Chap11 Global Marketing Management

8/13/2019 Chap11 Global Marketing Management

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Chapter 11

14thEdition

Philip R. Cateora

Mary C. Gilly

John L . Graham

Global Marketing Management:

Planning and OrganizationChapter 11


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Chapter Learning Objectives

1. How global marketing management differsfrom international marketing management

2. The increasing importance of internationalstrategic alliances

3. The need for planning to achieve companygoals

4. The important factors for each alternative market-entry strategy


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Introduction

Increasingly firms are entering foreign markets

Acquiring a global perspective requires

execution requires planning, organization, and

a willingness to try new approachessuch as

engaging in collaborative relationships

This chapter discusses global marketing

management, competition in the global

marketplace, strategic planning, and alternativemarket-entry strategies


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Global Marketing Management

Global Marketing Management thought has

undergone substantial revision

In the 1970s the argument was framed as

standardization vs. adaptation

In the 1980s it was globalization vs.

localization or Think local, act local

In the 1990s it was global integration vs.

local responsiveness

The basic issue is whether the global

homogenization of consumer tastes allowed

global standardization of the marketing mix

Global Marketing Management: An Old Debate and a New View


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The Nestle Way

The Nestl way is to dominate itsmarkets can be summarized in four

points:

(1) think and plan long term

(2) decentralize(3) stick to what you know, and

(4) adapt to local tastes

Nestl sells more than 8,500 products produced in 489factories in 193 countries

Nestl is the worlds biggest marketer of infant formula,powdered milk, instant coffee, chocolate, soups, and mineralwater


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Advantages of Global Marketing

Economies of scale in production and marketing can be

important competitive advantages for global companies

Unifying product development, purchasing, and supply

activities across several countries it can save costs

Transfer of experience and know-how across countries through

improved coordination and integration of marketing activities

Diversity of markets by spreading the portfolio of markets

served brings an important stability of revenues and operations

to many global firms

The merits of global marketinginclude:


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Disadvantages of Global Marketing

Differences in consumer needs, wants, and usage patterns for

products

Differences in consumer response to marketing mix elements

Differences in brand and product development and the

competitive environment

Differences in the legal environment, some of which may

conflict with those of the home market

Differences in administrative procedures

The demerits of global marketinginclude:


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Planning for Global Markets

Structurally, planning may be viewed as

(1) corporate, (2) strategic, or (3) tactical

Planning is a systematized way of relating to the future

It is an attempt to manage the effects of external, uncontrollable factors onthe firms strengths, weaknesses, objectives, and goals to attain a desired end

International corporate planning is essentially long term, incorporatinggeneralized goals for the enterprise as a whole

Strategic planning is conducted at the highest levels of management and

deals with products, capital, and research, and long- and short-term goals ofthe company

Tactical planning, or market planning, pertains to specific actions and to theallocation of resources used to implement strategic planning goals in specificmarkets


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The Planning Process

Phase 1: Preliminary Analysisand ScreeningMatchingCompany and Country Needs

Planning, which offers a systematic guide to planning for the multinationalfirm operating in several countries, includes the following 4 phases:

Phase 2: Adapting theMarketing Mix to TargetMarkets

Phase 3: Developing the

Marketing Plan

Phase 4: Implementation andControl

The answers to three major

questions are sought in Phase 2:

(a) Are there identifiable market

segments that allow for common

marketing mix tactics across

countries?

(b) Which cultural/environmental

adaptations are necessary for

successful acceptance of the

marketing mix?

(c) Will adaptation costs allow

profitable market entry?


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The planning process illustrated in Exhibit 11.1 below offers a systematic guide to planning for the

multinational firm operating in several countries


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Foreign Market-Entry Strategies

Market Size and Growth

Risk Government Regulations

Competitive Environment

Local Infrastructure

Company Objectives Need for Control

Internal Resources, Assets and Capabilities

Flexibility

When a company makes the commitment to go international, itmust choose an entry strategy

The choice of entry strategy depends on:


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Alternative Market-Entry Strategies

exporting

contractual agreements

strategic alliances, and

direct foreign investment

Import regulations may be imposed to protect health, conserveforeign exchange, serve as economic reprisals, protect homeindustry, or provide revenue in the form of tariffs

A company has four different modes of foreign market entryfrom which to select:


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Exporting

Exporting can be either direct or

indirect In direct exporting the company sells to

a customer in another country

In contrast, indirect exporting usually

means that the company sells to abuyer (importer or distributor) in the

home country who in turn exports the

product

The Internet is becoming increasingly

important as a foreign market entry

method


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EXPORTING AS AN ENTRY STRATEGY

Indirect Exporting

Domestic Intermediary

Direct Exporting Independent Distributor Vs. Sales

Subsidiary

The Company Owned SalesOffice (Foreign Sales Subsidiary)


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FOREIGN PRODUCTION ASAN ENTRY STRATEGY

Licensing

Reasons for Licensing

Disadvantages of Licensing


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LICENSING Licensor and the licensee

Benefits:

Appealing to small companies that lack

resourcesFaster access to the market

Rapid penetration of the global markets


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LICENSING

Disadvantages:

Other entry mode choices may be affected

Licensee may not be committed

Lack of enthusiasm on the part of a licensee

Biggest danger is the risk of opportunism

Licensee may become a future competitor


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LICENSING

How to seek a good licensing agreement:

Seek patent or trademark protection

Thorough profitability analysis

Careful selection of prospective licenseesContract parameter (technology package,

use conditions, compensation, andprovisions for the settlement of disputes)


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FR NCHISING

Franchisor and the franchisee

Master franchising

Benefits:

Overseas expansion with a minimum investmentFranchiseesprofits tied to their efforts

Availability of local franchiseesknowledge


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FRANCHISING

Disadvantages:

Revenues may not be adequate

Availability of a master franchisee

Limited franchising opportunities overseas Lack of control over the franchisees

operations

Problem in performance standards

Cultural problems

Physical proximity


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Contractual Agreements

Contractual agreements generally involve the transfer of

technology, processes, trademarks, or human skills

Contractual forms of market entry include:

(1) Licensing:A means of establishing a foothold in foreign markets

without large capital outlays is licensing of patent rights, trademark

rights, and the rights to use technological

(2) Franchising:In licensing the franchisor provides a standard package of

products, systems, and management services, and the franchisee

provides market knowledge, capital, and personal involvement inmanagement

Contractual agreementsare long-term, non-equity associationsbetween a company and another in a foreign market


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Strategic International Alliances

SIAsare sought as a way to shore up weaknesses and increasecompetitive strengths

SIAsoffer opportunities for rapid expansion into new markets,access to new technology, more efficient production and marketingcosts

An example of SIAsin the airlines industry is that of the Oneworldalliance partners made up of American Airlines, Cathay Pacific,British Airways, Canadian Airlines, Aer Lingus, and Qantas

Strategic alliances have grown in importance over the last fewdecades as a competitive strategy in global marketing

management A strategic international alliance (SIA)is a business

relationship established by two or more companies tocooperate out of mutual need and to share risk in achieving acommon objective


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The steps outlined in Exhibit 11.3 below can lead to successful and high performance strategic

alliances


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International Joint Ventures

International joint ventures (IJVs)have been increasinglyused since 1970s

IJVs are used as a means of lessening political and economicrisks by the amount of the partners contribution to the venture

JVs provide a less risky way to enter markets that pose legal andcultural barriers than would be the case in an acquisition of an

existing company A joint venture is different from strategic alliances or

collaborative relationships in that a joint venture is a partnershipof two or more participating companies that have joined forcesto create a separate legal entity

Joint ventures are different from minority holdings by an MNCin a local firm.


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International Joint Ventures (contd.)

1. JVs are established, separate, legalentities;

2. they acknowledge intent by the partnersto share in the management of the JV;

3. they are partnerships between legallyincorporated entities such as companies,chartered organizations, or governments,and not between individuals;

4. equity positions are held by each of the

partners

Four factors are associated with joint ventures:


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JOINT VENTURES

Cooperative joint venture

Equity joint venture

Benefits:

Higher rate of return and more control over the

operations Creation of synergy

Sharing of resources

Access to distribution network

Contact with local suppliers and government officials


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JOINT VENTURES

Disadvantages:

Lack of control

Lack of trust

Conflicts arising over matters such as strategies,resource allocation, transfer pricing, ownershipof critical assets like technologies and brandnames

JOINT VENTURES


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JOINT VENTURES

Drivers Behind Successful International JointVentures :

Pick the right partner

Establish clear objectives from the

beginning

Bridge cultural gaps

Gain top managerial commitment and

respectUse incremental approach


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Consortia

(1) They typically involve a large

number of participants, and

(2) They frequently operate in acountry or market in which

none of the participants is

currently active

Consortia are similar to joint ventures and could be classified assuch except for two unique characteristics:

Consortia are developed to pool financial and managerialresources and to lessen risks.


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Direct Foreign Investment

Companies may manufacture locally to capitalize on low-costlabor, to avoid high import taxes, to reduce the high costs of

transportation to market, to gain access to raw materials, or as

a means of gaining market entry

Firms may either invest in or buy local companies or establishnew operations facilities

A fourth means of foreign market development and entry isdirect foreign investment


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Organizing for Global Competition

(1) global product divisions responsible for product salesthroughout the world;

(2) geographical divisions responsible for all products and functionswithin a given geographical area; or

(3) a matrix organization consisting of either of these arrangementswith centralized sales and marketing run by a centralizedfunctional staff, or a combination of area operations and global

product management

An international marketing plan should optimize the resourcescommitted to company objectives by using one of the

following three alternative organizational structures:


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SCHEMATIC MARKETING ORGANIZATION PLANCOMBINING PRODUCT, GEOGRAPHIC,

AND FUNCTIONAL APPROACHES


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LOCUS OF DECISION

Considerations of where decisions will be made, bywhom, and by which method constitute a majorelement of organizational strategy Corporate headquarters

International headquarters

Regional levels

National levels

Local levels

Tactical decisions normally should be made atlowest possible level


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CENTRALIZED VERSUS

DECENTRALIZED ORGANIZATIONS

Most organizational patterns of multinational firmsfit into one of three categories Centralized

Regionalized

Decentralized

No single traditional organizational plan isadequate for todays global enterprise Seeking to combine the economies of scale of a global

company with the flexibility and marketing knowledge ofa local company


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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 agreater number of players mean that every

opportunity to refine international business

practices must be examined in light of company

goals


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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

Chap11 Global Marketing Management

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