Chapter 11Global Marketing Management: Planning and Organization

Learning objectives

Global marketing management Benefits of Global Marketing International Planning Process Market-entry Strategies The important factors for each

alternative market-entry strategy

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Global Perspective

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 smarten up their business processes

Smaller companies More flexible May enable them to reflect the demands of global

markets and redefine programs more quickly11-3

Global Marketing Management 1970s – “standardization versus

adaptation” 1980s – “global integration versus

localization” 1990s – “global integration versus

local responsiveness” Example of new “mass

customization” by Dell. Risk involves with global

standardization (e.g., Barbie Doll, Coca-cola).

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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. Other segmentation may work better (e.g., lifestyle)

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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

8500 products produced in 489 factories in 193 countries

Nestle strategy 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: Rapid growth of the international

function Changing markets Increasing competition, and the Turbulent challenges of different national

markets11-8

Planning for Global Markets Planning is both a process and philosophy

Relates to the formulation of goals and methods of accomplishing them▪ 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

What product, which market, and how?

Phase 1 – Preliminary analysis and screening Matching Company and Country Needs.

(SWOT and PESTEL analyses)Phase 2 – Adapting marketing mix

to target markets (e.g., KFC)Phase 3 – Developing the marketing

planPhase 4 – Implementation and

control

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Alternative Market-Entry Strategies An entry strategy into international market

should reflect on analysis Market characteristics▪ Potential sales▪ Strategic importance▪ Strengths of local resources▪ Cultural differences▪ Country restrictions

Company capabilities and characteristics▪ 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 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

Customers include Wal-Mart and Sears 11-16

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 Contractual agreement (e.g., transfer of technology,

processes, trademarks, human skills) Licensing

A means of establishing a foothold in foreign markets without large capital outlays.

Patent, trademark rights, and the right to use technological processes.

A favorite strategy for small and medium-sized companies

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Contractual Agreement Franchising

A rapid growing form of licensing. 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 as it provides an attractive form of corporate organization for companies wishing to expand quickly with low capital investment.

(e.g., KFC, McDonalds)

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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

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 (e.g., in airline industry One world Alliance consists of British

Airways, Japan Airlines etc.)11-20

Strategic International Alliances International joint ventures (IJVs)

A partnership of two or more participating companies that have joined forces to create a separate legal entity

(e.g., merge with foreign company in order to gain better access in the new market)

Consortia Similar to joint ventures and could be

classified as such except for two unique characteristics▪ Typically involve a large number of participants▪ Frequently operate in a country or market in which

none of the participants is currently active

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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

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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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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 Collaborative relationships Strategic international alliances Strategic planning Alternative market-entry strategies

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