TRƯỜNG ĐẠI HỌC NGOẠI NGỮ- TIN HỌC THÀNH PHỐ HỒ CHÍ MINH

Ho Chi Minh City University of Foreign Languages – Information Technology

CHAPTER 12

GLOBAL MARKETING MANAGEMENT:

PLANNING AND ORGANIZATION
P h i l i p R. Ca t e o r a - Ma r y C. Gi l l y - J o h n L . Gr a h a m

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

 What Should You Learn?

• How global marketing management differs

from international marketing management
• The increasing importance of
international strategic alliances
• The need for planning to achieve company goals
• The important factors for each alternative
market-entry strategy
 Basic Entry Decisions
Question: What are the basic entry decisions for
firms expanding internationally?
• A firm expanding internationally must decide
– which markets to enter
– when to enter them and on what scale
– how to enter them (the choice of entry mode)
Global Perspective Global Gateways
• Multinational companies
– Confronted with increasing global competition for expanding
markets
– Changing their marketing strategies and altering
their organizational structure
– Nearly 75% of North American and European
corporations are revamping their business processes
• Smaller companies
– More flexible
– May enable them to reflect the demands of global markets
and redefine programs more quickly
 Global Marketing Management

• 1970s – “standardization versus adaptation”

• 1980s – “global integration versus localization”
• 1990s – “global integration versus local
responsiveness”
The fundamental question was whether the global
homogenization of consumer tastes allowed
global standardization of the marketing mix.
 Global Marketing Management

• The trend back toward localization

– Caused by the new efficiencies of customization
– Made possible by the Internet
– Increasingly flexible manufacturing processes
• From the marketing perspective
customization is always best
Global Marketing Management
• Global markets continue to homogenize and
diversify simultaneously
– Best companies will avoid trap of focusing on country as the
primary segmentation variable
– Other segmentation variables are more important: climate,
language group, media habits, age, or income groups
 The Nestle Way –
Evolution Not Revolution
• Nestle – world’s biggest marketer of infant
formula, powdered milk, instant coffee, chocolate,
soups, and mineral water
• Nestle strategy
– Think and plan long term
– Decentralize
– Stick to what you know
– Adapt to local tastes
• Long-term strategy works for Nestle
– Because the company relies on local ingredients
– Markets products that consumers can afford
 Benefits of Global Marketing
• When large market segments can be identified
– Economies of scale in production and marketing
– Important competitive advantages for global companies

• Transfer of experience and know-how

– Across countries through improved coordination and
integration of marketing activities
• Marketing globally
– Ensures that marketers have access to the toughest customers
– Market diversity carries with it additional financial benefits
– Firms are able to take advantage of changing financial
circumstances
 Planning for Global Markets
• Planning is the job of making things happen that
might not otherwise occur
• Planning allows for:
– Rapid growth of the international function
– Changing markets
– Increasing competition, and the
– Turbulent challenges of different national markets
 Planning for Global Markets

• Planning is both a process and philosophy

– Relates to the formulation of goals and methods of
accomplishing them
► Corporate planning
► Strategic planning
► Tactical planning

• Company objectives and resources

– Each new market requires
► A complete evaluation, including existing commitments, relative to the parent
company’s objectives and resources
– Defining objectives clarifies the orientation of the domestic and
international divisions, permitting consistent policies
 Planning for Global Markets

• International commitment
– Commitment in terms of
► Dollars to be invested
► Personnel for managing the international organization
► Determination to stay in the market long enough to realize a return
in investments.
– The degree of commitment to an international marketing
cause
reflects the extend to a company’s involvement
International Planning Process
 The Planning Process

• Phase 1 – Preliminary analysis and screening

– Matching Company and Country Needs.

• Phase 2 – Adapting marketing mix to target markets

– Are there identifiable market segments that allow for common
marketing mix
– Which cultural/ environmental adaptations are necessary?
– Will adaptation costs allow profitable market entry?
• Phase 3 – Developing the marketing plan
• Phase 4 – Implementation and control
Alternative Market-Entry Strategies

• An entry strategy into international market

should reflect on analysis
– Market characteristics
► Potential sales
► Strategic importance
► Strengths of local resources
► Cultural differences
► Country restrictions
– Company capabilities and characteristics
► Degree of near-market knowledge
► Marketing involvement
► Management commitment
Alternative Market-Entry Strategies
Alternative Market-Entry Strategies

• Companies most often begin with modest export

involvement
• A company has four different modes of foreign
market entry
– Exporting
– Contractual agreements
– Strategic alliances
– Direct foreign investments
 Exporting

• Exporting accounts for some 10% of global

activity
• Direct exporting – the company sells to a
customer in another country
• Indirect exporting – the company sells to a buyer
(importer or distribution) in the home country,
who in turn exports the product
 Exporting

• The Internet
– Initially, Internet marketing focused on domestic sales
– A surprisingly large number of companies started receiving
orders from customers in other countries,
► Resulting in the concept of international Internet marketing (IIM)

• Direct sales
– Particularly for high technology and big ticket industrial products
 Contractual Agreement

• Contractual agreements
– Long-term
• Licensing
– A means of establishing a foothold in foreign markets without
large capital outlays
– A favorite strategy for small and medium-sized companies
– Legitimate means of capitalizing on intellectual property in a
foreign market
 Contractual Agreement

• Franchising
– Franchiser provides a standard package of products,
systems,
and management services
– Franchise provides market knowledge, capital, and
personal involvement in management
– Expected to be the fastest-growing market-entry strategy
• Two types of franchise agreements
– Master franchise
► Gives the franchisee the rights to a specific area with the authority to
sell or establish subfranchises
– Licensing
Strategic International Alliances

• A strategic international alliance (SIA)

– A business relationship established by two or more companies to
cooperate out of mutual need
– To share risk in achieving a common objective
• SIAs are sought as a way to shore up weaknesses and
increase competitive strengths
• Firms enter 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
– Access to additional sources of products and capital
Strategic International Alliances

• Many companies entering SIAs

– To be in strategic position to be competitive
– To benefit from the expected growth in the single European market

• International joint ventures (IJVs)

– 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
► The acknowledged intent by the partners to share in the management
of the JV
► There are partnerships between legally incorporated entities such as companies,
chartered organizations, or governments, and not between individuals
► Equity positions are held by each of the partners
Strategic International Alliances

• Consortia
– Similar to joint ventures and could be classified as such except
for two unique characteristics
► Typically involve a large number of participants
► 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
 Direct Foreign Investment
• Factors that influence the structure
and performance of direct
investments
– Timing
– The growing complexity and contingencies of contracts
– Transaction cost structures
– Technology transfer
– Degree of product differentiation
– The previous experiences and cultural diversity of acquired
firms
– Advertising and reputation barriers
Schematic Marketing Organization Plan
Combining Product, Geographic,
and Functional Approaches
 Centralized Versus
Decentralized Organizations
• Most organizational patterns of multinational
firms fit into one of three categories
– Centralized
– Regionalized
– Decentralized
• No single traditional organizational plan is
adequate for today’s global enterprise
– Seeking to combine the economies of scale of a global company
with the flexibility and marketing knowledge of a local company
 Summary

• To keep abreast of the competition and

maintain a viable position for increasingly
competitive markets, a global perspective is
necessary
• Cost containment, customer satisfaction, and a
greater number of players mean that every
opportunity to refine international business
practices must be examined in light of
company goals
 Summary

• Important avenues to global marketing that

must be implemented in the planning and
organization of global marketing management
– Collaborative relationships
– Strategic international alliances
– Strategic planning
– Alternative market-entry strategies
What is foreign direct
investment?
• Foreign direct investment (FDI) occurs when a firm
invests directly in new facilities to produce and/or market
in a foreign country
• Once a firm undertakes FDI it becomes a multinational
enterprise
• There are two forms of FDI
– A greenfield investment (the establishment of a wholly
new operation in a foreign country)
– Acquisition or merging with an existing firm in the
foreign country
 Greenfield or Acquisition?

• Acquisitions
– are quick to execute
– enable firms to preempt their competitors
– can be less risky than green-field ventures
• Acquisitions fail when
– the firm overpays for the assets of the acquired firm
– there is a clash between the cultures of the acquiring and
acquired firm
– attempts to realize synergies by integrating the operations of the
acquired and acquiring entities run into roadblocks and take
much longer than forecast
– there is inadequate pre-acquisition screening
 Research framework
Bruce Kogut & Harbir Singh
Cultural
distance Major focus
Country-level
Uncertainty variables
avoidance
R&D
Advertising Modes of entry
Industry-level
Sector variables 1. Acquisition
2. Joint- venture
Diversification 3. Greenfield

Country
experience Firm-level
variables
Multinational
Experience

Asset size
 Greenfield or Acquisition?

• Acquisitions
– are quick to execute
– enable firms to preempt their competitors
– can be less risky than green-field ventures
• Acquisitions fail when
– the firm overpays for the assets of the acquired firm
– there is a clash between the cultures of the acquiring and
acquired firm
– attempts to realize synergies by integrating the operations of the
acquired and acquiring entities run into roadblocks and take
much longer than forecast
– there is inadequate pre-acquisition screening
 Countertrade

Question: What alternatives do exporters have when

conventional methods of payment are not an option?

• Exporters can use countertrade when conventional

means of payment are difficult, costly, or nonexistent
• There are five types of countertrade
1. barter
2. counterpurchase
3. offset
4. switch trading
5. compensation or buyback