International Business

An Asian Perspective
By
Charles W.L. Hill
Chow-Hou Wee
Krishna Udayasankar
 Chapter 17

Global Marketing
and R&D

McGraw-Hill/Irwin Copyright © 2011 by the McGraw-Hill Companies, Inc. All rights reserved.
 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

17-3
 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
 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

17-4
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
 socio-cultural factors
 psychological factors
 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

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 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

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 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

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 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

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 How Does Distribution
Influence Marketing Strategy?
A Typical Distribution Strategy

17-9
 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

17-10
 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
 firms may have to devote considerable resources to
upgrading channel quality

17-11
 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 products
 When the retail sector is very fragmented, a long
channel can be beneficial
 economizes on selling costs
 can offer access to exclusive channels

17-12
 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

17-13
 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

17-14
 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
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

17-15
 How Do Firms Communicate
With Customers?
 Firms have to choose between two types of
communication strategies
1. A push strategy emphasizes personnel
selling
2. A pull strategy emphasizes mass media
advertising

17-16
 Which Is Better –
Push Versus 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

17-17
 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 products
 when distribution channels are long
 when sufficient print and electronic media are available
to carry the marketing message

17-18
 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
 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

17-19
 What Pricing Strategy
Should Firms Use?
 Firms need to consider
1. Price discrimination
2. Strategic pricing
2. Regulations that affect pricing decisions

17-20
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 must have different price elasticities of demand -
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 elasticities are greater in countries with lower
income levels and larger numbers of competitors

17-21
What Is Price Discrimination?
Elastic and Inelastic Demand Curves

17-22
 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
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 - 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

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

17-25
 Why Is New Product
Development Important?
 Firms today need to make product innovation a
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

17-26
 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

17-27
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

17-28
 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

17-29
 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 in their regions, and with
the various manufacturing facilities

17-30
 Review Question
Which of the following is not an element in
the marketing mix?

a) product attributes
b) communication strategy
c) distribution strategy
d) production strategy

17-31
 Review Question
The main differences between distribution
systems include all of the following except

a) retail concentration
b) product attributes
c) channel length
d) channel exclusivity

17-32
 Review Question
Standardized advertising makes sense in all of the
following situations except

a) when cultural differences among nations are

significant
b) when a firm is trying to save money
c) when creative talent is scarce and one large effort
to develop a campaign will be more successful
than numerous smaller efforts
d) when brand names are global
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 Review Question
A pull strategy is best

a) for industrial products

b) when distribution channels are short
c) when sufficient print and electronic media
are available to carry the marketing
message
d) for complex new products
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 Review Question
A firm is using _________ when it uses a pricing
strategy aimed at giving a company a
competitive advantage over its rivals.

a) predatory pricing
b) multipoint pricing
c) experience curve pricing
d) strategic pricing

17-35
 Review Question
Which of the following does not promote new
product development?

a) spending more money on basic and applied

research and development
b) weak demand
c) affluent consumers
d) intense competition

17-36