CHALLENGES IN GLOBAL MARKETING

L.Raja Rajeswari., Assistant Professor,DOBA, Arul Anandar College, Karumathur M

adurai District, Tamilnadu
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 fac
e the pressures of global competition at home as well as in international market
s. Choosing not to participate in global markets is no longer an option. All fir
ms, 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 conc
erned with learning about international markets, selecting an appropriate arena
to compete, and determining how to leverage core competencies in international m
arkets. Once in international markets, firms have to build their position in the
se markets, establishing a strong local presence by developing new products and
adapting to local tastes and preferences. As the firm expands internationally, i
t will need to move away from country-centered strategies and improve integratio
n and coordination across national markets, leveraging its competencies and skil
ls to develop a leadership position.
Keywords: Global marketing, Product strategy, Pricing strategy, product position
ing, Advertising, Sales and Distribution

Introduction
Transnational corporations serve different markets around the world. Their globa
l expansion may be driven by various factors. These include saturated and intens
ely competitive domestic markets, diversification of risk on a geographical basi
s, opportunity to realise economies of scale and scope, entry of competitors int
o overseas markets, the need to follow customers going abroad and the desire to
compete in a market with sophisticated consumer tastes. In different markets, cu
stomer requirements may vary. The temptation to customise for each market, has t
o be tempered by the need to keep costs down through standardisation. A truly gl
obal marketing strategy would aim to apply uniformly some elements of the market
ing mix across the world, while customising others. As discussed before, the log
ical approach would be to identify and analyse the various value chain activitie
s that make up the marketing function and decide which of these must be performe
d on a global basis and which localised.
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 labelling
• 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 invo
lve a great degree of customization.
Phases:
A global marketing strategy typically evolves over a period of time.
• In the initial phase, MNC is to decide which market(s) to enter.
• Choosing the mode of entry.
• To expand across several markets, simultaneously or one at a time.
• With growing overseas presence, MNCs have to resolve issues such as customizatio
n of the marketing mix for local markets and in some cases, development of compl
etely new products.
• In the final phase, global companies examine their product portfolio across coun
tries, strive for higher levels of coordination and integration and attempt to s
trike the right balance between scale efficiencies and local customization.
Entering new markets
While choosing new markets, MNCs need to consider several macro and micro factor
s.
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 are 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 greenfield projects.
1. Contract manufacturing:
Contract manufacturing avoids the need for heavy investm
ents 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 kee
p pace with demand. It may also be difficult to maintain the desired quality lev
els.
2. Franchising:
Franchising, like contract manufacturing involves limited finan
cial investment, but needs fairly intensive training to orient the franchisees.
Quality control is again an area of concern in franchising.
3. Licensing:
Licensing offers advantages similar to those in the case of cont
ract manufacturing and franchising, it offers limited returns, builds up a futur
e competitor and restricts future market development. Quality control is again a
source of worry in licensing.

4. Joint Venture
A joint venture helps in spreading risk, minimises capital requi
rements and provides quick access to expertise and contacts in local markets. Ho
wever, most joint ventures lead to some form of conflict between partners. If th
e conflicts are not properly resolved, they tend to collapse.
5. Acquisition:
An acquisition gives quick access to distribution channels, mana
gement talent and established brand names. However, the acquired company should
have a strategic fit with the acquiring company and the integration of the two c
ompanies, especially when there are major cultural differences, needs to be care
fully 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 greenfield projects usually incorporate state of the art technology an
d features which maximise efficiency and flexibility.
Entrance Strategies:
MNCs have to choose between simultaneous and incremental/ sequential entry into
different markets. Simultaneous entry involves high risk and high return. It ena
bles a firm to build learning curve advantages quickly and pre-empt competitors.
On the other hand, this strategy consumes more resources, needs strong manageri
al capabilities and is inherently more risky. In contrast, incremental entry inv
olves lesser risk, lesser resources and a steady and systematic process of gaini
ng international experience. The main drawbacks with this method are that compet
itors can move in during the intervening period and scale economies may be diffi
cult to achieve.
Timing is another important issue while entering new markets. An early e
ntrant can develop a strong customer franchise, exploit the most profitable segm
ents and establish formidable barriers to entry. On the other hand, an early ent
rant may have to invest heavily to stimulate demand. Early entrants may also hav
e to invest heavily in distribution infrastructure, especially in developing eco
nomies. Competitors may come in later and be able to market their wares incurrin
g relatively low promotional expenditure.
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 t
ransfer of knowledge.
The global head of market research has the important job of ensu
ring that each country is aware of not only the research activities it is carryi
ng out but also of the activities being carried out by other subsidiaries. The r
esearch design is more complicated due to cultural differences across regions. S
ome elements such as the sample to population ratio and the information to be co
llected for each product category can be standardised. Notwithstanding these dif
ficulties, opportunities to globalise should not be overlooked. For example, clu
sters of countries might need the same questionnaire.
Product Development
Product development is a critical activity for all MNCs. A globa
lly standardised product can be made efficiently and priced low but pleasing few
customers. On the other hand, excessive customisation for different markets acr
oss the world may be too expensive. Thus, a standard core can be developed, arou
nd which customised features can be built to suit the requirements of different
segments.
Japanese companies such as Sony and Matsushita have been quite successfu
l in marketing standardised versions of their consumer electronics products. The
se companies, had limited resources during their early days of globalisation, an
d cleverly identified features, which were universally popular among customers a
cross the world. Global economies of scale helped them to price their products c
ompetitively. At the same time, they laid great emphasis on quality. Consequentl
y, their products, even without frills, began to appeal to customers. Many of So
ny’s consumer electronics products are highly standardised except for components t
hat have to be designed according to national electrical standards. This is also
the case with Matsushita.
In the case of industrial products, standardisation may become unavoidab
le if customers coordinate globally their purchases. This seems to be true in th
e PC industry. Companies such as Dell are taking full advantage of this trend, w
hich is likely to strengthen further, as companies increasingly feel the need to
integrate corporate information systems across their global network. MNCs often
choose to replicate the computer system in their headquarters across their worl
dwide network to minimise training and software development costs.
In industries characterised by high product development costs (as in the
pharmaceuticals industry) and great risk of obsolescence(as in the case of fash
ion goods), there is a great motivation for developing globally standardised pro
ducts and services. By serving large markets, costs can be quickly recovered. Ev
en in the food industry, where tastes are largely local, companies are looking f
or opportunities to standardise as developing different products for individual
markets can be prohibitively expensive. Though identical offerings cannot be ma
de in different markets, companies are developing a core product with minor cust
omisation, (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 produ
ct developed on the basis of some ‘average’ preference may well end up pleasing no o
ne.
Some products tend to be more global than the others. These include came
ras, watches, pocket calculators, premium fashion goods and luxury automobiles.
In the case of many industrial products, since purchase decisions are normally t
aken on the basis of performance characteristics, considerable scope exists for
global standardisation. However, even here, local customisation may be required
in engineering, installation, sales, service and financing schemes. In the same
industry, different segments may have different characteristics.
Within a given product, some features lend themselves to global standard
isation. Consider a product like cars. Traditionally, car manufacturers have de
veloped hundreds of models to meet the needs of different markets without explor
ing the scope for standardisation. This has resulted in unused capacities and in
efficiencies. Faced with excess capacity, car manufacturers have been looking fo
r ways to cut costs. One approach has been to build models of different shapes f
or different markets around standardised platforms. The idea here is that the ba
sic functionality of a car can be extended globally while features and shape are
customised to appeal to varying consumer tastes in different parts of the world
. Ford, Honda Toyota and Volkswagen have made a lot of progress in standardising
their platforms.
Product positioning
International positioning is far more complicated than positioning in the domest
ic market. The degree and nature of segmentation can vary across countries. Bran
ds may not be perceived the same way in different regions. The importance of pro
duct attributes may vary from market to market. A MNC’s ability to convey an ident
ical positioning across countries may also be constrained by the different degre
es of sophistication in the local marketing infrastructure. Well-entrenched loca
l brands can also cause problems by creating competitive pressures that demand a
different positioning. Global communication media and frequent travel between c
ountries are creating a degree of homogeneity in consumer tastes. In the case o
f industrial products, organizational linkages created by professional organisat
ions are accentuating this trend.
In general, a global positioning is recommended when similar customer se
gments exist across countries, similar means of reaching such segments are avail
able, the product is evaluated in a similar way by different segments, and compe
titive forces are comparable. On the other hand, differing usage patterns, buyin
g motives and competitive pressures across countries result in the need for posi
tioning products uniquely to suit the needs of individual markets.
Global positioning ensures that money is spent efficiently on building t
he same set of attributes and features into products. Global positioning can als
o reduce advertising costs. However, uniform positioning without taking into acc
ount the sensitivities of local markets can result in product failures.
The choice of brand name is an important issue in global marketing. Com
panies such as Coca-Cola have used the same brand name around the world for thei
r flagship products. Others have used different names to convey the same meanin
g in different languages across the world.
Advertising
In general, advertising is more difficult to standardise, than product developme
nt. Due to language differences, chances of being misunderstood are great, espec
ially in the case of idiomatic expressions. Besides, cultural differences can re
sult in different interpretations of the same advertisement in different countri
es. Differences in media infrastructure also play an important role. Differences
in government regulations also stand in the way of developing a standardised ap
proach to advertising. In Germany, comparative advertising is not permitted. Com
mercials showing children eating snacks are not allowed in Italy. Many countries
impose restrictions on the advertising of alcohol and cigarettes. Due to all th
ese factors, advertising copy content may have to be modified suitably. Yet, som
e advertising activities can be rationalised, to do away with inefficiencies res
ulting from excessive customisation.
Consider the choice of advertising agency. A totally decentralised appro
ach would mean selection of different agencies for different countries. While lo
cal 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. Nestle once employed over a hundred different agencies. As the comp
any looked for global branding opportunities, coordinating the activities of mul
tiple agencies became a major problem.
Pricing
When it comes to pricing, both global and local approaches can be used, dependin
g on the specific situation. Sometimes, global pricing becomes difficult because
of different levels of competition in different markets. A point which MNCs sho
uld appreciate is that multiplying the home country price by exchange rate to ar
rive at the price in the overseas market may not always be appropriate. Very of
ten, 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 tw
o currencies. The Indian rupee trades at about Rs. 46 to the dollar but based o
n 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 Thir
d World countries. Yet opportunities to standardise should not be ignored.
International distribution has to take into account local factors. Strategies ca
n vary from country to country owing to different buying habits. In some societi
es, ‘mom and pop’ stores proliferate, while in others large departmental stores carr
ying several items under one roof are popular. In some countries, intermediaries
handle credit sales, while in others, cash transactions are the norm. Even with
in developed countries, significant differences exist in the channels of distrib
ution. 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 standard
isation and local customisation. In their quest to maximise local responsivenes
s, companies should not overlook opportunities to standardise and cut costs. On
the other hand, an excessive emphasis on generating efficiencies through a stan
dard marketing mix may result in the loss of flexibility. The challenge for glo
bal marketers is to identify the features which can be standardised and build a
core product. Then customised offerings can be designed around the core product
for different markets. In real life, striking the right balance between standa
rdisation and customisation can be extremely challenging.

A Framework for Global Marketing

Dominance of Local Considerations Dominance of Global Cons
iderations
Pricing Discounts, Responding to seasonal trends Policy guidelines for re
gional trading blocs common markets
Policy guidelines for the worldwide system
Distribution Channel selection, Schemes & Discounts Internet initiatives, wa
rehousing
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

Understanding overseas markets: The 12 C Analysis Model

Phillips, Doole and Lowe have suggested a model to help companies identify the i
nformation to be collected while entering an overseas market. The 12 Cs of this
model are:
Country: General information, environmental factors
Choices: Competition, strengths and weaknesses of competitors
Concentration: Structure of market segments, geographical spread.
Culture: Major characteristics, consumer behaviour, decision making style
.
Consumption: Existing and future demand, growth potential.
Capacity to pay: Pricing, prevailing payment terms.
Currency: Presence of exchange controls, degree of convertibility.
Channels: General behaviour, distribution costs and existing distr
ibution
infrastructure.
Commitment: Market access, tariff and non-tariff barriers.
Communication: Existing media infrastructure, commonly used promotional te
chniques.
Contractual obligations: Business practices, insurance, legal obligations
Caveats: Special precautions to be taken

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 Heineman
n
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, Dryde
n Press, 1994
7. "International Marketing Review" MCB Publications, UK.