1. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved.

2. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. CHAPTER Global Marketing and R&D

3. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Key Issues Why and how should a firm adapt to different country-markets –Product/service attributes? –Advertising and promotion strategy? –Distribution strategy? –Pricing strategy? How does globalization affect the way new- product development is approached by international businesses? Slide 13-1

4. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Globalization of Markets? “A powerful force drives the world toward a converging commonality, and that force is technology” (Levitt, 1983) “Converging commonality” may not have happened universally Consumer product tastes may have converged less than industrial product specifications Media, communications means have –made consumers world-wide more aware of their mutual preferences and –contributed to creation of world brands –caused certain market segments to emerge across national market that have indeed converged--inter-market segments Slide 13-2

5. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Market Segmentation The process of identifying distinct groups of consumers whose purchasing behavior differs from other groups in important ways –Demography, geography, social-cultural factors, psychological factors –Firms adjust their marketing mix to meet the particular needs of different market segments Marketing mix variables: –Product (physical goods and/or services) –Price –place (distribution) –Promotion (advertising and promotion) Slide 13-3

6. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. International Market Segmentation Across national markets, companies may Offer the same products –and marginally adapt the balance of the marketing mix to appeal to market segments with similar needs across markets –Market segments that transcend national borders -- intermarket segments -- allow companies to offer standardized products Adapt their products –and adapt the balance of the product mix to appeal to market segments with differing needs across markets –Market segments that have materially different needs force companies to customize -- adapt -- their products Slide 13-4

7. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. International Marketing Marketing Strategy –Standardization (Global Integration Pressures) intermarket segments 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/development responsive to local condition shifts Standardization-adaptation implications on marketing mix: Product-Pricing-Promotion-Place Slide 13-5

8. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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 mandated by state Slide 13-6

9. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Optimal channel a company chooses to deliver the product 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: Place Slide 13-7

10. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. 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) Slide 13-8

11. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. International Marketing Mix: Promotion Determinants of push/pull strategies –Product type and consumer sophistication –Channel length –Media availability 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 Consumer goods Long distribution channels Marketing message can be carried via print/electronic media Slide 13-9

12. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. International Marketing Mix: Pricing 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 Slide 13-10

13. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. New Product Development New product development – High risk / high return – Technological innovation – Creative destruction Locate R&D in trend/technology leading markets – High investment on basic and applied research – Strong underlying demand; affluent consumers – Intense competition Integrate R&D, marketing and Production – Product development driven by customer needs – New products can be manufactured efficiently and effectively – Time to market is minimized Slide 13-11

14. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Use of cross-functional, nationally and culturally 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 to build team culture, communication and conflict resolution processes Clear plan, goals, milestones, budgets New Product Development Slide 13-12

15. McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Marketing Research Issues Functional Equivalence –Similar observable phenomena/activities may have different function across cultures (shopping: Japan also a social event; US mostly a chore) Conceptual Equivalence –Non-observable assumptions/concepts/ideas/constructs may not have the same meaning across cultures Instrument Equivalence –must use measures that correctly measure the same phenomenon in each culture; language key –measurement equivalence: “summer” in Australia vs UK, “middle-aged” in Somalia (life expectancy 45 - 50 yrs) vs Scandinavia (life expectancy 80-85yrs) –metric equivalence: weights and measures Slide 13-13