GMS 522- Notes Week 1- Global Marketing (Ch. 1) Objectives: Define international, multi-domestic and global marketing Discuss globalization: Forms and Drivers Discuss globalization International Marketing- the process of planning and conducting transactions across national borders to create exchange that satisfies the objectives of individuals and organizations. Cross border transactions Satisfaction of consumer needs Exchange between transacting parties With international marketing, companies would simply extend their domestic marketing strategies to foreign countries with little or no adjustment. International sales seen as secondary to developing the domestic market Over time, country differences were recognized, and firms began to develop target marketing strategies for each target country, i.e. a multi-domestic marketing strategy was used. However, no head office coordination between country markets Emphasize is now on global marketing Defined as: marketing activities coordinated and integrated across multiple country markets Integration involves product standardization; identical brand names; consistent packaging and a similar advertising message. Levitt’s Homogeneous Markets: Ted Levitt argued in 1983 that markets are becoming more homogeneous and therefore could be targeted with standardized products. Levitt argued that technology and communication were the drivers. His work gave rise to the notion of global marketing. Why globalize market activities? Take advantage of opportunities from growth Survival. Companies that do not pursue global opportunities will eventually lose domestic market shares to foreign rivals “In globalization era, there are two categories of companies: one is the international company and the other is one taken over by the former group. There isn’t a third category.” Global markets are concerned with: In which countries should the firm sell its products? Should we enter foreign markets via exporting, foreign direct investment, or a strategic alliance? How should we price and distribute our products in foreign markets, given cultural and economic differences? What elements of the marketing mix can we standaize? How do we coordinate our activities across countries? While there are major differences between global and domestic marketing there are also similarities: Focus on the exchange of something of value Need to provide consumer satisfaction Note that global marketing assumes that consumers around the world can be grouped into homogenous segments. Is this true? Can we find homogenous segments in the countries as different as Saudi Arabia and Brazil? The definition of global marketing runs into problems because of difficulty in identifying these global homogenous segments The definition also suggests that the marketing concept is irrelevant given that consumers around the world are the same. Note: we use the terms global and international interchangeably while recognizing that they are different. By the late 1930s, companies began to realize that local tastes and preferences would not be ignoreseven as they pursued a global marketing strategy. Global marketing became the new trend- attempting to balance standardized with adaptation to local consumer needs. “Think global, act local.” Many examples of companies does this: McDonald’s (a family oriented business) Serves Beer in German Restaurant Coca Cola markets Qoo (a noncarbonated drink) in Japan – available in various flavors including grape and orange McDonald’s takes beef off the menu to cater to India’s Hindu community (>80% of population) Evolution of the concept Extention of domestic strategy to international markets, separate and uncoordinated multidomestic strategy for eacg country market, coordinate and integrated global strategy, global starty with adjeustments for local country difference What is Globalization? Globalization is the trends towards greater interdependence among national institutions and economies Oil price shock Asian financial crisis 9/11 Subprime Fiancail Crisi Covid 19 Two main components: Globalization of markets- convergence of buyers preferences in markets around the world Glodalozation of production- dispersal of production activities to loctions around the world that are low cost of high quality producers. In 2010 Vietnam replaced China as Nike’s largest production base worldwide In 2022 Apple began production of the iPhone 14 in both China and India. Wants to slowly reduce its dependence on China. Drivers of Globalization Market Factors Global consumers that need the same product in multiple countries Globalization of distribution channel Transferability of marketing ideas to multiple countries, e.g. brand names and advertising appeals Cross-border retail alliances Cost Factors Avoiding cost inefficiencies and duplicated efforts Economies of scale from longer production runs Economies of scope- spread costs over several product lines Outsourcing Environmental Factors Reduced governmental barriers, rapid technological evolution Successive rounds of multilateral trade negotia tions under GATT/WTO Internet and other communication technologies Changes in government policies, e.g. China’s Go Out policy of the late 1990s and more recently the Belt and Road Initiative (BRI). Competitive Factors Firms may need to enter new markets in order to match the moves of competitors Firms may need to enter new markets to follow major customers Forms may expand abroad to reduce the impact od competition from foreign firms in their domestic markets Can globalization be measured? Several attempts have been made to measure/quantify glodalization Dreher's KOF index measure globalization based on three dimensions Economic Integration- trade and investment flows (FDI; M; X; tariff rates, ect). Political Integration- diffusion of govt policies (# of embassies: # of peace keeping missions). Social Integration- flow of ideas and movements of people (tourism flows; telecom traffic; # of McDonalds restaurants). Note: dimensions are now measured on a scale of 1 to 100. Higher values denote greater globalization. Note: KOF is and\ acronym for “Konjunkturforschungsstelle” (business cycle research institute in German). Deglobalization We may be entering a period of de-globalization as countries around the world began to rebuild their national supply chains in response to COVID 19. Countries around the world are recognizing that over-reliance on countries such as China and India for critical inputs and products (e.g., vaccines) is not in their best interest. The trend towards economic nationalism is increasing, and this will have implications for how we conduct business in the new environment. Also pay attention to advances in artificial intelligence, which may erode the wage advantage of countries such as China, India, and Vietnam.
