International

Business (INE 2028)

Instructor: MA. Nguyen Thi Phuong Linh

Email: phuonglinhnt@vnu.edu.vn
Phone: 0967257858
Address: Room 407, E4, University of
Economics and Business – VNU.
 Course calendar
Part 1: Introduction and
Part 2: Country difference
Overview
Chapter 1: Globalisation Chapter 2: National difference in Political Economy
Chapter 3: Differences in Culture
Chapter 4: Ethics in International Business

Part 3: Competing in a Global marketplace

Chapter 5: The strategy of IB Chapter 8: Global production, outsourcing &

Chapter 6: Entry strategy and Strategic Logistics
Alliances Chapter 9: Global marketing and R&D
Chapter 7: Exporting, Importing and Chapter 10: Global human resources management
Countertrade
Chapter 9:
Global
marketing
and R&D
LEARNING OBJECTIVES

Understand about the development trend of international marketing strategy

Understand about market segmentation

Research on marketing mix

Analysis R&D activities

The globalization of Markets and Brand

Thanks to the Rapid development of modern

communication and transportation technology

Differences in national or regional preferences

are fading away

The emergence and development of global

markets for standardized consumer products

 Theodore Levitt: Theodore

Example of global products
Levitt is an American
economist and professor at
Harvard University
The globalization of Markets and Brand

Is Levitt’s statement correct?

• Many academics feel that Levitt overstates his case

• Still exist cultural and economic differences between countries

→ A marketing strategy tailored to the product to

serve local needs.
 Market Segmentation

 Market segmentation refers to

identifying distinct groups of
consumers whose purchasing
behavior differs from others in
important ways
Market Segmentation

 The goal is to optimize the fit between the purchasing behavior of consumers in a given
segment and the marketing mix, thereby maximizing sales to that segment

 Markets can be segmented in numerous ways:

➢ by geography

➢ by demography (sex, age, income, race, education level,…)

➢ By sociocultural factors (social class, values, religion, lifestyle choices,…)

➢ By psychological factors (personality)

 Note: When segmenting a market, it is often necessary to combine many factors together.
Market Segmentation

❖ When managers in an international business consider market segmentation

in foreign countries, they need to be perceived of two main issues:

The existence of
segments that
The differences
transcend
between countries
national borders
in the structure of
market segments
Market Segmentation

 The existence of segments that transcend national borders

 For a segment to transcend national borders, consumers in that segment must

have some compelling similarities along important dimensions such as age,
values, and lifestyle choices, and those similarities must translate into similar
purchasing behavior

=> Assume the global market as a single entity selling a standardized product
worldwide and using the same basic marketing mix
 Market Segmentation

Example: Market segmentation of Coca-Cola

Global market

The "regular" market "For dieters"

Female Male
Market Segmentation

❑ Nike’s global advertisement:

❑ https://www.youtube.com/watch?v=mf
FiDOepFCM

❑ https://www.youtube.com/watch?v=0tr
XUYYeNHY
Market Segmentation

 The differences between countries in the structure of market segments.

➢ The structure of market segments may differ significantly from country to country.

➢ An important market segment in a foreign country may have no parallel in the firm’s home
country, and vice versa

=> The firm may have to develop a unique marketing mix to appeal to the purchasing
behavior of a certain segment in a given country

➢ McDonald’s ADS different countries: https://www.youtube.com/watch?v=pMLrVP_E-jA

 Product attributes

Distribution system

Marketing Mix
Communication strategy

Price strategy
Product Attributes

 A product can be viewed as a bundle of attribute

➢ For example, the attributes that make up a car include power, design, quality,
performance, fuel consumption, and comfort;

➢ The attributes of a hamburger include taste, texture, and size; a hotel’s attributes include
atmosphere, quality, comfort, and service

❑ Products sell well when their attributes match consumer needs (and when their prices are
appropriate)

➢ BMW cars sell well to people who have high needs for luxury, quality, and performance
precisely because BMW builds those attributes into its cars
 Product Attributes

 If the needs of consumers around the world are similar or the same, the product will be sold as similar or
identical all over the world (Examples of global products)

➢ Taste and preferences are becoming increasingly international: e.g., Coffee takes the place of tea in
Japan, and American-style fast meals are popular in Europe.

=> The multinational corporation will sell the same thing in the same way everywhere

 On the contrary, if the needs of consumers are different in each country, products are tailored to specific
local needs, reflected through the following aspects:

➢ Cultural Differences

➢ Economic Development Levels

➢ Products and Technical Standards

=> A marketing strategy tailored to the product to serve local needs.

 Cultural Difference
 Still exist the difference in Cultures between
countries.
 The cultures of countries differ in many aspects:
social structure, language, religion, and
education, ...
 Attribute differentiation of marketing products to
each local market
=> A marketing strategy tailored to the product to
serve local needs.
➢ Example: Scent difference in Japan:
➢ SC Johnson Wax, a producer of furniture waxes
and polishes with a lemon scent, when entering the
Japanese market, the product was disliked
because it was similar to the disinfectant water
used in toilets at Japan, the company had to
adjust the scent to suit local tastes
 Economic Development Levels
Consumer behavior is influenced by the level of economic development
of each country.

Consumers in developed Consumers in less developed

countries countries
❖ Ask manufacturers to add more attributes to ❖ Taste towards basic products
their products ❖ Ex: Consumers care about durability and
❖ For example, The car needs more attributes such product quality, product price
as air conditioning, a power steering system,
electric windows, radio, CD player ...
❖ Consumers in developed countries do not like
globally standardized products and are unwilling
to pay a higher price for their favorite attributes
 Products and
Technical Standards
 Differentiated standard products required by
the government can prevent mass
production and marketing of a standardized
product.

 Different technical standards will limit the

creation of a global market
➢ For example, a DVD device made for sale in
the US will not be able to play a DVD recorded
on a device made for sale in the UK, Germany,
France, and vice versa.

=> A marketing strategy tailored to the product

to serve local needs.
Distribution system

 Distribution strategy refers to the means

the firm chooses for delivering the
product to the consumer

 Distribution system: the logistics system

that moves a product or service from
the producer to the consumer.
 A typical distribution system

Distribution
system
Distribution system
Distribution system

1. Retail concentration

 In a concentrated retail system, a few retailers supply most of the market – common in
developed countries

 Example: In the US: the importance of the auto industry + the rejuvenation of many regions
=> the retail system is concentrated in large stores and shopping malls where customers
can drive to

 In a fragmented retail system, there are many retailers, none of which has a major share of
the market – common in developing countries

 Example: In Japan: Large population density / a Large number of urban centers /

Japanese law system protects retailers => Fragmented retail system, including small
shops serving the area local population
Distribution system

2. Channel length

 Channel length - the number of intermediaries between the producer and the consumer

➢ short channel - when the producer sells directly to the consumer – common with
concentrated systems

➢ long channel - when the producer sells through an import agent, a wholesaler, and a
retailer – common with fragmented retail systems

❖ The factor that determines the length of the distribution channel: the degree of fragmentation
of the retail system

❖ Centralized retail system → short channel length

❖ Fragmented retail system → long channel length

Channel length
 Distribution system

3. Channel exclusivity
 Channel exclusivity – how difficult it is for outsiders to access
➢ Japan's system is an example of a very exclusive system because retailers like to sell
products from reputable established food manufacturers instead of unknown startups.
 The Channel exclusivity of the distribution system differs between countries
4. Channel quality
 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
 The quality of retailers is good in most developed countries but is variable at best in emerging
markets and less developed countries
➢ Lack of high-quality distribution channels => Constraining market access, especially for new
products requiring point-of-sale and after-sale service support
➢ Firms may have to devote considerable resources to upgrading channel quality
Communication Strategy

BARRIERS TO PUSH AND PULL

INTERNATIONAL STRATEGY
COMMUNICATION
Communication Strategy

• International communication occurs whenever a firm

uses a marketing message to sell its products in another
Barriers to country.
• The effectiveness of a firm’s international communication
International can be jeopardized by three potentially critical variables:

Communication ✓Cultural Barrier

✓Source and Country of Origin Effects
✓Noise Levels
Communication Strategy
1. Cultural Barriers

❖ Because of cultural differences, a message that

means one thing in one country may mean
something quite different in another.

 Ex: Advertising of Benetton clothes.

→ The best way for a firm to overcome cultural

barriers is to develop cross-cultural literacy.

→ The company should use local input, such as a

local advertising agency in developing its
marketing message.
 Communication Strategy
2. Source and Country of Origin Effects

 Source Effects: occur when the receiver of the message (the potential consumer in this case)
evaluates the message on the basis of the status or image of the sender.

 Country of Origin Effect: The extent to which the place of manufacturing influences product
evaluations

→ A company can reduce the importance of its country of Origin. When a negative country-of-
origin effect exists, an international business may have to work hard to counteract this effect
by, for example, using promotional messages that stress the positive performance attributes
of its product

→ However, Source effects and country of origin effects are not always negative. French wine,
Italian clothes, and German luxury cars benefit from nearly universal positive source effects. In
such cases, it may pay a firm to emphasize its foreign origins.
Communication Strategy
3. Noise Level

❖ Noise: The amount of other messages competing for a potential consumer’s

attention. Noise tends to reduce the probability of effective communication.

❖ Noise Levels is different between countries. In highly developed countries

such as the United States, noise is extremely high. Fewer firms vie for the
attention of prospective customers in developing countries; thus, the noise
level is lower

❖ https://www.youtube.com/watch?v=N0NpZKaSerg: PEPSI VS COCA

Communication Strategy
Push and Pull Strategy

Push Strategy
Emphasizes personal Pull strategy
selling rather than mass
media advertising in the Emphasizes more on mass
promotional mix. media advertising to
communicate the marketing
message to potential
consumers
Communication Strategy
Push and Pull Strategy

❖ Although some firms employ only a pull strategy and others only a push strategy,
other firms still combine direct selling with mass advertising to maximize
communication effectiveness.

❖ Factors that determine the relative attractiveness of push and pull strategies
include:

1. Product Type and Consumer Sophistication

2. Channel Length

3. Media Availability
 Communication Strategy
Push and Pull Strategy

❖ 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
❖ a push strategy works well for industrial products
2. Channel length
❖ a pull strategy works better with longer distribution
channels
3. Media Availability
❖ a pull strategy relies on access to advertising media
❖ a push strategy may be better when media is not
easily available
Case study:
Unilever in
India
Communication Strategy
Push and Pull Strategy

❖ 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
Pricing strategy
Three aspects of international pricing strategy

Regulatory
Influences
on Prices

Strategic
Pricing

Price
Discrimination
 Pricing Strategy
1. Price Discrimination

❖ Price discrimination - occurs when firms charge consumers in different countries different prices for
the same product.
→ Differentiating prices between countries helps companies gain more economical, maximizing their profits.
Conditions for price discrimination to be profitable:
1. Company must be able to keep national markets separate
 Avoid falling into a situation where other companies can take advantage of different prices between
countries: Ford Escort in Belgium and Germany / Ford in Belgium and the UK.
2. Countries must have different price elasticities of demand – a measure of the responsiveness
of demand for a product to changes in price.
 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
 Price Strategy
2. Strategic Pricing

❖ Strategic pricing has three aspects

1. 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
2. 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
3. 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
 Price Strategy
3. Regulatory Influences on Prices

❖ A firm’s ability to set its own prices may be limited by:

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

Competition Policy

• most industrialized nations have regulations designed to promote

competition and restrict monopoly practices
• can limit the prices that a firm can charge.
Marketing Mix
Standardization versus customization is not
an all or nothing concept

Most firms standardize some things and

customize others

Firms should consider the costs and

benefits of standardizing and customizing
each element of the marketing mix
 New Product Development

❖ Firms today need to make product innovation a priority

❖ Today, competition is as much about technological innovation as anything else

❖ The pace of technological change is faster than ever, and product life cycles are
often very short

❖ New innovations can make existing products obsolete, but at the same time, open
the door to a host of new opportunities

❖ Firms need close links between R&D, marketing, and manufacturing

 Where Should R&D Be Located?

❖ New product ideas come from the interactions of scientific research, demand
conditions, and competitive conditions

❖ The rate of new product development is greater in countries where

✓ more money is spent on basic and applied research and development

✓ demand is strong

✓ consumers are affluent

✓ competition is intense
How Can R&D, Marketing, And Production Be Integrated?

❖ Since new product development has a high failure rate, new product development
efforts should involve close coordination between R&D, marketing, and production

❖ Integration will ensure that

✓ customer needs drive product development

✓ new products are designed for ease of manufacture

✓ development costs are kept in check

✓ time to market is minimized

 ❖ To adequately commercialize new
technologies, firms need to integrate R&D
and marketing

❖ To successfully commercialize new

How Can technologies, firms may need to develop

Firms Build different versions for different countries

Global R&D ✓ so, a firm may need R&D centers in

North America, Asia, and Europe that
Capabilities? are closely linked by formal and
informal integrating mechanisms with
marketing operations in each country
in their regions and with the various
manufacturing facilities
Review Question

Which of the following is not an element in

the marketing mix?

a) product attributes
b) communication strategy
c) distribution strategy
d) production strategy
Review Question
The main differences between distribution
systems include all of the following
except

a) retail concentration
b) product attributes
c) channel length
d) channel exclusivity
Review Question
Standardized advertising makes sense in all of
the following situations except

a) when cultural differences among nations

are significant
b) when a firm is trying to save money
c) when creative talent is scarce and one
large effort to develop a campaign will be
more successful than numerous smaller
efforts
d) when brand names are global
Review Question
A firm is using _________ when it uses a
pricing strategy aimed at giving a
company a competitive advantage
over its rivals.

a) predatory pricing
b) multipoint pricing
c) experience curve pricing
d) strategic pricing
Review Question
Which of the following does not promote
new product development?

a) spending more money on basic and

applied research and development
b) weak demand
c) affluent consumers
d) intense competition
Review Question

A pull strategy is best:

a) for industrial products

b) when distribution channels are short
c) when sufficient print and electronic
media are available to carry the marketing
message
d) for complex new products