Global Marketing Management Planning and Organization Chapter 11 Global Marketing Management Planning and Organization McGraw-Hill/Irwin International Marketing, 13/e © 2007 The McGraw-Hill Companies, Inc., All Rights Reserved.

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. Transfer of experience and know-how across countries through improved coordination and integration of marketing activities. Marketing globally also ensures that marketers have access to the toughest customers. Diversity of markets served carries with it additional financial benefits. Firms that market globally are able to take advantage of changing financial circumstances.

Planning for Global Markets Planning is the systemized way of rating future. Planning allows for rapid growth of the international function, changing markets, increasing competition, and the turbulent challenges of different national markets. Planning relates to the formulation of goals and methods of accomplishing them, so it is both a process and philosophy. Corporate planning – long-term generalized goals for the organization – corporate philosophy, international commitment etc. Strategic planning – Dealing with products, capital and research and long/short term allocation of strategic resources. Tactical planning – specific actions and tactics in local markets. Successful planning is evaluating company objectives, including management’s commitment and philosophical orientation to international business.

Planning for Global Markets (cont’d) Company objectives and resources Each new market can require 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. 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

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 Phase 4: Implementation and Control

International Planning Process Insert Exhibit 11.1

Alternative Market-Entry Strategies An entry strategy into the international market should reflect on analysis of market characteristics such as: Potential sales Strategic importance Strengths of local resources Cultural differences Country restrictions Companies most often begin with modest export involvement. A company has four different modes of foreign market entry from which to select: 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. The Internet 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 industrial products.

Indirect exporting and Importing No involvement or commitment. Very little control. Less Market Knowledge and know-how. No opportunity to develop relations with foreign customers or markets.

Direct exporting and Importing Knowledge and control. Relationships and growth opportunities. Learn about markets and competitive advantages. Obstacles in identifying segments, promotions etc.

International Intermediaries. For initial market entry or long term strategic collaboration Export management companies - EMC’s As an agent - commission based, establishing contacts and developing sales strategies. As a distributor- takes title, more risk, higher profits.

Services Provided by EMCs Research foreign markets for a client’s products Travel overseas to find the best method of distributing the product Appoint distributors or commission representatives, frequently within an already existing network Exhibit the client’s products at international trade shows Handle the routine details in getting the product to the foreign customer – export declarations, shipping & customs documents, insurance, banking, and instructions for export packing and marking Prepare advertising/sales literature & adapt it to overseas requirements Correspond in the necessary foreign language Handle LOC details

Trading companies. Sogoshosha - Mitsubishi, Mitsui, etc. Importing, exporting, countertrading, investing, and manufacturing Resources, market knowledge, and economies of scale. Exist in several countries including Japan, Korea, Brazil, Turkey and U.S. U.S. encourages T.C. ; bank participation, relaxed antitrust provisions.

Sogo Shosha: Japanese Trading Companies The major sogo shosha are part of large corporate networks or keiretsu, which center on either a major bank or industrial group. There are hundreds of general trading companies in Japan, but the sixteen largest control the vast majority of Japan’s exports and imports. Websites that may help you better understand sogo shosha are: www.mitsui.com or www.misui.co.jp www.mitsubishi.com or www.mitsubishi.co.jp www.itochu.com or www.itochu.co.jp www.marubeni.com or www.marubeni.co.jp www.sumitomocorp.com or www.sumitomocorp.co.jp

Informal Cooperation & Contractual Agreements. Informal cooperation - No binding agreement, Exchange information, management knowhow, and personnel. Contractual agreements are long-term, nonequity association between a company and another in a foreign market. Contractual agreements - Cross-marketing or R&D., Outsourcing, Licensing, Franchising, Contract manufacturing, Management Contract (turnkey operation). Cross-Marketing - E.g., Nestle and General Mills – Honey nut Cheerios and Golden Grahams made in US plants by GM and shipped in bulk to Europe for packaging by Nestle – Complimentary Marketing or Piggybacking. Outsourcing – General Motors buys cars and components from Daewoo; Siemens buys computers from Fujitsu.

Contractual Agreement - 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. Licensing - Patents, trademarks, copyrights, technology, technical knowhow, business skills. Less resources, less commitment, govt. regulations, test market, preempt market - requires little depth of market knowledge, can be put in place fairly quickly, is relatively little investment. Risks associated with Licensing - “Leakage” -- The dissipation of one’s proprietary advantage; Your reputation now depends on another’s performance; Creation of a new competitor.

Contractual Agreement (Franching) Franchising Franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management. Despite temporary setbacks, franchising is still 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

Franchising. Franchising - Unique product, systems (mgmt./Mktg. knowhow), brands or unique selling propositions. Capital, market knowledge, personal involvement. Manufacturer-retailer (car dealerships); Manufacturer-wholesaler (soft drink companies); and service firm-retailer (Fast food or hotels)

Strategic International Alliances 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. 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 Many companies also are entering SIAs to be in strategic position to be competitive and to benefit from the expected growth in the single European market.

Strategic International Alliances (continued) International Joint Ventures A joint venture is 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

Equity participation, Joint ventures. Equity participation - minority ownership in companies -strengths of partner (Ford owns 33.4% of Mazda). Joint Ventures - Govt. regulations, Special skills, Distribution System, Resources, Access to raw materials, Export base, Political Risk.

Strategic International Alliances (Consortia) Consortia are similar to joint ventures and could be classified as such except for two unique characteristics: They typically involve a large number of participants 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.

Direct Foreign Investment Factors that have been found to 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

“Global Acquisitions” Acquisition may make most sense when you want to…. Diversify your product line Access new technologies, skills, distribution channels Overcome barriers to entry (e.g., local content, quotas, subsidy) Reduce market/competitive risk Get immediate results (e.g., competitive response) Especially if your research and planning is sufficient to minimize the risks attending……… Ignorance  Over valuation (pay too much?) The high failure rates that usually attend cross-cultural deals

Organizing for Global Competition Because organizations need to reflect a wide range of company-specific characteristics, devising a standard organizational structure is difficult. Companies are usually structured around one of three alternatives: Global product divisions responsible for product sales throughout the 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

Organizing for Global Competition (cont’d) Locus of decision Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy. Centralized versus decentralized organizations An infinite number of organizational patterns fro the headquarters activities of multinational firms exist, but most 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.

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