Approaches to Global Competition

Clarke Ricks

School of Business, Liberty University

BUSI 690: Policy and Strategy in Global Competition

Dr. Hicks

April 6, 2021

Approaches to Global Competition

Firms choose to engage in international marketing for many reasons, the most

attractive of which are market expansion and new profit opportunities. When a firm

chooses to market internationally, it must decide whether to adjust its domestic marketing

program—depending on how much centralized control a firm wishes to maintain over its

marketing. If an organization wants to maintain strong centralized control and uniformity in

its products and marketing activities, it is choosing a strategy called standardization. If an

organization wants to adjust products, messaging, and marketing activities to fit the needs

and preferences of local markets around the world, it is choosing a localization strategy.

You’ll recall our earlier discussion of the unique flavours of Oreo cookies developed for the

Chinese market: that’s an example of a localization strategy.

Global Standardization: The Argument for Standardized Marketing

To the extent that global consumer’s desire standardized products, companies can

pursue a global standardization strategy. Using this approach, a product and the way in

which it is marketed are largely uniform across the world, with little variation in the

marketing mix from country to country. Advocates of standardization strategy argue that

companies can achieve competitive advantage by offering the optimal combination of price,

quality, and reliability with products that are identical in design and function throughout the

world; they also claim that consumers will prefer this standardized product to a highly

localized product that is also more expensive.

Standardization can translate into lower operating costs because there aren’t extra

costs associated with developing and marketing unique products tailored to local market

needs. It also expands the customer base receptive to a common global product. There is no

need to adjust product features, naming, or other attributes for each new market, and

marketing materials themselves can be repurposed across different world regions. Below

are the primary benefits of a global standardization strategy:

Marketers can use the same approach for developing, promoting, and

delivering products and services worldwide, creating lower operating costs and economies

of scale in product development and marketing

The ability to develop and invest in a unified brand and/or company identity

throughout the world, along with the opportunity to develop brand awareness and brand

equity that gives a competitive advantage

Product lines that consist of a small number of global brands rather than a

plethora of localized product brands and extensions, along with cost savings and improved

efficiencies associated with managing a smaller total number of brands

Companies that pursue this approach assume that consumer needs are relatively

homogenous around the world and that the same basic marketing mix will work across

global markets. These organizations typically have a centralized approach to the marketing

function and try to minimize the need for developing localized marketing strategies.

The case for a standardization strategy was made by Harvard marketing professor

Theodore Levitt in his 1983 article “The Globalization of Markets” but the concept can

be found to discussed as early as 1968. He argued that technology and worldwide

communications have helped trigger the emergence of global consumer markets that are

receptive to single, standardized global products. According to Levitt, adopting a

standardized global strategy provides a competitive advantage in cost and effectiveness.

More recently, there are many business cases that offer illustrations of the failures of this

strategy such as Best Buy and the successes such as Marvel.

Localization: The Argument for Localized Marketing

On the other end of the spectrum is localization strategy, in which firms adjust their

products and marketing mix for each target market. Advocates of localization argue that, in

reality, global standardization doesn’t work, and in fact, nearly all exported products require

one or more adaptations to be successful. In work by Kotler, one study found that 80

percent of U.S. exports require one or more adaptations, and the average product requires

at least four to five adaptations out of eleven different elements: labeling, packaging,

materials, colours, name, product features, advertising themes, media, execution, price, and

sales promotion.

Localization strategy recognizes that diversity exists in global markets and that

marketers need to understand and respond to this diversity in the goods they offer and the

way they market to consumers in these markets. Language, culture, customs, the physical

environment, the degree of economic development, societal institutions, and other factors

all contribute to how well a product fits a local market’s needs. Localization may involve: 1)

altering existing products to fit the needs of the local target market, or 2) creating

completely new products to fit the needs of the local target market.

Although localization does increase the cost and complexity associated with

developing and marketing tailored products, its supporters argue that it results in products

and marketing strategies that are a better fit for local market needs and ultimately a greater

sales success.

Standardization is often responsible for marketing misfires like offensive marketing

images, catastrophic naming, and product-design glitches. Its critics argue that

standardization strategy overestimates how well any single, uniform product and marketing

approach will succeed in markets all over the world.

The Middle Ground: Blending Standardization and Localization

In reality, global marketing is not an either/or proposition requiring either full

standardization or completely localized control of product and marketing. In fact, a

successful global approach can fall anywhere on a spectrum–from tight worldwide

coordination on marketing program details to loose agreements on product ideas. Most

organizations find that flexibility is essential in order to allow organizations to capitalize on

global opportunities available to them. The right answer for each business depends on

organizational structure, leadership, and operations; the product category; the markets in

question; and other factors. Both strategies offer attractive benefits as well as costs and

risks. Most organizations find ways to balance the options available to them with a focus on

how to maximize success in their target markets.

Global Segmentation Strategies

Closely related to the issue of standardization vs. localization is the question of

global segmentation strategy. How marketers segment and market to consumers in global

markets is inextricably tied to whether products and marketing are uniform across multiple

world regions or whether they are localized to individual countries, regions, or markets.

Global marketers use the same principles and processes outlined in the

Segmentation and Targeting module to evaluate where there is greater potential and

market opportunity for their products and services. They work to answer the same set of

fundamental questions that domestic marketers do, using the broader world as their frame

of reference:

1. To whom should I be marketing?

2. Why them?

3. How can I reach them most effectively?

To develop a segmentation and targeting strategy, global marketers may use the

common segmentation approaches employed by domestic marketers but with an eye

on how these characteristics shape consumers within and beyond national boundaries and

world regions. These characteristics include the following:

Demographics: Gender, age distribution, ethnicity, income, socioeconomic

status, family size

Geography: Geographic location, world region, climate,

urban/suburban/rural orientation

Psychographics: Lifestyle, attitudes, social class

Behavioural: Purchasing occasions, user status, brand loyalty, readiness to

buy, and other behavioral patterns that drive consumer decisions

Decision maker: Who makes buying decisions for which types of goods and

services? Who influences these decisions?

Additionally, global marketers also consider the following factors in segmentation

and targeting:

Culture: The interplay between language, religion, education, values, identity,

history, and traditions

Economic status: Stage of economic development, wealthy vs. poor nations,

employment, GDP

Social environment: Conditions and operational stability for business,

government, politics, the legal system, health care, education, and other societal support

structures

A naive view of global marketing assumes that all consumers within a country or

world region are homogenous and can be reached effectively through a uniform approach

targeting the entire geographic area. While they have some things in common, they also

have different characteristics, needs, and preferences that drive their purchasing decisions.

It is important to recognize these differences and evaluate what they represent in terms of

potential market segments and growth opportunities. With the global dissemination of

information, is segmentation even possible? Tom Friedman, Nobel economist, argues the

internet has flattened the world for marketers as information is shared instantaneously.

Global Marketing Strategies