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Essay 3: Global expansion
November 11, 2008, 11:05 pm
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Third time lucky? Writing revision essays for international marketing. We love marketing theory! Ha.

Topic: List and discuss the strategic options available to the firm considering global expansion in the product area. Detail the conditions that make the strategic option favourable. Be sure to detail your answer using examples where possible.

When a company decides to expand their sales overseas, they must decide whether to maintain their marketing mix or to change it to better fit the new market. In particular, there are three product strategies used in international marketing, leading to five strategic options for global expansion.

The product strategies used in global expansion are distinct from those which would be used domestically. The three strategies are extension, adaptation and invention, and can be applied to both product development and marketing communications. For extension, product design is largely standardised with minor variations made if necessary. Adaptation is used when the product does not fit the target market and needs to be altered significantly. Where the product will not be effective in addressing the needs of the target market at all, the company may invent a new product to fill the same market space.

How the company applies these three strategies to their product and communications strategies will depend on the difference between the target market conditions and their existing market. Five strategic options can be formed based on whether the product will fulfil the same need and whether the product can be transferred in the same form.

The first is dual extension, where both the product and communication strategies that are used in the home market are transferred to the new market with little or no modification. An example of this is Cochlear, which creates hearing aid implants. The company is aiming to address the same need in all markets (assisting the hearing-impaired) and can fulfil this with exactly the same product design. Hence they can use the same product and same promotion methods and gain dual economies of scale.

However, in some cases the need addressed by the product is not the same, or the company wishes to address the same need but cannot do so with the original product. This leads to the use of product extension or product adaptation strategies.

Where the company wishes to retain the original design of the product but address a different need, they will use the product extension strategy and focus on tailoring the communications to the target market. This is commonly used by telecommunications companies. Vodafone’s mobile broadband services are largely similar throughout its network. However, their communications strategy in each market has been unique to reflect the different ways that the services are utilised. This strategy allows the company to retain economies of scale for production.

Where the company wants to maintain the same market space by addressing the same need but cannot do so with the same version of the product, they will use product adaptation strategy. The fashion brand ESPRIT maintains its signature colours and promotional pictures in stores and advertisements globally. However, the clothes on sale in each location vary according to local climate and tastes. Some costs may be saved from maintaining the same advertising in different markets.

In some cases both product and need change, requiring a dual adaptation strategy. Cosmetics companies entering Asia found that instead of wanting to be more tanned, many Asian women wanted products that would make their skin fairer. Both communications and the product had to be adapted to address the different needs of the market. This incurred more costs to alter the existing products and create a new communications campaign.

Some companies have tried to save on these costs and regain economies of scale by using the invention strategy. Proctor & Gamble has taken a ‘produce globally, market locally’ approach, designing new products that address the needs of multiple markets. This strategy allows them to ensure that they are localising their product while retaining economies of scale.

Companies adjust their global product strategies according to the needs that their product appeals to in each market and the direction the company wishes to take. They should be mindful when choosing strategies that they must balance between trying to reduce costs by standardising and catering to the individual needs of each market by localising their products and communications.

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