Chapter marketing strategies for emerging markets. After studying this chapter you will be able to understand: The role of interpersonal selling in international marketing, the considerations in designing an international sales force, the steps to recruiting three types of international salespeople, selection criteria for international sales and marketing positions,...
GLOBAL MARKETING MANAGEMENT Seventh Edition MASAAKI KOTABKE | KRISTIAAN HELSEN Chapter 18 PowerPoint Marketing Strategies for Emerging Markets Chapter Overview Emerging Markets Competing with New Champions Targeting/Positioning Strategies in Emerging Markets—BOP or No BOP? Entry Strategies for Emerging Markets Product Policy Pricing Strategy The Distribution Challenge Communication Strategies for Emerging Markets Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Introduction • Emerging markets are becoming more attractive as developed markets are saturated • Some emerging markets are already the top producers for MNCs—McDonald’s in Moscow • MNCs also are coming from emerging markets— Tata Motor from India, Emirates Air from Dubai • MNCs still face obstacles to trade in emerging markets Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Emerging Markets • Emerging markets (EMs) refer to economies that are in the process of rapid growth and industrialization • Label is indistinct, and membership varies with source Usual members are Brazil, China, Indonesia, and India • Transition economies—those changing from a centrally planned economy to free market—are also in this group Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Emerging Markets • BRICs—Brazil, Russia, India and China Predicted to eclipse the G7 economies by 2027 • Next Eleven (N-11)—Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, and Vietnam Expected to follow BRIC in surpassing the G7 economies Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Emerging Markets • Characteristics of Emerging Markets – Low per capita income and rapid economic development – Youthful populations – Chronic shortage of resources – Huge within market diversity – Weak and highly variable infrastructure – Unbranded competition – Technology is underdeveloped – Poorly developed marketing infrastructure Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Exhibit 181: Economic and Demographi c Comparison : Emerging Markets versus G7 Countries Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Exhibit 18-2: The World’s Largest Shopping Malls Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Exhibit 18-3: Challenges in Myanmar’s Business Environment Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Competing with the New Champions • In the Fortune Global 500 ranking of 2015, almost 100 companies hailed from China, India, Brazil, Mexico, and Russia • The New Champions – Jollibee’s, a Filipino burger chain, is challenging McDonalds in Asia, the Middle East, and the U.S – Haier is the world’s leading appliance maker by sales volume and one of China’s most famous brands In the U.S., 30 percent of households own a Haier product Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 10 Competing with the New Champions • What makes emerging market firms successful? – – – – Create customized offerings Develop business models to overcome obstacles Deploy latest technologies (Exhibit 18-4) Take advantage of cheap labor and train staff inhouse – Scale up rapidly – Invest in talent to sustain growth Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 11 Exhibit 18-4: Strategic Options for Emerging-Market Companies Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 12 Competing with the New Champions • Competing against the Newcomers • How MNCs deal with the newcomers? – Go beyond low-cost sourcing in emerging markets – Develop products in emerging markets and bring them home – Copy branding tactics used in emerging markets – Team up with the new emerging giants – Invest in growing mass markets in developing countries Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 13 Targeting/Positioning Strategies in Emerging Markets—BOP or No BOP? • Bottom of the pyramid (BOP) or not? – Defined as the billion people in the world living on less than $2 per day – Benefits of targeting BOP markets are: • They are large and attractive as stand-alone entities • Innovations developed in one BOP market can be leverged in other markets • Innovations originating in BOP markets can also be launched in the MNC’s developed markets • Pursuing BOP markets forces an MNC to deliver value for money, requiring relentless cost discipline Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 14 Entry Strategies for Emerging Markets • Timing of Entry is crucial Reasons first movers can fail: – Unaware of market pitfalls like lack of demand – Underdeveloped infrastructure like distribution channels – Steeper learning curve than later entrants • Reasons first moves have advantages: – Government support – Pent-up demand for foreign goods – Access to key marketing resources – Higher productivity of marketing dollars Copyright © 2017 John Wiley & Sons, Chapter 18 Inc – Ability to outmaneuver larger, established rivals 15 Product Policy • Product Innovation – Global corporations must adapt their offerings to the local culture in emerging markets and be willing to experiment with their product development and marketing approaches – Backward or reverse innovation – Frugal innovation Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 16 Product Policy • Branding – The wealthy can be sold the global brand – The BOP group needs a brand that emulates local brands • Packaging – Smaller sizes advisable to make products affordable – Use local materials that are recyclable or biodegradable Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 17 Pricing Strategy • Thin margins and big volumes generally successful • Saturate all price points to shut out local competition • Improve cost structure of products by lowering fixed and variable costs • Marketers should keep in mind that emerging market consumers are not always obsessed with price Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 18 Exhibit 18-7: Hindustan Unilever’s Brand Portfolio Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 19 The Distribution Challenge • Be first on the shelf with rural retailers • Be prepared to create your own distribution system • Managing Distributor Relationships – Four areas of distribution policy in which MNCs should adapt the approaches used in developed markets: • • • • Chapter 18 Distributor partner selection criteria Direct selling Local autonomy Exclusivity Copyright © 2017 John Wiley & Sons, Inc 20 Exhibit 18-8: Project Shakti Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 21 Communication Strategies for Emerging Markets • Prioritizing promotion tasks—educating about product use and benefits, raising brand awareness, and creating brand image—is crucial • Push versus Pull Activities – Push strategies are very important • Retailers have more power with trade-directed promotions than in developed markets • People shop more frequently, hence get more exposure to push strategies via in-store promotions Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 22 Communication Strategies for Emerging Markets – Pull strategies should be altered • Mass media typically less effective • Targeted media preferred • Communicate in the local language • Mass Media vs Nontraditional Marketing Approaches – – – – – Tastes of consumers on EMs tend to be fickle Illiteracy and language diversity difficult to navigate Grassroots marketing can be effective Reliance on social networks or opinion leaders Event marketing can be a very potent tool Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 23 ... Sons, Inc Exhibit 1 8- 2: The World’s Largest Shopping Malls Chapter 18 Copyright © 2017 John Wiley & Sons, Inc Exhibit 1 8- 3: Challenges in Myanmar’s Business Environment Chapter 18 Copyright © 2017... consumers are not always obsessed with price Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 18 Exhibit 1 8- 7: Hindustan Unilever’s Brand Portfolio Chapter 18 Copyright © 2017 John Wiley & Sons,... (Exhibit 1 8- 4) Take advantage of cheap labor and train staff inhouse – Scale up rapidly – Invest in talent to sustain growth Chapter 18 Copyright © 2017 John Wiley & Sons, Inc 11 Exhibit 1 8- 4: Strategic