Introduction to Global Marketing

Marketing: A Universal Discipline Marketing (1): the process of focusing the resources & objectives of an organization on environmental opportunities & needs Marketing (2): a set of concepts, tools, theories, practices, procedures, & experiences Although marketing is a universal discipline, marketing practice varies from country to country

The Marketing Concept Concept has chanced dramatically 1950’s: 1960’s: Focus on products 1960’s: Focus on customer orientation Development of marketing mix: product, price, place, promotion (4Ps)

The Marketing Concept 1990’s: Focus on customer in the context of the broader external environment Competition, government policy & regulation Focus on stakeholder value employees, customers, shareholders, society

The Marketing Concept Today...a new Era??? Two key tasks of marketing Focus on customer & his/her environment Create value for consumers & stakeholders Shift towards : Focus on managing strategic partnerships Positioning of firm in value chain to optimize value creation Profit as a measure of success, not an end in itself

What is Global Marketing? How is it different from regular marketing?

Introduction Global Marketing Marketing Focuses resources on global market opportunities and threats The main difference is the scope of activities ğ global marketing occurs in markets outside the organization’s home country Marketing Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals

Reasons for Global Marketing Survival Against competitors with lower costs (due to increased access to resources) Growth Access to new markets Access to resources

Global vs. “Regular” Marketing scope of activities are outside the home-country market

Key Elements: Customer Value Create value for customers by improving benefits or reducing price Improve the product Find new distribution channels Create better communications Cut monetary and non-monetary costs and prices Value = Benefits/Price

Key Elements: Competitive Advantage Goal: create competitive advantage through differentiation Advantage can exist in any element of a company’s offer It can be a real, tangible difference or a perceived difference One way to penetrate a new national market is to offer a superior product at a lower price

Competitive Advantage Success over competition in industry at value creation Competitive advantage is created through differentiation Achieved by integrating and leveraging operations on a worldwide scale Competitive advantage is measured relative to rivals in a given industry National or global competition Transformation of formerly local or national industries into global ones ğ is part of a broader process of “globalization”

Globalization “Globalization is the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before - in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, and cheaper than ever before.” Thomas Friedman

Global Industries A global industry ğ is one in which competitive advantage can be achieved by integrating and leveraging operations on a worldwide scale (M.Porter) An industry is global to the extent that a company’s industry position in one country is interdependent with its industry position in another country Indicators of globalization: Ratio of cross-border trade to total worldwide production Ratio of cross-border investment to total capital investment Proportion of industry revenue generated by companies that compete in key world regions

Degree of Industry Globalization Source: Farrell (2004), “Assesing Your Company’s Global Potential”, HBR, 82, 12.

Key Elements: Focus Goal: a concentration of attention on core business and competence Requirement to create customer value at a competitive advantage A viable way for small & medium sized companies to achieve dominant position in world market A clear focus on customer needs & wants

Competitive Advantage, Globalization and Global Industries Nestlé is focused. We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch…..We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus. Helmut Maucher , former chairman of Nestlé SA

Global Marketing: What It Is and What It Isn’t The discipline of marketing ğ universal Marketing practices ğ vary from country to country An important task in global marketing: learning to recognize the extent to which marketing plans and programs can be extended worldwide, the extent to which they must be adapted (global localization)

Global Marketing: What It Is and What It Isn’t The way a company deals with this task ğ reflection of its global marketing strategy (GMS) Strategy development comes down to 2 main issues similar to single country marketing Choosing a target market Developing a marketing mix

Global Marketing: What It Is and What It Isn’t

Global Marketing: What It Is and What It Isn’t Global marketing does not mean doing business in all of the 200-plus country markets Global marketing does mean widening business horizons to encompass the world in scanning for opportunity and threat

Standardization versus Adaptation Globalization (Standardization) Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing Global localization (Adaptation) Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation “Think globally, act locally”

Standardization vs. Adaptation The Faces of Coca-Cola around the World Arabic read right to left Chinese: “delicious/ happiness”

The Importance of Going Global For U.S. companies, 70% of world market potential for goods and services is outside the country Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America For Japanese companies, 90% of market potential is outside the country 94% of market potential is outside of Germany for its companies

Global Auto Industry Thousands of auto companies scattered around the globe in the early 20th century More than 500 of those producers were in the United States Today fewer than 20 major companies remain worldwide Toyota is the world’s most valuable car company and is eighth largest in revenue globally

Management Orientations How the company will respond to global marketing opportunities ğ will depend on management’s assumptions & beliefs about the nature of the world The world view of a company ğ by EPRG Framework Generally, 4 distinctive approaches dominating strategic thinking in international marketing

Management Orientations -EPRG Framework- Ethnocentric: Home country is superior, sees similarities in foreign countries Polycentric: Each host country is unique, sees differences in foreign countries Regiocentric: Sees similarities and differences in a world region; is ethnocentric or polycentric in its view of the rest of the world Geocentric: World view, sees similarities and differences in home and host countries Geocentric: World view, sees similarities and differences in home and host countries

Management Orientations Ethnocentric: Home country is superior, sees similarities in foreign countries Ethnocentric Orientation Characteristic of domestic & international companies Opportunities outside the home market are pursued by extending various elements of the marketing mix

Strategic Orientation 1. Ethnocentric or Domestic Marketing Extension Concept: Home country marketing practices will succeed elsewhere without adaptation; however, international marketing is viewed as secondary to domestic operations

Management Orientations Polycentric Orientation Characteristic of multinational companies Marketing mix is adapted by autonomous country managers Polycentric: Each host country is unique, sees differences in foreign countries

Strategic Orientation 2. Polycentric or Multi-Domestic Marketing Concept: Opposite of ethnocentrism Management of these multinational firms place importance on international operations as a source for profits Management believes that each country is unique and allows each to develop own marketing strategies locally

Management Orientations Regiocentric: Sees similarities and differences in a world region; is ethnocentric or polycentric in its view of the rest of the world Regiocentric or Geocentric Orientation Marketing opportunities are pursued by both extension & adaptation strategies in global markets Characteristic of global & transnational companies Geocentric: World view, sees similarities and differences in home and host countries

Strategic Orientation 3. Regiocentric: Sees the world as one market and develops a standardized marketing strategy for the entire world 4. Geocentric: Regiocentric and Geocentric are synonymous with a “Global Marketing Orientation” where a uniform, standardized marketing strategy is used for several countries, countries in a region, or the entire world

Management Orientations In geocentric orientation: Entire world is a potential market Strives for integrated global strategies Retains an association with the headquarters country Pursues serving world markets from a single country or sources globally to focus on select country markets Leads to a combination of extension and adaptation elements

Forces Affecting Global Integration and Global Marketing Restraining Forces Driving Forces

Forces Affecting Global Integration and Global Marketing Quality: Global and domestic companies may each spend 5 percent of sales on R&D but the global company has much more revenue from its markets. Global companies “raise the bar” for all industry competitors. Nissan, Matsushita, and Caterpillar have achieved world-class quality. World economic trends: Economic growth in key developing countries equals major market opportunities. Slowing growth in developed countries has compelled managers to look abroad. Rapid economic growth, in a country such as China, has caused policymakers to open markets to outsiders. Competition can strengthen domestic companies. Domestic companies seek more governmental protection if markets are not growing. Worldwide movement to free markets, deregulation, and privatization is another driving force. As independent private managers take over running businesses (steel, railroads, telephones, airlines, utilities, restaurants, nightclubs) from governments, they are likely to seek the best deals, regardless of the nationality of the supplier. Leverage: A company enjoys some type of advantage by virtue of the fact that it has experience in more than one country. Experience transfers mean that a company can leverage its experience in any part of the world. It can use management practices, strategies, products, advertising appeals, or sales or promotional ideas that have been test-marketed in one country or region and apply them in comparable markets. Because Chevron has drilled for oil under all conditions and recorded them, managers with a problem know how it has been handled in the past. Scale economies can be gained in manufacturing and by centralizing functional activities. Resource utilization means that a global companies can scan the entire world to identify people, money and raw material that will enable it to compete most effectively in world markets. Rising and falling “home country” currency is not an issue as the world is full of currencies and a global company seeks financial resources on the best available terms. It uses them where there is the best opportunity to serve a need at a profit. Global strategy is a design to create a winning offering on a global scale. A global strategy is built on an information system that scans the world business environment to identify opportunities, trends, threats, and resources. When opportunities are identified, the global company leverages its skills and focuses it resources to create superior value for customers and achieve competitive advantage. Driving Forces Regional economic agreements Market needs and wants Technology Transportation and communication improvements Product development costs Quality World economic trends Leverage Restraining Forces Management myopia Organizational culture National controls

Forces Affecting Global Integration and Global Marketing Driving Forces Regional economic agreements Market needs and wants Technology Transportation and communication improvements Product development costs Quality World economic trends Leverage Restraining Forces Management myopia Organizational culture National controls Opposition to globalization

Driving Forces Affecting Global Integration and Global Marketing Multilateral trade agreements Converging market needs and wants and the information revolution Transportation and communication improvements Product development costs

Driving Forces Affecting Global Integration and Global Marketing Quality R&D as a percent of sales World economic trends Global crisis Growing middle class in China, India, Brazil, etc. Rapid growth in China Movement to free markets worldwide

Driving Forces Affecting Global Integration and Global Marketing Leverage Experience transfers Scale economies Resource utilization Global strategy