Lesson 5- Global Marketing and Outsourcing Flashcards
Trans National Corporation
Companies with their headquarters in one country, and at least one branch in another country.
Foreign Direct Investment
A company from one country investing in another country by building a factory there.
Economies of scale
- The cost advantages that result as a company expands its scale.
- As more units are being produced, the average cost per unit decreases because fixed costs (advertising, rent, etc) are spread over an increased number of goods/services.
Why was it advantageous for Thompson to re-brand into TUI?
- Previously many different companies were owned by the same TNC company ‘TUI’ but had different names in different countries.
- By changing all the names into one single name, this makes it easier for the company to advertise globally, as well as to repaint aircraft moved between the countries, and many other benefits.
What is global marketing?
- Marketing is the process of promoting, advertising and selling products or services
- When a company becomes a global marketeer, it views the world as one single market and creates products that fit the various regional marketplaces
- It will usually develop a recognisable ‘brand’ and employ one marketing strategy to advertise the product to customers all over the world
- The ultimate goal is to sell the same or similar product, the same way, everywhere
- Having one marketing campaign on a global scale like this generates economies of scale for the organisation, which reduces their costs
Why is global marketing an ideal strategy for TNC’s?
1) There will be more sales overall. This leads to economies of scale, increasing profits.
2) By producing one product and one advertising strategy, and using it globally, it saves ‘modifying’ the product, and having to produce different adverts. This saves time and money.
3) Encourages brand loyalty as people move from one country to another.
CASE STUDY OF GLOBAL MARKETING-Coca Cola
- In 2015, Coca Cola was rated by Interbrand as one of the world’s most valuable and successful brands.
- Coca-Cola is an example of a company with a single product; only minor elements are tweaked for different markets. The company uses the same formulas (one with sugar, the other with corn syrup) for all its markets.
- The bottle design is recognisable in every country but the size of bottles and cans conforms to each country’s standard sizing.
Extra facts about Coco Cola for global marketing
- The Company HQ are in Atlanta, USA but it has its operation based in 200 countries around the world
- The size, shape, and labelling of the bottle are changed to match the norms in each country.
- While the company formerly used a standardised advertising approach, it has changed to adapt advertising messages to local culture.
-92 servings consumed per person worldwide 2011
Facts from Coca Cola article
- Coco Cola launched the ‘One Brand’ strategy in 2016
-This strategy means that ads across the globe will give ‘intimate glimpses’ into the experiences that people share when drinking coca cola
- Coke focus on the experience of drinking it instead of the actual ingredients
How can Global Marketing be linked to the ‘Changing Places’ unit?
- Placelessness occurs when global forces have a greater influence on shaping places than local factors. It is the idea that a particular landscape could be anywhere because it lacks uniqueness.
-As shops can be everywhere - In the UK, the term ‘clone town’ has been used to describe a settlements where the high street has been dominated by chain stores, which sell the same products in many different countries!
What are the barriers to global marketing?
- Cultural Barriers
- Economic Barriers
What are the barriers to global marketing-Cultural barriers
- Taste – It’s hard to create a singular product when our tastes are so varied.
- For example, Lays crips (Walkers in UK) have to cater for different tastes:
- UK: Prawn Cocktail, Smoky Bacon
-Greece: Feta cheese, olive and tomato
-Russia: Crab, Mushroom & Sour cream - Linguistics There can be problems with translating slogans and adverts in other languages.
- For example KFC’s ‘Finger Licking Good’ translates to ‘Eat Your Fingers Off’ in Chinese, and is therefore lost in translation!
What are the barriers to global marketing-Economic Barriers
- It is very difficult to create a global marketing strategy when a product is perceived very differently in different parts of the world.
- For example, a McDonald’s meal is often seen as low cost, fairly unhealthy family meal in the UK, but in China it is viewed as exotic – a taste of western living. In Cairo (Egypt), it is only affordable by the wealthy.
The new International division of labour
- HIC’S- Occupations that are highly skilled, highly paid and involve research and development (R&D), decision making and managerial roles. These are largely concentrated in developed (or high income) countries.
- LICS’s- Occupations that are unskilled and poorly paid assembly roles. These tend to be located in the emerging economies, often developing (or low income), based on low labour costs.
- Usually brain drain to the HIC’s
Why do HIC’s outsource labour?
- Lower wages mean lower production costs
- Factories can be built and operate cheaper
-Government support - Less rigid working hours
-Strong military government means little chance of strikes. - Good geographical positions
How do LIC/NEE’s benefit?
- TNCs invest in local infrastructure
- Jobs
- Products are introduced to host countries.
- Some profit remains for the country
- Taxes to government
Changes to the division of labour
- Over the past 50 years, many developing countries have industrialized. In the 1950s, 95% of manufacturing was in industrialized economies like the UK, USA, and Germany.
- Due to foreign direct investment (FDI) from transnational corporations (TNCs) in countries with lower manufacturing costs, manufacturing shifted from high-income countries (HICs) to low-income countries (LICs) and newly industrialized economies (NEEs).
-This process is known as the ‘global shift.’
- High productivity no longer requires high wages and advanced technology. Work moved from HICs to LICs/NEEs without losing productivity, widening the development gap.
- By 2010, over 50% of manufacturing jobs were in LICs, and 60% of exports to HICs from these countries were manufactured goods.
