Global Economy

Effects of globalisation on marketing and Pitfalls of global

Marketing
 Introduction
• Marketing departments of nowadays companies have to face fierce
competition on a global scale, which makes their marketing activities to
be carried out in a very dynamic global environment, resulting in frequent
revisions of marketing programmes.
• There is a belief that a business success formula for a certain period will
no longer work in the next period and may even lead to bankruptcy
 Introduction
• Businesses face a much broader marketing environment and a more
complex one than before. For example, in terms of global competition,
European and American companies have to face, even in their home
countries, major Asian producers (e.g. Sony, Toyota, Samsung), which
uses an aggressive and highly competitive marketing policy (according to
the concept of "total competition").
• But are there benefits to marketing gained from globalisation?
 Benefits of globalisation to Marketing
• It is undeniable that globalization has generated a number of benefits
for marketing activities in organizations. The most important benefits
generated by a globalization strategy are:
• The possibility of generating important economies of scale by standardizing
operational marketing and in particular packaging and communication.
• The speed to market because globalized firms centrally plan and organize
new product introductions worldwide within less than one year
 Benefits of globalisation to Marketing
• The advantage of creating a unique worldwide brand name and brand
identity for the global company. The most important effect of this
advantage is the significant reduction of communication costs by targeting
the same segments of consumers on all markets, using the same concept
of product.
• The possibility of market expansion, which could lead to a significant
increase in sales volume.
• Access to new resources and sources of financing.
 Benefits of globalisation to Marketing
• Globalization also brought many benefits for consumers and for the
countries as a whole.
• For consumers these include; lower prices, wider choices, and improved
quality.
• For countries these include improved standards of living in both
developing and less developed countries, increased economic integration
and democratization of economies.
 Drawbacks of globalisation
• Despite the benefits, there are some less favorable effects of
globalization. These include
• The negative effect of centralization, that can slow down some marketing
decisions (very slow reactions to local competitors actions, or to specific
local consumer problems).
• The insensitivity to local markets and lower responsiveness because
marketing managers from company headquarters have fewer contacts with
local markets.
 Drawbacks of globalisation
• The danger of developing too standardized product that are not in line
with some consumer needs;
• High risk management because a portfolio of brands constituted of a
majority of global brands is more vulnerable (a problem arising in a local
country on a global brand is rapidly made public and can be
communicated to the whole world within a few hours or even minutes).
 Drawbacks of globalisation
• From a consumer perspective, the greatest disadvantage of
globalization is represented by standardization, which could
negatively affect the degree of customer satisfaction.
• For countries, the negative effects of globalization refer mainly
to the loss of identity and national culture.
 Effects of globalization on marketing mix
• Product
• The key question is related to what extent the product will be adapted to the needs
of each market on which it will be commercialized. The company has three
strategic alternatives: the product can be adapted for each market (customizing
according to each market clients’ needs and wants), the product can be adapted for
a group of markets or the company may choose a unique product (standardized),
identical for all target markets. Product standardization has the advantage of a
significant cost reduction, but the adaptation of the product to the local public
demands may lead to a significant increase of the customer satisfaction.
 Effects of globalization on marketing mix
• Product
• Another effect of globalization on the product policy was that companies were
determined to achieve some of their products through global assembly lines. For
example, the Boeing 767 passengers plane, was designed in Seattle (USA), where
were also made the wings and cockpit; the rear of aircraft and some parts of the
wings component were manufactured in Italy, the back in Canada, windshields
and engines in the UK, and the fuselage and components that incorporate leading
technology were made in Japan.
Effects of globalization on marketing mix
• Prices
• Companies use different price strategies for different country. An
important task of the marketing department employees is to choose the
right price strategy for each market.
• There is a very rigorous process for determining the price for each market,
a process that involves six steps: selecting the price objective; determining
demand; estimating costs; analyzing competitors' costs, prices and offers;
selecting a price method and selecting final price
Effects of globalization on marketing mix
• Prices
• In respect to the price policy, companies are forced to choose between a
standard price strategy and a different price strategy. The decision can be a
difficult one, given that each one of the two strategies can bring benefits.
Thus, price standardization determines cost savings while price
differentiation (different pricing strategies for different countries) may
lead to increasing local market share by sales maximization.
Effects of globalization on marketing mix
• Price
• Product life cycle is another important factor in establishing the product
price for global products. Since the same product may be in different
stages of its life cycle on different markets, it can be sold at different
prices on different markets, according to it life cycle stage.
 Effects of globalization on marketing mix
• Place
• Global businesses have to tailor their distribution strategies to specific customer
and market characteristics. Tailoring distribution strategies to the distinctive
characteristics and conditions in each market needs to take place locally, using
local talent and resources.
• Local management is in the best position to identify local suppliers, distributors
and service organizations.
• Distribution strategies of global businesses take into consideration the cultural
particularities of each country / region
Effects of globalization on marketing mix
• Promotion
• When feasible, global advertising and promotional strategies can be
developed with minimal local adjustment.
• In global promotional strategy there is an increasing need to embrace
changes in technology and use digital and social media (such Internet,
mobile phones and social networking sites) and increasingly used
techniques (viral marketing and greater interaction with consumers) to
reach target audiences.
 Effects of globalization on marketing mix
• Promotion
• The principal factors influencing the elaboration of the promotional mix in
global marketing are:
• Cultural differences;
• Consumer's attitudes towards local brands / national brands / global brands
• Consumer's attitudes towards firm products;
• Ethnic, moral and religious considerations in the local environment;
• Target public’s attitude towards different promotional instruments
 Effects of globalization on marketing mix
• Promotion
• In developing the promotional mix in the global markets context, marketers
should have in mind the particular elements that each communication means has
in the context of the country or the market where it will be used. For example;
• In using the advertising, marketers must bear in mind the imposed rules and regulations in
sending the advertising messages (in China, TV commercials are allowed only between 2
successive programmes)
• The use of Public Relations is influenced by the clients’ attitude towards direct interaction
with the human factor (e.g.: the Brits are more reluctant, the Chinese prefer this kind of
interactions).
 Effects of globalization on marketing
Research
• As the markets became more global in acting, marketing research became
more useful for marketing managers.
• This is because managers with experience and insights into a country or
region are deprived of these skills when they find themselves in an unfamiliar
and foreign context.
• Studies showed that the lack or failure of marketing research is a critical
factor determining failure of global marketing activities.
 Effects of globalization on marketing
Research
• Traditionally, marketing research has focused on mature markets (e.g.
North America, Europe) and not on developing economies because of
many barriers (e.g., cultural, legal, operational). But the process of
globalization has favored the diffusion of the marketing research in these
emerging economies too.
• The globalization of businesses led to the opening of new markets in
which marketing studies are needed (e.g.: China, with a growth rate of
about 20% per year).
 Effects of globalization on marketing
Research
• Globalization brought about the need to adapt organizations to the various research
methods required to achieve their specific global perspective, and the need to take
into account country-specifics when designing a study.
• It is highly recommended for businesses to take into account differences in working
styles of different countries (e.g.: American moderators of focus groups have a more
aggressive moderation style, get more information, detailing themes) and to take
also into consideration the cultural differences when selecting research methods and
tools (e.g.: Chinese respondents, especially businessmen, prefer face to face
interviews instead of group interviews).
 Pitfalls of global marketing
• There are five identified pitfalls for global marketing;
• Insufficient use of formal research
• Tendency to overstandardise
• Poor follow-up
• Narrow vision in program coordination
• Inflexibility in implementation
 Pitfalls of global marketing
• Insufficient use of formal research
• A lot of businesses kick off the process of globalisation without
conducting sufficient research on their target market.
• Shortcutting the early stage of research when planning to expand globally
is a costly mistake. According to research, two thirds of global programs
that do not engage in sufficient formal research before lunch failed in their
mission.
 Pitfalls of global marketing
• Overstandardisation
• Marketing standardisation does not work in global businesses.
• Global businesses need local innovation to keep itself updated
and responsive to evolving market conditions.
• Overstandardisation destroys incentives for local contribution, a
price no global business wants to pay.
 Pitfalls of global marketing
• Poor follow-ups
• The quality of follow-ups after kick-offs in new geographic locations can
determine the success of the global marketing program.
• Impressive and fancy kick-offs can attract attention to your business, however if
proper follow-ups are not carried out to maintain consumers attention, people
lose interest.
• Timely follow-ups is of paramount importance and goes a long way to ensure the
programme does not succumb to local management and consumer’s lukewarm
interest.
 Pitfalls of global marketing
• Narrow vision
• A global marketing program’s success depends a lot on what
happens after its launch; whether problems in its
implementation are resolved, and how the program’s contents
are adapted to evolving internal and market conditions.
 Pitfalls of global marketing
• Rigid implementation
• Too common manifestations of rigidity are forced adoption and automatic piloting.
• Forced adoption is the outcome of a tendency to ignore local units reservation
about implementing a standardized marketing program. Some marketers that local
resistance should be expected and should be resisted because without some
centralization, a marketing program might never take off. However, forced
compliance rarely delivers any rewards.
• Automatic piloting is symptomatic to inflexible program management in the face
of changing market conditions.
 Avoiding the pitfalls
• Local initiatives and decision making are key to global marketing success
and should be given the levity it needs. To avoid sterile uniformity at one end
and a free-for-all at the other extreme, global marketers must delineate on a
few standards that are essential to attaining the programs objective and those
that are not.
• There must be compliance with the essential standards while local
experimentation on the less critical factors should be allowed and
encouraged.
 Avoiding the pitfalls
• Effective follow-ups should be recognised to be as important as the launch
of the global marketing programs. Initiating and directing post-launch
activities must be handled with care and by experienced marketers
• While the process of formulating a program, starting it and following it
through may be driven centrally, decisions on content must be left for the
local subsidiary to carry through. This will make the program more open
to local input than if follow ups are centred at headquarters.
 Avoiding the pitfalls
• Flexibility should be built into global marketing program implementation.
• There should be willingness to sacrifice global standards when local
conditions dictate so or leave the exit door open when local management
argues against the adoption of a global program.
• In the absence of flexibility, standardized marketing risks becoming an
obstacle to competitiveness.
 Bibliography
• Karan Kashani (1999). Beware the pitfall of global marketing . Harvard
Businee review.
• Remus Ionut NAGHI: The Effects of Globalization on Marketing. GSTF
Journal on Business Review (GBR) Vol.2 No.3, March 2013