Understanding Business Functions - Coursework Example

Understanding Business Functions Table of Contents Introduction 3 Reasons That Encourage Firms to Seek International Markets 4 Comparative Advantage 6 Nestlé Pure Life 7 Trends in the Global Market 7 Challenge of Negative Publicity 8 Globalisation Drivers 9 Future Trends 10 Problem of Bottled Water in Pakistan 11 References 12 Bibliography 13 Introduction Firms in the present scenario often opt for expanding their operations in different countries. This might be in terms of production and marketing as well. For instance, Honda is an automobile company which has its marketing and manufacturing units scattered all over the world. PepsiCo, Coca-Cola, IBM, Ford and several world renowned companies have their operations performed in more than one economy. In this context, the market oriented functions of an organisation (i.e. placing, promoting, pricing and serving the goods or services according to the ultimate customers’ preference) which is expanded in more than one economy, can be evidently termed as ‘International Marketing’. To be precise, the extension of marketing operations of any organisation situated in one economy to another is defined as ‘International Marketing’. The term can also be replaced as ‘Global Marketing’ (Cateora, P. R. & Et. Al., “International Marketing 13E (Sie)”). Reasons That Encourage Firms to Seek International Markets Organisations today are increasingly developing their activities with an aim to grow globally. There are several reasons for an organisation to take the decision to expand its operations internationally. Few reasons derive from within the organisational operations while few of them occur in terms of micro and macro environment of the firm. For instance, few organisations opt for global marketing due to the belief that growing globally can earn them better revenue and better market efficiency. In other words, when the managerial conception values the opportunities present in other economies more than its origin market, the organisation diversifies its actions towards the international market. It is due to this reason that Halliburton Co., one of the oil services organisations based in USA, decided to trade internationally with the aim to attain higher profit margin (Onkvisit, S. & Shaw. J. J., “International Marketing: Strategy and Theory”). With an overall perspective, the reasons that occur on the basis of macro-environment can be stated as the rise of risks and constraints in terms of legal and political attributes. Even this was another reason for Halliburton Co. to focus beyond the perspectives of USA. As the country legislations were evolving to be outraged according to the government, the company had to face certain major challenges in terms of political and legal issues. Finally, the company decided to develop its operations in the international market (Onkvisit, S. & Shaw. J. J., “International Marketing: Strategy and Theory”). Apart from the organisational issues and the problems and opportunities related to the macro-environment, there are also certain major reasons which occur in the micro-economic or industrial aspect. Few common reasons are customer preferences, lesser competitors, substitute products and other features which reward the company a better competitive edge in the new targeted market in the international perspective. An example worth mentioning in this context is the case of Coca-Cola. During 1900s, the company had already started to grow rapidly with increasing market demand for portable bottled drink. Identifying the opportunity in terms of demand in other economies and within its originated economy, the company developed its marketing activities in Canada, France and other countries. This in turn, offered the company an added efficient competency level (Coca-Cola, “History of Coca-Cola: 1905-1918”). Comparative Advantage One of the significant reasons for a company to choose the market strategy of global expansion is the fact of comparative advantage. Previously, the functions of an organisation were largely centred on absolute advantage that was based on the assumption of only two goods to be rendered in two different economies. However, in the realistic practise, organisations do not follow rigidly the form of absolute advantage. Today the organisations are more multifaceted and diversified having more than two products. For example, Ford produces different varieties of car products and markets the product with its target market strategy. On the other hand, Cadbury also produces more than a hundred items rendered to different market all around the world. Therefore, in the realistic viewpoint, a company today offers more than two products in more than two economies. This activity is referred to serve the company a certain level of comparative advantage (Carbaugh, R. J., “International Economics”). The concept of comparative advantage is therefore quite significant from the perspective of international marketing. This is because the theory suggests that one company may provide the opportunity to produce goods at a low cost while the other is offering a higher demand. For example, the climatic and the economic conditions of Brazil may be appropriate to produce Cocoa, but on the contrary the American market should provide a better market opportunity for chocolate based products. According to this theory, the company shall be able to offer its products at a low rate than its competitors and gain a level of comparative advantage in the international market (Gilligan, C. & Hird, M., “International Marketing: Strategy and Management”). Nestlé Pure Life Trends in the Global Market During the incorporation of the brand in the Pakistan market, Nestlé has witnessed several challenges and opportunities which depict the global market trend related to the industry. First, the customer preferences were driven by the fear of contamination in the tap water, mostly due to the fact of decreasing quantity and quality of fresh water to be supplied to the rapid growing population. Next, the firms manufacturing bottles and purifying water is becoming too costly. Moreover, using traditional means to obtain mineral water as done by Perrier springs can also prove to be insufficient to satisfy the world demand. The Pakistani market though was promising for the company in its initial stage, is presently facing a downfall in comparison to other markets like Italy and India. To state the Pakistani market scenario at present, the quality of tap water is referred to be highly contaminated causing serious diseases and death in the economy. This shall indeed give rise to the customer preference in the market, but as exclaimed by the Third World group ‘Oxfam’, the action of Nestle to introduce bottled water at a cheaper rate can influence the political actions to minimise the amount of contamination in tap water. Challenge of Negative Publicity At present, the company is also facing a major challenge in terms of negative publicity. For instance, the company had been facing the pressure from the Third World groups like Oxfam to re-evaluate the company’s operations. It is because these groups believe that the marketing of bottled mineral water by Nestle can affect the governmental actions to reduce contamination in the tap water. On the other hand, certain Public Relation practices of the company such as the awareness campaign which are often without the official approval of the company management reflect and enhance the fear to drink tap water. This issue of negative publicity was further encouraged by few powerful business leaders of the Pakistani market. It is evident from the above discussion that the core problem faced by the company is mostly related to its public relation operations and corporate social responsibilities. In order to eradicate these obstacles, the company should re-emphasise on its operations in the market. An effective solution to the problem can be to be extra focussed on the sustainability issue. In other words, the company through the awareness campaigns can suggest the local people belonging to the lower and the middle class of the economy, to purify the tap water themselves. This shall generate the feeling of trust within the market and develop the acceptability of the brand once again. It shall be further effective due to the reason that these kinds of products are mostly based on the trust and the acceptability of the targeted customers. Globalisation Drivers Globalisation, in an overall perspective is termed to be a voluntary process and is driven by multifarious factors arising from both systematic and environmental issues. The major drivers of globalisation are generally categorised in four groups, i.e. market drivers, cost drivers, government drivers, economic drivers, competitive drivers and cost drivers. These factors have a varied influence from one industry to another. Apart from these key drivers, the technological factor also has an immense influence in terms of globalisation. Today most of the companies tend to go global due to one basic reason, i.e. technological interdependence (Nankervis, A. R., “Managing Services”). In the case of Nestle, the globalisation drivers which are quite evident are basically the market drivers. The company at its present situation is facing a problem with the fluctuations in customer demands and needs. In other words, customer preference is one of the major factors which are pressurising the performance of the company operations. Apart from the market drivers, the company operations are also getting strongly influenced by the competitive drivers present within the economy. However, the company’s decision for globalisation was also driven by the cost drivers, such as the bottle manufacturing and the water purifying costs. Hence, in this case almost every cost driver was evident along with the technological factors. Future Trends The company at its present stage is evidently facing certain major problems in terms of customer demands and competitive influences. However, there are also certain future trends which can prove to be fruitful for the company in its near future. First, the global trend of customer preference is increasing in the favour of bottled mineral water. This is due to the effect of increasing awareness regarding water contaminations and diseases caused by water. The company thereon estimates to gain an increased amount of customer demand when compared to other markets like India and Italy. Apart from this opportunity, the company might also come across to certain major problems, such as the increasing competition with more than 50 local brands in the Asian Market. However, according to the expectation and projection of the company, the Asian bottled water market is also likely to grow rapidly in a long time perspective which is indeed an opportunity for the company. Problem of Bottled Water in Pakistan The market demand of bottled water is basically driven by the issue of trustworthiness. Therefore, the brand is promoted by highlighting the purity factor. Nestle in this context also has adapted the promotion technique to promote its brand, the Nestle Pure Life. But in Pakistan the matter seems to be slightly problematic in comparison to other economies. In Pakistan, the tap water is recorded to be highly contaminated causing more than 80% of diseases and approximately one-third of the total deaths in the nation. Therefore, purity of water in the economy is a major issue to be considered. On the contrary, the promotional techniques of the bottled water are highly depended on the customer perception and the purity factor. Any kind of promotional techniques in this regard shall attract the majority of the economy which in turn is feared to reduce the governmental force in order to eradicate the water contamination problem. In addition, the past experiences of the economy regarding the baby-milk disgrace are also a major problem for brand promotional schemes based on the purity of water. Due to all these reasons, the purity factor of bottled water can be a major problem in the brand promotional activities. References Carbaugh, Robert J. International Economics Cengage Learning, 2008. Cateora, Philip R. & Et. Al. International Marketing 13E (Sie) Tata McGraw-Hill, 2008. Coca-Cola. “History of Coca-Cola: 1905-1918”. December 29, 2010. Safeguarding the Brand, 2010. Gilligan, Colin. & Hird, Martin. International Marketing: Strategy and Management Taylor & Francis, 1986. Nankervis, Alan R. Managing Services Cambridge University Press, 2005. Onkvisit, Sak. & Shaw, John J. International Marketing: Strategy and Theory Taylor & Francis, 2008. Bibliography Rosemann, Nils. “Drinking Water Crisis in Pakistan and the Issue of Bottled Water”. December 29, 2010. The Case of Nestlé’s ‘Pure Life’, 2005. Read More