T10 - Managing Global Marketing

What Is The Marketing Mix?

• The marketing mix (the choices the firm offers to its targeted market) is comprised of
1) Product attributes
2) Distribution strategy
3) Communication strategy
4) Pricing strategy
• International marketing is like domestic marketing in that it still involves the basic
marketing elements of product attributes, distribution strategy, communication strategy,
and pricing strategy.
• Int marketing more complex cause it involves selling products in different countries, with
different literacy rates, currencies, levels of economic development, and so on.

Should The Marketing Mix Be Changed For Each Market?

• Question: Are markets and brands becoming global?
➢ Theodore Levitt argued that world markets were becoming increasingly similar
making it unnecessary to localize the marketing mix
➢ He argued that McDonald’s for example, sold the same thing everywhere.
➢ According to Levitt, because of this convergence of markets, firms could simply
avoid the costs of market adaptation, and sell standardized products around the globe
instead. He argued that McDonald’s for example, sold the same thing everywhere.

• Question: Is Levitt right? Probably not!

➢ Levitt’s theory has become a lightening rod in the debate about globalization
➢ Many people believed that he overstated his case, especially when it came to consumer
products.
➢ They argued that, for example, while McDonald’s is available around the globe, the
company does make menu changes. It sells a McArabia in the Middle East for example,
and a Croque McDo in France.

• The current consensus is that while the world is moving towards global markets, global
standardization is not possible because of
✓ cultural and economic differences among nations
- In other words, while people around the world might drink Coke, how the brand
is perceived, how it’s marketed, and so on, still differs from country to country.
✓ trade barriers and differences in product and technical standards
- limit a firm’s ability to standardize its marketing mix.

Market Segmentation
• Market segmentation - identifying distinct groups of consumers whose purchasing
behavior differs from others in important ways @ aggregating buyers into grps wit
common needs and who respond similarly to a marketing action.
• Ex: Toyota sells its Lexus line to high-income consumers, but attracts lower income buyers
with its Corolla.
• Markets can be segmented by :-
 ✓ Geography
- High is useful segmentation strategy
- Splitting up ur market based on their location.
- Can identify customer based on:-
i) Based on their location
- Country, state, county and zip code.
ii) Based on characteristics of the area they live in
- Climate, population and density
iii) Urban, suburbn/rural
✓ Demography
- Most common form
- Splitting up audiences based on observable, ppl based on audiences
- Qualities include age, sex, marital status, family size, occupation, education, level
income, race, nationality and religion.
- Ways to gather demographic data:-
i) Ask ur customer directly
▪ Time consuming
▪ Ensure accuracy
ii) Use second party n third party data providers
▪ Include market service providers and credit bureaus.
✓ socio-cultural factors
✓ psychological factors
• Two key market segmentation issues
1) The differences between countries in the structure of market segments
2) The existence of segments that transcend national borders
➢ when segments transcend national borders, a global strategy is possible

• How to implement market segment?

1) Define ur market
- Is there a need for product/service
- Is market large/small
2) Segment ur market
- Need to decide which 4 criteria geographic, demographic, sosio-cultural and
psychological u want to use to segment ur market.
3) Understand ur market
- Conduct preliminary research surveys, focus grps and polls
4) Create ur customer segment
- Analyze the response from ur research to highlight which customer segments r
most relevant to ur product/service.
5) Test ur market strategy
- Once u interpreted ur response, test ur findings on ur target market using
conversion tracking to see how effective.

• Benefits:-
a) Increased resource efficiency
- Allows management to focus on certain demographic
 b) Stronger brand image
- Once market segment is identified, management must then consider wat message
to craft.
c) Stronger market differentiation
- Gives a company the opportunity to pinpoint the exact message they weigh to
convey to the market and competitors.
d) Greater potential for brand loyalty
- Increased the opportunity for consumers to build long term relationships wit
company.
• Limitation:-
a) Higher upfront marketing expenses
- Spend resources up to gain the insight data and research into their customer base
in the broad market.
b) Increased product line complexity
- Has risk of creating an overly complex fractionalized product line
c) Greater risk of misassumption
- Company may risk misidentify the needs, value/motivations within individuals of
a given population.
d) Higher reliance on reliable data

How Do Product Attributes Influence Marketing Strategy?

• A product is like a bundle of attributes
• Products sell well when their attributes match consumer needs
➢ if consumer needs were the same everywhere, a firm could sell the same product
worldwide
• But, consumer needs depend on:-
1) Culture
➢ Countries differ along a range of cultural dimensions including tradition, social
structure, language, religion, education
➢ To identify where standardization is possible and where the marketing mix must be
customized, firms need to look for evidence of the globalization trends that Levitt
identified.
➢ Ex. Nestle sells frozen food in multiple countries, but offers different menus
depending on local preferences.
➢ Nestle sells fish fingers in Great Britain, but coq au vin in France, yet its able to sell
Lean Cuisine dinners in the same way in both Europe and the U.S.

2) Level of economic development

➢ consumers in highly developed countries tend to demand a lot of extra
performance attributes
➢ consumers in less developed nations tend to prefer more basic products
➢ Ex, our car probably got power steering and power windows, maybe a CD player
or DVD player.

3) Product and technical standards

➢ national differences can force firms to customize the marketing mix
 ➢ Ex, differences in technical standards between Great Britain and the U.S. mean
that producers of DVD equipment have to adapt their product to each market.

How Does Distribution Influence Marketing Strategy?

• Distribution strategy refers to the means the firm chooses for delivering the product to
the consumer
• How a product is delivered depends on the firm’s market entry strategy
➢ firms that manufacturer the product locally can sell directly to the consumer, to the
retailer, or to the wholesaler
➢ firms that manufacture outside the country have the same options plus the option of
selling to an import agent
• In a market economy, like the U.S., governments encourage free and fair competition and
discourage monopolies.

• There are four main differences in distribution systems

1) Retail concentration – concentrated or fragmented
- Refer to market share
a) in a concentrated retail system, a few retailers supply most of the market –
common in developed countries
- U.S. as an example of a country with a concentrated retail system. In the U.S.,
people go to large stores and shopping malls.
b) in a fragmented retail system there are many retailers, no one of which has a
major share of the market – common in developing countries
- Japan has a more fragmented system where stores serve the local neighborhood.
- Can be real challenge for companies.

2) Channel length - the number of intermediaries between the producer and the consumer
a) short channel - when the producer sells directly to the consumer – common with
concentrated systems.
- Ex: Countries like Germany and the U.S. tend to have much shorter channels.
b) long channel - when the producer sells through an import agent, a wholesaler, and a retailer
– common with fragmented retail systems
- Ex: Japan is often associated with long channels.
*It’s not uncommon to hv 2/3 wholesalers between the firm and retail outlet.

3) Channel exclusivity – how difficult it is for outsiders to access

- channels are exclusive because retailers like to carry well established brands rather
than take a chance on something new.
➢ Japan's system is an example of a very exclusive system
▪ Relationships between retailers, wholesalers and manufacturers in
Japan often go back decades, and it can be virtually impossible for
foreign companies to break in.
4) Channel quality - the expertise, competencies, and skills of established retailers in a
nation, and their ability to sell and support the products of international businesses .
- Ex: Apple is opening its own retail stores in countries like the UK to sell its iPods.
 ➢ the quality of retailers is good in most developed countries, but is variable at best
in emerging markets and less developed countries
➢ firms may have to devote considerable resources to upgrading channel quality

Which Distribution Strategy Should A Firm Choose?

• The optimal strategy depends on the relative costs and benefits of each alternative based on
the four factors, retail concentration, channel length, channel exclusivity, and channel
quality.
• When price is important, a shorter channel is better
➢ each intermediary in a channel adds its own markup to the products
• When the retail sector is very fragmented, a long channel can be beneficial
➢ economizes on selling costs
➢ can offer access to exclusive channels
• If there are concerns about channel quality, firms should handle distribution on their own, like
Apple did.

Why Is Communication Strategy Important?

• Communicating product attributes to prospective customers is a critical element in the
marketing mix
• How a firm communicates with customers depends partly on the choice of channel
• Communication channels available to a firm include
✓ direct selling – direct personal, presentation and demonstration
- sale of product/service to the consumer usually in their home/ at their job.
✓ sales promotion – short term incentive to initiate trial
- attempt to provide added value to the customer, wholesaler and retailer.
- Ex: give coupons, give freebies
✓ direct marketing – business of selling ur product/service directly to the public
- Ex: email, online advertising, letter newspaper.
✓ Advertising – use print advertising in newspaper, magazine
- Do broadcast advertising, outdoor advertising.

What Are The Barriers to International Communication?

• International communication occurs whenever a firm uses its marketing message to sell its
products in another country.
• The effectiveness of a firm's international communication can be jeopardized by
1) Cultural barriers - it can be difficult to communicate messages across cultures
- can prevent a firm from using a successful advertising campaign across countries.
➢ a message that means one thing in one country may mean something quite
different in another
▪ In Japan, it’s considered bad manners for a man to intrude on his
wife.
➢ firms need to develop cross-cultural literacy, and use local input when developing
marketing messages
▪ Ex: Proctor & Gamble found that it had to take a very localized
approach to selling Tampax tampons in some markets.
 2) Source and country of origin effects –
➢ Source effects occur when the receiver of the message evaluates the message on
the basis of status or image of the sender
- Ex: BP changed its name from British Petroleum after it made a big push into the
U.S. so that customers wouldn’t think about the fact that one of the biggest
gasoline companies in the U.S. is from Britain.
- can counter negative source effects by deemphasizing their foreign origins
➢ Country of origin effects - the extent to which the place of manufacturing
influences product evaluations
- Ex: You’d probably rather buy stereo equipment that’s made in Japan than in
Brazil

3) Noise levels - the amount of other messages competing for a potential consumer’s attention
- Anything to that distract from ur message
- Can be caused by too many messages
➢ in highly developed countries, noise is very high
➢ in developing countries, noise levels tend to be lower
➢ tends to be higher in developed countries like the U.S., than in developing markets.

How Do Firms Communicate With Customers?

• Firms have to choose between two types of communication strategies:-
1) A push strategy emphasizes personnel selling
- Used to gain and increase product exposure
- Push urself to sell ur product to the consumer
2) A pull strategy emphasizes mass media advertising
- Use advertising to build up consumer demand for the product/ service.
- Attract ppl to buy ur products.

Which Is Better – Push Versus Pull?

• The choice between strategies depends on:-
1) Product type and consumer sophistication
➢ a pull strategy works well for firms in consumer goods selling to a large market
segment
- because it’s a lot cheaper than trying to use direct selling.
➢ a push strategy works well for industrial products
- because direct selling lets the firm educate customers about the product.
*in poor nations where literacy levels are very low, direct selling may be the best option even for
products that would be mass marketed in other countries.

2) Channel length
➢ a pull strategy works better with longer distribution channels to create consumer
demand may be a better alternative.
➢ Typically, when channels are long, direct selling can be a very expensive
proposition.
 3) Media availability
➢ a pull strategy relies on access to advertising media like TV, newspapers,
magazines, and so on.
➢ a push strategy may be better when media is not easily available

What Is The Optimal Mix?

• In general, a push strategy is better
➢ for industrial products and/or complex new products
➢ when distribution channels are short
➢ when few print or electronic media are available
• A pull strategy is better
➢ for consumer goods products
➢ when distribution channels are long
➢ when sufficient print and electronic media are available to carry the marketing
message

Should A Firm Use Standardized Advertising?

• Standardized advertising makes sense when
✓ it has significant economic advantages
- it can be a lot cheaper than developing campaigns for individual markets.
- McCann-Erickson, Coca-Cola’s advertising agency believes that it’s been able to
save Coca-Cola $90 million over 20 years by using standardized promotion.
✓ creative talent is scarce and one large effort to develop a campaign will be more
successful than numerous smaller efforts
✓ brand names are global
- Many companies take advantage of that by developing a single brand image, and
avoid the confusion that could come from local campaigns.
• Standardized advertising does not make sense when
✓ cultural differences among nations are significant
- Ex: if seller want to do advertising related to alcohol in Europe Union is normal
but in Malaysia it’s not normally we do.
✓ advertising regulations limit standardized advertising
- France for example, doesn’t allow children to endorse products.
• Some firms standardize parts of a campaign to capture the benefits of global standardization,
but customize others to respond to local cultural and legal environments
• How can firms cope with country differences?
- Instead of developing individual campaigns for each market, many companies try
to use of the same features in each country where they do business.
- Nokia, for example, uses the same slogan around the world, but includes local
actors and locations.

What Pricing Strategy Should Firms Use?

• Firms need to consider:-
1. Price discrimination
• How should a firm price its product in foreign markets?
• occurs when firms charge consumers in different countries different prices for the same
product
• In other words, the firm charges whatever the market will bear.
• A firm can maximize its profits.
• For price discrimination to work:-
a) must be able to keep national markets separate
- In other words, the car manufacturer might not be able to price the cars differently
between France and Germany, but could charge a higher price in France and
Germany than the price charged in Britain because right hand cars are sold in
Britain, while left hand cars are sold in both France and Germany.

b) countries must have different price elasticities of demand - measure of the responsiveness
of demand for a product to changes in price
- Ex: Tommy Hilfiger in 2007 priced its jeans in Europe at roughly three times the
price of its American jeans.
✓ demand is elastic when a small change in price produces a large change in
demand
✓ demand is inelastic when a large change in price produces only a small
change in demand

• Typically, price elasticities are greater in countries with lower income levels and larger
numbers of competitors
• What determines elasticity of demand?
a) Income level
- When income levels are low, people tend to be more price conscious, and demand
is more elastic.
- In India for example, products like TVs that are considered necessities in the U.S.
are still thought of as luxury items.
b) the number of competitors in a market.
- The more competitors, the greater the bargaining power of consumers, and the
greater the elasticity of demand.

2. Strategic pricing
• Firms can set prices to achieve certain strategic goals.
• has three aspects:-
a) Predatory pricing - use profit gained in one market to support aggressive pricing
designed to drive competitors out in another market
➢ after competitors have left, the firm will raise prices
b) Multi-point pricing - a firm’s pricing strategy in one market may have an impact
on a rival’s pricing strategy in another market
➢ managers should centrally monitor pricing decisions
- Ex: if a firm uses aggressive pricing in one market, its rival may resort to
aggressive pricing in another market. Kodak and Fuji Photo have been playing
this game for years.
c) Experience curve pricing - price low worldwide in an attempt to build global sales
volume as rapidly as possible, even if this means taking large losses initially
 ➢ firms that are further along the experience curve have a cost advantage
relative to firms further up the curve
- Firms using this type of strategy are willing to take a loss initially because they
believe that in the future, once they’ve moved down the experience curve, they’ll
have a cost advantage over less aggressive competitors.

3. Regulations that affect pricing decisions

• A firm’s ability to set its own prices may be limited by:-
a) Antidumping regulations
➢ dumping occurs whenever a firm sells a product for a price that is less than the
cost of producing it
✓ antidumping rules set a floor under export prices and limit a firm’s ability
to pursue strategic pricing
➢ So, both predatory pricing and experience curve pricing can both be problematic when
antidumping regulations are in place.

b) Competition policy
➢ most industrialized nations have regulations designed to promote competition and
restrict monopoly practices
➢ can limit the prices that a firm can charge

How Should Firms Configure The Marketing Mix?

• Standardization versus customization is not an all or nothing concept
• Most firms standardize some things and customize others
- McDonald’s for example, standardizes many parts of its marketing mix, but
changes its menu a bit from market to market to meet local preferences.
- McDonald’s also changes its distribution strategy.
• Firms should consider the costs and benefits of standardizing and customizing each element
of the marketing mix