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Chapter 1: Global Marketing and the Firm

Characterize and compare the management style in SMEs and LSEs


Identify drivers of global integration and market responsiveness
Explain the role of global marketing the firm from holistic perspective
Describe and understand the concept of the value chain
Identify and discuss different ways of internationalizing the value chain
Explain the difference between the product value chain and the service value chain
Understand how customer experience can extend the traditional value perspective

1.1 Introduction to Globalization:


2008-2009 = slowdown in global trade but globalization is not reversing
2005: Friedmans book The World is Flat = global scale in competition for resources, cx, and talent.
Pankaj Ghemawat has new idea: World 3.0.
o Distinic nation states = world 1.0
o Stateless ideal = World 2.0
o His idea = the home matters but so does foreign countries. The bigger the distance, less the
trade #. A global strategy is not to eliminate the distance but rather to understand them.

1.2 Process of developing a global marketing plan:


The five stage decision model in global marketing
1. The decision whether to internationalize
2. Deciding which markets to enter
3. Market entry strategies
4. Designing the global marketing programme
5. Implementing and coordinating the global marketing programme

1.3 Comparison of the global marketing and management styles of SME and LSE
LSE = per the EU definition, LSEs are firms with more than 250 employees. Although LSEs
account for less than 1% of companies, almost one-third of all jobs in the EU are provided by LSEs
SME = occur commonly in the EU in international organizations. The EU categorizes companies
with fewer than 50 employees as small and those with fewer than 250 as medium. In the EU,
SMEs compromise 99% of all firms.

Example: Legos Strategic Drift


Lego was the 3rd largest toy company, 8% MS. But losing profit margin due to TV, online games,
etc Its strategic drift = the vision of mgmt. = Great brick toy but the world = technology based.
Lego sold off its lego land and refocused on its core business

Example 2: Nintendo game boy:


Economies of scale example where although Nintendo lost its market share to Sony within the
console wars, - it remained the dominant player within handheld DS leveraged the firms existing
structure.
Characteristics of LSEs and SMEs
LSEs SMEs
- Many resources - Limited resources
- Internalization of resources - Externalization of resources
Resources
- Coordination of: personal, (outsourcing of resources)
financing, market knowledge
- Deliberate strategy formation - Emergent strategy formation
- Adaptive decision-making mode in - The entrepreneurial decision-
small incremental steps (logical making model (e.g. each new
Formation of incrementalism) (e.g. each new product: considerable innovation
strategy/decision- product: small innovation for the for SME)
making process LSE) - The owner/manager is directly and
personally involved and will
dominate all decision-making
throughout the enterprise
- Formal/hierarchical - Informal
- Independent of one person - The owner/entrepreneur usually
Organization has the power/charisma to
inspire/control a total
organization
- Mainly risk-averse - Sometimes risk-taking/sometimes
Risk-Taking - Focus on long-term opportunities risk-averse
- Focus of short term opportunities
- Low - High
Flexibility
Taking advantage of - Yes - Only limited
economies of scale and
economies of scope
- Use of advanced techniques: - Information gathering in an
databases, external consultancy, informal manner and an
Use of information
internet expensive way: internal sources,
sources
face-to-face communication

The intended and emergent strategy


Incremental change and strategic drift

The entrepreneurial decision-making model

Example: Ford Focus Global Marketing Plan;


The EU team launched Focus in the US. Today, its a bout the one Ford strategy where the global
heads work together for a global stgx.

Sharing 80% of their parts and they used the EU leader because of his expertise with similar sized
cars.

Saving money due to 2008/2009 = new imperative. Ford refused to give a single picture to each
country. Instead, coming up with a similar landscape that can be appreciated by all countries
Removing duplication ~5m saved

1.4 Should the company internationalize at all?


Globalization = reflects the trend of firms buying, developing, producing and selling products and
services in most countries and regions of the world
Internationalization = Doing business in many countries of the world but often limited to a certain
region

Industry Globalism:
A single player cant change the industrys degree of globalism.
In the case of high degree of industry globalism there are many interdependencies between
markets, customers and suppliers, and the industry dominated by a few large, powerful players
(global), whereas the other end (local) represents a multidomestic market environment where
markets exist independently of one another.

Preparedness for internationalization:


Preparedness = ability to carry out strategies as planned. And do they have the language, cultural
sensitivities, international experience
The nine strategic windows
Takeaways:
If your industry is global, expect to expand or to get bought out. If you are in between, seek global
alliances to survive.
If your industry is potentially global, you are making plans to expand either large scale or very
niche.
If your industry is very local, you diversify into other industries, consolidate export markets or do
nothing.

Ultimately,
Unless you are mature in preparedness (high skill), it probably means you are not doing well at
home No reason to expand outside.
Maybe #7 is the majority of start-ups in IT: Not enough skill for global but market is big.

1.5 Development of the global marketing concept


Global Marketing = find/satisfy global customers better than competition.
o Your method will depend on mgmts assumptions and beliefs

Ethnocentric: the home country is superior and the needs of the homes country are most relevant.
Controls are highly centralized and the organization and technology implemented in foreign
locations will be largely the same as in the home country.
Polycentric (multidomestic): each country is unique = target in different way. More adapt = goal of
more profit. Control is highly decentralized among affiliates and communication between
headquarters and affiliates is limited.
Regiocentric: World consists of regions, Asia, Europe, ME&A. Emphasis = Within region not across
them
Geocentric: world is smaller and smaller; global product concept with small local adaptations.

Global marketing is defined as the firms commitment to coordinate its marketing activities across
national boundaries in order to find and satisfy global customer needs better than the competition.
This implies that the firm is able to:
o Develop a global marketing strategy, based on similarities and differences between markets;
o Exploit the knowledge of the headquarters (home organization) through worldwide diffusion
(learning) and adaptations
o Transfer knowledge and best practices from any of its markets and use them in other
international markets.

Key terms:
Coordinate marketing activities = coordinating and integrating marketing strategies and implementing
them across global markets, which involves centralization, delegation, standardization and local
responsiveness
Find global customer needs= involves carrying international marketing research, analyzing market
segments: and seeking the similarities and differences in customer groups across countries
Satisfy global customers= adapting products, services and elements of the marketing mix to satisfy
different customer needs across countries and regions
Being better than competition = assessing, monitoring and responding to global competition by
offering better value, lower prices, higher quality, superior distribution, great advertising strategies

The Glocalization framework

Think globally but act locally (glocalization) = the development and selling of products or services
intended for the global market but adapted to suit local culture and behaviour
Key element in knowledge management is the continuous learning from experiences. The aim of
knowledge management as a learning-focused activity across borders is to keep track of valuable
capabilities used in one market that could be used elsewhere, so that firms can continually update
their knowledge.
Example: Helly Hanson- Geo-targeting tech
HH used tech to lead cx into their stores when it realized that Germany was gonna rain, its
frontpage changed automatically into raingear.

Example: Persil Black and Persil Abalya:


Henkel (german chemical LME) had a great black cleaner for S.A. But when Black became very
fashionable in Europe, it used the same formulation + changed bottle.
Persil used its experience in middle east into Europe. (localization of packaging) but globalization
of formula.
1.6 Forces for global integration and market responsiveness
The global strategy approach reflects the aspirations of a global integrated strategy, while
recognizing the importance of local adaptation/market responsiveness
o In this way, globalization tries to optimize the balance between standardization and adaptation of
the firms international marketing activities
Global integration: recognizing the similarities between international markets and integrating them
into the overall global strategy
Market responsiveness: responding to each markets needs and wants.

The global integration/market responsiveness grid: the future orientation of LSEs and SMEs

Two elements:
Forces for national responsiveness (local)
Forces for globalizing (global)
Assumes that LSE and SME are learning from each other.
o LSE (very global) are moving Right: becoming more localized.
o SME (very local) are moving up: becoming more global focused.
o Result = High local and high global

Forces for global coordination/integration: The major drivers are


Removal of trade barriers (deregulation) such as tariffs and deregulation reduces time, cost, and
complexity
Global accounts/customers: as customers are global, they demand global services. Global
pricing. Suppliers have to provide them with global services to meet their global needs.
Relationship management: customers are everywhere and you need to be on-site to serve them.
Managing large clients in NA = having an office in NA.
Standardized worldwide technology: tech is available and plug and play is expected Xiaomi
of China is challenging Apple.
Worldwide markets: the concept of diffusions of innovations from the home country to the rest of
the world tends to be replaced by the concept of worldwide markets. Worldwide markets are likely
to develop because they can rely on world demographics.
Global Village: refers to the phenomenon in which the worlds population shares commonly
recognized cultural symbols. The business consequence of this is thats similar products and
services can be sold to similar groups of customers in almost any country in the world.
Worldwide communications: new internet-based low-cost communication made it cheap to
communicate and prospect new customers worldwide
Global cost drivers: economies of scale and scope dominated. Goal is to have higher returns by
finding cheap labor.

Forces for market responsiveness:


Cultural differences: People are not all the same. Some things cannot be changed. Religion,
history, etc.
Regionalism/protectionism: regionalism is the grouping of countries into regional clusters based
on geographic proximity.
Deglobalization: moving away from the globalization trends and regarding each market as special
with its own economy, culture and religion.

McDonalds Example Movings towards higher market responsiveness


Japan: Chicken teriyaki + eggs
India: No beef products its a lamb big mac
Other countries:
Selling beers, McCroissant (Germany)
Banana fruit pies in Brazil
McDelivery (Singapore)

1.7 The value chain as a framework for identifying international competitive advantage

The concept of the value chain:


Value chain: a categorization of the firms activities providing value for the customers and profit for
the company.

Activities:
Inbound logistics: receiving/storing input (inventory)
Operations: transformation into final product
Outbound logistics: distribution channel
Marketing & Sales: consumers/usuers are made aware of the product/service
Service: after-sale, CRM, relationship management etc.

Support activities:
Firm Infrastructure: quality control, internal motivation, etc
HR Management: staff and talent
Technology and R&D: tech systems
Procurement: buying raw material
Value = how much the customer is willing to pay for (perceived value).
Value chain = Cost + Value drivers. profitable if value it gives > costs to produce it

Porters concept of the value chain:


Value activities:
o Physical and technologies distinct activities that a firm performs. Building blocks with which a firm
creates a product valuable to its buyer.

Competitive advantage:
o Providing comparable buyer value more efficiently than competitors (lower cost)
o Performing activities at comparable cost but in unique ways that create more customer value than
the competitors are able to offer and command a premium price (differentiation)
o The firm might be able to identify elements of the value chain that are not worth the costs. These
can then be unbundled and produced outside the firm (outsources) at a lower price.

Value:
o Primary activities:
Physical creation of the product + Sale + transfer + After sale
o Support activities:
Helps make the primary activities run better.
A simplified version of the value chain

Internal linkages: between activities within the same value chain, but perhaps on different planning
levels within the firm
Your decisions about the value chain elements will affect your profit
You need the right structure to serve the right customer.

Think about your value chain in terms of 3 decisions:


1. Strategic (5-10): formulation of the business statement, etc corporate strategy for the firm to
pursue. (big picture)
2. Managerial level (1-5): Translating corporate objectives into functional/unit objectives
(delegation)
3. Operation level (0-1): the more on-the-ground and related to day to day activities.

They are all interdependent and a clear top objective makes the business run better.

External linkages: between different value chains owned by the different actors in the total value
system. A single company rarely does everything: from design to final customer sale. Form bonds
with X & Y
o Understand when to add external players (a specialized retailer) into your value chain
o To either reduce costs or reach a specific customer group.

Internationalizing the value chain:


Decision is whether to centralize the value chain?
Usually downstream activities: sales and support + Marketing is done locally
o This means that downstream activities competitive advantage tend to be country-specific.
But theres equally companies that need EOS so even upstream are centralized
Your decision to keep it centralized or not depends on if its difficult to ship the making and how
complicated it is to coordinate.
Dimension 1:
Configuration of a firms activities = location in the world where it is performed Action
Dimension 2:
Coordination = how identical or linked activities are coordinated with each other.

1.8 Value shop and the service value chain

Value shop = a model for solving problems in a service environment, similar to workshops. Value
created by mobilizing resources and deploying them to solve a specific customer problem.
Idea: model for solving customer problems in a service environment
Value network = the formation of several firms value chains into a network, where each company
contributes a small part to the total value chain.
Problem-finding
Problem-solving
Choice
Execution
Control evaluation
Deploy assets (people, knowledge, skills) to solve specific problems such as curing an illness.
Shops are there to identify, find a solution, execute and evaluate results. Its a specialized problem
solving unit.
Value shops are kinda like consulting engagements: facilitated by technology: intranets,
conferencing, etc.
Value networks are composed of multiple companies that specialized in one part of the chain.

Combining the product value chain and the service value chain:
Hard services where production and consumption can be separated. Ex: microsft excel
Soft services the customer is part of the value creation: haircut

A company will venture into services if it wants to


Enhance the appeal of its products
If competitors are using its products as part of their offering

The make sure your service line is profitable, you decide


Do you want services to support product
Have services be its own platform?

If you want to enhance the value of the product then you should design products that actually work
with your service.
This means adding support into the product itself: i.e how iphones have a call genius button
In the moment of truth, the seller represents all the functions of the focal companys product and
service value chainat the same time

1.9 Global Experimental Marketing


Customer experience occurs when a company intentionally uses products in combination with
services to engage individual customers in a way that creates a memorable event
Experiential marketing = new trend worldwide, in-depth, tangible experiences to provide
sufficient information for a purchase decision.
Providing customer value also through customer experience
B2C businesses: Customers are increasingly defining and creating value: co-branding through
holistic brand value structure
Think of experiences across two bi-polar spectrums:
Involvement/Participation: this dimension refers to the level of interactivity between the supplier
and the customer. At low degree there is passive participation, where the participants experience
the event as observers or listeners.
Intensity/Connection: this dimension refers to the strength of feeling towards the interaction

There are 4 types of services available:


Aesthetics: high intensity, low Participation Purely watching & expensive to do
o More passive involvement: admiring the structure of a building
Watching the grand canyon but not climbing down it
Cirque du soleil show
Escapist: High Intensity and high participation Escape from reality
o Escape from daily routine- escape from reality!
o Lifestyle experiences, tourism, etc Zumba dance class
Entertainment: Low involvement and low intensity Mindless & get bored
o Fashion runways
Educational: High participation and low intensity School
o Acquire new skills but dont get to change the course
B2B Businesses:

Mass customization:
Mass customization can be viewed as collaborative efforts between customers and manufacturers
to jointly search for solutions that best match customers individual specific needs with
manufacturers customization capabilities. This combines the low unit costs of mass production
process with the flexibility of individual customization.
One of the best ways to create customer value!
o Serving customers uniquely and locking cx in.
Intangible service of helping customers figure out EXACTLY what they are and solution.
ALSO an experience while you solve it. beginning of a relationship + partnership

Example: Case Construction:


CNH is a agricultural equipment company. They own a farm where cx can come and try it live.
For the business customer, its not almost like augmented reality but rather they can experience it
live. In terms of the B2C, its high involvement but perhaps low intensity (educational)

Augmented reality:
A live view of a physical, real-world environment whose elements are augmented (or
supplemented) by computer-generated sensory input such as sound, video, graphics, or GPS data.
AR technology allows consumers to virtually interact with three-dimensional product visualizations
displayed on users screens.
Form of experiential marketing not only on 1 product but rather an entire experience!
AR has most impact on pre-purchase stage. = put the product in their hand and its a cool story to
share!
o Using tech to get the customer to visualize themselves using it.

1.10 Information business and the virtual value chain


Added the use and collection of information into the model. And info is used to create value in these 4
ways. Successful marketers need to incorporate data into their models
Managing risks: simulations on value at risk
Reducing costs: removing redundancies automation!
Offering products and services relationship management + account management systems
Inventing new products: innovation = heart of success

At each stage of the original value chain, we use information. Not only to improve but result in more
coordination too. This information can help us to design new products or to improve existing ones.

Case study 1: Green toys:


- VC and electrical engineer created green toys
- Good market timing: Mattel recalled 10 million toys because of pollution
>Used recycled plastic milk jugs Bay area is known for recycling (abundance of milk jugs)
This model is not replicable elsewhere
- The founders had a lot of industry experience Strong human capital
- 30% more expensive 40million total market
>no plans to produce globally Rather export (very global view)
- In the future, children will be more numbered in developing countries v.s Europe and developed
>As fewer babies are born existing ones are cherished + More $$$$
>Toys enhance intelligence & teaching tool
-Sell at supermarkets + need to move into online and TV sales
>Depending on where you go Germany = feel the product at lifestyle stores
Russai = more specialist retailers & shopping centres
LATAM: childrens day toy sores
Brazil: specialist stores

Case study 2: Hunter boots


- British symbol for celebrities with historical meaning -> Duke of wellington
>Iconic for patritic reasons always made in the UK and didnt change shape & stamped by
royal family
- Suffered from high costs but new management restructured and lead cost cutting initiatives
>Expand sales abroad NY and London Flagships
>Handmade but they moved production to china AND increased prices by 20%
- International acclaim:
>Celebrities wore wellies to gastonbury, David Cameron sent them as gifts to obamas
daughters, Jimmy Choo collab