ESG
March 2008
Jean-Philippe Javel

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Purely local niches
Limited to a specific geographical area
Often, historical roots, consumer behavior linked to old traditions
Worldwide niches
Small market but potential customers in several countries
Example: Hummer H2
» derived from the military vehicle
» Target:
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Wealthy
« show-off »
Mostly urban
 Niche in some countries, mass market in others
Example : oil lamp
Decoration item (sailing style) in western countries

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Local markets (country)
Strong cultural links
Specific market conditions
Examples :
» medias (press, radio, TV)
» cheese
» airlines : state regulations (ex: Morocco)
Regional, multi-country markets
Specific products and marketing mix
Example : cars
» North America, Europe, Poor African countries
Global markets
Rather undifferentiated goods, universal solutions, not culturally related, commodities
» Example : wheelbarrow
» Example: vehicle gasoline
Luxury brands
» Strong global brand image
» Marketing mix may be adapted locally
Chevrolet Tahoe

The Maharaja Mac is an example of an
Ad ap ted Marketing Mix
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 Markets and consumers needs and wants can be different in each country / region
 But it is not always optimal to localize the marketing strategy and radically change the whole marketing mix for each country
 For example : developping a new product
 Mainly for cost reasons (economies of scale) and organisational reasons (simplify)
Adapt locally
Where is the optimum ?
Customer needs and wants
Standardize
Reduce costs
Maximize profits globally
 Consequently, a multinational company has to find out and implement the optimal approach, between global and local, depending on several factors and market screening

High
Level of cultural grounding
Need for adaptation
Low
Industrial /
Technology intensive
Nature of product
Consumer

Factors encouraging
Adaptation to local markets
• Different customer needs and wants, behavior patterns
 cultural background
 use conditions
• Different economic situation
• Legal, tax, political barriers
• Different competition landscape
• Specific sales/retail channels
• External growth and acquisition of foreign local brands
• Unleash local managers’ initiative
Factors encouraging
Globalization
• It’s sometimes possible
 Lifestyles and consumer behavior are converging (more or less)
• Cost reduction
 Economies of scale (lower manufacturing & purchasing costs)
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No product adaptation means less
R&D, Marketing, inventories costs
• Simplify management
 Easier control & coordination
 Centralized decisions
• Global marketing campaigns
 Communication etc
 Possible fast worldwide launch

Global marketing strategy
(same everywhere)
Local marketing strategies
(specific to each country or region )
Global tactics
Some tactics adapted locally
Pure Global Global
Mix of global & local tactics
Only local tactics & marketing mix
« Glocal » Pure Local
Bongrain : cheeses

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Strategies and tactics are the same everywhere
2 conditions
Markets adequate for such globalization
Strong brand policy, with no exception
Mostly luxury brands
Examples:
Chanel n
°5 perfume
Omega watches
Other examples
La Maison du Chocolat
» same product
» same shops (Paris, New York, Tokyo)
» same service
» same positioning, highest price on the market
Ikea
» same strategy everywhere (developped countries) : same brand, same positioning, same target
» same marketing mix : products and services, pricing, place, communication
» But a flop in China !

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Same brand, same positioning, same product
But the marketing mix can be partially adapted locally, depending of local market conditions and competition
Example : Air France
- Same brand, same planes, same quality of service, maintenance and security
- Pricing is adapted locally
»
When Air France has a quasi-monopolistic position (West Indies, some
African countries), prices are very high
» When Air France is on a market with fierce competition, especially from low cost companies such as EasyJet or RyanAir (ex: Europe), prices are much lower and special promotions are proposed

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« Think global, act local »
Standardizes certain core elements and localizes some marketing mix elements
Example : Honda Accor
Same brand and positioning in Europe and in the USA
But the product is not the same everywhere
In Europe, Accor sales are low, and cars are imported from
Japan
In the US, sales are higher and a special product is manufactured for the US market
» Automatic gearbox
» Slightly different style
» Different motors
» Different interior design and equipment
Since 1986, Honda has developped a new brand,
Acura , on the high-end, in the US & Japan, with specific models and a dedicated retail network

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Brand
Colors
Symbols
Same major sales channels
Some advertising campaigns
Sponsoring of major sport events
Olympic Games since 1928
Football World Cup

But some elements of the products are localized
Example: adaptation of the Diet Coke product
USA
Packaging, name and formulas can be different in local markets
« Diet » has a negative meaning in many countries.
It was changed to « light » in
South Europe and Japan.
(same problem with « coke » in French !)
Cherry flavor for the US market
China Thailand

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Brands, positioning, products and marketing mix are totally specific and adapted to each country
Example: Bongrain, world leader of cheeses
Tastes, preferences and traditions are very different in each country
Presence in 150 countries
Several hundreds of brands and products, with local marketing mix
» France : Caprice des Dieux, Saint Agur, Chavroux etc (28 brands)
» Spain : Burgo de Arias etc
» Hungary: Pannonia etc
» USA : Alouette etc
» India : Le Bon
» China : Pikifou
» Japan: Gerard Selection

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Depending on needs and wants differences, and local constraints, there are various approaches :
Exactly the same core product worldwide
Natural goods : Evian water
Manufactured luxury goods : Cartier watches
Partially localized product
Personal Computers : keyboard (20 different types in Europe), electrical power, software etc
Mainly or totally localized product
Cosmetics : different ethnic skins etc
Yoghourts :
French and American tastes are very different
(creamy formula, flavor, size, number of items)
Coffee : very different tastes and preferences in the world

International pricing strategies
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Different strategic goals in each country
- Market penetration / high-end
» Example : Bonne Maman jam
Different standards of living
L’Oreal mass market products are less expensive in China
- Coca-Cola prices are lower in India than in Japan
Manufacturing and/or shipping costs
- Evian bottle sold in Japan or in the USA (far away from France): the price includes a rather high transport cost
Tax, custom duties
Currency rates
Competition

International pricing strategies
 May blur brand image and positioning
example : Champagne Pommery used to be sold at different prices in
Europe, which was confusing some consumers (who travel)
 Foreign market price gaps may lead to “gray marketing” and
“parallel imports”
sales of authentic, legally trademarked goods through unauthorized or tolerated channels
example : Renault cars imported from Spain and sold in France
example of a technological response : DVD zones
same issue with different tax levels :
blank CD or DVD
cigarettes
 Less and less price differences are possible in the European
Union because of 2 factors easing price comparisons :
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Euro common currency
 Internet price comparators
 leguide.com, Kelkoo, Lycos etc

International pricing strategies
Price is around 40% higher in Japan than in
France (585 €)
But Louis Vuitton has to impose purchase limits to Japanese tourists in France
Counterfeiting is also a major concern !

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Choice of medias : a localized approach is usually better
Different audience
Different regulations
» Example: alcohol
Message : a certain level of globalization is usually preferable
Economies of scale
Brand image coherence worldwide
TV commercials, press ads etc often require localization
But most multinational companies choose a advertising agency with offices worldwide, to enable a global level of coherence in localized campaigns
There are few actual worldwide global advertising campaigns
» Example : Launch of Gillette Mach 3
» Same TV commercial in 19 European countries and in the US
» Only the soundtrack and slogan were translated
» « The best a man can get »: « La perfection au masculin »
» Choice of an international stars : David Beckham

International communication strategies
When is globalization of promotion most possible?
 Products / brands that can use a primarily visual appeal
 Products / brands that can use images associated with rather “universal” appeals
 such as sex or wealth
 Products / brands that appeal to a market segment with universally similar tastes, interests, needs, and values
 Products with a nationalistic flavor if the country has a reputation in that field
 High tech products free of cultural bounds

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Same campaigns worldwide
Different music soundtracks : Rock, electro / house, hip hop, jazz etc
Characters are presented in shadow style to avoid ethnic issues and to focus more on the product (contrast effect)
Apple is now a dominant leader on the MP3 player market
32 million iPods sold in 2005, more than 60% of market share
900 million songs sold through iTunes Music Stores, nearly 85% of the legal market

In which countries can’t you launch such a campaign ?

 Direct
- Domestic base
- Overseas sales branch
- Traveling sales representative
- Foreign-based distributors/agent
 Indirect-occasional, or active exporting
- Domestic-based export merchant
- Domestic-based export agent
- Cooperative organizations
- Export-management company

Franchising : A contractual arrangement where a wholesaler or retailer
(the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services
Foreign Licensing : an agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area.
Subcontracting : a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area.

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An additional strategy for entering global markets
Requires direct investment in foreign firms, production, and/or marketing facilities
Advantages
- cheaper labor cost in some countries
- government incentives
- creates better image
- deeper relationships with government, customers, suppliers and distributors
- full control of operations and marketing
Risks involved:
- economic difficulties of the host country
- political instability and negative perception

Form Control
Export
Ownership
Very limited
Total
Joint Ventures Shared
Risk
Low
High
Moderate
Licensing
Internet
Limited
Total
Moderate
High
Advantage
Low cost
Control
Local expertise
Low cost
No physical presence required

Economic Size and Structure Social and Cultural Factors
Living
Standards
Environmental
Factors
Growth
Prospects
Nature of
The Society
Segmentation of
The Market
Distinctive
Features
Marketing
Systems
Import
Restrictions
Legal
Framework
Political
Stability
Consumer
Groups
Geographical
Factors
Distribution Promotion
Consumer
Behaviour
Extent of
Competition
After International Marketing, Bennett & Blythe, 2002

 Country - What are the political, legal and economic issues of your potential overseas market, as well as its current market potential and your knowledge and experience of it?
 Currency - If foreign currencies fluctuate a lot against your home currency, you may have difficulties in pricing your goods or making a profit. Some countries, like China don’t allow their currency to leave the country, so you may have to work in $
 Culture - Every culture is different - even from one European country to another. Your product, advertising and even brand may need to be adapted to suit your new market.
 Control & Co-ordination - Trading abroad is not only about selling, but also after sales service. All these people will have to be hired, trained, managed and controled.
 Concentration (of markets) – some countries are vast (China, India etc).
It may not be so easy or cost effective to sell to different groups in isolated areas. However, there may be opportunities to sell cross-countries to different nationalities with similar cultural/language attitudes
 Commitment - Selling abroad seriously requires long term planning, significant financial investment, time and skills of your staff. There are risks and the return on investment may be long to come.

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Communication - You need to consider the language skills of you, your staff and your contacts abroad, and what media or information technology they have (advertising, telecommunications, e-mail etc). If it is difficult to communicate, it will slow up and complicate matters. It may also prevent you from developing your business properly.
Choices (of consumers) - It is possible that there are perfectly good products or services available from local suppliers. Yours are likely to be more expensive, so consider what would make your product better or more desirable.
Channels of distribution - Getting goods and services to overseas markets can be difficult. Building an efficient retail network is usually hard and long.
Contractual obligations -
Make sure that the contract meets everyone’s needs and that you and your customer are fully aware of the commitments listed.
Failure to meet the exact requirements of the contract, can result in nonpayment.
Capacity to pay - You should take a look at the customer and their ability to pay as well as the country itself. This will include not only financial health, but also political issues, and currency and banking regulations.
Caveats (laws) Some countries have laws that are very protective of their local traders and do not readily accept imports. There may be restrictions or differences between your country and the foreign market about what can be sold and under what circumstances.