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?
Levitts

Converging 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

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

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)

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 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:
monopoly restriction

antidumping,

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, marketing and Production

Ensure:

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
Organization acquires

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

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
required: approvals and certificates packaging & labeling measures, etc

However, localization often

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
Grey

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