Global marketplace – Principles of Marketing

Global market place

Global marketplace

As global trade grows, global marketing also intensifies. A global firm is a firm that, by operating in more than one country, gains R&D, production, marketing and financial advantages in its costs and reputation that are not available to purely domestic competitors.

A company faces six major decisions in international marketing.
1.     Looking at the global marketing environment.
Companies must start by understanding the international trade system. Countries may set quotas and limits on the amount of foreign import, which can lead to barriers. But there are also forces helping the trade between nations. The GATT is a treaty to promote word trade by reducing trade barriers. The World Trade Organization was created to enforce the GATT rules.

Certain countries have formed free-trade or economic communities: a group of nations organised to work toward common goals in the regulation of international trade, such as the EU.

The international marketer must pay attention to the economic environment. The industrial structure shapes its product and service needs. The four types of industrial structures are as follows:

  • Subsistence economies: the vast majority of people engage in simple agriculture, which they consume themselves.
  • Raw material exporting economies: economies are rich in natural resources, but not all of them. Revenue comes from exporting these resources.
  • Emerging economies are industrialising economies with rapid growth.
  • Industrial economies are major exporters of manufactured goods.

Besides the industrial structure, the income distribution is also of importance.

Next to the economic environment, international marketers must also look at the political/legal environment, such as political stability and monetary regulations, and the cultural environment. Culture can have a big impact on marketing strategy. When advertising, cultural differences must be taken into account.

2.     Deciding whether to go global.
Not all companies decide to dive into international markets. Local businesses only need to be present in their local marketplace. However, companies that operate in global industries often are strongly affected by global positions.

3.     Deciding which markets to enter.
Before going abroad, the company should define their international marketing objectives and policies. Most companies start small when they go abroad. Firms need to choose how many countries and the types of countries to enter.

4.     Deciding how to enter the market.
Once a company has decided upon entering a country, there are different modes of entry. Exporting is entering a foreign market by selling goods produced in a company’s home country, often with little modification.

Joint venturing is entering foreign markets by joining with foreign companies to produce or market a product or services. Licensing is a method of entering a foreign market in which a company enters into an agreement with a licensee in a foreign market. Contract manufacturing is a joint venture in which a company contracts with manufacturers in a foreign market to produce a product or provide a service. Management contracting: a joint venture in which a domestic firm supplies the management know-how to a foreign company that supplies the capital, the domestic firm exports management services rather than products.

Joint ownership is a joint venture in which a company joins investors in a foreign market to create local business in which a company shares joint ownership and control.

Direct investment means entering a foreign market by developing foreign-based assembly or manufacturing facilities. The major global marketing decision is how much a firm should adapt is marketing strategy to local markets.

5.     Deciding on the global marketing programme.

There are two extremes when deciding on adapting the marketing strategy. At one point is the standardised global marketing: an international marketing strategy that basically uses the same marketing strategy and mix in all of a company’s international markets. At the other end is adapted global marketing: an international marketing strategy that adjusts the marketing strategy and mix elements to each international target market, bearing more costs but hoping for a larger market share and return.

There are five strategies that allow for adapting product and marketing communication strategies to a global market. Three of them apply to the product, namely straight product extension, product adaption and product invention.

Straight product extension means marketing a product in a foreign market without any change.

Product adaption means adapting a product to meet local conditions or wants in foreign markets.

Product invention means creating new products or services for foreign markets.

The other two apply to the communication strategy. Communication adaption means a global communication strategy of fully adapting advertising messages to local markets. In dual adaption, both the product and the communication strategy are adapted. Companies may also consider adapting their prices.

An international company must take a whole-channel view of the problem of distributing products. A whole-channel view means designing international channels that take into account the entire global supply chain and marketing channel, forging an effective global value delivery network. It connects sellers with final buyers via channels between nations and channels within nations.

6.     Deciding on the global marketing organisation.
Most companies manage their international marketing activities in three ways. First they organise an export department, then create an international division and final become a global organisation. International divisions can be geographical organisations, world product groups or international subsidiaries.

Today, major companies must become more global if they hope to compete.

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