International Business
11e
By Charles W.L. Hill
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 18
Global Marketing
and R&D
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
What Is the Marketing Mix?
The marketing mix (the choices the firm
offers to its targeted market) is comprised
of
1. Product attributes
2. Distribution strategy
3. Communication strategy
4. Pricing strategy
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-3
Should the Marketing Mix Be
Changed for Each Market?
Question: Are markets and brands
becoming global?
Theodore Levitt 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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-4
Should the Marketing Mix Be
Changed for Each Market?
The current consensus is that while the
world is moving towards global markets,
global standardization is not possible
because of
cultural differences among nations
economic differences among nations
trade barriers
differences in product and technical
standards
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-5
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
demography
sociocultural factors
psychological factors
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-6
What Is Market Segmentation?
Two key market segmentation issues
1. The differences between countries in the
structure of market segments
may have to develop a unique marketing
mix to appeal to a certain segment in a
given country
2. The existence of segments that transcend
national borders
when segments transcend national
borders (known as intermarket segments),
a global strategy is possible
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-7
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-8
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-9
How Does Distribution
Influence Marketing Strategy?
Distribution strategy - 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 produce locally can sell directly to the
consumer, to the retailer, or to the wholesaler
firms that produce outside the country have the same
options plus the option of selling to an import agent
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-10
How Does Distribution
Influence Marketing Strategy?
A Typical Distribution Strategy
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-11
How Do Distribution
Systems Differ?
There are four main differences in distribution
systems
1. Retail concentration – concentrated or
fragmented
concentrated retail system has a few retailers who
supply most of the market
common in developed countries
fragmented retail system has many retailers, none of
which has a major share of the market
common in developing countries
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-12
How Do Distribution
Systems Differ?
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-13
How Do Distribution
Systems Differ?
3. Channel exclusivity – how difficult it is for
outsiders to access the channel
Japan's system is 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
good quality in most developed countries, but
variable in emerging markets and elsewhere
firms may have to devote considerable resources to
upgrading channel quality
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-14
Which Distribution Strategy
Should a Firm Choose?
The optimal strategy depends on the relative
costs and benefits of each alternative
When price is important, a shorter channel is
better
each intermediary in a channel adds its own markup
to the product
When the retail sector is very fragmented, a
long channel can be beneficial
economizes on selling costs
can offer access to exclusive channels
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-15
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-16
What Are the Barriers to
International Communication?
The effectiveness of a firm's international
communication can be jeopardized 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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-17
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
can counter negative source effects by
deemphasizing their foreign origins
country of origin effects - the extent to which
the place of manufacturing influences
product evaluations
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-18
What Are the Barriers to
International Communication?
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-19
How Do Firms Communicate
with Customers?
Firms have to choose between two types
of communication strategies
1. A push strategy emphasizes personal
selling
2. A pull strategy emphasizes mass media
advertising
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-20
Which Is Better –
Push or Pull?
The choice between strategies depends on
1. Product type and consumer sophistication
a pull strategy works well for firms in consumer
goods selling to a large market segment
a push strategy works well for industrial products
2. Channel length
a pull strategy works better with longer distribution
channels
3. Media availability
a pull strategy relies on access to advertising media
a push strategy may be better when media is not
easily available
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-21
What Is the Optimal Mix?
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
when distribution channels are long
when sufficient print and electronic media are
available to carry the marketing message
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-22
Should a Firm Use
Standardized Advertising?
Standardized advertising makes sense
when
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-23
Should a Firm Use
Standardized Advertising?
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-24
What Pricing Strategy
Should Firms Use?
Firms need to consider:
1. Price discrimination
2. Strategic pricing
3. Regulations that affect pricing decisions
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-25
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
firms must be able to keep national markets
separate
countries must have different price elasticity
of demand
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-26
What Is Price Discrimination?
Price elasticity of demand – a measure of
the responsiveness of demand for a
product to changes in price
demand is elastic when a small change in price
produces a large change in demand
demand is inelastic when a large change in
price
produces only a small change in demand
Typically, price elasticity is greater in
countries with lower income levels and larger
numbers of competitors
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-27
What Is Price Discrimination?
Elastic and Inelastic Demand
Curves
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-28
What Is Strategic Pricing?
Strategic pricing 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 and earn higher profits
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-29
What Is Strategic Pricing?
2. Multipoint 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 - price low 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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-30
How Do Regulations
Influence Pricing?
A firm’s ability to set prices may be limited by
1. Antidumping regulations –
dumping occurs when 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 charges
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-31
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-32
Levi Strauss experienced a significant financial turnaround
in the second half of the 2000s by customizing its product
attributes, distribution, pricing, and communications
strategies to the needs of its regional markets.
Consider a product that is currently struggling for market
share in your home town, be it a particular technological
gadget, item of clothing, type of beverage, or something
else. If you were hired as a consultant by the product
marketing manager, how would you adjust the marketing
mix to improve sales? What are the expected costs and
benefits of doing so?
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
The Role of International Market
Research
International market research is defined as the
systematic collection, recording, analysis, and
interpretation of data to provide knowledge that is useful
for decision making in a global company.
International market research may be performed in-
house or by external companies. Leading market
research firms include:
• Nielsen
• Kantar
• Ipsos
• NPD Group
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-34
The Role of International Market
Research
The basic data that companies want
collected in international market research
include:
1. Data on the country and potential market segments
(geography, demography, sociocultural factors, and
psychological factors)
2. Data to forecast customer demands within specific
country or world region (social, economic, consumer,
and industry trends)
3. Data to make marketing mix decisions (product,
distribution, communication, and price)
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-35
The Role of International Market
Research
International Market Research Steps
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-36
Why Is New Product
Development Important?
Product innovation should be a strategic priority
today, competition is as much about
technological innovation as anything else
The pace of technological change is faster than
ever and product life cycles are often very
short
new innovations can make existing products
obsolete, but at the same time, open the
door to a host of new opportunities
Firms need close links between R&D,
marketing, and manufacturing
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-37
Where Should
R&D Be Located?
New product ideas come from the interactions
of scientific research, demand conditions,
and competitive conditions
The rate of new product development is greater
in countries where
more money is spent on basic and applied research
and development
demand is strong
consumers are affluent
competition is intense
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-38
How Can R&D, Marketing, and
Production Be Integrated?
Since new product development has a high
failure rate, new product development efforts
should involve close coordination between
R&D, marketing, and production
Integration will ensure that
customer needs drive product development
new products are designed for ease of
manufacture
development costs are kept in check
time to market is minimized
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-39
Why Are Cross-Functional
Teams Important?
Cross-functional integration is facilitated by
cross-functional product development teams
Effective cross-functional teams should
be led by a heavyweight project manager with status
in the organization
include members from all the critical functional areas
have members located together
establish clear goals
develop an effective conflict-resolution process
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-40
How Can Firms Build
Global R&D Capabilities?
To adequately commercialize new technologies,
firms need to integrate R&D and marketing
To successfully commercialize new
technologies, firms may need to develop
different versions for different countries
So, a firm may need R&D centers in North America,
Asia, and Europe that are closely linked by formal
and informal integrating mechanisms with marketing
operations in each country of their respective regions
and with their various manufacturing facilities
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 18-41