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Global Marketing: A decision-oriented approach
Te gebruiken bij
Auteur(s): Svend Hollensen
Druk/Jaar van uitgave: 6e/2013
Remarks & Related
The following chapters are missing: 2, 3, 5, 12, 13, en 18
Zoek recente samenvattingen & studiehulp
Chapter 1: International marketing within the firm
We are entering a new phase of globalisation in which an ultimate model for success does not exist and whereby companies from every part of the world compete. This chapter contains an introduction to globalization. We will discuss the process of developing the global marketing plan, the two main types of enterprises, the development of the concept of global marketing, global integration and market responsiveness, the value chain and global experimental marketing.
Globalisation: the trend of companies buying, developing, producing and selling products and services in most countries and regions of the world. It increases the companies’ competitiveness and facilitates innovation.
Internationalisation: doing business in many countries of the world, but often limited to a certain region, e.g. Europe. It is unlikely to be successful unless the company prepares in advance.
The process of developing the global marketing plan contains the decision whether to internationalize, deciding which markets to enter, deciding on the Market entry strategy, designing the global marketing programme and implementing and coordinating the global marketing plan.
There are two types of enterprises:
LSEs (Large Scale Enterprises): firms with more than 250 employees. Comprise 1% of all firms.
SMEs (Small and Medium-sized Enterprises): small firms have fewer than 50 employees; medium firms have fewer than 250 employees. Comprise 99% of all firms.
There are a few main qualitative differences between marketing and management style in SMEs and LSEs:
Financial: SMEs have a lack of financial resources due to limited equity.
Business education/specialist expertise: SMEs have a lack of specialist expertise because managers are untrained in formal business disciplines.
Additionally, SMEs managers do not have knowledge about global marketing expertise. Therefore, the owners of SMEs are often closely involved with the firm’s processes.
Formation of strategy/decision-making processes: both the intended (or deliberate) strategy and the emergent strategy result in the realized strategy of a firm, Figure 1.3. LSEs mainly use the intended strategy and SMEs mainly use the emergent strategy. LSEs also use the approach logical incrementalism, Figure 1.4. They implement small adjustments, and when it is proved that they are successful further development of the strategy takes place. If the environmental change moves apart from the changes due to the incremental strategy, strategic drift arises. SMEs use the entrepreneurial decision-making model, Figure 1.5. The strategy is determined by several possible outcomes. There is propensity for change which can lead to changes in the enterprise’s growth direction.
Organisation: SME employees are closer to the entrepreneur compared to LSE employees.
Risk-taking: LSEs are risk-averse. SMEs risk-taking depends on the circumstances, e.g. they are risk-taking when the enterprise is under threat and risk-averse when the enterprise has been damaged by previous risk-taking.
Flexibility: The flexibility in LSEs is low, the flexibility in SMEs is high. SMEs can react in a quicker and more flexible way towards customers.
Take advantage of economies of scale and scope
Advantages of economies of scale: accumulated volume in production, resulting in lower cost prices per unit. LSEs have a bigger market share and therefore will benefit more from economies of scale than SMEs.
Advantages of economies of scope: re-using a resource from one business in additional businesses. LSEs benefit more from economies of scope than SMEs because they serve more different markets and countries.
Use of information sources: The demand for complex information increases when a firm becomes more international and marketing orientated. LSEs use advanced technologies for gathering information. SMEs gather information in an informal manner and it is often incomplete.
The nine strategic windows
Solberg (1997) discusses the conditions under which a firm should ‘stay at home’ or ‘go abroad’. His framework, ‘The nine strategic windows’ is based on two dimensions (p20):
Industry globalism: depends on the firm’s international competitive structure within the industry.
Local: the markets are independent form each other. The firm operates in a multi-domestic market environment. For example, a barber.
Global: there are many interdependencies between markets, customers and suppliers. The firm operates in an industry that is dominated by a few powerful players. For example, IT industries.
Preparedness for internationalisation: depends on the firm’s ability to perform strategies in the international marketplace.
Immature: the firm has little international experience and a weak position in the home market.
Mature: the firm has a good basis for dominating the international markets and is able to gain higher market shares.
The development of the global marketing concept
Global marketing: the firm’s commitment to coordinate its marketing activities across national boundaries in order to find and satisfy global customer needs better than the competition. Global marketing has his main purpose in finding or consisting and satisfying the needs of the global customer. The nature of the firm's response to global market opportunities depends on the assumptions of the management. The firm's business can be described to the EPRG framework. This framework contains four orientations:
Ethnocentric: the home country and its needs are superior. Control is centralised and approaches and equipment implemented in foreign locations are identical to those in the home country.
Polycentric: each country is unique and should be treated in a different way. Control is decentralised and he firm tries to adapt to the different conditions of different locations in order to maximize profits.
Regiocentric: the firm tries to integrate, adjust and coordinate its marketing programme within regions (e.g. Europe, Asia), but not across them.
Geocentric: the firm offers global products with local adaption.
The firm is able to develop a global marketing strategy, exploit the knowledge of the HQs and transfer knowledge and best practises from any of its markets and use them in other international markets. This contains a few key terms as Coordination of its marketing activities, finding the needs of the global customer, satisfying the global customer and performing better than the competition.
‘Think globally but act locally’
This is a global marketing strategy of a firm that coordinates their efforts, exploits their benefits of integration and efficiencies, and ensures their local flexibility through interdependence between headquarters and subsidiaries. Furthermore, it comprises two extremes: globalisation and localisation, which are combined into ‘the glocalization framework’, Figure 1.7. A key concept of glocalization is the aim to transfer knowledge and learning across borders, Figure 1.8. However, due to the cultural context of countries it is not always easy to transfer knowledge.
The strategies of LSEs and SMEs are changing. This is illustrated in Figure 1.9.
There are two dimensions that show the starting points of the LSEs and SMEs strategy, their movement of strategy and their aimed strategy: global integration and market responsiveness.
Global integration: recognizing the similarities between international markets and integrating them into the overall global strategy.
Market responsiveness: responding to each market’s needs and wants.
The strategy that both enterprises aim for is ‘the glocal strategy’. It reflects the ambitions of a global integrated strategy, while recognizing the importance of local adaptions.
Forces for global integration. These forces support a shift towards integrated global marketing.
Removal of trade barriers (deregulation): it reduces time, costs and complexity.
Global accounts/customers: LSEs are demanding suppliers (SMEs) to provide them with global products and services to meet their unique global needs. SMEs need cross-functional customer teams in order to manage these demands.
Relationship management: the increasing importance of relationships with external organisations and internal units (e.g. subsidiaries). These relationships reduce market uncertainties, especially in dynamic environments, but increase the need for coordination and communication.
Standardized worldwide technology: the customers’ electronic demands are high for homogeneity products, this increases the need for scale and scope production.
Worldwide markets: they are growing because they can rely on world demographics.
Global village: similar products and services can be sold to similar groups of customers in any country in the world.
Worldwide communication: due to internet it is easier and less expensive to communicate and trade across different countries. Consequently, customers are able to buy the same products and services in foreign countries as in their home country.
Global cost drivers
Forces for market responsiveness. These forces support a shift towards a national, market responsive marketing.
Cultural differences: there are difficulties in international negotiations and marketing management because of the differences in personal values and assumptions of people.
Regionalism/protectionism: the grouping of countries into regional clusters based on geographic proximity. These regional clusters form trading blocs and create outsiders as well as insiders, which can result in protectionism.
Deglobalization trend: moving away from the globalization trends and regarding each market as special, with its own economy, culture and religion. This trend develops due to the fear of (cultural) imperialism.
Value chain: a categorization of the firm’s activities providing value for the customers and profit for the company. It can be used as a framework for identifying international competitive advantages. Each stage of the value chain is an opportunity to perform better than competitors, which is a competitive advantage.
Simplified version: R&D > Production > Marketing > Sales and services
Value: the amount that buyers are willing to pay for what a firm provides them with (perceived value). Besides, value is the element used to analyse the competitive position of a firm rather than the costs.
The strategy of a firm is aimed at being profitable. Therefore a firm needs to provide more value than the costs of creating the product.
Margin: the difference between the total value (price) and the collective cost of performing the value activities.
A firm’s competitiveness can be created through: lower cost: providing comparable buyer value more efficiently than competitors, and differentiation: providing more buyer value than competitors at comparable cost.
There are two types of value activities, Figure 1.10:
Primary activities: physical creation of the product, its sale and transfer to the buyer, after-sales assistance. The activities can be divided into five categories:
Inbound logistics: receiving, storing and distributing the inputs to the product.
Operations: all activities concerning the transformation of inputs into the final product.
Outbound logistics: collection, storage and distribution of the product to customers.
Marketing and sales: the means used to make consumers aware of the products and services and being able to purchase it.
Services: all activities that improve or maintain the value of the product or service.
Support activities: support the primary activities. The first three activities are associated with specific primary activities; the last one supports the entire chain.
Procurement: providing purchased inputs.
Technology development: key technologies are involved directly with the product, the processes or the resources.
Human resources: goes beyond all primary activities. Activities involved with recruiting, training, developing and rewarding people.
Infrastructure: systems of planning finance, etc. Furthermore it consists of structures and routines to maintain culture.
The distinction between upstream (production-oriented) and downstream activities (marketing-oriented) is further elaborated in Figure 1.11.
Linkages: The value chain is not a collection of independent activities, but a system of interdependent activities. The activity of value is related by horizontal linkages within the chain. Linkages are relationships between the way in which one value activity is dependent on the performance of another.
There are two types of linkages: Internal and external linkages.
Internal linkages: between activities within the same value; so between two primary activities or between one primary and one support activity. The value chain requires that the primary activities are in harmony; otherwise they will weaken each other. The link between a primary and a support activity is the basis of competitive advantage, e.g. a firm has a unique system for procuring materials. Figure 1.12 shows the link between the value chain activities and the strategic levels of a firm.
Strategic level: responsible for formulation mission statement, determining objectives, identifying resources to attain objectives and select most appropriate strategy.
Managerial level: translating objectives into functional objectives and making sure resources are used effectively.
Operational level: responsible for effective performance of tasks, achievement of functional objectives.
External linkages: between different value chains ‘owned’ by different actors in the total value system; so between the firm and their suppliers and distribution chains, and the part of the buyer’s value chain. Gaining competitive advantage depends on the fit of the firm in the overall value system.
The internationalisation of the value chain.
Decision to make: Should the responsibility for the single value chain function be handled by the export markets or should it remain in the hand of the centralized head office?
Answer: value chain function must be performed where the highest competition and cost-effectiveness is. However, the downstream activities should be, in contrast to the upstream activities, be performed where the buyer is located, Figure 1.14.
Implications: 1. Competitive advantages are country specific because downstream activities are performed in the country of the buyer. 2. A multi domestic pattern of international competition can be created when the downstream activities become essential for competitive advantages. Global competition is more common when upstream and support activities are essential for competitive advantages. 3. It is more difficult to maintain a price differentiation across markets when customers enjoy regional cooperative buying organisations.
Two dimensions of how a firm competes internationally:
Configuration: each activity in the value chain is performed in a different location.
Coordination: how identical activities that are performed in different countries are coordinated with each other.
Stabell and Fjeldstad identified two models of value creation. They state that the value chain is a model only for making products.
Value shops: a model for solving customer problems in a service environment. Value is created by preparing resources and applying them to solve a specific customer problem. They are similar to workshops, not stores.
Value networks: the formation of several firms’ value chains into a network, where each company contributes a small part to the total value chain. The aim is to add more value to customer exchanges. Useful for telecommunications and banks.
Competitive success requires more than performing your primary model. You need to deliver complementary value in order to distinguish yourself from the competition.
Blomstermo distinguished hard and soft services. Hard services are those where production and consumption can be decoupled. Soft services are services where production and consumption occur at the same time, so decoupling is not possible.
A new trend is to combine the product value chain with the service value chain, Figure 1.15. This happens when a company realises that competitors use their products to offer services of value.
Decision to make: will the focus of the service business be on supporting the existing product businesses or on growing as a new and independent business?
The ‘moment of truth’ is a service interaction between the buyer and seller which creates new knowledge and improvements of the existing products/services processes.
Virtual value chain: an extension of the conventional value chain, where the information processing itself can create value for customers, Figure 1.16.
Four ways to create business value through the use of information:
Managing risks: stimulates the growth of functions such as accounting and finance.
Reducing costs: focuses on using information as efficiently as possible to achieve the required outputs.
Offering products and services: aim is to improve customer satisfaction through knowing customers and sharing information with partners and suppliers.
Inventing new products: using information to innovate.
In order to provide customer value, a firm has to increase their product and service offerings. The process of generating customer value from a product solution, services and finally customer experience occurs when a company uses products in combination with services. This is necessary in order to engage the individual customer in a way that creates a memorable event. This can be characterized into four groups:
It is important to know that consumers are involved in the process of both defining and creating value. Pine and Gilmore (1998) suggest that we think about experiences across two bi-polar constructs: Involvement/participation, which refers to the level of interactivity between the supplier and the customer, and intensity/connection, which refers to the strength of feeling forward the interaction.
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