Marketing: The Internet, Essay Example

The internet has accelerated the pace of globalization by enabling vast improvements in communication. The companies are able to reach wider market segments due to rapid dissemination of information and have become more efficient due to increasingly mobile factors of production. The opportunities have not emerged without challenges because global markets greatly vary in consumers’ lifestyle, tastes, cultures, expectations, and value perceptions. Serving a more diversified consumer base profitably requires a greater understanding of the underlying factors that shape the consumers’ purchase decisions.

As the factors of production have become increasingly mobile, it’s difficult if not impossible to remain competitive on the basis of cost advantages alone. Companies’ competitive advantages arise from traits or skills that are difficult to imitate and unique to the company. These competitive advantages not only promote brand loyalty but also give companies some degree of control over the price of their products in the face of the competition. Thus, companies that are aiming to expand their operations on a global scale have to figure out how to develop new core competencies or leverage the existing ones to ensure success as well as sustainable profitability. The core competencies could be product, service, or the production process. GM ruled the global auto industry for 76 years as the largest automaker until 2007 when it was dethroned by Toyota. Historically, GM has managed its brands on regional basis. The company realizes the new global nature of competition and has redesigned its product development process in such a way that each regional center will develop global strategy based on its core competency. For e.g. South Korean subsidiary with its expertise in small cars will devise strategy for small cars and U.S. facility may devise SUVs strategy to be implemented on a global scale (Townsend, Cavusgil, & Baba, 2010).

Companies should also ensure that they cultivate an organizational culture that welcomes changes, diversity of ideas, and continuous innovation to rapidly adapt to changing competitive environment as well as diversified consumer groups. An organization culture is a set of behaviors, values, and beliefs that guide the company’s everyday business conduct. Organizations that are resistance to change or employ uniform business policies on a global scale may find themselves out of touch with local needs and unable to compete with competitors that meet consumers’ expectations more effectively. In addition, the organization’s ability to have a reliable global network of partners such as suppliers, distributors, and marketers also greatly impact the success of product and services. An organization’s inability to meet consumers’ demand also hurts its image in quite the same way as an organization that faces low demand for its products. One of the essential components of product success is to make it available at places and in quantities that the market expects. Sony learnt lesson the hard way when it failed to accurately estimate the expected demand of its newly launched Playstation 3 console in 2006. Sony not only failed to meet Christmas Holidays demand in the U.S. but also had to delay its European launch. The mistake not only benefitted its competitors Microsoft and Nintendo but also hurt its partners such as Electronic Arts that developed games for the Sony game console (Takahashi, 2006).

The firm should also ensure that it has a reputable brand or at least willing to develop one. Many consumers’ perceive product quality on the basis of brand and are hesitant to purchase brands that fail to meet their quality and value perceptions. In addition, established brands often act as barriers to new entrants and thus, brands go a long way towards accommodating entry into new markets. In addition, the firms can’t ignore the quality of human capital when services are increasingly dominating the economies of developed countries and are becoming useful tools to achieve product differentiation. In addition, firms have also been forced to understand local market needs due to high competition which may require the recruitment of high quality local workers that understand their cultures and consumers better than the management at the headquarters (Calantone & Griffith, 2007). McDonald’s may be the market leader in the U.S. but KFC is the winner in China. KFC entered China earlier, was the first to introduce local offerings, and today operates more stores in the country than McDonalds.

The company also has to decide whether it want to serve various global markets with a standardized product or customized versions. Standardized products send a uniform message, enable production efficiency and help promote uniform image of the brand. Customized products help address local tastes and preferences. Whether the firm opts for mass production or customization depends upon the characteristics of the market, the intensity of the competition and the objectives of the firm. The products or services that the firm may launch abroad are also determined by national and cultural values as well as language. The firms often hire naming research firms to ensure that product names do not have undesirable or embarrassing meanings in local language or popular culture. In addition, the technology structure and technology habits of the host country will also influence the characteristics and design of the product and services.

Today, internet and communications technology has enabled companies to have a global supply chain as well as production facilities in various parts of the world. Despite the distances involved, these production facilities and suppliers collaborate with each other in real time and are able to track each other’s progress. Technology has also made it easy to reach customers and market to them in cheap and more effective ways. Internet ad targeting is becoming increasingly sophisticated in targeting the potential customers due to the vast amount of data being generated online. Microsoft launched Behavioral Online Ad Targeting campaign on a global scale in September 2006. The company reported that the new ad-targeting methods had increased click-throughs by as much as 76 percent (Seeking Alpha, 2006). The search engine heavyweight Google earns the bulk of its revenues through its proprietary ad-targeting technology called Google AdSense.

Technology has also enabled firms to find an effective compromise between mass production and customization in the form of mass customization. Nike was one of the first companies to pioneer the concept of mass customization when it started Nike ID that allows customers to design their own pair of shoes. Nike started the program with the primary goal of strengthening brand loyalty and didn’t expect it to be profitable. But the program started posting triple-digit growth in its third year and was profitable soon after that (Schlosser, 2004).

In addition, technology has made it possible for companies to sell products directly to customers without any middle stakeholders such as distribution intermediaries as well as sell certain products and services in digital format with none or very negligible marginal cost. Apple can operate all of its iTunes global websites from a single IT center and still be able to meet the needs of different markets. Apple deals directly with the customers and selling content in digital format means Apple doesn’t incur any cost on storage media such as CDs. Thus, marginal cost of each additional song is almost zero to Apple and Apple also gets the share of revenue that would have gone to distributors and retailers just a decade ago.

Global scale of operations present complex challenges for the organizations because the organizations have to comply with all different laws in the markets where they operate and also have to make sure they meet their ethical obligations. Laws differ to a great extent between some countries where certain conducts may be legal and allowed in one country and they may be illegal and unethical in other markets. In addition, different cultural values also result in different ethical standards, for e.g. most Muslim countries ban alcoholic consumption and commercials depicting sexual content. Arab cultures and Latin American cultures encourage coming inside personal space to create easiness among strangers where as in U.S. that is considered invasion of privacy and considered rude. Countries also have different definitions of acceptable content in the media. It’s not uncommon to see semi nude ads in France during prime time shows but it may come as a huge shock to American audience to see semi nude ads during prime time shows.

In addition, some societies tend to be conservative, others liberal, and the rest are moderate. Traditional and liberal societies have often extremely different positions on political and social issues. A recent super bowl ad by internet online coupon company Groupon is a good example of how even a good nature humor may attract controversy. Groupon was forced to issue explanation that it didn’t take the Tibet issue lightly but instead wanted to raise awareness about Tibet through humor.

They even have different definitions of ethics and morals. A P&G TV ad that was popular in Europe drew criticism in Japan because it showed a husband entering the bathroom while a woman was bathing and touching her. Japanese audience considered it an invasion of privacy and an inappropriate behavior. Similarly, a T.V. ad by a telephone company drew criticism in Saudi Arab because it showed a Saudi man talking on the phone with his feet rested on the table. In Saudi Arab, showing your shoe sole is considered a rude act (Kwintessential).

Language differences also create ethical barriers. Some words in one language are often not translatable into other language and this is quite a common occurrence. The law violations are not always easy to predict. The international laws are ambiguous and it becomes impossible to take measures against every possible scenario. Google’s case in Italy is an effective example of the uncertainty that companies operating in international markets face. Court in Italy ruled that Google broke Italy’s privacy law because a video depicting bullying of an autistic child was posted on YouTube which is owned by Google.

References

Calantone, R. J., & Griffith, D. A. (2007). Challenges and Opportunities in the Field of Global Product Launch. The Journal of Product Innovation Management , pp. 414-418.

Kwintessential. (n.d.). Cross Cultural Business Blunders. Retrieved February 9, 2011, from http://www.kwintessential.co.uk/cultural-services/articles/crosscultural-blunders.html

Schlosser, J. (2004, December 13). Cashing in on the new World of Me. Fortune , pp. 244-250.

Seeking Alpha. (2006, December 26). Microsoft To Introduce Behavioral Online Ad Targeting on a Global Scale. Retrieved February 9, 2011, from http://seekingalpha.com/article/23008-microsoft-to-introduce-behavioral-online-ad-targeting-on-a-global-scale

Takahashi, D. (2006, September 7). Sony to fall short on PS3: Tight Supply of Game Consoles in U.S.; Europe Launch Delayed. San Jose Mercury News .

Townsend, J. D., Cavusgil, S. T., & Baba, M. L. (2010, January). Global Integration of Brands and New Product Development at General Motors. Journal of Product Innovation Management , pp. 49-65.