Global Marketing Spring 2003 Some Abouts About me About this course About the project About the examination About grading.

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Slide 1 Slide 2 Global Marketing Spring 2003 Slide 3 Some Abouts About me About this course About the project About the examination About grading Slide 4 Text Structure Introduction to global marketing The global marketing environment Global market opportunities Global marketing strategy Global marketing program Global marketing management Slide 5 List of Questions What is global marketing? Do we have to go global? Why? Where shall we go? What shall we know before plunging ourselves into the storming sea? How can we survive and thrive in a foreign market? Slide 6 Global Marketing -- Introduction Slide 7 What is Global Marketing? Slide 8 What is marketing? The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives. Slide 9 The Three Principles of Marketing Customer Value Value Equation: V=B/P Differential Advantage Focus Slide 10 What is global marketing? Practicing marketing in the global environment. An organization that engages in global marketing focuses its resources on global market opportunities and threats Slide 11 Globalization An open economic system Non-discrimination Global brands Global structures Slide 12 Exports % share of world production Slide 13 Annual % Growth of trade and GDP 1959 96 GDP Slide 14 Effects of globalization on business Cheap offshore production Reduced transport costs Virtual communication Standardization of logistics Global marketing Slide 15 Export & Import By Regions 2002/01-10 Slide 16 Corporate Globalization -Chinas Case Walmart World Women Basket Ball Games Haier in USA Tsingdao Beer Slide 17 Global Marketing VS Domestic Marketing More difficult: language, law, culture, trade and non-trade barriers, market research, and communication; More complicated: currency, measures and weights, customs, monetary exchange, transportation, insurance, and counter-claim More risky: credibility, currency exchange, political risk, transportation, and pricing More opportunities and more profitable, hopefully. Slide 18 Should we go global? Internal analysis Resources, managerial mindset, strengths, weaknesses,etc. External analysis Competition, opportunities, threats, benefits, risks, etc. Cost VS Income Slide 19 Management Orientation Managements assumptions or beliefs-both conscious and unconscious-about the nature of the world Ethnocentric Polycentric Regiocentric Geocentric Slide 20 Ethnocentric Home country is superior. Domestic Company: No opportunities outside the home country; International Company Products and practices that succeed in the home country will be successful anywhere; Foreign operations are secondary or subordinate Nissan Slide 21 Polycentric Each country is unique. Multinational Company: Each subsidiary should develop its own business and marketing strategies according to the specific situation in that country. Problem: Cost, control, headquarter out of game Slide 22 Regiocentric & Geocentric Regiocentric: Each region is unique and an integrated regional strategy is to be developed to serve that region. Geocentric: The entire world is a potential market and integrated world market strategies should be developed. Global or transnational company. Global Localization: Think globally, act locally. Slide 23 Philips VS Matsushita Philips Electronics Polycentric: 7 models of TV based on 4 chassis, Variety Matsushita Geocentric: global strategy, 2 models of TV based on a single chassis, low price Slide 24 Driving and Restraining Forces Affecting Global Integration and Global Marketing Slide 25 Driving Forces Technology Internet, Satellite Dish, Globe Spanning TV Regional Economic Agreements NAFTA, EU, ASEAN, GCC, APEC Market Needs and Wants Converging, Global Brand, Transportation and Communication Improvements Jet Plane, Large Cargo Ship, email, fax, videoconferencing, cost deduction Slide 26 Driving Forces Cont. Product development costs Quality World Economic Trends More opportunities Less resistance World-wide deregulation and privatization Slide 27 Driving Forces Cont. Leverage Experience transfers Scale economies Resource utilization Global strategy The Global/Transnational Corporation Slide 28 Restraining Forces Management Myopia Organization Culture Integrate global vision and perspective with local market initiative and input Mutual respect National controls and barriers Tariff barriers and non-tariff barriers Slide 29 The Global Economic Environment Slide 30 Changes in The World Economy Emergence of global markets Economic integration Global companies, global brands Capital movements far exceed the volume of global merchandise and services trade $4 trillion VS. London Eurodollar Market, $100 trillion, VS. Foreign exchange $250 trillion Slide 31 Changes in The World Economy Productivity VS. Employment Application of new technologies Increase in production efficiency Plant emigration Internal reforms Slide 32 Changes in The World Economy World economy becomes the dominant economic unit The end of the cold war Collapse of USSR, ISC, E. European China, Vietnam, Cuba, North Korea Slide 33 Economic Systems Market Allocation Market economy Role of the state Command Allocation Planned economy Role of the state Mixed System Which plays the leading role? Slide 34 Stages of Market Development Based on GNP Per Capita Lower-Income Countries $2000 Upper-Middle-Income Countries $3036-$9386 High-Income Countries >$9386 Slide 35 Low-Income Countries Preindustrial countries, less than $766 Limited industrialization, high percentage of population in agriculture and farming High birth rates Low literacy rates Heavy reliance on foreign aid Political instability and unrest Africa, south of Sahara Slide 36 Lower-Middle-Income Countries Less developed countries (LDC) Early stage of industrialization Consumer markets expanding Low labor cost Labor-intensive products manufacturing Slide 37 Upper-Middle-Income Countries Industrializing countries Percentage of people in agriculture dropping sharply Degree of urbanization increasing High literacy Relatively low wage costs Slide 38 High-Income Countries Industrialized Countries Sustained economic growth Knowledge-based Service sector New products and innovations Slide 39 Income and PPP Purchasing Power Parity Real Income Standard of Living The concentration of income Regional, nationally, and within nations Triad: US, Canada, EU, and Japan Income inequality in developing countries Slide 40 Implication for Marketers Profitability Chances and challenges Marketings Role Market potential evaluation Slide 41 Emerging Markets Evaluation Slide 42 Social and Cultural Environments Differences Similarities Marketers two-folded task. Recognize difference Find similarities Slide 43 Culture Culture includes both conscious and unconscious values, ideas, attitudes, and symbols that shape human behavior and that are transmitted from one generation to the next. Culture is learned, not born with. Culture can be changed. Slide 44 Implications for Global Markers Food, drink preferences KFC, Colgate, Coco-cola, Green Giant Foods, and soy sauce Color, flower, and other preferences White, green, chrysanthemum, Corbie, dog, Converging global attitudes Cultural universals Be culturally sensitive! Slide 45 High and Low-Context Cultures Low-context: messages are explicit, words carry most of the information in a communication. I mean what I say. High-context: much more information resides in the context of communication, including background, associations, and basic values of the communications rather in the verbal message. Guess what I really mean. Slide 46 High and Low Context Cultures FactorHigh ContextLow Context LawyerLess importantVery important SpacePeople breath on each other Bubble of private space, no intrusion TimePolychronic, things dealt simultaneously Monochronic, linear Negotiati ons Lengthy, get to know each other Quick, get things done CountriesJapan, Middle East,US, Northern Europe Slide 47 Communication and Negotiation Language barriers Its a yes or no? You are invited to take advantage of the chambermaid. Ease your bosoms. This coffee has carefully selected high quality beans and roasted by our all the experience. The lift is being fixed for the next day. During that time we regret you will be unbearable. Nonverbal communication Verbal VS. Nonverbal Slide 48 Social Behavior Sneeze, belch, sharing food Saudi: Dont ask the host about the health of his spouse. Dont show the soles of your shoes. Dont touch or deliver with the left hand. Japan, Korea, China, India Venezuela, Indonesia Africa Madam or maam Slide 49 Analytical Approaches to Cultural Factors Dont assume you know everything. Dont judge others by the culture you are from. There are no perfect cultures in this world, or there is no such culture superior than another. Try to understand the beliefs, values, and motives of another culture Be open, be understanding. Slide 50 Maslows Hierarchy of Needs Physiological Safety Social Esteem Self-actualization Slide 51 Hofstedes Cultural Typology Power distance Individualism or Collectivism Masculinity or Femininity Uncertainty avoidance Slide 52 Power Distance The extent to which the less powerful members of a society accept or expect that power to be distributed unequally. High power distance Low power distance Slide 53 Individualism or Collectivism Individualistic culture: Each member of society is primarily concerned with his or her own interest and those of the immediate family. Collectivist culture: All of societys members are integrated into cohesive in-groups Slide 54 Masculinity of Femininity Masculinity A society in which men are expected to be assertive, competitive, and concerned with material success while women fulfill the role of nurturer and take care of the family Femininity A society in which the social roles of men and women overlap, with neither gender exhibiting overly ambitious or competitive behavior Slide 55 Uncertainty Avoidance The extent to which the members of a society are uncomfortable with unclear, ambiguous, or unstructured situations. Slide 56 Environmental Sensitivity The extent to which products must be adapted to the culture-specific needs of different national markets. Product Adaptation High Low Environmental Sensitivity Low High Integrated Circuit Computer Food Slide 57 Impact on Marketing Consumer behavior Campbell in US VS in Italy Instant coffee in UK VS. in Sweden Cake in US VS. in UK Personal aspect of international business Slide 58 Suggested Solutions Stake: expatriate failure averages $75,000, loss of business: $2.5 billion Research Training in cross-cultural competency Boot camp International exposure Workshop Slide 59 The Political, Legal, and Regulatory Environments of Global Marketing Slide 60 The Political Environment Sovereignty Political risk Taxes Dilution of Equity Control Expropriation Slide 61 Sovereignty The supreme and independent political authority. Control the flow of goods across borders Stage of development The political and economical system Protectionism: Agriculture Privatization dilutes the command portion of a mixed economy Global market integration erodes national economic sovereignty. Slide 62 Political Risk The risk of a change in government policy that would adversely impact a companys ability to operate effectively and profitably. HK, Argentina, Venezuela, Slide 63 Taxes Diverse geographic activities of MNC Host country tax avoidance Bilateral tax treaties Slide 64 Dilution of Equity Control Control ownership of foreign-owned companies. Equity percentage in local projects or joint ventures Become an insider Slide 65 Expropriation Governmental action to dispossess a company or investor. Compensation Nationalization: Ownership of the property or assets in question is transferred to the host government. Confiscation Slide 66 Expropriation Creeping expropriation: limitations on repatriation of profits, dividends, royalties, or technical assistance fees from local investments or technology arrangements. Tariff and non-tariff barriers Intellectual property restrictions Remedies: buy insurance, follow the law Slide 67 International Law Rules and principles that nation-states consider binding upon themselves. Public law, international commercial law Common law VS code law Slide 68 Which Law Applies? Be explicit in the contract The place of the domicile or principal place of business of one of the parties The place where the contract was entered The place of performance of the contract Slide 69 Intellectual Property Patents and Trademarks Registration Protection Counterfeiting: The unauthorized copying and product of a product. Imitation: Use of a product name that differs slightly from a well-known brand Piracy: The unauthorized publication or reproduction of copyrighted work. Slide 70 Intellectual Property Protection The Paris Union: International Convention for the Protection of Industrial Property. The Patent Cooperation Treaty European Patent Convention TRIPs: Trade Related Intellectual Property Rights Slide 71 Antitrust To combat restrictive business practices and to encourage competition. Constens case, Grundig Ruling: Territorial protection proved to be particularly damaging to the realization of the common market. IBM and Microsoft in Europe Slide 72 Licensing Licensing is a contractual agreement in which a licensor allows a licensee to use patents, trademarks, trade secrets, technology, or other intangible assets in return for royalty payments or other forms of compensation. What assets? At what price? The right to make, use, or sell? Sublicense? Exclusive or nonexclusive? Creation of competitor. Slide 73 Trade Secrets Confidential information or knowledge that has commercial value. TRIPs requires signatory countries to protect against acquisition, disclosure, or use of trade secrets in a manner contrary to honest commercial practices. Slide 74 Bribery and Corruption - A World-wide problem Slide 75 Conflict resolution Litigation Differences in language, legal systems, currencies, traditional business customs and patterns, discovery procedure, and enforcement. Complex, time consuming, costly Slide 76 Arbitration International Chamber of Commerce The New York Convention AAA and China Beijings Conciliation Center. Swedish Arbitration Institute International Council for Commercial Arbitration UN Conference on International Trade Law Slide 77 The Regulatory Environment Governmental and nongovernmental International Economic Organizations Price control, valuation of imports and exports, trade practices, labeling, food and drug regulations, employment conditions, collective bargaining, advertising content, competitive practices, etc. Slide 78 Regional Economic Organizations WTO EU NAFTA Slide 79 Global Markets and Buyers Slide 80 Trends of Global Market Markets in almost every world region are expected growing. The fastest growing markets are the developing countries. The fastest growing regions in the developing world are East Asia The fastest growing country in East Asia is China. Slide 81 The Boom Countries1974-19931994-2003 Developed Countries2.9%2.7% Developing Countries3.0%4.8% East Asia7.5%7.6% South Asia4.8%5.3% Latin America2.6%3.4% East Europe1.0%2.7% Sub-Saharan Africa2.0%3.9% Middle East, North Africa1.2%3.8% Slide 82 Economic Cooperation & Preferential Trade Arrangements International economic cooperation Free Trade Area (FTA) Customs Union Common Market Economic Union WTO and GATT Slide 83 Regional Trade Areas Slide 84 Slide 85 Free Trade Area (FTA) A group of countries that have agreed to abolish all internal barriers to trade among themselves. Certificates of origin Slide 86 Customs Union Member countries agree to the establishment of common external barriers. The Central American Common Market, Southern Cone Common Market (Mercosur), and the Andean Group Slide 87 Common Market Removal of internal barriers Establishment of external barriers Elimination of barriers to flow of factors (labor and capital) within the market Free markets not only for product, but also for services and capital. Slide 88 Economic Union Creation of a unified central bank; Usage of a single currency-a struggle; Common policies on agriculture, social services and welfare, regional development, transportation, taxation, competition and mergers Political unity, a central government; Slide 89 From GATT to WTO GATT: A treaty between 125 nations who agreed to promote trade among members. Trade-disputes settlement, no power of enforcement WTO: A forum for trade-related negotiations. A system to settle trade disputes Service industry: Market-entry barriers in banking, insurance, telecommunications, etc. Slide 90 Regional Economic Organizations APEC: Asian Pacific Economic Cooperation North American Free Trade Agreement Central American Common Market Andean Group Southern Cone Common Market Caribbean Community and Common Market Slide 91 Regional Economic Organizations Association of Southeast Asian Nations The European Union Cooperation Council for the Arab States of the Gulf Economic community of West African States South African Development Coordination Conference Slide 92 Slide 93 Slide 94 Slide 95 Slide 96 Slide 97 Global Marketing Information Systems and Research Slide 98 Acquire Global Information Superabundance in developed countries Scarcity in LDC and underdeveloped countries Where and how to get the right information Scanning Slide 99 Global Marketing Information System MIS defined Gathering, analyzing, classifying, storing, retrieving, and reporting EDI: Electronic Data Interchange Benetons MIS Timely, cost-efficiently, actionable Slide 100 Subject Agenda for a Global MIS Markets Competition Foreign exchange Prescriptive information Resource information General conditions Slide 101 Markets Demand estimates Consumer behavior Products Channels Communication media availability and cost Market responsiveness Slide 102 Competition Corporate strategies Business strategies Functional strategies Slide 103 Foreign Exchange Balance of payments Interest rates Attractiveness of country currency Expectations of analysts Slide 104 Prescriptive Information Laws, regulations, rulings concerning taxes, earnings, dividends in both hose countries and home country Slide 105 Resource Information Availability of human, financial, information, and physical resources Slide 106 General Conditions Overall review of sociocultural, political, technological environments Slide 107 Scanning Modes Surveillance Informal information gathering Viewing and monitoring Search Formal information gathering Investigation and Research Slide 108 Rule of Thumb Create an efficient and effective scanning system in both the home country and the host countries Create a MIS system Expanding information coverage to other regions of the world Slide 109 Sources of Marketing Information Human sources Overseas executives Friends, acquaintances, professional colleagues, consultants, and prospective new employees Personal relationship Direct perception Seeing, feeling, hearing, smelling, or tasting The design of Lexus Slide 110 Formal Marketing Research Project-specific, systematic gathering of data in the search scanning mode. Identify the research problem Develop a research plan Collect data Analyze data Interpret and report findings Slide 111 Step 1: Problem Definition A problem well defined is half solved. Assess the nature of the market opportunity. Existing Potential Slide 112 Existing Market Market size, level of demand, rate of product consumption Self-evaluation: competitiveness, product appeal, price, distribution, promotional coverage and effectiveness Slide 113 Potential Market Latent market Undiscovered segment. Prime move advantage P&G in China Incipient market Market booms when a particular economic, technological, political, or sociocultural trend continues. Slide 114 Step 2: Developing a Research Plan How much can I get from the information? How much do I have to spend for the information? Research objective, methodologies, budgets, time. Slide 115 Step 3: Data Collection Primary data Observation Survey research Experiment Secondary data Internal, external Slide 116 Observation Method Counting Watching People meter Videotaping Virtual reality Slide 117 Survey Method Interviews and Questionnaires Telephone Interviews Focus Groups Mail Surveys Fax Surveys Online Surveys Slide 118 Telephone Interviews Spoken instead of visual Quick, inexpensive Results could be biased Random dialing Answering machines and caller ID Slide 119 Personal Interviews Face to face interaction Detailed information Sensitive question Slow Expensive Mall intercepts Slide 120 Focus Groups Information-gathering procedure in marketing research that typically brings together 8 to 12 individuals to discuss a given subject. Quick and inexpensive Participants interaction Moderator Video taping, one-way mirror, videoconferencing Slide 121 Mail Surveys Low-cost, Anonymity Low response rate, slow Not suitable complex questions Who filled out the questionnaire? Bias due to difference between respondents and nonrespondents Slide 122 Fax Surveys Similar to mail surveys Slide 123 Online Surveys Web Survey Email Survey Online focus group Speedy, higher response rates, cost reduction, truthful answers Probability sample? Groups underrepresented on the Internet, ownership of computers Authenticity of the respondent Slide 124 Experimental Method Scientific investigation in which a researcher manipulates a test group(s) and compares the results with those of a control group that did not receive the experimental controls or manipulations. Test marketing Experiment group VS Control group Slide 125 Sampling Probability sample Nonprobability sample Sample size Standard statistical test Slide 126 Step 4: Data Analysis Demand pattern analysis Income elasticity measurements Engels Law Market estimation by analogy Comparative analysis Intra-company cross-national comparison Cluster analysis Slide 127 Market Estimation by Analogy Cross-sectional analysis Xa/Ya=Xb/Yb Xa=demand for product X in country a Ya=factor that correlate with demand for product X in country a Xb=demand for product X in country b Yb=factor that correlate with demand for product X in country b. Slide 128 Market Estimation by Analogy Displacing a time series Xa1/Ya1=Xb2/Yb2 Xa1=demand for product X in country a during time period 1 Ya1=factor associated with demand for X in country a during time period 1 Xb2=demand for X in country b during time period 2 Yb2=factor correlating with demand for X in country b during time period 2. Slide 129 Step 5: Interpreting and Reporting Clear Concise Actionable Management oriented, no technical jargons Slide 130 Current Issues in Global MR Data availability Data deflation or inflation Comparability Response rate Slide 131 Does MR really work? Its late. I dont know what I want. Differentiation-Coke VS. Pepsi in Israel There is no market for fax. Really? Slide 132 Integrated MIS Systemize the collection and analysis of competitive intelligence to serve the needs of the organization as a whole. Are top executives well informed? Do middle managers fully understand the competitive situation? Do managers in different functional areas share intelligence regularly? Slide 133 Integrated MIS Does the company encounter marketing blunders due to lack of intelligence? Do we have an intranet where every employee can have access to online database? Overload of data or underload of analysis Slide 134 Segmentation, Targeting, and Positioning Slide 135 Segmentation & Targeting Segmentation Division of the total market into smaller, relatively homogeneous groups according to various characteristics. Global Market Segmentation Targeting Evaluation the segments and focusing marketing efforts on a country, region, or group of people that has significant potential to respond. Slide 136 Criteria for Effective Segmentation The market segment must present measurable purchasing power and size. Marketers must find a way to effectively promote to and serve the market segment. Marketers must identify segments sufficiently large to give them good profit potential. The firm must target a number of segments that match its marketing capabilities. Slide 137 Types of Segmentation Geographical Demographical Psychographical Behavioral characteristics Product benefits Slide 138 Geographical Segmentation Dividing an overall market into homogeneous groups on the basis of population locations. Population distribution Wealth distribution Urbanization Climate Food preference Terrain Slide 139 Demographic Segmentation Dividing consumer groups according to characteristics such as sex, age, income, occupation, education, household size, and stage in the family life cycle. Income Gender Age: Cohort effect Education Family Life Cycle Slide 140 Psychographic Segmentation Dividing a population into homogeneous groups on the basis of psychological and lifestyle profiles. Lifestyle Peoples decisions about how to live their daily lives, including family, job, social, and consumer activities. VALS: Values and Lifestyles http://future.sri.com Slide 141 Behavior Segmentation Usage rate: Light users, medium users, heavy users User status: Potential users, nonusers, ex-users, regulars, first-timers, users of competitors products 80/20 rule Brand loyalty Slide 142 Global Targeting Evaluating, comparing, and select Criteria for Targeting Current segment size and anticipated growth potential Competition Compatibility and feasibility Slide 143 Global Target Market Strategy Standardized global marketing Create the same marketing mix for global operation. Extensive distribution in the maximum number of retail outlets. Concentrated global marketing Devise a marketing mix to reach a single segment of the global market. Differentiate global marketing Target two or more distinct market segments with different marketing mixes. Slide 144 Global Product Positioning The location of your product in the mind of your customer. Global positioning Pierre Cardin Audi Ikea Slide 145 Positioning Sony: Unit sale: 1 million, Profit: 1 billion RMB. Domestic brands combined: Market share of color TV: 80%, 90% for DVD; Profit: 0.54 billion. Changhong: unit sale 7,500,000 Toshiba: unit sale 500,000 Profit: equal Slide 146 High Tech Positioning Based on technological features Computers, video and stereo equipments, automobiles Technical products Special-interest products Products that demonstrate well Slide 147 High-Touch Positioning Less emphasis on specialized information, more on image Products that solve a common problem Global village products Global brands Products that use universal themes Materialism, heroism, recreation, procreation Slide 148 Sourcing: Exporting and Importing Slide 149 Export Selling or Export Marketing Export selling Does not involve tailoring the marketing mix to suit the requirements of global markets, only place is changed Export marketing Targets the customer in the context of the total market environment. Slide 150 Export Marketing An understanding of the target market environment The use of marketing research and the identification of market potential Decisions concerning with every elements of the marketing mix Slide 151 Buy Chinese Nationalism Customer value Harley Davidson Slide 152 Roles of Global Marketing Strategy Configuration of marketing Coordination of marketing activities across countries Tapping opportunities in product development and R & D Slide 153 Sourcing Decision Criteria Factor costs and conditions Logistics Country infrastructure Political risk Market access Exchange rate, availability, and convertibility of local money Slide 154 Factor Costs Land, labor, material, and capital costs Can lower wage rates justify relocation? VWs approach and SMHs approach Availability and abundance Three tiers of manufacturing factor costs Drive direct labor costs down Migration of low factor costs Slide 155 Logistics Transportation cost RTAs cut down cost Value chain management Video Slide 156 Country Infrastructure Power, transportation, communication, service and component suppliers, labor pool, civil order, effective governance, foreign exchange Slide 157 Political Risk Changes in government policy Slide 158 Market Access Limited market access Buy local, product local, sell local Slide 159 Foreign Exchange Importance of exchange rate Volatility of exchange rate Alternative country options for supplying markets Video Slide 160 Export-Related Problems Logistics Arranging transportation Transport rate determination Handling documentation Obtaining financial information Distribution coordination Packaging Obtaining insurance Slide 161 Servicing Exports Providing parts availability Providing repair service Providing technical advice Providing warehousing Slide 162 Legal Procedure Government policy Product liability Licensing Customers/Duty Slide 163 Sales Promotion Advertising Sales effort Marketing information Slide 164 Foreign Market Intelligence Locating markets Trade restrictions Competition overseas Slide 165 National Policies Governing Exports and Imports Schizophrenic Encouraging export Restricting imports Government programs supporting exports Tariffs Nontariff barriers Slide 166 Government Programs Supporting Export Tax incentives Tax exemption or lower tax rate on export earnings Tax refund Subsidies Direct or indirect financial contributions Governmental assistance Information, trade fairs, trade missions Slide 167 Tariffs Customs duties levied on imported goods Brussels Tariff Nomenclature (BTN), 1959 The Harmonized Tariff System (HTS), 1989 Export and import classification number Slide 168 Non-Tariff Barriers Any measure, other than a tariff, that is a deterrent or obstacle to the sale of products in a foreign market. Quotas and trade control Discriminatory procurement policies Restrictive customs procedures Selective monetary controls and discriminatory exchange rate policies Restrictive administrative and technical regulations Slide 169 Quotas and Trade Control Government imposed- limits or restrictions on the number of units or the total value of a particular product or product category Slide 170 Discriminatory Procurement Policies Government rules and administrative regulations, company policies that discriminate against foreign suppliers Buy American Act Slide 171 Restrictive Customs Procedures Classifying and valuing commodities as a basis for levying import duties Slide 172 Selective Monetary Controls and Discriminatory Exchange Rate Policies Discriminatory exchange rate policy Export deposit Slide 173 Restrictive Administrative & Technical Regulations Anti-dumping regulations, size regulations, and safety and health regulations Japanese restrictive technical regulations Double standards Slide 174 Choosing Export Markets Create a product-market profile Potential market size Competitor activities Overall marketing mix Target one or more export markets Slide 175 Market Selection Criteria Market potential Market access Shipping cost Potential competition Product fit Service requirements Slide 176 Visiting the Potential Market Confirm or contradict assumptions regarding market potential Gather additional data Develop a marketing plan in cooperation with the local agent or distributor Slide 177 Market Access Considerations Tariff systems Preferential tariffs Duties Slide 178 Tariff Systems Single column tariff Tariff schedule in which the duty rate applies to imports from all countries on the same basis Two-column tariff The initial single column of duties is supplemented by a second column showing reduced rates as determined through tariff negotiations with other countries (MFN) Preferential tariff A reduced tariff rate applied to imports from certain countries Slide 179 Types of Duties Ad Valorem Duties Specific Duties Alternative Duties Compound or Mixed Duties Antidumping Duties Countervailing Duties Slide 180 Ad Valorem Duties Duty is expressed as a percentage of the value of goods HTS: Customs value is landed CIF cost at the port of entry Slide 181 Specific Duties Duties expressed as a specific amount of currency per unit of weight, volume, length, or number of other units of measurement. Slide 182 Alternative Duties Both advalorem and specific duties are used to calculate the tariff, usually the one that yields the higher amount of duty is chosen Slide 183 Compound or Mixed Duties Duties provided for specific, plus ad valorem, rates to be levied on the same articles. Slide 184 Antidumping Duties Dumping The sale of merchandise in export markets are unfair prices. Injury is caused to the domestic producers Special additional import charges equal to the dumping margin Slide 185 Countervailing Duties Additional duties levied to offset subsidies granted in the exporting country. Slide 186 Other Import Charges Variable import levies When the prices of imported products would undercut those of domestic products Temporary import surcharges Provide additional protection for local industry in response to balance-of-payments deficits Compensatory import taxes Value-added tax Slide 187 Organizing For Exporting Organizing in the home country Organizing in the target market country Slide 188 Organizing in the Home Country In-house export organization External independent export organizations Slide 189 In-House Export Organization The companys appraisal of the opportunities in export marketing Its strategy for allocating resources to markets on a global basis Slide 190 External Independent Export Organizations Export trading companies Market information gathering Communication with markets Setting prices Ensuring parts availability Slide 191 Organizing in the Market Country Direct market representation Control and communication Independent representation Small sales volume Find good local distributor Piggyback marketing Arrangement where by one manufacture obtains distribution of products through anothers distribution channels. Slide 192 Export Financing/ Methods of Payment Currency availability in the buyers country Creditworthiness of the buyer Sellers relationship with the buyer Letter of Credit Documentary Collections Slide 193 Letter of Credit Assurance of being paid Payment obligation: buyers bank instead of the buyer The documents instead of the goods Slide 194 Documentary Collections Bill of exchange (draft) A negotiable instrument which is easily transferable from one party to another Slide 195 Counter Trade Alternative finance methods for international trade other than money Scarcity of hard currency Exchange control Inability to finance imports through bank loans Barter and mixed forms of counter trade Slide 196 Simple Barter Direct exchange of goods and services between two parties Exchange fluctuation, shadow price Slide 197 Counterpurchase Each delivery in an exchange is paid for in cash Two separate contracts Slide 198 Compensating Trading Two contracts The supplier agrees to build a plant or provide plant equipment, patents or technology The supplier agrees to take payment in the form of the plants output equal to its investments Slide 199 Entry & Expansion Slide 200 Entry Decision Process Sourcing Marketing organization Distribution Marketing strategy Strategy implementation Slide 201 Ownership & Control Licensing Joint ventures Investment/Ownership Slide 202 Licensing Contract Patent, trade secret, brand, trademark, company name, technical know-how Pros and cons Cross-technology exchange Slide 203 Joint Ventures Ownership partition Sharing of risk and competitive advantage Pros and cons Slide 204 Ownership/Investment Foreign direct investment 100% ownership; WFOE (wholly foreign owned enterprise) Acquisition VS. direct expansion Slide 205 Expansion Strategies 1 Narrow Focus 2 Country Focus 3 Country Diversification 4 Global Diversification ConcentrationDiversification Concentration Diversification Market Country Slide 206 Alternative Strategies Stages of development Domestic International Multinational Global Transnational Slide 207 Competitive Analysis & Strategy Slide 208 Forces Influencing Competition Threats of New Entrants Rivalry Among Existing Competitors Threat of Substitute Products or Services Bargaining Power Of Suppliers Bargaining Power Of Buyers Slide 209 Threat of New Entrants Economies of scale Product differentiation Capital requirement Switching costs Access to distribution channels Government policy Cost advantages Expected competitor response Slide 210 Threat of Substitute Products Availability of substitute products Price Slide 211 Bargaining Power of Suppliers Size and number Input importance, differentiation, switching costs Availability of alternative products Supplier product or brandname Slide 212 Bargaining Power of Buyers Bulk purchase Undifferentiated suppliers products Portion of cost Backward vertical integration Slide 213 Rivalry Among Competitors Mature industry, market share High fixed cost industry Lack of differentiation or absence of switching cost High strategic stakes in an industry Slide 214 National Competitive Advantage Factor conditions Demand conditions Related and supporting industry Firm structure and rivalry Slide 215 Factor Conditions Human Physical Knowledge Capital Infrastructure Slide 216 Demand Conditions The composition of home demand The size and pattern of growth of home demand The means by which a nations home demand pulls the nations products and services into foreign markets Slide 217 Related & Supporting Industries Value chain Proximity Slide 218 Firm Strategy, Structure, and Rivalry Strategy Structure Domestic rivalry Slide 219 Other Forces Chance Government Non-market factors Slide 220 Competitive Advantage Customer value Competitive advantage Successful strategy Slide 221 Models of Competitive Strategy Generic Business intent Slide 222 Generic Strategies Cost LeadershipDifferentiation Cost Focus Focused Differentiation Broad Target Narrow Target Lower Cost Differentiation Competitive Advantage Competitive Scope Slide 223 Cost-Leadership Low-cost producer Broadly-defined markets Experience curve and scale economy Low prices Barrier Slide 224 Differentiation Unique value Broad market Premium price Slide 225 Focused Differentiation Narrow target market Unique products Premium price Slide 226 Cost Focus Narrow market Lower price Slide 227 Strategic Position Variety-based positioning Customer-needs-based positioning Customer-access-based positioning Slide 228 Strategic Intent Continuous improvement Continuous innovation Continuous acquisition of new competitive advantage Slide 229 Cooperative Strategies Slide 230 Cooperative or Competitive? Trade barriers down Markets globalized Consumer needs and wants converged Product life cycles shortened Business environment: dynamism, turbulence, unpredictability Slide 231 Global Strategic Partnerships Participants remain independent Share of benefits and control Ongoing contribution Mergers, acquisitions, joint ventures Slide 232 GSP Attributes Joint long-term strategy, global leadership Reciprocal relationship Global vision and efforts Horizontal alliance Vertical alliance Partners as well as competitors Slide 233 GSP Success Factors Mission Strategy Governance Culture Organization Management Slide 234 Keiretsu In Japan Cooperative strategy in Japan Interbusiness alliance or enterprise group Bank-ownership of stocks Cross-ownership of stocks The big six Slide 235 Implications of Chinese Companies Launch GSA from home Developing core competitive advantage Know your partners Be long-term oriented Slide 236 Product Decisions Slide 237 Product Defined A bundle of physical, service, and symbolic attributes designed to enhance buyers want satisfaction Consumer-Business Durable-nondurable Slide 238 Products Based on Global Vision National product International product Global product R & D cost incentive Slide 239 Global Brands Guided by the same strategic principles Same name, similar image Similar positioning Marketing mix may vary Slide 240 Building Global Brand Strategic branding to long-term profitability Increasing quality, low price, communication Slide 241 Global Product Positioning Serving a specific market segment by achieving a certain position in buyers minds. Attribute or benefit Quality/Price Use/User Slide 242 High-Tech VS. High-Touch High-Tech Positioning Physical product features Technical information High-Touch Positioning More on image High-involvement Slide 243 Product Design Considerations Preferences Cost Laws and regulations Compatibility Country of origin Slide 244 Geographic Expansion 2. Product Extension, Communications Adaptation 4. Dual Adaptation 1. Dual Extension3. Product Adaptation Communication Extension Product SameDifferent Communication Different Same Slide 245 Pricing Decisions Slide 246 Price Boundary P=f (C, C, D) Price floor Price ceiling Optimum price Slide 247 International Pricing Issues Discount and allowance Price elasticity Government perception Anti-dumping law Fluctuating exchange rates Transportation, channel cost Taxes Slide 248 Global Pricing Strategies Market Skimming Penetration Pricing Market Holding Cost plus/Price escalation Sourcing Slide 249 Market Skimming Set a high or premium price relative to competitive offerings Introduction stage No or limited competition Distinguishing, segmentation based on price Revenue maximization Demand control Slide 250 Penetration Pricing Set a low entry price to secure market acceptance Entry into another industry Saturate the market Lure customers to new stores Highly elastic demand Slide 251 Cost Plus/Price Escalation Price=Unit Cost+shipping+Ancillary+Profit Transportation, duty, distributor margins and taxes Sourcing Local production and marketing Slide 252 Dumping Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin. Price, damage, causal effects Uruguay Round GATT Anti-Dumping Agreement (ADA) Slide 253 Similar Products Product definition Product differentiation Raw material Slide 254 Normal Price Market Economy Market price in domestic market Exporters price to a third country Structural price Non-market Economy Selling price in a substitute country Structural price Price of a third country Slide 255 Price Determination FOB or CIF? Domestic price Selling at loss Affiliation, Strategic Alliance Structural cost Direct inputs, indirect inputs, profits Export price to a third country Distributor dumping Slide 256 Damage Determination Amount of sales of the dumping product Selling price of the dumping product Related economic indicators Profit margin Price trend Market share Employment rate Usage of the productivity Slide 257 Causal Effect Voluntary price cut by domestic manufacturers Dumping caused by other non-dumping imports Small market share Realistic damage VS. potential damage Slide 258 China: The TARGET 500 cases, 4000 products, $10 billion Export-oriented economy Competing over price Lack of organization Reluctance to respond and defend Slide 259 Indias Case Slide 260 1 3991251 2 1253 20 3 153 18 4 134 17 5 114 116 6 1042 16 7 264214 8 11 9 63 9 10 61 7 81 260 Slide 261 What Should We Do? What can the government do? What can companies do? Absence is no rescue! 375% duty on Chinese garlic, Chain effects Find a good attorney Work with local importers and distributors Stop fighting against each other! Tracking the market Product differentiation Foreign direct investment instead of exporting Slide 262 Currency Fluctuations A strong RMB Exchange rate clauses Exchange rate review period Comparison basis Fluctuation range Slide 263 Global Pricing Alternatives Extension/Ethnocentric Price be the same around the world Importers absorb freight and duties Adaptation/Polycentric Up to subsidiary managers Gray markets Invention/Geocentric Slide 264 Global Distribution Slide 265 Channel of Distribution An organized system of marketing institutions and their interrelationships that promotes the physical flow of goods and services, along with title that confers ownership, from producer to consumer or business user. Slide 266 Flows Physical flow Title flow Payment flow Information flow Promotion flow Slide 267 Channel Objectives Creation of utilities Place Time Form Information Slide 268 Global Distribution Barriers A new market, no direct presence Separation of production and markets Little knowledge of the local distribution system and distributors Government regulations Bargaining power of the local distributors Slide 269 Forms of Presence Direct involvement Company-owned or franchised sales force, retail stores, etc Sales office and sales branch Indirect involvement Independent agents, distributors, wholesalers or retailers Title and ownership of goods, commission Slide 270 Direct Selling Manufacturer selling direct to the end customer Door-to-door sales Mail order Telemarketing TV selling Internet selling Manufacture-owned stores Slide 271 Marketing Intermediaries A business firm, either wholesaler or retailer, that operates between producers and consumers or business users, also called a middleman. Wholesaling intermediary A comprehensive term that describes wholesalers as well as agents and brokers. Retailer A marketing intermediary selling goods and services to the ultimate consumer Slide 272 Wholesaling Intermediaries Manufacture-owned facilities Sales branch Sales office Independent wholesaling intermediaries Merchant wholesalers Agents and brokers Slide 273 Distribution Intensity The number of intermediaries through which a manufacturer distributes its goods. Intensive distribution Selective distribution Exclusive distribution Slide 274 Intensive Distribution A channel policy in which a manufacturer of a convenience product attempts to saturate the market. Place products or services in as many outlets as possible Cigarettes, snack foods, gums, candy, soft drinks, household chemicals Location convenience Coverage and sales Slide 275 Selective Distribution A channel policy in which a firm chooses only a limited number of retailers to handle its product line. Cost reduction Control over marketing programs Shopping products Slide 276 Exclusive Distribution A channel policy in which a firm grants exclusive rights to a single wholesaler or retailer to sell its products in a particular geographic area. Automobiles, fitness equipments, specialty products Loss in coverage, gain in prestige Close cooperation between the producer and distributor, more control Slide 277 Closed Sales Territory An exclusive geographic selling region defined and enforced by a manufacturer for a distributor. Distributor competition Slide 278 Tying Agreements An arrangement that requires a marketing intermediary to carry a manufacturers full product line in exchange for an exclusive dealership. Slide 279 Channel Design Decision Market Product Producer Middlemen Competition Slide 280 Customer Factors Number, geographic distribution, income, shopping habits, promotion sensitivity Number of customers VS. Number of channel intermediaries Retailer selling volume or average order size Slide 281 Product Factors Degree of standardization Business or consumer Perishable or durable Size Service requirements Technology intensive or not? Unit value Slide 282 Producer Factors Resources Specialization Length of product line Channel control or channel power Slide 283 Middleman Factors Cherry picking Demand, selling cost, profit margin, commission Direct first, then through middleman Subsidize the cost of distributors sales reps Slide 284 Competitive Factors Competition intensity High Short channel Low Long channel Goal Market share Long channel Market penetration Short channel Slide 285 Long Channel Big single order size Easy account collection and dispatch Easy to maintain due to limited number of accounts Close relationship Difficulty in market penetration Blind market spot Low profit margin Less information about market and customers Too many stakes on wholesalers Slide 286 Short Channel Deep market penetration More control over sales terminals and marketing programs High gross profit margin Fast market feedback Less control by distributors Big number of orders adds to difficulty of order processing and payment collection Difficult to maintain and help Less distributor loyalty due small single order size Slide 287 Evaluating The Alternatives Direct distribution Manufactured owned sales force Finding, hiring, training, motivating sales force Rent, utility, deco Dedication Product knowledge Base salary plus 1% commission Less market access Independent intermediary Well trained sales force Big Client base No base salary, 5% commission Product knowledge Competing products More knowledge and access to the market Slide 288 Criteria Economic criteria Control criteria Adaptability criteria Slide 289 Economic Criteria Selling Costs ($) Level of Sales ($) Independent Intermediary Direct Distribution A $50,000$30,000 $4,000 $75,000 Slide 290 Control Criteria Wholesaler Less control Less product technical knowledge Carrying competing brands Sales Office More control Slide 291 Adaptive Criteria Adaptability of the channel Flexibility to respond to market changes, consumer purchasing pattern changes Slide 292 Channel Management Process Marketing research on target market, competitors, available distributors, media Determining channel structure; Recruiting and training distributors; Evaluation, negotiation, and signing contracts; Terminal design and development; Promotion, sales assistance, terminal maintenance; Management, training, adjustment, reward, and improvement Slide 293 Selection Home countrys trade department Home countrys embassy or consulate in the host country, Business Counselor Local chamber of commerce or local trade organizations Local distributor commitment Slide 294 Selection Network resource; coverage, depth; Control over price, assortment Terminal and sales force management; Credibility; payment reliability; Service capability; Financial resources; Warehousing and transportation Commitment to the product is the key. Slide 295 Terms and Responsibilities Price policy Price list, schedule of discounts, allowances Conditions of sales Payment terms, producer guarantees, Distributors territorial rights Performance and cancellation Mutual services and responsibilities Slide 296 Distributor Evaluation Sales volume Sales increase speed Percentage of product sales of the total distributor sales; Selling cost against sales Inventory level Number of product lines carried Terminal display and price execution Service provided to downstream distributors and customers Slide 297 Motivating Channel Members Coercive power Reward power Legitimate power Expert power Referent power Slide 298 ProducerDistributor Relationships Enemies Customers or clients Partners Conflict Competition Cooperation Slide 299 Trends In Global Distribution Flattened channel Involve as few intermediaries as possible Short channel preferred Channel power moving from producers to retailers; Booming of super-large retail chains and disappearance of small stores Application of high-tech in physical distribution of goods or services