International Trade and Business - Global Marketing Management-Planning and Organization

Global Marketing Management-Planning and Organization

In the modern world each nation state is sovereign and independent from other countries. In reality, however, no country can completely survive in isolation.  They are economically   mutually dependent on each-others.  Even the most inward-looking regimes have realized the limitations of closed economies in terms   scarcity of their own resources. They also realized as well as the benefits of opening up their borders. These changes in the orientation of most economies have led to an enormous amount of activity in the international marketplace.

There was massive expansion of economic activities in the last decade oftwentieth century. There is widespread realization that a  global economic boom has been one of the drivers for efficiency, productivity Never before in world history have businesses been so deeply involved in andaffected by international global developments.

 Current global forces are converging to build the foundation of a new global economic order. The structure of a world economic order is by and large governed by the market system. It has now become difficult for countries to escape the effect of the ever-increasing number of domestic firms exporting, importing, and/or manufacturing abroad; the number of foreign-based firms operating in most markets; the growth of regional trade areas; the rapid growth of world markets; and the increasing number of competitors for global markets. Of all the trends affecting global marketing today, five stand out as the most dynamic and as the ones that are influencing the shape of international marketing.

·        The interdependence of the world economies.

·        The rapid growth of regional free trade areas such as EU, NAFTA, ASEAN and APEC.

·         The increase in wealth and growth in most parts of the world, causing enhanced purchasing power.

·        The evolution of large emerging markets such as Brazil, China, India, Malaysia, Russia, Hungary and Poland.

·        Availability of advanced methods of communication and transportation due to developments in information technology. These forces affecting the international business have led to a dramatic growth in international marketing and have contributed to a perception that world has become a smaller and interdependent place. If we look at the Swiss Multinational Company, Nestlé, ‘The Food Company of the World’, it claims its products are sold in every country in the world. It has factories in more than 80 countries and it has many brands that are recognized all over the world. Toyota and its subsidiaries sell their cars in more than 170 countries, giving it a presence in more countries than any other auto manufacturer. Today most business activities are global in scope. Finance, technology, research, capital and investment flows, production facilities, purchasing and marketing and distribution networks all have global dimensions. Every business must be prepared to compete in an increasingly interdependent global economic environment, and all business people must be aware of the effects of these trends when managing a multinational conglomerate or a domestic company that exports. As one international expert noted, ‘every company is international, at least to the extent that its business performance is conditioned in part by events that occur abroad. Even companies that do not operate in the international arena are affected to some degree by the success of the European Union, the post 9-11 political economy and the economic changes taking place in China and India. The aftermath of 9-11 and the war in Afghanistan and Iraq have changed the political as well as economic scène. The interdependence among the nations and markets has however not been affected. Companies have become even more aggressive to capture new markets to compensate recessions at home or in their traditional markets.

 

As competition for world markets intensifies, the number of companies operating solely in domestic markets is decreasing. Or, to put it another way, it is increasingly true that the business of any business is international business. The challenge of international marketing is to develop strategic plans that are competitive in the intensifying global markets.

 

With the increasing globalization of markets, companies find they are unavoidably enmeshed with foreign customers, competitors and suppliers, even within their own borders. They face competition on all fronts – from domestic firms and from foreign firms. A significant portion of all televisions, DVD players, mobile phones, clothes and tableware sold in Western Europe is foreign made. Sony, Panasonic, Mitsubishi, Nokia, Fujitsu, Toyota and Nissan are familiar brands in Europe and North America, and for Western industry, they are formidable opponents in a competitive struggle for European and world markets. Many familiar domestic companies are now foreign controlled. When you shop for groceries at Aldi, A&P supermarkets or buy Alka-Seltzer, you are buying indirectly from a German company. Some well-known brands no longer owned by US companies are Carnation (Swiss), Brooks Brothers clothing (Canada) and the all-American Smith and Wesson handgun, which is now owned by a British firm. There is hardly any country that is not involved in international trade and investment, In fact, foreign investment in Western countries by other industrialized countries is quite common. We can see that companies from Germany, Japan, the United States and the United Kingdom lead the group of investors, with companies from Switzerland, The Netherlands and France following in that order.

 

Strategic Planning

 

In order to take advantage of global opportunities, as well as meet the challenges presented by so doing a number of concepts can be particularly useful. Every organization needs an understanding of what is involved in "strategy", or else the haphazardness’ involved in chance exporting can be accepted as the norm with all inherent dangers involved. Also potential exporters need to know what is going on in the global "environment". Just as in domestic marketing "Government" "competition", "social" and other factors need to be accounted for, such is the case in international marketing. If one can place products or services at a point on an environmental sensitivity/insensitivity continuum, one can see more clearly the need to account for differences in the marketing mix. By comparing the similarities and differences between domestic and international marketing needs and planning requirements, then the organisation is in a better position to isolate the key factors critical to success.

 

Companies often consist of several different businesses, and each one is a SBU (strategic business unit). For instance, a firm might be in the tobacco, cheese, coffee, luncheon meats, frozen vegetables, and dessert business. Each of these businesses has its own mission, objectives, and competition, and can be thought of as a separate entity. A major part of strategic planning is determining which parts of its business, e.g., product lines, to support and which to sell. A company should see its different SBU’s the way an investor sees her portfolio of investments. Some stocks should be sold and the proceeds might be used to purchase additional shares of other stocks.

 

The Boston Consulting Group approach requires a company to classify its SBU’s using two dimensions: how well the industry is doing (market growth rate) and how well the company’s brand is doing within the industry (relative market share). This results in the following:

 

·        High Market Growth/High Market Share: Stars

·        High Market Growth/Low Market Share: Question Marks (also called Problem Children)

·        Low Market Growth/High Market Share: Cash Cows

·        Low Market Growth/Low Market Share: Dogs

 

Generally, the cash cows generate more cash than is needed to maintain market share. Cows are "milked" and the excess cash is spent on the stars. Dogs might be eliminated or sold—unless a new strategy can be developed to revitalize the brand. Question marks also need work—should management eliminate them or try to turn them into stars?  Turning a question mark into a star requires money.

 

Marketing Planning

 

Marketing plans are very important components of international marketing management. For companies, it has been realized that there is need to develop effective marketing plan to go for international marketing. The marketing plans are vary by duration. There are short-run marketing as well as long run marketing plans. Marketing plans should also include and focus on scope of plan. By clearly defining the scope of the plan, marketing managers fully understand the focus of international marketing in different part of the world.

The development of marketing plan may have bottom up or top down approach. In case of bottom up approach each unit working in different countries develop their plan by taking into consideration demand, product, price, promotion, competitors, and environment factors etc. They submit their plan to their head-office further for suggestions and approval for implementation. Head –office by taking considering mission, vision, availability of resources etc provides suggestions for implementation. This approach is known as bottom-up approach. This approach is applicable in case of companies have adopted decentralized approach and further mostly marketing customized products according to cultural, social  needs of  different countries.

In top- down approach, strategic unit of company from top develop the marketing plan by taking into consideration mission, vision, availability of resources etc.

The objective is to create marketing plan also coincides with a plan of marketing strategy.

 Marketing strategy, which is very important component to develop the objectives of the marketing plan. It includes selecting and analyzing the target market(s) and creating and maintaining an appropriate marketing mix that satisfies the target market and company. A Marketing strategy articulates a plan for the best use of the organizations resources and tactics to meet its objectives. There is also need to adopt focused approach by developing marketing strategy that is consistent with marketing plan. There is no need to pursue projects that are outside the companies’ objectives or that stretch the companies’ resources.

 

The plan includes executive summary also. In this summary critical points of the plan are summarized. There is also a comprehensive situational analysis by taking into account prevailing external and internal environmental factors. There is also SWOT analysis of the plan that analyses opportunities and threats which are present in the international markets.  What are available tangible and intangible resources which company has for allocation are also included for developing comprehensive marketing plan. There is also need to include specific objectives which marketing plan focuses to achieve. 

 

The major elements of marketing strategies are target markets. A target market is group of persons/companies for whom a firm creates and maintains a Marketing Mix that specifically fits the needs and preferences of that group. Simultaneously there is also need to develop a marketing mix to reach the target market. The marketing mix is designed around the buying motive-emphasizing the marketing concept. The marketing environment affects the marketing mix, which is only controllable to a certain extent. There is also need to determine the needs of the target market before developing the marketing mix.  Along with marketing plan there is also need to match target markets with financial projections, controls and further evaluation. Marketing control process consists of establishing performance standards, evaluating the actual performance by comparing it with the actual standards, and reducing the difference between the desired and actual performance.

 

Financial projections should be developed by including sales forecasting. Companies that truly care about satisfying customers need to do some forecasting.  A company should be making short-run forecasts (3 to 12 months) as well as long-run forecasts (1 to 5 years and even beyond that in many cases).  For example, a utility that sells electricity should be forecasting electricity usage for the next ten or twenty years.  After all, it takes about ten years to build a nuclear power plant.  Even a college should do some forecasting so that it knows how many students will be taking courses and majoring in various areas.  Utilities that do not plan for the future will find that they have to cut voltage on a regular basis or have brown-outs.  Forecasting is important since it provides a basis for scheduling production, determining personnel needs, determining plant and equipment needs, establishing sales quotas for salespeople, making pricing decisions, scheduling purchases of raw materials, etc.  The methods used in sales forecasting are judgmental and quantitative. The plan also involves where the organization would like to be and how to get there, which involves goal setting and strategy determination. Therefore organization structure should be created before planning. The situational analysis, objectives, strategy and tactics which are vital components of any marketing plan should be developed by taking into consideration appropriate organizational structure. The marketing plan gives number of advantages. The major advantages of marketing plan are as:

·         Gives rise to systematic thinking

·        Helps prepare for exigencies

·        Gives activity continuity

·        Integrates functions and activities

·        Helps in a continuous review of operations.

The international marketing planning task depends on the level of involvement of companies in the various marketing activities in a country. Exporting and licensing give minimum country involvement but joint ventures involve more in-country activity and give a greater degree of integration and control. Wholly owned subsidiaries give the organization almost total control. Because of the "external uncontrollable" international planning is rather more difficult than domestic planning.  Depending on the level of involvement, there is needed to develop plans. Planning can be standardized, decentralized or interactive.

Standardized plans

The standard plan required if there is uniform process noticed in various marketing activities across various regions of the world. In this process of international marketing there are numerous advantages like Cost savings on limited product range and economies of scale both in production and marketing, for example fertilizers and uniformity of consumer choice across the world. But standard plan may not be advantageous if different market characteristics make uniform products inappropriate, for example, fresh milk products and environmental obstacles disallow standardization; for example lack of refrigerated transport in developing countries.

Decentralized plans

Decentralized plan precisely based by taking into consideration local conditions. Products which are offered are customized therefore there is scope of high cost and more resource consuming.

Interactive plans

In this approach headquarters devises branch policy and a strategic framework, and subsidiaries interpret these under local conditions, for example Nestlè. Headquarters coordinates and rationalizes advertising, pricing and distribution. Within any of the above approaches plans can be either long or short term. Increasingly planning is becoming fairly routine. Most companies operate "annual operating plans" although these are often "rolled forward" to cover a few years hence.

Operation of Plans

To implement any kind of plan in international marketing perspective there is need to develop information system appropriate to plan. It has been noticed that there is need of three types of information:-

·        Knowledge of the market: This is one of the most vital information that requires implementing any marketing plan in international perspective. The major information of customers, competitors and government are essential to include in this category

·         Knowledge of the product : There is also need to collect information related to the formal product, its technology and its core benefit

·         Knowledge of the marketing functions: For effective implementation of the plan there is need to gather required information of various marketing functions.

It has also observed that most of the companies especially from developing countries face difficulties in international market because they lack the information required therefore to implement plan is difficult for them. It has been seen that through country grouping, these countries might overcome this problem. Country grouping depends on criteria like market size, market accessibility (market or commercial economies), stage of market development, prospects for growth, and promise for future growth and development. Zimbabwe may be a "promising" country for investment, but Somalia may not be "promising". Other concepts for planning are "competence centres". The mission of a competence centre is to formulate a global business strategy for a new business. Competence centres are not those developed through "leadership" ability but involve a number of factors like strategic location and skills.

In marketing planning, ultimately, the decision on the type of plan rests entirely on the size of the task, type of task and competence to achieve the task. In exporting flowers, say, to Europe, Zimbabwe would be well advised, with the small quantities involved, to leave the task to those experts in Holland and Germany whose knowledge and competence is far superior.

In the formulation of international marketing plan there is also need to make distinction between domestic market plan and international marketing plan. The Table -1 summarizes major distinctions between domestic and international marketing plans.

 

                                                  Table-1

 

Domestic marketing planning  vs international  marketing planning

Domestic Marketing Planning			International Marketing  Planning
1.	Single or limited languages and nationality	1.	Multilingual/multinational/multicultural factors
2.	Relatively homogeneous market	2.	Fragmented and diverse markets
3.	Data available, usually accurate and collection easy	3.	Data collection a large task requiring significantly higher budgets and personnel allocation
4.	Political factors relatively unimportant	4.	Political factors frequently vital
5.	Relative freedom from government interference	5.	Involvement in national economic plans; government influences business decisions
6.	Individual corporation has little effect on environment	6.	"Gravitational" distortion by large companies
7.	Chauvinism helps	7.	Chauvinism hinders
8.	Relatively stable business environment	8.	Multiple environments, many of which are highly unstable (but may be highly profitable)
9.	Uniform financial climate	9.	Variety of financial climates ranging from over-conservative to wildly inflationary
10	Single currency	10.	Currencies differing in stability and real value
11	Business "rules of the game" mature and understood	11.	Rules diverse, changeable and unclear
12	Management generally accustomed to sharing responsibilities and using financial controls	12.	Management frequently unautonomous and unfamiliar with budgets and controls

 

 

 Organization for International Marketing

 

As more firms move outside their domestic borders into a dynamic world of international marketing, the globalization of world markets appears to be gaining momentum. This globalization of business is forcing managers to grapple with complex issues as they seek to gain or sustain a competitive advantage. Faced with unprecedented levels of foreign competition at home and abroad, firms are beginning to recognize not only that international marketing is high on top management list of priorities but that finding and nurturing the organization required implementing an international or global marketing strategy be of critical importance. Effective development of organization to meet international marketing challenges are  essential, especially for small and medium firms where international expansion places additional stress on limited resources, particularly people. The development of an appropriate organization to meet international marketing challenges is primarily depends on employees which are working in international context therefore there is always need that human resource management should be coordinated effectively with international marketing. Human resource management refers to the activities an organization carries out to utilize its human resource effectively.  These activities include determining the firm’s human resource strategy, staffing, performance evaluation, management development, compensation, and labor relations. None of these activities is performed in a vacuum; all are related to the international marketing strategy of the firm. HRM has an important strategic component of international marketing strategy. Most importantly, through its influence on the character, development, quality; and productivity of the firm’s human resources, the HRM function can help the firm achieve its primary strategic goals of reducing the costs of value creation and adding value by better serving customer needs. An article by Morgan on the development of international HRM presents a model of international HRM that consist of three dimensions:

 

The three broad human resource activities: procurement, allocation and utilization.

 

1.     The three national or country categories involved in international HRM activities: the host country where a subsidiary may be located, the home country where the firm is headquartered, and “other” countries that may be source of labor or finance.

2.     The three types of employees of an international firm: host-country nationals (HCNs), parent- country nationals (PCNs), and third- country nationals (TCNs). Thus, for example , IBM employs Australian citizens(HCNs) in its Australian operations, often sends U.S. citizens (PCNs) to Asia –Pacific countries on assignment, and may send some of its Singaporean employees on an assignment to its Japanese operations (as TCNs).

 

Coordination in international marketing and international HRM is complex and vital. For example for Indian fresh produce to arrive on a Thailand family table within 48 hours or less is quite remarkable, but a complex operation. Vertical coordination, harmonizing all the vested production, marketing, exchange interfaces and value added stages is a challenge. In order to make the process flow smoothly, human resource management at different stage is vital. Most failures to vertically coordinate will probably reveal themselves in resource misallocations, technical inefficiencies and other risks. An over-supply of tomatoes, for example, may incur storage costs or waste. One good example of an almost perfectly coordinated system is that of Geest bananas. Not only do the bananas ripen on the voyage over to the UK from the West Indies, but they are specially treated so that they ripen at the exact time when required. In evaluating agricultural performance a large number of indicators and norms are utilized. This-so called "structure, conduct and performance" paradigm is based on an effective co-ordination by the organization. Most work has centered on operational and allocative efficiencies as well as longer term development patterns and the environmental and the human resource management.

 

The formation and form of appropriate organization depends on a number of factors. Most important factors which are vital include company goals, size of business, the number of markets operated in, the level of involvement in the market, international experience, the nature of the product, the width and range of the product line, the nature of the marketing task and the risk involved.  It has been noticed that even today many organizational forms especially in developing countries are relatively unsophisticated. These are "domestic" based, that is, they may have a small export division within the domestic based operation. The export division is responsible for international marketing. Again there is also practice for most organizations deal through agents or other merchant houses which have their own organization.

 

Depending on the factors described above organizational development usually starts with dependence on outsiders, for example horticultural produce is usually handled by overseas agents who have their own exporting organization or by a local network of services like cool store owners, freight forwarders and so on. As the organization grows it usually has an overseas subsidiary which reports to it. This is exemplified by Oserian and Sulmac flowers of Kenya, who in turn are part of multinationals. Eventually, the organisation grows in complexity and extent of operations, which then gives rise to an International Division structure, with its own personnel. The next stage of evolution is the development of regional headquarters or regional management centres. Differences between regions are a pressure to create the regional centres. Regional centres can be costly, so they must be developed with care.

 

Table- 2 summarizes various performance criteria useful in global marketing activities. These performance criteria depend on the type and nature of organization. These criteria also include transaction costs. Transaction cost associated with buying, selling and transferring ownership of goods and services, and are very wide ranging. These costs include information, negotiating contracts, the actual costs of transferring goods, services, money and ownership rights, costs of monitoring trade conditions and enforcing trading terms and conditions. Transaction costs tend to get less attention than other costs. Table 1 gives a summary of performance criteria useful in agricultural marketing.

 

Table 2 Performance criteria useful in global marketing activities

OPERATIONAL ACTIVITY	ALLOCATIVE EFFICIENCY	LONG TERM DEVELOPMENT/ECONOMIC	MARKETING SERVICE	TRANSACTION COSTS
Production Extraction yields Capacity Utilization Unit costs Input/output ratios	Opportunity costs Costs of storage, transport Prices versus consumer preferences	Profitability Rates of return Rates of growth and volume and value Levels of raw materials, commodity wastage. Quality Variety Employment rates Innovation Technological development Risk analysis Income distribution Market access, Structure.	Transport delivery rates Order Grading Labeling Supply adjustments Uniformity to standards Mix of products Supply regulating Timing Information provision	Personal time, Travel, Communications Advertising Promotion Market research Inspection Services Property guards Recovery Reporting of stolen property Distribution Legal Consultancy Advocacy Advertising Insurance Transport Storage Financial Credit rating checks Delayed payment procurement.

It has been seen that organization structure in international marketing is a evolving concept with the expansion of international marketing activities. It has been seen that with growth in international marketing the international division   may be replaced by a variety of structures like a geographical, product, function or strategic business unit approach. The area organizational form is used by highly orientated organizations with stable products.

Area Organizational Structure:

The area organization structure is another form of organizational structure in international marketing. The major advantages of this type of organizational structure include growth of regional groupings, expertise grouping, and ease of communications and knowledge of areas. This is the process of developing and diversifying organizational structure at regional levels. The major disadvantages of area organizational structure are suboptimal product and functional expertise allocation, duplication and lack of coordination.

Product Organizational Structure:

Another form of organization structure is product organizational   structure. These product groups have global marketing responsibility. The major advantage of this kind of organizational structure is flexibility and this structure revolves mostly on product. Therefore organization structure is not rigid and may be changed accordingly to product positioning in the market. Major disadvantages of this organizational structure are shortage of area knowledge and difficult to coordinate and because of these disadvantages in this kind of organizational structure there is also sometimes marketing opportunities are missed by companies.

Functional organizational Structure 

Another form of organizational structure, which has evolved over the years in the process of globalization, is functional organizational structure. In functional structure functional areas executives have been given global responsibility of international marketing. This structure is useful mostly in case of uniform products because in this case most of the companies have narrow and homogeneous product line. This kind of organizational structure is very successful where there are lesser regional variations. But if products are heterogeneous, broad, customized and there is regional diversity then this structure is not useful in international marketing. It has also been noticed that companies in this kind organizational structure may miss market opportunities because of narrow focus.

Strategic Business Units (SBU)

Strategic Business Units although is not part of a formal organizational structure but these  represent a process or system overlay for the purpose of developing a business strategy. SBUs are defined as a group of products or technologies that serve an identified market and compete with identified competitors. The final organizational form is that called a Matrix organizational structure. Matrix organizations are the most sophisticated form of organization and bring together four competencies -geographic knowledge, product knowledge and know-how, functional competence in such fields as finance, production and marketing, and knowledge of the customer (industry and its needs. Management's task in a matrix organization is to bring together all the above perspectives and skills to achieve particular objective(s). Matrix structures require a fundamental change in management behavior, organizational culture and technical systems. One of the important things to remember is that structure must always follow strategy. Too often structures are developed long before a strategy is worked out.

Global Marketing Controls

Most multinational companies like Coca-Cola and McDonalds have   well developed international operations headquarters and they  may seek to achieve control over subsidiaries by three types of mechanism - data management mechanisms, merge mechanisms, which shift emphasis from subsidiary to global performance, and conflict resolution mechanisms that resolve conflicts triggered by necessary trade-offs.

The method of export control in many less developed countries takes the form of direct organization by government.

 

 But it has been noticed that there are no uniformity in the application of controls in international marketing process.  Factors like distance, culture, language and practices create barriers to effective control. But without applying controls over international operations, the degree success cannot be judged.

Plans without monitoring and controls lack accountability therefore it has been said that Plans are the prerequisite to control. But most of plans in international marketing are developed in the midst of uncertain forces both internal and external to the firm. Even then there is need for companies to establish of standards of performance, measuring performance against standards and correcting deviations from standards and plans. All these processes  require controls and  in international marketing the ability to control is disturbed by the distance, culture, political and other factors.

Formal Control Methods

Planning and budgeting

In management it has been seen that planning and budgeting are the main formal control methods. The budget focuses on necessary expenditures and also revenues to achieve these expenditures. Control consists of measuring actual sales against expenditures. If there is tolerable variance then no action is usually taken.

Evaluating performance

There is also need to exercise control to measure performance. Performance evaluation is based by   by measuring actual against planned performance. There is therefore need for companies to formulate performance standards. It has been seen that most of these are formulated on historical performance with some kind of industry average. Problems of international comparison inevitably occur like how does one plan in an environment where exchange rates fluctuate quite often during the budget period.

 

 

 

Influences on marketing budgets:

There is always a need to formulate marketing budgets by taking into account market potential that has to be covered, competitors and level of intensity among competitors,  Impact of substitute products - packaging can be substituted in many ways and process - headquarters may impose an "indicative planning" method or guidance.

Other performance measures

Other measures of performance include share of market, image, position or corporate acceptance. Often these are difficult to obtain where data or data collection is difficult.

Informal Control Method

When staffs are transferred from market to market, they often take their standards of performance with them and these can be assessed. Other methods include face-to-face contact and evaluation.

Variables influencing Control

There are number of variables may influence the control methods. These include

·        Higher opportunities for expansion and diversification:

·        Domestic practices and values of standardization

·        Communication systems

·        Distance

·         The product

·        Environmental differences - the greater the environmental differences the greater the delegation of responsibility and the more limited the control process

·        Environmental stability

·         Subsidiary performance

·        Size of international

 

 

Factors important for planning and organizational development:

Penetration of a foreign market is a zero-base process. At the point of market entry, the foreign entrant has no existing business and little or no market knowledge, particularly with regard to the managerial competence necessary to operate in the new market environment.

 During the years after market entry, therefore, the rate of change in the country-specific marketing capability of the firm is likely to be greater than the rate of change in the market environment, and firm effects may dominate market effects in shaping strategy.

This is particularly important given the business context, in which the generation of new business is of prime importance—rather than efficiency in managing a relatively stable business.

This usually results in (a) entering the market via a partnership with a local distributor or other marketing agent rather than via a directly controlled marketing unit and (b) a relatively rapid sequence of changes to the marketing strategy (such as new product introductions or expansion of distribution) or to the marketing organization (e.g., taking over marketing responsibility from the local distributor).

 Hierarchical Nature Decisions

International market situations are multilevel in their decision focus, with a hierarchy of decisions from country assessment and performance measurement decisions through to more traditional marketing mix allocations and programs.

 Thus, an executive responsible for a country in which the firm participates only for revenue generation and not for production (a common situation) is simultaneously managing country-level trends in the economy or government, and marketing decisions such as the product range or price level. In the domestic market, by contrast, separate specialists address these decision levels.

Managing a Multi-Market Network

From the time a company enters its second country-market, it will inevitably be influenced by its previous experience. The greater the number of national markets in which a company participates, the more likely it is to seek to manage them as an aggregated network rather than as independent units.

 Marketing strategy decisions in one country-market may in this case be made against extra-market criteria. For example, price levels may be set to minimize the difference among markets and to maintain a price corridor rather than purely to reflect local market conditions. Similarly, a multinational company may subsidize price levels in one market for strategic reasons while recouping that loss in another market.

 This ability to leverage a global network is sometimes described as “the global chess game,” and it is increasingly regarded as one of the key advantages enjoyed by a global firm relative to local players, partly because of the increasing globalization of firms and their consequent opportunities to integrate national operations.

 In practice, this frequently results in asymmetric competition in any single market, with different companies pursuing different objectives and setting different performance standards. As discussed later in this chapter, it is possible that one company may be participating in the market simply to learn, and it may therefore tolerate low profitability, while others are pursuing more conventional profit maximization goals.

Co-Location Strategic Marketing and Distribution Functions

A national distribution channel for an international corporation is usually responsible not just for the traditional distribution functions, but it is the de facto branch of the company in that country with an exclusive agency for the territory and responsibility for marketing strategy.

 The distribution unit in the country-market, whether an independent organization or a wholly-owned subsidiary, has to manage a strategy for growth, and it will therefore be judged on organizational criteria including feasibility, level of desired risk, supportability, and control issues.

 By contrast, distribution management in domestic markets is largely concerned with the implementation of preexisting marketing strategies such as communication platforms and target customer selection, and so the distributor is judged against efficiency or cost-minimization criteria.

 Although some more-established firms manage this trade-off with considerable sophistication, all too often the delegation of marketing strategy to what is essentially a distribution organization results in underperformance, as nobody is in fact formulating a marketing strategy.

In practice, these unique characteristics mean that marketing strategy in the international arena changes rapidly as the business grows or fails to grow.

 Importantly, it is driven not only by market characteristics (the basis for marketing strategy in the pure or theoretical sense), but also by organizational development, as the economics and knowledge of the local marketing unit develop. Indeed, it is usually impossible to separate the process of market development from the process of organizational development.

It is possible, however, to identify commonalities across companies in this process of internationalization and so to describe the usual evolution of international marketing strategy. Such a framework has to begin by recognizing that different objectives for market entry may produce quite different outcomes in terms of entry mode and marketing strategy.

Targeting the Market

One of the most crucial steps in international trade operations in the international marketing is to target the markets by segmenting how a particular product and service can be marketed effectively in selected market.  It is mainly defined by factors such as age, gender, per capita income, geography, psychographic and behavioral patterns of customers, socio-economic grouping, or any other combination of the selected country demographics.  Market targeting requires studying and mapping through secondary data inputs such as lists and reports containing demographic information of target country and assessment of the impact it may have one the marketing of key products or services.  Market targeting can be defined as “the process of pulling apart the entire market as a whole and separating it into manageable, disparate units based on demographics”.

The following are the various types of target-market strategies, which usually used by firm in targeting the markets overseas:

·        Single-segment strategy: 

This strategy of market targeting is also known as a concentrated strategy as the firm intends to cater to one segment and wishes to acquire competitive advantage in that segment by having superior products, lower prices, good branding etc.  Such a strategy is useful for smaller, first-time firms as it provides them the leverage to cater to only one segment of market and also the opportunity to specialize in that product with limited and scare resources.

·        Selective specialization:

The selective specialization is an an extension of a single segment strategy, whereby the firm intends to cater to multiple-segments in the market with differentiated products.  The firm offers varied product or services with different pricing, promotion and distribution strategies and tries to cater to a larger section of that particular segment.

·        Product specialization:

This strategy is good for a firm having capital-intensive products as it specializes in a particular product and makes necessary changes in it, so as to cater to different market segments.

·        Market Specialization:

Under this strategy, the firm specializes to cater to a particular market and offers an array of different products in various market segment of that market.  In international marketing such a strategy is not sustainable as global markets are increasingly becoming borderless.

·        Full market coverage:

Under this strategy of market targeting, the firm tries to cater to the entire market.  Mass production strategy is used in order to cater to all segments of the target market.  The products are usually undifferentiated under this strategy.

Benefits of Target Marketing

There are several reasons that motivate the firms to design proper and suitable market targeting strategies, some of which are summarized as under:

·        Suitable understanding of customer needs:

The customer is king and may have different expectations from the manufacturer based on his demographic, behavioral and psychographic profile.  Market targeting helps the firm to understand customer needs and accordingly design a customer solution for each segment for the counter

·        Better returns for the firm: 

The customer’s choices of the product and services are based on their disposable income and price sensitivity.  Marketer by segmenting and targeting the markets with a variety of products and can sell the products in higher income segments, thereby generating additional income for the firm.

·        Higher opportunities for expansion and diversification:

Good segmenting, targeting and positioning (STP) can help the firm have greater opportunities for growth as product and market coverage increase with good market targeting.  Customers have better chances of selecting a suitable product according to their choices if the firm has good targeting strategy for selling it product in target market.

·        Retaining customers for longer time:

 Market targeting helps the international trader to keep a tack of changing customer choices and preferences; because they have different set of required at different stages of life.  When they are young they have different buying patterns as compared to when they become older.  By designing and targeting the products according to customers’ lifestyles, firm can retain customers for a longer period of time.

·        Help in making target communications strategy: 

Market targeting also helps the firm to devise a suitable communication and promotion policy and also helps save important revenue from being spent unnecessarily on wrong advertising campaigns.

·        Help in increasing market share: 

Creative market targeting helps the firm to achieve competitive production and marketing costs and automatically becomes the preferred choice of customers and distributors.  Hence it can be said that creative market targeting offers the opportunity for smaller and first-time firms, planning to get started in international marketing to compete effectively with bigger firms in the market.

 

What is standardized?

 

The original Coca-Cola has a standardized name is global markets. McDonalds has a common self-service operating system in international markets, and golden arches appear alongside the McDonalds name in different alphabets. A Clinique (Linique) cosmetic has a common positioning in international markets. IKEA has a standardized store format and core range. Marks and Spencers offer products from a standardized range. Intel chips are promoted consistently internationally, with the same logo and the jingle. Cisco Systems’ network routers are standardized, but able to work in all markets. Shell’s aviation fuel must meet the international standards for this product in all of their markets. Microsoft’s Office 2000 suite can allow data to be shared between people in working in different countries and in different languages.

 

Finding the balance between standardization and adaptation is at the heart of effective international marketing decision making. Companies with products which appeal to people in different international markets constantly have to review this balance. The cost issue benefits of standardization are important, but they must be balanced against local preferences.

 

What is adapted?

 

Products made and sold by Coca- Cola may have different names in different markets- Coca-Cola Light is called Diet Coke in the UK –or different flavours – Fanta has different tastes and appearances in different markets and with different flavour options- such as with herbs in Germany. Also, Coca-Cola’s Georgua coffee products are offered in some countries (such as Japan), but not in other (such as UK). Their Minute Maid orange juice is available in supermarkets in the US, but harder to find in European retail markets, although it is commonly served on airlines.

 

In business markets, software is normally adapted to the language and the alphabet of the target countries. Microsoft makes its Office 2000 Word package available in (amongst others) Arabic, Basque, Catalan, Chinese, Croatian, Finnish, Hungarian, Korean, Latvian, Lithuanian, Swedish and Thai.

 

Local adaptation of marketing activities can also create problems for marketers. People travel more and (as mentioned earlier) use international media (such as MTV channels on e.g. Sky or Star satellite TV) or even seek things out on the Internet. We watch global sports events, such as the Olympics or World Cup. A company which presents its products and services in different ways will find that a lack of consistency confuses customers, or blocks the use of different media. How could for example, Unilever advertise its main supermarket brand, Persil internationally, when it is known as Omo in Holland, and in Germany, the brand name Persil belongs to a competition, Henkel?

Types of Marketing Channels (Distribution Channels)

There are various types of distribution channels in different countries. These are explained below:

1.        Distributors

Distributors buy and hold large stocks of a product. In return, they are granted an exclusive right to sell the product in a particular area to a particular type of customer group. They generally sell their goods to the wholesalers. They earn their profit from the difference between the price at which they import and the price at which they sell them to the wholesalers.

Sometimes distributors operate on consignment basis. They import a large consignment of goods, but do not pay for them immediately. The exporter has to wait for payment until part or the whole consignment has been sold by the distributor. The exporter may have to send a separate invoice as each part of the consignment is resold.

The main advantage of exporting to the distributor is the saving in cost, time and trouble that comes from dealing in large consignments. Another advantage is a better profit margin, because the distributor pays a higher price for delaying payment until goods are resold. It can be useful, too, to have large stocks of the product easily available in the export market.

Distributors operating on consignment basis must be chosen very carefully. Most of them resell the goods as quickly as possible because it costs them money to keep the goods in the warehouse. However, some may not work too hard to sell products that they have yet to pay for.

2.     Import Houses

An import house (which may be an import/ export house dealing in two-way trade) may buy the products as a direct customer. It may also act as an agent for a buyer. Sales to import houses are usually single, complete transactions. They do not normally enter into a contract for exclusive rights over a period as a distributor does. In small markets where no other company can profitably deal in the same products, an import house will have no competition.

3.        Government Organizations

In some countries, government organizations buy products from other countries, often on a long term basis. For example, they may want a certain quantity of rice to be delivered at regular intervals over a period of five years. They could arrange contracts with individual supplies to do this.

4.        Industrial Buyers

Large industrial companies often buy direct from producers. For example, a company in the ship building industry may place a contract covering the purchase of timber or furnishing material or it may directly import the machines, equipment or the plants from their manufacturers in other countries. Generally, there is no intermediary between the exporter and importer in the case of capital goods.

5.        Wholesalers

Some wholesalers may also be the direct importers. However, they are more likely to be indirect customers who obtain their supplies through distributors. While wholesalers do not usually have exclusive selling rights for the products they buy, they may have a commanding position in a particular market and so have no competition.

6.        Large Retail Stores

Many a time, large department stores also buy direct from producers or import directly in their name. Sometimes, they may want exclusive selling rights. They can be the most important of the buyers who visit supplying countries. Sometimes several independent stores voluntarily establish a joint buying group and employ a single buyer for the group. Mail order Houses fall in this category.

7.        Multiple Stores/Chain Stores

Department stores and supermarkets are often multiples with a central buying organization. Multiples are becoming increasingly important as direct customers. Such buyers may be particularly interested in the way products are packaged and presented as those should be attractive on store shelves. Some of these stores may purchase in bulk and pack the products in their own consumer packs.

8.        Discount Houses

These are the retail stores which sell very item at a fixed price which is quite low. Such stores buy in bulk and sell at a retail level and often deal in products of daily use.