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Webster University

Introduction to Global Strategic Planning & Global Market Expansion

MRKT 5980

Global Marketing
 

the world is becoming more homogenous ...distinctions between national markets are fading and may disappear

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Global Marketing Evolution


Develop Core Business Strategy Internationalize the Strategy Globalize the Strategy
Country A Country B Country C Country D

Core Business Strategy

Source: Reprinted from Global Strategy In a World of Nations? by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved.

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Globalization Drivers


Market Factors

new consumer groups, developed infrastructures, globalization of distribution channels, cross-border crossretail alliances


Cost Factors

avoiding cost inefficiencies and duplicated efforts




Environmental Factors

reduced governmental barriers, rapid technological evolution




Competitive Factors

rapid product innovation, introduction, distribution


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The Strategic Planning Process




Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed. The Strategic Business Unit

Based on product market similarities


  

Similar needs or wants to be met Similar end user customers to be targeted Similar products or services used to meet needs of specific customers

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The Strategic Planning Process


Global Strategy Formulation
Assessment and Adjustment of Core Strategy
Market/Competitive Analysis - Internal Analysis

Formulation of Global Strategy


Choice of Target Countries, Segments, and Competitive Strategy

Development of Global Marketing Program

Implementation
Organizational Structure - Control
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Market and Competitive Analysis




First, understand the structure of the global market industry; the common features of customer requirements and choice factors. Internal analysis

Examine the readiness and capability of the firm to undertake strategic moves with its current resources.

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Formulating Global Marketing Strategy


 

Formulation begins with a series of strategic decisions Choice of Competitive Strategy

Cost leadership Differentiation Focus




CountryCountry-Market Choice

Concentration or diversification Factors in country markets selection


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The stand-alone attractiveness of the market standGlobal strategic importance of the market Possible synergies offered by the market
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Competitive Strategies
Source of Competitive Advantage Competitive Scope
Industry-wide Single Segment Low Cost Differentiation

Cost Leadership

Broad Differentiation Focus

SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.

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Bases for Global Market Segmentation


Bases for International Market Segmentation

Environmental Variables

Marketing Management Variables

Geographic Variables

Political Variables

Economic Variables

Cultural Variables

Product Variables
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Promotion Variables

Price Variables

Distribution Variables
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Global Marketing Program Development




Development Decisions

Product offering


The degree of standardization and adaptation in the product offering. The marketing program beyond the product variable. Pooling production. Exploiting factor costs or capabilities. Strategic alliances. Concurrent engineering. CrossCross-subsidization using resources accumulated in one market to wage a competitive battle in another.
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The marketing approach




The location and extent of value-adding activities value   

Competitive moves to be made




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Implementing Global Marketing




Success will come from a balance between local and regional / global concerns. Think globally, act locally is the operative phrase for global marketers competing in country markets. Product choices should consider individual markets as well as transfer products from one region to another.

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Global Marketing Pitfalls to Avoid


   

Insufficient local market research. The tendency to over standardize the product. Inflexibility in planning and implementation. The Not-Invented-Here syndrome (NIH). Not-Invented-

How to avoid the NIH syndrome




Ensure that local managers participate in the development of global brand marketing strategies. Encourage local managers to develop ideas for regional or global use.
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Localizing Global Marketing




Achieving a balance between in-country inmanagers and global product managers at corporate headquarters will require action to develop and implement a global strategy.

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Localizing Global Marketing




Management processes

Enhance the global transfer of communications. Interchange personnel to gain experience abroad. Headquarters should coordinate and leverage resources. Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands. Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.
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Localizing Global Marketing




Organization structures

The shift to global account management.




Corporate culture

The world is not one single market. Plan and execute programs on a worldwide basis. A global Identity favors no specific country.

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Foreign Investments


Firms invest to enter markets or assure themselves of sources of supply. Foreign direct investment

An equity investment to create or expand a permanent interest in a foreign enterprise.




Portfolio investment

The purchase of stocks and bonds internationally.




Major foreign investors

More than 45,000 multinational corporations with 280,000 affiliates globally. The terms foreign and domestic may no longer apply.
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Reasons for Foreign Direct Investment




Marketing factors

Growth and profit motivations. Circumventing government-erected barriers to governmenttrade. Access to low-cost resources and supply. low Local customers preference for domestic goods and services. Attempts to obtain low-cost resources and lowensure their supply.
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Categories of International Firms




Resource seekers

are searching for natural and human resources.




Market seekers

are searching for better opportunities to enter or expand within markets.




Efficiency seekers

are attempting to obtain the most economic sources of production.

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Reasons for Foreign Direct Investment




Derived demand

results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market.


Government incentives

Fiscal incentives


tax holidays, allowances, credits and rebates. special funding for land or buildings, loans and guarantees, wage subsidies. guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure.
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Financial incentives


Non-financial incentives Non

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Foreign Direct Investors




Positive perspectives

Bring in capital, economic activity, and employment. Transfer technology and managerial skills. Competition, market choice, and competitiveness are enhanced.


Negative perspectives


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Drain resources from host countries. Starve smaller capital markets. Discourage local technology development. Bring in outmoded technology. Create new competition for local firms.
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Types of Ownership


Ownership patterns may be based on past experiences with similar ownership models. Full ownership

Full control, full assumption of all risks. May be desirable, but is not necessary for success internationally.


Joint ventures

Shared control, shared investment risks. Reasons for joint ventures:


 

governmental pressure to join with local partners. mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.

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Joint Ventures
Recommendations for joint ventures Find the right partner. Negotiate the joint venture agreement carefully. Maintain flexibility to adjust to changing market conditions.
ADVANTAGES  Pooling of resources  Better relationships with local organizations  Knowledge the partner brings of the local market  Minimizing exposure risk of longlong-term capital  Maximizing leverage of invested capital
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DISADVANTAGES  Different levels of control are permitted or required  Difficulty in maintaining the relationship  Disagreements over business decisions  Disagreements over profit accumulation, and distribution (profit repatriation)
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Types of Ownership continued

Strategic alliances

more than the traditional customer-vendor customerrelationship, but less than an outright acquisition.


Government consortia

Public-private relationship in a specific project. Public Typically government supported or subsidized.

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Complementary Strengths Create Value


PARTNER STRENGTH + PARTNER STRENGTH = JOINT OBJE TIVE
Pepsico marketing clout for canned beverages Philips consumer electronics innovation and leadership KF established brand and store format, and operation skills Lipton recognized tea brand and o sell canned iced tea customer franchise beverages jointly Levi Strauss fashion design and Outdoor wear with integrated distribution electronic equipment for fashion-conscience consumers Mitsubishi real estate and siteselection skills in apan o establish a KFC chain in apan o create a fiber-optic cable business

Siemens presence in range of orning technological strength telecommunications markets in optical fibers and glass worldwide and cablemanufacturing technology Ericsson technological strength in public telecommunications network Hewlett-Packard computers, software, and access to electronics-channels

o create and market network management systems

SOURCES: Portable Technology Takes the Next Step: Electronics You Can Wear,The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, Is Your Strategic Alliance Really a Sale? Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, Coca-Cola Proclaims Nesta Time for CAA. Advertising Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com.

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Contractual Arrangements


Cross marketing

The parties agree to carry out activities which are complementary and nonnoncompetitive.


Contract manufacturing

An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development.


Management contracting

A supplier furnishes an integrated service (e.g., turnkey operation) internally to a functionally important to the Page 26 7/27/2011 client that is Webster University MRKT 5980 client.

Management Contracting Advantages


CLIENT ADVANTAGES  Provide organizational skills not locally available.  Immediate availability of skills.  Management assistance and support that is not available locally. SUPPLIER ADVANTAGES  Lower risk because no equity capital is at stake.  Exercise large amounts of operational control.  The strategic advantage of being on the inside.  Opportunity to commercialize knowknowhow.  Using experienced staff to offset business fluctuations.
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Management Contracting Risks




Risks to the client

Over-dependence on the supplier. Over Loss of control to the supplier.




Risks to the contractor

Bidding without fully detailed insight into actual costs of delivering the service. The effects of the loss or termination of the contract and resulting personnel problems.

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