Transcript A global

Designing Global Market
Offering
Objectives

Before Going Global.

Selecting Foreign Markets

Ways of Foreign Market Entry.

Product Adaption for Global
Marketing.

Management & Organization of
Global Activities.
Competing on a global basis
The better way to compete is to
continuously improve products at
home and expand into foreign
markets, but considering that:
 The risk are high.
 Huge foreign indebtedness.
 Shifting borders.
 Unstable governments.
 Foreign exchange problems.

Tariffs and other trade barriers.
Corruption.
 Technological pirating.

Global Firm
A global firm: is a firm that operates in
more than one country and captures
R&D, logistical, marketing and financial
advantages in its cost and reputations
that are not available to purely domestic
competitors.
 Global
firms
plan,
operate
and
coordinate
their
activities
on
a
worldwide basis.

Major Decisions in International
Marketing
Deciding whether to go abroad
Deciding which markets to enter
Deciding how to enter the market
Deciding on the marketing
program
Deciding on the marketing
organization
1. Deciding whether to go
abroad

Most companies would prefer to remain domestic if
their domestic market were large enough,
managers would not need to learn other languages
and laws, deal with volatile currencies, face political
and legal uncertainties, or redesign their products to
suit different customer needs and expectations.
Factors drawing companies into
the international arena:
1.
Global firms offering better products or lower prices
can attack the company's domestic market. The
company might want to counterattack these
competitors in their home markets.
2.
The company discovers that some foreign markets
present higher profit opportunities than the domestic
market.
3.
The company needs a larger customer base to
achieve economies of scale.
4.
The company wants to reduce its dependence on
any one market.
5.
The company's customers are going abroad and
require international servicing
Several risks before making a
decision to go abroad:





The company might not understand foreign
customer preferences and fail to offer a
competitively attractive product.
The company might not understand the foreign
country's business culture or know how to deal
effectively with foreign nationals.
The company might underestimate foreign
regulations and incur unexpected costs.
The country might realize that it lacks managers
with international experience.
The foreign country might change its commercial
laws, devalue its currency, or undergo a political
revolution and expropriate foreign property.
2. Deciding which markets
to enter:

The company needs to define the marketing
objectives and policies.
What proportion of foreign to total sales will it seek?

How many markets to enter?
The company must decide whether to market in a
few countries or many countries and determine how
fast to expand.
It is better to operate in fewer
countries when:





Market entry and market control costs are high.
Product and communication adaptation costs are
high.
Population and income size and growth are high in
the initial countries chosen.
Dominant foreign firms can establish high barriers to
entry.
Regional free trade zones: Regional economic
integration-trading agreements between blocs of
countries-has intensified in recent years.
This
development means that companies are more likely
to enter entire regions overseas than do business with
one nation a time. (EU, NAFTA-North America Free
Trade Agreement, MERCOSUL, APEC)
Evaluating Potential markets:
In general a company prefers to enter
countries that:
1)
Rank high on market attractiveness.
2)
That are low in market risk.
3)
In which it
advantage.
possesses
a
competitive
3. Deciding how to enter
the market:

Once a company decides to target a particular country, it
has to determine the best strategy of entry:
Indirect
Exporting
Direct
Exporting
Licensing
Joint
Ventures
Direct
Investment
Amount of commitment, risk, control, and profit potential


Indirect
export:
They
work
through
independent intermediaries.
Domestic
based
export
merchants
buy
the
manufacturer's products and then sell them
abroad.
It has two advantage:
 It involves less investment, the firm does
not have a develop and export
department, and overseas sales force, or
a set of foreign contacts.
 It involves less risk; because international
marketing intermediaries bring know how
and services to the relationship, the seller
will normally make fewer mistakes.
2. Direct export:
A company may decide to handle their own
exports and can carry on direct exporting in
several ways:

Domestic-based export department or
division.

Overseas sales branch or subsidiary.
1.


Licensing: The simple way to become involved in
international marketing. The licensor licenses a
foreign company to use a manufacturing
process, trademark, patent, trade secret, or other
item of value for a fee or royalty.
Advantages:
 The licensor gains entry at little risk.
 the licensee gains production expertise or a
well-known product or brand name.
Disadvantages:
 Less control over the licensee.
 If and when the contract ends, the company
might find that it has created a competitor.
Contract Manufacturing: The firm hires local
manufacturers to produce the product.
 It gives the company less control over the
manufacturing process.
 It offers a chance to start faster, with less risk
and with the opportunity to form a
partnership
or
buy
out
the
local
manufacturer later.
3. Franchising:
More complete form of
licensing. The franchiser offers a complete
brand concept and operating system. In
return the franchisee invests in and pays
certain fees to the franchiser.
2.
4.




Joint Ventures: Foreign investor may join with
local investors to create a joint venture
company in which they share ownership and
control.
May be necessary and desirable for
economic or political reasons.
The foreign firm might lack the financial,
physical or managerial resources to
undertake the venture alone.
The foreign government might require joint
ownership as a condition for entry.
The partners might disagree over investment,
marketing or other policies.
4. Deciding on the Marketing
Program
Companies that operate in one or more foreign
markets must decide how to adapt their marketing
strategy to local conditions.
• Standardized
marketing
mix
(Product,
communication and distribution).
The argument for standardizing is that it saves costs and
allows the promotion of one central brand or corporate
image worldwide
Adv. & Dis. Of Standardizing
marketing program
•
Advantages:
- Economies
of
scale
in
production
and
distribution.
- Lower marketing
costs.
- Consistency
in
brand image.
- Ability to leverage
good
ideas
quickly
and
efficiently.
•
Disadvantages:
- Differences in consumer
needs, wants, and usage
patters for products
- Differences in consumer
response to marketing-mix
elements
- Differences in brand and
product development and
the
competitive
environment
- Differences in marketing
institutions
- Differences
in
administrative procedures.

Adapted Marketing Mix: Where the
producer adjusts the marketing program
to each target market.
The argument for adaptation is that every
market is different and victory will go to the
competitor who best adapts the offer to
the local market.
Five adaptation strategies of
product and communications
Product
Promotion
Do not change
product
Adapt
product
Do not
change
promotion
Straight
extension
Product
adaptation
Adapt
promotion
Communicatio
n
adaptation
Develop
new
product
Product
invention
Dual
adaptation
1.
Five Strategies for a Foreign
Market
Straight product extension: means marketing a
product in a foreign market without any change.
2.
Communication adaptation: involves modifying the
message so it fits with different cultural environments
(one message or one theme, media).
3.
Product adaptation: involves changing the product
to meet local conditions or wants (regional version,
country, city, retailer)
4.
Dual adaptation: when the company adapts both the
product and communication
5.
Product invention: consists of creating something new
for the foreign market (Backward invention , Forward
invention).
Pricing Challenges
Multinationals face several
problems when selling abroad:
1.
Price Escalation.
2.
Transfer Prices.
3.
Dumping Charges.
4.
Gray Markets.
pricing
1. Price Escalation
Set a uniform price everywhere: This
strategy would result in the price being too
high in poor countries and not high
enough in rich countries.
B. Set a market-based price in each country:
It could lead to a situation in which
intermediaries in low-price countries reship
their Coca-Cola to high-price countries.
C. Set a cost –based price in each country:
This strategy might price the company out
of the market in countries where its costs
are high.
A.
2.
Transfer Price:
If the company charges too high a price to a
subsidiary, it may end up paying higher tariff
duties, although it may pay lower income taxes
in the foreign country. If the company charges
too low a price to its subsidiary, it can be
charged with dumping.
3.
Dumping charges:
It occurs when a company charges either less
than its costs or less than it charges in its home
market, in order to enter or win the market.
4. Gray Market
Consists of branded products diverted from
normal or authorized distributions channels in
the country of product origin or across
international borders.
Dealers in the low-price country find ways to
sell some of their products in higher-prices
countries.
Distribution Channels
Seller
Seller’s
international
marketing
headquarters
Channels
between
Nations
Channels
within foreign
nations
Final
buyers
Building Country Images

Governments now recognize that the images
of their cities and countries affect more than
tourism and have important value in
commerce.

Attracting foreign business can improve the
local economy, provide jobs, and improve
infrastructure. Countries all over the world are
being marketed like any other brand.
Consumer perceptions of
country of origin

Country-of-origin perceptions can affect
consumer decision making directly and
indirectly. The perceptions may be included
as an attribute in decision making or
influence other attributes in the process.
Factors affecting consumer
perceptions of country of origin
1.
2.
3.
4.
5.
People are often ethnocentric and favorably
predisposed to their own country’s products, unless
they come from a less developed country.
The more favorable a country’s image, the more
prominently the “Made in…” lable should be
displayed.
The impact of country of origin varies with the type of
product.
Certain countries enjoy a reputation for certain
goods.
Sometimes country of-origin perception
encompass an entire country’s products.
can
5. Deciding on the Marketing
Organization
Companies manage their international
marketing activities in three ways:
1.
Export Department.
2.
International Division.
3.
Global Organization.
1. Export Department
A firm normally gets into international
marketing by shipping out its goods. If its sales
expand, the company organizes an export
department consisting of a sales manger and
a few assistants.
 As sales increases, the export department is
expanded to include various marketing
services. If the firms moves into joint ventures
or direct investment, the export department
will no longer be adequate to manage
international operations.

2. International Division
When companies become involved in
several international markets and ventures
they will create international divisions to
handle all their international activity, this
division is headed by a division president,
who sets goals and budgets and is
responsible
for
the
company's
international growth.
 The international divisions corporate staff
consists of functional specialists who
provide services to various operating units.

3. Global Organization

1.
Three organizational strategies:
A global strategy treats the world as a single
market: this strategy is warranted when the
forces for global integration are strong and
the forces for national responsiveness are
weak.
This is true of the consumer electronics market.
2.
A multinational strategy treats the world as a
portfolio of national opportunities: this
strategy is warranted when the forces
favoring national responsiveness are strong
and the forces favoring global integration
are weak.
This is the situation in the branded packagedgoods business (food products, cleaning
products).
3.
“A global” strategy standardizes certain
core elements and localize other elements:
this strategy makes sense for an industry
(such as telecommunications) where each
nation requires some adaptation of its
equipment, but the providing company
can also standardize some of the core
components.