Discuss the evolution of the markets that has resulted in the growth of global marketing. Also discuss the main contributory factors that have sped up these growth.'
Evolution of the market
Global marketing is not a revolutionary shift, it is an evolutionary process. It does apply to most companies that begin as domestic-only company. There are four stages of evolution resulted to growth of global marketing, there are:
1. Domestic Marketing/ Export Marketing/ Ethnocentrism
Ethnocentrism – marketing a standardized product anywhere in the world because of the perceived superiority of the home-country (by management). In some cases, a company may setup an export division for international operations, as product is standardized. Examples of standardized items sold through-out the world: Chocolate and soft-drink manufacturer, Cadbury-Schweppes, Coca Cola and Nestle.
2. International Marketing / Polycentrism
Polycentrism they acknowledge by management that each country is different and a customized (adapted) marketing mix is prepared for each country. Example of customized products for the global market: McDonald’s, Starbucks Coffee Company, Club-Med (holiday resorts) and Big Apple Donut.
3. Multinational Marketing /Regiocentric
The view that distinct regions of the world are similar (e.g. Asia, South America, Africa, Europe) and an integrated strategy is developed for marketing to the nations in that region. For example, cosmetic companies such as Shiseido and Max Factor market on a regional (certain countries/regions) level because consumers have similar skin tones and complexions within particular regions.
4. Global Marketing
When company becomes global marketer, it views the world as one market and creates products that will only require week to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all countries that will be affected. The goal is to sell the same thing the same way at everywhere of the world.
The main contribute factors that have sped up these growths.
Globalization is essential in the modern world that is filled with many uncertainties. Companies globalize because of many factors that include profit motives, costs minimization, diversification of the markets, search for new opportunities, saturated domestic market etc. the globalization process of a firm involves many processes that are interlinked and the firm that wants to globalize should always take these factors into considerations. The factors include the knowledge on the market, the availability of resources, the strategies to be used and the market environment.
Before a company takes going global it should plan first. Planning will help the organization not to make mistakes in its initiative. Despite the many motives of companies to globalize and the advantages involved, there are obstacles that the company must overcome for successful globalization, such as:-
Profit: many organizations going global with the motive of increasing the profits of the company and reduce costs. This objective of an organization to globalize can be realized if the company can access a large market and utilize the opportunities in the market so that it can benefit for an economies of scale and large scale production. These economies will help the company reduce its costs and increase its revenue (Perkins, 1997).
Opportunity: there exists opportunities in some countries across the globe that have an opportunity for growth of a company due to the growing economy. The growth of the economy means that consumers in the country will have the ability to gain purchasing power with time and the products of the company will be bought at an increasing capacity. A good example is the Chinese market that has realized economic growth with the possibility of the large population acquiring purchasing power with time (Muhlbacher, Leihs, & Dahringer, 2006).
Band wagon effect: this is a situation whereby the company decides to venture into the global market because its competitors in the industry or other industries are doing it. Such kind of globalization might be good for the company if it uses the opportunity well and maximizes of the potential available. However, care should always be taken not to venture into foreign market blindly (Perkins, 1997).
Global Markets: many organizations have become aware of the potential capability of gaining much revenue from the world market. Therefore, organizations attack their competitors using revenue earned from foreign markets in order to protect the local market that is more competitive.
Shifting cost priorities: the costs of manufacturing are driven by flexibility, quality of products, responsiveness of customers, required skills and the control processes. Labor costs are no longer given much consideration in the choice of locations of an organization. Therefore, companies internationalize because of low costs experienced in other international markets apart from local market.
Technology has gone global: there are many sources of new technology across the world and there is no dominance of the U.S as the only source of technology to manufacture. There are many countries that have cheap human resource and scientific infrastructure for the development of research and development of technology. Therefore, it is easier for companies to internationalize since the costs involved with technology are low (Muhlbacher, Leihs, & Dahringer, 2006, p. 10).
Complex international and political environment: the exchange rates are more flexible today than before and there are no high tariffs charged on imported products thus influencing a lot of direct foreign investments in other countries. These forces coupled with political stability have increased chances of internationalization of organizations.
Saturated home market: there are too many domestic manufacturers in a country making the domestic market saturated and too competitive for many companies. Therefore, companies globalization to compete in the foreign market that is less competitive and profitable to protect the local market operations. A good example is the Japanese departmental stores who ventured into other markets like the Chinese markets due to saturated market at the local level (Muhlbacher, Leihs, & Dahringer, 2006, p. 11).
In addition to the above, there are three decisions that the management of the organization needs to consider before going global of the firm;
v Which market: this should be the one market that is big and more attractive to the firm and that the firm will seek a balance between costs, benefits and the risks involved.
v When to globalization: this can be either a first mover or later entrants. First movers are those organizations that enter the market before any other organization of its kind does so. Later entrants on the other hand are those firms that enter a market after other firms of their kind have entered. First movers act as pioneers in the market and may end up experiencing high costs of entry.
v The scale of entry: a company can enter the market as either large or small depending on the involvement that the management is willing to commit to international market. Large scale entry means the firm will invest much of its resources and will enter rapidly and start immediate involvement in resources.
References
Perkins, S 1997, Internationalization: the people’s dimension: human resource strategies for global expansion, Kogan Page.
Muhlbacher, H, Leihs, H & Dahringer, L 2006, International marketing: a global perspective, 3rd Ed. Cengage Learning EMEA.
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