Global Marketing is the process of conceptualizing and then conveying a final product or service worldwide with the hopes of reaching the international marketing community. Proper global marketing has the ability to catapult a company to the next level.
As per Prof M.V. Kulkarni “Global marketing involves identifying needs, wants and demand of global customers and making the products/services available to them either through own manufacturing or outsourcing and distributing the product/service at the places convenient for consuming.”
Learn about:- 1. Meaning of Global Marketing 2. Emergence of Global Marketing 3. Features 4. Elements 5. Forces Affecting Global Marketing 6. Global Marketing Environment 7. Market Segmentation on a Global Scale 8. Orientations 9. Major Global Marketing Decisions.
10. Alternative Global Marketing Entry Strategies 11. Global Marketing Planning 12. Global Vs. International Marketing Management.
Global Marketing: Meaning, Emergence, Features, Elements, Planning , Decisions and Other Details
- Meaning of Global Marketing
- Emergence of Global Marketing
- Features of Global Market
- Elements of the Global Marketing
- Forces Affecting Global Marketing
- Global Marketing Environment
- Market Segmentation on a Global Scale
- Orientations to Global Marketing Management
- Major Global Marketing Decisions
- Alternative Global Marketing Entry Strategies
- Global Marketing Planning
- Global Vs. International Marketing Management
Global Marketing – Meaning
Globalisation means integrating the economy of a country with the Global/World Economy. It means our economy is open to foreign direct investment by providing facilities to foreign companies to invest in different fields of Indian industry/commerce. MNCs have freedom to import foreign capital.
Indian companies can enter into foreign collaborations in India and set up joint ventures abroad. Import duties are considerably reduced. MNCs can enter a number of crucial sectors. Imports are liberalised considerably. New Economic Policy since July 1991 has introduced Globalisation in India.
According to Warren J Keegan, “Globalisation is the process of focusing the resources i.e. people, money and physical assets and objectives of an organization on global market opportunities and threats”
As per Prof M.V. Kulkarni “Global marketing involves identifying needs, wants and demand of global customers and making the products/services available to them either through own manufacturing or outsourcing and distributing the product/service at the places convenient for consuming.”
Global Marketing is the process of conceptualizing and then conveying a final product or service worldwide with the hopes of reaching the international marketing community. Proper global marketing has the ability to catapult a company to the next level, if they do it correctly. Different strategies are implemented based on the region the company is marketing to. Global marketing is especially important to companies that provide products or services that have a universal demand such as automobiles and food.
Global Marketing – Emergence
In the last decade of the 20th century many companies all over the world have started developing global marketing plans. Both time and distance are rapidly shrinking on account of intensive and faster satellite communication, speedy transport, and free financial flows. There is also the trend in favour of Global Standardisation of Commodities (ISO).
Marketers can also employ similar decision technology. Hence, we are steadily witnessing the emergence of global markets having common needs and desires, i.e., common demand for products in many countries, particularly, after 1981. This is the true explanation of the growth of global markets and the phenomenal development of multinational companies to fulfil the common worldwide demand. Indeed, the process of globalisation on the supply side has already begun.
Prof. Levitt’s article on “Globalisation of Markets” points out that world markets are being driven towards a converging commonality, i.e., consumer demand round the world tends to have similar needs, desires and expectations for the same product, e.g., Soni TV, Nokia mobile, Levi’s Jeans. Arrow Shirts, Gucci purses, Coca-Cola, RayBan glasses, Toyota cars, McDonald’s Hamburger, and-so on.
Everyone, everywhere wants many things they have heard, seen or experienced through TV, radio or other means of communication. Marketer adapts to national or even local needs. We are steadily witnessing the emergence of global markets, global supply, global demand due to diminishing cultural differences and adaption of similar life-styles in the urban and suburban regions.
Examples- (a) American Express has an overall advertising strategy “Membership has its privileges”— but it adjusts its message for individual countries or even specific cities, (b) To-day, products like Pepsi and Coca-cola, popular in one culture, are becoming equally popular in another or many other regions.
In the near future, market for many consumer products will not be limited or rigidly defined by national, cultural or other boundaries, but it will surpass such limits and we shall have increasing non-national or global market for many commodities.
According to Levitt, the global corporation sells the same product, the same brand (as per ISO series) and the same way to all consumers. It concentrates on similarities across the world markets and forces standardised products and services on the entire globe. Standardisation of production and marketing will have integrated value-based marketing management.
Consumers are given greater value, more reliable products at affordable prices. Levitt’s article on the global markets in 1983 has generated a large number of new references in marketing activities, e.g., global marketing, global business, global company, global brands, global advertising, global life-styles and so on. Global marketing is now occupying the centre-stage in the new marketing environment of developed as well as developing countries.
Global Marketing – 10 Important Features
The basic principles and techniques of marketing are the same in domestic and global marketing. Global markets have special features which have to be considered while preparing global marketing strategies.
1. Multiple currencies differing in stability and real value.
2. Diverse, changing policies and procedures.
3. Political factors play a major role.
4. Exchange controls and tariffs obstacles.
5. Payment and credit risks
6. Changing business environments.
7. Markets are diverse and fragmented.
8. Marketing research is expensive and many not give accurate information.
9. Many languages, many nations and many cultures
10. Government influence on business decisions
Global Marketing – 3 Elements (With Advantages and Disadvantages)
a. Economies of scale in production and distribution
b. Lower marketing costs
c. Power and scope
d. Consistency in brand image
e. Ability to leverage good ideas quickly and efficiently
f. Uniformity of marketing practices
g. Helps to establish relationships outside of the “political arena”
h. Helps to encourage ancillary industries to be set up to cater for the needs of the global player
i. Benefits of e-Marketing over traditional marketing
a. Differences in consumer needs, wants, and usage patterns for products
b. Differences in consumer response to marketing mix elements
c. Differences in brand and product development and the competitive environment
d. Differences in the legal environment, some of which may conflict with those of the home market
e. Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure)
f. Differences in administrative procedures
g. Differences in product placement.
h. Differences in the administrative procedures and product placement can occur
Global Marketing – Forces Affecting Global Marketing
Global marketing is affected by many forces i.e. Favorable (Driving forces) and Unfavourable (Restraining forces).
1. Technology plays a major role in global marketing. Internet, mobile phones, e- mail, video-conferencing, fax, Satellite TV, have improved communication facilities and have reduced distance, time and cost-barriers between countries.
2. Heavy cost of new product introduction is a driving force for entering global market. In Pharma Industry, it takes about 7-10 years for introducing a research-based new product in the market and to recover the huge cost companies try to enter international markets.
3. A company can make use of marketing strategies, which have been found to be good in one country in another comparable country with modifications, if required.
4. If the product can deliver “guaranteed performance” in international market, the company can generate high volumes and revenue.
5. With a global scale manufacturing facility, the company can extend its marketing activities to more than one country and offer the products a low price.
6. Many global markets do not exist, but marketers have created it. Companies like Pepsi and Coca-Cola have created market for soft drinks in many countries.
1. Myopic or short-sighted management does not consider entering foreign markets and explore global marketing opportunities.
2. Ethnocentric management believes that products which succeed in local market will succeed in global market, without adaptation.
3. Trade control and trade barriers restrict access to global markets.
Global Marketing – Environment
Global marketing is highly complex and elaborate. The reasons of complexity encountered in global marketing are primarily due to environmental differences. Marketing decision-making in order to capitalise global marketing opportunities is similar to the decision-making process directing home-market efforts.
The four marketing decision variables — product, price, promotion and distribution — are related to global marketing. We do have global marketing segments based on demographic, social and cultural factors influencing consumer buying process. The principal components of global marketing environment include cultural, economic, commercial, legal, and political forces. Each of these forces represents informational inputs, which shape the typical marketing-mix for a specific global marketing region.
Social, educational, family and religious systems of a country have considerable influence on its marketing system. What people buy, why do they buy, when do they buy, and how do they buy, all these characteristics of buyer-behaviour are primarily determined by the typical culture of each country.
Culture has five elements- (1) material culture, (2) social institutions, (3) language, (4) customs and traditions, and (5) aesthetics. Promotional devices must match with the culture and traditions of the concerned country.
A global marketer must have adequate information of social and cultural differences and he must adapt his advertising, personal selling and sales promotion to these social and cultural differences between nations. Each country has a distinctive social and cultural environment; language differences also lead to problems of advertising and personal selling.
Example- (1) A famous and popular slogan, “Body by Fisher” when translated into German meant, “Corpse by Fisher.” (2) In the West the bridal gown is often white and it is a symbol of purity. In India and China, white is associated with death, whereas, in the West, black is associated with mourning.
Cultural variables influence buyer-seller relations, product-policy and marketing communications. Artistic tastes of people, temperamental differences of people, are important factors in the appearance of products and the character of advertising and other promotion efforts.
2. Economic Environment:
Differences in the economic levels of the countries, i.e., the differences in the standards of living, are responsible for differences in the marketing systems prevalent in various countries. The national income per capita is the common measure of economic development of a country.
A nation having poverty or subsistence level has low national income of Rs.6,000 per head, per year (at 1997-98 price level). In such a country, marketing system in economic terms is simple as buyer’s choices are limited and inflexible. As the revel of economic development rises, the national income per capita also rises and the discretionary buying power also emerges.
Such a country offers many marketing opportunities and the marketing systems also become elaborate and complicated in due course. In moderate-income and high-income societies, different types of promotion and distribution channels are required to distribute a wide variety of goods, particularly comfort and luxury goods.
Economic dynamism of the society (not merely economic level) plays a more important role in marketing decision. In a stagnant society, patterns of consumption are static or traditional and the whole marketing process becomes a routine supply operation.
In a dynamic society, we have changing patterns of consumption and the marketing system has to adapt itself to changing consumer demand by incorporating changes in all elements of marketing-mix. Fortunately, low-income countries are steadily moving from stagnation to rapid progress and global marketers will have vast marketing opportunities in the near future.
Multinational marketers are particularly interested in developing countries because these countries account for nearly 30 per cent of the world’s population and nearly 40 per cent of the world’s income. Middle Eastern countries have assumed unique importance for our exports since 1974.
Less developed countries have about 60 per cent of the world’s population but they account for hardly 20 per cent of the world’s income. In the near future, these countries will also provide considerable marketing opportunities. They may be the greatest markets in future.
We can define four stages of economic development:
(i) Subsistence economies, i.e., agricultural countries with limited economic activity and simple local market economy.
(ii) Raw material exporting economies, i.e., countries exporting oil, metals, rubber, etc. In such countries economic wealth is in the hands of a few, with ownership often in the hands of foreigners.
(iii) Developing economies, i.e., countries embarking upon large-scale industrialisation in order to improve living standards of masses. In such countries, there is a growing middle class with keen desire to buy imported goods.
(iv) Industrial economies, i.e., matured countries with much higher standard of living and deeply involved in foreign trade both as importer and exporter.
In agricultural countries, we have very limited demand of consumers for industrial and manufactured goods. In raw-material exporting countries, we have a small but very rich upper class having definite demand for consumer durable goods and luxuries. The developing countries like India offer a good marketing opportunity, even better than matured economies.
In a developing country, there is ever-growing demand for plant and machinery. We have also growing demand for consumer durables such as appliances, T.V., refrigerators, scooters, less expensive cars, etc. Fully industrialised countries provide the best market for most of the manufactured goods as the people have much higher purchasing power.
To all other countries the matured economies provide the major and best market opportunities. In such countries we have mass consumption societies and people have a large discretionary income. They lead very high-standard lives.
3. Commercial Practices:
Global marketer must have adequate and up-to-date knowledge of the business customs and practices in order to gain the confidence and support of local buyers, middlemen and other business operatives in the foreign market.
(i) He should be familiar with the business structure, management style, attitudes and behaviour of those in charge of commercial operations in the foreign market.
(ii) He should adhere to local customs, traditions, and usage prevalent in those marketplaces.
(iii) He should assess the pattern and degree of competition and ascertain the mode of doing business in those markets. For instance, he must know at what level personal contact is to be made, what are the business ethics, and business formalities, whether any emphasis is needed on communication and on negotiation of sale contracts.
(iv) Global marketer must have information about regulations, e.g., import licences, quotas, exchange allocation, tariffs, anti-dumping law, etc.
4. Political and Legal Environment:
The controlling role of the political organisation is reflected through the laws and regulations enforced by the government in order to direct the economy of the country.
(i) A global marketer must grasp the political forces operating within a country in order to get the desired insights in the basic legal framework of the country. At present in some countries governments have assumed substantial economic direction. The economic and commercial development is taking place with active Government participation and intervention. The degree of intervention varies across countries. In less developed countries, Government policies are most extreme.
(ii) To secure success, a global marketer must determine the political climates of other countries. If these are most favourable, he can give top preference for the exploitation of marketing opportunities in those countries.
(iii) A global marketer must find out whether his products are considered socially and economically desirable or essential, e.g., key drugs and medicines. His product should not involve a net drain on scarce foreign exchange of the host country.
(iv) Adequate labour, skill and materials should be available the product is to be manufactured in a foreign country.
(v) The foreign Government always welcomes foreign enterprises, if they contribute a lot to the development of its infrastructural facilities like transport, power, and communications. Foreign collaboration is also welcome in the development of basic and key industries such as machine tools, iron and steel, power, cement, construction machinery, etc.
(vi) Some governments may be hostile to imports, or even to foreign investments. Others may actively encourage foreign collaboration to attract capital and skills for quick industrialisation. When a country undergoes political instability, these attitudes may suddenly change. Many a time, there is the danger of expropriation. There may be price control or exchange restrictions imposed by foreign Governments.
(vii) The following political and government factors must be taken into consideration by a global marketer while planning to enter any market abroad- (a) consistency of government policies, (b) the nature of political relationship between the target country and the exporter’s country, (c) presence or absence of controls on foreign exchange, imports, prices, etc., in the target country, (d) legal restrictions on foreign investment and patentability of the product in the target market.
(viii) Each country has different legal environment. Legal difficulties in marketing are most prevalent in the following areas- (a) laws and practices relating to patents and trademarks, (b) price controls, (c) warranty laws and after-sales services, (d) packaging laws, (e) resale price maintenance, (f) rules of competition, restrictions on promotion, pricing, exclusive sales agencies. The marketer should establish proper understanding with his foreign customers on all these legal aspects.
The task of global marketer is to adapt the marketing-mix to the marketing environment of the foreign nations. Environmental differences between nations are usually far more marked. The marketer must adapt the marketing mix to economic, legal, social, cultural and technological environment of the country under consideration. Each country has typical economic, social, cultural, commercial, legal and political conditions.
Global environmental differences do require a change of emphasis on certain aspects of marketing such as barter trading, licensing, joint ventures, and the use of agents in the selling functions. These special global aspects of marketing demand a far more detailed knowledge than might be necessary within any nation.
Global Marketing – Market Segmentation on a Global Scale
Market segmentation is the modern marketing strategy. The global marketer partitions the global market into sub-markets or segments. Each sub-division manifests similar responses to marketing inputs. Segmentation helps to maximise penetration of such segments rather than spread the marketing effort over the total market.
The conventional ways of segmenting markets are:
(1) Socio-economic variables such as age, gender, family size, income, occupation, family life-cycle, race, religion, social class, etc., (2) Cultural groupings, (3) Geographical variables, (4) Behavioural patterns, e.g., usage rates or buying motives. If we have, say, four geographic levels, three culture and language groups and three usage rates (heavy users, light users and non-users), we would have thirty-six segments in the global marketing.
There are four alternatives before a global marketer- (1) selling the home product as is in the foreign markets without any change, (2) modifying it for different countries, (3) evolving new products for global sale, and (4) incorporating all differences duly into the domestic product design and then selling a global product as per ISO or other globally acceptable standards.
Till 1970, national differences in the needs and preferences and the marketing environment of each country demanded a custom-tailored marketing-mix for each country and marketers were following this practice.
From 1981, many multinational companies favoured standardisation of products wherever feasible and by 1991, many global companies could manage to create global market for standardised global products with or without a few modifications to accommodate the peculiar local, cultural or other differences. Benefits of standardisation are- (1) cost saving in production as well as in distribution or marketing and also economies in R & D, (2) “Shrinking” of the world market-place.
Factors demanding adaptation are- (1) Government and legal influences, (2) varying use conditions in countries, (3) differing consumer demand and buyer behaviour in countries, and (4) customer-oriented marketing concept demanding consumer supremacy even in the global market.
Emergence of global market and global common consumer wants and preference by 21st century is a fact which cannot be denied. Marketers should not rush and move too fast. We will have world brands for many consumer products once the product becomes very successful in a large home market. World-wide promotion can work effectively in the creation of globally standardised products.
Global Marketing – Orientations to Global Marketing Management
1. Domestic Market Extension Strategy:
The domestic company is mainly interested in home trade and export marketing is only a side activity as and when it has surplus supply to be sold at a profit. It regards foreign customers just like home consumers and foreign market is considered simply as an extension of home market. Naturally it offers similar marketing- mix assuming foreign demand and home demand to be similar. Thus, it ignores differences in internal and global marketing environments.
2. Separate Marketing Strategy for Each Country:
Once we recognise the differences in the marketing environment of overseas markets, each country will demand a unique marketing- mix to fulfill the unmet consumer needs and desires of each country and the tailor-made marketing-mix will be formulated to adapt the marketing environment and consumer demand of each country. The marketing orientation is now on a country-to-country basis. For each country we have separate marketing plan/programme.
3. Global Marketing Orientation:
Since 1981, with the emergence of global markets for many commodities, multinational companies began to act as global companies. Global marketing strategy is based on the existence of world markets which are being driven toward a common pattern of consumer demand, consumer preferences and similar buyer behaviour around the world.
The global market secures the economies of scale, develops standardised goods as per global standards and offers standard goods of reliable quality at fair prices to a global market. We have standardised global marketing-mix. A few modifications may be made to fulfil local influences. Cultural uniqueness of each country will be accommodated where feasible in our marketing-mix.
The global marketing concept would, consider home and all foreign markets as one marketing segment or one target market. Marketing planning and marketing-mix are based on global perspectives. We do not have as yet global market for all consumer goods. Environmental factors of each country still dominate and our tailor-made marketing-mix for each country has to be developed in global marketing.
Global Marketing – Major Global Marketing Decisions
When a firm thinks of entering into global markets, it has to take major decisions in the following areas:
1. The Global Marketing Decision:
The initial decision regarding entry or expansion in global marketing must be based on the opportunities (customer needs not yet satisfied) open to the firm abroad. These opportunities must be greater than those present in the home country. Even if opportunities appear very favourable, the firm must have resources in men, money, and materials to capitalise them.
2. The Market Selection Decision:
The next decision is the market selection decision. A marketer has three alternatives to enter the market—undifferentiated marketing, differentiated marketing, and concentrated marketing, i.e., concentrating on one or a few market segments. Globally, most companies should prefer a strategy of concentration on a limited number of key markets (market segments).
This approach will be feasible and they can operate only in narrow fields in the beginning. Global marketing research can help a firm to select a few key markets which will offer highest profitability.
3. The Market Entry Decision:
The firm will have to determine the most appropriate method of entering into those global markets which offer good and feasible marketing opportunities. The various methods of market entry open to a firm in a given country are exporting, licensing, manufacture abroad (through a foreign subsidiary or a joint venture) or entering into turn-key projects in foreign countries.
4. Marketing-Mix Decision:
Once the decision on market entry is taken, the firm will now have to plan and implement a marketing-mix, which will be perfectly in tune with the typical demands of the marketing environment of the foreign target markets.
(a) Product-Mix Decision:
These involve new product servicing, trademarks, etc. We may have one standard global brand name. Many a time, we may have separate brand name duly registered in the foreign country under its laws relating to brands and trademarks. For industrial goods brand name is not very important.
(b) Distribution Decision:
In any country, channel decisions are considered vital policy decisions as they involve long-term commitments and resolution of conflicts between the producer and middlemen. When middlemen are used, producers cannot have large control over their own markets and co-operation between all channels becomes very necessary.
The global marketer must take into account channels between nations and also channels within nations. Channels between nations include export through middlemen in your country or direct export to foreign customers who may be end users or middlemen in foreign countries. The marketer may also manufacture abroad on his own account or through a joint venture.
Channels within the foreign country involve local wholesalers and retailers. Marketers should take interest with the entire channel of distribution from producer to the final buyer. The whole channel concept for each market is necessary for good global marketing.
(c) Global Pricing:
Global pricing has three alternative approaches- (i) Demand-orientation, (ii) Competitor-oriented pricing is suitable in the commodity markets, i.e., wheat, tea, coffee, rubber, etc. Prevailing price is the main indicator for pricing. It will avoid price competition. (iii) Cost-orientation.
For industrial goods, we may use cost-oriented pricing, as the final price is not influenced primarily by the intensity of demand. Pricing can be on the basis of anticipated size of demand, if you can assess demand. In the case of branded consumer goods, we may have demand-oriented pricing. Global marketer must have satisfactory rate of return even against keen competition.
Differential (demand-oriented) pricing is becoming increasingly difficult in global market due to the following reasons- (1) We have inter-economic groups demanding price uniformity in their own increasing purchasing practices. In global marketing, we also have barter exchange, i.e., direct exchange of goods for goods, e.g., Pakistan selling cotton to Bangladesh and receiving jute in return. Barter exchange does not require the use of scarce foreign exchange.
Barter can provide access to some markets that would otherwise be out of reach. Global marketer has also to consider price controls prevalent in foreign countries while fixing his prices. In many countries restrictive trade practices and monopolistic pricing are prohibited by special legislation.
The transfer price between nations is also an important pricing decision. It is said that global transfer pricing is manipulated by global marketers in order to reduce tax burden or liability on import duties. The transfer price is also used to avoid accumulation of funds in a country with very high inflation or where there is the growing risk of expropriation. Governments are also now anxious to prevent global marketers in getting undue benefits through transfer prices.
In a marketing sense, communications include all devices of promotion, such as advertising, sales promotion, personal selling and publicity.
Environmental differences between nations create special problems for global marketer in global advertising and sales promotion. These differences are relating to culture, language, customs and traditions, and government attitudes towards advertising. There are legal and social restrictions in many countries on advertising messages.
For example, in Germany superlatives are prohibited in making comparisons. We cannot use ‘best’ or ‘better’ or ‘excellent’ superlatives in advertising. In Middle Eastern countries advertising cannot use openly fair sex pictures. Sexy advertising is prohibited in many less-developed countries.
Each sales promotion must be checked against local regulations. Sales promotion also needs full co-operation of local retailers. Global exhibitions are very good for publicity of your products in foreign countries. Participation in trade fairs and exhibitions should be an integral part of overall global marketing plan.
Global sales management covers the following aspects- (1) management of travelling export sales representatives based in the markets abroad, (2) management of sales through export-import agent middlemen. Partly due to higher cost and partly due to difficulties of custom, culture and language, exporters usually prefer local national sales representatives, already based in the foreign markets.
Sales agencies are considered good channels by global marketers. There is a regular agency agreement acting as a commercial contract and it describes the terms and conditions of sales agency. We may have exclusive or sole sales agency for one region or one country. The sales agency receives a fixed commission on sales. We have consignment sales.
5. Organisation for Global Marketing:
Marketing activities are usually organised on the basis of- (a) marketing functions, or (b) marketing regions, or (c) product groups. In global marketing, we come across three stages in organisational structure- (1) Marketer enters global marketing by establishing an export department. (2) In due course, there may be a global divisional organisation. (3) Finally, there may be a full-fledged multinational organisation.
An export department must be marketing (not merely a sales) organisation and it must be in charge of all the elements of marketing-mix. When a company moves into manufacturing in other countries, it starts a global division in place of an export department.
Divisionalisation or decentralisation may be functional, regional or product-wise. Regional organisations are very common. For each region we have one Regional Manager. He is the key manager at the head office for his region. He has full authority and responsibility for all activities in his region. A global division organised on regional basis can have ample scope for further expansion.
In a divisionalised organisation structure, we have limited degree of centralisation. The central management of Multinational Corporation is in charge of the following key areas- (1) Multinational strategic business planning and formulation of grand strategy. (2) Basic policy decisions such as changes in product policy, marketing policy, etc. (3) Major capital expenditure for a project in any target market abroad. (4) Basic research, and development of key executives abroad.
A multinational corporation adopts centralised co-ordination and decentralised administration. Each division is a profit centre but we have central co-ordination by overall plans and policies. We have centralised planning, co-ordination and control; each division, however, enjoys considerable autonomy in its internal organisation and management.
Global Marketing – Alternative Entry Strategies
Once the company has committed to go global it must choose an entry strategy, i.e., the best mode of entering into global marketing.
The usual entry strategies are:
A marketer can enter the global market by exporting from the home country. This is an easier and common entry strategy as a first step to enter the global market. There is minimum risk of financial liability. It can be adopted even by a mature global company. Exporting is an appropriate and permanent form of global operation in marketing.
It is a good method to enter a global market. It does not involve large capital investment. The license agreement may provide patent rights, trade mark rights, and the rights to use technological processes. The exporter (licensor) gains entry into another country at limited risk.
But licensor has limited control over the licensee company operating in the other country. At the end of the license period, the licensee may become a rival in case he is successful in his business.
Licences may be granted for production process, for the use of patents, or merely for distribution of imported goods, if foreign companies are not allowed by a country, licensing acts as an ideal entry strategy in global markets.
Franchising is a rapidly-growing form of licensing in which the franchiser provides the franchisee a standard package of products, as well as management and distribution systems/services. The franchisee (licensee) offers market knowledge, capital and personal involvement in management and marketing.
It may be noted that the franchiser is allowed to follow through on marketing of products right upto the point of sale to the consumers. Franchising provides an effective mix of centralisation of skill and operational decentralisation. Franchising is an important form of global marketing in the fast-food, hotels/motels, soft- drinks, retailing, car rentals, and recreation service industries.
Franchising is an attractive form of business organisation for companies to secure fast growth with limited capital investment. Foreign governments welcome franchising as it gives local ownership, local operations and also local employment.
Franchise companies can also enter a foreign market through a joint venture with a local company. However, in a joint venture franchisor and franchisee become regular partners in business. Even a Government can become a partner in franchising.
4. Contract Manufacturing:
It is an alternative entry strategy to licensing. A company enters into a contract with a foreign producer to manufacture products for sale in the foreign markets only. The company retains responsibility for promotion and distribution of its product. Contract manufacturing is common in book publishing and magazine publishing industry (e.g., Indian Edition of American book for India).
5. Management Contract:
Under this form of entry, a company contracts with a foreign corporation or government to manage an entire project or undertaking for an agreed period. Management contracts provide for training of local personnel who will, in due course, take over full management responsibility, in the installation of modern telecommunication system such a form of entry into a foreign market is quite common.
6. Turnkey Contract:
It is similar to management contract except that here the company enters into a contract with a foreign enterprise to design and build an entire operation. On the completion, the operation is handed over to local personnel who have been specially trained to run the enterprise.
Tata Consulting Engineers, India are specialists in executing turnkey projects. Some of the major projects executed by them are- (1) Gas turbo generator power station at Kuwait, (2) Hydroelectric project in Iraq, (3) Installation of spindle spinning mill in Tanzania, (4) Hotel project in Yemen, and (5) Water supply scheme in Malawi.
7. Joint Venture:
A joint venture is a foreign operation in which the global company has necessary equity to get a voice in management but not enough to completely dominate the venture. Generally, equity share is 25 per cent to 75 per cent. Global marketer is satisfied with 50 per cent share for effective managerial control.
Joint venture is a typical form of foreign collaboration adopted by a multinational corporation to expand its business in foreign countries, particularly in developing countries. Such joint deals take place between two or more units when these units come together for financial, managerial and technical collaboration. Joint venture is a partnership between the business houses or corporations of two countries.
The global partner or collaborator supplies capital, technology as well as managerial and technical personnel to start a project in another country. Multinational corporations are particularly interested in expanding their production and markets through joint ventures all over the world.
8. Direct Investment (Manufacturing Abroad):
Global investment in foreign countries indicates total involvement in production, finance, marketing and management of business in foreign countries. The biggest involvement in a global market is through direct investment or assembling facilities in foreign countries. This is done when foreign countries have no objection and the foreign market is vast. India has now agreed for direct investment, particularly in its infrastructure development, i.e., in transport, power and communication.
This pattern of marketing enables the marketer to use low-cost manpower, avoid several import-export restrictions, reduce cost of transport and distribution and secure access to local raw materials. Of course, in such global investment the marketer has 100 percent, ownership.
The marketer has full say in management and marketing and enjoys all the facilities which are available to local producers. The investor has all the benefits of joint ventures.
Cartels, consortia and syndicates are similar to joint ventures. They have two unique differences- (a) they involve a larger number of participants working as a team of specialists, (b) they operate in non-member countries. The consortium-approach helps pooling of financial, technical, and managerial resources and we also have minimisation of risks. Huge projects demanding considerable capital, technical skills and managerial responsibilities are completed under a consortia.
In this collective enterprise each partner is in charge of a specialised job. A senior partner acts as a leader or syndicate manager to co-ordinate and integrate the jumbo project involving huge capital and varied skills.
10. Counter Trading (Barter System):
Countertrade describes global trading transactions where all or partial payment is made in kind (barter) rather than in cash (foreign exchange). Countertrade gives an important competitive advantage in foreign trade.
Counter trading will play an important role when you are interested in the emerging growth markets, e.g., East Europe, Republics of Russia, China and some countries in Asia and South America. Such new growth markets are usually having great demand but very limited foreign exchange resources for global payments. Most developing countries have shortages of hard currencies and they have also great foreign debt.
They welcome sellers who accept counter trade. The emergence of buyers’ market in consumer goods and also in industrial goods needs counter trading as an instrument of competition. Corporations all over the world are increasingly employing counter trade as a competitive tool in order to enter a new market or to maintain or increase market share. Bilateral trade agreements are also based on counter trade. There are expert middlemen to facilitate counter trade dealings. However, they are also costly.
Global Marketing – Planning
The Government’s pragmatic economic reforms in the form of liberalisation, de-regulation, relaxation of trade and investment controls and privatisation have led to increase in exports and foreign exchange reserves, higher competition and efficiency in the market place and availability of a variety of goods and services.
The economic policies have resulted in major changes in the marketing environment of the country. Indian companies are in growth phase and are trying to explore global markets.
Marketing plans are the integral components of the total corporate plans which also cover other functional areas such as production, finance, personnel, and research and development. The overall corporate plan acts as the root. A multinational corporation can be compared with a big tree with many branches. Each branch represents a country.
The overall corporate objectives constitute the root of a multinational corporate planning. We will have appropriate grand or master strategy for accomplishing the master corporate plan. The master strategic plan will cover all branches such as marketing, production, finance, personnel, research and development, etc. Each market will have its own marketing plan. If there are four markets or divisions, we shall have four branch plans for markets A, B, C and D.
Let us concentrate on one branch plan, say, marketing planning of market ‘A.’
The planning process in global business involves the following steps:
1. The needs and expectations of the various stakeholders to be fulfilled by the firm in each country,
2. The strengths and weaknesses of the firm indicating its competence to capitalise global marketing opportunities,
3. Future marketing opportunities to be met and the threats or risks to be faced,
4. The overall corporate objectives to be achieved in the light of the firm’s competence and the perceived marketing opportunities,
5. Alternative strategies to accomplish the objectives,
6. The selection of the best and most profitable strategies or means to achieve the objectives, and
7. The strategic plan indicating the job of each function of the business in order to meet our objectives.
1. The Stakeholders’ Expectations- What do they desire from the multinational firm?
2. Internal Environment- What are our strengths and weaknesses and our capacity in the light of resources at our disposal?
3. External Environment- What are the future marketing opportunities which can be exploited and what are the probable risks and threats against which we have to protect ourselves?
4. Corporate Objectives- What are our goals and objectives which we can achieve in the light of our competence and perceived marketing opportunities?
5. Search of Alternative Strategies- How can we achieve our set objectives in the best possible manner?
6. Choice of Best Strategies- Which are the most desirable means to accomplish our objectives or ends?
7. The Strategic Plan- What shall be the tasks of each functional area of our business to meet our predetermined goals?
Marketing planner will start with assessment of internal strengths and weaknesses on the basis of performance-analysis of the market or division ‘A’. The planner will now embark upon external audit, i.e., assessment of marketing opportunities for market ‘A’ on the basis of marketing profile analysis, i.e., consumer needs, stakeholder’s expectations, etc. Once the planner has adequate information regarding internal and external environment for market ‘A’, he will find out corporate restraints, particularly funds available, corporate policies, etc.
On the basis of adequate information on corporate strengths and weaknesses as well as on marketing environmental factors such as competition, consumer demand, legal, political conditions as well as expectation of various stakeholders (shareholders, employees, customers, suppliers, bankers, government and community), the planner will formulate marketing objectives per country and per segment.
These marketing objectives must be duly coordinated with other markets and the overall corporate objectives must be simple and universally understood, particularly in a multi-language environment. They will indicate what the multinational firm as a whole is aiming to achieve. Marketing objectives of each division or target market are the means to achieve the overall corporate objectives.
Once the marketing objectives or goals are determined for the Market of each country or division, the planner will determine how to get there, i.e., how to reach the destination. This will involve exploration of alternative strategies. Marketing strategies which can be explored are- (1) Market penetration, (2) Market development, (3) Market segmentation, (4) Market concentration, (5) New product development, etc.
The planner will have to select the most appropriate or the best strategy (desirable means) to achieve the predetermined ends or objectives. The selected strategy should be compared with other markets and coordinated with the marketing strategies of other markets also.
The marketing strategies should also be coordinated with overall strategies at the corporate level such as acquisition, mergers, rationalisation, diversification, deeper penetration of global markets, etc. Thus, if at the corporate level, the planner has to achieve deeper penetration of global markets, it is quite obvious that the marketing plan of each country will have a strong leaning towards market penetration.
Strategies must be specific and practical. The planning package must have balance between the corporate and marketing strategies so that they are in full sympathy with each other.
Once the strategic plan is ready for the total organisation as well as for each family unit of each country, the planner will proceed to formulate action programmes in the shape of annual budgets and operating plans for each functional area of business.
Action plans will also be supported by schedules and time-table of market introduction plans, advertising and sales-promotion activities, sales-training etc. Action plans cover each ingredient of the marketing- mix, viz. – (1) Product. (2) Price. (3) Promotion. (4) Distribution.
The secret of successful management of global companies lies in the well-known principle- “Centralise responsibility for strategic planning and decentralise responsibility for local or regional planning operations and control.” In a complex global marketing environment effective co-ordination, communication and control assume unique importance in the cycle of planning- operations-control-replaning.
Global Marketing – Global Vs. International Marketing Management
Global marketing management adopts global marketing concept. It tries to develop a standardised marketing-mix for the home market and other foreign markets. Of course, cultural differences are never ignored. If such differences are crucial to marketing success, necessary adaptations are made in the components of the marketing-mix.
The world is viewed as one market on the basis of cultural and behavioural similarities, whereas international marketing management is based on the cultural and behavioural differences and the marketer believes that each foreign market is a separate market segment demanding a separate tailor-made or customised marketing-mix, i.e., each foreign market needs its owns culturally clicked or tuned marketing strategy.
Let us be very clear that global marketing strategy is primarily interested in efficiency of operations and competitiveness, whereas globalisation of markets is concerned with the uniformity of demand pattern across cultures. We can secure cost-effectiveness and competitive benefit in a global market through a global marketing strategy without complete standardisation of marketing-mix or without absolute demand uniformity.
Standardisation is resorted to wherever it is feasible. As international competition intensifies in the 21st century, successful MNCs will be guided steadily by the global marketing concept. Colgate-Palmolive Company has tartar-control toothpaste (same product) sold in more than 40 countries having only two alternative advertisings. Coca- Cola, the world leader in soft drink market, now sells the soft drink in China and India, the biggest two markets.
MNCs vs. Global COS:
1. Product life-cycle – Product life-cycle is different in each country for the same product.
2. Marketing-mix – Each country is offered tailor-made marketing- mix. One country, one market segment. Differences in consumer demand recognised for each nation. Marketing-mix clicks with national environmental forces.
3. Consumer – Preferences reflect unique national differences. Hence, many customised markets. Supply bent as per demand. Hence, limited role for standardisation.
4. Pricing – Consumers are prepared to pay more for a customised product as supply is adjusted to demand.
5. Distribution – Each nation has typical distribution system. It is followed by a marketer.
1. Product Life-Cycle – All consumers have common demand for the most advanced article. Hence, PLC is same in all countries.
2. Marketing Mix- Product designed for global performance. Product adapted to common global needs/desires; world as market segment for standardised product. One global marketing-mix with marginal adaptations in product/promotion.
3. Consumer – We have global convergence of consumer needs/ wants. Maximum standardisation of products and ample scope for economies of scale; globalisation of supply side. Common pattern of promotion.
4. Pricing – Consumers welcome a globally standardised product of reliable quality at reasonable fair price.
5. Distribution – Even in distribution we have global standardisation of distribution.
Foreign MNCs, with their capital, technology and brands, have a crucial role to play in India’s economic growth and are rightly being invited into India in the liberalised policy framework. Besides the direct technology and capital infusion, many small and ancillary businesses will also benefit more rapidly with the entry of foreign companies, enhancing value addition to the Indian economy.
The large Indian consumer market, now representing 15 per cent of world population, together with its low-cost of production, are powerful forces attracting foreign MNCs into India. Foreign MNCs are today eager to enter the Indian market both through strategic alliances with Indian companies who understand the Indian consumer better and who can provide ready-made distribution infrastructure, as well as through direct 100 per cent investment into India.
The top 10 MNCs — consisting of U.S.A., U.K., Japanese and German companies have combined turnovers exceeding India’s G.D.P. with less than about 3 million employees. India at this stage needs foreign capital, technology and linkages to overseas markets to take a quantum leap forward in order to secure accelerated growth in income and employment and to achieve the status of newly industrialised country by the turn of 21st century.
Foreign MNCs are initially attracted by the huge Indian consumer market. The low-cost advantage that goes with this attraction will, in due course, make India a preferred production centre, and foreign companies will profitably export goods out of India. Gradual exports from such facilities to global markets would then serve the useful purpose of invigorating the Indian economy and also bestow global respect on India as a production centre for high-quality goods.
The results of our liberalisation policies (since 1991) have certainly been dramatic. In many ways, the economy has been transformed so that it has become unrecognisable in comparison with the economy in the seventies or eighties. Most of the controls and regulations are dismantled.
Most restrictions on foreign capital have been removed. Foreign enterprise has now much wider scope. Even foreign trading firms are now permitted to function in India. Foreign companies are free to invest in India. Free market economy is established. Foreign exchange transactions on current account can be carried out in a virtually free market.
These measures have brought the remarkable economic resurgence. India has received massive infusion of private capital through both direct foreign investment in joint ventures and portfolio investment in the stock markets. Many well-known foreign companies have begun to invest in joint ventures in India.
New foreign financial institutions have also entered India. Indian private sector firms have raised large loan capital from abroad. Indian company shares are being traded in European stock markets in the form of global depository receipts. Our exports have risen sharply due to favourable exchange rate.
Private sector is now encouraged to participate on a large scale in the accelerated development of our infrastructure particularly in power, transport and telecommunication.
India today has competitive advantage in several areas such as textiles, agro-processing, software, jewellery, crafting, leather, granite, tea, marine foods, engineering goods, two- wheelers, tobacco, speciality steel, aluminium, construction materials, to name a few.
While foreign direct investment into India does benefit the economy in considerable measure, even greater benefits would be achieved if we nurture and develop our own companies to grow into India’s multinationals. Indian companies are in a position to adopt and achieve global relevance by accessing cost-effective funds to finance company and brand acquisitions, purchase of technology and investment in product development and R&D.
Over the last few years, there have been several multi-million dollar acquisitions by Indian companies. The list includes Tata Tea buying Tetley (UK), takeover of Corus by Tata Steel, Novelis by Hindalco, Jaguar by Tata Motors, Bharti Airtel taking over Zain Mobile, etc. India needs to adopt a dual policy consisting of attracting foreign multinationals and creating India’s multinationals.
Such a middle path strategy will result in balancing the Indian economic power, in the next decade with foreign multinationals on one side and a growing number of Indian multinationals on the other.