Lecture International marketing (14/e) - Chapter 11

International Marketi
ng
14th Edition
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham

Global Marketing
Management:
Planning and
Organization
Chapter 11
McGraw­Hill/Irwin
International Marketing 14/e

Copyright © 2009 by The McGraw­Hill 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

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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

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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.

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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

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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

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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
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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
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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

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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
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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

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International Planning Process

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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
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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

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• Uppsala Interntionalization Model (U-M) was proposed by
researchers from University of Uppsala, among many are Jan
Johanson, Jan-Erik Vahlne, and Wiedersheim-Paul.

• According to Johanson and Vahlne (1990, 1976), the
internationalization of the firm, which has its theoretical base
in the behavioral theory of the firm, is seen as the process in
which the enterprise gradually increases its international
involvement. This process evolves in an interplay between the
development of knowledge about foreign markets and
operations on one hand and an increasing commitment of
resources to foreign markets on the other.
• The model distinguish between four different modes of
entering an international market, where successive stages
represent higher degrees of international involvement:


U- Model of Internationalization
• Stage 1: No regular export activities
• Stage 2: Export via independent representative
(agents)
• Stage 3: Establishment of an overseas sales
subsidiary
• Stage 4: Overseas production/ manufacturing
units


The internationalization process of the firm


Alternative Market-Entry Strategies

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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

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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

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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

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Contractual Agreement
• Contractual agreements
– Long-term,
– Nonequity association between a company and another in a
foreign market

• 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

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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

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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
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