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International Marketing
14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham
Global Marketing
Management:
Planning and
Organization
Chapter 11
McGraw-Hill/Irwin
International Marketing 14/e
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
What Should You Learn?
• How global marketing management differs from
international marketing management
• The increasing importance of international
strategic alliances
• The need for planning to achieve company goals
• The important factors for each alternative
market-entry strategy
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Global Perspective
Global Gateways
• Multinational companies
– Confronted with increasing global competition for expanding
markets
– Changing their marketing strategies and altering their
organizational structure
– Nearly 75% of North American and European corporations
are revamping their business processes
• Smaller companies
– More flexible
– May enable them to reflect the demands of global markets and
redefine programs more quickly
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Global Marketing Management
• 1970s – “standardization versus adaptation”
• 1980s – “global integration versus local
responsiveness”
• 1990s – “global integration versus local
responsiveness”
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Global Marketing Management
• The trend back toward localization
– Caused by the new efficiencies of customization
– Made possible by the Internet
– Increasingly flexible manufacturing processes
• From the marketing perspective
customization is always best
• Global markets continue to homogenize and
diversify simultaneously
– Best companies will avoid trap of focusing on country as the
primary segmentation variable
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The Nestle Way –
Evolution Not Revolution
• Nestle – world’s biggest marketer of infant
formula, powdered milk, instant coffee,
chocolate, soups, and mineral water
• Nestle strategy
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Think and plan long term
Decentralize
Stick to what you know
Adapt to local tastes
• Long-term strategy works for Nestle
– Because the company relies on local ingredients
– Markets products that consumers can afford
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Benefits of Global Marketing
• When large market segments can be identified
– Economies of scale in production and marketing
– Important competitive advantages for global companies
• Transfer of experience and know-how
– Across countries through improved coordination and
integration of marketing activities
• Marketing globally
– Ensures that marketers have access to the toughest customers
– Market diversity carries with it additional financial benefits
– Firms are able to take advantage of changing financial
circumstances
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Planning for Global Markets
• Planning is the job of making things happen that
might not otherwise occur
• Planning allows for:
–
–
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Rapid growth of the international function
Changing markets
Increasing competition, and the
Turbulent challenges of different national markets
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Planning for Global Markets
• Planning is both a process and philosophy
– Relates to the formulation of goals and methods of
accomplishing them
►
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Corporate planning
Strategic planning
Tactical planning
• Company objectives and resources
– Each new market requires
►
A complete evaluation, including existing commitments, relative to the parent
company’s objectives and resources
– Defining objectives clarifies the orientation of the domestic and
international divisions, permitting consistent policies
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Planning for Global Markets
• International commitment
– Commitment in terms of
►
►
►
Dollars to be invested
Personnel for managing the international organization
Determination to stay in the market long enough to realize a return in
investments.
– The degree of commitment to an international marketing cause
reflects the extend to a company’s involvement
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International Planning Process
Exhibit 11.1
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The Planning Process
• Phase 1 – Preliminary analysis and screening
– Matching Company and Country Needs.
• Phase 2 – Adapting marketing mix to target
markets
• Phase 3 – Developing the marketing plan
• Phase 4 – Implementation and control
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Alternative Market-Entry Strategies
• An entry strategy into international market
should reflect on analysis
– Market characteristics
►
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Potential sales
Strategic importance
Strengths of local resources
Cultural differences
Country restrictions
– Company capabilities and characteristics
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Degree of near-market knowledge
Marketing involvement
Management commitment
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Alternative Market-Entry Strategies
Exhibit 11.2
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Alternative Market-Entry Strategies
• Companies most often begin with modest export
involvement
• A company has four different modes of foreign
market entry
–
–
–
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Exporting
Contractual agreements
Strategic alliances
Direct foreign investments
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Exporting
• Exporting accounts for some 10% of global
activity
• Direct exporting – the company sells to a
customer in another country
• Indirect exporting – the company sells to a buyer
(importer or distribution) in the home country,
who in turn exports the product
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Exporting
• The Internet
– Initially, Internet marketing focused on domestic sales
– A surprisingly large number of companies started receiving
orders from customers in other countries,
►
Resulting in the concept of international Internet marketing (IIM)
• Direct sales
– Particularly for high technology and big ticket industrial products
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Contractual Agreement
• Contractual agreements
– Long-term,
– Nonequity association between a company and another in a
foreign market
• Licensing
– A means of establishing a foothold in foreign markets without
large capital outlays
– A favorite strategy for small and medium-sized companies
– Legitimate means of capitalizing on intellectual property in a
foreign market
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Contractual Agreement
• Franchising
– Franchiser provides a standard package of products, systems,
and management services
– Franchise provides market knowledge, capital, and personal
involvement in management
– Expected to be the fastest-growing market-entry strategy
• Two types of franchise agreements
– Master franchise
►
Gives the franchisee the rights to a specific area with the authority to sell or
establish subfranchises
– Licensing
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Strategic International Alliances
• A strategic international alliance (SIA)
– A business relationship established by two or more companies to
cooperate out of mutual need
– To share risk in achieving a common objective
• SIAs are sought as a way to shore up weaknesses and
increase competitive strengths
• Firms enter SIAs for several reasons
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Opportunities for rapid expansion into new markets
Access to new technology
More efficient production and innovation
Reduced marketing costs
Strategic competitive moves
Access to additional sources of products and capital
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Building Strategic Alliances
Exhibit 11.3
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Strategic International Alliances
• Many companies entering SIAs
– To be in strategic position to be competitive
– To benefit from the expected growth in the single European market
• International joint ventures (IJVs)
– A partnership of two or more participating companies that have joined
forces to create a separate legal entity
– Four characteristics define joint ventures
►
JVs are established, separate, legal entities
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The acknowledged intent by the partners to share in the management
of the JV
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There are partnerships between legally incorporated entities such as companies,
chartered organizations, or governments, and not between individuals
►
Equity positions are held by each of the partners
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Strategic International Alliances
• Consortia
– Similar to joint ventures and could be classified as such except
for two unique characteristics
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Typically involve a large number of participants
Frequently operate in a country or market in which none of the participants
is currently active
– Consortia are developed to pool financial and managerial
resources and to lessen risks
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Direct Foreign Investment
• Factors that influence the structure and
performance of direct investments
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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
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Organizing for Global Competition
• Devising a standard organizational structure is
difficult
– Because organizations need to reflect a wide range of company-specific
characteristics
• Companies are usually structured around one of
three alternatives
– Global product divisions responsible for product sales throughout world
– Geographical divisions responsible for all products and functions within
a given geographical area
– A matrix organization consisting of either of these arrangements
►
With centralized sales and marketing run by a centralized functional staff, or
a combination of area operations and global product management
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Schematic Marketing Organization Plan
Combining Product, Geographic,
and Functional Approaches
Exhibit 11.4
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Locus of decision
• Considerations of where decisions will be made,
by whom, and by which method constitute a
major element of organizational strategy
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Corporate headquarters
International headquarters
Regional levels
National levels
Local levels
• Tactical decisions normally should be made at
lowest possible level
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Centralized Versus
Decentralized Organizations
• Most organizational patterns of multinational
firms fit into one of three categories
– Centralized
– Regionalized
– Decentralized
• No single traditional organizational plan is
adequate for today’s global enterprise
– Seeking to combine the economies of scale of a global company
with the flexibility and marketing knowledge of a local company
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Summary
• To keep abreast of the competition and
maintain a viable position for increasingly
competitive markets, a global perspective is
necessary
• Cost containment, customer satisfaction, and a
greater number of players mean that every
opportunity to refine international business
practices must be examined in light of
company goals
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Summary
• Important avenues to global marketing that
must be implemented in the planning and
organization of global marketing management
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Collaborative relationships
Strategic international alliances
Strategic planning
Alternative market-entry strategies
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