Competing on a Global Basis

Some companies have long been successful global marketers—firms like Shell, Bayer, and Toshiba have sold around the world for years. In luxury goods such as jewelry, watches, and handbags, where the addressable mar­ket is relatively small, a global profile is essential for firms like Prada, Gucci, and Louis Vuitton to profitably grow. But global competition is intensifying in more product categories as new firms make their mark on the interna­tional stage.

In China’s fast-moving mobile-phone market, Motorola found its once-promising share drop to the point where it was only the eighth-ranked competitor behind a slew of new entrants.2 To better understand the Chinese market, Starwood’s CEO and top management team even temporarily relocated to Shanghai for five weeks in 2011. Sixty percent of guests in their hotels in China were native Chinese, and the firm anticipated a wave of Chinese travelers going abroad.3

Competition from developing-market firms is also heating up. Founded in Guatemala, Pollo Campero (Spanish for “country chicken’) has launched more than 50 stores in different parts of the United States—including three as far north as Massachusetts—blending old favorites such as fried plantains and milky horchata drinks with traditional U.S. fare such as grilled chicken and mashed potatoes.4 Tata has created a marketing powerhouse in India and set its sights on other parts of the world.5

TATA NANO Tata Group, India’s biggest conglomerate, is also its largest commercial vehicle maker. The company created a stir with the 2009 launch of its $2,500 Tata Nano, dubbed the “People’s Car.” Although impossibly low by Western standards, the Nano’s price of 1 Indian lakh is three times India’s annual per capita income. Looking somewhat like an egg on wheels, the Nano comfortably seats five while running a 33-horsepower engine that gets nearly 50 miles per gallon. Aiming to sell 250,000 units annually, Tata targeted the 7 million Indians who buy scooters and motorcycles every year, in part because they cannot afford a car. Huge market potential exists in the country, which has just seven automobiles per 1,000 people. Tata is also targeting other “bottom of the pyramid” markets such as Africa and Southeast Asia, and perhaps even parts of Eastern Europe and Latin America, as well as the U.S. market. Despite its positive features, the Nano got off to a rocky start in India due in part to the stigma attached to buying a “cheap” car. In a country where incomes have risen dramatically in recent years, some saw it as a glorified version of a tuk-tuk, the three-wheeled motorized rickshaw often seen on the streets of developing nations. Many low-income consumers decided to try to stretch their budgets to buy the Maruti-Suzuki Alto instead, with its bigger 800cc engine. On the other hand, some target customers who had never owned a car before were intimidated by Tata’s glittering showrooms. After sales reached a low point in November 2012— only 3,500 cars sold against a target of 10,000—another makeover was announced—the third since launch in 2009, including a possible 800cc engine and a diesel option.

Although some U.S. businesses may want to eliminate foreign competition through protective legislation, the better way to compete is to continuously improve products at home and expand into foreign markets. In a global industry, competitors’ strategic positions in major geographic or national markets are affected by their overall global positions.6 A global firm operates in more than one country and captures R&D, production, logistical, mar­keting, and financial advantages not available to purely domestic competitors.

Global firms plan, operate, and coordinate their activities on a worldwide basis. Otis Elevator uses door systems from France, small geared parts from Spain, electronics from Germany, and motor drives from Japan; systems integration happens in the United States. Although some countries have erected entry barriers or regulations, the World Trade Organization, consisting of 160 countries, continues to press for more free trade in international ser­vices and other areas.7 An interconnected world and global supply chains can have drawbacks, though, as the 2011 tsunami and earthquake in Japan vividly demonstrated.8

To sell overseas, many successful global U.S. brands have tapped into universal consumer values and needs— such as Nike with athletic performance, MTV with youth culture, and Coca-Cola with youthful optimism. These firms hire thousands of employees abroad and make sure their products and marketing activities are consistent with local sensibilities. Global marketing extends beyond products. Services represent the fastest-growing sector of the global economy and account for two-thirds of global output, one-third of global employment, and nearly 20 percent of global trade.

For a company of any size or any type to go global, it must make a series of decisions (see Figure 8.1). We’ll examine each of these decisions here.9

Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.

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