IB Business Management HL 4.6 International marketing Question Bank

If RDM builds a new production facility in Europe, an immediate consequence will be an increase in capacity. At current levels of output this would lead to a reduction in capacity utilization. The current output of RDM's factory is 20000 units a year, with a productive capacity of 21000 units a year before the new facility is built. If the new production facility is built, the greater capacity for the whole business will, at current levels of output, result in the capacity utilization falling to 50 % until production at the new facility starts.

Xi, the marketing manager, suggests that this increased capacity provides the opportunity for market development to be achieved by entering the United States (US) market.

The US market has similarities with Europe, with an aging population and low birth rate. Demand for customized healthcare devices is high. However, the healthcare system in the US is very different, with a much greater role for private sector healthcare compared to Europe, where much of the healthcare is state funded. In the US, 18 % of gross domestic product (GDP) is spent on healthcare compared with an average of 11 % in Europe. Advertising spend in the US is very high for the typical healthcare equipment business, which uses TV and the internet to reach individuals, whereas in Europe healthcare equipment businesses typically negotiate with government organizations. Average incomes in the US are higher than in Europe. Competition in the US is very high, although some major healthcare equipment businesses dominate the market. Industrial/ employee relations in the US are generally more decentralized than in Europe, with a lower level of unionization.

To assess the best way to enter the US market, some senior managers may have to move to the US and Xi may need to recruit some new staff in the US with specialized knowledge of US laws and regulations, as well as some additional marketing employees. Xi is aware that industrial/ employee relations are different in the US.

Existing staff will have to get used to new ways of working and are concerned about having to work with new staff in the US.

SVT organizes each of its water treatment plants as a profit centre. SVTs water treatment plant in a Middle Eastern country extracts water from a local river to supply households in Dalgera, the capital city. In 2019, many people complained about the water's bad taste. A television documentary suggested that SVT was negligent.

SVT investigated and found that employees at its water treatment plant had failed to treat the water properly. This failure resulted in lead* from inside old pipes entering the water that was supplied, exposing the inhabitants of Dalgera to water with high levels of lead.

In 2020, SVT dismissed the regional director of Dalgera and installed automated monitoring equipment (which was already being used in its European water treatment plants) in all of SVT plants across the world. This equipment, which monitors lead levels, costs $ 100 million and depreciates on a declining-balance basis at a rate of 20 % per annum to a residual value of $ 10 million. However, in 2021, a court ordered SVT to pay $ 300 million in damages to the affected people in Dalgera, which was widely publicized across the world, badly damaging SVT's brand image.

By 2022, the global home water filter market was $14 billion, and 90\% of SVTs water filter sales were to Europe and the USA. SVT now wants to increase sales in Asia, a market with significant growth potential. In the same year, SVT closed its European and USA water filter manufacturing factories, partly because of increasing costs of energy and labour. These factories were replaced by a huge new factory in Asia.
* lead: a chemical element that is a soft, heavy, grey metal. In the past, it was widely used to make pipes, cover roofs, and in paint; it is harmful when ingested

3. Dean West Tutoring (DWT)
Dean West was an International Baccalaureate (IB) business management teacher in a developing country (country X). He also offered private tuition to students in need of additional support. Five years ago, he decided to leave teaching and set up Dean West Tutoring (DWT).
DWT has grown in the last five years and now employs ten tutors offering face-to-face tuition in a range of IB subjects. The tutors work part-time. DWT takes a percentage of the fees that students pay for the tutoring. To establish positive branding for DWT, Dean expects all tutors to follow a strict code of conduct. He also reviews each tutor's performance and student feedback every week. Some tutors are feeling demotivated.
With the worldwide growth of online learning in the last few years, Dean saw an opportunity to expand DWT. He discovered a large market in Asia, particularly in China. Online one-to
one tuition in Asia is charged at an hourly rate that is three times higher than that usually charged in country X. DWT would need to hire agents in Asia to find potential students who want to learn online.
As the new school year is starting soon in China, Dean will need to act quickly. He is considering drawing up a Gantt chart to assist his planning.
However, DWT's existing tutors are concerned about the expansion due to their lack of experience and equipment for online tutoring.
Dean is now considering two options to ensure that D W T has enough suitable tutors for expansion to online tuition:
- Option 1: Offer training and support to the existing tutors.
- Option 2: Recruit new tutors from anywhere in the world with online teaching experience.

4. "Think locally, grow globally"
To avoid negatively affecting sales, McDonald's ${ }^{\circledR}$ senior managers in the United States (US) headquarters realized that they should not apply identical American standards worldwide. McDonald's ${ }^{\circledR}$ must now think locally to grow globally.
British-born Steve Easterbrook, head of McDonald's ${ }^{\circledR}$ in the United Kingdom (UK), understood the need for strategic change and prepared tactics with two objectives:
- to attract new and different customers
- to enhance the good value of products to appeal to customers during economic recession.
One of the first tactics in the UK was the introduction of "Little Tasters ${ }^{\text {® }}$ ", which offered new products, in small portions, at low prices. Steve understood that young mothers, when taking their children to McDonald's ${ }^{\text {® }}$, would not buy meals for themselves because they felt the portions were too large. Other tactical changes, in response to customer demand, included the introduction of more chicken-based products for health-conscious customers. Moreover, an improved breakfast menu and better quality coffee attracted more price-conscious people on their way to work.
These adaptations to local conditions proved successful in the UK and beyond. McDonald's ${ }^{\circledR}$ UK had 13 million more customers in 2010 compared to 2009, resulting in an increase in market share (during the economic recession). In other host countries McDonald's ${ }^{\circledR}$ also successfully implemented its "think locally, grow globally" strategy. For example, it successfully launched products made from local produce and suited to local tastes such as the "Maharaja Mac ${ }^{\mathrm{TM}}$ " in India, the "McLobster ${ }^{\text {® }}$ " in Canada and the "Ebi Filet-O" (a shrimp burger) in Japan.
At the same time McDonald's ${ }^{\text {® }}$ launched a "global uniform initiative" to redecorate its restaurants with uniform appearance. McDonald's ${ }^{\text {® }}$ still tries to maintain the global recognition and the quality of its global brand. Local construction material and local labour are used, as well as different colours, comfortable armchairs and free Internet access. Other multinational food and drink companies, such as $K F C^{\text {® }}$ and Starbucks ${ }^{\text {® }}$, are also using a similar strategy to the "think locally, grow globally" strategy used by McDonald's ${ }^{\mathbb{®}}$.

With reference to an organization of your choice, discuss the ways in which culture can influence international marketing strategy.

5. Chips to Go (C2G)
Chips to Go (C2G) produce potato chips for the British market. C2G's Chief Executive Officer (CEO) is Charles Chip who is a dynamic entrepreneur famous for taking risks with chip flavours such as "banana and sour cream" and "chocolate fudge" and promoting them with humour especially appealing to British culture. C2G has created a number of successful snack products under the C2G family brand. Charles uses intuitive rather than scientific decision-making. He rarely consults with senior managers or considers financial data.
C2G's value as a company in terms of goodwill, brand value and other intangible assets is tied very closely to the personality and lifestyle of Charles. He is the company's most valuable intangible asset and is very popular among the younger generation. He is constantly in the news trying to travel around the world in a canoe, or taking risks by parachuting off high buildings to gain free publicity and word-of-mouth promotion. Current and potential investors have contacted the finance department as to what may happen to the value of these intangible assets if Charles were to have a serious accident.
C2G is looking for ways to increase market share in an increasingly competitive domestic snack market. One long-time aim for Charles has been the creation of a potato chip with all the taste of regular chips but without any fat. The marketing department of C 2 G is very excited with this idea but the Production Manager has indicated to Charles that it cannot be produced. Charles has been told and was furious.
A second strategic option could be to launch the potato chips into a new international market. One of Charles's closest advisers has argued that C2G would need to be careful with its product and promotion, as overseas customers may not share British tastes in potato chips, or British humour in promotion. He urges Charles to take time to carry out extensive market research of the new international market.