1. International Business 11e
By Charles W.L. Hill
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

2. Global Marketing and R&D
Chapter 18
Global Marketing and R&D

3. What Is the Marketing Mix?
The marketing mix (the choices the firm offers to its targeted market) is comprised of
Product attributes
Distribution strategy
Communication strategy
Pricing strategy

4. Should the Marketing Mix Be Changed for Each Market?
Question: Are markets and brands becoming global?
Theodore Levitt argued that world markets were becoming increasingly similar, making it unnecessary to localize the marketing mix
Question: Is Levitt right? Probably not!
Levitt’s theory has become a lightening rod in the debate about globalization
LO 18-1: Explain why it might make sense to vary the attributes of a product from country to country.

5. Should the Marketing Mix Be Changed for Each Market?
The current consensus is that while the world is moving towards global markets, global standardization is not possible because of
cultural differences among nations
economic differences among nations
trade barriers
differences in product and technical standards

6. What Is Market Segmentation?
Market segmentation - identifying distinct groups of consumers whose purchasing behavior differs from others in important ways
Markets can be segmented by
geography
demography
sociocultural factors
psychological factors

7. What Is Market Segmentation?
Two key market segmentation issues
The differences between countries in the structure of market segments
may have to develop a unique marketing mix to appeal to a certain segment in a given country
The existence of segments that transcend national borders
when segments transcend national borders (known as intermarket segments), a global strategy is possible
Management Focus: Marketing to Black Brazil 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.

8. How Do Product Attributes Influence Marketing Strategy?
A product is like a bundle of attributes
Products sell well when their attributes match consumer needs
if consumer needs were the same everywhere, a firm could sell the same product worldwide
But, consumer needs depend on
Culture
tradition, social structure, language, religion, education
LO 18-1: Explain why it makes sense to vary the attributes of a product from country to country.

9. How Do Product Attributes Influence Marketing Strategy?
Level of economic development
consumers in highly developed countries tend to demand a lot of extra performance attributes
consumers in less-developed nations tend to prefer more basic products
Product and technical standards
national differences can force firms to customize the marketing mix
Consumer behavior is influenced by economic development.
consumers in highly developed countries tend to demand extra performance attributes in their products
price is not a factor due to high income level
consumers in less developed countries value basic features as more important
price is a factor due to lower income level
cars: no air-conditioning, power steering, power windows, radios, and CD players
product reliability is more important

10. How Does Distribution Influence Marketing Strategy?
Distribution strategy - the means the firm chooses for delivering the product to the consumer
How a product is delivered depends on the firm’s market-entry strategy
firms that produce locally can sell directly to the consumer, to the retailer, or to the wholesaler
firms that produce outside the country have the same options plus the option of selling to an import agent
LO 18-2: Recognize why and how a firm’s distribution strategy might vary among countries.

11. How Does Distribution Influence Marketing Strategy?
A Typical Distribution Strategy

12. How Do Distribution Systems Differ?
There are four main differences in distribution systems
Retail concentration – concentrated or fragmented
concentrated retail system has a few retailers who supply most of the market
common in developed countries
fragmented retail system has many retailers, none of which has a major share of the market
common in developing countries
Concentrated system:
common in developed countries
contributing factors: increase in car ownership, number of households with refrigerators and freezers, and two-income households
Fragmented system:
common in developing countries
contributing factors: great population density with large number of urban centers, e.g. Japan
uneven or mountainous terrain, e.g. Nepal

13. How Do Distribution Systems Differ?
Channel length - the number of intermediaries between the producer and the consumer
short channel - when the producer sells directly to the consumer
common with concentrated systems
long channel - when the producer sells through an import agent, a wholesaler, and a retailer
common with fragmented retail systems

14. How Do Distribution Systems Differ?
Channel exclusivity – how difficult it is for outsiders to access the channel
Japan's system is a very exclusive system
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
good quality in most developed countries, but variable in emerging markets and elsewhere
firms may have to devote considerable resources to upgrading channel quality
Degree to which it is difficult for outsiders to access distribution channels.
Varies between countries:
Japan - exclusive systems because personal relations, often decades old, play an important role in stocking products
difficult for new firm to get shelf space as compared to an old firm

15. Which Distribution Strategy Should a Firm Choose?
The optimal strategy depends on the relative costs and benefits of each alternative
When price is important, a shorter channel is better
each intermediary in a channel adds its own markup to the product
When the retail sector is very fragmented, a long channel can be beneficial
economizes on selling costs
can offer access to exclusive channels

16. Why Is Communication Strategy Important?
Communicating product attributes to prospective customers is a critical element in the marketing mix
How a firm communicates with customers depends partly on the choice of channel
Communication channels available to a firm include
direct selling
sales promotion
direct marketing
advertising
LO 18-3: Identify why and how advertising and promotional strategies might vary among countries.

17. What Are the Barriers to International Communication?
The effectiveness of a firm's international communication can be jeopardized by
Cultural barriers - it can be difficult to communicate messages across cultures
a message that means one thing in one country may mean something quite different in another
firms need to develop cross-cultural literacy and use local input when developing marketing messages

18. What Are the Barriers to International Communication?
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
can counter negative source effects by deemphasizing their foreign origins
country of origin effects - the extent to which the place of manufacturing influences product evaluations
Cultural Barriers:
develop cross-cultural literacy
firm should use local input, such as local advertising agency and sales force
Source and country of origin effects:
receiver of the message evaluates the message based on status or image of the sender
anti-Japan wave in United States in 1990s
place of manufacturing influences product evaluations
often used when consumer lacks more detailed knowledge of the product
Examples: French wines, Italian clothes, and German luxury cars

19. What Are the Barriers to International Communication?
Noise levels - the amount of other messages competing for a potential consumer’s attention
in highly developed countries, noise is very high
in developing countries, noise levels tend to be lower

20. How Do Firms Communicate with Customers?
Firms have to choose between two types of communication strategies
A push strategy emphasizes personal selling
A pull strategy emphasizes mass media advertising

21. Which Is Better – Push or Pull?
The choice between strategies depends on
Product type and consumer sophistication
a pull strategy works well for firms in consumer goods selling to a large market segment
a push strategy works well for industrial products
Channel length
a pull strategy works better with longer distribution channels
Media availability
a pull strategy relies on access to advertising media
a push strategy may be better when media is not easily available
Pull strategy:
Consumer goods
Large market segment
Long distribution channels
Mass communication has cost advantages
Push strategy:
Industrial products or complex new products
Direct selling allows firms to educate users
Short distribution channels
Used in poorer nations for consumer goods where direct selling is the only way to reach consumers
Long or exclusive distribution channels
Japan, for example
Mass advertising to generate demand to pull product through various layers
Push Strategy:
In countries with low literacy levels to educate consumers

22. What Is the Optimal Mix? In general, a push strategy is better
for industrial products and/or complex new products
when distribution channels are short
when few print or electronic media are available
A pull strategy is better
for consumer goods
when distribution channels are long
when sufficient print and electronic media are available to carry the marketing message
Management Focus: Unilever—Selling to India’s Poor 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.

23. Should a Firm Use Standardized Advertising?
Standardized advertising makes sense when
it has significant economic advantages
creative talent is scarce and one large effort to develop a campaign will be more successful than numerous smaller efforts
brand names are global

24. Should a Firm Use Standardized Advertising?
Standardized advertising does not make sense when
cultural differences among nations are significant
advertising regulations limit standardized advertising
Some firms standardize parts of a campaign to capture the benefits of global standardization but customize others to respond to local cultural and legal environments
Management Focus: Dove’s Global ‘Real Beauty” Campaign describes how Unilever developed a global brand, but at the same time allowed for local differences. Prior to its ‘Real Beauty’ strategy, the company had customized its product and message for each market.

25. What Pricing Strategy Should Firms Use?
Firms need to consider:
Price discrimination
Strategic pricing
Regulations that affect pricing decisions
LO 18-4: Explain why and how a firm’s pricing strategy might vary among countries.

26. What Is Price Discrimination?
Price discrimination - occurs when firms charge consumers in different countries different prices for the same product
For price discrimination to work
firms must be able to keep national markets separate
countries must have different price elasticity of demand

27. What Is Price Discrimination?
Price elasticity of demand – a measure of the responsiveness of demand for a product to changes in price
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
Typically, price elasticity is greater in countries with lower income levels and larger numbers of competitors

28. What Is Price Discrimination?
Elastic and Inelastic Demand Curves

29. What Is Strategic Pricing?
Strategic pricing has three aspects
Predatory pricing - use profit gained in one market to support aggressive pricing designed to drive competitors out in another market
after competitors have left, the firm will raise prices and earn higher profits

30. What Is Strategic Pricing?
Multipoint pricing - a firm’s pricing strategy in one market may have an impact on a rival’s pricing strategy in another market
managers should centrally monitor pricing decisions
Experience curve pricing - price low worldwide in an attempt to build global sales volume as rapidly as possible, even if this means taking large losses initially
firms that are further along the experience curve have a cost advantage relative to firms further up the curve

31. How Do Regulations Influence Pricing?
A firm’s ability to set prices may be limited by
Antidumping regulations –
dumping occurs when a firm sells a product for a price that is less than the cost of producing it
antidumping rules set a floor under export prices and limit a firm’s ability to pursue strategic pricing
Competition policy –
most industrialized nations have regulations designed to promote competition and restrict monopoly practices
can limit the prices that a firm charges

32. How Should Firms Configure the Marketing Mix?
Standardization versus customization is not an all-or-nothing concept
most firms standardize some things and customize others
Firms should consider the costs and benefits of standardizing and customizing each element of the marketing mix
LO 18-5: Understand how to configure the marketing mix globally.
Management Focus: Levi Strauss Goes Local explores how Levi Strauss, the manufacturer of blue jeans, changed its international marketing strategy to regain its competitiveness in the mid-2000s. Levi Strauss had watched its sales fall from $7.1 billion in 1996 to just $4 billion in The company had failed to keep up with changes in the fashion market, and it was out of touch with its consumers. A three-part turnaround strategy was implemented, and the company has experienced a turnaround.

33. Think Like a Manager
Levi Strauss experienced a significant financial turnaround in the second half of the 2000s by customizing its product attributes, distribution, pricing, and communications strategies to the needs of its regional markets. Consider a product that is currently struggling for market share in your home town, be it a particular technological gadget, item of clothing, type of beverage, or something else. If you were hired as a consultant by the product marketing manager, how would you adjust the marketing mix to improve sales? What are the expected costs and benefits of doing so?
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

34. The Role of International Market Research
International market research is defined as the systematic collection, recording, analysis, and interpretation of data to provide knowledge that is useful for decision making in a global company.
International market research may be performed in-house or by external companies. Leading market research firms include:
Nielsen
Kantar
Ipsos
NPD Group
LO 18-6: Understand the importance of international market research.

35. The Role of International Market Research
The basic data that companies want collected in international market research include:
Data on the country and potential market segments (geography, demography, sociocultural factors, and psychological factors)
Data to forecast customer demands within specific country or world region (social, economic, consumer, and industry trends)
Data to make marketing mix decisions (product, distribution, communication, and price)
LO 18-6: Understand the importance of international market research.

36. The Role of International Market Research
International Market Research Steps
Defining the research objectives includes both (1) defining the research problem and (2) setting objectives for the international market research.
Determining the data sources includes determining whether to use primary data (data collected by the global company and/or its recruited international market research agency for the purpose of addressing the research problem and objectives defined by the company) or secondary data (data that have been collected previously by organizations, people, or agencies for purposes other than specifically addressing the research problem and objectives at hand)
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.
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. The two mechanisms to collect data are quantitative and qualitative data collection. Quantitative methods include experiments, clinical trials, observing and recording events, and administering surveys with closed-end questions. Qualitative methods include in-depth interviews, observation methods, and document reviews.
Analyzing and interpreting the research involves a number of complex processes to use the technique that best addresses the research problem and interpret the data according to the values, beliefs, norms, and artifacts that affect a respondent’s answers in a certain world region, country, and/or subculture.
Reporting the research findings is a way to communicate the overall results of the international market research project. Such reports often include information about customers, competitors, countries, the industry, and the environment that affect how the global company develops an appropriate marketing mix for the targeted international market segment.

37. Why Is New Product Development Important?
Product innovation should be a strategic priority
today, competition is as much about technological innovation as anything else
The pace of technological change is faster than ever and product life cycles are often very short
new innovations can make existing products obsolete, but at the same time, open the door to a host of new opportunities
Firms need close links between R&D, marketing, and manufacturing
LO 18-7: Describe how the globalization of the world economy is affecting product development.

38. Where Should R&D Be Located?
New product ideas come from the interactions of scientific research, demand conditions, and competitive conditions
The rate of new product development is greater in countries where
more money is spent on basic and applied research and development
demand is strong
consumers are affluent
competition is intense

39. How Can R&D, Marketing, and Production Be Integrated?
Since new product development has a high failure rate, new product development efforts should involve close coordination between R&D, marketing, and production
Integration will ensure that
customer needs drive product development
new products are designed for ease of manufacture
development costs are kept in check
time to market is minimized

40. Why Are Cross-Functional Teams Important?
Cross-functional integration is facilitated by cross-functional product development teams
Effective cross-functional teams should
be led by a heavyweight project manager with status in the organization
include members from all the critical functional areas
have members located together
establish clear goals
develop an effective conflict-resolution process

41. How Can Firms Build Global R&D Capabilities?
To adequately commercialize new technologies, firms need to integrate R&D and marketing
To successfully commercialize new technologies, firms may need to develop different versions for different countries
So, a firm may need R&D centers in North America, Asia, and Europe that are closely linked by formal and informal integrating mechanisms with marketing operations in each country of their respective regions and with their various manufacturing facilities