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  • 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. 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 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. Another Perspective: Unilever’s web site { http://www.unilever.com/ } is an interesting one to visit. You can click on countries and brands to see how the company sells its products in different markets.
  • The answer is d.
  • 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 cassette players Product reliability is more important
  • 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
  • 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
  • The answer is b.
  • 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 US in 1990’s 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
  • Management Focus: Overcoming Cultural Barriers to Selling Tampons Summary This feature examines Procter & Gamble’s (P&G) efforts to bring tampons to the world. After purchasing Tambrands in 1997, P&G found that marketing strategies that were successful in the United States failed to generate sales in many other parts of the world. P&G, in an effort to reach new customers, has developed a new marketing strategy that is based on direct selling and relationship marketing. The strategy is currently being tested in Mexico, and if successful, will be implemented in other South American markets. Suggested Discussion Questions 1. How has culture affected P&G’s efforts to sell tampons around the world? Discussion Points: Culture has played a significant role in P&G’s effort to sell tampons. While tampons are commonly used in North America and much of northwestern Europe, sales are almost nonexistent in other parts of the world. Many cultures link the use of tampons with a loss of virginity. The company has been forced to take a personal approach to marketing, and include education as part of its strategy. 2. P&G has resorted to direct selling and relationship marketing to sell tampons. In your opinion, would these methods work in the United States? Why or why not? Discussion Points: Most students would probably argue that direct selling and relationship marketing would not be necessary in the United States where tampon usage is already high. Another Perspective: To further explore Procter & Gamble’s international marketing efforts, go to { http:// www.pg.com/en_US/index.jhtml }, and click on “P&G Global Operations.” By clicking on different countries and then on a particular product you can follow how the company has changed the marketing mix for different markets.
  • 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 only way to reach consumers
  • Pull strategy: Long or exclusive distribution channels e.g. Japan Mass advertising to generate demand to pull product through various layers Push Strategy: In countries with low literacy levels to educate consumers
  • 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. 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 the company 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. Another Perspective: As noted earlier, Unilever’s web site is worth a visit. Go to the company’s India site by selecting it from the list available on the homepage { http://www.unilever.com } and compare the company’s marketing efforts there to the strategy used in other countries.
  • The answer is a.
  • The answer is c.
  • Antidumping rules vague, but place a floor under export prices and limit a firm’s ability to pursue strategic pricing Article 6 of GATT allows action against an importer if the product is sold at ‘less than fair value’ and causes ‘material injury to a domestic industry’
  • The answer is d.
  • Management Focus: Castrol Oil in Vietnam Summary This feature focuses on the strategies and experiences of Castrol Oil in marketing its GTX brand of motor oil around the world. Castrol Oil is the lubricants division of the British chemical, oil, and gas concern Burmah Castrol. Castrol Oil’s GTX brand of motor oil is marketed as a premium brand. The feature focuses on the company’s entries into the lubricants markets in Thailand and Vietnam . Castrol has a unique strategy of appealing to consumers who drive motorcycles, in hopes of developing brand loyalty and retaining these customers as their countries develop to the point where cars are more common. This strategy worked well in Thailand, and is currently under way in Vietnam . Suggested Discussion Questions 1. In underdeveloped countries like Thailand and Vietnam , the conventional forms of media that we are accustomed to, like radio and television, are often absent. This problem is particularly pronounced in Vietnam . Describe how Castrol Oil overcame this challenge. Does the company’s approach seem prudent to you? Explain your answer. Discussion Points: In Vietnam, Castrol Oil has focused on developing consumer awareness through the use of billboards, bumper stickers, and signs that are displayed at roadside garages and motorcycle cleaning shops. In addition, Vietnam was one of the cities visited by soccer star David Beckham as part of a global marketing campaign for the company. Students will probably argue that given the lack of alternatives, Castrol Oil has done well with its communications strategy in Vietnam. 2. Would you describe Castrol Oil’s communications strategy in Vietnam as a push or a pull strategy? Explain your answer. Discussion Points: Students will note that a pull strategy generally relies on access to advertising media such as newspapers, magazines, television, radio, and the Internet. Because mass media options are limited in Vietnam, Unilever has turned to alternate communications methods such as stickers, billboards, and gas station signs. Accordingly, students will probably conclude that Castrol Oil is using a push strategy in Vietnam. 3. Castrol Oil emphasizes a premium pricing strategy. What elements of the company’s communications and distributions strategies support this premium pricing strategy? Discussion Points: Castrol Oil has priced its product at about three times the cost of cheaper imports from Taiwan and Thailand. Accordingly, the company has developed a slogan that indicates that Castrol Oil is the best quality lubricant in the market. Students will probably note that the company is currently focusing on targeting motorcycle users based on the assumption that this market will start driving cars when they become more affordable. Another Perspective: To see more about how Castrol Oil handles its international marketing, go to { http://www.castrol.com/castrol/castrolglobalhomepage.do?categoryId=3225&contentId=6005575 }and click on the various country options to compare the products and services that are offered in different markets.
  • The answer is b.

International business 7e   chapter 17 International business 7e chapter 17 Presentation Transcript

  • InternationalBusiness 7eby Charles W.L. HillMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  • Chapter 17Global Marketing and R&D
  • 17-3IntroductionThe marketing mix (the choices the firm offers to itstargeted market) is comprised of:product attributesdistribution strategycommunication strategypricing strategy
  • 17-4The Globalization Of Markets And BrandsTheodore Levitt argued that world markets werebecoming increasingly similar making it unnecessary tolocalize the marketing mixLevitt’s theory has become a lightening rod in the debateabout globalizationThe current consensus is that while the world is movingtowards global markets, cultural and economic differencesamong nations limit any trend toward global consumertastes and preferencesIn addition, trade barriers and differences in product andtechnical standards also limit a firms ability to sell astandardized product to a global market
  • 17-5Market SegmentationMarket segmentation involves identifying distinct groupsof consumers whose purchasing behavior differs fromothers in important waysMarkets can be segmented by:geographydemographysocio-cultural factorspsychological factors
  • 17-6Market SegmentationFirms need to be aware of two key market segmentationissues:1. the differences between countries in the structure ofmarket segments2. the existence of segments that transcend nationalbordersWhen segments transcend national borders, a globalstrategy is possible
  • 17-7Classroom Performance SystemWhich of the following is not an element in the marketingmix?a) product attributesb) communication strategyc) distribution strategyd) production strategy
  • 17-8Product AttributesA product is like a bundle of attributesProducts sell well when their attributes match consumerneedsIf consumer needs were the same everywhere, a firmcould sell the same product worldwideBut, consumer needs vary from country to countrydepending on culture and the level of economicdevelopment
  • 17-9Cultural DifferencesCountries differ along a range of cultural dimensionsincluding:traditionsocial structurelanguagereligioneducationWhile there is some cultural convergence among nations,Levitt’s vision of global markets is still a long way off
  • 17-10Economic DevelopmentA country’s level of economic development has importantmarketing implicationsConsumers in highly developed countries tend todemand a lot of extra performance attributesConsumers in less developed nations tend to prefer morebasic products
  • 17-11Product And Technical StandardsLevitt’s notion of global markets does not allow for thenational differences in product and technological standardsthat force firms to customize the marketing mix
  • 17-12Distribution StrategyA firm’s distribution strategy (the means it chooses fordelivering the product to the consumer) is a critical elementof the marketing mixHow a product is delivered depends on the firm’s marketentry strategyFirms that manufacturer the product locally can selldirectly to the consumer, to the retailer, or to the wholesalerFirms that manufacture outside the country have thesame options plus the option of selling to an import agent
  • 17-13Distribution StrategyFigure 17.1: A Typical Distribution System
  • 17-14Differences Between CountriesThere are four main differences in distribution systems:1. retail concentration2. channel length3. channel exclusivity4. channel quality
  • 17-15Differences Between Countries1. Retail ConcentrationIn a concentrated retail system, a few retailers supplymost of the marketIn a fragmented retail system there are many retailers, noone of which has a major share of the marketDeveloped countries tend to have greater retailconcentration, while developing countries are morefragmented
  • 17-16Differences Between Countries2. Channel LengthChannel length refers to the number of intermediariesbetween the producer and the consumerWhen the producer sells directly to the consumer, thechannel is very shortWhen the producer sells through an import agent, awholesaler, and a retailer, a long channel existsCountries with fragmented retail systems tend to havelonger channels, while countries with concentrated systemshave shorter channelsThe Internet is helping to shorten channel length as is theemergence of large stores like Wal-Mart and Tesco
  • 17-17Differences Between Countries3. Channel ExclusivityAn exclusive distribution channel is one that is difficult foroutsiders to accessJapans system is an example of a very exclusive system
  • 17-18Differences Between Countries4. Channel QualityChannel quality refers to the expertise, competencies,and skills of established retailers in a nation, and theirability to sell and support the products of internationalbusinessesThe quality of retailers is good in most developedcountries, but is variable at best in emerging markets andless developed countriesFirms may find that they have to devote considerableresources to upgrading channel quality
  • 17-19Choosing A Distribution StrategyThe choice of distribution strategy determines whichchannel the firm will use to reach potential consumersThe optimal strategy depends on the relative costs andbenefits of each alternativeSince each intermediary in a channel adds its ownmarkup to the products, there is generally a critical linkbetween channel length and the firms profit marginSo, when price is important, a shorter channel is betterA long channel can be beneficial because it economizeson selling costs when the retail sector is very fragmented,and can offer access to exclusive channels
  • 17-20Classroom Performance SystemThe main differences between distribution systems includeall of the following excepta) retail concentrationb) product attributesc) channel lengthd) channel exclusivity
  • 17-21Communication StrategyCommunicating product attributes to prospectivecustomers is a critical element in the marketing mixHow a firm communicates with customers depends partlyon the choice of channelCommunication channels available to a firm includedirect sellingsales promotiondirect marketingadvertising
  • 17-22Barriers To International CommunicationInternational communication occurs whenever a firmuses a marketing message to sell its products in anothercountryThe effectiveness of a firms international communicationcan be jeopardized by:1. cultural barriers2. source and country of origin effects3. noise levels
  • 17-23Barriers To International Communication1. Cultural Barriers – it can be difficult to communicatemessages across culturesA message that means one thing in one country maymean something quite different in anotherTo overcome cultural barriers, firms need to developcross-cultural literacy, and use local input when developingmarketing messages
  • 17-24Barriers To International Communication2. Source and Country of Origin EffectsSource effects occur when the receiver of the messageevaluates the message on the basis of status or image ofthe senderFirms can counter negative source effects bydeemphasizing their foreign originsCountry of origin effects refer to the extent to which theplace of manufacturing influences product evaluations
  • 17-25Barriers to International Communication3. Noise LevelsNoise refers to the amount of other messages competingfor a potential consumer’s attentionIn highly developed countries, noise is very highIn developing countries, noise levels tend to be lower
  • 17-26Push versus Pull StrategiesFirms have to choose between two types of communicationstrategies:a push strategy emphasizes personnel sellinga pull strategy emphasizes mass media advertisingThe choice between the strategies depends upon:1. product type and consumer sophistication2. channel length3. media availability
  • 17-27Push versus Pull Strategies1. Product Type and Consumer SophisticationFirms in consumer goods industries that are trying to sellto a large market segment usually use a pull strategyFirms that sell industrial products typically prefer a pushstrategy2. Channel LengthA pull strategy can work better with longer distributionchannels
  • 17-28Push versus Pull Strategies3. Media AvailabilityA pull strategy relies on access to advertising mediaWhen media is not easily available, a push strategy maybe more attractive
  • 17-29Push versus Pull StrategiesIn 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 availableA pull strategy is better:for consumer goods productswhen distribution channels are longwhen sufficient print and electronic media are available tocarry the marketing message
  • 17-30Global AdvertisingStandardizing advertising worldwide has both pros andconsStandardized advertising makes sense when:it has significant economic advantagescreative talent is scarce and one large effort to develop acampaign will be more successful than numerous smallereffortsbrand names are global
  • 17-31Global AdvertisingStandardized advertising does not make sense when:cultural differences among nations are significantcountry differences in advertising regulations block theimplementation of standardized advertisingSome firms have been trying tactics to capture thebenefits of global standardization while responding toindividual cultural and legal environmentsSo, some features of a campaign are standardized whileothers are customized to local markets
  • 17-32Classroom Performance SystemStandardized advertising makes sense in all of thefollowing situations excepta) when cultural differences among nations are significantb) when a firm is trying to save moneyc) when creative talent is scarce and one large effort todevelop a campaign will be more successful thannumerous smaller effortsd) when brand names are global
  • 17-33Classroom Performance SystemA pull strategy is besta) for industrial productsb) when distribution channels are shortc) when sufficient print and electronic media are availableto carry the marketing messaged) for complex new products
  • 17-34Pricing StrategyInternational pricing is an important element in themarketing mixThere are three issues to consider:The case for price discriminationStrategic pricingRegulations that affect pricing decisions
  • 17-35Price DiscriminationPrice discrimination occurs when firms chargeconsumers in different countries different prices for thesame productFirms using price discrimination hope it will boost profitsFor price discrimination to work:the firm must be able to keep national markets separatedifferent price elasticities of demand must exist indifferent countries
  • 17-36Price DiscriminationThe price elasticity of demand is a measure of theresponsiveness of demand for a product to changes inpriceWhen a small change in price produces a large change indemand, demand is elasticWhen a large change in price produces only a smallchange in demand, demand is inelasticIncome level and competitive conditions are the two mostimportant determinants of a country’s elasticity of demandfor a certain productTypically, price elasticities are greater in countries withlower income levels and larger numbers of competitors
  • 17-37Price DiscriminationFigure 17.2: Elastic and Inelastic Demand Curves
  • 17-38Strategic PricingStrategic pricing has three aspects:1. predatory pricing2. multi-point pricing3. experience curve pricing
  • 17-39Strategic Pricing1. Predatory PricingPredatory pricing involves using the profit gained in onemarket to support aggressive pricing designed to drivecompetitors out in another marketAfter the competitors have left, the firm will raise prices
  • 17-40Strategic Pricing2. Multi-point PricingMulti-point pricing refers to the fact that a firm’s pricingstrategy in one market may have an impact on a rival’spricing strategy in another marketAggressive pricing in one market may elicit a competitiveresponse from a rival in another critical marketFor managers, it is important to centrally monitor pricingdecisions around the worldAggressive pricing in one market may elicit a responsefrom rivals in another market
  • 17-41Strategic Pricing3. Experience Curve PricingFirms that are further along the experience curve have acost advantage relative to firms further up the curveFirms pursuing an experience curve pricing strategyprice low worldwide in an attempt to build global salesvolume as rapidly as possible, even if this means takinglarge losses initiallyThe firm believes that several years in the future, when ithas moved down the experience curve, it will be makingsubstantial profits and have a cost advantage over its lessaggressive competitors
  • 17-42Regulatory Influences On PricesThe use of either price discrimination or strategic pricingmay be limited by national or international regulationsA firm’s ability to set its own prices may be limited by:1. antidumping regulations2. competition policy
  • 17-43Regulatory Influences On Prices1. Antidumping RegulationsDumping occurs whenever a firm sells a product for aprice that is less than the cost of producing itAntidumping rules set a floor under export prices andlimit a firm’s ability to pursue strategic pricing
  • 17-44Regulatory Influences On Prices2. Competition PolicyMost industrialized nations have regulations designed topromote competition and restrict monopoly practicesThe regulations can be used to limit the prices that a firmcan charge
  • 17-45Classroom Performance SystemA firm is using _________ when it uses a pricing strategyaimed at giving a company a competitive advantage overits rivals.a) predatory pricingb) multipoint pricingc) experience curve pricingd) strategic pricing
  • 17-46Configuring The Marketing MixStandardization versus customization is not an all ornothing conceptMost firms standardize some things and customizeothersFirms should consider the costs and benefits ofstandardizing and customizing each element of themarketing mix
  • 17-47New Product DevelopmentToday, competition is as much about technologicalinnovation as anything elseThe pace of technological change is faster than ever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 newopportunitiesFirms today need to make product innovation a priorityThis requires close links between R&D, marketing, andmanufacturing
  • 17-48The Location Of R&DNew product ideas come from the interactions ofscientific research, demand conditions, and competitiveconditionsThe rate of new product development is greater incountries where:more money is spent on basic and applied research anddevelopmentdemand is strongconsumers are affluentcompetition is intense
  • 17-49Integrating R&D, Marketing, And ProductionNew product development has a high failure rateTo reduce the chance of failure, new productdevelopment efforts should involve close coordinationbetween R&D, marketing, and productionThis 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
  • 17-50Cross-Functional TeamsCross-functional integration is facilitated by cross-functional product development teamsEffective cross functional teams should:be led by a heavyweight project manager with status inthe organizationinclude members from all the critical functional areashave members located togetherestablish clear goalsdevelop an effective conflict resolution process
  • 17-51Building Global R&D CapabilitiesTo adequately commercialize new technologies, firmsneed to integrate R&D and marketingCommercialization of new technologies may require firmsto develop different versions for different countriesThis may require R&D centers in North America, Asia,and Europe that are closely linked by formal and informalintegrating mechanisms with marketing operations in eachcountry in their regions, and with the various manufacturingfacilities
  • 17-52Classroom Performance SystemWhich of the following does not promote new productdevelopment?a) Spending more money on basic and applied researchand developmentb) weak demandc) Affluent consumersd) Intense competition