Global Marketing Management: Planning and Organization Chapter 11 With their domestic market crowded with competitors, Yahoo!, Lycos, America Online (AOL), and others are rushing to establish their brands in Europe, Asia, and Latin America before local competitors can create dominant franchises of their own. The top U.S. players face tough home-grown competitors, who often have a better sense of local culture and Internet styles. In many countries, the dominant telephone companies offer portals, giving them a big leg up because customers are automatically sent to their home pages when they log on. Germany’s leading portal, T-Online, is run by Deutsche Telekom. In France, No. 1 Wanadoo is operated by France Telecom. U.S. portals risk being viewed as digital colonists trying to flex their muscles around the world, according to industry analysts. Many advise that American companies hoping to set up shop abroad are better served by forming partnerships with local companies that understand the culture. This chapter discusses global marketing management, competition in the global marketplace, strategic planning, and alternative market-entry strategies. It also identifies the elements that contribute to an effective international or global organization. Follow along with the slides (or open book) as we cover Chapter 10.

Global Perspective Global Gateways Multinational companies Confronted with increasing global competition for expanding markets Changing their marketing strategies and altering their organizational structure Nearly 75% of North American and European corporations are revamping their business processes Smaller companies More flexible May enable them to reflect the demands of global markets and redefine programs more quickly

Global Marketing Management 1970s – “standardization versus adaptation” 1980s – “global integration versus local responsiveness” 1990s – “global integration versus local responsiveness” 2000s – “ Think global Act local”

The Planning Process Phase 1 – Preliminary analysis and screening Matching Company and Country Needs. Phase 2 – Adapting marketing mix to target markets Phase 3 – Developing the marketing plan Phase 4 – Implementation and control

International Planning Process Exhibit 11.1 The process illustrated in Exhibit 11.1 offers a systematic guide to planning for the multinational firm operating in several countries.

Global Marketing Management 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 Global markets continue to homogenize and diversify simultaneously Best companies will avoid trap of focusing on country as the primary segmentation variable

The Nestle Way – Evolution Not Revolution Nestle – world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water Nestle strategy Think and plan long term Decentralize Stick to what you know Adapt to local tastes Long-term strategy works for Nestle Because the company relies on local ingredients Markets products that consumers can afford

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

Planning for Global Markets Planning is the job of making things happen that might not otherwise occur Planning allows for: Rapid growth of the international function Changing markets Increasing competition, and the Turbulent challenges of different national markets

Planning for Global Markets Planning is both a process and philosophy Relates to the formulation of goals and methods of accomplishing them Corporate planning Strategic planning Tactical planning Company objectives and resources Each new market requires A complete evaluation, including existing commitments, relative to the parent company’s objectives and resources Defining objectives clarifies the orientation of the domestic and international divisions, permitting consistent policies

Planning for Global Markets International commitment Commitment in terms of Dollars to be invested Personnel for managing the international organization Determination to stay in the market long enough to realize a return in investments. The degree of commitment to an international marketing cause reflects the extend to a company’s involvement

Alternative Market-Entry Strategies 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 Exhibit 11.2 .

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

Exporting Exporting accounts for some 10% of global activity Direct exporting – the company sells to a customer in another country Indirect exporting – the company sells to a buyer (importer or distribution) in the home country, who in turn exports the product

Exporting The Internet Direct sales Initially, Internet marketing focused on domestic sales 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 industrial products

Contractual Agreement 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 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 Two types of franchise agreements Master franchise Gives the franchisee the rights to a specific area with the authority to sell or establish subfranchises Licensing

Strategic International Alliances A strategic international alliance (SIA) A business relationship established by two or more companies to cooperate out of mutual need To share risk in achieving a common objective SIAs are sought as a way to shore up weaknesses and increase competitive strengths Firms enter SIAs for several reasons Opportunities for rapid expansion into new markets Access to new technology More efficient production and innovation Reduced marketing costs Strategic competitive moves Access to additional sources of products and capital

Building Strategic Alliances Exhibit 11.3

Strategic International Alliances Many companies entering SIAs To be in strategic position to be competitive To benefit from the expected growth in the single European market International joint ventures (IJVs) A partnership of two or more participating companies that have joined forces to create a separate legal entity 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

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

Organizing for Global Competition Devising a standard organizational structure is difficult Because organizations need to reflect a wide range of company-specific characteristics Companies are usually structured around one of three alternatives Global product divisions responsible for product sales throughout world Geographical divisions responsible for all products and functions within a given geographical area A matrix organization consisting of either of these arrangements With centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management

Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Approaches Exhibit 11.4

Locus of decision Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy Corporate headquarters International headquarters Regional levels National levels Local levels Tactical decisions normally should be made at lowest possible level

Centralized Versus Decentralized Organizations Most organizational patterns of multinational firms fit into one of three categories Centralized Regionalized Decentralized No single traditional organizational plan is adequate for today’s global enterprise Seeking to combine the economies of scale of a global company with the flexibility and marketing knowledge of a local company

Summary To keep abreast of the competition and maintain a viable position for increasingly competitive markets, a global perspective is necessary Cost containment, customer satisfaction, and a greater number of players mean that every opportunity to refine international business practices must be examined in light of company goals

Summary Important avenues to global marketing that must be implemented in the planning and organization of global marketing management Collaborative relationships Strategic international alliances Strategic planning Alternative market-entry strategies