GLOBAL MARKETING OFFERING

*******************************************************************************
GLOBAL MARKETING OFFERING *******************************************************************************
Kotler on Marketing; “Your company does not belong in markets where it cannot be the best.” There are questions that should be asked such as; what are the major ways of entering a foreign market and to what extent must the company adapt its products and marketing program to each foreign country? Questions should also be asked as to how should the company manage and organize its international activities? With faster communication, transportation, and financial flows, the world is rapidly shrinking. Products develop in one country are finding enthusiastic acceptance in others. Since 1969, the number of multinational corporations in the world’s 14 riches countries has more than triple from 7,000 to 24,000. In fact, these companies today control one-third of all private sector assets and enjoy worldwide sales of $6 trillion. *******************************************************************************
There are Risks faced by companies that are thinking of entering and competing in a foreign market and some of the risks are as follows; · Huge Foreign Indebtedness · Shifting Borders · Unstable Governments · Foreign Exchange problems · Tariffs and other trade barriers · Corruption · Technological Pirating *******************************************************************************
Major Decisions when deciding to go abroad. *******************************************************************************
· Do we really need to go abroad? · If the decision is ‘yes’ then which market do we enter? · How do we enter that market? · What would be our Marketing Program? · What type of Organizational structure do we use? *******************************************************************************
Most companies would prefer to remain domestic if their domestic market is large enough. Managers would not need to learn new languages and laws, deal with volatile currencies or face political and legal uncertainty or redesigning their products to suit different customer needs and expectation. *******************************************************************************
Deciding Whether to Go Abroad Several Factors drawing Companies Internationally: Global firms offering better products or lower prices can attack the company’s domestic market. The company might want to counter attack these competitors in their home market. Companies discovering that some foreign markets present higher profit opportunities then the domestic market. The company need large customer base to achieve economies of scale. The company wants to reduce its dependencies on any one market. The company customers are going abroad and require international servicing *******************************************************************************
Several Risks *******************************************************************************
The company might not understand foreign customer preferences and fail to offer a competitively attractive product. The company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals. The company might underestimate foreign regulations and incur unexpected costs. The company might realize that it lacks managers with international exposure and experiences. The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property. *******************************************************************************
Deciding Which Markets to Enter In deciding to go abroad, companies need to defined its marketing objectives and policies. What proportion of foreign to total sales will it seek? How many markets to enter – Company must decide whether to market in a few countries or many countries and determine how fast to expand; Example: Digicel entry into the Caribbean and Pacific Region. · Companies must also decide on the types of countries to consider. Attractiveness is influenced by the product, geography, income and population, political climate and other factors. · The unmet needs of the developing world represent huge potential markets for food, clothing, shelter, consumer electronics, appliances, and other goods. · Many market leaders are now rushing into Eastern Europe, China, Vietnam, and Cuba where there are many unmet needs to satisfy. *******************************************************************************
Ayal and Zif have argued that a company should enter fewer countries when; Market entry and market control costs are high. Product and communication adaptation costs are high. Population and income size and growth are high in the initial countries chosen. Dominant foreign firms can establish high barriers to entry. *******************************************************************************
Regional Free Trade Zones – Regional economic integration – trading agreements between blocs of countries has intensified in recent years. This development means that companies are more likely to enter entire regions overseas than do business with one nation at a time. · The European Union - Group of nations organized to work toward common goals in regulation of international trade. *******************************************************************************
· NAFTA – (North America Free Trade Agreement) *******************************************************************************
· APEC – (Asia Pacific Economic Cooperation) *******************************************************************************
Evaluating Potential Markets How does a company choose which potential market to enter? Many countries prefer to sell to neighboring countries because they understand these countries better. Example: The largest US Market is Canada and Mexico, US neighbors. Australia’s market would be Papua New Guinea & other Asian countries. *******************************************************************************
Deciding How to Enter the Market *******************************************************************************
Indirect and Direct Export – The normal way to get involved in a foreign market is through export. Occasional exporting is a passive level of involvement in which the company exports from time to time, either on its own initiative or in response to unsolicited orders from abroad. Active Exporting takes place when the company makes a commitment to expand into a particular market. Indirect Exporting – Companies starts with indirect exporting by working through intermediaries. Whether companies decides to export indirectly or directly, many companies use exporting as a way to test the waters before building a plant or manufacturing a product overseas. The internet has also become an effective means of everything from gaining free exporting information and guidelines, conducting market research, and offering customers several time zones away a secure process for ordering and paying for products. *******************************************************************************
Licensing – Licensing is a simple way to become involved in international marketing. The licensor licenses a foreign company to use a manufacturing process, trademark, patent, trade secret, or other item of value for fee or royalty. Licensing has potential disadvantages and that is the licensor has less control over the licensee than it does over its own production and sales facilities. Company can also enter a country through franchising, which is a more complete form of licensing. The franchiser offers a complete brand concept and operating system. A good example of a franchise is: McDonald’s, KFC and Avis Rent A Car, are companies with operation in many countries by franchising their retail concepts. *******************************************************************************
Joint Ventures – Foreign investors may join with local investors to create a joint venture company in which they share ownership and control. A joint venture may be necessary or desirable for economic or political reasons. The foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone, or the foreign government might require joint ownership as a condition for entry. *******************************************************************************
Direct Investment – The ultimate form of foreign involvement is direct ownership of foreign-based assembly or manufacturing facilities. The foreign company can buy part or full interest in a local company or build its own facilities. *******************************************************************************
The Internationalization Process – Countries encouraging their companies to participate in foreign markets to bring in foreign exchange for needed imports. Many countries encourage their domestic companies to grow domestically and expand globally. *******************************************************************************
Deciding on the Marketing Program *******************************************************************************
International Companies must decide how much to adapt their marketing strategy to local conditions. At one extreme are companies that use a globally standardized marketing mix worldwide. At the other extreme is an adapted marketing mix where the producer adjusts the marketing mix elements to each target market. Between the two extreme many possibilities exist. Most brands are adapted to some extent. Example: Toyota. Product Straight extension means introducing a product in the foreign market without any change. Straight extension has been successful with electronic products, cameras, and many machine tools. Product Adaptation involves altering the product to meet local conditions or preferences. There are several levels of adaptation. Companies can produce a regional version of a product or other versions. Product invention consists of creating something new. It can take two forms. Backward invention is reintroducing earlier product forms that adapt well into the foreign markets. Forward invention is creating a new product to meet a need in another country. *******************************************************************************
Promotion *******************************************************************************
Companies can run the same advertising and promotion campaigns used in the home market or change them for each local market, a process called communication adaptation. If it adapts both the product and the communication, the company engages in dual adaptation. Messages and colors can be changed to avoid taboos in some countries. Examples: Purple is associated with death in Burma, White is a mourning colour in India and green is associated with diseases in Malaysia. *******************************************************************************
Price *******************************************************************************
Multinationals companies face several pricing problems when selling abroad. They must deal with price escalation, transfer prices, dumping charges, and gray markets. Because the cost escalation varies from country to country, the question is how to set the prices in different countries. Companies have three choices; Set a uniform price everywhere (Poor & Rich countries) Set a market-based price in each country (Affordability) Set a cost-based price in each country *******************************************************************************
Place (Distribution Channels) *******************************************************************************
Multinationals companies should pay close attention to how the product moves within the foreign country. From when the product leaves their port to another country, the company must ensure the distribution channel effectively delivers the product to the final outlet and onto consumers. *******************************************************************************
Deciding on the Marketing Organization *******************************************************************************
Export department - A firm normally gets into international marketing by shipping out its good. With international sales expanding, companies organize export departments to include various marketing services to be able to carry out its business more aggressively. *******************************************************************************
International Division – Many companies become involved in several international markets and ventures. Sooner or later they create international division to handle all their international activities. Global Organization - Several firms have truly become global organizations. Their top corporate management and staff plan worldwide manufacturing facilities, marketing policies, financial flows and logistic systems. The global operating units reports directly to the chief executive or executive committees. Executives are trained in worldwide operations. *******************************************************************************
The global firms distinguished three organizational strategies; *******************************************************************************
A global strategy treats the world as a single market A multinational strategy treats the world as a portfolio of national opportunities A “glocal” strategy standardizes certain core elements and localizes other elements *******************************************************************************
Summary and Conclusion *******************************************************************************
Companies cannot simply stay domestic and expect to maintain their markets. Despite the many challenges in the international arena (shifting borders, unstable governments, foreign exchange problems, corruption, and technological pirating), companies selling in global industries need to internationalize their operations. In deciding to go abroad, a company needs to define its international marketing objectives and policies. The company must determine whether to market in a few countries or many countries. It must decide which countries to consider. In general, the candidate countries should be rated on three criteria: Market attractiveness, Risk, and Competitive advantages. Once a company decides on a particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. Each succeeding strategy involves more commitment, risk, control and profit potential. In deciding on the marketing program, a company must decide how much to adapt its marketing mix (product, promotion, price and place) to local conditions. At the two ends of the spectrum are standardized and adapted marketing mixes with many steps in between. At the product level firms can pursue a strategy of straight extension, product adaptation, or product invention. At the promotion level, firms may choose communication adaptation or dual adaptation. At the price level, firms may encounter price escalation and gray markets. At the distribution level, firms need to take a whole-channel view of the challenge of distributing products to the final users. In creating all elements of the marketing mix, firms must be aware of the cultural, social, political, technological, environmental and legal limitations they face in other countries. Depending on the level of international involvement, companies manage their international marketing activity in three ways; through the export department, international divisions or a global organization *******************************************************************************