how good you want to be

I’ve realised that instead of writing up my essays for my international marketing exam I’m blogging. Sooo I’m going to do my essays on here, one a day. That way I should have all of them finished well before my exam. Feedback is handy also.

Today’s topic: ‘Describe and discuss ‘global marketing strategy’ and indicate how it is a [sic] separate and distinct from domestic marketing strategy (describing benefits and limitations). Use examples to strengthen your answer.’

Gone are the days when a company was confined to doing business only in their own country; with more and more companies achieving a global presence there has been a need for the corresponding development global marketing strategy. Some of the rules which apply when only focussing on the domestic market can no longer be applied once the company starts expanding overseas.

To discuss the differences between global marketing strategy and domestic marketing strategy, the factors which have led to global expansion must first be analysed. The first key factor is that the saturation of domestic markets has pushed companies to look for business elsewhere. For example, an electronics company in Japan would face a high level of competition due to the number of players in the market. They would be better off expanding internationally, where they not only would face less competition but may have an added advantage due to the reputation of Japanese technology.

Secondly, the increased consumer access to foreign brands means that there is a broader market space to conquer. With many international brands like Nike cutting manufacturing costs by outsourcing overseas and using economies of scale, it is more difficult for their competitors to get the same profit margin for price parity.

Thirdly, the current dominance of the internet makes conducting international business and forming international collaborations much more accessible. Many small businesses are fielding business from across the globe through their websites. For them, using the internet to communicate is cheap and instantaneous. However, it is increasingly becoming an expectation that businesses will have a website and trade internationally in order to remain competitive.

The need to expand internationally means that companies need to consider the sensitivities of new market conditions, giving rise to the evolution of global strategics from domestic strategy. There may be different opportunities or limitations for the company in the form of economic conditions or the political/legal framework. Company communications need to be culturally sensitive; for example, showing bare soles of feet in Thailand would be considered offensive. There may also be different sets of needs that the company’s product/service appeals to which require the adaptation of the market offering as well as promotions.

In the late 1980s, five stages of the evolution of global marketing were proposed. The first stage is domestic marketing, where the company’s production and marketing are focussed on only one market. Product development, communications and competition analysis are ethnocentric, with operations centralised in national headquarters.

In the exporting stage, companies start to look at selling their products overseas whilst maintaining their headquarters and operations in their home market. The majority of the time, product development will be based on the home market. Expansion in this manner is low-risk but may not allow the company to fully consider the needs of other markets.

However, when companies become international marketers, they start to look at the needs of other markets and tailoring their products and marketing mix to each country. This polycentric approach means that they are addressing the demands of each market, but with a large number of markets international marketing strategy can decentralise decisions and reduce brand consistency. Arguably, McDonalds is an international marketing company with country-specific products and separate advertising campaigns, dealing with brand consistency through global regulations.

The fourth stage is multinational marketing, where companies start to standardise product development and marketing decisions across a region in order to take advantage of economies of scale.

By the time global marketing strategies evolved they were very different to domestic strategies. Companies take a geocentric, as opposed to ethnocentric, approach. Products are global with only slight variations for each country. While marketing decisions are once again centralised, a global strategy demands that there is some flexibility to tailor the marketing mix to each market.

Global marketing strategy allows companies to expand their reach, and tap market share from other countries that they would not be able to access otherwise. They can also utilise greater economies of scale. For example, IKEA’s mostly standardised product range means that they can mass-produce in one place to ship to the rest of the world. IKEA also uses highly standardised communications, which saves costs in designing catalogues and advertising. Their flat-pack design means that their transportation costs are lowered; this cost advantage contributed to their initial success in their home market, but was also an advantage that could be utilised in other countries. By operating in a larger market, companies have more opportunity to make a profit.

Global expansion also allows companies to diversify the risk of poor market conditions. A solely domestic company is subject to the economic and regulatory conditions of their country of operation. However, global companies can harvest profits from one market to support another market which is experiencing difficulties, or to push operations in another market to success. Some companies have also used their global operations to minimise their taxes payable or consolidate their power structures, eg. IKEA.

However, to obtain the full benefit of global marketing strategy standardisation is required. This limits the degree to which companies cater to each market’s individual needs. Coca-cola was implementing a global marketing strategy until 2000, when it was realised that creating an aspirational brand required vastly different promotional techniques in different markets. There were also opportunities to produce other drinks which could not be pursued with a global marketing strategy.

Global marketing strategy has developed out of the need and opportunities for companies to occupy a greater market space. For some companies, the benefits in economies of scale, standardisation of marketing and establishing of global networks has allowed them to rise to the top of their industries. However, others have found that global strategy limits their level of customisation and have changed to a more flexible strategy.

[edit: realised that the structure was awful.. so very screwed.]