CHAPTER 21: TAPPING INTO GLOBAL MARKETS

Marketing Management (13th Edition)Philip Kotler . Kevin Lane Keller

Ice Breaker 1:

• In your post-it notes, please write at least five brands or company that you wear or you have in your bag right now.

• Then, please also write down the country-of-origin of that brand or company.

We will discuss the following:1. Factors to be reviewed

before deciding to go abroad

2. Evaluation & selection of foreign markets to enter

3. Major ways of entering foreign market

We will address the following questions:1. To what extent must

the company adapt its products and marketing programs to each foreign country

2. How should the company manage and organize its international activities

TAPPING INTO GLOBAL MARKETS

Competing in Global Basis

Source: Fortune 500

Global firm operates in more than one country and captures R&D, production, logistical, marketing and financial advantages not available purely from domestic competitors.

In a global industry, competitor’s strategic positions in major geographic or national markets are affected by their overall global positions.

Top 10 countries with the most Global 500 companies

Competing in Global Basis

Companies cannot simplyStay domestic and expect

to maintain markets.

MAJOR DECISIONS IN INTERNATIONAL MARKETING

Deciding whether to go abroad

Deciding which markets to enter

Deciding how to enter the market

Deciding on the marketing program

Deciding on the marketing organization

Source: www.american.com

(1) Deciding whether to go abroad

Factors that draw companies to enter international market:

Some international markets present higher profit opportunities than domestic market.

The company needs larger customer base to achieve economies of scale.

The company wants to reduce its dependence on any one market.

The company decides to counterattack global competitors in the home market.

Customers are going abroad and require international service.

(1) Deciding whether to go abroadRisks to consider

The company might… Not understand foreign preferences and could fail to offer a

competitively attractive product Not understand the foreign country’s business culture. Underestimate foreign regulations and incur unexpected

costs. Lack managers with international experience. The foreign country change its commercial laws, devalue its

currency or undergo political revolution and expropriate foreign property.

(2) Deciding which markets to enterDeveloped vs Developing Markets

DEVELOPED MARKETS A group of industrialized nations including Australia, Austria, Canada, France, Germany, Italy, Japan, the UK, and the United States. In some contexts such countries are collectively called the North. 20% of the world’s population.

DEVELOPING MARKETSSome of the world poorest countries (48 in 1995) designated by the UN as 'least developed' on the basis of health care, literacy, and per capita income. Most of them are in Africa, few in Asia and Pacific, and one (Haiti) in the Caribbean.

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How many markets to enter?

WATERFALL APPROACHGradually entering countries in sequence

SPRINKLER APPROACHEntering many countries simultaneuously

(2) Deciding which markets to enter

WATERFALL APPROACH

WATERFALL APPROACH

WATERFALL APPROACH

WATERFALL APPROACHSPRINKLE R APPROACH

SPRINKLE R APPROACH

Evaluating Potential Markets

In general, candidate countries should be rated on three criteria:

1. Market attractiveness2. Market risk3. Competitive Advantage

(3) Deciding which markets to enter

Indirect-Direct Export

Using Global Web Strategy

Licensing

Joint Ventures

Direct Investment

(3) Deciding how to enter the market

(4) Deciding on the marketing program

Standardized marketing mixStandardization of the product, communication and distribution channels promises the lowest cost.

Adapted marketing mixThe producer, consistent with the marketing concept, holds the consumer needs vary and tailors marketing program to each target group.

• 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

PROS

Ignore differences in… • Consumer needs,

wants and usage patterns for products

• Consumer response to marketing-mix elements

• Brand and product development & the competitive environment

• The legal environment

• Marketing institutions

• Administrative procedures

CONS

Table 21.2 Global Marketing Pros and Cons

(4) Deciding on the marketing program

Company should review the following elements and determine which add more revenue than cost:

Product features Labeling Colors Materials Sales Promotion Advertising Media Brand Name Packaging Advertising execution Prices Advertising themes

PRODUCT

STRAIGHT EXTENSION Introduces the product in the foreign

market without any change. (ie. cameras, consumer

electronics, machine tools)

PRODUCT ADAPTATION

Alters the product to meet local conditions or

preferences.> Regional version> Country version

> City Version> Retailer version

PRODUCT INVENTIONCreating something new.BACKWARD INVENTION

Reintroducing earlier product forms that are well

adapted to a foreign country’s need.

FORWARD INVENTIONCreating new product to

meet a need in other country

(4) Deciding on the marketing program

COMMUNICATION (4) Deciding on the marketing program

COMMUNICATION ADAPTATIONA process when companies can run the same marketing communications programs they use in the home market or change them for each local market.

DUAL ADAPTATIONIf it adapts both the product and the communications

De Beers

DIAMOND IS FOREVER

TRULY ASIA

ALWAYS

CONNECTING PEOPLE

I WANT MY….

Blunders in International Marketing Communication

• Scandinavian vacuum manufacturer Electrolux used this campaign in America: “Nothing Sucks like an Electrolux.”

• Coors put its slogan, “Turn It Loose,” into Spanish, where it was read as “Suffer From Diarrhea.”

• Pepsi’s “Come Alive With the Pepsi Generation” translated into “Pepsi Brings Your Ancestors Back From the Grave” in Chinese.

• Colgate introduced a toothpaste in France called Cue, the name of a notorious porno magazine.

• When American Airlines wanted to advertise its new leather first class seats in the Mexican market, it translated its “Fly In Leather” campaign literally, which meant “Fly Naked” (vuela en cuero) in Spanish.

• The Coca-Cola name in China was first read as “Kekoukela”, meaning “Bite the Wax Tadpole” or “Female Horse Stuffed with Wax”, depending on the dialect. Coke then researched 40,000 characters to find a phonetic equivalent “kokoukole”, translating into “Happiness in the Mouth.”

• The Dairy Association’s huge success with the campaign “Got Milk?” prompted them to expand advertising to Mexico. It was soon brought to their attention the Spanish translation read “Are You Lactating?”

PRICE

PRICE ESCALATION

• Changes in the cost or price of specific goods or services in a given economy over a period of time

TRANSFER PRICE

• Refers to the setting, analysis, documentation and adjustment of charges between related parties for goods, services or use of properties.

DUMPING

• Charging either less than its cost or less than it charges at home in order to enter or win a market

GRAY MARKET

• Consist of branded products diverted from normal or authorized distribution channels in the country of product origin or across international borders

Pricing challenges when selling abroad:

DISTRIBUTION Seller

Seller’s International marketing headquarters

Channels between nations

Channels within foreign nations

Final buyers

Country of Origin Effects

Country-of-origin perceptions are the mental associations and beliefs triggered by a country.

Can affect consumer decision directly and indirectly.

Managing perceptions in the most advantageous way possible is an important marketing priority.

Deciding on the Marketing Organozation

EXPORT DEPARTMENTConsists of Sales Manager and a few assistants

INTERNATIONAL DIVISIONHeaded by a division president who sets goals and budgets and is responsible for the company’s international growth

GLOBAL ORGANIZATIONGlobal operating units report directlt to the chief executive or executive committee, not to the head of international division.