Global Marketing Management

Prof. Zillur Rahman

Department of Management Studies
Indian Institute of Technology - Roorkee

Module - 1
Lecture - 1
Globalization - Part I

Welcome to this course on Global Marketing Management. I am Zillur Rahman and I work
for Department of Management Studies at IIT, Roorkee. This course of on Global Marketing
Management is spread over 40 modules and it has 5 sections. The first 2 modules;
(Refer Slide Time: 00:40)

That is module 1 and module 2. They will talk about globalization. So, we will build a base
for understanding this course. The next section is on global marketing environment. In the
third section we will talk about development of competitive strategy.
(Refer Slide Time: 00:53)
And then, the 4 section deals with global marketing strategy development.
(Refer Slide Time: 00:57)

And then, we will talk about global operations management.

(Refer Slide Time: 01:00)
So, let us start with the first module on globalization. In the second module we will talk about
the various theories related to international trade and multinational enterprises. And in the
first module we will talk about the benefits, the advantages and disadvantages of
globalization. So, let us start with the first module on globalization. This module consists of 5
components. We will give the introduction.
(Refer Slide Time: 01:26)

And then, we will talk about globalization, what is globalization and the definition of
globalization, etcetera. Then, why this global marketing is imperative, how is globalization of
market leading to convergence and divergence at the same time and in the last part that is the
fifth, we will talk about evolution of global marketing management. Now, as you can see
from this figure.
(Refer Slide Time: 01:54)
The international trade has been taking place across the world since times immemorial across
the Silk route that, through which the trade was happening across the world. 1 important fact
about globalization is that Western Europe, United States and Japan; they collectively
produce more than 3 times as much in foreign market as they export.
(Refer Slide Time: 02:14)

And about 1 third of their export and import are transacted within the company. That is,
exports and imports happening from the parents to the subsidiary, between the subsidiaries
and between subsidiary to the parent. So, basically this international trade in its current form
is between, is within the company.
(Refer Slide Time: 02:48)
Now, this figure shows how the world exports of manufactured goods increased from US$ 8
trillion in 2006 to US$ 11 trillion in 2016. And this graph, this portion, the yellow portion
shows the exports in agriculture, the international trade in agriculture products. In this green
it is the fuel and mining products. And blue one shows the manufactured products. So, in
manufactured products the international trade is the biggest. But, also keep in mind that in
agricultural product it is also quite large amount of trade that is happening.
(Refer Slide Time: 03:33)

This figure shows world exports of commercial services that totalled US$ 4.8 trillion, 2016 of
from US$ 2.9 trillion in 2006. So, this part, it shows commercial services, this yellow part
shows trade in travel. And this is transport. This is small components relate to goods related
services. So, the total contribution of goods related services is small while in commercial
services it is huge.
Now this, there is a fundamental shift that is occurring in the world economy. We are moving
towards an economy that is free of barriers to cross-border trade. Perceived distances
between country is decreasing. Material culture is looking similar across the world. And
therefore, national economies;
(Refer Slide Time: 04:36)

They are merging into an interdependent, integrated global economic system.

(Refer Slide Time: 04:42)

Now, this globalization has 2 facets. 1 is globalization of markets and another is globalization
of production. So, let us say that this globalization of market means globalization of demand.
And globalization of production means globalization of supply. So, the 2 important facets of
this globalization is globalization of demand. Demand can come from anywhere across the
world and globalization of supply that is, the goods and services can be produced and
supplied from anywhere in the world.
(Refer Slide Time: 05:24)

You see, most of us, we use Citibank groups credit card. People across the world even in
rural India drink Coca-Cola. Then, we have Sony PlayStations and we all have been to
Starbuck coffee at some point in time.
(Refer Slide Time: 05:41)

And similarly, globalization of production is happening. So, now, Boeing 777, it supplies, it
gets a supplies from Japan, Singapore, Italy. Thus, 30% of Boeing 777 by value is built by
foreign companies. Even the mobile phone that we have is build, has components that are
built across the world. Let us look at the definition of globalization as given by International
Monetary Fund.
(Refer Slide Time: 06:15)

The growing economic interdependence of countries worldwide through increasing volume

and variety of cross border transactions. Keep in mind that we are talking of increasing
volume, 1, and variety of cross border trade, cross border transactions in goods and services
and of international capital flows. So, volume and variety of goods and services is huge. And
then, also international capital flows and also through more rapid and widespread diffusion of
technology. Goods and services are being traded, capital is being traded and technology is
being traded.
(Refer Slide Time: 06:56)

Now, there are several benefits of this globalization. And we will talk about each one of them
in detail. So, the first benefit is cost reduction. Let us see how globalization reduced to cost
reduction. Because a company produces huge amount of products that are to be sold across
the world, which leads to economies of scales and therefore reduces per unit cost of
production. Enhanced customer preferences;
(Refer Slide Time: 07:30)

Product variety for consumers have increased due to globalization. Because of globalization
of demand, we have seen the globalization of markets. We have seen that a person now has a
variety of choices from which to choose. And the internet has opened new opportunities. And
you can browse from your home, office and train. That leads to enhanced consumer
preferences. Because of competition, the product quality has improved. And also, the quality
of marketing programs have improved.
(Refer Slide Time: 08:09)

So, you see that consumer has the liberty of choosing whichever product he or she thinks best
suited for his or her needs. This allow the person in America to wear clothes made in India
and Mexico while watching a football match taking place in England on a television made in
China.
(Refer Slide Time: 08:32)

And then, it leads to increased competitive advantage on the global basis. Because, the cost
has reduced, because of globalization consumer preferences have enhanced and the quality of
products have all gone up, though that leads to increased competition, competitive advantage
on a global basis. Briefly I will tell what competitive advantage is. The competitive
advantage is the advantage that a company has, which competitors do not.

So, because of these 3 things, it leads to competitive advantage to, on a global basis. Now, let
us see why global market is, marketing is imperative. Imperative means important. Is, so
why, let us see why global marketing is imperative. The, it is because of the following 6
reasons. And we will talk about each of this 6 reasons.
(Refer Slide Time: 09:23)
The first reason is saturation on domestic markets, the second is unfavorable domestic
economy, the third is emerging markets, global competition, need for global cooperation and
the last one is internet revolution. So, let us see the first reason, saturation of domestic
markets. Now, you see that most developed markets, developed economies, they are
saturation, because people have bought so many products that, the demand for several
products has is no longer there.
(Refer Slide Time: 09:58)

So, domestic market saturation in industrial parts of the world and marketing opportunity
overseas are evident in global markets. So, Samsung and Hyundai; now you see that
Samsung and Hyundai, they comes from Korea. Cemex from Mexico, Dome’s coffee from
Australia are competing head on for global dominance. So, these small companies, these
fairly new companies, Samsung and Hyundai, they are competing with well-established
players from developed countries.

Unfavorable domestic economies. The idea here is that, even if 1 economy is in, is facing
downturn, is in recession. Some other country somewhere in the world; it generally so
happens that it is facing expansion. So, if you are a global player, then even if you are facing
downturn in 1 economy, then also, even after, even in that situation, there will be a country
somewhere in the world that is expanding.

So now, you may be incurring losses at 1 place, but then, at the same time, you may earn
profit at the, at some other place. Then, there is a huge market that is coming up which
comprises of several countries which are coupled together and called as emerging markets.
(Refer Slide Time: 11:25)

That includes Chinese economic area, that is China, Hong Kong and Taiwan, India, South
Korea, Mexico, Brazil, Argentina, South Africa, Poland, Turkey. And it also includes certain
association of Southeast Asian nations. That is called as ASEAN, that includes Indonesia,
Brunei, Malaysia, Thailand, Philippines and Vietnam. So, these countries they are emerging.
Emerging markets for your general understanding is that, now their Gross Domestic Product
at sector, they are increasing; now, they have more purchasing power.

So, that is why they are called as emerging; this is 1 reason why they are called as emerging
markets. So, this emerging market, there is a lot of potential, great, huge market. So, that is
another reason why global marketing has become imperative. But at the same time, global
competition. Competition around the world is increasing.
(Refer Slide Time: 12:23)

About, now you see, you look at this example. About 30 years ago, the world's greatest
automobile manufacturers were General Motors, Ford and Chrysler. Today, Toyota, Honda,
BMW, Renault and Hyundai, among others stand as, stand out as competitive names, name
plates in the global automobile markets. Now, because of this global competition, it is giving
rise to another force that is called as global cooperation.

Japan's Sony, Toshiba and US computer maker IBM, jointly developing advanced
semiconductor processing technologies for next generation chip. Also, also keep in mind that
your most, many components of your Apple iPhone, they comes from Samsung. So,
although, on the face of it, Apple and Samsung they are competitors, but on the other hand,
they are also cooperating.

Similarly, Maruti Suzuki will be using production facilities from Toyota. Because Maruti
Suzuki is facing a shortfall in production capacity, while Toyota, in India they have excess
production capacity. So, now they have joined hand to where, so the Maruti where, Maruti
will be using Toyota’s facilities to manufacture their cars. And the last reason is internet
revolution. Now, this has, this internet revolution is bringing major structural change to the
ways companies operate worldwide.
(Refer Slide Time: 13:56)
Look at Amazon, eBay, Alibaba and Flipkart. So, to conclude, global epitomizes both the
competitive pressure and expanding market opportunities.
(Refer Slide Time: 14:13)

2 opposing forces are taking place at the same time. 1 is competitive pressure. More and
more competition. Competition coming from anywhere in the world. And at the same time,
expanding market opportunities. So, whether a company operates domestically or across
national borders, it will still face competition from across the world. And even domestic
competition is, also will continue to increase. So, this is the main focus of this term global.
Now, this globalization of markets is leading to convergence and divergence at the same
time. Let us look how it is happening.
(Refer Slide Time: 15:03)
Per capita income is an important determinant of consumer buying behavior. This is a well
understood fact. Now, the studies suggest that, when a country’s per capita income is less
than $10,000, most of this income is spent on satisfying the basic needs. As the country’s per
capita income increases and becomes equal to or more than $20,000, the disposable income
increases drastically.

Now, this increased disposable income; how people spend this increased disposable income,
this increases conversion pressures on consumer buying behavior. That is, people with higher
income tend to enjoy similar education levels. They want to have similar material
possessions.
(Refer Slide Time: 16:02)
They spend their leisure time similarly and their aspirations for the future. For example, we
see young people jogging in Nike shoes, an American product which is made in China;
listening to Coldplay, British rock band on Apple computer’s iPod, an American product in
Hong Kong, Philadelphia, Sydney in Tokyo. So, you see that, 1 person, a young man jogging
in Nike shoes. And he is owning products, he is using product that are made across the world.
(Refer Slide Time: 16:42)

Another dimension of this globalization of markets is divergence. It means that, globalization

do not suffocate local cultures. It does not mean that the culture across the world, across
different countries will look same. No. It rather liberates them from ideological conformity of
nationalism, with consumer becoming more receptive to new things. Now, consumer have
wider, more divergent choice sets of goods and services to choose from.

So, keep in mind that we are talking of the total set to consideration set, sorry, awareness set
to consideration set and to choice set. And then, the decision is taken. Now, this divergence
means that this choice set, the number of brands in this choice set has increased. Now, keep
in mind that if you want to buy a pair of shoes, so you will have 10 different brands or 20
different brands to choose from.

For example, Pollo Campero. That is a Latin American fried chicken from Guatemala,
offering chicken with a Latin service in a Latin American environment has been catching on
quietly in the US to cater to American’s increased appetite for a different kind of chicken. So,
although the basic need or the need that is being satisfied is hunger. But then, or the
requirement or the need or the want to eat chicken.
But then, there are variety of chickens that from which the consumer can choose from. Next,
we will talk about the last component, that is evolution of global marketing. Evolution is how
global marketing has developed. Now, we will move from left to right. First, you see that the
first stage in this evolution is domestic marketing.
(Refer Slide Time: 19:00)

The second stage is export marketing, the third stage is international marketing, the fourth is
multinational marketing and the fifth is global marketing. Also keep in mind, very important
thing is that, these 5 stages, they are not mutually exclusive. That is, a company may be for,
may be exporting to 1 country. It may be following a global strategy in another country or it
may be having multinational strategy for another group of countries.

So, we cannot put companies in either of these categories. This is, this is a rainbow. So, it
does not mean that, these categories, they are mutually exclusive. These are not watertight
compartments. No. But these, this slide shows that these are the 5 stages in evolution of
global marketing. The first stage is domestic marketing, the second is export marketing, the
third is international marketing, the fourth is multinational marketing and the last one is
global marketing.

Now, you see that in domestic marketing, the orientation is ethnocentric. This ethnocentric
orientation means that all marketing strategy is designed for domestic consumers. So, the
company is making products keeping in mind the domestic consumers. They are pricing it
and accordingly and promoting and distributing it accordingly. They are not taking a
consumer outside their home country into consideration.
Now, what happens is that, because we have seen that globalization will increase
competition. So, now this company thinks of selling their goods and services across the
border. So, as soon as they start selling their goods across the border, they get into export
marketing. But keep in mind that orientation is still ethnocentric. All product development is
based on the needs of the home country consumers.

So, they were just, they now just start exporting goods in the goods that they were producing
for the domestic market, domestic consumers. In both these cases, the marketing mix and the
marketing strategy decisions are being made at the headquarters in the home country. So,
then they start exporting. Now, over a period of time, what happens is that, competitors will
also start exporting and the competition in foreign markets also increases.

Now, what to do? So, the next stage is international marketing. Now, you see a significant
change is happening in the orientation. Now, the orientation is polycentric. This polycentric
orientation means that, all marketing strategy in country 1 will be made here; all marketing
strategy in country 2 will be made here; and similarly in country 3 and country 4. So, there is
a significant difference in ethnocentric and polycentric orientation.

In ethnocentric orientation, all the decisions were taken in the headquarters in the home
country for home country consumers. In polycentric orientation, now this company becomes
a domestic company in several different countries. Keep in mind, this company becomes a
domestic company in several different countries. So, in country 1, it has a head quarter and
all marketing mix decisions are being taken place in this country 1.

Second, then again it has a headquarter in country 2. And all marketing mix decision
regarding this country are being taken in this country. And similarly, country 3 and country 4.
Keep in mind that we are also talk; keep in mind that we you can think of Hindustan
Unilevers Limited. So, that was an international country. So, now, the marketing mix
decisions in India for Hindustan Levers Limited; I am not talking of HUL, I am talking of
HLL.

So, all marketing mix decisions were being taken for Indian market in India. And similarly,
for in Chinese market for, in China for Chinese Market, in Japan for Japanese market. So, the
Lux in India may not be priced similarly; it may not look similar to Lux in China or to Lux in
Japan. This is what we are talking of. Each country will have a different marketing strategy.
So, the develop and acquired new National brands.

So, HLL in India may have entirely different, will have some brands that are not there in
HLL Korea or in HLL Japan. This is what this international marketing means. But then, also
keep in mind that, because of competition there is all over the pressure on cost. International
marketing means that we are producing goods, we have a marketing strategy for a country
specifically for that country.

So, the economies of scales that we were talking about earlier, is not happening in
international marketing. But then slowly, competitors have also followed; so therefore, there
is a pressure on cost. Because of this competition, now companies are again forced to rethink
what to do. How to reduce cost and have a competitive advantage as compare vis a vis
competitor. So, then they move on to the next stage which is called as global marketing.

This is called as, this is, sorry, this is called as multinational marketing. Multi nation, now
these multi nations are put together here. And this is called as region 1. Then again, 2, 3, 4
countries, they are put together and they are called as region 2. See that the orientation which
has started from ethnocentric, moved to polycentric and now it is regiocentric. That is, region
specific. We are coupling countries.

We are putting together 2, 3, 4 countries in the form of a region. Now, the disadvantage that
we had in international marketing, that is the disadvantage on economies of scales; now this
is being taken care of here. Now, in this, in multinational marketing, 2, 3 countries, they are
put together. And it is called as region. Therefore, now we will have a marketing strategy that
is specific for this region.

We will develop and acquired new brands for this region. And similarly, this cost related to
advertising, promotion and distribution is distributed over this region. So, we have moved
from domestic to export to international and to multinational marketing. Here, all marketing
mix decisions are based, are made for this region. This region may comprise of 2 countries, it
the region may comprise of 6 countries.
Still economies of scales are being lost somewhere and competition is increasing. So, every
company is still under threat of competition. So, then they move on to the next stage which is
called as global marketing. Global marketing, here we are coordinating marketing mix across
countries and regions. Across countries and region, marketing mix is being coordinated, 1.
We are integrating sources and production with marketing.

Integrating, sourcing and production with marketing and allocate resources to achieve
portfolio balance and growth. And here the orientation; look at this important thing,
orientation is geocentric. So, these are the 4 different kind of orientations through which a
company passes through on its way to global marketing. The, in the first 2 stages, the
orientation is ethnocentric. Then it becomes polycentric, then regiocentric and at last it
becomes geocentric.

Idea of this geocentric orientation is to consider whole world as 1 integrated markets. But,
also keep in mind that we will have; I will explain this further. We are considering world as 1
market. It is not considered as a potpourri or a collection of markets. It is 1 integrated market.
So, but then we will have global products with local variations and most of the marketing mix
decisions are made jointly with mutual consultation across the countries and regions.
(Refer Slide Time: 28:21)

So, this global marketing refers to marketing activities. Global marketing refers to marketing
activities that emphasizes the 3 things. The first is standardization efforts. Standardizing
marketing programs across different countries with respect to product offerings, promotional
mix, pricing and channel structure. Such efforts increase the opportunities for the transfer of
products, brands and other ideas across subsidiaries and help address the emergence of a
global customer.

So, the first thing that global marketing is emphasizes is standardization efforts.
Standardizing marketing programs across the world, across different countries. Next thing
that it emphasizes is coordination across markets. Coordination of across market means that;
(Refer Slide Time: 29:32)

We are reducing cost, inefficiencies and duplication of efforts among their region, national
and regional subsidiaries. So, 1 is standardization efforts where we are standardizing
marketing programs. Second is coordination efforts the, so that the cost inefficiencies and
duplication of efforts are reduced. And the third is global integration. Participating in many
world markets to gain competitive advantage.

And effective integration of the firm’s competitive campaigns across these markets by
subsidizing operations in some markets with resources generated in other markets. And
responding to competitive attacks in 1 market by counter attacking in other. So, these are the
3 important things to keep in mind when we are talking of global marketing. First is
standardization efforts.

The third, the second is coordination across market and the third is global integration. So, we
are integrating the markets across the world. But global marketing does not necessarily
means standardization of products, promotion, pricing and distribution worldwide.
(Refer Slide Time: 30:42)
But rather, it is a company's proactive willingness. Keep in mind what important here is
proactive willingness. So, this global marketing is about the mindset . Global marketing does
not necessarily mean standardization of products, promotion, pricing and distribution across
the world, but it is the company's proactive willingness to adopt a global perspective instead
of country by country or region by region perspective in developing a marketing strategy.

So, first thing is that we are not, globalization does not mean that we will have the same
looking products which is being sold at the same price through promotion and distribution
that looks similar across the world. No. But it refers to the proactive willingness or the
mindset of a company to adopt a global perspective. So, the very important component of
global marketing is the global, the proactive willingness of country to adopt a global
perspective instead of country by country or region by region perspective.

For example, Black & Decker, a U.S. manufacturer of hand tools adopted a global
perspective by standardizing and streamlining components such as motors and rotors while
maintaining a wide range of product lines. So, you see that, what they are doing is to
standardize the components that through, components that go into manufacture of a hand of a
machine tool like motor and rotors while maintaining a wide range of product lines.

So, based on the same motors and rotors they have a wide range of product lines and create a
universal image for its products. Global marketing does not necessarily means that products
can be developed anywhere on a global scale;
(Refer Slide Time: 32:51)
Because, we will also, at the same time we will also have to keep in mind economics,
geography, climate and other culture factors that affect how companies develop certain
products. The internet adds a new dimension to global marketing. E-commerce retailers gain
substantial saving by selling online. Now, to get a better understanding of the complexity of
decision making in the, in global marketing. Let us look at this figure.
(Refer Slide Time: 33:30)

Let us for the time being concentrate only on this white circle that, on which it is written the
target markets, 1. Now, this target markets, they are being placed within the 4 Ps that relates
to a controllable environment. Controllable environment means, that component of
environment that is in the control of the company. So, the company controls, can control the
product, the price, the promotion and distribution and through which it targets the market.
This is the controllable environment. Now, this controllable environment which is in the
control of the company is within an uncontrollable environment. That is called as the external
environment. So, we also called this as external environment and this as internal
environment. So, this controllable internal environment that is controllable environment lies
within domestic environment that is uncontrollable.

This uncontrollable domestic environment is made up of several factors. 1 is competition, the

second is technology, economy, culture, geographical, political and legal. We can also
include geography, etcetera, etcetera, climatic conditions. So, this these are, this is the
uncontrollable environment. So, when a company is operating in purely domestic market, it
has only this environment into, it takes only this environment into consideration.

So, this is how domestic company operates. Now it is starts exporting or it is move on to
international marketing and to geocentric marketing. As it enters another country, there is
another level of uncontrollable environment. The foreign environments that starts affecting it.
So, that is for 1 country. Then, as it enters another country, yet another level of external
environments and external uncontrollable environment, foreign environment, it is start
affecting their controllable environment and so on so forth.

So, the more, in more number of countries a company operates, its controllable environment,
that is product price, place and promotion, it is starts getting affected by more and more
number of foreign uncontrollable environment. So, that is the biggest problem in this global
marketing. A purely domestic company has just this thing to look for. But, as a country starts
moving from 1 country to another country to yet another country, to the third country, to the
4th country, the number foreign environments, uncontrollable environment.

And keep in mind, this foreign environment is uncontrollable. So, as it moves from 1 country
to another country to the third country to the 4th country, more and more number of foreign
uncontrollable environments, they start affecting its domestic, sorry, they start affecting its
controllable internal environment. So, that is, that makes this global marketing a very
complex thing to do.

So, that was the first module on globalization where in we have talked about what is
globalization, why it is important, how it is leading to convergence and divergence and the
evolution of global marketing. And in module 2 we will talk about the various theories
related to international trade and a multinational enterprise.