Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

20. Managing Marketing’s
    Link with Other Functional
    Areas

Text © The McGraw−Hill

Companies, 2002

590 Chapter 20

As an interesting example, consider the marketing implications of Hanes’ deci-

sion to use offshore production for many of its men’s underwear products. Buyers for

mass-merchandiser chains, like Wal-Mart and Kmart, put constant pressure on

Hanes to find ways to cut prices. That’s why much of the sewing work on Hanes

underwear is done in the Caribbean Islands where labor costs are low.

However, the only practical way to transport the bulky and inexpensive finished

products back to the U.S. market is by boat. Boats are slow, and clearing customs

can add further delays. At the port, the bulk cases of underwear must be handled

again and broken down into quantities and assortments for shipping to the retail-

ers’ distribution centers. And at the distribution centers the cases need to be grouped

with other products going to a specific store. All of these steps are necessary to meet

customers’ needs, but they also make it difficult to quickly adjust supply.^13

Marketing managers must be aware of and sensitive to criticisms that may arise

concerning overseas production. Some of these concerns relate to nationalism. But

other issues are sometimes at stake.

Although overseas production may reduce prices for domestic consumers, some

critics argue that the costs are only lower because the work is handled in countries

with lower workplace safety standards and fewer employee protections. At the

extreme, some firms have been boycotted for relying on Chinese suppliers who were

accused of using political prisoners as slave labor.

Marketing managers can’t ignore such concerns. Just as a firm has a social respon-

sibility in the country where it sells products, it also has a social responsibility to

the people who produce its products. However, pay or safety standards that seem

low in developed nations may make it possible for workers in an undeveloped nation

to have a better, healthier life.^14

Firms that produce services often must locate near their customers. However,

some service firms are finding ways to reduce the cost of some of their production

work with task transfer—using telecommunications to move service operations to

places where there are pools of skilled workers. For example, Bank of America puts

its automatic teller machines and branch offices where they’re convenient for cus-

tomers, but many of the programmers who do its backroom computer work are in

India.

In Chapter 18, we analyzed various cost curves and how they fit, along with

demand curves, into the pricing puzzle. Production costs are usually an important

part of the overall costs that must be considered in pricing, so a marketing manager

Alien Workshop, which markets
skateboarding and snowboarding
equipment and apparel, was
growing rapidly and needed to
move into larger facilities. Key
Corp, a provider of financial
services, helped the firm develop
a plan that made its growth
objectives achievable.

Offshore operations
may complicate
marketing

Some critics object to
overseas production

Service firms may
transfer some tasks

Price must cover
production costs