Mid term review

Global

Marketing

Warren J. Keegan Mark C. Green

Introduction to

Global Marketing

Chapter 1

Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall


INTRODUCTION

• Global vs. “Regular” Marketing- Scope of activities are outside the home-country market


GLOBAL MARKETING: What It Is & What It Isn’t

Single Country Marketing Strategy

• Target Market Strategy

• Marketing Mix – Product

– Price

– Promotion

– Place

Global Marketing Strategy

• Global Market Participation

• Marketing Mix Development

– 4 P’s: Adapt or Standardize?

• Concentration of Marketing Activities

• Coordination of Marketing Activities

• Integration of Competitive Moves


STANDARDIZATION vs. 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


Management Orientations

• Ethnocentric Orientation

– Home country is superior to others

– Sees only similarities in other countries

– Assumes products and practices that succeed at home will be successful everywhere

– Leads to a standardized or extension approach



• Polycentric Orientation– Each country is unique

– Each subsidiary develops its own unique business and marketing strategies

– Often referred to as multinational

– Leads to a localized or adaptation approach that assumes products must be adapted to local market conditions



• Regiocentric Orientation

– A region is the relevant geographic unit• Ex: The NAFTA or European Union market

– Some companies serve markets throughout the world but on a regional basis• Ex: General Motors had four regions for decades

European Union



• Geocentric Orientation– Entire world is a potential market

– Strives for integrated global strategies

– Also known as a global or transnational company

– Retains an association with the headquarters country

– Pursues serving world markets from a single country or sources globally to focus on select country markets

– Leads to a combination of standardization and adaptation elements


Forces Affecting Global Integration & Global Marketing

• Multilateral trade agreements

• Converging market needs and wants and

the information revolution

• Transportation and

communication improvements

• Product development costs


Restraining Forces Affecting Global Integration and Global Marketing

• Management myopia

• Organizational culture

• National controls

• Opposition to globalizationglobophobia


Global

Marketing


Chapter 2: The

Global Economic

Environment

Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall2-12

The World Economy—The New Realities

1. Capital movements have replaced trade as the driving force of the world economy

2. Production has become uncoupled from employment

3. The world economy, not individual countries, is the dominating factor

4. 75-year struggle between capitalism and socialism has almost ended

5. E-Commerce diminishes the importance of national barriers and forces companies to re-evaluate business models


Economic Systems

Resource Allocation

Market Command

Private

Resource

Ownership

State

Market Capitalism

Market Socialism

Centrally Planned

Capitalism

Centrally Planned Socialism

DEMAND

SUPPLY


Market Capitalism

• Individuals and firms allocate resources

• Production resources are privately owned

• Driven by consumers

• Government’s role is to promote competition among firms and ensure consumer protection


Centrally Planned Socialism

• Opposite of market capitalism• State holds broad powers to serve the public interest;

decides what goods and services are produced and in what quantities

• Consumers can spend only what is available• Government owns entire industries and controls

distribution• Demand typically exceeds supply• Little reliance on product differentiation, advertising,

pricing strategy• China, India, and the former USSR now moving

towards some market allocation and private ownership


Stages of Market Development

• The World Bank has defined four categories of development using Gross National Income (GNI) as a base

– Low income countries

– Lower-middle income countries

– Upper-middle income countries

– High income countries

• BEMs (Big Emerging Markets), identified 10 years ago, were countries in Central Europe, Latin America, and Asia that were to have rapid economic growth

• Today, it’s BRIC: Brazil, Russia, India, and China


Categories of DevelopmentLow-Income Lower-Middle Upper-Middle High

Per capita GNI ≤ $996 $996 to $3,945 $3,946-$12,195 ≥ $12,196

% of population 13% 56% 15% 16%

Characteristics • Limited industrialization

• High % of population in farming

• High birth rates• Low literacy rates• Heavy reliance on

foreign aid• Political instability

and unrest

• Rapidly expanding consumer markets

• Cheap labour• Mature,

standardized, labour-intensive industries like footwear, textiles and toys

• Rapidly industrializing, less agricultural employment

• Increasing urbanization

• Rising wages• High literacy rates

and advanced education

• Lower wage costs than advanced countries

• Sustained economic growth through disciplined innovation

• Service sector is more than 50% of GNI

• Households have high ownership levels of basic products

• Importance of information processing and exchange

• Ascendancy of knowledge over capital, intellectual over machine technology, scientists and professionals over engineers and semiskilled workers

• Future-oriented• Importance of interpersonal

relationships

Countries • Sub-Saharan Africa• Uzbekistan and

Turmenistan

• BRIC nations are India, China

• Brazil, Russia, Malaysia, Chile, Venezuela, Hungary, Mexico

• Also called newly industrializing economies (NIEs)

• G-7 (U.S., Japan, Germany, France, Britain, Canada and Italy )


Product Saturation Levels

• The % of potential buyers or households who own a product

• India: 20% of people have telephones

• Autos: 1 per 43,000 Chinese; 21 per 100 Poles; 8 per 1,000 Indians

• Computers: 1 PC per 6,000 Chinese; 11 PCs per 100 Poles; 34 PCs per 100 EU citizen


Balance of Payments

• Record of all economic transactions between the residents of a country and the rest of the world– Current account–record of all recurring trade in

merchandise and services, and humanitarian aid• trade deficit—negative current account• trade surplus—positive current account

– Capital account–record of all long-term direct investment, portfolio investment, and capital flows


Balance of Payments


Managing Economic Exposure

• Economic exposure refers to the impact of currency fluctuations on the present value of the company’s future cash flows

• Two categories of economic exposure:

– Transaction exposure is from sales/purchases

– Real operating exposure arises when currency fluctuations, together with price changes, alter a company’s future revenues and costs

Global

Marketing


The Global Trade

Environment

Chapter 3


GATT

• General Agreement on Tariffs and Trade

– Treaty among nations to promote trade among members established in 1947

• Handled trade disputes

• Lacked enforcement power

• Replaced by World Trade Organization in 1995

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Hierarchy of Economic Integration

CET = Common External Tariffs

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Free Trade Area

• Two or more countries agree to abolish tariffs and other barriers to trade amongst themselves

• Countries continue independent trade policies with countries outside agreement

• Rules of origin requirements restrict transshipment of goods from the country with the lowest tariff to another

NAFTA Protest in Ottawa

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Customs Union

• Evolution of Free Trade Area

• Includes the elimination of internal barriers to trade (as in FTA)

• AND establishes common external barriers to trade

• Examples: The EU and Turkey, the Andean Community, Mercosur, CARICOM, Central American Integration System (SICA)

http://www.mercosur.gov.ar/

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Common Market

• Includes the elimination of internal barriers to trade (as in free trade area)

• AND establishes common external barriers to trade (as in customs union)

• AND allows for the free movement of factors of production, such as labor, capital, and information

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Economic Union

• Includes the elimination of internal barriers to trade (as in free trade area)

• AND establishes common external barriers to trade (as in customs union)

• AND allows for the free movement of factors of production, such as labor, capital, and information (as in common market)

• AND coordinates and harmonizes economic and social policy within the union

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Economic Union

• Full evolution of economic union

– creation of unified central bank

– use of single currency

– common policies on issues such as agriculture, social policy, transport, competition, mergers, taxation

– requires extensive political unity

– would lead to a central government in time

European

Union Flag

Global

Marketing


Social & Cultural

Environments

Chapter 4



Culture is both physical and nonphysical

Physical Culture– Clothing – Tools– Decorative art– Body

adornment– Homes– Diet– Language– Aesthetics– Colour

Abstract Culture– Religion– Perceptions– Attitudes– Beliefs– Values


High- and Low-Context Cultures

• High Context– Less information is

contained in the verbal part of the message

– Emphasis on background, basic values, societal status of the communicator

– Less emphasis on legal paperwork

– Focus on personal reputation

Saudi Arabia, Japan

• Low Context– Messages are explicit and

specific– Words and numbers carry

all information– Reliance on legal

paperwork– Focus on non-personal

documentation of credibility

Switzerland, U.S., Germany


High- and Low-Context Cultures


Hofstede’s Cultural Typology

• Power Distance

• Individualism/Collectivism

• Masculinity

• Uncertainty Avoidance

• Long-term Orientation

http://geert-hofstede.com/




Self-Reference Criterion (SRC) and Perception

• Unconscious reference to one’s own cultural values; creates cultural myopia

• How to Reduce Cultural Myopia:– Define the problem or goal in terms of home country

cultural traits

– Define the problem in terms of host-country cultural traits; make no value judgments

– Isolate the SRC influence and examine it

– Redefine the problem without the SRC influence and solve for the host country situation


Environmental Sensitivity

Global

Marketing


Political, Legal

and Regulatory

Environments

Chapter 5



Taxes

• Government taxation policies

– High taxation can lead to black market growth and cross-border shopping

• Corporate taxation

– Companies attempt to limit tax liability by shifting location of income


Seizure of Assets

• Expropriation–governmental action to dispossess a foreign company or investor– Compensation should be provided in a “prompt, effective,

and adequate manner”

• Confiscation occurs when no compensation is provided

• Nationalization–a government takes control of some or all of the enterprises in an entire industry

– Acceptable according to international law if:• satisfies public purpose

• includes compensation


Intellectual Property

• Intellectual property must be registered in each country where business is conducted

– Patent–gives an inventor exclusive right to make, use, and sell an invention for a specified period of time

– Trademark–distinctive mark, motto, device, or emblem used to distinguish it from competing products

– Copyright–establishes ownership of a written, recorded, performed, or filmed creative work


Infringement of Intellectual Property

• Counterfeiting–unauthorized copying and production of a product

• Associative Counterfeit/Imitation–product name differs slightly from a well-known brand

• Piracy–unauthorized publication or reproduction of copyrighted work


Antitrust Rulings

• Laws are designed to combat restrictive business

practices and to encourage competition

• Enforced by FTC in the U.S., Fair Trade Commission in

Japan, European Commission in European Union


Global

Marketing


Global

Marketing


Global Information

Systems and

Market Research

Chapter 6


5 Sources of Information for the Global Marketer

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1 -

Management

Information

Systems (MIS)

3 - Market

Research

4 - Personal

Sources

2 -

Environmental

Scanning

5 - Direct

Sensory

Perception

Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall 6-45

1 – Management Information Systems (MIS)

A. Intranet

B. Electronic Data Interchange (EDI)

C. Electronic point of sale

D. Data Warehouses (CRM)


A. Intranet

• A private network

• Allows authorized company personnel (or outsiders) to share information electronically

• 24-Hour Nerve Center

• Allows companies like Amazon.com and Dell to operate as real time enterprises


B. Electronic Data Interchange

• Allows business units to:

– Submit orders

– Issue invoices

– Conduct business electronically

• Transaction formats are universal

• Allows computers from different companies to speak the same language


C. Efficient Consumer Response (ECR)

• A joint initiative by members of a supply chain to work toward improving and optimizing aspects of the supply chain to benefit customers– This is in addition to EDI

– An effort for retailers and vendors to work closely on stock replenishment

• Utilizes electronic point of sale


D. Customer Relationship Management

• Philosophy that values two-way communication between company and customer

• Every point of contact with a consumer is an opportunity to collect data


2 - Environmental Scanning

• Business needs a routine way to track interesting information

• An efficient, effective system that will scan and digest published sources and technical journals

• Daily scanning, translating, digesting, abstracting, and electronic input of information into a market intelligence system

• Expanding information coverage to other regions of the world


3 - Formal Global Market Research

• Global marketing research is the project-specific, systematic gathering of data in the search scanning mode on a global basis

– Challenge is to recognize and respond to national differences that influence the way information is obtained


4/5 - Other Sources of Global Market Information

4. Personal sources– Company executives based abroad who have contact with

distributors, consumers, suppliers, and government officials

– Friends, acquaintances, professional colleagues, consultants, and prospective employees

5. Direct sensory perception– Using the senses to find out firsthand what is going on in a

particular country


Steps in the Research Process

1. Identify the information requirement

2. Define the problem

3. Choose a unit of analysis

4. Examine data availability

5. Assess value of research

6. Design the research

7. Analyze the data

8. Present the findings


Step 1: Identifying the Information Requirement

• What information do I need?– Existing markets

• Customer needs already being served by one or more companies; information may be readily available

– Potential markets

• Latent market—an undiscovered market; demand would be there if product was there

• Incipient market—market will emerge as macro environmental trends continue

• Why do I need this information?


Step 2: Problem Definition and Overcoming the SRC

• Self-reference criterion occurs when a person’s values and beliefs intrude on the assessment of a foreign culture

• Must be aware of SRCs– Enhances management’s willingness to conduct market research

– Ensures that research design has minimal home-country bias

– Increases management’s receptiveness to findings


Step 3: Choose a Unit of Analysis

• Will the market be

– Global

– A region

– A country

– A province

– A state

– A city


Step 4: Examine Data Availability

• Sources may be

– Company records

– Secondary sources

• Trade journals

• Government sources such as CIA World Factbook, Statistical Yearbook of the United Nations, World Bank

• Commercial sources such asThe Economist and Financial Times, Marketresearch.com


Step 5: Assess Value of Research

• What is the information worth versus what it will cost to collect?

• What will it cost if the data are not collected?

• What will the company gain with this information?


Step 6: Research Design—Data Collection

• Use multiple indicators

• Develop customized indicators specific to the industry, product market, or business model

• Do not assess a market in isolation

• Observation of purchasing patterns/ behavior is more important than reports of purchase intention or price sensitivity


Step 6: Research Design—Research Methodologies

• Primary data collection methods

1. Survey research

2. Personal interviews

3. Consumer panels

• Nielsen—TV viewing

4. Observation

• Using people or cameras

5. Focus groups Same as local Marketing


Step 7: Analyzing Data

• Clean the data

• Tabulate the data using statistical techniques—ANOVA, regression, factor analysis, cluster analysis

• Perceptual mapping, conjoint analysis


Step 8: Presenting the Findings

• Report must clearly address problem identified in Step 1

• Include a memo or executive summary of the key findings along with main report

Copyright 2013, Pearson Education Inc., Publishing as Prentice-HallCopyright 2013, Pearson Education Inc., Publishing as Prentice-Hall

Global

Marketing

Global

MarketingWarren J. Keegan Mark C. Green

Global Market Entry

Strategies: Licensing,

Investment and Strategic

Alliances

Chapter 9


Investment Cost of Marketing Entry Strategies


Which StrategyShould Be Used?

• It depends on:

1. Vision

2. Attitude toward risk

3. Available investment capital

4. How much control is desired


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


Advantages and Disadvantages to Licensing

Advantages

• Provides additional profitability with little initial investment

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

• Attractive ROI

• Low costs to implement

Disadvantages

• Limited participation

• Returns may be lost

• Lack of control

• Licensee may become competitor

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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-wide policies

119 countries

34000 outlets

80% are franchised units


Foreign Direct Investment (FDI)

• Partial or full ownership of operations outside of home country

• Forms1. Joint ventures

2. Minority or majority equity stakes

3. Outright acquisition

IKEA, with affordable furniture and

housewares, spent $2 billion in Russia.


1. Joint Ventures

• Partners share ownership of a newly-created business entity – Builds upon each partner’s strengths

• Examples: Budweiser and Kirin (Japan), GM and Toyota, GM and Russian government, Ericsson’s cell phones and Sony, Ford and Mazda, Chrysler and BMW


Advantages and Disadvantages of Joint Ventures

• Advantages– Allows for sharing of risk

(both financial and political)

– Provides opportunity to learn new environment

– Provides opportunity to achieve synergy by combining strengths of partners

– May be the only way to enter market given barriers to 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


2. Equity Stake or 3.Full Ownership

a. Start-up of new operations– Greenfield operations or Greenfield investment

b. Merger with an existing enterprise

c. Acquisition of an existing enterprise

• Examples: Volkswagen, 70% stake in Skoda Motors, Czech Republic (equity), Honda, $550 million auto assembly plant in Indiana (new operations)


The Nature of Global Strategic PartnershipsParticipants remain independent

Participants make ongoing contributions in technology, products, and other key strategic areas

Participants share benefits of alliance as well as control over performance of assigned tasks


Welcome back to Global Marketing

Chapter 8: Exporting, Importing and Sourcing


Learning Outcomes

• Understand the difference between export selling and export marketing

• Understand the role of government and how they impact exporting and importing

• Understand decisions related to sourcing

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• Export selling involves selling the same product, at the same price, with the same promotional tools, in a different place

• Export marketing tailors the marketing mix to international customers

Export Selling versus Export Marketing


Attitude toward Exporting

Unwilling to Export

Fills unsolicited orders only

Explores feasibility of

exporting

Exports to one or more

markets (trial)

Exports to one or more markets

Company pursues focused

exporting

Proactively seeks out any

exporting opportunities

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Requirements for Export Marketing

• An understanding of the target market environment

• The use of market research and identification of market potential

• Decisions concerning product design, pricing, distribution and channels, advertising, and communications


Key Export Participants

• Foreign purchasing agents

• Export brokers

• Export merchants

• Export management companies– Acts as the export department for

≥2 mfrs

• Manufacturer’s export agents

• Export distributor– Takes financial risk

– Represents several manufacturers

• Export commission representative

• Cooperative exporter

• Freight forwarders


In-house or External Representation?

• Direct market representation

– Usually selling directly to retailer or wholesaler

– Advantages—control and communications

• Representation by independent intermediaries

– Advantages—best for situations with small sales volume


National Policies Governing Exports and Imports

• Most nations encourage exportsand restrict imports

• When all nations want the same thing,…conflicts arise

• A trend towards lowering of trade barriers, eg. EU, NAFTA


Government Programs thatSupport Exports

• Tax incentives

• Subsidies

• Governmental assistance– Eg.Export Development

Canada (EDC)

–

• Free trade zones


Governmental Actions to Discourage Imports and Block Market Access

• Tariffs

• Nontariff barriers– Quotas

– Discriminatory procurement policies

– Restrictive customs procedures

– Arbitrary monetary policies

– Restrictive regulations


Other Duties and Import Charges

• Anti-dumping duties– Dumping is the sale of merchandise in export

markets at unfair prices

– Special import charges equal to the dumping margin

• Countervailing duties

• Variable import levies

• Temporary surcharges


Factors that Affect Sourcing

• Management vision

• Factor costs and conditions

• Customer needs

• Logistics

• Country infrastructure

• Political risk

• Exchange rate, availability, and convertibility of local money

Mid term review

Business

Transcript of Mid term review