Global Marketing Management Planning and Organization Global Marketing Management “Companies must learn to operate as if the world was one large market. ” – Theodore Levitt (1983) Global Marketing Management I. II. Global vs. International Marketing Standardization vs. Adaptation Controversy A. Benefits of Standardization 1) Cost Saving 2) Levitt’s Argument 3) Uniform Brand Image 4) Improved Coordination Global Marketing Management
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B. Advantages of Adaptation 1) Differing Use Conditions 2) Legal/Regulatory Factors 3) Different C. B. Patterns 4) The Marketing Concept III. Global Market Segmentation Global Segmentation Variables Others May Be More Important • Climate • Language Group Country • Media Habits • Age • Income Nestle’s Way To Dominate Its Global Markets ? Think and plan long term ? Decentralize ? Stick to what you know ? Adapt to local tastes Licensing The licensor permits the licensee to use its intellectual property (an intangible) in exchange for a royalty payment. • Advantages of licensing – No capital investment, knowledge, or marketing strength – Huge profit potential, recovered costs – Minimal risk of government intervention – A stage in internationalization – Preempt market entry before competition – Increasing intellectual property rights protection Licensing • Disadvantages of licensing Licensee controls marketing function and licensor does not gain expertise in local market – No guarantee of entry after license expires – Licensee may become local and international competitor of licensor – No extension of license permitted by local government – Licensee may create quality control and marketing problems for licensor Trademark Licensing • Companies trade on their names and characters as a substantial source of worldwide revenue Franchising • A licensing arrangement where the licensor grants the licensee the right to do business in a prescribed manner. The franchisee benefits from the reduced risk of implementing a proven concept • The major forms of international franchising – Manufacturer-retailer systems (Ford, Toyota, or Mercedes-Benz) – Manufacturer-wholesaler systems (Coca-Cola, Pepsi Cola) – Service firm-retailer systems (Holiday Inn, Wendy’s) International Franchise Expansion • Reasons for the growth – Market potential – Financial gain – Saturated domestic markets • Problems in franchising – Needs a high degree of standardization – Protection of the total business system from copycat competition – Government intervention – Selection and training of franchisees
Governmental Perspective on Franchising • Franchising does NOT – replace exporting – export jobs – require large outflow of foreign exchange… the bulk of profit remains in the country. Global Marketing Management IV. Foreign Market Entry Modes 1) The Internet 2) Exporting (Direct and Indirect) 3) Contractual Agreements i) Licensing – A firm allows another firm to use its intellectual property for a royalty ii) Franchising – A parent company grants another company the right to do business in a prescribed manner Exporting as an Entry Strategy Indirect Exporting – Domestic Intermediary • Direct Exporting – Independent Distributor vs. Sales Subsidiary – Company Owned Sales Office (Foreign Sales Subsidiary) Global Marketing Management 4) Joint Ventures Advantages: – Government may prefer it to full ownership – Shared risk – Access to skills your company lacks Disadvantages: – Must manage relationship with a partner – Regulations murky in some countries Global Marketing Management Recommendations of Joint Ventures i) Find a partner with complementary skills ii) Negotiate agreement carefully; Work out details iii) Plan to adjust to a changing environment
Global Marketing Management 5) Full Ownership – Greenfields – Acquisitions Advantages of Full Ownership: – Facilitates affiliate cooperation with business strategy/easier to coordinate – Protection of proprietary assets/skills Disadvantages of Full Ownership: – Host country may disapprove – Subject to greater political risk Global Marketing Management Reasons for Growth in Foreign Direct Investment (i. e. joint ventures and full ownership): 1) Desire for growth 2) Derived demand 3) Government incentives 6) Strategic Alliances