Global marketing and R&D

Ch17

Identifying group of consumers whose purchasing behavior is different from others in an important way. Market can be segmented by (age, sex, lifestyle)

Marketing mix should be adjusted based on each market segment

This includes pricing strategy, communication , channels, pricing strategy

Market segmentation

Things that makes up a product such as design, power, performance and quality )

1. cultural differences: These make an important differences for a product

(includes language, religion, education and social structure)

2. Economic development: Consumer behavior is affected by the level of

economic development. In high developed countries consumers demand lot of extra performance attributes

3. Product and technical standards: Set by the industry or government

Product attributes

It means the choice of delivering product to consumers

Four different distribution channels based on each country

Retail concentration: Some countries got concentrated retail

system, while others had fragmented retail system

Fragmented means allot of retail, no one got a major share of the market

Distribution strategy

In developed countries there are a tendency toward concentrated retailers. Why?

Increase of car ownership Householders with big freezers These factors changed shopping habits and

facilitated the growth of large retailers Channel length: Number of intermediaries between the producers

and consumers. If producers sell directly to producers it is a short channel, but if there are a number of retailers and wholesaler it is a long channel.

Distribution strategy

Channel length depends on how the retail system is fragmented. The more fragmented the retail system the more expensive for manufacturers to make contract with each individual retailer.

This makes the channel system longer Factors that shown to shorten the channel

length are Internet Large discount supermarkets

Distribution strategy

Channel exclusivity: This means channel that is hard for others to

access. New producers find it hard to access to shelf space in supermarkets. Retailers prefer to carry existing products instead of new ones.

Channel quality :Refers to the skills of established retailers and their ability to sell and support the product.Lack of channel quality may prevent from market entry

Distribution strategy

When channel quality is poor, international business may have to pay attention to upgrading the channel quality. This can be done by providing extensive education to existing retailers, and sometimes establishing new owned channel

Distribution strategy

Which channel producers will use to reach potential consumers. Should they sell directly to consumers or go through retailers? Or may they use wholesaler? Should they use existing import agent or establish their own channel?

This depends on: Retail concentration Channel length Channel quality Channel exclusivity

Choosing distribution strategy

Generally, the longer the channel the higher the price consumers should be charged for the product.; so if manufacturers have to work with long channel, they may afford small profit margin.

So if they need t increase their profit margin and decrease the product price, they should work to shorten the distribution channel

Distribution strategy

Sometimes there are some benefits of long channel?

Cut selling cost Enter exclusive channels

Distribution strategy

Barriers to international communication:

1. Cultural barriers2. Source and country of origin effects: occurs when the receiver of the message (consumer) evaluate the message based on the sender image.So many companies may prefer to hide their foreign origins to avoid evaluating the product based on the product manufacturing country

Communication strategy

Noise levels Refers to the amount of other messages

competing for the consumers attention. In developing countries noise is very high but in less developed countries noise is less.

Communication strategy

Push and pull strategies Push selling emphasis personal selling than

mass media advertising, but using extensive personal selling is usually costly

Pull strategy depends on mass media advertising

Firms usually uses a mix of both strategies

Communication strategy

Factors that determine the choice of pull or push strategies include

1. Product type and consumers sophisticationFirms in consumer good industries that are trying to sell to large segment of the market generally favor a pull strategy. Firms that sell industrial or complex products usually use push strategy why?Direct selling allows personal selling to teach consumers about features of the product

Communication strategy

This may not be necessary in developed countries where a complex products have been in use for long time , product attributes are well understood and consumers are already sophisticated and there are high quality media channels that can provide point of sale assistance

2. Channel length: in longer distribution channels where there are many intermediaries, using selling personal will be expensive, so use pull strategy, once demand is created selling people will feel free to carry the product

Communication strategy

3. Media availability: Some countries got no good quality mass

media such as printing and electronic In general push strategy can be used

when: Selling industrial products When distribution channel is short When few print or electronic media are

available

Communication strategy

In general pull strategy can be used when:

For consumers goods When distribution channels are long When sufficient print and electronic media

are available to carry the market

Communication strategy

Standardized advertising: Spreading the fixed cost of developing

advertisement over many countries Fear about the scarcity of creative talent

some feel that one large campaign will be enough than many small campaigns

Localized advertising: Cultural difference among consumer should

be considered. Targeted messages are more effective than global advertising

Global advertising

Advertising regulations in some countries may block the implementation of standardized advertising

Global advertising

Price discrimination Means charging whatever the market will

bear, in competitive market, prices should be lower than others in the market

business may achieve price discrimination by engaging in an arbitrage

Pricing strategies

Arbitrage occurs when a company capitalize on a product differential price between two countries, by purchasing a product in a country with low price and reselling it in other country with high price

Second condition for success price discrimination is price elasticity of demand in different countries.

Price elasticity of demand measures the responsive of demand due to change in price

Pricing strategies

Demand is elastic when a small change in price causes a large change in demand.

Inelastic demand means that large change in prices causes a small change in demand.

The elasticity of demand is determined by some factors:

Income level Competitive conditions

Pricing strategies

Price elasticity tend to be higher in countries with low income level.

High competition usually results in high price elasticity.

Three main pricing strategies:Predatory pricing: using the price as a competitive weapon to drive weaker competitors out of the market, once competitors are out companies can raise the price and enjoy the high profits.

Pricing strategies

To success in predatory pricing strategies, firm should have a profitable position in other markets to support the aggressive pricing in the market it is trying to monopolize.

Multipoint pricing strategy:This happens when two or more international business compete against each others in two national markets

Pricing strategies

Pricing strategy for one firm can affect its competitors in other market. Aggressive pricing strategy done by a firm in one country may have a competitive response by competitors in other foreign markets.

Experience curve pricing: means setting low price worldwide to build global large sales volume as rapidly as possible, even if this means large losses at the mean time.

Pricing strategies

After several years, they will have cost advantage over their competitors and large profits.

Pricing strategies