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Introduction to global strategic planning and market expansion
- 1. Introduction to GlobalStrategic Planning &Global Market Expansion
- 2. Global Marketing“…the worldis becoming more homogenous…”“...distinctions between national markets are fading and may disappear…”
- 3. Global Marketing EvolutionCoreBusiness StrategyDevelop CoreBusiness StrategyInternationalizethe StrategyCountryACountryBCountryCCountryDGlobalizethe StrategySource: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan Management Review Association. All rights reserved.
- 4. Globalization DriversMarket Factorsnewconsumer groups, developed infrastructures, globalization of distribution channels, cross-border retail alliancesCost Factorsavoiding cost inefficiencies and duplicated effortsEnvironmental Factorsreduced governmental barriers, rapid technological evolutionCompetitive Factorsrapid product innovation, introduction, distribution
- 5. The Strategic PlanningProcessUnderstanding and adjusting the core strategy begins with a clear definition of the business for which the strategy is to be developed.The Strategic Business UnitBased on product market similaritiesSimilar needs or wants to be metSimilar end user customers to be targetedSimilar products or services used to meet needs of specific customers
- 6. The Strategic PlanningProcessGlobal Strategy FormulationAssessment and Adjustment of Core StrategyMarket/Competitive Analysis - Internal AnalysisFormulation of Global StrategyChoice of Target Countries, Segments, and Competitive StrategyDevelopmentof Global Marketing ProgramImplementationOrganizational Structure - Control
- 7. Market and CompetitiveAnalysisFirst, understand the structure of the global market industry; the common features of customer requirements and choice factors.Internal analysisExamine the readiness and capability of the firm to undertake strategic moves with its current resources.
- 8. Formulating Global MarketingStrategyFormulation begins with a series of strategic decisionsChoice of Competitive StrategyCost leadershipDifferentiationFocusCountry-Market ChoiceConcentration or diversificationFactors in country markets selectionThe stand-alone attractiveness of the marketGlobal strategic importance of the marketPossible synergies offered by the market
- 9. Competitive StrategiesSource ofCompetitive AdvantageCompetitiveScopeLow CostDifferentiationCostLeadershipBroadDifferentiationIndustry-wideSingle SegmentFocusSOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.
- 10. Bases for GlobalMarket SegmentationBases for InternationalMarket SegmentationEnvironmentalVariablesMarketingManagementVariablesGeographicVariablesPoliticalVariablesEconomicVariablesCulturalVariablesPromotionVariablesProductVariablesPriceVariablesDistributionVariables
- 11. Global Marketing ProgramDevelopmentDevelopment DecisionsProduct offeringThe degree of standardization and adaptation in the product offering.The marketing approachThe marketing program beyond the product variable.The location and extent of value-adding activitiesPooling production.Exploiting factor costs or capabilities.Strategic alliances.Concurrent engineering.Competitive moves to be madeCross-subsidization using resources accumulated in one market to wage a competitive battle in another.
- 12. Implementing Global MarketingSuccesswill come from a balance between local and regional / global concerns.“Think globally, act locally” is the operative phrase for global marketers competing in country markets.Product choices should consider individual markets as well as transfer products from one region to another.
- 13. Global Marketing Pitfallsto AvoidInsufficient local market research.The tendency to over standardize the product.Inflexibility in planning and implementation.The “Not-Invented-Here” syndrome (NIH).How to avoid the NIH syndromeEnsure that local managers participate in the development of global brand marketing strategies.Encourage local managers to develop ideas for regional or global use.
- 14. Localizing Global MarketingAchievinga balance between in-country managers and global product managers at corporate headquarters will require action to develop and implement a global strategy.
- 15. Localizing Global MarketingManagementprocessesEnhance the global transfer of communications.Interchange personnel to gain experience abroad.Headquarters should coordinate and leverage resources.Permit local managers to develop their own programs within defined parameters Maintain a product portfolio that includes local as well as regional or global brands.Allow local managers control over marketing budgets to respond to local customer needs and counter global competition.
- 16. Localizing Global MarketingOrganizationstructuresThe shift to global account management.Corporate cultureThe world is not one single market.Plan and execute programs on a worldwide basis.A global Identity favors no specific country.
- 17. Foreign InvestmentsFirms investto enter markets or assure themselves of sources of supply.Foreign direct investmentAn equity investment to create or expand a permanent interest in a foreign enterprise.Portfolio investmentThe purchase of stocks and bonds internationally.Major foreign investorsMore than 45,000 multinational corporations with 280,000 affiliates globally.The terms “foreign” and “domestic” may no longer apply.
- 18. Reasons for ForeignDirect InvestmentMarketing factorsGrowth and profit motivations.Circumventing government-erected barriers to trade.Access to low-cost resources and supply.Local customers preference for domestic goods and services.Attempts to obtain low-cost resources and ensure their supply.
- 19. Categories of International FirmsResource seekersare searching for natural and human resources.Market seekersare searching for better opportunities to enter or expand within markets.Efficiency seekersare attempting to obtain the most economic sources of production.
- 20. Reasons for ForeignDirect InvestmentDerived demandresults when businesses move abroad and encourage their suppliers to follow them, creating chain or pattern of direct investment in a market.Government incentivesFiscal incentivestax holidays, allowances, credits and rebates.Financial incentivesspecial funding for land or buildings, loans and guarantees, wage subsidies.Non-financial incentivesguaranteed purchases, protective tariffs, import quotas, local content requirements, infrastructure.
- 21. Foreign Direct InvestorsPositiveperspectivesBring in capital, economic activity, and employment.Transfer technology and managerial skills.Competition, market choice, and competitiveness are enhanced.Negative perspectivesDrain resources from host countries.Starve smaller capital markets.Discourage local technology development.Bring in outmoded technology.Create new competition for local firms.
- 22. Types of OwnershipOwnershippatterns may be based on past experiences with similar ownership models.Full ownershipFull control, full assumption of all risks.May be desirable, but is not necessary for success internationally.Joint venturesShared control, shared investment risks.Reasons for joint ventures:governmental pressure to join with local partners.mutually beneficial commercial considerations in sharing markets, pooling resources, and local suppliers.
- 23. Joint VenturesRecommendations forjoint venturesFind the right partner.
- 24. Negotiate the jointventure agreement carefully.
- 25. Maintain flexibility toadjust to changing market conditions.ADVANTAGESPooling of resourcesBetter relationships with local organizationsKnowledge the partner brings of the local marketMinimizing exposure risk of long-term capitalMaximizing leverage of invested capitalDISADVANTAGESDifferent levels of control are permitted or requiredDifficulty in maintaining the relationshipDisagreements over business decisionsDisagreements over profit accumulation, and distribution (profit repatriation)
- 26. Types of Ownership…continuedStrategic alliances“…more than the traditional customer-vendor relationship, but less than an outright acquisition.”Government consortiaPublic-private relationship in a specific project.Typically government supported or subsidized.
- 27. Complementary Strengths CreateValueSOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-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.
- 28. Contractual ArrangementsCross marketingTheparties agree to carry out activities which are complementary and non-competitive.Contract manufacturingAn arrangement that allows one part to outsourcing product manufacturing to another party while retaining control over research and development. Management contractingA supplier furnishes an integrated service (e.g., turnkey operation) internally to a client that is functionally important to the client.
- 29. Management Contracting AdvantagesCLIENTADVANTAGESProvide organizational skills not locally available.Immediate availability of skills.Management assistance and support that is not available locally.SUPPLIER ADVANTAGESLower risk because no equity capital is at stake.Exercise large amounts of operational control.The strategic advantage of being on the “inside”.Opportunity to commercialize “know-how”.Using experienced staff to offset business fluctuations.
- 30. Management Contracting RisksRisksto the clientOver-dependence on the supplier.Loss of control to the supplier.Risks to the contractorBidding without fully detailed insight into actual costs of delivering the service.The effects of the loss or termination of the contract and resulting personnel problems.