Global Marketing In Contrast With Local Marketing Marketing Essay

Global Marketing In Contrast With Local Marketing Marketing Essay This report analyse the concept of global marketing in contrast with local marketing, examined with the help of different scholars of all time. It has also been advocated that a new concept of glocal marketing has now prevail in the global scenario to comprehend different markets of the world. There are certain issues and challenges companies face when going global which has been explained with the help of contextual determinants of international marketing explained by the renowned theorist of marketing called Porter and Kotler. The determinants are political stability, government policy, ideology driven economy, fear of colonialism, marketing transfer issues, and lack of infrastructure, north-south dichotomy, east-west dichotomy, and product life cycles. There are certain entry modes or global marketing strategies through which companies can do international and global business, like exporting, licensing, franchising, joint ventures and wholly owned subsidiaries. However, the greater the investment the more would be the control and risk. It has been also analysed that franchising appeared to be the most successful means of doing business internationally, which has also been advocated by the case study of McDonalds. The 4Ps of marketing which has been the basis of many marketing plans previously, has now become 7Ps of marketing, that is, product, price, place, promotion, people, process and physicals, the case of McDonalds operating in Saudia Arabia has been analysed according to that. Hence, it has been concluded that companies that are going global cannot treat the whole world as one homogenous market as there are many different cultures, circumstances and characteristics in the world. Therefore the concept of glocal marketing is more feasible to be adopted when going global. INTRODUCTION Global marketing, the most profound change is the orientation of the company toward markets and associated planning activities. At this stage, companies treat the world, including their home market, as one market. Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by the income levels, usage patterns, or other factors that often span countries and regions. (Cateora and Graham, 2005:312) Keegan (1989:11) mentions two motives for the globalisation of marketing activities. One is to take advantage of opportunities for growth and expansion, and the other is survival. Companies that fail to pursue global opportunities will eventually lose their domestic markets, since they may be pushed aside by stronger and more competitive global competitors. Dahinger and Muhlbacher (1991:5) state that a global approach allows companies to achieve a concentration and coordination of marketing activities, which stimulates the companies effort for globalisation. Sevesson (2002:574-583) extracted from Lamont (1996), he argues that global marketing expresses initiatives to find new markets, segments, niches; the development of buying and selling opportunities; and of marketing across international boundaries. The globalisation of marketing activities includes specific tasks such as the organisation of worldwide efforts, the research of domestic and foreign markets, the finding of new partn ers, the purchasing of comprehensive support services and the managing of the cost of international transactions (Sevesson, 2002:574-583). Johansson (2000:6) describes global marketing as the integration that can involve standardised products, uniform packaging, identical brand names, synchronised product introductions, similar advertising messages or coordinated sales campaigns across markets in several countries. This report undergoes with the issues, challenges and strategy of global marketing along with the international marketing mix of McDonalds, followed by some recommendations to end with. METHODOLOGY An exploratory form of research has been carried out and the data has been collected from the secondary sources, that is, through journals, articles and books. However, the analysis has been done in a vivid, analytical and logical way. LITERATURE REVIEW THE DIFFERENCE BETWEEN GLOBAL AND LOCAL MARKETING: Keegan and Green (2000:2) state that one difference between regular marketing and global marketing is the scope of activities. Another difference is that global marketing involves an understanding of concept and strategies that should be applied in conjunction with universal marketing issues to ensure a global marketing success. Whereas, local and domestic marketing strive exclusively to maximise adaptation, tailoring, differences, concentration, independence, flexibility and separation of marketing activities within market frontiers. A local or domestic related marketing strategy recognises the necessity to consider locally-related issues in the performance of marketing activities in the market place. An international marketing strategy is the widening of local or domestic marketing strategy that is applicable beyond the home markets frontiers while global marketing strategy refers to marketing activities towards a wide selection of foreign markets (Sevensson, 2002:574-583). Johansson (2000:2-6) states that there are four factors that influence companies to strive towards the globalisation of marketing, namely the categories of market, competition, cost and government. These factors are often referred to as the four major globalisation drivers. Originally, Yip (1989:23-63) discusses and classifies the globalisation drivers thus: Market drivers consisting of homogenous needs, global customers, global channels and transferable marketing; Cost drivers categorized as economies of scale and scope, learning and experience, sourcing efficiencies, favourable logistics, differences in country cost and skills, and product development costs; Competitive drivers consisting of the interdependence between countries and the competitors that globalise or might globalise; Government drivers classified as favourable trade policies, compatible technical standards and common marketing regulations. Usually, most marketing activities have to be adapted to local conditions, characteristics and circumstances in the market place. Therefore, it is not suitable to apply a global marketing strategy, since locally related issues of the marketing activities normally have to be taken into consideration in the market place. Daft (2000:2) states that: we must remember we do not do business in markets; we do business in societies..in our future, we will succeed because we will also understand and appeal to local differences. The twenty-first century demands nothing less Therefore, the concept of glocal marketing is introduced to be a compromise, which in part reflects the aspirations of a pure global marketing strategy, while the necessity of locally related issues of marketing activities is simultaneously recognised (Svensson, 2002:574-583). For example, McDonald modifies its traditional Big Mac in India, where it is known as the Maharaja Mac. This burger features two mutton patties because most Indians consider cows sacred and dont eat beef (Cateora and Graham, 2005:56-178). Similarly, the McDonalds restaurants which are operating in the Muslim countries use halal meat. In the same way, McDonalds standardises its processes, logo, most of its advertising, store decor and layouts whenever and wherever possible. However, you will find wine on the menu in France and beer in Germany, a Filipino-style spicy burger in Manila and pork burgers in Thailand-all to accommodate local tastes and customs. The point is, being global is a mindset, a way of looking at the market (Cateora and Graham, 2005:56-178). Thus, glocal marketing make every effort on the way to optimise the steadiness as well as the harmony of the focal organisations marketing conduct on functioning, tactical, and strategic points in terms of standardisation in opposition to adaptation, homogenisation in opposition to tailoring, similarity in opposition to dissimilarity, focus in opposition to dispersion, reliance in opposition to autonomy, synchronisation in opposition to suppleness and integration in opposition to division. THE GLOBAL MARKETING STRATEGIES: There are certain global marketing strategies which can be opted by the organisations in order to prevail in the global scenario. But, before making any choice, the analysis of the market is a vital issue which includes market characteristics (such as potential sales, strategic importance, cultural differences and country restrictions), companys capabilities and characteristics. There are numerous examples of organisations who have simply either imitated other companies or came up with extremely new strategy to enter into the global scenario. The decision of going global mainly depends upon companys capabilities and the market characteristics in order to make an effort to develop a market or to maintain its position permanently. There are different ways which can be adopted by the companies in order to do global marketing, likely, exporting, contractual agreements, strategic alliances and direct foreign investments. Some modes of entering the market are more risk aversive but constit ute more control as well. Firms that are beginning to internationalize and multinational companies that are expanding in nations outside their home base are both faced with the challenge of choosing the best structural arrangement. Four major alternatives are exporting, licensing, joint ventures, and wholly-owned subsidiaries (Osland, Taylor and Zoe, 2001:153-261). EXPORTING: Exporting can be either direct or indirect. With direct exporting the company sells to a customer in another country (Cateora and Graham, 2005:312-528). Exporting differs from the other modes in that a companys final or intermediate product is manufactured outside the target country and subsequently transferred to it. Indirect exporting uses intermediaries who are located in the companys home country and who take responsibility to ship and market the products. With direct exporting the producer firm does not use home country middlemen, although it may utilize target country intermediaries. This is the most common approach employed by companies taking their first international step because the risks of financial loss can be minimised. The Internet is becoming increasingly important as foreign market entry method. Initially, internet marketing focused on domestic sales, but later on a concept of international internet marketing was developed when companies got orders from other countri es. Today lots of companies are entering into the circle of making their own websites, which indeed has created a competitive advantage overall. Such firms can be called accidental exporters (Michael and Ilkka, 2003:224). Apart from that there are different intermediaries which serve as a major change agent to encourage companies towards exports. Like, chambers of commerce and other business associations that interact with firms locally that can frequently heighten international marketing interests. Similarly, Government efforts both on the national or local level can also serve as a major change agent. In the same way, there are other governmental entities that are actively encouraging firms to participate in the international market. In addition to it, there are many Export Management Companies operating in the domestic markets that specialise in performing international marketing services. They either take the title to the goods or operate internationally on their own account, or they perform services as agents (Cateora and Graham, 2005:398-528) and (Michael and Ilkka, 2003: 224). Another major intermediary is the trading company. The concept was originated by the European trading houses such as the Fuggers and was soon formalised by the monarchs. Today, the most famous trading companies are the sogoshosha of Japan. These general trading companies play a unique role in world commerce by importing, exporting, countertrading, investing and manufacturing. Because of their vast size, they can benefit from economies of scale and perform their operations at very low profit margins (Michael and Ilkka, 2003:224-245). CONTRACTUAL AGREEMENTS: Contractual Agreements are long-term, non-equity associations between a company and another in a foreign market. Contractual agreements generally involve the transfer of technology, processes, trademarks or human skills. In short, they serve as a means of transfer of knowledge rather than equity (Cateora and Graham, 2005:434-450). Licensing is non-equity, contractual mode with one or more local partner firms. A company transfers to a foreign organization the right to use some or all of the following property: patents, trademarks, company name, technology, and/or business methods. The licensee pays an initial fee and/or percentage of sales to the licensor (Osland, Taylor and Zoe, 2001:153-261). The advantages of licensing are more apparent when capital is scarce, import restrictions forbid other means of entry, a country is sensitive to foreign ownership, or it is necessary to protect patents and trademarks against cancellation for non-use (Cateora and Graham, 2005:434-450). Franchising is a rapidly growing form of licensing in which the franchisor provides a standard package of products, systems and management services, whereas the franchisee provides market knowledge, capital and personal involvement in management. The combination of skills permits flexibility in dealing with local market conditions and yet provides the parent firm with a reasonable degree of control (Cateora and Graham, 2005:434-450). The emblematic reasons in support of the international growth of franchise systems are market potential, financial increase as well as the saturation of domestic markets. Apart from all the compensation of franchising it has a number of disadvantages as well likely, the affirmation of assets from the franchisee point of view. An added apprehension is the level of standardisation seeing as the adjustments are essential in several conditions like McDonalds has developed non-beef burgers to cater the customers in India since cows are treated as sacred in th eir culture. To encourage better organised and more successful growth many companies turn to the master franchising system, wherein foreign partners are selected and awarded the rights to a large territory in which they in turn can sub franchise. As a result, the franchiser gains market expertise and an effective screening mechanism for new franchises, without incurring costly mistakes (Michael and Ilkka, 2003:224-272). Despite provisional setbacks at some stage in the worldwide economic slump right after the twirl of the millennium, franchising is still expected to be the greatest growing market way in strategy. For instance, McDonalds first store in Moscow had seven hundred seating arrangements and twenty seven cash registers. Joint Ventures is differentiated from other types of strategic alliances or collaborative relationships, in that a joint venture is a partnership of two or more participating companies that join forces to create a separate legal entry. McGraw-Hill explained that there are four factors associated with joint ventures which are appended below: Joint ventures are established, separate, legal entities. They acknowledge intent by the partners to share in the management of the joint ventures. They are partnerships between legally incorporated entities such as companies, chartered organisations, or governments and not between individuals. Equity positions are held by each of the partners. Wholly Owned Subsidiaries Wholly-owned operations are subsidiaries in another nation in which the parent company has full ownership and sole responsibility for the management of the operation (Osland, Taylor and Zoe, 2001:153-261). These global marketing strategies may be differentiated according to three characteristics of the modes that have been identified (Woodcock, 1994:253-274): 1 quantity of resource commitment required; 2 amount of control; 3 level of technology risk. Resource commitments are the dedicated assets that cannot be employed for other uses without incurring costs. Resources may be intangible, such as managerial skills, or tangible, such as machines and money. The amount of required resources varies dramatically with the entry mode, ranging from almost none with indirect exporting, to minimal training costs in licensing, to extensive investments in facilities and human resources in wholly-owned subsidiaries (Osland, Taylor and Zoe, 2001:153-261). Control is the ability and willingness of a firm to influence decisions, systems, and methods in foreign markets. In a franchise type of licensing agreement, control over the operations is granted to the franchisee in exchange for some type of payment and for the promise to abide by the terms of the contract. Thus, the licensor has little direct control. In a joint venture control is shared formally according to level of ownership, as when equity ownership over 50 percent gives one of the partners the largest number of directors on the board. However, informal control mechanisms may also be exerted as when one partner possesses and uses knowledge and information that the other lacks. Wholly-owned subsidiaries are attractive to many companies because this mode enables the MNC to exert the most control in decision-making. Technology risk is a third parameter of decision-making. This concept can be defined as the potential that a firms applied knowledge (tangible and/or intangible) will be unintentionally transferred to a local firm. In a licensing agreement, the risk of the licensee reproducing and using the licensors technology in the future is fairly high. Joint venture partners may also learn and acquire unspecified elements of the other firms technology in the context of their partnership. Technology risk is probably lowest in a wholly-owned subsidiary, since the operations are under the control of only one firm (Osland, Taylor and Zoe, 2001:153-261). Resource commitment, control, and technology risk are highly correlated. For example, as implied above, increased control leads to lower technology risk. Yet, control also requires increased resource commitment. Some researchers have argued that the entry mode decision consists mainly of determining the levels of resource commitment, control, and technology risk that the international entrant desires or can accept. Since each mode has a certain level of each factor, the entry decision can seem clear cut (Osland, Taylor and Zoe, 2001:153-261). In practice, the entry mode decision is highly complex. Besides the previously discussed qualities of each mode, there are a host of target market factors and within company factors that may affect decision making. Certain antecedent conditions affect whether to use, say, a high control mode or a method that requires few resources (Osland, Taylor and Zoe, 2001:153-261). MARKETING MIX STRATEGIES: Standardization proponent argued that the world and the people living in it have similar wants and needs as it has become one homogenous market due to the intervention of international media specifically the television broadcasting, which has ultimately change the whole global scenario and made it to stand on common characteristics, circumstances, needs and wants. Champions of localization argue that the proponents of standardisation had based their theory on faulty assumption, that it says the world has become a homogenous market, which is not true as the standardisation proponents have overlooked the cultural differences between the countries which ultimately play a vital role in consumer behaviour regardless of the fact of expansion of media globally. The study of Vignali (2001:97-111) extracted some work of Ohmae (1989) which states that: Large companies must become more global if they hope to compete. They must change from companies that treat their foreign operations as secondary, to companies that view the entire world as a single borderless market. Similarly, Vignali (2001:97-111) also extracted Czinkota and Ronnenken (1995) who believed that: Altering and adjusting the marketing mix determinants are essential and vital to suit local tastes, meet special needs and consumers non-identical requirements. The debate between these two school of thoughts are still on but most of the scholars advocates regional segmentation strategy that the practice of market segmentation in domestic markets is a clear indicator of the ineffectiveness of treating the whole world as a homogeneous market, as significant tool when entering global. Regional market segmentation examines homogeneous segments, those with similar demand functions, across world markets. Assessing the similarities and differences between consumers across markets, this strategy achieves the advantages of both standardization and localization (Vignali 2001:97-111). FINDINGS ISSUES AND CHALLENGES OF GLOBAL MARKETING There are certain contextual determinants Porter (1986) and Kotler (1991) which are the issues and challenges organisations face that ultimately shape the marketing practices between countries (Sheth and Parvartiyar, 2001. 16-29). CONTEXTUAL DETERMINANTS OF INTERNATIONAL MARKETING In view of the fact that there are huge literatures in black and white on these determinants, consequently rather than going into detail few points would be discussed which results as a challenge or create issues for the organisations when going global. The first four determinants (political stability, government policy, ideology-driven economy, and fear of colonialism) are more responsible for the prescription of multi domestic marketing practices; therefore, there exists more anecdotal and trade literature and less academic research on them. This includes such managerial decisions as selection of countries with which to do business and specific entry strategies. Most of this has required the understanding and utilization of what has been recently referred to as the fifth P of marketing (politics and public relations). Unfortunately, there is very little theoretical foundation underlying these determinants, partly because international marketing has not borrowed constructs and theories from the social sciences, including political science. Instead it has relied on the framework provided in international business literature, wherein barriers to conducting international business have received considerable attention. However, much of it is based on simply the environmental and policy differences across countries and its consequential impact on the choice of market entry modes and operating strategies (Sheth and Parvartiyar, 2001:16-29). The next three determinants (marketing transfer issues, lack of infrastructure, and North-South dichotomy) need a little more description. Marketing transfer issues relate to the operational challenges of product, price, distribution, and promotion adjustments across national boundaries due to divergence in support and core value chain activities including materials, people, processes and facilities. Its purpose is to understand what market factors, including consumer differences and unavailability of marketing institutions, would pose difficulties to the multinational firm in transferring its successful international marketing programs to other countries (Sheth and Parvartiyar, 2001:16-29). The lack of infrastructure refers to inadequate availability of transportation, communications, physical, financial, natural, and human resources, especially in emerging markets. This lack of infrastructure impacts the adjustment process for the marketing mix as well as the implementation of the marketing program in foreign countries. Finally, the North-South dichotomy refers to the have and have-not countries of the world and is a direct reflection of the traditional economic development theories and their importance to international marketing practices. Academic research related to these three determinants is moderately rich and seems to be grounded in the theories of economic development, logistics and public policy (Sheth and Parvartiyar, 2001:16-29). Finally, most of the academic research in international marketing has been focused on the last two determinants: East-West dichotomy and product life cycles. The first refers to the cultural differences between nations at both a macro and a micro level of understanding and explanation. The second refers to the birth and death theories of product life cycles as they move across national boundaries (Sheth and Parvartiyar, 2001:16-29). Likely, McDonald is on different PLC in the US and Japan (Vignali, 2001:103). THE MARKETING MIX:CASE OF MCDONALDS The concept of marketing mix, the 4Ps, the product, the price, the promotion and the place has been formulated by McCarthy (1975) as extracted by Vignali (2001:97-111) and for many years the marketing plans of enormous companies have been established according to this concept but in 1996 Fifield and Gilligan added- process, physical and people as major aspects of marketing mix and make it to 7Ps of marketing which includes the following: (Vignali 2001:97-111) Product- features, quality and quantity. Place- location and number of outlets. Price- strategy, determinants and levels. Promotion- advertising, sales promotion and public relations. People- quantity, quality, training and promotion. Process- blueprinting, automation and control procedures. Physical- cleanliness, decor and ambience of the service. The following case study of McDonalds advocates that how it has achieved a competitive advantage in the market of Saudia Arabia and how it has implemented its international marketing mix. The marketing mix of McDonalds will be examined according to the above mentioned 7Ps. OVERVIEW OF MCDONALDS: McDonalds was founded in 1937 by the two brothers called Richard McDonald and Maurice McDonald in Pasadena, California. They introduced for the first time the drive-in restaurant techniques. Later on, Ray Kroc after seeing an opportunity in this business offered a McDonalds franchise for $950. In 1961, the McDonalds brothers sold it for $2.7 million. In 1967, the first international venture of McDonalds took place in Canada. Right after that, George Cohon after buying the licence of McDonalds opened his first restaurant in 1968 and ended up in building a network of 640 restaurants. Franchising has been the key of international success for McDonalds. McDonalds now operating in more than 100 countries with over 20,000 restaurants of which most of them are franchises (Vignali, 2001:97-111). In 1993, Riyadh International Catering Corporation (RICC) acquired the McDonalds franchise by which the 100% Saudi company owns and operates all McDonalds restaurants in the Central, Eastern and Northern regions of the Kingdom. Since establishing the first restaurant in Al Riyadh, RICC (McDonalds KSA) has been an active player in the local community and a solid supporter of its economy; sourcing around 80% of its supplies from local and regional suppliers in the Arab world. Recognizing the strength of the Saudi manpower, and translating its commitment towards the local community, RICC strived hard to increase the number of Saudi employees in its workforce. Today, the company is proud that around 25% of its employees are Saudi nationals (www.mcdonaldsarabia.com/index). PRODUCT: McDonalds is among those organisations which has successfully implemented both the global and local marketing strategy in terms of their products. That is, by keeping standardised procedures in producing their products all over the world, while only changing or adapting the contents of the products according to the countries in which it is operating. Irrespective of variations and recent additions, the structure of the McDonalds menu remains essentially uniforms the world over: main course burger/sandwich, fries and drink, however, the contents of the burger may vary according to the scenarios in which they are operating. The thin and elongated fries cut from russet potatoes is the signature feature of McDonalds which is consumed all over the world irrespective of any religious belief or political views (Vignali, 2001:97-111). The main aim of McDonalds is to create products which has standardised or uniformed taste all over the world, but there are times when McDonalds also adapted and changed its items because of religious laws, customs and rituals (Vignali, 2001:97-111). For instance, McDonalds operating in Saudia Arabia has adjusted their menus according to the local religious laws and customs. Like, McArabi Chicken Burger has been introduced, which suits the tastes of the people living in Saudia Arabia. In addition to it, McDonalds KSA, as well as McDonalds across all the Middle East countries served only 100% pure Halal prime cut beef and 100% pure Halal chicken from chicken breast meat with no additives and no fillers. McDonalds also serves the highest quality fries that are Halal and cooked only in 100% vegetable oil without any additives or flavours. Moreover, the Halal certificates which prevail in their market for McDonalds are called Braslo Beef, Braslo Chicken and Lamb Weston Fries (www.mcdonal dsarabia.com/index). Quality, since McDonalds has prevailed in every market with a similar aim that is the standardisation of its procedures, therefore, to maintain that regular inspections takes place either announced or unannounced in order to check the procedures according to different dimensions including the right quantity of contents to be used. This is a global practice of McDonalds which it has remarkably maintained all over the world and over a number of years (Vignali, 2001:97-111). Similarly, in Saudia Arabia it has launched the Open Door program as part of its initiatives that aim at educating customers about its food quality. The program offers the public the opportunity to tour McDonalds kitchen and take a close look at the high quality, safety and cleanliness measures that are implemented while preparing McDonalds food with an aim of High Quality Is Our Standard (www.mcdonaldsarabia.com/index). Nutrition, all McDonalds meals are rich with the various nutrients needed by your body including proteins, carbohydrates, vitamins, mineralsà ¢Ã¢â€š ¬Ã‚ ¦etc. In addition, McDonalds Happy Meals provide a great nutrient package for kids. The meals are an excellent or good source of nine or more nutrients, depending on which Happy Meal combination you choose. These include: Protein, fiber, vitamins B1, B2, B3, B6, B12, and C, calcium, iron, magnesium, phosphorus, potassium, zinc and copper. The nutrient values available on our tray liners and on our nutrition booklets are transparently provided to assist our customers with their selections at McDonalds restaurants in Saudia Arabia. (www.mcdonaldsarabia.com/index) Products Calories Total Fat (g) Carbohydrates (g) Protein (g) Beefburger 254 9 31 13 Cheeseburger 299 13 31 16 Quarter Pounder with Cheese 530 30 38 28 Big Mac 500 26 42 26 McRoyale 540 31 <