Misha Sulpovar-Bases for Global Market Segmentation

Global Strategic Planning
Misha Sulpovar

09/06/1709/06/17 Misha SulpovarMisha Sulpovar PagePage 22
Global MarketingGlobal Marketing
 “…“…the world is becoming more homogenous…”the world is becoming more homogenous…”
 ““...distinctions between national markets are...distinctions between national markets are
fading and may disappear…”fading and may disappear…”

Global Marketing EvolutionGlobal Marketing Evolution
Core Business StrategyCore Business Strategy
Country
A
Country
B
Country
C
Country
D
Develop Core
Business Strategy
Internationalize
the Strategy
Globalize
the Strategy
Source: Reprinted from “Global Strategy… In a World of Nations?” by George S. Yip, Sloan
Management Review 31 (Fall 1989): 30, by permission of the publisher. Copyright 1989 by Sloan
Management Review Association. All rights reserved.

Globalization DriversGlobalization Drivers
 Market FactorsMarket Factors
• new consumer groups, developed infrastructures,new consumer groups, developed infrastructures,
globalization of distribution channels, cross-borderglobalization of distribution channels, cross-border
retail alliancesretail alliances
 Cost FactorsCost Factors
• avoiding cost inefficienciesavoiding cost inefficiencies
and duplicated effortsand duplicated efforts
 Environmental FactorsEnvironmental Factors
• reduced governmental barriers,reduced governmental barriers,
rapid technological evolutionrapid technological evolution
 Competitive FactorsCompetitive Factors
• rapid product innovation, introduction, distributionrapid product innovation, introduction, distribution

The Strategic Planning ProcessThe Strategic Planning Process
 Understanding and adjusting the core strategy beginsUnderstanding and adjusting the core strategy begins
with a clear definition of the business for which thewith a clear definition of the business for which the
strategy is to be developed.strategy is to be developed.
 The Strategic Business UnitThe Strategic Business Unit
• Based on product market similaritiesBased on product market similarities
 Similar needs or wants to be metSimilar needs or wants to be met
 Similar end user customers to be targetedSimilar end user customers to be targeted
 Similar products or services used to meet needsSimilar products or services used to meet needs
of specific customersof specific customers

The Strategic Planning ProcessThe Strategic Planning Process
Assessment and Adjustment of Core Strategy
Market/Competitive Analysis - Internal Analysis
Assessment and Adjustment of Core Strategy
Market/Competitive Analysis - Internal Analysis
Formulation of Global Strategy
Choice of Target Countries, Segments, and Competitive Strategy
Formulation of Global Strategy
Choice of Target Countries, Segments, and Competitive Strategy
Development of Global Marketing ProgramDevelopment of Global Marketing Program
Implementation
Organizational Structure - Control
Implementation
Organizational Structure - Control
Global Strategy Formulation

Market and Competitive AnalysisMarket and Competitive Analysis
 First, understand the structure of the globalFirst, understand the structure of the global
market industry; the common features ofmarket industry; the common features of
customer requirements and choice factors.customer requirements and choice factors.
 Internal analysisInternal analysis
• Examine the readiness and capability ofExamine the readiness and capability of
the firm tothe firm to
undertake strategic moves with itsundertake strategic moves with its
current resources.current resources.

Formulating Global Marketing StrategyFormulating Global Marketing Strategy
 Formulation begins with a series of strategic decisionsFormulation begins with a series of strategic decisions
 Choice of Competitive StrategyChoice of Competitive Strategy
• Cost leadershipCost leadership
• DifferentiationDifferentiation
• FocusFocus
 Country-Market ChoiceCountry-Market Choice
• Concentration or diversificationConcentration or diversification
• Factors in country markets selectionFactors in country markets selection
 The stand-alone attractiveness of the marketThe stand-alone attractiveness of the market
 Global strategic importance of the marketGlobal strategic importance of the market
 Possible synergies offered by the marketPossible synergies offered by the market

Competitive StrategiesCompetitive Strategies
Cost
Leadership
Broad
Differentiation
Broad
Differentiation
Source of Competitive Advantage
Low Cost Differentiation
Industry-wide
Single
Segment
Competitive
Scope
Focus
SOURCE: Michael Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1998), chapter 1.

Bases for Global Market SegmentationBases for Global Market Segmentation
Environmental
Variables
Environmental
Variables
Marketing
Management
Variables
Marketing
Management
Variables
Geographic
Variables
Geographic
Variables
Political
Variables
Political
Variables
Economic
Variables
Economic
Variables
Cultural
Variables
Cultural
Variables
Promotion
Variables
Promotion
Variables
Product
Variables
Product
Variables
Price
Variables
Price
Variables
Distribution
Variables
Distribution
Variables
Bases for International
Market Segmentation
Bases for International
Market Segmentation

Global Marketing Program DevelopmentGlobal Marketing Program Development
 Development DecisionsDevelopment Decisions
• Product offeringProduct offering
 The degree of standardization and adaptation in theThe degree of standardization and adaptation in the
product offering.product offering.
• The marketing approachThe marketing approach
 The marketing program beyond the product variable.The marketing program beyond the product variable.
• The location and extent of value-adding activitiesThe location and extent of value-adding activities
 Pooling production.Pooling production.
 Exploiting factor costs or capabilities.Exploiting factor costs or capabilities.
 Strategic alliances.Strategic alliances.
 Concurrent engineering.Concurrent engineering.
• Competitive moves to be madeCompetitive moves to be made
 Cross-subsidization using resources accumulated in oneCross-subsidization using resources accumulated in one
market to wage a competitive battle in another.market to wage a competitive battle in another.

Implementing Global MarketingImplementing Global Marketing
 Success will come from a balance between localSuccess will come from a balance between local
and regional / global concerns.and regional / global concerns.
 ““Think globally, act locally” is the operativeThink globally, act locally” is the operative
phrase for global marketers competing in countryphrase for global marketers competing in country
markets.markets.
 Product choices should consider individualProduct choices should consider individual
markets as well as transfer products from onemarkets as well as transfer products from one
region to another.region to another.

Global Marketing Pitfalls to AvoidGlobal Marketing Pitfalls to Avoid
 Insufficient local market research.Insufficient local market research.
 The tendency to over standardize the product.The tendency to over standardize the product.
 Inflexibility in planning and implementation.Inflexibility in planning and implementation.
 The “Not-Invented-Here” syndrome (NIH).The “Not-Invented-Here” syndrome (NIH).
• How to avoid the NIH syndromeHow to avoid the NIH syndrome
 Ensure that local managers participate inEnsure that local managers participate in
the development of global brandthe development of global brand
marketing strategies.marketing strategies.
 Encourage local managers to developEncourage local managers to develop
ideas for regional or global use.ideas for regional or global use.

Localizing Global MarketingLocalizing Global Marketing
 Achieving a balance between in-countryAchieving a balance between in-country
managers and global product managers atmanagers and global product managers at
corporate headquarters will require action tocorporate headquarters will require action to
develop and implement a global strategy.develop and implement a global strategy.

 Management processesManagement processes
• Enhance the global transfer of communications.Enhance the global transfer of communications.
• Interchange personnel to gain experience abroad.Interchange personnel to gain experience abroad.
• Headquarters should coordinate and leverageHeadquarters should coordinate and leverage
resources.resources.
• Permit local managers to develop their ownPermit local managers to develop their own
programs within defined parameters Maintain aprograms within defined parameters Maintain a
product portfolio that includes local as well asproduct portfolio that includes local as well as
regional or global brands.regional or global brands.
• Allow local managers control over marketing budgetsAllow local managers control over marketing budgets
to respond to local customer needs and counterto respond to local customer needs and counter
global competition.global competition.

 Organization structuresOrganization structures
• The shift to global account management.The shift to global account management.
 Corporate cultureCorporate culture
• The world is not one single market.The world is not one single market.
• Plan and execute programs on a worldwidePlan and execute programs on a worldwide
basis.basis.
• A global Identity favors no specific country.A global Identity favors no specific country.

Foreign InvestmentsForeign Investments
 Firms invest to enter markets or assure themselves of sourcesFirms invest to enter markets or assure themselves of sources
of supply.of supply.
 Foreign direct investmentForeign direct investment
• An equity investment to create or expand aAn equity investment to create or expand a
permanent interest in a foreign enterprise.permanent interest in a foreign enterprise.
 Portfolio investmentPortfolio investment
• The purchase of stocks and bonds internationally.The purchase of stocks and bonds internationally.
 Major foreign investorsMajor foreign investors
• More than 45,000 multinational corporations withMore than 45,000 multinational corporations with
280,000 affiliates globally.280,000 affiliates globally.
• The terms “foreign” and “domestic” may no longerThe terms “foreign” and “domestic” may no longer
apply.apply.

Reasons for Foreign Direct InvestmentReasons for Foreign Direct Investment
 Marketing factorsMarketing factors
• Growth and profit motivations.Growth and profit motivations.
• Circumventing government-erected barriers toCircumventing government-erected barriers to
trade.trade.
• Access to low-cost resources and supply.Access to low-cost resources and supply.
• Local customers preference for domestic goodsLocal customers preference for domestic goods
and services.and services.
• Attempts to obtain low-cost resources andAttempts to obtain low-cost resources and
ensureensure
their supply.their supply.

Categories of International FirmsCategories of International Firms
 Resource seekersResource seekers
• are searching for natural and human resources.are searching for natural and human resources.
 Market seekersMarket seekers
• are searching for better opportunitiesare searching for better opportunities
to enter or expand within markets.to enter or expand within markets.
 Efficiency seekersEfficiency seekers
• are attempting to obtain theare attempting to obtain the
most economic sourcesmost economic sources
of production.of production.

Reasons for Foreign Direct InvestmentReasons for Foreign Direct Investment
 Derived demandDerived demand
• results when businesses move abroad andresults when businesses move abroad and
encourage their suppliers to follow them, creatingencourage their suppliers to follow them, creating
chain or pattern of direct investment in a market.chain or pattern of direct investment in a market.
 Government incentivesGovernment incentives
• Fiscal incentivesFiscal incentives
 tax holidays, allowances, credits and rebates.tax holidays, allowances, credits and rebates.
• Financial incentivesFinancial incentives
 special funding for land or buildings, loans andspecial funding for land or buildings, loans and
guarantees, wage subsidies.guarantees, wage subsidies.
• Non-financial incentivesNon-financial incentives
 guaranteed purchases, protective tariffs, importguaranteed purchases, protective tariffs, import
quotas, local content requirements, infrastructure.quotas, local content requirements, infrastructure.

Foreign Direct InvestorsForeign Direct Investors
 Positive perspectivesPositive perspectives
• Bring in capital, economic activity, andBring in capital, economic activity, and
employment.employment.
• Transfer technology and managerial skills.Transfer technology and managerial skills.
• Competition, market choice, andCompetition, market choice, and
competitiveness are enhanced.competitiveness are enhanced.
 Negative perspectivesNegative perspectives
• Drain resources from host countries.Drain resources from host countries.
• Starve smaller capital markets.Starve smaller capital markets.
• Discourage local technology development.Discourage local technology development.
• Bring in outmoded technology.Bring in outmoded technology.
• Create new competition for local firms.Create new competition for local firms.

Types of OwnershipTypes of Ownership
 Ownership patterns may be based on past experiences withOwnership patterns may be based on past experiences with
similar ownership models.similar ownership models.
 Full ownershipFull ownership
• Full control, full assumption of all risks.Full control, full assumption of all risks.
• May be desirable, but is not necessary for successMay be desirable, but is not necessary for success
internationally.internationally.
 Joint venturesJoint ventures
• Shared control, shared investment risks.Shared control, shared investment risks.
• Reasons for joint ventures:Reasons for joint ventures:
 governmental pressure to join with local partners.governmental pressure to join with local partners.
 mutually beneficial commercial considerations inmutually beneficial commercial considerations in
sharing markets, pooling resources, and local suppliers.sharing markets, pooling resources, and local suppliers.

Joint VenturesJoint Ventures
ADVANTAGESADVANTAGES
 Pooling of resourcesPooling of resources
 Better relationships withBetter relationships with
local organizationslocal organizations
 Knowledge the partnerKnowledge the partner
brings of the local marketbrings of the local market
 Minimizing exposure risk ofMinimizing exposure risk of
long-term capitallong-term capital
 Maximizing leverage ofMaximizing leverage of
invested capitalinvested capital
DISADVANTAGESDISADVANTAGES
 Different levels of controlDifferent levels of control
are permitted or requiredare permitted or required
 Difficulty in maintaining theDifficulty in maintaining the
relationshiprelationship
 Disagreements overDisagreements over
business decisionsbusiness decisions
 Disagreements over profitDisagreements over profit
accumulation, andaccumulation, and
distribution (profitdistribution (profit
repatriation)repatriation)
Recommendations for joint ventures
• Find the right partner.
• Negotiate the joint venture agreement carefully.
• Maintain flexibility to adjust to changing market conditions.

Types of Ownership… continuedTypes of Ownership… continued
 Strategic alliancesStrategic alliances
• “…“…more than the traditional customer-vendormore than the traditional customer-vendor
relationship, but less than an outrightrelationship, but less than an outright
acquisition.”acquisition.”
 Government consortiaGovernment consortia
• Public-private relationship in a specific project.Public-private relationship in a specific project.
• Typically government supported or subsidized.Typically government supported or subsidized.

Complementary Strengths Create ValueComplementary Strengths Create Value
SOURCES: “Portable Technology Takes the Next Step: Electronics You Can Wear,”The Wall Street Journal, August 22, 2000, B1, B4; Joel Bleeke and David Ernst, “Is Your
Strategic Alliance Really a Sale?” Harvard Business Review 73 (January-February 1995); 97-105; and Melanie Wells, “Coca-Cola Proclaims Nesta Time for CAA.” Advertising
Age, January 30, 1995, 2 See also http://www.pepsico.com; http://www.kfc.com;http://www.siecor.com;http:www.ericsson.com; and http://www.hp.com.

Contractual ArrangementsContractual Arrangements
 Cross marketingCross marketing
• The parties agree to carry out activitiesThe parties agree to carry out activities
which are complementary and non-which are complementary and non-
competitive.competitive.
 Contract manufacturingContract manufacturing
• An arrangement that allows one part toAn arrangement that allows one part to
outsourcing product manufacturing tooutsourcing product manufacturing to
another party while retaining control overanother party while retaining control over
research and development.research and development.
 Management contractingManagement contracting
• A supplier furnishes an integrated serviceA supplier furnishes an integrated service
(e.g., turnkey operation) internally to a(e.g., turnkey operation) internally to a
client that is functionally important to theclient that is functionally important to the
client.client.

Management Contracting AdvantagesManagement Contracting Advantages
CLIENT ADVANTAGESCLIENT ADVANTAGES
 Provide organizationalProvide organizational
skills not locallyskills not locally
available.available.
 Immediate availability ofImmediate availability of
skills.skills.
 Management assistanceManagement assistance
and support that is notand support that is not
available locally.available locally.
SUPPLIER ADVANTAGESSUPPLIER ADVANTAGES
 Lower risk because noLower risk because no
equity capital is at stake.equity capital is at stake.
 Exercise large amountsExercise large amounts
of operational control.of operational control.
 The strategic advantageThe strategic advantage
of being on the “inside”.of being on the “inside”.
 Opportunity toOpportunity to
commercialize “know-commercialize “know-
how”.how”.
 Using experienced staffUsing experienced staff
to offset businessto offset business
fluctuations.fluctuations.

Management Contracting RisksManagement Contracting Risks
 Risks to the clientRisks to the client
• Over-dependence on the supplier.Over-dependence on the supplier.
• Loss of control to the supplier.Loss of control to the supplier.
 Risks to the contractorRisks to the contractor
• Bidding without fully detailed insight intoBidding without fully detailed insight into
actual costs of delivering the service.actual costs of delivering the service.
• The effects of the loss or terminationThe effects of the loss or termination
of the contract and resultingof the contract and resulting
personnel problems.personnel problems.

Misha Sulpovar-Bases for Global Market Segmentation

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