Marketing Management - Chapter 2: Marketing Foundations

Marketing Management, 4e - Chapter 2: Marketing Foundations

Opening Statement

  • Learning changes everything.

    • Emphasizes the transformative power of learning in the context of marketing management.

    • Source: Marketing Management, 4e by Greg W. Marshall and Mark W. Johnston

Learning Objectives

  • LO 2-1: Identify the various levels in the Global Marketing Experience Curve.

  • LO 2-2: Learn the essential information components for assessing a global market opportunity.

  • LO 2-3: Define the key regional market zones and their marketing challenges.

  • LO 2-4: Describe the strategies for entering new global markets.

  • LO 2-5: Recognize key factors in creating a global product strategy.

  • LO 2-6: Learn the importance of ethics in marketing strategy, the value proposition, and the elements of the marketing mix.

  • LO 2-7: Recognize the significance of sustainability as part of marketing strategy and the use of the triple bottom line as a metric for evaluating corporate performance.

Marketing Beyond Borders

  • Globalization of Markets

    • Marketing is not confined by geographical limits, primarily due to:

    • Worldwide distribution networks.

    • Advanced communication tools.

    • Increased product standardization.

    • Business Size Diversity:

    • Both large and small companies engage in global business.

    • Opportunities versus Risks:

    • While global opportunities are unprecedented, associated risks have also escalated.

    • Customer Needs:

    • Global customers may demand adaptations to products to meet local requirements.

The Global Experience Learning Curve

  • Stages of Global Marketing:

    1. No Foreign Marketing:

    • No direct foreign marketing; companies may receive unsolicited orders.

    1. Foreign Marketing:

    • Selling to foreign customers, usually through intermediaries.

    1. International Marketing:

    • Manufacturing outside the home market, establishing an international business unit.

    1. Global Marketing:

    • Treats the world as one market while considering various segments.

Companies with No Foreign Marketing

  • Characteristics:

    • Typically small firms with a limited product range.

    • Can conduct incidental business through intermediaries or unsolicited orders.

    • Rapid globalization of small companies, driven by better distributor relationships and effective online platforms.

Companies with Foreign Marketing

  • Develop local distribution and services to support existing customers in foreign markets:

    • Utilizes local intermediaries or creates its own sales force.

    • Activities modified for international contexts.

International Marketing Overview

  • Definition:

    • A firm engaging in manufacturing products for markets outside its home region.

  • Significance:

    • International markets are crucial for corporate growth.

  • Organizational Mindset:

    • Management often maintains a “domestic first” mentality.

Global Marketing Overview

  • Global Perspective:

    • Sees the world as a single market with various segments.

    • More than 50% of revenue originates from international markets.

  • Market Viewing:

    • Global firms identify segments that may not align with political boundaries, unlike international firms which generally do.

  • Significance of Research:

    • Critical for decision-making in global marketing initiatives.

Examples of Global Companies

  • Expansion Timelines:

    • Walmart (1991: Mexico)

      • 29 years since establishment in 1962.

    • Hewlett-Packard (1959: Europe)

      • 20 years since establishment in 1939.

    • Tyson Foods (1989: Mexico)

      • 26 years since establishment in 1963.

    • Caterpillar (1950: Great Britain)

      • 25 years since establishment in 1925.

    • Home Depot (1998: Puerto Rico and Argentina)

      • 19 years since establishment in 1979.

    • Gap (1987: London)

      • 18 years since establishment in 1969.

    • Goodyear (1910: Canada)

      • 12 years since establishment in 1898.

    • FedEx (1981: Canada)

      • 10 years since establishment in 1971.

    • Nike (1972: Canada)

      • 4 years since establishment in 1968.

    • AirBnB (2011: Germany)

      • 4 years since establishment in 2007.

    • PepsiCo (1966: Japan/Eastern Europe)

      • 1 year since establishment in 1965.

Components of a Global Marketing Experience

  • Five Essential Information Components:

    1. Economic environment

    2. Culture and societal trends

    3. Business environment

    4. Political and legal changes

    5. Specific market conditions

Emerging Markets

  • Economic Shift:

    • Traditionally, economic growth stemmed from the Triad: Western Europe, U.S., and Japan.

    • In the past 25 years, emerging markets (primarily China and India) accounted for 75% of global growth.

  • Fastest-Growing Economies (2019 GDP rates):

    • Dominica: 9.4%

    • South Sudan: 7.9%

    • Bangladesh: 7.8%

    • Rwanda: 7.8%

    • Côte d'Ivoire: 7.5%

    • Source: IMF, World Economic Outlook, October 2019.

Multinational Regional Market Zones

  • Definition:

    • Regional market zones involve countries with formal economic relationships that reduce trade barriers.

  • Forces behind Formation:

    • Economic considerations.

    • Geographic proximity.

    • Political influences.

    • Cultural similarities.

Significant Regional Markets

  • Examples:

    • European Union

    • NAFTA & USMCA

    • MERCOSUR

    • ASEAN

Selecting Global Markets

  • Assessment:

    • Entering new countries involves risks; poor decisions can lead to significant costs.

  • Key Criteria:

    • Competition analysis.

    • Target market size and growth rate.

    • Investment size and potential profitability timeline.

    • Review company characteristics: personnel, managerial capabilities, and financial resources.

Global Market Entry Strategies

  • Exporting:

    • Minimal investment; represents 10% of all global economic activity.

    • The Internet and payment innovations simplify global transactions.

    • Exporters and distributors are critical for navigating local market conditions.

  • Contractual Agreements:

    • Non-equity relationships, often implemented through:

    • Licensing: Necessary for compliance or limited resources.

    • Franchising: Maintains quality control, low capital requirements, rapid expansion, and local insights.

  • Strategic Alliances:

    • Spread foreign investment risks among partners.

    • International joint ventures facilitate market entry by mitigating legal or cultural barriers.

    • Structure shared management resources and equity positions.

  • Direct Foreign Investment (DFI):

    • The most risky but potentially rewarding strategy for long-term growth.

    • Key considerations include timing, legal implications, transaction costs, technology transfer, product differentiation, and marketing communication challenges.

Organizational Structure Choices

  • Decision-Making Complexity:

    • Addition of authority layers complicates decision-making in global contexts.

  • Structure Options:

    • Centralized: Consolidated decision-making authority.

    • Decentralized: Empowered regional units.

    • Regionalized: Focuses on local market needs within global strategies.

Product Strategy Choices

  • Direct Product Extension:

    • No modifications for local markets; avoids additional costs.

  • Product Adaptation:

    • Altered to fit local legal and cultural needs.

  • Product Invention:

    • Backward Product Invention: Renewed launch of a discontinued product from one market to another.

    • Forward Product Invention: Development of new products for new markets.

Consumer Issues in Global Markets

  • Perceptions of quality can significantly differ across cultures.

  • Product modifications must accommodate cultural factors, including brand names and features.

  • Brand Strategy:

    • Global, regional, or local brand strategies must align with market expectations.

  • Country-of-Origin Effect:

    • The perceived value of a product based on its country of production can influence purchasing decisions.

Marketing Communication Strategies

  • Advertising Strategies:

    1. Global marketing themes.

    2. Global marketing with local content.

    3. Basket of global advertising themes.

    4. Local market advertisement creation.

  • Other Marketing Communications:

    • Personal Selling: Requires culturally sensitive hiring and training of global sales forces.

    • Sales Promotion: Emphasizes creating consumer trial and purchase incentives, especially outside the U.S.

    • Public Relations: The importance of an effective global public relations strategy has increased due to extended reach of communication channels.

Pricing Strategies

  • One World Price:

    • A single price applied across all markets; effective for commodities such as oil or diamonds.

  • Local Market Pricing:

    • Prices tailored to reflect conditions and competition in local markets.

  • Cost-Based Pricing:

    • Formula driven purely by production costs, potentially overlooking local market dynamics.

  • Price Escalation Factors:

    • Higher costs associated with exporting, including product configuration and documentation.

    • Transfer Pricing: Internal product pricing can complicate competitiveness.

    • Tariffs and Taxes: Imposed by governments to protect local industries, affecting final pricing.

    • Exchange-Rate Fluctuations: Currency valuation changes can impact pricing strategies.

Global Pricing Issues

  • Dumping:

    • Selling products at below cost or lower than domestic prices, leading to market manipulation.

  • Gray Marketing:

    • Unauthorized diversion of branded products into international markets, with distributors exploiting pricing differences.

Ethical Considerations in Marketing Management

  • Ethics Importance:

    • Ethical leadership and policies guide marketing practices; critical for maintaining customer relationships.

  • Case Study: Ethical failures, such as Volkswagen's emission deception, illustrate the consequences of unethical marketing practices.

Ethics and the Value Proposition

  • Value Equation:

    • Value = \frac{Benefits}{Costs}

  • Trust in a company's commitments regarding product quality and service interactions is vital.

  • Examples of companies failing to maintain trust with customers:

    • Wells Fargo: Fake accounts scandal.

    • Johnson & Johnson: Baby powder controversies.

    • Big Tech Companies: Privacy concerns.

Ethical Elements in Marketing Mix

  • Product:

    • Use ethical research practices, ensure safe product materials and manufacturing conditions, and honor warranties.

  • Price:

    • Full price disclosure, avoiding unethical practices like price discrimination and price fixing.

  • Distribution:

    • Fair treatment for channel members; maintaining data privacy and a fair purchasing environment.

  • Promotion:

    • Avoid deceptive practices in marketing communications and ensure transparency in advertising.

Code of Marketing Ethics

  • Create a formal code of ethics outlining company values:

    • Honesty

    • Responsibility

    • Fairness

    • Respect

    • Transparency

    • Citizenship

  • Source: The American Marketing Association's established framework.

Sustainability in Marketing

  • Definition:

    • The concept of doing well by doing good; integrating ethical responsibility and sustainability in marketing strategies.

  • Historical Context:

    • Environmental laws originated from the Great Depression; contemporary sustainability focuses on resource utilization.

  • Modern Sustainability Principles:

    • Integration of educated workforce, community support, and strategic alignment of policies with operations.

Stakeholders in Marketing

  • Key Stakeholders:

    • Society at large

    • Local communities

    • Employees

    • Suppliers

    • Government entities

    • Customers

    • Stockholders

Triple Bottom Line Concept

  • Components:

    • Profit: Financial returns, innovation, and risk management measures.

    • Socio-economic Impact: Job creation and skill enhancement.

    • Social Investment: Factors related to eco-efficiency, community engagement, and labor relations.

    • Environmental Impact: Addressing health, safety, and environmental crises, focusing on clean air and water, and biodiversity.

Conclusion

  • The chapter outlines essential facets of global marketing, ethical considerations, and sustainability, establishing a framework for making informed decisions in the international marketplace.

End of Chapter Note.
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