The future of marketing for a company’s international strategy

Posted on 9 Ιουνίου , 2006

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https://www.openbc.com/hp/Apostolos_Tsorakis/ 

Author: Apostolos Tsorakis 

Marketing is the function which stimulates the demand for the company’s products. A social definition of marketing system describe it as a societal process by which persons and groups acquire what they seek through creating, offering, and exchanging products and services of value freely with others. Peter Drucker, a leading management theorist, says that “the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. Ideally, marketing should result in a customer who is ready to buy.”
 
Definitions of marketing however, count for little if businesses do not develop a process, culture and set of operational procedures to actually “do” marketing (Cravens, 1998; Piercy, 1998). The textbooks promote a process which hinges on marketing analysis, marketing strategy, marketing mix tactics and internal program controls.

During the last decades though, the world has dramatically changed, new patterns that had not been seen earlier became evident all of a sudden. Towards the seventies the information revolution started to transform organizations. There were however greater structural differences to come. Traveling between different countries for pleasure on a regular basis became normal, watching television programs from around the whole world became reality, and the introduction of the Internet to the masses brought the world together.

Therefore, it is nowadays possible to follow, with a slight delay, what happens in almost all the countries of the world. The environment in which companies compete has also changed considerably during the last decades, actions taken by international bodies, governments and businesses have provoked an internationalization and globalization of the industries. (Nordström & Vahlne, 1993)

Drucker believes that the internationalization is no longer utopia, and that the earlier stage is regionalism. A regionally structured world brings different countries together, and considers the different regions as local markets. He also suggests that when the industrialisation started, labour and capital were scarce resources. The society has gradually changed and the scarce resource in organisations nowadays is knowledge. The change towards a more knowledge oriented world makes it possible for firms with limited capital to successfully compete, not only on the domestic market, but also on the international market.

Johanson and Wiedersheim-Paul (1975) discuss how a firm that is already internationalised extends its degree of internationalisation; at the same time as the perceived risk of internationalisation is smaller, the firm is exposed to more offers and demands to extend its operations which logically stimulate it. The firm is also stimulated by an increased need to control sales. Johanson and Wiedersheim-Paul (1975) believe that since firms are risk-avert they will start exporting to neighbouring countries and countries that are relatively similar in.

Porter (1986) writes that the mid-1950s was a period of fundamental change in the international competitive environment. He argues that the literature gives a guidance to how incremental decisions to enter a new market are taken, but it gives only at best a partial view of how to describe a firms overall international strategy, and how this strategy should be chosen. Porter argues that the analysis should start from the industry, because the industry is the arena in which competitive advantage can be won or lost.

Porter uses the value chain to explain the sources of competitive advantage on a national, as well as on an international level. There are various activities that a firm performs, these include selling the product, performing repairs, process design etc. Porter argues that these activities are physically quite distinct, thus creating the need for a less aggregated view of the firm to be able to see the competitive advantage.
 
Under this system there are two key dimensions that describe how a firm competes internationally: configuration and coordination. The configuration is related to where the company has chosen to establish its activities in the value chain. The coordination dimension is related to how the firm coordinates its activities that are similar between different countries.

A purely domestic firm focuses only on its home market, has no current ambitions of expanding abroad, and does not perceive any significant competitive threat from abroad. Such a firm may eventually get some orders from abroad, which are seen as an irritation (for small orders, there may be a great deal of effort and cost involved in obtaining relatively modest revenue). As the firm begins to export more, it enters the export stage, where little effort is made to market the product abroad, although an increasing number of foreign orders are filled. In the international stage, as certain country markets begin to appear especially attractive with more foreign orders originating there, the firm may go into countries on an ad hoc basis—that is, each country may be entered sequentially, but with relatively little learning and marketing efforts being shared across countries. In the multi-national stage, some efficiency is pursued by standardizing across a region (e.g., Central America, West Africa, or Northern Europe). Finally, in the global stage, the focus centers on the entire World market, with decisions made optimize the product’s position across markets—the home country is no longer the center of the product. Porter (1986) claims that a firm’s success of internationalization depends on how it coordinates its marketing and sales activities.

Segmentation according to Kotler (2000) is the cornerstone of marketing—almost all marketing efforts in some way relate to decisions on who to serve or how to implement positioning through the different parts of the marketing mix. For example, one’s distribution strategy should consider where one’s target market is most likely to buy the product, and a promotional strategy should consider the target’s media habits and which kinds of messages will be most persuasive. Although it is often tempting, when observing large markets, to try to be “all things to all people” this is a dangerous strategy because the firm may lose its distinctive appeal to its chosen segments.

Further more Kotler suggests that market segmentation aims to increase a company’s precision marketing. In contrast, sellers that use mass marketing engage in the mass production, distribution, and promotion of one product for all buyers. Henry Ford epitomized this strategy when he offered the Model T Ford “in any color, as long as it is black.” Coca-Cola also used mass marketing when it sold only one kind of Coke in a 6.5-ounce bottle. The argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. However, many critics point to the increasing splintering of the market, which makes mass marketing more difficult.

According to Regis McKenna, “Consumers have more ways to shop: at giant malls, specialty shops, and superstores; through mail-order catalogs, home shopping networks, and virtual stores on the Internet. And they are bombarded with messages pitched through a growing number of channels: broadcast and narrow-cast television, radio, on-line computer networks, the Internet, telephone services such as fax and telemarketing, and niche magazines and other print media.”

This proliferation of media and distribution channels is making it difficult to practice “one size fits all” marketing. Some observers even claim that mass marketing is dying. Therefore, to stay focused rather than scattering their marketing resources, more marketers are using market segmentation. In this approach, which falls midway between mass marketing and individual marketing, each segment’s buyers are assumed to be quite similar in wants and needs, yet no two buyers are really alike.

General considerations

Marketing is strategically concerned with the direction and scope of the long-term activities performed by the organization to obtain a competitive advantage. The organization applies its resources within a changing environment to satisfy customer needs while meeting stakeholder expectations. Implied in this view of strategic marketing is the requirement to develop a strategy to cope with competitors, identify market opportunities, develop and commercialize new products and services, allocate resources among marketing activities and design an appropriate organizational structure to ensure the performance desired is achieved.

There is no unique strategy that succeeds for all organizations in all situations. In thinking strategically about marketing many factors must be considered: the extent of product diversity and geographic coverage in the organization; the number of market segments served, marketing channels used, the role of branding, the level of marketing effort, and the role of quality. It is also necessary to consider the organization’s approach to new product development, in particular, its position as a technology leader or follower, the extent of innovation, the organization’s cost position and pricing policy, and its relationship to customers, competitors, suppliers and partners.

The marketing and sales activities must consider what product lines they want to offer, and in which markets. Much of the success of a firm’s internationalization can depend on how it coordinates its marketing and sales activities. Therefore the firm must decide whether it will use the same brand name worldwide or not. It is also important to decide if the channel and product positioning should be similar between the different markets.

The use of the same type of channels in different countries, together with special demands about how, and where the products should be sold, has made it possible to distinguish the firm from its competitors. It is possible to claim that the firm started off using a global strategy, selling the same products to every country, but over the years the firm has become more aware of what product are popular in different markets, and it has therefore started to use a more export based strategy with decentralized marketing. This means that the firm designs its products for different countries, but still all agents are welcome to buy these products. This strategy takes into account consumer taste, thus generating a source of competitive advantage for the firm, since it seems as this is a source of competitive advantage related to differentiation vis-à-vis its competitors. Rather than being a rapid shift from a global to a more decentralized strategy, the firm has evolved slowly. This observation is important, since this can be seen as the result of increased knowledge from the firm’s current business activities.

Conclusions

In today’s reality, change is occurring at an accelerating rate and under this perspective companies will have to consider three new realities:
• Globalization will continue to affect businesses
• Technology will continue to advance and amaze people
• There will be a continuing push toward deregulation of the economic sector

These forces have created new behaviors and challenges:
• Customers demand higher quality of service and some customization
• Brand manufacturers are facing intense competition from domestic and foreign brands
• Store-based retailers are suffering from an over saturation of retailing

Given these changes, companies are doing a lot of internal searching, and many firms are adjusting in a number of ways. As the environment changes and companies adjust, marketers also are rethinking their philosophies, concepts, and tools.

It is necessary thus companies to be aware of the effect of globalization, technology, and deregulation. Rather than try to satisfy everyone, companies should start with market segmentation and develop a market offering that is positioned in the minds of the target market since products will be successful only if they deliver value to customers.

The combination of technology, globalization, and deregulation is influencing customers, brand manufacturers, and store-based retailers in a variety of ways. The challenge of marketing within the internationalization process is, therefore, to manage this complexity and to reconcile the influences of a changing environment in the context of a set of resource capabilities.

References – Bibliography

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Drucker, P. (1973) Management: Tasks, Responsibilities, Practices (New York: Harper & Row, 1973), pp. 64–65.

Johanson, J. & Wiedersheim-Paul, F., 1975, “The Internationalisation of the Firm-
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PORTER, M.E., 1990, The Competitive Advantaqe of Nations (1990). London : The MacMillan Press.

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