Global Marketing Management

1. February 1, 2014 Chris Schrage, CGBP, Certified CGBP Trainer Global Marketing Management

2. Shrinking Globe Source: David Harvey, The Condition of Postmodernity(Oxford and Cambridge, Mass.: Basil Blackwell, 1989), p. 241, plate 3.1.

4. Speed of globalization of markets Change in transportation technology Change in communication technology

5. reason for trade Access to products not available at home Raw materials for products Better quality of life Comparative Advantage

6. New realities • Capital movements replaced trade levels • Production “uncoupled” from employment • World economy dominate-country economies are secondary • End of the capitalism/socialism struggle • E-commerce changes all models • Business and national

7. Impact of 1989 to 1991 Break up of Soviet Union Apartheid over- sanctions ended Privatization of public companies in Brazil, France and England, Special Economic Zones in China Democracy started in Latin America

8. A tale of two nations March 7, 1957 Independence from Great Britain through peaceful negotiations 1957 End of the Korean Conflict and devastation from war

9. 1st British African colony to win independence (1957). • Nkrumah espoused pan African socialism. • High tariffs. • Anti-exporting policy.

10. Kept lowering tariffs on manufactured goods. • Created incentives to export. • Reduced quotas. • Reduced subsidies. • 1950s: 77% of employment in agriculture. Now 20%. • Manufacturing GNP went from 10% to over 30%.

11. The Impact of Trade Policies • Ghana • 1970 • GNP/capita • $250 • 1992 • GNP/per capita • $450 • GNP Growth/year • 1.5% • Shift from productive uses (cocoa) to unproductive uses (subsistence agriculture). • Korea • 1970 • GNP/per capita • $260 • 1992 • GNP/per capita • $6790 • GNP Growth/year • 9% • Shift from non-comparative advantage uses (agriculture) to productive uses (labor-intensive manufacturing).

12. South Korea today • With a GDP per capita of $25,800 in 2010 • Eighth largest exporter in the world • In 2010 ranks 14th out of 225 nations at 1243 billion US dollars

13. Ghana today • GDP - per capita: purchasing power parity - $1,300 (2010) • In 2010 ranks 100 at 30.14 billion US dollars

14. Reasons to go beyond domestic Mature market at home Underutilized capacity Leverage competitive advantage Compete in home market of others.

15. Kenichi Ohmae Global companies understand the balance of standardization and customization required in the world’s marketplace.

16. Global Industry Competitive advantage gained by integrating and leveraging operations on a global scale Five forces analysis can assist a company in formulating the appropriate strategy to gain a competitive advantage Micheal Porter

17. Industry Analysis: Forces Influencing Competition

18. Porter’s Force 1: Threat of New Entrants • New entrants mean downward pressure on prices and reduced profitability • Barriers to entry determine the extent of threat of new industry entrants

19. Threat of New Entrants: Barriers to Entry • Economies of scale • Product differentiation • Capital requirements • Switching costs • Distribution channels • Government policy • Cost advantages independent of scale economies • Competitor response

20. Porter’s Force 2: Threat of Substitute Products Substitute products limits prices High prices induce buyers to switch to the substitute

21. Porter’s Force 3: Bargaining Power of Buyers • Buyers = manufacturers and retailers, not consumers • Buyers seek to pay the lowest possible price • Buyers have leverage over suppliers when • They purchase in large quantities (enhances supplier dependence on buyer) • Suppliers’ products are commodities • Product represents significant portion of buyer’s costs • Buyer is willing and able to achieve backward integration

22. Porter’s Force 4: Bargaining Power of Suppliers • When suppliers have leverage, • Raise prices enough> affect customer profits • Leverage accrues when • Suppliers are large and few in number • Supplier’s products are critical inputs, are highly differentiated, or carry switching costs • Few substitutes • Suppliers are willing and able to sell product themselves

23. Porter’s Force 5: Rivalry Among Competitors • Refers to all actions taken by firms in the industry to improve their positions and gain advantage over one another • Price competition • Advertising battles • Product positioning • Differentiation

24. National Competitive Advantage Strategy, Structure, Rivalry Demand Conditions Factor Conditions Related and Supporting Industries Activity in any one of the four points of the diamond impacts all the others and vice versa

25. Factor Conditions

26. Demand Conditions

27. Related and Supporting Industries The advantage that a nation gains by being home to internationally competitive industries in fields that are related to, or in direct support of, other industries

28. Growth Matrix Product Orientation Existing Markets MarketOrientation New Markets EXISTING pRODUCTS new pRODUCTS

29. Competitive Advantage • Achieved when there is a match between a firm’s distinctive competencies and the factors critical for success within its industry • Two ways to achieve competitive advantage • Low-cost strategy • Product differentiation

30. Generic Strategies for Creating Competitive Advantage • Broad market strategies • Cost leadership—low price • Product differentiation—premium price • Narrow market strategies • Cost focus—low price • Focused differentiation—premium price

31. Building Layers of Advantage Build a wide portfolio of advantages Develop portfolios by establishing layers on top of one another Move along the value chain to strengthen competitive advantage

32. Searching for Loose Bricks • Search for opportunities in the defensive walls of competitors whose attention is narrowly focused • Focused on a market segment • Focused on a geographic area to the exclusion of others

33. Changing the Rules of Engagement • Refuse to play by the rules set by industry leaders • Ex: Xerox and Canon • Xerox employed a huge direct sales force; Canon chose to use product dealers • Xerox built a wide range of copiers; Canon standardized machines and components • Xerox leased machines; Canon sold machines

34. Collaborating Use the know-how developed by other companies Licensing agreements, joint ventures, partnerships, or strategic alliances

35. 4 Cs to partner selection • Complementary skills • Cooperative cultures • Compatible goals • Commensurate levels of risk

36. Efforts here are impacted by Differences here Communication Strategy Product Attributes Competition GovernmentRegulations Infrastructure Pricing Strategy Standards Product Attributes Culture Economy

37. Current Issues • In today’s business environment, market stability is undermined by • Short product life cycles • Short product design cycles • New technologies • Globalization • Escalation and acceleration of competitive forces • Difficult to achieve one sustainable advantage • Build a series of unsustainable but effective advantages • Marketing focus needs to be on innovation • Learn to create new markets • Must forget “that’s the way we always have done it”

38. Innovative organizations spend neither time nor resources on defending yesterday. Systematic abandonment of yesterday alone can transfer the resources . . . for work on the new. —Peter Drucker

39. ONE VOICE, ONE IMAGE… ONE BRAND

40. Anheuser-Busch • Global Advertising Strategy • Contemporary Relevance • SPEAKS TO “Consumer’s Heart” • Knows my language- relevant to my lifestyle • Brand Quality • SPEAKS TO “Consumer’s Head” • Value perception

41. Anheuser-Busch Right Product Right Distribution Brand Development Basics Right Profit Right Image

42. For Global Positioning Miller Time is the “MILLER WAY” Rooted in the “urban cool” mindset Globalmiller.com website

43. Heritage Foundation Economic Freedom • Free • 20 nations (includes US) • Mostly Free • 52 nations • Mostly Unfree • 73 nations • Repressed • Unrated

45. Corruption • Foreign Corrupt Practices Act

46. U.S. Legal Considerations • Foreign Corrupt Practices Act • Grease Payments • U.S. Embargoes • Sanctions • Against US • Export Controls • Antitrust Laws • The Sherman Antitrust Act • Federal Trade Commission Act • Product liability • No contingency payment programs • Loser pays fees of both parties

47. Stages of Market Development High-Income Countries GNP > $10,666 Upper-middle-income Countries GNP ≥ $3,256 ≤ $10,065 86% of the world’s population Lower-middle-income Countries GNP ≥ $826 ≤ $3,255 Low-Income Countries GNP < $825

48. FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad Philosophy for Developing Products and Services for BOP market • The basic economics of the BOP market are based on • small unit packages, • low margin per unit, • high volume, • high return on capital employed.

49. FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad True Nature of BOP market • There is Money at the BOP • Ease of access to BOP markets • BOP Markets are brand-conscious • Extremely value conscious • BOP Market is connected • BOP Customers accept advanced technology readily

50. Purchases aircraft from Boeing • 10% down payment • Rest upon delivery (5 years later) • Revenues of JAL in Yen • Payments in USD • In 1985- entered into 10 year forward exchange contract • Value of Yen surged against dollar from ¥240 to ¥99 in 1994 • Misjudgment cost JAL 86 percent more per each aircraft. • Admitted loss of USD 45 million or ¥45 billion