Summer 2008

INTERNATIONAL MARKETING MKTG3417

Professor: Bob Carpenter

Summer 2008

Todays Agenda

Career impact of Emerging Markets Discussion Nestle Case Solution Strategies for International Expansion Group Project Work Assignments

Summer 2008

What about your Career?

How will Multinational Market Regions and the Emerging markets change in next ten years? Give me at least five implications of

1) 2) 3) 4) 5)

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Nestle Infant Formula Define a problem(s) Sort relevant and irrelevant information Separate fact from opinion Interpret and analyze information Come to reasoned decision and course of action Communicate your thoughts clearly and persuasively to others during class discussions

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1. How global marketing management differs from international marketing management

2. The increasing importance of international strategic alliances

3. The need for planning to achieve company goals

4. The important factors for each alternative market-entry strategy

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Introduction

Increasingly firms are entering foreign markets Executing a global perspective requires planning, organization, and willingness to try new approaches such as engaging in collaborative relationships and redefining the scope of company operations Important elements of this process are global marketing management, competition in the global marketplace, strategic planning, and alternative market-entry strategies

Summer 2008

Global Marketing Management

Global Marketing Management: An Old Debate and a New View
Global Marketing Management thought has undergone substantial revision In the 1970s the argument was framed as standardization vs. adaptation In the 1980s it was globalization vs. localization or Think local, act local In the 1990s it was global integration vs. local responsiveness The fundamental question is whether the global homogenization of consumer tastes allowed global standardization of the marketing mix

Summer 2008

Global Marketing Management

As global markets continue to homogenize and diversify simultaneously, the best companies will avoid the trap of focusing on country as the primary segmentation variable Other segmentation variables are often more important e.g. climate, language group, media habits, age, or income

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The Nestle Way

Nestl sells more than 8,500 products produced in 489 factories in 193 countries Nestl is the worlds biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water
The Nestl way is to dominate its markets; its strategy can be summarized in four points: think and plan long term decentralize stick to what you know, and adapt to local tastes

(1) (2) (3) (4)

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Benefits of Global Marketing

When large market segments can be identified:

Economies of scale in production and marketing can be important competitive advantages for global companies Unifying product development, purchasing, and supply activities across several countries it can save costs Transfer of experience and know-how across countries through improved coordination and integration of marketing activities Diversity of markets by spreading the portfolio of markets served brings an important stability of revenues and operations to many global firms

Summer 2008

Global Branding Strategies

Brands are all about trust
Global branding is becoming one of the key drivers of firm growth in markets throughout the world Effective branding can increase returns by as much as five percent By using a well-organized branding strategy, companies can differentiate themselves from competitors and thereby become less vulnerable Global branding is also a strong factor in building customer loyalty Branding allows the communications between company and customers to be homogenized, thus reducing the need to customize messages and images

Summer 2008

Yum! Brands video Watch for balance between global brands/products and localization.

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The Planning Process

Phase 1: Preliminary Analysis and Screening Matching Company and Country Needs Phase 2: Adapting the Marketing Mix to Target Markets Phase 3: Developing the Marketing Plan
(a) The answers to three major questions are sought in Phase 2: Are there identifiable market segments that allow for common marketing mix tactics across countries? Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix? Will adaptation costs allow profitable market entry?

(b)

Phase 4: Implementation and Control

(c)

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International Planning Process
The planning process illustrated here offers a systematic guide to planning for the multinational firm operating in several countries

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Expand or not Know thyself
Country Environment
Industry Competitors Internationaliz ation Growth Company Culture Objectives Skills Etc: Product Nature Differentiation Technology

Market Evaluation
Segmentation Variables Country Consumer type Climate Other Market Selection Country Screening Segment data Opportunity Assessment Demand Competitors Other markets

Mode of Entry
Exporting Indirect Direct Internet Contractual Licensing Franchising Contract Manufacturing Other Alliances Joint Ventures Consortia Strategic alliances Direct Invest Greenfield M&A

Overall Strategy
Scope Waterfall Sprinkler Sequencing

Marketing Mix
Product Positioning Branding Style/Features Packaging Services Standards
Place Channels Scope Logistics Price Price strategy Trade margins Promotion Advertising Selling Promotions Publicity & PR

Timing
Coordination Cross market optimization

International Planning Process

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Country Selection Things to consider

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Countries

Brazil China Germany India Saudi Arabia Senegal

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Product Electric Razor from Mexico

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Product Mexican Food Franchise from Mexico

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Product Seadoo from Canada

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Alternative Market-Entry Strategies

The choice of entry strategy depends on:
market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions) company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and commitment that management is prepared to make

2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

Alternative Market-Entry Strategies

A company has four different modes of foreign market entry from which to select:

exporting contractual agreements strategic alliances direct foreign investment

Summer 2008

Alternative Market-Entry Strategies

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Exporting
Exporting can be either direct or indirect In direct exporting the company sells to a customer in another country In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product The Internet is becoming increasingly important as a foreign market entry method

Summer 2008

Contractual Agreements
Contractual agreements are long-term, non-equity associations between a company and another in a foreign market
Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills Contractual forms of market entry include: (1) Contract Manufacturing (2) Licensing: A means of establishing a foothold in foreign markets without large capital outlays is licensing of patent rights, trademark rights, and the rights to use technological processes. (3) Franchising: In licensing the franchisor provides a standard package of products, systems, and management services, and the franchisee provides market knowledge, capital, and personal involvement in management. Franchising permits flexibility in dealing with local market conditions and provides the parent firm with reasonable degree of control.

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Strategic International Alliances

Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective
SIAs are sought as a way to shore up weaknesses and increase competitive strengths SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and Qantas

Summer 2008
Building Strategic Alliances

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International Joint Ventures

International joint ventures (IJVs) have been used increasingly since 1970s IJVs are used as a means of lessening political and economic risks by the amount of the partners contribution to the venture JVs provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in an acquisition of an existing company A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity Joint ventures are different from minority holdings by an MNC in a local firm

Summer 2008

International Joint Ventures

1. 2. 3. 4. Four factors are associated with joint ventures: JVs are established, separate, legal entities; they acknowledge intent by the partners to share in the management of the JV; they are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals; equity positions are held by each of the partners.

2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

Consortia
Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

(1) They typically involve a large number of participants, and (2) They frequently operate in a country or market in which none of the participants is currently active
Consortia are developed to pool financial and managerial resources and to lessen risks.

Summer 2008

Direct Foreign Investment

A fourth means of foreign market development and entry is direct foreign investment
Companies may manufacture locally to capitalize on low-cost labour, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry Firms may either invest in or buy local companies or establish new operations facilities

2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

FDI

FDI Honda Video

Summer 2008

Administration

Read Chapter 10 and 11 Test #2 Moved to Tuesday