INTERNATIONAL MARKETING MKTG3417

1. INTERNATIONAL MARKETINGMKTG3417 Professor: Bob Carpenter

2. Today’s Agenda • Career impact of Emerging Markets Discussion • Nestle Case Solution • Strategies for International Expansion • Group Project Work • Assignments

3. What about your Career? How will Multinational Market Regions and the Emerging markets change in next ten years? Give me at least five implications of 1) 2) 3) 4) 5)

4. Nestle Infant Formula • Define a problem(s) • Sort relevant and irrelevant information • Separate fact from opinion • Interpret and analyze information • Come to reasoned decision and course of action • Communicate your thoughts clearly and persuasively to others during class discussions

5. 1. How global marketing management differs from international marketing management 2. The increasing importance of international strategic alliances 3. The need for planning to achieve company goals 4. The important factors for each alternative market-entry strategy

6. Introduction • Increasingly firms are entering foreign markets • Executing a global perspective requires planning, organization, and willingness to try new approaches – such as engaging in collaborative relationships and redefining the scope of company operations • Important elements of this process are global marketing management, competition in the global marketplace, strategic planning, and alternative market-entry strategies

7. Global Marketing Management Global Marketing Management: An Old Debate and a New View • Global Marketing Management thought has undergone substantial revision • In the 1970s the argument was framed as “standardization vs. adaptation” • In the 1980s it was “globalization vs. localization” or “Think local, act local” • In the 1990s it was “global integration vs. local responsiveness” • The fundamental question is whether the global homogenization of consumer tastes allowed global standardization of the marketing mix

8. Global Marketing Management • As global markets continue to homogenize and diversify simultaneously, the best companies will avoid the trap of focusing on country as the primary segmentation variable • Other segmentation variables are often more important – e.g. climate, language group, media habits, age, or income

9. The Nestle Way • Nestlé sells more than 8,500 products produced in 489 factories in 193 countries • The “Nestlé way” is to dominate its markets; its strategy can be summarized in four points: • think and plan long term • decentralize • stick to what you know, and • adapt to local tastes • Nestlé is the world’s biggest marketer of infant formula, powdered milk, instant coffee, chocolate, soups, and mineral water

10. Benefits of Global Marketing • Economies of scale in production and marketing can be important competitive advantages for global companies • Unifying product development, purchasing, and supply activities across several countries it can save costs • Transfer of experience and know-how across countries through improved coordination and integration of marketing activities • Diversity of markets by spreading the portfolio of markets served brings an important stability of revenues and operations to many global firms When large market segments can be identified:

11. Global Branding Strategies • Global branding is becoming one of the key drivers of firm growth in markets throughout the world • Effective branding can increase returns by as much as five percent • By using a well-organized branding strategy, companies can differentiate themselves from competitors and thereby become less vulnerable • Global branding is also a strong factor in building customer loyalty • Branding allows the communications between company and customers to be homogenized, thus reducing the need to customize messages and images “Brands are all about trust…”

12. Yum! Brands video • Watch for balance between global brands/products and localization.

13. The Planning Process Phase 1: Preliminary Analysis and Screening – Matching Company and Country Needs • The answers to three major questions are sought in Phase 2: • Are there identifiable market segments that allow for common marketing mix tactics across countries? • Which cultural/environmental adaptations are necessary for successful acceptance of the marketing mix? • Will adaptation costs allow profitable market entry? Phase 2: Adapting the Marketing Mix to Target Markets Phase 3: Developing the Marketing Plan Phase 4: Implementation and Control

14. International Planning Process The planning process illustrated here offers a systematic guide to planning for the multinational firm operating in several countries

15. Expand or not Know thyself Market Evaluation Mode of Entry Overall Strategy Marketing Mix • Country • Environment • Industry • Competitors • Internationalization • Growth • Company • Culture • Objectives • Skills • Etc: • Product • Nature • Differentiation • Technology • Product • Positioning • Branding • Style/Features • Packaging • Services • Standards • Place • Channels • Scope • Logistics • Price • Price strategy • Trade margins • Promotion • Advertising • Selling • Promotions • Publicity & PR • Segmentation • Variables • Country • Consumer type • Climate • Other • Market Selection • Country • Screening • Segment data • Opportunity • Assessment • Demand • Competitors • Other markets • Exporting • Indirect • Direct • Internet • Contractual • Licensing • Franchising • Contract Manufacturing • Other • Alliances • Joint Ventures • Consortia • Strategic alliances • Direct Invest • Greenfield • M&A • Scope • Waterfall • Sprinkler • Sequencing • Timing • Coordination • Cross market optimization International Planning Process

16. Country Selection • Things to consider

17. Countries • Brazil • China • Germany • India • Saudi Arabia • Senegal

18. Product – Electric Razor from Mexico

19. Product – Mexican Food Franchise from Mexico

20. Product – Seadoo from Canada

21. Alternative Market-Entry Strategies The choice of entry strategy depends on: • market characteristics (such as potential sales, strategic importance, cultural differences, and country restrictions) • company capabilities and characteristics, including the degree of near-market knowledge, marketing involvement, and • commitment that management is prepared to make © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

22. Alternative Market-Entry Strategies • A company has four different modes of foreign market entry from which to select: • exporting • contractual agreements • strategic alliances • direct foreign investment

23. Alternative Market-Entry Strategies

24. Exporting Exporting can be either direct or indirect In direct exporting the company sells to a customer in another country In contrast, indirect exporting usually means that the company sells to a buyer (importer or distributor) in the home country who in turn exports the product The Internet is becoming increasingly important as a foreign market entry method

25. Contractual Agreements Contractual agreements are long-term, non-equity associations between a company and another in a foreign market • Contractual agreements generally involve the transfer of technology, processes, trademarks, or human skills • Contractual forms of market entry include: • Contract Manufacturing • Licensing: A means of establishing a foothold in foreign markets without large capital outlays is licensing of patent rights, trademark rights, and the rights to use technological processes. • Franchising: In licensing the franchisor provides a standard package of products, systems, and management services, and the franchisee provides market knowledge, capital, and personal involvement in management. Franchising permits flexibility in dealing with local market conditions and provides the parent firm with reasonable degree of control.

26. Strategic International Alliances • Strategic alliances have grown in importance over the last few decades as a competitive strategy in global marketing management • SIAs are sought as a way to shore up weaknesses and increase competitive strengths • SIAs offer opportunities for rapid expansion into new markets, access to new technology, more efficient production and marketing costs • An example of SIAs in the airlines industry is that of the Oneworld alliance partners made up of American Airlines, Cathay Pacific, British Airways, Canadian Airlines, Aer Lingus, and Qantas • A strategic international alliance (SIA) is a business relationship established by two or more companies to cooperate out of mutual need and to share risk in achieving a common objective

27. Building Strategic Alliances

28. International Joint Ventures • International joint ventures (IJVs) have been used increasingly since 1970s • IJVs are used as a means of lessening political and economic risks by the amount of the partner’s contribution to the venture • JVs provide a less risky way to enter markets that pose legal and cultural barriers than would be the case in an acquisition of an existing company • A joint venture is different from strategic alliances or collaborative relationships in that a joint venture is a partnership of two or more participating companies that have joined forces to create a separate legal entity • Joint ventures are different from minority holdings by an MNC in a local firm

29. International Joint Ventures • Four factors are associated with joint ventures: • JVs are established, separate, legal entities; • they acknowledge intent by the partners to share in the management of the JV; • they are partnerships between legally incorporated entities such as companies, chartered organizations, or governments, and not between individuals; • equity positions are held by each of the partners. © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

30. Consortia • Consortia are similar to joint ventures and could be classified as such except for two unique characteristics: • They typically involve a large number of participants, and • They frequently operate in a country or market in which none of the participants is currently active • Consortia are developed to pool financial and managerial resources and to lessen risks.

31. Direct Foreign Investment • Companies may manufacture locally to capitalize on low-cost labour, to avoid high import taxes, to reduce the high costs of transportation to market, to gain access to raw materials, or as a means of gaining market entry • Firms may either invest in or buy local companies or establish new operations facilities • A fourth means of foreign market development and entry is direct foreign investment © 2006 McGraw-Hill Ryerson, Ltd. All rights reserved.

32. FDI • FDI • Honda Video

33. Administration • Read Chapter 10 and 11 • Test #2 Moved to Tuesday