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CHAPTER 17. Global Marketing and R&D. 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 17

CHAPTER 17

Global Marketing and R&D

learning objectives
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
chapter focus
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.

globalization of markets and brands
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.
market segmentation

Identifying distinct groups of

consumers whose purchasing

behavior differs from other

in important ways.

geography

Marketing mix

adjusted to

reflect differing

purchasing

patterns in

segments.

demographics

Social-cultural

factors

Psychological

factors

Market Segmentation
market segmentation1

Two

main

issues

in the

differences

between

countries

Segments that

transcend

national

borders.

Structure of

their market

segments.

Market Segmentation
product attributes
Product Attributes
  • Cultural differences.
  • Economic differences.
  • Product and technical standards.
cultural differences
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.
economic differences
Economic Differences
  • Consumer behavior is influenced by economic development.
    • Consumers inhighly developedcountries tend to have extra performance attributes in their products.
    • Consumers inless developedcountries 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.
product and technical standards
Product and Technical Standards
  • 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.
distribution strategy

Concentrated

Fragmented

Short

Long Channel

No Outsiders

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.
a typical distribution system
A Typical Distribution System

Manufacturer Inside the Country

Manufacturer Outside the Country

Import Agent

Wholesale Distributor

Retail Distributor

Final Customer

Figure 17.1

communications strategy

Channels

direct selling

sales promotion

direct marketing

advertising

International communication occurs

When a firm uses a marketing

Message to sell its products in

another country.

Communications Strategy
communications strategy1
Communications Strategy
  • 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.
attractiveness of push versus pull strategies

Pull = selling to large

market segments.

Push = selling

complex products.

Product Type and

Consumer

Sophistication.

Factors

Channel

Length.

Pull = long

distribution channel.

Push = short

distribution channel.

Media

Availability.

Pull = access to

advertising media.

May be legal

Restrictions.

Attractiveness of Push versus Pull Strategies
push pull mix

consumer goods

few print or

electronic media

available

Push

long

distribution

channels

industrial or

complex

products

short

distribution

channels

Pull

sufficient print

and electronic

media available

Push-Pull Mix
global advertising
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.
pricing strategy
Pricing Strategy
  • Price discrimination.
    • Different prices, different countries, same product.
  • Strategic pricing.
  • Regulatory factors:
    • Price controls.
    • Antidumping.
pricing strategy1

Using Arbitrage

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
determinants of demand elasticity
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.
elastic and inelastic demand curves

Inelastic Demand Curve

$

Elastic Demand Curve

Output

Elastic and Inelastic Demand Curves

Figure 17.2

price discrimination

Figure 17.3

Revenue and Costs

Revenue and Costs

Revenue and Costs

110 -

100 -

90 -

80 -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

0

110 -

100 -

90 -

80 -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

0

110 -

100 -

90 -

80 -

70 -

60 -

50 -

40 -

30 -

20 -

10 -

0

Japan

United States

World

j+u

D

43.58

10 -

20 -

30 -

40 -

50 -

60 -

70 -

D

MC

j

10 -

20 -

30 -

40 -

50 -

10 -

20 -

30 -

40 -

50 -

j+u

D

u

MR

MR

MR

u

j

15

55

Price Discrimination

Output

Output

Output

strategic pricing
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.
regulatory influences on prices
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.
dumping gatt and the u s
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.
configuring the marketing mix

Standards

Differences Here

Competition

Distribution

Economy

Gov’t Regs

Culture

Product Attributes

Pricing Strategy

Requires Variation Here

Communications Strategy

Distribution Strategy

Configuring the Marketing Mix
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