Globalization created a huge opportunity for organizations to market their products and services worldwide and grow exponentially. Whether it is a soft drink brand like Pepsi or Coca-Cola or supermarket chains like Walmart, companies have expanded across Asia, Africa and Europe to boost their sales and revenue generation. Similarly, if you see the way one of America’s favorite sports, basketball, has created ripples across new territories becoming the number-two sport in the world, you’ll be amazed to know that this phenomena too was caused by the ever increasing global marketing methods. So, how does an organization create a global marketing strategy taking into consideration the cultural, economic and social differences that exist across countries? If you are a marketing executive, an entrepreneur or a small business owner looking to take advantage of global marketing techniques for your company’s growth, then you should be well aware of the different marketing strategies, best practices and key decision making factors. This course can help you learn how to succeed in a global business.
In this article, we shall touch upon these details in our discussion and provide you with an insight into global marketing strategies.
What is Global Marketing?
You might be a fan of McDonald’s burgers or Starbucks Coffee; well don’t be surprised when you take a holiday in any Asian city or town and find your favorite outlets in one of the buzzing streets there! This effect of global marketing and with the rapidly shrinking world due to lightning quick communication and technology is encouraging big companies as well as smaller businesses to set up shop in distant shores. Learn more about how the global marketplace is changing and how to reach out to the world with online marketing.
Global or International Marketing is nothing but the marketing of goods and services outside the home country of the organization, where it is based. Companies have several operations in different parts of the world, may manufacture the goods in off-shore factories, set up customer care centers across the globe and cater to multiple markets.
Global Marketing Strategies
A classic example of a successful global marketing campaign was Colgate’s decision to enter the Chinese market. The company addressed several questions like will it be able to overcome the cultural barriers to convince Chinese consumers to brush their teeth daily, something that wasn’t a habit especially in the rural areas? Will the company be able to compete with the local state-owned brands and can Colgate set up an effective production and distribution facility in China? After considering these factors and more, Colgate decided to enter the Chinese market and their market share has grown from 7% in 1995 to more than 40% today.
Starting small is the safest way to explore as to which markets to enter and how much of international sales your business wants to target. Take into account the geographical factors of the country, political climate, business and economic factors like income and buying trends of the population etc. before choosing the country of operation. If you are a small business owner or a marketing professional, this course will give you the complete guide to online marketing to enter new markets.
After deciding on the markets that your business wants to enter, you need to decide on the mode of market entry and strategy for marketing. Let’s touch upon the details of each one of these global marketing entry strategies:
This is the easiest way to enter new markets without making too many changes to product lines, investments or the organization itself. Businesses normally start selling through indirect exporting wherein international intermediaries bring in their experience and marketing services. With time, you can move towards direct exporting with a little more investment and taking more risks. Companies set up an overseas sales branch, a customer service centre and establish a marketing cum sales team abroad that takes care of finding business and selling the goods / services. Once you set up your own exports, you can even look at Export Consulting – this course shows you how to get started.
This is similar to contract manufacturing. The company wanting to enter the foreign markets (licensee) buys the rights to use a patent, trademark or similar, from a local company (licencor) that is already established in those markets. This is a popular strategy since it is low risk and low investment. It gives the licensee access to the brands, patent or trademarks that the licencor has already established, without having to go through the actual invention and setting up processes. This is also an effective way to test the waters for more active future engagements with a foreign partner. Although licensing fees vary according to the industry and geography, these are usually much lower than the profits that can be made via export or direct manufacturing. The decision on whether to opt for the License model versus the others should be made only if the licensing fees is substantially lower than the entry costs to export, manufacturing or any other entry method.
Franchising is a special form of licensing that we discussed above. Here the franchiser provides the complete business and marketing plan including business model, revenue models, method of operations, brand, logo, products and everything else required to get the business started. You will though still have to take care of the legal aspects of setting up shop. Franchising involves the least risk of any of these strategies, since you have direct access to the franchisers proven business model from day one. McDonald’s is good proof of this model – about 80% of all McDonald’s outlets are franchises!
Another effective strategy to enter a new market is by joining hands with a host country partner to sell or produce your goods and services abroad. The participation of each partner may vary. Specific areas, and proportions of ownership and management control need to be clearly worked out in advance. In many cases, firms prefer wholly owned subsidiaries, or at the very least, majority stake, for reasons of control. It’s important to choose a Joint Venture partner who complements your organisation and gives you access to local resources that may have been beyond your reach otherwise. This course shows you how to gain join venture partners successfully.
This requires setting up of manufacturing facilities with the help of the foreign government, developing relations with local raw material suppliers, hiring cheap labor and creating jobs, adapting the products to suit local markets and keeping full control on the investments made. Direct Investment involves huge commitment and serves long-term business objectives of a company; however, it also involves many risks like turbulent markets, government changes or falling currencies.
You need to assess how you can make your product differentiation to compete against local competitors or other foreign brands. Either through straight product extensions, product adaptation or invention, you can achieve differentiation to attract customers.
How do you set the international prices of your goods and services? By choosing cost-effective distribution channels and managing the lowest delivered cost, you can lead the markets by taking advantage of your product cost and pricing strategy.
Creating the right global marketing strategy is the keystone to finding success in international markets. You not only need to understand your customers buying preferences and spending patterns but also need to keep in mind the cultural and socio-economic differences. If you are in the process of going global, identify profitable markets and understand the international consumer’s requirements to achieve maximum business growth.
Why Global Marketing?
Due to the growing global trade and expansion of markets, the competition is getting stiffer by the day. With foreign companies aggressively making foray into international markets, the domestic industries are not safe from competition in terms of pricing, quality and economies of scale. Therefore, it is imperative for home grown industries and small businesses to plan towards internationalization and take calculated risks instead of trying to play it safe. Let’s look at some of the motives behind companies going global:
- Greater opportunities for business development by tapping into diverse markets
- Catering to a wide range of customers living abroad thereby improving customer satisfaction
- Taking advantage of different economic growth rates, which leads to better scales and profits
- To overcome domestic competition and exploring the potential in new markets
- To exploit the product life cycle differences, especially in technological products or take advantage of special tax structures etc.
- Tapping into geographical differentiation thereby catering to different climate or topographic requirements etc.
The reasons for globalization could be many; however, organizations need to have the right marketing strategy to serve the international markets while taking care of the target audience’s cultural or religious sentiments, economic situation and political/ legal environments. To learn more about how you can create an effective global strategy for your small business, take this course.