Global Marketing
Spring 2003
Some Abouts
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About
About
About
About
About
me
this course
the project
the examination
grading
Text Structure
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Introduction to global marketing
The global marketing environment
Global market opportunities
Global marketing strategy
Global marketing program
Global marketing management
List of Questions
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What is global marketing?
Do we have to go global?
Why?
Where shall we go?
What shall we know before plunging
ourselves into the storming sea?
How can we survive and thrive in a foreign
market?
Global Marketing
-- Introduction
What is Global Marketing?
What is marketing?

The process of planning and executing
the conception, pricing, promotion, and
distribution of ideas, goods, services,
organizations, and events to create and
maintain relationships that will satisfy
individual and organizational objectives.
The Three Principles of Marketing
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Customer Value
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Value Equation: V=B/P
Differential Advantage
Focus
What is global marketing?
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Practicing marketing in the global
environment.
An organization that engages in global
marketing focuses its resources on
global market opportunities and threats
Globalization
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An open economic system
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Non-discrimination
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Global brands
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Global structures
Exports % share of world production
25
20
15
10
5
0
1913
1950
2000
Annual % Growth of trade and GDP
1959 – 96
12
Trade
10
8
6
Trade
GDP
GDP
GDP
GDP
4
2
0
World
USA
Effects of globalization on
business
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Cheap offshore production
Reduced transport costs
Virtual communication
Standardization of logistics
Global marketing
Export & Import By Regions
2002/01-10
国家（地区
）
进出口额
出口额
总 值
亚洲
非洲
欧洲
拉丁美洲
北美洲
大洋洲
50,025,801
28,989,873
1,001,081
9,116,406
1,438,463
8,494,617
984,621
26,249,924 23,775,878
13,725,513 15,264,360
561,926
439,156
4,750,486 4,365,920
783,826
654,637
6,001,213 2,493,404
426,226
558,395
进口额
累计比上年同期增减%
进出口
出口
进口
19.7
23.2
10.8
13.9
16.2
16.6
17.3
20.6
20.3
12.9
18
13.3
25
27.6
18.7
26
8.3
9.8
19.8
0.4
10.6
Corporate Globalization
-China’s Case
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Walmart
World Women Basket Ball Games
Haier in USA
Tsingdao Beer
Global Marketing VS Domestic Marketing
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More difficult: language, law, culture, trade
and non-trade barriers, market research, and
communication;
More complicated: currency, measures and
weights, customs, monetary exchange,
transportation, insurance, and counter-claim
More risky: credibility, currency exchange,
political risk, transportation, and pricing
More opportunities and more profitable,
hopefully.
Should we go global?
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Internal analysis
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External analysis
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Resources, managerial mindset, strengths,
weaknesses,etc.
Competition, opportunities, threats, benefits,
risks, etc.
Cost VS Income
Management Orientation
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Management’s assumptions or
beliefs-both conscious and
unconscious-about the nature of the
world
Ethnocentric
Polycentric
Regiocentric
Geocentric
Ethnocentric
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Home country is superior.
Domestic Company:
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International Company
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No opportunities outside the home
country;
Products and practices that succeed in the
home country will be successful anywhere;
Foreign operations are secondary or
subordinate
Nissan
Polycentric
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Each country is unique.
Multinational Company:
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Each subsidiary should develop its own
business and marketing strategies
according to the specific situation in that
country.
Problem: Cost, control, headquarter out
of game
Regiocentric & Geocentric
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Regiocentric: Each region is unique and an
integrated regional strategy is to be developed
to serve that region.
Geocentric: The entire world is a potential
market and integrated world market strategies
should be developed.
Global or transnational company.
Global Localization: Think globally, act locally.
Philips VS Matsushita
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Philips Electronics
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Polycentric: 7 models of TV based on 4
chassis, Variety
Matsushita
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Geocentric: global strategy, 2 models of TV
based on a single chassis, low price
Driving and Restraining Forces
Affecting Global Integration
and Global Marketing
Driving Forces
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Technology
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Regional Economic Agreements
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NAFTA, EU, ASEAN, GCC, APEC
Market Needs and Wants
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Internet, Satellite Dish, Globe Spanning TV
Converging, Global Brand,
Transportation and Communication
Improvements
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Jet Plane, Large Cargo Ship, email, fax,
videoconferencing, cost deduction
Driving Forces Cont.
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Product development costs
Quality
World Economic Trends
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More opportunities
Less resistance
World-wide deregulation and privatization
Driving Forces Cont.
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Leverage
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Experience transfers
Scale economies
Resource utilization
Global strategy
The Global/Transnational Corporation
Restraining Forces
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Management Myopia
Organization Culture
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Integrate global vision and perspective
with local market initiative and input
Mutual respect
National controls and barriers
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Tariff barriers and non-tariff barriers
The Global Economic Environment
Changes in The World Economy
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Emergence of global markets
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Economic integration
Global companies, global brands
Capital movements far exceed the volume
of global merchandise and services trade

$4 trillion VS. London Eurodollar Market, $100
trillion, VS. Foreign exchange $250 trillion
Changes in The World Economy
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Productivity VS. Employment
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Application of new technologies
Increase in production efficiency
Plant emigration
Internal reforms
Changes in The World Economy
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World economy becomes the dominant
economic unit
The end of the cold war
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Collapse of USSR, ISC, E. European
China, Vietnam,
Cuba, North Korea
Economic Systems
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Market Allocation
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Command Allocation
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Market economy
Role of the state
Planned economy
Role of the state
Mixed System
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Which plays the leading role?
Stages of Market Development
Based on GNP Per Capita
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Lower-Income Countries
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Lower-Middle-Income Countries
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$766-$3036
China 10239.8/129=$799
Shanghai >$2000
Upper-Middle-Income Countries
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<$766
$3036-$9386
High-Income Countries
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>$9386
Low-Income Countries
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Preindustrial countries, less than $766
Limited industrialization, high percentage of
population in agriculture and farming
High birth rates
Low literacy rates
Heavy reliance on foreign aid
Political instability and unrest
Africa, south of Sahara
Lower-Middle-Income Countries
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Less developed countries (LDC)
Early stage of industrialization
Consumer markets expanding
Low labor cost
Labor-intensive products manufacturing
Upper-Middle-Income Countries
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Industrializing countries
Percentage of people in agriculture
dropping sharply
Degree of urbanization increasing
High literacy
Relatively low wage costs
High-Income Countries
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Industrialized Countries
Sustained economic growth
Knowledge-based
Service sector
New products and innovations
Income and PPP
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Purchasing Power Parity
Real Income
Standard of Living
The concentration of income
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Regional, nationally, and within nations
“Triad”: US, Canada, EU, and Japan
Income inequality in developing countries
Implication for Marketers
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Profitability
Chances and challenges
Marketing’s Role
Market potential evaluation
Emerging Markets Evaluation
Size
Countries
HONGKONG
SINGAPORE
S. KOREA
ISRAEL
CHINA
HUNGARY
CZECH REP.
POLAND
CHILE
INDIA
MEXICO
THAILAND
RUSSIA
TURKEY
Rank
21
24
6
23
1
22
18
10
19
2
5
13
3
9
Growth Intensity Infrastructure Freedom Risk
Rank
6
8
1
9
11
19
23
18
3
16
12
5
2
7
Rank
1
14
4
3
24
5
15
12
9
20
6
21
22
7
Rank
1
2
6
5
17
4
3
7
10
23
14
19
12
9
Rank
4
12
7
9
24
2
2
6
1
17
13
8
22
20
Rank
2
1
7
3
8
4
6
11
5
14
9
13
23
21
Overall
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Social and Cultural Environments
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Differences
Similarities
Marketers’ two-folded task.
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Recognize difference
Find similarities
Culture
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Culture includes both conscious and
unconscious values, ideas, attitudes, and
symbols that shape human behavior and
that are transmitted from one generation to
the next.
Culture is learned, not born with.
Culture can be changed.
Implications for Global Markers
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Food, drink preferences
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Color, flower, and other preferences
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KFC, Colgate, Coco-cola, Green Giant Foods,
and soy sauce
White, green, chrysanthemum, Corbie, dog,
Converging global attitudes
Cultural universals
Be culturally sensitive!
High and Low-Context Cultures
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Low-context: messages are explicit, words carry
most of the information in a communication. “I
mean what I say”.
High-context: much more information resides in
the context of communication, including
background, associations, and basic values of the
communications rather in the verbal message.
“Guess what I really mean.”
High and Low Context Cultures
Factor
High Context
Low Context
Lawyer
Less important
Very important
Space
People breath on
each other
Time
Polychronic, things
dealt simultaneously
Negotiati Lengthy, get to
ons
know each other
Countries Japan, Middle East,
Bubble of private
space, no intrusion
Monochronic, linear
Quick, get things
done
US, Northern Europe
Communication and Negotiation
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Language barriers
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It’s a “yes” or “no”?
“You are invited to take advantage of the
chambermaid”.
“Ease your bosoms. This coffee has carefully
selected high quality beans and roasted by our all
the experience.”
The lift is being fixed for the next day. During that
time we regret you will be unbearable.”
Nonverbal communication
Verbal VS. Nonverbal
Social Behavior
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Sneeze, belch, sharing food
Saudi: Don’t ask the host about the health of
his spouse. Don’t show the soles of your shoes.
Don’t touch or deliver with the left hand.
Japan, Korea, China, India
Venezuela, Indonesia
Africa
“Madam” or “ma’am”
Analytical Approaches
to Cultural Factors
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Don’t assume you know everything.
Don’t judge others by the culture you are from.
There are no perfect cultures in this world, or
there is no such culture superior than another.
Try to understand the beliefs, values, and motives
of another culture
Be open, be understanding.
Maslow’s Hierarchy of Needs
Self-actualization
Esteem
Social
Safety
Physiological
Hofstede’s Cultural Typology
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Power distance
Individualism or Collectivism
Masculinity or Femininity
Uncertainty avoidance
Power Distance
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The extent to which the less powerful
members of a society accept or expect
that power to be distributed unequally.
High power distance
Low power distance
Individualism or Collectivism
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Individualistic culture: Each member of
society is primarily concerned with his
or her own interest and those of the
immediate family.
Collectivist culture: All of society’s
members are integrated into cohesive
in-groups
Masculinity of Femininity
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Masculinity
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A society in which men are expected to be
assertive, competitive, and concerned with
material success while women fulfill the role of
nurturer and take care of the family
Femininity
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A society in which the social roles of men and
women overlap, with neither gender exhibiting
overly ambitious or competitive behavior
Uncertainty Avoidance
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The extent to which the members of a
society are uncomfortable with unclear,
ambiguous, or unstructured situations.
Environmental Sensitivity
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The extent to which products must be
adapted to the culture-specific needs of
different national markets.
Product Adaptation
High
Food
Computer
Low
Integrated
Circuit
Low
High
Environmental Sensitivity
Impact on Marketing
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Consumer behavior
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Campbell in US VS in Italy
Instant coffee in UK VS. in Sweden
Cake in US VS. in UK
Personal aspect of international
business
Suggested Solutions
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Stake: expatriate failure averages
$75,000, loss of business: $2.5 billion
Research
Training in cross-cultural competency
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“Boot camp”
“International exposure”
“Workshop”
The Political, Legal, and
Regulatory Environments of
Global Marketing
The Political Environment
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Sovereignty
Political risk
Taxes
Dilution of Equity Control
Expropriation
Sovereignty
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The supreme and independent political
authority.
Control the flow of goods across borders
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Stage of development
The political and economical system
Protectionism: Agriculture
Privatization dilutes the command portion of a
mixed economy
Global market integration erodes national
economic sovereignty.
Political Risk
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The risk of a change in government
policy that would adversely impact a
company’s ability to operate effectively
and profitably.
HK, Argentina, Venezuela,
Taxes
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Diverse geographic activities of MNC
Host country tax avoidance
Bilateral tax treaties
Dilution of Equity Control
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Control ownership of foreign-owned
companies.
Equity percentage in local projects or
joint ventures
Become an insider
Expropriation
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Governmental action to dispossess a
company or investor.
Compensation
Nationalization: Ownership of the
property or assets in question is
transferred to the host government.
Confiscation
Expropriation
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Creeping expropriation: limitations on
repatriation of profits, dividends, royalties, or
technical assistance fees from local
investments or technology arrangements.
Tariff and non-tariff barriers
Intellectual property restrictions
Remedies: buy insurance, follow the law
International Law
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Rules and principles that nation-states
consider binding upon themselves.
Public law, international commercial law
Common law VS code law
Which Law Applies?
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Be explicit in the contract
The place of the domicile or principal
place of business of one of the parties
The place where the contract was
entered
The place of performance of the
contract
Intellectual Property
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Patents and Trademarks
Registration
Protection
Counterfeiting: The unauthorized copying
and product of a product.
Imitation: Use of a product name that
differs slightly from a well-known brand
Piracy: The unauthorized publication or
reproduction of copyrighted work.
Intellectual Property Protection
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The Paris Union: International
Convention for the Protection of
Industrial Property.
The Patent Cooperation Treaty
European Patent Convention
TRIPs: Trade Related Intellectual
Property Rights
Antitrust
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To combat restrictive business practices
and to encourage competition.
Consten’s case, Grundig
Ruling: “Territorial protection proved to
be particularly damaging to the
realization of the common market.”
IBM and Microsoft in Europe
Licensing
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Licensing is a contractual agreement in which a
licensor allows a licensee to use patents,
trademarks, trade secrets, technology, or other
intangible assets in return for royalty payments or
other forms of compensation.
What assets? At what price? The right to “make”,
“use”, or “sell”? Sublicense? “Exclusive or
nonexclusive?”
Creation of competitor.
Trade Secrets
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
Confidential information or knowledge
that has commercial value.
TRIPs requires signatory countries to
protect against acquisition, disclosure,
or use of trade secrets in a manner
contrary to honest commercial practices.
Bribery and Corruption
- A World-wide problem
Conflict resolution
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Litigation
Differences in language, legal systems,
currencies, traditional business customs
and patterns, discovery procedure, and
enforcement.
Complex, time consuming, costly
Arbitration
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International Chamber of Commerce
The New York Convention
AAA and China Beijing’s Conciliation Center.
Swedish Arbitration Institute
International Council for Commercial
Arbitration
UN Conference on International Trade Law
The Regulatory Environment
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Governmental and nongovernmental
International Economic Organizations
Price control, valuation of imports and
exports, trade practices, labeling, food
and drug regulations, employment
conditions, collective bargaining,
advertising content, competitive
practices, etc.
Regional Economic Organizations
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WTO
EU
NAFTA
……
Global Markets and Buyers
Trends of Global Market

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Markets in almost every world region are
expected growing.
The fastest growing markets are the
developing countries.
The fastest growing regions in the
developing world are East Asia
The fastest growing country in East Asia is
China.
The Boom
Countries
Developed Countries
Developing Countries
East Asia
South Asia
Latin America
East Europe
Sub-Saharan Africa
Middle East, North Africa
1974-1993
2.9%
3.0%
7.5%
4.8%
2.6%
1.0%
2.0%
1.2%
1994-2003
2.7%
4.8%
7.6%
5.3%
3.4%
2.7%
3.9%
3.8%
Economic Cooperation &
Preferential Trade Arrangements

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International economic cooperation
Free Trade Area (FTA)
Customs Union
Common Market
Economic Union
WTO and GATT
Regional Trade Areas
Chart 1: RTAs in force and under negotiation as of
July 2000, by type of RTA
1
67
FTAs in force
CUs in force
24
148
FTAs under negotiation
CUs under negotiation
Chart 2: Geographical Distribution of RTAs, both in force and
under negotiation
120
Number of RTAs
100
80
FTAs under negotiation
CUs under negotiation
60
FTAs in force
CUs in force
40
20
0
Americas
Asia Pacif ic
Eastern Europe
& Central Asia
EuroMediterranean
Region
Sub-Saharan
Cross Regional
Free Trade Area (FTA)


A group of countries that have
agreed to abolish all internal
barriers to trade among themselves.
Certificates of origin
Customs Union


Member countries agree to the
establishment of common external
barriers.
The Central American Common Market,
Southern Cone Common Market
(Mercosur), and the Andean Group
Common Market




Removal of internal barriers
Establishment of external barriers
Elimination of barriers to flow of factors
(labor and capital) within the market
Free markets not only for product, but
also for services and capital.
Economic Union




Creation of a unified central bank;
Usage of a single currency-a struggle;
Common policies on agriculture, social
services and welfare, regional
development, transportation, taxation,
competition and mergers
Political unity, a central government;
From GATT to WTO




GATT: A treaty between 125 nations who
agreed to promote trade among members.
Trade-disputes settlement, no power of
enforcement
WTO: A forum for trade-related negotiations.
A system to settle trade disputes
Service industry: Market-entry barriers in
banking, insurance, telecommunications, etc.
Regional Economic Organizations

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



APEC: Asian Pacific Economic Cooperation
North American Free Trade Agreement
Central American Common Market
Andean Group
Southern Cone Common Market
Caribbean Community and Common
Market
Regional Economic Organizations





Association of Southeast Asian Nations
The European Union
Cooperation Council for the Arab States
of the Gulf
Economic community of West African
States
South African Development
Coordination Conference
Global Marketing Information
Systems and Research
Acquire Global Information




Superabundance in developed countries
Scarcity in LDC and underdeveloped
countries
Where and how to get the right
information
Scanning
Global Marketing Information System

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

MIS defined
Gathering, analyzing, classifying, storing,
retrieving, and reporting
EDI: Electronic Data Interchange
Beneton’s MIS
Timely, cost-efficiently, actionable
Subject Agenda for a Global MIS






Markets
Competition
Foreign exchange
Prescriptive information
Resource information
General conditions
Markets






Demand estimates
Consumer behavior
Products
Channels
Communication media availability and
cost
Market responsiveness
Competition



Corporate strategies
Business strategies
Functional strategies
Foreign Exchange




Balance of payments
Interest rates
Attractiveness of country currency
Expectations of analysts
Prescriptive Information

Laws, regulations, rulings concerning
taxes, earnings, dividends in both hose
countries and home country
Resource Information

Availability of human, financial,
information, and physical resources
General Conditions

Overall review of sociocultural, political,
technological environments
Scanning Modes

Surveillance



Informal information gathering
Viewing and monitoring
Search


Formal information gathering
Investigation and Research
Rule of Thumb



Create an efficient and effective
scanning system in both the home
country and the host countries
Create a MIS system
Expanding information coverage to
other regions of the world
Sources of Marketing Information

Human sources




Overseas executives
Friends, acquaintances, professional
colleagues, consultants, and prospective
new employees
Personal relationship
Direct perception


Seeing, feeling, hearing, smelling, or tasting
The design of Lexus
Formal Marketing Research






Project-specific, systematic gathering of
data in the search scanning mode.
Identify the research problem
Develop a research plan
Collect data
Analyze data
Interpret and report findings
Step 1: Problem Definition




A problem well defined is half solved.
Assess the nature of the market
opportunity.
Existing
Potential
Existing Market


Market size, level of demand, rate of
product consumption
Self-evaluation: competitiveness,
product appeal, price, distribution,
promotional coverage and effectiveness
Potential Market

Latent market




Undiscovered segment.
Prime move advantage
P&G in China
Incipient market

Market booms when a particular economic,
technological, political, or sociocultural
trend continues.
Step 2: Developing a Research Plan



How much can I get from the
information?
How much do I have to spend for the
information?
Research objective, methodologies,
budgets, time.
Step 3: Data Collection

Primary data




Observation
Survey research
Experiment
Secondary data

Internal, external
Observation Method





Counting
Watching
People meter
Videotaping
Virtual reality
Survey Method

Interviews and Questionnaires





Telephone Interviews
Focus Groups
Mail Surveys
Fax Surveys
Online Surveys
Telephone Interviews





Spoken instead of visual
Quick, inexpensive
Results could be biased
Random dialing
Answering machines and caller ID
Personal Interviews






Face to face interaction
Detailed information
Sensitive question
Slow
Expensive
Mall intercepts
Focus Groups





Information-gathering procedure in marketing
research that typically brings together 8 to 12
individuals to discuss a given subject.
Quick and inexpensive
Participants interaction
Moderator
Video taping, one-way mirror,
videoconferencing
Mail Surveys





Low-cost, Anonymity
Low response rate, slow
Not suitable complex questions
Who filled out the questionnaire?
Bias due to difference between
respondents and nonrespondents
Fax Surveys

Similar to mail surveys
Online Surveys







Web Survey
Email Survey
Online focus group
Speedy, higher response rates, cost reduction,
truthful answers
Probability sample?
Groups underrepresented on the Internet,
ownership of computers
Authenticity of the respondent
Experimental Method



Scientific investigation in which a
researcher manipulates a test group(s) and
compares the results with those of a control
group that did not receive the experimental
controls or manipulations.
Test marketing
Experiment group VS Control group
Sampling




Probability sample
Nonprobability sample
Sample size
Standard statistical test
Step 4: Data Analysis


Demand pattern analysis
Income elasticity measurements



Market estimation by analogy
Comparative analysis


Engels’ Law
Intra-company cross-national comparison
Cluster analysis
Market Estimation by Analogy


Cross-sectional analysis
Xa/Ya=Xb/Yb




Xa=demand for product X in country a
Ya=factor that correlate with demand for
product X in country a
Xb=demand for product X in country b
Yb=factor that correlate with demand for
product X in country b.
Market Estimation by Analogy


Displacing a time series
Xa1/Ya1=Xb2/Yb2




Xa1=demand for product X in country a during time
period 1
Ya1=factor associated with demand for X in country
a during time period 1
Xb2=demand for X in country b during time period 2
Yb2=factor correlating with demand for X in country
b during time period 2.
Step 5: Interpreting and Reporting




Clear
Concise
Actionable
Management oriented, no technical
jargons
Current Issues in Global MR




Data availability
Data deflation or inflation
Comparability
Response rate
Does MR really work?




It’s late.
I don’t know what I want.
Differentiation-Coke VS. Pepsi in Israel
There is no market for fax. Really?
Integrated MIS




Systemize the collection and analysis of
competitive intelligence to serve the
needs of the organization as a whole.
Are top executives well informed?
Do middle managers fully understand
the competitive situation?
Do managers in different functional
areas share intelligence regularly?
Integrated MIS



Does the company encounter marketing
blunders due to lack of intelligence?
Do we have an intranet where every
employee can have access to online
database?
Overload of data or underload of
analysis
Segmentation, Targeting,
and Positioning
Segmentation & Targeting

Segmentation



Division of the total market into smaller, relatively
homogeneous groups according to various
characteristics.
Global Market Segmentation
Targeting

Evaluation the segments and focusing marketing efforts
on a country, region, or group of people that has
significant potential to respond.
Criteria for Effective Segmentation




The market segment must present
measurable purchasing power and size.
Marketers must find a way to effectively
promote to and serve the market segment.
Marketers must identify segments sufficiently
large to give them good profit potential.
The firm must target a number of segments
that match its marketing capabilities.
Types of Segmentation





Geographical
Demographical
Psychographical
Behavioral characteristics
Product benefits
Geographical Segmentation







Dividing an overall market into homogeneous
groups on the basis of population locations.
Population distribution
Wealth distribution
Urbanization
Climate
Food preference
Terrain
Demographic Segmentation






Dividing consumer groups according to
characteristics such as sex, age, income,
occupation, education, household size, and stage
in the family life cycle.
Income
Gender
Age: Cohort effect
Education
Family Life Cycle
Psychographic Segmentation


Dividing a population into homogeneous groups
on the basis of psychological and lifestyle profiles.
Lifestyle



People’s decisions about how to live their daily lives,
including family, job, social, and consumer activities.
VALS: Values and Lifestyles
http://future.sri.com
Behavior Segmentation




Usage rate: Light users, medium users,
heavy users
User status: Potential users, nonusers,
ex-users, regulars, first-timers, users of
competitors’ products
80/20 rule
Brand loyalty
Global Targeting


Evaluating, comparing, and select
Criteria for Targeting



Current segment size and anticipated
growth potential
Competition
Compatibility and feasibility
Global Target Market Strategy

Standardized global marketing


Concentrated global marketing


Create the same marketing mix for global operation.
Extensive distribution in the maximum number of retail
outlets.
Devise a marketing mix to reach a single segment of
the global market.
Differentiate global marketing

Target two or more distinct market segments with
different marketing mixes.
Global Product Positioning


The location of your product in the
mind of your customer.
Global positioning



Pierre Cardin
Audi
Ikea
Positioning





Sony: Unit sale: 1 million, Profit: 1
billion RMB.
Domestic brands combined: Market
share of color TV: 80%, 90% for DVD;
Profit: 0.54 billion.
Changhong: unit sale 7,500,000
Toshiba: unit sale 500,000
Profit: equal
High Tech Positioning





Based on technological features
Computers, video and stereo
equipments, automobiles
Technical products
Special-interest products
Products that demonstrate well
High-Touch Positioning



Less emphasis on specialized
information, more on image
Products that solve a common problem
Global village products


Global brands
Products that use universal themes

Materialism, heroism, recreation,
procreation
Sourcing:
Exporting and Importing
Export Selling or Export Marketing

Export selling


Does not involve tailoring the marketing mix to
suit the requirements of global markets, only
“place” is changed
Export marketing

Targets the customer in the context of the total
market environment.
Export Marketing



An understanding of the target market
environment
The use of marketing research and the
identification of market potential
Decisions concerning with every
elements of the marketing mix
Buy Chinese



Nationalism
Customer value
Harley Davidson
Roles of Global Marketing Strategy



Configuration of marketing
Coordination of marketing activities
across countries
Tapping opportunities in product
development and R & D
Sourcing Decision Criteria






Factor costs and conditions
Logistics
Country infrastructure
Political risk
Market access
Exchange rate, availability, and
convertibility of local money
Factor Costs


Land, labor, material, and capital costs
Can lower wage rates justify relocation?





VW’s approach and SMH’s approach
Availability and abundance
Three tiers of manufacturing factor costs
Drive direct labor costs down
Migration of low factor costs
Logistics




Transportation cost
RTAs cut down cost
Value chain management
Video
Country Infrastructure

Power, transportation, communication,
service and component suppliers, labor
pool, civil order, effective governance,
foreign exchange
Political Risk

Changes in government policy
Market Access


Limited market access
Buy local, product local, sell local
Foreign Exchange




Importance of exchange rate
Volatility of exchange rate
Alternative country options for
supplying markets
Video
Export-Related Problems

Logistics







Arranging transportation
Transport rate determination
Handling documentation
Obtaining financial information
Distribution coordination
Packaging
Obtaining insurance
Servicing Exports




Providing
Providing
Providing
Providing
parts availability
repair service
technical advice
warehousing
Legal Procedure




Government policy
Product liability
Licensing
Customers/Duty
Sales Promotion



Advertising
Sales effort
Marketing information
Foreign Market Intelligence



Locating markets
Trade restrictions
Competition overseas
National Policies Governing
Exports and Imports

Schizophrenic





Encouraging export
Restricting imports
Government programs supporting exports
Tariffs
Nontariff barriers
Government Programs
Supporting Export

Tax incentives



Subsidies


Tax exemption or lower tax rate on export
earnings
Tax refund
Direct or indirect financial contributions
Governmental assistance

Information, trade fairs, trade missions
Tariffs




Customs duties levied on imported goods
Brussels Tariff Nomenclature (BTN), 1959
The Harmonized Tariff System (HTS), 1989
Export and import classification number
Non-Tariff Barriers






Any measure, other than a tariff, that is a
deterrent or obstacle to the sale of products in a
foreign market.
Quotas and trade control
Discriminatory procurement policies
Restrictive customs procedures
Selective monetary controls and discriminatory
exchange rate policies
Restrictive administrative and technical
regulations
Quotas and Trade Control

Government imposed- limits or
restrictions on the number of units or
the total value of a particular product or
product category
Discriminatory Procurement Policies


Government rules and administrative
regulations, company policies that
discriminate against foreign suppliers
Buy American Act
Restrictive Customs Procedures

Classifying and valuing commodities as
a basis for levying import duties
Selective Monetary Controls and
Discriminatory Exchange Rate Policies


Discriminatory exchange rate policy
Export deposit
Restrictive Administrative &
Technical Regulations



Anti-dumping regulations, size
regulations, and safety and health
regulations
Japanese restrictive technical regulations
Double standards
Choosing Export Markets





Create a product-market profile
Potential market size
Competitor activities
Overall marketing mix
Target one or more export markets
Market Selection Criteria






Market potential
Market access
Shipping cost
Potential competition
Product fit
Service requirements
Visiting the Potential Market



Confirm or contradict assumptions
regarding market potential
Gather additional data
Develop a marketing plan in cooperation
with the local agent or distributor
Market Access Considerations



Tariff systems
Preferential tariffs
Duties
Tariff Systems

Single column tariff


Two-column tariff


Tariff schedule in which the duty rate applies to
imports from all countries on the same basis
The initial single column of duties is supplemented by
a second column showing reduced rates as
determined through tariff negotiations with other
countries (MFN)
Preferential tariff

A reduced tariff rate applied to imports from certain
countries
Types of Duties






Ad Valorem Duties
Specific Duties
Alternative Duties
Compound or Mixed Duties
Antidumping Duties
Countervailing Duties
Ad Valorem Duties


Duty is expressed as a percentage of
the value of goods
HTS: Customs value is landed CIF cost
at the port of entry
Specific Duties

Duties expressed as a specific amount
of currency per unit of weight, volume,
length, or number of other units of
measurement.
Alternative Duties

Both advalorem and specific duties are
used to calculate the tariff, usually the
one that yields the higher amount of
duty is chosen
Compound or Mixed Duties

Duties provided for specific, plus ad
valorem, rates to be levied on the same
articles.
Antidumping Duties

Dumping



The sale of merchandise in export markets
are unfair prices.
Injury is caused to the domestic producers
Special additional import charges equal to
the dumping margin
Countervailing Duties

Additional duties levied to offset
subsidies granted in the exporting
country.
Other Import Charges

Variable import levies


Temporary import surcharges


When the prices of imported products would
undercut those of domestic products
Provide additional protection for local industry in
response to balance-of-payments deficits
Compensatory import taxes

Value-added tax
Organizing For Exporting


Organizing in the home country
Organizing in the target market country
Organizing in the Home Country


In-house export organization
External independent export
organizations
In-House Export Organization


The company’s appraisal of the
opportunities in export marketing
Its strategy for allocating resources to
markets on a global basis
External Independent
Export Organizations





Export trading companies
Market information gathering
Communication with markets
Setting prices
Ensuring parts availability
Organizing in the Market Country

Direct market representation


Independent representation



Control and communication
Small sales volume
Find good local distributor
Piggyback marketing

Arrangement where by one manufacture obtains
distribution of products through another’s
distribution channels.
Export Financing/
Methods of Payment





Currency availability in the buyer’s country
Creditworthiness of the buyer
Seller’s relationship with the buyer
Letter of Credit
Documentary Collections
Letter of Credit



Assurance of being paid
Payment obligation: buyer’s bank
instead of the buyer
The documents instead of the goods
Documentary Collections


Bill of exchange (draft)
A negotiable instrument which is easily
transferable from one party to another
Counter Trade





Alternative finance methods for
international trade other than money
Scarcity of hard currency
Exchange control
Inability to finance imports through bank
loans
Barter and mixed forms of counter trade
Simple Barter


Direct exchange of goods and services
between two parties
Exchange fluctuation, shadow price
Counterpurchase


Each delivery in an exchange is paid for
in cash
Two separate contracts
Compensating Trading

Two contracts


The supplier agrees to build a plant or
provide plant equipment, patents or
technology
The supplier agrees to take payment in the
form of the plant’s output equal to its
investments
Entry & Expansion
Entry Decision Process





Sourcing
Marketing organization
Distribution
Marketing strategy
Strategy implementation
Ownership & Control



Licensing
Joint ventures
Investment/Ownership
Licensing




Contract
Patent, trade secret, brand, trademark,
company name, technical know-how
Pros and cons
Cross-technology exchange
Joint Ventures



Ownership partition
Sharing of risk and competitive
advantage
Pros and cons
Ownership/Investment



Foreign direct investment
100% ownership; WFOE (wholly foreign
owned enterprise)
Acquisition VS. direct expansion
Expansion Strategies
Market
Concentration
Diversification
Concentration
Country
Diversification
1
Narrow Focus
2
Country Focus
3
Country
Diversification
4
Global
Diversification
Alternative Strategies

Stages of development





Domestic
International
Multinational
Global
Transnational
Competitive Analysis & Strategy
Forces Influencing Competition
Threats of
New Entrants
Bargaining Power
Of Suppliers
Rivalry Among
Existing Competitors
Threat of Substitute
Products or Services
Bargaining Power
Of Buyers
Threat of New Entrants








Economies of scale
Product differentiation
Capital requirement
Switching costs
Access to distribution channels
Government policy
Cost advantages
Expected competitor response
Threat of Substitute Products


Availability of substitute products
Price
Bargaining Power of Suppliers




Size and number
Input importance, differentiation,
switching costs
Availability of alternative products
Supplier product or brandname
Bargaining Power of Buyers




Bulk purchase
Undifferentiated supplier’s products
Portion of cost
Backward vertical integration
Rivalry Among Competitors




Mature industry, market share
High fixed cost industry
Lack of differentiation or absence of
switching cost
High strategic stakes in an industry
National Competitive Advantage




Factor conditions
Demand conditions
Related and supporting industry
Firm structure and rivalry
Factor Conditions





Human
Physical
Knowledge
Capital
Infrastructure
Demand Conditions



The composition of home demand
The size and pattern of growth of home
demand
The means by which a nation’s home
demand pulls the nation’s products and
services into foreign markets
Related & Supporting Industries


Value chain
Proximity
Firm Strategy, Structure, and Rivalry



Strategy
Structure
Domestic rivalry
Other Forces



Chance
Government
Non-market factors
Competitive Advantage



Customer value
Competitive advantage
Successful strategy
Models of Competitive Strategy


Generic
Business intent
Generic Strategies
Competitive Scope
Broad
Target
Narrow
Target
Cost
Leadership
Differentiation
Cost Focus
Focused
Differentiation
Lower Cost
Differentiation
Competitive Advantage
Cost-Leadership





Low-cost producer
Broadly-defined markets
Experience curve and scale economy
Low prices
Barrier
Differentiation



Unique value
Broad market
Premium price
Focused Differentiation



Narrow target market
Unique products
Premium price
Cost Focus


Narrow market
Lower price
Strategic Position



Variety-based positioning
Customer-needs-based positioning
Customer-access-based positioning
Strategic Intent



Continuous improvement
Continuous innovation
Continuous acquisition of new
competitive advantage
Cooperative Strategies
Cooperative or Competitive?





Trade barriers down
Markets globalized
Consumer needs and wants converged
Product life cycles shortened
Business environment: dynamism,
turbulence, unpredictability
Global Strategic Partnerships




Participants remain independent
Share of benefits and control
Ongoing contribution
Mergers, acquisitions, joint ventures
GSP Attributes






Joint long-term strategy, global leadership
Reciprocal relationship
Global vision and efforts
Horizontal alliance
Vertical alliance
Partners as well as competitors
GSP Success Factors






Mission
Strategy
Governance
Culture
Organization
Management
Keiretsu In Japan





Cooperative strategy in Japan
Interbusiness alliance or enterprise group
Bank-ownership of stocks
Cross-ownership of stocks
The “big six”
Implications of Chinese Companies




Launch GSA from home
Developing core competitive advantage
Know your partners
Be long-term oriented
Product Decisions
Product Defined



A bundle of physical, service, and
symbolic attributes designed to enhance
buyers’ want satisfaction
Consumer-Business
Durable-nondurable
Products Based on Global Vision




National product
International product
Global product
R & D cost incentive
Global Brands




Guided by the same strategic principles
Same name, similar image
Similar positioning
Marketing mix may vary
Building Global Brand


Strategic branding to long-term
profitability
Increasing quality, low price,
communication
Global Product Positioning




Serving a specific market segment by
achieving a certain position in buyers’ minds.
Attribute or benefit
Quality/Price
Use/User
High-Tech VS. High-Touch

High-Tech Positioning



Physical product features
Technical information
High-Touch Positioning


More on image
High-involvement
Product Design Considerations





Preferences
Cost
Laws and regulations
Compatibility
Country of origin
Geographic Expansion
Communication
Different 2. Product Extension, 4. Dual Adaptation
Communications
Adaptation
1. Dual Extension
Same
3. Product Adaptation
Communication
Extension
Same
Different
Product
Pricing Decisions
Price Boundary




P=f (C, C, D)
Price floor
Price ceiling
Optimum price
International Pricing Issues







Discount and allowance
Price elasticity
Government perception
Anti-dumping law
Fluctuating exchange rates
Transportation, channel cost
Taxes
Global Pricing Strategies





Market Skimming
Penetration Pricing
Market Holding
Cost plus/Price escalation
Sourcing
Market Skimming






Set a high or premium price relative to
competitive offerings
Introduction stage
No or limited competition
Distinguishing, segmentation based on price
Revenue maximization
Demand control
Penetration Pricing





Set a low entry price to secure market
acceptance
Entry into another industry
Saturate the market
Lure customers to new stores
Highly elastic demand
Cost Plus/Price Escalation




Price=Unit Cost+shipping+Ancillary+Profit
Transportation, duty, distributor margins
and taxes
Sourcing
Local production and marketing
Dumping




Sale of an imported product at a price
lower than that normally charged in a
domestic market or country of origin.
Price, damage, causal effects
Uruguay Round GATT
Anti-Dumping Agreement (ADA)
Similar Products



Product definition
Product differentiation
Raw material
Normal Price

Market Economy




Market price in domestic market
Exporter’s price to a third country
Structural price
Non-market Economy



Selling price in a substitute country
Structural price
Price of a third country
Price Determination


FOB or CIF?
Domestic price



Structural cost



Selling at loss
Affiliation, Strategic Alliance
Direct inputs, indirect inputs, profits
Export price to a third country
Distributor dumping
Damage Determination



Amount of sales of the dumping product
Selling price of the dumping product
Related economic indicators





Profit margin
Price trend
Market share
Employment rate
Usage of the productivity
Causal Effect




Voluntary price cut by domestic
manufacturers
Dumping caused by other non-dumping
imports
Small market share
Realistic damage VS. potential damage
China: The TARGET





500 cases, 4000 products, $10 billion
Export-oriented economy
Competing over price
Lack of organization
Reluctance to respond and defend
India’s Case
India’s Case
序
号
国家或地区
已经作出终
裁
已经初裁尚未
终裁
已经立案尚
未初裁
立案后被中
止
总计
1
中国
39
9
1
2
51
2
欧盟
12
5
3
3
韩国
15
3
18
4
日本
13
4
17
5
美国
11
4
6
中国台湾省
10
4
2
7
新加坡
2
6
4
8
俄罗斯
11
9
泰国
6
3
9
10
印度尼西亚
6
1
7
20
1
16
16
2
14
11
其他
81
总计
260
What Should We Do?


What can the government do?
What can companies do?







Absence is no rescue! 375% duty on Chinese
garlic, Chain effects
Find a good attorney
Work with local importers and distributors
Stop fighting against each other!
Tracking the market
Product differentiation
Foreign direct investment instead of exporting
Currency Fluctuations


A strong RMB
Exchange rate clauses



Exchange rate review period
Comparison basis
Fluctuation range
Global Pricing Alternatives

Extension/Ethnocentric



Adaptation/Polycentric



Price be the same around the world
Importers absorb freight and duties
Up to subsidiary managers
Gray markets
Invention/Geocentric
Global Distribution
Channel of Distribution

An organized system of marketing
institutions and their interrelationships that
promotes the physical flow of goods and
services, along with title that confers
ownership, from producer to consumer or
business user.
Flows





Physical flow
Title flow
Payment flow
Information flow
Promotion flow
Channel Objectives





Creation of utilities
Place
Time
Form
Information
Global Distribution Barriers





A new market, no direct presence
Separation of production and markets
Little knowledge of the local distribution
system and distributors
Government regulations
Bargaining power of the local distributors
Forms of Presence

Direct involvement



Company-owned or franchised sales force,
retail stores, etc
Sales office and sales branch
Indirect involvement


Independent agents, distributors,
wholesalers or retailers
Title and ownership of goods, commission
Direct Selling







Manufacturer selling direct to the end customer
Door-to-door sales
Mail order
Telemarketing
TV selling
Internet selling
Manufacture-owned stores
Marketing Intermediaries


A business firm, either wholesaler or retailer, that
operates between producers and consumers or
business users, also called a middleman.
Wholesaling intermediary


A comprehensive term that describes wholesalers as
well as agents and brokers.
Retailer

A marketing intermediary selling goods and
services to the ultimate consumer
Wholesaling Intermediaries

Manufacture-owned facilities



Sales branch
Sales office
Independent wholesaling intermediaries


Merchant wholesalers
Agents and brokers
Distribution Intensity




The number of intermediaries through
which a manufacturer distributes its goods.
Intensive distribution
Selective distribution
Exclusive distribution
Intensive Distribution





A channel policy in which a manufacturer of a
convenience product attempts to saturate the
market.
Place products or services in as many outlets
as possible
Cigarettes, snack foods, gums, candy, soft
drinks, household chemicals
Location convenience
Coverage and sales
Selective Distribution




A channel policy in which a firm chooses
only a limited number of retailers to handle
its product line.
Cost reduction
Control over marketing programs
Shopping products
Exclusive Distribution




A channel policy in which a firm grants exclusive
rights to a single wholesaler or retailer to sell its
products in a particular geographic area.
Automobiles, fitness equipments, specialty
products
Loss in coverage, gain in prestige
Close cooperation between the producer and
distributor, more control
Closed Sales Territory


An exclusive geographic selling region
defined and enforced by a manufacturer for
a distributor.
Distributor competition
Tying Agreements

An arrangement that requires a marketing
intermediary to carry a manufacturer’s full
product line in exchange for an exclusive
dealership.
Channel Design Decision





Market
Product
Producer
Middlemen
Competition
Customer Factors



Number, geographic distribution,
income, shopping habits, promotion
sensitivity
Number of customers VS. Number of
channel intermediaries
Retailer selling volume or average
order size
Product Factors







Degree of standardization
Business or consumer
Perishable or durable
Size
Service requirements
Technology intensive or not?
Unit value
Producer Factors




Resources
Specialization
Length of product line
Channel control or channel power
Middleman Factors




Cherry picking
Demand, selling cost, profit
margin, commission
Direct first, then through
middleman
Subsidize the cost of
distributor’s sales reps
Competitive Factors

Competition intensity



HighShort channel
LowLong channel
Goal


Market shareLong channel
Market penetrationShort channel
Long Channel




Big single order size
Easy account
collection and dispatch
Easy to maintain due
to limited number of
accounts
Close relationship





Difficulty in market
penetration
Blind market spot
Low profit margin
Less information about
market and customers
Too many stakes on
wholesalers
Short Channel





Deep market penetration
More control over sales
terminals and marketing
programs
High gross profit margin
Fast market feedback
Less control by
distributors



Big number of orders
adds to difficulty of
order processing and
payment collection
Difficult to maintain
and help
Less distributor
loyalty due small
single order size
Evaluating The Alternatives








Direct distribution
Manufactured owned
sales force
Finding, hiring, training,
motivating sales force
Rent, utility, deco
Dedication
Product knowledge
Base salary plus 1%
commission
Less market access







Independent intermediary
Well trained sales force
Big Client base
No base salary, 5%
commission
Product knowledge
Competing products
More knowledge and
access to the market
Criteria



Economic criteria
Control criteria
Adaptability criteria
Economic Criteria
$4,000
Selling Costs ($)
Independent Intermediary
Direct Distribution
A
$30,000
$50,000
$75,000
Level of Sales ($)
Control Criteria

Wholesaler




Less control
Less product technical knowledge
Carrying competing brands
Sales Office

More control
Adaptive Criteria


Adaptability of the channel
Flexibility to respond to market changes,
consumer purchasing pattern changes
Channel Management Process







Marketing research on target market, competitors,
available distributors, media
Determining channel structure;
Recruiting and training distributors;
Evaluation, negotiation, and signing contracts;
Terminal design and development;
Promotion, sales assistance, terminal maintenance;
Management, training, adjustment, reward, and
improvement
Selection




Home country’s trade department
Home country’s embassy or consulate in
the host country, Business Counselor
Local chamber of commerce or local
trade organizations
Local distributor commitment
Selection








Network resource; coverage, depth;
Control over price, assortment
Terminal and sales force management;
Credibility; payment reliability;
Service capability;
Financial resources;
Warehousing and transportation
Commitment to the product is the key.
Terms and Responsibilities

Price policy


Conditions of sales




Price list, schedule of discounts, allowances
Payment terms, producer guarantees,
Distributors’ territorial rights
Performance and cancellation
Mutual services and responsibilities
Distributor Evaluation








Sales volume
Sales increase speed
Percentage of product sales of the total
distributor sales;
Selling cost against sales
Inventory level
Number of product lines carried
Terminal display and price execution
Service provided to downstream distributors
and customers
Motivating Channel Members





Coercive power
Reward power
Legitimate power
Expert power
Referent power
Producer–Distributor Relationships



Enemies
Customers or clients
Partners



Conflict
Competition
Cooperation
Trends In Global Distribution

Flattened channel





Involve as few intermediaries as possible
Short channel preferred
Channel power moving from producers to
retailers;
Booming of super-large retail chains and
disappearance of small stores
Application of high-tech in physical
distribution of goods or services