Global Marketing Global Marketing and RD Among different

Global Marketing

Global Marketing and R&D Ø 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 Ø 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? Ø Levitt’s “Converging commonality” has not happened universally Ø Consumer product tastes converged less than industrial product specifications Ø 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 Ø 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 Ø Marketing mix variables: product-price-place (distribution)-promotion

Market Segmentation Across National Markets Ø Standardization: companies may – Offer same products – Adjust balance of marketing mix to market segments with similar needs across countries Ø Adaptation: companies may – Offer different products – Adjust balance of marketing mix to market segments with differing needs across countries

Marketing Strategy Ø Standardization (Global Integration Pressures) – Efficiencies through integrated R&D, production, marketing – Control implications Ø 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 Ø Implications on marketing mix

International Marketing Mix: Product Ø Product: a bundle of attributes Hamburger: meat type, taste, texture, size – Automobile: power, design, quality, performance, comfort, size/capacity – Ø Attributes need 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 Ø The most locally responsive element of marketing mix because distribution channels vary dramatically across countries Ø – Retail system: concentrated- fragmented – Channel length: long, short – Channel exclusivity

International Marketing Mix: Promotion Ø How firm communicates the product attributes / benefits to customers Ø Barriers to international communication – Cultural barriers – Source effects (country of origin effects) – Noise levels Ø Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws)

International Marketing Mix: Promotion Ø Push vs pull strategies – Push strategy: personal selling emphasis Industrial products; complex new products l Short distribution channels l Few print or electronic media l – Pull strategy: mass media advertising emphasis l Consumer goods l Long distribution channels l Marketing message may be carried via print / electronic media

International Marketing Mix: Price ØPrice discrimination: demand elasticity ØStrategic pricing – Predatory (quick share-of-market focus): l lower prices to drive competitors out, then raise prices – Multipoint pricing: l pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another – Experience curve: l use aggressive pricing to build volume and move firm down experience curve (lower marginal costs) ØRegulatory issues: l antidumping, monopoly restriction

New Product Development ØNew product development High risk / high return – Technological innovation – Creative destruction – ØLocation – of R&D Disperse R&D to trend/technology leading markets l High investment on basic and applied research l Strong underlying demand; affluent consumers l Intense competition

New Product Development Ø Integrate R&D, marketing and Production Ø Ensure: – – – Ø 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 Ø Ø Ø Use cross-functional, multinationally diverse teams Span: initial concept development to market introduction Team composition critical – Assign heavyweight project manager l High status in organization; high power and authority l Dedicated to fullest possible extent to project – Ø 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: Ø Follow customers overseas Ø Respond to enquiries from overseas Ø Competition is in overseas markets Ø Seek profitable growth Ø Sell capacity “as is”

Strategic Analysis Eventually one or more of key distributors become a candidate for acquisition (FDI) Ø Foreign regional development organizations actively recruit FDI Ø Competitive pressures force examination of local assembly or production nearer to key international markets Ø Major international customers demand local support Ø

Strategic Analysis Ø Organization acquires companies that are complimentary to existing businesses Ø Continued growth requires regional management, development, distribution, technical and customer support

Strategic Analysis Ø Issues involved in conducting international business become “significant” Ø Demands for organization’s resources increases: ü Management ü Cash ü Product adaptation or unique development ü Customer support

Strategic Analysis Eventually, these demands force the active planning of international business by the organization – Active strategy Ø

Strategic Analysis Ø SWOT Ø Strength and Weaknesses – decisions made and controlled by management Ø Opportunities and Threats – business environment – events that are likely to occur

Marketing Mix (4 Ps) Ø Product Ø Promotion Ø Pricing Ø Place (Distribution) – the most important for international business entry

Marketing Mix (4 Ps) Ø Place (Distribution) – the most important for international business entry: ü Incoterms determine where title to goods changes ü Transportation to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management “in the market”, currency risk

Marketing Mix (4 Ps) Ø Product – usually controlled by the exporter, initially the least impacted element of the marketing mix Ø However, ü ü ü “localization” often required: approvals and certificates packaging & labeling measures, etc

Marketing Mix (4 Ps) Ø Promotion – success at home leads to interest from potential importers, licensors, joint venture partners Ø Local knowledge essential on initial entries: ü Integrated market communication ü Trade and consumer sales promotion ü Sales management ü Trade shows

Marketing Mix (4 Ps) Ø Pricing : What tasks need to be performed to get the product from place of manufacture to foreign customers? Ø The remainder of the marketing mix needs to be determined in order to set prices

Export Pricing Policy Issues Ø Channel length: longer channels than domestic markets, may drive up end user prices Ø Price influence: distribution partners negotiate for the lowest possible “landed cost” Ø 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’. Ø US: An unfair trade practice that results in injury, destruction, or the prevention of the establishment of an American industry. Ø US considers dumping when price is >5% below home market price or, Ø Price is below cost of production Ø

Grey Marketing Ø Grey (or parallel marketing) Ø Products are imported outside of the established distribution channel – undercutting the authorized channel pricing Ø Usually results from high imported prices