Susan P. Douglas*
Stern School of Business
New York University


C. Samuel Craig
Stern School of Business
New York University

* contact author
44 West 4th St., MEC 7-67
New York, NY 10012-1126
Tel: (212) 998-0418
Fax: (212) 995-4221



       As the 21st century approaches, powerful forces are transforming markets and dramatically changing ways of doing business. Increased movement of people, goods and organizations across borders have resulted in the emergence of global market segments and the growth of globally integrated markets. Advances in communications and information systems technology have shrunk distances, linking markets through flows of information, images and ideas across markets. These trends facilitate the management of operations on a global scale and accelerate the need to deal effectively with global competition. As a result, firms need to adapt and rethink strategies to respond to these globalizing forces, charting direction for future growth, realigning operations in the light of emerging market and competitor dynamics.
       In the past, research relating to international marketing has tended to focus on initial market entry decisions and the need for adaptation of various elements of the marketing mix to differing market conditions (Jain 1989). This provided an appropriate focus for firms in the initial stages of involvement in international markets, those determining which country markets to enter and how to modify their tactics in local markets. However, as markets become increasingly integrated and interlinked, management needs to chart direction for future growth relative to world markets as a whole rather than on a country-by-country basis.
       The dramatic changes in the global marketing environment that are opening up new opportunities as well as ways of operating in these markets have implications for how managers approach development of marketing strategy. In particular, they imply the need to adopt a radically new perspective to strategy development in a rapidly globalizing, highly competitive, and technologically sophisticated context (Craig and Douglas 1996). How should management respond to these challenges? How should the firm position itself for the next millenium? The authors have identified five areas of particular relevance to the marketing manager seeking to meet the challenges of global markets in the 21st century. The following discussion of each area is designed to identify critical issues and provoke thought as to how the firm can best prepare to compete in the new millenium.

Looking Beyond Marketing Strategy

       Development and assessment of marketing strategy needs to be predicated on a broader view of the components that underlie marketing strategy. International marketing strategy must encompass not only the outward manifestations of the marketing mix, but more broadly the factors within the firm and its environment that shape marketing strategy. Marketing strategy does not exist in isolation but is highly interdependent with strategies relative to sourcing raw materials and components, as well as licensing technology and acquiring other skills (Douglas and Craig 1986). Marketing strategy is also conditioned by the complexity of establishing and coordinating production, distributing products and linking point-of-sale to production across multiple countries. In developing its marketing strategy, the firm must consider how far key aspects are both contingent upon and integrated with other functions or activities of the firm.
       In entering international markets, the firm has to consider not only which countries offer the most attractive opportunities for its product and services, but also how to enter the market and what are the costs and likely risks of operating in that market. This requires a detailed examination of macro-economic factors such as political and economic stability, foreign exchange risk, labor, management and other resource costs as well as the nature of the marketing infrastructure in making entry decisions. Decisions relating to how to enter a market should consider factors such as the availability of potential partners and collaborators at different stages of the value chain, as well as government policy and attitudes towards foreign investment. Similarly, in making decisions relating to expansion in international markets, the firm needs to consider the extent to which markets are becoming integrated as a result of flows of goods and services across borders, government initiatives towards economic integration, as well as the linking of distribution and communication infrastructures and organizational networks.
       Marketing strategies also have to be co-ordinated or integrated with sourcing strategies as well as production, management and logistical systems. Increased efficiency of transportation and communication networks coupled with greater awareness and sensitivity to cost and efficiency differences between countries and regions have generated pressures for the growth of global sourcing and procurement. This in turn generates forces to co-ordinate operations at subsequent levels of the value chain across countries and regions. In the case of production and logistics, numerous synergies may be achieved through the integration and co-ordination of operations worldwide.
       At the same time, marketing strategies play a key role in unleashing potential for increased efficiencies and integration of upstream activities across markets (Porter 1986). While to some degree mediated by the spread of modular production and mass-customization techniques, standardization of products or product lines across countries will, for example, create opportunities for cost efficiencies through integration of production at a global or regional level.

Beyond Countries as Strategic Planning Units

       Adoption of a broader perspective means that the country is no longer the appropriate unit for planning strategy. While still a key political entity and relevant for the purposes of secondary data collection, businesses need to plan strategy and organize operations relative to the configuration of market areas. As people, goods and organizations move freely across national borders and communications and physical distribution systems link markets, the relevant market area is no longer synonymous with national boundaries (Craig and Douglas 1998). Rather, differences or similarities in customer tastes and preferences, customer networks that span the world or the existence of global customers, define market areas.
       In some industries, cost and market drivers as well as government forces are resulting in industry globalization and integration. Industries such as aircraft, industrial electronics, or business computers are characterized by a relatively limited number of buyers who have the same preferences and purchase criteria. Consequently, the relevant strategic unit is global in scope. In other industries such as trucks and automobiles, manufacturers are designing and marketing products on a regional basis, making the relevant planning unit a geographic region.
       In yet other industries, firms target global market segments, i.e. customers in different countries with similar needs and interests. In this case the firm needs to define its competitive position relative to the specific needs and interests of these customers and organize operations so as to deliver superior customer value relative to both local and global competitors. Often this will entail integrating operations at different stages of the value chain across national boundaries. Production, for example, may be located so as to take advantage of cost differences associated with alternative locations. At the same time, vertical linkages between production points and customers need to be established to supply and service global customers, transcending national boundaries.
       As a result, the relevant strategic or organizational unit may vary depending on the level of activities in the value chain. Increasingly, technological advances imply that geographically dispersed operations can be linked, reducing the role of proximity as a determinant of organizational form. Rather new and complex forms are emerging linking operations horizontally and vertically across geographic borders to provide efficiency, flexibility as well as quick and localized customer responsiveness (Bartlett and Ghoshal).

Effective Transfer of Capabilities and Experience

       As market integration proceeds apace, a critical issue is the extent to which the firm can leverage skills, capabilities or experience developed in relation to one market into others. Where capabilities are grounded in unique location-specific skills, e.g. low labor costs or management skills, only limited transfer of capabilities is feasible. Firm-specific assets and capabilities, such as brand equity, merchandising or brand management skills are typically more easily leveraged or transferred, though this depends on the nature of the targeted market segment and the degree of similarity between markets.
       Where the firm targets the same segment worldwide or a globally integrated market, it is likely to be able to leverage its distinctive capabilities directly. Bodyshop and Benneton, for example, target the same segment in one case, environmentally concerned customers, and in the other, young adults worldwide. In the case of Bodyshop, the same green stores, with their mounds of brightly colored shampoos and soaps, are to be found in all countries. Consequently, they are able to pursue the same marketing strategy in all markets, leveraging their distinctive image worldwide, and utilizing the same capabilities and skills to target this segment. Similarly, where the firm targets customers with global operations, as for example, banks and other financial organizations, it should be able to develop capabilities and resource bases to supply and service customer operations worldwide.
       In many cases, however, customer needs and interests as well as the nature of competition and the market infrastructure differ from one country or region to another. Consequently, the firm needs to fit its domestic positional advantage to each market in order to be successful. In order to take advantage of different competitive positions and local capabilities in multiple markets worldwide, the firm needs to develop cross-positional linkages, leveraging position and capabilities in one market to build or support its position in another market (Craig and Douglas 1998). Ideas and assets at different levels of the value chain can be transferred or leveraged across geographic boundaries. For example, ideas for new products, packaging or advertising copy can be leveraged across countries or geographic markets, and adapted or reformulated for local market conditions. For example, P&G has transferred formulations for environmentally friendly detergents and packaging such as phosphate free detergents and refill pouches for fabric softener developed in the German market to other markets, including the U.S.
       Similarly, marketing and management skills or experience in dealing with a specific type of market environment or competitor can also be transferred from one country or region to another. For example, McDonalds used expertise developed in Brazil in managing pricing in an inflationary environment to develop pricing and sourcing strategies for their operations in Moscow. Equally, experience in developing marketing and promotional tactics in different types of retail environments (e.g. in relation to highly fragmented distribution structure or highly concentrated structures) can be exchanged.
       Establishment of formal and informal mechanisms to transfer learning across diverse markets can also provide the firm with a competitive advantage stemming from utilization of a broader and richer base of experience and ideas. Global information systems or Intranets often play a key role in the transfer of best practices (Bradley 1993). Formalized communication mechanisms to facilitate the reporting and dissemination process can be established, or regular meetings of managers from different regions or country divisions held, in order to stimulate and promote exchange of ideas. In some instances this may lead the firm to develop border-spanning capabilities, i.e. capabilities in managing and co-ordinating activities that span national boundaries. These capabilities enable the firm to take advantage of efficiencies and synergies associated with operating across markets, while at the same time allowing for responsiveness to local market characteristics, competitive conditions and resource availability.

Establishing a Global Branding Policy

       The firm’s branding policy in international markets is another key issue in crafting a strategy for global markets. Firms expanding in international markets have to consider whether to develop a branding strategy explicitly in relation to international markets and if so what type of international brand architecture is most appropriate given the firm’s organizational structure and administrative heritage. Management has to decide whether to place emphasis on corporate, house or product level brands or some combination of these. The balance between local, regional and global brands has to be determined as well as who should have custody for an international brand. The individual or organization with responsibility for managing an international brand has to ensure that the positioning of products sold under the brand name is consistent across different national or regional markets as well as product lines. Consistency of positioning is critical to maintaining a strong, coherent image and to avoid dilution of the brand name (Riesenbeck and Freeling 1993). The brand custodian should also be responsible for sanctioning brand extensions to other products and lines to ensure consistency in its use and sustain brand equity.
       Whether or not the firm has an explicit international brand strategy depends to a substantial degree on how a firm has expanded internationally and how its international operations are organized. Some firms, such as Coca-Cola, Phillips and Nike have expanded through leveraging successful domestic "power" brands internationally. Consequently in expanding further, they have to consider whether to develop local or regional brands geared to specific regional or national preferences. For example, Coca-Cola uses the Coca-Cola name on its colas worldwide, including variants such as Cherry Coke, Coke-Lite or Diet Coke. In addition, Coca-Cola has a number of less known local brands such as Lilt, grapefruit and pineapple, and mango and orange in the U.K., and Cappy, a fruit drink sold in Eastern Europe and Turkey.
Other firms such as Nestlé or Unilever have historically adopted country-centered strategies, building or acquiring large portfolios of national brands. In some cases successful products are marketed in other countries under different brand names or local brands and products are acquired resulting in a diverse assortment of brands and products spread across different countries. Such companies have to decide how far to move towards greater harmonization of brands and integration of their brand portfolios across countries, and if so, how to do it.
       Escalating media costs, and increased communication and movement across national boundaries generate pressures for co-ordination of branding strategies across markets. In some instances, use of a corporate brand name or logo helps to provide a unifying image, enhancing position with the customer, and providing greater leverage with the retailer. Nestlé, for example, has established an international branding tree consisting of four levels (Parsons 1996): Worldwide corporate brands, such as Nestlé, Carnation and Buitoni; strategic brands such as Kit-Kat, Polo, and After Eight; regional brands such as Mackintosh, Contadina or Stouffer; and over 7,500 local brands available only in a single country. The strategic, regional and local brands are always endorsed by a corporate level brand; the coffee and confectionery products by the Nestlé brand; milk-based products by the Carnation brand, etc. to reinforce their global identity.
In addition to determining the structure of the international brand portfolio and the degree of integration across countries, the firm has also to resolve custody issues. Who should have custody of an international brand and be responsible for determining its positioning in national or regional markets, as well as ensuring the consistency of brand positioning across countries? Procedures, tools and mechanisms to manage custody have to be established, as well as guidelines to determine when and how brand extensions are permitted so as to avoid dilution of brand image. In many respects, the issue of global branding and how the firm deals with it is becoming a lynchpin of international marketing strategy.

Dealing with Shifts in Power Relationships in Distribution Channels

       Formulation of strategy and development of global brands is complicated by the changes taking place throughout channels of distribution. The most fundamental change is a dramatic shift in the balance of power from manufacturers to resellers further down the channel. In many industries, ranging from consumer packaged goods to pharmaceuticals, increased concentration at the retail level means a loss of power or at best a sharing of power by the manufacturer. Procter and Gamble historically had been able to dictate the terms and conditions of sale. With the growth of large retailers such as Wal-Mart, P&G has had to work closely with Wal-Mart to develop mutually beneficial programs tailored to Wal-Mart's needs.
       As retailers expand more aggressively into international markets the same type of changes that had been confined to country markets are beginning to occur on a much larger scale. As the distribution infrastructure begins to span national borders and become integrated on a regional basis, manufacturers, or "brand owners" need to find ways to counterbalance retailer power. This shift in power within markets is illustrated by the large share that private label brands are capturing in supermarkets, particularly in the U.K. As retailers expand their operation across national borders, the trend toward private label will have even greater impact on the sales of established packaged goods. As a result, it becomes even more critical for brand owners to maintain contact with, and build the relationship with, end users of their brand in order to retain control.
       A countervailing trend to the shift in power in reseller-dominated channels of distribution is that of disintermediation. This is the process where manufacturers by-pass resellers (intermediaries) and deal directly with end customers. Much of this is made possible with the enhanced ability of the Internet to provide a strong link between the manufacturer and its end customers. Technology facilitates the process of disintermediation, enabling brand owners to achieve cost efficiencies and deliver superior customer value by reaching the consumer directly. The success of Dell and Gateway selling PC’s directly to individual consumers and businesses illustrates vividly the power of a successful disintermediation strategy.
       Technology also facilitates building links with dispersed end customers because it overcomes the distance dependence of traditional forms of distribution. The spatial separation of markets that tends to hinder the growth of traditional forms of retailing is less of a factor for resellers who incorporate technology into their strategies. The complex logistics involved in supplying and servicing customers in distant places are largely overcome or are less of a barrier for Internet-based retailers. Furthermore, Internet resellers do not incur the cost of establishing a physical presence in each market. Consequently, the Internet is becoming a factor in the sales of products and services beyond those which can be directly down loaded, such as software, music and information products. In distribution channels where physical access to the product before purchase is important, hybrid strategies have to be devised.


       To compete successfully in the 21st century, firms need to meet the challenges of a rapidly globalizing, highly competitive and technologically complex environment. These challenges become yet more daunting with the accelerating pace of change and increasingly volatile and turbulent nature of global markets.
       The complexity of the global market environment requires firms to look beyond marketing activities to examine more broadly the context in which these activities take place. Management must develop an understanding of how the broader environmental context impacts the success of its operations as well as to how to respond to the challenges it presents. The focus of planning and executing marketing strategy must shift from a narrow focus on individual country markets to a broader perspective that looks at world markets as a whole and is responsive to the forces integrating regional and global markets. Underlying effective mastery of these forces and implementation of a global integrated strategy is the firm’s ability to transfer skills and capabilities from its operations in one part of the world to another.
       A crucial element of the firm’s global marketing strategy is its approach to international branding. The brand is the vehicle that enables the firm to leverage its position, achieve global visibility and realize synergies in global markets. At the same time, strong brands provide the firm with a weapon to combat the changes that are taking place in power relationships within distribution channels. With power increasingly residing with resellers, manufacturers need to develop strong brands, so they avoid loss of control and chart their own course through global markets. Alternatively, firms must find ways to effectively partner with resellers or establish mechanisms to reach end customers directly.
Competition in the 21st century will be more intense and challenging than ever before. The dynamic changes that are reshaping the international environment present opportunities for those able to adapt, but spell disaster for those that continue to do business as usual. Firms that are only now beginning to deal with these issues will find themselves lagging behind those firms that have already embraced the new realities.


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