MARKETING IN GLOBAL MARKETS

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Chapter 6

• MARKETING IN GLOBAL MARKETS

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Learning Objectives

• Global marketing is very broad in scope
• Multiple reasons why firms choose to engage in
  global marketing
• Elements of the environment of global marketing
  are different than those for domestic markets
• Disadvantages and advantages of strategies for
  foreign market entry
• Marketing mix strategies cannot be simply copied
  from domestic marketing mix strategies

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International Marketing

• Simplest the firm makes one or more marketing
  decisions across national boundaries
• Complex the firm establishes manufacturing and
  marketing facilities overseas and coordinates
  strategies across markets
• Uncontrollable variables like economic
  structures, cultural values, legal, political
  infrastructure, differ significantly between
  markets along with controllable factors like
  cost, price, distribution structures, advertising

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Degrees of Commitment

• Export Marketing of goods and services across
  national/political boundaries
• Multinational Activities, interests or
  operations in more than one country control over
  marketing activities from outside the country in
  which the product will actually be sold each
  market is an independent profit center
• Global Entire organization focused on selection,
  exploration of global marketing opportunities
  marshalling of resources around the globe
  achieve synergy, global competitive advantage
• Toyota is a company that has gone through all the
  above stages

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Motivations

• Large Market size
• Stability through diversification
• Profit potential
• Unsolicited orders
• Proximity of markets
• Excess capacity
• Offer by foreign distributor
• Increasing growth rate
• Smoothing out business cycles

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Trepidations

• Too much red tape
• Trade barriers
• Transportation difficulties
• Lack of trained personnel
• Lack of incentives
• Lack of coordinated assistance
• Unfavorable conditions overseas
• Slow payment by buyers
• Lack of competitive products
• Payment defaults
• Language barriers

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Stages of Going International

• Ranked in order of least to greatest risk and
  investment
• Exporting
• Licensing
• Joint venture
• Direct Investment
• U.S. commercial centers
• Trade intermediaries
• Alliances

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Exporting

• More effective for small and medium firms
• More control over risk, cost, resource commitment
• Products in maturity stage of domestic lifecycle
• Products with seasonal demand

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Types of Export

• Indirect sales made through the firms domestic
  sales department no overseas sales force
• Semi-direct combination export manager,
  manufacturers export agent, Webb-Pomerene Export
  Association, piggyback exporting
• Direct export department conducts market
  research, establishes physical distribution,
  obtains necessary documentation, sells directly
  to a foreign firm

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Licensing

• Provide technology, right to use licensors
  manufacturing process, brand name, patents, sales
  knowledge, to a foreign firm in return for
  payment
• Limited profit potentials
• Binding commitment to a firm that may turn out to
  be incompetent
• Good option when there is scarce capital, import
  / government restriction
• Franchising e.g., McDonalds

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Joint Ventures

• Partnership between a domestic and foreign firm
  e.g., GM Toyota

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Direct Investment

• Invest in wholly-owned subsidiaries, full-scale
  production and marketing
• Allows the firm to compete more aggressively
• Necessitates detailed understanding of local
  business conditions, customs, labor, and other
  factors

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U.S. Commercial Centers

• Additional resources for promotion e.g.,
  familiarizing with local customs providing
  business facilities like exhibition space
  translation and clerical services facilitating
  contacts between sellers, buyers, government
  officials provide trade-related information

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Trade Intermediaries

• Entrepreneurial middlemen
• Buy U.S.-produces goods at 15 below a
  manufacturers best discount and then resell the
  product in overseas markets
• Good for small companies who do not have the time
  or resources to develop relationship with foreign
  companies

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Alliances

• To better compete in global markets or enter new
  markets a good strategy for a firm is to form
  alliances with other companies
• e.g., Miller and Budweisers alliance with global
  breweries like Molson and Corona to fight off a
  stiff competitor from Heineken
• Star Alliance and One World in the airline
  industry

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Marketing Plan

• Corporate level data on potential markets
  resources to be allocated
• Business level external environment, level of
  commitment, resources /capabilities, assessment
  of stakeholders
• Functional level integration of all elements
  that achieve objectives

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Integration Marketing Mix

• Product / Promotion
• Pricing
• Distribution Logistics

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Product / Promotion

• One product, one message, worldwide
• Product extension, promotion adaptation
• Product adaptation, promotion extension
• Dual adaptation
• Product invention
• Brand

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Pricing

• Analyze factors that influence international
  pricing e.g., cost structures, competitor pricing
  levels, exchange rates
• Confirm the impact of corporate strategies
• Evaluate strategic pricing options and select
  most appropriate approach
• Implement strategy through a variety of tactics
• Manage price and financing international
  transactions

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Customer sensitivity to prices

• The more distinctive the product
• The greater the perceived quality
• Less aware consumers are of substitutes
• Difficulty of making comparisons
• If price of a product represents a small
  proportion of customers total expenditure
• As the perceived benefit increases
• If the product is used in association with a
  product bought previously
• If costs are shared with other parties
• If the product cannot be stored

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Problems of price co-ordinations

• Dumping selling a product in a foreign country
  below domestic price or below actual cost helps
  build market share through competitive pricing
  helps get rid of burdening surplus
• Gray market / parallel importing products sold
  through unauthorized channels of distribution

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Distribution Logistics

• Distribution channels means of distribution of
  the goods from the manufacturer to end user
  headquarters, channels between countries, channel
  structure within countries
• Logistics physical distribution management
  concerned with planning, implementing, control of
  physical flow of materials from points of origin
  to use at a profit
• Uncontrollable factors e.g., wholesaling,
  retailing structures, quality of services,
  infrastructure, differs widely between nations

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Environment

• Social / cultural
• Language
• Colors
• Customs and taboos
• Values
• Aesthetics
• Time
• Business norms
• Religion
• Social structures

• Political / legal
• Economic
• Competitive
• Technology

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Examples (socio-cultural)

• Language e.g., in Canada labels must be in both
  English and French
• Colors e.g., in Japan black and white are colors
  of mourning and should not be used on a products
  package
• Customs and taboos e.g., McDonalds in India
  serves mutton hamburgers as beef and pork are
  religiously tabooed meat
• Values e.g., Americans are materialistic,
  Indians philosophy is non-materialism

• Aesthetics e.g., Americans believe suntans are
  attractive, Japanese do not
• Time e.g., Americans value punctuality and
  deadlines Latin Americans consider deadlines
  rude and pushy
• Business norms e.g., Americans are more verbose
  than Japanese who prefer periods of silence in
  negotiations
• Religious beliefs e.g., in conservative Islamic
  countries women have less or no say in household
  buying decisions

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Political / Legal

• Government intervention
• Contracts for supply and delivery
• Registration and enforcement of trademarks, brand
  names, labeling
• Patents
• Marketing communications
• Pricing
• Product safety, acceptability, environmental
  issues

• Political Stability
• Monetary circumstances (exchange rate)
• Trading Blocs Agreements e.g., NAFTA
• Customs Unions
• Tariffs
• Expropriation

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Technology

• Technological problems
• Training foreign workers to operate unfamiliar
  equipment
• Poor transportation system increase costs
• Maintenance standards vary
• Poor communication facilities hinders use of mass
  media ads
• Lack of data processing facilities makes
  planning, implementing and controlling marketing
  strategy difficult

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Competition

• Gain differential advantage by investing
  resources in the target market
• Local firms may successfully adapt imitation
  strategies
• Unsuccessful local firms are often bought out by
  multinationals

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Marketing Objectives

• Financial performance e.g., return on investment
• Market penetration e.g., volume and value of
  sales
• Customer growth
• Distribution e.g., number of outlets
• Brand awareness and value
• New product introductions, diffusion
• Company image including quality and added value