Designing Global Market Offerings

Learning Objectives:

I.

The importance of international markets

The riskiness of international markets
How to make international marketing decisions
Differing entry strategies
Differing marketing organizations
Introduction: Competing on a global basis

With the onset of globalization and liberalization encompassing almost every industry of the
world, industries are gradually opening up on the world stage from the narrow confines of its
national boundaries. The firms operating in the industries now have to take production
decisions depending on global demand and market conditions and depending on the
economic scenario in world markets.
Global Industry is an industry in which the strategic positions of competitors in major
geographic or national markets are fundamentally affected by their overall global positions.
The key industries where the marks of global industry behaviour are felt include: (a) energy
sector; (b) financial services; (c) education; (d) retail and consumer goods; (e) transport
sector; and (f) information and communication technology.
Global firm is a firm that operates in more than one country and captures R&D, production,
logistical, marketing, and financial advantages in its costs and reputation that are not
available to purely domestic competitors.
Major decisions:
Deciding whether to go abroad
Deciding which markets to enter
Deciding how to enter the market
Deciding on the marketing program
Deciding on the marketing organization
II.

Deciding whether to go abroad

Most companies would prefer to remain domestic if their domestic market were large
enough. Managers would not need to learn other languages and laws, deal with volatile
currencies, face political and legal uncertainties, or redesign their products to suit different
customer needs and expectations. Business would be easier and safer. Yet several factors
are drawing more and more companies into the international arena:
Pros:
Global firms offering better products or lower prices can attack the companys
domestic market. The company might want to counterattack these competitors in
their home markets.
The company discovers that some foreign markets present higher profit opportunities
than the domestic market.
The company needs a larger customer base to achieve economies of scale.
The company wants to reduce its dependence on any one market.

 The companys customers are going abroad and need servicing.

Cons:
The company might not understand foreign customer preferences and fail to offer a
competitively attractive product.
The company might not understand the foreign countrys business culture or know
how to deal countrys business culture or know how to deal effectively with foreign
nationals.
The company might underestimate foreign regulations and incur unexpected costs.
The company might realize that it lacks managers with international experience.
The foreign country might change its commercial laws, devalue its currency, or
undergo a political revolution and expropriate property.

III.

Deciding which markets to enter

The firm should define its international objectives and policies:

a. How many markets to enter
A company should enter fewer countries when: (a) Market entry and market costs are
high; (b) Product and communication costs are high; (c) Population and income size and
growth are high in the initial countries chosen; and (d) Dominant foreign firms can
establish high barriers to entry.
b. Regional Free Trade Zones
Regional free trade zones offer many potential benefits to companies expanding
potential benefits. Clearly defined national import/export policies are just one
potential benefit.
The European Union
NAFTA (North American Free Trade Agreement)
MERCOSUL ( Mercado Comun del Sur)
APEC (Asia Pacific Economic Cooperation)
IV.

Deciding how to enter the market

Many countries prefer to sell to neighboring countries because they understand these
countries better. Example: The largest US Market is Canada and Mexico, US neighbors.
Australias market would be Papua New Guinea & other Asian countries.
Five Modes of Entry into Foreign Market:
a. Direct export is when company handles its own exports, through a domestic
department, overseas sales branch, traveling representatives, or foreign-based
distributors and agents.
The advantages of exporting are:

Manufacturing is home based thus, it is less risky than overseas

based
Gives an opportunity to "learn" overseas markets before investing in
bricks and mortar.
Reduces the potential risks of operating overseas.

The disadvantage is:

Mainly that one can be at the "mercy" of overseas agents and so the lack of
control has to be weighed against the advantages.

b. Indirect export works through independent intermediaries to export products. Some

examples of this are domestic-based export merchants, cooperative organizations
and export-management companies.
Indirect methods offer a number of advantages including:

Contracts in the operating market or worldwide

Commission sates give high motivation (not necessarily loyalty)

Manufacturer/exporter needs little expertise

Credit acceptance takes burden from manufacturer.

c. Licensing is when a firm sells to a foreign company the rights to manufacturing

process, trademark, patent, trade secret and others for a fee. Examples are contract
manufacturing, management contracts, and franchising.

Licensing gives the following advantages:

Good way to start in foreign operations and open the door to low
risk manufacturing relationship.
Linkage of parent and receiving partner interests means both get
most out of marketing effort.
Capital not tied up in foreign operation and
Options to buy into partner exist or provision to take royalties in
stock.

The disadvantages are:

Limited form of participation - to length of agreement, specific

product,
process
or
trademark
Potential returns from marketing and manufacturing may be lost
Partner develops know-how and so license is short
Licensees become competitors overcome by having cross
technology transfer deals and
Requires considerable fact finding, planning, investigation and
interpretation.

d. Joint venture is joining with local investors to share ownership and control.

Joint ventures give the following advantages:

Sharing of risk and ability to combine the local in-depth knowledge

with a foreign partner with know-how in technology or process

Joint financial strength

May be only means of entry and

May be the source of supply for a third country.

They also have disadvantages:

Partners do not have full control of management

May be impossible to recover capital if need be
Disagreement on third party markets to serve and
Partners may have different views on expected benefits.

e. Direct investment entails direct ownership of foreign-based operations. The most

extensive form of participation is 100% ownership and this involves the greatest
commitment in capital and managerial effort. The ability to communicate and control
100% may outweigh any of the disadvantages of joint ventures and licensing.
However, as mentioned earlier, repatriation of earnings and capital has to be carefully
monitored.
Internationalization process:
No regular export activities
Export via independent reps
Establishment of one or more sales subsidiaries
Establishment of production facilities abroad
V.

Deciding on the Marketing Program

Once the market and format of entering in the market are finalized, it is time for the company
to work out the marketing strategy. Company has to work out the option between
standardized marketing of one size fits all or come out with completely new strategy for the
new market. Alternatively, companies can choose to mix and match in product, promotion,
price and place.
a. Standardized marketing mix involves selling the same products and using the same
marketing approaches worldwide.
b. Adapted marketing mix involves adjusting the marketing mix elements in each target
market, bearing more costs but hoping for a larger market share and ROI.
At product level, company may choose to enter the global market without changes in the
original product, or company may choose to modify the product as per the local market taste
and preference or company may decide to introduce completely new products.
a. Straight extension is the practice of releasing an existing product without making any
changes to it while releasing it to a foreign market.
b. Product adaptation is the process of modifying an existing product so it is suitable for
different customers or markets.
c. Product invention is when new products are designed from scratch for the
international marketplace.
d. Backward invention is the reintroduction of an earlier product form that can be
adapted to a foreign company's needs.
e. Forward invention is form of invention where a new product is created to meet a need
in another country.

For promotion company may choose standard or may modify as per the local market needs.
a. Communication adaptation is the process of changing marketing communications
programs for each local market.
b. Dual adaptation is the adaption of both the product and the communications to a
local market.
Pricing is a tricky issue. Therefore, companies can set uniform price across global market or
introduce market-based price in each market or use cost based approach to set the price.
There are several issues in regards with pricing in international markets:
International price escalation refers to the problem of end-user prices reaching
exorbitant levels in the export market caused by multi-layered distribution channels,
intermediary margins, tariffs, and other international customer costs. International
price escalation may mean that the retail price in the export market may be two or
three times the domestic price, creating a competitive disadvantage for the exporter.
Transfer pricing refers to the practice of pricing intermediate or finished products
exchanged among the subsidiaries and affiliates of the same corporate family located
in different countries.
Gray market activity is the legal importation of genuine products into a country by
intermediaries other than authorized distributors.
At distribution channel level company have to figure the best way to reach the market. The
firms distribution channel goes through with: (a) an international marketing headquarters; (b)
channels between nations; and (c) channels within foreign nations.
VI.

Deciding on the Marketing Organization

The company needs to choose which marketing organization fits it. The company may
choose among the three global strategies:
An international strategy entails that the organizations objectives relate primarily to
the home market. However, we have some objectives with regard to overseas activity
and therefore need an international strategy. The competitive advantage important in
strategy development is developed mainly for the home market.

A multinational strategy treats the world as a portfolio of national opportunities. The

organization is involved in a number of markets beyond its home country. But it
needs distinctive strategies for each of these markets because customer demand
and, perhaps competition, are different in each country.

A glocal strategy describes an organizational approach that provides clear global

strategic direction along with the flexibility to adapt to local. It standardizes certain
core elements and localizes other elements.

References
Kotler, P. & Keller, K. (2008). Marketing Management. 13th ed. Prentice Hall
EconomyWatch.
(2010,
June
29).
Global
Industry.
http://www.economywatch.com/world-industries/global-industry.html
Rao, S. (2007, September
http://www.citeman.com/

25).

Competing

on

Global

Basis.

Retrieved
Retrieved

from
from

Bradley, F. (2005). International Marketing Strategy. 5th ed. Person Education Limited,
England

Lynch, R. (n.d.). Global Strategy. Retrieved from http://www.global-strategy.net/

Czinkota, M. & Ronkainen, I. (n.d). Achieveing Glocal Success. Retrieved from

https://www.ama.org