The Global Marketplace

10b

Professor TakadaProfessor Takada 10b-2

ROAD MAP: Previewing the Concepts

• How does the global marketing How does the global marketing environment affect a company’s environment affect a company’s international marketing decisions?international marketing decisions?

• Key approaches to entering international Key approaches to entering international markets: markets:

• How do companies adapt their marketing How do companies adapt their marketing mixes for international markets?mixes for international markets?

• Three major forms of international Three major forms of international marketing organization:marketing organization:– Export department, international divisions, Export department, international divisions,

global organizationglobal organization

Professor TakadaProfessor Takada 10b-3

Global Marketing in the 21st Century

• The world is shrinking rapidly with The world is shrinking rapidly with the advent of faster communication, the advent of faster communication, transportation, and financial flows.transportation, and financial flows.

• International trade is booming.International trade is booming.

• Global competition is intensifying.Global competition is intensifying.

• Higher risks with globalization.Higher risks with globalization.

Professor TakadaProfessor Takada 10b-4

Global Firm

A firm that operates in more than onecountry and captures R&D, production,

logistical, marketing, and financial advantages in its costs and

reputation that are not available to purelydomestic competitors.

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Major International Marketing Decisions

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Four Stages of Internationalization

No regular export activities

Export via independent agents

Establish sales subsidiaries

Establish production

facilities abroad

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Nescafe Markets in Russia

Professor TakadaProfessor Takada 10b-9

ROAD MAP:

• How does the global marketing environment How does the global marketing environment affect a company’s international marketing affect a company’s international marketing decisions?decisions?

– International trade systemInternational trade system– Economic environmentEconomic environment– Political-legal environmentPolitical-legal environment– Cultural environmentCultural environment

• Three key approaches to entering international markets: Three key approaches to entering international markets: – Exporting, joint venturing, and direct investmentExporting, joint venturing, and direct investment

• How do companies adapt their marketing mixes for How do companies adapt their marketing mixes for international markets?international markets?

• Three major forms of international marketing organization:Three major forms of international marketing organization:– Export department, international divisions, global organizationExport department, international divisions, global organization

Professor TakadaProfessor Takada 10b-10

Looking at the Global Marketing Environment

The International Trade System:Restrictions—tariffs, quotas, embargos, exchange

controls, and non-tariff trade barriers.

The World Trade Organization and GATT:Helps Trade—reduces tariffs and other

international trade barriers.

Regional Free Trade Zones:Groups of nations organized to work toward

common goals in the regulation of international trade.

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Regional Free Trade Zones

• European UnionEuropean Union

• NAFTANAFTA

• MERCOSULMERCOSUL

• APECAPEC

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Industrial Structure• Shapes a country’s product and service needs, Shapes a country’s product and service needs,

income levels, and employment levels.income levels, and employment levels.

Subsistence EconomiesSubsistence Economies

Raw Material Exporting EconomiesRaw Material Exporting Economies

Industrializing EconomiesIndustrializing Economies

Industrial EconomiesIndustrial Economies

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Political-Legal Environment

Attitudes Toward International Buying

Government Bureaucracy

Political Stability

Monetary Regulations

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Cultural Environment

• Sellers must examine the ways Sellers must examine the ways consumers in different countries think consumers in different countries think about and use products before about and use products before planning a marketing program.planning a marketing program.

• Business norms vary from country to Business norms vary from country to country.country.

• Companies that understand cultural Companies that understand cultural nuances can use them to advantage nuances can use them to advantage when positioning products when positioning products internationally.internationally.

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Cultural Differences

When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.

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Cultural Dimensions

Individualism

vs.

Collectivism

Weak vs. Strong

Uncertainty

Avoidance

High vs. Low

Power Distance

Masculine

vs.

Feminine

Professor TakadaProfessor Takada 10b-17

Deciding Whether to Go Global

• Reasons to consider going global:Reasons to consider going global:– Foreign attacks on domestic marketsForeign attacks on domestic markets– Foreign markets with higher profit Foreign markets with higher profit

opportunitiesopportunities– Stagnant or shrinking domestic marketsStagnant or shrinking domestic markets– Need larger customer base to achieve Need larger customer base to achieve

economies of scaleeconomies of scale– Reduce dependency on single marketReduce dependency on single market– Follow customers who are expandingFollow customers who are expanding

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Deciding Which Markets to Enter• Before going abroad, the company should try to Before going abroad, the company should try to

define its international marketing objectives and define its international marketing objectives and policies.policies.

What Volume of Foreign Sales is Desired?

How Many Countries to Market In?

What Types of Countries to Enter?

Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of

Doing Business, Competitive Advantage, and Risk Level

Professor TakadaProfessor Takada 10b-19

Colgate Goes to China

Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decade.

Professor TakadaProfessor Takada 10b-20

ROAD MAP:

• How does the global marketing How does the global marketing environment affect a company’s environment affect a company’s international marketing decisions?international marketing decisions?

• Key approaches to entering international Key approaches to entering international marketsmarkets

• How do companies adapt their marketing How do companies adapt their marketing mixes for international markets?mixes for international markets?

• Three major forms of international marketing Three major forms of international marketing organization:organization:– Export department, international divisions, global Export department, international divisions, global

organizationorganization

Professor TakadaProfessor Takada 10b-21

Five Modes of Entry into Foreign Markets

Indirect

exporting

Direct

exportingLicensing

Joint

ventures

Direct

investment

Commitment, Risk, Control, Profit Potential

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Direct Exporting Methods

•Domestic-based export departmentDomestic-based export department

•Overseas sales branch or subsidiaryOverseas sales branch or subsidiary

•Traveling export sales Traveling export sales representativesrepresentatives

•Foreign-based distributors or agentsForeign-based distributors or agents

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McDonald’s Franchises Are Sold Worldwide

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Market Entry Strategies

• Joint Venturing:Joint Venturing:LicensingLicensing

• Budweiser-Kirin in Japan; E*TRADE in Canada, Budweiser-Kirin in Japan; E*TRADE in Canada, Australia/NZ, and France; Tokyo Disneyland-Oriental Australia/NZ, and France; Tokyo Disneyland-Oriental Land Co. Land Co.

Contract manufacturingContract manufacturing• Sears in Mexico and SpainSears in Mexico and Spain

Management contractingManagement contracting• HiltonHilton

Joint ownershipJoint ownership• KFC-MitsubishiKFC-Mitsubishi

Professor TakadaProfessor Takada 10b-25

ROAD MAP:

• How does the global marketing environment affect a company’s How does the global marketing environment affect a company’s international marketing decisions?international marketing decisions?

• Three key approaches to entering international markets: Three key approaches to entering international markets: – Exporting, joint venturing, and direct investmentExporting, joint venturing, and direct investment

• How do companies adapt their marketing mixes How do companies adapt their marketing mixes for international markets?for international markets?

– Standardized-adapted marketing mix:Standardized-adapted marketing mix:• ProductProduct• PromotionPromotion• PricingPricing• ChannelChannel

• Three major forms of international marketing organization:Three major forms of international marketing organization:– Export department, international divisions, global Export department, international divisions, global

organizationorganization

Professor TakadaProfessor Takada 10b-26

Deciding on the Global Marketing Program

• StandardizedStandardized Marketing Mix: Marketing Mix:– Selling largely the same products and using the Selling largely the same products and using the

same marketing approaches worldwide.same marketing approaches worldwide.

• AdaptedAdapted Marketing Mix: Marketing Mix:– Producer adjusts the marketing mix elements to Producer adjusts the marketing mix elements to

each target market, bearing more costs but hoping each target market, bearing more costs but hoping for a larger market share and return.for a larger market share and return.

• ““Think globally but act locally.”Think globally but act locally.”– A balance between standardization and adaptation.A balance between standardization and adaptation.

Professor TakadaProfessor Takada 10b-27

Marketing Mix Adaptation

In India, McDonald’s serves chicken, fish, and vegetable burgers, and the Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame-seed bun.

Professor TakadaProfessor Takada 10b-28

Five Global Product and Promotion Strategies

Kellogg cereals, Gillette razors, IBM PC, Heineken beer, Nokia cellular phone, Hyatt Hotels, L’Oreal

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Global Promotion Strategies

• Can use a standardized theme Can use a standardized theme globally, but may have to make globally, but may have to make adjustments for language or cultural adjustments for language or cultural differences.differences.

• Communication Adaptation:Communication Adaptation:– Fully adapting an advertising message Fully adapting an advertising message

for local markets.for local markets.

• Changes may have to be made due Changes may have to be made due to media availability.to media availability.

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Communications

• Communications adaptation

• Dual adaptation

Professor TakadaProfessor Takada 10b-31

Global Pricing Strategies

• Companies face many problems in setting Companies face many problems in setting their international prices.their international prices.

• Possible approaches include:Possible approaches include:– Charge a uniform price all around the world.Charge a uniform price all around the world.– Charge what consumers in each country will pay.Charge what consumers in each country will pay.– Use a standard markup of costs everywhere.Use a standard markup of costs everywhere.

• International prices tend to be higher than International prices tend to be higher than domestic prices because of domestic prices because of price escalationprice escalation..

• Companies may become guilty of Companies may become guilty of dumpingdumping –a –a foreign subsidiary charges less than its costs foreign subsidiary charges less than its costs or less than it charges in its home market.or less than it charges in its home market.

Professor TakadaProfessor Takada 10b-32

International Pricing

Twelve European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe.

Professor TakadaProfessor Takada 10b-33

Whole-Channel Concept for International Marketing

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Country of Origin Effects

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EU’s PDO and PGI Listings

Professor TakadaProfessor Takada 10b-36

ROAD MAP:

• How does the global marketing environment affect a company’s How does the global marketing environment affect a company’s international marketing decisions?international marketing decisions?

• Three key approaches to entering international markets: Three key approaches to entering international markets: – Exporting, joint venturing, and direct investmentExporting, joint venturing, and direct investment

• How do companies adapt their marketing mixes for How do companies adapt their marketing mixes for international markets?international markets?

• Three major forms of international marketing Three major forms of international marketing organization:organization:

– Export departmentExport department– International divisionsInternational divisions– Global organizationGlobal organization

Professor TakadaProfessor Takada 10b-37

Deciding on the Global Marketing Organization

• Organize an export departmentOrganize an export department

• Create international divisionsCreate international divisions– Geographical organizationsGeographical organizations– World product groupsWorld product groups– International subsidiariesInternational subsidiaries

• Become a global organizationBecome a global organization

Professor TakadaProfessor Takada 10b-38

Global Organization Strategies

World as Single MarketWorld as Single Market

MultinationalMultinational

“Glocal”“Glocal”

Professor TakadaProfessor Takada 10b-39

Rest Stop: Reviewing the Concepts

1.1. Discuss how the international trade Discuss how the international trade system, economic, political-legal, and system, economic, political-legal, and cultural environments affect a company’s cultural environments affect a company’s international marketing decisions.international marketing decisions.

2.2. Describe three key approaches to Describe three key approaches to entering international markets.entering international markets.

3.3. Explain how companies adapt their Explain how companies adapt their marketing mixes for international marketing mixes for international markets.markets.

4.4. Identify the three major forms of Identify the three major forms of international marketing organization.international marketing organization.