International Marketing

1
International Marketing

• Tim Beal
• Lecture 2
• 9 March

2
Today

• Housekeeping
• Janet Keilar using library online databases
• Information and IM
• Globalisation and the global economy
• My thoughts, then Fletcher and Brown if time

3
Housekeeping

• Apologies for change in time
• Tutorial list during break
• Tutorials start next week
• Blackboard any problems?
• Course homepage - URL case sensitive
• http//www.vuw.ac.nz/caplabtb/m302w04/

4
Textbook Fletcher Brown

• Should be sufficient copies in Victoria Book
  Centre
• And 2nd hand
• Any problems?

5
Class Representative

• Candidates?
• See me in break

6
Janet Keilar
7
Information and IM

• Importance of information
• Limits of information
• Skills linking information and marketing
• What sort of information?
• Glance at sources

8
Importance of information for IM

• Recent issue of Hong Kong Monitor
• MNCs setting up regional HQs in HK
• why HK?
• clean government, low taxes, banking and
  financial facilities, rule of law BUT MAIN FACTOR
  WAS
• Information

9
Still in China

• Sun Zi (c 400BC)
• Know yourself, know your enemy, a hundred
  battles, a hundred victories
• The more we know and understand the better our
  marketing is likely to be
• True domestically, even more so internationally
• But its not easy..

10
Skills we seek to develop

• Ability to gather information
• Analyse information
• Formulate strategies
• Facts are for illustration not memorisation
• Because facts change

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Beyond facts and figures

• Dating
• Complexity
• Contestability
• Not sufficient

12
Dating

• World is constantly changing
• last weeks facts may be of no use
• may be misleading
• questions need to be constantly re-asked
• NZ butter in Russia, Thai tourists to NZ

13
Complexity

• World in hugely complex
• Relevant data and information boundless
• Couldnt cover everything

14
Contestability

• few facts are unchallenged
• facts are often contradictory
• Opinions more so
• Some say global economy will prosper, others say
  no
• Need to develop ability to cope with
  contradictory facts and opinions

15
Never sufficient

• Marketing goes beyond facts
• Human beings complex and often unpredictable
• Facts only take us so far
• Fijians with freezers, ice cream sold last year
• Doesnt tell what will happen if we introduce new
  brand to Fijian market

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What sort of information?

• What is it that we are seeking information on?
• Customers
• Competitors
• Business environment

17
Business environment

• laws and regulations
• technology
• Social and demographic trends
• political changes
• cultural and religious factors..

18
Criteria

• Too much information can be as bad as too little
• One reason for word limits and executive
  summaries
• Information must be
• Up-to-date
• Relevant
• authoritative
• actionable

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Globalisation and the global economy

• Why the world trades comparative advantage
• Limits of comparative advantage
• Terms of Trade
• Globalisation to global markets

20
Global economy and IM

• Marketing an economic activity
• Takes place within specific economic environment
• Controllable and uncontrollable variables
• environment uncontrollable variables
• larger the organisation more effect it has on
  environment
• Interaction with political, socials and
  technological factors

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Why the world trades

• 16-18th Mercantilists
• Controlled trade in order to make nation strong
• Focus on gold and silver (specie)
• Adam Smith and successors argued for free trade
• David Ricardo and comparative advantage

22
David Ricardo 1772-1823
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Comparative advantage

• Not the same as absolute advantage/ competitive
  advantage
• Advocates specialisation even if no competitive
  advantage
• Ricardos example - wool and wine
• 2 country 2 product model
• Labour only cost of production
• Cost of transport ignored

24
Labour required per unit
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Why trade?

• Both wool AND wine are cheaper in Portugal
• Yet trade is advantageous to both - why?
• Bale of wool worth 3 barrels of wine in Portugal
  rather than 2 in Britain
• British wool seller gets more wine exporting to
  Portugal than selling at home
• Despite British wool being more expensive

26
Portugals advantage

• British prices 2 wine 1 wool
• Portugal 3 wine 1 wool
• Portuguese wine seller gets
• 1/3 bale of wool in Portugal
• 1/2 bale of wool in Britain

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Both sides gain

• Specialise
• Portuguese specialise in wine
• British specialise in wool
• by trading they get more of the other commodity
  than they would have if they had produced it
  themselves
• How much more?

28
Prices change

• Trade alters prices
• British price of wine will drop
• gtgt somewhere between original British price
• 2 barrels of wine per bale of wool
• and original Portuguese price
• 3 barrels of wine per bale of wool
• International pricegtgtgt(say) 2.5

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Gains from trade

• Comparative advantage does not tell us what
  international price will be
• at 2.8 British gain more, at 2.2 Portuguese gain
  more
• Both gain, but gains of trade not necessary equal
• Other problems with theory

30
Limitations of comparative advantage

• Transport and distribution ignored
• Assumes that factors of production are mobile
• Often are not eg European agriculture

31
CAP

• European Unions Common Agricultural Policy
• NZ produces dairy products 1/4 price of EU
• no over-wintering costs
• NZ, because small market lacks economies of scale
• Manufacturing more expensive

32
Reasons for having range of production

• Countries may resist specialisation for many
  reasons
• Social eg rural depopulation, unemployment
• Security - food, military equipment, etc.
• Technological - need to participate in new
  technologies

33
Terms of Trade

• Relationship of export to import prices
• Raw materials versus (high tech) manufactures
• fluctuate
• Deteriorate over time
• 1962 1 BMW 50 litres of milk
• 2002 1 BMW 100 litres of milk
• Milk doesnt change, cars do

34
Marketing to rescue

• commodity prices fluctuate and tend to fall over
  time
• Log prices now very log lumber giant CarterHolt
  posted 676m loss last year
• IM aims to change commodities into branded
  products
• Important for NZ to seek ways of adding value to
  our primary commodities
• Zespri, Cervana are examples

35
Globalisation, then and now

• Aspects of globalisation not new
• Silk Road linking China and Europe
• 19th century onwards great growth in
  international trade
• post World War II liberalisation process
• Chinas opening up
• collapse of Soviet Union
• changes in transportation, information and
  communications technology

36
Combination

• Modern globalisation product of combination of
  economic, political and technological factors
• eg trade grows because
• transport cheaper
• communications easier and cheaper
• lowering of political barriers such as tariffs

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Result

• Move from separate local and national economies
  to borderless economy
• e-commerce most advanced example
• distance often irrelevant

38
Exchange rates

• Ricardos wine and wool expressed in labour
• trade uses money often US (also Euros)
• Eg tourism
• yen falls 10 against US
• baht falls 20 against US
• NZ falls 15 against US
• Consequences?
• In IM price becomes more of an uncontrollable
  variable
• What is current state of NZ?

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Globalisationgtgtglobal markets

• Great growth in world trade and income
• liberalisation of global economy
• more next week
• falling transport and communication costs
• mobility of capital, technology, products
• relative immobility of labour
• Creation of dynamic and volatile global markets

40
dynamic and volatile global markets

• Demand Societies becoming
• richer and less self-sufficient
• changing society and lifestyles
• Supply
• new products eg TVs, computers
• old products now available globally eg tourism,
  out of season fruit
• IM constantly combining continuity with change

41
Globalisation a perspective from Fletcher
Brown

• Learning Objectives
• After studying this chapter, you should be able
  to
• Evaluate the forces of globalisation and the
  underlying philosophy of globalism
• Assess the motivations for globalisation and the
  six-stage internationalisation process
• Identify the elements relevant to global
  planning
• Use a global strategy framework
• Examine basic global competitive strategy
  profiles and the pitfalls of global marketing
  and
• Explore the rise of Asian competitors and their
  steps in regional and global market development.

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Introduction

• As we commence the new millennium, the world is
  becoming increasingly globally linked in terms
  of
• Production
• Technology
• Capital
• People
• Information
• Business

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Globalisation

• What is globalisation
• Globalism trends
• Globalism as a philosophy

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What Is Globalisation

• Globalisation is the process by which firms
  operate on a global basis, organising their
  structure, capabilities, resources, and people in
  such a way as to address the word as one market.

45
Globalism Trends

• A myriad of forces are coming together which are
  triggering the globalisation of industries,
  companies and individuals. Trade blocks are
  forming which are consolidating market regions
  such as the EEC, North America, Japan and the
  Asia-Pacific area.

46
Globalism as a Philosophy

• Globalism is a philosophy based on an
  integrated, standardised world where people buy,
  sell and share common products, services and
  ideas.

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Globalism as a Philosophy

• Hamel and Prahalad contend that core
  competencies for a firm must pass three tests
• Customer value
• Competitor differentiation
• Extendibility

48
Motivations for Globalisation

• Yip classifies the drivers of globalisation
  under four headings
• Market drivers
• Cost drivers
• Government drivers
• Competitive drivers

49
Characteristics of the Global Firm

• Has a business concept rather than a geographic
  concept with a focus on how you do business
  rather than where you do business
• Is decentralised rather than centralised and is
  willing to do business in any location
• Adopts a holistic view of its operation
• Consciously eliminates the isolation that
  precludes the sharing of information
• Builds trust between members of the organisation

50
Characteristics of the Global Firm

• Goes out of its way to be a good corporate
  citizen
• Operates as a co-ordinator among members of its
  network
• Actively works to avoid duplication of its
  facilities
• Encourages horizontal communication
• Understands the world wide economies of the
  business.

51
Global or Multinational Questions

• Which approach provides a better picture for
  developing future competitive position?
• Which elements of the marketing mix or aspects of
  the value chain can be effectively standardised
  or modified?
• Which external or environmental variables require
  analysis?
• What is the impact of global telecommunications,
  media and computing?
• How does a multinational firm convert to a global
  company?
• Is true globalisation really ever possible?

52
Global Strategy Framework

• Step 1
• Develop a core strategy
• Step 2
• Internalisation of the strategy
• Step 3
• Integrates the strategy across countries

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Basic Competitive Strategy Profiles

• Global Leader Strategy
• Global Challenger Strategy One
• Global Challenger Strategy Two
• Global Follower Strategy
• Global Niche Strategy One
• Global Strategy Two
• Global Collaborator Strategy

54
Global Leader Strategy

• Innovator in technologies, products and markets
  with high global share and wide country market
  coverage.

55
Global Challenger Strategy One

• Frontal or encirclement attack on the leader in
  all markets with increasing country market
  coverage and high global share but less than the
  leader.

56
Global ChallengerStrategy Two

• Flanking or bypassing world leader with
  increasing country market coverage and high
  global share but less than the leader.

57
Global Follower Strategy

• Rapid imitation of leader or challenger with
  moderate country market coverage and emphasis on
  price sensitive markets.

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Global Niche Strategy One

• Rapid penetration of narrow market segments by
  selective targeting of country markets and a
  small share of their overall market.

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Global Niche Strategy Two

• Infiltration, slow penetration of selected
  narrow markets with focus on selected country
  markets and a low share of the overall market.

60
Global Collaborator Strategy

• Innovator in research and development of
  technologies, products and markets, sets
  standards and shares them with other firms.

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The Pitfalls of Global Marketing

• Once the global strategy is right, the pitfalls
  of global marketing lie in implementation. This
  may involve a combination of vertical
  integration, joint ventures and alliances
  depending upon regulatory, competitive and market
  conditions in target countries.

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Globalisation From a Macro Perspective

• Socio/cultural
• Economic/financial
• Political/legal
• Technology

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Summary

• Products, markets, companies and life styles are
  becoming more global as people travel and
  communication links provide real time reporting
  of events.
• A global strategy framework assists firms in
  assessing the external factors, internal
  capabilities and the benefits and costs of global
  strategies.

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Today

• Information for IM
• Globalisation and the global economy

65
Next week

• The political framework of globalisation
• Changing social fabric
• Visiting speaker from the Philippines