Lecture 13 Part1

Lecture 13 (Part 1)
Global
Marketing and
R&D
Intro
Many companies today sell their products all over
the world.
If youve ever been to another country, you may have
seen some familiar products on the shelves at local
shops.
In fact, you probably buy imported products but you
think its a local product.
Have you ever thought about how international

companies sell their products?
Does the product meet the same need in every country,
or do companies have to develop different messages
about their products depending on where theyre being
sold?
17-2
When you see below products, what is

your mind thinking about!
17-3
Or of these products!
17-4
What is the Marketing

Mix?
The marketing mix (the choices the
firm offers to its targeted market) is
comprised of:
1. Product attributes --> product (p1)
2. Distribution strategy --> place (p2)
3. Communication strategy -->
promotion (p3)
4. Pricing strategy --> price (p4)
17-5
Further on the Marketing

Mix
One may add with this 4Ps with another
3Ps:
1. Process
2. Physical evidence
3. People
Or, one may put different names, such as

4Cs:
Product --> Commodity (C1)

Place --> Channel (C2)
Promotion --> Communication (C3)
Price --> Cost (C4)
17-6
Should the Marketing

Mix be Changed for Each
Market?
Question: Are markets and brands becoming

global?
Theodore Levitt argued that world markets were
becoming increasingly similar making it unnecessary to
localize the marketing mix
Question: Is Levitt right? Probably not!
Levitts theory has become a lightening rod in the
debate about globalization
The current consensus is that while the world is moving
towards global markets, global standardization is not
possible because of:
cultural and economic differences among nations
trade barriers and differences in product and technical
standards
17-7
Market Segmentation
Market segmentation - identifying distinct groups of
consumers whose purchasing behavior differs from others in
important ways
Markets can be segmented by:
geography
demography
socio-cultural factors
psychological factors
Two key market segmentation issues
1. The differences between countries in the structure of
market segments
2. The existence of segments that transcend national
borders
when segments transcend national borders, a global
strategy is possible
17-8
How do Product
Attributes Influence
Marketing Strategy?
A product is like a bundle of attributes
Products sell well when their attributes
match consumer needs
if consumer needs were the same
everywhere, a firm could sell the same
product worldwide
But, consumer needs depend on

1.Culture
tradition, social structure, language, religion,
education
17-9
How do Product
Attributes Influence
Marketing Strategy?
2. Level of economic development

consumers in highly developed
countries tend to demand a lot of extra
performance attributes
consumers in less developed nations
tend to prefer more basic products
3. Product and technical standards

national differences can force firms to
customize the marketing mix
17-10
How does Distribution

Influence Marketing
Strategy?
Distribution strategy refers to the
means the firm chooses for delivering the
product to the consumer
How a product is delivered depends on the
firms market entry strategy
firms that manufacturer the product locally can
sell directly to the consumer, to the retailer, or
to the wholesaler
firms that manufacture outside the country
have the same options plus the option of
selling to an import agent
17-11
How does Distribution

Influence Marketing
Strategy?
A Typical Distribution Strategy
17-12
How Distribution
Systems Differ?
There are four main differences in distribution
systems
1.Retail concentration concentrated or fragmented
in a concentrated retail system, a few retailers supply
most of the market common in developed countries
in a fragmented retail system there are many
retailers, no one of which has a major share of the
market common in developing countries
2.Channel length - the number of intermediaries

between the producer and the consumer
short channel - when the producer sells directly to the
consumer common with concentrated systems
long channel - when the producer sells through an import
agent, a wholesaler, and a retailer common with
fragmented retail systems
17-13
How do Distribution
Systems Differ?
3. Channel exclusivity how difficult it is for
outsiders to access
Japan's system is an example of a very exclusive
system
4. Channel quality - the expertise,

competencies, and skills of established
retailers in a nation, and their ability to sell
and support the products of international
businesses
the quality of retailers is good in most developed
countries, but is variable at best in emerging
markets and less developed countries
firms may have to devote considerable resources to
upgrading channel quality
17-14
Which Distribution
Strategy should a Firm
Choose?
The optimal strategy depends on the relative

costs and benefits of each alternative
When price is important, a shorter channel is
better
each intermediary in a channel adds its own
markup to the products
When the retail sector is very fragmented, a

long channel can be beneficial
economizes on selling costs
can offer access to exclusive channels
17-15
Why is Communication
Strategy Important?
Communicating product attributes to
prospective customers is a critical
element in the marketing mix
How a firm communicates with customers
depends partly on the choice of channel
Communication channels available to a
firm include
direct selling
sales promotion
direct marketing
advertising
17-16
What are the Barriers to

International
Communication?
The effectiveness of a firm's international
communication can be jeopardized by
1.Cultural barriers - it can be difficult to
communicate messages across cultures
a message that means one thing in one
country may mean something quite
different in another
firms need to develop cross-cultural
literacy, and use local input when
developing marketing messages
17-17
What are the Barriers to

International
Communication?
2. Source and country of origin effects
Source effects occur when the receiver of the

message evaluates the message on the basis of
status or image of the sender
can counter negative source effects by deemphasizing their
foreign origins
Country of origin effects - the extent to which

the place of manufacturing influences product
evaluations
3. Noise levels - the amount of other messages

competing for a potential consumers attention
in highly developed countries, noise is very high
in developing countries, noise levels tend to be
lower
17-18
How do Firms
Communicate with
Customers?
Firms have to choose between two
types of communication strategies
1.A push strategy emphasizes
personnel selling
2.A pull strategy emphasizes mass
media advertising
17-19
Which is Better
Push Versus Pull?
The choice between strategies depends on
1.Product type and consumer sophistication
a pull strategy works well for firms in consumer
goods selling to a large market segment
a push strategy works well for industrial products
2.Channel length
a pull strategy works better with longer distribution
channels
3.Media availability
a pull strategy relies on access to advertising media
a push strategy may be better when media is not
easily available
17-20
What is the Optimal Mix?

In general, a push strategy is better
for industrial products and/or complex new
products
when distribution channels are short
when few print or electronic media are available
A pull strategy is better

for consumer goods products
when distribution channels are long
when sufficient print and electronic media are
available to carry the marketing message
17-21
Should a Firm Use

Standardized
Advertising?
Standardized advertising makes sense when
it has significant economic advantages

creative talent is scarce and one large effort to develop a
campaign will be more successful than numerous smaller
efforts
brand names are global
Standardized advertising does not make sense when

cultural differences among nations are significant
advertising regulations limit standardized advertising
Some firms standardize parts of a campaign to capture

the benefits of global standardization, but customize
others to respond to local cultural and legal environments
17-22
What Pricing Strategy

Should Firms Use?
Firms need to consider:
1.Price discrimination
2.Strategic pricing
2.Regulations that affect pricing
decisions
17-23
Price Discrimination
Price discrimination - occurs when firms charge
consumers in different countries different prices for
the same product
For price discrimination to work
must be able to keep national markets separate
countries must have different price elasticities of
demand - measure of the responsiveness of demand
for a product to changes in price
demand is elastic when a small change in price
produces a large change in demand
demand is inelastic when a large change in price
produces only a small change in demand
Typically, price elasticities are greater in countries with
lower income levels and larger numbers of competitors
17-24
Price Discrimination
Elastic and Inelastic Demand Curves
17-25
Strategic Pricing
Strategic pricing has three aspects:
1.Predatory pricing - use profit gained in one market
to support aggressive pricing designed to drive
competitors out in another market
after competitors have left, the firm will raise prices
2.Multi-point pricing - a firms pricing strategy in one

market may have an impact on a rivals pricing
strategy in another market
managers should centrally monitor pricing decisions
3.Experience curve pricing - price low worldwide in

an attempt to build global sales volume as rapidly as
possible, even if this means taking large losses initially
firms that are further along the experience curve
have a cost advantage relative to firms further up the
curve
17-26
How do Regulations
Influence Pricing?
A firms ability to set its own prices may be
limited by:
1.Antidumping regulations
dumping occurs whenever a firm sells a product
for a price that is less than the cost of producing
it
antidumping rules set a floor under export prices
and limit a firms ability to pursue strategic pricing
2.Competition policy
most industrialized nations have regulations
designed to promote competition and restrict
monopoly practices
can limit the prices that a firm can charge
17-27
How should Firms

Configure the Marketing
Mix?
Standardization versus customization
is not an all or nothing concept
Most firms standardize some things
and customize others
Firms should consider the costs and
benefits of standardizing and
customizing each element of the
marketing mix
17-28

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Lecture 13 (Part 1)

Have you ever thought about how international

When you see below products, what is

What is the Marketing

Further on the Marketing

Or, one may put different names, such as

Product --> Commodity (C1)

Should the Marketing

Question: Are markets and brands becoming

But, consumer needs depend on

2. Level of economic development

3. Product and technical standards

How does Distribution

How does Distribution

2.Channel length - the number of intermediaries

4. Channel quality - the expertise,

The optimal strategy depends on the relative

When the retail sector is very fragmented, a

What are the Barriers to

What are the Barriers to

2. Source and country of origin effects

Source effects occur when the receiver of the

Country of origin effects - the extent to which

3. Noise levels - the amount of other messages

What is the Optimal Mix?

A pull strategy is better

Should a Firm Use

Standardized advertising makes sense when

it has significant economic advantages

Standardized advertising does not make sense when

Some firms standardize parts of a campaign to capture

What Pricing Strategy

2.Multi-point pricing - a firms pricing strategy in one

3.Experience curve pricing - price low worldwide in

How should Firms

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