Managing global marketing
Globalization and Global Products
marketing mix
Globalization is transforming the way
in which some products are marketed
internationally
Global product
PRODUCT
• a product is anything that can be offered
to a market that might satisfy a want or
need. However it is much more than just
a physical object. It is the complete
bundle of benefits or satisfactions that
buyers perceive they will obtain if they
purchase the product.
• It is the sum of all physical,
psychological, symbolic, and service
attributes.
 The global product meets the wants and needs of a global
market
 The key to success of the globally standardized products is
that they are often the best-value products because they
offer higher quality and more advanced features at better
prices
 Global products tend to be stronger on the intangible extras
such as status and brand image
Global products embody the best in technology with

designs from leading markets and are manufactured to the
highest standards
 A cornerstone of a global marketing mix program is the set
of product policy decisions that multinational companies
(MNCs) constantly need to formulate.
 The range of product policy questions may include:
 What new products should be developed for what
markets?
 What products should be added, removed, or
modified for the product line in each of the countries
in which the company operates?
Global product examples
Gillette razor blades
–
– Sony television sets
– Benetton sweaters
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Global Products
 Localisation of a product or service to fit
local regulation and usage requirements e.g.
local voltages and safety laws
 THIS REFERS TO THE CHANGES REQUIRED
FOR A PRODUCT OR SERVICE TO FUNCTION
IN A NEW COUNTRY (EX: FAX MACHINES
FITTED WITH NEW TYPES OF TELEPHONE
JACKS FOR USE IN A FOREIGN COUNTRY).
LOCALIZATON AVOIDS HAVING POTENTIAL
CUSTOMERS REJECT A PRODUCT
OUTRIGHT.
 Adaptation fits the product to buyer
preferences e.g. Air-conditioning in USA
 WHEN PRODUCTS ARE CHANGED TO
MATCH CUSTOMER TASTES OR
PREFERENCES. ADAPTATION GIVES
CUSTOMERS A POSITIVE REASON FOR
CHOOSING A GIVEN PRODUCT.
 NOTE: A standardized product still needs to
be localized to function properly.
Global products
 Global standardization
 The standardization of products across
markets,and ultimately,t o the
standardization of the marketing mix, more
commonly called glocalization
 Standardised global products are not
adapted to local preferences, but
must still be localised. E.g Coca-Cola
obey local hygiene laws
 Regional standardization. The use of
a uniform marketing strategy within a
particular region
What to Standardize?
• 100% standardization is rare
• Usually starts with a core product as the
foundation
• Various features are added, these may
differ according to the country market
• Can also involve modular design, where
various features are packaged as modules,
different assembly combinations in different
markets
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 Localization and adaptation both involve some
changes or accommodations in product design
to meet local demand and use factors.
However, localization refers to changes needed
to make a product functional, usable, and
minimally acceptable to customers in a given
market area. For example, electric appliances
require voltage accommodations and plug
design that allow them to be used in certain
local markets; and laundry detergents may
have to undergo some composition changes to
work properly with local water, which may be
harder or softer, and therefore mitigate the core
functioning of the detergent. No matter how
great the brand awareness or product benefits
associated with the product, customers cannot
use them until they are localized.
 Adaptation, on the other hand, refers to
modifications made in product design to
enhance the customer's perception of value and
ultimate satisfaction with the product.
Adaptations are made to better meet
customers' tastes or preferences. Products
may be functional and usable in a given market,
but possess insufficient competitive advantage
over other product alternatives that cater more
closely to local customs and preferences.
  
 Herzberg's Two-Factor Theory of management
provides a useful analogy for understanding
the different dynamics of localization versus
adaptation. Herzberg identified both hygiene
factors and motivators which affect the relative
level of one's job satisfaction. Hygiene factors,
such as pay, working conditions, policies and
practices, and interpersonal relations, have to
be at an acceptable level for workers to avoid
job dissatisfaction and the organization to
avoid turnover and attrition. Motivators include
aspects such as meaningful work offering
intrinsic rewards, accomplishment recognition,
and growth and advancement opportunities.
The presence of these factors directly increase
the level of satisfaction with work, thereby
turning a "bearable" or "acceptable" job into a
desirable and sought after job.
 Localization acts in much the same way as
hygiene factors do such that they create
acceptability of the product and avoid product
dissatisfaction and rejection. Adaptation has
an impact similar to motivators in that it
enhances the desirability of the product offered
and enhances product image, demand, and
customer satisfaction.
 
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 Localization, in and of itself, does not preempt a
standardized product approach. The primary
features and benefits of a product may remain
the same even when localization is required. In
products designed to have multisystem
compatibility, the product may be made to
accommodate many local operating scenarios
in one version, as with laptop computers which
have built-in adapters to make them usable all
over the world. Adaptation, however, moves in
a direction opposite that of standardization,
and is applied in markets where tastes and
preferences have not yet converged and show
no immediate signs of doing so.
Why do Global Product Lines Differ?
History
Different local products were well established before
standardization was feasible
M&A (Mergers & Acquisitions)
Complete integration is often difficult in M&A cases
Preferences
Differences in preferences force product line
customization
Capacity
Global product lines need large production capacity
Channels
Channel loyalties makes it difficult to drop local
products.
Product and Gamble offers some product lines in a
variety of countries but also offers local products
in certain markets. Tide and Cheer are sold
globally but Vizir is a regional detergent.
Benetton changes its product line based on the local
market’s level of discretionary income, climate
and fashion style since wool sweaters are likely to
prove more popular in New York than in Miami.
Nokia offers different models in different markets based
on a country’s technological infrastructure and
local demand sophistication.
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There are numerous possible advantages to such
standardization when applied to global marketing
activities.
  
 *cost reduction - cost per unit is most typically the
focus since standardization allows economies of
scale and scope. Obtaining standardized materials
and components or applying standardized production
techniques provides lower costs per unit produced.
Therefore, prices can be more competitive and/or
profit margins may be larger. When the same media
can be used across markets or the same brand name,
bulk purchasing and carryover effects reduce the costs
of promoting and supporting products.
  
 *enhanced customer preference - this is also a
function of carryover or spillover effects from one
market to another. As had been noted, in a number of
countries well-known global brands are preferred over
domestic ones because of their perception of quality
and superiority.
   
 *improved quality - more research and development
and other up- front product investments can be made
when the product is expected to have a global
customer base. This follows the same logic as
presented in cost reduction. Therefore overall quality
should be enhanced.
   standardized approach.
 *global customers - additionally, products
which are going to be used by the purchaser in
multiple countries are more attractive when
they are standardized. One example would be a
traveler who uses a laptop computer when he
goes to other countries. He will prefer to be
able to get software, repairs, service, hook-ups
etc. that are compatible with his model. If it is a
globally standardized product, this is more
likely. In a different scenario, companies who
want to use computers in multiple locations of
their business need standardized products so
software can be shared, electronic networking
may be enhanced, and so forth.
  
*global segments - increasingly marketers are
discovering segments of consumers which are
identifiable across many of the world's markets.
This is especially evident when the
segmentation characteristics are high income,
high levels of education, lifestyle variables, and
business/industry markets. These common
segments provide sensible rationale for a
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disadvantages of standardization. These include:
 
 *being off-target - a standardized product or other
marketing activity runs the risk of being "something
for everyone, but everything for no one". That is,
products designed to have satisfactory or acceptable
features for a mass global market may not be
sufficiently tailored to beat out competing
alternatives which are more directly customized for
various target markets. This is more critical in
markets with sophisticated or diverse consumers
who have differences in tastes, preferences, or uses.
 *lack of uniqueness - following the same logic,
standardized global products have no novelty nor do
they contribute to a consumer's unique self-concept.
This may be particularly important for socially
conspicuous products, those which convey some
level of status, and those which are considered value-
expressive or personality/culture related.
 *sensitivity to protectionism - protectionist measures
distort market mechanisms in countries where they
are implemented. Protectionist measures still would
not be an overbearing problem if they were applied
uniformly across markets, but in most instances,
trade barriers are unique to specific country markets,
making standardized approaches impractical and
unfeasible.
 *strong local competitors - standardized
approaches often suffer from lack of presence
or a "feel" for the local market. Therefore, local
competitors may be able to construct a total
core and augmented product package which
offers customers more overall value than a
globally standardized offering. The same may
be true with distribution channels and after-sale
support as well as promotional themes,
vehicles, and execution.
 
The likelihood that global marketing and
implementation will not succeed increases
when:
o        Insufficient marketing research is performed in
relevant market areas.
o        Products are overstandardized, especially
relative to the positioning.
o        Frequent follow-up on initial plans and
activities does not take place.
o        The vision emanating from headquarters or
upper management is too narrow and inflexible.
o        Implementation and execution are centrally
dictated such that excessive rigidity and lack of
market responsiveness occurs.
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Honda’s Non-Global Car Models

EUROPE Honda Stream

ASIA Honda City

NORTH AMERICA Honda Element

LATIN AMERICA Honda Fit

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 Pitfalls of Standardization
Pitfalls of Standardization

Insufficient market research

Similarities among customers are assumed, not
proven
Used US campaign/agency in European launch
TV testimonials from ‘unknown’ people
hence local lack of awareness Narrow Vision
Goals should not be narrow and inflexible
Polaroid SX-70 Vision lead from HQ
UK took lead in promoting Domestos
In Germany positioned as dirt remover, not germ
killer
UK ignored this - consumers confused
Overstandardisation
Standardization compromises the positioning strategy Unilever – Domestos
First ‘positioned’ as the expert’s choice in all markets
Then endorsed by John Newcombe (Tennis Champion)
Created a much bigger market for single-lens reflex
cameras world-wide Rigid implementation
Canon AE-1 Some flexibility in implementation needs to be
retained by local units
In US, competitor Tyco offered plastic buckets
Danish HQ refused to act
Poor follow-up Denmark relented after market slide
Follow ups need to be implemented if a campaign is to Now use buckets world-wide
succeed
Lego Buckets
Pritt stick launched as an umbrella brand
failed to capitalise on initial momentum
local business units were under resourced
weak results had to be turned around
Henkel Pritt

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 New product development
Differences between European and North American
new product development programs:

 The NPD process among European firms is

 Identifying New Product Ideas much more formalized.
4 C’s:
 Company  European Go/No Go standards tend to be far
 Customers stricter than American norms.
 Competition
 Collaborators  NPD projects within European firms are more
likely to have a well-defined project leader
and an assigned team of players than
projects run by North American companies;
 Timing of Entry: European teams are much more
multifunctional than American teams.
 Waterfall versus Sprinkler Strategies
 European companies punish project leaders
less in case of failure, reward intrapreneurs
 Waterfall Strategy: Global phased rollout more generously, and offer more seed money
where new products trickle down in a for pet projects.
cascade-like manner

 Sprinkler Strategy: Simultaneous Japanese Companies and Product Churning:

worldwide entry
Global linkages between the new product
development process and national cultures
where cultural differences heavily influence the
NPD process.
 Japanese companies strongly believe in
rushing new products to the markets with
little or no market research and then gauge
the market’s reaction.
 Japanese NPD managers constantly listen to
the “voice of the customers.

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“64 ideas make one successful product”

Number of
surviving
new product
ideas

Idea generation Preliminary Concept Sales Test

(leading markets) screening research (focus forecasting marketing
groups, concept
testing)

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Five Stages of the New Product Development Process
New Products’ Speed of Diffusion
Idea Generation
Local subsidiaries are likely to have some
ideas from their respective markets and Relative advantage – how much better is the new product?
new technology is a common source of
new product ideas The perceived marginal value of the new product relative
the old
Preliminary Screening
The most immediate evaluation of an idea is
whether it is compatible with the company Compatibility – can the product be used in terms of local
objectives, strategies, and resources. infrastructure & customs?
Its compatibility with acceptable behavior,norm,values
Concept Research
Focus Groups offer the development team a
chance to hear spontaneous reactions to a Complexity – is it easy to use?
new concept and hear suggestions for
improvement. The degree of complexity associated with product use

Test Marketing Trialability – is it easy to try the new product?

Once the sales forecast looks promising, the
new product is usually placed in production The degree of economic and or social risk associated with
and test marketed. product use

commercialization
Observability – are the advantages obvious?
The ease with which the product benefits can be
communicated

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Degree of product/service newness
Refers to the extent to which a product or service
is new to the market
New product to existing market
a product never before offered to the market
new product to existing company
A new product that the company offers to the
market;the product competes with similar
competitor offerings
New line
A new product category offered by the company
New item in an existing product line
A new brand that the company offers to the
market in an existing product line
Modification
The alteration of an existing company product
Degree of product/service newness
Innovation
A product new to the world
Radical innovation
The creation of new industries or new standards of
management,manufacturing,and servicing that
represent fundamental changes for consumers,
entailing departures from established
consumption
Dynamically continuous innovation
Innovation that does not alter significantly consumer
behavior but still entails a change in the
consumption pattern
has more disruptive effects than a continuous
innovation,although it generally does not involve
new consumptions patterns,mean the creation of a
new product or considerable alteration of an
existing one designed to fulfill new needs arise
from changes in lifestyles or new expectations
brought about by change
Continuous innovation
Product innovation where there is no disruption in
consumption patterns;such innovation involves
product alterations such as new flavors or new
products that are improvement over the old
offering
Has the least disruptive influence established
consumption patterns. Alteration of product is
almost always involved rather than the creation of
a new product
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Counterfeit Products
Counterfeit products are damaging to the brand’s equity & must
be controlled, often by direct intervention.
A Rolex watched bought from
Design counterfeiting. Copying designs or scents of another a sidewalk vendor in New York
company is certainly more likely to be
Brand name counterfeiting. Selling counterfeit products as brand counterfeit when purchased
name originals for $20 as compared with a

$2000 watch acquired from an
authorized distributor. It will be
1. COUNTERFEITS OR KNOCKOFFS ARE FAKE PRODUCTS far more difficult determining
THAT ARE DESIGNED AND LABELED SO AS TO whether a gray good has been
MISLEAD THE CUSTOMER INTO ASSUMING THAT purchased unless the
THEY ARE “THE REAL DEAL.” consumer knows which
2. WORLDWIDE LOSSES DUE TO COUNTERFEITING IS product lines are available in
OVER $20 BILLION ANNUALLY certain markets and whether
the vendor advertises styles
3. COUNTERFEITERS OPERATE AT ALL LEVELS OF THE
ECONOMY, JUST ABOUT ANY PRODUCT OR and prices that are not
TECHNOLOGY DEVELOPMENT IS FAIR GAME customary for a particular
brand.

Actions Against Counterfeits

“SEARCH & DESTROY” –

firms hire private investigation agencies to track down fakes in
stores and locate counterfeit factories

CODING DEVICES –
firms encode unique signatures to products
(e.g. Levi’s micro-weave patterns, Microsoft’s Windows 95
tracking codes)

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Global product elements
Packaging The marketing activity of creatively
designing and producing the appropriate
container or wrapper for a product suitable
to target markets relative to competitors
products
“The container that holds your product is just
as important as the contents-often more
so. the package is the first thing your
customer will see. It is a portal into the
product itself, a chance for the company
to maximize opportunity with the
consumer and engage them in the product.”
Criteria for choosing packaging material
 Protection
 Display value
 Cost
 Convenience
 Size
Design : refers to the organization of the
elements on a package. An effective
package design is one that permits good
eye flow and provides consumers with a
point of focus.
Shapes arouse certain emotions and have
specific connotation
Label-descriptive part of a products package
that lists the brand name or symbol,name
and address of manufacturer or distributor,
product composition and size and
recommended uses
a. Identifies the product/brand
b. Might alsograde the product
c. Might promotes the product through
its attractive graphics.
UPC (Universal Product Code)
Bar code on products package that provides
information read by optical scanners and
computer systems. Which recognize
items and print their prices on cash
register receipts.
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Global Brands
Global product elements
Brand
Name, term, sign, symbol or design or a
combination of them, intended to identity the
goods or services of one seller and to
differentiate them from those of competitors.
 Global Brands
 A truly global brand is one that has a
consistent identity with consumers across the
world.
 The development costs for products
launched under the global brand name
can be spread over large volumes.
 A global brand has much more visibility
than a local brand.
 The fact of being global adds to the
image of a brand country.
 Global brands are also able to leverage
the country association for the product.
brand architecture
 refers to the hierarchy of brands within a single
company.
 It is the interrelationship of the parent company,
subsidiary companies,and products
Monolithic brand architecture
 In this scenario,there is a strong,single master
brand around which everything is unified.
 Customers have a clear picture of this
company-its persons,its values-and make
purchasing decisions based on loyalty.the
visual identity and the brand name are
consistent across products and in global
locations
 Examples: Starbucks, The Body Shop
Sub brand or subsidiary brand architecture
 In this scenario,a branded subsidiary product is
combines with the core brand identity.
 Example: Sony disc man
Endorsed brand architecture
 There is marketing synergy between the
product or division name and the parent name.
 Example: Polo and Ralph Lauren
Pluralistic brand architecture
 A parent has a series of products that are well
known consumer brands
 Example: Jeep Cherokee (Daimler Chrysler)
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 Johansson, Johny K., and Hirano, Masaaki
(1999), "Brand reality: the Japanese perspective"
Journal
, of Marketing Management , January-
April, p. 93.
  
 Brands are more important since global
 The Japanese conception of brand identity has
started to change as Japanese companies face
consumers have become more pervasive.
increasing competition from Western rivals. As more people travel, work or study in
Traditionally, brands in Japan have symbolized various parts of the world, consumers
not only the company and the product, but also become attracted to familiar brands that
the individual employee's sense of identity and are available in a variety of different
belonging to the company. Brand management locations. The risk associated with new
is a concept that is developing slowly in Japan. product trial can be totall eliminated by
 . Johansson, Johny K., and Hirano, Masaaki the globalization of consumer goods
(1999), "Brand reality: the Japanese perspective"
markets. Clearly brands play a more
Journal
, of Marketing Management , January-
April, p. 93. major role in higher involvement
  
purchases, since consumers will be less
willing to try an unknown brand when the
 The Japanese conception of brand identity has
started to change as Japanese companies face financial risk is higher. Items bought
increasing competition from Western rivals. infrequently are also likely to be
Traditionally, brands in Japan have symbolized dominated by brands, since consumers
not only the company and the product, but also will have fewer bases for evaluating
the individual employee's sense of identity and alternatives.
belonging to the company. Brand management
is a concept that is developing slowly in Japan.
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Intellectual property
• deals with patents, trademarks and copyrights.
These are intangible assets: the right to protect
your invention from imitation, your brand name
from appropriation, or a song you wrote from
performance and plagiarism.
• Intellectual property laws confer a bundle of
exclusive rights in relation to the particular form
or manner in which ideas or information are
expressed or manifested, and not in relation to
the ideas or concepts themselves The term "
intellectual property" denotes the specific legal
rights which authors, inventors and other IP
holders may hold and exercise, and not the
intellectual work itself.
• Intellectual property laws are designed to protect
different forms of subject matter, although in
some cases there is a degree of overlap.
• Copyright may subsist in creative and artistic
works (e.g. books, movies, music, paintings,
photographs, and software) and give a copyright
holder the exclusive right to control reproduction
or adaptation of such works for a certain period
of time (historically a period of between 10 and
30 years depending on jurisdiction, more recently
the life of the author plus several decades).
• A patent may be granted for a new, useful, and
non-obvious invention, and gives the patent
holder a right to prevent others from practicing
the invention without a license from the
inventor for a certain period of time (typically
20 years from the filing date of a patent
application).
• A trademark is a distinctive sign which is used
to distinguish the products or services of
different businesses.
• An industrial design right protects the form of
appearance, style or design of an industrial
object (e.g. spare parts, furniture, or textiles).
• A trade secret (which is sometimes either
equated with, or a subset of, "confidential
information") is secret, non-public information
concerning the commercial practices or
proprietary knowledge of a business, public
disclosure of which may sometimes be illegal.
• Patents, trademarks, and designs rights are
sometimes collectively known as industrial
property, as they are typically created and used
for industrial or commercial purposes.
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 International pricing

 Price is the only marketing mix  Several options exist to lower the export
instrument that creates revenues. price:
All other elements entail costs.
Global pricing

 Global pricing is one of the most 1. Rearrange the distribution channel

critical and complex issues in
international marketing.
2. Eliminate costly features (or make
them optional)
 Main drivers (4Cs) affecting global
pricing:
3. Downsize the product
 Company (costs/goals)
4. Assemble or manufacture the
product in foreign Markets
 Customer Demand
5. Adapt the product to escape tariffs
 Competition or tax levies

 Channels (markups)

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Prices higher in the home market
 Setting prices in the home market than in the
international market is justified by, among
others,one or a combination of the following:
 A lower labor or raw material cost in the
international market
 Strong local competition in the international
market
 A lower buying power of host country
consumers relative to consumers in the
company's home market
 A firms goal to increase market share by using
a penetration pricing strategy in the
international market,
International pricing decisions
Prices lower in the home market
 Setting prices lower in the home country,
compared to company prices in the
international market,is justified among other by
one or a combination of the following
 There may be no cost advantages to producing
overseas, such as economies of scale and labor
to justify a lower price
 There may be few or no challenges from
competition in the international market
 The market potential might be limited
 Buyers in the international market can afford to
the higher price
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 Aggressive export pricing
 A pricing strategy that prices products below
market price in order to penetrate new markets
 Dynamic incremental pricing
 A pricing strategy whereby a company
assumes that it will have certain fixed costs
whether or not it exports its products overseas
and does not factor in its international price
marketing and promotion costs for domestic
distribution not its full overhead
 Local pricing
 A pricing strategy in which different prices are
charged in different markets,reflecting
differences in consumer purchase power,
distribution costs,tax systems, or other market
traits
International pricing decisions
 Standardized pricing
 a pricing strategy in which the same price is
charged for a product regardless of local
market conditions
 Penetration pricing
 A pricing strategy in which a product is first
priced below the price of competitors products
in order to quickly penetrate the market at the
competitors expense and then raised to target
levels
 Skimming strategy
 A pricing strategy in which product is priced
above that of competitors products, when
competitions minimal,to quickly recoup
investments;consumers responding to
skimming strategies are more concerned with
quality,uniqueness,and status,rather than price.
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 Why is it so difficult to set and control uniform standard
prices in global markets?
 Pricing in a domestic setting is a complex and imprecise
task, but that complexity is magnified geometrically when
extended to international markets. A large number of
factors affect price setting outside the domestic market:
          Costs and experience curves: the Cost-plus formulas
may be hard to use, especially in exporting, since all the
relevant costs may be hard to determine in advance. In
addition, headquarters usually has to make a decision
whether only the direct costs will be charged against
products in foreign markets, leaving domestic prices to
cover fixed overhead and administrative costs, or what
percentage of overhead and administrative costs those
products should carry. Marginal cost coverage is often
preferred when penetrating new markets or reducing
excess inventory. When those products are treated as
stand-alone profit centers, full cost accountability is usually
allocated. Low introductory prices may also be used in
anticipation of experience-curve effects with increased
production and sales volume. Expanding into other
markets increases output and therefore scale and scope
economies, however, per unit cost reductions in unknown
markets can be difficult to forecast accurately.
          Competition and demand: Competition may take the
form of foreign vs. domestic, not only in terms of
nationalistic perceptions, but also the ability of foreign
imports to compete on the same cost/price basis as
domestic offerings. Competitive parity may be an
approach used when comparing prices of other foreign
product alternatives in the marketplace. Further, a
competitive price basis may be determined by assessing a
product's unique or competitive features/benefits package
and adjusting price with a premium price differential.
Demand is also considered in determining what the market
will bear. A unique product in a strong demand market has
the ability to carry a high profit margin. Conversely, a
commodity-type product in a soft demand market reduces
markups significantly. Thus uniform prices across markets
with different competition and demand structures are not
very realistic.
          Price escalation, price quotes, trade credit: Price
escalation is a problem that primarily plagues the export
marketer. Prices in foreign markets are generally higher than
those at home because of the increased costs arising from
tariffs, duties, exchange rate fluctuations, transportation
and customs costs, etc. These costs can, as mentioned, be
hard to estimate in advance, and therefore make advance
price quotations difficult to determine. Price escalation may
be thwarted somewhat through knockdown assembly
shipping, a change in the location of origin of the product
or foreign direct investment. Final price quotes on exports
must also consider how much of the logistics costs are to
be assumed by the buyer and how many by the seller. And
the total price quote may not be as important on very
expensive purchases as the favorability of trade credit
arrangements. Producers who can obtain, offer, or arrange
favorable payments and terms for buyers are able to charge
a total price that is higher than competitors who are unable
to offer these services.
 
          Exchange rates, hedging: For exporters there is also
the problem of exchange rate fluctuations. Prices quoted
well in advance based on exchange rates at the time may
result in a windfall profit or a large loss if exchange rates
between the relevant currencies are significantly different at
the time payment becomes due. Hedging is a method of
protecting one or more of the parties against these
uncontrollable changes. It may involve forward purchasing
of currencies, exchange of currencies, or other methods to
insure the same "value" of exchange when the transaction
is complete.
          government intervention: Foreign governments may
affect price setting by artificially inflating or deflating the
values of their home currencies. They may also set price
controls which usually prohibit setting prices above a
predetermined level without approval by the government.
Governments also have different approaches to regulating
price discrimination - in some countries regulation is strict,
in some it is lax, and in some it is nonexistent, although
most, if not all, governments take a stand against bribery, at
least in principle.
kdacanay
24
characteristics of the three approaches to pricing in
global companies?
   American‑made products are cheaper abroad?
 Polycentric pricing - Prices are set locally in
each market without constraints from
headquarters. Prices may vary considerably
 Because of its size, the United States is an
across markets, but local adaptability to
changing market conditions is enhanced.
   very free and open market, with strong
 Geocentric pricing - This is the most common of
the pricing strategies employed in foreign
markets and it revolves around the use of a
global or regional standard plus a markup that
is variable across countries. The comparison
price is derived for the home country or some
other lead country for the world or regional
trading bloc. Coordination across markets can
be difficult so gray trade is a consideration.
Geocentric pricing poses the greatest execution
challenges when considering product line
pricing, but still is probably the most well-
balanced compromise to pricing strategy.
 Ethnocentric pricing - Using this approach, the
same price is charged to all customers
regardless of their location. This produces the
most uniform prices worldwide, but may not be
realistic. It is generally based on a cost-plus
formula and works best with highly
standardized products and marketing
approaches.
 Why are so many foreign‑made products
cheaper in the United States, while very few
How will global electronic commerce change
this?
important market for many foreign producers,
in some cases their greatest market. It is also a
competitive pressure on prices. Regulations are
kept to a minimum internally, and lack of
enforceable resale price maintenance has
resulted in strong intra-brand competition. The
same brand of a product is often sold at widely
varying prices in different types of retail outlets.
This is also why American consumers tend to
be very price conscious -- widely different prices
mean that you need to find out whether you
might get a better deal somewhere else. In their
home markets, many of these foreign producers
are often protected by natural and artificial
entry barriers, and their dominance there makes
it possible for them to maintain higher prices
than in the United States. Examples include
Japanese camera makers and European auto
manufacturers and apparel makers. In contrast,
American companies have often less direct
protection, and their wavering allegiance to
American workers and American plants has
discredited any pro-American buying sentiment
on the part of their consumers. As a result, they
cannot keep prices high at home. At the same
time, their large home market makes any one
market abroad often seem insignificant, and
kdacanay
makes it tempting for them to keep prices 25
higher there, only skimming the foreign markets.
 From a marketing viewpoint, what are the
advantages and disadvantages of allowing
local units to set their own prices?
   Dichotomy", Journal of Global Marketing , vol. 8,
 From a traditional marketing perspective the
local units should be allowed to set prices so as
to adapt optimally to local market conditions.
This means that the local units should set their
own prices -- the classic case of what economic
theory calls "price discrimination." The local
units maximize their profits, and the firm
maximizes its total profits.
   firms are global while "J" companies are
 The main drawback of such a practice is that
local markets are not often completely
separable from each other. Customers can
move between markets. One supplier can ship
to several markets, especially with the help of a
gray trader. This means that price
discrimination will be unworkable -- the lower
price markets will sell a lot, the higher price
markets little, as customers shift their buying to
the lower price alternative. There is need for
coordination -- for "joint optimization," in the
economic theory language.
   are multiple currencies, trade barriers,
 Apart from the sales effects of gray trade,
different prices in different markets can also
lead to a diffusion of brand image and
positioning. Finding a Seiko watch at a rock-
bottom price in a Hong Kong store makes it
difficult to maintain a high quality image of the
make -- which is why Swatch attempts to
maintain its premium pricing in its markets by
limiting its distribution to a controllable number.
 . Samli, Coskun, and Jacobs, Laurence (1994), "
Pricing Practices of American Multinational
Firms: Standardization vs. Localization
no. 2, pp. 51-71.
  
 This article discusses findings regarding the
international pricing practices of a sample of
Fortune 500 companies. Specifically, an
attempt is made to determine if these
companies behave in an "A" or "J" manner on
the basis of their pricing practices. The "A"
multilocal. The authors also explore some of
the specific international pricing activities of
these firms and try to make an implicit
connection between these activities and the
international growth of their businesses.
  
 2. Cavusgil, S. Tamer (1996), "Pricing for global
markets",Columbia Journal of World Business ,
Winter, vol. 31, no. 4, pp. 66-78.
  
 Many factors contribute to the complexity of
pricing in international markets. Among these
additional cost considerations, and longer
distribution channels. This article discusses the
key questions asked by any firm making price
decisions across borders. First the article
suggests international price setting decision
rules and processes. In addition, the topics of
key pricing considerations, location of pricing
responsibility in the multinational corporation,
price setting approaches,kdacanay
and transfer pricing
are addressed. 26
 Marketing channel
 An organized network of agencies
and institutions, which performs the
activities required to link producers
with user to accomplish the
marketing task
Global distribution
Nature & Importance of Marketing
Channels
 Channel choices affect other
decisions in the marketing mix
 Pricing, Marketing
communications
 A strong distribution system can be
a competitive advantage
 Channel decisions involve long-term
commitments to other firms
 How Channel Members Add Value
 Intermediaries require fewer
contacts to move the product
to the final purchaser.
 Intermediaries help match
product assortment demand
with supply.
 Intermediaries help bridge
major time, place, and
possession gaps that separate
products from those who
would use them.
Distribution-
 activities that make products available to
customers when and where they need them.
 The distribution system:
 determines a product's marketing
presence and the buyers' accessibility to
the product
 entails a long-term commitment, easier to
change other aspects of the marketing
mix.
 Changing Distributors
 The distribution channel configuration for
entry into a foreign markets is rarely
optimal once the product is established
on the market
 The traditional reason for termination of a
distributor is
 The exporting firm finds that the
distributor is not doing a good enough
job in the market
 Multiple Channels (Parallel Distribution)
Channel changes do not necessarily
involve termination of contracts
 In some cases multiple channels emerge
or are created
kdacanay 27
 How is systematic screening and assessment
of countries performed? How is the information
needed for this process obtained?

 There are four stages in the basic evaluation

process:
 2) Stage 2/ Preliminary/Screening
 1) Stage 1/Country Identification  
 Preliminary screening involves rating identified countries
 All countries which might possibly be
considered for entry are included in a broad
screening based on general indicators such as
population statistics, GNP, growth rates,
political and economic features and trends.
The main objective at this stage is to narrow
down the list of potential country markets for
more specific screening and analysis.
 Sources of data useful for preliminary screening include
 Since basic and general information is needed
at this stage, widely available secondary
sources are utilized. These may include
government publications, computer databases
and on-line services, trade publications,
international business and research firms, and
the International Trade Administration of the
Department of Commerce. The United Nations
provides valuable publications containing
country data and information. Such
information may be used to produce cluster
maps of countries, showing which countries are
similar or far apart when compared on some
selection of variables.
on macrolevel variables such as political stability,
geographic distance, economic development, currency
exchange, entry costs, customs duties, transportation
and warehousing costs, and so forth. Again the primary
objective is to eliminate countries not meeting basic
criteria.
theBusiness International Market Report which offers
indicators of market size, market growth, and market
intensity, the BI indices published by the Economist
Intelligence Unit which identify growth countries and
emerging markets, Political
the Risk Yearbook assessing
probability of violent or sudden governmental changes
and social unrest as well as limitations placed on
foreign business operations,Institutional
and Investor
offering semi-annual credit ratings. 
kdacanay 28
 3) Stage 3/In-depth Screening
 The most costly and time-consuming screening
is done in Stage Three. Data examined relate
specifically to the industry and product markets.
Microlevel variables examined include market
potential and actual market size, market growth
rate, competition's strengths and weaknesses,
level of entry barriers, in-country market
segments, specific company resource
constraints, industry-specific government
regulation, etc.
 Availability of needed data varies by industry
and country. Trade associations and
government agencies play important roles in
providing information for in-depth screening.
Syndicated data is also extremely useful.
Cluster maps are often used at this stage as
well, but using the more specific criteria
researched at this stage.
 4) Final Selection
 During this stage company objectives,
resources, and capabilities are matched against
the screening information gathered in the
previous three stages to determine the country
or countries chosen for market entry. Each
selection factor is rated in importance for the
overall evaluation. Countries are ranked on the
basis of attractiveness.
  
 Secondary information sources play a minor
role at best at this stage. No final selection
should be made, however, without direct
experience acquired through actual visits to the
countries to get first-hand confirmation that the
selection is appropriate. Numerous
observations may be made regarding the way
of life, nature of the people, logistics systems,
and more.
kdacanay 29
Three modes of entry

LICENSING
Host Country
Home country Blueprint : “how to do it”

Ho
st
Co
Host County

u nt
ry

WHOLLY-OWNED SUBSIDIARY STRATEGIC ALLIANCE (J.V.)

A replica of home A “joint effort”

kdacanay
30
 Exporting
Degree of goods and services produced and based in
one country that are sold abroad

 Direct exporting,
 using market country agent or distributor
who takes ownership of the merchandise
when it enters their country
 using own sales representatives which
entry mode represents only its products,not those of
other companies

 is the institutional arrangement by which a

 Practice by which a company sells its
products directly to buyers in its target
firm gets its products,technologies,human
market
skill or other resources into market

 indirect exporting
 Practice by which a company sells its products t
intermediaries who then resell to buyers in a target
Three categories of entry modes available to market
companies
 via agents (individuals or organizations that
represent one or more indirect exporter in a
1. Exporting and counter trade target market)
2. Contractual entry
 export management companies( company
3. Investment entry that exports products on behalf of indirect
exporters)
 export trading companies ( company that
provides services to indirect exporters in
addition to activities related directly to clients
exporting activities)

kdacanay
31
Why companies export
1. Expand sales Selecting and managing entry modes
2. Diversify sales
3. Gain experience

Imports
goods and services brought into a country that
are acquired from organizations located
abroad

Counter trade
Practice of selling goods or services that are paid for ,
 counter purchase
in whole or in part,with other goods or is the sales of goods or service to a country
services by a company that promises to make a future
purchase of a specific product
Types:
 Switch trading
barter Proactive in which one company sells to
another its obligation to make purchase
exchange of goods or services directly for in a given country
other goods and services without the use of
money
 Buyback
Is the export of industrial equipment in
return for products produced by that
equipment

kdacanay
32
Contractual entry modes
 The products of some companies simply
cannot be traded in open markets because they Selecting and managing entry modes
are intangible

Contract options:

Licensing
 a practice by which one company owning
intangible property grants another firm the right
to use that property firm a specified period of
time

 HP(US) licensed from canon(Japan) a Exclusive license : grants a company the

printer engine from use in its
monochrome laser printers
 refers to offering a firm’s know-how or other
intangible asset to a foreign company for a fee,
royalty, and/or other type of payment
Advantages for the new exporter
The need for local market research is reduced
The licensee may support the product strongly
in the new market
exclusive right to produce and market
products made from that property in a
specific region
Non exclusive license : grants a company the
right to use a property but does not
grant its sole access to market
Cross licensing : occurs when companies use
licensing agreements to swap
intangible property with one another

Disadvantages
Can lose control over the core competitive
advantage of the firm.
The licensee can become a new competitor to
the firm
kdacanay
33

Selecting and managing entry modes
Franchising
 Practice by which one company supplies
another with intangible property and other
assistance over an extended period
 A form of licensing where the franchisee in a
local market pays a royalty on revenues -
and sometimes an initial fee - to the
franchisor who controls the business and
owns the brand.
 The local franchisee typically invests money
in the local operation and has the right to
operate under the franchisor’s brand name.
 The franchisee gets help setting up the
operation, usually according to a well-
developed blueprint. The business is
typically very standardized (fast food
operations is a case in point).
Advantages:
1. franchiser can use franchising as a
low cost,low risk entry mode into new
markets
2. allows rapid geographic expansion
3. Franchiser can benefit from the cultural
knowledge and know how of local
managers
4. The basic “product” sold is a well-
recognized brand name.
5. The franchisor provides various market
support services to the franchisee
6. The local franchisee raises the
necessary capital and manages the
franchise
Disadvantages:
• franchiser may find it cumbersome to
manage a large number of franchisees
in a variety of national markets
• Franchisees can experience a loss of
organizational flexibility in franchising
agreements
• Careful and continuous quality control
is necessary to maintain the integrity
of the brand name.
Management contracts
 Practice by which one company supplies
another with managerial expertise
kdacanay
34
Investment entry mode
Wholly owned subsidiary
 Facility entirely owned and controlled by a
single parent company
 Undertaken by the international firm for several
reasons
 To acquire raw materials
 To operate at lower manufacturing
costs
 To avoid tariff barriers
 To satisfy local content
requirements
Joint venture
Separate company that is created and jointly owned
by two or more independent entities to achieve
a common business objective
Involve the transfer of capital, manpower, and
usually some technology from the foreign
partner to an existing local firm.
Examples include Rank-Xerox, 3M-Sumitomo, several
China entries where a government-controlled
company is the partner.
Selecting and managing entry modes
 Forward integration joint venture , the parties
choose to invest together in downstream
business activities-activities farther along in the
value system that are normally performed by
others
 Backward integration joint venture , The joint
venture signals a move by each company
into upstream business activities-activities
earlier in the value system that re normally
performed by others
 Buyback join ventures is formed when each
partner requires the same components in its
production process
 Multistage joint venture often results when one
company produces a good or service
required by another.
kdacanay
35
 Selecting and managing entry modes
Strategic alliance
relationship whereby two or more entities corporate
to achieve the strategic goals of each
 Typically a collaborative arrangement
between firms, sometimes competitors,
across borders
 Based on sharing of vital
information, assets, and technology
between the partners
 Have the effect of weakening the tie
between potential ownership
advantages and company control
Distribution Alliances
Also called “piggybacking”, “consortium
marketing”
Examples
SAS, KLM, Austrian Air, and Swiss Air
STAR Alliance (United Airlines, Lufthansa, Air
Canada, SAS, Thai Airways, and Varig
Brazilian Airlines)
Chrysler and Mitsubishi Motors
Manufacturing alliances
 Shared manufacturing examples
 Volvo and Renault share body parts and
components
 Saab engines made by GM Europe
 Advantages
 Convenient
 Money saving
 Disadvantages
 The organization must deal with two
principals in charge of production, harder
to communicate customer feedback
 Can put constraints on future growth
R&D Alliances
 Provide favorable economics, speed of
access, and managerial resources and are
intended to solve critical survival
questions for the firm
 Used to be seen as particularly risky, since
technological know-how is often the key
competitive advantage of a global firm
 The risk of dissipation has become less of
a concern, however, as technology
diffusion is growing ever faster anyway.
kdacanay
36
 Entry Modes and Local business Control
The local business can be controlled to varying degrees,
quite independent of the entry mode chosen. The
typical global firm maintains a sales subsidiary to
manage the local business. Examples:

m a r k e tin g c o n tr o l
m o d e o f e n tr y in d e p e n d e n t a g e n t jo in t w ith a llia n c e p a r tn e r o w n s a le s s u b s id ia r y
e x p o r tin g A b s o lu t v o d k a in th e U S T o s h ib a E M I in J a p a n V o lv o in th e U S
lic e n s in g D is n e y in J a p a n M ic r o s o ft in J a p a n N ik e in A s ia
s t r a t e g i c a l l i a n c e a u to s in C h in a E u r o D is n e y B la c k & D e c k e r in C h in a
FDI G o ld s ta r in th e U S M its u b is h i M o to r s in U S P & G in th e E U

kdacanay
37
 Seiko’s Channels of Distribution
Europe Hong Kong Japan North America

Importer Importer Importer

Distributors Distributors Distributors Distributors

Retailers Retailers Retailers Retailers

Broken arrows denote the flow of Seiko watches through unauthorized channels of distribution.
Solid arrows denote the flow of Seiko watches through authorized channels of distribution.

kdacanay
38

Global retailing
 All the activities involved in selling products and
services to final international consumers for
their personal consumption
 The logistical and operational know-how of
leading retailers is helping to increase the trend
of retailing being globalize at a fast rate
 The rapid deployment of point-of-purchase
information technology has shifted the power in
the channel toward large retailers
 Retailers are the middlemen who buy from
wholesalers and manufacturers and sell directly
to the ultimate consumer.
 Theretailing structure involves stores
(supermarkets, department stores, specialty
stores) as well as banks, restaurants, mail-order,
etc.
 Different economies have different retail
structures (e.g. Gillette blades are sold through
drugstores in the US, tobacco shops in Italy,
department stores in Germany, on the street in
Moscow, at movie counters in Thailand, & from
traveling vans in India)
Global retailing
 Retailing and Lifestyles
 The retailing structure has to adapt to the
varying living conditions (the lifestyles) of
individual households
 Creating New Channels
 As economic growth takes place and
global trade expands, new alternatives
emerge
 Global expansion of retailing is still difficult.
Most large retailers are still pre-dominantly
domestic.
 The Body Shop is one success story. The
factors that helped its global expansion include:
 1. STANDARDIZED PRODUCTS, GLOBAL BRAND
 2. GLOBAL SEGMENTS
 3. A STRONG STORE “CONCEPT”
 4. CONCEPT MOBILITY
 5. SIMILAR INFRASTRUCTURE (REPLICABILITY )
kdacanay
39
 various characteristics of retailing across local country
markets? How has retailing become an increasingly
globalized activity?
 The variety within retailing across countries is greater in
general than that in wholesaling. The types of retailing
outlets and the number of retailers are notable variables.
The U.S. has many stores and many employees in retail,
while Europe has fewer stores and fewer employees per
store. Japan, as in wholesaling, has many stores, but few
people employed in each one. The great variations are
most closely associated with different lifestyles in the
countries being served. Since retailers deal with ultimate
consumers and different infrastructures, their services and
structure have traditionally been much more localized.
Overall, as economic development progresses, some
aspects of lifestyle become more convergent, and the
potential for retailing to become more globalized is greater.
With differing infrastructures and channel alternatives,
some frequently used methods of retailing for a given
product may not exist or be available to the marketer for
competitive reasons. This will usually require new channel
creation. Forms of retailing penetrating foreign markets
include catalogs, convenience and/or self-serve stores,
discount stores, and franchises. Sometimes channel
systems which have been replaced domestically are
resurrected in foreign markets due to their particular
effectiveness in those areas. An example is door-to-door
selling which, because of trends like increased crime and
dual career families, has largely been retired in the U.S. but
which enjoys great success in Japan and other countries.
 Retailing has been among the least globalized of the
marketing activities, but that appears to be changing rather
rapidly. Leading companies in different types of retailing (i.e.
, Wal-Mart in discount stores, Makro in wholesale clubs,
Delhaize and Marks & Spencer in supermarkets, etc.) are
heading the expansion into foreign markets. Some have
been notable successes while others have yet to take hold.
And while globalized retailing holds opportunities for
manufacturers who want to have central coordination of
channel activities, it also poses the likelihood that these
large worldwide retailers will become the dominant
members of the channel structure, therefore reducing the
power and influence of those same manufacturers.
 Fram, Eugene H., and Ajami, Riad (1994), "Globalization of
Markets and Shopping Stress: Cross-Country
Comparisons",Business Horizons , vol. 37, no. 1, pp. 17-23.
 
 With the purported and often celebrated convergence of
consumers across countries and cultures, this article
examines whether significant differences exist between
countries in how shoppers perceive the shopping process.
Four different country settings were employed - The US,
Singapore, Turkey, and Jordan. Specifically, shopping
stress is a variable of focus. Three of the four countries
reflected significant shopping stress, with Singapore being
the exception. Comparisons of other perceived shopping
aspects across countries are also discussed.
  
 5. Howard, Kim (1994), "Global Retailing 2000",Business
Credit , February, pp. 22-24.
 Retailing has been traditionally "local" because it required
knowledge of the needs and habits of specific groups of
consumers. However, with more trade barriers dropping,
retailing has been added to the list of businesses that must
sell globally to stay competitive. The author contends that
markets will be divided into three regional blocs: the
Americas, Europe, and the Far East, with little integration
between the three. Retail is also moving toward
specialization with store examples such as Home Depot
and Foot Locker. The report makes general conclusions
about the next decade of global retailing. Several strategies
for success are given, including implementing micro-
marketing, developing retail technology, and investing in a
partner.
kdacanay
40
 global logistics?
  
 Competition and Technology forces combine to drive
logistics toward globalization even though decentralizing
to maximize customer satisfaction in local markets has
been a prevailing strategy. Since transportation,
warehousing, materials management and inventory control
are areas in which large costs may be incurred, companies
are looking to streamline and consolidate to reduce those
costs. Technologies in equipment and communications
systems have enabled faster, more efficient logistics which
can be controlled through more centralized operations.
These innovations have allowed closer tracking of
shipments, shorter lead times on orders, tighter inventory
control, and more centralized storage of goods until the
time they are needed.
   goods being shipped from more centrally
 Air Express systems are increasingly cost efficient, which,
although air is the most expensive transport method,
makes it a more attractive alternative for shipping goods
overseas. Air Express companies like FedEx, DHL, UPS and
others are becoming oriented to offering a wider range of
services to their customers. They offer pick-up, sorting,
customs clearance, one or two day delivery, and some of
these systems even rent out space for storage of goods
which, when ordered, can then be shipped directly through
air express services from their facilities.
   This will not occur overnight.
 Ocean Carriers are better for shipment of bulky, non-
perishable, lower unit value goods. Global carrier alliances
pool their resources to share routes, vessels, port facilities,
provide more cargo destinations and faster, more
economical customs clearance. Technology has driven the
creation of large-capacity lifting cranes, bigger and faster
ships, more current warehousing facilities, and
computerized processing. Future technologies will be
used to upgrade port systems.
  
 Overland Transport is crucial once overseas
goods leave air or sea ports and move inland.
The inland road and rail systems in the
European Union are predicted to be strained
with the greater movement of goods between
member countries, not to mention those foreign
located distribution centers. While North
American rail systems pale in comparison to
those in Europe when it comes to transporting
people, North American systems are much
further ahead in freight management systems
and technologies than European counterparts.
Improved rail systems will need roll-on-roll-off
capabilities and RoadRailers, and expensive
truck/rail terminals will have to be constructed.
  
 Warehousing is becoming more centralized in
response to the ability to deliver goods faster
and cheaper than before. Now it is not as
crucial to have distribution centers in the
customers' back yards to provide prompt
service. Fewer facilities definitely increase
overall efficiency and decrease total logistics
costs.
41
General merchandising stores

 Specialty stores
 Retailer that offer a narrow product line and
wide assortment

 Specialized markets
 Markets that contain specialty stores
specializing in particular product
 Department stores
 General retailers that offer a broad variety of
goods wand wide assortments
 General merchandise discount
 Retailer that sell high volumes of merchandise,
offer limited service,and charge lower prices
 All purpose discount
 General merchandise discount stores that offer
a wide variety of merchandise and limited
depth
 Category specialist/category killer
 Large general merchandise discount stores that
carry a narrow variety of merchandise and a
wide assortment
 Off price retailers
 Retailers who sell brand name products and
designer merchandise below regular retail prices
 Catalog showrooms
 Showrooms displaying the products of catalog
retailer,offering high turnover,brand name goods
at discount prices

kdacanay
42
Food retailers
 Retailers selling selling primarily food products

 Conventional supermarkets
 Self service food retailer with annual sales of
more than $2 million and with an area less
than 20,000 square feet  Warehouse clubs/wholesale clubs
 Stores that require members to pay an annual
fee operating in low overhead, warehouse type
 Superstores
facilities, offering limited lines of brand name,
 Larger retailers such as combination stores or and dealer brand groceries,apparel,appliances
hypermarkets that sell food, drugs, and other and other goods at a substantial discount
products

 Convenience stores
Combination stores  Small retailer located in residential area,open
 Medium sized retail stores that combine food long hours, and caring limited lines of high
and drug retiling turnover necessities

 Hypermarkets
 Very larger retail stores that combine
supermarkets, discount and warehouse
retailing principles

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Non store retailing
 Interactive home shopping/ electronic retailing/
internet retailing
 Selling through the internet using websites to
increase market penetration and market
diversification
 Vending machines
 Interactive modes of retailing convenience
goods
 TV home shopping
 Retailing through cable channels selling to
consumers in their homes, through infomercial
and through direct response advertising shown
on broadcast and cable TV
 Direct mail retailing
 Retailing using catalogs and other direct mail,
instead of brick and mortar stores
 Catalog retailer
 Retailers selling products through catalogs
 Direct selling
 Selling that involves a salesperson,typically an
independent distributor,contacting a consumer
at a convenient location-at his or her home or
workplace, demonstrating product use and
benefit,taking orders,and delivering the
merchandise
 Network marketing/multilevel marketing
 Using acquaintance networks through an
alternative distribution structure for the purpose
of distribution
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The World's Top 10 Retailers (WMT, COST)
By J. William Carpenter | December 24, 2015
Investopedia
1. Wal-Mart Stores, Inc.
Wal-Mart Stores, Inc. (NYSE: WMT) is the world's
largest brick-and-mortar retailer by a substantial
margin. The company reported worldwide revenue of
$485.7 billion for its 2015 fiscal year, a year-over-
year increase of about 2%. It operates 11,453 store
locations in 27 countries. About $228 billion of its
2015 revenue, nearly 60% of the total, is attributed to
operations in the United States. Most of the
company's store locations worldwide operate under
the Walmart brand. However, the company also
operates a number of other retail chains, including
Sam's Club membership warehouse stores around
the world, ASDA stores in the United Kingdom,
Bodega Aurrera stores in Mexico and Seiyu stores in
Japan. As of December 2015, Wal-Mart Stores, Inc.
has a market capitalization of about $194 billion.
 2. Costco Wholesale Corporation
 Costco Wholesale Corporation (NASDAQ: COST) is
a membership-only warehouse retail chain with
operations in nine countries. The company reported
worldwide revenue of $112.6 billion for fiscal year
2014, including more than $2.4 billion in revenue
attributed to annual customer membership fees.
Year-on-year revenue growth amounted to about
7.1%. Costco operates 671 warehouse locations
around the world, including 474 locations in the U.S.
The company opened 30 new warehouse locations
in 2014 and plans to open another 34 locations in
2015. As of December 2015, Costco has a market
capitalization of $73.6 billion.
 3. Kroger Company
 Kroger Company (NYSE: KR) is the third-largest
retailer in the world by revenue and the largest
grocery retailer in the U.S. It reported total sales of
$108.5 billion for fiscal year 2014, an increase of
10.2% over the prior year. Kroger operates 2,625
supermarkets and multi-department stores, which
combine to make up 93% of company revenue. The
company also operates 782 small-format
convenience stores and 326 jewelry stores. It
operates stores under more than 30 different brand
names, including Kroger, Ralphs, Fry's, Fred Meyer,
Food4Less, Littman Jewelers and QuikStop. Kroger
has a market capitalization of $40.4 billion.

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 4. Walgreens Boots Alliance, Inc.
 Walgreens Boots Alliance, Inc. (NASDAQ: WBA) is
a holding company formed during the merger of
drugstore giants Walgreen Company and Alliance
Boots at the close of 2014. For the fiscal year
ending on Aug. 31, 2015, Walgreens Boots
Alliance reported sales of $103.4 billion. However,
this figure only includes sales arising from
Alliance Boots operations after the merger was
completed on Dec. 23, 2014. Consequently, true
full-year results for the combined company are
not yet available. The combined company
operates more than 12,800 drugstore locations in
11 countries. It has a market capitalization of
$92.2 billion.
 5. Tesco PLC
 Tesco PLC is a global grocery retailer
headquartered in the U.K. For fiscal year 2015, the
company reported revenue of £62.3 billion
excluding value-added tax (VAT), equivalent to
approximately $101.3 billion at average exchange
rates for the reporting period. This represents a
2% decline in revenue compared to the prior year,
making Tesco one of only two companies on this
list not experiencing sales growth. Tesco operates
6,814 stores in 11 countries. In addition to its
grocery stores in the U.K. and Europe, Tesco has
major operations in Thailand, Malaysia, India and
China. The company has a market capitalization
of $19.9 billion.
 6. Carrefour SA
 France's Carrefour SA reported sales of €74.7
billion excluding VAT, equivalent to approximately
$99.1 billion at average exchange rates for the
period. Revenue growth amounted to 2.9% on the
year. At the close of 2014, Carrefour had 10,860
store locations in 33 countries. It operates stores in
a variety of formats, including small convenience
stores, mid-size supermarkets and large-scale
superstores offering both food and general
merchandise. Carrefour opened or acquired a total
of 1,128 new stores during the 2014 year, adding
more than 650,000 square meters of retail space.
The company has a market capitalization of about
$22 billion.
 7. Amazon.com, Inc.
 Amazon.com, Inc. (NASDAQ: AMZN) is the world's
top online retailer. It reported sales of
approximately $89 billion for the 2014 fiscal year,
an increase of about 19.5% over the previous
period. The company operates 14 country-specific
retail websites and ships products to customers
around the globe. About 62% of Amazon.com
sales take place outside the U.S. Both domestic
and international sales figures have
shown continued fast growth in recent years. Sales
of media products account for 25.3% of net sales,
while electronics and other general merchandise
account for about 68.4%. As of December 2015,
Amazon.com has a market capitalization of $314
billion, the highest market cap of any company on
this list by a substantial margin.
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8. Metro Group AG
Germany's Metro Group is a European retail giant
with far-flung operations in Russia, China, Japan,
Thailand, Pakistan and India. The company reported
sales of €63 billion excluding VAT, equivalent to
approximately $85.5 billion at average exchange
rates for the period. Sales were down about 4% from
the prior year. Metro Group operates 2,200 stores
under several brands, including the warehouse retail
chain, Metro Cash & Carry, which is responsible for
more than 48% of the company's sales. Other Metro
Group retail operations include the supermarket
chain Real, the consumer electronics retailers Media
Markt and Saturn, and the department store chain
Galeria Kaufhof. Metro Group has a market
capitalization of $9.9 billion.
 9. The Home Depot, Inc.
 The Home Depot, Inc. (NYSE: HD) is the world's
biggest home-improvement retailer. It reported
sales of $83.2 billion for the 2014 fiscal year, an
increase of about 5.5% over the previous year.
The company operates 2,273 stores in total,
including 1,977 in the U.S. and its territories,
and the remainder in Canada and Mexico. The
Home Depot offers a variety of proprietary and
exclusive brands in its stores, including
Hampton Bay home products, Glacier Bay
home fixtures, Vigoro lawn care products and
Husky tools, among others. As of December
2015, The Home Depot has a market
capitalization of just over $170 billion.

10. Target Corporation
 Target Corporation (NYSE: TGT) reported
revenue of $72.6 billion for fiscal year 2014, an
increase of 1.9% over the prior year's results.
Target is a big-box retailer with 1,790 stores
across the U.S. In addition to its large-format
stores, the company also operates eight
CityTarget stores in an ongoing test phase.
CityTarget locations are designed as small-
format stores for densely populated urban
areas. Further expansion in this segment is
planned for fiscal year 2015. Target has a
market capitalization of $45.3 billion.
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 Top 25 retailers in Europe
European turnover 2015 in Billion €

Rank Retailer Turnover Headquarter

1 Schwarz 86 Germany
2 Carrefour 67 France
3 Tesco 65 UK
4 Aldi 54 Germany
5 Metro 51 Germany
6 Edeka 49e Germany
7 Rewe  45e Germany
8 E.Leclerc 44 France
9 Auchan 37 France
10 ITM  34 France
11 Sainsbury 32 UK
12 Walmart 32 USA
13 Migros 27 Switzerland
14 Morrisons 22 UK
15 MediaMarkt 22 Germany
16 IKEA 21 Sweden
17 Mercadona 20 Spain
18 Casino 19 France
19 Amazon.com 19e US
20 Systeme U 18 France
21 Expert International 18e Switzerland
22 Euronics 18* Netherlands
23 ADEO 18 France
24 El Corte Ingles 15* Spain
25 Kingfisher 14 UK
26 Ahold 13 Netherlands
27 Otto.de 12 Germany
28 Tengelmann 11* Germany
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GLOBAL PROMOTION
International promotion mix
 The different modes of communication with
international consumers about products
and services, using international advertising,
international sales force management,
international sale promotion, public
relations and publicity
International communication process
The communication process takes place between
the product sponsor and the international
target market
sender
the sponsor of an advertisement,usually
represented by and advertising agency,who
encodes the message into words and
images and communicates it to the target
market
Channel of communication
The medium used to communicate a
message about a product to the
consumer
Medium/media
The channel of communication that a
company uses to send to the target
consumer a message about its product or
service
Receiver
The target market that receives the
advertising message for a sender
Non personal medium
A channel of communication such as a print
medium, a broadcast medium , or an
interactive medium that does not involve
contact between the seller and the
consumer
Personal medium
A communication channel that involves
contact between the seller and the
consumer
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International
 advertising
A non personal communication by an identified
sponsors across international borders, using
broadcast,print and or interactive media
 media advertising that is more or less uniform
across many countries, often, but not
necessarily in media vehicles with global reach
Media infrastructure
 Provides different challenges in countries of
different levels of economic development.
Media challenges
Media availability
the extent to which media are available to
communicate with target consumers
Media reliability
The probability of the media to air advertising
messages on time, at an acceptable quality,and
with the agreed upon frequency.
Media restriction
legal or self-imposed restrictions on the types and
numbers of advertisements aired or published
Media costs
Media format,features, and turn around the world
 Advertising posters on kiosks and fences
 Advertising on sides of private homes
 Advertising on plastic shopping bags
 Advertising on outdoor umbrellas
 The omnipresent billboards
Advertisements in public areas appearing
on large posters or electronic panels
 The dominance of global media
 Infomercials
long TV advertisements that are positioned
as programming
 TV shopping networks
 Cable channels that sell products to
a TV audience
 Product placement
 The strategy of placing brands in
movies with the purpose of
promoting the products to viewers
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Four Components of Global Advertising
1. STRATEGY – Global ads involve products
&services that are positioned similarly across
markets, wherein the product’s appeal is
consistent
2. ORGANIZATION – global ads are typically
directed from headquarters with the help of
advertising agencies with a global network
3. MEDIA – with global reach are used, creating
spillover that crosses borders to reach
customers in different countries & follows
traveling customers around the globe
4. MESSAGE & CREATIVE – copy & visualization
may be uniform across markets, uniformity
decreases based on how different each local
market is from another
The advertising infrastructure
Advertising agencies
The most common types of relationships between
international corporations and the agencies
providing advertising support are as follows:
1. Hiring local local advertising agencies
2. Hiring international advertising agencies
3. Hiring local advertising agencies to implement
international agency messages
role of advertising agencies in the development and
execution of global advertising campaigns?
As mentioned above, budgeting assistance and cost
estimation are usually in the purview of the global
advertising agency. In many cases, the advertising
agency will also assist in the creation of message
and creative aspects as well as media selection
and scheduling. The global marketer must
determine whether to work with one or a small
number of global advertising agencies or to try to
coordinate a number of local advertising agencies
from the countries to be targeted. While it is true
that local agencies have the most expertise in the
local markets, these individual agencies are not
able or predisposed to see the whole picture when
considering all the markets to be addressed.
Increasingly, large global agencies are acquiring,
merging with, or at least collaborating with,
significant local agencies so that they develop
expertise and networks in markets all over the
world. Local agencies may be preferable when the
accounts are small or limited in focus. Larger
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important aspects of international/global
advertising?
1. Advertising intensity varies between countries
2. As GDP increases, so do advertising expenditures
 
3. Religion is an important consideration
 
4. The U.S. relies heavily on the use of advertising
 
5. Different cultures have different levels of
receptivity to advertising
 
6. There are significant media availability and
importance differences across countries - In
some countries, outdoor, cinema, and radio are
much more important than is typically the case
in U.S. markets. Television is among the most
important in the U.S.
 
7. Global media are emerging - satellite television
and global/regional channels like CNN,
SkyChannel, magazines and newspapers with
large international reach, on-line media such as
the Internet and World Wide Web, cross country
media ownership.
 
8. Appropriate, realistic advertising objectives differ
across countries.
 what an advertiser may do to avoid conflicts
with country managers when a globalized
advertising campaign is contemplated.
  
 This question taps directly into the Goodyear
discussion at the end of the chapter. As noted
there, and discussed in depth, the locals need to
be involved early in the planning stages,
because:
  
 -- The local managers can bring to bear their
particular views and shape the campaign
accordingly.
  
 -- The local managers need to learn from each
other about conditions in other markets, partly
to have a better understanding of their requests,
but also to expand their own repertoire with
good ideas from elsewhere.
  
 -- The headquarters managers need to get a
better feel for the variety in the local markets, to
understand the depth of the local
idiosyncracies, but also to help better ideas
come to the surface.
  
 -- The locals need to be motivated for effective
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The advertising strategy

 IDENTICAL ADS – ads are identical, usually with localization only in terms of language voice-over
changes & simple copy translations (e.g. the Marlboro cowboy ads)
 PROTOTYPE ADVERTISING – the same ads, but the voice-over may be changed to avoid language
& cultural problems, & the ad may be re-shot with local celebrities (e.g. Drakkar Noir)
 PATTERN STANDARDIZATION – similar but less structured global approach, wherein the
positioning theme is unified & some alternative creative concepts are planned, but execution
differs between markets (e.g. Xerox)

PROTOTYPE ADVERTISING PATTERN STANDARDIZATION

• Brand Name same • Brand Name same

• Theme same • Theme same
• Visual same • Visual same
• Positioning same • Positioning same
• Actors same • Actors not same
• Words same • Words not same
• Language (local) • Language (local)
• Media same • Media not same
• Materials same • Materials not all same
• Slogan same • Slogan same

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56
57
 Media Usage in % of Ad Expenditures

A d v e r tis in g E x p e n d itu r e s
C o u n tr y T o ta l ( $ b illio n ) $ p e r c a p ita
N o r th A m e r ic a
C anada 4 .8 157
U n ite d S ta te s 1 2 0 .2 445
L a tin A m e r ic a
A r g e n tin a 2 .7 76
B r a z il 5 .2 32
C h ile 0 .6 43
A s ia
C h in a 3 .4 0 .3
H ong K ong 2 .8 419
I n d ia 1 .2 1 .2
Ja p a n 3 3 .3 262
S in g a p o r e 0 .7 222
S o u th K o r e a 3 .3 70
A u s tr a lia 4 .6 246
N e w Z e a la n d 0 .7 185
E u ro p e
F ra n c e 9 .3 157
G e rm a n y 1 8 .9 230
I ta ly 6 .8 118
S p a in 4 .7 120
S weden 1 .9 211
S w itz e r la n d 2 .5 356
U n ite d K in g d o m 15 252
R u s s ia 0 .0 4 0 .0 2

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Top Global Advertisers

Figures are in millions of US dollars

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TOP ADVERTISING AGENCIES

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 In-Store and Trade Promotion Sponsorships and Cross-Marketing

IN-STORE: promotional activities inside the store SPONSORSHIPS increase with the advent
of global media and global events (e.
TRADE: promotional activities targeted at
g. World Cup, Olympics).
channel intermediaries
Products associate themselves with
globally recognized sports figures (e.
• In-store promotions are more localized than g. Tiger Woods & Nike)
advertising
• In-store promotions need to be supported by
trade promotions CROSS-MARKETING of related products
• Different countries/cultures have different leverage a strong brand name into product
attitudes towards coupons line extensions (e.g. Burberry’s baby
products)
• Different countries have different distribution
infrastructures that limit transferability of
certain in-store/trade promotions
• Sales promotion needs to be localized because
of country-unique restrictions/regulations

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Country Regulations of Promotions

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 Global Publicity
Global promotion

PUBLICITY is the publishing of news about the

company and its products. Very prominent
in hi-tech industries.
Any communication about a company and or the
company’s products that the company does
not pay for

The New Promotional In-words

• Event marketing GOOD NEWS – wherein positive press

coverage enhances consumer interest in
the company and its products
•Product placement
• Cause marketing BAD NEWS – even negative publicity helps
keep the brand name in the public eye (e.g.
• E-commerce Benetton), although some may of course
damage brand equity
• Pop-up ads
PRODUCT PLACEMENT – using branded
• Banner ads products in film/TV (e.g. BMW Z3 in James
Bond’s Goldeneye)
• Experiential marketing

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 Global promotion

Global Public Relations International Trade Fairs

GLOBAL P.R. – focuses on creating goodwill toward

the corporation as a whole. Has become
increasingly important because of anti-
globalization sentiments.a concerted effort on
the part of a company to generate goodwill
among international publics that are essential Participation in International Trade fairs is
to the company a way of identifying potential distributors
in a new local market.
Global PR targets various groups of
stakeholders such as:
At trade fairs, local marketers can
Stockholders introduce a company’s latest products,
• Employees discover industry trends, & spot new
• Customers competitive developments.
• Distributors
• Suppliers
• Financial community Participation involves preparation of
• Media product and sales materials, opening a
• Activist groups booth, sending a team – plus paying a
• General public sometimes steep fee. Fairs cost money.
• Government

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Global promotion
Direct Marketing
DIRECT MARKETING: an interactive marketing
system that uses one or more advertising media
to effect a measurable response and/or
transaction at any location.
CATALOG OF PRODUCTS (“STORE”)
2. NAMES, ADDRESSES, TELEPHONES, FAXES,
EMAILS
3. TOLL-FREE NUMBERS (1-800, 1-888)
4. CREDIT CARDS
5. STANDARDIZED, RELIABLE BRANDS (GLOBAL
BRANDS)
• MAIL ORDER – catalogs, sales offers through
“snail” mail
• TELEMARKETING – phone calls from
companies to households
• DIRECT RESPONSE TV (DRTV) – TV
commercials with phone numbers to let viewers
call for purchases.
E-Commerce
PROS
•Easy and convenient for the customer
• Creates a natural on-to-one relationship between buyer
and seller
• Fosters customer loyalty and increases customer
retention rates
• Helps the company focus on providing customer value
• Lowers costs for buyers and sellers from the pre-
purchase stage to the post-purchase stage
• Facilitates price comparisons
CONS
Can reach only a certain segment, those with desktops
and Internet access
• Cannot provide the full tactile experience with the
product or the personal interaction in services
• E-commerce needs good electronic communication
links
• Customers are put off by computers and technology
• Perceived risks involved can be great
• Without credit cards, e-commerce would be unthinkable
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 How transferable are selling strategies & techniques?
The following are factors that affect transferability:

Global Personal • DIFFERING HUMAN RELATIONS

Selling (e.g. the role of a salesperson is looked
down on by hierarchical cultures)
• DEGREE OF MARKET DEVELOPMENT
(e.g. level of customer sophistication)
• DIFFERING REGULATORY ENVIRONMENTS

Culture affects the “people skills” of the global
marketer.
Good salesmanship varies across countries.
Personal selling is usually the least global of all
marketing activities.
(e.g. salesperson costs escalate in countries
where fringe benefits are high)
• GEOGRAPHIC & PHYSICAL DIMENSIONS
(e.g. climate, transportation conditions,
population density)

Presentations made during a sales visit usually consist of five distinct stages:

1. ATTENTION – get the customer to listen to you

End of Finals
2. INTEREST – get the customer interested in what you have to say
3. DESIRE – get the customer to desire what you are selling
4. CONVICTION – get the buyer convinced that the offer is a good deal
5. ACTION – get the customer’s signature on the contract

In foreign markets, these stages are still valid but the salesperson needs to
adapt these stages to the local culture.
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