camu as a dietary supplement. If there is no immediate change in the regulation, camu camu can be sold as a dietary supplement, as an astringent, for functional -fruit.” Products using camu beverages such as Coca Cola’s Minute Maid, or as a “super -fruit. camu will have to support its properties with sufficient evidence or historical record of usage.

2.

What brand strategy is Navitas following to “adapt” camu camu to the U.S. market?

Navitas is capitalizing on the potential of camu camu as a “super -fruit.” Navitas added camu camu to its product list in 2010 and named it “Camu Powder.” In July 2011, the company launched a healthy snacks line, combining the power of all superfoods within their product range with camu camu as part of one combination: the Citrus Chia Power Snack , along with chia seeds, maca, and lucuma superfoods, as well as apricot, raisin, cashew, and coconut flakes. 3.

Would you recommend that Peru use the same brand strategy Navitas is using in the U.S. and in other international markets? This question will be good for class discussion with students having different view-points. Many of them may say that Peru P eru should use a different brand strategy than the one Navitas is using in the U.S. and in other international markets. Peru should use a different strategy because the market in Peru is not the same as that of the U.S. and other international markets. So, the strategy that is a success in the U.S. and other international markets may ma y not work successfully in Peru.

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4.

Amazon Herbs follows in the U.S. camu camu. c amu. Would you recommend this th is strategy to other American importers of camu camu? Student answers will vary.

5.

What international marketing strategy would you recommend to Peru in order to promote camu camu in the North American market? This question will be good for class discussion as many ma ny students will have different opinions about what Peru should do. When entering the U.S., Peru will need to get authorization for the commercialization of camu camu from the Food and Drug Administration. Further, if Peru makes health claims regarding camu camu, it must request permission to sell the product as a drug with all paperwork and information that comes with that request (such as scientific support). However, if Peru sells it as a fo od, or eventually as a dietary supplement under the Dietary Supplement Health and Education Act of 1994 (DSHEA), then permissions are handled on a different basis. When selling in North America, Peru can continue promoting camu camu as a dietary supplement. It can also consider promoting it as an ingredient for functional beverages such as Coca C oca Cola’s Minute Maid and as a “super -fruit.” It will have to create advertising adv ertising campaigns that highlight the uses of camu camu and localize the advertisements so that camu camu appeals to the North Americans. Peru should try to use intermediaries who can help camu camu reach the North Americans easily.

African Producers in the Cut Flower and Foliage Trade

1.

One of the challenges for African flower and foliage producers is the need to ensure that the products reach the final consumers in good quality. Must they then produce and market their own products that are more tolerant to the stresses of long shipping or continue to produce traditional European flowers which are difficult and expensive to transport? The main market for cut flowers and foliage from Africa is the European Union, as it is for much of its horticulture product. The obvious reasons are proximity to the market, lower cost of transportation, and longer shelf life of these delicate products. Moreover, it is the buyers that determine and dictate the “design” and trends in the trade. If African has to sustain its participation in the trade, the African producers need not actually produce traditional European flowers which are difficult and ex pensive to transport. All they need to do is identify African varieties that are most tolerant to the stresses of long shipping and storage. A trade-off may also be achieved by producing mostly African varieties and one or two varieties of traditional European flowers.


4.

Amazon Herbs follows in the U.S. camu camu. c amu. Would you recommend this th is strategy to other American importers of camu camu? Student answers will vary.

5.

What international marketing strategy would you recommend to Peru in order to promote camu camu in the North American market? This question will be good for class discussion as many ma ny students will have different opinions about what Peru should do. When entering the U.S., Peru will need to get authorization for the commercialization of camu camu from the Food and Drug Administration. Further, if Peru makes health claims regarding camu camu, it must request permission to sell the product as a drug with all paperwork and information that comes with that request (such as scientific support). However, if Peru sells it as a fo od, or eventually as a dietary supplement under the Dietary Supplement Health and Education Act of 1994 (DSHEA), then permissions are handled on a different basis. When selling in North America, Peru can continue promoting camu camu as a dietary supplement. It can also consider promoting it as an ingredient for functional beverages such as Coca C oca Cola’s Minute Maid and as a “super -fruit.” It will have to create advertising adv ertising campaigns that highlight the uses of camu camu and localize the advertisements so that camu camu appeals to the North Americans. Peru should try to use intermediaries who can help camu camu reach the North Americans easily.

African Producers in the Cut Flower and Foliage Trade

1.

One of the challenges for African flower and foliage producers is the need to ensure that the products reach the final consumers in good quality. Must they then produce and market their own products that are more tolerant to the stresses of long shipping or continue to produce traditional European flowers which are difficult and expensive to transport? The main market for cut flowers and foliage from Africa is the European Union, as it is for much of its horticulture product. The obvious reasons are proximity to the market, lower cost of transportation, and longer shelf life of these delicate products. Moreover, it is the buyers that determine and dictate the “design” and trends in the trade. If African has to sustain its participation in the trade, the African producers need not actually produce traditional European flowers which are difficult and ex pensive to transport. All they need to do is identify African varieties that are most tolerant to the stresses of long shipping and storage. A trade-off may also be achieved by producing mostly African varieties and one or two varieties of traditional European flowers.


2.

What types of upgrading can producers in Africa conveniently adopt to ensure increased recognition and participation in the floriculture chain? Cut flowers are highly perishable and very quickly quickl y lose their usefulness if they are not handled properly. The chain process is therefore marked by a highly efficient coordination of activities between the producers from Africa and the final consumers in homes and offices in Europe. Producers should work towards increasing the efficiency of the coordination activities between them and the final consumers. Kenya and Ethiopia, with support from their governments, have organized the trade into string clusters and associations that team up to support each othe r, and they are able to comply with the codes and standards required by the market. Another characteristic ch aracteristic of these successful farms is that they are usually owned and or managed by traditional European growers who have relocated to Africa. Producers in other countries should try to adapt these strategies. The flower industry is subject to seasonal colors, shapes, and varieties. Consumers are continually seeking products that offer diversity in flower and leaf color, good texture and form, as well as better performance in interior environments. This makes research and development an important aspect of the chain. Producers could try partnering with Europeans who could conduct the research and share the findings with them. Producers must make efforts to develop techniques which will reduce production costs and the ultimate cost to the consumer. The industry indu stry is capital-intensive. There must be efforts to identify and use low-cost production technologies and reorient imported technology to suit Africans’ requirements. There is also an urgent need for African producers to identify varieties that are most tolerant of the stresses of long shipping and storage in order to remain competitive and sustain their position in the chain.

3.

How much value does the agent or distributor add to a bouquet bouq uet of flowers or bunch of roses from Africa before it reaches the final consumers? How can this be accurately calculated to ensure fair prices to the men and women who work on o n flower farms in Africa? Cut flowers are highly perishable and very quickly quickl y lose their usefulness if their production and handling is not properly done. The chain process is therefore marked by a highly efficient coordination of activities between the producers from Africa and the final consumers in homes and offices in Europe. A bouquet of flowers or bunch of roses from Africa reaches the consumer in the th e following ways: Grower/exporter to agent to auctions to retailer to consumers Grower/exporter to agent to wholesalers to retailer to consumers Grower/exporter to agent to retailer to consumers   


The intermediary agents play an important role in seeing to it that the consumers receive the flowers in good condition. So, the agents do add value. The value that the agents add to the flowers may be calculated by keeping in mind that once the growers or exporters hand over the flowers to the agents, the risk shifts to the agents. The perishability factor comes into play and the agent has to do his or her best to ensure that the flowers reach the consumers before the flowers perish. 4.

Knowing that flower production depends on availability of water, how long can the water bodies in Africa continue to feed flower production and still have enough for human consumption and, importantly, remain unpolluted? This question will be good for class discussion as students will have different opinions. Students have to keep the following facts in mind while answering this question: A flower is 90 percent water, needing more water than conventional horticulture products. This water must also be free from contamination and be fit for human consumption. As of now, many of the African flower farms are located near rivers and water bodies. The farms further invest in irrigation equipment for consistent supply and distribution of water for the plants. 

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Students could additionally research the use of water in horticulture, the major sources of water in Africa, and the different methods of irrigation used in order to arrive at a conclusion.

Of Catfish and Shrimp: A Dispute between Vietnam and the United States

1.

Was it fair for the Vietnamese catfish importers to step in and capture market share while the market has been expanded due to the significant efforts and investments of the domestic industry? How should quality considerations (if quality differences exist) be reconciled? The idea of free trade assumes that no matter the methods employed to expand markets, there must be no barriers to market entry and trade. If the domestic industry is competitive, it will retain profits in the long run and the investment costs will be paid off. Otherwise, if tariffs are necessary to keep supply limited and to protect the profit margins of the industry, it means that the industry expansion was not feasible in the first place and further protection of it will distort the market and resource allocation. However, if, as a result of thorough research and investigation, it is found that the income and spillover effects generated by the protected industry overweigh the benefits that consumers get under free trade, tariffs and barriers may be applied. In this case, however, the international role of the country and its foreign policy priorities, and integration in global economy must be taken into consideration.


2.

The label regulation that prevented Vietnamese fish from being called catfish would probably make consumers pay a higher price than they would have paid otherwise. Is this right? Most of the neoclassical school economists agree that barriers to free trade always hurt consumer interests in the long run. There are cases, however, when the introduction of at least temporary tariffs and other trade barriers can be justified in terms of unfair practices of a foreign nation, national security, or infant industry considerations. The administration or Congress should consider comprehensive research on the cross-industry and general public effects of such measures if introduced. Such concepts as net loss in welfare for society, feasibility of transfer effects from consumers to producers, validity of infant industry, and other possible justifications should be thoroughly considered.

3.

Can any industry in the United States influence lawmakers to take decisions in its favor? As the experience with steel and catfish shows, United States politics can be significantly influenced by domestic industry interests, which is especially true under the conditions of a weakening economy. After being organized, industry representatives can find ways to effectively promote their interests through Congress and administration playing on public sentiment and using future election leverage as well as past election promises. Industry organizations may also refer to national security matters to promote their interests. This issue may be even more sensitive in the post-9/11 environment. It is important to recognize the fact that some of the American foreign policy goals cannot be achieved with protectionism on the surge. It is true that the U.S. is the most attractive market for foreign producers; however, foreign producers and their governments are very reluctant to put up with American double standard policies and will retaliate. It may also hurt American prestige, which nowadays is very important to retain when the U.S. needs international support in its antiterrorism campaign.

4.

Did the WTO membership of Vietnam play any role in the different disputes? The WTO was originally formed following the General Agreement on Tariffs and Trade (GATT) with the intention to reduce tariffs on international trade. Eventually, h owever, when international trade tariffs were sufficiently low, its focus turned to resolving international trade disputes and reducing barriers in trade. Once Vietnam became a member, it began to experience the benefits of such a connection. After the U.S. government created the antidumping tariffs for Vietnamese shrimp, Vietnam requested for a consultation with the United States on February 1, 2010, to resolve issues regarding several administrative practices, one of which was zeroing. Vietna m brought up the issue that the U.S. was not complying with several rules established by the GATT, the Anti-Dumping Agreement, the WTO agreement, and Vietnam’s Protocol of Accession. When these consultations did not seem to produce many results, Vietnam requested the establishment of an arbitration panel to settle the dispute on April 7, 2010. Because


Vietnam was a member of the WTO, an international panel was called to judge the shrimp dispute. In accordance with WTO rules, neither the United States nor Vietnam was permitted to be a member of the panel. Throughout the dispute, Vietnam contested many practices of the U.S. DOC including zeroing, the restriction on the number of exporters chosen for examination, and the use of a “Vietnam-wide entity” rate without concern for independent producers. Vietnam particularly emphasized America’s practice of zeroing even after antidumping tariffs were banned in past WTO debates. After a series of meetings held by the panel, the WTO judges gave a final ruling on July 11, 2011. They decided that the U.S. was violating the Anti-Dumping Agreement and the GATT, both of which were established in 1994. Specifically, the panel recognized that the U.S. was practicing zeroing methodology and turned to previous rulings by the WTO to conclude that zeroing was indeed defying several provisions developed in past antidumping conflicts. On September 2, 2011, the Dispute Settlement Body (DSB) officially approved the final ruling mad by the panel on the Vietnamese lawsuit against the U.S. The WTO ruled that the U.S. was violating several positions of the anti-dumping laws and agreements established by GATT. They stated that in particular U.S. would have to reform its zeroing policies, as they were a serious breach of international trade agreements. After the WTO officially approved the decision made by the DSB in September 2011, the U.S. was given 60 days to appeal, but no such action was taken. Rather the U.S. lowered the taxes in February 2012, indicating a victory for Vietnam. Round two of the seafood dispute was decided in favor of Vietnam. Finally, on March 8, 2012, the U.S. government signed an agreement to halt its zeroing practices, officially ending the long, worldwide dispute.

IKEA: A Better Everyday Life

1.

What has allowed IKEA to be successful with a relatively standardized product and product line in a business with strong cultural influence? Did adaptations to this strategy in the North American market constitute a defeat to its approach? The IKEA case shows that consumers with low status concern, low conservatism, low dogmatism, high education, white-collar workers, and also high-income groups have fewer cross-cultural differences than other consumer groups. They are also more op en to adapting their values to new views. The obstacle, however, that products have to fit into the consumer ’s mind-set is more pronounced in furniture than it is in industries like fast food. Low-priced products like McDonald’s do not have the same problems, but can base their concepts on good-value products and a worldwide interest to spend as little as possible on necessities. Luxury


products are also truly international, based on the worldwide interest to get the best on the market independent of origin. Culture seems to be a determinant factor only up to a certain level. When price differences between alternatives become too large, cultural values diminish in importance and other factors take over. IKEA controlled its distribution and did not have to accept the prevailing system in the markets it entered. Its control also gave it other advantages — small retailers could not follow because of price, and large ones would have taken too much time. The North American adaptations changed IKEA from a standardizer to a global marketer. Some of the adjustments made in North America have actually found interest in other parts of the world as well. For example, sleeper sofas (unique to North America) are now big sales items in Europe. 2.

Which features of the “young people of all ages” are universal and can be exploited by a global/regional strategy? IKEA has described its target market as “young people of all ages.” The market segment in foreign markets are those individuals and families for whom prices are more important than cultural values and also those who are starting a new home and have no or very little furniture. The largest market segments in foreign markets have not become IKEA’s customers, since IKEA does not offer products that look like the ones they are used to. The upper class will not buy at IKEA because IKEA does not offer the best on the market when prices are unimportant. Furthermore, “young people of all ages” are likely to move more frequently, which is the case especially in the United States. For these people, functional, easy to assemble (and disassemble) furniture is a must. IKEA’s product line allows to be built on as an individual's life-cycle stage changes, thereby ensuring brand loyalty to the IKEA concept.

3.

Is IKEA destined to succeed everywhere it cares to establish itself? Judging by IKEA’s performance and expansion since the 1980s, it is difficult to argue against this proposition. Although the desire for economical prices for quality furniture is universal, IKEA is also being helped by the convergence of tastes around the world. IKEA’s success has not been ill-deserved, but has come as a result of careful planning and well-researched market entry. A good example of this is IKEA’s Eastern European operations. In l985, IKEA started to lobby governments in Eastern Europe to change laws that prevented joint ventures in retailing with state-run enterprises. IKEA also promised to increase dramatically the purchase of components from local Eastern European suppliers. Since Eastern European currencies cannot be taken out of those countries, IKEA’s profits from its operations have to be reinvested locally. Having promised all of this, IKEA received its permission to operate. IKEA’s main challenge will be the sharing of control and maintaining working relations with its state-owned partners. Although IKEA has faced the usual difficulties, ranging from bureaucratic red tape to import restrictions in


penetrating the Eastern bloc, the company is confident that “IKEA will eventually prove to be as much a hit there as in the West.” IKEA has been careful in its entry to and development in markets that are culturally far from the company’s origins. In the Far East, IKEA has used franchising as its preferred method of entry, relying on local partners for necessary adjustments. In some cases such as Japan, the company has taken a wait-and-see attitude. 4.

IKEA Social Initiative was formed to manage the comp any’s social involvements on a global level. Why? IKEA’s Social Initiative was formed in 2005 to promote the rights of every child to a healthy, secure childhood and access to quality education. As part of the Initiative, IKEA works together with two leading global organizations for children’s rights, UNICEF and Save the Children. IKEA invests in a range of programs with a holistic approach to impact the lives of children and concentrates its long-term commitments in South Asia, especially in India, which is an important supplier to the company and where children’s needs are dire.

IKEA has set a sustainability objective requiring that all of their activities have an overall positive impact on people and the environment. It also stresses social responsibility towards customers, coworkers, suppliers, and the employees who work for them, as well as towards the entire community. The initiative is a step towards achieving this sustainability objective. Moreover, the initiative also clearly reflects IKEA’s vision, “to create a better everyday life for the many people.” They want to offer a good quality, durable, and functional home furnishing product. They are just as committed to making the world better with their various sustainability initiatives and humanitarianism efforts.


PART 2 Working towards Better Vision

1.

How was Essilor able to achieve outstanding financial performance? Did it employ strategies differently from other lens manufacturers? Essilor ’s success rested on its product innovation, efficient distribution network, and production tooling. To meet the demands of customers (both optical professionals and consumers), it developed a large number of new products combining different materials, optical surfaces, and coatings. Essilor had the largest product offering in the market with 580,000 product items. Through a broad range of lenses, Essilor could provide solutions for correcting myopia (nearsightedness), hypermetropia (farsightedness caused by eye imperfections), astigmatism (blurred vision due to the inability of the eye to focus), and presbyopia. It continued using its financial strength to acquire businesses to facilitate its entry into new market segments and to expand its presence in high-growth markets. This allowed Essilor to participate outside its prescription lens segment helping it to gain a strong foothold in one of the fastest growing markets. The company also invested heavily in logistics to distribute lenses to retailers.

2.

What were the opportunities and threats in the optical industry? How did these trends affect industry growth? The ophthalmic optical market was affected by several trends — demographics, retailing, geographic locations, substitute products, replacement markets, and insurance programs — which influenced the growth of this industry. Demographics: Numerous demographic factors favored the increasing need for eyeglasses. Several factors contributed to this potential industry growth. In 2010, there were approximately 2 billion people with nearsightedness; this was projected to be 2.1 billion in 2050. The size of the older population with farsightedness was about 2 billion, expected to grow to 3.8 billion by 2050. Corrective lenses were the cheapest option for age-related farsightedness. Other vision problems also increased as the world’s population expanded. Retailing: The retail market for optical products in developed countries faced some structural changes. Retail chains already controlled about half of the U.S. market. In Europe, chains and buying groups together accounted for the majority of the market. The ongoing retail consolidation would further reduce the bargaining power of lens manufacturers. Typically, gross margins of lens manufacturers were lower for products distributed through chains. Although the volume of corrective lenses sold through the Internet was still relatively low, purchasing eyeglasses through this new outlet had gained more acceptances among price conscious buyers.


Geographic Locations: The number of lenses and selling prices were related closely to GDP per capita. Lowincome countries tended to use cheap mineral lenses. As incomes rose, mineral lenses were replaced by basic plastic lenses and, subsequently, by premium lenses such as those with multicoating layers and antiglare lenses. Developed countries with a high GDP per capita such as the U.S., France, the UK, Germany, and Spain were the primary markets for glasses. Although these countries would continue to be important, their market growth rates were low. In contrast, emerging markets like China, India, Indonesia, Mexico, and Brazil had more growth potential. However, much of the population in developing countries who needed eyeglasses did not have access to eye care or were unable to afford eyeglasses. Substitute Products: Instead of wearing glasses, contact lenses and Lasik surgery to correct eyesight were alternatives. The worldwide contact lens market was estimated at $6 .1 billion in 2010 and projected to be $11.7 billion by 2015. Despite the popularity of contact lenses, many users still wore both contacts and glasses. Also, there were more than 18 million people who had Lasik surgery. However, the operation was still costly, and not all eyeglass wearers were good candidates for Lasik surgery. Only those who did not have problems with cornea disease, dry eyes, unstable diabetes, or arthritis were appropriate for the Lasik procedure. Replacement Markets: Replacements controlled the majority of the industry sales volume. E yeglasses needed to be maintained and inspected regularly. If there were scratches on the surface of a lens, its optical corrective performance would deteriorate. However, many people kept their eyeglasses beyond their service life, especially during times of eco nomic hardship. They waited until the eyeglasses broke or could not be used anymore. Insurance Programs: In several developed countries, state social security systems partially reimbursed prescriptions. The high government deficits in these countries may lead to the removal of prescription lenses from the list of reimbursable items. This would affect the demand for eyeglasses and corrective lenses in these lucrative markets. 3.

In order to sustain strong financial performance, what options did Essilor have? How should it expand geographically, if at all? Should its marketing strategies differ between advanced and lesser developed countries? Essilor was more than three times larger than the second-largest operator, H oya, one of its many competitors. Essilor operated only in the corrective lens segment, while most of its competitors had expanded into related industries. Perhaps, expanding into other related industries or operations would help Essilor sustain its strong financial performance. The marketing strategies should differ between advanced and lesser developed countries. The number of lenses and selling prices are related closely to GDP per capita. Low-income


countries tend to use cheap mineral lenses. As incomes rise, mineral lenses are replaced b y basic plastic lenses and, subsequently, by premium lenses such as those with multicoating layers and antiglare lenses. Developed countries with a high GDP per capita such as the U.S., France, the U.K., Germany, and Spain are the primary markets for glasses. Although these countries will continue to be important, their market growth rates were low. In contrast, emerging markets like China, India, Indonesia, Mexico, and Brazil have greater growth potential. However, much of the population in developing countries who need eyeglasses do not have access to eye care or are unable to afford eyeglasses. Essilor should consider these factors when undertaking product development.

La Casa de las Botas

1.

Should La Casa de las Botas embrace expansion or should it maintain the status quo? If you think Jorge should expand his business (perhaps to better sell the company when he retires), which geographic markets and which customer segments should he focus on? That is, should La Casa de las Botas further penetrate existing markets or develop new markets, and in this case which ones? Should the company further develop the fashion segment or should it stick to its core business, the equestrian segment? Building upon your recommendations, establish an international marketing plan for the company. This question will be good for class discussion, with students having different perspectives about the issue. Some of them may cite the following material from the case and say that La Casa de Las Botas should embrace expansion: Production capacity could still be improved (by some 20 percent) with current resources. Furthermore, the foreign markets which contributed to stabilizing incomes over the year were especially attractive. Indeed, some seasonality in the riding boots business could be observed with slower sales in the equestrian “offseason” in the Southern hemisphere offset by increased sales in the Northern hemisphere. The company could therefore benefit from complementary foreign markets and exploit the link between climate and intensity of equestrian activities. In addition, international sales could help mitigate fluctuations due to econo mic slowdowns around the world. 

On the other hand, some of the students may say cite the following material from the case and say that La Casa de las Botas should maintain the status quo: Jorge Da Silva Villagrán is not interested in expanding his business significantly. Moving production up to larger quantities, risks going against La Casa de Las Botas’ high standards of quality and customer service. The products cannot be standardized and their exclusivity is part of the company’s positioning. In addition, expanding foreign sales will strain limited production capacities. Because good employees for manufacturing boots are difficult to find and take a long time to train and because of current space limitations, Jorge is not willing to hire and increase the workforce. A common belief in Argentina is that the econom y will collapse every 8 to 10 years. For Jorge, maintaining his business in the long run is far more important than any spectacular short term peak in business development. Finally, none of Jorge’s sons 


are interested into taking over the family business. Considering all these elements and his retirement sometime within the next decade, Jorge is not highly motivated to undergo major changes. Some of the students may cite the following material from the text and say that the company should further develop the fashion segment: The number of potential buyers in the fashion segment is much larger than in the Equestrian segment. In addition, margins could even be more interesting considering the lack of direct competition for products falling entirely into the luxury category. 

On the other hand, some of the students may cite the following material from the text and say that the company should stick to its core business, the equestrian segment: Traditionally, La Casa de Las Botas has targeted the “Equestrian” segment (70 percent of overall sales). This segment is composed of adults, teenagers, and children of both genders passionately undertaking equestrian activities and sports. In this segment, professional users need to be distinguished from recreational users because of the high frequency of use, and the intensity of their practice of specific activities. Although professionals make a very minor contribution to overall sales (less than 1 percent), they are very important to the company because of their advocacy power. Moreover, developing the fashion segment would represent a significant move away from La Casa de Las Botas core business and this may not be the right thing to do. 

A thoughtful strategic marketing plan is needed to maintain the benefits from international expansion while avoiding its pitfalls. Thus, the marketing plan could contain some of the following elements: In terms of corporate reputation, the quality of products is an obvious primary success factor. In addition, customer service and personalized attention are critical. Service to customers should take the form of answering questions in the pre-purchase phase (about the quality of the boots, how they are made, what are the payment options, what would happen if the boots did not fit perfectly) and in addressing aftersale situations (adjusting the boots to weight loss or gain, for instance). Business stability over time is the key to building trust and long-term relationships with customers. Since the lifetime of boots is about ten to fifteen years, a long-term horizon is most important for capturing re-purchases and building up word-of- mouth recommendations. An online presence which conveys the image of a traditional and small company dedicated to craftsmanship is also critical. 

2.

How can the demand for custom-made boots be estimated in an underserved foreign market? Entering an underserved market is considered to be more lucrative than taking market share from competitors in a stable market. However, estimating the demand for the particular product can be crucial. An analysis, at a macro level, for the need for the product in that market may be one of the first steps. This analysis can be carried out by a research firm. If the research indicates that the market is viable, La C asa de las Botas could start by catering to orders via the Internet or exporting.


3.

How should La Casa de las Botas address online ordering and customer payment methods for both individual customers and distributors? At present, La Casa de Las Botas has an online presence which conveys the image of a traditional and small company dedicated to craftsmanship. In addition, a page on Facebook was also created mid-2010. The website is in Spanish, English, French, and German. The website is not equipped to conduct full transactions but includes a form for customers to place orders (by email, phone, or fax) with all the required measures of their two legs and feet. According to Jorge Da Silva Villagrán, the reasons why online payments are not possible is due to the high costs of the system, the inflationary risk, the willingness to keep a certain control over the number of accepted orders (for production limitation), and finally, a sense of comfort with the current payment system. Although, the online ordering system seems to be working, Jorge should consider introducing an online customer payment system. Online payment service providers like Amazon Payments and PayPal should be considered.

4.

Do you think Jorge should modify his views about promotion at fairs and exhibition and establish a direct presence or is he right to give priority to his distributors’ interests? List the possible advantages and disadvantages of his policy in this regard on the short and the long term. For instance, how would La Casa de las Botas benefit from further participating into the Government’s efforts to promote the “Industria Argentina” label abroad? This question will be good for class discussion. Boots by La Casa de Las Botas are regularly promoted by local representatives at competitions, fairs and ex hibitions held around the world. Referring to work ethics, Jorge Da Silva Villagrán has been vigilant to avoid ‘short cutting’ his distributors by attending these events himself. With his presence at a fair stand, consumers would certainly be interested in placing direct orders with the manufacturer in Argentina. However, Jorge considers this as unfair to the distributors, who have invested and spent large sums for their commercial presence at such events. But, maintaining healthy distributor relationships also comes with some opportunity costs. Indeed, the branch of the government in charge of promoting exports of national products, has offered twice to finance a direct presence for La Casa de Las Botas. For the 2010 Games in Kentucky, Jorge was invited at the Palacio San Martín along with other craftsmen enjoying international recognition and whose products would contribute to promote the brand “Argentina.” Jorge declined this offer for the above-mentioned reasons. Some of the students may say that Jorge should try to bring a balance between both extremes by accepting at least one or two government invitations in a year. As of now, his policy makes sense because his distributors have been the face of the brand in their respective countries and that’s why people would connect with them more than him. But, in the long run, Jorge’s revenue may suffer because of the many intermediaries that his channel has.


Water from Iceland

1.

Is there sufficient information to determine whether importing water from Iceland would be a profitable business? If not, what additional information is needed to make a determination? Research helps prospective companies to obtain detailed information for penetrating a market, for designing and fine-tuning the marketing mix, or for monitoring the political climate of a country so that the firm can expand its operation successfully. Apart from the information provided by the marketing research group, Stan Otis needs to research on few other aspects. As an importer, Stan Otis needs to evaluate the capabilities and competitive standing of the foreign firms with whom he would collaborate to import bottled water. Information about the reliability of the foreign supplier, the consistency of its product or service quality, and the length of delivery time should also be collected. Stan Otis also needs to judge the distribution channels available for the transaction to take place within time.

2.

Is the market climate in the United States conducive to water imports from Iceland? The bottled water industry in the United States is regulated and controlled at two levels — by the federal government and by various state governments. Besides, firms in the water industry require meeting various regulations and standards imposed by the Environmental Protection Agency (EPA) and the Food and Drug Administration (FDA) in the U.S. for testing of bottled water. However, Iceland enjoys “most favored nation” status with the United States. Under this designation, mineral and carbonated water from Iceland is subject to a tariff of 0.33 cents per liter, and natural (still) water is tariff-free. Hence, water import from Iceland can be considered a lucrative business in the U.S.

3.

What are some possible reasons for the fluctuation in the market share held by imports over the past ten years? As a result of the 2008 financial crisis, great strain has been placed on Icelandic trade — particularly imports. Although the Central Bank of Iceland has worked to boost international trade in the past, imports have been restricted. Imports are limited to necessities such as food, as the government tries to curb the entrance of foreign currency into its economy. Meanwhile, the banking system in Iceland crippled as the country’s three largest banks collapsed in the same year. This in turn caused the country’s stock ex change to plummet, delivering a sharp blow to the imports. The government was further troubled by civil unrest.

4.

Should the U.S. government be involved in regulating bottled water products? Although government regulations in the U.S. are viewed as a major hindrance to the development of water trade, the regulations and standards help consumers to a large extent. Not only does it prevent trade of contaminated water but it also allows consumers to gain


information on the product, such as the origin of water, the mineral content, the processing technique, and thus cater to the consumer requirements in a better way. Besides, the FDA assures fair advertising by the water manufacturing companies, which often try to mislead consumers.

Damar International

1.

Evaluate alternative expansion strategies for Damar International in the United States. Two feasible expansion alternatives open to Damar are offering a wider selection of goods and expanding its labor base. Due to the limitations imposed on Damar by artisans in Indonesia, not to mention existing competition, it would be very difficult for Damar to target larger retail and department stores. Because of the individual size of Damar ’s targeted market, the order sizes are relatively small. Therefore to become more profitable Damar must target as many boutiques, trade fairs, craft exhibitions and gift shows as possible. In order to do this, Damar must have a larger labor base. (By hiring people on a commission basis, labor costs would be minimized.) Furthermore, Damar would be able to respond to and process orders more quickly. A logical expansion site would be New York. Not only would Damar be closer to the Indonesian trade office to ease future red tape problems, but it would also be closer to the numerous boutiques and trade fairs held in New York.

2.

Discuss Damar ’s expansion alternatives in Indonesia and France and their implications for the U.S. market. If Damar wants to expand, it has to either find or borrow the resources necessary to expand and organize the cottage industry production in Indonesia. By having a wider base in Indonesia — perhaps by seeking out artisans from the different islands (and even different parts of the same island), Damar can diversify its Indonesian hand-made crafts and be able to supply more stores with goods. Sooner or later, Damar will have to hire people outside of family and friends to cover all the work that needs to be done. The wider variety of crafts could lead to an expansion of the U.S. market. By further expanding into France, Damar will diversify its goods and perhaps appeal to an even wider selection of boutiques.

3.

How can Damar protect itself against exchange-rate fluctuations? One way to protect itself against exchange rate fluctuations is to denominate the transaction in the currency where the expenses are incurred. Although the customer might be able to pay in U.S. dollars, the price would reflect any exchange rate changes. Another way is to trade in the futures market by buying the necessary currency in advance so that it will know how much it will receive in the local currency.


4.

What are the likely effects of shipment delays on Damar? How can these effects be overcome? Since Damar carries no inventory, shipment delays translate into late delivery, customer dissatisfaction, and lost sales. As Damar ’s business is almost entirely based on the cultivation of personal contacts and by expansion suggestions from customers, customer satisfaction is extremely important. Ways to overcome this problem are by maintaining some kind of inventory in the United States and having alternate routes and methods of transportation open to be used if necessary.

Parker: Big Red Duofold

1.

Parker Pen has gone back to its roots of crafting fine writing instruments as luxury consumer symbols. Are there any new emerging markets that they can focus on that have a similar culture of writing or gift giving? With sales lagging or flat in traditional markets, China has become Parker Pen’s top-selling market. The company has seen a growth of 30 to 50 percent over the past three years. Pens are selling well because they are an affordable accessory and useful in the gift-giving culture in China. They are also a status symbol for the climbing middle-class consumers. With China’s new-found wealth, fancy pens are finding a strong new market. Chinese professionals are using these expensive pens as examples of their new wealth. In 2009, Parker Pen employed a team of Chinese design professionals to redesign their pens for the new luxury consumers in China. They are willing to recast their old images for these new customers.

Emerging economies like India could also be a market for Parker Pen, with similar strengths as the Chinese market. 2.

Is there room in Chinese luxury markets for new brands to capture some of this new market share? Who are China’s luxury consumers and how do we define or redefine them? There is room in Chinese luxury markets for new brands to capture some of the new market share and that’s why luxury brands are scrambling to catch the eyes of China’s swelling class of wealthy consumers. Louis Vuitton, Gucci, Hermes, and the other world’s priciest and most prestigious luxury brands have been in a rush to capture these new luxury consumers. A rapid increase of wealth and shifting social mores among Chinese consumers has sparked a growing infatuation with luxury goods. Rapid urbanization and growing wealth outside China’s largest cities has developed a new sizeable pool of untapped luxury consumers.


China’s love for luxury is trickling down to an even broader spectrum of consumers than those than normally considered viable targets. This trend is creating new opportunities and challenges for marketers of luxury goods, which usually serve only the very wealthy.

There are four categories of Chinese luxury consumers: Core luxury buyers — More than half of luxury consumers are core luxury buyers who traditionally spend between 12 to 20 percent of their income on luxury goods. Luxury role models — Luxury role models are young and rich, living a fashionable lifestyle in Beijing or Shanghai as entrepreneurs or corporate ex ecutives. Many have had an opportunity to study or work overseas and have been exposed to luxury brands and consider them essential to their everyday life. They often indulge themselves by snapping up items spontaneously. They prefer in-store shopping outside of China and return if they feel they have gotten good service. Fashion fanatics — Fashion fanatics are not rich, only making between US$15,000 and $30,000. These consumers spend more than 40 percent of their income on luxury items. They want cutting-edge trends, and they use credit to make these purchases. They enjoy planning purchases and researching products online, talking to friends, and visiting stores. Middle-class aspirants — Middle-class aspirants live in Tier 2 or Tier 3 cities and earn between US$30,000 and $90,000 at mid-level positions. They buy luxury items that make them feel successful but will save and reduce spending on other things to keep their budget in check. They tend to be cautious consumers, spending a significant amount of time researching an item before bu ying it. They will shop around and prefer Chinese brands. 

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3.

What can Parker Pen do to continue to maintain or grab new market share from big competitors like Montblanc? What other niches should or could they focus on to grab more of these emerging luxury buyers? Parker’s mission is to continue to fuse superior craftsmanship with contemporary style, offering new products with a high-quality writing nib from the affordable to the luxurious. This mission will help it maintain or grab some new market share.

Parker has to find the right location. It will also have to provide exceptional service. It must deploy a sales staff familiar with the latest fashion trends. The staff should ex hibit exceptional levels of patience with the Chinese shoppers who prefer to linger. It will need to develop incentives for high-performing sales staffs to cultivate stronger brand focus. The second-largest key to attracting Chinese luxury consumers is the Internet, where they spend a lot of time collecting basic brand information. Social networking sites such as RenRen, Youku, and Weibo, third-party reviews, and China’s own bulletin-board services (BBSs) are often the first stop for information. Identifying influential bloggers and educating them can be key at this stage of brand adoption. Parker should monitor and react to online conversations among consumers and carefully craft its e-commerce in China.


To maximize the value of their marketing efforts and to create a lasting relationship with the Chinese customers, Parker must understand these consumers and differentiate their approaches to each of the market segments. Only then can it be successful, win the loyal trust of China’s luxury consumers, and play a role in shaping their evolving tastes and buying behavior.


PART 3 Toyota Incident

1.

Toyota had achieved the pinnacle in the U.S. market by creating a reliable, high-quality, fuel-economic cars. The past three years have seen that brand’s superiority erode. What can Toyota do now to recapture their market share? With Toyota’s new brands Venza and Yaris, can Toyota attract new, younger market with new social media? How does Toyota break out of the stodgy styling of past brands — or should it? This question will be good for class discussion. Students may say that Toyota’s new brands Venza and Yaris will help attract a new and younger market. Social media is the right way to go about promoting these brands to youth because today’s youth are heavily involved in social networking and are more likely to buy a brand or product when they see positive messages about the brand from their friends or peers on such networking sites. However, others may say that people will be apprehensive about trying out the brands because it may not be easy for everyone to forget the negative incidents associated with Toyota. These incidents may impact the sales of the new brands. However, one argument against Toyota restyling its product offerings is the brand image of quality it had prior to the recall disaster. Aiming to appeal to a younger audience, or one that is more likely to value style over quality, may also negatively impact Toyota.

2.

Toyota is not only having a quality crisis but an internal battle as well, pitting the foundin g Toyota family against a group of professional managers, each blaming the other for the automaker ’s problems. Why? [answer]

3.

Did the “Toyota Way” get in the way of corporate response? This question will be good for class debate in class. Students might say that the seven distinct elements of the “Toyota Way”— kaizen, genchi genbustu, kakushin, challenge, teamwork, respect, and customers first, dealers second, manufacturer last — could not get in the way of corporate response. The main purpose of the “Way” is to see to it that the employees build a product of the best quality for the customers. However, others may say that, the pressure of living up to the expectation of the “Way” may have resulted in some of the employees making a compromise with the quality.

4.

Did Toyota make enough changes to further prevent sales damage and to get the company’s reputation back on path? Although Toyota said it received the first complaint about the Prius in August 2007, some reports go back as far as the early 2000s. It was only in October 2009 that Toyota began sending letters to certain Toyota and Lexus owners to notify them the serious safety risk of improperly installed floor mats interfering with the accelerator pedal to cause very high


vehicle speeds. In February 2010, Akio Toyoda, president and CEO of Toyota Motor, made the first public appearance since the sudden acceleration problem began. The president expressed his regret for the inconvenience caused to customers and announced that he would command quality improvement around the world with the establishment of a global quality task force. These instances show that Toyota delayed taking responsibility for the problem. This may have an impact on future sales and the company’s reputation because potential customers will find it a bit difficult to trust Toyota to own up for its future mistakes (if any). 

Later, in February 2010, Toyoda, and Yoshimi Inaba, president and CEO of Toyota Motor North America Inc. explained how the company was going to manage quality control in the future. Among the proposed measures were setting up a system for customers’ voices around the world to reach management in a timely manner and a system which will allow each region to make any decisions as necessary. Another measure was the establishment of a quality advisory group composed of outside experts from around the world. The company also created a section on its website with information about the recall process. The new section included an option for customers to write down their Vehicle Identification Number (VIN) and figure out whether their cars were involved in recent recalls, and postings of all important messages about the recall process. Finally, Toyota created the Toyota Safety Website in order to inform customers about the technology it is developing to keep its customers safe and the safety features it is implementing in its vehicles. These efforts if properly adhered to may help prevent further sales damage and may also help get the company’s reputation back on path. 

The following steps may also help the company: It could try to have a flat organizational structure instead of the current hierarchical structure. It should be prompt in identifying and addressing such crises. It should use a communication strategy that allows people representing the company to effectively clear up the public’s doubts and inform them of Toyota’s measures to address such issues. 

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The Bell Boeing V-22

1.

Why would the Bell Boeing team agree to an offset deal rather than insist on a money based transaction? An offset is any type of nonmonetary compensation that a procuring government requires an exporting firm to provide as a condition of the sale and generally commits the exporting firm to spend a certain percentage of the value of the sale in the procuring country. Obligations are imposed on the seller in major purchases by or for foreign governments to minimize any trade imbalance or other adverse economic impact caused by the outflow of currency required to pay for such purchases. Direct offsets enable the purchaser to be


involved in the manufacturing process. In addition to component coproduction, complete products are produced under license. An integral part of these arrangements is the training of the local employees. Training is not only for production and assembly purposes but also for maintenance and overhaul of the equipment in the longer term. Some offsets have buyback provisions; that is, the seller is obligated to purchase output from the facility or operations it has set up or licensed. All these characteristics may prompt Bell Boeing team to agree to an offset deal rather than insist on a money-based transaction. 2.

Why do governments typically take an unsupportive stance on countertrade arrangements? Governments typically take an unsupportive stance on counterpurchase arrangements because they may have to deal with goods that they are not accustomed with. Defense counterpurchases can have an adverse impact on national security: Counterpurchases may undermine national security interests if they exacerbate the decline in the defense industrial base or disrupt critical parts of the defense supply chain. Counterpurchases may undermine national security if the counterpurchases result in the loss of critical skills in the defense industry’s workforce that cannot later be replaced or expanded quickly. 

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3.

Comment on this statement: “Offset arrangements involving overseas production that permits a foreign government or producer to acquire the technical information to manufacture all or part of a U.S.-origin article trade short-term sales for long-term loss of market position.”

Students might say that the above statement is true. Because the U.S. producer is sharing the technical information to manufacture all or part of the product, it may get the finished article at a lower price or at a quicker rate and can sell it at a higher price or at a faster rate. This will help the U.S. producer gain immediate profits. But, in the long-run the U.S. producer will lose its market share because the foreign producer acquiring the technical information will be in a position to introduce its own article to the market and pose as a competitor to the U.S. producer. 4.

The international market is key for the V-22, which has been named as one of the programs vulnerable to pending, deep cuts in U.S. defense spending. Does the Middle East hold promise for the Osprey? Does Europe? Students might say that the Middle East holds more promise for the Osprey than Europe. The Middle East is comparatively more unstable than Europe because of players like Iraq, Iran, etc. Thus, there are more chances of the Osprey being a success in the Middle East.


Honeyland Manuka Honey From New Zealand: An International New Venture

1.

Imagine that you are in charge of logistics for a small exporting business such as Honeyland. What are the difficulties you need to think about? The difficulties concerning logistics can be differentiated into two main ca tegories. First, there are general issues for a small exporter that ships to an Asian country that is non – English language based. That means besides the usual logistics problems covered by the material in the textbook, it is obvious that there is a severe language barrier to overcome. Sea transport is the preferred transportation mode and airfreight is generally not an option because of the heavy weight/costs involved. Second, there are specific issues in regard to the export product that is a high-quality organic niche product. The high quality of the honey needs to be maintained, which requires special attention to how and where the product is stored during transport. For example, the temperature in the sea container where the honey is stored has to be kept within a certain range. This is necessary to maintain the taste and physical properties and to justify the high price of the product. Another important aspect is that the shipping can only go one way; once the honey leaves New Zealand there is no coming back because it is illegal for the honey to be re-imported into New Zealand. Thus, the execution of export contract and logistics has to be done thoroughly and carefully in order to minimize the risks.

2.

What are the specific contextual requirements when exporting from New Zealand? The contextual requirements specific to the countries involved are far-reaching. Both countries, New Zealand and Japan, have entered into a legal framework that guarantees high standard bio-security and food safety standards. New Zealand is determined to keep its clean green image and its good reputation for high quality and safe food products. Therefore, government agencies such as New Zealand’s Ministry of Agriculture and Fisheries are given the authority to oversee these strict legal requirements, including their documentation.

3.

Considering that Sue is under a significant time constraint, do you think that outsourcing the entire logistics activity would be a good move for Honeyland? This question is not easy to answer as both, yes and no, are correct. If the answer is yes, and the entire logistics is outsourced, then of course the costs of exporting will increase and profits will go down. Honeyland most probably would need to increase the business to ensure it remains worthwhile and recover the costs involved in outsourcing. In this case, Sue, as the owner/manager of Honeyland, will give up a certain amount of control of her operations. It is, however, unlikely, because this is actuall y a part that Sue enjoys and really likes doing herself. If the answer is no, then everything seems to stay the same, which is what Sue probably likes best. Sue can maintain the level of operation she is comfortable with. Naturally, this option takes up a lot of management time and Honeyland might not grow as much as it possibly could.


4.

What would have been an alternative entry strategy for the Japanese market? Theoretically, there are other entry strategies possible, such as involving Japanese intermediaries or a joint venture arrangement. However, Hone yland’s approach to sell directly to retail outlets cuts out the middleman and makes the business more cost-efficient. This is beneficial in times of a high New Zealand dollar, because the trade is done in Japanese Yen. A joint venture would have required a hefty financial commitment upfront. Another aspect concerning joint ventures in Japan is also worth mentioning. To find a suitable joint-venture partner in the initial market entry stage of Hone yland would have been an even more difficult undertaking in a country where long-term trust relationships and networks are so important. Honeyland’s chosen entry mode probably was the best possible in regard to context and resources.

5.

Do you think the company should expand or diversify? Honeyland has reached the stage where the available time of management seems to restrict its growth. In New Zealand, lifestyle is perceived as more impo rtant than maximizing profits, and it could be a deliberate choice to not pursue expansion. This applies to product range and market extension. Increasing the complexity of company structure is not sought at the moment. Sue prefers to work without employees, which gives her freedom as well as tight control over the company. This is a lifestyle decision. In future, Honeyland’s situation might change and the option to grow and diversify could be reevaluated.

Nova Scotia

1.

How would you position Nova Scotia to potential American travelers? Use the benefitmatching model to achieve your super-match. The province is not actively considered as a destination choice by most consumers in the U.S. market. The critical question, therefore, becomes what benefits does this market seek from vacation travel that can be provided uniquely by Nova Scotia? In particular, what benefits can be identified in Nova Scotia? While research in benefit segmentation is needed to answer these questions, the findings will most likely have a heavy emphasis on water activities, seaside activities, camping, or scenic viewing. Maine, Massachusetts, and Vermont provide these benefits to the potential market with greater accessibility than Nova Scotia (see map p rovided in Figure 2). Nova Scotia is unique in North America in the Highland Games and festivals it provides each summer; i.e., a foreign adventure close to home filled with pageantry, history, and sporting events is the benefit provided. A large segment of seasoned American travelers is seeking an alternative to the benefit packages provided by Florida, Vermont, upstate New York, Ontario, and Quebec. Promoting the beauty of Nova Scotia is not really enough for a successful promotion theme. A theme along the following lines may be more focused:


"Drive to Scotland and France on 2 tanks of gas. Come to Nova Scotia for the Highland Games and Summer Festivals." This strategy relates Nova Scotia to two well-known destinations in the minds of consumers in the market. The direct link between Nova Scotia and Scotland and France is established. Also, the word “drive” is uniquely suited for Nova Scotia. Accessibility is a big, albeit secondary, benefit provided by Nova Scotia, making possible a foreign adventure at a bargain price plus the flexibility to change the itinerary during the trip. Third, the Highland Games and the Summer Festivals make Nova Scotia a bona fide destination. Both provide sets of benefits sought by the market but not perceived to be associated with competing destinations. At present, few households in the New England and Mid-Atlantic States are aware of these events. Most do not consider Nova Scotia to be an accessible foreign adventure, and changing this will call for a long-term commitment (e.g., five to seven years). If research finds this theme to be correct, the majority of the promotional budget should be used for it. Limited funds could be allocated to other themes with narrower target audiences. 2.

Constructively criticize past positioning attempts, such as “Come to Life.” Two reasonable criticisms are: The general themes do not bring out the unique features of Nova Scotia; rather, dimensions provided by locations such as Maine are brought to mind. The almost yearly changes that the marketing theme has undergone confuse consumers, thus failing to create a focused image based on the relative strengths of the province. Since creating an image in the minds of consumers requires a long-term o endeavor, the theme cannot change dramatically from year to year. Changes can take place as long as consumers perceive consistency. A unique product image can be one of the most valuable assets a product or a service has. 

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3.

What other variables, apart from positioning, will determine whether Americans will choose Nova Scotia as a destination? Regardless of an attractive image, accessibility is important to the consumer. Accessibility has two dimensions: Accessibility in terms of physically getting to the destination Accessibility in terms of affordability  

Nova Scotia is not the easiest place to get to, although all of the modern means are available. This handicap may well be turned into a plus in the promotional campaign by adding to the adventure feeling of the location. Affordability has to be assessed as to whom in the geographic target audience Nova Scotia wants to reach. Upscale couples will want to plan their trips themselves as may those who are ardent RVists (those traveling by recreational vehicle). If mass tourism is sought for, packages to Nova Scotia will have to 24 © 2013 Cengage Learning. All Right s Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

be developed with the help of travel intermediaries such as travel agents and tour wholesalers. The latter target may well be a thing of the more long-term future.

Amer and Japan: Making 2011 the Year to Go to Market for Amer Sports

1.

What do you consider as key issues in implementing the new group-level strategy in local Japanese markets? What do you see as success factors and challenges? This question will be good for class discussion with students having different viewpoints. In 2010, Amer Sports set up a group-level marketing function to gain local consumer insight. This will guide the design of marketing programs and offerings with higher local relevancy, leading to increased brand equity. According to a study, people prefer sports such as taking a walk, stretching, or playing Nintendo Wii! Traditional sports, such as tennis and golf, that Amer is in are not so high on the list. Furthermore, the Japanese population is aging. So, the major challenge for Amer will be to convince the Japanese population that sports such as tennis and golf are actually good.

2.

Consider the determinants of channel structure and relationships. How should Amer S ports arrange its distribution to reach consumers in the mass markets? What kind of role do distribution partnerships have in achieving the business goal of appealing to new segments? What kind of conflicts may arise and how would you prevent or solve them. At present, Amer Sports distributes to trade customers and directly to consumers. The business clients include sporting goods chains, specialty retailers, mass merchants, fitness clubs, and distributors. Consumers can purchase products through brand stores, factory outlets, and online channels. Amer can continue using these distribution channels and can also implement the same in Japan. Distributor partners can appeal to new segments because the y are in a position to provide the essential linkages that connect the products and customers. They are close to customers and can solve their problems as and when they arise. They can sell the idea of traditional sports to the Japanese population that is high on walking, stretching, or playing Nintendo Wii. Small conflicts such as billing errors or rivalry over channel duties ma y arise. In some cases, conflict may be caused by an outside entity, such as gray markets, in which unauthorized intermediaries compete for market share with legitimate distributors. Amer Sports can establish distributor advisory councils to help in reactive or proactive measure s. After finding a suitable distributor, the company can draw up a distributor agreement. Generally, such an agreement specifies the contract duration, geographic boundaries, methods of payment, product and conditions of sale, etc. If a distribution agreement is in place, there are less chances of conflict arising with regard to the areas mentioned in the agreement.


3.

What are your recommendations for channel management in Japan? How should Amer adopt its global strategy to local conditions in Japan? Can Amer Sports as a Group learn something from the Japanese markets? In order to efficiently manage its channels, Amer Sports can establish distributor advisory councils to help in reactive or proactive measures. After finding a suitable distributor, the company can draw up a distributor agreement. Generally, such an agreement specifies the contract duration, geographic boundaries, methods of payment, product and conditions of sale, etc. If a distribution agreement is in place, there are less chances of conflict arising with regard to the areas mentioned in the agreement. Amer can use its global distribution strategy in Japan. Its group-level marketing’s function will help it gain local customer insights. If it wants to succeed, the company must have an ability to identify and react to constantly evolving trends in consumer demand through product development. It will have to put its best effort in selling the idea of traditional sports to the Japanese population that is high on walking, stretching, or playing Nintendo Wii. Initially, it might have to produce a line of products that appeal to the Japanese sports customers in order to gain their attention and confidence.


PART 4 Thai Food in Europe

1.

Why was Sappé able to penetrate the Eastern European market? How did the brand’s success in its domestic market facilitate this entrance? Sappé was able to penetrate the Eastern Europe market because of its buyers from the region. For example, a Hungarian engineer who wanted to own a business approached Sapanan General Food Co., Ltd. during a trade show. When on vacation in Thailand, a beverage distributor from Slovakia contacted Sapanan after buying Sappé drinks from a local convenience store. When the product was widely distributed in Hungary and Slovakia, other importers visiting these countries became interested in representing Sappé in their own countries. From the beginning, the importers in Slovakia and Hungary desired to build the brand and insisted the company register the Sappé trademark EU-wide (European Community trademark). This turned out to be beneficial for Sapanan. After Sappé had achieved some sales success, a number of imitators entered the market. The company was able to ward off some of these imitators with its registered brands and unique packa ge design. In addition to the legal protection, modifying machines to produce jelly chunks for Sappé and using raw materials from Thailand reduced copycats significantly.

2.

What challenges did the company face when expanding into other Eastern European markets? How should it deal with these challenges? Some of the challenges and ways that the company dealt with the challenges are as follows: After Sappé had achieved some sales success, a number of imitators entered the market. The company was able to ward off some of the imitators because it had registered the Sappé trademark EU-wide (European Community trademark). Thus, none of the imitators could use its registered brands or package designs. After initial success, a key issue for Sapanan was whether or not to standardize advertising across markets. Initial success in Slovakia was achieved partly because of the use of a dark background; it presented Sappé as being hip and different. However, this was not acceptable in other markets. After convincing the Slovakian importer to adopt a lighter-colored background in order to gain a wholesome image, the advertisements in Slovakia were gradually adjusted to this new background. Coordinating other marketing activities was also a challenge. For example, the same television advertisement was broadcast in Slovakia and Israel. This commercial was well received by the audience in both countries. Because of this success, the company believed that coordinating marketing activities across the European market was viable. Sapanan had to reconsider its export pricing. During the initial export arrangement to Eastern Europe, the company set prices very low in order to be attractive to importers. This provided greater margins to importers and distributors given the 

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prevailing retail price, but caused Sapanan’s own margin to be very thin. When importers requested financial support to promote Sapanan’s products, it did no t have surplus for this activity. In addition, once the price was established, it was difficult to raise it. Thus, a different export pricing structure was needed for new importers and o was based on market demand. In quoting the FOB price for an importer, the company had to consider the various costs incurred when shipping its products to an importer’s country. If the retail price was too high, the importer would have little chance to be successful. Typically, a retail price had to cover shipping costs, import tariffs, inland clearance, operating costs, distribution costs, and margin for importers. If the importer did not have direct access to an outlet network, the retail price had to be higher to allow for more margins for distributors. Typically, for a longer channel of distribution, more margins were needed. 3.

Was Sapanan’s process in searching for and selecting suitable partners appropriate? Are there any other ways to find suitable importers who could support the company’s brand building activity?

Initially, Sapanan didn’t have to search for partners because Sappé’s exporting was initiated by its buyers. For example, a Hungarian engineer who wanted to own a business approached Sapanan during a trade show. When on vacation in Thailand, a beverage distributor from Slovakia contacted Sapanan after buying Sappé drinks from a local convenience store. When the product was widely distributed in Hungary and Slovakia, other importers visiting these countries became interested in representing Sappé in their own countries. However, not all contacts were fruitful or reliable. For example, at a trade show, a buyer from Eastern Europe requested product samples and specifications. After receiving this requested information, the buyer launched his own brand by imitating the product specifications of Sappé. In such cases, Sapanan should have done a thorough background checks before disclosing its products samples and specifications. 

Many importers approaching Sapanan tended to be small entrepreneurs or had no prior experience in international trade. Large, established distributors were more desirable, but they proved to be more difficult business partners. They would demand that their export suppliers provide promotional plans and marketing budgets to support a product launch. In addition, they did not spend much effort to promote new brands because they already represented several products. In such cases, Sapanan could partner initially partner with the small entrepreneurs and once the success becomes apparent, it could convince its partner to adopt more favorable distribution and promotional strategies. 

Since the importers were more familiar with local market conditions, Sap anan had to depend on them to plan marketing activities. Thus, these activities tended to reflect the 28 © 2013 Cengage Learning. All Right s Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

characteristics of these importers. For example, the importer in Slovakia was a distributor of alcohol and spirits as well as a concert and event organizer. So Sappé Aloe Vera drink was promoted at concerts and in pubs as a drink to be mixed with alcohol. To support the product’s positioning as being modern and cool, Sappé Aloe Vera was initially advertised with images of its package on a dark background. The importer in Hungary had access to gas stations, and so Sappé was distributed mainly through these outlets. The importer also displayed Sappé Aloe Vera drink on laminated stands, making floating cubes inside the bottle clearly visible in a dark room. Some importers aggressively promoted Sappé Aloe Vera in hypermarkets and faced an out-of-stock problem during a “buy-one-get-one free” promotion, causing friction among retailers, importers, and Sapanan. Sapanan could try to take a more active part in the planning of the marketing activities. Although its distribution worked out fine in Slovakia and Hun gary, Sapanan should take a call when deciding whether it would really like to be associated with importers who distribute alcohol and spirits. It should also adopt good production schedules so that future out-of-stock problems do not arise. 

China: The Next Aerospace Giant?

1.

The Chinese systems integrator strategy is to use joint ventures with Western firms to fill key knowledge gaps. What challenges can Chinese firms encounter when depending on other sources? The Chinese systems integrator strategy is to use joint ventures with Western firms to fill key knowledge gaps. China selects its joint venture partners based on their expertise in ke y areas, which allows China to fill these key knowledge gaps. These Western partners are the leaders in their technology areas and respected globally. China solicits help in development and production of their aircraft from its experienced joint ve nture partners. However, the Chinese firms may encounter the following challen ges when depending on other sources: The objectives of each firm may be dissimilar. Disparity of knowledge, expertise, etc. may generate friction between the firms. Dissimilarity in the work culture may lead to insufficient cooperation. If the accountability of the individual firms is not clearly de fined and communicated, the joint venture may collapse. The joint venture may be affected if the channel of communication between the firms is not open and transparent.    

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General Electric is an important Western partner. What problems could this cause for General Electric? General Electric (GE) is an important Western partner in the development of the ARJ21. In 2002, the Commercial Aircraft Corporation of China (COMAC, formerly ACAC) chose GE’s CF34-10 engine for the ARJ21 regional jet. GE has been an investment partner in the


ARJ21 project, and GE Commercial Aviation Services (GECAS) ordered 25 of the first ARJ21s. With the limited information given in the case, the major problem that may be deduced is that GE is known for its six-sigma quality. Although GE is suppl ying CF34-10 engines for the ARJ21, it has no means of checking the quality standards of other raw materials used for the ARJ21. If the other raw materials are not up to GE’s quality standards and the final product fails the test, GE’s brand name will suffer a loss. 3.

What other partnerships may further legitimize the C919? In a recent major development, Ryanair, a European discount airline, reported that they will explore an agreement with Commercial Aircraft Corporation of China (COMAC) to help design the C919. A partnership with a European airline will legitimize the C919 program and potentially open up a major Western market in Europe. Ryanair’s assistance could be instrumental in helping COMAC receive certification from the European Aviation Safety Agency and eventually the United States Federal Aviation Administration (FAA). Some other partnerships that may further legalize the C919 are: A partnership with a top technology firm that can provide the latest engine technology for the C919s. This will help better the quality standards of the C919s. A partnership with a firm that can help the C919s achieve economic performances that Boeing 737, Airbus 320, etc. A partnership with a firm that can provide a clean energy fuel for the C919. Initially, this will add to the cost, but in the long-run it will add to the goodwill of the C919. Clean energy fuel will help the C919s achieve their aim of reducing emissions. A partnership with a firm that can help the Chinese design aesthetically comfortable C919s. This will enhance the comfort of the fliers. 

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Conflict Diamonds Help War

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In light of the conflict diamond issue, would you buy a diamond? Why or why not? This question will be good for class discussion with students having opposing view-points. Supporters of buying diamonds may argue that their beauty and symbol of status in today’s society will be the reason they purchase diamonds. However, others may argue that they will not purchase diamonds because of the exploitation of people in diamond extraction and the use of diamond profits to fund terrorist activities.

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Do you think that the Kimberley Process certification plan will help decrease the global trade in “conflict” diamonds? Why or why not? This question will be good for class discussion with students. Supporters of the Kimberly Process certification may argue that the plan will help ensure that only legally mined rough diamonds, untainted by conflict, reach established markets around the world. According to


Czinkota 10 Ed Answers to Case Questions 1

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