Factors Affecting Global

Marketing Integration
Driving Forces Restraining
Technology Forces
Culture Culture

Market Needs Market Differences

Cost Costs

Free Markets Global National Controls

Economic Integration Integration Nationalism

Peace War

Management Vision Management Myopia

Strategic Intent Organization History

Global Strategy & Action Domestic Focus

Driving and Restraining Forces Affecting Global Integration

• Today, the growing importance of global marketing
stems from the fact that driving forces have more
momentum than the restraining forces
• The forces affecting global integration are shown in
(Figure).
 Driving Forces

• Converging market needs and wants, technology

advances, pressure to cut costs, pressure to improve
quality, improvements in communication and
transportation technology, global economic growth, and
opportunities for leverage all represent important
driving forces; any industry subject to these forces is
a candidate globalization.
Technology

• Technology is a universal factor that crosses national

and cultural boundaries
• Technology is truly “stateless”; there are no cultural
boundaries limiting its application
• Once a technology is developed, it soon becomes
available everywhere in the world
• This phenomenon supports Levitt’s prediction
concerning the emergence of global markets for
standardized products
• In his landmark Harvard Business Review article,
Levitt anticipated the communication revolution that has,
in fact, become a driving force behind global marketing
• Satellite dishes, globe-spanning television networks,
such as CNN and MTV, and the Internet are just a few of
the technological factors underlying the emergence of a
true global village
• In regional markets, such as Europe, the increasing
overlap of advertising across national boundaries
and the mobility of consumers have created
opportunities for marketers to pursue pan- European
product positioning.
Regional Economic Agreements

• A number of multilateral trade agreements have

accelerated the pace of global integration
• NAFTA is already expanding trade among the United
States, Canada, and Mexico
• The General Agreement on Tariffs and Trade
(GATT), which was ratified by more than 120 nations in
1994, has been replaced by the World Trade
Organization to promote and protect free trade, but it
has come under attack by developing countries
• In Europe, the expanding membership of the
European Union is lowering barriers to trade within the
region.
Market Needs & Wants

• A person studying markets around the world will

discover cultural universals as well as cultural
differences
• The common elements in human nature provide an
underlying basis for the opportunity to create and serve
global markets
• The word create is deliberate
• Most global markets do not exist in nature: They
must be marketing effort
• For example, no one needs soft drinks, and yet
today in some countries per capita soft-drink
consumption exceeds the consumption of water
• Marketing has driven this change in behaviour, and
today the soft-drink industry is a truly global one
• Evidence is mounting that consumer needs and
wants around the world are converging today as never
before
• This creates an opportunity for global marketing
• Multinational companies pursuing strategies of
product adaptation run the risk of being overtaken by
global competitors that have recognized opportunities to
serve global customers
• Marlboro is an example of a successful global brand
• Targeted at urban smokers around the world, the
brand appeals to the spirit of freedom, independence,
and open space symbolized by
 the image of the cowboy in beautiful, open western
settings
• The need addressed by Marlboro is universal, and,
therefore, the basic appeal and execution of its
advertising and positioning are global
• Philip Morris, which markets Marlboro, is a global
company that discovered years ago how the same
basic market need can be met with a global approach.
Transportation & Communication
Improvements

• The time and cost barriers associated with distance

have fallen tremendously over the past 100 years
• The jet airplane revolutionized communication by
making it possible for people to travel around the
world in less than 48 hours
• Tourism enables people from many countries to see
and experience the newest products being sold abroad
• One essential characteristic of the effective global
business is face-to-face communication among
employees and between the company and its customers
• Without modern jet travel, such communication
would be difficult to sustain
• In the 1990s, new communication technologies
such as e-mail, fax, and teleconferencing and
videoconferencing allowed managers, executives, and
customers to link up electronically from virtually any
part of the world for a fraction of the cost of air travel
• A similar revolution has occurred in transportation
technology
• Physical distribution has declined in terms of cost;
the time required for shipment has been greatly
reduced as well
• A letter from China to New York is now delivered in
eight days – faster than domestic mail is delivered
within many countries
• The per-unit cost of shipping automobiles from
Japan and Korea to the United States by specially
designed auto-transport ships is less than the cost of
overland shipping from Detroit to either U.S. Coast.
Product Development Costs

• The pressure for globalization is intense when new

products require major investments and long periods of
development time
• The pharmaceutical industry provides a striking
illustration of this driving force
• According to the Pharmaceutical Manufacturers
Association (PMA), the cost of developing a new drug in
1976 was $ 54 million; by 1982, the cost had
increased to $ 87 million
• By 1993, the cost of developing a new drug had
reached $ 359 million
• Such costs must be recovered in the global
marketplace, as no single national market is likely to
be large enough to support investments of this size
• As noted earlier, global marketing does not
necessarily mean operating everywhere; in the
$ 200 billion pharmaceutical industry, for example,
seven countries account for 75% of sales.
Quality

• Global marketing strategies can generate greater

revenue and greater operating margins, which, in turn,
support design and manufacturing quality
• A global and a domestic company may each spend
5% of sales on research and development, but the
global company may have many times the total
revenue of the domestic because it serves the world
market
• It is easy to understand how Nissan, Matsushita,
Caterpillar, and other global companies can achieve
world-class quality
• Global companies “raise the bar” for all competitors
in an industry
• When a global company establishes a benchmark
in quality, competitors must quickly make their own
improvements and come up to par
• Global competition has forced all companies to
improve quality
• For truly global products, uniformity can drive down
research, engineering, design, and production costs
across business functions.
World Economic Trends

• There are three reasons why economic growth has

been a driving force in the expansion of the international
economy and the growth of global marketing
• First, growth has created market opportunities that
provide a major incentive for companies to expand
globally
• At the same time, slow growth in a company’s domestic
market can signal the need to look abroad for
opportunities in nations or regions with high rates of
growth
• Secondly, economic growth has reduced resistance that
might otherwise have developed in response to the entry
of foreign firms into domestic economies
• When a country is growing rapidly, policy makers
are likely to look favorably on outsiders
• A growing country means growing markets; there is
often plenty of opportunity for everyone
• It is possible for a “foreign” company to enter a
domestic economy and to establish itself without taking
business away from local firms
• Without economic growth, global enterprises may
take business away from domestic ones
• Domestic businesses are more likely to seek
governmental intervention to protect their local
position if markets are not growing
• Predictably, the worldwide recession of the early
1990s created pressure in most countries to limit access
by foreigners to domestic markets
• The worldwide movement towards deregulation and
privatization is another driving force
• The trend towards privatization is opening up
formerly closed markets significantly; tremendous
opportunities are being created as a result
• For example, when a nation’s telephone company is
a state monopoly, it is much easier to require it to buy
only from national companies
• An independent, private company will be more
inclined to look for the best offer, regardless of the
nationality of the supplier
• Privatization of telephone systems around the world
is creating opportunities and threats for every company
in the industry.
Leverage

• A global company possesses the unique

opportunity to develop leverage
• Leverage is simply some type of advantage that a
company enjoys by virtue of the fact that it conducts
business in more than one country
• Four important types of leverage are experience
transfers, scale economies, resource utilization, and
global strategy.
1. Experience Transfers

• A global company can leverage its experience in any

market in the world
• It can draw on management practices, strategies,
products, advertising appeals, or sales or
promotional ideas that have been tested in actual
markets and apply them in other comparable markets
2. Scale Economies

• The global company can take advantage of its

greater manufacturing volume to obtain traditional
scale advantages within a single factory
• Also, finished products can be produced by
combining components manufactured in scale-
efficient plants in different countries
3. Resource Utilization

• A major strength of the global company is its ability to

scan the entire world to identify people, money, and
raw materials that will enable it to compete most
effectively in world markets.
4. Global Strategy

• The global company’s greatest single advantage can be its

global strategy
• A global strategy is built on an information system that scans
the world business environment to identify opportunities,
trends, threats, and resources
• When opportunities are identified, the global company
adheres to the three principles identified earlier: it leverages
its skills and focuses its resources to create superior
perceived value for customers and achieve competitive
advantage
• The global strategy is a design to create a winning offering on
a global scale
• This takes great discipline, much creativity, and constant effort
• The reward is not just success – it is survival.
The Global/Transational Corporation

• The global/transational corporation, or any business

enterprise that pursues global business objectives by
linking world resources to world market opportunity, is
the organization that has responded to the driving,
restraining, and underlying forces in the world
• Within the international financial framework and
under the umbrella of global peace, the global
corporation has taken advantage of the expanding
communications technologies to pursue market
opportunities and serve needs and wants on a global
scale
• The global enterprise has both responded to market
opportunity and competitive threat by going global and
at the same has been one of the forces driving the
world towards greater globalization.
 Restraining Forces

• Despite the impact of the driving forces identified

earlier, several restraining forces may slow a
company’s efforts to engage in global marketing
• Three important restraining forces are:-
1. management myopia, 2. organizational culture,
and, 3. national controls
• As we have noted, however, in today’s world the
driving forces predominate over the restraining forces
• That is why the importance of global marketing is
steadily growing.
Management Myopia and organizational
culture

• In many cases, management simply ignores

opportunities to pursue global marketing
• A company that is “nearsighted” and ethnocentric
will not expand geographically
• Myopia is also a recipe for market disaster if
headquarters attempts to dictate when it should listen
• Global marketing does not work without a strong
local team that can provide information about local
market conditions
• In companies in which subsidiary management
“knows it all,” there is no room for vision from the top
• In companies in which headquarters management is
all-knowing, there is no room for local initiative or an
in-depth knowledge of local needs and conditions
• Executives and managers at successful global
companies have learned how to integrate global vision
and perspective with local market initiative and input
• A striking theme emerged during interviews
conducted by the author with executives of successful
global companies
• That theme was the respect for local initiative and
input by headquarters executives, and the
corresponding respect for headquarters’ vision by
local executives.
National Controls and Barriers

• Every country protects local enterprise and interests

by maintaining control over market access and entry
in both low-and-high-tech industries and advertising
• Such control ranges from a monopoly controlling
access to tobacco markets to national government
control of broadcast, equipment, and data transmission
markets
• Today, tariff barriers have been largely removed in
the high-income countries, thanks to the World Trade
Organization (WTO), NAFTA, and other economic
agreements
• However, non-tariff barriers (NTBs) still make it
more difficult for outside companies to succeed in
foreign markets
• The only way global companies can overcome
these barriers is to become “insiders” in every country in
which they do business
• For example, utility companies in France are
notorious for accepting bids from foreign equipment
suppliers but, in the end, favouring national suppliers
when awarding contracts
• When a global company, such as ABB acquires or
establishes a subsidiary in France, it can receive the
same treatment as other local companies
• It becomes an “insider”
• Global advertising and promotion are also hampered
by government regulations
• It is illegal in some countries to use comparative
advertising
• In some countries, such as Germany, premiums and
sweepstakes are illegal
• Also working against global advertising is the use
of different technical standards around the world
• Videotape players in the Americas and Japan use
the NTSC standard, whereas in Europe (except for
France, which uses SECAM), the PAL system is used.