Marketing 2A
COMKA2
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What will be covered
in today’s lesson?
Going global and entering global
markets
Week 4
Lesson 8 Cultural dimensions
Adapting for global markets
Going global
Going global: Activity 1
Imagine you're the CEO of a successful tech startup based in Silicon Valley that has
developed a cutting-edge software solution for managing financial transactions.
Your product has gained significant traction in the domestic market, and now you're
considering expanding your business globally to capitalize on new opportunities.
After conducting market research and identifying potential target countries, you decide to
launch your product in several key international markets simultaneously.
However, as you prepare to take your company global, you begin to encounter various risks
and challenges that could potentially impact your expansion strategy.
Question:
As the CEO of the company, what risks can you identify in going global?
Going global: Possible answer
General Risks:
• Inability to understand customer needs and develop suitable offerings.
• Difficulty in identifying and addressing competitive threats.
• Challenges in building effective supply and distribution networks.
• Inefficient or ineffective promotion strategies.
Specific Risks:
• Lack of understanding of foreign business culture and regulations.
• Shortage of skilled managers with international experience.
• Business disruption due to commercial and political changes such as tariffs, currency
fluctuations, and expropriation of foreign property.
How many markets to enter (Expansion Strategy)
Waterfall Approach:
• Matsushita, BMW, General Electric, Benetton, and The Body Shop followed this method,
entering countries gradually in sequence for careful planning.
Sprinkler Approach:
Apple, Gillette, and Unilever used this approach, entering many countries simultaneously
for a first-mover advantage, especially in high-competitive scenarios.
Born Global:
• Some firms, especially technology-intensive and online ventures, adopt a global market
strategy from the beginning.
How many markets to enter (Expansion Strategy)
Factors for Country Entry:
• Product suitability, geography, income, population, and political climate influence the
decision.
• Consider competitive landscape and enter markets where competitors are present to
learn and force market share defense.
• Market Growth:
• Entry into fast-growing markets can be attractive despite potential crowding with
competitors.
• Example: KFC franchised its retail concept, making marketing culturally relevant in
various countries.
How to enter the foreign market: Activity 2
ABC Electronics, a successful consumer electronics company, is contemplating expanding its market
beyond its domestic borders.
In your groups, refer to the 5 ways to enter a foreign market and recommend a suitable market entry
strategy(s) based on the given scenario.
How to enter the foreign
market: Possible answer
Indirect Exporting: If ABC Electronics wants to test international waters with lower risk and investment, they can
consider indirect exporting through export agents or trading companies. This approach allows them to leverage the
expertise of intermediaries in handling distribution and sales.
Direct Exporting: If ABC Electronics has confidence in its product and wants more control over marketing and sales,
they might opt for direct exporting. This could involve establishing direct relationships with retailers and distributors in
the foreign market without intermediaries.
Licensing: Licensing could be a viable option if ABC Electronics wishes to grant permission for the use of its
manufacturing process, trademark, or other valuable items to a foreign company. This is a way to enter international
markets with lower risk and investment.
Joint Venture: If ABC Electronics recognizes the need for local expertise, resources, or to meet specific market
requirements, forming a joint venture with a local firm could be beneficial. This allows for shared ownership and
control, mitigating risks and leveraging the partner's knowledge.
Direct Investment: If ABC Electronics sees significant potential in a particular market and wants to secure cost
economies, strengthen its image, and have full control over its investment, direct investment by establishing
manufacturing or service facilities could be the strategic choice.
How to enter a foreign market:
Aspect Indirect Exporting
Definition Use of independent intermediaries for selling in other countries
Intermediaries Export agents, cooperative organizations, export-management firms
- Lower investment
Advantages - Lower risk
- Export agents
- Cooperative organizations
Types of Intermediaries - Export-management companies
Testing the Waters Commonly used for "testing the waters" before extensive investment
Web Presence May not require a significant online presence initially
- Less customization required
- May not need extensive language support
Adaptation for Global Market
Information Accessibility Generally, intermediaries bring know-how and services
How to enter a foreign market:
Aspect Direct Exporting
Definition Company handles the sale of its offerings directly in the market
Intermediaries May involve domestic-based export departments, overseas branches, or representatives
- More control over operations
Advantages - Higher potential return
- Export department or division
- Overseas sales branch or subsidiary
Types of Intermediaries - Home-country-based traveling export sales representatives
Testing the Waters Also utilized for initial market exploration and risk assessment
Web Presence Essential to adapt websites for country-specific content and services
Leverages the internet for customer outreach, sourcing, and brand awareness
- Requires adaptation of websites for international markets
Adaptation for Global Market - Country-specific content and services in the local language
Information Accessibility Companies use the internet, trade shows, and state resources for information
Accessibility to trade and exporting information is easier
How to enter a foreign market:
Aspect Licensing Contract Manufacturing Franchising
Hiring local manufacturers to produce Offering a complete brand concept
Granting permission to manufacture the company’s product in a specific and operating system in return for
Definition and sell offerings in a specific market market fees
Franchisor offers a comprehensive
brand concept and operating system
Licensor issues a license to a foreign The firm hires local manufacturers
Nature of Agreement company under a contract agreement
Reduced control over the
manufacturing process
Low risk for licensor; less control over Potential loss of profits if licensee Franchisor maintains control over the
Risk and Control licensee becomes a competitor brand and concept
May supply proprietary product Lead in innovation to keep franchisee
Strategy to Prevent Competition ingredients/components - dependent on franchisor
- Volkswagen's contract agreement - McDonald’s, Subway, Burger King
- Coca-Cola licensing its syrup with GAZ Group franchising globally
- Management contracts by Hyatt and - Toshiba, Hitachi using contract - 7-Eleven, Hertz, Best Western Hotels
Examples Marriott manufacturing in Eastern Europe franchising globally
- Faster start with reduced control; Comprehensive brand offering; fee-
Key Considerations - Less control but low risk entry potential buyout opportunity based revenue model
How to enter a foreign market:
Aspect Joint Ventures
A business enterprise involving two or more separate entities jointly
Definition engaging in activities in another country
- License product
- Form a joint venture with a local firm
Formation Methods - Buy from local suppliers to meet “domestic content” requirements
- Star Alliance: 28 airlines including Lufthansa, United Airlines,
Examples Singapore Airlines, SAS, and Avianca forming a global partnership
Ownership and Control Share ownership and control between foreign and local investors
- Lack of financial, physical, or managerial resources by the foreign firm
Reasons for Joint Ventures - Government requirements for joint ownership as a condition for entry
- Extends beyond increased sales to include access to distribution and
Partnership Value shared "brand values"
- Partners with shared "brand values" help maintain consistency across
markets
- Example: McDonald’s commitment to product and service
Brand Consistency standardization globally
- Disagreements over investment, marketing, or other policies
- Potential conflicts on reinvesting earnings or declaring dividends
Drawbacks - Limits on implementing global manufacturing and marketing policies
How to enter a foreign market:
Aspect Direct Investment
The foreign company buys a partial or full interest in a local company or builds its own
Definition manufacturing or service facilities
- Cost economies through cheaper labor, raw materials, government incentives, and freight
savings
- Strengthens the firm's image in the host country by creating jobs
- Deepens relationships with government, customers, local suppliers, and distributors
- Retains full control over investment and can develop long-term international policies
Advantages - Ensures market access in case of host country requirements for domestic content
- Exposure to risks such as blocked or devalued currencies, worsening markets, or expropriation
- High severance pay in case of reducing or closing operations
Disadvantages - Challenges in adapting offerings to local preferences, as seen with Starbucks in Australia
Škoda's acquisition by Volkswagen, upgrading quality and image, delivering over 1.2 million
Acquisition Example vehicles globally
- Significant investment required
- Potential mismatch in corporate cultures
- Represents a longer-term commitment to maintain a presence in the acquired company's
Drawbacks of Acquisition country
Kraft's acquisition of Cadbury in 2010, expanding presence in emerging markets like India
- Permitted restructuring, dividing businesses into grocery products and snack foods
Acquisition Strategy Example - Careful consideration of pros and cons compared to other global market entry forms
4 Global product strategies: Activity 3 – watch the videos and answer the questions
Global Product Strategies Description
Straight Extension - Introduction of the product in a foreign market without any change.
- Tempting due to no additional R&D expense, manufacturing retooling, or promotional modification.
- Successful for products like cameras, consumer electronics, and many machine tools.
- Effective for high-end and luxury products where quality and prestige are marketable consistently across countries.
Product Adaptation - Alters the product to meet local conditions or preferences.
- Adjustments to product features, labelling, colours, ingredients, packaging, brand name, pricing, and advertising.
- Essential for products like food and beverages where tastes and cultural habits vary widely.
- Examples include regional versions (Dunkin' Donuts), country versions (Kraft's coffee for different regions), and city
versions.
Product Invention - Development of new products specifically for global markets.
- Addresses specific needs or preferences in different regions.
- Researches nutrition requirements and formulates new foods for less developed countries.
Dealing with Counterfeit
Products - Counterfeit products pose a significant challenge for global companies.
- Estimated to cost over a trillion dollars annually; online counterfeiting alone resulted in $323 billion losses in 2017.
- Manufacturers use online software with artificial intelligence to detect and combat counterfeiting.
Oreo in
China
(watch
the
video)
What is your take
on Oreo’s strategy?
What strategy do
they use?
https://www.youtube.com/watch?v=U48nmKPJclA&t=16s&pp=ygUbb3JlbyBpbiBkaWZmZXJlbnQgY291bnRyaWVz
2 Global brand strategies: Activity 3 – watch the video
Brand Adaptation:
•Brand Name Translation: Clairol's "Mist Stick" in Germany became problematic as "mist" is slang for manure. Coca-
Cola and Nike found phonetic translations in Chinese characters with relevant meanings.
•Numbers and Colors: The number four is considered unlucky in Asia due to its phonetic association with "death."
Colors like purple, white, and green carry different connotations in various countries.
•Slogans and Taglines: Translations can lead to unintended meanings. Coors' "Turn it loose" in Spanish was interpreted
as "suffer from diarrhea," and Perdue's slogan in Spanish was rendered humorously.
Country-of-Origin Effects:
•Perceptions: Country-of-origin perceptions are mental associations triggered by a country. Governments aim to
strengthen their country's image for export and investment, while marketers use positive perceptions to sell products.
•Buyer Attitudes: Buyers hold distinct attitudes based on a product's attributes, brand meaning, and country of origin.
For example, Coca-Cola's success in China was influenced by its association with U.S. modernity and affluence.
•Global Marketing Considerations: Understanding and leveraging country-of-origin effects are crucial for global
marketers to effectively position and sell products in diverse markets.
https://www.youtube.com/watch?v=HRy2_ksQ_yo&pp=ygUXYnJhbmQgYWRhcHRhdGlvbiBnbG9iYWw%3D
2 Global pricing strategies
•Global Pricing Strategies:
•Factors Influencing Prices: Transportation costs, tariffs, importer margin, wholesaler margin, and retailer margin
contribute to the final price. Currency-fluctuation risks impact pricing decisions. Prices reflect customers' willingness
to pay for the offered benefits.
Two Basic Pricing Choices:
• Uniform Price Everywhere:
• Setting the same price globally may result in different profit rates in various countries.
• Challenges: High prices in poor countries, low prices in rich countries.
• Market-Based Price in Each Country:
• Adapting prices to what each country can afford.
• Challenges: Ignores cost differences, may lead to reshipping by intermediaries.
•Issues with Market-Based Pricing:
• Transfer Pricing:
• Units in the same company charge transfer prices for goods shipped to foreign subsidiaries.
• High transfer prices may lead to higher tariff duties, while low prices can be accused of dumping.
• Governments monitor and may force prices similar to competitors' prices.
Global communication strategies https://www.youtube.com/watch?v=5ljy85q9vVo
•Watch the video about communication failures when going global – study the work in your textbook on page 483
Global distribution strategies
•Multinational Distribution Dynamics: Initial Cooperation:
Multinationals prefer local distributors initially.
Friction arises later with complaints on both sides.
•Common Challenges: Multinational Concerns: Lack of distributor investment, policy non-compliance, and information
sharing.
•Local Distributor Issues: Insufficient corporate support, unattainable goals, and confusing policies.
•Retail Unit Differences: Global Retail Trends: Large-scale chains dominate the U.S.; small, independent retailers
abroad. Unique characteristics impact retail dynamics globally.
•Gray Market Challenges: Definition and Risks: Gray market exploits price differences, poses risks to consumers.
• Harms relationships, brand equity, and distribution channel integrity.
•Prevention Strategies:
• Multinational Actions:
• Policing distributors, adjusting prices, altering product characteristics.
• Effective Deterrents:
• Severe penalties, timely detection, and punishment implementation.
•Healthcare Concerns:
• Gray Market Targets:
• Prescription drugs face risks; incidents prompt industry scrutiny.
Hofstede’s 5 dimensions of Culture
High power
Individualistic distance
Collectivistic Lower power
distance
High uncertainty
avoidance Achievement
Low uncertainty Nurturing
avoidance
Long-term orientation
Short-term orientation
Global Similarities and Differences
Cultural Dimensions Description
Reflects acceptance of unequal power distribution; high power distance indicates a hierarchical
Power Distance Index society.
Defines self-worth; individualistic societies prioritize individual achievement, while collectivist ones
Individualism vs. Collectivism emphasize the social system.
Measures assertiveness (masculinity) or nurturing qualities (femininity); reflects societal
Masculinity vs. Femininity preferences.
Indicates comfort with uncertainty; high avoidance leads to rigid beliefs and intolerance of
Uncertainty Avoidance Index unorthodox ideas.
Reflects societal approach to traditions and change; normative societies value traditions, while
Normative vs. Pragmatic Orientation pragmatic ones focus on practicality.
Represents the extent of societal regulation on individual behavior; indulgence allows gratification,
Indulgence vs. Restraint while restraint imposes strict norms.
Convergence and Variations:
• Connectivity, online media, and social platforms create shared needs.
• Cultural differences still impact consumer behaviour across countries.
Differentiating Factors:
• Independent preferences that distinguish countries, not individuals.
• Dimensions include Power Distance, Individualism vs. Collectivism, Masculinity vs. Femininity, Uncertainty
Avoidance, Normative vs. Pragmatic Orientation, Indulgence vs. Restraint.
Watch the video on the 6 Hofstede’s cultural
dimensions https://www.youtube.com/watch?v=yKKruTRQ_2A
Country specific: Hofstede’s cultural dimensions
https://www.youtube.com/watch?v=IHdqPqWle04
What Happens Next?
•Please work through the content for Week 4, Lesson 8.
•Do the activities within Week 4, Lesson 8.
•Complete self-assessment quiz week 4, lesson 8.
•It is important to have a thorough understanding of the
following:
•Deciding to go global.
•Deciding how to enter the market.
References:
Business Buying Process. Available at: https://www.youtube.com/watch?v=akmkRGOBPGI&t=77s [Accessed on 19 May 2023]
Chen, Mansa, Courage (2023) Business-to-Business (B2B): What It Is and How It’s Used. Available at:
https://www.investopedia.com/terms/b/btob.asp#:~:text= [Accessed on 22 May 2023]
Geoff da Silva (2013). Oreos in China (Example of Product Adaptation Strategy in Global Marketing). [online] Available at:
https://www.youtube.com/watch?v=U48nmKPJclA&t=16s&pp=ygUbb3JlbyBpbiBkaWZmZXJlbnQgY291bnRyaWVz [Accessed 29 February 2024].
Giulia Belloni (2016). Hofstede - Cultural Dimensions. YouTube. Available at: https://www.youtube.com/watch?v=IHdqPqWle04.
Professor Wolters. (2021). How Firms Adapt Their Products & Communication Strategies When They Go Abroad. [online] Available at:
https://www.youtube.com/watch?v=HRy2_ksQ_yo&pp=ygUXYnJhbmQgYWRhcHRhdGlvbiBnbG9iYWw%3D [Accessed 29 Feb. 2024].
Professor Wolters. (2020) The B2B Buying Process Explained. [online] Available at:
https://www.youtube.com/watch?v=peiwGrQMsz8&ab_channel=ProfessorWolters [Accessed 20 February 2024].
Stowers, J. 2023. How to Start a Business. A step-by-step Guide. [Online] Available at: https://www.businessnewsdaily.com/4686-how-to-start-a-
business.html [Accessed: 28 May 2023.
Trim Tab (2022). Hofstede’s Six Dimensions of Organizational Culture. [online] Available at: https://www.youtube.com/watch?v=yKKruTRQ_2A.
WatchMojo (2023). Top 10 American Businesses That Failed In Foreign Countries. [online] Available at:
https://www.youtube.com/watch?v=5ljy85q9vVo. [Accessed 29 February 2024].
