Global Marketing, R & D

Global Marketing, R & D
Global Marketing and R&D

Among different countries, why and how:
– It makes sense to vary the attributes of products
– Distribution strategy may vary
– Advertising and promotion strategies may vary
– Pricing strategy may vary

How globalization affects new-product
development
Levitt, 1983
“A powerful force drives the world
toward a converging commonality,
and that force is technology”
(Prof. Ted Levitt, HBS)
Globalization of Markets?
 Levitt’s
“Converging commonality” has
not happened universally
 Consumer product tastes converged less
than industrial product specifications
 Media, communications means have
– made consumers world-wide more aware of
their mutual preferences
– have contributed to creation of world brands
– have caused market segments to emerge
across some national markets--inter-market
segments
Market Segmentation

The process of identifying groups of consumers whose
purchasing behavior is unique in important ways
– Is based on demography, geography, social-cultural factors,
psychological factors
– Allows firms to adjust marketing mix to meet the needs of
separate market segments

Marketing mix variables:
product-price-place (distribution)-promotion
Market Segmentation Across
National Markets
 Standardization:
companies may
– Offer same products
– Adjust balance of marketing mix to market
segments with similar needs across countries
 Adaptation:
companies may
– Offer different products
– Adjust balance of marketing mix to market
segments with differing needs across countries
Marketing Strategy

Standardization (Global Integration Pressures)
– Efficiencies through integrated R&D, production,
marketing
– Control implications

Adaptation (Local Responsiveness Pressures)
– Buyer behavior (cultural, economic influence,
brand perception--country of origin idea)
– Laws, regulations
– Local environment needs
– Responsiveness to local condition shifts

Implications on marketing mix
International Marketing Mix: Product
 Product:
–
–
a bundle of attributes
Hamburger: meat type, taste, texture, size
Automobile: power, design, quality,
performance, comfort, size/capacity
 Attributes
need to be adapted to a greater or
lesser extent to satisfy
–
–
–
Consumer preferences/tastes due to culture
Economic development levels affect consumer
behavior
National product/technical standards state
mandated
International Marketing Mix: Place
Optimal channel a company chooses
to deliver the product
 The most locally responsive element
of marketing mix because
distribution channels vary
dramatically across countries

– Retail system: concentrated-
fragmented
– Channel length: long, short
– Channel exclusivity
International Marketing Mix: Promotion
 How
firm communicates the product
attributes / benefits to customers
 Barriers to international communication
– Cultural barriers
– Source effects (country of origin effects)
– Noise levels
 Standardized
advertising strategy possible;
standardized advertising strategy
execution more difficult (culture, laws)
International Marketing Mix:
Promotion
 Push vs pull strategies
– Push strategy: personal selling emphasis



Industrial products; complex new products
Short distribution channels
Few print or electronic media
– Pull strategy: mass media advertising
emphasis



Consumer goods
Long distribution channels
Marketing message may be carried via print /
electronic media
International Marketing Mix: Price
Price
discrimination: demand elasticity
Strategic pricing
– Predatory (quick share-of-market focus):
 lower prices to drive competitors out, then raise prices
– Multipoint pricing:
 pricing in one market may have an impact in another
market; subsidize low pricing in one market from
profits in another
–
Experience curve:
 use
aggressive pricing to build volume and move firm
down experience curve (lower marginal costs)
 Regulatory
issues:
 antidumping,
monopoly restriction
New Product Development
New
product development
High risk / high return
– Technological innovation
– Creative destruction
–
Location of
–
R&D
Disperse R&D to trend/technology leading
markets
 High
investment on basic and applied research
 Strong underlying demand; affluent consumers
 Intense competition
New Product Development
 Integrate
R&D, marketing and Production
 Ensure:
–
–
–

Product development driven by customer needs
New products can be manufactured
efficiently/effectively
Time to market is minimized
Plan clearly: goals, milestones, budgets
New Product Development
 Use cross-functional, multinationally diverse teams
 Span: initial concept development to market
introduction
 Team composition critical
–
Assign heavyweight project manager
 High
status in organization; high power and authority
 Dedicated to fullest possible extent to project
–

Team should have representative from each function
Physical co-location
–
–
–
When appropriate?
Build team culture
Communication and conflict resolution processes
Strategic Analysis
Why do organizations decide to enter
international business? Passive entry:
Follow customers overseas
Respond to enquiries from overseas
Competition is in overseas markets
Seek profitable growth
Sell capacity “as is”
Strategic Analysis

Eventually one or more of key distributors become
a candidate for acquisition (FDI)
 Foreign regional development organizations
actively recruit FDI
 Competitive pressures force examination of local
assembly or production nearer to key international
markets
 Major international customers demand local
support
Strategic Analysis
 Organization acquires
companies that are
complimentary to existing businesses
 Continued growth requires regional
management, development, distribution,
technical and customer support
Strategic Analysis
 Issues
involved in conducting international
business become “significant”
 Demands for organization’s resources
increases:
 Management
 Cash
 Product adaptation or unique development
 Customer support
Strategic Analysis

Eventually, these demands force the
active planning of international business by
the organization – Active strategy
Strategic Analysis
 SWOT
and Weaknesses – decisions made
and controlled by management
 Strength
– business
environment – events that are likely to
occur
 Opportunities and Threats
Marketing Mix (4 Ps)
 Product
 Promotion
 Pricing
(Distribution) – the most important
for international business entry
 Place
Marketing Mix (4 Ps)
(Distribution) – the most important
for international business entry:
 Place
 Incoterms determine where title to goods
changes
 Transportation to international freight carrier,
freight, insurance, documentation, customs
clearance, local transportation, logistic
management “in the market”, currency risk
Marketing Mix (4 Ps)
– usually controlled by the exporter,
initially the least impacted element of the
marketing mix
 Product
 However,



“localization” often required:
approvals and certificates
packaging & labeling
measures, etc
Marketing Mix (4 Ps)
 Promotion –
success at home leads to
interest from potential importers, licensors,
joint venture partners
 Local knowledge essential on initial entries:
 Integrated market communication
 Trade and consumer sales promotion
 Sales management
 Trade shows
Marketing Mix (4 Ps)
 Pricing
: What tasks need to be performed
to get the product from place of
manufacture to foreign customers?
 The remainder of the marketing mix needs
to be determined in order to set prices
Export Pricing Policy Issues

Channel length: longer channels than domestic
markets, may drive up end user prices

Price influence: distribution partners negotiate
for the lowest possible “landed cost”

Price-setting authority: How much pricing
authority should be given to distributors or to
subsidiaries?
Dumping
WTO: 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.
 US considers dumping when price is >5%
below home market price or,
 Price is below cost of production

Grey Marketing
 Grey
(or parallel marketing)
 Products are imported outside of the
established distribution channel –
undercutting the authorized channel pricing
 Usually results from high imported prices