Chapter 18

Global Marketing and R&D

 Learning Objectives 1 of 2
LO 18-1 Explain why it might make sense to vary the
attributes of a product from country to
country.
LO 18-2 Recognize why and how a firm’s distribution
strategy might vary among countries.
LO 18-3 Identify why and how advertising and
promotional strategies might vary among
countries.
LO 18-4 Explain why and how a firm’s pricing strategy
might vary among countries.
LO 18-5 Understand how to configure the marketing
mix globally.
©McGraw-Hill Education.
 What Is Marketing? Pulling It All Together

Source: Principles of Marketing (Arab World Edition) by Philip Kotler 17-3

 What Is The Marketing Mix?

❖ The marketing mix (the choices the firm

offers to its targeted market) is comprised
of (4 Ps).
1. Product attributes (Product)
2. Pricing strategy (Price)
3. Distribution strategy (Place)
4. Communication strategy (Promotion)

17-4
International Marketing: How it is different?
The process of International marketing remain same.
However, it is more complex and differs from domestic
marketing because it involves selling products in
different countries, with different:
❖Consumer needs, wants, demand & preferences
❖PESTLE factors
❖literacy rates
❖Currencies and many more

Firms must decide which elements of the marketing mix

can be standardized, and which need to customized.

17-5
 Should The Marketing Mix Be Changed
For Each Market?
❖Question: Are markets and brands becoming global?
❖Theodore Levitt (in 1960) argued that world markets
were becoming increasingly similar making it
unnecessary to localize the marketing mix
❖Question: Is Levitt right? Probably not!
❖Levitt’s theory has become a lightening rod in the debate
about globalization.
❖The current consensus is that while the world is moving
towards global markets, global standardization is not
possible because of
❖Cultural and economic differences among nations
❖Trade barriers and differences in product and technical
standards 17-6
 What is Market Segmentation?

❖ Market segmentation - identifying distinct

groups of consumers whose purchasing behavior
differs from others in important ways
❖ Markets can be segmented by
❖ Geography (various locations)
❖ Demography (gender, age, income level, education level)
❖ socio-cultural factors (language, religion, traditions)
❖ psychological factors (life style, activities, interest and
opinion)
❖ Two key market segmentation issues
1. The differences between countries in the structure of
market segments.
2. The existence of segments that transcend national
borders
❖ when segments transcend national borders, a global strategy is
possible . 17-7
 How Do Product Attributes Influence
Marketing Strategy?
❖ A product is like a bundle of attributes
❖ Products sell well when their attributes
match consumer needs
❖ if consumer needs were the same everywhere,
a firm could sell the same product worldwide.
❖ But consumer needs depend on
1. Culture
❖ tradition, social structure, language, religion,
education

17-8
 How Do Product
Attributes Influence
Marketing Strategy?
2. Level of economic development
❖ consumers in highly developed
countries tend to demand a lot of
extra performance attributes
❖ consumers in less developed
nations tend to prefer more basic
products
3. Product and technical standards
❖ national differences can force
firms to customize the marketing
mix
17-9
 How Does Distribution Influence
Marketing Strategy?
❖Distribution strategy refers to the means the
firm chooses for delivering the product to the
consumer.
❖How a product is delivered depends on the firm’s
market entry strategy.
❖firms that manufacturer the product locally can sell
directly to the consumer, to the retailer, or to the
wholesaler
❖firms that manufacture outside the country have the
same options plus the option of selling to an import
agent

17-10
How Does Distribution Influence
Marketing Strategy?
A Typical Distribution Strategy

17-11
 How Do Distribution Systems Differ?

❖ There are four main differences in distribution systems

1. Retail concentration – concentrated or fragmented
❖ In a concentrated retail system, a few retailers supply
most of the market – common in developed countries
❖ In a fragmented retail system there are many retailers,
no one of which has a major share of the market –
common in developing countries
2. Channel length - the number of intermediaries between
the producer and the consumer
❖ short channel - when the producer sells directly to the
consumer – common with concentrated systems
❖ long channel - when the producer sells through an
import agent, a wholesaler, and a retailer – common
with fragmented retail systems
17-12
 How Do Distribution Systems Differ?

3. Channel exclusivity – how difficult it is

for outsiders to access.
❖ Japan's system is an example of a very
exclusive system
4. Channel quality - the expertise,
competencies, and skills of established
retailers in a nation, and their ability to
sell and support the products of
international businesses
❖ the quality of retailers is good in most
developed countries, but is variable at best in
emerging markets and less developed
countries 17-13
 Why is Communication Strategy
Important?
❖Communicating product attributes to
prospective customers is a critical element
in the marketing mix
❖How a firm communicates with customers
depends partly on the choice of channel
❖Communication channels available to a firm
include
❖Direct selling
❖Sales promotion
❖Direct marketing
❖Advertising
17-14
 What are the Barriers to International
Communication?
❖ The effectiveness of a firm's international
communication can be endangered by
1. Cultural barriers - it can be difficult to
communicate messages across cultures
❖ A message that means one thing in one
country may mean something quite different
in another.
❖ Firms need to develop cross-cultural literacy,
and use local input when developing
marketing messages.

17-15
 What Are The Barriers to International
Communication?
2. Source and country of origin effects –
❖ Source effects occur when the receiver of the
message evaluates the message on the basis of
status or image of the sender.
❖ Country of origin effects - the extent to
which the place of manufacturing influences
product evaluations.
3. Noise levels - the amount of other
messages competing for a potential
consumer’s attention
❖ in highly developed countries, noise is very
high
❖ in developing countries, noise levels tend to
be lower
17-16
 How Do Firms Communicate With
Customers?
❖ Firms have to choose between two types of
communication strategies
❖ A push strategy involves taking the product directly
to the customer. It emphasizes personnel selling via:
Trade show, Direct selling in showrooms, Negotiation
with retailers to stock your product and increased
points of displays.
❖ A pull strategy involves motivating customers to
seek out your brand in an active process. It
emphasizes mass media advertising, word of mouth,
CRM and Sales promotions and discounts
17-17
How Do Firms Communicate With
Customers?

17-18
 Which Is Better –
Push Versus Pull?
❖In general, a push strategy is better
❖for industrial products and/or complex new
products
❖when distribution channels are short
❖when few print or electronic media are
available
❖A pull strategy is better
❖for consumer goods products
❖when distribution channels are long
❖when sufficient print and electronic media are
available to carry the marketing message 17-19
 Should A Firm Use Standardized
Advertising?
❖Standardized advertising makes sense when
❖Cultural differences among nations are minor.
❖it has significant economic advantages
❖creative talent is scarce and one large effort to develop
a campaign will be more successful than numerous
smaller efforts
❖brand names are global
❖Standardized advertising does not make sense
when
❖cultural differences among nations are significant
❖advertising regulations limit standardized advertising

❖ Some firms standardize parts of a campaign to capture the

benefits of global standardization, but customize others to
respond to local cultural and legal environments 17-20
What Pricing Strategy Should Firms Use?

Firms need to consider

1. Price discrimination
2. Strategic pricing
3. Regulations that affect pricing
decisions

17-21
 What Is Price Discrimination?

❖ Price discrimination - occurs when firms

charge consumers in different countries
different prices for the same product .
For price discrimination to work
❖ must be able to keep national markets
separate.
❖ countries have different demand for the
products.

17-22
 What Is Strategic Pricing?
In Strategic pricing firms set prices to achieve certain
strategic goals. It has three aspects
1. Predatory pricing - use profit gained in one market to
support aggressive pricing designed to drive competitors
out in another market
❖ after competitors have left, the firm will raise prices
2. Multi-point pricing - a firm’s pricing strategy in one
market may have an impact on a rival’s pricing strategy
in another market
❖ managers should centrally monitor pricing decisions
3. Experience curve pricing – lowering price worldwide
in an attempt to build global sales volume as rapidly as
possible, even if this means taking large losses initially
❖ firms that are further along the experience curve have
a cost advantage relative to firms further up the
curve.
17-23
 How Do Regulations Influence Pricing?

❖ A firm’s ability to set its own prices may be

limited by
1. Antidumping regulations –
❖ dumping occurs whenever a firm sells a product for a
price that is less than the cost of producing it
❖ antidumping rules set a floor under export prices and limit a
firm’s ability to pursue strategic pricing
2. Competition policy –
❖ most industrialized nations have regulations designed
to promote competition and restrict monopoly
practices
❖ can limit the prices that a firm can charge

17-24
 How Should Firms Configure The
Marketing Mix?
❖ Standardization versus customization is not an all or nothing
concept.
❖ Most firms standardize some things and customize others.
❖ Firms should consider the costs and benefits of standardizing
and customizing each element of the marketing mix
❖ Marketing mix may vary according to:
❖Local differences in culture
❖Economic conditions
❖Competitive conditions
❖Product and technical standards
❖Distribution systems
❖Government regulations
17-25