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Transcript of CHAPTER 17 Global Marketing and R&D. McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All...
CHAPTER 17
Global Marketing and R&D
McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
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Learning Objectives What are the limits of globalization? Factors affecting the marketing mix-
Four P’s
Why do firms charge two different prices for the same product? What are the conditions for successful price discrimination?
Strategic pricing
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Chapter Focus Examine roles of marketing and R&D in international
business. Reduce costs of value creation. Add value by better serving customer needs.
Look at the relationship between marketing and R&D. Look at the marketing mix:
Product attributes. Distribution strategy. Communication strategy. Pricing strategy.
Set of choices the firm offers to its targeted
market.
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Globalization of Markets and Brands
“A powerful force drives the world toward a converging commonalty (sic), and that force is technology.” Theodore Levitt, Harvard Business Review. CNN and MTV.
Overstatement? Cultural and economic differences act as a
major brake on any trend toward global consumer tastes and preferences.
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Market Segmentation
Identifying distinct groups of consumers whose purchasing
behavior differs from other in important ways.
geography
demographics
Social-culturalfactors
Psychologicalfactors
Marketing mix adjusted to
reflect differingpurchasingpatterns insegments.
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Market Segmentation
Twomainissuesin the
differencesbetweencountries
Structure oftheir marketsegments.
Segments that transcend national borders.
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Product Attributes
Cultural differences. Economic differences.
Product and technical standards.
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Cultural Differences Range of dimensions:
Social structure. Language. Religion. Education.
Most important - the impact of tradition. Impact is greatest in foodstuffs and beverages. Also, scent preferences differ from country to
country. Some tastes and preferences becoming cosmopolitan:
Coffee (Japan and Great Britain). American-style frozen dinners (Europe).
Levitt’s global culture still a long way off.
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Economic Differences
Consumer behavior is influenced by economic development.
Consumers in highly developed countries tend to have extra performance attributes in their products.
Consumers in less developed countries tend not to demand these extra performance attributes.
Cars: no air-conditioning, power steering, power windows, radios and cassette players.
Product reliability is more important. Contrary to Levitt, consumers in the most
developed countries are often unwilling to sacrifice preferred attributes for lower prices.
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Government standards can prevent the introduction of global products.
Different technical standards impede global markets, as well. Come from idiosyncratic decisions
made long ago. Video equipment. Television signals.
Levitt’s prediction is still far off.
Product and Technical Standards
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Distribution Strategy Three different distribution systems:
Retail concentration Channel length. Channel exclusivity.
Choice of channel: Cost/benefit of each alternative
vary from country to country. Longer the channel, the higher the price.
But, cuts selling costs in fragmented market.
Market access. Shorter channel, lower price.
Concentrated market.
Concentrated
Fragmented
Short
No Outsiders
Long Channel
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A Typical Distribution System
Manufacturer Inside the Country
Manufacturer Outside the
Country Import Agent
Wholesale Distributor
Retail Distributor
Final Customer Figure
17.1
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Distribution Can Present Interesting Problems
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Communications Strategy
International communication occursWhen a firm uses a marketingMessage to sell its products in
another country.
Channelsdirect selling
sales promotiondirect marketing
advertising
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Effectiveness of international communications can be impacted by:
Cultural barriers. Need to develop cross-cultural literacy.
Source and country of origin effects. Receiver of the message evaluates it based upon the
status of the sender. Country of origin effects:
Emphasize/de-emphasize foreign origin. Noise levels.
Tends to reduce the effectiveness of a message. Developed countries - high. Less developed countries - low.
Push versus Pull: Push emphasizes personal selling. Pull depends on mass media advertising.
Communications Strategy
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Attractiveness of Push versus Pull Strategies
MediaAvailability.
ChannelLength.
Factors
Product Type and Consumer
Sophistication.
Pull = selling to large market segments.
Push = selling complex products.
Pull = long distribution channel.
Push = shortdistribution channel.
Pull = access toadvertising media.
May be legalRestrictions.
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Push-Pull Mix
sufficient printand electronic
media available
Push
industrial orcomplexproducts
shortdistributionchannels
few print orelectronic media
available
consumer goods
long distribution
channels
Pull
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Global Advertising Standardized:
Significant economic advantages. Scarce creative talent. Many global brand names.
Non-standardized: Messages in one country may fail in another. Advertising regulations can be a restriction.
Dealing with Country differences: Select some features for standardization and others for
localization. Saves some costs.
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Advertising in New Delhi
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Pricing Strategy
Price discrimination. Different prices, different
countries, same product. Strategic pricing. Regulatory factors:
Price controls. Antidumping.
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Pricing Strategy Price discrimination:
Charging what the market will bear. Two factors:
Must keep national markets separate Different price elasticities
Arbitrage:Charging different prices in different countries for same product.
Doesn’t always work. Ford in Germany and Belgium
Sometimes it does. Ford in UK and Belgium
Using Arbitrage
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Determinants of Demand Elasticity
Income level and competitive conditions determine elasticity. Elasticity (price) tends to be be
greater in countries with low income levels.
Elasticity (demand) tends to be greater in countries where there are many competitors.
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Elastic and Inelastic Demand Curves
Elastic Demand Curve
Inelastic Demand Curve
$
Output
Figure 17.2
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Price Discrimination
Figure 17.3
Output Output Output
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Strategic Pricing Predatory pricing:
Using price as a competitive weapon. Multipoint pricing strategy:
When 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.
Experience curve pricing: Firms price low worldwide to build market share.
Incurred losses are made up as company moves down experience curve.
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Regulatory Influences on Prices
Antidumping regulations: Selling a product for a price that is less
than the cost of producing it. Predatory pricing and experience curve
pricing may violate regulations. Antidumping rules place a floor under
export prices and limit a firm’s ability to pursue strategic pricing.
Competition Policy: Promote competition. Restrict monopoly practices. Can limit the prices a company can charge
in a given country.
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Dumping: GATT and the U.S.
GATT: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.
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Configuring the Marketing Mix
Culture
Economy
Com
petition S
tandard
s
Distrib
ution
Gov’t Regs
Product
Attrib
ute
s
Dis
trib
utio
n
Stra
tegy
Comm
unicatio
ns Strategy
Pricing Strategy
Differences Here
Requires Variation Here