marketing ch. 15

Global Marketing, R & DGlobal Marketing, R & D

Global Marketing and R&DGlobal Marketing and R&D

Among different countries, why and how:

– It makes sense to vary the attributes of products

– Distribution strategy may vary

– Advertising and promotion strategies may vary

– Pricing strategy may vary

How globalization affects new-product

development

“A powerful force drives the world

toward a converging commonality,

and that force is technology”

(Prof. Ted Levitt, HBS)

Levitt, 1983

Globalization of Markets?Globalization of Markets? Levitt’s “Converging commonality” has

not happened universally Consumer product tastes converged less

than industrial product specifications Media, communications means have

– made consumers world-wide more aware of their mutual preferences

– have contributed to creation of world brands– have caused market segments to emerge

across some national markets--inter-market segments

Market SegmentationMarket Segmentation The process of identifying groups of consumers

whose purchasing behavior is unique in important

ways

– Is based on demography, geography, social-cultural

factors, psychological factors

– Allows firms to adjust marketing mix to meet the needs of

separate market segments

Marketing mix variables:

product-price-place (distribution)-promotion

Market Segmentation Across Market Segmentation Across National MarketsNational Markets

Standardization: companies may – Offer same products

– Adjust balance of marketing mix to market segments with similar needs across countries

Adaptation: companies may– Offer different products

– Adjust balance of marketing mix to market segments with differing needs across countries

Marketing StrategyMarketing Strategy Standardization (Global Integration Pressures)

– Efficiencies through integrated R&D, production, marketing

– Control implications Adaptation (Local Responsiveness Pressures)

– Buyer behavior (cultural, economic influence, brand perception--country of origin idea)

– Laws, regulations– Local environment needs– Responsiveness to local condition shifts

Implications on marketing mix

International Marketing Mix: ProductInternational Marketing Mix: Product Product: a bundle of attributes

– Hamburger: meat type, taste, texture, size– Automobile: power, design, quality,

performance, comfort, size/capacity Attributes need to be adapted to a greater or

lesser extent to satisfy– Consumer preferences/tastes due to culture– Economic development levels affect consumer

behavior– National product/technical standards state

mandated

Optimal channel a company chooses to deliver the product

The most locally responsive element of marketing mix because distribution channels vary dramatically across countries– Retail system: concentrated-

fragmented– Channel length: long, short– Channel exclusivity

International Marketing Mix: PlaceInternational Marketing Mix: Place

International Marketing Mix: PromotionInternational Marketing Mix: Promotion

How firm communicates the product attributes / benefits to customers

Barriers to international communication– Cultural barriers– Source effects (country of origin effects)– Noise levels

Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)

International Marketing Mix: International Marketing Mix: PromotionPromotion

Push vs pull strategies– Push strategy: personal selling emphasis

Industrial products; complex new products Short distribution channels Few print or electronic media

– Pull strategy: mass media advertising emphasis

Consumer goods Long distribution channels Marketing message may be carried via print /

electronic media

International Marketing Mix: Price International Marketing Mix: Price

Price discrimination: demand elasticityStrategic pricing

– Predatory (quick share-of-market focus): lower prices to drive competitors out, then raise prices

– Multipoint pricing: pricing in one market may have an impact in another

market; subsidize low pricing in one market from profits in another

– Experience curve: use aggressive pricing to build volume and move firm

down experience curve (lower marginal costs)

Regulatory issues: antidumping, monopoly restriction

New Product DevelopmentNew Product DevelopmentNew product development

– High risk / high return– Technological innovation– Creative destruction

Location of R&D– Disperse R&D to trend/technology leading

marketsHigh investment on basic and applied researchStrong underlying demand; affluent consumersIntense competition

Integrate R&D, marketing and Production Ensure:

– Product development driven by customer needs– New products can be manufactured

efficiently/effectively– Time to market is minimized

Plan clearly: goals, milestones, budgets

New Product DevelopmentNew Product Development

Use cross-functional, multinationally diverse teams Span: initial concept development to market

introduction Team composition critical

– Assign heavyweight project managerHigh status in organization; high power and authorityDedicated to fullest possible extent to project

– Team should have representative from each function Physical co-location

– When appropriate?– Build team culture– Communication and conflict resolution processes

New Product DevelopmentNew Product Development

Strategic AnalysisStrategic Analysis

Why do organizations decide to enter international business? Passive entry:

Follow customers overseas Respond to enquiries from overseas Competition is in overseas markets Seek profitable growth Sell capacity “as is”


Eventually one or more of key distributors become a candidate for acquisition (FDI)

Foreign regional development organizations actively recruit FDI

Competitive pressures force examination of local assembly or production nearer to key international markets

Major international customers demand local support


Organization acquires companies that are complimentary to existing businesses

Continued growth requires regional management, development, distribution, technical and customer support


Issues involved in conducting international business become “significant”

Demands for organization’s resources increases:ManagementCashProduct adaptation or unique developmentCustomer support


Eventually, these demands force the active planning of international business by the organization – Active strategy


SWOT

Strength and Weaknesses – decisions made and controlled by management

Opportunities and Threats – business environment – events that are likely to occur

Marketing Mix (4 Ps)Marketing Mix (4 Ps)

Product Promotion Pricing Place (Distribution) – the most important

for international business entry


Place (Distribution) – the most important for international business entry:Incoterms determine where title to goods

changesTransportation to international freight carrier,

freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk


Product – usually controlled by the exporter, initially the least impacted element of the marketing mix

However, “localization” often required: approvals and certificates packaging & labeling measures, etc


Promotion – success at home leads to interest from potential importers, licensors, joint venture partners

Local knowledge essential on initial entries:Integrated market communicationTrade and consumer sales promotionSales managementTrade shows


Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers?

The remainder of the marketing mix needs to be determined in order to set prices

Export Pricing Policy IssuesExport Pricing Policy Issues

Channel length: longer channels than domestic markets, may drive up end user prices

Price influence: distribution partners negotiate

for the lowest possible “landed cost” Price-setting authority: How much pricing

authority should be given to distributors or to subsidiaries?

DumpingDumping

WTO: Sale of an imported product at ‘less than fair value’ and causes ‘material injury to a domestic industry’.

US: An unfair trade practice that results in injury, destruction, or the prevention of the establishment of an American industry.

US considers dumping when price is >5% below home market price or,

Price is below cost of production

Grey MarketingGrey Marketing

Grey (or parallel marketing) Products are imported outside of the

established distribution channel – undercutting the authorized channel pricing

Usually results from high imported prices

marketing ch. 15

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