11-03-2024

Global Marketing Management:

Planning and Organization

Chapter 12

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives
LO1 How global marketing management differs from
international marketing management
LO2 The need for planning to achieve company goals
LO3 The important factors for each alternative
market entry strategy
LO4 The increasing importance of international
strategic alliances

12-2

1
 11-03-2024

Global Marketing Management

• “standardization
1980s • “global
vs. adaptation” • “globalization integration vs.
vs. localization” local
responsiveness”

1970s 1990s

12-3

Global Marketing Management

 The issue is if the global homogenization of
consumer tastes allow for the global standardization
of the marketing mix
 The Internet revolution of the 1990s added a new
twist to the old debate
 Some companies continue to believe that “global” is
the way to go

12-4

2
 11-03-2024

Global Marketing Management

 In many parts of the world, consumers have become
pickier, more penny-wise, or a little more nationalistic
 They are spending more of their money on local drinks
whose flavors are not part of the Coca-Cola lineup
 The trend back toward localization is because of the
efficiencies of customization because of the proliferation
of the Internet and flexible manufacturing processes

12-5

The competition among soft drink bottlers in India is fierce. Coca-Cola has
purchased Thums Up, a prominent local brand—this is a strategy the
company is applying around the world. But the red is a substantial competitive
advantage both on store shelves and in outdoor advertising of the sort
common in India and other developing countries. We’re not sure who
borrowed the “monsoon/thunder” slogans from whom.

12-6

3
 11-03-2024

Global Marketing Management

 The debate about standardization versus adaptation
is an example of ethnocentrism in the U.S.
 As global markets homogenize and diversify
simultaneously, the best companies will avoid
focusing on country as the primary segmentation
variable
 Other segmentation variables are often more
important—for example, climate, language group,
media habits, age, or income

12-7

Global markets continue to become homogenous,

savvy companies focus on a common set of variables
such as climate or language rather than looking at each
country market separately. A case in point is the
diversity in the Chinese market and the importance of
marketing to different regions differently. Hong Kong
and Shanghai may be more similar consumer markets
(cosmopolitan) than Shanghai and Guangzhou in
Southern China.

12-8

4
 11-03-2024

The Nestlé Way:

Evolution Not Revolution
 The “Nestlé way” is to dominate its markets
 Its overall strategy can be summarized in four points:

Think and plan long term

Decentralize

Stick to what you know

Adapt to local tastes

12-9

Benefits of Global Marketing

 Economies of scale in production and marketing
 Transfer of experience and know-how across
countries
 Global diversity in marketing talent leading to new
approaches
 Marketing globally ensures that marketers have
access to the toughest customers
 Spreading the portfolio of markets brings stability of
revenues and operations to many global companies

12-10

5
 11-03-2024

Economies of Scale: Black & Decker Manufacturing

Company—makers of electrical hand tools, appliances,
and other consumer products—realized significant
production cost savings when it adopted a pan-European
strategy. It was able to reduce not only the number of
motor sizes for the European market from 260 to 8 but
also 15 different models. Similarly, Ford estimates that by
unifying product development, purchasing, and supply
activities across several countries, it saves more than $3
billion a year. While Japanese firms initially dominated the
mobile phone business in their home market, international
competitors now pose growing challenges via better
technologies developed through greater global
penetration.

Transfer of experience and know-how across countries:

Unilever successfully introduced two global brands
originally developed by two subsidiaries. Its South
African subsidiary developed Impulse body spray, and a
European branch developed a detergent that cleaned
effectively in European hard water. Aluminum Company
of America’s (Alcoa) joint venture partner in Japan
produced aluminum sheets so perfect that U.S. workers,
when shown samples, accused the company of hand-
selecting the samples. Line workers were sent to the
Japanese plant to learn the techniques, which were then
transferred to the U.S. operations.

6
 11-03-2024

Access to the toughest customers : For example, in

many product and service categories, the Japanese
consumer has been the hardest to please; the
demanding customers are the reason that the highest-
quality products and services often emanate from that
country. Competing for Japanese customers provides
firms with the best testing ground for high-quality
products and services.
Stability of revenues: Firms that market globally are
able to take advantage of changing financial
circumstances. For example, as tax and tariff rates ebb
and flow around the world, the most global companies
are able to leverage the associated complexity to their
advantage.

Planning for Global Markets

 Planning is a systematized way of relating to the future
 It is a commitment of resources to a country market to
achieve specific goals
 It allows for rapid growth of the international function and the
challenges of different national markets
 International corporate planning is essentially long term
incorporating generalized goals for the enterprise as a whole
 Strategic planning deals with products, capital, research, and
the long- and short-term goals of the company
 Tactical planning , or market planning, pertains to specific
actions and to the allocation of resources to implement goals

12-14

7
 11-03-2024

Company Objectives and Resources

 Foreign market opportunities do not always parallel
corporate objectives and resources
 It may be necessary to change the objectives, alter
the scale of international plans, or abandon them
 One market may offer immediate profit but have a
poor long-run outlook, while another may offer the
reverse.
 Only when corporate objectives are clear can such
differences be reconciled effectively

12-15

Defining Corporate Objectives is critical, as well as

matching resources to foreign market opportunities or
vice versa. For example P&G’s Vicks Vaporub was a
strong brand, P&G took advantage of a variety of
opportunities and uses for the product. In India, the
monsoon season caused an onset of the cold and flu
season, P&G learned it could come up with multiple
uses for it’s Vicks Vaporub brand (Balm, vaporizer, etc.).

12-16

8
 11-03-2024

International Commitment
 Management needs to be prepared to make the level of
commitment required for successful international
operations
 Commitment affects the specific international strategies
and decisions of the firm
 A long-term marketing plan should have realistic time
goals set for sales growth
 There is a strong regional preference for multinational
companies as they expand their operations
 Competition and the ease of communications is forcing
managers to make commitments to global marketing

12-17

Management Commitment is commitment in terms of

dollars to be invested, personnel for managing the
international organization, and determination to stay in
the market long enough to realize a return on these
investments.

Long-term commitment means a company uncertain of

its prospects is likely to enter a market timidly, using
inefficient marketing methods, channels, or
organizational forms, sets itself up for failure.
Occasionally, casual market entry is successful, but
more often than not, market success requires long-term
commitment.

9
 11-03-2024

Regional preference refers to the preference to

deal with companies in the regions that are
culturally similar, are in the same time zone and
physically close to each other. Most countries
and companies trade most with their neighbors.

Global Marketing Although there is a strong

regional preference, and multinational marketing
agreements and trading blocs start out regionally
with geographic proximity being a primary
determinant, competition and ease of
communications is forcing firms to commit to
global marketing.

 Whether a company is marketing in several countries

or is entering a foreign market for the first time,
planning is essential to success. The first-time foreign
marketer must decide what products to develop, in
which markets, and with what level of resource
commitment.
 For the company that is already committed, the key
decisions involve allocating effort and resources
among countries and product(s), deciding on new
market segments to develop or old ones to withdraw
from, and determining which products to develop or
drop.
12-20

10
 11-03-2024

12-21

Phase 1: Preliminary Analysis

and Screening
 A critical first step in the planning process is deciding in which
existing country market to make a market investment
 A company’s strengths and weaknesses, products,
philosophies, modes of operation, and objectives must be
matched with a country’s qualities
 First, countries are analyzed and screened to eliminate those
that do not offer sufficient potential for further consideration
 Second, screening criteria are established against which
prospective countries can be evaluated
 Third, a complete analysis of the environment within which a
company plans to operate is made

12-22

11
 11-03-2024

Emerging markets pose a special problem because

many have inadequate marketing infrastructures,
distribution channels are underdeveloped, and income
levels and distribution vary among countries.

Screening criteria are ascertained by an analysis of

company objectives, resources, and other corporate
capabilities and limitations.

Once the screening is done, a complete environmental

analysis is done which includes a detailed examination
of controllable and uncontrollable elements both in the
home and host countries. This helps in determining
which parts of the marketing mix can be standardized
and which parts need to be adapted.

The results of Phase 1 provide the marketer with

the basic information necessary to evaluate the
potential of a proposed country market.
Radio Shack’s early attempts at international
marketing in western Europe resulted in a series
of costly mistakes that could have been avoided
had it properly analyzed the uncontrollable
elements of the countries targeted. The company
staged its first Christmas promotion in anticipation
of December 25 in Holland, unaware that the
Dutch celebrate St. Nicholas Day and give gifts
on December 6.

12
 11-03-2024

Phase 2: Defining Target Markets and

Adapting the Marketing Mix
 A more detailed examination of the components of the
marketing mix is the purpose of Phase 2
 The primary goal of Phase 2 is to decide on a marketing
mix adjusted to the cultural constraints imposed by the
uncontrollable elements of the environment that
effectively achieves corporate objectives and goals
 The answers to three major questions are generated in
Phase 2:
• Are there identifiable market segments that allow for common
marketing mix tactics across countries?
• Which cultural/environmental adaptations are necessary for
successful acceptance of the marketing mix?
• Will adaptation costs allow profitable market entry?

12-25

 The process used by the Nestlé Company is an

example of the type of analysis done in Phase 2.
 Each product manager has a country fact book that
includes much of the information suggested in Phase
1. The country fact book analyzes in detail a variety
of culturally related questions.
 Frequently, the results of the analysis in Phase 2
indicate that the marketing mix will require such
drastic adaptation that a decision not to enter a
particular market is made. For example, a product
may have to be packaged differently or in smaller
sizes to adapt to a country market, but the additional
manufacturing cost of doing this may be too high to
justify market entry. This is what happened to
Haagen Daaz in Japan and they exited the market.
12-26

13
 11-03-2024

Phase 3: Developing the Marketing Plan

 A marketing plan is developed for the target

market—whether it is a single country or a global
market set
 The marketing plan begins with a situation analysis
and culminates in the selection of an entry mode and
a specific action program for the market
 The specific plan establishes what is to be done, by
whom, how it is to be done, and when. Included are
budgets and sales and profit expectations

12-27

Phase 4: Implementation and Control

 The planning process is a dynamic, continuous set of

interacting variables with information continuously
building among phases
 An evaluation and control system requires performance-
objective action; bringing the plan back on track should
standards of performance fall short
 The system encourages the decision maker to consider all
variables that affect the success of a company’s plan
 It provides the basis for viewing all country markets and
their interrelationships as an integrated global unit

12-28

14
 11-03-2024

Alternative Market-Entry Strategies

 A company has four different modes of foreign
market entry from which to select: exporting,
contractual agreements, strategic alliances, and
direct foreign investment
 The amount of equity required by the company to
use different modes affects the risk, return, and
control that it will have in each mode

12-29

Exhibit 12.2 Alternative Market-Entry Strategies

12-30

15
 11-03-2024

Exporting
 Exporting accounts for some 10 percent of global
economic activity.
 Exporting can be either direct or indirect:
• With direct exporting , the company sells to a customer in
another country
• With indirect exporting usually means that the company
sells to a buyer (importer or distributor) in the home
country, which in turn exports the product

12-31

Direct Exporting This method is the most common approach

employed by companies taking their first international step because
the risks of financial loss can be minimized

Indirect Exporting Indirect exporting can be done through large

retailers such as Walmart or Sears, wholesale supply houses, trading
companies, and others that buy to supply customers abroad.

Early motives for exporting often are to skim the cream from the
market or gain business to absorb overhead. Early involvement in
exporting may also come from unexpected opportunities that present
themselves to firms. An example is a hot sauce manufacturing
company in California that received an inquiry from the Middle East
and this spurred its exporting business.

Exporting is also a common approach for mature international

companies with strong marketing and relational capabilities. Some of
America’s largest companies engage in exporting as their major
market-entry method (Boeing is an example).

16
 11-03-2024

Exporting
 The Internet
• The Internet is becoming increasingly important as a
foreign market entry method
• Should not be overlooked as an alternative market entry
strategy by the small or large company
 Direct Sales
• A direct sales force may be required particularly for high-
technology and big ticket industrial products
• It may mean establishing an office with local and/or
expatriate managers and staff, depending of course on the
size of the market and potential sales revenues.

12-33

Contractual Agreements
 Contractual agreements are long-term, non equity
associations between a company and another in a
foreign market
 Contractual agreements involve the transfer of
technology, processes, trademarks, and/or human
skills.
 They serve as a means of transfer of knowledge
rather than equity

12-34

17
 11-03-2024

Contractual Agreements: Licensing

 Licensing is a means of establishing in foreign markets
without large capital outlays
 Includes patent rights, trademark rights, and the rights to use
technological processes

 It is a favorite strategy for small and medium sized companies.

Common examples of industries that use licensing
arrangements in foreign markets are television programming
and pharmaceuticals.

12-35

Contractual Agreements: Licensing

 Advantages  Risks
• capital is scarce • choosing the wrong partner
• import restrictions forbid • quality and other production
other means of entry problems
• a country is sensitive to • payment problems
foreign ownership or • contract enforcement and
• patents and trademarks must • loss of marketing control
be protected against
cancellation for nonuse.

12-36

18
 11-03-2024

Contractual Agreements: Franchising

 Franchising is a rapidly growing form of licensing
 The franchiser provides a standard package of products,
systems, and management services, and the franchisee
provides market knowledge, capital, and personal
involvement in management
 The combination of skills permits flexibility in dealing
with local market conditions and yet provides the parent
firm with a reasonable degree of control.
 The franchiser can follow through on marketing of the
products to the point of final sale
 It is an important form of vertical market integration

12-37

Contractual Agreements: Franchising

 The franchise system provides an effective blending of skill centralization
and operational decentralization
 In spite of the economic downturn, franchising is still expected to be the
fastest growing market-entry strategy
 Franchises were often among the first types of foreign retail business to
open in the emerging market economies of eastern Europe, the former
republics of Russia, and China
 The franchising system combines the knowledge of the franchiser with the
local knowledge and entrepreneurial spirit of the franchisee
 McDonald’s is an excellent example of how it entered difficult to enter
markets like Russia when it was part of the former USSR and more
recently the Indian market. Foreign laws and regulations are friendly
toward franchising because it tends to foster local ownership, operations,
and employment. In spite of the advantages associated with franchising,
there are cost associated with it that the firm must be cognizant of.
12-38

19
 11-03-2024

Strategic International Alliances (SIAs)

 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
 Strategic international alliances are sought as a way to shore
up weaknesses and increase competitive strengths;
complementarity is key.
 Firms enter into 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 and
• access to additional sources of products and capital.

12-39

SIAs often contribute to profits. Among some of the more prominent

SIAs are Nokia (Finland)/ATT, Alibaba (China)/Microsoft, Tata
(India)/Starbucks, and Renault (France)/Nissan (Japan). But
perhaps the most visible SIAs are now in the airline industry, the
more recent being United and Continental and Delta and
Northwest/KLM, where they become partners in and alliance like
the Star Alliance or Skyteam, which integrate schedules and
mileage programs. The success of the airline alliances is in the
fact that the two airlines usually although in the same business
have dominance in different world markets, they have
complementary strengths.

Many companies also are entering SIAs to be in a strategic position

to be competitive and to benefit from the expected growth in the
single European market.

20
 11-03-2024

Strategic International Alliances:

International Joint Ventures (IJVs)
 A joint venture is different from other types of strategic
alliances or collaborative relationships in that 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
• they acknowledge intent by the partners to share in the
management of the JV
• they are partnerships between legally incorporated entities and
not between individuals and
• equity positions are held by each of the partners

12-41

Strategic International Alliances:

Consortia
 Consortia are similar to joint ventures and 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
 One firm usually acts as the lead firm, or the newly
formed corporation may exist independently of its
originators

12-42

21
 11-03-2024

Direct Foreign Investment

 Direct foreign investment is direct investment within
a foreign country
 Companies may invest locally to:
• capitalize on low cost labor
• avoid high import taxes
• reduce the high costs of transportation to market
• gain access to raw materials and technology or
• as a means of gaining market entry
 Firms may either invest in or buy local companies or
establish new operations facilities

12-43

Direct Foreign Investment

 Several factors have been found to influence the
structure and performance of direct investments:
• timing—first movers have advantages but are more risky
• the growing complexity and contingencies of contracts
• transaction cost structures
• technology and knowledge transfer
• degree of product differentiation
• the previous experiences and cultural diversity of acquired
firms
• advertising and reputation barriers

12-44

22
 11-03-2024

In spite of the many barriers such as tariffs in entering

foreign markets, many large multinationals are now
preferring to enter a market directly, even though they
have to deal with the bureaucracies in the foreign
country. The growth of free trade areas has helped
helps with direct investment strategies for companies
as they now have to operate in multiple countries in
the region. Nestlé's strategy is often buying out
popular local brands and direct foreign market entry
provided by such acquisitions.

12-45

Organizing for Global Competition

 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

12-46

23
 11-03-2024

International Market Entry Modes

Production in home country Production in foreign country

Exports Providing Offshore services Contractual Modes Investment Modes

Indirect Direct Complementary

(Piggybacking)

International International International Overseas

International International International
strategic management contract turnkey
Licensing franchising leasing
alliance contracts manufacturing projects

Overseas Wholly owned

International
assembly of foreign
joint ventures
mixing subsidiaries

Greenfield Mergers and

operations acquisitions

Advantages and Disadvantages of Different Modes

of Entry
48

24
 11-03-2024

Global product division structures are usually used by companies

experiencing rapid growth and have broad, diverse product lines.
General Electric, NBC Universal.

Geographic structures work best when a close relationship with

national and local governments is important

Matrix form is the most extensive of the three organizational

structures. It is popular with companies as they reorganize for
global competition. A matrix structure permits management to
respond to the conflicts that arise among functional activity,
product, and geography. It is designed to encourage sharing of
experience, resources, expertise, technology, and information
among global business units.

12-50

25
 11-03-2024

Locus of Decision
 Relates to where decisions will be made, by whom,
and by which method
 Management policy must be explicit about which
decisions are to be made at which level
 Most companies limit the amount of money to be
spent at each level
 Decision levels for determination of policy, strategy,
and tactical decisions must be established
 Tactical decisions are usually made at the lowest
possible level

12-51

Centralized versus Decentralized

Organizations
 Organizational patterns for the headquarters’
activities of multinational firms usually fit into one of
three categories:
• Centralized
• Regionalized
• Decentralized
 The advantages of centralization are:
• the availability of experts at one location
• the ability to exercise a high degree of control on both the
planning and implementation phases
• the centralization of all records and information

12-52

26
 11-03-2024

Centralized vs. Decentralized

Organizations
 Some companies implement extreme
decentralization by giving selecting competent local
managers full responsibility for national or regional
operations
 Even though product decisions may be highly
centralized, subsidiaries may have a substantial
amount of local influence in pricing, advertising, and
distribution decisions
 If a product is culturally sensitive, the decisions are
more likely to be decentralized

12-53

27