Transcript BUSI 617 Global Marketing Issues in the Global

BUSI 617 Global Marketing
Issues in the Global Economy
Professor Nicholas Didow
Kenan-Flagler Business School
University of North Carolina
Chapel Hill, NC 27599-3490
[email protected] 919.962.3189
Primary Texts:
Warren J. Keegan and Mark C Green, Global Marketing, (2015) 8th Edition,
Pearson
Thomas L. Friedman, The World is Flat, (2007) 3rd Edition, Picador
Chapter 1. Introduction to Global Marketing
We live in a global marketplace. We live in a world in which markets are local.
Marketing strategy planning emerges as the universal marketing management model
Everyone “does marketing”
Principles of Marketing
• Customer value and the value equation
• Finding competitive or differential advantage
• Focus using marketing strategy planning marketing management model
What is Global Marketing?
• Adaptation versus standardization
Importance of Global Marketing
Management Orientations
• Ethnocentric
• Polycentric
• Regiocentric
• Geocentric
Marketing Strategy Planning
Understand the landscape for marketing management in each nation, or
political economy – the defining history, major demographic and economic
trends, social and political (legal) environment, and religious and cultural
influences that establish and influence market opportunities.
Understand the company, customers, and competition
(SWOT, 3C’s).
Segmentation, target marketing and positioning with 4P’s.
•Product
•Price
•Place
•Promotion
•Entry strategy, implementation, evaluation, revision
•Pro forma budget of anticipated expenses against anticipated
revenues
Forces Affecting Global Integration and Global Marketing
•Driving forces
•Technology
•Regional economic and political agreements
•Market needs and wants
•Transportation and communication improvements
•Product development costs
•Quality
•World economic trends
•New market opportunities
•Reduced resistance to foreign firms and foreign products
•Worldwide trend toward privatization and deregulation
•Leverage
•Experience transfer
•Scale economies
•Resource utilization
•Global strategy
•Emergence of the global or transnational corporation
•Restraining forces
•Management myopia and organizational culture
•National controls and barriers
•Opposition to globalization
The Cuban Brothers
Fidel Castro 8/13/1926 – Present
Raul Castro 6/3/1931 - Present
Fidel Castro
• Fidel came to power as a result of
the Cuban revolution
• The Communist Party of Cuba
transformed into a one-party
socialist republic under Fidel’s rule
• Castro tried to denounce the ideas
of dictatorship, stating that “we are
fighting to do away with
dictatorship in Cuba, to establish
the foundations of a genuine
representative government”
• He later declared Cuba a socialist
state, abolishing multiparty
elections
• Fidel is known for his fiery
speeches, usually lasting for hours
Raul Castro
• Raul became President of Cuba in
2008 when Fidel resigned and
underwent intestinal surgery
• He was known to be a political
hardliner who would maintain the
Communist Party of Cuba’s
political power at all costs (said
before he took power)
• Some question future leadership
ability because of health concerns
(alcoholism main factor)
• Known for his businesslike,
unanimated delivery of prepared
speeches
• He removed restrictions against
purchasing products (DVD
players, computers, microwaves,
etc) forbidden under Fidel rule
Interesting Facts about
the Brothers…
• Raul was ranked 13th on
Parade Magazine’s 2009
World’s Worst Dictator list
• Raul is rumored to be fathered
by Felipe Miraval, different
from Fidel’s own father
• Public rumors about Fidel’s
health ranged from having
reoccurring heart attacks, to a
neurological problem, or even
Parkinson’s disease
• Rumors state that Castro was
scouted for various US baseball
teams after graduating from his
Catholic high school
Marketing Strategy Planning
Understand the landscape for marketing management in each nation, or
political economy – the defining history, major demographic and economic
trends, social and political (legal) environment, and religious and cultural
influences that establish and influence market opportunities.
Understand the company, customers, and competition
(SWOT, 3C’s).
Segmentation, target marketing and positioning with 4P’s.
•Product
•Price
•Place
•Promotion
•Entry strategy, implementation, evaluation, revision
•Pro forma budget of anticipated expenses against anticipated
revenues
Chapter 2. The Global Economic Environment
New realities of the world economic environment:
• World economy dominates, individual economies subordinate
• Commerce ignores national boundaries
• “Struggle between capitalism and socialism is largely over…”
–
–
Really?
Who won? see Michael Mandelbaum “The Triumph of the Market” in The Ideas That Conquered
the World – Peace, Democracy, and Free Markets in the Twenty-First Century (2003) and “The
Visible Hand,” The Economist, January 21, 2012.
RESOURCE ALLOCATION
MARKET
RESOURCE
OWNERSHIP
COMMAND
PRIVATE
Market
capitalism
Centrally
planned
capitalism
STATE
Market
socialism
Centrally
planned
socialism
www.tickld.com/x/jaw/capitalism-explained?utm_source=Tickld
RESOURCE ALLOCATION
MARKET
RESOURCE
OWNERSHIP
COMMAND
PRIVATE
Market
capitalism
Centrally
planned
capitalism
STATE
Market
socialism
Centrally
planned
socialism
Friedrich August Von Hayek et al versus John Maynard Keynes et al (Chicago School versus
Harvard) https://www.youtube.com/watch?v=d0nERTFo-Sk
https://www.youtube.com/watch?v=GTQnarzmTOc
Do Karl Marx and Adam Smith end up at the same place with respect to market
capitalism?
Socialism is an economic system in which more people (everyone?) have a say in how the
economy works and more people benefit. Ideally, socialism and “free market”
capitalism would be the same as everyone would produce exactly what is needed for
whoever needs it. Realistically they both fail due to corruption and greed. Both
systems work only when everyone plays fair and follows the same rules.
Communism is a political system in which only the party leaders determine how the
economy works and who is to benefit.
TWO GENERAL SOURCES FOR COUNTRY INFORMATION:
CIA Factbook:
https://www.cia.gov/library/publications/the-world-factbook/index.html
BBC Country Profiles:
http://news.bbc.co.uk/2/hi/country_profiles/default.stm
From CIA World Factbook:
GDP Growth Rate
https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2003rank.html
GDP (Purchasing Power Parity) est.
https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2001rank.html
GDP per Capita (Purchasing Power Parity) est.
https://www.cia.gov/library/publications/the-worldfactbook/rankorder/2004rank.html
From The Economist, The Big Mac Index
(PPP):
www.economist.com/content/big-mac-index
Human Freedom Index (1991)
http://alumni.media.mit.edu/~kris/FreedomIndex.html
Heritage Foundation, Index of Economic Freedom
http://www.heritage.org/index
World’s Happiest Countries
http://thehappinessshow.com/HappiestCountries.htm (2004)
http://abcnews.go.com/2020/story?id=4086092&page=1 (2007)
HBO series The Newsroom (2012):
Do not watch if you are offended by profanity!
http://www.youtube.com/watch?v=zEyUWKJFER8
Ch. 3. The Global Trade Environment
Global Trade Authority: The World Trade Organization and GATT www.wto.org
The WTO’s overriding objective is to help trade flow smoothly, freely, fairly and predictably. It does this by:
•
Administering trade agreements
•
Acting as a forum for trade negotiations
•
Settling trade disputes
•
Reviewing national trade policies
•
Assisting developing countries in trade policy issues
•
Cooperating with other international organizations
“The price to participate in the global economy is increasingly a portion of
your national sovereignty.” Didow
Preferential trade agreements benefit industries in a limited number of
nations
•
•
•
•
Free trade area
Customs union
Common market
Economic union
Are free trade areas really discriminatory trade agreements?
If so, is that good or bad?
Issues in trade agreements from the US perspective:
• Political process in US –”Fast track authority”
• Evaluating the impact of trade agreements
• “Free trade” or “Fair and free trade”
• FTAA? – Free Trade Area of the Americas
• TPP? – Trans Pacific Partnership – two different views:
http://www.cnbc.com/id/101074874#.
https://www.uschamber.com/issue-brief/trans-pacific-partnership
http://www.msnbc.com/the-ed-show/watch/highlighting-the-dangers-ofthe-back-door-tpp-257931843746
https://www.youtube.com/watch?v=WviiQzdCB50
Chapel Hill’s own Raging Grannies:
https://www.youtube.com/watch?v=ybOhszqc23U
Emergence of major bilateral agreements initiated by PRC:
• Venezuela
• Chile
• Cuba
North America
• CFTA 1988
• NAFTA 1994
• CATFA 2005
• FTAA under negotiation
Latin America
• SICA 1991
• Andean Community 1969
• MERCOSUR 1991
• CARICOM 1973
Asia-Pacific
• ASEAN 1967
Western, Central, Eastern Europe
• EU 1958
• EFTA, EEA 1990+
• CEFTA 1992
Middle East
• GCC 1981
• AMU 1989
• ACC 1989
Africa
• ECOWAS 1975
• East African Cooperation 1996
• SADC 1992
Ch. 4. Social and Cultural Environments
Social and cultural forces impact individual and corporate behavior in the
marketplace.
• Social and cultural environments around the world have some
similarities across the globe.
• Social and cultural environments around the world have some
differences across the globe.
Elements of society, culture and global consumer culture
• Attitudes, beliefs and values
– Hofstede’s National Culture Dimensions www.geerthofstede.com http://geerthofstede.com/countries.html
– Inglehart’s World Values Survey www.worldvaluessurvey.org
– Schwartz’s Cultural Value Orientation
•
•
•
•
Religion
Aesthetics
Dietary preferences
Language and communication patterns
www.kwintessential.co.uk/map/world-languages.html
Shared global preferences?
• Convenience foods
• Disposable products
• Popular music
• Movies
www.mla.org/map_single
Case for Chapter 4. Barbie: Growing Pains as the American Girl
Goes Global
Summary of the case.
www.barbie.com
Describe and assess Mattel’s global marketing strategy for Barbie.
Is there a moral, ethical, and economic opportunity at the bottom of the
pyramid for Mattel to grow their Barbie business?
What is Mattel’s way forward for Barbie within the US?
Other issues and opportunities?
Ch. 5. The Political, Legal, and Regulatory Environments
Political Environment
• Nation-States and Sovereignty
“The price to participate in the global economy is increasingly a portion of
your national sovereignty.” Didow
• Political Risk
– Taxes
– Dilution of equity
– Seizure of Assets
•
•
Nationalization
Confiscation – Oil industry in Venezuela under Hugo Chavis
International Law
• Common Law v Civil Code Law
• Islamic Law
Major Business Legal Issues in the Global Economy
• Jurisdiction, Regulatory Environment
• `local, state, national, regional, global -- WTO
• Intellectual Property (IP) and Innovation – Western vs Eastern Views
(see also Didow doc China IP talk Jan 2012)
–
–
–
–
Patents
Trademarks
Copyrights
http://www.weforum.org/issues/global-competitiveness
• Antitrust – EU and European Commission decisions
• Licensing and Trade Secrets
• Bribery and Corruption: Legal and Ethical Issues
– http://www.transparency.org/research/cpi/overview
• Conflict Resolution, Dispute Settlement, Litigation
Chapter 6. Global Information Systems and Market
Research
Information technology and marketing information systems as
strategic assets
Framework for information scanning and threat/opportunity
identification
General understanding of the formal marketing research
process
Managing the marketing information system and marketing
research
Linking marketing research to the decision making process
Current issues in global marketing research
Integrated approach to information collection
Information technology and marketing information systems as
strategic assets
Intranets
EDI – electronic data interchange
fully integrated supply chain
logistics and distribution innovations
POS scanner based
RFID – radio frequency identification tags
CRM– customer response management
tracking bundled sales, forecasting churn
electronic CRM – individualized value-added products and
services
www.amazon.com
privacy issues and regional differences in privacy rights
www.export.gov/safeharbor
Framework for information scanning and threat/opportunity
identification
• Markets
– Demand estimates and forecasts
– Consumer behavior
– Market structure
• Products, channels, promotion
• Competition
– Corporate, SBU, product line, brand
– Capabilities and plans
• Foreign exchange
– Country balance of payments, interest rates, analysts forecasts
• Prescriptive information
– Legal and regulatory environment, tax laws, earnings and dividends
• Resource information
– Human, financial, raw materials or components, information
• General conditions
– Social, cultural, political, technology environments
General understanding of the formal marketing research process
Leading general global market research companies
• www.nielsen.com
• www.dentsu.com
• www.imshealth.com
• www.research-int.com
• www.kantar.com
• www.kmr-group.com (see BRIC report)
• www.marketresearch.com
• www.qrca.org
General sources
• CIA The World Factbook www.cia.gov/cia/publications/factbook
• BBC News – Country Profiles
http://news.bbc.co.uk/1/hi/country_profiles/default.stm
• World Bank www.worldbank.com
International Business Etiquette
The classic:
“Kiss, Bow or Shake Hands: How to do business in 60 countries” Morrison
et al, 2006
Example of Internet sources:
www.cyborlink.com
Current issues in global marketing research…
• Understanding and modeling differences between nations
• Limited data
• Small potential markets limit justifiable ROI from investing in
mkt res
• Data validity and reliability problems
– Inflated?
– Deflated?
•
•
•
•
•
Comparability of secondary data across multiple countries
Inconsistent definitions between countries
Mismatch of classification cohorts and segment definitions
Different technology platforms
Varying response bias
Global Customers
The following slides draw from various sources of
demographic data, including slides from Dr. John D.
Kasarda’s Business Demographics series and Professor
Nicholas Didow’s Consumer Behavior series
Sources are cited for most slides on the individual
PowerPoint slides.
US Census Bureau
www.census.gov/popclock/?intcmp=home_pop
US Fertility Rate
Actual Fertility Rate
Replacement Rate
3.5
3.0
2.5
2.0
Total Fertility: Average number of births per woman over her lifetime
Source: U.S. National Center for Health Statistics. National Vital Statistics Report, annual data World Population Data Sheet, 2009
2005-09
2000-04
1995-99
1990-94
1985-89
1980-84
1975-79
1970-74
1965-69
1960-64
1955-59
1950-54
1945-49
1.5
1940-44
Births per Woman
4.0
33
•
•
•
•
•
Factors Depressing Fertility
Urbanization
More Education
Income
More Working Women
Career Pressures
• Better Contraceptive Techniques
• More Abortions Due to Legalization
• Perceived High Costs of Children
• More “Living Together” and DINKs
• More Divorce
• More Open Gay & Lesbian Lifestyles
• Delayed Marriage
• Delay of Birth of First Child
• 34Increased Infertility
Live Births, U.S.
Generation Z
61 million
(0-16)
Baby Boomlet
Gen Y
76 million
(16-33)
1994
Baby
Boom
78 million
(46-64)
Baby Bust
Gen X
41 million
(34-45)
1976
1946
1926
WWII
Generation
56 million
(64-84)
1964
Boomer
Grandparents
44 million
(84+)
35
Source: U.S. Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. U.S. National Center for Vital Statistics, National Vital Statistics Reports.
Working Life
36
Ratio of people ages 20-64
to people ages 65+
shrinks in coming decades!
37
Maintaining Vitality and Appearance
Sam
Gadless
Harry
Scott
(Great
Scott!)
Ran the NYC
Marathon at
age 90
At Age 65
174 pounds
(8% fat)
30in waist
44in chest
17in biceps
“Banana” George Blair
Living life with intensity at 80
Cher
age: 64 at 2010 MTV
Music Video Awards
Tina Turner
age: 71
On tour in 2008!
38
Aging: Quest for Youth
39
BIRTH DEARTH:
THE GRAYING OF
THE INDUSTRIAL WORLD
40
Fertility Trends in Four Industrialized
Countries: 1950-2009
4.0
Japan
3.5
3.0
Sweden
2.5
U.S.
2.0
Germany
1.5
1.0
Replacement
Rate
0.5
0.0
1950
1960
1970
1980
1990
2000 2009
41
Source: World Bank. World Population Projections: 1994-95; 2002 World Development Indicators; Population Reference Bureau; 2009 World Population Data Sheet
2010 World Fertility Rates
Total Worldwide = 2.5
Russia 1.5
Canada 1.7
Germany 1.3
Poland 1.4
France 2.0
U.S. 2.0
Italy 1.4
Afghanistan 5.7
Niger 7.4
Guinea-Bissau 5.8
Liberia 5.9
India 2.6
Somalia 6.5
Uganda 6.5
Angola 5.8
Fertility Rate
Lower
Upper
42
Source: Population Reference Bureau, 2010 World Population Data Sheet, http://www.prb.org/Datafinder/Topic/Map.aspx?variable=93
China 1.5
Fertility Worldwide: 2030
43
Source: Hayutin, Adele M. (2007). How Population Aging Differs Across Countries: A Briefing on Global Demographics.
Distribution of World Births by
Country
44
Source: US Census Bureau, International Database
Other = about 220 countries
World’s 10 Most Populous Nations:
2010 & 2050
2010
Country
Rank
Population (millions)
2050
Country
Population (millions)
China
1,338
1
India
1,748
India
1,189
2
China
1,437
United States
310
3
United States
439
Indonesia
236
4
Indonesia
343
Brazil
193
5
Pakistan
335
Pakistan
185
6
Nigeria
285
Bangladesh
164
7
Bangladesh
222
Nigeria
158
8
Brazil
215
Russia
142
9
Congo, DR
189
Japan
127
10
Philippines
150
45
Source: Population Reference Bureau, 2010 World Population Data Sheet
Age Distribution of the World’s Population, by Age and Sex,
2000 (in millions)
46
Sources: United Nations Department of Economic and Social Affairs, 2007b; and U.S. Census Bureau, International Data Base, accessed on December 28, 2007.
Age Distribution of the World’s Population, by Age and Sex,
2040 (in millions)
47
Sources: United Nations Department of Economic and Social Affairs, 2007b; and U.S. Census Bureau, International Data Base, accessed on December 28, 2007.
Whose Population is Aging the Fastest?
Median Age
Country
Japan
Germany
Italy
France
United Kingdom
1970
28.9
34.3
33.1
32.5
34.2
2010
44.7
44.3
43.3
40.1
39.9
2050
55.1
51.7
50.5
44.8
42.5
Russia
United States
China
Thailand
Brazil
30.6
28.2
19.7
17.7
18.6
38.1
36.6
34.2
33.2
29.0
44.0
41.7
45.2
41.4
45.6
Indonesia
Mexico
Vietnam
India
Philippines
18.9
16.6
18.0
19.2
17.1
28.2
27.6
28.5
25.0
23.2
41.1
43.9
42.4
38.4
35.0
Source: United Nations Population Division. World Population Prospects, the 2008 Revision.
48
Japan: Face of the Future
49
Source: New York Times, September 2, 1997.
World Population Growth Through
Billions
History
12
11
2100
10
9
Old
Stone
7 Age
8
New Stone Age
Bronze
Age
Iron
Age
6
Modern
Age
Middle
Ages
2000
Future
5
4
1975
3
1950
2
1
Black Death
1+ million 7000 6000 5000
years
B.C. B.C. B.C.
4000
B.C.
— The Plague
1900
1800
3000 2000 1000 A.D. A.D. A.D. A.D. A.D. A.D.
B.C. B.C. B.C.
1 1000 2000 3000 4000 5000
Source: Population Reference Bureau; and United Nations, World Population Projections to 2100 (1998).
World Population Growth, in Billions
Number of years to add each billion (year)
All of Human History
First Billion
Second
Third
Fourth
130 (1930)
30 (1960)
15 (1975)
Fifth
12 (1987)
Sixth
12 (1999)
Seventh
14 (2013)
Eighth
14 (2027)
Ninth
(1800)
21 (2048)
Sources: First and second billion: Population Reference Bureau. Third through ninth billion: United Nations, World Population
Prospects: The 2004 Revision (medium scenario), 2005.
Search for “Life Expectancy CIA”
www.cia.gov/library/publications/the-worldfactbook/rankorder/2102rank.html
Life Expectancies in North Carolina
(At Age 65)
24
White female
22
Years
20
White male
18
16
Nonwhite
female
14
12
Nonwhite
male
Source of data: NC State Demographics Unit (2002)
Prepared by the UNC Institute on Aging; Last updated: 2005
0
2
0
3
0
2
0
2
0
2
0
1
0
2
0
0
0
1
9
9
0
1
9
8
0
1
9
7
0
6
9
1
1
9
5
0
10
More Older Women than Older Men
Percent of NC population by Gender and Age (2000)
All Ages
Female
51.0%
Male
49.0%
Age 65+
Female
59.9%
Age 85+
Male
40.1%
Source of data: U.S. Census Bureau, Census 2000 Summary File 1, P13 and PCT12
Prepared by the UNC Institute on Aging; Last updated: September 2001
Male
25.9%
Female
74.1%
Aging America: U.S. Median Age, 1820-2000
40
35
30
25
20
15
10
5
0
1820 1840 1860 1880 1900 1920 1940 1960 1980 2000
Source: U.S. Census Bureau, San Francisco Chronicle
National Population Pyramids
www.census.gov/population/international/data/idb/informationGateway.php
Regional Market Characteristics
•
•
•
•
•
•
European Union
Russia
North America
Asia-Pacific
Latin America and the Caribbean
Middle East and Africa
Marketing in Low-Income Countries, BOP -- Bottom of the Pyramid
• Affordability
– Smaller packages
– Disintermediation
• Access
– Intensive distribution
• Availability
– Intensive distribution
Global Buyers – value, value equation, diffusion and adoption
Ch. 7 Segmentation, Targeting, and Positioning
Global market segmentation is the process of finding segments of potential
customers with homogeneous attributes who are likely to have similar
responses to a the marketing mix.
Requirements for effective segmentation:
• Measurable
• Accessible
• Substantial
• Differentiable
• Actionable
Bases for global segmentation
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–
–
–
–
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Geographic segmentation
Demographic segmentation
Psychographic segmentation
Behavior segmentation
Benefit segmentation
Vertical versus horizontal segmentation
Assessing market potential and choosing target markets
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–
–
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Current segment size and growth potential
Potential competition
Feasibility and compatibility
First mover advantages versus first mover disadvantages
Target market strategy options
– Standardized global marketing
• Undifferentiated target marketing
• Assumes global mass market
– Concentrated global marketing
• Selective niche in selective locations around the world
– Differentiated global marketing
• Pursuing multiple market segments across the globe with different marketing
mixes
Positioning
–
–
–
–
–
Attribute or benefit
Quality and price
Use or user
Relative to competitors
Global (GCCP), foreign (FCCP), or local (LCCP) consumer culture positioning
Ch. 8. Importing, Exporting and Sourcing,
Global Market-Entry Strategies
Export selling
• No changes to product, price, promotion vehicles to target global
markets
Export marketing
• Marketing mix determined by target markets across the globe
Developmental steps in exporting
• Don’t even think about it, refuse to do it
• Sporadic export selling
• Limited export marketing for one or two “easy” target markets
• Global export marketing
National Policies Governing Exports and Imports
(Subject to WTO)
Prevailing logic – encourage exports and FDI, restrict imports
Government tactics to support exports
• Tax exemptions and incentives
• Subsidies
• Direct governmental assistance
– Information
– Credit and financing
– Trade fairs and trade missions
http://www.nccommerce.com/en/BusinessServices/Int
ernationalBusiness
Government tactics to restrict imports
• Tariffs
– Rules
– Duties
– Regulation of import from specific countries of origin
• Non tariff barriers
– Quotas
– Discriminatory procurement policies and promotion programs
» http://www.ncagr.com/markets/gginc/
– Creative customs, exchange rate, administrative and technical
policies and regulations
Organizing to Export
• Major specialized organizations and functions in export channel of
distribution
Exporting from the home country of manufacture
Organizing in the market country that receives the exports
•
•
•
•
•
•
Export financing and methods of payment
Documentary credit
Documentary collections
Cash in advance
Sales on open account
Sales on a consignment basis
Countertrade
Sourcing decisions for goods and services – Outsourcing or
offshoring?
•
•
•
•
•
•
•
•
Business strategy and management vision
Land, labor, and capital availability and costs
Country infrastructure
Customer needs
Transportation and management logistics
Public opinion
Political and regulatory factors
Exchange rates and currency issues
Chapter 9. Three Global Market Entry Strategies –
Licensing, Investment, and Strategic Alliances
Evaluative criteria
• Vision and opportunity
• Risk
• Capital implications
• Control
1. Licensing
• Licensing
• Contract manufacturing or outsourcing
• Franchising
http://www.entrepreneur.com/franchise500/index.html
2. Investment (FDI Foreign Direct Investment)
• Joint venture
• Investment by ownership or share of equity
3. Strategic partnerships (aka collaborative agreements, strategic alliances,
strategic international alliances, strategic global partnerships, global
strategic partnerships, …)
• Participants independent
• Share alliance benefits
• Contribute key resources
Special issues
• Japan – Keiretsu cartels with interlocking bds of dir organized by banks
– The Big 6: Mitsubishi, Mitsui, Sumimoto, Fuyo, Sanwa, DKB
• South Korea – Chaebol
– Organized by bank or holding company dominated by founding family
• India – Tata Group Holdings
Ch. 10
Brand and Product Decisions in Global Marketing
Marketing Management
Understand the landscape for marketing management in each nation, or
political economy – the defining history, major demographic and economic
trends, social and political (legal) environment, and religious and cultural
influences that establish and influence market opportunities.
Understand the company, customers, and competition (3C’s).
Segmentation, target marketing and positioning with 4Ps.
•Product
•Price
•Place
•Promotion
•Entry strategy, implementation, evaluation, revision
•Pro forma financials
Porter’s Competitive Analysis and Strategy
Porter’s model of industry analysis organized by his five forces influencing
competition:
1. Threat of new entrants, or potential barriers to entry
2. Threat of substitute products or services
3. Power of manufacturers and trade
4. Bargaining power of suppliers further up the supply chain
5. Rivalry among competitors
Competitive Analysis and Strategy
Porter’s model of industry analysis organized by his five forces influencing
competition:
1. Threat of new entrants, or potential barriers to entry
Economies of scale
Product differentiation
Capital requirements capex/ operating costs opex
One time switching costs
Distribution channels
Government policies
Cost advantages outside scale or scope economies
Likely competitor response
2. Threat of substitute products or services
3. Power of manufacturers and trade
The “Wal-Mart Effect”?
4. Bargaining power of suppliers further up the supply chain
5. Rivalry among competitors
Coke vs Pepsi
Three winning strategies:
Overall cost leadership
Meaningful differentiation thru service, quality, style, or
technology leadership
Product-market niche focus and ownership
One losing strategy:
Being “middle-of-the-road” – not particularly excellent at
anything
(Michael Porter and others)
Porter’s Strategies for creating competitive advantage
• Cost leadership
• Product differentiation
• Cost focus
• Focused differentiation
Sequential, temporary competitive advantage from strategic intent
(Hamel & Prahalad)
“Transitory defensibility” (Didow & Garrison)
– change the rules
– collaboration and strategic partnerships
http://www.lego.com/en-us/
Ch. 12. Global Marketing Channels and Physical Distribution
Channels provide place, time, form, and information utility to customers.
B2B or B2C
• Hybrid, mixed channels
• Disintermediation
• Piggybacking marketing channels
Channels are often the most challenging aspects of marketing in either
emerging markets or developed markets.
Companies don’t compete with other companies -- supply chains and channels
of distribution compete with each other! Didow
The Role of Logistics in Global Marketing Management
GLOBAL MARKETING – Issues in the Global Economy
Presented by:
Paul Davies, Director Logistics Partner Management
Kuehne + Nagel Integrated Logistics
Kuehne + Nagel Integrated Logistics
p. 81
Agenda
1
Introduction & Kuehne + Nagel Overview
2
General Supply Chain Overview
3
Impact of Global Trend Convergence upon SCM
4
Transport Mode Overview: Evaluating Options
5
Panama Canal Expansion
Impacts upon Global Trade & US Transportation Infrastructure
6
Lessons for Global Marketers
Kuehne + Nagel Integrated Logistics
25/03/2017
p. 82
Kuehne + Nagel Overview
A Global Logistics Network
Facts and
Did
you
Figures
know?
Worldwide
Network
1,000 locations in
more than 110
countries
Integrated
Service
Portfolio
~ 63,000
employees
Warehousing
Space
7 Million m2
Turnover 2011
19,596 mCHF
Kuehne + Nagel Integrated Logistics
Seafreight
Top 1
 Sustained year-on-year double digit growth in managed
freight
 Strong partnerships with extensive range of preferred
ocean carriers
Airfreight
Top 3




Contract
Logistics
Top 3
 Top 3 global contract logistics provider
 Worldwide network of warehouse & distribution facilities
 Dedicated and shared warehousing & distribution
management
Road &
Rail
Top 6




Integrated
Logistics
Top 3
 Top 3 Global Lead Logistics Provider (LLP)
 Industry specific services for end to end supply chain
 Worldwide organization with dedicated teams and
Logistics Control Centers
Well positioned in the top league
Leader in innovative cargo management concepts
Cargo 2000 Phase II certified
Strong partnerships with preferred airlines
European Top 6 Provider
Focus on network services, LTL & FTL business
Pan-European coverage of 38 countries
Innovative intermodal solutions
Supply Chain Management vs. Logistics Supply Chain
Supply Chain Management encompasses:
•
•
•
Planning & management of all activities involved in sourcing, procurement, and conversion
Coordination & collaboration with channel partners including suppliers, intermediaries, 3rd &
4th party service providers, and customers
Logistics management activities
Supply Chain Management integrates supply & demand management within and
across companies.
Source: Journal of Operation Management
A Logistics Supply Chain is a system of organizations, people, technology,
activities, information and resources involved in moving a product or service from
supplier to customer.
Source: Council of Supply Chain Management Professionals
Kuehne + Nagel Integrated Logistics
25/03/2017
p. 84
Example Supply Chain: FMCG Vertical
Primary
(food)
ingredients
Kuehne + Nagel Integrated Logistics
finished goods
warehousing
processing
pre
processed
raw material
PRODUCTION
raw
material
raw material and
packaging warehousing
packaging
material
Secondary
retailers DC's
stores
end
consumer
wholesalers
stores
end
consumer
stores
end
consumer
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p. 85
Friedman’s “10 Flatteners” + Triple Convergence
1. “Walls come down”
2. Web Browsing
3. Workflow Software
4. Uploading / Open Source
5. Outsourcing
6. Off-shoring
7. Supply Chaining
8. Insourcing / Logistics
9. In-forming
10.“The Steroids”
Triple Convergence
1. Complementary synchronization of the flatteners
2. Horizontal collaboration
3. Socio-politico-economic liberation of ~ 3 billion
The rapidly changing business landscape, as described in The World is Flat, is forcing firms to
evaluate risk through a new lens, redefine marketing strategies, explore new markets, and
establish new partnerships around the globe. The process by which firms cope with and adapt
to this newly-leveled playing field is what Friedman calls “the Great Sorting Out.”
Kuehne + Nagel Integrated Logistics
25/03/2017
p. 86
Supply Chain Trends and Implications on Logistics
Many firms are challenged by the complexities and inherent risks involved with globalized
sourcing, distributed operations, and serving geographically-dispersed consumer markets.
Trend
Globalized Sourcing, Distribution
and Customer Markets
Outsourcing of Non-Core Activities
Segmentation of Processes &
Enablers across the Extended
Enterprise
Kuehne + Nagel Integrated Logistics
Logistics Implications
Increased Volatility in the form of longer lead-times,
supply disruptions, price fluctuations, and security risks
Limit investments in non-core logistics
activities; outsource without losing control
Proliferation of IT Integration Needs over an increasingly
complex supply chain
25/03/2017
p. 87
Supply Chain Trends and Implications
 Inherent Risks of Globalization
Sourcing from low cost countries
elongates the supply chain, increases
product lead-times, and significantly
raises the potential for supply
disruptions…
Top 5 Supply Chain
Risks
Increase
from 2008
Supply Failure
38%
28%
Price Volatility
36%
45%
Product Quality
Failures
Lower Consumer
Spend
Regulatory
Compliance
35%
34%
32%
Top 5 Supply Chain Risks – Contributed
by China
Intellectual Property
Infringement
57%
Internal Product Quality
Failures
52%
Supplier Product Quality
Failures
50%
Supply Chain Security
Breaches
41%
Rising Labor Costs
35%
24%
63%
Source: AMR Research, 2008
Source: AMR Research, 2009
2009
...and the single most popular
source of goods over the past
decade is one of the most risky
places to source from.
29%
Increasingly, our client base is looking for strategies to help minimize the impact of
supply chain volatility.
Kuehne + Nagel Integrated Logistics
25/03/2017
p. 88
Supply Chain Trends and Implications
 Inherent Risks of Globalization
Global sourcing of raw materials and finished goods results in longer product lead times. At the
same time, many firms are targeting reductions in inventory investment. Longer lead times,
combined with less inventory, increases a firm’s exposure to stock outs.
Modern Just-in-Time
Traditional Mass-Based
 Prime Objective: Avoid Stock Outs
 More is better
 Uses massive inventory to hedge
against supply & demand uncertainty
 High inventory and facility costs
Logistics
Evolution





Prime Objective: Flow Time
On-time is better
Inventory reduced to minimum & kept moving
Small but frequent shipments
Uses demand prediction and static optimization to
purge uncertainty
 Lean inventory levels mean no room for
fluctuations in demand
Managing the flow of goods, information, and funds across borders is highly regulated,
complex, and continuously changing.
Current Trade Management Challenges:

Increased regulatory burden saps valuable resources

Complexity of each country’s rules and subtle variations from country-to-country

Data from multiple sources requires proper management and optimization for international reporting

Changes in sourcing could significantly impact a company’s international trade and customs position
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Supply Chain Trends and Implications
 Outsourcing Non-Core Activities as a Means to Manage Risk
Supplier
Reverse Logistics
Inbound Supply
Distribution
Centre
Supplier
Distribution
Receiving
Customer
End
Customer
Manufacturing
Spare Part Services
Integrated Logistics Solutions Provider
Order- & Data
Management
Sea Freight
Kuehne + Nagel Integrated Logistics
Air Freight
Road & Rail
Warehousing &
Distribution
Compliance &
Documents
25/03/2017
p. 90
Supply Chain Trends and Implications
 Outsourcing Non-Core Activities as a Means to Manage Risk
Many companies view collaborative outsourcing as a strategy to mitigate risk, add
expertise to augment or replace internal competencies, reduce costs, and improve
service & efficiencies.
Typical Functions
Outsourced
Business Challenge(s) Addressed
* Facilitate product classification
* Create and file trade documentation
* Conduct denied party screening
Trade Management
* Assign export and import licenses
* Communicate electronically with regulatory agencies
* Determine preferential trade eligibility
* Identify qualified partners & suppliers in new & expanding markets
Logistics Procurement &
* Introduce consistent, globally-aligned processes for sourcing & selecting local, regional, and global
supply chain partners
Contract Management
* Manage supplier compliance to contracted terms & conditions
* Reverse poor supplier compliance with a focused approach to monitoring, measuring, and
managing provider performance
Supplier Management
* Establish clear linkage between contractual obligations and operational outcomes
* Load planning & scheduling
* Asset utilization
Transportation Management
* Excessive expedite freight spend
* Missed promised customer delivery dates
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Supply Chain Trends and Implications
 Proliferation of IT Integration Needs
Supply chain effectiveness is dependent upon adaptability. Integration solutions
enable and improve adaptability by providing visibility to internal and external flows
of material, capital, and information
Production
Distribution
Transit Hub
Customer
Supplier
Parts
Information
Finances
Multi-tier supply base
necessitates visibility to
sourcing, operational, and
financial flows.
Kuehne + Nagel Integrated Logistics
International trade
involving numerous
regulatory jurisdictions and
3rd party partners makes
root cause analysis difficult
Visibility of end-to-end multimodal transportation is
complicated by the presence
of multiple 3rd party transport
providers
Changing delivery
requirements complicate
attempts at achieving
clear visibility
Comparison of Major Transport Modes
A product marketing manager planning a New Product Introduction (NPI) must be as
concerned with HOW a product gets to market as they are with WHEN that product gets to
market.
The prudent product manager always evaluates competing modal options in order to weigh
multi-faceted trade-offs in the following areas:
• Cost
• Transport network capacity
• Transit time / speed
• Emissions generation
• Transport network reliability
Emissions
low
low
moderate
high
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Considerations for Transport Mode Selection
Cost
 Modal choice can significantly influence product cost and profit margin
 How much does transportation contribute to my total landed cost?
 Freight cost per kg; freight as % of sales; cost per ton-km; cost per pound-mile; cost per unit of material shipped
Transit Time




Rule of thumb suggests faster transit will result in higher cost
What is the premium we are willing to pay to reduce time to market?
Under what circumstances should we expedite incoming supply to avoid production schedule slippage?
Growth in e-commerce & lean inventory focus are increasing velocity of global goods (smaller, faster, and more
frequent shipments)
Reliability
 Network advantages, owned versus outsourced terminal infrastructure and/or transport assets
 Risk of delay or risk of damage from excessive handling
 Infrastructure capacity – will my demand for “space” be met within my chosen mode?
Sustainability
 Is sustainability a major component of my branding strategy? Corporate initiatives supporting sustainable practice?
 Under what circumstances is sustainability consistent with the profit motive?
Accessibility
 All modes are not interchangeable - low accessibility to key terminals (ocean & rail) limit choices for many shippers
Kuehne + Nagel Integrated Logistics
Examples of General Modal Comparisons
Comparison of Transit Times by Transport Mode
Time (days)
Comparison of CO2 Emissions by Transport Mode
Distance (hundreds of miles)
Sample Cost per Ton-Km
$0.35
$0.30
International Journal of Lean Thinking Volume 1, Issue 1 (June 2010)
$0.25
$0.20
$0.15
$0.10
$0.05
$Air
Ocean
Kuehne + Nagel Integrated Logistics
Road
Rail
Modal Trade-Offs: Real World Comparisons
Trade-offs should always be considered within the context of your specific business. Examples of
actual trade lane modal comparisons may look like this:
International:
8,000 kgs or ~8 Metric Tons
Air
Lane
Chicago-Luxembourg
Bangkok-Los Angeles
Cleveland-Rotterdam
Shanghai-London
Ocean
Shipment
Cost
Cost per
Ton-km
Transit
Time
$
$
$
$
$
$
$
$
3 days
5 days
4 days
4 days
17,600
37,680
16,080
27,200
0.31
0.35
0.32
0.36
CO2
Emissions
(MT)
3.8
7.2
3.4
5.1
Shipment Cost per Ton- Transit
Cost
km
Time
$
$
$
$
4,119
3,600
3,605
2,350
$
$
$
$
0.07
0.03
0.07
0.03
16 days
22 days
18 days
31 days
CO2
Emissions
(MT)
0.1
0.2
0.1
0.1
US Domestic: 22,000 lbs or ~10 Metric Tons
Air
Lane
Raleigh-Minneapolis
Los Angeles-Philadelphia
Hartford-Miami
Shipment
Cost
$
$
$
Cost per
Ton-km
19,598 $
22,768 $
19,598 $
Kuehne + Nagel Integrated Logistics
1.15
0.58
0.97
Road
Transit
Time
2 days
2 days
2 days
CO2
Shipment
Emissions
Cost
(MT)
0.9
$ 1,839
2.1
$ 4,168
1.1
$ 2,692
Cost per Ton- Transit
km
Time
$
$
$
0.11
0.11
0.13
3 days
6 days
3 days
Rail
CO2
Shipment Cost per Transit
Emissions
Cost
Ton-km
Time
(MT)
0.1
$ 1,488 $
0.09 7 days
0.2
$ 3,250 $
0.08 9 days
0.1
$ 2,100 $
0.10 6 days
CO2
Emissions
(MT)
0.04
0.09
0.04
Air Freight as a Key Flattener
The highly-distributed workforce collaborates via workflow platforms to create, design, and
manufacture goods for global distribution. The value of those goods is a key determinant in
how they are transported to market.
Professor John Kasarda’s Aerotropolis highlights air transport’s role as a key flattener
 “Space overcome by speed”
 Air-freight collapses the distance between global cities “as effortlessly as the internet nodes
connecting them”
Supply Chain Velocity has become a Key Differentiator for Innovative Brands
Producers of high value fast-moving goods (tablets, mobile phones, fashion, perishables)
depend upon supply chain velocity to maintain competitive position.
 Apple replenishes inventory on retail shelves around the world directly from OEM factories in
Shanghai, Chengdu, and Shenzen within days of receiving an order
 Zara “fast fashion” – style as perishable commodity
Kuehne + Nagel Integrated Logistics
The Quest for Scale in the Global Transport of Goods
Container Ship Evolution
Ocean Shipping via Containerships
Container vessels are the most common means for moving non-time-sensitive, non-bulk
cargo over long distances. Cargo is loaded into standardized twenty-foot-equivalent-unit
boxes (TEUs) for ease of handling & stowage during transport.
Containerization began in the 1950’s and has continued to evolve toward greater efficiency
 Efficiency gains are measured in terms of net contribution per TEU (revenue per
container less operating cost per container)
 Incentive for building vessels of ever-increasing size will always exist, provided revenue
potential from adding capacity exceeds cost to add capacity
 Earliest container ships could transport 300-500 TEU per voyage compared to the
18,000 TEU vessels on order today
Despite rapid growth in containership capacity, the development of trade infrastructure
such as waterways, ports, and land-side terminals has not kept pace. As a result,
routes and ports of call for the largest of today’s largest containerships are limited.
The Panama Canal offers a clear example of how infrastructure limitations are
being addressed, and how the anticipated follow-on effects will be felt by us all.
Kuehne + Nagel Integrated Logistics
More Global Goods and Larger Vessels to Move them…
Infrastructure Races to Catch Up
This vessel has a fully loaded capacity of 6,500 TEU,
but is limited to 4,550 TEU when transiting the
Panama Canal . Vessels of this size are among the
largest capable of passing through the current system
of locks.
This containership has a capacity of 15,000 TEU,
which puts it among the largest vessels on the water
today. Its draft, width, and length all surpass current
limits for vessels in the Panama Canal.
Kuehne + Nagel Integrated Logistics
The Quest for Scale in the Global Transport of Goods
Container Ship Evolution – Limitations of Panama Canal
Current
Panama Canal
Limitation
Planned
Panama Canal
Limits (2014)
Kuehne + Nagel Integrated Logistics
Panama Canal Expansion
Since 1914, the Canal has provided a short, cost-effective passageway between the Pacific &
Atlantic Oceans, allowing all-water freighter service between Asia and US East and Gulf Coasts.
Due to size restrictions, today’s larger, more efficient vessels must avoid the Canal and discharge
their cargo on the US West Coast – requiring additional, more costly movement to inland points
 While 2/3 of US population is east of the Mississippi, only 1/3 of all inbound cargoes are discharged
there (Port of Charleston Authority)
 Midwestern and East Coast shippers & importers pay higher transport costs to move goods to/from West
Coast ports than via US East or Gulf ports
Efficiency gains & cost reductions made possible with larger vessels are not shared
evenly
Demand from shippers (primarily importers of Chinese-made products) and various trade
interests, as well as pressure from ocean carriers, has led to Panama Canal Expansion
 Currently underway, expected completion early 2014
 Expansion in draft (40‘ to 50‘); width (110‘ to 180‘); length (1080‘ to 1490‘); TEUs (4550 to 15000)
Expansion of the Panama Canal is poised to dramatically alter global trade
flows once again.
Kuehne + Nagel Integrated Logistics
Panama Canal Expansion
Construction of a 3rd set of locks, parallel to the
existing passageway, is underway and
scheduled for completion in early 2014.
Three phases of this multi-year commitment appear below.
3
2
Kuehne + Nagel Integrated Logistics
Panama Canal Expansion will Impact Markets
Kuehne + Nagel Integrated Logistics
Trade Off Scenarios
Lower handling costs, less
port congestion, proximity to
population centers, and a
more stable union labor
environment all result in
comparatively lower total
landed costs for importers
using an all-water service via
the East Coast; however, in
exchange for these lower
costs, importers must be
willing to accept a longer
lead time on products from
Asia.
(via Suez Canal)
Kuehne + Nagel Integrated Logistics
Panama Canal Expansion
Impacts upon Port Infrastructure
East and Gulf Coast ports in the
US are racing to dredge their
harbors, modernize their
terminals, develop more robust
rail linkages, and expand
interstate access in an effort to
lure new post-Panamax vessel
operators.
Competition among ports is heating up as regional
economic interests vie to attract increased cargo
throughput promised with larger ocean vessels. New
jobs and hope for an economic recovery hang in
the balance.
Kuehne + Nagel Integrated Logistics
Marketing Management & “The Great Sorting Out”
The Flat World dramatically expands markets for goods and services
 Global consumer pool has grown exponentially over last 2-3 decades
In the Flat World, low-cost sourcing is legitimized and takes place on an
unprecedented scale
 Reducing labor, materials, and manufacturing costs for firms around the globe
 Driving consumerism and middle class growth rates
The benefits of a Flat World are clear, but we must also consider the trade-offs:
 Cost versus speed (time versus money)
 Trade management complexity - potential barrier to entry
 Market-specific distribution strategy, including distribution partners, logistics
infrastructure / capability
 Relationship between demand-supply within the context of longer product lead-times,
price volatility, and quality
 Sustainability (e.g. “food miles”) – just because you can source from afar, doesn’t always
mean you should…
 Ethical implications
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25/03/2017
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http://www.voanews.com/content/newnicaragua-canal-may-change-globaltrade/1739153.html
Kuehne + Nagel Integrated Logistics
p. 107
Market-Oriented Strategic Planning –
High Performance Businesses in the Global Economy
Lessons and general findings:
•Market and financial success are possible even in a hostile
domestic and global environment
•Market-oriented strategies leading to success evidence
common characteristics:
•Achieve low delivered cost position, or
•Achieve “meaningful” product differentiation, or
•Achieve both low cost and product differentiation
•Successful strategies come from purposeful, intentional
moves toward leadership
•Problems come from failing to capture or defend market
leadership
•Diversification is a risky growth strategy
http://www.kodak.com