Which rural population is the most ethnocentric?
Table of Contents
- Special features and tasks of international marketing
- Goals and strategies in international marketing
- International target planning
- Basic strategic orientations
- Standardization vs. differentiation of brand management
- Market segmentation and selection
- Market entry: timing and development
- International operational marketing
- Implementation of international marketing and success measurement
- International, integrated marketing success system
Special features and tasks of international marketing
International marketing is becoming increasingly important due to the increasingly international business activity of companies. But what is international marketing and how does it differ from national marketing?
International marketing is not a discipline that only addresses topics other than “classic”, “national” or “generic” marketing. Often questions dominate that are also justified in generic marketing, but receive special attention in international marketing and are therefore considered in more detail. One example is the cultural heterogeneity that undoubtedly exists between Germany and China, but also within a country between different ethnic groups or urban and rural populations. The three central peculiarities of international marketing result from the parallel processing of heterogeneous country markets and are shown in the following figure.
The focus is on the question of standardization versus differentiation in international market development, which has been asked for decades. Put simply, the efficiency advantages of standardization contrast with the effectiveness advantages of differentiation. Previous research on this discussion has dominated international marketing with unfortunately very contradicting results and often unhelpful recommendations for action. In order to advance the discussion, a holistic perspective appears to be helpful. The concept of identity-based branding is suitable for this because it integrates the competence and market perspective on the one hand and thus combines an “inside-out” with an “outside-in” analysis and, on the other hand, regards brands as the connecting reference object between the national markets. As a result, the question of standardization is not primarily assessed on the basis of cost advantages, but starts with the initial question of what benefits brands offer consumers in different parts of the world. In particular, the needs in developing and emerging countries (e.g. the BRIC countries Brazil, Russia, India, China), which are becoming increasingly important due to their economic development, differ in some cases fundamentally from the needs of consumers in the classic sales markets in industrialized countries. This influences the question of the optimal degree of standardization and often leads to the need for a much stronger adaptation to local peculiarities than in the past.
National and local adjustments in market cultivation lead to the second specialty in international marketing: the creation of feedback between the national markets. For example, aggressively priced market cultivation in country A can lead to sales losses in neighboring country B, since consumers buy the product in country A instead of in their home country B. Feedback occurs due to today's stronger networking of the markets, which can be attributed to the increasing mobility of people and above all to the dramatic increase in the mobility of information via the Internet in recent decades.
Feedback occurs in particular when companies operate in different countries with the same brand. In the above example, the customer only has to compare the prices, provided that he assumes products of the same brand are of equal value in both countries. This is made easier for him than before, e.g. by the Internet and the free movement of goods within free trade zones such as the European Union, NAFTA (North American Free Trade Agreement) or ASEAN (Association of Southeast Asian Nations). If, on the other hand, the customer did not recognize that it was the same or a very similar product, he would probably not carry out the transaction because the risk of a wrong purchase decision as well as the search effort and thus his transaction costs would increase significantly. The strength of the feedback thus depends crucially on the marking of the services, which is why the brand can be viewed as the central reference object between the various national markets. Brand management therefore plays a central role in international marketing.
The third peculiarity results from the enormously increased complexity and the high dynamics in global competition. Today, companies not only have to react to global developments, as the financial crisis in autumn 2008 and the euro crisis that has persisted since 2010 have shown, but also to local changes within a country market. With increasing internationalization, the importance of flexibility for corporate success increases.
Based on the marketing management process according to Meffert, Burmann & Kirchgeorg (2012), the management process of international marketing is divided into four sections. First of all, the goals and strategies have to be defined. The question of a more standardized or differentiated market cultivation must be answered here. This depends not only on the general conditions in the country but also on the basic strategic orientation of the management. The decision made must be operationalized below. The focus here is on the question of which elements of the marketing mix instruments can be standardized and how much should be differentiated. Implementation and success measurement are often neglected but highly relevant. In the international as well as in the national context, the role of the employees plays a particularly important role. To control brand-compliant employee behavior, international internal brand management is therefore an essential success factor in the implementation of a marketing strategy in international marketing.
Goals and strategies in international marketing
International target planning
Goal planning is at the beginning of every management process. The formulation of a clear, operational target system is an essential part of a marketing concept. The target system should take into account both the company's internal competencies and resources and the external environment. Ideally, the overall corporate goals are first defined as the overall goals and only then broken down into the country markets, as this is the only way to maximize the company's success across all country markets. There are four reasons for this.
First, the feedback between the country markets can lead to decisions in one country market (e.g. price reductions) influencing the achievement of goals in another country market. Thus, the goals of one country market (e.g. sales growth through price reductions) can lead to a sub-optimal target achievement in another country market and thus to a sub-optimal target achievement from the perspective of the company as a whole. Second, global goals such as environmentally friendly production or economies of scale can only be optimally achieved from an overall company perspective. Thirdly, only limited resources are available to work on the country markets, so that the decision to work on another country market is usually associated with a resource reallocation. And fourth, the optimal design of the brand portfolio can only be done from an overall company perspective. A global brand should also be designed and managed centrally, even if operational adjustments are necessary in the country markets.
Basic strategic orientations
The design of international marketing essentially depends on the prevailing basic orientation of management with regard to the country markets being worked on. Three forms can be distinguished: The ethnocentric, the polycentric and the geocentric orientation.
Type 1: International Marketing
The strategy of international marketing is based on an ethnocentric basic orientation that assumes the home country is superior to the rest of the world. Companies with an ethnocentric management approach expect their brands to be equally successful abroad as they are at home and that local peculiarities only need to be taken into account due to legal circumstances. The market entry usually takes place by exporting the services created in Germany. International marketing is the usual strategic option at the beginning of a company's internationalization process, as it requires the least amount of resources and the least demands on a company's competencies. The international marketing concentrates on a few country markets similar to the home country. This means that economies of scale can only be realized to a limited extent. The greatest danger of the international marketing strategy lies in the lack of acceptance by international customers due to insufficient adaptation to the peculiarities of the foreign markets.
Type 2: Multinational Marketing
The strategic option of multinational marketing results from a polycentric basic orientation, which emphasizes the uniqueness and incomparability of each country and therefore requires a highly differentiated market development. With a multinational marketing strategy, the maximum local adaptation allows the market potential in the respective country markets to be exploited very well. This can lead in particular to the implementation of a price premium, because the customers are offered a high level of benefit due to the maximum adaptation to their needs. The advantage of maximum local adaptation is offset by low cost advantages due to lower economies of scale. In extreme cases, each country has its own production facilities and product range. In addition, a multinational marketing strategy mostly relies on a decentralized organizational structure. The national companies act largely autonomously. Since a maximum local adjustment leads to a worse cost position, a strategy that relies on cost and price leadership in the market is difficult to reconcile with the multinational marketing strategy. Rather, it relies on closeness to the customer and a superior, locally adapted range of services.
Type 3: Global Marketing
The global marketing strategy promises most of the advantages of standardization. This is based on a geocentric basic orientation, which is based on the basic idea of the convergence thesis according to Levitt (1983). So-called cross-cultural groups, i.e. cross-border homogeneous target groups, are targeted. The aim of global marketing is to improve international competitiveness through the global integration of all company activities. The formulation of the corporate goals is geared towards the world market, without special consideration of national needs and wishes. This requires the consistent use of cost advantages through standardized marketing, with the result that the individual national companies no longer operate independently, but are obliged to divide up work and specialize around the world and are centrally controlled. Consciously accepting nationally suboptimal strategies, an attempt is made to implement a globally optimal marketing strategy. Since country-specific features are largely neglected in a global marketing strategy, this strategy is only suitable for selected products or services. These include highly standardized services (e.g. fast food), high-tech products (especially in the B2B area, e.g. corporate software), prestige and luxury items (e.g. fitted kitchens, watches, clothing) or products that are not very culturally bound (e.g. salt). The supranational marketing strategy is largely similar to the global marketing strategy. It is based on a basic regional orientation and only differs from the global marketing strategy in that not the entire world market, but transnational areas such as Europe are selected and processed in a standardized manner.
Type 4: Transnational Marketing
The idea of “Think Global, Act Local” developed from the global marketing strategy and the knowledge of the need for local adjustments. This mixed strategy, known as transnational marketing, tries to combine the standardization advantages of global marketing with the local differentiation advantages of a multinational strategy. A transnational strategy, on the one hand, offers the chance of economies of scale and a good local competitive position; on the other hand, it also places the highest demands on the competencies and resources of a company and can therefore be described as the highest level of development in international market cultivation.
Standardization vs. differentiation of brand management
Various studies have shown that a globally uniform brand image is difficult to implement. On the one hand, demand needs and the competitive environment mostly differ from country to country, so that a globally identical positioning is often not promising. On the other hand, consumers decode and evaluate the same information differently. This means that completely standardized branding in different countries usually leads to different brand images. The main reason for this is the culture of a country.
These differences allow the conclusion that extensive differentiation in brand management is necessary. On the other hand, however, the identity of a brand must be "similar in space and time". A spatial similarity contradicts a spatial adaptation of the brand identity, which means that there are limits to the adaptation of the brand identity to different countries. The decision to standardize vs. differentiate international brand management is thus caught in a field of tension between the need for adjustment due to heterogeneous demand and market situations on the one hand and the brand success factor of consistency, i.e. freedom from contradictions, on the other.
In order to resolve this conflict, the adaptation potential of a brand must be analyzed more closely. Because the constitutive identity feature of consistency demands a certain period and point of time-related immobility from a brand. However, they are not intended to suggest that a brand cannot adapt. Rather, this leads to a loss of relevance and timeliness for the consumer (brand rigidity). The second problem area can be described as brand actionism. By fully adapting the brand identity to local markets, the brand loses its consistency and thus its clarity, uniqueness and credibility.
The endeavor of brand management must therefore be to find the right level of local adaptation on the one hand and consistency on the other (zone of success). For this, a division of the brand identity into essential and accidental features is necessary. The essential characteristics of the brand identity describe its essence. They are the core of the brand identity and indispensable for it. Retaining essential characteristics ensures the necessary consistency in brand management. This includes, for example, the essential "appearance" of the brand (e.g. the logo and the color scheme of a brand), but also its "birthplace" and history (e.g. VW as a German car brand), the core values (e.g. Marlboro and Freiheit) and, if necessary, certain events from the brand history (e.g. Red Bull as the inventor of the “Energy Drinks” product category). Essential characteristics cannot be changed or can only be changed in the long term and in small steps. However, by weighting the individual essential characteristics differently in the countries, a slight adjustment to the market conditions can be made. In contrast, accidental (peripheral) features ensure the flexibility of the brand. Local adaptations of the accidental features are accepted as long as the essential brand identity features are identical. For example, the need for prestige when buying a car in China or Thailand is satisfied by active and passive safety, while in Germany it is satisfied by the design of the car. A globally uniform positioning is thus possible and only requires certain local translations in operational marketing.
In order for the right degree of standardization to be achieved, the management must develop central specifications for all country markets and thus define the scope for action. For example, VW has determined the following essential identity features that are the same worldwide. In the respective country markets, these essential identity features are supplemented by accidental identity features. This translates them into the country context and makes adjustments to the country-specific conditions. In China, for example, the essential characteristic “Responsible” is supplemented by the accidental characteristic “Environmental Friendly”. In addition to these essential identity features, there is the slogan “Das Auto”, which is written in German in every country and is sometimes supplemented with a translation.This is intended to emphasize the German origin of the brand, which thus represents the fourth essential identity feature of the VW brand.
How much a brand can adapt to different country markets is determined by the degree of feedback between the countries. For example, due to the short distance, the same language and overlaps in media use (e.g. with TV stations), strong feedbacks between Germany and Austria, but weak feedbacks between Germany and India, are to be expected. The stronger the feedback between two countries, the more similar a brand should be positioned in both countries.
If there is only little potential for adaptation, but demand needs require extensive differentiation, then the company should think about a multi-brand strategy and develop local brands as well as global ones. For example, the companies Coca Cola and Anheuser-Busch InBev should be mentioned, both of which have a few global and hundreds of local brands.
Market segmentation and selection
The selection of the country markets to be worked on and their grouping into homogeneous country groups represent two classic decisions in the context of international marketing. As in national marketing, the market segmentation includes the two tasks of selecting suitable country markets (segments) and developing the selected country markets in the sense of a concrete market cultivation. Depending on the basic strategic orientation of management, a distinction is made between two different approaches.
The international market segmentation describes a multi-stage approach. In a first step, those countries are selected that appear promising for processing. Subsequently, the demanders are segmented and possibly cross-border segments are formed. This approach emphasizes the diversity of the country markets.
In contrast, the integral market segmentation regards the world as a homogeneous overall market and tries to find target groups that are valid worldwide (e.g. teenagers with the same behavior and interests). This process is used in the context of global brand management, e.g. for fashion brands (e.g. Hugo Boss, Zegna), cigarettes (e.g. Marlboro) or perfumes (e.g. Chanel) and aims at largely standardized, global marketing.
Market entry: timing and development
There are various strategies for companies to enter the market and develop a new country market. The management has to make two important decisions: With which organizational form (e.g. export, franchising or joint venture) should the market entry and the subsequent market development take place and how should the market entry be timed? In international management, a distinction is made in particular between six organizational forms based on their complexity and thus the required skills and resources on the one hand and the degree of internationalization and control options on the other.
In addition to the form of market entry, timing is the second important success factor for market entry. With regard to the temporal market entry, a distinction is made between country-specific and cross-country timing strategies. First, it must be decided from a dynamic, transnational perspective how many national markets are to be opened up in which period. Here the management shapes the speed of the market penetration. Second, the exact time of market entry must be determined in the country-specific timing strategy. With regard to the period of market entry, a distinction is made between the waterfall and sprinkler strategy. With the sprinkler strategy, several national markets are simultaneously developed. The aim is to achieve economies of scale as quickly as possible and to distribute market entry risks across a large number of national markets in order to avoid high dependency on a few foreign markets. In contrast, the waterfall strategy relies on a slow, gradual development of new countries. This is to avoid cross-border flops. This is to be achieved by gradually opening up the markets and gaining experience in the first country markets.
International operational marketing
The strategic planning is followed by the development and coordination of the measures required for implementation within the marketing mix (international operational marketing). The optimal degree of standardization in operational marketing depends on the environmental conditions. Basically, the more heterogeneous the country markets to be worked on, the less standardization is possible. However, different environmental influences are important depending on the instrument. For example, the prices should be adjusted to the intensity of competition and the level of development of an economy. The culture of a country, on the other hand, is comparatively less important when it comes to pricing policy, but is of great importance for product policy (e.g. no sale of beef in India) and communication policy (e.g. no revealing advertising in Islamic countries). The quality of the infrastructure (e.g. roads) mainly influences the distribution policy. In developing and emerging countries in particular, logistics (e.g. fast transport, securing a cold chain) are a major challenge. Political and legal framework conditions also have a strong influence on the design of distribution policy, e.g. due to import restrictions or import duties.
Table: Extent of selected influencing factors on the standardization potential of the four marketing instruments
Implementation of international marketing and success measurement
While the substantive specification (implementation) of the international marketing strategy is the task of the product, distribution, price and communication policy, the implementation of the instrumentally specified action plans is carried out by the internal brand management. As part of the internal brand management, measures are considered that lead to brand-compliant employee behavior that ultimately leads to the fulfillment of the communicated brand promise.
Just like external brand management, the instruments of internal brand management are also influenced by national circumstances. First, employees in different cultures differ in their fundamental willingness to build commitment to a brand. Second, the national culture influences the perception and evaluation of internal, brand-related communication messages. Thirdly, a leadership style cannot be successfully applied in every country, since the power distance in particular decisively determines the acceptance of leadership styles. Fourth, the corporate culture is influenced by the national culture. For this reason, adjustments to the country conditions must also be made in the context of international internal brand management.
International, integrated marketing success system
After all, building an international, integrated marketing success system is the last important step in the international marketing management process. This is to prove the contribution of marketing to the company's success. The overall goal is to increase the global brand value. The global brand value is to be understood as the aggregated brand value across all country markets. In order to increase this, the country markets have to be viewed individually, as they not only make very different value contributions, but also have to struggle with very different problems. Marketing controlling only fulfills the control function intended for it through a differentiated analysis. In international marketing, when implementing a marketing controlling system, it is important to ensure that identical data is collected individually for each relevant room. For very large country markets such as China or India, further differentiation within a country can also be useful.
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