Global Marketing, R & D This is a test

Global 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

Levitt, 1983 “A powerful force drives the world toward a converging commonality, and that force is technology” (Prof. Ted Levitt, HBS)

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 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 National 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 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: 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

International Marketing Mix: Place 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: 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: Promotion 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 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

New Product Development High risk / high return Technological innovation Creative destruction Location of R&D Disperse R&D to trend/technology leading markets High investment on basic and applied research Strong underlying demand; affluent consumers Intense competition

New Product Development 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 Development Use cross-functional, multinationally 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 When appropriate? Build team culture Communication and conflict resolution processes

Strategic 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 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 Analysis Organization acquires companies that are complimentary to existing businesses Continued growth requires regional management, development, distribution, technical and customer support

Strategic Analysis Issues involved in conducting international business become “significant” Demands for organization’s resources increases: Management Cash Product adaptation or unique development Customer support

Strategic Analysis Eventually, these demands force the active planning of international business by the organization – Active strategy

Strategic 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) Product Promotion Pricing Place (Distribution) – the most important for international business entry

Marketing Mix (4 Ps) Place (Distribution) – the most important for international business entry: Incoterms determine where title to goods changes Transportation to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk

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) Promotion – success at home leads to interest from potential importers, licensors, joint venture partners Local knowledge essential on initial entries: Integrated market communication Trade and consumer sales promotion Sales management Trade shows

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 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?

Dumping 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 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