International Marketing Strategy
In affluent societies, one observes a growing fragmentation of markets, buyers requesting more and more products adapted to their specific needs.
How can we reconcile this fact with the objectives of global marketing that emphasises a strategy of standardisation of products and brands across the entire world? Executive Summary: Companies developing a global marketing strategy must consider its impact and influence on the company. Crucial for development of global marketing strategy is clear segmentation and positioning of product and company on the market.
Advantages of global strategy could also come from using cheap local and national sources, global marketing operation, global brand name, advertising campaign and better knowledge of customer’s problems. There is a trade-off between standardisation and adaptation. The essay suggests that a company should have an optimal marketing mix to balance the increasing demand for products adapted to customers’ needs and its own global marketing objectives that emphasise standardisation.
Customer needs and markets are becoming increasingly global for many products and services. But the extent of globalisation varies considerably from market to market. Hence, a global marketing strategy and the associated marketing mix have to take into account of the following factors in the market environment: customer needs, culture, language, technology and legal factors. Culture determines customer behaviour strongly and therefore the products, branch names or advertising may have to be varied on a local basis to account for regional cultural differences.
Language enables understanding in communication and for that may require local variations in packaging, labelling, brand name and advertising.
The level of technology in a country or differing technological standards may require variation in products. Legal factors also play role in variations in packaging, advertising and the information of contents displayed. Global marketing strategy is primarily concerned with the global scope and coordination of marketing activities, and the extent of standardization and adaptation of products, brands, and promotion and advertising.
Three steps are essential in developing a total worldwide strategy. First step is development of the core strategy as the basis of sustainable competitive advantage. It is usually developed for home country first.
Second step is internationalization of the core strategy through international expansion of activities and through adaptation. The third step concerns the globalisation of the international strategy by integrating the strategy across countries. Setting strategy for a worldwide business requires making choices taking into consideration a number of strategic factors.
Factor| Purely multi-domestic strategy| Purely global strategy| Marketing approach| Local| Uniform worldwide| Market participation| No particular pattern| Significant share in major markets| Product offering| Fully customised in each country| Fully standardized worldwide| Competitive moves| Stand-alone by country| Integrated across countries| Location of value-added activities| All activities in each country| Concentrated – one activity in each different country| Adapted from: (Yip, G. , 1992)
The key drivers and forces for ongoing globalisation of the world economy are market, costs, institutional and competitive factors. For the development of an appropriate global marketing strategy it is important to take into account the position and resources of a company towards these globalisation drivers as they determine the company’s market participation, level of product standardization, its concentration of activities, the uniformity of marketing mix elements and its integration in frame of global strategy.
A global strategy can be defined as one that views the world as a single, but segmented, market.
Some authors of marketing literature have argued that companies that compete on a national basis are vulnerable compared to companies that compete on a global basis because of 2 main assumptions – 1) Globalisation of Customer Preferences and 2) Scale of Economies. (Levitt, Albaum and Duerr). Firms producing standardized products for the global market can access scale of economies in product development, manufacturing and marketing that offer efficiency advantages that nationally based competitors cannot match. In multi-domestic strategy each country is served y a fairly autonomous national subsidiary that manages a full range of functional activities.
The chief advantage of this strategy is the flexibility it affords with respect to local conditions. For example, it allows differentiation on the basis of local preferences, while avoiding the administrative complexities associated with centralised control from a remotely located head office. Multi-domestic strategy seeks to maximize worldwide performance by maximizing local competitive advantage, revenues or profits. A global strategy seeks to maximize worldwide performance through sharing and integration.
Companies that use global strategy levers can achieve one or more of these benefits: cost reduction, improved quality of products and programs, enhanced customer preference and increased competitive leverage. Types of international marketing strategies (Adapted from: Stonehouse, 2004) The simplest global strategy is to concentrate as many activities as possible is one country, serve the world from this home base, and to tightly coordinate the activities that must be performed near the customer through standardisation.
(Adapted from: Stonehouse, 2004)
Global niche strategy involves specialisation by product, technology, and market segmentation. National high share strategy utilises nationally based competitive advantages, with marketing and production geared toward achieving high volume and lower costs relative to other national competitors. National niche strategy involves specialisation on a national scale to avoid competition with both global and national high share companies. Global high share strategy involves pricing, promotion, product and other elements of marketing mix being geared toward the high volume segments of global markets.
The basis of this strategy is the worldwide coordination of company resources.
The development of any global marketing strategy should involve four main stages: defining the global marketing objectives, providing global segmentation strategy, development of a competitive market positioning strategy and a global marketing mix strategy. Global marketing strategy simply denotes a global perspective which seeks to combine benefits of global and local features. The key assumptions about global and international marketing strategy with-respect-to features such as product life cycle, design, production and market competition are summarised below.
Feature| Global Marketing Strategy| International Marketing Strategy| Product life cycle| Global life cycles. All customers want the most advanced product.
| Products are in different stages of the product life cycle in each country. | Design| International performance criteria considered during design stage. | Adjustments to products initially designed for domestic markets. | Adaptation| Products are adapted to global wants and needs. | Products are adapted to national wants and needs.
| Market| Fewer standardized markets. | Many customised markets. | Market segmentation| Segments reflect group similarities.
Similar segments are grouped together. | Segments reflect differences. Customised product for each segment.
| Customer Needs| Global convergence of customer needs. | Preferences reflect national differences. | Competition| Ability to compete in national markets is affected by a firm’s global position. | National competitive position is important. | Production| Globally standardized production. | Standardization is limited by requirements to adapt products to national tastes.
| Price Sensitivity| Consumers prefer a globally standardised product if it carries a lower price. Consumers willing to pay more for customised products. | Promotion| Global product image, sensitive to national differences and global needs. | National product image, sensitive to national needs. | Distribution Channels| Global standardisation of distribution. | National distribution channels.
| The three broad segmentation strategies for global markets are global market segments, national market segments and mixed market segments. Global market segmentation approach largely ignores national boundaries and concentrates on identifying similarities in customer needs across countries. Example- European Union.
National market segmentation approach involves serving the same market segments in multiple markets, but on a national basis. Example- Electronics, fashion, or the home appliances market for high end consumers.
Segmentation is based on nationality and emphasises cultural differences of geographical areas. Example- Starbucks China. Mixed strategy is a combination of these two. Choosing the appropriate segmentation bases is the greatest challenge for a global marketer.
The objective is to identify groups that are substantial enough to merit individual attention and which can be reached efficiently through marketing tools.
A different approach for segmenting international markets is through the identification of transnational segments of consumers with similar needs, who respond similarly to a given marketing mix. There are 4 main steps in this approach: (1) setting the criteria to be used in segmenting market and development of qualifying and determining dimensions (2) country screening to narrow down the list of countries as viable entry candidates (3) identifying market segments in each country and development micro-segments to be targeted in each country (4) measuring segments to be able select and provide total market.
After identifying key segments and target markets, the global marketing strategy can be selected in terms of marketing mix. Four main categories of marketing mix strategy can be identified based on the global segmentation and product strategy used.
The global marketing strategy mix matrix (Adapted from: Toyne, B. , Walters, P. G. , 1993) Ideal global marketing strategy follows the marketing of standard product to a global market segment using uniform marketing programmes. Example- Apple IPod. Ideal national marketing strategy is that in what the marketing mix is specifically tailored to meet the requirements of each national market.
Example- Cadburys in India. Hybrid I marketing strategy arises from the standardization of products, but the adaptation of other elements of the marketing mix to reinforce the product strategy. Example- Coca-Cola in India, Adidas in UK.
Hybrid II marketing strategy consists of the standardization of one key element of the marketing mix, but the adaptation of others. Example- Toyota Corolla in India and abroad. Any of the elements of the marketing mix can be standardized or varied as part of global marketing strategy according to the requirements of the global market.