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The current paper focus on the impacts of the financial crisis we are facing now and
Definition
Credit crunch is a period during which borrowed funds are difficult to obtain and, even
if funds can be found, interest rates are very high. Credit crunches usually occur during
recessions.
The current financial crisis is considered the worst since the Great Depression which
started about 1930s and lasted until late 1930s or early 1940s preceding the World War II.
No one can determine how the crisis started. Usually these booms come after several
smaller crises started in the past. For example the energy crisis and the increase of oil prices
The financial crisis we are experiencing is a result of unregulated mortgages and credit
boom that were pushed by the low interest rate,1 set by Federal Reserve (at that time
Federal Reserve Ratio was only about one percent). Commercial banks increased their
borrowing heavily and exercised the practice of leverage. In more simple terms, this can be
translated as a lot of people spending more each year that may can afford. Many individuals
International Marketing Assignment Report
and businesses are in a state of moderate to advanced panic, believing that their businesses,
The current financial crisis results to a lot of problems and/or changes globally. There is
a lack of free finances. That means that individuals and/or businesses can not borrow
money in order to retain in their business, or even to expand in new markets, globally or
internationally. All businesses in the financial sector introduced very strict regulations
concerning loans strategies and if one is qualified to obtain such a loan the interest is too
high.
Unemployment
Unemployment in the most developed and developing countries is in the highest level
ever. Because of the decrease in all sections in the real estate business and as a consequence
in other industries as well, a lot of people lost their jobs, others fear that they will also have
such a fortune. When the unemployment increases, this means that consumers loose their
Social instability
The social instability is also a consequence of the financial crisis. The majority of
businesses and individuals are feeling that are standing in a vacuum. The most employees
are facing the feeling of job insecurity, especially in the UK and US. So, they are working
harder, may be more hours per day in order to keep their jobs.
Bankruptcy
We all have seen businesses which were colossus which were felt in bankruptcy. The
best example in US market is AIG which was once the 18th-largest public company in the
world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September
22, 2008.
A company that masters only in its domestic market, sooner or later will lose it by strong
foreign competitors which will come and challenge the company. The most companies
hesitate to go abroad, because they see languages or cultural differences. Going abroad
there are benefits as well, because the company is not depending on only one country’s
market. In fact, the market of their products may be mature at home and growing abroad.
Companies must adapt their marketing mix when going international. Asea Brown
Boveri uses the slogan: “We are a global firm local everywhere”. Royal Ahold has the
brand philosophy: “Everything the customer sees we localize. Everything they don’t see,
we globalize”.
Companies are most successful when they recognize a large target market whose needs
are not meet yet. Building a strong culture at this target market the chances to succeed are
good.
which countries. The allocation of products and the advertising budget to each country must
Global countries must learn to use counter trading. Many countries are poor but they will
barter. You’d better learn to take some goods in exchange or you have to forget doing
business within this county. Pepsi-Cola had to promise Russia that it would help sell Russia
Start from your base - your customers. Now is the time to really understand who they
are, where they come from and how they may be affected by the recession. Now is the time
to start communicating with them on a regular basis. And now is the time to identify their
needs, and start tapping into them. The importance of retaining their loyalty during these
times is paramount, and a little goodwill right now could pay off in the future. You already
know that acquiring new customers is more costly than keeping existing users happy. Many
small businesses often adopt a fairly lax approach to invoicing their clients. Aside from the
fact that this is a bad business practice, this is precisely the sort of problem you want to
avoid during these times. If you allow your customer's inefficiency or inability to pay on
time to run rife, your own business could well run into cash flow problems. It's a problem
A recession can also offer opportunities for businesses to expand their market share, and
those with the courage and foresight to increase their marketing budgets can gain in the
long term. When a company's income shows signs of falling, the knee-jerk reaction is to cut
back on spending. And all too often, the marketing budget is one of the first to go. This is
undoubtedly a mistake.
The changes of the consumers buying behavior is a factor that a marketer has to
consider. Because a lot of problems arise during a credit crunch, consumers are more
carefully in what they are shopping or why they shopping the specific products or services.
They have the chance to examine the best alternatives in the market place and products
In spite of all the obvious negative consequences of a recession, it can also be a good
time to expand and develop your business, as many of your competition will probably be
doing the complete opposite. In spite of the apparent panicking, consumers and customer
do not completely stop looking for solutions to their problems, but they might begin
looking for better value. If your product or service offers that enhanced value proposition,
then this particular recession-fuelled demand could turn into a great opportunity.
Value for money has again become a strategic imperative—and not just because of the
recession. Even before the slowdown began, there were signs that it ought to be a major
the past decade have favored the top 20% of earners, while the spending power of most
families has stagnated or declined. Many people in the United States, for instance, have
found it difficult to maintain their standard of living after paying for such necessities as
their mortgage, transport, utilities, and health care without borrowing money. More
recently, small salary increases and the steady drumbeat of job losses have turned many
Unsurprisingly, Wal-Mart has been gaining share from premium retailers, and apart
from luxury cars, only sales of small or fuel-efficient vehicles have been growing over the
past five years. In Western Europe, according to a recent Credit Suisse study, the market
share of value-priced store brands rose by two percentage points in 2007 while that of
In developing countries, consumers are traditionally value conscious. Many have entered
the consuming class recently and have limited disposable income. For instance, Credit
Suisse projects that the number of Chinese households whose income exceeds their basic
needs will rise from around 55 million in 2008 to 212 million by 2013. However, many of
them will earn only a little over $5,000 a year. By 2020 in India, the market research firm
Information Resources predicts, 5% of the population will be part of households that earn
more than $4,000 per annum, but they, too, are unlikely to have much excess income.
Meanwhile, upper- and middle-class consumers in both countries must stretch limited
earnings to cope with rising aspirations and inflation. Business buyers in developing
countries depend on low costs to gain competitive advantage, so they always look for value
According to Professor Peter Williamson’s seminar which took place in Nicosia, 21st of
March 2009, there are four critical implications for Marketing Leadership 4 in recessionary
times. The first one is communicating the “Value for Money” which was analyzed above.
The second one is that for companies which their target market are niche ones, now is the
best timing to deliver their value to mass markets as well. This will be attainable if they can
differentiate their product without damage their brand image. Like Mercedes, who were
produced luxury expensive cars that few people could afford to pay for. Then, they
expanded to smaller cars, less expensive like A3, A4 or Smart, so every individual could
buy a Mercedes. Did this damage the reputation of Mercedes cars or image? The third one
is to improve the impact/cost ratio of company’s marketing, meaning that there is no room
for scatterguns or special interest campaigns. The fourth one is that companies have to have
their eyes and ears open to learn from the emerging markets.
Innovation
As Professor Tim Amber said to CIM Marketing Summit on 21st of March, recession is
According to a research of Boston Consulting Group5, 64% of senior executives say that
innovation is one of their top three strategic priorities, 25% of companies interviewed say
that innovation is now their number one priority and 58% of senior executives plan to raise
The impacts of the financial crisis
Page 7
International Marketing Assignment Report
Procter & Gamble6. Can you imagine what this company managed to do? Two of the
products of the company were Oral-care, a dental health and Fabric/home care bleach.
After combined R& D efforts, it produced its most successful product launch in the last 20
years, Whitestrips. In just its first year, the product generated $200 million in revenue and
The example below is not from an international business, although it covers the above
subtitle 100%. The order in which food is displayed to school-children7 in all US is always
the same. In one school, the principal decided to change the order in which the food was
displayed and started with salads which are the healthiest foods and then the rest unhealthy
meals. The result was that in one year time there was a change of 30% healthier students
than before.
The following example will show you how Hyundai8 managed to increase their sales in
What was the reason? 50% of people were thinking about buying a car were holding
back because they were afraid of loosing their jobs. The genius behind the Hyundai
approach to selling cars is that it has caught on to a way to get people into showrooms
during the worst recession in decades. They advertise that a decade ago Hyundai pioneered
America’s Best Warranty to show to their customers the faith they had in their cars. Today,
Hyundai, even if in the next year any customer looses his income, they will let him return it
The market share of Hyundai in the US market increased from 2.7% to 4.3%.
Conclusion
Summarizing I will reemphasize the fact that in such turbulence business times in order
modifying existing marketing strategies and expanding into new mass markets using
innovative and creative approaches. Changes can be small but results can be significant.
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