Lecture International business (9e): Chapter 18 - Charles W.L. Hill

Chapter 18 - Global marketing and R&D. After completing this chapter, students will be able to: Explain why there are differences between domestic and international marketing, explain why international marketing managers may wish to standardize the marketing mix regionally or worldwide, explain why standardizing the marketing mix globally is often impossible,...

International Business 9e By Charles W.L Hill McGraw­Hill/Irwin         Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved Chapter 18 Global Marketing and R&D What Is The Marketing Mix?  The marketing mix is comprised of Product attributes Distribution strategy Communication strategy Pricing strategy 18­3 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!  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 18­4 What Is Market Segmentation?  Market segmentation - identifying distinct groups of consumers whose purchasing behavior differs from others in important ways  can be segmented by geography, demography, socio-cultural factors, and psychological factors  When there are differences between countries in the structure of market segments a unique marketing mix to appeal to a certain segment in a given country may be necessary  When segments that transcend national borders exist a global strategy is possible 18­5 How Do Product Attributes  Influence Marketing Strategy?   A product is like a bundle of attributes - products sell well when their attributes match consumer needs Consumer needs depend on Culture - tradition, social structure, language, religion, education Level of economic development - consumers in highly developed countries tend to demand a lot of extra performance attributes, while consumers in less developed nations tend to prefer more basic products Product and technical standards - national differences can force firms to customize the marketing mix 18­6 How Does Distribution  Influence Marketing Strategy?  Distribution strategy - the means the firm chooses for delivering the product to the consumer  How a product is delivered depends on the firm’s market entry strategy  firms that produce locally can sell directly to the consumer, to the retailer, or to the wholesaler  firms that produce outside the country have the same options plus the option of selling to an import agent 18­7  How Do Distribution  Systems Differ?  There are four main differences in distribution systems Retail concentration – concentrated or fragmented Channel length - the number of intermediaries between the producer and the consumer Channel exclusivity – how difficult it is for outsiders to access 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 18­8 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 product  When the retail sector is very fragmented, a long channel can be beneficial  economizes on selling costs  can offer access to exclusive channels 18­9 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 18­10 What Are The Barriers to  International Communication?  The effectiveness of a firm's international communication can be jeopardized by Cultural barriers - it can be difficult to communicate messages across cultures Source and country of origin effects Noise levels - the amount of other messages competing for a potential consumer’s attention  There are two types of communication strategies A push strategy emphasizes personnel selling A pull strategy emphasizes mass media advertising 18­11 Which Is Better –  Push Versus Pull?  The choice between strategies depends on 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 Channel length  a pull strategy works better with longer distribution channels Media availability  a pull strategy relies on access to advertising media  a push strategy may be better when media is not easily available 18­12 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 18­13 What Pricing Strategy  Should Firms Use?  Firms need to consider Price discrimination  price elasticity of demand Strategic pricing predatory pricing multi-point pricing experience curve pricing Regulations that affect pricing decisions  antidumping regulations  competition policy 18­14 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 18­15 Why Is New Product  Development Important?  Product innovation should be a strategic priority  today, competition is as much about technological innovation as anything else  Technological change is shortening product life cycles short  new innovations can make existing products obsolete, but, open the door to new opportunities  The rate of new product development is greater in countries where more money is spent on basic and applied research and development, demand is strong, consumers are affluent, competition is intense 18­16 How Can R&D, Marketing, And  Production Be Integrated?  To adequately commercialize new technologies, firms need to integrate R&D, marketing, and production  Integration will ensure that  customer needs drive product development  new products are designed for ease of manufacture  development costs are kept in check  time to market is minimized  Cross-functional integration is facilitated by cross-functional product development teams 18­17 ... 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 18 8 Which Distribution Strategy ... marketing  advertising 18 10 What Are The Barriers to  International Communication?  The effectiveness of a firm's international communication can be jeopardized by Cultural barriers - it can be difficult.. .Chapter 18 Global Marketing and R&D What Is The Marketing Mix?  The marketing mix is comprised of Product attributes Distribution strategy Communication strategy Pricing strategy 18 3 Should The Marketing Mix Be