The globalization of markets and brands

Standardization vs Adaptation Different marketing mix in different country Globalization may be the exception rather than the rule in many consumer goods markets and industrial markets

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

Segments can based on:

Geography Demography Socio-cultural factors Psychological factors

Market segmentation
Two main issues relating to segmentation:
Extent of differences between countries in the structure of market segments Existence of segments that transcend national borders

Product Policy
Cultural differences Economic development Product and technical standards

Product Policy : Cultural differences

Differ along dimensions such as social structure, language, religion and education Impact of tradition Some tastes and preferences becoming cosmopolitan

Product Policy : Economic development

Consumer behavior is influenced by economic development
Consumers in highly developed countries tend to demand extra performance attributes in their products
Price not a factor due to high income level

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

Price 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 Policy : Technical standards

Government standards can rule out mass production and marketing of a standardized product Differing technical standards constrain globalization of markets
Different television signal frequencies, left hand and right hand driven cars, different voltage requirements

Pricing strategy

Three aspects of international pricing strategy

Price discrimination Strategic pricing Regulatory influence on prices

Price discrimination
Said to occur when consumers in different countries are charged different prices for the same product Two conditions necessary National markets kept separate to prevent arbitrage
Capitalization of price differentials by purchasing product in countries where prices are lower and reselling where prices are higher

Different price elasticities of demand in different countries

Greater in countries with low income levels & highly competitive conditions

Elastic and inelastic demand curves

Price discrimination

Strategic pricing
Predatory pricing
Using price as a competitive weapon to drive weaker competition out of a national market Firms then raise prices to enjoy high profits Firms normally have profitable position in another national market

Strategic pricing
Multipoint pricing strategy
Two or more international firms compete against each other in two or more national markets A firms pricing strategy in one market may impact a rival in another market.
Kodak and Fuji

Strategic pricing
Experience curve pricing
Firms price low worldwide to build market share Incurred losses are made up as company moves down experience curve, making substantial profits Cost advantage over its less-aggressive competitors

Regulatory influences on prices

Antidumping regulations
Selling a product for a price that is less than the cost of producing it Antidumping rules vague, but place a floor under export prices and limit a firms 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

Competition policy
Regulations designed to promote competition and restrict monopoly practices

Communication strategy
Defines the process the firm will use in communicating the attributes of its product to prospective customers

Barriers to international communication

Cultural Barriers
Develop cross-cultural literacy Firm should use local input such as local advertising agency and sales force

Barriers to international communication

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 1990s

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

Noise levels
Amount of other messages competing for a potential customers attention
Developed countries - high. Less developed countries - low.

Standardized advertising strategy execution more difficult (culture, laws)

Push versus pull strategy

Push strategy emphasizes personal selling
Requires intense use of a sales force Relatively costly

Pull strategy depends on mass media advertising

Can be cheaper for a large market segment

Determining factors of type of strategy

Product type and consumer sophistication Channel length Media availability

Product type and consumer sophistication

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

Channel length
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

Media availability
Pull strategy
Relies on access to advertising media Common in developed nations

Push strategy
Media availability limited by law All electronic media state owned with no commercial policy

Global advertising
Standardized:
Significant economic advantages Scarce creative talent Many global brand names

Non-standardized:
Cultural differences Advertising regulations can be a restriction

Distribution strategy
Choice of the optimal channel for delivering a product to the consumer
Optimal strategy is determined by the relative costs and benefits of each alternative Depends on differences between countries
retail concentration channel length channel exclusivity

A typical distribution system

Retail concentration
Concentrated system
common in developed countries contributing factors: increase in car ownership, number of households with refrigerators and freezers and twoincome 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

Channel length
Refers to number of intermediaries between the producer and the consumer Determined by degree to which the retail system is fragmented
Long distribution channel Short distribution channel

Channel length
Long distribution channel
Fragmented retail system promotes growth of wholesalers and retailers Firms go through intermediaries such as wholesalers to cut selling costs

Short distribution channel

Concentrated retail system Firms deal directly with retailers

Channel exclusivity
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 important role in stocking products Difficult for new firm to get shelf space as compared to an old firm

Configuring the marketing mix

Differences Here
Culture

Requires Variation Here

New product development

The location of R & D
Rate of new product development greater in countries where
More money spent on R&D Underlying demand is strong Consumers are affluent Competition is intense

Integrating R&D, marketing and production

Integrating R&D, production and marketing ensures

Project development driven by customer needs New products are designed for ease of manufacture Development costs are kept in check Time to market is minimized

Integrating R&D, marketing and production

High failure rate ratio
Between 33 % and 60% of new products fail to earn adequate profits

Reasons for failure:

Limited product demand Failure to adequately commercialize product Inability to manufacture product cost-effectively

Cross-functional product development teams

Objective of team to take a product development project from the initial concept development to market introduction Effective teams must have
Heavyweight project manager

One member from each key function Physically co-located to facilitate communication Clear plan and goals Own process for communication and conflict resolution