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Global Marketing, R & DGlobal Marketing, R & D
Global Marketing and R&DGlobal 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
“A powerful force drives the world
toward a converging commonality,
and that force is technology”
(Prof. Ted Levitt, HBS)
Levitt, 1983
Globalization of Markets?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 SegmentationMarket 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 Market Segmentation Across National MarketsNational 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 StrategyMarketing 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: ProductInternational 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
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: PlaceInternational Marketing Mix: Place
International Marketing Mix: PromotionInternational 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: International Marketing Mix: PromotionPromotion
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 International Marketing Mix: Price
Price discrimination: demand elasticityStrategic 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 DevelopmentNew Product DevelopmentNew product development
– High risk / high return– Technological innovation– Creative destruction
Location of R&D– Disperse R&D to trend/technology leading
marketsHigh investment on basic and applied researchStrong underlying demand; affluent consumersIntense competition
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 DevelopmentNew Product Development
Use cross-functional, multinationally diverse teams Span: initial concept development to market
introduction Team composition critical
– Assign heavyweight project managerHigh status in organization; high power and authorityDedicated 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
New Product DevelopmentNew Product Development
Strategic AnalysisStrategic 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 AnalysisStrategic 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 AnalysisStrategic Analysis
Organization acquires companies that are complimentary to existing businesses
Continued growth requires regional management, development, distribution, technical and customer support
Strategic AnalysisStrategic Analysis
Issues involved in conducting international business become “significant”
Demands for organization’s resources increases:ManagementCashProduct adaptation or unique developmentCustomer support
Strategic AnalysisStrategic Analysis
Eventually, these demands force the active planning of international business by the organization – Active strategy
Strategic AnalysisStrategic Analysis
SWOT
Strength and Weaknesses – decisions made and controlled by management
Opportunities and Threats – business environment – events that are likely to occur
Marketing Mix (4 Ps)Marketing Mix (4 Ps)
Product Promotion Pricing Place (Distribution) – the most important
for international business entry
Marketing Mix (4 Ps)Marketing Mix (4 Ps)
Place (Distribution) – the most important for international business entry:Incoterms determine where title to goods
changesTransportation to international freight carrier,
freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk
Marketing Mix (4 Ps)Marketing Mix (4 Ps)
Product – usually controlled by the exporter, initially the least impacted element of the marketing mix
However, “localization” often required: approvals and certificates packaging & labeling measures, etc
Marketing Mix (4 Ps)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 communicationTrade and consumer sales promotionSales managementTrade shows
Marketing Mix (4 Ps)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 IssuesExport 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?
DumpingDumping
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 MarketingGrey 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