© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

Marketing II Marketing II The Chang School-Ryerson UniversityThe Chang School-Ryerson University

Continuing EducationContinuing Education

Email:Email: agervais@ryerson.caagervais@ryerson.ca preferredpreferred

Web: Web: www.ryerson.ca/~agervaiswww.ryerson.ca/~agervais Office: Bus 308Office: Bus 308

Phone: 416-979-5000 Ext 4215Phone: 416-979-5000 Ext 4215

CMKT 200 Fall 2005Instructor: Armand Gervais

Lecture AgendaLecture Agenda

Don’t Forget Name TagsDon’t Forget Name Tags Global MarketingGlobal Marketing BreakBreak SimulationSimulation To Do’s for next weeks classTo Do’s for next weeks class Time to work in GroupsTime to work in Groups

How Global Brands How Global Brands CompeteCompete

Theodore Levitt declared that a global market Theodore Levitt declared that a global market for uniform products and services had emergedfor uniform products and services had emerged

He argued that corporations should exploit the He argued that corporations should exploit the economies of simplicity and grow by selling economies of simplicity and grow by selling standardized products all over the world standardized products all over the world

Global branding was about saving costs and Global branding was about saving costs and ensuring consistent customer communicationensuring consistent customer communication

However consumer in most countries had However consumer in most countries had trouble relating to generic products and trouble relating to generic products and communications that resulted from the least communications that resulted from the least common denominator thinkingcommon denominator thinking

Global BrandsGlobal Brands 62 of the world’s 100 most valuable brands 62 of the world’s 100 most valuable brands

were Americanwere American Most people choose on global brand over Most people choose on global brand over

another because of differences in the another because of differences in the brands global qualitiesbrands global qualities

Rather than ignore the global Rather than ignore the global characteristics of their brands, firms must characteristics of their brands, firms must learn to manage those characteristicslearn to manage those characteristics

This is critical because most future growth This is critical because most future growth will come from foreign marketswill come from foreign markets

By 2030 the planets population will rise to 9 By 2030 the planets population will rise to 9 Billion with 90% of people living in Billion with 90% of people living in developing countries developing countries

Dimensions of Global Dimensions of Global BrandsBrands

The Global Brands Study revealed The Global Brands Study revealed that consumers all over the world that consumers all over the world associate global brands with three associate global brands with three characteristics and evaluate them on characteristics and evaluate them on those dimensions while making those dimensions while making purchase decisions. The study also purchase decisions. The study also found that one factor American found that one factor American Values didn’t matter much to Values didn’t matter much to consumers consumers

Quality SignalQuality Signal ““The more people who buy a brand the better The more people who buy a brand the better

quality it is” quality it is” Consumers also believe that transnational Consumers also believe that transnational

companies compete by trying to develop new companies compete by trying to develop new products and break through technologies products and break through technologies faster than rivals faster than rivals

Until recently, peoples perceptions about Until recently, peoples perceptions about quality for value and technological prowess quality for value and technological prowess were tied to the nations from which products were tied to the nations from which products originatedoriginated

Increasingly a company's global stature Increasingly a company's global stature indicates whether it excels on quality indicates whether it excels on quality

Global MythGlobal Myth

Consumers llok to global brand as Consumers llok to global brand as symbols of cultural ideals. symbols of cultural ideals.

They use brands to create an They use brands to create an imagined global identity that they imagined global identity that they share with like-minded people share with like-minded people

““Local brands show what we are; Local brands show what we are; global brands show what we want to global brands show what we want to be be

Global ResponsibilityGlobal Responsibility Consumers expect firms to address social Consumers expect firms to address social

problems linked to what they sell and how they problems linked to what they sell and how they conduct business conduct business

People have become convinced that global brands People have become convinced that global brands have a special duty to tackle social issueshave a special duty to tackle social issues

Consumers don’t demand the same of local brandsConsumers don’t demand the same of local brands When we measured the extent to which consumers When we measured the extent to which consumers

purchase decision were influenced by products’ purchase decision were influenced by products’ American roots we discovered the impact American roots we discovered the impact negligible negligible

Why Consumers Pick Global Why Consumers Pick Global BrandBrand

44%

12%

8%

QualityGlobal MythSocial Responsibility

4 Global Segments4 Global Segments Global Citizens. Global Citizens. 50 % of respondents, on average, rely on the global 50 % of respondents, on average, rely on the global

success of a company as a sig nal of quality and innovation. At the same success of a company as a sig nal of quality and innovation. At the same time, they are concerned whether companies behave responsibly on is time, they are concerned whether companies behave responsibly on is sues like consumer health, the environment, and worker rights. sues like consumer health, the environment, and worker rights. According to our study, the United States and the UK have relatively According to our study, the United States and the UK have relatively few global citizens, and Brazil, China, and Indonesia have relatively few global citizens, and Brazil, China, and Indonesia have relatively high numbers of them.high numbers of them.

Global DreamersGlobal Dreamers. 23%, consisted of consumers who are less . 23%, consisted of consumers who are less discerning about, but more ardent in their admiration of, transnational discerning about, but more ardent in their admiration of, transnational companies. They see global brands as quality products and readily buy companies. They see global brands as quality products and readily buy into the myths they author. They aren't nearly as concerned with those into the myths they author. They aren't nearly as concerned with those companies' social responsibilities as are the global citizens. companies' social responsibilities as are the global citizens.

Antiglobals. Antiglobals. 13% of consumers are skepti cal that transnational 13% of consumers are skepti cal that transnational companies deliver higher quality goods. They dislike brands that preach companies deliver higher quality goods. They dislike brands that preach American values and don't trust global companies to behave American values and don't trust global companies to behave responsibly. Their brand preferences indicate that they try to avoid responsibly. Their brand preferences indicate that they try to avoid doing business with transnational firms. The antiglobals' numbers are doing business with transnational firms. The antiglobals' numbers are relatively high in the UK and China and rel atively low in Egypt and relatively high in the UK and China and rel atively low in Egypt and South Africa.South Africa.

Global Agnostics.Global Agnostics. Such consumers don't base purchase decisions on a Such consumers don't base purchase decisions on a brand's global attributes. Instead, they evaluate a global product by the brand's global attributes. Instead, they evaluate a global product by the same criteria they use to Judge local brands and don't regard its global same criteria they use to Judge local brands and don't regard its global nature as meriting special consideration. nature as meriting special consideration.

Global Branding Global Branding Branding must cater to people's percep tions Branding must cater to people's percep tions

of transnationals as behemoths with of transnationals as behemoths with extraordinary capacities and power.extraordinary capacities and power.

For example, in the late 19905, For example, in the late 19905, SamsungSamsung launched a global advertising campaign that launched a global advertising campaign that showed the South Ko rean giant routinely showed the South Ko rean giant routinely pulling off great feats of engineer ing, design, pulling off great feats of engineer ing, design, and aesthetics. Samsung convinced and aesthetics. Samsung convinced consumers that it competed with technology consumers that it competed with technology leaders like Nokia and Sony across the world. leaders like Nokia and Sony across the world. As a result, Samsung was able to change the As a result, Samsung was able to change the perception that it was a down-market brand, perception that it was a down-market brand, and it became known as a global provider of and it became known as a global provider of leading-edge technologies.leading-edge technologies.

Samsung-As good as it Samsung-As good as it GetsGets The economist Jan. 13 2005The economist Jan. 13 2005

Poised to overtake Motorola as the world’s second largest maker of Poised to overtake Motorola as the world’s second largest maker of mobile phonesmobile phones

1997 during the Asian economic crisis Samsung was deep in debt and 1997 during the Asian economic crisis Samsung was deep in debt and heading towards bankrupcy heading towards bankrupcy

The company’s strategy is based on providing leading edge stylish The company’s strategy is based on providing leading edge stylish products that can be sold for a premiumproducts that can be sold for a premium

2005 Annual profit of 9.5 Billion2005 Annual profit of 9.5 Billion R&D 2.9 billion in 2003 8% of revenueR&D 2.9 billion in 2003 8% of revenue More than 20,000 of Samsung's 88,000 employees work as More than 20,000 of Samsung's 88,000 employees work as

researchers in 15 R&D centers around the worldresearchers in 15 R&D centers around the world More and more money will be spent on brand buildingMore and more money will be spent on brand building 10 years ago Samsung was seen as a producer of cheap TV10 years ago Samsung was seen as a producer of cheap TV Used product placement in movies like the Matrix to build brandUsed product placement in movies like the Matrix to build brand Marketing budget 3 BillionMarketing budget 3 Billion According to Interbrand the value of Samsung’s brand is now close to According to Interbrand the value of Samsung’s brand is now close to

Sony’s Sony’s Two things allowed Samsung to transform itself Two things allowed Samsung to transform itself 1.1. Transition from analogue to digitalTransition from analogue to digital2.2. Convergence Convergence

Samsung RevenuesSamsung Revenues

Marvelous MobilesMarvelous Mobiles

South Korea where 75% have South Korea where 75% have mobiles 20% buy a new handset mobiles 20% buy a new handset every 7 months (Porters factor every 7 months (Porters factor conditions)conditions)

Samsung was the first to popularize Samsung was the first to popularize the clamshell design the clamshell design

First to produce phones that work First to produce phones that work with both CDMA and GSM systemswith both CDMA and GSM systems

Samsung sharesSamsung shares

Screen TestsScreen Tests LCD prices are fallingLCD prices are falling A 32 inch LCDTV sold for $3,800 U.S. a year ago A 32 inch LCDTV sold for $3,800 U.S. a year ago

now sells for $2,400now sells for $2,400 Phillips and LG formed a joint venturePhillips and LG formed a joint venture Samsung and Sony will join forces to build a Samsung and Sony will join forces to build a

seventh generation LCD factoryseventh generation LCD factory In the mid 1990’s more than a third of Samsung’s In the mid 1990’s more than a third of Samsung’s

business came from supplying other companies like business came from supplying other companies like Sony, Dell and NokiaSony, Dell and Nokia

Samsung on the other hand make most of its own Samsung on the other hand make most of its own components or buys them from with the group of components or buys them from with the group of companies to which it belongscompanies to which it belongs

Samsung is part of Chaebol, one of the giant faminly Samsung is part of Chaebol, one of the giant faminly controlled conglomerates that, with government controlled conglomerates that, with government backing built up South Korea’s economy after the backing built up South Korea’s economy after the war war

Coca ColaCoca Cola

““Gone Flat”, Business Week, 12/24/2004 issue Gone Flat”, Business Week, 12/24/2004 issue 3913 pg.76 3913 pg.76

CEO Neville Isdell came out of retirementCEO Neville Isdell came out of retirement 33rdrd quarter earnings for 2004 fell 24% quarter earnings for 2004 fell 24% Various CEO’s have made little progress to Various CEO’s have made little progress to

meet the rising challenges of carbonated meet the rising challenges of carbonated drinksdrinks

The culture of Coke is one that focused on The culture of Coke is one that focused on doing what Coke had always done but better.doing what Coke had always done but better.

Meanwhile Pepsi had a much different view of Meanwhile Pepsi had a much different view of the marketplace Hint its not just about colathe marketplace Hint its not just about cola

Frozen in TimeFrozen in Time

Isdell believes that salvation lies in Isdell believes that salvation lies in turning up operations and turning up operations and capitalizing on existing brandscapitalizing on existing brands

Same playbook as the previous CEO Same playbook as the previous CEO Roberto Goizueta!Roberto Goizueta!

Under Goizueta 16 year reign the Under Goizueta 16 year reign the stock soared 3500% Annual earnings stock soared 3500% Annual earnings growth of 18% 1990-97growth of 18% 1990-97

Bottler FrictionBottler Friction Coke imposes a 7.6% price hike on bottlers in the late 90’sCoke imposes a 7.6% price hike on bottlers in the late 90’s Some bottlers are beginning to push back with their own Some bottlers are beginning to push back with their own

price hikesprice hikes Others refused to carry some of Coke’s new Others refused to carry some of Coke’s new

noncarbonated offerings like mad river teas and planet noncarbonated offerings like mad river teas and planet java coffeejava coffee

Company unwavering focus on the hallowed four Coke, Company unwavering focus on the hallowed four Coke, Diet, Sprite and FantaDiet, Sprite and Fanta

Coke’s sodas constitute 82% of its worldwide beverage Coke’s sodas constitute 82% of its worldwide beverage sales sales

Consumers are increasingly reaching for anything but sodaConsumers are increasingly reaching for anything but soda Sport and energy drinks, coffee and teas, etcSport and energy drinks, coffee and teas, etc Per capita cola consumption in the U.S. has declined every Per capita cola consumption in the U.S. has declined every

year since 1998year since 1998 Coke PowerAde has 17% vs. Pepsi Gatorade 81% Coke PowerAde has 17% vs. Pepsi Gatorade 81% Margins on new category is lower than ColasMargins on new category is lower than Colas

MarketingMarketing and Brandand Brand Resources shifted away from advertising Resources shifted away from advertising

and into blanketing the world with and into blanketing the world with vending machines, coolers and trucksvending machines, coolers and trucks

The goal was simple ubiquity while the The goal was simple ubiquity while the niceties of brand building were ignored.niceties of brand building were ignored.

There was no vision no marketingThere was no vision no marketing Ivestor believed the Coke brand was Ivestor believed the Coke brand was

powerful enough to sell itself powerful enough to sell itself Starbucks can charge $2 for coffee Coke Starbucks can charge $2 for coffee Coke

can barely sell a 12-pack for $2 !can barely sell a 12-pack for $2 !

Coke vs. PepsiCoke vs. Pepsi

Break down of Coke’s Break down of Coke’s issuesissues

MORIBUND MARKETINGMORIBUND MARKETING Once world-class, critics say that today the soda giant has become too Once world-class, critics say that today the soda giant has become too

conservative, with Norman Rockwell-like ads that don't resonate with the conservative, with Norman Rockwell-like ads that don't resonate with the teenagers and young adults that make up its most important audience.teenagers and young adults that make up its most important audience.

FRICTION WITH FRICTION WITH BOTTLERSBOTTLERS Over the past decade Coke has often made its profit at the expense of bottlers, Over the past decade Coke has often made its profit at the expense of bottlers,

pushing aggressive price hikes on the concentrate it sells them. But key bottlers pushing aggressive price hikes on the concentrate it sells them. But key bottlers are now fighting back with sharp increases in the price of Coke at retail.are now fighting back with sharp increases in the price of Coke at retail.

MEDDLING BOARDMEDDLING BOARD Coke's star-studded group of directors, many of whom date back to the Coke's star-studded group of directors, many of whom date back to the

Goizueta era, has built a reputation for meddling: Some insiders believe the last Goizueta era, has built a reputation for meddling: Some insiders believe the last CEO, Doug Daft, never recovered after the board unexpectedly vetoed his 2000 CEO, Doug Daft, never recovered after the board unexpectedly vetoed his 2000 deal for Quaker Oats.deal for Quaker Oats.

LACK OF INNOVATIONLACK OF INNOVATION In the U.S. market, Coke hasn't created a best-selling new soda since Diet Coke In the U.S. market, Coke hasn't created a best-selling new soda since Diet Coke

in 1982. In recent years, Coke has been outbid by rival PepsiCo for faster in 1982. In recent years, Coke has been outbid by rival PepsiCo for faster growing noncarb beverages like SoBe and Gatorade.growing noncarb beverages like SoBe and Gatorade.

INTERNATIONAL WORRIESINTERNATIONAL WORRIES Coke desperately needs more international growth to offset its flagging U.S. Coke desperately needs more international growth to offset its flagging U.S.

business, business, but while some markets like Japan remain lucrative, in the large but while some markets like Japan remain lucrative, in the large German market Coke's had so many problems it's rebidding all bottling German market Coke's had so many problems it's rebidding all bottling contracts in 2007.contracts in 2007.

© 2003 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

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