Global Marketing and R&D

Chapter 17

© McGraw Hill Companies, Inc., 2000

 Globalization and Markets
 “Globalization seems to be the exception
rather than the rule in \\\\\markets;
and,
 Procter and Gamble …still customizes
the final product offering and market
strategy to the conditions that pertain in
individual national markets.” - Charles
W. Hill -
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 Market Segmentation
Identifying distinct groups of consumers
whose purchasing behavior differs
from others in important ways.
 Identifying and profiling distinct groups of buyers who
might require separate products and/or marketing mixes
 Clustering consumers in terms of behavior, needs,
attitudes, opinions…
Segmented markets:
Sex, age, income, race, education.
Social-cultural factors.
Psychological factors.
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 Segmentation variables
Consumer characteristics Marketing characteristics
Geographic -Consumer responses to benefits sought, use
-Nations occasions or brands
-States (consumer-response segments)
-Regions
-Cities… -Hierarchy of attributes in choosing a brand,
shifts in consumer priorities
Demographic (market partitioning)
-Age and life-cycle stage
-Marketing mix variables: product, price,
- VALS or psychographics
placement, promotion
-Gender
(price-quality-type dominant)
-Income
-Generation
-Social class…

In international marketing, broader market segments compared to

domestic segments, transnational segments
 Example: culture-based segmentation
Size PDI UAI IDV MAS Marketing implications
(million)

Cluster 1 203 Small Medium Medium- High Preference for “high

Austria, High performance” products,
Germany, use “successful-achiever”
Switzerland, them in advertising, desire
Italy, GB, for novelty, variety and
Ireland pleasure, fairly risk-averse
market.
Cluster 2 182 Medium Strong Varied Low- Appeal to consumer’s
Belgium, Medium status and power position,
France, reduce perceived risk in
Greece, product purchase and use,
Portugal, emphasize product
Spain, functionality.
Turkey
Cluster 3 37 Small Low High Low Relatively weak resistance
Denmark, to new products, strong
Sweden, consumer desire for novelty
Netherlands and variety, high consumer
, Norway regard for
“environmentally friendly”
marketers and socially
conscious firms.
 Elements of a product Augmented
product

Installation Tangible
product

Packaging
Core
product
Brand Features
name Core After-
Delivery benefit or sale
and credit service service

Quality Styling

Global
Warranty variations,
adapt or
standardize?
 Product Attributes
Cultural differences.
Economic differences.
Product and technical
standards.

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 Cultural Differences

Most important - the impact of tradition.

• Impact is greatest in foodstuffs and beverages.
• Scent preferences differ from country to country.
Some tastes and preferences becoming
cosmopolitan:
• Coffee (Japan).
• American-style frozen
dinners (Europe).

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 Economic Differences
Consumer behavior is influenced by
economic development.
Consumers in highly developed countries
tend to have extra performance attributes in
their products.
Chrysler’s Jeep Ford’s Explorer Toyota
Lexus,Cruiser
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.
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 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.
• Different television signal
frequencies.

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 Psychosocial characteristics
 Attitudes toward the product
 Are the basic psychological, social, and economic factors
motivating the purchase and use of the product the same for all
target markets?
 Are the advantages/disadvantages of the product in the minds of
consumers basically the same from one country to another?
 Does the symbolic content of the product differ from one country
to another?
 Is the psychic cost of purchasing and using the product the same?

 Attitudes toward the brand

 Is the brand name equally known and accepted in all target
countries?
 Are customer attitudes toward the package basically the same?
 Are customer attitudes toward pricing basically the same?
 Is brand loyalty the same throughout target countries for the
product?
 Specific international
product policy problems
 Country of origin, made in effect

 Preference for national brands

 Global branding (mono, line, umbrella)

 Brand equity and extension

 International standards

 Product protection

 Product adaptation
 Distribution Strategy
Three different distribution systems:
Retail concentration.
USA concentrated, Japan Fragmented system.
Concentra
ted
Fragmented
Channel length. Short
More channels in fragmented market
Long Chan
nel
Channel exclusivity.
tsiders
No Ou
Choice of channel:
Cost/benefit of each alternative
vary from country to country.
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 A Typical Distribution System
Manufacturer Manufacturer
Inside the Outside the
Country Country Import
Agent
Wholesale
Distributor

Retail
Distributor

Final
Customer

© McGraw Hill Companies, Inc., 2000 Figure 17.1

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 Communications Strategy
Effectiveness of international
communications can be impacted by:
Cultural barriers.
• Need to develop cross-cultural literacy.
United Colors of Benetton Controversial ads.
Source effects.
• Emphasize/De-emphasize foreign origin.
Honda in USA McDonald’s French Franchisor hit USA
o Country of Origin Effects
Noise levels.
• Developed countries - high.
• Less developed countries - low.
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 Foreign vs Domestic Products

Depends on perception.
Hide
Emphasize Country Influence on Purchase

Premium pricing Age Percentage Influenced

18 -30 19
French wines 31 - 45 35
46 - 60 29
61+ 50

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 Push versus Pull
 For industrial products and/or complex
new products.
 Short distribution channels. Push
 Few print/electronic media available
 For consumer goods.
 Long distribution channels.
 Sufficient print/electronic
media to carry message Pull

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 Cultural dimensions and
advertising appeals
 Power distance
 High: status symbols, presence and importance of elders, master-learner relationships…
 Low: independence, “empowered” consumers

 Individualism/Collectivism
 IDV: low context, direct, explicit (you, we, I…), data, facts
 COL: high context, indirect, symbols, entertainment, groups

 Masculinity/Femininity
 MAS: winning, success, domination, persuasion, comparative advertising, reverse sexism…
 FEM: less endorsement, caring, less role differentiation

 Uncertainty avoidance
 High: explanations, testing, technology, design, structure, well-groomed
 Low: results are important, change, subtle
 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.

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 Marketing Laws
Premiums:
No in Austria and France and Germany. Yes
in Finland.
Product comparisons:
Germany - competitor can take you to court
to prove claims made about product.
Canada - no ‘puffery’, use the
credulous person standard.
United States - ‘puffery’ is ok.

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© McGraw Hill Companies, Inc., 2000
 Pricing Strategy
Price discrimination:
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
Using
 Sometimes it does.
Arbitrage
• Ford in UK and Belgium

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Determinants of Demand Elasticity

Income level and competitive conditions

determine elasticity.
Elasticity tends to be be greater in countries with
low income levels.
Elasticity tends to be greater in countries where
there are many competitors.

© McGraw Hill Companies, Inc., 2000

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 Elastic and Inelastic Demand
Curves
Inelastic
Demand Curve

$
Elastic
Demand Curve

Figure 17.2

Output
© McGraw Hill Companies, Inc., 2000
17-20
 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 D +u
40 - 40 - 40 -
30 - D 30 - 30 -
MC
20 - 20 - 20 -
 D MR
10 - MR 10 - MR 
10 - +u
50 -

50 -

30 -

50 -
20 -
30 -
40 -

20 -
30 -
40 -

20 -

40 -

60 -
70 -
10 -

10 -

10 -
0  0  0
15

55
Output Output Output
© McGraw Hill Companies, Inc., 2000
Figure 17.3 17-21
 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.
© McGraw Hill Companies, Inc., 2000
17-22
 Regulatory Influences on
Prices
Antidumping regulations:
Selling a product for a price that is less
than the cost of producing it.
Antidumping rules place a floor under
export prices and limit a firm’s ability to
pursue strategic pricing.

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 Dumping: GATT and the U.S.
GATT: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.

© McGraw Hill Companies, Inc., 2000

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 FINAL MEGA QUIZ
Q.No.1 What are the salient features of New Trade theory..define
with examples?/
Q.No.2 Differentiate between Mercantilism and Absolute
advantage theory?
Q.No.3 What is Leontief paradox Theory?
Q.No./4 How does a Strategic behavior explain the Pattern of
Foreign direct Investment?
Q.No.5 What do you think what major factors could affect a
Pakistani taste and choice of buying a product, if he moves to UK?

Q.No.6: How could Pakistani government discourage the Pakistani

investors to invest in Bangladesh textile industry?
 Configuring the Marketing Mix

Com

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