Unit 1

Global Marketing

Introduction
What is Global Marketing? How is it different from regular marketing?

© 2005 Prentice Hall

Introduction
Marketing
– Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals

Global Marketing
– Focuses resources on global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organization’s home country

© 2005 Prentice Hall

Reasons for Global Marketing Growth – Access to new markets – Access to resources Survival – Against competitors with lower costs (due to increased access to resources) © 2005 Prentice Hall .

Competitive Advantage Success over competition in industry at value creation Achieved by integrating and leveraging operations on a worldwide scale © 2005 Prentice Hall .

Globalization Globalization is the inexorable integration of markets. corporations. faster. » Thomas Friedman © 2005 Prentice Hall . corporations. deeper. and nation-states farther.in a way that is enabling individuals. and cheaper than ever before. and nationstates to reach around the world farther. deeper and cheaper than ever before. and in a way that is enabling the world to reach into individuals. and technologies to a degree never witnessed before . faster. nation-states.

We are not running bicycle shops..We have no soft drinks because I have said we will either buy CocaCola or we leave it alone. There are certain areas we do not touch…. This is focus. Helmut Maucher © 2005 Prentice Hall .Competitive Advantage. Even in food we are not in all fields. Globalization and Global Industries Focus – Concentration and attention on core business and competence Nestle is focused: We are food and beverages.

Global Marketing: What it is and What it isn’t Global marketing does not mean doing business in all of the 200-plus country markets Global marketing does mean widening business horizons to encompass the world in scanning for opportunity and threat © 2005 Prentice Hall .

act locally © 2005 Prentice Hall .Standardization versus Adaptation Globalization (Standardization) – Developing standardized products marketed worldwide with a standardized marketing mix – Essence of mass marketing Global localization (Adaptation) – Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction – Essence of segmentation – Think globally.

75% of sales potential is outside the US.The Importance of Global Marketing For US-based companies. For German and EU companies. 85% of potential is outside Japan. 94% of potential is outside Germany. – About 90% of Coca-Cola’s operating income is generated outside the US. For Japanese companies. © 2005 Prentice Hall .

Forces Affecting Global Integration and Global Marketing Driving Forces – Regional economic agreements – Market needs and wants – Technology – Transportation and communication improvements – Product development costs – Quality – World economic trends – Leverage © 2005 Prentice Hall Restraining Forces – Management myopia – Organizational culture – National controls .

Forces Affecting Global Integration and Global Marketing Global Integration and Global Marketing © 2005 Prentice Hall .

Country Risk Analysis Country risk represents the potentially adverse impact of a country’s environment on the MNC’s cash flows. It may represnt the country risk exposure to loss in cross boarder lending caused by the event in a particular country. These events must be atleast to some extent under the control of the government of that country and not in private hands .

and – to improve the analysis used in making longterm investment or financing decisions. . – as a screening device to avoid conducting business in countries with excessive risk.Country Risk Analysis Country risk can be used: – to monitor countries where the MNC is presently doing business.

Attitude of Host Government – The host government may impose special requirements or taxes. restrict fund transfers. subsidize local firms.Political Risk Factors Attitude of Consumers in the Host Country – Some consumers may be very loyal to homemade products. or fail to enforce copyright laws. .

Political Risk Factors Blockage of Fund Transfers – Funds that are blocked may not be optimally used. Currency Inconvertibility – The MNC parent may need to exchange earnings for goods. .

or even the threat of war. Bureaucracy – Bureaucracy can complicate businesses. can have devastating effects.Political Risk Factors War – Internal and external battles. . Corruption – Corruption can increase the cost of conducting business or reduce revenue.

inflation. Indicators of Economic Growth – A country’s economic growth is dependent on several financial factors . exchange rates.interest rates.Financial Risk Factors Current and Potential State of the Country’s Economy – A recession can severely reduce demand. . etc. – Financial distress can also cause the government to restrict MNC operations.

and – predicting the values of factors that cannot be measured objectively. – determining the relative importance of each factor.Types of Country Risk Assessment Note that the opinions of different risk assessors often differ due to subjectivities in: – identifying the relevant political and financial factors. .

. The Delphi technique involves collecting various independent opinions and then averaging and measuring the dispersion of those opinions. and then consolidating the rates and weights to produce an overall assessment.Techniques of Assessing Country Risk A checklist approach involves rating and weighting all the identified factors.

Inspection visits involve traveling to a country and meeting with government officials.Techniques of Assessing Country Risk Quantitative analysis techniques like regression analysis can be applied to historical data to assess the sensitivity of a business to various risk factors. and/or consumers to clarify uncertainties. firm executives. .

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Market Entry .

Which strategy should be used? It depends on: – Vision – Attitude toward risk – How much investment capital is available – How much control is desired .

license fees.Licensing A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties. or some other form of compensation – – – – Patent Trade secret Brand name Product formulations .

and other export barriers Attractive ROI Low costs to implement . quotas.Advantages to Licensing Provides additional profitability with little initial investment Provides method of circumventing tariffs.

Disadvantages to Licensing Limited participation Returns may be lost Lack of control Licensee may become competitor Licensee may exploit company resources .

Special Licensing Arrangements Contract manufacturing – Company provides technical specifications to a subcontractor or local manufacturer – Allows company to specialize in product design while contractors accept responsibility for manufacturing facilities Franchising – Contract between a parent company-franchisor and a franchisee that allows the franchisee to operate a business developed by the franchisor in return for a fee and adherence to franchise-wide policies .

Franchising Questions Will local consumers buy your product? How tough is the local competition? Does the government respect trademark and franchiser rights? Can your profits be easily repatriated? Can you buy all the supplies you need locally? Is commercial space available and are rents affordable? Are your local partners financially sound and do they understand the basics of franchising? .

Investment Partial or full ownership of operations outside of home country – Foreign Direct Investment Forms – Joint ventures – Minority or majority equity stakes – Outright acquisition .

Joint Ventures Entry strategy for a single target country in which the partners share ownership of a newly-created business entity .

Joint Ventures Advantages – Allows for sharing of risk (both financial and political) – Provides opportunity to learn new environment – Provides opportunity to achieve synergy by combining strengths of partners – May be the only way to enter market given barriers to entry Disadvantages – Requires more investment than a licensing agreement – Must share rewards as well as risks – Requires strong coordination – Potential for conflict among partners – Partner may become a competitor .

Global Strategic Partnerships Possible terms: – – – – Collaborative agreements Strategic alliances Strategic international alliances Global strategic partnerships .

The Nature of Global Strategic Partnerships .

products. and other key strategic areas .The Nature of Global Strategic Partnerships Participants remain independent following formation of the alliance Participants share benefits of alliance as well as control over performance of assigned tasks Participants make ongoing contributions in technology.

expectations and approaches – No corporate memory .Alliances with Asian Competitors Four common problem areas – Each partner had a different dream – Each must contribute to the alliance and each must depend on the other to a degree that justifies the alliance – Differences in management philosophy.

and dominated by a founding family – – – – Samsung LG Hyundai Daewoo . centered around a bank or holding company.Cooperative Strategies in South Korea: Chaebol Composed of dozens of companies.

21st Century Cooperative Strategies: Targeting the Digital Future Alliances between companies in several industries that are undergoing transformation and convergence – – – – Computers Communications Consumer electronics Entertainment .

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 Until the early 1990s. the Internet was primarily the preserve of the military and academic researchers. .Introduction  The Internet has revolutionized the international business arena and global marketing in particular. the Internet is a network of computers interconnected throughout the world operating on a standard protocol that allows data to be transmitted.  Roughly speaking.

.Introduction  The Web clearly provides a unique distribution and communication channel to marketers across the globe.  This chapter looks at the impact of the World Wide Web (WWW) on global marketing activities.  The development of new software and other technologies during the early 1990s turned the Internet into a commercial medium that has transformed businesses worldwide.

1. By 2010. The internet population in China ranks second now. . analysts estimate it will equal the entire US population.  The worldwide internet population surpassed 1 billion in 2005. The Internet and the Global Marketplace  Internet usage worldwide is growing rapidly (see Exhibit 19-1).up from only 45 million 10 years ago and 420 million in 2000.

1. The Internet and the Global Marketplace .

online shopping is more attractive in South Korea than in the rest of the region. Most of the action in the region is business-to-business.1. With high broadband penetration. In China. . Internet penetration in Japan and South Korea is higher now than in the US. web surfers apparently have a positive attitude toward online shopping (see Global Perspective 19-1 for further information on China’s internet sector). The Internet and the Global Marketplace  Asia-Pacific Asia-Pacific region is quickly catching up.

) Several obstacles hinder the spread of ecommerce in Asia which include:  prefer to do business face-to-face instead of via anonymous channels. relationships and networking. The Internet and the Global Marketplace  Asia-Pacific (cont. problems of secrecy and family-owned businesses. and knowledge barriers.1. .

2. Structural Barriers to Global E-Commerce  Language Barriers: Much of the content on the Web is in the English language. A recent study found that business users on the Web are three times more likely to purchase when the Web site “speaks” their language. The demand for Web site localization services has boosted a new Web-oriented translation industry. .

In many countries. credit card penetration is low. In Confucian-based cultures like most East Asian nations. .2. To become familiar with local markets as well as local cultures is not possible through the Internet. Structural Barriers to Global E-Commerce  Cultural Barriers: Cultural norms and traditions can hinder the spread of the Internet. business is conducted on a personal basis.

scarcity of proper talent and skills will restrain the development of a digital economy. E-readiness measures the extent of internet connectivity and infrastructure in the country (see Exhibit 19-2 and 19-2B). . ereadiness rank very low. In emerging markets.  Knowledge Barriers: Setting up an e-business requires certain knowledge and skills. Structural Barriers to Global E-Commerce  Infrastructure: In many emerging market countries.2.

 One-to-One Marketing  Product Policy Global branding Internet-based new product development (see Global Perspective 19-4) . Internet Ramifications for Global Marketing Strategies  Globally Integrated Versus Locally Responsive Web Marketing Strategies (see Exhibit 19-4): At the core of any global Web marketing strategy is the basic conflict between local responsiveness and global integration.6.

6. Internet Ramifications for Global Marketing Strategies
 Marketing of Services Features of Services:  Intangibility  Simultaneity  Heterogeneity  Perishability  Global Pricing Cost transparency

6. Internet Ramifications for Global Marketing Strategies
 Distribution Role of Existing Channels  Replacement effect/complementary effect (see Exhibit 19-5) E-Tailing Landscape  Click-and-retailing model E-Tailing model depends on three factors: Consumer behavior, cost structure, and government policies

6. Internet Ramifications for Global Marketing Strategies
 Global Communication and the Web: By 2009, JupiterResearch forecasts online advertising spending is expected to grow to $16.1 billion in the US and $3.9 billion in Europe.

Overall, in almost all countries internet advertising still is a tiny slice of the global advertising pie, even in the developed world (see Exhibit 19-6)

6. Internet Ramifications for Global Marketing Strategies  Advantages of internet advertising: Global reach Lower cost Allows precision Interactivity Ability to customize Ability to instantly monitor .

Internet Ramifications for Global Marketing Strategies Online advertising: Wide spectrum of techniques  Banner ads  Search engine advertising-keyword search or website context  Microsites  Audience measurement is still a major issuemetrics to monitor the effectiveness of an online campaign.number of views? click-through rates? cost per acquisition? cost per sale? .6.

6. Internet Ramifications for Global Marketing Strategies The ultimate success of an online campaign depends on the following four factors:  The nature of the product  The targeting  Choice of site  Execution of the ad Direct E-Marketing: More and more global companies recognize the promise of the Web as a direct marketing tool to build ties with customers worldwide. .