Download Chapter 1 Introduction to Global Marketing

Introduction to
Global Marketing
Global Marketing
Chapter 1
1
Introduction
• Global vs. “Regular” Marketing
– Scope of activities are outside the homecountry market
1-2
©2011 Pearson Education, Inc. publishing as Prentice Hall
• The matrix shows that Market Development is
defined as taking existing products into new
markets. Wal-Mart’s expansion into Guatemala
and other Central American countries is an
example of this strategy.
• Diversification strategy is used by LG to enter the
American appliance market or Japan’s Kirin
holdings which bought Australia’s leading milk
producer.
1-3
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Diversification is developing new products
for new markets. South Korea’s LG
Electronics has created new products for
other American home appliance market.
Innovations like a $3,000 refrigerator with
a built-in flat panel LCD TV have been
instrumental in Home Depot’s decision to
carry the appliance product line.
1-4
©2011 Pearson Education, Inc. publishing as Prentice Hall
What is global marketing? How does it differ
from “regular” marketing?
• Marketing is an organizational function and
a set of processes for creating,
communicating, and delivering value to
customers and for managing customer
relationships in ways that benefit the
organization and its stakeholders.
• One difference between "regular"
marketing and "global" marketing is the
scope of activities.
1-5
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Marketing activities center on an organization’s
efforts to satisfy customer wants and needs with
products and services that offer competitive
value. The marketing mix (product, price, place,
and promotion) comprises a contemporary
marketer’s primary tools.
• An organization that engages in global marketing
focuses it resources and competencies on global
market opportunities and threats. A fundamental
difference between “regular” marketing and
“global” marketing is the scope of activities.
1-6
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Global marketing may also take the form of a
diversification strategy in which a company
creates new products or services and introduces
them into new geographical markets.
1-7
©2011 Pearson Education, Inc. publishing as Prentice Hall
Global Marketing
PRINCIPLES OF MARKETING :A REVIEW
• Create value for customers by
improving benefits or reducing price
– Improve the product
– Find new distribution channels
– Create better communications
– Cut monetary and non-monetary costs and
prices
Value=Benefits/Price
1-8
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Marketing is one of the functional areas of
business – distinct from finance and operations.
• The core of marketing is to surpass the
competition in creating perceived value for
customers. The value equation is the guide to
this:
• Value = Benefits / Price (money, time, effort, etc.
• The marketing mix is central to this equation
because benefits are a combination of the
product, promotion, and distribution components
of the mix.
1-9
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Value to the customer can be increased in two
ways – 1. an improved bundle of benefits or 2. a
lower price (or both).
• Marketers may improve the product, design new
channels of distribution, communicate better – or
a combination of all three.
• Marketers may seek ways to cut costs or lower
the price. Nonmonetary costs may be lowered by
decreasing the time and effort customers must
expend to learn about or acquire a product.
1-10
©2011 Pearson Education, Inc. publishing as Prentice Hall
Competitive Advantage
• When a company succeeds in creating more value
for customers than its competitors, that company
is said to enjoy competitive advantage in an
industry.
• Competitive advantage is measured relative to
rivals with whom you compete in the industry –
whether that is on a local, national, or global
level.
1-11
©2011 Pearson Education, Inc. publishing as Prentice Hall
• If a company is able to offer a combination of
superior product, distribution or promotion
benefits and lower price than competitors, it
should enjoy a competitive advantage.
• Japanese auto makers made significant gains in
the American market in the 1980s by creating a
superior value proposition. They offered cars with
higher quality and lower prices than those made
by American car companies.
1-12
©2011 Pearson Education, Inc. publishing as Prentice Hall
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 nationstates to reach around the world farther, faster,
deeper and cheaper than every 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
1-13
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Global marketing is essential if a company
competes in a global industry or one that is
globalizing.
• What is “globalization”?
• The process of globalization is the
transformation of formerly local or national
industries into global ones.
1-14
©2011 Pearson Education, Inc. publishing as Prentice Hall
Global Industries
• A global industry is one in which
competitive advantage can be achieved by
integrating and leveraging operations on a
worldwide scale.
• Achieving competitive advantage in a
global industry requires executive to
maintain focus. Focus is the concentration
of attention on the core business or
competence (e.g. Nestle).
1-15
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Value, competitive advantage, and focus
are universal in their relevance and they
should guide marketing efforts in any part
of the world.
• Fundamental Premise: Companies that
understand and engage in global marketing
can offer more overall value to customers
than companies that do not.
1-16
©2011 Pearson Education, Inc. publishing as Prentice Hall
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, former chairman of Nestlé SA
1-17
©2011 Pearson Education, Inc. publishing as Prentice Hall
Global Marketing: What It Is
and What It Isn’t
Single Country
Marketing Strategy
• Target Market Strategy
• Marketing Mix
–
–
–
–
Product
Price
Promotion
Place
Global Marketing
Strategy
• Global Market Participation
• Marketing Mix Development
– 4 P’s: Adapt or Standardize?
• Concentration of Marketing
Activities
• Coordination of Marketing
Activities
• Integration of Competitive
Moves
1-18
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Since countries and people are different,
marketing practices that work in one country will
not necessarily work in another.
• Customer preferences, competitors, channels of
distribution, and communication may differ.
• Global marketers must realize the extent to
which plans and programs may be extended or
need adaptation.
• The way a company addresses this task is a
reflection of its global marketing strategy (GMS).
1-19
©2011 Pearson Education, Inc. publishing as Prentice Hall
What are the two core issues of a firm’s
GMS?
• Just as in single-country marketing, choosing a
target market and developing a marketing mix
are the two core issues of a firm’s GMS.
• Global market participation – the extent to
which a company has operations in major world
markets.
• Standardization versus adaptation – the extent
to which each marketing mix element can be
standardized (used the same way) or must be
adapted (used in different ways) in different
country markets.
1-20
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Concentration of marketing activities – the
extent to which activities related to the marketing
mix (such as pricing decisions) are performed in
one or only a few country locations.
• Coordination of marketing activities – the extent
to which marketing activities related to the mix
are planned and executed interdependently
around the globe.
• Integration of competitive moves – the extent to
which a firm’s competitive marketing tactics in
different parts of the world are interdependent.1-21
©2011 Pearson Education, Inc. publishing as Prentice Hall
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
1-22
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Global marketing made Coke a worldwide
success. However, that success was not based on
a total standardization of marketing mix
elements.
• Coca-Cola succeeded through the application of
global localization.
What does the term “global localization” mean?
• Global localization: Think globally, act locally.
1-23
©2011 Pearson Education, Inc. publishing as Prentice Hall
Standarization versus Adaptation
Arabic
Read right to left
Chinese
“delicious/happiness”
1-24
©2011 Pearson Education, Inc. publishing as Prentice Hall
The Faces of Coca-Cola Around the World
• Global marketing requires marketers to think and
act in a way that is both global and local by
responding to similarities and differences in world
markets.
• For example, McDonald’s global marketing
strategy is based on a combination of global and
local marketing mix elements
1-25
©2011 Pearson Education, Inc. publishing as Prentice Hall
McDonald’s Global Marketing
Marketing Mix Element
Standardization
Product
Big Mac
Localized
McAloo Tikka potato burger
(India)
Promotion
Brand name
Slang Macca’s (Australia)
MakDo (Philippines)
Place
Advertising Slogan
“I’m Loving It”
McJoy magazine, “Hawaii
Surfing Hula” promotion
(Japan)
Free-standing
Home delivery (India)
Swiss rail system dining cars
Price
Big Mac is $3.10 in
U.S. and Turkey
$5.21 (Switzerland)
$1.31(China)
1-26
©2011 Pearson Education, Inc. publishing as Prentice Hall
The Importance of
Going Global
• For U.S. companies, 75% of total world
market for goods and services is outside the
country
– Coca-Cola earns 75% of operating income and 2/3
of profit outside of North America
• For Japanese companies, 85% of world
market is outside the country
• 94% of market potential is outside of
Germany for its companies
1-27
©2011 Pearson Education, Inc. publishing as Prentice Hall
The Fortune Global 500
1-28
©2011 Pearson Education, Inc. publishing as Prentice Hall
Consumer/Industrial Markets
Product/Service
Market Size (Billions)
Cigarettes
$295
Luxury Goods
230
Cosmetics
200
Personal Computers
175
Bottled Water
100
Container Shipping
150
Construction Equip.
90
Crop Seeds
30
CRM Services
6
©2011 Pearson Education, Inc. publishing as Prentice Hall
1-29
Management Orientations
• The form and substance of a company’s response
to global market opportunities will depend
greatly on management’s assumptions and beliefs
– both conscious and unconscious - about the
nature of the world.
• What are the four “global” management
orientations?
• The world view of a company’s personnel can be
described as ethnocentric, polycentric,
regiocentric, and geocentric.
1-30
©2011 Pearson Education, Inc. publishing as Prentice Hall
Management Orientations
• Ethnocentric Orientation
– Home country is superior to others (Foreign operations are
typically viewed as being secondary or subordinate to the
country in which the company is headquartered)
– Sees only similarities in other countries
– Assumes products and practices that succeed at home will be
successful everywhere
– Leads to a standardized or extension approach- the belief that
products can be sold everywhere without adaptation.
– Ethnocentric companies that conduct business outside their
home country are known as international companies – they
believe products that succeed in the home country are
1-31
superior.
©2011 Pearson Education, Inc. publishing as Prentice Hall
Management Orientations
• Polycentric Orientation
– The opposite view of ethnocentrism.
– Each country is unique
– Each subsidiary develops its own unique
business and marketing strategies
– Often referred to as multinational
– Leads to a localized or adaptation approach
that assumes products must be adapted to
local market conditions
1-32
©2011 Pearson Education, Inc. publishing as Prentice Hall
Management Orientations
• Regiocentric Orientation
– A region is the relevant geographic unit
• Ex: The NAFTA or European Union market
– Some companies serve markets throughout
the world but on a regional basis
• Ex: General Motors had
four regions for decades
– May be viewed as a variant of the
multinational view (polycentric).
©2011 Pearson Education, Inc. publishing as Prentice Hall
European Union
1-33
Management Orientations
• Geocentric Orientation
–
–
–
–
Entire world is a potential market
Strives for integrated global strategies
Also known as a global or transnational company
Retains an association with the headquarters
country
– Pursues serving world markets from a single
country or sources globally to focus on select
country markets
– Leads to a combination of extension and
adaptation elements
1-34
©2011 Pearson Education, Inc. publishing as Prentice Hall
• A key factor that distinguishes global and
transnational companies from international or
multinational companies is mind-set: At global
and transnational companies, decisions regarding
extension and adaptation are not based on
assumptions but rather on made on the basis of
ongoing research into market needs and wants.
1-35
©2011 Pearson Education, Inc. publishing as Prentice Hall
• What is the key global challenge facing
organizational leaders today?
• The key challenge facing organizational
leaders today is managing a company’s
evolution beyond an ethnocentric,
polycentric, or regiocentric orientation to a
geocentric one.
1-36
©2011 Pearson Education, Inc. publishing as Prentice Hall
Forces Affecting Global Integration
and Global Marketing
• The remarkable growth of the global economy
over the past 65 years has been shaped by the
dynamic interplay of various driving and
restraining forces.
• Regional economic agreements, converging
market needs and wants, technology advances,
and pressures to cut costs, pressures to improve
quality, improvements in communications and
transportation technology, global economic
growth, and opportunities for leverage all
1-37
represent important driving forces.
©2011 Pearson Education, Inc. publishing as Prentice Hall
Driving Forces Affecting Global
Integration and Global Marketing
• Multilateral trade
agreements
• Converging market needs
and wants and the information
revolution
• Transportation and communication
improvements
• Product development costs
©2011 Pearson Education, Inc. publishing as Prentice Hall
1-38
Multilateral Trade Agreements
• NAFTA (North American Free Trade Agreement)
has expanded trade among the US, Mexico, and
Canada.
• GATT (General Agreement on Tariffs and Trade)
has created the WTO (World Trade Organization)
to promote and protect free trade.
• EU (European Union) is lowering boundaries to
trade within the region.
1-39
©2011 Pearson Education, Inc. publishing as Prentice Hall
Converging Market Needs and Wants
and the Information Revolution
• A person studying markets around the world will
discover cultural universals as well as differences.
Most global markets to not exist in nature –
marketing efforts must create them. (For
example, no one needs soft drinks.)
• Evidence is mounting that consumer needs and
wants around the world are converging today as
never before. This creates an opportunity for
global marketing.
1-40
©2011 Pearson Education, Inc. publishing as Prentice Hall
• The information revolution is one reason for the
trend toward convergence. Thanks to satellite
dishes and globe-spanning TV networks (CNN and
MTV), it seems as though almost everyone has
the opportunity to compare their lives against
everyone else’s.
• The Internet is an even stronger driving force.
When a company establishes a presence on the
Internet, it is automatically a global company.
1-41
©2011 Pearson Education, Inc. publishing as Prentice Hall
Transportation and
Communication Improvements
• Time and cost barriers associated with distance
have fallen tremendously over the past 100 years.
• The jet airplane revolutionized communication by
making it possible for people to travel around the
world in less than 48 hours.
• The newest communication technologies, such as
e-mail, video teleconferencing, and Wi-Fi, means
that managers, executives, and customers can
link up electronically from virtually any part of the
globe without traveling at all.
1-42
©2011 Pearson Education, Inc. publishing as Prentice Hall
Product Development Costs
• The pressure for globalization is intense when
new products require major investment and long
period of development time. The pharmaceutical
industry provides a good example of this driving
force.
• Today, the process of developing a new drug and
bringing it to market can span 14 years and
exceed $400 million. Such cost must be recovered
globally because no single national market is
likely to be large enough to support investments
of this size.
1-43
©2011 Pearson Education, Inc. publishing as Prentice Hall
Quality
– R&D as a percent of sales
• Global and domestic companies
may each spend 5% of sales on
R&D but the global company has
much more revenue from its
markets.
• Global companies “raise the bar”
for all industry competitors.
Nissan, Matsushita, and
Caterpillar have achieved worldclass quality.
1-44
©2011 Pearson Education, Inc. publishing as Prentice Hall
World economic trends
– 2008 global crisis
– Growing middle class in China, India,
Brazil, etc.
– Rapid growth in China pre-2008
– Movement to free markets worldwide
1-45
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Economic growth has been a driving force in the
expansion of the international economy and the
growth of global marketing for three reasons
• Economic growth in key developing countries has
created market opportunities that provide a
major incentive for companies to expand globally.
1-46
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Economic growth has reduced resistance that
might otherwise have developed in response to
the entry of foreign firms into domestic
economies. (When a country such as China
experiences rapid economic growth, policy
makers are more likely to look favorably on
outsiders.)
• The worldwide movement toward free markets,
deregulation, and privatization is the third driving
force. (Telephone company privatization is an
example.)
1-47
©2011 Pearson Education, Inc. publishing as Prentice Hall
Leverage
• Leverage means some type of advantage that a
company enjoys by virtue of the fact that it has
experience in more than one country.
• Leverage allows a company to conserve resources
when pursuing opportunities in new geographical
markets.
1-48
©2011 Pearson Education, Inc. publishing as Prentice Hall
Restraining Factors
• Despite the impact of the driving forces
previously discussed, several restraining forces
may slow a company’s efforts to engage in global
marketing.
• Luckily, in today’s world the driving forces
predominate over the restraining forces. That is
why the importance of global marketing is
steadily growing.
1-49
©2011 Pearson Education, Inc. publishing as Prentice Hall
Restraining Forces Affecting Global
Integration and Global Marketing
•
•
•
•
Management myopia
Organizational culture
National controls
Opposition to globalization
1-50
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Management Myopia and Organizational
Culture – Management may simply ignore
opportunities to pursue global marketing. A
company that is ethnocentric (or
“nearsighted”) will not expand
geographically.
1-51
©2011 Pearson Education, Inc. publishing as Prentice Hall
• National Controls –Every country tries to protect
its home industries and services through tariff
and non-tariff controls.
• Thanks to organizations like GATT, WTO, NAFTA,
EU, and other economic agreements, tariffs have
been largely removed in high-income countries.
• Non-tariff barriers to trade include “Buy Local”
campaigns, food safety rules and other
bureaucratic obstacles.
1-52
©2011 Pearson Education, Inc. publishing as Prentice Hall
• Opposition to Globalization – To many
people, globalization represents a threat.
Globaphobia is used to describe an
attitude of hostility toward trade
agreements or global brands.
1-53
©2011 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.
Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
©2011 Pearson Education, Inc. publishing as Prentice Hall