The Context Of International Marketing Strategy Marketing Essay

A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global position (Porter, 1980).A global firm is a firm that operates in more than one country and captures R & D. production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competition (Porter, 1980; Kottler, 2000).

Most companies would prefer to remain domestic if their domestic markets were large enough. Managers would need not to learn other languages and laws, deal with volatile currencies, face political and legal uncertainties, or redesign their products to suit different customer needs and expectations. Businesses would be easiest and safest (Kottler, 2000).

Marketing, among all business functions, is most down-to-earth in terms of dealing with customers. As ordinary customers, every one of us already knows about marketing. After all, it is all around us. Many people may be under the impression that marketing is only selling and advertising, i.e. what we can see. However, (Kottler, 2000) argue that selling and advertising is only the tip of the marketing iceberg. There exists a massive network of people and activities, competing for customers’ attention and purchases. In today’s marketplace, marketing must be understood in the new sense of satisfying customer needs. They define marketing as the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

To (Kottler, 2000) yet several factors are drawing more and more companies into the international arena:

Global firms offering better products or lower prices can attack the company’s domestic market. The company might want to counterattack these competitions in their home markets.

The company discovers that some foreign markets present higher profit opportunities than the domestic market.

The company needs a larger customer base to achieve economies of scale.

The company wants to reduce its dependence on any one market.

The company’s customers are going abroad and require international servicing.

Kottler further says that before making a decision to go abroad, the company must weigh several risks:-

The company might underestimate foreign regulations and incur unexpected costs

The company might realize that it lacks managers with international experience.

The company might not understand the foreign customer preferences and fall to offer a competitively attractive product.

The company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals.

The foreign county might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property.

DEFINING STANDARDIZATION AND ADAPTATION

International marketing targets people in other countries. Two basic approaches are being used in international marketing i.e. Standardization (GLOBALIZATION or GLOBAL MARKETING) i.e. “to develop a single strategy and implement it in multiple countries, even to the point of providing ready to use ads.” And in contrast, advertising using Adaptation (LOCALIZATION or LOCAL MARKETING) i.e. “to develop a unique ad or a unique variation on a generic ad for each country.”Another factor that distinguishes localized advertising in that local offices have a greater say in the advertising that runs in their countries. (Bovee, Thill, Dovel, & Wood, 1995)

FACTORS INFLUNCING THE STRATEGY TO ADOPT STANDARDIZATION OR ADAPTATION.

A major debate in the international marketing literature deals with the globalization of markets and the extent to which a company’s international marketing strategy can be standardized (Cavusgil & Zou, Jan 1994).

Standardization with respect to the finer dimensions within the marketing programme the 4-Ps has not been investigated. Vague theoretical propositions are likely to be generated from research that assumes standardization of the entire marketing program or the 4-P elements are uni-dimensional constructs. Thus, there is a need to develop knowledge about the specific dimensions of the 4-Ps which can be successfully standardized. This knowledge will facilitate managerial utilization of the research in practice. (Zou, Andrus, & Norvell, 1997)

To (Nichifor, 2006)for greater clarity factors of influences to be structured in two new categories: one category related to factors which explain the influences of macro and micro marketing environment over the organization, and its indirect or direct effect over the organization’s objectives and strategies, and the other category related to organization’s motivations to exploit the opportunities of the business environment. In other words, it could be said that the standardization, adaptation or the combination of the first two strategies are the direct results of the simultaneous presence and manifestation of contextual and motivational factors.

Contextual factors are associated with the macro and micro environment and can be seen from two perspectives. First of such perspective is the one which stimulate the organization to adopt standardization strategy. There are various situations in which the international markets macro environments point towards standardization. Economic and cultural consistencies of the international markets, political, legislative and infrastructural similarities are the new realities of international business. These realities are generated by: the progress in communication technologies, the trend of globalization, the regional economic and political integration. The micro environment factors can point towards standardization too. The centralized management at the level of organization is one of the main factors which can be in favor of standardization strategy. From the other perspective, the same factors presented above could orientate the organization towards adaptation strategy. Cultural, political, economic and infrastructural differences between international markets could be the other reality of business environment. These realities could be doubled by the presence and manifestation of ethnocentrism and local nationalism. Over all that a decentralized management system at the organization level point definitively to adaptation strategy (Nichifor, 2006).

These two facets of organization environment could coexist and could manifest their influences in the same time. Both, homogeneity and ethnocentrism could be found in international markets. Moreover, even in the case of the same market we could identify the presence of these two opposite factors. Studies developed in Europe demonstrate that the economic, political and legislative similarity specific to EU does not necessarily generate a cultural homogeneity (Hoeken, 2003). The presence and manifestation of contextual factors in one of the two directions can be useful in explaining organization attraction toward an international strategy but is not sufficient. The consideration of motivational factors could bring more clarity to the logic of selecting international strategy. (Nichifor, 2006).

Motivational factors refer to those advantages associated with the presence and manifestation of the contextual factors and to interest of organization to make use of it. Scale economies, experiences transfer, coherent brand and institutional image, on the one hand, and communication impact, image and positioning relevance, on the other hand, are motivational factors associated with the standardization and adaptation strategies in international advertising. The management of each organization decides which of these two groups of opportunity or advantages could be more consistent with their own philosophy and objectives in international practices. In some situations, organizations from the same industry could see the ir international development in a different way, this leading to a different selection regarding possible strategies (Laroche, December 1999)

If you ever want to stir up a lively argument among advertising professionals, bring up the topic of Standardization (globalization) versus Adaptation (localization). (Bovee, Thill, Dovel, & Wood, 1995)

Globalization’s most visible proponent is Theodore Levitt of Harvard, who helped launch the discussion in 1983 by maintain that instead of seeking out and emphasizing difference between countries and cultures, we should look for similarities not the differences. Global proponents say that great advertising concepts have a universal appeal and that, when those rear gems are discovered they should be exploited fully (Bovee, Thill, Dovel, & Wood, 1995).

MARKETING STRATEGY AND STANDARDIZATION / ADAPTATION.

To (Armstrong & Kottler, 2006) and (Kottler, 2000) International must decide how much to adapt their marketing strategy to local conditions. At one extreme are companies that use a globally standardized marketing mix worldwide. Standardization of the product, advertising, and distribution channels promises the lower costs. At the other extreme is an adapted marketing mix where the producer adjusts the marketing mix elements to each target market. The marketing insight box “Global Standardization or Adaptation?” discusses the main issues. Between the two extremes, many possibilities exist. Here we will examine potential adaptations that firms might make to their product, promotion, price, and distribution as they enter foreign markets.

ADAPTATION IN MARKETING PROCESS STRATEGY

Keegan has distinguished five adaptation strategies of product and promotion to a foreign market. These strategies are:-

Straight Extension

Straight extension means introducing the product in the foreign market without any change. Top management instructs its salespeople; “find customers for the product as it is.” However, the company should first determine whether foreign consumers use that product. Deodorant usage among men ranges from 80 percent in the United States to 55 percent in Sweden to 28 percent in Italy to 8 percent in the Phillipines. In interviewing women in one county about how often they used a deodorant, a typical response was “I use it when I go dancing once a year”; hardly grounds for introducing the product.

Product adaptation

Product adaptation involves altering the product to meet local conditions or preferences. There are several levels of adaptation. A company can produce a regional version of its product, such as a Western European version. Finish cellular phone superstar Nokia customized its 6100series phone for every major market. Developers built in rudimentary voice recognition for Asia, where key boards are a problem and raised the ring volume so the phone could be heard on crowded Asian Streets. Or it can produce a country version. In Japan, Mister Donut’s coffee cup is smaller and lighter to fit the hand of the average Japanese consumer; even the doughnuts are a little smaller.

Product Invention

Product invention consists of creating something new. It can take two forms,

Backward inventions

Backward inventions is reintroducing earlier product forms that are well adapted to a foreign country’s needs. The National Cash Register Company reintroduced its crank-operated cash register at half the price of a modern cash register and sold substantial numbers in Latin America and Africa.

Forward invention

Forward invention is creating a new product to meet a need in another country. There is an enormous need in less developed countries for low cost high protein foods. Companies such as Quaker Oats, Swift, and Monstano are researching these countries nutrition needs, formulating new foods, and developing advertising campaigns’ to gain product trial and acceptance.

Globalization in Marketing Strategy

Companies can run ths same advertising and promotion campaigns used in the home market or change them for each local market, a process called communication adaptation strategy. If it adapts both the product and communication, the company engages in Dual adaptation strategy. Consider the message. The company can change its message at four different levels. The company can use on message everywhere, varying only the language, name and colors. Exxon used “Put a tiger in your tank” with minor variations and gained international recognition. Colors might be changed to avoid taboos in some countries. Purple is associated with death in Burma and some Latin American nations. White is a mourning color in India; and green is associated with disease in Malaysia. Even names and headlines may have to be modified. When Clairol introduced the “Mist Stick” a curling iron, into Germany, it found tha mist is slang for manure. Few Germans wanted to purchase a “manure stick.” The dairy association brought its “got Milk?” advertising campaign to Mexico only to find that the Spanish Translation read, “Are you lactating?” When Coors put its slogan “turn it loose” into Spanish, it was read by some as “suffer from diarrhea.” In Spain, Chevorlet’s Nova translated as “it doesn’t go.”

Next possibility is to use the same theme globally but adapt the copy to each local market. For example, Camay soap commercial showed a beautiful woman bathing. In Venezuela, a man was seen in the bathroom; in Italy and France, only a man’s hand was seen; and in Japan, the man waited outside. Danish beer company, Carlber, goes so far as to adapt copy not to countries but to individual cities and even neighborhoods with in those cities. The 151 year old Danish beer is available in more than 140 countries around the world, but because of the competitiveness and maturity of the US Market, it has to take a local tack in its approach to win new customers who aren’t familiar with brand. All advertisements feature the same single image of the Carlsberg bottle, along with a humorous message about the specific city.

The use of media also requires international adaptation because media availability varies from country to country. Norway, Belgium, and France do not allow cigarettes and alcohol to be advertised on TV. Austria and Italy regulate TV advertising to children. Saudi Arabia does not want advertisers to use women in ads. India taxes advertising. Magazines vary in availability and effectiveness; they play a mor role in th Italy and a minor one in Austria. Newspapers have a national reach in the United Kingdom, but the advertiser can buy only local newspaper coverage in Spain.

Marketers must also adapt sales-promotion techniques to different markets. Greece prohibits coupons, and France prohibits games of chance and limits premiums and gifts to 5 percent of prouct value. People in Europe and Japan tend to make inquiries via mail rather than phone – which may have ramifications for direct mail and other sales promotion campaigns. The result of these varying preferences and restrictions is that international companies generally assign sales promotion as a responsibility of local management.

Multinationals face several pricing problems when selling abroad. They must deal with, price escalation, transfer price, dumping charges, and gray markets. When companies sell their goods abroad, the face a price escalation problem. Depending upon the additions in cost like transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price the currency fluctuation risk, the product might have to sell for two to five times as much in another country to make the same profit for the manufacturer. Because the cost escalation varies from country to country, the question is how to set the price in different countries. Companies have three choices.

Setting a uniform prices everywhere

Setting market based price in each country

Setting a cost based price in each country

Another problem arises when a company sets a transfer price for good that it ships to its foreign subsidiaries. Very often a company finds some enterprising distributors buying more than they can sell in their own country and reshipping goods to another country to take advantage of price difference. Multinationals try to prevent gray markets by policing the distributors, by raising their prices to lower cost distributors, or by altering the product characteristics or servie warranties for different countries.

GLOBALIZATION IN MARKETING PROCESS STRATEGY

In globalization latest twist, American companies are not only inventing new products for overseas markets but also lifting products and ideas from their international operations and bringing them home. As an example, Haagen Dazs had developed a flavor for sale solely in Argentina called dule del leche, named for the caramelized milk that is one of the most popular flavor of sale solely in Argentina. Just one year later, the company rolled out dulce de leche in supermarkets from Boston to Los Angles to Paris. The co-opted flavor now does $1 million a month in the United States and is particularly popular in Miami where it sells twice as fast as any other flavor. Product invention is a costly strategy, but the payoffs can be great, particularly if you can parlay a product innovation overseas into a new hit at home.

A growing part of international trade is taking place in services. The world market is growing at double the rate of world merchandise trade. Large firms in accounting, advertising, banking, communications, construction, insurance, law, management consulting, and retailing are pursuing global expansion. Arthur Andersen, American Express Citicorp, Club Med, Hilton and Thomas cook are known worldwide. United States credit-card companies have streamed across the Atlantic to convince Europeans of the joys of charge cards. In Britain, industry heavyweights Citibank and American Express have wrested a lot of business from big British banks like Barclays and already control 7 percent of the market. Many retailers are trying to make similar inroads. Faced with slowing growth at home in the United States, Wal-Mart is using cash flow from its domestic business to fuel the growth of its $9 billion international division. In November 1997, Wal-mart acquired German retailer Wetkauf, adding 21 hypermarkets with annual sales of $1.4 billion. Just two months earlier, the retailer had purchased its Mexican joint venture partner, CIFRA, making it the largest retailer in Mexico. Wal-Mart is the leading discount retailer in Canada and has opened outlets in Argetina, Indonesia, and China. As of 2005, Wal-Mart employed more than 105000 international sales associates in more than 602 international retail units and had plans to open up to 50 to 60 retail units outside United States.

At the same time, many countries have erected entry barriers or regulations. Brazil requires all accountants to possess a professional degree from a Brazilian university. Many western European countries want to limit the number of US television programs and films shown in their countries. Many US states bar foreign bank branches. At the same time, the United States is pressuring South Korea to open its market to US Banks. The General Agreement of Tariffs and Trade (GATT) is pressing more free trade in international services, but the progress is slow.

Developing a global pool of ads from which each country selects the most appropriate one. Coca-Cola and Goodyear use this approach. Finally some companies allow their country managers to create country specific ads – with in guidelines, of course. Kraft uses different ads for Cheez Whiz in different countries, given that house hold penetration is 95 percent in Puertor Rice, where the cheese is put on everything; 65 percent in Canada, where it is spread on morning breakfast toast; and 35 percent in United States, where it is considered a junk food.

Another global pricing challenge that has arise in recent years I that countries with over capacity, cheap currencies, and the need to export aggressively have pushed prices down and devalued their currencies. For multinational firms this poses challengers: Sluggish demand and reluctance to pay higher prices make selling these emerging markets difficult. Instead of lowering price, and taking a loss, some multinationals have found more lucrative and creative.

Another difference lies in the size and character of retail units abroad . Large scale retail chains dominate the US scene, but much foreign retailing is in the hands of small independent retails. In India millions of retailers operate tiny shops or sell in open markets. Their markups are high, but the real price is brought down through haggling. Incomes are low and people must shop daily for small amounts and are limited to whatever quantity can be carried home on foot or on a bicycle. Most homes lack storage and refrigeration space to keep food fresh. Breaking buld remains an important function of intermediaries and helps perpetuate the long channel of distribution which are major obstacle to the expansion of large scale retailing in developing countries.

SIGNIFICANCE OF STANDARDIZATION AND ADAPTATION

The significance of the Standardization and Adaptation can be best judged from the merits and demerits of the approaches. While the limitations of the globalization are the merit of adaptation. To (Armstrong & Kottler, 2006) and (Bovee, Thill, Dovel, & Wood, 1995) merits / demerits of the standardization and adaptation are being stated here in context to the significance and merits and demerits of standardization and adaptation.

WHY GLOABALIZATION

The proponents of standardization assert that several factors make global campaigns feasible and attractive because of the following merits of standardization:

Global travel and communication

It’s often said that the world is getting smaller, that jet airliners, satellite communications and globe- trotting business people have reduced the barriers that separate countries. The people I the so-called global set, who regularly telephone and travel to points all over the world, are less likely to view the world through the narrow lens of their own countries. They are use to seeing Sony Electronics, Mont Blanc pens, American Express Cards, and many other high profile global products they travel.

Regional and global media

To show how much people in other countries view and real much of the same media, supporters of globalization point to regional media such as The European Newspaper, global media such as the CNN cable network, and exported programming like many US television shows and movies play in other countries.

Converging buyer wants and needs.

A presumed result of global travel and of regional and global media is that buyers every where will increasingly want the same products. It fans of a popular US Television show wear Levi’s and Ray Ban sunglasses because the star of the show does and if that program is later shown in the other countries, one might theorize that demand for the two products will go up in those other countries as well.

Economies of scale

An economy of scale is a cost saving that results from doing things in big way. In terms of advertising production fans of global advertising say that global campaigns cost less than localized one primarily because you don’t have to repeat the production process for each country. With production costs running up to a million dollars or more for major television commercials, this is an effective argument.

Budget Allocation

A benefit of an economy of scale is the money that’s saved with whatever you don’t spend on producing ads, you can run more ads or spend more on research to develop new products.

Efficiency and productivity.

The process of creating ads and putting them in front of audience is complex and time consuming. Proponents of globalization would like to minimized the headaches and managerial overhead by not going through the process all over again for each additional country. They argue that if you don’t have to spend all that time and energy adapting your ads to each country, you can spend more time selling, supporting customers, making new products and so forth..

WHY NOT GLOBALIZATION OR WHY NOT ADAPTATION

Critics of globalization contend that it can’t work for most products, even under the best of circumstance. Even if it can, say the critics, its over standardized products and promotions open the door for competitors offering something more closed tuned to local markets. Phillip Kotler considers globalization a step backward to the so called production era of business. Nukhet Vardar, of Yartim / FCB Istanbul, Turkey, spent a lot of time rather several years studying the globalization issue, and she offers a number of reasons for adapting campaigns to local or perhaps regional markets rather than trying to globalize:

Better fit with local markets.

With a global approach, the marketers might overlook local variations that affect buyer behavior. For instance, in the early days of its international expansion, Apple Computer decided to define strategies at the local level because the degree of personal computer awareness varied from country to country. In addition, although the world’s consumers are becoming more similar in many respects, not all consumers in all countries are moving at same rate. Consumers in countries with high degree of business and cultural interaction, such as the UNITED STATES and Canada may have increasingly similar wants and needs, but the same can’t be said of consumers in many developing nations around the world. The average family in Pasadena or Paris may not have the same buying habits as the average family in Pakistan.

Shorter Response Time

As a general rule, the fewer people who have to approve decisions, the faster the decisions can be made. Requiring local managers to clear their decisions with regional or international managers in other countries can slow decisions with regions or international managers in other countries can slow decisions enough so that the dlay affects the company’s competitiveness.

Local management involvement and motivation

For the both multinational corporations and their international agency networks, getting local managers and employees involved and motivated is much easier if those people have say is marketing decisions. Peoples in general are more likely to support a decision or a plan if their opinions and insights were included in the decision making process.

Reduced chance of cultural blunders.

Sometimes the best advertising plan imaginable can stumble over a seemingly minor cultural blunder. Even things as basic as language have tripped up otherwise well executed marketing and programs. Some errors have come classics such as General Motors’ ” Body by fisher” tagline, which translated into flrmish (one of the languages spoken in Belgium) as “Corpse by Fisher.” Schweppes Tonic Water showed up in Italian advertisements as “bathroom water.” Obviously, having some local input would have averted both mistakes.

Increased Competitiveness

Not surprisingly, critics of globalization believe that all the factors already mentioned culminate in increased competiveness. If you can respond faster and more appropriately to local conditions, motivate the people responsible for carrying out marketing and advertising at the local level, and avoid cultural blunders, your marketing is almost sure to be more successful.

Limitations to both: standardization vs adaptation

No single approach is always the right approach. For one thing, there’s no such thing as a completely global campaign or a completely local campaign. For another, even companies committed to globalization, such as Coca-cola and Pepsi co, must translate many of their ads into other languages, and they must make their ads conform to local standards and regulations. The German Consumer-goods company Henkels explains its strategy by comparing its markets to a “highway that passes through a wide variety of terrain … the hgihg wasy is the same throughout, but the support structures are different depending on local circumstances.” In other words, Heckels’s marketing and advertising strategy is the same in all countries, with minor variations made at local level as needed.

At the other extreme, a completely localized marketing could result in chaos and inefficiency. What if the US arm of a major hotel chain started a joint promotion with United Airlines at the same time that the chain’s UK office was starting a joint promotion with British Airways one of United’s strongest global competitors? At a less drastic level, what if offices in the two countries opted for the same marketing strategy.

(Thanking, here for the adaptation of this text from the book Advertising Excellence The International Edition by (Bovee, Thill, Dovel, & Wood, 1995))