BSAD 258
1. Joint Venture (strategic alliance)
(Equity) - involve capital investments, technology, and creation of a new corporate unit jointly with a foreign partner, create an equity-based unit; often in countries where government mandates participation by locals and local companies, ex: India • Partners make capital investment and create a new corporate unit jointly • Foreign partner: capital, management, and technology • Local Firm: expertise and understanding of the local market • Partner Selection Criteria: o Complementary skills o Willing and able to share company resources and skills • Cons: transfer of technology, risk that the know-how and firm-specific advantage becomes diluted by sharing information
Pricing Actions Against Gray Trade:
1. Centralization - set the maximum and minimum prices to regulate a trading area/price corridor o Solves "Price" motivation 2. Economic Controls - set quotas, ration the product purchased by a certain market o Solves "Availability" motivation 3. Informal Coordination - explicit articulation of corporation values and cultures, human resource exchange, and frequent visits to share experiences in other markets 4. Formalization - standardize the process of planning and implementing pricing decisions in order to direct the pricing at local levels
Int'l Marketing Research Process:
1. Define the problem. 2. Research design 3. Measurement/scaling 4. Questionnaire construction 5. Sampling 6. Fieldwork → Data Analysis
Globalizing Brand Name Checklist:
1. Does the brand name make sense outside of the source country? 2. If the name suggests a country association, is the effect positive? 3. Is the name available legally in many countries? 4. Does the brand compete with other brands in the portfolio?
Effects of Gray Trade:
1. Erosion of Brand Equity - can happen if the gray goods do not perform to the level expected 2. Strained relationships with the authorized channel members - arises when channel members face intra-brand competition 3. Legal liabilities - usually involves warranties that can't be honored and performance criteria can't be fulfilled - ex: Pharmaceuticals 4. Complication of global marketing strategies - can cause problems associated with new product introduction, sales forecasting, and global pricing
When It's Most Useful/Powerful:
1. Features of a product desired are same across the global market 2. Usage conditions of a product are similar across the global market 3. Image of product can be identically communicated across countries 4. Symbols used with brand or products carry the same meaning across countries or cultures
Benefits if Transfer Pricing
1. Lowering tariff costs by shipping goods into high-tariff countries at minimal transfer prices 2. Reducing income taxes in high-tax countries by overpricing goods transferred to units in such countries. Profits are eliminated and shifted to low-tax countries Costs of Transfer Pricing: - National governments = loss in potential tax revenues
Two-stages Global Segmentation:
1. Macro-segmentation - groups a number of countries into subgroups of countries that share similarities; homogenous by general characteristics 2. Micro-segmentation - identify local segments within a subgroup of countries that share similarities, collect data on potential customers in each country Advantages: Screens out countries that do not present good market opportunities for the firm, useful for the firm with multiple product lines since it shows insight across all the firm's products
Types of emerging markets:
1. NDC Markets • basic needs of population have been satisfied • solid basic education, strong social control and a secure life • Russia and newly democratized post-communist nations, China 2. Developing Countries • Nations of Africa - Nigeria, Zambia, Tanzania; Asia - Pakistan, India, Vietnam; Central America - Nicaragua, Guatemala * Both defined by low per capita income levels and severe lack of marketing infrastructure
Price quotes
CIF (cost-insurance-freight) vs. FOB (free on board) • CIF - accepting responsibility for product cost, insurance, and freight and factoring these items into the quote; check and add tariff charges and duties and arrange transportation = high costs • FOB - the buyer has to arrange shipping to his country
Local Marketing in Emerging Markets:
Challenges - o lack of effective marketing infrastructure • distribution channels - rural areas are difficult to access o need to adapt to local standards
Strategic Alliances
Collaborations between companies/firms, sometimes competitors, across borders; Equity and Non-Equity Based Alliances Reasons for Strategic Alliance - • Entry Barriers to foreign market are high • Lack of knowledge of the foreign market o A need to outsource marketing to local firms with greater understanding of the market • Pros: based on sharing of vital information, assets, and technology between the partners • Cons: may weaken a company's control over firm-specific advantages and know-how 1. Joint Venture 2. Research and development 3. Distribution 4. Manufacturing alliances
Major countries on Hofstede's, effect on International business:
Japan: individualism = low, power distance = high, uncertainty avoidance = high USA, UK, Canada: individualism = high, power distance = low, uncertainty avoidance = low NorthWest Europe: individualism = high, power distance = low, uncertainty avoidance = low Europe: individualism = low, power distance = high, uncertainty avoidance = high
Global Product Positioning
Perceptual Space: 1. Salient Attributes - data on what attributes a customer looks for in a product 2. Evoked Set - identifying what brands the buyer considers 3. Attribute Ratings - how the individual rates the brands in the evoked set on salient attributes 4. Preferences - how the brands rank in terms of overall preferences
Global Pricing Policies
Polycentric Pricing Ethnocentric Pricing Geocentric Pricing
4P's (Mature Markets):
Product - Introducing a new product that has little or no competition Pricing - Fierce competition makes discounts and other pricing schemes necessary Place/Distribution - Well developed; channels are crowded and hard to get into Promotion - All types of promotion tools are used to break habitual choices of loyal consumers
Global Distribution: Global Retailing:
Reality - different economies have different retail structures: - Italy and Algiers = small specialty houses, narrow line of products - Northern Europe = many stores, broad assortment of products - Japan = department stores with retail outlets - Middle East = bazaars - many shops Retailers = middlemen, sell directly to ultimate consumer - Retailing and Lifestyles - Creating new Channels -Global retailing
Gray Trade:
Sale of genuine branded goods through unauthorized channels; parallel distribution - Aims to take advantage of the price differences among identical products in different country markets - direct competition - Fluctuations in exchange rates tend to produce temporary misaligned prices between countries - Thrives in a variety of industries: o Ex: automobile, high-end fashion apparel, electronics business, TV programming - Half of the demand in the UK of several drug products is being met by imports from low priced countries o Prices for ulcer drug, Losec: $18 in Spain, $39 in Germany o Prices for heart drug, Plavix: $55 in France, $79 in London
Sampling
determine target customers for each culture and then select a sampling frame - compatible for the research and questions • issues: o lack of comprehensive and reliable/current sampling frames o emergence of firms that specialize in developing lists for direct marketing and survey research - may not be current o sampling equivalence can be questionable because the appropriate profiles differ
Dumping
selling goods in some markets below cost - often considered illegal as it is destructive of trade • Used to enter into a large competitive market by selling at very low prices or when a company overproduces and wants to sell the product in market where it has no brand franchise to protect • Notorious for protracted duration - often legislation changes over time
Pattern Standardization
similar ads, but less structured global approach; positioning theme is unified and some alternative creative concepts are planned
4. Related and Supporting Industries
the presence or absence of supplier industries and related industries that are internationally competitive • creates clusters of supporting industries that are internationally competitive • must also meet requirements of other parts of the diamond
Ethnocentric Pricing
the same pricing is charged to all customers regardless of nationality - Often used to price a relatively standardized product; industrial goods, large-ticket items - Based on full-cost formula to ensure all costs are covered Pros: no gray trade, makes planning easier - simplicity Cons: no local adaptation
Geocentric Pricing
the use of a global or regional standard, base price, plus a markup that varies across countries - The base price is computed from cost-plus formula - The markup is then adjusted for the particular situation the product faces in each country - can avoid threat of parallel imports from neighboring country - Product line Pricing - mark-up for one product in a line may not make sense for another product in the line; mark-up differs across products in local market - influenced by competitive conditions - Compromise between global coordination and local adaptation Pros: some coordination, little gray trade, some adaptation Cons: not locally adapted
Price Escalation
transportation costs, tariffs and other duties, special taxes, and exchange rate fluctuations, export prices tend to escalate; increase in price overseas • Price becomes higher than intended • Makes difficult to anticipate the final price in market - cope with redesign to fit lower tariff category, shifting final stages in assembly process abroad, lower prices to absorb some trade barrier cost on to company
Identical Ads
usually with localization, only in terms of language - voice-over changes and simple copy translations
4. Manufacturing alliances (strategic alliance)
(Non-Equity) • Shared manufacturing, early form of an SA, involves the brands of both manufacturers with existing capabilities in the manufacturing of the parts • Complementary more in economics than in technology • Advantages: inexpensive and convenient, partners fill unused capacity and save money and time by not investing in new equipment • Disadvantages: Sales organization has to deal with two principals in charge of production, harder to communicate customer feedbacks, can put constraints on future growth
2. Research and development (strategic alliance)
(Non-Equity) • Solve critical survival questions for the firm • Provide favorable economics, speed of access, and managerial resources • The risk of dissipation has become less of a concern • New products in market = increased competitive rivalry - R&D SA's alleviate this financial pressure
3. Distribution (strategic alliance)
(Non-Equity) - companies agree contractually to use an existing distribution network jointly - optimal in markets with complex distribution • Shared distribution network • Pros: inexpensive and quick access to a local market, improved capacity load and wider product lines • Cons: hinder learning about the local market, limit future growth - SA does not last long if one partner wants to expand
Global Pricing: Basic Factors:
- Costs: o A cost-plus formula: various types of costs + markup = final price; standard pricing procedure (costs of producing & shipping + markup = export price) o The use of total costs vs. direct costs - Experience Curve o Unit costs go down as successively more units of a product are produced o Companies could offer lower introductory prices when entering into a new market - "learning by doing", employees develop skills and capabilities = lower cost o Adopted primarily by companies entering existing markets in mature stage o Experience Curve Effect → breakeven point production = unit cost; more sold = profit → increase domestic demand and decrease price still makes profit - existing product into new market; if you charge too high of a price, then you will not have a market = no profit - Demand o Price elasticity of demand - identifies how many customers are willing to buy how much of the product at various price levels; curve yields the "commodity" price - willingness to buy and ability to pay o Demand and supply: whether or not price can be high in a strong demand market is also determined by the supply from competitors - Competition o Competitive Value Pricing - setting a price premium on the basis of direct comparisons with competition - global and domestic competitors in a particular market • "Reservation" prices o Commodity + Premium price differential • Degree to which the firm might be granted a higher price by the market because of the particular strengths of its product
Financial Issues: Foreign exchange exposure
- Foreign exchange exposure: investments, assets or liabilities that are at risk due to unanticipated changes in exchange rates Managing Foreign Exchange Exposure: - Reduce loss - Reduce business uncertainty Hedging - purchasing insurance against losses because of currency fluctuations/change in exchange rates - Forward contracts - the sale or purchase of a specified amount of a foreign currency at a fixed exchange rate for delivery or settlement on an agreed date in the future o Downside - could prevent gains from favorable change in rates - Swap - exchange of one currency for another for a fixed period of time; at the expiration of swap each party returns the currency initially received - Buyers assume the risk of exchange rate fluctuations when the goods are priced in sellers' currencies, and sellers assume the risk of exchange rate fluctuations when the goods are priced in buyers' currencies * Price your goods in your home country currency - protects against foreign exchange exposure
Global Advertising
- Media advertising is more or less uniform across many countries in media vehicles with global reach o Not always complete uniformity because of linguistic and regulatory differences between the countries - Some localization effort may be needed in global advertising - local advertising - Multi-domestic advertising - international advertising deliberately adapted to particular markets and audiences in message and creative execution Pros: - Cost savings - one idea developed, used across the globe - Global markets and products - global advertising useful in an already established global market, with some localization for products Cons: - image and symbols may not be locally acceptable - appropriate media may not be available
Transfer Pricing
- Prices of goods are transferred from a company's operations or sales units in one country to its units elsewhere - intra-company pricing - There has to be a price paid for the products shipped between units of the same organization when the shipment crosses national border so the correct duties and related fees can be paid - "Arm's-Length Principle" - transfer prices set should reflect he prices the subsidiary might encounter in the open market; price at which trade takes place between "independent" enterprises a) Market-based transfer pricing - price for which the product or service could be purchased by the receiving subsidiary in the external market, can't easily be manipulated b) Cost-based transfer pricing - transfer price based upon cost, cost plus mark-up; in absence of "perfect" market
Firm-Specific advantages
- image and brand name assets unique to the company that cannot be duplicated by other firms ex: patent, trademark, brand name, control of raw materials - monopolistic • Knowledge-Based FSAs - competitive advantage lies in analysis to increase company's speed and flexibility in introducing new products and services - know-how, skills, and experiences of company and its employees • Resource-Based FSAs - defines what firm is capable of; what the firm can offer in technology, know-how, products, and services • Marketing FSAs - analyzing and segementing markets, developing promotional programs and advertising campaigns, and administering massive introductory campaigns for new products and services o changes with each country and different marketing needs
Hofstede's 5 cultural dimensions:
- managers can evaluate how difficult it may be to do business in a country culturally distant from their own and how severe a cultural shock they and their families are likely to get when moving to the country - Individualism vs collectivism - High vs low uncertainty avoidance - High vs low Power Distance - Masculinity vs Femininity - Long vs Short term orientation
Global markets:
- markets in which buyer preferences are similar across countries
Transferability of FSAs
- not all FSAs can be utilized in every country; often with intangible products ex: limited TV access in some countries = no commercials Value Chain: - "internalized" sequence of operations undertaken by the firm; firm's activities in transforming raw materials and other inputs to final goods - sequential and complimentary tasks, each adding value to the product
Global Promotion:
- top 10 in ad expenditure: USA, China, Japan, UK, Brazil, Germany, Mexico, France, Italy, Canada - Competitive Advantage - FSA - Global marketers should allocate resources differently across the world
Basic Modes of entry:
-Exporting -Licensing -Strategic alliances - Foreign direct investment
Global Products
-Localization: Changes required for a product or service to function in a new country - compatability * Find balance between uniform and adapted = localized = necessary changes -Adaptation: When products are changed to match customer tastes or preferences in different country markets - optional changes for company -Standardization
Export Pricing:
-Price quotes - CIF (cost-insurance-freight) vs. FOB (free on board) -Price escalation - Dumping
Theoretical Fundations
-fundamental aim of business strategy is create and sustain competitive advantage - competitive analysis - identify company's FSAs and CSAs • if not FSA, competitive advantage is less sustainable since company can't prevent imitation from competitors
Air Express System Process:
1. Call the local express mail office for a pick up 2. Transport the packages in the evening to a domestic trans-shipment point, ex: LA, NYC 3. Ship out packages to the trans-shipment point in the country of destination, ex: Tokyo 4. Clear customs in the destination country 5. Ship out packages to the destination points for local delivery
Motivation to engage in Gray Trade:
1. Price related - Wide price discrepancies between national markets, bolster sales, often from currency fluctuations 2. Availability - Limited availability of certain models of versions in one market, spread product; ex: luxury cars 3. Inexpensive logistics or transportation can be accomplished with relative ease; global modes of transportation from carriers and freight forwarders Sources of Gray Trade: • Authorized dealers • Authorized retailers • Un-authorized channels EX: Seiko Watches - watches are shipped through authorized channels, but the distributors may sell directly to unauthorized retailers to get higher prices
Global Marketer's Mindset:
1. Selling Orientation - sell existing product, "sell what we make", the product line is given • Sell abroad once the new product is successful in lead market 2. Standardization of products as much as possible • Prominent for strategic use of brands Consequences: • Global marketing can easily lead to mis-positioned products and inappropriate promotional appeals • Global marketing can also lead to local resistance and animosity * Strike the optimal balance between local adaptation and global efficiency
Global S-T-P Strategies
1. Similar Segment - target segment is the same across countries 2. Different Segment - target segment differs across countries 3. Similar Positioning - Indicates that the positioning theme is the same across countries Different Positioning - Indicates that the positioning theme is different across countries
Channel Actions Against Gray Trade:
1. Supply Interference - engaging in relationship building with distributors and requesting the careful screening of orders and careful disposal of surplus inventory 2. Dealer Interference - searching for gray imports at the gray trader's outlets in the importing country, then asking the dealer to help dispose of the inventory 3. Demand Interference - using advertising to educate customers about the drawbacks of gray goods 4. Strategic Attack - creating stronger reasons for customers to patronize authorized dealers - price cutting, improved service
Comparative Advantage
: free trade between two countries yields economic payoffs - international trade; each country specializes in specific production; especially raw materials • David Ricardo, Principles of Political Economy, 1817 • "Why should we buy products from other countries when we can produce them more efficiently ourselves?" • Argument: A nation should specialize in the production of those goods that has a comparative advantage, not an absolute advantage --> Produce at a lower marginal and opportunity cost
Optimal Entry Modes for Firms with Different Company Factors and Market Company Factors:
A strategic position of a company - • Incremental: few resources and exploring opportunities; wants to stay flexible for the future, uses "waterfall" strategy • Protected: well-protected trade secret or patentable know-how; need to learn about the market Control: well-established firm-specific advantages; committed to global expansion
Marketing in China
Background - • Communist government engaging in strategic experiments with free markets • High growth rate of the economy since 1990s • Special economic zones to attract foreign investment in production for export • National language is Mandarin • Collectivist society with high power distance Segmentation - • Geographic region • Urban/rural split - weak infrastructure in rural areas • Target customers - city middle class people • Teenagers/college age people in the cities represent the Chinese version of the global youth segment Product positioning - • Global brands confer status; domestic products have negative image • Need to accommodate translation of brand names
Marketing in India
Background - • Democratic government, ideologically socialist • High political risk - regulation rifts and problems with Pakistan • With liberalization foreign firms enter via FDI and joint venture • Strong growth of telecommunications and computer software industries • English is one of the dominant languages • Collectivist culture with high power distance Segmentation - • Two large segments - an impoverished rural population and an increasingly well-off urban middle class • Target customers - urban middle-class people • Traditional habits are changing as the middle class becomes more Westernized Product positioning - • Products are bought for status, domestic products are of low quality Western companies overestimate the size and depth of the demand
Global Market Targeting
Criteria for selecting target segments: 1. Predicting competitive reactions • Resource commitment of competitors • Loyal customers to home country brands 2. Analyzing projected profitability • Cost consideration: leverage firm-specific advantages 3. Consider tradeoff between focus and diversification Diversification Strategy: • A conscious effort to be a player in different countries and different market segments • Difficulties in one market segment or country can be offset by gains elsewhere
Dominant Marketing Features:
Emerging Markets - (China, India, Russia, developing countries in Africa and Central America) New Growth Markets - (Latin American countries, South Africa, South Korea, Taiwan, Singapore, Thailand) Mature Markets - (US, Canada, Australia, New Zealand, Japan, European Union Countries) See Table
Foreign Entry
Entry Barriers: 1. Tariff Barriers • Customs duties enforced on imported products • Different tariff rates for different countries and different products o Final products or intermediate products • May be adjusted by political influence from trade associations 2. Artificial Entry/Nontariff Barriers • Limited distribution access • Bureaucratic inertia • Government regulations 3. Natural Entry Barriers • Intense competition among several differentiated brands Pro-domestic/"pure domestic" sentiment favoring local brands
Arguments - 4 sources of CSAs
Factor conditions Firm strategy, structure and rivalry Demand conditions Related and Supporting industries
Standardization
Global products are standardized with SOME uniform features in ALL countries; certain localization is required for global products; ex: Gillete razor blades, Sony TV sets • Cost: reduced manufacturing costs, R&D decreased, tariffs can decrease by remaining in the same country or significantly increase by trading outside the defined trading zone • Quality: multiple test markets = better quality after fixing learning mistakes, more R&D to please global customers = higher functional quality • Pros: Cost Reduction, improved functional quality, global customers, global segments • Cons: off-target, lack of uniqueness, vulnerability to trade barriers, strong local competitors * Global customers and global segments are a minority = world travelers, looking for similar consumer products in many locations in the world; missed segments/off-target consumers are the ordinary consumer and are the majority
Cultural Foundations:
Low context culture - what you say is what you think • silent language role is low • Explicit communication and expressive verbal communication Monochronic (clock) time, punctual • Informal business culture • Deal focused Ex: Swiss, Scandinavian, and German High context culture - what you say is not really what you think • silent language role is high • implicit communication • reserved non-verbal communication • polychronic time • formal business culture • relationship focused Ex: Japanese, Arabian, Latin American
Drivers towards globalization
Market Technological Government Competitive Cost
Phases of Globalization:
Multi- national Phase pre-1980 Global-Phase 1980-1990's Anti-Globalization Phase 1990 +
International Marketing Research:
National differences: political, legal, economic, social, and cultural differences Comparability of research across countries, not standardization of research methods
Globalization
The shift towards a more integrated and interdependent market place. The tendency of businesses, technologies, or philosophies to spread throughout the world, or the process of making this happen
Global Logistics:
The transportation and storage activities necessary to transfer the physical product from the manufacturing plants and warehouses in different countries to various local market countries • Transportation was traditionally one of the strongest trade barriers • Management of the channels within a country - interactions with local subsidiaries, distributors, and agents • Supply Chain Management - coordinating and rationalizing the global logistics function of the firm involved in many markets • The growth of the air express system contributed to the growth of outsourcing manufacturing and other business functions to low-wage countries Ex: FedEx, Ocean carriers, rail system
Porter's Diamond:
Theory - dynamic theory, country can retain competitive in an industry even as its manufacturing costs rise - yet counters IPC Theory Questions Answered - competitive rivalry and capable business management can help nations develop new skills and renew their competitive advantages Arguments - 4 sources of CSAs:
Absolute advantage
a nation should produce only goods where it is most efficient and trade for those where it is not efficient • one country has higher productivity than the other; used when formulating competitive strategy at firm level • Adam Smith, Wealth of Nations, 1776 • Argument: countries differ in their ability to produce goods efficiently • Assumes there is an absolute advantage balance among nations
1. Factor conditions
a nation's position in factors of production such as skilled labor or the infrastructure necessary to compete in a given industry • basic factors - natural resources, climate, location, unskilled labor • advanced factors - technology and communications, skilled labor - more likely to generate sustainable competitive advantages
Exporting
a) Direct Exporting: • Firm itself contacts the buyers abroad; Exporting agent located in country product is to be exported to; control of operations • 3 Direct exporting options: o Employ middleman, using foreign agents and distributors - pay through fees and commissions o Establish own sales subsidiaries o Direct sales (ex: commerce and mail order) b) Indirect exporting: • Use of home country agencies to get the product to foreign markets; could "piggy-back" on existing exporting distribution facilities; Exporting agent located in same country as the manufacturer • EMC (Export Management Company) - company performs all the transactions relating to foreign trade for the firm, independent agents that work for the firm in overseas markets
2. Firm Strategy, Structure, and Rivalry
conditions in the nation governing how companies are created, organized, and managed and the nature of domestic rivalry • management "ideology" can help or hurt • presence of domestic rivalry improves company's competitiveness • vigorous competition in industry will help develop stronger firms and support growth and improvement in firms
High vs low Power Distance
high power distance societies tend to be less egalitarian, while democratic countries exhibit low power distance
Multi-domestic markets:
local consumers have widely different preferences and functional requirements Ex: Food vs. high-tech products
Polycentric Pricing
local prices, in local currency, no constraints from headquarters; prices vary significantly - Apply when: price sensitivity differs between markets, the problem of gray trade is minimal - Increases control and allows complete attention to competing in local market; not ideal in the global context Pros: locally adapted Cons: not coordinated, greater risk of gray trade
Masculinity vs Femininity
masculine cultures tend to be dominated by assertive rather than nurturing social values
High vs low uncertainty avoidance
measures the tolerance of uncertainty and risks among members of a society
3. Demand Conditions
nature of home demand for the industry's product or service • sophisticated and demanding consumers push firms to innovate and improve product quality
Creating new Channels
o As economic growth takes place and global trade expands, new alternatives emerge in developing countries - dynamic Ex: supermarkets, convenience stores, fast food, mail orders, Internet
Retailing and Lifestyles
o Retailing structure has to adapt to the varying lifestyles of individual households - cater to individual o Retail stores are indication of country's economic achievement and lifestyles of citizens
Global retailing
o The logistical and operational know-how of leading retailers is helping to increase the trend of retailing being globalized at a fast rate o Point-of-purchase information technology - bar coding, scanner data, inventory control - large retailers use p-o-p technology to analyze product data o Channel captains - most powerful units in distribution channel between manufacturers and ultimate consumer
Licensing
offering a foreign company the rights to use the firm's proprietary technology and other know-how in return for a fee plus royalty • Franchising - firm provides technological expertise to the reseller abroad and helps with management and often capital investment for start-up - popular because it allows more control over marketing efforts in foreign country • Contract manufacturing - involves hiring a firm to produce a pre-specified product - Original Equipment Manufacturing (OEM), company enters a foreign market by selling its unbranded product or component to another company in the market country who can then sell the product under its own name
Pros of Globalization
• Allows countries to specialize in production of goods and services that they can produce most efficiently • Lowers prices for goods and services and increase consumer spending power • Increases consumer incomes in general and creates a growing global market • Rising income levels leads to demand for greater environmental protection and lessen pollution levels • Multinationals provide improved labor working conditions and wages • Power of super-national organizations rests on how well they serve the collective interests of member states
Cons of Globalization
• Destroys manufacturing and service jobs in advanced countries • Wage rates of unskilled workers in advanced countries decline • Companies move to countries with fewer labor and environment regulations • Shifts decision-making power from national governments to super-national organizations, like WTO
Counterfeiting Products
• Fake, knockoffs of products • Operate at all levels of the economy in all industries • Companies lose money - $20 billion annually • Sources - domestic market and South East Asia • Why buy? o Cheaper price o Acceptable quality Coping Strategies: 1. Search and Destroy - counterfeiting crackdown, companies get together and lobby against the illegal vendors; burn and destroy products - vendors fight back for their livelihood, protest against - injured in physical violence 2. Special coding - label on authentic products, no label on counterfeit products = drugs, money, etc.
Fieldwork → Data Analysis
• Focus Group - group of 8-12, paid $50-100 for an hour or 2, smaller sample - starting point in research • Survey - at least 100 responses, $50/survey = expensive • Focus Groups Pros (Qual) - relatively inexpensive, can be completed quickly, and can reach local pockets of the market • Focus Groups Cons (Qual) - unrepresentative sample, bias associated with paid respondents
multi-national phase
• Focus on adaption to local markets • Foreign markets could be penetrated easily after WWII • Development of advanced marketing techniques
global phase
• Focus on standardization to global markets - standardization of products and integration of activities across countries • Appearance of strong foreign competitors in the US - Japan; especially companies with well-known global brand names became successful overseas • Standardization = advantage, profitable while selling at a lower price, company can amortize investments in R&D and design in many markets - superior quality-to-price ratio
3. Government
• Free trade, reduced tariff barriers- favorable trade policies, acceptance of foreign investment, compatible technical standards, and common marketing regulations • Deregulations that encourage foreign direct investment • ISO 9001 - a global standard of quality certification; Industrial Standards of Operation; encourages global marketing; worldwide
New way Global Segmentation:
• Group markets based on variables that companies focus on for the specific product Ex: language, media habits, age, income level
Long vs Short term orientation
• High vs. low Confucianist Dynamics or long-term Orientation: distinguishes the long-term orientation of Asian cultures influenced by Confucius philosophy from the more short-term outlook of western culture
Individualism vs collectivism
• Individualism: o Individual achievement, purchase goods to satisfy individual needs, refer to family and close circles of friends and peers, loosely-connected social interactions, respect privacy • Collectivism: o Group achievement, purchase social and visible luxury goods, refer to members of various other groups, tightly-connected social interactions in group, loosely-connected to outside groups o Identity and worth of individual based on group achievement o Culture tends to have clear "in-group" and "out-of-group" distinctions
Market Segmentation (Mature Markets)
• Narrow niche segments continue to increase, exploit a small group of consumers - customers are particular with well-developed preferences ex: Baskin-Robbins in Japan
Market Positioning (Mature Markets)
• Product positioning - create a particular place in consumer's mind for the product; provide something special • The Country-of-Origin Effect • High-end positioning - brand image conveys benefits of status and recognition for consumer and quality product
anti-globalization phase
• Questioning the economic, political and social benefits of globalization • Anti-globalization events: trashed KFC store in India, disrupted World Bank/IMF meeting in DC • Mix of economic, political, and social issues; multiple arguments: o globalization has failed to lift standard of living in many third world countries but companies have profited o exploited workers in poor countries o globalization has provided info about consumer choices to people who cannot afford the product
1. Market
• converging common customer needs - free trade and technology have created a homogenous market that expose customers to the same messages; creates common desires • growth of global customers, customers that need the same product or service in several countries, and channels, distribution and logistics firms which provide seamless transportation and storage around the world • Transferable marketing - using same marketing ideas in different countries; packaging, advertising, brand names, marketing mix
5. Cost
• economies of scale - unit cost reductions made possible by long series in a given plant, supply to more than one foreign market • economies of scope - gains from spreading activities across multiple product lines or businesses; when no economies of scale; wider selection of products • global sourcing advantages - cost saving via supply from a low-wage country, improved logistics and distribution systems, and the growth of inexpensive global telecommunications; high product-development costs relative to the size of the national market and fast-developing technology serve to reinforce the need for global strategies to help recoup the investment • the most important cost savings from global marketing are usually the gains from avoiding unnecessary duplication across countries and redesign of products in different markets - sourcing advantages
Country-Specific Advantages
• fundamental aim of business strategy is create CSAs advantages that are specific to the firm and those a firm possesses because of the country it is from or where it produces
4. Competitive
• global competition - follow competitors or respond to global competition; competitors go global and creates incentive for other firms to follow suit o firms learn from other company's mistakes o strong global competitors creates facilities and infrastructure for domestic companies to go global
Globalization of markets
• merging of historically different national markets into one global marketplace • convergence of consumer tastes and preferences
Questionnaire construction
• needs to be carefully pre-tested and translated into the foreign language and then translated back for verification and adjustment
Research design
• qualitative research • consumer surveys - random samples drawn from a sampling from of representative users • Problems - difficulty to receive accurate responses in the high context cultures; informal face-to-face interviews are prone to bias • trade surveys of distribution channels and trade associations can provide a good starting point for further data gathering and analysis; less diverse countries, informants on trade are good info about buyers • causal
2. Technological
• telecommunications - growth of internet and e-commerce • transportation - development of commercial jet, boats, and shipping containers
Globalization of production
• tendency among firms to source goods and services from locations around the world - take advantage of national differences in cost and quality of production o labor, energy, land, capital • lower costs and/or improve quality - increases firm's competitiveness in global markets
Measurement/Scaling
• the cognitive and emotional concepts measured might not be equivalent across cultures - question translations may not be equivalent • in attitude scaling, very basic factors can create difficulties - even vs. odd number scaling, neutral vs. opinion
