Global Marketing Management

multinational companies
-confronted with increasing global competition for expanding markets
-changing their marketing strategies and altering their organizational structure
-nearly 75% of US and European corporations are revamping their business processes
smaller companies
-more flexible
-many enable them to reflect the demands of global market and redefine programs more quickly
global marketing management (1970’s)
“standardization vs. adaption”
global marketing management (1980’s)
“globalization vs. localization”
global marketing management (1990’s)
“global integration versus local responsiveness”
trend back toward localization
-caused by the new efficiencies of customization
-made possible by the internet
-increasingly flexible manufacturing processes
customization
always the best in terms of marketing perspective
benefit of global marketing: when large market segments can be identified
-economies of scale in production of marketing
-important competitive advantages from global companies
benefit of global marketing: transfer of experience and know how
-across countries through improved coordination and integration of marketing activities
benefit of global marketing: marketing globally
-ensures that marketers have access to the toughest customers
-market diversity caries with it additional financial benefits
-firms are able to take advantage of changing financial circumstances
porters diamond
-the basis framework to illustrate the determinants of national advantage
-represents national playing field that countries establish for their industries
-low competition can make an industry attractive, but on the long term high domestic competition motivate firms to be innovative
structure of firms
1. intensity of competition
2. number of competitors
3.capital intensity
4. competitive advantages
5 .management culture
6. organizational structure
structure of firms increases…
competitiveness
German firms are…
good at engineering
Italian firms are…
creative
factor conditions (basic factors)
-climate and geographical situation
-demographic variables (growth of aging of population, culture, and ethics)
factor conditions (advanced factors)
1. Advanced factors are the products of investments of companies. A country creates its own factors such as skilled resources and technological base.
2. qualification, quantity, and cost of labor force (HR)
3. quantity and cost of labor force, which ensures financing of the economy
4. quality and cost of infrastructure (communication, transportation, health)
factor conditions
-basic factors
-advanced factors
-the stock of factors at a given time is less important than the extent they are upgraded and deployed
-local disadvantages in factors of production force innovation
advanced factors
the products of investments of companies
vertical support
-existence of internationally competitive supplier industries
horizontal support
-existence of internationally competitive supporting industries
related and supporting industries
– nations are not successful as isolated industries, but as industry groups with vertical and horizontal supporting
-ex: industrial enzims of Danmark are very competitive, because of the successful Danish dairy products
demand factors
1. when the demand for a product is larger locally than in foreign markets, the local firms devote more attention to that product than do foreign firms, leading to a competitive advantage when the local firms begin exporting the product
2. a more demanding local market leads to national advantage
3. A strong, trend-setting local market helps local firms anticipate global trends
4. sophisticated local customers force firms to innovate and have high quality products
a more demanding local market –>
national advantage
strong trend-setting local market–>
helps local firms anticipate global trends
sophisticated local customers–>
force firms to innovate and high quality products
Government can influence all factors:
1. direct and indirect financial support
2. tax exempt
3. enforcing strict product standards and environmental laws
4. stimulate early demand for advanced products: governmental tenders
5. focus on specialized factor creation: education
6. stimulate local rivalry but by limiting direct cooperation and enforcing antitrust regulations
chance
-ad hoc events can also effect firms negatively or positively
1. important technological inventions
2. foreign governments political decisions (ex: embargoes
3. war, vis major
4. dramatic changes in currency
5. sudden changes in prices effecting raw material prices (oil price born in the 70’s)
6. sudden changes in worldwide demand or customer preference (digitalization)
Reasons for Japanese dominance in fax industry:
1. Japanese factor conditions: Japan has relatively high electrical engineers per capita
2. Japanese demand conditions: The Japanese market was very demanding because of written language
3. Large number of related and supporting industries with good technology (Ex: good miniature components since there is less space in Japan)
4. Domestic rivalry in this type of market pushed innovation and resulted in rapid cost reductions
5. Government support: NTT (state-owned telecom company) changed its cumbersome approval requirements for each installation to a more general type approval
major points
– no longer possible for a country to insulate itself from the rest of the world
– with the current industrialized world there is a narrowing gap between it and third world countries
– the accelerated pace of change is what disturbs the pessimists because they can see it happening
– took Britain 60 years to double its output, US 50 , but developing countries are doubling their output every 12 years. China doubled its GDP in 6 years
– in may respects the developing world is unknown economic and financial territory
conclusions
-the diamond of national advantage as means of understanding global economic success
– domestic success does not prepare countries to compete globally
– major european companies and increasing number of Asian countries are capable of competing on a global basis
– the global marketplace is only going to get tougher based on more, tougher competitors
-the diamond can help to anticipate and understand new competitors
international planning process
– information derived from each phase, market research, and evaluation of program performance
– 4 phases
international planning process (phase 1)
-preliminary analysis and screening: matching company/country needs
-environmental factors, company characters, and screening criteria
-company character
-home-country constraints
-host country(s) constraints
international planning process (phase 2)
-adapting the marketing mix to target markets
-matching mix requirements
-product
-price
-promotion
-distribution
international planning process (phase 3)
-developing the market plan
-marketing plan development
-situation analysis
-objectives and goals
-strategy and tactics
-selecting mode of entry
-budget
-action programs
international planning process (phase 4)
-implementation and control
-implementation, evaluation, and control
-objectives
-standards
-assign responsibility
-measure of performance
-correct for error
alternative market-entry strategies
-an entry strategy into international market should reflect the analysis of:
-market characteristics
– company capabilities and characteristics
alternative market-entry strategies (market characteristics)
– potential sales
-strategic importance
-strengths of local resources
– cultural differences
-country restrictions
alternative market-entry strategies (company capabilities and characteristics)
-degree of near-market knowledge
-marketing involvement
-management commitment
*direct franchising model
-nder this model, the franchisor grants to the franchisee the right to open one franchised business at one location, with a specified geographic range that will be protected from other franchised businesses of the same system, for instance the right to open one fast-food restaurant at a particular address. Additional franchises may be granted based on the performance of the first location. In most cases, it will be rare for the franchisee under this model to be required to satisfy performance criteria or sales quotas.
-purest form of franchising a business
*indirect franchising model
contractual agreements
-long-term, non-equity association between a company and another in a foreign market
licensing
-a mean of establishing a foothold in a foreign market without large capital outlays
-a favorite strategy for small and medium sized companies
-legitimate means of capitalizing on intellectual property in a foreign market
franchising
– 2 types of agreements
– master franchise
-licensing
– provides a standard package of products, system, and management services
-provides market knowledge, capital, and personal involvement in management
master franchise
– type of franchise agreement
-gives the franchise rights to a specific area with the authority to sell or establish sub franchises
licensing
– type of franchise agreement
-the right to use a good, service, trademark, patent, or other asset for a fee
contract manufacturing
-in business model, the hiring firm approaches the _______ with a design or formula
-quote parts based on processes, labor, tooling, and material costs. Typically hiring firms will request quotes from multiple CM’s
– after the bidding process is complete, will select a source, for the the agreed upon price, the CM acts as the hiring firms factory, producing and shipping units of design on behalf of the hiring firm
– its a form of outsourcing
benefits of contract manufacturing
1.cost savings
2.advanced skills
3.focus
4.economies of scale
cost savings (CM)
-companies save on their cost of capital and labor
advanced skills (CM)
-companies can take advantage of skills they may not possess, but the contract manufacturer does. The contract manufacturer is likely to have relationships formed with raw material suppliers or methods of efficiency within their production
focus (CM)
-companies can focus on their core competencies better if they hand off base production to an outside company
economies of sale (CM)
-contract manufacturers have multiple companies that they can produce for
risks of contract manufacturing
1. lack of control
2. relationships
3. quality concerns
4. IP loss
5. Outsourcing risks
6. capacity constraints
7. loss of flexibility and responsiveness
relationships (CM)
-the company is not the only customer to the manufacturer
IP loss (CM)
– a company should not give out any of its core competencies to its contract manufacturer
outsourcing risks (CM)
-cultural differences and language barriers and long lead times
capacity constraints (CM)
-if a company does not make up a large portion of the contract manufacturers business, they may find that they are de-prioritized over the other companies during high production periods
strategic international alliances (SIAs)
-sought as a weigh to shore up weaknesses and increase competitive strengths
Reasons firms enter SIAs
-opportunities for rapid expansion into new markets
-access to new technology
-more efficient production and innovation
-reduced market costs
-strategic competitive moves
-access to additional sources of product and capital
international joint ventures (IJVs)
– a partnership of 2 or more participating companies that have joined forces to create a separate legal entity
-4 characterisitics
Characteristics of joint ventures
-established, legal entities
-acknowledge intent by the partners to share in the management of it
-there are partnerships between legally incorporated entities, such as companies, characterized organizations or governments, and not between individuals
-equity positions are held by each of the partners
consortia
-developed to pool financial and managerial resources and to lessen risks
-similar to joint ventures and could be classified as such except for two unique characteristics :
– 1. typically involve a large number of participants
– 2. frequently operate in a country or market in which none of the participants is currently active
(Direct Foreign Investment) Factors that influence the structure and performance of direct investments:
-timing
-the growing complexity and contingencies of contracts
-transaction cost structures
-technology transfer
-degree of product differentiation
-the previous experiences and cultural diversity of acquired firms
-advertising and reputation barriers
companies usually structured around 1 of 3 alternatives:
1. global product sales responsible for product sales throughout the world
2. geographical divisions responsible all products and functions within a given geographical area
3. a matrix organization consisting of either of these 3 arrangements
-with centralized sales and marketing run by centralized functional staff, or a combination of area operations and global product management
IP loss (CM)