1. Global Marketing and R & D
Managing Transnational Corporations
Global Marketing and
R & D

2. Opening Case Kodak entered Russia in the early 1990’s
Country was deep in the middle of a turbulent transition from a communist economy to a new democracy
Russian consumers had little knowledge of Kodak’s products
The consumer market for photography was underdeveloped
Apart from state-run stores, there was little or no infrastructure in place for distributing photographic equipment, film, and processing
Consumers were poor and lacked the ability to afford all but the most inexpensive cameras

3. Opening Case
Kodak’s entry into Russia is widely regarded as a major success because it accounts for a significant portion of $2.59 billion in international sales and growth rate of 26%
Reasons for Kodak’s success include
A clear and consistent marketing message communicated through a number of media- saving memories; you press button and we do the rest
They invested in promoting a corporate image as a firm that takes a stand against corruption and black-market practices
The product strategy has been to sell lower-end film and cameras in Russia
Encouraged major enterprises to give cameras to valued employees
Built a distribution channel through franchising – Kodak Express

4. The Globalization of Markets and Brands
Important to determine when product standardization is appropriate in an international market
Firms may need to vary marketing mix in each different country
Globalization may be the exception rather than the rule in many consumer goods markets and industrial markets due to significant differences in countries

5. Key Focus areas of this session
Market Segmentation
Distribution Strategy
Communication Strategy
Push Versus Pull Strategy
Pricing Strategy
Configuring the Marketing Mix
New Product Development
Integrating R&D, Marketing and Production

6. Market Segmentation
Refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways
Segments can based on:
Geography
Demography
Socio-cultural factors
Psychological factors

7. Market Segmentation Two main issues relating to segmentation:
Extent of differences between countries in the structure of market segments
Existence of segments that transcend national borders

8. Product Attributes Cultural differences Economic development
Product and technical standards

9. Cultural Differences
Differ along dimensions such as social structure, language, religion, and education
Impact of tradition
Some tastes and preferences becoming cosmopolitan

10. Economic Development
Consumer behavior is influenced by economic development
Consumers in highly developed countries tend to demand extra performance attributes in their products
Price not a factor due to high income level
Consumers in less developed countries value basic features as more important
Price a factor due to lower income level
Cars: no air-conditioning, power steering, power windows, radios, and cassette players
Product reliability is more important

11. Product and Technical Standards
Government standards can rule out mass production and marketing of a standardized product
Differing technical standards constrain globalization of markets
Different television signal frequencies
120 vs 220 volt equipments

12. Distribution Strategy
Choice of the optimal channel for delivering a product to the consumer
Optimal strategy is determined by the relative costs and benefits of each alternative
Depends on differences between countries
Retail concentration
Channel length
Channel exclusivity

13. Typical Distribution System
Figure 17.1, p. 590

14. Retail Concentration Concentrated system Fragmented system
Common in developed countries
Contributing factors: increase in car ownership, number of households with refrigerators and freezers, and two-income households
Fragmented system
Common in developing countries
Contributing factors: great population density with large number of urban centers, e.g. Japan
Uneven or mountainous terrain, e.g. Nepal

15. Channel Length
Refers to number of intermediaries between the producer and the consumer
Determined by degree to which the retail system is fragmented
Long distribution channel
Short distribution channel

16. Channel Length Long distribution channel Short distribution channel
Fragmented retail system promotes growth of wholesalers and retailers
Firms go through intermediaries such as wholesalers to cut selling costs
Short distribution channel
Concentrated retail system
Firms deal directly with retailers

17. Channel Exclusivity
Degree to which it is difficult for outsiders to access distribution channels
Varies between countries
Japan - exclusive systems because personal relations, often decades old, play an important role in stocking products
Difficult for new firm to get shelf space as compared to an old firm

18. Choosing a Distribution Strategy
The optimal strategy is determined by the relative costs and benefits of each alternative
Varies from country to country
Benefits of a shorter distribution channel
The longer the channel, the greater the aggregate markup and the higher the price that consumers are charged for the final product
If price is an important competitive weapon the firm might choose a shorter channel

19. Choosing a Distribution Strategy
Benefits of a longer distribution channel
Cuts selling costs when the retail sector is fragmented
Longer channels can provide increased market access
If channel quality is poor, a firm should consider what steps it could take to upgrade the quality of the channel
This may include establishing its own distribution channel

20. Communication Strategy
Defines the process the firm will use in communicating the attributes of its product to prospective customers
Cultural barriers
Source effects
Noise levels

21. Barriers to International Communication
Cultural Barriers
Develop cross-cultural literacy
Firm should use local input such as local advertising agency and sales force
Source and country of origin effects
Receiver of the message evaluates the message based on status or image of the sender
Anti-Japan wave in US in 1990’s
Place of manufacturing influences product evaluations
Often used when consumer lacks more detailed knowledge of the product
Examples: French wines, Italian clothes, and German luxury cars

22. Barriers to International Communication
Noise levels
Amount of other messages competing for a potential customer’s attention
Developed countries - high
Less developed countries - low
Standardized advertising strategy execution more difficult (culture, laws)

23. Push Versus Pull Strategy
Push strategy emphasizes personal selling
Requires intense use of a sales force
Relatively costly
Pull strategy depends on mass media advertising
Can be cheaper for a large market segment
Determining factors of type of strategy
Product type and consumer sophistication
Channel length
Media availability

24. Product Type and Consumer Sophistication
Pull strategy
Consumer goods
Large market segment
Long distribution channels
Mass communication has cost advantages
Push strategy
Industrial products or complex new products
Direct selling allows firms to educate users
Short distribution channels
Used in poorer nations for consumer goods where direct selling only way to reach consumers

25. Channel Length Pull strategy Push Strategy
Long or exclusive distribution channels
e.g. Japan
Mass advertising to generate demand to pull product through various layers
Push Strategy
In countries with low literacy levels to educate consumers

26. Media Availability Pull strategy Push strategy
Relies on access to advertising media
Common in developed nations
Push strategy
Media availability limited by law
All electronic media state owned with no commercial policy

27. Global Advertising Standardized: Non-standardized:
Significant economic advantages
Scarce creative talent
Many global brand names
Non-standardized:
Cultural differences
Advertising regulations can be a restriction

28. Pricing Strategy Three aspects of international pricing strategy
Price discrimination
Strategic pricing
Regulatory influence on prices

29. Price Discrimination
Said to occur when consumers in different countries are charged different prices for the same product
Two conditions necessary
National markets kept separate to prevent arbitrage
Capitalization of price differentials by purchasing product in countries where prices are lower and reselling where prices are higher
Different price elasticities of demand in different countries
Greater in countries with low income levels and highly competitive conditions

30. Elastic and Inelastic Demand
The price elasticity of demand is a measure of the responsiveness of demand for a product to changes in price. Demand is said to be elastic when a small change in price produces a large change in demand; it is said to be inelastic when a large change in price produces only a small change in demand. Figure 17.2 illustrates elastic and inelastic demand curves. Generally a firm can charge a higher price in a country where demand is inelastic.
Figure 17.2, p. 601

31. Strategic Pricing Predatory pricing
Using price as a competitive weapon to drive weaker competition out of a national market
Firms then raise prices to enjoy high profits
Firms normally have profitable position in another national market

32. 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 in another market
Kodak and Fuji

33. Strategic Pricing Experience curve pricing
Firms price low worldwide to build market share
Incurred losses are made up as company moves down experience curve, making substantial profits
Cost advantage over its less-aggressive competitors

34. Regulatory Influences on Prices
Antidumping regulations
Selling a product for a price that is less than the cost of producing it
Antidumping rules vague, but place a floor under export prices and limit a firm’s ability to pursue strategic pricing
Article 6 of GATT allows action against an importer if the product is sold at ‘less than fair value’ and causes ‘material injury to a domestic industry’
Competition policy
Regulations designed to promote competition and restrict monopoly practices

35. Configuring the Marketing Mix
Standards
Differences Here
Competition
Distribution
Economy
Culture
Gov’t Regs
Product Attributes
Pricing Strategy
Requires Variation Here
Communications Strategy
Distribution Strategy

36. New Product Development
The location of R & D
Rate of new product development greater in countries where
More money spent on R&D
Underlying demand is strong
Consumers are affluent
Competition is intense

37. Integrating R&D, Marketing and Production
Integrating R&D, production and marketing ensures
Project development driven by customer needs
New products are designed for ease of manufacture
Development costs are kept in check
Time to market is minimized

38. Integrating R&D, Marketing and Production
High failure rate ratio
Between 33 % and 60% of new products fail to earn adequate profits
Reasons for failure:
Limited product demand
Failure to adequately commercialize product
Inability to manufacture product cost-effectively

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

40. Looking Ahead to next session
Global Human Resource Management
The Strategic Role of International HRM
Staffing Policy
Training and Management Development
Performance Appraisal
Compensation
International Labor Relations
Please Read:
1-Cross cultural case study
2-Hindustanizaion of Levers