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Global Marketing Management:

Planning and Organization

Module 3

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Chapter Learning Objectives

How global marketing management differsfrom international marketing management

The increasing importance of international

strategic alliances The need for planning to achieve company

goals

The important factors for each alternativemarket entry strategy

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Global Perspective:Global Gateways

Confronted with increasing global competitionfor expanding markets, multinational companiesare changing their marketing strategies andaltering their organizational structure.

A recent study of North American and Europeancorporations indicated that nearly 75% of thecompanies are revamping their businessprocesses.

The flexibility of a similar company may enable itto reflect the demands of global markets andredefine its programs more quickly than larger

multinationals. 3

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Global Marketing Management

1970s standardization versus adaptation 1980s global integration versus local responsiveness

1990s global integration versus local responsiveness

The trend back toward localization is caused by the new

efficiencies of customization made possible by the Internetand increasingly flexible manufacturing processes.

From the marketing perspective customization is always

best. As global markets continue to homogenize and diversify

simultaneously, the best companies will avoid the trap offocusing on country as the primary segmentation variable.

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The Nestle Way: Evolution Not Revolution

Nestle is the worlds biggest marketer of infant formula,

powdered milk, instant coffee, chocolate, soups, and mineralwater.

Nestle strategy can be summarized in four points:

- Think and plan long term

- Decentralize

- Stick to what you know

- Adapt to local tastes

Long-term strategy works for Nestle because the company relieson local ingredients and markets products that consumers canafford.

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Benefits of Global Marketing

When large market segments can be identified,

economies of scale in production and marketing canbe important competitive advantages for globalcompanies.

Transfer of experience and know-how across countries

through improved coordination and integration ofmarketing activities.

Marketing globally also ensures that marketers have

access to the toughest customers.

Diversity of markets served carries with it additional

financial benefits.

Firms that market globally are able to take advantage

of changing financial circumstances. 6

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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, andthe turbulent challenges of different national markets.

Planning relates to the formulation of goals and methods of

accomplishing them, so it is both a process andphilosophy.

- Corporate planning

- Strategic planning- Tactical planning

Successful planning is evaluating company objectives,

including managements commitment and philosophical

orientation to international business. 7

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Planning for Global Markets (contd)

Company objectives and resources

- Each new market can require a complete evaluation, including

existing commitments, relative to the parent companysobjectives and resources.

- Defining objectives clarifies the orientation of the domestic andinternational divisions, permitting consistent policies.

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 returnin investments.

- The degree of commitment to an international marketing causereflects the extend to a companys involvement

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The Planning Process

Phase 1: Preliminary Analysis and Screening-Matching Company and Country needs.

Phase 2: Adapting the Marketing Mix to TargetMarkets.

Phase 3: Developing the Marketing Plan

Phase 4: Implementation and Control

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International Planning Process

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Alternative Market-Entry Strategies

An entry strategy into the international market should reflect on

analysis of market characteristics such as:

- Potential sales

- Strategic importance

- Strengths of local resources

- Cultural differences

- Country restrictions

Companies most often begin with modest export involvement.

A company has four different modes of foreign market entry from

which to select:- Exporting

- Contractual agreements

- Strategic alliances

- Direct foreign investments 11

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Alternative Market-Entry Strategies

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Exporting

Exporting accounts for some 10% of global activity.

Direct exporting - the company sells to a customer inanother country.

Indirect exporting the company sells to a buyer(importer or distribution) in the home country, who in

turn exports the product. The Internet - Initially, Internet marketing focused on

domestic sales, however, a surprisingly large numberof companies started receiving orders from customersin other countries, resulting in the concept ofinternational Internet marketing (IIM).

Direct sales - Particularly for high technology and big

ticket industrial products. 13

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Contractual Agreement

Contractual agreements are long-term, nonequity associationbetween a company and another in a foreign market.

Licensing

- A means of establishing a foothold in foreign markets withoutlarge 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 Agreement (continued)

Franchising

- Franchiser provides a standard package of products,systems, and management services, and the franchiseprovides market knowledge, capital, and personal

involvement in management.- Despite temporary setbacks, franchising is still expected

to be the fastest-growing market-entry strategy.

- Two types of franchise agreements:

Master franchise gives the franchisee the rights to aspecific area with the authority to sell or establishsubfranchises.

Licensing15

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Strategic International Alliances

A strategic international alliance (SIA) is a business relationship

established by two or more companies to cooperate out of mutual

need and 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

Many companies also are entering SIAs to be in strategic position to

be competitive and to benefit from the expected growth in the singleEuropean market.

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S i I i l Alli ( i d)

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Strategic International Alliances (continued)

International Joint Ventures

- A joint venture is a partnership of two or moreparticipating companies that have joined forces tocreate 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, orgovernments, and not between individuals Equity

positions are held by each of the partners

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Strategic International Alliances (continued)

Consortia

- Consortia are similar to joint ventures and could beclassified as such except for two uniquecharacteristics:

They typically involve a large number of participants

They 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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Building Strategic Alliances

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Direct Foreign Investment

Factors that have been found to influence the structure

and performance of direct investments:- Timing

- The growing complexity and contingencies ofcontracts

- Transaction cost structures

- Technology transfer

- Degree of product differentiation

- The previous experiences and cultural diversity ofacquired firms

- Advertising and reputation barriers

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O G C

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Organizing for Global Competition

Because organizations need to reflect a wide range of

company specific characteristics, devising a standardorganizational structure is difficult.

Companies are usually structured around one of three

alternatives:

- Global product divisions responsible for product salesthroughout the world

- Geographical divisions responsible for all products andfunctions within a given geographical area

- A matrix organization consisting of either of thesearrangements with centralized sales and marketing runby a centralized functional staff, or a combination of

area operations and global product management 21

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Organizing for Global Competition (contd)

Locus of decision - Considerations of where decisions will bemade, by whom, and by which method constitute a majorelement of organizational strategy.

Centralized versus decentralized organizations - An infinitenumber of organizational patterns fro the headquartersactivities of multinational firms exist, but most fit into one of

three categories:

Centralized

Regionalized

Decentralized

No single traditional organizational plan is adequate for todays

global enterprise seeking to combine the economies of scale ofa global company with the flexibility and marketing knowledgeof a local company.

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S h ti M k ti O i ti Pl C bi i

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Schematic Marketing Organization Plan CombiningProduct, Geographic, and Functional Approaches

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Summary

To keep abreast of the competition and maintain a

viable position for increasingly competitive markets, aglobal perspective is necessary.

Cost containment, customer satisfaction, and a greater

number of players mean that every opportunity torefine international business practices must beexamined in light of company goals.

Collaborative relationships, strategic international

alliances, strategic planning, and alternative market-entry strategies are important avenues to globalmarketing that must be implemented in the planningand organization of global marketing management.

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