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 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, is considered
a novel food in the European Union (EU) according to Regulation EC258/97. The
regulation covers all exotic foods coming from countries 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 a dossier with
evidence of the products safety, which is an expensive undertaking.
However, the novel food regulation does not cover uses of specific ingredients or 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
beverages such as Coca Colas Minute Maid, or as a super-fruit. Products using camu
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 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
not work successfully in Peru.
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4. Amazon Herbs follows in the U.S. camu camu. Would you recommend this 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 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 food, 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 Colas
Minute Maid and as a super-fruit. It will have to create advertising 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 expensive 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.
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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 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 other, and they are able to
comply with the codes and standards required by the market. Another characteristic 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 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 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 flower farms in
Africa?
Cut flowers are highly perishable and very quickly 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 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
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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.
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.
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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, however,
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. Vietnam 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 Vietnams 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
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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 Americas 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 open to adapting
their values to new views.
The obstacle, however, that products have to fit into the consumers mind-set is more
pronounced in furniture than it is in industries like fast food. Low-priced products like
McDonalds 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
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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 advantagessmall 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 IKEAs
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. IKEAs 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 IKEAs 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.
IKEAs 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 IKEAs 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, IKEAs profits
from its operations have to be reinvested locally. Having promised all of this, IKEA
received its permission to operate. IKEAs 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
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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 companys 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 companys social involvements on a
global level. Why?
IKEAs 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 childrens 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 childrens 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 IKEAs 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.
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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?
Essilors 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 trendsdemographics, 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 worlds 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.
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Geographic Locations:
The number of lenses and selling prices were related closely to GDP per capita. Low-
income 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. Eyeglasses 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 economic 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, Hoya, 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
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countries tend to use cheap mineral lenses. As incomes rise, mineral lenses are 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 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 economic 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 Villagrn 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 companys 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 economy 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 Jorges sons
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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 after-
sale 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 Casa de las Botas could start by
catering to orders via the Internet or exporting.
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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 Villagrn, 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 Governments 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 exhibitions held
around the world. Referring to work ethics, Jorge Da Silva Villagrn 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 Martn 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 thats why people would connect with them more than him. But,
in the long run, Jorges revenue may suffer because of the many intermediaries that his
channel has.
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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 countrys three
largest banks collapsed in the same year. This in turn caused the countrys stock exchange
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
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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 Damars
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 Damars 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
Indonesiaperhaps 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.
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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 Damars 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 Pens 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 Chinas 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 Chinas 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 thats why luxury brands are scrambling to catch the eyes of Chinas
swelling class of wealthy consumers. Louis Vuitton, Gucci, Hermes, and the other worlds
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 Chinas largest cities has developed a new sizeable pool of untapped luxury
consumers.
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Chinas 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 buyersMore 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 modelsLuxury role models are young and rich, living a fashionable
lifestyle in Beijing or Shanghai as entrepreneurs or corporate executives. 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 fanaticsFashion 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 aspirantsMiddle-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 buying it. They will shop
around and prefer Chinese brands.
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?
Parkers 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 exhibit
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 Chinas 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.
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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 Chinas luxury consumers, and play a role in shaping their evolving tastes and
buying behavior.
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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 brands superiority erode. What
can Toyota do now to recapture their market share? With Toyotas 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 brandsor should it?
This question will be good for class discussion. Students may say that Toyotas 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 todays 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 founding
Toyota family against a group of professional managers, each blaming the other for the
automakers 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 Waykaizen, genchi genbustu, kakushin, challenge,
teamwork, respect, and customers first, dealers second, manufacturer lastcould 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
companys 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
19
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 companys 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 companys 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 publics doubts and inform them of Toyotas measures to
address such issues.
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
20
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 industrys workforce that cannot later be
replaced or expanded quickly.
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.
21
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 categories. 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 Zealands 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 actually 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.
22
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, Honeylands 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 Honeyland would have
been an even more difficult undertaking in a country where long-term trust relationships
and networks are so important. Honeylands 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 important 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, Honeylands 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 benefit-
matching 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 provided 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:
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"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.
o Since creating an image in the minds of consumers requires a long-term
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.
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
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 Sports
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 they 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 may 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 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.
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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 marketings 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.
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PART 4
Thai Food in Europe
1. Why was Sapp able to penetrate the Eastern European market? How did the brands
success in its domestic market facilitate this entrance?
Sapp 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 Sapp 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 Sapp
in their own countries.
From the beginning, the importers in Slovakia and Hungary desired to build the brand and
insisted the company register the Sapp trademark EU-wide (European Community
trademark). This turned out to be beneficial for Sapanan. After Sapp 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 package design. In addition to
the legal protection, modifying machines to produce jelly chunks for Sapp 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 Sapp 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 Sapp 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 Sapp 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
27
prevailing retail price, but caused Sapanans own margin to be very thin. When
importers requested financial support to promote Sapanans products, it did not have
surplus for this activity. In addition, once the price was established, it was difficult to
raise it.
o Thus, a different export pricing structure was needed for new importers and
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 importers 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 Sapanans process in searching for and selecting suitable partners appropriate? Are
there any other ways to find suitable importers who could support the companys brand
building activity?
Initially, Sapanan didnt have to search for partners because Sapps 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 Sapp 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 Sapp 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 Sapp.
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, Sapanan had to
depend on them to plan marketing activities. Thus, these activities tended to reflect the
28
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 Sapp Aloe Vera drink
was promoted at concerts and in pubs as a drink to be mixed with alcohol. To support the
products positioning as being modern and cool, Sapp 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 Sapp was distributed mainly through these outlets. The importer also
displayed Sapp Aloe Vera drink on laminated stands, making floating cubes inside the
bottle clearly visible in a dark room. Some importers aggressively promoted Sapp 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 Hungary,
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 key
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 venture partners.
However, the Chinese firms may encounter the following challenges 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 defined 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.
2. 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
GEs CF34-10 engine for the ARJ21 regional jet. GE has been an investment partner in the
29
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 supplying 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 GEs quality standards and the final
product fails the test, GEs 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. Ryanairs 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.
Conflict Diamonds Help War
1. 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 todays
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.
2. 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
30
the plan, all rough diamonds passing through or into a participating country must be
transported in sealed, tamperproof containers and accompanied by a government issued
certificate guaranteeing the containers contents and origin. However, others may argue
that the Kimberly Process certification remains open to abuse and it will not be enough to
stop the flow of conflict diamonds. They may say that bribery and forgery are inevitable
and that corrupt government officials will render the scheme inoperable.
3. Why do you think the diamond industry in the U.S. began implementing the certification
scheme even before it had garnered proper legislative support?
Many of them may say that it is more important to establish the accountability measures
immediately than to debate how they could be improved later on. The Kimberly Process
certification may is not a perfect construct, is not absolutely watertight, and still has
number of outstanding anomalies. However, it is the best compromise that could be agreed
without placing intolerable burdens on the industry. It is better to block the trade of conflict
diamonds because of the extraordinary humanitarian nature of the issue.
4. Should the U.S. limit its importing of diamonds to only those countries that can effectively
guarantee (e.g., through laser engravings or digital fingerprints) that it is a clean
diamond?
Many of them may say that the U.S. should limit its importing of diamonds to only those
countries that can effectively guarantee that it is a clean diamond because of the
extraordinary humanitarian nature of the issue.
31

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ANSWERS TO CASE QUESTIONS

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