• The global brand benefits from familiarity in most markets, but a downside is that any adverse publicity rapidly becomes news, potentially damaging the company’s reputation. Not all news is good news when it comes to global brands, and the good-news stories do not make headline news in the way that bad-news stories do. Brand owners benefit from the fact that their brand image helps immensely to sell their products. Even if quality is allowed to slip, the image will still generate sales for a time. However, the brand owner must be vigilant to ensure that customer expectations are satisfied – poor-quality goods will do great damage to a brand with a quality reputation.

• The global brand owner can use the global brand in all markets, but adapt products and marketing messages to local conditions. An alternative strategy is to acquire or build local sub-brands, which have their own image, independent of the owner. For example, Walkers Crisps is a well-known brand in the UK, owned by PepsiCo. It is thought of as a local brand.

Ethical concerns impact on all aspects of communications with consumers of the company’s products. Some areas:

• Description of the product, and claims about its characteristics in advertising

• Pricing

• How the product is sold, for example, with high-pressure selling techniques

• Targeting of specific groups, such as teenagers or children

It could be argued that brand image can be damaged by unethical marketing, although ethical marketing does not necessarily enhance brand image. The MNE would be advised to see ethical marketing as essential to maintain brand image, in order to avoid the damage which can be caused by cases of unethical behavior. This is rather a defensive strategy, but possibly a realistic one.

 

4. Globalization is associated with increasing inequality. This is one of the arguments often highlighted as a negative impact. Assess the evidence on the basis of current trends, deciding whether this criticism is justified.

Inequality is discussed further in Chapter 3. It is raised here specifically in conjunction with globalization. As was mentioned there, inequality is measured by the Gini coefficient, a measure of the inequality of a distribution, a value of 0 expresses total equality and a value of 100% maximal inequality. This is an issue that always gets raised in conjunction with globalization because there is often a direct link between the economic growth that globalization brings in and the concomitant rise in inequality. After all, the countries and companies with the skills, resources and strategies in the sectors which are rapidly becoming globalized (such as manufacturing, telecoms, finance, internet, extraction industries) can potentially make huge financial gains for their owners. Not surprisingly, therefore, China and India now have the most rapid growth in numbers of billionaires. Although ordinary workers have seen rising wages in both developed and emerging economies, the gap between these workers and the richest in their societies has widened. Some may argue that this is not a negative impact, and globalization should not be blamed for these consequences. They might argue that governments should bear responsibility for the social and economic well-being of all in society. Governments have encouraged market reforms and economic integration, seeking the benefits of economic growth, but rising inequality in many countries can lead to social unrest, often as a backlash against globalization.

Gini index data for selected countries

 

MNEs now generally accept that they are active participants in the communities in which they operate, whatever the location. While they may view their activities chiefly in economic terms, economic activities are increasingly mingled with social, ethical, environmental and political issues. For this reason, it is arguable that companies which manage these interactions with a view to social as well as economic goals will build more sustainable long-term strategies in host countries.

The implications for global strategy are that local CSR and stakeholder concerns can bring positive benefits. Moreover, for MNEs, reputational damage in one location can lead to negative perceptions of the company in terms of global reputation.

 

Country focus             China (page 286)

Assess China as a potential market in terms of the three levels of analysis presented in the previous section: macro-level factors, consumer markets, and micro-level product markets?

• Macro-level factors:
  
  China enjoys rising GDP per capita and high economic growth rate. Its growing urban middle class is a tempting market. However, these factors are unevenly distributed: rural areas have not participated in the rising incomes and growth to the same extent as urban areas.

• Consumer markets:
  
  China’s new consumers are eager to acquire the items associated with Western lifestyles, including consumer electronics, cars, holidays, and meals out. Eating habits are changing in the urban areas: people are eating more western-style foods, including meat.

• Micro-level product markets:
  
  China is an attractive market for foreign MNEs, but in most product markets, existing domestic firms are active, and the foreign MNE can expect a fierce competitive environment. Retailers such as foreign hypermarkets have entered China. Because of their size and scale economies, they can compete on price with smaller local stores. They also offer a great variety of products under one roof. However, Chinese consumers are highly influenced by price, and local supermarkets are adept at maintaining competitive prices. Similarly, in car manufacturing, Chinese makers, such as Chery, compete successfully alongside the models offered by the foreign joint ventures.

How does China’s rich-poor divide impact on the growth in consumer markets?

It is a mistake to view China as a single market. The rich-poor divide is mainly based on the differences between urban and rural populations. However, regional differences are significant. The developed urban coastal areas are richer than inland cities, although urban areas generally have growing numbers of middle-class consumers. Western entrants have focused on the coastal areas, but future growth in consumer markets is likely to come from the more inland cities. Consumer markets in these cities are diverse, reflecting regional differences in tastes. These consumers cannot be assumed to be attracted to Western consumer goods as they become richer. China’s consumers are becoming more affluent, but their location and cultural environment help to determine consumer markets, in addition to their growing incomes.

Why have hypermarket retailers flocked to China?

• The size of the Chinese market is the main attraction. Although affluent consumers are still in the minority, the potential for growth makes it worthwhile for Western hypermarket retailers to invest.

• Hypermarket retailers benefit from economies of scale. Where the market is potentially large, as in China, their advantages become more pronounced.

• China is still experiencing economic growth rates of about 8%. This is not as high as those of the last two decades, but is till much higher than the more mature markets of the US and Europe.

• Hypermarket retailers have met resistance in some European markets because of their size and perceived detrimental impact on local competitors. Hence, their scope for growth in these markets has tailed off. In addition, planning permission for the large sites they require often raises objections. Their moves into emerging markets such as China therefore represent opportunities in an environment where the formal retailer sector is less developed.

• Once one hypermarket retailer has entered China, such as Carrefour, its main rivals feel compelled to follow.
   

Strategic cross-roads       Excitement mounts as Hispanic media take to a wider stage (page 290)

Assess the reasons behind Univision’s growth? The company is credited with bringing the  ‘telenovela’ to US audiences. The growth of Hispanic TV audiences in the US reflected the growing numbers of Hispanic immigrants. The rising spending power of Hispanic consumers helped Hispanic TV to attract advertisers. Univision was also able to enter mainstream TV, persuading advertisers that the audience size would justify the expenditure.   As this chart from the Census Bureau shows, Hispanics already account for almost one-sixth of the U.S. population.

 

How are the strategies of media firms in Spanish-language output evolving in terms of wider markets?

Large media companies are now recognizing the opportunities in Spanish language output. An example is GE, which bought Telemundo. These companies see the benefits of in-house production, in contrast to the imported content used by Univision. Other aspects of strategy are targeting wider global audiences and creating accompanying websites which carry advertising. Owning their own content gives the companies flexibility to exploit a variety of formats. Success in Asia opens up the prospect of much bigger audiences, and these are audiences with considerable spending power as well as widespread internet access.

 

Extension versus Adaptation

Levitt had argued that, with the convergence of technology and globalization, the MNE's product and brand diversities across national and regional markets will be replaced by a cost-efficient global standardization. Unfortunately, though, this ignored the basic dynamic of international scene, that the nations and regions are culturally, socioeconomically and linguistically different. This cross-cultural diversity usually necessitates formulation of different brand and marketing strategies for different national markets. As this 2x2 matrix shows, this can be accomplished in a combination of four ways: Product extension Product adaptation Communication extension Communication adaptation

Whether in Moscow of Modesto, for instance, Pepsi and Coke have exactly the same logo, except for lettering.			True	False
	This is an example of ...	Product extension
		Product adaptation
		Communication extension
		Communication adaptation
Their advertisements too differ	This is an example of ...	Product extension
		Product adaptation
		Communication extension
		Communication adaptation

 

Updated on 05/05/2015