IMM Module 3 - VTU MBA

International Marketing Management

By Nagendra RCIT, Gubbi

Global marketing management-planning and

organizationBy Nagendra R

CIT, Gubbi

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Global perspective? When?

• Emergence of WTO

• Creation of Free Trade Areas

• Benefits of Foreign Trade

• Revolution in Global Communications

• Fast and Efficient Transportation

• Opening of Previously Closed Markets

• When domestic market is crowded with the competition

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Global perspective? When?

• Rushing to foreign market before local companies capture the market

• With the increase in competition for expanding markets, MNC's are

changing their marketing strategies & their org structure

• Acquiring the global perspective is easy, but planning, organizing, and

willingness try new approaches, redefining company operations is

difficult…

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Global perspective is far more than understanding of

worldwide business and international career opportunities.

Enable people to understand the links between their own

lives and other part of the world.

Incremental growth of economic, social, political which

shape life.

Develop skills, attitudes and values to enable people

working together to bring change for good – Work for

sustained world where resources are shared.

Global perspective? What?

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1. Multinational Phase

2. Global Phase

3. Transnational Phase

Global Gate Ways

1. Multinational Phase: After WW-II, MNC’s from US &

Europe expanded into Asia, Europe and Latin America.

• Parent company maintained nominal control over

subsidiaries.

• Manufacturing & marketing of products were localized to

meet local demands

• Foreign markets needs are subordinate to the home markets

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Global Gate Ways2. Global Phase: Highlighted the merits of

standardization i.e Noted the convergence of world

markets

• Selling standardized products in standardized

methods all over the world Centralized core

competence activities

• R&D, Manufacturing, Management, etc

• E.g.: Semiconductors, Software, Boeing etc.

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Global Gate Ways3. Transnational Phase: Sumantra Ghoshal, Christopher

Bartlett etc developed a Transnational business idea

• Decentralized but Coordinated operations

• Products are tailored to suit local needs

• Central marketing plan but Local execution

• Subsidiaries network with each other and share

knowledge.

• Head Quarters manages and coordinates activities

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Standardization v/s adaption (1970s)

Globalization v/s Localization (1980s)

Global integration

v/s Local responsiveness (1990s)

Internet revolution

Homogeneous Vs Heterogeneous (21st Century)

An Old Debate and a New View

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Considerable factors are

Company objectives and resources

International commitment

Planning process

Planning for global market

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• Why plan?

To manage external, uncontrollable factors on the firm’s

strengths, weakness, objetives, and goals to attain desired

end

Allows rapid growth of international function, changing

markets, increasing competition, and turbulent changes in

the market

Planning relates to goals and methods of achieving them

Planning for global market

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International Planning Process

• What pdt to develop?• In which market?• What level of resource commitment?

• Where to allocate resources and efforts?• How to allocate resources and efforts ?

For the company entering a foreign market for the first time

For the company which has already committed

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Developing the International Marketing Plan• Develop strategies for the target market

Product mix

Distribution

Promotion mix

Pricing

• Plan international marketing programs

• Manage the international marketing effort:

Organize

Implement

Control

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International Planning ProcessInformation derived from each phase, market research, and evaluation of

program performance

Phase 1Preliminary analysis and

screening: Matching company/country needs

Phase 2Adapting the

marketing mix to target markets

Phase 3Developing the

marketing plan

Phase 4Implemen-tation and

control

Environmental uncontrollable, company character, and

screening criteria

Matching mix requirements

Marketing plandevelopment

Implementation, evaluation, and

control

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Company Character

Philosophy

Objectives

Resources

Management style

Organization

Financial limitations

Management and

marketing skills

Products

Other

Phase 1 Preliminary Analysis and Screening: Matching Company/Country Needs

Host Country(s) Constraints Economic Political/legal Competitive Level of technology Culture Structures of distribution Geography Competition

Home Country Constraints Political Legal

Economic Other

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Phase 2 Adapting The Marketing Mix To Target Markets

Product

Adaptation

Brand name

Features

Packaging

Service

Warranty

Style

Standard

Price

Credit

Discounts

Promotion

Advertising

Personal selling

Media

Message

Sales promotion

Distribution

Logistics

Channels

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Phase 3 Developing the Marketing Plan

Situation analysis

Objectives and goals

Strategy and tactics

Budgets

Action programs

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Phase 4 Implementation and Control

Objectives

Standards

Assign responsibility

Measure performance

Correct for error

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International Planning Types

co rpo ra te p la nn ing s tra te g ic p la nn ing ta c tica l p la nn ing

p la nn ing

Long term,incorporating generalized goals for the enterprise as whole

Conducted at the highest levels of mngt-deals with product,capital,and research and long term and short term goals of the company

Used in specific markets-made at local level-address adv and mktg questions

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Alternative Market-Entry Strategies• An entry strategy into the international market should reflect

on analysis of market characteristics such as:

– Potential sales

– Strategic importance

– Strengths of local resources

– Cultural differences

– Country restrictions

• Companies most often begin with modest export

involvement.

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Alternative Market-Entry Strategies• A company has four different modes of foreign market

entry from which to select:

– Exporting

– Contractual agreements

– Strategic alliances

– Direct foreign investments

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Alternative Market-Entry Strategies

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Exporting• Exporting accounts for some 10% of global activity.• Direct exporting - the company sells to a customer in

another country.• Indirect exporting – the company sells to a buyer (importer

or distribution) in the home country, who in turn exports the product.

• The Internet- Initially, Internet marketing focused on domestic sales, however, a

surprisingly large number of companies started receiving orders from customers in other countries, resulting in the concept of international Internet marketing (IIM).

• Direct sales- Particularly for high technology and big ticket industrial products.

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Contractual Agreements• Contractual agreements are long-term, non equity association

between a company and another in a foreign market.

• Licensing

- A means of establishing a foothold in foreign markets without large

capital outlays.

- A favorite strategy for small and medium-sized companies.

- Legitimate means of capitalizing on intellectual property in a

foreign market.

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Contractual agreements• Franchising

- Franchiser provides a standard package of products, systems, and

management services, and the franchisee provides market

knowledge, capital, and personal involvement in management.

- Two types of franchise agreements:

• Master franchise – gives the franchisee the rights to a specific

area with the authority to sell or establish sub franchises.

• Licensing

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A strategic international alliance (SIA)• A strategic international alliance (SIA) is a business

relationship established by two or more companies to

cooperate out of mutual need and to share risk in achieving a

common objective

• Firms enter SIAs for several reasons:- Opportunities for rapid expansion into new markets- Access to new technology- More efficient production and innovation- Reduced marketing costs- Strategic competitive moves- Access to additional sources of products and capital

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A strategic international alliance (SIA)

consortium

• Consortia are similar to joint ventures and could be classified

as such except for two unique characteristics:

• They typically involve a large number of participants

• They frequently operate in a country or market in which none

of the participants is currently active.

• Consortia are developed to pool financial and managerial

resources and to lessen risks.

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Direct Foreign Investment

Many Factors that have been found to influence the

structure and performance of direct investments:

- Timing

- The growing complexity and contingencies of contracts

- Transaction cost structures

- Technology transfer

- Degree of product differentiation

- The previous experiences and cultural diversity of acquired

firms

- Advertising and reputation barriers

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Organization – organizing for global competition

• Organization is defined by the formal structure,

coordination and control systems, and the

organization culture.

• It’s the formal arrangement of roles,

responsibilities and relationships within an

organization.

• It’s a powerful tool with which to implement

strategy.

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• The goal is to find a structure that:

Enables the company to respond to relevant market

environment differences

Ensures the diffusion of corporate knowledge and

experience throughout the entire system

• Organization’s must balance:

The value of centralized knowledge and control

The need for individualized response to local

markets

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Organization – organizing for global competitionVertical Differentiation:

(Centralization V/S Decentralization.)

• Vertical Integration: The issue of determining where in the

hierarchy, the authority to make decisions stand.

• Centralization is the degree to which high level managers,

usually above the country level, make strategic decisions

and pass them over to lower levels for implementation.

• Decisions made at foreign subsidiary level are considered

decentralized, and those made at HQ are considered to be

centralized.

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Horizontal Differentiation: (The Design of the Formal Structure)

• Horizontal Differentiation: The way a company designs

its formal structure to perform the following functions;

1. Specify the set of organizational tasks.

2. Divide these tasks into jobs, departments, subsidiaries

and divisions to get the work done.

3. Assign authority relationships to get the work done in a

way that supports co. strategy.

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In global marketing there is not a single best structure

Leading-edge global competitors share one key

organizational design characteristic:

Structure is flat and simple

In the 21st century corporations will have to find new,

more creative ways to organize

Must be flexible, efficient, and responsive to meet the

demands of globalizing markets

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• The basic functions of an organization are to provide:

– A route and locus of decision making and coordination.

– A system for reporting and communication.

• The types of structures that companies use to manage foreign

activities are divided into three categories.

– Little or no formal organizational recognition

– International division

– Global organizations

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• Competitive Environment• Environmental Stability• Similarity with Home Country• Common Traits/Integration• Availability of Local Qualified Labor

• Divisional Structure• Centralized vs. Decentralized

• International Department

Factors affecting Organisation Structure

External Factors

Internal Factors

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• Worldwide regional divisions

• International division

• Product divisions

• Matrix structure

• Domestic division

Types Organisation Structure

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Worldwide Regional Division

• Subsidiaries report directly to single division

responsible for operations

Geographical region

Country

• Better equipped to respond to country-specific

information and conditions

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Worldwide Regional Division

Worldwide Regional Division Structure: Frito-Lay.

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International Division Organizational

• Organizations vary in:

Size

Potential of targeted global markets

Local management competence

• Conflicting pressures may arise

For product and technical knowledge

Functional area expertise

Area and country knowledge

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Four factors that lead to this structure

Top management’s commitment to global operations has

increased enough to justify the position

Complexity of international operations requires a single

organizational unity

The firm has recognized the need for internal specialists to

deal with the demands of global operations

Management recognizes the importance of proactively

scanning the global horizon for opportunities and threats

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Product Division Structure

• Subsidiaries report to the product division (strategic

business unit) with responsibility for the particular

products.

• In the past, this structure was common for high-tech

companies or multinational companies with diversified

portfolios

• increasingly, this format is replaced by the matrix

structure.

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• Firms with an international division have two main

divisions:

• The domestic division

• The international division

• Export department structure: division has

responsibility for all international operations

• International division structure: all foreign

subsidiaries report directly to a single division

responsible for international operations.

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The Matrix Design

• Takes into account the multiple dimensions involved in

doing business internationally—• Functional areas, • Product, and • Region/country.

• In a matrix structure, two dimensions are integrated so

that each operational unit reports to both region/country

managers and product managers.

• E.g. Unilever with global and local brands

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• Functional competence – corporate staff with worldwide

responsibility contributes toward the development of functional

competence on a global basis.

• Product knowledge and know-how – Product managers that have a

worldwide responsibility can achieve new levels of product

competency.

• Region/country knowledge– understanding of economic, social,

political, and governmental market and competitive dimensions

• Knowledge of customer or industry and its needs – staff with

responsibility for serving industries on a global basis assist

organizations in their efforts to penetrate specific customer markets

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Chemicals

Plastics

Performance Products

FunctionalSolutions

AgriculturalSolutions

Oil & Gas

Europe NorthAmerica Asia Pacific South America,

Africa, Middle East

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IMM Module 3 - VTU MBA

Marketing

Transcript of IMM Module 3 - VTU MBA