Global Marketing, R & D

Global Marketing and R&D



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

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?
commonality has not happened universally  Consumer product tastes converged less than industrial product specifications  Media, communications means have
made consumers world-wide more aware of

 Levitts Converging

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


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



Marketing mix variables: product-price-place (distribution)-promotion

Market Segmentation Across National Markets

 Standardization: companies may
Offer same products Adjust balance of marketing mix to market

segments with similar needs across countries

 Adaptation: companies may
Offer different products Adjust balance of marketing mix to market

segments with differing needs across countries

Marketing Strategy


Standardization (Global Integration Pressures)

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 Responsiveness to local condition shifts


Implications on marketing mix

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 state mandated

International Marketing Mix: Place

Optimal channel a company chooses to deliver the product  The most locally responsive element of marketing mix because distribution channels vary dramatically across countries


Retail system: concentrated-

fragmented Channel length: long, short Channel exclusivity

International Marketing Mix: Promotion

communicates the product attributes / benefits to customers  Barriers to international communication
Cultural barriers Source effects (country of origin effects) Noise levels

 How firm

 Standardized advertising

strategy possible; standardized advertising strategy execution more difficult (culture, laws)

International Marketing Mix: Promotion

 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

emphasis
  

Consumer goods Long distribution channels Marketing message may be carried via print / electronic media

International Marketing Mix: Price

Price discrimination: demand Strategic pricing Predatory (quick share-of-market focus):  lower prices to drive competitors out, then raise prices Multipoint pricing:


elasticity

pricing in one market may have an impact in another market; subsidize low pricing in one market from profits in another aggressive pricing to build volume and move firm down experience curve (lower marginal costs) restriction

Experience curve:
 use

 Regulatory issues:
 antidumping, monopoly

New Product Development

New

product development

High risk / high return Technological innovation Creative destruction

Location

of R&D

Disperse R&D to trend/technology leading markets

 High

investment on basic and applied research  Strong underlying demand; affluent consumers  Intense competition

New Product Development

 Integrate R&D,  Ensure:

marketing and Production

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

 Use cross-functional, multinationally 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 When appropriate? Build team culture Communication and conflict resolution processes

Physical co-location

Strategic Analysis
Why do organizations decide to enter international business? Passive entry:  Follow customers overseas  Respond to enquiries from overseas  Competition is in overseas markets  Seek profitable growth  Sell capacity as is

Strategic Analysis
  

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

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

Strategic Analysis
 Issues

involved in conducting international business become significant  Demands for organizations resources increases:
 Management  Cash  Product adaptation or unique development  Customer support

Strategic Analysis


Eventually, these demands force the active planning of international business by the organization Active strategy

Strategic Analysis
 SWOT  Strength and

Weaknesses decisions made and controlled by management Threats business environment events that are likely to occur

 Opportunities and

Marketing Mix (4 Ps)

 Product  Promotion  Pricing  Place (Distribution)

the most important for international business entry

Marketing Mix (4 Ps)

 Place (Distribution)

the most important for international business entry:

 Incoterms determine where title to goods

changes  Transportation to international freight carrier, freight, insurance, documentation, customs clearance, local transportation, logistic management in the market, currency risk

Marketing Mix (4 Ps)

 Product

usually controlled by the exporter, initially the least impacted element of the marketing mix localization often required: approvals and certificates packaging & labeling measures, etc

 However,   

Marketing Mix (4 Ps)

 Promotion

success at home leads to interest from potential importers, licensors, joint venture partners  Local knowledge essential on initial entries:
 Integrated market communication  Trade and consumer sales promotion  Sales management  Trade shows

Marketing Mix (4 Ps)

 Pricing :

What tasks need to be performed to get the product from place of manufacture to foreign customers?  The remainder of the marketing mix needs to be determined in order to set prices

Export Pricing Policy Issues

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

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