Post on 22-Nov-2014
Chapter 1 Introduction to
Global Marketing
Introduction
What is Global Marketing?
How is it different from regular marketing?
Introduction
Marketing– Process of planning
and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals
Global Marketing– Focuses resources on
global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organization’s home country
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The International Marketing Task
Political/legalforces
Economicforces
1
2
Environmentaluncontrollablescountry market A
Environmentaluncontrollablescountrymarket B
Environmentaluncontrollablescountrymarket C
Competitivestructure Competitive
Forces
Level of Technology
Price Product
Promotion Channels of distribution
Geography and
Infrastructure
Foreign environment(uncontrollable)
Structure ofdistribution
Economic climate
Cultural forces
3
45
6
7Political/
legalforces
Domestic environment(uncontrollable)
(controllable)
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Domestic environmentDomestic political decisions affecting marketing activities to foreign markets (e.g. Libya, Iraq, South Africa, China…)
Domestic economic climate (e.g. strength of domestic economy = possibilities to invest abroad, value of currency (weakness of US$))
Competition in home country
International environment
Cultural, political and economic climates can change dramatically (e.g. China and Russia)
Reasons for Global Marketing
Growth – Access to new markets and access to resources
Survival– Against competitors with lower costs (due to
increased access to resources) – e.g. India and China
Or push and pull factors
Inititation of internationalization - Export motives
usually there are many factors which affect the company’s decision to export
in Hollensen’s book those factors are devided into two categories: proactive and reactive - they can also be called push and pull factors
Proactive motives
1. Profit and growth goals
the possibility for a short term profit may be especially important to SMEs
experiences from the profitability of export affect the company’s attitude towards growing by the means of export (especially when you start to internationalize the perceptions about profitability may be far away form reality)
2. Managerial urge
managerial urge is a motivation which reflects the desire of management towards global marketing activities
often the managerial urge is simply a reflection of general entrepreneurial motivation - desire for continuous growth
managerial attitudes play a critical role in determining the exporting activities of the firm
– In SMEs export decisions may be the province of a single decision maker
– in LSEs decision making unit might be responsible for these decisions
these decisions are affected by the international background of the managers - those who have more international experiences are more internationally minded
3. Technology competence / unique product
If a company produces goods or services which are unique, a competence edge exists which can result in major business success abroad
one issue is how long such an advantage will continue?
4. Foreign market opportunities
market opportunities act as stimuli only if the firm has or is capable of securing resources necessary to respond to the opportunities
in general decision makers are considering only a rather limited number of foreign market opportunities in planning their foreign market entry– the market opportunities of similar overseas
markets are explored first
5. Economies of scale
the benefits of decreasing production costs / unit by increasing production has increased the interest of firms to penetrate to foreign markets to search for this advantage
6. Tax benefits
Reactive motives
1. Competitive pressuresa firm may fear losing domestic market share to competing firms that have benefited from economies of scale gained by global marketing activitiesfurther, it may fear losing foreign markets permanently to domestic competitors that decide to focus on these markets
Competitors are an important external factor stimulating internationalization (Coca-Cola & Pepsi)
2. Domestic market: small and saturateda company may be pushed into exporting because of a small home market potentialif domestic markets are unable to provide sufficient economies of scale, export markets are automatically included in their market entry strategya saturated domestic market has a similar effect (car manufacturers in USA)
3. Overproduction / excess capacity• if domestic sales are below
expectations => inventory can be above desired levels => with short-term price cuts export is started
• when domestic markets are normal, global marketing activities may be terminated (Canadian paper and pulp producers)
4. Unsolicited foreign orders• many small companies have become
aware of export market opportunities by accident (advertising, exhibitions etc.)
5. Extend sales of seasonal products• seasonality in demand conditions may
be different in domestic market from other international markets
• this can act as a stimulus for example to market skiing shoes to New Zealand during summer or harvesting machines to Argentina during winter
6. Proximity to international customers / psychological distance
• German firms established near Austrian border may not even perceive their marketing to Austria to be international
the same situation in Europe exists between Germany and parts of Switzerland, France and parts of Switzerland, France and part of Belgium, Sweden and parts of Finland, Netherlands and part of BelgiumBetween USA and Canada (partly with Mexico)
Overview of Marketing
One of the functional areas of a business that is distinct from finance and operationsPrimary tools in marketing are product, price, place, and promotionMarketing is an activity that comprises the firm’s value chainCurrent trend is to involve marketers in all value-related decisions – called boundaryless marketing
Boundaryless Marketing
Goal is to eliminate communication barriers between marketing and other business functional areasProperly implemented it ensures that a market orientation permeates all value creating activities
Goal of Marketing
Surpass the competition at the task of creating perceived value for customers
The Guide line is the value equation –
Value = Benefits/Price (Money, Time, Effort, Etc.)
Value Chain and Boundaryless Marketing
Competitive Advantage
Success over competition in industry at value creation
Achieved by integrating and leveraging operations on a worldwide scale
Globalization
Globalization is the inexorable integration of markets, nation-states, and technologies to a degree 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 way that is enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, and cheaper than ever before.
» Thomas Friedman
Global Industries
An industry is global to the extent that a company’s industry position in one country is interdependent with its industry position in another country
Indicators of globalization:
– Ratio of cross-border trade to total worldwide production
– Ratio of cross-border investment to total capital investment
– Proportion of industry revenue generated by companies that compete in key world regions
Competitive Advantage, Globalization and Global Industries
Focus– Concentration and attention on core business
and competence Nestle is focused: We are food and beverages.
We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we 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 isn’t
Strategy development comes down to two main issues similar to single country marketing– Target market– Marketing Mix
Global Marketing: What it is and What it isn’t
Global Marketing: What it is and What it isn’t
Global marketing does not mean doing business in all of the 200-plus country markets
Global marketing does mean widening business horizons to encompass the world in scanning for opportunity and threat
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
Standardization versus Adaptation
The Importance of Global Marketing
For US-based companies, 75% of sales potential is outside the US.– About 90% of Coca-Cola’s operating income is
generated outside the US.
For Japanese companies, 85% of potential is outside Japan.For German and EU companies, 94% of potential is outside Germany.
Environmental Adaptation Needed
Differences are in the uncontrollable environment of internationalmarketingDifferences are in the uncontrollable environment of internationalmarketing
Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)
Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)
Adaptation(of Marketing Mix)
Standardization(of Marketing Mix)
Continuum
INFLUENCED BY 5 ENVIRONMENTAL FACTORS
Environmental adaptationTo adapt marketing programs to foreign markets certain amount of adaptation is needed (take uncontrollable elements into consideration)
In broad sense the uncontrollable elements constitute the culture – the difficulty is in the recognition of the cultural impact
The problem in adapting to foreign markets is self-reference criterion (SRC) and an associated ethnocentrism
SRC is an unconscious reference to one’s own cultural values, experiences and knowledge as a basis for decisions – ethnocentrism: one’s own culture knows best how to do things
To avoid this misconception remember that it makes sense for the other person to do things in his/her own way, if you don’t remember this you might fail in recognizing cultural differences and the importance of those differences
Developing a Global Awareness
To be globally aware is to have:To be globally aware is to have:
1. Tolerant of Cultural Differences, and
2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential,(d) Global Economic, Social and Political Trends
Management Orientations
Ethnocentric:Home country is
Superior, seesSimilarities in foreign
Countries
Regiocentric:Sees similarities and differences in a world
Region; is ethnocentric or polycentric in its view of
the rest of the world
Geocentric:World view, seesSimilarities and
Differences in homeAnd host countries
Polycentric: Each host country Is
Unique, sees differencesIn foreign countries
Strategic orientation to international markets
Domestic Market Extension (Ethnocentric)
Multi-Domestic Market (Polycentric)
Global Marketing (Regio/Geocentric)
Concept EPRG Schema
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It is expected that differences in the complexity and sophistication of company’s operations depend on which orientation guides its operations
Among the approaches describing the orientations from casual exporting to global marketing is EPRG schema- in this schema the firms are classified as
ethnocentric, polycentric, regiocentric or geocentric depending on the international commitment of the firm
- in this schema it is also assumed that the degree of internationalization to which management is committed or willing to move affects the specific international strategies and decision rules of the firm
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Domestic market extension orientation
It views its international operations as secondary and as an extension of its domestic operations
The primary motive is to market excess domestic production
Minimal, if any, efforts are made to adapt the marketing mix to foreign markets
In EPRG schema these companies are classified as ethnocentric
Multidomestic market orientation
A company guided by this orientation has a strong sense that country markets are vastly different and that market success requires an almost independent program for each country => development of country based marketing strategies
Control is usually decentralizedIn EPRG schema these companies are classifies as
polycentric
Global marketing orientation
A company guided by global marketing orientation is referred to as a global company: its marketing activity is global and its market coverage is the world
It develops a standardized marketing mix applicable across national boundaries
In EPRG schema these companies are regiocentric or geocentric
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
Forces Affecting Global Integration and Global Marketing
GlobalIntegration
andGlobal
Marketing
Stages of International Marketing Involvement
In general, firms go through five different phases in going international:In general, firms go through five different phases in going international:
Infrequent Foreign MarketingInfrequent Foreign Marketing
No Direct Foreign MarketingNo Direct Foreign Marketing
International MarketingInternational Marketing
Regular Foreign MarketingRegular Foreign Marketing
Global MarketingGlobal Marketing
Stages of International Marketing Involvement
1. No Direct Foreign Marketing2. Infrequent Foreign Marketing
- export operations3. Regular Foreign Marketing
- export operations, direct investment sales operations, direct investment production operations
4. International Marketing- fully committed and involved in
imternational marketing through production and service operations
5. Global Marketing- companies treat the world as one
market