Global Marketing and R&D Chapter 17 © McGraw Hill Companies, Inc., 2000

Procter & Gamble in Japan © McGraw Hill Companies, Inc., 2000 17-1

Globalization and Markets “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 - © McGraw Hill Companies, Inc., 2000 17-2

Market Segmentation Identifying distinct groups of consumers whose purchasing behavior differs from others in important ways. Segmented markets: Sex, age, income, race, education. Social-cultural factors. Psychological factors. © McGraw Hill Companies, Inc., 2000 17-3

Product Attributes Cultural differences. Economic differences. Product and technical standards. © McGraw Hill Companies, Inc., 2000 17-4

Cultural Differences Most important - the impact of tradition. Impact is greatest in foodstuffs and beverages. Scent preferences differ from country to country. Some tastes and preferences becoming cosmopolitan: Coffee (Japan). American-style frozen dinners (Europe). © McGraw Hill Companies, Inc., 2000 17-5

Campbell’s International 17-6

Economic Differences Consumer behavior is influenced by economic development. Consumers in highly developed countries tend to have extra performance attributes in their products. Consumers in less developed countries tend not to demand these extra performance attributes. Cars: no air-conditioning, power steering, power windows, radios and cassette players. Product reliability is more important. © McGraw Hill Companies, Inc., 2000 17-7

Product and Technical Standards Government standards can prevent the introduction of global products. Different technical standards impede global markets, as well. Come from idiosyncratic decisions made long ago. Different television signal frequencies. © McGraw Hill Companies, Inc., 2000 17-8

Distribution Strategy Three different distribution systems: Retail consideration. Channel length. Channel exclusivity. Choice of channel: Cost/benefit of each alternative vary from country to country. Concentrated Fragmented Short Long Channel No Outsiders © McGraw Hill Companies, Inc., 2000 17-9

A Typical Distribution System Manufacturer Inside the Country Manufacturer Outside the Country Import Agent Wholesale Distributor Retail Distributor Final Customer Figure 17.1 © McGraw Hill Companies, Inc., 2000 17-10

© McGraw Hill Companies, Inc., 2000

Communications Strategy Effectiveness of international communications can be impacted by: Cultural barriers. Need to develop cross-cultural literacy. Source effects. Emphasize/De-emphasize foreign origin. Noise levels. Developed countries - high. Less developed countries - low. © McGraw Hill Companies, Inc., 2000 17-12

Foreign vs Domestic Products Depends on perception. Hide Emphasize Premium pricing French wines Country Influence on Purchase Age Percentage Influenced 18 -30 19 31 - 45 35 46 - 60 29 61+ 50 17-13

Push versus Pull Push Pull For industrial products and/or complex new products. Short distribution channels. Few print/electronic media available For consumer goods. Long distribution channels. Sufficient print/electronic media to carry message Push Pull © McGraw Hill Companies, Inc., 2000 17-14

Global Advertising Standardized: Non-standardized: Significant economic advantages. Scarce creative talent. Many global brand names. Non-standardized: Messages in one country may fail in another. Advertising regulations can be a restriction. © McGraw Hill Companies, Inc., 2000 17-15

© McGraw Hill Companies, Inc., 2000

Marketing Laws Premiums: Product comparisons: No in Austria and France and Germany. Yes in Finland. Product comparisons: Germany - competitor can take you to court to prove claims made about product. Canada - no ‘puffery’, use the credulous person standard. United States - ‘puffery’ is ok. © McGraw Hill Companies, Inc., 2000 17-17

Pricing Strategy Price discrimination: Must keep national markets separate. Different price elasticities Arbitrage:Charging different prices in different countries for same product. Doesn’t always work. Ford in Germany and Belgium Sometimes it does. Ford in UK and Belgium Using Arbitrage © McGraw Hill Companies, Inc., 2000 17-18

Determinants of Demand Elasticity Income level and competitive conditions determine elasticity. Elasticity tends to be be greater in countries with low income levels. Elasticity tends to be greater in countries where there are many competitors. © McGraw Hill Companies, Inc., 2000 17-19

Elastic and Inelastic Demand Curves $ Elastic Demand Curve Figure 17.2 Output © McGraw Hill Companies, Inc., 2000 17-20

Price Discrimination Japan United States World 17-21 Figure 17.3 Revenue and Costs Revenue and Costs Revenue and Costs 110 - 100 - 90 - 80 - 70 - 60 - 50 - 40 - 30 - 20 - 10 - 110 - 100 - 90 - 80 - 70 - 60 - 50 - 40 - 30 - 20 - 10 - 110 - 100 - 90 - 80 - 70 - 60 - 50 - 40 - 30 - 20 - 10 - Japan United States World D 43.58 +u D 10 - 20 - 30 - 40 - 50 - 60 - 70 -  MC 10 - 20 - 30 - 40 - 50 - 10 - 20 - 30 - 40 - 50 - D  MR MR +u MR   15 55 Output Output Output © McGraw Hill Companies, Inc., 2000 17-21 Figure 17.3

Strategic Pricing Predatory pricing: Multipoint pricing strategy: Using price as a competitive weapon. Multipoint pricing strategy: When 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. Experience curve pricing: Firms price low worldwide to build market share. Incurred losses are made up as company moves down experience curve. © McGraw Hill Companies, Inc., 2000 17-22

Regulatory Influences on Prices Antidumping regulations: Selling a product for a price that is less than the cost of producing it. Antidumping rules place a floor under export prices and limit a firm’s ability to pursue strategic pricing. © McGraw Hill Companies, Inc., 2000 17-23

Dumping: GATT and the U.S. GATT: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. © McGraw Hill Companies, Inc., 2000 17-24

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 © McGraw Hill Companies, Inc., 2000 17-25

The Location of R&D New product development is greater where: More money spent on R&D. Underlying demand is strong. Consumers are affluent. Competition is intense. © McGraw Hill Companies, Inc., 2000 17-26

The Need to Integrate R&D, Marketing and Production High failure rate ratio between new products development and profit goals. Reasons for failure: Limited product demand. Failure to adequately commercialize product. Inability to manufacture product cost-effectively. © McGraw Hill Companies, Inc., 2000 17-27

Cross-Functional Integration Integrating R&D, production and marketing ensures: Project development is driven by customer need. New products are designed for ease of manufacture. Development costs are kept in check. Time to market is minimized. Use cross-functional development teams. © McGraw Hill Companies, Inc., 2000 17-28