"Tobacco companies are cranking out cigarettes at the rate of five and a half trillion a year," announced the World Health Organization, "nearly 1,000 cigarettes for every man, woman, and child on the planet."
Top five cigarette consumers:
China: 1,643 billion
US: 451 billion
Japan: 328 billion
Russia: 258 billion
Indonesia: 215 billion[1]
[1]Source: US Federal Trade Commission Cigarette Report, 2003.
THE MARKETERS' RESPONSE
At the very heart of marketing lies the product life curve, from which there is no escape. Eventually, over time, sales of any product or service decline, as it loses its appeal, the market becomes saturated, it becomes displaced by newer or cheaper replacement products, or simply as the original need it was satisfying no longer exists. Therefore the basic tool of the marketer is portfolio planning (Table 1.2).
Table 1.2
The changing market
Existing markets
New markets
Existing products
Maintaining the sales of existing products to existing markets or established customers
Seeking new markets for existing products or services
The product range available for sale
New products
Developing new products for existing markets or established customers
Developing new products for new markets - either to satisfy existing demand or to create new demands
At first sight, the new international markets are there to grab. But despite the claims of the free market protagonists, what constitutes a market economy differs across the world (Farnham, 1999). Thus marketers should not expect to transfer their own ethnocentric frameworks to other cultures directly without a methodology for dealing with the cultural differences (Table 1.3).
Table 1.3
System
Market
Regulation
Accountability
Labor
Value orientations
Anglo-Saxon/US
"Free"
The contract
Shareholder
Deregulated
Individualistic Achievement
Central European
Social
Public law
Stakeholders
Regulated
Social cohesion
Russian
Anarchic
Power
Managers-workers
Local
Diffuse
Japanese
Managed
Trust
Networks of organizations
Internal
Communitarianism
Chinese
Interpersonal
Trust
Families
Parochial
Paternalistic, Ascribed
In summary, there are many factors that combine to feed the growth of globalization. These include:
An increasing number of countries opening up their markets, especially the Far East and China.
The advancing reach of information technology and communications, including the Internet.
Corporations seeking wider markets for their goods and services, cost reduction (or enhancements), and optimizing logistics.
Support by the World Bank, OECD, GATT, and other agencies to enable world trade growth.
So how and why are corporations trying or learning to use these global differences in costs and material sources to manage their worldwide operations, achieve sustained growth, and survive against ever-increasing competition?
We refer, throughout this book and in others in the series, to how THT has made extensive use of web-based diagnostic tools in our research and services to our clients. In our portfolio of tools, we have developed the Globalization Readiness Assessment (GRA) tool. This web-based questionnaire has been subject to our usual analytical tests of reliability and validity, and has been completed by many thousands of respondents from a whole range of countries and types of industry. Respondents include our clients from our consultancy assignments, our own research and that of some of our affiliate PhD student projects.
Included in the GRA tool is the following question that seeks to identify the reasons for organizations to "go global": What are the main motives for your organization to pursue an international strategy?
Economies of scale: We go abroad to achieve scale advantages in the volume of transactions. We, and our customers, can profit from global economies of scale, where products and services are available everywhere around the world. In our business, competition takes on a worldwide stage instead of being limited to individual countries.
To prepare for global convergence: Traditional markets are highly affected by global convergence. Global convergence is the process in which countries develop more and more in the same direction and become more closely interrelated. This process is already far advanced and will continue in the future. As a result nation states will lose their relevance and it is therefore wise to anticipate, and even encourage, a "nationless" world.
Economies of scope and new markets: We go abroad to achieve increases in variety and scope, to broaden our range, and to discover new ways of reaching more customers via worldwide communication nets.
Lower transaction costs: We go abroad to achieve a critical mass to pay back our investments. These are increasing and any future financial success will largely depend on our ability to offset these costs in shorter periods of time.
Lower per unit costs: We go abroad for cheaper per unit costs, that is for the costs of each incremental unit of product or service. This is crucially dependent on the productivity of employees and the speed with which they learn.
Reputation of countries: We go abroad to establish and maintain a truly international reputation for our organization. In the past, countries used to have their own distinct characteristics; there were few international markets and strong pressures to respond to local needs. With borders disappearing these pressures will become weaker, while the need to be perceived as an international player, sensitive to needs of the international community, will become stronger.
While we found some variability in responses across respondents' functional disciplines, this was much less than might be expected; overall there is a considerable degree of consistency. Furthermore, option "d" (lower costs as the principal motive for global reach) was rated considerably lower than is normally indicated in the business management press.
Figure 1.2: Motives for global reach
This clearly indicates the high priority that organizations place on the global marketing quest and, hence, the rationale for this book. Such motives for going abroad may be considered a wish list by many, so it is also constructive to look at how well prepared organizations are to meet these quests.
We therefore also asked the following question in our GRA tool. Respondents were asked to place their organization on a scale for each option. For each of the following indicate on the scale how you think your organization is ready for the evolving global market place.
Strategy development
In our company, senior management has created a sense of purpose in the organization, developed clear goals with associated measures, and created a corporate culture in which everyone understands the strategy and sees the connection between their work and the organization's goals, enabling effective international operations.
Performance measurement
In our company, individual and/or group performance measures have been defined clearly and linked to the organization's goals in such a way that it supports the development of an international mindset.