Description
The world of marketing is a dynamic and very exciting one where decision making is at the heart of the marketing process. In recent years, one of the most talked-about trends in marketing has been the globalisation of markets for goods and services. New markets are opening and old markets are evolving, bringing with them new competitors but also alliances. Globalisation is indeed making the world a global market place.
International
Marketing
Module Overview
Author: D. Chong
Co-author: D. Kasturiratne
This document was prepared for the University of London by:
Derrick Chong, School of Management, Royal Holloway, University of London and
Dulekha Kasturiratne, Imperial College London, University of London
It is part of a series of chapters developed for the module on International Marketing by the same
authors, and published by the University of London. We regret that the author is unable to enter into
any correspondence relating to, or arising from, this document. Correspondence should be addressed to
the module leader, via the WWLC.
Publications Office
The External Programme
University of London
Stewart House
32 Russell Square
London WC1B 5DN
United Kingdom
www.londonexternal.ac.uk
Published by the University of London Press
© Royal Holloway, University of London 2009
Printed by Central Printing Service, University of London
All rights reserved. No part of this work may be reproduced in any form, or by any means, without
permission in writing from the publisher.
Contents
About the Authors 1
How to Approach the Module 3
Module Introduction 5
Module Overview 5
Module Aims 6
Module Learning Objectives 6
Resources 6
Module Contents 8
Module Review 10
1
Module Overview
About the Authors
Dr Derrick Chong
Derrick Chong, a Senior Lecturer in
Management at Royal Holloway, University
of London, is interested in the various
relationships between management and the
arts. This is based, in part, on his academic
studies in business administration (BComm
Toronto and MBA McGill) and art history
(MA York (Canada)). Aspects of his PhD
(London), a comparative analysis of art
museums in the USA, Canada, and the UK, appeared in Arts
Management (Routledge 2002). Publication vehicles include the
International Journal of Arts Management; Journal of Nonprofit and
Public Sector Marketing; International Journal of Cultural Property;
Museum Management and Curatorship; and Journal of Arts
Management, Law, and Society. Consultancy work with Sotheby’s
Institute of Art-London is linked to research, including chapters in
books on international art markets and art business. Chong’s
teaching focuses on marketing, but has included postgraduate
courses on general management and North American business. Ever
cognizant of the English class system, he continues voice classes to
cultivate an authorial mid-Atlantic accent. Chong has been a staff
member at RHUL since 1992. He continues to travel between
London and Toronto with a Canadian passport.
Dulekha Kasturiratne
Dulekha Kasturiratne is currently
completing her PhD at Imperial College
London (University of London). Her thesis
is titled ‘Creating Value for Competitive
Advantage in Supply Chain Relationships of
the Sri Lankan Tea Industry’. Dulekha is
also completing her Professional Post
Graduate Diploma in Marketing from the
Chartered Institute of Marketing.
Some of Dulekha’s consultancy work include working as a Project
Manager at Unilever Ceylon Ltd. (2003), where she was responsible
for establishing and coordinating a CORD (COnsumer Research &
Development) Panel, investigating consumer response to specific
products. She was also a Research Assistant (2002) for an EU-
funded research study on ‘The Impact of International Safety and
Quality Standards on the Competitiveness of Mediterranean Fresh
Produce’.
Her research interests focus on the fields of international
marketing, foreign market entry, emerging/mature markets, brand
identity, strategic alliances and organisational networks. Dulekha is
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2
a Tutor for the Distance Learning Program at Imperial College
London (University of London) and a Graduate Teaching Assistant
at the same University. Her current lecturing and tutoring subjects
include Strategic Marketing Management, Organisational Behaviour
and Human Resource Management, Marketing Research
Techniques, Applied Business Management and Strategic Marketing
Management.
Module Overview
3
How to Approach the Module
It is commonly accepted that people learn in different ways and at
different speeds and that any individual needs to find an approach
to learning that suits them best. There are some broad guidelines,
however, that might be useful for you to follow when studying a
module such as this.
Your study materials include any text books that have been
recommended for the module, plus a number of booklets such as
the one you are reading from at present! Each of the remaining
booklets (that is, all except this introduction) is pertinent to a
particular chapter of the module; there are ten of these. The
booklet for a particular chapter will contain a commentary on each
of the topics to be studied in that chapter, plus any articles or other
reading material which, together with the textbook, are essential
reading for that chapter.
You will find that the chapters follow a logical progression in
setting out and elaborating the subject matter, but you can move
about between chapters and sections if this suits you. Learning is an
iterative process. It is often useful to go back to something studied
earlier. You may also find it useful to move about between different
chapters according to what interests you, or according to the
connections that you make between different topics. It is always
important to be clear about the objectives of a particular section.
What are you trying to achieve in completing the section? What are
you expected to accomplish?
You will find that the module contains ten chapters and that each of
these is divided into a number of sections. You can view each
section as a discrete topic. However, you must always remember
that the commentary on the topic that you find here is merely a
guide to the literature and other materials that you also receive. It is
NOT a substitute for it.
So, once you have decided which topic you are going to study today
(or any other day!), you could read through the appropriate
commentary and then read the associated literature, or explore the
relevant websites or other resources, making appropriate notes as
you do so.
As we suggested, there is no single rule about how best to learn, but
you will see in the commentaries that go with each topic, that there
are activities for you to undertake. These are very important to the
learning process. They are intended as a guide for you to know
whether you have appropriately understood the topic you have
been studying. So, even if you think you have no difficulties with a
particular topic, it’s still worthwhile doing the associated activity,
because you may have unwittingly misinterpreted something! A
good rule to follow, then, is not to proceed to a new topic before
you have successfully completed the activity(s) for the previous
one.
There is feedback on these activities, at the end of the commentary,
but you are encouraged to attempt the activities first before you go
to the feedback. If you have any difficulties understanding or
interpreting any of these activities or questions, always sort out
your problems before you leave the topic:
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4
First of all, go back to your reading materials to check if you
have misinterpreted something, or found something too
difficult or obscure.
If you still have problems, go online and seek assistance. This
can be from your online tutor, or you might ask help from your
fellow students. You can even ask both! But be sure to seek help
before moving on. If you leave it until later, you may forget
when you get absorbed by new topics, and find that you start
your revision for examinations with a host of unresolved
questions. Your tutor is there to help you, so allow him or her
to do their job!
It is also important for your learning to attempt the ‘short’
assignments as you go through. There is a separate note here on
these, but please bear in mind that they are designed to assist you
in the learning process and to develop the way you think about the
subject matter so that, when you take the examinations, you will be
familiar with the approach required.
Finally, remember that learning is fun! Enjoy the module.
Module Overview
5
Module Introduction
Module Overview
The world of marketing is a dynamic and very exciting one where
decision making is at the heart of the marketing process. In recent
years, one of the most talked-about trends in marketing has been
the globalisation of markets for goods and services. New markets
are opening and old markets are evolving, bringing with them new
competitors but also alliances. Globalisation is indeed making the
world a global market place.
In the first three chapters of this module, we introduce the basic
concepts of marketing with an international orientation. We
identify how international marketing management is linked with
global aspects such as national wealth creation, international
consumers and Triad nations. You will become familiar with
different schools of thought on marketing which are connected with
the marketing concept. Next we introduce the latter parts of the
module chapters by identifying the concepts of the marketing mix
and the segmentation process. The introductory chapters finish with
a thorough discussion of the analysis of the firm’s micro and macro
environments.
After laying a solid foundation for the rest of the module through
the first few chapters, we go deeper into the world of international
marketing. First as marketing managers we would need to
understand and satisfy the needs of international consumers. Thus
we look more closely at how to identify and target potential
customers. You will know perhaps through your own experience,
the importance of getting the right product/service to the market at
the right time. This is crucial for the success of firms competing in
very aggressive markets. In this context, branding, managing
product life cycles, innovation and new product development all
become increasingly important and more so in the global context.
This covers the ‘product’ element of the marketing mix, which takes
us onto the other decisions firms must make in terms of promotion,
place and pricing. Although firms operating in domestic markets
will need to take the same decisions, in international contexts these
decisions become much more complex. For example, international
marketing managers will have to think about changing the product
or promotion aspects to suit different markets in different countries.
They will have to consider political and social influences,
regulations, languages, religions, economic standings and
currencies, all of which must be taken into consideration in order to
make the right strategic decisions. In the excitement of looking at
the product, price and promotional aspects we must not forget
‘place’. In ‘place’ we focus on the link that bridges the gap between
production and consumer and look at how goods reach the market.
Thus we identify intermediaries, routes taken and difficulties faced
before a product reaches its target market.
In the ten chapters of this module we try to bring together theory
and practice, showing how the two feed from each other. Each of
the chapters will consist of self-assessment activities at the end of
the chapter as well as activities which are set at the end of each
section of the chapters. Relevant answers are provided as guidelines
for each of these activities. You will also be introduced to a
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discussion topic at the conclusion of each chapter which will enable
you to actively participate in discussions online with fellow students
and tutor. One of the things we encourage is for you to look at real-
life examples that relate to this module as you study it. These
examples can come from a variety of sources such as newspapers,
TV, from your daily food and drink or even from the work place,
and will enable you to understand and apply some of the concepts
of this module in a practical way.
Module Aims
International marketing is a live and interactive process. In this module we aim to:
Describe how awareness of global developments apply to marketing and
business
Identify marketing as influenced by internal and external factors. In other
words identify that strategic marketing decisions are influenced by a firm’s
internal factors as well as external factors such as competitors, political,
social, technological and economic trends
Explore marketing as an integrative process and as part of a myriad of other
units of a firm which must communicate effectively and work jointly towards
achieving competitive advantage
Identify marketing concepts in a global scale, keeping in mind that these are
more complex and numerous when applied beyond the domestic scenario
Explore the power, needs and wants of the global consumer. In other words,
explore the difference between the global and the local consumer. What are
the skills and competencies required to cater to the global consumer?
Module Learning Objectives
By the end of this course you should be able to:
Explain the influence of global developments on international marketing and
business
Identify external and internal factors that influence the strategic decision-
making process
Outline the segmentation process as a means of identifying the global
consumer
Describe the marketing mix as a process, and as a set of complex tools
utilised to cater to the needs of the global consumer
Demonstrate the importance of striving for customer satisfaction through a
customer oriented organisation
Resources
Core Texts
1. Doyle, P., Stern, Philip (2006) Marketing Management and Strategy, 4th ed.
Prentice Hall.
2. Chee, H., Harris, R. (1998) Global Marketing Strategy, Financial Times,
Pitman Publishing.
There are also a range of case-studies that you are asked to consult
at appropriate intervals in your studies.
Module Overview
7
In addition, there are recommendations for further reading that you
might explore if a particular topic interests you.
International Marketing
8
Module Contents
Chapter 1: Introduction
1.1 Marketing and National Wealth Creation
1.2 Globalisation
1.3 Services Marketing and Experience Economy
Chapter 2: Corporate Marketing Management
2.1 Introduction: Orientations & Schools of Marketing
2.2 The Marketing Concept
2.3 Segmentation, Targeting and Positioning
2.4 Elements of the Marketing Mix (4Ps)
2.5 Customer Relationship Management (CRM)
Chapter 3: Components of the Marketing Environment
3.1 Microenvironment
3.2 Macro environment
Chapter 4: STP Marketing
4.1 Market segmentation
4.2 Target markets
4.3 Positioning
4.4 Conjoint analysis
Chapter 5: Corporate Identity and Branding
5.1 Identity and Image
5.2 Brand Equity
5.3 Name Development
5.4 Package Design
5.5 Battle of the Brands
5.6 Brand Valuation
5.7 Brand Development
Chapter 6: Products & Product Management
6.1 Role of Innovation
6.2 Product Life Cycle (PLC)
6.3 New Product Developments (NPD)
6.4 Death and Burial of Products
6.5 Some International Considerations
Chapter 7: Communications, Sales and Client Relationships
7.1 The Communications Process
7.2 Advertising: Standardisation versus Adaptation
7.3 Direct Marketing
7.4 Communications Mix
7.5 Personal Selling and Sales Cultures
Module Overview
9
Chapter 8: Distribution
8.1 Conventional Channel Basics
8.2 Disintermediation
8.3 Delivery Systems
8.4 Channel Conflict
8.5 Marketing Distribution Systems
8.6 Polarity of retail Trade
Chapter 9: Competition and Pricing
9.1 Pricing perspectives
9.2 Strategic Choices in Pricing
9.3 Economics and Pricing
9.4 Initiating and Responding to Price Changes
9.5 Some International Pricing Consideration
Chapter 10: Turnaround Management
10.1 Turnaround Management
10.2 Creating a Customer-Managed Organisation
10.3 Setting the Context for Pan-Company Marketing
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10
Module Review
Introduction
This section describes the key learning outcomes that you should be
familiar with once you have completed the module. It is for you to
use as a reference point to ensure that you have understood the key
parts of the module.
It can be particularly useful as an aid to your revision, although you
may wish to refer to appropriate parts of the review as you go
through the work, in order to consolidate your understanding and
ensure that you have not missed key elements of your learning.
Decision-making is at the heart of the marketing strategy process
and all organisations now operate in competitive environments
which are dynamic and complex. Markets and marketing are
becoming more and more global in nature and managers around
the world need to act quickly and effectively in order to stay ahead
of competition and gain and sustain competitive advantage. In this
module we have gone through a range of ideas, concepts and tools
to understand the environment around us and enable us to think
and act as strategic marketers operating in an international world.
The review below looks at the module in a nutshell and draws on
the important issues in each chapter.
Try the review questions at the end of this section which will help
you to consolidate your understanding and draw from knowledge
gained from the entire module.
Chapter 1
This chapter emphasised how marketing objectives are fundamental
to overall corporate success. We discussed the relationship between
marketing and economic development, and their impact on
providing high and increasing standards of living. We also raised
the issue of globalisation. We looked at it as a pervasive decline in
barriers to the global flow of information, ideas, technology and
goods. This was followed by a debate on standardisation and
adaptation. In this first chapter we also examined the managerial
concerns in the marketing of services namely quality control,
productivity, and the management of human resources. Finally, we
glanced at the “experience economy”, its importance, and where it
fits in with the concepts we have discussed in this chapter so far.
Chapter 2
In chapter two we paid particular attention to corporate marketing
management in terms of three levels within the firm, namely,
marketing as culture (the marketing concept), marketing as
strategy (segmentation, targeting, and positioning), and marketing
as tactics (elements of the marketing mix). We also discussed the
marketing mix, known as the 4Ps. For much of this chapter, the
focus of our discussion was the customer and how the customer can
be better served through the appropriate orientation of the
Module Overview
11
marketing mix and the best management of customer relationships.
Here we also noted that marketing strategies that reap the best
results are those that achieve company goals through creating value
for the customer.
Chapter 3
In this chapter, we looked at how firms can develop their
capabilities and compete effectively in constantly changing
environments. In order to best cater to the changing needs of the
customer in a competitive environment, firms must constantly
analyse its marketing environment. These are the firm’s internal
and external environments which have a significant impact on
strategic marketing decisions made by the firm. We discussed how
Porter’s five forces and PEST analysis can be utilised for this
purpose. Successful marketers collect market intelligence in order
to anticipate and meet customer needs. We also looked at the
political environment, developments in the economic environment
and the changing trends in the socio-cultural environment which all
impact on the marketing environment and strategic decision-
making.
Chapter 4
Here we looked at aspects of segmenting, targeting and positioning
in more detail. We also introduced conjoint analysis as a method of
market research used to determine the perceived value of a range of
potential features of a new product offering. We discussed the
importance of dividing markets into relevant, manageable and
targetable segments in order to provide better tailored offerings to
customers. In this chapter we examined how marketers can reap
many benefits from appropriate and efficient segmentation.
However, it is also important to remember the possible dangers and
pitfalls in carrying out this process.
Chapter 5
In this chapter we focus on the current and widely spoken about
topic of branding. Branding can be viewed as a source of strategic
competitive advantage for a firm. It helps buyers identify and
evaluate products, helps sellers facilitate repeat purchasing, and
fosters brand loyalty. In this chapter we discovered various aspects
of branding such as corporate identity, brand equity, development
of brand name and brand valuation, and their role in strategic
international marketing. We also discussed issues about brand
identity and image, as well as package design, brand valuation and
development of brands in local and global markets.
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12
Chapter 6
Here we looked at the product in more detail. We discussed the role
of innovation and the product life cycle as important considerations
in the management of the product. We talked about new product
development in terms of strategy, diffusion in the market and how
consumers adopt it. We also looked at both new product successes
and failures. As international marketers it is important for us to
understand these concepts in the context of a global environment.
Finally we concluded the chapter by discussing the movement of
products across international boundaries and possible problems
associated with it.
Chapter 7
Communication is a simple process which we do all the time and
take for granted. In this chapter we discussed the various elements
of promotion. After all, what would be the point of a wonderful
brand and an innovative product if the consumer is not aware of it!
So we focused on the way organisations attempt to communicate
with their target audiences through advertising, personal selling,
sales promotion, public relations, direct marketing and sponsorship.
Finally we discussed the emergence of the internet as a significant
and dominant communication tool.
Chapter 8
Part of the responsibility of a marketing oriented organisation is to
get the product to the customer at the right place and at the right
time. Here we looked at how organisations are connected to their
markets in ways that build value to the organisations as well as
their customers. We discussed how the structure of the channels
can vary depending on the type of market, the needs of the end
consumer and the type of product. We looked at influences on
channel design such as organisational objectives and resources, as
well as the role of intermediaries in the channel. We discussed
various forms of channel structure in terms of horizontal, vertical
and multichannel competition and their impacts on organisations. It
is important to note in this chapter that, in an environment where
the Internet dominates all spheres of life, we as marketers need to
re-evaluate distribution strategies in international markets.
Chapter 9
Pricing plays a significant role in strategic marketing decision and
thus requires much attention. Price is the only element of the
marketing mix that directly generates revenue, can be used as a
communicator, a bargaining tool and a competitive weapon. In this
chapter we discussed various aspects of pricing such as pricing
objectives, economic theory in pricing, influences in pricing as well
as international pricing considerations. We discussed many external
and internal influences on pricing as well as a host of global pricing
considerations. Here we understand that pricing decisions are
difficult to make and that decisions should be taken with long term
objectives in mind as otherwise consequences to the firm could be
detrimental.
Module Overview
13
Chapter 10
In this chapter we focused on symptoms of decline as well as the
causes. We also discussed changes required when an organisation is
in decline or when decline is anticipated.
Module Review Questions
In order to consolidate your understanding of this module, try the
following questions. These will require you to draw from
knowledge gained from the entire module.
1. To What extent do you think internationalisation is essential to
today’s organisations?
2. Discuss how an organisation of your choice incorporates
corporate social responsibility in its decision-making process.
3. Imagine that company X has been criticised for sourcing
ornaments from unregulated sources in China and India. There
have also been complaints that the ornament manufacturers are
guilty of exploitative employment practices. How should
company X deal with such criticism? What measures can be
taken to overcome such criticism and ensure that the company
image is not tarnished?
4. Discuss the marketing mix strategies for a product of a
company of your choice.
5. For an organisation of your choice, assess the current and
future impact of globalisation on the business.
6. What factors affect the customer’s interpretation of price?
7. How can a small firm compensate for lack of resources when
competing in international markets?
8. Discuss the benefits and pitfalls of the segmentation process for
a product of your choice.
9. Using examples, discuss the impact of ‘country-of-origin’ effect
on consumers and companies.
10. How does the management of a global marketing strategy differ
from the management of a domestic strategy?
International
Marketing
Chapter 1: Introduction
Author: D. Chong
Co-author: D. Kasturiratne
This chapter was prepared for the University of London by:
? Derrick Chong, School of Management, Royal Holloway, University of London and
Dulekha Kasturiratne, Imperial College London, University of London
It is part of a series of chapters developed for the module on International Marketing by the same
authors, and published by the University of London. We regret that the authors are unable to enter into
any correspondence relating to, or arising from, this chapter. Correspondence should be addressed to
the module leader, via the WWLC.
Publications Office
The External Programme
University of London
Stewart House
32 Russell Square
London WC1B 5DN
United Kingdom
www.londonexternal.ac.uk
Published by the University of London Press
© Royal Holloway, University of London 2007
Printed by Central Printing Service, University of London
All rights reserved. No part of this work may be reproduced in any form, or by any means, without
permission in writing from the publisher.
1
Chapter 1: Introduction
Introduction
Overview
In this chapter we will introduce the link between corporate
marketing management and national wealth creation. We will
discuss how, under capitalism, consumers are posited as key
decision makers with firms in competition to attract their custom,
resulting in better quality products, continuous improvement and
innovation, and ultimately higher standards of living. We will
examine how U.S.A, Japan, the E.U. and other countries are
important nations in a marketing framework, and how international
and global dimensions of marketing can be exploited to the
commercial advantage of firms. In this chapter we will also look at
managerial concerns in the marketing of services, namely quality
control, productivity, and the management of human resources.
Finally, we will discuss issues relating to the "experience economy"
and how this changes the tenor of what needs to be provided to
customers.
Aims
The purpose of this chapter is to enable you to:
? review how marketing questions relate to management aims and objectives
? discuss the links between marketing, national wealth creation and economic
development
? demonstrate the relationship between consumer choice and democracy
? compare and contrast consumer markets in Triad nations
? assess various marketing positions associated with the keyword
"globalisation"
? identify the characteristics of "services" and distinguish the managerial
concerns associated with "services"
? assess the "experience economy"
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Learning Outcomes
After studying this chapter, you will be able to:
? identify the links amongst corporate marketing management, national
wealth creation and economic development
? describe the impact and influence of consumers in a capitalist society on firm
competition
? outline the role of various nations in marketing, and how the international
and global dimensions of marketing can be exploited to the commercial
advantage of firms
? identify the characteristics of services marketing and distinguish the place of
'experience economy' in marketing
Chapter 1: Introduction
3
Contents___________
Introduction 1
Overview 1
Aims 1
Learning Outcomes 2
Contents___________ 3
Resources 4
Essential readings 4
Readings for further study 4
1.1. Marketing and National Wealth Creation 5
Learning Objectives 5
What is marketing? 5
Activity 1.1.1 8
1.2 Globalisation 9
Learning outcome 9
The global consumer 9
Adaptation vs. Standardisation 10
Activity 1.2.1 12
1.3 Services Marketing & Experience Economy 13
Learning Outcome 13
Services & Marketing 13
Experience Economy 19
Activity 1.3.1 20
Summary_____________ 21
Self-Assessment Activity 21
Online Discussion Topic 21
Feedback on Activities 22
Self-Assessment Activities 22
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Resources
Essential readings
? Doyle, P., Stern, Philip (2006) Marketing Management and Strategy, 4th ed.
Prentice Hall, Chapters 1 & 12.
Chapters 1 and 12 of Doyle cover the overall ideas discussed in this
chapter of the Module. Chapter 1 talks about how rapidly changing
technologies, information and global competition are presenting
ever more complicated challenges in international marketing.
Chapter 12 covers the services marketing aspects.
Readings for further study
? Magretta, J. (1998) The Power of Virtual Integration: An Interview with Dell
Computer's Michael Dell, Harvard Business Review, Vol. 76, Issue 2
(March/April), pp. 72-84.
? Wetlaufer, S. (2000), Common Sense and Conflict: An Interview with
Disney's Michael Eisner, Harvard Business Review, Vol. 78, Issue 1 (Jan/Feb),
pp. 114-124.
The two separate HBR interviews, with Michael Dell (Dell
Computers) and Michael Eisner (Walt Disney), offer insights into
firms considered to be leaders in consumer awareness. Dell is a
pioneering New Economy firm. Disney is the epitome of an
Experience Economy organisation.
Chapter 1: Introduction
5
1.1. Marketing and National Wealth Creation
In this section we will look at the link between corporate marketing
management and national wealth creation. We will discuss how the
consumer is at the centre of the marketing philosophy with firms
competing to attract them. We will also briefly examine the triad
nations and look at some international issues and managerial
concerns in global marketing.
Learning Objectives
? Identify the links amongst corporate marketing management, national
wealth creation and economic development
? Describe the impact and influence of consumers in a capitalist society on firm
competition
What is marketing?
In a book dealing with the art of creative management, Gareth
Morgan cites a common view of marketers:
They're peacocks … all show; no real substance. They look good; people
like to watch; but they serve no useful purpose. Irish setters … very good
looking dogs. But not very intelligent at all. They've no real knowledge.
1
On the other hand, there is an argument that marketing is a source
of competitive ability, economic growth, and wealth creation.
A fundamental question that we should be asking is:
If governments can no longer fix world markets, nor guarantee
national market shares, who decides what the standards of quality,
service and value are? Who decides who wins and loses?
The answer is obvious: the customer.
When we talk about new world competitive order it becomes
obvious that customer choice, preference and demand are its
exclusive driving forces. What we have come to call 'customer
science' is pivotal. That, of course, is marketing. Marketing is, above
all, a philosophy enshrining a long-term commitment to customer
satisfaction and the deployment of a set of intense skills to achieve
it. By definition, therefore, marketing is the key to profitable
growth and must form part and parcel of every business operation.
2
Therefore you can see that this latter perspective is based on the
belief that marketing can provide a better understanding and
assessment of the marketplace, including customers and
competitive behaviour.
When undertaking your reading for this topic, keep in mind that the
aims and objectives adopted by firms may lack sufficient attention
to innovative and entrepreneurial thinking owing to attention on
short-term financial results and institutionalised aversion to risk.
Some useful questions to be thinking of
As a complement to some of the readings in this chapter, issues
related to mission determination can best be explained by
1 Gareth Morgan, Imaginization: the art of
creative management (Sage, 1993), p.
24.
2 Sir Colin Marshall, chairman of British
Airways, in “The Marketing Council:
launch speech event,” (London, 24
October 1995).
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identifying several of the broad question areas often asked of the
organisation. These include the following:
? What business is the company in? (A functional approach can
be useful at this point. Do we sell ice cream or fun? Do we sell
financial products or offer you an opportunity to lead the life
you desire?
? Who are your company's customers? What are their needs?
Why do they buy from us?
? What are your company's resources, strengths, and
weaknesses? What assets does the company have in terms of
people, products, reputation, etc?
? What are your company's major opportunities and threats?
Where can the company apply its resources most profitably?
What are the most vulnerable areas?
? What rate of growth appears best for your company? This
should include a clear delineation of specific numbers with
regard to the rate of growth in sales, profit, and return on
investment.
? What share of market is best for your company? This opens up
the question of market position.
? What is your company's attitude to risk and stability? Seeking
higher returns usually entails more risk.
? Now have a look at Case Study 1.1.1* As you read it, keep in mind the
points we have reviewed so far.
Marketing and Economic Development
In 1989 Francis Fukuyama, with the financial support of the RAND
Corporation, a conservative think tank based in the United States,
proclaimed the triumph of liberal democracy.
3
In the real world, the crumbling of the Berlin Wall and the
dismantling of the satellite system of the Soviet Union, viewed as
the synthetic result of the end of the so-called Cold War and the
demise of communism, supported Fukuyama's "end of history"
thesis. This post-ideological society envisioned by Fukuyama was
based on a mixture of capitalism, democracy, and materialism.
In many respects, the management guru Peter Drucker put forward
similar sentiments forty years earlier in an essay titled "Markets and
economic development"
4
.
He says that the development of marketing makes economic
integration possible, as well as the fullest utilisation of assets and
productive capacity and economy possesses. It mobilises latent
economic energy. In addition, Drucker says that marketing is
essential in order to remedy the inequality among nations. As such
it is interesting to note that marketing was viewed as the "under
developed" part of the economy of under-developed nations.
? Have a look now at case study 1.1.2 about stock markets in China. It raises
a similar issue.
Would you agree that economic development is the result of
purposeful, responsible, risk-taking actions of individuals as
managers and entrepreneurs?
* All case studies are available in the Case
Study Booklet.
3 Francis Fukuyama, "Have we reached the
end of history?", National Interest
(Summer 1989), pp. 3-18.
4 Peter Drucker, "Marketing and economic
development," Journal of Marketing
(January 1958), p. 253.
Chapter 1: Introduction
7
If marketing is adopted and practised by individuals within firms,
high standards can be set by firms in free-market competition. This
type of competition and inter-firm rivalry allow firms to progress
from strength to strength. Firms must give more attention to the
product and customer service, and increase the freedom of choice
to the consumer in a way that serves human wants. Hence we can
appreciate the effectiveness of marketing as a competitive medium
that benefits the public, the firms, and ultimately the national
economy.
Some International Concerns
On the other hand, in December 1999 a coalition of passionate
environmentalists, trade union members, church groups, and
organized anarchists, took part in demonstrations to disrupt the
meeting of the World Trade Organization. The Seattle riots
represented the latest example of a rising anti-corporation
sentiment in the U.S. The people chanted "Hey, hey. Ho, ho, the
WTO has to go" protesting against deforestation, genetically-
modified food, labour standards in Third World countries, and the
threat to the shrimp turtle. The location of Seattle was appropriate
as it was the very paradigm of the so-called New Economy. Many of
the protestors were its willing beneficiaries and active participants.
It seems that much of the organisation of the protests was carried
out over the Internet. During this time, two main groups with
different grievances competed for attention: unions and other
organisations that fear world trade is a plot to replace American
workers with cheap foreign labour; and a host of environmental
and human rights groups that see the relentless economic
development represented by free trade as trampling on the poor
and the Earth's dwindling resources.
Consumer sovereignty and free choice
It is important for us to consider the link between consumer
sovereignty and free choice, because it is a central and well-
entrenched theme in marketing.
5
Consumer sovereignty, of course, concerns the satisfaction of
consumer needs as an ultimate aim of the entire capitalist system.
Underpinning this system is the over-riding belief that the
individual's needs are best known by him, and that he is in the best
position to exercise this right by making actual choices. Therefore,
it is not surprising that in many respects, marketers see themselves
as the democrats of the business world and the supporters of the
view that in the long run, business will be profitable only if they
satisfy consumer needs. Yet Micklethwait and Wooldridge, who
work for the Economist, believe that the globalisation case needs to
be reiterated, stressing its link to the cause of liberty.
6
5 There is a view that marketing is
essentially an American construct; the
constitution of the U.S. offers its citizens
"Life, Liberty, and the Pursuit of
Happiness."
6 John Micklethwait and Adrian
Wooldridge, A Future Perfect: the
challenge and the hidden promise of
globalisation (William Heinemann, 2000).
International Marketing
8
Activity 1.1.1
In order to consolidate your understanding of this section, try the following
exercise:
? Identify three companies which you consider to be successful and evaluate to
what extend they have a customer-based approach.
Feedback: See page 22
Chapter 1: Introduction
9
1.2 Globalisation
In the previous section we looked at how competition between
firms increases the standard of products and services in the market.
We also looked at the role of marketing in the economy as well as
freedom of choice and sovereignty of the consumer. In this section
we will try to understand the 'global consumer', and the concepts of
adaptation and standardisation.
Learning outcome
? Outline the role of various nations in marketing, and how the international
and global dimensions of marketing can be exploited to the commercial
advantage of firms
The global consumer
The notion of the global consumer is based on the role of
technology. In many respects the world is getting smaller, yet
noticeable differences remain. Here, we will consider a working
sketch of consumer markets in Germany, Japan, and the U.S.A - the
wealthy triad, as proffered by McKinsey.
7
Germany
You may be aware that in Germany a few retailers hold most of the
power and capture most of the surplus generated by the systems. In
food, for example, the leading five German retailers control more
than 40 per cent of the market—twice the level of concentration in
the U.S. and eight times that of Japan. Understandably, this
concentration of power is not good for consumers as these giant
retailers are the only pathway between manufacturers and
consumers. The sheer static power of German retailers has bred a
generation of consumer companies that are slow to innovate and
slow to develop new products, because it is less risky and more
profitable to sell established products with proven track records of
commercial appeal. Also, unfortunately, the power of established
brands may be used to smother new products.
Japan
In Japan, distribution and retail channels are highly fragmented
and extremely inefficient. For example, the U.S. has 145,000 food
stores to serve a nation of 250 million, while Japan, a population of
half the size, requires more than 620,000 food stores. Japanese
consumers can choose from a much larger variety of goods than
consumers in other cultures, but they pay for their system's lack of
efficiency with considerably higher prices. The average Japanese
person must work 40 per cent longer than his German or American
counterpart to buy a week's supply of groceries. There are quirky
inefficiencies of the Japanese system, yet the Japanese system at its
most successful rests, in large part, on the dynamic that drives
consumer product companies to create and introduce new products.
Though this reflects the well-known passion of Japanese consumers
for new products, it also reflects the manufacturers' effort for speed
to market in new product development. Second, marketing in Japan
7 Tatsuo Ohbora, Andrew Parsons, and
Hajo Riesenbeck, "Alternative routes to
global marketing,"McKinsey Quarterly
(1992 / No. 3), pp. 52-74.
International Marketing
10
means developing and nurturing long-term relationships with those
in the distribution channel (as opposed to selling in the U.S.)
because channels, both wholesale and retail, are small and
fragmented. For example Shiesido, the largest cosmetics company
in Japan, has over 25,000 retailers.
United States
Now let's look at the U.S.A. Here, the consumer system has very low
barriers to entry, and its structure is extremely competitive and
dynamic. The intense flurry of competition and segmentation has
created an ever-widening set of options for consumers, both in
terms of products they can buy and the types of stores in which
they can buy them. For example, grocery stores compete against
drug stores and warehouse clubs. The whole system is very open,
yet this same intense competition has bred a dangerous short term
mentality in which the constant drive to segment markets has left
organisations awash with information, but running amuck in terms
of spending for advertising and other forms of promotion.
If we look closely at the systems in these three nations, it seems
highly possible that Triad nations can learn from each other.
Japanese and German firms can learn product marketing strategy
and advertising from American firms; German and American firms
can learn rapid product development and manufacturing from
Japan; and American firms can learn how to build collaborative
relations to retailers from both the Japanese and Germans.
The emphasis on the so-called Triad, essentially divides the world
into three affluent geographic regions of North America (U.S. and
Canada), Western Europe (members states of the European Union
and notable non-members like Switzerland), and Japan—as
developed by Kenichi Ohame
8
and current McKinsey consultants. In
many respects, attention on the global consumer cannot exclude
China (labelled as the Sleeping Giant, the Next Superpower and
Economic Miracle), India, and the transition economies of Central
and Eastern Europe, particularly led by EU enlargement.
Adaptation vs. Standardisation
When we talk about marketing, it is important to note the various
international dimensions to it. In 1968 Robert Bartels asked "are
domestic and international markets dissimilar?" Robert Buzzell
posed a similar question "can you standardise multinational
marketing?"
9
It is interesting to note that these two prominent
management writers expressed these ideas just prior to the end of
the so-called American Century in the early 1970s, with the first Oil
Crisis. During this time international marketing was associated with
American-based consumer goods giants extending "home" strategies
to non-American markets.
The work of Theodore Levitt
His celebrated Harvard Business Review essay, "The globalisation of
markets," says that the world is becoming standardised and
homogeneous, and companies should follow suit.
10
He explains in
his globalisation thesis that at a low cost, the corporation ought to
operate with resolute constancy as if the world were a single entity.
In other words, the firm should make the same things on offer in
8 Kenichi Ohmae, Triad Power (New York:
Free Press, 1985); and Ohmae, "The
Triad world view,"Journal of Business
Strategy (Spring 1987), pp 8-19.
9 Robert Bartels, "Are domestic and
international markets dissimilar, "Journal
of Marketing (July 1968), pp. 56-61; and
Robert Buzzell, "Can you standardise
multi-international marketing," HBR
(Nov/Dec 1968), pp. 102-12.
10 Theodore Levitt, "The globalisation of
markets, "HBR (May/Jun 1983), pp. 92-
102.
Chapter 1: Introduction
11
the same way everywhere. This is possible because "the world's
needs have been irrevocably homogenised," according to Levitt. He
says that the primary agent in this system is technology:
a powerful force [which] drives the world toward a converging
commonality.
Technology helps to determine human preferences. Levitt invited
firms to "accept the inevitable," namely that "for better or worse
technology drives consumers relentlessly toward the same common
goals—alleviation of life's burden and the expansion of
discretionary time and spending power." He says that among the
benefits accruing to the firm via standardisation, substantial
economies of scale in production and marketing come to the fore.
In 1988 Levitt reaffirmed his position:
The more powerfully homogenised and relentlessly globalised the world's
communications and commerce get, the more varied its products and
more numerous its consuming segments seem to become.
11
Criticisms of Levitt
However, other researchers have lodged valid criticisms of Levitt's
thesis. For example, Douglas and Wind argue that standardisation
is merely one option in a range of possible marketing strategies
which may be used to enter foreign markets.
12
The potential for standardisation may be greater for certain types of
products such as industrial raw materials and high technology
products. Of course, one cannot fail to notice the pronounced and
growing homogeneity among certain groups, particularly business
executives, the brand-hungry young and the wealthy. Upmarket
personal items including Rolex watches, Hermes scarves, Prada
handbags, and Coco Chanel perfumes are found all over the world
and are undifferentiated. Mass appeal brands like Levi's, Coca-Cola,
Mars and McDonald's are viewed as the exception rather than the
rule. Douglas and Wind add that "opportunities for standardisation
are likely to occur more frequently among industrialised nations,
and especially Triad countries where consumer interests as well as
market conditions are likely to be more similar than among
developing countries".
As you can see, there are various views on the subject. But Levitt
points us in the direction of some interesting ideas to think about.
For example let's consider the following managerialist advice:
Arguing against a standardised approach is the old advice, when in
Rome, do as the Romans. This sounds like reasonable counsel. In a
competitive situation, however, there are two reasons to question it. First,
if one behaves like the Romans while in their city, the Romans will
probably win every time: they are very good at being Romans. Second,
Rome has a lot of Romans and probably doesn't need any more. Any
foreigner who tries to be a pseudo-Roman probably won't contribute
much to Rome, expect more congestion. On the other hand, a foreigner
who is a bit different might be more valuable to the Romans.
13
11 Theodore Levitt, "The pluralisation of
cul ture," HBR (May/Jun 1988), pp. 7-8.
12 Susan Douglas and Yoram Wind, "The
myth of globalisation, "Columbia
Journal of World Business (Winter
1987), pp. 19-29.
International Marketing
12
Muji as an example
Now let's look at the Japanese retailer Muji in the United Kingdom
to see how adaptation vs. standardisation applies in practice. In
Japan, Muji operates more than 200 outlets offering a range of
anonymous goods (primarily stationery, clothing, and home
furnishings), to a core market mainly of school children and young
adults. Muji entered the British market in 1991 and now operates
about 10 locations in London.
14
In Japan, buying Muji invites
anonymity. In Britain customers of Muji are older and see
themselves as sophisticated and stylish. Muji in the UK has been
compared to an esoteric and utilitarian version of Habitat (which is
itself further up the market ladder in terms of quality and style than
Ikea). Muji stands for "no-brand quality goods" yet operates as a
very effective brand logo and concept: "Functional Japanese
minimalism for everyone." Muji was created in 1980 by three
partners and grew during the hyperactivity of the bubble economy
from 1985-91, a period marked by a 25 per cent increase in Japan's
GNP.
Though Muji is a relatively new outfit, it can be viewed as
representing an aspect of Japanese living and culture that stretches
back hundreds of years. This has to do with a historical
understanding on the part of the Japanese of simplicity to everyday
life. Yet in London much of this has the look of a clever marketing
device. For example, the company's UK director of operations
believes that "when a product goes through the Muji process it
becomes so simple, so Japanese people see it as Japanese. British
think of it as Muji." Thus one can think of Mujification as rigid
design direction and tight quality control, which means that Muji's
policy of global sourcing, does not affect the Mujiness of the things
on offer. Like so many product areas, from cars to clothes to comic
books, one is buying into a Japanese design philosophy, rather than
Japanese workmanship through one's choice of brands and
products.
? Now have a look at Case Study 1.2.1. This reviews some of the issues
around internationalisation.
Activity 1.2.1
Now try the following activity to enhance your understanding of this section:
? What do you consider to be the benefits of standardisation?
Feedback: See page 22
13 Vern Terpstra, International Dimensions
of Marketing 3rd ed. (Wadsworth,
1993), p. 9.
14 In the product brochure 2000 Muji
notes that its basic principles remain
unchanged: the four key concepts
remain good value for money, simple
and functional design, basic and
understated colour, and a complete
lifestyle range.
Chapter 1: Introduction
13
1.3 Services Marketing & Experience Economy
In the previous sections, we considered marketing and aspects of
globalisation mostly in terms of the tangible product. In this section
we will look at services marketing and the experience economy and
its growing importance in global marketing.
Learning Outcome
? Identify the characteristics of services marketing and distinguish the place of
'experience economy' in marketing
Services & Marketing
Let's look at the list below. Financial services can be classified as
having the following characteristics:
? Private ownership
? Profit orientation with income from customers
? High degree of competition
? Consumer and industrial markets
? High customer contact
? Requiring professional and intensive labour skill
In marketing, as in many other fields, it helps to break things down
for simplicity. Therefore, classification schemes have been very
useful in marketing. Various attempts have been made by
marketing theorists to classify goods into a range of categories. One
of the most famous and enduring is that of Melvin Copeland from
the 1920s. Goods were classified as convenience, shopping, or
specialty.
15
You may discover through your reading that the history of
corporate marketing management has been written with a focus on
fast moving consumer goods (FMCG) firms like Proctor & Gamble
and Coca-Cola in mind. Though the role of FMCG and consumer
durables remains important to the global economy, the shift to
service-based industries suggests new directions for competitive
success in the longer term. Yet you may find it strange that there is
no consensus in economic or social thought as to what constitutes a
service.
16
Did you know that in Triad nations private and public services
account for approximately 60 to 70 per cent of national output, and
that services represent the fastest growing part of international
trade? The sheer size and growth in the service sector during the
latter half of the twentieth century have been documented, but the
features that distinguish the service sector from the industrial or
manufacturing sectors are not clear.
Many activities in manufacturing firms are bought-in services (e.g.,
advertising, health care, financial services) which complement
international service jobs like design, marketing, and finance.
Furthermore, a wide range of services exists from corporate
management to "independent" professionals to the lowest-paid
domestic helpers.
15 Melvin Copeland, "The relation of
consumers' buying habits to marketing
methods, "HBR (April 1923), pp. 282-9.
16 Jean-Claude Delaunay and Jean Gadrey,
Services in Economic Thought , (Kluwer
Academic, 1992).
International Marketing
14
Service Characteristics
It is helpful for us to think of goods-services as a continuum. Here
we suggest that services are key for all firms, yet that there are
sectors whose service components are greater than those in other
sectors. It is helpful to consider the characteristics that increase the
service component of the product offering. Let's look at each of
these separately.
? Intangible: Here we believe that the physical nature (or
tangibility) of the offering is less important to the consumer.
Lovelock characterises the service act of financial services as
"intangible actions directed at people's intangible assets."
Owing to its abstract nature, the customer may be offered
something tangible to represent the service. For example let's
look at Cater Allen, an offshore bank based in Jersey and the
Isle of Man. It offers those who open a High Interest Current
Account (HICA) a "free" Cater Allen Gold VISA card.
? Perishable: Under this category, you will realise that inventories
cannot be kept. In other words services cannot be saved, stored,
resold or returned. Therefore, the monetary value of time needs
to be considered. For example, empty seats for an English
National Opera performance at the Hammersmith Apollo
cannot be stored and sold for a performance at the revamped
London Coliseum. As financial services firms cannot store their
products to meet fluctuations in demand, managing demand
becomes of vital importance.
? Heterogeneous: Now think about heterogeneity of services.
Services are essentially "performances" and no two
performances are exactly alike. The quality of a service derives
in large measure from its performance and delivery. The
providers of financial services face the challenge of attempting
to ensure consistency and quality of services offered.
Heterogeneity also results as clients of financial services differ
in their demands and expectations. It is somewhat ironic that
the less sophisticated consumers of financial products require a
greater depth of service.
? Inseparable: As you will now realise, production and
consumption of services take place simultaneously. Service
providers are an essential ingredient in the service experience
for the consumer. Essentially, the employees delivering the
service frequently are the service in the eyes of the customer.
For example, Singapore Airlines emphasise the attentive care of
their flight attendants as a unique selling proposition that
distinguishes the firm from that of other long-haul air carriers.
Now let's look at how Christopher Lovelock attempts to examine
ways to analyse services by asking a series of questions.
17
He asks: "What is the nature of the service act? A service has been
described as deed, act, or performance. Two fundamental issues are
at whom (or what) is the act directed, and is this act tangible or
intangible in nature?"
What type of relationship does the service organisation have with
its customers? Here, two sets of questions are posed:
17 Christopher Lovelock, "Classifying
services to gain strategic marketing
insights, "Journal of Marketing
(Summer 1983), pp. 9-20.
Chapter 1: Introduction
15
? Is it a "membership" relationship or is there no formal
relationship?
? Is the service delivered on continuous basis or is each
transaction recorded and charged separately?
It is important to consider profitability and customer convenience
as the central issues in deciding how to price membership services.
Will the organisation generate long-term profits by tying payment
explicitly to consumption, by charging a flat rate regardless of
consumption, or by unbundling the components of the service and
charging a flat rate for some and an incremental rate for others?
Lovelock states that membership relationships usually result in
customer loyalty to a particular service supplier. You may
appreciate that as a market strategy, many service businesses seek
ways to develop formal, ongoing relations with customers in order
to ensure repeat business and/or ongoing financial support. The
marketing task for us to keep in mind is to determine how it might
be possible to build sales and revenues through such memberships,
but at the same time, avoid requiring membership when this would
result in freezing out a large volume of desirable casual business.
? How much room is there for customisation and judgment on the
part of the service provider? Lovelock says that customisation
can proceed along at least two dimensions: the first concerns
the extent to which the characteristics of the service and its
delivery system lend themselves to customisation; the second
relates to how much judgment customer contact personnel are
able to exercise in defining the nature of the service received by
individual consumers. There is a class of service that not only
involves a high degree of customisation but also requires
customer contact personnel to exercise judgment concerning
the characteristics of the service and how it is delivered to each
customer. These service personnel are often prescriptive: clients
look to them for advice as well as for customised execution. Yet
it is important for us to understand that customisation has its
costs. Service management often represents an ongoing
struggle between the desires of marketing managers to add
value and the goals of operations managers to reduce costs
through standardisation.
? What is the nature of demand and supply for the service? While
we recognise that inventories cannot be maintained, two issues
must be raised. They are - classifying services according to
whether demand fluctuates widely or narrowly over time, and
classify services according to whether or not capacity is
sufficient to meet peak demand.
? How is the service delivered? Lovelock says that understanding
distribution in services marketing requires for two basic issues
to be addressed. The first relates to the method of delivery. Is it
necessary for the customer to be in direct physical contact with
the service organisation, or can transactions be completed at
arm's length? The second is concerned with whether the service
organisation maintains just a single outlet or whether it serves
customers through multiple outlets at different sites?
International Marketing
16
Management and Service Marketing
You may realise by now that people and relationships are
heightened when it comes to marketing services. In this type of
marketing it is important for us to consider three managerial
concerns. These are quality control problems, productivity concerns
and management of human resources.
1. Quality control problems: When we talk of quality control,
perceived relative quality of a product (goods and services) is
rated as the single most important factor determining its long-
run market share and profitability. Yet the issue of quality in
services is a concept that customers find difficult to articulate.
The inseparability of production and consumption raises a
significant point in the management of quality. For example, it
is important for us to realise that customers evaluate quality
not just in terms of the outcome but also in terms of the process
or the manner in which the service is delivered. Therefore it is
vital that managers of service organisations focus on both the
quality of outcomes and the quality of the process.
2. Concerns with productivity: As you may note, not all services can
be standardised, and many services resist standardisation. Yet
Levitt points out that there are means by which productivity
can be improved without sacrificing quality.
18
In some cases
industrialising a service to take advantage of the economies of
mass production may actually increase consumer satisfaction
through speed, consistency and price savings. However, we
must address certain issues.
? Firstly, high-contact activities must be separated from low-
contact activities. Also the efficiency of productivity-based
low-contact activities (or backroom operations) must be
maximised. In addition the effectiveness of high-contact
activities which are geared towards the quality of the
service must be maximised.
? Secondly, participation by customers should be increase
through familiarising them with information technology
systems. This can help to reduce the service cost. Here we
suggest that from the standpoint of operations, it may be
desirable to get the customer to transform from a high-
contact service into a low-contact one.
Let's look at online facilities in retail banking as an example.
This reduces the need for tellers to handle routine transactions
such as cash withdrawals. In addition customers are offered the
advantage of 24-7 access. But at the same time the retail banks
need to continue to monitor customer reaction to the loss of
personal service.
3. Management of human resources: When it comes to managing
services, we must consider human relations as a particular
concern. This is especially so in high-contact financial services.
Each transaction becomes a so-called "moment of truth" where
the customer makes a decisive judgement. Here, methods of
supervision and quality control associated with manufacturing
are not appropriate, because an unsatisfactory service
18 See, for example, Theodore Levitt, "The
industrialisation of service, "HBR
(Sep/Oct 1976), pp. 63-74
Chapter 1: Introduction
17
transaction cannot be halted, examined and recycled before the
customer sees it.
Therefore it is vital for the financial service organisation to have
members of staff who adopt the service mission. For example,
James Heskett describes the objective as producing a so-called
"Quality Wheel" - highly motivated employees delivering high-
quality services, which in turn leads to satisfied customers, more
business, satisfied employees and enhanced motivation.
19
Quality Strategy
When you undertake your reading for this topic, you may come
across the service quality wheel. See if you understand this idea.
Now let's focus on the quality strategy which involves four
commitments as we will discuss next.
If we look closely at most companies, we can see the commitment
of top management to quality from their quality strategy, their
attention to the importance of quality approaches, and ensuring
that financial support is available.
These companies have a long-term commitment to improving
quality as indicated by an explicit statement of the company's
quality policy, and translating these into departmental goals and
measurable targets, while focusing on the needs of internal clients.
You will see that these companies have a culture which underpins
quality by:
? involving everyone in continuous improvement
? adopting formal structures to support the quality strategy
? articulating well-defined quality improvement processes
Most companies use systems and techniques to monitor and control
quality such as:
? job descriptions
? performance objectives
? written standards and procedures
? formal appraisal systems
The emphasis on services
If you look at affluent societies, you will notice that services tend to
provide higher marginal utility for consumers than for goods. You
will discover that spending on business and industrial services has
increased even faster than on consumer goods.
However, the desire of professional services providers to broaden
the range of services is not always straightforward. For example,
many law firms have entered into conventionally non-legal fields
such as public relations, lobbying, training and software
development. There is the desire to be able to advise clients in the
areas of technology, media, and communications. Dot-com start-ups
represent another area of interest as these firms require advice in
fields such as advertising, trademarks, intellectual copyright and
finance. Yet it is important to consider the risks of including a
greater number of services in-house as opposed to developing links
with external service advisors. Many critics claim that the law firm
could be in danger of losing its focus as well as missing out on
referrals from advisors with which it is competing.
19 James Heskett, "The service quality
wheel, " HBR (Mar/Apr 1987), pp.
118-26.
.
International Marketing
18
Accountancy firms
Now let's focus our attention on accountancy firms. They venture
into advisory services as a means to gain non-auditing work. KLegal
is a parallel organisation to KPMG, and desires to become an
international leader in the provision of legal services.
Pricewaterhouse Coopers (PwC) has a VTeam to help technology
entrepreneurs launch the next big Internet start-up. The VTeam
coaches start-ups on how to get their first venture capital breaks.
Owing to a desire to draw in start-ups that could become major
clients in the future, PwC allows the VTeam to provide its services
for free. Some people argue that PwC is changing the way the Big
Five accountancy firms are being perceived by entrepreneurs. No
longer just being approached for auditing services, PwC is showing
entrepreneurs how to work through the whole financial process.
However, the Securities and Exchange Commission (SEC) in the
U.S. claims that selling services to clients affects audit
independence. Yet it is interesting that not all the major
accountancy firms are in agreement in disposing of consultancy
services. For example, PwC announced its intentions to dispose of
significant sectors of its business. Ernst & Young has already sold its
consulting arm to Cap Gemini Yet Deloitte & Touche is rejecting the
SEC position that audit independence is compromised. You may
have your own views and examples on this which will help you to
build your own discussion.
You may remember that we briefly discussed human relations in
financial services before. Now let's look at how the client-supplier
relationship for a financial services firm can be illustrated as a four-
stage process:
1. Find: Client services that help to facilitate the sales process by
providing customised information by client sector: identifying
the target markets and updating the database of client profiles.
2. Win: Sales teams need to be aware of the firm's position vis-à-
vis that of competitors. The differential advantage of the firm
needs to be emphasised, and the presence and awareness
within the industry must be given importance. Also, while
global networks are viewed as essential personal care cannot be
overlooked.
3. Retain: Gaining greater knowledge of existing clients is
necessary in order to be able to provide useful and valued
information on appropriate products. Tailoring information to
existing clients demonstrates a commitment to providing
superior service. Monitoring client satisfaction is an important
first step to improving the quality of service and client
relationships.
4. Grow: Seeking methods to reward the loyalty of long-term
clients. The sponsorship of prestige events may appear
superficial and unnecessary, but they van be viewed as an
enjoyable and cost-effective form of corporate hospitality.
? To conclude this part of the section, have a look at Case Study 1.3.1.
Chapter 1: Introduction
19
It is important for us to note that economic impact of different
levels of satisfaction can be significant. In other words, satisfied
customers are not all equal. Those displaying the highest levels of
satisfaction are, in economic terms, significantly more attractive to
the firm than those showing only moderate levels of satisfaction.
Also, a customer who stays highly satisfied becomes steadily more
attractive over time.
20
In order to emphasise customer development, the company needs
to collect information on the "Life time" value of each customer, be
aware of the relative profitability of individual customers and
operate a key account structure. Furthermore, the marketing
programme needs to be regularly adjusted to reflect and anticipate
customer needs.
Experience Economy
Previously in this section, we looked at services and its role in
marketing in various sectors. In this section we focus our attention
on the experience economy and where it fits in with what we have
discussed so far.
Pine and Gilmore, co-founders of Strategic Horizons, an American-
based consultancy firm, have argued that the "experience economy"
represents the current stage of economic development in advanced
nations: from extracting commodities to manufacturing goods to
delivering services to staging experiences.
21
Table 1.3.1 Economic Distinctions
Economic
Offering
Commodities Goods Services Experiences
Economy Agrarian Industrial Service Experience
Economic
Function
Extract Make Deliver Stage
Nature of
Offering
Fungible Tangible Intangible Memorable
Key Attribute Natural Standardised Customised Personal
Method of
Supply
Stored in bulk Inventoried
after production
Delivered
on demand
Revealed over
a duration
Seller Trader Manufacturer Provider Stager
Buyer Market User Client Guest
Factors of
Demand
Characteristics Features Benefits Sensations
Source: Pine and Gilmore, HBR, 1998
A good example to consider under this topic is Walt Disney. This
firm is cited as a pioneering experience economy firm. For example,
the buyers of its experiences are known as "guests" and the
experience strives to be "memorable." I am sure you would agree
that experiences are inherently personal. Indeed each experience
derives from an interaction between a staged event and the
individual's state of mind. Experiences, like goods and services,
have to meet a customer need; they have to work; and they have to
be deliverable. Just as goods and services result from an iterative
20 As reported by Nichloas Carr,
"Marketing : the economics of
customer satisfaction,"HBR (Mar/Apr
1999), pp. 15-18.
21 B. Joseph Pine II and James Gilmore,
"Welcome to the experience economy,"
HBR (Jul/Aug 1998), pp. 97-105.
International Marketing
20
process of research, design, and development, experiences derive
from an iterative process of exploration, scripting, and staging.
When designing memorable experiences we must consider five
concepts:
? Theme the experience
? Harmonize impressions with positive cues
? Eliminate negative cues
? Mix in memorabilia
? Engage all five senses
Activity 1.3.1
Now that we have looked at services and experience economy in marketing,
attempt this activity to test your understanding.
? What are the important things to consider when marketing a service and
when designing a memorable experience?
Feedback: See page 22
Chapter 1: Introduction
21
Summary_____________
This chapter emphasised how marketing objectives are fundamental
to overall corporate success. We also saw the relationship between
marketing and economic development, and their impact on
providing high and increasing standards of living. Given the
importance of firms in competition as a source for national
competitive advantage, marketing strategies and technique can be
used to aid firms. Also we raised the issue of globalisation and
discussed how the world is becoming smaller, although still
noticeable differences remain. This was followed by a debate on
standardisation and adaptation. This chapter makes us think
whether the practice of marketing leads to the homogenisation of
nations as they become more affluent.
We also looked at how services are integral to advanced economies
due to the relative decline of manufacturing and the emphasis on
value-added knowledge worker. We looked at different aspects of
services marketing and its role in the economy. It is important to
note that marketing of services, as opposed to goods, poses certain
nuances marketers need to consider. Supporters of the "experience
economy" view it as a step beyond service marketing to a more
holistic approach to marketing.
Self-Assessment Activity
To make sure you understand the material we have covered in this chapter, try
the following activities.
1. Define globalisation in your own words
2. Discuss the winners and losers of globalisation
3. Recall the managerial concerns associated with marketing services
Feedback: See page 22
Online Discussion Topic
Post your views on the following question in the on-line forum where you can
debate your findings with your tutor and fellow students:
? In your view and experience, discuss the role of marketing in national wealth
creation.
International Marketing
22
Feedback on Activities
Activity 1.1.1
You may find it easier to answer this question in the form of a grid. For example,
you can draw the grid with the names of the three companies at the top, and the
components of a customer-based philosophy along the side. Components of the
customer-based philosophy can include marketing orientation, commitment to
innovation, capacity to care for the customer and create superior value for the
customer. Assess the evidence for these components, and the priority given to
them by each of the companies that you have stated. Then identify how these
activities are being implemented by the companies. Remember that firms with a
sound marketing orientation have the capacity to understand the needs of the
customer in a way that superior value is provided.
Activity 1.2.1
Some of the arguments for the benefits of standardisation include:
? Gaining economies of scale
? The increase in customer value of a consistent image and brand
? The advantages of a simpler planning process
? Lower overall expenditure, for example in promotion
Activity 1.3.1
Some of the important issues to consider when marketing a service are:
? What is the market to which the service is directed?
? What type of relationship does the service organisation have with its
customers?
? How much room is there for customisation and judgment on the part of the
service provider?
? How is the service delivered?
? How do you want to be perceived by the customer?
Self-Assessment Activities
Question 1
This is a relatively open question as many issues can be discussed under this
heading. While you can give definitions from various researchers, remember that
the question is looking for the definition as you see it. Your answer should
include that globalisation has reduced barriers to the global flow of information,
ideas, capital, skilled labour, technology and goods.
Question 2
Your answer should include how/why globalisation has resulted in both winners
and losers. Some of the good outcomes of globalisation consist of cultural
interchanges, travel, improvements in living standards, more people being above
the poverty line and increases in economic growth rates.
Chapter 1: Introduction
23
Some of the negative outcomes of globalisation include issues dealing with those
who have been excluded from globalisation, those who have suffered from
globalisation and those who have gained but still remain poor.
Question 3
When discussing this problem, first look at why services marketing can pose
different managerial concerns over other type of marketing (e.g. tangible goods
marketing). You should look at issues such as:
? Quality control problems: Here it is also important for you to realise that
customers evaluate quality not just in terms of the outcome but also in terms
of the process or the manner in which the service is delivered. Therefore it is
vital that managers of service organisations focus on both the quality of
outcomes and the quality of the process.
? Concerns with productivity: Also mention here if services can/should be
standardised
? Management of human resources: Here you can use high-contact financial
services as a particular example
doc_360059124.pdf
The world of marketing is a dynamic and very exciting one where decision making is at the heart of the marketing process. In recent years, one of the most talked-about trends in marketing has been the globalisation of markets for goods and services. New markets are opening and old markets are evolving, bringing with them new competitors but also alliances. Globalisation is indeed making the world a global market place.
International
Marketing
Module Overview
Author: D. Chong
Co-author: D. Kasturiratne
This document was prepared for the University of London by:
Derrick Chong, School of Management, Royal Holloway, University of London and
Dulekha Kasturiratne, Imperial College London, University of London
It is part of a series of chapters developed for the module on International Marketing by the same
authors, and published by the University of London. We regret that the author is unable to enter into
any correspondence relating to, or arising from, this document. Correspondence should be addressed to
the module leader, via the WWLC.
Publications Office
The External Programme
University of London
Stewart House
32 Russell Square
London WC1B 5DN
United Kingdom
www.londonexternal.ac.uk
Published by the University of London Press
© Royal Holloway, University of London 2009
Printed by Central Printing Service, University of London
All rights reserved. No part of this work may be reproduced in any form, or by any means, without
permission in writing from the publisher.
Contents
About the Authors 1
How to Approach the Module 3
Module Introduction 5
Module Overview 5
Module Aims 6
Module Learning Objectives 6
Resources 6
Module Contents 8
Module Review 10
1
Module Overview
About the Authors
Dr Derrick Chong
Derrick Chong, a Senior Lecturer in
Management at Royal Holloway, University
of London, is interested in the various
relationships between management and the
arts. This is based, in part, on his academic
studies in business administration (BComm
Toronto and MBA McGill) and art history
(MA York (Canada)). Aspects of his PhD
(London), a comparative analysis of art
museums in the USA, Canada, and the UK, appeared in Arts
Management (Routledge 2002). Publication vehicles include the
International Journal of Arts Management; Journal of Nonprofit and
Public Sector Marketing; International Journal of Cultural Property;
Museum Management and Curatorship; and Journal of Arts
Management, Law, and Society. Consultancy work with Sotheby’s
Institute of Art-London is linked to research, including chapters in
books on international art markets and art business. Chong’s
teaching focuses on marketing, but has included postgraduate
courses on general management and North American business. Ever
cognizant of the English class system, he continues voice classes to
cultivate an authorial mid-Atlantic accent. Chong has been a staff
member at RHUL since 1992. He continues to travel between
London and Toronto with a Canadian passport.
Dulekha Kasturiratne
Dulekha Kasturiratne is currently
completing her PhD at Imperial College
London (University of London). Her thesis
is titled ‘Creating Value for Competitive
Advantage in Supply Chain Relationships of
the Sri Lankan Tea Industry’. Dulekha is
also completing her Professional Post
Graduate Diploma in Marketing from the
Chartered Institute of Marketing.
Some of Dulekha’s consultancy work include working as a Project
Manager at Unilever Ceylon Ltd. (2003), where she was responsible
for establishing and coordinating a CORD (COnsumer Research &
Development) Panel, investigating consumer response to specific
products. She was also a Research Assistant (2002) for an EU-
funded research study on ‘The Impact of International Safety and
Quality Standards on the Competitiveness of Mediterranean Fresh
Produce’.
Her research interests focus on the fields of international
marketing, foreign market entry, emerging/mature markets, brand
identity, strategic alliances and organisational networks. Dulekha is
International Marketing
2
a Tutor for the Distance Learning Program at Imperial College
London (University of London) and a Graduate Teaching Assistant
at the same University. Her current lecturing and tutoring subjects
include Strategic Marketing Management, Organisational Behaviour
and Human Resource Management, Marketing Research
Techniques, Applied Business Management and Strategic Marketing
Management.
Module Overview
3
How to Approach the Module
It is commonly accepted that people learn in different ways and at
different speeds and that any individual needs to find an approach
to learning that suits them best. There are some broad guidelines,
however, that might be useful for you to follow when studying a
module such as this.
Your study materials include any text books that have been
recommended for the module, plus a number of booklets such as
the one you are reading from at present! Each of the remaining
booklets (that is, all except this introduction) is pertinent to a
particular chapter of the module; there are ten of these. The
booklet for a particular chapter will contain a commentary on each
of the topics to be studied in that chapter, plus any articles or other
reading material which, together with the textbook, are essential
reading for that chapter.
You will find that the chapters follow a logical progression in
setting out and elaborating the subject matter, but you can move
about between chapters and sections if this suits you. Learning is an
iterative process. It is often useful to go back to something studied
earlier. You may also find it useful to move about between different
chapters according to what interests you, or according to the
connections that you make between different topics. It is always
important to be clear about the objectives of a particular section.
What are you trying to achieve in completing the section? What are
you expected to accomplish?
You will find that the module contains ten chapters and that each of
these is divided into a number of sections. You can view each
section as a discrete topic. However, you must always remember
that the commentary on the topic that you find here is merely a
guide to the literature and other materials that you also receive. It is
NOT a substitute for it.
So, once you have decided which topic you are going to study today
(or any other day!), you could read through the appropriate
commentary and then read the associated literature, or explore the
relevant websites or other resources, making appropriate notes as
you do so.
As we suggested, there is no single rule about how best to learn, but
you will see in the commentaries that go with each topic, that there
are activities for you to undertake. These are very important to the
learning process. They are intended as a guide for you to know
whether you have appropriately understood the topic you have
been studying. So, even if you think you have no difficulties with a
particular topic, it’s still worthwhile doing the associated activity,
because you may have unwittingly misinterpreted something! A
good rule to follow, then, is not to proceed to a new topic before
you have successfully completed the activity(s) for the previous
one.
There is feedback on these activities, at the end of the commentary,
but you are encouraged to attempt the activities first before you go
to the feedback. If you have any difficulties understanding or
interpreting any of these activities or questions, always sort out
your problems before you leave the topic:
International Marketing
4
First of all, go back to your reading materials to check if you
have misinterpreted something, or found something too
difficult or obscure.
If you still have problems, go online and seek assistance. This
can be from your online tutor, or you might ask help from your
fellow students. You can even ask both! But be sure to seek help
before moving on. If you leave it until later, you may forget
when you get absorbed by new topics, and find that you start
your revision for examinations with a host of unresolved
questions. Your tutor is there to help you, so allow him or her
to do their job!
It is also important for your learning to attempt the ‘short’
assignments as you go through. There is a separate note here on
these, but please bear in mind that they are designed to assist you
in the learning process and to develop the way you think about the
subject matter so that, when you take the examinations, you will be
familiar with the approach required.
Finally, remember that learning is fun! Enjoy the module.
Module Overview
5
Module Introduction
Module Overview
The world of marketing is a dynamic and very exciting one where
decision making is at the heart of the marketing process. In recent
years, one of the most talked-about trends in marketing has been
the globalisation of markets for goods and services. New markets
are opening and old markets are evolving, bringing with them new
competitors but also alliances. Globalisation is indeed making the
world a global market place.
In the first three chapters of this module, we introduce the basic
concepts of marketing with an international orientation. We
identify how international marketing management is linked with
global aspects such as national wealth creation, international
consumers and Triad nations. You will become familiar with
different schools of thought on marketing which are connected with
the marketing concept. Next we introduce the latter parts of the
module chapters by identifying the concepts of the marketing mix
and the segmentation process. The introductory chapters finish with
a thorough discussion of the analysis of the firm’s micro and macro
environments.
After laying a solid foundation for the rest of the module through
the first few chapters, we go deeper into the world of international
marketing. First as marketing managers we would need to
understand and satisfy the needs of international consumers. Thus
we look more closely at how to identify and target potential
customers. You will know perhaps through your own experience,
the importance of getting the right product/service to the market at
the right time. This is crucial for the success of firms competing in
very aggressive markets. In this context, branding, managing
product life cycles, innovation and new product development all
become increasingly important and more so in the global context.
This covers the ‘product’ element of the marketing mix, which takes
us onto the other decisions firms must make in terms of promotion,
place and pricing. Although firms operating in domestic markets
will need to take the same decisions, in international contexts these
decisions become much more complex. For example, international
marketing managers will have to think about changing the product
or promotion aspects to suit different markets in different countries.
They will have to consider political and social influences,
regulations, languages, religions, economic standings and
currencies, all of which must be taken into consideration in order to
make the right strategic decisions. In the excitement of looking at
the product, price and promotional aspects we must not forget
‘place’. In ‘place’ we focus on the link that bridges the gap between
production and consumer and look at how goods reach the market.
Thus we identify intermediaries, routes taken and difficulties faced
before a product reaches its target market.
In the ten chapters of this module we try to bring together theory
and practice, showing how the two feed from each other. Each of
the chapters will consist of self-assessment activities at the end of
the chapter as well as activities which are set at the end of each
section of the chapters. Relevant answers are provided as guidelines
for each of these activities. You will also be introduced to a
International Marketing
6
discussion topic at the conclusion of each chapter which will enable
you to actively participate in discussions online with fellow students
and tutor. One of the things we encourage is for you to look at real-
life examples that relate to this module as you study it. These
examples can come from a variety of sources such as newspapers,
TV, from your daily food and drink or even from the work place,
and will enable you to understand and apply some of the concepts
of this module in a practical way.
Module Aims
International marketing is a live and interactive process. In this module we aim to:
Describe how awareness of global developments apply to marketing and
business
Identify marketing as influenced by internal and external factors. In other
words identify that strategic marketing decisions are influenced by a firm’s
internal factors as well as external factors such as competitors, political,
social, technological and economic trends
Explore marketing as an integrative process and as part of a myriad of other
units of a firm which must communicate effectively and work jointly towards
achieving competitive advantage
Identify marketing concepts in a global scale, keeping in mind that these are
more complex and numerous when applied beyond the domestic scenario
Explore the power, needs and wants of the global consumer. In other words,
explore the difference between the global and the local consumer. What are
the skills and competencies required to cater to the global consumer?
Module Learning Objectives
By the end of this course you should be able to:
Explain the influence of global developments on international marketing and
business
Identify external and internal factors that influence the strategic decision-
making process
Outline the segmentation process as a means of identifying the global
consumer
Describe the marketing mix as a process, and as a set of complex tools
utilised to cater to the needs of the global consumer
Demonstrate the importance of striving for customer satisfaction through a
customer oriented organisation
Resources
Core Texts
1. Doyle, P., Stern, Philip (2006) Marketing Management and Strategy, 4th ed.
Prentice Hall.
2. Chee, H., Harris, R. (1998) Global Marketing Strategy, Financial Times,
Pitman Publishing.
There are also a range of case-studies that you are asked to consult
at appropriate intervals in your studies.
Module Overview
7
In addition, there are recommendations for further reading that you
might explore if a particular topic interests you.
International Marketing
8
Module Contents
Chapter 1: Introduction
1.1 Marketing and National Wealth Creation
1.2 Globalisation
1.3 Services Marketing and Experience Economy
Chapter 2: Corporate Marketing Management
2.1 Introduction: Orientations & Schools of Marketing
2.2 The Marketing Concept
2.3 Segmentation, Targeting and Positioning
2.4 Elements of the Marketing Mix (4Ps)
2.5 Customer Relationship Management (CRM)
Chapter 3: Components of the Marketing Environment
3.1 Microenvironment
3.2 Macro environment
Chapter 4: STP Marketing
4.1 Market segmentation
4.2 Target markets
4.3 Positioning
4.4 Conjoint analysis
Chapter 5: Corporate Identity and Branding
5.1 Identity and Image
5.2 Brand Equity
5.3 Name Development
5.4 Package Design
5.5 Battle of the Brands
5.6 Brand Valuation
5.7 Brand Development
Chapter 6: Products & Product Management
6.1 Role of Innovation
6.2 Product Life Cycle (PLC)
6.3 New Product Developments (NPD)
6.4 Death and Burial of Products
6.5 Some International Considerations
Chapter 7: Communications, Sales and Client Relationships
7.1 The Communications Process
7.2 Advertising: Standardisation versus Adaptation
7.3 Direct Marketing
7.4 Communications Mix
7.5 Personal Selling and Sales Cultures
Module Overview
9
Chapter 8: Distribution
8.1 Conventional Channel Basics
8.2 Disintermediation
8.3 Delivery Systems
8.4 Channel Conflict
8.5 Marketing Distribution Systems
8.6 Polarity of retail Trade
Chapter 9: Competition and Pricing
9.1 Pricing perspectives
9.2 Strategic Choices in Pricing
9.3 Economics and Pricing
9.4 Initiating and Responding to Price Changes
9.5 Some International Pricing Consideration
Chapter 10: Turnaround Management
10.1 Turnaround Management
10.2 Creating a Customer-Managed Organisation
10.3 Setting the Context for Pan-Company Marketing
International Marketing
10
Module Review
Introduction
This section describes the key learning outcomes that you should be
familiar with once you have completed the module. It is for you to
use as a reference point to ensure that you have understood the key
parts of the module.
It can be particularly useful as an aid to your revision, although you
may wish to refer to appropriate parts of the review as you go
through the work, in order to consolidate your understanding and
ensure that you have not missed key elements of your learning.
Decision-making is at the heart of the marketing strategy process
and all organisations now operate in competitive environments
which are dynamic and complex. Markets and marketing are
becoming more and more global in nature and managers around
the world need to act quickly and effectively in order to stay ahead
of competition and gain and sustain competitive advantage. In this
module we have gone through a range of ideas, concepts and tools
to understand the environment around us and enable us to think
and act as strategic marketers operating in an international world.
The review below looks at the module in a nutshell and draws on
the important issues in each chapter.
Try the review questions at the end of this section which will help
you to consolidate your understanding and draw from knowledge
gained from the entire module.
Chapter 1
This chapter emphasised how marketing objectives are fundamental
to overall corporate success. We discussed the relationship between
marketing and economic development, and their impact on
providing high and increasing standards of living. We also raised
the issue of globalisation. We looked at it as a pervasive decline in
barriers to the global flow of information, ideas, technology and
goods. This was followed by a debate on standardisation and
adaptation. In this first chapter we also examined the managerial
concerns in the marketing of services namely quality control,
productivity, and the management of human resources. Finally, we
glanced at the “experience economy”, its importance, and where it
fits in with the concepts we have discussed in this chapter so far.
Chapter 2
In chapter two we paid particular attention to corporate marketing
management in terms of three levels within the firm, namely,
marketing as culture (the marketing concept), marketing as
strategy (segmentation, targeting, and positioning), and marketing
as tactics (elements of the marketing mix). We also discussed the
marketing mix, known as the 4Ps. For much of this chapter, the
focus of our discussion was the customer and how the customer can
be better served through the appropriate orientation of the
Module Overview
11
marketing mix and the best management of customer relationships.
Here we also noted that marketing strategies that reap the best
results are those that achieve company goals through creating value
for the customer.
Chapter 3
In this chapter, we looked at how firms can develop their
capabilities and compete effectively in constantly changing
environments. In order to best cater to the changing needs of the
customer in a competitive environment, firms must constantly
analyse its marketing environment. These are the firm’s internal
and external environments which have a significant impact on
strategic marketing decisions made by the firm. We discussed how
Porter’s five forces and PEST analysis can be utilised for this
purpose. Successful marketers collect market intelligence in order
to anticipate and meet customer needs. We also looked at the
political environment, developments in the economic environment
and the changing trends in the socio-cultural environment which all
impact on the marketing environment and strategic decision-
making.
Chapter 4
Here we looked at aspects of segmenting, targeting and positioning
in more detail. We also introduced conjoint analysis as a method of
market research used to determine the perceived value of a range of
potential features of a new product offering. We discussed the
importance of dividing markets into relevant, manageable and
targetable segments in order to provide better tailored offerings to
customers. In this chapter we examined how marketers can reap
many benefits from appropriate and efficient segmentation.
However, it is also important to remember the possible dangers and
pitfalls in carrying out this process.
Chapter 5
In this chapter we focus on the current and widely spoken about
topic of branding. Branding can be viewed as a source of strategic
competitive advantage for a firm. It helps buyers identify and
evaluate products, helps sellers facilitate repeat purchasing, and
fosters brand loyalty. In this chapter we discovered various aspects
of branding such as corporate identity, brand equity, development
of brand name and brand valuation, and their role in strategic
international marketing. We also discussed issues about brand
identity and image, as well as package design, brand valuation and
development of brands in local and global markets.
International Marketing
12
Chapter 6
Here we looked at the product in more detail. We discussed the role
of innovation and the product life cycle as important considerations
in the management of the product. We talked about new product
development in terms of strategy, diffusion in the market and how
consumers adopt it. We also looked at both new product successes
and failures. As international marketers it is important for us to
understand these concepts in the context of a global environment.
Finally we concluded the chapter by discussing the movement of
products across international boundaries and possible problems
associated with it.
Chapter 7
Communication is a simple process which we do all the time and
take for granted. In this chapter we discussed the various elements
of promotion. After all, what would be the point of a wonderful
brand and an innovative product if the consumer is not aware of it!
So we focused on the way organisations attempt to communicate
with their target audiences through advertising, personal selling,
sales promotion, public relations, direct marketing and sponsorship.
Finally we discussed the emergence of the internet as a significant
and dominant communication tool.
Chapter 8
Part of the responsibility of a marketing oriented organisation is to
get the product to the customer at the right place and at the right
time. Here we looked at how organisations are connected to their
markets in ways that build value to the organisations as well as
their customers. We discussed how the structure of the channels
can vary depending on the type of market, the needs of the end
consumer and the type of product. We looked at influences on
channel design such as organisational objectives and resources, as
well as the role of intermediaries in the channel. We discussed
various forms of channel structure in terms of horizontal, vertical
and multichannel competition and their impacts on organisations. It
is important to note in this chapter that, in an environment where
the Internet dominates all spheres of life, we as marketers need to
re-evaluate distribution strategies in international markets.
Chapter 9
Pricing plays a significant role in strategic marketing decision and
thus requires much attention. Price is the only element of the
marketing mix that directly generates revenue, can be used as a
communicator, a bargaining tool and a competitive weapon. In this
chapter we discussed various aspects of pricing such as pricing
objectives, economic theory in pricing, influences in pricing as well
as international pricing considerations. We discussed many external
and internal influences on pricing as well as a host of global pricing
considerations. Here we understand that pricing decisions are
difficult to make and that decisions should be taken with long term
objectives in mind as otherwise consequences to the firm could be
detrimental.
Module Overview
13
Chapter 10
In this chapter we focused on symptoms of decline as well as the
causes. We also discussed changes required when an organisation is
in decline or when decline is anticipated.
Module Review Questions
In order to consolidate your understanding of this module, try the
following questions. These will require you to draw from
knowledge gained from the entire module.
1. To What extent do you think internationalisation is essential to
today’s organisations?
2. Discuss how an organisation of your choice incorporates
corporate social responsibility in its decision-making process.
3. Imagine that company X has been criticised for sourcing
ornaments from unregulated sources in China and India. There
have also been complaints that the ornament manufacturers are
guilty of exploitative employment practices. How should
company X deal with such criticism? What measures can be
taken to overcome such criticism and ensure that the company
image is not tarnished?
4. Discuss the marketing mix strategies for a product of a
company of your choice.
5. For an organisation of your choice, assess the current and
future impact of globalisation on the business.
6. What factors affect the customer’s interpretation of price?
7. How can a small firm compensate for lack of resources when
competing in international markets?
8. Discuss the benefits and pitfalls of the segmentation process for
a product of your choice.
9. Using examples, discuss the impact of ‘country-of-origin’ effect
on consumers and companies.
10. How does the management of a global marketing strategy differ
from the management of a domestic strategy?
International
Marketing
Chapter 1: Introduction
Author: D. Chong
Co-author: D. Kasturiratne
This chapter was prepared for the University of London by:
? Derrick Chong, School of Management, Royal Holloway, University of London and
Dulekha Kasturiratne, Imperial College London, University of London
It is part of a series of chapters developed for the module on International Marketing by the same
authors, and published by the University of London. We regret that the authors are unable to enter into
any correspondence relating to, or arising from, this chapter. Correspondence should be addressed to
the module leader, via the WWLC.
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1
Chapter 1: Introduction
Introduction
Overview
In this chapter we will introduce the link between corporate
marketing management and national wealth creation. We will
discuss how, under capitalism, consumers are posited as key
decision makers with firms in competition to attract their custom,
resulting in better quality products, continuous improvement and
innovation, and ultimately higher standards of living. We will
examine how U.S.A, Japan, the E.U. and other countries are
important nations in a marketing framework, and how international
and global dimensions of marketing can be exploited to the
commercial advantage of firms. In this chapter we will also look at
managerial concerns in the marketing of services, namely quality
control, productivity, and the management of human resources.
Finally, we will discuss issues relating to the "experience economy"
and how this changes the tenor of what needs to be provided to
customers.
Aims
The purpose of this chapter is to enable you to:
? review how marketing questions relate to management aims and objectives
? discuss the links between marketing, national wealth creation and economic
development
? demonstrate the relationship between consumer choice and democracy
? compare and contrast consumer markets in Triad nations
? assess various marketing positions associated with the keyword
"globalisation"
? identify the characteristics of "services" and distinguish the managerial
concerns associated with "services"
? assess the "experience economy"
International Marketing
2
Learning Outcomes
After studying this chapter, you will be able to:
? identify the links amongst corporate marketing management, national
wealth creation and economic development
? describe the impact and influence of consumers in a capitalist society on firm
competition
? outline the role of various nations in marketing, and how the international
and global dimensions of marketing can be exploited to the commercial
advantage of firms
? identify the characteristics of services marketing and distinguish the place of
'experience economy' in marketing
Chapter 1: Introduction
3
Contents___________
Introduction 1
Overview 1
Aims 1
Learning Outcomes 2
Contents___________ 3
Resources 4
Essential readings 4
Readings for further study 4
1.1. Marketing and National Wealth Creation 5
Learning Objectives 5
What is marketing? 5
Activity 1.1.1 8
1.2 Globalisation 9
Learning outcome 9
The global consumer 9
Adaptation vs. Standardisation 10
Activity 1.2.1 12
1.3 Services Marketing & Experience Economy 13
Learning Outcome 13
Services & Marketing 13
Experience Economy 19
Activity 1.3.1 20
Summary_____________ 21
Self-Assessment Activity 21
Online Discussion Topic 21
Feedback on Activities 22
Self-Assessment Activities 22
International Marketing
4
Resources
Essential readings
? Doyle, P., Stern, Philip (2006) Marketing Management and Strategy, 4th ed.
Prentice Hall, Chapters 1 & 12.
Chapters 1 and 12 of Doyle cover the overall ideas discussed in this
chapter of the Module. Chapter 1 talks about how rapidly changing
technologies, information and global competition are presenting
ever more complicated challenges in international marketing.
Chapter 12 covers the services marketing aspects.
Readings for further study
? Magretta, J. (1998) The Power of Virtual Integration: An Interview with Dell
Computer's Michael Dell, Harvard Business Review, Vol. 76, Issue 2
(March/April), pp. 72-84.
? Wetlaufer, S. (2000), Common Sense and Conflict: An Interview with
Disney's Michael Eisner, Harvard Business Review, Vol. 78, Issue 1 (Jan/Feb),
pp. 114-124.
The two separate HBR interviews, with Michael Dell (Dell
Computers) and Michael Eisner (Walt Disney), offer insights into
firms considered to be leaders in consumer awareness. Dell is a
pioneering New Economy firm. Disney is the epitome of an
Experience Economy organisation.
Chapter 1: Introduction
5
1.1. Marketing and National Wealth Creation
In this section we will look at the link between corporate marketing
management and national wealth creation. We will discuss how the
consumer is at the centre of the marketing philosophy with firms
competing to attract them. We will also briefly examine the triad
nations and look at some international issues and managerial
concerns in global marketing.
Learning Objectives
? Identify the links amongst corporate marketing management, national
wealth creation and economic development
? Describe the impact and influence of consumers in a capitalist society on firm
competition
What is marketing?
In a book dealing with the art of creative management, Gareth
Morgan cites a common view of marketers:
They're peacocks … all show; no real substance. They look good; people
like to watch; but they serve no useful purpose. Irish setters … very good
looking dogs. But not very intelligent at all. They've no real knowledge.
1
On the other hand, there is an argument that marketing is a source
of competitive ability, economic growth, and wealth creation.
A fundamental question that we should be asking is:
If governments can no longer fix world markets, nor guarantee
national market shares, who decides what the standards of quality,
service and value are? Who decides who wins and loses?
The answer is obvious: the customer.
When we talk about new world competitive order it becomes
obvious that customer choice, preference and demand are its
exclusive driving forces. What we have come to call 'customer
science' is pivotal. That, of course, is marketing. Marketing is, above
all, a philosophy enshrining a long-term commitment to customer
satisfaction and the deployment of a set of intense skills to achieve
it. By definition, therefore, marketing is the key to profitable
growth and must form part and parcel of every business operation.
2
Therefore you can see that this latter perspective is based on the
belief that marketing can provide a better understanding and
assessment of the marketplace, including customers and
competitive behaviour.
When undertaking your reading for this topic, keep in mind that the
aims and objectives adopted by firms may lack sufficient attention
to innovative and entrepreneurial thinking owing to attention on
short-term financial results and institutionalised aversion to risk.
Some useful questions to be thinking of
As a complement to some of the readings in this chapter, issues
related to mission determination can best be explained by
1 Gareth Morgan, Imaginization: the art of
creative management (Sage, 1993), p.
24.
2 Sir Colin Marshall, chairman of British
Airways, in “The Marketing Council:
launch speech event,” (London, 24
October 1995).
International Marketing
6
identifying several of the broad question areas often asked of the
organisation. These include the following:
? What business is the company in? (A functional approach can
be useful at this point. Do we sell ice cream or fun? Do we sell
financial products or offer you an opportunity to lead the life
you desire?
? Who are your company's customers? What are their needs?
Why do they buy from us?
? What are your company's resources, strengths, and
weaknesses? What assets does the company have in terms of
people, products, reputation, etc?
? What are your company's major opportunities and threats?
Where can the company apply its resources most profitably?
What are the most vulnerable areas?
? What rate of growth appears best for your company? This
should include a clear delineation of specific numbers with
regard to the rate of growth in sales, profit, and return on
investment.
? What share of market is best for your company? This opens up
the question of market position.
? What is your company's attitude to risk and stability? Seeking
higher returns usually entails more risk.
? Now have a look at Case Study 1.1.1* As you read it, keep in mind the
points we have reviewed so far.
Marketing and Economic Development
In 1989 Francis Fukuyama, with the financial support of the RAND
Corporation, a conservative think tank based in the United States,
proclaimed the triumph of liberal democracy.
3
In the real world, the crumbling of the Berlin Wall and the
dismantling of the satellite system of the Soviet Union, viewed as
the synthetic result of the end of the so-called Cold War and the
demise of communism, supported Fukuyama's "end of history"
thesis. This post-ideological society envisioned by Fukuyama was
based on a mixture of capitalism, democracy, and materialism.
In many respects, the management guru Peter Drucker put forward
similar sentiments forty years earlier in an essay titled "Markets and
economic development"
4
.
He says that the development of marketing makes economic
integration possible, as well as the fullest utilisation of assets and
productive capacity and economy possesses. It mobilises latent
economic energy. In addition, Drucker says that marketing is
essential in order to remedy the inequality among nations. As such
it is interesting to note that marketing was viewed as the "under
developed" part of the economy of under-developed nations.
? Have a look now at case study 1.1.2 about stock markets in China. It raises
a similar issue.
Would you agree that economic development is the result of
purposeful, responsible, risk-taking actions of individuals as
managers and entrepreneurs?
* All case studies are available in the Case
Study Booklet.
3 Francis Fukuyama, "Have we reached the
end of history?", National Interest
(Summer 1989), pp. 3-18.
4 Peter Drucker, "Marketing and economic
development," Journal of Marketing
(January 1958), p. 253.
Chapter 1: Introduction
7
If marketing is adopted and practised by individuals within firms,
high standards can be set by firms in free-market competition. This
type of competition and inter-firm rivalry allow firms to progress
from strength to strength. Firms must give more attention to the
product and customer service, and increase the freedom of choice
to the consumer in a way that serves human wants. Hence we can
appreciate the effectiveness of marketing as a competitive medium
that benefits the public, the firms, and ultimately the national
economy.
Some International Concerns
On the other hand, in December 1999 a coalition of passionate
environmentalists, trade union members, church groups, and
organized anarchists, took part in demonstrations to disrupt the
meeting of the World Trade Organization. The Seattle riots
represented the latest example of a rising anti-corporation
sentiment in the U.S. The people chanted "Hey, hey. Ho, ho, the
WTO has to go" protesting against deforestation, genetically-
modified food, labour standards in Third World countries, and the
threat to the shrimp turtle. The location of Seattle was appropriate
as it was the very paradigm of the so-called New Economy. Many of
the protestors were its willing beneficiaries and active participants.
It seems that much of the organisation of the protests was carried
out over the Internet. During this time, two main groups with
different grievances competed for attention: unions and other
organisations that fear world trade is a plot to replace American
workers with cheap foreign labour; and a host of environmental
and human rights groups that see the relentless economic
development represented by free trade as trampling on the poor
and the Earth's dwindling resources.
Consumer sovereignty and free choice
It is important for us to consider the link between consumer
sovereignty and free choice, because it is a central and well-
entrenched theme in marketing.
5
Consumer sovereignty, of course, concerns the satisfaction of
consumer needs as an ultimate aim of the entire capitalist system.
Underpinning this system is the over-riding belief that the
individual's needs are best known by him, and that he is in the best
position to exercise this right by making actual choices. Therefore,
it is not surprising that in many respects, marketers see themselves
as the democrats of the business world and the supporters of the
view that in the long run, business will be profitable only if they
satisfy consumer needs. Yet Micklethwait and Wooldridge, who
work for the Economist, believe that the globalisation case needs to
be reiterated, stressing its link to the cause of liberty.
6
5 There is a view that marketing is
essentially an American construct; the
constitution of the U.S. offers its citizens
"Life, Liberty, and the Pursuit of
Happiness."
6 John Micklethwait and Adrian
Wooldridge, A Future Perfect: the
challenge and the hidden promise of
globalisation (William Heinemann, 2000).
International Marketing
8
Activity 1.1.1
In order to consolidate your understanding of this section, try the following
exercise:
? Identify three companies which you consider to be successful and evaluate to
what extend they have a customer-based approach.
Feedback: See page 22
Chapter 1: Introduction
9
1.2 Globalisation
In the previous section we looked at how competition between
firms increases the standard of products and services in the market.
We also looked at the role of marketing in the economy as well as
freedom of choice and sovereignty of the consumer. In this section
we will try to understand the 'global consumer', and the concepts of
adaptation and standardisation.
Learning outcome
? Outline the role of various nations in marketing, and how the international
and global dimensions of marketing can be exploited to the commercial
advantage of firms
The global consumer
The notion of the global consumer is based on the role of
technology. In many respects the world is getting smaller, yet
noticeable differences remain. Here, we will consider a working
sketch of consumer markets in Germany, Japan, and the U.S.A - the
wealthy triad, as proffered by McKinsey.
7
Germany
You may be aware that in Germany a few retailers hold most of the
power and capture most of the surplus generated by the systems. In
food, for example, the leading five German retailers control more
than 40 per cent of the market—twice the level of concentration in
the U.S. and eight times that of Japan. Understandably, this
concentration of power is not good for consumers as these giant
retailers are the only pathway between manufacturers and
consumers. The sheer static power of German retailers has bred a
generation of consumer companies that are slow to innovate and
slow to develop new products, because it is less risky and more
profitable to sell established products with proven track records of
commercial appeal. Also, unfortunately, the power of established
brands may be used to smother new products.
Japan
In Japan, distribution and retail channels are highly fragmented
and extremely inefficient. For example, the U.S. has 145,000 food
stores to serve a nation of 250 million, while Japan, a population of
half the size, requires more than 620,000 food stores. Japanese
consumers can choose from a much larger variety of goods than
consumers in other cultures, but they pay for their system's lack of
efficiency with considerably higher prices. The average Japanese
person must work 40 per cent longer than his German or American
counterpart to buy a week's supply of groceries. There are quirky
inefficiencies of the Japanese system, yet the Japanese system at its
most successful rests, in large part, on the dynamic that drives
consumer product companies to create and introduce new products.
Though this reflects the well-known passion of Japanese consumers
for new products, it also reflects the manufacturers' effort for speed
to market in new product development. Second, marketing in Japan
7 Tatsuo Ohbora, Andrew Parsons, and
Hajo Riesenbeck, "Alternative routes to
global marketing,"McKinsey Quarterly
(1992 / No. 3), pp. 52-74.
International Marketing
10
means developing and nurturing long-term relationships with those
in the distribution channel (as opposed to selling in the U.S.)
because channels, both wholesale and retail, are small and
fragmented. For example Shiesido, the largest cosmetics company
in Japan, has over 25,000 retailers.
United States
Now let's look at the U.S.A. Here, the consumer system has very low
barriers to entry, and its structure is extremely competitive and
dynamic. The intense flurry of competition and segmentation has
created an ever-widening set of options for consumers, both in
terms of products they can buy and the types of stores in which
they can buy them. For example, grocery stores compete against
drug stores and warehouse clubs. The whole system is very open,
yet this same intense competition has bred a dangerous short term
mentality in which the constant drive to segment markets has left
organisations awash with information, but running amuck in terms
of spending for advertising and other forms of promotion.
If we look closely at the systems in these three nations, it seems
highly possible that Triad nations can learn from each other.
Japanese and German firms can learn product marketing strategy
and advertising from American firms; German and American firms
can learn rapid product development and manufacturing from
Japan; and American firms can learn how to build collaborative
relations to retailers from both the Japanese and Germans.
The emphasis on the so-called Triad, essentially divides the world
into three affluent geographic regions of North America (U.S. and
Canada), Western Europe (members states of the European Union
and notable non-members like Switzerland), and Japan—as
developed by Kenichi Ohame
8
and current McKinsey consultants. In
many respects, attention on the global consumer cannot exclude
China (labelled as the Sleeping Giant, the Next Superpower and
Economic Miracle), India, and the transition economies of Central
and Eastern Europe, particularly led by EU enlargement.
Adaptation vs. Standardisation
When we talk about marketing, it is important to note the various
international dimensions to it. In 1968 Robert Bartels asked "are
domestic and international markets dissimilar?" Robert Buzzell
posed a similar question "can you standardise multinational
marketing?"
9
It is interesting to note that these two prominent
management writers expressed these ideas just prior to the end of
the so-called American Century in the early 1970s, with the first Oil
Crisis. During this time international marketing was associated with
American-based consumer goods giants extending "home" strategies
to non-American markets.
The work of Theodore Levitt
His celebrated Harvard Business Review essay, "The globalisation of
markets," says that the world is becoming standardised and
homogeneous, and companies should follow suit.
10
He explains in
his globalisation thesis that at a low cost, the corporation ought to
operate with resolute constancy as if the world were a single entity.
In other words, the firm should make the same things on offer in
8 Kenichi Ohmae, Triad Power (New York:
Free Press, 1985); and Ohmae, "The
Triad world view,"Journal of Business
Strategy (Spring 1987), pp 8-19.
9 Robert Bartels, "Are domestic and
international markets dissimilar, "Journal
of Marketing (July 1968), pp. 56-61; and
Robert Buzzell, "Can you standardise
multi-international marketing," HBR
(Nov/Dec 1968), pp. 102-12.
10 Theodore Levitt, "The globalisation of
markets, "HBR (May/Jun 1983), pp. 92-
102.
Chapter 1: Introduction
11
the same way everywhere. This is possible because "the world's
needs have been irrevocably homogenised," according to Levitt. He
says that the primary agent in this system is technology:
a powerful force [which] drives the world toward a converging
commonality.
Technology helps to determine human preferences. Levitt invited
firms to "accept the inevitable," namely that "for better or worse
technology drives consumers relentlessly toward the same common
goals—alleviation of life's burden and the expansion of
discretionary time and spending power." He says that among the
benefits accruing to the firm via standardisation, substantial
economies of scale in production and marketing come to the fore.
In 1988 Levitt reaffirmed his position:
The more powerfully homogenised and relentlessly globalised the world's
communications and commerce get, the more varied its products and
more numerous its consuming segments seem to become.
11
Criticisms of Levitt
However, other researchers have lodged valid criticisms of Levitt's
thesis. For example, Douglas and Wind argue that standardisation
is merely one option in a range of possible marketing strategies
which may be used to enter foreign markets.
12
The potential for standardisation may be greater for certain types of
products such as industrial raw materials and high technology
products. Of course, one cannot fail to notice the pronounced and
growing homogeneity among certain groups, particularly business
executives, the brand-hungry young and the wealthy. Upmarket
personal items including Rolex watches, Hermes scarves, Prada
handbags, and Coco Chanel perfumes are found all over the world
and are undifferentiated. Mass appeal brands like Levi's, Coca-Cola,
Mars and McDonald's are viewed as the exception rather than the
rule. Douglas and Wind add that "opportunities for standardisation
are likely to occur more frequently among industrialised nations,
and especially Triad countries where consumer interests as well as
market conditions are likely to be more similar than among
developing countries".
As you can see, there are various views on the subject. But Levitt
points us in the direction of some interesting ideas to think about.
For example let's consider the following managerialist advice:
Arguing against a standardised approach is the old advice, when in
Rome, do as the Romans. This sounds like reasonable counsel. In a
competitive situation, however, there are two reasons to question it. First,
if one behaves like the Romans while in their city, the Romans will
probably win every time: they are very good at being Romans. Second,
Rome has a lot of Romans and probably doesn't need any more. Any
foreigner who tries to be a pseudo-Roman probably won't contribute
much to Rome, expect more congestion. On the other hand, a foreigner
who is a bit different might be more valuable to the Romans.
13
11 Theodore Levitt, "The pluralisation of
cul ture," HBR (May/Jun 1988), pp. 7-8.
12 Susan Douglas and Yoram Wind, "The
myth of globalisation, "Columbia
Journal of World Business (Winter
1987), pp. 19-29.
International Marketing
12
Muji as an example
Now let's look at the Japanese retailer Muji in the United Kingdom
to see how adaptation vs. standardisation applies in practice. In
Japan, Muji operates more than 200 outlets offering a range of
anonymous goods (primarily stationery, clothing, and home
furnishings), to a core market mainly of school children and young
adults. Muji entered the British market in 1991 and now operates
about 10 locations in London.
14
In Japan, buying Muji invites
anonymity. In Britain customers of Muji are older and see
themselves as sophisticated and stylish. Muji in the UK has been
compared to an esoteric and utilitarian version of Habitat (which is
itself further up the market ladder in terms of quality and style than
Ikea). Muji stands for "no-brand quality goods" yet operates as a
very effective brand logo and concept: "Functional Japanese
minimalism for everyone." Muji was created in 1980 by three
partners and grew during the hyperactivity of the bubble economy
from 1985-91, a period marked by a 25 per cent increase in Japan's
GNP.
Though Muji is a relatively new outfit, it can be viewed as
representing an aspect of Japanese living and culture that stretches
back hundreds of years. This has to do with a historical
understanding on the part of the Japanese of simplicity to everyday
life. Yet in London much of this has the look of a clever marketing
device. For example, the company's UK director of operations
believes that "when a product goes through the Muji process it
becomes so simple, so Japanese people see it as Japanese. British
think of it as Muji." Thus one can think of Mujification as rigid
design direction and tight quality control, which means that Muji's
policy of global sourcing, does not affect the Mujiness of the things
on offer. Like so many product areas, from cars to clothes to comic
books, one is buying into a Japanese design philosophy, rather than
Japanese workmanship through one's choice of brands and
products.
? Now have a look at Case Study 1.2.1. This reviews some of the issues
around internationalisation.
Activity 1.2.1
Now try the following activity to enhance your understanding of this section:
? What do you consider to be the benefits of standardisation?
Feedback: See page 22
13 Vern Terpstra, International Dimensions
of Marketing 3rd ed. (Wadsworth,
1993), p. 9.
14 In the product brochure 2000 Muji
notes that its basic principles remain
unchanged: the four key concepts
remain good value for money, simple
and functional design, basic and
understated colour, and a complete
lifestyle range.
Chapter 1: Introduction
13
1.3 Services Marketing & Experience Economy
In the previous sections, we considered marketing and aspects of
globalisation mostly in terms of the tangible product. In this section
we will look at services marketing and the experience economy and
its growing importance in global marketing.
Learning Outcome
? Identify the characteristics of services marketing and distinguish the place of
'experience economy' in marketing
Services & Marketing
Let's look at the list below. Financial services can be classified as
having the following characteristics:
? Private ownership
? Profit orientation with income from customers
? High degree of competition
? Consumer and industrial markets
? High customer contact
? Requiring professional and intensive labour skill
In marketing, as in many other fields, it helps to break things down
for simplicity. Therefore, classification schemes have been very
useful in marketing. Various attempts have been made by
marketing theorists to classify goods into a range of categories. One
of the most famous and enduring is that of Melvin Copeland from
the 1920s. Goods were classified as convenience, shopping, or
specialty.
15
You may discover through your reading that the history of
corporate marketing management has been written with a focus on
fast moving consumer goods (FMCG) firms like Proctor & Gamble
and Coca-Cola in mind. Though the role of FMCG and consumer
durables remains important to the global economy, the shift to
service-based industries suggests new directions for competitive
success in the longer term. Yet you may find it strange that there is
no consensus in economic or social thought as to what constitutes a
service.
16
Did you know that in Triad nations private and public services
account for approximately 60 to 70 per cent of national output, and
that services represent the fastest growing part of international
trade? The sheer size and growth in the service sector during the
latter half of the twentieth century have been documented, but the
features that distinguish the service sector from the industrial or
manufacturing sectors are not clear.
Many activities in manufacturing firms are bought-in services (e.g.,
advertising, health care, financial services) which complement
international service jobs like design, marketing, and finance.
Furthermore, a wide range of services exists from corporate
management to "independent" professionals to the lowest-paid
domestic helpers.
15 Melvin Copeland, "The relation of
consumers' buying habits to marketing
methods, "HBR (April 1923), pp. 282-9.
16 Jean-Claude Delaunay and Jean Gadrey,
Services in Economic Thought , (Kluwer
Academic, 1992).
International Marketing
14
Service Characteristics
It is helpful for us to think of goods-services as a continuum. Here
we suggest that services are key for all firms, yet that there are
sectors whose service components are greater than those in other
sectors. It is helpful to consider the characteristics that increase the
service component of the product offering. Let's look at each of
these separately.
? Intangible: Here we believe that the physical nature (or
tangibility) of the offering is less important to the consumer.
Lovelock characterises the service act of financial services as
"intangible actions directed at people's intangible assets."
Owing to its abstract nature, the customer may be offered
something tangible to represent the service. For example let's
look at Cater Allen, an offshore bank based in Jersey and the
Isle of Man. It offers those who open a High Interest Current
Account (HICA) a "free" Cater Allen Gold VISA card.
? Perishable: Under this category, you will realise that inventories
cannot be kept. In other words services cannot be saved, stored,
resold or returned. Therefore, the monetary value of time needs
to be considered. For example, empty seats for an English
National Opera performance at the Hammersmith Apollo
cannot be stored and sold for a performance at the revamped
London Coliseum. As financial services firms cannot store their
products to meet fluctuations in demand, managing demand
becomes of vital importance.
? Heterogeneous: Now think about heterogeneity of services.
Services are essentially "performances" and no two
performances are exactly alike. The quality of a service derives
in large measure from its performance and delivery. The
providers of financial services face the challenge of attempting
to ensure consistency and quality of services offered.
Heterogeneity also results as clients of financial services differ
in their demands and expectations. It is somewhat ironic that
the less sophisticated consumers of financial products require a
greater depth of service.
? Inseparable: As you will now realise, production and
consumption of services take place simultaneously. Service
providers are an essential ingredient in the service experience
for the consumer. Essentially, the employees delivering the
service frequently are the service in the eyes of the customer.
For example, Singapore Airlines emphasise the attentive care of
their flight attendants as a unique selling proposition that
distinguishes the firm from that of other long-haul air carriers.
Now let's look at how Christopher Lovelock attempts to examine
ways to analyse services by asking a series of questions.
17
He asks: "What is the nature of the service act? A service has been
described as deed, act, or performance. Two fundamental issues are
at whom (or what) is the act directed, and is this act tangible or
intangible in nature?"
What type of relationship does the service organisation have with
its customers? Here, two sets of questions are posed:
17 Christopher Lovelock, "Classifying
services to gain strategic marketing
insights, "Journal of Marketing
(Summer 1983), pp. 9-20.
Chapter 1: Introduction
15
? Is it a "membership" relationship or is there no formal
relationship?
? Is the service delivered on continuous basis or is each
transaction recorded and charged separately?
It is important to consider profitability and customer convenience
as the central issues in deciding how to price membership services.
Will the organisation generate long-term profits by tying payment
explicitly to consumption, by charging a flat rate regardless of
consumption, or by unbundling the components of the service and
charging a flat rate for some and an incremental rate for others?
Lovelock states that membership relationships usually result in
customer loyalty to a particular service supplier. You may
appreciate that as a market strategy, many service businesses seek
ways to develop formal, ongoing relations with customers in order
to ensure repeat business and/or ongoing financial support. The
marketing task for us to keep in mind is to determine how it might
be possible to build sales and revenues through such memberships,
but at the same time, avoid requiring membership when this would
result in freezing out a large volume of desirable casual business.
? How much room is there for customisation and judgment on the
part of the service provider? Lovelock says that customisation
can proceed along at least two dimensions: the first concerns
the extent to which the characteristics of the service and its
delivery system lend themselves to customisation; the second
relates to how much judgment customer contact personnel are
able to exercise in defining the nature of the service received by
individual consumers. There is a class of service that not only
involves a high degree of customisation but also requires
customer contact personnel to exercise judgment concerning
the characteristics of the service and how it is delivered to each
customer. These service personnel are often prescriptive: clients
look to them for advice as well as for customised execution. Yet
it is important for us to understand that customisation has its
costs. Service management often represents an ongoing
struggle between the desires of marketing managers to add
value and the goals of operations managers to reduce costs
through standardisation.
? What is the nature of demand and supply for the service? While
we recognise that inventories cannot be maintained, two issues
must be raised. They are - classifying services according to
whether demand fluctuates widely or narrowly over time, and
classify services according to whether or not capacity is
sufficient to meet peak demand.
? How is the service delivered? Lovelock says that understanding
distribution in services marketing requires for two basic issues
to be addressed. The first relates to the method of delivery. Is it
necessary for the customer to be in direct physical contact with
the service organisation, or can transactions be completed at
arm's length? The second is concerned with whether the service
organisation maintains just a single outlet or whether it serves
customers through multiple outlets at different sites?
International Marketing
16
Management and Service Marketing
You may realise by now that people and relationships are
heightened when it comes to marketing services. In this type of
marketing it is important for us to consider three managerial
concerns. These are quality control problems, productivity concerns
and management of human resources.
1. Quality control problems: When we talk of quality control,
perceived relative quality of a product (goods and services) is
rated as the single most important factor determining its long-
run market share and profitability. Yet the issue of quality in
services is a concept that customers find difficult to articulate.
The inseparability of production and consumption raises a
significant point in the management of quality. For example, it
is important for us to realise that customers evaluate quality
not just in terms of the outcome but also in terms of the process
or the manner in which the service is delivered. Therefore it is
vital that managers of service organisations focus on both the
quality of outcomes and the quality of the process.
2. Concerns with productivity: As you may note, not all services can
be standardised, and many services resist standardisation. Yet
Levitt points out that there are means by which productivity
can be improved without sacrificing quality.
18
In some cases
industrialising a service to take advantage of the economies of
mass production may actually increase consumer satisfaction
through speed, consistency and price savings. However, we
must address certain issues.
? Firstly, high-contact activities must be separated from low-
contact activities. Also the efficiency of productivity-based
low-contact activities (or backroom operations) must be
maximised. In addition the effectiveness of high-contact
activities which are geared towards the quality of the
service must be maximised.
? Secondly, participation by customers should be increase
through familiarising them with information technology
systems. This can help to reduce the service cost. Here we
suggest that from the standpoint of operations, it may be
desirable to get the customer to transform from a high-
contact service into a low-contact one.
Let's look at online facilities in retail banking as an example.
This reduces the need for tellers to handle routine transactions
such as cash withdrawals. In addition customers are offered the
advantage of 24-7 access. But at the same time the retail banks
need to continue to monitor customer reaction to the loss of
personal service.
3. Management of human resources: When it comes to managing
services, we must consider human relations as a particular
concern. This is especially so in high-contact financial services.
Each transaction becomes a so-called "moment of truth" where
the customer makes a decisive judgement. Here, methods of
supervision and quality control associated with manufacturing
are not appropriate, because an unsatisfactory service
18 See, for example, Theodore Levitt, "The
industrialisation of service, "HBR
(Sep/Oct 1976), pp. 63-74
Chapter 1: Introduction
17
transaction cannot be halted, examined and recycled before the
customer sees it.
Therefore it is vital for the financial service organisation to have
members of staff who adopt the service mission. For example,
James Heskett describes the objective as producing a so-called
"Quality Wheel" - highly motivated employees delivering high-
quality services, which in turn leads to satisfied customers, more
business, satisfied employees and enhanced motivation.
19
Quality Strategy
When you undertake your reading for this topic, you may come
across the service quality wheel. See if you understand this idea.
Now let's focus on the quality strategy which involves four
commitments as we will discuss next.
If we look closely at most companies, we can see the commitment
of top management to quality from their quality strategy, their
attention to the importance of quality approaches, and ensuring
that financial support is available.
These companies have a long-term commitment to improving
quality as indicated by an explicit statement of the company's
quality policy, and translating these into departmental goals and
measurable targets, while focusing on the needs of internal clients.
You will see that these companies have a culture which underpins
quality by:
? involving everyone in continuous improvement
? adopting formal structures to support the quality strategy
? articulating well-defined quality improvement processes
Most companies use systems and techniques to monitor and control
quality such as:
? job descriptions
? performance objectives
? written standards and procedures
? formal appraisal systems
The emphasis on services
If you look at affluent societies, you will notice that services tend to
provide higher marginal utility for consumers than for goods. You
will discover that spending on business and industrial services has
increased even faster than on consumer goods.
However, the desire of professional services providers to broaden
the range of services is not always straightforward. For example,
many law firms have entered into conventionally non-legal fields
such as public relations, lobbying, training and software
development. There is the desire to be able to advise clients in the
areas of technology, media, and communications. Dot-com start-ups
represent another area of interest as these firms require advice in
fields such as advertising, trademarks, intellectual copyright and
finance. Yet it is important to consider the risks of including a
greater number of services in-house as opposed to developing links
with external service advisors. Many critics claim that the law firm
could be in danger of losing its focus as well as missing out on
referrals from advisors with which it is competing.
19 James Heskett, "The service quality
wheel, " HBR (Mar/Apr 1987), pp.
118-26.
.
International Marketing
18
Accountancy firms
Now let's focus our attention on accountancy firms. They venture
into advisory services as a means to gain non-auditing work. KLegal
is a parallel organisation to KPMG, and desires to become an
international leader in the provision of legal services.
Pricewaterhouse Coopers (PwC) has a VTeam to help technology
entrepreneurs launch the next big Internet start-up. The VTeam
coaches start-ups on how to get their first venture capital breaks.
Owing to a desire to draw in start-ups that could become major
clients in the future, PwC allows the VTeam to provide its services
for free. Some people argue that PwC is changing the way the Big
Five accountancy firms are being perceived by entrepreneurs. No
longer just being approached for auditing services, PwC is showing
entrepreneurs how to work through the whole financial process.
However, the Securities and Exchange Commission (SEC) in the
U.S. claims that selling services to clients affects audit
independence. Yet it is interesting that not all the major
accountancy firms are in agreement in disposing of consultancy
services. For example, PwC announced its intentions to dispose of
significant sectors of its business. Ernst & Young has already sold its
consulting arm to Cap Gemini Yet Deloitte & Touche is rejecting the
SEC position that audit independence is compromised. You may
have your own views and examples on this which will help you to
build your own discussion.
You may remember that we briefly discussed human relations in
financial services before. Now let's look at how the client-supplier
relationship for a financial services firm can be illustrated as a four-
stage process:
1. Find: Client services that help to facilitate the sales process by
providing customised information by client sector: identifying
the target markets and updating the database of client profiles.
2. Win: Sales teams need to be aware of the firm's position vis-à-
vis that of competitors. The differential advantage of the firm
needs to be emphasised, and the presence and awareness
within the industry must be given importance. Also, while
global networks are viewed as essential personal care cannot be
overlooked.
3. Retain: Gaining greater knowledge of existing clients is
necessary in order to be able to provide useful and valued
information on appropriate products. Tailoring information to
existing clients demonstrates a commitment to providing
superior service. Monitoring client satisfaction is an important
first step to improving the quality of service and client
relationships.
4. Grow: Seeking methods to reward the loyalty of long-term
clients. The sponsorship of prestige events may appear
superficial and unnecessary, but they van be viewed as an
enjoyable and cost-effective form of corporate hospitality.
? To conclude this part of the section, have a look at Case Study 1.3.1.
Chapter 1: Introduction
19
It is important for us to note that economic impact of different
levels of satisfaction can be significant. In other words, satisfied
customers are not all equal. Those displaying the highest levels of
satisfaction are, in economic terms, significantly more attractive to
the firm than those showing only moderate levels of satisfaction.
Also, a customer who stays highly satisfied becomes steadily more
attractive over time.
20
In order to emphasise customer development, the company needs
to collect information on the "Life time" value of each customer, be
aware of the relative profitability of individual customers and
operate a key account structure. Furthermore, the marketing
programme needs to be regularly adjusted to reflect and anticipate
customer needs.
Experience Economy
Previously in this section, we looked at services and its role in
marketing in various sectors. In this section we focus our attention
on the experience economy and where it fits in with what we have
discussed so far.
Pine and Gilmore, co-founders of Strategic Horizons, an American-
based consultancy firm, have argued that the "experience economy"
represents the current stage of economic development in advanced
nations: from extracting commodities to manufacturing goods to
delivering services to staging experiences.
21
Table 1.3.1 Economic Distinctions
Economic
Offering
Commodities Goods Services Experiences
Economy Agrarian Industrial Service Experience
Economic
Function
Extract Make Deliver Stage
Nature of
Offering
Fungible Tangible Intangible Memorable
Key Attribute Natural Standardised Customised Personal
Method of
Supply
Stored in bulk Inventoried
after production
Delivered
on demand
Revealed over
a duration
Seller Trader Manufacturer Provider Stager
Buyer Market User Client Guest
Factors of
Demand
Characteristics Features Benefits Sensations
Source: Pine and Gilmore, HBR, 1998
A good example to consider under this topic is Walt Disney. This
firm is cited as a pioneering experience economy firm. For example,
the buyers of its experiences are known as "guests" and the
experience strives to be "memorable." I am sure you would agree
that experiences are inherently personal. Indeed each experience
derives from an interaction between a staged event and the
individual's state of mind. Experiences, like goods and services,
have to meet a customer need; they have to work; and they have to
be deliverable. Just as goods and services result from an iterative
20 As reported by Nichloas Carr,
"Marketing : the economics of
customer satisfaction,"HBR (Mar/Apr
1999), pp. 15-18.
21 B. Joseph Pine II and James Gilmore,
"Welcome to the experience economy,"
HBR (Jul/Aug 1998), pp. 97-105.
International Marketing
20
process of research, design, and development, experiences derive
from an iterative process of exploration, scripting, and staging.
When designing memorable experiences we must consider five
concepts:
? Theme the experience
? Harmonize impressions with positive cues
? Eliminate negative cues
? Mix in memorabilia
? Engage all five senses
Activity 1.3.1
Now that we have looked at services and experience economy in marketing,
attempt this activity to test your understanding.
? What are the important things to consider when marketing a service and
when designing a memorable experience?
Feedback: See page 22
Chapter 1: Introduction
21
Summary_____________
This chapter emphasised how marketing objectives are fundamental
to overall corporate success. We also saw the relationship between
marketing and economic development, and their impact on
providing high and increasing standards of living. Given the
importance of firms in competition as a source for national
competitive advantage, marketing strategies and technique can be
used to aid firms. Also we raised the issue of globalisation and
discussed how the world is becoming smaller, although still
noticeable differences remain. This was followed by a debate on
standardisation and adaptation. This chapter makes us think
whether the practice of marketing leads to the homogenisation of
nations as they become more affluent.
We also looked at how services are integral to advanced economies
due to the relative decline of manufacturing and the emphasis on
value-added knowledge worker. We looked at different aspects of
services marketing and its role in the economy. It is important to
note that marketing of services, as opposed to goods, poses certain
nuances marketers need to consider. Supporters of the "experience
economy" view it as a step beyond service marketing to a more
holistic approach to marketing.
Self-Assessment Activity
To make sure you understand the material we have covered in this chapter, try
the following activities.
1. Define globalisation in your own words
2. Discuss the winners and losers of globalisation
3. Recall the managerial concerns associated with marketing services
Feedback: See page 22
Online Discussion Topic
Post your views on the following question in the on-line forum where you can
debate your findings with your tutor and fellow students:
? In your view and experience, discuss the role of marketing in national wealth
creation.
International Marketing
22
Feedback on Activities
Activity 1.1.1
You may find it easier to answer this question in the form of a grid. For example,
you can draw the grid with the names of the three companies at the top, and the
components of a customer-based philosophy along the side. Components of the
customer-based philosophy can include marketing orientation, commitment to
innovation, capacity to care for the customer and create superior value for the
customer. Assess the evidence for these components, and the priority given to
them by each of the companies that you have stated. Then identify how these
activities are being implemented by the companies. Remember that firms with a
sound marketing orientation have the capacity to understand the needs of the
customer in a way that superior value is provided.
Activity 1.2.1
Some of the arguments for the benefits of standardisation include:
? Gaining economies of scale
? The increase in customer value of a consistent image and brand
? The advantages of a simpler planning process
? Lower overall expenditure, for example in promotion
Activity 1.3.1
Some of the important issues to consider when marketing a service are:
? What is the market to which the service is directed?
? What type of relationship does the service organisation have with its
customers?
? How much room is there for customisation and judgment on the part of the
service provider?
? How is the service delivered?
? How do you want to be perceived by the customer?
Self-Assessment Activities
Question 1
This is a relatively open question as many issues can be discussed under this
heading. While you can give definitions from various researchers, remember that
the question is looking for the definition as you see it. Your answer should
include that globalisation has reduced barriers to the global flow of information,
ideas, capital, skilled labour, technology and goods.
Question 2
Your answer should include how/why globalisation has resulted in both winners
and losers. Some of the good outcomes of globalisation consist of cultural
interchanges, travel, improvements in living standards, more people being above
the poverty line and increases in economic growth rates.
Chapter 1: Introduction
23
Some of the negative outcomes of globalisation include issues dealing with those
who have been excluded from globalisation, those who have suffered from
globalisation and those who have gained but still remain poor.
Question 3
When discussing this problem, first look at why services marketing can pose
different managerial concerns over other type of marketing (e.g. tangible goods
marketing). You should look at issues such as:
? Quality control problems: Here it is also important for you to realise that
customers evaluate quality not just in terms of the outcome but also in terms
of the process or the manner in which the service is delivered. Therefore it is
vital that managers of service organisations focus on both the quality of
outcomes and the quality of the process.
? Concerns with productivity: Also mention here if services can/should be
standardised
? Management of human resources: Here you can use high-contact financial
services as a particular example
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