Globalization and its Effects on International Marketing - Term Paper Example

International Marketing-Sony Corporation Faculty i) Define Globalization and its effects that have led to defining the form of an international firm today. [40 marks] ii) With reference to an actual case firm (must be dealing with household durable goods), discuss the impact of political, social, economical and cultural (PEST) factors that has affected its international marketing. [60 marks] i) Define Globalisation and its effects that have led to defining the form of an international firm today. [40 marks] Globalisation in the simplest form can be defined as a means the reduction of barriers to the exchange of goods, services, and ideas across national borders.1 Globalisation is a universal process. This process have made the world one market place where things produced at one part of the world can be sold and utilised at the other part of world. Globalisation has been defined differently by different scholars. There is a rapidly expanding literature on globalisation and its impact on many aspects of peoples lives—including their working lives. There are many definitions of globalisation. These range from narrow technical definitions, associated with the structure of international trade, to those that define globalisation as a fundamental change in the ideological principles underpinning the international social, political and cultural order.2 As a result of the impact of Globalisation the overall world economy has been changed. On the one hand this process is getting influenced by various internal and external environments of the firms operating in the global market place; on the other hand the same has influenced various environmental factors in the countries these have been operating within. In the last few decades the world has been experiencing various changes on the technological, economic, and political fronts. These changes have supported in reduction of various barriers to international exchange and trade. Faster communication and transportation services supported this exchange to a large extent. It also have minimised the cost of effective and speedy communications. Innovations in various fields facilitated the process of globalisation worldwide. On the economy front various countries opened their local markets for the global firms. This also led to financial innovations. There has been tremendous growth in the financial innovations and the development of international bodies to protect and support global activities of firms. It eased the movement of capital from one part of the world to the other or within a country. On the political front government and states of various countries opened their market fully or partially based on their economy, local industries and economical growth goals. These countries utilised the tools like tariffs, non-tariff barriers and obstacles to investment, taxes, developing economic zone for development of particular regions etc. Impact of Globalisation on International Firm Sony Corporation is one of the biggest brand names in the electronics and consumer durables industry of the world. This company is known for its quality products and customer driven approach. The philosophy of company is based on consumers’ changing need. This is a global organisation which operates in almost all parts of the world like Asia, America, Oceania, Europe and Africa. Each of these continents differs from each other in various aspects of environment, culture, sociological, technological and infrastructural, political and legal and many others. The challenge Sony Corporation has faced for its operations and marketing in each of these continents is of various levels. These challenges can be minor due to currency rate frequency to major like unstable political conditions and offensive government policies. However the changing trends of economy and business worldwide has provided certain level of protection to the international firms but still several levels of challenges persist for these firms. a) Political situation The government policies, stability of government, terrorism, internal conflicts, trade policy of government, risk level involve in operating in certain global area is another area of concern for the organisation. Countries like Iraq, Taliban, etc where the political instability and hatred for foreign firms, it’s neither wise nor appropriate to start or continue any form of business. b) Economic situation The economic condition of particular country is also one of the areas of concern. The countries where the economic stability or growth is visible the organisation should develop products according to that market. Sony Corporation has been targeting Indian market due to the fact that high volume and growing disposable income of population encourages such products. The demand levels of products in the growing economies are increasing. People are focusing on the lifestyle products. Apart from those the other factors affecting the international firm are the exchange rates and inflation rate. These markets also attract competitors very fast. Sony Corporation has been getting first mover’s advantage for most of the growing economy. c) Socio-Cultural background Socio-cultural background refers to the living style of the people of specific region. Worldwide there are various languages, religions, norms and culture people follow. Black can be considered as a good colour in one part of the world while for the other part it can be symbol of death. The language, way of communication, message, and role of different genders in society is different in various parts of world and even within same country. In a country where Islam is a major religion the decision makers in the family may be male rather than female or equal decision making like the western countries. Aesthetics values attached to various products, their colour, presentations will differ from place to place. It becomes challenge for an international marketing firm to develop product and marketing plan according to the culture and social aspects of the target market place. d) The impacts of globalization on the demand level and consumer’s behaviour The impact of globalisation is directly on the economy and consumption pattern of any country. Globalisation impacts the demand and supply curve and the existing industries. When overall economy grows demands of various goods and services, more and more firms come into that particular sector, offering more choices to the consumer and increasing the competition. e) Economic trading block There are various associations and trading blocks of the group of countries like SAARC, Commonwealth, European Union, OPEC member countries, NATO member countries and others which function towards various objectives to benefit the member organisations. Any firm operating in the particular company may get benefited by working in particular country due to its trade policies and various agreements with the trade blocks. Views against Globalisation: There are several views against globalisation. When any firm enters new country the local industry of that country gets affected with that. Marx in mid-19th Century that globalization will make the poor countries poorer and bring about unmitigated economic crises and small-scale terrorism. (Thurow, L. & Lessard, D., 2002) Rorenstein-Rodan, P (1993) says on the contrary, development proceeds from the less developed areas to the more developed countries. This is due to the fact that the low developed countries the labour cost, material cost and operating cost might be low than the developed countries. Firms can operate in the host country more profitably than that of home country. The flow of capital, know how and others is from the home country to the host country. Globalisation has been proven a mean of development for various countries. The foreign direct investments have changed the overall economic and social perspective of these countries. ii) With reference to an actual case firm (must be dealing with household durable goods), discuss the impact of political, social, economical and cultural (PEST) factors that has affected its international marketing. [60 marks] The case discussed here is of Sony Corporation. Sony is one of the most admired and trusted brands in the world. The organisation was founded in 1946. Its headquartered is in Japan. Sony Corporation had revenues of over US$ 66 billion in 2003. Sony operates in six segments: Electronics, Games, Music, Pictures and Entertainment, Financial services and Internet based services. Sony has nearly 1,000 consolidated subsidiaries spread across 36 countries in which it employs over 160,000 people.3 Sony operates in Africa, Asia, North America, Latin America and Oceania. It operates in most of the markets in the world. As mentioned in the above paragraph it operates in 36 countries and employs more than 160,000 people across the world. The diversity of the environment in which organization is functioning can be understood by this fact only. Each country has different political, economic, socio-cultural background. This is further discussed below. a) Political situation Sony when expanded its market out of Japan it has to face various challenges. The governments of various countries had different trade policies, tax structure and the political conditions at various countries involved several kinds of risks. Like in Middle East region despite of being a good prospective market the current political scenario of some countries are unstable. Sony has a bad experience in entering the France market. The agent through which it was working it tried to cancel its agreement to that agent and wanted to set up a wholly owned subsidiary there. The agent had good relations with the ministry and this becomes one of the reasons ministry was reluctant for that. After a long time Sony got opportunity of fifty-fifty joint venture with Sony chose Bank. French government had tight controls despite of this fact the products of Sony become extremely popular there. On the other hand German Government had been supportive for Sony but market there was difficult to win due to the superior quality of existing competitors there. In America the start of Sony was good but later on America put restrictions on the imports of some special integrated circuits in Japan due to which Sony had to procure those from America itself. At each country Sony has faced some or other political conditions. The global success of Sony was due to the fact that Morita’s philosophy to understand the market and consumer requirement to the best level. This helped it in assessment of the expenditure and financial projections. The risk taken was based on effective market assessments. b) Economic situation The economic conditions of the countries in the world get influenced by various factors. The factors which have impact on the Sony’s operations and marketing are the income level and disposable income of the customer group, demand of products among the consumer groups, exchange rates and inflation. Sony has set up its overseas plants in Taiwan and Spain when Yen appreciated sharply against Dollar in mid 1980’s. During second half of 1997 Asian currency and economic turmoil also benefited Sony because it had major manufacturing bases in Asia and its cost in this region got reduced. But in the long run it had its negative impact on this. c) Socio-Cultural background The socio cultural background, language, social interactions, aesthetics, religion and other aspects of various countries have affected the strategies of Sony from manufacturing, product development to the marketing levels. Sony had developed products on the basis of the aesthetic looks of particular market. It developed the product according to German language where many guttural sounds were present. Details like the shape of buttons and colour of products are also based on the consumer and market preference. These factors are always influenced by the culture and society of individual customers. Sony has tried to be a good corporate citizen in the countries it has been operating. d) Technological Factors Sony operates in the highly competitive market. The organisation is led by technological innovations but these innovations get copied by the competitors very soon. The duration of benefiting profitably with these innovations is less because of product being copied. For instance, when Sony launched walkman it was soon copied by Samsung and various other competitors. Sony adopted the strategy to offer low priced walkman to tap the market. 80% of the innovations by Sony are extensions of the existing products. e) The impacts of globalization on the demand level and consumer’s behaviour Globalisation created demand for the products being sold outside the countries as well. Sony created demand of its products by excessive advertising and communications of the products and features it was offering. Apart from that the service stations the consumer centric approach has also been one of the factors for consumers to move towards Sony brands. Sony looked at the needs of customer in different markets and based on those needs it developed or modified its products and launched it with communicating the same benefits customer was looking at. These strategies helped it to serve various markets successfully. Globalisation created employment opportunities for developing countries. It improved the economic conditions of those countries by offering those an opportunity to encourage the investments, capital and technological know how to flow in the countries. More money was circulating within the economy which led to increase in disposable income. Governments in various countries like India decreased the rates on savings to increase the spending on various products. All these factors led to the flow of currency within the economy and outside the economy. The demands have been created with appropriate marketing strategies and offering products within the price range of consumers and according to their preferences. In India itself one of the biggest challenges for Sony was to offer products for the price sensitive consumer group. The Indian market was characterised by the price and value sensitive consumers, requirements of huge and robust distribution channel and highly competitiveness due to the local players and MNCs. Brand promotion played a crucial role in serving this market. In Indian culture there are various religions followed and people usually prefer buying new things during the festivals. The company offered exclusive offers during festival seasons. For the consumer durable products one of the major source of sales come from the festival seasons of this country. Sony has allocated 4-5% of its turnover for its advertising and promotional activities. Cricket is the most admired sports in India and Sony has been one of the sponsors during the major trophies and sports activities. It has acquired exclusive rights for the live telecast cricket matches from 2002 to 2007. The semi urban and rural market in India is huge. Sony also tried to target these markets with low end products. f) The economic / trading block India is a growing economy. It belongs to the developing countries. In last few years the foreign direct investment in this country has been increased due to positive and supportive government policies, changes in infrastructure and growing market for various product groups. India belongs to the Commonwealth member countries and SAARC member countries. Commonwealth is an association of 53 states which are working together in cooperation with each other to in the common interests of their peoples and in the promotion of international understanding and world peace. As mentioned on the website of Commonwealth the objective for the international trade is to ensure that all the members take full advantage of the benefits of globalisation. A key part of this is assisting developing countries improve their understanding of international trade rules and regulations and helping them strengthen their effectiveness and participation in WTO negotiations. This is achieved by providing policy advice on international trade developments, the WTO, ACP/EU relations and regional economic integration.4 On the other hand SAARC focuses on the economic growth and facilitation of economic integration of the member countries. The international marketing strategies for Sony have been primarily focused on the understanding of market and the target consumer groups. The consistent innovation and product development, product up gradation along with the advertising and promotional strategy has made it successful in various countries. Sony Corporation has focused on each factor to meet the stakeholders demand and it has been successful so far in that globally. Reference Drenzer, 2003, GLOBALIZATION AND ITS DISCONTENTS retrieved on 13 August 2006 from http://www.danieldrezner.com/teaching/PSCI243.doc International and Comparative Employment Relations: Globalisation and the Developed Market Economies. Contributors: Greg J. Bamber - editor, Russell D. Lansbury - editor, Nick Wailes - editor. Publisher: Allen & Unwin. Place of Publication: Crows Nest, N.S.W.. Publication Year: 2004. 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