Chapter Learning Objectives • 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 marketentry strategy 11 - 1 The Nestle Way: Evolution Not Revolution • Nestle is the world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water. • Nestle strategy can be summarized in four points: - 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 and markets products that consumers can afford. 11 - 2 Benefits of Global Marketing • When large market segments can be identified, economies of scale in production and marketing can be important competitive advantages for global companies. • Transfer of experience and know-how across countries through improved coordination and integration of marketing activities. • Marketing globally also ensures that marketers have access to the toughest customers. • Diversity of markets served carries with it additional financial benefits. • Firms that market globally are able to take advantage of changing financial circumstances. 11 - 3 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. • Planning relates to the formulation of goals and methods of accomplishing them, so it is both a process and philosophy. - Corporate planning - Strategic planning - Tactical planning • Successful planning is evaluating company objectives, including management’s commitment and philosophical orientation to international business. 11 - 4 Planning for Global Markets (cont’d) • Company objectives and resources - Each new market can require 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. • 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 11 - 5 The Planning Process • Phase 1: Preliminary Analysis and Screening – Matching Company and Country Needs. • Phase 2: Adapting the Marketing Mix to Target Markets. • Phase 3: Developing the Marketing Plan • Phase 4: Implementation and Control 11 - 6 International Planning Process • Insert Exhibit 11.1 11 - 7 Alternative Market-Entry Strategies • An entry strategy into the international market should reflect on analysis of market characteristics such as: - Potential sales - Strategic importance - Strengths of local resources - Cultural differences - Country restrictions • Companies most often begin with modest export involvement. • A company has four different modes of foreign market entry from which to select: - Exporting - Contractual agreements - Strategic alliances - Direct foreign investments 11 - 8 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. • The Internet - Initially, Internet marketing focused on domestic sales, however, 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. 11 - 9 Contractual Agreement • Contractual agreements are 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. 11 - 10 Contractual Agreement (continued) • Franchising - Franchiser provides a standard package of products, systems, and management services, and the franchise provides market knowledge, capital, and personal involvement in management. - Despite temporary setbacks, franchising is still 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 11 - 11 Strategic International Alliances • A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and 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 • Many companies also are entering SIAs to be in strategic position to be competitive and to benefit from the expected growth in the single European market. 11 - 12 Strategic International Alliances (continued) • International Joint Ventures - A joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity. - Four Characteristics define joint ventures: • JVs are established, separate, legal entities • The acknowledged intent by the partners to share in the management of the JV • There are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals • Equity positions are held by each of the partners 11 - 13 Strategic International Alliances (continued) • Consortia - Consortia are similar to joint ventures and could be classified as such except for two unique characteristics: • They typically involve a large number of participants • They frequently operate in a country or market in which none of the participants is currently active. - Consortia are developed to pool financial and managerial resources and to lessen risks. 11 - 14 Direct Foreign Investment • Factors that have been found to influence the structure and performance of direct investments: - Timing The growing complexity and contingencies of contracts Transaction cost structures Technology transfer Degree of product differentiation The previous experiences and cultural diversity of acquired firms - Advertising and reputation barriers 11 - 15 Organizing for Global Competition • Because organizations need to reflect a wide range of companyspecific characteristics, devising a standard organizational structure is difficult. • Companies are usually structured around one of three alternatives: - Global product divisions responsible for product sales throughout the world - Geographical divisions responsible for all products and functions within a given geographical area - A matrix organization consisting of either of these arrangements with centralized sales and marketing run by a centralized functional staff, or a combination of area operations and global product management 11 - 16 Organizing for Global Competition (cont’d) • Locus of decision - Considerations of where decisions will be made, by whom, and by which method constitute a major element of organizational strategy. • Centralized versus decentralized organizations - An infinite number of organizational patterns fro the headquarters activities of multinational firms exist, but most fit into one of three categories: • Centralized • Regionalized • Decentralized • No single traditional organizational plan is adequate for today’s global enterprise seeking to combine the economies of scale of a global company with the flexibility and marketing knowledge of a local company. 11 - 17 Schematic Marketing Organization Plan Combining Product, Geographic, and Functional Approaches • Insert Exhibit 11.4 11 - 18