Lecture International marketing (14/e) - Chapter 12

Chapter 12 - Global marketing management: Planning and organization. After studying this chapter you will be able to understand: How global marketing management differs from international marketing management, the need for planning to achieve company goals, the important factors for each alternative marketentry strategy, the increasing importance of international strategic alliances.

International Marketi ng 14th Edition P h i l i p R C a t e o r a M a r y C G i l l y John L Graham Products and Services for Consumers Chapter 12 McGraw­Hill/Irwin InternationalMarketing14/e Copyrightâ2009byTheMcGrawưHillCompanies,Inc.Allrightsreserved Mid term Chapter 1, 4, 5, 8, 9, 12 • 60 questions • 90 minutes • One A4 (2 sided) summary is allowed in test room 12-2 Discussion • Define the country of origin effect and give examples • The text in the book discusses stereotypes, ethnocentrism, degree of economic development as the basis for generalizations about country of origin effect on product perception Explain and give an example • What are the three major components of a product? Discuss their important to product adaptation • How can knowledge of the diffusion of innovations help a product manager plan international investment? • Explain the PLC theory and how it applies to International Marketing • “If the product sells in Dallas, it will sell in Tokyo or Berlin” Comment • Discuss “environmentally friendly” products and product development 12-3 What Should You Learn? • The importance of offering a product suitable for the intended market • The relationship between product acceptance and the market into which it is introduced • The importance of quality and how quality is defined • Country-of-origin effects on product image • Physical, mandatory, and cultural requirements for product adaptation • The need to view all attributes of a product in order to overcome resistance to acceptance 12-4 Global Perspective Hong Kong – Disney Rolls the Dice Again • Tokyo Disneyland – successful • EuroDisney – disaster • Hong Kong Disneyland – open for business • Opportunities and challenges for international marketers of consumer goods and services are great and diverse • Any marketing firm’s goal should be quality products and services that meet the needs and wants of consumers at an affordable price 12-5 Quality • Shift to a customer’s market • Increased customer knowledge • The customer defines quality • The cost and quality of a product – Among the most important criteria by which purchases are made • Quality can be defined on two dimensions – Market-perceived quality – Performance quality • Most consumers expect performance quality • In many industries quality is measured by third parties – JD Power and Associates 12-6 Maintaining Quality • Damage in the distribution chain – Russian chocolate • Quality is essential for success in today’s competitive global market • The decision to standardize or adapt a product is crucial in delivering quality 12-7 Physical or Mandatory Requirements and Adaptation • Product homologation • Product adaptation requirements – – – – – Legal Economic Political Technological Climate 12-8 Green Marketing and Product Development • Green marketing concerns the environmental consequences of a variety of marketing activities • Critical issues affecting product development – Control of the packaging component of solid waste – Consumer demand for environmentally friendly products • European Commission guidelines for ecolabeling • Laws to control solid waste 12-9 Products and Culture • A product is the sum of the physical and psychological satisfactions it provides the user – Primary function – Psychological attributes • The need for cultural adaptation is often necessary, affected by how the product conforms – Norms – Values – Behavior patterns 12-10 Ethnocentrism and COO • “Buy American” concept 12-32 Animosity model of foreign product purchase • Animosity is defined as the remnants of antipathy related to previous or ongoing military, political, or economic events It will affect consumers’ purchase behavior in the international marketplace Animosity model of foreign product purchase S o urc e : Klein, Ettenson and Morris (1998) Findings from empirical study on 244 Chinese consumers supported the model Country-of-Origin Effects and Global Brands • Countries are stereotyped – On the basis of whether they are industrialized – In the process of industrializing – In process of developing • Technical products – Perception of one manufactured in a less-developed or newly industrializing country less positive • Fads often surround product from particular countries or regions 12-35 Diffusion of Innovation Rogers, E.M (1983) Inno vato rs 2.5% Early Ado pte rs 13.5% Early  Majo rity 34% Late   Majo rity 34% Lag g ards 16% Private Brands • Growing as challengers to manufacturers’ brands • Private labels – Provide the retailer with high margins – Receive preferential shelf space and in-store promotion – Are quality products at low prices • Manufacturers brands must be competitively priced and provide real consumer value 12-37 Summary • The growing globalization of markets must be balanced with the continuing need to assess all markets for those differences that might require adaptation for successful acceptance • In spite of the forces of homogenization, consumers also see the world of global symbols, company images, and product choice through the lens of their own local culture and its stage of development and market sophistication 12-38 Summary • Each product must be viewed in light of how it is perceived by each culture with which it comes in contact • Analyzing a product as an innovation and using the Product Component Model may provide the marketer with important leads for adaptation 12-39 International Product Strategies S traig ht Exte ns io n The firm adopts the same policy used in its home market Pro duc t Adaptatio n The company caters to the needs and wants of its foreign customers Pro duc t Inno vatio n The firm designs a product from scratch for foreign customers Source: W.J Keegan, Multinational Product Planning: Strategic Alternatives, J ournal of Marketing, 33, 1969, pp.58-62 Five Options International Product Strategy   Strategy 1   Product and Communication Extension   Strategy 2   Product Extension Communication Adaptation  Strategy 3  Product Adaptation Communication Extension   Strategy 4   Product and Communication Adaptation   Strategy 5   Product Invention S o urc e : W.J. Ke e g an Product Example Consumer Need Satisfied Product Strategy Communication Strategy Gillette Razor Disposable, easy to use product Extension Extension Wrigley Chewing Gum USA: Substitute for Smoking Europe: Dental benefits Extension Adaptation McDonalds Fast­Food Adaptation: Adding local products to range Extension: Using global campaign Slim Fast Identical: Lose Weight Adaptation: Consumer preferences for different flavors Adaptation: Celebrity in Germany, Teacher in UK Buckler Beer Non­alcoholic beer Invention Develop new communication OPTION 1 PRODUCT EXTENSION – COMMUNICATION EXTENSION Product Strategy Communications Strategy Highlight Extension  Standardized product with same Extension communications strategy across the globe ­ This strategy is Cost effective ­ Allows for greater economies of  scale ­ Rarely used for consumer type  products except soft drink and some  luxury type goods ­Used mainly for industrial type products OPTION 2 PRODUCT EXTENSION – COMMUNICATION  ADAPTATION Product Strategy Communications Strategy Highlight Adaptation Standardized product with different Extension communications strategies across the globe ­ Cost effective because  communications adaptation is less expensive than the tailoring product to a local market ­ Can be used for consumer type  products eg. Bicycles OPTION 3 PRODUCT ADAPTATION ­ COMMUNICATION EXTENSION Product Strategy Communications Strategy Highlight Extension Changes made to the product, same communications strategy across the  globe Adaptation ­ Product formulations are changed without consumers knowing it. E.g detergents  ­ Entails research, development expenses and tooling costs ­ Do not allow for economies of scale to the extent possible under an product  extension strategy ­ savings can be realized from the  creation of a single communications  strategy OPTION 4 PRODUCT ADAPTATION ­ COMMUNICATION ADAPTATION Product Strategy Communications Strategy Highlight Adaptation Dual adaptation: Changes made to the product, changes  made to communications strategy  Adaptation ­ Recognizes the socio­cultural differences from country to country ­To make this option profitable, the  foreign market or markets need to be  of sufficient volume ­ Calls for extensive research and  development expenses and tooling  costs OPTION 5 PRODUCT INVENTION Product Strategy Communications Strategy Highlight Develop new communications Usually redesigning of an original  product at a lower level of Invention complexity.  ­ Recognizes the socio­cultural and economic differences from  country to country ­Leads to more purchases as a result  of the reinvention of the product ... competitors • Importance is unquestionable • Most valuable company resource 1 2-2 5 Top Twenty Brands 1 2-2 6 Top Twenty Brands 1 2-2 7 Global Brands • The Internet and other technologies accelerate the... global brands where possible and national brands where necessary 1 2-2 9 Country-of-Origin Effects and Global Brands • Country-of-Origin effect – Influences that the country of manufacture, assembly,... “best” • Ethnocentrism 1 2-3 0 Country-of-Origin Effects and Global Brands • English tea • French perfume • Chinese silk • Italian leather • Japanese electronics • Jamaican rum 1 2-3 1