DESIGNING GLOBAL

MARKET STRATEGIES

DR. RAGINI MOHANTY

20/08/2004
 GLOBAL INDUSTRY
A global industry is an industry in which the
strategic positions of competitors in major
geographic or national markets are
fundamentally affected by their overall global
positions. (Auto manufacturers like Suzuki,
Honda, Ford, etc.)
 GLOBAL FIRM
* A global firm is a firm that operates in more than
one country and captures R & D, production,
logistical, marketing, and financial advantages in
its costs and reputation that are not available to
purely domestic competitors.
* Global firms plan, operate, and coordinate their
activities on a worldwide basis.
* A company need not be large to sell globally.
Small and medium-size firms can practice global
niche-man-ship. E.g. Biocon Pharma - Genetics.
 REASONS FOR
GLOBALIZATION:
1. Global firms offering better products or lower
prices can attack the company's domestic
market. The company might want to
counterattack these competitors in their home
markets.
 
2. The company discovers that some foreign
markets present higher profit opportunities than
the domestic market.
3. The company needs a larger customer base to
achieve economies of scale.

 4. The company wants to reduce its

dependence on any one market.

 5. The company's customers are going abroad

and require international servicing.
 RISKS
1. The company might not understand the
foreign customer preferences and fail to offer a
competitively attractive product.
 
2. The company might not understand the foreign
country's business culture or know how to deal
effectively with foreign nationals.

3. The company might underestimate foreign

regulations and incur unexpected costs.
4. The company might realize that it lacks
managers with international experience.
 
5. The foreign country might change its
commercial laws, devalue its currency, or
undergo a political revolution and expropriate
foreign property.
 Decisions
To go abroad or not?

Which markets to enter?

How to enter the market?

Marketing Program?

Marketing Organization?
 TO GO OR NOT?
1. Huge Foreign Indebtedness.
2. Unstable government/ Political instability.
3. Foreign exchange problems.
4. Foreign government entry
requirements/bureaucracy.
5. Tariffs and other trade barriers.
6. Corruption.
7. Technological pirating.
8. High cost of product and communication
adaptation.
9. Shifting borders.
 WHICH MARKETS?

1. Define Objectives and Policies.

2. Few countries or many?  Expansion?
3. Type of country to enter.
4. Regional Free Trade Zones – European
Union, common currency.
5. Evaluating Potential Markets – Neighboring
countries – language, laws, and culture.
 Enter fewer countries -
WHEN
1. Market entry and market control costs are
high.
2. Product and communication adaption costs
are high.
3. Population and income size and growth are
high in the initial countries chosen.
4. Dominant foreign firms can establish high
barriers to entry.
 Which type of country to
enter?

Influencing factors include product, geography, income and

population, political climate, and other factors.
 
Earlier international trade concentrated on the triad markets of
U.S.A., Western Europe, and Far East. Now, companies are
shifting focus to developing countries of Central and West Asia,
Eastern Europe, Cuba - huge market potential.
 
Regional Economic Integration - Trading Agreements between
blocs of countries (EU), companies enter entire regions rather
than individual nations.
 HOW TO ENTER?
1. Indirect exporting.

2. Direct exporting.

3. Licensing.

4. Joint ventures.

5. Direct investment.
 INDIRECT EXPORTING:
Occasional Exporting - Passive level of involvement.
 
Active Exporting - When a company makes a
commitment to expand its exports to a particular market.
 
TYPES OF INTERMEDIARIES:
 
Domestic-based export merchants.
Domestic-based export agents.
Cooperative organizations.
Export-management companies.
 ADVANTAGES OF INDIRECT EXPORTING:

1. Involves less investment - no need to

develop export dept., overseas sales force, or
set of foreign contacts.
 2. Involves less risk - international marketing
intermediaries bring the know-how and services
to the relationship.
 DIRECT EXPORTING:
Domestic-Based Export Department or Division.
 
Overseas Sales Branch or Subsidiary.
 
Traveling Export Sales Representatives.
 
Foreign-Based Distributors or Agents.
 
Exhibiting at Overseas Trade Shows.
 
Electronic Communication via the Internet.
 
 LICENSING:
PROCESS: The licenser licenses a foreign company to use a
manufacturing process, trademark, patent, trade secret or other item of
value for a fee or royalty. The licenser gains entry at little risk. The
licensee gains production expertise of a well-known product or brand
name. E.g. Pharmaceuticals.
DISADVANTAGES: Licenser has less control over licensee. If licensee
is very successful, company might end up creating a new competitor.
PREVENTED BY: Supply of ingredients or components needed to
make the product. Innovation of the product.

Variations to licensing arrangements:

Management Contracts - Management consultancy for a fee.
Contract Manufacturing - Hire local manufactures.
Franchising - Complete brand concept and operating system offered
by franchiser; in turn, the franchisee invests in and pays certain fees to
the franchiser.
 JOINT VENTURES:
REASONS:
* Economic or political reasons.
* The foreign firm might lack the financial, physical, or
managerial resources to take the venture alone.
* Foreign government might require joint ownership as a
condition of entry. E.g. Maruti Suzuki.
DRAWBACKS:
* Disagreement between partners over investment,
marketing or other policies (reinvest or declare dividends).
* Specific manufacturing and marketing policies on a
worldwide basis might not be possible for an MNC.
 DIRECT INVESTMENT:
Direct ownership of foreign-based assembly/mfg. facility.
ADVANTAGES: 1) Cheap labor/raw materials, govt.
incentives, freight savings. 2) Jobs created - image
strengthened. 3) Deeper relationship developed with govt.,
customers, local suppliers, and distributors – adaption of
products and communication is better with the local
environment. 4) Firm retains full control over the investment
– can develop mfg. and mktg. Policies that serve its long-term
international objectives. 5) Firm has assured market share if
local govt. insists upon use of domestic content in locally
manufactured products. E.g. Saint Gobain Glass India, Hutch.
 Internationalization Process.

* No export activity.
* Export via representatives.
* Establishment of sales subsidiaries.
* Establishment of production facilities
abroad.
 MARKETING PROGRAM?
* Standardized – marketing mix elements
are std., so costs kept low. E.g. Nike,
Pizza Hut/Macdonald.

* Adapted – marketing mix elements

adjusted as per the target market. E.g.
Pizza Hut/Macdonald.
 MARKETING TOOLS – 4 P’s
Product
Straight extension – product is introduced
as it is. E.g. Consumer electronics,
machine tools, cameras, etc.
Product adaptation – alter the product to meet
customer preference/local conditions -
regional/country/city/retailer version + local
beliefs/superstitions, e.g. Feng Shui.
Product invention – Backward invention -
reintroduce earlier product forms. Forward
invention – Create new products. Services
E.g. Insurance, credit cards, consultancy firms.
 MARKETING TOOLS
Promotion
Communication adaptation – Ads and promotion
campaigns for home market + local market. Dual
adaptation – both product and communication
adaptation.
1. One message - language, colors, name,
headlines can differ.
2. Global theme, adapt copy - local.
3. Global ad pool, select country-appropriate ad.
4. Sales promotion technique - local mgmt.
 MARKETING TOOLS
Price
Strategies:
Uniform price.
Market-based price.
Cost-based price.
Transfer price – price charged to subsidiary
unit in the company. High price - to pay low
income tax abroad. Low price – dumping.
Gray markets – same product sells at
different prices geographically.
 MARKETING TOOLS
Place
Track movement of product
SELLER - Seller's International
Marketing Unit (export div.) - Channels
Between Nations (agents, transport,
financing and risk) - Channels Within
Foreign Nation (entry into the nation to
ultimate buyer) - BUYER.
 MARKETING
ORGANIZATION

EXPORT DEPARTMENT.

INTERNATIONAL DIVISION.

GLOBAL ORGANIZATION.
 GLOBAL Organizational Strategy

* World is a single market.

* Forces for global integration are strong,
forces for national responsiveness are weak.
* e.g. Consumer electronics market, Infosys –
software services, L N Mittal Steel – UK
based, global operations.
 MULTINATIONAL Strategy

* World as portfolio of national opportunities.

* Forces favoring national responsiveness are strong
and forces favoring global integration are weak.
* e.g. Branded packaged products, food products.
Macdonald/Pizza Hut – changed flavor as per
Indian taste, Unilever (UK) – more decision
making autonomy to its local branches.
 GLOCAL Strategy

* Standardizes certain core elements and localizes

other elements.
* Makes sense for an industry where each nation
requires some adaptation of its equipment but the
providing company can also standardize some of
the core components.
* e.g. Hyundai, Siemens Electronics, Indian Textile
designs per African tastes and culture.