Global Marketing

Chapter 17

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Extra credit opportunity

• Presentations on - a country or - a region (even a town/city in U.S.)- some other subject in global business

• An especially good chance to discuss your home or your ancestors’ home

• Up to 16 points extra on class participation grade• Details available on web site

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Nike debate

• A ‘Town Hall’ meeting May 6- One group of people at front are Nike

executives- Second group is activists critical of Nike- The question: Should Nike change its approach

to global sourcing?- Audience plays roles of stakeholders

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Your group should pick one or two of the following roles

• Nike employees• Stockholders• U.S. labor leaders (or ordinary union members)• Human rights activists (maybe rivals of the debaters)

• Asian workers flown to the U.S. by human rights activists

• Economic development officials of Asian countries• Ordinary concerned citizens

- In this role, it’s fine to just be yourself

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• 2-4 people required for each team (executives and activists)

- Preference given to people whose midterm essays showed good critical thinking

• Extra credit – up to 7 extra points on final exam midterm

- The rest of us will prepare questions for the debate

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What is ‘Marketing?’

• The process by which the firm’s abilities, products, and services are

- brought to the attention of customers, - then sold and - delivered

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Global marketing requires thinking through the complete process

• Even people who have done well in a marketing class tend to oversimplify it

• Global marketing involves complexity at each step

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‘4 Ps’ of Marketing

• Product• Place (=‘Distribution Strategy’ in text) • Promotion (=‘Communication Strategy’ in text)• Price (Pricing Strategy)

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Choosing a Strategy

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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 marketing, especially in consumer goods markets

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Product Attributes

• Cultural differences• Levels of economic development• Product and technical standards

- Mostly standards set by governments

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Distribution (Place)

• Definition – “The course that goods take between production and consumption”

- physical path and - legal title – Who buys the product from the maker and

sells it to others closer to the final customer?

• Today we’re mostly interested in how products get to final customer once they’re in a particular country

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- Shipping is one part of distribution- But the core of the distribution challenge is

identifying the people and companies you will work with and the process through which you will sell it

• to retailers, and through them• to the final customer

- These people, companies, and processes for distribution are called marketing “channels”

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Distribution Strategy (Place)

• Choice of the optimal channel for delivering a product to the consumer

- Depends on differences between countries• Retail concentration – How many companies have

major stores relevant to your product?

• Channel length – Do you sell directly to the retailer or through intermediaries? How many intermediaries?

• Channel exclusivity- Will people in the channel consider buying from you

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Direct Selling

• Selling direct to foreign retailers or end users- Often difficult- But gives you control of

the process- Avoids risk of a lazy

distributor

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- A distributor – a firm that buys from maker or a larger distributor and sells to a retailer or a smaller distributor (or sometimes to the final customer)

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Selling is complex everywhere – but even more so abroad

• Need to provide a sales program- Promotional materials, - services, - training of sales people, - discounts for quantity, - credit

• Don’t be quick to cut the base price

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Communication Strategy (Promotion)

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

Cultural barriersSource effects

Noise levels

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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

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Product Type and Consumer Sophistication – in U.S.

• 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

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Channel Length

• Pull strategy- Common in U.S. consumer goods

• Combination of pull and push - Needed for 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

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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 commercials’

policy

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Pricing is much more complex in international business

• Changing values of currency• Diversity of markets• Costs of transportation, warehousing• Tariffs, quotas• Government regulations• Distribution methods have to differ from one country to the

next

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Distribution systems result in ‘price escalation’

• U.S., Canada, much of Europe have concentrated system

• It is impossible to build huge stores in many countries• So many buyers must be reached through long,

complex channels – a ‘fragmented’ system- They typically buy at small stores within walking or

public transit distance from home- Small distributors serve the small stores

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Price escalation

US production cost = $1

Sell to retailer for $1.50

U.S. retailer sells for $2.25

Ship & sell to retailer in Canada for $1.60

Canada retailer sells for $2.40

Ship & sell to distributor

in JapanTariff = .05Shipping = .20Your cost=$1.25

Big distributor buys for $1.875, takes 20% markup, sells

for $2.25

Small distributor adds 20%, sells for $2.70

Store in Japan has high costs, adds 60%, sells for $4.32

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• Government involvement – no consistency- Some laws set minimum prices – to prevent ‘monopoly,’ Japan,

Germany protect small stores

- Many prohibit selling below ‘cost’ - Others set maximum prices

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• Material below here is not required unless specifically mentioned in study guide

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Choosing a Distribution Strategy

• Benefits of a longer distribution channel- Cuts selling costs when the retail sector is fragmented- Longer channels can provide increased market access

• If channel quality is poor, a firm should consider what steps it could take to upgrade the quality of the channel

- This may include establishing its own distribution channel

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Pricing Strategy

• Three aspects of international pricing strategy- Price discrimination- Strategic pricing

- Regulatory influence on prices

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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

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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

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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- Antidumping rules vague, but place a floor

• Competition policy- Regulations designed to promote competition and restrict

monopoly practices

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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