Global Marketing Foreign Entry Local Marketing Global Management
Why go Global?
Emergence of WTO
Creation of Free Trade Areas
Benefits of Foreign Trade
Revolution in Global Communications
Fast and Efficient Transportation
Opening of Previously Closed Markets
Means to go Global
Exports to foreign Countries
Wholly Owned Subsidiaries
After WW-II, MNC’s from US & Europe expanded into Asia, Europe and Latin America.
Parent company maintained nominal control over subsidiaries
Manufacturing & marketing of products were localized to meet local demands
Foreign markets needs are subordinate to the home markets
Theodore Levitt’s “Globalization of markets” highlighted the merits of standardization – Noted the convergence of world markets
Selling standardized products in standardized methods all over the world
Centralized core competence activities
R&D, Manufacturing, Management, etc
E.g.: Semiconductors, Software, Boeing etc.
Sumantra Ghoshal, Christopher Bartlett etc developed a Transnational business idea
Decentralized but Coordinated operations
Products are tailored to suit local needs
Central marketing plan but Local execution
Subsidiaries network with each other and share knowledge.
Head Quarters manages and coordinates activities
People all over have similar needs
This implies that some products have Global demand
E.g. Industrial products Steel, Chemicals etc.
Semiconductors, Internet services, Software
Global products are usually impersonal products.
People have no personal preference and decision is made on price or technical merits.
Global –Local Products
People in different cultures have different styles and different tastes
E.g: Food, Clothes, Housing etc.
Cell Phones, Software – Different languages
Government Regulations force Local Modifications
Electrical Appliances, Cars, Automobiles etc.
Regional Economic Differences
Purchasing power, economic development etc.
Global Marketing Defined
Marketing activities that are coordinated and integrated across multiple markets
Integration can involve Standardized products, Identical Brand names, Uniform packaging, Synchronized product introductions, Similar advertising messages etc.
Coordination can involve competitive pricing, sales campaigns, market promotions etc.
Other Terms Used
International Marketing or Foreign Marketing
Primarily for exports to selective countries
Different Products sold in different countries.
Driven to localize and adapt to local markets
E.g: HLL and Unilever
Increasingly Common Consumer requirements and preferences as lifestyles, tastes and behavior narrow.
Disappearing National trade boundaries with new Free Trade Agreements
Global Brand Recognition
E.g: Nike, Reebok, Coke, Nikon, Honda, Sony
Global Communication Revolution
Competitors are expanding globally
Home market is challenged by a Global competitor
Global Raw Material procurement will drive down costs
Can also be Man power, finished products etc.
Saturated home market is slowing down growth
Global Distribution, Transportation, Marketing Channels
Walmart, Metro, Costco – Global retailers
CNN, Star TV, Zee etc.
I.e.: Similar marketing strategies all over
Need to learn from the leading markets. E.g. Scooters in Italy, Cars in Germany
Economies of Scale
E.g. Reliance Petroleum
Economies of Scope
E.g. Infosys, Wipro, TCS
Global Sourcing Advantages
E.g TELCO in Italy, Cisco in Bangalore
Avoid Duplication – Capitalize on spillover effects
E.g P&G with Pantene Shampoo
Favorable Trade policies
Export promotion, Foreign Investments
Common Technical Standards
Free Trade Agreements
NAFTA, ASEAN, EU etc.
Active Government Promotion
Limits to Globalization
Capital, Labor, Experience etc.
Industry Factors – Not All industries can go global e.g Medical services, Defense etc.
Recession, Political coup, war etc.
Culturally sensitive products cannot be Globalized
Products that need large scale customization
Strategy formulation is Globalized
Execution is Localized
McDonalds, Pizza Hut
Resource limitations force Local Execution
Developing Knowledge Assets
Knowledge from Global operation can be a powerful competitive advantage
E.g Fiat learnt a lot about emerging markets in Brazil and applied the same concepts in India
Knowledge is build through exposure to new competition, customers, government rules, technology and business methods
Learning Organizations can apply their newly acquired skills in other regions
Transferring competitive information and new products to other markets (including home market)
Capitalizing on the knowledge of foreign markets
Offer distribution service to other companies
Stretching and Building the firm’s capability
New markets need new skills. Going Global helps
Global Marketing Objectives
Exploit Market Potential and Growth
Gain Economies of Scale and Scope
Learn from the Leading Market
Learning How to do Business Abroad
Roles of a Global Manager
Select & Implement Foreign Market Entry
Select Countries, Mode of Entry etc
Perform Local Marketing Abroad
Promote Products and Services
Conduct Market Research
Manage Advertising Campaign
Manage Global Operations
Skills of Global Manager Meeting Goals, Motivating & E-Commerce Marketing in New Countries Finding the right Agent Implement & Execution Global Marketing Strategy Local Marketing Strategy Modes of Entry Expansion Paths Strategy Global Segmentation, Targeting, Positioning Local Customer Behavior Local Market Research Market Research Barriers to Entry Market Analysis Global Management Local marketing Foreign Entry Skills
Anti-Globalization movement started gaining ground in year 1998
Underdeveloped countries questioned the economic benefits
Developed Countries are afraid of losing Jobs
Developing Countries are worried about Financial Instability
Thailand, Mexico, Brazil, Indonesia, South Korea
Global Competitive Analysis
The Fundamental aim of business Strategy is to create and sustain competitive advantages
First Step is to conduct competitive analysis.
Porter’s 5 Forces Model
Value Chain Analysis
Competitive Self Analysis
Analyze firm’s Strengths & Weakness
Clear Identification of Firm Specific Advantages
How Mobile & Flexible are these Advantages?
Best way to leverage these advantages in Foreign Markets & gain advantage over Local Firms
Dealing with Global Competitors
Porter’s Five Forces Model New Entrants Firm’s Intense Rivalry Bargaining Power of Customers Threat Of substitutes Bargaining Power of Suppliers
A Strategic Group consists of competitors who offer similar products or service in that Segment
E.g: IBM, Accenture, EDS for Infosys but NOT Bian, McKinsey, BCG
Strategic Group can consist of competitors who offer Substitute Products
E.g: Nestlé's water for Pepsi and Coca Cola
Country Specific Advantages
A Firm possesses some advantages because of the country from where it Operates.
E.g: Infosys, Wipro have a cost advantage by operating in India
E.g: Cosco, a Chinese furniture manufacturer has a cost advantage when competing in US
E.g: IBM has a cost advantage by operating in India, has famous Brand Name & Recognition
National Competitive Advantage
A country might provide an absolute advantage by the virtue of having certain resources
Oil in Saudi Arabia, Labor in China
High Technology in USA
Comparative Advantage : When one country is better in producing a certain type of product
Coffee in Brazil
Software & Garments in India
New Trade Theory
Man made Locational Advantages has a big impact on the Trade Patterns
Certain Areas have a huge concentration of certain Industries
Software firms in Bangalore, Silicon Valley
Garments in Delhi, Financial services in Mumbai
Country of Origin Effects
Customers give a value for “Made-in-XXX” label.
Products or services from a country with a positive image tend to be favorably evaluated, while products from less positively perceived countries tend to be downgraded
Chocolates from Belgium, Watches from Switzerland, Computers from USA : Positively Perceived
Cars from Kenya, Brazil : Negatively Perceived
Domestic Competitors : They have the same Country Specific Advantages as you.
E.g: Wipro & Infosys
Country Specific Advantages are derived from Government Rules, Regulations, Tax benefits, Availability of Raw materials, Human Resources etc
A large Home Market also helps domestic competitors. E.g: IBM, DELL & EDS
Also called Demand Conditions
Foreign Competitors : Foreign Firms are the most direct competitors of a Globalizing firm.
Foreign Competitors from the same country can be analyzed as a separate Strategic Group. E.g: Samsung, LG, Daewoo
Firms from the same country follow similar strategy
Regional Trade Blocs also help Foreign Competitors E.g: Electrolux from EU
New Entrants & Substitutes
Potential New Entrants & Substitutes are another competitive threat to a Firm
Banks face a threat of more competition with new entrants from Japan, US, Europe
Banks face a threat from substitutes like Web-Bank, Investment companies like Charles Schwab, E-Trade etc.
Banks face threat from Chit-Funds, Mutual Funds etc.
First Mover Advantages
An Emerging market offers an opportunity to be a first mover and create demand. Emerging Market can be a Country or Introducing a new Product/Services
Higher Brand Recognition
Positive Brand Image
More Customer Loyalty
Longer Market Experience
Customer Tastes & Preferences are unknown
New Distribution Channel may have to be set up
Customers have to be educated
Advertising Expenses, Promotion expenses will be high
Few Firms tend to be Followers – “Second Mover Advantage”
Related & Supporting Industries creates a National Advantage
Exercise: Does India have a National Advantage in Medical Services?
Stages in Product Lifecycle Sales 1 2 3 4 5 6 Legend 1: Pioneer 2: Early Adopter 3: Early Majority 4: Late Majority 5: Late Adopter 6: Laggards Time
Trade & Product Lifecycle
International Product Lifecycle theory is based on past trends.
New Products will be first introduced in developed markets & exported worldwide, As the product matures, it will be manufactured in developing countries at a lower cost and imported to developed countries
E.g: It is advantageous for US to TV & concentrate on Computers
Firm Specific Advantages
Firms develop competitive advantages which is unique to them
E.g: Patents, Distribution Network, Manufacturing techniques, Access to Raw materials etc
Knowledge Based FSA: Soft skills such as marketing, brand management etc. Skills reside in employees and experience of the Firms
Resource Based FSA: Resources such as products, technology, know-how & Services
Firms have to build both Knowledge based & Resource based advantages
Taking FSA Abroad
FSA cannot always be transferred abroad. The degree of transferability depends on FSA itself
Intangible “skills” are toughest to transfer
FSA tied to home country infrastructure cannot be transferred. E.g: Distribution
Budweiser Beer, Henkel detergents etc
Externalization of FSA
There are several ways to enter a country’s Market. The mode of entry depends on FSA
If a firm choose to License or Franchise abroad, then it has to transfer its FSA to another partner abroad – Called Externalization of FSA
E.g: Coca-Cola, McDonalds, FedEx
Problem with licensing – Unable to learn from the new market, Loss of FSA
Outsourcing parts in Value chain is Externalization of FSA
Internalization of FSA
If a firm chooses to maintain a tight control over its FSA & internal advantages, it can:
Export or FDI
Both Cases, company can maintain tight control over its FSA
Choice between Export or FDI depends on trade barriers, market size, transaction costs, CSA etc.
Retaining the firm’s value chain when going abroad is Internalization of FSA
Transaction Costs are costs incurred when completing a transaction between a buyer and a seller.
Includes hidden costs such as negotiation costs, finding partners, communication overheads etc. In addition to obvious costs such as transportation, taxes, brokerage fees etc.
The intense rivalry between global firms and domestic competitors is common in Global business.
Competitive advantages are increasingly difficult to sustain is face of Hypercompetition
Bench Marking reduces competitive advantages of the competitors
Lack of sustainable competitive advantages is forcing companies to develop intangible skills like customer service, quality, Brand image etc
Winning in Hypercompetition
Firms can win in a hypercompetitive environment by continuously moving to new grounds, I.e raising standards, improving product/Service quality etc.
Hypercompetition forces firms to concentrate on:
Cost & Quality: Lower cost, improve quality
Timing & Know-how: Market Knowledge
Financial Resources: Financial strength is necessary to keep competitive edge; R&D, M&A, Advertising etc.
Going global will stretch and mold company resources into a globally effective marketing organization.
Global Managers will have to select the right entry strategies, decide on trade-offs between localization or global standardization to achieve the optimal local responsiveness and global scale of economies.
When Going global, it is better to take help from experts for market entry, market research & international Financing