The International Marketing Strategies Of Companies Marketing Essay

The International Marketing Strategies Of Companies Marketing Essay It is not too long ago when people from one part of the world did not know the existence of others. Peoples desire to share knowledge and explore the whole world led to some major exploration likes Marco Polo and Christopher Columbus, who made the connection between Europe and America. Before this period, people had no scope to know about knowledge or innovations of others. It was the 16th century A.D. that brought Patagonian Indians to America. During the 17th century Europeans discovered Australia and by that time the whole world was recognized and was ready for contact and trade activity. This can be considered to be the earliest recorded history of the beginning of a new era called globalization. (Daniels et al. ,2002). Although the idea of globalization and its relation to the business world is not too old and it is only in the last two decades that the current trend of globalization has brought a dramatic change to the business world (Thoumrungroje Tansuhaj, 2004). In the book, Globalisation in world business, the author A. G. Hopkins said globalization is not simply a western experience. The key is to understand the globalizing processes which include ancient and modern as well as western and eastern dimensions. The representative of globalisation could be anywhere starting from spiritual leaders and their beliefs to crowned heads and their royal family; travelling soldiers and scholars or even traders or general community people (Bell, 2003). However, Globalization has been defined by Jane Fraser and Jeremy Oppenheim (1997), in the simplest terms, as a process by which the worlds economy is transformed from a set of national and regional markets into a set of markets that operate without regard to national boundaries. WHAT DRIVES IT? In mid 1980s, after facing some fast changes in cold war, East world-West world relation became almost friendly. In addition, after the fall of Soviet Union, lot of emerging markets appeared in the context of world market, with an aspiration to enhance their living standard. In 1990s West German and East Germany re-merged and appeared as a potential industrialist country in world market. Many Eastern Europe countries and transition economies countries joined in European Union. China and India started exporting goods and services to large regions of the globe, particularly to the United States. The powerful economic growth of countries, resulted in enlarged local demands, leading to divergence between provinces, discriminations in income, anxieties about employment, and increases in energy prices (Czinkota and Samli, 2007). The USA market took the leadership role in this current trend of globalization. Factors like decentralization, privatization, deregulation as well as the growth of cyberspace made the globalization process faster. Through decentralization, new trading markets and trading blocs have emerged around the world. The companies are able to produce, buy or sell goods anywhere in the world and meet the local and regional needs. On the other hand, deregulation removed the trade barriers and helped to form NAFTA, LAFTA and World Trade Organization. Also, non government organization became involved in globalization through the process of privatization. Countries like India and China became more involved in global trade due cyberspace and technological improvement (Czinkota and Samli, 2007). Many authors and scholars have talked about many characteristics of globalization around the world. But factors like fast technological progress, the deteriorating role of the nation state, transfer of industrial production from western countries to newly industrialising countries for cheap labour and material are key drivers of globalization (Brown, 1999). THE EFFECT OF GLOBALISATION The effects of globalization are spreading widely day by day. All the major industries and business of both developed and developing countries, along with individuals, are affected by globalization. (Garrette, 2000). The current business environment is more aggressive and competitive and can be characterised as hypercompetitive environment (DAveni, 1994). As markets are becoming more global day by day, the trade involves more countries and economies around the world. World merchandise trade was $157 billion in 1963 and it has become $10,159 in 2005 which is a significant increase of $10 trillion. Also, service trade which used to be $365 billion in 1980 has increased to $2,415 billion (Held Mcgrew, 2007). The effect of globalization brought dramatic changes in the business environment and companies are restructuring their business due to this reason (Jones, 2002). One of the most strategical change and significant business development in the recent years, is the formation of co-marketing alliances (Hwang and Burgers, 1997). Globalization does not always bring good outcome to all people. It has badly affected the job sector of the developed countries, where jobs of manufacturing sector has decreased. As production plants have moved to the low cost producers and unavailability of alternative employment, many are still unemployed. Other issues for developed countries include the debt obligations to international bank. The amount has increased to $1 trillion which has an adverse impact on their economy. The privatisation sector, deregulation and currency adjustment has been affected due to this reason (Roukis, 2006). Globalization has consequences on our culture as well. The globalization of culture also affects cities. As people around the world exchange cultural symbols, they tend to forget their own cultures and identity. The exchange of cultural symbols has increased dramatically in the recent decade due to the availability of communication technologies. (Nijman,1999). Globalization also caused the remarkable increase in inequality between rich and poor countries. Also, globalization is related with globally organized crime, ethnic clash, environmental disaster, and the collapse of many states and the emergence of others, terrorism, militarism, proper democratic system as a political condition for international aid, the rise of civil wars etc. (Santos, 2006). On the other hand, Held Mcgrew (2007) suggests that economic globalization could encourage economic development as well as it could be the only successful path to global poverty reduction. During 1970, there were more than 1400 million people who used to earn less than $2 a day and during 1998, this figure came down to less than 1000 million. WHAT IS MARKETING STRATEGY? According to Varadarajan Clark (1994), Marketing strategy is concerned with the creation of a marketing mix that enables the business to achieve its objectives in a target market. Marketing strategy is the main and most important principle that a firm uses to organize and allocate its resources for generating profit from customers, who are an integrate part of the market (Kim, 2004). Aaker (2009 cited by Kyung Hoon Kim et al., 2012) notes that marketing strategy can involve a variety of functional area strategies including positioning, pricing, distribution, and global strategies. The overriding principle driving a firms marketing strategy is that, marketing strategy depends on the companys vision for its future. This vision generally reflects where the firm expects to position itself in five to ten years-in effect, how the market perceives the firm. The development of a marketing strategy needs a basic assessment of both the firm and the market. The strategy, chosen, has to be the best at increasing the firms assets, with respect to the target market (Kyung Hoon Kim et al., 2012) Also, the key task of international marketing management is to establish a companys overall international strategy which also decides the degree of international integration of the company (Ghauri Cateora, 2006). INTERNATIONAL BUSINESS AND GLOBAL MARKETING Global marketing or globalization of markets is a key issue for multinational business firms. Many companies who markets global products around the world such as Nestle, Sony, Toyota and many others has to carefully look for opportunities in the international markets. Globalization of markets is a challenging issue for governments and political party or trade unions while business related people or organizations encourage the initiative of open trade which connects different markets by going beyond the national boundary. According to Solberg (1997), cited by Hollensen (1998), the following table explains nine strategic windows which are major motives for firms to internationalise. At immature stage, where firms have little experience, it is better not to go for international markets. Instead they should strength their position in the home market. Also, if firms find themselves smaller and weaker among other multinational firms in the global market, then Solberg (1997) suggests that the firms should try to increase its net assets by attracting potential partners for a future by-out bid. This could be a good option for small and medium size enterprises who are supplying advanced high-tech components to large industrial buyers. Firms also can overcome their competitive disadvantages by going into alliances with other firms. Preparedness for internationalization Mature 3.Go into new business 6. Prepare for globalization 9. Strengthen your global position Adolescent 2.Consolidate your expert markets 5. Consider expansion in international markets 8. Seek global alliances Immature 1. Stay at home 4. Seek niches in international markets 7. Prepare for a buy-out Local Potentially global Global Industry globalism Table. The nine strategic windows , Source: opted from Solberg (1997), cited by Hollensen (1998). The technological advancement of the 21st century has been a key factor behind global marketing. The exchange of information has become easy and transport has become more cheap and comfortable. Consumers around the world wants new and innovative product even if they are being made in the other part of the world because technology makes them aware about the existence of that new product. Business firms accept this commercial reality and as result enjoy greater economies of scale in production or marketing or distribution. As a result, the globalization of business helps them to offer products at a cheaper rate and thus gain a competitive advantage among its competitors (Buzzel et al.,1995). Although global marketing strategy and globalization of markets are two interrelated areas but there is a little difference between them. Global marketing strategy is needed in order to improve the efficiency of operations while globalization of markets is occurring due to the homogeneity of demand across cultures (Ghauri cateora, 2006). Due to the raise in globalization of markets day by day companies find they are inevitably surrounded by foreign consumers as well as their competitors and suppliers. On the other hand, different countries have to admit the limitation of their own assets and the advantage of trade activities outside their own boundaries. Thus engaging in international business for both firms and countries are very much essential. According to Ghauri and Cateora (2006), the following factors play an important role in shaping of international business. Each country or economy is dependent to other economies. The formulation of free trade areas such as ASEAN, EU, APEC and NAFTA and the expansion of business activities in those areas. Countries having greater purchasing power due to their improving economy The arrival of new and potential markets with a large number of customers such as countries like India, China, Russia, Brazil, Malaysia etc. Technological advancement has been the key factor behind the improvement of transportation and communication. In order to engage in international business, companies need to have proper international marketing strategies. As international markets bring new opportunities and threats, appropriate strategies could help them to overcome possible difficulties in the international markets. Also, international companies need to respond to customer needs and wants by adapting existing product or by bringing new product to the market. (Bradley, 2002). International marketing exists all around us due to the globalization and provides new opportunities and challenges for marketers around the world. (Czinkota and Samli, 2007). EFFECT OF GLOBALISATION ON COMPANIES MARKETING STRATEGIES According to Czinkota Samli (2007), Globalization enables international marketing to take place all around us, and to continuously offer new opportunities and challenges. Successful economies are always driven by customer needs and wants. The bureaucratic plans do not play an important role there. On the other hand, a firm must have a strategic response to the challenges of global market. Companies which are expanding their business in domestic market need to choose an appropriate strategy suitable to their situation. Since a global company is involved in many countries economy, it brings the idea of standardizing the marketing activities. The recent trend in globalization encourages the companies as well as countries to engage more in world trade activities. World exports were three times higher in 1998 than 1950; according to a WTO estimate, in 2001 this ratio was 29 per cent and in 2005 it was 27 per cent comparing to 12.5 per cent in 1970 and 17 per cent in 1990. In spite of 11 September attack in the USA the world economy is still achieving a rapid growth (Held Mcgrew, 2007). Also, Czinkota and Samli (2007) suggest that the base of globalization has two dimensions. The first one deal with deregulation, decentralization, the development of electronic data transfer and the other is characterised by capital flow, information and technological development. These features accelerate globalization, which enable companies to engage in international trade activity. Thus globalization provides a powerful foundation for international marketing to make progress. CO-MARKETING ALLIANCES According to Hewang and Burgers (1997, cited by Thoumrungroje and Tansuhaj, 2004), one of the recent trends to overcome the globalization effects has been the formation of marketing alliances. As companies around the world are restructuring their business to meet the global threats co-marketing alliances can bring greater success in the international marketing performances. In simple words, Anderson and Narus (1990, cited by Louis P. Bucklin Sanjit Sengupta, 1993) defines Co-marketing alliances as a form of working partnership with mutual recognition and understanding that the success of each firm depends in part on the other firm. Its a contractual relationship between the two firms, whose respective products acts as complimentary products, in the market. The purpose of such relationship is to intensify and/or build awareness, about benefits of such complementarities. The co-ordination between firms can be extended into product development, product and even research development. Also, according to Hoskisson et al. (2004, cited by Thoumrungroje and Tansuhaj, 2004), co-marketing alliances are a particular type of strategic alliance which is a business level competitive strategy. The primary focus of such alliance is to create a competitive advantage in the international market. It is also called horizontal complementary strategic alliance. The main objective of such alliance formation is to maximize the companies profit by utilizing their resources and capabilities. Co-marketing alliances also helps firms to gain better market position through increasing sales and market share. The following figure explains the relationship between co-marketing alliance, globalization effects and international marketing performance. Global Competitive environment Global Market Uncertainty Cooperation in Co-Marketing Alliance International Marketing Performance Global Market Opportunities Figure1.4 Conceptual relationship of globalization effects, cooperation and performance. Source. Adapted from (Thoumrungroje and Tansuhaj ,2004). Thoumrungroje and Tansuhaj (2004) suggest there are two kinds of globalization effects. They are global market opportunities and global market threats. Global market opportunities encourage the mergers of different firms, by combining their resources; from which, more powerful and larger group can emerge. Such groups are capable of providing a complete range of new product and services and thus gain the customer preferences. In United States, Citigroup and Travellers Group have merged together and have become one of the most successful financial service providers in the world. Also, powerful companies like General motor is attacking different sector by offering credit cards.(Doole Lowe, 1999) On the other hand, Thoumrungroje and Tansuhaj (2004) also suggest global market threat could be classified into two categories. It is consists of global market uncertainty as well as the intensity and the level of competition. Global market threats are increasing due to, the easy access opportunity in the international markets. However, Co-marketing alliance does have significant management challenges, in spite of its potential contribution. There are chances of disagreement between partners, as they often tend to compete with each other in terms of product lines and occasionally, even those covered by co-marketing agreement. In fact, there is a high possibility of opportunism as one of the partners may use the other to gain market position only; or may be to build technological skills from the knowledge of the others intellectual property. (Louis P. Bucklin Sanjit Sengupta, 1993) STANDARDISATION VERSUS ADAPTATION Its been a long time, since the two opposing international marketing strategies have been debated upon standardisation versus adaptation of products. Standardization means selling essentially the same product in all markets. The advantage of standardisation is low costs, as designing, manufacturing and distributing same product across countries involves less of investment. However, selling identical products across borders may be undesirable due to differences in the legal environments, distribution channels, climates, topography, levels of market and technological development, and competitive and cultural factors. As customers of different countries have different requirements, a standardised product might not be able to satisfy all customers. (Roger J. Calantone et al. 2004) On the other hand, product adaptation refers to the degree to which the physical characteristics or attributes of a product and its packaging differs across national markets (Cavusgil et al., 1993 cited by Roger J. Calantone et al. 2004). Though customising products for different markets increases cost, the adapted products are more likely to fit the needs of the varied range of customers of different countries and become more acceptable; but would command higher margins, generating greater revenues. For example, Procter Gambles (PG) Oil of Olay skin moisturizer has different type of product in different countries, based on research of the need of customers in those countries; instead of just changing the language on the bottle of the same product. Doole and Lowe (1999) suggests within the elements of marketing management products or service image or marketing objective and strategies can be standardised easily than pricing or distribution. Pricing Differentiation Distribution Sales force Sales promotion Product Image Objective strategy Standardisation A firm taking a global approach means they are standardising their marketing activities to some extent and the firms who have multi-domestic approach means they adopt totally different policy for every single market. In one of the important studies on this topic, Cavusgil et al. (1993) concluded that it is difficult to make blanket statements about suitable standardization/adaptation strategy without an examination of (these factors). The preferable option for firms is to take such a strategy which is a mixture of standardisation as well as adaptation of the different elements of marketing management programmes. Most companies around the world globalise some elements of the marketing mix while localising others and they use a combination of multi-domestic, global or regional, and transitional strategies. Many international firms find it difficult to optimally balance standardizing and adapting their marketing, specifically the marketing strategies, across national borders, in order to be successful. Also, in the process of internationalisation, firms need to find the correct approach towards globalisation, regionalisation and localisation of business activities, in general, along with finding a way to transfer the approach to their marketing strategies level (Stefan Schmid and Thomas Kotulla, 2011).