Global Marketing Strategies and Market Entry

Globalization: An Overview

  • Definition: Increased flow of goods, services, capital, people, information, and ideas across national borders, allowing firms to expand markets and source products globally.

Components of a Country Market Assessment

Firms use four key criteria:

A. Evaluating the General Economic Environment

  • Gross Domestic Product (GDP): Total market value of all goods and services produced by a country in a year.

  • Gross National Income (GNI): GDPGDP + net income from foreign investments (excluding payments to non-residents).

  • Purchasing Power Parity (PPP): Theory that identical products should cost the same in different countries when expressed in the same currency.

    • The Big Mac Index: Informal PPPPPP application comparing Big Mac cost globally.

  • Trade Deficit or Surplus:

    • Trade Deficit: Imports > Exports (signals foreign competition).

    • Trade Surplus: Exports > Imports (offers export opportunities, good manufacturing location).

  • Evaluation Approach: Use multiple relevant metrics for a comprehensive view.

B. Evaluating Market Size and Population Growth Rate

  • Population Growth: Rapid growth, especially in less developed countries (e.g., BRIC), suggests high demand. Developed countries often have stagnant/declining growth.

  • Distribution of Population: Urban vs. rural concentration affects distribution strategies.

C. Evaluating Real Income

  • Firms adapt products/pricing for lower-income countries (e.g., Haier washing machines for vegetables in China).

D. Analyzing Infrastructure and Technological Capabilities

  • Infrastructure: Basic facilities needed for society to function (transportation, distribution channels, communication, commerce).

  • Crucial for efficient business operations.

E. Analyzing Governmental Actions

  • Tariffs: Tax on imported products; increases price, reduces demand, benefits domestic producers.

  • Quotas: Limit on quantity of goods imported; benefits domestic goods.

  • Exchange Control: Regulation of currency exchange rates (e.g., central bank); affects import/export cost/profitability. Strong domestic currency: cheaper imports, costlier exports.

  • Trade Agreements: Intergovernmental agreements to promote trade within blocs (e.g., EU, NAFTA); reduce barriers.

  • Pricing Laws: National rules on competition (e.g., antidumping laws); impact global pricing strategies, may prohibit selling below cost.

F. Analyzing Sociocultural Factors

  • Understanding local culture is critical.

  • Visible Artifacts: Observable cultural elements (dress, food, language).

  • Underlying Values: Deeper aspects (beliefs, thought processes, ethics).

  • Ethical Dilemma (Dolce & Gabbana): Culturally insensitive advertising led to market backlash in China.

  • Geert Hofstede's Cultural Dimensions: Framework for cultural differences:

    • Power Distance: Acceptance of unequal power distribution.

    • Uncertainty Avoidance: Tolerance for ambiguity; high avoidance means preference for strict rules.

    • Individualism vs. Collectivism: Focus on self/family vs. group loyalty/cohesion.

    • Masculinity vs. Femininity: Values assertiveness/achievement vs. cooperation/quality of life.

Global Entry Strategies

Strategies vary in risk and potential return, typically starting less risky.

1. Exporting

  • Description: Producing goods in one country and selling them in another.

  • Risk/Return: Least financial risk, limited return; often first approach.

2. Strategic Alliance

  • Description: Collaboration between independent companies in a foreign market, without equity investment in each other.

  • Role: Flexible cooperation.

3. Franchising

  • Description: Contract allowing franchisee to operate business using franchisor's brand, products, and format for a fee/royalties.

4. Joint Venture

  • Description: Pooled resources of a firm and local firm to create a new, shared company; share ownership, control, profit.

  • Risk/Return: More risk than exporting/alliances, but greater control and potential returns.

5. Direct Investment

  • Description: Firm maintains 100 percent ownership of foreign facilities, offices, plants.

  • Risk/Return: Significant risk, but highest potential return and complete control.

Developing a Global Marketing Mix (STP - Segmentation, Targeting, Positioning)

  • Complexity: More complicated globally due to cultural nuances and differing consumer views.

  • Approach: Tailor marketing mix to meet needs of individual global markets.

1. Global Product Strategies

Three options:

  • Selling the Same Product/Service: Identical product (e.g., Glocalization, where product is standardized but adapted to local cultural taste).

  • Selling a Product with Minor Adaptations: Slight modifications for host country.

  • Selling a Completely New Product: Entirely new product for host country.

  • Adaptation Factors: Economic development and product/technical standards determine adaptation needs.

2. Global Pricing Strategies

Prices differ due to:

  • Market Positioning: Products may have different perceived value globally.

  • Impact of Governmental Actions: Tariffs increase costs; antidumping laws prevent selling below cost.

3. Global Distribution Strategies

  • Complex Value Chains: Include wholesalers, importers, transportation, increasing final price.

  • Adaptation for Developing Countries: Consumers shop in small outlets; difficult transport to remote areas due to poor infrastructure.

  • Creative Solutions: Retailers must devise ways to reach hard-to-access consumers.

4. Global Communication Strategies (Promotion)

  • Language and Culture: Firms invest to avoid culturally insensitive messaging or embarrassing translations; cultural sensitivity is crucial.