What is Global Marketing? Organizing Factors

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What is Global Marketing?

What is Global Marketing? Global marketing is an approach that businesses use strategically to expand their reach and influence beyond domestic markets. It involves the identification and targeting of potential customers worldwide for the promotion and sale of products or services on a global scale.

Define Global Marketing

Global marketing is defined as “marketing on a worldwide scale reconciling or taking global operational differences, similarities and opportunities to reach global objectives”. It is an essential area of marketing management focusing on marketing products or services in the international marketplace. Global marketing is concerned with an international business environment that markets products, solutions and services to consumers locally, nationally, and internationally to meet a universal marketplace’s needs and preferences.  

Organizing Global Marketing

Organising global marketing is to find a structure that enables the company to respond to relevant market environment differences while ensuring the diffusion of corporate knowledge and experience from national markets throughout the entire corporate system.

The pull between the value of centralised knowledge and coordination and the need for individualised responses to the local situation creates constant tension in the global marketing organization. A key issue in a global organisation is how to achieve a balance between autonomy and integration. Subsidiaries require autonomy to adjust to their local surroundings

However, the business as a whole needs integration to implement the global strategy. When management at a domestic company decides to pursue international expansion, the issue of how to organise arises immediately. Who should be responsible for this expansion? Should particular country subsidiaries report directly to the company president, or should they appoint a special corporate officer to be assigned to take full-time responsibility for international actions?

What is Global Marketing?

Evolution of Organizational Structures in Global Business: Challenges and Considerations

Once the first decision on how to organise initial international operations has been reached, a growing company is faced with several reappraisal points during the development of its international business activities. Should a company consider discontinuing its international division, and if it does, what alternative structure should it embrace? Should an area or regional headquarters be formed? What should the relationship of staff executives be at corporate, regional, and subsidiary offices?

Specifically, how should the marketing function be organised? To what extent should regional and corporate marketing executives become involved in subsidiary marketing management? It is essential to recognise that there is no correct organisational structure for global marketing. Even within an industry, worldwide companies have developed very different strategic and organisational responses to changes in their environments. However, it is always likely to make generalizations.

Simplicity and Efficiency in Organizational Structures for Global Marketing Competition

Leading-edge global competition shares one key organisational design characteristic: Their corporate structure is simple and flat, rather than tall and complex. The message is clear; The world is complicated enough; there is no need to add to the confusion with complex internal structuring. Simple structures increase the speed and clarity of communication and allow the concentration of organisational energy and valuable resources on learning, rather than on controlling, monitoring, and reporting.

A geographically dispersed company cannot limit its knowledge to product, function, and home territory. Company staff must gain an understanding of the intricate web of social, political, economic, and institutional factors present in each global market. Most companies, after initial ad hoc arrangements, for example, all foreign subsidiaries reporting to a designated vice president or the president establish an international division to manage their geographically dispersed new business. It is clear, however, that the international division in the multi-product company is an unstable organisational arrangement. As a company expands, this initial organisational structure often gives way to alternative structures.

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Factors Affecting Global Marketing Organisation

The success of a global strategy will be acutely influenced by the selection of an appropriate organisation to implement that strategy. The structure of an international organisation should be congruent with the tasks to be performed, the need for product knowledge, and the need for market knowledge. The ideal structure of such an organisation should be a function of the products or services to be sold in the marketplace, as well as of the external and internal environment.

Theoretically, the way to develop a global marketing organisation is to analyse the specific tasks to be accomplished within an environment and then design a structure that will support these tasks most effectively. Several other factors complicate the selection of an appropriate organisation, however. In most cases, a company already has an existing organisational structure. As the internal and external environments change, companies will need to re-evaluate that structure. The search for an appropriate organizational structure must balance local responsiveness against global integration. Global managers must understand the strengths and weaknesses of different organisational structures as well as the factors that usually lead to a change in the structure.

The major factors affecting global service marketing organisations are as follows:

1) Corporate Goals

Every company needs a mission. The mission is the business’s framework values that drive the company and the vision it has for itself. The mission statement serves as a cohesive force that holds the company together. It asks four questions:

  1. Why do we exist?
  2. Where are we going?
  3. What do we believe in?
  4. What is our distinctive competence?

After declaring its mission, no company should begin establishing an international organisation until it has reviewed and established its strategies and objectives. Some multinational companies include strategy statements in their missions. If the head of a company can instil this sense of winning throughout the firm, it will inspire the organisation to excel and achieve far greater goals.

2) Corporate Worldview

Corporate management has the option to embrace various perspectives when it comes to global markets. These worldviews or orientations will significantly affect the choice of organisational structure. Some firms adopt an ethnocentric orientation.

Management is centred on the home market. Ideas that originate from there are considered superior to those from foreign subsidiaries. Headquarters tells its subsidiaries what to do and demands little or no input from them. Top managers in foreign subsidiaries are most often managers sent from headquarters on relatively short-term assignments.

Alternatively, corporate management can adopt a polycentric orientation, where each market is seen as distinct and unique. Local subsidiaries are given substantial autonomy to develop and implement their strategies, with less interdependencies among subsidiaries. Local nationals usually fill management positions in local subsidiaries.

Some polycentric companies evolve a focus that is regional rather than national. Rather than single national markets, geographic regions such as Europe and Latin America possess unique features that require separate marketing strategies. Decision making becomes centralised at the regional level, but regions remain relatively independent of headquarters and one another.

A geocentric orientation returns power to global headquarters, which differs from an ethnocentric orientation. A geocentric company focuses on the global market rather than the domestic market. Valuable ideas can originate from any country, and the company makes an effort to maintain open communication channels across its different departments.

Even top management at corporate headquarters is likely to come from worldwide. Most importantly, all national units, including the domestic one, must consider what is best for the whole organisation and act accordingly.

3) Other Internal Forces

Other internal factors often affect the international organisation as well. These factors are as follows:

i) Importance of International Sales

The size and importance of a firm’s international business affect its organisational structure. If only a small percentage of sales (1 to 10 per cent) are international, the company will tend to have a simple organisation such as an export department.

As the proportion of international sales increases relative to total sales, a company is likely to evolve from having an expensive department to having an international division and then to having a worldwide organisation.

Companies may even consider moving global headquarters out of the home country when overseas sales become dominant. Japan’s Sony Corporation, Nintendo Company, and Sega Enterprises have all considered moving their headquarters to the United States.

ii) Level of Economic Commitment

A company that is unable or unwilling to allocate sufficient financial resources to its international efforts will not be able to sustain a complex or expensive global structure. The less expensive organisational approaches to international marketing usually result in less control by the company at the local level. It is extremely important to build an organisation that will provide the flexibility and resources to achieve the corporation’s long-term goals for international markets.

iii) Human Resources

Available and capable personnel are just as essential to a business as financial resources. Certain companies dispatch senior executives from their home country to oversee foreign operations, only to discover that these expatriates struggle to comprehend the local culture.

The hiring of local executives is also tricky because competition for such people can be highly intense. Motorola puts hundreds of executives through workplace simulation exercises to try to identify the best candidates with the essential international management skills to operate a global business. Because people are such an important resource in international organisations, a lack of appropriate personnel can constrain a firm’s organisational growth.

iv) Diversity of International Markets Served

As the number and diversity of international markets increase, it becomes necessary to have a more complex organisation to manage the marketing efforts and it requires a larger number of people to understand the markets and implement the strategies.

v) Home-Country Culture and History

Siemens, the large German electronics and engineering conglomerate, does 80 per cent of its business abroad, and 60 per cent of its workforce is employed outside Germany. Managers of most local subsidiaries are local nationals.

However, like many German companies, Siemens has employed a more centralised management style when dealing with its important U.S. subsidiary, with power located at headquarters in Germany and a German citizen sent to oversee the U.S. market.

Keeping close control over important markets and decisions has its roots in German history. An individual can only decide on a few day-to-day issues but must be approved by the management board in Germany, and a separate supervisory board consisting of shareholder and employee representatives has to approve major decisions. Some managers argue that Siemens will not truly change until Americans and Asians are on the board.

vi) Flexibility

When a company devises an organisational structure, it must build in some flexibility, especially to be prepared in case re-organisation becomes necessary in the future. A study of implementing a global strategy for seventeen products found that organisational flexibility was one of the keys to success.

The structure should be adaptable to meet consumer needs and address global competition challenges. Even companies that establish a perfect design for the present find themselves in trouble later on when the business expands or downfalls.

4) External Forces

Several external factors can affect how global organisations are structured and managed. Some of the most important of these forces are discussed as follows:

i) Time Zones

One major problem that even advanced technology cannot solve is time differences. Managers in New York who strike a deal over lunch may face challenges in finalizing it with their London headquarters until the following day. This delay arises because, by that time, most executives in England will have left for the evening.

The 5-hour time difference results in lost communication time and impedes rapid results. Email has greatly enhanced communication among distant teams, but there are still adjustments that need to be implemented. Brady Corporation of Milwaukee produces industrial signs and printing equipment.

About 45 per cent of its sales are outside the United States. Managers in Milwaukee often participate in conference calls as early as 6 a.m. and make late-night calls to connect with the company’s Asian managers during their work hours.

ii) Types of Customers

Companies may need to take their “customer profiles” into account in structuring their global marketing organisations. Companies that serve very few, geographically concentrated global customers will organise their global marketing efforts differently from firms that serve a large number of small customers in country after country.

For example, if a firm has key global customers, it may adjust its organisation and select its office locations according to where its customers are located. Numerous companies supplying equipment or parts to automotive firms establish marketing units near major automotive hubs, like Detroit and Stuttgart, Germany.

Supplier parks sit adjacent to Ford manufacturing sites in Spain, Germany, and Brazil and are increasingly planned for U.S. locations. On the other hand, companies that sell to large numbers of customers tend to maintain more regional, or even country-specific, organisations, with relatively less centralisation. Similarly, if customer needs or competition varies greatly from country to country, there is less impetus to centralise.

iii) Government Regulations

How various countries attract or discourage foreign operations can affect the structure of the global organisation. Laws involving imports, exports, taxes, and hiring differ from country to country. Local taxes, statutory holidays, and political risks can deter a company from establishing a subsidiary or management centre in a country.

Some countries require a firm that establishes plants on their territory to hire, train, and develop local employees and to share ownership with the government or local citizens. These requirements for local investment and ownership may dictate an organisation that allows greater local decision-making.

iv) Geographic Distance

Technological innovations have reduced the problems associated with physical distance. Companies, primarily in the United States and other developed countries, enjoy such conveniences as next-day mail and e-mail, facsimile machines, videoconferencing, mobile phones, rapid transportation, mobile data transmissions, and, of course, the internet.

However, these benefits must be taken seriously in international operations. Distance becomes a different barrier when operations are established in less developed nations, where the telecommunications infrastructure may be more primitive.

Moreover, companies always find it essential to have key personnel make trips to engage in face-to-face conversations. Organisations in the same region are often grouped to help minimise travel costs and the travel time of senior executives. Technology has not eliminated but shortened the distance gap.

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