Transcript Global Business Today, 5e

Chapter 12
International Marketing and
R&D
12
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-1
Lecture/Chapter Topics
• The Globalisation of Markets and Brands
• Market Segmentation
• Product Attributes
• Distribution Strategy
• Communication Strategy
• Configuring the Marketing Mix
• New Product Development
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
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The Globalisation of Markets and
Brands
•
Theodore Levitt argued that world markets were
becoming increasingly similar, making it
unnecessary to localise the marketing mix.
•
Levitt’s theory has become a lightening rod in the
debate about globalisation.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-3
The Globalisation of Markets and
Brands
•
•
The current consensus is that although the world is
moving towards global markets, the continuing
persistence of cultural and economic differences
among nations acts as a major brake on any trend
towards global consumer tastes and preferences.
In addition, trade barriers and differences in product
and technical standards also constrain a firm's
ability to sell a standardised product to a global
market.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-4
Market Segmentation
•
Market segmentation involves identifying distinct
groups of consumers whose purchasing behaviour
differs from others in important ways.
•
Firms must adjust their marketing mix from segment
to segment.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-5
Market Segmentation
•
•
Firms also need to consider the existence of
segments that transcend national borders and
understand differences across countries in the
structure of segments.
Segments that transcend national borders include
consumers with compelling similarities that lead to
similarities in purchasing behaviour.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-6
Market Segmentation
•
•
Where there are no such similarities, firms must
customise the product, the packaging, or the way in
which the product is marketed in order to maximise
performance in the market.
Global market segments are more likely to exist in
industrial products than in consumer products.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-7
Product 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 do vary from country to
country, depending on culture and the level of
economic development.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-8
Product Attributes
• Cultural Differences
–
Countries differ along a range of cultural dimensions
including:
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tradition
social structure
language
religion
education
Among these dimensions, there is evidence of the trends
Levitt identified.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-9
Product Attributes
• Economic Development
–
–
–
A country’s level of economic development has important
marketing implications.
Firms based in highly developed countries tend to build a
lot of extra performance attributes into their products.
Consumers in less developed nations tend to prefer more
basic products.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-10
Product Attributes
• Product and Technical Standards
–
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National differences in product and technological
standards force firms to customise the marketing mix.
Differing government-mandated product standards can
rule out mass production and marketing of a standardised
product.
Differences in technical standards also constrain the
globalisation of markets.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-11
Distribution Strategy
•
•
•
A firm’s distribution strategy is a critical element of
the marketing mix.
If a firm manufactures its product in a particular
country, it can sell directly to the consumer, to the
retailer or to the wholesaler.
The same options are available to a firm that
manufactures outside the country.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-12
Distribution Strategy
A typical distribution system
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-13
Distribution Strategy
•
Differences between Countries
– Retail Concentration
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In some countries the retail system is very concentrated,
while in other countries it is fragmented.
In a concentrated system, a few retailers supply most of the
market.
In a fragmented system there are many retailers, no one of
which has a major share of the market.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-14
Distribution Strategy
• Differences between Countries (Cont’d)
–
Channel Length
 Channel length refers to the number of intermediaries
between the producer and the consumer.
 When the producer sells directly to the consumer, the
channel is very short.
 When the producer sells through an import agent, a
wholesaler and a retailer, a long channel exists.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-15
Distribution Strategy
• Differences between Countries (Cont’d)
– Channel Exclusivity
 An exclusive distribution channel is one that is difficult for
outsiders to access.
 Japan's system is an example of a very exclusive system.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-16
Distribution Strategy
• Differences between Countries (Cont’d)
– Channel Quality
 Channel quality refers to 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.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-17
Distribution Strategy
• Differences between Countries (Cont’d)
–
Choosing a Distribution Strategy
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The choice of distribution strategy determines which channel
the firm will use to reach potential consumers.
Since each intermediary in a channel adds its own markup
to the products, there is generally a critical link between
channel length and the firm's profit margin.
A long channel can be beneficial because it economises on
selling costs when the retail sector is very fragmented.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-18
Communication Strategy
•
•
Communicating product attributes to prospective
customers is a critical element in the marketing mix
and is partly determined by the channel choice.
Communication channels available to a firm include:
– Direct selling
– Sales promotion
– Direct marketing
– Advertising
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-19
Communication Strategy
• Barriers to International Communication
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–
International communication occurs whenever a firm uses
a marketing message to sell its products in another
country.
The effectiveness of a firm's international communication
can be jeopardised by:
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cultural barriers
source and country of origin effects
noise levels
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-20
Communication Strategy
• Push versus Pull Strategies
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The main choice with regard to communication strategy is
between a push strategy (emphasises personnel selling)
and a pull strategy (emphasises mass media advertising).
The choice between the strategies depends upon:
 product type and consumer sophistication
 channel length
 media availability
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-21
Communication Strategy
•
Product Type and Consumer Sophistication
– Firms in consumer goods industries that are trying to sell
to a large segment of the market tend to prefer a pull
strategy.
– Firms that sell industrial products or other complex
products favour a push strategy.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-22
Communication Strategy
• Channel Length
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Using direct selling to push a product through many
layers of a distribution channel can be very expensive.
A firm may try to pull its product through the channels by
using mass advertising to create consumer demand.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-23
Communication Strategy
• Media Availability
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A pull strategy relies on access to advertising media.
A push strategy is more attractive when there is limited
access to mass media.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-24
Communication Strategy
• The Push-Pull Mix
– Push strategies tend to be emphasised:
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for industrial products and/or complex new products
when distribution channels are short
when few print or electronic media are available
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-25
Communication Strategy
• The Push-Pull Mix (Cont’d)
– Pull strategies tend to be emphasised:
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
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for consumer goods products
when distribution channels are long
when sufficient print and electronic media are
available to carry the marketing message
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-26
Communication Strategy
• Global Advertising
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Should a firm standardise its advertising worldwide?
Standardised advertising is an option:
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If it has significant economic advantages
If creative talent is scarce and one large effort to develop a
campaign will be more successful than numerous smaller
efforts
If brand names are global
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-27
Communication Strategy
• Global Advertising (Cont’d)
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Standardised advertising is not an option:
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If cultural differences among nations are significant
If country-specific differences in advertising regulations may
block the implementation of standardised advertising
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-28
Communication Strategy
• Global Advertising (Cont’d)
–
Dealing with Country Differences
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Some firms have been trying tactics to capture the benefits
of global standardisation while responding to individual
cultural and legal environments.
A firm may select some features to include in all its
advertising campaigns while localising other features.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-29
Pricing Strategy
•
•
Pricing strategy is an important component of the
overall international marketing mix.
Price Discrimination
– A firm can maximise profits by using price discrimination
(charging consumers in different countries different prices
for the same product).
– For price discrimination to work the firm must be able to
keep national markets separate and different price
elasticities of demand must exist in different countries.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-30
Pricing Strategy
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Price Elasticity of Demand
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The price elasticity of demand is a 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.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-31
Pricing Strategy
• Elastic and Inelastic Demand Curves
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12-32
Pricing Strategy
•
The elasticity of demand is determined by a number
of factors including:
– income level
– competitive conditions
•
In general, price elasticities tend to be greater in
countries with lower income levels and higher
numbers of competitors.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-33
Pricing Strategy
•
Strategic Pricing
– Strategic pricing has three aspects:
i. Predatory pricing
ii. Multi-point pricing
iii. Experience curve pricing
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-34
Pricing Strategy
•
Predatory Pricing
– Predatory pricing involves using the profit gained in one
market to support aggressive pricing, designed to drive
competitors out, in another market.
– Once the competitors have left the market, the firm can
raise prices and enjoy high profits.
– Predatory pricing may violate antidumping regulations.
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PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-35
Pricing Strategy
• Multi-Point Pricing Strategy
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Multi-point pricing refers to the fact that a firm’s pricing
strategy in one market may have an impact on a rival’s
pricing strategy in another market.
Aggressive pricing in one market may elicit a competitive
response from a rival in another critical market.
For managers, it is important to centrally monitor pricing
decisions around the world.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-36
Pricing Strategy
•
Experience Curve Pricing
– Firms pursuing an experience curve pricing strategy on an
international scale price low worldwide in an attempt to build
global sales volume as rapidly as possible, even if this means
taking large losses initially.
– A firm using experience curve pricing believes that several
years in the future, when it has moved down the experience
curve, it will be making substantial profits and have a cost
advantage over its less aggressive competitors.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-37
Pricing Strategy
• Regulatory Influences on Prices
– The use of either price discrimination or strategic pricing
may be limited by national or international regulations.
– A firm’s freedom to set its own prices is constrained by
antidumping regulations and competition policy.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-38
Pricing Strategy
•
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
firms’ ability to pursue strategic pricing.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-39
Pricing Strategy
•
Competition Policy
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Most industrialised nations have regulations designed to
promote competition and restrict monopoly practices.
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These regulations can be used to limit the prices that a
firm can charge.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-40
Pricing Strategy
•
Competition Policy (Cont’d)
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The Australian Competition and Consumer Commission
(ACCC) enforces competition policy and monitors
predatory pricing.
The New Zealand Commerce Commission (NZCC)
administers that country’s Trade Practices Act 1974 and
monitors predatory pricing under the Act’s misuse of
market power provisions (s. 46).
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-41
Configuring the Marketing Mix
• Standardisation versus customisation is not an all or
nothing concept.
• Most firms standardise some things and customise
others.
• Decisions about what to customise and what to
standardise should be driven by a detailed examination
of the costs and benefits of doing so for each element
in the marketing mix.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-42
New Product Development
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The Location of R&D
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New product ideas come from the interaction of scientific
research, demand conditions and competitive conditions.
The rate of new-product development is greater in
countries where:
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More money is spent on basic and applied research and
development
Demand is strong
Consumers are affluent
Competition is intense
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-43
New Product Development
• Integrating R&D, Marketing and Production
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Commercialisation of new technologies in international
firms may require different versions of a new product to be
produced for different countries.
New product development efforts should be closely
coordinated with the marketing, production and materials
management functions.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-44
New Product Development
• Integrating R&D, Marketing and Production (Cont’d)
–
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Close integration between R&D and marketing is required
to ensure that product development projects are driven by
the needs of customers.
Integration between R&D and production can help a
company design products with manufacturing
requirements in mind.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-45
New Product Development
• Integrating R&D, Marketing and Production (Cont’d)
–
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Designing for manufacturing can lower costs and increase
product quality.
Integrating R&D and production can also help lower
development costs and speed products to market.
Minimising time to market and development costs may
require the simultaneous development of new products
and new processes.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-46
New Product Development
• Cross-Functional Teams
– Cross-functional integration is facilitated by cross-functional
product development teams.
– Effective cross-functional teams should:
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be led by a heavyweight project manager with status in the
organisation
have members from all the critical functional areas
have members located together
have clear goals
have an effective conflict resolution process
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-47
New Product Development
• Building Global R&D Capabilities
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R&D and marketing need to be integrated to adequately
commercialise new technologies.
This may require R&D centres 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.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-48
Summary of Main Themes
• This chapter discussed the marketing and R&D functions in
international business.
• A persistent theme of the chapter is the tension that exists
between the need to reduce costs and the need to be
responsive to local conditions, which raises costs.
Copyright  2007 McGraw-Hill Australia Pty Ltd
PPTs t/a Global Business Today 1e by Hill. Slides prepared by Fuming Jiang.
12-49