MARKETING MANAGEMENT
Lecture Notes
Chapter 21 TAPPING INTO GLOBAL MARKETS
Competing on a Global Basis
Despite the many challenges in the international arena (shifting borders, unstable governments, foreignexchange problems, corruption, and technological pirating), companies selling in global industries need to
internationalize their operations. Companies cannot simply stay domestic and expect to maintain their
markets. A global industry is an industry in which the strategic positions of competitors in major
geographic or national markets are fundamentally affected by their overall global positions. A global firm is
a firm that operates in more than one country.
For a company of any size to go global, it must make a series of decisions. Those decisions are:
Deciding Whether to Go Abroad
Several factors are drawing more and more companies into the international arena,
higher profit opportunities, better products, international servicing.
Deciding Which Markets to Enter
The company needs to define its marketing objectives and policies. Some plan to stay small
while others have bigger plans.
How Many Markets to Enter
Company must decide how many countries to enter and how fast to expand. We recognize
two approaches: a waterfall approach (in which countries are gradually entered
sequentially) or a sprinkler approach (in which many countries are entered
simultaneously within a limited period of time).
Developed versus Developing Markets
These marketers are able to capitalize on the potential of developing markets by
changing their conventional marketing practices to sell their products and services
more effectively. Smaller packaging and lower sales prices are often critical in
markets where incomes are limited.
Regional Free Trade Zones
European Union - Nafta - Mercosul - Apec
Evaluating Potential Markets
Company prefers to enter countries
(1) That rank high on market attractiveness, (2) that are low in market risk and (3)
in which it possesses a competitive advantage.
Deciding How to Enter the Market
Once a company decides to target a particular country, it has to determine the best mode of entry. Its broad
choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. Each
succeeding strategy involves more commitment, risk, control, and profit potential.
Indirect and Direct Export
Occasional exporting is a passive level of involvement in which the
company exports from time to time. Active exporting takes place when the
company makes a commitment to expand into a particular market.
Using a Global Web Strategy
Electronic communication via the Internet is extending the reach of
companies large and small to worldwide markets.
Licensing
Licensing is a simple way to become involved in international marketing.
The licensor issues a license to a foreign company to use a manufacturing
process, trademark, patent, trade secret, or other item of value for a fee or
royalty (management contracts, contract manufacturing and franchising).
Joint Ventures
Foreign investors may join with local investors to create a joint venture
company in which they share ownership and control.
Direct Investment
The ultimate form of foreign involvement is direct ownership. The foreign
company can buy part or full interest in a local company or build its own
facilities.
Deciding on the Marketing Program
In deciding on the marketing program, a company must decide how much to adapt its marketing program
(product, communications, distribution, and price) to local conditions.
Product
Some types of products travel better across borders than
others. Straight extension means introducing the product
in the foreign market without any change. Product
adaptation involves altering the product to meet local
conditions or preferences (regional version, country
version, city version, retail version). Product invention
consists of creating something new (2 ways: Backward
invention is reintroducing earlier product forms and
Forward invention is creating a new product to meet a
need in another country)
Communications
Companies can run the same marketing communications programs as used in the home market or change
them for each local market, a process called communication adaptation. If it adapts both the product and
the communications, the company engages in dual adaptation.
Price
Multinationals face several pricing problems when selling abroad. They must deal with price escalation,
transfer prices, dumping charges, and gray markets. Companies have three choices: 1.Set a uniform price
everywhere, 2.Set a market-based price in each country, 3.Set a cost-based price in each country-transfer
price (the price it charges another unit in the company).
Distribution Channels
At the distribution level, firms need to take a whole-channel view of the challenge of distributing products
to the final users. In creating all elements of the marketing program, firms must be aware of the cultural,
social, political, technological, environmental, and legal limitations they face in other countries.
Country-of-Origin Effects
Building Country Images and Consumer Perceptions of Country of Origin
Country-of-origin perceptions can affect consumers and businesses alike. Managing those perceptions in
the most advantageous way possible is an important marketing priority.
Deciding on the Marketing Organization
Companies manage their international marketing activities in three ways:
1) Export Department is consisting of a sales manager and a few assistants. As sales increase, the export
department is expanded to include various marketing services so that the company can go after business
more aggressively.
2) International Division is headed by a division president, who sets goals and budgets and is responsible
for the company's international growth. The international division's corporate staff consists of functional
specialists who provide services to various operating units.
3) Global Organization has three organizational strategies:
1. A global strategy treats the world as a single market.
2. A multinational strategy treats the world as a portfolio of national opportunities.
3. A "glocal" strategy standardizes certain core elements and localizes other elements.