Global marketing management

Q:- How do the concepts of ‘local marketing’

and global management’ affect the branding
strategies of companies in globalizing markets?
Executive summary
The paper below revolves around the central theme that a global organization insists on
global consistency in brand strategy execution by standardization to achieve greater
brand awareness and economies of scale (which ,as it happens , is true), while their local
markets in various countries are unique and require customized brand executions (which
is also true)and in this scuffle the sought after globalness never materializes .Thus the
paper debates and discusses over brand strategy execution which is the broader set of
challenges being faced by global companies in today’s scenario and how to strike a
balance between customization and standardization –a challenge for which there is no
‘one size fits all ‘ answer .We begin by defining and explaining the concepts of local
marketing , global management & branding strategies. We further analyse the issues
related to each and critically evaluate what affect they have on the organization branding
strategy with examples which is the central theme of the overall paper.

Local marketing:-
Buyers everywhere are the same-only different(pg 224,johannson, J.(2002) global
marketing: foreign entry).Local marketing in simple terms refers to customization and
the local marketing activities that a global company apply in a foreign country.

The meaning:-

Customization strategy in local marketing pays more attention to the needs of different
customers and tries to satisfy the varied demand. The firms that adopted this strategy tend
to provide dissimilar products with unlike price, advertisement, etc.

Focus:-
Customization focuses on the revenue side of the profit equation. It allows the firm to
tailor its products to meet the needs of customers in each market, although it may
sacrifice cost efficiencies. That is to say, by attending to the unique customer needs in
each market, the firm is able to charge higher prices and sell more good in each market.
Namely, it maximizes the revenue to make the profit rise.

Approach:-
To perform customization strategy, the firm tends to adopt the polycentric approach,
which is more costly because the international marketers attempt to customize the firm's
marketing mix in each market in order to meet the idiosyncratic needs of customers in
that market.
Influence on products:-
Extend to which products should be customized varies because of several factors. One
factor is the nature of the customer. Products for industrial costumers are more likely to
be standardized than consumer products. Another important factor are legal forces due to
which differences in the requirements of the features of a product might occur. Some
countries e. g. have detailed labeling requirements others have strict health standards.
During the development phase it is also important for companies to consider cultural
influences. The ingredients have to be adapted to the taste of the local consumer. Mothers
in Japan feed their babies with dried sardines and rice which seems curios to European
customers because they prefer mashed vegetables and fruits.Cultural values might also
affect product policy; e. g. Japanese customers are quality orientated due to the fact that a
car is more a status symbol than a transportation mode there.

Concepts:-
Consumer behaviour:-
Customers in different countries have same basic needs but their preferences vary
considerably.The reasons in variations lie in cultures , socio-economic and geographic
environments under which the products are used and consumed. The basic understanding
of consumer behaviour is in terms of what specifically they want ? and how and why
customers and competitors behave as they do? and is a KSF. The various factors apart
from culture affecting the buyer behaviour (see appendix,exhibit 1.1) in his purchasing
decisions are economics, politics and technology. Characteristics like age, personality
and marital status are internal determinants of behaviour. Local marketing efforts can
make the difference in terms of influencing the choices that consumers make.The aim is
to analyze and explain ‘what to look for in buyer’s behaviour’ and its decision making
process to buy a product. The preliminary steps involved in understanding consumer
behaviour are on the basis of:-
1.‘What product means to the consumer’?for eg diet coke , Is it quality or pride
association attached to it.
2.What does product do for the buyer ? is it quenching thirst or satisfaction .
3.How does it fit into the consumption and usage pattern of the buyer in terms –
heavy/light or daily/occasionally .
4.What are the core benefits of the product ? in terms less carbohydrates/no preservatives
etc. Core benefits represents products generic benefits not customer preferences .Core
benefits of a product differs between different markets for example an automobile is a
mode of transportation in USA while is a status symbol in some under-developed
countries . Products core benefits is dependent on local environment of the market in
other words have to be reformulated/localized or product/service itself have to be
localized. Hence core benefits of the products differ not because the people are different
but because the local infrastructure differs and has to be customized . Buyer decision
making process can be further analyzed five stage flowchart model (exhibit 1.2,
appendix) by Engel, Kollat and Blackwell(source pg 231 , johannson, J.(2002) global
marketing: foreign entry). Thus core benefits of the product differ i.e customization is
required and to satisfy the need will differ as well. Introduction of a new customized
product in a foreign market changes the ideal state and consumer is made aware of
deficiencies of the existing product and his aspiration levels are raised subsequently
creating a need .

Local segmentation:-
While selecting target segments it is important to select a segment with high demand
potential for firms products and access wheather global standardization and uniformity
will be feasible .The key segments should have following characteristics like they should
be identifiable, measurable, reachable, able to buy and willing to buy. The key factors
for micro-segmentation are:-
Economic:- Economic development/ GDP per capita matters as it is difficult to globalize
marketing mixes where distribution channels are different and communication media is
unavailable.
Demographics:-Help determine consumption levels but they do not help in influencing
choice between competing brands.
Culture:-Segments are defined in terms of culture as people care about their identities and
culture influences choice between competing substitutes more than actual consumption
levels.Eg:- British airways targets anglo-saxon business people around the world.
Benefits:- Is identified as group of people which are looking for the same benefits Eg:-
Bodyshop identified global segment which looks for green products in personal care.
Lifestyle:-Bases being what customer want, not simple what they need. Because it is not
tied to specific product category it is employed in conjunction with other segmentation
criteria.

Local product positioning:-

In a given market the firm has to ‘identify’ what ‘attributes' like taste and ‘benefits’ like
low carbohydrate content in case of diet coke the customers look for and how the product
measures up on these features against competition but with globalization factors like ‘cost
savings’ and ‘demand spillovers’ are also looked upon. Thus there are limits to how
much features and communications can be adapted to consumer preferences.

Advantages of customization:-
 Market share:-
By offering tailored products and by adapting consumer requirements
customization can lead to an increase in market share. Modern consumers are
more demanding and because of new technologies such as internet shopping
they have access to a large product choice. There is a tendency that the modern
consumer no longer accepts products which mostly fulfill his needs but demands
products which fully meets his requirements
 Reflects different conditions of product use
 Acknowledges local legal differences
 Accounts for differences in buyer behavior patterns
 Promotes local marketing initiatives.
 Accounts for other differences in individual markets
Disadvantages:-
 Increase marketing costs
 Inhibits centralized control of marketing
 Creates inefficiency in R&D
 Reduces economies of scale in production
 Ignores the trend toward a single global marketplace

Key Issues:-

 Customization is expensive:-
The more customized a product is the more complex is the production process , thus
more expensive it is. Therefore higher production costs forces to offer a product at a
higher price than competitors, which produce standardized products, and benefit from
economies of scale. Thus, customers which are not price sensitive will chose the product
which fulfills their needs best, but other customers may be more price sensitive and will
chose the cheaper product, even if it does not fulfill their requirements completely. Hence
a very precise market research is required to understand the demand patterns.

 Time consuming:-
Is time consuming than producing standardized products. So in time sensitive markets
customization may lead to a loss of competitive advantage.

 Over-customization:-
Sometimes firms tend to over customize their products: By doing so they create a lot of
very small market segments which will not be served in a cost effective manner.
A good example for over customizations can be found in the telecommunications
industry. Consumers are getting confused because of the large number of
different tariffs which are offered by telecommunication companies. Whenever a
company introduces a new tariff they create a new market segment. But the
more sophisticated/customized a new tariff is designed the fewer customers will
be attracted by this tariff. So the cost of implementing a new tariff may be higher
than the profit it generates afterwards. In general , it only makes sense to create a new
market segment if the marginal revenue of this segment is bigger than its marginal costs.
Customers appreciate choice but prefer a simple process of choosing the right product to
fulfill their needs. So if product is highly customized it gets very hard to compare
against competitors and customers may decide against the product simply because the
process of comparison becomes too complex and the decision is no longer based on facts
but on gut feeling.
Global management

Meaning:-
Global management refers to standardization strategy which indicates that the firm tends
to offer the similar products with same price and distribution to the consumers.

Focus:-
Standardization focuses on the cost side of the profit equation. It allows a firm to be able
to decrease the costs and makes the firm's profit increase. For example, soft drink of
Coca-Cola, due to it consists of same elements, thus using the machine make lots of it.
By doing so, the firm could minimize the cost.

Approach:-
The firm usually utilizes the geocentric approach. It allows the company to provide
essentially the same product or service in different markets and sell that product or
service globally.

Influence on products:-
Standardization influences products from two sides: the production process is influenced
as well as customer perception of a product. From a production point of view the costs
per piece will decrease because of economies of scale. It is far easier to efficiently
produce a standard product than a highly customized product which maybe needs to be
produced manually. There is no simple answer for companies if they should use a
standardized or adapted promotion strategy. A company must know about similarities and
differences of it's target groups and then decide which approach they follow

Advantages of standardization :-

 Economies of scale:-
A very important factor is cost efficiency in terms of economies of scale and to offer
product for a lower price than local competitors.

 Production procedures:-
By using standardized production procedures there is an increase in quality of products

 International standards:-
If a company has products which comply to international standards customers will
benefit from reduce transactions costs and improved interoperability. A good example for
sticking to international standards is the mobile telecommunication industry. The GSM
standard is used in over 200 different countries. So if a mobile phone does support the
GSM standard it will work in all countries supporting GSM.

 Meeting general requirements:-

Standardization also makes sense if it is not possible to meet all requirements
from all markets . As a compromise a standardized product equipped with a set of
standard features is developed.
 Reduces marketing costs.
 Facilitates centralized control of marketing.
 Promotes efficiency in R&D.
 Reflects the trend towards a single global market place.

Disadvantages :-
 Ignores different conditions of product use.
 Ignores local legal differences.
 Ignores differences in buyer behavior patterns.
 Inhibits local marketing initiatives.
 Ignores other differences in individual markets

Key Issues:-

 Positioning:-
With a highly standardized product it is hard to get a strong market position because high
standardization implies low uniqueness which further leads to low degree of customer
loyalty.

 Complexity in the product:-

If a company plans to introduce a highly standardized product to different markets it
should fulfill the needs and requirements of all markets. By doing so the product becomes
very complicated and contains a lot of features which are only needed by a few customers
and so produce an unneeded complexity in the product. This is a critical issue because
simplicity of product has become a KSF for example vodafone mobile phone. This phone
was developed because customers got confused by all the features a regular
mobile phone offers.

 Trade barriers:-
If a key component which is used inside highly standardized product becomes subject to
legal regulations or is forbidden within some countries huge market potential will be lost
and it will be very difficult to reenter these markets, because the whole production
procedure needs to be changed.

 Competition:-
Another problem occurs if a company experiences strong competition in foreign
markets. Local competitors do have a better knowledge about the local market
and so their products will match the needs and requirements much better than a
product which is designed for global distribution.

Argument:-
Is one better than the other?

Analysis and evaluation:-

To compare both marketing strategies of standardization and customization, obviously, it
is difficult to determine which one is better than other because the different approach is
suitable with different environment. The only one strategy that is better refers to be able
to improve the business and is influenced by many elements. The factors that influences
the firm adopting either standardization strategy or customization strategy are:-

A. Product factor:-
The degree of standardization or customization a firm adopts mainly depends on the
product type. Generally speaking, industrial products are more likely to be standardized
than consumer products. Spinners for example, the factory that needs these machines
must provide a reasonable environment to install the spinners. Therefore, it is not
necessary to invest capital to modify the frame. Another general rule refers to the product
that is closer to the body will more likely need to be customized. Consider food, for
example, McDonald's provides the pork and beer in its German restaurants, offers pork,
beef, chicken in its China restaurants, but only beef, chicken in its Malaysia restaurants.

B. Culture influence:-
Culture is defined as an integrated system of learned behavior patterns that are
characteristic of the members of any given society. (Czinkota, Ronkainen & Moffett,
1999, p35). International firms often must modify their product to meet the culture needs
of local markets.If culture shock exists between home country and host countries,
usually, the firm should customize their products in order to fit the specific requirement.

C. Legal system:-
Local marketing activities are heavily influenced by political and legal systems. (Fatehi,
1996, p433). Especially, countries often impose special requirement and health standards
on consumer products that firms, both foreign and domestic must follow strictly.
Therefore, under this situation, the firms impossibly standardize their goods but should
customize their products in order to meet these consumer protection regulations. For
example, U. S. A., China, and Russia all force the motor mobile running along the right
way. Therefore, international makers must install the steering wheel in the left side of the
car. In contrary, Japan and Australia laws only allow driving vehicle along the left way;
thus, the steering wheel only can be installed in the right side of the car. That is to say,
the firms should customize their products according to the host countries' law and
regulations, so that the firms could facilitate their international businesses.

Recommendations on the branding strategy:-

In practice, most firms avoid the extremes of either approach. The firm attempts to adopt
both marketing strategies of customization and standardization although combining them
is very difficult. The firm may adopt one branding strategy for one element of the
marketing mix and another for a second element. Indeed, the firm often standardizes
some elements of the marketing mix such as product design, brand name, so that the firm
could capture manufacturing economies of scale. Following, the local managers
implement customized elements of the marketing mix that including promotion and
distribution in order to meet specific local market needs.

Appendix

Exhibit 1.1

Major factors influencin

buyer behaviou
External Models of man
Influences
Culture Buyer
Economics Characteristics
Technology
Politics Buyer decision
process

Local marketin
effort
Exhibit 1.2

Consumer decision p

Evaluation
Problem Search
of Choic
Exhibit 1.3 recognition alternatives
alternatives

Targeting strateg
Segmentation and positioning fo
brands Local market segment
Universal Unique

Uniform Mobile
Nike
phones
Positioning

Adapted Volvo Levi’s

References:-

Johannson,j.(2002) global marketing:foreign entry, local marketing and global

management, Mcgraw hill.

Czinkota, M. R., Ronkainen, I. A. & Moffett, M. H., (1999), International Business,

5th ed, The Dryden Press, U. S. A.

Fatehi, K., (1996), International Management, Prentice-Hall International, Inc., U.

S. A.

Keegan, W. J., (2002), Global Marketing Management, 7th ed, Prentice-Hall

International, Inc, U. S. A.

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Identifying the determinants of internal marketing orientation ,EJM , vol 37, no-9
2003 pp 1205-1220.

Market segmentation by using consumer lifestyle dimension and

ethnocentrism,EJM, vol 33, no5/6 1999, pp 470-487