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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


    Chapter 17

    Distribution Can Present Interesting Problems


    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.


    Chapter 17

    Advertising in New Delhi


    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 -

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    50 -

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    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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