CHAPTER # 6

Designing Global Market Offerings

Chapter Outline

Competing on Global Basis

Deciding whether to Go Abroad?

Deciding which Market to Enter?

Deciding How to Enter?

Global/International Marketing

We would not be surprised to hear about an Afghani Businessman, wearing an Italian suit, meeting an English friend, at a Japanese restaurant who later return home to drink Swiss coffee and watch American TV...

Competing on Global Basis

Many companies have made the world their market because they are competing on Global Basis.

Global Marketing

The Oxford University Press defines Global Marketing as;

“Global Marketing is a type of marketing on a worldwide scale taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives.”

Global Strategy

Definition:

“Global strategy consist of a dispersed location (another country) of each or some part of a value chain (production process) that are performed”

OR

“An efficient approach that involve a company launching production on global basis.”

Regional Strategy

Definition:“The global organization which changes their global strategy due to difference in local customs, climate or taste is called regional strategy.”

Instead of having similarities among human beings, there are some differences which changes from people to people and culture to culture. Therefore the local culture needs to be understand by the global companies.

Attraction of International Marketing

i. To seek revenue growth opportunities

a) To earn more money due to difference in cost of production or seeking new markets

ii. To compete against global competitors

a) In order to compete against the rivals

iii. To support global customers

a) In order to supply your products to your customers abroad

iv. To access global knowledge

i. To understands the like/and dislikes of people in other countries

v. To achieve efficiency in value chain

i. To get more efficient that is to access cheaper/economical labour or economical resources

An Example of Afghanistan’s Carpets...

Uniqueness of Afghan Carpets:

Globally known as one of Afghanistan’s most viable and visible product

Large supply of skilled labour in parts of the country where carpet weaving has been traditionally important.

Hand-made process makes Afghan carpets one-of-a-kind and gift for others.

Two Points should be Remembered in Global Business

1- Understanding business environment in the HOST (foreign) country

Local tastes, likes & Dislikes, religion, economic condition and political stability etc

2- Making necessary changes in the marketing strategy necessary for the HOST country

In order to make attachment in the foreign culture we need to make some changes in our own strategy.

Reasons for Going International

Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program

Companies that understand these factors can use them to advantage when positioning products internationally.

1-Access to Products otherwise Unavailable2- Comparative Advantage3- Competitive Human/Natural Resources4- Socio Cultural Factors5- Cultural Differences

6- Education Factor7- Economic Condition8- Language Differences9- Competitors

1-Access to Products otherwise Unavailable

Access to products which are not available in the domestic market if we don’t have international companies, so we may not have access to some of the good products which are the need of today daily life of people.

For Example:

Fuel Oil, Cell Phones, Cars etc

2-Comparative Advantage

Due to foreign competition, local companies are trying to create comparative advantages to bring uniqueness in comparison.

Some companies have real comparative advantage in producing some products.

For Example:

Chinese toys & dinner set and Japanese electronics have comparative advantage.

3- Competitive Human/Natural Resources

In some countries there might have been economical (cheap) labour or resources which are not available in the home country. Therefore, companies go in the international market.

For Example: Chinese labour and Indian Labour is very cheap, that’s why the organizations

4- Socio Cultural Factors

Family: International Marketing also requires understanding of the family system. There are two kinds of family system presently i.e.

1- Individual Family System: The family system in which individuals are free to act. For Example:

Most European and modern cultures are individualist.

2- Collective Family System The system in which people live in collective form as families. For Example: Most Asian cultures are collectivist.

It is likely to see that the buying behaviour is influenced by the family system a consumer is living in. It is believed that in the individual societies the buying decision is in the hand of individual himself while in the collectivist society the buying decision is within hand of the family elders.

5- Cultural Differences

• Cultural differences can effect the organizations.

• For Example: When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.

6- Education Factor

Education define the literacy rate of a country’s population. It play an important role in terms of Advertising, Branding and Labels.

More education mean more appealing use of words and languages and less education means more pictures in the advertisements and promotions with less use of meaningful statements.

For Example:

Some countries general public don’t have the good knowledge and practice of advance marketing concepts and offers, like online shopping in Afghanistan

7- Economic Condition

It is important to examine the economic condition in foreign market.

Infrastructure:

Communication: Communication play an important role in transferring of information and goods such as telephony, media, internet etc

Transportation: In order to move around the borders of the country the organisation needs to confirm the existence of transportation such as Rail, Road, Air, Water

Energy: The availability of Fuel, Gas, Electricity etc would give a company easy access to energy resources so as make new products and services.

Economic Development:

Distribution of Income: It would determine the buying power of the people. Equal distribution of wealth mean good economic conditions while unequal distribution means the opposite

Rate of growth of buying power: An economically stable country would have a reasonable rate of growth in buying power and therefore a good opportunity for a marketer and vice versa.

8- Language Differences

Language may cause sometimes ambiguity (confusing) especially when making translation of the marketing brands.

For Example: Some brands have Chinese, Japanese and arabic languages, so when its translated to other local languages , then its meaning has been changed.

9- Competitors

Local brand may have been strongly bonded due to nationalism.

People may not encourage foreign products due to strong attachment with the products produced in the local country.

For Example:• Such as Arabian Zam Zam Cola• Indian Tata

Deciding Which Market to Enter

The possible Global Markets shall be decided on the following bases:

1. Market size i.e. The size of population and the growth factor in relation to the products being launched.

2. The cost of doing business in the international markets.

3. The competitive advantages.4. The risk of investment.

Deciding How to Enter International Market

Marketing of products on international basis is very important for the expansion and growth of businesses in today’s modern era.

International marketing is carried out in the following means/ways:

1- Exporting

2- Joint Venture

3- Licensing

4- Foreign Direct Investment (FDI)

1- Exporting

“Exporting means when goods are produced in the home country but exported to a foreign market with some modifications.”

For Example: Afghanistan deal $50 million

USD exports in 2010. Exports have grown up by 13%

in Handcrafts, fresh and dry fruits, minerals, Olive, leather products, carpets, cotton and precious stones last year in Afghanistan.

Analysing the Exportation

Demand

Due to the uniqueness of Afghanistan’s Carpet there is a

high demand in foreign markets.

Local Market Saturation (local demands are fulfilled):

The local market is saturated therefore the makers needs

expansion of the products through exporting.

Customer Expectation

Afghans are scattered around the world and could make a good market for exportation, being Global customers.

2- Joint Venturing

“When a company in home country joins a company in foreign country to produce products & services is called Joint Venture”

For Example: Afghan Wireless Communications Company (AWCC) did a joint

venture between Telephone Systems International Inc. in New York and the Ministry of Communications of the Afghan Government.

Sony Ericsson is a joint venture established on October 1, 2001 by the Japanese consumer electronics company. Sony Corporation and the Swedish Telecommunications Company Ericsson to make mobile phones. The stated reason for this venture is to combine Sony's consumer electronics expertise with Ericsson's technological leadership in the communications sector. Therefore, both companies have stopped making their own mobile phones and now making Sony Ericsson cell phones

3- Licensing

“Licensing is a method in which a company provides licence to a foreign company for manufacturing/service for a specified payment.”

While the licence offer Royalty (fee) and the parent/home company share manufacturing process, trade mark, patents and trade secrets.

For Example: Coca Cola (Afghanistan), Toyota (Pakistan)

Licensing Terms

Patent: Government licence to an individual/body giving a right or title for some business for a stated period.

Trademarks are marks, words, symbols, designs, combinations of letters or numbers, that identify and distinguish products and services in the market place. When trademarks are presented to the public via advertising, marketing, trade shows, or other means, they become one of a company's most valuable assets. Potential customers identify a company by its trademark.

4- Foreign Direct Investment (FDI)

Entering a foreign market and developing foreign based assembly or manufacturing facilities is called Foreign Direct Investment (FDI).

For Example:

Etisalat, a UAE company came to Afghanistan and started their own business with their own investment.

End of Chapter