International Marketing

Global Marketing
Management:
Planning and
Organization
Chapter 12
McGraw-Hill/Irwin
International Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?
• How global marketing management differs from
international marketing management
• The increasing importance of international
strategic alliances
• The need for planning to achieve
company goals
• The important factors for each
alternative market-entry strategy

11-2
 Global Perspective
Global Gateways
• Multinational companies
– Confronted with increasing global competition for
expanding markets
– Changing their marketing strategies and altering their
organizational structure
– Nearly 75% of North American and European corporations
are revamping their business processes
• Smaller companies
– More flexible
– May enable them to reflect the demands of global markets
and redefine programs more quickly

11-3
 Global Marketing Management
• 1970s – “standardization versus adaptation”
• 1980s – “global integration versus local
responsiveness”
• 1990s – “global integration versus local
responsiveness”

11-4
 Global Marketing Management
• The trend back toward localization
– Caused by the new efficiencies of customization
– Made possible by the Internet
– Increasingly flexible manufacturing processes
• From the marketing perspective customization
is always best
• Global markets continue to homogenize
and diversify simultaneously
– Best companies will avoid trap of focusing on country
as the primary segmentation variable

11-5
 The Nestle Way –
Evolution Not Revolution
• Nestle – world’s biggest marketer of infant
formula, powdered milk, instant coffee,
chocolate, soups, and mineral water
• Nestle strategy
– Think and plan long term
– Decentralize
– Stick to what you know
– Adapt to local tastes
• Long-term strategy works for Nestle
– Because the company relies on local ingredients
– Markets products that consumers can afford

11-6
 Benefits of Global Marketing
• When large market segments can be identified
– Economies of scale in production and marketing
– Important competitive advantages for global companies
• Transfer of experience and know-how
– Across countries through improved coordination and
integration of marketing activities
• Marketing globally
– Ensures that marketers have access to the toughest
customers
– Market diversity carries with it additional financial
benefits
– Firms are able to take advantage of changing
financial 11-7

circumstances
 Planning for Global Markets
• Planning is the job of making things happen that
might not otherwise occur
• Planning allows for:
– Rapid growth of the international function
– Changing markets
– Increasing competition, and the
– Turbulent challenges of different national markets

11-8
 Planning for Global Markets
• Planning is both a process and philosophy
– Relates to the formulation of goals and methods of
accomplishing them
► Corporate planning
► Strategic planning
► Tactical planning

• Company objectives and resources

– Each new market requires
► A complete evaluation, including existing commitments,
relative to the parent company’s objectives and resources
– Defining objectives clarifies the orientation of the domestic
and international divisions, permitting consistent policies

11-9
 Planning for Global Markets
• International commitment
– Commitment in terms of
► Dollars to be invested
► Personnel for
managing the
international
organization
► Determination to stay
in the market long
enough to
realize a return in
investments.
– The degree of commitment to an international
marketing cause reflects the extend to a company’s
11-10
 International Planning Process
Exhibit 11.1

11-11
 The Planning Process

• Phase 1 – Preliminary analysis and screening

– Matching Company and Country Needs.
• Phase 2 – Adapting marketing mix to target
markets
• Phase 3 – Developing the marketing plan
• Phase 4 – Implementation and control

11-12
Alternative Market-Entry Strategies
• An entry strategy into international market
should reflect on analysis
– Market characteristics
► Potential sales
► Strategic importance
► Strengths of local resources
► Cultural differences
► Country restrictions

– Company capabilities and characteristics

► Degree of near-market knowledge
► Marketing involvement
► Management commitment

11-13
Alternative Market-Entry Strategies
Exhibit 11.2

11-14
Alternative Market-Entry Strategies
• Companies most often begin with modest export
involvement
• A company has four different modes of foreign
market entry
– Exporting
– Contractual agreements
– Strategic alliances
– Direct foreign investments

11-15
 Exporting
• Exporting accounts for some 10% of global
activity
• Direct exporting – the company sells to
a customer in another country
• Indirect exporting – the company sells to a buyer
(importer or distribution) in the home country,
who in turn exports the product

11-16
 Exporting
• The Internet
– Initially, Internet marketing focused on domestic sales
– A surprisingly large number of companies started
receiving orders from customers in other countries,
► Resulting in the concept of international Internet
marketing
(IIM)
• Direct sales
– Particularly for high technology and big ticket industrial
products

11-17
 Contractual Agreement
• Contractual agreements
– Long-term,
– Nonequity association between a company and
another in a foreign market
• Licensing
– A means of establishing a foothold in foreign markets
without large capital outlays
– A favorite strategy for small and medium-sized
companies
– Legitimate means of capitalizing on intellectual
property in a foreign market
11-18
 Contractual Agreement
• Franchising
– Franchiser provides a standard package of products,
systems, and management services
– Franchise provides market knowledge, capital, and
personal involvement in management
– Expected to be the fastest-growing market-entry strategy
• Two types of franchise agreements
– Master franchise
► Gives the franchisee the rights to a specific area with the
authority to sell or establish subfranchises
– Licensing

11-19
Strategic International Alliances
• A strategic international alliance (SIA)
– A business relationship established by two or more companies to
cooperate out of mutual need
– To share risk in achieving a common objective
• SIAs are sought as a way to shore up
weaknesses and increase competitive
strengths
• Firms enter SIAs for several reasons
– Opportunities for rapid expansion into new markets
– Access to new technology
– More efficient production and innovation
– Reduced marketing costs
– Strategic competitive moves
– Access to additional sources of products and capital 11-20
 Building Strategic Alliances
Exhibit 11.3

11-21
Strategic International Alliances
• Many companies entering SIAs
– To be in strategic position to be competitive
– To benefit from the expected growth in the single European
market
• International joint ventures (IJVs)
– A partnership of two or more participating companies
that have
joined forces to create a separate legal entity
– Four characteristics define joint ventures
► JVs are established, separate, legal entities
► The acknowledged intent by the partners to share in the management
of the JV
► There are partnerships between legally incorporated entities such as
companies, chartered organizations, or governments, and not
between individuals
► Equity positions are held by each of the partners 11-22
Strategic International Alliances
• Consortia
– Similar to joint ventures and could be classified as
such except for two unique characteristics
► Typically involve a large number of participants
► Frequently operate in a country or market in which none
of the participants is currently active
– Consortia are developed to pool financial and
managerial resources and to lessen risks

11-23
 Direct Foreign Investment
• Factors that influence the structure
and performance of direct investments
– Timing
– The growing complexity and contingencies
of
contracts
– Transaction cost structures
– Technology transfer
– Degree of product differentiation
– The previous experiences and cultural
diversity of
acquired firms 11-24

–
Organizing for Global Competition
• Devising a standard organizational structure is
difficult
– Because organizations need to reflect a wide range of
company-specific characteristics
• Companies are usually structured around one of
three alternatives
– Global product divisions responsible for product sales
throughout world
– Geographical divisions responsible for all products
and
functions within a given geographical area
– A matrix organization consisting of either of these
arrangements
► With centralized sales and marketing run by a centralized functional
staff, or a combination of area operations and global product
management 11-25
Schematic Marketing Organization Plan
Combining Product, Geographic, and Functional
Approaches
Exhibit 11.4

11-26
 Locus of decision
• Considerations of where decisions will be made,
by whom, and by which method constitute a
major element of organizational strategy
– Corporate headquarters
– International headquarters
– Regional levels
– National levels
– Local levels
• Tactical decisions normally should be made at
lowest possible level
11-27
 Centralized Versus
Decentralized Organizations
• Most organizational patterns of multinational
firms fit into one of three categories
– Centralized
– Regionalized
– Decentralized
• No single traditional organizational plan is
adequate for today’s global enterprise
– Seeking to combine the economies of scale of a
global company with the flexibility and
marketing knowledge of a local company

11-28
 Summary
• To keep abreast of the competition and
maintain a viable position for increasingly
competitive markets, a global perspective
is necessary
• Cost containment, customer satisfaction, and
a greater number of players mean that every
opportunity to refine international business
practices must be examined in light of
company goals

11-29
 Summary
• Important avenues to global marketing that
must be implemented in the planning and
organization of global marketing
management
– Collaborative relationships
– Strategic international alliances
– Strategic planning
– Alternative market-entry strategies

11-30