Principles of Marketing Essay I

Jtiumaf (>f MarUung Management, I98fi, 2, Nu 2, 135

Global Marketing Myopia

Susan P. Douglas and Samuel C. Craig Professor of Marketing and International Business, and Associate Dean and Professor of Marketing, respectively. Graduate School of Business Administration, New iork University, 100 Trinity Place, New York, NT 10006.

The objective of this paper is lo expand the concept of global marketing strategy beyond its current myopic focus on product positioning and branding. Emphasis on these issues tends to lead lo the conclusion that standardisation is the most desirable global strategy. However a successful global marketing strategy needs to be developed and evaluated within the broader context of the overall strategy of the firm, rather than being based purely on customer-market considerations. This calls for examination of resource allocation across countries, market segments and products, the integration of sourcing activities and production, management and logistical systems into global marketing strategy.

INTRODUCTION

International marketing strategists are embroiled in a fierce debate concern- ing the wisdom of standardising products and brands worldwide. Propo- nents of the philosophy of "global" products and brands, such as Professor Theodore Levitt of Harvard, and the highly successful advertising agency, Saatchi and Saatchi, argue that, in a world of growing internationalisation, the key to success is the development of global products and brands. In other words, a focus on the marketing of standardised products and brands worldwide (Levitt 1983). Others point to the numerous barriers to standard- isation, and believe that greater returns are to be obtained from adapting products and marketing strategies to the specific characteristics of individual markets (Fisher 1984, Kotler 1985, Vedder 1986).

The focus of the debate on the issue of standardisation versus adaptation as the keystone of international marketing strategy ignores the role of other components of global strategy. In the first place, emphasis on standardis- ation vs adaptation does not take into consideration the fact that many companies are multi-product businesses, and hence need to consider the cohesion or co-ordination of marketing strategies across product lines and opportunities for shared marketing expenditure. These may tend to create pressures towards a country specific or regional orientation rather than a standardised global approach. In addition, focus on standardisation neglects the interdepencence of marketing strategies with the firm's strategies rela-

This paper was presented at the 13th Annual Conference of the European Marketing Academy, 3-6 June 1986, Helsinki, Finland.

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156 SUSAN P. DOUGLAS .AND SAMUEL C. CRAIG

tive to resource markets—raw materials, components, managing expertise, technology or capital, as, for example, policies relating to global sourcing, licensing of technoiogy or other know-how, etc. Such a perspective also tends to neglect the complexity of establishing and co-ordinating production, management and distribution systems for world markets and the extent to which these may involve joint ventures or collaborative agreements with other firms in specific countries. These may thus impose certain constraints on the firm's ability to standardise strategies across countries. Furthermore, decisions relative to global strategy are seldom made in a vacuum, but rather relative to an existing network of operations spread across countries and diverse product lines. This may, therefore, affect the costs and advantages of moving towards a strategy of global standardisation.

The purpose of the present paper is thus to expand the concept of global marketing strategy beyond its current myopic focus on product positioning and branding and to consider also the interrelation with sourcing strategies relative to markets upstream, and the development of production, manage- ment and logistical systems to supply target markets. The various compo- nents of global strategy are first examined, together with the key issues to be considered in each area. The benefits and limitations of global standardis- ation are then examined, followed by an examination of the impact of other components of global strategy on such a policy. The advantages of adopting a broader integrative perspective to strategy development are then discus- sed, together with the implications for global strategy.

THE COMPONENTS OF GLOBAL MARKETING STRATEGY

Innumerable forces such as improved and more efficient transportation and communication systems have triggered a growing internationalisation of business and the resultant integration of markets worldwide for many goods and services. As a resuit, increased attention has been focused on integrating and co-ordinating marketing strategy across national boundaries to take advantage of potentiai synergies in internationai operations. This requires consideration not oniy of marketing mix strategies relative to target markets worldwide, but also of sourcing and procurement strategies and the design of production, management and logistical systems to supply markets worldwide (Takeuchi and Porter, 1985).

The marketing mix

A core component of international marketing strategy is the marketing mix. Here, as noted previously, a key issue is the extent to which this is standardised across countries, or is adapted to each specific national environment. However, while this issue has attracted considerable attention in relation to product policy and branding, it should also be considered relative to other elements of the marketing mix, such as pricing, distribution and promotional policy.

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Standardisation may thus be desirable and more feasible in relation to certain aspects of the marketing mix, such as for example, products, but not in relation to pricing or distribution. For example, Kellogg's markets its Corn Flakes brand in many countries throughout the world, but in some cases standardises its promotional themes across regions, as, for example, Latin America, the Far East, and in other areas, such as Europe, develops promotional themes, packaging and distribution strategies specific to each country. All possibie combinations of standardisation vs adaptation with regard to each element of the mix need thus to be considered.

Sourcing strategies

A second major component of internationai marketing strategies are deci- sions reiating to sourcing or procurement of required inputs, such as raw materials, components, management expertise, technology or capital. Here, as in the case of the marketing mix, a central issue is the extent to which these are integrated and co-ordinated across national markets, or rather are de\eloped and implemented on a country by country basis.

As in the case of customer markets, the increased efficiency of inter- national transportation and communication networks, coupled with increased awareness of differential iabour, production and raw materiai costs in different countries, has stimulated the integration of these markets. This in turn has encouraged the development of global sourcing and procurement strategies. Companies may thus take advantage of economies or increased efficiencies afforded by the consolidation of purchasing power on a global scale. In addition, lower labour or production costs in other countries may also be exploited.

The benefits associated with global sourcing may, however, depend on the extent of product standardisation in world markets. If a company markets a standardised product line worldwide, opportunities for global sourcing may be more significant than where local adaptation takes place. In fact, global standardisation may create pressures toward global sourcing to ensure compatibility and consistency in production and uniformity in production costs worldwide. On the other hand, the existence of barriers to global sourcing in certain countries as, for example, "buy local" policies, or import tariff quotas or restrictions, may encourage local product develop- ment or adaptation of products to locai market conditions.

Opportunities and barriers to global sourcing may thus impact on the advantages and costs associated with product standardisation and need to be examined carefully in each specific case.

The design of production, management and logistical systems

The third component of global marketing strategy is the design of the production, management and logistical systems to deliver desired benefits to target markets. Here again, a key consideration is the extent to which these

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are co-ordinated and integrated on a global scale. This issue is further complicated by the extent to which a company may decide to enter into collaborative agreements with other firms, as for example, licensing tech- nology or trademarks, joint ventures for production or tnarketing, or piggybacking on existing distribution systems of other companies.

As in the case of sourcing strategies, numerous synergies may be achieved through the integration and co-ordination of production, management and logistical systems worldwide, as for example, economies of scale in produc- tion and technical development, udiisation of specialised expertise or exploitation of process skills and standardised management procedures worldwide. Experience may be transferred from one country to another and learning accumulated at a faster rate, thus providing substantial cost- savings.

On the other hand, barriers to the development of such systems abound, ranging from trade barriers such as tariffs and quotas exchanges restrictions to increased transportation or administrative costs, immobility of labour or other resources, market fragmentation or differences in technological con- ditions may imply that different production methods or logistical systems are more efficient.

A company may also find it advantageous to enter into collaborative agreements with other companies to acquire technology, capital, production knowhow or other resources required for specific product markets. In some cases, other companies may possess specific marketing expertise, or an established distribution network in a given country, or may be able to operate more efficiently in a specific environment, making collaboration desirable.

Such arrangements may, however, constrain a company's freedom to establish and control marketing strategy. Local companies may, for example, favour tailoring strategy to local market conditions, and oppose global standardisation which creates external ties and facilitates control by the parent company. Such factors have thus to be taken into consideration when developing global strategy.

Product line or product business

Where companies have multiple product lines or product businesses, the co- ordination of marketing strategies and in particular, of resource allocation strategies across product lines and product businesses needs also to be considered. Here, opportunities may exist for shared marketing expenditures or joint utilisation of production, distribution or other facilities. Adminis- trative overheads may also be spread across product lines or product businesses, thus reducing unit operating costs.

In some instances, the costs associated with initial entry into a country may be substantial, as, for example, in developing familiarity with market conditions and competition, and establishing relations with distributors, agents or regulatory bodies and oflicials. Consequently, it may be highly

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advantageous to amortise such costs across a broad range of products. Such factors may aJso make the acquisition of product lines and brands from other companies attractive, and thus encourage the development of country- based strategies rather than a policy of global standardisation.

In deveioping giobai marketing strategy for a specific product or brand, the integration of strategy into existing activities and operations of 'a company has, therefore, to be assessed. Frequentiy, these may consist of a patchwork of different products and types of operation spread across an array of countries. Integration and co-ordination of strategy within this organisation context may thus dramaticaiiy affect the economics and feasibility of standardisation.

STANDARDISING THE GLOBAL MARKETING MIX

In developing giobai marketing strategy, a central theme is the standardis- ation vs adaptation of the marketing mix. Proponents of standardisation point to the increasing homogenisation of customer tastes and interests woridwide, and suggest that substantiai economies of scale can be achieved by marketing standardised products, enabling companies to obtain a crucial competitive edge over nationally oriented companies (Levitt, 1983). Critics of this viewpoint, on the other hand, underscore the innumerable barriers to this approach, such as government policy, tariff and trade restrictions, product, pricing and advertising regulation, competitive strategies, and argue that tailoring strategy to specific national environments will generate improved response (Buzzeil, 1968). This debate is next examined in more detail.'

Benefits of standardisation

Economies of scale in production and marketing One of the main arguments put forward in favour of standardisation is that siibstantial economies of scale in production and marketing may be achieved by developing a standardised product line or a standardised advertising or promotional campaign for markets worldwide (Saporito, 1984). However, such arguments ignore recent developments in flexible automation, which enable production of nonstandardised products at sub- stantial cost-savings, and reduce the minimum efficient scaie of production. Furthermore, production costs are only partial and not necessarily critical components in determining total delivered cost to the ultimate customer. In many instances, the costs of distribution, which are more difficult to standardise, will exceed production costs. Similarly, costs of developing advertising copy may be less significant than media costs, or, as for

'The following section is based on Wind, Yoram and Susan P. Douglas, "The Myth of Globalization" working paper. New York University 1985. See also the speciai issue of Advertising Age, June 28, 1984.

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example, in the case of industrial goods, be a relatively minor aspect of overall promotional activity.

Transfer of experience or know-how Improved integration and co-ordination of marketing activities across countries or regional areas, also facilitates transfer of know-how and experience developed in one country or market to another. This may enable better use of specific types of expertise, as for example, in assessing country or foreign exchange risk, developing creative advertising copy, negotiating contracts, etc. Similarly, good ideas, whether for products, advertising copy, or distribution may be exploited on a broader geographical scale. Bic, has, for example, been able to exploit its "throwaway" concept in the lighter, razor blade and pen markets all over the'globe. Philip Morris has effectively used its cowboy image to market its Marlboro brand in almost every country throughout the world.

Uniform image Standardisation ofthe product line, service, advertising copy, etc., also helps to project a uniform global image throughout the world. This may be particularly desirable in markets where target segments travel extensively or are open to communication and interaction with other countries. Products and services such as cigarettes, soft drinks, liquor, car rental, hotels, etc., may all benefit from an "international" image.

In industrial markets, a uniform image may be particularly effective in relation to customers who themselves operate on an international scale, and desire to purchase a uniform product and consistent service worldwide. Purchase of a standardised product or service thus ensures uniformity in production standards, systems, and compatibility in operating procedures and also uniform production costs worldwide. Furthermore, it enables the establishment of standardised purchase specifications worldwide and the negotiation of global purchasing contracts which may provide substantial cost savings for the buyer, and consolidate orders for the seller.

Easier control and co-ordination Standardisation also facilitates centralised co-ordination and control of operations in different countries. If the same product is sold worldwide and the same promotional campaign is used then the same product quality standards, production control methods, as well as the same brand aware- ness, or advertising recall measures may be applied. This not only enables effective monitoring of performance in different countries, but also provides the basis for determining the reallocation of resources across products and country markets.

Barriers to standardisation

On the other hand, the benefits or even feasibility of standardisation may be

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restricted by various constraints such as governmental or trade restrictions, the nature of the marketing infrastructure as weii as differences in the nature of market conditions, customer interests and response patterns and competition from one country to another.

Governmental and trade restrictions Government and trade restrictions, such as tariff or other trade barriers, product, pricing or promotionai regulation, as weii as the existence of carteis, frequentiy hamper marketing of a standardised product iine or uniform pricing and promotion. Tariffs, or quotas on the import of key materials or components or other resources may, for example, affect production costs and hamper uniform pricing or result in the substitution of other components and modifications in product design. Regulation of business practices, such as product regulation, price controls, advertising regulation and promotional standards, may also affect the feasibility of standardisation. In Japan, for example, in many product markets such as electronics, food, etc., product design must conform to strict standards established by the trade body, necessitating adaptation by foreign com- panies. Similarly, severe advertising regulation in countries such as Germany and Switzerland, has restricted use of many campaigns successful in other countries.

The existence of cartels such as the European steei cartei, or the Swiss chocoiate cartei, may also impede or exclude standardised strategies in countries covered by these agreements. In particular, they may hamper adoption of a uniform pricing strategy, or control of established distribution channels, thus preventing use of a standardised distribution strategy. Extensive grey markets in countries such as India or Hong Kong, may also hamper administered pricing systems, and require adjustment of pricing strategies.

The nature of the marketing infrastructure Differences in the marketing infrastructure from one country to another may hamper use of a standardised strategy. These may, for example, include differences in the availability and reach of various advertising media, in the avaiiabiiity of certain distribution channeis or retaii insti- tutions, or in the existence and efficiency of the communication and transportation network.

The type of media avaiiable as well as their reach and effectiveness differs from country to country. For example, TV advertising, while a major medium in the US, Japan and Australia, is not permitted in a number of countries such as Scandinavia. In other countries, it may reach only a limited number of households due to limited ownership of TVs, as for example, in South Africa, Nigeria or Indonesia. Similarly, in countries with high ieveis of iiliteracy, such as many African and Middle Eastern countries, the effectiveness of print media is severely limited.

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The nature of the distribution system and structure also differs signifi- cantly from one country to another. While in the US, supermarkets account for the major proportion of food sales, in other countries there are virtually no supermarkets and Mom and Pop type stores predominate. This severely limits the effectiveness of a "pull" type strategy and ability to use instore promotions and display to stimulate customer interest. Even in indus- trialised nations such as Italy, Belgium, Portugal and Spain, over 75% of retail sales are done through small retailers. Again, discount outlets common in many industrialised nations may not exist in other countries. This may restrict the ability to use an aggressive price penetration strategy.

Differences in customer interests and response patterns Customers may also differ significantly from one country to another, or one region to another in terms of interests, preferences and response patterns. This may be particularly marked in relation to certain products as, for example, food or beverages. Culinary preferences are, for example, frequ- ently embedded in cultural value systems and traditions, and differ sub- stantially from one country to another, and one region to another. Consequently, adaptation of products to such taste preferences may be desirable to obtain substantial market penetration.

Similarly, customer interest in specific product benefits or response to different types of advertising appeals may vary from country to country limiting the effectiveness of a standardised approach. Response to sex appeals, or to different styles of humour may, for example, vary. In Scandinavia and France, for example, overt sex appeals are frequently used effectively while in many Middle Eastern and Far Eastern countries when used, they evoke a negative response.

The nature of the competitive structure Differences in the nature of the competitive situation from one country to another may also suggest the desirability of adapting strategy. The existence of low-cost local competition in certain countries may, for example suggest lowering of price to meet competitors' prices. Similarly, pre-emption of established distribution networks by competition may encourage adoption of" innovative distribution methods or direct distribution to short-circuit their entrenched position.

All such aspects thus impose major constraints on the feasibility and effectiveness of a standardised strategy, and suggest the desirability or need to adapt to specific market conditions.

Yet, irrespective of the arguments which may be advanced concerning the merits or limitations of a standardised marketing strategy, these need to be evaluated in the context of the firm's overall strategy, and in relation to the interface with other aspects of the firm's operations such as strategies relative to other product lines, sourcing and procurement activities, and production and logistical systems. Each of these is examined further.

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DEVELOPING STRATEGY FOR A MULTI-PRODUCT BUSINESS

Protagonists in the debate over global products and brands typically centre on the case of a single product or brand ignoring the fact that many companies today are multi-product businesses. Consequently, in developing plans for a given product or product line, it is important to consider interaction or interdependence with other product lines not oniy in relation to marketing activities, but also all aspects of operations, i.e., sourcing, production, management, financing or marketing.

This issue has recently been examined by a number of economists (Teece, 1980; Willig, 1979) in relation to the diversification strategies of firms. In explaining this phenomena, they have pointed out the existence of "economies of scope". These arise when "joint production of two goods by one enterprise is less costly than the combined costs of production of two specialty firms" (Teece, 1980). This may occur due to joint use or sharing of a common body of proprietary knowiedge or a highiy specialised and indivisible asset in the product of two or more goods. For exampie, if a machine for stamping automobile bodies operating beiow capacity in automobile production can also be used to stamp truck bodies, economies of scope will occur from joint production of automobiles and trucks. Similarly, if there is an initial set-up cost in the acquisition of know-how, such as R&D, or information, economies of scope will occur if this is spread over multiple products (Teece, 1980).

This concept can equally be extended to other aspects of the firm's operations, as for example, sourcing and marketing. In the case of sourcing, for example, economies may be achieved if similar raw materials or materials which are obtained from the same location or require similar information or expertise are used in the production of two or more goods. For example, colour tubes for TV sets and disc drives for personal computers may be supplied by the same manufacturer and hence economies of scope may be achieved by joint sourcing.

Opportunities may also occur for shared marketing expenditures across similar product lines. For example, products such as razor blades and shampKJos which are distributed through the same distribution channels may share the same distribution network and a common sales-force. This may give rise to economies of scope and lower distribution costs per item. Such economies may be particularly significant if there are substantial set-up costs associated with establishing a distribution network or sales-force, or in developing goodwill among the trade. Similarly, economies of scope may be achieved by family branding and shared advertising costs. Again, such economies are likely to be particularly marked where there are substantial initial investment, or set-up costs, associated with developing advertising copy or promotional campaigns or establishing contact with external agencies.

Such interdependencies among product lines or product businesses are

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not only an important consideration in plan development and in determin- ing strategy, but may also affect decisions with regard to standardisation of products and other aspects of the marketing mix. While the impact of potential economies of scope will need to be analysed in each specific case, it seems likely that where these are significant, they may trigger a tendency toward diversification of the product line and product businesses within countries, rather than as implied in the standardisation approach (Hamel and Pralahad, 1985).

Opportunities may, for example, occur for the addition of new products or brands, or for the acquisition of new products or brands in countries in which the company has existing operations. Such opportunities may appear particularly attractive if they enable more effective use of the existing operational structure as for example, administrative capabilities, the distri- bution network or the sales-force, or capitalise on experience acquired in operating in the country environment, or contacts and relations established with distributors, advertising agencies and other external organisations.

Thus, where significant initial investment costs are incurred in entering a country, for example, in establishing a marketing and sales or distribution network or in acquiring familiarity in operating in an environment, there may be substantial potential for economies of scope. This may generate a tendency to amortise these costs over a broader product range, by adding new products or brands. Especially where initial costs are intangible, i.e. acquisition of knowledge and experience with the marketing environment, an establishment of relations with distributors and other organisations, they may constitute a powerful force toward product diversification.

INTEGRATING SOURCENG AND MARKETING STRATEGY

Important aspects to consider in planning global marketing strategy are sourcing strategies relative to raw materials, components, management expertise, technology or capital. These decisions are closely linked to the issue of global standardisation insofar as policies of product standardisation may open up or enlarge opportunities for global sourcing, whereas con- versely, barriers to global sourcing such as trade barriers may encourage adaptation to local environmental conditions.

Many of the forces which have triggered the integration of end-user tnarkets, such as improved communication and transportation systems, have also impacted on resource markets (Porter, 1980). It is thus, important to adopt a global p»erspective in developing sourcing strategies and to consider poten- tial opportunities worldwide. This requires examination of the availability and cost of raw materials, labour costs and skills and capital costs in different locations throughout the world.

Cost differentials in key resource imports may affect not only sourcing decisions, but also decisions with regard to the location of production and other activities, as also whether to produce internally or purchase compo-

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nents externally. Low labour costs in countries such as Taiwan, South Korea and Singapore, have not only encouraged the establishment of subsidiaries in these countries, but also the sourcing of products such as textiles, TVs and components such as printers, disc drives, etc. from these countries.

Global product standardisation may tend to stimulate trends toward global sourcing insofar as it opens up possibilities for economies of scale in sourcing. Where a standardised product is marketed worldwide, sourcing of components or raw materials may be centralised or co-ordinated worldwide, thus consolidating buying power, and enabling negotiation of more favourable contract terms in price, s^vice, delivery, etc., than if purchases were negotiated for each loCSl production or sourcing units. In addition, consolidation or centralization of sourcing activities may generate greater efficiencies, as the administrative structure for sourcing and the negotiation process is not duplicated in every country. Information costs relating to resource markets may aiso be reduced, and management with greater expertise, or specialised in relation to the specific resource markets, may be employed.

There are, however, numerous constraints on the free operation of resource markets such as tariff barriers or quotas, currency restrictions, counter trade requirements to "buy local", or to export a given proportion of production which may impede or afTect the economies of global sourcing. Tariffs or quotas may, for example, restrict import of raw materials, components, etc., or encourage local sourcing. Insofar as tariffs are typically lower on raw materiais than components or assembied products, this may encourage locai production and assembiy and a shift from imports of components to that of raw materiais.

Such constraints may also affect decisions with regard to product standardisation. High tariffs imposed on the import of components required for standardised products or requirements to "buy local", may encourage modifications in product design so as to reduce the costs of important components or to incorporate local raw materiais. Similarly, restrictions on the impwrt of advertising copy, and insistence on local production of promotional materials may lead to adaptation to local tastes, rather than following a standardised format.

Establishment of local production facilities in order to maintain good relations with host governments, or to ease balance of payments problems, may also tend to encourage product adaptation. Local market size may not be sufficient to absorb the production capacity of a plant or operations designed to produce standardised products. Consequently, modifications in production process may be required in order to reduce minimum efficient ievel of production entaiiing certain modifications in product design.

Locai differences in the costs and availability of raw materials may also tend to encourage adaptation of product or packaging design. For example, in the paper industry, availability of cheap local materials such as jute and sugar cane may result in their substitution for wood fibre. Similarly, the

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relative cost of paper vs. plastic materials may affect product packaging decisions. In Europe, use of plastic rather than paper is more common than in the US due to differences in the relative cost of the two materials.

Sourcing strategies are thus closely linked to product standardisation policies, and at the same time impact on these policies. They are also closely interwoven with the organisation of production operations and the logistical network. This facet of the firm's operations is next considered in more detail.

THE ROLE OF PRODUCTION, MANAGEMENT AND LOGISTICAL SYSTEMS

A third key component of a firm's global marketing strategy is the design of production, management and logistical systems to direct and co-ordinate the various operations and activities in which the firm is involved, in order to deliver the desired product benefits and services to the end user. The design of this system is to a large extent contingent on policies with regard to the standardisation of the marketing mix as are sourcing strategies.

Policies with regard to standardisation are a key impact into the design of the firm's production, management and logistical system. The marketing of a standardised product line worldwide for example may facilitate the establishment of a global production system, which takes maximutn ad- vantage of potential economies of scale in R&D and technical development, procurement and production, in producing for world markets, as do opportunities for sourcing from low-cost countries or products. Similarly, standardisation of advertising, promotions, and other aspects of marketing strategy, may encourage the establishment of standardised management processes and procedures, which are applied worldwide. This will facilitate co-ordination and control of operations worldwide. McDonalds, for example, has established standardised procedures for the production of hamburgers and other items sold in its outlets and also for the management and day to day maintenance of its outlets. These standards must be adhered to by all its franchisees throughout the world.

As in the case of global sourcing, there are, however, various factors which impede the establishment of global production and logistical system. Constraints such as tariff barriers, balance of payments problems, currency restrictions, import quotas, requirements for local content or compensatory exports may restrict a firm's ability to design a global production and logistical system which takes full advantage of potential scale economies and cost differentials in different, locations. Furthermore, the complexity of such a system given not only the impact of such factors, but also that of exchange rate fluctuations, changes in market growth and demand conditions, as also of competitive conditions, implies that some degree of sub-optimisation is inevitable. However, careful planning may enable co-ordination of

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production schedules and counterbalancing of the transhipment of items so as to minimise the impact of such constraints.

Recent developments in flexible automation also enable minor modifica- tions in product design and efficient production on a smali scale without incurring substantial costs, and hence may reduce potential production economies of scale. Such factors together with political and economic constraints may provide forces towards the decentralisation or localisation of production systems, which in turn may encourage a move from standardised products toward product adaptation and the development of products tailored to local market demand.

Similarly, in the case of management systems, constraints on the hiring of foreign nationals (or pressures to hire iocai nationals), the immobility of management, restrictions on the international transfer of information, differences in national accounting systems, labour legislation, as well as desire of local management for responsibility for local operations, may constitute impediments to the establishment of giobai management systems aijd standardised management procedures. Such factors coupied with im- proved motivation and managerial efTectiveness provided by iocai manage- nic nt respon.sibiiity, may encourage decentraiisation of management systems and local profit centres. This in turn may lead to greater adaptation of marketing strategy to local environmental conditions.

Another aspect to be considered in the design of production, logistical and management is whether technoiogy, components, products and other services shouid be deveioped, manufactured or performed inhouse, or rather shouid be purchased externaily. ̂ In fact, this decision has to be made with regard to aii aspects of the firms operations, whether R&D, production, distribution, management, etc.

External purchase of products, skills or services is likely to occur where these entail certain skills, information or capital investment or equipment, which would not be economical for the company to acquire or develop internally. For example, acquisition of ships or planes for air or sea shipment of goods. Similarly, companies may prefer to make use of export management companies, rather than taking charge of the export manage- ment process themselves, or using distributors or sales agents in foreign markets, rather than establishing a sales organisation for overseas markets.

External organisations may also be able to supply products, components or services at a lower cost due to lower production administrative or operating costs. This may, for example, occur where the product or service has a substantial labour component, which can be acquired more cheaply from low labour-cost countries such as Taiwan, Korea or China.

External purchase of products, components or other services, licensing of technology, or trademarks, use of export or sales agents may however give rise to probiems of quaiity control and iimit the firm's ability to control

^For further discussion of external vs internal acquisition of resources see Williamson, O. E. (1979) "Transactions-cost economies: The governance of contractual relations". Journal of Law and Economics, October.

168 SUSAN P. DOUGLAS AND SAMUEL C. CRAIG

marketing and distribution activities. This is likely to be particularly pronounced in the case of intangible services, such as distribution. Such problems may in part be mitigated by the establishment of contractual agreements or collaborative arrangements with other companies as, for example, joint ventures for production or marketing, piggybacking on existing distribution systems, etc.

Collaborative agreements with other companies, and external contracting of tnarketing and distribution are, however, likely to create pressures towards adaptation of strategy to local market conditions. This is likely to be particularly acute where partners or distribution agents are of local origin. Their primary frame of" reference and orientation is likely to be the local market, and hence they will emphasise responsiveness relative to this market, as opposed to global integration and rationalisation of strategy.

CONCLUSION

A narrow focus on the marketing aspects of global strategy can thus give rise to global marketing myopia. Emphasis on issues related to branding and product image, typically leads to the conclusion that standardisation is the most desirable strategy in overseas markets. Furthermore, it implies a tacit belief that marketing considerations are the key or even sole factors to be taken into account in formulating marketing strategies relative to the countries and markets worldwide. Frequently, however, the forces militating against global standardisation are stronger than those which press for such a strategy.

In brief, a successful global marketing strategy needs to be developed and assessed within the broader context of the overall business strategy of the firm rather than based solely on customer market considerations. This implies examination of resource allocation across countries and market segments as well as across products, and the integration and co-ordination of sourcing activities, as well as production, management and logistical systems, into global marketing strategy. Only a careful consideration of all such factors will permit formulation of an effective strategy combining an appropriate balance between standardisation and adaptation.

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