Global Market Segments the Widespread Term Paper

Excerpt from Term Paper :

A good market segmentation can reduce operational costs by efficiently allocating the resources to the most suitable segments, while taking under careful consideration the differences across different cultures (Hofstede et.al., 1999). The main alternative to this pricing strategy is by establishing the prices according to the local buying power. However, the customers from those countries where the company adopts a higher price may feel that this strategy is not very fare to them. Finally, the last approach is probably the one that fits better the current manufacturing global market trends. Thus, in those countries where is cheap to produce, the products will have a low price and vice-versa.

7. Factors that influence channel structures and strategies available to global marketers

Channels can be organised as networks, hierarchies and markets. Williamson (1991a, b) divided the channels into hierarchies - the companies internalize activities along the value chain - or choose not to do so and let the market to follow its course. The notion of networks was later introduced as an intermediate way between the other two (Thorelli, 1986). The most important factor to influence channel structures and related strategies is the cost incurred for including an extra member along the value chain. The cost refers to the functions performed by the new member. There is also a cost that can be incurred if the extra member is not included, which is actually the opportunity cost of integrating a new member.

One other factor that influence channel structures and related strategies is the customer. This one may need a variety of product assortments, such as tooth paste, shampoo and other products as such within the toiletry category. Also, when products are bought in small volume, the manufacturer may choose to integrate more members along the value chain, rather than sell directly to the customer.

In some instances, the channel structure is changed in situations in which intermediaries have sets of special skills that manufacturers lack and integrating the intermediaries would be cost effective.

However, besides cost consideration, there are time considerations, while choosing a given channel structure. For instance the distribution channels for perishable products are very short and not as cost efficient as for other products. However, making those longer would lead to a lot of product losses until those reach the final customer.

8. Global brands and global advertising campaigns

There are several advantages that companies get for having global brands and running global adverting campaigns, such as:

Economies of scale from, manufacturing, distribution and promotional activities. However, the advertising -related economies of scale may turn out to be tricky, because not all companies benefit if they run the same advertising campaigns in more countries, such as IBM or Visa. In some instances, it may be cheaper to have distinct advertising campaign in each country, than importing one campaign in every place (Aaker & Joachimstaler, 1999).

Lower marketing-related costs. The media reach is becoming larger, especially now that the internet is spreading so fast.

Easier to maintain a brand image. The products tend to be more homogenous than before. However, companies have to take under consideration that as products become more homogenous, individuals become more heterogeneous from the cultural point-of-view, due to emigration/immigration process.

Global brands usually imply global networks. Companies can benefit from knowledge diffusion in while being integrated in global networks (Ernst & Kim, 2002).

Although global advertising campaigns have to take under consideration the cultural and mental characteristics of the different societies that constitute the markets, a global approach may turn out to strengthen the brand. For instance, Benetton is worldwide famous for its controversial campaigns, however, these constitute the company's competitive advantage.

9. Sales promotions for consumer and industrial products

Generally speaking, the role of sales promotion in the marketing mix is the 'active' one that stimulates the consumers to buy the products. Sales promotions can be directed towards the ultimate consumer - 'pull strategy' that encourage buying - or towards the distribution channel - 'push strategy' that encourage channels to stock products.

Ultimate consumers are of two different types: industrial and individual. These two types differentiate themselves from the nature of their markets, the products commercialized and the demand, but also the determinants behind the purchasing decision (Webster, 1978).

Companies that commercialize industrial products have a different approach of sales promotions than those that commercialize consumer products. Studies have suggested that industrial product companies are more focused to have a sales orientation, whereas the consumer product companies are usually building a market orientation (Avlonitis & Gounaris, 1997). Industrial products are usually designed for a small number of customers, whereas consumer products are designed for a wide range of consumers, which determines the consumer product companies to focus more on other parts of the marketing mix within the marketing strategy. Also, the competition is likely to be tighter for this type of products, which makes sales activity less efficient than other marketing activities, such as product design. The market for industrial products is less concentrated and customers don't face so many choices. Therefore, a good sales force is likely to turn into success in this case. Also, the sales activity is likely to be more specialized for industrial products are those are more complex than consumer products. Conversely, the sales activity is likely to be more diversified for consumer products.

10. The "network effect" and its strategic marketing implications

The network effect refers to the situation in which the value of a product for a given customer depends on the number of other customers using the same product. Network effect can be either direct or interactive. The direct effects refer to the effects of a customer base on the demand, whereas the interactive ones refer to the interaction between a customer base with more marketing mix variables, such as price or advertising. The last type of effect is important for companies from the marketing point-of-view as it has to do with the company's marketing strategy and the firm's network strength has a direct impact on its individual direct and interactive effects (Shankar & Bayus, 2002).

A customer base can influence demand in a positive way if the utility of using a given product increased with the number of users in the network. In the same way a customer base can influence the effectiveness of a company's marketing mix decisions, namely price and advertising. For example, some customers are willing to pay a premium price to use Microsoft's spreadsheet product called Excel with a very large pool of consumers (Brynjolfsson & Kemerer, 1996). In this case, with a limited advertising budget, a promotional campaign can turn out to be very effective. It can be concluded that the customer reaction to a given marketing mix depends a lot on the firm's customer network.

The network effect also has an impact on the company's product strategy, because the effect seems to be stronger as more customers use the product. This implies that proprietary knowledge has to be very well preserved and the product design has to be customer friendly. Microsoft's Excel application is a good example in this case as well, because it is one of the most user-friendly products of this type.

11. Global marketing audit

According to the definition given Oxford University Press, global marketing is "a technique aimed at evaluating and improving an organization's global marketing operations." The success of a global audit depends on the data availability, on the quality of data sources, on its objectives and the time span of the actual audit. In global operations, the success is a difficult task because problems arise while trying to gather data, problems of cultural, political or language context.

The cultural distance (Hofstede, 1984), which implies differences in language, culture and mentalities, together with differences arising from business practices generate communications problems within global firms or their interaction with other firms. The anticipation of these problems often determines companies to internationalize in countries with similar cultures to the home market (Dunning, 1995).

The global marketing audit is a useful tool through which, on one hand, global companies evaluate the performance of global marketing activity - marketing strategies and policies and, on the other hand, they identify existing and potential problems and market opportunities and threats.

An effective audit is run annually to prevent big problems from becoming bigger or even fatal for companies. Also, it involves a systematic and formal component. The audit process has a given number of steps that have to be followed in the right order to insure the results quality.

The marketing audit can be focused on a given task (e.g. An activity) or it can be done at a general, broad level, depending on the objectives that were set in the beginning of this process.

12. Economic democracy (free markets) and political democracy

Economic democracy, synonym with the freedom in markets is characterized by the market demand of supply establishing the quantity of goods sold in the economy and their price.

Economic democracy is usually connected to the…

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