MARK4210, 2014 Spring, L1/L2

MARK4210: Strategic Marketing

2014 Spring, Section L1/L2

[Class #23]

Competing in a Global

Market

Agenda

Global Marketing Strategic Approaches

Global Marketing Mix

Price

Product

Place

Promotion

2

Global Marketing Strategic

Approaches

Three main international strategies:

Multi-domestic

Global

Transnational

Each strategy involves a different approach to

build efficiency across nations and

responsiveness to variation in customer

preferences and market conditions across

nations

3

4

Glo

ba

l in

teg

rati

on

We

ak

Str

on

g

Local responsiveness Weak Strong

Source: Cavusgil et al. 2012

Coordinate marketing

activities across

countries to maximize

efficiency and

effectiveness

Adapt to the local

environment, meet

the specific needs

of buyers in

individual countries

Global Marketing: Integration-

Responsiveness Framework

Multi-domestic Strategy

HQ delegates autonomy to each country

manager, allowing him/her to operate

independently and pursue local responsiveness

Sacrifices efficiency in favor of emphasizing

responsiveness to local market requirements

MTV customizes the programming that is shown on its

channels within dozens of countries, including New

Zealand, Portugal, Pakistan, and India

Source: Strategic Management: Evaluation and Execution, D. Ketchen, J. Short, Flat World Knowledge, Inc., 2012 5

Global Strategy

HQ emphasizes centralized coordination of

country operations to minimize duplication, and

maximize efficiency; minor product modifications

in various markets, but essentially offering same

products

Sacrifices responsiveness to local market

requirements in favor of emphasizing efficiency

Microsoft offers the same software around the world

but adjusts the programs to match local languages

Very effective for firms whose product is largely hidden

from the customer’s view -- silicon chip maker Intel

Source: Strategic Management: Evaluation and Execution, D. Ketchen, J. Short, Flat World Knowledge, Inc., 2012 6

Transnational Strategy

Involves balancing the desire for efficiency with

the need to varying preferences across countries;

seeks middle ground between multi-domestic

strategy and global strategy

Standardize whenever possible; adapt when

necessary

McDonald’s relies on the same brand names and the

same core menu items around the world, but make

some concessions to local tastes too

Source: Strategic Management: Evaluation and Execution, D. Ketchen, J. Short, Flat World Knowledge, Inc., 2012 7

8

Glo

ba

l in

teg

rati

on

We

ak

Str

on

g

Local responsiveness Weak Strong

Global Strategy Transnational

Strategy

Export

Strategy

Multi-domestic

Strategy

Source: Cavusgil et al. 2012

Global Marketing Strategies

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2013 Top Global Brands

4P’s: Approaches to Global

Pricing

Ethnocentric Pricing

Polycentric Pricing

Geocentric Pricing

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Ethnocentric Pricing

Per-unit price of an item is the same no matter

where in the world the buyer is located

Importer must absorb freight and import duties

Potential problems?

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Price Escalation

Price escalation is a common result of

ethnocentric pricing

The increase in the final foreign selling price of

goods traded across borders

12

Price Escalation – How to

lessen the Problem?

Rearrange the distribution channel

Eliminate costly features or downsize the product

Production in local or a low-cost market

13

Polycentric Pricing

Permits affiliate managers or independent

distributors to establish price as they feel is most

desirable in their circumstances

14

Geocentric Pricing

Global pricing with local adjustments

Allows firms to take into account global markets

and global competitors in establishing prices, but

also local factors

Local costs

Income levels

Competition

Local marketing strategy

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4P’s: Global Product

Strategies

• Firm adopts

the same

policy used in

home market

• Offering

product

virtually

unchanged in

all market

• Firm caters to

the needs and

wants of foreign

customers

• Changing

elements of

design,

function, and

packaging

• Firm designs a

product from

scratch for

foreign

customers

Source: W.J. Keegan, Multinational Product Planning: Strategic Alternatives, Journal of Marketing, 33, 1969, pp.58-62

Straight Extension

Product Adaptation

Product Innovation

Source: Kotabe and Helsen 2012

4P’s: Global Product Strategies

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Advantages of Product

Standardization

• Scale economies

• Global image

• Easier planning and control

• Convergence in consumer tastes

• Global customers

Advantages of Product

Adaptation/Innovation

• Meet local consumer needs

• Meet local economic, climatic, technological, requirements

• Utilize local advantages

• Increase motivation for local staff

• Meet legal and technical standards

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Global Product Planning:

Strategic Alternatives

Product Same Different

Communi-

cation

Different

Same Strategy 1:

Dual Extension

Strategy 2:

• Product Extension

• Communication

Adaptation

Strategy 4:

Dual Adaptation

Strategy 3:

• Product Adaptation

• Communication

Extension

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Global Product Planning:

Strategic Alternatives Examples

Product Strategy Product

Example

Consumer

Need Satisfied

Product

Strategy

Communication

Strategy

Strategy 1: Product

& Communication

Extension

Gillette

Razor

Disposable,

easy to use

product

Extension Extension

Strategy 2: Product

Extension/

Communication

Adaptation

Wrigley

Chewing

Gum

USA: Substitute

for Smoking

Europe: Dental

benefits

Extension Adaptation

Strategy 3: Product

Adaptation/

Communication

Extension

McDonald Fast-Food

Adaptation:

Add local

products to

range

Extension:

Using global

campaign

Strategy 4: Product

& Communication

Adaptation

Slim Fast Identical:

Lose Weight

Adaptation:

Preferences for

different flavors

Adaptation:

Celebrity in DE,

Teacher in UK

Source: W.J. Keegan

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PRS: Which Strategy Is It?

Product Same Different

Communi-

cation

Different

Same Strategy 1:

Dual Extension

Strategy 2:

• Product Extension

• Communication

Adaptation

Strategy 4:

Dual Adaptation

Strategy 3:

• Product Adaptation

• Communication

Extension

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4P’s: Global Distribution

Strategy – Key Decisions

Guidelines for international

distributors

Select distributors – do not let them select you

Look for distributors capable of developing markets

Treat the local distributors as long-term partners

Support market entry by committing money, managers

and proven marketing ideas

Maintain control over marketing strategy

Make sure distributors provide you with detailed market

and financial performance data

Build links among national distributors at the earliest

opportunity

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23 Source: adapted from Cavusgil et al. (1995)

Evaluating Foreign Distributors

24 Source: Paliwoda (1993, p. 300). Reprinted with permission from Butterworth-Heinemann Publishers, a division of Reed Educational & Professional

Publishing Ltd.

Grey Marketing (Parallel

Importing)

Strategies to Reduce

Grey Marketing

Seek legal redress

Change the marketing mix

– Product strategy

– Pricing strategy

– Warranty strategy

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4P’s: Global Promotions: Elements

of International Communication

Standardization vs. Adaptation of

Advertising Strategy: Benefits

Standardization reduces costs: No duplication of

effort for each market

Individual (customized) campaigns delay product

launches

Consumers increasingly share similar frames of

references with regard to products and

consumption

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Barriers to Standardization

Communication infrastructure

Agencies might not serve a particular market

Consumer literacy

Legal restrictions and self-regulation

Differing values and purchase motivations

Attitudes toward product country of origin

Promotional mix elements

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Reminders: PharmaSim

PharmaSim Team Live Play Round 2

Started April 22 @ 7am

Ends May 8 @ 8pm

Periods 0-8

NO replay, NO restarts, NO consultation

PharmaSim Final Report by May 14, 9AM

Peer Evaluations (excluding self)

7 Points (%) to Final Grade

Based on contribution to team effort

Anonymous, online link (http://ipeer.ust.hk) will be

posted by May 9 29

Reminders: Finals

When: May 17, Saturday, 16:40 to 18:10

90 minutes exam time

Please arrive at venue by 16:25 (15 minutes before exam starts) to

look for your assigned seats

Where: HALL

G/F Entrance of Sports Hall Complex is blocked

Use the open staircase between the Library and Lift No.3 only

What: Lectures/discussions from Class #9 (Product

Strategies) onwards

Open notes (handwritten notes, class slides, course packet)

Bring your own calculator (no borrowing, no laptops, no

smartphones)

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