Webster University Introduction to Global Strategic Planning &
Webster University Introduction to Global Strategic Planning & Global Market Expansion MRKT 5980 Global Marketing “…the world is becoming more homogenous…” “...distinctions between national markets are fading and may disappear…” 1/11/2017 Webster University MRKT 5980 Page 2 Global Marketing Evolution Develop Core Business Strategy Core Business Strategy Internationalize the Strategy Globalize the Strategy Country A Country B Country C Country D Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved. 1/11/2017 Webster University MRKT 5980 Page 3 Globalization Drivers Market Factors • new consumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliances Cost Factors • avoiding cost inefficiencies and duplicated efforts Environmental Factors • reduced governmental barriers, rapid technological evolution Competitive Factors • rapid product innovation, introduction, distribution 1/11/2017 Webster University MRKT 5980 Page 4 The Strategic Planning Process Understanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed. The Strategic Business Unit • Based on product market similarities 1/11/2017 Similar needs or wants to be met Similar end user customers to be targeted Similar products or services used to meet needs of specific customers Webster University MRKT 5980 Page 5 The Strategic Planning Process Global Strategy Formulation Assessment and Adjustment of Core Strategy Market/Competitive Analysis - Internal Analysis Formulation of Global Strategy Choice of Target Countries, Segments, and Competitive Strategy Development of Global Marketing Program Implementation Organizational Structure - Control 1/11/2017 Webster University MRKT 5980 Page 6 Market and Competitive Analysis First, understand the structure of the global market industry; the common features of customer requirements and choice factors. Internal analysis • Examine the readiness and capability of the firm to undertake strategic moves with its current resources. 1/11/2017 Webster University MRKT 5980 Page 7 Formulating Global Marketing Strategy Formulation begins with a series of strategic decisions Choice of Competitive Strategy • Cost leadership • Differentiation • Focus Country-Market Choice • Concentration or diversification • Factors in country markets selection 1/11/2017 The stand-alone attractiveness of the market Global strategic importance of the market Possible synergies offered by the market Webster University MRKT 5980 Page 8 Competitive Strategies Source of Competitive Advantage Competitive Scope Industry-wide Single Segment Low Cost Differentiation Cost Leadership Broad Differentiation Focus SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1. 1/11/2017 Webster University MRKT 5980 Page 9 Bases for Global Market Segmentation Bases for International Market Segmentation Marketing Management Environmental Variables Geographic Variables Product Variables 1/11/2017 Variables Political Variables Promotion Variables Economic Variables Price Variables Webster University MRKT 5980 Cultural Variables Distribution Variables Page 10 Global Marketing Program Development Development Decisions • Product offering The degree of standardization and adaptation in the product offering. • The marketing approach The marketing program beyond the product variable. • The location and extent of value-adding activities Pooling production. Exploiting factor costs or capabilities. Strategic alliances. Concurrent engineering. • Competitive moves to be made 1/11/2017 Cross-subsidization using resources accumulated in one market to wage a competitive battle in another. Webster University MRKT 5980 Page 11 Implementing Global Marketing Success will come from a balance between local and regional / global concerns. “Think globally, act locally” is the operative phrase for global marketers competing in country markets. Product choices should consider individual markets as well as transfer products from one region to another. 1/11/2017 Webster University MRKT 5980 Page 12 Global Marketing Pitfalls to Avoid Insufficient local market research. The tendency to over standardize the product. Inflexibility in planning and implementation. The “Not-Invented-Here” syndrome (NIH). • How to avoid the NIH syndrome 1/11/2017 Ensure that local managers participate in the development of global brand marketing strategies. Encourage local managers to develop ideas for regional or global use. Webster University MRKT 5980 Page 13 Localizing Global Marketing Achieving a balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy. 1/11/2017 Webster University MRKT 5980 Page 14 Localizing Global Marketing Management processes • Enhance the global transfer of communications. • Interchange personnel to gain experience abroad. • Headquarters should coordinate and leverage resources. • Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands. • Allow local managers control over marketing budgets to respond to local customer needs and counter global competition. 1/11/2017 Webster University MRKT 5980 Page 15 Localizing Global Marketing Organization structures • The shift to global account management. Corporate culture • The world is not one single market. • Plan and execute programs on a worldwide basis. • A global Identity favors no specific country. 1/11/2017 Webster University MRKT 5980 Page 16 Foreign Investments Firms invest to enter markets or assure themselves of sources of supply. Foreign direct investment • An equity investment to create or expand a permanent interest in a foreign enterprise. Portfolio investment • The purchase of stocks and bonds internationally. Major foreign investors • More than 45,000 multinational corporations with 280,000 affiliates globally. • The terms “foreign” and “domestic” may no longer apply. 1/11/2017 Webster University MRKT 5980 Page 17 Reasons for Foreign Direct Investment Marketing factors • Growth and profit motivations. • Circumventing government-erected barriers to trade. • Access to low-cost resources and supply. • Local customers preference for domestic goods and services. • Attempts to obtain low-cost resources and ensure their supply. 1/11/2017 Webster University MRKT 5980 Page 18 Categories of International Firms Resource seekers • are searching for natural and human resources. Market seekers • are searching for better opportunities to enter or expand within markets. Efficiency seekers • are attempting to obtain the most economic sources of production. 1/11/2017 Webster University MRKT 5980 Page 19 Reasons for Foreign Direct Investment Derived demand • results when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market. Government incentives • Fiscal incentives tax holidays, allowances, credits and rebates. • Financial incentives special funding for land or buildings, loans and guarantees, wage subsidies. • Non-financial incentives 1/11/2017 guaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure. Webster University MRKT 5980 Page 20 Foreign Direct Investors Positive perspectives • Bring in capital, economic activity, and employment. • Transfer technology and managerial skills. • Competition, market choice, and competitiveness are enhanced. Negative perspectives • • • • • 1/11/2017 Drain resources from host countries. Starve smaller capital markets. Discourage local technology development. Bring in outmoded technology. Create new competition for local firms. Webster University MRKT 5980 Page 21 Types of Ownership Ownership patterns may be based on past experiences with similar ownership models. Full ownership • Full control, full assumption of all risks. • May be desirable, but is not necessary for success internationally. Joint ventures • Shared control, shared investment risks. • Reasons for joint ventures: 1/11/2017 governmental pressure to join with local partners. mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers. Webster University MRKT 5980 Page 22 Joint Ventures Recommendations for joint ventures • Find the right partner. • Negotiate the joint venture agreement carefully. • Maintain flexibility to adjust to changing market conditions. ADVANTAGES Pooling of resources Better relationships with local organizations Knowledge the partner brings of the local market Minimizing exposure risk of long-term capital Maximizing leverage of invested capital 1/11/2017 DISADVANTAGES Different levels of control are permitted or required Difficulty in maintaining the relationship Disagreements over business decisions Disagreements over profit accumulation, and distribution (profit repatriation) Webster University MRKT 5980 Page 23 Types of Ownership… continued Strategic alliances • “…more than the traditional customer-vendor relationship, but less than an outright acquisition.” Government consortia • Public-private relationship in a specific project. • Typically government supported or subsidized. 1/11/2017 Webster University MRKT 5980 Page 24 Complementary Strengths Create Value PARTNER STRENGTH… + PARTNER STRENGTH… = JOINT OBJECTIVE Pepsico marketing clout for canned beverages Lipton recognized tea brand and To sell canned iced tea customer franchise beverages jointly Philips consumer electronics innovation and leadership Levi Strauss fashion design and Outdoor wear with integrated distribution electronic equipment for fashion-conscience consumers KFC established brand and store format, and operation skills Mitsubishi real estate and siteselection skills in Japan To establish a KFC chain in Japan Siemens presence in range of Corning technological strength telecommunications markets in optical fibers and glass worldwide and cablemanufacturing technology To create a fiber-optic cable business Ericsson technological strength in public telecommunications network To create and market network management systems Hewlett-Packard computers, software, and access to electronics-channels SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com. 1/11/2017 Webster University MRKT 5980 Page 25 Contractual Arrangements Cross marketing • The parties agree to carry out activities which are complementary and noncompetitive. Contract manufacturing • An arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development. Management contracting • A supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is Webster functionally University MRKT 5980 important to the Page 26 1/11/2017 client. Management Contracting Advantages CLIENT ADVANTAGES Provide organizational skills not locally available. Immediate availability of skills. Management assistance and support that is not available locally. 1/11/2017 SUPPLIER ADVANTAGES Lower risk because no equity capital is at stake. Exercise large amounts of operational control. The strategic advantage of being on the “inside”. Opportunity to commercialize “knowhow”. Using experienced staff to offset business fluctuations. Webster University MRKT 5980 Page 27 Management Contracting Risks Risks to the client • Over-dependence on the supplier. • Loss of control to the supplier. Risks to the contractor • Bidding without fully detailed insight into actual costs of delivering the service. • The effects of the loss or termination of the contract and resulting personnel problems. 1/11/2017 Webster University MRKT 5980 Page 28
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