Khon Kaen University International College International

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Transcript Khon Kaen University International College International

Khon Kaen University International College
International Product and Pricing Strategy
Course number 052 201 - First semester 2012
Monday 10:40 room 732
Friday 10:40 room 823
Lecturer: Michael Cooke
office room 817
WalMart Mexico is accused of violating the FCPA because:
A) Company representatives paid facilitation fees to local building contractors (think of Southern Shrimp
B) The company is suspected of having systematically paid substantial bribes to government officials
C) The company paid ‘grease money’ to local government planning officials
D) All of the above
Host country as used in this course refers to
A) The country in which the business has headquarters
B) A foreign country in which the multinational is allowed to do business
C) Any country with a robust tourism sector
Marketing can mitigate host country political risk by which of the following?
A) Creating the perception of being a host country business or product
B) Opposing Compulsory Licensing (CL) legislation whenever it is proposed
C) Systematically bribing host government officials
D) Joining the WTO (World Trade Organization)
Foreign direct investment is a way to gain entry to certain markets, however it carries risks, such as:
A) Risk of expropriation or nationalization of assets by a host government
B) Risk of a loss of control over processes or intellectual property
C) Risk of confiscation of assets (such as for suspicion of money laundering)
D) All of the above
A small highly motivated advocacy group can affect any aspect of marketing in a foreign country
A) True
B) False
WTO rules to protect intellectual property allow exceptions for public health or emergencies
A) True
B) False
Answers: 1=B, 2=B, 3=A, 4=D, 5=A, 6=A
Homework for week 5
• Skim chapter 8 (fairly long, try to get a sense
of the contents)
• Read P&G case 8-2 (pages 287-288). Look for
the P&G trademark on supermarket goods.
• Skim the Aaker article (link in the syllabus)
How should Gulf Coast shrimpers market the
• Wally Stevens, the chief operating officer of Slade Gorton, a seafood
distributor in Boston, argues that the damage is self-inflicted. The
American Seafood Distributors Association, of which Mr. Stevens is
president, maintains that farmed shrimp is more consistent in size and
quality than domestic shrimp. He also says the domestic industry has
tried to compete on price alone—impossible, since trawlers and fuel are
so expensive—instead of marketing to a niche. The sort of sophisticated
consumers who seek out boutique pinot noirs from Oregon and artisanal
cheeses from Vermont would presumably pay a little extra for wildcaught Louisiana shrimp. The shrimpers reply that better marketing alone
won't keep them in business, and that a big advertising blitz would eat up
money few of them have.*
• The salmon fishing industry had a similar problem from salmon raised on
farms in the USA, Chile, and elsewhere. The higher cost product found a
viable lucrative niche among wealthier and health conscious consumers.
*Source: The Economist 4 July, 2004 (
Niche: Narrowly defined group of customers having unique needs.
Chapter Overview – Segmentation and
1. Reasons for International Market Segmentation
2. International Market Segmentation Approaches
3. Segmentation Scenarios
4. Bases for Country Segmentation
5. International Positioning Strategies
6. Global, Foreign, and Local Consumer Culture Positioning
Appendix – making sense of data
Note: Much of the material covered in these slides can be
found in Chapter 7 of ‘Global Marketing Management’
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
• Variation in customer needs is the primary motive
for market segmentation.
• Most companies will identify and target the most
attractive market segments that they can
effectively serve.
• In global marketing, market segmentation
becomes especially critical because of wide
divergence in cross-border consumer needs and
• Once management has chosen its target
segments, management needs to determine a
competitive positioning strategy for its products.
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
Reasons for International Market Segmentation
Country Screening (consideration of a market is based on initial screening criteria)
Global Market Research
Market Entry Decisions
Where will marketing efforts have greatest impact?
Target market segments might change due to consumer preferences or population changes
How the products or service is positioned will follow the opportunity
Resource Allocation (Exhibit 7-1)
Product launches based on shared relevant characteristics across countries
Country differences on other dimensions can hinder success
Positioning Strategy (influencing customer perception of the product relative to competitors)
Cluster countries across relevant characteristics
Focus research efforts on a representative sample
Market share clusters (increase penetration)
Consumption clusters (developing the market)
Marketing Mix Policy
– Countries in same segment might have similar mix strategy (design, pricing, promotion,
– Similarities on one dimension might be offset by differences on another (such as price
Exhibit 7-1: Market Clustering Approach for
Instant Coffee
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Requirements for International Market
– Identifiable
• Should be easy to define and measure
• Value or lifestyle measures typically difficult to gauge
– Sizable
• Segments should be large enough to be worth pursuing
• Small segments aggregated across countries might work
– Accessible
• Segments should be easy to reach
• Infrastructure differences across countries
– Stable target market behavior and composition
– Responsive – segments have unique responses
– Actionable – the required marketing mix is consistent
with the company goals and competencies
Chapter 7
Adapted from 2009 John Wiley & Sons,
International Market Segmentation Approaches
• International segmentation procedures:
– Country-as-segments or aggregate segmentation
(Exhibits 7-2 & 7-3.)
• Geographic single dimension or several dimensions
• Marketing irrelevance of many country boundaries
• Difficulty of determining which variables to use for geo segments
– Disaggregate international consumer segmentation
• Consumer segments defined by similarities along chosen
• Consumer bases might be geographically disbursed – logistical issues
– Two-stage international segmentation
• First aggregate countries (macro level) screens out countries
• Second segment consumers within the country cluster (micro)
• Market oriented and accessible
• For numerous country traits, use data reduction techniques such as factor
analysis (SAS Proc Factor).
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
Exhibit 7-2: Nestlé’s Geographic
Segmentation of the Americas
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
Exhibit 7-3: Macro-Level Country Characteristics
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Psychological basis
• Information filtering (sensory filtering)
– Occurs among even lowest organisms (react to heat, light. Other
aspects of environment ignored by primitive senses)
– Highest life forms still limited in gathering and processing
information from environment
• We learn to filter information irrelevant to a situation
• Often the most highly educated among us filter most
– We fail to see/hear or recall much of what is available to us
• Under the right conditions (context) we might recall what
we otherwise would not
• Our filtering and recall changes through life and with
• Marketers try to determine which audiences might be
receptive to the product message, and how to enable recall
• Distances between high SES among countries might be less
than between SESs within a country (life circumstances and
education factors)
Segmentation Scenarios
Universal or global segments (go beyond boundaries)
– Customers belonging to universal segments have common needs
– Could be a universal niche (example: global elite, business travelers)
– Common customer needs higher in some product categories (high-tech or travel related)
Regional segments
– Differentiated versus undifferentiated strategies apply to global segments as well
– Differentiated strategy tailors marketing to local market conditions
– An undifferentiated strategy is often followed by some high-tech companies – uniform
worldwide marketing, scale economies
Unique (diverse) segments
– Substantial differences in cross country customer preferences
– Localized marketing mix programs
– Food products may have country specific segments
• Degrees of segmentation often follow degrees of market
development (emerging markets usually have a simple consumer
market structure – high price or low price only)
Bases for Country Segmentation
Demographic variables are among the most popular criteria
Socioeconomic Variables
Per Capita income
Issues in using per capita income as an indicator:
Transactions valued in an international currency (monetization of
Official exchange rates seldom reveal true buying power within a country
Services are provided in-country using local currency
Goods not traded across borders (housing, etc)
Gray and Black Market sections of the economy (cash or barter)
Income disparities (wide gap between rich and poor) – Gini index
Chapter 7
Lower number means more income equality
Scandinavian countries have most equality (lowest index number)
Thailand, China, USA relatively unequal (higher index)
UN’s Human development index (HDI) classification
Life expectancy at birth
Adult literacy
PPP per capita income – in-country basket of goods
Socioeconomic Strata (SES) Analysis (education, consumption)
Adapted from 2009 John Wiley & Sons,
Demographics Segmentation
• Easy to measure
• Fairly accurate and easy to obtain
• The elderly are an often overlooked segment
– Unique needs
– Self perceptions (active, not old)
• Global middle class family is highly sought
– Definition is tricky
• HH income figures ignore purchasing power differences
• Vast differences between countries in how income is spent
– Chinese spend less than 5% on rent, transport, health
– US consumers spend 50%
– Income distinctions ignore education and values
Example of population clusters, from Japanese
ad agency study of Asian women (Exhibit 7-5):
Socially conscious (8%) Community oriented
My Small World (26%) Family oriented
Happy as I am (26%) Satisfied with current lifestyle
I want more (26%) Like to try new things
Look at me (13%) Ambitious, want status
– Ford Fiesta’s ‘Beautiful’ strategy in China targets which group?
• Would Ford use an identical strategy in Europe?
• Personalization versus standardization
– Note that the often ignored elderly:
• Have unique needs (wish to perceive self as active, ‘not old’)
• Are a growing % of the population in developed countries (soon up to 1/3 of
total population in some countries)
• May have high disposable income
Exhibit 7-5: Six Types of Chinese Pre-Elders
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Bases for Country Segmentation
Product Related (Exhibit 7-7)
– Attitudes toward product attributes
• Country of origin
• Status related (microwaves in living room)
– Usage rate (product consumption per capita or
per HH)
– Product penetration
• Percentage of target market that uses the product
• An often used measure of new sales potential
– Consumption infrastructure (electricity, etc.)
Chapter 7
Exhibit 7-7: Benefit Segments of Toothpaste
Market in the U.S.A., China, and Mexico
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Other Bases for Country Segmentation
Roper Consulting Valuescope Model (1998)
– Strivers (largest WW segment) have material goals
• More likely to be men
• More common in developing Asia than in developed Asia
Devout (second largest segment) emphasis on tradition and duty
• Women more than men
• Least common in Europe, highest in Saudi Arabia
Altruists (18% of all adults) interests in social issues
• Women more than men, and older people
• Latin America and Russia
Intimates value personal relationships and nuclear family
• Europe and North America (especially UK)
Fun Seekers (12% of population) more common in developed Asia (highest in Brazil)
Creative (10% of population) have strong interest in education and technology
People in different segments buy different products, use different media
– Tailor messages to parts of the population most likely to buy
– Tools for refining strategies
• Potential customers
• Reinforcing loyal customers
Chapter 7
A last thought on segments
• For many forms of marketing, the higher the
likelihood of getting a sale, the higher the cost
per target consumer.
– Before internet, mailing lists were sold with a price
per name. Marketers considered cost of sending mail
– The more specific the segment (higher likelihood of
getting a response) the higher the unit cost
– How do international Google ads fit this model?
– How does worldwide spam fit into this economic
• How does this rule change when there is no cost
to deliver a message? What sort of filtering
mechanisms would we have?
For global marketing careful segmentation is critical because:
A. Different countries have big differences in customer lifestyles
B. Marketing departments need something to do
C. Many host countries require the use of segments
D. None of the above
Motives for market segmentation include:
A. Variation in individual needs
B. Differences in how people perceive
C. Cost of delivering communication
D. All of the above
Which of the following countries is most likely to have a prosperous middle class:
A) High average income, low income differences (Sweden)
B) Low average income, low income differences (Ukraine)
C) Medium average income, high income differences (South Africa)
D) Low income, high income differences (Central African Republic)
Differences in needs and perceptions can be due to which of the following:
A) Age differences
B) Cultural differences
C) Education differences
D) All of the above
Product related country segmentation would consider attitudes toward country of origin because:
A) In some circumstances foreign products carry prestige or status
B) In some circumstances local products are preferred
C) Both A and B
D. International Marketing staff have travel expense budgets
International segmentation can involve macro level country screening and then customer screening
(micro level)
A) True
B) False
International Positioning Strategies
• Positioning: The presentation of a product or service to evoke a
positive and differentiated mental image in the consumer’s
perception (International Marketing; Czinkota and Ronkainen)
• Position: The place a product, brand or group of products occupies
in consumer’s minds relative to competing offerings. (Introduction
to Marketing 9th edition; McDaniel, Lamb, Hair)
• Effective positioning (local or global) requires:
– Finding and assessing competing products
– Understanding the important aspects of competitor positions
– Choosing a position to maximize the impact of marketing efforts
• Product differentiation involves distinguishing a
product from competitor’s products.
International Positioning Strategies
• Uniform versus Localized Positioning Strategies
– Target a universal segment
• May involve same positioning worldwide
• Might involve tailoring to different markets
– Pursue different segments in different markets
• Typically customize positioning appeals to each segment
• Universal Positioning
– Consistent image worldwide
– Can use global media
– Difficult to devise a theme that appeals across markets (differences in culture,
economics, competition, product lifecycle)
– Successful appeals may target specific buying groups
Quality or performance for business customers
Features or benefits for consumer non-durables
Quality or performance for consumer durables
User groups share common characteristics
– A mainstream brand in a home market might be upscale in overseas markets
Global, Foreign, and Local Consumer Culture
• Global consumer culture positioning (GCCP)
– Brand as a symbol of a given global consumer culture (self image of
buyer is cosmopolitan)
– Global brands might confer status in less developed economies
– High tech consumer products symbolize modernism
– Consumers share core values
• Local consumer culture positioning (LCCP)
– Brand as an intrinsic part of the local culture
• Brand is portrayed as consumed buy local people
• Brand may be depicted as using local supplies or ingredients
• Multi-local brands are perceived as local across several countries
• Foreign consumer culture positioning (FCCP)
– Brand mystique built around a specific foreign culture
• A company might employ all of these at the same time
(cosmopolitan, with foreign origins, using local ingredients, etc)
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
Exhibit 7-10: McDonald’s Promoting Its Local
Community Support in New Zealand
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Appendix: Segmentation Tools
• Segmentation techniques and tools:
– Cluster Analysis: Collection of statistical
procedures for dividing objects into groups
(clusters). The grouping is done in such a manner
that members belonging to the same group are
very similar to one another but quite distinct from
members of other groups (no overlap). (SAS Proc
Chapter 7
Copyright (c) 2009 John Wiley & Sons,
Appendix: Segmentation Tools
– Regression Analysis: In regression, one assumes that
there exists a relationship between a response
variable, Y, and one or more so-called predictor
variables, X1, X2 and so on. (SAS Proc Reg)
– The higher the R2 value, the better the ability of the
regression model to predict the data.
– With multivariate regression the user has the ability
to determine which bases are most explanatory.
Chapter 7
Exhibit 7-11: Principles of Cluster Analysis
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Exhibit 7-12: Plot of Concentration versus
Category Growth Chocolate Market
Chapter 7
Copyright (c) 2007 John Wiley & Sons,
Exhibit 7-13: Cluster Analysis
Chapter 7
Copyright (c) 2009 John Wiley & Sons,