Marketing Ch. 15
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Transcript Marketing Ch. 15
Global Marketing, R & D
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
Levitt, 1983
“A powerful force drives the world
toward a converging commonality,
and that force is technology”
(Prof. Ted Levitt, HBS)
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
International Marketing Mix: Place
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: 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 elasticity
Strategic 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
markets
High
investment on basic and applied research
Strong underlying demand; affluent consumers
Intense competition
New Product Development
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
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
and Weaknesses – decisions made
and controlled by management
Strength
– business
environment – events that are likely to
occur
Opportunities and Threats
Marketing Mix (4 Ps)
Product
Promotion
Pricing
(Distribution) – the most important
for international business entry
Place
Marketing Mix (4 Ps)
(Distribution) – the most important
for international business entry:
Place
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)
– usually controlled by the exporter,
initially the least impacted element of the
marketing mix
Product
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