Chapter 17 Outline

Chapter Summary

This chapter discussed the marketing and R&D functions in international business. A persistent theme of the chapter is the tension that exists between the need to reduce costs and the need to be responsive to local conditions, which raises costs. This chapter made the following points:

1. Theodore Levitt has argued that, due to the advent of modern communications and transport technologies, consumer tastes and preferences are becoming global, which is creating global markets for standardized consumer products. However, this position is regarded as extreme by many commentators, who argue that substantial differences still exist between countries.

2. Market segmentation refers to the process of identifying distinct groups of consumers whose purchasing behavior differs from each other in important

   ways. Managers in an international business need to be aware of two main issues relating to segmentation--the extent to which there are differences between countries in the structure of market segments, and the existence of segments that transcend national borders.

3. A product can be viewed as a bundle of attributes. Product attributes need to be varied from country to country to satisfy different consumer tastes and preferences.

4. Country differences in consumer tastes and preferences are due to differences in culture and economic development. In addition, differences in product and technical standards may require the firm to customize product attributes from country to country.

5. A distribution strategy decision is an attempt to define the optimal channel for delivering a product to the consumer.

6. Significant country differences exist in distribution systems. In some countries, the retail system is concentrated; in others, it is fragmented. In some countries, channel length is short; in others, it is long. Access to distribution channels is difficult to achieve in some countries.

7. A critical element in the marketing mix is communication strategy, which defines the process the firm will use in communicating the attributes of its product to prospective customers.

8. Barriers to international communication include cultural differences, source effects, and noise levels.

9. A communication strategy is either a push strategy or a pull strategy. A push strategy emphasizes personal selling, and a pull strategy emphasizes mass media advertising. Whether a push strategy or a pull strategy is optimal depends on the type of product, consumer sophistication, channel length, and media availability.

10. A globally standardized advertising campaign, which uses the same marketing message all over the world, has economic advantages, but it fails to account for differences in culture and advertising regulations.

11. Price discrimination exists when consumers in different countries are charged different prices for the same product. Price discrimination can help a firm maximize its profits. For price discrimination to be effective, the national markets must be separate and their price elasticities of demand must differ.

12. Predatory pricing is the use of profit gained in one market to support aggressive pricing in another market to drive competitors out of that market.

13. Multipoint pricing refers to the fact a firm's pricing strategy in one market may affect rivals' pricing strategies in another market. Aggressive pricing in one market may elicit a competitive response from a rival in another market that is important to the firm.

14. Experience curve pricing is the use of aggressive pricing to build accumulated volume as rapidly as possible to quickly move the firm down the experience curve.

15. New-product development is a high-risk, potentially high-return activity. To build a competency in new-product development, an international business must do two things: (1) disperse R&D activities to those countries where new products are being pioneered and (2) integrate R&D with marketing and manufacturing.

16. Achieving tight integration among R&D, marketing, and manufacturing requires the use of cross-functional teams.