Saturday, November 23, 2013

The Global Marketplace

This Blog discusses the importance of global marketing and explains the key
elements  of the  planning process:  analyzing international  market  opportunities;
deciding whether or not to go abroad; establishing market entry mode; allocating
resources; developing  the  marketing plan;  organizing for international  marketing;
implementing the marketing strategy; and evaluation and control.
Companies pay little attention to international trade when the home market
is  big  and  teeming  with  opportunities.  The  home  market  is  also  much  safer.
Managers  do  not need  to  learn  other languages,  deal  with  strange  and  changing
currencies,  face  political  and  legal  uncertainties  or  adapt  their  products  to
different  customer  needs  and  expectations.  This  has  been  the  attitude  of many
western  companies,  which  saw  little  need  to  sell  in  overseas  markets  because
their  domestic  market  alone  seemed  to  offer attractive opportunities  for growth.
Today, however, die business environment is changing and firms cannot afford to
ignore  international  markets.  The  increasing dependency  of nations  around  die
world on each other's goods and services has raised awareness among companies of
die need for a more international outlook in their approach to business. International
markets are important because most firms are geared towards growth and so must
seek new opportunities  in foreign countries as their domestic markets mature. As
international  trade  becomes  more  liberalized,  firms  are  facing  tougher  foreign
competition  in  the  domestic  market.  They  must develop  the  ability  to  fight  off
competitors  on  tlieir own  home ground,  or to  exploit business  opportunities in
foreign markets.
Furthermore,  time  and  distance  are  shrinking  rapidly  with  the  advent  of
faster communication,  transportation  and financial flows. Products  developed in
one  country  are  finding  enthusiastic  acceptance  in  other  countries.  Across
western  Europe  and  North  America,  names  such  as  Toyota,  Sony  and  Toshiba
have become household words in the same way McDonald's, Toys 'fl'  Us, Philips
and  IKEA are familiar names  to most young consumers in Asian  countries like
Japan, Singapore find Hong Kong.
Thus,  as global  competition  intensifies,  local  companies  that  never  thought
about  foreign  competitors  suddenly  find  these  competitors  in  their  own  back-
yards. The firm that stays at home to play it safe not only misses the opportunity
to enter other markets, but also risks losing its home market.
Consider,  for  example,  Japanese  victories  over  western  producers  in  ninny
sectors   -   motorcycles,   cars,   cameras,   consumer   electronics,   machine   tools,photocopiers. These markets used to be the stronghold of US, German and British
companies in the 1970s, but are now dominated by .lapanese manufacturers. The
latter  are  not  insulated from  foreign  competitors  either.  Increasing competition
from  lower-cost  newly  industrializing  countries  (NIGs)  in  the  Far  East,  notably
South Korea  and Taiwan,  are posing a big threat to  established Japanese  firms in
traditional industries like steel, chemicals and heavy machinery.
In  the United  States, American firms are fighting off aggressive  assaults  by
international  European   companies:   Die's   successful  attacks   on  Gillette   and
Nestle's  gains  in  the  coffee  and  confectionery  markets  are  a  reflection  of  the
growing  level  of  international  competition  in  'safe'  home  markets.  In  the
European Union(Ell), foreign firms'direct  investment is  on  the increase and
ititra-Union flows of investment in all kinds of business sectors - cars, clothing,
retailing,  financial  services  -  are  particularly  active.  Many  sophisticated  and
aggressive foreign companies also see the emerging eastern European economies
as longer-term opportunities.  So, more than ever, firms must learn how to enter
foreign markets and increase their global competitiveness.
Although  some  companies  would  like  to  stem  the  tide  of  foreign  imports
through  protectionism,  this  response  would  be  only  a  temporary  solution.
Suppressing a free  flow  of foreign  imports  would  lead  to  fewer  choices  for  the
consumer and higher prices for indigenously produced goods.  In the long run, it
would raise the cost of living and protect inefficient domestic firms. It also means
that consumers' needs and wants would not be met effectively and efficiently. A
better  solution  is  to  encourage  more  firms  to  learn  to  make  the  world  their
market.
The importance of internationalization is also reflected by the fact that most
governments run an export promotion programme, which tries to persuade local
companies  to  export.  Denmark  pays  more  than  half  the  salary  of  marketing
consultants who help small and medium-size Danish companies get into exports.
Many countries go even further and subsidize their companies by granting prefer-
ential land and energy  costs -  they even  supply cash outright so  that  their  com-
panies can charge  lower prices  than do  their foreign competitors.
Today the pressure on firms operating in global industries is not just to export
to  other  countries,  but  to  strive  to  be  a  global firm.  A  global industry  is  one  in
which  the  strategic  positions  of  competitors  in  given  geographic  or  national
markets are affected by their overall global positions, A global  firm,  therefore, is
one  that,  by  operating  in  more  than  one  country,  gains  research  and  develop-
ment, production, marketing and financial advantages in its costs and reputation
that are not available to purely domestic competitors,2 The global company sees
the world as one market. It minimizes the importance of national boundaries, and
raises capital, sources materials and components, and manufactures and markets
its goods wherever it can do the best job. For example, Ford's 'world truck' sports
a cab  made  in  Europe  and  a  chassis  built  in North America.  It  is  assembled  in
Brax.il  and  imported  to  the  United  States  for  sale.  Thus  global  firms  gain  advan-
tages by planning,  operating and  co-ordinating their activities  on a worldwide
basis.   These  gains   are   a   key   reason   behind   recent   global   restructuring
programmes undertaken by leading German car producers, BMW and Mercedes-
Benz. Global marketing is concerned with integrating or standardizing marketing
actions  across  a  number of geographic  markets.  This does  not  rule  out forceful
adaptation  of  the  marketing  mix  to  individual  countries,  but  suggests  that  firms,
where possible, ignore traditional market boundaries and capitalize on similari-
ties between  markets  to build competitive advantage.
Because firms around the world are globalizing at a rapid rate, domestic firms
in global industries must act quickly before the window closes on them. This does
not mean that small and medium-size firms must operate in a dozen countries to succeed.  These firms can practise global  nichernanship. The world, however, is
becoming  smaller  and  every  company  operating  in  a  global  industry  -  whether
large or small - must assess and establish its place in world markets.
Firms  that  confront international  competitors  in  their existing markets  must
ask some  basic questions;  What market position  should we  try  to establish  in  our
country,  in  the  geographic  region  (e.g.  Europe.  North  America,  Asia,  Australasia)
and globally? Who will our global competitors he and what are their strategies and
resources?  Where  should  we  produce  or  source  our  products?  What  strategic
alliances should we form with other firms around the world V.