LECTURE28 Tapping Into Global Markets Chapter Questions What

LECTURE-28 Tapping Into Global Markets

Chapter Questions § What factors should a company review before deciding to go abroad? § How can companies evaluate and select specific foreign markets to enter? § What are the major ways of entering a foreign market? § To what extent must the company adapt its products and marketing program to each foreign country? § How should the company manage and organize its international activities?

What is a Global Firm? A global firm is one that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors.

Major Decisions in International Marketing § § § Deciding whether to go Deciding which markets to enter Deciding how to enter Deciding on the marketing program Deciding on the marketing organization

The internationalization process The process by which a company enters a foreign market. § Firms regards foreign markets as risky due to the fact that, as these markets are unknown to it. § Firm faces high marketing cost to enter in an International market. § To avoid cost & risk. Its strategy is to go abroad at a slow & cautious pace.

Desired Country Characteristics for Market Entry § Rank high on market attractiveness § Rank low in market risk § Possess a competitive advantage

A typical internationalization process 1. Initially, the firm might license patents, trademarks, or technology to a foreign company in exchange for a fee or royalty. 2. The firm sees a potential for extra sales by exporting and uses a local agent or distributor to enter a foreign market.

A typical internationalization process 3. The firm may use exporting as a “vent” for its surplus production and might have no long-term commitment to the international market. 4. As exports become more important, the MNE will set up an office for its sales representative or a sales subsidiary.

A typical internationalization process 5. The firm might set up local packaging and/or assembly operations. 6. Finally, the firm will set up a wholly-owned subsidiary (FDI).

Entry into foreign markets: the internationalization process

Why do firms become MNEs? 1. To diversify themselves against the risks and uncertainties of the domestic business cycle. 2. To tap the growing world market for goods and services. 3. In response to foreign competition. 4. To reduce costs. 5. To overcome barriers to entry into foreign markets. 6. To take advantage of technological expertise by manufacturing goods directly.

Top Global Firms Based in Developing Markets § § § China Mobile Lenovo Group Infosys Technologies Haier Huawei Technologies

Economic integration: an overall perspective The establishment of transnational rules and regulations that enhance economic trade and cooperation among countries.

Trade creation and diversion § Trade creation: A process in which members of an economic integration group begin to focus their efforts on those goods and services for which they have a comparative advantage and start trading more extensively with each other. § Trade diversion: A process in which members of an economic integration group decrease trade with non-member countries in favor of trade with each other.

Levels of economic integration § Free Trade Area: barriers to trade (such as tariffs) among member countries are removed (e. g. NAFTA ) USA, Canada & Mexico § Customs Union: tariff between member countries are eliminated and a common trade policy toward non-member countries is established (e. g. Andean Pact Bolivia, Colombia, Ecuador, Peru & Venezuela) § Common Market: elimination of trade barriers among member countries, a common external trade policy, and mobility of factors of production among member countries (e. g. EU progressed beyond this. )

Levels of economic integration (cont. ) § Economic union: A deep form of integration characterized by free movement of goods, services, and factors of production among member countries and full integration of economic policies (e. g. EU) § Political union: An economic union in which there is full economic integration, unification of economic policies, and a single government (e. g. USA & UAE)

Key Developing Markets Brazil Russia China South Africa

Global Marketing Advantages Disadvantages § Economies of scale § Lower marketing § Differences in § Power and scope § Consistency in brand § Differences in costs image § Ability to leverage § Uniformity of marketing practices consumer needs, wants, usage patterns consumer response to marketing mix § Differences in brand development process § Differences in environment

What Marketing Aspects Might Be Adapted for International Marketing? § § § Product features Labeling Colors Materials Sales promotion Advertising media § § § Brand name Packaging Advertising execution Prices Advertising themes

Commandments of Global Branding § Understand similarities and differences in the global branding landscape § § Do not take shortcuts in brand building Establish a marketing infrastructure Embrace integrated marketing communications Establish brand partnerships

Commandments of Global Branding (cont. ) § § Balance standardization and customization Balance global and local control Establish operable guidelines Implement a global brand-equity measurement system § Leverage brand elements

Levels of Product Adaptation § § Production of regional product versions Production of country versions Production of city versions Production of retailer versions

Price Choices § Set a uniform price everywhere § Set a market-based price in each country § Set a cost-based price in each country

What is a Gray Market? A gray market consists of branded products diverted from normal or authorized distributions channels in the country of product origin or cross international borders; dealers in lower priced countries sell products in higher priced countries.

Global Organization Strategies § World as single market § Multinational § Glocal

Bibliography v Marketing Management – A South Asian Perspective by Philip Kotler, Kevin Lane Keller, Abraham Koshy & Mithileshwar Jha, 13 th Edition, Published by Pearson Education, Inc. v Advertising Principles & Practice by Wells, Moriarty & Burnett Published by Pearson Education, Inc. v Principles of Advertising & IMC by Tom Duncan 2 nd Edition, Published by Mc. Graw-Hill Irwin. v Principles of Marketing by Philip Kotler & Gary Armstrong Thirteenth Edition, Published by Prentice Hall

The End: “Take care of your reputation. It’s your most valuable asset”