quiz #7
Chapter 13 Global Marketing
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Global Marketing
Firms invest in foreign countries for the same basic reasons they invest in their own country
Reasons vary from firm to firm but fall under the categories of achieving offensive or defensive goals
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Global Marketing: Goals
Increase long term growth and profit prospects
Maximize total sales revenue
Take advantage of economies of scale
Improve overall market position
Offensive goals
To compete with foreign companies on their own turf
Gain access to technological innovations in other countries
Take advantage of differences in operating costs
Preempt competitors’ global moves
Avoid being locked out of future markets by arriving too late
Defensive goals
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Figure 13.1 - Porter’s Diamond of National Advantage
Source: Michael E. Porter, The Competitive Advantage of Nations (New York: Fress Press, 1990), pp. 577–615
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The Competitive Advantage of Nations
Nation’s ability to turn its natural resources, skilled labor, and infrastructure into a competitive advantage
Factor conditions
Nature of domestic demand and the sophistication of domestic customers for the industry’s product or service
Demand conditions
Existence or absence in the country of supplier and related industries that are also internationally competitive
Related and supporting industries
Conditions in the nation that govern how companies are created, organized, and managed, and how intensely they compete domestically
Company strategy, structure, and rivalry
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Problems with Entering Foreign Markets
Cultural misunderstanding
Result due to difference in:
Communication and behavior
Spatial boundaries
Perception of time
Managers tend to use their own cultural values and priorities as a frame of reference
Feelings of superiority can lead to changed communication mannerisms
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Problems with Entering Foreign Markets
Political uncertainty
Government instability
Social unrest
Armed conflict
Import restrictions
Tariffs, quotas, and other types of restrictions
Established to promote self-sufficiency
Become a roadblock for multinational firms
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Problems with Entering Foreign Markets
Exchange controls and ownership restriction
Established by nations experiencing balance of payment problems
Important considerations in the decision to expand into a foreign market
Economic conditions
Differences in economies due to political upheaval or social changes
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Organizing the Multinational Company
Types global companies
Multidomestic company: Pursues different strategies in each of its foreign markets
Global company: Views the world as one market and pits its resources against competition in an integrated fashion
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Organizing the Multinational Company
Alternatives to organizing global companies
Worldwide product divisions
Divisions responsible for all products sold within a geographic region
Matrix system that that combines elements of both of these arrangements
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Factors Affecting Global Strategy
Market factors
Economic factors
Environmental factors
Competitive factors
External factors
Structure
Management processes
Culture
People
Internal factors
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Global Marketing Research
Organizational issues to be considered
Population characteristics
Demographic variables
Ability to buy
Gross national product or per capita national income
Distribution of income
Rate of growth in buying power
Extent of available financing
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Global Marketing Research
Willingness to buy
Cultural values and attitudes
Tastes and habits
Differences in research tasks and processes
Language
Data content
Timeliness
Availability in the United States
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Global Product Strategy
Global marketing research helps determine if there is an unsatisfied need:
For which a new product could be developed to serve foreign market
That could be met with an existing domestic product
Either as is or adapted to the foreign market
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Global Distribution Strategy
Role of the distribution network is as important in foreign markets as it is at home
Channel arrangements range from no control to almost complete control of the distribution system by manufacturers
Challenging as it has to influence both home country and foreign country channels
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Figure 13.2 - International Channel-of-Distribution Alternatives
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Global Pricing Strategy
Pricing task is more complicated in foreign markets because of problems associated with tariffs, antidumping laws, taxes, inflation, and currency conversion
Challenges
Import duties
Rigidity in price structures
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Global Advertising Strategy
Issues related to advertising
Language barrier
Selecting media
Limited media available - Unable to reach out to potential buyers
Lack of accurate media information
Type of agency to be used to prepare and place the firm’s advertisements
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Global Advertising Strategy
Sales promotion
Used as a strategy for bypassing restrictions on advertisements placed by some foreign governments
Effective means for reaching people in rural locations where media support for advertising is virtually nonexistent
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Entry and Growth Strategies for Global Marketing
Company can decide to:
Make minimal investments of funds and resources by limiting its efforts to exporting
Make large initial investments of resources and management effort to try to establish a long-term share of global markets
Take an incremental approach
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Exporting
Firm produces the product outside the final destination and then ships it there for sale
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Exporting
Advantages
Avoids the cost of establishing manufacturing operations in the host country
It may help a firm achieve experience-curve and location economies
Disadvantages
Higher cost associated with the process
Necessity of the exporting firm to pay import duties or face trade barriers
Delegation of marketing responsibility for the product to foreign agents
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Licensing
Organization’s granting of patent rights, trademark rights, and the right to use technological processes to foreign markets
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Licensing
Advantages
Firm does not have to bear the development costs and risks associated with opening up a foreign market
Attractive option in unfamiliar or politically volatile markets
Disadvantages
Firm does not have tight control over manufacturing, marketing, and strategy
There is the risk that foreign companies may capitalize on the licensed technology
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Franchising and Joint Ventures
Franchising: Franchisor sells limited rights to use its brand name in return for a lump sum and share of the franchisee’s future profits
Commonly employed by service firms, as opposed to manufacturing firms
Offers an effective mix of centralized and decentralized decision making
Joint ventures: Sharing management with one or more collaborating foreign firms
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Joint ventures
Firm may be able to benefit from a partner’s knowledge of the host country
Firm gains by sharing costs and risks of operating in a foreign market
Sole option when political considerations make joint ventures the only feasible entry mode
Allow firms to take advantage of a partner’s distribution system, technological know-how, or marketing skills
Advantages
Firm may risk giving up control of proprietary knowledge to its partner
Firm may lose the tight control over a foreign subsidiary needed to engage in coordinated global attacks against rivals
Disadvantages
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Strategic Alliances
Partnerships where two or more firms invest in each other to gain competitive advantages on a worldwide versus local level
Advantages
Reduced manufacturing costs, accelerated technological diffusion and new product development
Overcoming legal and trade barriers
Disadvantage - Increased risk of competitive conflict between the partners
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Direct Ownership
Establishment of a wholly owned subsidiary or acquisition where it owns 100 percent of the stock
Advantages
Complete control over its technology and operations
Immediate access to foreign markets
Instant credibility and gains in the foreign country
Ability to install its own management team
Disadvantages - Huge costs and significant risks
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