Chapter 9 Global Marketing Management:

Planning and Organization

Discussion Questions
1. Define:
Global marketing management Licensing
Corporate planning Franchising
Direct exporting Joint Venture
Strategic planning Global market concept
Indirect exporting SIA
Tactical planning

2. Define strategic planning. How is strategic planning different for international

marketing than domestic marketing?
Strategic planning is a systemized way of relating to the future. It is an attempt to manage the
effects of external uncontrollable factors on the firm’s strengths, weaknesses, objectives, and
goals to attain a desired end. Further, it is a commitment of resources to a country market to
achieve specific goals.

The principles of planning are not in themselves different between international and domestic
marketing, but the intricacies of the operating environments of the MNC (host country, home,
and corporate environments), its organizational structure, and the task of controlling a
multicountry operation create differences in the complexity and processes of international
planning. Strategic planning on an international level allows for rapid growth of the
international function, changing markets, increasing competition, and the ever-varying
challenges of different national markets. The plan blends the changing parameters of external
country environments with corporate objectives and capabilities to develop a sound,
workable marketing program.

3. Discuss the effect of shorter product life cycles on a company’s planning process.
Global competition is placing new emphasis on some basic tenets of business. It is reducing
time frames and focusing on the importance of quality, competitive prices, and innovative
products. Time is becoming a precious commodity for business, and expanding technology is
shortening product life cycles and creating greater opportunities for innovative products. A
company no longer can introduce a new product with the expectation of dominating the
market for years while the idea spreads slowly through world markets. In any given year, for
example, two thirds of Hewlett-Packard’s revenue comes from product introduced in the
prior three years. Shorter product life cycles mean that a company must maximize sales
rapidly to recover development costs and generate a profit by offering its products globally.
Along with technological advances have come enhanced market expectation for innovative
products at competitive prices. Today, strategic planning must include emphasis on quality,
technology, and cost containment. To achieve the flexibility and speed required under such
conditions, many firms are entering collaborative relationships to shore up their weaknesses
whether in distribution, technology or manufacturing that will enable them to respond to the

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problems created by shorter life cycles.

4. What is the importance of collaborative relationships to competition?

The competitive environment of international business is changing rapidly. To be competitive
in global markets a company must meet or exceed new standards for quality and new levels
of technology. There is an increasing change of pace for product development and
profitability. Cost efficient, technologically advanced products are being offered by
competitors and demanded in established markets as well as in markets rising from formerly
Marxist-socialist economies. Opportunities abound the world over, but to benefit, firms must
be current in new technology, have the ability to keep abreast of technological change, have
distribution systems to capitalize on global demand, have cost-effective manufacturing, and
have capital to build new systems as necessary.

The accelerating rate of technological progress, market demand created by global

industrialization, and the creation of new middle classes will result in tremendous potential in
global markets. But, along with this surge in global demand comes an increase in competition
as technology and management capabilities spread beyond global companies to new
competitors from Asia, Europe, and Latin America. Although global markets offer
tremendous potential, companies seeking to function effectively in a fragmented global
market of five billion people are being forced to stretch production, design\engineering, and
marketing resources and capabilities because of the intensity of competition and the
increasing pace of technology. Improvements in quality and staying on the cutting edge of
technology are critical and basic for survival but often are not enough. Restructuring,
reorganizing and downsizing are all avenues being taken by firms to strengthen their
competitive positions. Additionally, many multinational companies are realizing they must
develop long term, mutually beneficial relationships throughout the company and beyond to
competitors, suppliers, governments, and customers. In short, multinational companies are
developing orientations that focus on building collaborative relationships to promote long-
term alliances and they are seeking continuous, mutually beneficial exchanges.

The environment facing multinational companies demands flexibility, quality, cost

containment, cutting edge manufacturing skills, and a rapid response to market changes to
sustain a competitive advantage. The strengths and capabilities a company must have to be a
major player are enormous and few companies can cover all the bases all of the time. To
shore up weaknesses, companies are entering relationships with others to share what each
does best whether in marketing, research or manufacturing. Collaborative relationships are
becoming a common way to meet the demands of global competition and a successful
collaboration means that each achieves more together than either can accomplish alone.

5. In phases one and two of the international planning process, countries may be
dropped from further consideration as potential markets. Discuss some of the
conditions in each phase that may exist in a country that would lead a marketer to
exclude a country.
In phase one of the planning process, there are a host of reasons why a country would no
longer be considered. On balance, those countries that do not offer sufficient potential for

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further consideration will be eliminated. Some of the reasons why this may occur are that
product acceptance within the country could not be achieved without extensive investment
and new product development, and the firm does not have sufficient resources to make that
investment; the legal structure may be such that it would be impossible for the company to
function within that country. Competition in the country is such that, based on the company’s
objectives, resources, etc., it is felt that it would not be a profitable venture. In other words,
any problem that would lead to minimum market potential, minimum profit, minimum return
on investment, unacceptable competitive levels, unacceptable political stability, unacceptable
legal requirements, etc., may all lead to the dropping of a country.

While the major reasons for dropping a country in phase one center around general
environmental constraints, the reasons that a country may be dropped in phase two center
around the more specific questions of what cultural environmental adaptations are necessary
for successful acceptance of the company’s marketing mix, and will adaptation costs allow
for profitable market entry. In phase two, the marketing mix is the focal point of analysis.
Still, the final determination of whether or not a country is dropped depends upon the
anticipated profitability of the market after necessary adaptations are made.

6. Assume that you are the director of international marketing for a company
producing refrigerators. Select one country in Latin America and one in Europe
and develop screening criteria to use in evaluating the two countries. Make any
additional assumptions about your company that are necessary.
This is a library-type project. Whatever the details of the screening criteria, the major points
that should be considered are: (1) company objectives and goals, (2) product-use
characteristics, (3) country environmental characteristics.

7. “The dichotomy typically drawn between export marketing and overseas marketing
is partly fictional; from a marketing standpoint, they are but alternative methods of
capitalizing on foreign market opportunities.” Discuss.
The dichotomy drawn between export marketing and overseas marketing is very misleading,
for in fact they are but alternative methods of approaching the foreign markets. Yet, on the
other hand, these approaches are often interrelated in the complete marketing structure. Both
exporting and overseas marketing can be successfully interchanged to reach various
heterogeneous markets. Depending on market structure, competition, and company policies,
the organizational structure can be so devised so as to use exporting, overseas marketing, or a
combination of both to successfully reach a wide assortment of foreign markets. In one
country, due to high tariff rates, overseas production and marketing might be advised; on the
other hand, poor communications or resources might necessitate exporting.

8. How will entry into a developed foreign market differ from entry into a relatively
untapped market?
The differences between entering a fully developed market and an untapped foreign market
are many and extremely varied. Some of these differences are channels of distribution which
may or may not be developed. Governmental attitudes toward business, foreigners, and
industry may be very liberal in a growing economy, while an established market may be very

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restrictive. Communication and transportation may be highly limited in untapped markets and
highly developed in successful countries. The amount of capital, banks, and exchange-rate
systems will vary according to the market’s development. Finally, the degree and amount of
competition will vary accordingly. To this list, endless factors could be added such as cost of
entering the market, social customs, laws, etc.

9. Why do companies change their organizations when they go from being an

international to a global company?
An international marketing plan should optimize the resources committed to stated company
objectives. The organizational plan includes the type of organizational arrangements to be
used, and the scope and location of responsibility. Many ambitious multinational plans meet
with less than full success because of confused lines of authority, poor communications, and
lack of cooperation between headquarters and subsidiary organizations.

Companies are usually structured around one of three alternatives: global product divisions
responsible for product sales throughout the world; geographical divisions responsible for all
products and functions within a given geographical area; and a matrix organization consisting
of either of these arrangements with centralized sales and marketing run by a centralized
functional staff, or a combination of area operations and global product management.

10. Market-oriented firms are finding greater competitiveness in world markets makes
it essential to assume a global perspective in planning and organizational structure.
Global competition also requires quality products designed to meet ever-changing
customer needs in the face of rapidly growing competition from every corner of the
world. Cost containment, escalating technology, customer satisfaction and a greater
number of players mean that every opportunity to refine international business
practices must be examined in light of company goals. Strategic international
alliances, strategic planning and alternative market entry strategies are important
avenues to global marketing that must be implemented in the planning and
organization of global marketing management.
11. Formulate a general rule for deciding where international business decisions
should be made.
International business decisions should reflect the culture of the country in which they will be
implemented. Thus the decision should be as close to the country where it is to be
implemented as possible.

12. Explain the popularity of joint ventures.

Joint ventures have become popular for a number of reasons. One important marketing
reason is to gain access to markets. Nearly all of the developing countries, and many
developed countries, require some degree of local participation for operating in their country.
Mergers with distributor companies or companies which already have well-established local
distribution may provide rapid market access and distribution to foreign companies entering a
country. Sometimes companies join forces in order to broaden the line of merchandise that
they have available, thereby gaining marketing efficiency and better public image. Another

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market reason for joining ventures is that local firms possess market information and the
marketing know-how which would take years for a foreign company to acquire. Such
participation minimizes the risk of market failure and speeds the marketing effort. Joint
ventures may also arise for financial and manpower reasons. Financially it is sometimes
desirable to merge with foreign companies because the merger provides access to local
capital markets and combines the resources and fund raising capabilities the companies have.
It may also give access to a higher quality and more capable managerial manpower.

13. Compare the organizational implications of joint ventures versus licensing.

Joint ventures involve the partners in a new venture and usually require significant inputs of
both capital and management. In licensing, the companies retain separate identity. Usually
the licensor is little affected by his licensing actions.

14. Visit the homepages of Maytag Corporation http://www.maytag.com/ and the

Whirlpool Corporation http://www.whirlpool.com/, both appliance manufacturers
in the United States. Each has some international involvement. Search their Web
sites and compare their international involvement. How would you classify each,
as exporter, international, or global?
The following excerpts from the homepages of these two companies reveals rather forcefully
that these two giants in the U.S. market are far apart when it comes to international
marketing. Maytag is an exporter with some desire to become international while Whirlpool
is an international company with global sales.

Maytag
Maytag’s heritage is more than a hundred years old and synonymous with a single product:
washing machines. Today, Maytag Corporation is a $3.4 billion home and commercial
appliance company focused in North America and targeted international markets.

Maytag International is responsible for finished goods export sales, licensing of the
corporation’s appliance and floor care brands, and joint ventures worldwide.

Investing for profitable growth is a key corporate objective. That was underscored in
September 1996 when Maytag announced a joint venture with Hefei Rongshida, the leading
washing machine company in the People’s Republic of China.

Maytag invested $35 million for an ownership position in the China joint venture and both
parties will each invest $35 million over approximately two years to expand the joint venture
into the Chinese refrigerator market. Maytag’s interests in the joint venture are managed by
Maytag International, the division responsible for appliance exports, licensing and
international ventures. China is a huge appliance market with tremendous growth potential.
For example, Chinese consumers buy more than 8 million refrigerators a year, which is
comparable to the U.S. market. However, fewer than one out of four households in China has
a refrigerator.

Maytag’s China joint venture involves a well-established, profitable business with high-
quality washers, a widely recognized brand name, RSD, and an effective nationwide sales
and distribution network. Their annual revenues more than doubled from 1993 to 1995, and

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operating margins are strong. Maytag will receive a full-year benefit from its China joint
venture in 1997, and significant growth opportunities exist in the years ahead. The China
joint venture is part of Maytag’s strategy to grow profitably by making selective investments
domestically and abroad.

Whirlpool
Whirlpool Appliances are manufactured in 13 countries and marketed in approximately 140
countries around the world. Whirlpool Corporation is the world’s leading manufacturer and
marketer of major home appliances. Its growth, from primarily a U.S. manufacturer to “world
leader,” is the result of strategic direction set in the mid 1980s and reaffirmed through an
exhaustive and integrated strategic planning process in 1992.

In the 1980s, four manufacturers accounted for almost all major home appliance sales in the
United States, a market where approximately 40 million appliances are sold annually. Each
was a tough, seasoned competitor fighting for greater sales in a market predicted to grow
little in the decade ahead. Whirlpool was one of those companies. Unable to find growth
potential in the U.S. appliance market and unwilling to accept the status quo, the company
began a systematic evaluation of opportunities—both inside and outside the appliance
industry—worldwide.

At the same time, Whirlpool established parameters within which decisions about the
company’s future would be made. New ventures would provide opportunity for growth, build
on existing company strengths, and be market driven. Leadership opportunities, too, would
be a consideration.

With growth parameters established and study data in, the decision was made to remain
focused on major home appliances but to expand into markets not already served by
Whirlpool. The goal was world leadership in a rapidly globalizing major appliance industry
in which approximately 190 million appliances are sold each year. A major acquisition in
Europe, joint ventures with companies in Mexico and India and increased ownership in
companies in Canada and Brazil swiftly followed.

Throughout the early 1990s, the company continued its expansion in Latin America and
Europe and a manufacturing and marketing presence was established in Eastern Europe. And,
to manage its small appliance business on a global basis, including the KitchenAid stand and
hand mixers, a Small Appliance Business Unit was formed.

In the past four years, Whirlpool has aggressively pursued its Asian strategy. A headquarters
office and four regional offices were established in 1993. Two years later, five majority-
owned joint ventures were announced in India and China to expand the company’s Asian
manufacturing base.

15. In Asia, Latin America, North America, Europe, and in all the countries where it
has a presence, Whirlpool seeks to set the standards against which the global major
domestic appliance industry is measured. To that end, the company vigorously
pursues the goals of its Worldwide Excellence System (WES). Initiated in 1991,
WES incorporates the best of all Whirlpool quality programs, worldwide, with

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 Malcolm Baldrige Award and International Standards Organization criteria to
establish a common approach to quality, one that dedicates the company to the
pursuit of excellence and total customer satisfaction.
16. Using the sources in question above i.e., http://www.maytag.com/) and
http://www.whirlpool.com/, list the different alternative entry modes each uses.
Both use foreign direct investment although Whirlpool is the most advanced. Maytag exports
from the United States.

17. Visit the Nestlé Corporation homepage http://www.nestle.com and Unilever N.V.
http://www.unilever.com/ and compare their strategies towards international
markets. In what ways to they differ (besides product categories) do they differ in
their international marketing?
This exercise can lead to a good class discussion of multinational and/or global companies
and strategies. These two global giants probably are among the first real global companies.
From their beginning they viewed the world as their market and still follow that direction.
The excerpts below from their home pages gives a brief look at their philosophies.

Nestlé
In a world of endless diversity, there is one activity that almost everyone shares. No matter
where you go, you’ll find people of all ages, from every social class, and representing every
religion and ethnic group enjoying some Nestlé food or drink product. Our products (more
than 8,500 in all) are sold in more than 100 countries, and they bring pleasure to millions of
people. Whether it’s ready-to-eat meals, instant coffee, chocolate bars or mineral water,
Nestlé products are enjoyed around the world.

Meeting the needs and desires of a diverse and ever-changing world requires respect for and
knowledge of local values and desires. To achieve that, Nestlé has made decentralization a
basic principle. We have offices, factories and research centers throughout the world. It is our
policy to adapt as much as possible to local customs and circumstances while allowing
decisions about products, marketing and personnel to be made at the local level.

Nestlé is The World’s Largest Food Company. Only two percent of sales are generated in
Switzerland, our country of origin, and our management and staff reflect a truly international
outlook. As a Company, we do not believe in mission statements, because one would either
be so general as to become meaningless, or so specific that it wouldn’t be applicable or
relevant everywhere—we would like to offer a set of principles that will provide insight into
the Company’s attitudes and culture.

At Nestlé, we try to take the mentality and customs of individual countries into account, but
there are some general guidelines that we apply everywhere. Those include:

• A positive attitude toward work

• A pragmatic, realistic approach to doing business

• An open-minded approach to the world

• A minimal number of systems and written guidelines

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 • A personal style of management

• An atmosphere of mutual trust

• An avoidance of showing off, windy rhetoric and hypocritical remarks

• An emphasis on practical experience and on the setting of good examples.

Employees, people and products are more important at Nestlé than systems. Systems and
methods, while necessary and valuable in running a complex organization, should remain
managerial and operational aids but should not become ends in themselves. It is a question of
priorities. A strong orientation toward human beings, employees and executives is a decisive,
if not the decisive, component of long-term success.

Our focus is on products. The ultimate justification for a company is its ability to offer
products that are appealing because of their quality, convenience, variety and price—products
that can stand their ground even in the face of fierce competition.

Nestlé makes clear a distinction between strategy and tactics. It gives priority to the long-
range view. Long-term thinking defuses many of the conflicts and contentions among groups
—this applies to employment conditions and relations with employees as well as to the
conflicts and opposing interests of the trade and the industry. Of course, our ability to focus
on long-term considerations is only possible if the company is successful in the struggle for
short-term survival. This is why Nestlé strives to maintain a satisfactory level of profits every
year.

Switzerland is home to Nestlé’s Swiss subsidiary, its international headquarters and the
registered office of Nestlé’s holding company, but Nestlé does not regard its Swiss
headquarters as the center of the universe. Decentralization is a basic principle of Nestlé. Our
policy is to adapt as much as possible to regional circumstances, mentalities and situations.
By decentralizing operational responsibility, we create strength and flexibility and are able to
make decisions that are better attuned to specific situations in a given country. Policies and
decisions concerning personnel, marketing and products are largely determined locally. This
policy creates stronger motivation for Nestlé’s executives and employees and a greater sense
of identification with Nestlé’s business. It is not Nestlé’s policy to generate most of its sales
in Switzerland, supplemented by a few satellite subsidiaries abroad. Nestlé strives to be an
“insider” in every country in which it operates, not an “outsider.”

A very important concern at Nestlé has to do with uniformity: how consistent Nestlé’s
principles, policies, rules of conduct and strategies should be, and to what extent they should
differ depending on the country, subsidiary, region, branch or group of products. In general,
Nestlé tries to limit the uniformity of its policy to a requisite minimum. This minimum is
then systematically enforced, unless there are compelling reasons in a given market that
justify deviation from policy.

Nestlé does not want to become either a conglomerate or a portfolio manager. Nestlé wants to
operate only those businesses about which it has some special knowledge and expertise.
Nestlé is a global company, not a conglomerate hodgepodge. We regard acquisitions and
efforts at diversification as logical ways to supplement our business, but only in the context

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 of a carefully considered corporate marketing policy.

The public’s sense of the power and size of a corporation is often inaccurate, for a company’s
power is limited by a host of factors including legislation, competition, regulatory bodies and
publicity. From a business point of view, it is desirable for a firm to achieve the size best
suited to a specific industry or mode of production. To be competitive internationally and
make significant investments in research and technology, a larger company has an advantage.
From a strictly organizational point of view, flexible, simple structures work best and
excessively large units should be avoided whenever possible. In both respects Nestlé has a
natural advantage: Although it is a big company, it is spread out over many countries and
each of Nestlé’s factories has its own management and responsibility.

Nestlé is probably unique in the food industry in having an integrated research and
development program that engages in applied and basic research in the fields of human
physiology, health, nutrition and raw materials. Our research and development program gives
us the capacity to create new types of products that we cannot even imagine today, especially
in the critical area where preventive medicine and food products overlap. In addition, as
concern for the environment grows, research will play an important role in overcoming
environmental problems. For Nestlé, this is particularly important in packaging. Concern for
the effects of packaging on the environment is forcing us to look for new solutions and to
consider their interaction with our biological product—food.

At present, the world faces daunting questions about its ability to provide enough wholesome
food for everyone. Malnutrition and poor eating habits are still serious problems in many
developing countries. By 2100, the world’s population will double. Will it be possible to feed
a world with so many inhabitants? At Nestlé, the big picture is all about feeding the world
and providing food and nutrition for an ever-growing population. Our response to this
situation is to intensify research, strive for innovations and improve quality.

Teaching Method:

Teaching by lecturer mainly with the help of multimedia

Design of Lecturer and Students’ Activities in the Unit

Students answer questions and teacher sums up their ideas.

Exercise distribution of the Unit: Nil