Introduction to Global Strategic Planning and Market Expansion

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Webster UniversityIntroduction to

Global Strategic Planning&

Global Market Expansion

MRKT 5980



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Global MarketingGlobal Marketing

³«the world is becoming more homogenous«´ ³«the world is becoming more homogenous«´

³...distinctions between national markets are ³...distinctions between national markets arefading and may disappear«´ fading and may disappear«´




Global Marketing EvolutionGlobal Marketing Evolution

Core Business StrategyCore Business Strategy

Country

A

Country

B

Country

C

Country

D

Develop Core

Business Strategy

Internationalizethe Strategy

Globalize

the Strategy

Source: Reprinted from ³Global Strategy« In a World of Nations?´ by GeorgeS. Yip, SloanManagement Review 31 (Fall 1989): 30, by permission of the publisher . Copyright 1989 by Sloan

Management Review Association. All rights reserved.




Globalization DriversGlobalization Drivers

Market FactorsMarket Factors

�� new consumer groups, developed infrastructures,new consumer groups, developed infrastructures,globalization of distribution channels, crossglobalization of distribution channels, cross--borderborder

retail alliancesretail alliances Cost FactorsCost Factors

�� avoiding cost inefficienciesavoiding cost inefficienciesand duplicated effortsand duplicated efforts

Environmental FactorsEnvironmental Factors

�� reduced governmental barriers,reduced governmental barriers,rapid technological evolutionrapid technological evolution

Competitive FactorsCompetitive Factors

�� rapid product innovation, introduction, distributionrapid product innovation, introduction, distribution




The Strategic Planning ProcessThe Strategic Planning Process

Understanding and adjusting the core strategy beginsUnderstanding and adjusting the core strategy beginswith a clear definition of the business for which thewith a clear definition of the business for which thestrategy is to be developed.strategy is to be developed.

The Strategic Business UnitThe Strategic Business Unit

�� Based on product market similaritiesBased on product market similarities

Similar needs or wants to be metSimilar needs or wants to be met

Similar end user customers to be targetedSimilar end user customers to be targeted

Similar products or services used to meet needsSimilar products or services used to meet needs

of specific customersof specific customers




The Strategic Planning ProcessThe Strategic Planning Process

Assessment and Adjustment of Core StrategyMarket/Competitive Analysis - Internal Analysis

Formulation of Global StrategyChoice of Target Countries, Segments, and Competitive Strategy

Development of Global Marketing Program

ImplementationOrganizational Structure - Control

Global Strategy Formulation



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Market and Competitive AnalysisMarket and Competitive Analysis

First, understand the structure of the globalFirst, understand the structure of the globalmarket industry; the common features of market industry; the common features of customer requirements and choice factors.customer requirements and choice factors.

Internal analysisInternal analysis

�� Examine the readiness and capability of Examine the readiness and capability of the firm tothe firm to

undertake strategic moves with itsundertake strategic moves with itscurrent resources.current resources.



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Formulating Global Marketing StrategyFormulating Global Marketing Strategy

Formulation begins with a series of strategic decisionsFormulation begins with a series of strategic decisions

Choice of Competitive StrategyChoice of Competitive Strategy

�� Cost leadershipCost leadership

�� DifferentiationDifferentiation

�� FocusFocus

CountryCountry--Market ChoiceMarket Choice

�� Concentration or diversificationConcentration or diversification

�� Factors in country markets selectionFactors in country markets selection The standThe stand--alone attractiveness of the marketalone attractiveness of the market

Global strategic importance of the marketGlobal strategic importance of the market

Possible synergies offered by the marketPossible synergies offered by the market



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Competitive StrategiesCompetitive Strategies

Cost

Leadership

Broad

Differentiation

Source of Competitive Advantage

Low Cost Differentiation

Industry-wide

Single

Segment

Competitive

Scope

Focus

SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.



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Bases for Global Market SegmentationBases for Global Market Segmentation

Environmental

Variables

Marketing

ManagementVariables

Geographic

Variables

Political

Variables

Economic

Variables

Cultural

Variables

Promotion

Variables

Product

Variables

Price

Variables

Distribution

Variables

Bases for InternationalMarket Segmentation



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Global Marketing Program DevelopmentGlobal Marketing Program Development

Development DecisionsDevelopment Decisions

�� Product offeringProduct offering

The degree of standardization and adaptation in theThe degree of standardization and adaptation in theproduct offering.product offering.

�� The marketing approachThe marketing approach The marketing program beyond the product variable.The marketing program beyond the product variable.

�� The location and extent of valueThe location and extent of value--adding activitiesadding activities

Pooling production.Pooling production.

Exploiting factor costs or capabilities.Exploiting factor costs or capabilities.

Strategic alliances.Strategic alliances. Concurrent engineering.Concurrent engineering.

�� Competitive moves to be madeCompetitive moves to be made

CrossCross--subsidization using resources accumulated in onesubsidization using resources accumulated in onemarket to wage a competitive battle in another.market to wage a competitive battle in another.




Implementing Global MarketingImplementing Global Marketing

Success will come from a balance between localSuccess will come from a balance between localand regional / global concerns.and regional / global concerns.

³Think globally, act locally´ is the operative ³Think globally, act locally´ is the operative

phrase for global marketers competing in countryphrase for global marketers competing in countrymarkets.markets.

Product choices should consider individualProduct choices should consider individualmarkets as well as transfer products from onemarkets as well as transfer products from oneregion to another.region to another.




Global Marketing Pitfalls to AvoidGlobal Marketing Pitfalls to Avoid

Insufficient local market research.Insufficient local market research.

The tendency to over standardize the product.The tendency to over standardize the product.

Inflexibility in planning and implementation.Inflexibility in planning and implementation.

The ³NotThe ³Not--InventedInvented--Here´ syndrome (NIH).Here´ syndrome (NIH).

�� How to avoid the NIH syndromeHow to avoid the NIH syndrome

Ensure that local managers participate inEnsure that local managers participate in

the development of global brandthe development of global brandmarketing strategies.marketing strategies.

Encourage local managers to developEncourage local managers to developideas for regional or global use.ideas for regional or global use.




Localizing Global MarketingLocalizing Global Marketing

Achieving a balance between inAchieving a balance between in--countrycountrymanagers and global product managers atmanagers and global product managers atcorporate headquarters will require action tocorporate headquarters will require action to

develop and implement a global strategy.develop and implement a global strategy.





Management processesManagement processes

�� Enhance the global transfer of communications.Enhance the global transfer of communications.

�� Interchange personnel to gain experience abroad.Interchange personnel to gain experience abroad.

�� Headquarters should coordinate and leverageHeadquarters should coordinate and leverageresources.resources.

�� Permit local managers to develop their ownPermit local managers to develop their ownprograms within defined parameters Maintain aprograms within defined parameters Maintain aproduct portfolio that includes local as well asproduct portfolio that includes local as well as

regional or global brands.

regional or global brands.

�� Allow local managers control over marketing budgetsAllow local managers control over marketing budgetsto respond to local customer needs and counterto respond to local customer needs and counterglobal competition.global competition.





Organization structuresOrganization structures

�� The shift to global account management.The shift to global account management.

Corporate cultureCorporate culture

�� The world is not one single market.The world is not one single market.

�� Plan and execute programs on a worldwidePlan and execute programs on a worldwidebasis.basis.

�� A global Identity favors no specific country.A global Identity favors no specific country.




Foreign InvestmentsForeign Investments

Firms invest to enter markets or assure themselves of sourcesFirms invest to enter markets or assure themselves of sourcesof supply.of supply.

Foreign direct investmentForeign direct investment

�� An equity investment to create or expand aAn equity investment to create or expand apermanent interest in a foreign enterprise.permanent interest in a foreign enterprise.

Portfolio investmentPortfolio investment

�� The purchase of stocks and bonds internationally.The purchase of stocks and bonds internationally.

Major foreign investorsMajor foreign investors

�� More than 45,000 multinational corporations withMore than 45,000 multinational corporations with280,000 affiliates globally.280,000 affiliates globally.

�� The terms ³foreign´ and ³domestic´ may no longerThe terms ³foreign´ and ³domestic´ may no longerapply.apply.




Reasons for Foreign Direct InvestmentReasons for Foreign Direct Investment

Marketing factorsMarketing factors

�� Growth and profit motivations.Growth and profit motivations.

�� Circumventing governmentCircumventing government--erected barriers toerected barriers to

trade.trade.�� Access to lowAccess to low--cost resources and supply.cost resources and supply.

�� Local customers preference for domestic goodsLocal customers preference for domestic goodsand services.and services.

�� Attempts to obtain lowAttempts to obtain low--cost resources andcost resources andensureensuretheir supply.their supply.




Categories of International FirmsCategories of International Firms

Resource seekersResource seekers

�� are searching for natural and human resources.are searching for natural and human resources.

Market seekersMarket seekers

�� are searching for better opportunitiesare searching for better opportunities

to enter or expand within markets.to enter or expand within markets. Efficiency seekersEfficiency seekers

�� are attempting to obtain theare attempting to obtain themost economic sourcesmost economic sourcesof production.of production.




Reasons for Foreign Direct InvestmentReasons for Foreign Direct Investment

Derived demandDerived demand

�� results when businesses move abroad and encourageresults when businesses move abroad and encouragetheir suppliers to follow them, creating chain ortheir suppliers to follow them, creating chain orpattern of direct investment in a market.pattern of direct investment in a market.

Government incentivesGovernment incentives

�� Fiscal incentivesFiscal incentives

tax holidays, allowances, credits and rebates.tax holidays, allowances, credits and rebates.

�� Financial incentivesFinancial incentives

special funding for land or buildings, loans andspecial funding for land or buildings, loans andguarantees, wage subsidies.guarantees, wage subsidies.

�� NonNon--financial incentivesfinancial incentives

guaranteed purchases, protective tariffs, importguaranteed purchases, protective tariffs, importquotas, local content requirements, infrastructure.quotas, local content requirements, infrastructure.




Foreign Direct InvestorsForeign Direct Investors

Positive perspectivesPositive perspectives

�� Bring in capital, economic activity, andBring in capital, economic activity, andemployment.employment.

�� Transfer technology and managerial skills.Transfer technology and managerial skills.

�� Competition, market choice, andCompetition, market choice, andcompetitiveness are enhanced.competitiveness are enhanced.

Negative perspectivesNegative perspectives

�� Drain resources from host countries.Drain resources from host countries.

�� Starve smaller capital markets.

Starve smaller capital markets.

�� Discourage local technology development.Discourage local technology development.

�� Bring in outmoded technology.Bring in outmoded technology.

�� Create new competition for local firms.Create new competition for local firms.




Types of OwnershipTypes of Ownership

Ownership patterns may be based on past experiences withOwnership patterns may be based on past experiences withsimilar ownership models.similar ownership models.

Full ownershipFull ownership

�� Full control, full assumption of all risks.Full control, full assumption of all risks.

�� May be desirable, but is not necessary for successMay be desirable, but is not necessary for successinternationally.internationally.

Joint venturesJoint ventures

�� Shared control, shared investment risks.Shared control, shared investment risks.

�� Reasons for joint ventures:Reasons for joint ventures:

governmental pressure to join with local partners.governmental pressure to join with local partners.

mutually beneficial commercial considerations inmutually beneficial commercial considerations insharing markets, pooling resources, and local suppliers.sharing markets, pooling resources, and local suppliers.




Joint VenturesJoint Ventures

ADVANTAGESADVANTAGES Pooling of resourcesPooling of resources

Better relationships withBetter relationships withlocal organizationslocal organizations

Knowledge the partnerKnowledge the partner

brings of the local marketbrings of the local market Minimizing exposure risk of Minimizing exposure risk of

longlong--term capitalterm capital

Maximizing leverage of Maximizing leverage of invested capitalinvested capital

DISADVANTAGESDISADVANTAGES Different levels of controlDifferent levels of control

are permitted or requiredare permitted or required

Difficulty in maintaining theDifficulty in maintaining therelationshiprelationship

Disagreements overDisagreements overbusiness decisionsbusiness decisions

Disagreements over profitDisagreements over profitaccumulation, andaccumulation, anddistribution (profitdistribution (profitrepatriation)repatriation)

Recommendations for joint ventures

� Find the right partner .

� Negotiate the joint venture agreement carefully.

� Maintain flexibility to adjust to changing market conditions.




Types of Ownership« continuedTypes of Ownership« continued

Strategic alliancesStrategic alliances

�� ³«more than the traditional customer ³«more than the traditional customer--vendorvendor

relationship, but less than an outrightrelationship, but less than an outrightacquisition.´ acquisition.´

Government consortiaGovernment consortia

�� PublicPublic--private relationship in a specific project.private relationship in a specific project.

�� Typically government supported or subsidized.Typically government supported or subsidized.




Complementary Strengths Create ValueComplementary Strengths Create Value

PARTNER STRENGTH« + PARTNER STRENGTH« = JOINT OBJE TIVE

Pepsico marketing clout for canned beverages

Lipton recognized tea brand andcustomer franchise

o sell canned iced teabeverages jointly

Philips consumer electronicsinnovation and leadership

Levi Strauss fashion design anddistribution

Outdoor wear with integratedelectronic equipment for

fashion-conscience consumers

KF established brand andstore format, and operationskills

Mitsubishi real estate and site-selection skills in apan

o establish a KFC chain inapan

Siemens presence in range of telecommunications marketsworldwide and cable-

manufacturing technology

orning technological strengthin optical fibers and glass

o create a fiber-optic cablebusiness

Ericsson technologicalstrength in publictelecommunications network

Hewlett-Packard computers,software, and access toelectronics-channels

o create and market networkmanagement systems

SOURCES: ³Portable Technology Takes the Next Step: Electronics You Can Wear,´The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, ³Is Your

Strategic Alliance Really a Sale?´ Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, ³Coca-Cola Proclaims Nesta Time for CAA.´ Advertising

Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor .com;http:www.ericsson.com; and http://www.hp.com.




Contractual ArrangementsContractual Arrangements

Cross marketingCross marketing

�� The parties agree to carry out activitiesThe parties agree to carry out activitieswhich are complementary and nonwhich are complementary and non--competitive.competitive.

Contract manufacturingContract manufacturing

�� An arrangement that allows one part toAn arrangement that allows one part tooutsourcing product manufacturing tooutsourcing product manufacturing toanother party while retaining control overanother party while retaining control over

research and development. research and development. Management contractingManagement contracting

�� A supplier furnishes an integrated serviceA supplier furnishes an integrated service(e.g., turnkey operation) internally to a(e.g., turnkey operation) internally to aclient that is functionally important to theclient that is functionally important to theclient. client.




Management Contracting AdvantagesManagement Contracting Advantages

CLIENT ADVANTAGESCLIENT ADVANTAGES

Provide organizationalProvide organizationalskills not locallyskills not locallyavailable.available.

Immediate availability of Immediate availability of skills.skills.

Management assistanceManagement assistanceand support that is notand support that is notavailable locally.available locally.

SUPPLIER ADVANTAGESSUPPLIER ADVANTAGES

Lower risk because noLower risk because noequity capital is at stake.equity capital is at stake.

Exercise large amountsExercise large amounts

of operational control.of operational control.

The strategic advantageThe strategic advantageof being on the ³inside´.of being on the ³inside´.

Opportunity toOpportunity tocommercialize ³knowcommercialize ³know--

how´.how´.

Using experienced staff Using experienced staff to offset businessto offset businessfluctuations.fluctuations.




Management Contracting RisksManagement Contracting Risks

Risks to the clientRisks to the client

�� OverOver--dependence on the supplier.dependence on the supplier.

�� Loss of control to the supplier.Loss of control to the supplier.

Risks to the contractorRisks to the contractor

�� Bidding without fully detailed insight intoBidding without fully detailed insight intoactual costs of delivering the service.actual costs of delivering the service.

�� The effects of the loss or terminationThe effects of the loss or terminationof the contract and resultingof the contract and resulting

personnel problems.personnel problems.

Introduction to Global Strategic Planning and Market Expansion

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