Global Marketing Strategy: Adaptation vs Standardization

1. Global Marketing, R & D

2. 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

3. Levitt, 1983 “A powerful force drives the world toward a converging commonality, and that force is technology” (Prof. Ted Levitt, HBS)

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

11. 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)

12. 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

13. 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

15. 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

16. 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

17. 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

18. 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”

19. 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

20. Strategic Analysis • Organization acquires companies that are complimentary to existing businesses • Continued growth requires regional management, development, distribution, technical and customer support

21. 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

22. Strategic Analysis • Eventually, these demands force the active planning of international business by the organization – Active strategy

23. Strategic Analysis • SWOT • Strength and Weaknesses – decisions made and controlled by management • Opportunities and Threats – business environment – events that are likely to occur

24. Marketing Mix (4 Ps) • Product • Promotion • Pricing • Place (Distribution) – the most important for international business entry

25. Marketing Mix (4 Ps) • Place (Distribution) – the most important for international business entry: • 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

26. Marketing Mix (4 Ps) • Product – usually controlled by the exporter, initially the least impacted element of the marketing mix • However, “localization” often required: • approvals and certificates • packaging & labeling • measures, etc

27. 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

28. 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

29. 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?

30. 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

31. 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