Chapter 1 Introduction to Global Marketing

Introduction
Global versus regular marketing
Scope of activities are outside the homecountry market

Product/market growth matrix

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The matrix shows that market development is defined as taking existing products into new markets. Wal-Marts expansion into Guatemala and other Central American countries is an example of this strategy. Diversification is developing new products for new markets. South Koreas LG Electronics has created new products for the American home appliance market. Innovations such as a $3,000 refrigerator with a built-in flat panel LVD TV have been instrumental in Home Depots decision to carry the appliance product line.
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Global Marketing
Create value for customers by improving benefits or reducing price
Improve the product Find new distribution channels Create better communications Cut monetary and non-monetary costs and prices

Value = Benefits/Price

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Companies that use price as a competitive weapon may use global sourcing to access cheap raw materials or low-wage labor. Companies can seek to improve process efficiencies or gain economies of scale with high production volumes. Marketers may be able to reduce non-monetary costs by decreasing the time and effort customers expend to learn about or seek out the product.
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Globalization
Globalization is the inexorable integration of markets, nation-states and technologies to a degree never witnessed beforein a way that is enabling individuals, corporations and nationstates to reach around the world farther, faster, deeper and cheaper than every before, and in a way that is enabling the world to reach into individuals, corporations and nation-states father, faster, deeper and cheaper than ever before. Thomas L. Friedman
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Global Industries
An industry is global to the extent that a companys industry position in one country is interdependent with its industry position in another country Indicators of globalization Ratio of cross-border trade to total worldwide production Ratio of cross-border investment to total capital investment Proportion of industry revenue generated by companies that compete in key world regions
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Competitive Advantage, Globalization, and Global Industries

Focus
Concentration and attention on core business and competence Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch. . . . We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.
Helmut Maucher, former chairman of Nestl SA
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When a company succeeds in creating more value for customers than its competitors, that company is said to enjoy competitive advantage. Competitive advantage is measured relative to rivals in an industry. A local laundromat is in a local industry and competes locally. A national company competes within its countrys borders. Global industries compete globallyconsumer electronics, apparel, automobiles, steel, pharmaceuticals, furniture, and so forth. 1-9

Global Marketing: What It Is and What It Isnt

Single Country Marketing Strategy
Target market strategy Marketing mix
Product Price Promotion Place

Global Marketing Strategy

Global market participation Marketing mix development
4 Ps: adapt or standardize?

Concentration of marketing activities Coordination of marketing activities Integration of competitive moves

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Because countries and people are different, marketing practices that work in one country will not necessarily work in another. Customer preferences, competitors, channels of distribution, and communication may differ. Global marketers must realize the extent to which plans and programs may be extended or need adaptation. The way a company addresses this task is a reflection of its global marketing strategy (GMS).
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Standarization versus Adaptation

Globalization (standardization)
Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing

Global localization (adaptation)

Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation Think globally, act locally
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Standardization versus adaptation is the extent to which each marketing mix element can be executed in the same or different ways in various country markets. Concentration of marketing activities is the extent to which marketing mix activities are performed in one or a few country locations. Coordination of marketing activities refers to the extent to which marketing mix activities are planned and executed interdependently around the globe. Integration of competitive moves is the extent to which a firms competitive marketing tactics are interdependent in different parts of the world
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Standarization versus Adaptation

Arabic read right to left

Chinese delicious/happiness

The faces of Coca-Cola around the world

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The design is basically the same but the name is frequently transliterated into local languages. The Arabic label is read right to left; the Chinese label translates delicious/happiness.

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Because countries and people are different, marketing practices that work in one country will not necessarily work in another. Customer preferences, competitors, channels of distribution, and communication may differ. Global marketers must realize the extent to which plans and programs may be extended or need adaptation. The way a company addresses this task is a reflection of its global marketing strategy (GMS).
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McDonalds Global Marketing

Marketing Mix Element Product Promotion Standardization Big Mac Brand name Localized McAloo Tikka potato burger (India) Slang Maccas (Australia) MakDo (Philippines) Advertising slogan Im Loving It Place Free-standing McJoy magazine, Hawaii Surfing Hula promotion (Japan) Home delivery (India) Swiss rail system dining cars Price Big Mac is $3.10 in U.S. and Turkey $5.21 (Switzerland) $1.31(China)
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The Importance of Going Global

For U.S. companies, 70% of total world market for goods and services is outside the country
Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America

For Japanese companies, 90% of world market is outside the country 94% of market potential is outside of Germany for its companies
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Global Auto Industry

Thousands of auto companies globally in the early twentieth century More than 500 of those producers were in the United States Today there are fewer than 20 in the world Toyota is the worlds most valuable car company and is eighth largest in revenue globally
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Management Orientations
Ethnocentric orientation
Home country is superior to others Sees only similarities in other countries Assumes products and practices that succeed at home will be successful everywhere Leads to a standardized or extension
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approach

Ethnocentric orientation leads to a standardized or extension approach. Foreign operations are typically viewed as being secondary or subordinate to the country in which the company is headquartered. Sometimes valuable managerial knowledge and experience in local markets may go unnoticed. Manufacturing firms may view foreign markets as dumping grounds with little or no marketing research conducted, manufacturing modifications made or attention paid to customer needs and wants.

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Example: In Nissans early days of exporting to the United States, the company shipped cars for the mild Japanese winters. Executives assumed that when the weather turned cold, Americans would put a blanket over their cars just like Japanese would. Nissans spokesperson said, We tried for a long time to design cars in Japan and shove them down the American consumers throat. That didnt work very well.
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Management Orientations
Polycentric orientation
Each country is unique Each subsidiary develops its own unique business and marketing strategies Often referred to as multinational Leads to a localized or adaptation approach that assumes products must be adapted to local market conditions
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For example, Citicorp used this approach until the mid1990s when John Reed instilled a geocentric approach. He sought to instill a higher degree of integration among operating units. James Bailey, Citicorp executive, said, We were like a medieval state. There was the king and his court and they were in charge, right? No. It was the land barons who were in charge. The king and his court might declare this or that, but the land barons went and did their thing. Jack Welch at GE also sought to instill a geocentric approach

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Management Orientations
Regiocentric orientation
A region is the relevant geographic unit
Ex: The NAFTA or European Union market

Some companies serve markets throughout the world but on a regional basis
Ex: General Motors had four regions for decades

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Management Orientations
Geocentric orientation
Entire world is a potential market Strives for integrated global strategies Also known as a global or transnational company Retains an association with the headquarters country Pursues serving world markets from a single country or sources globally to focus on select country markets Leads to a combination of extension and

adaptation elements

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EX: GM now assigns engineering jobs worldwide. A Detroit global council determines $7 billion annual budget allocation for new product development. One goal is to save 40 percent on the cost of radios by using only 50 instead of 270 different ones. Basil Drossos, president of GM Argentina, said, We are talking about becoming a global corporation as opposed to a multinational company; that implies that the centers of expertise may reside anywhere that best reside.
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Driving Forces Affecting Global Integration and Global Marketing

Regional economic agreements Converging market needs and wants and the information revolution Transportation and communication improvements Product development costs
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DRIVING FORCES Regional agreements: NAFTA, EU expansion and single currency. WTO (1994) Market needs and wants and IT: There are cultural universals as well as differences. Common elements in human nature provide the opportunity to create and serve global markets. For example, soft drinks companies must recognize that product adaptation is not always necessary and that competitors may be serving global customers. The information revolution that Thomas Friedman calls the democratization of information is one reason for the trend to convergence.
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CNN and MTV allow people in remote areas to compare their lifestyles to others. Advertising overlapping national boundaries such as in Asia or Europe and the mobility of consumers in these markets has allowed for pan-regional positioning. The Internet is perhaps the strongest force that allows people everywhere to buy and sell.

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Transportation and communication: Jets allow around the world travel in less than 48 hours. 1970: 75 million international passengers. 2003: 540 million. Airlines sell one anothers seats thanks to modern technology. International phone calls are inexpensive and there are many other ways to communicate including fax, email, video conferencing, wi-fi, and broadband Internet. Transportation costs have fallen. Due to specially designed ships, the cost of shipping autos from Japan to the United States is less than the cost to ship from Detroit to either U.S. coast. Intermodal transportation uses 20to 40-foot containers that may be transferred from trucks to railroad cars to ships.
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Product Development Costs: New pharmaceutical cost in 1976 = $ 76 million; today = $400 million and up to 14 years to get a drug approved. Pharmaceutical companies go global to spread the costs. However, only 7 countries account for 75 percent of sales.

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Driving Forces Affecting Global Integration and Global Marketing

Quality World economic trends Leverage

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Quality: Global and domestic companies may each spend 5 percent of sales on R&D but the global company has much more revenue from its markets. Global companies raise the bar for all industry competitors. Nissan, Matsushita, and Caterpillar have achieved world-class quality. World economic trends: Economic growth in key developing countries equals major market opportunities. Slowing growth in developed countries has compelled managers to look abroad. Rapid economic growth, in a country such as China, has caused policymakers to open markets to outsiders.

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Competition can strengthen domestic companies. Domestic companies seek more governmental protection if markets are not growing. Worldwide movement to free markets, deregulation, and privatization is another driving force. As independent private managers take over running businesses (steel, railroads, telephones, airlines, utilities, restaurants, nightclubs) from governments, they are likely to seek the best deals, regardless of the nationality of the supplier.

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Competition can strengthen domestic companies. Domestic companies seek more governmental protection if markets are not growing. Worldwide movement to free markets, deregulation, and privatization is another driving force. As independent private managers take over running businesses (steel, railroads, telephones, airlines, utilities, restaurants, nightclubs) from governments, they are likely to seek the best deals, regardless of the nationality of the supplier.
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Restraining Forces Affecting Global Integration and Global Marketing

Management myopia Organizational culture National controls Opposition to globalization

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Management myopia and organizational culture: Ethnocentric companies will not expand geographically. Managers tend to dictate when they should create strong local teams that they can rely upon for market information. Know-it-all local teams wont listen to management and all-knowing managers wont listen to local experts. Successful global companies have learned to integrate global vision and perspective with local market initiative and input.
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National controls: Every country tries to protect its home industries and services through tariff and non-tariff controls. Thanks to organizations like GATT, WTO, NAFTA, EU, and other economic agreements, tariffs have been largely removed in high-income countries. Non-tariff barriers to trade include Buy Local campaigns, food safety rules, and other bureaucratic obstacles.
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Opposition to Globalization: Globophobia is the term used to describe an attitude of hostility toward trade agreements, global brands, or company policies that appear to result in hardship for some individuals or countries while benefiting others. Opponents to globalization include college or university students, NGOs, and labor unions. Some Americans believe that globalization has sent American jobsboth blue- and white-collaroverseas and also depressed wages at home. In developing countries, many believe that free trade agreements benefit the worlds most advanced countries. An unemployed miner in Bolivia said, Globalization is just another name for submission and domination. Weve had to live with that here for 500 years and now we want to be our own masters.
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Overview of Book
Part I: Overview of global marketing Part II: Environments of global marketing Part III: Global strategy Part IV: Global considerations of the marketing mix Part V: Integrating the dimensions of global marketing
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