Case study

1. Critically analyse 5 issues found in the case study in the context

of international marketing & its implications to theory or
practice.

2. PESTLE
The external audit covers a number of key factors in the environment. These include political;
economical; social; cultural and ethical; technological; legal; and ecological factors known as PESTLE
plus competitive factors that may present opportunities and threats.

Political instability in one nation or region can pose a threat to ongoing operations. Changes such as
new political leaders or new political initiatives and polices can also lead to a new marketing
possibility. Local, regional and international political actions including embargoes and changes to
trade agreements can make current and new markets more or less attractive to businesses. For
instance, the Trade War between China and America. Tariffs are up, exports down. Even as they
resume trade negotiations, but they still talk of blacklisting each other’s firms. Financial links
between China and the West have grown tighter since the trade war broke out. They are set to grow
tighter still.

In the interconnected global economy, conditions in one region can have a cascading effect on the
purchasing patterns of consumers and businesses near and far. Economic factors influence customer
buying power because of the effect on consumer and business income, debt, and credit usage.
Economic slowdowns often discourage government from pursuing infrastructure projects.
Fluctuations are another economic factor that can affect both costs and profits. Following the UK
vote to exit the European Union, currency fluctuations hurt the costs or profits of some firms that
were buying or selling in pounds sterling.

Social and cultural factors are among the most dynamic in the external environment, affecting the
size and composition of markets and segments as well as customers’ requirements, characteristics,
attitudes and perceptions. For example, Hofstede and Minkov has suggested a range of dimensions
which identified the national cultures between the countries; power-distance, individualism vs
collectivism, uncertainty-avoidance index; masculinity vs femininity; indulgence vs resistance; and
long-term orientation vs short term orientation. Taking China and Brazil as an example. Brazil as
market that result in low power-distance tend to expect and accept power relations that are more
consultative or democratic. China appear to be higher power-distance compared to Brazil, in this
situation, the less power accepts power relations that are more autocratic and paternalistic. This also
shows that China are slower in decision making as subordinate will need to gain approval or opinions
from the hierarchical layer.

Fast changing technology has an effect on customers, suppliers, competitors, channel members,
marketing techniques and organizational processes. Today, technology touches virtually every
element of marketing, from digitally enhanced advertisements to pricing, packaging, research,
distribution and beyond. Although the Internet has opened opportunities for consumer and business
marketing worldwide, it has also led to serious questions about privacy and security. For example,
Tesla vehicles are known for no human driving, however, it was faced with multiple problems that
arose from the security concern.

Legal factors such as legislation, regulation and governmental actions can affect product purity and
labelling, communications, data collection and customer privacy, pricing, distribution, competitive
behaviour and consumer choices. For instance, The French data privacy authority CNIL ruled that
Google violated General Data Protection Regulation because the company hadn't properly gained
consent from users to use their data to personalize advertising (Finley, 2019).

Ecological factors can influence marketing in numerous ways. Manufacturers will be unable to
achieve their objectives if vital raw materials such as water or minerals are unavailable for
production. A steady source of non-polluting energy is problematic for business and non-
governmental organizations in certain regions; in other areas, high energy costs pose a challenge.
Further, government regulations and community attitudes are shaping how companies interact with
the natural environment. Unfortunately, goods or services are sometimes marketed as safe for the
planet even when they have little or no actual ecological impact. Hence, customers who want to
steer clear of such greenwashing often look for certification by groups such as Green Globe, which
set specific standards for sustainability.

3. Company’s global success in terms of STP

Market segmentation is the process by which a market is divided into distinct subsets of customers
with similar needs and characteristics that lead them to respond in similar ways to a particular
product offering and marketing program. Type of segmentation are demographics (age, sex, income),
psychographic, benefit, ethnic and behavioral (lifestyle, consumer needs). If markets are incorrectly
or not effectively or insightfully segmented, product benefits will not match customer wants and the
target marketing and positioning efforts will be wasted. From properly segmenting its market, a firm
can gain a better match between product benefits and consumer wants.

Target marketing requires evaluating the relative attractiveness of various segments in terms of
market potential, growth rate, competitive intensity, firm’s mission and capabilities and other factors
to deliver what each segment wants in order to choose which segments it will serve. The three
common targeting strategies are undifferentiated marketing, differentiated marketing and
concentrated marketing. Undifferentiated marketing means targeting the entire market with the
same marketing mix, ignoring any segment differences. Differentiated marketing can be pursue in
two ways, it can ignore any segment differences and design a single product-and-marketing program
that will appeal to the largest number of consumers or It can design separate products and
marketing programs for the differing segments. This is also often called niche market strategy.
Concentrated marketing involves targeting one segment with one marketing mix. As long as the
targeted segment remains attractive, this can be a profitable coverage approach. However,
uncontrollable and unexpected factors such as new competition or change in customer needs can
make the targeted segments less attractive or even unfeasible over time.

Brand positioning entails designing product offerings and marketing programs that can establish an
enduring competitive advantage in the target market by creating a unique brand image, or position,
in the customer’s mind. Brand positioning is closely associate with the determinant attributes, some
common bases attributes such as features, benefits, percentage, manufacturing process,
endorsement and more can be used as a positioning base. Determinant attributes helps customers in
differentiating the product. Other than that, recent research has identified three additional
positioning strategies that are particularly useful in global marketing: global consumer culture
positioning, local consumer culture positioning, and foreign consumer culture positioning.
With positioning, it successfully reflect the Unique selling point with the development of positioning
statements and value propositions. The outcome of effective positioning is building brand equity.
Brand equity is the term marketers use to refer to the value created by establishing customer
preference for one’s brand. It reflects how consumers feel, think, and act toward the brand, and it
has implications for the prices and profits the brand can achieve in the marketplace.

4. 5 types of segmentations used in the industry

Global market segmentation has been defined as the process of identifying specific segments –
whether they be country groups or individual consumer groups – of potential customers with
homogenous attributes who are likely to exhibit similar responses to a company’s marketing mix.
Type of segmentation are demographics (age, sex, income), psychographic, benefit, ethnic and
behavioral (lifestyle, consumer needs). If markets are incorrectly or not effectively or insightfully
segmented, product benefits will not match customer wants and the target marketing and
positioning efforts will be wasted. From properly segmenting its market, a firm can gain a better
match between product benefits and consumer wants.

Demographic segmentation is based on measurable characteristics of populations, such as income,

population, age distribution, gender, education and occupation. A number of global demographic
trends – fewer married couples, smaller family size, changing roles of women, higher incomes and
living standards, for example – have contributed to the emergence of global market segments. When
a company charts a plan for global market expansion, it often finds that income is a valuable
segmentation variable. After all, a market consists of those who are willing and able to buy. For
instance, a vast range of industrial and consumer products offered in global markets today, income is
a valuable and important macro indicator of market potential. Age is another useful demographic
variable in global marketing. One global segment based on demographics is global teens, young
people between the ages of 12 and 19. Another global segment is global elite, affluent customers
who are well traveled and have the money to spend on prestigious products with an image of
exclusivity. Furthermore, for obvious reason, segmenting markets by gender is an approach that
makes sense for many companies. For instance, in 2000, Nike generated $1.4 billion in global sales of
women’s shows and apparel, a figure representing 16 percent of total Nike sales.

Psychographic segmentation involves grouping people in terms of their attitudes, values and
lifestyles. Data are obtained from questionnaires that require respondents to indicate the extent to
which they agree or disagree with a series of statements. Psychographics is primarily associated with
SRI international, a market research organization whose original Values and Lifestyles (VALS) and
updated VALS 2 analyses of consumers are widely known. For example, Finland’s Nokia relies
Poseurs, Trendsetters, Social Contact Seekers and highfliers. By carefully studying these segments
and tailoring products to each, Nokia once commanded 40 percent of the world’s market for mobile
communication devices. Recently, however, Nokia’s market share has declined due to intense
competition from a new generation of Android-based phones.

Behavior segmentation focuses on whether people buy and use a product, as well as how often and
how much they use or consume. Consumers can be categorized in terms of usage rates: heavy,
medium, light, or nonuser. Consumers can also be segmented according to user status: potential
users, nonusers, ex-users, regulars, first-timers, or users of competitors’ products. Marketers
sometimes refer to the 80/20 rule when assessing usage rates. This rule (also known as the law of
disproportionality or Pareto’s Law) suggests that 80 percent of a company’s revenuers or profits are
accounted for by 20 percent of a firm’s products or customers. As noted, nine country markets
generate about 80 percent of McDonald’s revenues.

Global benefit segmentation focuses on the numerator of the value equation – the B in V = B/P. This
approach is based on marketers’ superior understanding of the problem, the benefit of it offers, or
the issue it addresses, regardless of geography. Food marketers are finding success creating products
that can help parents create nutritious family meals with a minimal investment of time. Campbell
Soup is making significant inroads into Japan’s $500 million soup market as time-pressed
homemakers place a premium on convenience. Marketers of health and beauty aids also use benefit
segmentation. Many toothpaste brands are straightforward cavity fighters, and as such they reach a
very broad market. However, as consumers become more concerned about whitening, sensitive
teeth, gum disease and other oral care issues, marketers are developing new toothpaste brand
extensions suited to the different sets of perceived needs.

In many countries, the population includes ethnic groups of significant size. In the United States, for
example, the three major ethnic segments are African/Black Americans, Asian Americans and
Hispanic American. Each segment shows great diversity and can be further subdivided. For example,
Asian Americans include Thai Americans, Vietnamese Americans and Chinese Americans and each
group speaks a different language. Moreover, new segmentation approaches are being developed in
response to today’s rapidly changing business environment. For example, the widespread adoption
of the Internet and other new technologies creates a great deal of commonality among global
consumers. These consumers subcultures are composed of people whose similar outlooks and
aspirations create a shared mind-set that transcends language and national differences.

5. Positioning strategy (gccp/fccp/lccp) / high tech & high touch

Brand positioning entails designing product offerings and marketing programs that can
establish an enduring competitive advantage in the target market by creating a unique brand
image, or position, in the customer’s mind. Brand positioning is closely associate with the
determinant attributes, some common bases attributes such as features, benefits, percentage,
manufacturing process, endorsement and more can be used as a positioning base. Other than
that, recent research has identified three additional positioning strategies that are particularly
useful in global marketing: global consumer culture positioning, local consumer culture
positioning, and foreign consumer culture positioning.
Determinant attributes help customers in differentiating the product. A frequently used
positioning strategy exploits a particular product attribute, benefit or feature. Economy,
reliability and durability are frequently used attribute/benefit positions. Quality and price
strategy can be thought of a continuum from high-fashion/quality and high price to good
value (rather than ‘low quality”) at a reasonable price. Another positioning strategy represents
how a product is used or associates the brand with a user or class of users. Moreover, implicit
or explicit reference to competitors can provide the basis for an effective positioning strategy.
For example, Dove’s “Campaign for Real Beauty” broke new ground by positioning the
brand around a new definition of beauty.
Moving on, global consumer culture positioning is a strategy that can be used to target
various segments associated with the emerging global consumer culture. Global consumer
culture positioning is defined as a strategy that identifies a brand as symbol of a particular
global culture or segment. It has proven to be an effective strategy for communicating with
global teens, cosmopolitan elites, globe-trotting laptop warriors who consider themselves
members of a “transnational commerce culture” and other groups. Certain categories of
products lend themselves especially well to GCCP. High-tech and high-touch products are
both associated with high levels of customers involvement and by a shared “language”
among users.
Foreign consumer culture positioning associates the brand’s user, use occasions or production
origins with a foreign country or culture. IKEA the home furnishings retailer based in
Sweden, wrap itself in the Swedish flag – literally. Inside and out, IKEA’s stores are
decorated in the national colors of blue and yellow. To reinforce the chain’s Scandinavian
heritage – and to encourage shoppers to linger – many stores feature cafeterias in which
Swedish meatballs and other foods are served. Sometimes, brand names suggest an FCCP
even though product is a local origin. For example, the name “Haegen-Dazs” was made up to
imply Scandinavian origin even though an American company launched the ice cream.
Conversely, a popular chewing gum in Italy marketed by Perfetti bears the brand name
“Brooklyn”.
Marketers can also utilize local consumer culture positioning, a strategy that associates the
brand with local cultural meanings, reflects the local culture’s norms, portrays the brand as
consumed by local people in the national culture, or depicts the product as locally produced
for local consumers. An LCCP approach can be seen in Budweiser’s US advertising; ads
featuring the iconic Clydesdale horses, for example, associate the brand with small-town
American culture. Researchers studying television advertising in seven countries found that
LCCP predominated, particularly in ads for food, personal nondurables and household
nondurables.
With positioning, it successfully reflects the Unique selling point with the development of
positioning statements and value propositions. The outcome of effective positioning is
building brand equity. Brand equity is the term marketers use to refer to the value created by
establishing customer preference for one’s brand. It reflects how consumers feel, think, and
act toward the brand, and it has implications for the prices and profits the brand can achieve
in the marketplace.
Essay
1. 5 strategic alternatives for global product planning (Keagan &
Green, 2015) (pg 333)
To capitalize on opportunities outside the home country, company managers must devise and
implement appropriate marketing programs. Depending on organizational objectives and market
needs, a particular program may consist of extension strategies adaptation strategies, or a
combination of the two. A company that has developed a successful local product or brand can
implement an extension strategy that calls for offering a product virtually unchanged in markets
outside the home country. A second option is an adaptation strategy; this involves changing
elements of design, function or packaging in response to needs or conditions in particular country
markets.

Many companies employ the product-communication extension (dual extension) strategy when
pursuing global market opportunities. Under the right conditions, this is a very straightforward
marketing strategy; it can be the most profitable one as well. Companies pursuing this strategy sell
the same product with virtually no adaptation using the same advertising and promotional appeals
used domestically, in two or more country markets or segments. For this strategy to be effective, the
advertiser’s message must be understood across different cultures. As a general rule, extension/
standardization strategies are utilized more frequently with industrial (business-to-business)
products than with consumer products. For example, Apple launched its iPhone in the United States
in mid-2007. In the following months, it was gradually rolled out in several more markets, including
France and United Kingdom. When Apple brought its second-generation iPhone to market 1 year
later, it was launched in 21 countries simultaneously.

In some instances, a product or brand can be successfully extended to multiple country markets with
some modification of the communication strategy. Research may have revealed that consumer
perceptions about one or more aspects of the value proposition are different from country to
country. It may also turn out that a product fills a different need, appeals to a different segment, or
serves a different function in a particular country or region. Whatever the reason, extending the
product while adapting the market communications program may be the key to market success. The
appeal of the product extension-communication strategy is it relatively low cost of implementation.
Because the product itself is unchanged, expenditures for research and development (R&D),
manufacturing setup, and inventory are avoided. The biggest costs associated with this approach are
in researching the market and revising and advertising, sales promotion efforts, point-of-sale
material, and other communication elements as appropriate. For example, in Hungary, Slovakia and
other Central European countries, SABMiller positions Miller Genuine Draft as international lifestyle
brand (GCCP) rather than an American brand (FCCP). The communication adaptation strategy was
chosen after focus group research showed that many Europeans have a low regard for American
beer.

A third approach to global product planning is to adapt the product to local use or preference
conditions while extending, with minimal change, the basic home-market communications strategy
or brand name, which can be known as product adaptation-communication extension. For example,
when Kraft Foods launched Oreo brand cookies in China in 1996, it used a product extension
approach. Following several years of flat sales, Kraft’s in-country marketing team launched a research
study, which alerted the team to the fact that Oreo was too sweet for the Chinese palate and that
the price – 14 cookies for 72 cents – was too high. Oreos were then reformulated as a less-sweet,
chocolate-covered, four0layer wafer filled with vanilla and chocolate cream. Packages of the new
wafer Oreo contain fewer cookies but sell for about 29 cents. Today Oreo is the best-selling cookies
brand in China. Kraft’s experience with Oreos in China is an example of changing rom a product
extension to a product adaptation strategy when an extension strategy does not yield the desired
results.

A company my also utilize the product-communication adaptation (dual adaptation) strategy. As the
name implies, both the product and one or more promotional elements are adapted for a particular
country or region. Sometimes marketers discover that environmental conditions or consumer
preferences differ from country to country; the same may be true of the function a product serves or
consumer receptivity to advertising appeals. In cases where country managers who have been
granted considerable autonomy order adaptations, they may be simply exercising their power to act
independently. If headquarters tries to achieve intercountry coordination, the result can be, in the
words of one manager, “like herding cats”. For example, consider Unilever’s use of dual adaptation
strategies. Unilever’s Italian country managers discovered that, although Italian women spend more
than 20 hours each week cleaning, ironing and doing other tasks, they are not interested in labor-
saving conveniences. The final result – a really clean, shiny floor, for example – is more important
than saving time. For the Italian market, Unilever reformulated its Cif brand spray cleaner to do a
better job on grease; several different varieties were also rolled out, as were bigger bottles.
Television commercials portray Cif as strong rather than convenient.

Extension and adaptation strategies are effective approaches to many but not all global market
opportunities. For example, they do not respond to markets where there is a need but not the
purchasing power to buy either the existing or the adapted product. Global companies are likely to
encounter this situation when targeting consumers in India, China and other emerging markets.
When potential customers have limited purchasing power, a company may need to develop an
entirely new product designed to address the market opportunity at a price point that is within the
reach of the potential customer. The converse is also true: Companies in low-income countries that
have achieved local success may have to go beyond mere adaptation by “raising the bar” and binging
product designs up to world-class standards if they are to succeed in high-income countries.
Innovation, the process of endowing resources with a new capacity to create value, is a demanding
but potentially rewarding product strategy for reaching mass markets in less-developed countries as
well as important market segments in industrialized countries.

2. Trends in global retailing

3. Cultural Theories/ Hofstede’s cultural dimension (compare 2

countries/ BRICS)
The distinctive differences between a domestic market and international market is the culture
factors. A society organizes itself in such a way that people adhering to cultural norms and rewarded,
while those who deviate are ‘punished to a greater or lesser degree depending on the culture. As a
society’s needs change and evolve, so cultural norms will change and ‘old’ patterns of behaviour will
no longer rewarded, whereas new pattern will. Hence, in order to offer value to the market,
salesperson must understand the value system of the foreign market. Hofstede and Minkov has
suggested a range of dimensions which identified the national cultures between the countries;
power-distance, individualism vs collectivism, uncertainty-avoidance index; masculinity vs femininity;
indulgence vs resistance; and long-term orientation vs short term orientation. Taking Brazil and China
as an example.

Power distance is the extent to which people accept the uneven distribution of power. Brazil as
market that result in low power-distance tend to expect and accept power relations that are more
consultative or democratic. People relate to one another more as equal, regardless of formal
positions. People tend to have a direct or more involving communication with each other and on a
first-name basis. Subordinates are more comfortable with demanding the right to contribute as well
as criticizing the decision making of those in power. China appear to be higher power-distance
compared to Denmark, in this situation, the less power accepts power relations that are more
autocratic and paternalistic. Subordinates acknowledge the power of others simply based on where
they are situated in a certain formal, hierarchical positions. This also shows that Japan are slower in
decision making as subordinate will need to gain approval or opinions from the hierarchical layer.

Individualistic and collectivist is the extent to which the individual’s interests and identity prevails
over the group’s interest and identity. In individualistic society such as Brazil, the stress is put on
personal achievements and individual rights. Hence, the forming of lesser personal relationship and
minimal amount of small talks were produced. By contrast, in collectivist society, individuals act
predominantly as members of a life-long and cohesive group or organization. Japan were at the
moderate level of both, however, as compared to Brazil, China habits a more group-oriented culture
place more emphasis on harmony of the group. Hence, they are more loyal to the company and
appear to be more private and reserved.

Masculine societies emphasize competitiveness, assertiveness, and excelling, while feminine

societies focus on quality of life and caring for the weak. Brazil appears to be a comparably feminine
cultures as they emphasize on quality of life, involvement, equality, and compromise. In masculine
cultures such as China, the differences between gender roles are more dramatic and less fluid. Also,
they tend to be more competitive. This is something that is fostered from a very young age and
serves as the main motivational factor in business, while in Brazil motivational factors include free
time and comfortable living.

Uncertainty avoidance is the extent to which a society feels threatened by the uncertainty of the
future. People in cultures with high uncertainty-avoidance tend to minimize the occurrence of
unknown and unusual circumstances such as Brazil. Brazil have an aversion towards ambiguity and
emphasize structure and codes of behavior. Managers are interested in all the facts and figures, and
a lot of effort is put into feasibility studies (etc.) in an effort to identify and eliminate risk factors.
Basically, they proceed with careful step-by-step changes, by planning and by implementing rules,
laws and regulations. China as a lower uncertainty avoidance culture, accept and feel comfortable in
unstructured situation or changeable environments. At the same time, they try to have few rules as
possible. At 66 China has a low score on Uncertainty Avoidance. Truth may be relative though in the
immediate social circles there is concern for Truth with a capital T and rules (but not necessarily laws)
abound. None the less, adherence to laws and rules may be flexible to suit the actual situation and
pragmatism is a fact of life. The Chinese are comfortable with ambiguity; the Chinese language is full
of ambiguous meanings that can be difficult for Western people to follow. Chinese are adaptable and
entrepreneurial. At the time of writing the majority (70% -80%) of Chinese businesses tend to be
small to medium sized and family owned.

Long term orientation is the extent to which a society focuses on the future instead of the
present/past, such as China. They foster pragmatic values oriented towards rewards, including
persistence, saving and capacity for adaption. In business, this translates to a far higher focus on long
term investment (e.g. in R&D) rather than short-term profits. Brazil as a short-term orientated
society, values promoted are related to the past and present, including steadiness, respect for
tradition, saving face, reciprocation and fulfilling social obligations.

Lastly, societies with a high rate of indulgence like Brazil, generally exhibit a willingness to realise
their impulses and desires with regard to enjoying life and having fun. They possess a positive
attitude and have a tendency towards optimism. In addition, they place a higher degree of
importance on leisure time, act as they please and spend money as they wish. While China, as a
restraint culture, do not put much time for leisure and control the gratification of their desires.
People with this orientation have the perception that their actions are Restrained by social norms
and feel that indulging themselves is somewhat wrong.
 4. Global Pricing Policies (pg352)
When dealing with a single home-country market or multiple country markets, marketing managers
must develop pricing objectives as well as strategies for achieving those objectives. Price is an
independent variable; as a marketing tactic, managers can raise, lower or maintain prices as part of
the overall marketing strategy. However, a number of pricing issues are unique to global marketing.
The pricing strategy for a particular product may vary from country to country; a product may be
positioned as low-priced, mass market product in some countries and a premium-priced, niche
product in others. Pricing objectives may also vary depending on a product’s life-cycle stage and the
country-specific competitive situation. In making global pricing decisions, it is additionally necessary
to factor in external considerations such as the added cost associated with shipping goods long
distance across national boundaries.

Price can be used as a strategic variable to achieve specific financial goals, including return on
investment, profit and rapid recovery of product development costs. When financial criteria such as
profit or maintenance of margins are the objectives, the product must be part of a superior value
proposition for buyers; price is thus integral to the total positioning strategy. The market skimming
pricing strategy is often part of a deliberate attempt to reach a market segment that is willing to pay
a premium price for a particular brand or for a specialized or unique product. Companies that seek
competitive advantage by pursuing differentiation strategies or positioning their products in the
premium segment frequently use market skimming. LVMH and other luxury goods marketers that
target the global elite market segment use skimming strategies. For years Mercedes-Benz utilized a
skimming strategy; however, this created an opportunity for Toyota to introduce its luxury Lexus line
and undercut Mercedes.

Some companies are pursuing nonfinancial objectives with their pricing strategy. Price can be used as
a competitive weapon to gain or maintain market position. Market share or other sales-based
objectives are frequently set by companies that enjoy cost-leadership positions in their industry. A
market penetration pricing strategy calls for setting price levels that are low enough to quickly build
market share. Historically, many companies that used this type of pricing were located in the Pacific
Rim. Scale-efficient plants and low-cost labor allowed these companies to blitz the market. For
example, unlike Sony, many companies that are new to exporting cannot absorb such losses, nor are
they likely to have the marketing system in place (including transportation, distribution and sales
organizations) that allows global companies like Sony to make effective use of a penetration strategy.

When formulating pricing strategies for products such as video game consoles, DVD players, and
smartphones, it is necessary to view these products in a broader context. The biggest profits in the
video industry come from sales of game software; even though Sony and Microsoft may actually lose
money on each console, sales of hit video titles generate substantial revenues and profits. Sony,
Microsoft and Nintendo also receive licensing fees from the companies that create the gemaes.
Moreover, typical households own only one or two consoles but dozens of games. Likewise, in the
mobile phone business, substantial profits come from the services – app and music downloads, for
example – that handset users purchase. This can be known as the companion products that uses the
captive pricing which also known as the razors and blades pricing.

Japanese companies have traditionally approached cost issue in a way that results in substantial
production savings and products that are competitively priced in the global marketplace. Toyota,
Sony, Olympus and Komatsu are some of the well-known Japanese companies that use target
costing. This process, sometimes known as design to cost. Target costing ensures that development
teams will bring profitable products to market not only with the right level of quality and
functionality but also with appropriate prices for the target customer segments. For example, target
osting was used in the development of Renault’s Logan, a car that retails for less than $10,000 in
Europe. Nissan is also using target costing to develop a $3,000 Datsun. According to Luc-Alexandre
Menard, chief of Renault’s Dacia unit, the design approach prevented technical personnel from
adding features that customers did not consider absolutely necessary. For example, he Logan’s side
windows have relatively flat glass; curved glass is more attractive, but it adds to the cost.

Lastly, company frequently use a method known as cost-plus or cost-based pricing when selling
goods outside their home-country markets. Cost-based pricing is based on an analysis of internal and
external costs. At a starting point, firms that comply with Western cost-accounting principle typically
use the full absorption cost method; this defines the per-unit product cost as the sum of all past or
current direct and indirect manufacturing and overhead costs. However, when goods cross national
borders, additional costs and expenses such as transportation, duties and insurance are incurred. If
the manufacturer is responsible for those costs, they, too, must be included. By adding the desired
profit margin to the cost-plus figure, managers can arrive at a final selling price.