Imm unit-01 (framework of global marketing management)

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By :

Prof. Amit Kumar

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International marketing has become a major concern for business schools to develop global strategies to lead and sustain in the much expanded and

competitive arena. Liberalization thus catalyzing market competition, poses challenge for the

managers in handling the rigors of expanding global marketplace.

Syllabus aims at providing contemporary knowledge & skills on issues of global

marketing management.

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Importance of this course

Global Marketing Management

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Course: International Marketing Management

1. Framework of Global Marketing Management

2. Global Marketing Research

3. Decision Making in International Marketing

4. Foreign Market Entry & Export Marketing

5. Product Planning & Development

6. Global Pricing Strategies

7. Global Distribution System

8. Promoting Product Internationally

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Global Marketing Management Framework of Global Marketing Management

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Contents

• Growing Importance of International Marketing• Drivers of International Marketing• International Marketing Vs Domestic Marketing• Motives for Entering International Market• Towards GLOCAL Marketing• Orientations Towards International Marketing

Case study: Geocentric approach- The Boeing Way• Process of International Marketing• Internationalization of Firm’s Value Chain

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International marketing (IM) or global marketing refers to marketing carried out by companies

overseas or across national borderlines.

This strategy uses an extension of the techniques used in the home country of a firm.

It refers to the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic

decisions to compete in international markets.

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International Marketing Management

‘International marketing is the multinational process of planning and executing the

conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and

organizational objectives.’

- American Marketing Association (AMA)

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Growing Importance of Global Marketing

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• In the 21st century, international marketing is proving to be of ever-increasing importance to companies of all sizes and to national economies.

• Consumers worldwide are familiar with international brands and additionally are using locally produced goods that include materials or components supplied from abroad.

• The increasing importance of international markets over the past 20 years has been the result of a number of interrelated factors i.e. known as DRIVERS OF INTERNATIONAL MARKETING.

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“The term ‘drivers’ refers to the global forces that have fueled the process of globalization. These global factors have acted as catalyst that have contributed to the growth of international marketing”.

1. Declining Trade and Investment Barriers

2. Technological Change

3. Emergence of Global Institutions

4. Increasing Competition

Drivers of International Marketing

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1. Declining Trade and Investment Barriers• The economic liberalization in India-1991, refers to

ongoing reforms in India. After Independence in 1947, India adhered to socialist policies. The extensive regulation was sarcastically dubbed as the "License Raj"; the slow growth rate was named the "Hindu rate of growth". In the 1980s, the Prime Minister Rajiv Gandhi initiated some reforms. His government was blocked by politics. In 1991, the government of P. V. Narasimha Rao and his finance minister Manmohan Singh started breakthrough reforms (proposed LPG).

• Declining trade and investment barriers (by government) have vastly contributed to globalization.


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2. Technological Change • Most powerful instrument that triggered globalization is

technology. Technology is expanding, especially in:• Microprocessors and Telecommunication• Internet and World Wide Web• Transportation Technology

• Thus we find that telecommunications is creating a global audience and transport is creating a global village. From Delhi to Beijing to Boston ordinary people watching MTV, wearing Levi’s jeans and listening to i-pods as they commute to work.


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2. Technological Change (cont’)

Microprocessors and Telecommunication• Single most important innovation of this century has

been the microchip enabling the explosive growth of high-power, low-cost computing, enabling huge amounts of information to be processes by individual and firms.

• This has been accompanied by developments in satellite, optical fiber and wireless technologies resulting in communication revolution.


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Internet and World Wide Web• In 1990 there were less than 1 million users of internet. The

number had gone up to 655 million by 2002 and 1.12 billion users by 2005.

• The internet and world wide web are the information backbone of the global economy.

• The value of web-based transaction rose to $657 billion in 2000 from virtually nothing in 1994, to $6.8 trillion by 2004. These transactions include both business to business and B2C or e-commerce.


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Transportation Technology• Several major innovation in transportation technology since

World War-II, are development of commercial jet aircraft and super-freighter, and

• Introduction of containerization, which simplifies transshipment from one mode of transport to another and lowering the cost of shipping goods over long distances.

• There has also been an increase in the share of cargo traveling by air as a result of improvements in air travel.


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3. Emergence of Global Institutions • Trading block, WTO (and its predecessor the GATT)

seeks to promote international business by removing trade and investment barriers.

• The United Nations, along with its associated financial institutions (World Bank, IMF), is committed to preserving world peace through international cooperation and collective security.

• Regional trading blocks (EU, NAFTA, ASEAN) are adding to the pace of globalization


North American Free Trade Agreement

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4. Increasing Competition • Competition has become more global.

• Developing markets have huge markets. Many MNCs are locating their subsidiaries in low wage and low cost countries to take advantage of low cost production.

• Four countries from developing world- Brazil, Russia, India and China (BRIC)- are seen as future global leaders in the world economy.


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• Large MNCs such as Toyota, Honda and Mitsubishi started operations in the domestic market before expanding into the international market. Indian Ranbaxy, Satyam, Asian Paints, Wipro, Infosys, NIIT also started operations domestically before entering into international market.

• Although international marketing is often an extension of domestic marketing, there are significant differences between the two.

1. Diverse Business Environment

2. Enhanced Risk and Uncertainty

3. Operational Complexities

International Versus Domestic Marketing

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• International marketing/business operates in a diverse business environment (PEST), since it is located in different countries.

• Differences are primarily in the areas of Currency, Interest rates, Inflation, Taxation systems, Government regulation, Language, Cultural and Economic barriers, which gives rise to complexities for the business firms.


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http://www.worldwide-tax.com/

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McDonald’s, which has a presence in almost all countries of the world, adapts its menu

according to local taste and religious learning.

In India it has replaced beef products with chicken and in the Muslim countries of the Middle-East it does not serve any pork products.


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2. Enhanced Risk and Uncertainty

• Business firms face risks (PEST Related) on account of the unpredictability of operational and financial outcomes.

• More diverse business environment means more risks. Also risks related to payments in different currencies, supply and demand conditions etc.

• Uncertainty refers to the unpredictability of the environmental or organizational conditions that affect firm performance.


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www.allaboutrisk.com/www.eurasiagroup.net

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3. Operational Complexities • Operationally, international business is often more difficult

and costly to manage than activities in the domestic market alone. Example, local employees and expatriates (employees from foreign country) may have trouble getting along with each other because of cultural and language differences.

• Cultural diversity encountered when operating in several countries may create problems of communication, coordination and motivation in employees of the organization.

• Organizational principles and managerial philosophies differ widely across nations, increasing complexity of operation and management of international business.


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Daimler Chrysler Merger Failed

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Motives behind International Marketing

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1. Increased Profits• The basic raison de etre of a business is to

maximize profits through increased revenues and/or reduced costs.

• The rapid growth of outsourcing industry is an example of the ability of firms in developed parts of the world being able to take advantage of the low cost skilled labor force in countries such as India, Ireland and Philippines, to lower costs and maximize profits


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2. Optimum Capacity Utilization• Maximization of profits possible only when it can

minimize costs.

• This requires production at a scale which may be constrained due to lack of demand in the domestic market.

• A firm can increase its scale of operation if it is able to tap into demand in foreign markets.


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3. Market Motives• Firms often need to protect and hold their market

power or competitive position in the face of threats from domestic rivals or changes in government policy. Dell, a leading personal computer company, invested in Europe, Asia, Latin America and Africa due to strong competitions in the US domestic market.

• A firm may decide to seek international market opportunities in foreign countries through trade or investment. Companies such as Avon and Amway have entered India in early 1990s in search of opportunities in its direct marketing business.


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4. Strategic Motives• Firms often participate in international business

for strategic reasons and able to take advantage of vertical integration in different countries.

• This leads the firm to advantages of technological leadership, brand image, customer loyalty, competitive position and ‘first mover’.

• MNEs with this intension often establish global strategic alliances or acquire local firms.


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Philosophy of Marketing

The Production ConceptThe Product ConceptThe Selling ConceptThe Marketing ConceptThe Holistic Marketing Concept

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Philosophy of International Marketing

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Orientations Towards International Marketing

An increasing number of companies are operating on a global or regional rather than a national scale.

International marketing managers are asking themselves how they should cope with the new scope of operations and whether they

can apply domestic strategies to international markets.

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Some guidelines for developing international marketing strategies and other issues may be

provided by EPRG Framework.

A key assumption in EPRG framework is that the degree to which management is

committed (or willing to move towards) affects the specific international strategies

and decision rules of the firm.

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• The degree and nature of involvement in international business, or International orientations of MNEs, vary very widely.

• Four types of attitudes or orientations towards internationalization are:

• Ethnocentrism (Home country orientation)• Polycentric (Host country orientation)• Regiocentrism (Regional orientation)• Geocentrism (World orientation)

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Ethnocentrism (Home country orientation)• An MNE with an ethnocentric orientation relies on the values

and interests of the parent company in formulating and implementing its internationalization plans.

• In the ethnocentric company, overseas operations are viewed as secondary to domestic operations and primarily as a means of disposing of ‘surplus’ domestic production.

• Firms trying to sell the same product abroad that they sell at home use. Even if consumer needs or wants differ from those in the home country, those differenced are ignored at headquarters.

• This orientation appears to be appropriate for a small company just entering international operations and looks for minimum risk & commitment to overseas markets.

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Ethnocentrism (Home country orientation)

Nissan’s ethnocentric orientation was quite apparent during its first few years of exporting cars and trucks to the United States. Designed for mild Japanese winters, the vehicles were difficult to

start in many parts of the United States during the cold winter cars.

Until the 1980s, activity outside the United States was tightly controlled by headquarters at Japan and focused on

selling products originally developed for the US market.

Today, however, ethnocentrism is one of the biggest internal threats a company faces.

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Polycentric (Host country orientation)• The polycentric orientation is the opposite of

ethnocentrism.

• The term polycentric describes management’s belief that each country in which a company does business is unique. This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies in order to succeed.

• The term multinational company is often used to describe such a company.

• The important merit of polycentrism is the adaptation of the marketing strategies to the local conditions.

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Regiocentrism (Regional orientation)• A regiocentric company views different regions as different

markets. A particular region with certain important common marketing characteristics is regarded as a single market, ignoring national boundaries.

• Categorization of regions may be based on cultural traits e.g. the Asia-Pacific or on economic and political characteristics such as European Union.

• For example, a US company that focuses on the countries included in the NAFTA is a regiocentric orientation. Similarly, a European company that focuses its attention on the Europe is regiocentric.

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Geocentrism (World orientation)

Geocentric approach is an orientation whereby executives believe that a global view (entire world as a single market & develops a standardized marketing

mix) is needed in both headquarters of the parent company and its various subsidiaries.

The best individuals, regardless of home or host country origin, should be utilized to solve company problems

anywhere in world.

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Geocentrism (World orientation)

Geocentric approach is the most difficult to achieve because it requires that managers acquire both local and

global knowledge.

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The Boeing Company is a major aerospace and defense corporation, founded by William E. Boeing

in Seattle, Washington on July 15, 1916. In the beginning of the 1970s, Boeing faced a new crisis.

Sales began to slow down in the early 1970s because of several reasons.

Managing Diversity-The Boeing Way

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The Apollo program (NASA's Apollo Program ran from 1961 until 1975 ), in which Boeing had participated significantly during the preceding decade, was almost entirely canceled. Once more, Boeing hoped to compensate with sales of its commercial airliners. At that time, however, there was a heavy recession in the airlines industry so that Boeing did not receive any orders for more than a year. Another problem was that in 1971, the U.S. Congress decided to stop the financial support for the development of the supersonic 2707. Boeing's answer to the British-French Concorde, forcing the company to discontinue the project. The company had to reduce the number of employees from over 80,000 to almost half, only in the Seattle area.

Problem Analysis-The Boeing Way

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‘When sales began to slow down in the early 1970s, a group of Boeing engineers began to recognize that they had not given enough attention to a major potential market, the developing regions of the world’.

Through visits abroad, the engineers found that runways in developing countries were generally too short for the 737 and were mainly asphalt, a

softer material than concrete.

Problem Analysis-The Boeing Way

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“A geocentric approach helped

Boeing save its 737 airplane”.

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•Consequently they redesigned the wings to allow shorter landings on soft pavement and changed the engine so that take-offs would be quicker.

•They also developed a new landing gear and installed low-pressure tires. •Boeing soon began to get small orders for the 737 from a number of developing countries, which later bought larger Boeing planes because of their satisfaction with the 737.

The Boeing 737 ultimately became the best selling commercial jet in aviation history and is

still selling well.

Geocentric approach in Managing Diversity-The Boeing Way

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Empirical Support for EPRG

An exploratory study was recently conducted to provide some initial insight into the validity of this framework. The perceptions and preferences of international executives towards the current and

future appropriateness of each of these alternative orientations and associated strategies

were assessed.

The sample consisted of 40 key international executives of one large US firm whose

product lines are composed of frequently purchased household items.

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Each respondent was presented with a set of 4 alternative strategies (one for each orientation) for each of 15 marketing decisions areas. For example for the brand name decision, the set

was as follows:

A) Branding policy in overseas companies stresses the parent country as a unifying feature but not necessarily the origin of the parent country (ethnocentric).

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B) Each local company brands products on an independent basis and consistent with local country criteria (polycentric).

C) Overseas companies brand products uniformly within the region (regiocentric).

D) A world wide branding policy exists only for those brands, which are acceptable world wide (geocentric).

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Result of Empirical Support for EPRG

Studies suggested that the polycentric orientation is the dominant approach in the case of price,

customer service, market research, channel of distribution and least marked in the case of brand

name and product quality.

In both (brand name and product quality) areas ethnocentric approaches were used by one-fifth

and geocentric approaches by one-third of sample.

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PRESENTSITUATION

ETHNOCENTRIC

REGIOCENTRIC

GEOCENTRIC

POLYCENTRIC

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DESIREDSITUATION

ETHNOCENTRIC

REGIOCENTRIC

GEOCENTRIC

POLYCENTRIC

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Exploratory Research: EPRG

A second exploratory study was undertaken to examine the conditions under which different EPRG marketing strategies are appropriate.

The study was based on unstructured in-depth interviews with senior international marketing

executives from 10 US corporations.

Respondents were asked to describe their company’s current strategies, their planned strategies and

their opinion concerning EPRG strategies.

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Exploratory Research EPRG:

The result of these interviews suggest that the:• Ethnocentric position appears most appropriate when

the absolute or relative volume of overseas sales is insignificant. In these situations product modifications are generally viewed as uneconomic.

“We simply can’t afford to produce different products for foreign buyers, …may not be justified by low

anticipated revenue…and appropriate to export to countries with similar characteristics”.

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Exploratory Research EPRG: Polycentric

The result of these interviews suggest that the:• Most executives interviewed tended to regard the

polycentric position as currently most desirable one.• Several executives felt that local nationals has a

better understanding and awareness of national market conditions than home office personnel.

“I don’t presume to tell the Germans how to sell to the German”.

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Exploratory Research EPRG: Regiocentric

The result of these interviews suggest that the:• Geocentric was viewed as entailing high costs in

collecting information and administering policies on a worldwide basis. In this respect, the regiocentric appeal was generally viewed as more economical and manageable.

• Because of the national huge differences, geocentric position may be more advantageous for production and research development than for marketing.

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Exploratory Research EPRG: Regiocentric

In brief, the desirability of a particular international

Orientation – E, P, R or G - seems to depend on

several factors:• Size of the firm• Experience in overseas market• The size and degree of heterogeneity of the potential

market• The nature of the product .

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Towards GLOCAL Marketing

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Time

MarketingComplexity Global

Marketing

GLOCALMarketing

InternationalMarketing

Exporting

Domestic

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Companies in this case seek markets all over the world and sell products that are a result of planned production for markets in various countries.

This generally entails not only the marketing but also the production of goods outside the home market. At this

point company becomes an international or multinational firm.

International Marketing

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The experience of Fedders, largest manufacturer of air conditioners in the US, the firm faced constraints in the

domestic market. • Its sales were growing steadily, but sales of air conditioners (the

company’s only product) are seasonal and thus domestic sales at times do not even cover fixed costs.

• Furthermore, US market is mature, with most customers buying only replacement units. Any growth would have to come from a rival’s market share, and the rivals, Whirlpool and Matsushita, are formidable.

Fedders decided that only way to grow was to venture abroad.

Fedders Experience in International Marketing

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Fedders decided that Asia, with its steamy climate and expanding middle class, offered the best opportunity.

China, India and Indonesia were seen as the best prospects.

• China was selected because sales of room air conditioners had grown from 500,000 to over 4 million in five years, which still accounted for only 12% of the homes in cities like Beijing, Shanghai.

• Finally, Fedders entered a joint venture with a small Chinese air conditioner company that was looking for a partner; new company, Fedders Xinle, was formed.


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The company immediately found that it needed to redesign its product for its market.

• In China, air conditioners are a major purchase seen as a status symbol, not as a box to keep a room cool, as in US.

• The Chinese also prefer a split-type air conditioner.

• Since Fedders did not manufacture split models, it designed a new product that is lightweight, energy efficient, and packed with features such as remote control and automatic air-sweeping mechanism.

Fedders expands into other markets and makes other commitments internationally.


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At this stage, companies treat the world, including their home market, as one market, offering a single standard product.

• Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by income levels, usage patterns, or other factors that often span countries and regions.

• In this case, more than half of its revenues coming from abroad.

• The best people in the company begin to seek international assignments, and the entire operation- organization structure, sources of finance, production in low-cost location, marketing and so forth- begin to take on a global perspective.

Ford Motor, Intel, IBM, Nestle are the best example.

Global Marketing

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Process of International Marketing

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Motivation for International Marketing

SWOT Analysis

International Marketing Decisions

Growth

Profitability

Risk Spread

Access to Imported Inputs

Uniqueness of Product/ Services

Spreading R & D Costs

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Process of International Marketing

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Enter International Markets

International Marketing Decisions

Market Identification & targeting

Entry Mode Selection

Product Decisions

Distribution Channels Decisions

Market Promotion Decisions

Review Performance & Marketing Efforts

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Each value-adding activity is subject to internationalization; that is, it can be performed abroad instead of at home.

The most typical reasons for locating value-chain activities in particular countries are to reduce the costs of R&D and

production or to gain closer access to customers.

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Internationalization of Firm’s Value ChainStages in the Firm’s Value Chain

R&D Procurement(Sourcing)

Manufacturing Marketing Distribution Sales &Services

Global Business Management Globalization

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The pharmaceutical firm Pfizer conducts R&D in Singapore, Japan and other countries to gain access to scientific talent

or collaborate with local partner firms.

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Office furniture manufacturer Steelcase sources low-cost parts from suppliers in China and Mexico.

Dell has business processes such as data entry, call centers and payroll processing performed in India.

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Genzyme Crop. Does much of the manufacturing and testing of its surgical and diagnostic products in Germany,

Switzerland and the UK.

Renault produces cars via low-cost factories in eastern Europe.

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BMW and Honda locate marketing subsidiaries in the US to more effectively target their vehicles to the huge US market.

Carrefour and Barclays Bank establish worldwide networks of stores and offices to be near their customers.

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Wolverine World Wide, marketers of popular shoe brands ( e.g. Hush Puppies, Bates), contracts with independent

retail stores abroad to reach its customers.

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Direct sales company such as Amway and Avon employ their own independent sales office in China, Mexico and

elsewhere, in order to reach end-users.

Toyota maintains sales & customer service operations abroad in order to meet customer requirements more

effectively.

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Documents

Imm unit-01 (framework of global marketing management)