FAQ: Marketing Methods and Challenges
Question 1: What types of information should I research about my industry?
Answer 1: The following are some industry-specific data you should collect:
Market size: This is generally stated as annual revenue or sales
figures with growth rate projections.
Competition: Who are the competitors, and what is the market
share, product offering, and financial status of each?
Regulatory environment: This is a list of regulations and
government organizations that govern your industry.
Innovation: This refers to the technological or other changes and
improvements occurring in your industry.
Question 2: Why is it important to conduct market research?
Answer 2: The data points collected in your market research will contribute
to your marketing efforts and plans. First, understanding market size and
competition is very important when it comes to preparing plans and setting
marketing initiative objectives and goals. For example, if you are in an
industry with $1 billion in annual revenue and you predict growing to a 5%
market share, setting a $100 million annual sales goal would be inconsistent
and rather unrealistic. Second, if you understand the regulatory environment,
you will avoid paying costly fines because you have followed government
restrictions or guidelines in the production, distribution, or marketing of your
product. Finally, a grasp of the your industry's innovations will allow you to
make realistic projections regarding product releases and production
schedules, as well as preempt any competitive moves that might undermine
your marketing efforts.
Question 3: How can market research be used to determine metrics for
success?
Answer 3: In doing market research, you will collect data that you can use
to measure your own success. For example, if you know that the largest
market share of the top competitor is only 12%, you can feel a lot better
about a 4% market share than if the top competitor has a 72% market share.
Also, the number of competitors should be considered. It is also important to
understand customer metrics such as wallet share. If you know customers
spend an average of one hundred dollars per year on a product you carry,
your goal should be focusing consumer spending on your brand.
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FAQ: Marketing Methods and Challenges
Question 4: How can I learn what consumers like and want?
Answer 4: General market data are easily found on the Internet or
purchased from research firms that specialize in gathering and disseminating
market data. More specific methods such as focus groups or surveys once a
specific target market is chosen. These methods can be used to collect data
that can be even more helpful in determining product mix, branding,
marketing campaign approaches, distribution, and pricing.
Question 5: What is meant by marketing campaign?
Answer 5: A campaign is a marketing plan that may include one or several
different methods of communicating a specific message or promoting a
specific product. For example, a company launching a new line of desserts
and snacks will launch a campaign that might include television advertising,
newspaper coupon inserts, and in-store samples. The campaign is viewed as
a set of efforts with a specific goal, such as successfully introducing a new
product to a market, increasing sales, or decreasing returns and customer
service inquiries.
Question 6: What are the various options for advertising a product or
service, and why would I choose a particular one?
Answer 6: There are numerous venues and channels for advertising, which
include
Highway billboards
Television
Newspapers
Magazines
Internet banner ads
Radio
Signs buses and taxis
Within each of these, are numerous choices to make, such as length or size of
the advertisement, network, specific publications, and so on. Your choice will
depend on what you learn in your market research. For example, if you
decide your target audience is business travelers, you should advertise your
product in magazines most often distributed on airplanes or on the in-flight
media presentations.
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FAQ: Marketing Methods and Challenges
Question 7: When is it appropriate to engage in direct marketing?
Answer 7: Direct marketing requires contacting individual consumers
directly, which means a company needs to obtain addresses, phone numbers,
or e-mail addresses for targeted customers. Direct marketing can be very
expensive, but generally has a higher response rate because it is sent directly
to a customer. If a marketer can learn more about a customer’s demographic
data or preferences, the message can be tailored and become even more
effective. For example, a video rental store company could send a mailer to
those who rent mostly video games with offers for rentals and purchases on
new video game releases.
Question 8: What are the restrictions and roadblocks to direct marketing?
Answer 8: One of the greatest challenges encountered when embarking on a
direct marketing project is obtaining accurate and complete data. Consumer
data can be purchased from many companies, but it is very difficult to
maintain a high level of accuracy on that data. Additionally, there are many
privacy laws that protect much of that consumer data. A company wishing to
use data to market directly to customers should be fully aware of the
regulations and guidelines suggested by governing bodies to avoid any costly
fines.
Question 9: How do advertising techniques apply to a business-to-business
(B2B) scenario?
Answer 9: Many companies engaged in B2B will use traditional advertising
for a mass audience targeted through a specific publication. For example, an
investment bank is more likely to run a print ad in Forbes than in People
magazine. Other common B2B marketing efforts are:
Trade shows: Many companies within an industry or complimentary
industry gather in one place to display their wares.
Field sales force: These are generally divided by geography.
Conferences or seminars: These are designed to educate the
customer on product features or on industry knowledge.
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FAQ: Initial Development of the Marketing Plan Project
Question 1: Where and how should I begin my initial analysis for my
marketing plan project?
Response:
A clear strategy is critical when beginning to develop a marketing plan. The
best place to begin a marketing plan project is to remember that your
ultimate goal will be to produce a comprehensive marketing plan that
develops a new product or service. It is therefore essential to begin by
choosing a company that you are able to find data to research. The data,
which could include sales and market information, is essential for you to
access so you can develop a clear marketing analysis and build a strategy
that fits that company. Said another way, do not choose a firm that is
privately held or has no public data or that is unwilling to provide you with
data so you may complete your project. It is recommended that you make a
list of four or five firms and do some preliminary research. If one stands out
as to the wealth of data, which might include access to executives, that it will
provide or is accessible that firm might be an excellent choice. If possible,
you should consider the firm for whom you currently work; however, before
you begin, be sure to speak to management to guarantee that you will have
access to the information you need.
Question 2: Should I work in a group or alone?
Response:
The choice of working in a group or alone should be based upon careful
reflection. The following are some basic considerations:
Do you prefer to work alone or in a group? If you prefer to work alone,
you have an advantage because you will not have to depend upon
anyone to perform his or her share of the work. Conversely, it can be
a tremendous help to have another student to bounce ideas off and to
share the workload. There are advantages and disadvantages to either
choice.
Are you able to identify group members with whom you have worked
before? Have they proven to be reliable and as committed to the
quality of work as you are? Do they feel the same sense of urgency to
complete work on schedule?
If you choose to work in a group and the members do not perform as
promised or expected, you may have to make up for their dereliction
by doing a larger proportion of the work.
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FAQ: Initial Development of the Marketing Plan Project
If there is a dispute in the group, are you prepared to negotiate and
compromise if necessary?
Remember that once you have made a commitment to a group, you
cannot change your decision. Likewise, if you begin the project
independently, you will not be able to join a group during the process.
Carefully consider these points and choose wisely.
Question 3: When I do the SWOT analysis, what should I learn from the
strengths of a company?
Response:
The strengths of a company should give you insight into what new markets
you might enter and what types of products you are able to produce. The
strengths will also highlight areas where the company can compete and
prevail over competition. Company strengths involve and are related to many
areas or facets of an organization. Some organizational strengths may be
operational or process related. Business processes are the procedures and
activities that, after being refined, may help deliver a competitive advantage.
For example, an organization may possess a powerful distribution
system. Powerful distribution systems allow firms to quickly cover market
segments with a product that a competitor with poor distribution systems
may not be able to match. A company with this type of strength can quickly
bring new products to market and gain a first-to-market advantage. Other
company strengths may be related to personnel: Companies with a keen or
specialized talent can create highly competitive organizations. One example
of specialized talent is a highly effective and productive research and
development team. Companies that possess strong research and
development functions are often able to leverage their skills by developing
more advanced or innovative products. Research and development skills may
then provide the organization a way to bring ever more attractive products to
the market, which helps them maintain or develop competitive advantage in
a market.
Question 4: When I do the SWOT analysis, what should I learn from the
weaknesses of a company?
Response:
While it is wise to understand and take advantage of the strengths a company
possesses, it is equally wise to fully consider and take into account a
company's weaknesses. Company weaknesses could be deficiencies or a lack
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FAQ: Initial Development of the Marketing Plan Project
of abilities when compared to competition. In either case, strategic planning
will generally account for company weaknesses in two general ways. The first
general strategy is to attempt to minimize the effect that a weakness may
have on operational effectiveness. This type of strategy is meant to isolate
the weakness to keep it from disrupting our competitive position. For
example, planners might decide to outsource some or all business processes
to use specialized and more proficient labor. The second general strategy
designed to deal with organizational weaknesses is to invest in the
improvement of the weak area or areas. For example, the organization’s
ability to recruit talented employees is found unsatisfactory. In addition, this
ability is deemed essential for a firm to remain competitive, or if this inability
keeps the firm from entering a new and attractive market, one would need to
take action. In this case, strategic planners might consider investing in that
area by increasing salaries or improving human resource’s abilities to
recruit. In addition, a company might invest in training its current employees
to a level that would restore or improve the firm’s competitive position. In
any event, one must account for and deal with weaknesses in the firm.
Question 5: When I do the SWOT analysis, what should I learn from the
opportunities of a company?
Response:
Opportunities are those market conditions that fit into organizational
strengths. Opportunities may take several forms and carry varying risk
levels. Some opportunities will involve completely new products in new
markets. Understand that the products themselves do not have to be new to
the world; they would just be considered new ventures for the company. New
products in new markets tend to carry a fair amount of risk for the
organization. This is because of the fact that as an organization, it may have
to learn and apply new processes to new customers. These customers may
demand a level of service that will require much more than the company's
previous markets did. The risk is that the organization will fail to learn and
adapt to the new product and market—no matter the size of a firm, it can be
very difficult to change organizational behavior.
Other opportunities may involve partnering with another firm in a joint
venture. This is usually done because each organization has identified
strengths that are unique to them, and by partnering, they can bring a very
competitive offer to market. The risk in this option is that the organizations
will not be able to cooperate enough to make the venture work. Companies,
like individuals, have different ways of doing things and communicate in
vastly different ways. This leads to confusion, and some joint ventures are
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FAQ: Initial Development of the Marketing Plan Project
abandoned because of these issues cannot be overcome. There are other
opportunities that may be completely external to the organization. For
example, a change in laws may ban certain products or services. This may
create an opportunity for the organization. Any time there is change or
turmoil in a market, there are opportunities. The key is to understand that for
something to truly be an opportunity it must correlate with organizational
strengths, and the organization's strengths must be sufficient to compete
with current firms that are serving that market.
Question 6: When I do the SWOT analysis, what should I learn from the
threats to a company?
Response:
Threats should also guide one's decision making because they focus the
attention on market conditions that may prevent a firm’s success. Threats
may be short-term in nature or long-term threats. In either case, each threat
should be evaluated and categorized. One factor would be to categorize the
threat in terms of their impact in a monetary sense. For example, some
threats may make and have a small impact on cash flows and others may
potentially be quite large. Another critical category would be an evaluation of
the probability of whether the threat will materialize. Some threats are
projections or involve scenarios that may develop. For example, some threats
are based upon several economic events that would need to happen at the
same time. While these events would be a real threat, the probability of them
happening at the same time may be small. This is critical to evaluate because
it gives the organization a way prioritize and plan to deal with threats and not
waste resources on low probability risks.
Other threats involve competition from other companies. If a company is
currently serving a market successfully and there is a threat of a large and
very aggressive firm entering a market, this could pose a very large threat. A
firm could not keep another from entering the market; however, it should
plan to meet the threat and not fall into a reactive "let’s see what happens"
type of situation. If a company has not planned and developed contingencies
to meet this type of threat, then by the time the threat becomes real it may
be too late to plan and react.
Another very real type of threat involves government regulation.
Governments—local, state, and federal—may pass or enact regulations that
have a very negative impact on operations. The good news is that
government will likely not change rules or pass regulations without some
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FAQ: Initial Development of the Marketing Plan Project
forewarning. This should allow a firm to prepare for the changes and in some
cases lobby the governing body for a more favorable change.
Question 7: What is a PEST analysis, and how will it help me make
decisions?
Response:
PEST is an acronym that stands for certain factors included in an analysis of
the macroenvironment: the political, economic, social, and technological
variables of the environment external to the organization. These factors affect
all firms and may include more or fewer factors depending upon the needs of
the planners. These variables are almost always beyond the control of the
firm and are often viewed as threats; however, changes in these variables
may also create opportunities. This analysis is often used in conjunction with
a SWOT analysis and together serves to give a very comprehensive picture of
the strategic environment. In addition, keep in mind that many of these
macroenvironmental variables are nation specific. This is extremely helpful
when planning for international expansion.
The following examples are some of the criteria that might be considered
when performing a PEST analysis:
Political factors in a country should be considered, including the
political stability of a country. The legal system and how contracts are
enforced are also evaluated. Trade regulations and taxation
regulations are also very important. Additional political considerations
include wage and work regulations such as industrial safety rules.
Economic factors of a nation are very important as well. For example,
whether the economic system of a country is capitalistic or socialistic
is very important. Currency exchange rates and the stability of the
financial markets are critical factors as well. The general business
cycle should also be considered. For example, is the country in a
recession or experiencing prosperity?
Social factors are also critical variables. What include the
demographics of a nation, and what social classes exist? Other social
factors analyzed include education, how people use their leisure time,
and what is the populations’ attitude toward work and culture.
The last factor is technology. Questions to be asked and answered
would include information about technological breakthroughs and the
impact that technology may have on a firm or product. How
technology affects costs and business processes is also considered. In
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FAQ: Initial Development of the Marketing Plan Project
addition, planners must consider how technologically advance a nation
is.
Question 8: What are the different types and sources of market research
data?
Response:
Like any function in business, is it best to plan before beginning any task to
maximize the results. A general framework for market research involves first
defining the problem or opportunity and the objectives you need to
accomplish. If an organization were performing primary research, the
research plan would be for gathering data from sources external to the
firm. Primary research attempts to gather primary data, which are data that
are newly gathered for a specific purpose or need. The process of gathering
primary data is complex, time-consuming, and generally expensive. Typically,
primary data are gathered through observational methods such as watching
people shop or other market-related behaviors. Focus groups involve groups
of 5–10 participants that would have characteristics similar to the target
market. This group would discuss topics of interest to the marketer. Mail and
Internet surveys are also methods of gathering primary data.
Secondary data are data that have already been gathered. Secondary data
include sales information the company possess and data that other firms
have made public. Accounting and financial data can also prove to be very
helpful. Internal data that comes from purchasing, production, and the
service department are often very useful. Other external sources include
government agencies, trade associations, business publications, and
magazine and newspaper articles.
Marketing goals and plans should guide the information desired. For example,
if a firm wishes to change an existing product by adding new features, it
would be very wise to look at the sales history of the product and forecast
based upon those sales. Needs then dictate where one looks for data and
what type of data is considered.
Question 9: How is a strategic plan applied?
Response:
A strategic plan can be applied to many business situations and forms. One
way to look at strategy is from a corporate level of planning. Corporate
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FAQ: Initial Development of the Marketing Plan Project
planning is the broadest view, which usually applies to a large corporation
with many divisions. This type of corporation is usually referred to as a
conglomerate. Strategic planning at this level focuses on the broadest view of
the organization. This type of planning covers the general direction for all the
various divisions and sets targets for growth.
The next level of strategic planning goes to the divisional level. Divisions are
often called business units, and when planning, strategic business
units. Planning at this level would become more specific and focus only on the
business unit. For example, this strategic plan might call for moving the
division into a new market or even getting out of an unprofitable market. Any
plans, however, would be a reflection of the corporate strategic plan.
The last level of strategic planning would move to the functional
level. Functional levels or departments would set broad strategic goals that
would help focus themselves on helping achieve the divisional goals.
In each of the preceding cases, strategic planning is a long-term plan, usually
a year or more in length, and it is typically done at the highest levels of
management at whatever level the planning is taking place. Also note that
strategic plans apply to small, entrepreneurial businesses. Small business,
just like large multinational firms, must be able to plan for the long term and
develop a plan to profit. The one advantage that a small business does have
in a strategic planning sense is that it is usually able to change the plan
quicker as results or feedback from the market are witnessed and
recorded. The need to constantly revisit and analyze strategic plans is
essential and vital to long-term growth.
Question 10: What is a tactical plan?
Response:
A tactical plan is developed after a strategic plan is completed. A tactical plan
is designed to put into action and accomplish the goals laid out in the
strategic plan. Tactical plans tend to be much more detailed and focus on
milestones that are yearly, quarterly, monthly, and weekly. The shorter time
focus is essential because adjustments must be made more often to tactical
plans than strategic plans. Because the operational environment is much
more fluid in nature than in strategic plans, tactical plans are usually done by
midlevel managers and affect line workers in daily operations. Tactical plans
also tend to be more directly tied to annual budgeting processes.
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FAQ: Initial Development of the Marketing Plan Project
The elements of a tactical plan may follow this broad process (Porter, 1998):
Strategic planning must drive the tactical plan and its associated
budget. At the beginning, it is wise to reconnect with the goals and
objectives laid out by the strategic plan so as to assure alignment and
efficiencies. Budgets tied to tactical plans are also reviewed at this
time.
Good tactical marketing plans should have elements such as a
summary of the general marketing goals and sales objectives; a list of
the essential marketing initiatives ranked in order of importance and
likely success; a summation of the value that will be delivered to the
target market; and segments for which and in which the firm will be
competing. How the product or service will be differentiated and
communicated should also be examined and stated. The plan should
have a budget with estimates of both fixed and variable costs and
assumptions as needed.
The plan should be as action oriented as possible and be communicated to all
affected areas of the organization. Unless the organization is a part of the
process and well informed, the plan is not likely to succeed.
Reference
Porter, M. E. (1998). Competitive strategy: Techniques for analyzing
industries and competitors. New York: Free Press.
8
FAQ: Quantitative and Qualitative Data
Question 1: What is the difference between quantitative and qualitative
data?
Answer 1: In developing a marketing research plan, the proposed use of
qualitative data is sure to lead to a spirited discussion. One side might argue
that only "hard numbers" can yield truly accurate information with a definable
confidence level. The other side would counter that knowing a fact does not
necessarily explain why it is so. In practice, you often need both: quantitative
data to show you specifics and trends, and qualitative data to help explain the
reason(s) behind those specifics and trends. This is especially true when you
are researching human behavior, because knowing how many boxes of corn
flakes are being purchased is far different from understanding why people
buy corn flakes.
The quantitative method is based on the "scientific method," which has its
roots in the physical sciences. It is a search for truth. This method has three
steps: state the objective or hypothesis of an experiment, gather the
appropriate data, and evaluate the results to ascertain whether the objective
was met or the hypothesis proved or disproved. The scientific method
requires structure. The researcher defines and frames the data to provide
specific focus.
The qualitative method is based more on the social sciences. It is a search for
truth as well as for meaning. There is still structure, but emphasis is placed
on identifying relationships and symbols as opposed to numbers. Qualitative
methods include direct observation and interviews, either individual or group.
The researcher endeavors to understand the issue from the subject's
perspective.
Some studies benefit from using qualitative methods to identify trends, then
quantitative methods to measure them. Some, as the example above, start
with the numbers and then look for meaning. Both types of methods are valid
and very useful tools for the marketing researcher.
Question 2: What is an example of the importance of qualitative data?
Answer 2: The customer service department for a large business-to-business
(B2B) manufacturer wanted to improve customer satisfaction. A survey was
administered (quantitative) that asked the customers to rank certain servicerelated issues in order of importance. Customers consistently ranked having
their calls answered promptly as very important to their satisfaction. The
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FAQ: Quantitative and Qualitative Data
company decided to use the incidence of customer hang-ups (dissatisfied
customers) as the key measure of performance in this area. To reduce the
hang-ups they shortened the queue, added staff at typically peak demand
periods, used scripts calls to shorten call time, and so on. No matter what
they did, however, the hang-up rate remained at about the same percentage
of total calls. Finally the exasperated manager called a number of key
customers to ask them about the hang-ups. The answer astounded him. It
seems that this company, from the beginning, was the best in the industry
for call pick-up. Customers therefore knew if the service reps were all busy on
the first call, one would most likely be available if they called back. The
customers found it more efficient to call back later than to wait in a queue
because of this confidence, regardless of the waiting time.
The original survey served its purpose—it found out in hard numbers what
issues were important. What it failed to do is find out how the company was
performing to customer expectations relative to those issues.
Question 3: What is a data warehouse?
Answer 3: The accumulation of an organization's data is its "data
warehouse." Astute managers will work with their Information Systems
department to automatically gather, process, and report information gleaned
from the data warehouse. The only real cost is the initial set-up and the
information could be priceless. Consider the following:
•
•
•
A sudden sales decline for a particular product might signal a new
competitor initiative or the entry of a substitution product into the
market
A greater portion of sales shifting from smaller to larger customers
may predict a maturing of a particular product or market
A surge in spare parts sales might signal an increase in customer
output, and therefore a building demand for new products
Question 4: What is involved with data mining?
Answer 4: Some of the most significant strategic information is found from
indirect sources. All of a company's electronically saved data is stored in a
computer in an application known as a database management system
(DBMS). This system organizes the data and provides a number of tools
(programs) to help retrieve and report on it. There are many reports
generated for every function, from invoices to time cards to shipping labels,
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FAQ: Quantitative and Qualitative Data
and there are also special reports used by management to make key
decisions concerning the business. These are called decision support systems
(DSS) or Executive Information Systems (EIS).
One particularly powerful use of these systems, from a research perspective,
is known as "data mining." Data mining is the process of finding patterns and
relationships among different types of data that are not typically obvious
when the data is viewed separately. In other words, data mining can find
questions to answers no one thought to ask!
You may question the value of looking for something that might not be there,
but too many companies have discovered significant strategic information in
this way to disregard the opportunity. The data is already there, so it costs
nothing to gather. The computer system already has built-in reporting
capabilities, although the researcher might need some assistance from the
Information Systems group.
Go on an expedition. Keep your eyes open and there is no telling what gold
you might find in your data mine. Consider the following:
•
•
•
Suppliers' increases in quoted delivery lead times for a critical
component may predict growth in a key product segment as
companies scramble to secure supply lines
Increases in accounts receivable aging may indicate an inventory
build-up in the field and predict an imminent sales slowdown
Increased employee turnover might signal a tightening labor market
Question 5: How can accumulated data benefit a company?
Answer 5: Marketing research data is very much like cheese. Sometimes it
gets better with age, but sometimes it begins to go bad almost immediately.
Data are facts that are important today but often lose significance quickly.
Data accumulated over time, however, can be recycled to plot trends which
can be in turn be used to make predictions about the future. If past trends
can be used to develop predictive models that test well against incoming data
going forward, then the researcher has developed a powerful set of strategic
tools for the organization.
Question 6: Why do not all companies take advantage of these tools?
Answer 6: Collecting data for trend analysis consumes scarce resources,
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FAQ: Quantitative and Qualitative Data
which often cannot be justified without an approved research program.
Luckily, the technology available in most companies today can greatly
simplify the task, thereby reducing the cost. Company databases are literally
full of relevant facts that can be processed into useful information with very
minimal effort and expense, if only someone would take the time to look into
them.
4
Global Marketing Strategy
There are many failures for every successful international venture.
Understanding the rules of the match before getting into the ring can help a
marketer get the edge on competition. A great product or service does not
hurt either, but how exactly is this done? What are the rules? In this
presentation, we examine these issues by focusing on segmenting, targeting,
and positioning for advantage, the rules of exportation and importation, and
the strategies available for market entry or expansion.
Segmenting, Targeting, and Positioning
There is power in superior global market segmentation and targeting. Why?
Market segmentation represents an effort to identify and categorize groups of
customers and countries according to characteristics. Targeting is the process
of evaluating those segments and focusing marketing efforts on a country,
region, or group of people that has significant potential to respond. Such
targeting reflects the reality that a company should identify those consumers
it can reach most effectively and efficiently. Finally, positioning refers to the
act of locating a brand in customers’ minds over and against competitors in
terms of attributes and benefits that the brand does and does not offer. In
short, with proper positioning, a company can successfully influence the
perceptions of it targeted customers.
Exporting, Importing, and Sourcing
It is hard to overstate the affect of exporting and importing on the world’s
national economies. Most national policies, while extremely important, are
marked by contradiction. For centuries, nations have combined two opposing
policy attitudes toward the movement of goods across national boundaries.
On the one hand, nations directly encourage exports; the flow of imports, on
the other hand, is generally restricted. Global firms must navigate through
this variety of regulations and simultaneously strategize customer value
though their sourcing decisions. Making the decision to enter this global
market or to expand one’s market position within the international context
produces the need for even more organizational strategizing. Let us briefly
look at these strategy choices.
Global Market Entry Strategies
Every firm, at various points in its history, faces a broad range of strategy
alternatives. Some companies are making the decision to go global for the
first time; other companies are seeking to expand their share of world
markets. Companies in either situation face the same basic sourcing issues,
but each must also address issues of marketing and value chain management
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Global Marketing Strategy
before deciding to enter or expand their share of global markets by means of
licensing or some form of direct investment. Each available alternative has
distinct associated advantages and disadvantages; in fact, the alternatives
can be ranked on a continuum representing increasing levels of investment,
commitment, and risk. Licensing, for example, can generate revenue flow
with little new investment. A higher level of involvement outside the home
country may precipitate the use of foreign direct investment, which can take
multiple forms such as joint ventures or greenfield investments. Joint
ventures allow two or more companies to share risk and combine value chain
strengths, while greenfield investments allow a firm to obtain minority or
majority equity stake in a foreign business or acquire outright ownership.
Finally, cooperative alliances known as global strategic partnerships represent
an entirely different form of market entry strategy that is particularly well
suited to emerging markets in Central and Eastern Europe, Asia, and Latin
America. Ultimately, the particular market strategy company executives
choose will depend upon their vision, attitude toward risk, how much
investment capital is available, and how much control is sought.
2
Environmental Factors
Motivations to Market Globally
The primary motivation for companies to go abroad is profitability. However,
there are other motivations that are equally compelling for companies seeking
global opportunities. These can be divided into internal and external
motivators.
Some internal motivators include a unique product, a technological advantage,
or unused production capacity. A unique product that is hard to find elsewhere
in the world can give a company the desired impetus to enter global markets.
Similarly, having a product that has technological advantages can help
persuade the company to enter foreign markets. Finally, the ensuing high-unit
costs resulting from maintaining an inactive production facility can convince the
most stubborn marketing executive to "go global."
Less obvious external factors include a declining domestic demand, competitive
challenges, and proximity to a country border or seaport facility. Consistent
declining industry sales are a clear sign that the market may have reached
saturation or that the product no longer meets the needs of the domestic
market. Domestic competitors operating globally can pose a threat to the
company's ability to compete with them at home. Finally, being close to a
border or a seaport facility may convince a company to export its products to
take advantage of its geographical location.
The enactment of trade agreements (for example, NAFTA) and the drive toward
economic integration (for example, EU) has provided many companies with an
added incentive to market their products to these regional blocs. Most
members of the World Trade Organization (WTO) are members of at least one
regional trade agreement and, in some cases, more than one.
The Global Marketing Plan
Once the company has decided to market globally and has selected a foreign
market, it needs to develop a marketing plan. The marketing plan is a unique
tool available to all global marketing managers. Typically, a global marketing
plan starts with the analysis of the company's internal and external
environments. An example of an internal environmental analysis includes the
revision of the company's mission statement as it relates to global markets. An
example of an external environmental analysis is the analysis of factors that
may influence the demand of the company's product in the foreign country.
Once the company has formulated an objective as a result of the environmental
analysis, the company should define the target market in the foreign country
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Environmental Factors
and the marketing-mix strategies necessary to reach it.
Analysis of External Factors
With the wide availability of the Internet, most people have access to data and
information necessary for the environmental analysis of a foreign market.
Factors to consider in the analysis of a foreign market include the following:
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Legal and trade agreements
Economic performance
Social and cultural values
Population demographics
Marketing infrastructure
Information on the specific factors that drive the demand for a particular
product (or product category) is more difficult to track. Typically, this
information is located in the company's own marketing information system,
which consists of the company's own secondary and primary research efforts or
from studies commissioned by the company to market research companies.
Alternatively, industry and trade associations develop their own studies
exploring the demand factors for specific product categories. There are global,
syndicated marketing services dedicated to identifying and researching growing
industries in anticipation of demand from interested parties.
The Target Market and the Marketing Mix
Sometimes the definition of the foreign target market is identical to the
definition of the domestic market. However, more often than not, the definition
of the foreign target market is based on the unique environmental
characteristics of the foreign market. This definition must include information
on demographics, lifestyles, benefits sought, and the circumstances around the
use of the product. Subsequently, the process of designing the marketing mix
for the target market is no different from the domestic process. The product,
distribution, promotion, and pricing strategies should reflect the activities and
policies necessary to reach the target market.
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