All about global marketing strategy

All about global marketing strategy

1 Overview

The challenge

Global marketing strategies have become increasingly important with the internationalisation of business and globalisation of markets. Even though they are characterised by centralised coordination to achieve scale and scope economies, localisation is also becoming increasingly important as consumer demand varies across countries. As you enter new markets, your challenge is to strike the right balance between having a global strategy and local adaptation.

Your aim

To coordinate your company's marketing strategy as your business becomes more globalised.

How to go about it

This guide will help you think about the implications of having a global versus a multidomestic marketing strategy, and their competitive strengths and weaknesses. You can then go about creating an integrated marketing plan as you grow into your new market.

2 What is a global marketing strategy?

A global marketing strategy (GMS) is a strategy that encompasses countries from several different regions in the world and aims at coordinating a company's marketing efforts in markets in these countries.

A GMS does not necessarily cover all countries but it should apply across several regions. A typical regional breakdown is as follows: Africa, Asia, and the Pacific (including Australia), Europe and the Middle East, Latin America, and North America. A “regional” marketing strategy is one that coordinates the marketing effort in one region.

A GMS should not be confused with a global production strategy. Outsourcing and foreign manufacturing subsidiaries, common features of a global production strategy, can be used with or without a GMS for the finished products.

GMS can involve one or more of several activities:

  • Identical brand names
  • Uniform packaging
  • Standardised products
  • Similar advertising messages
  • Coordinated pricing
  • Synchronised product introductions
  • Coordinated sales campaigns

The coordination involved in implementing a GMS unavoidably leads to a certain level of uniformity of branding, of packaging, of promotional appeal, and so on (Zou and Cavusgil, 2002). This also means that, in some ways, the product and marketing mix are not as closely adapted to local customer preferences. This is a potential weakness of GMS, and leaves opportunities open for local products and brands.

Consistency can have positive revenue benefits because of reinforcement of a unique message. But the main driving force behind the adoption of a GMS is the scale and scope of cost advantages from such uniform marketing strategies. These cost advantages include not having to repeat the same marketing task, savings on multilingual and same-size packaging, use of the same promotional material, and quantity discounts when buying media.

Global segmentation

The firms most likely to engage in GMS are those present in global markets. Global markets are those where customer needs, wants, and preferences are quite similar across the globe. Typical product categories are technology products, including consumer electronics, cameras and computers, branded luxury products, and also apparel, personal care, and entertainment categories where, for certain segments, globally standardised products are desired by all. By contrast, in multidomestic markets such as food and drink, where preferences are more culturally determined, global coordination is less common.

Global marketers might first group countries into similar regions to increase the chances of finding homogeneous subgroups within each region. Often this amounts to selecting a trade bloc, such as the European Union. As research has documented, many global strategies are, in fact, more regional than global (Rugman, 2005)1.

A GMS can also be successful if the firm has managed to change local preferences. A new product entering a local market will usually change preferences to some degree, whether by new features, promotion, or price. For example, IKEA, the Swedish furniture retailer, has changed the market for furniture in many countries – it uses a very standardised and coordinated marketing strategy, focusing around its simple and functional furniture, annual catalog, and warehouse stores. Starbucks, the American coffee chain, also has recreated and enlarged a mature market in several countries with its new coffee choices, novel store layouts, and wider menu.

In other cases, changes in the environment have affected preferences so as to make standardisation possible. “Green” products are naturally targeting global segments, as are the lighter beers, the bottled waters, and the shift to wines. Such global segments naturally induce companies to adopt GMS.

Global positioning

The main issue in global positioning is whether the product offering should be positioned the same way everywhere or not. Complicating the issue is the fact that even with complete uniformity of the marketing mix, the arrived-at position may still differ between countries. A classic example are Levi's jeans, whose rugged outdoors image places it in a mainstream American lifestyle segment, but becomes a stylish icon in other countries. Also, as this example illustrates, even if a brand wants to be seen as “global,” its position is typically affected positively or negatively by its country of origin.

A food product such as apples might be consumed as a healthy snack in the West (“An apple a day keeps the doctor away” as the saying goes). But in Japan, apples are a favourite item in the gift-giving season, placing a premium on color, packaging, and price – hardly the same positioning.

Even without such dramatic usage differences, differences in economic development and cultural distance, in general, are main factors influencing the potential for an identical position. First-time buyers in emerging markets rarely view products the same way as buyers in the more mature markets, where preferences are well established. For example, the successful Buicks offered to new customers in China offer quite different benefits from those offered Buick customers in the United States, even though the product is largely the same.

The strength of local competition is also likely to vary across countries, affecting the positioning. Where domestic competitors are strong, a foreign brand that is a mainstream brand at home will typically attempt to target a niche abroad. In global markets, where often the same global players compete in the major foreign markets, positioning is more likely to remain constant across the mature markets. Examples include automobiles, with the global players occupying very similar positions in most markets. This is less true for new product categories that are still in the growth stage in many countries and the brands are not equally well known everywhere.

The stage of the life cycle is also likely to vary across countries, affecting how well a particular position can be transferred. In the early stages, with preferences still in flux, a strategy based on the positioning in a lead country may not be very effective in a new country. Thus, the first automatic single-lens reflex camera was introduced by Canon as a mainstream product in Japan, but a specialty product for more professional photography overseas. In emerging countries with their pent-up demand, however, even new consumers aspire for the best products in the leading markets. This is why some Western companies (such as Electrolux, the home appliance manufacturer) will position themselves at the top of the market even in a country like Russia.

The typical strategic assumption is that a globally uniform positioning requires similarity of culture, of competition, and of life cycle stage. However, even in countries where one or more of these requirements are not met, a standardised global positioning may still work. For example, when global communications have made the brand name already well known, a global strategy may work even in a multi-domestic market.

3 The global marketing mix

Global products and services

Standardisation of the product or service is usually a major feature of a global marketing mix. “Product Standardisation” means uniformity of product or service features, design, and styling.

The advantages are mainly on the cost side – scale economies from the larger number of identical units produced. But there are also quality advantages involved. With longer series, there is more reason to invest in specialised technology, machine tools, components, and parts, yielding higher and more consistent quality. Finally, there is a possible positive demand effect on customers. Because of the prevalence of the products and designs, there’s a positive impact on customer preferences.

The disadvantages of product standardisation are mainly on the demand side. Apart from the case of pent-up demand in an emerging country, standardised products rarely manage to target precisely a specific segment in a new country market. They are at least slightly off target. This is not always such an obstacle to success. First, preferences may change – the standardised product may offer features not offered before in that market. Second, a mispositioning may be overcome by a strong brand name. Third, the entering product may well be sold at a low price – its scale advantages can allow such a strategy.

From a marketing perspective, a uniform product or service is often less acceptable locally. What is seen as a good product or service in one market might not be acceptable elsewhere. Luxury products are usually the same across the globe, and utilitarian items such as automobile tires, toothpaste, and kitchen utensils can be standardised. But products such as shampoos, soaps, and personal-care items need to take account of hair types, skin color, and water quality to perform satisfactorily. Coca Cola's level of sweetness differs across countries, McDonald's menu is adapted to country preferences (partly to reduce anti-globalisation protests), and apparel manufacturers have to make adjustments for different body proportions between Western and Asian peoples.

To deal with these adaptations while trying to retain some scale economies, companies resort to two solutions. One solution is to use the same basic design or “platform” for the product, and then adapt by adding alternative features at the later stage of manufacturing. A second related option is to break up the product into component modules that can be produced in large series to gain the scale advantages, and then produce different products by different combinations of modules. This has become a very prominent manufacturing strategy for large companies, since it allows the different modules to be outsourced and offshored. The manufacturing process then becomes a simple assembly process, which can then be done locally, if necessary, to gain lower tariff rates. This allows the company to “mix and match” features for different country markets, which helps adaptation to local preferences.

Companies don’t need to offer identical products everywhere in order to gain the scale economies of product standardisation. A company can develop a coordinated global strategy even without a completely standardised product. But it is almost impossible to develop a GMS without a strong global brand.

Global brands

Keeping the same brand name everywhere has become the signature feature of a global marketer, and “global branding” has become an obsession among many multinationals.

But what does ‘global brand’ mean?

Global brands are brands that are well known and recognised in all major markets of the world; regional brands are brands that are the same across a region; and local brands are brands found in only one or two markets.

Most top brands in terms of financial equity are global. But a strong brand not only needs reach across countries – it also needs allegiance from local customers. As global brands have stretched further to build financial equity, local brands have been able to defend their turf by staying closer to their customer and building affinity, or ‘soft equity’. Recognising this, many global companies not only market their global brand in a country market but might also buy up a successful local brand and retain its brand name – and customers.

The most clear-cut advantages of global brands are the cost efficiencies from scale and scope. The cost efficiencies tend to come from the ability to produce identical products and packaging in long series, and also because global brands can draw on uniform global promotions. Demand spillover is a result of the increased exposure to the same brand in many places – especially useful when customers are global. The growth of international tourism has been a strong driver of global brands, and the status and esteem advantages have been shown by researchers, especially prominent in less-developed countries.

Global pricing and distribution

In GMS, pricing, and distribution are more closely connected than at home. The reason is not that the costs involved in distribution (transportation but also insurance and custom duties) necessarily raise the final price to the customer. Such straight “price escalation” does not usually occur except in one-time transactions.

The strong connection between pricing and distribution rests more directly on another phenomenon. The ease of transportation, coupled with differing local prices and currency fluctuations, are what provide the margin that allows for arbitrage opportunities for customers to buy branded products cheaper abroad. This is an instance of so-called “gray trade” – the importation of branded products through other than authorised channels. It is the rise of gray trade that force multinationals to decide pricing and distribution strategies jointly – and even multinationals that would otherwise not contemplate a global strategy, have to find a way to align prices to avoid such trade.

Gray trade affects a number of multinationals – and is not illegal. For example, there are numerous stories of Asian contract manufacturers who make branded products for Western multinationals on day shifts, and then produce an added batch of identical products on the night shift. These products are then shipped abroad at low costs, distributed via indirect channels perhaps from a third country, and finally appear on the various markets in the West. In other cases, gray trade involves Western distributors (large European retailers, for example) who acquire goods in a low-priced country and then sell it at higher prices at home.

Global marketing communications

With increasing globalisation and the stress on global brands, the momentum behind global advertising has been sustained despite anti-globalisation and pro-localisation sentiments around the globe. One contributing factor has been the rise of the Internet and the availability of many commercials on sites such as YouTube, where even local advertisement campaigns potentially have global reach.

There are several forces behind the need for integrated global communications. On the supply side, the emergence of consolidated global advertising agencies has played a significant role in generating more global advertising, and on the demand side, customers are increasingly global. Consumers now travel much more than before as the lower cost of travel have made for many more tourists, and for business-to-business products, the customers are often multinational companies.

In the general case, however, not all the marketing communications of a global company are globally coordinated. First of all, media advertising is only one of several promotional tools, and media regulations vary across countries. Not all countries' retail regulations allow contests, for example, and in many cases, coupon redemptions are denied by stores.

Even media advertising is rarely fully globalised. The motivation for local subsidiaries and their agencies to do their best creative work is enhanced with more autonomy. Not all media are equally available in all countries, and the costs vary considerably. Effectiveness also varies. In poorer countries, print media are usually less effective. By contrast, Europe on the whole gives much greater weight to print than other countries. The Internet, a new and naturally global channel of communications, has still not penetrated all corners of the world. In addition, the advertising message often has to be adapted. Linguistic, cultural, and religious differences can prevent standardisation of advertising messages and render symbols inappropriate.

Because of these issues, most companies dedicate only a portion of their total advertising budget to a global campaign. While the localised campaigns may employ local agencies, it is common for the global campaign to be handled by one large global agency.

Most global companies place strict limits on how their name should be portrayed, including fonts and coloring. But even in a global campaign there is usually some variety. The typical form of global advertising in television follows what is known as pattern standardisation. Here the advertisement visualisation is adapted to local culture and language, with recognisable local spokespersons and actors, and a story that has local appeal. The brand name and logo are identical, and the final slogan is usually translated directly. Instead of actors speaking, voice-overs allow local language to be superimposed on a commercial. In this form, global advertising is becoming more common today, creating a unified image of corporations and brands as well as countries and places.

Overall, most companies play it safe, with some global uniformity but allocating the majority of the funds for regional and local adaptation of communications.

4 Sources