9d53aintro to int marketing 1 (1)


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9d53aintro to int marketing 1 (1)

  1. 1. Introduction to Global Marketing
  2. 2. Reasons for Global Marketing <ul><li>Growth </li></ul><ul><ul><li>Access to new markets </li></ul></ul><ul><ul><li>Access to resources </li></ul></ul><ul><li>Survival </li></ul><ul><ul><li>Against competitors with lower costs (due to increased access to resources) </li></ul></ul>
  3. 3. Global Marketing Vs. Marketing <ul><li>Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals. </li></ul><ul><li>Global marketing focuses on global market opportunities and threats. </li></ul>
  4. 4. Globalization <ul><li>Globalization is the inexorable integration of markets, nation-states, and technologies to a degree never witnessed before - in a way that is enabling individuals, corporations, and nation-states to reach around the world farther, faster, deeper and cheaper than ever before, and in a way that is enabling the world to reach into individuals, corporations, and nation-states farther, faster, deeper, and cheaper than ever before. </li></ul><ul><ul><ul><ul><ul><li>Thomas Friedman </li></ul></ul></ul></ul></ul>
  5. 5. What is a Global Industry? <ul><li>An industry is global to the extent that a company’s industry position in one country is interdependent with its industry position in another country </li></ul><ul><li>Indicators of globalization: </li></ul><ul><ul><li>Ratio of cross-border trade to total worldwide production </li></ul></ul><ul><ul><li>Ratio of cross-border investment to total capital investment </li></ul></ul><ul><ul><li>Proportion of industry revenue generated by companies that compete in key world regions </li></ul></ul>
  6. 6. Keys to Global Success <ul><li>Value creation </li></ul><ul><li>Competitive advantage </li></ul><ul><li>Focus </li></ul>
  7. 7. Value Creation <ul><li>Value = Benefits/Price </li></ul><ul><ul><li>Price is a function of money, time, and effort </li></ul></ul><ul><ul><li>Benefits result from the product, promotion, and distribution </li></ul></ul><ul><li>2 methods of value creation </li></ul><ul><ul><ul><li>Improved benefits </li></ul></ul></ul><ul><ul><ul><li>Lower prices </li></ul></ul></ul>
  8. 8. Competitive Advantage <ul><li>Success over competition in industry at value creation </li></ul><ul><li>Achieved by integrating and leveraging operations on a worldwide scale </li></ul>
  9. 9. Focus <ul><li>Concentration and attention on core business and competence </li></ul><ul><ul><li>Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch…..We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus. </li></ul></ul><ul><ul><ul><ul><ul><li>Helmut Maucher </li></ul></ul></ul></ul></ul>
  10. 10. Globalization or Global Localization? <ul><li>Globalization </li></ul><ul><ul><li>Developing standardized products marketed worldwide with a standardized marketing mix </li></ul></ul><ul><ul><li>Essence of mass marketing </li></ul></ul><ul><li>Global localization </li></ul><ul><ul><li>Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction </li></ul></ul><ul><ul><li>Essence of segmentation </li></ul></ul><ul><ul><li>Think globally, act locally </li></ul></ul>
  11. 11. Where in the World? <ul><li>How does a company decide which markets to enter? </li></ul><ul><ul><li>Company resources </li></ul></ul><ul><ul><li>Managerial mind-set </li></ul></ul><ul><ul><li>Nature of opportunities and threats in that market </li></ul></ul>
  12. 12. Examples of Global Marketers <ul><li>Coca-Cola </li></ul><ul><li>Philip Morris </li></ul><ul><li>Daimler-Chrysler </li></ul><ul><li>McDonald’s </li></ul><ul><li>Toyota </li></ul><ul><li>Ford </li></ul><ul><li>Unilever </li></ul><ul><li>Gillette </li></ul><ul><li>IBM </li></ul><ul><li>USA </li></ul><ul><li>USA </li></ul><ul><li>Germany </li></ul><ul><li>USA </li></ul><ul><li>Japan </li></ul><ul><li>USA </li></ul><ul><li>UK/ Netherlands </li></ul><ul><li>USA </li></ul><ul><li>USA </li></ul>
  13. 13. Why Go Global? <ul><li>For US-based companies, 75% of sales potential is outside the US. </li></ul><ul><ul><li>About 90% of Coca-Cola’s operating income is generated outside the US. </li></ul></ul><ul><li>For Japanese companies, 85% of potential is outside Japan. </li></ul><ul><li>For German and EU companies, 94% of potential is outside Germany. </li></ul>
  14. 14. Management Orientations <ul><li>Ethnocentric </li></ul><ul><li>Polycentric </li></ul><ul><li>Regiocentric </li></ul><ul><li>Geocentric </li></ul>
  15. 15. Ethnocentric Orientation <ul><li>Assumes home country is superior to the rest of the world; associated with attitudes of national arrogance and supremacy </li></ul><ul><li>Management focus is to do in host countries what is done in the home country </li></ul><ul><ul><li>Sometimes called an international company </li></ul></ul><ul><ul><li>Products and processes used at home are used abroad without adaptation </li></ul></ul>
  16. 16. Polycentric Orientation <ul><li>Management operates under the assumption that every country is different; the company develops country-specific strategies </li></ul><ul><ul><li>Sometimes called a multinational company </li></ul></ul><ul><ul><li>Company operates differently in each host country based on that situation </li></ul></ul><ul><li>Opposite of ethnocentrism </li></ul>
  17. 17. Regiocentric Orientation <ul><li>Region becomes the relevant geographic unit (rather than by country) </li></ul><ul><li>Management orientation is geared to developing an integrated regional strategy </li></ul><ul><ul><li>European Union </li></ul></ul><ul><ul><li>NAFTA </li></ul></ul>
  18. 18. Geocentric Orientation <ul><li>Entire world is a potential market </li></ul><ul><li>Managerial goal is to develop integrated world market strategies </li></ul><ul><ul><ul><li>Global companies serve world markets from a single country and tend to retain association with a headquarters country </li></ul></ul></ul><ul><ul><ul><li>Transnational companies serve global markets and acquire resources globally; blurring of national identity </li></ul></ul></ul>
  19. 20. Forces Affecting Global Integration
  20. 21. Driving Forces <ul><li>Regional economic agreements </li></ul><ul><li>Market needs and wants </li></ul><ul><li>Technology </li></ul><ul><li>Transportation and communication improvements </li></ul><ul><li>Product development costs </li></ul><ul><li>Quality </li></ul><ul><li>World economic trends </li></ul><ul><li>Leverage </li></ul>
  21. 22. Restraining Forces <ul><li>Management myopia </li></ul><ul><li>Organizational culture </li></ul><ul><li>National controls </li></ul>
  22. 23. International Trade Theory <ul><li>• Classical trade theories: </li></ul><ul><li>– explain national economy conditions--country </li></ul><ul><li>advantages--that enable such exchange to happen </li></ul><ul><li>• New trade theories: </li></ul><ul><li>– explain links among natural country advantages, </li></ul><ul><li>government action, and industry characteristics that enable such exchange to happen </li></ul>
  23. 24. Classical Country-Based Theories <ul><li>• Mercantilism (pre-16th century) </li></ul><ul><li>– Takes an us-versus-them view of trade; other </li></ul><ul><li>country’s gain is our country’s loss </li></ul><ul><li>– Neo-mercantilism views persist today </li></ul><ul><li>• Free Trade supporting theories </li></ul><ul><li>– Show that specialization of production and free </li></ul><ul><li>flow of goods grow all trading partners’ economies </li></ul><ul><li>– Absolute Advantage (Adam Smith, 1776) </li></ul><ul><li>– Comparative Advantage (David Ricardo, 1817) </li></ul><ul><li>• Free Trade refined </li></ul><ul><li>– Factor-proportions (Heckscher-Ohlin, 1919) </li></ul><ul><li>– International product life cycle (Ray Vernon, 1966) </li></ul>
  24. 25. Mercantilism/Neomercantilism <ul><li>• Prevailed from 1500 to 1800 </li></ul><ul><li>– Export more to “strangers” than we import to amass treasure, expand kingdom </li></ul><ul><li>– Maximize exports and minimize imports: no advantage in increased trade </li></ul><ul><li>• Government intervenes to achieve a surplus in exports </li></ul><ul><li>– King, exporters, domestic producers: happy </li></ul><ul><li>– Subjects: unhappy because domestic goods stay expensive and of limited variety </li></ul><ul><li>• Today neo-mercantilists=protectionists: some segments of society shielded short term </li></ul>
  25. 26. Absolute Advantage <ul><li>• Adam Smith: The Wealth of Nations , 1776 </li></ul><ul><li>• Mercantilism weakens a country in the long run </li></ul><ul><li>and enriches only a few segments </li></ul><ul><li>• A country should specialize in and export products </li></ul><ul><li>for which it has absolute advantage; import others </li></ul><ul><li>• A country has absolute advantage when it is more productive than another country in producing a particular product </li></ul>
  26. 27. Comparative Advantage <ul><li>• David Ricardo: Principals of Political Economy , 1817 </li></ul><ul><li>• Country should specialize in the production of those goods in which it is relatively more productive... even if it has absolute advantage in all goods it produces </li></ul><ul><li>• Absolute advantage is really a special case of comparative advantage </li></ul>
  27. 28. Theory of Relative Factor Endowments (Heckscher-Ohlin) <ul><li>• Factor endowments vary among countries </li></ul><ul><li>• Products differ according to the types of factors </li></ul><ul><li>that they need as inputs </li></ul><ul><li>• A country has a comparative advantage in </li></ul><ul><li>producing products that intensively use factors of </li></ul><ul><li>production (resources) it has in abundance </li></ul><ul><li>• Factors of production: labor, capital, land, human </li></ul><ul><li>resources, technology </li></ul>
  28. 29. Heckscher (1919)-Ohlin (1933) Theory <ul><li>• The pattern of international trade depends on differences in factor endowments not on differences in productivity </li></ul><ul><li>• Absolute amounts of factor endowments matter </li></ul><ul><li>• Leontief paradox: </li></ul><ul><li>– US has relatively more abundant capital yet imports goods more capital intensive than those it exports </li></ul><ul><li>– Explanation(?): </li></ul><ul><li>• US has special advantage on producing new products made with innovative technologies </li></ul><ul><li>• These may be less capital intensive till they reach mass production state </li></ul>
  29. 30. International Product Life-Cycle (Vernon) <ul><li>• Most new products initially conceived and produced in the US in 20th century </li></ul><ul><li>• US firms kept production close to the market </li></ul><ul><ul><ul><li>• Aid decisions; minimize risk of new product introductions </li></ul></ul></ul><ul><ul><ul><li>• Demand not based on price yet; low production cost not an </li></ul></ul></ul><ul><ul><ul><li>issue </li></ul></ul></ul><ul><li>• Limited initial demand in other advanced countries </li></ul><ul><li>• Exports more attractive than production there initially </li></ul><ul><li>• With demand increase in advanced countries </li></ul><ul><li>• Production follows there. </li></ul><ul><li>• With demand expansion elsewhere </li></ul><ul><li>• Product becomes standardized </li></ul><ul><li>• production moves to low production cost areas </li></ul><ul><li>• Product now imported to US and to advanced countries </li></ul>
  30. 31. Classic Theory Limitations <ul><li>• Fundamentally: Free Trade expands the world “pie” for </li></ul><ul><li>goods/services </li></ul><ul><li>Theory Limitations </li></ul><ul><li>• Simple world (two countries, two products) </li></ul><ul><li>• No transportation costs </li></ul><ul><li>• No price differences in resources </li></ul><ul><li>• Resources immobile across countries </li></ul><ul><li>• Constant returns to scale </li></ul><ul><li>• Each country has a fixed stock of resources and no efficiency gains in resource use from trade </li></ul><ul><li>• Full employment </li></ul>
  31. 32. The New Trade Theory <ul><li>• In many industries, as output expands with specialization, the ability to realize economies of scale increases and unit costs should decrease Because of such scale economies, world demand supports only a few firms in such industries (e.g., commercial aircraft, automobiles) </li></ul><ul><li>• Countries that had an early entrant to such an industry have an advantage in such an industry: </li></ul><ul><li>– Fist-mover advantage </li></ul><ul><li>– Barrier to entry (Airbus overcame through government </li></ul><ul><li>subsidies?) </li></ul>
  32. 33. New Trade Theory <ul><li>• Global Strategic Rivalry </li></ul><ul><li>– Firms gain competitive advantage through: </li></ul><ul><li>intellectual property, R&D, economies of scale and scope, experience </li></ul><ul><li>• National Competitive Advantage (Porter, </li></ul><ul><li>1990) </li></ul>
  33. 34. New Trade Theories <ul><li>• Increasing returns of specialization due to </li></ul><ul><li>economies of scale (unit costs of prod. decrease) </li></ul><ul><li>• First mover advantages (economies of scale </li></ul><ul><li>such that barrier to entry crated for second or </li></ul><ul><li>third company) </li></ul><ul><li>• Luck... first mover may be simply lucky. </li></ul><ul><li>• Government intervention: strategic trade policy </li></ul>
  34. 35. National Competitive Advantage (Porter, 1990) <ul><li>• Factor endowments </li></ul><ul><li>• land, labor, capital, workforce, infrastructure </li></ul><ul><li>(some factors can be created...) </li></ul><ul><li>• Demand conditions </li></ul><ul><li>• Large, sophisticated domestic consumer base: offers an </li></ul><ul><li>innovation friendly environment and a testing ground </li></ul><ul><li>• Related and supporting industries </li></ul><ul><li>• Local suppliers cluster around producers and add to innovation </li></ul><ul><li>• Firm strategy, structure, rivalry, competition good, national governments can create conditions which facilitate and nurture such conditions </li></ul>