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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.
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Global Marketing and R&D
Chapter 18 Global Marketing and R&D
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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
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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.
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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
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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
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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.
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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.
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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
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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.
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How Does Distribution Influence Marketing Strategy?
A Typical Distribution Strategy
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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
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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.
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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
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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.
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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.
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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
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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
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What Is Price Discrimination?
Elastic and Inelastic Demand Curves
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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