Final Exam - Global Marketing

Initial definitions

- Definitions of Marketing

• Simplest definition of marketing: managing profitable customer relationships

- The Marketing Concept

• Philip Kotler: “The science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit”

• Renee Blodget: “Marketing is an ongoing communications exchange with customers in a way that educates, informs, and builds a relationship time”

• Marjorie Clayman: “Marketing is building your brand, convincing people that your brand (meaning your product/service/company) is the best and protecting the relationships you build with your customers”

• David Packard: “Marketing is too important to be left to the Marketing Department”

• Theodore Levitt: “Some companies viewed themselves as providing a product instead of serving customers. Too many other industries make the same mistake-putting themselves at risk of obsolescence”

- The 4Ps (make sure you understand them)

• Product: physical characteristics, taste, design, features, packaging, services

• Price: price tag, discounts, payment terms

• Place: channels (distribution), locations, logistics

• Promotion: advertising, personal selling, sales promotion, public relations

  • The marketing mix—or the four Ps—consists of strategic and tactical marketing tools blended into an integrated marketing program that delivers the intended value to target customers, so that the firm achieves its Marketing Objectives.

- Important change vectors, according to Kotler

• Technology/globalization: have profoundly affected the way we conduct business at every level

  • Digital transformation: removes barriers & connects society

• Physical environment/social responsibility: world demands a stronger responsibility-taking with regards to very severe problems

- The characteristics of LSEs and SMEs

• LSEs LARGE SCALE: firms with more than 250 employees

  • Although LSEs account for less than 1% of companies, almost one-third of all private sector jobs in the EU are provided by LSEs

• SMEs: companies with fewer than 50 employees as “small” AND companies with fewer than 250 employees as “medium”

  • In the EU, SMEs (250 employees or less) comprise approximately 99% of all firms

- The different meanings of ‘global marketing’ (globalisation and glocalisation)

• Global marketing: the firm’s commitment to coordinate its marketing activities across national boundaries in order to find and satisfy global customer needs better than the competition

  • This implies the firm is able to:

    • Develop a global marketing strategy, based on similarities and differences between markets

    • Exploit the knowledge of the headquarters (home organization) through worldwide diffusion (learning) and adaptations

    • Transfer knowledge and best practices from any of its markets and use them in other international markets

• Globalization (STANDARDIZATION): Globalization refers to the process of increasing interconnectedness and interdependence among countries through the exchange of goods, services, and ideas.

• Glocalization (LOCALIZATION): The development and selling of products or services intended for the global market, but adapted to suit local culture and behaviour

  • Think globally, act locally

  • Coca-cola came to Spain and introduced Aquarius: specifically for Spain

  • Glocalization example:

    • Same product, but different packaging and market communication

      • Henkel: founded in 1876, global leader with brands like Persil, Schwarzkopf, and Loctite. 20B in revenue and lots of profits

      • Persil abaya: detergent launched in 2007 for black abayas: offering color protection for dark clothing

      • Expansion: Persil black launched in 2011 in Germany, Austria, and Switzerland, tapping into the dark clothing trend

      • Strategy: global technology with local adaptation, similar formulations and region-specific marketing

- VUCA concept

• If going international, NEED TO BE ABLE TO OVERCOME VOLATILITY, UNCERTAINTY, COMPLEXITY, and AMBIGUITY

• Volatility (being flexible): unexpected challenges, unstable/unpredictable context, timing or duration unknown

• Uncertainty (dealing with the unknown): basic cause-effect are known, lacking key information, change is possible, but not given

• Complexity (lots of moving parts): many interconnected parts & variables, overwhelming amount of information processing and sense-making, challenges capacity

• Ambiguity (lack of clarity) : casual relationships unclear, no precedents, several “unknown” unknowns

- Meaning of the value chain in international marketing

Orientations

• Ethnocentric: home/your own country superiority, centralized control, same practices abroad

• Polycentric: local adaptation in one country, decentralized control, tailored strategies for each country

• Regiocentric: focuses on regional integration, coordination within specific global regions

• Geocentric: global approach, local adaptation, combining global concepts with regional customization

The Cultural Environment - no slideshow

- Cultural universals

- Definition of culture, elements of culture

- Reasons for manager’s attention to culture

- Video from Pellegrino Riccardi: sample answers are uploaded on canvas

• What is Riccardi’s definition of culture: 

  • "A system of behaviour that helps us act in an accepted or familiar way"

• What is the comparison he makes between waiting in line in England vs Norway?

  • England: if they are 10 people waiting in line and a new cashier opens, the 6 people in the back would then switch to the new one and the first 4 people will stay in line at the current register

  • Norway: "first come first serve" - if a new cashier opens everyone rushes to the new one.

• What the underlying value are in Norway, according to Riccardi?

  • Equality: people are laid back, they don't bother with titles or hierarchy

• Because it is impossible to learn all the codes, what is a useful skill to have for navigating across cultures?

  • Curiosity: it gets you through a lot of things

  • Always feel free to just ask people questions

• Summarize in a short sentence Norwegians approach to rules as opposed to “Italians” approach to them

  • Italians find it tricky to listen to rules, whereas Norwegian's always stick to the rules and stay in their lanes while driving.

  • Italians believe that the power of speech is important in life: he believed that he could talk his way out of a traffic ticket if he spoke well enough.

• What would be for Riccardi a global mindset?

  • Take the best of all three different cultures and try and merge them into one new culture. Expand your boundaries and remove the borders to create a global mindset and then the world will go around much smoother.

- Product Adaptation Strategy in Global Marketing: OREO video example

• To win over chinese customers, Kraft realized that even a global corporation  must transform itself, letting local managers make decisions based on their self understanding of the market

  • “Chinese consumers found the U.S. Oreo is too sweet, so we made it less sweet”

  • “The price of their spending on these old packages, including 14 cookies, was too expensive” - made the smaller sleeves

- Case Studies: Nivea, Hunter Boot Ltd, Uber, Elvis Presley Enterprises, LifeStraw

• Nivea:

  • Which degree of market responsiveness and global coordination/integration does Nivea represent?

  • Which marketing problems does Nivea anticipate when penetrating the US market?

• Hunter Boot Ltd:

  • What are the main reasons for the recent international marketing success of the Hunter Boot?

  • Recently Hunter has added outerwear (leather footwear and hand-bags) to its international product range. What are the pros and cons of extending the product range in this way? Should Hunter Boots Ltd include further products like eyewear and watches?

• Uber:

  • What are the basic principles in the ‘sharing economy’?

  • Explain the competitive advantage of Uber.

  • Why is it so important for Uber to get into so many countries so fast?

• Elvis Presley Enterprises / Green Toys?

• LifeStraw:

  • What are the key success factors in the world toy industry?

  • What are Green Toys’ key competitive advantages in the international toy market?

  • Should Green Toys Inc. consider a higher degree of international expansion of their products?

  • If yes, which countries/regions should they target and how?

Internationalization Theories

- Triggers of export initiation

- Export barriers

- Three theories explaining firms’ internationalization process: 

• Uppsala internationalization model

  • A sequential pattern of entry into successive foreign markets, coupled with a progressive commitment to each market

  • Firms tend to intensify their commitment to foreign markets, couple with a progressive commitment to each market

  • Additional market commitments are made in small incremental steps: choosing additional geographic markets with SMALL PSYCHIC DISTANCES, combined with choosing entry modes with few additional risks

    • Cultural distance: refers to the (macro) cultural level of a country and its defined as the degree to which factual cultural values in one country are different from those in another country

    • Psychic distance: can be defined as the individual manager’s perception of the differences between the home and the foreign market, and it is a highly subjective interpretation of reality

      • Level of economic development

      • Communication infrastructure

      • Marketing structure

      • Technical requirements

      • Market competitiveness

      • Legal regulations

      • Per-capita income

      • Purchasing power of customers

      • Customer lifestyles and preferences

      • Level of education, language, and cultural values

        • THE HIGHER THE PSYCHIC DISTANCE BETWEEN TWO MARKETS, THE GREATER THE ADAPTATION OF THE INTERNATIONAL MARKETING MIX (PRODUCT, PRICE, PLACE, PROMOTION) IS NEEDED

STAGE 1: No regular export activities (sporadic export)

STAGE 2: Export via independent representatives (export modes)

STAGE 3: establishment of a foreign sales subsidiary

STAGE 4: foreign production/manufacturing units

• Some companies leapfrog some intermediate entry modes (foreign operation methods) in order to move away from the sequentialist pattern and more directly to some kind of foreign investment

• Transaction cost theory

  • If the “friction” between buyer and seller is higher than through an internal hierarchical system, then the firm should internalize

  • Transaction cost = (ex ante costs) + (ex post costs)

    • (search costs + contracting costs) + (Monitoring costs + enforcement costs)

• Externalization: doing business through an external partner (importer, agent, distributor)

• Internalization: integration of an external partner into one’s own organization

If it costs more to outsource than it does to control doing it yourself, you should internalize

• Network model

  • Business networks are a mode of handling activity interdependencies between several business actors

    • Can be direct or indirect

  • The actors are linked to each other through exchange relationships

  • The relationships of a firm in a domestic network can be used as bridges to other networks in other countries

  • More flexible in response to changing conditions

- Determinants for the internationalization process of SMEs

- Factors that influence internationalization of services

- ‘Born Global’ concept

• Challenging traditional theories: often choose a business area with homogenous and minimal adaptation of the marketing mix

• A firm that from its inception pursues a vision of becoming global and globalizes rapidly without any preceding long-term domestic or internationalization period

  • +: being flexible and agile

  • Ability to adapt to global cultures

    • Example: K-pop

      • Born globals are typically characterized as SMEs with fewer than 500 employees, with annual sales under $100 million

• Born-again global

  • A firm that previously focused on its domestic markets but that suddenly embraces rapid and dedicated internationalization

    • This can be due to a change in ownership/management, or a takeover by another company

    • Acquisitions: the acquired firm can gain access to more financial resources, managerial capability, and international market knowledge

• Born regional

  • A firm that starts international activities early and with significant international shares, but its international activities are only in its home region

CONCLUSION:

- Case Studies related to Internationalization theories: Reebok, BYD, Bumble.

• Reebok:

  • Which of the internationalization theories best explains Adidas’s acquisition of Reebok?

    • In Dunning’s eclectic approach, acquisition fulfills the ownership advantage, which is one of the three conditions that should be satisfied in connection with internationalisation. It can also be argued that acquisition is also one of the stages in increasing market commitment, according to the Uppsala internationalisation model. In this case, the market, which would contribute to more market commitment for Adidas by acquiring Reebok, could be the US market.

  • What could be the motives behind Adidas’s acquisition of Reebok?

    • The acquisition helps Adidas to take on top sporting goods brand Nike as it gives Adidas a stronger presence in North America, which accounts for nearly half of the world market for all sports footwear and apparel. It gives Reebok a stronger presence on the global stage, where it currently ‘only’ has a strong presence in the United Kingdom.

  • Which of the three internationalisation theories is best for explaining whether Reebok follows the establishment of its retailers, for example Foot Locker, in international markets?

    • The network model. Foot Locker is the world’s leading retailers of athletic footwear and apparel. It operates in 20 countries in North America, Europe and Australia. Most of the stores are still in the US market. It was first introduced to the retail marketplace in 1974, and since then, its stores have become destination locations for its core customer group, the 12 to 20-year-old.

  • Is Reebok able to adopt its US marketing approach (connecting to the youth segment through famous rappers, like 50 Cent) in other international markets?

    • The question is, if 50 Cent or Jay-Z will have the same impact in other international markets, for example, in the European market. If not, it would be relevant for Reebok to choose European rap-singers.

• BYD Electric Cars:

  • What are BYD’s competitive advantages in the electric car business?

    • BYD’s key competitive advantage comes from its battery business, where it is one of the key suppliers to other EV OEMs. Then around 2010, BYD made a forward vertical integration, by using its battery as the first step to make a complete EV.

    • BYD is developing its EVs after the Chinese local taste.

    • Low cost – highly skilled labour in R&D and production in China.

  • List the criteria that you should use for choosing new international markets for BYD electric cars.

    • Access to electrical power

    • Number of EV Charging Stations per country

    • Government subsidies for buying EVs

  • List the criteria that you should use for choosing new international markets for BYD electric cars.

    • Access to electrical power

    • Number of EV Charging Stations per country

    • Government subsidies for buying EVs

  • Will the use of Leonardo DiCaprio help with penetration of the US EV market?

    • Yes, probably a good idea, as Leonardo DiCaprio has celebrity status in China.

• Bumble:

  • Which of the internationalisation models presented in this chapter best fits the internationalisation of Bumble?

    • According to Forbes (Go to www.forbes.com and search for ‘Bumble new initiative’) in May 2019 Bumble has grown to more than 55 million users in 150 countries and that almost 1 billion women have made the first move by messaging other users. The principle behind the smartphone app, Bumble, is fitting perfectly with the ‘Born Global’ concept, where Bumble can build up a global consumer base very fast.

  • Why is Bumble’s global business model so successful?

    • In May 2019, Forbes (Goto www.forbes.com and search for ‘Bumble new initiative’) estimated that the company was valued at $1 billion. In heterosexual matches, only female users can make the first contact with matched male users, while in same-sex matches either person can send a message first. Consequently, Bumble is a kind of Tinder for women, as it is a dating app for women who want to play it safe in the dating jungle.

Market Research

- Definitions

• Marketing research: gathering, analyzing, and presenting information related to a well-defined problem

  • Hence the focus of marketing research is a specific problem or project with a beginning and an end

- Reasons for carrying it out and timing

• Act as an aid to the decision-maker

• Helps to reduce risk

• Manager bases a decision on the solid foundation of knowledge

• Thinking on the needs of the marketplace; rather than on the product

- Relevant data types for assessment of market potential in a country

• Both internal (firm-specific) and external (market) data are needed. The role of a firm’s internal information system in providing data for marketing decisions is often forgotten

- Article from Knowledge at Wharton: what do you really know about your customer base? -> READ IT

- Primary / Secondary research

• Primary: 

  • Information that is collected first-hand, generated by original research tailor-made to answer specific research questions

    • Pros: specific (fine-grained), relevant and up to date

    • Cons: high costs and time-consuming

      • First hand data

      • Tailored to company needs

      • Up to date

      • Time consuming to collect

      • Expensive to collect

• Secondary:

  • Information that has already been collected for other purposes and is thus readily available

    • Pros: low cost and less time-consuming

    • Cons: data more general and coarse-grained

      • Data already exists

      • Not specific to company needs

      • May be out of date

      • Quick to collect

      • Cheaper to collect

- Qualitative / Quantitative

- Video on qualitative research on Tums. See slide with questions.

• Got it

- PEST analysis: 

• This tool is commonly used for country situational analysis

• It might be a useful way of structuring the country context we have discussed in previous session

  • Political

  • Economical

  • Socio cultural

  • Technological

- SWOT & TOWS analysis. 

• SWOT:

  • The foundation for a strategic analysis

  • From there, marketing will identify the most profitable targets for service, determine if their needs will be met and create promotion plans accordingly

    • Strengths & weaknesses: internal

    • Opportunities & threats: external

• TOWS:

  • It allows you to work out the relationship between the internal and external factors

  • It is a more action-oriented tool

  • It helps you reduce threats, take advantage of opportunities, leverage on your strengths & eliminate weaknesses

- Case Study: Teepack Spezialmaschinen GmbH

• How would you forecast worldwide demand for tea bag machines?

  • Determinants for the demand of tea bag machines:

    • World demand for the end product, tea bags (demand for the tea bag machines is derived demand)

    • Exchange rate from loose tea to tea bags

    • Number of existing tea bag machines around the world

    • Age distribution of existing tea bag machines (the assumption is, that the older a machine is, the more ‘ripe’ it is for replacement)

• How can Teepack and Teekanne use their relationship to each other with regard to collecting relevant market research data for both companies?

  • As Teepack is one step further back in the value chain (as a supplier for the tea bag manufacturers, like Teekanne), Teepack can use the relationship to Teekanne to collect data about tea consumers’ preferences (especially regarding the double chamber system) that they can use in their R&D for designing the best possible tea bag machines.

• How can Teepack and Teekanne use their relationship to each other with regard to collecting relevant market research data for both companies?

  • On the other hand, Teekanne can use the relationship to Teepack for gathering information about new tea bag packaging trends, as Teepack is visiting many different tea bag manufacturers to hear about their future needs for tea bag machines.

• Argue the case for the market analysis method you would choose if you had to evaluate the competitiveness of Teepack Spezialmaschinen on the global tea bag packaging machine market. 

  • The market analysis method that you could choose to evaluate the competitiveness of Teepack Spezialmaschinen is in-depth interviewing of the major global tea bag manufacturers (e.g.Unilever/Lipton) because they are the potential customers of Teepack Spezialmaschinen.

• Argue the case for the market analysis method you would choose if you had to evaluate the competitiveness of Teepack Spezialmaschinen on the global tea bag packaging machine market.

  • Many of these customers would also have experience of some of Teepack’s competitors, and therefore, the customers might be able to evaluate Teepack versus one of the competitors (kind of competitive benchmarking – see Chapter 4).

• In order to achieve better customer feedback, the top management of Teepack is interested in learning how to measure customer satisfaction. Propose a questionnaire design that contains some of the themes it would be relevant to include in the questionnaire.

  • The questionnaire design should capture the customers’ satisfaction with the different aspects of Teepack’s product and service package, like the following items:

    • Production capacity of the tea bag machine

    • Reliability of the tea bag machine (few breakdowns)

    • Quality of the finished product

    • Installation of the tea bag machine

    • Price level as compared to the performance

    • After-sales service

    • Availability of spare parts

    • Personal visits by Teepack’s representatives

• These dimensions can be measured on the following five-point scale:

  • Very satisfied, Satisfied, Neither satisfied nor dissatisfied, Dissatisfied and Very dissatisfied

    • (You could also consider a seven-point scale.)

• The survey could be done once a year, maybe by email or online, by clicking on a homepage where the questionnaire could be filled out.

• The customers’ responses should be kept centrally at the HQ in Germany because the biggest customers are global customers with operations around the world.

• By storing the data by customer, Teepack could follow each customer’s satisfaction over time and see if it changes for worse or better.

Field Study (Roca Gallery)

• Talked about sustainability; community

• In lots of different countries

• Even though it's just a gallery, it's a place for community and connection