CHAPTER 17
Global Marketing and R&D
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Learning Objectives
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McGraw-Hill/Irwin
What are the limits of globalization?
Factors affecting the marketing mix- Four P’s
Why do firms charge two different prices for
the same product? What are the conditions
for successful price discrimination?
Strategic pricing
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Chapter Focus
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McGraw-Hill/Irwin
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.
Set of choices the firm
 Distribution strategy.
offers to its targeted
 Communication strategy.
market.
 Pricing strategy.
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Globalization of Markets and Brands
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“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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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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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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Product Attributes
Cultural differences.
 Economic differences.
Product and technical standards.
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Cultural Differences
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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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Economic Differences
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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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Product and Technical Standards
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McGraw-Hill/Irwin
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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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.
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 Concentrated market.
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A Typical Distribution System
Manufacturer
Inside the
Country
Manufacturer
Outside the
Country
Import
Agent
Wholesale
Distributor
Retail
Distributor
Final
Customer
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Figure 17.1
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Distribution Can Present Interesting Problems
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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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Communications Strategy
Effectiveness of international communications can be impacted by:
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Cultural barriers.
 Need to develop cross-cultural literacy.
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Source and country of origin effects.
 Receiver of the message evaluates it based upon the status
of the sender.
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Country of origin effects:
 Emphasize/de-emphasize foreign origin.
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Noise levels.
 Tends to reduce the effectiveness of a message.
 Developed countries - high.
 Less developed countries - low.
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Push versus Pull:
 Push emphasizes personal selling.
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 Pull depends on mass media advertising.
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Attractiveness of Push versus Pull
Strategies
Product Type and
Consumer
Sophistication.
Factors
Channel
Length.
Media
Availability.
McGraw-Hill/Irwin
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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Push-Pull Mix
Push
industrial or
complex
products
McGraw-Hill/Irwin
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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Global Advertising
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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.
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Advertising in New Delhi
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Pricing Strategy
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Price discrimination.
 Different prices, different
countries, same product.
Strategic pricing.
Regulatory factors:
 Price controls.
 Antidumping.
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Pricing Strategy
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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.
Using
 Ford in Germany and Belgium
Arbitrage
 Sometimes it does.
 Ford in UK and Belgium
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Determinants of Demand Elasticity
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Income level and competitive
conditions determine elasticity.
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McGraw-Hill/Irwin
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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Elastic and Inelastic Demand Curves
Inelastic
Demand Curve
$
Elastic
Demand Curve
Figure 17.2
Output
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Figure 17.3
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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 -
McGraw-Hill/Irwin
j+u
50 -
40 -
0
30 -
Output
10 -
50 -
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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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Strategic Pricing
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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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Regulatory Influences on Prices
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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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Dumping: GATT and the U.S.
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McGraw-Hill/Irwin
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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Configuring the Marketing Mix
Differences
Here
Culture
Requires
Variation
Here
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