Summer 2008

INTERNATIONAL MARKETINGMKTG3417

Professor: Bob Carpenter

Summer 2008

Today’s Agenda

• Career impact of Emerging Markets Discussion

• Nestle Case Solution

• Strategies for International Expansion

• Group Project Work

• Assignments

Summer 2008

What about your Career?How will Multinational Market Regions and the Emerging markets change in next ten years? Give me at least five implications of

1)2)3)4)5)

Summer 2008

Nestle Infant Formula

• Define a problem(s)• Sort relevant and irrelevant information

• Separate fact from opinion

• Interpret and analyze information

• Come to reasoned decision and course of action

• Communicate your thoughts clearly and persuasively to others during class discussions

Summer 2008

1. How global marketing management differs from international marketing management

1. How global marketing management differs from international marketing management

2. The increasing importance of international strategic alliances

2. The increasing importance of international strategic alliances

3. The need for planning to achieve company goals

3. The need for planning to achieve company goals

4. The important factors for each alternative market-entry strategy4. The important factors for each alternative market-entry strategy

Summer 2008

Introduction

• Increasingly firms are entering foreign markets • Executing a global perspective requires planning,

organization, and willingness to try new approaches – such as engaging in collaborative relationships and redefining the scope of company operations

• Important elements of this process are global marketing management, competition in the global marketplace, strategic planning, and alternative market-entry strategies

Summer 2008

Global Marketing Management

• Global Marketing Management thought has undergone substantial revision

• In the 1970s the argument was framed as “standardization vs. adaptation”

• In the 1980s it was “globalization vs. localization” or “Think local, act local”

• In the 1990s it was “global integration vs. local responsiveness”

• The fundamental question is whether the global homogenization of consumer tastes allowed global standardization of the marketing mix

Global Marketing Management: An Old Debate and a New ViewGlobal Marketing Management: An Old Debate and a New View

Summer 2008

Global Marketing Management

• As global markets continue to homogenize and diversify simultaneously, the best companies will avoid the trap of focusing on country as the primary segmentation variable

• Other segmentation variables are often more important – e.g. climate, language group, media habits, age, or income

Summer 2008

The Nestle Way

• The “Nestlé way” is to dominate its markets; its strategy can be summarized in four points:

(1) think and plan long term (2) decentralize(3) stick to what you know, and(4) adapt to local tastes

• Nestlé sells more than 8,500 products produced in 489 factories in 193 countries

• Nestlé sells more than 8,500 products produced in 489 factories in 193 countries

• Nestlé is the world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water

• Nestlé is the world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water

Summer 2008

Benefits of Global Marketing

• Economies of scale in production and marketing can be important competitive advantages for global companies

• Unifying product development, purchasing, and supply activities across several countries it can save costs

• Transfer of experience and know-how across countries through improved coordination and integration of marketing activities

• Diversity of markets by spreading the portfolio of markets served brings an important stability of revenues and operations to many global firms

When large market segments can be identified:When large market segments can be identified:

Summer 2008

Global Branding Strategies

• Global branding is becoming one of the key drivers of firm growth in markets throughout the world

• Effective branding can increase returns by as much as five percent • By using a well-organized branding strategy, companies can

differentiate themselves from competitors and thereby become less vulnerable

• Global branding is also a strong factor in building customer loyalty• Branding allows the communications between company and customers

to be homogenized, thus reducing the need to customize messages and images

“Brands are all about trust…”“Brands are all about trust…”

Summer 2008

• Yum! Brands video

• Watch for balance between global brands/products and localization.

Summer 2008

The Planning Process

Phase 1: Preliminary Analysis and Screening – Matching Company and Country Needs

Phase 1: Preliminary Analysis and Screening – Matching Company and Country Needs

Phase 2: Adapting the Marketing Mix to Target Markets

Phase 2: Adapting the Marketing Mix to Target Markets

Phase 3: Developing the Marketing PlanPhase 3: Developing the Marketing Plan

Phase 4: Implementation and ControlPhase 4: Implementation and Control

• The answers to three major questions are sought in Phase 2:

(a) Are there identifiable market segments that allow for common marketing mix tactics across countries?

(b) Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix?

(c) Will adaptation costs allow profitable market entry?

Summer 2008

The planning process illustrated here offers a systematic guide to planning for the multinational firm operating in several countries

International Planning Process

Summer 2008

International Planning Process

Expand or notKnow thyself

MarketEvaluation

Mode ofEntry

OverallStrategy

MarketingMix

SegmentationVariables•Country•Consumer type•Climate•Other

Market Selection•Country•Screening•Segment data

OpportunityAssessment•Demand•Competitors•Other markets

Exporting•Indirect•Direct•Internet

Contractual•Licensing•Franchising•Contract Manufacturing•Other

Alliances•Joint Ventures•Consortia•Strategic alliances

Direct Invest•Greenfield•M&A

Scope•Waterfall•Sprinkler

Sequencing

Timing

Coordination

Cross market optimization

Product•Positioning•Branding•Style/Features•Packaging•Services•Standards

Place•Channels•Scope•Logistics

Price•Price strategy•Trade margins

Promotion•Advertising•Selling•Promotions•Publicity & PR

Country•Environment

Industry•Competitors•Internationalization•Growth

Company•Culture•Objectives•Skills•Etc:

Product•Nature•Differentiation•Technology

Summer 2008

• Country Selection

• Things to consider

Summer 2008

Countries

• Brazil

• China

• Germany

• India

• Saudi Arabia

• Senegal

Summer 2008

Product – Electric Razor from Mexico

Summer 2008

Product – Mexican Food Franchise from Mexico

Summer 2008

Product – Seadoo from Canada

Summer 2008

Alternative Market-Entry Strategies

• market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions)

• company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and

• commitment that management is prepared to make

The choice of entry strategy depends on:The choice of entry strategy depends on:

© 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

Alternative Market-Entry Strategies

• exporting

• contractual agreements

• strategic alliances

• direct foreign investment

• A company has four different modes of foreign market entry from which to select:

• A company has four different modes of foreign market entry from which to select:

Summer 2008

Alternative Market-Entry Strategies

Summer 2008

Exporting

Exporting can be either direct or indirectIn direct exporting the company sells to a customer in another countryIn contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product The Internet is becoming increasingly important as a foreign market entry method

Summer 2008

Contractual Agreements

• Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills

• Contractual forms of market entry include:(1) Contract Manufacturing(2) Licensing: A means of establishing a foothold in foreign markets

without large capital outlays is licensing of patent rights, trademark rights, and the rights to use technological processes.

(3) Franchising: In licensing the franchisor provides a standard package of products, systems, and management services, and the franchisee provides market knowledge, capital, and personal involvement in management.Franchising permits flexibility in dealing with local market conditions and provides the parent firm with reasonable degree of control.

Contractual agreements are long-term, non-equity associations between a company and another in a foreign market

Contractual agreements are long-term, non-equity associations between a company and another in a foreign market

Summer 2008

Strategic International Alliances

• SIAs are sought as a way to shore up weaknesses and increase competitive strengths

• SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs

• An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and Qantas

• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management

• Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management

• 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

• 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

Summer 2008

Building Strategic Alliances

Summer 2008

International Joint Ventures

• International joint ventures (IJVs) have been used increasingly since 1970s

• IJVs are used as a means of lessening political and economic risks by the amount of the partner’s contribution to the venture

• JVs provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in an acquisition of an existing company

• A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity

• Joint ventures are different from minority holdings by an MNC in a local firm

Summer 2008

International Joint Ventures

1. JVs are established, separate, legal entities; 2. they acknowledge intent by the partners to share in the

management of the JV; 3. they are partnerships between legally incorporated

entities such as companies, chartered organizations, or governments, and not between individuals;

4. equity positions are held by each of the partners.

• Four factors are associated with joint ventures:• Four factors are associated with joint ventures:

© 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

Consortia

(1) They typically involve a large number of participants, and

(2) They frequently operate in a country or market in which none of the participants is currently active

• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

• Consortia are similar to joint ventures and could be classified as such except for two unique characteristics:

• Consortia are developed to pool financial and managerial resources and to lessen risks.

• Consortia are developed to pool financial and managerial resources and to lessen risks.

Summer 2008

Direct Foreign Investment

• Companies may manufacture locally to capitalize on low-cost labour, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry

• Firms may either invest in or buy local companies or establish new operations facilities

• A fourth means of foreign market development and entry is direct foreign investment

• A fourth means of foreign market development and entry is direct foreign investment

© 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

Summer 2008

FDI

• FDI

• Honda Video

Summer 2008

Administration

• Read Chapter 10 and 11

• Test #2 Moved to Tuesday