Marketing ch. 15

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Marketing ch. 15

  1. 1. Global Marketing, R & D
  2. 2. Global Marketing and R&D Among different countries, why and how: – It makes sense to vary the attributes of products – Distribution strategy may vary – Advertising and promotion strategies may vary – Pricing strategy may vary How globalization affects new-product development
  3. 3. Levitt, 1983“A powerful force drives the worldtoward a converging commonality, and that force is technology” (Prof. Ted Levitt, HBS)
  4. 4. Globalization of Markets? Levitt’s“Converging commonality” has not happened universally Consumer product tastes converged less than industrial product specifications Media, communications means have – made consumers world-wide more aware of their mutual preferences – have contributed to creation of world brands – have caused market segments to emerge across some national markets--inter-market segments
  5. 5. Market Segmentation The process of identifying groups of consumers whose purchasing behavior is unique in important ways – Is based on demography, geography, social-cultural factors, psychological factors – Allows firms to adjust marketing mix to meet the needs of separate market segments Marketing mix variables: product-price-place (distribution)-promotion
  6. 6. Market Segmentation Across National Markets Standardization: companies may – Offer same products – Adjust balance of marketing mix to market segments with similar needs across countries Adaptation: companies may – Offer different products – Adjust balance of marketing mix to market segments with differing needs across countries
  7. 7. Marketing Strategy Standardization (Global Integration Pressures) – Efficiencies through integrated R&D, production, marketing – Control implications Adaptation (Local Responsiveness Pressures) – Buyer behavior (cultural, economic influence, brand perception--country of origin idea) – Laws, regulations – Local environment needs – Responsiveness to local condition shifts Implications on marketing mix
  8. 8. International Marketing Mix: Product Product: a bundle of attributes – Hamburger: meat type, taste, texture, size – Automobile: power, design, quality, performance, comfort, size/capacity Attributesneed to be adapted to a greater or lesser extent to satisfy – Consumer preferences/tastes due to culture – Economic development levels affect consumer behavior – National product/technical standards state mandated
  9. 9. International Marketing Mix: Place Optimal channel a company chooses to deliver the product The most locally responsive element of marketing mix because distribution channels vary dramatically across countries – Retail system: concentrated- fragmented – Channel length: long, short – Channel exclusivity
  10. 10. International Marketing Mix: Promotion How firm communicates the product attributes / benefits to customers Barriers to international communication – Cultural barriers – Source effects (country of origin effects) – Noise levels Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)
  11. 11. International Marketing Mix: Promotion Push vs pull strategies – Push strategy: personal selling emphasis  Industrial products; complex new products  Short distribution channels  Few print or electronic media – Pull strategy: mass media advertising emphasis  Consumer goods  Long distribution channels  Marketing message may be carried via print / electronic media
  12. 12. International Marketing Mix: PricePrice discrimination: demand elasticityStrategic pricing – Predatory (quick share-of-market focus):  lower prices to drive competitors out, then raise prices – Multipoint pricing:  pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another – Experience curve: use aggressive pricing to build volume and move firm down experience curve (lower marginal costs)Regulatory issues: antidumping, monopoly restriction
  13. 13. New Product DevelopmentNew product development – High risk / high return – Technological innovation – Creative destructionLocation of R&D – Disperse R&D to trend/technology leading markets High investment on basic and applied research Strong underlying demand; affluent consumers Intense competition
  14. 14. New Product Development Integrate R&D, marketing and Production Ensure: – Product development driven by customer needs – New products can be manufactured efficiently/effectively – Time to market is minimized Plan clearly: goals, milestones, budgets
  15. 15. New Product Development Use cross-functional, multinationally diverse teams Span: initial concept development to market introduction Team composition critical – Assign heavyweight project manager  High status in organization; high power and authority  Dedicated to fullest possible extent to project – Team should have representative from each function Physical co-location – When appropriate? – Build team culture – Communication and conflict resolution processes
  16. 16. Strategic AnalysisWhy do organizations decide to enter international business? Passive entry: Follow customers overseas Respond to enquiries from overseas Competition is in overseas markets Seek profitable growth Sell capacity “as is”
  17. 17. Strategic Analysis Eventually one or more of key distributors become a candidate for acquisition (FDI) Foreign regional development organizations actively recruit FDI Competitive pressures force examination of local assembly or production nearer to key international markets Major international customers demand local support
  18. 18. Strategic Analysis Organization acquires companies that are complimentary to existing businesses Continued growth requires regional management, development, distribution, technical and customer support
  19. 19. Strategic Analysis Issues involved in conducting international business become “significant” Demands for organization’s resources increases:  Management  Cash  Product adaptation or unique development  Customer support
  20. 20. Strategic Analysis Eventually, these demands force theactive planning of international business bythe organization – Active strategy
  21. 21. Strategic Analysis SWOT Strengthand Weaknesses – decisions made and controlled by management Opportunities and Threats – business environment – events that are likely to occur
  22. 22. Marketing Mix (4 Ps) Product Promotion Pricing Place (Distribution) – the most important for international business entry
  23. 23. Marketing Mix (4 Ps) Place (Distribution) – the most important for international business entry:  Incoterms determine where title to goods changes  Transportation to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk
  24. 24. Marketing Mix (4 Ps) Product – usually controlled by the exporter, initially the least impacted element of the marketing mix However, “localization” often required: approvals and certificates packaging & labeling measures, etc
  25. 25. Marketing Mix (4 Ps) Promotion – success at home leads to interest from potential importers, licensors, joint venture partners Local knowledge essential on initial entries:  Integrated market communication  Trade and consumer sales promotion  Sales management  Trade shows
  26. 26. Marketing Mix (4 Ps) Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers? The remainder of the marketing mix needs to be determined in order to set prices
  27. 27. Export Pricing Policy Issues Channel length: longer channels than domestic markets, may drive up end user prices Price influence: distribution partners negotiate for the lowest possible “landed cost” Price-setting authority: How much pricing authority should be given to distributors or to subsidiaries?
  28. 28. Dumping WTO: Sale of an imported product at ‘less than fair value’ and causes ‘material injury to a domestic industry’. US: An unfair trade practice that results in injury, destruction, or the prevention of the establishment of an American industry. US considers dumping when price is >5% below home market price or, Price is below cost of production
  29. 29. Grey Marketing Grey (or parallel marketing) Products are imported outside of the established distribution channel – undercutting the authorized channel pricing Usually results from high imported prices

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