MARKETING MANAGEMENT

Lecture Notes

Chapter 21 TAPPING INTO GLOBAL MARKETS

Competing on a Global Basis

Despite the many challenges in the international arena (shifting borders, unstable governments, foreign-exchange problems, corruption, and technological pirating), companies selling in global industries need to internationalize their operations. Companies cannot simply stay domesticand expect to maintain their markets.A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions.A global firmis a firm that operates in more than one country.

For a company of any size to go global, it must make a series of decisions. Those decisions are:

Deciding Whether to Go Abroad

Several factors are drawing more and more companies into the international arena, higher profit opportunities, better products, international servicing.

Deciding Which Markets to Enter

The company needs to define its marketing objectives and policies.Some plan to stay small while others have bigger plans.

How Many Markets to Enter

Company must decide how many countries to enter and how fast to expand. We recognize two approaches:a waterfall approach (in which countries are gradually entered sequentially) or a sprinkler approach (inwhich many countries are entered simultaneously within a limited period of time).

Developed versus Developing Markets

These marketers are able to capitalize on the potential of developing markets by changing their conventional marketing practices to sell their products and services more effectively.Smaller packaging and lower sales prices are often critical in markets where incomes arelimited.

Regional Free Trade Zones

European Union - Nafta - Mercosul - Apec

Evaluating Potential Markets

Company prefers to enter countries

(1) That rank high on market attractiveness, (2) that are low in market risk and (3) inwhich it possesses a competitive advantage.

Deciding How to Enter the Market

Once a company decides to target a particular country, it has to determine the best mode ofentry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, anddirect investment. Each succeeding strategy involves more commitment, risk, control, and profit potential.

Indirect and Direct Export

Occasional exporting isa passive level of involvement in which the company exports from time to time. Active exportingtakes place when the company makes a commitment to expand into a particular market.

Using a Global Web Strategy

Electronic communication via the Internet is extending the reach of companies large and small to worldwide markets.

Licensing

Licensing is a simple way to become involved in international marketing. The licensor issues a license to a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for a fee or royalty (management contracts, contract manufacturing and franchising).

Joint Ventures

Foreign investors may join with local investors to create a joint venturecompany in which they share ownership and control.

Direct Investment

The ultimate form of foreign involvement is direct ownership. The foreign company can buy part or full interest in a local companyor build its own facilities.

Deciding on the Marketing Program

In deciding on the marketing program, a company must decide how much to adapt its marketing program (product, communications, distribution, and price) to local conditions.

Product

Some types of products travel better across borders than others. Straight extensionmeans introducing the product in the foreign market without any change.Product adaptation involves altering the product to meet local conditions or preferences (regional version, country version, city version, retail version).Product inventionconsists of creating something new (2 ways: Backward inventionis reintroducing earlier product forms and Forward inventionis creating a new product to meet a need in another country)

Communications

Companies can run the same marketing communications programs as used in the homemarket or change them for each local market, a process called communication adaptation.If it adapts both the product and the communications, the company engages in dualadaptation.

Price

Multinationals face several pricing problems when selling abroad. They must deal with priceescalation, transfer prices, dumping charges, and gray markets.Companies have three choices: 1.Set a uniform price everywhere, 2.Set a market-based price in each country, 3.Set a cost-based price in each country-transfer price (the price it charges another unit in the company).

Distribution Channels

At the distribution level, firms need to take a whole-channel view of the challenge of distributing products to the final users. In creating all elements of the marketing program, firms must be aware of the cultural, social, political, technological, environmental, and legal limitationsthey face in other countries.

Country-of-Origin Effects

Building Country Images and Consumer Perceptions of Country of Origin

Country-of-origin perceptions can affect consumers and businesses alike. Managing those perceptions in the most advantageous way possible is an important marketing priority.

Deciding on the Marketing Organization

Companies manage their international marketing activities in three ways:

1) Export Department is consisting of a sales manager and a few assistants. As sales increase, the export department is expanded to include various marketing services so that the company can go after business more aggressively.

2) International Division is headed by a division president, who sets goals and budgets and is responsible for the company's international growth. The international division's corporate staff consists of functional specialists who provide services to various operating units.

3) Global Organization has three organizational strategies:

1. A global strategy treats the world as a single market.

2. A multinational strategy treats the world as a portfolio of national opportunities.

3. A "glocal" strategy standardizes certain core elements and localizes other elements.