International Marketing Strategies and Marketing mix ESG March 2008 Jean-Philippe Javel Size and nature of international markets Niches Local markets Regional markets Global markets Niche markets Purely local niches - Limited to a specific geographical area Often, historical roots, consumer behavior linked to old traditions Worldwide niches - Small market but potential customers in several countries Example: Hummer H2 » derived from the military vehicle » Target: Wealthy « show-off » Mostly urban Niche in some countries, mass market in others - Example : oil lamp Decoration item (sailing style) in western countries Local, regional and global markets Local markets (country) - Strong cultural links Specific market conditions Examples : » medias (press, radio, TV) » cheese » airlines : state regulations (ex: Morocco) Regional, multi-country markets - Specific products and marketing mix Example : cars » North America, Europe, Poor African countries Global markets - Rather undifferentiated goods, universal solutions, not culturally related, commodities » Example : wheelbarrow » Example: vehicle gasoline - Luxury brands » Strong global brand image » Marketing mix may be adapted locally Chevrolet Tahoe The Maharaja Mac is an example of an Ad ap ted Marketing Mix Adapting or standardizing your marketing strategy and/or mix ? Clickor press spacebar to retu Markets and consumers needs and wants can be different in each country / region But it is not always optimal to localize the marketing strategy and radically change the whole marketing mix for each country For example : developping a new product Mainly for cost reasons (economies of scale) and organisational reasons (simplify) Adapt locally Where is the optimum ? Customer needs and wants Standardize globally Reduce costs Maximize profits Consequently, a multinational company has to find out and implement the optimal approach, between global and local, depending on several factors and market screening Strategic Adaptation to Foreign Markets High Level of cultural grounding Need for adaptation Low Industrial / Technology intensive Consumer Nature of product Marketing : Globalization versus Adaptation Factors encouraging Factors encouraging Adaptation to local markets Globalization • Different customer needs and wants, behavior patterns cultural background use conditions • It’s sometimes possible Lifestyles and consumer behavior are converging (more or less) • Cost reduction • Different economic situation Economies of scale (lower manufacturing & purchasing costs) • Legal, tax, political barriers No product adaptation means less R&D, Marketing, inventories costs • Different competition landscape • Specific sales/retail channels • External growth and acquisition of foreign local brands • Unleash local managers’ initiative • Simplify management Easier control & coordination Centralized decisions • Global marketing campaigns Communication etc Possible fast worldwide launch The 4 Types of International Marketing Global marketing strategy Local marketing strategies (same everywhere) (specific to each country or region) Global tactics Some tactics adapted locally Pure Global Global Mix of global & local tactics « Glocal » Only local tactics & marketing mix Pure Local Bongrain : cheeses Marketing Strategy : Pure global Strategies and tactics are the same everywhere 2 conditions - Markets adequate for such globalization Strong brand policy, with no exception Mostly luxury brands Examples: - Chanel n°5 perfume - Omega watches Other examples - La Maison du Chocolat » » » » - same product same shops (Paris, New York, Tokyo) same service same positioning, highest price on the market Ikea » same strategy everywhere (developped countries) : same brand, same positioning, same target » same marketing mix : products and services, pricing, place, communication » But a flop in China ! Marketing Strategy : Global Same brand, same positioning, same product But the marketing mix can be partially adapted locally, depending of local market conditions and competition Example : Air France - Same brand, same planes, same quality of service, maintenance and security - Pricing is adapted locally » When Air France has a quasi-monopolistic position (West Indies, some African countries), prices are very high » When Air France is on a market with fierce competition, especially from low cost companies such as EasyJet or RyanAir (ex: Europe), prices are much lower and special promotions are proposed Marketing strategy : « Glocal » « Think global, act local » Standardizes certain core elements and localizes some marketing mix elements Example : Honda Accor Same brand and positioning in Europe and in the USA But the product is not the same everywhere - In Europe, Accor sales are low, and cars are imported from Japan In the US, sales are higher and a special product is manufactured for the US market » » » » Automatic gearbox Slightly different style Different motors Different interior design and equipment Since 1986, Honda has developped a new brand, Acura, on the high-end, in the US & Japan, with specific models and a dedicated retail network Coca Cola marketing is coherent worldwide and some elements are global Brand Colors Symbols Same major sales channels Some advertising campaigns Sponsoring of major sport events - Olympic Games since 1928 Football World Cup But some elements of the products are localized Example: adaptation of the Diet Coke product « Diet » has a negative meaning in many countries. It was changed to « light » in South Europe and Japan. (same problem with « coke » in French !) USA Cherry flavor for the US market Packaging, name and formulas can be different in local markets China Thailand Marketing strategy : Pure local Brands, positioning, products and marketing mix are totally specific and adapted to each country Example: Bongrain, world leader of cheeses - Tastes, preferences and traditions are very different in each country Presence in 150 countries Several hundreds of brands and products, with local marketing mix » » » » » » » France : Caprice des Dieux, Saint Agur, Chavroux etc (28 brands) Spain : Burgo de Arias etc Hungary: Pannonia etc USA : Alouette etc India : Le Bon China : Pikifou Japan: Gerard Selection Examples of product adaptation Depending on needs and wants differences, and local constraints, there are various approaches : Exactly the same core product worldwide - Natural goods : Evian water - Manufactured luxury goods : Cartier watches Partially localized product - Personal Computers : keyboard (20 different types in Europe), electrical power, software etc Mainly or totally localized product - Cosmetics : different ethnic skins etc - Yoghourts : French and American tastes are very different (creamy formula, flavor, size, number of items) - Coffee : very different tastes and preferences in the world International pricing strategies Main reasons to adapt pricing in local markets Different strategic goals in each country - Market penetration / high-end » Example : Bonne Maman jam Different standards of living - L’Oreal mass market products are less expensive in China - Coca-Cola prices are lower in India than in Japan Manufacturing and/or shipping costs - Evian bottle sold in Japan or in the USA (far away from France): the price includes a rather high transport cost Tax, custom duties Currency rates Competition International pricing strategies Limits of different pricing by country May blur brand image and positioning - example : Champagne Pommery used to be sold at different prices in Europe, which was confusing some consumers (who travel) Foreign market price gaps may lead to “gray marketing” and “parallel imports” - sales of authentic, legally trademarked goods through unauthorized or tolerated channels - example : Renault cars imported from Spain and sold in France - example of a technological response : DVD zones - same issue with different tax levels : - blank CD or DVD - cigarettes Less and less price differences are possible in the European Union because of 2 factors easing price comparisons : Euro common currency Internet price comparators leguide.com, Kelkoo, Lycos etc International pricing strategies Example : Louis Vuitton - Alma bag Price is around 40% higher in Japan than in France (585 €) But Louis Vuitton has to impose purchase limits to Japanese tourists in France Counterfeiting is also a major concern ! International communication strategies Advertising Choice of medias : a localized approach is usually better - Different audience Different regulations » Example: alcohol Message : a certain level of globalization is usually preferable - Economies of scale Brand image coherence worldwide TV commercials, press ads etc often require localization - But most multinational companies choose a advertising agency with offices worldwide, to enable a global level of coherence in localized campaigns There are few actual worldwide global advertising campaigns » » » » » Example : Launch of Gillette Mach 3 Same TV commercial in 19 European countries and in the US Only the soundtrack and slogan were translated « The best a man can get »: « La perfection au masculin » Choice of an international stars : David Beckham International communication strategies When is globalization of promotion most possible? Products / brands that can use a primarily visual appeal Products / brands that can use images associated with rather “universal” appeals such as sex or wealth Products / brands that appeal to a market segment with universally similar tastes, interests, needs, and values Products with a nationalistic flavor if the country has a reputation in that field High tech products free of cultural bounds Example : Apple iPod Worldwide advertising campaign Same campaigns worldwide - Different music soundtracks : Rock, electro / house, hip hop, jazz etc Characters are presented in shadow style to avoid ethnic issues and to focus more on the product (contrast effect) Apple is now a dominant leader on the MP3 player market - 32 million iPods sold in 2005, more than 60% of market share 900 million songs sold through iTunes Music Stores, nearly 85% of the legal market International communication issues In which countries can’t you launch such a campaign ? A low budget ? Why not try viral marketing ? Be creative ! Market entry strategies Market entry strategies Exporting Direct - Domestic base Overseas sales branch Traveling sales representative Foreign-based distributors/agent Indirect-occasional, or active exporting - Domestic-based export merchant Domestic-based export agent Cooperative organizations Export-management company Market entry strategies Contractual Agreements - Franchising: A contractual arrangement where a wholesaler or retailer (the Franchisee) agrees to make some payment and to meet the operating requirements of a manufacturer or other franchiser in exchange for the right to use the firm’s name and to market its goods or services - Foreign Licensing: an agreement that grants foreign marketers the right to distribute a firm’s merchandise or to use its trademark, patent, or process in a specified geographic area. - Subcontracting: a contractual agreement where a firm hires a local company to produce goods or services in a specific geographic area. Market entry strategies International Direct Investment An additional strategy for entering global markets Requires direct investment in foreign firms, production, and/or marketing facilities Advantages - cheaper labor cost in some countries government incentives creates better image deeper relationships with government, customers, suppliers and distributors - full control of operations and marketing Risks involved: - economic difficulties of the host country - political instability and negative perception Comparison of Market Entry Strategies Form Control Risk Advantage Export Very limited Low Low cost Ownership Total High Control Joint Ventures Shared Moderate Local expertise Licensing Limited Moderate Low cost Internet Total High No physical presence required Market Screening Economic Size and Structure Living Standards Growth Prospects Environmental Factors Import Restrictions Legal Framework Political Stability Social and Cultural Factors Nature of The Society Segmentation of The Market Consumer Groups Geographical Factors Distinctive Features Marketing Systems Distribution Promotion Consumer Behaviour Extent of Competition After International Marketing, Bennett & Blythe, 2002 The 12C framework to analyse international markets Country - What are the political, legal and economic issues of your potential overseas market, as well as its current market potential and your knowledge and experience of it? Currency - If foreign currencies fluctuate a lot against your home currency, you may have difficulties in pricing your goods or making a profit. Some countries, like China don’t allow their currency to leave the country, so you may have to work in $ Culture - Every culture is different - even from one European country to another. Your product, advertising and even brand may need to be adapted to suit your new market. Control & Co-ordination - Trading abroad is not only about selling, but also after sales service. All these people will have to be hired, trained, managed and controled. Concentration (of markets) – some countries are vast (China, India etc). It may not be so easy or cost effective to sell to different groups in isolated areas. However, there may be opportunities to sell cross-countries to different nationalities with similar cultural/language attitudes Commitment - Selling abroad seriously requires long term planning, significant financial investment, time and skills of your staff. There are risks and the return on investment may be long to come. The 12C framework to analyse international markets Communication - You need to consider the language skills of you, your staff and your contacts abroad, and what media or information technology they have (advertising, telecommunications, e-mail etc). If it is difficult to communicate, it will slow up and complicate matters. It may also prevent you from developing your business properly. Choices (of consumers) - It is possible that there are perfectly good products or services available from local suppliers. Yours are likely to be more expensive, so consider what would make your product better or more desirable. Channels of distribution - Getting goods and services to overseas markets can be difficult. Building an efficient retail network is usually hard and long. Contractual obligations - Make sure that the contract meets everyone’s needs and that you and your customer are fully aware of the commitments listed. Failure to meet the exact requirements of the contract, can result in nonpayment. Capacity to pay - You should take a look at the customer and their ability to pay as well as the country itself. This will include not only financial health, but also political issues, and currency and banking regulations. Caveats (laws) Some countries have laws that are very protective of their local traders and do not readily accept imports. There may be restrictions or differences between your country and the foreign market about what can be sold and under what circumstances.