Chapter 1- Understanding Global Markets and Marketing "Companies must learn to operate as if the world were one large market – ignoring superficial regional and national differences" Theodore Levitt McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc All rights reserved Outline Globalization Global Marketing • Objectives • Approach Global Markets • CAGE Distance Framework • EPRG Framework Global Marketing Strategy Global Vision Summary 1-2 Markets Are Becoming Global Globalization - a process of interaction and integration among people, companies, and governments of many nations, is driven by international trade Example • 18-year-old Hanna logs on to a Canadian web site, orders the latest CD recorded by Madonna, and pays for it in Kroner, using a Danish credit card issued by her local bank and investment and has resulted in what some call a global economy 1-3 Global Marketing Increasingly mobile workforce, more informative customers, and rapidly changing technologies and business models Marketing strategy is the key to attaining competitive advantage in the global marketplace How can a successful global marketing strategy be developed and sustained? 1-4 Global Marketing Approach Requires the firm to focus its efforts world-wide, rather than developing marketing strategies on a country by country basis The objective: Coordination and integration of production, marketing and other functional activities across countries 1-5 Global Markets Global markets: • The idea that regional and/or world markets are converging, allowing for a more standardized marketing strategy Implementing a global strategy depends on the distance (or closeness) between regions and countries 1-6 The Cage Distance Framework Measured by dimensions • Cultural Language, ethnicities, religion, values, norms • Administrative Laws, political risk, government structure • Geographic Country size, infrastructure, climate, remoteness from neighboring countries • Economic Differences in national income, costs of doing business, prices, availability of human and natural resources 1-7 CAGE Distance Dimensions 1-8 Global & Domestic Marketing Compared Global markets are characterized by: Greater uncertainty in markets and environments Greater diversity and dynamism than domestic, internal markets Greater separation of geographical and psychological distances 1-9 Geographic or Spatial Distance Spatial distances between domestic and global marketing have been reduced by the substitution of IT media for face-to-face contact between buyers and sellers However, in some instances face-to-face communication is preferable One of the most dramatic developments of the start of the new millennium was a shift of advertising expenditures from traditional media to the Internet 1-10 The EPRG Framework approaches/orientations by which a firm is managed in foreign markets Ethnocentric- a focus on the home market Polycentric – approach global markets with discrete strategies Regiocentric – strategies target entire regions Geocentric – the world is one market 1-14 EPRG & Global Product Strategy 1-15 Elements of Global Marketing Strategy Standardization vs localization-adaptation Configuration/Coordination Integration of the Firm's Value Chain 1-16 Standardization/Localization Standardization vs localization-adaptation • Standardization benefits include Economies of scale Lowered costs Uniform products Shorter learning curve • Localization is preferred: Different customer preferences Different performance requirements and standards across countries Different cultural perceptions 1-17 Companies with Standardized Strategies 1-18 Need for Localization Varies by Business Function Figure 1-4 1-19 Managing the Firm’s Value Chain A value chain is the sequence of activities required to make a product or provide a service Primary activities • Inbound logistics • Operations • Marketing and sales • Service 1-20 Value Chain Framework 1-21 Configuration/Coordination Configuration refers to where and how activities will be located • Concentrated in one country or • Dispersed throughout many countries Coordination refers to the governance of the activities, how they are linked together throughout a chain which is dispersed geographically among many countries 1-22 Global Value Chain Configuration 1-23 Framework for a Global Marketing Strategy 1-24 Measuring Global Marketing Performance dimensions: • Market measures • Consumer measure • Measures of innovation • Financial results 1-25 Measures of Marketing Performance 1-26 Global Vision Strategic vision • Where a company wants to go, how it will get there, and why it should be successful in doing so Global vision • The ability to look into the future or the capacity to visualize the image that the company is seeking to create on a world-wide basis 1-27 Summary The chapter addresses what is meant by global marketing and global marketing strategy and how it may be implemented Global firms must plan globally while acting locally Globalization is a process of interaction and integration driven by international trade The CAGE model determines distances between countries Several alternative measures are available to determine performance based on the consumer, product development and financial return Several framework s for global marketing strategy will serve as the agenda for topics discussed in the following chapters 1-28 ... Summary The chapter addresses what is meant by global marketing and global marketing strategy and how it may be implemented Global firms must plan globally while acting locally Globalization... Coordination and integration of production, marketing and other functional activities across countries 1-5 Global Markets Global markets: • The idea that regional and/ or world markets are converging,...Outline Globalization Global Marketing • Objectives • Approach Global Markets • CAGE Distance Framework • EPRG Framework Global Marketing Strategy Global Vision Summary 1-2 Markets