978-0078112911 Chapter 16 Part 1

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

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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

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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/}.

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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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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

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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.

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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

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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

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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: