December 12, 2011
Chris Schrage
GLOBAL MARKETING MANAGEMENT
SHRINKING
GLOBE
Source: David Harvey, The Condition of Postmodernity
(Oxford and Cambridge, Mass.: Basil Blackwell, 1989), p. 241,
plate 3.1.
3
SPEED OF GLOBALIZATION OF MARKETS
Change in transportation technology
 Change in communication technology

REASON FOR TRADE
Access to products not available at home
 Raw materials for products
 Better quality of life
 Comparative Advantage

NEW REALITIES





Capital movements replaced trade
levels
Production “uncoupled” from
employment
World economy dominate-country
economies are secondary
End of the capitalism/socialism
struggle
E-commerce changes all models

Business and national
6
IMPACT OF 1989 TO 1991
Break up of Soviet Union
 Apartheid over- sanctions ended
 Privatization of public companies in Brazil,
France and England,
 Special Economic Zones in China
 Democracy started in Latin America

A TALE OF TWO NATIONS


March 7, 1957
Independence from Great
Britain through peaceful
negotiations


1957
End of the Korean Conflict and
devastation from war
1st British African colony to win
independence (1957).
Nkrumah espoused pan African
socialism.
High tariffs.
Anti-exporting policy.
Kept lowering tariffs on manufactured goods.
Created incentives to export.
Reduced quotas.
Reduced subsidies.
1950s: 77% of employment in agriculture. Now
20%.
Manufacturing GNP went from 10% to over
30%.
THE IMPACT OF TRADE POLICIES

Ghana

Korea

1970

1970

GNP/capita


GNP/per capita



$450
1.5%
Shift from productive uses
(cocoa) to unproductive
uses
(subsistence agriculture).

GNP/per capita
 $260
1992
GNP/per capita
 $6790
 GNP Growth/year
 9%
Shift from non-comparative
advantage uses (agriculture)
to productive uses (laborintensive manufacturing).

GNP Growth/year


$250
1992


SOUTH KOREA TODAY



With a GDP per capita of
$25,800 in 2010
Eighth largest exporter in
the world
In 2010 ranks 14th out of
225 nations at 1243 billion
US dollars
GHANA TODAY


GDP - per capita:
purchasing power
parity - $1,300
(2010)
In 2010 ranks 100 at
30.14 billion US
dollars
REASONS TO GO BEYOND DOMESTIC
Mature market at home
 Underutilized capacity
 Leverage competitive advantage
 Compete in home market of others.

KENICHI OHMAE
Global companies understand the balance of standardization
and customization required in the world’s marketplace.
MICHEAL PORTER

Global Industry
 Competitive advantage gained by
integrating and leveraging operations
on a global scale
Five forces analysis can assist a
company in formulating the
appropriate strategy to gain a
competitive advantage
INDUSTRY ANALYSIS:
FORCES INFLUENCING
COMPETITION
Power of
Suppliers
Power of
Buyers
Barriers to
Entry
Substitute
Products
Industry
Competitive
Rivalry
PORTER’S FORCE 1:
THREAT OF NEW ENTRANTS


New entrants mean
downward pressure on
prices and reduced
profitability
Barriers to entry
determine the extent of
threat of new industry
entrants
THREAT OF NEW ENTRANTS: BARRIERS TO
ENTRY

Economies of scale

Product differentiation

Capital requirements

Switching costs

Distribution channels

Government policy

Cost advantages independent of scale economies

Competitor response
PORTER’S FORCE 2:
THREAT OF SUBSTITUTE PRODUCTS
Substitute products limits prices
 High prices induce buyers to switch to the
substitute

PORTER’S FORCE 3:
BARGAINING POWER OF BUYERS



Buyers = manufacturers and retailers, not consumers
Buyers seek to pay the lowest possible price
Buyers have leverage over suppliers when




They purchase in large quantities (enhances supplier
dependence on buyer)
Suppliers’ products are commodities
Product represents significant portion of buyer’s costs
Buyer is willing and able to achieve backward integration
PORTER’S FORCE 4:
BARGAINING POWER OF SUPPLIERS


When suppliers have leverage, they can raise
prices high enough to affect the profitability of their
customers
Leverage accrues when




Suppliers are large and few in number
Supplier’s products are critical inputs, are highly
differentiated, or carry switching costs
Few substitutes
Suppliers are willing and able to sell product themselves
PORTER’S FORCE 5:
RIVALRY AMONG COMPETITORS

Refers to all actions taken by firms in the
industry to improve their positions and
gain advantage over one another
 Price
competition
 Advertising battles
 Product positioning
 Differentiation
NATIONAL COMPETITIVE ADVANTAGE
Strategy,
Structure,
Rivalry
Demand
Conditions
Factor
Conditions
Related and
Supporting
Industries
Activity in any one of the four points of the diamond
impacts all the others and vice versa
FACTOR CONDITIONS
Physical
Human
Knowledge
Resources
Infrastructure
Capital
DEMAND CONDITIONS
RELATED AND SUPPORTING INDUSTRIES
The advantage that a nation gains by being
home to internationally competitive industries
in fields that are related to, or in direct
support of, other industries
GROWTH MATRIX
Market
Penetration
Strategy
Product
Development
Strategy
Market
Development
Strategy
Diversification
Strategy
COMPETITIVE ADVANTAGE
Achieved when there is a match between a
firm’s distinctive competencies and the factors
critical for success within its industry
 Two ways to achieve competitive advantage

 Low-cost
strategy
 Product differentiation
GENERIC STRATEGIES FOR CREATING
COMPETITIVE ADVANTAGE

Broad market strategies



Cost leadership—low price
Product differentiation—premium price
Narrow market strategies


Cost focus—low price
Focused differentiation—premium price
BUILDING LAYERS OF ADVANTAGE
Build a wide portfolio of advantages
 Develop portfolios by establishing layers on top
of one another
 Move along the value chain to strengthen
competitive advantage

SEARCHING FOR LOOSE BRICKS

Search for opportunities in the defensive walls
of competitors whose attention is narrowly
focused
 Focused
on a market segment
 Focused on a geographic area to the exclusion of
others
Global Marketing- Schrage 15
15-34
CHANGING THE RULES OF ENGAGEMENT


Refuse to play by the rules
set by industry leaders
Ex: Xerox and Canon



Xerox employed a huge direct
sales force; Canon chose to
use product dealers
Xerox built a wide range of
copiers; Canon standardized
machines and components
Xerox leased machines; Canon
sold machines
COLLABORATING
Use the know-how developed by other
companies
 Licensing agreements, joint ventures,
partnerships, or strategic alliances

4 Cs to partner selection
•
•
•
•
Complementary skills
Cooperative cultures
Compatible goals
Commensurate levels of risk
Global Marketing- Schrage 15
15-37
Efforts here
are impacted by
Differences here
CURRENT ISSUES

In today’s business environment, market stability is
undermined by






Escalation and acceleration of competitive forces
Difficult to achieve one sustainable advantage


Build a series of unsustainable but effective advantages
Marketing focus needs to be on innovation


Short product life cycles
Short product design cycles
New technologies
Globalization
Learn to create new markets
Must forget “that’s the way we always have done it”
Innovative organizations
spend neither time nor
resources on defending
yesterday. Systematic
abandonment of yesterday
alone can transfer the
resources . . . for work on
the new.
—Peter Drucker
ONE VOICE, ONE IMAGE… ONE
BRAND
ANHEUSER-BUSCH

Global Advertising Strategy
 Contemporary
Relevance
 SPEAKS
TO “Consumer’s Heart”
 Knows my language- relevant to my lifestyle
 Brand
Quality
 SPEAKS
TO “Consumer’s Head”
 Value perception
ANHEUSER-BUSCH
New Brands
Quality
Control
Brand Development Basics
Motivated
People
& Partners
Right
Right
Product Distribution
Right
Profit
Revenue
& Cost
Management
Right
Image
Promotion
Advertising
Packaging
FOR GLOBAL POSITIONING
Miller Time is the “MILLER WAY”
Rooted in the “urban cool” mindset
Globalmiller.com website
45
HERITAGE FOUNDATION ECONOMIC FREEDOM

Free
 20

Mostly Free
 52

nations (includes US)
nations
Mostly Unfree
 73
nations
Repressed
 Unrated

STAGES OF MARKET
DEVELOPMENT
High-Income Countries
GNP > $10,666
Upper-middle-income Countries
GNP ≥ $3,256 ≤ $10,065
86% of the world’s
population
Lower-middle-income Countries
GNP ≥ $826 ≤ $3,255
Low-Income Countries
GNP < $825
FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad
PHILOSOPHY FOR DEVELOPING PRODUCTS AND
SERVICES FOR BOP MARKET

The basic economics of the BOP market are
based on
 small
unit packages,
 low margin per unit,
 high volume,
 high return on capital employed.
FORTUNE AT THE BOTTOM OF THE PYRAMID, Prahalad
TRUE NATURE OF BOP MARKET
There is Money at the BOP
 Ease of access to BOP markets
 BOP Markets are brand-conscious

 Extremely
value conscious
BOP Market is connected
 BOP Customers accept advanced technology
readily

50

Purchases aircraft from Boeing
– 10% down payment
– Rest upon delivery (5 years later)



Revenues of JAL in Yen
Payments in USD
In 1985- entered into 10 year forward exchange contract
– Value of Yen surged against dollar from ¥240 to ¥99 in 1994
– Misjudgment cost JAL 86 percent more per each aircraft.
– Admitted loss of USD 45 million or ¥45 billion