As domestic markets mature, it is becoming more and more fashionable for organisations to seek growth through opportunities in foreign countries. Faster communication, new technologies and improved transport links are making international markets more accessible and businesses pursuing a global position can experience an upsurge in brand awareness and cost effectiveness. Global marketing is a relatively new concept linked to these developments.
In the main, it is concerned with decisions for integrating or standardising marketing actions across a number of geographic markets. This does not rule out any customisation of the marketing mix to individual countries but suggests that organisations should capitalise on similarities between markets to build competitive advantage.
Compelling cases can be put forward for both a standardisation or adaptation approach to international marketing practice. These arguments are keenly explored, drawing from examples of Coca-Cola's international marketing programme to elucidate key points.
Background of Coca-Cola
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As the world's largest manufacturer and distributor of non-alcoholic beverages, Coca-Cola is certainly no stranger to global marketing. Established in the US, Coca-Cola initiated its global expansion in 1919 and now markets to more than 200 countries worldwide. It is one of the most recognizable brands on the planet and also owns a large portfolio of other soft drink brands including Schweppes, Oasis, 5 alive, Kea Oar, Fanta, Lilt, Dr Pepper, Sprite and Powerade. Despite this, Coca-Cola often struggles to maintain its market share over its main rival PepsiCo in some overseas markets, particularly Asian countries.
Arguments for Standardisation
- Converging customer needs and preferences
It is proposed by Levitt that the forces of globalisation driven by technology and wider travel are leading to more homogenised customer needs and wants worldwide. This paves the way for the building of global brand identities where companies are able to export their domestic brands to mass markets abroad and consumers will react to them in similar ways.
In this sense, standardised marketing with a universal product and message can be an integrating force across national borders. To send out different communication messages across countries could lead to customer confusion and even dilution of the brand. In keeping with this, Coca-Cola sells virtually the same Coke beverage worldwide.
The design of Coca-Cola soft drinks has changed little in its history, from the logo to the distinctive glass bottle. These unique and consistent characteristics evoke a strong brand image which has cross-cultural appeal.
- Economies of scale/experience
In many industries, companies can reap cost advantages by operating on a global scale and ultimately improve their all-round competitiveness. Using a centralised structure, a firm can draw economies from bulk purchase discounts or by sharing functions such as product development, marketing, production and managerial resources among different markets.
In Coca-Cola's example, economies are gained through the competent running of a large-scale franchising system for its bottling operations.
- Technological viability
In sectors where technological and production processes are homogeneous, extra weight is placed on standardisation of products as a prerequisite for success. As part of its vision that Coke should taste the same around the world, Coca-Cola has chosen to standardise its product and manufacturing process.
The knock on effects of this are more streamlined procedures and greater cost efficiencies. It is worth noting Levitt's argument that companies' which opt to produce an assortment of products serving different customer segments would be unable to survive globalisation due to inefficiencies in their operation.
Arguments for Adaptation
- Consumer Diversity
Supporters of the adaptation view contend that, regardless of globalisation, consumers in different countries continue to vary dramatically in their geographic, demographic, economic and cultural characteristics. It is sensible to imply that, where there are differences in product preferences, product uses, attitudes, shopping patterns, income levels and education, a business will need to adapt its product offering or communication programme in some shape or form.
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By carefully singling out the most significant differences, organisations can tailor products to suit local tastes and conditions. Dennis and Harris pronounced that global branding strategy should actually be a local plan for each component market, as to apply a standard approach worldwide without considering local preferences and cultural differences is doomed to failure. Food and beverage organisations in particular, can easily fall prey to obstacles such as regional taste and category development issues.
On the other hand, organisations that market internationally have to bear in mind that customising communication and product strategy will increase overall marketing costs. Traditionally, Coca-Cola used a standardised marketing campaign strategy where it would pull advertisements for specific markets from a common pool of adverts designed to have universal appeal.
Lately, Coca-Cola has chosen to back away from a full standardisation approach and to instead tweak its efforts to accommodate local culture and nuances. Its former approach was deemed too rigid with some of its campaigns not always successfully transcending national borders.
Although the branding and position of Coca-Cola remains consistent worldwide, its execution is based on what is judged to be best for each local market. This is evident in its 'Live on the Coke Side of Life' advertisement campaign launched in 2006 where elements of local culture are included. On the product side, Coke bottles and cans include the target countries native language and are sized to match up to other beverage bottles or cans in that country. The company also offers a varied product line-up to capture different consumer tastes, for example, soy drinks for its Asian markets.
- Differences in Infrastructure and Regulations
Several multinational companies, including Coca-Cola, have discovered that operating from a completely central and standardised perspective can impede the progress of the company, especially when it comes to understanding and integrating with local conditions. Coca-Cola is well known for its widespread accessibility through a variety of channels such as large supermarkets, petrol stations, restaurants, hospitals, cafes and so on.
Having a strong brand gave Coca-Cola the supplier bargaining power it needed to break into the more complex and entrenched distribution systems of lots of countries. Adding the fact that food laws can vary tremendously from one country to another, it is not surprising that Coca-Cola describes itself as multi-local'.
Despite a standardised product, Coca-Cola is obliged to adopt different approaches to the global marketplace. This goes some way to disproving Levitt's idea that one size fits all and emphasises a plan global, act local approach instead.
In essence, the arguments above reveal that global marketing is not necessarily an all or nothing proposition. Companies have the freedom to choose from many possibilities on the spectrum from total standardisation through to complete customisation. Clearly there are circumstances where multinationals can gain through increased standardisation of products and marketing, especially with respect to keeping costs down and building brand power.
On the other hand, in conditions where national market differences are more marked, this strategy would harm the company and its reputation. By making standardisation decisions using target market conditions as its starting point, an organisation can ensure that, in the long-term, customers are being offered what they want.
Although Coca-Cola can seemingly gain a great deal from a standardised agenda, its decision to combine global and local resources is ultimately more long-standing in a market where national customer differences are influential.