Transcript Global Business Management

Global Business Management
(MGT380)
Lecture #23:
Today’s topic
Global Marketing and Product Development
Learning Objectives
Understand why and how it may make sense to
vary the attributes of a product among
countries
 Appreciate why and how a firm’s distribution
strategy might vary among countries
 Understand why and how advertising and
promotional strategies vary among countries

Recap of the last lecture
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
When a firm’s competitive advantage is based on proprietary
technological know-how, the firm should avoid licensing and joint venture
arrangements unless it believes its technological advantage is only
transitory, or that it can establish its technology as the dominant design in
the industry
When a firm’s competitive advantage is based on management know-how,
the risk of losing control over the management skills is not high, and the
benefits from getting greater use of brand names is significant
Firms can establish a wholly owned subsidiary in a country by:

Using a greenfield strategy - building a subsidiary from the ground up

Using an acquisition strategy
Acquisitions are attractive because: they are quick to execute; they enable
firms to preempt their competitors; acquisitions may be less risky than
greenfield ventures
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Acquisitions can fail when: the acquiring firm overpays for the acquired firm
ii) the cultures of the acquiring and acquired firm clash iii) attempts to
realize synergies run into roadblocks and take much longer than forecast;
iv)there is inadequate pre-acquisition screening
The main advantage of a greenfield venture is that it gives the firm a
greater ability to build the kind of subsidiary company that it wants.
However, greenfield ventures are slower to establish; Greenfield ventures
are also risky
Acquisition may be better when the market already has well-established
competitors or when global competitors are interested in building a market
presence; A greenfield venture may be better when the firm needs to
transfer organizationally embedded competencies, skills, routines, and
culture

Choice of strategic partner; structure, and managing
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Exporting procedure: Three modes of importer-exporter interaction
Globalization and Markets
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
“Globalization seems to be the exception rather
than the rule in many consumer goods markets
and industrial markets;
and,
Procter and Gamble …still customizes the final
product offering and market strategy to the
conditions that pertain in individual national
markets.” - Charles W. Hill -
17-2
What Is The Marketing Mix?

The marketing mix (the choices the firm offers to
its targeted market) is comprised of
1.
2.
3.
4.
Product attributes
Distribution strategy
Communication strategy
Pricing strategy
Should The Marketing Mix Be
Changed For Each Market?

Question: Are markets and brands becoming
global?
 Theodore
Levitt argued that world markets were
becoming increasingly similar making it unnecessary to
localize the marketing mix

Question: Is Levitt right? Probably not!
 Levitt’s
theory has become a lightening rod in the
debate about globalization
Should The Marketing Mix Be
Changed For Each Market?

The current consensus is that while the world is
moving towards global markets, global
standardization is not possible because of
 cultural
differences among nations
 economic differences among nations
 trade barriers
 differences in product and technical standards
What Is Market
Segmentation?
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
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
What Is Market
Segmentation?

Two key market segmentation issues
1.
The differences between countries in the structure of
market segments

2.
may have to develop a unique marketing mix
to appeal to a certain segment in a given
country
The existence of segments that transcend national
borders

when segments transcend national borders, a
global strategy is possible
How Do Product Attributes
Influence Marketing Strategy?


A product is like a bundle of attributes
Products sell well when their attributes match
consumer needs


1.
if consumer needs were the same everywhere, a firm
could sell the same product worldwide
But, consumer needs depend on
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.
Coca-Cola markets Georgia, a cold coffee in Japan
based on traditional taste.
How Do Product Attributes
Influence Marketing Strategy?
2.
Level of economic development
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

3.
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
consumers in less developed nations tend to prefer
more basic products, Price is important
cars: no air-conditioning, power steering, power
windows, radios, and cassette players; product
reliability is more important
Product and technical standards

national differences can force firms to customize the
marketing mix
How Does Distribution
Influence Marketing Strategy?


Distribution strategy - the means the firm chooses for
delivering the product to the consumer
How a product is delivered depends on the firm’s
market entry strategy
firms that produce locally can sell directly to the consumer,
to the retailer, or to the wholesaler
 firms that produce outside the country have the same options
plus the option of selling to an import agent

How Does Distribution
Influence Marketing Strategy?
A Typical Distribution Strategy
How Do Distribution
Systems Differ?

1.
There are four main differences in distribution
systems
Retail concentration – concentrated or fragmented
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concentrated retail system, a few retailers supply most of
the market
 common in developed countries
 contributing factors: increase in car ownership, number
of households with refrigerators and freezers, and twoincome households
fragmented retail system there are many retailers, no
one of which has a major share of the market
 common in developing countries
How Do Distribution
Systems Differ?
2.
Channel length - the number of intermediaries
between the producer and the consumer

short channel - when the producer sells directly to the
consumer


common with concentrated systems
long channel - when the producer sells through an
import agent, a wholesaler, and a retailer

common with fragmented retail systems
How Do Distribution
Systems Differ?
3.
Channel exclusivity – how difficult it is for outsiders
to access


4.
Japan's system is a very exclusive system
difficult for new firm to get shelf space as compared to
an old firm
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


good in most developed countries, but variable in
emerging markets and less developed countries
firms may have to devote considerable resources to
upgrading channel quality
Which Distribution Strategy
Should A Firm Choose?


The optimal strategy depends on the relative costs
and benefits of each alternative
When price is important, a shorter channel is better


each intermediary in a channel adds its own markup to the
product
When the retail sector is very fragmented, a long
channel can be beneficial
economizes on selling costs
 can offer access to exclusive channels

Why Is Communication
Strategy Important?


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Communicating product attributes to prospective
customers is a critical element in the marketing mix
How a firm communicates with customers depends
partly on the choice of channel
Communication channels available to a firm include
direct selling
 sales promotion
 direct marketing
 advertising

What Are The Barriers to
International Communication?

1.
The effectiveness of a firm's international
communication can be jeopardized by
Cultural barriers - it can be difficult to
communicate messages across cultures


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


in highly developed countries, noise is very high
in developing countries, noise levels tend to be lower
Summary of the lecture




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





(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

1.





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
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
country of origin effects and Noise effect