Global Marketing

Global Marketing and R&D

Among different countries, why and how:

It makes sense to vary the attributes of products

Distribution strategy may vary

Advertising and promotion strategies may vary

Pricing strategy may vary

How globalization affects new-product

development

“A powerful force drives the world

toward a converging commonality,

and that force is technology”

(Prof. Ted Levitt, HBS)

Levitt, 1983

Globalization of Markets?

Levitt’s “Converging commonality” has not happened universally

Consumer product tastes converged less than industrial product specifications

Media, communications means have made consumers world-wide more aware of

their mutual preferences have contributed to creation of world brands have caused market segments to emerge across

some national markets--inter-market segments

Market Segmentation

The process of identifying groups of consumers

whose purchasing behavior is unique in

important ways Is based on demography, geography, social-cultural

factors, psychological factors

Allows firms to adjust marketing mix to meet the

needs of separate market segments

Marketing mix variables:

product-price-place (distribution)-promotion

Market Segmentation Across National Markets

Standardization: companies may Offer same products

Adjust balance of marketing mix to market segments with similar needs across countries

Adaptation: companies may Offer different products

Adjust balance of marketing mix to market segments with differing needs across countries

Marketing Strategy

Standardization (Global Integration Pressures)– Efficiencies through integrated R&D, production,

marketing– Control implications

Adaptation (Local Responsiveness Pressures)– Buyer behavior (cultural, economic influence, brand

perception--country of origin idea)– Laws, regulations– Local environment needs– Responsiveness to local condition shifts

Implications on marketing mix

International Marketing Mix: Product

Product: a bundle of attributes– Hamburger: meat type, taste, texture, size– Automobile: power, design, quality,

performance, comfort, size/capacity Attributes need to be adapted to a greater

or lesser extent to satisfy– Consumer preferences/tastes due to culture– Economic development levels affect

consumer behavior– National product/technical standards state

mandated

Optimal channel a company chooses to deliver the product

The most locally responsive element of marketing mix because distribution channels vary dramatically across countries Retail system: concentrated-fragmented Channel length: long, short Channel exclusivity

International Marketing Mix: Place

International Marketing Mix: Promotion

How firm communicates the product attributes / benefits to customers

Barriers to international communication Cultural barriers Source effects (country of origin effects) Noise levels

Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)

International Marketing Mix: Promotion

Push vs pull strategies Push strategy: personal selling emphasis

Industrial products; complex new products Short distribution channels Few print or electronic media

Pull strategy: mass media advertising emphasis Consumer goods Long distribution channels Marketing message may be carried via print /

electronic media

International Marketing Mix: Price

Price discrimination: demand elasticityStrategic pricing

Predatory (quick share-of-market focus): lower prices to drive competitors out, then raise prices

Multipoint pricing: pricing in one market may have an impact in another

market; subsidize low pricing in one market from profits in another

– Experience curve: use aggressive pricing to build volume and move firm

down experience curve (lower marginal costs)

Regulatory issues: antidumping, monopoly restriction

New Product Development

New product development– High risk / high return– Technological innovation– Creative destruction

Location of R&D– Disperse R&D to trend/technology leading

marketsHigh investment on basic and applied researchStrong underlying demand; affluent consumersIntense competition

Integrate R&D, marketing and Production Ensure:

– Product development driven by customer needs

– New products can be manufactured efficiently/effectively

– Time to market is minimized Plan clearly: goals, milestones, budgets

New Product Development

Use cross-functional, multinationally diverse teams Span: initial concept development to market

introduction Team composition critical

– Assign heavyweight project manager High status in organization; high power and authority Dedicated to fullest possible extent to project

– Team should have representative from each function Physical co-location

– When appropriate?– Build team culture– Communication and conflict resolution processes

New Product Development

Strategic Analysis

Why do organizations decide to enter international business? Passive entry:

Follow customers overseas Respond to enquiries from overseas Competition is in overseas markets Seek profitable growth Sell capacity “as is”

Strategic Analysis

Eventually one or more of key distributors become a candidate for acquisition (FDI)

Foreign regional development organizations actively recruit FDI

Competitive pressures force examination of local assembly or production nearer to key international markets

Major international customers demand local support

Strategic Analysis

Organization acquires companies that are complimentary to existing businesses

Continued growth requires regional management, development, distribution, technical and customer support

Strategic Analysis

Issues involved in conducting international business become “significant”

Demands for organization’s resources increases: Management Cash Product adaptation or unique development Customer support

Strategic Analysis

Eventually, these demands force the active planning of international business by the organization – Active strategy

Strategic Analysis

SWOT

Strength and Weaknesses – decisions made and controlled by management

Opportunities and Threats – business environment – events that are likely to occur

Marketing Mix (4 Ps)

Product Promotion Pricing Place (Distribution) – the most important for

international business entry

Marketing Mix (4 Ps)

Place (Distribution) – the most important for international business entry: Incoterms determine where title to goods changes Transportation to international freight carrier,

freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk

Marketing Mix (4 Ps)

Product – usually controlled by the exporter, initially the least impacted element of the marketing mix

However, “localization” often required: approvals and certificates packaging & labeling measures, etc

Marketing Mix (4 Ps)

Promotion – success at home leads to interest from potential importers, licensors, joint venture partners

Local knowledge essential on initial entries: Integrated market communication Trade and consumer sales promotion Sales management Trade shows

Marketing Mix (4 Ps)

Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers?

The remainder of the marketing mix needs to be determined in order to set prices

Export Pricing Policy Issues

Channel length: longer channels than domestic markets, may drive up end user prices  

      Price influence: distribution partners negotiate

for the lowest possible “landed cost”      Price-setting authority: How much pricing

authority should be given to distributors or to subsidiaries?

Dumping

WTO: 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.

US considers dumping when price is >5% below home market price or,

Price is below cost of production

Grey Marketing

Grey (or parallel marketing) Products are imported outside of the

established distribution channel – undercutting the authorized channel pricing

Usually results from high imported prices