Challenges in Global Marketing


By

L. RajaRajeswari
Asst. Professor
Department of Business Administration
Arul Anandar College
Karumathur–625514, Madurai Dist
 


Abstract:

Globalization is no longer an abstraction but a stark reality that virtually all firms, large and a small, face. Firms that want to survive in the 21st century must confront this all encompassing force that pervades every aspect of business. In a wide range of industries from automobiles to food and clothing, firms face the pressures of global competition at home as well as in international markets. Choosing not to participate in global markets is no longer an option. All firms, regardless of their size, have to craft strategies in the broader context of world markets to anticipate, respond and adapt to the changing configuration of these markets. Firms initially entering international markets will be more concerned with learning about international markets, selecting an appropriate arena to compete, and determining how to leverage core competencies in international markets. Once in international markets, firms have to build their position in these markets, establishing a strong local presence by developing new products and adapting to local tastes and preferences. As the firm expands internationally, it will need to move away from country-centred strategies and improve integration and coordination across national markets, leveraging its competencies and skills to develop a leadership position.

Keywords: Global marketing, Product strategy, Pricing strategy, product positioning, Advertising, Sales and Distribution

CHALLENGES IN GLOBAL MARKETING

Introduction

Transnational corporations serve different markets around the world. Their global expansion may be driven by various factors. These include saturated and intensely competitive domestic markets, diversification of risk on a geographical basis, opportunity to realize economies of scale and scope, entry of competitors into overseas markets, the need to follow customers going abroad and the desire to compete in a market with sophisticated consumer tastes. In different markets, customer requirements may vary. The temptation to customize for each market has to be tempered by the need to keep costs down through standardization. A truly global marketing strategy would aim to apply uniformly some elements of the marketing mix across the world, while customizing others.

Meaning of global marketing:

Global marketing refers to the marketing activities that direct the flow of goods and services to the customers or users in more than one nation.

Key issues in global marketing:

Typically, marketing includes the following activities: -

    • Market research.
    • Concept & idea generation.
    • Product design.
    • Prototype development & test marketing
    • Positioning
    • Choice of brand name
    • Selection of packaging material, size and labeling
    • Choice of advertising agency
    • Development of advertisement copy
    • Execution of advertisements
    • Recruitment and posting of sales force
    • Pricing
    • Sales Promotion
    • Selection and management of distribution channels.

Some of these activities are agreeable to a uniform global approach. Others involve a great degree of customization.

Phases:

A global marketing strategy typically evolves over a period of time.

    • Decision to enter the market
    • The mode of entry.
    • To expand across several markets, simultaneously or one at a time.
    • Customization of the marketing mix or development of completely new products.
    • In the final phase, global companies examine their product portfolio across countries, strive for higher levels of coordination and integration and attempt to strike the right balance between scale efficiencies and local customization.

Entering new markets

While choosing new markets, MNCs need to consider several macro and micro factors.

Macro issues:

      • Political/regulatory environment,
      • Financial/economic environment,
      • Socio cultural issues and technological infrastructure.

Micro issues:

      • Competitive considerations and
      • Local infrastructure such as transportation & logistics network
      • Availability of mass media for advertising is important.
      •  

How to enter:

While entering new markets, an MNC has various options. These include

    • Contract manufacturing,
    • Franchising,
    • Licensing,
    • Joint ventures,
    • Acquisitions and
    • Full fledged green field projects.

1. Contract manufacturing:

Contract manufacturing avoids the need for heavy investments and facilitates a quick entry with a lot of flexibility. On the other hand, there can be supply bottlenecks in such arrangements and production may not keep pace with demand. It may also be difficult to maintain the desired quality levels.

2. Franchising:

Franchising, like contract manufacturing involves limited financial investment, but needs fairly intensive training to orient the franchisees.  Quality control is again an area of concern in franchising.

3. Licensing:

Licensing is defined as "the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor". Coca Cola is an excellent example of licensing

4. Joint Venture

Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation". A joint venture helps in spreading risk, minimizes capital requirements and provides quick access to expertise and contacts in local markets.

5. Acquisition:

An acquisition gives quick access to distribution channels, management talent and established brand names. However, the acquired company should have a strategic fit with the acquiring company and the integration of the two companies, especially when there are major cultural differences, needs to be carefully managed.

6. Greenfield projects:

Greenfield projects are time consuming and delay market access. They also involve big investments. On the other hand, the delay may be worth its while as green field projects usually incorporate state of the art technology and features which maximize efficiency and flexibility. 

Market Research

Consider another important marketing activity, market research. For a transnational corporation, this activity is far more complicated than for a domestic company. Global coordination is necessary to facilitate sharing and transfer of knowledge.

The global head of market research has the important job of ensuring that each country is aware of not only the research activities it is carrying out but also of the activities being carried out by other subsidiaries. The research design is more complicated due to cultural differences across regions. Some elements such as the sample to population ratio and the information to be collected for each product category can be standardized.

Product Development

Product development is a critical activity for all MNCs. A globally standardized product can be made efficiently and priced low but pleasing few customers. On the other hand, excessive customization for different markets across the world may be too expensive. Thus, a standard core can be developed, around which customized features can be built to suit the requirements of different segments.

In the case of industrial products, standardization may become unavoidable if customers coordinate globally their purchases. In industries characterized by high product development costs (as in the pharmaceuticals industry) and great risk of obsolescence (as in the case of fashion goods), there is a great motivation for developing globally standardized products and services. By serving large markets, costs can be quickly recovered. Even in the food industry, where tastes are largely local, companies are looking for opportunities to standardize as developing different products for individual markets can be prohibitively expensive.  Though identical offerings cannot be made in different markets, companies are developing a core product with minor customization, (like a different blend of coffee), to appeal to local tastes.

In their enthusiasm to reduce costs by offering standard products, MNCs need to avoid some pitfalls. Customer preferences vary across countries. A product developed on the basis of some 'average' preference may well end up pleasing no one.

Some products tend to be more global than the others. These include cameras, watches, pocket calculators, premium fashion goods and luxury automobiles. In the case of many industrial products, since purchase decisions are normally taken on the basis of performance characteristics, considerable scope exists for global standardization. However, even here, local customization may be required in engineering, installation, sales, service and financing schemes. In the same industry, different segments may have different characteristics. 

Product positioning

International positioning is far more complicated than positioning in the domestic market. The degree and nature of segmentation can vary across countries. Brands may not be perceived the same way in different regions. The importance of product attributes may vary from market to market.

In general, a global positioning is recommended when different usage patterns, buying motives and competitive pressures across countries result in the need for positioning products uniquely to suit the needs of individual markets.

Global positioning ensures that money is spent efficiently on building the same set of attributes and features into products. Global positioning can also reduce advertising costs. However, uniform positioning without taking into account the sensitivities of local markets can result in product failures.

Brand Name:

The choice of brand name is an important issue in global marketing.  Companies such as Coca-Cola have used the same brand name around the world for their flagship products.  Others have used different names to convey the same meaning in different languages across the world.

Advertising

In general, advertising is more difficult to standardize, than product development. Due to language differences, chances of being misunderstood are great, especially in the case of idiomatic expressions. Besides, cultural differences can result in different interpretations of the same advertisement in different countries. Differences in media infrastructure also play an important role. Differences in government regulations also stand in the way of developing a standardized approach to advertising.

Consider the choice of advertising agency. A totally decentralized approach would mean selection of different agencies for different countries. While local agencies are often in the best position to understand the needs of the local markets, no global company can afford a totally uncoordinated approach towards advertising.

Pricing

When it comes to pricing, both global and local approaches can be used, depending on the specific situation. Sometimes, global pricing becomes difficult because of different levels of competition in different markets. A point which MNCs should appreciate is that multiplying the home country price by exchange rate to arrive at the price in the overseas market may not always be appropriate.  Very often, there is a significant difference between the market exchange rate and the exchange rate calculated on the basis of the relative purchasing power of the two currencies.  The Indian rupee trades at about Rs. 46 to the dollar but based on relative purchasing power, the rate is closer to Rs. 10.

Sales & Distribution

Approaches to personal selling can vary from country to country. In some markets, door to door selling is very popular while in others, people prefer to shop at retail stores. Telemarketing is quite popular in the US but not so in many Third World countries. Yet opportunities to standardize should not be ignored.

International distribution has to take into account local factors. Strategies can vary from country to country owing to different buying habits. In some societies, 'mom and pop' stores proliferate, while in others large departmental stores carrying several items under one roof are popular. In some countries, intermediaries handle credit sales, while in others, cash transactions are the norm. Even within developed countries, significant differences exist in the channels of distribution.  The rapid emergence of the Internet is however changing the old paradigm.  Many companies are seriously looking at the potential of the Net as a global distribution vehicle, an excellent example being Amazon.com.

Conclusion

Global marketing strategies have to respond to the twin needs of global standardization and local customization.  In their quest to maximize local responsiveness, companies should not overlook opportunities to standardize and cut costs.  On the other hand, an excessive emphasis on generating efficiencies through a standard marketing mix may result in the loss of flexibility.  The challenge for global marketers is to identify the features which can be standardized and build a core product.  Then customized offerings can be designed around the core product for different markets.  In real life, striking the right balance between standardization and customization can be extremely challenging.

A Framework for Global Marketing

 

Dominance of Local Considerations

 

Dominance of Global Considerations

Pricing

Discounts, Responding to seasonal trends

Policy guidelines for regional trading blocs  common markets

Policy guidelines for the worldwide system

Distribution

Channel selection, Schemes & Discounts

Internet initiatives, warehousing

Policy guidelines

Advertising & Positioning

Execution,
Choice of sponsor
Choice of Media

Theme,
Choice of brand name

Choice of agency, Positioning Management of brand equity

Product Development

Local Customization

Module building

Design & Prototype development

Market Research

Questionnaire Administration

Questionnaire Design

Identification of Information to be collected


References:

1. Keegan, W.J. 1989, "Global Marketing Management", 4th ed., Prentice Hall International Edition.

2. Terpstra, V.(1987) "International Marketing", 4th ed. Dryden Press

3.  Bradley F. (1991) "International Marketing Strategy", Prentice Hall

4. Paliwoda S. (1993) "International Marketing Strategy "2 Edition Heinemann

5. Philip C, Lowe R. and Doole I. (1994) "International Marketing Strategy; Analysis", Butterworth Heinemann.

6. Terptsra V. and Sarathy R. "International Marketing", 6th Edition, Dryden Press, 1994

7. "International Marketing Review" MCB Publications, UK.
 


L. RajaRajeswari
Asst. Professor
Department of Business Administration
Arul Anandar College
Karumathur–625514, Madurai Dist
 

Source: E-mail October 11, 2010

          

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