Global Marketing

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Global Marketing

• Professor Lawrence Feick
• University of Pittsburgh

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CBA/BSC Picnic!

• Saturday, September 12, 3-6 PM
• WPU Lawn
• Featuring bands
• The Simpletons
• Blend
• Food
• Prizes

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Outline

• The importance of foreign trade
• Deciding which countries
• Deciding how to enter
• Deciding on selling using a localized or
  standardized marketing mix

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Definitions

• Exports domestically produced products sold in
  foreign markets
• Imports products produced in a foreign market
  and sold in the domestic market
• Balance of trade approximately exports -
  imports

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The importance of foreign tradeUS GDP and
foreign trade in nominal billions of USD
Source US International Trade Administration,
USDC
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Who are our top trading partners?1997 US trade
data in millions of USD
Source International Trade Administration, USDC
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Top 10 US Exports and Imports
Major Export Product
Amount (billions)
Amount (billions)
Major Import Product
1. Agricultural products
54.9
1. Computers and office equipment
62.8
2. Electrical machinery
53.1
2. Crude oil
42.8
3. Computers and office equipmt.
36.4
3. Clothing
39.5
4. General industrial machinery
24.4
4. Telecommunications equipment
34.4
5. Motor vehicle parts
23.4
5. Agricultural products
29.3
6. Specialized industrial machnry.
23.3
6. Cars produced in Canada
24.4
7. Power generating equipment
21.9
7. General industrial machinery
24.1
8. Telecommunications equipmt.
19.0
8. Cars produced in Japan
21.1
9. Scientific instruments
18.6
9. Power generating equipment
20.5
10. Chemicals-organic
16.6
10. Motor vehicle parts
20.1
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Foreign market entry decisions
How to enter?
Go International?
Which Countries?
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Typical triggers to initial internationalization

• Saturation or competition in domestic market
• Movement overseas of domestic customers
• Diversification of risk
• Sourcing opportunities in overseas markets
• Government incentives to export

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Foreign market entry which countries?
Product factors
Company factors
Country factors
Country choices
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Company factors

• Geographic and language distance
• Preexisting ties with customers going abroad

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Product factors

• Product-market fit
• Product adaptability

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Country factors screening criteria

• Macro variables
• GDP, inflation, population size, political risk
• General market factors
• size, growth, taxes, duties, regulation, support
• Customer characteristics
• segments, preferences, buying power
• Competitor characteristics
• size, strength, importance of the market to them

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Foreign market entryhow to enter?
High
Foreign Direct Investment Foreign assembly and
production
Contractual Agreements Franchising,
Licensing,and Contracting
Degree of Risk and Control
Exporting Direct and indirect Exporting
Low
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Foreign market entry exporting

• Indirect exporting
• using a trading company
• Direct exporting
• using sales reps or manufacturers reps in the
  foreign country

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Foreign market entry contractual agreements

• Licensing
• for a fee, grant rights to use patent or
  trademark to foreign company
• Franchising
• special form of licensing that dictates
  operations and marketing procedures
• Contract manufacturing
• produce locally under contract from firm

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Foreign market entryforeign production

• Assembly
• produce locally from subunits completely (CKD)
  or semi (SKD) knocked down parts shipped in
• usually has high labor, small capital investment
• Full production

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Typical initial internationalization

• Opportunistic exports of unadapted products
• Usually to close, same language markets
• Contracted marketing activities using
  distributors, trading companies, etc

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Should we standardize the marketing mix across
borders?

• Benefits of standardization
• cost savings, communication benefits, MNC
  customers, exploit good ideas, better control
• Benefits of localization
• better meet local customer needs, allow
  discretion of local managers
• Which elements of the mix to standardize?

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When to standardize...

• Similar macro environments
• socio-cultural, economic, technological,
  regulatory, political-legal, competitive
• Intrinsically borderless products

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How hard is it to find similar macro environments?

• Start with culture...

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Culture defined

• values, attitudes, beliefs, artifacts, and
  symbols represented in the pattern of life
  adopted by people that help them interpret,
  evaluate and communicate as members of society
  (Rice 1993)
• underlying framework that guides an individuals
  perceptions of events and selection of responses
  (Johansson 1997)

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Understanding culture

• Includes shared interpretations, meanings,
  understandings of a group
• Reflected in knowledge, values, beliefs, art,
  music, dance, material artifacts, language
• Culture is learned
• People are to culture as fish are to water

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Example US culture

• Some core values
• individualism, freedom, industriousness,
  self-determination, materialism, impatience,
  present focus, youth, secularism
• The importance of subcultures

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Example Other cultures

• How different from US?
• core values?
• subcultures?

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Cultures impact on marketing

• Taste and preferences
• pizza topping preferences
• Values
• impact on ads
• Language
• product names, slogans

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Pizza Hut most popular pizza toppings by country

• US-pepperoni
• England-corn and tuna
• India-pickled ginger
• Japan-squid
• Guatemala-black bean sauce
• Australia-eggs
• Bahamas-barbecued chicken

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A US ad for Guerlains Champs-Elysees perfume
A Middle Eastern adaptation of the Guerlain ad
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Cultures impact on choices of brand names

• Nova
• Calpis water
• Kodak

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So, when does a standardized mix seem to work?

• Consumer products bought on functional
  characteristics
• stereos, computers, cameras
• Common cross-border segments, especially high
  end, image products
• jewelry, cosmetics

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Standardized products (continued)

• Industrial products
• airplane engines, semiconductors, medical
  equipment, etc
• Services
• banking, accounting, advertising
• Brands positioned on country-of-origin
• Fosters beer, Marlboro cigarettes

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When is standardizing least likely to work?

• Consumer products where unique taste differences
  are important
• foods
• personal care products
• clothing