Introduction To Global Marketing
A look atthe appropriate figures, (for example The World Development Report by the World Bank) will indicate that the world is becoming increasingly interdependent forits economic progress. In 1954, in the USA, for instance, imports were only onepercent of GNP, but in 1984 they had risen to 10%. In food crops, while developing countries trade in coffee, cocoa, cotton and sugar actually declinedin value during the 1980s, developing countries as a group experienced annualexport growth rates of 4 to 11% in categories like processed fruit andvegetables, fresh processed fish products, feed stuffs and oil seeds. Highvalue food product exports in 1990 totalled approximately $144 billion, thesame as crude petroleum, representing 5% of world commodity trade. In 1990,more than twenty Less Developed Countries (LDCs) had exports of high valuefoods exceeding $500 million including countries like Brazil, China, Thailand,India and Senegal.
Terms such as “global village” and “world economy” have become very fashionable. Marketing goods and services on a global scale can happen in an”engineered” way, but often it is as a result of good and meticulous planning. For example, in order to stave off potential famine, the United Nation’s World Food Programmer (WFP) may purchase maize from Zimbabwe anddistribute it in Tanzania, Malawi and Kenya. This “engineered” international marketing transaction may benefit Zimbabwe, without Zimbabwe having to prospect markets. Most international transactions are not like this.Most are clearly planned, involving meticulous attention to global social and economic differences and/or similarities in product, price, promotion,distribution and socio/economic/legal requirements.
Chapter Objectives
Theobjectives of this chapter are:
· To provide an understanding of thefactors which have led to the growth of internationalism and globalisation
· To produce a description of the majorconcepts and themes on which the subject of global marketing is based
· To describe what is involved inplanning for global marketing.
StructureOf The Chapter
The chapterstarts by looking at the evolution of a firm’s orientation from primarily adomestic producer to a global player. It then goes on to describe the majorfactors that have led to global marketing, including both economic and social.Finally the chapter examines the planning mechanism necessary to take accountof important differences and/or similarities when marketing goods and servicesinternationally.
The evolution of globalmarketing
Whether anorganisation markets its goods and services domestically or internationally,the definition of marketing still applies. However, the scope of marketing isbroadened when the organisation decides to sell across internationalboundaries, this being primarily due to the numerous other dimensions which theorganisation has to account for. For example, the organisation’s language ofbusiness may be “English”, but it may have to do business in the”French language”. This not only requires a translation facility, butthe French cultural conditions have to be accounted for as well. Doing business”the French way” may be different from doing it “the Englishway”. This is particularly true when doing business with the Japanese.
Let us,firstly define “Marketing” and then see how, by doing marketingacross multinational boundaries, differences, where existing, have to beaccounted for.
S. Carterdefines marketing as:
“The process of building lastingrelationships through planning, executing and controlling the conception,pricing, promotion and distribution of ideas, goods and services to createmutual exchange that satisfy individual and organisational needs andobjectives”.
The longheld tenants of marketing are “customer value”, “competitiveadvantage” and “focus”. This means that organisations have tostudy the market, develop products or services that satisfy customer needs andwants, develop the “correct” marketing mix and satisfy its ownobjectives as well as giving customer satisfaction on a continuing basis.However, it became clear in the 1980s that this definition of marketing was toonarrow. Preoccupation with the tactical workings of the marketing mix led toneglect of long term product development, so “Strategic Marketing”was born. The focus was shifted from knowing everything about the customer, toknowing the customer in a context which includes the competition, governmentpolicy and regulations, and the broader economic, social and political macroforces that shape the evolution of markets. In global marketing terms thismeans forging alliances (relationships) or developing networks, working closelywith home country government officials and industry competitors to gain accessto a target market. Also the marketing objective has changed from one ofsatisfying organisational objectives to one of “stakeholder” benefits- including employees, society, government and so on. Profit is still essentialbut not an end in itself.
Strategicmarketing according to Wensley (1982) has been defined as:
“Initiating, negotiating andmanaging acceptable exchange relationships with key interest groups orconstituencies, in the pursuit of sustainable competitive advantage withinspecific markets, on the basis of long run consumer, channel and otherstakeholder franchise”.
Whether onetakes the definition of “marketing” or “strategicmarketing”, “marketing” must still be regarded as both aphilosophy and a set of functional activities. As a philosophy embracingcustomer value (or satisfaction), planning and organising activities to meetindividual and organisational objectives, marketing must be internalised by allmembers of an organisation, because without satisfied customers theorganisation will eventually die. As a set of operational activities, marketingembraces selling, advertising, transporting, market research and productdevelopment activities to name but a few. It is important to note thatmarketing is not just a philosophy or one or some of the operationalactivities. It is both. In planning for marketing, the organisation has tobasically decide what it is going to sell, to which target market and with whatmarketing mix (product, place, promotion, price and people). Although thesetenents of marketing planning must apply anywhere, when marketing across nationalboundaries, the difference between domestic and international marketing liesalmost entirely in the differences in national environments within which theglobal programme is conducted and the differences in the organisation andprogrammes of a firm operating simultaneously in different national markets.
It isrecognised that in the “postmodern” era of marketing, even theassumptions and long standing tenents of marketing like the concepts of”consumer needs”, “consumer sovereignty”, “targetmarkets” and “product/market processes” are being challenged.The emphasis is towards the emergence of the “customising consumer”,that is, the customer who takes elements of the market offerings and moulds acustomised consumption experience out of these. Even further, post modernisim,posts that the consumer who is the consumed, the ultimate marketable image, isalso becoming liberated from the sole role of a consumer and is becoming aproducer. This reveals itself in the desire for the consumer to become part ofthe marketing process and to experience immersion into “thematicsettings” rather than merely to encounter products. So in consuming foodproducts for example, it becomes not just a case of satisfying hunger needs,but also can be rendered as an image – producing act. In the post modern marketplace the product does not project images, it fills images. This is true insome foodstuffs. The consumption of “designer water” or”slimming foods” is a statement of a self image, not just a productconsuming act.
Acceptanceof postmodern marketing affects discussions of products, pricing, advertising,distribution and planning. However, given the fact that this textbook isprimarily written with developing economies in mind, where the environmentalconditions, consumer sophistication and systems are not such that allow aquantum leap to postmodernism, it is intended to mention the concept inpassing. Further discussion on the topic is available in the accompanying listof readings.
Whenorganisations develop into global marketing organisations, they usually evolveinto this from a relatively small export base. Some firms never get any furtherthan the exporting stage. Marketing overseas can, therefore, be anywhere on acontinuum of “foreign” to “global”. It is well to note atthis stage that the words “international”, “multinational”or “global” are now rather outdated descriptions. In fact”global” has replaced the other terms to all intents and purposes.”Foreign” marketing means marketing in an environment different fromthe home base, it’s basic form being “exporting”. Over time, this mayevolve into an operating market rather than a foreign market. One such exampleis the Preferential Trade Area (PTA) in Eastern and Southern Africa whereinvolved countries can trade inter-regionally under certain common modalities.Another example is the Cold Storage Company of Zimbabwe.
0 In”global marketing” the modus operandi is very different.Organisations begin to develop and run operations in the targeted country orcountries outside of the domestic one. In practice, organisations evolve andTable 1.1 outlines a typology of terms which describes the characteristics ofcompanies at different stages in the process of evolving from domestic toglobal enterprises.
The fourstages are as follows:
1. Stage one: domesticin focus, with all activity concentrated in the home market. Whilst manyorganisations can survive like this, for example raw milk marketing, solelydomestically oriented organisations are probably doomed to long term failure.
2. Stage two:home focus, but with exports (ethnocentric). Probably believes only in homevalues, but creates an export division. Usually ripe for the taking by stagefour organisations.
3. Stagethree: stage two organisations which realise that they must adapt theirmarketing mixes to overseas operations. The focus switches to multinational(polycentric) and adaption becomes paramount.
4. Stagefour: global organisations which create value by extending products andprogrammes and focus on serving emerging global markets (geocentric). Thisinvolves recognising that markets around the world consist of similarities anddifferences and that it is possible to develop a global strategy based onsimilarities to obtain scale economies, but also recognises and responds tocost effective differences. Its strategies are a combination of extension,adaptation and creation. It is unpredictable in behaviour and always alert toopportunities.
There is notime limit on the evolution process. In some industries, like horticulture, theprocess can be very quick.
Factors which have led to internationalisation
There havebeen many underlying forces, concepts and theories which have emerged as givingpolitical explanation to the development of international trade. Remarkably,despite the trend to world interdependency, some countries have been lessinvolved than others. The USA, for example, has a remarkably poor exportrecord. About 2000 US companies only account for more than 70% of USmanufacturer’s exports. This has been mainly due to its huge statewide domesticmarket, which is almost tantamount to “international trade”, forexample, Californian fruit being sold three thousand kilometres away in NewJersey. Japan has risen fast to dominate the export rankings, with countries ofAfrica struggling to make a significant mark, mainly because of their emphasison exporting primary products. This section will briefly examine the forceswhich have been instrumental in the development of world trade.
Theoreticalapproaches
Theseinclude the theory of comparative advantage described in the book Wealth ofNations (Adam Smith) and David Ricardo), the product trade cycle (RaymondVernon) and The Business Orientation (Howard Perlmutter).
Thetheory of comparative advantage:
The theorycan be relatively complex and difficult to understand but stated simply thistheory is a demonstration (under assumptions) that a country can gain fromtrade even if it has an absolute disadvantage in the production of all goods,or it can gain from trade even if it has an absolute advantage in the productionof all goods. Even though a country has an absolute production advantage it maybe better to concentrate on its comparative advantage. To calculate thecomparative advantage one has to compare the production ratios, and make theassumption that the one country totally specialises in one product. To maximisethe wellbeing of both individuals and countries, countries are better offspecialising in their area of competitive advantage and then trading andexchanging with others in the market place. Today there are a variety ofspreedsheets that one can use to calculate comparative advantage, one such isthat of the Food and Agriculture Organization (FAO). Calculation of comparativeadvantage is as follows:
Example
It may beassumed that Holland is more efficient in the production of flowers than Kenya.Yet Kenya succeeds in exporting thousands of tonnes of flowers to Europe everyyear. Kenya flower growers Sulmac and Oserian have achieved legendaryreputations, in the supply of fresh cut flowers to Europe, How?
Take thesimple two country – two product model of comparative advantage. Europe growsapples and South Africa oranges, these are two products, both undifferentiatedand produced with production units which are a mixture of land, labour and capital.To use the same production units South Africa can produce 100 apples and nooranges, and Europe can produce 80 apples and no oranges. At the other extremeSouth Africa can produce no apples and 50 oranges and Europe no apples and 30oranges. Now if the two countries specialise and trade the position is asfollows:
Theproduct trade cycle:
The modeldescribes the relationship between the product life cycle, trade and investment(see figure 1.1) and is attributable to Venon1 (1966)
Theinternational product trade cycle model suggests that many products go througha cycle during which high-income, mass consumption countries which are initialexporters, lose their export markets and finally become importers of theproduct. At the same time other countries, particularly less developed but notexclusively so, shift from being importers to exporters. These stages arereflected in figure 1.1.
Figure 1.1 International product trade cycle
From a highincome country point of view phase 1 involves exporting, based on domesticproduct strength and surplus-to phase 2, when foreign production begins, tophase 3 when production in the foreign country becomes competitive, to phase 4when import competition begins. The assumption behind this cycle is that newproducts are firstly launched in high income markets because a) there is mostpotential and b) the product can be tested best domestically near its source ofproduction. Thus new products generally emanate from high income countries and,over time, orders begin to be solicited from lower income countries and so athriving export market develops. High income country entrepreneurs quicklyrealise that the markets to which they are selling often have lower productioncosts and so production is initiated abroad for the new products, so starts thesecond stage.
In thesecond stage of the cycle, foreign and high income country production begins tosupply the same export market. As foreign producers begin to expand and gainmore experience, their competition displaces the high income export productionsource. At this point high income countries often decide to invest in foreigncountries to protect their share. As foreign producers expand, their growingeconomies of scale make them a competitive source for third country marketswhere they compete with high income exporters. The final phase of the cycleoccurs when the foreign producer achieves such a scale and experience that itstarts exporting to the original high income producer at a production costlower than its original high income producer at a production cost lower thanits original high income supplier. High income producers, once enjoying amonopoly in their own market, now face competition at home.
The cyclecontinues as the production capability in the product extends from otheradvanced countries to less developed countries at home, then in internationaltrade, and finally, in other advanced countries home markets.
Orientation of management:
Perlmutter1 (1967) identified distinctive”orientations” of management of international organisations. His”EPRG” scheme identified four types of attitudes or orientationsassociated with successive stages in the evolution of international operations.
· Ethnocentrism – home countryorientation – exporting surplus.
· Polycentrism – host countryorientation – subsidiary operation.· Regiocentrism – regional orientation- world market strategies.· Geocentrism – world orientation -world market strategies.
The lattertwo are based on similarities and differences in markets, capitalising onsimilarities to obtain cost benefits, but recognising differences.
Marketforces and development
Over thelast few decades internationalism has grown because of a number of marketfactors which have been driving development forward, over and above thosefactors which have been attempting to restrain it. These include market andmarketing related variables.
Many globalopportunities have arisen because of the clustering of market opportunitiesworldwide. Organisations have found that similar basic segments exist worldwideand, therefore, can be met with a global orientation. Cotton, as an ingredientin shirtings, suitings, and curtain material can be globally marketed as naturaland fashionable. One can see in the streets of New York, London, Kuala Lumparor Harare, youth with the same style and brand of basketball shirts or AmericanFootball shorts. Coca Cola can be universally advertised as “AddsLife” or appeal to a basic instinct ” You can’t beat theFeeling” or “Come alive” as with the case of Pepsi. One canquestion “what feeling?”, but that is not the point. The moreculturally unbounded the product is, the more a global clustering can takeplace and the more a standardised approach can be made in the design ofmarketing programmes.
Thisstandardised approach can be aided and abetted with technology. Technology hasbeen one of the single most powerful driving forces to internationalism. Rarelyis technology culturally bound. A new pesticide is available almost globally toany agricultural organisation as long as it has the means to buy it. Computersin agriculture and other applications are used universally with IBM andMacintosh becoming household names. The need to recoup large costs of researchand development in new products may force organisations to look at globalmarkets to recoup their investment. This is certainly true of many veterinaryproducts. Global volumes allow continuing investment in R & D, thus helpingfirms to improve quality. Farm machinery, for example, requires volume togenerate profits for the development of new products.
Communicationsand transport are shrinking the global market place. Value added manufacturerslike Cadbury, Nestlè, Kelloggs, Beyer, Norsk Hydro, Massey Ferguson and ICIfind themselves “under pressure” from the market place anddistributors alike to position their brands globally. In many cases this maymean an adaption in advertising appeals or messages as well as packaging andinstructions. Nestle will not be in a hurry to repeat its disastrous experienceof the “Infant formula” saga, whereby it failed to realise that theability to find, boiled water for its preparations, coupled with the literacylevel to read the instructions properly, were not universal phenomenon.
Marketingglobally also provides the marketer with five types of “leverage” or”advantages”, those of experience, scale, resource utilisation andglobal strategy. A multi-product global giant like Nestle’, with over £10billion turnover annually, operates in so many markets, buys so much rawmaterial from a variety of outgrowers of different sizes, that itsinternational leverage is huge. If it consumes a third of the world’s cocoaoutput annually, then it is in a position to dominate terms. This also has itsdangers.
The greatestlift to producers of raw agricultural products has been the almost universalnecessity to consume their produce. If one considers the whole range ofmaterials from their raw to value added state there is hardly a market segmentwhich cannot be tapped globally. Take, for example, oranges. Not only areBrazilian, Israeli, South African and Spanish oranges in demand in their rawstate worldwide, but their downstream developments are equally in demand.Orange juice, concentrates, segments and orange pigments are globally demanded.In addition the ancillary products and services required to make the orangeindustry work, find themselves equally in global demand. So insecticides,chemicals, machinery, transport services, financial institutions, warehousing,packaging and a whole range of other production and marketing services are indemand, many provided by global organisations like Beyer, British Airways andBarclays Bank. Of course, many raw materials are at the mercy of world prices,and so many developing countries find themselves at the mercy of supply anddemand fluctuations. But this highlights one important global lesson – the needto study markets carefully. Tobacco producing countries of the world arefinding this out. With a growing trend away from tobacco products in the west,new markets or increasing volumes into consuming markets have to be prospectedand developed. Many agricultural commodities take time to mature. An orange grovewill mature after five years. By that time another country may plant or haveits trees mature. Unless these developments are picked up by globalintelligence the plans for a big profit may be not realised as the extra volumesupplied depresses prices. This happened in 1993/94 with the Malawian andZimbabwean tobacco companies. The unexpected release of Chinese tobaccodepressed the tobacco price well below expectations, leaving farms with stockand large interest carrying production loans.
A number ofsuppliers of agricultural produce can take advantage of “off season”in other countries, or the fact that they produce speciality products. This isthe way by which many East African and South American producers establishedthemselves in Europe and the USA respectively. In fact the case of Kenyavegetables to Europe is a classic, covering many of the factors which have justbeen discussed-improved technology, emerging global segments, shrinkingcommunications gaps and the drive to diversify product ranges.
Whilst theforces, market and otherwise, have been overwhelming in their push toglobalisation, there remain a number of negatives. Many organisations have beenput off or have not bothered going into global industry due to a variety offactors. Some have found the need to adapt the marketing mix, especially inmany culture bound products, too daunting. Similarly brands with a strong localhistory may not easily transfer to other markets. National Breweries ofZimbabwe, for example, may not find their Chibuku brand of beer (brewedespecially for the locals) an easy transboundary traveller. More often than notsheer management myopia may set in and management may fail to seize the exportopportunity although products may be likely candidates. Similarly organisationsmay refuse to devolve activities to local subsidiaries.
Othernegative forces may be created by Governments. Simply by creating barriers toentry, local enterprises may be protected from international competition aswell as the local market. This is typical of many developing countries, anxiousto get their fledging industries off the ground.
The international economicsystem
Severalfactors have contributed to the growth of the international economy post WorldWar II. The principal forces have been the development of economic blocs likethe European Union (EU) and then the “economic pillars”- the WorldBank (or International Bank for Reconstruction and Development to give its fullname), the International Monetary Fund (IMF) and the evolution of the WorldTrade Organisation from the original General Agreement on Tariffs and Trade (GATT).
Until 1969the world economy traded on a gold and foreign exchange base. This affectedliquidity drastically. After 1969 liquidity was eased by the agreement thatmember nations to the IMF accept the Special Drawing Rights (SDR) in settlingreserve transactions. Now an international reserve facility is available.Recently, the World Bank has taken a very active role in the reconstruction anddevelopment of developing country economies, a point which will be expanded onlater.
Until theGeneral Agreement on Tariffs and Trade (GATT) after World War II, the worldtrading system had been restricted by discriminating trade practices. GATT hadthe intention of producing a set of rules and principles to liberalise trade.The most favoured nation concept (MFN), whereby each country agrees to extendto all countries the most favourable terms that it negotiates with any country,helped reduce barriers. The “round” of talks began with Kennedy inthe 60s and Tokyo of the 70s. The latest round, Uruguay, was recently concludedin April 1994 and ratified by most countries in early 1995. Despite these tradeagreements, non tariff barriers like exclusion deals, standards andadministrative delays are more difficult to deal with. A similar system existswith the European Union, – the Lomè convention. Under this deal, African andCaribbean countries enjoy favoured status with EU member countries.
Relativeglobal peace has engendered confidence in world trade. Encouraged by this andthe availability of finance, global corporations have been able to expand intomany markets. The break up of the former Soviet Union has opened up vastopportunities to investors, aided by the World Bank and the EuropeanDevelopment Bank. This atmosphere of peace has also allowed the steady upward trendof domestic growth and again opened up market opportunities domestically toforeign firms. Peace in Mozambique, the “normalisation” of SouthAfrica, and peace in Vietnam as examples have opened up the way for domesticgrowth and also, therefore, foreign investment. The liberation of economiesunder World Bank sponsored structural adjustment programmes have also givenopportunities. This is very true of countries like Zambia and Zimbabwe, wherein the latter, for example, over Z$2.8 billion of foreign investment in thestock exchange and mining projects have occurred in the early 1990s.
Sometimes,market opportunities open up through “Acts of God”. The great droughtof 1992 in Southern Africa, necessitated a large influx of foreign produce,especially yellow maize from the USA and South America.
Not only didthis give a market for maize only, but opened up opportunities for transportbusinesses and services to serve the drought stricken areas. Speedycommunications like air transportation and electronic data transmission andtechnology have “shrunk” the world. Costs and time have reducedenormously and with the advent of television, people can see what is happeningelsewhere and this can cause desire levels to rise dramatically. Only recently hastelevision been introduced into Tanzania, for example, and this has brought theworld and its markets, closer to the average Tanzanian.
No doubt agreat impetus to global trade was brought about by the development of economicblocs, and, conversely, by the collapse of others. Blocs like the EuropeanUnion (EU), ASEAN, the North American Free Trade Agreement (NAFTA) with theUSA, Canada and Mexico has created market opportunities and challenges. Newcountries are trying to join these blocs all the time, because of the economic,social and other advantages they bring. Similarly, the collapse of the oldcommunist blocs have given rise to opportunities for organisations as theystrive to get into the new market based economies rising from the ruins. Thisis certainly the case with the former Soviet bloc.
In the late1980s and early 90s, the United States, along with Japan, have been playing anincreasingly influential role in world affairs, especially with the collapse ofthe former USSR. Whilst on the one hand this is good, as the USA is committedto world welfare development, it can be at a price. The Gulf War coalition ofthe 90s, primarily put together by the USA as the leading player, was anexample of the price.
Impetus to global marketinginvolvement
Individualsor organisations may get involved in International Marketing in a ratherunplanned way which gives the impetus to more formal and larger operations.This may happen in a number of ways:
Foreigncustomers
Unsolicitedenquiries through word of mouth, visits, exhibitions, and experience throughothers may result in orders. This is often typical of small scaleorganisations.
Importers
Importersmay be looking for products unavailable in domestic markets, for example,mangoes in the UK, or products which can be imported on more favourable terms.An example of these is flowers from Kenya to Holland.
Intermediaries
These may beof four types – domestic based export merchants, domestic based export agents,export management companies or cooperative organisations. These will beexpanded on later in this text. Sometimes an intermediary may provide exportservices in an attempt to reduce their own costs on the export of their ownproduce by acting as a representative for other organisations. This is called “piggybacking”.
Othersources
These mayinclude banks, export organisations like ZIMTRADE, parastatals like the KenyanHorticultural Crop Development Authority or even individual executives.
Attitudesas precursors to global involvement
Cavusgil3 (1984) developed a three stage modelof export involvement, based on the fact that the opportunity to export mayarise long before exporting behaviours became manifest. See figure 1.2.
Figure 1.2 Cavusgil’s three stage model of export involvement
According toCavusgil attitudes are determined by the operating style of the organisationand cultural norms which prevail in the domestic market. An organisation’sstyle may be defensive or prospective. The latter type of organisation maysystematically, or in an ad hoc manner, search out international opportunities.
Cultureplays a vital part in the internationalisation process. Hakansson et al4. (1982) demonstrated that German andSwedish firms internationalise much earlier in their corporate history than doFrench or British companies. African culture is not littered with internationalmarketers of note. This may be due to colonialisation late into the twentiethcentury.
Behaviouras a global marketing impetus
We sawearlier in the internationalisation process that organisations may evolve fromexporting surplus or serving ad hoc enquiries to a more committed globalstrategy. This gradual change may involve moving from geographically adjacentmarkets to another, say, for example from the Southern African DevelopmentConference (SADC) to Europe. However, not all globalisation takes place likethis. In the case of fresh cut flowers, these may go to major, developedcountry consumer centres, for example from Harare to London or Amsterdam andFrankfurt. Lusaka or Nairobi may never see Zimbabwe flowers. In analysingbehaviour one has not to generalise. What is certain, is that in all stages,the balance of opportunity and risk is considered.
Thecontext of internationalisation
It isessential to see in what context individual organisations viewinternationalisation. The existing situation of the firm will affect itsinterest in and ability to internationalise. Such may be the low domesticquality and organisation that a firm could never export. It may not have theresources or the will.
Internationalisationinfrastructure
Johanson andMattison5 (1984) have explored the notion ofdifferences in tasks facing organisations which internationalise. In low andhigh infrastructure situations. “Early starters” are likely toexperiment or depend on contacts with experienced organisations which know theprocess. “Late starters” may use existing contacts as a”bridge” to new opportunities. They may also be pressurised bycustomers, supplies or competitors to get into joint venturing. Jointventuring, with its added infrastructure, may lead to rapid progress. If theorganisation faces intense competition then it may be forced to up the pace andscale of foreign investment. Rising protectionism in recent years has givenimpetus to late starters to establish production facilities in target markets.Infrastructure for foreign operations may also change (firms also reduce theirinvestment as well as invest). When this happens the perceived risk changesalso.
Thisdiscussion on international infrastructure concludes the factors which have ledto internationalisation. It is a complex focus of internal and external factorsand looking carefully at risk versus opportunities.
Planning to meet theopportunities and challenges of global marketing
In order totake advantage of global opportunities, as well as meet the challengespresented by so doing a number of concepts can be particularly useful. Everyorganisation needs an understanding of what is involved in”strategy”, or else the hapharzardness involved in chance exportingcan be accepted as the norm with all inherent dangers involved. Also potentialexporters need to know what is going on in the global “environment”.Just as in domestic marketing “Government” “competition”,”social” and other factors need to be accounted for, such is the casein international marketing. If one can place products or services at a point onan environmental sensitivity/insensitivity continuum, one can see more clearlythe need to account for differences in the marketing mix. By comparing thesimilarities and differences between domestic and international marketing needsand planning requirements, then the organisation is in a better position toisolate the key factors critical to success. This section examines all theseconcepts in brief.
Strategy
Whateverbusiness we are in, haphazard organisation often leads to haphazard results. Inplanning for international marketing organisations need a clear picture of thesteps involved. “Strategy” gives such a picture. Strategy is theresponse of the organisation to the realities of shareholders and the businessenvironment. The phases in the strategy formulation process are given on figure1.3.
Figure 1.3 Strategy formulation
Theglobal environment
Of all thesteps in formulating strategy, no one step is as important as the ability toassess the “environmental” factors in international marketing. Takingaccount of cultural, economic and political differences is a must when dealingwith different markets. More will be said on these factors in later chapters.Environmental analysis allows the organisation to cluster markets according tosimilarities and differences, based on the environmental”uncontrollable” factors. The international”uncontrollables” are in addition to the organisation’s domestic”uncontrollables” so need to be treated with extra care. Figure 1.4shows the major environmental factors to be considered. It must be noted thataccording to the “relationship” marketing school of thought, the socalled “incontrollables” can be made more “controllable” bybuilding relationships with the influences of these factors. For example, if anexporter of horticultural produce wishes to be able to anticipate changes inthe political environment, it may build a relationship with certain politicianswho may have intimate knowledge of the political system. This should not, ofcourse, be misconstrued as “insider information”. However, havingmade this caveat, this text will treat the “incontrollables” in theconventional way.
Figure 1.4 Foreign “uncontrollables”-in the global macroenvironment
Internationalenvironment
An analysisof the environmental uncontrollables allows the potential marketers to placeproducts on a continuum of environmental sensitivity. At the one end areenvironmentally insensitive products and at the other end, those more sensitiveto economic, sociocultural, physical and other factors. The greater thesensitivity, the greater the need for the organisation to learn the way theproduct interacts with the environment. An example is given below (figure 1.5).
Figure 1.5 Environmental sensitivity
Framework for internationalanalysis
In order toput together the task of finding the differences and similarities inenvironmental and market analysis, a framework needs to be devised. Whereunifying influences are found then the marketer is able to develop morestandardised plans. When there are a large number of differences, then planshave to be designed adapted to circumstances. Figure 1.6 gives a framework forthe process of identifying similarities and differences.
Figure 1.6 A Conceptual framework for multinational marketing: Nationalmarket versus other nations
Once havingidentified the unifying and differentiating influences and answered manyquestions about where one could or could not standardise the marketing planningprocess then a conceptual framework for multinational marketing planning can bedeveloped. One such conceptual framework is given in figure 1.7.
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Figure 1.7 A conceptual framework for multinational marketing in constraint economies
Key questions for analysis, planning and control of marketing in constraint economies.
a) Principle constraint analysis
i) Government’s attitude to employment, foreign intervention, foreign exchange, indebtedness and policies
ii) Government’s policy of economic development, foreign exchange, barter deals, equity arrangements, remittance of funds, state intervention, private sector development and import substitution?
iii) Government’s social objectives including indegenisation, subsidies, population and socialisation?
iv) Laws, tariffs, duties, trade regulations, balance of payments, licensing and labour laws?
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Leading to an economic analysis
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Gathering of appropriate data on:
b) Appropriate environmental variable data
i) Market characteristics-physical, cultural, size, growth rate, stage of development?
ii) Market institutions – distribution, media, research, services?
iii) Industry conditions- size, practices, development stage, appropriate technology?
iv) Resources- manpower and money?
Planning
c)Target country experts or generalist staff to plan operations?
d) What are the authorised target markets and the product appropriateness?
e) Market size?
f) What is the stage of development and strenght of competition both state and private?
g) What is the appropriate product/market technology?
h) What is the necessary adaptaton of the marketing mix?
i) How do the goverment and company objectives coincide?
j) What is the trading risk?
k) What goverment/organisation interface is required? How are licencies agreed and obtained? Who are the principle characters?
Structure
l) How does the company have to be structured to meet the government, economic and social objectives as well as company objectives
Plan implementation
m) Given the goverment’s policies, attitudes and economic and social objectives how is an effective marketing plan designed, resouced and implemented? what degree of adaptation and cooperation is required at all levels? (Government marketing institutions and function)? Who will be responsible for each level”?
Controlling the market program
n) Who is responsible and how is the plan performance measured and monitored?
o) What controls, other than profit are required? Are employment and other such objectives necessary?
p) Has the company the ability and authority to alter the parameters to bring actual results into line with desired?
q) What are the principal control parameters? Can they be easily adjusted at all?
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Thisframework is particularly relevant to developing economies where governmentconstraints and controls tend to be more intensive than developed economies.
Productlife/market life cycle
Just as indomestic marketing the concept of the Product Life Cycle has often been citedas a useful (but often maligned!) planning concept, so it can be useful ininternational marketing. Figure 1.8 gives an outline of the Market Life Cycleacross international boundaries.
Figure 1.8 The product/market life cycle
Thetraditional four stage life cycle – introduction, growth, maturity, decline -is a well documented phenomenon. Attempts are made in the maturity stage toextend the cycle. The market life cycle is very similar and what globalmarketers have to be wary of is that not all markets are at the same stageglobally. It may be appropriate to have tractor mounted ditchers and diggers inAfrica or the UK where labour is not too plentiful, but in India, they may bethe last thing required where labour is plentiful and very cheap. So theappropriate marketing strategy will be different for each market.
It would bevery easy to discuss the global marketing decision as a case of decidingwhether to export or standardise or adapt your product/market offering. This isfar from the case. Even the smallest nuance of change in the global environmentcan ruin a campaign or plan. Whilst the above discussion has tended to betheoretical in nature, most of it, if not all of it, is essential in practice.In food marketing systems many transactions and discussions take place acrossinternational boundaries. This involves a close look at all the necessaryenvironmental factors. If one considers food marketing as the physical andeconomic bridge linking raw materials production and consumer purchases then awhole series of interdependent decisions, institutions, resource flows andphysical and business activities take place. Food marketing stimulates andsupports raw material production, balances commodity supply and demand andstimulates end demand and enhances consumer welfare. This process oftentranscends several different industries and markets, many of them crossinginternational boundaries. The product may change form, be graded, packed,transported and necessitate information flows, financial resources, invoice andretailing or wholesaling functions. In addition, quality standards designed forproducers and transporters may apply as may product improvements. In otherwords, the bridge may involve a whole set of utilities afforded to the end user(time, place and form), and add value at each stage of the transaction. Thissystem involves numerous independent and interdependent players and activities.To shift a perishable like strawberries 7000km from Harare, Zimbabwe to the UKrequires an extraordinary complex series of activities, involving perfecttiming. The detail involved in this intricate transaction will be explained inlater chapters.
Withcommodities, physical, Government and economic environmental factors playing amajor role in international marketing. So does price and qualitydifferentiation. In later years the enormous success of the Brazilian frozenconcentrated orange juice industry has been attributable not only to poorclimatic conditions prevailing in its competitive countries, but the fact thatits investment in large production economies of scale, bulk transport and storagetechnologies considerably reduced international transport costs and facilitatedimproved distribution of the juice to, and within, importing countries. From acottage industry in 1970, it grew to account for 80% of world trade by theearly 1990’s. Its success, therefore, has been based on price and added valuequality differentiation.
Internationalmarketing is, therefore, quite a complex operation, involving both anunderstanding of the theoretical and practical aspects involved. Prescriptionsare totally inappropriate.
Thisconcludes the discussion on the reasoning why internationalism has grown andthe next chapters’ took more closely at the environmental factors which have tobe taken into account when considering to market internationally.
ChapterSummary
Thedevelopment of global marketing has been brought about by a number of variablesboth exogenous and endogenous. The evolution of global marketing has been in aseries of four stages from exporting to truly global operations. These stageshave been termed “domestic” in focus to “ethnocentric”,”polycentric” and “geocentric”. When planning to do globalmarketing, a number of “environmental” factors have to be consideredbut generally one is looking for “unifying” or”differentiating” influences which will dictate a “standard or”adapted” planning approach. Finally, a number of concepts andtechniques, including the International Product Life Cycle, can give insightand a guide to global planning.
ReviewQuestions
From yourknowledge of the material in this chapter, give brief answers to the followingquestions below.
1. What are theprincipal differences between marketing domestically and internationally orglobally?
2. Whatfactors have led to the growth of “Internationalism” since World WarII? Discuss which you think are the most important and why.
3. Whichconcepts and techniques are available to aid marketers isolate differences andsimilarities in domestic and international marketing in order for them to planappropriate marketing strategies?
ReviewQuestion Answers
1.Essentially there is no difference between the two. Both require theidentification of product/market objectives, an analysis of the internal andexternal environment and the organising, planning, implementation and controlof an effective marketing strategy. The differences lie in the degree of marketsimilarities and differences, and the extent to which the product to bemarketed is environmentally sensitive or insensitive.
2. Factorsinclude:
· Theoretic – comparative advantage,the Product Trade Cycle and Perlmutter’s business orientation.
· Market forces – market clusters,technology, cost/volume considerations, shrinking of transport andcommunication gaps, international leverage.
· The International System -development of economic blocs, growth in domestic economies, the InternationalMonetary Framework, global peace, communication and transport technology,global corporation growth, GATT.
· Others – impetus through globalexperience, attitudes (Cavusgil), behaviour, context and the internationalinfrastructure.
3. Conceptsand techniques available include:
· Strategy formulation
· Global environmental scanning· Framework for isolating similaritiesand differences· Conceptual frameworks· Product/market life cycles
Studentsshould be encouraged to give examples of the concepts, techniques and factorswhere appropriate.
Exercise1.1 Zambezi nuts
Zambezi nutswas a small agricultural cooperative, recently developed in the Zambezi Valleyin Zimbabwe. In previous years much time had been spent selecting and clearinga site and putting in cashew nut trees and a service road. The trees had nowreached maturity. Although the domestic market was attractive, the cost ofproduction and the quality of the nuts meant that far higher returns could begained by selling the nuts on the international market.
Thecooperative provided employment for about twenty small scale growers with ahectare each. Irrigation was in place. The coop itself had collection, gradingand bulk packing facilities but no packaging facilities. It employed tenworkers, a supervisor and general manager. It had two one tonne trucks whichcollected from farms and distributed from the coop. The company had noexperience at all in selling its produce overseas.
References
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5.Hakansson, H. (ed), “International Marketing and Purchasing of IndustrialGoods.” IMP Project Group, John Wiley and Sons, 1982.
6. Jaffee S.”Exporting high value food commodities.” World Bank Discussion PaperNo. 198. The World Bank 1993.
7. Johanson,J and Mattison, L.G. “Internationalisation in Industrial Systems – ANetwork Approach.” Paper prepared for the Prince Bertil Symposium onStrategies in Global Competition. Stockholm School of Economies, 1984.
8. Keegan,W. J. “Global Marketing Management” 4th Edition. Prentice HallInternational Edition 1989.
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11. Carter,S. “Multinational and International Marketing in ConstraintEconomies.” The Quarterly Review of Marketing, Summer 1988, pp 13-18.
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