Global Marketing, R & D

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
 Levitt, 1983

“A powerful force drives the world

toward a converging commonality,
and that force is technology”

(Prof. Ted Levitt, HBS)

 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
 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
 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
 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
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
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
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)
 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
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
 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
 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
 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
 Strategic Analysis
Why 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”
 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
 Strategic Analysis
 Organization acquires companies that are
complimentary to existing businesses
 Continued growth requires regional
management, development, distribution,
technical and customer support
 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
 Strategic Analysis
 Eventually, these demands force the
active planning of international business by
the organization – Active strategy
 Strategic Analysis
 SWOT

 Strengthand Weaknesses – decisions made

and controlled by management

 Opportunities
and Threats – business
environment – events that are likely to
occur
 Marketing Mix (4 Ps)
 Product
 Promotion
 Pricing
 Place (Distribution) – the most important
for international business entry
 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
 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
 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
 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
 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?
 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
 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