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Factors Affecting Global Marketing

Driving Forces
Technology Culture Market Needs Cost Free Markets Economic Integration Peace Management Vision Strategic Intent

Restraining Forces
Culture Market Differences Costs

Global marketing

National Controls Nationalism

War
Management Myopia Organization History

Global Strategy & Action

Domestic Focus

Driving and Restraining Forces Affecting Global Integration

Today, the growing importance of global marketing stems from the fact that driving forces have more momentum than the restraining forces The forces affecting global integration are shown in (Figure).

. technology advances. pressure to cut costs. improvements in communication and transportation technology. global economic growth. pressure to improve quality. any industry subject to these forces is a candidate globalization. and opportunities for leverage all represent important driving forces.Driving Forces • Converging market needs and wants.

it soon becomes available everywhere in the world This phenomenon supports Levitt’s prediction concerning the emergence of global markets for standardized products In his landmark Harvard Business Review article. Levitt anticipated the communication revolution that has. in fact.Technology • Technology is a universal factor that crosses national and cultural boundaries Technology is truly “stateless”. there are no cultural boundaries limiting its application Once a technology is developed. become a driving force behind global marketing • • • • .

and the Internet are just a few of the technological factors underlying the emergence of a true global village In regional markets. . such as CNN and MTV. such as Europe. globe-spanning television networks.• • Satellite dishes. the increasing overlap of advertising across national boundaries and the mobility of consumers have created opportunities for marketers to pursue panEuropean product positioning.

but it has come under attack by developing countries In Europe. Canada. the expanding membership of the European Union is lowering barriers to trade within the region. • • • . and Mexico The General Agreement on Tariffs and Trade (GATT). which was ratified by more than 120 nations in 1994.Regional Economic Agreements • A number of multilateral trade agreements have accelerated the pace of global integration NAFTA is already expanding trade among the United States. has been replaced by the World Trade Organization to promote and protect free trade.

Market Needs & Wants • A person studying markets around the world will discover cultural universals as well as cultural differences The common elements in human nature provide an underlying basis for the opportunity to create and serve global markets The word create is deliberate Most global markets do not exist in nature: They must be marketing effort For example. and yet today in some countries per capita soft-drink consumption exceeds the consumption of water • • • • . no one needs soft drinks.

• • • • • • Marketing has driven this change in behaviour. independence. and open space symbolized by . and today the soft-drink industry is a truly global one Evidence is mounting that consumer needs and wants around the world are converging today as never before This creates an opportunity for global marketing Multinational companies pursuing strategies of product adaptation run the risk of being overtaken by global competitors that have recognized opportunities to serve global customers Marlboro is an example of a successful global brand Targeted at urban smokers around the world. the brand appeals to the spirit of freedom.

is a global company that discovered years ago how the same basic market need can be met with a global approach. the basic appeal and execution of its advertising and positioning are global Philip Morris.• • the image of the cowboy in beautiful. . open western settings The need addressed by Marlboro is universal. and. which markets Marlboro. therefore.

Transportation & Communication Improvements • • • • The time and cost barriers associated with distance have fallen tremendously over the past 100 years The jet airplane revolutionized communication by making it possible for people to travel around the world in less than 48 hours Tourism enables people from many countries to see and experience the newest products being sold abroad One essential characteristic of the effective global business is face-to-face communication among employees and between the company and its customers .

and customers to link up electronically from virtually any part of the world for a fraction of the cost of air travel A similar revolution has occurred in transportation technology Physical distribution has declined in terms of cost. the time required for shipment has been greatly reduced as well A letter from China to New York is now delivered in eight days – faster than domestic mail is delivered within many countries . and teleconferencing and videoconferencing allowed managers. such communication would be difficult to sustain In the 1990s. new communication technologies such as e-mail. fax. executives.• • • • • Without modern jet travel.

• The per-unit cost of shipping automobiles from Japan and Korea to the United States by specially designed auto-transport ships is less than the cost of overland shipping from Detroit to either U.S. . Coast.

the cost of developing a new drug had reached $ 359 million • • • . by 1982. the cost of developing a new drug in 1976 was $ 54 million.Product Development Costs • The pressure for globalization is intense when new products require major investments and long periods of development time The pharmaceutical industry provides a striking illustration of this driving force According to the Pharmaceutical Manufacturers Association (PMA). the cost had increased to $ 87 million By 1993.

in the $ 200 billion pharmaceutical industry.• • Such costs must be recovered in the global marketplace. for example. seven countries account for 75% of sales. . as no single national market is likely to be large enough to support investments of this size As noted earlier. global marketing does not necessarily mean operating everywhere.

Matsushita. which. support design and manufacturing quality A global and a domestic company may each spend 5% of sales on research and development. Caterpillar. but the global company may have many times the total revenue of the domestic because it serves the world market It is easy to understand how Nissan.Quality • • Global marketing strategies can generate greater revenue and greater operating margins. in turn. and other global companies can achieve world-class quality Global companies “raise the bar” for all competitors in an industry • • .

. design. and production costs across business functions. competitors must quickly make their own improvements and come up to par Global competition has forced all companies to improve quality For truly global products. engineering. uniformity can drive down research.• • • When a global company establishes a benchmark in quality.

economic growth has reduced resistance that might otherwise have developed in response to the entry of foreign firms into domestic economies • • • . growth has created market opportunities that provide a major incentive for companies to expand globally At the same time. slow growth in a company’s domestic market can signal the need to look abroad for opportunities in nations or regions with high rates of growth Secondly.World Economic Trends • There are three reasons why economic growth has been a driving force in the expansion of the international economy and the growth of global marketing First.

global enterprises may take business away from domestic ones Domestic businesses are more likely to seek governmental intervention to protect their local position if markets are not growing Predictably.• • • • • • When a country is growing rapidly. policy makers are likely to look favorably on outsiders A growing country means growing markets. there is often plenty of opportunity for everyone It is possible for a “foreign” company to enter a domestic economy and to establish itself without taking business away from local firms Without economic growth. the worldwide recession of the early 1990s created pressure in most countries to limit access by foreigners to domestic markets .

private company will be more inclined to look for the best offer. it is much easier to require it to buy only from national companies An independent. . when a nation’s telephone company is a state monopoly.• • • • • The worldwide movement towards deregulation and privatization is another driving force The trend towards privatization is opening up formerly closed markets significantly. regardless of the nationality of the supplier Privatization of telephone systems around the world is creating opportunities and threats for every company in the industry. tremendous opportunities are being created as a result For example.

and global strategy.Leverage • A global company possesses the unique opportunity to develop leverage Leverage is simply some type of advantage that a company enjoys by virtue of the fact that it conducts business in more than one country Four important types of leverage are experience transfers. resource utilization. • • . scale economies.

Experience Transfers • A global company can leverage its experience in any market in the world It can draw on management practices. strategies.1. or sales or promotional ideas that have been tested in actual markets and apply them in other comparable markets • . products. advertising appeals.

Scale Economies • The global company can take advantage of its greater manufacturing volume to obtain traditional scale advantages within a single factory Also.2. finished products can be produced by combining components manufactured in scaleefficient plants in different countries • .

and raw materials that will enable it to compete most effectively in world markets. . money. Resource Utilization • A major strength of the global company is its ability to scan the entire world to identify people.3.

4. and constant effort The reward is not just success – it is survival. Global Strategy • • • The global company’s greatest single advantage can be its global strategy A global strategy is built on an information system that scans the world business environment to identify opportunities. threats. the global company adheres to the three principles identified earlier: it leverages its skills and focuses its resources to create superior perceived value for customers and achieve competitive advantage The global strategy is a design to create a winning offering on a global scale This takes great discipline. much creativity. trends. • • • . and resources When opportunities are identified.

or any business enterprise that pursues global business objectives by linking world resources to world market opportunity. the global corporation has taken advantage of the expanding communications technologies to pursue market opportunities and serve needs and wants on a global scale • . and underlying forces in the world Within the international financial framework and under the umbrella of global peace.The Global/Transational Corporation • The global/transational corporation. is the organization that has responded to the driving. restraining.

.• The global enterprise has both responded to market opportunity and competitive threat by going global and at the same has been one of the forces driving the world towards greater globalization.

national controls As we have noted. 3.Restraining Forces • Despite the impact of the driving forces identified earlier. in today’s world the driving forces predominate over the restraining forces That is why the importance of global marketing is steadily growing. • • • . and. several restraining forces may slow a company’s efforts to engage in global marketing Three important restraining forces are:1. however. organizational culture. 2. management myopia.

management simply ignores opportunities to pursue global marketing A company that is “nearsighted” and ethnocentric will not expand geographically Myopia is also a recipe for market disaster if headquarters attempts to dictate when it should listen Global marketing does not work without a strong local team that can provide information about local market conditions • • .Management Myopia and organizational culture • • In many cases.

• • • • In companies in which subsidiary management “knows it all.” there is no room for vision from the top In companies in which headquarters management is all-knowing. there is no room for local initiative or an in-depth knowledge of local needs and conditions Executives and managers at successful global companies have learned how to integrate global vision and perspective with local market initiative and input A striking theme emerged during interviews conducted by the author with executives of successful global companies .

.• That theme was the respect for local initiative and input by headquarters executives. and the corresponding respect for headquarters’ vision by local executives.

and other economic agreements • • .National Controls and Barriers • Every country protects local enterprise and interests by maintaining control over market access and entry in both low-and-high-tech industries and advertising Such control ranges from a monopoly controlling access to tobacco markets to national government control of broadcast. NAFTA. tariff barriers have been largely removed in the high-income countries. equipment. and data transmission markets Today. thanks to the World Trade Organization (WTO).

favouring national suppliers when awarding contracts When a global company.• • • • • However. non-tariff barriers (NTBs) still make it more difficult for outside companies to succeed in foreign markets The only way global companies can overcome these barriers is to become “insiders” in every country in which they do business For example. utility companies in France are notorious for accepting bids from foreign equipment suppliers but. such as ABB acquires or establishes a subsidiary in France. in the end. it can receive the same treatment as other local companies It becomes an “insider” .

the PAL system is used. . such as Germany.• • • • • Global advertising and promotion are also hampered by government regulations It is illegal in some countries to use comparative advertising In some countries. premiums and sweepstakes are illegal Also working against global advertising is the use of different technical standards around the world Videotape players in the Americas and Japan use the NTSC standard. whereas in Europe (except for France. which uses SECAM).