International Marketing Management for Multinational Companies - Assignment Example

International Marketing Management Part (a) Why should the international marketer have knowledge of sub culture groups when attempting to segment markets in a particular country or region. Use examples in your answer. International marketing strategies are quite different from national marketing strategies. Many companies assume that what works in their home country will work in another country. They take the same product, same advertising campaign, even the same brand names and packaging, and with virtually no chance to try to market it the same way in another country. Many times such investments may turn out to be a big loss to the company. The main reason for this is the assumption that one approach works everywhere fails to consider differences that exist between countries and cultures. While many companies who sell internationally are successful following a standardized marketing strategy it is a mistake to assume this approach will work without sufficient research that addresses this question. Today in marketing studies these strategies holds high value for particularly those who would like to enter the global market. The explosive growth of international strategic alliances as firm’s way to enter markets as well as a mode to acquire new knowledge has affected the complexity of academic research about international cooperation and knowledge sharing process, because of the existing link between international knowledge transfer, strategic alliances form and partners cross-cultural variations. The expansion of markets, both domestically and internationally, intensifies environmental turbulence, impelling firms to enhance flexibility (Volderba, 359-374) and to improve their level of knowledge exploration (March, 1995). In the beginning of the 1980s many researchers in organizational theory developed a cultural approach to the firm trying to better understand the dynamics at work in the organizations (Canestrino, 184-204). Selling globally is not as simple as selling domestically. When marketing internationally, it is essential to decide on payment mode, shipping agency, customs interruption, and last but not the least customer satisfaction on products. If there are any problems, it is essential to deal with them across language, time zones, currency, and different legal systems. Marketing globally requires the expertise in local languages thereby increasing the complexity of advertising, Website content, and search engine optimization (DePalma, 2006). In recent years, a number of high- profile advertisers, including Walt Disney, Hewlett-Packard, Mercedes-Benz, and Coca-Cola, have started, or announced plans to start, worldwide ad campaigns. Some of these marketers have previously eschewed global campaigns, or switched back and forth between local and regional approaches. There are several strategies adopted by these companies while growing in the global market.  One of the oldest debate in the industries is that of "global vs. local". Proponents of global campaigns argue that a multinational company ought to present a single brand identity in all of its far- flung operations. Supporters of local approaches say it is more important to connect with local consumers - never mind whether they see a different advertising message when they travel to another country (Pfanner, 2006). Managing in a global environment means manage people who are separated not only by time and distance but also by cultural, social, and language differences. The main challenge here is to integrate and coordinate these individuals in ways that will ensure success. And it is important to be sensitive to and respect the cultural differences. People from different cultures tend to misunderstand each others behaviours or stereotype people from other countries. It is essential to recognize the discrepancies between cultures in order to work together effectively. For instance, Mary Kay Cosmetics, set up operations in China and discovered that it was not allowed to sell door to door as it did in the rest of the world. The Chinese government decided it had had enough Amway salespeople invading the country and called a halt to such selling. So Mary Kays Chinese managers came up with a new distribution system in China, and a savvy marketing manager there led the development and introduction of a new midrange product that sold well in Chinese department stores. Mary Kay brought this Chinese marketing manager to its Dallas headquarters to replicate what she did in China and help managers see how it could be replicated elsewhere in the firms global operations. That is the way to use the human supply chain very effectively (Rifkin, 2006). There are several studies conducted on ethnic identity as a variable in the communication mix to determine the impact of cultural segmentation. Ethnic identity is defined as “the individual affiliation with a specific ethnic group and it can be of variable intensity over time, affecting group strength” (Pires, Stanton, and Cheek, 224-236). A variety of cultural differentiators exist within each ethnic group. These differentiators are so unique, that the ways in which communication professionals typically research audiences may not work when examining ethnic groups. When analyzing and assessing potential ethnic markets, it is essential to examine demographics, psychographics, behavioural factors, personal attributes, networks of communication, location, concentration and cultural experiences (Cui, 54-73). Without researching all of these variables, organizations may fall into the trap of “single ethnic identification indicators” (Pires, Stanton, and Cheek 224-236). For example, a company offering Gas service in an urban area may assume that because the majority of people there speak Spanish, they are all Puerto Rican. This false assumption ignores the variety of subcultures that can exist within each ethnic group. Using single ethnic identification indicators, like language, flattens three-dimensional groups and reduces demographics and psychographics that can contribute to a successful communication campaign. Once communication professionals research targeted ethnic groups, they can select the best strategic approach based on the business/product/service and the audience. Three types of ethnic communication approaches are individual brand groups, cross-cultural/transcultural communication and ethnic niche marketing/subculture segmentation (Bush, et al 1-11). Part (b) Discuss the main political risks that may confront a company venturing into international markets. What can management do to take such risks into account? Portfolio investment values and cash flows are affected when political change causes unanticipated discontinuities in the business environment. This is the Robock and Simmonds (1973) definition of political risk. They are also affected by the risks pointed out by Root (1973) that include potential restrictions on the transfer of funds, products, technology and people, uncertainty about policies, regulations, governmental administrative procedures, and, finally, risks on control of capital such as discrimination against foreign firms, expropriation, forced local shareholding, etc. Wars, revolutions, social upheavals, strikes, economic growth, inflation and exchange rates all figure in the political risk literature and, obviously, are capable of affecting portfolio investment as well as direct investment (Clark and Tunaru, 155-173). Two of the chief reasons why people invest internationally are Diversification -- spreading investment risk among foreign companies and markets that are different in economy and Growth -- taking advantage of the potential for growth in some foreign economies, particularly in emerging markets. Of course, these have to be balanced with considerations against the possibility of higher costs, sudden changes in value, and the special risks of international investing. The diversification benefits in emerging markets have become a prominent feature of the financial globalization sweeping the world over the last decade. Besides market risk, however, investments in emerging markets are also exposed to political phenomena that are not generally present in the more developed economies. The Asian economic meltdown is one of the spectacular examples. This problem is well known to banks and multinational companies by the name of country or political risk and assessment techniques in these domains are relatively well developed. They are, generally not adapted to investment in that they tend to ignore the diversification aspect associated with cross country correlations and are difficult to translate into practical decisions. International business could expect to incur losses from several directions: 1 • Customers and suppliers default on contracts 2 • Failure of local banks – letters of credit dishonoured and transfer of funds may be frustrated 3 • Repatriation of dividends, profits, royalties and licence payments from overseas 4 • Local market for products may implode • Local operations may be disrupted by government intervention and discrimination or through political violence, terrorism and civil disturbances (Jardine Lloyd Thompson, 2003). To succeed in exporting, it is a must to first identify the most profitable international markets for your products or services. Without proper guidance and assistance, however, this process can be time consuming and costly. The following are some of the major other risks involved in international marketing: Changes in currency exchange rates: When the exchange rate between the foreign currency of an international investment and national changes, it can increase or reduce investment return. How does this work? Foreign companies trade and pay dividends in the currency of their local market. When you receive dividends or sell your international investment, you will need to convert the cash you receive into national currency. During a period when the foreign currency is strong compared to national currency, this strength increases your returns because your foreign earnings translate into more dollars or other national currencies. If the foreign currency weakens compared to national currency, this weakness reduces your returns because your earnings translate into fewer dollars. In addition to exchange rates, you should be aware that some countries may impose foreign currency controls that restrict or delay you from moving currency out of a country. Dramatic changes in market value: Foreign markets, like all markets, can experience dramatic changes in market value. One way to reduce the impact of these price changes is to invest for the long term and try to ride out sharp upswings and downturns in the market. Individual investors frequently lose money when they try to "time" the market in a particular country and are even less likely to succeed in a foreign market. When you "time" the market you have to make two astute decisions -- deciding when to get out before prices fall and when to get back in before prices rise again. Political, economic and social events: It is difficult for investors to understand all the political, economic, and social factors that influence foreign markets. These factors provide diversification, but they also contribute to the risk of international investing. Lack of liquidity: Foreign markets may have lower trading volumes and fewer listed companies. They may only be open a few hours a day. Some countries restrict the amount or type of stocks that foreign investors may purchase. You may have to pay premium prices to buy a foreign security and have difficulty finding a buyer when you want to sell. Less information: Many foreign companies do not provide investors with the same type of information. It may be difficult to locate up-to-date information, and the information the company publishes may not be in English. Different market operations: Foreign markets often operate differently. For example, there may be different periods for clearance and settlement of securities transactions. Some foreign markets may not report stock trades. Rules providing for the safekeeping of shares held by custodian banks or depositories may not be as well developed in some foreign markets, with the risk that your shares may not be protected if the custodian has credit problems or fails (Office of Investor Education and Assistance U.S. Securities and Exchange Commission, 1999). The U.S. government created the Trade Promotion Coordinating Committee (TPCC) in 1990. It is the federal government’s export team. The TPCC, an interagency task force chaired by the Secretary of Commerce, is dedicated to thinking strategically about global competitive position and has been charged with leveraging and streamlining export promotion and trade finance services (Identifying International Markets). Sudden changes in market value are only one important consideration in international investing. Changes in foreign currency exchange rates will affect all international investments, and there are other special risks that should be consider before deciding whether to invest. The degree of risk may vary, depending on the type of investment and the market. Going global is a risky and major step for many companies who are only familiar with their domestic market. It is important for the prosperity of the business to really know the international market. On average, it takes about a three-year commitment to establish a presence in a foreign market. This will require the resources of people and finances during this developmental period. Checking the feasibility of the venture is an obvious exercise before going global. A major step is evaluation of business or current resources of the company. If this confirms the commitment to export development, proceed with the next step, the Export Business Plan. Prior to spending a tremendous amount of research time on developing export plan, the diagnostic will help to evaluate whether the objectives for exploring foreign market will be satisfied and whether the risks of the venture are truly worth the returns. Finally it is important to be equipped with the risk management strategies to compete in the international market and have a flourishing business. Work cited Bush, I. Damminger, R., Daniels, L.M. and Laoye, E. : “Communication Strategies: Marketing to the ‘Majority Minority’” 26 August 2006, 1-11. Canestrino, R.: “Cross-Border Knowledge Transfer in International Strategic Alliances: From Cultural Variations to Asymmetric Learning Process”, Proceedings of I-KNOW ’04 Graz, Austria, June 30 - July 2, (2004) 184-204. Clark, E and Tunaru, R.: “Emerging Markets: Investing with Political Risk”, Multinational Finance Journal, 2001, vol. 5, no. 3, pp. 155–173 Cui, G.: “Marketing diversity and cost-effective marketing strategies.” Journal of Consumer Marketing. 19(1) (2002): 54-73. DePalma, D.A.: “Knowing When It’s Time to Take Your Brand Abroad”, Prism Business Media Inc. 26 August 2006, “Identifying International Markets”, 26 August 2006, Jardine Lloyd Thompson, “Political and economic risk to international business in emerging markets at its highest in 20 years, warns JLT Risk Solutions”, Press Information Issued by JLT Risk Solutions Limited London (2003). March, J.G.: “Exploration and exploitation in organizational learning”, Organization Science, 2, (1991), 477-501. Office of Investor Education and Assistance U.S. Securities and Exchange Commission, “International investing get the facts: How You Can Learn More About Foreign Companies and Markets” (1999), 26 August 2006, Pfanner, E.: “On Advertising: Passport to success?” International Herald Tribune 2006, 26 August 2006, Pires, G., Stanton, J. and Cheek, B.: “Identifying and reaching an ethnic market: Methodological issues.” Qualitative Market Research. 6(4) (2003): 224 – 236. Rifkin, G.: "Building Better Global Managers," Harvard Management Update, Vol. 11, No. 3, March 2006. Robock, S. H. and Simmonds, K.: “International business and multinational Enterprise”. Homewood: R. Irwin. (1973). Root, F.: “Analysing political risks in international business”. A. Kapoor and Ph. D. Grub (eds). Multinational Enterprise in Transition. Princeton: Darwin Press. (1973). Volberda, H. W.: “Toward the flexible form: How to remain vital in hypercompetitive environments”, Organizational Science, (1996), 7(4), 359–374. Read More