Prospects and challenges of global marketing

Global Marketing: A Definition: Global marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a companys goods and services to consumers or users in more than one nation for a profit. Marketing concepts, processes, and principles are universally applicable all over the world The Difference More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors, Consumer traditions, or any uncontrollable elements. Reasons for Internationalisation Growth Access to new markets Access to resources

Survival Against competitors with lower costs (due to increased access to resources) Leveraging Key Success Factors Abroad Follow Customers Abroad Pursuing Diversification Taking Advantage of Different Growth Rates of Economies Exploiting Product Life Cycle Differences Internationalising for Defensive Reasons

Need for global marketing 1. An increasingly larger share of corporate profits are generated by international operations

2. Till last decade competition for the company comes from the local market only, now it is not so. It comes from all the country Global Business Trends 1. The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA, the European Union, SAARC 2. General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe 3. 4. 5. 6. 7. Impact of the Internet and other global media on the dissolution of national borders, and Managing global environmental resources Increasing globalization of markets Firms face competition on all fronts Changing ownership structure (TATA CORUS) ,

8. Saturation of Demand in certain big market eg. USA, UK & emergence of it in certain market (China, India) 9. Technology & Excess surplus

10. Global peace & Dependence (No world war- 3) The Importance of International Marketing For US-based companies, 75% of sales potential is outside the US. About 90% of Coca-Colas operating income and 73 % of total revenue is generated outside the US. For Japanese companies, 85% of potential is outside Japan. For German and EU companies, 94% of potential is outside Germany.

The effects of uncontrollable and controllable both in the domestic and foreign environments - International marketers deals with at least two uncontrollable Elements 1. 2. Domestic International

- As the number of international market increases: uncontrollable layer increases - Controllable elements - Domestic Uncontrollable elements Technology : 4 ps (MARKETING MIX) : Political & Legal, Competition, Economy, Culture &

- Foreign Uncontrollable elements : Political & Legal, Competition, Economy, Culture, Technology, structure of distribution, Geography & infrastructure Environmental Adaptation Needed Differences are in the uncontrollable environment of international marketing

Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and place) Developing a Global Awareness To be globally aware is to have 1. 2. Tolerant of Cultural Differences, and Knowledgeable of:

(a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends

Stages of International Marketing Involvement In general, firms go through five different phases in going international: 1. The first phase includes those domestic firms which have no foreign business activity except those sales made to foreign customers who come directly to the firm. 2. The second phase includes domestic firms which have temporary surpluses which are sold abroad. Therefore, sales are made on an availability basis with little or no intention for continuing market representation. 3. The third phase includes the domestic firms that have permanent productive capacity which is utilized to produce goods which are sold on a continuing basis in foreign markets. 4. The fourth phase includes the international company that produces a product for the world market. Conditions that have led to the development of global markets According to the Professor Levitt and others who suggest that there is a global market for goods, this phenomenon has resulted from new communications technology, travel and other factors which have led to the markets of the world being more aware of different products and processes. As a result of this awareness, there are segments in each market who have had similar experiences and thus have common needs. These common needs are described as a demand for high quality, reasonably priced, standardized products. There is a strong feeling that within each countrys market there is a growing segment that has been exposed to ideas from around the world and thus have had their tastes and perceived needs affected. Three factors necessary to achieve global awareness. 1) Objectivity; objective in assessing opportunities, evaluating potential, and responding to problems. Too often mistakes are made because companies are swept away with generalities and make investments only later to find out that their commitment or abilities were not sufficient to succeed,

2) Tolerance toward cultural differences: tolerance is understanding cultural differences and accepting and working with others whose behavior may be different from yours, 3) Knowledgeable; knowledgeable about cultures, history, world market potentials, and global economy and social trends is critical for a person to be culturally aware. To be successfully in international business and globally aware, a person needs to keep abreast of the enormous changes occurring throughout the world. Driving Forces in International Market Regional economic agreement Market need & Wants Technology Transportation & Communication Product development Cost Product quality World economic trend Restraining Forces Management myopia Organizational culture National controls International World Order Fight against International terrorism

EXAMPLE:

Problems and challenges while globalizing McDonalds:

Challenges for McDonalds in India Vegetarianism: The major issue was beef. Cow being sacred and worshipped, beef could not be served. Muslims did not eat pork. The challenge was to change the form of the worldwide popular Hamburger to make an entry into India. With 25-30% of the population being lacto vegetarian and a large majority eating meat, an alternative to beef and pork was necessary. Competition from Local Food Retailers The competition from the local food retailers was intense. The food retailers had been doing business for years. Their familiarity with the market and the understanding of the local taste gave them a competitive edge. There were numerous eating joints which offered snacks and meals with affordable price tags. Target Marketing: Value propositions had to be directed to the right target market to establish a new product. An interesting question was who would eat at McDonalds? In order to develop the marketing strategy, it was important for any company to understand the consumer market. The more one knew and understood about consumers, the more effectively one could communicate and market to them. Four aspects of consumer behaviour which needed to be examined to understand a consumer market were the ability of the people to buy, consumer needs, buying motives and the buying processvi. The initial attempt of McDonalds was to induce trials and get the customers into the restaurants. Word of mouth and advertising was expected to reveal the experience of eating at McDonalds. Pricing Food pricing was a sensitive issue in India. An ideal strategy was to focus on customers ability to pay and tap the rich and upper middleclass population in India. Although McDonalds strategy was to increase sales volumes by making products available at affordable price, its products were perceived to be expensive. The company outlets in Delhi and Mumbai initially were opened due to the increased affordability of people with western exposure and brand recognition factors in metros. Additionally, people in the metros were open to experiment with variety of foods. Absorption of newer cultures was faster in the Metros than other areas. The mass markets in India were price sensitive.The positive factors were the growth in consumer markets with rapid growth in disposable incomes, development of modern urban lifestyles and the demand for value.

Eating Habits Eating out was a special occasion to many Indian families. Meals had been an essential medium for social sharing and relationshipxii.Whenever families decided to eat out, the choices available were abundant. The trend in metropolitan cities was however changing. With more nuclear families and dual income households, the demand for fast and readymade food was growing. The needs of the growing working population stimulated the need for new products and services. Indian culture was relatively new to the use of technology and streamlined process in food service. McDonalds needed to find ways and methods to motivate the customers opt for initial trials and acceptance. The conventional eating pattern of Indians involved breakfast, lunch and dinner. Lunch and dinner menus were complete meals providing the right balance in terms of nutrition. Breakfast was conventional as per the family culture and upbringing. Burgers were likely to be slotted in the category of snacks. But globally burgers and beverage brands were linked with poor eating habits. The market situation called for focus on the environment within the restaurant and western association. Issues McDonalds had been accused of destruction of vast areas of the rainforest for the production of cattle to produce beef, promoting unhealthy food with a risk of cancer and heart disease, taking advantage of children with its advertising and marketing, and cruelty to animals. There had been complaints as regards the nutrition, hygiene etc.. Environment Conservationists had often focused on McDonald's as an industry leader promoting business practices detrimental to the environment. But the company spent a fortune promoting itself as environmentally friendly. They annually produced over a million ton of packaging, used for just a few minutes before being discarded. The environmental effect of the production and disposal of all this needed to be taken into account. Multinational companies operating on such a scale contributed to global warming, ozone destruction, depletion of mineral resources and the destruction of natural habitats. Thus these are the various issues that McDonalds faces while globalizing and establishing them in India.