14 – The Global Marketplace

Introduction

The world has evolved into a global marketplace. Countries use trade to accelerate economic growth. The growing importance of international marketing results from the current shifting structure of competition and changing demand patterns in global markets. Whether businesses like it or not, market protectionism is fading in several countries. Domestic markets, large and small, must now share a variety of offers and their marketers. Businesses are inevitably connected with international customers, competitors, and suppliers within their home marketplaces. All large and small players must explore global markets for their products and services to survive and flourish.

With the globalisation of economies, rising income levels, barrier-free communications and travel, and technology advancements, people worldwide seek the same things. They demand modern appliances, fast-food restaurants, the latest styles, life’s ever-increasing convenience, high-quality services, and so on. As a result of these dramatic shifts in trends, organizations must be prepared to compete in an increasingly interdependent global environment. Whether a company chooses to compete directly or indirectly, it is influenced by other foreign competitors who do.

For example, a company that manufactures refrigerators or traditional Rajasthani Namkeen appears to have no choice but to compete in the global market. Businesses may communicate at the speed of sound worldwide by using data, text, voice, or image.

14.1 Levels of Global Marketing Involvement

Some organisations try to keep their involvement in global marketing as low-key as possible, while others may become involved entirely. According to Cateora, a company can commit to worldwide marketing at one of five different levels. Companies typically progress through various stages of foreign marketing activity. The reasons are self-evident. Risks can be reduced by gradually allocating more financial resources to a specific overseas market based on prior experience. Low financial risks are associated with a temporary, low level of commitment. However, every organisation doesn’t need to follow the phase sequence, and some may skip one or more stages:

No Involvement: The company has not actively committed to seeking clients in overseas areas, but the items may reach those countries through other channels. The firm may only sell to international traders or companies who come to the firm directly or domestic wholesalers who sell the firm’s products in different nations on their initiative. Unsolicited purchasers approaching the firm frequently pique the firm’s interest in expanding its sales in international regions.

Infrequent International Marketing: At this level, enterprises may sell any temporary surplus production to foreign purchasers, but international marketing operations are curtailed when domestic demand rises. There are no plans to maintain a presence in the foreign market. The company makes no changes to its organisational structure or the items it offers.

Regular International Marketing: Companies in this phase establish regular worldwide marketing plans to attain predetermined targets. The company enters overseas markets by finding foreign middlemen, using its sales team, or establishing subsidiaries in specific regions. At this stage, the corporation often invests in management, production capacity, and constant marketing of goods in foreign markets. Profits from foreign activities become increasingly important to the corporation.

International Marketing: At this level, companies are fully committed to and involved in international marketing operations. They search for potential markets worldwide and sell goods and services in various nations. They frequently establish manufacturing sites in foreign countries, transforming themselves into worldwide or multinational corporations that rely on revenue from these markets.

Global Marketing Operation: The company is committed to and participating in international marketing. While a multinational corporation sees the world as a series of distinct markets with distinct features and creates separate strategies for each, a global corporation considers the entire world, including the native country, one enormous market for products and services. The international corporation examines shared market demands and desires and seeks to maximise returns through the worldwide standardisation of its business operations. The output is scheduled to match the demand of the global market.

As a result of globalisation, organisations engaged in international marketing operations reflect the dynamic patterns of competitiveness, the interconnection of countries’ economies, and the ever-increasing number of competing enterprises from industrialised and developing countries.

14.2 International Market Entry Strategies

Exporting, contracting, joint ventures, and direct ownership are all methods of worldwide marketing.

14.2.1 Exporting

Exporting is the sale of goods to one or more foreign countries and is an essential component of any worldwide marketing. Small businesses enjoy a high level of success when it comes to exporting. This entails little risk or expenditure on the side of the exporting firm and is the most basic degree of involvement in international marketing. Most companies active in international marketing begin as exporters, and most corporations rely significantly on domestic production to deliver goods to foreign markets. Exporting enterprises offer their goods either directly to overseas importers or through export agencies. Export merchants or agencies perform most of the marketing functions involved in selling in overseas markets.

According to Joseph V. McCabe, export agencies can aid enterprises with limited resources at a reasonable cost and avoid significant investments. Furthermore, exporting requires little time and effort from the exporting producer. The disadvantage is that the exporter has little influence over the exporting agency. Some businesses export through their own sales branches in overseas countries. This allows them to regulate sales efforts better and streamline distribution.

Sometimes, a distinction is made between direct and indirect exports. Direct export means that the producer performs all of the exporting-related tasks. Indirect export refers to a corporation selling its products in its home nation to another entity acting as an exporter. The distinction lies in the extent of involvement in export activities and the associated costs, risks, and advantages.

Many corporations have buying representatives stationed or send buying teams to India and other countries to obtain goods. In this instance, as in the case of selling to export merchants, the company is not involved in completing any export procedures and avoids accepting any risks. These representatives or visiting teams may recommend ways to adjust items and provide specifications, designs, styling, etc.

14.2.2 Contracting

Various contracting procedures entail legal relationships that international marketers enter to quickly create a market presence in a foreign country. Licensing, contract manufacturing, and franchising are common approaches.

When a corporation wants to avoid direct engagement in overseas marketing, licencing is an effective method. This strategy can aid in the removal of tariffs and import restrictions. This is an excellent strategy for entering a foreign market with little or no investment and risk. The disadvantage is that the licensee may learn everything there is to know about the product and processes and begin independently when the licence agreement expires.

A licencing agreement can take several forms, including granting licences to use production methods, trade names, or distributing the licensor’s imported products. This model presents challenges in locating, controlling, and motivating licensees.

In contract manufacturing, the company enters into a contract with a foreign firm to supply items to the international corporation, which are then sold in the country of the producers.

Major Approaches to Operating in International Markets

For example, Reebok obtains its sports shoes from companies in Indonesia, China, Taiwan, South Korea, Malaysia, Thailand, and the Philippines. Phoenix Overseas, Liberty, Woodland, and other Indian companies are among them. Reebok develops technologies, creates designs, and purchases the total output. The corporation intends to purchase almost thirty million pairs of shoes yearly from contract producers.

Contract manufacturing is used by many other multinational marketers in industries such as automobiles, photography equipment, electronics, computer parts, garments, multinational retail chain companies, and others.

14.2.3 Joint Venture

Forming a joint venture is a more critical and often-used method of conducting worldwide marketing. A joint venture is a collaboration between a domestic corporation and a foreign business house or between two countries. A joint venture partner minimises risks linked to political, economic, and cultural issues.

A joint venture can be an appealing option for an international marketer when the company can benefit from the local partner’s specialised skills and use the local partner’s distribution setup. A wholly-owned subsidiary is not permitted. The international marketer gains access to protected markets.

For example, General Motors launched a joint venture with China’s Jinberi Automobiles to build light commercial trucks. Many foreign-owned company brands are manufactured and marketed in China at prices that would not be viable if these brands were imported.

Strategic alliances are the most recent type of joint ventures in partnership, in which two or more firms join forces to generate a competitive advantage on a global scale. Strategic alliances are frequent in businesses such as automobiles, airlines, insurance, and computers, among others, to meet the ever-increasing rivalry. Strategic International Alliance (SIA), according to Harvey Arbelaez and Rafik Cuplan, provides support for deficiencies while increasing competitive strengths. International strategic alliances attract partners who want to take advantage of chances to enter and expand into new markets, gain access to new technologies, reduce costs in production and marketing, and gain access to marketing channels and suppliers.

For instance, Jeffery Ball, Todd Zaun, and Norihiko Shirouzu claim that Daimler Chrysler, Mitsubishi, and Hyundai have formed a joint venture to create a “small-car engine” that will be used in one million of these automakers’ vehicles. An engine is one of the most expensive automotive components. Because margins on tiny cars are so thin, this type of strategic partnership saves money for everyone while allowing them to compete in other aspects.

14.2.4 Direct Ownership

This level of international marketing participation requires owning a foreign company or division.

Because the corporation is the sole owner, it has greater control and flexibility over all aspects of the business, including manufacturing and marketing programmes. The parent firm is frequently based in one nation and has manufacturing, managerial, and marketing operations in many countries. The subsidiaries may be autonomous and allowed to function independently of the parent firm to adapt to local environmental conditions, with local management in most cases.

14.3 Opportunity Analysis

Different overseas countries may bring substantially different opportunities and hazards than a company has experienced in its home market. To assess whether a market warrants further investigation, the corporation should analyse elements such as political stability and cultural characteristics in general. The PEST framework (political/legal, economic, social/cultural, and technical) is practical for evaluating the prospective opportunities of various overseas markets.

14.3.1 Legal/Political Considerations

At the national level, the stability of the political system and the laws issued by the government define the legal and economic borders within which firms will function, as well as affect marketing opportunities for enterprises from other countries. The following factors must be considered:

1. In general, unstable political systems make markets exceedingly dangerous and unappealing to enterprises interested in international markets.
2. The host country’s legislation may shield domestic enterprises from foreign competition, the government may restrict imports or make clearance onerous, and trademark protection may be rugged in some nations.
3. The host government may restrict currency transfers, and profit repatriation from international activities may be problematic.

14.3.2 Economic Considerations

A corporation seeking global markets must assess the host country’s economic conditions, including infrastructure, economic development, and competition.

Infrastructure research would assess a foreign country’s ability to provide transportation, power, and communications. Depending on the product’s nature, the worldwide marketer will require various levels of infrastructure development.

Example: To conduct business, a company may require reliable Internet access, warehousing, and courier services. Businesses will also need newspapers, television, and other communication forms to reach customers efficiently and effectively.

The corporation would analyse current GDP per capita and income distribution, as well as what is expected to be the scenario in the future. As GDP and per capita income rise, so does demand for most goods and services. The distribution of income may show some appealing prosperous niche industries. India and Indonesia, for example, have low per capita incomes, but they have limited and wealthy niche markets that can afford branded luxury products.

Over the last few years, India has gradually reduced import duties and exempted certain goods from all responsibilities. Interest rates have been reduced, direct and indirect taxes have been rationalised, entry barriers have been reduced, public sector undertakings have been privatised, and foreign direct investment limits in many sectors have been increased. These broad reforms are making India an appealing destination for many multinational marketers.

14.3.3 Social/Cultural Considerations

Understanding the cultural values of a host country is critical for an international marketer. The study of culture will cover material, religious, social, beliefs and behaviour, artistic, educational, and linguistic characteristics. Individual consumers from various cultures purchase different things and may react differently to the same product. According to Kazuo Nukazawa, understanding cultural differences is necessary for success in worldwide marketing.

Example: Customers did not buy Mattel Toys’ iconic Barbie Doll when it debuted in Japan. However, when the business later launched a modified Barbie Doll with slightly oriental eyes and a girlish physique, sales skyrocketed.

Religion strongly influences local consumer purchasing behaviour in various nations, such as acceptance of specific goods and apparel.

McDonald’s, for example, entered India and opened its first store in Jaipur. After encountering difficulties, it was forced to make numerous significant adjustments and adapt products to the dominant cultural groupings in India. Eighty percent of the Indian population is Hindu, and they do not eat beef. Hence, there is no beef in the Big Mac. Big Maharaja, which contains mutton, has taken its place, and McDonald’s now provides Vegetable Burgers to strictly vegetarian customers. McDonald’s likewise promises to utilise only vegetable oils. The menu also excludes any food containing pork because a substantial portion of India’s population is Muslim and considers it unclean.

Language barriers frequently deter businesses from entering foreign markets. A literal translation of a brand name or marketing message in a foreign language may occasionally indicate something absurd to consumers in a foreign market.

14.3.4 Technological Considerations

When engaging in international marketing activities, it is vital to consider technological elements. Companies that require technically sound infrastructure must assess host markets on this criterion. No two countries have the same level of technological advancement at any one time. For example, in some nations, a significant lack of power influences the demand for electrically operated devices. Businesses are concerned about communication services that differ across different countries. Communications influence the speed with which customers, suppliers, and others are responded to.

Many countries lack reliable communication services such as modern broadcasting and postal services, landline and mobile phones, fax, Broadband Internet, courier, transportation and travel, etc. Due to a lack of technological developments, many nations cannot employ much of the technology used for marketing communications. To manufacture goods and services in the local market, enterprises that use advanced technology must have access to skilled labour.

14.4 Key Decision Areas

Domestic marketing practices may need to be modified or replaced by international marketers. A lack of statistically accurate secondary data may make judging the country’s market attractiveness challenging in a foreign market. The availability of credible data is primarily determined by a country’s level of economic development. In some nations, the lack of trustworthy listings makes obtaining primary data challenging, compounded by foreign language issues. Other critical issues are mostly around creating a suitable marketing mix.

Different companies use different techniques depending on how much flexibility they have in their marketing mix.

14.4.1 Product

Some businesses represent the world as a single market with the exact needs, wants, product preferences, etc. Product standardisation can result in significant economies of scale. Customers visiting markets in different nations can recognise a brand and comprehend what it stands for right away.

Customers would be confused if Coca-Cola or Pepsi tasted differently in different nations. Gillette sells the same razor blades worldwide, IBM sells identical laptops worldwide, Intel sells the same chips worldwide, and Microsoft sells the same operating software worldwide.

The biggest bet for standardisation is in the field of durable products, exceptionally durable commercial goods such as computers, earth-moving machines, and aircraft. Consumer durable products such as televisions, cameras, mobile phone sets, and small appliances may have minor challenges expanding completely unchanged into international markets.

Personal products, such as beauty care products, clothing, and food, are the most difficult to standardise. International marketers use a practice known as product adaptation, in which they adjust a successful selling product to meet the needs of another country.

For example, Procter & Gamble reformulated Max Factor cosmetics with brighter colours to appeal to Latin American consumers. McDonald’s, the multinational fast-food giant, adapted its burgers to Indian consumers’ preferences. Ford and Hyundai researched India’s weather and road conditions before developing appropriate air conditioners and shock absorbers.

Another way is to create a whole new product or tweak an existing one for a foreign country.

For example, Gillette released Vector Plus, a modified version of the twin-bladed Gillette Sensor shaving system, to fit the shaving preferences of many Indian consumers. Kellogg’s developed Basmati rice flakes exclusively for Indian consumers.

Occasionally, firms launch an earlier product version that is better suited to the country’s demands or stage of development.

1988, Panasonic sold its basic washing machine model to Videocon in India. Some firms sell their less advanced laptop computer versions in India.

Companies must exercise caution while employing the same brand names in multiple nations because translating the brand name and its symbol in the host culture may have amusing or detrimental implications.

Product packaging is equally vital when dealing with overseas markets. Supermarkets and self-service stores serve many customers in industrialised and fast-developing countries, and packages act as silent persuaders. The size of a package should be determined by the purchasing behaviour of a country’s consumers. Packages made of recyclable materials are preferred in several countries. Consumers prefer reusable containers in some nations. Packaging for perishable commodities must be devised based on a country’s meteorological conditions.

14.4.2 Advertising and Promotion

The debate over standardisation versus localisation has raged for many years. A handful of companies have had great success with standardised advertising.

For example, Gillette released its Sensor shaving system using the same worldwide theme: “The Best a Man Can Get.” The firm also introduced its Mach3 triple-bladed shaving system using the same global theme.

When it comes to standardisation, not everyone agrees with Prof. Levitt, especially when it comes to advertising. Many academics and professionals argue that products and advertising messages should be designed or, at the very least, modified to the demands and tastes of consumers in various regions. Language, tradition, morals, beliefs, lifestyle, music, usage patterns, media availability, and legal limits, among other factors, make standardising advertising exceedingly tricky. According to certain scholars and experts, cultures worldwide are getting more diverse, and advertising can be effective within a specific cultural setting.

Advertising standardisation, according to Rebecca Fannin, may be appropriate given the following conditions:

1. Brands or marketing messaging, such as Boeing aircraft or Apple’s iMac desktop computers, can be altered for aesthetic appeal.
2. Brands that use sex or money appeal in their image promotions, such as liquor, jewellery, cosmetics, or cigarettes.
3. High-tech and new-to-the-world things that have nothing to do with the country’s cultural legacy, such as televisions, calculators, or computers.
4. Products associated with nations, such as Swiss watches, German automobiles, and French wines, if the country has established a reputation in the industry.
5. These products appeal to a market niche with similar tastes worldwide, such as the elite wealthy who buy expensive jewellery, clothing, automobiles, etc.

International marketers use the third technique to create a worldwide advertising pool with a similar topic and format for all markets. This strategy encourages managers from regions or nations to choose the commercials that, in their opinion, will work best in their country. Some corporations give managers more leeway in adapting global advertising themes to local realities.

Many global marketers are attempting to build global brands; evidence suggests that most do so through a localised approach. Ali Kansu discovered that most consumer durable goods producers in the United States used a localised approach to advertising with some standardised messages. Jan Jaben discovered that “think worldwide, act locally” is still the leading advertising strategy for international marketers, albeit with a slight modification: “Think Globally, Act Regionally.” Managers often believe it is critical to tailor ad content such as language, message content, models, scenic background, and symbols to local cultural aspects.

International marketers’ sales promotion programmes are best managed locally. This is required since many nations have unique rules controlling the usage of specific sales promotion tactics.

14.4.3 Price

Setting pricing for a product in a foreign country is complex and may need trial and error. Multinational corporations face several challenges, including price escalation, transfer pricing, dumping fines, and grey markets. Setting prices is especially difficult for an exporter who must deal with currency conversion, whether any service is included, and frequently has little control over prices set by resellers. Depending on the increased shipping cost, tariffs, importer margin, dealer and retailer margin, and exporter’s production costs, the price escalation in another foreign market may be two to five times higher to earn profits. The transfer price is the price set for items shipped to a company’s overseas subsidiary. Pricing a high price will result in higher tariffs, while charging less than the product cost or less than the firm charges in its native market may result in dumping duty.

Grey marketing happens when an importer purchases a product and, rather than selling it in an agreed-upon low-cost country, sells it in other geographic areas to capitalise on price discrepancies. In several South Eastern nations, for example, widely used PC software is sold at a fraction of the price of genuine software.

The disparity in prices charged in different nations for the same brand is becoming a significant source of worry. Price differences result from the strength of demand, the complexity of the distribution system, and tax differences. Because the Internet and other means have made it easy for consumers to learn about pricing differences, resellers’ jobs have become highly complex. An exporter may quote pricing in either the seller’s or the buyer’s currency. The risk of quoting prices in the buyer’s currency is that it will fall in value, resulting in a loss for the exporter or importer.

Countertrade or bartering is an alternative to currency pricing. Instead of paying in either country’s currency, the buying foreign country arranges to exchange domestically produced goods for imported ones. This could occur for two reasons:

(1) Less developed countries may lack reasonably stable currency, commonly referred to as “hard” currency, to purchase necessary capital goods such as equipment and trade in less sophisticated domestically produced goods such as coffee, timber, food grains, or oil, or

(2) A country may lack marketing infrastructure to encourage international trade. Countertrade is associated with less developed economies and is common in some high-value international business-to-business commerce.

14.4.4 Distribution

The distribution system differs per country, as one would anticipate. For example, as more resellers are involved and product prices to consumers rise, the distribution of commodities for exporters to Japan becomes more convoluted. In general, the goal of distributing goods and services to points where consumers can purchase them is pretty similar in different markets. The proper distribution strategy is just as crucial for success in overseas markets as in local markets. The international marketer works to select the ideal distribution network, and many exporters prefer to form alliances with organisations that are already well-established in foreign markets.