Global Marketing
Chapter 15
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Extra credit opportunity
• Presentations on
- a country or
- a region (even a town/city in U.S.)
- some other subject in global business
• An especially good chance to discuss your home or
your ancestors’ home
• Up to 16 points extra on class participation grade
• Details available on web site
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What is ‘Marketing?’
• The process by which the firm’s abilities, products,
and services are
- brought to the attention of customers,
- then sold and
- delivered
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Global marketing requires thinking
through the complete process
• Even people who have done well in a
marketing class tend to oversimplify it
• Global marketing involves complexity at each
step
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‘4 Ps’ of Marketing
• Product
• Place (=‘Distribution Strategy’ in texts)
• Promotion (=‘Communication Strategy’ in
texts)
• Price (Pricing Strategy)
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Choosing a Strategy
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The Globalization of
Markets and Brands
• Important to determine when product standardization
is appropriate in an international market
• Firms may need to vary the marketing mix in each
different country
- Globalization may be the exception rather than the
rule in marketing, especially in consumer goods
markets
- Firms with a global standardization strategy overall
may still need to localize marketing a great deal
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Product Attributes
• Firms will change their product from country to
country (localize) due to …
- Cultural differences
- Levels of economic development
- Product and technical standards
• Product & technical standards are mostly set by
governments
• Sometimes even firms whose basic approach is global
standardization or the international strategy must
alter product for these reasons
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Distribution (Place)
• Definition – “The course that goods take between
production and consumption”
- physical path and
- legal title – Who buys the product from the maker
and sells it to others closer to the final customer?
• Today we’re mostly considering how products get to
final customer once they’re in a particular country
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- Shipping is one part of distribution
- But the core of the distribution challenge is
identifying the people and companies you will work
with and the process through which you will sell it
• to retailers, and through them
• to the final customer
- These people, companies, and processes for
distribution are called marketing “channels”
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• If you’re selling on line, you still have to think about
‘place’
- How will people find your product in cyberspace?
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Distribution Strategy
(Place)
• Choice of the optimal channel for delivering a product
to the consumer
- Depends on differences between countries
• Retail concentration – How many companies have
major stores relevant to your product?
• Channel length – Do you sell directly to the retailer or
through intermediaries? How many intermediaries?
• Channel exclusivity- Will people in the standard
channels for your product consider buying from you?
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Direct Selling
• Selling direct to foreign retailers or end users
- Often difficult
- But gives you control of
the process
- Avoids risk of a lazy
distributor
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- A distributor – a firm that buys from maker or a larger
distributor and sells to a retailer or a smaller distributor (or
sometimes to the final customer)
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Selling is complex everywhere –
but even more so abroad
• Need to provide a sales program
-
Promotional materials,
services,
training of sales people,
discounts for quantity,
credit
• Don’t be quick to cut the base price
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Communication Strategy
(Promotion)
• Defines the process the
firm will use in
communicating the
attributes of its product
to prospective customers
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Push Versus Pull Strategy
• Push strategy emphasizes personal selling
- Requires intense use of a sales force
- Relatively costly
• Pull strategy depends on mass media advertising
- Can be cheaper for a large market segment
• Determining factors of type of strategy
- Product type and consumer sophistication
- Channel length
- Media availability
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Product Type and
Consumer Sophistication
• Pull strategy – typically used
for
- Consumer goods
- Large market segment
(e.g., personal
computers)
- Mass communication has
cost advantages
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• Push strategy
- Industrial products or
complex new products
- Direct selling allows firms
to educate users
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Channel Length
• A combination of pull and push
- is needed for long or exclusive distribution channels
• common in Japan and some other countries
- Mass advertising is needed to generate demand to
pull product through various layers
- Salespeople’s push working with distributors
• Push strategy is often especially important in countries
with low literacy levels to educate consumers
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Media Availability
• Pull strategy
- Relies on access to advertising media
- Common in developed nations
• A push strategy is necessary if..
- Media availability is limited by law
- Most electronic media is state owned with ‘no
commercials’ policy
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Pricing is much more complex
in international business
•
•
•
•
•
•
Changing values of currency
Diversity of markets
Costs of transportation, warehousing
Tariffs, quotas
Government regulations
Distribution methods have to differ from one country to the
next
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Distribution systems result in
‘price escalation’
• U.S., Canada, much of Europe have concentrated
distribution system with many big stores
• It is difficult to build huge stores in many countries
• So many buyers must be reached through long,
complex channels – a ‘fragmented’ system
- They typically buy at small stores within walking or
public transit distance from home
- Small distributors serve the small stores
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Price escalation
US
production
cost = $1
Sell to retailer
for $1.50
Ship & sell to
distributor
in Japan
U.S. retailer
sells for
$2.25
Canada
retailer sells
for $2.40
Tariff = .05
Shipping = .20
Your cost=$1.25
Store in Japan
Big distributor buys for $1.875,
has high costs,
Small distributor adds 20%,
takes 20% markup, sells
adds 60%, sells
sells for $2.70
for $2.25
for $4.32
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• Government involvement – no consistency
- Some laws set minimum prices – to prevent ‘monopoly,’ Japan,
Germany protect small stores
- Many prohibit selling below ‘cost’
- Others set maximum prices
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Globalization of Markets?
• Prof. Theodore Levitt has argued that markets were
becoming fully “globalized” – that is,
the same everywhere
- He said people used to be very different from one
country to the next,
- But they’ve become essentially the same with the spread
of
• similar communications media
• similar government regulation
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• There’s much truth in Levitt’s claim
- Developed country markets have become much more similar
• Proctor & Gamble no longer has to make different laundry
detergents for different developed countries
- People in poorer countries aspire to live like those in the rich
countries, and they will often buy the same products
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But big differences still exist in
desires for most consumer goods
• Products where differences are large include:
- Foods
- Cars
- Cosmetics
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If you can standardize, there are
big advantages
• You not only save money by producing in fewer, more efficient
locations
• You also have an organization that is easier and
more efficient to run, because the rules are similar everywhere
- Starbucks
- Levi’s
- Apple
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• Material below here is not required unless specifically
mentioned in study guide
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Choosing a Distribution
Strategy
• Benefits of a longer distribution channel
- Cuts selling costs when the retail sector is fragmented
- Longer channels can provide increased market access
• If channel quality is poor, a firm should consider what
steps it could take to upgrade the quality of the
channel
- This may include establishing its own distribution channel
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Pricing Strategy
• Three aspects of international pricing strategy
- Price discrimination
- Strategic pricing
- Regulatory influence on prices
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Strategic Pricing
• Multipoint pricing strategy
- 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
• Kodak and Fuji
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Strategic Pricing
• Experience curve pricing
- Firms price low worldwide to build market share
- Incurred losses are made up as company moves
down experience curve, making substantial profits
- Cost advantage over its less-aggressive competitors
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Regulatory Influences on Prices
• Antidumping regulations
- Selling a product for a price that is less than the cost of
producing it
- Antidumping rules vague, but place a floor
• Competition policy
- Regulations designed to promote competition and restrict
monopoly practices
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Configuring the Marketing Mix
Differences
Here
Culture
Requires
Variation
Here
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