50018805 Factors Affecting Global Marketing Integration

8/13/2019 50018805 Factors Affecting Global Marketing Integration

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Factors Affecting Global

Marketing



Global

marketing

Driving Forces

Technology

Culture

Market Needs

Cost

Free Markets

Economic Integration

Peace

Management Vision

Strategic Intent

Global Strategy & Action

Restraining

Forces

CultureMarket Differences

Costs

National Controls

Nationalism

War

Management Myopia

Organization HistoryDomestic Focus

Driving and Restraining Forces Affecting Global Integration



• Today, the growing importance of global marketingstems from the fact that driving forces have moremomentum than the restraining forces

• The forces affecting global integration are shown in (Figure).



Driving Forces

• Converging market needs and wants, technologyadvances, pressure to cut costs, pressure toimprove quality, improvements in communicationand transportation technology, global economic

growth, and opportunities for leverage all representimportant driving forces; any industry subject tothese forces is a candidate globalization.



Technology

• Technology is a universal factor that crosses

national and cultural boundaries• Technology is truly “stateless”; there are no cultural

boundaries limiting its application

• Once a technology is developed, it soon becomesavailable everywhere in the world

• This phenomenon supports Levitt’s predictionconcerning the emergence of global markets forstandardized products

• In his landmark Harvard Business Review article,Levitt anticipated the communication revolutionthat has, in fact, become a driving force behind

global marketing



• Satellite dishes, globe-spanning televisionnetworks, such as CNN and MTV, and the Internetare just a few of the technological factors

underlying the emergence of a true global village• In regional markets, such as Europe, the

increasing overlap of advertising across nationalboundaries and the mobility of consumers have

created opportunities for marketers to pursue pan- European product positioning.



Regional Economic Agreements

• A number of multilateral trade agreements have

accelerated the pace of global integration• NAFTA is already expanding trade among the

United States, Canada, and Mexico

• The General Agreement on Tariffs and Trade(GATT), which was ratified by more than 120nations in 1994, has been replaced by the WorldTrade Organization to promote and protect freetrade, but it has come under attack by developing

countries• In Europe, the expanding membership of the

European Union is lowering barriers to trade withinthe region.



Market Needs & Wants

• A person studying markets around the world willdiscover cultural universals as well as culturaldifferences

• The common elements in human nature provide

an underlying basis for the opportunity to createand serve global markets

• The word create is deliberate

• Most global markets do not exist in nature: Theymust be marketing effort

• For example, no one needs soft drinks, and yettoday in some countries per capita soft-drink

consumption exceeds the consumption of water



• Marketing has driven this change in behaviour, andtoday the soft-drink industry is a truly global one

• Evidence is mounting that consumer needs and

wants around the world are converging today asnever before

• This creates an opportunity for global marketing

• Multinational companies pursuing strategies of

product adaptation run the risk of being overtakenby global competitors that have recognizedopportunities to serve global customers

• Marlboro is an example of a successful global

brand• Targeted at urban smokers around the world, the

brand appeals to the spirit of freedom,independence, and open space symbolized by



the image of the cowboy in beautiful, open westernsettings

• The need addressed by Marlboro is universal, and,

therefore, the basic appeal and execution of itsadvertising and positioning are global

• Philip Morris, which markets Marlboro, is a globalcompany that discovered years ago how the samebasic market need can be met with a globalapproach.



Transportation & CommunicationImprovements

• The time and cost barriers associated withdistance have fallen tremendously over the past100 years

• The jet airplane revolutionized communication bymaking it possible for people to travel around theworld in less than 48 hours

• Tourism enables people from many countries tosee and experience the newest products beingsold abroad

• One essential characteristic of the effective globalbusiness is face-to-face communication amongemployees and between the company and itscustomers



• Without modern jet travel, such communicationwould be difficult to sustain

• In the 1990s, new communication technologies

such as e-mail, fax, and teleconferencing andvideoconferencing allowed managers, executives,and customers to link up electronically fromvirtually any part of the world for a fraction of thecost of air travel

• A similar revolution has occurred in transportationtechnology

• Physical distribution has declined in terms of cost;

the time required for shipment has been greatlyreduced as well

• A letter from China to New York is now delivered ineight days – faster than domestic mail is delivered

within many countries



• The per-unit cost of shipping automobiles fromJapan and Korea to the United States by speciallydesigned auto-transport ships is less than the cost

of overland shipping from Detroit to either U.S.Coast.



Product Development Costs

• The pressure for globalization is intense when newproducts require major investments and longperiods of development time

• The pharmaceutical industry provides a striking

illustration of this driving force• According to the Pharmaceutical Manufacturers

Association (PMA), the cost of developing a newdrug in 1976 was $ 54 million; by 1982, the costhad increased to $ 87 million

• By 1993, the cost of developing a new drug hadreached $ 359 million



• Such costs must be recovered in the globalmarketplace, as no single national market is likelyto be large enough to support investments of this

size• As noted earlier, global marketing does not

necessarily mean operating everywhere; in the

$ 200 billion pharmaceutical industry, for example,seven countries account for 75% of sales.



Quality

• Global marketing strategies can generate greater

revenue and greater operating margins, which, inturn, support design and manufacturing quality

• A global and a domestic company may each spend5% of sales on research and development, but the

global company may have many times the totalrevenue of the domestic because it serves theworld market

• It is easy to understand how Nissan, Matsushita,Caterpillar, and other global companies canachieve world-class quality

• Global companies “raise the bar” for all

competitors in an industry



• When a global company establishes a benchmarkin quality, competitors must quickly make their ownimprovements and come up to par

• Global competition has forced all companies toimprove quality

• For truly global products, uniformity can drivedown research, engineering, design, andproduction costs across business functions.

W ld E i T d



World Economic Trends

• There are three reasons why economic growth has

been a driving force in the expansion of theinternational economy and the growth of globalmarketing

• First, growth has created market opportunities that

provide a major incentive for companies to expandglobally

• At the same time, slow growth in a company’sdomestic market can signal the need to lookabroad for opportunities in nations or regions with

high rates of growth• Secondly, economic growth has reduced resistance

that might otherwise have developed in response tothe entry of foreign firms into domestic economies

Wh t i i idl li k



• When a country is growing rapidly, policy makersare likely to look favorably on outsiders

• A growing country means growing markets; there

is often plenty of opportunity for everyone• It is possible for a “foreign” company to enter adomestic economy and to establish itself withouttaking business away from local firms

• Without economic growth, global enterprises maytake business away from domestic ones

• Domestic businesses are more likely to seekgovernmental intervention to protect their local

position if markets are not growing• Predictably, the worldwide recession of the early

1990s created pressure in most countries to limitaccess by foreigners to domestic markets

Th ld id t t d d l ti



• The worldwide movement towards deregulationand privatization is another driving force

• The trend towards privatization is opening up

formerly closed markets significantly; tremendousopportunities are being created as a result

• For example, when a nation’s telephone company

is a state monopoly, it is much easier to require itto buy only from national companies

• An independent, private company will be moreinclined to look for the best offer, regardless of the

nationality of the supplier• Privatization of telephone systems around the

world is creating opportunities and threats forevery company in the industry.

L



Leverage

• A global company possesses the uniqueopportunity to develop leverage

• Leverage is simply some type of advantage that acompany enjoys by virtue of the fact that it

conducts business in more than one country• Four important types of leverage are experience

transfers, scale economies, resource utilization,and global strategy.

1 E i T f



1. Experience Transfers

• A global company can leverage its experience in any

market in the world• It can draw on management practices, strategies,

products, advertising appeals, or sales or

promotional ideas that have been tested in actualmarkets and apply them in other comparable markets

2 S l E i



2. Scale Economies

• The global company can take advantage of its

greater manufacturing volume to obtain traditionalscale advantages within a single factory

• Also, finished products can be produced by

combining components manufactured in scale-efficient plants in different countries

3 R Utili ti



3. Resource Utilization

• A major strength of the global company is its ability to

scan the entire world to identify people, money, andraw materials that will enable it to compete mosteffectively in world markets.

4 Global Strategy



4. Global Strategy

• The global company’s greatest single advantage can beits global strategy

• A global strategy is built on an information system thatscans the world business environment to identifyopportunities, trends, threats, and resources

• When opportunities are identified, the global companyadheres to the three principles identified earlier: itleverages its skills and focuses its resources to createsuperior perceived value for customers and achievecompetitive advantage

• The global strategy is a design to create a winningoffering on a global scale

• This takes great discipline, much creativity, and constanteffort

• The reward is not just success – it is survival.

Th Gl b l/T ti l C ti



The Global/Transational Corporation

• The global/transational corporation, or anybusiness enterprise that pursues global businessobjectives by linking world resources to worldmarket opportunity, is the organization that has

responded to the driving, restraining, andunderlying forces in the world

• Within the international financial framework andunder the umbrella of global peace, the global

corporation has taken advantage of the expandingcommunications technologies to pursue marketopportunities and serve needs and wants on aglobal scale

The global enterprise has both responded to



• The global enterprise has both responded tomarket opportunity and competitive threat by goingglobal and at the same has been one of the forces

driving the world towards greater globalization.

R t i i F



Restraining Forces

• Despite the impact of the driving forces identifiedearlier, several restraining forces may slow acompany’s efforts to engage in global marketing

• Three important restraining forces are:-

1. management myopia, 2. organizational culture,and, 3. national controls

• As we have noted, however, in today’s world the

driving forces predominate over the restrainingforces

• That is why the importance of global marketing issteadily growing.



• In companies in which subsidiary management



• In companies in which subsidiary management“knows it all,” there is no room for vision from the

top

• In companies in which headquarters managementis all-knowing, there is no room for local initiativeor an in-depth knowledge of local needs andconditions

• Executives and managers at successful globalcompanies have learned how to integrate globalvision and perspective with local market initiative

and input• A striking theme emerged during interviews

conducted by the author with executives ofsuccessful global companies

• That theme was the respect for local initiative and



• That theme was the respect for local initiative andinput by headquarters executives, and thecorresponding respect for headquarters’ vision by

local executives.

National Controls and Barriers



National Controls and Barriers

• Every country protects local enterprise andinterests by maintaining control over marketaccess and entry in both low-and-high-techindustries and advertising

• Such control ranges from a monopoly controllingaccess to tobacco markets to national governmentcontrol of broadcast, equipment, and datatransmission markets

• Today, tariff barriers have been largely removed inthe high-income countries, thanks to the WorldTrade Organization (WTO), NAFTA, and other

economic agreements

• However non tariff barriers (NTBs) still make it



• However, non-tariff barriers (NTBs) still make itmore difficult for outside companies to succeed inforeign markets

• The only way global companies can overcomethese barriers is to become “insiders” in every

country in which they do business

• For example, utility companies in France arenotorious for accepting bids from foreignequipment suppliers but, in the end, favouringnational suppliers when awarding contracts

• When a global company, such as ABB acquires orestablishes a subsidiary in France, it can receivethe same treatment as other local companies

• It becomes an “insider”

• Global advertising and promotion are also



• Global advertising and promotion are alsohampered by government regulations

• It is illegal in some countries to use comparative

advertising• In some countries, such as Germany, premiums

and sweepstakes are illegal

• Also working against global advertising is the useof different technical standards around the world

• Videotape players in the Americas and Japan usethe NTSC standard, whereas in Europe (except for

France, which uses SECAM), the PAL system isused.



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50018805 Factors Affecting Global Marketing Integration