GLOBAL MARKETING

Abdul Salam abdulsalam@lrk.szabist.edu.pk

Lecture # 2 Scope and Challenges of Global Marketing

Abdul Salam abdulsalam@lrk.szabist.edu.pk

Events and Trends Affecting Global Business

The rapid growth of the World Trade Organization (WTO) and NAFTA and EU The trend toward the acceptance of the free market 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 to come
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Internationalization of U.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 global diversification Intensifying domestic competition
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International Marketing
International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a companys goods and services to consumers or users in more than one nations for 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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Globalization
Globalization is the inexorable integration of markets, nation-states and technologies to a degree never witnessed beforein a way that is enabling individuals, corporations and nationstates to reach around the world farther, faster, deeper and cheaper than every before, and in a way that is enabling the world to reach into individuals, corporations and nation-states father, faster, deeper and cheaper than ever before. 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
Chevrolet Tahoe

Luxury brands
Strong global brand image Marketing mix may be adapted locally
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Adapting or standardizing your marketing strategy

The Maharaja Mac is an example of an Ad ap ted Marketing Mix

Clickor press spaceb ar to retu

Markets and consumers needs and wants can be different in each country / 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 organisational reasons (simplify)

Adapt locally

Where is the optimum ?

Standardize globally

Customer needs and wants

Reduce costs Maximize profits

Consequently, a multinational company has to find out and implement the optimal approach, between global and local, depending on several factors and market screening
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Marketing : Globalization versus Adaptation

Factors encouraging Adaptation Factors encouraging

to local markets
Different customer needs and wants, behavior patterns cultural background
use conditions

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

Different economic situation Legal, tax, political barriers Different competition landscape Specific sales/retail channels External growth and acquisition of foreign local brands

Simplify management
Easier control & coordination Centralized decisions

Global marketing campaigns

Communication etc Possible fast worldwide launch 9

Unleash local managers initiative

The 4 Types of International Marketing

Global marketing strategy
(same everywhere)

Local marketing strategies

(specific to each country or region)

Global tactics

Some tactics adapted locally

Mix of global & local tactics

Only local tactics & marketing mix

Pure Global

Global

Glocal

Pure Local

10 Bongrain : cheeses

Marketing Strategy : Pure global

Strategies and tactics are the same everywhere 2 conditions
Markets adequate for such globalization Strong brand policy, with no exception

Mostly luxury brands

Examples: 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 !

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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 some marketing 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 manufactured for the US market
Automatic gearbox Slightly different style Different motors Different interior design and equipment

Since 1986, Honda has developed a new brand, Acura, on the high-end, in the US & Japan, with specific models and a dedicated retail network
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Coca Cola marketing is coherent worldwide and some 1 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 negative meaning in many countries. It was changed to light in South Europe and Japan. (same problem with coke in French !) Cherry flavor for the US market

USA

Packaging, name and formulas can be different in local markets

China

Thailand
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Marketing strategy : Pure local

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

Brands, positioning, products and marketing mix are totally specific and adapted to each country Example: Bongrain, world leader of cheeses

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Examples of product adaptation

Depending 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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Example : 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 the product (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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A low budget ? Why not try viral marketing ? Be creative !

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Market entry strategies

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Market 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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Market entry strategies Contractual Agreements

Franchising: A contractual arrangement where a wholesaler or retailer (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.
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 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

Market entry strategies International Direct Investment

Risks involved:
economic difficulties of the host country political instability and negative perception
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Comparison of Market Entry Strategies

Form
Export Ownership Joint Ventures

Control
Very limited Total Shared

Risk
Low High Moderate

Advantage
Low cost Control Local expertise Low cost No physical presence required
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Licensing Internet

Limited Total

Moderate High

Market Screening
Economic Size and Structure Social and Cultural Factors

Living Standards

Growth Prospects

Nature of The Society Segmentation of The Market

Distinctive Features
Marketing Systems

Environmental Factors

Import Restrictions

Legal Framework

Political Stability

Consumer Groups

Geographical Distribution Factors

Promotion

Consumer Behaviour

Extent of Competition

The 12C framework 1 to 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 have difficulties in pricing your goods or making a profit. Some countries, like China dont allow their currency to leave the country, so you may have to work in $ Culture - Every culture is different - even from one European country to another. Your product, 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 sales service. 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 so easy or cost effective to sell to different groups in isolated areas. However, there may be opportunities to sell cross-countries to different nationalities with similar cultural/language attitudes Commitment - Selling abroad seriously requires long term planning, significant financial investment, time and skills of your staff. There are risks and the return on investment may be long to come.

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The 12C framework 1 to analyse international markets

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 up and 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 services available from local suppliers. Yours are likely to be more expensive, so consider what would make 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 you and your customer are fully aware of the commitments listed. Failure to meet the exact requirements 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, and currency and banking regulations. Caveats (laws) Some countries have laws that are very protective of their local traders and do not readily accept imports. There may be restrictions or differences between your country and the foreign market about what can be sold and under what circumstances.
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The Importance of Going Global

For U.S. companies, 70% of total world market for goods and services is outside the country
Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America

For Japanese companies, 90% of world market is outside the country 94% of market potential is outside of Germany for its companies
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Global Auto Industry

Thousands of auto companies globally in the early twentieth century More than 500 of those producers were in the United States Today there are fewer than 20 in the world Toyota is the worlds most valuable car company and is eighth largest in revenue globally
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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 pressures 2. Declining domestic demand 3. Overcapacity 4. Proximity to customers 5. Counterattack foreign competition
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The International Marketing Task

Exhibit 1.3

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Self-Reference Criterion (SRC)

Self-Reference Criterion (SRC) is an unconscious reference to ones own cultural values, experiences, and knowledge as a basis for decision. Risk of SRC:

Prevent you from becoming aware of cultural differences Influence the evaluation of the appropriateness of a domestically designed marketing mix for a foreign market
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Cross-Cultural Analysis

1. Define business problem or goal in homecountry cultural traits, habits, or norms 2. Define business problem or goal in foreigncountry cultural traits, habits, or norms through consultation with natives of target country 3. Isolate the SRC influence and examine it carefully to see how it complicates the problem 4. Redefine the problem without SRC influence and solve for the optimum business goal situation
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Avoiding 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 Marketing Involvement In general, firms go through five different phases in going
international: No Direct Foreign Marketing Infrequent Foreign Marketing Regular Foreign Marketing International Marketing Global Marketing

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Strategic Orientation: EPRG Schema

Orientation EPRG Schema
(Ethnocentric)

Domestic Marketing Extension

Multi-Domestic Marketing

(Polycentric)

Global Marketing

(Regio/Geocentric)

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International Marketing Involvement - Stages

No Direct Infrequent Foreign Foreign Marketing Marketing Global Marketing Regular Foreign International Marketing Marketing

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No Direct Foreign Marketing Reactive

Products indirectly reach foreign markets
Trading companies Foreign customers who contact firm Domestic wholesalers/distributors Web orders

Foreign orders stimulate a companys interest to seek additional international sales

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Infrequent Foreign Marketing Reactive

Caused by temporary surpluses
Sales to foreign markets are made as goods become available

Firm has little or no intention of maintaining continuous market representation

Foreign sales activity declines and is withdrawn when domestic demand increases

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Regular Foreign Marketing Proactive

Dedicated production capacity for foreign markets Strategy:

Firm employs domestic or foreign intermediaries Uses its own sales force or sales subsidiaries

Products are adapted for foreign markets as domestic demand grows Firms depend on profits from foreign markets

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International Marketing Proactive

Fully committed and involved in foreign markets and international activities Production takes place on foreign soil earning firms the MNC (Multinational Corporation) title Fedders being proactive:
Looked to Asia for future growth after stymied U.S. sales Designed new types of air conditioner unit for the Chinese market Plan to introduce new product in the U.S!
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Global Marketing Proactive

The firm sees the world as one market! Market segmentation is now defined by income levels, usage patterns, or other factors that span the globe More than half of its revenues come from abroad The firm has a global perspective

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Global Market Orientation

This orientation entails operating as if all the country markets in a companys scope of operations (including the domestic market) were approachable as a single global market and standardizing the marketing mix where culturally feasible and cost effective. Depending on the product and market, firms may pursue a global market strategy for one product (global market orientation P&G diapers) but a multidomestic strategy for another product (international market orientation = P&G detergents).
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Assignment # 1 IMPLICATION OF POLITICAL, ECONOMIC, CULTURAL AND SOCIAL ENVIRONMENT IN GLOBAL MARKETING MANAGEMENT
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