Global Marketing Strategies for Indian Firms
With rare exceptions, products just don’t emerge in foreign markets
overnight—a firm has to build up a market over time. Several
strategies, which differ in aggressiveness, risk, and the amount of
control that the firm is able to maintain, are available which most of
the Indian firms adopt while entering in global marketing. These
are:
Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country.
Licensing and franchising are also low exposure methods of entry—you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country.
Joint venture. Here, a firm partners up with a firm already in the country. Each partner contributes. Usually, the host country partner contributes expertise about the country and possibly some manufacturing facilities. The “guest” partner usually contributes technology and/or financial resources. This reduces risk and investment to some extent, but also reduces the control since agreements must now be made to satisfy the partner.
Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market.
Hamel and Prahalad (1996) suggest the firms operating globally that succeed are those that perceive the changes in the international environment and are able to develop strategies which enable them to respond accordingly. The firms that will do well will base their success largely on the early identification of the changes in the boundaries of markets and industries in their analysis of their international marketing environment. Management foresight and organisational learning are therefore the basis of a sustainable competitive advantage in global markets
The increasing globalisation of business, particularly because it is being driven by information technology, has led many firms to reexamine what contributes to their global competitive advantage. They have recognised the fact that it is the pool of personal knowledge, skills and competencies of the firm’s staff that provides its development potential and they have redefined themselves as ‘knowledge-based’ organisations. Moreover, these firms have acknowledged that they must retain, nurture and apply the knowledge and skills across their business if they wish to be effective in global markets. The growth potential of international markets can only be exploited if the firm becomes a learning organisation in which the good practice learned by individual members of staff in one market can be leveraged and built upon throughout its global activity.
However, firms are increasingly vulnerable to losing these valuable personal assets, because of the greater mobility of staff, prevalence of industrial espionage and the security risks and abuse associated with the Internet. Moreover, with the increase in communications it is becoming more difficult to store, access and apply the valuable knowledge that exists amongst the huge volume of relatively worthless data that the company deals with. Consequently, effective knowledge management is now critical for success. This means having Web-enabled database systems that facilitate effective data collection, storage in data warehouses and data mining (the identification of opportunities from patterns that emerge from detailed analysis of the data held).
Successful global operators use the knowledge gained to assess their strengths and weaknesses in light of their organisational learning and ensure they have the company capability and resources to respond to their learning in order to sustain their competitive advantage. This is particularly important in international markets as, for example, customer and brand loyalty may be much stronger in certain markets than others, and products that may be at the end of their life in the domestic market may be ideal for less sophisticated markets. In the dynamic international markets, therefore, if a firm is to succeed it must develop the ability to think, analyse and develop strategic and innovative responses on an international, if not global scale.
It is apparent, therefore, that firms and organisations planning to compete effectively in world markets need a clear and well-focused international marketing strategy that is based on a thorough understanding of the markets which the company is targeting or operating in. International markets are dynamic entities that require constant monitoring and evaluation. As we have discussed, as markets change so must marketing techniques. Innovation is an important competitive variable, not only in terms of the product or service but throughout the marketing process. Counter-trading, financial innovations, networking and value-based marketing are all becoming increasingly important concepts in the implementation of a successful international strategy. The challenge, then, of international marketing is to ensure that any international strategy has the discipline of thorough research and an understanding and accurate evaluation of what is required to achieve the competitive advantage. Doole (2000) identified three major components to the strategies of firms successfully competing in international markets:
Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country.
Licensing and franchising are also low exposure methods of entry—you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country.
Joint venture. Here, a firm partners up with a firm already in the country. Each partner contributes. Usually, the host country partner contributes expertise about the country and possibly some manufacturing facilities. The “guest” partner usually contributes technology and/or financial resources. This reduces risk and investment to some extent, but also reduces the control since agreements must now be made to satisfy the partner.
Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market.
Hamel and Prahalad (1996) suggest the firms operating globally that succeed are those that perceive the changes in the international environment and are able to develop strategies which enable them to respond accordingly. The firms that will do well will base their success largely on the early identification of the changes in the boundaries of markets and industries in their analysis of their international marketing environment. Management foresight and organisational learning are therefore the basis of a sustainable competitive advantage in global markets
The increasing globalisation of business, particularly because it is being driven by information technology, has led many firms to reexamine what contributes to their global competitive advantage. They have recognised the fact that it is the pool of personal knowledge, skills and competencies of the firm’s staff that provides its development potential and they have redefined themselves as ‘knowledge-based’ organisations. Moreover, these firms have acknowledged that they must retain, nurture and apply the knowledge and skills across their business if they wish to be effective in global markets. The growth potential of international markets can only be exploited if the firm becomes a learning organisation in which the good practice learned by individual members of staff in one market can be leveraged and built upon throughout its global activity.
However, firms are increasingly vulnerable to losing these valuable personal assets, because of the greater mobility of staff, prevalence of industrial espionage and the security risks and abuse associated with the Internet. Moreover, with the increase in communications it is becoming more difficult to store, access and apply the valuable knowledge that exists amongst the huge volume of relatively worthless data that the company deals with. Consequently, effective knowledge management is now critical for success. This means having Web-enabled database systems that facilitate effective data collection, storage in data warehouses and data mining (the identification of opportunities from patterns that emerge from detailed analysis of the data held).
Successful global operators use the knowledge gained to assess their strengths and weaknesses in light of their organisational learning and ensure they have the company capability and resources to respond to their learning in order to sustain their competitive advantage. This is particularly important in international markets as, for example, customer and brand loyalty may be much stronger in certain markets than others, and products that may be at the end of their life in the domestic market may be ideal for less sophisticated markets. In the dynamic international markets, therefore, if a firm is to succeed it must develop the ability to think, analyse and develop strategic and innovative responses on an international, if not global scale.
It is apparent, therefore, that firms and organisations planning to compete effectively in world markets need a clear and well-focused international marketing strategy that is based on a thorough understanding of the markets which the company is targeting or operating in. International markets are dynamic entities that require constant monitoring and evaluation. As we have discussed, as markets change so must marketing techniques. Innovation is an important competitive variable, not only in terms of the product or service but throughout the marketing process. Counter-trading, financial innovations, networking and value-based marketing are all becoming increasingly important concepts in the implementation of a successful international strategy. The challenge, then, of international marketing is to ensure that any international strategy has the discipline of thorough research and an understanding and accurate evaluation of what is required to achieve the competitive advantage. Doole (2000) identified three major components to the strategies of firms successfully competing in international markets:
- A clear international competitive focus achieved through a thorough knowledge of the international markets, a strong competitive positioning and a strategic perspective which was truly international.
- An effective relationship strategy achieved through strong customer relations, a commitment to quality products and service and a dedication to customer service throughout international markets.
- Well-managed organisations with a culture of learning. Firms were innovative and willing to learn, showed high levels of energy and commitment to international markets and had effective monitoring and control procedures for all their international markets.
Goods moving at buyer’s risk and cost
- Ex-works (EXW): The seller makes the goods available at his premises. The buyer bears the full cost and risk of transportation of the goods.
- Free carrier (FCR): The seller delivers the goods to the custody of the carrier (or the first carrier in multi-modal transport). The risk of the goods passes to the buyer at that moment and the buyer pays the transport costs.
- Free on rail, free on truck (FOR/FOT): This term is used for rail transport only. The seller delivers the goods to the railway and the buyer bears the risk of loss of damage from that moment and pays the transportation costs.
- Free on airport (FOA): The seller delivers the goods to the air carrier at the airport of departure. The buyer bears the risk of goods from that moment and pays the transport costs. The seller normally arranges the contract of carriage on the buyer’s behalf.
- Free alongside ship (FAS): The seller delivers the goods alongside the ship in the port of shipment. The risk of the goods in transferred to the buyer from that moment
- Free on board (FOB): The seller clears the goods for transport and delivers them on board the ship. The risk passes form Chapter-2: International Marketing Strategies of Indian Firms 86 seller to buyer when the goods cross the ship’s rail at the port of departure.
- Goods moving at buyer’s risk and seller’s cost and freight (C&F): The seller clears the goods for export, pays the freight charges, and delivers the goods on board the ship. The risk passes form seller to buyer when the goods cross the ship’s rail at the port of departure. The seller undertakes to provide the buyer with a negotiable bill of lading that can be endorsed to transfer ownership of the goods or pledge them in a bank.
- Cost, insurance and freight (CIF): This is identical to C&F except that, in addition, the seller insures the goods against loss and damage at his own cost. The insurance covers the buyers not the seller, since the goods are travelling at buyer’s risk.
- Freight, carriage paid to (FCP): The seller pays the transport costs. Risk passes to buyer when the seller delivers the goods into the custody of the first carrier.
- Freight, carriage, insurance paid to (CIP): This is identical to FCP, except that in addition, the seller insures the goods at his own cost, for the benefit of the buyer
Goods moving at seller’s risk and cost:
- Ex-ship (EXS): The seller makes the goods available to the buyer, on board the ship at the port of destination. He pays the transport costs and bears the risk of the goods until they are made available this way.
- Ex-quay (EXQ): The seller makes the goods available to the buyer on the quay or wharf at the port of destination. The seller bears the risk of the goods upto that point and pays the transport cost. The seller pays the import duties (“ex-quay duty paid”) unless the contract provides for the contrary (“ex-quay, duties on buyer’s account”).
- Delivered at the frontier (DAF): The seller delivers the goods at the agreed frontier and bears all the costs and risks upto the point, including transportation costs. The buyer is responsible for the import duties and formalities.
- Delivered Duty Paid (DDP): The seller delivers the goods at an agreed point in the buyer’s country. The seller bears all the costs and the risks of the goods upto the point of delivery including the transport costs. The seller is responsible for import duties and formalities.
posted by Anil Thakor @ October 26, 2018
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