McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights CHAPTER 13 Global Marketing and R&D McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-1 Key Issues • Why and how should a firm adapt to different country-markets – – – – Product/service attributes? Advertising and promotion strategy? Distribution strategy? Pricing strategy? • How does globalization affect the way newproduct development is approached by international businesses? McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-2 Globalization of Markets? • “A powerful force drives the world toward a converging commonality, and that force is technology” (Levitt, 1983) • “Converging commonality” may not have happened universally • Consumer product tastes may have converged less than industrial product specifications • Media, communications means have – made consumers world-wide more aware of their mutual preferences and – contributed to creation of world brands – caused certain market segments to emerge across national market that have indeed converged inter-market segments McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-3 Market Segmentation • The process of identifying distinct groups of consumers whose purchasing behavior differs from other groups in important ways – Demography, geography, social-cultural factors, psychological factors – Firms adjust their marketing mix to meet the particular needs of different market segments • Marketing mix variables: – – – – Product (physical goods and/or services) Price place (distribution) Promotion (advertising and promotion) McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-4 International Market Segmentation • Across national markets, companies may Offer the same products – and marginally adapt the balance of the marketing mix to appeal to market segments with similar needs across markets – Market segments that transcend national borders -intermarket segments allow companies to offer standardized products Adapt their products – and adapt the balance of the product mix to appeal to market segments with differing needs across markets – Market segments that have materially different needs force companies to customize adapt their products McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-5 International Marketing • Marketing Strategy – Standardization (Global Integration Pressures) • intermarket segments • efficiencies through integrated R&D, Production, Marketing • control implications – Adaptation (Local Responsiveness Pressures) • buyer behavior (cultural, economic influence, brand perception country of origin idea) • laws regulations • local environment needs/development • responsive to local condition shifts • Standardization-adaptation implications on marketing mix: Product-Pricing-Promotion-Place McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-6 International Marketing Mix: Product • Product: a bundle of attributes – – • Hamburger: meat type, taste, texture, size Automobile: power, design, quality, performance, comfort, size/capacity 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 mandated by state McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-7 International Marketing Mix: Place • • Optimal channel a company chooses to deliver the product Most locally responsive element of marketing mix because distribution channels vary dramatically across countries – retail system: concentrated-fragmented – channel length: long, short – Channel exclusivity McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-8 International Marketing Mix: Promotion • How firm communicates the product attributes / benefits to customers • Barriers to international communication – Cultural barriers – Source effects (country of origin effects) – Noise levels • Standardized advertising strategy possible; standardized advertising strategy execution more difficult (culture, laws) McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-9 International Marketing Mix: Promotion • Determinants of push/pull strategies – Product type and consumer sophistication – Channel length – Media availability • Push vs pull strategies – Push strategy: personal selling emphasis • Industrial products; complex new products • Short distribution channels • Few print or electronic media – Pull strategy: mass media advertising • Consumer goods • Long distribution channels • Marketing message can be carried via print/electronic media McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-10 International Marketing Mix: Pricing • Price discrimination: demand elasticity • Strategic pricing – predatory (quick share-of-market focus): • lower prices to drive competitors out, then raise prices – Multipoint pricing: • pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another – experience curve: • – use aggressive pricing to build volume and move firm down experience curve (lower marginal costs) Regulatory issues: • antidumping, monopoly restriction McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-11 New Product Development • New product development – – – High risk / high return Technological innovation Creative destruction • Locate R&D in trend/technology leading markets – – – High investment on basic and applied research Strong underlying demand; affluent consumers Intense competition • Integrate R&D, marketing and Production – – – Product development driven by customer needs New products can be manufactured efficiently and effectively Time to market is minimized McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-12 New Product Development Use of cross-functional, nationally and culturally diverse teams •Span: initial concept development to market introduction •Team composition critical – Assign heavyweight project manager • High status in organization; high power and authority • Dedicated to fullest possible extent to project – Team should have representative from each function – Physical co-location to build team culture, communication and conflict resolution processes •Clear plan, goals, milestones, budgets McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-13 Marketing Research Issues • Functional Equivalence – Similar observable phenomena/activities may have different function across cultures (shopping: Japan also a social event; US mostly a chore) • Conceptual Equivalence – Non-observable assumptions/concepts/ideas/constructs may not have the same meaning across cultures • Instrument Equivalence – must use measures that correctly measure the same phenomenon in each culture; language key – measurement equivalence: “summer” in Australia vs UK, “middle-aged” in Somalia (life expectancy 45 - 50 yrs) vs Scandinavia (life expectancy 80-85yrs) – metric equivalence: weights and measures McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights ... Rights Slide 13-5 International Marketing • Marketing Strategy – Standardization (Global Integration Pressures) • intermarket segments • efficiencies through integrated R&D, Production, Marketing. ..CHAPTER 13 Global Marketing and R&D McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-1 Key Issues • Why and how should a firm adapt to different... behavior National product/technical standards mandated by state McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Slide 13-7 International Marketing Mix: Place • • Optimal channel