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DISSERTATION WORK ON
“GLOBALIZATION AND ITS IMPACT ON MARKETING STRATEGIES”
VIKAS KHANDELWAL ROLL NO. D9232 (MARKETING & FINANCE) 2008-2010
INTERNATIONAL SCHOOL OF BUSINESS AND MEDIA, PUNE
This is to certify that the dissertation work titled “Globalization and its effect on Marketing Strategy” is a bonafide work done by Mr. Vikas Khandelwal, Roll No. 9232 of International School of Business & Media, Pune belonging to Marketing and Finance specialization batch 2008-10. As his guide I am satisfied with his work done and declare his dissertation work complete in a given period of time.
I wish him great success and best of luck for his future.
Prof. Deepak Chakborty (Dissertation Guide)
With immense pleasure I would take this opportunity to acknowledgement the invaluable assistance and cooperation extended to me by certain individuals for the successful completion of my dissertation work. I consider it as a privilege to thank all those who have helped me in completing my work. First of all I would to thank my guide Prof. Deepak Chakraborty for his constant motivation and valuable help throughout the work and whose support has helped me to complete my work in the stipulated period period of time.He persistently encouraged me to strive for excellence. He taught me to think critically and to have self-discipline. As my advisor, he was readily available and gave prompt advice during the dissertation process. I truly appreciate his guidance, patience, and dedication throughout my PGDBM study. I express my sincere and profound gratitude to Mr. Avaneesh Jhumde (Academic chairperson), Dr. P.K De (Executive Director) for his kind support in guiding me, selecting a dissertation guide. I would also like to extend my warm feelings and sincere thanks to Mr. Sandeep (Librarian) for his ample help. I also acknowledge the help and cooperation of all the staff and my class mates who have directly or indirectly helped me in completion of my dissertation work successfully.
OBJECTIVE OF STUDY…………………………………………………………………………5
SCOPE OF THE STUDY…………………………………………………………………………6 LIMITATION OF THE STUDY………………………………………………………………….7 ABSTRAT……………………………………………………………………………………… 8 INTRODUCTION………………………………………………………………………………. 9 GLOBALIZATION…………………………………………………………………………… 10 EFFECT OF GLOBALIZATION ON DIFFERENT ASPECTS………………………………13 NEW GLOBAL CUSTOMERS…………………………………………………………………14 THE EFFECT OF GLOBALIZATION ON CONSUMER BEHAVIOR………………………19 GLOBALIZATION AND BUSINESS………………………………………………………….21 DECIDING WHICH MARKET MATTER……………………………………………………..25 GLOBALIZATION AND MARKETING CO-OPERATION………………………………….28 THE GLOBALIZATION OF MARKETING…………………………………………………..30 FORCES OF GLOBALIZATION……………………………………………………………….32 DIFFERENT MARKET ENTRY STRATEGIES……………………………………………….33 10 STEP STRATEGIES FOR GOING GLOBAL………………………………………………38 GLOBAL MARKET-OPPORTINITY AND FIRM PERFORMANCE………………………..39 GLOBAL EFFECTS, CO-MARKETING ALLIANCE AND PERFORMANCE……………..40 VIEWS OF DIFFERENT COMPANIES………………………………………………………..41 SUCCESS STORY OF DIFFERENT GLOBAL BRANDS…………………………………….44 HOW GLOBAL BRANDS COMPETE…………………………………………………………47 GLOBAL MARKETING V/S LOCAL MARKETING…………………………………………48 EFFECT OF GLOBALIZATION ON INDIAN INDUSTRY…………………………………..52 EFFECT OF GLOBALIZATION ON RURAL MARKETING………………………………..53 CONCLUSION…………………………………………………………………………………..55 BIBLIOGRAPHY………………………………………………………………………………..57
OBJECTIVE OF STUDY
The primary objective of this research is to gain a better understanding of the effects of globalization on firms’ international marketing cooperation and performance of firms, both in developed and emerging economies (i.e., the U.S. and Thailand, respectively).
The first two questions of this dissertation are: 1) Does globalization affect firm performance? And 2) is the relationship between global market opportunities and performance stronger than the relationship between global market threats and performance? By answering these questions, the study indicates the extent to which firms in two different economic contexts are affected by globalization. It also shows which dimension of globalization effects tends to have stronger impact on the performance of firms that are located in very different market environments. Some Questions arises while studying this topic
1. Up to what extent Globalization is affecting different aspects of our life including culture,
2. 3. 4. 5. 6.
environment and business or marketing. To study the different strategies used by the companies in this environment. To study the change in consumer behavior To study the threats and opportunities globalization is creating. What steps company’s may take To study “Is globalization useful for business.”
SCOPE OF THE STUDY
The emphasis of this dissertation is on how the degree of cooperation in co marketing alliances enables firms to manage globalization effects and stay competitive in international markets. As suggested in past literature, globalization makes alliances an essential part of a firm’s strategy in order to stay competitive and to achieve superior performance. To better capture global
opportunities, firms tend to cooperate with other firms to capitalize on and leverage their limited resources since it is impossible for one firm to “do it all and go it alone. Similarly, in order to cope with increasing global competitive threats, firms are likely to form alliances .Based on the classical industrial organization perspective—the market power, firms form alliances to reduce competition and uncertainty. Through such cooperation, companies gain market power that helps alleviate competition and improve its competitive position. Therefore, the next two research questions of this dissertation are: 1) Does globalization affect the degree of cooperation in co-marketing alliances? and 2) Do co-marketing alliances influence firms’ international performance? Guided by these two broad research questions, a more specific emphasis of this paper is on the degree of cooperation in international marketing activities of the co-marketing alliances among firms. Past literature also suggests that firms from emerging economies usually possess characteristics which distinguish them from those of developed economies. Therefore, empirical investigations on the relationships among globalization effects, degree of co-marketing alliances, and performance of firms from Thailand and the U.S., which possess different backgrounds and characteristics, are undertaken by a primary data approach. The data collection using survey technique is thus used.
LIMITATIONS OF THE STUDY
This study is among a very few empirical studies of globalization effects. Therefore, the results of this study must be viewed with these limitations. The scales to measure globalization effects were newly developed. The scope and domain of our formative measure for the degree of cooperation in co-marketing alliances represents another measurement concern. Although these
scales were developed from a careful literature review, they are new, and thus need further verifications and applications. Several variables were not included in this study, but are worth incorporating in further studies. The roles of trust and commitment in the co-marketing alliances should be investigated. As stated in Dyer, the transaction costs of the firms vary based on the choice of safeguarding mechanisms used. For instance, higher commitment between exchange partners, higher economies of scale and scope of exchange relationships and higher inter-firm information sharing can help lower transaction costs (Dyer, 1997). Since levels of trust and commitment may affect the degree of cooperation and satisfaction of each partner, further studies could investigate the relationships between the two and its effects on firms’ efficiency. Other research avenues may include comparative studies of differences in the degree of comarketing alliances and their performance implications among firms from emerging economies themselves. Although most emerging economies appear to possess similar characteristics, they tend to differ in various ways (e.g., political regimes, levels of economic development, and managerial styles). Moreover, empirical studies of firms in different emerging markets are scarce. Thus, studies comparing firms from different emerging economies are worth exploring in the future.
Building on international business, strategic management, and marketing literature, this dissertation advances prior knowledge on globalization and business by analyzing different effects of globalization on firms. Globalization—the process of increasing social, cultural, political, and economic interdependence—has resulted in several changes in business environment. Global market opportunities and threats are major effects of globalization. While
the former refers to the increases in market potential, trade and investment potential, and resource accessibility, the latter refers to the increases in number and level of competition, and the level of uncertainty. Two empirical studies included in this dissertation explore how these effects influence firms’ international marketing activities and performance. The first empirical study investigates the effects of globalization on firm performance. The second study examines the role of firms’ cooperation in alliances in enhancing their performance amid globalization by specifically focusing on co-marketing alliances and international marketing performance of firms. Conceptual models are developed based on environment-organization literature, transaction cost economics, and market power perspective. Results from both empirical investigations lend support to theoretical conjectures. Specifically, the first study found that while firm performance is enhanced by increased market opportunities evoked by globalization, it is also hampered by growing competitive threats. Moreover, the second study indicates that globalization drives more collaboration in international marketing activities among firms in co-marketing alliances, and such cooperation enables firms to enhance their international marketing effectiveness. Thus, central contributions of this dissertation include: first, it classifies the effects of globalization on firms into global market opportunities and global competitive threats; second, it integrates literature on international business, strategic management, and marketing to address the effects of globalization on firms’ marketing conduct and outcomes; third, it demonstrates the generalizability of the transaction cost economics, the market power perspectives, and the literature on environment-organization interfaces in the domain of globalization; fourth, it confirms that globalization acts as a two-edged sword and that alliance cooperation presents a viable alternative for firms to navigate successfully in this new competitive landscape.
Overview Globalization has caused dramatic changes to business practices around the world. Companies such as IBM, Intel, Microsoft, and Philips have started to outsource specialists from various parts of the world, causing job shifts and changes in companies’ structures. Alliances among automakers (e.g., GM-Ford- DaimlerChrysler, Ford-Mazda, and GM-Honda), petroleum
manufacturers (e.g., BP-Mobil, NUPI-Chevron Texaco), and airlines(e.g., star alliances) are other examples of changes driven by this phenomenon. Therefore, this dissertation investigates the effects of globalization on business firms with a particular interest on how it affects firms from both emerging economies (i.e., China, India,Thailand), and developed economies, (i.e., the U.S). In this study, “globalization” refers to the process of increasing social and cultural interconnectedness, political interdependence, and economic, financial and market integrations that are driven by advances in communication and transportation technologies, and trade liberalization. The dissertation is comprised of three related studies. The first study is empirical research designed to examine the effects of globalization on the performance of exporting firms in Thailand and in the U.S. The second study examines the relationships between the effects of globalization and the degree of co-marketing alliance and international marketing performance of firms. The last study makes an empirical investigation of the effects of globalization on the degree of co-marketing alliance and international marketing performance of firms from two distinct economic contexts—developed and emerging economies, which are represented by American and Thai firms, respectively. Thailand and the U.S. are appropriate research settings since these two countries differ greatly in their degree of globalization level of economic development, and national competitiveness. While the U.S. is highly globalized, Thailand is considerably less globalized. According to the survey conducted by AT Kearney and EDS Company in cooperation with Foreign Policy Magazine Thailand is ranked 48th, and the U.S. is ranked 7th on the globalization index. Thailand is classified as a lower-middle-income economy, one in which the Gross National Income (GNI) per capita is between $736 and $2,935, while the U.S. is considered a high income- economy whose GNI per capita is above $40,000. Furthermore, the national competitiveness of these two nations differs dramatically. The U.S. is the second most competitive country in the world whereas Thailand is ranked number 40 on the national competitiveness index. In this introduction, the phenomenon of globalization, including the effects of globalization on businesses, is first described. The purpose of the study, the major research questions, and the scope of the study are then presented. Finally, the organization of the dissertation is provided in the last section.
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Globalization (or globalization) describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and trade. The term is sometimes used to refer specifically to economic globalization: the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. However, globalization is usually recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors. The term can also refer to the transnational circulation of ideas, languages, or popular culture through acculturation.
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People around the globe are more connected to each other than ever before. Information and money flow more quickly than ever. Goods and services produced in one part of the world are increasingly available in all parts of the world. International travel is more frequent. International communication is commonplace. This phenomenon has been titled "globalization." "The Era of Globalization" is fast becoming the preferred term for describing the current times. Just as the Depression, the Cold War Era, the Space Age, and the Roaring 20's are used to describe particular periods of history; globalization describes the political, economic, and cultural atmosphere of today. While some people think of globalization as primarily a synonym for global business and trade, it is much more than that. The same forces that allow businesses to operate as if national borders did not exist also allow social activists, labor organizers, journalists, academics, and many others to work on a global stage. In terms of economics, businesses participate in globalization to increase the international flow on capital, including foreign investments. This would lead to the economic stability of the nation and means providing more development such as infrastructures and establishments. Furthermore, it could create international agreements among different nations, and may lead to more job opportunities in the nation. This also affects the political aspect, as more projects will be produced, nationally and locally, and will practically help the nation or country in their stability and leadership. More opportunities may also mean the boosting of confidence of each individual to become more productive and effective. Culturally, there will be an increase in the exchange of information, and multiculturalism will be achieved; having no inferior or superior races. This will lead to a boom in travel and tourism, which would totally help locals to promote their products and profit from their small businesses. No one doubts that the world’s economy is truly global. Whether it’s a Fortune 100 company that sells on six continents or a local concern whose bottom line is affected by the cost of raw materials that originate across the ocean, every business is tied to the global economy. And ambitious companies look to become more global by the day. And why not? Nestlé has reported massive double-digit growth in its China business. Procter & Gamble has acknowledged that emerging markets will account for 25 percent more business in a few short years. India will be a top-five consumer-packaged-goods market by 2010. The average salary in that country is growing by more than 10 percent a year. Global means growth potential. And the potential is staggering. By 2030, the world population will have gained nearly 50 percent over 2002, and developing nations will represent 90 percent of the world’s population, up five percentage points.
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EFFECT OF GLOBALIZATION ON DIFFERENT ASPECTS
Globalization is an interesting phenomenon since it is obvious that the world has been going through this process of change towards increasing economic, financial, social, cultural, political, market, and environmental interdependence among nations. Virtually, everyone is affected by this process. Given these changes, globalization brings about a borderless world. Globalization drives people to change their ways of living, prompts firms to change their ways of conducting business, and, spurs nations to establish new national policies. Events transpiring in different parts of the world now have dramatic consequences to other parts of the world at a faster pace than anyone could imagine in the past. For example, the Asian financial crisis in 1997 has severely affected businesses around the world and the outbreak of SARS (Severe Acute Respiratory Syndrome) in 2003 has shown how globalization permits the rapid spread of the
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disease, which affects many airlines, the hospitality industry, and other businesses around the globe. On the positive side, globalization enables firms to outsource and find customers around the world, e.g., the auto and electronics industries. The globalization of production and operations benefits firms through the realization of economies of scales and scope. Hence, no one can deny that globalization has changed the way we conduct business. Although globalization is a worldwide phenomenon, the extent to which each country is globalized is not identical. To measure the degree of globalization of each nation, a globalization index was recently developed by a cooperation between Foreign Policy Magazine, AT Kearney and EDS Company. The index indicates that some small developing countries in emerging economies such as Singapore and Malaysia were among the top twenty most globalized nations from 2001 to 2004 with Singapore being ranked as the most globalized nation. Thus, it is clear that globalization is an important phenomenon, one that cannot be simply ignored, because every nation—regardless of size or level of development—is globalized and affected by globalization. With the prevalence of this worldwide phenomenon, it is not surprising that businesses are inevitably affected. Throughout this dissertation, the effects of globalization are classified into two broad Categories: 1) Global market opportunities and 2) global market threats. These two major effects are chosen to be investigated here because they are frequently cited in the past literature as the most apparent and immediate effects of globalization. Global market opportunities refer to the increases in market potential, trade and investment potential and resource accessibility. Global market threats refer to the increases in the number and level of competition, and the level of uncertainty.
NEW GLOBAL CUSTOMERS
Two billion new consumers from the developing world will enter the global economy by 2030. Who is the “new consumer” who will drive future global growth? Key Points • Armed with information technology, consumers become impatient and omnipotent; they drive costs down and quality up, whether in education or food or text-messaging services • The new consumer is predominantly female – women make 85% of all purchases; they are savvy, demanding, value hassle-free shopping and are multi-loyal among brands and stores • The new consumer demands sustainability, and will punish or reward companies based on their
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market behaviour, well beyond what the law or political regulations require • There is no single, broad-based “new consumer”, but rather many diverse segments in differentiated markets • The “what” and “where” of consumer goods is increasingly giving way to the “how” those products and services have been produced, packaged and delivered • Not all new consumers want more – in recession-struck economies of Europe and North America, consumers are more frugal, and baby boomers value leisure more than material things The sheer numbers are sobering, as the Earth’s population will surge to 8.3 billion people in 2030. By then, each individual will eat 45 kilograms of meat per year, twice as much as the 1965 average, and the world will collectively burn 105 billion tons of oil. The expanding economy and burgeoning demographics offer new opportunities for businesses, but impose heavy burdens from savvy consumers who demand sustainable products and services. Even without all the newborn babies coming into the world each day, the demands of consumers are being unleashed in ways that are transforming the global marketplace from the bottom up. Company executives and even government officials who fail to listen, re-engineer and deliver on these demands will soon find themselves driven out of the marketplace. Human aspirations have always been high, but technology is now rewriting the rules and the pace of the game. What used to take 50 years to achieve is now expected to be accomplished in five; an item that formerly cost US$ 100 must now be sold for US$ 5. Not long ago, one dollar would buy delivery of eight text messages; now companies are being asked to send 8,000 for the same price. It would be a mistake to broad-brush the new consumer as any one type or category. Depending on the goods or services and market, there are millions of differentiated new consumers. For example, many do not check or care if a label says “Made in China”. Some value “made locally” for everyday products, but even they likely prefer “Made in France” for luxury items such as perfume. What’s more, in some countries the new consumer does not want any additional stuff, but may even be trading down, saving money for retirement, and shrinking his or her economic footprint. One potent segment of a global new clientele that is not trading down, however, appears to be women. Their purchasing power has grown alongside technological and political empowerment. They have growing aspirations – for themselves, their children and their spouses – that range from education and mobility to tools for becoming self-employed. Their loyalty to family does not extend to the marketplace, however; unless they find goods and services that are fact-based, emotional and fun, they will turn elsewhere. Fast moving retailers must show what is safe, available, sustainable and affordable. Some argued that because of widespread risks, regulations on behalf of consumers would be inevitable. Panelists generally agreed, with two caveats. First, even regulations must involve society and be responsive to consumer demands, not unilaterally imposed by a few experts.
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Second, legal protections merely form the baseline for consumers; success goes well beyond what the law requires. A broad survey of consumer demands focused on where products come from, how they are made, the size of their footprint and the nature of their labor practices. All of these related to various definitions of sustainability, but that loaded word was open to interpretation. “Green” goods and services remained a niche market for only 5% of elite consumers, while “sustainable” products found broad appeal among 30%. Why? Progress in communication drives research and development to innovate towards reduced impacts. The resulting efficiency may appear in ecolabeling, cradle-to-grave awareness or other marketing efforts, but the progress owes less to visionary leadership or political mandates than to the rising influence of the relentlessly demanding new consumer. The changing dynamic of consumer behavior Consumer researchers are increasingly exploring and comparing behavior and cognitions in diverse national environments. New samples of the consumer behavior are formed by the fact that it drastic changes within the political borders and in the spatial configuration of the sales markets for consumer goods, which are connected with strong sociological-cultural forces. Barriers between markets moved away through regional integration, and created larger unified market entities. Consumers are increasingly exposed to a myriad of diverse influences from beyond their national borders, because the advances in communications technology are shrinking distances and forgetting links between markets worldwide. Traditional definitions of the unit of analysis used in cross cultural research need to be critically re-examined in view of the changing consumer landscape. There are different changing dynamics of consumer behaviour in the world. In the following a few are introduced. The first changing dynamic are the massive waves of migration which are taking place, as consumers from emerging market economies are moving to industrialized economies. The second one is that consumers are becoming more mobile and travelling more both for pleasure and business. One of the results of this changing dynamic is that the consumers are becoming exposed to the products, lifestyles and behaviour patterns of consumers in other countries. There are some reasons, for example that barriers come down (European Union) and consumers and goods move freely across national boundaries. Firms gradually alter traditional patterns of behavior, by introducing new products, services and ideas into the global market place. As a result countries or cultures can no longer be viewed in isolation as a set of separate entities, characterized by their own distinctive value-systems, traits and customs. In the 60s and 70s the first studies (cross-cultural consumer research) emerged, which examine the consumer behaviour in the different countries. Studies were primarily descriptive and lacked any strong conceptual framework to interpret findings and make inferences about observed similarities' or differences' in behaviour in different countries. One wanted to examine whether similar consumption samples and behavior in similar demographic and sociological-cultural groups in the different national cultures exist. A number of studies have focused on examining
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the universality of consumer models in different countries and cultural contexts. This is one of the key themes in cross-cultural psychology. Another stream of research focuses on comparing similarities and differences in various aspects of consumer attitudes and behaviors such as values, cognitions and decision making etc., in different cultural contexts or countries. The key theme of this is the study of cultural values or rather to compare values cross culturally. Differences in time orientation and use of time across countries or cultures have been another favorite topic of investigation. A number of studies have focused on identifying global market segments based on demographic characteristics, such as, global teenagers, women worldwide, elite consumers, and have compared their attitudes and behavior patterns in different countries. The changing dynamics of consumption behavior and the increasing complexity of cultural influences on behaviour, together with the limited ability of traditional research designs to capture this complexity suggest the need to reexamine the design of cross cultural consumer research. It is necessary to define the unit of analysis. There are different aspects to be attended here. The first priority is to define the relevant unit of analysis, or cultural group to be studied. Important point in this context is a high degree of homogeneity in attitudes and behaviour among members of the group. There are two different key criteria to define the unit. First there is the language, which may be a dialect or main language, and secondly the degree of social interaction and communication. Modern means of communication enable members located at geographically dispersed sites to communicate, interact, and establish a strong closely knit community of shared interest and identity. Besides this it structures the research design in cross-cultural studies. Once the unit of analysis has been determined along with its cultural context, the next step is to structure the research design and identity, the nature of the cultural phenomena or influences to be studied. The first and most common type of study involves a static comparison of culti-units located at different geographic sites and within different macro or micro-cultures. Another type of study involves examination of the impact of exposure to direct and indirect influences from other cultures on behaviour patterns of a given group. A third type of study examines how attitudes, interest and behaviour patterns change with movement from one macro-culture to another. In such studies, the local point is to examine the ethnic core of the culture, and in some instances, its variation across sites. Different aspects of the ethnic core and its relation to behaviour as consumers can be examined, including, for example, its core values and beliefs, the artifacts and symbols of the culture, and their impact on consumption, and desired product benefits, or ritualistic behavior. While multi-site studies focus on the ethnic core of the culti- unit, and its influence on attitudes, preferences and consumption behavior, the second type of study focuses explicitly on examining the impact of external cultural influences on the culti- unit or individual members. These are influences which come from other macro-cultures or originate from a cultural context other than the one in which their culti-unit is embedded. There are direct and indirect influences. Direct influences will arise when an individual travels to or lives for a period of time in another cultural
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context or macro-culture. Indirect influences, on the other hand, arise from passive exposure to media, information, visual images, or other stimuli generated by organizations from other ma cro-cultures. A third type of study deals with transition from one macro-culture to another. This occurs when an individual moves from one macro-cultural context to another, as through immigration to another country. Consumer Behaviour in Global markets The A-B-C-D paradigm and its application to Eastern Europe and the third world The focus is to provide a comprehensive view of consumer behaviour in global markets, especially in relation to the countries of Eastern Europe and the third world. Consumer behaviour is likely to be somewhat different in developing countries since it is largely influenced by social, political and economic conditions. It provides a framework that can be used to study consumer behaviour in global markets, this framework is applied to examine and understand consumer behaviour in countries of the third World and Eastern Europe. Besides this it offers generalizations and recommendations to those wishing to market their products/services in the Third World and Eastern Europe. Theories/models have played an important role by detailing how various factors influence consumer behaviour. In this article it presents the A-B-C-D paradigm. The four stages are termed access, buying behaviour, consumption characteristics, and disposal. A thorough understanding of each stage is essential for the global marketer since the overall effectiveness of the marketing function is contingent on all four stages being facilitated within any culture. First there are short definitions of each stage: (1) Access The first step in global marketing is to provide access to the product/service for consumers within a culture. Access pertains both to physical access as well as to economic access. (2) Buying Behaviour This stage encompasses all factors impacting on decision making and choice within a culture. Examples of these factors include perceptions, attitudes, and consumer responses such as brand loyalty. (3) Consumption characteristics The specific products/services that are purchased and consumed may be different in each culture. The cultural orientation (traditional versus modern) and social class distribution, among other factors, will determine consumption patterns within a culture. (4) Disposal Most countries, including the developing countries, are becoming more environmentally conscious and moving away from throw-away products. Hence marketers need to design systems to facilitate the safe disposal, recycling, resale or manufacturing of products. They must also meet their social responsibilities in other countries, especially in relation to public safety and environmental pollution.
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A different rationale for the A-B-C-D paradigm: First, since the four stages are universally applicable, the paradigm offers a general framework to understand consumer behaviour within any global market. Second, in order to understand the broadest possible range of consumer behaviour within any culture, the paradigm encompasses all aspects of purchase and consumption within a simple framework. Third, the four stages of the paradigm are arranged in a hierarchical fashion from the consumers' viewpoint. And fourth the A-B-C-D paradigm is consistent with the concept of business process reengineering, which encourages business to improve corporate performance by using a cross- functional perspective. The practical application of consumer behaviour findings in international markets has often posed a problem for marketers for two reasons. First, most consumer research in international markets has used a piecemeal approach. Second, there has been no comprehensive framework to integrate the findings in a meaningful manner.
THE EFFECT OF GLOBALIZATION ON CONSUMER BEHABIOR
Global consumer segments are beginning to emerge. Often it is thought that because of globalization the world is becoming one global market. Like in the article of Leeflang & van Raaij where the research proved a trend towards a conversion to a more similar macromarketing environment and macro- marketing mix in the EU nations, but this is just partly due to the effect of globalization. This is however just proof for the European market and can certainly not be generalized to the whole world. Suh & Kwon researched the difference in buying behavior for foreign products between an Asian country and the US. They introduced the term global openness as a measure for globalization. Global openness is the construct incorporating the impact of globalization and so reflecting a self-conscious level of globalization as a process of Increasing consciousness and sensitivity to other people and cultures. They researched the effect of global openness on consumers' ethnocentric tendencies in a certain cultural context.
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Consumer ethnocentrism generally plays an important role in determining the magnitude of reluctance to buy a foreign product, and product judgments also play a part but only in a western culture, where consumers' reluctance to buy foreign products might have been decreased by perceived product quality, lowering consumer ethnocentrism, and directly developing global openness. It is concluded that consumers in a different culture, who are fundamentally different in their tastes and preferences, perceptions, ordering of needs and motivations to consume, are still sufficiently different even after being exposed to the enormous wave of globalization (Suh & Kwon, 2002). The article is concludes that globalization is not creating one big market and that different cultures still differ to a great amount. Both studies are not completely comparable because of the different aim and different countries studied. The countries studied differ and the European countries are geographically near to each other and have a more similar or interwoven background than Korea and the US have. Globalization effects the buying behavior of consumers but not every country is affected the same. There are several different patterns of cosmopolitan behavior, varying both with the situation and the consumer. Every market has relatively central or relatively peripheral consumption contexts. Because one and the same product can be in one country in the relatively central context but, because of cultural differences, in the other country in relatively peripheral consumption contexts. (An example could be French wine, which is not easily substituted by another wine in France, but in the Netherlands South- African wines are able to gain market share as well, so in France French wine has a central consumption context and in the Netherlands French wine has a peripheral consumption context) in every market, consumer behavior encompasses conservative consumption contexts, which are difficult to penetrate for nontraditional products, and areas which are more open to globalization and modernization. Those consumption contexts are referred to as relatively central or relatively peripheral consumption contexts. The general level of openness to change of a society is reflected in the degree of modernization of the consumption situations in general, but also that the effect of modernization depends on the cultural importance of each of the particular consumption situations. The different degree of resistance of the consumption situations implies that innovation is unevenly distributed, and that it has its strongest impact in the culturally important areas. An example of a framework for studying consumer behaviors in global markets is the ABC- D paradigm, the four stages are universally applicable, and the paradigm offers a general framework to understand consumer behavior within any country. Conclusions The preceding definitions of globalization show that there is some general equality, but no formal uniform definition. Most definitions are on the Macro-level. Globalization is facilitated by developments like, better communication tools, easier travel etc. Globalization should not be confused with cosmopolitism. A cosmopolitan is a typefication for a consumer which can have both a global as well as a local mindset. The question posed in the synthesis chapter, whether the effect of globalization creates a large connected market or individual small segments, can be answered. The effect of globalization is that borders are fading
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and it is looking like the world is becoming one global market. An example is the European Union that is becoming one market more and more. On the other hand research clearly indicates that the effect of globalization is not that consumer characteristics are becoming equal all over the world. Consumers in a different culture are still different although exposed to a great deal of globalization. Globalization effects the buying behavior of consumers but not every country is affected the same. Concluding, there is no such thing as a global market. The implications for the marketing departments of companies producing global products is that it should be decided in which stage of globalization the market is and if the customer sees the product in a central or relatively peripheral consumption contexts. A framework for analyzing consumer behavior is the A-B-C-D paradigm. Another implication is that every market should be approached differently because of the differences between the markets. Further research could be done on the development of globalization over time, how the development is shaped and how to make predictions for the effect of globalization among different countries for the future. Another field of interest is the effect of globalization on countries geographically near to each other and countries which do not have these characteristics. There are no global markets, but possibly due to the effect of globalization there can be appointed several "mega- markets" (such as EU, USA etc.).
GLOBALIZATION AND BUSINESS
Globalization has melted national borders, free trade has enhanced economic integration and the information and communications revolution has made geography and time irrelevant. The role and functions of entrepreneurship in the new global economy have taken on added significance and face compounded challenges. We live in a challenging environment of rapidly changing economic events, where the private sector has become the most important engine of economic growth and the public sector has shrunk in importance and influence. Entrepreneurs are defining the new rules of engagement on the economic landscape as they come to grips with contemporary challenges and new opportunities. In this new environment, entrepreneurs need to articulate a pragmatic vision, exercise effective leadership and develop a competent business strategy. They should create the synergies that will allow them to integrate the interactive ingredients of the new economy in order to enhance their competitive advantage. Their business strategy should embrace flexibility, a quick response time and a proactive approach to economic
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opportunities. This paper will also enumerate the entrepreneurial abilities, skills, competencies and perspectives that are essential pre-requisites for success in the new global economy of the twenty-first century. In short, the economic heartbeat of the new economy is the global entrepreneur with an international mindset. The economic gains of the Industrial Revolution were associated primarily with economies of scale. Economies of scale accrue when the cost of producing a unit of output decreases as the output rate increases prior to diminishing returns setting in. This is a result of the incremental decrease in per unit cost, as the per unit fixed cost is distributed over a larger number of total production output. Economies of scale arise from specialization and the division of labor that can be attained more effectively by each business' internal structure of the production process coordination, rather than in market co-ordination. The mass production of consumer durable goods using the assembly line method of production is a good example of gains from economies of scale during the Industrial Revolution. More specifically, car manufacturers have been the beneficiaries of economies of scale through the use of cost saving machinery and highly specialized labor, along with targeting increases in production output levels. The role and functions of entrepreneurship in the new global economy of the 21st Century have taken on added significance and face compounded challenges. Today we live in a challenging environment of rapidly changing economic events, where the private sector has become the most important engine of economic growth, and the public sector has shrank in importance and influence. In this context, the entrepreneur has a primary role to play in promoting national wellbeing through the enterprise of the private sector. Entrepreneurs are defining new rules of engagement on the economic landscape as they come to grips with contemporary challenges and new opportunities. New ideas, new directions, and new initiatives are the signature mark of the 21st Century. In this new environment, entrepreneurs need to articulate a pragmatic vision, exercise effective leadership, and develop a competent business strategy. They should have personal qualities to integrate the interactive ingredients of the new economy, viz. globalization, trade liberalization, and the information technology and communications revolution, in order to enhance their competitive advantage. Their business strategy should embrace flexibility, a quick response time and a proactive approach to economic opportunities The pervasive economic integration that has taken place in the new global economy has compounded the interdependence of nations, and enhanced the linkages of production and marketing. At the very heart of this transformation is the birth of the global entrepreneur. In other words, the ability to adopt a global mindset in the exercise of entrepreneurial initiatives. Indeed, in addition to a new global vision, new competencies and new skills are necessary tools for the modern entrepreneur. Among those new skills are the ability to cope with the tidal wave of frequent and repeated change, more cost-effective production methods, improving the quality of products, having a faster response time to changing market conditions, selling at lower prices, and being more aggressively competitive. In order to strategize globally, the contemporary
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entrepreneur must extend his/her mindset to incorporate multidimensional relationships and complex social, cultural, economic and political realities. One of the most important entrepreneurial requirements is the ability to have a global perspective. Globalization has for all practical purposes melted national borders and made geographical location irrelevant. Entrepreneurs with a global vision have the advantage of reaching out to embrace economic opportunities world-wide. Conducting business in a local, regional or national milieu is significantly different from doing business internationally. For example, it requires up scaling from a national image in the market place to a global image. This involves endorsing the same standards of quality throughout the world on a consistent basis, but at the same time incorporating the flexibility to tailor packaging or the image of the product to suit the customs and traditions of the local market. Second, the new global entrepreneur must have the ability to meet the challenges and take advantage of the opportunities associated with human diversity. This requires the adoption of a progressive multicultural approach in terms of one's workforce as well as one's product clients. The contemporary entrepreneur must develop a knowledge and appreciation of the cultural, social, and economic differences that influence how people perceive and interact in their environment and its relationship to community development. It requires being constantly sensitized to the different cultural values, attitudes and approaches to problem solving and decision-making. A proficiency in managing diversity domestically and internationally is essential for harnessing the multicultural profile of the workforce and ensuring optimum levels of productivity. The cultural diversity of the workforce is an economic asset that must be deployed to strategic business advantage. It translates into an ability to communicate in the languages of many different countries, and familiarity with local customs, traditions, business, and financial habits. Marketing strategies must understand the role of languages and cultures as they attempt to introduce new products in foreign markets. The failure to take local preferences, packaging, branding, local conditions, and economic infrastructure into account can result in poor strategic decisions. An imperative for effectively managing cultural diversity is cultural sensitivity. The modern entrepreneur requires a comfort level that is conducive to utilizing the multicultural, multiracial, multilingulstic, and multifaith character of the workforce. This is a profound economic advantage in such areas as international trade, identifying export markets, overseas business contacts, opening doors of economic opportunity, establishing a presence in overseas markets, facilitating foreign direct investment, integrating advanced technology, and assessing the business risk of operating in a foreign market. A global perspective involves a holistic view of workforce inclusiveness whereby all employees are treated fairly and equitably, and are provided with equal opportunities and equal rewards. It requires the effective integration of diverse cultures in the business network in a productive and trusting environment. In short, this is about creating people synergy, where the outcome is greater than the inputs, because of the strategic co-ordination of a diverse and pluralistic workforce.
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The third axiom of successful entrepreneurship in the new economy depends on pushing the frontiers of innovation in a persistent and deliberate manner. Integrating innovation has become a constant objective for economic efficiency and the development of a successful business strategy. The maxim "if it ain't broke don't fix it" should be replaced with "if it ain't broke improve it". The modern entrepreneur must embrace the role of a catalyst for innovative change on a continuous time frame. In this respect, entrepreneurs must seek opportunities for achieving economies of scale and economies of scope. Global enterprises can ascertain these economies by extending their reach to global markets. In doing so, they extend the potential of their domestic market and enhance the scope of their innovation initiatives through research and development, the development of new products, improving quality, and reducing the cost of existing products. It should be noted that developing global niche market requires a long-term customer oriented focus. In order to compete in the contemporary global market, products and services must be sensitive and responsive to local market needs and customer preferences. Furthermore, in the fast paced world of business, even the long term is getting shorter. Given the diversity of market requirements and needs, the dispersion of manufacturing and out sourcing, the importance of research and development leadership, and the recognition of technological advances for product and process innovations; learning and the transfer of knowledge are key to global success. Business organizations that are successful must be able to co-ordinate, transfer, and use knowledge gained rapidly and effectively. New corporations with an international focus must embrace an organizational vision that has a global reach. There must be an administrative model that facilitates the corporate vision and has the plans to implement it effectively and consistently throughout the entire organization. It is in this regard that product quality takes on added significance. The culture of the modern enterprise must be to adhere to high quality standards that are company-wide and permeate throughout the entire enterprise, not just parts of it. The economic profile of the new global economy has been driven by technology, fuelled by innovation and entrepreneurial initiative, and is based on new ideas, new perspectives and new business strategies. It has opened the door to new investment opportunities and acted as a catalyst for employment creation. At the same time the new economy has altered the economic landscape and realigned the linkages between different sectors of the economy. In short, technological innovation and entrepreneurial initiative is alive and well in the new global economy of the 21st Century. The new economy has markedly transformed the structural parameters of the economic landscape and contracted the prism for time and space. The role of information technology in the new economy has been pivotal. It is particularly potent in the changing structure of international production. International economic transactions that formerly were conducted between independent entities are now being internalized within a single firm or multinational corporation. The new technological infrastructure has empowered services to be delinked from production, and traded or performed remotely. In this contemporary venue, the market for a growing number
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of internationally integrated but geographically dispersed business enterprises is global, rather than national or regional. The internationalization of production is necessitated by the economics of profitability. In other words, the high cost of information technology and the highly skilled labour used in the production process, require a marketing niche that caters to a global market rather than a smaller national market. The economic heartbeat of the new economy is the global entrepreneur.
The opportunities and threats evoked by globalization have caused firms to adapt their organizational structures and strategies accordingly. Firms that respond to these trends have been found to improve their performance. Although many scholars have often discussed these two effects of globalization, a review of related literature reveals that empirical work on such effects and business firms is still scarce. Therefore, this dissertation specifically aims at analyzing the effects of global market opportunities and threats on 1) a firms’ overall performance, and 2) a firms’ cooperation in marketing alliances and international marketing performance.
DECIDING WHICH MARKET MATTER
Deciding where you should offer translated localized information and how much of it are basic international marketing functions. Globalization is not an all-or-nothing proposition. This is not a binary decision. Some markets make natural sense to support because you have a significant customer base. Others will be less obvious and might involve localizing your internal operations or a behind-the scenes supply chain before tackling the consumer-facing Web site. • Language plus country make a market. Most globalists start out by reviewing the countries or the languages that are important to their business. Here I outline the more evolved notion of country-language pairs, also called locales. For example, supporting the German language for Germany is such a pair that I would characterize as a discrete market or locale, just as Spanish for U.S. Latinos or French for Canadian francophone’s is unique markets. I call languages like Chinese, English, and Spanish that are spoken by people in different countries mega languages.
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Some companies go global by first creating an international site for all English or Chinese speakers regardless of where they live. • Seven guideposts for global marketing. Just as we have the traditional four Ps of marketing (product, price, place, and promotion) to guide us, we can look to similar guideposts for moving into international markets. Here we discuss the three Ps: product portability, Internet penetration, and the polities that you must consider for each market. These discussions will always revolve around return on investment Business without Borders (ROI) factored against the benefits. • Tiered support lessens the burden. Too many globalization aspirants want to enter every country at once and offer phenomenal levels of service in each one. Here I lay out the notion of a multitier approach to entering only the markets that matter.
When Supporting a Market Online Should Be a No-Brainer
One thing that I have learned over the last few years of talking to companies is that globalization is not a binary decision. You can indeed be a little global—and some of the best thinkers in this space have gone global incrementally. This step-wise approach means picking the right markets to offer the appropriate level of localized support. The first moves of these market leaders may have been to reach out to established customers in strong markets, while others have worked at the problem from behind the scenes, striving to improve the efficiency of their Web-based internal operations and supply chains. There are a few cases where most companies will not hesitate to go global: • Make relationships in an established market more profitable. If you already have a significant brick-and-mortar presence or a healthy customer base in a market, you might choose to shortcircuit the evaluation process and go directly to creating a branded site for that country or improving the locally built site that you already have. For example, both BMW and Sony get a significant share of their revenue from the American market, so they pushed their U.S. subsidiaries to invest heavily in localized sites. Any of the expected benefits of a global online business—better support for local customers, competitive pressures, and so on—could steer you to online investment where you already have a physical presence. Increase the productivity of international employees. You might choose to localize only the inward-facing part of your company in order to sustain internal manufacture—for example, to support maquiladoras in Mexico or offshore software development in India or Russia. This may take a simple form. For example, Germany’s Siemens uses automated computer translation to give employees around the world the gist of email communications in other languages, thus improving the flow of information between business units. These internal considerations are often more straightforward than any other decisions. Review your in-country staff and its fluency with your corporate language and determine whether no localized information stands in the way of productivity or progress. Some global companies may not even realize that not all of their staff speaks fluent English.
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• Extend supply chains to new geographies and opportunities. If your international supply chain suffers from a lack of local language or market logistics support, you might look at localization as a way to increase efficiency. Multinational firms like DaimlerChrysler now envision broader, multilingual procurement systems. This international, multilingual supply chain will be a growing concern for companies that have chosen English as their lingua franca. And as the Web insinuates itself into more small- and medium-sized businesses around the world, the guarantee of English-speaking users will become null and void, thus driving up costs or increasing the time it takes to get a product to market. These are the easy cases. If you are like many globally branded companies that sell directly to consumers, you have already got a pretty good sense of which markets might make the most sense for further investment in a more localized experience. But you are probably also somewhat behind where you want to be on the question of more local supply chain and internal operations over the Internet. Business without Borders describe the tailoring of a site, a document, or a business to national markets is localization. This term is actually more correct than nationalization in its broadest sense because it incorporates the sense of locale plus language. For example, that lets you talk about localizing to the U.S. English or Latino markets, two different activities. Now it is time to approach the question of which market deserves your next round of investment. It Takes More Than a Border to Make a Market On the Eighth Continent, the political entity of a country combines with language, culture, legal systems, and business practices to create a distinct market. If you went by language alone, you could expose your firm to some nasty legal problems and consumer reaction to the wrong language. Languages Mapped against the Countries Where They Are Spoken Let’s map a language to a country in the three most common variants: 1. One country, one language. These are linguistically simple markets with a one-to-one correspondence of language to the political entity— for example, Japan or Korea. Once you choose to enter such a market, you must render your message in their language and localize the experience to national currency, practices, and expectations. 2. One country, multiple languages. More complex markets involve multiple languages used in a single polity, such as French and Flemish in Belgium. In these situations, the sound business approach is to pick the country-language pair that makes the most economic or political sense. For example, Quebec’s Bill 101 made French the official law of the province. Combined with subsequent Canadian federal legislation, doing business in English sometimes mandates operating in French as well; therefore, English-only sites might not be an option.1 3. Multiple countries, one language. Megalanguages such as Chinese, English, French, Portuguese, and Spanish are spoken in different countries around the world. Even languages with smaller populations can span national boundaries, as Dutch does with the Netherlands and Belgium. Should you enter individual markets or the more universal megalanguage market? The business case that you will establish as you work through the issues in this chapter will drive
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your decision one way or the other. Many companies start their international push by supporting multinational languages with no reference to any single country (see Figure 4. They use the country-agnostic support for a megalanguage as a first Deciding Which Markets Matter step to get accustomed to the idea of managing translation projects and synchronizing content between the home-country site, as well as the raft of process and organizational issues that will come up. Without exception, companies that have taken this approach adopt the megalanguage dialect used in the biggest, most lucrative markets. For example, Sony might target Parisian French before supporting smaller countries with lower Internet densities, figuring that francophones in Quebec and elsewhere could understand the language well enough. Besides addressing the needs of a large population speaking another language, this approach lets a company get its feet wet with technology that will allow it to manage the more complex content that will come from managing content for multiple countries.
GLOBALIZATION AND MARKETING CO-OPERATION
GENERAL BRAND STRATEGIES Brand strategy is aimed at influencing people.s perception of a brand in such a way that they are persuaded to act in a certain manner, e.g. buy and use the products and services offered by the brand, purchase these at higher price points, donate to a cause. A global brand needs to provide relevant meaning and experience to people across multiple societies. To do so, the brand strategy needs to be devised that takes account of the brand’s own capabilities and competencies, the strategies of competing brands, and the outlook of consumers (including business decision makers) which has been largely formed by experiences in their respective societies. There are four broad brand strategy areas that can be employed. (1) Brand Domain. Brand domain specialists are experts in one or more of the brand domain aspects (products/services, media, distribution, solutions). A brand domain specialist tries to preempt or even dictate particular domain developments. This requires an intimate knowledge, not
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only of the technologies shaping the brand domain, but also of pertinent consumer behavior and needs. The lifeblood of a brand domain specialist is innovation and creative use of its resources. A brand domain specialist is like a cheetah in the Serengeti preying on impala and gazelle. The cheetah is a specialist hunter with superior speed to chase, and the claws and teeth to kill these animals. The cheetah is also very familiar with the habits of its prey. (2) Brand Reputation. Brand reputation specialists use or develop specific traits of their brands to support their authenticity, credibility or reliability over and above competitors. A brand reputation specialist needs to have some kind of history, legacy or mythology. It also needs to be able to narrate these in a convincing manner, and be able to live up to the resulting reputation. A brand reputation specialist has to have a very good understanding of which stories will convince consumers that the brand is in some way superior. A brand reputation specialist is like a horse.
(3) Brand Affinity. Brand affinity specialists bond with consumers based on one or more of a range of affinity aspects. A brand affinity specialist needs to outperform competition in terms of building relationships with consumers. This means that a brand affinity specialist needs to have a distinct appeal to consumers, be able to communicate with them affectively, and provide an experience that reinforces the bonding process. A brand affinity specialist is like a pet dog. (4) Brand Recognition. Brand recognition specialists distinguish themselves from competition by raising their profiles among consumers. The brand recognition specialist either convinces consumers that it is somehow different from competition, as is the case for niche brands, or rises above the melee by becoming more well known among consumers than competition. The latter is particularly important in categories where brands have few distinguishing features in the minds of consumers. IMPACT ON BRAND STRATEGIES The factors discussed above each have their own specific impact on the four general brand strategies and their strategy sub-types. Due to the limitations of its format, this paper focuses on factors that influence the four general strategies only. We also limit the discussion to one global branding issue that has attracted a lot of attention among practitioners in recent years, namely brand harmonization or standardization. This is not say that the factors discussed above do not also have a profound effect on other global branding issues such as global brand extensions, rationalizing a global brand portfolio, global brand architecture and co-branding global brands.
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THE GLOBALIZATION OF MARKETING
Since at least 10 years you hear a lot about Globalization, about the shrinking physical and mental distances between countries. Thomas Friedman calls is the “Flattening of our world”, other describe it as the “Globe as our village” phenomena. Is the same happening in our beloved marketing field? There are probably four different marketing constituents that need to be considered if one analyzes the extent of the globalization of marketing: The Consumer, Brands, the community of marketers, and the academic field of marketing. Let’s review each one separately: The Consumer – There is no doubt that today’s consumers are much more globally oriented than ever before. The internet makes physical boundaries seem obsolete, the exchange of ideas and communication appear more borderless. But, but most consumers, especially in the US, still spend most of their discretionary income on US brands, on products and goods that are sold (definitely not manufactured) in the United States. There is only a very limited global sourcing and purchasing behavior of consumers. This is very different from businesses which are getting used to buy goods and services from anywhere. Still, the US consumer is used to shop non US brands, and thinks more and more beyond physical country boundaries but there are only a few (very rich) truly global consumers.
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Brands – The number of truly global brands (e.g. Apple, Nokia, Hugo Boss) have increased over the last decade. One just needs to look at Toyota and their increasing leadership in the automotive industry on a global level. One can imagine that the world of brands morph into two extremes, of very global and very local brands. Brands will have to decide if they want to focus primarily on their local or their local identity. Marketers – It’s still pretty rare to find really global marketers in the CMO’s position of Fortune 2,000 Firms. It’s much more common for CEO’s to have the global work experience with stints on multiple continents. CMOs still seem to follow the old rule of originating from a brand’s motherland. While this is partly understandable (you first need to understand the consumer’s mindset of the brand’s mother or fatherland), CMO’s need to become much more global players. Unfortunately there does not seem to be a growing community of global marketers, not even within the big marketing services firms, that actively promote the global CMO. Academics – The biggest lack of globalization resides within the academic community. Most US marketing academics are too busy enough in reinforcing their own US superiority while non US academics don’t like to rely heavily on the US marketing leadership. Just recently I asked US academics about their favorite non US marketing personality or stimulating book. I did the same with some of their European counterparts and inquired about their favorite US marketing academic or book. In both cases I only received blank stares and uncomfortable silence. This brief assessment of the globalization degree along the key marketing constituents shows that leading brands behave and think much more global than the practicing or the academic oriented marketer. We Marketers have to be careful that we don’t fall further back but instead keep up with the speed of globalization. Currently it’s more driven by brands and opinion leading consumers instead of a community of global marketers. Let’s change it.
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FORCES OF GLOBALIZATION
Why Go Global? The playing field is wide open for small business. Here’s why both men and women should consider going global: • Increase sales. • Generate economies of scale in production. • Raise profitability. • Insulate seasonal domestic sales by finding new foreign markets. • Create jobs, productivity growth and wealth. • Encourage the exchange of views, ideas and information. Small business in particular can take a mentoring role in educating other men and women in going global. They can establish educational programs, conferences and other activities to advance their colleagues, and in doing so, promote professional growth and leadership among all small business owners. The best is truly yet to come.
What Does It Take To Go Global? Any small business owner must be adaptable, strategic and willing to take calculated risks. But becoming a successful global small business requires the following commitments:
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• • • •
Be comfortable with change. Welcome new experiences; and learn as much as possible about the culture in which you are interested in doing business. Be willing to take risks, even though it may create short term challenges. Push yourself to continuously innovate.
DIFFERENT MARKET ENTRY STRATEGIES
1. Exporting Exporting, the most traditional mode of entering the foreign market is quite a common one even now. International trade has been growing much faster than the world output resulting in greater world economic integration. Exporting is the appropriate strategy when one of more of the following conditions prevails. 1. The volume of foreign business is not large enough to justify production in the foreign market. 2. Cost of production in the foreign market is high. 3. The foreign market is characterized by production bottlenecks like infrastructural problems, problems with materials supplies etc. 4. There are political or other risks of investment in the foreign country. Exporting is more attractive than other modes particularly when underutilized capacity exists. Even when there is no excess capacity, expansion of the existing facility may sometimes be easier and less costly than setting up production facilities abroad. Further, many governments, as in India, provide incentives for establishing facilities for export production. The alternatives to making in foreign countries by the international marketer for marketing the goods in the foreign countries are licensing and contract manufacturing. Although these have certain advantages, there are also certain risks. Hence, if a company does not want to go in for licensing or contract manufacturing, the only avenue open is exporting. 2. Licensing and Franchising
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Licensing and Franchising, which involve minimal commitment of resources and effort on the part of the International marketer, are easy ways of entering the foreign markets. Under International licensing, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its intellectual property (such as patents, trademarks, copyrights, technology, and technical know-how, marketing skill or some other specific skill). The monetary benefit to the licensor is the royalty or fees which licensee pays. In many countries, such fees or royalties are regulated by the government; it does not exceed five per cent of the sales in many developing countries. A licensing agreement may also be one of cross licensing, wherein there is a mutual exchange of knowledge and/or patents. In cross licensing, a cash payment mayor may not be involved. Franchising is “a form of licensing in which a parent company (the franchiser) grants another independent entity (the franchisee) the right to do business in a prescribed manner. This right can take the form of selling the Franchiser’s products, ‘using its name, production and marketing techniques, or general business approach.” One of the common forms of franchising involves the franchisor supplying an important ingredient (part, material etc.,) for the finished product, like the Coca-Cola supplying the syrup to the bottlers. 3. Contract Manufacturing Under contract manufacturing, a company doing international marketing contracts with firms in foreign countries to manufacture or assemble the products while retaining the responsibility of marketing the product. This is a common practice in international, business. Contract manufacturing has the following advantages. 1. The company does not have to commit resource for setting up production facilities. 2. It frees the company from the risks of investing in foreign countries. 3. If idle production capacity is readily available in the foreign country, it enables the marketer to get started immediately. 4. In many cases, the cost of the product obtained by contract manufacturing is lower than if it were manufactured by their international firm. 4. Management Contracting Under the management contract, the firm providing the management know-how may not have any equity stake in the enterprise being managed. In short, in a management contract the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership Thus, as Kotler observes, management contracting is a low-risk method of getting into a foreign market and it starts yielding income right from the beginning. The arrangement is especially attractive if the contracting firm is given an option to purchase, some shares in the managed company within a stated period. Management contract could, sometimes, bring in additional benefits for the managing company. It may obtain the business of exporting or selling otherwise of the products of the managed company or supplying the inputs required by the managed company.
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Management contract enables a firm to commercialize existing know-how that has been built up with significant investments and frequently the impact of fluctuations in business volumes can be reduced by making use of experienced personnel who otherwise would have to be laid off. 5. Turnkey Contracts Turnkey contracts are common in international business in the supply, erection and commissioning of plants, as in the case of oil refineries, steel mills, cement and fertilizer plants etc; construction projects and franchising agreements. “A turnkey operation is an agreement by the seller to supply a buyer with a facility fully equipped and ready to be operated by the buyer’s personnel, who will be trained by the seller. The term is sometimes used in fast - food franchising when a franchiser agrees to select a store site, build the store, equip it, train the franchisee and- employees and sometimes arrange for the financing.” 6. Wholly Owned Manufacturing Facilities Companies with long term and substantial interest in the foreign market normally establish fully owned manufacturing facilities there. As Drucker points out, “it is simply not possible to maintain substantial market standing in an important area unless one has a physical presence as a producer.” A number of factors like trade barriers, differences in the production and other costs, government policies etc., encourage the establishment of production facilities in the foreign markets Establishment of manufacturing facilities abroad has several advantages. It provides the firm with complete control over production and quality. It does not have the risk of developing potential competitors as in the case of licensing and contract manufacturing. Wholly owned manufacturing facility has several disadvantages too. In some cases, the cost of production is high in the foreign market. There may also be problems such as restrictions regarding the types of technology, non-availability of skilled labour, production bottlenecks due to infrastructural problems etc. If the market size is small, a separate production unit for the market may be uneconomical. Foreign investment also entails political risks. 7. Assembly Operations As Miracle and Albaum point out, a manufacturer who wants many of the advantages that are associated with overseas manufacturing facilities and yet does not want to go that fat may find it desirable to establish overseas assembly facilities in selected markets. In a sense, the establishment. of an assembly operation represents a cross between exporting and overseas manufacturing. Having assembly facilities in foreign markets is very ideal when there are economies of scale in he manufacture of parts and components and when assembly operations are labour intensive, and labour is cheap in the foreign country. It may be noted that a number of U.S. manufacturers ship the parts and components to the developing countries, get the product assembled there and bring it back home. The U.S. tariff law also encourages this. Thus, even products meant to be marketed domestically are assembled abroad.
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8. Joint Ventures Joint venture is a very common strategy of entering the foreign market. In the widest sense, any form of association which implies collaboration for more than a transitory period is a joint venture (pure trading operations are not included in this concept). Such a broad definition encompasses many diverse types of joint overseas operations, viz, 1. Sharing of ownership and management in an enterprise. 2. Licensing/franchising agreements. 3. Contract manufacturing. 4. Management contracts. Three of the above have already been discussed in the preceding sections. The following paragraphs are confined to the first category referred to above, i.e. joint ownership ventures. What is often meant by the term joint venture is joint ownership venture. The essential feature of a joint ownership venture is that the ownership and management are shared between a foreign firm and a local firm. In some cases there are more than two parties involved. A joint ownership venture may be brought about by a foreign investor buying an interest in a local company, a local firm acquiring an interest in an existing foreign firm or by both the foreign and local entrepreneurs jointly forming a new enterprise. 9. Third Country Location Third country location is sometimes used as an entry strategy. When there are no commercial transactions between two nations because of political reasons or when direct transactions between two nations are difficult due to political reasons or the like, a firm in one of these nations which wants to enter the other market will have to operate from a third country base. For example, Taiwanese entrepreneurs found it easy to enter People’s Republic of China through bases in Hong Kong. Third country location may also be helpful to take advantage of toe friendly trade relations between the third country and the foreign market concerned. Thus, for example, Rank Xerox found it convenient to enter the erstwhile USSR through its Indian joint venture Modi Xerox. There are several cases of countries not having direct commercial transactions. For example, it was true of Israel and Arab Countries. In the past, government of India did not permit trade with South Africa and Mauritius. 10. Mergers and Acquisitions Mergers and acquisitions (M & A) have been a very important market entry strategy as well as expansion strategy. A number of Indian companies have also used this entry strategy. Mergers and acquisitions have certain specific advantages: It provides instant access to markets and distribution network. As one of the most difficult areas in international marketing is the distribution, this is often a very important consideration for M & A. Another important objective of M and A is to obtain access to new technology or a patent right. M and A also has the
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advantage of reducing the competition. Mergers and acquisitions may also give rise to some problems which arise mostly because of the deficiencies of the evaluation of the case for acquisition. Sometimes the cost of acquisition may be unrealistically high. Further, when a enterprise is taken over, air its problems are also acquired with it. The success of the enterprise will naturally depend on the success in solving the problems. 11. Strategic Alliance Strategic alliance has been becoming more and more popular ininternational business. Also known by such names as entente and coalition, this strategy seeks to enhance the long term competitive advantage of the firm by forming alliance with its competitors, existing or potential in critical areas, ‘instead of competing with each other. “The goals are to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes.” Strategic alliance is also sometimes used as a market entry strategy. For example, a firm may enter a foreign market by forming an alliance with a firm in the foreign market for marketing or distributing the former’s products. A U.S. pharmaceutical firm may use the sales promotion and distribution infrastructure of a Japanese pharmaceutical firm to sell its products in Japan. In return, the Japanese firm can use the same strategy for the sale of its products in the U.S. market. Strategic alliance, more than an entry strategy, is a competitive strategy. There are different types of alliances according to purpose or structure. Based on the description of the generic forms of coalitions by Michael Porter ‘and Mark Fuller, Magsaysay classifies alliances according to purpose as follows. 1. Technology development alliances like research consortia, simultaneous engineering agreements, licensing or joint development agreements. 2. Marketing, sales and service alliances in which a company makes use of the marketing infrastructure etc., of another company, in the foreign market, for its products. This may help easy penetration of the foreign market and preemption of potential competitors. 3. Multiple activity alliance which involves the combining of two or more types of alliances. While marketing alliances are often single country alliances, as international firms take on different allies in each country, technology development and operations alliances are usually multi-country since these kinds of activities can be employed over several countries. 4. Multiple activity alliance involves the combining of two or more types of alliances. While marketing alliances are often single country alliances, as international firms take on different allies in each country, technology development and operations alliances are usually multicountry since these kinds of activities can be employed over several countries. 12. Countertrade Although the major reason for the substantial growth of counter trade is its use as a strategy to increase exports, particularly by the developing countries, countertrade has been successfully used by a number of companies as an entry strategy.
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For example, Pepsi Co, gained entry to the USSR by employing this strategy. Countertrade is a form of international trade in which certain export and import transactions are directly linked with each other and in which import of goods are paid for by export of goods, instead of money payments. In the modern economies, most transactions involve monetary payments and receipts, either immediate or deferred. As against this, “countertrade refers to a variety of unconventional international trade practices which link exchange of goods - directly or indirectly - in an attempt to dispense with currency transactions.”
10 STEPS FOR GOING GLOBAL
As with any sound business plan, the first step is doing your homework. Here are ten action steps for taking on the world: 1. Conduct market research to identify your prime target markets. 2. Search out the data you need to predict how your product will sell in a specific geographic location. 3. Update your database rigorously with a view to focusing more closely on those products or services which are in demand and dropping those which are not. 4. Articulate your business plan for accessing global markets. 5. Get companywide commitment. 6. Build a web site and implement your international plan sensibly. 7. Factor in a two year lead time for world market penetration. 8. Make personal contact with your new targets armed with culture specific information and courtesies, professionalism and consistency. 9. Value the relationship more than the deal; the individual is more important than closing the deal under discussion. 10. Welcome the unknown.
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GLOBAL MARKET OPPORTUNITIES AND FIRM PERFORMANCE
Global market opportunities can be defined as increases in market potential, trade and investment potential and resource accessibility resulting from globalization Developments in information technology, removal of trade and investment barriers, privatization, and deregulation of trade and investment policies have provided firms seeking international markets with tremendous opportunities. Such changes in the business environment enable firms to not only access new markets but also lower costs by relocating their operations and exploiting cheap resources around the world. Firms can outsource their production in various locations to lower their costs. Market transactions have also become more efficient due to globalization of technology. These new market opportunities have eventually fostered rapid growth in various economic sectors in many regions around the world (Graham, 1996). A large volume of cross-border flows of trade, investment, and technology during the 1990s and early 2000s is excellent evidence of increasing opportunities driven by globalization . As discussed earlier, globalization increases market potential, trade and investment potential and resource accessibility of firms. It has become easier for firms to outsource their production to different locations to gain benefits from location advantage since less trade and investment barriers are present in today’s global marketplace. Firms are able to reach out and serve many new untapped markets around the globe. Liberal movements of financial and human capital also facilitate their business transactions. Moreover, advances in communication technology and information systems also lower search costs and improve efficiency. Hence, it is clear that globalization makes resources necessary for a firm’s growth and success more abundant. Given that these opportunities are likely to enhance the firm performance, the first hypothesis of this study can be stated as: H1: Firm performance is positively influenced by global market opportunities. Global market threats and firm performance Global market threats can be further categorized into 1) global competitive threats and 2) global market uncertainty. Global competitive threats are defined as the intensified competition in global markets resulting from larger numbers of competitors in the global marketplace. Along with higher competition, another threat posed by globalization is global market uncertainty, which refers to the increasing complexity and demand uncertainty in the market. These two types
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of global market threats and their hypothesized relationships are discussed in detail in the following sections.
Due to the emergence of global market opportunities and global market threats, firms have been forced to respond quickly to these effects. Unlike other environmental changes, the effects of globalization are far more pervasive—affecting every individual, business, industry, and country The environment surrounding business today is characterized as a “hypercompetitive” environment—a faster and more aggressive competitive environment. Major forms of business restructuring in response to the dramatic changes brought by globalization include, for example, investments in new technologies, downsizing and reengineering, the formation of strategic alliances and networks, and a shift from international and multinational to global and transnational strategies. Among these various forms of business restructuring designed to manage globalization effects, alliance formation is considered the most remarkable business trend of the past decades. Therefore, it is of interest to both academics and practitioners to explore how alliances help firms achieve superior international marketing performance in the globalization era. Since globalization makes alliances an integral part of a firm’s strategy to better satisfy customers and to achieve sustainable competitive advantage, the proliferation of alliances in recent years is not surprising. It has become difficult for firms to stay competitive in this era without allying with other firms. Moreover, to achieve superior marketing performance in the present business environment, firms need to manage relationships with partners, customers, and different parties in the value chain. As a result, there has been an increasing trend towards more cooperation among firms, both vertically and horizontally. Such inter-firm cooperation is especially important for firms to compete in the global marketplace. In order for firms to succeed in international markets, they need cooperate with other firms and or governmental agencie. Thus, the purpose of this paper is to explore whether globalization affects the degree of international marketing cooperation of firms participating in co-marketing alliances, a type of strategic alliance in which partners cooperate in one or more marketing activities. Specifically, we propose to investigate the influence of globalization effects on the degree of firms’ cooperation in co-marketing alliances, and the relationship between such cooperation and the firms’ international marketing performance.
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VIEWS OF DIFFERENT COMPANIES
Marketing experts address impact of globalization at Wharton's Marketing Conference Strategies adopted by Various Companies How Johnson & Johnson is winning in this environment. Specifically, the shift in economic activity to developing nations, along with the associated rise of the middle class, which is projected to significantly increase levels of consumer spending. How Johnson & Johnson is maintaining its competitive edge in a global environment, citing its recent acquisition of Pfizer Consumer HealthCare and the geographic expansion of Splenda. The Pfizer acquisition effectively doubled the size of Johnson & Johnson's OTC market, with 50% of this market now located outside of the U.S. Furthermore, in only five years since its launch, Splenda is now distributed in 33 countries worldwide. While the core brand footprint - the look and feel of the product - is consistent from region to region, Johnson & Johnson tailors the approach and positioning of Splenda to local markets. The company's global reach and focus on local market dynamics has enabled it to successfully enter these new markets. In addition to learning from keynote addresses, ranging from health and wellness to the evolution of market research. The "Branding Strategies: The Challenge of Going Global and Staying Local" panel explored what marketers can do when expanding product lines globally to protect their brands and improve the chances of successfully launching products. Rob Warren, Senior Vice President of Global Tequila for Diageo, explains that in taking a brand global, the core essence of the brand and what it stands for must remain consistent. However, the way that Diageo brings a brand to life for consumers may be tailored to specific cultures. Sylvia Lin, Associate Director of Global Oral Care Long Term Innovation for ColgatePalmolive, noted that companies should determine how to gain a competitive advantage in a new market. For example, Colgate-Palmolive conducts extensive research to determine whether Colgate toothpaste should be marketed in English or in local languages. "In some instances it makes sense to leverage the American brand; in others, it simply does not," explains Lin. The "Health and Wellness: Trends in a Global Marketplace" panel discussed how marketers can react
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to and capitalize on health and wellness trends when developing competitive marketing strategy. Sharon Fox, Director of Marketing of Beverages at Kraft Foods, discussed a holistic health and wellness trend, explaining that customers "desire balance in mind, body and soul; it is not just about what they eat, but about overall healthiness." Kraft has developed a Sensible Solution Flag for over 500 products that meet specific health related criteria, like 100-calorie-packs and Crystal Light. Brian Graybill, Director of Marketing of Tostitos, describes how Frito Lay responded to changing consumer preferences by launching its Flat Earth products, snacks that include half a serving of fruits or veggies per ounce. He also stressed the importance of engaging children in healthier food options. However, Mr. Gray noted that lifestyle is more of a challenge than calorie intake with kids. This led Frito Lay to launch "America on the Move," a program dedicated to educating children about active, healthy lifestyles. The Industry believes that while flavor preferences may vary regionally, philosophies and general trends in health and wellness are global in nature. Companies worldwide are addressing widespread health problems like heart disease, diabetes, and obesity. Some People dedicated to the media industry, "Ready to Sweep out Traditional Media?" focused on the impact of new media such as user-generated media and mobile marketing on consumers' purchasing behaviors. The panelists also addressed whether they believe new media will soon supplant traditional off -line media. Elizabeth Poon, Regional Brand Development Manager for Unilever, believes in the effectiveness of new media in developing consumer interaction with a brand. Unilever established consumer interaction with its Dove brand through an online contest for women to create a 30-second Dove advertisement. The winning video from this popular contest was aired during the 2007 Oscar broadcast and generated serious industry buzz. According to Ms. Poon, "consumers always had power and intent to contribute; only now they have the tools." Panelists agreed that while newer media has advantages in its accountability and in the immediacy of results, traditional media still has its place. "It's not a matter of new versus old; integration is the bottom line." Some other Industry expert explored the changing landscape of market research. Panelists discussed how technology, such as online and adaptive surveys, online focuses groups, consumer auctions, and data mining have affected the field. Dan Salzman, Global Vice President of Marketing Research in Consumer Healthcare for Johnson & Johnson, believes that technology has made research faster, cheaper, and allows companies to answer questions in non-intrusive ways. In addition, the targeted nature of new technologies
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allows researchers to "no longer seek to get accurate averages, but tailored solutions for customers." Steve Nollau, Partner of Brado Cuneo Nollau, believes that a cost-saving advantage related to technological advances in marketing research. New technology has enabled companies to test product concepts at an early stage in the development process, "preventing lots of money from being spent on bad ideas and promoting investment in viable ones." Last, the effects of the Internet and globalization on consumers, as they are provided increasing access to product information, purchase outlets, and overall purchase options. This evolving landscape presents both challenges and opportunities in consumer loyalty and retention for the retailer, manufacturer, and marketer. To provide professional attendees with a taste of academics at Wharton and to remind alumni of what it was like to be in school, Marketing professors Jerry Wind and Roderick McNealy brought the classroom to the conference with lectures on the importance of networks in competing effectively in a flat world and on deriving great consumer insights that lead to big marketing ideas.
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SUCCESS STORY OF DIFFERENT GLOBAL BRANDS
Local success on a global scale Much of the debate about global branding has centered on the question of whether global brands should attempt to speak with one voice around the world, or whether they should adapt to local cultures. A popular strategy for many brands has been to globalize logos, brand names and trademarks, while introducing product variations at the local level. But a few global brands have gone the extra mile and achieved what must be the best of all possible worlds—acceptance as local brands nearly everywhere they do business. Most of the brands that have achieved multilocal status have been around for awhile, although the tie-in is not completely obvious. One modern American brand that has achieved widespread local acceptance overseas is McDonald's. The American fast food chain has become such a routine part of the landscape in parts of Asia, for example, that kids may not even be aware of the company's foreign origins. In the book "Golden Arches East," Emiko Ohnuki-Tierney relates a story of Japanese Boy Scouts who were surprised, when traveling abroad, to encounter a McDonald's in Chicago (edited by James L. Watson, Stanford, 1997). McDonald's began expanding internationally in 1967, twelve years after it began franchising in the US. By 1996, the restaurant chain was operating restaurants in more than 25 foreign countries. In contrast to Singer and Philips, however, McDonald's became multi-local in the absence of trade barriers and at a time when global communications were practically instantaneous; nor have McDonald's overseas restaurants operated independently of the home office. Although the restaurant chain has made numerous efforts to localize its menu (it offers, for example, salads in the US, lamb burgers in India, vegetarian burgers in the Netherlands, teriyaki burgers in Japan, salmon sandwiches in Norway, frankfurters in Germany, and poached egg burgers in Uruguay), it did not gain local acceptance worldwide by marketing local specialties. As Harvard's James L. Watson argues in Golden Arches East: McDonald's in East Asia, the secret to the restaurant's global popularity has almost certainly been its French fries, which he writes are "consumed with great gusto by Muslims, Jews, Christians, Buddhists, Hindus, vegetarians, communists, Tories, marathoners, and armchair athletes." McDonald's fries have resonated with local tastes in dozens of countries—a fact that is not surprising when one
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considers that potatoes, consumed by over a billion people around the world, are one of the most recognized foods on earth. But there's even more to the potato story. According to the University of Western Ontario's Dawar, McCain Foods of Canada is the largest international supplier of French fries to McDonald's. Meanwhile McCain, which markets frozen potato specialties in 100 countries, has itself achieved multi-local acceptance in many of the countries where it does business. The company localizes its product by calling it chips in the UK for instance and developing local advertising for markets and managers by region. In Australia, people think of McCain as an Australian company. In England, people think of McCain as an English company. In Canada, people think of McCain as a Canadian company... McCain is a very local brand in each of the markets in which it operates Problems faced by Global brands Companies find it difficult to succeed in new markets that are culturally unfamiliar. • They often underestimate differences in the patterns of daily life in the new markets. • This makes it difficult to develop products and services that fit peoples’ lives, • It is difficult to extend their brand, and manage culturally diverse teams. Strategy adopted by Coca-Cola Coca-cola : Global is Out, Local is In • Initial set backs in 80s the benefits of global integration are sought and the need to adapt products to local markets is largely ignored. • Coke is instituting a strategy of ‘think local, act local’ by putting increased decision making in the hands of local managers. • Make model citizen by reaching out to the local communities and getting involved in civic and charitable activities. Better understanding and appealing to local differences.
Disney: Learning to Say Oui Not Yes Before : • workers were required to speak English, even if most people in attendance were French. • liquor was not sold in the park, they have a drink with lunch or dinner. • many of the exhibits and rides did not have a local theme, they were the same as those in Disneyland USA and thus did not appeal to Europeans. After :
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• began creating European-specific attractions • Started to serve alcoholic beverages A series of changes, abandoning its global approach, and substituting one that appealed to local tastes. P&G: Regional Focus and Global Coordination Procter & Gamble (P&G) with annual sales of almost $40 billion has operations in virtually every country of the world.
Trick: • the firm employs a strategy that combines high national responsiveness with high economic integration. • strategies being developed and implemented locally and/or regionally. In particular, product delivery and marketing are local. • the ‘back office’ of payroll, financing, human resource management and other general services and processes is coordinated on a more global basis, in order to achieve internal economies of scale. Result: • Economic efficiency and localization.
How Companies Try to Understand Consumers Two general types of research that companies use to understand new markets 1. product-focused research: asks consumers through surveys, focus groups, interviews, home visits and usability tests, about existing or prototypical products and services. 2. culture-focused research: uses measures like census-taking and demographic data, to look at general patterns of daily life like value systems, social structures, and relationships among friends and relatives.
HOW GLOBAL BRANDS COMPETE
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Consumers in most countries had trouble relating to generic products, so executives instead strove for global scale on backstage activities such as production while customizing product features and selling techniques to local tastes. Such "global" strategies now rule marketing. Global branding has lost more lusters recently because transnational companies have been under siege, with brands like Coca-Cola and Nike becoming lightning rods for anti globalization protests. The instinctive reaction of most transnational companies has been to try to fly below the radar. But global brands can't escape notice. In a research project involving 3,300 consumers in 41 countries, the authors found that most people choose one global brand over another because of differences in the brands' global qualities. Rather than ignore the global characteristics of their brands, it's critical for firms to manage those characteristics, because future growth for most companies will likely come from foreign markets. Consumers base preferences on three dimensions of global brands--quality (signaled by a company's global stature); the cultural myths that brands author; and firms' efforts to address social problems. The authors also found that it didn't matter to consumers whether the brands they bought were American--a remarkable finding considering that the study was conducted when anti-American sentiment in many nations was on the rise.
GLOBAL BRANDING V/S LOCAL MARKETING
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Day by day, global branding is becoming a bigger challenge. Why? Because it's no longer possible to isolate a brand and its reputation. Companies might think you've created an excellent strategy for your brand in one local market, only to realize that the rest of the world has access to that same local communication. This exposure destroys any possibility of separating your local branding strategy from your global branding strategy. This unavoidable exposure of company’s local brand-building strategy in the international arena is part of the growing difficulties that attend global brand building. Related to this complication are the internal issues that arise. For example, how can corporations handle the local and global mix in their marketing departments? Is every local marketing department now obsolete? Can local marketing be taken over by a single department of centralized marketing functions? Such issues are the result of the speed and spread of communications. The Internet has enabled every consumer to access every piece of communication in the world. Good old concepts like running test markets have been dramatically altered because of the increasing proximity among markets. True separation among markets has disappeared. When Coca-Cola selected Australia as the test market for the first non-Coca-Cola drink it had launched in years, most of the world watched the experiment, and almost as many people participated in the experiment from outside the test market. This might very well have been the strategy's intention. However, if the objective was to test a new product in a local market, the strategy clearly failed. Global communication is more or less forcing brand builders around the world to adjust their approaches. They're having to forego the strategy that provides local marketing teams with full autonomy. So, how should we handle the brand challenge? First of all, the local brand is not dead. But some of the activities that are used to promote it are now obsolete. I would separate local brand-building activities from global brand-building activities on the promotional side, as McDonald's has done. Ronald McDonald is the key in-store promotional figure. Very seldom do you see him on television commercials and, when you do, you see him publicizing in-store promotions. Ronald, very cleverly, has become McDonald's point of differentiation in each market. He celebrates Christmas in Northern Europe and the Chinese New Year in Hong Kong. He promotes McDonald's wine in France and McDonald's Filet-o-Fish in Australia. But he never appears in globally accessible media. McDonald's' global messages come through television commercials.
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The corporation produces local adaptations of these, too. But you can see McDonald's local twists are substantially stronger in the in-store promotions than on television. The purpose of global brand management is to conceive of and control a brand's global direction, and this is done by defining and communicating the brand's core values. The execution of this communication lies in devising and consistently applying a specific style, tone, and image. The role of local brand management is to refine the communication of the brand's core values by adjusting their execution to communicate meaningfully with each local market. If a local event like the Chinese New Year is taking place, it's the local brand-builder's task to ensure the brand leveraging on it. Local brand building depends on an acute awareness of local trends; it's all about leveraging knowledge that the international marketing department has no access to or sympathy with. The global marketing department is the strategic group. The local team is the tactical group. Both need to work hand in hand.
Managing Brands in Global Markets: One Size Doesn't Fit All
Global companies need global brands to some extent. But global branding is not an all-ornothing proposition. There is a continuum along which firms can decide how global they wish their brands to be -- with a single global brand at one extreme and an assortment of nothing but local brands at the other. Global and local brands can be part of a successful marketing mix at any spot along the continuum. Decisions to use a combination of local and global brands -- what the Wharton professors call the "hybrid" approach -- depend on many factors, including products, industry, local cultures and the nature of the competition. There are "various levels of being truly global. It is not always achievable, nor desirable, to go the full extent. Some form of local adaptation may be necessary, either in the product/service that is offered or in the positioning relative to competition." Big Brands, Big Money Which global brands are most valuable? According to the 2004 Business Week/Interbrand survey, Coca-Cola tops the list of the 10 most valuable global brands ($67.4 billion), followed by Microsoft ($65 billion), IBM ($53.8 billion), General Electric ($44.1 billion), Intel ($33.5 billion), Disney ($27.1 billion), McDonald's ($25 billion), Nokia ($24 billion), Toyota ($22.7 billion) and Marlboro ($22.1 billion). These brands and others share some common features: They have a consistent name that is easy to pronounce; corporate sales are globally balanced with no dominant market; the essence and positioning of the brand is the same the world over; they address the same customer needs, or the
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same target segment, in every market; and there is great similarity in execution (pricing, packaging, advertising) across cultures. What kinds of products do not lend themselves to global brands? Food is one category where, literally, differences in tastes from culture to culture compel global companies to adapt to local conditions, according to Day. At the other end of the spectrum is a company like Intel, whose products and markets make it easier for executives to establish a truly global brand with a memorable catch-phrase: "Intel inside." It's much easier for a company like Intel to establish a global brand, Intel has a smaller number of buyers [than many other global companies] and all of those buyers are using computer chips for the same purpose. And all of Intel's competitors are global. Intel is a global brand without significant local adaptation. The same holds true for Disney, which stands for family entertainment in all cultures. Forces against Globalization One such force is the inherent market differences that can exist from country to country. For example, KFC, formerly Kentucky Fried Chicken, has 5,000 restaurants in the U.S. and 6,000 in other countries. It has learned that it cannot open restaurants globally based on its U.S. model. In Japan, KFC sells tempura crispy strips. In Holland, it features potato-and-onion croquettes. In China, KFC's chicken gets spicier the farther inland one travels. Another countervailing force is entrenched local brands. Conditions favoring local over global brands include unique market needs; low frequency of purchase, so that brand loyalty passes from one generation to another through family traditions; and the relative unimportance of advertising, which makes it harder for global companies to change loyalty patterns. A third force mitigating against global brands is the growing concentration of retail buying power -- labeled "growing channel power" by the authors -- which can lead to heightened price sensitivity on the part of the buyer. Wal-Mart's goal to offer low prices every day can constrain companies wishing to sell their products through Wal-Mart stores. Finally, criticism of global brands by activists opposed to globalization can also limit global branding. A 1999 book titled No Logo, by Naomi Klein, alleged that global brands and excessive corporate power were chief contributors to poverty around the world. Well-known logos of firms such as Nike, Disney, Shell and McDonald's became symbols of a host of complaints about globalization. Targeted companies responded by establishing codes of conduct and improving labor practices, but the anti-globalization movement served notice that high-profile brands carried risks.
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In a chapter titled "Managing Brands in Global Markets," the authors trace the paths of two global brands, Unilever and Music Television Networks (MTV). Both companies exhibit the various challenges faced by global firms to sell their products and services worldwide. The experiences of these two firms also show that developing brands for global markets is more complex and nuanced than Levitt's portrait of an inexorable march toward globalization would suggest. In the 1990s, Unilever was struggling under the weight of some 1,600 brands in more than 50 countries. Revenues were lopsided -- 3% of the brands provided 63% of revenues -- and the company was not growing. In 2002, Unilever launched a program to reduce its number of brands to 400 "core" brands so that it could concentrate its resources on fewer products. The company combined branding strategies by placing the 400 in three categories: international brands (such as Dove and Lipton), regional brands (such as a spread called Flora in the United Kingdom and Becel in Germany), and local brands with strong positions in single countries (including Wishbone salad dressing in the United States and Persil detergent in England). MTV might appear to be the kind of company that could establish the type of uniform global brand that Levitt envisioned. MTV entered Europe in 1987 with pan-regional programs in English. Programming was provided to cable operators at no charge, and all revenue came from advertising. Within a few years, however, things changed. Advertisers called on MTV to offer local programs, either because they could not afford pan-European coverage, their products were available only locally, or their products were not uniformly branded in all countries. At the same time, strong local competitors emerged, such as VIVA in Germany and MCM in France. MTV responded to the change in climate. Today, MTV Europe (MTVE) has a presence in 41 countries with multiple languages and formats and nearly 50% local programming. For one thing, MTV realized that the local advertising sales market was much bigger than the pan-European market. Moreover, changes in technology allowed separate satellite feeds to each country. Hence, MTV managed to address local content and advertising concerns, while simultaneously leveraging its powerful global brand identity -- the anti-establishment voice of young people.
EFFECT OF GLOBALIZATION ON INDIAN INDUSTRY
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Effects of Globalization on Indian Industry started when the government opened the country's markets to foreign investments in the early 1990s. Globalization of the Indian Industry took place in its various sectors such as steel, pharmaceutical, petroleum, chemical, textile,cement,retail,andBPO. Globalization means the dismantling of trade barriers between nations and the integration of the nations economies through financial flow, trade in goods and services, and corporate investments between nations. Globalization has increased across the world in recent years due to the fast progress that has been made in the field of technology especially in communications and transport. The government of India made changes in its economic policy in 1991 by which it allowed direct foreign investments in the country. As a result of this, globalization of the Indian Industry took place on a major scale. The various beneficial effects of globalization in Indian Industry are that it brought in huge amounts of foreign investments into the industry especially in the BPO, pharmaceutical, petroleum, and manufacturing industries. As huge amounts of foreign direct investments were coming to the Indian Industry, they boosted the Indian economy quite significantly. The benefits of the effects of globalization in the Indian Industry are that many foreign companies set up industries in India, especially in the pharmaceutical, BPO, petroleum, manufacturing, and chemical sectors and this helped to provide employment to many people in the country. This helped reduce the level of unemployment and poverty in the country. Also the benefit of the Effects of Globalization on Indian Industry are that the foreign companies brought in highly advanced technology with them and this helped to make the Indian Industry more technologically advanced. The various negative Effects of Globalization on Indian Industry are that it increased competition in the Indian market between the foreign companies and domestic companies. With the foreign goods being better than the Indian goods, the consumer preferred to buy the foreign goods. This reduced the amount of profit of the Indian Industry companies. This happened mainly in the pharmaceutical, manufacturing, chemical, and steel industries. The negative Effects of Globalization on Indian Industry are that with the coming of technology the number of labor required decreased and this resulted in many people being removed from their jobs. This happened mainly in the pharmaceutical, chemical, manufacturing, and cement industries. The effects of globalization on Indian Industry have proved to be positive as well as negative. The government of India must try to make such economic policies with regard to Indian Industry's Globalization that are beneficial and not harmful
EFFECT OF GLOBALIZATION ON RURAL MARKETING
Rural Agricultural Marketing - Impact of Globalization: Contract Marketing
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The macro level changes due to the New Economic Policy have had a direct impact in the field of agricultural marketing. So the impact of globalization has been highlighted here. As a result of globalization substantial investments in new ventures are being made by national as well as international corporations. A number of foreign companies are slated to enter the Indian market through collaborations with the well known Indian companies like Eagle Agrofarms, Maxworth Orchards, etc. It is clear that the wholesaler in the fresh products market as well as the processor will prefer contract marketing tie-ups with the farmers for sourcing his supply requirements. The concept of contract farming is not new to India. Several years back, contract marketing was successfully tried in respect of "Hima peas". 'MARKFED' of Punjab also operated a scheme of contract marketing for green peas, Agrecotec proposes to setup country-wide retail network of shops for fresh fruit vegetable marketing. ,Direct marketing to consumer is already being done by the Mother Dairy through its outlets in Delhi. The successful integration of production and marketing under Apni mandi' scheme in Punjab and the marketing managements of 'FRESH' in Hyderabad are clear signs that contract marketing is going to be increasingly resorted to in the years to come. “Pepsi Foods" also an another example of contract farming of potatoes and tomatoes. Under this farming farmers will be producing specific varieties or qualities tailored to meet the requirements of the processor or the fresh produce market. The potential benefits of the contract farming are:- producers can reduce the market risk, post harvest losses can be reduced, technology can be transferred to the producers, contract serve as a security for increased access to credit by both producers and processors, contract may create a greater sense of common interest among the producers and induce greater involvement in group activities etc. Common problems may be volatility in market price, there is risk that the processors may manipulate the quality standards, coordination problems may be there regarding delivery of inputs or produce, processors may lack the competence or capacity to deliver the require technical assistance, producers may become tied to a contract relationship by virtue of debt, specialization, or the disappearance of other markets and may be unable to adjust their production activities to changing conditions etc. Many of these problems of contract farming will not arise where goodwill and credibility exist between the farmers and the concerned company. Major Areas of Concern in the Rural Marketing Sector
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1. Government should assume a more dynamic role in the field of agricultural marketing that of a strong buffer between global forces and local needs. 2. Emphasize value addition by giving a thrust to agro-processing industries at farm level so that the benefit of value addition is transferred to the producer. 3. There is a need for professionalizing agricultural marketing as a subject of great practical application. 4. Creation of an effective market intelligence network, right from the importer in the global market to the producer in the remote corner of the rural India. 5. Institutional linkages should be emphasized upon to integrate the markets, for easy movement of goods and also to facilitate the inter-state trade. 6. Regular surveys and analytical studies on agricultural marketing should be conducted, so that appropriate policy adjustments and refinements whenever necessary. 7. Decentralization in the marketing system. 8. To introduce social marketing for bringing about a change in the behaviour and attitude through social advertising and social communication. Some fertilizer companies and commercial banks are taking up Village Adoption Programme under the social marketing. 9. A design frame work for information technology based Agricultural Marketing Network is essential. Computer installations at State as well as district marketing boards enhances the availability of trade information. 10. Economic incentives should be offered to the farmers to encourage them during low economic conditions.
This dissertation is comprised of three papers relating to the effects of globalization on firms. The first paper advances prior knowledge on globalization and business by empirically investigating how this phenomenon affects firm performance. The second and third papers
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explore the role of firms’ cooperation in alliances in enhancing their performance amid globalization by specifically focusing on co-marketing alliances and international marketing performance of firms. A particular emphasis is paid to this type of alliance since superior marketing is crucial for firms to build a sustainable source of unique competitive advantage. Such advantage eventually enables firms to achieve long-run success in a hypercompetitive terrain under globalization. While the second paper proposes a conceptual framework relating globalization effects to alliance cooperation and firm performance, the last paper empirically tests the proposed relationships in two distinct economies (i.e., Thailand and the U.S.). Given that globalization is a complex phenomenon, there is a scarcity of empirical research investigating its effects on businesses. Hence, there are several significant contributions of this dissertation. First, the effects of globalization on firms are classified into two key dimensions— global market opportunities and global market threats— based on an extensive review of scattered literature on the topic. Second, these major effects are operational zed and empirically tested in two conceptual models to examine the relationships among these effects, cooperation in alliances, and firm performance. Third, literature on international business, strategic management, and marketing are integrated to address the effects of globalization on firms’ marketing conduct and outcomes. The first paper in this dissertation discusses how globalization affects firms. It draws from environment-organization literature. Building on this stream of research, macro environment such as globalization represents a context in which organizational characteristics and outputs are strongly shaped. For this reason, this paper attempts to demonstrate and address how globalization influences firm performance. Although academic scholars have alluded to various impacts of globalization, limited empirical studies have been conducted to investigate its effects on firms. Therefore, the purpose of this paper is to classify and define such effects into two major categories, i.e., global market opportunities and global market threats. Then, scales to measure these effects were developed and empirically tested in two different economic contexts (i.e., Thailand and the U.S.) to answer two research questions: 1) Does globalization affect firm performance? and 2) Is the relationship between global market opportunities and performance stronger than the relationship between global market threats and performance. The results of this study provide considerable support for the notion that globalization can be both beneficial and detrimental to business. Moreover, this study confirms that globalization is a universal phenomenon in which firms, regardless of where they are located, are inevitably affected. The second paper proposes a conceptual framework to investigate relationships among globalization effects, degree of cooperation in co-marketing alliances, and international marketing performance. This paper focuses on relationships between globalization effects and alliances because past research often mentions that globalization drives more collaboration and alliance participation, yet no empirical study establishes the link between these two. Co marketing alliances and international marketing performance are particularly emphasized here since gaining a competitive edge in today’s globalized business environment requires firms to excel in marketing activities. As in Webster’s (1994) words, “in the global markets of the 1990s
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and beyond, superior marketing will be a more sustainable source of unique competitive advantage than superior technology”. Thus, this paper explores how firms with international marketing activities can enhance their performance in the global marketplace through increased cooperation in co-marketing alliances. Building on market power perspective and transaction cost economics; this paper proposes that increased global market threats, including competitive threats and market uncertainty, will encourage more cooperation in alliances while global market opportunities will not. While transaction costs economics considers alliances as a strategy enabling firms to expand their strategic capabilities, market power perspective regards alliances as a means to reduce competition and minimize uncertainty evoked by globalization. Hence, a higher degree of cooperation in co-marketing alliances is then hypothesized to enhance firms’ international marketing performance. The findings of this study indicate that globalization drives more collaboration among firms, allowing them to better cope with higher global competitive threats and market uncertainty. Such cooperation eventually increases international marketing effectiveness of firms engaging in comarketing alliances. Whereas an increase in cooperation is influenced by higher global market threats (i.e., both competitive threats and uncertainty), it is not affected by global market opportunities. The absence of any effect of global market opportunities on alliance cooperation can be attributed to the fact that ample opportunities in the markets may result in the lack of collaboration among firms. Moreover, it is found that increased cooperation in co-marketing alliances helps firms enhance international marketing effectiveness but not efficiency. Since higher expenses may arise from such cooperative attempts, efficiency becomes difficult to realize. In sum, these results validate globalization-alliance literature by showing that globalization actually drives more cooperation among firms. Managers should be prepared to cope with these diverse effects by capitalizing on global market opportunities while carefully managing the inherent threats. Alliance participation and cooperation presents a viable option for firms to navigate successfully in this new competitive landscape. From both theoretical and practical perspectives, globalization is a complex phenomenon. The three manuscripts included in this dissertation are among a few empirical studies emphasizing the effects of globalization on firms. Given that globalization is multifaceted and only a few key dimensions of its effects were explored here, many issues remain to be addressed. It is hoped that this research will inspire more studies on the impact of globalization on business and a search for theories to explain the phenomenon.
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