Webster University Introduction to Global Strategic Planning &

Webster University
Introduction to
Global Strategic Planning
&
Global Market Expansion
MRKT 5980
Global Marketing


“…the world is becoming more homogenous…”
“...distinctions between national markets are
fading and may disappear…”
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Webster University MRKT 5980
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Global Marketing Evolution
Develop Core
Business Strategy
Core Business Strategy
Internationalize
the Strategy
Globalize
the Strategy
Country
A
Country
B
Country
C
Country
D
Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan
Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan
Management Review Association. All rights reserved.
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Globalization Drivers

Market Factors
• new consumer groups, developed infrastructures,
globalization of distribution channels, cross-border
retail alliances

Cost Factors
• avoiding cost inefficiencies
and duplicated efforts

Environmental Factors
• reduced governmental barriers,
rapid technological evolution

Competitive Factors
• rapid product innovation, introduction, distribution
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The Strategic Planning Process

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Understanding and adjusting the core strategy begins
with a clear definition of the business for which the
strategy is to be developed.
The Strategic Business Unit
• Based on product market similarities
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Similar needs or wants to be met
Similar end user customers to be targeted
Similar products or services used to meet needs
of specific customers
Webster University MRKT 5980
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The Strategic Planning Process
Global Strategy Formulation
Assessment and Adjustment of Core Strategy
Market/Competitive Analysis - Internal Analysis
Formulation of Global Strategy
Choice of Target Countries, Segments, and Competitive Strategy
Development of Global Marketing Program
Implementation
Organizational Structure - Control
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Market and Competitive Analysis


First, understand the structure of the global
market industry; the common features of
customer requirements and choice factors.
Internal analysis
• Examine the readiness and capability of
the firm to
undertake strategic moves with its
current resources.
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Formulating Global Marketing Strategy


Formulation begins with a series of strategic decisions
Choice of Competitive Strategy
• Cost leadership
• Differentiation
• Focus

Country-Market Choice
• Concentration or diversification
• Factors in country markets selection
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The stand-alone attractiveness of the market
Global strategic importance of the market
Possible synergies offered by the market
Webster University MRKT 5980
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Competitive Strategies
Source of Competitive Advantage
Competitive
Scope
Industry-wide
Single
Segment
Low Cost
Differentiation
Cost
Leadership
Broad
Differentiation
Focus
SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.
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Bases for Global Market Segmentation
Bases for International
Market Segmentation
Marketing
Management
Environmental
Variables
Geographic
Variables
Product
Variables
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Variables
Political
Variables
Promotion
Variables
Economic
Variables
Price
Variables
Webster University MRKT 5980
Cultural
Variables
Distribution
Variables
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Global Marketing Program Development

Development Decisions
• Product offering

The degree of standardization and adaptation in the
product offering.
• The marketing approach

The marketing program beyond the product variable.
• The location and extent of value-adding activities

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Pooling production.
Exploiting factor costs or capabilities.
Strategic alliances.
Concurrent engineering.
• Competitive moves to be made
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Cross-subsidization using resources accumulated in one
market to wage a competitive battle in another.
Webster University MRKT 5980
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Implementing Global Marketing


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Success will come from a balance between local
and regional / global concerns.
“Think globally, act locally” is the operative
phrase for global marketers competing in country
markets.
Product choices should consider individual
markets as well as transfer products from one
region to another.
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Global Marketing Pitfalls to Avoid

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Insufficient local market research.
The tendency to over standardize the product.
Inflexibility in planning and implementation.
The “Not-Invented-Here” syndrome (NIH).
• How to avoid the NIH syndrome
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Ensure that local managers participate in
the development of global brand
marketing strategies.
Encourage local managers to develop
ideas for regional or global use.
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Localizing Global Marketing

Achieving a balance between in-country
managers and global product managers at
corporate headquarters will require action to
develop and implement a global strategy.
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Localizing Global Marketing

Management processes
• Enhance the global transfer of communications.
• Interchange personnel to gain experience abroad.
• Headquarters should coordinate and leverage
resources.
• Permit local managers to develop their own
programs within defined parameters Maintain a
product portfolio that includes local as well as
regional or global brands.
• Allow local managers control over marketing budgets
to respond to local customer needs and counter
global competition.
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Localizing Global Marketing

Organization structures
• The shift to global account management.

Corporate culture
• The world is not one single market.
• Plan and execute programs on a worldwide
basis.
• A global Identity favors no specific country.
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Foreign Investments


Firms invest to enter markets or assure themselves of sources
of supply.
Foreign direct investment
• An equity investment to create or expand a
permanent interest in a foreign enterprise.

Portfolio investment
• The purchase of stocks and bonds internationally.

Major foreign investors
• More than 45,000 multinational corporations with
280,000 affiliates globally.
• The terms “foreign” and “domestic” may no longer
apply.
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Reasons for Foreign Direct Investment

Marketing factors
• Growth and profit motivations.
• Circumventing government-erected barriers to
trade.
• Access to low-cost resources and supply.
• Local customers preference for domestic goods
and services.
• Attempts to obtain low-cost resources and
ensure
their supply.
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Categories of International Firms

Resource seekers
• are searching for natural and human resources.

Market seekers
• are searching for better opportunities
to enter or expand within markets.

Efficiency seekers
• are attempting to obtain the
most economic sources
of production.
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Reasons for Foreign Direct Investment

Derived demand
• results when businesses move abroad and encourage
their suppliers to follow them, creating chain or
pattern of direct investment in a market.

Government incentives
• Fiscal incentives

tax holidays, allowances, credits and rebates.
• Financial incentives

special funding for land or buildings, loans and
guarantees, wage subsidies.
• Non-financial incentives
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guaranteed purchases, protective tariffs, import
quotas, local content requirements, infrastructure.
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Foreign Direct Investors

Positive perspectives
• Bring in capital, economic activity, and
employment.
• Transfer technology and managerial skills.
• Competition, market choice, and
competitiveness are enhanced.

Negative perspectives
•
•
•
•
•
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Drain resources from host countries.
Starve smaller capital markets.
Discourage local technology development.
Bring in outmoded technology.
Create new competition for local firms.
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Types of Ownership

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Ownership patterns may be based on past experiences with
similar ownership models.
Full ownership
• Full control, full assumption of all risks.
• May be desirable, but is not necessary for success
internationally.

Joint ventures
• Shared control, shared investment risks.
• Reasons for joint ventures:
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governmental pressure to join with local partners.
mutually beneficial commercial considerations in
sharing markets, pooling resources, and local suppliers.
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Joint Ventures
Recommendations for joint ventures
• Find the right partner.
• Negotiate the joint venture agreement carefully.
• Maintain flexibility to adjust to changing market conditions.
ADVANTAGES

Pooling of resources

Better relationships with
local organizations

Knowledge the partner
brings of the local market

Minimizing exposure risk of
long-term capital

Maximizing leverage of
invested capital
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DISADVANTAGES

Different levels of control
are permitted or required

Difficulty in maintaining the
relationship

Disagreements over
business decisions

Disagreements over profit
accumulation, and
distribution (profit
repatriation)
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Types of Ownership… continued

Strategic alliances
• “…more than the traditional customer-vendor
relationship, but less than an outright
acquisition.”

Government consortia
• Public-private relationship in a specific project.
• Typically government supported or subsidized.
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Complementary Strengths Create Value
PARTNER STRENGTH… + PARTNER STRENGTH… = JOINT OBJECTIVE
Pepsico marketing clout for
canned beverages
Lipton recognized tea brand and To sell canned iced tea
customer franchise
beverages jointly
Philips consumer electronics
innovation and leadership
Levi Strauss fashion design and Outdoor wear with integrated
distribution
electronic equipment for
fashion-conscience consumers
KFC established brand and
store format, and operation
skills
Mitsubishi real estate and siteselection skills in Japan
To establish a KFC chain in
Japan
Siemens presence in range of Corning technological strength
telecommunications markets in optical fibers and glass
worldwide and cablemanufacturing technology
To create a fiber-optic cable
business
Ericsson technological
strength in public
telecommunications network
To create and market network
management systems
Hewlett-Packard computers,
software, and access to
electronics-channels
SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your
Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising
Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com.
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Contractual Arrangements

Cross marketing
• The parties agree to carry out activities
which are complementary and noncompetitive.

Contract manufacturing
• An arrangement that allows one part to
outsourcing product manufacturing to
another party while retaining control over
research and development.

Management contracting
• A supplier furnishes an integrated service
(e.g., turnkey operation) internally to a
client that is Webster
functionally
University MRKT 5980
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client.
Management Contracting Advantages
CLIENT ADVANTAGES

Provide organizational
skills not locally
available.

Immediate availability of
skills.

Management assistance
and support that is not
available locally.
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SUPPLIER ADVANTAGES

Lower risk because no
equity capital is at stake.

Exercise large amounts
of operational control.

The strategic advantage
of being on the “inside”.

Opportunity to
commercialize “knowhow”.

Using experienced staff
to offset business
fluctuations.
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Management Contracting Risks

Risks to the client
• Over-dependence on the supplier.
• Loss of control to the supplier.

Risks to the contractor
• Bidding without fully detailed insight into
actual costs of delivering the service.
• The effects of the loss or termination
of the contract and resulting
personnel problems.
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