ASSIGNMENT ON

'Marketing-mix oI a product in Global Market

In Global Marketing


Submitted to: Submitted by:
Asst ProII. Maneesh kr tarun
Mr. Kishlay Kashyap
Global Marketing Of Product
'The multinational corporation knows a lot about a great many countries and congenially
adapts to supposed differences..... By contrast, the global corporation knows everything about one
great thing. It knows about the absolute need to be competitive on a worldwide basis as well as
nationally and seeks constantly to drive down prices by standardising what it sells and how it
operates. It treats the world as composed of a few standardised markets rather than many customised
markets.`
Theodre Levitt*

Introduction
Transnational corporations serve diIIerent markets around the world. Their global expansion may be
driven by various Iactors. These include saturated and intensely competitive domestic markets,
diversiIication oI risk on a geographical basis, opportunity to realise economies oI scale and scope,
entry oI competitors into overseas markets, the need to Iollow customers going abroad and the desire
to compete in a market with sophisticated consumer tastes. In diIIerent markets, customer
requirements may vary. The temptation to customise Ior each market, has to be tempered by the need
to keep costs down through standardisation. A truly global marketing strategy would aim to apply
uniIormly some elements oI the marketing mix across the world, while customising others. As
discussed beIore, the logical approach would be to identiIy and analyse the various value chain
activities that make up the marketing Iunction and decide which oI these must be perIormed on a
global basis and which localised.

Key issues in global marketing :
Typically, marketing includes the Iollowing activities: -
O Market research.
O oncept & idea generation.
O Product design.
O Prototype development & test marketing
O Positioning
O hoice oI brand name
O Selection oI packaging material, size and labelling
O hoice oI advertising agency
O evelopment oI advertisement copy
O xecution oI advertisements
O #ecruitment and posting oI sales Iorce
O Pricing
O Sales Promotion
O Selection and management oI distribution channels.

Some oI these activities are amenable to a uniIorm global approach. Others involve a great
degree oI customisation. Again, within a given activity, some parts can be globalised while others
have to be customised. For instance, product development may be customised to suit the needs oI
diIIerent markets but basic research may be conducted on a global basis. (We have looked at how
companies manage their global #& network in the earlier chapter).

































A global marketing strategy typically evolves over a period oI time. In the initial phase, the main
concern Ior an MN is to decide which market(s) to enter. Then comes choosing the mode oI entry. A
related decision is whether to expand across several markets, simultaneously or one at a time. With
growing overseas presence, MNs have to resolve issues such as customisation oI the marketing mix
Ior local markets and in some cases, development oI completely new products. In the Iinal phase,
global companies examine their product portIolio across countries, strive Ior higher levels oI
coordination and integration and attempt to strike the right balance between scale eIIiciencies and
local customisation.

Entering new markets
While choosing new markets, TNs need to consider several macro and micro Iactors. Some oI the
macro issues to be examined include the political/regulatory environment, financial/economic
environment, socio cultural issues and technological infrastructure. At a micro level, competitive
considerations and local infrastructure such as transportation & logistics network and availability oI
mass media Ior advertising are important. It may not be a bad idea to do a preliminary screening on
the basis oI diIIerent criteria and then do an in-depth analysis oI the selected countries. The Iactors
which need to be examined careIully, include legal and religious restrictions, political stability,
economic stability, income distribution, literacy rate, education, age distribution, life expectancy and
penetration of television sets in homes.

How to enter

While entering new markets, an MN has various options. These include contract manuIacturing,
Iranchising, licensing, joint ventures, acquisitions and Iull Iledged greenIield projects. ontract
manufacturing avoids the need Ior heavy investments and Iacilitates a quick entry with a lot oI
Ilexibility. On the other hand, there can be supply bottlenecks in such arrangements and production
may not keep pace with demand. It may also be diIIicult to maintain the desired quality levels.
Franchising, like contract manuIacturing involves limited Iinancial investment, but needs Iairly
intensive training to orient the Iranchisees. Quality control is again an area oI concern in Iranchising.
While licensing* oIIers advantages similar to those in the case oI contract manuIacturing and
Iranchising, it oIIers limited returns, builds up a Iuture competitor (iI licensees decide to part ways)
&nderstanding overseas markets: The 12 C Analysis Model

Phillips, oole and Lowe have suggested a model to help companies identiIy the inIormation to be collected while
entering an overseas market. The 12 s oI this model are:

Country: General inIormation, environmental Iactors
Choices: ompetition, strengths and weaknesses oI competitors
Concentration: Structure oI market segments, geographical spread.
Culture: Major characteristics, consumer behaviour, decision making style.
Consumption: xisting and Iuture demand, growth potential.
Capacity to pay: Pricing, prevailing payment terms.
Currency: Presence oI exchange controls, degree oI convertibility.
Channels: General behaviour, distribution costs and existing distribution inIrastructure.
Commitment: Market access, tariII and non-tariII barriers.
Communication: xisting media inIrastructure, commonly used
promotional techniques.
Contractual obligations: Business practices, insurance, legal obligations
Caveats: Special precautions to be taken

and restricts Iuture market development. Quality control is again a source oI worry in licensing. A
oint venture helps in spreading risk, minimises capital requirements and provides quick access to
expertise and contacts in local markets. However, most joint ventures lead to some Iorm oI conIlict
between partners. II the conIlicts are not properly resolved, they tend to collapse. An acquisition gives
quick access to distribution channels, management talent and established brand names. However, the
acquired company should have a strategic Iit with the acquiring company and the integration oI the
two companies, especially when there are major cultural diIIerences, needs to be careIully managed.
Greenfield proects are time consuming and delay market access. They also involve big investments.
On the other hand, the delay may be worth its while as greenIield projects usually incorporate state oI
the art technology and Ieatures which maximise eIIiciency and Ilexibility.
TNs have to choose between simultaneous and incremental/ sequential entry into diIIerent markets.
Simultaneous entry involves high risk and high return. It enables a Iirm to build learning curve
advantages quickly and pre-empt competitors. On the other hand, this strategy consumes more
resources, needs strong managerial capabilities and is inherently more risky. In contrast, incremental
entry involves lesser risk, lesser resources and a steady and systematic process oI gaining international
experience. The main drawbacks with this method are that competitors can move in during the
intervening period and scale economies may be diIIicult to achieve.
Timing is another important issue while entering new markets. An early entrant can develop a strong
customer Iranchise, exploit the most proIitable segments and establish Iormidable barriers to entry.
On the other hand, an early entrant may have to invest heavily to stimulate demand. arly entrants
may also have to invest heavily in distribution inIrastructure, especially in developing economies.
ompetitors may come in later and be able to market their wares incurring relatively low promotional
expenditure.

The peculiarities oI emerging markets

For TNs planning to enter underdeveloped or emerging markets, a careIul understanding oI the local
conditions is crucial to success. In many emerging markets, there are peculiar problems, which
managers in developed countries normally do not Iace. Gillette`s experience in hina illustrates how
easy it is to misread an emerging market. In the early 1990s, Gillette set up a $43 million joint
venture* with the state owned Shanghai #azor & Blade Factory (S#BF). At the time oI commencing
operations, S#BF had a 70 share oI the market, consisting mostly oI cheap blades oI the double-
edged carbon variety. Gillette Ielt that it would not be too diIIicult to persuade at least a Iraction oI
these customers to opt Ior more sophisticated blades. Gillette also assumed that S#BF`s distribution
network would enable eIIicient and Iast coverage oI consumers throughout hina. Both assumptions
have been proved wrong. Gillette has learnt with experience that hinese men do not shave as
Irequently as their western counterparts and preIer cheaper blades. S#BF`s distribution network has
also proved to be highly ineIIective. Under hinese laws, state owned distributors typically collect
their quotas Irom consumer


Entering developed markets
ust as MNs based in developed countries Iace major challenges while entering emerging markets,
companies Irom Third World / newly industrialized economies have to plan their entry into western
markets very careIully. onsider the example oI the Taiwanese computer maker, Acer, established in
1976. Founder chairman Stan Shih has led the company`s globalisation eIIorts since then to make
Acer the third largest P. manuIacturer in the world. In 1998, Acer generated 24.1 oI its sales in the
Asia PaciIic, 24.3 in urope, 4.2 in Latin America, and 41.6 in North America with only 9.5
oI its sales coming Irom the home country. Total worldwide sales amounted to $6.717 billion in 1998.
Acer currently operates 176 subsidiaries, employing about 32,000 employees in 42 countries oIIering
a wide product range, including Ps, servers, notebook computers, networking solutions, ISP services
and various types oI peripherals. Acer has appointed more than 10,000 resellers in 100 countries.
AIter developing a strong presence in south east Asia and Latin America, Acer decided to target the
US market with its popular Aspire Home P, only to Iind itselI being outmaneuvered by stronger
rivals such as ell with superior marketing capabilities. As the Aspire line began to pile up losses,
Acer announced that it would concentrate on its Power Ps, backed by a $10 million marketing
campaign to target small and medium businesses. Acer also indicated that it would seriously consider
launching low cost computer appliances called Xs priced $200 or lower once they were established
in Asia. Notwithstanding these moves, Acer`s market share slipped Irom 5.4 (late 1995) to 3.2
(late 1998) and it began to make losses in the US market.
Shih had once told his executives that a strong presence in America was vital to the development oI a
global brand*: 'It`s almost a mission impossible but all oI our people are ready to Iight Ior that
mission. These hopes however were belied and aIter losing $45 million in the US, in 1999, Acer
began to retreat Irom the US consumer market. Acer`s experience illustrates that substantial Iinancial
resources and strong marketing capabilities are required to enter developed markets such as the US,
where competition can be cut throat.

Market Research
onsider another important marketing activity, market research. For a transnational corporation, this
activity is Iar more complicated than Ior a domestic company. Global coordination is necessary to
Iacilitate sharing and transIer oI knowledge.

The global head oI market research has the important job oI ensuring that each country is aware oI not
only the research activities it is carrying out but also oI the activities being carried out by other
subsidiaries. The research design is more complicated due to cultural diIIerences across regions. Some
elements such as the sample to population ratio and the inIormation to be collected Ior each product
category can be standardised. However, questions have to take into account the sensitivity oI both the
local government and the local people. In particular, personal and embarrassing questions have to be
avoided in certain countries. (See Box Item on conducting market research in hina.)
Notwithstanding these diIIiculties, opportunities to globalise should not be overlooked. For example,
clusters oI countries might need the same questionnaire.


Product Development
Product development is a critical activity Ior all TNs. A globally standardised product can be made
eIIiciently and priced low but may end up pleasing Iew customers. On the other hand, excessive
customisation Ior diIIerent markets across the world may be too expensive. The trick, as in the case oI
other value chain activities, is to identiIy those elements oI the product which can be standardised
across markets and those which need to be customised. Thus, a standard core can be developed,
around which customised Ieatures can be built to suit the requirements oI diIIerent segments.
apanese companies such as Sony and Matsushita have been quite successIul in marketing
standardised versions oI their consumer electronics products. These companies, had limited resources
during their early days oI globalisation, and cleverly identiIied Ieatures, which were universally
popular among customers across the world. Global economies oI scale helped them to price their
products competitively. At the same time, they laid great emphasis on quality. onsequently, their
products, even without Irills, began to appeal to customers. Many oI Sony`s consumer electronics
products are highly standardised except Ior components that have to be designed according to national
electrical standards. This is also the case with Matsushita.
anon oIIers an interesting example oI a apanese company that took into account global
considerations at the cost oI domestic requirements while developing a new product. In its domestic
market, customer requirements were quite diIIerent, photocopiers being expected to copy all sizes oI
paper. anon Ielt that to emerge as a global player, the design had to be built around the requirements
oI the US, the largest market Ior photocopiers in the world. In the process, the company deliberately
overlooked some oI the Ieatures required by apanese customers, to keep its development costs under
control.

In the case oI industrial products, standardisation may become unavoidable iI customers coordinate
globally their purchases. This seems to be true in the P industry. ompanies such as ell are taking
Iull advantage oI this trend, which is likely to strengthen Iurther, as companies increasingly Ieel the
need to integrate corporate inIormation systems across their global network. MNs oIten choose to
replicate the computer system in their headquarters across their worldwide network to minimise
training and soItware development costs.

In industries characterised by high product development costs (as in the pharmaceuticals industry) and
great risk oI obsolescence(as in the case oI Iashion goods), there is a great motivation Ior developing
globally standardised products and services. By serving large markets, costs can be quickly recovered.
ven in the Iood industry, where tastes are largely local, companies are looking Ior opportunities to
standardise as developing diIIerent products Ior individual markets can be prohibitively expensive.
Though identical oIIerings cannot be made in diIIerent markets, companies are developing a core
product with minor customisation, (like a diIIerent blend oI coIIee), to appeal to local tastes.
In their enthusiasm to reduce costs by oIIering standard products, MNs need to avoid some pitIalls.
ustomer preIerences vary across countries. A product developed on the basis oI some average`
preIerence may well end up pleasing no one. As Kenichi Ohmae has remarked*: 'When it comes to
product strategy, managing in a borderless economy doesn`t mean managing by averages. It doesn`t
mean that all tastes run together into one amorphous mass oI universal appeal. And it doesn`t mean
that the appeal oI operating globally removes the obligation to localise products. The lure oI a
universal product is a Ialse allure.
Some products tend to be more global than the others. These include cameras, watches, pocket
calculators, premium Iashion goods and luxury automobiles. In the case oI many industrial products,
since purchase decisions are normally taken on the basis oI perIormance characteristics, considerable
scope exists Ior global standardisation. However, even here, local customisation may be required in
engineering, installation, sales, service and Iinancing schemes. In the same industry, diIIerent
segments may have diIIerent characteristics. Institutional Iinancial services, tend to be more global
than retail ones. thical (prescription) medicines tend to be more global than OT drugs.
Within a given product, some Ieatures lend themselves to global standardisation. onsider a product
like cars. Traditionally, car manuIacturers have developed hundreds oI models to meet the needs oI
diIIerent markets without exploring the scope Ior standardisation. This has resulted in unused
capacities and ineIIiciencies. Faced with excess capacity, car manuIacturers have been looking Ior
ways to cut costs. One approach has been to build models oI diIIerent shapes Ior diIIerent markets
around standardised platIorms. The idea here is that the basic Iunctionality oI a car can be extended
globally while Ieatures and shape are customised to appeal to varying consumer tastes in diIIerent
parts oI the world.


Product positioning
International positioning is Iar more complicated than positioning in the domestic market. The degree
and nature oI segmentation can vary across countries. Brands may not be perceived the same way in
diIIerent regions. The importance oI product attributes may vary Irom market to market. A TN`s
ability to convey an identical positioning across countries may also be constrained by the diIIerent
degrees oI sophistication in the local marketing inIrastructure. Well-entrenched local brands can also
cause problems by creating competitive pressures that demand a diIIerent positioning. Having said
that, opportunities Ior global positioning are expanding due to the convergence oI tastes. Global
communication media and Irequent travel between countries are creating a degree oI homogeneity in
consumer tastes. In the case oI industrial products, organizational linkages created by proIessional
organisations are accentuating this trend.
In general, a global positioning is recommended when similar customer segments exist across
countries, similar means oI reaching such segments are available, the product is evaluated in a similar
way by diIIerent segments, and competitive Iorces are comparable. On the other hand, diIIering usage
patterns, buying motives and competitive pressures across countries result in the need Ior positioning
products uniquely to suit the needs oI individual markets.
Global positioning ensures that money is spent eIIiciently on building the same set oI attributes and
Ieatures into products. Global positioning can also reduce advertising costs. However, as mentioned
earlier, uniIorm positioning without taking into account the sensitivities oI local markets can result in
product Iailures.
For a long time, itibank has been serving the premium segment in India. To open a savings bank
account, the minimum deposit required is #s. 3 lakhs. While this may sound reasonable in dollar
terms ($7000) it is obviously beyond the reach oI the Indian middle class. itibank has probably
realised that targeting the mass market is a Herculean task in a vast, predominantly rural country like
India where there are also several restrictions on the expansion oI Ioreign banks. Hence its decision to
limit itselI to India`s major cities and target wealthy individuals and blue chip corporates. itibank`s
upmarket positioning as a consumer Iinance company, rather than a commercial bank, needs to be
appreciated in this context. Now itibank seems to have realised the need Ior oIIering products and
services Ior the mass market. Its new Suvidha scheme is in line with the changed philosophy.
Global positioning oI products oIten evolves over time. Ford oIIers some useIul insights in this
context. The automobile giant`s scort model was launched individually in diIIerent countries. ach
country not only came up with its own positioning but also developed its own advertising messages
using local agencies. In some countries, the product was positioned as a limousine and in others as a
sports car. ompared to the scort, Ford`s new compact, Focus is a classic example oI global
positioning. The Focus is being launched across diIIerent markets as a car with a lot oI design Ilair,
plenty oI space, great Iuel eIIiciency and special engineering Ieatures to enhance saIety. Ford has
employed only one advertising agency Ior the launch oI the Focus.
Nestle uses positioning documents Ior its global, as well as, important regional brands. These
documents are prepared by the respective strategic business units in consultation with marketing
personnel Irom diIIerent parts oI the world and are approved by the general management. In the late
1990s, roughly 40 oI Nestle`s total sales was generated by products covered by the Nestle corporate
brand. For some products such as pet Ioods and mineral water, Nestle has chosen to keep the brands
as distant as possible Irom the corporate brand. Nestle O Peter Letmathe* explains: 'We Ielt that
people buying water are looking Ior the purity oI the source whereas our seal is that oI a
manuIacturer. So we set up a special institute, Perrier Vittel, which puts its own guarantee on
mineral water.

The choice oI brand name is an important issue in global marketing. ompanies such as oca-ola
have used the same brand name around the world Ior their Ilagship products. Others have used
diIIerent names to convey the same meaning in diIIerent languages across the world. Volkswagen has
chosen the same brand name across various countries Ior many models but there have been some
exceptions. It has a series oI model names denoting Wind - GolI (gulI wind), Sirocco (hot wind in
North AIrica) and Passaat (trade wind). GolI is one oI urope's most popular cars. For the US
market, however, Volkswagen renamed the GolI as #abbit to project a youthIul image. apanese car
maker Nissan's experience oIIers useIul lessons. When Nissan started exporting cars to the US, it
chose the name atsun. AIter establishing the brand over a period oI time, it decided to revert back to
Nissan. Sales however plummetted, with the name change possibly playing a major role in the
decline.

Advertising
In general, advertising is more diIIicult to standardise, than product development. ue to language
diIIerences, chances oI being misunderstood are great, especially in the case oI idiomatic expressions.
Besides, cultural diIIerences can result in diIIerent interpretations oI the same advertisement in
diIIerent countries. iIIerences in media inIrastructure also play an important role. In many emerging
markets, due to a low penetration oI TV sets in rural areas, Iilm based advertising is ruled out.
iIIerences in government regulations also stand in the way oI developing a standardised approach to
advertising. In Germany, comparative advertising is not permitted. ommercials showing children
eating snacks are not allowed in Italy. Many countries impose restrictions on the advertising oI
alcohol and cigarettes. ue to all these Iactors, advertising copy content may have to be modiIied
suitably. Yet, some advertising activities can be rationalised, to do away with ineIIiciencies resulting
Irom excessive customisation.
onsider the choice oI advertising agency. A totally decentralised approach would mean selection oI
diIIerent agencies Ior diIIerent countries. While local agencies are oIten in the best position to
understand the needs oI the local markets, no global company can aIIord a totally uncoordinated
approach towards advertising. Nestle once employed over a hundred diIIerent agencies. As the
company looked Ior global branding opportunities, coordinating the activities oI multiple agencies
became a major problem. Nestle decided to retain only a Iew agencies Mc ann ricsson, Lintas,
Ogilvy & Mather, WT, Publicis / FB and entsu.

Pricing
When it comes to pricing, both global and local approaches can be used, depending on the speciIic
situation. onsider the virtual bookstore
Amazon.com, which sells books - essentially branded products. ustomers typically have a distinct
preIerence Ior a particular book. For Amazon. com, global pricing makes sense except in cases where
cheaper reprints are available Ior developing countries. On the other hand, in the car industry, pricing
has to take into account local Iactors. ompanies such as Ford
2
and General Motors are realising that
their Indian customers are unwilling to pay #s. 8-9 lakhs (based on an exchange rate oI #s. 45/$) Ior
the same models which cost $15 18,000 in the US and Western urope. This is putting pressure on
them to look Ior ways to cut costs, indigenise and oIIer cheaper models. Fiat`s success in Brazil has
been largely due to its ability to design and oIIer value Ior money cars. Sometimes, global pricing
becomes diIIicult because oI diIIerent levels oI competition in diIIerent markets. A company like G
which Iollows global pricing Ior its jet engines, makes suitable adjustments to take into account local
competitive Iactors. Using a uniIorm price relative to competitors appears to make sense in many
cases as it protects market share while maintaining a consistent positioning. A point which MNs
should appreciate is that multiplying the home country price by exchange rate to arrive at the price in
the overseas market may not always be appropriate. Very oIten, there is a signiIicant diIIerence
between the market exchange rate and the exchange rate calculated on the basis oI the relative
purchasing power oI the two currencies. The Indian rupee trades at about
#s. 46 to the dollar but based on relative purchasing power, the rate is closer to #s. 10.

Sales & Distribution
Approaches to personal selling can vary Irom country to country. In some markets, door to door
selling is very popular while in others, people preIer to shop at retail stores. Telemarketing is quite
popular in the US but not so in many Third World countries. Yet opportunities to standardise should
not be ignored. ell omputer has replicated its direct selling practices across the world. To be closer
to overseas customers in urope and Asia, ell has a plant in Limerick, Ireland and another in
Penang, Malaysia. In Ireland, ell`s Iacilities are very close to the plants oI its suppliers such as Intel
(microprocessors), Maxtor (hard drive) and Selectron (motherboard). Such arrangements Iacilitate the
smooth execution oI ell`s direct selling, build to order, just in time model. ell`s sales persons
directly target large institutional accounts. #etail customers can dial toll Iree one oI its call centres in
urope and Asia. II a customer in Portugal makes a local call, it is automatically Iorwarded to the call
center in France where a Portuguese speaking sales representative answers the customer`s questions.
International distribution has to take into account local Iactors. Strategies can vary Irom
country to country owing to diIIerent buying habits. In some societies, mom and pop` stores
proliIerate, while in others large departmental stores carrying several items under one rooI are
popular. In some countries, intermediaries handle credit sales, while in others, cash transactions are
the norm. ven within developed countries, signiIicant diIIerences exist in the channels oI
distribution. (See Note: istribution in apan at the end oI the chapter). The rapid emergence oI the
Internet is however changing the old paradigm. Many companies are seriously looking at the
potential oI the Net as a global distribution vehicle, an excellent example being Amazon.com.






Conclusion
Global marketing strategies have to respond to the twin needs oI global standardisation and local
customisation. In their quest to maximise local responsiveness, companies should not overlook
opportunities to standardise and cut costs. On the other hand, an excessive emphasis on generating
eIIiciencies through a standard marketing mix may result in the loss oI Ilexibility. The challenge Ior
global marketers is to identiIy the Ieatures which can be standardised and build a core product. Then
customised oIIerings can be designed around the core product Ior diIIerent markets. In real liIe,
striking the right balance between standardisation and customisation can be extremely challenging.
A classic example is Volkswagen, which Iaced major problems while trying to market its best selling
model, GolI in the US. O, arl Hahn, who had been leading the company's globalisation eIIorts
admitted* "Our basic mistake was to trust the design adaptation oI the GolI to American thinking: too
much attention to outward appearances, too little to engineering detail.... We were not true to our
heritage. We gave American customers a car that had all the handling characteristics - one might say
the smell - oI a US car. We should have restricted ourselves to our traditional appeal, aiming at
customers, who were looking not Ior American style but Ior a uropean Ieel. Instead, we gave them
plush, colour coordinated carpeting on the door and took away the utility pocket. We gave them seats
that matched the door but were not very comIortable."





Framework for Clobal Marketing: Striking the balance between
centralisation and decentralisation


Pricing
iscounts,
#esponding to
seasonal trends
Policy guidelines
Ior regional
trading blocs ,
common markets

Policy guidelines Ior
the worldwide system

Distribution
hannel selection,
Schemes &
iscounts
Internet
initiatives,
warehousing

Policy guidelines

Advertising &
Positioning

xecution,
hoice oI sponsor
hoice oI Media

Theme,
hoice oI brand
name
hoice oI agency,
Positioning
Management oI brand
equity
Product
Development
Local ustomisation Module building esign & Prototype
development

Market
Research
Questionnaire
Administration
Questionnaire
esign
IdentiIication oI
InIormation to be
collected
Dominance of Local
Considerations
Dominance of Global
Considerations