Developing International Marketing Plan

Global Strategic Marketing Planning

The vast majority of MNCs prepare a global strategic marketing plan to guide and implement their strategic and tactical marketing decisions. Such plans are usually developed on an annual basis and look at policies over multiple years.

The content of a global strategic marketing plan can be very broad in scope but usually covers four areas:

1. Market Situation Analysis: A situation analysis on a global basis of the company’s customers (market segments, demand trends, etc.), the competition (SWOT analysis), the company itself, and the collaborators (e.g., suppliers, distribution channels, and alliance partners).
   
   
2. Objectives and Targets: For each country or region, management states goals that are achievable and challenging at the same time. These objectives are formulated for a specific planning horizon.
   
   A good example is Nissan’s “Power 88” midterm business plan. Announced in 2011, the plan stated that the company will achieve a global market share of 8% and profit margins of 8% by the end of fiscal year 2016. However, Nissan fell short of its “Power 88” targets. In FY 2017, Nissan’s U.S. profit margins tumbled due to heavy discounting to promote sales.
   
   
3. Strategies: Once the objectives have been determined, management needs to formulate marketing strategies for each country to achieve the set goals, including resource allocation.
   
   
4. Action Plans: Strategies need to be translated into concrete actions that will implement those strategies. Specific actions are to be spelled out for each marketing mix element.

Bottom-up Versus Top-down Strategic Planning

International planning can be top-down (centralized) or bottom-up (decentralized). Obviously, hybrid forms that combine both options are also possible. With top-down planning, corporate headquarters guides the planning process.

Bottom-up planning is the opposite. Here, the planning process starts with the local subsidiaries and is then consolidated at headquarters level. The bottom-up approach has the advantage of embracing local responsiveness. Top-down planning, on the other hand, facilitates performance monitoring. A centralized approach also makes it easier to market products with a global perspective.

Pitfalls

Marketing plans can go awry. One survey identified the following obstacles as the main problems in preparing strategic plans for global markets:

1. Lack of information of the right kind (39% of the respondents).
2. Too few courses of action; too little discussion of alternatives (27%).
3. Unrealistic objectives (22%).
4. Failure to separate short-/long-term plans (20%).
5. Lack of framework to identify strengths/weaknesses (19%).
6. Too many numbers (17%).
7. Lack of framework to define marketplace threats and opportunities (15%).
8. Senior management de-emphasizing or forgetful about strategic/long-range plans (15%).
9. Too little cooperation between headquarters/subsidiaries or among subsidiaries (10%).
10. Too much information of the “wrong kind” (4%).
11. Too much planning jargon (1%).

Obviously, external factors can also interfere with the strategic planning process. Changes in the political and the economic environment can upset the finest strategic plans. China’s sudden clampdown on direct selling created upheaval for Avon, Amway, and Mary Kay, among other companies. The 2008–2009 global economic downturn wreaked havoc on the strategic plans of multinationals around the globe.

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Key Criteria in Global Organizational Design

There are some factors that companies should consider when engineering their global organizational structure. In the following discussion, we make a distinction between environmental and firm-specific factors.

Environmental Factors Competitive Environment

Global competitive pressures force MNCs to implement structures that facilitate quick decision-making and alertness. In industries where competition is highly localized, a decentralized structure where most of the decision-mak- ing is made at the country-level is often appropriate.

Rate of Environmental Change

Drastic environmental change is a way of life in scores of industries. New competitors or substitutes for a product emerge. Existing competitors form or disband strategic alliances. Consumer needs worldwide constantly change. Businesses that are subject to rapid change require an organizational design that facilitates continuous scanning of the firm’s global environment and swift alertness to opportunities or threats posed by that environment.

Regional Trading Blocs

Companies that operate within a regional trading bloc (e.g., the European Union (EU), the United States–Mexico–Canada Agreement (USMCA), and MERCOSUR) usually integrate their marketing efforts to some extent across the affiliates within the block area. In light of the European integration, numerous MNCs still maintain their local subsidiaries, but the locus of most decision-making now lies with the pan-European headquarters.

Nature of Customers

The company’s customer base also has a great impact on the MNC’s desired organizational setup. Companies such as DHL, IBM, and Citigroup, which have a “global” clientele, need to develop structures that permit a global reach and, at the same time, allow the company to stay “close” to their customers. We now turn to the prime firm-specific determinants.

Firm-specific Factors

Strategic Importance of International Business

Typically, when overseas sales account for a very small fraction of the company’s overall sales revenues, simple organizational structures (e.g., an export department) can easily handle the firm’s global activities. As international sales grow, the organizational structure will evolve to mirror the growing importance of the firm’s global activities.

For instance, companies may start with an international division when they test the international waters. Once their overseas activities expand, they are likely to adopt an area-type (country- and/or region-based) structure.

Product Diversity

The diversity of the company’s foreign product line is another key factor in shaping the company’s organization. Companies with substantial product diversity tend to go for a global product division configuration.

Company Heritage

Differences in organizational structures within the same industry can also be explained via corporate culture. Nestlé and Unilever, for example, have always been highly decentralized MNCs. When Unilever realized that its marketing efforts required a more pan-European approach to compete with the likes of Procter & Gamble, the company transformed its organization and revised its performance measures to provide incentives for a European focus.

Skills and Resources Within the Company

Decentralization could become a problem when local managerial talents are missing. For instance, expatriate managers may find it hard to adjust to the local environment Another critical factor is how competent people within the organization are working across geographies. If cooperation skills are limited or there is resistance to rotating people across countries, structures along geographies or product lines would be more suitable

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Organizational Design Options

The principal designs that firms can adopt to organize their global activities are as follows:

• International Division: Under this design, the company basically has two entities: the domestic division, which is responsible for the firm’s domestic activities, and the international division, which is in charge of the company’s international operations.
  
  
• Product-Based Structure: With a product structure, the company’s global activities are organized along its various product divisions.
  
  
• Geographic Structure: This is a setup where the company configures its organization along geographic areas: countries, regions, or some combination of these two levels.
  
  
• Matrix Organization: This is an option where the company integrates two approaches—for instance, the product and geographic dimensions—with a dual chain of command. We will now consider each of these options in greater detail. At the end of this section, we will also discuss the so-called networked organization model.

International Division Structure

Most companies that engage in global marketing initially start by establish- ing an export department. Once international sales reach a threshold, the company might set up a full-blown international division.

The charter of the international division is to develop and coordinate the firm’s global operations. This option is most suitable for companies that have a product line that is not too diverse and does not require a large amount of adaptation to local country needs.

Global Product Division Structure

The second option centers around the company’s different product lines or strategic business units (SBUs). Each product division, being a separate profit center, is responsible for managing worldwide the activities for its product line. This alternative is especially popular among high-tech companies with highly complex products or MNCs with a very diversified product portfolio.

Ericsson and John Deere are some of the companies that have adopted this structure. Exhibit 1 shows how Henkel, the German multinational, organizes its businesses, resource allocation and strategic planning. This approach is exemplified by Honeywell, the U.S. maker of control tools, which has set up centers of excellence that span the globe.

Another appeal is that global product structures facilitate the development of a global strategic focus to cope with challenges posed by global players. Lack of communication and coordination among the various product divisions could lead to needless duplication of tasks. A too narrow focus on the product area will lead to a climate where companies fail to grasp the synergies that might exist between global product divisions.

Geographic Structure

The third option is the geographic structure, where the MNC is organized along geographic units. The units might be individual countries or regions. In many cases, MNCs use a combination of country-based subsidiaries and regional headquarters (RHQs).

There are other variants. Kraft- Heinz, for instance, uses a mixture of regions and countries. Area structures are especially appealing to companies that market closely related product lines with very similar end-users and applications around the world.

Country-based Subsidiaries

Scores of MNCs set up subsidiaries on a country-by-country basis. To some degree, such an organization reflects the marketing concept. By setting up country affiliates, the MNC can stay in close touch with the local market conditions.

The firm can thereby easily spot new trends and swiftly respond to local market developments. Country-focused organizations have several serious handicaps. However, they tend to be costly. Coordination with corporate headquarters and among subsidiaries can easily become extremely cumbersome.

New Role of Country Managers

Corporate strategy gurus such as Kenichi Ohmae foresee the demise of the country manager. Major companies have already cut down the role of their country managers within the organization, with power being transferred to a new breed, the “product champion.”

Companies such as Oracle cut down its country managers to size when the company realized that its country-based organization had become a patchwork of local fiefs that did not communicate with each other: Oracle’s logo in France differed from the one in the United Kingdom, global accounts like Michelin were treated as different customers, and so forth.

Several forces are held responsible for this shift away from strong country managers:

• The threats posed by global competitors who turn the global marketplace into a global chess game.
  
  
• The growing prominence of global customers who often develop their sourcing strategies and make their purchase decisions on a global (or pan-regional) basis.
  
  
• The rise of regional trading blocs that facilitate the integration of manufacturing and logistics facilities but also open up arbitrage opportunities for grey marketers.
  
  
• Knowledge transparency. The internet and other information technologies allow customers and suppliers to become better knowledgeable about products and prices across the globe.

At the same time, several developments create a need for strong country managers. Nurturing good links with local governments and other entities (e.g., the EU) becomes increasingly crucial clientele. Local competitors sometimes pose a far bigger threat than global rivals.

In many emerging markets, strong local brands (e.g., Huawei smartphones in China, fast-food restaurant Jollibee in the Philippines) often have a much more loyal following than regional or global brands.

A good example is 3M. In 1991, 3M set up 30 product-based units. To cut costs, 3M centralized procurement, production, distribution, and service centers (e.g., human resources). However, a decade later, 3M decided to hand power back to its country managers as they can provide a local perspective on group policies. The country managers also play a valuable role in establishing contacts with local customers and spotting opportunities for new businesses.

Country managers of the twenty-first century should fit any of the following five profiles depending on the nature of the local market.

• The trader who establishes a beachhead in a new market or heads a recently acquired local distributor. Traders should have an entrepreneurial spirit. Their roles include sales and marketing, scanning the environment for new ideas, and gathering intelligence on the competition.
  
  
• The builder who develops local markets. Builders are entrepreneurs who are willing to be part of regional or global strategy teams.
  
  
• The cabinet member who is a team player with profit and loss responsibility for a small-to-medium-sized country. Teamwork is key here, since marketing efforts may require a great deal of cross-border coordination, especially for global and pan-regional brands. Major strategic decisions are often made at the regional level rather than by the country’s subsidiary.
  
  
• The ambassador who is in charge of large and/or strategic markets. His responsibilities include handling government relations, integrating acquisitions, and strategic alliances, coordinating activities across SBUs.
  
  
  In this role, the country manager can provide hands-on parenting for local markets that need more attention than they can get from the global product division. Ideally a seasoned manager, the ambassador should be somebody who is able to manage a large staff.
  
  For instance, Asea Brown Boveri (ABB), a Swiss/Swedish consortium, views the tasks of its Asia-based country managers as “to exploit fully the synergies between our businesses in the countries, to develop customer-based strategies, to build and strengthen relationships with local customers, governments, and communities.”
  
  
• The representative in large, mature markets whose tasks include han- dling government relations and legal compliance and maintaining good relations with large, local customers. Dow Chemical, for example, realised that it needed to have strong local management in Germany who can talk shop with the German government authorities.
  
  Some companies are now combining the two jobs of country manager and product champion. This new breed of hybrid manager, referred to by some as a country prince, is based in a country that is seen as strategically important for the product category.

Paris-based Nexans, the world’s biggest maker of electric cables, adopted this approach. Nexans has three country princes. For instance, one heads the global product division for ship cables and is country manager for South Korea.

Regional Structures

Many MNCs that do not feel entirely comfortable with a pure country-based organization opt for a region-based structure with RHQs. A typical structure has divisions for North America, Latin America, the Asia-Pacific, and EMEA. To some extent, a regional structure offers a compromise between a completely centralized organization and a country-focused organization.

The intent behind most region-based structures is to address two concerns: lack of responsiveness of headquarters to local market conditions and paro- chialism among local country managers. In some cases, the regions are formal trading blocs like the EU or NAFTA that allow almost complete free movement of goods across borders. In other cases, the clusters tend to be more culture-driven.

A survey done in the Asia-Pacific region singles out five distinct roles for RHQs

• Scouting: The RHQ serves as a listening post to scan new opportunities and initiate new ventures.
  
  
• Strategic Stimulation: The RHQ functions as a “switchboard” between the product divisions and the country managers. It helps the SBUs understand the regional environment.
  
  
• Signalling Commitment: By establishing an RHQ, the MNC signals a commitment to the region that the company is serious about doing business in that region.
  
  
• Coordination: Often the most important role of the RHQ is to coordinate strategic and tactical decisions across the region. Areas of cohesion include developing pan-regional campaigns in regions with a lot of media overlap; price coordination, especially in markets where parallel imports pose a threat; consolidation of manufacturing; and logistics operations.
  
  
• Pooling Resources: Certain support and administrative tasks are often done more efficiently at the regional level instead of locally. RQH might fulfill support functions like after-sales services, product development, and market research.

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Organizing for Global Brand Management

Global branding is the rage for more and more companies. This is especially so for decentralized companies where local decisions involve global brand- ing strategies. Several options exist: (1) a global branding committee, (2) a brand champion, (3) global brand manager, and (4) informal, ad hoc brand meetings. Let us look at each one of these in detail.

Global Branding Committees

Global branding committees are usually made up of top-line executives from corporate (or regional) headquarters and local subsidiaries. Their charter is to integrate and steer global and local branding strategies.

Visa International’s “Global Branding Marketing Group” exemplifies this approach. The group’s goal is to establish better communications among regions and to leverage global media buying power. It is made up of the heads of marketing from each region.

Brand Champion

The brand champion is a top-line executive (sometimes a CEO) who serves as the brand’s advocate. The approach works well for companies whose senior executives have a passion and expertise for branding. One practitioner of brand championship is Nestlé.

The company has a brand champion for each of its 12 corporate strategic brands. The brand champion approves all brand and line extension decisions, 4monitors the presentation of the brand worldwide, and spreads insights on best practices within the organization.

Global Brand Manager

The global brand manager is a steward of the brand whose main responsibility is to integrate branding efforts across countries and combat local biases. The position is most suitable for organizations where top management lacks marketing expertise, as is often the case with high-tech firms.

For the global brand manager to be effective, the following conditions should hold:

• Commitment to branding at the top of the organization. Top-line executives—though most likely lacking a marketing background—should share the vision and a belief in strong branding.
  
  
• Need to create and manage a solid strategic planning process. Country managers should adopt the same format, vocabulary, and planning cycle.
  
  
• Need to travel to learn about local management and best practices and to meet local customers and/or distributors.
  
  
• Need for a system to identify, mentor, and train prospects that can fill the role.

Informal, Ad Hoc Branding Meetings

Even if for some reason a company decides against a formal structure, it could still find it worthwhile to have informal mechanisms to guide global branding decisions. This usually takes the form of ad hoc branding meetings.

A good example is Abbott International, a U.S.-based pharmaceutical company. Whenever a new product is planned, international executives meet with local staff to discuss the global brand. The ad hoc committee reviews patents and trademarks for each country to decide whether or not to use the U.S. name in other countries.