chapter seventeen global marketing and r & d. 17 - 2 mcgraw-hill/irwin international business,...
TRANSCRIPT
Chapter Seventeen
Global Marketing and R & D
17 - 2
McGraw-Hill/IrwinInternational Business, 6/e
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.
The Globalization of Markets and Brands
• Important to determine when product standardization is appropriate in an international market
• Firms may need to vary marketing mix in each different country
• Globalization may be the exception rather than the rule in many consumer goods markets and industrial markets
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Market Segmentation
• Refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways
• Segments can based on:- Geography- Demography- Socio-cultural factors- Psychological factors
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Market Segmentation
• Two main issues relating to segmentation:- Extent of differences between countries in the structure of
market segments- Existence of segments that transcend national borders
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Product Attributes
• Cultural differences• Economic development• Product and technical standards
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Cultural Differences
• Differ along dimensions such as social structure, language, religion, and education
• Impact of tradition• Some tastes and preferences becoming cosmopolitan
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Economic Development
• Consumer behavior is influenced by economic development
- Consumers in highly developed countries tend to demand extra performance attributes in their products
• Price not a factor due to high income level
- Consumers in less developed countries value basic features as more important
• Price a factor due to lower income level- Cars: no air-conditioning, power steering, power windows,
radios, and cassette players
• Product reliability is more important
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Product and Technical Standards
- Government standards can rule out mass production and marketing of a standardized product
- Differing technical standards constrain globalization of markets
• Different television signal frequencies
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Distribution Strategy
• Choice of the optimal channel for delivering a product to the consumer
- Optimal strategy is determined by the relative costs and benefits of each alternative
- Depends on differences between countries• Retail concentration• Channel length• Channel exclusivity
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Typical Distribution System
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Retail Concentration
• Concentrated system- Common in developed countries- Contributing factors: increase in car ownership,
number of households with refrigerators and freezers, and two-income households
• Fragmented system- Common in developing countries- Contributing factors: great population density with
large number of urban centers, e.g. Japan- Uneven or mountainous terrain, e.g. Nepal
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Channel Length
• Refers to number of intermediaries between the producer and the consumer
• Determined by degree to which the retail system is fragmented
- Long distribution channel- Short distribution channel
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Channel Length
• Long distribution channel- Fragmented retail system promotes growth of
wholesalers and retailers- Firms go through intermediaries such as wholesalers
to cut selling costs
• Short distribution channel- Concentrated retail system- Firms deal directly with retailers
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Channel Exclusivity
• Degree to which it is difficult for outsiders to access distribution channels
• Varies between countries- Japan - exclusive systems because personal relations,
often decades old, play an important role in stocking products
- Difficult for new firm to get shelf space as compared to an old firm
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Choosing a Distribution Strategy
• The optimal strategy is determined by the relative costs and benefits of each alternative
- Varies from country to country
• Benefits of a shorter distribution channel- The longer the channel, the greater the aggregate markup
and the higher the price that consumers are charged for the final product
- If price is an important competitive weapon the firm might choose a shorter channel
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Choosing a Distribution Strategy
• Benefits of a longer distribution channel- Cuts selling costs when the retail sector is fragmented- Longer channels can provide increased market access
• If channel quality is poor, a firm should consider what steps it could take to upgrade the quality of the channel
- This may include establishing its own distribution channel
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Communication Strategy
• Defines the process the firm will use in communicating the attributes of its product to prospective customers
Cultural barriersSource effects
Noise levels
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Barriers to International Communication
• Cultural Barriers- Develop cross-cultural literacy- Firm should use local input such as local advertising
agency and sales force
• Source and country of origin effects- Receiver of the message evaluates the message based on
status or image of the sender • Anti-Japan wave in US in 1990’s
- Place of manufacturing influences product evaluations• Often used when consumer lacks more detailed knowledge of the
product- Examples: French wines, Italian clothes, and German luxury cars
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Barriers to International Communication
• Noise levels- Amount of other messages competing for a potential
customer’s attention• Developed countries - high• Less developed countries - low
• Standardized advertising strategy execution more difficult (culture, laws)
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Push Versus Pull Strategy
• Push strategy emphasizes personal selling - Requires intense use of a sales force- Relatively costly
• Pull strategy depends on mass media advertising- Can be cheaper for a large market segment
• Determining factors of type of strategy- Product type and consumer sophistication- Channel length- Media availability
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Product Type and Consumer Sophistication
• Pull strategy- Consumer goods- Large market segment- Long distribution
channels- Mass communication has
cost advantages
• Push strategy- Industrial products or
complex new products- Direct selling allows firms
to educate users- Short distribution
channels- Used in poorer nations
for consumer goods where direct selling only way to reach consumers
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Channel Length
• Pull strategy- Long or exclusive distribution channels
• e.g. Japan
- Mass advertising to generate demand to pull product through various layers
• Push Strategy- In countries with low literacy levels to educate
consumers
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Media Availability
• Pull strategy- Relies on access to advertising media- Common in developed nations
• Push strategy- Media availability limited by law- All electronic media state owned with no commercial policy
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Global Advertising
• Standardized:- Significant economic advantages- Scarce creative talent- Many global brand names
• Non-standardized:- Cultural differences- Advertising regulations can be a restriction
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Pricing Strategy
• Three aspects of international pricing strategy- Price discrimination- Strategic pricing- Regulatory influence on prices
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Price Discrimination
• Said to occur when consumers in different countries are charged different prices for the same product
• Two conditions necessary- National markets kept separate to prevent arbitrage
• Capitalization of price differentials by purchasing product in countries where prices are lower and reselling where prices are higher
- Different price elasticities of demand in different countries
• Greater in countries with low income levels and highly competitive conditions
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Elastic and Inelastic Demand
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Strategic Pricing
• Predatory pricing- Using price as a competitive weapon to drive weaker
competition out of a national market- Firms then raise prices to enjoy high profits- Firms normally have profitable position in another
national market
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Strategic Pricing
• Multipoint pricing strategy- Two or more international firms compete against each
other in two or more national markets- A firm’s pricing strategy in one market may impact a rival in
another market• Kodak and Fuji
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Strategic Pricing
• Experience curve pricing- Firms price low worldwide to build market share- Incurred losses are made up as company moves
down experience curve, making substantial profits- Cost advantage over its less-aggressive competitors
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Regulatory Influences on Prices
• Antidumping regulations- Selling a product for a price that is less than the cost of
producing it- Antidumping rules vague, but place a floor under export
prices and limit a firm’s ability to pursue strategic pricing• Article 6 of GATT allows action against an importer if the product is
sold at ‘less than fair value’ and causes ‘material injury to a domestic industry’
• Competition policy- Regulations designed to promote competition and restrict
monopoly practices
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Configuring the Marketing Mix
Culture
Economy
Com
petition
Stan
dard
s
Distrib
ution
Gov’t Regs
Product
Attrib
utes
Dis
tribu
tion
Stra
tegy
Comm
unications
Strategy
Pricing Strategy
Differences Here
Requires Variation Here
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New Product Development
• The location of R & D- Rate of new product development greater in countries
where• More money spent on R&D• Underlying demand is strong• Consumers are affluent• Competition is intense
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Integrating R&D, Marketing and Production
• Integrating R&D, production and marketing ensures- Project development driven by customer needs- New products are designed for ease of manufacture- Development costs are kept in check- Time to market is minimized
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Integrating R&D, Marketing and Production
• High failure rate ratio- Between 33 % and 60% of new products fail to earn
adequate profits
• Reasons for failure:- Limited product demand- Failure to adequately commercialize product- Inability to manufacture product cost-effectively
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Cross-Functional Product Development Teams
• Objective of team to take a product development project from the initial concept development to market introduction
• Effective teams must have - “Heavyweight “ project manager- One member from each key function- Physically co-located to facilitate communication- Clear plan and goals- Own process for communication and conflict resolution