CHAPTER 17

Global Marketing and R&D

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Learning Objectives What are the limits of globalization? Factors affecting the marketing mix-

Four P’s

Why do firms charge two different prices for the same product? What are the conditions for successful price discrimination?

Strategic pricing

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Chapter Focus Examine roles of marketing and R&D in international

business. Reduce costs of value creation. Add value by better serving customer needs.

Look at the relationship between marketing and R&D. Look at the marketing mix:

Product attributes. Distribution strategy. Communication strategy. Pricing strategy.

Set of choices the firm offers to its targeted

market.

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Globalization of Markets and Brands

“A powerful force drives the world toward a converging commonalty (sic), and that force is technology.” Theodore Levitt, Harvard Business Review. CNN and MTV.

Overstatement? Cultural and economic differences act as a

major brake on any trend toward global consumer tastes and preferences.

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Market Segmentation

Identifying distinct groups of consumers whose purchasing

behavior differs from other in important ways.

geography

demographics

Social-culturalfactors

Psychologicalfactors

Marketing mix adjusted to

reflect differingpurchasingpatterns insegments.

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Market Segmentation

Twomainissuesin the

differencesbetweencountries

Structure oftheir marketsegments.

Segments that transcend national borders.

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Product Attributes

Cultural differences. Economic differences.

Product and technical standards.

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Cultural Differences Range of dimensions:

Social structure. Language. Religion. Education.

Most important - the impact of tradition. Impact is greatest in foodstuffs and beverages. Also, scent preferences differ from country to

country. Some tastes and preferences becoming cosmopolitan:

Coffee (Japan and Great Britain). American-style frozen dinners (Europe).

Levitt’s global culture still a long way off.

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Economic Differences

Consumer behavior is influenced by economic development.

Consumers in highly developed countries tend to have extra performance attributes in their products.

Consumers in less developed countries tend not to demand these extra performance attributes.

Cars: no air-conditioning, power steering, power windows, radios and cassette players.

Product reliability is more important. Contrary to Levitt, consumers in the most

developed countries are often unwilling to sacrifice preferred attributes for lower prices.

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Government standards can prevent the introduction of global products.

Different technical standards impede global markets, as well. Come from idiosyncratic decisions

made long ago. Video equipment. Television signals.

Levitt’s prediction is still far off.

Product and Technical Standards

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Distribution Strategy Three different distribution systems:

Retail concentration Channel length. Channel exclusivity.

Choice of channel: Cost/benefit of each alternative

vary from country to country. Longer the channel, the higher the price.

But, cuts selling costs in fragmented market.

Market access. Shorter channel, lower price.

Concentrated market.

Concentrated

Fragmented

Short

No Outsiders

Long Channel

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A Typical Distribution System

Manufacturer Inside the Country

Manufacturer Outside the

Country Import Agent

Wholesale Distributor

Retail Distributor

Final Customer Figure

17.1

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Distribution Can Present Interesting Problems

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Communications Strategy

International communication occursWhen a firm uses a marketingMessage to sell its products in

another country.

Channelsdirect selling

sales promotiondirect marketing

advertising

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Effectiveness of international communications can be impacted by:

Cultural barriers. Need to develop cross-cultural literacy.

Source and country of origin effects. Receiver of the message evaluates it based upon the

status of the sender. Country of origin effects:

Emphasize/de-emphasize foreign origin. Noise levels.

Tends to reduce the effectiveness of a message. Developed countries - high. Less developed countries - low.

Push versus Pull: Push emphasizes personal selling. Pull depends on mass media advertising.

Communications Strategy

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Attractiveness of Push versus Pull Strategies

MediaAvailability.

ChannelLength.

Factors

Product Type and Consumer

Sophistication.

Pull = selling to large market segments.

Push = selling complex products.

Pull = long distribution channel.

Push = shortdistribution channel.

Pull = access toadvertising media.

May be legalRestrictions.

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Push-Pull Mix

sufficient printand electronic

media available

Push

industrial orcomplexproducts

shortdistributionchannels

few print orelectronic media

available

consumer goods

long distribution

channels

Pull

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Global Advertising Standardized:

Significant economic advantages. Scarce creative talent. Many global brand names.

Non-standardized: Messages in one country may fail in another. Advertising regulations can be a restriction.

Dealing with Country differences: Select some features for standardization and others for

localization. Saves some costs.

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Advertising in New Delhi

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Pricing Strategy

Price discrimination. Different prices, different

countries, same product. Strategic pricing. Regulatory factors:

Price controls. Antidumping.

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Pricing Strategy Price discrimination:

Charging what the market will bear. Two factors:

Must keep national markets separate Different price elasticities

Arbitrage:Charging different prices in different countries for same product.

Doesn’t always work. Ford in Germany and Belgium

Sometimes it does. Ford in UK and Belgium

Using Arbitrage

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Determinants of Demand Elasticity

Income level and competitive conditions determine elasticity. Elasticity (price) tends to be be

greater in countries with low income levels.

Elasticity (demand) tends to be greater in countries where there are many competitors.

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Elastic and Inelastic Demand Curves

Elastic Demand Curve

Inelastic Demand Curve

$

Output

Figure 17.2

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Price Discrimination

Figure 17.3

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Strategic Pricing Predatory pricing:

Using price as a competitive weapon. Multipoint pricing strategy:

When two or more international firms compete against each other in two or more national markets.

A firm’s pricing strategy in one market may impact a rival in another market.

Experience curve pricing: Firms price low worldwide to build market share.

Incurred losses are made up as company moves down experience curve.

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Regulatory Influences on Prices

Antidumping regulations: Selling a product for a price that is less

than the cost of producing it. Predatory pricing and experience curve

pricing may violate regulations. Antidumping rules place a floor under

export prices and limit a firm’s ability to pursue strategic pricing.

Competition Policy: Promote competition. Restrict monopoly practices. Can limit the prices a company can charge

in a given country.

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Dumping: GATT and the U.S.

GATT: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.

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Configuring the Marketing Mix

Culture

Economy

Com

petition S

tandard

s

Distrib

ution

Gov’t Regs

Product

Attrib

ute

s

Dis

trib

utio

n

Stra

tegy

Comm

unicatio

ns Strategy

Pricing Strategy

Differences Here

Requires Variation Here