Chapter Twelve Global Products

1
Chapter Twelve Global Products
3-1

• MKT568
• Global Marketing Management
• Dr. Fred Miller

2
Sample Essay Question

• HerbalGlow is Korean producer of natural
  skin care products. The firm wishes to build
  upon its success in Asian markets by expanding to
  Europe, North and South America.
• Identify and describe the three general
  international marketing strategies. (6 points)
• For each element of the marketing mix (product,
  price, promotion and distribution), identify and
  describe one benefit of a global strategy and one
  constraint to implementing such a strategy. (12
  points)
• Which of the three general marketing strategies
  do you recommend to HerbalGlow? Explain why. (2
  points)

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Marketing Strategy Options

• Multidomestic
• strong cultural influences, localize and adapt
• Global
• similar buyer preferences, global
  customers/competitors
• Globalized localization
• integrate sourcing, production and marketing
• seek balanced growth
• coordination of marketing across countries
• globalize as much as possible, localize when
  necessary

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Multidomestic versus Global MarketsKey
Differences
Exhibit 11.1
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A Multidomestic Industry
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The Value of Global Brands
Take the Ten Second Brand Test
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The Value of Global Brands

• What brands do you remember?

• What brands do you recognize?

• American Express
• Wall Street Journal
• McDonalds
• Nike
• Coke
• Perrier
• Mobil
• Phillips
• Haagen Das
• 3M

• Daily Telegraph
• Honda
• Motorola
• Johnson and Johnson
• Hertz
• Levis
• Mars
• Seven Up
• Campbells

• Sony
• Rover
• Kelloggs
• British Airways
• Apple
• IBM
• Michelin
• Dell
• Club Med

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Globalized Localization Coca Cola
9
Globalized Localization McDonalds
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Standardization and its Problems

• Standardization
• advantages cost, customer preference, quality,
  global customer/segments
• disadvantages off-target, lack of uniqueness,
  protectionism, local competitors
• Globalization limits and pitfalls
• limitsindustry, resource, marketing mixes
• pitfalls research, over-standardization, poor
  follow-up, narrow vision, rigid implementation
• Localization vs Adaptation

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The Tradeoff Between Standardization and
Adaptation
12-2
Incremental manufacturing cost
Combined costs
Cost of lost sales
Fully standardized
Fully adapted
Exhibit 12.1
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Strong Local Brands
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Global Brand Management

• Developing new global products
• idea generation
• preliminary screening
• concept research focus groups, concept
  testing, target research
• sales forecast
• test marketing
• Globalizing successful brands
• diffusion factors advantage, compatability,
  perceived complexity, trialability,
  observability
• globalization potential-sensible, favorable,
  available, complement, regional
• changeover tactics - fade, axing, forewarning

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Low Globalization Potential
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The Zoo of Product Branding

• RCA
• Jordache
• Merrill Lynch
• Mercury
• Kangaroo Shoes
• Schlitz
• Camel
• Trix
• Exxon
• Greyhound
• MGM
• John Deere
• Kiwi
• Mustang
• Playboy
• Kellogs FF
• Hartford
• VW Rabbit
• Kellogs CF

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Global Brand Management

• Brand Management, Top 100 Global Brands
• Brand equity, global brands, brand portfolio/mix
• Counterfeit products
• Counterfeit vs gray trade
• Actions against counterfeit goods

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Global Value of the Nescafe Brand
US 5 billion 700 mil 25 billion 90 billion
Global sales of Nescafe
Nescafes global promotion
Value of Nescafe brand
Value of Nestles brands 113 billion Market
capitalization 23 billion Book value of
assets
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Localizing the Nescafe Brand
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Evolution of a European Brand
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A Tale of Two Beers
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Anheuser Busch in Europe
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Czech Budvar in USA
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Significance of Private Brands
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Flanker Brand Example
The Current Sarotti Brand
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Cola Wars Video

• In which countries, with what strategy and with
  what success has Mecca Cola chosen to challenge
  Coca Cola?
• In which countries, with what strategy and with
  what success has Qibla Cola chosen to challenge
  Coca Cola?
• How has Coca Cola responded to these challenges?

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Chapter Twelve Global Products
3-1

• MKT568
• Global Marketing Management
• Dr. Fred Miller

27
Target Market Definition, Size and Purchasing
Power

• Define your target market by age and income
  classifications in the SPSS dataset.
• Use this definition to analyze statistical data
  on this market (review previous slides)
• To calculate size of target market in number of
  people,
• Determine the number of people in your chosen
  age range (Data tables for Population Pyramids)
• Multiply the result by the percentage of people
  in your chosen income range (SPSS Crosstabs)
• To calculate purchasing power, multiply the
  product of the previous step by your countrys
  per capita income (from Part 1 of your report,
  World Bank)

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Determine target population by age
Visit the Population Pyramid site of the US
Census Burearu and select the current
year. Determine the number of people in the
target market you have defined, in this case,
5,840,087
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Screen for Income
Determine percent of population in the defined
income range, in this case 42 Multiply target
population by this percentage to calculate number
of people in target market, in this
case, 5,840,087 .42 2,452,837
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Calculate Purchasing Power
Multiply TM population by Per Capita GNI from
World Bank or CIA to calculate purchasing power.
In this case, 2,452,837 26,900
65,981,315,300
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Pro Forma Income Statement

• 14,832,000, using the formulaeVolume (CY1)
  CY Industry Sales (1Growth Rate) 1,030,000,000
  (1,000,000,000) 1.03 Sales Volume
  Schmidts SoM Price14,832,000 1,030,000,000
  .012 1.20
• 23,260,284, using the formulaeVolume (CY2)
  Volume(CY1) (1Growth Rate)
• 1,050,600,000 1,030,000,000
  1.02 Price(CY2) Price(CY1) Price
  Increase(CY2)1.23 1.20 0.03Sales
  Volume Schmidts SoM Price23,260,284
  1,050,600,000 .018 1.23

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Pro Forma Income Statement

• 9,888,000, using the formulaProduction Costs
  Volume Schmidts SoM Cost per
  Liter9,888,000 1,030,000,000 .012 .80
• 15,128,640, using the formulaProduction Costs
  Volume Schmidts SoM Cost per
  Liter15,128,640 1,050,600,000 .018 .80
• 4,944,000, using the formulaGross Margin
  Sales Production Costs 4,944,000
  14,832,000 - 9,888,000

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Pro Forma Income Statement

• 8,131,644, using the formulaGross Margin
  Sales Production Costs 8,131,644
  23,260,284 - 15,128,640
• 741,600, using the formula Sales Costs Sales
  Agents Commission 741,600 14,832,000
  .05
• 1,163,014, using the formula Sales Costs
  Sales Agents Commission 1,163,014
  23,260,284 .05

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Pro Forma Income Statement

• 889,920, using the formula Promotion Costs
  Sales Promotion as of Sales (CY1) 889,920
  14,832,000 .06
• 1,163,014, using the formula Promotion Costs
  Sales Promotion as of Sales (CY2)
  1,163,014 23,260,284 .05

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Pro Forma Income Statement

• 3,312,480, using the formula Contribution
  Margin Gross Margin - Sales Costs Promotion
  Costs 3,312,480 4,944,000 - 741,600 -
  889,920
• 5,805,616, using the formula Contribution
  Margin Gross Margin - Sales Costs Promotion
  Costs 5,805,616 8,131,644 - 1,163,014 -
  1,163,014

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Pro Forma Income Statement

• Identify three estimates to be revised.
  Describe revision and explain reasoning.
• Increase CY1 market growth rate to 3.2 because
  Brahmas new entry will stimulate increased sales
  
• Decrease share of market estimate in CY1 to .9
  because of greater competition from the Corona
  brand will lower SoM
• Increase promotion costs as of sales in CY 1
  to 8 to provide more funds for advertising to
  match Brahmas promotion for introduction of
  Corona brand