Global Marketing Foreign Entry Local Marketing Global Management
Dec 18, 2015
Global Marketing
Foreign Entry
Local Marketing
Global Management
Why go Global?
Emergence of WTO Creation of Free Trade Areas Benefits of Foreign Trade Revolution in Global Communications Fast and Efficient Transportation Opening of Previously Closed Markets
Means to go Global
Exports to foreign Countries Strategic Alliances
– Licensing– Franchising– Contract Manufacturing
Joint Ventures Wholly Owned Subsidiaries
Multinational Phase
After WW-II, MNC’s from US & Europe expanded into Asia, Europe and Latin America.
Parent company maintained nominal control over subsidiaries
Manufacturing & marketing of products were localized to meet local demands
Foreign markets needs are subordinate to the home markets
Global Phase
Theodore Levitt’s “Globalization of markets” highlighted the merits of standardization – Noted the convergence of world markets
Selling standardized products in standardized methods all over the world
Centralized core competence activities– R&D, Manufacturing, Management, etc– E.g.: Semiconductors, Software, Boeing etc.
Transnational Phase
Sumantra Ghoshal, Christopher Bartlett etc developed a Transnational business idea
Decentralized but Coordinated operations Products are tailored to suit local needs Central marketing plan but Local execution Subsidiaries network with each other and
share knowledge. Head Quarters manages and coordinates
activities
Global Products
People all over have similar needs This implies that some products have
Global demand– E.g. Industrial products Steel, Chemicals etc.– Semiconductors, Internet services, Software
Global products are usually impersonal products.– People have no personal preference and
decision is made on price or technical merits.
Global –Local Products
People in different cultures have different styles and different tastes– E.g: Food, Clothes, Housing etc.– Cell Phones, Software – Different languages
Government Regulations force Local Modifications – Electrical Appliances, Cars, Automobiles etc.
Regional Economic Differences– Purchasing power, economic development etc.
Global Marketing Defined
Marketing activities that are coordinated and integrated across multiple markets– Integration can involve Standardized products,
Identical Brand names, Uniform packaging, Synchronized product introductions, Similar advertising messages etc.
– Coordination can involve competitive pricing, sales campaigns, market promotions etc.
Other Terms Used
International Marketing or Foreign Marketing– Primarily for exports to selective countries
Multi-domestic marketing– Different Products sold in different countries.– Driven to localize and adapt to local markets– E.g: HLL and Unilever
Global Markets
Increasingly Common Consumer requirements and preferences as lifestyles, tastes and behavior narrow.
Disappearing National trade boundaries with new Free Trade Agreements
Global Brand Recognition– E.g: Nike, Reebok, Coke, Nikon, Honda, Sony
Global Communication Revolution
Global Competition
Competitors are expanding globally Home market is challenged by a Global
competitor Global Raw Material procurement will
drive down costs– Can also be Man power, finished products etc.
Saturated home market is slowing down growth
Global Channels
Global Distribution, Transportation, Marketing Channels– Walmart, Metro, Costco – Global retailers
Global Channels– CNN, Star TV, Zee etc.
Transferable Marketing– I.e.: Similar marketing strategies all over
Leading markets– Need to learn from the leading markets. E.g.
Scooters in Italy, Cars in Germany
Cost Drivers
Economies of Scale– E.g. Reliance Petroleum
Economies of Scope– E.g. Infosys, Wipro, TCS
Global Sourcing Advantages– E.g TELCO in Italy, Cisco in Bangalore
Avoid Duplication – Capitalize on spillover effects– E.g P&G with Pantene Shampoo
Government Drivers
Favorable Trade policies– Export promotion, Foreign Investments
Common Technical Standards– ISO 9000
Free Trade Agreements– NAFTA, ASEAN, EU etc.
Active Government Promotion– E.g Halliburton
Limits to Globalization
Internal Resources– Capital, Labor, Experience etc.
Industry Factors – Not All industries can go global e.g Medical services, Defense etc.
Global Turmoil– Recession, Political coup, war etc.
Product Mixes– Culturally sensitive products cannot be
Globalized
Global Localization
Products that need large scale customization Strategy formulation is Globalized Execution is Localized Examples
– McDonalds, Pizza Hut – HLL soaps
Resource limitations force Local Execution– E.g MTR
Developing Knowledge Assets
Knowledge from Global operation can be a powerful competitive advantage– E.g Fiat learnt a lot about emerging markets in
Brazil and applied the same concepts in India
Knowledge is build through exposure to new competition, customers, government rules, technology and business methods
Learning Organizations can apply their newly acquired skills in other regions
Skill Benefits
Transferring competitive information and new products to other markets (including home market)
Capitalizing on the knowledge of foreign markets– Offer distribution service to other companies
Stretching and Building the firm’s capability– New markets need new skills. Going Global
helps
Global Marketing Objectives
Exploit Market Potential and Growth Gain Economies of Scale and Scope Learn from the Leading Market Pressuring Competitors Diversifying Markets Learning How to do Business Abroad
Roles of a Global Manager
Select & Implement Foreign Market Entry– Select Countries, Mode of Entry etc
Perform Local Marketing Abroad– Promote Products and Services– Conduct Market Research– Manage Advertising Campaign
Manage Global Operations
Skills of Global ManagerSkills Foreign Entry Local marketing Global
Management
Market Analysis
Market Research
Barriers to Entry
Local Customer Behavior
Local Market Research
Global Segmentation, Targeting, Positioning
Strategy Modes of Entry
Expansion Paths
Local Marketing Strategy
Global Marketing Strategy
Implement
& Execution
Finding the right Agent
Marketing in New Countries
Meeting Goals, Motivating &
E-Commerce
Anti-Globalization Phase
Anti-Globalization movement started gaining ground in year 1998
Underdeveloped countries questioned the economic benefits
Developed Countries are afraid of losing Jobs
Developing Countries are worried about Financial Instability– Thailand, Mexico, Brazil, Indonesia, South
Korea
Global Competitive Analysis
The Fundamental aim of business Strategy is to create and sustain competitive advantages
First Step is to conduct competitive analysis. SWOT Porter’s 5 Forces Model Porter’s Diamond Value Chain Analysis
Competitive Self Analysis
Analyze firm’s Strengths & Weakness Clear Identification of Firm Specific
Advantages How Mobile & Flexible are these
Advantages? Best way to leverage these advantages in
Foreign Markets & gain advantage over Local Firms
Dealing with Global Competitors
Porter’s Five Forces Model
New Entrants
Firm’s Intense Rivalry
BargainingPower
ofCustomers
Threat Of substitutes
BargainingPower
ofSuppliers
Strategic Groups
A Strategic Group consists of competitors who offer similar products or service in that Segment
E.g: IBM, Accenture, EDS for Infosys but NOT Bian, McKinsey, BCG
Strategic Group can consist of competitors who offer Substitute Products
E.g: Nestlé's water for Pepsi and Coca Cola
Country Specific Advantages
A Firm possesses some advantages because of the country from where it Operates.
E.g: Infosys, Wipro have a cost advantage by operating in India
E.g: Cosco, a Chinese furniture manufacturer has a cost advantage when competing in US
E.g: IBM has a cost advantage by operating in India, has famous Brand Name & Recognition
National Competitive Advantage
A country might provide an absolute advantage by the virtue of having certain resources– Oil in Saudi Arabia, Labor in China– High Technology in USA
Comparative Advantage : When one country is better in producing a certain type of product– Coffee in Brazil– Software & Garments in India
New Trade Theory
Man made Locational Advantages has a big impact on the Trade Patterns
Certain Areas have a huge concentration of certain Industries– Software firms in Bangalore, Silicon Valley– Garments in Delhi, Financial services in
Mumbai
Country of Origin Effects
Customers give a value for “Made-in-XXX” label.
Products or services from a country with a positive image tend to be favorably evaluated, while products from less positively perceived countries tend to be downgraded– Chocolates from Belgium, Watches from
Switzerland, Computers from USA : Positively Perceived
– Cars from Kenya, Brazil : Negatively Perceived
Domestic Competitors
Domestic Competitors : They have the same Country Specific Advantages as you.– E.g: Wipro & Infosys
Country Specific Advantages are derived from Government Rules, Regulations, Tax benefits, Availability of Raw materials, Human Resources etc
A large Home Market also helps domestic competitors. E.g: IBM, DELL & EDS– Also called Demand Conditions
Foreign Competitors
Foreign Competitors : Foreign Firms are the most direct competitors of a Globalizing firm. – Foreign Competitors from the same country can
be analyzed as a separate Strategic Group. E.g: Samsung, LG, Daewoo
– Firms from the same country follow similar strategy
– Regional Trade Blocs also help Foreign Competitors E.g: Electrolux from EU
New Entrants & Substitutes
Potential New Entrants & Substitutes are another competitive threat to a Firm– Banks face a threat of more competition with
new entrants from Japan, US, Europe– Banks face a threat from substitutes like Web-
Bank, Investment companies like Charles Schwab, E-Trade etc.
– Banks face threat from Chit-Funds, Mutual Funds etc.
First Mover Advantages
An Emerging market offers an opportunity to be a first mover and create demand. Emerging Market can be a Country or Introducing a new Product/Services
Higher Brand Recognition Positive Brand Image More Customer Loyalty Longer Market Experience Wider Distribution
Pioneering Costs
Customer Tastes & Preferences are unknown
New Distribution Channel may have to be set up
Customers have to be educated Advertising Expenses, Promotion expenses
will be high Few Firms tend to be Followers – “Second
Mover Advantage”
Porter’s Diamond
Firm Strategy,Structure & Rivalry
DemandConditions
Factor Conditions
Related & Supporting Industries
Determinants of National Advantage
Porter’s Diamond highlights:– Intense Competition creates a National
Advantage– Strong Local Demand is Important– Favorable Conditions must exist– Related & Supporting Industries creates a
National Advantage
Exercise: Does India have a National Advantage in Medical Services?
Stages in Product Lifecycle
Sales
1 2 3 4 5 6
Legend
1: Pioneer2: Early Adopter3: Early Majority4: Late Majority5: Late Adopter6: Laggards
Time
Trade & Product Lifecycle
International Product Lifecycle theory is based on past trends.
New Products will be first introduced in developed markets & exported worldwide, As the product matures, it will be manufactured in developing countries at a lower cost and imported to developed countries
E.g: It is advantageous for US to TV & concentrate on Computers
Firm Specific Advantages Firms develop competitive advantages which is
unique to them– E.g: Patents, Distribution Network, Manufacturing
techniques, Access to Raw materials etc Knowledge Based FSA: Soft skills such as
marketing, brand management etc. Skills reside in employees and experience of the Firms
Resource Based FSA: Resources such as products, technology, know-how & Services
Firms have to build both Knowledge based & Resource based advantages
Taking FSA Abroad
FSA cannot always be transferred abroad. The degree of transferability depends on FSA itself
Intangible “skills” are toughest to transfer FSA tied to home country infrastructure
cannot be transferred. E.g: Distribution– Budweiser Beer, Henkel detergents etc
Externalization of FSA There are several ways to enter a country’s
Market. The mode of entry depends on FSA If a firm choose to License or Franchise abroad,
then it has to transfer its FSA to another partner abroad – Called Externalization of FSA
E.g: Coca-Cola, McDonalds, FedEx Problem with licensing – Unable to learn from the
new market, Loss of FSA Outsourcing parts in Value chain is
Externalization of FSA
Internalization of FSA
If a firm chooses to maintain a tight control over its FSA & internal advantages, it can:– Export or FDI
Both Cases, company can maintain tight control over its FSA
Choice between Export or FDI depends on trade barriers, market size, transaction costs, CSA etc.
Retaining the firm’s value chain when going abroad is Internalization of FSA
Transaction Costs
Transaction Costs are costs incurred when completing a transaction between a buyer and a seller.
Includes hidden costs such as negotiation costs, finding partners, communication overheads etc. In addition to obvious costs such as transportation, taxes, brokerage fees etc.
Banks & middlemen lower transaction costs by performing “Market Making” functions
Hypercompetition The intense rivalry between global firms and
domestic competitors is common in Global business.
Competitive advantages are increasingly difficult to sustain is face of Hypercompetition
Bench Marking reduces competitive advantages of the competitors
Lack of sustainable competitive advantages is forcing companies to develop intangible skills like customer service, quality, Brand image etc
Winning in Hypercompetition
Firms can win in a hypercompetitive environment by continuously moving to new grounds, I.e raising standards, improving product/Service quality etc.
Hypercompetition forces firms to concentrate on:– Cost & Quality: Lower cost, improve quality
– Timing & Know-how: Market Knowledge
– Defending Strongholds
– Financial Resources: Financial strength is necessary to keep competitive edge; R&D, M&A, Advertising etc.
Closing Thoughts Going global will stretch and mold company
resources into a globally effective marketing organization.
Global Managers will have to select the right entry strategies, decide on trade-offs between localization or global standardization to achieve the optimal local responsiveness and global scale of economies.
When Going global, it is better to take help from experts for market entry, market research & international Financing