2. Global Marketing “…the world is becoming more homogenous…” “...distinctions between national markets are fading and may disappear…”
3. Global Marketing Evolution Core Business Strategy Develop CoreBusiness Strategy Internationalizethe Strategy Country A Country B Country C Country D Globalizethe Strategy Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved.
4. Globalization Drivers Market Factors new consumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliances Cost Factors avoiding cost inefficiencies and duplicated efforts Environmental Factors reduced governmental barriers, rapid technological evolution Competitive Factors rapid product innovation, introduction, distribution
5. The Strategic Planning Process Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed. The Strategic Business Unit Based on product market similarities Similar needs or wants to be met Similar end user customers to be targeted Similar products or services used to meet needs of specific customers
6. The Strategic Planning Process Global Strategy Formulation Assessment and Adjustment of Core Strategy Market/Competitive Analysis - Internal Analysis Formulation of Global Strategy Choice of Target Countries, Segments, and Competitive Strategy Developmentof Global Marketing Program Implementation Organizational Structure - Control
7. Market and Competitive Analysis First, understand the structure of the global market industry; the common features of customer requirements and choice factors. Internal analysis Examine the readiness and capability of the firm to undertake strategic moves with its current resources.
8. Formulating Global Marketing Strategy Formulation begins with a series of strategic decisions Choice of Competitive Strategy Cost leadership Differentiation Focus Country-Market Choice Concentration or diversification Factors in country markets selection The stand-alone attractiveness of the market Global strategic importance of the market Possible synergies offered by the market
9. Competitive Strategies Source of Competitive Advantage Competitive Scope Low Cost Differentiation CostLeadership BroadDifferentiation Industry-wide Single Segment Focus SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.
10. Bases for Global Market Segmentation Bases for InternationalMarket Segmentation Environmental Variables Marketing Management Variables Geographic Variables Political Variables Economic Variables Cultural Variables Promotion Variables Product Variables Price Variables Distribution Variables
11. Global Marketing Program Development Development Decisions Product offering The degree of standardization and adaptation in the product offering. The marketing approach The marketing program beyond the product variable. The location and extent of value-adding activities Pooling production. Exploiting factor costs or capabilities. Strategic alliances. Concurrent engineering. Competitive moves to be made Cross-subsidization using resources accumulated in one market to wage a competitive battle in another.
12. Implementing Global Marketing Success will come from a balance between local and regional / global concerns. “Think globally, act locally” is the operative phrase for global marketers competing in country markets. Product choices should consider individual markets as well as transfer products from one region to another.
13. Global Marketing Pitfalls to Avoid Insufficient local market research. The tendency to over standardize the product. Inflexibility in planning and implementation. The “Not-Invented-Here” syndrome (NIH). How to avoid the NIH syndrome Ensure that local managers participate in the development of global brand marketing strategies. Encourage local managers to develop ideas for regional or global use.
14. Localizing Global Marketing Achieving a balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy.
15. Localizing Global Marketing Management processes Enhance the global transfer of communications. Interchange personnel to gain experience abroad. Headquarters should coordinate and leverage resources. Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands. Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.
16. Localizing Global Marketing Organization structures The shift to global account management. Corporate culture The world is not one single market. Plan and execute programs on a worldwide basis. A global Identity favors no specific country.
17. Foreign Investments Firms invest to enter markets or assure themselves of sources of supply. Foreign direct investment An equity investment to create or expand a permanent interest in a foreign enterprise. Portfolio investment The purchase of stocks and bonds internationally. Major foreign investors More than 45,000 multinational corporations with 280,000 affiliates globally. The terms “foreign” and “domestic” may no longer apply.
18. Reasons for Foreign Direct Investment Marketing factors Growth and profit motivations. Circumventing government-erected barriers to trade. Access to low-cost resources and supply. Local customers preference for domestic goods and services. Attempts to obtain low-cost resources and ensure their supply.
19. Categories of International Firms Resource seekers are searching for natural and human resources. Market seekers are searching for better opportunities to enter or expand within markets. Efficiency seekers are attempting to obtain the most economic sources of production.
20. Reasons for Foreign Direct Investment Derived demand results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market. Government incentives Fiscal incentives tax holidays, allowances, credits and rebates. Financial incentives special funding for land or buildings, loans and guarantees, wage subsidies. Non-financial incentives guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure.
21. Foreign Direct Investors Positive perspectives Bring in capital, economic activity, and employment. Transfer technology and managerial skills. Competition, market choice, and competitiveness are enhanced. Negative perspectives Drain resources from host countries. Starve smaller capital markets. Discourage local technology development. Bring in outmoded technology. Create new competition for local firms.
22. Types of Ownership Ownership patterns may be based on past experiences with similar ownership models. Full ownership Full control, full assumption of all risks. May be desirable, but is not necessary for success internationally. Joint ventures Shared control, shared investment risks. Reasons for joint ventures: governmental pressure to join with local partners. mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.
25. Maintain flexibility to adjust to changing market conditions.ADVANTAGES Pooling of resources Better relationships with local organizations Knowledge the partner brings of the local market Minimizing exposure risk of long-term capital Maximizing leverage of invested capital DISADVANTAGES Different levels of control are permitted or required Difficulty in maintaining the relationship Disagreements over business decisions Disagreements over profit accumulation, and distribution (profit repatriation)
26. Types of Ownership… continued Strategic alliances “…more than the traditional customer-vendor relationship, but less than an outright acquisition.” Government consortia Public-private relationship in a specific project. Typically government supported or subsidized.
27. Complementary Strengths Create Value SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com.
28. Contractual Arrangements Cross marketing The parties agree to carry out activities which are complementary and non-competitive. Contract manufacturing An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development. Management contracting A supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is functionally important to the client.
29. Management Contracting Advantages CLIENT ADVANTAGES Provide organizational skills not locally available. Immediate availability of skills. Management assistance and support that is not available locally. SUPPLIER ADVANTAGES Lower risk because no equity capital is at stake. Exercise large amounts of operational control. The strategic advantage of being on the “inside”. Opportunity to commercialize “know-how”. Using experienced staff to offset business fluctuations.
30. Management Contracting Risks Risks to the client Over-dependence on the supplier. Loss of control to the supplier. Risks to the contractor Bidding without fully detailed insight into actual costs of delivering the service. The effects of the loss or termination of the contract and resulting personnel problems.
