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Chapter Twelve Global Products

3-1. Chapter Twelve Global Products. MKT568 Global Marketing Management Dr. Fred Miller. Sample Essay Question. HerbalGlow is Korean producer of natural skin care products. The firm wishes to build upon its success in Asian markets by expanding to Europe, North and South America.

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Chapter Twelve Global Products

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  1. 3-1 Chapter Twelve Global Products MKT568 Global Marketing Management Dr. Fred Miller

  2. Sample Essay Question • HerbalGlow is Korean producer of natural skin care products. The firm wishes to build upon its success in Asian markets by expanding to Europe, North and South America. • Identify and describe the three general international marketing strategies. (6 points) • For each element of the marketing mix (product, price, promotion and distribution), identify and describe one benefit of a global strategy and one constraint to implementing such a strategy. (12 points) • Which of the three general marketing strategies do you recommend to HerbalGlow? Explain why. (2 points)

  3. Marketing Strategy Options • Multidomestic • strong cultural influences, localize and adapt • Global • similar buyer preferences, global customers/competitors • Globalized localization • integrate sourcing, production and marketing • seek balanced growth • coordination of marketing across countries • globalize as much as possible, localize when necessary

  4. Multidomestic versus Global Markets:Key Differences Exhibit 11.1

  5. Local Candy Brands A Multidomestic Industry

  6. The Value of Global Brands Take the Ten Second Brand Test

  7. The Value of Global Brands • What brands do you remember? • What brands do you recognize? American Express Wall Street Journal McDonalds Nike Coke Perrier Mobil Phillips Haagen Das 3M Daily Telegraph Honda Motorola Johnson and Johnson Hertz Levi’s Mars Seven Up Campbell’s Sony Rover Kellogg’s British Airways Apple IBM Michelin Dell Club Med

  8. Globalized Localization: Coca Cola

  9. Germany India "Real food is not frozen meat," said Jacqueline García, 24, who runs Toñita's, a food stand in Oaxaca's old market. "It's fresh cheese and crickets. Fast food's unnatural. The people who make it are incompetent. And McDonald's belongs in the United States, not our zócalo.“NY Times, Aug 24, 2002 Japan But NOT in Oaxaca’s Zocalo! Globalized Localization: McDonald’s

  10. Standardization and its Problems • Standardization • advantages: cost, customer preference, quality, global customer/segments • disadvantages: off-target, lack of uniqueness, protectionism, local competitors • Globalization limits and pitfalls • limits:industry, resource, marketing mixes • pitfalls: research, over-standardization, poor follow-up, narrow vision, rigid implementation • Localization vs Adaptation

  11. 12-2 The Tradeoff Between Standardization and Adaptation Incremental manufacturing cost Combined costs Cost of lost sales Fully adapted Fully standardized Exhibit 12.1

  12. Dragon’s Blood Beer from Furth im Wald Strong Local Brands

  13. Global Brand Management • Developing new global products • idea generation • preliminary screening • concept research – focus groups, concept testing, target research • sales forecast • test marketing • Globalizing successful brands • diffusion factors – advantage, compatability, perceived complexity, trialability, observability • globalization potential-sensible, favorable, available, complement, regional • changeover tactics - fade, axing, forewarning

  14. Low Globalization Potential

  15. The “Zoo” of Product Branding • RCA • Jordache • Merrill Lynch • Mercury • Kangaroo Shoes • Schlitz • Camel • Trix • Exxon • Greyhound • MGM • John Deere • Kiwi • Mustang • Playboy • Kellog;s FF • Hartford • VW Rabbit • Kellog’s CF • Borden’s Milk

  16. Global Brand Management • Brand Management, Top 100 Global Brands • Brand equity, global brands, brand portfolio/mix • Counterfeit products • Counterfeit vs gray trade • Actions against counterfeit goods

  17. Global Value of the Nescafe Brand $US $5 billion $700 mil $25 billion $90 billion Global sales of Nescafe Nescafe’s global promotion Value of Nescafe brand Value of Nestle’s brands $113 billion – Market capitalization $23 billion – Book value of assets

  18. Cup Coffee in Japan “Mellow taste of milk will soothe your mind. Type of cup coffee that one would like to drink when feeling relieved, or relaxing.” “Features sound feel of coffee that fully convinces even true coffee lovers. Type of cup coffee one would feel like drinking when one needs to holdout, or when one wishes to cheer up.” Single Bean in Japan China Europe Columbia Localizing the Nescafe Brand

  19. Evolution of a European Brand

  20. Budweiser/Budvarremains a strong regional beer with aquality, hand craftedtraditional beer image Plzensky Prazdroj is a member of the international group, SABMiller, the second largest brewery in the world. Pilsner Urquell is the group’s flagship brand.-- Plzensky Prazdroj Website A Tale of Two Beers

  21. Anheuser Busch in Europe

  22. Czech Budvar in USA

  23. Significance of Private Brands

  24. Flanker Brand Example The Current Sarotti Brand

  25. Cola Wars Video • In which countries, with what strategy and with what success has Mecca Cola chosen to challenge Coca Cola? • In which countries, with what strategy and with what success has Qibla Cola chosen to challenge Coca Cola? • How has Coca Cola responded to these challenges?

  26. 3-1 Chapter Twelve Global Products MKT568 Global Marketing Management Dr. Fred Miller

  27. Target Market Definition, Size and Purchasing Power • Define your target market by age and income classifications in the SPSS dataset. • Use this definition to analyze statistical data on this market (review previous slides) • To calculate size of target market in number of people, • Determine the number of people in your chosen age range (Data tables for Population Pyramids) • Multiply the result by the percentage of people in your chosen income range (SPSS Crosstabs) • To calculate purchasing power, multiply the product of the previous step by your country’s per capita income (from Part 1 of your report, World Bank)

  28. Determine target population by age Visit the Population Pyramid site of the US Census Burearu and select the current year. Determine the number of people in the target market you have defined, in this case, 5,840,087

  29. Screen for Income Determine percent of population in the defined income range, in this case 42% Multiply target population by this percentage to calculate number of people in target market, in this case, 5,840,087 * .42 = 2,452,837

  30. Calculate Purchasing Power Multiply TM population by Per Capita GNI from World Bank or CIA to calculate purchasing power. In this case, 2,452,837 * $26,900 = $65,981,315,300

  31. Pro Forma Income Statement • $14,832,000, using the formulaeVolume (CY+1) = CY Industry Sales * (1+Growth Rate)1,030,000,000 = (1,000,000,000) * 1.03 Sales = Volume * Schmidt’s SoM * Price$14,832,000 = 1,030,000,000 * .012 * $1.20 • $23,260,284, using the formulaeVolume (CY+2) = Volume(CY+1) * (1+Growth Rate) • 1,050,600,000 = 1,030,000,000 * 1.02 Price(CY+2) = Price(CY+1) + Price Increase(CY+2)$1.23 = $1.20 + $0.03Sales = Volume * Schmidt’s SoM * Price$23,260,284 = 1,050,600,000 * .018 * $1.23

  32. Pro Forma Income Statement • $9,888,000, using the formulaProduction Costs = Volume * Schmidt’s SoM * Cost per Liter$9,888,000 = 1,030,000,000 * .012 * $.80 • $15,128,640, using the formulaProduction Costs = Volume * Schmidt’s SoM * Cost per Liter$15,128,640 = 1,050,600,000 * .018 * $.80 • $4,944,000, using the formulaGross Margin = Sales – Production Costs$4,944,000 = $14,832,000 - $9,888,000

  33. Pro Forma Income Statement • $8,131,644, using the formulaGross Margin = Sales – Production Costs$8,131,644 = $23,260,284 - $15,128,640 • $741,600, using the formulaSales Costs = Sales * Agent’s Commission$741,600 = $14,832,000 * .05 • $1,163,014, using the formulaSales Costs = Sales * Agent’s Commission$1,163,014 = $23,260,284 * .05

  34. Pro Forma Income Statement • $889,920, using the formulaPromotion Costs = Sales * Promotion as % of Sales (CY+1)$889,920 = $14,832,000 * .06 • $1,163,014, using the formulaPromotion Costs = Sales * Promotion as % of Sales (CY+2)$1,163,014 = $23,260,284 * .05

  35. Pro Forma Income Statement • $3,312,480, using the formulaContribution Margin = Gross Margin - Sales Costs – Promotion Costs$3,312,480 = $4,944,000 - $741,600 - $889,920 • $5,805,616, using the formulaContribution Margin = Gross Margin - Sales Costs – Promotion Costs$5,805,616 = $8,131,644 - $1,163,014 - $1,163,014

  36. Pro Forma Income Statement • Identify three estimates to be revised. Describe revision and explain reasoning. • Increase CY+1 market growth rate to 3.2% because Brahma’s new entry will stimulate increased sales • Decrease share of market estimate in CY+1 to .9% because of greater competition from the Corona brand will lower SoM • Increase promotion costs as % of sales in CY +1 to 8% to provide more funds for advertising to match Brahma’s promotion for introduction of Corona brand

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