Transcript Lecture-24x

Global Business Management
(MGT380)
Lecture #24
Global Marketing and Product
Development
Learning Objectives
Understand why and how distributing
strategies vary among countries
 Understand why and how a firm’s pricing
strategy might vary among countries
 Understand how the globalization of the world
economy is affecting the new product
development process within international
business

Quick recap of the last lecture
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
Globalization seems to be the exception rather than the rule in
many consumer goods markets and industrial markets.
The marketing mix (the choices the firm offers to its targeted
market) is comprised of Product attributes, Distribution
strategy, Communication strategy, Pricing strategy
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: 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
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(ii) The existence of segments that transcend national borders
when segments transcend national borders, a global strategy
is possible
Culture: tradition, social structure, language, religion, education
For example: Findus frozen food division of Nestle the Swiss
food giant, market frozen fish cakes and fingers in UK, beef
bourguignon in France, bravilio in Italy.
Level of economic development: consumers in highly developed
countries tend to demand a lot of extra performance attributes
in Product. price is not a factor due to high income level
Product and technical standards: national differences can force
firms to customize the marketing mix
Distribution strategy: the means the firm chooses for delivering
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1.
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There are four main differences in distribution systems
Retail concentration – concentrated or fragmented
Channel length - the number of intermediaries between the
producer and the consumer
Channel exclusivity – how difficult it is for outsiders to access
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
What Are The Barriers to
International Communication?
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1.
The effectiveness of a firm's international
communication can be jeopardized by
Cultural barriers - it can be difficult to
communicate messages across cultures
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
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
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, Examples:
French wines, Italian clothes, and German
luxury cars
country of origin effects - the extent to which the
place of manufacturing influences product
evaluations anti-Japan wave in US in 1990’s
What Are The Barriers to
International Communication?
3.
Noise levels - the amount of other messages
competing for a potential consumer’s attention
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in highly developed countries, noise is very high
in developing countries, noise levels tend to be lower
How Do Firms Communicate
With Customers?
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1.
2.
Firms have to choose between two types of
communication strategies
A push strategy emphasizes personnel selling
A pull strategy emphasizes mass media
advertising
Which Is Better –
Push Versus Pull?
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1.
The choice between strategies depends on
Product type and consumer sophistication


2.
Channel length

3.
a pull strategy works well for firms in consumer goods
selling to a large market segment
a push strategy works well for industrial products
a pull strategy works better with longer distribution
channels
Media availability
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a pull strategy relies on access to advertising media
a push strategy may be better when media is not easily
available
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
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
Push versus Pull
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For industrial products and/or
complex new products.
Short distribution channels.
Few print/electronic media
available
For consumer goods.
Long distribution channels.
Sufficient print/electronic
media to carry message
Push
Pull
17-14
What Is The Optimal Mix?
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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
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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
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Should A Firm Use
Standardized Advertising?
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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
Should A Firm Use
Standardized Advertising?
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Standardized advertising does not make sense when
cultural differences among nations are significant
 advertising regulations limit standardized advertising
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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
What Pricing Strategy
Should Firms Use?
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2.
3.
Firms need to consider
Price discrimination
Strategic pricing
Regulations that affect pricing decisions
Marketing Laws
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Premiums (:promotional items—toys, collectables,
souvenirs and household products—that are
linked to a product):
 No
in Austria and France and Germany. Yes in
Finland.
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Product comparisons:
 Germany
- competitor can take you to court to prove
claims made about product.
 Canada - no ‘puffery’, use the
credulous
person standard.
 United States - ‘puffery’ is ok.
17-17
What Is Price Discrimination?
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Price discrimination - occurs when firms charge
consumers in different countries different prices
for the same product
For price discrimination to work
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must be able to keep national markets separate
countries must have different price elasticity of
demand
What Is Price Discrimination?
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Price elasticity of demand – a measure of the
responsiveness of demand for a product to
changes in price
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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
What Is Price Discrimination?
Elastic and Inelastic Demand Curves
What Is Strategic Pricing?
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1.
Strategic pricing has three aspects
Predatory pricing - use profit gained in one
market to support aggressive pricing designed to
drive competitors out in another market
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after competitors have left, the firm will raise prices
and earn higher profits
What Is Strategic Pricing?
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
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3.
managers should centrally monitor pricing decisions
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
How Do Regulations
Influence Pricing?
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1.
A firm’s ability to set prices may be limited by
Antidumping regulations –
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2.
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
Competition policy –
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most industrialized nations have regulations designed to
promote competition and restrict monopoly practices
can limit the prices that a firm can charge
How Should Firms Configure
The Marketing Mix?
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Standardization versus customization is not an all or
nothing concept
 most
firms standardize some things and customize
others
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Firms should consider the costs and benefits of
standardizing and customizing each element of the
marketing mix
Summary of the lecture

1.
2.
The effectiveness of a firm's international communication can
be jeopardized by
Cultural barriers - it can be difficult to communicate
messages across cultures
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, Examples: French
wines, Italian clothes, and German luxury cars

country of origin effects - the extent to which the place
of manufacturing influences product evaluations antiJapan wave in US in 1990’s
Noise levels - the amount of other messages competing for a
potential consumer’s attention
Firms have to choose between two types of communication
strategies

1.
2.

1.
2.
3.
A push strategy emphasizes personnel selling
A pull strategy emphasizes mass media advertising
The choice between strategies depends on
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
Channel length
 a pull strategy works better with longer distribution
channels
Media availability


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
 Price discrimination - occurs when firms charge consumers in
different countries different prices for the same product