Today’s Lecture Chapter 3 Global marketing Global/International Marketing We would not be surprised to hear about a German Business man wearing an Italian suit meeting an English friend at a Japanese restaurant who later return home to drink Swiss coffee and watch American TV... U.S. Globalization Many U.S. companies have made the world their market. Global Marketing • The Oxford University Press defines global marketing as “marketing on a worldwide scale taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives Reasons for going International 1-Access to products otherwise unavailable Access to products which are not available in the domestic market. For example: Fuel Oil 2-Comparative Advantage Competitive human/natural resources In some countries there might have been economical (cheap) labour or resources which are not available in the home country For Example: Chinese labour, Indian Labour Attraction of International marketing. i. To seek revenue growth opportunities a) ii. To earn more money due to difference in cost of production or seeking new markets To compete against global competitors a) In order to compete against the rivals iii. To support global customers a) In order to supply your products to your customers abroad iv. To access global knowledge i. v. To understands the like/and dislikes of people in other countries To achieve efficiency in value chain i. To get more efficient that is to access cheaper/economical labour or economical resources An example of Afghanistan’s Carpets... Uniqueness of Afghan Carpets: Globally known as one of Afghanistan’s most viable and visible products. Large supply of skilled labour in parts of the country where carpet weaving has been traditionally important. Hand-made process makes Afghan carpets oneof-a-kind and souvenir (gift) Analysing the exportation Demand: Due to the uniqueness of Afghanistan’s Carpet there is a high demand in foreign markets Saturation (local demands are fulfilled): The local market is saturated therefore the makers needs expansion Customer Expectation: Global Afghans: Afghans are scattered around the world and could make a good market for exportation, being Global customers Global Strategy Definition: Global strategy consist of a dispersed location (another country) of each or some part of a value-chain (production process) that are performed OR An efficient approach that involve a company launching production on global basis Regional Strategy Instead of having similarities among human beings, there are some differences which changes from people to people and culture to culture. Therefore the local culture needs understanding. Definition: The global organisation which changes their global strategy due to difference in local customs, climate or taste is called regional strategy Two points to remember before going Global 1- Understanding business environment in the HOST (foreign) country. Local tastes, like & Dislikes, religion, economic condition, political stability etc 2- Making necessary changes in the marketing strategy necessary for the HOST country. In order to make attachment in the foreign culture we need to make some changes in our own strategy Sociocultural Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program Companies that understand cultural can use them to advantage when positioning products internationally. Cultural Differences When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution. SOCIOCULTURAL FACTORS: Family: International Marketing requires understanding of the family system. There are two kinds of family system presently i.e. Individual: The family system in which individuals are free to act. Most European and modern cultures are individualist. Collective The system in which people live in collective form as families. Most Asian cultures are collectivist. It is likely to see that the buying behaviour is influenced by the family system a consumer is living in. It is believed that in the individual societies the buying decision is in the hand of individual himself while in the collectivist society the buying decision is within hand of the family elders. Education: Education define the literacy rate of a country’s population. It play an important role in terms of Advertising, Branding and Labels. More education mean more appealing use of words and languages and less education means more pictures in the advertisements and promotions. Economic condition It is important to examine the economic condition in foreign market Infrastructure: Communication: Communication play an important role in transferring of information and goods such as telephony, media, internet etc Transportation: In order to move around the borders of the country the organisation needs to confirm the existence of transportation such as Rail, Road, Air, Water Energy: The availability of Fuel, Gas, Electricity etc would give a company easy access to energy resources so as make new products and services. Economic Development: Distribution of Income: It would determine the buying power of the people. Equal distribution of wealth mean good economic conditions while unequal distribution means the opposite Rate of growth of buying power: An economically stable country would have a reasonable rate of growth in buying power and therefore a good opportunity for a marketer and vice versa. Language Differences: Language may cause sometimes ambiguity (confusing) especially when making translation of the marketing brands Competitor Local brand may have been strongly bonded due to nationalism. People may not encourage foreign products due to strong attachment with the products produced in the local country. • Such as Arabian Zam Zam Cola • Indian Tata Deciding Whether to go Global • Operating domestically is easier and safer, otherwise a company needs to learn foreign laws and languages, dealing fluctuation in foreign currencies, face political and legal problems. Yet several factors are drawing more and more companies into the international arena: • Global firms offering better product or lower prices can attack the company’s domestic market. • The company wants to reduce its dependence on any one market. • The company customers are going abroad and require international servicing. Deciding Whether to go Global • Before going global a company shall answer the following questions: – – – – Can company understand behaviours of consumer in foreign country? Can a company offer competitive products/services Can a company adopt other country business culture? Has the company calculated the impact of other country political and legal environment on businesses? Deciding which market to enter • The possible global markets shall be decided on the following bases: – Market size i.e. the size of population and the growth factor in relation to the products being launched – The cost of doing business in the international markets – The competitive advantage – The risk of investement Deciding how to enter International Market • Marketing of products on international basis. • International marketing is carried out in the following means: – Exporting – Joint Venture – Licensing – Joint Ownership – Direct Investment Exportation • When goods are produced in the home country but exported to a foreign market with some modifications – Afghanistan dealt $50 million dollars exports in 2007 – Exports have gone up by 13% – Handcrafts, fresh and dry fruit, minerals, leather products, cotton and precious stones Joint Venturing • When a company in home country joins a company in foreign country to produce product and services is called joint venture – Afghan Wireless Communications Company (AWCC), a joint venture between Telephone Systems International, Inc. in New York and the Ministry of Communications of the Afghan government – Sony Ericsson is a joint venture established on October 1, 2001 by the Japanese consumer electronics company Sony Corporation and the Swedish telecommunications company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Both companies have stopped making their own mobile phones. Joint Ownership KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi. Licensing – A method in which a company provide licence to a foreign company for manufacturing/service while the licence offer Royalty (fee) and home company share manufacturing process, trade mark, patents and trade secrets • Patent: Government licence to an individual or body giving a right or title for a set period • Trademarks or marks are words, symbols, designs, combinations of letters or numbers, that identify and distinguish products and services in the marketplace. When trademarks are presented to the public via advertising, marketing, trade shows, or other means, they become one of a company's most valuable assets— potential customers identify a company by its trademark • Toyota (Pakistan) . Direct Investment • Entering a foreign market developing foreign based assembly or manufacturing facilities Deciding on the Global Marketing Program • Standardized Marketing Mix: – Selling largely the same products and using the same marketing approaches worldwide. • Adapted Marketing Mix: – Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return. Global Product Strategies • Straight Product Extension: – Marketing a product in a foreign market without any change. • Product Adaptation: – Adapting a product to meet local conditions or wants in foreign markets. • Product Invention: – Creating new products or services for foreign markets. Global Promotion Strategies • Can use a standardized theme globally, but may have to make adjustments for language or cultural differences. • Communication Adaptation: – Fully adapting an advertising message for local markets. • Changes may have to be made due to media availability. Global Pricing Strategies • Companies face many problems in setting their international prices. • Possible approaches include: – Charge a uniform price all around the world. – Charge what consumers in each country will pay. – Use a standard markup of costs everywhere. • International prices tend to be higher than domestic prices because of price escalation. • Companies may become guilty of dumping –a foreign subsidiary charges less than its costs or less than it charges in its home market. International Pricing Thirteen European Union countries have adopted the euro as a common currency, creating “pricing transparency” and forcing companies to harmonize their prices throughout Europe.