1. International Business Functions
© Newscast/AP Images
Chapter 16: Global Marketing and R&D

2. Learning Objectives
LO 16-1 Explain why it might make sense to vary the attributes of a product from country to country. LO 16-2 Recognize why and how a firm’s distribution strategy might vary among countries. LO 16-3 Identify why and how advertising and promotional strategies might vary among countries. LO 16-4 Explain why and how a firm’s pricing strategy might vary among countries. LO 16-5 Understand how to configure the marketing mix globally. LO 16-6 Understand the importance of international market research. LO 16-7 Describe how globalization is affecting product development.

3. Introduction 1 of 2
Marketing and R&D can be performed so they will reduce the costs of value creation and add value by better serving customer needs in the global marketplace (distribution strategy)
Global marketing function needs to consider
When product standardization is appropriate
How standardized it can be, and
When it is not in the business’s best interest to standardize a product too much

4. Introduction 2 of 2
The marketing function is to identify unmet needs in the market so that the firm can develop new products to fill those gaps
The marketing mix (the choices the firm offers to its targeted market)
Product attributes
Distribution strategy (place)
Communication strategy (promotion)
Pricing strategy

5. Globalization of Markets and Brands
In the 1980s, Theodore Levitt (Harvard Business School professor and editor of the Harvard Business Review who coined the term, “globalization”) suggested world markets were becoming increasingly similar making it unnecessary to localize the marketing mix
Most experts believe that while there is a trend towards global markets, cultural and economic differences among nations limit any trend toward global consumer tastes and preferences
Consumers may prefer local options if they exist
Trade barriers and differences in product and technical standards also limit the ability of firms to sell a standardized product to a global market
Levitt’s remarks have become a lightening rod in the debate about globalization.
Internet Extra: Mars operates in many countries around the world. The company sells some products in virtually the same way in some markets, but sells entirely different products that fill a similar need in other markets. Go the company’s site { Click on Visit our Local Sites.
Choose a couple of countries and explore the local sites.
Next, to see when new brands were developed or acquired, and to see how the company has changed some product names, go Brands. Pick a brand. Then go to a couple of countries and explore the sites for the brand. For example, compare the site for Mars in the U.S. to Mars in the U.K. How are the sites the same? How are they different? Is the product line the same in both countries? How about packaging? What do your findings imply about pressures to be locally responsive?

6. Globalization of Markets and Brands
Gardner
Benefits and Costs of standardization
Cost reductions
Loss of potential sales
Levitt’s remarks have become a lightening rod in the debate about globalization.
Internet Extra: Mars operates in many countries around the world. The company sells some products in virtually the same way in some markets, but sells entirely different products that fill a similar need in other markets. Go the company’s site { Click on Visit our Local Sites.
Choose a couple of countries and explore the local sites.
Next, to see when new brands were developed or acquired, and to see how the company has changed some product names, go Brands. Pick a brand. Then go to a couple of countries and explore the sites for the brand. For example, compare the site for Mars in the U.S. to Mars in the U.K. How are the sites the same? How are they different? Is the product line the same in both countries? How about packaging? What do your findings imply about pressures to be locally responsive?

7. Market Segmentation 1 of 2
Identifying distinct groups of consumers whose needs, wants, and purchasing behavior differs from others in important ways
Geography
Demography
Sociocultural factors – Lemon-scented Pledge in Japan
Psychological factors
Management Focus: Marketing to Black Brazil
Summary
This feature explores how companies are marketing to Brazil’s black population. Although Brazil is home to a sizable racial minority, to date companies have essentially ignored the market segment. Now however, companies are beginning to target the group using products and promotions specifically developed for the market. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. Describe the differences between the black population in the United States and the black population in Brazil. What are the implications of these differences for the Brazilian culture as a whole?
Discussion Points: Racial discrimination in the United States has made the country’s black population an identifiable subculture. In contrast, in Brazil racism has been more subtle, and the black population has not been excluded in the manner found in the United States. In fact, Brazil has encouraged marriages between blacks and whites. In the end, most African-Brazilians think of themselves as part of a culture that transcends race, rather than as black or white. Most students will probably suggest that this attitude promotes a more cohesive culture where biases toward or against certain groups are not prevalent.
2. How has Unilever targeted the black population in Brazil? How does the company’s strategy in Brazil differ from its strategy in other countries? What does your response tell you about Unilever’s overall global marketing strategy?
Discussion Points: Because Brazil’s blacks think of themselves as falling into a range of skin tones, rather than being simply black, Unilever’s approach to the Brazilian market has been to target the entire population rather than certain segments. The company’s advertisements show people with different skin tones, not just blacks or whites, and its products are labeled as being for tan and black people so as to cover a greater range of consumers. Students will probably note that this strategy indicates that Unilever is using a localization approach for its marketing.
Teaching Tip: Unilever’s web site { is an interesting one to visit. You can click on countries and brands to see how the company sells its products in different markets.
Lecture Note: To extend this discussion to include some of Unilever’s other efforts in foreign markets, consider { { and {

8. Product Attributes 2 of 4 Cultural Differences Tradition
Social structure
Language
Religion
Education
Tradition is particularly important in foodstuffs and beverages.

9. Tradition Impacts Product Offerings
Source: © Phillip Augustavo/Alamy Stock Photo
Coca-Cola responded to Japan’s traditional tastes with the beverage Georgia, a cold coffee in a can.

10. Product Attributes 3 of 4 Economic Development
Consumers in highly developed countries tend to demand a lot of extra performance attributes in their products
Consumers in less developed nations tend to prefer more basic products
Contrary to Levitt’s suggestions, consumers in most developed countries not willing to sacrifice preferred attributes for lower prices

11. Product Attributes 4 of 4 Product and Technical Standards
Regional trade agreements may influence certain regional markets to become more globalized
Differing government-mandated standards can force company to rule out mass production and constrain globalization of markets
Different technical standards for television signal frequency emerged in the 1950s that require television and video equipment to be customized to prevailing standards. RCA stumbled in the 1970s when it failed to account for this in its marketing of TVs in Asia.

12. Figure 16.1 A Typical Distribution System
A firm’s distribution strategy (the means it chooses for delivering the product to the consumer ) is a critical element of the marketing mix. If the firm manufacturers its product in the particular country, it can sell directly to the consumer, to the retailer, or to the wholesaler. The same options are available to a firm that manufactures outside the country, or the firm could sell to an import agent.
Source: C. W. L. Hill and G. T. M. Hult, International Business: Competing in the Global Marketplace (New York: McGraw-Hill Education, 2017).

13. Distribution Strategy 1 of 5
Differences Between Countries
Retail Concentration
In a concentrated system, a few retailers supply most of the market. More common in developed countries.
In a fragmented system there are many retailers, no one of which has a major share of the market
There is a tendency for greater retail concentration in developed countries. Three factors that contribute to this are the increases in car ownership, the number of households with refrigerators and freezers, and the number of two-income households.
In contrast, retail systems are very fragmented in many developing countries, which can make for interesting distribution challenges.

14. Distribution Strategy 2 of 5
Differences Between Countries continued
Channel Length
The number of intermediaries between the producer and the consumer
When the producer sells directly to the consumer, the channel is very short
When the producer sells through an import agent, a wholesaler, and a retailer, a long channel exists
Fragmented retail systems tend to have longer channels
Another factor that is shortening channel length in some countries is the entry of large discount superstores, such as Carrefour, Walmart, and Tesco.

15. Distribution Strategy 3 of 5
Differences Between Countries continued
Channel Exclusivity
An exclusive distribution channel is one that is difficult for outsiders to access
Retailers tend to prefer to carry the products of established manufacturers
Japan's system is an example of a very exclusive system
For example, it is often difficult for a new firm to get access to shelf space in supermarkets.
In Japan, relationships among manufacturers, wholesalers, and retailers often go back decades. Many of these relationships are based on the understanding that distributors will not carry the products of competing firms.

16. Distribution Strategy 4 of 5
Differences Between Countries continued
Channel Quality
The expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses
The quality of retailers is good in most developed countries, but is variable at best in emerging markets and less developed countries
A poor quality channel can impede market entry

17. Distribution Strategy 5 of 5
Choosing a Distribution Strategy
The choice depends on the relative costs and benefits of each alternative
Each intermediary adds its own markup to the products, there is a link between channel length, final selling price and profit margin
If price is important, a shorter channel is better
If a retail sector is very fragmented, a long channel is better
Consider less traditional alternatives to gain market access

18. Communication Strategy 1 of 7
Communication channels available to a firm include
Direct selling
Sales promotion
Direct marketing
Advertising
LO Identify why and how advertising and promotional strategies might vary among countries.

19. Communication Strategy 2 of 7
Barriers to International Communication
Cultural Barriers:
Can make it difficult to communicate messages across cultures
Develop cross-cultural literacy to combat this
Source and Country of Origin Effects:
Source effects: occur when the receiver of the message evaluates the message on the basis of status or image of the sender
Country of origin effects: the extent to which the place of manufacturing influences product evaluations
Noise Levels:
Refer to the amount of other messages competing for a potential consumer’s attention

20. Communication Strategy 3 of 7
Push versus Pull Strategies
A push strategy: emphasizes personal selling
A pull strategy: emphasizes mass media advertising
Factors that affect this decision
Product type and consumer sophistication
Channel length
Media availability
Management Focus: Unilever—Selling to India’s Poor
Summary
This feature explores Unilever’s innovative global marketing strategy. Unilever maintains a substantial presence in many of the world’s poorer nations where low-income levels, unsophisticated consumers, illiteracy, a fragmented retail distribution system, and unpaved roads make marketing difficult. Still, the company has managed to succeed thanks to its efforts to customize its marketing strategy to the local market. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. Discuss the effects of India’s culture on each of the components of Unilever’s marketing strategy. What can Unilever learn from its experiences in India?
Discussion Points: In India, Unilever faces numerous challenges to its marketing strategy. Income levels are low, consumers are unsophisticated and illiterate, the retail distribution system is fragmented, and the road system is poor. However, by adapting to the environment, Unilever has built a small, but successful business in the country. Because most consumers do not have access to television, the company posts advertisements in common meeting areas such as village wells and marketplaces. The company also takes part in weekly markets where it not only sells its products, but it also gives away free samples. Unilever has also made a strong effort to fit in with the country’s retail system, and stocks its products in small size packages in about 3 million stores, many of which are very tiny.
2. Is Unilever’s strategy in India a push strategy or a pull strategy? Explain.
Discussion Points: Most students will suggest that Unilever’s strategy in India is a push strategy. The country has few mass media options, and consequently has been forced to take a unique approach to developing awareness of its products among consumers. Unilever representatives frequently establish a presence in locations where people tend to congregate such as riverbanks where clothes washing takes place, or the village well or marketplace.
Teaching Tip: As noted earlier, Unilever’s web site { worth a visit. Go to the company’s Indian site by selecting it from the list available on the homepage and compare the company’s marketing efforts there to the strategy used in other countries.
Lecture Note: To learn more about Unilever’s efforts in India consider {
Video Note: While India has been enjoying greater prosperity recently, the country’s rural citizens are still very poor. To explore the gap between India’s rich and poor, consider the iGlobe India's Economy Remains Robust Despite Global Downturn.

21. Communication Strategy 4 of 7
Push versus Pull Strategies continued
Product Type and Consumer Sophistication
Consumer goods firms trying to sell to a large segment of the market tend to prefer a pull strategy
Industrial products firms or makers of other complex products favor a push strategy

22. Communication Strategy 5 of 7
Push versus Pull Strategies continued
Channel Length
The longer the channel, the more intermediaries involved
Can be expensive to use direct selling to push a product through many layers of a distribution channel
A firm may try to pull its product through the channels by using mass advertising to create consumer demand
Media Availability
A pull strategy relies on access to advertising media
A push strategy is more attractive when there is limited access to mass media

23. Communication Strategy 6 of 7
The Push-Pull Mix
Push strategies
For industrial products or complex new products
When distribution channels are short
When few print or electronic media are available
Pull strategies
For consumer goods products
When distribution channels are long
When sufficient print and electronic media are available to carry the marketing message

24. Communication Strategy 7of 7
Global Advertising
For Standardized Advertising
It has significant economic advantages
Creative talent is scarce - one large effort to develop a campaign will be more successful than many smaller efforts
Brand names are global
Against Standardized Advertising
Cultural differences among nations are significant
Country differences in advertising regulations block the implementation of standardized advertising
Some features may be in all advertising while other features are localized
Management Focus: Dove’s Global ‘Real Beauty’ Campaign
Summary
This feature explores how Unilever’s reconfigured its marketing mix for its Dove brand. Historically, Unilever had customized its products and marketing campaigns for each market, a strategy that not only resulted in duplication of effort, but also in organizational complexity. In 2003, Unilever shifted its strategy to develop a more globally standardized approach for Dove. The company now uses a basic message for the brand, and allows some customization at the local level. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. How would you describe Unilever’s approach to international markets prior to 2003? What were the advantages of this strategy? What were the drawbacks of this approach?
Discussion Points: Prior to 2003, Unilever more or less approached each market individually. The company often developed entirely different products and marketing campaigns for each market. In India for example, the company developed a shampoo designed to clean hair that had been oiled. But it also developed entirely different products for both Hong Kong and China. This strategy of customizing products, packaging, and messages to individual markets while allowing the firm to cater to the individual needs of customers also led to high costs, complexity, and confusion within the organization.
2. In 2003, Unilever adopted its Real Beauty strategy. Explain how this new strategy differed from its traditional approach to foreign markets? How should this new approach help Unilever’s international sales?
Discussion Points: Unilever’s Real Beauty strategy involved establishing a basic product and message that could be used across several markets, but that allowed for tweaking at the local level. So, rather than developing a Dove shampoo and message for the Indian market, and for the Chinese market, and so on, the company used a basic message that Dove stood for the beauty of all women, and then the product and message was adapted to local markets. So, while the basic message is the same, in the Latin America, ads might show women touching each other, but in the United States, the ad might show women standing apart from each other. Moreover, the Real Beauty message was carried through other products like body gels and skin creams allowing Unilever to further reduce its costs. So far, the new strategy seems to be working. Dove is now a leading brand in the global market place.
Teaching Tip: To see learn more about Unilever’s international operations and its Real Beauty strategy, go to {
Lecture Note: To extend this discussion, consider exploring how rival firms are selling their products internationally. To learn more, go to { { and {

25. Pricing Strategy 1 of 5 Price Discrimination
Firms can maximize profits through price discrimination
The firm must be able to keep national markets separate
Different price elasticities of demand must exist in different countries
LO 16-4 Explain why and how a firm's pricing strategy might vary among countries.

26. Pricing Strategy 2 of 5 Price Discrimination continued
Price elasticity of demand
Demand is elastic when a small change in price produces a large change in demand
Demand is inelastic when a large change in price produces only a small change in demand
Elasticity of demand is determined by income level and competitive conditions
Price elasticities tend to be greater in countries with lower income levels and more competitors

27. Pricing Strategy 3 of 5 Strategic Pricing Predatory pricing
The profit gained in one market is used to support aggressive pricing designed to drive competitors out in another market
Multi-point pricing
A firm’s pricing strategy in one market may have an impact on a rival’s pricing strategy in another market
Aggressive pricing in one market can prompt a competitive response from a rival in another market
Central monitoring of pricing decisions around the world is important
Strategic pricing involves pricing aimed at giving a company a competitive advantage over its rivals.

28. Pricing Strategy 4 of 5 Strategic Pricing continued
Experience curve pricing: pricing low worldwide in an attempt to build global sales volume as rapidly as possible, even if this means taking large losses initially
Firms believe that several years in the future, after moving down the experience curve, they will be making substantial profits and have a cost advantage over less aggressive competitors

29. Pricing Strategy 5 of 5 Regulatory Influences on Prices
Antidumping regulations
Antidumping rules set a floor under export prices and limit firms’ ability to pursue strategic pricing
Competition policy
Many developed nations have regulations promoting competition and restricting monopoly practices
Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing it.

30. International Market Research
The systematic collection, recording, analysis, and interpretation of data to provide knowledge that is useful for decision making in a global company
Translation of questionnaires and reports
Accounting for cultural and environmental differences
LO Understand the importance of international market research.

31. Figure 16.3 International Market Research Steps
Source: C. W. L. Hill and G. T. M. Hult, International Business: Competing in the Global Marketplace (New York: McGraw-Hill Education, 2017).
Defining the research objectives includes both (1) defining the research problem and (2) setting objectives for the international market research.
Determining the data sources that will address specific research problems and ultimately achieve the objectives is often not an easy task, especially if the international market research spans more than one country market. In market research, we talk about two forms of data that can be used: primary and secondary data.
Assessing the costs and benefits of the research often relates to the cost of collecting primary data that can address the research problem and objectives directly versus using available secondary data. If secondary data are available, such data are typically available as a less costly alternative to collecting primary data.
Collecting the data simply refers to gathering data via primary or secondary methods that address the research problem and objectives that the global company has established.
Analyzing and interpreting the research begins when the data have been collected.
Reporting the research findings is a way to communicate the overall results of the international market research project

32. Product Development 1 of 5
Firms need to develop and market new products
Technological innovation is important in new product development
Technology can make a host of new products available
Technology can make established products obsolete overnight
Product life cycles are shorter than in the past because technological innovation generates “creative destruction”
LO 16-7 Describe how globalization is affecting product development.
Firms need to invest in R&D and apply the technology to developing products that meet consumer needs, and that can be manufactured in a cost-effective way.

33. Product Development 2 of 5
The Location of R&D
New product ideas come from the interactions of scientific research, demand conditions, and competitive conditions
New-product development is greater when
More is spent on basic and applied research and development
Demand is strong
Consumers are affluent
Competition is intense
Over the past 25 years, things have been changing quickly. The U.S. monopoly on new-product development has weakened considerably. Although U.S. firms are still at the leading edge of many new technologies, Asian and European firms are also strong players. As a result, it is often no longer appropriate to consider the United States as the lead market. Because leading-edge research is now carried out in many locations around the world, the argument for centralizing R&D activity in the United States is not as strong as it was three decades ago.

34. Product Development 3 of 5
Integrating R&D, Marketing, and Production
Tight cross-functional integration helps a company
Product development projects are driven by customer needs
New products designed for ease of manufacture
Development costs are kept in check
Time to market is minimized

35. Product Development 4 of 5
Cross-Functional Teams
Be led by a heavyweight project manager with status in the organization
Include members from all the critical functional areas
Have members located geographically together
Have clear plan and goals
Each team needs to develop its own processes for communication and conflict resolution
Cross-functional integration is facilitated by cross-functional product development teams.

36. Product Development 5 of 5
Building Global R&D Capabilities
R&D and marketing need to be integrated to adequately commercialize new technologies
Many firms establish a global network of R&D centers to develop the basic technologies that will become new products
These technologies are then applied by local R&D groups in regional or country units

37. Summary In this chapter we have
Explained why it might make sense to vary the attributes of a product from country to country.
Recognized why and how a firm’s distribution strategy might vary among countries.
Identified why and how advertising and promotional strategies might vary among countries.
Explained why and how a firm’s pricing strategy might vary among countries.
Understood how to configure the marketing mix globally.
Understood the importance of international market research.
Described how globalization is affecting product development.