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February 03, 2015Global Marketing » Lecture 1
Semi-global Marketing Strategy
DEVELOPING A SEMI-GLOBAL MARKETING STRATEGY
S.P. Douglas & C.S. Craig (2001). Convergence and Divergence:
Developing a Semi-global Marketing Strategy. Journal of International
Marketing, Vol. 19, No. 1, Pages 82-101.
Globalization
Globalization:
As markets become increasingly integrated, more firms from all
parts of the world are expanding operations on a global scale.
This trend is not confined to large multinational corporations, but
includes firms of all sizes, from medium-sized to entrepreneurial
companies (niche markets).
Saturated markets:
Internationalization trend was largely confined to firms from
highly developed countries of the industrial triad (i.e. United
States, Europe and Japan).
Saturated markets in the developed world (decreasing rates of
growth) competition for market share has accelerated,
requiring additional promotional expenditures.
Firms are looking for new growth opportunities outside the
developed world large emerging countries (BRIC) and second-
tier emerging countries (Next 11).
Implications for marketing strategy:
Important implications for the marketing strategies of MNCs from
developed world need to reformulate their global marketing
strategy, adopting a broader focus.
On the one hand, this entails developing new initiatives to
stimulate and capture demand in their traditional markets
(developed countries / global or regional market segments).
On the other hand, they must formulate new strategies to target This study examines the implications
of these changes in the global
the wide range of growth opportunities in other countries marketplace for the design of global
marketing strategy by MNCs from
(emerging markets important avenue for growth). developed counties.
Page 1 of 50
,Global marketing as an evolutionary process
Seminal stages theory: Early internationalization:
Seminal stages theory of internationalization: the perceived risk Firms initially seek only familiar
markets, costs of acquiring market
associated with international expansion leads firms to enter knowledge.
Later internationalization:
proximate, more familiar markets first, gradually expanding into Benefits of international expansion
more distant markets as experience is gained internationally. realized; economies of scale and
scope; access to lower cost
Evolutionary and multistage perspective of internationalization resources.
Excessive internationalization:
consists of three phases early internationalization, later Over-expand internationally beyond
internationalization, and excessive internationalization. a desirable optimum level; coordi-
nation costs of dispersed markets.
Integration-responsiveness framework:
Internal pressures arising from the increasing scale and growing Internationalization of activities is a
process that unfolds across time and
complexity of international operations, and external pressures
space.
arising from operations in multiple countries drive changes in the
Pressures for synergy and improved
MNC’s organizational structure and processes. efficiency became more critical.
Integration-responsiveness framework: identifies the increase in Issues of innovation and knowledge
transfer became increasingly central.
pressures for global integration coupled with pressures for local
responsiveness as key forces influencing the MNC’s organizational
design.
A sequential decision-making process:
Firm’s international market expansion can be viewed as a
sequential decision making process with three phases initial
market entry, local market expansion, and global market
rationalization.
Initial market entry: firm selects countries (markets) to enter as a Focus on realizing potential
economies of scale by entering
base for future expansion, decides how to enter each country, and
international markets (tangible and
determines the timing and sequencing of international market intangible assets).
entry.
Local market expansion: aims to expand outward and develop Focus on achieving economies of
scope, spreading shared costs across
sales from its base within each country developing new
multiple products lines (the facilities
products and services tailored to specific customer demand for production, warehousing and
distribution etc.).
characteristics or adapting to existing products to market
characteristics.
Global market rationalization: attempts to rationalize its far-flung Pay greater attention to coordinating
and integrating operations at
operations shift away from country-centered strategies to use different stages of the value chain
skills and resources developed in a given country on a worldwide across countries.
basis.
Page 2 of 50
, Synergies:
The principal goal of restructuring and rationalization of The concept of serving a series of
domestic markets disappears and is
operations on a global scale is the desire to achieve substantial replaced by that of meeting needs in
synergies. a group of interrelated markets
worldwide.
Scale efficiencies in production and marketing are achieved by
organizing operations regionally or globally rather than on a
country-by-country basis.
Knowledge, expertise and successful best practices can be
transferred from one region to another, resulting in world-class
As firms begin to expand the
products and operations.
geographic scope of its operations, it
enters a wide range of markets, with
Entering the four phase of global marketing strategy high degree of cultural and economic
diversity between these markets
need to reassess its strategy and
Emerging markets: organization.
MNCs placed primary emphasis on opportunities in developed
countries (high per capita income, highly developed infrastructure,
and predictable operating environments).
However, these markets have saturated competition for
market share accelerated, requiring additional promotional
expenditures and effort to expand or even maintain sales.
At the same time, rates of growth in large emerging countries Although levels of average income
are low, the size of these markets are
(BRIC), and second-tier emerging countries have risen rapidly,
vast India and China account for
providing new opportunities middle-class and entrepreneurs. more than one third of the world.
Important trends:
New sources of competition are the large companies from To undercut position of rivals in their
home markets, to take advantage of
emerging markets firms from developed countries need to low-cost resources, and to master
counterattack in the home market of these firms. resources of rivals’ comp. adv.
Managers become more mobile and move across national New generation of engineers and
managers provides a new talent base
borders increasing cultural and economic diversity of market for NPD and stimulates hiring local
managers.
opportunities (income, living conditions, educational progress).
Technological advances have aided small- and medium-sized firms Transfer of technology through
licensing, contract manufacturing or
in targeting specialized market segments in international markets, other collaborative agreements has
also enabled a broader range of firms
such as medical equipment and software. and increased level of competition.
The spread of communication links between and within countries
Enables improved coordination and
has further facilitated firms’ ability to develop market knowledge integration of operations at different
stages of the value chain as well as
competencies (customers, competitors, and suppliers). geographically across countries.
Page 3 of 50
, New challenges for global marketing strategy:
Global marketing strategy needs to be reassessed to adjust to
these new and diverse sources of market growth and opportunity,
as well as differences in competitive activity.
These may require different strategies and new skills, as well as an Factors such as customer interests,
preferences, purchasing patterns,
improved understanding of substantial differences in demand
and price sensitivity differ greatly
characteristics, the nature of competition, and the market among countries.
infrastructure in emerging markets.
Rather than adopting an integrative perspective and focusing on Consequently, firms need to focus on
development of divergent strategies
developed-country markets MNCs need to adopt a broader geared toward different geographic
perspective in developing a global marketing strategy. needs, competitors, and market
conditions in different geographic
The key imperative is to develop a more complex, multi-faceted locations, which requires a local or
regional focus.
approach to designing different strategies for a broad array of
Rather than a global integration and
diverse and rapidly growing markets. coordination of strategy, and more
centralized.
Developing a semi-global marketing strategy
Semi-global marketing strategy:
In the semi-global marketing strategy development phase of
global market expansion, the MNC must be able to focus on
multiple goals simultaneously in different markets throughout the
world.
It must maintain its competitive position and market share in
developed markets while focusing on establishing a presence in
divergent emerging markets.
Five major spheres:
Two types of markets that MNCs have traditionally targeted:
Developed countries: the industrial triad
Global/regional segments: similar preferences and response
Three new market configurations attracting increased attention:
Large emerging-market countries: BRIC (country-centric)
Second-tier emerging-market clusters: Next11 (country cluster)
Large rural markets and urban poor: within emerging markets
Page 4 of 50
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