international marketing 14 edition chapter11

I n t e r n a t i o n a l M a r k e t i n g I n t e r n a t i o n a l M a r k e t i n g

Global Marketing Management:Planning and Organization

Chapter 11

1 4 t h E d i t i o nP h i l i p R. C a t e o r a

M a r y C. G i l l yJ o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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What Should You Learn?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 PerspectiveGlobal Gateways

Global PerspectiveGlobal 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 ManagementGlobal Marketing Management

• 1970s – “standardization versus adaptation”

• 1980s – “global integration versus local responsiveness”

• 1990s – “global integration versus local responsiveness”

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Global Marketing ManagementGlobal 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

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 – 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 MarketingBenefits 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 MarketsPlanning 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 markets

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• 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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• 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 ProcessInternational Planning Process

Exhibit 11.1

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The Planning ProcessThe 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 StrategiesAlternative 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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Exhibit 11.2

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• 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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ExportingExporting

• 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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ExportingExporting

• 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 AgreementContractual 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 AgreementContractual 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 AlliancesStrategic 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

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Building Strategic AlliancesBuilding Strategic Alliances

Exhibit 11.3

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• 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

► The acknowledged intent by the partners to share in the management of the JV

► 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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• 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

– Consortia are developed to pool financial and managerial resources and to lessen risks

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Direct Foreign InvestmentDirect 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 CompetitionOrganizing 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

Schematic Marketing Organization Plan Combining Product, Geographic,

and Functional ApproachesExhibit 11.4

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Locus of decisionLocus of decision

• Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy– 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

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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SummarySummary

• 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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SummarySummary

• 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

international marketing 14 edition chapter11

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