Unit 1

Global Marketing

Introduction
What is Global Marketing? How is it different from regular marketing?

2005 Prentice Hall

Introduction
Marketing
Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals

Global Marketing
Focuses resources on global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organizations home country

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Reasons for Global Marketing

Growth
Access to new markets Access to resources

Survival
Against competitors with lower costs (due to increased access to resources)

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Competitive Advantage
Success over competition in industry at value creation Achieved by integrating and leveraging operations on a worldwide scale

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Globalization
Globalization is the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before - in a way that is enabling individuals, corporations, and nationstates to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, and cheaper than ever before.
Thomas Friedman

2005 Prentice Hall

Competitive Advantage, Globalization and Global Industries

Focus
Concentration and attention on core business and competence Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch..We have no soft drinks because I have said we will either buy CocaCola or we leave it alone. This is focus.
Helmut Maucher

2005 Prentice Hall

Global Marketing: What it is and What it isnt

Global marketing does not mean doing business in all of the 200-plus country markets Global marketing does mean widening business horizons to encompass the world in scanning for opportunity and threat

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Standardization versus Adaptation

Globalization (Standardization)
Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing

Global localization (Adaptation)

Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation Think globally, act locally

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The Importance of Global Marketing

For US-based companies, 75% of sales potential is outside the US.
About 90% of Coca-Colas operating income is generated outside the US.

For Japanese companies, 85% of potential is outside Japan. For German and EU companies, 94% of potential is outside Germany.

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Forces Affecting Global Integration and Global Marketing

Driving Forces
Regional economic agreements Market needs and wants Technology Transportation and communication improvements Product development costs Quality World economic trends Leverage
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Restraining Forces
Management myopia Organizational culture National controls

Forces Affecting Global Integration and Global Marketing

Global Integration and Global Marketing

2005 Prentice Hall

Country Risk Analysis

Country risk represents the potentially adverse impact of a countrys environment on the MNCs cash flows. It may represnt the country risk exposure to loss in cross boarder lending caused by the event in a particular country. These events must be atleast to some extent under the control of the government of that country and not in private hands

Country Risk Analysis

Country risk can be used:
to monitor countries where the MNC is presently doing business; as a screening device to avoid conducting business in countries with excessive risk; and to improve the analysis used in making longterm investment or financing decisions.

Political Risk Factors

Attitude of Consumers in the Host Country
Some consumers may be very loyal to homemade products.

Attitude of Host Government

The host government may impose special requirements or taxes, restrict fund transfers, subsidize local firms, or fail to enforce copyright laws.

Political Risk Factors

Blockage of Fund Transfers
Funds that are blocked may not be optimally used.

Currency Inconvertibility
The MNC parent may need to exchange earnings for goods.

Political Risk Factors

War
Internal and external battles, or even the threat of war, can have devastating effects.

Bureaucracy
Bureaucracy can complicate businesses.

Corruption
Corruption can increase the cost of conducting business or reduce revenue.

Financial Risk Factors

Current and Potential State of the Countrys Economy
A recession can severely reduce demand. Financial distress can also cause the government to restrict MNC operations.

Indicators of Economic Growth

A countrys economic growth is dependent on several financial factors - interest rates, exchange rates, inflation, etc.

Types of Country Risk Assessment

Note that the opinions of different risk assessors often differ due to subjectivities in:
identifying the relevant political and financial factors, determining the relative importance of each factor, and predicting the values of factors that cannot be measured objectively.

Techniques of Assessing Country Risk

A checklist approach involves rating and weighting all the identified factors, and then consolidating the rates and weights to produce an overall assessment. The Delphi technique involves collecting various independent opinions and then averaging and measuring the dispersion of those opinions.

Techniques of Assessing Country Risk

Quantitative analysis techniques like regression analysis can be applied to historical data to assess the sensitivity of a business to various risk factors. Inspection visits involve traveling to a country and meeting with government officials, firm executives, and/or consumers to clarify uncertainties.

Market Entry

Which strategy should be used?

It depends on: Vision Attitude toward risk How much investment capital is available How much control is desired

Licensing
A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation
Patent Trade secret Brand name Product formulations

Advantages to Licensing
Provides additional profitability with little initial investment Provides method of circumventing tariffs, quotas, and other export barriers Attractive ROI Low costs to implement

Disadvantages to Licensing
Limited participation Returns may be lost Lack of control Licensee may become competitor Licensee may exploit company resources

Special Licensing Arrangements

Contract manufacturing
Company provides technical specifications to a subcontractor or local manufacturer Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities

Franchising
Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies

Franchising Questions
Will local consumers buy your product? How tough is the local competition? Does the government respect trademark and franchiser rights? Can your profits be easily repatriated? Can you buy all the supplies you need locally? Is commercial space available and are rents affordable? Are your local partners financially sound and do they understand the basics of franchising?

Investment
Partial or full ownership of operations outside of home country Foreign Direct Investment Forms
Joint ventures Minority or majority equity stakes Outright acquisition

Joint Ventures
Entry strategy for a single target country in which the partners share ownership of a newly-created business entity

Joint Ventures
Advantages
Allows for sharing of risk (both financial and political) Provides opportunity to learn new environment Provides opportunity to achieve synergy by combining strengths of partners May be the only way to enter market given barriers to entry

Disadvantages
Requires more investment than a licensing agreement Must share rewards as well as risks Requires strong coordination Potential for conflict among partners Partner may become a competitor

Global Strategic Partnerships

Possible terms:
Collaborative agreements Strategic alliances Strategic international alliances Global strategic partnerships

The Nature of Global Strategic Partnerships

The Nature of Global Strategic Partnerships

Participants remain independent following formation of the alliance Participants share benefits of alliance as well as control over performance of assigned tasks Participants make ongoing contributions in technology, products, and other key strategic areas

Alliances with Asian Competitors

Four common problem areas
Each partner had a different dream Each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance Differences in management philosophy, expectations and approaches No corporate memory

Cooperative Strategies in South Korea: Chaebol

Composed of dozens of companies, centered around a bank or holding company, and dominated by a founding family
Samsung LG Hyundai Daewoo

21st Century Cooperative Strategies: Targeting the Digital Future

Alliances between companies in several industries that are undergoing transformation and convergence
Computers Communications Consumer electronics Entertainment

Introduction
The Internet has revolutionized the international business arena and global marketing in particular. Roughly speaking, the Internet is a network of computers interconnected throughout the world operating on a standard protocol that allows data to be transmitted. Until the early 1990s, the Internet was primarily the preserve of the military and academic researchers.

Introduction
The Web clearly provides a unique distribution and communication channel to marketers across the globe. The development of new software and other technologies during the early 1990s turned the Internet into a commercial medium that has transformed businesses worldwide. This chapter looks at the impact of the World Wide Web (WWW) on global marketing activities.

1. The Internet and the Global Marketplace

Internet usage worldwide is growing rapidly (see Exhibit 19-1). The internet population in China ranks second now. By 2010, analysts estimate it will equal the entire US population. The worldwide internet population surpassed 1 billion in 2005- up from only 45 million 10 years ago and 420 million in 2000.

1. The Internet and the Global Marketplace

1. The Internet and the Global Marketplace

Asia-Pacific
Asia-Pacific region is quickly catching up. Most of the action in the region is business-to-business. Internet penetration in Japan and South Korea is higher now than in the US. With high broadband penetration, online shopping is more attractive in South Korea than in the rest of the region. In China, web surfers apparently have a positive attitude toward online shopping (see Global Perspective 19-1 for further information on Chinas internet sector).

1. The Internet and the Global Marketplace

Asia-Pacific (cont.)
Several obstacles hinder the spread of ecommerce in Asia which include:
prefer to do business face-to-face instead of via anonymous channels, relationships and networking, problems of secrecy and family-owned businesses, and knowledge barriers.

2. Structural Barriers to Global E-Commerce

Language Barriers: Much of the content on the Web is in the English language. A recent study found that business users on the Web are three times more likely to purchase when the Web site speaks their language. The demand for Web site localization services has boosted a new Web-oriented translation industry.

2. Structural Barriers to Global E-Commerce

Cultural Barriers: Cultural norms and traditions can hinder the spread of the Internet. In Confucian-based cultures like most East Asian nations, business is conducted on a personal basis. In many countries, credit card penetration is low. To become familiar with local markets as well as local cultures is not possible through the Internet.

2. Structural Barriers to Global E-Commerce

Infrastructure: In many emerging market countries, ereadiness rank very low. E-readiness measures the extent of internet connectivity and infrastructure in the country (see Exhibit 19-2 and 19-2B). Knowledge Barriers: Setting up an e-business requires certain knowledge and skills. In emerging markets, scarcity of proper talent and skills will restrain the development of a digital economy.

6. Internet Ramifications for Global Marketing Strategies

Globally Integrated Versus Locally Responsive Web Marketing Strategies (see Exhibit 19-4): At the core of any global Web marketing strategy is the basic conflict between local responsiveness and global integration. One-to-One Marketing Product Policy Global branding Internet-based new product development (see Global Perspective 19-4)

6. Internet Ramifications for Global Marketing Strategies

Marketing of Services Features of Services: Intangibility Simultaneity Heterogeneity Perishability Global Pricing Cost transparency

6. Internet Ramifications for Global Marketing Strategies

Distribution Role of Existing Channels Replacement effect/complementary effect (see Exhibit 19-5) E-Tailing Landscape Click-and-retailing model E-Tailing model depends on three factors: Consumer behavior, cost structure, and government policies

6. Internet Ramifications for Global Marketing Strategies

Global Communication and the Web: By 2009, JupiterResearch forecasts online advertising spending is expected to grow to $16.1 billion in the US and $3.9 billion in Europe.

Overall, in almost all countries internet advertising still is a tiny slice of the global advertising pie, even in the developed world (see Exhibit 19-6)

6. Internet Ramifications for Global Marketing Strategies

Advantages of internet advertising: Global reach Lower cost Allows precision Interactivity Ability to customize Ability to instantly monitor

6. Internet Ramifications for Global Marketing Strategies

Online advertising: Wide spectrum of techniques
Banner ads Search engine advertising-keyword search or website context Microsites Audience measurement is still a major issuemetrics to monitor the effectiveness of an online campaign- number of views? click-through rates? cost per acquisition? cost per sale?

6. Internet Ramifications for Global Marketing Strategies

The ultimate success of an online campaign depends on the following four factors: The nature of the product The targeting Choice of site Execution of the ad Direct E-Marketing: More and more global companies recognize the promise of the Web as a direct marketing tool to build ties with customers worldwide.