1. Webster University Introduction to Global Strategic Planning & Global Market Expansion MRKT 5980

2. 8/8/2015 Webster University MRKT 5980 Page 2 Global Marketing “…the world is becoming more homogenous…” “…the world is becoming more homogenous…” “...distinctions between national markets are fading and may disappear…” “...distinctions between national markets are fading and may disappear…”

3. 8/8/2015 Webster University MRKT 5980 Page 3 Global Marketing Evolution Core Business Strategy Country A Country B Country C Country D Develop Core Business Strategy Internationalize the Strategy Globalize the Strategy Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved.

4. 8/8/2015 Webster University MRKT 5980 Page 4 Globalization Drivers Market Factors Market Factors new consumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliancesnew consumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliances Cost Factors Cost Factors avoiding cost inefficiencies and duplicated effortsavoiding cost inefficiencies and duplicated efforts Environmental Factors Environmental Factors reduced governmental barriers, rapid technological evolutionreduced governmental barriers, rapid technological evolution Competitive Factors Competitive Factors rapid product innovation, introduction, distributionrapid product innovation, introduction, distribution

5. 8/8/2015 Webster University MRKT 5980 Page 5 The Strategic Planning Process Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed. Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed. The Strategic Business Unit The Strategic Business Unit Based on product market similaritiesBased on product market similarities Similar needs or wants to be met Similar needs or wants to be met Similar end user customers to be targeted Similar end user customers to be targeted Similar products or services used to meet needs of specific customers Similar products or services used to meet needs of specific customers

6. 8/8/2015 Webster University MRKT 5980 Page 6 The Strategic Planning Process Assessment and Adjustment of Core Strategy Market/Competitive Analysis - Internal Analysis Assessment and Adjustment of Core Strategy Market/Competitive Analysis - Internal Analysis Formulation of Global Strategy Choice of Target Countries, Segments, and Competitive Strategy Formulation of Global Strategy Choice of Target Countries, Segments, and Competitive Strategy Development of Global Marketing Program Implementation Organizational Structure - Control Implementation Organizational Structure - Control Global Strategy Formulation

7. 8/8/2015 Webster University MRKT 5980 Page 7 Market and Competitive Analysis First, understand the structure of the global market industry; the common features of customer requirements and choice factors. First, understand the structure of the global market industry; the common features of customer requirements and choice factors. Internal analysis Internal analysis Examine the readiness and capability of the firm to undertake strategic moves with its current resources.Examine the readiness and capability of the firm to undertake strategic moves with its current resources.

8. 8/8/2015 Webster University MRKT 5980 Page 8 Formulating Global Marketing Strategy Formulation begins with a series of strategic decisions Formulation begins with a series of strategic decisions Choice of Competitive Strategy Choice of Competitive Strategy Cost leadershipCost leadership DifferentiationDifferentiation FocusFocus Country-Market Choice Country-Market Choice Concentration or diversificationConcentration or diversification Factors in country markets selectionFactors in country markets selection The stand-alone attractiveness of the market The stand-alone attractiveness of the market Global strategic importance of the market Global strategic importance of the market Possible synergies offered by the market Possible synergies offered by the market

9. 8/8/2015 Webster University MRKT 5980 Page 9 Competitive Strategies Cost Leadership Broad Differentiation Source of Competitive Advantage Low CostDifferentiation Industry-wide Single Segment Competitive Scope Focus SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.

10. 8/8/2015 Webster University MRKT 5980 Page 10 Bases for Global Market Segmentation Environmental Variables Environmental Variables Marketing Management Variables Marketing Management Variables Geographic Variables Geographic Variables Political Variables Political Variables Economic Variables Economic Variables Cultural Variables Cultural Variables Promotion Variables Promotion Variables Product Variables Product Variables Price Variables Price Variables Distribution Variables Distribution Variables Bases for International Market Segmentation

11. 8/8/2015 Webster University MRKT 5980 Page 11 Global Marketing Program Development Development Decisions Development Decisions Product offeringProduct offering The degree of standardization and adaptation in the product offering. The degree of standardization and adaptation in the product offering. The marketing approachThe marketing approach The marketing program beyond the product variable. The marketing program beyond the product variable. The location and extent of value-adding activitiesThe location and extent of value-adding activities Pooling production. Pooling production. Exploiting factor costs or capabilities. Exploiting factor costs or capabilities. Strategic alliances. Strategic alliances. Concurrent engineering. Concurrent engineering. Competitive moves to be madeCompetitive moves to be made Cross-subsidization using resources accumulated in one market to wage a competitive battle in another. Cross-subsidization using resources accumulated in one market to wage a competitive battle in another.

12. 8/8/2015 Webster University MRKT 5980 Page 12 Implementing Global Marketing Success will come from a balance between local and regional / global concerns. Success will come from a balance between local and regional / global concerns. “Think globally, act locally” is the operative phrase for global marketers competing in country markets. “Think globally, act locally” is the operative phrase for global marketers competing in country markets. Product choices should consider individual markets as well as transfer products from one region to another. Product choices should consider individual markets as well as transfer products from one region to another.

13. 8/8/2015 Webster University MRKT 5980 Page 13 Global Marketing Pitfalls to Avoid Insufficient local market research. Insufficient local market research. The tendency to over standardize the product. The tendency to over standardize the product. Inflexibility in planning and implementation. Inflexibility in planning and implementation. The “Not-Invented-Here” syndrome (NIH). The “Not-Invented-Here” syndrome (NIH). How to avoid the NIH syndromeHow to avoid the NIH syndrome Ensure that local managers participate in the development of global brand marketing strategies. Ensure that local managers participate in the development of global brand marketing strategies. Encourage local managers to develop ideas for regional or global use. Encourage local managers to develop ideas for regional or global use.

14. 8/8/2015 Webster University MRKT 5980 Page 14 Localizing Global Marketing Achieving a balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy. Achieving a balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy.

15. 8/8/2015 Webster University MRKT 5980 Page 15 Localizing Global Marketing Management processes Management processes Enhance the global transfer of communications.Enhance the global transfer of communications. Interchange personnel to gain experience abroad.Interchange personnel to gain experience abroad. Headquarters should coordinate and leverage resources.Headquarters should coordinate and leverage resources. Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands.Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands. Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.

16. 8/8/2015 Webster University MRKT 5980 Page 16 Localizing Global Marketing Organization structures Organization structures The shift to global account management.The shift to global account management. Corporate culture Corporate culture The world is not one single market.The world is not one single market. Plan and execute programs on a worldwide basis.Plan and execute programs on a worldwide basis. A global Identity favors no specific country.A global Identity favors no specific country.

17. 8/8/2015 Webster University MRKT 5980 Page 17 Foreign Investments Firms invest to enter markets or assure themselves of sources of supply. Firms invest to enter markets or assure themselves of sources of supply. Foreign direct investment Foreign direct investment An equity investment to create or expand a permanent interest in a foreign enterprise.An equity investment to create or expand a permanent interest in a foreign enterprise. Portfolio investment Portfolio investment The purchase of stocks and bonds internationally.The purchase of stocks and bonds internationally. Major foreign investors Major foreign investors More than 45,000 multinational corporations with 280,000 affiliates globally.More than 45,000 multinational corporations with 280,000 affiliates globally. The terms “foreign” and “domestic” may no longer apply.The terms “foreign” and “domestic” may no longer apply.

18. 8/8/2015 Webster University MRKT 5980 Page 18 Reasons for Foreign Direct Investment Marketing factors Marketing factors Growth and profit motivations.Growth and profit motivations. Circumventing government-erected barriers to trade.Circumventing government-erected barriers to trade. Access to low-cost resources and supply.Access to low-cost resources and supply. Local customers preference for domestic goods and services.Local customers preference for domestic goods and services. Attempts to obtain low-cost resources and ensure their supply.Attempts to obtain low-cost resources and ensure their supply.

19. 8/8/2015 Webster University MRKT 5980 Page 19 Categories of International Firms Resource seekers Resource seekers are searching for natural and human resources.are searching for natural and human resources. Market seekers Market seekers are searching for better opportunities to enter or expand within markets.are searching for better opportunities to enter or expand within markets. Efficiency seekers Efficiency seekers are attempting to obtain the most economic sources of production.are attempting to obtain the most economic sources of production.

20. 8/8/2015 Webster University MRKT 5980 Page 20 Reasons for Foreign Direct Investment Derived demand Derived demand results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market.results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market. Government incentives Government incentives Fiscal incentivesFiscal incentives tax holidays, allowances, credits and rebates. tax holidays, allowances, credits and rebates. Financial incentivesFinancial incentives special funding for land or buildings, loans and guarantees, wage subsidies. special funding for land or buildings, loans and guarantees, wage subsidies. Non-financial incentivesNon-financial incentives guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure. guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure.

21. 8/8/2015 Webster University MRKT 5980 Page 21 Foreign Direct Investors Positive perspectives Positive perspectives Bring in capital, economic activity, and employment.Bring in capital, economic activity, and employment. Transfer technology and managerial skills.Transfer technology and managerial skills. Competition, market choice, and competitiveness are enhanced.Competition, market choice, and competitiveness are enhanced. Negative perspectives Negative perspectives Drain resources from host countries.Drain resources from host countries. Starve smaller capital markets.Starve smaller capital markets. Discourage local technology development.Discourage local technology development. Bring in outmoded technology.Bring in outmoded technology. Create new competition for local firms.Create new competition for local firms.

22. 8/8/2015 Webster University MRKT 5980 Page 22 Types of Ownership Ownership patterns may be based on past experiences with similar ownership models. Ownership patterns may be based on past experiences with similar ownership models. Full ownership Full ownership Full control, full assumption of all risks.Full control, full assumption of all risks. May be desirable, but is not necessary for success internationally.May be desirable, but is not necessary for success internationally. Joint ventures Joint ventures Shared control, shared investment risks.Shared control, shared investment risks. Reasons for joint ventures:Reasons for joint ventures: governmental pressure to join with local partners. governmental pressure to join with local partners. mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers. mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.

23. 8/8/2015 Webster University MRKT 5980 Page 23 Joint Ventures ADVANTAGES Pooling of resources Pooling of resources Better relationships with local organizations Better relationships with local organizations Knowledge the partner brings of the local market Knowledge the partner brings of the local market Minimizing exposure risk of long-term capital Minimizing exposure risk of long-term capital Maximizing leverage of invested capital Maximizing leverage of invested capitalDISADVANTAGES Different levels of control are permitted or required Different levels of control are permitted or required Difficulty in maintaining the relationship Difficulty in maintaining the relationship Disagreements over business decisions Disagreements over business decisions Disagreements over profit accumulation, and distribution (profit repatriation) Disagreements over profit accumulation, and distribution (profit repatriation) Recommendations for joint ventures Find the right partner. Negotiate the joint venture agreement carefully. Maintain flexibility to adjust to changing market conditions.

24. 8/8/2015 Webster University MRKT 5980 Page 24 Types of Ownership… continued Strategic alliances Strategic alliances “…more than the traditional customer-vendor relationship, but less than an outright acquisition.”“…more than the traditional customer-vendor relationship, but less than an outright acquisition.” Government consortia Government consortia Public-private relationship in a specific project.Public-private relationship in a specific project. Typically government supported or subsidized.Typically government supported or subsidized.

25. 8/8/2015 Webster University MRKT 5980 Page 25 Complementary Strengths Create Value SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com.

26. 8/8/2015 Webster University MRKT 5980 Page 26 Contractual Arrangements Cross marketing Cross marketing The parties agree to carry out activities which are complementary and non- competitive.The parties agree to carry out activities which are complementary and non- competitive. Contract manufacturing Contract manufacturing An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development.An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development. Management contracting Management contracting A supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is functionally important to the client.A supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is functionally important to the client.

27. 8/8/2015 Webster University MRKT 5980 Page 27 Management Contracting Advantages CLIENT ADVANTAGES Provide organizational skills not locally available. Provide organizational skills not locally available. Immediate availability of skills. Immediate availability of skills. Management assistance and support that is not available locally. Management assistance and support that is not available locally. SUPPLIER ADVANTAGES Lower risk because no equity capital is at stake. Lower risk because no equity capital is at stake. Exercise large amounts of operational control. Exercise large amounts of operational control. The strategic advantage of being on the “inside”. The strategic advantage of being on the “inside”. Opportunity to commercialize “know- how”. Opportunity to commercialize “know- how”. Using experienced staff to offset business fluctuations. Using experienced staff to offset business fluctuations.

28. 8/8/2015 Webster University MRKT 5980 Page 28 Management Contracting Risks Risks to the client Risks to the client Over-dependence on the supplier.Over-dependence on the supplier. Loss of control to the supplier.Loss of control to the supplier. Risks to the contractor Risks to the contractor Bidding without fully detailed insight into actual costs of delivering the service.Bidding without fully detailed insight into actual costs of delivering the service. The effects of the loss or termination of the contract and resulting personnel problems.The effects of the loss or termination of the contract and resulting personnel problems.