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Chapter 6

Chapter 6. MARKETING IN GLOBAL MARKETS. Global marketing is very broad in scope Multiple reasons why firms choose to engage in global marketing Elements of the environment of global marketing are different than those for domestic markets

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Chapter 6

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  1. Chapter 6 MARKETING IN GLOBAL MARKETS

  2. Global marketing is very broad in scope Multiple reasons why firms choose to engage in global marketing Elements of the environment of global marketing are different than those for domestic markets Disadvantages and advantages of strategies for foreign market entry Marketing mix strategies cannot be simply copied from domestic marketing mix strategies Learning Objectives

  3. Simplest: the firm makes one or more marketing decisions across national boundaries Complex: the firm establishes manufacturing and marketing facilities overseas and coordinates strategies across markets Uncontrollable variables like economic structures, cultural values, legal, political infrastructure, differ significantly between markets along with controllable factors like cost, price, distribution structures, advertising International Marketing

  4. Export: Marketing of goods and services across national/political boundaries Multinational: Activities, interests or operations in more than one country; control over marketing activities from outside the country in which the product will actually be sold; each market is an independent profit center Global: Entire organization focused on selection, exploration of global marketing opportunities; marshalling of resources around the globe; achieve synergy, global competitive advantage Toyota is a company that has gone through all the above stages Degrees of Commitment

  5. Large Market size Stability through diversification Profit potential Unsolicited orders Proximity of markets Excess capacity Offer by foreign distributor Increasing growth rate Smoothing out business cycles Motivations

  6. Too much red tape Trade barriers Transportation difficulties Lack of trained personnel Lack of incentives Lack of coordinated assistance Unfavorable conditions overseas Slow payment by buyers Lack of competitive products Payment defaults Language barriers Trepidations

  7. Ranked in order of least to greatest risk and investment: Exporting Licensing Joint venture Direct Investment U.S. commercial centers Trade intermediaries Alliances Stages of Going International

  8. More effective for small and medium firms More control over risk, cost, resource commitment Products in maturity stage of domestic lifecycle Products with ‘seasonal demand’ Exporting

  9. Indirect: sales made through the firm’s domestic sales department; no overseas sales force Semi-direct: combination export manager, manufacturer’s export agent, Webb-Pomerene Export Association, piggyback exporting Direct: export department conducts market research, establishes physical distribution, obtains necessary documentation, sells directly to a foreign firm Types of Export

  10. Provide technology, right to use licensor’s manufacturing process, brand name, patents, sales knowledge, to a foreign firm in return for payment Limited profit potentials Binding commitment to a firm that may turn out to be incompetent Good option when there is scarce capital, import / government restriction Franchising e.g., McDonalds Licensing

  11. Partnership between a domestic and foreign firm e.g., GM & Toyota Joint Ventures

  12. Invest in wholly-owned subsidiaries, full-scale production and marketing Allows the firm to compete more aggressively Necessitates detailed understanding of local business conditions, customs, labor, and other factors Direct Investment

  13. Additional resources for promotion e.g., familiarizing with local customs; providing business facilities like exhibition space; translation and clerical services; facilitating contacts between sellers, buyers, government officials; provide trade-related information U.S. Commercial Centers

  14. Entrepreneurial middlemen Buy U.S.-produces goods at 15% below a manufacturer’s best discount and then resell the product in overseas markets Good for small companies who do not have the time or resources to develop relationship with foreign companies Trade Intermediaries

  15. To better compete in global markets or enter new markets a good strategy for a firm is to form alliances with other companies e.g., Miller and Budweiser’s alliance with global breweries like Molson and Corona to fight off a stiff competitor from Heineken; Star Alliance and One World in the airline industry Alliances

  16. Corporate level – data on potential markets; resources to be allocated Business level – external environment, level of commitment, resources /capabilities, assessment of stakeholders Functional level – integration of all elements that achieve objectives Marketing Plan

  17. Product / Promotion Pricing Distribution & Logistics Integration: Marketing Mix

  18. One product, one message, worldwide Product extension, promotion adaptation Product adaptation, promotion extension Dual adaptation Product invention Brand Product / Promotion

  19. Analyze factors that influence international pricing e.g., cost structures, competitor pricing levels, exchange rates Confirm the impact of corporate strategies Evaluate strategic pricing options and select most appropriate approach Implement strategy through a variety of tactics Manage price and financing international transactions Pricing

  20. Customer sensitivity to prices • The more distinctive the product • The greater the perceived quality • Less aware consumers are of substitutes • Difficulty of making comparisons • If price of a product represents a small proportion of customer’s total expenditure • As the perceived benefit increases • If the product is used in association with a product bought previously • If costs are shared with other parties • If the product cannot be stored

  21. Problems of price co-ordinations • Dumping: selling a product in a foreign country below domestic price or below actual cost; helps build market share through competitive pricing; helps get rid of burdening surplus • Gray market / parallel importing: products sold through unauthorized channels of distribution

  22. Distribution channels: means of distribution of the goods from the manufacturer to end user; headquarters, channels between countries, channel structure within countries Logistics: physical distribution management; concerned with planning, implementing, control of physical flow of materials from points of origin to use at a profit Uncontrollable factors e.g., wholesaling, retailing structures, quality of services, infrastructure, differs widely between nations Distribution & Logistics

  23. Social / cultural: Language Colors Customs and taboos Values Aesthetics Time Business norms Religion Social structures Political / legal Economic Competitive Technology Environment

  24. Language: e.g., in Canada labels must be in both English and French Colors: e.g., in Japan black and white are colors of mourning and should not be used on a product’s package Customs and taboos: e.g., McDonald’s in India serves mutton hamburgers as beef and pork are religiously tabooed meat Values: e.g., Americans are materialistic, Indians’ philosophy is non-materialism Aesthetics: e.g., Americans believe suntans are attractive, Japanese do not Time: e.g., Americans value punctuality and deadlines; Latin Americans consider deadlines rude and pushy Business norms: e.g., Americans are more verbose than Japanese who prefer periods of silence in negotiations Religious beliefs: e.g., in conservative Islamic countries women have less or no say in household buying decisions Examples (socio-cultural)

  25. Government intervention: Contracts for supply and delivery Registration and enforcement of trademarks, brand names, labeling Patents Marketing communications Pricing Product safety, acceptability, environmental issues Political Stability Monetary circumstances (exchange rate) Trading Blocs & Agreements e.g., NAFTA Customs Unions Tariffs Expropriation Political / Legal

  26. Technological problems: Training foreign workers to operate unfamiliar equipment Poor transportation system; increase costs Maintenance standards vary Poor communication facilities hinders use of mass media ads Lack of data processing facilities makes planning, implementing and controlling marketing strategy difficult Technology

  27. Gain differential advantage by investing resources in the target market Local firms may successfully adapt imitation strategies Unsuccessful local firms are often bought out by multinationals Competition

  28. Financial performance e.g., return on investment Market penetration e.g., volume and value of sales Customer growth Distribution e.g., number of outlets Brand awareness and value New product introductions, diffusion Company image including quality and added value Marketing Objectives

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