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| Developing a Strategic Marketing Plan |
Standardization
or Adaptation for International Markets?
At one extreme are companies that use a
standardized marketing mix worldwide. Proponents highlight several reasons for
global standardization.
HOMOGENEOUS NEEDS AND PREFERENCES.
The presence of homogeneous needs among customers permits the building of global brands such as Levi jeans and Nike sports shoes. In these cases, the 'home culture' has been successfully exported to mass markets abroad, where consumers share a similar attraction to the cult image that Levi portrays and the 'just do it' attitude that Nike extols. The success of Ilaagcn-Dazs is another case in point. The product has a long history in North America. Under a new, aggressive management team, it was successfully launched in Japan and Europe. Throughout these markets, Haagen-Dazs uses a standard marketing approach: high quality, high price, selective distribution outlets, and sexual imagery. Similar examples can be found for niche products, especially luxury goods: Carder jewelry, Roles watches, Royal Doulton fine china, Mikimoto pearls, and Louis Vuitton luggage are all marketed in the same way to consumers showing similar preferences for the exclusive image that these brands portray across the globe.
CONSUMER MOBILITY-
A larger
number of people are traveling more widely, thus allowing more products to be
marketed to them on a global basis. Kodak film, for example, is sold worldwide
in its distinctive yellow box and the emphasis on wide availability is
similar across markets. Travelers can expect to find Novotel hotels across
Europe to offer similar standards of service and food.
ECONOMIES OF SCALE/EXPERIENCE.
In many industries, cost advantages are
essential for competitive success when operating on a global scale. Economies
are derived from discounts from bulk purchases and/or sharing R & D,
marketing, production, and managerial resources among different markets. A standardized
marketing program reduces costs even further, letting companies offer
consumers higher-quality and more reliable products at lower prices. Gillette
Sensor's worldwide launch is a good case of how the firm derived scale
economies from a standardized global approach.
The Sensor
took ten years to develop. It represented a breakthrough in wet-shave
technology. It was essentially a niche product. To recuperate funds already
spent on the product's development and launch, it needed high unit sales, so
had to be marketed globally. Gillette identified three cultural universals
(attributes that transcend national cultures) associated with wet shaving:
comfort, the closeness of shave, and safety.
The
company exploited these; in a common communications campaign — 'the best a man
can get. The worldwide launch was a phenomenal success. So successful was the
Sensor campaign that its effects spilled over into a new, complementary product
- the Shaving Gel - which enjoyed raised awareness and sales!
TECHNOLOGICAL FEASIBILITY.
In product
sectors where the technological processes are homogeneous, standardization
becomes a prerequisite for market success. For simple technologies like the
production of moldings, toys, paint, hand tools, and so forth, it makes sense
to standardize the product as much as possible to keep costs down. This is also
the thinking behind Coca-Cola's decision that Coke should taste about the same
around the world and Ford's production of a 'world car' that suits the needs of
most consumers in most countries. At the other extreme is an adapted marketing
mix. In this case, the producer adjusts the marketing mix elements to each
target, bearing more costs but hoping for a larger market share and return.
Nestle, for example, varies its product line and its advertising in different
countries. The rationale for marketing mix adaptation is the reverse of the
reasons given for standardization. Most important are the disparities among
different country markets.
DIVERSITY.
Proponents
of adaptation argue that consumers in different countries vary greatly in their
geographic, demographic, economic, and cultural characteristics. Differences in
the following factors suggest the need to adapt the firm's product offering for
international markets: product preferences; uses and conditions of product use;
customer needs, perceptions, and attitudes; consumers' shopping patterns; income
levels and spending power; the country's laws and regulations; user/customer skills
or education; competitive conditions; advertising laws; and media availability.
In the single European market, many argue that the 'Euroconsumer' is a myth.
Marketers are advised to identify carefully differences that do exist across
national markets and tailor products and services to suit local tastes and
preferences. The dictum 'different strokes for different folks' is still very
much the way of business in international marketing.
The decision about which aspects of the marketing mix to standardize and which to adapt should be taken on the basis of target market conditions. Firms are often unwilling to modify their product offering for foreign markets because of 'cultural arrogance'. German and American machine-tool manufacturers, for example, saw their world market shares dive over the 1980s due, in part, to their reluctance to adapt products and marketing approaches in the face of changing customer needs in their home and foreign markets. 'What's good for Germany is good enough for the world market' was the view typifying a large proportion of German machine tool producers which formed the focus of a study into international marketing strategies in the UK market. This cultural arrogance has been termed the 'self-reference criterion and has been a significant factor in accounting for poor export performance.17 The question of whether to adopt or standardize the marketing mix has been much debated in recent years. However, global standardization is not an all-or-nothing proposition, but rather a matter of degree. Companies should look for more standardization to help keep down costs and prices and to build greater global brand power. But they must not replace long-run marketing thinking with short-run financial thinking. Although standardization saves money, marketers must make certain that they offer what consumers in each country want.18 Many possibilities exist between the extremes of standardization and complete adaptation. For example, Coca-Cola sells virtually the same Coke beverage worldwide, and it pulls advertisements for specific markets from a common pool of ads designed to have cross-cultural appeal. However, the company sells a variety of beverages created specifically for the taste buds of local markets, with prices and distribution channels varying widely from market to market. Let us now examine marketing mix decisions with regard to global marketing planning.
Product
Five
strategies allow for adapting products and promotion to a foreign market. We first discuss the three product strategies and then turn to
the two promotion strategies. Straight product extension means marketing a
product in a foreign market without any change. The straight extension has been
successful in some cases. Coca-Cola, Kellogg cereals, Heineken beer, and Black
& Decker tools are all sold successfully in about the same form around the
world. The straight extension is tempting because it involves no additional
product-development costs, manufacturing changes, or new promotion. But it can
be costly in the long run if products fail to satisfy foreign consumers.
Product adaptation involves changing the product to meet local conditions or
wants. For example, Philips began to make a profit in Japan only after it
reduced the size of its coffee makers to fit into smaller Japanese kitchens and
its shavers to fit smaller Japanese hands. The Japanese construction machinery
maker, Komatsu, had to alter the design of the door handles of earthmovers
sold in Finland: drivers wearing thick gloves in winter found it impossible to
grasp the door handles, which were too small (obviously designed to fit the
fingers of the average Japanese, but not the double-el added ones of larger
European users!). Campbell serves up soups that match the unique tastes of
consumers in different countries. For example, it sells duck-gizzard soup in
the Guangdong Province of China; in Poland, it features flaky, peppery tripe
soup. And IBM adapts its worldwide product line to meet local needs. For
example, IBM must make dozens of different keyboards - 20 for Europe alone - to
match different languages. Marie Claire, the glossy women's magazine with a
social conscience, launched its Russian edition on 1 March 1997. Marie Claire
now has editions in 27 countries from South Korea to Turkey, providing a turnover
for the group in 1995, the last available figure, of Ftr8S4 million
(US&156m). The key to Marie Claire's success has been its ability to adapt
its editorial content to the country in which it appears. In the ease of the
Russian market, it acknowledges that it is a country where people still read a
lot, so it is important to have long articles. As well as local stories, the
magazine sticks to the usual Marie Claire formula with articles taken from
other editions. The fashion pages, however, use local models and clothes, and
the cover girl in the first Russian edition, for example, is Russia's top
model.2 " Product invention consists of creating something new for the
foreign market. This strategy can take two forms, it might mean Intro due
ing earlier product forms that happen to be well adapted to the needs of a
given country. For example, the National Gash Register Company introduced its
crank-operated cash register at half the price of a modern cash register and
sold large numbers in the Orient, Latin America, and Spain, Or a company might
create a new product 10 meet a need in another country. For example, an
enormous need exists for low-cost, high-protein foods in less developed
countries. Companies such as Quaker Oats, Swift, and Monsanto are researching
the nutrition needs of these countries, creating new foods, and developing
advertising campaigns to gain product trials and acceptance. Product invention
can be costly, but the pay-offs are worthwhile.
Promotion
Companies can either adopt the same
promotion strategy in different countries or change it for «each local market.
Consider advertising messages. Some global companies use a standardized
advertising theme around the world. Pirelli, the tire maker, used a visually
stunning commercial featuring US Olympic sprint star Carl Lewis, running across
the Hudson River in New York, scaling the Statue of Liberty, and leaping off it
to land on the top of the Chrysler Building. There is no dialogue and no
voice-over, but the message - power with control - is universally clear. The
visual message and die choice of an easily identifiable city (New York) meant
that the message could transcend national and cultural boundaries and just one
ad could be screened around the world. Sometimes the copy may be varied in
minor ways to adjust for language differences. In Japan, for instance, where
consumers have trouble pronouncing 'snap, crackle, pop', in Kellogg's
advertisement, the little Rice Krispies creatures say 'patchy, pitchy, patchy.
Colors are also changed sometimes to avoid taboos in other countries. Black is
an unlucky color for the Chinese, white is a mourning color in Japan, and
green is associated with jungle sickness in Malaysia. Even names must be
changed. In Sweden, Ilene Curtis changed the name of its 'Every Night
Shampoo' to 'Every Day' because Swedish consumers usually wash their hair in
the morning. Kellogg's also had to rename 'Bran Buds" cereal in Sweden,
where the name roughly translates as 'burned fanner'. Other companies follow a
strategy of communication adaptation, fully adapting their advertising messages
to local markets. Kellogg's ads in the United States promote the taste and
nutrition of Kellogg's cereals versus competitors' brands. In France, where
consumers drink little milk and eat little for breakfast, Kellogg's ads must
convince consumers that cereals are a tasty and healthy breakfast. Media also
need to be adapted internationally because media availability varies from
country to country. TV advertising time is very limited in Europe, for
instance, ranging from four hours a day in France to none in Scandinavian
countries, where print advertising is preferred to TV ads. Advertisers must buy
time months in advance, and they have little control over air times. The types
of print media also vary in effectiveness. For example, magazines are a popular
medium in Italy and a minor one in Austria. Newspapers are national in the
United Kingdom but are only local in Spain. Companies adopt a dual adaptation
strategy when both the product and communication messages have to be modified
to meet the needs and expectations of target customers in different country
markets. For example, the French food multinational, Dan one, not only had to
bring its products closer to consumer tastes, but also adapted advertising
messages to suit the Japanese market, the company recognized that Japanese
consumers preferred yogurt drinks with less sugar, a milder taste, and less
acid in the fruit flavors; they also preferred smaller packages than their
American and European counterparts. Moreover, advertising messages emphasizing
these drinks as healthy options do not work as effectively as in some western
countries because Japanese consumers do not distinguish between western Health
food and junk food.
Price
Companies also face many problems in
setting their international prices. Regardless of how companies go about
pricing their products, their foreign prices will probably be higher than their
domestic prices. A Gucci handbag may sell for,880 in Italy and £160 in
Singapore. Why? Gucci faces a price escalation problem. It must add the cost of
transportation, tariffs, importer margin, wholesaler margin, and retailer margin
to its factory price. Depending on these added costs, the product may have to
sell for two to five times as much in another country to make the same profit.
For example, a pair of Levi's jeans that sells for S30 in the United States
typically fetches 863 in Tokyo and S88 in Paris. Another problem involves
setting a price for goods that a company ships to its foreign subsidiaries. If
the company charges a foreign subsidiary too much, it may end up paying higher
tariff duties even while paying lower income taxes in that country. If the
company charges its subsidiary too little, it can be charged with dumping -
that is, pricing exports at levels less than their costs or less than the
prices charged in its home market. Since the 1980s the EU has aggressively
increased the use of anti-dumping measures against imports ranging from
electronics components to raw materials. For example, the FU imposed
anti-dumping duties of as much as 96.8 percent on imports of broadcasting
cameras made by some Japanese companies. The duties were imposed after an
investigation by the European Commission, following complaints by BTS, part of
Philips, and Thomson Broadcast of France (Europe's only makers of studio video
cameras), found that Japanese exporters had, through unfair pricing, increased
their share of the EU studio market from 52 percent in 1989 to 70 percent in
1992. European producers' share had fallen from 48 percent to 30 percent over
this period.21 Last but not least, many global companies face a grey market.
For example, Minolta sold its cameras to Hong Kong distributors for less than
it charged German distributors because of lower transportation costs and
tariffs. Minolta cameras ended up selling at retail for £80 in Hong Kong and
£170 in Germany. Some Hong Kong wholesalers noticed this price difference and shipped
Minolta cameras to German dealers for less than the dealers were paying their
German distributors. The German distributor couldn't sell its stock and
complained to Minolta. Thus a company often finds some enterprising
distributors buying more than they can sell in their own country, then shipping
goods to another country to take advantage of price differences. International
companies try to prevent grey markets by raising their prices to lower-cost
distributors, dropping those that cheat, or altering the product for different
countries.
Distribution Channels The international
company must be aware of 'a whole-channel view of the problem of distributing
products to final consumers. The first link, the seller's headquarters
organization, supervises the channels and is part of the channel itself. The
second link, channels between nations, moves the products to the borders of the
foreign nations. The third link, channels within nations, move the products
from their foreign entry point to the final consumers. Some manufacturers may
think their job is done once the product leaves their hands, but they would do
well to pay more attention to its handling within foreign countries. Another difference
lies in the size and character of retail units abroad. Whereas large-scale
retail chains dominate the British and US markets, most retailing in the rest
of Europe and other countries is done by many small independent retailers. The
variety of anecdotes that we have offered, in relation to the penetration of
Japanese markets by western firms, suggests that getting to grips with a
country's distribution structure is often crucial to achieving effective market
access. The firm must therefore invest in acquiring knowledge about each
foreign market's channel features and decide on how best to break into complex
or entrenched distribution systems
Organizing an Operational Team
and Implementing a Marketing Strategy
The key to
success in any marketing strategy is the firm's ability to implement the chosen
strategy. Because of the firm's distance from its foreign markets,
international marketing strategy implementation is particularly difficult. The
firm must have an organizational structure that fits with the international
environment. It has to be flexible to implement different strategies for the
various markets it operates in. Companies manage their international marketing
activities in at least three different ways. Most companies first organize an
export department, then create an international division and finally become a
global organization.
Export
Department
A firm normally gets into international
marketing by simply shipping out its goods. If its international sales expand,
the company organizes an export department with a sales manager and a few
assistants. As safes increase, the export department can then expand to include
various marketing services, so that it can actively go after business. If the
firm moves into joint ventures or direct investment, the export department will
no longer be adequate.
International
Division
Many
companies get involved in several international markets and ventures. A company
may export to one country, license to another, have a joint-ownership venture
in a third, and own a subsidiary in a fourth. Sooner or later it will create an
international division or subsidiary to handle all its international
activities. International divisions are organized in a variety of ways. The
international division's corporate staff consists of marketing, manufacturing,
research, finance, planning, and personnel specialists. They plan for and
provide services to various operating units. Operating units may be organized
in one of three ways. They may be geographical organizations, with country managers
who are responsible for salespeople, sales branches, distributors, and licensees
in their respective countries. Or the operating units may be 'world product
groups, each responsible for worldwide sales of different product groups.
Finally, operating units may be international subsidiaries, each responsible
for its own sales and profits
Global
Organization
Several firms have passed beyond the
international division stage and become truly global organizations. They stop
thinking of themselves as national marketers that sell abroad and start
thinking of themselves as global marketers. The top corporate management and
staff plan worldwide manufacturing facilities, marketing policies, financial
flows, and logistical systems. The global operating units report directly to the
chief executive or executive committee of the organization, not to the head of
an international division. Executives are trained in worldwide operations, not
just domestic or international. The company recruits management from many countries buys components and supplies where they cost the least and invests where the
expected returns are greatest. Moving into the twenty-first century, major
companies must become more global if they hope to compete. As foreign
companies successfully invade the domestic market, domestic companies must move
more aggressively into foreign markets. They will have to change from companies
that treat their foreign operations as secondary concerns, to companies that
view the entire world as a single borderless market.22 More intensely
competitive international markets suggest that global firms must place a
premium on organizational flexibility. GFT, the Italian firm, is the world's
biggest manufacturer of designer clothes, covering expensive 'labels' such as Emanuel
Ungaro, Giorgio Armani, Valentino, and Ballmer. The company's international
expansion required extreme flexibility in managing organizational change. The
tension the firm faced mirrors the dilemma confronting most global firms today:
For GFT, globalization is not about standardization; it is about a quantum
increase in complexity. The more the company has penetrated global markets, the
more sustaining its growth depends on responding to myriad local differences in
its key markets around the world.23 Organising for effective international
marketing is a considerable challenge that besets multinational firms of any
size. The tension between centralization and decentralization is a very tight
one. On the one hand, managers must agree upon the key strategic decisions and
activities to centralize. On the other, they must give as much autonomy as
possible to local staff who are close to market conditions. There is no one
correct combination of centralized-decentralized organizations. It is important
to heed the maxim, 'Think global, act locally. The organ national structure
varies according to the firm's circumstances and over time. The firm must
ensure that its structure fits with its international environment, while at the
same time having the internal flexibility required to implement its strategic
goal.J* Percy Barnevik, chief executive officer of the Swiss-Swedish group Asea
Brown Boveri, best sums up the real complexity of international business
organizations. He describes the need to have a structure that leverages the
firm's core technologies, gains scale economies, and still maintains local
market position and responsiveness: global organization Affirms of international
organization whereby top corporate management and staff plan worldwide
manufacturing or operational facilities, marketing policies, financial flatus, and logistical systems. The global operating unit reports directly to the
chief executive, not to an international divisional head. ABB is an
organization with three internal contradictions. We want to be global and
local, big and small, radically decentralized with centralized reporting and
control. If we can resolve those contradictious we create a real organizational
advantage.
Evaluation
and Control of Operations
Any number of problems can beset the
marketing plan, from unexpected competition to the outbreak of war. The firm must
be sensitive to such occurrences. Its flexibility to respond to environmental
shocks determines its long-term success. As such, (the firm must evaluate the
outcome of its marketing plans, analyze progress and variances from target
goals and objectives, and take control actions where needed. It is important to
note that the model of planning decisions taken by international marketing
managers, as discussed above, is an iterative process. The activities must be
undertaken continually to ensure environmental sensitivity and effective
strategy implementation
Summary
Companies today can no longer afford to
pay attention only to their domestic market, no matter how large it is. Many
industries are global industries, and those firms that operate globally achieve
lower costs and higher brand awareness. At the same time, global -marketing is
risky because of variable exchange rates, unstable governments, protectionist
tariffs and trade barriers, and several other factors. Given the potential
gains and risks of international marketing, companies need to adopt a
systematic approach to making international marketing decisions. We examined
eight components of international marketing planning. First, a company must
analyze the international market opportunity open to it. To do this managers
must understand the global marketing environment, especially the international
trade system. The company must assess each foreign market's economic, political-legal
and cultural characteristics. The company decides whether to go abroad based on
a consideration of the potential risks and benefits. Second, it has to decide
which country markets it wants to enter. The decision calls for determining the
volume of foreign sales - assuming there is high product potential - and how
many countries to market in, having weighed the probable rate of return on
investment against the level of risk. Third, the company must decide how to
enter each chosen market - whether through exporting, joint venturing, or direct
investment. Many companies start as exporters, move to joint ventures, and
finally make a direct investment in foreign markets. Increasingly, however,
firms - domestic or international — use joint ventures and even direct
investments to enter a new country's market for the first time. Fourth, the firm
must allocate necessary resources to secure a foothold initially and then build a strong position in the market. Fifth, the firm must develop its
strategic marketing plan, which must take stock of the level of adaptation or
standardization appropriate for all elements of the marketing mix - product,
promotion, price, and distribution channels. Next, the company has to organize
its operational team to achieve effective strategy implementation. The firm may
adopt different organizational structures for managing international
operations. Most firms start with an export department and graduate to an
international division. A few become global organizations, with worldwide
marketing planned and managed by the top officers of the company, who view the
entire world as a single borderless market. Finally, managers should
continually evaluate their international marketing programs. Plans should be
monitored and control procedures applied, when needed, to secure
desired. performance.
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