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Chapter 6

MARKETING IN GLOBAL MARKETS

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• 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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• Higher profit potential, more market share & sales• Proximity to cheaper raw material and labor• Market saturation, stiff competition & adverse economic

conditions in domestic markets• Product life cycle extension and opening of new markets

abroad e.g., China, Eastern Europe • Emergence of an interdependent global economy

characterized by fast communication, transportation and financial flows that create new opportunities and challenges and dictates an appropriate response for survival

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• 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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• 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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Standardized firms:View the whole world as one entity, not a collection of national markets (e.g., Levi’s jeans)

Compete by optimal combination of price, quality, reliability and delivery of products that are identical in design and function; advantages of cost and effectiveness

Branding, positioning and promotion may have to reflect local conditions

Critics argue that all aspects of marketing labeling, packaging, materials, colors, names, product features, advertising themes, media, execution, price, sales promotion need to be customized for each country (e.g., Yoplait yogurt)

Best option is a combination of both that fits the business

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• 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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• 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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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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More effective for small and medium More effective for small and medium firmsfirms

More control over risk, cost, resource More control over risk, cost, resource commitmentcommitment

Products in maturity stage of Products in maturity stage of domestic lifecycledomestic lifecycle

Products with ‘seasonal demand’Products with ‘seasonal demand’

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• Indirect: sales made through the firm’s domestic sales department; no overseas sales force

• Semi-direct: combination export manager,

manufacturer’s 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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• Provide technology, right to use licensor’s 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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Partnership between a domestic and foreign firm e.g., GM & Toyota

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• 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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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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• Entrepreneurial middlemen

• Buy U.S.-produces goods at 15% below a manufacturer’s 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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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 Budweiser’s 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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• 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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• Product / Promotion

• Pricing

• Distribution & Logistics

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• One product, one message, worldwide

• Product extension, promotion adaptation

• Product adaptation, promotion extension

• Dual adaptation• Product invention• Brand

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Analyze factors that influence international pricing e.g., cost Analyze factors that influence international pricing e.g., cost structures, competitor pricing levels, exchange ratesstructures, competitor pricing levels, exchange rates

Confirm the impact of corporate strategiesConfirm the impact of corporate strategies

Evaluate strategic pricing options and select most appropriate Evaluate strategic pricing options and select most appropriate approachapproach

Implement strategy through a variety of tacticsImplement strategy through a variety of tactics

Manage price and financing international transactionsManage 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

customer’s 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 channelsDistribution channels: means of distribution of the goods : means of distribution of the goods from the manufacturer to end user; headquarters, channels from the manufacturer to end user; headquarters, channels between countries, channel structure within countriesbetween countries, channel structure within countries

LogisticsLogistics: physical distribution management; concerned with : physical distribution management; concerned with planning, implementing, control of physical flow of materials planning, implementing, control of physical flow of materials from points of origin to use at a profitfrom points of origin to use at a profit

Uncontrollable factors e.g., wholesaling, retailing structures, Uncontrollable factors e.g., wholesaling, retailing structures, quality of services, infrastructure, differs widely between quality of services, infrastructure, differs widely between nationsnations

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Social / cultural:Social / cultural: LanguageLanguage ColorsColors Customs and taboosCustoms and taboos ValuesValues AestheticsAesthetics TimeTime Business normsBusiness norms ReligionReligion Social structuresSocial structures

Political / legalPolitical / legal EconomicEconomic CompetitiveCompetitive TechnologyTechnology

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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 product’s package

• Customs and taboos: e.g., McDonald’s 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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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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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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Economic Growth: Industrialized: private enterprises, consumer

orientation, modern technology, high per capita income e.g., U.S.A., Japan

Developing: transitioning from agricultural to industrial; rising levels of income, education e.g., Brazil

Less-developed nations: low standards of living, low literacy, limited technology e.g., Bangladesh

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Gain differential advantage by Gain differential advantage by investing resources in the target investing resources in the target marketmarket

Local firms may successfully adapt Local firms may successfully adapt imitation strategiesimitation strategies

Unsuccessful local firms are often Unsuccessful local firms are often bought out by multinationalsbought out by multinationals

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• 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