Global Marketing & R&D
CH 15
Role of Marketing & R&D in international business - when product
standardization is appropriate & when it is not
Link to R& D is identifying gaps in market so new products can be
developed to fill gaps
Market segmentation & the marketing mix
Globalization of Markets
& Brands
Levitt (HBR) – provacative…but
Modern transportation and communication technologies are facilitating a
convergence of the tastes and preferences of consumers in the more advanced
countries of the world.
Trade barriers & differences in product & technical standards constrain a firm’s
ability to sell a standardized product to a global marketing using a standardized
marketing strategy
Marketing Mix
Set of choices the firm offers to targeted markets
Elements = product attributes, distribution strategy, communication strategy &
pricing strategy
Varies from country to country depending on differences in culture, economic
development, product standards, distribution channels, etc.
Market Segmentation
Identifying distinct groups of consumers whose purchasing behavior differs from
others in important ways (geography, demography, social-cultural factors,
psychological factors)
Can vary design of product, pricing strategy, distribution channel &
communication strategy from segment to segment
Maximize sales by optimizing fit between the purchasing behavior of consumers
in a given segment & the marketing mix
Structure of market segments in a country – may have no parallel in home
country (African-Brazilian, Chinese 45-55)
Market segments that transcend national borders – compelling similarities along
dimensions of age, value, lifestyles, etc. -> ability to view global marketplace as
single entity & pursue global strategy ( global youth segment)
Product Attributes
Product = bundle of attributes
Car = power, design, quality, performance, fuel consumption
& comfort; & Hotel = atmosphere, quality, comfort & service
Products sell well when attributes match consumer
needs & are priced appropriately
Influence on product attributes
Cultural Differences – tradition (food)
Economic Development – developed vs developing
Product & Technical Standards – (video equipment)
Distribution Strategy
Means chosen for delivering product to consumer
Retail Concentration
Concentrated = few retailers (US malls)
Fragmented = many w/no major share (Japan)
Channel Length
Number of intermediaries between producer & consumer
Fragmented retail systems promote growth of wholesalers & lengthen the
channel (Japan, India, China)
Internet helps shorten the channel
Channel Exclusivity
Exclusive = difficult for outsiders to access (shelf space in supermarkets)
Often based on long term relationships (P&G Japan)
Choosing a Distribution Strategy
Optimal strategy is determined by relative costs &
benefits & depends on retail concentration, channel
length & channel exclusivity
Critical link between channel length, final selling price &
firm’s profit margin (markup -> higher price or less margin)
Longer channels cut selling costs when retail sector is very
fragmented
Longer channels can influence market access with long term
relationships (Apple Computer & Japanese firms)
Communication Strategy
Communicating product attributes to
prospective customers
Communication channels = direct selling,
sales promotion, direct marketing, &
advertising
Communication strategy is partly defined by
choice of channel
Barriers to International
Communication
Cultural Barriers
A message in one country can mean something else in another
(P&G, Benneton)
Overcome by developing cross-cultural literacy
Source & Country of Origin Effect
Source Effects = Receiver of the message (consumer) evaluates
the message based on the status or image of the sender (Honda)
Country of Origin = Extent to which place of manufacturing
influences product evaluation (Hyundai cars, German cars, French
wine)
Noise Levels
Amount of other messages competing for a potential consumers
attention (US high)
Push vs Pull Strategies
Push Pull
Personal selling rather than Mass media advertising to
mass media advertising – communicate the marketing
relatively costly message to a large segment
Product type = industrial Product type = consumer goods
product or complex new
products – educate the Channel length = long, more
customer about features intermediaries need consumer
to pull product through channel
Channel length = short
Sufficient print & electronic
Media =few print or electronic media to carry the marketing
media available (or limited by message
law)
Global Advertising
For Standard Advertising Against Standard Advertising
Significant economic advantages – Cultural differences are such that a
lowers the cost of value creation by message that works in one nation
spreading cost over many countries can fail in another
Creative talent is scarce so one Advertising regulations can block
large effort better than 40-50 small implementation of standardized
advertising (Kellogg cornflakes)
Justification = many brand names
are global – project single brand
image Hybrid = select some features to
include in advertising campaigns &
localize other features -> build
international brand recognition yet
customize ads to different cultures
Pricing Strategy
Price Discrimination - Charging different prices for the same product in
different countries
Firm must be able to keep national markets separate or will have
arbitrage (cars in Europe)
Different price elasticities of demand in different countries – measure
of the responsiveness of demand for a product to changes in prices
Income Level - Consumers with limited incomes tend to be very
price conscious
Competitive conditions – Many competitors cause high elasticity
of demand (firm raises prices -> consumers will switch)
Pricing Strategy
Strategic Pricing
Predatory Pricing
Use of price as a competitive weapon to drive weaker competitors out of a
national market
Once the competitors have left market , firm can raise prices & enjoy high
profits. Usually subsidized by another market’s profits
Multipoint Pricing
Two international businesses compete against each other in two or more
national markets. Firms pricing strategy in one market may have an impact
on its rivals’ pricing strategy in another market (Kodak – Fuji)
Experience Curve Pricing
Firm will price low worldwide in attempting to build global sales volume as
rapidly as possible thus moving production down the experience curve
Regulatory Influence on Prices
Anti-Dumping Regulations
Dumping is whenever a firm sells a product for a
price that is less than the cost of producing it
Sets a floor under export prices & limits a firm’s
ability to pursue strategic pricing
Competition Policy
Nations have regulations to promote competition
& restrict monopoly practices
Regulations can be used to limit the prices a firm
can charge in a given country (Hoffman-LaRoche)
New Product Development
Competition is as much about technological
innovation as anything else – firm must stay
on leading edge of technology
Technological innovation is both creative &
destructive (computer/typewriter)
Build close links between R&D, marketing &
production
Location of R&D
Ideas for new products are stimulated by
interactions of scientific research, demand
conditions & competitive conditions
Rate of new product development is greater
where (centers in Japan, Europe, US)
More $$$ is spent on basic/applied R&D
Underlying demand is strong
Consumers are affluent
Competition is intense
Integrating R&D, Marketing &
Production
Failure 80%
Development of technology for which demand is limited
Failure to adequately commercialize promising technology
Inability to manufacture a new product cost effectively
Cross functional integration
Product development projects are driven by customer needs
New products are designed for ease of manufacture
Development costs are kept in check
Time to market is minimized
Cross-Functional Team
Composed of representatives of R&D, marketing & production
Take product development from initial concept to market introduction
Project manager who can get resources for team to succeed
