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Global Marketing Strategies Other
marketing activities also need to be examined carefully for their globalization
potential. Dell
Computer is a good example of a company which has replicated its direct
selling practices across the world. In 1998, Dell generated
approximately 31% of its sales in overseas markets. Dell’s sales
persons directly target large international accounts. Retail customers
can dial toll free one of its call centres in Europe and Asia. A truly
global marketing strategy would aim to standardize some elements of the
marketing mix across the world, while customizing others. The correct
approach would be to identify the various value chain activities within
the marketing function and decide which of these can be performed on a
global basis and which can be localized. Typically,
marketing includes the following activities: -
·
Market
research.
·
Concept
& idea generation.
·
Product
design.
·
Prototype
development & test marketing
·
Positioning
·
Choice
of brand name
·
Selection
of packaging material, size and labeling
·
Choice
of advertising agency
·
Development
of the advertising script
·
Execution
of advertisements
·
Recruitment
and posting of sales force
·
Pricing
·
Promotion
·
Selection
and management of distribution channels. Some
of these activities are amenable to a uniform global approach. Others
involve a great degree of customization. Within a given activity, parts
can be globalized and others performed locally. Product
Development
Product design & development is an activity where the
potential to globalize needs to be examined carefully. A globally standardized
product can be made efficiently at a low cost but may end
up pleasing few customers. On the other hand, customized products
targeted at different markets across the world may be too expensive. The
trick, as in the case of other value chain activities is to identify
those elements of the product which can be standardized across markets
and those which need to be customized.
Japanese companies such as Sony and Matsushita have been quite
successful in marketing standardized versions of their consumer
electronics products. These companies had limited resources during their
early days of globalization and identified features which were
universally popular among customers across the world. Global economies
of scale helped them to price their products competitively. At the same
time, these companies laid great emphasis on quality. As a result, as
their products, even without frills, began to appeal to customers. Many
of Sony’s consumer electronics products are highly standardized except
for the parts that meet national electrical standards.
Canon offers the interesting example of a Japanese company that
took into account global considerations while developing a new product.
In its domestic market, customer requirements were quite different.
Photocopiers in Japan were expected to copy all sizes of paper. Canon
felt that the designing around the requirements of the US, the largest
market for photocopiers in the world made sense. In the process, the
company deliberately overlooked
some of the features required by the Japanese market, to keep its
development costs under
control.
In the case of industrial products, standardization may become
unavoidable if global customers coordinate globally their purchases.
This seems to be true in the PC industry and companies such as Dell are
taking full advantage of this trend. This is likely to accentuate
further, as companies increasingly feel the compelling need to
coordinate their corporate information systems on a global scale. MNCs
often choose to replicate the computer system in their headquarters to minimize
the costs involved in writing new programs and training staff.
In industries characterised by high product development costs and
great risk of technological obsolescence, there is a great motivation
for developing globally standardized products and services. By serving
large markets, costs can be quickly recovered. Even in the food
industry, where tastes are largely local, companies are looking for
opportunities to standardize. Even if identical offerings cannot be made
in different markets, companies are developing a core product with minor
customization, such as a different blend of coffee, to appeal to local
tastes.
In a globalized economy, there is pressure on companies to
improve efficiencies by offering standard products to the extent
possible. There are pitfalls however to be avoided. Customer preferences
vary across countries. Let us say all these are carefully taken note of
and some ‘average’ preference arrived at. Based on this, if a
company develops a new product, it may well and up pleasing no one. As
Kenichi Ohmae has remarked in his book, ‘The Borderless World’:
“When it comes to product strategy, managing in a borderless economy
doesn’t mean managing by averages. It doesn’t mean that all tastes
run together into one amorphous mass of universal appeal. And it
doesn’t mean that the appeal of operating globally removes the
obligation to localize products. The lure of a universal product is a
false allure.”
Some products of course tend to be more global than the others.
These include cameras, watches, pocket calculators, premium priced
fashion goods and luxury automobiles. In the case of many industrial
products, purchase decisions are normally taken on the basis of
performance characteristics. Considerable scope exists for standardization
that can cut costs. However, even for these products,
local customization may be required in engineering, installation, sales,
service and financing schemes. In the case of financial services,
institutional products tend to be more global than the retail ones.
Consider a product like cars. Traditionally, car manufacturers
have developed hundreds of models to meet the needs of
different markets without exploring the possibilities that exist
for standardization. Proliferation of models has resulted in unused
capacities and inefficiencies. In the global automobile industry today,
substantial excess capacity exists. Under these circumstances, car
manufacturers are looking for ways to cut costs. One approach has been
to select common platforms and build models of different shapes around
these platforms. The idea here is that the basic functionality of a car
can be extended globally while features and shape are customized to
appeal to different consumer tastes in various parts of the world. Ford
and Toyota have made a lot of progress in standardizing the platforms.
Other automobile companies are also laying a lot of emphasis in this
regard. Market
Research
Now, let us move on to another important marketing activity,
market research. Some elements can probably be standardized. For
example, the sample to population ratio can be controlled globally. The
information to be collected for each product category can also be standardized. However, questions have to be tailored taking into account
the sensitivity of both the local government and the local people. In
particular, personal and embarrassing questions have to be avoided in
certain countries. The actual task of administering the questionnaire
and collecting data has of course to be performed locally.
Even if questionnaires have to be customized to suit local
requirements, a global approach to marketing research efforts can help
in improving efficiency. For
example, clusters of countries might need the same questionnaire. Global
coordination is also necessary to facilitate sharing and transfer of
knowledge. The global head of market research has the important job of
ensuring that each country is aware of not only the research activities
it is carrying out but also of the activities being conducted in other
countries. A systematic
process of collecting inputs relating to research methodology and data
from different parts of the world can help in the formulation and
implementation of a globally coordinated market research strategy. Advertising
Advertising is obviously a critical marketing activity. Consider
the choice of advertising agency. A totally decentralized approach would
mean selection of different agencies by different subsidiaries. While
local agencies may feel they are in the best position to
understand the needs of the local markets, no global company can afford
such an uncoordinated approach towards advertising.
Nestle had been employing over a hundred different agencies. As
the company looked for global branding opportunities, coordinating the
activities of so many agencies became a major problem. Nestle decided in
favour of retaining only a few agencies – Mc Cann Ericsson, Lintas,
Ogilvy & Mather, JWT, Publicis / FCB and Dentsu. Peter Letmathe,
Nestle CEO explains the role of an advertising agency in the company’s
globalization efforts: “ To us, the most important thing is to have
dedicated teams. Mc Cann
for instance has 10 people working only with Nestle. I see them as an
extended arm of my communications team. They visit every six weeks to
tell us what they are doing around the world.”
Nestle subsidiaries have encouraged their local agencies to tie
up with the company’s global agencies. The rationalization of
worldwide communications efforts has helped Nestle achieve efficiencies
in the case of products such as coffee, ice creams and chocolates. While
Nestle has also made attempts to transfer advertising expertise across
countries, there are obvious limits. Letmathe himself has articulated
some of the difficulties involved in using the same advertisement across
different countries: “Sometime ago, Chile produced an outstanding
Nescafe commercial. In a little house by a lake, a man gets up early and
tries to wake his son (who prefers to stay in bed) to go fishing. We see
the disappointed father sitting in the morning mist at the lake. Then
the son reconsiders the decision, get up and makes a cup of coffee and
brings it to his father for a moment of spontaneous renewal. Their whole
relationship is built up through coffee. Now, the same commercial,
projected in a different market can bring completely different
connotations. In Paris, you might even provoke ecological feelings that
look almost like an environmental statement. The same images are
perceived totally differently.” Pricing When
it comes to pricing, both global and local approaches can be used
depending on the specific situation. Consider the virtual bookstore
Amazon. Com. The store sells books which are essentially branded
products. Customers typically have a distinct preference for a
particular book. For Amazon. Com, global pricing probably makes sense.
On the other hand in the car industry, inspite of claiming to be global,
pricing has to take into account local factors. Companies such as Ford
and General Motors are realizing that the Indian customers are unwilling
to pay Rs. 7 –8 lakhs (based on an exchange rate of Rs. 43/$) for the
same models which cost $ 15 – 18,000 in the US and Western Europe.
This is putting pressure on them to look for ways to cut costs,
indigenise and offer cheaper models. Sometimes global pricing becomes
difficult because of different levels of competition in different
markets. Even a company like GE which follows global pricing for its jet
engines makes suitable adjustments for local competition. Using a
uniform price relative to competitors appears to make sense in many
cases as it protects market share while maintaining a consistent
positioning. Positioning A
global positioning of products helps in improving the efficiency and
effectiveness of marketing programs. On the other hand, differing usage
patterns, buying motives and competitive pressures across countries
necessitate the need for positioning products uniquely to suit the needs
of individual markets. Wherever possible, a global positioning needs to
be used as it ensures that money is wisely spent on building the same
set of qualities and features into products. Global positioning can also
reduce advertising costs. However, as mentioned earlier, uniform
positioning without taking into account
the sensitivities of local markets can result in product
failures. Sometimes, local positioning has to take into account market
realities. For a long time, Citibank has been serving the premium
segment in India. To open a Savings Bank account, the minimum deposit
required is Rs. 3 lakhs. While this may sound reasonable in dollar terms
($ 7500) it is obviously beyond the reach of the Indian middle class.
Citibank has probably realised that targeting the mass market would be a
Herculean task in a vast, predominantly rural country like India where
the Government also has imposed several restrictions on the expansion of
foreign banks. Hence its decision to restrict itself to India’s major
cities and target wealthy individuals and blue chip corporates.
Citibank’s up market positioning needs to be viewed in this context.
Now, Citi seems to have realized the need for offering products and
services for the mass market. Global
positioning of products often evolves over time. Ford offers some useful
insights. Ford’s first global product, the Escort was launched
individually in different countries. Each country not only came up with
its own positioning but also developed its own advertising message using
local agencies. In some countries, the product was positioned as a
limousine and in others as a sports car. Compared to the Escort,
Ford’s new compact, Focus is a classic example of global positioning.
The Focus is being launched across markets as a car with a lot of design
flair, plenty of space, great fuel efficiency and engineering features
to promote safety. Ford has employed only one advertising agency for the
launch of the Escort. Nestle
uses positioning documents for the worldwide brands as well as important
regional brands. These documents are prepared by the respective
Strategic Business Units in consultation with marketing personnel from
different parts of the world and approved by the general management. In
the late 1990s, roughly 40% of Nestle’s total sales was generated by
products covered by the Nestle corporate brand. For some products such
as pet foods, Nestle has chosen to keep the brands as distant as
possible from the Nestle brand name. In the case of mineral water also,
Nestle does not use its corporate name. Letmathe explains: “We felt
that people buying water are looking for the purity of the source
whereas our seal is that of a manufacturer. So we set up a special
institute, Perrier – Vittel, which puts its own guarantee on mineral
water.” Selling If a customer in Portugal makes a local call, it is automatically forwarded to the call center in France where a Portuguese speaking sales representative answers the customer’s questions. To be closer to overseas customers in Europe and Asia, Dell has a plant in Limerick, Ireland and another in Penang, Malaysia. Dell has attempted to configure its factories similar to its Austin plant, in the US. The plant at Ireland, is for example very close to the plants of its suppliers such as Intel (microprocessors), Maxtor (hard drive) and Selectron (motherboard). Such arrangements facilitate the smooth execution of Dell’s direct selling, build to order, just in time model. |