Global marketing planning and organization

Increased importance of international strategic alliances Need for planning to achieve company goals Market entry strategies Learning objectives

Country, Climate, Language, media habits, age, income etc. - Ferrari Standardization, Globalization Vs Localization, local responsiveness, customization. Finance managers – Standardization Marketing – Customization. Nestle – 1. Think and plan long term 2. Decentralize 3. Stick to what you know. 4. Adapt to local tastes. Market segmentation argument

The trend back toward localization – Caused by the new efficiencies of customization – Made possible by the Internet – Increasingly flexible manufacturing processes From the marketing perspective customization is always best - Dell Global markets continue to homogenize and diversify simultaneously - Barbie – Best companies will avoid trap of focusing on country as the primary segmentation variable Global Marketing Management

Glocalization

When large market segments can be identified – Economies of scale in production and marketing – Black and Decker – Important competitive advantages for global companies Transfer of experience and know-how – Across countries through improved coordination and integration of marketing activities - Unilever Marketing globally – Ensures that marketers have access to the toughest customers - Japan – Market diversity carries with it additional financial benefits – Firms are able to take advantage of changing financial circumstances Benefits of Global Marketing

Planning = making goals and how to accomplish them. Planning for international markets is an attempt to manage the effects of outside uncontrollable factors on the firms strengths weakness objectives and goals in order to achieve the firms purpose. It commits resources to a country market to make things happen that might not happen otherwise. International Planning

Corporate – long term general goals Strategic – products, money, research, long and medium term goals Tactical – specific actions and allocation of resources to meet goals. Local level. Clear objectives and commitment are needed for a plan to be successful. Levels of planning

International Planning Process Exhibit 12.1

1. Are there identifiable market segments that allow for common marketing mix tactics across countries? 2. Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix? 3. Will adaptation costs allow profitable market entry? Adapting the marketing mix to target markets

An entry strategy into international market should reflect on analysis – Market characteristics Potential sales Strategic importance Strengths of local resources Cultural differences Country restrictions – Company capabilities and characteristics Degree of near-market knowledge Marketing involvement Management commitment Alternative Market-Entry Strategies (1 of 2)

Companies most often begin with modest export involvement A company has four different modes of foreign market entry – Exporting – Contractual agreements – Strategic international alliances – Direct foreign investments Alternative Market-Entry Strategies (2 of 2)

Alternative Market-Entry Strategies Exhibit 12.2

Indirect exporting: a company uses a trading company or export agent, to handle all the logistics of exporting its goods overseas, e.g. customer payments Direct exporting: products are typically exported to an intermediary located in the foreign country or handled through a domestic department or division. It also provides greater return and participation in marketing mix activities. Exporting

Contractual agreements – Long-term, – Nonequity association between a company and another in a foreign market Licensing – A means of establishing a foothold in foreign markets without large capital outlays – A favorite strategy for small and medium-sized companies – Legitimate means of capitalizing on intellectual property in a foreign market Contractual Agreement (1 of 3)

Franchising – Franchiser provides a standard package of products, systems, and management services – Franchise provides market knowledge, capital, and personal involvement in management – Expected to be the fastest-growing market-entry strategy Contractual Agreement (2 of 3)

Contract manufacturing or outsourcing: they provide the necessary technical specifications to a local company to manufacture or assemble products or parts of products. Many companies now solely focus on contract manufacturing. Contractual Agreement (3 of 3)

Partnerships between two or more parties in a particular market, allows companies to share risk through joint ownership of a newly created business entity. Partnering with a local company not only allows for greater participation in profits than the modes of entry previously discussed, but also allows the foreign company to learn about a new market with relatively lower financial and political risk. Joint ventures

Four characteristics define joint ventures: – JVs are established, separate, legal entities – The acknowledged intent by the partners to share in the management of the JV – There 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 Strategic International Alliances

Consortia – Similar to joint ventures and could be classified as such except for two unique characteristics Typically involve a large number of participants 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 Strategic International Alliances

With technological advances, falling trade barriers, and a growing belief that globalization is inevitable, companies have developed more flexible and innovative strategic partnerships. Airlines use global alliances through which they offer frequent fliers easier access to benefits, smoother international flight connections, and improved customer service. Strategic International Alliances

1. Acquisition/merger, where a company gains instant entry into the foreign market, with facilities, operations, relationships, expertise, and brand names 2.Greenfield investment, where a company creates a business entity from the ground up in the foreign country. Both are also referred to as FDI. Direct Foreign Investment

Factors that influence the structure and performance of direct investments – Timing – The growing complexity and contingencies of contracts – Transaction cost structures – Technology transfer – Degree of product differentiation – The previous experiences and cultural diversity of acquired firms – Advertising and reputation barriers Direct Foreign Investment

Company owned stores Joint ventures Franchises Zara

Key high profile countries with high growth prospects and low economic and political risk. E.g. France Took up many resources, especially management time. 231 stores in 18 countries Zara -FDI

Countries that are small, risky or have large cultural differences or administrative barriers e.g. Middle-east, Iceland. In return for selling their product and a fee of 5-10% of sales Zara offered HR, training, logistics and returns. 31 Franchises in 12 countries Zara - Franchising

Key markets with barriers to direct entry, usually access to prime retail space being the main barrier. E.g. Germany and Japan They made a joint venture with a mall owner in Germany and a distributor in Japan. Zara –Joint Ventures

1.Give 3 benefits of global marketing? 2.Why would a marketer exclude a country after Phase 1 or 2 of the marketing plan? 3.In what kind of situations would a joint venture or licensing be suitable? Questions

Visit the websites of Ford and Nestle. Compare their international involvement and strategies towards international markets. How do they differ? Internet task