Question

In this module, we have outlined specific business characteristics and how these affect domestic and global markets. As organizations seek to promote their products, global and domestic marketing concerns need to be addressed. Depending where and how the organization markets its products or services, it will need to consider domestic, global, or both domestic and global marketing factors.

For this discussion activity, respond to the following prompts:

Research one organization that has expanded into a global market and outline some of the problems that the organization had to mitigate when entering the new market-space.

Specifically identify three of the seven characteristics detailed in the module notes.

Was there another global market barrier the company had to deal with that is not addressed in the seven aforementioned characteristics?

Answer 1

One organisation which seek to promote their products, global and domestic marketing concerns

An established corporation looking for new international markets makes a foray into an emerging market, carefully limiting its exposure by appointing an independent local distributor. At first, sales take off, revenues grow pleasingly, and the entry is praised as a smart move. But after a while, stagnation sets in and sales plateau. Alarmed, the multinational’s managers try to discover what happened. They soon settle on what they perceive to be the main obstacle to sustained growth: the local distributor that got the company off to a flying start has run out of ideas and is now underperforming.

Managing the Life Cycle of the International Distributor. The multinationals I studied made trade-offs among three worthy objectives: wanting to control their business expansion at a strategic level; partnering with local distributors, at least for the first years, to benefit from the locals’ expertise; and minimizing costs and risks in these new ventures.

These are all good objectives, but finding the correct balance among them at any particular time is tricky. In the beginning of market entry, partnerships with local distributors make good sense: distributors know the distinctive characteristics of their markets, and most customers prefer to do business with local partners. Changes during later phases of market entry, including a possible switch to directly controlled distribution, are usually corrective moves to redress imbalances that emerged during the initial phases, and many of these changes lead to new imbalances. The following guidelines can help executives of multinationals anticipate and correct potential problems.

7 Characteristics are follows:-

1. Select distributors. Don’t let them select you.

2. Look for distributors capable of developing markets, rather than those with a few obvious customer contacts.

3. Treat the local distributors as long-term partners, not temporary market-entry vehicles.

4. Support market entry by committing money, managers, and proven marketing

5. From the start, maintain control over marketing strategy.

6. Make sure distributors provide you with detailed market and financial performance data

7. Build links among national distributors at the earliest opportunity

Specifically identify three of the seven characteristics details are under:-

1. Look for distributors capable of developing markets, rather than those with a few obvious customer contacts. The choice of distributors and the terms of the relationships should serve the multinational’s long-term goals. “The most obvious distributor is not necessarily the best partner for the long term,” says a Loctite executive. Like most companies expanding internationally, Loctite used to look for partners with the best “market fit,” meaning those already serving major customer prospects with similar product lines. But, says the executive, “The closeness of the market fit can be a liability as well as an asset, because the distributors represent the market’s status quo, and we are selling a replacement technology and attempting to change the market.”

The answer lies in the choice of partners. “We increasingly look for what we have come to call ’company fit’—a partner with a culture and a strategy we feel comfortable with, in terms of the investment they’ll make, the training they’ll give their people, and the support they’ll ask from us,” says the Loctite executive. “In many cases, this leads us to partners who have no experience of our market. The first couple of times, this felt risky, but our success with some of these partnerships has made us bolder in choosing distributors.”

In effect, this means bypassing the obvious choice—a distributor who has the right customers and can therefore generate quick sales—in favor of a partner with a greater willingness to invest and an acceptance of an open relationship that draws on the multinational’s experience in marketing its own products.

2. Treat the local distributors as long-term partners, not temporary market-entry vehicles. Structure the relationships so that distributors become marketing partners willing to invest in long-term market development. One traditional way of doing this is to grant national exclusivity to a distributor, although such an agreement can become unproductive if conflicts of interest arise once entry is established. A more effective solution is to create an agreement with strong incentives for appropriate goals, such as customer acquisition or new product sales. After all, the local distributor is the de facto marketing arm of the multinational in its country.

Unfortunately, many companies actively signal to distributors that their intentions are only for the short term, drawing up contracts that allow them to buy back distribution rights after a few years. Such a strategy does avert one problem—it prevents a distributor from claiming that the multinational partner reneged on an earlier promise—but it creates other problems. Even with such a contract, a distributor might simply decide not to sell back the rights and might well be backed up in the local courts. In many countries, regulations favor local businesses over foreign vendors, so the multinational could face a protracted struggle over distribution rights. Additionally, under a short-term agreement, a local distributor doesn’t have much incentive to undertake long-term business development. The Asia-Pacific manager of a consumer goods company reported that several national distributors, acting in the belief that sales revenues were the key to the reacquisition price, had cut prices, boosting overall revenues but undermining the company’s market positioning strategies.

3. From the start, maintain control over marketing strategy. An independent distributor should be allowed to adapt a multinational’s strategy to local conditions. But multinationals should convene and lead planning sessions and exercise authority about which products to sell, how to position them, and budgeting. If corporations provide solid leadership for marketing, they will be in a position to exploit the full potential of a global marketing network.

Multinationals committed to maintaining early control over marketing strategy find that it’s important to have employees on-site. Some send a few employees to work full-time at the local distributor’s offices. Others establish country or regional managers who can keep a close watch on both distributor performance and customer needs.

“We used to give far too much autonomy to distributors, thinking that they knew their markets,” says one manager. “But our value proposition is a tough one to execute, and time and again we saw distributors cut prices to compensate for failing to target the right customers or to sufficiently train salespeople.”