the grass is greener on the internet

Essay 1: global marketing strategy
November 8, 2008, 9:01 pm
Filed under: 1

NOTE 16/8/09: I’ve noticed that a lot of people have found this essay through search engines and some have even directly copied it. Personally, I don’t care if you do. But I suggest you don’t – it’s not a great essay and the interpretation of the question only relates to my course.

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.]


10 Comments so far
Leave a comment

I too have been studying of late, particularly for my International Business subject. Not sure how relevant it is, but we also looked at IKEA as a case study, specifically how their standardisation of products did not work as a global strategy.

Upon expanding into North America, consumers tastes did not much the products on offer. For example beds were considered too narrow and drawers not deep enough, requiring IKEA to rethink their strategy according to local tastes and culture.

Might be useful?

Comment by Zac Martin

Yeah, that example came up in our course too. The sheet sets weren’t big enough for American beds? Having problems finding a good example of a true ‘global marketing strategy’ though…

Long story short, need to re-write this essay. Ugghhh…

Comment by katherineliew

Hey Katherine,

I just got done taking an Ethnography class focusing on brand differentiation between European countries. I was looking online for various opinions and came across this post.

During our class, we focused mostly on the consumer and his/her cultural differences and how that affects their purchases.

In your article, you primarily discussed the business side of the matter. What are your views on the consumer side?


Comment by starteuroengines

Standardization use to be the key strategy during the early days in the case of coca cola,with the advert of technology which have enhance globalization,Consumers want more customize product base on preference.Culture is critical when going global.A thorough situation analysis needs to be carryout to determine what is happening in the macro environment.

Comment by Nashon Awah Egoh

I agree with your summation Nashon…the environment in terms of ones cultural responsibilities are paramount as is “respect” of ones cultural differences be it in commerce…solutions must be given time and space also

Comment by Te Tangata

Spot on with this write-up, I honestly think this site needs much more attention. I’ll probably be returning to read more, thanks for the info!

Comment by Learn Marketing Strategies

This post provides clear idea designed for
the new people of blogging, that genuinely how to do blogging.

Comment by opt-in e-mail marketing

Superb piece, good job Katherine! However I don’t agree with a one specific point, “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. ” I don’t think so, that marketing strategy strandisation would reduce a company potential to provide to individual needs, yes well off course it will result in that, only if you think the traditional way, that marketing is function of business, but if you think and consider marketing as the function of businesses, then the prime purpose of your business is to act as marketing agency right, someone said that in these profound words, “business has only two functions , innovation and marketing”.

Now if one think , develops their business model in that sense than i guess nothing can prevent them from attaining the global or domestic benefits. As they would innovate in ways to keep their business model alive in any market, anywhere, therefore standardisation is not needed, rather its out of question, not to mention that marketing is an ever evolving (1)(2), therefore no standardisation can be achieved.

Lastly I invite you to my weblog on marketing
Easy Marketing A2Z , to share your ideas, your contention as I believe you know what you write :).

1. Carson, D., Cromie, S., McGowan P. and Hill, J. (1995), Marketing and Entrepreneurship in SMEs: An Innovative Approach, Prentice Hall, London.
2. Webster, F.E. Jr (2005), “A perspective on the evolution of marketing management”, Journal of Public Policy & Marketing, Vol. 24 No. 1, pp. 121-6.

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