Marketing Mix and Value Proposition Adaptation

Marketing Mix and Value Proposition – Standardization or Adaptation

Week 2: Competitive Advantage

Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner

Agenda

1. Intro: The Fit between Value Proposition and Market Segement(s)

2. The CAGE Framework - it´s all about differences

3. Group Task

4. Discussion

5. Strategies according to Bartlett & Ghoshal

6. Bottom of the Pyramid Marketing

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2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner

The Global Canvas3


Key

Partners /

Global Value

Chain

Key

Activities /

Structure &

Process

Value

Proposition

Customer

Relationships

Customer

Segments /

Target Markets

Humans &

Resources

Channels /

Modes of Entry

Cost Structure Revenue Streams

Business Environment / Institutional Environment (at home/

abroad)

CAGE Distance Framework 1/2

The CAGE Distance Framework identifies Cultural, Administrative, Geographic and Economic (CAGE) differences or distances between countries that companies shouldaddress when crafting international strategies.

It was developed by Pankaj Ghemawat, an international strategy expert, to offerbusinesses a way to evaluate countries in terms of the “distances” between them.

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CAGE Distance Framework 2/2CAGE Comparator: https://www.ghemawat.com/cage 5


C Cultural

Distance

List the cultural norms, values and social beliefs, also

known as the unwritten rules, that shape the behavior of

individuals and organizations. Various societies also differ

in their attitudes toward globalization and market power

that have important consequences in terms of both

formalized trade regulations and general attitudes toward

how businesses are run.

• •

• •

• •

A Administrative

Distance

List the differences in history and politics among countries,

especially those which do not share colonial ties. Also, a

lack of shared currency, political hostilities, and

government corruption contribute to Administrative

distance.

• •

• •

• •

G Geographic

Distance

Geographic distance refers not only to the physical

distance between two countries, but also a country’s

physical size, whether it shares borders with hostile or

non-hostile neighbors, and access to trade routes such as

the ocean and other topographical features. List these

attributes.

• •

• •

• •

E Economic

Distance

Two of the biggest determinants of economic distance are

the Cost of Labor and level of Consumer wealth between

countries. It is more difficult for a company from a wealthy

country to enter a poorer country and be successful there,

but not impossible. List these determinants.

• •

• •

• •

Pros & Cons6


Standardization Adaptation

Pros • Economics of scale• Faster set up time• Single coherrent global image• Excellent monitoring of

communication

• Respect local specifications and expectations

• Excellent local image• Customer keeps their landmark

and feel noticed

Cons • Possible loss of advertisingeffectiveness

• Little reactivity and littleflexibility

• Can create negative reactionfrom neglecting local needs

• Higher cost• Time consuming and poor speed

of execution• Difficulty to know what

consumers really want

Standardization vs. Adaptation7


India Germany

Standardization

Adaptation

McDonald's (mcdonaldsindia.com)

McDonald’s Deutschland | Burger | McNuggets | McCafé | Desserts & Mehr (mcdonalds.com)

https://www.mcdonaldsindia.com/

https://www.mcdonalds.com/de/de-de.html

Your Group Task

• You want to introduce a brand new BIO ENERGY DRINK

1) Pick two countries that you feel slightly familiar with and use the CAGE templet todocument similarities and differences.

2) Based on your CAGE Analysis, decide whether you want to use a standardized ordifferentiated approach (adaptation) for your BIO Energy Drink.

3) Pick three out of the "four P" or "seven P" as examples for how you wouldstandardize or adapt in order to reach your target markets.

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From 4Ps to 7Ps

„It is about putting the rightproduct or a combinationthereof in the place, at theright time, and at the rightprice.“

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Product

Price

Place

Promotion

Personnel

Process

Physical

Evidence

Product

Price

Place

Promotion

4 Ps

7 Ps

1. Product 1/2

• How should the products/services of a company look like in order to meet the needsof the customers?

• The product policy is assigned aspects such as:

• Quality

• Style

• Brand name

• Packaging

• Size

• Service

• Guarantees

• The product can be intangible or tangible as it can be in the form of services orgoods.

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1. Product 2/2

In developing the right product, you have to answer the following questions:

• What does the client want from the service or product?

• How will the customer use it?

• Where will the client use it?

• What features must the product have to meet the client’s needs?

• Are there any necessary features that you missed out?

• Are you creating features that are not needed by the client?

• What’s the name of the product?

• Does it have a catchy name?

• What are the sizes or colors available?

• How is the product different from the products of your competitors?

• What does the product look like?

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2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner Source: https://marketingmix.co.uk

2. Price

• How must the price of the product/service be determined in order to be accepted bythe customer?

• Pricing includes, among other things:

• Determination of prices

• Discounts/quantity surcharges

• Terms of payment

• Credit terms

• When setting the product price, marketers should consider the perceived value thatthe product offers. There are three major pricing strategies:

• Market penetration pricing

• Market skimming pricing

• Neutral pricing

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3. Place

• How does the product get to the customer as easily, quickly and cost-effectively aspossible?

• The following factors play a role in the distribution policy:

• Sales channels

• Sales Intermediaries

• Locations

• Stockkeeping

• Transportation

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4. Promotion

• How can the company/manufacturer make customers aware of the product orconvince them to buy it?

• Keywords of the communication policy are:

• Advertising

• Personal sale

• Sales promotion

• Public relations

• Word of mouth is also a type of product promotion.

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5. Personnel

• What are the capacity and qualification needs of the personnel?

• These include:

• Quantity

• Quality

• Training needs

• Incentive programs

• etc.

• This is a secret, “internal” competitive advantage a business can have over othercompetitors which can inherently affect a business's position in the marketplace.

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6. Process Management

• What are the customer-oriented business processes and how are they designed?

• The central question is: Who does what, when, how and with what?

• It could be your entire sales funnel, a pay system, distribution system and othersystematic procedures and steps to ensure a working business that is runningeffectively.

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7. Physical Evidence

• The environment in which a service is delivered, and where the firm and customerinteract, and any tangible components that facilitate performance or communicationof the service.

• Physical Evidence is the material part of a service.

• What physical equipment should be available?

• This includes, for example:

• Buildings and equipment

• Signs and logos

• Annual accounts and business reports, brochures

• Website and social media presence

• ...

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Bartlett & GhoshalCost pressure and local responsiveness 18


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pre

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tag

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of

glo

bal sta

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izati

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low

high

low high

Need for local responsiveness

🏭 🏪

🏢

Company CCompany A

Company BCompany D

🏬

Local responsiveness

• Different consumer needs and preferences

• Different infrastructure

• Different distribution channels

• State or safety regulations

• …

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Source: https://picolio.auto123.com/art-images/85052/2007-Brilliance-BS6-i001.jpg

China‘s Brilliance BS6 performing horrible in German crash test

Cost reduction

Desire to reduce costs through:

• Mass production

• Product standardization

• Optimal site production

Background:

• Consumer goods: Products serve universal needs

• Competitors produce at low-cost production location

• International competition creates price pressure

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Bartlett & Ghoshal 4 Strategies – A Challenge to Porter´s Generic Strategies? 21

2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner Source: https://www.pocketbook.co.uk/wp-content/uploads/2017/04/strategic-options-for-multi-national-corporations-bartlett-

ghoshal.png

Co

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low

high

low high

Need for local responsiveness

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Bartlett & Ghoshal Strategy characteristics

Transnational Strategy: Companies no longer own a center or a home country, but are at

home anywhere in the world. (e.g. Starbucks, Unilever)

• Core competencies can develop in each of the worldwide subsidiaries

• Flow of expertise and product offerings throughout the entire company, not just from the

main company to the subsidiary (global learning)

Multi-domestic

Strategy

International

Strategy

Global

Strategy

Core

competenceReactability Knowledge transfer Efficiency

Features Transfer of expertise and

products and adaptation of

problem solutions

Products are produced

domestically and exported

(centralization), subsidiaries

as sale channels

Learning curve and location

effects are exploited

Low cost strategy &

Product standardization

Examples Nestle, ITT McDonalds, UPS Exxon, Toyota, Pfizer

The „Base of the Pyramid“ – where Adaptation is needed

• "Base of the Pyramid" as a new market especially for multinational companies

• Previously untapped market opportunities and development possibilities

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The 4A Marketing-Mix for the BOP-Market

• Affordability

• Availability

• Awareness

• Acceptability

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2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner Quelle: Diehl & Christiaans, 2007

MNE Examples targeting the BOP-Market

• SE Allianz: microinsurance, e.g. in India

• Unilever: iodized salt in small packets in sub-Saharan Africa

• Grameen-Danone: enriched yogurt in Bangladesh

• Procter & Gamble: PuR - water purifier- in Africa, Southeast Asia, Latin America

• Vodafone: village phone in South Africa

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2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht SöllnerQuelle: The European Alliance for CSR (w.y.) Creating Wealth And Value At The Base Of The Pyramid. Available:

http://www.csreurope.org/data/files/toolbox/Base_of_the_pyramid_workingpaper.pdf ; Access: 15.01.10

The LifeStraw of Vestergaard Frandsen26


“The company Vestergaard Frandsen (VF) has developed a product named ‘LifeStraw’,

which purifies surface water for personal use with filters. A LifeStraw can clean up to 700

litters of water (the yearly consumption of an adult) and is relatively affordable (2,50 €).”

Quelle: Diehl & Christiaans, 2007

The OSRAM WE!-Hub™ Concept 1/227

2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner Quelle: Gregor (2009) DGCN Berlin

The OSRAM WE!-Hub™ Concept 2/228


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Design for two worlds

95% Smoke Reduction

50% Fuel Reduction

1.5 Tons CO2 Avoided

Electricity Access

„Nanolution“ –The Tata Nano for $ 2.500

“Dream-dream and dream, because dream gives vision, vision gives thoughts and finally thoughts lead to the action". Each letter of these motivational words said by India's former President Dr. A.P.J. Abdul Kalam goes exactly with Mr. Ratan Tata,

Chairman of Tata group, who in the year 2003, dreamt of producing a safe, affordable Car for the common man. Finally after the wait of five years, crossing all financial and technological barriers, Ratan Tata kept his promise and unveiled Tata 'Nano' on 10th

January 2007, at the 9th Auto Expo 2008 in New Delhi. Tata Nano, cool & smart, launched by Tata Motors is world's cheapest Car with a price tag of iR 100.000 (1.480

Euro ohne Steuern).

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2.2.3. Marketing Mix and Value Proposition - Yanis Hamdali, M.Sc., Prof. Dr. Albrecht Söllner Quelle: Ranjan, Tripathi & Mishra, 2008

The low-cost car is clearly intended for the masses. For the family of four that would otherwise ride on a scooter, precariously balancing a tiny tot on the front

and a baby on the wife’s lap. For the first-time car buyer in India - a huge market despite the increasing number of cars in the urban and semi-urban areas.

Key takeaways

• The CAGE Distance Framework identifies cultural, administrative, geographic and economic differences or distances between countries that companies should address.

• Product, Price, Distribution and Communication policy form the so-called classical 4Ps

• Especially for the service sector there are three additional Ps: Personnel, Process and Physical evidence

• In general, it is all about getting the right product or a combination of them to the right place, at the right time and at the right price.-> Fit between value proposition and customer needs

• The key question in an international context is: Standardization or Adaptation

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Key takeaways

Bartlett and Ghoshal consider the need for local adaptation

• An international strategy occurs when there are similarities between markets and little gains from globally integrating.

• A multi-domestic strategy occurs when there are considerable variations between market demands and few benefits from globally integrating.

• A global strategy occurs when there are significant economies of scale and where there are similarities in terms of market demand.

• A transnational strategy occurs when there is pressure to meet local needs and also benefits from integrating globally.

Bottom or Base of Pyramid Markets (BOT-Markets) deliver powerful examples for the need for adaptation.

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Documents

Marketing Mix and Value Proposition Adaptation