A Global Product or Service - Assignment Example

Answers of Thee Important Questions: Q1: What is a global product or service Can any product or service be marketed globally Why or why not How can you relate the 4P's of marketing to Customer Relations Management (CRM) in a global business environment Answer: There has always been a controversy around the definition of product or service. However, in terms of marketing, a product can be defined as the set of tangible and/or intangible goods, services, and ideas while having relevant benefits for the end-use1. Similarly, a global product or service can be defined as set of tangible and/or intangible goods, services, and ideas, while having relevant benefits for the inter-regional end-use market. For example, Microsoft claims its MSN Hotmail (free of cost email service) as a global product. A global product or service can indeed be marketed as it is claimed by every major producer of global products. For example, Google markets its search engine in various countries with respect to the local social and cultural issues. Another example of car manufacturing and producing giant Toyota, who market their global products (such as Toyota Corolla) which are meant to be for the use in various regions of the world by different types of end-users with different specifications and different levels of customizations. However, this also is a very controversial claim. A true global product is the one which is produced with a same version for multiple regions of the world. For example, Michael Jackson's earth song is a global product, since it is meant to be for individuals belonging to different regions, ethnicities, social and cultural backgrounds. It is not like that a different earth song is made for people in India and there is a different version of earth song for people in Europe. Customer Relations Management (CRM) is the implementation of process of moving towards long-term, cost-effective, mutually beneficial trust with selected customers while maintaining interactive relationship2. In a global business environment, it perhaps becomes very difficult and also very important to maintain same relationships with those selected customers while keeping in mind the basic marketing components of Product, Price, Place, and Promotion. Product: Usually, CRM becomes very important when it comes to customize the products according to individual customer requirements in intra or inter regional market. In global business environment, product can be customized for effective CRM. For example, success story of Apple Computer begins from maintaining its CRM in internal market while being able to produce highly customized computer equipment according to specific customer requirements. However, on a very large scale, this policy may become impossible. For example, it is almost impossible for Microsoft to call every individual user of its windows software and produce customized software on special requirements. Thus, it can be said that in global marketing and business environment, CRM can only be possible in terms of product only at a small scale. Price: While maintaining CRM in global business environment, it is essentially important to provide customers with special prices and discounts. On a large scale, this may also not be possible and can be termed as unethical. For example, it can be said that Microsoft will abuse international laws if it provides only Indian customers with very low prices for its Windows software while comparing the high prices of windows in international market. However, when it comes to selected customers, CRM does become possible in terms of pricing in international business and marketing environment. Place & Promotion: It can be argued that place cannot be effectively related to the CRM in a global business environment with enough evidences for a positive response. Promotion is always essential for a product's stable life in a global market. While considering relationship with selected customers, it can be said that promotion becomes possible and easy to do. For example, advertisement of MSN Hotmail's newest features is a customary policy of Microsoft by sending regular email messages to its customer's mailboxes across the globe. Q2: What are the primary functions of the foreign exchange market Who are the participants in the market How do global companies use the foreign exchange market to hedge against foreign exchange risks Answer: Foreign exchange market can be defined as a market for converting the currency of one country into that of another country3. On a larger scale, it can be said that a foreign exchange market exists wherever one currency is traded for another, and by far, it is the largest market in the world in terms of cash value traded, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions4. Primary functions of this market are to stabilize the value of one currency in its direct relationship with that of another by providing the accessibility to directly convert one type of currency into another. Major participants in this market are usually Banks. However, other major participants in this market are Commercial companies, Central banks, Investment management firms, Hedge funds, Retail forex brokers, and retail customers5. Foreign Exchange Risks: Foreign Exchange Risks usually affect businesses that deal in import/export. In simple terms, it can be said that Foreign-Exchange risks the potential gains or losses that occur as a result of an exchange rate change. It can also affect investors making international investments. For example, if money is to be converted into another currency to make a certain investment, then any changes in the currency exchange rate will cause that investment's value to either decrease or increase when the investment is sold and converted back into the original currency. In order to avoid the potential effects and damages caused by the foreign exchange risks, global companies practice money hedging. By large, global companies reduce the effect of foreign exchange risks by using various forms of hedging (insuring against the price of an item) through a bank. In terms of foreign exchange related risks, global companies make sure that they are insured against the price of currency which is considered as a moving item in the future. There are three types of hedging generally used in the money market. These are Forward Foreign Exchange Contracts, Opening Foreign Currency Accounts, and Buying Currency Options. Q3: How do you define the global monetary and financial system What are the international and regional institutions that comprise the system What role do these institutions play in promoting global business operations Answer6: The global monetary and financial system refers to those financial institutions and regulations that act on the international level while dealing directly with the governments of different countries, states, regions and territories. The main participants of this global system are, International Monetary Fund, World Bank, World Trade Organization, Asian Development Bank, Bank for International Settlements, etc. Apart from these major participants, there are other participant organizations that play some level of role in the global monetary and financial system. These organizations can be classified as various national financial agencies, financial and monetary government departments, central and state banks, finance ministries, hedge funds and private institutions acting on the global scale. The role played by these institutions while promoting the global business operations is thought to be very vital. These financial institutions assist governments of those countries, states, regions and territories who need financial support while restoring their economic stability. The major role of these institutions is to help devise programs of corrective policies and providing loans to support such governments. Apart from these functions, these global monetary and financial institutions provide governments with loans in order to carry out developmental projects while making sure in reducing budget deficits; thus, such governments get some gasping opportunities in order to implement adjustment policies and reforms to restore conditions for strong and sustainable growth, employment, and social investment. Q4: What are some advantages large companies have over smaller companies when choosing a mode of entry strategy Answer: Typically, large companies enjoy greater success rates over the smaller companies while entering into a new market or its segment. This happens due to the fact that small companies have smaller resources, which at times are insufficient in competing with a large company in a relatively newer market or it's opened up segment. For example; Linux, though it can not be categorized into the category of small company, it has proved to be ineffective while coming in direct competition with Microsoft in home user market for operating system software. This has happened till now due to the fact that Microsoft, in comparison, is by far a large company then the Linux and it entertains sufficient amount of marketing budget to derail Linux' positioning advertisement in the home market across the globe. In another recent example, it can be observed that Hutch (while being a smaller company then Vodafone) could not survive its competition with the later company while selling its telecom and mobile phone business in India to the Vodafone. References: (2001) Michael, Bruce, William. Marketing (13th Edition) Pages 136-138, 208-215 Global financial system, Wikipedia - The Encyclopedia. Retrieved on March 10, 2007 from http://en.wikipedia.org/wiki/Global_financial_system International Monetary Fund, Wikipedia - The Encyclopedia. Retrieved on March 10, 2007 from http://en.wikipedia.org/wiki/International_Monetary_Fund What is the Role of the World Bank Retrieved on March 10, 2007 from http://www.seerecon.org/gen/wbrole.htm Foreign Exchange Market, Currencies of the World - Pacific Exchange Rate Service. Retrieved on March 10, 2007 from http://www.econ.iastate.edu/classes/econ355/choi/fex.htm European Monetary System - EMS, The Free Dictionary by FARLEX. Retrieved on March 10, 2007 from http://financial-dictionary.thefreedictionary.com/European+Monetary+System+-+EMS What is hedging Why do companies hedge By Chand Sooran (Principal, Victory Risk Management Consulting Inc) (Available Online). Retrieved on March 10, 2007 from http://www.finpipe.com/hedge.htm The Management of Foreign Exchange Risk by Ian H. Giddy and Gunter Dufey (New York University and University of Michigan) (Available Online). Retrieved on March 10, 2007 from http://209.85.135.104/searchq=cache:AdkbdeLmjPwJ:www.stern.nyu.edu/igiddy/fxrisk.htm+How+do+global+companies+use+the+foreign+exchange+market+to+hedge+against+foreign+exchange+risks%3F&hl=en&ct=clnk&cd=3 Dear Niba, This document contains answers of four-questions that you had asked in your order. I have prepared the answers for these questions at my earliest and have uploaded them for you as early as possible so that you can read them and ask me to do changes if required. I have answered your questions with some detail so that it becomes easy to understand while including necessary background information where possible. As I told you in my last message, I have my semester exams from Monday to Wednesday (i.e. March 12-14). In between these three days, I will be taking on six different exam papers; therefore, may not have time to complete the remaining assignment before March 15. I'll upload the remaining assignment of yours on the same day i.e. March 15, 2007 or in worst case scenario on March 16, 2007. I am grateful to you for your highly valued cooperation in this regard! Good Luck! Dleep Kumar P.S Do not forget to wish me best of luck for my exams Opening Business: Case: Explain two managerial approaches, by which, managers can control situations, with less resources, where the expansion of their growing business can be affected by strong competition and other external/internal threats. Solution: Strong competition in the market brings the best from business-organizations. Generally, business oriented organizations introduce greater customer oriented services in such a situation. Competition also brings newer challenges along with it and may act as a motivational force for making a business organization 'best of the best'. But, it can also dampen one's chances to survive in the market. In such a situation, when a business organization enters into a market in presence of strong competitors; managers must utilize their resources properly in order to survive and gain an unseeded advantage over the arch rivals. Although it is a very difficult task to accomplish with required level of success, it can nevertheless be achieved by utilizing sound analytical skills of the top level management. Downsizing is not the most effective managerial approach to tackle this issue; rather, the management must look for other positive and result oriented approaches. Ideally, desired positioning7 through mass promotion is the answer to the question. However, this may not be possible if the growing business does not afford to burn its resources while doing expensive promotion due to the shortage of resources. In such a case, it also becomes almost imperative for the top level management to enter the market by creating a brand new segment7 (small or large by size) into it. Thus, a business can cater altogether a different set of buyers than its rivals. Managers can also avoid such strong competition by implementing product differentiation theory, where, a product is positioned to be different then what is being served in the market. Hence, buyers can assume that, perhaps, this product has further new added features which may bring additional usability for them and an edge for the business over its rivals. In any case, managers have to draft in successful and competitive strategic planning and its implementation through various steps. If the case of Starbucks India is taken as example; it can be noticed that there was strong and severe competition already present in Indian coffee market at the time of its entry. Starbucks India's management entered the market with the partnership of a local business group while attempting to utilize its local experience of the market. Thus, Starbucks India has had acquired a vast experience in the local market of India while being a newcomer itself. In the case of Starbucks India, perhaps the best managerial approach would be to source the input material as cost-effectively as possible8, and as the company grows, it will be able to bulk buy at ever more favorable prices. Thus, overall decrease in the pricing can be achieved while making customers to be attracted by such cost-effective solutions (who hates saving money!). This approach certainly guarantees coming in of new customers while reducing the adverse effects of strong competition. A new company, thus, can survive the decisive fears of strong competition by implementing penetrative pricing9. Another important managerial approach in this situation can be 'exchange of information10', where data on price, output, costs, discounts, purchase quantities, etc can be exchanged through the medium of the market while lowering competition. Read More