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International Marketing 15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Introduction

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Confronted with increasing global competition for expanding markets, multinational companies are changing their marketing strategies and altering their organizational structures Comprehensive decisions must be made regarding key strategic choices, such as standardization vs. adaptation, concentration vs. dispersion, and integration vs. independence The flexibility of a smaller company may enable it to reflect the demands of global markets and redefine its programs more quickly than larger multinationals
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Overview
Global marketing management Planning for global markets Alternative market-entry strategies
Exporting Contractual agreements l Strategic international alliances Direct foreign investment

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Organizing for global competition

Locus of decision Centralized vs. decentralized organizations
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12 Global Perspective: The British Sell another Treasure

Grandiose mergers more often destroy brands than strengthen them, particularly when those brands are such delicate confections as chocolate bars and gooey eggs Kraft (US) proposed to buy Cadbury (Britain)for $17 billion in September 2009; Kraft finally bought Cadbury in January 2010 for some $19 billion in cash and stock Studies have shown that three-quarters of mergers fail to produce any benefits of shareholders and more than half actually destroy share value
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Global Marketing Management (1 of 2)

1970s standardization versus adaptation 1980s global integration versus local responsiveness global 1990s global integration versus local responsiveness

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Global Marketing Management (2 of 2)

The trend back toward localization
Caused by the new efficiencies of customization Made possible by the Internet Increasingly flexible manufacturing processes

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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

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Nestle worlds 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 Marketing

When large market segments can be identified
Economies of scale in production and marketing Important competitive advantages for global companies

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Transfer of experience and know-how

Across countries through improved coordination and integration of marketing activities i t ti f k ti ti iti

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 Markets (1 of 2)

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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

Planning is both a process and philosophy; it relates to the formulation of goals and methods of accomplishing them
Corporate planning, Strategic planning, and Tactical planning
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Planning for Global Markets (2 of 2)

The keys to successful planning are as follows:
Company objectives and resources International commitment The planning process Phase 1 Preliminary analysis and screening h li i l i d i Phase 2 Adapting marketing mix to target markets Phase 3 Developing the marketing plan Phase 4 Implementation and control

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Company Objectives and Resources

Each new market requires a complete evaluation, including existing commitments, relative to the parent companys 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

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Dollars to be invested Personnel for managing the international organization Determination to stay in the market long enough sta eno gh to realize a return in investments

The degree of commitment to an international marketing cause reflects the extend to a companys involvement

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International Planning Process

Exhibit 12.1

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The Planning Process

Phase I

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Preliminary analysis and screening (matching company and country needs) Adapting marketing mix to target markets (a more detailed examination of the components of th marketing mix) f the k ti i ) Developing the marketing plan (situation analysis, entry mode, and specific action program for the specific market) Implementation and control (implementing of specific plans and anticipation of successful marketing)
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Phase II

Phase III

Phase IV

Alternative Market-Entry Strategies (1 of 2)

Market characteristics Potential sales Strategic importance S Strengths of l l resources h f local Cultural differences Country restrictions Company capabilities and characteristics Degree of near-market knowledge Marketing involvement Management commitment
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An entry strategy into international market should reflect on analysis

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Alternative Market-Entry Strategies

Exhibit 12.2

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Alternative Market-Entry Strategies (2 of 2)

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Companies most often begin with modest export involvement A company has four different modes of foreign market entry
Exporting E ti Contractual agreements Strategic international alliances Direct foreign investments

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Exporting (1 of 2)

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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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Exporting (2 of 2)
The Internet
Initially, Internet marketing focused on domestic sales A surprisingly large number of companies started receiving orders f i i d from customers i other countries, t in th t i

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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 Agreement (1 of 2)
Contractual agreements
Long-term, Nonequity association between a company and another in a foreign market

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Licensing g
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 Agreement (2 of 2)
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

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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 Alliances (1 of 4)

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

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SIAs are sought as a way to shore up weaknesses and p g 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 Alliances

Exhibit 12.3

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Strategic International Alliances (2 of 4)

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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

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Strategic International Alliances (3 of 4)

Four characteristics define joint ventures:

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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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Strategic International Alliances (4 of 4)

Consortia

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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 Investment 12

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 Competition

Devising a standard organizational structure is difficult Companies are usually structured around one of three alternatives
Global product divisions responsible for product sales throughout world

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Because organizations need to reflect a wide range of companyspecific characteristics

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
Exhibit 12.4

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Locus of decision

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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

Most organizational patterns of multinational firms fit into one of three categories
Centralized Regionalized D Decentralized t li d

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No single traditional organizational plan is adequate for todays 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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Summary (1 of 2)

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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 th t every t b f l that opportunity to refine international business practices must be examined in light of company goals

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Summary (2 of 2)
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

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