Ch.18: Global Marketing

Cultural Diversity

- Domestic marketing executives should understand cultural nuances before initiating international business in new nations - US business people prefer to get right to business and pursue tough "fast-to-fast" negotiating tactics. - Chinese, Japanese, and other Asian business people prefer to converse and socialize politely before entering business discussions.

5) Sociocultural factors

- Dominant values - Lifestyle patterns - Ethnic groups - Linguistic fragmentation

Advantages of Global Marketing

- Economies of scale in production and distribution - Lower Marketing Costs - Power and scope - Consistency in brand image - Ability to leverage good ideas quickly and efficiently - Uniformity of marketing practices

Dual Customization

- Egg McMuffin in the USA vs. Veg Supreme McMuffin in India - McDonald's foods in diff. parts of the world

Political and Trade Factors Ex.

- Exploiting workers where different Labor Laws exist - Changes in Laws can open new Markets, Ex: women being able to drive in Saudi Arabia

Deciding How to Go Global

- Exporting - Joint Venture - Direct Investment ((Low) Amount of commitment, risk, control and profit potential (High))

3) Economic factors

- GDP per capita - income distribution - rate of growth of GNP - ratio of investment to GNP

Global Marketing Strategy

- Global Market Participation - Marketing Mix Development: -- Product adaption or standardization -- Price adoption or standardization -- Promotion adaptation or standardization -- Place adaptation or standardization - Concentration of Marketing Activities - Coordination of Marketing Activities - Integration of Competitive Moves

Promotion Adaptation Ex.

- Guy Larouche uses similar ads in European and Middle Eastern countries, but tones down the level of touch and sensuality (the man is clothed and the woman barely touches him). - Apple's "Mac vs. PC" ad campaign featured two actors bantering. -- Apple dubbed the US ads for Spain, France, Germany, and Italy, but chose to reshoot and rescript for the United Kingdom and Japan - two important markets with unique advertising and comedy cultures.

Direct Investment

- HP has made direct investments in various major international markets, including India. - HP established two factories in India that manufactured personal computers during 2007, and opened HP-owned retail stores in more than 150 Indian cities.

Product Adaptation

- Hallmark markets Happy Birthday [Mom or Dad] greeting cards in Japan, messages are far more ceremonial and formal. -- USA vs. Japan - Hallmark does not produce and sell 40th birthday greeting cards in Russia. - Diet Coke Product - Coca-Cola withdrew its big twoliterbottle in Spain -- Why? They discovered that few Spaniards owned refrigerators that accommodate the large size. Smaller sizes needed to be distributed instead.

Economic Factors Examples

- In India, Ford's $7,700 Figo targets low to middle income consumers who can afford their first car and who want to move off their motorbikes.

Exporting

- Indirect and Direct - Simplest way to enter a foreign market, but usually offers less control and profit potential A domestic firm enters an international market by transporting goods to and selling those goods in the foreign market.

6) National goals and plans

- Industry priorities - Infrastructure investment plans

4) Technological factors

- Level of technological skills - Existing production technology - Existing consumption technology - Education levels

Direct Investment

- Owning your own foreign-based operation - Affords greater control and profit potential, but is often riskier A domestic firm enters an international market by investing in and developing foreign-based assembly or manufacturing facilities located in the foreign country.

Economic Factors

- Per-Capita Income - Gross Domestic Product - Infrastructure - Exchange Rates prevailing inside foreign economies materially influence how attractive those nations are as potential global targets.

SCANNING THE GLOBAL ENVIRONMENT

- Political: Stability of Government, potential changes to legislation, global influences - Economic: Economic growth or stagnation, Employment rates, Inflation rates, Monetary Policy, Consumer Confidence - Society/Culture: Income distribution, demographic influences, Lifestyle factors - Technology: International Influences, Changes in information Technology, Take up Rates - Law: Taxation policies, Employment Laws, Industry regulations, Health and Safety - Environment/Ecology: Regulations and restrictions, Weather, Climate, Pollution, Energy Availability, resource availability, pollution

Cultural Diversity Ex. cont.

- South Americans prefer to sit extremely close to one another (truly nose-to-nose or side-by-side) when discussing business affairs - The American businessperson's cultural propensity is to back away when someone infringes on his or her personal space. However, backing away is likely to compel a culturally insensitive South American negotiator to move closer still. - Unhappy new year for Coca-Cola as it upsets first Russia, then Ukraine

Political and Trade Factors

- The Legal Environment - Trade Barriers

Economic Factors - Infrastructural Conditions

- Transport - Roads - Media Channels - Banking and Financial Services - Utilities - Public Services

Disadvantages of Global Marketing

- ignores differences in consumer needs, wants, and usage patterns for products - ignores differences in consumer response to marketing programs and activities - ignores differences in brand product development and the competitive environment - ignores differences in the legal environment - ignores differences in marketing institutions - ignores differences in administrative procedures

2) Geographic characteristics

- physical size of a country - topographical characteristics - climate conditions

1) Demographic characteristics

- size of population - rate of population growth - degree or urbanization - population density - Age structure and composition of the population

Single-Country Marketing Strategy

-Target Market Strategy - Marketing Mix Development: -- Product -- Price -- Promotion -- Place

INDICATORS OF MARKET POTENTIAL

1) Demographic characteristics 2) Geographic characteristics 3) Economic factors 4) Technological factors 5) Sociocultural factors 6) National goals and plans

D. Joint Venturing

A ____________ for penetrating international markets by US firms occurs when the US-based firm combines forces with a host firm in the foreign market to produce or market products or services in the host country. A. Direct exporting B. Indirect Exporting C. Direct Investment D. Joint Venturing E. Contract manufacturing.

Joint Venture

A domestic firm enters an international market by joining with a partner firm located in the foreign host nation for purposes of marketing in that host nation - Licensing - Contract Manufacturing - Management Contracting - Joint Ownership

4) Joint Ownership

A form of joint venture in which a domestic firm combines forces with a foreign firm or investment group to create a local business in an international market • US-based firms enter into arrangements with foreign firms to create local businesses in foreign markets. • Both firms share ownership and control of the venture. Ex: Best Buy formed a joint venture with UK retailer Carphone Warehouse to jointly introduce Best Buy stores in Europe.

2) Contract Manufacturing

A form of joint venture in which a domestic firm enters into a contractual agreement with manufacturers or other firms (including retailers) to produce, deliver, merchandise, retail or sell the domestic firm's products or services. • Domestic firms contractually engage with manufacturers or other firms (including retailers) to produce, deliver, merchandise, retail, or sell their products or services. Ex: When Sears opened department stores in Mexico and Spain, it found qualified manufacturers to produce many of its products.

Political and Trade Factors - Trade Barriers - *Subsidies*

A trade barrier in which a domestic government subsidizes the costs associated with producing and selling certain products to allow those products to be priced competitively in foreign markets make domestic goods cheaper to produce than in foreign markets which results in a lower domestic price.

Advantages & Risks of Direct Investment

Advantages: • Lower operational and production costs • Can improve brand image and local power • Closer relationships with locals • Easier to adapt • Greater control Risks: • Restricted or devalued currencies • Economic uncertainties • Unpredictable government transitions

C. Trade barriers

All of the following are considered to be economic factors affecting a firm's global marketing strategy except __________. A. Gross domestic product B. Per capita income of individuals C. Trade barriers D. Infrastructure E. Exchange rates.

A. Cultural differences

An understanding of traditions, preferences, and dos and don'ts in foreign counties helps domestic firms avoid embarrassing marketing mistakes. Equally important, these insights can also provide opportunities to exploit important differences in wants, needs, values, and perceptions. These considerations reflect the importance of understanding how ___________ impact a firm's potential global marketing strategy. A. Cultural differences B. Economic factors C. Political factors D. Trade barriers E. Exchange rates.

Cultural Diversity - Language

Ex: An Italian company's "Traficante" mineral water received an interesting reception in Spanish and Portuguese speaking countries, where it translates as "Drug Dealer" - What does mist mean in German? -- Rolls-Royce avoided using the name "Silver Mist" in German markets and instead called it "Silver Shadow" -- Sunbeam, however entered the German market with its Mist Stick hair-curling iron. A children's workbench named Fartfull... - The word means "Speedy" in Swedish and suggests mobility in German - Nike unintentionally agitated Chinese officials after it released an ad in China that featured Lebron James destroying several culturally-esteemed Chinese figures in a Kung Fu-themed television promotion. -- Chinese politicians asserted that the ad violated regulations to maintain national dignity. - Nike pulled these shoes from distribution in 1997 after learning that the stylized shoe logo resembled "Allah" when written in Arabic.

Cultural Diversity - Usage

Ex: Germans, the French, and Americans eat more packaged and branded spaghetti than Italian consumers. - The average French husband uses about twice the amount of cosmetics and grooming products as his wife.

C. Direct Investment

HP, in 2007, established two factories in India that manufactured personal computers. At about the same time, HP opened company-owned retail stores in more than 150 Indian cities. This is an example of _______ for penetrating a foreign market. A. Direct exporting B. Indirect Exporting C. Direct Investment D. Joint Venturing E. Contract manufacturing.

New Product Development

Household appliance manufacturers might go "back to the future" by creating hand-powered washing machines in order to solve common user problems in developing nations or remote regions where electricity is not available.

B) Two-sided messages

Marmite's My Mate and I hate commercial shows a promotional message pointing out both the positive features and negative deficiencies. This sounds like an example of ___. A) One-sided messages B) Two-sided messages C) Positive-point messages D) Single-point messages E) Benefit-oriented messages

Indirect Exporting

Manufacturing firm DOESN'T TAKE DIRECT CARE of exporting activities. Instead another domestic company, such as an export house or trading company, performs these activities, often without the manufacturing firms involvement in the foreign sales of its products A domestic firm enters an international market by engaging, partnering, or otherwise aligning with one or more independent third-party providers rather handling exporting functions itself

Global Marketing

Marketing of goods and services in international markets

D. Management contracting

Marriott intends to add hotel operations in Belize and Honduras. It would like to partner with local investors who would own the hotels, but rely on Marriott to provide management services. Ultimately, Marriott wants to buy out the foreign investors. Marriott probably should be advised to use which method of entering a foreign market? A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership.

D) Dual customization strategy

McDonald's product menu and its promotions vary greatly across the different countries in which it operates. The firm sensibly focuses substantial marketing mix attention on delivering products and messages that are popular and culturally acceptable across various nations and regions. McDonald's is using a(n) __. A) Straight extension strategy B) Product adaptation strategy C) Promotion adaptations strategy D) Dual customization strategy E) New product development strategy

B. Indirect Exporting

Most firms begin their global marketing efforts using _____________ . This is the simplest and least risky method for entering foreign markets. A. Direct exporting B. Indirect Exporting C. Joint Venturing D. Licensing E. Contract manufacturing.

Economic Factors - per capital incomes Ex.

Nations with low per-capital incomes may be poor markets for expensive industrial equipment, but excellent targets for agricultural hand tools Expensive Equipment vs. Agricultural hand tools

MANAGING INTERNATIONAL MARKETING MIXES

Promotion: - Same Promotion - Adopted Promotion Same Product: - Straight Extension - Promotion Adaptation Adapted Product: - Product Adaptation - Dual Adaptation Develop New Product: - New Product Development/ Invention

Cultural Diversity

Shared cultural norms, beliefs, attitudes, values, language, taboos - Cultural differences must be understood as they can impact a firm's potential global marketing strategy. - Culture can be defined as the collective programming of the mind which distinguishes one category of people from another - meaning of one thing can be different in another

Political and Trade Factors - Trade Barriers - *Tariffs*

Taxes imposed on foreign goods imported into a country. are taxes levied on imported products by the nations being targeted.

D. Management contracting

The Hilton hotel chain recently opened a Doubletree in Dubai, the capital of the United Arab Emirates. Local investors own the facility. Hilton manages the property for these local investors. This is an example of __________ for entering a foreign market. A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership.

D) Reminder advertising

The Marmite ad was most likely employing __ to keep the brand in consumers' minds. Letting them know that the brand is available and continues to be a viable choice. A) Product advertising B) Pioneering advertising C) Persuasive advertising D) Reminder advertising E) Institutional advertising

E. Reduced risk of foreign governmental restrictions on operations.

The benefits of direct investment as a means of entering foreign markets include all of the following except: A. Greater control of operations and marketing activities B. Lower operational and production costs C. Enhanced brand image and brand power in the host country D. Easier to adopt products to local tastes and desires E. Reduced risk of foreign governmental restrictions on operations.

E. All of the above.

The benefits of direct investment as a means of entering foreign markets include: A. Greater control of operations and marketing activities B. Lower operational and production costs C. Enhanced brand image and brand power in the host country D. Easier to adopt products to local tastes and desires E. All of the above.

D. All of the above.

The disadvantages of licensing as a means for US firms to enter foreign markets include: A. Reduced control over how it's products are produced and marketing in the foreign country B. An alternative entry strategy may have been more profitable, particularly is the product gains substantial sales C. After developing an expertise and market for the licensed product, the licensee may break from the licensing arrangement and become a direct competitor with the US-based firm in the foreign market. D. All of the above.

E. All of the above.

The need to understand the importance of global marketing is based on A. Many large corporations producing products commonly purchased in the US are headquartered in foreign countries B. International logistics and transportation costs are rapidly declining making it possible for even small firms to penetrate global markets C. American-made goods are favorably perceived in many foreign countries D. Marketing via the Internet has become increasingly easy and has opened international markets E. All of the above.

Direct Exporting

The producing firm takes care of exporting activities and IS IN DIRECT CONTACT w/ the first intermediary in the foreign target market. The firm is typically involved in handling documentation, physical delivery and pricing policies, with the product being sold to agents and distributors A domestic firm enters an international market by handling all exporting functions itself

B. Exporting

The term _________ means that a domestic marketer ships goods or delivers professional services outside the country in which the marketer is located. A. Direct investment B. Exporting C. Joint Venture D. Licensing E. Contract manufacturing.

E. Joint ownership.

US-based firms can enter into arrangements with foreign firms to create local businesses in foreign markets. Both firms share ownership and control of the venture. This arrangement is termed _______ . A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership.

B. Indirect exporting

Which of the following is not considered to be joint venturing for penetrating foreign markets? A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership

C. Contract manufacturing

When Sears decided to enter Mexico with its retail facilities it engaged in contractual agreements with qualified local manufacturers to produce products that Sears was merchandising and selling in its new Mexican retailing facilities. This is an example of __________ for entering a foreign market. A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership.

A) Straight extension strategy

When firms employ a one-product, one-message marketing mix to tap all foreign markets and this program is basically the same as their domestic marketing program, they are employing as . A) Straight extension strategy B) Product adaptation strategy C) Promotion adaptations strategy D) Dual customization strategy E) New product development strategy

E. All of the above.

Which of the following are considered to be economic factors affecting a firm's global marketing strategy? A. Gross domestic product B. Per capita income of individuals C. Exchange rates D. Infrastructure E. All of the above.

A. Are the firm's domestic sales sufficient to finance a move to global markets?

Which of the following is NOT a key question a firm must address when deciding whether it should "go global?" A. Are the firm's domestic sales sufficient to finance a move to global markets? B. Can the firm adapt is business model to accommodate differences in global cultures and supply chain structure? C. Can the firm identify, understand, and effectively respond to differences in consumer preferences and buying behaviors in global markets? D. Does the firm have the relevant expertise and experience to target global markets? E. Is the firm capable of managing and responding to the varying legal requirements in global markets?

E. All of the above are types of joint ventures.

Which of the following is considered to be joint venturing for penetrating foreign markets? A. Licensing B. Contract manufacturing C. Management contracting D. Joint ownership E. All of the above are types of joint ventures.

B. *Can the firm be sure that it can use its current business model in global markets?

Which of the following is not a key question a firm must address when deciding whether it should "go global?" A. Can the firm offer products that will be competitive in global markets? B. Can the firm be sure that it can use its current business model in global markets? C. Can the firm identify, understand, and effectively respond to differences in consumer preferences and buying behaviors in global markets? D. Does the firm have the relevant expertise and experience to target global markets? E. Is the firm capable of managing and responding to the varying legal requirements in global markets?

E. All of the above

Which of the following is true concerning the importance of global marketing? A. The proportion of US goods exported to other countries has doubled in the last 10 years B. International logistics and transportation costs are rapidly declining making it possible for even small firms to penetrate global markets C. American-made goods are favorably perceived in many foreign countries D. Marketing via the Internet has become increasingly easy and has opened international markets E. All of the above

A. Licensing

With __________ a US firm reaches an agreement with another firm in the targeted foreign market. In exchange for a royalty payment or fee, the foreign-based firm acquires the right to use a US firm's manufacturing process, brand or trademark, trade secret or patent, or some other item that delivers differentiating value. A. Licensing B. Indirect exporting C. Contract manufacturing D. Management contracting E. Joint ownership.

C. Direct Investment

With __________ firms invest in and establish their own foreign-based assembly or manufacturing facilities. A. Direct exporting B. Indirect Exporting C. Direct Investment D. Joint Venturing E. Contract manufacturing.

A. Direct exporting

With __________ the marketer takes over those supply chain functions initially performed by third-party providers. Risks, as well as the costs of financial investments, rise as this strategy is employed. A. Direct exporting B. Indirect Exporting C. Joint Venturing D. Licensing E. Contract manufacturing.

Political and Trade Factors - Trade Barriers - *Import Quotas*

constrain the number of product units from certain product categories that can enter a country for resale. Constraints set by governments on the quantities of certain foreign-made products that can enter a country for resale domestically.

Political and Trade Factors - Trade Barriers - *Dumping*

entails selling a product in a foreign market at prices lower than it commands in the producer's home market. A domestic firm sells a product in a foreign market at prices lower than it commands in the producer's home market.

Political and Trade Factors - Trade Barriers - *Embargoes*

involve a complete ban on certain products. A form of quota in which the importing of a foreign-made product is temporarily or permanently banned Ex: After a mad cow disease outbreak, South Korea placed an embargo on all beef imports from the United States

1) Licensing and/or franchising

with a licensee in the foreign market granting the right to use the domestic marketer's manufacturing process, brand or trademark, trade secret, patent, or some other item of value • In exchange for a royalty payment or fee, a foreign based firm acquires the right to use a US firm's brand or trademark, trade secret or patent, etc. Ex: In Japan, the Moringa Milk company produces Sunkist fruit juices, drinks, and dessert items

Dangers of using a Straight Extension Strategy Ex:

• Domino's opened pizza stores throughout Asia during the 1990s using the same positioning strategy employed in domestic US markets. • This strategy, however, did not resonate with Asian consumers. In their minds 30-minute delivery promises were not sufficient to offset the pizza's comparative mediocrity.

Restraining Forces

• Market Differences • National Controls/Barriers • Costs • Management Myopia • History of Company: brand not transferable because it is too national/regional

Examples of Globalization

• McDonald's • Coca-Cola • Starbucks • GE • IBM • Colgate • Caterpillar • Boeing • Sony • Toyota • Nestle • IKEA • Canon • Nokia • Baskin-Robbins ice cream • GE and RCA televisions • Carnation Milk • Motel 6 • Michelin Tires

Driving Forces

• Technology • Economic Agreements • Leverage (experience, economies of scale, resource utilization) • Economic trends • Communication and Transportation Improvements

3) Management Contracting

• The domestic partner provides managerial expertise to a foreign partner • The foreign partner supplies the capital, or investment resources Ex: Companies such as Hyatt and Marriott sell management contracts to owners of foreign hotels to manage these businesses for a fee.

Straight Extension

• occurs when firms employ a oneproduct, one-message marketing mix to tap all foreign markets (and this program is basically the same as their domestic marketing program) • Yields the longest production runs, lowest costs, and reinforces the "universality" of a brand's global image • Is tempting because it involves no additional product development costs, manufacturing changes, or new promotion. But it can be costly in the long run if products fail to satisfy consumers in specific global markets Ex: Apple iPod, Gillette Razors, Black and Decker Tools, 7-11 Slurpee's - Rolex has used the same simple positioning message of elegance, precision, and durability for decades in all its global markets. -- It is the world's 72nd most dominant brand. - Procter & Gamble (P&G) markets its Pringle's potato chips brand using the same product formulation in each international market. -- It is able to satisfy 80% of world demand through only six flavors and one package design.