gm_lec 2 fall 2013
TRANSCRIPT
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GLOBAL MARKETING
Abdul Salam
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Lecture # 2
Scope and Challenges
of Global Marketing
Abdul Salam
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1Events and TrendsAffecting Global Business
The rapid growth of the World TradeOrganization (WTO) and NAFTA and EU
The trend toward the acceptance of the freemarket system among developing countries in
Latin America, Asia, and Eastern Europe The burgeoning impact of the Internet, mobile
phones, and other global media on the
dissolution of national borders The mandate to properly manage the resources
and global environment for the generations tocome
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1Internationalization ofU.S. Business
Foreign companies are here to stay in the U.S.and compete with U. S. companies
The great worldwide acquisitions both by U. S.and foreign companies
Global markets are a necessity
Foreign earnings a higher percentage of profits
Multinationals outperform domestic firms
Global value increased through globaldiversification
Intensifying domestic competition
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1International Marketing
International marketing is defined as theperformance of business activities designed toplan, price, promote, and direct the flowof a companys goods and services to
consumers or users in more than one nationsfor a profit.
The difference is the environment
Competition, legal restraints, government controls,weather, fickle consumers, economic conditions,technological constraints, infrastructure concerns,culture, and political situations.
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1-6
Globalization
Globalization is the inexorable integration ofmarkets, nation-states and technologies to adegree never witnessed beforein a way that is
enabling individuals, corporations and nation-states to reach around the world farther, faster,deeper and cheaper than every before, and in away that is enabling the world to reach into
individuals, corporations and nation-statesfather, faster, deeper and cheaper than everbefore.
Thomas L. Friedman
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Local, regional and global markets Local markets (country)
Strong cultural links
Specific market conditions
Examples :
medias (press, radio, TV)
cheese
airlines : state regulations (ex: Morocco)
Regional, multi-country markets Specific products and marketing mix
Example : cars
North America, Europe, Poor African countries
Global markets Rather undifferentiated goods, universal solutions,
not culturally related, commodities
Example : wheelbarrow
Example: vehicle gasoline
Luxury brands
Strong global brand image
Marketing mix may be adapted locally
Chevrolet Tahoe
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The Maharaja Mac is an exampleof an
Adapted Marketing Mix
Adapting or standardizing
your marketing strategy
Markets and consumers needs and wants can be different in eachcountry / region
But it is not always optimal to localize the marketing strategy and
radically change the whole marketing mix for each country For example : developping a new product
Mainly for cost reasons (economies of scale) and organisationalreasons (simplify)
Where is the optimum ?Adapt
locally
Standardize
globally
Consequently, a multinational company has to find out and implement
the optimal approach, between global and local, depending on several
factors and market screening
Customer
needs and wants
Reduce costs
Maximize prof i ts
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k l b l
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Marketing : Globalization versus
AdaptationFactors encouraging
Globalization
Its sometimes possible
Lifestyles and consumer behavior
are converging (more or less)
Cost reduction Economies of scale (lower
manufacturing & purchasing costs)
No product adaptation means less
R&D, Marketing, inventories costs
Simplify management
Easier control & coordination
Centralized decisions
Global marketing campaigns
Communication etc
Possible fast worldwide launch
Factors encouraging Adaptat ion
to local markets
Different customer needs and wants,
behavior patterns
cultural background
use conditions
Different economic situation
Legal, tax, political barriers
Different competition landscape
Specific sales/retail channels
External growth and acquisition of
foreign local brands
Unleash local managers initiative 9
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1The 4 Types of International
Marketing
Global marketing strategy(same everywhere)
Local marketing strategies(specific to each country or region)
Global tacticsSome tactics
adapted locally
Mix of global &
local tactics
Only local
tactics &
marketing mix
Pure Global Global Glocal Pu re Local
Bongrain : cheeses10
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Strategies and tactics are the same everywhere
2 conditions Markets adequate for such globalization
Strong brand policy, with no exception
Mostly luxury brandsExamples:
Chanel n5 perfume Omega watches
Other examples La Maison du Chocolat
same product
same shops (Paris, New York, Tokyo)
same service same positioning, highest price on the market
Ikea
same strategy everywhere (developped countries) :
same brand, same positioning, same target
same marketing mix : products and services, pricing, place,communication
But a flop in China !
Marketing Strategy : Pure global
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Marketing Strategy : Global Same brand, same positioning, same product
But the marketing mix can be partially adapted locally, depending of local
market conditions and competition
Example : Air France
Same brand, same planes, same quality of service, maintenance and
security Pricing is adapted locally
When Air France has a quasi-monopolistic position (West Indies,
some African countries), prices are very high
When Air France is on a market with fierce competition,
especially from low cost companies such as EasyJet or RyanAir(ex: Europe), prices are much lower and special promotions are
proposed
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Marketing strategy : Glocal Think global, act local
Standardizes certain core elements and localizes somemarketing mix elements
Example : Honda Accor
Same brand and positioning
in Europe and in the USA
But the product is not the same everywhere In Europe, Accor sales are low, and cars are imported from Japan
In the US, sales are higher and a special product is manufacturedfor the US market
Automatic gearbox
Slightly different style
Different motors
Different interior design and equipment
Since 1986, Honda has developed a new brand,Acura, onthe high-end, in the US & Japan, with specific models anda dedicated retail network
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1Coca Cola marketing is coherent worldwide and some
elements are global
Brand
Colors
Symbols
Same major sales channels
Some advertising campaigns
Sponsoring of major sport events Olympic Games since 1928
Football World Cup
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But some elements of the products are localized Example:
adaptation of the Diet Coke product
Diet has a negativemeaning in many countries.
It was changed to light in
South Europe and Japan.
(same problem with coke
in French !)
China Thailand
Cherry flavor for
the US marketPackaging, name and
formulas can be different
in local markets
USA
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Brands, positioning, products and marketing mix are totally specific and
adapted to each country
Example: Bongrain, world leader of cheeses
Tastes, preferences and traditions are very different in each country
Presence in 150 countries
Several hundreds of brands and products, with local marketing mix
France : Caprice des Dieux, Saint Agur, Chavroux etc (28 brands)
Spain : Burgo de Arias etc
Hungary: Pannonia etc
USA : Alouette etc
India : Le Bon
China : Pikifou
Japan: Gerard Selection
Marketing strategy : Pure local
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Examples of product adaptationDepending on needs and wants differences, and local constraints, there are
various approaches : Exactly the same core product worldwide
Natural goods : Evian water
Manufactured luxury goods : Cartier watches
Partially localized product
Personal Computers : keyboard (20 different types in Europe), electrical power, software etc
Mainly or totally localized product
Cosmetics : different ethnic skins etc
Yoghourts :
French and American tastes
are very different
(creamy formula, flavor,
size, number of items)
Coffee : very different tastes and preferences in the world
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1Example : Apple iPod
Worldwide advertising campaign
Same campaigns worldwide
Different music soundtracks : Rock, electro / house, hip hop, jazz etc
Characters are presented in shadow style to avoid ethnic issues and to focus more on theproduct (contrast effect)
Apple is now a dominant leader on the MP3 player market
32 million iPods sold in 2005, more than 60% of market share
900 million songs sold through iTunes Music Stores, nearly 85% of the legal market
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1
A low budget ?
Why not try viral marketing ?
Be creative !
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1
Market entry strategies
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1Market entry strategies Exporting
Direct
Domestic base
Overseas sales branch
Traveling sales representative
Foreign-based distributors/agent
Indirect-occasional, or active exporting
Domestic-based export merchant
Domestic-based export agent
Cooperative organizations
Export-management company
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M k i
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Franchising: A contractual arrangement where a wholesaler orretailer (the Franchisee) agrees to make some payment and to
meet the operating requirements of a manufacturer or other
franchiser in exchange for the right to use the firms name and
to market its goods or services
Foreign Licensing:an agreement that grants foreign marketers
the right to distribute a firms merchandise or to use its
trademark, patent, or process in a specified geographic area.
Subcontracting: a contractual agreement where a firm hires a
local company to produce goods or services in a specific
geographic area.
Market entry strategies
Contractual Agreements
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M k t t t t i
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1Market entry strategies
International Direct Investment An additional strategy for entering global markets
Requires direct investment in foreign firms, production, and/or
marketing facilities
Advantages
cheaper labor cost in some countries
government incentives
creates better image
deeper relationships with government, customers, suppliers and distributors
full control of operations and marketing
Risks involved:
economic difficulties of the host country
political instability and negative perception
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1Comparison of Market Entry Strategies
Form Control Risk Advantage
Export Very limited Low Low cost
Ownership Total High Control
Joint Ventures Shared Moderate Local
expertise
Licensing Limited Moderate Low cost
Internet Total High No physical
presence required
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Market Screening
Economic Size and Structure Social and Cultural Factors
Living
Standards
Growth
Prospects
Nature of
The Society
Distinctive
Features
Distribution PromotionConsumer
Behaviour
Extent of
Competition
Consumer
Groups
Geographical
Factors
Environmental
Factors
Marketing
Systems
Segmentation of
The Market
Import
Restrictions
Legal
Framework
Political
Stability
T e 12C rame or
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1T e 12C rameworto analyse international markets
Country - What are the political, legal and economic issues of your potential overseas
market, as well as its current market potential and your knowledge and experience of it?
Currency - If foreign currencies fluctuate a lot against your home currency, you may havedifficulties in pricing your goods or making a profit. Some countries, like China dont allowtheir currency to leave the country, so you may have to work in $
Culture - Every culture is different - even from one European country to another. Yourproduct, advertising and even brand may need to be adapted to suit your new market.
Control & Co-ordination - Trading abroad is not only about selling, but also after salesservice. All these people will have to be hired, trained, managed and controled.
Concentration (of markets) some countries are vast (China, India etc). It may not be soeasy or cost effective to sell to different groups in isolated areas. However, there may beopportunities to sell cross-countries to different nationalities with similarcultural/language attitudes
Commitment - Selling abroad seriously requires long term planning, significant financialinvestment, time and skills of your staff. There are risks and the return on investment maybe long to come.
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The 12C framework
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Communication - You need to consider the language skills of you,
your staff and your contacts abroad, and what media or information technology they have(advertising, telecommunications, e-mail etc). If it is difficult to communicate, it will slow upand complicate matters. It may also prevent you from developing your business properly.
Choices (of consumers) - It is possible that there are perfectly good products or servicesavailable from local suppliers. Yours are likely to be more expensive, so consider what wouldmake your product better or more desirable.
Channels of distribution - Getting goods and services to overseas markets can be difficult.Building an efficient retail network is usually hard and long.
Contractual obligations - Make sure that the contract meets everyones needs and that youand your customer are fully aware of the commitments listed. Failure to meet the exactrequirements of the contract, can result in non-payment.
Capacity to pay - You should take a look at the customer and their ability to pay as well as
the country itself. This will include not only financial health, but also political issues, andcurrency and banking regulations.
Caveats (laws) Some countries have laws that are very protective of their local traders anddo not readily accept imports. There may be restrictions or differences between yourcountry and the foreign market about what can be sold and under what circumstances.
The 12C frameworkto analyse international markets
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The Importance of Going GlobalFor U.S. companies, 70% of total worldmarket for goods and services is outside the
countryCoca-Cola earns 75% of operating income andtwo-thirds of profit outside of North America
For Japanese companies, 90% of worldmarket is outside the country
94% of market potential is outside ofGermany for its companies
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Global Auto IndustryThousands of auto companies globally in theearly twentieth century
More than 500 of those producers were in theUnited States
Today there are fewer than 20 in the world
Toyota is the worlds most valuable carcompany and is eighth largest in revenueglobally
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WHY GO GLOBAL?
PROACTIVE REASONS
1. Increased profits
2. Unique goods or services
3. Technological advantage
4. Exclusive market information
5. Owner-manager desire
6. Economies of scale
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WHY GO GLOBAL?REACTIVE REASONS
1. Competitive pressures2. Declining domestic demand
3. Overcapacity
4. Proximity to customers
5. Counterattack foreigncompetition
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1The International Marketing Task
Exhibit 1.3
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Self Reference Criterion
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1Self-Reference Criterion(SRC)
Self-Reference Criterion (SRC) is anunconscious reference to ones own culturalvalues, experiences, and knowledge as a basisfor decision.
Risk of SRC:
Prevent you from becoming aware of culturaldifferences
Influence the evaluation of the appropriatenessof a domestically designed marketing mix for aforeign market
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1Cross-Cultural Analysis
1. Define business problem or goal in home-country cultural traits, habits, or norms
2. Define business problem or goal in foreign-country cultural traits, habits, or norms
through consultation with natives of targetcountry
3. Isolate the SRC influence and examine itcarefully to see how it complicates the problem
4. Redefine the problem without SRC influenceand solve for the optimum business goalsituation
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1Avoiding the Self Reference Criterion
To avoid the SRC, the following steps are suggested:
1: Define the business problem or goal in home-country cultural
traits, habits, or norms
2: Define the business problem or goal in foreign-country cultural
traits, habits, or norms. Make no value judgments
3: Isolate the SRC Influence in the problem and examine it
carefully to see how it complicates the problem
4: Redefine the problem without the SRC influence and solve for
the optimum business goal situation*
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Stages of International
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1Stages of International
Marketing
InvolvementIn general, firms go through five different phases in going
international:
Infrequent Foreign Marketing
No Direct Foreign Marketing
International Marketing
Regular Foreign Marketing
Global Marketing
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1Strategic Orientation: EPRG Schema
Orientation EPRG Schema
Domestic Marketing
Extension
Multi-DomesticMarketing
Global Marketing
(Ethnocentric)
(Polycentric)
(Regio/Geocentric)
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International Marketing
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1International MarketingInvolvement - Stages
No DirectForeign Marketing
Infrequent ForeignMarketing
Regular ForeignMarketing
InternationalMarketing
GlobalMarketing
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No Direct Foreign
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1No Direct ForeignMarketing Reactive
Products indirectly reach foreign markets Trading companies
Foreign customers who contact firm
Domestic wholesalers/distributors Web orders
Foreign orders stimulate a companys interestto seek additional international sales
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Infrequent Foreign
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1Infrequent ForeignMarketing Reactive
Caused by temporary surpluses Sales to foreign markets are made as goods
become available
Firm has little or no intention of maintainingcontinuous market representation
Foreign sales activity declines and iswithdrawn when domestic demand increases
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Regular Foreign
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1Regular ForeignMarketing Proactive
Dedicated production capacity for foreignmarkets
Strategy:
Firm employs domestic or foreign intermediaries
Uses its own sales force or sales subsidiaries
Products are adapted for foreign markets asdomestic demand grows
Firms depend on profits from foreign markets
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International Marketing
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1International Marketing Proactive
Fully committed and involved in foreign marketsand international activities
Production takes place on foreign soil earningfirms the MNC (Multinational Corporation) title
Feddersbeing proactive:
Looked to Asia for future growth after stymiedU.S. sales
Designed new types of air conditioner unit for theChinese market
Plan to introduce new product in the U.S!
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Global Marketing
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1Global Marketing Proactive
The firm sees the world as one market! Market segmentation is now defined by income
levels, usage patterns, or other factors that spanthe globe
More than half of its revenues come from abroad
The firm has a global perspective
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1Global Market Orientation
This orientation entails operating as if all thecountry markets in a companys scope of operations(including the domestic market) were approachableas a single global market and standardizing the
marketing mix where culturally feasible and costeffective.
Depending on the product and market, firms maypursue a global market strategy for one product
(global market orientation P&G diapers) but amultidomestic strategy for another product(international market orientation = P&Gdetergents).
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Assignment # 1
IMPLICATION OF POLITICAL,
ECONOMIC, CULTURAL AND SOCIALENVIRONMENT IN GLOBAL
MARKETING MANAGEMENT