Supply Chain and Global Marketing Notes PDF

Chapter 15 Supply Chain Place: Delivering Value ​ Marketing processes necessary to get the product to the right customer at the right time ○​ Coke Machines that are everywhere ​ The fourth P includes all the activities related to production and distribution so that the right prod...

Chapter 15 Supply Chain Place: Delivering Value ​ Marketing processes necessary to get the product to the right customer at the right time ○​ Coke Machines that are everywhere ​ The fourth P includes all the activities related to production and distribution so that the right product is delivered: ○​ Right Quantities ○​ Right Locations ○​ Right Time ​ Many marketers overlook or underestimate the importance of place as a P in the marketing mix because it happens behind the scenes ​ But supply chain management adds immense value when operating efficiently, and is highly visible to consumers when operational issues arise Supply Chain Management ​ Supply chain management or Marketing Channel Manegment is defined as the set of approaches and techniques firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and transportation intermediaries into a seamless operation ​ If everything is working correctly, we probably won’t see much evidence of the supply chain in motion! Members: ​ Suppliers ​ Manufacturers ​ Warehouse ​ Retail Stores ​ Transportation Intermediaries  ​ In the simplified supply chains, manufacturers make the product and sell them to retailers or wholesalers ​ When markets develop and become more complex, there may be a need for wholesalers ​ Wholesalers are firms that buy products from manufacturers and resell them to retailers. Each Members Value ​ The transportation partner manages delivery to the distribution center, where it can be stored and grouped with other products ​ Via the distribution center, retailers have centralized access to multiple product types and brands ​ The transportation partner then manages delivery from the distribution center to the retailer ​ The retailers promote the products in-store, online, or both ​ Retail salespeople can educate the customer and walk them through the product features ​ Retailers can also facilitate, delivery, payment, or training related to the product ​ Both retailers and end-customers expect to have their goods delivered and services performed on time ​ Two distinct channel partners aid in this process: ○​ A distribution center is a facility for the receipt and storage of large quantities of items temporarily, while they’re on their way to somewhere else ○​ Goods and packages are stored and moved in and out of distribution centers in large quantities, usually on pallets ○​ The primary purpose of a distribution network is to reduce order lead times and shipping costs for these businesses ○​ In contrast, fulfillment centers specialize in small-parcel, direct-to-consumer (DTC) logistics example: Amazon ○​ Warehouse teams receive goods in bulk, break them down into saleable units, and store them until a customer places an order for one of those units ○​ To process or “fulfill” the order, they locate the item, pick it from the shelf, pack it, label it, and ship it to the customer’s address Direct Marketing ​ In direct marketing channels, there are no intermediaries between the buyer and seller ​ The seller could be a manufacturing firm or an individual (e.g., an Etsy seller) ​ By not going through a retailer, the seller can increase their margin ​ Wouldn’t it be cheaper for consumers to buy directly from manufacturers? ​ Sometimes, but this kind of operation doesn’t always scale ​ Nor is it advantageous for complex products that would benefit from a showroom or salesperson DTC Brands ​ Direct-to-consumer brands sell directly to customers online, bypassing wholesalers and retailers ​ This allows them to control the user experience, collect first-party shopper data and increase margins ​ Starting in the late 2000s, upstart brands in hyper-focused categories like Warby Parker and Dollar Shave Club launched online to take advantage of direct access to customer ○​ Examples: ​ Gymshark ​ BONOBOS ​ Hims | Hers ​ When brands sell products through retailers, those retailers own the relationships with customers ​ With their own e-commerce platforms, brands could acquire their own customers directly through social ads ​ Another key point of differentiation of DTC brands was their emphasis on providing premium customer experience Indirect Marketing ​ In indirect marketing channels, one or more intermediaries work with manufacturers to provide goods and services to customers ​ Wholesalers are more common in developed economies in which large retail stores are common Inventory Management ​ Inventory management systems track goods throughout stores, warehouses, and distribution centers ​ Just-in-time (JIT) inventory management is a method designed to deliver less merchandise on a more frequent basis than traditional inventory systems ​ The firm gets the merchandise “just in time” for it to be used in the manufacture of another product or sold to a consume ​ Just-in-time inventory management is also known as a quick response (QR) inventory system ○​ Many firms, such as H&M, Zara, Mango, and Forever 21, have adopted a QR inventory system Franchising Franchising refers to a contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchisor Example: Dunkin’ ​ ​ People who open up the Franchise Franchisor​ ​ ​ Franchisee ​ In a franchise contract, the franchisee pays a lump sum plus a negotiated royalty on all sales in return for the right to operate in a specific location ​ The franchisor provides assistance in identifying the retail location, developing the products or services offered, and training the franchisee Marketing activities such as advertising, product development, and pricing are typically done by the franchisor with costs shared across all franchisees Examples: Halloween Donuts from Dunkin’  ​ Top Franchises in the U.S. ○​ Popeyes $384k-$3.5M ○​ Taco Bell $576k-$3.4M ○​ Jersey Mikes $169k-$804k ○​ Kumon $74k-$157k ○​ Servpro $168k-$221k Franchising is a lucrative second career for many Professional Athletes Example: Shaq owns 155 Five Guys, 40 24-hour Fitness, etc. Flow of Information ​ Information flows from the customer to stores, to and from distribution centers, to and from wholesalers, to and from product manufacturers, and then on to the producers of any components and the suppliers of raw materials ​ This flow of information is enabled by technology and infrastructure that recognizes and transmits data across channels ​ When warehouse and retail workers scan products, data is transmitted to parties throughout the channel chain ​ A universal product code (UPC) is the black-and-white bar code found on most merchandise ​ Radio frequency identification (RFID) chips automatically transmit to a special scanner all the information about a container’s contents or individual products Flow of Merchandise Distribution Center Model ​ Advantages of merchandise through a distribution center: ○​ More accurate sales forecasts due to the volume of stores ○​ Lower inventory in each store, lower overall inventory costs ○​ Easier to avoid running out of stock or having too much stock in any one retail location ○​ Square footage for storage less expensive in a remote warehouse than an expensive retail location Direct Store Delivery (DSD) Model ​ Advantages of direct store delivery: ○​ Gets merchandise to the stores faster, better for: ​ Perishable goods (meat, dairy, and produce) ​ In-demand items that positively influence the retailer’s image ​ Trendy or fad products ○​ Gives manufacturers control over stocking and merchandising ○​ Eliminates costs of distribution centers for retailers with few outlets Both Models are indirect Managing the Supply Chain ​ Relationship management is critical in keeping a supply chain operational, as participating members must cooperate for the marketing channel to run efficiently ​ However, supply chain members sometimes have conflicting goals that result in channel conflict Example: ​ Newell vs. Office Depot ○​ Displays are a form of reminder advertising Conflict in Supply Chain When members of the supply chain have competing interests, two distinct types of conflicts can arise: vertical channel conflict or horizontal channel conflict Vertical channel conflicts occur when supply chain members that buy and sell to each other, meaning they are part of the same marketing channel, disagree about the goals or roles Ex. Newell and Office Depot Horizontal channel conflict occurs when there is disagreement among members at the same level of a marketing channel Ex. Amazon and Walmart ​ Conflict can arise in any marketing channel, but is affected by the degree to which one member has power over another ​ Power in a marketing channel refers to the means or ability of one member to dictate the actions of another member at a different level of distribution Power ​ In a corporate vertical marketing system, the parent company has complete control, meaning it can dictate the priorities and objectives of the supply chain ​ In this system, the firm likely owns its facilities such as manufacturing plants, warehouse facilities, retail outlets, or other methods of transportation (e.g., Tesla, Amazon) ​ In contrast, an independent marketing channel is one in which several independent members each attempts to satisfy its own objectives ​ For example, channel partners such as the manufacturer, wholesaler, and retailer each trying maximize its profits, often at the expense of the other members ​ In an independent marketing channel is which all the members are comparable in size, no one partner has power over another ​ However, if one partner is dominant in either size or market present, they can exert power over other members ​ For example, with its size and leverage, Walmart is able to exert significant power over manufacturer Sources of Power With its reward power, Walmart offers rewards, often a monetary incentive, if the wholesalers or manufacturers do what Walmart wants them to do Coercive power arises when Walmart threatens to punish or punishes wholesalers or manufacturers for not undertaking certain tasks ​ Example: Newell Withholding Stock from Office Depot Walmart may also have referent power if a supplier wants to be associated with Walmart to enable that supplier to attract other retailers’ business (reference) If Walmart exerts expertise power, it relies on its vast experience and knowledge to decide how to market the wholesalers or manufacturers products ​ Experience and know how Because Walmart has vast amounts of data about consumers, it might exert information power over wholesalers or manufacturers by providing or withholding important market information ​ Data / Bar code scans ​ Kroger with Data Power because of Kroger Plus Legitimate power is based on getting a channel member to behave in a certain way because of a contractual agreement between the two firms Chapter 8 Global Marketing ​ Increased levels of globalization, or the processes by which goods, services, information, and ideas flow across borders, means consumers have easier access to international products than ever before ​ This provides both opportunities for U.S.-based firms to try and appeal to international consumers, and for international brands to market their products here ​ The principles associated with global marketing are the same as domestic marketing, the key difference is the uncertainty of the operating environment ​ With each new international market a firm operates in, there are increased uncontrollable factors the firm must prepare for Global Entry Strategies ​ After conducting an analysis of its target market, the firm has to conduct an internal assessment of its capabilities ​ This assessment includes the firm’s access to capital, manufacturing capacity, and management abilities ​ Based on this assessment, the firm will decide how to enter the marketplace Exporting ​ Exporting means producing goods in one country and selling them in another ​ This entry strategy requires the least financial risk but also allows for only a limited return to the exporting firm ​ Global expansion often begins when a firm receives an order for its product or service from another country, in which case it faces little risk because it has no investment in people, capital equipment, buildings, or infrastructure Franchising ​ Franchising is a contractual agreement between a firm, the franchisor, and another firm or individual, the franchisee ​ Franchising is the fastest-growing market-entry strategy ​ “Skill centralization and operational decentralization” ​ Global franchising entails lower risks and requires less investment than does opening units owned wholly by the firm ​ However, when it engages in franchising, the firm has limited control over the market operations in the foreign country, its potential profit is reduced ​ Monitoring costs, adapting products appropriately, and establishing brand equity in the new market are key to success Example: Dunkin’ Donuts ​ Dunkin Donuts international retail locations and loyalty program look very similar to those in the U.S ​ But the menu items are adapted to local tastes: ○​ Fish Flake (China) ○​ Mango (Thailand) ○​ Rice and Charcoal (South Korea) Strategic Alliances ​ Strategic alliances refer to collaborative relationships between independent firms ​ The partnering firms do not create an equity partnership; that is, they do not invest in one another ​ Although the companies work together to reach new consumers, each company still operates independently ​ Strategic alliances are established out of mutual need to achieve a common objective, benefits include: ○​ Opportunities for rapid expansion into new markets ○​ Access to new technology ○​ More efficient production and innovation ○​ Reduced marketing costs ○​ Access to additional sources of products and capita Example: Airlines across the world like Delta, Aeroflot, Airfrance, etc. Joint Venture ​ A joint venture is formed when a firm entering a market pools its resources with those of a local firm ​ Ownership, control, and profits are shared between the firms ​ The local partner offers the foreign entrant greater understanding of the market and access to resources such as vendors and real estate ​ Some countries require joint ownership of firms entering their domestic markets ​ Problems with this entry approach can arise when the partners disagree or if the government places restrictions on the firm’s ability to move its profits out of the foreign country and back to its home country Direct Investment ​ Direct Investment requires a firm to maintain 100% ownership of its plants, operation facilities, and offices in a foreign country ​ This is often through the formation of wholly owned subsidiaries ​ Requires the highest level of investment and exposes the firm to significant risks ​ Many firms believe that in certain markets, the potential risks of direct investment are outweighed by the high potential returns ​ With this strategy, none of the potential profits must be shared with other firms ​ In addition, direct investment offers the firm complete control over its operations in the foreign country The International 4Ps Just as with domestic marketing, international marketing strategy has two core components: ​ Determining the target through segmentation, targeting and positioning exercises ​ Developing or adapting the 4Ps of their marketing mix to form a sustainable competitive advantage Global Product Adaptations Same Product/Service ​ The most common method of launching a product in an international market is to offer the same product as is in the home market ​ For example, Apple does not customize the product features of the iPhone for different global markets ​ This helps Apple maintain a strong and consistent brand identity and reputation ​ However, Apple’s market share in India is very small, so their product mix and approach to customer service does need to adap Similar Product/Service ​ Some products will require only minor changes to their core features in order to appeal to customers in an international market ​ This could be due to functional attributes that need to change to increase adoption or due to cultural differences Example: ​ Netflix is not only buying the rights to popular international programs, but producing original content in its biggest global markets New Product/Service ​ Depending on the level of economic development and cultural adaptations required, the firm can choose to offer entirely different products or services globally ○​ For example, Kit Kat bars are so popular in Japan, they are produced in 40+ different varieties for that market ○​ Pringles different flavors in different countries Global Pricing Strategies ​ Determining the selling price in the global marketplace is an extremely difficult task ​ Many countries still have rules governing the competitive marketplace, including those that affect pricing ○​ For example, the inability to advertise a “before” price would impact a consumer’s reference price ​ Remember that package size also impacts price ​ In developing markets, cleaning and personal care items are often sold in single-use sachets ​ Global distribution networks form complex value chains, and delivering products to local retailers can be incredibly difficult and frustrating ​ Infrastructure issues often prevent traditional distribution methods and require creative adjustments to reach remote markets such as canoes and motorbikes Poorly encoded or translated messages become meaningless to the receiving audience and may harm brand perceptions Example: ​ Pepsi → “Pepsi brings your ancestors out the Grave” Poorly encoded or translated messages become meaningless to the receiving audience and may harm brand perceptions: Example: ​ KFC → “Eat your Fingers Off” Global Promotion Strategies ​ Many brands focus Chinese New Year campaigns on discount or purchase-focused messaging ​ However, brands that most resonate with consumers during this time are those that capture the essence of the celebration ○​ Nike, for example, received praise for its Chinese New Year campaign that focused on “family bonds, wellness, and a new better self through had work and consistency Factors such as color, timing, symbols, humor, taste, and appropriateness impact how the message will resonate ​ Should firms use the same brand identity globally? Or make localized versions? ​ Companies with strong brand try to globalize them ​ Ideally gives company uniformly positive association worldwide Assessing Global Markets Economic Analysis ​ In general, the greater the spending power of a country’s population, the greater the business opportunity for the firm ​ An economic analysis of a country consists of three key areas: ○​ General health of the economic environment ○​ Market size and population growth ○​ Real income Economic Health ​ One measure of market potential is the relative level of imports and exports ​ A trade deficit results when a country imports more goods than it exports ​ The U.S. currently has a trade deficit with China, meaning we import more goods from China than we import to China ​ Trade deficits signal competition from imported goods, and more competition is better for consumers ​ Firms prefer to manufacture in a country with a trade surplus , meaning the country has a higher level of exports than imports ​ Why? This signals a greater opportunity to export products to more markets ​ The most common way to assess the market potential of an economy is by looking at its standard metrics of output ​ Gross domestic product (GDP) is defined as the market value of the goods and services produced by a country in a year ​ GDP is the most widely used standardized measure of output ​ Gross national income (GNI) consists of GDP plus the net income earned from investments abroad ○​ For example, a U.S. firm with investments abroad counts any earnings from those foreign investments in GNI but not GDP ​ Why would those earnings not be counted in the GDP? ○​ Because it was NOT produced here Assesing Infrastructure ​ A firm’s ability to conduct business in a particular country is in large measure determined by that country’s infrastructure ​ Infrastructure is defined as the basic facilities, services, and installations needed for a community or society to function ​ Transportation and communications systems, water and power lines, and public institutions such as schools and post offices are all types of infrastructure ​ Transportation infrastructure is essential to transport goods throughout a selected market ○​ This element of infrastructure is especially important when consumers live across a vast area or far from other trading partners ​ Examples: trains, roadways, refrigeration ​ Distribution channels must exist to deliver goods and services quickly and without excess expense ○​ Examples: warehouses, transportation partners ​ Communication systems must be developed in order for consumers to find out about products or services ○​ Without sufficient media access, there is no way to effectively educate or persuade consumers ​ Examples: newspaper circulation, internet access ​ Commercial infrastructure enables businesses to function ○​ Examples: legal, banking, and regulatory systems Governmental Actions ​ Governmental actions can significantly impact a firm’s ability to do business in an international market ​ Governments will pass laws and regulations that either promote foreign investments or close off the country to protect home-based industries ​ Government actions include tariffs, quotes, and exchange controls ​ A tariff is a tax levied on a good imported into a country ○​ Tariffs are intended to make imported goods more expensive and thus less competitive ​ A quota designates a maximum of a product that may be brought into a country during a specified time period ○​ This lowers the availability of imported product  ​ The U.S. has quotas on goods such as sugar, beef, cheese, milk, butter, and other dairy protects to protect domestic production ​ Both tariffs and quotas benefit domestically made products because they reduce foreign competition ​ But because they increase prices and suppress supply, they inhibit consumer choice ○​ Trade negotiations often revolve around reducing or eliminating tariffs, quotas, or similar impediments to trade ​ Exchange control refers to the regulation of a country’s currency exchange rate, the measure of how much one currency is worth in relation to another ​ The central bank of a country generally regulates its currency ​ Countries try to keep their markets attractive to foreign investors and their goods attractive to foreign buyers through exchange control ​ A trade agreement is an intergovernmental agreement designed to manage and promote trade for a specific region ​ A trading bloc consists of those countries that have signed a particular trade agreement. ○​ Regional trade agreements (RTAs), such as the U.S.-Mexico-Canada agreement, account for more than half of international trade Culture/Society ​ Understanding another culture is crucial to the success of a global marketing initiative ​ Culture, or the shared meanings, beliefs, morals, values, and customs of a group of people, exists on two levels: ○​ Visible artifacts (behavior, dress, symbols, physical settings, ceremonies) ○​ Underlying values (thought processes, beliefs, and assumption) ​ Hofstede’s cultural dimensions offer a classification scheme that can be used to understand underlying values of a society ​ The six dimensions of Hofstede’s concept serves as a foundation from which to research and analyze different cultures ​ Power distance focuses on authority orientation ​ Measures tolerance for power inequality ○​ Higher power distance = hierarchical ○​ Lower power distance = egalitarian ​ How do less powerful members accept the power of individuals and institutions? ​ Individualism focuses on self-orientation ​ Individualism = emphasis on the individual over the group ○​ Independence is strongly valued ○​ Loose-knit social network ​ Collectivism = emphasis on the group over the individual ○​ Focus on behaviors that benefit greater good ○​ Tight-knit social network ​ Masculinity refers to the extent to which dominant values are male-oriented, focuses on assertiveness and achievement ○​ “Masculine” = higher value on achievement and assertiveness; society is more competitive ○​ “Feminine” = higher value on cooperation and nurturing; society is more collaborative ​ Uncertainty avoidance focuses on risk orientation and the extent to which society relies on orderliness and structure ​ High uncertainty avoidance = intolerant of ambiguity ○​ Distrust new ideas ○​ Follow established rules ​ Low uncertainty avoidance = willing to take risks ○​ Relaxed attitudes toward new ideas and behavio