3.3.1 Responding to global demand

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    Global marketing strategy – when firms have a common marketing strategy for all operations across the globe which is most effective when firms have similar expectations of all the countries they operate in.

     

    Glocalisation – this is when products and marketing are adapted to the specific requirements of local practices and cultural expectations e.g. Maharajah mac in India.

    MODEL DESCRIPTION EXAMPLES ADVANTAGES DISADVANTAGES
    ETHNO-CENTRIC

    (Domestic approach)

    When the business approaches the world from the view of the home country. Assumes what works in the domestic market will work in foreign markets When Tesco expanded into Thailand, Hungary and Czech Republic, it kept name and branding

    Taco Bell tried to open in Mexico they used US menu and failed

    Consumers see domestic culture as ideal and are less likely to purchase foreign goods

    Domestic firms will survive.

    Economies of scale with standardised marketing

    Can be difficult to trade with other countries if they are also ethnocentric

    They risk losing sales as their marketing mix is mot oriented towards individual markets

    POLYCENTRIC

    (International approach)

    An approach which considers each country to be unique. A unique marketing mix is developed for each market Nestle offers a very wide range of choices in terms of KitKat:

    Flavours in Japan etc.

    Walmart in UK has completely different branding – Asda

    Sales are likely to increase on a local scale as they are more likely to meet consumer needs

    More likely to gain customer loyalty and market share if marketing mix is optimal

    Very time consuming and expensive to enter any new markets

    Can create a confusing message – obstacle to a unified brand if there are many different messages

    GEOCENTRIC

    (Mixed approach)

    Approaches the whole world as a potential market

    Recognises differences and similarities and creates adaptable world strategies

    MTV expanded into Asia using channels which play music in the native language.

    Whirlpool adapted products – crispy microwave in Europe, special turbine for saris in India

    Able to gain some economies of scale from a semi-standardised approach. Sales are maximised across a range of countries with relatively low cost

    Increasing global integration means that they are competitive in many markets

    Difficult to find managers and employees with experience in a range of cultures to develop these strategies

    Price competition in global markets

    In emerging markets, disposable income is lower than in developed markets (lower prices needed) as Western pricing tactics may not work. Examples of this is the Tata Nano which is a cheap car but also McDonalds have cheaper items on their Indian menu. In China, cheaper prices can signify fake, and higher priced products signify genuine items and the richer people value premium priced products.

     

    Non-price competition in global markets

    Product – technological goods such as the iPad, need little adaptation for different markets (globally standardised). Food and drink must be adapted to local tastes. As a larger market is served, development costs can be quickly recovered. Clothing manufacturers will have to adapt sizes. There may be backward innovation – creating cheaper, simpler versions of a product to reach people on low incomes

     

    Promotion – has to link into the culture and language must be accurately translated as literal translations of advertising slogans are likely to fail (mistranslation of Pepsi slogan in Chinese market and Chevy Nova in Latin America).  Images must not be offensive to religious/cultural norms. Time and effort are needed to find most effective promotional message in a new market

     

    Place – traditional channels of distribution (place) may not work in many emerging economies due to rural areas. Poor infrastructure can mean than supply chains are unreliable. In emerging economies, luxury products are sold in opulent and prestigious shopping malls. In countries where internet use is lower, online retailing is reduced. One example is how Unilever has a Shakti programme which recruits village women to sell small packages of soap, shampoo etc. to family/friends on a commission basis.

     

    Branding and differentiation

    This has the following benefits:

    • Suggests reliability (USP)
    • Allows them to have premium pricing
    • Trusted company (adds value) in emerging economies
    • Can be status symbols (esp. in China) and more price elastic e.g. Burberry
    • In developed countries consumers will buy domestic products out of brand loyalty and patriotism

     

    However, the following problems are also present:

    • In recession consumers will switch to inferior goods
    • Bad publicity will negatively affect brand
    • Differentiation is only effective if competitors cannot copy it

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