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