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3-1 Chapter Twelve Global Products MKT568 Global Marketing Management Dr. Fred Miller Sample Essay Question HerbalGlow is Korean producer of natural skin care products. The firm wishes to build upon its success in Asian markets by expanding to Europe, North and South America. 1. Identify and describe the three general international marketing strategies. (6 points) 2. For each element of the marketing mix (product, price, promotion and distribution), identify and describe one benefit of a global strategy and one constraint to implementing such a strategy. (12 points) 3. Which of the three general marketing strategies do you recommend to HerbalGlow? Explain why. (2 points) Marketing Strategy Options Multidomestic strong cultural influences, localize and adapt Global similar buyer preferences, global customers/competitors Globalized localization integrate sourcing, production and marketing seek balanced growth coordination of marketing across countries globalize as much as possible, localize when necessary Multidomestic versus Global Markets: Key Differences Multidomestic Markets Market boundaries Markets are defined within country borders. Customers and competitors are of local origin. Customers Competition Interdependence Strategies Exhibit 11.1 Global Markets Markets transcend country borders. Customers and/or competitors cross frontiers to buy and to sell. Significant differences exist Significant similarities exist among customers from different among customers from different countries; segments are defined countries; segments cut across locally. geographic frontiers. Competition takes place among Competitors are few and present primarily local firms; even in every major market. Rivalry international companies takes on regional or global scope. compete on a country-bycountry basis. Each local market operation in Local markets operate isolation from the rest. interdependently. Competitive Competitive actions in one actions in one market impact other market have no impact markets. elsewhere. Strategies are locally based. Strategies are regional or global in Little advantage exists in scope. Great advantage exists in coordinating activities among coordinating activities within markets. regions or worldwide. A Multidomestic Industry Local Candy Brands The Value of Global Brands Take the Ten Second Brand Test The Value of Global Brands 1. What brands do you remember? 2. What brands do you recognize? American Express Wall Street Journal McDonalds Nike Coke Perrier Mobil Phillips Haagen Das 3M Daily Telegraph Honda Motorola Johnson and Johnson Hertz Levi’s Mars Seven Up Campbell’s Sony Rover Kellogg’s British Airways Apple IBM Michelin Dell Club Med Globalized Localization: Coca Cola Globalized Localization: McDonald’s Germany Japan But NOT in Oaxaca’s Zocalo! India "Real food is not frozen meat," said Jacqueline García, 24, who runs Toñita's, a food stand in Oaxaca's old market. "It's fresh cheese and crickets. Fast food's unnatural. The people who make it are incompetent. And McDonald's belongs in the United States, not our zócalo.“ NY Times, Aug 24, 2002 Standardization and its Problems Standardization advantages: cost, customer preference, quality, global customer/segments disadvantages: off-target, lack of uniqueness, protectionism, local competitors Globalization limits and pitfalls limits:industry, resource, marketing mixes pitfalls: research, over-standardization, poor follow-up, narrow vision, rigid implementation Localization vs Adaptation 12-2 The Tradeoff Between Standardization and Adaptation Incremental manufacturing cost Combined costs Cost of lost sales Fully adapted Exhibit 12.1 Fully standardized Strong Local Brands Dragon’s Blood Beer from Furth im Wald Global Brand Management Developing new global products idea generation preliminary screening concept research – focus groups, concept testing, target research sales forecast test marketing Globalizing successful brands diffusion factors – advantage, compatability, perceived complexity, trialability, observability globalization potential-sensible, favorable, available, complement, regional changeover tactics - fade, axing, forewarning Low Globalization Potential The “Zoo” of Product Branding 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. RCA Jordache Merrill Lynch Mercury Kangaroo Shoes Schlitz Camel Trix Exxon Greyhound MGM John Deere Kiwi Mustang Playboy Kellog;s FF Hartford VW Rabbit Kellog’s CF Borden’s Milk Global Brand Management Brand Management, Top 100 Global Brands Brand equity, global brands, brand portfolio/mix Counterfeit products Counterfeit vs gray trade Actions against counterfeit goods Global Value of the Nescafe Brand $US $5 billion Global sales of Nescafe $700 mil Nescafe’s global promotion $25 billion Value of Nescafe brand $90 billion Value of Nestle’s brands $113 billion – Market capitalization $23 billion – Book value of assets Localizing the Nescafe Brand Cup Coffee in Japan Single Bean in Japan “Mellow taste of milk will soothe China your mind. Type of cup coffee that one would like to drink when feeling relieved, or relaxing.” Europe “Features sound feel of coffee that fully convinces even true coffee lovers. Type of cup coffee one would feel like drinking when one needs to holdout, or when one wishes to cheer up.” Columbia Evolution of a European Brand A Tale of Two Beers Budweiser/Budvar remains a strong regional beer with a quality, hand crafted traditional beer image Plzensky Prazdroj is a member of the international group, SABMiller, the second largest brewery in the world. Pilsner Urquell is the group’s flagship brand. -- Plzensky Prazdroj Website Anheuser Busch in Europe Czech Budvar in USA Significance of Private Brands Flanker Brand Example The Current Sarotti Brand Cola Wars Video In which countries, with what strategy and with what success has Mecca Cola chosen to challenge Coca Cola? In which countries, with what strategy and with what success has Qibla Cola chosen to challenge Coca Cola? How has Coca Cola responded to these challenges? 3-1 Chapter Twelve Global Products MKT568 Global Marketing Management Dr. Fred Miller Target Market Definition, Size and Purchasing Power Define your target market by age and income classifications in the SPSS dataset. Use this definition to analyze statistical data on this market (review previous slides) To calculate size of target market in number of people, Determine the number of people in your chosen age range (Data tables for Population Pyramids) Multiply the result by the percentage of people in your chosen income range (SPSS Crosstabs) To calculate purchasing power, multiply the product of the previous step by your country’s per capita income (from Part 1 of your report, World Bank) Determine target population by age Visit the Population Pyramid site of the US Census Burearu and select the current year. Determine the number of people in the target market you have defined, in this case, 5,840,087 Screen for Income Determine percent of population in the defined income range, in this case 42% Multiply target population by this percentage to calculate number of people in target market, in this case, 5,840,087 * .42 = 2,452,837 Calculate Purchasing Power Multiply TM population by Per Capita GNI from World Bank or CIA to calculate purchasing power. In this case, 2,452,837 * $26,900 = $65,981,315,300 Pro Forma Income Statement 1. $14,832,000, using the formulae Volume (CY+1) = CY Industry Sales * (1+Growth Rate) 1,030,000,000 = (1,000,000,000) * 1.03 Sales = Volume * Schmidt’s SoM * Price $14,832,000 = 1,030,000,000 * .012 * $1.20 2. $23,260,284, using the formulae Volume (CY+2) = Volume(CY+1) * (1+Growth Rate) 1,050,600,000 = 1,030,000,000 * 1.02 Price(CY+2) = Price(CY+1) + Price Increase(CY+2) $1.23 = $1.20 + $0.03 Sales = Volume * Schmidt’s SoM * Price $23,260,284 = 1,050,600,000 * .018 * $1.23 Pro Forma Income Statement 3. $9,888,000, using the formula Production Costs = Volume * Schmidt’s SoM * Cost per Liter $9,888,000 = 1,030,000,000 * .012 * $.80 4. $15,128,640, using the formula Production Costs = Volume * Schmidt’s SoM * Cost per Liter $15,128,640 = 1,050,600,000 * .018 * $.80 5. $4,944,000, using the formula Gross Margin = Sales – Production Costs $4,944,000 = $14,832,000 - $9,888,000 Pro Forma Income Statement 6. $8,131,644, using the formula Gross Margin = Sales – Production Costs $8,131,644 = $23,260,284 - $15,128,640 7. $741,600, using the formula Sales Costs = Sales * Agent’s Commission $741,600 = $14,832,000 * .05 8. $1,163,014, using the formula Sales Costs = Sales * Agent’s Commission $1,163,014 = $23,260,284 * .05 Pro Forma Income Statement 9. $889,920, using the formula Promotion Costs = Sales * Promotion as % of Sales (CY+1) $889,920 = $14,832,000 * .06 10. $1,163,014, using the formula Promotion Costs = Sales * Promotion as % of Sales (CY+2) $1,163,014 = $23,260,284 * .05 Pro Forma Income Statement 11. $3,312,480, using the formula Contribution Margin = Gross Margin - Sales Costs – Promotion Costs $3,312,480 = $4,944,000 - $741,600 - $889,920 12. $5,805,616, using the formula Contribution Margin = Gross Margin - Sales Costs – Promotion Costs $5,805,616 = $8,131,644 - $1,163,014 - $1,163,014 Pro Forma Income Statement Identify three estimates to be revised. Describe revision and explain reasoning. 1. Increase CY+1 market growth rate to 3.2% because Brahma’s new entry will stimulate increased sales 2. Decrease share of market estimate in CY+1 to .9% because of greater competition from the Corona brand will lower SoM 3. Increase promotion costs as % of sales in CY +1 to 8% to provide more funds for advertising to match Brahma’s promotion for introduction of Corona brand