Global Marketing

GLOBAL MARKETING
Unit 1: Globalisation: Scope and Objectives Multinational Corporations Entry strategiesEnvironmental factors effecting global business: Economic Environment- Cultural Environment- Political Environment- Legal Environment Regional Integration.
Chapter 1 Introduction to Global Marketing

Overview z Marketing: A Universal Discipline z The Three Principles of Marketing z Global Marketing:What It Is & What It Is Not z Importance of Global Marketing z Management Orientation & Global Marketing z Driving and Restraining Forces Affecting Global Integration & Global Marketing z Summary Learning Objectives z Understand how the world economy developed over the past decades z Know the impact of globalization on the marketing discipline z Learn about the interdependencies between management orientation & marketing performance z Understand the factors supporting or inhibiting international marketing activities Marketing: A Universal Discipline z Marketing (1): the process of focusing the resources & objectives of an organization on environmental opportunities & needs z Marketing (2): a set of concepts, tools, theories, practices, procedures, & experiences z Although marketing is a universal discipline, marketing practice varies from country to country The Marketing Concept (1) z Concept has chanced dramatically z 1950s: Focus on products z 1960s: y Focus on customer orientation y Development of marketing mix: product, price, place, promotion (4Ps) z 1990s: y Focus on customer in the context of the broader external environment z Competition, govearnment policy & regulation y Focus on stakeholder value z employees, customers, shareholders, society z Today: y Two key tasks of marketing z Focus on customer & his/her environment z Create value for consumers & stakeholder y Shift towards z Focus on managing strategic partnerships z Positioning of firm in value chain to optimize value creation y Profit as a measure of success, not an end in itself
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The Three Principles of Marketing
Key Elements of Marketing 1. z z Customer Value Goal: create customer value that is greater than the value created by competitors Strategy: y Expand or improve product and/ or service benefits y Reduce the price y Combine these two elements
V = Value B = Perceived Benefits Perceived Costs P = Price 2. z z z 3. z z z z Differentiation Goal: create competitive advantage through differentiation Advantage can exist in any element of a companys offer One way to penetrate a new national market is to offer a superior product at a lower price. Focus Goal: a concentration of attention & resources Requirement to create customer value at a competitive advantage A viable way for small & medium sized companies to achieve dominant position in world market A clear focus on customer needs & wants
Global Marketing
z z Marketing discipline is universal but markets & customers are quite different 3 domains of knowledge y Cross-Cultural Knowledge y Country/ Regional Knowledge y Cross-Border Transactions Knowledge Need for Global Localization: Adjustment of global marketing strategies to local requirements Examples of Global Marketing Canon/photocopier/McDonalds/Toyota/Ford Marlboro/Coke/Pepsi/Mercedes/Caterpillar Colgate toothpaste/Unilever fabric softener Gillette razors Coca-cola/British Airways/Benetton IBM Benetton/United Distillers American Express/Hertz
Product Design Brand Name Product Positioning Packaging Advertising Strategy Sales Promotion Distribution Customer Service
Importance of Global Marketing z International arena is of great importance to companies maximizing growth potential z 75% of market potential is outside the US z 94% of market potential for German companies is outside of Germany z A large number of industries will be dominated by a handful of global companies Management Orientation and Global Marketing (1) z Different Management Orientations in the Global Arena EPRG Framework
Management Orientation & Global Marketing (2) z Ethnocentric Orientation: y Characteristic of domestic & international companies y Opportunities outside the home market are pursued by extending various elements of the marketing mix z Polycentric Orientation y Characteristic of multinational companies y Marketing mix is adapted by autonomous country managers z Regiocentric or Geocentric Orientation: y Characteristic of global & transnational companies y Marketing opportunities are pursued by both extension & adaptation strategies in global markets Driving Forces Affecting Global Marketing y Technology y Regional Economic Agreements y Market Needs & Wants y Transportation & Communication Improvements y Product Development Costs y Quality y World Economic Trends y Leverage y The Global/ Transnational Corporation Restraining Forces Affecting Global Marketing y Management Myopia & Organizational Culture y National Controls & Barriers Summary z Global marketing is the process of focusing resources on global marketing opportunities z Goal, to create customer value & competitive advantage by maintaining focus z Three classifications of management orientation: ethnocentric, polycentric, regiocentric, geocentric z Global marketing importance is shaped by a variety of driving & restraining forces Chapter 8 Overview
z z z z z z Decision Criteria for IB Entry & Expansion Decision Model Exporting Additional Expansion Alternatives Market Strategy Summary
Entry and Expansion Strategies: Marketing and Sourcing
Learning Objectives
z z z z
To identify criteria for selection of foreign markets. To appreciate which market entry alternatives are available to companies. To recognise export activities as a process developing over time. To understand different entry startegies: sourcing, licensing,investment & ownership
Decision Criteria for IB z Political risk z Market access z Factor cost & conditions z Shipping consideration z Country infrastructure z Foraeign Exchange Selecting Foreign Markets z ... should be based on a number of criteria: y market-related characteristics y cost-related aspects y the regulatory framework y tariffs, duties & non-tariff trade barriers z the importance of these selection criteria depends upon the industry & the markets taken into account Market Selection Criteria z 1. Market Potential z 2. Market Access z 3. Shipping Cost & Time z 4. Appraising Level & Quality of Competition z 5. Service z 6. Product Fit Critical Questions for a Product-Market Profile: The 9 Ws 1.Who buys our product? 2.Who does not buy our product? 3.What need or function does our product serve? 4.What problem does our product solve? 5.What are customers currently buying to satisfy the need and/or solve the problem for which our product is targeted? 6.What price are they paying for the products they are currently buying? 7.When is our product purchased? 8.Where is our product purchased? 9.Why is our product purchased?
A Multi-Stage Selection Process
Visiting the Potential Market z ... is essential after assessment & selection of potential market(s) z goals: y to confirm (or contradict) assumptions regarding market potential y to gather additional (primary) data y to develop a marketing plan in co-operation with the local agent or distributor Production Abroad
Direct Exporting z Direct market representation y via wholesalers or retailers or directly to the consumers z Independent representation y independent distributor z Piggyback marketing y distribution through another distributors channel
Exporting: A Developmental Process Stages of the firm 1. ... is unwilling to export. 2. ... fills unsolicited export orders (export seller). 3. ... explores the feasibility of exporting (may bypass stage 2). 4. ... exports to one or more markets on a trial basis. 5. ... is an experienced exporter to one or more markets. 6. ... pursues country or region focused marketing. 7. ... evaluates the global market potential. All markets, domestic & international, are regarded as equally worthy of consideration. Export-Related Problems z Logistics z Legal procedure z Servicing exports z Sales promotion z Foreign market intelligence Sourcing Decision Factors 1. Factor costs & conditions 2. Logistics 3. Country infrastructure 4. Political risk 5. Market access 6. Exchange rate, availability & convertibility of local money Licensing z contractual arrangement whereby one company (licensor) makes an asset available to another company (licensee) in exchange for royalties, license fees or other form of compensation Franchising z A form of licensing z a company permits its name, logo, cultural design and operations to be used in establishing a new firm or store. Joint Ventures z Company run by two or more partner firms z Risk is shared and different value chain strengths are combined z Influence depends on degree of ownership z Good opportunity to build on local know-how z JV finds greater acceptance by local authorities
Wholly-owned Subsidiaries/Acquisition z Represents the most extensive engagement abroad z Subsidiary is either established through the creation of a new facility or the acquisition of an existing firm z Company has complete decision power & control z Investor achieves greater flexibility z In many countries majority or 100% ownership by foreign companies is forbidden Market Expansion Strategies z Narrow focus: concentrated markets/concentrated countries z Country focus: diverse markets/concentrated countries z Country diversification: concentrated markets/diverse countries z Global diversification: diverse markets/diverse countries Summary z The choice of potential foreign markets must be based on a thorough evaluation of criteria which influence the potential success abroad; eg market potential, market access, or product fit. z Once the potential foreign target market(s) is selected, a company has to decide how to enter this market. Chapter 2 Global Economic Environment Overview The World Economy An Overview Economic Systems Stages of Market Development Stages of Economic Development Income and Purchasing Power Parity The Location of Population Marketing and Economic Development Balance of Payments Trade Patterns Summary Learning Objectives Understand the main differences between economic systems found around the world Learn ways of classifying countries by their market development Understand consumption patterns in different countries Know the main regional economic co-operation agreements The World Economy Overview During the last 50 years: Emergence of global markets Integration of world economy Capital movements are driving force Production is uncoupled from employment Macroeconomics of individual countries no longer control economic outcomes
Economic Systems Three types of economic systems: Capitalist Socialist Mixed Classification based on dominant method of resource allocation Market allocation Command allocation Mixed system Economic Systems Market Allocation Relies upon consumers to allocate resources Role of state Promote competition Ensure consumer protection Predominately market economies: US, Western European Countries, Japan Economic Systems Command Allocation State has broad powers to serve public interest Decides which products to make Decides how to make them Elements of marketing mix are not used as strategic variables Countries that relied upon command allocation systems for decades: China, former USSR, India Economic Systems Mixed Systems In reality, no pure market or command allocation systems among the worlds economies In OECD countries, the portion taxes ranges from 32% GDP in US to 64% in Sweden
Economic Systems Index of Economic Freedom (Source: Heritage Foundation) Free: Hong Kong, Singapore, New Zealand, , Bahrain, Luxembourg, US, Mostly Free Canada, Chile, El Salvador, Taiwan Mostly Unfree Cambodia. Mexico, Slovak Rep., Slovenia, Swaziland Repressed North Korea, Iraq, Libya, Somalia, Cuba
Stages of Market Development Countries/markets are at different stages of development GNP per capita provides a useful way of grouping countries into 5 categories Categories are a useful basis for: Market segmentation Target marketing Country Income Segmentation $9,656 High Income (Advanced Countries) -Triad -Others + $3,126 Upper Middle Income (NICs) + $786 Lower Middle Income (DCs) < $768 Lower Income (LDCs) Basket Cases (BCs) Global Income & Population 2001 Income GNP (billion) $30,251 $24,280 $2,111 $3,150 $810 GNP/ Capita $4,931 $24,693 $4,476 $1303 $355 % GNP 100 80 7 10 3 Population (Millions) 6,134 983 449 2,418 2,284 % Pop.
World High Up-Mid Low-Mid Low
100 16 7 39 37
Top 10 GNP (in millions) z United States z Japan z Germany z France z United Kingdom z China z Italy z Brazil z Canada z Spain
$8,259,358 4,427,104 2,127,086 1,446,515 1,359,764 1,179,345 1,168,771 850,852 602,158 544,944
Stages of Market Development High Income Countries GNP per capita above $9,656 Norway at $38,070, US at $20,953 Post-Industrial Countries Importance of service sector more than 50% of GNP Ascendancy of knowledge over capital Upper Middle Income Countries GNP per capita between $3,126 and $9,656 Characteristics Rising wages High rates of literacy Advanced education Experience rapidly, export-driven economic growth Become formidable competitors Lower Middle Income Countries GNP per capita between $785 and $3,125 Characteristics Early stages of industrialization Expanding consumer markets Major competitive advantage in the production of mature, standardized, labor-intensive products Low Income Countries Income per capita less than $785 Characteristics Limited industrialization High birth rates Low literacy rates Heavy reliance on foreign aid Political instability Concentration in Africa, south of the Sahara Basket Cases A country with economic, social & political problems that are so serious they make the country unattractive for investment and operations Low-income, no-growth countries (E.g.. Ethiopia) One-time growing & successful countries that have become divided by political struggles
Stages of Economic Development Stages of market development based on GNP per capita correspond with the stages of economic development Low & lower-middle-income countries = less developed countries (LDCs) Upper- middle-income countries = industrializing countries High-income countries = advanced, industrialized & postindustrial Income and Purchasing Power (1) Income Single most important indicator of market potential Purchasing Power Parities Comparison of goods & services that can be bought with local currency in different countries Gross National Product (GNP) Sum of the money values of all final goods & services produced during a year Top 10 Nations ranked by GNP/Capita (2000) Luxembourg Japan Norway Denmark Singapore United States Switzerland Hong Kong Kuwait Austria Top 10 Nations ranked by GNP/Capita adjusted for Purchasing Power (PPP) Luxembourg Switzerland United States Denmark Singapore Japan Norway Belgium Hong Kong Austria The Location of Population Country Population GNP/Capita % World (thousands) (thousands) GNP 1,268,121 1,015,287 275,746 210,785 170,661 930 424 29,953 1,176 5,535 3.9 1.4 27.3 0.7 2.8
China India United States Indonesia Brazil
Marketing & Economic Development
Balance of Payments A record of all economic transactions between residents of a country & the rest of the world Capital Account records Long-term direct investment, Portfolio investment, Other short & long-term capital flows Current Account records Trade in merchandise & service, Private gifts, Public aid transactions between countries Trade Patterns (1) World merchandise trade has grown faster than world production during the last 50 years Top 5 exporting countries Top 5 importing countries United States United States Germany Germany Japan Japan China United Kingdom France France Services Trade The fastest- growing sector of world trade In 1994, U.S. service exports totalled $195 Billion
Summary z Economic environment is major determinant of global market potential & opportunity z World economies can be categorized into market allocation systems, command allocation systems, & mixed systems z For many products, most important indicator of market potential is income
Chapter 3 Social and Cultural Environments Overview z Basic Aspects of Society & Culture z Analytical Approaches to Cultural Factors z Impact on Industrial Products z Impact on consumer Products z Cross-Cultural Complications z Summary Learning Objectives z z z z Understanding how important cultural & social differences are in global marketing Learning fundamental concepts that provide an understanding of cultural differences Understanding where potential conflicts may arise in global business relations Knowing how cultural differences impact the marketing of products and services
Basic Aspects of Society and Culture z Culture as ways of living z Conscious and unconscious values, ideas, attitudes, and symbols that shape human behaviour z Culture is learned, not innate z Culture defines the boundaries between different groups z All facets of culture are interrelated The Search for Cultural Universals z Universal = Mode of behaviour existing in all cultures z Universal aspects = opportunities to standardize some or all elements of a marketing program z Cultural universals: athletic sports, body adornment, religious rituals, music z Increasing travel & improving communications are leading to convergence The Anthropologists Standpoint z Must understand human experience from the local point of view & become insiders with cultural empathy z Need combination of tough-mindedness & generosity z Tough-mindedness: be secure in your own convictions & traditions z Generosity: Appreciate the integrity & value of other ways of life High- and Low-Context Cultures (1) z Low-context culture: z z z Messages are explicit Words carry most of the information in communication United States, Switzerland, Germany
High-context culture z Less information is contained in the verbal part of the message z More information resides in the context of communication (background, associations, basic values of communicators) z Japan, Saudi Arabia
Communication and Negotiation z Challenges in: z Verbal communication z Non-verbal communication z Knowledge & understanding of cross-cultural differences is crucial during negotiations z You can buy in your home-country language but you need to learn your customers language to sell. Analytical Approaches to Cultural Factors (1)
z z
z z z
z z z z
Hofstedes cultural typology Cultures of different nations can be compared in terms of four dimensions z Power distance z Integration into groups z Masculinity z Uncertainty avoidance Self-reference criterion (SRC) and perception Perception of market needs is framed by own cultural experience Four-step framework z Define problem in terms of home country norms z Define problem in terms of host country norms z Isolate SRC influence. See how it complicates problem z Redefine problem without SRC influence. Solve for host country market situation Environmental Sensitivity The extent to which products must be adapted to the culture-specific needs of different national markets Environmental sensitive products z Require significant adaptation to the environments of various global markets Environmental insensitive products z Do not require significant adaptation
Handling Cultural Diversity (1) z Impact of social & cultural environments on marketing industrial products z Industrial products might exhibit z Lower levels of environmental sensitivity z Higher levels of environmental sensitivity z Impact of social & cultural environments on marketing consumer products z Consumer goods are usually more sensitive to cultural diversity than industrial goods z Culture is changing so rapidly that innovative marketing may be able to change established consumption patterns rooted in cultural differences z Example: Consumption of Soft Drinks (Y) Y = f (A, B, C, D, E, F, G) z A = influences of other beverages relative prices, quality, taste B = advertising expenditure and effectiveness, all beverage categories C = availability of products in distribution channel D = cultural elements, tradition, custom, habit E = availability of raw materials F = climatic conditions, temperature, relative humidity z Culture always has been a major source for disagreement and misunderstandings z Cross-cultural complications can lead to costly failures z Companies realize the importance of training and supporting people in cultural awareness
Cultural Diversity Why People Fail: Ethnocentric Orientation Ignorance Arrogance Time Factor Summary z Culture has both a pervasive & changing influence on each national market environment z Global marketers must recognize the influence of culture z Nations can be classified as high- or low-context cultures z Maslows hierarchy, Hofstedes typology, and the self-reference criterion can provide clues about cultural differences & similarities Chapter 5 Global Customers Overview z Regional Market Characteristics z Marketing in Transitional Economies & Less Developed Countries z Global Buyers z Global Marketing Plan z Summary Learning Objectives z Become familiar with different regional markets z Learn how transitional & developing markets differ from developed countries z Understand the customer value & the value equation z Discuss diffusion theory Western Europe z Smaller than Australia z 32 % Global Income z 460 million population z 7% World Population z 23 Countries Product Strategies in the EU z Harmonization in product standards z Common patenting & branding z Harmonization in packaging Pricing Strategies in the EU z More competitive z Withdrawal of restrictions on foreign products z Anti-monopoly measures z Widening of public procurement market Distribution Strategies in the EU z Simplification of transit documents & procedures z Elimination of customs formalities
Promotion Strategies in the EU z Common guidelines for TV broadcasting z Deregulation of national monopolies z Uniform standard for TV commercials Eastern & Central Europe z Balkans: Albania, Bosnia-Herzegovina, etc. z Baltics:Lithuania, Latvia & Estonia z Commonwealth of Independent States z Poland, Hungary, etc. Eastern & Central Europe Before After Market Economy Before After % World GNP 6.9% 2.5% GNP per Capita $3,665 $2,219 Marketing in Eastern & Central Europe z Wide range in economic development z Young people have unlearned the communist past z Needs business and distribution infrastructure z Familiar with Western Brands North America NAFTA z $9,254 trillion GNP z 30% of Global Income z 407 million population z 7% world population Asia-Pacific z $8,230 billion Global Income z 25% of Global Income z 2.8 Billion population z 52% World Population
JAPAN Home of most demanding customers Home market of global customers Home market of global competitors Significant market of global competitors Major source of industry innovation. China z $1,179 Billion GNP z 3.9% Global Income z 1.27 Billion population z 21% world population z $930 GNP per Capita z Nearly 10% annual growth in GNP
Latin America z Consists of South and Central America & Caribbean z Mexico is economically part of NAFTA z 7% of global Income z 510 million population z 9.5% world population Africa z 3.5 times size of US z 3 Regions: North Africa, Sub-Sahara and Republic of South Africa z 1.3% Global Income z 730 million population z 12% of world population z Average per capita = $536 Transitional Economies & Less Developed Countries z 1. Low per capita income - under $4000 z 2. High inflation 10 to 30% annually z 3. Wide gap in income distribution z 4. High level of taxes, duties & bureaucratic z 5. Lack of marketing awareness z 6. Fragmented communications & distribution 7. Inadequate infrastructure
hurdles
To Enter or Not to Enter? z Look beyond per capita GNP z Consider LDCs collectively z Weigh the benefits of being first z Set realistic deadlines Middle East z 16 countries z 2% of Global Income z 260 million population z 4% of world population z Predominately Muslim Rogers Diffusion Theory z Awareness z Interest z Evaluation z Trial z Adoption Rogers Factors Affecting Rate of Innovation Adoption z Relative advantage z Compatibility z Complexity z Divisibility z Communicability Legal Environment is not covered in this material

Global Marketing

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Global Marketing

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GLOBAL MARKETING

Chapter 1 Introduction to Global Marketing

The Three Principles of Marketing

Entry and Expansion Strategies: Marketing and Sourcing

A Multi-Stage Selection Process

World High Up-Mid Low-Mid Low

China India United States Indonesia Brazil

Marketing & Economic Development

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