Module1-MMSS13-CFVG Session 2

Berlin
London
Developing Marketing Management in

the Global Marketplace Paris
Session 2 – Coping with the marketing environment
Torino
Madrid
Copyright Owner: European Department of Marketing, ESCP Europe

Session 2 - Agenda
1 Foundations
1.1 The marketing “macro-environment”
1.2 The international “global” environment or the FOUR globalizations
1.3 Motivations for marketing across borders
2 Work in progress: the company project
CFVG - MMSS Session 2 © ESCP Europe 2

Session 2 - Agenda
1 Foundations

EXERCISE:
The Marketing « Macro-environments »
Economic
Environment
Political
Competitive
and Legal
Environment
Environment
P P
TM
Technological
P P Social
Environment Environment
Natural
Environment
In your own business, IDENTIFY at least 3 factors per category that

impacts on your marketing activities and be ready to share (5 min please)
CFVG - MMSS Session 2 © ESCP Europe
Session 2 - Agenda
1 Foundations

The FOUR Globalizations
What are the four levels of globalization, and how do

they impact current international marketing practices?
Macro
Meso
Micro
Nano

MACRO Level: Economic integration dynamics and
countries’ interdependence at the worldwide scale
Drivers of global integration

Worldwide reduction of barriers to trade and investment
Transition to market-based economies and adoption of free trade in
China, former Soviet Union countries, and elsewhere
Integration of world financial markets
Advances in technology (production, information, transportation)
Indicators of global integration

Industrialization, economic development, and modernization
Interdependence of national economies
Rise of regional economic integration blocs
Growth of global investment and financial flows
Globalization of production activities
Global access to products & services

MACRO level: World population and GDP based on
purchasing-power-parity (PPP) and current dollar (2010-2016)
Share in GDP % GDP GDP per Capita, Population %

GDP based on evolution based on PPP (millions) world population
PPP % World ($)
($ billions)
2010 2015 2016* 2010 2015 2016 2016- 2016- 2010 2015 2016* 2010 2015 2016 2010 2015 2016
2010 2015
World 88997 114137 119097 100.0% 100.0% 100.0% 33.8% 4.3% 12861 15531 16008 6920 7349 7440 100.0% 100.0% 100.0%
USA 14964 18037 18562 16.8% 15.8% 15.6% 24.0% 2.9% 48272 56014 57290 310 322 324 4.5% 4.4% 4.4%
EU 16879 19344 19973 19.0% 16.9% 16.8% 18.3% 3.3% 33633 38107 39212 502 508 509 7.3% 6.9% 6.8%
Japan 4320 4843 4932 4.9% 4.2% 4.1% 14.2% 1.8% 33746 38136 38834 128 127 127 1.8% 1.7% 1.7%
Brazil 2803 3199 3135 3.2% 2.8% 2.6% 11.8% -2.0% 14340 15681 15218 195 204 206 2.8% 2.8% 2.8%
China 12406 19696 21269 13.9% 17.3% 17.9% 71.4% 8.0% 9251 14345 15424 1341 1373 1379 19.4% 18.7% 18.5%
India 5312 7998 8721 6.0% 7.0% 7.3% 64.2% 9.0% 4445 6187 6658 1195 1293 1310 17.3% 17.6% 17.6%
Russia 3241 3725 3745 3.6% 3.3% 3.1% 15.6% 0.5% 22664 26048 26189 143 143 143 2.1% 1.9% 1.9%
Total
36163 42223 43467 40.6% 37.0% 36.5% 20.2% 2.9% 115651 132258 135336 940 957 960 13.6% 13.0% 12.9%
TRIAD
Total BRIC 23762 34618 36870 26.7% 30.3% 31.0% 55.2% 6.5% 50700 62261 63489 2875 3013 3038 41.5% 41.0% 40.8%
* estimated July 2016

Sources : Adapted from World Bank data and International Monetary Fund (World Economic Outlook Database, october 2016).
MACRO LEVEL: Leading countries in GDP
and GDP per capita (based on PPP), current dollars
TOP 20 countries GDP per country (PPP, $ billion) Top 20 countries GDP per capita (PPP, $)
2013 2014 2013 2014
1 China 16,585 18,088 1 Qatar 141,851 137,162
2 United States 16,663 17,438 2 Luxembourg 93,128 97,639
3 India 6,796 7,411 3 Singapore 80,443 83,065
4 Japan 4,694 4,767 4 Brunei 81,742 79,891
5 Germany 3,630 3,748 5 Kuwait 71,385 70,686
6 Russia 3,498 3,576 6 Norway 65,415 67,166
7 Brazil 3,218 3,276 7 U.A.Emirates 64,294 66,347
8 Indonesia 2,516 2,686 8 San Marino 60,469 60,886
9 France 2,555 2,591 9 Switzerland 56,864 58,148
10 United Kingdom 2,454 2,569 10 Hong Kong 53,211 55,096
11 Mexico 2,070 2,149 11 United States 52,607 54,382
12 Italy 2,110 2,135 12 Saudi Arabia 51,027 52,310
13 Korea 1,699 1,784 13 Ireland 48,133 51,284
14 Saudi Arabia 1,531 1,610 14 Bahrain 47,070 49,020
15 Canada 1,533 1,596 15 Netherlands 46,878 47,960
16 Spain 1,526 1,572 16 Austria 46,027 46,640
17 Turkey 1,448 1,515 17 Australia 45,212 46,550
18 Iran 1,279 1,357 18 Sweden 44,931 46,219
19 Australia 1,053 1,099 19 Germany 44,945 46,216
20 Thailand 1,043 1,069 20 Taiwan 43,758 46,036
Sources : IMF & Worldbank, World Economic Outlook Database, 27 France 39,978 40,537
october 2015)
28 United Kingdom 38,295 39,826
CFVG - MMSS Session 243 Spain 32,741
© ESCP Europe 33,8359
MESO Level: The globalization degree of industries
GLOBAL
Global Industries
“Globalization”: Standardization LOCAL
Clients are served at
regional/worldwide scale
(chemicals, aeronautics,
IT services, industrial
equipments…)
Potential for economies of
Globalization
scale (focus on cost

reduction)
“Localization”: Adaptation
A handful of global
competitors
Specificity of local demand (culture, regulations,

climate…) Multidomestic
Limited potential of economies of scale (focus on
adaptation) Industries
Powerful local competitors
Geo-centralization
Source: Adapted from Jean-Paul Lemaire, Stratégies d’internationalisation, Dunod, 2013.

MESO Level: Examples of global industries
1. Kodak must contend with the same rivals,

Japan’s Fuji and the European multinational
Agfa-Gevaert, wherever it does business around
the world.
2. American Standard sells similar bathroom

fixtures worldwide, competing with Toto in most
major markets.
3. In the earth moving equipment industry,

Caterpillar and Komatsu compete head-on in all
major markets, and offer similar brands of
tractors.

MESO Level: Examples of multidomestic industries
1. The British publisher Bloomsbury has

translated each volume of its Harry Potter series
into the local language in every country where the
books are sold.
2. Beverage companies produce various brands

and flavors in markets worldwide: Coca-Cola
offers “Georgia Coffee” in Japan, “Café Zu” in
Thailand, “Inca Cola” in Peru, and “Burn” energy
drinks in France.
3. KFC restaurants in Asia often sell distinctive

flavors of chicken.

MICRO Level: Measurement of international growth
of companies
Macroeconomic internationalization is the result of increased international

economic activities by companies.
Growth of the following indicators in a company indicate an increasing internationalization of

the company.
▪ the revenues abroad to total revenues

▪ the manufacturing plants abroad to the total number
of manufacturing plants
▪ the net production abroad on the total net production
▪ the profit realized abroad on the total profit of a
company
▪ the employees abroad to total employees of a
company
▪ the foreigners in the management of a company
▪ the foreign direct investments (FDI) on the total
investments

EXERCIZE
Discuss to what extent the following industries / markets are

global or multidomestic whether considering 1) competition; 2)
consumer behavior; 3) the product / service
Beer,
Microchips (electronic components, processors),
Meat-based processed food,
Auditing services (such as KPMG)
You may distinguish different subsets of the industry or different

market segments within this industry
10 minutes please

MICRO Level: The UNCTAD transnationality index
Source: UNCTAD

MICRO Level: World’s top 100 non-financial TNCs,
ranked by foreign assets, 2012
Source: WTO

MICRO Level:
However, to what extent are we global?
Pankaj Ghemawat
« Globaloney: why the world is not flat - it's at best semi-globalized,

with limited interactions between countries and economies »

MICRO Level:
How “global” are the largest companies (or MNEs)?
4 major patterns
11. Global MNEs: 20% + sales in each of the three parts of the triad,
but less than 50% in any one region 22 companies
22. Host region MNEs: 50% + of sales in a triad market other than their
home region 14 companies
33. Bi-regional MNEs: 20% + of sales in two regions each, but less
than 50% in any one region 59 companies
44. Home region oriented MNEs: 50% + of their sales in their home
region of their triad 435 companies
Source: Oh & Rugman (2014)

MICRO Level: Global MNEs
1 Global MNEs
% of total sales
100%
8,3
25
80% 44 42
47,1
60% 30,9 Other
Asia-Pacific
25 28 Europe
40% North America
23,2
20% 44,1
32 30
21,4
0%
Unilever Sony Nestlé Canon

MICRO Level: Home-region based MNEs
4 Home-region based
% of total sales
100%
14 9,2 8,2
28,9
80% 16
60% 15 Other
72,1 79,8 Asia-Pacific
Europe
40%
71,1 North America
55
20%
10,5 12,1
0%
Wal-Mart General Mitsubishi Allianz
Electric

MICRO Level: Host and bi-regional MNEs
2 Host region MNEs 3 Bi-regional MNEs
Honda: a host-region based Mc Donald’s: a bi-regional MNE

MNE
No. 36 in Fortune 2016 Global 500 list No. 420 in Fortune 2016 Global 500 list
> 50% of sales in North America 32% of sales in North America, 40 % in
Europe, 22 % rest of the world

MICRO Level: “Globalization”: a delicate meaning
to use with appropriate context for IMD
A GLOBAL industry: when competition takes place at the global level with
high pressures on standardization (opposed to multi-domestic industry)
A GLOBAL company: with a global presence, i.e. in Triad and emerging

markets (opposed to local company)
A GLOBAL strategy: with a global reach (opposed to local strategy)
A company can be “global,” working in a “multi-domestic” industry,

developing “local” strategies (e.g. Unilever’s strategy in Brazil for low income
consumers in the detergent industry)

MICRO Level: Re-defining global competitiveness:
Emerging Markets (EM) global challengers
“Global
challengers
have stood the
test of time.
They have
moved into the
global spotlight
by dramatically
increasing their
share of
overseas
revenues.”
Source: BCG 2016 Global Challengers

“Generally, B2B markets are more global

than B2C markets. The similarity of
business needs for goods and services
across markets allows these companies
to build global scale more easily than
many consumer-oriented companies.”
“Consumer companies historically have been

underrepresented on the global challengers
list. There are plenty of successful consumer-
oriented companies, but relatively few global
fast-moving-consumer-goods companies.”

“The latest global challengers continue

to show strong performance.
Despite economic turmoil in emerging

markets, they have maintained both
their growth rates and profit
margins.”


NANO Level: Are consumers becoming “global”?
Paradoxically, while firms and their strategies tend to go increasingly “global” in terms of
scope, consumers’ / clients’ behavior tend to remain significantly local
International B to C Markets: generally speaking, more culture-bound products and

culture-bound buying processes
International B to B Markets: more culture-free products BUT still culture-bound

buying processes
Need for observing consumers’, clients’ and partners’

behavior in situ of buying and consumption, to avoid cultural risk

NANO Level: culture-bound consumption (B2C)
McDonald’s
local specialties

NANO Level: The cultural risk
Incapacity to integrate the cultural sensitivity of:

external diversity (markets, partners)
and internal diversity (collaborators)
when deciding and implementing international
marketing decisions
Strong unconscious belief that “What worked at

home will work abroad”, “what’s good for my
consumers is good for the others”

NANO Level: Cultural risk – Hedging strategies
Example: HSBC “the world’s local bank”

Cultural differences in management style
1. Identification of the cultural risk when analyzing,

deciding, implementing
2. Work in synergy between local and international

marketing teams
3. International mobility within the company (HR tools!)
4. Sharing best practices / knowledge management

approaches

Session 2 - Agenda
1 Foundations
What are the opportunities of exploring foreign markets? What do

companies have to gain from selling their offerings abroad?

Session 2 - Agenda
1 Foundations
What are the opportunities of exploring foreign markets? What do

companies have to gain from selling their offerings abroad?

A large scope of marketing opportunities abroad:
looking for …
Context:
Deregulation of markets
Modernization of distribution channels in emerging markets (example of m-
commerce growth)
Consumers:
Superior and/or sustainable growth of demand in emerging markets
(example of Chinese income growth)
Follow the client
Competition:
Valuing competitive advantages more easily
Local innovations
Company:
Larger economies of scales
Prolonged international product life cycle
Balanced risks

EXAMPLE – The changing consumer in China
While the “poor” and “value” household number will decline, there will be a large mainstream
consumer group with higher purchasing power.
Source: Meet the Chinese consumer 2020 (McKinsey, 2012)

EXAMPLE – The changing consumer in China:
Geographical segmentation
“Advanced cities” will experience the biggest shift towards mainstream income, while the shift
of “Emerging cities”, who make up almost half of the urban population, will be slower.

EXAMPLE – The changing consumer in China
Increasing discretionary spending (Engel’s law applied)

HOWEVER: In a period of crisis, marketing will be
adapted
“Our recent survey of 1,000 Brazilian consumers confirms that most of them are indeed
worried about their financial prospects and curtailing their spending.(…)
We found that even amid sharp declines in consumer confidence and private
consumption, consumer companies can still find pockets of opportunity in Brazil.”
Source: McKinsey & Company, 2016

HOWEVER: Behavioral shifts among Brazilian
consumers in crisis
Behavioral shifts among Brazilian consumers
1. They proactively search for savings.

3 out of 4 respondents are “increasingly looking for ways to save money”.
2. Some remain brand loyal—but only if the price is right.

1/3 of Brazilians haven’t abandoned their preferred brands but are shopping around
to find retailers that sell these brands at lower prices.
3. Once they ‘trade down,’ they might not go back.

Among down-traders, 60 % don’t intend to go back to the more expensive brand.
4. There are “splurgers” in select categories.

Even as most Brazilians sought to save money, some opted to trade up in certain
categories (e.g. in alcoholic beverages and personal-care products).
5. They shop across channels.

Brazilian consumers are shifting some of their spending to discount chains and the
cash-and carry format (atacarejo), which combines both retail and wholesale.

HOWEVER: Marketing implications in a period of crisis
1. At every price point, think ‘value for money.’

With many consumers seeking savings opportunities, brands must give consumers
solid reasons to choose their product over lower-priced alternatives.
2. Invest in advanced revenue-growth-management capabilities.

Companies determine optimal tactics and then devise granular strategies for their
brands, portfolio, and promotions—and refine these strategies for each channel,
customer segment, and region.
3. Find granular opportunities for growth.
4. Review price architecture to capture both up-traders and down-traders.
5. Be thoughtful about channel changes.

With Brazilian consumers doing more of their grocery shopping in discount and
cash-and-carry formats, manufacturers must launch initiatives to serve these fast-
growing channels.
6. Relentlessly optimize investments and operations.

Key Learning Points
11. Don’t forget about marketing basics: Understand well the marketing
macro-environments which are especially complex and dynamic at an
international scale.
22. For the marketer, globalization can be defined at the macro-meso-micro-

nano levels with different conclusions: but the world is not (yet?) flat,
distances matter!
33. At the nano level of consumers and clients addressed by marketers,

“globalization” does not mean “standardization”, but rather
complexification!
44. Growing on foreign markets offer a large scope of opportunities

Read More
The evolving economic and consumer landscape 2017

(Euromonitor international):
The global economy is entering an increased period of political volatility, particularly

in advanced economies. In this briefing, Euromonitor International explores the
economic landscape in 2017, taking in top trends within Business Dynamics, Cities,
Economy, Finance and Trade, Industrial, Natural Resources, Digital Consumer,
Households, Income and Expenditure and Population.

List of links to videos
To what extent are we global? Pankaj Ghemawat

http://live.wsj.com/video/globaloney-globalization-challenged/8DB8D439-97C8-4D2E-
9970-65727E4821B0.html
McDonald’s local specialties

https://www.youtube.com/watch?v=9ORiKlpasOw
HSBC “the world’s local bank” Cultural differences in management style

http://www.youtube.com/watch?v=mUCODUvKbzE

Session 2 - Agenda
1 Foundations
2 Work in progress: the company project

Work in Progress : the company project
1. Identify the major strengths and weaknesses of the company in the markets (internal
analysis)
2. Identify the macroenvironments impacting the business of the company in the country
(external analysis)
3. Draw the SWOT table

Module1-MMSS13-CFVG Session 2

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Berlin

Developing Marketing Management in

Session 2 – Coping with the marketing environment

Copyright Owner: European Department of Marketing, ESCP Europe

1.1 The marketing “macro-environment”

1.2 The international “global” environment or the FOUR globalizations

1.3 Motivations for marketing across borders

2 Work in progress: the company project

CFVG - MMSS Session 2 © ESCP Europe 2

1.1 The marketing “macro-environment”

CFVG - MMSS Session 2 © ESCP Europe 3

In your own business, IDENTIFY at least 3 factors per category that

1.1 The marketing “macro-environment”

1.2 The international “global” environment or the FOUR globalizations

CFVG - MMSS Session 2 © ESCP Europe 5

What are the four levels of globalization, and how do

CFVG - MMSS Session 2 © ESCP Europe

Drivers of global integration

Indicators of global integration

CFVG - MMSS Session 2 © ESCP Europe

Share in GDP % GDP GDP per Capita, Population %

* estimated July 2016

scale (focus on cost

Specificity of local demand (culture, regulations,

CFVG - MMSS Session 2 © ESCP Europe 10

1. Kodak must contend with the same rivals,

2. American Standard sells similar bathroom

3. In the earth moving equipment industry,

CFVG - MMSS Session 2 © ESCP Europe 11

1. The British publisher Bloomsbury has

2. Beverage companies produce various brands

3. KFC restaurants in Asia often sell distinctive

CFVG - MMSS Session 2 © ESCP Europe 12

Macroeconomic internationalization is the result of increased international

Growth of the following indicators in a company indicate an increasing internationalization of

▪ the revenues abroad to total revenues

CFVG - MMSS Session 2 © ESCP Europe 13

Discuss to what extent the following industries / markets are

You may distinguish different subsets of the industry or different

CFVG - MMSS Session 2 © ESCP Europe

CFVG - MMSS Session 2 © ESCP Europe 15

CFVG - MMSS Session 2 © ESCP Europe 16

« Globaloney: why the world is not flat - it's at best semi-globalized,

CFVG - MMSS Session 2 © ESCP Europe 17

Source: Oh & Rugman (2014)

CFVG - MMSS Session 2 © ESCP Europe 18

CFVG - MMSS Session 2 © ESCP Europe 19

CFVG - MMSS Session 2 © ESCP Europe 20

2 Host region MNEs 3 Bi-regional MNEs

Honda: a host-region based Mc Donald’s: a bi-regional MNE

CFVG - MMSS Session 2 © ESCP Europe 21

A GLOBAL company: with a global presence, i.e. in Triad and emerging

A GLOBAL strategy: with a global reach (opposed to local strategy)

A company can be “global,” working in a “multi-domestic” industry,

CFVG - MMSS Session 2 © ESCP Europe 22

Source: BCG 2016 Global Challengers

CFVG - MMSS Session 2 © ESCP Europe 23

“Generally, B2B markets are more global

“Consumer companies historically have been

Source: BCG 2016 Global Challengers

CFVG - MMSS Session 2 © ESCP Europe 24

“The latest global challengers continue

Despite economic turmoil in emerging

Source: BCG 2016 Global Challengers