Developing a Strategic Marketing Plan: Chapter 19

Developing a Strategic Marketing Plan
Developing a Strategic Marketing Plan

 The marketing program for each foreign market must be carefully planned. Managers must first decide on the precise customer target or targets to be served. Then managers have to decide how, if at all, to adapt the firm's marketing mix to local conditions. To do this requires a good understanding of the country's market conditions as well as the cultural characteristics of customers in that market. We have already addressed the need for cultural sensitivity. This section will discuss the reasons for standardization versus adaptation for the global market before highlighting specific international marketing mix decisions.

 

 

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!

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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.

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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.

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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

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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

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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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