McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Focus Examine roles of marketing and R&D in international business. Reduce costs of value creation. Add value by better serving customer needs. Look at the relationship between marketing and R&D. Look at the marketing mix: Product attributes. Distribution strategy. Communication strategy. Pricing strategy. Set of choices the firm offers to its targeted market.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Globalization of Markets and Brands “A powerful force drives the world toward a converging commonalty (sic), and that force is technology.” Theodore Levitt, Harvard Business Review. CNN and MTV. Overstatement? Cultural and economic differences act as a major brake on any trend toward global consumer tastes and preferences.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Market Segmentation Identifying distinct groups of consumers whose purchasing behavior differs from other in important ways. geography demographics Social-cultural factors Psychological factors Marketing mix adjusted to reflect differing purchasing patterns in segments.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Product Attributes Cultural differences. Economic differences. Product and technical standards.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Cultural Differences Range of dimensions: Social structure. Language. Religion. Education. Most important - the impact of tradition. Impact is greatest in foodstuffs and beverages. Also, scent preferences differ from country to country. Some tastes and preferences becoming cosmopolitan: Coffee (Japan and Great Britain). American-style frozen dinners (Europe). Levitt’s global culture still a long way off.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved 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. Contrary to Levitt, consumers in the most developed countries are often unwilling to sacrifice preferred attributes for lower prices.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Distribution Strategy Three different distribution systems: Retail concentration Channel length. Channel exclusivity. Choice of channel: Cost/benefit of each alternative vary from country to country. Longer the channel, the higher the price. But, cuts selling costs in fragmented market. Market access. Shorter channel, lower price. Concentrated market. Concentrated Fragmented Short No Outsiders Long Channel

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Communications Strategy International communication occurs When a firm uses a marketing Message to sell its products in another country. Channels direct selling sales promotion direct marketing advertising

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Attractiveness of Push versus Pull Strategies Media Availability. Channel Length. Factors Product Type and Consumer Sophistication. Pull = selling to large market segments. Push = selling complex products. Pull = long distribution channel. Push = short distribution channel. Pull = access to advertising media. May be legal Restrictions.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Global Advertising 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. Dealing with Country differences: Select some features for standardization and others for localization. Saves some costs.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Pricing Strategy Price discrimination. Different prices, different countries, same product. Strategic pricing. Regulatory factors: Price controls. Antidumping.

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved Configuring the Marketing Mix Culture Economy Competition Standards Distribution Gov’t Regs Product Attributes Distribution Strategy Communications Strategy Pricing Strategy Differences Here Requires Variation Here

McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved New Product Development Technological Innovation Creative Destructive Critical to stay on leading edge of technology Apply technology to developing products Consumers’ want. Design product for cost effective manufacture.