INTERNATIONAL

BUSINESS
TOPIC 10
Global Marketing and
R&D
Chapter Focus

• Examine roles of marketing and R&D in international

business.
 Reduce costs of value creation.
 Add value by better serving customer needs.
• Look at the relationship between marketing and R&D.
• Look at the marketing mix:
 Product attributes.
 Distribution strategy.
 Communication strategy. Set of choices the firm
offers to its targeted
 Pricing strategy. market.
 Globalization of Markets and Brands

• “A powerful force drives the world toward a

converging commonalty and that force is
technology.” Theodore Levitt, Harvard
Business Review.
• e.g. CNN and MTV.
• Overstatement?
• Cultural and economic differences act as a major
brake on any trend toward global consumer tastes
and preferences.
Market Segmentation

geography

Identifying distinct groups of

consumers whose purchasing
behavior differs from other
in important ways. demographics Marketing mix
adjusted to
reflect differing
purchasing
Social-cultural patterns in
factors segments.

Psychological
factors
Market Segmentation

Two
main
Segments that issues Structure of
transcend in the their market
national differences segments.
borders. between
countries
Product Attributes

• Cultural differences.
• Economic differences.
• Product and technical
standards.
 Cultural Differences

• Range of dimensions:
• Social structure.
• Language.
• Religion.
• Education.
• Most important - the impact of tradition.
• Impact is greatest in foodstuffs and beverages.
• Also, scent preferences differ from country to country.
• Some tastes and preferences becoming
cosmopolitan:
• Coffee (Japan and Great Britain).
• American-style frozen dinners (Europe).

• Levitt’s global culture still a long way off.

Economic Differences
• Consumer behavior is influenced by economic
development.
• Consumers in highly developed countries tend to
have extra performance attributes in their products.
• Consumers in less developed countries tend not to
demand these extra performance attributes.
 Cars: no air-conditioning, power steering, power
windows, radios and cassette players.
 Product reliability is more important.
• Contrary to Levitt, consumers in the most
developed countries are often unwilling to sacrifice
preferred attributes for lower prices.
Product and Technical Standards

• Government standards can prevent the

introduction of global products.
• Different technical standards impede global
markets as well.
• Come from idiosyncratic decisions
made long ago.
 Video equipment.
 Television signals.
• Levitt’s prediction is still far off.
Distribution Strategy

• Three different distribution systems:

• Retail concentration
• Channel length.
• Channel exclusivity.
• Choice of channel:
• Cost/benefit of each alternative
vary from country to country.
• Longer the channel, the higher the price.
• But, cuts selling costs in fragmented market.
• Market access.
• Shorter channel, lower price.
• Concentrated market.
Communications Strategy

International communication occurs

When a firm uses a marketing Channels
Message to sell its products in direct selling
another country. sales promotion
direct marketing
advertising
 Communications Strategy
• Effectiveness of international communications can be
impacted by:
• Cultural barriers.
• Need to develop cross-cultural literacy.
• Source and country of origin effects.
• Receiver of the message evaluates it based upon the status of the
sender.
• Country of origin effects:
• Emphasize/de-emphasize foreign origin.
• Noise levels.
• Tends to reduce the effectiveness of a message.
• Developed countries - high.
• Less developed countries - low.
• Push versus Pull:
• Push emphasizes personal selling.
• Pull depends on mass media advertising.
Attractiveness of Push versus Pull
Strategies

Pull = selling to large

Product Type and market segments.
Consumer Push = selling
Sophistication. complex products.

Pull = long
Factors distribution channel.
Channel
Length. Push = short
distribution channel.

Pull = access to
Media
advertising media.
Availability.
May be legal
Restrictions.
Push-Pull Mix

Push few print or consumer goods

electronic media
available long
distribution
channels

industrial or short
complex distribution
products channels sufficient print
and electronic Pull
media available
 Global Advertising
• Standardized:
• Significant economic advantages.
• Scarce creative talent.
• Many global brand names.
• Non-standardized:
• Messages in one country may fail in another.
• Advertising regulations can be a restriction.
• Dealing with Country differences:
• Select some features for standardization and others for
localization.
• Saves some costs.
Pricing Strategy

• Price discrimination.
• Different prices, different countries, same
product.
• Strategic pricing.
• Regulatory factors:
• Price controls.
• Antidumping.
Pricing Strategy
• Price discrimination:
• Charging what the market will bear.
• Two factors:
• Must keep national markets separate
• Different price elasticities
• Arbitrage:Charging different prices in different countries for same
product.
• Doesn’t always work.
• Ford in Germany and Belgium
• Sometimes it does. Using
• Ford in UK and Belgium Arbitrage
Determinants of Demand Elasticity

• Income level and competitive conditions

determine elasticity.
• Elasticity (price) tends to be be greater in countries
with low income levels.
• Elasticity (demand) tends to be greater in countries
where there are many competitors.
Elastic and Inelastic Demand Curves

Inelastic
Demand Curve

$
Elastic
Demand Curve

Figure 17.2

Output
Figure 17.3

Price Discrimination
Revenue Revenue Revenue
and Costs and Costs and Costs
110 - 110 - 110 -
100 - 100 - 100 -
90 -
Japan 90 -
United 90 -
World
80 - 80 -
States 80 -
70 - 70 - 70 -
60 - 60 - 60 -
50 - 50 - 50 -
43.58 Dj+u
40 - 40 - 40 -
30 - D 30 - 30 -
20 -
j
20 - 20 -
MC
Du MR
10 - MRj 10 - MRu 10 - j+u
50 -

20 -

40 -
20 -
30 -
40 -

30 -

50 -
60 -
70 -
0 0 20 - 0
30 -
40 -
50 -
10 -

10 -
10 -


Output Output Output
 Strategic Pricing
• Predatory pricing:
• Using price as a competitive weapon.
• Multipoint pricing strategy:
• When two or more international firms compete against
each other in two or more national markets.
• A firm’s pricing strategy in one market may impact a
rival in another market.
• Experience curve pricing:
• Firms price low worldwide to build market share.
Incurred losses are made up as company moves down
experience curve.
Regulatory Influences on Prices
• Antidumping regulations:
• Selling a product for a price that is less than the
cost of producing it.
• Predatory pricing and experience curve pricing
may violate regulations.
• Antidumping rules place a floor under export
prices and limit a firm’s ability to pursue strategic
pricing.
• Competition Policy:
• Promote competition.
• Restrict monopoly practices.
• Can limit the prices a company can charge in a
given country.
Configuring the Marketing Mix

Differences
Here

Culture

Requires
Variation
Here
New Product Development

Critical to stay
Creative on leading edge
of technology

Apply technology to
Technological Innovation developing products
Consumers’ want.

Design product
for cost
Destructive effective
manufacture.
The Location of R&D

• New product development is greater

where:
• More money spent on R&D.
• Underlying demand is strong.
• Consumers are affluent.
• Competition is intense.

Leading-edge research is carried

out worldwide. Centralization is
no longer as important.
 The Need to Integrate R&D, Marketing
and Production
• High failure rate ratio between new product
development and profit goals.
• Reasons for failure:
• Limited product demand.
• Failure to adequately commercialize product.
• Inability to manufacture product cost-effectively.
• Cross-functional coordination and integration can
reduce risk:
• Project development is driven by customer needs.
• New products design ensures ease of manufacture.
• Development costs kept in check.
• Time to market is minimized.
Cross-Functional Integration
• Using cross-functional development teams:
• Led by “heavyweight” project manager.
• Composed of at least one member from each key
function.
• Physically co-located to create camaraderie and
facilitate communication.
• Clear plan and goals.
• Incentives to attain goals.
• Develop own processes for communication
and conflict resolution.