global marketing and r & d_en

Global Marketing and R&D

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Introduction

The marketing mix (the choices the firm offers to its targeted market) is comprised of:product attributesdistribution strategycommunication strategypricing strategy

The Globalization Of Markets And Brands

Theodore Levitt argued that world markets were becoming increasingly similar making it unnecessary to localize the marketing mix Levitt’s theory has become a lightening rod in the debate about globalizationThe current consensus is that while the world is moving towards global markets, cultural and economic differences among nations limit any trend toward global consumer tastes and preferencesIn addition, trade barriers and differences in product and technical standards also limit a firm's ability to sell a standardized product to a global market

Market Segmentation

Market segmentation involves identifying distinct groups of consumers whose purchasing behavior differs from others in important ways

Markets can be segmented by:geographydemographysocio-cultural factorspsychological factors

Market Segmentation

Firms need to be aware of two key market segmentation issues:

1. the differences between countries in the structure of market segments

2. the existence of segments that transcend national borders

When segments transcend national borders, a global strategy is possible

Studiu de caz: Marketing to Black Brazil

Summary This feature explores how companies are marketing to

Brazil’s black population. Although Brazil is home to a sizable racial minority, to date companies have essentially ignored the market segment. Now however, companies are beginning to target the group using products and promotions specifically developed for the market.

Suggested Discussion Questions 1. Describe the differences between the black

population in the United States and the black population in Brazil. What are the implications of these differences for the culture as a whole?

Discussion Points: Racial discrimination in the United States has made the country’s black population an identifiable subculture. In contrast, In Brazil racism has been more subtle, and the black population has not been excluded in the manner found in the United States. In fact, Brazil has encouraged marriages between blacks and whites. In the end, most African-Brazilians think of themselves as part of a culture that transcends race, rather than as black or white. Most of you will probably suggest that this attitude promotes a more cohesive culture where biases toward or against certain groups are not prevalent.

2. How has Unilever targeted the black population in Brazil? How does the company’s strategy in Brazil differ from its strategy in other countries? What does your response tell you about Unilever’s overall global marketing strategy?

Discussion Points: Because Brazil’s blacks think of themselves as falling into a range of skin tones, rather than being simply black, Unilever’s approach to the Brazilian market has been to target the entire population rather than certain segments. The company’s advertisements show people with different skin tones, not just blacks or whites, and its products are labeled as being for tan and black people so as to cover a greater range of consumers. You will probably note that this strategy indicates that Unilever is using a localization approach for its marketing.

Another Perspective: Unilever’s web site {http://www.unilever.com/} is an interesting one to visit. You can click on countries and brands to see how the company sells its products in different markets.

Verificarea atenţiei!

Which of the following is not an element in the marketing mix?

a) product attributes

b) communication strategy

c) distribution strategy

d) production strategy

Product Attributes

A product is like a bundle of attributesProducts sell well when their attributes match consumer needsIf consumer needs were the same everywhere, a firm could sell the same product worldwideBut, consumer needs vary from country to country depending on culture and the level of economic development

Cultural Differences

Countries differ along a range of cultural dimensions including:traditionsocial structurelanguagereligioneducation

While there is some cultural convergence among nations, Levitt’s vision of global markets is still a long way off

Economic Development

A country’s level of economic development has important marketing implicationsConsumers in highly developed countries tend to demand a lot of extra performance attributesConsumers in less developed nations tend to prefer more basic products

Consumer behavior is influenced by economic development.

• Consumers in highly developed countries tend to demand extra performance attributes in their products

• Price is not a factor due to high income level

• Consumers in less developed countries value basic features as more important

• Price is a factor due to lower income level• Cars: no air-conditioning, power steering, power windows, radios, and

cassette players

• Product reliability is more important

Product And Technical Standards

Levitt’s notion of global markets does not allow for the national differences in product and technological standards that force firms to customize the marketing mix

Distribution Strategy

A firm’s distribution strategy (the means it chooses for delivering the product to the consumer) is a critical element of the marketing mix How a product is delivered depends on the firm’s market entry strategyFirms that manufacturer the product locally can sell directly to the consumer, to the retailer, or to the wholesalerFirms that manufacture outside the country have the same options plus the option of selling to an import agent

Distribution Strategy

Figura 2: Un model de sistem de distribuţie

Differences Between Countries

There are four main differences in distribution systems:

1. retail concentration

2. channel length

3. channel exclusivity

4. channel quality


1. Retail Concentration In a concentrated retail system, a few retailers supply most of the marketIn a fragmented retail system there are many retailers, no one of which has a major share of the marketDeveloped countries tend to have greater retail concentration, while developing countries are more fragmented

Concentrated system:• Common in developed countries• Contributing factors: increase in car ownership, number

of households with refrigerators and freezers, and two-income households

Fragmented system:• Common in developing countries• Contributing factors: great population density with large

number of urban centers, e.g. Japan• Uneven or mountainous terrain, e.g. Nepal


2. Channel LengthChannel length refers to the number of intermediaries between the producer and the consumerWhen the producer sells directly to the consumer, the channel is very shortWhen the producer sells through an import agent, a wholesaler, and a retailer, a long channel existsCountries with fragmented retail systems tend to have longer channels, while countries with concentrated systems have shorter channelsThe Internet is helping to shorten channel length as is the emergence of large stores like Wal-Mart and Tesco


3. Channel ExclusivityAn exclusive distribution channel is one that is difficult for outsiders to accessJapan's system is an example of a very exclusive system

Degree to which it is difficult for outsiders to access distribution channels.Varies between countries:• Japan - exclusive systems because personal relations, often

decades old, play an important role in stocking products• Difficult for new firm to get shelf space as compared to an old firm


4. Channel QualityChannel quality refers to the expertise, competencies, and skills of established retailers in a nation, and their ability to sell and support the products of international businesses The quality of retailers is good in most developed countries, but is variable at best in emerging markets and less developed countriesFirms may find that they have to devote considerable resources to upgrading channel quality

Choosing A Distribution Strategy

The choice of distribution strategy determines which channel the firm will use to reach potential consumersThe optimal strategy depends on the relative costs and benefits of each alternative Since each intermediary in a channel adds its own markup to the products, there is generally a critical link between channel length and the firm's profit marginSo, when price is important, a shorter channel is betterA long channel can be beneficial because it economizes on selling costs when the retail sector is very fragmented, and can offer access to exclusive channels


The main differences between distribution systems include all of the following except

a) retail concentration

b) product attributes

c) channel length

d) channel exclusivity

Communication Strategy

Communicating product attributes to prospective customers is a critical element in the marketing mix How a firm communicates with customers depends partly on the choice of channel

Communication channels available to a firm include direct sellingsales promotiondirect marketingadvertising

Communication Strategy

Factors that determine choice of strategy– product type and consumer sophistication– channel length– media availability

Overcoming cultural barriers– develop cross-cultural literacy– use local advertising agency and sales force

Barriers To International Communication

International communication occurs whenever a firm uses a marketing message to sell its products in another country

The effectiveness of a firm's international communication can be jeopardized by:

1. cultural barriers

2. source and country of origin effects

3. noise levels


1. Cultural Barriers – it can be difficult to communicate messages across culturesA message that means one thing in one country may mean something quite different in anotherTo overcome cultural barriers, firms need to develop cross-cultural literacy, and use local input when developing marketing messages


2. Source and Country of Origin Effects Source effects occur when the receiver of the message evaluates the message on the basis of status or image of the sender Firms can counter negative source effects by deemphasizing their foreign originsCountry of origin effects refer to the extent to which the place of manufacturing influences product evaluations

Cultural Barriers:

• Develop cross-cultural literacy

• Firm should use local input such as local advertising agency and sales force

Source and country of origin effects:

• Receiver of the message evaluates the message based on status or image of the sender

• Anti-Japan wave in US in 1990’s

• Place of manufacturing influences product evaluations

• Often used when consumer lacks more detailed knowledge of the product

• Examples: French wines, Italian clothes, and German luxury cars

Barriers to International Communication

3. Noise LevelsNoise refers to the amount of other messages competing for a potential consumer’s attentionIn highly developed countries, noise is very highIn developing countries, noise levels tend to be lower

Studiu de caz: Overcoming Cultural Barriers to Selling Tampons

Summary This feature examines Procter & Gamble’s (P&G) efforts to

bring tampons to the world. After purchasing Tambrands in 1997, P&G found that marketing strategies that were successful in the United States failed to generate sales in many other parts of the world. P&G, in an effort to reach new customers, has developed a new marketing strategy that is based on direct selling and relationship marketing. The strategy is currently being tested in Mexico, and if successful, will be implemented in other South American markets.

Suggested Discussion Questions 1. How has culture affected P&G’s efforts to sell tampons

around the world?

Discussion Points: Culture has played a significant role in P&G’s effort to sell tampons. While tampons are commonly used in North America and much of northwestern Europe, sales are almost nonexistent in other parts of the world. Many cultures link the use of tampons with a loss of virginity. The company has been forced to take a personal approach to marketing, and include education as part of its strategy.

2. P&G has resorted to direct selling and relationship marketing to sell tampons. In your opinion, would these methods work in the United States? Why or why not?

Discussion Points: Most of you would probably argue that direct selling and relationship marketing would not be necessary in the United States where tampon usage is already high.

Another Perspective: To further explore Procter & Gamble’s international marketing efforts, go to {http://www.pg.com/en_US/index.jhtml}, and click on “P&G Global Operations.” By clicking on different countries and then on a particular product you can follow how the company has changed the marketing mix for different markets.

Push versus Pull Strategies

Firms have to choose between two types of communication strategies:a push strategy emphasizes personnel sellinga pull strategy emphasizes mass media advertising

The choice between the strategies depends upon:

1. product type and consumer sophistication

2. channel length

3. media availability

Pull strategy:• Consumer goods• Large market segment• Long distribution channels• Mass communication has cost advantages

Push strategy:• Industrial products or complex new products• Direct selling allows firms to educate users• Short distribution channels• Used in poorer nations for consumer goods where direct

selling only way to reach consumers


1. Product Type and Consumer SophisticationFirms in consumer goods industries that are trying to sell to a large market segment usually use a pull strategyFirms that sell industrial products typically prefer a push strategy

2. Channel LengthA pull strategy can work better with longer distribution channels

Pull strategy:• Long or exclusive distribution channels• e.g. Japan• Mass advertising to generate demand to pull product

through various layers

Push Strategy:• In countries with low literacy levels to educate consumers


3. Media AvailabilityA pull strategy relies on access to advertising mediaWhen media is not easily available, a push strategy may be more attractive


In general, a push strategy is better:for industrial products and/or complex new productswhen distribution channels are shortwhen few print or electronic media are available

A pull strategy is better:for consumer goods productswhen distribution channels are longwhen sufficient print and electronic media are available to carry the marketing message

The Fortune at the Bottom of the Pyramid

C.K. Prahalad proposes that the global poor be seen not as victims, but as “resilient and creative entrepreneurs and value-conscious consumers”

Addressing the needs of these consumers is about more than Corporate Social Responsibility

Engaging those at the bottom of the pyramid requires “co-creative solutions” involving new actors

Studiu de caz: Unilever—Selling to India’s Poor

Summary This study case explores Unilever’s innovative global

marketing strategy. Unilever maintains a substantial presence in many of the world’s poorer nations where low-income levels, unsophisticated consumers, illiteracy, a fragmented retail distribution system, and unpaved roads make marketing difficult. Still, the company has managed to succeed thanks to its efforts to customize its marketing strategy to the local market.

Suggested Discussion Questions 1. Discuss the effects of India’s culture on each of the

components of Unilever’s marketing strategy. What can Unilever learn from its experiences in India?

Discussion Points: In India, Unilever faces numerous challenges to its marketing strategy. Income levels are low, consumers are unsophisticated and illiterate, the retail distribution system is fragmented, and the road system is poor. However, by adapting to the environment, Unilever has built a small, but successful business in the country. Because most consumers do not have access to television, the company posts advertisements in common meeting areas such as village wells and marketplaces. The company also takes part in weekly markets where it not only sells its products, but it also gives away free samples. Unilever has also made a strong effort to fit in with the country’s retail system, and stocks its products in small size packages in about 3 million stores, many of which are very tiny.

2. Is Unilever’s strategy in India a push strategy or a pull strategy? Explain.

Discussion Points: Most of you will suggest that Unilever’s strategy in India is a push strategy. The country has few mass media options, and the company has been forced to take a unique approach to developing awareness of its products among consumers. Unilever representatives frequently establish a presence in locations where people tend to congregate such as riverbanks where clothes washing takes place, or the village well or marketplace.

Another Perspective: As noted earlier, Unilever’s web site is worth a visit. Go to the company’s India site by selecting it from the list available on the homepage {http://www.unilever.com} and compare the company’s marketing efforts there to the strategy used in other countries.

Global Advertising

Standardizing advertising worldwide has both pros and cons

Standardized advertising makes sense when:it has significant economic advantagescreative talent is scarce and one large effort to develop a campaign will be more successful than numerous smaller effortsbrand names are global

Global Advertising

Standardized advertising does not make sense when:cultural differences among nations are significantcountry differences in advertising regulations block the implementation of standardized advertising

Some firms have been trying tactics to capture the benefits of global standardization while responding to individual cultural and legal environmentsSo, some features of a campaign are standardized while others are customized to local markets


Standardized advertising makes sense in all of the following situations except

a) when cultural differences among nations are significant

b) when a firm is trying to save money

c) when creative talent is scarce and one large effort to develop a campaign will be more successful than numerous smaller efforts

d) when brand names are global


A pull strategy is best

a) for industrial products

b) when distribution channels are short

c) when sufficient print and electronic media are available to carry the marketing message

d) for complex new products

Pricing Strategy

International pricing is an important element in the marketing mix

There are three issues to consider:The case for price discriminationStrategic pricingRegulations that affect pricing decisions

Price Discrimination

Price discrimination occurs when firms charge consumers in different countries different prices for the same product Firms using price discrimination hope it will boost profits

For price discrimination to work:the firm must be able to keep national markets separatedifferent price elasticities of demand must exist in different countries


The price elasticity of demand is a measure of the responsiveness of demand for a product to changes in priceWhen a small change in price produces a large change in demand, demand is elastic When a large change in price produces only a small change in demand, demand is inelastic Income level and competitive conditions are the two most important determinants of a country’s elasticity of demand for a certain product Typically, price elasticities are greater in countries with lower income levels and larger numbers of competitors

For price discrimination to work: the firm must be able to keep national markets separate different price elasticities of demand must exist in

different countriesprice elasticities are greater in countries with lower

income levels and larger numbers of competitors


Figura 3: Elastic and Inelastic Demand Curves

Strategic Pricing

Strategic pricing has three aspects:

1. predatory pricing

2. multi-point pricing

3. experience curve pricing

Strategic Pricing

1. Predatory PricingPredatory pricing involves using the profit gained in one market to support aggressive pricing designed to drive competitors out in another marketAfter the competitors have left, the firm will raise prices

Strategic Pricing

2. Multi-point PricingMulti-point pricing refers to the fact that a firm’s pricing strategy in one market may have an impact on a rival’s pricing strategy in another marketAggressive pricing in one market may elicit a competitive response from a rival in another critical marketFor managers, it is important to centrally monitor pricing decisions around the worldAggressive pricing in one market may elicit a response from rivals in another market

Strategic Pricing

3. Experience Curve PricingFirms that are further along the experience curve have a cost advantage relative to firms further up the curveFirms pursuing an experience curve pricing strategy price low worldwide in an attempt to build global sales volume as rapidly as possible, even if this means taking large losses initiallyThe firm believes that several years in the future, when it has moved down the experience curve, it will be making substantial profits and have a cost advantage over its less aggressive competitors

Regulatory Influences On Prices

The use of either price discrimination or strategic pricing may be limited by national or international regulations

A firm’s ability to set its own prices may be limited by:

1. antidumping regulations

2. competition policy


1. Antidumping RegulationsDumping occurs whenever a firm sells a product for a price that is less than the cost of producing itAntidumping rules set a floor under export prices and limit a firm’s ability to pursue strategic pricing

– Antidumping rules vague, but place a floor under export prices and limit a firm’s ability to pursue strategic pricing

• Article 6 of GATT allows action against an importer if the product is sold at ‘less than fair value’ and causes ‘material injury to a domestic industry’


2. Competition Policy Most industrialized nations have regulations designed to promote competition and restrict monopoly practicesThe regulations can be used to limit the prices that a firm can charge


A firm is using _________ when it uses a pricing strategy aimed at giving a company a competitive advantage over its rivals.

a) predatory pricing

b) multipoint pricing

c) experience curve pricing

d) strategic pricing

Configuring The Marketing Mix

Standardization versus customization is not an all or nothing conceptMost firms standardize some things and customize othersFirms should consider the costs and benefits of standardizing and customizing each element of the marketing mix

Studiu de caz: Castrol Oil în Vietnam

Summary This feature focuses on the strategies and experiences

of Castrol Oil in marketing its GTX brand of motor oil around the world. Castrol Oil is the lubricants division of the British chemical, oil, and gas concern Burmah Castrol. Castrol Oil’s GTX brand of motor oil is marketed as a premium brand. The feature focuses on the company’s entries into the lubricants markets in Thailand and Vietnam . Castrol has a unique strategy of appealing to consumers who drive motorcycles, in hopes of developing brand loyalty and retaining these customers as their countries develop to the point where cars are more common. This strategy worked well in Thailand, and is currently under way in Vietnam .

Suggested Discussion Questions 1. In underdeveloped countries like Thailand and

Vietnam , the conventional forms of media that we are accustomed to, like radio and television, are often absent. This problem is particularly pronounced in Vietnam . Describe how Castrol Oil overcame this challenge. Does the company’s approach seem prudent to you? Explain your answer.

Discussion Points: In Vietnam, Castrol Oil has focused on developing consumer awareness through the use of billboards, bumper stickers, and signs that are displayed at roadside garages and motorcycle cleaning shops. In addition, Vietnam was one of the cities visited by soccer star David Beckham as part of a global marketing campaign for the company. You will probably argue that given the lack of alternatives, Castrol Oil has done well with its communications strategy in Vietnam.

2. Would you describe Castrol Oil’s communications strategy in Vietnam as a push or a pull strategy? Explain your answer.

Discussion Points: You will note that a pull strategy generally relies on access to advertising media such as newspapers, magazines, television, radio, and the Internet. Because mass media options are limited in Vietnam, Unilever has turned to alternate communications methods such as stickers, billboards, and gas station signs. Accordingly, students will probably conclude that Castrol Oil is using a push strategy in Vietnam.

3. Castrol Oil emphasizes a premium pricing strategy. What elements of the company’s communications and distributions strategies support this premium pricing strategy?

Discussion Points: Castrol Oil has priced its product at about three times the cost of cheaper imports from Taiwan and Thailand. Accordingly, the company has developed a slogan that indicates that Castrol Oil is the best quality lubricant in the market. You will probably note that the company is currently focusing on targeting motorcycle users based on the assumption that this market will start driving cars when they become more affordable.

Another Perspective: To see more about how Castrol Oil handles its international marketing, go to {http://www.castrol.com/castrol/castrolglobalhomepage.do?categoryId=3225&contentId=6005575 }and click on the various country options to compare the products and services that are offered in different markets.

New Product Development

Today, competition is as much about technological innovation as anything elseThe pace of technological change is faster than everProduct life cycles are often very shortNew innovations can make existing products obsolete, but at the same time, open the door to a host of new opportunities Firms today need to make product innovation a priorityThis requires close links between R&D, marketing, and manufacturing

The Location Of R&D

New product ideas come from the interactions of scientific research, demand conditions, and competitive conditions

The rate of new product development is greater in countries where:more money is spent on basic and applied research and developmentdemand is strongconsumers are affluentcompetition is intense

Integrating R&D, Marketing, And Production

New product development has a high failure rate To reduce the chance of failure, new product development efforts should involve close coordination between R&D, marketing, and production

This integration will ensure that:customer needs drive product developmentnew products are designed for ease of manufacturedevelopment costs are kept in checktime to market is minimized

Cross-Functional Teams

Cross-functional integration is facilitated by cross-functional product development teams

Effective cross functional teams should:be led by a heavyweight project manager with status in the organizationinclude members from all the critical functional areashave members located togetherestablish clear goalsdevelop an effective conflict resolution process

Building Global R&D Capabilities

To adequately commercialize new technologies, firms need to integrate R&D and marketing Commercialization of new technologies may require firms to develop different versions for different countries This may require R&D centers in North America, Asia, and Europe that are closely linked by formal and informal integrating mechanisms with marketing operations in each country in their regions, and with the various manufacturing facilities


Which of the following does not promote new product development?

a) Spending more money on basic and applied research and development

b) weak demand

c) Affluent consumers

d) Intense competition

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