Global Marketing Management: Planning and Organization Week 4

Global Marketing Management “standardization vs. adaptation” 1970s “globalization vs. localization” 1980s “global integration vs. local responsiveness” 1990s

Global Marketing Management The issue is if the global homogenization of consumer tastes allow for the global standardization of the marketing mix The Internet revolution of the 1990s added a new twist to the old debate Some companies continue to believe that “global” is the way to go For example, executives at Twix Cookie Bars tried out their first global campaign with a new global advertising agency, Grey Worldwide.

Global Marketing Management In many parts of the world, consumers have become pickier, more penny-wise, or a little more nationalistic They are spending more of their money on local drinks whose flavors are not part of the Coca-Cola lineup The trend back toward localization is because of the efficiencies of customization because of the proliferation of the Internet and flexible manufacturing processes Consumer tastes are converging on one hand, but tastes could also be unique as consumers around the world are becoming more savvy.

Global Marketing Management The debate about standardization versus adaptation is an example of ethnocentrism in the U.S. As global markets homogenize and diversify simultaneously, the best companies will avoid focusing on country as the primary segmentation variable Other segmentation variables are often more important—for example, climate, language group, media habits, age, or income Global markets continue to become homogenous, savvy companies focus on a common set of variables such as climate or language rather than looking at each country market separately. A case in point is the diversity in the Chinese market and the importance of marketing to different regions differently. Hong Kong and Shanghai may be more similar consumer markets (cosmopolitan) than Shanghai and Guangzhou in Southern China.

Benefits of Global Marketing Economies of scale in production and marketing Transfer of experience and know-how across countries Global diversity in marketing talent leading to new approaches Marketing globally ensures that marketers have access to the toughest customers Spreading the portfolio of markets brings stability of revenues and operations to many global companies Economies of Scale: Black & Decker Manufacturing Company—makers of electrical hand tools, appliances, and other consumer products—realized significant production cost savings when it adopted a pan-European strategy. It was able to reduce not only the number of motor sizes for the European market from 260 to 8 but also 15 different models. Similarly, Ford estimates that by unifying product development, purchasing, and supply activities across several countries, it saves more than $3 billion a year. While Japanese firms initially dominated the mobile phone business in their home market, international competitors now pose growing challenges via better technologies developed through greater global penetration. Transfer of experience and know-how across countries: Unilever successfully introduced two global brands originally developed by two subsidiaries. Its South African subsidiary developed Impulse body spray, and a European branch developed a detergent that cleaned effectively in European hard water. Aluminum Company of America’s (Alcoa) joint venture partner in Japan produced aluminum sheets so perfect thatU.S. workers, when shown samples, accused the company of hand-selecting the samples. Line workers were sent to the Japanese plant to learn the techniques, which were then transferred to the U.S. operations. Access to the toughest customers : For example, in many product and service categories, the Japanese consumer has been the hardest to please; the demanding customers are the reason that the highest-quality products and services often emanate from that country. Competing for Japanese customers provides firms with the best testing ground for high-quality products and services. Stability of revenues: Firms that market globally are able to take advantage of changing financial circumstances. For example, as tax and tariff rates ebb and flow around the world, the most global companies are able to leverage the associated complexity to their advantage.

Planning for Global Markets Planning is a systematized way of relating to the future It is a commitment of resources to a country market to achieve specific goals It allows for rapid growth of the international function and the challenges of different national markets International corporate planning is essentially long term incorporating generalized goals for the enterprise as a whole Strategic planning deals with products, capital, research, and the long- and short-term goals of the company Tactical planning , or market planning, pertains to specific actions and to the allocation of resources to implement goals

Whether a company is marketing in several countries or is entering a foreign market for the first time, planning is essential to success. The first-time foreign marketer must decide what products to develop, in which markets, and with what level of resource commitment. For the company that is already committed, the key decisions involve allocating effort and resources among countries and product(s), deciding on new market segments to develop or old ones to withdraw from, and determining which products to develop or drop. 12-8

Phase 1: Preliminary Analysis and Screening A critical first step in the planning process is deciding in which existing country market to make a market investment A company’s strengths and weaknesses, products, philosophies, modes of operation, and objectives must be matched with a country’s qualities First, countries are analyzed and screened to eliminate those that do not offer sufficient potential for further consideration Second, screening criteria are established against which prospective countries can be evaluated Third, a complete analysis of the environment within which a company plans to operate is made Emerging markets pose a special problem because many have inadequate marketing infrastructures, distribution channels are underdeveloped, and income levels and distribution vary among countries. Screening criteria are ascertained by an analysis of company objectives, resources, and other corporate capabilities and limitations. Once the screening is done, a complete environmental analysis is done which includes a detailed examination of controllable and uncontrollable elements both in the home and host countries. This helps in determining which parts of the marketing mix can be standardized and which parts need to be adapted. The results of Phase 1 provide the marketer with the basic information necessary to evaluate the potential of a proposed country market. Radio Shack’s early attempts at international marketing in western Europe resulted in a series of costly mistakes that could have been avoided had it properly analyzed the uncontrollable elements of the countries targeted. The company staged its first Christmas promotion in anticipation of December 25 in Holland, unaware that the Dutch celebrate St. Nicholas Day and give gifts on December 6.

Phase 2: Defining Target Markets and Adapting the Marketing Mix A more detailed examination of the components of the marketing mix is the purpose of Phase 2 The primary goal of Phase 2 is to decide on a marketing mix adjusted to the cultural constraints imposed by the uncontrollable elements of the environment that effectively achieves corporate objectives and goals The answers to three major questions are generated in Phase 2: Are there identifiable market segments that allow for common marketing mix tactics across countries? Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix? Will adaptation costs allow profitable market entry? The process used by the Nestlé Company is an example of the type of analysis done in Phase 2. Each product manager has a country fact book that includes much of the information suggested in Phase 1. The country fact book analyzes in detail a variety of culturally related questions. Frequently, the results of the analysis in Phase 2 indicate that the marketing mix will require such drastic adaptation that a decision not to enter a particular market is made. For example, a product may have to be packaged differently or in smaller sizes to adapt to a country market, but the additional manufacturing cost of doing this may be too high to justify market entry. This is what happened to Haagen Daaz in Japan and they exited the market.

Phase 3: Developing the Marketing Plan A marketing plan is developed for the target market—whether it is a single country or a global market set The marketing plan begins with a situation analysis and culminates in the selection of an entry mode and a specific action program for the market The specific plan establishes what is to be done, by whom, how it is to be done, and when. Included are budgets and sales and profit expectations Just as in Phase 2, if the needs of the market does not match company objectives and resources, a decision may be made not to enter the market.

Phase 4: Implementation and Control The planning process is a dynamic, continuous set of interacting variables with information continuously building among phases An evaluation and control system requires performance-objective action; bringing the plan back on track should standards of performance fall short The system encourages the decision maker to consider all variables that affect the success of a company’s plan It provides the basis for viewing all country markets and their interrelationships as an integrated global unit Basically, this phase provides guidelines to develop timelines and benchmarks for different stages of the planning process. It also allows the firm to take a comprehensive view of all its international markets.