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Chapter 1 Introduction to Global Marketing

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

IntroductionMarketing 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

Global Marketing Focuses resources on global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organizations home country

The International Marketing TaskForeign environment (uncontrollable) Political/legal forces

1Domestic environment (uncontrollable) (controllable)

Economic forces

71-5 Cultural forces

2

Political/ legal forces

Competitive structure Competitive Forces

Price Promotion

Product

7Channels of distribution

3

Environmental uncontrollables country market A Environmental uncontrollables country market B

6Geography and Infrastructure Level of Technology

Economic climate

5Structure of distribution

4

Environmental uncontrollables country market C

Copyright2002 by The McGraw-Hill Companies, Inc. All rights reserved.

Domestic environmentDomestic political decisions affecting marketing activities to foreign markets (e.g. Libya, Iraq, South Africa, China) Domestic economic climate (e.g. strength of domestic economy = possibilities to invest abroad, value of currency (weakness of US$)) Competition in home country

International environmentCultural, political and economic climates can change dramatically (e.g. China and Russia)

Reasons for Global MarketingGrowth Access to new markets and access to resources

Survival Against competitors with lower costs (due to increased access to resources) e.g. India and China

Or push and pull factors

Inititation of internationalization - Export motivesusually there are many factors which affect the companys decision to export in Hollensens book those factors are devided into two categories: proactive and reactive - they can also be called push and pull factors

Proactive motives

1. Profit and growth goals the possibility for a short term profit may be especially important to SMEs experiences from the profitability of export affect the companys attitude towards growing by the means of export (especially when you start to internationalize the perceptions about profitability may be far away form reality)

2. Managerial urge managerial urge is a motivation which reflects the desire of management towards global marketing activities often the managerial urge is simply a reflection of general entrepreneurial motivation - desire for continuous growth managerial attitudes play a critical role in determining the exporting activities of the firm

In SMEs export decisions may be the province of a single decision maker in LSEs decision making unit might be responsible for these decisions

these decisions are affected by the international background of the managers those who have more international experiences are more internationally minded 3. Technology competence / unique product

If a company produces goods or services which are unique, a competence edge exists which can result in major business success abroad one issue is how long such an advantage will continue? 4. Foreign market opportunities market opportunities act as stimuli only if the firm has or is capable of securing resources necessary to respond to the opportunities

in general decision makers are considering only a rather limited number of foreign market opportunities in planning their foreign market entry the market opportunities of similar overseas markets are explored first

5. Economies of scale the benefits of decreasing production costs / unit by increasing production has increased the interest of firms to penetrate to foreign markets to search for this advantage

6. Tax benefits

Reactive motives1. Competitive pressures a firm may fear losing domestic market share to competing firms that have benefited from economies of scale gained by global marketing activities further, it may fear losing foreign markets permanently to domestic competitors that decide to focus on these markets

Competitors are an important external factor stimulating internationalization (Coca-Cola & Pepsi) 2. Domestic market: small and saturated a company may be pushed into exporting because of a small home market potential if domestic markets are unable to provide sufficient economies of scale, export markets are automatically included in their market entry strategy a saturated domestic market has a similar effect (car manufacturers in USA)

3. Overproduction / excess capacity if domestic sales are below expectations => inventory can be above desired levels => with short-term price cuts export is started when domestic markets are normal, global marketing activities may be terminated (Canadian paper and pulp producers) 4. Unsolicited foreign orders many small companies have become aware of export market opportunities by accident (advertising, exhibitions etc.)

5. Extend sales of seasonal products seasonality in demand conditions may be different in domestic market from other international markets this can act as a stimulus for example to market skiing shoes to New Zealand during summer or harvesting machines to Argentina during winter 6. Proximity to international customers / psychological distance German firms established near Austrian border may not even perceive their marketing to Austria to be international

the same situation in Europe exists between Germany and parts of Switzerland, France and parts of Switzerland, France and part of Belgium, Sweden and parts of Finland, Netherlands and part of Belgium Between USA and Canada (partly with Mexico)

Overview of MarketingOne of the functional areas of a business that is distinct from finance and operations Primary tools in marketing are product, price, place, and promotion Marketing is an activity that comprises the firms value chain Current trend is to involve marketers in all value-related decisions called boundaryless marketing

Boundaryless MarketingGoal is to eliminate communication barriers between marketing and other business functional areas Properly implemented it ensures that a market orientation permeates all value creating activities

Goal of MarketingSurpass the competition at the task of creating perceived value for customers The Guide line is the value equation Value = Benefits/Price (Money, Time, Effort, Etc.)

Value Chain and Boundaryless Marketing

Competitive AdvantageSuccess over competition in industry at value creation Achieved by integrating and leveraging operations on a worldwide scale

GlobalizationGlobalization 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 nationstates 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 IndustriesAn industry is global to the extent that a companys 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

Competitive Advantage, Globalization and Global IndustriesFocus Concentration and attention on core business and competence Nestle 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 CocaCola or we leave it alone. This is focus.Helmut Maucher

Global Marketing: What it is and What it isntStrategy development comes down to two main issues similar to single country marketing Target market Marketing Mix

Global Marketing: What it is and What it isnt

Global Marketing: What it is and What it isntGlobal 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 AdaptationGlobalization (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 versus Adaptation

The Importance of Global MarketingFor US-based companies, 75% of sales potential is outside the US. About 90% of Coca-Colas operating income is generated outside the US.

For Japanese companies, 85% of potential is outside Japan. For German and EU companies, 94% of potential is outside Germany.

Environmental Adaptation NeededDifferences are in the uncontrollable environment of international marketing Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution)

Continuum Adaptation (of Marketing Mix) Standardization (of Marketing Mix)

INFLUENCED BY 5 ENVIRONMENTAL FACTORS

Environmental adaptationTo adapt marketing programs to foreign ma