Ch.

16 global marketing/ international marketing

Globalization
- Movement of goods, labour, and money (production resources) move around the world

Issue
1.Environmental analysis (PEST)
2.Market entry strategies or entry modes
3.Marketing strategies
- Each of these standardized measures allow for comparison across countries
- Depends on specific circumstance
- Many reports now feature GNI rather than GDP, bc
- Include the economic impact of firms that earn income from their global
operations
- Unlike GDP -> dramatically undercounts the impact of those activities on
the economy of the firm’s home markets
- Human development index is interesting to students
- Q: what it might include as an indicator of quality of life in the country
4. Market entry strategies or entry modes
5. Marketing mix strategies

Assessing global markets- PEST

- Important factors to decide do u want to go to the country
- Any entry into a new market
- Especially into a new market
- Requires careful planning
- A formal market assessment prevents firms from making costly mistakes
1. P -> political/ Legal
- Do any legal restrictions complicate entering the market?
- More a-f = protectionist
- Less a-f = trade liberalization
a. Tariff
b. Quota
i. More items -> more restriction
c. Boycott
d. Exchange control
e. Trade agreement
f. Trade sanctions
-
*
2. E -> economic
- What is the state of the nation’s economic health?
a. General economic environment
b. Market size and population growth rate
c. Real income
3. T -> technology & infrastructure
 - To what degree are technological innovations used by consumers in the market?
a. Transportation
b. Distribution channels
c. Communications
d. Commerce
4. S -> sociocultural analysis
- How do cultural factors affect business opportunities?
a. Power distance
b. Uncertainty avoidance
c. Individualism
d. Masculinity
e. Time orientations

Evaluating the general economic environment

- Gross domestic product
- All the goods and service product within a country
- Signals economic growth or contraction
- Trade surplus or deficit
- Surplus
- Exports more than it imports
- Deficit
- Imports more than exports
- Purchasing power parity
- Economic term
- How much goods in USD standard for the same good/ service in different
country
- Cost of goods in different countries
- (currency ovulation: over or under valued)
- Eg. Big Mac Index
- Human development index (HDI)
- Signals lifestyles and consumption needs/ patterns
- High HDI -> rich
- Basic income -> low income

Global human development index

- HDI component
1. Life expectancy at birth
2. Education attainment
a. % of different degrees & profession level
3. Average income enough for basic needs
a. High education -> earn more $
- Note
- HDI goes beyond
- traditional economic measures
 - Considers people’s ability to afford subsistence
- Many western nations score close to 1
- Many african nations earn the lowest scores in the world

Evaluating market size & population growth rate

- Estimated that by 2050
- The world population will reach 9.7 billion
- Less developed nations
- Experiencing rapid populations growth
- Many developed countries are experiencing
- Either 0/ negative natural population growth
- In developed countries (canada)
- Want less kids
- Cause population decrease

Evaluating real income

- Normal income
- $ that u get
- Real income
- $ after adjust by inflation rate
- Firm can
- Make adjustments to an existing product
- Change the price to meet the unique needs of a particular country market
- Successful firms make their products accessible to average buyers
- Which in many countries means offering products in smaller portion than make
them affordable
- Note
- ⅔ chinese population earns less than $25 a month
- P&G repackaged its head & shoulders shampoo in single-use packets
- Make it affordable
- Allowing head and shoulders to become the top-selling shampoo
in china

Analyzing sociocultural factors

- Power distance
- Hierarchy
- Uncertainty avoidance 不确定性规避
- Individualism
- Masculinity 阳刚之气
- In ur job setting, how ur boss treat u
- A set of attributes, behaviors and roles associated with men and boys
- Time orientation
- Everything measure by a quarter
- Indulgence放纵/ restraint
 - Allows u to do whatever u want
- Note
- Perhaps no other aspect of globalization has posed more difficulties to marketers
than culture
- Outsides often have trouble understanding the detailed meaning
associated with proper communication in a foreign culture
- Understanding another country’s culture is crucial
- The success of any global marketing initiative
- Culture
- The set of values
- Guiding beliefs, understanding & ways of doing things shared y members
of a society
- Exists on 2 levels
- Visible artifacts
- Underlying values

国家集群
 - Hofestede’s cultural dimensions
- offer an effective understanding of the subtle elements of a culture
- Taken together
- These dimensions enable marketers to group countries together ]
- According to their similarity on these dimensions
a
- Therefore engage in more efficient planning

Analyzing technology & infrastructure capacities

- Markets are especially concerned with 4 keys elements of a country’s infrastructure
- Transportation
- Distribution channels
- Communications
- Channels to tell customers ur product
- Commerce
- Eg bank, insurance company
- Note
- A firm’s ability to conduct business in a particular country
- In large measure determined by that country’s infrastructure

Part 2
Issue
1. Market entry strategies or entry modes
2. Marketing mix strategies
- Each of these standardized
- Measures allow for comparisons across countries
- The use of each depends on specific circumstances
- Many reports now feature GNI rather than GDP,
- Because it includes the economic impact of firms that earn income
from their global operations, unlike GDP
- Which dramatically undercounts the impacts of those activities on
the economic of the firm’s home markets
- Human development index is interesting to students
- Q: what it might include as an indicator of quality of life in the
country
 - In each strategy, the risks are rewards change
- As risk increases -> potential rewards +
- Exporting represents the lowest risk level for the firm
- Q: why do you think most firms first try exporting
- Q: why is your chosen entry strategy appropriate for your offering? What criteria did you
use to determine your strategy? What risks does your strategy entail, and are the
potential rewards worth those risks?

Exporting
- A company produces goods in 1 country and sells them in another country
- Least financial risk
- Allows for only limited returns
- offers lowest level of control
- 2 forms
- Indirect exporting
- The firm sells its products in the host country through an intermediary
- Used when company has limited contacts in the foreign country
- Eg. Ossetra wondrous earth in newfoundland
 - Sells in US, Greece, Hong Kong, South Korea
- Direct exporting
- When the exporting company sells its products in the host country directly
- Eg. Digital christie, a kitchener waterloo firm

1. Franchising
a. A contractual agreement between a franchisor and franchises
b. Eg. McDonalds, Tim Horton’s, Pizza Hut
2. Strategic alliance
a. An agreement between 2 companies share resources
i. Benefit both companies
b. Collaborative relationships between independent firms
c. X create and equity partnership
d. X invest in each other
e. Eg. star alliance
3. Joint venture (JV)
a. Create a new company
b. Buy or combine a company
i. Create a new company
ii. Share profit, company’s share and equity
c. 2 companies (still exist)
d. A foreign firm pools its resources with those of a local firm to form a new
company with
i. shared ownership, control and profits
e. Two variants of JV are
i. Contract manufacturing
1. Contractual arrangement
a. A company contracts with manufacturers in a foreign
market to product or provide its service
b. Eg. NutraLab Canada, magna International
c. Cons
i. Decreased control over the manufacturing process
ii. Loss of potential profits on manufacturing
d. Pros
i. Chance to start faster with less risk
ii. The possibility to form a partnership with the local
manufacturer
iii. Buy them out
e. Can reduce
i. plant investment
ii. Transportation
iii. Tariff costs
1. While meeting local manufacturing
standards
 ii. Management contracting
1. Contractual arrangement in which the domestic firm supplies the
management know-how to a foreign company that supplies the
capital
2. The domestic firm export management services rather than
products
3. Many canadian companies supply their technologies to firms and
govt in developing countries
a. With a specific agreement
i. Only the canadian supplier
1. can maintain the technology
2. Provide know-how regarding technology
use and repair
4. Low risk method for entering a country’s market
a. Without setting up operations in the country
5. Generates returns immediately upon execution of the agreement
6. Tends to be long-term since it extends over the life of the
technology
4. Direct investing
a. Firm maintain 100% ownership of its plants, facilities and offices in the foreign
country
i. Often in the form of wholly owned subsidiaries
1. Eg. Barrick Gold
b. Gives the firms greater control over its investments and the opportunity for
greater profit potential
c. Pros
i. Cheap labour
ii. Raw materials
iii. Tax incentives
iv. Reduced transportation
v. Reduced marketing costs
1. In the host country are some of incentives for foreign direct
investment
d. Risks
i. Restricted or devalued currencies
ii. Falling markets
iii. Government changes

Factors to consider when choosing a Global Marketing strategy

- Deep understanding of the PEST factors for each international market
- Lead to better understanding of local market conditions
- Knowledge enables marketers
- Decide how much adaptation to their marketing strategy
 - If any at all
- Needed to suit host market conditions
1. Cultural nuances 文化差异
2. Laws, regulations & policies
3. Level economic development
4. Level of social & human development
5. Level of technological development
- Note
- Adjusting the marketing mix and positioning strategy
- To meet the needs of a new market may represent the most complex
topic for global marketing

Global product or service strategies

- PEST factors
- Consumer’s psychological
- Social & situational factors
- Influence how marketers configure the marketing mix
- Implement their marketing strategy
1. Standardization
a. Sell the same product/ Service in both the home country and host country
b. Pros
i. Economies of scale
1. Less cost -> more cost effective
2. The more product produce, the less cost
ii. Faster setup time
iii. Single global image
iv. Better control over communications
v. Effective
c. Cons
i. Some loss of advertising effectiveness
ii. Ignore local needs
iii. Ignore local competition
iv. Have assumption
1. Discrimination or ignore customer’s needs
2. Minor modifications
a. Sell a product or service similar to that sold in home country but include minor
adaptations
b. Eg. car left/ right seats
c. Pros
i. Caters to the needs/ wants of local markets
ii. Customer feel respected & valued
1. Increase customer satisfaction
iii. Lead to strong image of company
iv. Possibility for greater market share, loyalty and financial returns
 1. Greater overall success
d. Cons
i. More time-consuming
ii. More costly
iii. Catering or factor in local competition
iv. Possibility for mistakes & poor execution
v. Due to lack of understanding of local market
3. Adaptation
a. Sell totally new products or services
b. Eg. climate -> different materials of clothes

Global product or service strategies

- Mandatory consideration vs discretionary considerations

- Mandatory considerations ( need to modify the product)
- Legal standards
- Eg. official language, safety lockers
- Economic conditions
- Is infrastructure well developed
- Education
- Climate and geography
- Discretionary considerations
(different customer preference -> modify the product)
- Cultural differences
- Customer needs/ preference
- Competitor’s strategies
- Look at competitors, they know everything
- Culture
- Distribution
- Customers
 - Taboo
- 4ps
- Eg. drinks -> less sweet

Global pricing strategies

- Price
- Tariffs
- Quotas
- Transportation costs
- Margins channel members
- Anti-dumping policies 反倾销税
- Protectionist tariff that a domestic govt imposes on foreign imports on
foreign imports that it believes are priced below fair market value
- Can drive the price up
- Extra note
- Dumping
- The act of changing a lower price for the like product in a
foreign market than the normal value of the product
- Economic conditions (affordability)
- Poor countries cannot buy it
- Competitive factors
- Companies may have to modify products to sell in some markets
- Eg. bottom of pyramid consumers in developing and emerging economies
- Note
- In addition to competitive, cost and other considerations
- Global pricing involves additional dimensions that increase its complexity
- Eg. LV bags cost 40% more in Japan
- Set limits on Japanese Tourists in france

Global distribution strategies

- Some global channels are very long and complex
- Consumers ship at local small stores
- Supplies must be creative in delivering to these outlets
- Consider the cost of shipping and how many transaction will it occur
- Eg. distribution in rural india
- Eg. from ottawa -> vancouver -> china (a city) -> japan ( a city )
- Note
- Delivering products to local retailers
- Incredibly difficult and frustrating
- Infrastructure issues
- Prevent traditional distribution methods and require creative adjustments
- Global firms must find distribution strategies
- Enable them to reach every really remote markets
 - For instance, Avon sells and delivers cosmetics to customers
using canoes
- Prompt an ethical discussion on whether or not firms
should be marketing hedonic products or services to
consumers with very little disposable income

Global communication strategies

- Media availability & advertising regulations
- Vary widely among countries
- Literacy levels vary by country & even within regions of a country
- Language differences even with countries with multiple languages
- Culture, customs, religious differences
- Eg. taboo
- Q: how do firms market their products in countries with very low literacy levels? Imagine
you are promoting a new soft drink. How would you do it without written communication?