Chapter Learning Objectives

How global marketing management differs from

international marketing management
The increasing importance of international
strategic alliances
The need for planning to achieve company goals
The important factors for each alternative marketentry strategy

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The Nestle Way: Evolution Not Revolution

Nestle is the worlds biggest marketer of infant formula,
powdered milk, instant coffee, chocolate, soups, and
mineral water.
Nestle strategy can be summarized in four points:
-

Think and plan long term

Decentralize
Stick to what you know
Adapt to local tastes

Long-term strategy works for Nestle because the

company relies on local ingredients and markets products
that consumers can afford.
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Benefits of Global Marketing

When large market segments can be identified, economies of scale
in production and marketing can be important competitive
advantages for global companies.
Transfer of experience and know-how across countries through
improved coordination and integration of marketing activities.
Marketing globally also ensures that marketers have access to the
toughest customers.
Diversity of markets served carries with it additional financial
benefits.
Firms that market globally are able to take advantage of changing
financial circumstances.
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Planning for Global Markets

Planning is the job of making things happen that might not
otherwise occur.
Planning allows for rapid growth of the international function,
changing markets, increasing competition, and the turbulent
challenges of different national markets.
Planning relates to the formulation of goals and methods of
accomplishing them, so it is both a process and philosophy.
- Corporate planning
- Strategic planning
- Tactical planning

Successful planning is evaluating company objectives, including

managements commitment and philosophical orientation to
international business.
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Planning for Global Markets (contd)

Company objectives and resources
- Each new market can require a complete evaluation, including
existing commitments, relative to the parent companys objectives
and resources.
- Defining objectives clarifies the orientation of the domestic and
international divisions, permitting consistent policies.

International commitment
- Commitment in terms of:
Dollars to be invested
Personnel for managing the international organization
Determination to stay in the market long enough to realize a return in
investments.

- The degree of commitment to an international marketing cause

reflects the extend to a companys involvement
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The Planning Process

Phase 1: Preliminary Analysis and Screening Matching
Company and Country Needs.
Phase 2: Adapting the Marketing Mix to Target Markets.
Phase 3: Developing the Marketing Plan
Phase 4: Implementation and Control

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International Planning Process

Insert Exhibit 11.1

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Alternative Market-Entry Strategies

An entry strategy into the international market should reflect on analysis of
market characteristics such as:
- Potential sales
- Strategic importance
- Strengths of local resources
- Cultural differences
- Country restrictions
Companies most often begin with modest export involvement.
A company has four different modes of foreign market entry from which to
select:
- Exporting
- Contractual agreements
- Strategic alliances
- Direct foreign investments
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Exporting
Exporting accounts for some 10% of global activity.
Direct exporting - the company sells to a customer in another
country.
Indirect exporting the company sells to a buyer (importer or
distribution) in the home country, who in turn exports the product.
The Internet
- Initially, Internet marketing focused on domestic sales, however, a
surprisingly large number of companies started receiving orders from
customers in other countries, resulting in the concept of international
Internet marketing (IIM).

Direct sales
- Particularly for high technology and big ticket industrial products.
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Contractual Agreement
Contractual agreements are long-term, nonequity
association between a company and another in a foreign
market.
Licensing
- A means of establishing a foothold in foreign markets without
large capital outlays.
- A favorite strategy for small and medium-sized companies.
- Legitimate means of capitalizing on intellectual property in a
foreign market.

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Contractual Agreement (continued)

Franchising
- Franchiser provides a standard package of products, systems,
and management services, and the franchise provides market
knowledge, capital, and personal involvement in management.
- Despite temporary setbacks, franchising is still expected to be
the fastest-growing market-entry strategy.
- Two types of franchise agreements:
Master franchise gives the franchisee the rights to a
specific area with the authority to sell or establish
subfranchises.
Licensing

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Strategic International Alliances

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
SIAs are sought as a way to shore up weaknesses and increase competitive
strengths.
Firms enter SIAs for several reasons:
- Opportunities for rapid expansion into new markets
- Access to new technology
- More efficient production and innovation
- Reduced marketing costs
- Strategic competitive moves
- Access to additional sources of products and capital
Many companies also are entering SIAs to be in strategic position to be
competitive and to benefit from the expected growth in the single European
market.
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Strategic International Alliances (continued)

International Joint Ventures
- A joint venture is a partnership of two or more participating
companies that have joined forces to create a separate legal
entity.
- Four Characteristics define joint ventures:
JVs are established, separate, legal entities
The acknowledged intent by the partners to share in the
management of the JV
There 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
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Strategic International Alliances (continued)

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
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.

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Direct Foreign Investment

Factors that have been found to influence the structure
and performance of direct investments:
-

Timing
The growing complexity and contingencies of contracts
Transaction cost structures
Technology transfer
Degree of product differentiation
The previous experiences and cultural diversity of acquired
firms
- Advertising and reputation barriers

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Organizing for Global Competition

Because organizations need to reflect a wide range of companyspecific characteristics, devising a standard organizational
structure is difficult.
Companies are usually structured around one of three alternatives:
- Global product divisions responsible for product sales throughout
the world
- Geographical divisions responsible for all products and functions
within a given geographical area
- A matrix organization consisting of either of these arrangements with
centralized sales and marketing run by a centralized functional staff,
or a combination of area operations and global product management

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Organizing for Global Competition (contd)

Locus of decision
- Considerations of where decisions will be made, by whom, and by
which method constitute a major element of organizational strategy.

Centralized versus decentralized organizations

- An infinite number of organizational patterns fro the headquarters
activities of multinational firms exist, but most fit into one of three
categories:
Centralized
Regionalized
Decentralized

No single traditional organizational plan is adequate for todays

global enterprise seeking to combine the economies of scale of a
global company with the flexibility and marketing knowledge of a
local company.
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Schematic Marketing Organization Plan Combining

Product, Geographic, and Functional Approaches
Insert Exhibit 11.4

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