International Marketing
15th edition
Philip R. Cateora, Mary C. Gilly, and John L. Graham
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Introduction
12
• Confronted with increasing global competition for
expanding markets, multinational companies are
changing their marketing strategies and altering
their organizational structures
• Comprehensive decisions must be made regarding
key strategic choices, such as standardization vs.
adaptation, concentration vs. dispersion, and
integration vs. independence
• The flexibility of a smaller company may enable it to
reflect the demands of global markets and redefine
its programs more quickly than larger
multinationals
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Overview
12
• Global marketing management
• Planning for global markets
• Alternative market-entry strategies
–
–
–
–
Exporting
Contractual agreements
Strategic international alliances
Direct foreign investment
• Organizing for global competition
– Locus of decision
– Centralized vs. decentralized organizations
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12
Global Perspective:
The British Sell another Treasure
• Grandiose mergers more often destroy brands
than strengthen them, particularly when those
brands are such delicate confections as chocolate
bars and gooey eggs
• Kraft (US) proposed to buy Cadbury (Britain)for
$17 billion in September 2009; Kraft finally
bought Cadbury in January 2010 for some $19
billion in cash and stock
• Studies have shown that three-quarters of mergers
fail to produce any benefits of shareholders and
more than half actually destroy share value
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Global Marketing
Management (1 of 2)
12
• 1970s – “standardization versus adaptation”
• 1980s – “global integration versus local
responsiveness”
• 1990s – “global integration versus local
responsiveness”
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Global Marketing
Management (2 of 2)
12
• The trend back toward localization
– Caused by the new efficiencies of customization
– Made possible by the Internet
– Increasingly flexible manufacturing processes
• From the marketing perspective customization is
always best
• Global markets continue to homogenize and
diversify simultaneously
– Best companies will avoid trap of focusing on
country as the primary segmentation variable
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12-6
The Nestle Way –
Evolution Not Revolution
12
• Nestle – world’s biggest marketer of infant formula,
powdered milk, instant coffee, chocolate, soups, and
mineral water
• Nestle strategy
–
–
–
–
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
– Markets products that consumers can afford
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Benefits of Global Marketing
12
• When large market segments can be identified
– Economies of scale in production and marketing
– Important competitive advantages for global companies
• Transfer of experience and know-how
– Across countries through improved coordination and
integration of marketing activities
• Marketing globally
– Ensures that marketers have access to the toughest
customers
– Market diversity carries with it additional financial
benefits
– Firms are able to take advantage of changing financial
circumstances
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Planning for Global
Markets (1 of 2)
12
• 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 is both a process and philosophy; it relates to
the formulation of goals and methods of accomplishing
them
• Corporate planning, Strategic planning, and Tactical
planning
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Planning for Global
Markets (2 of 2)
12
• The keys to successful planning are as follows:
– Company objectives and resources
– International commitment
– The planning process
• Phase 1 – Preliminary analysis and screening
• Phase 2 – Adapting marketing mix to target
markets
• Phase 3 – Developing the marketing plan
• Phase 4 – Implementation and control
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Company
Objectives and Resources
12
• Each new market requires 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
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International Commitment
12
• 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
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International Planning
Process
12
Exhibit 12.1
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The Planning Process
12
Phase I
Preliminary analysis and screening (matching
company and country needs)
Phase II
Adapting marketing mix to target markets (a
more detailed examination of the components
of the marketing mix)
Phase III
Developing the marketing plan (situation
analysis, entry mode, and specific action
program for the specific market)
Phase IV
Implementation and control (implementing of
specific plans and anticipation of successful
marketing)
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Alternative Market-Entry
Strategies (1 of 2)
12
• An entry strategy into international market should reflect
on analysis
– Market characteristics
• Potential sales
• Strategic importance
• Strengths of local resources
• Cultural differences
• Country restrictions
– Company capabilities and characteristics
• Degree of near-market knowledge
• Marketing involvement
• Management commitment
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Alternative Market-Entry
Strategies
12
Exhibit 12.2
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Alternative Market-Entry
Strategies (2 of 2)
12
• Companies most often begin with modest export
involvement
• A company has four different modes of foreign
market entry
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–
–
–
Exporting
Contractual agreements
Strategic international alliances
Direct foreign investments
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Exporting (1 of 2)
12
• 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
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Exporting (2 of 2)
12
• The Internet
– Initially, Internet marketing focused on domestic
sales
– 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
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Contractual Agreement
(1 of 2)
12
• Contractual agreements
– 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
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Contractual Agreement
(2 of 2)
12
• Franchising
– Franchiser provides a standard package of products,
systems, and management services
– Franchise provides market knowledge, capital, and
personal involvement in management
– 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
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Strategic International
Alliances (1 of 4)
12
• A strategic international alliance (SIA)
– A business relationship established by two or more
companies to cooperate out of mutual need
– 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
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–
–
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–
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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
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Building Strategic Alliances
12
Exhibit 12.3
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Strategic International
Alliances (2 of 4)
12
• Many companies entering SIAs
– To be in strategic position to be competitive
– To benefit from the expected growth in the single
European market
• International joint ventures (IJVs)
– A partnership of two or more participating
companies that have joined forces to create a separate
legal entity
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Strategic International
Alliances (3 of 4)
12
• 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
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Strategic International
Alliances (4 of 4)
12
• Consortia
– Similar to joint ventures and could be classified as
such except for two unique characteristics
• Typically involve a large number of
participants
• 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
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Direct Foreign Investment
12
• Factors that 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
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Organizing for
Global Competition
12
• Devising a standard organizational structure is difficult
– Because organizations need to reflect a wide range of companyspecific characteristics
• Companies are usually structured around one of three
alternatives
– Global product divisions responsible for product sales
throughout 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
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Schematic Marketing Organization Plan
Combining Product, Geographic,
and Functional Approaches
12
Exhibit 12.4
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Locus of decision
12
• Considerations of where decisions will be made,
by whom, and by which method constitute a
major element of organizational strategy
–
–
–
–
–
Corporate headquarters
International headquarters
Regional levels
National levels
Local levels
• Tactical decisions normally should be made at
lowest possible level
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Centralized Versus
Decentralized Organizations
12
• Most organizational patterns of multinational
firms 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
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Summary (1 of 2)
12
• To keep abreast of the competition and maintain
a viable position for increasingly competitive
markets, a global perspective is necessary
• Cost containment, customer satisfaction, and a
greater number of players mean that every
opportunity to refine international business
practices must be examined in light of company
goals
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Summary (2 of 2)
12
• Important avenues to global marketing that
must be implemented in the planning and
organization of global marketing management
–
–
–
–
Collaborative relationships
Strategic international alliances
Strategic planning
Alternative market-entry strategies
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