- What Is Different about International Marketing?
- Modes of Market Entry
- Marketing Entry Strategies·Learning from Emerging Markets
- A Framework for the Evolution of Marketing Strategies in an International Market
A Framework for the Evolution of Marketing Strategies in an International Market
The process of business development in an individual foreign country-market consists of a sequence of distinct business challenges, and this evolution produces a sequence of marketing strategies and marketing organizations. This evolution, originally described in the conceptual paper by Susan P. Douglas and C. Samuel Craig from which Figure 3-2 is adapted,11 consists of three principal phases: (1) a low-commitment market entry, in which the MNC seeks incremental sales with minimum investment and is in effect testing the market; (2) a phase of intensified local marketing activity to develop business beyond the platform achieved in market entry and maximize performance within the country; (3) the consolidation of national units into a more integrated and efficient global marketing organization. Although some start-up firms appear to telescope this incremental internationalization into a “born global” or “big bang” expansion (see Chapter 7), it remains the dominant pattern. The evolution of the corporation through these phases appears to accelerate with international experience—from a more laissez-faire attitude in early years of international operation to a deliberate and forceful approach as the firm becomes more dependent upon, and committed to, its international business. This reflects the organizational learning that occurs systematically during internationalization and highlights the fact that the objectives an MNC sets itself for its business in any individual country-market can be a function not only of characteristics of the country, such as market potential, stability, and existing business infrastructure, but also of its own corporate international experience, level of commitment to international markets, and relevant management resources.
Figure 3-2. The Evolution of International Marketing Strategy (Source: adapted from Douglas and Craig
In many ways, the initial phase is more concerned with sales rather than marketing. Given the international firm’s focus on risk minimization and its lack of local knowledge, the distributor will usually take the easiest option of selling the newly available products to its existing customer base. Indeed, the distributor will usually have been selected on the basis of this customer base. In this initial phase, there is little adaptation to the local market because the low sales levels cannot support the fixed costs of developing a local offer and because the international firm is still learning about the market. In fact, the only circumstance in which the international company is clearly targeting a segment of customers is when its broader international marketing strategy is based upon an international segment. In consumer markets, Nike, for example, addresses similar segments in multiple countries; in business to business markets, the customer is often international. Only when the distributor has exhausted the growth possibilities of “picking the low-hanging fruit” does the challenge of marketing arise with the need to target new customers or segments or introduce new product lines, in order to maintain growth.
It is often at this point that the international company takes over distribution and begins to invest in its own marketing organization in the country-market. Once this organization is in place, the range of products and services expands rapidly, often including new offers developed specifically for the local market. In this stage, the emphasis on local market development results in a marketing focus not unlike that in the domestic market or any other single market. Over time, however, the multinational firm can be expected to seek synergies across its global marketing network, both in terms of production and marketing economics, and market knowledge. It is also likely that it has a fully developed subsidiary in all developed markets, so it seeks consolidation to mirror the internationalization of its strategy. In the countries of the European Union, for example, many international firms are now shifting marketing strategy to a regional level, so they therefore realize that they do not need a senior marketing executive and team in each country.
There are a number of key learnings that experienced executives identify from this evolution:
Greater Commitment at Market Entry
Increasingly, experienced companies seek closer control over marketing strategy at the time of market entry instead of delegating everything to a local distributor. This usually involves placing one or two appropriately qualified executives in-market alongside the local sales and distribution partner. The objective is to accelerate market development and maximize performance earlier in the process rather than relying on the distributor’s customer base and then reaching a sales plateau (see Chapter 5).
Long-Term Planning at Market Entry
Frequently, the appropriate market entry strategy is the wrong market development strategy. In other words, a company learns after a few years in the market that the distribution organization has the wrong coverage, it has been offering the wrong product lines, or some other aspect of the marketing offer is wrong. The probability of this is higher when the company has taken an opportunistic approach to market entry and has viewed the country as no more than a potential source of incremental sales of existing products that can be achieved with minimal risk or investment. The remedy is obviously to prepare a more rigorous plan for market development at the time of entry—one that is based upon the level of analysis of market potential and enabling conditions described in the previous chapter.
Early Development of Local or Regional Marketing Programs
Experienced multinationals are becoming far more capable of modular design in their products or services, identifying a core platform from which local variations can be more easily and economically developed. This enables earlier development of products tailored to local market conditions, which can be expected to accelerate market penetration. In many cases, the level at which products are customized is regional rather than country by country. This enables a multinational to retain some economies of scale while still adapting to local demand characteristics. Once a firm’s international marketing network is well developed, such regional products may then be available at the time of market entry for other country-markets in the region.
These ways in which international firms are adapting the process of market development, based on accumulated experience, amount to a blurring of the three phases in the general framework described. Greater commitment at the time of market entry, for example, anticipates the increased investment and commitment previously seen at a later stage. Similarly, the development of regionally adapted products anticipates the integrated network and focus on international synergies characteristic of fully developed international marketing organizations.
Another important underlying dynamic, which experienced multinationals come to learn, is the distinction between market knowledge and marketing knowledge. Market knowledge is a local operating capability that is required for doing business in any country: it includes a knowledge of local regulatory requirements, business practices, negotiating styles, cultural norms, and a host of other details that add up to “the way people do business in a given country.” Clearly, this cannot be acquired quickly by an outsider, so it explains why even the most experienced multinational will always need some sort of local partner at the time of market entry. Marketing knowledge, by contrast, is a global product-oriented capability: Anheuser Busch or Heineken know more about the marketing of beer than any local partner they take on because of years of experience in a wide range of markets and segments. Like local market knowledge, it cannot be acquired quickly by somebody new to the business. It is clear that both types of knowledge (market knowledge and marketing knowledge) are required to grow a business in a new international market. Inexperienced companies, however, tend to take on partners with extensive market knowledge and, because of their own stand-off approach and desire to minimize risk, assume that the local partner also has marketing knowledge. In fact, the companies that own a particular product or service are almost always the most knowledgeable marketers of it—this knowledge is behind the long-run desire of most companies to gain “control” of their international marketing operations in order to maximize sales and growth. To rely on a local partner’s market knowledge to grow the business is to remove a vital engine of growth (in the form of well-developed marketing knowledge). This explains why experienced international companies are increasingly putting their own people alongside the local distributor or sales organization at the point of market entry.