Chapter 1 Introduction to

Global Marketing

Introduction

What is Global Marketing?

How is it different from regular marketing?

Introduction

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

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 organization’s home country

7

The International Marketing Task

Political/legalforces

Economicforces

1

2

Environmentaluncontrollablescountry market A

Environmentaluncontrollablescountrymarket B

Environmentaluncontrollablescountrymarket C

Competitivestructure Competitive

Forces

Level of Technology

Price Product

Promotion Channels of distribution

Geography and

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural forces

3

45

6

7Political/

legalforces

Domestic environment(uncontrollable)

(controllable)

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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 environment

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

Reasons for Global Marketing

Growth – 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 motives

usually there are many factors which affect the company’s decision to export

in Hollensen’s 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 company’s 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 motives

1. Competitive pressuresa firm may fear losing domestic market share to competing firms that have benefited from economies of scale gained by global marketing activitiesfurther, 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 saturateda company may be pushed into exporting because of a small home market potentialif domestic markets are unable to provide sufficient economies of scale, export markets are automatically included in their market entry strategya 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 BelgiumBetween USA and Canada (partly with Mexico)

Overview of Marketing

One of the functional areas of a business that is distinct from finance and operationsPrimary tools in marketing are product, price, place, and promotionMarketing is an activity that comprises the firm’s value chainCurrent trend is to involve marketers in all value-related decisions – called boundaryless marketing

Boundaryless Marketing

Goal is to eliminate communication barriers between marketing and other business functional areasProperly implemented it ensures that a market orientation permeates all value creating activities

Goal of Marketing

Surpass 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 Advantage

Success over competition in industry at value creation

Achieved by integrating and leveraging operations on a worldwide scale

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

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

Competitive Advantage, Globalization and Global Industries

Focus– 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 Coca-Cola or we leave it alone. This is focus.

Helmut Maucher

Global Marketing: What it is and What it isn’t

Strategy development comes down to two main issues similar to single country marketing– Target market– 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 versus Adaptation

The Importance of Global Marketing

For US-based companies, 75% of sales potential is outside the US.– About 90% of Coca-Cola’s 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 Needed

Differences are in the uncontrollable environment of internationalmarketingDifferences are in the uncontrollable environment of internationalmarketing

Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)

Firms must adapt to uncontrollable environment of internationalmarketing by adjusting the marketing mix (product, price,promotion, and distribution)

Adaptation(of Marketing Mix)

Standardization(of Marketing Mix)

Continuum

INFLUENCED BY 5 ENVIRONMENTAL FACTORS

Environmental adaptationTo adapt marketing programs to foreign markets certain amount of adaptation is needed (take uncontrollable elements into consideration)

In broad sense the uncontrollable elements constitute the culture – the difficulty is in the recognition of the cultural impact

The problem in adapting to foreign markets is self-reference criterion (SRC) and an associated ethnocentrism

SRC is an unconscious reference to one’s own cultural values, experiences and knowledge as a basis for decisions – ethnocentrism: one’s own culture knows best how to do things

To avoid this misconception remember that it makes sense for the other person to do things in his/her own way, if you don’t remember this you might fail in recognizing cultural differences and the importance of those differences

Developing a Global Awareness

To be globally aware is to have:To be globally aware is to have:

1. Tolerant of Cultural Differences, and

2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential,(d) Global Economic, Social and Political Trends

Management Orientations

Ethnocentric:Home country is

Superior, seesSimilarities 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, seesSimilarities and

Differences in homeAnd host countries

Polycentric: Each host country Is

Unique, sees differencesIn foreign countries

Strategic orientation to international markets

Domestic Market Extension (Ethnocentric)

Multi-Domestic Market (Polycentric)

Global Marketing (Regio/Geocentric)

Concept EPRG Schema

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It is expected that differences in the complexity and sophistication of company’s operations depend on which orientation guides its operations

Among the approaches describing the orientations from casual exporting to global marketing is EPRG schema- in this schema the firms are classified as

ethnocentric, polycentric, regiocentric or geocentric depending on the international commitment of the firm

- in this schema it is also assumed that the degree of internationalization to which management is committed or willing to move affects the specific international strategies and decision rules of the firm

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Domestic market extension orientation

It views its international operations as secondary and as an extension of its domestic operations

The primary motive is to market excess domestic production

Minimal, if any, efforts are made to adapt the marketing mix to foreign markets

In EPRG schema these companies are classified as ethnocentric

Multidomestic market orientation

A company guided by this orientation has a strong sense that country markets are vastly different and that market success requires an almost independent program for each country => development of country based marketing strategies

Control is usually decentralizedIn EPRG schema these companies are classifies as

polycentric

Global marketing orientation

A company guided by global marketing orientation is referred to as a global company: its marketing activity is global and its market coverage is the world

It develops a standardized marketing mix applicable across national boundaries

In EPRG schema these companies are regiocentric or geocentric

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

Forces Affecting Global Integration and Global Marketing

GlobalIntegration

andGlobal

Marketing

Stages of International Marketing Involvement

In general, firms go through five different phases in going international:In general, firms go through five different phases in going international:

Infrequent Foreign MarketingInfrequent Foreign Marketing

No Direct Foreign MarketingNo Direct Foreign Marketing

International MarketingInternational Marketing

Regular Foreign MarketingRegular Foreign Marketing

Global MarketingGlobal Marketing

Stages of International Marketing Involvement

1. No Direct Foreign Marketing2. Infrequent Foreign Marketing

- export operations3. Regular Foreign Marketing

- export operations, direct investment sales operations, direct investment production operations

4. International Marketing- fully committed and involved in

imternational marketing through production and service operations

5. Global Marketing- companies treat the world as one

market