Definition of Global Marketing
Marketing is a set of principles, activities, and institutions used by companies to produce goods or offer services to end users. Unlike domestic marketing limited to its native country, global marketing is directed to as many foreign countries as possible. In as much as new markets offer additional income and development, sometimes going global is motivated by the necessity to survival. In the case when there are many local competitors, going global can let a company stay afloat. Due to their large investments global players are able to offer good price without compromising the value. It gives them priorities before domestic producers. A principal difference from domestic marketing is a set of actions a company has to take. Like ‘regular’ markets, global players use a 4Ps strategy, which includes product, price, promotion, and place. However, they need to adapt 4Ps to the needs and requirements of the global market (fig. 1). Even though a global player wants to sell globally, in fact, it deals with local markets but outside its own country. Therefore, products and prices have to be adapted or standardized according to the tastes and conditions of each local market. For example, McDonalds is known for its Big Mac burgers, but to attract new customers in Asian countries, the company had to invent local variants such as McAloo Tikka potato burger in India. For global corporations, the adaptation and standardization can be applied to all 4Ps. As for the vending place, McDonalds, for example, introduced dining cars to the local railway system in Switzerland and delivery service in India.
Fig. 1. Domestic Marketing Strategy and Global Marketing Strategy.
There are different global marketing strategies depending on the existing situation and conditions on the global market (fig. 2). If there is already a market, a global player has to penetrate it with existing products or develop a new product. If there is no market, then a market development strategy needs to be made up for existing products, or a diversification strategy has to be developed for a new product.
Fig. 2. Marketing strategies for existing and new markets.
Segmentation and Targeting as Advertising Strategies
Defining the target market in great detail is extremely important to advertising strategy because it gives producers an opportunity to find the biggest number of customers and satisfy their needs to the fullest. Concerning global markets, it is especially true because using segmentation and targeting even the most exclusive and narrowly oriented products and services can find their end users. For example, a highly specialized scientific Swiss documentary would gather a handful of viewers in its own country but taken to the global market it can find a large audience and bring a hefty income. Before entering a target market, a lot of information should be analyzed. On the first glance, the size of the country seems an important marker, but not always countries of large territories are favorable to new products. For example, China’s population is billion people, but market access is easier in less populated Mexico than in China (fig. 3).
Fig. 3. Market Selection Framework.
Simultaneously with studying market conditions, new global players need to understand their consumers to target the market better. They should take into account a large number of factors to understand what product and how to sell. These factors include demographic, age, and gender segmentations that help to create a kind of psychological portrait of a consumer. Furthermore, answering the Who, What, When, Where, Why, and How of the target markets, global corporations are able to create products that will be sold successfully. They need to understand who buys the products and who does not; what need their product serves or what problems it solves; what price is paid for similar products at the moment; where and when the product is bought. As a result, it leads to different global marketing strategies that can be standardized, concentrated, and differentiated. It is a known fact that the same product demands different treatment in terms of advertising and promotion in different countries. Even film promotion campaigns use different photographs and slogans in different countries. Figure 4 shows how Pioneer Hi-Bred International applied different visual ads for the American audience and for the farmers of Quebec.
Fig. 4. The 2008 ads from Pioneer Hi-Bred.
Culture as an Influence on Buying Behavior
Different countries have different ways of living, food preferences, religious rituals, medical practices, etc. Based on these aspects, global marketers develop their products and services because beliefs, values, and attitudes affect the way people react to and accept new brands. For example, young Japanese favor American brands because they believe that the West offers a new fashion direction. In contrast, among Russians, there are growing nationalistic moods that make them favor domestic brands more than the Western ones. Cultures are formed under the influence of different factors such as religion, aesthetics, dietary preferences, language, and others. In terms of global marketing, it means that hamburgers cannot be sold in India where cows are sacred, and white can hardly be widely used as a brand color in Asia as it denotes death.
Researchers go further in their descriptions of cultural differences and group them so the information is easier to use. Geert Hofstede argues that there are five major cultural differences that should be taken into account for global marketing (fig. 5). They show how people of a certain country behave in a society and value time. This information allows global marketers to avoid obvious mistakes such as sending a young girl to hold a conference in Tokyo, ranking first in the masculinity-oriented culture.
Fig. 5. Hofstede’s Cultural Dimension Rankings: Selected Countries.
However, various products have different needs for adaptation (fig. 6). For example, industrial goods need very little adaptation to a target market. At the same time, foods are very fastidious in terms of adaptability. Until an economic boom in the Great Britain in the late 1990s involving a large number of new restaurants, Britain was known as a country of tea-drinkers, and it was difficult to reap large incomes for coffee companies. However, Americans living in the UK made Seattle Coffee cafés instantly popular and now the Brits drink as much coffee as tea.
Fig. 6. Environmental Sensitivity.
Centralize Strategy, Decentralize execution
In terms of global marketing, the expression “Centralize strategy, decentralize execution” means that local subsidiaries should be in full charge of work in target countries. Whereas the headquarters provide the strategy and the planning that are obligatory for all subsidiaries and branches, execution is carried out at the local level. A company that intends to go global usually sets up an International Department that will take care of marketing, manufacturing, research, planning, personnel, and finance for international markets (fig. 7). It looks like a matrix and is usually rather complex in structure. However, some companies decide to decentralize their structures, and it results in flatter and simpler structures. Nowadays, the pace is fast. Companies feel that if their structures are too cumbersome, the coordination of all activities demands much time and effort. Therefore, subsidiaries are given more freedom. The staff hired from local population knows cultural peculiarities better and can contribute to the general well-being of the company.
Fig. 7. Functional Corporate Structure, Domestic Corporate Staff Orientation, International Division, Area Divisions.
At the same time, decentralized management is not trouble-free. During the intensive growth of a company, it immensely helps because employees do not waste much time on coordination of their activities with the central office. However, when the company grows bigger, it can become more difficult to eliminate arising problems. For example, ABB, a successful Swiss engineering company, had a decentralized structure, but after it had bought a subsidiary, an American company Combustion Engineering, it became more difficult to communicate with remote departments; thus, conflicts arose. Figure 8 shows conflicting patterns in global trade companies: if there are discrepancies between expectations of shareholders and management; if top management does not do what was intended and announced; if society expects something else from the company.
Fig. 8. Source of Conflict in Global CSR.
Types of Export
Global marketers can be involved into different types of export. The first one is direct exporting, where a producer sells directly to consumers. In this case, the producer does not need to pay to intermediaries and is in full control of its company’s development. However, it takes upon itself all the expenditures and drawbacks of work in the non-home country. Figure 9 shows the potential problems that may arise in direct exporting. Indirect exporting involves a subsidiary that potentially has a better knowledge of the local market, legal procedure, and logistics. Subsidiaries require an additional payment for their services and sales support.
Fig. 9. Potential Export Problems.
Export types depend on how much is the cost and the degree of involvement (fig. 10). Acquisition and joint ventures are highest in terms of cost and degree of involvement. Joint ventures offer an insider’s experience when a foreign company shares responsibility and risks with a local company. It is a great way to learn about the culture and the market in the shortest term. Licensing is one of the most attractive forms of export because the producer needs only to sign the papers and give its permission to a local company to use its logo, name, product formula or trade secret in exchange for revenues. For example, Disney Inc. has been using licensing to be present in almost all countries of the world. Toys, clothing and other products are produced throughout the world, and the company reaps royalties for its licensing.
Fig. 10. Investment Cost of Market Entry Strategies.