International
Business
Fourth Edition
CHAPTER 17
Global Marketing and R&D
17-3
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.
Pricing strategy.
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Set of choices the firm
offers to its targeted
market.
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17-4
Globalization of Markets and Brands
“A powerful force drives the world toward a
converging commonalty (sic), and that force is
technology.” Theodore Levitt, Harvard
Business Review.
CNN and MTV.
Overstatement?
Cultural and economic differences act as a
major brake on any trend toward global
consumer tastes and preferences.
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17-5
Market Segmentation
geography
Identifying distinct groups of
consumers whose purchasing
behavior differs from other
in important ways.
demographics
Social-cultural
factors
Marketing mix
adjusted to
reflect differing
purchasing
patterns in
segments.
Psychological
factors
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17-6
Market Segmentation
Segments that
transcend
national
borders.
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Two
main
issues
in the
differences
between
countries
Structure of
their market
segments.
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17-7
Product Attributes
Cultural differences.
Economic differences.
Product and technical standards.
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17-8
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.
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17-9
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.
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17-10
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.
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17-11
Distribution Strategy
Three different distribution systems:
Retail concentration
Channel length.
Channel exclusivity.
Choice of channel:
Cost/benefit of each alternative
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.
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vary
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17-12
A Typical Distribution System
Manufacturer
Inside the
Country
Manufacturer
Outside the
Country
Import
Agent
Wholesale
Distributor
Retail
Distributor
Final
Customer
Figure 17.1
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17-13
Distribution Can Present Interesting Problems
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17-14
Communications Strategy
International communication occurs
When a firm uses a marketing
Message to sell its products in
another country.
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Channels
direct selling
sales promotion
direct marketing
advertising
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17-15
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.
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17-16
Attractiveness of Push versus Pull
Strategies
Product Type and
Consumer
Sophistication.
Factors
Channel
Length.
Media
Availability.
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Pull = selling to large
market segments.
Push = selling
complex products.
Pull = long
distribution channel.
Push = short
distribution channel.
Pull = access to
advertising media.
May be legal
Restrictions.
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17-17
Push-Pull Mix
Push
industrial or
complex
products
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few print or
electronic media
available
short
distribution
channels
consumer goods
long
distribution
channels
sufficient print
and electronic
media available
Pull
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17-18
Global Advertising
Standardized:
Significant economic advantages.
Scarce creative talent.
Many global brand names.
Non-standardized:
Messages in one country may fail
another.
Advertising regulations can be a
Dealing with Country differences:
in
restriction.
Select some features for standardization
and others for localization.
Saves some costs.
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17-19
Advertising in New Delhi
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17-20
Pricing Strategy
Price discrimination.
Different prices, different countries,
same product.
Strategic pricing.
Regulatory factors:
Price controls.
Antidumping.
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17-21
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.
Ford in UK and Belgium
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Using
Arbitrage
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17-22
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.
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17-23
Elastic and Inelastic Demand Curves
Inelastic
Demand Curve
$
Elastic
Demand Curve
Figure 17.2
Output
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Figure 17.3
17-24
Price Discrimination
Revenue
and Costs
Revenue
and Costs
110 -
110 -
100 -
100 -
100 -
80 -
70 -
70 -
70 -
60 -
60 -
60 -
50 -
50 -
40 -
40 -
30 -
20 -
20 -
MR
10 -
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j+u
50 -
40 -
0
30 -
Output
10 -
50 -

Du
40 -
30 -
20 -
0
MRu
10 -
j
D
40 -
30 -
50 -
Output
40 -
30 -
20 -
0
10 -
10 -
50 -
43.58
D
j
20 -
80 -
Output
MC
MR
j+u
70 -
80 -
30 -
World
90 -
60 -
United
States
90 -
20 -
Japan
90 -
10 -
110 -
Revenue
and Costs
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17-25
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.
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17-26
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.
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17-27
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.
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17-28
Configuring the Marketing Mix
Differences
Here
Culture
Requires
Variation
Here
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17-29
New Product Development
Creative
Technological Innovation
Destructive
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Critical to stay
on leading edge
of technology
Apply technology to
developing products
Consumers’ want.
Design product
for cost
effective
manufacture.
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17-30
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.
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17-31
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.
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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.
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