The actual marketing strategy (Greenley, 1993; Sudharasam, 1995; Hooley et al., 1998) can be formulated in different ways, but usually it includes the following dimensions:
- the product or service market where the company compete;
- the level of investment to maintain or grow the business;
- the product line, positioning, pricing and distribution strategies needed to compete in selected markets; and
- assets or skills to provide a sustainable competitive advantage.
In the long run, success depends on creating core competencies in the areas where the company operates.
Economic and technological developments are driving the world towards a global marketplace. With current economic changes making international trade more accessible and increased technology making communication more possible, the issue of effectively implementing international marketing strategy is becoming increasingly important. Given the need to implement more effective marketing strategies, a better understanding of the globalization process is needed.
The dynamic nature of the global economy has prompted marketing managers to consider a number of factors when implementing global marketing strategy. Two factors are critical: brand-image consistency and economies of scale.
Economies of scale develop from the increased, unrestricted market size available to the firm. Increased market size means increased production, which enables a firm to achieve sizeable cost savings through economies of scale. Economies of scale allow organizations to capitalize on their cost savings either through a low-cost strategy, or by maintaining a market price strategy, which permits them to reap significantly higher margins than their competitors. From a marketing standpoint, utilizing the same campaign over multiple markets, organizations are able to spread fixed costs (i.e. advertising development) over a larger number of units (i.e. coverage) leading to an overall lower per unit cost. Imagine the cost savings that could have been realized by Unilever if they had simply used the brand name Radion in Austria as well as Germany. Overall marketing strategy costs would have been reduced by standardizing both the product and advertising for use in both markets, rather than incurring the costs of producing two separate products and promotional campaigns. While managers realize all aspects of global marketing strategy cannot be standardized, each component of the strategy that is standardized produces increased cost savings.
Standardization, as discussed through the international product life cycle (IPLC), may enable marketing mangers to conceptualize better the dynamic nature of technology-based products in the new global environment. The IPLC concept describes the movement of production facilities throughout the life of a product (Vernon, 1966, 1979; Wells, 1968, 1972). While still controversial in terms of predicting direct investment (Ayal, 1981; Giddy, 1978; Lutz and Green, 1983; Mullor-Sebastian, 1983; Thomas, 1981; Vernon, 1979), the IPLC provides a perspective through which the transition from a local, to a regional, to a standard marketing strategy can be better understood. Summarized, the IPLC indicates that initially a product is innovative (i.e. considered on the cutting edge of technology within its respective product category) and highly attribute adaptable (i.e., many product modifications are made) during its initial period of introduction, usually occurring in high-income countries. As the product moves throughout the IPLC it becomes more standardized (i.e. less novel in relation to other products). During this transition process production moves from higher to lower cost producing countries (Vernon, 1966; Wells, 1968, 1972). Thus, on introduction, products are more novel and price inelastic and throughout their life cycle they become relatively obsolete, standardized and more price elastic (Onkvisit and Shaw, 1983; Wells, 1968).
Understanding the IPLC concept in the arena of globalization, one may observe the positioning of products in relation to one another and the marketing strategy implications (Onkvisit and Shaw, 1983). Because the target market of the newly introduced product is smaller in size (small potential) a localized marketing strategy is utilized. As the product filters through the IPLC its market potential increases, its level of technology relative to other products decreases, and is therefore more suited for standardization.
As indicated previously, standardization is founded in the increase of economic integration and technological developments. These two constructs provide the basis for the standardization of international marketing strategy.
While the issue of standardization of marketing strategy has been debated by academics for decades, one major criticism remains: "When is it appropriate to implement a particular strategy?" The following integrative framework, derived from classical economic demand theory, provides a guide for marketers. Once this three-step analysis has been completed by a marketing manager a determination of the appropriate strategy to implement may be realized in 3 steps:
- Accessibility to target market
- Similar demand across markets
- Global market potential
Step 1. Accessibility to target market
Accessibility to the target market within the specific country needs to exist. Since each market structure is different, tools (e.g. media, channels of distribution, etc.) available to marketers will vary across countries. As economic integration drives countries closer together, accessibility to similar cross-national target markets may become easier. Given this, international managers may wish to determine the current and potential accessibility to each target market within countries in order to effectively position themselves for current and future competition.
As marketing mangers consider the standardization of marketing strategy, they need to ensure similar access to cross-national target markets. Once accessibility to the market is established, the nature of the demand function for the product needs to be ascertained.
Step 2. Similar demand across markets
Demand functions across different country markets need to become homogeneous in order for a standardized strategy to be effective. Demand functions are not demand curves, which relate price to quantity, but rather are abstract conceptualizations of consumer wants and needs. The assumption that the driving force of both economic integration and communication technology innovation are creating similar demand functions across national market segments appears to be substantiated within some product segments. For instance, the high-technology electronic industry can be utilized for illustrative purposes. One may propose that similar demand functions exist in Argentina, Chile, Germany and the UK for virtual reality, within a specific target market (the high-end consumer electronics market). One can find, if given enough time and resources, a number of individuals in each country who would have the financial resources and desire to purchase the product.
It needs to be emphasized that similar demand is a necessary, but not sufficient, condition for standardization. Much too often marketing scholars stop at similar demand. From a marketing managers perspective, potential is the all-important factor.
Step 3. Global market potential
In order for the strategic benefits of standardization to be achieved, the global target market potential (i.e. economic aggregate demand) needs to be of adequate size. Market potential is the critical evaluation criterion for standardization. Therefore, after both accessibility and similar demand functions for a product have been determined, an estimation of market potential can ensue.
Global market potential is the summation of demand across all markets (i.e. global economic aggregate demand). Thus, while individual market potential may be small, overall market potential may be adequate to standardize various aspects of the marketing mix. It is necessary for the international marketer to determine the global market potential for the product before the development of a standardized strategy.
Revisiting the virtual reality example, once one has established similar demand functions across markets, the need is to identify different market potentials. While the potential for a virtual reality product may exist in Argentina and Chile, and the demand function for those consumers is similar to those in Germany and the UK, the market potentials differ greatly. For instance, the Argentinian and Chilean market potentials may be minute as compared to the more economically advanced economies of Germany and the UK. Could a standardized strategy be utilized? Yes. Effectively? No. While similar demand functions exist, the global consumer market is rather small. However, as the global market expands for the product, regional and then standardized strategies may be more appropriate.
The electronics industry could be a good example and will be utilized to demonstrate the effectiveness of the globalization conceptualization for determining the appropriate marketing strategy to implement. Within the technology life-cycle, products either become surpassed by new technology or diffused through the marketplace. The life-cycle of technology-based products tends to be much shorter than non-technological products; however, the flow of the products through the IPLC stages remains consistent.
New innovative electronic product, such as virtual reality, are considered cutting-edge technology. As such, these products have limited market size potential. Through time, these products are surpassed technologically, and are dispersed through the marketplace or become obsolete. The marketing implications of this progression are at the heart of marketing strategy development and implementation. New innovative products which break from tradition often require extensive market adaptation in marketing strategy to gain acceptance. Due to the limited acceptance, global market potential and newness of the product, localized strategies have been most effective on product introduction. Conversely, products that are well accepted in the global marketplace may warrant a standardized strategy. This progression of marketing strategy can be seen in hand-held calculators. At one time hand-held calculators were considered high-technology products which required extensive instructions. Today, however, most hand-held calculators are standardized, low-technology products, and in their base product form (i.e. four-function calculators) are often given out as promotional items in many developed countries. Given the global acceptance of hand-held calculators, it is no wonder that many manufactures of such products have successfully implemented standardized strategies.
If one looks back in time, one can see products that most now consider either everyday items, such as colour televisions, or products that are in the decline stage of the technology life-cycle in many developed countries, such as black and white television sets that were once considered cutting edge. Looking forward is impossible, and as such, one cannot determine the length of the technology life-cycle, or the changes in marketing strategy that will occur. However, it can be seen that marketing strategy of a product within the technological life-cycle follows the pattern of the IPLC. Utilizing the three-step process to determine market size, while evaluating the relative level of technology of a product, a marketing manager may be able to determine which strategy to implement and how to plan for the future.
The standardization of marketing strategy only becomes effective when the technology-based product enters into the global mass consumer market. Up until the point of entry, localized, or regionalized, strategies may be more effective.
Marketing managers can assess the appropriate strategy for implementation through the evaluation of the product's relative level of technology and market size. For instance, on their introduction to world markets, microwave ovens were considered high-technology products that commanded premium prices. Given price reductions, through economies of scale, increased competition and greater acceptance of the technology by consumers, the global market potential of the product has increased. The increase in the globalization of the world marketplace has allowed multinationals selling such products to move from local to regional marketing strategies. As globalization of world markets continues, and products become relatively less technologically advanced within their respective product categories, marketing strategies may be able to be standardized. This is but one example of the strategy changes that are possible with the dynamic nature of both relative product position and globalization of world markets.
Therefore, the basis of standardization potential remains within the arena of classical economic demand theory. However, as the wave of globalism swept through management, many became enamoured with the idea rather than with the foundations of the concept. It appears, now, that many have become disillusioned with the allure of standardization and are attempting to find the most appropriate strategy for the organization or product (Fleenor, 1993). It is from the standpoint of effectively implementing marketing strategy that this conceptualization emanates.
The purpose here was not to develop guidelines for determining the exact point for the implementation of various marketing strategies, but rather to provide a conceptual basis of the globalization process which drives marketing strategy. More importantly, the conceptual framework presented for understanding the positioning of a product within the global economy provides a basis on which marketers can rely as they continue to strive for effective marketing strategy implementation within the global economy.
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