Global Marketing Management:

Planning and Organization

 Chapter Learning Objectives

1.
1. How
How global
global marketing
marketing management
management differs
differs
from
from international
international marketing
marketing management
management

2.
2. The
The increasing
increasing importance
importance of
of international
international
strategic
strategic alliances
alliances

3.
3. The
The need
need for
for planning
planning to
to achieve
achieve company
company
goals
goals

4.
4. The
The important
important factors
factors for
for each
each alternative
alternative market-entry
market-entry strategy
strategy
 Introduction

 Increasingly firms are entering foreign markets

 Acquiring a global perspective requires
execution requires planning, organization, and
a willingness to try new approaches—such as
engaging in collaborative relationships
 This chapter discusses global marketing
management, competition in the global
marketplace, strategic planning, and alternative
market-entry strategies
 Global Marketing Management
Global
Global Marketing
Marketing Management:
Management: An
An Old
Old Debate
Debate and
and aa New
New View
View

 Global Marketing Management thought has

undergone substantial revision
 In the 1970s the argument was framed as
“standardization vs. adaptation”
 In the 1980s it was “globalization vs.
localization” or “Think local, act local”
 In the 1990s it was “global integration vs.
local responsiveness”
 The basic issue is whether the global
homogenization of consumer tastes allowed
global standardization of the marketing mix
 Thums Up , Limca , Gold Spot
Parle sold out to Coke for a meagre US$ 60 million

“Happy days are here again” Manmad Hills

Mattel Toys
 The Nestle Way
•• Nestlé
Nestlé sells
sells more
more than
than 8,500
8,500 products
products produced
produced in
in 489
489
factories
factories in
in 193
193 countries
countries

•• Nestlé
Nestlé is
is the
the world’s
world’s biggest
biggest marketer
marketer of
of infant
infant formula,
formula,
powdered
powdered milk,
milk, instant
instant coffee,
coffee, chocolate,
chocolate, soups,
soups, and
and mineral
mineral
water
water

 The “Nestlé way” is to dominate its

markets can be summarized in four
points:
(1) think and plan long term
(2) decentralize
(3) stick to what you know, and
(4) adapt to local tastes
 Benefits of Global Marketing
The
The merits
merits of
of global
global marketing
marketing include:
include:

 Economies of scale in production and marketing can be important

competitive advantages for global companies
Black and Decker Mfr Co. Motor sizes reduced from 260 to 8 and 15 different models to
8
 Unifying product development, purchasing, and supply activities across
several countries it can save costs
 Transfer of experience and know-how across countries through
improved coordination and integration of marketing activities
 Ensures that marketers have access to the toughest customers.
 Diversity of markets by spreading the portfolio of markets served brings
an important stability of revenues and operations to many global firms
 Planning for Global Markets
Planning
Planning is
is aa systematized
systematized way
way of
of relating
relating to
to the
the future
future

•• ItIt isis an
an attempt
attempt to
to manage
manage the
the effects
effects of
of external,
external, uncontrollable
uncontrollable factors
factors on
on
the
the firm’s strengths, weaknesses, objectives, and goals to attain a desired end
firm’s strengths, weaknesses, objectives, and goals to attain a desired end

•• Structurally,
Structurally, planning
planning maymay be be viewed
viewed asas
(1)
(1) corporate,
corporate, (2)
(2) strategic,
strategic, or
or (3)
(3) tactical
tactical

•• International
International corporate
corporate planning
planning isis essentially
essentially long
long term,
term, incorporating
incorporating
generalized
generalized goals
goals for
for the
the enterprise
enterprise asas aa whole
whole
•• Strategic
Strategic planning
planning isis conducted
conducted at at the
the highest
highest levels
levels of
of management
management andand
deals
deals with
with products,
products, capital,
capital, and
and research,
research, and
and long-
long- and
and short-term
short-term goals
goals of
of
the
the company
company
•• Tactical
Tactical planning,
planning, or
or market
market planning,
planning, pertains
pertains to
to specific
specific actions
actions and
and toto the
the
allocation
allocation of
of resources
resources used
used to
to implement
implement strategic
strategic planning
planning goals
goals in
in specific
specific
markets
markets
 Key to Successful planning involves:
• Evaluating company’s objectives and
resources
• Management commitment
• The planning process.
The planning process illustrated in Exhibit below offers a systematic guide to planning for the
multinational firm operating in several countries
 The Planning Process
•• Planning,
Planning, which
which offers
offers aa systematic
systematic guide
guide to
to planning
planning for
for the
the multinational
multinational
firm
firm operating
operating in
in several
several countries,
countries, includes
includes the
the following
following 44 phases:
phases:

Phase
Phase 1:
1: Preliminary
Preliminary Analysis
Analysis and
and Screening
Screening –– Matching
Matching Company
Company and
and
Country
Country Needs
Needs
 Phase 1: Preliminary Analysis and
Screening
Phase 1: Preliminary Analysis and
Screening – Matching Company and
Country Needs
• Nestle produces 200 types of instant
coffee
• Dark robust espresso ( Latin) to lighter
blends (US)- $50billion/year – 4 research
laboratories – colour, aroma, flavour
Phase 2: Adapting the Marketing Mix to
Target Markets
 The answers to three major
questions are sought in Phase 2:
Phase
Phase 2:
2: (a) Are there identifiable market
Adapting
Adapting the
the segments that allow for common
Marketing
Marketing Mix
Mix to
to marketing mix tactics across
Target
Target Markets
Markets countries?
(b) Which cultural/environmental
adaptations are necessary for
successful acceptance of the
marketing mix?
(c) Will adaptation costs allow
profitable market entry?
Phase
Phase 3:
3: Developing
Developing the
the
Marketing
Marketing Plan
Plan

Phase
Phase 4:
4: Implementation
Implementation and
and
Control
Control
 Foreign Market-Entry Strategies
When
When aa company
company makes
makes the
the commitment
commitment to
to go
go international,
international, itit
must
must choose
choose an
an entry
entry strategy
strategy

The
The choice
choice of
of entry
entry strategy
strategy depends
depends on:
on:

 market characteristics (such as potential

sales, strategic importance, cultural
differences, and country restrictions)
 company capabilities and characteristics,
including the degree of near-market
knowledge, marketing involvement, and
 commitment that management is prepared
to make
 Alternative Market-Entry Strategies
•• Import
Import regulations
regulations may
may be
be imposed
imposed to to protect
protect health,
health, conserve
conserve
foreign
foreign exchange,
exchange, serve
serve as
as economic
economic reprisals,
reprisals, protect
protect home
home
industry,
industry, or
or provide
provide revenue
revenue in
in the
the form
form of
of tariffs
tariffs

•• A
A company
company has
has four
four different
different modes
modes of
of foreign
foreign market
market entry
entry
from
from which
which to
to select:
select:

 exporting
 contractual agreements
 strategic alliances, and
 direct foreign investment
 Exporting
 Exporting can be either direct or
indirect
 In direct exporting the company sells
to a customer in another country
 In contrast, indirect exporting usually
means that the company sells to a
buyer (importer or distributor) in the
home country who in turn exports the
product
 Motives for exporting often are to skim
the cream from the market or gain
business to absorb overhead.
 INTERNET

DIRECT SALES
 Contractual Agreements
Contractual
Contractual agreements
agreements are
are long-term,
long-term, non-equity
non-equity associations
associations
between
between aa company
company and
and another
another in
in aa foreign
foreign market
market

 Contractual agreements generally involve the transfer of

technology, processes, trademarks, or human skills
 Contractual forms of market entry include:
(1) Licensing: A means of establishing a foothold in foreign markets
without large capital outlays is licensing of patent rights, trademark
rights, and the rights to use technological
(2) Franchising: Here the franchisor provides a standard package of
products, systems, and management services, and the franchisee
provides market knowledge, capital, and personal involvement in
management
 Licensing:

 Favorite stratergy for small and medium firms

 The advantage is most apperent when the
capital is scare, import restriction forbids other
modes, country sensitive to foreign ownership,
 The risk of licensing involves: choosing a wrong
partner, quality and other production
problems,payment problems, loss of market
control.
 Franchising:

 The franchiser can follow through on

marketing of the products to the point of
sale
 This system provides an effective blend of
skill centralisation and operational
decentralisation.
 Companies can expand quickly with low
capital investment.
 Master franchise
 Strategic International Alliances
•• Strategic
Strategic alliances
alliances have
have grown
grown in in importance
importance overover the
the last
last few
few
decades
decades asas aa competitive
competitive strategy
strategy inin global
global marketing
marketing
management
management
•• A
A strategic
strategic international
international alliance
alliance (SIA)
(SIA) isis aa business
business
relationship
relationship established
established by
by two
two or
or more
more companies
companies to to
cooperate
cooperate out
out of
of mutual
mutual need
need and
and toto share
share risk
risk in
in achieving
achieving aa
common
common objective
objective
 SIAs are sought as a way to shore up weaknesses and increase
competitive strengths
 SIAs offer opportunities for rapid expansion into new markets, access
to new technology, more efficient production and marketing costs
 An example of SIAs in the airlines industry is that of the Oneworld
alliance partners made up of American Airlines, Cathay Pacific,
British Airways, Canadian Airlines, Aer Lingus, and Qantas
The steps outlined in Exhibit 11.3 below can lead to successful and high performance strategic
alliances
 International Joint Ventures

 International joint ventures (IJVs) have been

increasingly used since 1970s
 IJVs are used as a means of lessening political and
economic risks by the amount of the partner’s
contribution to the venture
 JVs provide a less risky way to enter markets that pose
legal and cultural barriers than would be the case in an
acquisition of an existing company
 A joint venture is different from strategic alliances or
collaborative relationships in that a joint venture is a
partnership of two or more participating companies
that have joined forces to create a separate legal entity
 International Joint Ventures (contd.)
•• Four
Four factors
factors are
are associated
associated with
with joint
joint ventures:
ventures:

1. JVs are established, separate, legal

entities;
2. they acknowledge intent by the partners
to share in the management of the JV;
3. they are partnerships between legally
incorporated entities such as companies,
chartered organizations, or governments,
and not between individuals;
4. equity positions are held by each of the
partners
 Consortia
•• Consortia
Consortia are
are similar
similar to
to joint
joint ventures
ventures and
and could
could be
be classified
classified as
as
such
such except
except for
for two
two unique
unique characteristics:
characteristics:

(1) They typically involve a large

number of participants, and
(2) They frequently operate in a
country or market in which
none of the participants is
currently active

•• Consortia
Consortia are
are developed
developed to to pool
pool financial
financial and
and managerial
managerial
resources
resources and
and toto lessen
lessen risks.
risks.
 Direct Foreign Investment

•• A
A fourth
fourth means
means of
of foreign
foreign market
market development
development and
and entry
entry isis
direct
direct foreign
foreign investment
investment

 Companies may manufacture locally to capitalize on low-cost labor, to avoid

high import taxes, to reduce the high costs of transportation to market, to gain
access to raw materials, or as a means of gaining market entry
 Firms may either invest in or buy local companies or establish new operations
facilities
 Timing, the growing complexity and contingencies involved in contract,
Transaction cost structure, technology transfer, degree of product
differentiation, the previous experience and cultural diversity of acquired
firms, advertising and reputation barriers
 Organizing for Global Competition
•• An
An international
international marketing
marketing plan
plan should
should optimize
optimize the
the resources
resources
committed
committed toto company
company objectives
objectives by
by using
using one
one of
of the
the
following
following three
three alternative
alternative organizational
organizational structures:
structures:

(1) global product divisions responsible for product sales

throughout the world;
(2) geographical divisions responsible for all products and functions
within a given geographical area; or
(3) a matrix organization consisting of either of these arrangements
with centralized sales and marketing run by a centralized
functional staff, or a combination of area operations and global
product management
 Horizontal Differentiation:
The Design Of Structure
The worldwide area structure:
 is favored by firms with low degree of diversification and
a domestic structure based on function
 divides the world into autonomous geographic areas
 decentralizes operational authority
 facilitates local responsiveness
 can result in a fragmentation of the organization
 is consistent with a localization strategy
 Horizontal Differentiation:
The Design Of Structure
The worldwide product division structure:
 is adopted by firms that are reasonably diversified
 allows for worldwide coordination of value creation
activities of each product division
 helps realize location and experience curve economies
 facilitates the transfer of core competencies
 does not allow for local responsiveness
 Horizontal Differentiation:
The Design Of Structure
A Worldwide Product Divisional Structure
 Horizontal Differentiation:
The Design Of Structure
 The global matrix structure is an attempt to minimize the
limitations of the worldwide area structure and the
worldwide product divisional structure
The global matrix structure:
 allows for differentiation along two dimensions - product
division and geographic area
 has dual decision–making - product division and geographic
area have equal responsibility for operating decisions
 can be bureaucratic and slow
 can result in conflict between areas and product divisions
 can result in finger-pointing between divisions when
something goes wrong
Horizontal Differentiation:
The Design Of Structure
A Global Matrix Structure