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Global Business Today Ninth Edition
Chapter 16
Global Marketing and
Research and Development
Chapter Outline
OPENING CASE: Global Branding of Avengers and Iron Man
INTRODUCTION
THE GLOBALIZATION OF MARKETS AND BRANDS
MARKET SEGMENTATION
Management Focus: Marketing to Black Brazil
PRODUCT ATTRIBUTES
Cultural Differences
Economic Development
Product and Technical Standards
DISTRIBUTION STRATEGY
Differences between Countries
Choosing a Distribution Strategy
COMMUNICATION STRATEGY
Barriers to International Communication
Push Versus Pull Strategies
Management Focus: Unilever—Selling to India’s Poor
Global Advertising
Management Focus: Dove’s Global ‘Real Beauty’ Campaign
PRICING STRATEGY
Price Discrimination
Strategic Pricing
Regulatory Influences on Prices
CONFIGURING THE MARKETING MIX
Management Focus: Levi Strauss Goes Local
Global Business Today Ninth Edition
Chapter 16
INTERNATIONAL MARKETING RESEARCH
PRODUCT DEVELOPMENT
The Location of R&D
Integrating R&D, Marketing, and Production
Cross-Functional Teams
Building Global R&D Capabilities
SUMMARY
CRITICAL THINKING AND DISCUSSION QUESTIONS
CLOSING CASE: Domino’s Pizza
Learning Objectives
1. Explain why it might make sense to vary the attributes of a product from country to country.
2. Recognize why and how a firm's distribution system might vary among countries.
3. Identify why and how advertising and promotional strategies might vary among countries.
4. Explain why and how a firm's pricing strategy might vary among countries.
5. Understand how to configure the marketing mix globally.
6. Understand the importance of international market research.
5. Describe how globalization is affecting product development.
Chapter Summary
This chapter focuses on the marketing and R&D activities of global firms. The chapter begins
with a review of the four elements that constitute a firm's marketing mix: product attributes,
distribution strategy, communication strategy, and pricing strategy. A firm's marketing mix is the
set of choice that if offers its customers. Many firms vary their marketing mix from country to
country depending on differences in cultures, levels of economic development, product and
technical standards, the availability of distribution channels, and so forth. The chapter discusses
the strategic implications of each element of the marketing mix for an international firm and the
importance of international market research. The link between marketing and R&D is also
discussed. The author stresses the point that selling a product on a global scale may require that a
firm vary its products from country to country to satisfy local preferences. This may require a firm
Global Business Today Ninth Edition
Chapter 16
to establish R&D centers in different parts of the world, and closely link R&D and marketing in
each region to ensure that the company is producing products that its overseas customers will buy.
Opening Case: Global Branding of Avengers and Iron Man
Summary
The opening case explores how Marvel Studios has successfully created global brands with its
Avengers series and the Iron Man movies. Iron Man debuted in international markets a few days
before it was premiered in the United States. Marvel Studios was able to capitalize on the global
marketing power of its parent company, The Walt Disney Company. inued the strategies
implemented by Bravo and in addition, worked to reacquire licensing rights and bring greater unity
to the brand. Discussion of the case can begin with the following questions:
QUESTION 1: Comment on Marvel Studios’ success at global branding. In your opinion, is its
success related to the superhero theme of its movies, or could it have had the same level of success
with other story lines?
QUESTION 2: Reflect on the role of Marvel Studios parent company, the Walt Disney Company,
as a factor in the success of Marvel Studios. Do you think Marvel Studios would have had the
same level of success without Disney?
Teaching Tip: To learn more about Marvel Studios and The Walt Disney Company go to
{http://marvel.com/movies} and {http://disney.com/}.
Global Business Today Ninth Edition
Chapter 16
Lecture Note: To extend this discussion, consider {http://www.businessweek.com/articles/2014-
04-03/kevin-feige-marvels-superhero-at-running-movie-franchises} and
{http://www.businessweek.com/news/2014-10-28/disney-s-marvel-unit-maps-plans-for-
superheroes-to-2019}.
Chapter Outline with Lecture Notes, Video Notes, and Teaching Tips
INTRODUCTION
A) This chapter explores how an international business can perform marketing and R&D activities
to reduce the costs of value creation and add value by better serving customer needs.
B) The tension that exists in most international businesses between the need to reduce costs and
the need to be responsive to local conditions is particularly predominant in this chapter as we look
at the development and marketing of products
C) The four elements that constitute a firm’s marketing mix, or set of choices the firm offers to its
targeted markets, are product attributes, distribution strategy, communication strategy, and pricing
strategy.
THE GLOBALIZATION OF MARKETS AND BRANDS
A) Theodore Levitt wrote lyrically about the globalization of world markets. Levitt’s arguments
are worth quoting at some length since they have become something of a lightening rod for the
debate about the extent of globalization.
B) The current consensus among academics is that although the world is moving towards global
markets, the continuing persistence of cultural and economic differences among nations acts as a
major brake on any trend toward global consumer tastes and preferences. In addition, trade
barriers and differences in product and technical standards also constrain a firm's ability to sell a
standardized product to a global market.
Teaching Tip: Some firms are in the business of helping firms "go global." One example is
GeoTrade Global Marketing {http://www.geotradeglobalmarketing.com/} which focuses on
international Internet marketing.
Video Note: To expand this discussion, consider the videos in the International Business Library
on Pinterest (http://www.pinterest.com/mheibvideos/) Yum! To Bring First KFC to Myanmar in
2015 and Black Friday Goes Global.
MARKET SEGMENTATION
A) Market segmentation refers to identifying distinct groups of consumers whose purchasing
behavior differs from others in important ways. Firms must adjust their marketing mix from
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Chapter 16
segment to segment. The goal is to optimize the fit between the purchasing behavior of consumers
in a given segment and the marketing mix.
B) International managers need to consider the existence of intermarket segments that transcend
national borders and understand differences across countries in the structure of segments.
C) For a segment to transcend national borders, consumers in that segment must have some
compelling similarities that lead to similarities in purchasing behavior.
D) Where such similarities do not exist, there must be some customization if the firm is to
maximize performance in the market. This customization may be in the product, the packaging, or
simply the way in which the product is marketed.
E) Global market segments are much more likely to exist in industrial products (e.g., memory
chips, chemical products, and corporate bonds) than in consumer products. An emerging segment
that is attracting the attention of international consumer product marketers is the global youth
segment.
Management Focus: 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. Discussion of the feature can begin with the
following questions:
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 Brazilian culture as a
whole?
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?
Global Business Today Ninth Edition
Chapter 16
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
305
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. Students will probably note that
this strategy indicates that Unilever is using a localization approach for its marketing.
Teaching Tip: 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.
Lecture Note: To extend this discussion to include some of Unilever’s other efforts in foreign
markets, consider {http://www.businessweek.com/ap/2014-10-23/unilever-prices-falling-in-
europe-china-weak}, {http://www.businessweek.com/articles/2012-08-23/unilever-wants-to-be-
americas-ice-cream-king}, and {http://www.businessweek.com/ap/2012-07-30/unilever-selling-
frozen-foods-unit-to-conagra}.
PRODUCT ATTRIBUTES
A) Products sell well when their attributes match consumer needs. If consumer needs were the
same the world over, a firm could simply sell the same product worldwide. But consumer needs
vary from country to country depending on culture and the level of economic development. In
addition, firms are limited by countries differing product standards.
Cultural Differences
B) Countries differ along a whole range of cultural dimensions, including tradition, social
structure, language, religion, and education. At the same time, there is some evidence of the trends
Levitt talked about. Tastes and preferences are becoming more cosmopolitan.
Lecture Note: KFC has been testing different products in Korea. To learn more, go to
{http://www.businessweek.com/articles/2014-10-24/kfc-offers-daring-sandwiches-in-korea}.
Economic Development
C) Just as important as differences in culture are differences in the level of economic development.
Firms based in highly developed countries tend to build a lot of extra performance attributes into
their products. Consumers in less developed nations do not usually demand these extra attributes,
instead the preference is for more basic products.
Product and Technical Standards
D) Notwithstanding the forces that are creating some convergence of consumer tastes and
preferences, Levitt's vision of global markets may still be a long way off due to national
differences in product and technological standards.
Global Business Today Ninth Edition
Chapter 16
DISTRIBUTION STRATEGY
A) A critical element of a firm's marketing mix is its distribution strategy, the means it chooses for
delivering the product to the consumer.
B) Figure 16.1 in the text illustrates a typical distribution system consisting of a channel that
includes a wholesale distributor and a retailer. If the firm manufactures it product in the particular
country, it can sell directly to the consumer, to the retailer, or to the wholesaler. The same options
are available to a firm that manufacturers outside the country.
Differences between Countries
C) The four main differences between distribution systems are retail concentration, channel length,
channel exclusivity, and channel quality.
Retail Concentration
D) In some countries the retail system is very concentrated, whereas in other countries it is
fragmented. In a concentrated retail system, a few retailers supply most of the market. A
fragmented retail system is one in which there are many retailers, no one of which has a major
share of the market.
Channel Length
E) Channel length refers to the number of intermediaries between the producer and the consumer.
If the producer sells directly to the consumer, the channel is very short. If the producer sells
through an import agent, a wholesaler, and a retailer, a longer channel exists.
F) In recent years, the entry of large discount retailers to some markets has helped to shorten
channels.
Channel Exclusivity
G) An exclusive distribution channel is one that is difficult for outsiders to access. Japan's
system is often held up as an example of a very exclusive system.
Channel Quality
H) Channel 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 countries.
Choosing a Distribution Strategy
Global Business Today Ninth Edition
Chapter 16
I) The choice of distribution strategy determines which channel the firm will use to reach potential
consumers. Since each intermediary in a channel adds its own markup to the product, there is
generally a critical link between channel length and the firm's profit margin.
J) A long channel also has benefits. One benefit of using a longer channel is that it economizes on
selling costs when the retail sector is very fragmented. Another benefit is increased market access.
COMMUNICATION STRATEGY
A) Another critical element in the marketing mix is communicating the attributes of the product to
prospective customers. A number of communication channels are available to a firm. They
include direct selling, sales promotion, direct marketing, and advertising.
B) A firm's communications strategy is partly defined by its choice of channel.
Barriers to International Communication
C) 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 three potentially critical variables: cultural barriers, source effects, and noise levels.
Cultural Barriers
D) Cultural barriers can make it difficult to communicate messages across cultures. The best way
for a firm to overcome cultural barriers is to develop cross-cultural literacy.
Source and Country of Origin Effects
E) Source effects occur when the receiver of the message (the potential consumer) evaluates the
message based upon the status or image of the sender. Source effects can be either positive or
negative. A subset of source effects is referred to as country of origin effects (the extent to which
the place of manufacturing influences product evaluations).
Lecture Note: The class can be stimulated to think of some positive and negative source effects
(German autos vs. German wine, Italian cuisine vs. British cuisine).
Noise Levels
F) Noise tends to reduce the chance of effective communication. In this context, noise refers to the
amount of other messages that are competing for a potential consumer's attention.
Push versus Pull Strategies
Global Business Today Ninth Edition
Chapter 16
G) The main choice with regard to communication strategy is between a push strategy and a pull
strategy. A push strategy emphasizes personnel selling whereas a pull strategy emphasizes mass
media advertising. The choice between push and pull strategies depends upon product type and
consumer sophistication, channel length, and media availability.
Product Type and Consumer Sophistication
H) A pull strategy is generally favored by firms in consumer goods industries that are trying to sell
to a large segment of the market. In contrast, firms that sell industrial products or other complex
products favor a push strategy.
Channel Length
I) Using direct selling to push a product through many layers of a distribution channel can be very
expensive. In such circumstances, a firm may try to pull its product through the channels by using
mass advertising to create consumer demand.
Media Availability
J) A pull strategy relies on access to advertising media. A push strategy is more attractive when
access to mass media is limited.
Video Note: China now has more Internet users than any other nation in the world – a situation
which is sure to attract the attention of many companies that market or advertise their products
using this medium. However, as the videos in the International Business Library on Pinterest
(http://www.pinterest.com/mheibvideos/) Growing Internet Use in China Reflects Changing Society
points out, Internet users in China tend to be quite different from Internet users in other countries like the
United States.
The Push-Pull Mix
K) Push strategies tend to be emphasized more in the following circumstances:
• for industrial products and/or complex new products,
• when distribution channels are short, and
• when few print or electronic media are available.
L) Pull strategies tend to be emphasized more in the following circumstances:
• for consumer goods products,
• when distribution channels are long, and
• when sufficient print and electronic media are available to carry the marketing message.
Management Focus: Unilever—Selling to India’s Poor
Summary
Global Business Today Ninth Edition
Chapter 16
This feature 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. Discussion of the feature can begin with the
following questions:
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?
2. Is Unilever’s strategy in India a push strategy or a pull strategy? Explain.
Teaching Tip: As noted earlier, Unilever’s web site {http://www.unilever.com/}is worth a visit.
Go to the company’s Indian site by selecting it from the list available on the homepage and
compare the company’s marketing efforts there to the strategy used in other countries.
Lecture Note: To learn more about Unilever’s efforts in India consider
{http://www.businessweek.com/globalbiz/content/sep2007/gb20070926_123492.htm}. In
addition, consider
{http://www.businessweek.com/globalbiz/content/jun2009/gb20090612_706157.htm}.
Lecture Note: Unilever’s sales plunged in 2013 mainly as a result of slower sales in China. To
extend this discussion, consider {http://www.businessweek.com/news/2014-10-23/unilever-posts-
slowest-quarterly-sales-growth-since-2009-on-asia}.
Video Note: While India has been enjoying greater prosperity recently, the country’s rural citizens
are still very poor. To explore the gap between India’s rich and poor, consider the video in the
Global Business Today Ninth Edition
Chapter 16
International Business Library on Pinterest (http://www.pinterest.com/mheibvideos/) India's
Economy Remains Robust Despite Global Downturn.
Global Advertising
L) In recent years there has been much discussion about the pros and cons of standardized
advertising worldwide.
For Standardized Advertising
M) The support for global advertising is threefold. 1) It has significant economic advantages. 2)
There is the concern that creative talent is scarce and that one large effort to develop a campaign
will produce better results than 40 or 50 smaller efforts. 3) Brand names are global.
Against Standardized Advertising
N) There are two main arguments against globally standardized advertising. 1) Cultural differences
among nations are such that a message that works in one nation can fail miserably in another. 2)
Country differences in advertising regulations may block implementation of standardized
advertising.
Dealing with Country Differences
O) Some firms have been experimenting with tactics that allow them to capture some of the
benefits of global standardization while recognizing differences in countries' cultural and legal
environments.
Management Focus: Dove’s Global ‘Real Beauty’ Campaign
Summary
This feature explores how Unilever’s reconfigured its marketing mix for its Dove brand.
Historically, Unilever had customized its products and marketing campaigns for each market, a
strategy that not only resulted in duplication of effort, but also in organizational complexity. In
2003, Unilever shifted its strategy to develop a more globally standardized approach for Dove.
The company now uses a basic message for the brand, and allows some customization at the local
level. Discussion of the feature can begin with the following questions:
Suggested Discussion Questions
1. How would you describe Unilever’s approach to international markets prior to 2003? What
were the advantages of this strategy? What were the drawbacks of this approach?
© 2016 by McGraw-Hill Education.
This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner.
This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
311
2. In 2004, Unilever adopted its Real Beauty strategy. Explain how this new strategy differed
from its traditional approach to foreign markets? How did this new approach help Unilever’s
international sales?
Teaching Tip: To see learn more about Unilever’s international operations and its Real Beauty
strategy, go to {http://www.unilever.com/}.
Lecture Note: To extend this discussion, consider exploring how rival firms are selling their
products internationally. To learn more, go to {http://www.businessweek.com/ap/2014-02-
11/nestle-buying-out-galderma-from-loreal}, {http://www.businessweek.com/ap/2013-10-
30/loreal-sees-sales-fall-slightly-as-asia-slows} and {http://www.businessweek.com/articles/2012-
07-05/in-vietnam-p-and-g-woos-hearts-minds-and-schools}.
PRICING STRATEGY
A) International pricing strategy is an important component of the overall international marketing
mix. Issues to consider include the case for pursing price discrimination, strategic pricing, and
how regulatory factors influence prices.
Price Discrimination
B) Price discrimination exists whenever consumers in different countries are charged different
prices for the same product. Price discrimination can help a firm to maximize its profits.
C) For price discrimination to work the firm must be able to keep national markets separate and
different 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 price. Demand
