International Firms Segment the Global

International firms segment the global market primarily by geography. The geographic unit structure is generally considered to be the most practical for international organizations for a couple of reasons. The first is that it allows the companies to tailor their product lineups for individual countries in order to meet the specific needs of that country or culture. The second is that a geographic structure allows for management to be relatively local. Firms typically break the global into broad regions.

For example, Nestle breaks the world down into three zones -- Europe, Americas and "Asia, Oceania and Africa." Caterpillar uses North America; Europe, Africa & Middle East; Asia Pacific; and Latin America. Firms use these breakdowns according to their business volume, such that a North American or European firm may consider Asia Pacific to be a singular entity, but an Australian or Japanese firm may break the region down more specifically. Drilling down from the broad geographic divisions, firms segment markets further by major countries.

Wal-Mart breaks North America down to the U.S., Canada and Mexico with smaller nations generally coming under the Mexican branch. This allows for more specific segmentation by separating out linguistic groups and major cultural groups as well. At the country level, international firms segment their markets in much the same way as they would the domestic market. Extra care is needed with respect to target marketing, because any assumptions that are brought over from the home market may not be as effective with respect to segmentation in foreign markets.

Firms need to understand that the marketing function and in particular segmentation starts from scratch in foreign countries, which is precisely why these nations are treated differently from the home nation in the first place. 2) Products are often modified for export to international markets. There are a number of factors that could influence these modifications, including government regulations, infrastructure differences, cultural differences, end-user differences in tastes and preferences and competitive intensity (Johnson & Arunthanes, 1995).

Government regulations dictate that cars sold in Canada have daytime running lights, so auto manufacturers must include those in the product whereas in the United States they do not. Infrastructure differences also can force modifications -- cars in Hong Kong must be equipped for left-side driving whereas cars in China must be equipped for right-side driving. There are also cultural factors that can play a role. Guinness Stout is marketed all around the world, but in several variants tailored for the individual tastes of each country.

In Ireland, Guinness is fairly light in alcohol, for example whereas in Nigeria it is nearly double the strength, because it is not seen as something to drink over the course of many hours. Marketing programs are also subject to modification, especially due to cultural considerations. The amount of flesh in European advertisements will vary significantly from the amount in Arab advertisements for the same product, due to cultural sensitivities.

Nestle's infamous case in Africa is strong evidence of the need to modify both product and marketing -- their marketing tactics in Africa differed little from their tactics in North America, but the consequences were strongly negative rather than positive. 3. I disagree with this statement. Consumer needs are not homogenized. There is a tremendous amount of linguistic and cultural diversity in this world, and it will take a long time for that to diminish.

What the statement implies is that the same product can be marketed the same way around the world. Yet, the aforementioned Nestle baby milk situation illustrates clearly how this is not the case. Nestle began in Switzerland with baby milk formula, and built its success on that product. When it marketed that product in Africa, a number of problems occurred. The formula was diluted with unsafe water to stretch scarce income, not only malnourishing the baby but also exposing it to unclean water.

Instructions and warnings were ignored because they were not made in the local language. Nestle failed to recognize the effects of culture, income disparity, linguistic diversity and poor infrastructure on its marketing practices in Africa. The Nestle situation may have been extreme, but there are other cases in modern marketing history that illustrate this point as well. Starbucks succeeded in Asia specifically because it did not market the same way that it did in North America.

Cultural differences made it difficult to market their primary product (coffee), so they shifted focus to their secondary product (the casual "third place"), something that is in high demand in Asia's densely populated cities and Asia's communal culture (Chang, 2010). Had Starbucks stuck with its focus on coffee, the message would have been lost on tea-drinking Asian consumers. The notion that products can be marketed the same all the world over is a fanciful one.

Even the world's most ubiquitous companies tailor their products, their distribution and their promotional strategies to the local conditions. The brand may be the same, but the marketing behind the brand is often very different. 4. There are a number of costs beyond the domestic price that must be considered when marketing abroad, including product-related costs, transportation costs, marketing costs and financial costs. The first set of costs is product-related. These include modifications to the product to meet the needs or standards of the foreign country.

Once the product is ready to go, there are a range of transportation related costs. These include shipping to the international market, insurance, customs brokerage fees, duties and tariffs. Lastly, there are transportation and distribution costs within the foreign country to bring the goods to market. A third set of costs includes marketing costs. This includes not only the basic costs associated with developing a marketing program, but other costs as well. Special packaging must be developed. The local market must be studied and segmented.

Executives from the company will need to travel to the new market in order to build the infrastructure required to bring the product to market as well (UNZCO, 1999). Lastly, there are costs related to currency exchange (unless the export takes place within a currency bloc). These include transaction risk costs, hedging costs and the financial impact of currency translation back to the home country financial statements. These can work in the company's favor, but management should assume that they will not, and therefore will be costs. 5.

Building international distribution channels requires a significant amount of information gathering. The structure of the distribution network in an international market will be dictated in part by decisions regarding the product and how it is to be marketed and in part by the local market conditions.