15 e Chapter 13 Global Marketing © McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw-Hill Education. Chapter Outline • The competitive advantage of nations • Organizing for global marketing • Programming for global marketing • Entry and growth strategies for global marketing © McGraw-Hill Education Global Marketing Firms invest in foreign countries for the same basic reasons they invest in their own country • Reasons vary from firm to firm but fall under the categories of achieving offensive or defensive goals Goals of Global Marketing Offensive goals • • • • Increase long-term growth and profit prospects Maximize total sales revenue Take advantage of economies of scale Improve overall market position Defensive goals • • • • • Compete with foreign companies on their own turf Gain access to technological innovations in other countries Take advantage of differences in operating costs Preempt competitors’ global moves Avoid being locked out of future markets by arriving too late Jump to Goals of Global Marketing, Appendix Figure 13.1: Porter’s Diamond of National Advantage Source: The Competitive Advantage of Nations by Michael E. Porter. Jump to Figure 13.1: Porter’s Diamond of National Advantage, Appendix Competitive Advantage of Nations Factor conditions • Nation’s ability to turn its natural resources, skilled labor, and infrastructure into a competitive advantage Demand conditions • Nature of domestic demand and the sophistication of domestic customers for the industry’s product or service Related and supporting industries • Existence or absence in the country of supplier and related industries that are also internationally competitive Company strategy, structure, and rivalry • Conditions in the nation that govern how companies are created, organized, and managed, and how intensely they compete domestically Jump to Competitive Advantage of Nations, Appendix Problems with Entering Foreign Markets, 1 Cultural misunderstanding • Areas in which differences occur • Communication • Spatial boundaries • Perception of time • Behavior • Managers must make the necessary efforts to learn, understand, and adapt to the cultural norms of customers and managers and sales team members in countries in which they do business • Sensitivity to cultural differences is essential Problems with Entering Foreign Markets, 2 Political uncertainty • Government instability • Social unrest • Armed conflict Import restrictions • Tariffs, quotas, and other types of restrictions • Established to promote self-sufficiency and can be a roadblock for multinational firms Problems with Entering Foreign Markets, 3 Exchange controls and ownership restriction • Established by nations experiencing balance-of-payment problems • Important considerations in the decision to expand into a foreign market Economic conditions • Differences in economies due to political upheaval or social changes Organizing the Multinational Company Types global companies • Multidomestic company: Pursues different strategies in each of its foreign markets • Global company: Views the world as one market and pits its resources against competition in an integrated fashion Alternatives to organizing global companies • Worldwide product divisions • Divisions responsible for all products sold within a geographic region • Matrix system that combines elements of both of these arrangements Factors Affecting Global Strategy External factors • • • • Market factors Economic factors Environmental factors Competitive factors Internal factors • • • • Structure Management processes Culture People Jump to Factors Affecting Global Strategy, Appendix Organizational Issues to Be Considered in Global Marketing Research, 1 Population characteristics • Demographic variables, such that the number and size of families, education, occupation, and religion, are important Ability to buy • Gross national product or per capita national income • Distribution of income • Rate of growth in buying power • Extent of available financing Organizational Issues to Be Considered in Global Marketing Research, 2 Willingness to buy • Related to cultural values and attitudes, tastes, and habits Differences in research tasks and processes • Language • Data content • Timeliness • Availability in the United States Global Product Strategy Global marketing research helps determine whether there is: • Unsatisfied need for which a new product could be developed to serve a foreign market • Unsatisfied need that could be met with an existing domestic product, either as is or adapted to the foreign market Global Distribution Strategy • Role of the distribution network is as important in foreign markets as it is at home • Channel arrangements range from no control to almost complete control of the distribution system by manufacturers • Influencing both home country and foreign country channels is challenging Global Pricing Strategy Pricing task is more complicated in foreign markets because of problems associated with tariffs, antidumping laws, taxes, inflation, and currency conversion Constraints • Import duties • Rigidity in price structures Global Advertising Strategy Issues related to advertising • Language barrier • Selection of media • Limited media availability and their inability to reach out to potential buyers • Lack of accurate media information • Type of agency to be used to prepare and place the firm’s advertisements Sales promotion • Used as a strategy for bypassing restrictions on advertisements placed by some foreign governments • Effective means for reaching people in rural locations where media support for advertising is virtually nonexistent Entry and Growth Strategies for Global Marketing Strategy depends on analysis of market opportunities, company capabilities, degree of marketing involvement and commitment, and risk tolerance Company can decide to: • Make minimal investments of funds and resources by limiting its efforts to exporting • Make large initial investments of resources and management effort to try to establish a long-term share of global markets • Take an incremental approach Growth Strategies for Global Marketing: Exporting Firm produces the product outside the final destination and then ships it there for sale Advantages Disadvantages • Avoids the cost of establishing manufacturing operations in the host country • It may help a firm achieve experience-curve and location economies • Higher cost associated with the process • Necessity of the exporting firm to pay import duties or face trade barriers • Delegation of marketing responsibility for the product to foreign agents Jump to Growth Strategies for Global Marketing: Exporting, Appendix Growth Strategies for Global Marketing: Licensing Organization’s granting of patent rights, trademark rights, and the right to use technological processes to foreign markets Advantages • Firm does not have to bear the development costs and risks associated with opening up a foreign market • Attractive option in unfamiliar or politically volatile markets Disadvantages • Firm does not have tight control over manufacturing, marketing, and strategy • There is the risk that foreign companies may capitalize on the licensed technology Jump to Growth Strategies for Global Marketing: Licensing, Appendix Growth Strategies for Global Marketing: Franchising and Joint Ventures Franchising: Franchisor sells limited rights to use its brand name in return for a lump sum and share of the franchisee’s future profits • Employed by service firms, as opposed to manufacturing firms • Offers an effective mix of centralized and decentralized decision making Joint ventures: Sharing management with one or more collaborating foreign firms Advantages and Disadvantages of Joint ventures Advantages • Firm may be able to benefit from a partner’s knowledge of the host country • Firm gains by sharing costs and risks of operating in a foreign market • Sole option when political considerations make joint ventures the only feasible entry mode • Firms can take advantage of a partner’s distribution system, technological know-how, or marketing skills Disadvantages • Firm may risk giving up control of proprietary knowledge to its partner • Firm may lose the tight control over a foreign subsidiary needed to engage in coordinated global attacks against rivals Jump to Advantages and Disadvantages of Joint ventures, Appendix Growth Strategies for Global Marketing: Strategic Alliances Partnerships where two or more firms invest in each other to gain competitive advantages on a worldwide versus local level Long term in nature Advantages • Reduced manufacturing costs, accelerated technological diffusion, and new product development • Legal and trade barriers can be overcome Disadvantage: Increased risk of competitive conflict between the partners Growth Strategies for Global Marketing: Direct Ownership Establishment of a wholly owned subsidiary or acquisition where it owns 100 percent of the stock Advantages • Complete control over its technology and operations • Immediate access to foreign markets • Instant credibility and gains in the foreign country • Ability to install its own management team Disadvantages: Huge costs and significant risks
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