© mcgraw hill companies, inc., 2000 global marketing and r&d chapter 17
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© McGraw Hill Companies, Inc., 2000
Global Marketing and R&D Chapter 17
© McGraw Hill Companies, Inc., 2000
Procter & Gamble in Japan
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© McGraw Hill Companies, Inc., 2000
Globalization and Markets “Globalization seems to be the exception
rather than the rule in many consumer goods markets and industrial markets; and,
Procter and Gamble …still customizes the final product offering and market strategy to the conditions that pertain in individual national markets.” - Charles W. Hill -
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Market Segmentation
Identifying distinct groups of consumers whose purchasing behavior differs from others in important ways.
Segmented markets: Sex, age, income, race, education. Social-cultural factors. Psychological factors.
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Product Attributes
Cultural differences. Economic differences. Product and technical
standards.
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Cultural Differences
Most important - the impact of tradition.• Impact is greatest in foodstuffs and beverages.
• Scent preferences differ from country to country.
Some tastes and preferences becoming cosmopolitan:
• Coffee (Japan).
• American-style frozen dinners (Europe).
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Campbell’s International
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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.
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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.• Different television signal
frequencies.
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Distribution Strategy
Three different distribution systems: Retail consideration. Channel length. Channel exclusivity.
Choice of channel: Cost/benefit of each alternative
vary from country to country.
ConcentratedFragmented
Short
Long Channel
No Outsiders
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A Typical Distribution SystemManufacturer
Inside the Country
Manufacturer Outside the
Country Import Agent
Wholesale Distributor
Retail Distributor
Final Customer
Figure 17.117-10
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Distribution Can Be A Problem
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Communications Strategy Effectiveness of international communications
can be impacted by: Cultural barriers.
• Need to develop cross-cultural literacy.
Source effects.• Emphasize/De-emphasize foreign origin.
Noise levels.• Developed countries - high.
• Less developed countries - low.
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Foreign vs Domestic Products
Depends on perception. Hide Emphasize
Premium pricing French wines
Country Influence on PurchaseAge Percentage Influenced
18 -30 19
31 - 45 35
46 - 60 29
61+ 50
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Push versus Pull For industrial products and/or complex
new products. Short distribution channels. Few print/electronic media available For consumer goods. Long distribution channels. Sufficient print/electronic media
to carry message
Push
Pull
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Global Advertising
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.
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Advertising in New Delhi
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Marketing Laws Premiums:
No in Austria and France and Germany. Yes in Finland.
Product comparisons: Germany - competitor can take you to court to
prove claims made about product. Canada - no ‘puffery’, use the
credulous person standard. United States - ‘puffery’ is ok.
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Pricing Strategy Price discrimination:
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
Using Arbitrage
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Determinants of Demand Elasticity
Income level and competitive conditions determine elasticity. Elasticity tends to be be greater in countries with
low income levels. Elasticity tends to be greater in countries where
there are many competitors.
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Elastic and Inelastic Demand Curves
Elastic Demand Curve
Inelastic Demand Curve
$
Output
Figure 17.2
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Price DiscriminationRevenue and Costs
Revenue and Costs
Revenue and Costs
Output Output Output
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Figure 17.3
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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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Regulatory Influences on Prices
Antidumping regulations: Selling a product for a price that is less than
the cost of producing it. Antidumping rules place a floor under export
prices and limit a firm’s ability to pursue strategic pricing.
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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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Configuring the Marketing Mix
Culture
Economy
Com
petition S
tandard
s
Distrib
ution
Gov’t Regs
Product
Attrib
ute
s
Dis
trib
utio
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Stra
tegy
Comm
unicatio
ns Strategy
Pricing Strategy
Differences Here
Requires Variation Here
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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.
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The Need to Integrate R&D, Marketing and Production
High failure rate ratio between new products development and profit goals.
Reasons for failure: Limited product demand. Failure to adequately commercialize product. Inability to manufacture product cost-
effectively.
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Cross-Functional Integration Integrating R&D, production and marketing
ensures: Project development is driven by customer
need. New products are designed for ease of
manufacture. Development costs are kept in check. Time to market is minimized.
Use cross-functional development teams.
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