Lecture Global marketing management (7th edition): Chapter 18 - Masaaki Kotabe, Kristiaan Helsen

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,...

Chapter Overview

1 Emerging Markets

2 Competing with New Champions

3 Targeting/Positioning Strategies in Emerging

Markets—BOP or No BOP?

4 Entry Strategies for Emerging Markets

5 Product Policy

6 Pricing Strategy

7 The Distribution Challenge

8 Communication Strategies for Emerging Markets

• 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.

1 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.

1 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.

1 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

Exhibit 18-2: The World’s Largest Shopping

Malls

Exhibit 18-3:

Challenges in Myanmar’s Business

Environment

2 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

2 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

in-house

– Scale up rapidly

– Invest in talent to sustain growth

Exhibit 18-4: Strategic Options for Emerging-Market Companies

2 Competing with the New Champions

• Competing against the Newcomers

• How do 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

3 Targeting/Positioning Strategies

in Emerging Markets—BOP or No BOP?

• Bottom of the pyramid (BOP) or not?

– Defined as the 4 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.

4 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

5 Product Policy

• Branding

– The wealthy can be sold the global brand

– The BOP group needs a brand that emulates local

6 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

Exhibit 18-7: Hindustan Unilever’s Brand

Portfolio

7 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

Exhibit 18-8: Project Shakti

8 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

8 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