1. INTERNATIONAL
BUSINESS

2. Global Marketing and R&D

3. Global Marketing
Global marketing decisions are central in a firm’s tradeoff between reducing costs vs. local responsiveness
When is product standardization appropriate?
When and how should customization occur?
When and how will the marketing mix be adjusted?

4. Globalization of Markets and Brands

5. Globalization of Markets and Brands
“A powerful force drives the world
toward a converging commonality,
and that force is technology.”
Theodore Levitt, Harvard Business Review
Is this an Overstatement?

6. Most Likely The continuing persistence of
cultural and economic differences,
along with trade barriers,
act as a major brake on any trend toward
global consumer tastes and preferences
But we do have some global products and brands!

7. Market Segmentation

8. What factors should firms consider in order to target each market segment?
Product attributes
Distribution strategy
Communication strategy
Pricing strategy

9. Market Segmentation Identifying distinct groups of consumers whose
purchasing behavior differs from other groups in
important ways
Segments can based on:
geography
demography
socio-cultural factors
psychological factors
Marketing mix needs to be adjusted to reflect the differing purchasing behavior of each market segment

10. Two Related Issues….First
Market Segmentation
Two Related Issues….First
What are the differences between countries in the structure of market segments?
Might require adapting the marketing mix

11. Two Related Issues….Second
Market Segmentation
Two Related Issues….Second
Are there existing market segments that transcend national borders?
Some tastes and preferences are becoming cosmopolitan which might allow a standardized, global marketing mix
Consumers in this transcending segment must have some compelling similarities among important dimensions that translates into similar purchasing behavior

12. Product Attributes

13. Constraints on Globalization of Markets
Product Attributes
Constraints on Globalization of Markets
Cultural Differences
most important aspect is probably the role of tradition
Economic Differences
consumer behavior is influenced by the level of economic development within and between nations
Product and Technical Standards
national differences exist as non-tariff barriers

14. Cultural Differences
Countries differ along a whole range of dimensions:
social structure
language
religion
education
Most important aspect is the role of tradition
impact is greatest in foodstuffs and beverages

15. Economic Differences
Consumers in highly developed countries tend to have extra performance attributes in their products
Consumers are often unwilling to sacrifice preferred attributes for lower prices
Consumers in less developed countries tend not to demand these extra performance attributes
Consumers favor product reliability
Be cautious! Avoid stereotypes
Significant market niches may exist

16. Product and Technical Standards
Global products and markets are impeded by different:
government standards
technical standards
market characteristics

17. Distribution Strategy

18. Distribution Strategy
Determining the optimal channel configuration
for delivering a product to the consumer
Optimal strategy is determined by the
firm’s market entry strategy
relative costs and benefits of each alternative
Depends on differences between the countries:
retail concentration
channel length
channel exclusivity
channel quality

19. Typical Distribution System
FIG 17.1

20. Retail Concentration Concentrated System
Tend to exist in developed countries
Few retailers supply most of the market
Shift to large retailers from traditional small, local shops is due to the increases in :
car ownership
households with refrigerators and freezers
number of two-income households

21. Retail Concentration Fragmented System
Tend to exist in developing countries
Many retailers supply market
No single retailer has significant market share

22. The number of intermediaries between the producer and the consumer
Channel Length
The number of intermediaries between
the producer and the consumer
Partly determined by strategic choice by firm
Mostly determined by degree to which the retail system is fragmented
The more fragmented the retail system, the more costly for a firm to contact each individual retailer

23. Long Distribution Channel
Channel Length
Long Distribution Channel
Fragmented retail systems tend to lengthen channels
Greater aggregate markup and higher prices
Cuts selling costs in a fragmented retail market
Easier market access to exclusive channel

24. Short Distribution Channel
Channel Length
Short Distribution Channel
Concentrated retail systems shorten channels
Smaller aggregate markup and lower prices
Channels are shortening due to the:
Internet
Entry of large discount superstores

25. Channel Exclusivity Degree to which it is difficult for outsiders
to access the distribution channel
Exclusive channels are
often tradition bound
distributors of a single manufacturer

26. Channel Quality The expertise, competencies, and skills of established
retailers in a nation and their ability to sell and
support the products of international firms
The lack of high-quality channels may impede the entry of new or sophisticated products that need significant point-of-sale assistance and after-sales support
May require the international firm to devote large amount of resources to upgrade the channel

27. Communication Strategy

28. Communication Strategy
Communicating the attributes of its product
to prospective customers
Partly defined by the firm’s channel strategy
Firms might use a mix of
direct selling
point-of-sale promotions
mass advertising
Effectiveness of communication can be affected by
cultural barriers
source effects
noise levels

29. International Communication
Cultural Barriers
Difficult to communicate messages across cultures
both verbal and non-verbal communication
same message may not mean the same thing in different countries
Firms must overcome cultural barriers by:
developing cross-cultural literacy
using local ad agencies and sales force

30. International Communication
Source and Country of Origin Effects
Occurs when the receiver (consumer) evaluates the message based on the status or image of the sender
Country of origin effects can be positive or negative
Country of origin is often used as a cue when evaluating a product if a consumer lacks more detailed knowledge
Firms may emphasize or de-emphasize “foreign origin”

31. International Communication
Noise Levels
Amount of other messages competing for the potential consumer’s attention
Tends to reduce the probability of effective communication
Developed countries typically have high noise levels
Less-developed countries typically have low levels

32. Push vs. Pull Communication Strategies

33. Push Strategy Emphasizes personal selling rather than mass media
Requires intensive use of sales force
Relatively costly

34. Pull Strategy Depends more on mass media advertising
Can be cheaper for a large market segment

35. Push vs. Pull Communication Strategies
The relative attractiveness of push and pull strategies depends on:
product type and customer sophistication
channel length
media availability

36. Product Type and Consumer Sophistication
Pull Strategies
Favored by consumer goods firms that are selling to large segment of the market
Mass communication has cost advantage over direct selling
Push Strategies
Favored by firms selling industrial products or other complex products
Direct selling allows firm to educate the consumer

37. Channel Length Pull Strategies
Favored by firms trying to pull product through long distribution channels to avoid costly push strategies requiring direct selling
Push Strategies
Favored by firms trying sell in long distribution channels but need to overcome low literacy rates and the lack of mass advertising
Requires direct selling by distributors and sales force

38. Media Availability Pull Strategies Rely on access to advertising media
Push Strategies
Attractive in markets with limited media availability

39. Optimal Push-Pull Mix Push strategies tend to be emphasized:
for industrial products and/or complex new products
when distribution channels are short
when few print or electronic media are available
Pull strategies tend to be emphasized:
For consumer goods
When distribution channels are long
When sufficient print and electronic media are available

40. Can We Standardize Global Advertising?

41. Arguments for Standardization
Global Advertising?
Arguments for Standardization
Significant economic advantages by lowering costs
Creative talent is scarce and a large coordinated effort is better than multiple smaller efforts
Many brand names are global

42. Global Advertising? Arguments against Standardization
Cultural differences exist between nations
Messages in one country may fail in another
Advertising regulations can be a restriction

43. Legal Regulations and Constraints

44. Pricing Strategy

45. International Pricing Strategy
Three Key Aspects
Price discrimination
Strategic pricing
Regulatory influence on prices

46. Price Discrimination Whenever consumers in different countries are
charged different prices for the same product
Firms charge what the market will bear to maximize its profits
Two conditions must exist:
must be able to keep its national markets separate due to different income levels and competitive conditions
different price elasticities of demand in different markets
Elastic demand: small change in price produces large change in demand
Inelastic demand: large change in price produces small change in demand
Creates opportunity for arbitrage
Transshipments or Gray Markets

47. Strategic Pricing Predatory Pricing
Using price as a competitive weapon to drive weaker competitors out of a national market
After driving out the competitors, the firm can raise prices to enjoy higher profits
Firms must normally have a profitable position in another national market to subsidize strategy

48. Multipoint Pricing Strategy
Strategic Pricing
Multipoint Pricing Strategy
Two or more international firms compete against each other in two or more national markets
A firm’s pricing strategy in one market may impact a rival’s pricing strategy in another market
Pricing in one market may elicit a competitive response

49. Experience Curve Pricing
Strategic Pricing
Experience Curve Pricing
Firms use low worldwide prices (even at a loss) to build global sales volume as rapidly as possible
Initial losses are made up as the firm moves down the experience curve and makes substantial profits
Creates cost advantage over less-aggressive competitors

50. Regulatory Influences on Prices
Antidumping Regulations
Occurs when selling a product for a price that is less than the cost of producing it
Predatory pricing and experience curve pricing may violate regulations
Antidumping rules place a floor under export prices and limit a firm’s ability to pursue strategic pricing

51. Regulatory Influences on Prices
Competition Policy
Most nations have regulations that:
promote competition
restrict monopolistic practices
limit the prices a company can charge

52. Configuring the Marketing Mix

53. Configuring the Marketing Mix
Firms vary the elements of it’s marketing mix from country to country to accommodate differences in:
culture
economic and competitive conditions
product and technical standards
distribution systems
government regulations
However, there are significant opportunities for standardizing some elements of their marketing mix
Firms must evaluate the cost and benefits

54. Configuring the Marketing Mix
….and the central tradeoff is….
global standardization
vs.
local adaptation

55. New-Product Development

56. New Product Development
Often critical for a firm’s success
Competition often based on technological innovation
“Creative destruction” is a major competitive driver
A firm must:
apply technology to developing products that satisfy consumer needs
design products to be cost-effectively manufactured
locate R&D at locations where expertise exists

57. Location of R&D
Rate of new product development is greater in countries where:
more money spent on basic and applied R&D
underlying demand is strong
consumers are affluent
competition is intense
Leading-edge R&D is carried out worldwide
Centralization of R&D is no longer as important

58. Why Integrating R&D, Marketing and Production
High failure rate in new product development
Reasons for Failure
Development of a technology with limited demand
Failure to adequately commercialize technology
Inability to manufacture product cost-effectively

59. Integrating R&D, Marketing and Production
Insisting on tight cross-functional coordination and integration between R&D, production and marketing ensures that:
project development is driven by customer needs
new products are designed for ease of manufacture
development costs are kept in check
time to market is minimized

60. Cross-Functional Product Development Teams
Objective of the team is to take a product development project from the initial concept to market introduction
Effective teams must have
“Heavyweight” project manager with status and power
One member from each key function
Physically co-located to facilitate communication
Clear plan and goals with milestones and budgets
Team process for communication and conflict resolution