Summary
Global Marketing
Svend Hollensen
7th Edition
, Part I. The decision of whether to internationalize
1. Global marketing in the firm
1.1 Introduction to globalization
After two years in economic crisis mode, companies are re-engaging in global marketing
strategy thinking.
Thomas Friedman published a book in 2005, named The World is Flat. In his viewpoint, all
competitors have equal opportunities. Companies in developing countries are equal to
multinational companies, because they provide supplies for these multinational companies.
Pankaj Ghemawat contradicted Friedman’s viewpoint by introducing World 3.0. In such a
world, global strategies must be based not on the elimination of differences and distances
among people, cultures and places, but on an understanding of them.
1.2 The process of developing the global marketing plan
1. The decisions whether to internationalize
2. Deciding which markets to enter
3. Market entry strategies
4. Designing the global marketing program
5. Implementing and coordinating the global marketing program
The purpose of a global marketing plan is to create sustainable competitive advantages in
the global marketplace.
1.3 Comparison of the global marketing and management style of SMEs and LSEs
LSEs (large-scale enterprises) are firms with more than 250 employees. LSEs account for less
than 1 per cent of companies, although they provide almost one third of all jobs in the EU.
99 per cent of all firms are SMEs (small and medium-sized enterprises). The EU categorizes
companies with fewer than 50 employees as small and those with fewer than 250
employees as medium.
Resources
The owners of SMEs put a limited amount of capital into the business.
A characteristic of SME managers is their limited formal business education, compared to
LSE managers. Managers in SMEs tend to be generalists rather than specialists.
Formation of strategy/decision-making processes
No companies form a purely deliberate or intended strategy. All companies will have some
elements of both intended (planned) and emergent (not planned) strategies.
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,LSEs form a planned strategy. Managers try to formulate their intentions as precisely as
possible and then aim to implement these with a minimum of distortion.
An approach within LSEs is logical incrementalism, where companies take small, incremental
steps when it comes to innovation (adaptive decision-making model). If such small
movements prove to be successful, then further development of the strategy will take place.
Even when managers act step-by-step, it does not mean that they succeed in keeping up
with changes in their environment. When strategic changes and environmental changes
move apart, a strategic drift appears.
SMEs are characterized by the entrepreneurial decision-making model. Decision making
happens intuitive, loose and unstructured. The growth of the company is not coordinated
and sporadic decisions can have an impact on the overall direction in which the company is
going.
Organization
In SMEs, the organization is normally informal. Employees are usually closer to the owner
(entrepreneur). The owner has the power to control the total organization.
In LSEs, the organization is normally more hierarchical.
Risk-taking
Normally, LSEs will be against taking risks because of their use of a decision-making model.
LSEs focus on long-term opportunities.
In SMEs, risk-taking depends on the circumstances. SMEs may want to take risks when the
survival of the company is under threat. If the company has been damaged by previous risk-
taking, the company will most likely be reluctant to take any kind of risk in the future.
Flexibility
SMEs can react in a quicker and more flexible way to customer enquiries, because of their
shorter communication lines. LSEs are less flexible.
Economies of scale and economies of scope
Economies of scale refer to the benefits of a lower cost price per unit due to an increased
production.
The benefits are:
- Reducing operating costs per unit and spreading fixed costs over a larger volume
- The opportunity to concentrate global purchasing power over suppliers – volume
discounts and lower transaction costs
- The opportunity to build centers of excellence for the development of specific
technologies or products
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, LSEs will normally take advantage of these factors. SMEs tend to concentrate on smaller
market segments. Such market segments are often too insignificant for LSEs to target.
Economies of scope refer to savings gained by reusing a resource from one business/country
in additional businesses/countries. LSEs often serve many different countries and are able to
transfer experience gained in one country to another country. SMEs usually serve a very
limited number of international markets. However, they can make use of economies of
scope when they work together with a partner (joint venture) who has something they are
missing.
Overall, LSEs take advantage of economies of scale and economies of scope. SMEs take
limited advantage.
Use of information sources
Typically, LSEs use advanced techniques to gather global marketing information, while SMEs
usually gather information in an informal way through the use of face-to-face
communication.
However, the demand for complex information grows as SMEs evolve from production-
oriented (upstream) to more marketing-oriented (downstream) companies.
1.4 Should the company internationalize at all?
International expansion provides new and potentially more profitable markets, helps to
increase the company’s competitiveness and facilitates access to new product ideas,
manufacturing innovations and the latest technology.
However, internationalization is unlikely to be successful unless the company prepares in
advance.
Industry globalism
A single company can’t influence the degree of globalism within an industry. Examples of
global industries are those making IT, films and aircraft. Examples of more local industries
are those that are more culture-bounded, such as hairdressing and foods.
Preparedness for internationalization
It depends on the individual company if it is prepared to internationalize. A well-prepared
(mature) company has a good basis for dominating the international markets.
With limited international experience and a weak position in the home market (immature)
there is little reason for a company to enter international markets. Instead the company
should try to improve its performance in its home market.
If a company has already acquired some competence in international business operations
(adolescent), it can overcome some of its competitive disadvantage by going into alliances
with companies that have complementary competences.
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