Chapter 11

1. Global Marketing Management: Planning and Organization Chapter 11

2. Learning objectives • Global marketing management • Benefits of Global Marketing • International Planning Process • Market-entry Strategies • The important factors for each alternative market-entry strategy

3. Global Perspective • Multinational companies • Confronted with increasing global competition for expanding markets • Changing their marketing strategies and altering their organizational structure • Nearly 75% of North American and European corporations are smarten up their business processes • Smaller companies • More flexible • May enable them to reflect the demands of global markets and redefine programs more quickly

4. Global Marketing Management • 1970s – “standardization versus adaptation” • 1980s – “global integration versus localization” • 1990s – “global integration versus local responsiveness” • Example of new “mass customization” by Dell. • Risk involves with global standardization (e.g., Barbie Doll, Coca-cola).

5. Global Marketing Management • The trend back toward localization • Caused by the new efficiencies of customization • Made possible by the Internet • Increasingly flexible manufacturing processes • From the marketing perspective customization is always best • Global markets continue to homogenize and diversify simultaneously • Best companies will avoid trap of focusing on country as the primary segmentation variable. Other segmentation may work better (e.g., lifestyle)

6. The Nestle Way – Evolution Not Revolution • Nestle – world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water • 8500 products produced in 489 factories in 193 countries • Nestle strategy • Think and plan long term • Decentralize • Stick to what you know • Adapt to local tastes • Long-term strategy works for Nestle • Because the company relies on local ingredients • Markets products that consumers can afford

7. Benefits of Global Marketing • When large market segments can be identified • Economies of scale in production and marketing • Important competitive advantages for global companies • Transfer of experience and know-how • Across countries through improved coordination and integration of marketing activities • Marketing globally • Ensures that marketers have access to the toughest customers • Market diversity carries with it additional financial benefits • Firms are able to take advantage of changing financial circumstances

8. Planning for Global Markets • Planning is the job of making things happen that might not otherwise occur • Planning allows for: • Rapid growth of the international function • Changing markets • Increasing competition, and the • Turbulent challenges of different national markets

9. Planning for Global Markets • Planning is both a process and philosophy • Relates to the formulation of goals and methods of accomplishing them • Corporate planning • Strategic planning • Tactical planning • Company objectives and resources • Each new market requires • A complete evaluation, including existing commitments, relative to the parent company’s objectives and resources • Defining objectives clarifies the orientation of the domestic and international divisions, permitting consistent policies

10. Planning for Global Markets • International commitment • Commitment in terms of • Dollars to be invested • Personnel for managing the international organization • Determination to stay in the market long enough to realize a return in investments. • The degree of commitment to an international marketing cause reflects the extend to a company’s involvement

11. International Planning Process Exhibit 11.1

12. The Planning Process What product, which market, and how? • Phase 1 – Preliminary analysis and screening • Matching Company and Country Needs.(SWOT and PESTEL analyses) • Phase 2 – Adapting marketing mix to target markets (e.g., KFC) • Phase 3 – Developing the marketing plan • Phase 4 – Implementation and control

13. Alternative Market-Entry Strategies • An entry strategy into international market should reflect on analysis • Market characteristics • Potential sales • Strategic importance • Strengths of local resources • Cultural differences • Country restrictions • Company capabilities and characteristics • Degree of near-market knowledge • Marketing involvement • Management commitment

14. Alternative Market-Entry Strategies Exhibit 11.2

15. Alternative Market-Entry Strategies • Companies most often begin with modest export involvement • A company has four different modes of foreign market entry • Exporting • Contractual agreements • Strategic alliances • Direct foreign investments

16. 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 • Customers include Wal-Mart and Sears

17. Exporting • The Internet • Initially, Internet marketing focused on domestic sales • 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

18. Contractual Agreement • Contractual agreements • Long-term, • Nonequity association between a company and another in a foreign market • Contractual agreement (e.g., transfer of technology, processes, trademarks, human skills) • Licensing • A means of establishing a foothold in foreign markets without large capital outlays. • Patent, trademark rights, and the right to use technological processes. • A favorite strategy for small and medium-sized companies

19. Contractual Agreement • Franchising • A rapid growing form of licensing. Franchiser provides a standard package of products, systems, and management services • Franchise provides market knowledge, capital, and personal involvement in management • Expected to be the fastest-growing market-entry strategy as it provides an attractive form of corporate organization for companies wishing to expand quickly with low capital investment. • (e.g., KFC, McDonalds)

20. Strategic International Alliances • A strategic international alliance (SIA) • A business relationship established by two or more companies to cooperate out of mutual need • To share risk in achieving a common objective • SIAs are sought as a way to shore up weaknesses and increase competitive strengths • 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 • (e.g., in airline industry One world Alliance consists of British Airways, Japan Airlines etc.)

21. Strategic International Alliances • International joint ventures (IJVs) • A partnership of two or more participating companies that have joined forces to create a separate legal entity • (e.g., merge with foreign company in order to gain better access in the new market) • Consortia • Similar to joint ventures and could be classified as such except for two unique characteristics • Typically involve a large number of participants • Frequently operate in a country or market in which none of the participants is currently active

22. Direct Foreign Investment • Factors that 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

23. Organizing for Global Competition • Devising a standard organizational structure is difficult • Because organizations need to reflect a wide range of company-specific characteristics • Companies are usually structured around one of three alternatives • Global product divisions responsible for product sales throughout world • Geographical divisions responsible for all products and functions within a given geographical area • A matrix organization consisting of either of these arrangements • With centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management

24. Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Approaches Exhibit 11.4

25. Summary • To keep abreast of the competition and maintain a viable position for increasingly competitive markets, a global perspective is necessary • Cost containment, customer satisfaction, and a greater number of players mean that every opportunity to refine international business practices must be examined in light of company goals

26. Summary • Important avenues to global marketing that must be implemented in the planning and organization of global marketing management • Collaborative relationships • Strategic international alliances • Strategic planning • Alternative market-entry strategies