International Marketing & Research · International Marketing - 2010 Session 1 –page 11 Globalization History Globalization intensified during the 19th - 20th centuries, a period

International Marketing

Dr. A. Lemmens

Bloc 1 -2010

FEM 11081

International Marketing - 2010

Session 1 – page 2

Course Outline


Elaboration of marketing activities in international markets,

standardized or not,

in order to sustain a coherent international development

International Entry Strategies

Where? When? How? to reach new international markets?

Marketing mix elements:

• Product, brand, new product introduction, positioning

• Pricing

• Promotional activities

• Advertising activities

• Distribution channels



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Course Outline (II)

Standardization vs. Localization

To what extent should a company standardize/homogenize and/or adapt/localize

each of the marketing mix elements across the various world markets?

Consumers across Cultures

How heterogeneous/homogeneous are the various markets? How does culture

affect consumer behavior, tastes, …?

International Segmentation

How can we segment/group the various markets and submarkets in terms of

consumer behavior, tastes, product purchases, reactions to the marketing mix

activities?



Course Outline (III)

International Entry Decisions & New Product Launch

Should a company enter a market using exports, franchises, strategic alliances,

or direct investments in local subsidiaries? What market to enter?

How to develop a product on the global market? Should the new product be

introduced on all markets simultaneously or sequentially?

International Pricing & Promotion

How should an international company determine prices on the various markets?

How do customers from various countries react to promotional activities?

International Advertising & Product Design

Should a company launch an international advertising campaign or adapt the

message to the local tastes?

Cross-National Research & Data Analysis

How to analyze an international marketing issue? How can we compare cross-

national marketing data?

Introduction to




Agenda

Globalization

Drivers of Globalization

Marketing Globalization

Global Brands



Technological

Advances

•ICT enhance communication

•Cheaper travel modes

Globalization

•Increasing interactions across countries

•Converging commonalities

•Preferences

•Expectations

•Lifestyles

•Knowledge

•…

Potential for Global

Marketing

•Standardized products

•Standardized mix

•Global brands

Economies of Scale

•Production

•Distribution

•Marketing mix

•Management

Greater Efficiency

•Lower prices

•And/or

•Higher quality Firms’ Growth

Levitt Theory of Globalization (1983)

Globalization is the increasing interdependence, integration and

interaction among people, companies, and governments of different

nations around the world. The increasing interdependence leads to

converging commonalities across the globe.



This process is not new…

The Silk Road: 1500 years of history



Globalization History

Globalization intensified during the 19th - 20th centuries, a period of large-

scale international trade and investment (Globalization 1.0)

2008 Nobel Prize Winner Paul Krugman argues that the current

globalization era is actually “Globalization 2.0.” Today’s globalization is

“farther, faster, cheaper, and deeper,” due to the information and

communication technologies (ICT).

This process affects the economic development and prosperity, culture,

political systems, environment and human physical well-being in societies

around the world.

Even if there is a large debate on the size of these effects….

“Do we leave some people behind ?” e.g. digital divide.




Technological changes: Global Connectivity

Political agreements and unification process

Technical and legal harmonization

Economic and trade globalization

Financial globalization



Global Connectivity: Global Village




Technological Changes:

Development of a global telecommunications

infrastructure and increase in information flows

between geographically remote locations.

ICT include (broadband) Internet, communication

satellites, submarine fiber optic cable, wireless

telephony, …

Facilitates communication within the company

and with customers. E.g. In the service industry,

distance thus becomes less relevant.

Web 2.0: the website content is now created by

its users.



But Barriers Remain: The Digital Divide

Source: www.itu.int



Source: www.itu.int

But Barriers Remain: The Digital Divide




Political Agreements and Unification Processes

Since WWII, creation of multiple supra-national political organizations and

institutions, such as the North Atlantic Treaty Organization (NATO) or the United

Nations (UN).

International trade organizations, such as the World Trade Organization (WTO),

and agreements to promote trade in goods, services, and investment, such as

the General Agreement on Tariffs and Trade (GATT) at the worldwide level,

MERCOSUR for South America, the North American Free Trade Agreement

(NAFTA) between the United States, Canada and Mexico, and the European

Union between 27 European countries.

Or monetary unions, such as the Euro-Area.

Technical and legal globalization

Increase in the number of standards applied globally; e.g. copyright laws and

patents

Lobbying by many advocates in favor of an international criminal court and

international justice movements.



Economic and trade globalization

Increasing volume and variety of cross-border transactions in goods and

services (EU – US trade €1 billion a day)

Since 1950, the volume of world trade has increased by 20 times.

Rise and expansion of multinational companies

Financial globalization

Emergence of worldwide financial markets

Better access to external financing for corporate, national and sub-

national borrowers

Free international capital flows

Globalization of the financial crises too…




Intra/Extra Regional Exports

Source: www.wto.org (2007)

http://www.wto.org/



Leading Exporters: Growth 2000-2007


http://www.wto.org/



China Exports by Importing Region


http://www.wto.org/




Rise of a consumerist

society around the world

Started after WWII in the

US

Gradually spread out to

the world

Consumerism (buying

material goods) came to

be equated with success

and status




3 stages:

Stage 1:’50s -’60s: the US supremacy and multinational

strategies

Stage 2: ‘70s – ‘80s: standardization, integration and global

strategies

(corresponds to the timing of Levitt’s article)

Stage 3: ’90s – Now: back home? Glocal strategies




Stage 1: after WWII: ’50s -’60s

The US supremacy

Multinational companies apply the American Model,

US companies supply the world with “Originals”

Country-specific segments

Kotler & emerging marketing concepts in the US:

Market segmentation, segment targeting, product positioning

Marketing mix adaption

Localization of the production

Marketing mix adaptation (product, promotion, price and place)



http://www.amazon.com/gp/reader/1931128162/ref=sib_dp_pt/002-6369825-1770433#reader-link

http://www.amazon.com/gp/reader/1931128162/ref=sib_dp_pt/002-6369825-1770433#reader-link






Stage 2: ‘70s –’80s:

Standardization and Integration

Levitt’s famous article (1983), The Globalization of Markets, Harvard

Business Review.

Increased competition with the US companies, outside & inside the US

market (Japan as low-price, Europe for luxury products).

Shift towards high-tech. outside US due to greater access to education

worldwide.

Emergence of global and standardized brands all over the place:

Benetton (IT), Swatch (SW), Mercedes-Benz (GE), Sony, Toyota (JA)

with strong images

Homogenization of the customers' needs and preferences

EOS allowing superior quality-to-price ratios.



German Car Expertise



Swatch: Swiss Watchmaking



Italian Clothing



Ikea Enters the American Market

In 1985, expansion to the US began

Now, 33 stores, including 23 after 2000

“Glasses are much

too small for ice cubes”

“Beds are too small too”




Stage 3: ’90s – Now: Back home?

Recall conditions of Levitt theory:

Converging commonalities

Greater efficiency leading to lower prices and/or higher quality

However,

Cross-national differences remain (culture, religion, climate, …)

Standardized products are not always the best not the cheapest ones.

Cross-national interactions matter!!!

Shocks on the financial markets (Asian crisis)




And Now ?

Global brands and “glocal” strategies

Glocalization = Differentiated Globalization

GLObal …. Standardize part of the marketing mix

E.g. product lines, brand names

loCAL… Adapt other part of the marketing mix

E.g. distribution, promotions and communications

“Think global, act local”, strategy vs. execution

Facilitated by the Web 2.0, e.g. Converse



Ford Company: Adapted Product Line

US market:



Ford Company: Adapted Product Line

European market:



Mc Donalds’ Glocal Strategy





Best Global Brands

Business Week’s rank 2007 based on brand global value:

Net present value of the earnings the brand is expected to generate in the future.

2007

Brand

Rank

2006

Brand

Rank

Change

in

Rank Brand Name

2007

Brand Value

$m

2006

Brand

Value

Change in

Value From

Prev Year

(in %) Parent Company Country

1 1 0 Coca-Cola 65,324 67,000 -3 Coca-Cola U.S.

2 2 0 Microsoft 58,709 56,926 3 Microsoft U.S.

3 3 0 IBM 57,091 56,201 2 IBM U.S.

4 4 0 GE 51,569 48,907 5 GE U.S.

5 6 1 Nokia 33,696 30,131 12 Nokia Finland

6 7 1 Toyota 32,070 27,941 15 Toyota Japan

7 5 -2 Intel 30,954 32,319 -4 Intel U.S.

8 9 1 McDonald's 29,398 27,501 7 McDonald's U.S.

9 8 -1 Disney 29,210 27,848 5 Walt Disney U.S.

10 10 0 Mercedes-Benz 23,568 21,795 8 DaimlerChrylser Germany

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=rank_2006&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=rank_2006&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=change_in_rank&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=change_in_rank&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand_2007_value_m&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand_2007_value_m&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand_2006_value&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=brand_2006_value&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=change_in_value_from_prev_yr&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=change_in_value_from_prev_yr&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=name&sortOrder=2&pageNum=1&resultNum=110

http://bwnt.businessweek.com/interactive_reports/top_brands/index.asp?sortCol=name&sortOrder=2&pageNum=1&resultNum=110



Global Brands

Benefits of a Global Brands

Economies of scale, e.g. Ikea vs. the local carpenter

Global visibility and reputation

A focus on a single product category (e.g. Nokia and Intel)

The company name is the brand name: all marketing dollars are

concentrated on that one brand (e.g. GE and IBM)

Cross-country learning effects

Global sourcing advantages (e.g. Indian call centers)



Global Brands

Overall tendency to prefer global brands, because of

1. The same positioning worldwide (quality signal), providing a

combination of functional product quality and innovation with emotional

appeal (e.g. Coca-Cola and Disney)

2. “Global myth”: symbols of global cultural identity, access to the global

village. Consuming the brand equals membership in a global club (e.g.

IBM's "solutions for a small planet“)

3. Social responsibility: consumers expect global brands to lead on

corporate social responsibility, leveraging their technology to solve the

world's problems (e.g. Nestlé)

From: Holt, Quelch and Taylor (2004), How Global Brands Compete. HBR.



Nestle advertising

its social responsibility



Global Brands

Four types of attitudes w.r.t. global brands

Global citizens:

Consumers concerned with quality signal and social responsibility

> 50 %, mostly in Brazil, China and Indonesia

Global dreamers:

Consumers consider global brands as quality signal and global myth

>20%

Anti-globals:

Skeptical consumers about all three elements

>10%, mostly in UK, France and China

Global agnostics:

No effect of the global aspects on buying behavior

<10%, US and South Africa

From: Holt, Quelch and Taylor (2004), How Global Brands Compete. HBR.



Preference for Global Brands

Driven by the Global Orientation of Consumers

Exposure to global cultural flows

Consumers exposed to mass media from other countries are more oriented

towards global consumption

Consumers exposed to travel are more oriented towards global consumption

Materialism

Importance attached to possessions and belief that they create pleasure and

happiness

Materialist consumers are more oriented towards global consumption

Susceptibility to normative influence

Importance attached to others’ opinions and to norms.

Highly susceptible consumers are less oriented towards global consumption

From: Alden, Steenkamp, and Batra (2006), Consumer Attitudes Toward Marketplace Globalization: Structure,

Antecedents, and Consequences, International Journal of Research in Marketing.



Starbucks

Starbucks’ CEO: "China traditionally has been a tea-

drinking country but we turned them into coffee drinkers”



DHL: Global Advertising Campaign

Standardization vs.

Localization





Euro Disney Theme Park

“There were various errors made in the operations of Euro Disneyland

which affected the French culture.”

“An example if this is the Walt Disney Company's policy of serving no

alcohol in its parks in California, Florida, and Tokyo which it

extended to France. This caused astonishment and rebellion in

France where a glass of wine for lunch is a given.”

“After much consideration, in May 1993, the Walt

Disney Company changed its policy and allowed wine

and beer in the Euro Disneyland theme park”

(Wentz & Crumley, 1993).




First View: Standardization perspective (Levitt 1983)

Operating with relative constancy in a number of markets, as if the

entire world (or major regions of it) were a single entity

Concerns one or several elements of the mix (controllables)

Applies to global markets with homogeneous preferences, e.g.,

Technological products, like cell phones, cars, pc, tv…

Food (e.g. tikka massala)

Fashion (e.g. Stone Island)

Media (e.g. Pop Idol).

http://en.wikipedia.org/wiki/File:Stoneisland-1--1-.png

http://en.wikipedia.org/wiki/File:Stoneisland-1--1-.png




First View: Standardization perspective (Levitt 1983)

Benefits of Standardization:

Reduces costs through greater economies of scale in production and

marketing

Standardization should lead to high-quality, low-prices

Consistency in dealing with consumers, e.g. hotel chains

Attracts global customers

Where “made in” image is important to a product’s perceived value e.g.

France for perfumes, Germany for cars.



The French “Savoir-Vivre”



Price Product

PromotionChannels of

distribution

Marketing

(controllable)

Product standardization

Brand name

Core product, e.g. car structure

Modular design (e.g. cameras)

Adapted packaging

Service standardization

Core service, e.g. McDonalds

“smile”, “quick” and “clean”

Some adaptation: local staff



Competitivestructure

Price Product


distribution

Economic climate

Political/legal

forces

Domestic environment(uncontrollable)

Marketing

(controllable)



Political/legalforces

Economicforces


CompetitiveForces

Level of Technology

Price Product


distribution

Geography and

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural forces

Political/legal

forces


Marketing

(controllable)




Economicforces


CompetitiveForces

Level of Technology

Price Product


distribution

Geography and

Infrastructure



Economic climate

Cultural forces

Political/legal

forces


Marketing

(controllable)

Environmentaluncontrollablescountry market A




Economicforces


CompetitiveForces

Level of Technology

Price Product


distribution

Geography and

Infrastructure



Economic climate

Cultural forces

Political/legal

forces


Marketing

(controllable)

Environmentaluncontrollablescountry market A

Environmentaluncontrollablescountry market B

Environmentaluncontrollablescountry market C



Second View: Adaptation perspective Operating in a number of countries, adjusting products and practices in

each, at a high relative cost, with a committed operating presence in the

markets of other nations.

Applies to multi-domestic markets with strong local preferences, e.g.,

Quality concerns (e.g. made in China)

Attitude towards foreign brands (e.g. french fries)

Taste differences (e.g. Coca Cola, Ikea)

Local constraints (e.g. SMART)

Government requirements, e.g. Car manufacture

Modularity can help, e.g General Motors has established a modular product

architecture (combination of components from 70 different body modules and about

a hundred major mechanical components)

ECONOMIES OF SCOPE




Second View: Adaptation perspective

Benefits of adaptation

Allows a better match between local preferences and needs

E.g. package sizes

Creates “uniqueness”

E.g. fashion

Does not undermine some company networks which already exist

(e.g. ad agency)

Can be accompanied with a local production avoiding trade barriers

Shows commitment and does not dampen entrepreneurial spirit

Global Marketing Strategy: Three Views



Packaging Adaptation



Standardization and Performance

Customer similarity

Product usage

Product life cycle stage

Home-target market

Market infrastructure similarity

Marketing regulations

Advertising media availability

Marketing program standardization

(marketing mix)

Centralization of product

decisions

Product characteristics

Branding decisions

Packaging decisions

Centralization of non-product

decisions

Pricing decisions

Sales force decisions

Sales promotion decisions

Performance

+ +

+ +

(+) -

+

From: Ozmozer and Simonin (2004)

Documents

International Marketing & Research · International Marketing - 2010 Session 1 –page 11 Globalization History Globalization intensified during the 19th - 20th centuries, a period