Marketing 4720 Exam 1 Mizzou

Why do companies go global?

To survive as competitors enter the company's home market with lower costs, more experience and better products forcing them to look at new markets.

How much of the global market is represented by the U.S?

25%

Marketing

"The activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."

Global Marketing

Firm focuses its resources and competencies onglobal market opportunities and threats.

Market Penetration

Same market, same product

Market Development

New market, same product

Product Development

Same market, new product

Diversification

New product, new market

What might marketer's encounter in different countries or regions?

- Counterfeiting and piracy in China

- Bribery and corruption

Market

People or organizations that are both able and willing to buy

What is the essence of marketing?

To provide a superior value proposition to surpass the competition.

Value Proposition

The promise of the firm, and success is determined by the customer (perception matters!)

How can you create value for consumers?

Improving benefits or reducing price.

Value = Benefits / Price

▪ Improve the Product

▪ Find new distribution channels (Place)

▪ Create better communications (Promotion)

▪ Cut monetary and non-monetary costs and Prices

Competitive Advantage

When a company succeeds in creating more value for customers than its competitors create.

Global Industry

When a company's industry position in one country is interdependent with its industry position in another country

Indicators of Globalization

- Ratio of cross-border investment to total capital investment

- Proportion of industry revenue generated by all companies that compete in key world regions

- Ratio of cross-border trade to worldwide production

Pros of Globalization

• Hundreds of millions of people have been lifted from poverty and joined the middle class

•Where globalization has raised wages, living standards have improved

Cons of Globalization

• Not all gains from globalization have been evenly distributed. Wealth flows to "Have lots" and "Have yachts"

• Nationalism results in nations retreating into protectionism and isolation resulting in "Globalization in reverse"

Standardization

Developing standardized products marketed worldwide with a standardized marketing mix. The essence of mass marketing.

Adaptation

- Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction

- Essence of segmentation

- Think globally, act locally

Concentration of Marketing Activities

The extent to which activities related to the marketing mix (e.g.,promotional campaigns or pricing decisions) are performed in one or a few country locations

Coordination of Marketing Activities

The extent to which marketing activities related to the marketing mix are planned and executed interdependently around the globe.

Integration of Competitive Moves:

The extent to which a firm's competitive marketing tactics in different parts of the world are interdependent.

The decision to enter one or more markets outside the home country depends on...

1. a company's resources,

2. its managerial mind-set, and

3. the nature of opportunities and threats.

Ethnocentric Orientation

- Home country is superior to others

- Assumes products and practices that succeed at home will be successful everywhere

- If they do conduct business outside the home country, they are described as an international company

- Leads to a standardized or extension approach

- This orientation will inhibit global expansion

Polycentric Orientation

- Each country is unique

- Each subsidiary develops its own unique business and marketing strategies

- Often referred to as multinational company

- Leads to a localized or adaptation approach that

assumes products must be adapted to local market

conditions

Regiocentric Orientation

A region is the relevant geographic unit.

Geocentric Orientation

Entire world is a potential market.

World economic trends toward growth being driven by...

Economic growth in key developing countries providing incentive for firms to invest in these countries.

Industry

Group of firms that produce products that are close substitutes for each other.

Porter's Force 1: Threat of New Entrants

- If new competitors can easily enter, there will be downward pressure on prices and reduced profitability

- Barriers to Entry may exist and will determine if new industry competitors can enter.

Porter's Force 2: Threat of Substitute Products

- Availability of substitute products places limits on the prices market leaders can charge

- A high priced offering may cause buyers to switch to the substitute

Porter's Force 3: Bargaining Power of Buyers

Buyers want to pay the lowest possible price.

Porter's Force 4: Bargaining Power of Suppliers

When suppliers have leverage, they can raise prices high enough to affect the profitability of their customers.

Porter's Force 5: Rivalry Among Competitors

How likely are the firms in the industry to take action to improve their competitive positions and gain advantage over each other.

Generic Strategies for Competitive Advantage

Cost Leadership, Differentiation, Focused Differentiation, & Cost Focus

Strategic Intent for Competitive Advantage

A firm's obsession with winning as the means for achieving competitive advantage.

▪ Four approaches: Layers of Advantage, Loose Bricks, Changing the Rules, Collaborating

Cost Leadership

Industry's low-cost producer.

Differenation

A product that has an actual, or perceived uniqueness in abroad market has a differentiation advantage.

Focused Differenation

The product not only has actual uniqueness, but it also has a very narrow(niche) target market.

Cost Focus

Firm's lower cost position enables it to offer a narrow target market lower prices than the competition.

Building Layers of Advantage

A company faces less risk if it has a wide portfolio of advantages. Examples may be private-label, strategic partnerships, global customer base.

Searching for Loose Bricks

The company searches for opportunities in the defenses of competitors. Looking to attack weaknesses.

Changing the "Rules of Engagement"

Refuse to play by the rules set by industry leaders.

Collaborating

Use the know-how developed by other companies.

What makes a country attractive for foreign investment?

Factor conditions, demand conditions, firm strategy, structure and rivalry, chance, and government.

Hypercompetition

A term used to describe a dynamic competitive world in which no action or advantage can be sustained for long.

Red Oceans

Existing markets where the players understand the rules.

Blue Oceans

Markets or industries that do not currently exist.

Market Capitalism

• Individuals and firms allocate resources

• Production resources are privately owned

• Driven by consumers

• Government's role is to promote competition among firms and ensure consumer protection

• North America and European Union (EU)

Centrally Planned Socialism

• State owns and directs the resources

• State holds broad powers to serve the public interest; decides what goods and services are produced and in what quantities

• Consumers can spend only what is available

• Government owns entire industries and controls distribution• Demand typically exceeds supply

• Little reliance on product differentiation, advertising, pricing strategy

Centrally Planned Capitalism

Economic system in which command resource allocation is used extensively in an environment of private resource ownership.

Market Socialism

State owns the resources, but resource-allocation is allowed to be directed by the market.

Big Emerging Markets

Rapid economic growth

Characteristics of least developed countries... (GNI of $1,005 or less)

- Limited industrialization with high percentage of population in farming

- High birth rates and low literacy rates

- Heavy reliance on foreign aid

- Political instability and unrest

- Concentrated in Sub-Saharan Africa

- Have serious economic, social and political problems and represent very limited opportunities as they are unstable and potentially dangerous

Characteristics of Lower-Middle-Income Countries (GNI of $1,006 to$3,955)

- Rapidly expanding consumer markets

- Cheap motivated labor

- Mature, standardized, labor

-intensive industries like footwear, textiles, and toys

- These are developing countries with consumer markets that are expanding rapidly

Characteristics of Upper-Middle-Income Countries (GNI of $3,956 to $12,235)

- Rapidly industrializing, less agricultural employment

- Increasing urbanization

- Rising wages

- High literacy rates andadvanced education

- Lower wage costs thanadvanced countries

- BRICS: Brazil, Russia,China, South Africa

Characteristics of High-Income Countries (GNI of $12,235 or more)

- Sustained economic growth through disciplined innovation

- Future oriented with heavy dependence on innovation

- Households have extremely high ownership levels of basic products

- Importance of information processing and exchange

- Ascendancy of knowledge over capital as a key resource

Product Saturation Levels

The percentage of potential buyers or households who own a product.

Balance of Payments

• Measures the global trade of a country

• Is a record of all economic transactions between the residents of a country and the rest of the world

Devaluation

The reduction of a nation's currency against other currencies. When the nation's currency is worth less, a foreign currency can buy more of that country's goods so exports will be strong.

Revaluation

A nation allows its currency to strengthen through monetary and fiscal policy.

Economic Exposure

The impact of currency fluctuations on the present value of the company's financial performance.

Hedging

Balancing the risk of loss in one currency with a corresponding gain in another currency.

Forward Contracts

Set the price of the exchange rate at some point in the future to eliminate some risk.