Global Marketing

PRESENTED BY:

 

Daksha Shukla (11DCP017)

 

Nishant Puri (11DCP029)

 

Amritanshu Mehra (11DCP008) 5/4/12

Contents

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Defining Global Marketing

Basically ‘global marketing’ consists of finding and satisfying global customer needs better than the competition, and of coordinating marketing activities within the constraints of the global environment. OR conceptualizing and then conveying a5/4/12 final

The process of

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Why Internationalize ?
Expanding

sales into foreign

markets Ranbaxy
Access

to new and potentially more profitable markets

Coca-Cola and Pepsi receive more than half of their revenues from operations outside 5/4/12 United the

Factors influencing the decisions to go GLOBAL

Industry globalism

The more culturally unbounded the product is, the more a global clustering can take place and the more a standardised approach can be made in the design of marketing programmes
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Global Industries

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Preparedness for internationalization

The degree of preparedness is dependent on the firm’s ability to carry out strategies in the international marketplace, i.e. the actual skills in international business operations. These skills or organizational capabilities may consist of personal skills (e.g. language, cultural sensitivity, etc.), the managers’ international experience or financial resources.

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P r e p a r e d n e s s F o r I n t e r n a ti o n a li z a ti o n

H i g h M e d L o w

Enter new business

Prepare for globalization

Strengthen your global position

Consolidate your export markets

Consider expansion in international markets

Seek global alliances

Stay at home

Seek niches in international markets

Prepare for a buy-out

Low
Industry Globalism

Medium

High
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When to stay at HOME ?

Lack of international experience and a weak position in the home market If the firm finds itself in a global industry as a dwarf among large multinational firms, it may seek ways to increase its net worth so as to attract partners for a future buyout bid. If the firm has already acquired some competence in international business operations it can overcome some of its competitive disadvantages by going into alliances with firms representing complementary competences
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GLOCALIZATION

“Think globally but act locally’ flexibility while exploiting the benefits of global integration and efficiencies, as well as ensuring worldwide diffusion of innovation tries to optimise the ‘balance’ between standardization and adaptation of the firm’s international marketing activities
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 Local

 ‘Glocalization’

Japan
chicken tatsuta teriyaki chicken Teriyaki McBurger

Thailand Kiwi Burger

India Aloo Tikki Maharaja Mac

Singapore Kiasuburger Chicken Breakfast

Thailand Samurai Pork Burger

Germany Beer McCroissants

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Internationalization Motives
 o o o o

Proactive motives Profit and growth goals Managerial urge Technology competence/unique product Foreign market opportunities/market information Economies of scale Tax benefits

o o

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Internationalization Motives
 o o o o o o o

Reactive motives Competitive pressures Domestic market: small and saturated Overproduction/excess capacity Unsolicited foreign orders Extend sales of seasonal products Proximity to international customers/psychological distance
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Competitive pressures

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Small and saturated markets
Saturated Korean Markets

Japanese market saturated with Toyota and Nissan - > Honda moving to American markets

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Haier – Proactive & Reactive motives
The Chinese manufacturer of home appliances ,Haier Group, was near bankruptcy when Mr Zhang Ruimin Proactive Motives Reactive motives was appointed plant director in 1984, Zhang Ruimin had an that year. Entry of global home the fourth one
internationalization mindset appliance manufacturers into the Chinese market forced Haier to seek international expansion Since China joined the WTO almost every international competitor had invested in China, establishing wholly-owned companies. Saturation of the Chinese home appliance market

Price wars – potential for further 5/4/12 development was

INTERNATIONAL BARRIERS & RISKS
    

Insufficient finances Insufficient knowledge Lack of foreign market connections Lack of export commitment Lack of capital to finance expansion into foreign markets Lack of productive capacity to dedicate to foreign markets Lack of foreign channels for distribution Management emphasis on developing domestic 5/4/12 markets

 

General market risks
    

Comparative market distance; Competition from other firms in foreign markets; Differences in product usage in foreign markets; Language and cultural differences; Difficulties in finding the right distributor in the foreign market; Differences in product specifications in foreign markets; Complexity of shipping services to overseas buyers.
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Commercial risks

Exchange rate fluctuations when contracts are made in a foreign currency Failure of export customers to pay due to contract dispute, bankruptcy, refusal to accept the product or fraud Delays and/or damage in the export shipment and distribution process; Difficulties in obtaining export financing

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Political risks
Foreign

government restrictions export policy

National Foreign

exchange controls imposed by host governments that limit the opportunities for foreign customers to make payment of governmental assistance in overcoming export barriers of tax incentives for companies 5/4/12

Lack Lack

Global Market Research

Lack of familiarity with customers, competitors and the market environment in other countries, coupled with the growing complexity and diversity of international markets makes it increasingly critical to collect information in relation to these markets. The term ‘marketing research’ refers to gathering, analysing and presenting information related to a well-defined problem. Hence the focus of marketing research is a specific problem or project with a beginning and an end.
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Sources of Information

Primary data.

This can be defined as information that is collected first-hand, generated by original research tailor-made to answer specific current research questions. Secondary data This can be defined as information that has already been collected for other purposes and is thus readily available. Advantages : Less expensive and less time 5/4/12 consuming

Internal data sources

Total sales , Sales by country, Sales by products , Sales volume by market segment , Sales volume by type of channel distribution , Pricing information , Communication mix information External data sources Electronic databases

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Global Marketing Environment

Those variables , largely out of the organizations control but which it must account for , within which it conducts its business globally.

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i. Reduce Risk

Reasons for taking environmental factors into consideration

ii. Isolate most important variables so that highest attention can be payed to those. iii. Aids in strategy planning and decision making iv. Aids in deciding which are the markets to enter and plan on the appropriate marketing mix. v. Evaluate and assess the risk of doing business with different countries.
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Scanning the Global Marketing Environment
 o

Cultural Environment Culture is the collective programming of the mind which distinguishes the members of one human group from another . Culture, in this sense, includes systems of values. Some cultural differences are easier to manage than others. Greater problem is to understand the underlying attitudes and values of buyers in different countries.
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o

o

Language

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Non Verbal Language
• Takes into account Time, Space , Material

Possessions , friendship patterns and business agreements.

o Thumbs up after a deal

- US – OK - South France – The deal was worthless - Japan – Little bribe has been asked for the deal
o Herman Miller did an office installation for

5/4/12 Monsanto in India Workers wanted to work more

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Religion
 

Nike offended Muslims in June, 1997 “Flaming air” logo for its Nike Air sneakers looked too similar to the Arabic form of God’s name, “Allah”. Nike pulled more than 80,000 pairs of sneakers from the market

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Manners and Customs
 

Differences in Gift giving behaviour Differences in eating habbits

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Economic Environment

HUL learned that low income Indians usually forced to settle down for lower quality products wanted to buy high end detergents and personal care products, but could not afford them in the quantities available In response the company developed extremely low cost packaging material and other innovations that allowed for a product priced in pennies instead of the $4 to $15 price of the regular containers.

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Political and Legal Environment
Forced out of India as Indian government was trying to prevent its own soft drink industry
Japanese law prevents foreign companies to open branches in Japan •For example, the only foreign bank allowed to have "almost" regular operations in Japan is Citibank (but there are restrictions; e.g. no business bank account can be open there). •Other foreign bank may have a representative branch (HSBC, Lloyds, BNPParibas, etc. have one) but people can't open a bank account there. •Until about some years ago, it was not even allowed for a foreign company to purchase (take over) a Japanese company.

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The launch of the international liquor brands of Seagram & W D Gilbey coincided with prohibition being imposed in some of the high potential states like Andhra Pradesh & Haryana , giving them a run for their money. A federal court ruled that American Airlines was not guilty of trying to drive weaker competitors out of business when it slashed fares in 1992. In contrast, a state court in Arkansas found Wal-Mart guilty of predatory pricing by selling pharmacy products below cost to drive out competitors.
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Embargoes or sanctions by the UN or individual governments to limit trade to specific countries, a popular political weapon in recent years. Example : US participated in embargoes against Iraq, South Africa, Libya, and Vietnam. An embargo, of course, eliminates many potential market opportunities. In contrast, the lifting of trade sanctions, as in the case of South Africa, can release pent-up demand and produce tremendous opportunities. A case in point involves Vietnam, against which the US had a near total economic embargo for 18 years.
5/4/12 When the embargo was lifted in February 1994,

Competitive Environment

The competitive environment consists of all the organizations that attempt to serve similar customers. Brand competitors

o

Nike is a brand competitor of Reebok, LA Gear, and other firms that market different brands of the same types of sport shoes.
o

Product competitors offer different types of products to satisfy the same general need. Domino's Pizza, McDonald's, and Kentucky Fried Chicken are product competitors. They attempt to satisfy a consumer need for fast food, but they offer somewhat different menus and services.
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Factors influencing the choice of our entry mode decision

Internal Factors External Factors Desired Mode Characteristics

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Internal Factors

Firm Size Experience

 International

 Product/Service

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Firm Size

More the Size  More the resource availability  Provides basis for increased International Involvement over time instance SMEs

 For

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International Experience

Another important factor, refers to the international experience of the managers and thus of the firm Uncertainty in the international markets is reduced through actual operations in the foreign market

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PRODUCT / SERVICE

The nature of the product affects channel selection because products vary widely in their characteristics and use For Instance • Products with high value/weight ratios, such as

expensive watches, are typically used for direct exporting.
• However soft drinks and beer industry,

companies typically establish licensing agreements, or invest in local bottling or production facilities because of high shipment costs.
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HARD & SOFT SERVICES

Hard services are those where production and consumption can be decoupled. For example software services can be transferred into a CD, or some other tangible medium, which can be massproduced, making standardization possible. On the other hand Soft Services are those where production and consumption occur simultaneously and decoupling is not viable. The soft-service provider must be present abroad from their first day of foreign operations.
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EXTERNAL FACTORS
 Sociocultural

Distance

 Country

Risk/Demand Uncertainty

 Market

Size and Growth

 Direct

and Indirect Trade Barriers
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SOCIOCULTURAL DISTANCE

The greater the perceived distance between the home and host country in terms of culture, economic systems and business practices, the more likely it is that the firm will shy away from direct investment in favor of joint venture agreements. They’ll prefer entry modes that involve relatively low resource commitments and high flexibility.

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COUNTRY RISK/DEMAND UNCERTAINITY

When planning its method of entry the firm must do a risk analysis of both the market and its entry mode. Exchange rate risk is another variable. Risks are not only economic they could be political as well. So when the country risk is high, firms favor entry modes that involve relatively low resource commitments (export modes).

 

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MARKET SIZE & GROWTH

The larger the country and the size of its market, and the higher the growth rate, the more likely it is that the firms would commit resources & consider establishing a wholly-owned sales subsidiary or participate in a majority-owned joint venture. Small markets, on the other hand, especially if they are geographically isolated and cannot be serviced efficiently from a neighboring country, may not warrant significant attention or resources. Consequently they may be best supplied via exporting or a licensing agreement
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DIRECT & INDIRECT TRADE BARRIERS Tariffs or quotas on the import of foreign goods and
components is one important factor. Product or trade regulations and standards have an impact on mode of entry and operation decisions. Preferences of local suppliers, or tendencies to ‘buy national’, often encourage companies to consider a joint venture or other contractual arrangements with a local company as the local partner helps in developing local contacts, negotiating sales and establishing distribution channels. In some instances product regulations and standards necessitate significant adaptation and 5/4/12 modification so the firm may have to establish

SMALL NUMBER OF RELEVANT INTERMEDIARIES AVAILABLE

In such a case the market field is subject to the opportunistic behavior of the few export intermediaries, and this will favor the use of hierarchical modes in order to reduce the scope for opportunistic behavior. For Instance -

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Distribution channels in Japan are very different. They are as inefficient as they are complex. The system is characterized by multiple layers of wholesalers who have developed close, personal relationships with other wholesalers, manufacturers, importers, and retailers. Moreover, these intimate relationships often serve as an informal barrier to U.S. companies wishing to sell directly to end-users or retailers.

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DESIRED MODE CHARACTERISTICS
 Risk

Averse

 Control

 Flexibility

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RISK AVERSE

If the decision maker is risk averse they will prefer export modes (e.g. indirect and direct exporting) or licensing because they typically entail low levels of financial and management resource commitment. A joint venture provides a way of sharing risk, financial exposure and the cost of establishing local distribution networks and hiring local personnel. However, modes of entry that entail minimal levels of resource commitment and hence minimal risks are unlikely to foster the development of international operations.
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CONTROL

Control is often closely linked to the level of resource commitment. Exporting, provide little or no control over the conditions under which the product or service is marketed abroad. In the case of licensing and contract manufacturing management needs to ensure that production meets its quality standards. Joint ventures also limit the degree of management control over international operations. Wholly-owned subsidiaries provide the most control, but also require a substantial commitment 5/4/12

FLEXIBILITY

There’s always a flexibility associated with every mode of entry Modes like Wholly owned Subsidiaries (involving substantial equity investment) are typically the most costly but the least flexible and most difficult to change in the short run. Then modes like Contractual Agreements and Joint Ventures limit the firm’s ability to adapt to or change strategy when market conditions are changing rapidly.

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ENTRY MODE STRATEGIES

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EXPORTING
• DIRECT • INDIRECT

LICENSING

FRANCHISING
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Indirect Exporting

Indirect exports is the process of exporting through domestically based export intermediaries. The exporter has no control over its products in the foreign market.

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Types of Intermediaries
 i) Domestic-based export merchants
 Buy the manufacturer’s products and then sell them abroad.  

ii) Domestic-based export agents
Including trading companies, seek and negotiate foreign purchases for a commission.

iii)

Cooperative organizations
Carry on exporting activities on behalf of several producers and are partly under their administrative control. They are often used by producers of primary products such as fruits or nuts.
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Advantages

Less Investment : The firm does not have to develop an export department, an overseas sales force, or a set of foreign contacts. Low Risk : Because international marketing intermediaries bring know-how and services to the relationship, the seller will normally make fewer mistakes. Little or no control over distribution, sales, marketing, etc. as opposed to direct exporting
5/4/12 Wrong choice of market and distributor may lead to

Disadvantages

Direct Exporting

Direct exporting involves selling directly to your target customer in market. This could be from your home country through the internet and regular trade visits, or by setting up a branch, office or company in the target country. Selling directly to customers prevents other businesses taking parts of your margin. However this approach requires a large commitment of financial and human resources. It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing.
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Advantages :
 

You are in control of pricing, your brand. You get a direct understanding of buyers' or end users' needs and an ability to customize accordingly You maintain the customer relationship

Disadvantages :
 

Greater information requirements Longer time-to-market as opposed to indirect 5/4/12 exporting

LICENSING

Is a simple way to engage in international marketing. The licensor issues a license to a foreign company to use a manufacturing process, trademark, patent, trade secret or other item of value for a fee or royalty. The licensor gains entry at little risk ; the licensee gains production expertise or a well known product or brand name.

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Disadvantages

The licensor has less control over the licensee than if it had set up its own production and sales facilities. Furthermore, if the licensee is very successful, the company might find that it has created a competitor.

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Now to avoid a situation like this, Coca-Cola usually supplies some proprietary ingredients or components needed in the product But the best strategy is for the licensor to lead in innovation so that the licensee will continue to depend on the licensor.

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There are several variations on a licensing arrangement.

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Management Contracts
 Some

examples

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Companies such as Hyatt and Marriot sell management contracts to owners of foreign hotels to manage these businesses for a fee. The management firm may even be given the option to purchase some share in the managed company within a stated period. 

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Contract Manufacturing

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The firm hires local manufacturers to produce the product. When Sears opened department stores in Mexico and Spain, it found qualified local manufacturers to produce many of its products.

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Advantages :
• Definitely there’s chance to start faster. • Less risk • There’s opportunity to form a partnership or buy

out the local manufacturer later. Disadvantages :
• The company has less control over the

manufacturing process
• There is loss of potential profits on manufacturing.
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FRANCHISING

A system in which semi-independent business owners (franchisees) pay fees and royalties to a parent company (franchiser) in return for the right to become identified with its trademark, to sell its products or services, and often to use its business format and system.

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Franchising Vs Licensing

Compared to licensing, franchising agreements tends to be longer and the franchisor offers a broader package of rights and resources which usually includes: equipments, managerial systems, operation manual, initial trainings, site approval and all the support necessary for the franchisee to run its business. A licensing agreement involves things such as intellectual property, trade secrets and others while franchising is limited to trademarks and operating know-how of the business.
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Some examples

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TURNKEY PROJECTS
 Wholly

Owned Subsidiaries(WOS)

 Joint

Venture (JV) Alliance

 Strategic

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TURNKEY PROJECTS

A turnkey project refers to a project in which clients pay contractors to design and construct new facilities and train personnel. A turnkey project is way for a foreign company to export its process and technology to other countries by building a plant in that country Industrial companies that specialize in complex production technologies normally use turnkey projects as an entry strategy

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WHOLLY OWNED SUBSIDARIES
Can be further classified into :
 Greenfield

Investments

 Acquisitions

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GREENFIELD INVESTMENT

It is the establishment of a new wholly owned subsidiary. It is often complex and potentially costly, but gives full control to the firm and has the most potential to provide above average return. It is preferred where close contact with end customers, high levels of professional skills, specialized know how, and customization are required. Also, its more likely preferred where physical capital intensive plants are planned.

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 Some

Examples :

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Successful Greenfield Investments Hyundai Motor Company planned a major
greenfield investment in Nošovice in the MoraviaSilesia region of the Czech Republic. They opened a new manufacturing plant to begin operations in October 2008 and employed 3,000 people. Both the Czech government and Hyundai signed an agreement outlining the conditions of this investment. It’s one of the largest investment in the Czech Republic’s modern history. Hyundai also got subsidies amounting to CZK 4.3 billion
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Mercedes Benz’s production facility in Pune, India Mercedes Benz began its Indian production in the mid1990s from a plant based in the small town of Pimpri. In 2007 it acquired 100 acres for a greenfield plant in the Pune, Maharashtra, India. The investment was a whopping Rs. 250 Crores & it took just over a year to be completed. The production capacity could now turn out almost 5000 vehicles, hence reducing the amount of competition Mercedes faced in the Indian market from brands like BMW & Audi. Clearly, this provided a competitive edge. The idea to setup a facility in India to exploit the cheap resources & make use of relatively cheap investment 5/4/12 worked very well in favor of the auto-giant.

 

An Unsuccessful Greenfield Investment
Carrefour’s Riding

South Korean Investment

on its successful retail history, Carrefour chose to venture into a completely different area on its own without a local partner, due to which it failed to understand the market. the country in question was South Korea, Carrefour employed most of the top management 5/4/12 personnel from France and this did

Although

ACQUISITION

It has become a popular mode of entering foreign markets mainly due to its quick access. It offers the fastest, and the largest, initial international expansion of any of the alternative. It leads to greater market power and market share is usually affected by market power. Acquisition is lower risk than Greenfield Investment because of the outcomes of an acquisition can be estimated more easily and accurately. In overall, acquisition is attractive if there are well established firms already in operations or competitors want to enter the region.
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 Some

Examples :

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A Successful Acquisition
 

Volkswagen’s acquisition of Skoda Skoda, set up in the 1895 is one of the oldest car companies in the world. It was a well recognized car brand in the early half of the 1900s after which it lost its value, mainly due to being outdated in terms of technology, quality & unreliability. In 1991, VW took over a part (30%) of Skoda & went about restoring brand’s pride which it enjoyed many decades ago. More than £2 billion was invested in upgrading plants, R&D facilities & training employees to make sure the product meets the quality standards of the targeted markets.
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A Failed Acquisition

In 2005, eBay, the multibillion dollar internet auction site decided it was time to purchase Skype for a whopping US$2.6 billion. That seemed a little out of place as Skype generated revenues of around US$60 million. Obviously, the acquisition would have to be justified after paying such a huge bill. Skype is renowned for its free VoIP services enabling members to make free calls over the internet along with paid calls at negligible rates from PC to phones. By the time of its purchase, it was estimated to have almost 54 million subscribers.
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JOINT VENTURES

Foreign investors may join with local investors to create a joint venture company in which they share ownership and control. For instance The foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone. The foreign government might require joint ownership as a condition for entry. Even corporate giants need joint ventures to crack the toughest markets
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 

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Coca-Cola and Nestle joined forces to develop the international market for “ready to drink” tea and coffee, which currently sell in significant amounts only in Japan. Procter & Gamble formed a joint venture with its Italian arch-rival Fater to cover babies’ bottoms in the United Kingdom and Italy 

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Whirlpool took a 53 percent stake in the Dutch electronics group Philips’s white goods business to leapfrog into the European market. GE Money – views joint ventures as one of its “most powerful strategic tools” . It has formed JVs with financial institutions in S Korea, Spain, Turkey etc.

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STRATEGIC ALLIANCE

It’s a term used to describe a variety of cooperative agreements between different firms, such as shared research, formal joint ventures, or minority equity participation. The modern form of strategic alliances is becoming increasingly popular and has three distinguishing characteristics.

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Strategic alliance between McAfee & Verizon

This is an extensive, far-ranging partnership, bringing together each company’s respective strengths today and extending them ambitiously into the future. The highlight of the partnership is the companies’ commitment to jointly develop and market a suite of next-generation, cloud-based, managed security solutions for enterprise & government customers. It has the potential of providing a secure foundation for the widespread adoption and proliferation of enterprise-class cloud computing.
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PRODUCT DECISIONS

A company’s customers and competitors are defined by the products it offers. The challenge facing a company with global horizons is to develop product policies and strategies that are sensitive to market needs, competition, and company 5/4/12 resources on a global scale.

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LOCAL PRODUCT

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NATIONAL PRODUCT

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INTERNATIONAL PRODUCT

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GLOBAL PRODUCT

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PRODUCT POSITIONING

Positioning refers to an act of locating a brand in the customers’ mind over and against other products in terms of product attributes and the benefits that a brand does and does not offer.

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PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH
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ATTRIBUTE/BENEFIT

In global marketing, the fact that a product is imported itself represents benefit positioning. Economy, reliability and durability are other frequently used attribute/benefit positions.
PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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ATTRIBUTE/BENEFIT
Example: In the on-going Credit card wars, VISA’s advertising focuses on the benefit of worldwide merchant acceptance.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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QUALITY/PRICE

This strategy focuses on providing the customers high fashion/quality goods at a high price rather than providing them the low quality goods at a low price.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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QUALITY/PRICE
Example: The American express card has traditionally been positioned as an upscale card whose prestige justifies higher annual fees than a VISA or Master card. The Discover card positions itself at the other end by charging no annual fee and a cash rebate to card holders each year.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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USE/USER

Positioning can also be achieved by describing how a product can be used or by associating a product with a user or class of users the same way in every market.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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USE/USER
Example: Marlboro’s success as a global brand is due in part to the product’s association with cowboys – the archetypal symbol of rugged independence, freedom and space. Smoking Marlboro is a way of getting in touch with a powerful urge to be free and independent. Lack of physical space may be a reflection of the Marlboro user’s own sense of ‘macho-ness’ or a symbol of freedom and independence. The message is reinforced in advertising with an image carefully calculated to appeal to the universal human desire for

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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HIGH-TECH

There are certain products for which the buyers wish to acquire considerable technical information.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

The positioning of the technical products such as Computers, tires, financial services, adidas and nike sports equipments, fuji HIGH-TOUCH bicycles, Canon cameras, Sega video games, etc. is classified 5/4/12

HIGH-TECH
Example: Computer buyers in Russia and the United States are equally knowledgeable about Pentium microprocessors, hard drives, and RAM requirements.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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HIGH-TOUCH

Marketing of high touch products requires less emphasis on the specialized information and more emphasis on the image. Buyers of such products share a common language and set of symbols relating to themes of wealth, materialism, and romance.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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HIGH-TOUCH
Example: The Americanness of Levi’s , Marlboro, McDonald’s and Harley-Davidson enhances their appeal to the cosmopolitians around the world and offers opportunities for benefit positioning.

PRODUCT POSITIONING
ATTRIBUTE/BENEFIT

HIGH-TOUCH

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PRODUCT SATURATION LEVELS IN MARKET

The sale of the products in the market does not depend only on the income of the consumers. Other companion factors are also taken into account.

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PRODUCT SATURATION LEVELS IN MARKET
Example: 1) The sale of air conditioners is explained by income and climate. In a low-income country, many people cannot afford an air conditioner no matter how hot it is. Affluent people in a Northern climate can easily afford an air conditioner but have no need for one.

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PRODUCT SATURATION LEVELS IN MARKET

2) During the 1960s, the ownership of vacuum cleaners in the European common market ranged from a high of 95 percent in Netherlands to a low of 7 percent in Italy. An important factor in explaining the ownership levels is the type of floor covering used in the homes of the country. Almost every home in Netherlands contains rugs, whereas in Italy the use of rugs is uncommon.
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FACTORS AFFECTING PRODUCT DESIGN
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PRODUCT DESIGN
PREFERENCES

HIGH-TOUCH
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PREFERENCES

Color
PRODUCT DESIGN

Taste Heavyness

Example: Italy’s Olivetti Corporation had gained a considerable distinction for its awardwinning modern consumer 5/4/12 typewriters. But these

PREFERENCES

COST
Design-related Labour Repair

costs

cost services
PRODUCT DESIGN

PREFERENCES

Example: British approach – Engine inside the wing.

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COMPATABILITY
 

Language System Example:

The companies manufacturing the electrical equipments have to take into consideration the power system in the country of use. Three different television broadcast systems are found in the world today: the French SECAM system, the German PAL system and the U.S. NTSC system. The companies that are targeting global markets design multisystem TVs that allow users to simply flip a switch for proper 5/4/12 orientation with any system. Companies

PRODUCT DESIGN

PREFERENCES

LAWS AND REGULATIONS

Compliance with the laws and regulations of different countries has direct impact on the product design decisions, leading to the adaptations in the design thus increasing the price of the product.

PRODUCT DESIGN

PREFERENCES

Example: In the food industry in Europe there were 200 legal and regulatory barriers (such as prohibitions or taxes on products with certain ingredients, and different packaging and labelling laws) to crossborder trade within the European-Union in 5/4/12 the food categories.

GEOGRAPHIC EXPANSION

STRAIGHT EXTENSIO N

PRODUCT ADAPTATI ON

PROMOTI ON ADAPTATI ON

DUAL ADAPTATI ON

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STRAIGHT EXTENSION

The straight extension strategy involves introducing a standard product with the same promotion strategy throughout the world market. By implementing this strategy successfully major savings can be done on market research and product development.

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STRAIGHT EXTENSION
Example: When Campbell tried to sell its tomato soup in the UK, it discovered, through substantial losses, that the English prefer a more bitter taste than Americans. Campbell learned its lesson and subsequently succeeded in Japan by offering 7 soup varieties – for example, corn potage – designed specifically for the Japanese markets. Another example of successful extension is Unilever’s Organic shampoo, which was first launched in Thailand and then its sales were extended to Bangkok, Paris and various other countries.

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PROMOTION ADAPTATION

Use of this strategy involves leaving a product unchanged but fine-tuning promotional activity to take into account the cultural differences between markets. Example:

Bi-cycles and motor scooters are examples of products that have been marketed with this approach. They satisfy the recreational needs in the US but serve as the basic need for transportation in many other countries.
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PRODUCT ADAPTATION
• By modifying only the product a

manufacturer intends to maintain the core product function in different markets. Example: The electrical appliances have to be modified to cope with different electrical voltages in different environmental conditions. Exxon changed the chemical composition of petrol to cope with the extremities of climate, but still used the ‘Put a tiger in your tank’ campaign 5/4/12 unchanged around the world.

DUAL ADAPTATION

By adapting both product and promotion for each market the firm is adopting a completely differentiated approach. This strategy is often adopted by firms when it is not in a leadership position and is therefore reacting to the market or following competitors.
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DUAL ADAPTATION

Example:

Kellogg’s Basmati flakes was specially created to suit Indian tastes, India being a rice-eating country . The advertising campaign was a locally adapted concept based in international positioning.

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PRODUCT INVENTION

Product invention is the strategy in which the products are specifically developed to meet the needs of the individual markets. Existing products may be technologically sophisticated to operate in less developed countries, where power supplies may be intermittent and local skills limited.

Example: Colgate pursued this strategy in developing Total, a toothpaste brand whose formulation, imagery and ultimate consumer appeal were designed from the ground up to translate across national boundaries.

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PRICING

In any country, three basic factors determine the boundaries within which the market prices should be set. The first is product cost, which establishes the price floor, or minimum price. Second, competitive prices for comparable products create a price ceiling, or the upper boundary. Between the lower and the upper boundaries for every product there is an optimum price which is the function of the demand for the product as determined by the willingness and ability 5/4/12 of customers to buy.

PRICING
Questions that arise before the company --

Should the firm pursue market penetration, market skimming or any other pricing objective?

What type of discount or allowance should the company offer its international consumers?

Are the firm’s prices likely to be viewed by the host-country government as 5/4/12 reasonable or exploitive?

GLOBAL PRICING OBJECTIVES AND STRATEGIES

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MARKET SKIMMING

In this strategy a high price is charged to ‘skim the cream’ from the top end of the market, with the objective of achieving the highest possible contribution in a short time. For a marketer to use this approach the product has to be unique, and some segments of the market must be willing to pay the high price.

GLOBAL PRICING OBJECTIVES AND STRATEGIES

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MARKET SKIMMING
Example: When Sony first began selling Betamax videocassette recorders (VCRs) in the U.S., it used a skimming strategy. Harvey Schein, the then president of Sony of America at that time, recalled the response to the $1,295 tag.

GLOBAL PRICING OBJECTIVES AND STRATEGIES

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PENETRATION PRICING

A penetration pricing policy is used to stimulate market growth and capture market shares by deliberately offering products at low prices.
GLOBAL PRICING OBJECTIVES AND STRATEGIES

This approach requires mass markets, price-sensitive customers and reduction in unit costs through economies of scale and experience curve effects.

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PENETRATION PRICING

Japanese companies have used penetration pricing intensively to gain market share leadership in a number of markets, such as cars, home entertainment products and electronic components. Example:
GLOBAL PRICING OBJECTIVES AND STRATEGIES

When Sony developed the portable compact disc player, the cost per unit at initial sales was estimated to exceed $600. Since this was a ‘no-go’ price in the U.S. and other target markets, the competitors like Akio Morita gained the market share by pricing the unit in the $300 range.

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MARKET HOLDING

The market holding strategy is frequently adopted by the companies that want to maintain their share of the market.

GLOBAL PRICING OBJECTIVES AND STRATEGIES

In global marketing, currency fluctuations often trigger price adjustments.

If the competitive situation in market countries is price sensitive, manufacturers must absorb the

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MARKET HOLDING

Example: IKEA, the Swedish home furnishing company sourced 50% of its products in the U.S. in 1992, compared with only 10% in 1989.
GLOBAL PRICING OBJECTIVES AND STRATEGIES

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GLOBAL MARKETING CHANNELS AND PHYSICAL DISTRIBUTIONS
Distribution is the physical flow of goods through channels. • Channels are comprised of coordinated groups of individuals or firms that perform functions adding utility to a product or a service. •

The American Marketing Association defines channel of distribution as ‘an organized network of agencies and institutions, which, in combination, perform all the activities required to link producers with users to accomplish the marketing task’. Hypermarkets like Carrefour and Euromarche are one of the many 5/4/12 elements that constitute distribution

MARKETING CHANNELS PURPOSE
The purpose of the marketing channels is to create utility for the customers. The major categories of utility are –

1. Place – The availability of a product or

service in a location that is convenient to a potential customer
2. Time – The availability of a product or

service when desired by a customer.
3. Form – The product is processed,

prepared and ready to use when desired by a customer.

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MARKETING CHANNELS PURPOSE
Coke’s leadership position in world markets is based on its ability to put coke ‘within an arm’s reach of desire’, which is, in marketing channel terminology, ‘place utility’.

Dell’s rise to number-three position in the world computer industry is based on its innovative channel strategy: Direct marketing and Build to Order (BTO) i.e. build the computers with exact configurations as ordered by the customers. 5/4/12

SELECTION OF CHANNEL DECISIONS

Some of the questions which help the company to identify its channel arrangement may be –

1.

Where are the potential customers located?

1.

What are their information requirements?

1.

What are their preference for service?

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FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

ENVIRONMENTAL CHARACTERISTICS

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CUSTOMER CHARACTERISTICS

The number of customers, geographic distribution, income, shopping habits and reactions to different selling methods all vary from country to country and therefore require different channel approaches.

FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

EXAMPLE: If there are only 10 customers for an industrial product in each national market, these 10 customers must be directly contacted by either the manufacturer or an agent. For massmarket products bought by millions

ENVIRONMENTAL CHARACTERISTICS

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PRODUCT CHARACTERISTICS

Certain product attributes such as standardization, perishability, bulk, service requirements and unit price have an important influence on channel design and strategy.

FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

Example: Products with a high unit price are sold through a company sales force because the selling cost of this expensive distribution method is a small part of the total sale price. Moreover, the high cost of such products is usually associated with complexity or product features that

ENVIRONMENTAL CHARACTERISTICS

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PRODUCT CHARACTERISTICS

Example: Mainframe computers are expensive, complicated products that require both explanation and applications analysis focused on the customer’s needs. A company-trained sales-person or a sales-engineer is well suited to the task of creating information utility for the computer buyers.

FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

ENVIRONMENTAL CHARACTERISTICS

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MIDDLEMAN CHARACTERISTICS

Middlemen are in business to maximize their own profit and not of the manufacturer.

FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

They have a tendency of taking orders from the manufacturers whose products and brands are in demand to avoid any real selling effort for a manufacturer’s products that may require push.
ENVIRONMENTAL CHARACTERISTICS

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MIDDLEMAN CHARACTERISTICS
Example: The RF division of Harris achieved a great success in international market with its shortwave radios. One of the reasons for its success was the quality of agents in key markets and their commitment to the Harris product. Also Harris offered commissions of 33 percent on all sales – at least 15 percent higher than commissions offered by any other competitor.

FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

ENVIRONMENTAL CHARACTERISTICS

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ENVIRONMENTAL CHARACTERISTICS

The variety of economic, social and political environments internationally, create a need to delegate a large degree of independence to local operating management or agents. Example:
FACTORS CONSTRAINING THE SELECTION OF SHAPING INTERNATIONAL CHANNELS

In the U.S., several factors combine to make the supermarket or the self-service, one-stop food store the basic food retailing unit. These factors include high incomes, large capacity refrigerator/freezer units, automobile ownership, acceptance of frozen and convenience foods and attitude toward food preparation. Many shoppers want to purchase a week’s worth of groceries in one trip to the store. They have money, ample storage space in the refrigerator and hauling capacity of the car

ENVIRONMENTAL CHARACTERISTICS

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DISTRIBUTION CHANNELS

Distribution blocks are the links that link the manufacturers to the customers. Consumer channels are designed to put the products in the hands of the people for their own use. Industrial channels deliver the products to the manufacturers or the organizations that use them in the production process or in day-to-day operations. 5/4/12

DISTRIBUTION CHANNELS

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CONSUMER PRODUCTS

A consumer products manufacturer can sell to customers directly, through mailorder selling, through manufacturer-owned or independent retailers, or the internet. Example: IKEA, the world’s largest furniture retailer, relies primarily on its companyowned retail stores, but it also has a catalog that supports both the retail stores and the expanding on-line store as well as direct mail-order selling.

DISTRIBUTION CHANNELS

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INDUSTRIAL PRODUCTS

SCAN IMAGE

DISTRIBUTION CHANNELS

Before deciding which pattern to use

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INDUSTRIAL PRODUCTS
Example: Kyocera Corporation of Kyoto, Japan, has successfully used its own sales force at home and in the U.S. to achieve leadership in the $1.2 billion global market for certain ceramic microchip covers.
DISTRIBUTION CHANNELS

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GLOBAL RETAILING

Global retailing is any retailing activity that crosses national boundaries. Retail stores can be divided into categories according to the amount of square feet of floor space, the level of service offered, and width and depth of product offerings. A variety of terms used to refer large stores are – Hypermarkets, mass merchandisers, discounters, supermarkets and superstores. The critical question for the
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DISTRIBUTION CHANNELS

GLOBAL RETAILING

Basically, a retailer has two things to offer to the consumers – One is the selection of goods at a price, and the second is the overall manner in which the goods are offered in the store setting. This includes such things as the store site, parking facilities, in-store setting and the customer service. One of the important aspects of global retailing is the ability to develop an environment that invites the customer to the shop. Example: In Istanbul, Turkey, a
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DISTRIBUTION CHANNELS

CHANNEL STRATEGY FOR NEW MARKET ENTRY

The company entering a market for the first time uses either the established channels or builds its own channels. There is little immediate incentive for an independent channel agent to take on a new product when established names are accepted in the market and are satisfying current demands. The global company seeking to enter such a market must either provide some incentive to channel agents or establish its own direct-distribution system.

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CHANNEL STRATEGY FOR NEW MARKET ENTRY

By using a sales force, the manufacturer can ensure aggressive sales activity and attention to its products.

Sufficient resource commitment to sales activity, backed up by appropriate communications programs, may in time allow a manufacturer with competitive  products and prices to obtain a reasonable share of the market.

When market share objectives have been reached, the manufacturer may consider shifting from the direct sales force to reliance on independent intermediaries. 5/4/12

CHANNEL STRATEGY FOR NEW MARKET ENTRY

Example: Kyocera achieved great success in the U.S. market by custom-tailoring ceramic chip housings to each customer’s needs. Kyocera also has become legendary for its service among California’s Silicon Valley chipmakers. Instead of following the electronics industry norm of using distributors for its products, Kyocera relies on a salaried sales force. Kyocera backs up its $100 million-per-year research and development (R&D) expenditures with sales forces in both the U.S. – 50 direct salespersons at 12 direct sales offices – and Japan that place unwavering emphasis on quality and customer service. Early on, Kyocera earned a reputation for answering customer questions overnight, whereas American suppliers often took weeks to respond. Employees would work around the5/4/12 to satisfy clock

PROMOTION

The promotion P of the marketing mix refers to all forms of communication used by the organization to inform, remind, explain, persuade and influence the attitudes and buying behavior of the customers. The primary purpose of marketing communications is to tell customers about the benefits and values that a product or service offers.

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GLOBAL ADVERTISING AND BRANDING  Advertising may be defined as
any sponsored, paid message placed in a mass medium.
 Global

advertising is the use of the same appeals in multiplecountry markets.

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Reasons for Global Advertising’s growing popularity
 Global

campaigns attest to management’s conviction that unified themes not only spur short-term sales but also help build long term product identity and offer significant savings in production costs. advertising also offers companies economies of scale in advertising as well as improved access to distribution 5/4/12 channels.

 Global

Coca-Cola, the most global brand in the world, records radio spots in 40 languages with 140 different music backgrounds. CocaCola asserts that consumers still differ from country to countryand must reach by advertising tailored to their respective countries.

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PUBLIC RELATIONS AND PUBLICITY
A

company’s public relations (PR) effort should foster goodwill and understanding among constituents both inside and outside the company. relations practices in specific countries can be affected by cultural traditions, social and political contexts, and economic environments.
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 Public

PUBLIC RELATIONS AND PUBLICITY
In

1994, intel showed a poor understanding of public relations basics after a college professor discovered a technical defect in the company’s flagship Pentium chip. The professor, contacted intel and asked for a replacement, but his request was rejected. Word 5/4/12 about the intel flaw spread

PERSONAL SELLING

Personal selling is a two-way, personal communication between a company representative and a potential customer as well as back to the company. The salesperson’s job is to correctly understand the buyer’s needs, match those needs to the company’s product(s), and then persuade the customer to buy. Effective personal selling in a salesperson’s home country requires building a relationship with the customer, global marketing presents additional challenges because the buyer 5/4/12 and seller may come from different

In

1993,a Malaysian developer, YTL Corp, sought bids on a $700 million contract for powergeneration turbines. Siemens AG of germany and GE were among the bidders. The MD of YTL requested meetings with the executives from both the companies. Siemens complied with the request, GE did not send an

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The selling process is typically divided into several stages

Prospective: process of identifying potential purchasers and assessing their probability of purchases. Preapproach: problem solving stage to gather information on a prospective customer’s problem areas and tailor a presentation that demonstrates how the company’s product can solve these specific problems. Approach and Presentation: involve one or more meetings between seller and buyer in order to understand cultural norms and protocols. Presentation comes only after rapport has been 5/4/12 firmly

SALES PROMOTION

Sales promotion refers to any consumer or trade program of limited duration that adds tangible value to a product or brand. The tangible value created by the promotion may come in various forms such as a price reduction or a “buy one, get one free” offer. The purpose of sales promotion may be to stimulate customers to sample a product or to increase customer demand.
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DIRECT MARKETING

Direct marketing is a system of marketing that integrates ordinarily separate marketing mix elements to sell directly to both customers and other businesses, bypassing retail stores and personal sales calls. Used by virtually every consumer and other business to business category from banks to airlines to nonprofit organizations. Direct marketing uses wide spectrum of media, including direct mail, telephone, broadcast, including television and radio, and print including newspaper 5/4/12 and magazines.

Global Marketing Operations

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Global Marketing Operations

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A KEY TO GLOBAL MARKETING STRATEGY IMPLEMENTATION

The key to good organizing and controlling in global marketing is to create a flexible structure or framework which enables organizations to respond to relevant differences in the markets in which they operate, but, at the same time, delineates relationships clearly between parts and personnel of the company. Companies develop strategies to fit the needs of diverse markets while capitalizing on economies of scale in centralized operations, centralized control and experience across many markets. The structure of the organization should be congruent with the tasks to be performed, the need for product knowledge, and the need for market knowledge.
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FACTORS AFFECTING A GLOBAL MARKETING ORGANIZATION

The structure of an organization should be a function of the products or services to be sold in the market place and the external and internal environments.

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External Factors
   

Geographic Distance. Time Zone Differences. Types of Customers. Government regulations.

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Internal Factors
     

Extent of international Sales Level of International Commitment. Access to Human Resources. Organizational Flexibility. Existing Company Structure. Allocation of Decision- Making Authority

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ORGANIZATIONAL STRUCTURES

The way in which a global marketing organization is structured is an important determinant of its ability to exploit effectively and efficiently the opportunities available to it. It determines the capacity for responding to problems and challenges. Companies operating internationally must decide whether the organization should be structured along functions, products, geographical areas or combinations of the three (matrix).

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Functional Structure

Management is primarily concerned with the functional efficiency of the company. The company is new to international business, has no international specialist and typically has few products and few markets. As the international involvement intensifies an export or international department may become part of the organizational structure. The functional export
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International Division Structure

As international sales grow, an international divisional structure emerges and becomes directly responsible for the development and implementation of the overall international strategy. The international division incorporates international expertise, information flows about foreign market opportunities, and authority over international activities. Manufacturing and other related functions still remain with the domestic divisions in order to take advantage of economies of scale.

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Product Divisional Structure

This structure is more suitable for companies with more experience in international business and marketing, and with diversified product lines and extensive R&D activities. The product division structure is most appropriate under conditions where the products have potential for worldwide standardization.

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Product Divisional Structure

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Product Divisional Structure

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Geographical Structure

The geographical structure is suitable if market conditions with respect to product acceptance and operating conditions vary considerably across world markets. This structure is especially useful for companies that have a homogeneous range of products (similar technologies and common end-use markets), but at the same time need fast and efficient worldwide distribution. The world is divided into regions (divisions).

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Geographical Structure

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Matrix Structure

Some global companies need both capabilities, so they have adopted a more complex structure: the matrix structure. The international matrix structure consists of two organizational structures intersecting with each other. The matrix structure may consist of product divisions intersecting with functional departments, or geographical areas intersecting with global divisions. The two intersecting structures will largely be a function of what the organization sees as the two dominant aspects of its environment.

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Matrix Structure

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Global Marketing Operations

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Planning the Global Marketing Operations

Planning involves where the organization would like to be and how to get there, which involves goal setting and strategy determination. The international marketing plan is more than a mere integration of the country plans, for it seeks to direct and co-ordinate the activities of the corporation on a global basis and at country levels. This involves a number of variables . Knowledge of the market Knowledge of the product Knowledge of the marketing systems
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Strategic planning in the global marketing context comprises

Considering the resource The commitment decision: position of the firm and its home market situation, does the international market offer an attractive opportunity worth striving for? Which country/countries Area of operation decision: present the most attractive alternative(s) as potential target markets?

What could be the most effective strategy for entering Entry mode and operations decision: the international markets and conducting the marketing 5/4/12 operations?

Strategic planning in the global marketing context comprises

Marketing organization decision:

What is the best possible organizational arrangement of facilities and personnel to enable the firm to have local flexibility and corporate control? Which possible combination of the marketing mix element would be most suitable for the given foreign market environment?
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Marketing mix decision:

The planning process can then be divided into two related phases. Strategic planning is the selection of opportunities defined in terms of products and markets, the commitment of resources, both human and financial, to achieve these objectives. Operational planning is the process in which strategic market objectives and resource commitments to these objectives are translated into specific projects and programs.

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Global Marketing Operations

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Controlling of Global Marketing Operations
In order to perform at optimum profit levels consistently, all functional areas need systematic control and coordination. While the requirements of an international marketing control system are similar to those of the domestic system, the specific challenges posed by the former necessitate that some consideration may be given to the following:

International control can seldom be as complete as that of domestic operations, the tools used therefore need to be reasonable and realistic. The cost of control system must be commensurate with the benefits accruing from it. The control system must be sensitive and fast so that the organization retains the flexibility to react to environmental opportunities and challenges. The control system may need variation according to the needs posed by different subsidiaries. Though this sounds a simple theoretical 5/4/12 principal, most multinational companies tend to adopt a

CONTROL SEQUENCE

The control operations in international operation follow similar logical sequence as that in domestic markets though, the implementation may vary greatly, according to the needs of markets chosen.

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Companies vary in the entry objectives they seek in international markets. For the purposes of designing adequate control systems, management needs to clearly outline its specific long run and short run objectives for specific international markets. Methods of control chosen for international control may be direct or indirect. The direct control methods include contractual arrangements and equity sharing. Communication and competition are used as indirect control methods. Organizations vary in the extent and degree of control, regardless of the method of control used.
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