Part Six Managing International Operations

Chapter Sixteen Marketing Globally

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What We Are Striving To Accomplish

1. To compare and contrast the merits of standardization

2.

3.
4.

5.

versus localization strategies for country markets and of regional versus global marketing efforts. To consider factors affecting the adaptation of products for launch in global markets. To understand the variables that affect pricing different markets and discuss various pricing methods. To evaluate differing distribution channels, including ecommerce. To see how marketers set about selecting the proper combination of promotional tools - advertising, personal selling, sales promotion, and publicity - for targeted global markets.

Marketing as a Means of Pursuing an International Strategy

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Marketing Orientations
International marketing strategies depend on companies orientations that include:
Production Sales Customer Strategic marketing Societal marketing

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Production Orientation
Companies focus primarily on production either efficiency or high quality - with little emphasis on marketing. Used internationally for certain cases:
Commodity sales Passive exports Foreign-market segments or niches

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Other Orientations
Sales orientation: a company tries to sell abroad what it can sell domestically and in the same manner on the assumption that consumers are sufficiently similar globally. Customer orientation: the product and method of marketing it are varied Strategic Marketing orientation: combines production, sales, and customer orientations Social Marketing orientation: Companies consider effects on all stakeholders when selling or making their products.
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Segmenting and Targeting Markets

The most common way of segmenting markets is through demographics and psychographics Three basic approaches to international segmentation:
By country By global segment By multiple criteria
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Levitt, 1983

A powerful force drives the world toward a converging commonality, and that force is technology (Levitt, 1983)

Global Marketing and R&D

Among different countries, why and how: It makes sense to vary the attributes of products Distribution strategy may vary Advertising and promotion strategies may vary

Pricing strategy may vary

How globalization affects new-product development

Global Marketing Management 1970s standardization versus adaptation 1980s global integration versus local responsiveness 1990s global integration versus local responsiveness The trend back toward localization is caused by the new efficiencies of customization made possible by the Internet and increasingly flexible manufacturing processes. From the marketing perspective customization is always best. As global markets continue to homogenize and diversify simultaneously, the best companies will avoid the trap of focusing on country as the primary segmentation variable.

The Nestle Way: Evolution Not Revolution Nestle is the worlds biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water. Nestle strategy can be summarized in four points: Think and plan long term Decentralize Stick to what you know Adapt to local tastes Long-term strategy works for Nestle because the company relies on local ingredients and markets products that consumers can afford.

11 Cs of Channel Design
1. Customers 2. Culture 3. Competitors 4. Company objectives 5. Character 6. Capital 7. Cost 8. Coverage

9. Control
10. Continuity 11. Communication

SIVA Model
S=Solution to stakeholders Problems and concerns I= Stakeholders need for information V= Stakeholders question for value A= Stakeholders need for access Integrating marketing communication should be based on the behavior of the customers, not their attitudes. The historical marketing concepts are all about pursuing the customers. but now those concepts do not fit in for the emerging markets.

Dr. Don E Schultz Professor Northwestern University world Marketing Summit 2012

Market Segmentation
geography Identifying distinct groups of consumers whose purchasing behavior differs from other

in important ways.

demographics

Social-cultural factors

Marketing mix adjusted to reflect differing purchasing patterns in segments.

Psychological factors

Market Segmentation

Segments that transcend national borders.

Two main issues in the differences between countries

Structure of their market segments.

SECTION 1
Global Marketing Issues
Cultural Misunderstanding Marketing managers often use their own frames of reference time, space, roles, individuality, etc. rather than adopt the indigent ones.

Acculturation must occur to be effective.

Okay sign in Brazil; deer in Brazil, Pepsi in Indonesia, white flowers on Asian airlines

Language, translation, context, traditions, family roles, cultural dimensions (humor), concept of beauty
Bribery

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SECTION 1
Global Marketing Issues
Political Uncertainty
Social unrest and conflict can do great harm to any current or future initiatives and involve great risk. Political Risk Assessment, due diligence essential

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SECTION 1
Global Marketing Issues
Import Restrictions
Tariffs, quotas and other types of restrictions hinder global business. Designed to promote selfsufficiency, they can be a huge roadblock for multinational firms.

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SECTION 1
Global Marketing Issues
Exchange Controls and Ownership Restrictions
Some nations restrict the amount of earned and invested funds than can be withdrawn from it. Some require that majority ownership lie within the country.

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SECTION 1
Global Marketing Issues
Economic Conditions
Although global economies are more intertwined, political upheavals and social unrest can do significant harm to the economy.

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SECTION 1
Strategic Alternatives Orientations
Domestic Market Extension (Not in book)
Sell overseas what you sell at home Multi-Domestic Market Treat each market as unique and special All aspects of strategy may vary No economies, synergies

Global Marketer The world is my oyster

World or regional market defn; standardization, exploit cost efficiencies

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SECTION 1
Factors Fostering Global Strategy
EXTERNAL

Market Factors degree of homogeneous market needs, transferable brands, ability to globalize distribution channels Economic Factors worldwide economies of scale. learning curves, global resourcing Environmental Factors communications ability, favorable governmental policies Competitive Factors global moves by competitors, preemptive strikes

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SECTION 1
Factors Fostering Global Strategy
INTERNAL

Structure ease of installing a centralized global authority vs competing power centers Management processes capabilities and resources available to perform operational functions on a global scale

Culture ability to project a global identity, increased tolerance People availability of foreign nationals, frequent travel, commitments to multi-country careers

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Product Attributes
Cultural differences Economic differences Product and technical standards

Distribution Can Present Interesting Problems

Distribution Strategy
Three distribution factors:
Retail concentration/fragmentation Channel length Channel exclusivity

Communications Strategy
Cultural barriers Source/country of origin effects Noise levels Push versus Pull:
Push - personal selling Pull - mass media advertising

Advertising in New Delhi

Push-Pull Mix
Push
few print or electronic media available consumer goods long distribution channels

industrial or complex products

short distribution channels

sufficient print and electronic media available

Pull

SECTION 1
Marketing Research Issues
The same information you need to develop domestic strategy, youd like to have to develop global strategy
Population demographics, values, willingness/ability to buy information is needed for each country you do business in.

Problem is: sometimes that information is not readily available

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SECTION 1
Marketing Research Issues
1. Language barriersmeaning of questions and responses lacks precision in meaning
2. Data content some nations may omit data viewed as important by marketers

3. Timeliness census data infrequent and even abandoned by some nations

4. Availability in the U.S. data may need to be gathered within the nation

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Exporting
Exporting accounts for some 10% of global activity. Direct exporting - the company sells to a customer in another country. Indirect exporting the company sells to a buyer (importer or distribution) in the home country, who in turn exports the product. The Internet
Initially, Internet marketing focused on domestic sales, however, a surprisingly large

Contractual Agreement
Contractual agreements are longterm, nonequity association between a company and another in a foreign market. Licensing
A means of establishing a foothold in foreign markets without large capital outlays. A favorite strategy for small and mediumsized companies.

Contractual Agreement (continued)

Franchising
Franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management. Despite temporary setbacks, franchising is still expected to be the fastest-growing market-entry strategy. Two types of franchise agreements:

Strategic International Alliances

A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective SIAs are sought as a way to shore up weaknesses and increase competitive strengths. Firms enter SIAs for several reasons:
Opportunities for rapid expansion into new markets Access to new technology More efficient production and innovation Reduced marketing costs Strategic competitive moves

Strategic International Alliances (continued)

International Joint Ventures
A joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity. Four Characteristics define joint ventures:
JVs are established, separate, legal entities The acknowledged intent by the partners to share in the management of the JV There are partnerships between legally incorporated entities such as companies,

Strategic International Alliances (continued)

Consortia
Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:
They typically involve a large number of participants They frequently operate in a country or market in which none of the participants is currently active.

Consortia are developed to pool financial and managerial resources and to lessen

Building Strategic Alliances

Insert Exhibit 11.3

Direct Foreign Investment

Factors that have been found to influence the structure and performance of direct investments: Timing The growing complexity and contingencies of contracts Transaction cost structures Technology transfer Degree of product differentiation The previous experiences and cultural diversity of acquired firms Advertising and reputation barriers

Organizing for Global Competition

Because organizations need to reflect a wide range of company-specific characteristics, devising a standard organizational structure is difficult. Companies are usually structured around one of three alternatives:
Global product divisions responsible for product sales throughout the world Geographical divisions responsible for all products and functions within a given

Organizing for Global Competition (contd)

Locus of decision
Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy.

Centralized versus decentralized organizations

An infinite number of organizational patterns fro the headquarters activities of multinational firms exist, but most fit into one of three categories:
Centralized

Global advertising
Standardized: Significant economic advantages Scarce creative talent Many brand names are global Non-standardized: Cultural differences Advertising regulations Mixed: standardized + local

International Pricing Strategy

Three aspects: Price discrimination Strategic pricing Regulatory influences

Price Discrimination
Markets separate
Arbitrage: purchase product in country where cheaper and resell in country where more expensive Example: Brazilian cigarettes

Price elasticity of demand

Discuss The Impact Of Multinational Firms On The World Economy.

Multinational Corporation
A company that is heavily engaged in international trade, beyond exporting and importing; i.e, moving resources without regard to where headquarters are.

Discuss The Impact Of Multinational Firms On The World Economy.

Stage 1 Operate in a country

& sell to others

Produce in Japan & Sell Thru U.S. GM

Stage 2 subsidiaries to sell

Set up foreign

Produce in Japan & Sell in U.S. Toyota Dealerships

Produce in U.S. & Sell in U.S. Toyota Dealerships Engines in UK. Trannys in S.A. Assembled in U.S Sold World Wide

Stage 3

Open entire business in another country Company countries

Stage 4 functions different

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Learning 3-2 Objective

Discuss The Impact Of Multinational Firms On The World Economy.

Multinational Advantage
Overcome trade problems
U.S. Honda exported to Korea

Sidestep regulatory problems

Different rules for insiders: dont pay import taxes

Shift production from one plant to another:

Dow making chemical in Germany, instead of Louisiana

Tap new technology from around the world:

Otis Elevators

Save labor costs Leverage to gain labor concessions

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Learning 3-5 Objective

List The Basic Elements Involved In Making A Global Marketing Mix.

Dumping
The sale of an exported product at a price lower than that charged for the same or a like product in the exporters home market.
Steel

Countertrad e
A form of trade in which all or part of the payment for goods or services is in the form of other goods or services.
International Barter

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Learning 3-5 Objective

List The Basic Elements Involved In Making A Global Marketing Mix.

Distribution Challenges
Japanese distribution system is the most complicated in the world
Retail institutions may differ from companys domestic market

$20
6 Wholesalers No refrigeration in Third World Countries

Distribution channels & physical infrastructure may be inadequate

Globalization of Markets?

Levitts Converging commonality has not happened universally Consumer product tastes converged less than industrial product specifications Media, communications means have made consumers world-wide more aware of their mutual preferences have contributed to creation of world brands have caused market segments to emerge across some national markets--inter-market segments

Distribution Channels