M302 06 lecture8a

International Marketing : International Marketing Tim Beal Lecture 8 15 September 2006


TODAY : TODAY Where we’re at Pat English on China Wine Assignment prize draw Global Product development and Branding


Where we’re at : Where we’re at Environmental issues IM strategy and implementation Continuing our country studies Q&A on Educational Services project after break


Educational Services project : Educational Services project Any questions?


Global Product Development and Branding : Global Product Development and Branding Two readings – links on course page Also articles on links page Levitt: The Globalisation of Markets Onkvisit and Shaw: The International Dimension of Branding


Levitt : Levitt Technology is globalising the world economy Almost everyone, everywhere wants global products Prefer low prices to supposed national characteristics example of refrigerators in Europe


Strategy : Strategy Companies should move from multi-domestic (multinational) to global strategy Do not adapt to superficial differences but force suitably standardised products globally “Offering everyone simultaneously high-quality, more or less standardised products at optimally low prices”


Multi-domestic strategy : Multi-domestic strategy Treating each country market as different Adapting products for these separate markets However, forces of standardisation are strong In fact, most companies do both standardise adapt Think global, act local


Advantages of standardisation : Advantages of standardisation Cheaper - economies of scale Gains from experience For many products human needs and wants are basically similar If products are new then they set the standard Many differences are due to historical accident Companies create markets (eg Sony Walkman)


Arguments for M-Domestic(I) : Arguments for M-Domestic(I) Industry standards diverse companies have to produce variants for different national standards eg TVs, cars Customer demand local differences customary habits can be hard to change eg degree of sweetness varies between markets eg Japanese demand higher level of packaging (though now backlash)


Arguments for M-Domestic (II) : Arguments for M-Domestic (II) Often preference for product perceived to be local eg Toyota’s adverts very ‘kiwi’ However, there is often preference for foreign goods eg French perfumes, wines Global organisations difficult to manage


Global marketing : Global marketing Making no distinction between domestic and foreign market opportunities Not developing a product for domestic market and then going offshore Japanese released colour TV in USA before their home market, which was not saturated for B&W sets Seeks to identify global market opportunities


Forces driving globalisation (I) : Forces driving globalisation (I) Flow of information We know what films Hollywood produces, what computers are developed in Silicon Valley ‘We’ means people in Mumbai, Beijing as well as Wellington or London


Forces driving globalisation (II) : Forces driving globalisation (II) Flow of people More and more people are familiar with products in foreign markets 700 million tourists


Forces driving globalisation (III) : Forces driving globalisation (III) Technology economies of scale Cheaper transportation makes global-sourcing possible FMS allows economies of scale with marginal variation eg producing variants of car (colour, etc) on same assembly line


Forces driving globalisation (IV) : Forces driving globalisation (IV) Cost - huge investment needed for new product development strategic alliances requires global market to provide sufficient demand Japanese example from 1960s Japanese products swept the world radios, TVs, cars, specifically developed for foreign markets


Forces driving globalisation (V) : Forces driving globalisation (V) Economic liberalisation GATT, WTO, etc. Strategic positioning unsafe to let competitors free access to markets One reason foreign companies want to get into Japanese market is to deprive Japanese companies of unchallenged springboard Demand or Supply driven?


Transnational strategy : Transnational strategy Globalisation demands a transnational strategy transnationals seek- Global scale efficiency and competitiveness Local responsiveness and flexibility cross-market learning ‘Act global, think local’


Some implications : Some implications Product and market policies - may be simple, complex, independent, interdependent no set rules Customer segments - may be unique to specific country/market, or may cut across national/cultural boundaries former declining - not many products unique to specific countries most products overlap national, and sometimes cultural boundaries


Market <>country : Market <>country Country is often used as shorthand Not the same thing as market Often countries are treated as separate markets for legal and administrative reasons In reality, most modern markets don’t recognise national boundaries


Market <> country : Market <> country Many markets are broader that national boundaries thought there may be some local adaptation eg Hallal meat, laptop computers Many markets are sub-divisions of countries especially large countries such as USA or China


Global product development and branding : Global product development and branding Two sides of same coin Two brands may be physically identical but are perceived to be different Products may be created different in order to function as separate brands From point of view of IM brand is more important and broader than (physical) product


Branding : Branding Articles in course links page Brand and brand name are trademarks Trademark integral part of product Branding strategy key part of marketing More complex in global environment


Four levels : Four levels brand vs. no brand Manufacturer’s brand vs private brand one brand vs multiple brands worldwide brand vs local brands


No Brand: advantages : No Brand: advantages Lower production cost eg lower quality control Lower marketing cost Lower legal cost registering trademarks expensive


No Brand: disadvantages : No Brand: disadvantages Severe price competition May be facing lower cost competitors Lack of market identity


Branding: Advantages : Branding: Advantages Better identification and awareness Better chance for product differentiation Possible brand loyalty Possible premium pricing


Branding: Disadvantages : Branding: Disadvantages Higher production cost Higher marketing cost Higher legal cost


To brand or not? : To brand or not? Depends on whether commodity or product commodity: undifferentiated product product: value added and differentiated Products need quality and quantity consistency possibility of product differentiation importance to customers of that differentiation


Manufacturer or private brand? : Manufacturer or private brand? Private brand - distributor’s brand One way of entering foreign market eg Matsushita producing for American retailers Often companies do both eg Michelin, Matsushita


Disadvantage of private brand : Disadvantage of private brand Price pressure - manufacturer is supplying commodity to retailer reflection of relative power of manufacturer and distributor eg Sears wanted RCA TVs under its brand; RCA declined; Sanyo and Toshiba agreed now sells under own brand Other examples include Acer (Taiwan)


Single/Multiple : Single/Multiple Depends on heterogeneity of market eg Swiss watch manufacturers high end - Omega, Longines medium innovative : Swatch


Legal considerations : Legal considerations eg ban on comparative advertising in Spain Companies create brands so that they can compare their leading brands against them without fear of legal penalty


Worldwide vs local : Worldwide vs local Advantages Constraints


Global brand advantages : Global brand advantages market efficiency and economies of scale associated with status and prestige familiar to international travellers familiar via TV, movies etc


Constraints : Constraints Legal constraints may be in conflict with existing brands antitrust/competition law Political constraints LDCs may discriminate against foreign brands in order to promote local ones Popular preference for local products (eg French wine in France)


Local brand advantages : Local brand advantages When product quality varies between countries cf Ericson - product quality in China has to be at the same level as in Sweden Linguistic barriers global name may be unsuitable unpronounceable, rude, unpleasant…


Acquiring brands : Acquiring brands Common way of entering foreign market is to acquire a local brand But when Lenovo acquired IBM PC it went under its own name http://www.lenovo.com/lenovo/us/en/ HQ in Raleigh, NC Research triangle


Industry specific factors : Industry specific factors Some products more suitable for homogeneous branding, others less so eg Unilever global brands for detergents and personal products local brands for food products


Creation of global brands : Creation of global brands Coca Cola, Heineken, McDonalds’s etc transferred onto global market Japanese more likely to create global brands eg Sony, National Panasonic, (Nissan originally called Datsun) Creation probably becoming more common high tech products small country global producers more likely


Global Product development : Global Product development Technological and economic change producing global markets Degree of adaptation to local conditions varies with market and economic specifics of industry Nature of product Legal constraints Company strategies


Global products, global brands : Global products, global brands Brand is integral part of product IM lays stress on branding otherwise price-sensitive commodities eg Zespri rather than kiwifruit, Cervana rather than venison Global product development and branding are linked parts of global marketing strategy