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Chapter Twelve

Global Products

Chapter Twelve

Global Products

MKT568

Global Marketing Management

Dr. Fred Miller

3-1

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Sample Essay Question

HerbalGlow is Korean producer of natural skin care products.

The firm wishes to build upon its success in Asian markets by

expanding to Europe, North and South America.

1. Identify and describe the three general international marketing

strategies. (6 points)

2. For each element of the marketing mix (product, price, promotion

and distribution), identify and describe one benefit of a globalstrategy and one constraint to implementing such a strategy. (12

points)

3. Which of the three general marketing strategies do you

recommend to HerbalGlow? Explain why. (2 points)

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Marketing Strategy Options

Multidomestic

strong cultural influences, localize and adapt

Globalsimilar buyer preferences, global customers/competitors

Globalized localization

integrate sourcing, production and marketingseek balanced growth

coordination of marketing across countries

globalize as much as possible, localize when necessary

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Multidomestic versus Global Markets:

Key Differences

Multidomestic versus Global Markets:

Key Differences

Exhibit 11.1

Mult d t c Market Global Market

Market boundaries Mar ar fr r r r and

competitor are oflocal origin.

Mar ets transcend countr borders. Customers and/orcompetitors cross frontiers to buyand to sell.

Customers Significant differences existamong customers from different

countries; segments are definedlocally.

Significant similarities existamong customers from different

countries; segments cut acrossgeographic frontiers.

Competition Competition takes place among

primarily local firms; eveninternational companiescompete on a country-by-country basis.

Competitors are few and present

in every majormarket. Rivalrytakes on regional orglobal scope.

InterdependenceEach local market operation in

isolation from the rest.Competitive actions in one

market have no impactelsewhere.

Local markets operate

interdependently. Competitiveactions in one market impact othermarkets.

Strategies Strategies are locally based.Little advantage exists in

coordinating activities amongmarkets.

Strategies are regional orglobal inscope. Great advantage exists incoordinating activities withinregions orworldwide.

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A Multidomestic Industry

Local

Candy

Brands

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The Value of Global Brands

Take the

TenSecond

Brand Test

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The Value of Global Brands

1. What bran s o you remember?

American Express

Wall Street Journal

McDonalds

Nike

Coke

Perrier

Mobil

Phillips

Haagen Das

3M

Daily Telegraph

Honda

Motorola

Johnson and Johnson

Hertz

Levis

Mars

Seven Up

Campbells

Sony

Rover

Kelloggs

British Airways

Apple

IBM

Michelin

Dell

Club Med

2. What bran s o you re ognize?

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Globalized Localization: Coca Cola

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India

Japan

Globalized Localization: McDonalds

Germany

But NOT in

Oaxacas Zocalo!

"Real foo is not frozen

meat,"

sai Ja quelineGar a, 24, who runs

Toita's, a foo stan in

Oaxa a's ol market."It's

fresh heese an ri kets.

Fast foo 's unnatural. The

people who make it are

in ompetent. An

M Donal 's belongs in the

Unite States, not our

z alo.

NY Times, Aug 24, 2002

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Standardization and its Problems

Standardization

advantages: cost, customer preference, quality,

global customer/segments

disadvantages: off-target, lack of uniqueness,

protectionism, local competitors

Globalization limits and pitfalls

limits:industry, resource, marketing mixespitfalls: research, over-standardization, poor

follow-up, narrow vision, rigid implementation

Localization vs Adaptation

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The Tradeoff Between Standardization

and Adaptation

The Tradeoff Between Standardization

and Adaptation

12-2

Fully standardized

Exhibit12.1

Fully adapted

Incremental

manufacturing costCombined costs

Cost of lost sales

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Dragons

Bloo

Beer from

Furth im

Wal

Strong Local Brands

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Global Brand Management

Developing new global productsidea generation

preliminary screening

concept research focus groups, concept testing, target research

sales forecast

test marketing

Globalizing successful brands

diffusion factors advantage, compatability,perceived complexity, trialability, observability

globalization potential-sensible, favorable, available,complement, regional

changeover tactics - fade, axing, forewarning

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Low Globalization Potential

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The Zoo of Product Branding

1. RCA

2. Jor a he

3. Merrill Lyn h

4. Mer ury

5. Kangaroo Shoes

6. S hlitz

7. Camel

8. Trix

9. Exxon

10. Greyhoun

11. MGM

12. John Deere

13. Kiwi

14. Mustang

15. Playboy

16. Kellog;s FF17. Hartfor

18. VWRabbit

19. KellogsCF

20. Bor ens Milk

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Global Brand Management

Brand Management, Top 100 Global Brands

Brand equity, global brands,brand portfolio/mix

Counterfeit products

Counterfeit vs gray trade

Actions against counterfeit goods

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Global Value of the Nescafe Brand

$US

$5 billion

$700 mil

$25 billion$90 billion

Global sales of Nescafe

Nescafes global promotion

Value of Nescafe brandValue of Nestles brands

$113 billion Market capitalization

$23 billion Book value of assets

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Single Bean in Japan

Localizing the Nescafe Brand

Mellow taste of milk will soothe

your min . Type of up offee that

one woul like to rink when feeling

relieve , or relaxing.

Features soun feel of offee that

fully onvin es even true offeelovers. Type of up offee one woul

feel like rinking when one nee s to

hol out, or when one wishes to heer

up.

Cup Coffee in Japan

Columbia

China

Europe

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Evolution of a European Brand

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A Tale of Two Beers

Plzensky Prazdroj is a member of the

international group, SABMiller, the

second largest brewery in the world.

Pilsner Urquell is the groups

flagship brand.

-- Plzensky Prazdroj Website

Bu weiser/Bu var

remains a strong

regional beer with a

quality, han rafte

tra itional beer image

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Anheuser Busch in Europe

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Czech Budvar in USA

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Significance of Private Brands

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Flanker Brand Example

The Current Sarotti Bran

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Cola Wars Video

In which countries, with what strategy and withwhat success has Mecca Cola chosen tochallenge Coca Cola?

In which countries, with what strategy and withwhat success has Qibla Cola chosen to

challenge Coca Cola?

How has Coca Cola responded to thesechallenges?

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Chapter Twelve

Global Products

Chapter Twelve

Global Products

MKT568

Global Marketing Management

Dr. Fred Miller

3-1

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Target Market Definition, Size an

Pur hasing Power

Define your target market by age and incomeclassifications in the SPSS dataset.

Use this definition to analyze statistical data on this

market (review previous slides)To calculate size of target market in number ofpeople,

Determine the number of people in your chosen age range(Data tables forPopulation Pyramids)

Multiply the result by the percentage of people in yourchosen income range (SPSS Crosstabs)

To calculate purchasing power, multiply the productof the previous step by your countrys per capita

income (from Part 1 of your report, World Bank)

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Determine target population by age

Visit the Population

Pyramid site of the US

Census Burearu andselect the current year.

Determine the number

of people in the target

market you havedefined, in this case,

5,840,087

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Cal ulate Pur hasing Power

Multiply TM population by Per Capita GNI from World

Bank or CIA to calculate purchasing power. In this case,

2,452,837 * $26,900 = $65,981,315,300

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Pro Forma Income Statement

1. $14,832,000, using the formulae

Volume (CY+1) = CY Industry Sales * (1+Growth Rate)

1,030,000,000 = (1,000,000,000) * 1.03

Sales = Volume * Schmidts SoM * Price

$14,832,000 = 1,030,000,000 * .012 * $1.20

2. $23,260,284, using the formulae

Volume (CY+2) = Volume(CY+1) * (1+Growth Rate)

1,050,600,000 = 1,030,000,000 * 1.02Price(CY+2) = Price(CY+1) + Price Increase(CY+2)

$1.23 = $1.20 + $0.03

Sales = Volume * Schmidts SoM * Price

$23,260,284 = 1,050,600,000 * .018 * $1.23

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3. $9,888,000, using the formula

Production Costs = Volume * Schmidts SoM * Cost per Liter

$9,888,000 = 1,030,000,000 * .012 * $.80


Production Costs = Volume * Schmidts SoM * Cost per Liter

$15,128,640 = 1,050,600,000 * .018 * $.80


Gross Margin = Sales Production Costs

$4,944,000 = $14,832,000 - $9,888,000

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Gross Margin = Sales Production Costs

$8,131,644 = $23,260,284 - $15,128,640

7. $741,600, using the formula

Sales Costs = Sales * Agents Commission

$741,600 = $14,832,000 * .05


Sales Costs = Sales * Agents Commission

$1,163,014 = $23,260,284 * .05

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9. $889,920, using the formula

Promotion Costs = Sales * Promotion as % of Sales

(CY+1)

$889,920 = $14,832,000 * .06


Promotion Costs = Sales * Promotion as % of Sales

(CY+2)$1,163,014 = $23,260,284 * .05

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Contribution Margin = Gross Margin - Sales Costs

Promotion Costs

$3,312,480 = $4,944,000 - $741,600 - $889,920


Contribution Margin = Gross Margin - Sales Costs

Promotion Costs

$5,805,616 = $8,131,644 - $1,163,014 - $1,163,014

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Identify three estimates to be revised. Des ribe revision and

explain reasoning.

1. Increase CY+1 market growth rate to 3.2% because Brahmasnew entry will stimulate increased sales

2. Decrease share of market estimate in CY+1 to .9% because of

greater competition from the Corona brand will lower SoM

3. Increase promotion costs as % of sales in CY +1 to 8% to provide

more funds for advertising to match Brahmas promotion for

introduction of Corona brand

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