Global Market Penetration Techniques & Their Impact
Clarke Ricks
School of Business, Liberty University
BUSI 690: Policy and Strategy in Global Competition
Dr. Hicks
April 3, 2021
Global Market Penetration Techniques & Their Impact
Why Go Global?
Laura owns a company based in the United States that has done exceptionally well
within the country. She has maximized her market share in all 50 states. However, she seeks
additional growth for her organization. After a bit of research, Laura finds that in order to
expand brand recognition, revenue potential, and the company's consumer base,
companies will often look to extend beyond domestic borders to penetrate global markets,
which are the different economic markets around the world.
Penetrating the Global Market
Laura decided to use the cash flow she obtained through her success in the domestic
market to fund her global expansion. But Laura wondered 'Where do I begin? How do I get
started?' Being the resourceful business owner that she is, Laura found an online course on
global market penetration techniques. Although she had a great understanding of market
penetration, there were some important considerations specific to global markets that she
had not yet taken into account. After taking the course, Laura explored aspects of each of
the Four P's of Marketing (which are Place, Product, Promotion, and Price) to expand the
company's reach into international markets. Let's look at these four P's and see what Laura
discovered.
Place
Laura first needed to decide which global markets to penetrate. She researched many
countries to determine the best location to target. She was able to determine and predict
the countries that would have the largest demand for her products. To do this, she gathered
demographic data, economic trends, barriers to entry, and current demand potential.
Armed with this information, she selected her targeted market. Laura selected China as the
target market.
Product
Laura then sought to gather legal, safety, and regulatory guidelines she must abide by in
order to sell products in her targeted markets. Although in China there isn't one specific
product safety law, Laura discovered requirements specified in other laws and regulations.
For example, Laura discovered regulations within the Law on Protection of the Rights and
Interests of Consumers as well as within the General Principles of the Civil Law. She
scheduled additional audits and product reviews to accommodate additional regulations
and gather necessary documentation for her products and processes. There were a few
small changes she had to make in her product packaging to comply with a new industry
standard. She had to update the product label to clearly show the country of origin. This is a
requirement for product labels in China.
Laura also explored additional product offerings that provided market specific value
that complements her existing product line, as well.
Promotion
Branding is one of the most critical aspects of market penetration. In order to expand
brand recognition in global markets, the brand should be consistent. In order for
consistency to work, the brand must be one that resonates outside the domestic market.
Luckily, Laura's current brand is one that she created that doesn't contain words or phrases
that have alternate meanings in other cultures and languages. She had to conduct extensive
research to ensure the brand, slogan, or symbol did not contain anything that could
potentially be culturally offensive. If it had, she'd need to undergo a re-branding effort in
order to effectively penetrate the global market.
An example of a company whose brand name and product description did not translate
well into the overseas market is Schweppes. An Italian campaign for Schweppes Tonic Water
translated its name to Schweppes Toilet Water. It's safe to say that this wasn't quite the
description the company was looking for. Thankfully, Laura wouldn't have to assume the
financial expense to re-brand her business.
Another aspect of promotion to consider, is localization. Beyond translation, Laura
sought to pull cultural details into promotional items, such as packaging, emails, flyers, and
direct mail campaigns.
Price
Laura conducting market research and competitor analysis to determine an acceptable
price point. She had to learn about the foreign legal and tax system, which included
additional fees, taxes, and reporting requirements she had not previously had. She decided
to employ a strategy in pricing where the initial product price is set low, beneath
competitors' pricing, in order to attract new customers. This strategy is referred to
as penetration pricing. Global Market Entry Strategies
1. Exporting
Exporting refers to a business producing products and/or services in its home country
and selling them in other countries. Exporting can be done either:
Direct via company staff based in the home country (e.g., by processing orders
placed online or by telephone). For example, victoriassecret.com allows international users
to order online. It then ships orders internationally from the United States.
Indirect management of an agent or distributor in the foreign country (e.g., by the
agent placing products into local stores). For example, Converse sells shoes globally directly
via its website as well as indirectly via foreign distributors.
2. Investing
Another option is to establish a local site (i.e., office, store, warehouse, or factory)
inside a foreign country through foreign direct investment (FDI). In this option, the
company buys resources and assets in the foreign country. This is implemented by:
Building a greenfield site by hiring local staff, leasing commercial space, and/or
setting up equipment in the foreign country. Starbucks and Godiva, for example, often build
their own sites or stores overseas, which the businesses fully own.
Buying a local established company via merger or acquisition. For example,
amazon.com has entered the Middle East markets by acquiring a local site, souq.com.
3. Joint Ventures
In joint ventures (JV), two individuals or companies come together to invest in a third
new business, reducing risk of market entry and sharing key resources. JVs are often
temporary because they focus on specific objectives and often present challenges sharing
control, equity, or profits. For example, Exxon is considering a joint venture with Petrobras,
Brazil's state-run energy company, that would establish a deep-water oil-drilling rig off the
Brazilian coast.
4. Franchising
Franchising involvesa local individual buying the rights to use a global entity's branding,
resources, materials, and best practices, resulting in a local version of the business in a
foreign country. Franchising is most often used by service companies for which exporting
alone is not practical. Fast food restaurants are well-known for allowing local operators to
run a McDonald's, Subway, or KFC restaurant as long as it follows the global entity's
specified procedures. Other service firms, such as financial services, also use franchises.
