Table of Contents http://www.fao.org/docrep/W5973E/W5973E00.htm Originated by: Agriculture Department Title: Global agricultural marketing management. (Marketing and Agribusiness Texts - ... Global Agricultural Marketing Management. (Marketing and Agribusiness texts - 3) Table of Contents S. Carter FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS Rome, 1997 This publication has previously been issued as ISBN 92-851-1004-5 by the FAO Regional Office for Africa. The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. M-62 ISBN 92-5-104013-3 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior permission of the copyright owner. Applications for such permission, with a statement of the purpose and extent of the reproduction, should be addressed to the Director, Information Division, Food and Agriculture Organization of the United Nations, Viale delle Terme di Caracalla, 00100 Rome, Italy. © FAO 1997 This electronic document has been scanned using optical character recognition (OCR) software and careful manual recorrection. Even if the quality of digitalisation is high, the FAO declines all responsibility for any discrepancies that may exist between the present document and its original printed version. Table of Contents 1 van 5 24/12/2006 11:59 Table of Contents http://www.fao.org/docrep/W5973E/W5973E00.htm Preface Chapter 1: Introduction To Global Marketing Chapter Objectives Structure Of The Chapter The evolution of global marketing The international economic system Impetus to global marketing involvement Planning to meet the opportunities and challenges of global marketing Framework for international analysis Product life/market life cycle Chapter Summary Key Terms Review Questions Review Question Answers References Chapter 2: The Economic Environment Chapter Objectives Structure Of The Chapter Overview The global economy Chapter Summary Key Terms Review Questions Review Question Answers References Appendix 2A: European Union Consumers The changing structure of the retail trade Changes to the wholesale trade Packing requirements for self-service Market overview Barriers to trade in the EU Appendix 2B: Southern African Development Community Historical development Appendix 2C: The Preferential Trade Area Of Eastern And Southern Africa Institutions of the PTA Chapter 3: The Cultural Environment Chapter Objectives Structure Of The Chapter What is culture The elements of culture Chapter Summary Key Terms Review Questions Review Question Answers References 2 van 5 24/12/2006 11:59 Table of Contents http://www.fao.org/docrep/W5973E/W5973E00.htm Chapter 4: The Legal, Political/Trade Environment Chapter Objectives Structure Of The Chapter Laws, rules, and standards Issues The political environment The legal environment Terms of access Winds of change Chapter Summary Key Terms Review Questions Review Questions Answers References Chapter 5: Identifying Market Opportunities Through Marketing Information Systems And Research Chapter Objectives Structure Of The Chapter Elements of the information system Sources of global information Chapter Summary Key Terms Review Question Review Question Answers References Chapter 6: A Competitive Analysis And Strategy Chapter Objectives Structure Of The Chapter Competition Industry analysis Competitive strategy Sourcing Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 7: Market Entry Strategies Chapter Objectives Structure Of The Chapter Entry strategies Special features of commodity trade Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 8: Product Decisions Chapter Objectives 3 van 5 24/12/2006 11:59 Table of Contents http://www.fao.org/docrep/W5973E/W5973E00.htm Structure Of The Chapter Basic concepts Product design Production decisions Branding and trademarks Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 9: Pricing And Financing Chapter Objectives Structure Of The Chapter The international financial system Pricing products Global pricing Financing of exports Malawi - Export Credit Guarantee System Pre- and Post-Shipment Support Facility Currency transactions Option Concluding comments Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 10: Distribution Decisions Chapter Objectives The Structure Of The Chapter Channels Channel structure Cotton marketing Physical distribution East Africa horticulture marketing Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 11: Promotion Decisions Chapter Objectives Structure Of The Chapter The nature of global promotion Global promotion Campaign design Chapter Summary Key Terms Review Questions Review Question Answers Carmel of Israel 4 van 5 24/12/2006 11:59 Table of Contents http://www.fao.org/docrep/W5973E/W5973E00.htm References Bibliography Chapter 12: Global Marketing, Logistics - Access And Documentation Chapter Objectives Structure Of The Chapter Complexity Terms of access International trade Special trade terms in export sales Export documentation Commercial documents Official documents Insurance documents Transport documents Financial and financing documents Export financing Collection arrangements Letters of credit Conflict of law Chapter Summary Key Terms Review Questions Review Question Answers References Bibliography Chapter 13: Organising, Planning And Controlling Global Marketing Operations Objectives Of The Chapter Structure Of The Chapter Agricultural systems: organisation, coordination and performance overview Global marketing planning Global marketing control Formal control methods Informal control method Variables influencing control Chapter Summary Key Terms Review Questions Review Question Answers Fruit and vegetables marketing - the future Key statistical data on horticultural marketing References Bibliography Appendix 13A: Export control - The Malawi case Glossary of marketing terms Technical note: A short introduction to exchange traded options* Futures and hedging trading in cotton * 5 van 5 24/12/2006 11:59 Preface http://www.fao.org/docrep/W5973E/w5973e01.htm#preface Originated by: Agriculture Department Title: Global agricultural marketing management. (Marketing and Agribusiness Texts - ... Preface This book, Global agricultural marketing management, was prepared by the project Network and Centre for Agricultural Marketing Training in Eastern and Southern Africa. The project, funded by the Government of Japan and executed by the Food and Agriculture Organization of the United Nations, was based in Zimbabwe and ran for five years from May 1990. Its overall objective was to strengthen agricultural marketing training in eastern and southern Africa. Approach and objectives This book, is one of a series of texts prepared by the Network and Centre. It is written in a style intended to provide both the theory concepts and practice of global agricultural marketing management, with emphasis on the latter. In particular, it provides: • the theoretical framework for global agricultural marketing management including definitions of marketing, enumerated analysis, marketing planning, the marketing mix and marketing evaluation and control. • numerous case studies and examples drawn from Eastern and Southern Africa (reflecting the project bias), but not exclusively so. • details of the many practical procedures and transactions included in global marketing. The text is primarily designed as a teaching aid for marketing or agribusiness lecturers or trainers and is suitable for post graduate students studying agricultural marketing, agricultural economics, agribusiness, management or business studies; undergraduates studying for the same and students studying for professional qualifications like the Chartered Institute of Marketing diploma. It can also be used as material for short courses, as a refresher or basic text for post graduates, for in service training of managers and as a self learning aid. The learning process The learning process is assisted within the text through the provision of a number of learning aids. These are: • Chapter objectives; Each chapter has specific objectives which prepare the learner for the chapter material and outline the learning outcomes. • Figures and tables; Each chapter is illustrated with relevant figures and tables which illustrate, encapsulate or summarize the text. • Examples; Each chapter contains examples which serve to illustrate the text and reinforce understanding of the principles. 1 van 2 24/12/2006 11:59 Preface http://www.fao.org/docrep/W5973E/w5973e01.htm#preface • Exercises; Each chapter contains both worked and unworked exercises intended to ensure the learner's understanding of both the concepts and the use of practical techniques involved in global marketing. • Key terms; Key terms are included at the end of each chapter and are intended to act as an aide-memoire. • Index; A subject index is included at the end of the text to assist with quick reference. Additional texts The text is complemented by an additional set of learning and teaching aids as follows: • Global Agricultural Marketing Management - Tutors Manual This text contains all the exercises referred to in the text together with their solutions. • Transparency Masters The Transparency Masters contain a series of overhead transparency masters which include all the subject matter, examples, and their solution in summarised or full format. These can be photocopied and used as additional student notes. Authors and acknowledgements Steve Carter was FAO project director, previous to which he taught marketing at universities in the United Kingdom, India and Africa and consulted in many developing countries around the world. The author, in particular, acknowledges the contribution of those who were directly involved in the production of the texts either in providing subject matter, print production, comments or suggestions. He is indebted to the following colleagues and organisations: Tapera Baidon, Zimbabwe Orlean Chimbewa, Zimbabwe Ellen Simbi, Zimbabwe Edward Seidler, FAO, Rome World Bank, Washington, DC, USA Denise C.B. Cheng, United Kingdom International Trade Centre UNCTAD/GATT, Geneva, Switzerland S. Carter 2 van 2 24/12/2006 11:59 Chapter 1: Introduction To Global Marketing http://www.fao.org/docrep/W5973E/w5973e02.htm#TopOfPage Originated by: Agriculture Department Title: Global agricultural marketing management. (Marketing and Agribusiness Texts - ... Chapter 1: Introduction To Global Marketing Chapter Objectives Structure Of The Chapter The evolution of global marketing The international economic system Impetus to global marketing involvement Planning to meet the opportunities and challenges of global marketing Framework for international analysis Product life/market life cycle Chapter Summary Key Terms Review Questions Review Question Answers References A look at the appropriate figures, (for example The World Development Report by the World Bank) will indicate that the world is becoming increasingly interdependent for its economic progress. In 1954, in the USA, for instance, imports were only one percent of GNP, but in 1984 they had risen to 10%. In food crops, while developing countries trade in coffee, cocoa, cotton and sugar actually declined in value during the 1980s, developing countries as a group experienced annual export growth rates of 4 to 11% in categories like processed fruit and vegetables, fresh processed fish products, feed stuffs and oil seeds. High value food product exports in 1990 totalled approximately $144 billion, the same as crude petroleum, representing 5% of world commodity trade. In 1990, more than twenty Less Developed Countries (LDCs) had exports of high value foods exceeding $500 million including countries like Brazil, China, Thailand, India and Senegal. Terms such as "global village" and "world economy" have become very fashionable. Marketing goods and services on a global scale can happen in an "engineered" way, but often it is as a result of good and meticulous planning. For example, in order to stave off potential famine, the United Nation's World Food Programme (WFP) may purchase maize from Zimbabwe and distribute it in Tanzania, Malawi and Kenya. This "engineered" international marketing transaction may benefit Zimbabwe, without Zimbabwe having to prospect markets. Most international transactions are not like this. Most are clearly planned, involving meticulous attention to global social and economic differences and/or similarities in product, price, promotion, distribution and socio/economic/legal requirements. Chapter Objectives The objectives of this chapter are: • To provide an understanding of the factors which have led to the growth of internationalism and globalisation 1 van 19 24/12/2006 12:01 Chapter 1: Introduction To Global Marketing http://www.fao.org/docrep/W5973E/w5973e02.htm#TopOfPage • To produce a description of the major concepts and themes on which the subject of global marketing is based • To describe what is involved in planning for global marketing. Structure Of The Chapter The chapter starts by looking at the evolution of a firm's orientation from primarily a domestic producer to a global player. It then goes on to describe the major factors that have led to global marketing, including both economic and social. Finally the chapter examines the planning mechanism necessary to take account of important differences and/or similarities when marketing goods and services internationally. The evolution of global marketing Whether an organisation markets its goods and services domestically or internationally, the definition of marketing still applies. However, the scope of marketing is broadened when the organisation decides to sell across international boundaries, this being primarily due to the numerous other dimensions which the organisation has to account for. For example, the organisation's language of business may be "English", but it may have to do business in the "French language". This not only requires a translation facility, but the French cultural conditions have to be accounted for as well. Doing business "the French way" may be different from doing it "the English way". This is particularly true when doing business with the Japanese. Let us, firstly define "Marketing" and then see how, by doing marketing across multinational boundaries, differences, where existing, have to be accounted for. S. Carter defines marketing as: "The process of building lasting relationships through planning, executing and controlling the conception, pricing, promotion and distribution of ideas, goods and services to create mutual exchange that satisfy individual and organisational needs and objectives". The long held tenants of marketing are "customer value", "competitive advantage" and "focus". This means that organisations have to study the market, develop products or services that satisfy customer needs and wants, develop the "correct" marketing mix and satisfy its own objectives as well as giving customer satisfaction on a continuing basis. However, it became clear in the 1980s that this definition of marketing was too narrow. Preoccupation with the tactical workings of the marketing mix led to neglect of long term product development, so "Strategic Marketing" was born. The focus was shifted from knowing everything about the customer, to knowing the customer in a context which includes the competition, government policy and regulations, and the broader economic, social and political macro forces that shape the evolution of markets. In global marketing terms this means forging alliances (relationships) or developing networks, working closely with home country government officials and industry competitors to gain access to a target market. Also the marketing objective has changed from one of satisfying organisational objectives to one of "stakeholder" benefits - including employees, society, government and so on. Profit is still essential but not an end in itself. Strategic marketing according to Wensley (1982) has been defined as: "Initiating, negotiating and managing acceptable exchange relationships with key interest groups or constituencies, in the pursuit of sustainable competitive advantage within specific markets, on the basis of long run consumer, channel and other stakeholder franchise". 2 van 19 24/12/2006 12:01 Chapter 1: Introduction To Global Marketing http://www.fao.org/docrep/W5973E/w5973e02.htm#TopOfPage Whether one takes the definition of "marketing" or "strategic marketing", "marketing" must still be regarded as both a philosophy and a set of functional activities. As a philosophy embracing customer value (or satisfaction), planning and organising activities to meet individual and organisational objectives, marketing must be internalised by all members of an organisation, because without satisfied customers the organisation will eventually die. As a set of operational activities, marketing embraces selling, advertising, transporting, market research and product development activities to name but a few. It is important to note that marketing is not just a philosophy or one or some of the operational activities. It is both. In planning for marketing, the organisation has to basically decide what it is going to sell, to which target market and with what marketing mix (product, place, promotion, price and people). Although these tenents of marketing planning must apply anywhere, when marketing across national boundaries, the difference between domestic and international marketing lies almost entirely in the differences in national environments within which the global programme is conducted and the differences in the organisation and programmes of a firm operating simultaneously in different national markets. It is recognised that in the "postmodern" era of marketing, even the assumptions and long standing tenents of marketing like the concepts of "consumer needs", "consumer sovereignty", "target markets" and "product/market processes" are being challenged. The emphasis is towards the emergence of the "customising consumer", that is, the customer who takes elements of the market offerings and moulds a customised consumption experience out of these. Even further, post modernisim, posts that the consumer who is the consumed, the ultimate marketable image, is also becoming liberated from the sole role of a consumer and is becoming a producer. This reveals itself in the desire for the consumer to become part of the marketing process and to experience immersion into "thematic settings" rather than merely to encounter products. So in consuming food products for example, it becomes not just a case of satisfying hunger needs, but also can be rendered as an image - producing act. In the post modern market place the product does not project images, it fills images. This is true in some foodstuffs. The consumption of "designer water" or "slimming foods" is a statement of a self image, not just a product consuming act. Acceptance of postmodern marketing affects discussions of products, pricing, advertising, distribution and planning. However, given the fact that this textbook is primarily written with developing economies in mind, where the environmental conditions, consumer sophistication and systems are not such that allow a quantum leap to postmodernism, it is intended to mention the concept in passing. Further discussion on the topic is available in the accompanying list of readings. When organisations develop into global marketing organisations, they usually evolve into this from a relatively small export base. Some firms never get any further than the exporting stage. Marketing overseas can, therefore, be anywhere on a continuum of "foreign" to "global". It is well to note at this stage that the words "international", "multinational" or "global" are now rather outdated descriptions. In fact "global" has replaced the other terms to all intents and purposes. "Foreign" marketing means marketing in an environment different from the home base, it's basic form being "exporting". Over time, this may evolve into an operating market rather than a foreign market. One such example is the Preferential Trade Area (PTA) in Eastern and Southern Africa where involved countries can trade inter-regionally under certain common modalities. Another example is the Cold Storage Company of Zimbabwe. Case 1.1 Cold Storage Company Of Zimbabwe The Cold Storage Company (CSC) of Zimbabwe, evolved in 1995, out of the Cold Storage Commission. The latter, for many years, had been the parastatal (or nationalised company) 3 van 19 24/12/2006 12:01