10.20 Summary: Part B
This topic began with a restatement of the concept of the global marketplace as defined by Levitt in 1983, and the notion of convergence which suggests that consumer tastes worldwide are becoming similar. We then looked at the components of the marketing mix, beginning with product.
We noted that Levitt's position is somewhat extreme and that product attributes need to be varied from country-to-country to satisfy consumer tastes and preferences. These differences in tastes and preferences are due to differences in culture and the country's stage of economic development.
We next considered place - the distribution system - and saw that there are significant differences in distribution systems. Some countries have a concentrated retail system and thus a short distribution channel. Other countries have fragmented wholesale/retail systems with long distribution channels. Long distribution channels generally lead to higher prices for consumers, but they may also lead to lower selling costs and so assist a firm to gain access to the market.
The third P of the marketing mix we considered was promotion, or communication strategy. Barriers to communication include cultural differences, source effects, and noise levels. A communication strategy may be a push strategy which emphasises personal selling, or a pull strategy which emphasises use of the advertising media. Whether a push or a pull strategy is better depends on the type of product, customer sophistication, channel length and the availability of the various types of media. Standardised global advertising suits products such as luxury goods, chemicals and bulk commodities, but for most products some degree of specialised advertising is necessary to meet local tastes and preferences.
Our final P was pricing. Price discrimination relates to differential pricing between countries. For price discrimination to be profitable, national markets must be separate (no cross border traffic) and their price elasticities of demand must differ. Predatory pricing is aggressive pricing designed to undercut the opposition and force it out of the market. Predatory pricing may go hand in hand with experience curve pricing to build volume quickly and so move down the experience curve towards lower production costs. Multipoint pricing is concerned with the effects of rival firms' pricing strategy in different markets.
The ability of firms to use price discrimination and predatory pricing is often limited by government anti-dumping regulations and competition policies.
Finally in this chapter we looked briefly at R&D and its close association with marketing. We noted why firms employ international R&D and from our reading of Hill's text we learned that lead markets which give rise to the bulk of new products generally become the sites for R&D facilities. However, there is much to be gained by dispersal of R&D activities to take advantage of talents and ideas, two qualities on which no country has a monopoly.
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