Chapter 22 - Marketing Strategy
Learning Objectives: To understand pan-global and global-localization approaches to international marketing
International Markets are becoming increasingly important for businesses. Globalization is a strong force pushing towards that direction:
Globalization - the growing trend towards worldwide markets in products, labor, capital unrestricted by barriers:
The process of globalization has been rapidly accelerating for several reasons:
Rapid growth of multinational companies;
Expansion of free international trade cutting down tariffs and quotas;
And...
Free-trade agreements (a.k.a. free trade areas / blocs):
In summary, there has been an increase in international trade (lower trade barriers), greater freedom of capital due to the worldwide presence of multinational businesses, and the facilitated movement of workers between countries
There are many potential benefits of globalization:
Potential higher profits (new markets, higher sales, economies of scale;
More competition = increased efficiency = increased competitiveness;
Chance for development of global brands;
More locations for operations (lower costs, access to local markets, etc.);
Less restrictions on foreign acquisitions (more options for M&A);
As always, there are also some drawbacks of globalization:
Competition
Local differences leading to fails;
Diseconomies of scale (transportation, communication);
Risk of foreign takeovers;
Anti-globalization pressure groups (bad publicity);
Less influence from government in business decisions (e.g. relocations).
It is a fact: globalization improved communications and transportation, freed international trade, and facilitated companies to take on International Marketing (selling products in markets other than the business' original market).
And it's obvious why business want to sell in other countries:
Saturated home markets and severe competition;
Opportunity of increased profits due to high sales and low costs;
Spreading risks;
Legal constraints in the home market.
An immense amount of challenges come alongside International Marketing:
Political differences (e.g. instability);
Economic and social differences (e.g. age, income);
Legal differences (e.g. product safety, advertising);
Cultural differences (e.g. language, colors, customs);
Business practices (accounting standards; setup process).
Strategies for International Marketing:
When businesses decide to go international they have alternative international marketing strategies:
A pan-global strategy treats the entire world market as a single market:
The risks of such approach are clear:
Lost market opportunities due to cultural or religious differences;
Legal restrictions can damage the business strategy (e.g. ads and products labeled illegal in some countries);
Standardizing prices across the world fails to take into consideration differences in income and can lead to low sales/revenues;
Saudization of brand names (translation) can lead to misunderstandings and bad publicity:
On the other hand, a pan-global international marketing strategy can be advantageous:
It facilitates recognition and strengthens the brand identity.
High volumes leads to low costs due to increased economies of scale;
The fact that customers preferences worldwide is are increasingly similar makes it easier for businesses to carry on a pan-global standardized strategy.
Global Localization, on the other hand, is all about adapting the marketing mix to meet national and regional specific tastes and cultures:
The philosophy of “thinking global, acting local” enables for different products, different prices, different ads with ethnic differentiation, different distribution channels.
This localization leads to a number of benefits to business employing it
Potential higher sales/revenues and profits;
Good publicity as locals don't see it as an snobbish brand that doesn't consider or respect the local tastes and culture;
Lower chances of pressure group actions against the activity of the multinational business.
Here are some great examples of winning global localization strategies:
Coca-Cola "share a coke with..." promotion:
Nintendo includes content and designs specifically to certain geographical locations:
KFC China adapts dishes regionally and sometimes even to the individual store level:
The disadvantages of a localized strategy include:
Lower chances of benefiting from economies of scale;
Potential loss of brand identify and power;
Additional costs of adapting products, ads, layouts - potentially leading to higher prices and consequentially lower sales, revenues, and profits.
There are many factors businesses should look into when choosing the strategy to develop a global market:
Economic: income levels, spending patterns, GDP per person;
Social: role of women in society, age;
Legal: prohibit products, limitation on advertising, product safety regulations;
Cultural: language, religions, traditions, colors;
Business Practices: ease and cost of setting up business.
To-Do-List
Activity 22.2
Chapter 22 - Marketing Strategy
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