unit 1 global marketing

8/13/2019 Unit 1 global marketing

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Unit 1

Global Marketing


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2005 Prentice Hall

Introduction

What is Global

Marketing?

How is it different

from regular

marketing?


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2005 Prentice Hall

Introduction

Marketing

Process of planningand executing the

conception pricing,promotion anddistribution of ideas,goods and services tocreate exchanges that

satisfy individual andorganization goals

Global Marketing

Focuses resources onglobal market

opportunities andthreats; the maindifference is the scopeof activities becauseglobal marketing

occurs in marketsoutside theorganizations homecountry


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2005 Prentice Hall

Reasons for Global Marketing

Growth

Access to new markets

Access to resourcesSurvival

Against competitors with lower costs (due to

increased access to resources)


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2005 Prentice Hall

Competitive Advantage

Success over competition in industry at

value creation

Achieved by integrating and leveragingoperations on a worldwide scale


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2005 Prentice Hall

Globalization

Globalization is the inexorable integration ofmarkets, nation-states, and technologies to adegree never witnessed before - in a way that is

enabling individuals, corporations, and nation-states to reach around the world farther, faster,deeper and cheaper than ever before, and in a waythat is enabling the world to reach into individuals,

corporations, and nation-states farther, faster,deeper, and cheaper than ever before. Thomas Friedman


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Competitive Advantage,

Globalization and Global Industries

Focus

Concentration and attention on core businessand competence

Nestle is focused: We are food and beverages.We are not running bicycle shops. Even in foodwe are not in all fields. There are certain areaswe do not touch..We have no soft drinks

because I have said we will either buy Coca-Cola or we leave it alone. This is focus.

Helmut Maucher



Global Marketing: What it is and

What it isnt

Global marketing does not mean doing

business in all of the 200-plus country

marketsGlobal marketing does mean widening

business horizons to encompass the world

in scanning for opportunity and threat



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, act locally



The Importance of Global Marketing

For US-based companies, 75% of salespotential is outside the US.

About 90% of Coca-Colas operating income is

generated outside the US.

For Japanese companies, 85% of potential isoutside Japan.

For German and EU companies, 94% ofpotential is outside Germany.



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

Restraining Forces

Management myopia

Organizational culture

National controls


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2005 Prentice Hall

Forces Affecting Global Integration

and Global Marketing

GlobalIntegration

and

Global

Marketing


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Country Risk Analysis

Country risk represents the potentiallyadverse impact of a countrys environmenton the MNCs cash flows.

It may represnt the country risk exposure toloss in cross boarder lending caused by theevent in a particular country. These eventsmust be atleast to some extent under the

control of the government of that countryand not in private hands


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Country Risk Analysis

Country risk can be used:

to monitor countries where the MNC is

presently doing business;

as a screening device to avoid conducting

business in countries with excessive risk; and

to improve the analysis used in making long-

term investment or financing decisions.


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Political Risk Factors

Attitude of Consumers in the Host Country

Some consumers may be very loyal to

homemade products.

Attitude of Host Government

The host government may impose special

requirements or taxes, restrict fund transfers,

subsidize local firms, or fail to enforce

copyright laws.


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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.


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War

Internal and external battles, or even the threat

of war, can have devastating effects.

Bureaucracy

Bureaucracy can complicate businesses.

CorruptionCorruption can increase the cost of conducting

business or reduce revenue.



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Financial Risk Factors

Current and Potential State of the Countrys

Economy

A recession can severely reduce demand.Financial distress can also cause the

government to restrict MNC operations.

Indicators of Economic Growth

A countrys economic growth is dependent on

several financial factors - interest rates,

exchange rates, inflation, etc.


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Note that the opinions of different risk

assessors often differ due to subjectivities

in:identifying the relevant political and financial

factors,

determining the relative importance of each

factor, and

predicting the values of factors that cannot be

measured objectively.

Types of Country Risk Assessment


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Techniques ofAssessing Country Risk

Quantitative analysistechniques like

regression analysis can be applied to

historical data to assess the sensitivity of abusiness to various risk factors.

Inspection visitsinvolve traveling to a

country and meeting with government

officials, firm executives, and/or consumers

to clarify uncertainties.


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Market Entry


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Which strategy should be used?

It depends on:

Vision

Attitude toward riskHow much investment capital is available

How much control is desired


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Licensing

A contractual agreement whereby one company

(the licensor) makes an asset available to another

company (the licensee) in exchange for royalties,

license fees, or some other form of compensation Patent

Trade secret

Brand name

Product formulations


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Advantages to Licensing

Provides additional profitability with little

initial investment

Provides method of circumventing tariffs,quotas, and other export barriers

Attractive ROI

Low costs to implement


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Disadvantages to Licensing

Limited participation

Returns may be lost

Lack of controlLicensee may become competitor

Licensee may exploit company resources


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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-widepolicies


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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 dothey understand the basics of franchising?


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Investment

Partial or full ownership of operations

outside of home country

Foreign Direct InvestmentForms

Joint ventures

Minority or majority equity stakesOutright acquisition


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Joint Ventures

Entry strategy for a single target country in

which the partners share ownership of a

newly-created business entity


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Joint Ventures

Advantages

Allows for sharing of risk(both financial and

political)

Provides opportunity tolearn new environment

Provides opportunity toachieve synergy bycombining strengths of

partners

May be the only way toenter market given barriersto 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


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Global Strategic Partnerships

Possible terms:

Collaborative agreements

Strategic alliances

Strategic international alliances

Global strategic partnerships


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The Nature of Global Strategic

Partnerships


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The Nature of Global Strategic

Partnerships

Participants remain independent followingformation of the alliance

Participants share benefits of alliance as

well as control over performance ofassigned tasks

Participants make ongoing contributions in

technology, products, and other keystrategic areas


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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,

expectations and approachesNo corporate memory


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Cooperative Strategies in South

Korea: Chaebol

Composed of dozens of companies,

centered around a bank or holding

company, and dominated by a founding

family

Samsung

LG

Hyundai

Daewoo


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21stCentury 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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I t d ti


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Introduction

The Internet has revolutionized the internationalbusiness arena and global marketing in particular.

Roughly speaking, the Internet is a network of

computers interconnected throughout the worldoperating on a standard protocol that allows datato be transmitted.

Until the early 1990s, the Internet was primarilythe preserve of the military and academicresearchers.

I t d ti


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Introduction

The Web clearly provides a unique distribution andcommunication channel to marketers across theglobe.

The development of new software and othertechnologies during the early 1990s turned theInternet into a commercial medium that hastransformed businesses worldwide.

This chapter looks at the impact of the World WideWeb (WWW) on global marketing activities.

1. The Internet and the Global


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1. The Internet and the GlobalMarketplace

Internet usage worldwide is growing rapidly(see Exhibit 19-1). The internet population inChina ranks second now. By 2010, analystsestimate it will equal the entire US population.

The worldwide internet population surpassed1 billionin 2005- up from only 45 million 10years ago and 420 million in 2000.



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Asia-PacificAsia-Pacific region is quickly catching up. Most of the

action in the region is business-to-business.

Internet penetration in Japan and South Korea is higher

now than in the US. With high broadband penetration,online shopping is more attractive in South Korea than inthe rest of the region.

In China, web surfers apparently have a positive attitude

toward online shopping (see Global Perspective 19-1 forfurther information on Chinas internet sector).



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Marketplace

Asia-Pacific (cont.)

Several obstacles hinder the spread of e-commerce in Asia which include:

prefer to do business face-to-face instead of viaanonymous channels, relationships and networking,problems of secrecy and family-owned businesses,and knowledge barriers.

2. Structural Barriers to Global


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E-Commerce

Language Barriers:

Much of the content on the Web is in theEnglish language.

A recent study found that business users on theWeb are three times more likely to purchasewhen the Web site speaks their language.

The demand for Web site localization serviceshas boosted a new Web-oriented translationindustry.



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E-Commerce

Cultural Barriers:Cultural norms and traditions can hinder the

spread of the Internet.

In Confucian-based cultures like most EastAsian nations, business is conducted on apersonal basis.

In many countries, credit card penetration islow.

To become familiar with local markets as wellas local cultures is not possible through theInternet.



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E-Commerce

Infrastructure:In many emerging market countries, e-

readiness rank very low. E-readiness measuresthe extent of internet connectivity and

infrastructure in the country (see Exhibit 19-2and 19-2B).

Knowledge Barriers:

Setting up an e-business requires certain

knowledge and skills.In emerging markets, scarcity of proper talent

and skills will restrain the development of adigital economy.

6. Internet Ramifications for Global


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Marketing Strategies

Globally Integrated Versus Locally ResponsiveWeb Marketing Strategies (see Exhibit 19-4):

At the core of any global Web marketingstrategy is the basic conflict between localresponsiveness and global integration.

One-to-One Marketing

Product Policy

Global brandingInternet-based new product development (see

Global Perspective 19-4)



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Marketing of Services

Features of Services:

Intangibility

Simultaneity

Heterogeneity

Perishability

Global PricingCost transparency



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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, andgovernment policies



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Global Communication and the Web:

By 2009, JupiterResearch forecasts onlineadvertising spending is expected to grow to

$16.1 billionin the US and $3.9 billioninEurope.

Overall, in almost all countries internet

advertising still is a tiny slice of the globaladvertising pie, even in the developedworld (see Exhibit 19-6)



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Advantages of internet advertising:

Global reach

Lower cost

Allows precision

Interactivity

Ability to customize

Ability to instantly monitor


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unit 1 global marketing

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