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Chapter 8 Marketing To identify the role of marketing strategy within corporate goals and operations To assess appropriate market entry strategies and target markets in a variety of organizational and environmental contexts To appreciate the role of product markets and brands in the marketing mix for differing markets and environments To integrate elements of the marketing mix, including communications, pricing and distribution strategy, in international markets To develop awareness of ethical issues in marketing Aims of the lecture • To highlight the role of marketing strategy in the organization • To evaluate market entry strategies in light of differing national markets • To identify the global and local dimensions of products and branding • To grasp how the elements of the marketing mix aid in reaching consumers in diverse markets • To critically asses the ethical dimension of marketing in the international context Levels of marketing • The marketing concept – an organizational focus on satisfying the needs of consumers. • The firm formulates its competitive strategy in terms of targeted customers and their needs. • Marketing strategy enables the firm to reach consumers with its products and messages. • For the large MNE, competitive strategy is often determined from the head office, but locally designed marketing strategy is important in diverse markets. Figure 8.1: Levels of marketing Corporate culture What customer needs can we satisfy? What is our mission? Who are our customers? How best can we satisfy customer needs? Competitive strategy What are our target markets? Products Pricing Marketing culture Marketing mix Promotion Placement Global marketing strategies • Global strategy – a single strategy for all markets, associated with centralized organizations; not suitable in most consumer markets • Multidomestic strategy – different marketing strategies devised by managers in country subsidiaries, associated with decentralized organizations • Regional and multiregional strategies – groups countries together, assuming similarity on the basis of geography; tends to underestimate national differences • Country strategy – Adaptation of products and branding for national markets, often within a broad global product strategy Figure 8.2: Generic marketing strategies Multidomestic strategy Single global strategy Figure 8.3: Global marketing strategy Which markets? • Decisions on market entry depend on the company, its products and possible markets. • Companies often begin expansion by entering similar markets to their home country, especially for consumer products. • These could be in the same region (eg Europe) or same language (eg Spanish firms expanding in Latin America). More challenging… • Asian markets, which are very different for Western firms • Emerging and developing countries, which are fastgrowing but often unstable political and legal environments Figure 8.4: Analysis of country markets Segmentation and targeting • Target marketing – aimed at satisfying the needs of a particular group of consumers • Segmentation – division of a market into consumer groups based on factors such as socioeconomic level or demographic group • Demographics: age and gender are among the most common groupings. • The large company targets different segments with specific products in a product category (eg mobile phones). • Niche market – specialist strategy for specific group of consumers (eg organic products) Market entry strategies • Exporting offers several options, direct and indirect (using intermediaries). A sales office may be set up in the market. • Foreign production indicates greater commitment to the location, and a platform from which to increase sales in the new market. • Can be production under licence or FDI. • The joint venture is often used by retailers. • Franchising can be an attractive option, blending local ownership and support of the brand owner. Figure 8.5: Market entry strategies Market entry analysis • Every possible market offers possible gains which must be weighed against probable costs. • Environmental factors, such as… • Political uncertainty • Strength of the legal system • Currency risk • Other factors • Timescale – how long will it take to return a profit? • Exit strategy in case conditions in the market deteriorate. Figure 8.6: Market entry analysis Products and branding • The product may be goods, services or a combination. • Recall that the marketing concept views satisfying the customer as a service aspect of providing goods. • Attributes of each product distinguish it from others in the product category, and are designed for particular segments. • The brand distinguishes the firm’s products. It has a… • Legal dimension – trademark or logo is intellectual property • Image-creating dimension – designed to enhance appeal in target markets • Global brands v local brands Figure 8.7: Rankings of global brands for 2007 Sources: Interbrand, Interbrand Best Global Brands 2007, www.interbrand.com; Millward Brown Optimor, Brandz Survey 2007, www.millwardbrown.com Product and brand strategies • The global brand evokes images associated with the company’s reputation, national heritage and quality. • It also conveys an image of the consumer, such as lifestyle, social status and level of wealth. • Building brand loyalty is key for brand owners – brand equity is the added value which accrues to the brand and its owner. • Brand extension – applying a brand associated with one product to other products. • Sub-brands – part of a multi-brand strategy, whereby the brand owner applies different brands to different products. • Private or own-label brands – brands owned by retailers, which compete against specialist brands. Standardization versus Adaptation in Global Marketing Product Communication Extension Adaptation Extension Soft drinks, Luxury goods, Perfumes etc. Bicycles, motorcycles etc. Adaptation Detergents, Gasoline etc. Apparel, Greeting cards, Precooked food etc. How product differentiation works? Start with three undifferentiated products: A, B and C, and three market segments, I1, I2 and I3. With a little bit of effort, A can be geared I1 Towards I1, B towards I2 and C I3 towards I3 and it is easy to how every one ends A B C up happier! I2 Source: Financial Times, 26 January 2006 Figure 8.8: Own-label share of consumer packaged goods spending Marketing mix • Set of marketing tools known as the four Ps: • Product, Promotion, Price and Place (distribution) • Product – totality of the offering to the consumer, including packaging, services and support • Promotion – all types of communication with customers • Advertising now encompasses the traditional media, such as TV and print media, but also internet, including the firm’s own website. • Advertising must be adapted to the country – for example, low-tech advertising (eg billboards) in developing countries. Figure 8.9: The marketing mix Price and distribution • Pricing – Price must take account of costs, desired profits and competitor pressures. • The price varies according to • Newness of the product • The brand’s position in the firm’s portfolio • The level of quality of the product • Place – Distribution channel consists of all stages involved in bringing the product to the consumer. • In consumer products, a growing array of channels, largely facilitated by new technology and logistics management Figure 8.10: Distribution channels Marketing and ethics • Ethics – values and principles which people would generally consider to be standards of right and wrong in business behaviour. • Ethical considerations overlap with legal requirements, but where the law is weak (as in developing countries), firms are still expected to behave ethically. • Ethical marketing – issues of fairness, safety, honesty and transparency in communication with consumers. • Also now incorporates environmental concerns • Consumer and other stakeholder pressure is now compelling companies to examine marketing strategy in light of ethical concerns. Figure 8.11: Overlapping spheres of ethical issues Conclusions • Marketing strategy is linked to the firm’s culture and goals, aiding it to reach consumers in diverse markets. • Market entry strategies vary according to the firm’s goals and environmental factors in potential markets. • International marketing targets both national markets and diverse segments within each. • MNEs seek to design products and brands to maximize the benefits of both global strategy and local adaptation. • The elements of the marketing mix can vary according to differing target markets, in which local expertise is key. • Responding to stakeholders, MNEs must take ethical concerns into account in marketing strategy and practices.