Business in Global economy: Issues and Challenges Abstract: Issues and Due to the globalization of markets and businesses, there Is a need for the marketers to enter into the global business with fool-proof global marketing strategies. Companies must learn how to enter foreign markets and increase their global competitiveness. Firms that do venture abroad find the international market place far different from the domestic one.
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Market sizes, buyer behavior and marketing practices all vary, which means that global marketers must carefully evaluate all market segments in which they expect to compete. The marketers have to deal with various problems while marketing their products globally which may Include differences in consumer products, consumer response to marketing mix elements, brand environment, differences in the legal environment, some of which may conflict with those of the home market, infrastructure, administrative procedures, product placement etc.
Hence it is very important for the companies to form systematic global marketing strategies. In this paper, the authors have tried to analyze the strategies that a company can consider while entering Into a global market and succeed In their guest to achieve their global business objectives. The authors are dealing with various strategies which include global market entry strategies, integrated global marketing strategy, global advertising strategy, global branding strategies, global product strategy, global segment strategy, global marketing mix element strategies and global buyer behavior strategies.
To be at the top it is not easy but these strategies can certainly help the marketers to launch their products successfully In the global market. Introduction Global marketing can be defined as entering and marketing to the entire world and et the expectations of varieties of consumers, thereby taking commercial advantage of the global operational differences, similarities and opportunities in order to meet global objectives. In the beginning, companies around the world paid little attention to global trade.
They were satisfied If they could have picked up extra sales through exporting because the big market for them was at home, and It Marketers did not need to learn other languages, deal with strange and changing currencies, face political and legal uncertainties, or adopt their products to different customer needs and expectations. Today, however, the situation is much different. Organizations of all kinds have gone global. The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. Products developed in one country have found enthusiastic acceptance in other countries.
Global trade is once again booming after recession. But while global trade is growing, global competition is intensifying. Even though there are potential gains in global marketing, there involves lot of risks in going global. Hence companies need systematic strategies to make their global marketing decisions. Scope of global marketing The foundation for a successful global marketing is a sound understanding of the marketing environment. Global marketing is the process of focusing the resources and objectives of an organization on environmental needs and opportunities of various countries.
The first and the most fundamental fact about marketing is that it is a universal discipline. The international marketing discipline is equally applicable to all the countries. Marketing is a set of concepts, tools, theories, practices and procedures and experience. The marketing discipline is universal and customers are quite unique. This means that marketing practices must vary from country to country. These differences cause marketers to move forward with different marketing strategies to adjust to the countries where they want to pursue with their business.
The scope of international marketing is to have a border-less world. It is quite important to produce products that are both international and local in nature. The main issue in global marketing is to formulate vibrant marketing strategies to fit a particular region or country. Criticisms of Globalization: When there is increase in international business and globalization many criticisms as also raised against globalization, these criticisms can be classified into three broad categories: threats to national sovereignty, growth, growing income inequality.
Threats to National sovereignty: People in small countries are particularly concerned that their dependence on a larger country for supplies and sales will make them vulnerable to demands of that country which they might oppose. Many people fear that existence of international agreements will diminish countries sovereignty or freedom from external control and curtail their ability to act in their own best interest. Economic Growth: as globalization increases economic growth, it also brings both immediate and long-term consequences.
Certainly, as economic growth takes place, the world uses more non renewable natural resources. At the same time, increased production adds environmental pollution through toxic and pesticide runoffs into rivers and oceans, air pollutions from factory and vehicle emission, deforestation that can negatively affect weather and climate. Growing Income Inequality: By various measurements, there has been a growing income disparity both within and among countries thus, even if the overall global gains from liberation are positive, there are bound to be some losers in both an absolute and a relative sense.
The losers will inevitably critics of globalization, thus a challenge is minimizing the cost of the losers. Problems in Global Marketing When businesses begin to market across different countries, they frequently encounter various problems. A company has to decide upon many challenges and issues before getting into the global business. A thorough study of the country and the market should be done and they should also explore the opportunities within the markets. The various problems faced by the global marketers are listed as below:
One of the major difficulties while entering global market is the political and legal environment which is different from country to country. This is a very prominent issue that the marketers have to go through while entering into a global business. Another major difficulty that a marketer faces is forming the advertising for global marketers. Many companies have failed in formulating a general and common advertisement for the global market. Hence, it is a difficult decision for a marketer to choose between a common advertisement or customized one for each country.
Branding also results in a major impact on the global customers. A well known brand is very easy to market whereas if it unknown, then the companies have to struggle and spend a fortune to build brand image in the foreign countries. Domestic as well as international competition can also slow down the growth of a firm. It can be quite difficult to develop a product which will be accepted globally unless each market is studied properly Consumer segmentation can also act as a major constraint for the success of a company. The consumers may respond differently to the marketing mix elements chosen by the marketer.
Integrating various marketing mix to communicate in the same way to all the people globally can be quite difficult. Each individual or each region or each state or each country is different from the other. The lifestyle, culture and tradition, customs, beliefs, values, religion, attitude, perception etc play a very important role in the purchasing behavior of a customer. Differences in consumer needs, wants and usage patterns of the product can also become a problem for a marketer. Global Marketing Strategies A global marketing strategy that totally globalizes all marketing activities is not always achievable or desirable.
In the early days of development, global marketing strategies were assumed to be of one type only, offering the same marketing strategy across the globe. As marketers gained more experience, many other types of global marketing strategies became apparent. Some of those were much less complicated and exposed a smaller aspect of a marketing strategy to globalization. Global marketing requires proper understanding of relevant concepts and strategies that must be skillfully applied in conjunction with universal marketing fundamentals to ensure success in global marketing.
This paper formulates a new strategy for marketers who are on the urge to go for global markets. The strategies are explained as below Global Market Entry Strategies: When an organization has made a decision to enter a global market, there are a variety of options open to it. These options vary with cost, which organizations can enter global market includes indirect exporting, direct exporting, licensing, franchising, Contract manufacturing, fully owned manufacturing facilities, Joint venture, strategic alliances, counter trade and third country location.
Each of these entry strategies are have been described below. Exporting is the most traditional and well established form of operating mode to enter a global market. Exporting can be defined as the marketing of goods produced in one country into another country. Indirect exporting involves the company selling its products to intermediaries in the company’s home country who, in turn, sells the products overseas. A company engaging in indirect exporting can use middlemen such as trading companies, export houses, agents/brokers to distribute its products in the global market.
On the other hand, companies operating direct exporting set up their win in-house exporting expertise, usually in the form of an exporting department. This mode provides for more control over the marketing mix in the target market. They can ensure that the intermediaries observe the company’s marketing policies, charge the suggested sale price, offer the appropriate promotions and handle customer requests promptly and satisfactorily. Even then, direct exporting is however a costly strategy.
Hence companies mainly go for indirect exporting as it is easy and convenient. Licensing is also a entry strategy which is quite popular. Licensing involves a licensor and a licensee. Licensing is the method of foreign operation whereby the licensor in one country agrees to permit the licensee in another country to use the know-how, shares technology and often shares a brand name with the licensee, in turn, the licensee pays royalties to the licensor.
Franchising is a form of licensing where the franchiser grants another independent franchisee the right to do business in a prescribed manner. This right can be in many forms like selling the franchiser’s product, using its brand name, trademarks, production and marketing techniques or general business approach. One of the common forms of franchising involves the franchiser supplying an important ingredient like parts, materials etc to the franchisee. The franchiser may also provide the franchisee with advertising and sales promotion support, all in return for royalties.
Contract manufacturing is another form of entry where a company doing global marketing contracts with companies in foreign countries to manufacture or assemble the products, while retaining the responsibility of marketing the product. This is a common practice of business process outsourcing in global business. Another entry strategy is the fully waned manufacturing facilities. In this mode, the companies establish fully owned manufacturing facilities in the foreign market, especially when they have a long term and substantial interest to develop a market there.
Sometimes it is developed as a wholly owned subsidiary. Many factors like trade barriers, differences in the production and other costs, government policies etc encourage the choice of this mode. This strategy provides the company with complete control over production and quality. It does not have the risk of developing potential competitors as in the case of licensing and contract manufacture. Joint venture involves a foreign company Joining with a local company, sharing capital, equity and labor, among other things, to set up a new corporate entity.
This is a preferred entry mode for emerging markets. Generally, Joint venture takes place between an international firm and a state owned instant local market access and also preferential treatment. Strategic alliance is another mode of entry which seeks to enhance the long term competitive advantage by forming alliance relationship with its competitors instead of competing with each other. It is an attempt to reach Joint corporate and market related goals. Alliances could be manufacturing alliances, marketing alliances or distribution alliances.
Counter trade is a form of international trade where certain export and import transduction are directly linked with each other and where import of good are paid for by export of goods, without involving any monetary transactions. This mode has been used successfully by many firms as a global market entry strategy. Counter trade can be in several ways. Barter is direct exchange of goods of equal value, with no money and no third party involved in it. Under the buyback agreement the applier of plant, equipment or technology agrees to purchase good manufactured with that equipment or technology.
The payment is fully in kind or partly kind and the balance in cash. In counter purchase agreement, the seller receives the full payment in cash but agrees to spend an equivalent amount of money in that country within a specified period for purchases. In some cases, when there are no commercial transactions between two nations because of political reasons or when direct transactions between two nations, a company in one of these nations which wants to enter the other market will have to operate from a third neutral country ease.
Sometimes, commercial reasons encourage third country location for their business. This mode is used to reduce cost of production and by that to increase price competitiveness to facilitate market entry. These are the various entry strategies that the companies will adapt, but in reality, most entry strategies consist of a combination of different formats. Rarely do companies employ a single entry mode per country. The marketer should analyze and decide upon which entry strategy is more suitable and profitable for the company.
Global Advertising Strategy: Advertising is a critical instrument of mix promotion. As a form of a company’s communication with its environment and as a means of advancement of sale, advertising should point out utility and value advantages offered by the product to existing and potential customers. The power of successful transfer of promotion campaign around the globe is a considerable advantage of a globally oriented company in term of competitiveness. To expand globally it must find markets for its products worldwide.
Locating more precisely target markets and lifting the level of detailed analysts of customer’s buying motives in these markets he management of the company enchants successful implementation of its global advertising strategy. Globalizes advertising is generally associated with the use of the same brand name across the world. However, a company may want to use different brand names partly for historic purposes. Many global firms have made acquisitions in other countries resulting in a number of local brands. These local brands have their own distinctive market and a company may find it counterproductive to change those names.
Instead, the company may want to leverage a certain theme or advertising approach that may have been developed as a exult of some global customer research. Global advertising themes are most world. Once the purchasing reason has been determined as similar, a common theme may be created to address it. Global Branding Strategies: Global branding strategies consist of using the same brand name or logo worldwide. Companies want to leverage the creation of such brand names across many markets, because the launching of new brands requires a considerable marketing investment.
Global branding strategies tend to be advisable if the target customers travel across country borders and will be exposed to products elsewhere. Global branding strategies also become important if target customers are exposed to advertising worldwide. This is often the case for industrial marketing customers who may read industry and trade Journals from other countries. Increasingly, global branding has become important also for consumer products where cross-border advertising through international TV channels has become common.
Global branding allows a company to take advantage of such existing goodwill. Companies pursuing global branding strategies may include luxury product marketers who typically face a large fixed investment for the worldwide promotion of product. Global Product Strategy: Pursuing a global product strategy implies that a company has largely globalizes its product offering. Although the product may not need to be completely standardized worldwide, key aspects or modules may in fact be globalizes.
Global product strategies require that product use conditions, expected features and required product functions be largely identical so that few variations or changes are needed. Companies pursuing a global product strategy are interested in leveraging the fact that all investments for producing and developing a given product eave already been made. Global strategies will yield more volume, which will make the original investment easier to Justify. Global Segment Strategy: A company that decides to target the same segment in many countries is following a global segment strategy.
The company may develop an understanding of its customer base and leverage that experience around the world. In both consumer and industrial industries significant knowledge is accumulated when a company gains in-depth understanding of a niche or segment. A pure global segment strategy will even allow for different products, brands or advertising although some standardization is expected. The choices may consist of competing always in the upper or middle segment of a given consumer market or for a particular technical application in an industrial segment. Segment strategies are relatively new to global marketing.
Global Marketing Mix Element Strategies: These strategies pursue globalization along individual marketing mix elements such as pricing, distribution, place, promotion, communications or product. They are partially globalizes strategies that allow a company that customize other aspects of its marketing strategy. Although various types of strategies may apply, the most important ones are global product strategies, globalize those marketing mix elements that are subject to particularly strong global logic forces. A company facing strong global purchasing logic may globalize its account management practices or its pricing strategy.
Another firm facing strong global information logic will find it important to globalize its communications strategy. Global Buyer Behavior Strategies: Buyer behavior is an attempt to understand & predict human actions in the buying role. It has assumed growing importance under arrest-oriented or customer oriented marketing planning & management. Buyer behavior can be defined as all psychological, social & physical behavior of potential customers as they become aware of, evaluate, purchase, consume, & tell others about product & services.
Buyer behavior focuses on how individuals make decisions to spend their available resources on consumption related items. That includes what they buy, why they buy it, where they buy it, how often they buy it, how often they use it, how they evaluate it after the purchase, the impact of such evaluations on future purchases and how they dispose of it. So in buyer behavior, we not only learn what the behavior of the consumer is when he buys the product but also how the buyer feels before the consumption, during the consumption and after the consumption.
It is very important for a marketer to study the buyer behavior as it can have a major impact on the business. The company can survive only if the products of the company will find customers. In each country, the culture of the people will be different, the beliefs of the people will be different, the social environment will be different and on top of all, each individual is different from the other. The marketers have to do a lot of research to understand the target market and predict whether their products will click in the foreign market.
The marketers have to consider many factors that may affect the buying behavior of the customer. The various factors affecting the buying behavior of a customer are the cultural factor, social factors, personal factors and psychological factors and each factor has been discussed in detail. The cultural factors are again divided into three sub factors which are culture, sub culture and social class. Culture are the set of basic values, perceptions, wants ND behaviors learned by a member of society from family and other important institutions. Culture is the most basic cause of a person’s wants and behavior.
Every group or society has a culture, and cultural influences on buying behavior may vary greatly from country to country. Sub Culture can be defined as a group of people with shared value systems based on common life experiences and situations. Each culture contains smaller sub cultures a group of people with shared value system based on common life experiences and situations. Sub culture includes nationalities, religions, racial group and geographic regions. Many sub culture make up important market segments and marketers often design products.
Social Class is another cultural factor which almost every society has some form of social structure, social classes are society relatively permanent and ordered divisions whose members share similar values, interests and behavior. In Social Factors, a consumer’s behavior can be influenced by various factors such as the groups, family, roles and status. Groups are two or more people who interact to accomplish individual or mutual goals. A person’s to which a person belongs are called membership groups. Some are primary groups includes family, friends, neighbors and coworkers.
Some are secondary groups, which are more formal and have less regular interaction. These include organizations like religious groups, professional association and trade unions. Family members can strongly influence buyer behavior. The family is the most important consumer buying organization society and it has been researched extensively. Marketers are interested in the roles, and influence of the husband, wife and children on the purchase of different products and services. Another factor to be considered under social factors s the roles and Status.
A person belongs to many groups, family, clubs, and organizations. The person’s position in each group can be defined in terms of both role and status. Personal Factors is one more factor which contributes to the behavior of the buyer. Personal factors include age and life cycle stage, occupation, economic situation, life style, personality and self concept. In age and life cycle stage people changes the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of he family life cycle.
Occupation is another factor which contributes to the personal factors wherein the person’s occupation affects the goods and services bought. Blue collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. A company can even specialize in making products needed by a given occupational group. Economic situation is where a person’s economic situation will affect product choice. Life Style is a person’s pattern of living, understanding these forces involves measuring consumer’s major activities, interests and opinion dimensions.
In the case of personality and self concept, each person’s distinct personality influence his or her buying behavior. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Psychological Factors includes motivation, perception, learning, beliefs and attitudes. Motivation is a drive that is sufficiently pressing to direct the person to seek satisfaction of the need. Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world.
Learning, on the other hand, are the changes in an individual behavior arising from experience. Beliefs are the descriptive thoughts that a person holds about something and attitudes are a person’s consistently favorable or unfavorable evaluations, feelings, and tendencies towards an object or idea. Conclusion: Global marketing is the process of focusing an organization ‘s resources on the selection and exploitation of global market opportunities consistent with and supportive of its short and long-term strategic objectives and goals.
A detailed analysis of environment is essential before a company enters a foreign market. Environmental aspects of special importance include market entry, advertising, branding, standardized global product, target segmentation, marketing mix elements and the buyer behavior. A nation’s economic stability and trade barriers can also affect marketing efforts. Significant trade barriers include import tariffs, quotas and exchange controls. Political and legal forces include a nation’s political system, laws, regulatory bodies, special interest groups and courts. Advances in technology have greatly facilitated global marketing.