'The world's youth prefer Coke to tea, trainers to sandals,' wrote one marketing specialist recently. This implies that tastes everywhere are becoming similar and homogeneous. But the watchword should still be 'Think global, act global'. Acting local means having local market knowledge: there are still wide variations in taste, customs, behaviour and expectations between consumers in different markets, even markets that from the outside look very similar, like those in Europe. It means, for example, recognising attachments to local brands, how business is done in each place, and so on.
Of course, these are issues that a company with a global presence has to address. But even companies that seem as if they have been global forever had to start from a home base. For example, it took Marlboro 30 years and McDonalds 20 years to become truly global organisations.
How to enter overseas markets in the first place? Philip Kotler enumartes the various methods:
- INDIRECT EXPORT: Exporters use an intermediary such as an export agent to deal with buyers in the overseas market.
- DIRECT EXPORT: Companies handle their own exports, for example, by setting up overseas sales offices.
- LICENSING: Companies sell the rights to use a manufacturing process, trademark or patent for a fee or royalty. In services such as hotels, the company may negotiate a management contract with a local business to run the hostels on its behalf.
- JOINT VENTURES: Two companies, for example an overseas firm and a local one, may work together to develop a particular market.
- DIRECT INVESTMENT: The company buys a local firm, or sets up its own manufacturing subsidiaries.
Of course, these different arrangements involve different levels of commitment, investment and risk. Kotler talks about the internationalisation process, where firms move (hopefully) through these stages:
- Stage 1: no regular export activities
- Stage 2: export via independent representatives / agents
- Stage 3: establishment of overseas sales subsidiaries
- Stage 4: establishment of production facilities abroad
This process will help them to progress towards global thinking and local action as they expand internationally. At different stages, companies will have different levels of understanding of the markets where they are trying to develop. Each step in the process requires different l