Global Marketing

Practical Insights and International Analysis

Carlyle Farrell

• Publisher: SAGE Publications Ltd
• Year: 2015
• ISBN:
  9781473910881
• Edition: 1
• Topic: Business
• Subtopic: International Marketing
• Index: Business

This newtextbook introduces students to the essential concepts, theories and perspectives of Global Marketing and these are supported by real-world case studies from North America, Europe and the emerging markets of China, India and Latin America. These emerging markets are given balanced coverage alongside developed markets and the text also includes a dedicated chapter on emerging markets multinationals.

Practical in its orientation, the text equips students with the tools needed to make strategic marketing decisions and find solutions in a global business environment.

Key features include:

• A full-colour text design with photos to help bring the content to life and enhance students? learning
• ?Spotlight on Research' and 'Expand Your Knowledge', introducing students to some of the seminal scholarly research undertaken in the field
• ?Real World Challenges' offering additional engaging practice-led examples to Case Studies in chapters and providing a scenario for students to analyse and reflect upon via questions
• A companion website (https://study.sagepub.com/farrell) offering a range of instructor and student support materials including PowerPoint slides, a testbank for instructors and quizzes for students

1 Global Marketing Explained

Learning Objectives

After reading this chapter you should be able to:

• Define the term ‘global marketing’ and explain how it differs from other terms such as ‘international marketing’, ‘multi-domestic marketing’ and ‘glocal marketing’
• Explain the EPRG framework
• Define the term ‘globalization’
• Discuss the major forms of globalization
• Discuss the main drivers of globalization
• Explain the perspective of the anti-globalization movement.

Introduction

In today’s business environment, firms may face competition from companies located in their own home market as well as from those based halfway around the world. Also, customer trends which take root in one country may quickly spread to other parts of the world, creating either new marketing opportunities or potential threats to a firm’s established products and business models. In addition, political and economic crises in one region may have important implications for consumer and business confidence around the world. One need look no further than the sovereign debt crisis in Europe that began to unfold in 2009 or the sub-prime mortgage crisis in the USA that first came to light some two years earlier, to appreciate the impact of such events on economic growth, consumer spending and prosperity. Economic and political events taking place around the world may have a profound effect on a company’s prospects for survival and growth. It should be noted that whether or not a firm elects to operate internationally, it is still vulnerable to changes taking place in the global marketplace. A focus only on its domestic market does not make a firm immune to global competitive pressures or exogenous shocks that stem from political and economic events originating outside the borders of its home country.

This text will introduce you to the field of global marketing. As you read through the following chapters, you will learn how to identify opportunities in foreign markets and develop effective strategies to capitalize on those opportunities. You will begin to appreciate the cultural differences between consumers in your home market and those in markets around the world, and you will learn how those differences impact a company’s ability to succeed abroad. You will also learn how to formulate and execute effective marketing strategies in foreign countries while mitigating the political and economic risks involved in doing business abroad.

The study of global marketing is as exciting as it is important. For many firms based in developed countries, penetrating fast-growing emerging markets such as India and China is a matter of survival. The mature markets of Western Europe and North America offer little prospect for rapid growth with their aging populations and low population growth rates. Firms operating in these established markets also face intense competitive pressures which effectively limit expansion possibilities. These competitive pressures, it should be noted, come not only from established western firms but also from emerging market multinationals headquartered in countries such as Brazil, China and India.

In some cases, firms may be forced to adopt a global marketing perspective simply based on the nature of their products. High research and development (R&D) costs involved in bringing some pharmaceutical drugs to market, for example, necessitate that they be marketed globally if those costs are to be recouped. There is considerable debate around the cost of developing new pharmaceutical drugs. Indeed, one recent study estimated the cost at over $1 billion.¹ To be financially feasible, clearly such products must be marketed globally. Also, some high technology products, such as Apple’s iPhone 6, are themselves inherently global and demand that the firm adopt a global marketing perspective. With robust demand from consumers around the world, it would make little sense for Apple to market its products only in its home market of the USA.

Box 1.1

Foreign direct investment (FDI) and strategic alliances are both institutional arrangements used by firms to penetrate foreign markets. When a firm engages in FDI, it is making a long-term capital investment in a new or existing foreign business. For example, in June 2012 the Belgian company Anheuser-Busch InBev SA agreed to purchase the 50 percent of Mexican brewer Grupo Modelo it did not already own for $20 billion. The deal gave Anheuser-Busch InBev a stronger presence in the fast-growing Mexican beer market. Strategic alliances, on the other hand, involve two or more companies collaborating over the short to medium term in order to achieve some mutually beneficial corporate objective. In February 2011, for example, US-based Microsoft and the Finnish handset maker, Nokia, announced a broad strategic alliance between their firms. As part of the deal, Microsoft developed applications to run on Nokia’s handsets and Nokia adopted Windows Phone as its smartphone strategy. Of course, a strategic alliance may be the first step towards FDI. For example, in August 2013 Microsoft opted to deepen its commitment to the handset market by purchasing Nokia’s entire hardware business for over $7 billion.

Global Marketing Defined

One may define global marketing as the systematic planning, coordination and implementation of the firm’s marketing activities across national borders. From this definition, we note that global marketing involves the implementation of marketing activities across national borders, i.e. outside the firm’s home country. What this means is that the firm is no longer dealing with the familiar environment of its home country but is now confronted with environments with significant differences in terms of culture and level of economic development, and perhaps major differences in political structures and approaches to government regulation. In attempting to implement marketing activities in these new host countries, the firm may also face unfamiliar competitors and marketing channels as well as consumers with decidedly different needs and purchasing behaviors. Business practices may also be found to differ significantly from what obtains in the firm’s home country. Understanding regulations governing foreign direct investment and dealing with strategic alliances with foreign partners are likely to prove taxing for the firm new to global marketing. These inter-country differences clearly make global marketing considerably more challenging for firms that have historically focussed on their domestic markets.

Global marketers are generally concerned with several issues that are of little relevance to the purely domestic firm. For example, the global marketing firm has to consider issues such as:

• the selection of foreign countries that offer the best prospects for the products marketed by the firm
• the choice of strategies and approaches, e.g. foreign direct investment, exporting or a more loosely structured strategic alliance, which the firm may employ to penetrate international markets
• the need for changes to the firm’s products so that they fit more closely with the needs of consumers in the foreign countries selected
• the need for the firm’s advertising strategies to be adjusted to better communicate with consumers who are culturally dissimilar to those in its home market
• the need to contract and work with foreign intermediaries in order to get the firm’s products into the hands of customers in the various host countries
• the need to adjust the firm’s pricing strategies in response to differences in the structure of marketing channels in the foreign countries and differences in the purchasing behavior of consumers in those markets
• the need to identify countries in which to locate the firm’s value-added activities, e.g. research and development
• the need to evaluate and mitigate the political risks inherent in doing business in foreign countries
• the need to consider opportunities for the firm to coordinate its marketing activities across the various countries in which it plans to conduct business.

Domestic marketing is not concerned with the issues identified above. In essence, the ‘liability of foreignness’² a firm faces when operating outside its home market adds an additional layer of complexity and risk to its marketing decisions (Zaheer, 1995).

The definition of global marketing presented above implies that the firm is conducting marketing activities in a number of countries outside of its home market. The definition is, however, deliberately silent on the precise number of countries a firm must operate in to be considered a global marketer. One should note that a company does not need to market its products in every country in the world to be considered a global marketing company. Given that there are roughly 200 countries around the world, even major multinationals such as McDonald’s, Nike and Coca-Cola would not meet such a strict criterion. Research published in the Journal of International Business Studies has shown that the vast majority of large firms generate most of their sales in their home region of the Triad (the USA, Japan and Western Europe), i.e. they do not have the breadth of foreign market coverage to be considered truly ‘global’ (Rugman and Verbeke, 2004).³ Of course, despite the above finding, firms do need to market their products in a number of foreign countries simultaneously in order to satisfy the definition of global marketing. It is also necessary for the firm to engage in systematic planning and coordination of its activities in these foreign markets. This systematic planning and coordination may be manifested in, for example, the sale of a standardized product in all international markets, the use of a consistent brand name and advertising message across all foreign markets, or a coherent pricing strategy that must be followed by all of the firm’s subsidiary managers, regardless of geographic location. Systematic planning and coordination may also be demonstrated by the firm adopting an integrated approach to foreign market entry and the utilization of resources, such as manufacturing facilities and sales personnel, in ways which maximize efficiency and overall corporate profitability.

The need for systematic planning and coordination of marketing activities across country markets is central to the concept of global marketing but is not at all relevant to purely domestic marketing. There are, however, similarities between domestic and global marketing. Both share a focus on the satisfaction of consumer needs and the exchange of something of value. These basic principles which are, of course, central to the discipline of marketing apply equally whether marketing activities take place in a domestic or global context. In the case of global marketing, transactions take place between entities in different countries, making it significantly more difficult to apply these basic marketing principles. The cross-border nature of global marketing transactions adds an additional la...