Chapter Learning Objectives
• How global marketing management differs from
international marketing management
• The increasing importance of international
strategic alliances
• The need for planning to achieve company goals
• The important factors for each alternative marketentry strategy
11 - 1
The Nestle Way: Evolution Not Revolution
• Nestle is the world’s biggest marketer of infant formula,
powdered milk, instant coffee, chocolate, soups, and
mineral water.
• Nestle strategy can be summarized in four points:
-
Think and plan long term
Decentralize
Stick to what you know
Adapt to local tastes
• Long-term strategy works for Nestle because the
company relies on local ingredients and markets products
that consumers can afford.
11 - 2
Benefits of Global Marketing
• When large market segments can be identified, economies of scale
in production and marketing can be important competitive
advantages for global companies.
• Transfer of experience and know-how across countries through
improved coordination and integration of marketing activities.
• Marketing globally also ensures that marketers have access to the
toughest customers.
• Diversity of markets served carries with it additional financial
benefits.
• Firms that market globally are able to take advantage of changing
financial circumstances.
11 - 3
Planning for Global Markets
• Planning is the job of making things happen that might not
otherwise occur.
• Planning allows for rapid growth of the international function,
changing markets, increasing competition, and the turbulent
challenges of different national markets.
• Planning relates to the formulation of goals and methods of
accomplishing them, so it is both a process and philosophy.
- Corporate planning
- Strategic planning
- Tactical planning
• Successful planning is evaluating company objectives, including
management’s commitment and philosophical orientation to
international business.
11 - 4
Planning for Global Markets (cont’d)
• Company objectives and resources
- Each new market can require a complete evaluation, including
existing commitments, relative to the parent company’s objectives
and resources.
- Defining objectives clarifies the orientation of the domestic and
international divisions, permitting consistent policies.
• International commitment
- Commitment in terms of:
• Dollars to be invested
• Personnel for managing the international organization
• Determination to stay in the market long enough to realize a return in
investments.
- The degree of commitment to an international marketing cause
reflects the extend to a company’s involvement
11 - 5
The Planning Process
• Phase 1: Preliminary Analysis and Screening – Matching
Company and Country Needs.
• Phase 2: Adapting the Marketing Mix to Target Markets.
• Phase 3: Developing the Marketing Plan
• Phase 4: Implementation and Control
11 - 6
International Planning Process
• Insert Exhibit 11.1
11 - 7
Alternative Market-Entry Strategies
• An entry strategy into the international market should reflect on analysis of
market characteristics such as:
- Potential sales
- Strategic importance
- Strengths of local resources
- Cultural differences
- Country restrictions
• Companies most often begin with modest export involvement.
• A company has four different modes of foreign market entry from which to
select:
- Exporting
- Contractual agreements
- Strategic alliances
- Direct foreign investments
11 - 8
Exporting
• Exporting accounts for some 10% of global activity.
• Direct exporting - the company sells to a customer in another
country.
• Indirect exporting – the company sells to a buyer (importer or
distribution) in the home country, who in turn exports the product.
• The Internet
- Initially, Internet marketing focused on domestic sales, however, a
surprisingly large number of companies started receiving orders
from customers in other countries, resulting in the concept of
international Internet marketing (IIM).
• Direct sales
- Particularly for high technology and big ticket industrial products.
11 - 9
Contractual Agreement
• Contractual agreements are long-term, nonequity
association between a company and another in a foreign
market.
• Licensing
- A means of establishing a foothold in foreign markets without
large capital outlays.
- A favorite strategy for small and medium-sized companies.
- Legitimate means of capitalizing on intellectual property in a
foreign market.
11 - 10
Contractual Agreement (continued)
• Franchising
- Franchiser provides a standard package of products, systems,
and management services, and the franchise provides market
knowledge, capital, and personal involvement in management.
- Despite temporary setbacks, franchising is still expected to be
the fastest-growing market-entry strategy.
- Two types of franchise agreements:
• Master franchise – gives the franchisee the rights to a
specific area with the authority to sell or establish
subfranchises.
• Licensing
11 - 11
Strategic International Alliances
• A strategic international alliance (SIA) is a business relationship established by
two or more companies to cooperate out of mutual need and to share risk in
achieving a common objective
• SIAs are sought as a way to shore up weaknesses and increase competitive
strengths.
• Firms enter SIAs for several reasons:
- Opportunities for rapid expansion into new markets
- Access to new technology
- More efficient production and innovation
- Reduced marketing costs
- Strategic competitive moves
- Access to additional sources of products and capital
• Many companies also are entering SIAs to be in strategic position to be
competitive and to benefit from the expected growth in the single European
market.
11 - 12
Strategic International Alliances (continued)
• International Joint Ventures
- A joint venture is a partnership of two or more participating
companies that have joined forces to create a separate legal
entity.
- Four Characteristics define joint ventures:
• JVs are established, separate, legal entities
• The acknowledged intent by the partners to share in the
management of the JV
• There are partnerships between legally incorporated entities such
as companies, chartered organizations, or governments, and not
between individuals
• Equity positions are held by each of the partners
11 - 13
Strategic International Alliances (continued)
• Consortia
- Consortia are similar to joint ventures and could be classified
as such except for two unique characteristics:
• They typically involve a large number of participants
• They frequently operate in a country or market in which none of
the participants is currently active.
- Consortia are developed to pool financial and managerial
resources and to lessen risks.
11 - 14
Direct Foreign Investment
• Factors that have been found to influence the structure
and performance of direct investments:
-
Timing
The growing complexity and contingencies of contracts
Transaction cost structures
Technology transfer
Degree of product differentiation
The previous experiences and cultural diversity of acquired
firms
- Advertising and reputation barriers
11 - 15
Organizing for Global Competition
• Because organizations need to reflect a wide range of companyspecific characteristics, devising a standard organizational
structure is difficult.
• Companies are usually structured around one of three alternatives:
- Global product divisions responsible for product sales throughout the
world
- Geographical divisions responsible for all products and functions
within a given geographical area
- A matrix organization consisting of either of these arrangements
with centralized sales and marketing run by a centralized functional
staff, or a combination of area operations and global product
management
11 - 16
Organizing for Global Competition (cont’d)
• Locus of decision
- Considerations of where decisions will be made, by whom, and by
which method constitute a major element of organizational strategy.
• Centralized versus decentralized organizations
- An infinite number of organizational patterns fro the headquarters
activities of multinational firms exist, but most fit into one of three
categories:
• Centralized
• Regionalized
• Decentralized
• No single traditional organizational plan is adequate for today’s
global enterprise seeking to combine the economies of scale of a
global company with the flexibility and marketing knowledge of a
local company.
11 - 17
Schematic Marketing Organization Plan Combining
Product, Geographic, and Functional Approaches
• Insert Exhibit 11.4
11 - 18