Global Marketing

Prof Arvind Agrawal

My Background

IIMA batch of 1981-83

Over 26 years of industry experience across Marketing, CRM,
Credit Risk, Business Strategy and Business Intelligence.

Key Projects:

Launched cards in India for American Express

Launched personal loans for GE in India

Led the Analytic services business for Fair Isaac in the Asia Pacific region

Developed a strategic framework for card acquisition and customer
retention for American Express GNS partner banks in Asia Pacific region

Mobile: +91 9665098069; Email: arvind@flame.edu.in

My Philosophy

I hear and I am going to forget

I see and I may remember
I do and I am sure to remember
Course Mechanics

Class GM Course Coordinators:

Jasmine Narang

Sarvesh Sridhar

Attendance

Class

Group Assignment - Presence is mandatory to get credit

Evaluation

End-of-term exam 20%

Class participation, quizzes & pstns 40%

Group Final Project 40%

Missed deadline

Late Submission 10% deduction

More than 2 hrs and upto 24 hour late: 25% deduction

> 24 hour late: No marks
Agenda for Session 1

Discuss & mark the Home Assignment

Pstn on - Introduction to Global Marketing

Use Singapore Airlines case study as an example

Teams for Group assignment
Introduction to global marketing

‘The process of focusing the resources

(people, money, and physical assets)
and objectives of an organisation
on global market opportunities and threats’

Keegan 1995
Introduction to global marketing

International Marketing is
simply an attitude of mind,
the approach of a company with truly global outlook,
seeking its profits impartially around the world,
home market included,
on a planned and systematic basis.
What’s the Difference?

International Marketing

Vs

International Trade
1. Marketing is a Universal Discipline
2. Markets & Consumers are differentiated
3. Cannot apply experience across countries
4. Customised Marketing Plan
The Three Principles of Marketing
1. Customer value and the value equation

i.e. value greater than competitors

Value equation is:

VALUE = PERCEIVED BENEFITS / PRICE

2. Competitive or differential advantage

Advantage vis-à-vis competition
3. Focus

i.e. the concentration of attention

Achieved through concentrating resources

IBM ‘was’ focused on customer needs and wants for data
processing

IBM crisis in early 1990s - ‘lost focus’
From Domestic to Global/Transnational
Marketing

Political & Legal differences

Cultural differences

Economic differences

Differences in currency unit

Language difference

Difference in Marketing Infrastructure

Trade restrictions

Cost of transportation

Differences in trade practices
Driving forces

‘Global Village’ Marshall Macluhan

Market needs - X-Box for leisure

Technology - Third Generation phones (3G)

Cost - low cost production e.g. Gap

Quality - Is now taken for granted.

Communications and Transportation
Driving forces ...contd

Leverage (i.e. advantages of operating in numerous markets
simultaneously)

Experience transfers

Systems transfers

Scale economies

Resource utilisation

Global strategy. Scanning the globe!
 Underlying forces

Dr. Howard Perlmutter ‘Orientation of Management and
Companies’

International money framework and exposure to currency
fluctuations

post WWII World trading system - WTO (GATT)

Global peace - post September 11th

Arrival of global/transnational companies
How have things changes after September 11 2001? 26/11 2008?
Global Marketing Environment
 The Environment of Global Trade

Capital movements (not trade) are driving forces of the
world economy

Production is ‘uncoupled’ from employment e.g security
guards in India using webcams

Primary products have become uncoupled from the
industrial economy e.g steel from South America into
Europe

The world economy is in control

75-year contrast between capitalism and socialism is over
 Barriers to Trade

Tariff barriers - direct taxes on imports

Bahamas has 30% on all goods

Australia and US impose on cars and agricultural goods e.g Japanese
manufacture in Australia

Average now 5% was 25% in1945

Non-tariff Barriers

Increased govt. participation, US wheat subsidy

Customs entry procedures

Quotas (quantitative restriction) US textile imports from China

Global warming – CO2 emissions
Forms of Market Agreement

Free Trade Area - remove all tariffs amongst members

e.g NAFTA USA/Canada Mexico

e.g EEA (European Economic Area) EU, EFTA and LAFTA

Customs Unions - as above but with common external

barriers

e.g EC prior to 1993.

Common Market - as above but also the free flow of all
factors of production

e.g EU since 1993

Economic Union -

Common market characteristics are combined with the harmonisation of
economic policy.

Supranational authority to design policy for a group of nations

Objective of Maastricht Treaty in 1991. EU was formed in 1993.
Monetary Union commenced in 1999. Next political union? More
convergence and less national autonomy?
Five forces analysis
Potential
entrants

Threat of
entrants

Suppliers COMPETITIVE Buyers

RIVALRY

Bargaining Bargaining
power power

Threat of
substitutes

Substitutes

Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980,

Competitive Rivalry

Entry is likely

Substitutes threaten

Buyers or suppliers exercise control

Competitors are in balance

There is slow market growth

Global customers increase competition

There are high fixed costs in an industry

Markets are undifferentiated

There are high exit barriers
Competitive Rivalry -
motor industry
Buyer power

There is a concentration of buyers

There are many small operators in the supplying
industry

There are alternative sources of supply

Components or materials are a high percentage of
cost to the buyer leading to “shopping around”

Switching costs are low

There is a threat of backward integration
Bargaining power of buyers - Wal-Mart
Supplier power

There is a concentration of suppliers

Switching costs are high

The supplier brand is powerful

Integration forward by the supplier is possible

Customers are fragmented and bargaining
power low
Bargaining power of suppliers - Bill
Gates - Microsoft
Threat of substitutes
Substitutes take different forms:

Product substitution - BT for Orange

Substitution of need - international not local calls
(satellites not wires)

Generic substitution - mobiles for land based
telephones

Doing without - no communication
Threat of substitutes -
KFC China
The threat of entry
Dependent on barriers to entry such as:

Economies of scale

Capital requirements of entry

Access to distribution channels

Cost advantages independent of size (eg the
“experience curve”)

Expected retaliation

Legislation or government action

Differentiation
New Entrants - Citibank
Citibank - ‘Firstmover’

High brand recognition

More positive brand image

More customer loyalty

More distribution

Longer market experience
Country-
Country- Specific Advantages (CSAs)

E.g low cost production of Volkswagens in Portugal

Comparative advantage - e.g France apples, UK lamb

International Product Cycle (IPC) - Raymond Vernon 1966

USA production shifted over time to new locations

USA begins to export goods and technology

Countries such as Korea then become low cost producers and export
back to USA
Porter’s Determinants of National Advantage
(1990)

Firm strategy,
structure,
and rivalry

Factory Demand
conditions conditions

Related and
supporting
industries
National Competitive Advantages

Factor conditions e.g skilled labour, infrastructure

Demand conditions e.g. ‘home’ demand for the product of
service

Related and supporting industries e.g raw materials,
components

Firm strategy, structure and rivalry
Competing in Global Markets
Competing in the Global Market

Global competition impacts:

industry structure

degree of competition

firm’s national origin and the competitive advantage of nations

Competitive position

costs, market share, price quality, accumulated experience

Competitive forces - Five Forces Analysis
Fragmented Industries

‘Populated by a large number of Small Medium Enterprises’
Porter

‘Absence of market leaders with the power to influence
events.’

Where:

low barriers to entry

transport costs are high

local image important etc.

A fragmented industry may become consolidated with:

technological change

standard product preferred over customised one

large publishing companies with small ‘imprints’

Consolidate naturally with age

Without consolidation a firm can specialise and grow by:

offering a standard product or service

dealing with particular customers

Concentrating on a particular area
Concentrated Industries

Dominated by a small number of large firms, exercising
significant influence over the market

How does this happen?

Cheap to produce in bulk

Significant resources to stay in business

High barriers to entry etc.

Always a main market leader

influences the way business is done

strong relationship with sources of supply

control over distribution networks
Emerging Industries

New or reformed industry

e.g electronic publishing and interactive TV - FT, New York times, Digital
TV.

e.g Waste recycling - BMW, Winchester City Council

e.g Internet browsers - Netscape Navigator

e.g Road pricing systems - Toll systems for bridges and motorway

Problems with emerging industries:

lack of faith in technology

innovative product where customer needs are as yet unknown

high initial start up costs

potential customers need to be kept informed of developments

early barriers to entry e.g raw materials

competition for components

customer confusion

Obsolescence

Erratic quality

Scepticism from bankers and investors
Waste Recycling?
Link in with . . .

Kenichi Ohmae - Globalisation means businesses do not have
a nationality, but shared values

Levitt ‘Globalisation of Markets’

Competitive Advantage of Nations

Kotler - Where do we go from here?
Culture in a Global Marketplace
Social and Cultural Environments
Basic aspects of culture

It is not innate, but learned

The various facets of culture are interrelated - touch a
culture in one place and everything is affected

It is shared by group members, and defines boundaries
between different groups
Edward T. Hall, Beyond Culture (1977)
General Motors

Ad should read
‘Body by Fischer’

It actually read
‘Corpse by Fischer’
Hertz strap-line

‘Let Hertz put you in the
driving seat’(liberation
and action)

‘Let Hertz make you a
chauffeur’ (change your
occupation or status)
 Cultures across countries
High context culture

The meaning of individual behaviour and speech changes
depending on the situation

Nonverbal messages are full of important meaning (Read
between the lines)

e.g. Saudi Arabia and Japan, written contracts are not always
enforceable as new people move into executive positions (Chile,
Mexico)

Low context culture

Intentions are expressed verbally

The situation does not change the meaning of words

e.g. India, China, Australia, New Zealand
Social and cultural influences on the
international buyer

Cultural differences

Language, spoken and silent

Mental processes and learning

Values and norms

Rewards and recognition

Type of buyer behaviour

Consumer

Business

Government

The influence of others in the buying process

Decision-making unit

Family

Peers

Specific cultural influences

Religion

Education

Family

Reference groups

The influence of the market

Distribution channels

Manufacturer

Service provider
Phillips, Doole and Lowe (1994)
 ‘Self-Reference Criteria’
1. Define problem or goals in terms of home-country
cultural traits, habits and norms
2.Define problem or goals in terms of foreign cultural
traits, habits and norms
3.Isolate the SRC influence in the problem and examine it
carefully to see how it complicates the problem
4. Redefine the problem without the SRC influence and
solve for the foreign market
James Lee (1966)
 Written English: but what does it
mean?
Japanese hotel notice to guests:
‘You are invited to take advantage of the chambermaid’
Bangkok dry cleaner to potential customers
‘Drop you trousers here for best results’
A Roman laundry innocently suggests:
‘ Ladies, leave your clothes here and spend the afternoon having a good time’
A Copenhagen Airline promises to
‘Take your bags and send them in all directions’
A Hong Kong dentist claims to extract teeth
‘By the latest Methodists’
An outline of cross-cultural analysis of
consumer behaviour

Determine the relevant motivations of the culture

Determine the characteristic behaviour patterns

Determine what broad cultural patterns are relevant to
this product

Determine the characteristic forms of decisions making

Evaluate promotion methods appropriate to the culture

Determine appropriate institutions for this product in
the mind of the consumer
Assessing Global Market
Opportunities: Research
• Background information
• Five rules for international research
• Entry evaluation procedure
Market information

Market potential

Consumer / customer attitudes and behaviour

Channels of distribution

Communications and media

Market sources

New products
Competitive information

Competitive business strategy and goals (mission and
rationale of the company)

Competitive functional strategies and programmes (target
markets, marketing mix, etc)

Competitive operations (morale, employee transfers, i.e.
detail)
 Foreign exchange

Balance of payments, interest rates, etc

Prescriptive information e.g incentives, controls, regulations.

Country monetary and fiscal policy

Expectations of bankers, traders, analysts, etc

Government policy in relation to its own competitiveness e.g
China, USA
Resource information

Human resources

Money

Raw materials

Acquisitions and mergers, joint ventures
General conditions

Economic factors - e.g. growth

Social factors e.g. customs, attitudes

Political factors e.g investment climate

Scientific and technological factors - major developments and
trends

Management and administrative factors e.g. report procedure
Sources of information

Human sources e.g company executives

Documentary sources e.g central bank report

Perception sources e.g. what we see and hear

Information and media

face-to-face conversation

telex/fax/e-mail

sight, smell, taste
Five rules for international research

One:

What information do I need?

Where can I get this information?

Why do I need this information?

When do I need this information?

What is this information worth in $ ?

What is the cost of not obtaining this information?

Two: Start with desk research

Three: Identify the type of information that is
available from overseas sources

Four: Know where to look (or find somebody
that does)

Five: Do not assume that the information that you
gain is comparable or complete.
Keegan 1995
Entry evaluation procedure

Stage 1 - Country identification

Stage 2 - Preliminary screening
Stage 3 - In-Depth screening
Stage 4 - Final selection
Stage 1 - Country identification

Candidate countries are identified and listed

Broadly based on general statistical information

Conduct population comparisons to predict market potential

Indonesia 18 million, Malaysia 17 million

Brazil 50 million, Chile 13 million
 Stage 2 - Preliminary screening

Rating the identified countries

Macro level - political stability, geographical distance,
economic development

Weed out countries from consideration

Anticipated cost of entry are calculated e.g. warehousing,
product support, distribution
 Stage 3 - In-Depth screening

Core of attractiveness evaluation

Data specific to industry/market

Market size

Market growth - business cycle, computing rates of growth

Competitive intensity - e.g. US Dept of Commerce ‘Market
Shares Report’

Trade barriers
 Stage 4 - Final selection

Objectives brought to bear for a match

Revenues and costs are compared for ‘leverage’

Weights can be added to criteria based on objectives

This leads to a final ranking

Personal visits are made. ‘Direct experience’ leads to
final decision
Johansson (1999)
 Information derived from each phase, market research and performance.

Phase one – Phase two – Phase three – Phase four –

Preliminary analysis Adapting the Implementation and
and screening: Developing the plan
marketing mix to control
matching target markets
company/country
needs

Matching mix
Environmental requirements Marketing plan Implementation,
uncontrollables, development evaluation, control
Product
company character, Objectives and
Situation analysis
and screening. Price standards
Objectives
Host country (s) Promotion Assign
constraints Strategic options responsibilities
Distribution/pla
Company ce Tactics Measure
character performance
Physical Budget
Evidence Corrective action
Action
People Process programmes

The International Marketing Planning Process

Planning for Overseas Marketing
 Global Marketing Management
Stages of development of the transnational corporation
• Stage one - Domestic
• Stage two - International
• Stage three - Multinational
• Stage four - Global
• Stage five - Transnational

The International Marketing Planning Process

Stage one - Domestic

Domestic in focus, visions and operations

Focus on domestic markets

Environment scanning is local

‘If it’s not happening in the home country, it’s not happening’

Often conscious decision

Can develop to be stage two company
Stage two - International

Extends marketing, manufacturing and other activities
outside the main country

Remains ethnocentric (home country orientated)

Groups people together in an international division

Strategy of ‘extension’

Global development always begins in stage two

It would be a mistake to simultaneously jump into new
customer and new product/technology markets
Stage three - Multinational

Discover that different markets need some degree of
adaptation

e.g Toyota first entered US in 1957 as Toyopet

‘Overpriced, underpowered, built like tanks’

No such thing as failure, only learning

‘Multi-domestic’ focus
Discover that different markets need some
degree of adaptation -Toyopet

Polycentric orientation

Adapts domestic marketing mix to suit the differing
international markets
Stage four - Global

Major strategic departure

Global marketing and/or sourcing strategy

Focus globally and supply from domestic market e.g
Harley Davidson

Supply domestic market from global sources e.g. Gap

Must understand the limitations of competitive
advantage (not too ambitious!)
Harley Davidson
 Stage five - Transnational

Sales, investments and operations in many countries

Integrated world enterprise that links global markets and
global supplies

Geocentric - recognises similarities and differences and
adapts to them

Adaptation adds value

Key assets are dispersed, interdependent and specialised
e.g. R&D

E.g. Caterpillar - manufactures and assembles in many
countries

components are shipped-in from many countries

they are assembled

then despatched to different countries

Experience and knowledge are shared globally

Scans the world for information

‘Grow or die’ - aspirations are global

Global bias for key functions e.g. finance, NPD, supply
chain management
Caterpillar - manufactures and
assembles in many countries
Strengths at each level

International

exploit’s the parent company’s knowledge and capabilities through
worlwide diffusion of products

Multinational

flexible ability to respond to national differences

Global

cost advantage through centralised operations

Transnational

combines above in an integrated network, which leverages worldwide
learning and experience
Global Market Entry Strategies
• Operational reasons for setting up overseas manufacture
• Strategic reasons for investing in local operations
• Methods of overseas production
• Exporting options
• Joint Ventures and Strategic Alliances
 Operational reasons for setting-up
overseas manufacture

Reduced costs of transportation

Reduced barriers/ quota handicap e.g. Nissan

Some governments demand investment with market entry
e.g. China

Customers sometimes prefer local manufacture e.g. Heinz
‘British’?

Government contracts prefer firms contributing to the local
economy

Improved local market information

Local manufacture ensures greater commitment to
international markets

Faster response and Just-in-time delivery
Strategic reasons for investing in local
operations

Gain new business

demonstrates strong commitment

persuades customers to change suppliers

provides better service and more reliability

Defend existing business

avoid market restrictions as sales increase, particularly in single market

Move with established customer

component suppliers follow customers to compete with local component
suppliers

Save costs

labour, raw materials and transport

Avoid government restrictions to import certain goods

Exporting

Indirect

export houses

buying offices of foreign stores or governments

complementary exporting

Direct

sales to final user

overseas agencies

distributors and stockists

company branch offices abroad

Degree of involvement vs control?

Methods of overseas production

Licensing

Companies with strong brand or know-how

e.g. Coca-Cola, Disney

Franchising

more of a ‘whole’ package

e.g.Body Shop, KFC

Contract manufacture

bulk items e.g. Nike

components

Joint ventures -

e.g. Burmah Castrol in S.Korea

Wholly owned overseas subsidiaries

Organic growth
Strategic Alliances

Strategic alliances can range from loose networking relationships
to very tight contractual relationships such as joint ventures.

e.g. ‘code share’ where airlines of a similar type sell each other’s
tickets. There is no co-ownership.

Types

Technology swaps

R&D exchanges

Distribution relationships

Driving forces

Insufficient resources

High R&D costs

Concentration of firms in mature markets

Market access
 Joint ventures e.g European Airbus.

Orgs can remain separate, but have a tight legal relationship.

Reasons for setting up

overcome foreign ownership restrictions

increase speed of entry

exploit new opportunities, complementary technologies and management skills

achieve worldwide presence at lower cost

Disadvantages

differences in partner aims and objectives

equal ownership and different options can slow decision making

dominance by one partner can lead to resentment in the other

Large time commitment for education, negotiation and agreement with partner
Mergers

The identity of each of the merging companies is
subordinated into the identity of the newly merged
organisation, or disappears.

Benefits include:

Cutting cost

Eliminate competition

Synergy augments mutual strengths
International Distribution &
Logistics
 International Distribution and Logistics

Swatch’s channel design

Today’s system of exchange

Rationalising local channels

Wholesaling

Nike’s ‘Do it yourself’

Retailing

Creating new channels

Kodak’s own airfreight hub

Global logistics
Global Channel Design

Chosen intermediaries must
meet criteria

Work closely with distributors

Build sustain brand

Avoid discounting

‘Shops in shops’ approach e.g
department stores
 Today’s system of exchange

Promotion

Contact

Negotiation

Transporting and storing

Producers

Users
Financing

Packaging

Money

Goods
Rationalising Local Channels

Changing distributors - where a poor job is being done e.g.
Nike took on distributors

Dual distribution - multiple channels may emerge e.g
Goldstar in USA (OEM deal with Sears, later under own
brand)
 Wholesaling

Vertical integration

power and competition 80/20 rule e.g. Malaysia a dozen European
import houses handle half of the trade, whilst hundreds of smaller
companies handle the remainder

Efficiency

trend towards integration by technology e.g. Wal-Mart

Types of wholesaler

fit all bills e.g. full-service wholesalers
Nike’s ‘Do it yourself’

1970s independent
distributors

successful brand at home

1980s established own
subsidiaries overseas

Now controls most
subsidiaries

even bought some distributors
 Retailing

Middlemen who sell directly to the consumer

Retailing and lifestyles

many in developed world

retailers are globalising

Problems for marketer?

Gillette blades through drugstores in USA, tobacco shops in Italy,
department stores in Germany, street in Moscow, counters in Thailand,
travelling vans in India
Creating New Channels

Retailing is dynamic

Innovative over recent years

self-service

discounting

vending machines

mail-order houses

fast-food globally diffused

Global retailing

success for Carrefour in Brazil and Argentina

Marks and Spencer had problems in Canada and pulled-out
Kodak’s own airfreight hub

Minimise shipping errors and
product handling

Loaded onto trucks at
Rochester plant

All paperwork is already
completed

Flight approval is obtained
before truck arrives at airport
(JFK)
 Global Logistics

Focus on channels within a country

‘the transportation and storage activities necessary to transfer the physical
product from manufacturing plants and and warehouses in different
countries to the various local market countries’ Johansson (1999)

Supply chain management

e.g. Nissan trucks sold in France come from their Tennessee plant, Micras
from Sunderland, Maximas from Japan via Amsterdam.

Competition and technology

Air Express e.g. FedEX, DHL, UPS and Airborne

Ocean carriers

Global carrier alliances e.g. Sea-Land Service of Seattle and Maersk of
Denmark have a global partnership.

Overland transportation

roll-on-roll-off (RORO) containers are moved from ships directly onto
rail (USA)

Warehousing and inventory management

e.g. SKF bearings new distribution centre in Belgium reduced distribution
points from 24 to 5
Organizing for Overseas Markets
 Organising for international marketing

Factors affecting organisational design

Organisation by product or brand/Matrix organisations

Guidelines for the organisation

Factors influencing the international organisation

Centralisation vs decentralisation

The impact of business culture

Human resource implications

Expatriate managers
Factors affecting Corporate goals Jeannet and
organisational Mission
Hennessey (1994)
design Objectives
Strategies

External Internal
forces influences
Geographic
distance
Organisation Percentage
design of sales
Types of
customer Diversity of
markets
Govt. regulations
Management style Human resources
Structural basis
Focus on decision Flexibility
E.g. Organisation by product or brand

Product Divisionalisation

Board of
Directors

Central Divisional Divisional Divisional Finance

Departments Manager Manager Manager Department
Product group A Product group B Product group C

Area 1 Area 2 Area 3 Area 4

 Area 1 Area 2 Area 3

Product Manager A

Product Manager B

Product Manager C
Matrix Organisation

Unity of command is sacrificed to co-ordination across business functions.

E.g. people reporting to both product managers and area bosses.
Guidelines to the organisation

Concerns:

The division of labour

The allocation of responsibilities

Delegation/power/authority
There must be:

A clear chain of command

Everyone must know who to report to/who reports to
whom

Responsibility must be matched with authority

Few levels of authority

The span of control should not be too great

The structure must be flexible
Factors influencing international
marketing organisation

Size of the firm

Number of foreign countries involved

Level of involvement

Firm’s objectives for its foreign business

Firm’s experience in international business

The value and variety of its products

The nature of the marketing task
Centralisation v decentralisation

I.e. the global division of labour or specialisation by
subsidiary?

Advantages of centralisation?

better for planning

better co-ordination

optimum use of resources

Disadvantages of centralisation

poor motivation amongst subsidiary staff due to too much control

misunderstandings and delays in communication
The impact of business culture
Influenced by:

the organisation’s founder

the organisation’s history

leadership and management style

original structure and systems

the industry itself e.g. ‘Silicon Valley’ and software
Human resource implications -
expatriates v locals?

Think global and act local

Local managers could lead to loss of control

Is there such a thing as a global manager, if so is
he/she available?
Expatriate managers
(reverse for local managers)

Advantages

where there are poor educational opportunities

where senior managers believe expatriates are better

where there is control at the top.

Disadvantages

they cost more! E.g. relocation

growth in dual career households

culture shock

substantial training programme
Standardization Vs Adaptation
Product decisions - Standardisation vs
Adaptation

Three levels of product

Global products

Advantages/disadvantages of standardisation

Problems with standardisation

Brand globalisation potential
Three levels of product
Augmented
Installation
product

Packaging Actual
product
Brand Features
name
Delivery Core
After-
and benefit
or service sales
credit service
Core
product
Quality Styling

Warranty
 Global Products

Localisation of a product or service to fit local regulation
and usage requirements e.g. local voltages and safety laws

Adaptation fits the product to buyer preferences e.g. Air-
conditioning in USA

Standardised global products are not adapted to local
preferences, but must still be localised. E.g Coca-Cola
obey local hygiene laws
Advantages of standardisation

Cost reduction - e.g. economies of scale

Improved quality - resources can be focussed

Enhanced customer preference - positive experiences
lead to global brand loyalty

Global customers - uniform quality and services

Global segments - e.g. software, cameras.
Disadvantages of Standardisation

Lack of uniqueness - exclusivity may be behind purchase
decision

Off-target - miss the customer target completely

Vulnerable to trade barriers - local production may be
necessary, so economy of scale benefits are lost

Strong local competition - customisation by competitors,
lack of local knowledge
Problems with global standardisation

Insufficient market research

Over standardisation

Poor follow-up

Narrow vision

Rigid implementation
Polaroid SX-70

Insufficient market research

Used US campaign/agency in
European launch

TV testimonials from
‘unknown’ people

Hence local lack of awareness
Canon AE-1

Overstandardisation

First ‘positioned’ as the
expert’s choice in all markets

Then endorsed by John
Newcombe (Tennis
Champion)

Created a much bigger market
for single-lens reflex cameras
world-wide
Henkel Pritt

Poor follow-up

Pritt stick launched as an
umbrella brand

Failed to capitalise on initial
momentum

Local business units were
under resourced

Weak results had to be turned
around
Unilever - Domestos

Narrow Vision

Vision lead from HQ

UK took lead in promoting
Domestos

In Germany positioned as dirt
remover, not germ killer

UK ignored this - consumers
confused
Lego Buckets

Rigid implementation

In US, competitor Tyco
offered plastic buckets

Danish HQ refused to act

Denmark relented after
market slide

Now use buckets world-wide
 Brand globalisation potential

Does the brand name make sense outside of the country?
Nokia from Finland is aware name sounds Japanese
(same roots)

Does the name have a positive, country specific image?
E.g GM’s Opel and Chevrolet

Is the name available legally in many countries? Dutch
Philips, Phillips Oil registered in USA

Does the brand complement other global brands in the
portfolio(or not)? E.g. Sony supports Aiwa at a lower price

Should the growth be limited to the creation of a regional
brand? E.g. Strasbourg beer maker, ‘Kronenbourg’ in global
markets, as ‘1866’ in S. Europe. Local brand can be difficult
to remove.

Johnny K. Johansson (1999)

Pricing Decisions
•Keegan’s four steps to global pricing strategy
•General pricing strategies
•Problems with pricing for multinational markets
•Problems with foreign currency and economic conditions
•Grey markets
 Global Pricing Strategies - Four Steps
1 Determine the price elasticity of demand
(Inflexible demand will allow for a higher price)
2 Estimate fixed and variable manufacturing costs
(product adaptation costs must be calculated)
3 Identify all costs associated with the marketing
programme
4 Select the price that offers the highest contribution
margin
Warren J. Keegan (1995)
Pricing Strategies

Market skimming

Market penetration

Market holding

Cost-plus pricing
Market Skimming - Sony Betamax
Harvey Schein, President - $1,295 at launch!
Market Penetration - Daewoo ‘blitz’ the
market
Market Holding

Maintain their share of the market

Currency fluctuations often trigger price adjustments

Price adjustments can mean lower, or no profit margin

Strong home currency could mean manufacturing/licensing
abroad
Cost-plus

Adds-up all cost of production (and shipping)

Easy to make quotes

Ignores demand and competitive pricing in target market

Consumer and competitor value issues must always
considered in a rational pricing strategy
Problems of multinational pricing

Co-ordination across various markets?

Do we maintain a ‘uniform’ pricing policy across
markets?

How to transfer price between and across markets? E.g.
Sandvik (Sweden)

Parallel imports or ‘Grey’ markets?
Problems with foreign currency and
economic conditions

Which currency for pricing in international

markets?

How to deal with fluctuating exchange rates?

Strategies for high inflation rates?
Grey Markets

Products must be available internationally (as products are
standardised in global markets)

Low trade barriers (tariffs, legal restrictions, transport costs)

Price differentials must be great enough (so that grey
marketers can make a profit)
Duhan and Sheffet (1988)
International Communications
•Four major difficulties
•Typical Marcoms (Marketing Communications) tools
•International communications plan
•Tactical decisions
•Organising and co-ordination of advertising effort
•Personal selling
 Four Major Difficulties

The message may not get through to the intended recipient

The message may reach the target audience but may not be
understood (or may be misunderstood)

The message may reach the target audience and may be
understood but may not induce the recipient to take action
desired by the sender

The effectiveness of the message can be impaired by noise, or
the effect of external influences such as competitive
advertising etc
Warren G. Keegan (1995)
 Media Spending

Outdoor - important in Japan and South Korea - exposure in large
cities

Cinema - Argentina and India where films are popular pastimes

Print - high literacy rates e.g France, Germany, and Sweden

Radio - lack of opportunity in Europe with government
ownership

Television - Strong in USA, Asia, and South America
 Advertising exposure

Awareness

Knowledge

The Hierarchy
Liking/Attitude
of Effects
Preference

Trial

Repeat purchase/loyalty
International communications plan

How do marcoms objectives help to achieve the international
marketing objectives?

Think through various scenarios e.g. PR, sales force

Decide upon specific objectives

Decide how you will organise e.g. selection of agencies

How important is creativity?

How much standardisation are we seeking to achieve?

What is the overall communications budget?

What is the balance of expenditure between the
elements of the promotions mix?

The main elements of the promotions mix need to be
specified

Detailed tactical plans need to be written

Timings and schedules need to be worked-out

Methods of evaluation and control need to be established

Develop contingency plans

Learning will lead to need plans for the future
Tactical decisions

TV commercials are sandwiched together in a string of
10-50 commercials within one station break in Brazil

National coverage can mean using as many as 40-50
different media

Specialised media reach small segments of the market
only

In Germany, TV scheduling for the entire year must be
arranged by 30th August

In Germany, no guarantee that commercials intended for
summer viewing will run in that period

In Vietnam, advertising in newspapers and magazines will
be limited to 10 % of space and 5 % of time, or three
minutes and hour on radio or TV
Organising and co-ordination of
advertising effort

Domestic agency

familiarity/trust/relationship/knowledge

no international experience

Appointing local agency

(local to the market) understand local cultures/relevant
contacts/experience

Centralising the effort

Saatchi & Saatchi claimed to be the first global advertising agency - ‘one
sight, one sound, one sell’
Personal selling

Generally the marcom thrust where

wages are low

Philip Morris in Venezuela employs 300 sales people and assistants

Linguistic pluralism exists e.g India

Business etiquette

lateness is inexcusable in Hong Kong but is expected in India

banquets and frequent toasts in China

Negotiation strategies where bargaining varies between
cultures

Staffing the sales force

Personal selling through intermediaries

Government sponsored trade missions

International trade fairs

Consortium selling (airports/hospitals/etc)
Marketing of Services
•Services
•The extended marketing mix for services
•Elements of service
•People
•Processes
•Physical evidence
Services are distinguished from products
mainly because they are generally produced
at the same time as they are consumed,
and cannot be stored away or taken. An
enhanced marketing mix needs to be
deployed.
Services

Growth of service sector in advanced industrial societies

Market oriented trade with service organisations e.g.
internal markets

Marketing characteristics of services

intangibility

inseparability (cannot be separated from the provider)

heterogeneity (precise standardisation is difficult)

perishability (cannot be stored e.g. hotel rooms)

ownership (does not result in a property transfer)
The extended marketing mix for
services

People - the personnel

Process e.g. airlines

Physical evidence

Personal selling

Front line workers e.g. skills, attitude
People
•Appearance •Professionalism
•E.g. uniforms •E.g. doctors/police
•Attitude •Skills
•E.g. friendly v unhelpful •E.g. glass cutting
•Commitment •Numbers
•E.g. clergymen •E.g. enough waiters
•Behaviour •Discretion
•E.g. MacDonald’s •E.g. lawyers
 Processes
•Procedures •Information
•E.g. form filling •E.g. www.bbc.co.uk
•Policies •Capacity levels
•E.g. Argos 28 days • e.g. easyjet/Go
•Mechanisation •Speed/timing
•E.g. Package holidays •E.g. Trains
•Queuing •Accessibility
•E.g. one in front •Cashpoints
 Physical Evidence
Environment Facilities Tangible
Evidence
•Furnishings •Vans/aircraft •labels

•Colours •Uniforms •Tickets

•Ambience •Paperwork •Packaging

International Marketing Control
International Marketing Control

International context of control

Obtaining performance information

Principles of a control system.

Simple process of control

Control techniques

Effective control systems

Benchmarking

Balanced Scorecard
International Context of Control

Each international market is different, so strategies and
controls will vary

Distance, language differences and cultural variations cause
communications problems

Resentment from subsidiaries of HQ control

Local marketing plan will need to controls appropriate for
HQ and subsidiaries.
Obtaining Performance Information

Report

Standardised to allow comparison

Use common language

As frequently as necessary

Cover all HQ information needs

Meetings

Gathering of all. Take time and resources

Information Technology

Make control simpler and quicker
 Principles of a control system.

Aim to translate strategic plans into actions (Drummond and Ensor 2001).

Ensure that behaviour and operations conform to corporate objectives

Organisations need to measure, compare and analyse variances so that timely
corrections can be made

Effective control involves the measurement of inputs as well as outputs.

Control is important because:
1. ‘You can’t manage what you can’t measure’ adage
2. Gaining importance to measure ROI in marketing
3. Moves afoot to include branding in financial accounts.
Simple process of control

Set targets – quantified objectives and/or budgets.

Determine the method(s) of measurement

Measure the results at the end of each period

Compare results against the targets and identify
variances

Identify and implement any necessary corrective action.
Control Techniques

Financial analysis e.g. ratio analysis, variance analysis, cash flow,
monitoring capital expenditure.

Market analysis – I.e. market demand, market share, marketing
resources.

Sales analysis – e.g. sales targets, selling costs.

Physical resources analysis – analysis of plant and equipment
utilisation, other measures of productivity and product quality

Systems analysis – consider the effectiveness of implementation
and application of marketing resources.

Others. . . . . .
Benchmarking

‘Benchmark’ core operational standards against the very
best in business.

Process benchmarking – compare one process from within
the organisation to another.

Competitor benchmarking – compares performance in key
areas against that of competitors.

Others?
Balanced Scorecard

Assesses performance across a wider dimension other than just
financial performance. (tend to be backward looking)

Customer perspective – e.g. satisfaction and retention.

Internal perspective – e.g. employee behaviour, skills, quality.

Innovation and learning – e.g. idea generation, product
development.

The financial perspective – traditional financial measures. Takes a
shareholder’s perspective.
Thanx