Marketing is a very general term that refers to the commercial functions involved in transferring goods and services from a producer to a consumer. It is commonly associated with endeavors such as branding, selling, and advertising, but it also encompasses activities and processes related to production, product development, distribution, and many other functions. Furthermore, on a less tangible level, marketing facilitates the distribution of goods and services within a society, particularly in free markets. Evidence of the pivotal role that marketing plays in free markets is the vast amount of resources it consumes: about 50 percent of all consumer dollars, in fact, pay for marketing-related activities.
This text recognizes a chief delineation of the subject of marketing, micro- and macro-marketing. The latter pertains to the flow of goods and services within and between societies. Micro-marketing, in contrast, encompasses specific activities performed by an organization as it attempts to transfer its particular offerings to consumers, primarily through targeted marketing techniques. Case studies and a discussion of multinational marketing nuances complement the very basic review of micro and macro principles.
Marketing, as a means of transferring goods and services from suppliers to consumers, predates recorded history. It was born by the transition from a purely subsistence-based society, in which families and tribes produced their own consumables, to more specialized and cooperative societal forms. The simple act of trading a piece of meat for a tool, for example, entails some degree of marketing. The term "marketing," of course, derives from the word "market," a group of sellers and buyers that cooperate to exchange goods and services. The term "marketing" in the modem business sense is believed to have come into use during the first decade of the 20th century.
Some scholars and marketing texts have divided the history of marketing into three and sometimes four distinct eras corresponding to the main emphases and practices of those times. Periods commonly cited include, in chronological order, the production era, the sales era, the marketing era, and in some cases, the relationship era.
The production era refers to the period leading up to the 1930s or, more broadly, the pre-World War II period, when emphasis was placed on simply producing a satisfactory product and informing potential customers about it through catalogs, brochures, and advertising. In the sales era, corresponding roughly to the decade or so after the war, companies reportedly recruited customers more actively by trying to develop persuasive arguments or pitches to encourage customers to choose their products. By the late 1950s and early 1960s this evolved further, the theory goes, into the marketing era, when companies grew increasingly sensitive and responsive to consumer preferences and to exactly what motivated purchasing decisions. Finally, in the 1980s, some argue that the notion of relationship marketing began to take hold as a guiding tenet, where companies moved away from courting simple transactions and toward facilitating more complex long term relationships with customers. The concept of relationship marketing is still quite popular today.
Although such era distinctions derive from classic marketing texts from as early as the 1960s, some observers believe the differences are overstated because of the particular marketing fads and vocabulary of more recent times, when there has been a wish by some corporate marketers to "reinvent" how they approach their craft and demonstrate that their newer practices are a departure from the past. These scholars argue that while the specific tools and vehicles of marketing have evolved over time, there has in fact been greater continuity in the historical approaches to marketing (at least within the 20th century) than these era designations suggest. In particular, several scholars have concluded that cultivating enduring relationships, purportedly the newest phase in marketing, has existed as a priority at large companies since at least the 1920s.
Macro-marketing refers to the social process that directs the flow of goods and services from producer to consumer—an economic system that determines what and how much is to be produced and distributed by whom, when, and to whom. Economists and marketing scholars often identify three broad macromarketing spheres and eight functions within them that make up the economic process:
All of the eight basic macro-marketing functions exist in some form in both command economies and in free markets. In both systems, in fact, consumers have different needs, preferences, and patterns of resource allocation. Similarly, producers have different resources, goals, and capabilities. Although virtually every society has some sort of marketing system that serves to match this heterogeneous supply and demand, the success of any macro-marketing system is judged by its ability to accomplish the society's objectives, whether the chief goal is equality of wealth, as in a command economy, or the greatest good for the greatest number regardless of equal distribution, as is the case in a free market system.
In a command economy, government planners perform most of the marketing function for society. The planners tell producers what and how much to provide and at what price. The goal of the producers is primarily to meet government quotas. Such a system may work well in a small and simple economic system or during a crisis like a war. In a larger economy, however, the process of matching supply and demand tends to become so extraordinarily complex that planners are simply overwhelmed. The complicated dynamics of consumer demands and the capabilities of suppliers elude planners, the result being that many consumer needs are left unfulfilled. Nevertheless, the marketing function may still achieve a primary goal, such as equal distribution of wealth.
In a free-market economy the marketing function is carried out by individual consumers and producers who essentially act as economic planners by means of numerous day-to-day decisions. In most modem economies, consumers register their purchasing decisions with dollars. Providers of goods and services respond primarily to consumer input in determining what and how much to provide, and at what price. They are motivated by competition rather than incentives to meet government quotas.
The marketing function of free market economies also tends to be characterized by a greater emphasis on middlemen, or parties that specialize in trade rather than production. They bring buyers and sellers together and charge a fee or commission for their services. Likewise, facilitators serve free market economies by providing producers with adjunct services. Examples of facilitators include advertising agencies, transportation firms, banks and other financial institutions, and market research companies.
Although the marketing function in a free economy is generally effective when judged by its ability to provide the greatest good for the greatest number, it may fail to achieve other goals. For example, some members of society may fail to compete effectively, thus reducing their dollar "vote" in the economy and diminishing their ability to acquire basic necessities. As another example, some producers may profit by providing goods and services, such as addictive drugs, that are detrimental to society as a whole.
Critics of free market systems cite several other flaws. Advertising, for instance, can be used to promote products that are unhealthy, bad for the environment, or cause consumers to make unwise decisions by clouding the facts. Also, the extreme emphasis on promotion consumes vast amounts of resources that are not put to any tangible consumer use. Furthermore, some people believe that the marketing function in a free economy leads to materialism, or an emphasis on things rather than social values.
To overcome some of the negative effects that may result from purely free market economies, most societies without a command economy adopt a market-directed economy that reflects a compromise between the two systems. Market-directed economies use government constraints to temper free markets. In the United States, for example, the federal government sets interest rates, creates import and export rules, regulates advertising medium, mandates safety and quality controls, and even limits wages and prices in some instances.
Micro-marketing is the formal term for marketing activities in specific businesses; it is what most people mean when they use the word "marketing." Micro-marketing refers to the activities performed by the providers of goods and services within a macromarketing system. Those organizations use various marketing techniques to accomplish objectives related to profits, market share, cash flow, and other economic factors that can enhance the organization's well being and position in the marketplace. The micro-marketing function within an entity is commonly referred to as marketing management. Marketing managers strive to get their organizations to anticipate and accurately determine the needs and wants of customer groups. Afterward they seek to effectively respond with a flow of need satisfying goods and services. They are typically charged with planning, implementing, and then measuring the effectiveness of all marketing activities.
Academic discussions of the marketing management function are often presented within the context of behaviorist Abraham Maslow's famous hierarchy of needs. Maslow (1908-1970) posited that all peopled respond first to vital physical needs, such as food and shelter. Only after those needs have been met, he argued, do people strive to meet social and emotional needs that are important to their psychological well-being. Examples of those needs are security, belonging, and self-esteem. It is these basic biological needs that shape the buying behavior of all consumers.
Because the way that people choose to satisfy their needs can be shaped by past experiences, different groups and individuals may have different "wants" to satisfy the same need. Comprehension of this basic tenet of human behavior reveals an important aspect of the micro-marketing function—that producers are not capable of creating or shaping basic needs, but rather achieve marketing success by influencing wants. In other words, a chief goal of a marketing manager's job is to stimulate customers' "wants" for a product or service by persuading the consumer that the offering can help them better satisfy one or more of their needs.
An implication of Maslow's theory for marketing managers is that customers view products and benefits differently; customers don't buy products (services), they buy the benefits that they believe they will get from them. For instance, when trying to get a consumer to purchase an automobile, marketers must remember that they are selling an image. Car buyers with strong needs for social acceptance might seek a prestigious looking automobile, for example, or be willing to pay more for a particular name brand. This product-versus-benefit element is best evidenced by the strategic marketing of relatively homogenous goods, such as fruit juices, which are differentiated from competing products in the marketplace almost solely on the basis of perceived benefits attached to the product through advertising and promotion.
Micro-marketing encompasses a profusion of related activities and responsibilities. Marketing managers must carefully design their marketing plans to ensure that they complement related production, distribution, and financial constraints. They must also allow for constant adaptation to changing markets and economic conditions. Perhaps the core function of a marketing manager, however, is to identify a specific market, or group of consumers, and then deliver products and promotions that ultimately maximize the profit potential of that targeted market. Often, it is only by carefully selecting and wooing a specific group that an organization can attain profit margins sufficient to allow it to continue to compete in the marketplace.
For instance, a manufacturer of fishing equipment would not randomly market its product to the entire U.S. population. Instead, it would likely conduct research to determine which customers would be most likely to purchase its offerings. It could then more efficiently spend its limited resources in an effort to persuade members of its target group(s). Perhaps it would target males in the Midwest between the ages of 18 and 35. The company may even strive to further maximize the profitability of its target market through market segmentation, whereby the group is further broken down by age, income, zip code, or other factors indicative of buying patterns. Advertisements and promotions could then be tailored for each segment of the target market.
There are infinite ways to satisfy the wants, and subsequently the needs, of a target market. For example, in the case of a product the packaging can be designed in different sizes and colors, or the product itself can be altered to appeal to different personality types or age groups. Producers can also alter the warranty or durability of the good or provide different levels of follow-up service. Other influences, such as distribution and sales methods, licensing strategies, and advertising media may also play an important role. It is the responsibility of the marketing manager to take all of these factors into account and to devise a cohesive marketing program that will appeal to the customer.
The different elements of micro-marketing strategy can be divided into four basic decision areas that marketing managers may use to devise an overall marketing strategy for a single product or a line of products, often dubbed the "four Ps":
These four decision groups represent all of the variables that a company can control. But those decisions must be made within the context of outside variables that are not entirely under the control of the company, such as competition, economic and technological changes, the political and legal environment, and cultural and social factors.
Marketing decisions related to the product (or service) involve conceiving of and realizing the right product for the selected target group. This typically encompasses market research and data analysis to determine how well the product meets the wants and needs of the target group. Numerous determinants factor into the final choice of a product and its presentation. A completely new product, for example, will entail much higher promotional costs, whereas a product that is simply an improved version of an existing item likely will make use of its predecessor's image. A pivotal consideration in product planning and development is branding, whereby the good or service is positioned in the market according to its brand name. Other important elements of the complex product planning and management process may include selection of features, warranty, related product lines, and post-sale service levels.
Considerations about place, the second major functional group, relate to actually getting the good or service to the target market through the right channels, at the right time, and in the proper quantity. Strategies related to place may utilize middlemen and facilitators with expertise in joining buyers and sellers, and they may also encompass various distribution channels, including retail, wholesale, catalog, and others. Marketing managers must also devise a means of transporting the goods to the selected sales channels. Decisions related to place typically play an important role in determining the degree of vertical integration in a company or how many activities in the distribution chain are owned and operated by the manufacturer. For example, some companies elect to own their trucks, the stores in which their goods are sold, and perhaps even the raw resources used to manufacture their goods. On the other hand, the company may determine that its strengths are not in physical distribution, and it may contract other firms to perform all distribution-related activities.
Decisions about promotion, the third target market functional area, relate to sales, advertising, public relations and other activities that communicate information intended to influence consumer behavior. Often promotions are also necessary to influence the behavior of retailers and others who resell or distribute the product. Three major types of promotion typically integrated into a target market strategy are personal selling, mass selling, and sales promotions. Personal selling, which refers to face-to-face or telephone sales, usually provides immediate feedback for the company about the product and instills greater confidence in customers. Mass selling encompasses advertising on traditional mass media, such as television, radio, direct mail, and newspapers, and is beneficial because of its broad scope. It also entails the use of unpaid media exposure, known as publicity, such as feature articles about a company or product in a magazine or related interviews on television talk shows. Finally, sales promotion efforts include free samples, coupons, contests, and other miscellaneous marketing tactics. These approaches are used to stimulate interest in products, encourage first-time trials, or help build brand loyalty, among other objectives. While such tactics have generally been shown effective at increasing unit sales, their overall impact is debatable because they can be seen as needlessly subsidizing or rewarding customers who would have bought the product anyway.
Determining price, the fourth major marketing activity, entails using discounts and long-term pricing goals, as well as considering competitive, demographic, and geographic influences. From the buyer's perspective, the price must be within certain boundaries (especially the upper limit) and must be commensurate with the perceived value of the item. For the producer, the price of a product or service generally must at least meet some minimum level that will cover a company's cost of producing and delivering its offering; however, even if a company were to price its items exactly at the break-even point on a unit basis, there is no guarantee there will be sufficient demand at that price. The break-even price at the aggregate level will, of course, vary with how many units are sold when the sum of fixed and variable costs for production and overhead are considered. Thus, pricing is an implicit (and sometimes explicit) negotiation between supplier and customer, with competition as an intervening factor that colors the nature of this negotiation.
A firm would logically price a product at the level that maximizes profits. While this seems obvious, it is often difficult for companies to determine the profit-maximizing price because they can't be certain how strong the demand is for their products at a given price level or how a competitor will respond to a price change. Cutting prices to stimulate sales volume, for example, can simply be a "race to the bottom" if competitors respond in kind, diminishing profits for both without improving either's competitive position. In general, depending on the exact nature of demand, such as whether it is relatively elastic (fickle) or inelastic (constant), and the availability of substitute products (competition), profits can be maximized either by (1) pricing the product high and moving fewer units, or (2) pricing the product lower and selling more units. In rare cases, such as for certain perceived luxury goods, increased prices can actually lead to higher unit volume, but this is usually regarded as an exception to the norm.
Still, there are a number of other factors that influence pricing, both financial and nonfinancial. In a few cases pricing decisions may be largely out of a firm's control, such as when government controls are in effect or when items (usually raw materials and agricultural commodities) are sold through a competitive bidding system. In most cases, though, a company has a high degree of control over its pricing, at least in a formal sense; in practice it will still be confined by market forces, as it can't set a price that no one will pay.
The price that a company selects for its products will generally vary according to its long-term marketing strategy. For example, a company may underprice its product in the hopes of building market share and ensuring its competitive presence, or simply to generate a desired level of cash flow (however, in some cases extreme underpricing can be illegal, especially in international trading settings). Another producer may price its goods extremely high in the hopes of conveying to the consumer that it is offering a premium product. Another reason a firm might offer a product at a very high price is to discount the good slowly in an effort to maximize the dollars available from consumers willing to pay different prices for the good, a practice known as market skimming. In any case, price is used as a tool to achieve comprehensive marketing goals.
Often times, decisions about product, place, promotion, and price will be dictated by the competitive stance that a firm assumes in its target market. According to Michael Porter's well-received book Competitive Strategy (1980), the three most common competitive strategies are
Porter believed that the strategy a company chooses is shaped in large part by its current position within its industry and by the industry's current stage of development. Competitors in mature industries, for example, are more likely to find market advantages through niche strategies because the broad markets are already tapped out.
Companies that adopt a low-cost supplier strategy are usually characterized by a vigorous pursuit of efficiency and cost controls. A company that manufactures a low-tech or commodity product, such as wood paneling, would likely adopt this approach. Such firms compete by offering a better value than their competitors, accumulating market share, and focusing on high-volume and fast inventory turnover.
Companies that adhere to a differentiation strategy achieve market success by offering a unique product or service. They often rely on brand loyalty, specialized distribution channels or service offerings, or patent protection to insulate them from competitors. Because of their uniqueness, they are able to achieve higher-than-average profit margins, making them less reliant on high sales volume and extreme efficiency. A company that markets proprietary medical devices would likely assume a differentiation strategy.
Firms that pursue a niche market strategy succeed by focusing all of their efforts on a very narrow segment of an overall target market. They strive to prosper by dominating their selected niche. Such companies are able to overcome competition by aggressively protecting market share and by orienting every action and decision toward the service of its select group. An example of a company that might employ a niche strategy would be a firm that produced floor coverings only for extremely upscale commercial applications.
An important micro-marketing delineation is that between industrial and consumer markets. Marketing strategies and activities related to transferring goods and services to industrial and business customers are generally very different from those used to lure other consumers. The industrial, or intermediate, market is made up of buyers who purchase for the purpose of creating other goods and services. Thus, their needs are different from those of general consumers. Buyers in this group include manufacturers and service firms, wholesalers and retailers, governments, and nonprofit organizations.
In many ways, it is often easier to market to a target group of intermediate or industrial customers. They typically have clearly defined needs and are buying the product for a very specific purpose. They are also usually less sensitive to price and are more willing to take the time to absorb information about goods that may help them do their job better. Nonetheless, marketing to industrial customers can be complicated. For instance, members of an organization usually must purchase goods through a multi-step process involving several decision makers. Importantly, business buyers will often be extremely cautious about trying a new product or a new company because they don't want to be responsible for supporting what could be construed as a poor decision if the good or service does not live up to the organization's expectations.
A chief difference between marketing to intermediate and consumer markets is that consumers are typically considering purchasing goods and services that they might enjoy but don't really need. As a result, they are more difficult to sell to than are business buyers. Consumers are generally
However, consumers typically make a buying decision on their own, or at least through an informal decision-making process involving family members or friends, and are much more likely to buy on impulse than are industrial customers.
Despite the differences, a dominant similarity between marketing to both intermediate buyers and consumers is that both groups ultimately make purchases based on personal needs, as described earlier. Consumers tend to react strongly to a desire to belong, have security, feel high self-esteem, and enjoy freedom and status. Similarly, business and industrial consumers react more strongly to motivators such as fear of loss, fear of the unknown, the desire to avoid stress or hardship, and security in their organizational role.
An example of micro-marketing that demonstrates the importance of the marketing function in relation to other business functions, such as production and distribution, is Rubbermaid, Inc.'s strategy. Rubbermaid continued to produce and sell a line of plastic home products for several decades in an industry characterized as undynamic and even stagnant. Nevertheless, Rubbermaid's savvy marketing strategy allowed it to post continuous gains in sales and market share during the 1980s when the company's sales rocketed more than six-fold. The company achieved its stellar gains by focusing on new product introductions and by tailoring its existing products to meet new consumer wants and needs. While it amassed market share, Rubbermaid managed to post strong profit margins by charging high prices. It commanded premium prices because it had positioned its products as unique and high in quality in comparison to competing products. An emphasis on a field sales force and a high level of service to its retailers augmented Rubbermaid's overall stratagem.
The success of Domino's Pizza, Inc. during the 1980s shows how a company that targets a particular market and is sensitive to its customer's needs can achieve success in the marketplace. Tom S. Monaghan opened his first store in 1960 with $500 and grew his tiny enterprise to a chain of four stores by 1965. Strong competition and the lack of a cohesive marketing strategy, however, forced him into bankruptcy. Monaghan researched pizza consumers and entered the pizza business again in 1971. He decided to target residential customers between the ages of 18 and 34 who preferred to have pizzas delivered to their door. He found that consumers were generally dissatisfied with the taste and reliability of delivery available from other pizza shops. As a result, Monaghan developed a pizza that his customers liked and then promised delivery within 30 minutes from the time the order was placed. His restaurants were strictly delivery and carry-out. By the 1990s, the chain had expanded internationally with thousands of outlets worldwide and sales in the billions of dollars.
One of the most dynamic and telling of all marketing case studies is the U.S. "cola wars." Those battles, which have been waged by major soft-drink manufacturers since World War II, demonstrate the effects of competition on marketing strategies in a free market. Although numerous soft-drink makers competed during the 1950s and 1960s, by the late 1980s the industry had consolidated to just six companies that controlled more than 80 percent of the entire market. The two fiercest competitors, Coca Cola Co. and PepsiCo, Inc. each spend hundreds of millions of dollars each year to promote their products and to avoid loss of market share. Pepsi bludgeoned Coke during the early 1980s with a taste-test promotion. It challenged consumers to taste both colas, which were not labeled, and select the one they believed tasted better. Despite the taste test, both companies have emphasized an emotional appeal to consumers, touting their drinks as fun, youth-oriented, or "American," for example.
Marketing efforts at General Electric (GE) exhibit some of the differences between marketing to industrial and consumer markets. Although GE is generally associated with its production of consumer goods, particularly appliances, only about 25 percent of GE's sales are garnered from consumer markets. Most of its profits come from sales of power generation, heavy industrial, and aerospace equipment. The general public still views GE as a provider of appliances, however, because the company's marketing strategy entails promoting that image in the mass media and through various consumer promotions. In contrast, GE markets its core industrial and technical products primarily through a direct sales force, which consists mostly of highly trained technical sales engineers. GE's marketing program also stresses an extensive lobbying effort at the federal level to secure government contracts and influence policies related to defense spending.
Despite a company's best attempts to research and devise effective marketing plans, even the largest and most astute marketing divisions sometimes commit serious marketing mistakes that fail to lure customers and ultimately cost their companies millions of dollars. Such flops illustrate the subjective and complex nature of the micro-marketing process and often show how influences outside of the company's control can play an integral role in the success of any marketing endeavor.
One well-known marketing failure occurred at the Korvette chain of discount department stores. Started in 1948 by Eugene Ferkauf, Korvette grew during the mid-20th century by undercutting department store prices by 10 to 40 percent on appliances and other heavy goods. Ferkauf, who grew Korvette to more than $700 million in revenues by 1965, is credited with revolutionizing merchandising and retail marketing techniques and paving the way for mass discount merchandisers like Kmart and Wal-Mart. But Ferkauf began to change the market position of his stores in the mid-1960s. He tried to upgrade the image of the chain by bringing in higher-priced merchandise, food, and clothing. The new products did not complement Korvette's existing distribution and management infrastructure, however, causing the profitability of the stores to lag. At the same time, moreover, Korvette failed to respond to increased competition in the discount industry. By the late 1960s, Korvette's market presence was quickly fading and Ferkauf was forced out of his management position.
The failure of the Burger Chef hamburger chain to mimic the success achieved by McDonald's exemplifies the importance of a comprehensive and well-executed marketing plan. General Foods purchased the 700-store Burger Chef chain in 1967 with the intent of growing it into a national fast-food powerhouse. By 1969 General Foods had added nearly 600 stores to the chain, primarily through franchising. Unfortunately, the rapid expansion only exacerbated underlying problems that plagued the chain.
Burger Chef developed a red and yellow sign and a menu that was a near clone of its leading competitor. Despite Burger Chef's attempt to copy the vastly successful McDonald's, it lacked key marketing elements that had made McDonald's so successful. Its sign, for example, lacked the distinction of McDonald's golden arches, and its chain of restaurants lacked uniformity, thus reflecting an image of inconsistency to consumers. Furthermore, Burger Chef had failed to concentrate enough restaurants in a single area, which would have allowed them to increase the efficiency of local promotions. Most importantly, McDonald's had centered its marketing efforts on a creed of quality, service, and cleanliness, three virtues that Burger Chef failed to adequately imitate. In fewer than four years, General Foods amassed a loss of $83 million from its Burger Chef operations. Many of its stores soon closed.
Perhaps the most widely identified marketing flop was Coca-Cola Co.'s introduction of New Coke in the mid-1980s, an effort to diminish gains made by its arch rival, Pepsi, in the youth market. Coke changed its long-revered cola recipe in an attempt to boost interest in its product and to appeal to younger soft-drink consumers who were seeking a sweeter drink. Coca-Cola, long known for its canny marketing prowess, seemingly misread public reaction to the modification. Outraged at the company's tinkering with what they viewed as an American icon, many consumers rejected the change. Fewer than three months after embarking on its new version, Coca-Cola decided to bring back its old "Classic" Coke, which was soon outselling New Coke by a margin of 10 to 1. Coca-Cola apparently failed to comprehend both the historical value of, and consumer loyalty to, Coke, both of which it had spent millions of dollars trying to cultivate during much of the 20th century. Still, some marketing specialists have advanced the alternative view that the New Coke episode did in fact help significantly revitalize the brand because it drew intense scrutiny to the product and made consumers more conscious of its uniqueness and their loyalty to it.
As the rapid growth experienced by the U.S. economy during the post World War II boom years faded during and after the 1970s, many companies began to focus on overseas markets for continued growth. While the basic goals of global marketing are the same as marketing a product or service domestically, important differences exist. For example, a product that sells well in the United States may require an entirely different marketing plan to achieve success in another country. General Motors Corp. discovered this when it tried to sell its Nova model in Mexico, where the company learned that the word "Nova" in Spanish is similar to "no go."
Besides obvious language barriers, cultural subtleties in a country or region can easily thwart a marketing program that has achieved success elsewhere. Other risks associated with global marketing include currency fluctuations, political instability, and unforeseen legal ramifications. Furthermore, the lack of existing market research in many countries and the lack of means to gather information poses a serious roadblock for many would-be competitors. Nevertheless, rampant market growth in emerging countries, as well as relatively untapped markets in established economies, often provide great incentives for U.S. marketers to risk overseas ventures.
Marketers may utilize several different approaches to market their goods to foreign target groups. A common, relatively low-risk strategy is exporting goods through distributors and importers. This technique reduces the company's participation in a foreign country and essentially limits marketing initiatives to various middlemen and their buyers. Retailers and wholesalers in the host country can then select appropriate marketing media, utilize established distribution channels, set prices, and handle other localized marketing endeavors. A second marketing strategy is licensing and franchising, whereby a company sells the right to manufacture or sell its products to a foreign producer. Although this involves a minimal commitment, the company often maintains limited control over the company that purchases the license.
Joint ventures with enterprises in the host country, a third method of overseas marketing, entail a greater commitment on the part of the company trying to sells its goods. Joint ventures reduce political and cultural risks, however, and may help the company compete against local producers. Finally, some manufacturers choose to produce and market their products independently through a wholly owned subsidiary in another country. Although this last method exposes the organization to greater risk and represents a significant commitment to business in the country or region, it allows more control over operations and provides greater profit opportunities should the venture succeed.
Regardless of the ways a company selects to market its products or services abroad, once it makes the decision to go global it typically must establish two separate marketing strategies. First of all, it needs a global strategy that will direct the organization's overall goals abroad—to establish a market presence in Scandinavia, for example, or to control X percent of the East Asian market within five years. Secondly, the company usually devises a separate marketing program tailored to each country or region in which it becomes active—a strategy that is sensitive to the marketing nuances of that particular locale.
Aside from market research, pricing, distribution, advertising, and other marketing activities, the three primary product options available to a company active in overseas markets are: (1) marketing a single "global" product to all countries in which it is active; (2) adapting its product to reflect local markets within a region, such as Asia or Europe; or, (3) changing the product to suit individual countries and locales within each country.
[ Dave Mote and
Scott Heil ]
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