Global Marketing Management: Planning and Organization Section A: Global Marketing Management Global Marketing Management: An Old Debate and a New View: The approaches to global marketing have revolved over the decades. The following trends have been observed: ? 1970’s: “standardization vs. adaptation” ? 1980’s: “globalization vs. localization” ? 1990’s: “global integration vs. local responsiveness” ? 2000’s: mixture of global, localization The recent trend of mixture of global and localization is caused by the new efficiencies of customization made possible by the Internet and increasing flexible manufacturing processes.
For example, one of the largest computer manufacturers of the world, Dell Computer Corporation maintains no inventory and builds each computer after order. Another crucial reason behind this global/local mixture is the apparent rejection of the logic of globalism by trade unionists, environmentalists and consumers. That’s why Coca-Cola is maintaining two brands in India ??? Coke and Thumps Up. The Nestle Way: Evolution Not Revolution: The global food giant is not bothered about the debate on standardization vs. adaptation. From the very beginning, Nestle was international. The ‘Nestle Way’ is to dominate its markets.
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Its overall strategy is: ? Think and plan long term ? Decentralize ? Stick to what you know ? Adapt to local tastes To see how Nestle operates, considering the example of Poland. After breaking up of Soviet Union, Poland emerged as a big market for the food items. The Nestle executives decided that it would take too long to build plants there and create brand awareness. Instead they acquired the 2nd largest chocolate maker of the country, Goplana and adjusted the end product by small changes every two months over a two-year period until it measured up to Nestle’s standards.
These efforts along with all-out marketing put the company very close to the market leader. Nestle also purchased a milk operation and trained the Polish farmers so that they could improve the quantity and quality of milk. This is a perfect example of Nestle Motto: “Evolution Not Revolution”. Benefits of Global Marketing: Following are the major benefits of global marketing approach: ? With large market segments, economies of scale in production and marketing can be realized. ? Transfer of experience and improved coordination and integration of marketing activities can take place. Allows companies’ access to tough customers for testing and re-inventing. ? Diversity of markets provides financial benefits – The more diversified the portfolio of markets, the better risk is spread out when economic down-turns occur or political changes, etc. A Balanced Approach to Global Marketing Strategy ??? 3M Corporation: A Balanced Approach to Global Marketing is more advantageous than one centered on domestic markets. A global strategy with marketing activities (branding, distributing, etc. ) is more beneficial than one for each market segments (i. . country markets). The example of 3M Corporation can illustrate this phenomenon. In the 1980s, 3M Corporation faced sever competition and was losing market shares. Then 3M conducted several market studies and it revealed some interesting points. The customers can better distinguish a brand from another if homogenous packaging used and the trends in electronics marketplace are consistent across national boundaries. 3M then developed a global strategy and introduced a global brand identity and packaging for the entire line of products in all country markets.
The advertising strategy was developed in global perspective with just necessary tailoring for national tastes. The result of this global effort was very astonishing: ? 3M achieved its goals in all three major markets; it recovered the leading position in Europe and North America and dramatically increased market share in Japan. ? In addition to increasing sales volume and market share, the cost of marketing was also reduced through uniform packaging system. ? This global marketing approach also helped to launch products on a global scale in a very quick speed.
Section B: Planning for Global Markets Planning: Planning is a systemized way of relating to the future. It is an attempt to mange the effects of external, uncontrollable factors on the firm’s strengths, weaknesses, objectives, and goals to attain a desired end. Types of Planning: Structurally planning may be viewed as corporate, strategic, and tactical. 1. Corporate planning: It is long term, focused on enterprise objectives, goals. 2. Strategic planning: Highest level of management develops these plans involving the requirements for products, capital, and research.
These plans are focused on long and short term company goals. 3. Tactical planning: In other words, it is Market planning which considers what actions and resources need to be allocated to implement the strategic planning goals. Company Objectives and resources: Evaluation of a company’s objectives and resources is crucial in all stages of planning. Defining objectives clarifies the orientation of the domestic and international divisions, permitting consistent policies. It may be necessary to change the objectives, alter the scale of international plans, or abandon them.
One market may offer immediate profit but have a poor long-term outlook, while another may offer the opposite. Only when corporate objectives are clear, such differences can be reconciled clearly. International Commitment: The management’s commitment towards internationalization affects the planning approach taken by an international firm. This commitment affects the international strategies and decisions of the firm. Commitment has to be made in terms of: ? Money to be invested, ? Personnel for international venture, and Determination to stay in the market long enough to realize a return on the investments. Poor commitment strategy can make a company to enter a market timidly, using inefficient marketing methods, channels or organizational forms; thus get failure as result. The Planning Process: The Planning Process occurs in 4 phases: 1. Preliminary Analysis and Screening- Matching Company and Country Needs 2. Adapting the Marketing Mix to target markets 3. Developing the Marketing Plan 4. Implementation and Control [pic] Figure: International Planning Process
Phase 1: Preliminary Analysis and Screening- Matching Company and Country Needs: Whether a company is new to international marketing or heavily involved, an evaluation of potential market is the first step in the planning process. The first step in international planning process is deciding in which country market to make an investment. A company’s strengths and weaknesses, products, philosophies, and objectives must be matched with a country’s constraining factors and market potential. In this step, countries are analyzed and screened to eliminate those that do not offer sufficient potential for further consideration.
The next step is to establish screening criteria against which prospective countries can be evaluated. These criteria are established considering company’s strengths and weaknesses, products, philosophies, objectives, and international commitment. An example of evaluation criteria can be: ? Minimum market potential, ? Minimum profit, ? Return on investment, ? Acceptable competitive levels, ? Standards of political stability, ? Acceptable legal requirements, and ? Other measures suitable for company’s products.
After evaluation criteria are set, a complete analysis of the environment within which the company plans to operate is made. The results of Phase 1 provide the marketer with the basic information necessary to avoid blundering marketing mistakes. At the completion of analysis in Phase 1, the marketer faces the task of segmenting and selecting country target markets, identifying problems and opportunities, and the process of creating marketing programs. Phase 2: Adapting the Marketing Mix to target markets: A detailed scrutiny of the components of the marketing mix is the purpose of phase 2.
When target markets are selected, the marketing mix must be evaluated in light of the data generated in Phase 1. The primary goal of Phase 2 is to decide on a marketing mix adjusted to the cultural constraints imposed by the uncontrollable elements of the environment and to ensure that this marketing mix effectively achieves corporate objectives and goals. The answers to 03 major questions are generated in Phase 2: 1. Are there identifiable market segments that allow for common marketing mix across countries? 2. Which cultural or environmental adaptations are necessary for successful acceptance of the marketing mix? . Will adaptation costs allow profitable market entry? Based on the results in Phase 2, a second screening of countries may take place, with some countries dropped from further consideration. The next phase is development of marketing plan. Phase 3: Developing the Marketing Plan: At this stage of planning process, a marketing plan is developed for the target market- whether it is a single country or a global market segment. The marketing plan begins with a situation analysis and concludes with the selection of an entry mode and a specific action program for the market.
The action plan includes what is to be done, by whom, how it is to be done, and when and describes budgets, and sales and profit expectations. In this a decision might be made not to enter a specific market if it is determined that company marketing objectives and goals cannot be met. Phase 4: Implementation and Control: All marketing plans require coordination and control during the implementation stage. An evaluation and control system requires performance-objective action, i. e. bringing the plan back on track if standards of performance fall short. Section C: Alternative Market Entry Strategies Market Entry Strategy:
When a company makes the commitment to go international, it must choose an entry strategy. This decision must reflect an analysis of: ? Market characteristics, ? Company capabilities and characteristics, ? Degree of market knowledge, ? Marketing involvement, and ? Management commitment Models of Market Entry: A company has four different models of foreign market entry: A. Exporting B. Contractual Agreements C. Strategic Alliances, and D. Direct Foreign Investment A. Exporting Model of Market Entry: Exporting can be of two types: i. Direct: With direct exporting, the company sales to a customer in another country.
This is the most common approach employed by companies taking their first international step because the risks of financial loss can be minimized. ii. Indirect: Indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product. Customers include large retailers such as Wal-Mart, or Sears, wholesale supply houses, trading companies and others that but to supply to customers abroad. Initial motives for exporting often are to skim the cream form the market or gain business to absorb overhead.
The Internet: The Internet is becoming increasingly important as a foreign market entry method. Initially, Internet marketing focused on domestic sales. However, 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 international products, a direct sales force may be required in a foreign country. This may mean establishing an office with local and / or expatriate mangers and staff depending on the size of the market and potential sales revenues.
B. Contractual Agreements: Contractual agreements are long-term, non-equity association between a company and another in a foreign market. Contractual agreements generally involve the transfer of technology, process, trademarks, or human skills. In short, they serve as a means of transfer of knowledge rather than equity. Different kinds of Contractual Agreement: i. Licensing, and ii. Franchising i. Licensing: It is a means of establishing foothold in a foreign country without large capital outlays. The licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment.
Patent rights, trademark rights, and the rights to use technological processes are granted in foreign licensing. It is favorite strategy for small and medium???sized companies. Common examples of licensing include television programming and pharmaceuticals. Advantages of licensing: – No capital investment, knowledge, or marketing strength – Huge profit potential, recovered costs – Minimal risk of government intervention – A stage in internationalization – Preempt market entry before competition – Increasing intellectual property rights protection Disadvantages of licensing Licensee controls marketing function and licensor does not gain expertise in local market – No guarantee of entry after license expires – Licensee may become local and international competitor of licensor – No extension of license permitted by local government – Licensee may create quality control and marketing problems for licensor ii. Franchising: Franchising is a rapidly growing form of licensing in which the franchisor provides a standard package of products, systems, and managements services, and the franchisee provides market knowledge, capital, and personal involvement in management.
It is an important form of vertical market integration. Franchising is an effective blending of skill centralization and operational decentralization. This system combines the knowledge of the franchisor with the local knowledge and entrepreneurial sprit of the franchisee. Reasons for the growth of Franchising: – Market potential – Financial gain – Saturated domestic markets Problems in Franchising: – Needs a high degree of standardization – Protection of the total business system from copycat competition – Government intervention – Selection and training of franchisees
Two types of franchising are mainly used by companies, master franchise and licensing, both can have a foreign government as one partner. The master franchise gives the franchisee the rights to a specific area or a country, with the authority to sell or establish sub-franchises. Under licensing, the local franchisor gets the right to use intellectual property (an intangible) of the franchisor in exchange for a royalty payment. C. Strategic International Alliances: A Strategic International Alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need to share risk in achieving common objective.
Characteristics of SIA: – A common objective – One partner’s weakness is offset by the other’s strength – Reaching the objective alone would be too costly, take too much time, or be too risky – Together their respective strengths make possible what otherwise would be unattainable – Opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs, strategic competitive moves, and access to additional sources of capital are motives for engaging in strategic international alliances.
Different kinds of Strategic Alliances: i. International Joint ventures, and ii. Consortia i. International Joint ventures: International Joint ventures (IJVs) as a means of foreign market entry have accelerated sharply since the 1970s. A joint venture is differentiated from other types of strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that join forces to create a separate legal entity Four factors are associated with joint ventures: i. JVs are established, separate, legal entities i. They acknowledge intent by the partners iii. They are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals, and iv. Equity positions are held by each of the parties Advantages of Joint Ventures: – Avoid political or cultural barriers to market entry – Shared risk – Access to skills that the company lacks Disadvantages: – Must manage relationship with a partner – Regulations murky in some countries Recommendations for Joint Ventures – Find a partner with complementary skills Negotiate agreement carefully; – Work out details – Plan to adjust to a changing environment ii. Consortia: Consortia are similar to joint ventures. But there are two major differences of Consortia with Joint Ventures that: i. They typically involve a large number of participants, and ii. They frequently operate in a country or market where none of the participants are currently active. Consortia are developed to accumulate financial and managerial resources and to lessen risks. One good example of consortia is Airbus Company. D. Direct Foreign Investment:
The fourth means of foreign market development and entry is direct foreign investment. Companies may manufacture locally to capitalize on low-cost labor, to avoid high import taxes, to reduce the high cost of transportation to market, to gain access to raw materials, or as a means of gaining market entry. Firms may invest in or buy local companies or establish new operations facilities. Advantages of DFI – Facilitates affiliate cooperation with business strategy/easier to coordinate – Protection of proprietary assets/skills Disadvantages of DFI: – Host country may disapprove Subject to greater political risk Reasons for Growth in Foreign Direct Investment: – Desire for growth – Derived demand – Government incentives Section D: Organizing for Global Competition Organizational Arrangements: The organizational plan includes the type of organizational arrangements to be used, and the scope and location of responsibility. Companies are usually structured around one of the three alternatives: 1. Global products division responsible for product sales throughout the world 2. Geographical divisions responsible for all products and functions within a given geographical area, or 3.
Matrix organization consisting of either of these arrangements with centralized sales and marketing run by centralized functional staff, or a combination of area operations and global product management. Companies adopt the global product division structure when they experience rapid growth and have broad diverse product lines. Geographic structures work best when a close relationship with national and local government is important. The matrix form is popular with companies as they reorganize for global competition. A company may be organized by product lines but have geographical subdivision under the product categories.
Both may be supplemented with functional staff support. The following figure shows such an organization: [pic] Locus of Decision: Decision level must be established for: – Policy – Strategy – Tactical decisions Management policy must be explicit for which decisions are to be made at corporate headquarters, international headquarters, regional levels, national levels or local levels. Considerations of where decision will be made, by whom, and by which method constitutes a major element of organizational strategy. Tactical decisions normally should be made at the lowest possible level, without country-by-country duplication.
Centralized versus Decentralized Organizations: Most of the organizations fit into one of the three organizational patterns: 1. Centralized, 2. Regionalized, or 3. Decentralized Advantages of Centralized: – experts are available in one location; – exert a high degree of control over planning and execution; – centralization of all records and information The major advantage of Decentralization is the ability to respond to local needs and culture as locals have best knowledge of marketing strategies, industry, political and governmental policies.
But the problem is that the operational managers deployed at local levels lack a broad company view, which may cause partial loss of control for the parent company. Companies are experimenting with several different organizational schemes, but greater centralization of decision is common to al. Section E: Suggestion for International Marketer The Issues of Global Marketing: Today we have the speed and global reach of the Internet and global communications. Yet the international marketers need to concentrate specially on the four areas: 1.
Communications, which includes sales & marketing. 2. Technology 3. Logistics and distribution. 4. Legal and financial. 1. Communications: Communications issues are anything that is involved with getting the message out about a company or product ??? public relations, advertising, marketing, and product positioning ??? written, visual or spoken words. In Saudi Arabia, women are not normally photographed, for fear of being seen without a veil, which affected Fuji Photo’s marketing plans there. Gillette learned that while 80% of men in Indonesia shaved, the average was 5. times a month, compared to 12 times a month in Hong Kong and 26 in the U. S. In addition, Asian beards did not grow as fast as Caucasian or Latino beards. Stories are widespread about the blunder of companies when they expanded in foreign countries. American Airlines wanted to advertise its new leather first class seats in the Mexican market, it translated its’ “Fly in leather” campaign literally, which meant “Fly naked” (vuela en cuero) in Spanish. When Gerber started selling baby food in Africa, they used the same packaging as in the US, with the smiling baby on the label.
Later they learned that in Africa, companies routinely put pictures on the labels of what’s inside, since many people can’t read. Sales and Marketing: It doesn’t matter whether companies are selling a product or service, the issues are the same. You need to first identify your target market, then tailor the marketing to that local market. In 1991 Mastercard wanted to expand their brand globally, so they chose to sponsor major soccer events. They made sure their local partners participated in the events with media buys directing individuals to the events.
They reached a worldwide television audience of 31. 2 billion. There is no one marketing or advertising campaign that is better than others. Companies need to combine the various platforms in order to get their products seen by the masses as many times as possible. Sergio Zyman (past CEO of Coca-Cola) pulled Coke’s award-winning “Mean Joe Greene” advertisements for a simple reason ??? it didn’t increase sales! A company with a limited budget, can spread ads over a period of time, and make it appear as if they are everywhere.
For example, there are four periodicals in one industry. So the company placed three ads in each of the periodicals, spaced over a year. That gives them an ad once a month for a year. Some companies have built a brand and can capitalize on that brand via licensing their products. Disney, Warner Brothers, celebrities and sports figures are examples of licensing opportunities, where they will license to manufacturers or distributors in a country. Since licensing is intellectual property, negotiations are individualized for the particular agreement. 2. Technology:
Technology is mandatory for successful expansion and to effectively control the flow of products and information in other countries. Companies who have good systems reduce costs internally and externally. Today, the cost of entry into technology is very low. And with the speed and connectivity of the Internet, a company who is not online will suffer with expansion efforts. Retailers in the US and some other parts of the world demand that suppliers be linked to them using Electronic Data Interchange (EDI), which is a standard method of entering orders, receiving advanced delivery notices and receiving invoices.
This technological advance, combined with bar code reading technology has reduced the amount of time and money required to process orders, receive goods and record purchases into inventory. 3. Logistics and Distribution: It may be easy to manufacture products locally, but it is not easy for a company to get those products to another country. The laws that govern selling in a country also affect logistics. For example, in Germany one must state the landed cost to the consumer, including all duties, freight and taxes, which therefore implies real-time technology that can handle global pricing.
Successful companies establish long-term relationships with suppliers and business partners. Ikea went so far as to support its suppliers financially and technically, even to the point of designing their factories. It is wise in the long run, as Ikea’s success is dependent on having product available to sell. Today’s successful retailers like Home Depot and Wal-Mart use capacity, or the availability of product as the main criteria for selecting a vendor, not price or even the products themselves. Manufacturers need to know the countries where they plan to expand in terms of how products are distributed.
Distribution of products can be by independent distributors (low cost-low control), representative office, licensed manufacturing, joint venture, investment and/or acquisition (high cost-high control). 4. Legal and Financial: Many countries have restrictions on ownership of a business in that country, with many requiring local ownership. This means global corporations need to partner with locals if they are going to operate. Often they will create joint ventures (JVs) with local companies to expand in a particular country.
JVs will work if everybody knows who is doing what and how the results are controlled and the profits allocated. There are issues that need to be addressed ??? like trade secrets, ownership of the functions used to produce the results, control of the resources, financial controls, etc. JVs need to be structured very carefully, and needs legal representation in the local country. Often a country will favor the local entity in a conflict. In many countries companies need to address the moral or ethical or religious issues within that country.
Proctor & Gamble’s first true global innovation ??? liquid detergent ??? ran into issues in Europe with the use of phosphates. Bajaj Auto ran into regulations in Europe for selling their products. And any auto distributor in the US needs to comply with strict safety regulations ??? safety glass, emission control, etc. Reference 1. “International Marketing” (12th Edition) by Cateora and Graham 2. www. wikipedia. com 3. Oxford University Press Role of consumer research in the brand design process, The Design Management Journal, summer 2001 by Recker, John, Kathman, Jerry 4. Other Web Material pic][pic] ———————– Implementation, evaluation, and control Marketing plan development Matching mix requirements Environmental factors, company character, and screening criteria Phase 4 Implementation and control Phase 3 Developing the marketing plan Phase 2 Adapting the marketing mix to target markets Phase 1 Preliminary analysis and screening: Matching company/country needs Information derived from each phase, market research, and evaluation of program performance Manager N. American distribution Manager S. American distribution – Objectives – Standards Assign responsibility – Measure performance – Correct for error Manager African distribution Manager European distribution – Situation analysis – Objectives and goals – Strategy and tactics – Budgets – Action programs Product – Adaptation – Brand name – Features – Packaging – Service – Warranty – Style Price – Credit – Discounts Promotion – Advertising – Personal selling – Media – Message – Sales promotion Distribution – Logistics – Channels Company Character – Philosophy – Objectives – Resources – Management style – Organization – Financial limitations – Management and marketing skills Products – Other Home Country Constraints – Political – Legal – Economic – Other Host Country(s) Constraints – Economic – Political/legal – Competitive – Level of technology – Culture – Structures of distribution – Geography Manager African distribution Manager N. American distribution Research Vice President Marketing Sales Adv. Sales Adv. Sales Adv. Sales Adv. Sales Adv. Sales Adv. Research Director: Truck marketing Director: Passenger car marketing Company President Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Approaches