3-1

Chapter Twelve
Global Products

MKT568
Global Marketing Management
Dr. Fred Miller
 Sample Essay Question

HerbalGlow is Korean producer of natural skin care products.

The firm wishes to build upon its success in Asian markets by
expanding to Europe, North and South America.
1. Identify and describe the three general international marketing
strategies. (6 points)
2. For each element of the marketing mix (product, price, promotion
and distribution), identify and describe one benefit of a global
strategy and one constraint to implementing such a strategy. (12
points)
3. Which of the three general marketing strategies do you
recommend to HerbalGlow? Explain why. (2 points)
 Marketing Strategy Options

Multidomestic
strong cultural influences, localize and adapt

Global
similar buyer preferences, global customers/competitors

Globalized localization
integrate sourcing, production and marketing
seek balanced growth
coordination of marketing across countries
globalize as much as possible, localize when necessary
 Multidomestic versus Global Markets:
Key Differences
Multidomestic Markets Global Markets
Market boundaries Markets are defined within Markets transcend country
country borders. Customers and borders. Customers and/or
competitors are of local origin. competitors cross frontiers to buy
and to sell.
Customers Significant differences exist Significant similarities exist
among customers from different among customers from different
countries; segments are defined countries; segments cut across
locally. geographic frontiers.
Competition Competition takes place among Competitors are few and present
primarily local firms; even in every major market. Rivalry
international companies takes on regional or global scope.
compete on a country-by-
country basis.
Interdependence Each local market operation in Local markets operate
isolation from the rest. interdependently. Competitive
Competitive actions in one actions in one market impact other
market have no impact markets.
elsewhere.
Strategies Strategies are locally based. Strategies are regional or global in
Little advantage exists in scope. Great advantage exists in
Exhibit 11.1 coordinating activities among coordinating activities within
markets. regions or worldwide.
A Multidomestic Industry

Local
Candy
Brands
The Value of Global Brands

Take the
Ten
Second
Brand Test
 The Value of Global Brands

1. What brands do you remember?

2. What brands do you recognize?
American Express Daily Telegraph Sony
Wall Street Journal Honda Rover
McDonalds Motorola Kellogg’s
Nike Johnson and Johnson British Airways
Coke Hertz Apple
Perrier Levi’s IBM
Mobil Mars Michelin
Phillips Seven Up Dell
Haagen Das Campbell’s Club Med
3M
Globalized Localization: Coca Cola
 Globalized Localization: McDonald’s

Germany India
"Real food is not frozen

Japan meat," said Jacqueline

García, 24, who runs
But NOT in Toñita's, a food stand in
Oaxaca's old market. "It's
Oaxaca’s Zocalo! fresh cheese and crickets.
Fast food's unnatural. The
people who make it are
incompetent. And
McDonald's belongs in the
United States, not our
zócalo.“
NY Times, Aug 24, 2002
 Standardization and its Problems

Standardization
advantages: cost, customer preference, quality,
global customer/segments
disadvantages: off-target, lack of uniqueness,
protectionism, local competitors
Globalization limits and pitfalls
limits:industry, resource, marketing mixes
pitfalls: research, over-standardization, poor
follow-up, narrow vision, rigid implementation
Localization vs Adaptation
12-2
The Tradeoff Between Standardization
and Adaptation

Incremental
Combined costs
manufacturing cost

Cost of lost sales

Fully adapted Fully standardized

Exhibit
12.1
Strong Local Brands

Dragon’s
Blood
Beer from
Furth im
Wald
 Global Brand Management

Developing new global products

idea generation
preliminary screening
concept research – focus groups, concept testing, target research
sales forecast
test marketing

Globalizing successful brands

diffusion factors – advantage, compatability,
perceived complexity, trialability, observability
globalization potential-sensible, favorable, available,
complement, regional
changeover tactics - fade, axing, forewarning
Low Globalization Potential
The “Zoo” of Product Branding

1. RCA
2. Jordache
3. Merrill Lynch
4. Mercury
5. Kangaroo Shoes
6. Schlitz
7. Camel
8. Trix
9. Exxon
10. Greyhound
11. MGM
12. John Deere
13. Kiwi
14. Mustang
15. Playboy
16. Kellog;s FF
17. Hartford
18. VW Rabbit
19. Kellog’s CF
20. Borden’s Milk
 Global Brand Management

Brand Management, Top 100 Global Brands

Brand equity, global brands, brand portfolio/mix

Counterfeit products
Counterfeit vs gray trade
Actions against counterfeit goods
 Global Value of the Nescafe Brand

$US
$5 billion Global sales of Nescafe
$700 mil Nescafe’s global promotion
$25 billion Value of Nescafe brand
$90 billion Value of Nestle’s brands
$113 billion – Market capitalization
$23 billion – Book value of assets
 Localizing the Nescafe Brand

Cup Coffee in Japan

Single Bean in Japan
China
“Mellow taste of milk will soothe
your mind. Type of cup coffee that
one would like to drink when feeling
relieved, or relaxing.”
Europe
“Features sound feel of coffee that
fully convinces even true coffee
lovers. Type of cup coffee one would
Columbiafeel like drinking when one needs to
holdout, or when one wishes to cheer
up.”
Evolution of a European Brand
 A Tale of Two Beers
Budweiser/Budvar
remains a strong
regional beer with a
quality, hand crafted
traditional beer image

Plzensky Prazdroj is a member of the

international group, SABMiller, the
second largest brewery in the world.
Pilsner Urquell is the group’s
flagship brand.
-- Plzensky Prazdroj Website
Anheuser Busch in Europe
Czech Budvar in USA
Significance of Private Brands
Flanker Brand Example

The Current Sarotti Brand

 Cola Wars Video

In which countries, with what strategy and with

what success has Mecca Cola chosen to
challenge Coca Cola?

In which countries, with what strategy and with

what success has Qibla Cola chosen to
challenge Coca Cola?

How has Coca Cola responded to these

challenges?
3-1

Chapter Twelve
Global Products

MKT568
Global Marketing Management
Dr. Fred Miller
 Target Market Definition, Size and
Purchasing Power

Define your target market by age and income

classifications in the SPSS dataset.
Use this definition to analyze statistical data on this
market (review previous slides)
To calculate size of target market in number of
people,
Determine the number of people in your chosen age range
(Data tables for Population Pyramids)
Multiply the result by the percentage of people in your
chosen income range (SPSS Crosstabs)
To calculate purchasing power, multiply the product
of the previous step by your country’s per capita
income (from Part 1 of your report, World Bank)
 Determine target population by age

Visit the
Population Pyramid
site of the US Census
Burearu and select the
current year.

Determine the number

of people in the target
market you have
defined, in this case,

5,840,087
 Screen for Income
Determine percent of
population in the defined
income range, in this case
42%

Multiply target population by

this percentage to calculate
number of people in target
market, in this case,

5,840,087 * .42 = 2,452,837

 Calculate Purchasing Power

Multiply TM population by Per Capita GNI from World

Bank or CIA to calculate purchasing power. In this case,

2,452,837 * $26,900 = $65,981,315,300

 Pro Forma Income Statement

1. $14,832,000, using the formulae

Volume (CY+1) = CY Industry Sales * (1+Growth Rate)
1,030,000,000 = (1,000,000,000) * 1.03
Sales = Volume * Schmidt’s SoM * Price
$14,832,000 = 1,030,000,000 * .012 * $1.20

2. $23,260,284, using the formulae

Volume (CY+2) = Volume(CY+1) * (1+Growth Rate)
1,050,600,000 = 1,030,000,000 * 1.02
Price(CY+2) = Price(CY+1) + Price Increase(CY+2)
$1.23 = $1.20 + $0.03
Sales = Volume * Schmidt’s SoM * Price
$23,260,284 = 1,050,600,000 * .018 * $1.23
 Pro Forma Income Statement

3. $9,888,000, using the formula

Production Costs = Volume * Schmidt’s SoM * Cost per Liter
$9,888,000 = 1,030,000,000 * .012 * $.80

4. $15,128,640, using the formula

Production Costs = Volume * Schmidt’s SoM * Cost per Liter
$15,128,640 = 1,050,600,000 * .018 * $.80

5. $4,944,000, using the formula

Gross Margin = Sales – Production Costs
$4,944,000 = $14,832,000 - $9,888,000
 Pro Forma Income Statement

6. $8,131,644, using the formula

Gross Margin = Sales – Production Costs
$8,131,644 = $23,260,284 - $15,128,640

7. $741,600, using the formula

Sales Costs = Sales * Agent’s Commission
$741,600 = $14,832,000 * .05

8. $1,163,014, using the formula

Sales Costs = Sales * Agent’s Commission
$1,163,014 = $23,260,284 * .05
 Pro Forma Income Statement

9. $889,920, using the formula

Promotion Costs = Sales * Promotion as % of Sales
(CY+1)
$889,920 = $14,832,000 * .06

10. $1,163,014, using the formula

Promotion Costs = Sales * Promotion as % of Sales
(CY+2)
$1,163,014 = $23,260,284 * .05
 Pro Forma Income Statement

11. $3,312,480, using the formula

Contribution Margin = Gross Margin - Sales Costs –
Promotion Costs
$3,312,480 = $4,944,000 - $741,600 - $889,920

12. $5,805,616, using the formula

Contribution Margin = Gross Margin - Sales Costs –
Promotion Costs
$5,805,616 = $8,131,644 - $1,163,014 - $1,163,014
 Pro Forma Income Statement

Identify three estimates to be revised. Describe revision and

explain reasoning.

1. Increase CY+1 market growth rate to 3.2% because Brahma’s

new entry will stimulate increased sales

2. Decrease share of market estimate in CY+1 to .9% because of

greater competition from the Corona brand will lower SoM

3. Increase promotion costs as % of sales in CY +1 to 8% to provide

more funds for advertising to match Brahma’s promotion for
introduction of Corona brand