Transcript Khon Kaen University International College International

Introduction – Global Marketing Strategies
 On a political map, country borders are clear as
ever. But on a competitive map, financial, trading,
and industrial activities across national
boundaries have rendered those political borders
increasingly irrelevant.
 Not only firms that compete internationally but
also those whose primary market is considered
domestic is affected by competition from around
the world.
 Note: Much of what your text puts in the future
tense is really present tense.
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Case: P&G in China
 Entry through joint venture with a Hong Kong based multinational in
1998
 Chinese market characterized by:
 Huge disparity in income levels and consumer needs within China
 Large number of outlets for consumer goods
 Three tier consumer segment system developed
 Premium
 Middle
 Low price
 Marketing objective to promote global products as Chinese brands
 R&D in Beijing
 Use local ingredients
 Local cost and pricing targets
 Local customer research staff
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Go into villages to research rural consumers
Tailor products to local traditions, local tastes, local budgets
Different and more costly products for wealthier urban markets
Global Strategy Elements
1. Competitive forces in an industry
2. Global industry – the extent of globalization
3. Competitive advantage (cost, differentiation, etc)
4. Hyper competition (disrupting the market)
5. Interdependency – standardized components
Competitive Industry Structure
An element of global strategy
Michael Porter
 Industry competitors – rivalry among existing firms
 Potential entrants – note barriers to entry
 Barriers could be legislated
 Time and investment
 Bargaining power of suppliers (raw materials to
components)
 Bargaining power of buyers (supermarket chains, large
volume operations like WalMart, government as
customer, single large company customer)
 Threats of substitutes (next slide)
Competitive Industry Structure
Substitute Products or Services
 Often overlooked or underestimated by established
industry players
 HP in 2004 saw Personal Computers as a commodity
 Build cheap in high volume
 Main competitor thought to be Dell Computer of TX
 $3BB R&D under-utilized
 Substitutes can restructure entire industries
 Common in technology industries
 Always a threat in the petroleum industry
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But cost of entry for substitutes is high
Once a substitute gains entry, costs may rapidly drop
Pattern is to have price spikes, followed by periods of prices too low
for substitutes to thrive
 Synthetic rubber became a substitute when war cut natural
rubber supplies
Nature of Competitive Industry Structure
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Global Industry
 Those industries where a firm’s competitive position
in one country is affected by its position in other
countries.
 The first question that faces managers is the extent of
globalization of their industry. Example: Foreign car
brands in many countries are made locally.
 Every industry could have global aspects. Some
academics believe consumer tastes are converging
globally, and firms drive tastes to converge.
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Industry Globalization Potential
The potential globalization of an industry is determined
by:
1. Market forces
2. Cost forces
3. Government forces
4. Competition forces
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Exhibit 8-1: Industry Globalization Drivers
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Global Industry
Market Forces
 Per capita income convergence
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Rich consumers in emerging markets
Convergence of lifestyles and tastes
Increased international travel creates global customers
Organizations behaving as global customers (Toyota)
Growth of global and regional retail channels
 More regional successes than global
 Those that are global are adapted to regional culture (7-11)
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Establishment of world brands
Global advertising
Spread of global and regional media
Revolution in communication technology*
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*Revolution in Communication technology
 Much bigger and more fundamental than e-commerce alone
 Growth of worldwide secure financial settlements
 Rapid spread of ATMs from the mid-90s for example
 Ease of doing financial transactions across borders
 Rapid spread of cellular technology connected whole regions to the
outside world, from late 1990s
 Rapid decrease in the price of bandwidth late 1990s
 Large scale long distance data transfer became viable
 Fiber optic technology means very cheap prices across oceans
 Google and others have mix of local and central content
 Offshore factories and suppliers have real time access
 Distributors have real time access to retail inventory
 Medical information and other data intensive documents exchanged real
time
 Cultural diffusion via better communication
 Often thought of as spread of English
 Growing exposure and interest works in both directions
Global Strategy
Cost Forces
1. Global economies of scale and scope
2. Steep experience curve
3. Global sourcing efficiencies
4. Favorable logistics
5. Difference in country costs
6. High product development costs
 Need to spread costs onto higher volumes
 Emerging R&D centers in lower cost countries
7. Fast-changing technology
8. Shorter product life cycles
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Global Strategy
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Government Forces
1. Favorable trade policies (and trading blocks)
2. Compatible technical standards
3. World Trading Regulations
4. High growth/low labor cost developing countries
5. Deregulation/privatization of industries
6. Shift to market economies in China, Russia, E. Europe
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Competitive Forces
1. High exports and imports
2. Competitors from different continents and countries
3. Interdependent countries (components specialization)
4. Globalized competitors
5. Globalized financial markets (and company ownership)
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Global Strategy
Competitive Advantage
 Cost leadership
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Builds on economies of scale
Learning effects (how to be more efficient)
Long production runs (high cost to change lines)
Amortize fixed costs over more units (R&D often fixed)
Cost leadership can be a barrier to entry (and a trap!)
 Product differentiation
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Customers willing to pay premium price for unique products
Can be a barrier to entry (note Brand Relevance, “own a category”)
 Niche strategy
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Focus on a highly specialized segment
Try to achieve a dominant global position in that segment
Pays to stay ‘under the radar’
A overlooked niche can grow into something much bigger
 Global marketers combine cost control and product differentiation
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Global Strategy
Gaining Competitive Advantage
 Firms create series of temporary advantages
 Most advantages are temporary (methods are learned)
 Firms must innovate to stay ahead (think of Brand Relevance)
 Experiment with small product introductions – some will work
 Advantages and disadvantages of being the pioneer
 Can grow quickly in absence of competitors (a reason small firms
with innovative ideas seek to go public or be bought – marketing)
 Can become the standard for a product
 But others may learn from mistakes of pioneers – first mover costs
 Competitor-focused approach
 Comparisons with competitor costs, prices, technology
 Firm might focus too intently on competitors
 Customer-focused approach (How would we describe P&G
China?)
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Global Strategy
Interdependency
 Interdependency of modern companies
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Firms draw on outside technologies – purchase use of ideas
Standardized components enable scale economies to
suppliers
Standardized components enable different firms to use same
components
Note that many firms may cooperate for open standards
 Governments affect parts of a firm’s cost structure
 Export restraints (to protect domestic markets or for
defense purposes)
 Tariff and non-tariff barriers
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Global Marketing Strategy
 Benefits of Global Marketing:
 Cost Reduction
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Standard packaging (include lower inventory)
Consolidate multiple marketing functions
Reduced total advertising costs
 Improved Products and Program Effectiveness (from integration
of ideas and spreading costs over larger base)
 Enhanced Customer Preference through consistent theme
 Competitive Advantage through coordinating the worldwide
organization (employee communication, intelligence gathering)
 Limits to Global Marketing:
 Globalization vs. localization (local adaptation)
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Worldwide Web has elements of both
Languages and cultural values differ among national sites
 Global integration vs. local responsiveness
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Global companies create local subsidiaries to respond locally
Local R&D etc
 Scale vs. sensitivity to local cultures
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Degrees of Standardization of Products in World Markets
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Typical Income Statement
 Net Revenue
 Less COGS (includes provision for inventory write-off)
 Gross Profit
 SG&A (mostly fixed cost in short term)
 Administration (includes finance)
 Sales and Marketing
 Distribution
 Research and Development
 Net (operating) income before taxes and depreciation
 Taxes etc
 Net income
Marketing Interactions within the Company
 Marketing interacts with Finance, Operations, and R&D to
determine whether new products are viable from a resources and
opportunities perspective
 Financial resources (can we afford to launch?)
 Human and manufacturing hardware resources
 Marketing interacts with Finance to make forecasts and budgets
 Top line numbers – budgeting usually begins with revenue forecasts
 Marketing expenses
 Marketing interacts with Finance, Manufacturing, and
Distribution to determine pricing and promotion strategies
(what do we need to move this month?), fine tuning of
production runs, and inventory obsolescence
R&D, Operations and Marketing Interfaces
 R&D/Operations Interface (basic R&D & production R&D)
 New products, new component sources
 Process innovation
 Manufacturing influences design
 Manufacturing/Distribution/Marketing Interface
 Core Components Standardization in adapting to local needs
 Some cosmetic or packaging considerations might be applied in packaging and
distribution
 Some adaptation might occur only in customer perceptions
 Timing and length of factory production runs
 Cost and pricing considerations
 Inventory management
 Avoiding excess inventory through coordinating sales with production
 Getting rid of unused inventory (obsolete product might be sold in LDC)
 Marketing/R&D Interface
 Customers as idea sources – more in ‘developing new products’
 Coordinates with operations and distribution to have product available in
sufficient quantities at the right time and place
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Interfaces among R&D, Manufacturing, and Marketing
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Regionalization of Global
Marketing Strategy
 Regional strategies are the cross-subsidization of markets in pursuit of
regional production, branding, and distribution advantages.
 Opportunities or perils in regionalization of global marketing strategy:
 Cross-Subsidies of Markets (competitor bases)
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The book mentions how Kodak ignored Japan
Failure to counter an attack can be catastrophic
 Identification of Weak Market Segments
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Use a weak niche to expand in a foreign market
Established players often ignore niches
 Lead Markets set standards for the world (India = tractors)
 Marketing Strategies for Emerging Markets
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Local companies identify strengths relative to foreign competition
Local businesses are closer to customers, part of local culture
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Competitive Analysis
 SWOT (Strengths, Weaknesses, Opportunities,
and Threats) Analysis (See Exhibit 8-6.)
 A SWOT analysis divides the information into two main
categories: internal and external factors.
 Based on SWOT analysis, marketing executives can
construct alternative strategies.
 The aim of any SWOT analysis should be to isolate the
key issues that will be important to the future of the firm
and that will be addressed by subsequent marketing
strategy.
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Exhibit 8-6: SWOT Analysis
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