International and Domestic Marketing Comparison - Essay Example

Due to marketing environment uncertainty, multinational companies (MNCs) keep the options open whether to shift operations within or establish a network of extended contracts against conducting business in the open market where it can create new incentives, regulate information flow and coordinate mechanisms (Manolis, Nygaard & Stillerud, 1997). Domestic markets can absorb uncertainties by bridging gaps between supply and demand, by reducing opportunistic behavior on the part of the exchange partners, and facilitating flow of information. Environmental uncertainty affects vertical control in international markets. Uncertainties could arise due to cultural, political, legal, and economic influences. The ability to respond quickly to changing market conditions motivates vertical control. Market concentration does not work in Germany as hard discounter Aldi carries no national brands and yet its market share has grown dramatically over the decade (Gielens & STeenkamp, 2007). Aldi does not cooperate with national brands thus collusion opportunities are less in more concentrated markets. New product acceptance is lower in heavily promoted categories but heavy advertising can facilitate new product success in Germany. For any given product introduction, the influence of the competitive environment can differ across countries. Thus even companies pursuing global strategies should concentrate on the domestic markets. Germany has been experiencing weaker GDP growth which implies that its IT growth is not in line with its GDP growth. The German model of business is deep-rooted in a specific set of national-level accommodation but is under pressures for transformation as a result of unification, the opening of new labor and product markets on its eastern borders and globalization (Ferner & Varul, 2000). The German firms were slow in becoming MNCs. They took a mature approach of first learning lessons from their subsidiaries that operate in more internationally advanced host environments. Research suggests that the German firms lack well-developed systems of international management development. Because of their inherent traditional approach, they are more likely to absorb the prevailing business-cultural practices of that host country rather than transmit their own peculiarities to others. The Great Wall Sheraton Hotel (GWSH) Beijing is a joint venture enterprise between the American ITT Sheraton Corporation and various Chinese business partners, and operated through a management contract under the brand name of ITT Sheraton Hotels and Resorts. ITT Sheraton’s global reputation for service excellence and quality requires the Beijing hotel’s commitment to quality and customer satisfaction (Mwaura, Sutton & Roberts, 1998). The GWSH has its own distinct US-influenced corporate culture. US companies strongly adhere to the US cultural values of social mobility, economic achievement, closeness to the customer and productivity through people but the influence of the Chinese is present in the environment, the language, the folklore and the practices of government, business and interpersonal relations. Theorists therefore argue that the Chinese culture is a strong determinant of the ways in which organizations in China are managed. Thus, US cannot enforce the same business practice in its overseas ventures and local culture has to be taken into account. Uncertainties in business are most prominent in the telecommunications industry. Despite fluctuating fortunes and the volatility of the industry, Vodafone is the worlds biggest wireless operator and one of worlds largest company by market capitalization (Strategic, 2004). To start operation is US, Vodafone would have to obtain a license. To avoid these hassles, Vodafone invested of £112bn for the acquisition of US firm AirTouch in 1999 (Stamp, 2006) but because of because of security laws and other regulatory barriers, Vodafone did not get success in USA. Thus political and governmental barriers do obstruct the market environment. The automobile industry is the most globalised industry in the world. Volkswagen (VW) was one of the few companies that could take the challenge of globalization and survived despite cost cutting measures (SD, 2002). Both BMW and Mercedes set up plants in USA but they found that it is much more than setting up a plant and taking on staff. They realized that the prestige of German cars comes from the fact they are ‘built in Germany’. Hence the drive to maintain a global position had to be carefully balanced with the brand image and the brand image can be sustained only when the working conditions are not strictly regulated. Mercedes sent all their workers to Germany for technical training. Sales of Porsche, Volkswagen Audi and Mercedes-Benz have all gone up while GM and Ford, the US manufacturers have experienced shrinking sales (GACC, 2007). The reason attributed to this is that the German cars are fuel efficient and the diesel passenger cars are something of a novelty to the US market. Thus what is important is to give the consumers what they are looking for. After VW took over Skoda in 1991, the company has transformed from a small, low volume producer of maligned, cheap and low quality cars into a mass producer of vehicles which have gained an enviable reputation of reliability and quality (SD, 2003). In 2001 it produced double the amount of cars that the plant produced in early 1990s. This is being manufactured in Czech Republic and has gained the same reputation as the parent company, which implies that making cars in Germany is not what matters. It is the governance, reliability and the ability to steer the company forward that matters. In US too there has been a turnaround as the new management team was able to win the workforce through empowerment, trust building and partnership (Birkinshaw, 2003). The brand image in US has also been changed due to alteration in their advertising strategy. Firms in today’s global scenario are constantly being pulled by their strategies while they are being pushed by assertive customers. Organizations have been forced to reorganize and there has been a steady evolution of organizations towards closer alignment with their markets (Day, n.d.). Motorola, one of the world’s most innovative companies, is shaping the future in Germany. They have five strategically located units exploiting location-specific synergies. They have recently signed a unique marketing agreement with Napster, the pioneer of digital music, offering free and easy access to a vast collection of music and content across Motorolas entire line of portable subscription-enabled devices (PRNewswire, 2007). Motorola enjoys an exceptional market position both in US and Germany. Whether service package design be centralized or should be managed country by country has always remained an issue. Kentucky Fried Chicken (KFC) addressed this issue by sending managers to distant provinces, with hardly any expertise and practically no staff support (McLaughlin & Fitzsimmons, 1996). Each country manager was left to make a success of his own venture. The corporate staff had little choice but to conform to the US template. Franchising collapses in the face of cultural adaptation. In the hospitality industry, Teare (1995) emphasizes that the incentive packages too have to be flexible and vary across nations. The German managers in the hospitality industry prefer incentive based on thirteen-month salary bonus rather than a non-contributory pension scheme used in USA. It is thus evident that domestic marketing differs from international marketing. The culture, behavioral patterns, the government regulations and the customer needs of the other country has to be taken into account and not of the host country. Even the automobile manufacturers cannot afford to ignore the customer demands. Volkswagen realized that what matters is efficient management and trust. Culture of the country where any product is launched has to be taken into account. The political stability, the governmental barriers, the local culture all influence the marketing environment and no firm can expect success without giving these due consideration. References: Birkinshaw, J., (2003), Volkswagen strikes back, Business Strategy Review, Vol. 14 Issue 4 Winter 2003 Ferner, A., & Varul, M., (2000), Vanguard subsidiaries and the diffusion of new practices: a case study of the German Multinationals, British Journal of Industrial Relations, 38:1 pp. 115- 140 GACC (2007), German Business in the U.S. on the Fast Lane, German American Chamber of Commerce, 14 June 2007 Gielens, K., & Steenkamp, J., (2007), Drivers of consumer acceptance of new packaged goods: An investigation across products and countries, Intern. J. of Research in Marketing 24 (2007) 97–111 Manolis, C., Nygaard, A., & Stillerud, B., (1997), Uncertainty and Vertical Control: An International Investigation, International Business Review Vol. 6, No. 5, pp. 501-518, 1997 McLaughlin, C. P. & Fitzsimmons, J. A. (1996), Strategies for globalizing service operations, International Journal of Service Industry Management, Vol. 7 No. 4, 1996, pp. 43-57 Mwaura, G. Sutton, J. & Roberts, D. (1998), Corporate and national culture – an irreconcilable dilemma for the hospitality manager? International Journal of Contemporary Hospitality Management 10/6 [1998] 212–220 PRNewswire (2007), Napster and Motorola Enter Unique Marketing Agreement for the US, UK and German Markets, 14 June 2007 SD (2002), Peugeot, VW and Renault keep the wheels turning, Strategic Direction, Volume 18 Number 7 2002 pp. 13-15 SD (2003), What now for Jaguar and Skoda? Strategic Direction, Volume 19 Number 8 2003 pp. 8-11 Stamp G (2006), Japanese Sale buys Vodafone Time, 14 June 2007 Strategic (2004), How Vodafone is wired for growth, Strategic Direction, Volume 20 Number 7 2004 pp. 22-24 Teare, R. (1995), The international hospitality business: a thematic perspective, International Journal of Contemporary Hospitality Management, Vol. 7 No. 7 1995, pp. 55-73 Read More