Reading 11:

Responding to the challenges of global markets

Globalization is no longer an abstraction but a stark reality

Firms face in wide range the pressures of global competition at home as well as in
international markets. One key challenge is working in changing or unstable
environment. This is need for new approaches in how the organization should respond
to changing environmental conditions.
Such as; Changes in technology, structural changes impacting industry, the emergence
of new sources of competition, and increased environmental concerns.
Key importance is the need to remain responsive to local markets, at the same time
achieving global efficiency through integrating and coordinating operations
across world markets and allowing for the transfer of learning from operations
in one part of the world to another.
Effective strategy moves were stranded in assessment of the firms current
competitive position and identification of the skills and capabilities gives the most
influence in the light of future market developments.

Firm should 1) select suitable area to compete, 2) determine how to influence core
competencies in international markets, 3) developing products or services to meet
different customers tastes and preferences and 4) improve integration and
coordination across national markets.

First, the four major challenges (change, complexity, competition and conscience
), and the implications for firms in each stage of involvement in international
markets are discussed.
Then, three key management tools for dealing with these challenges are examined
information systems technology, administrative structures, and resource deployment,
and their use in each of the three phases of involvement are outlined.

Challenges facing global markets

Involvement in global markets presents the firm with a number of challenges. There
are four interrelated challenges of global marketing strategy change, complexity,
competition and conscience .

There are three stages of international market development: (see table 1 page
148)

Phase1 - Initial market entry ( local market )

Phase2 - Local market expansion ( international market )
Phase3 - global rationalization ( global market )

Firm will face four challenges while entering in

global market:
1. Change: marketing strategy must take into
account new economic, technology, political and
social changes
2. Complexity: in managing operations differs based
upon the geographical areas
3. Competition: increasing intensity and speed of
competition affects the global market
competitiveness
4. Conscience: awareness of social responsibility and
ethical issue is fourth challenge. Such as
environmental protection and conservation, or
consumer rights

1- Change
Rapid change dominates all aspects of operations in global markets. Such as;
technological evolution, knowledge oldness and the intensity of competition
increasing and unexpected events are intensely changing the political and economic
context.
Technological change concentrate product development, production processes, and
experience rapidly out-dated and contribute to increasing investment costs as well as
heightened competitive pressures with minimized introduction stage in product life
cycle.
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Today, established models for predicting change no longer work in many cases due
to the discontinuity / of change. However, market trends and
growth in a developing country could be predicted on the basis of trends in more
advanced countries ten years earlier.
At the same time, as customers become more open to new ideas and patterns of
behaviour through the new global media, the distribution of new products and
innovation takes place and spread more rapidly.(Such as; fashion emerge in one
country than it spreads rapidly to another)

Coping with change

The consequences change rapid pace differs depending on the stage of globalization.
Firms in PHASE 1international market entry

Scope of international activity is confined ( )or narrowed to a few

markets.
less affected by the uncertainty produced by change
can pace their involvement relative to the anticipated rate of change
selectively avoid high levels of uncertainty market (Latin American
markets)

Firms in the PHASE 2 of globalizationlocal market expansion

Cope with variation in change in Extensive international operations (some

markets will be changing rapidly while others will be more stable)

discontinuous rates of change result in multi-directional pulls as the firm

attempts

The difficulties of change will be worsened by the number of markets in

which the firm is involved.

Firms in PHASE 3 of globalizationglobal rationalization

Widespread change which impacts all aspects of its business throughout

markets worldwide.
Not only must the firm cope with change on a market by market basis, but it
must also deal with the inter-linkages between markets.

Rapid change has both positive (+) and negative (-) aspects.
(+) For firms able to adapt rapidly to the new environment, there are uncountable
opportunities.
(-) frim unable to adapt will see their market share reduce.
Firms in the initial entry phase have choosing markets that are suited to their core
competencies.

2- Complexity

Complexity in the global environment is a product of contextual factors such as

technological advances, diverse social and economic change, and political
conflict.

Challenge is complexity of managing international operation. Technology

advances enable management to coordinate and control operations on geographic
scope. (Such advances add further complexity).

If firm move to international market, the threats of complexity is increased as

there should be link between corporate headquarter and local management. Also
the coordination and control between functions in the firm raise the threat of
complexity, as the transfer ideas, information and experience in global level will
be less effective than domestic level.

Customer markets become more spread; establishment of linkages with

customers and suppliers becomes increasing critical in order to coordinate
supplying and servicing these markets rapidly and efficiently, and to compete
effectively in global markets.

Sometimes, firm should make strategic alliance with other firms, to raise more
opportunities, skills and resources needed to implement strategy.

Networks are formed by far partners (suppliers, customers, and competitors)

sharing costs, skills, access, and operations in global markets through electronic
links.

Firms in PHASE 1,

Firms face relatively simple operating environments

Decision making is unidirectional coming from the domestic market base.
Control and coordination for local firms are easier, decision making are taking in
domestic base.

Firms in PHASE 2

It focus their efforts on developing products and services to suit tastes in local
markets

They begin to encounter a greater degree of complexity.

Control and coordination become more problematic in international markets,

organizations structure become more complex, decision making are taking in
parallel tracks.

Firms in PHASE 3

Firms with widespread international operations must develop strategy and

doing business in highly complex environments.
Outsourcing of functions and establishment of relational networks covers the
way for the effective organization.
Business functions become interlinked and interact to allow for best
control and coordination of activities on a global basis.

3- Competition
Increasing intensity of competition in global markets constitutes yet another
challenge facing companies at all stages of involvement in international markets. As
markets open up, and become more integrated, the pace of change accelerates,
technology shrinks distances between markets and reduces the scale advantages of
large firms, new sources of competition emerge, and competitive pressures mount at
all levels of the organization.
More firms in global market raise new threats and make competition intensity. Some
countries like China, its firms are greater awareness of international market
opportunity because the domestic markets are open up to foreign competition.
However, success in global markets depends on knowledge accumulation and
deployment. Firms that win in the market place will be those that can use information
to their advantage to guide the delivery of superior value.
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Firms in PHASE 1

It dealing with established competitors that are known quantities, and

frequently compete on a single dimension, e.g., cost, leadership.

Firms in PHASE 2

In International level, new competitors may enter the market easily; the react
of established firms may be danger. Also competitors can compete in both
differentiate of products or being low-cost leadership.

Firms in PHASE3:

the intense competition of global market are much more harder than the
international level who encounter competitors of all types and attempt to block
the firms expansion into new markets or market segments.

4- Conscience
The fourth challenge relates to the firms moral and social responsibilities in the
global marketplace.
Companies have become increasingly aware of the need to take measures to limit
destruction of the environment to be environmentally friendly. Through such
activities (limit pollution, limited emission of gases and other toxic materials, Use of
recyclable packaging, limit waste of resources and should be designed to be free of
environmentally harmful).
Another area of social responsibility Such as environmental protection and
conservation, or consumer rights, require that the firm develop a social conscience.
with customer education and general well-being. Some customers in global market are
poorly educated and dont understand how to use the products, firm should develop
easy usage instructions and increase support staff to help customers how to use it.

Social responsibility is the managerial obligation to take action to protect and

improve both the welfare of society as a whole and the interest of organizations. The
main concepts of obligation, welfare, and self-interest of obligations

Firms in PHASE 1
It is adopt narrow approach to social responsibility, applying the standard of their
home market in other countries.
Firms in PHASE 2
It faced with diverse standards of ethical and social responsibilities behavior may be
different in different countries.

Firms in PHASE 3
In global scope, taking the social responsibilities is much wider to be handled in
different markets. Decisions that impact the environment, workers, and consumer
safety and well-being in different markets and parts of the world are also becoming
more inter-twined.