Chapter Global Marketing and R&D 17. McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 17-2 Case:

Chapter

Global Marketing and R&D

17

McGraw-Hill/IrwinInternational Business, 5/e

© 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.

17-2

Case: Marketing Coca-Cola in China

China major market for Coca-Cola Expected to surpass consumption in the US in the next

decade

To reach goals aggressive marketing campaign Market information helps define sales and distribution

strategies

Coca- Colas hurdle is distribution & pricing Coke only reaches 8% of population High transportation costs makes Coke most expensive

where people are the poorest



17-3

The globalization of markets and brands

Important to determine when product standardization is appropriate in an international market

Firms may need to vary marketing mix in each different country

Globalization may be the exception rather than the rule in many consumer goods markets and industrial markets



17-4

Market segmentation

Refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways

Segments can based on: Geography Demography Socio-cultural factors Psychological factors



17-5

Market segmentation

Two main issues relating to segmentation: Extent of differences between countries in the

structure of market segments Existence of segments that transcend national

borders



17-6

Product attributes

Cultural differences Economic development Product and technical standards



17-7

Cultural differences

Differ along dimensions such as social structure, language, religion and education

Impact of tradition Some tastes and preferences becoming

cosmopolitan



17-8

Economic development

Consumer behavior is influenced by economic development

Consumers in highly developed countries tend to demand extra performance attributes in their products Price not a factor due to high income level

Consumers in less developed countries, value basic features as more important Price a factor due to lower income level

Cars: no air-conditioning, power steering, power windows, radios and cassette players.

Product reliability is more important



17-9

Product and technical standards

Government standards can rule out mass production and marketing of a standardized product

Differing technical standards constrain globalization of markets Different television signal frequencies



17-10

Distribution strategy

Choice of the optimal channel for delivering a product to the consumer Optimal strategy is determined by the relative

costs and benefits of each alternative Depends on differences between countries

retail concentration channel length channel exclusivity



17-11

A typical distribution system

FIG 17.1



17-12

Retail concentration

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



17-13

Channel length

Refers to number of intermediaries between the producer and the consumer

Determined by degree to which the retail system is fragmented Long distribution channel Short distribution channel



17-14

Channel length

Long distribution channel Fragmented retail system promotes growth of

wholesalers and retailers Firms go through intermediaries such as

wholesalers to cut selling costs

Short distribution channel Concentrated retail system Firms deal directly with retailers



17-15

Channel exclusivity

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 important role in stocking products

Difficult for new firm to get shelf space as compared to an old firm



17-16

Communication strategy

Defines the process the firm will use in communicating the attributes of its product to prospective customers

Cultural barriersSource effects

Noise levels



17-17

Barriers to international communication

Cultural Barriers Develop cross-cultural literacy Firm should use local input such as local

advertising agency and sales force



17-18


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



17-19


Noise levels Amount of other messages competing for a

potential customer’s attention Developed countries - high. Less developed countries - low.

Standardized advertising strategy execution more difficult (culture, laws)



17-20

Push versus pull strategy

Push strategy emphasizes personal selling Requires intense use of a sales force Relatively costly

Pull strategy depends on mass media advertising Can be cheaper for a large market segment

Determining factors of type of strategy Product type and consumer sophistication Channel length Media availability



17-21

Product type and consumer sophistication

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



17-22

Channel length

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



17-23

Media availability

Pull strategy Relies on access to advertising media Common in developed nations

Push strategy Media availability limited by law All electronic media state owned with no

commercial policy



17-24

Global advertising

Standardized: Significant economic advantages Scarce creative talent Many global brand names

Non-standardized: Cultural differences Advertising regulations can be a restriction



17-25

Pricing strategy

Three aspects of international pricing strategy Price discrimination Strategic pricing Regulatory influence on prices



17-26

Price discrimination

Said to occur when consumers in different countries are charged different prices for the same product

Two conditions necessary National markets kept separate to prevent

arbitrage Capitalization of price differentials by purchasing

product in countries where prices are lower and reselling where prices are higher

Different price elasticities of demand in different countries Greater in countries with low income levels & highly

competitive conditions



17-27

Elastic and inelastic demand curves

Fig 17.2



17-28

Price discrimination

Fig. 17.3



17-29

Strategic pricing

Predatory pricing Using price as a competitive weapon to drive

weaker competition out of a national market Firms then raise prices to enjoy high profits Firms normally have profitable position in

another national market



17-30

Strategic pricing

Multipoint pricing strategy Two or more international firms compete

against each other in two or more national markets

A firm’s pricing strategy in one market may impact a rival in another market. Kodak and Fuji



17-31

Strategic pricing

Experience curve pricing Firms price low worldwide to build market share Incurred losses are made up as company moves

down experience curve, making substantial profits

Cost advantage over its less-aggressive competitors



17-32

Regulatory influences on prices

Antidumping regulations Selling a product for a price that is less than the cost of

producing it 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’

Competition policy Regulations designed to promote competition and restrict

monopoly practices



17-33

Configuring the marketing mix

Culture

Economy

Com

petition

Stan

dard

s

Distrib

ution

Gov’t Regs

Product

Attrib

utes

Dis

tribu

tion

Stra

tegy

Comm

unications

Strategy

Pricing Strategy

Differences Here

Requires Variation Here



17-34

New product development

The location of R & D Rate of new product development greater in

countries whereMore money spent on R&DUnderlying demand is strongConsumers are affluentCompetition is intense



17-35

Integrating R&D, marketing and production

Integrating R&D, production and marketing ensures Project development driven by customer needs New products are designed for ease of

manufacture Development costs are kept in check Time to market is minimized



17-36

Integrating R&D, marketing and production

High failure rate ratio Between 33 % and 60% of new products fail to

earn adequate profits Reasons for failure:

Limited product demand Failure to adequately commercialize product Inability to manufacture product cost-effectively



17-37

Cross-functional product development teams

Objective of team to take a product development project from the initial concept development to market introduction

Effective teams must have “Heavyweight “ project manager One member from each key function Physically co-located to facilitate

communication Clear plan and goals Own process for communication and conflict

resolution

Documents

Chapter Global Marketing and R&D 17. McGraw-Hill/Irwin International Business, 5/e © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 17-2 Case: