Chapter 18
Global Marketing
and R&D
What Is The Marketing Mix?
The marketing mix is comprised of
1. Product attributes
2. Distribution strategy
3. Communication strategy
4. Pricing strategy
18-2
Excerpt from an HBR Article
18-3
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
18-4
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
18-5
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
18-6
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
(eg global youth segment)
18-7
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
1. Culture - tradition, social structure,
language, religion, education
18-8
2. 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
3. Product and technical standards -
national differences can force firms to
customize the marketing mix
18-9
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
18-10
18-11
How Do Distribution
Systems Differ?
There are four main differences in distribution
systems
1. Retail concentration – concentrated or
fragmented
2. Channel length - the number of
intermediaries between the producer and
the consumer
18-12
[Link] exclusivity – how difficult it is for
outsiders to access eg in Japan
[Link] quality - the expertise,
competencies, and skills of established
retailers in a nation, and their ability to sell
and support the products of international
businesses eg Apple
18-13
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
18-14
When the retail sector is very fragmented,
a long channel can be beneficial
economizes on selling costs
can offer access to exclusive channels
18-15
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
18-16
Communication channels available to
a firm include
Direct selling
Sales promotion
Direct marketing
Advertising
18-17
What Are The Barriers to
International Communication?
The effectiveness of a firm's international
communication can be jeopardized by
1. Cultural barriers - it can be difficult to
communicate messages across cultures
2. Source effects and country of origin effects –
Negative and positive
3. Noise levels - the amount of other messages
competing for a potential consumer’s
attention
18-18
18-19
There are two types of communication
strategies
1. A push strategy emphasizes personnel
selling
2. A pull strategy emphasizes mass media
advertising
18-20
Which Is Better –
Push Versus Pull?
The choice between strategies depends
on
1. 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
18-21
2. Channel length
a pull strategy works better with longer distribution
channels (Literacy levels in Japan vs India)
3. Media availability
a pull strategy relies on access to advertising media
a push strategy may be better when media is not
easily available
Country laws such as tobacco and alcohol,
pharmaceutical products
18-22
Push and Pull Mix
Push strategies tend to be emphasized
• For industrial products or complex new products.
• When distribution channels are short.
• When few print or electronic media are available.
Pull strategies tend to be emphasized
• For consumer goods.
• When distribution channels are long.
• When sufficient print and electronic media are
available to carry the marketing message.
18-23
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
18-24
For example, Kellogg could not use a television commercial it
produced in Great Britain to promote its cornflakes in many other
European countries.
A reference to the iron and vitamin content of its cornflakes was
not permissible in the Netherlands, where claims relating to health
and medical benefits are outlawed.
A child wearing a Kellogg T-shirt had to be edited out of the
commercial before it could be used in France, because French law
forbids the use of children in product endorsements.
The key line "Kellogg's makes their cornflakes the best they have
ever been" was disallowed in Germany because of a prohibition
against competitive claims
18-25
Way out?
Capturing some benefits of global
standardization while recognizing
differences in countries' cultural and legal
environments.
18-26
What Pricing Strategy
Should Firms Use?
Firms need to consider
1. Price discrimination
Keep national markets separate so no arbitrage
occurs
Price elasticity of demand (income levels and
competitiveness)
18-27
Strategic pricing
1. Predatory pricing
2. Multi-point pricing
A firm's pricing strategy in one market may have an
impact on its rivals’ pricing strategy in another market
a) Aggressive pricing in one market may elicit a
response from rivals in another market.
b) Price wars in the same market
c) Central monitoring
3. Experience curve pricing
Learning effects and economies of scale underlie the
experience curve.
18-28
Regulations that affect pricing decisions
Antidumping regulations
a) Dumping occurs whenever a firm sells a product for a
price that is less than the cost of producing it
b) According to GATT, sales at "less than fair value“
and "material injury to a domestic industry."
Competition policy
Regulations designed to promote competition and to
restrict monopoly practices
18-29
How Should Firms Configure
The Marketing Mix?
Marketing mix from country to country to take
into account local differences in culture,
economic conditions, competitive conditions,
product and technical standards, distribution
systems, government regulations, and the like
18-30
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
18-31
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
18-32
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
18-33
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
18-34
Any Questions?
18-35
