Globalization marketing Essay Example

company recognizes the importance of comprehending, studying, measuring, and nurturing loyalty towards its brand and global brand value in the long term. This offers an overview of the growing significance of global marketing within a broader transformation that has profoundly influenced individuals and industries globally over the past 160 years. It is worth noting that a mere three decades ago, the notion of global marketing was non-existent.

Today, savvy cuisines individuals employ global marketing to fully achieve their companies' commercial potential. Moreover, globalization plays a crucial role in converting local or national industries into global ones. According to Michael Porter, a global industry is characterized by the ability to gain a competitive advantage through the integration and utilization of worldwide operations. A company's position within an industry becomes interdependent with its industry position in other countries, thus emphasizing the significance of global marketing.

Around 25 percent of total worldwide market revenue is held by the United States, making it the largest portion of the global market. However, American companies must expand internationally in order to fully capitalize on their growth potential since 75 percent of the global market exists outside their own country. Similarly, non-U.S. companies also have a strong incentive to enter the international arena as they can target the extensive U.S. market consisting of 300 million people. For instance, Japan ranks second globally in terms of dollar value, but markets outside Japan represent an impressive 85 percent of the world's potential.

In order to succeed and thrive in the 21st Century, it is crucial for Japanese companies to strive towards becoming global enterprises. Although Germany holds the position of being the largest market

in Europe, merely 6 percent of German companies' potential global market lies within their own country. Without expanding on a global scale, businesses will either be acquired by more dynamic competitors or face extinction. When a company solely concentrates on its domestic market, it only needs to contend with competition from within its own nation. Even if foreign companies are vying for the same share of the market, the primary focus for the company remains on competing within its home market.

The development of products and services for the domestic market often overlooks the importance of considering international markets. This creates a challenge for marketers as all marketing decisions are centralized at headquarters. One significant obstacle they encounter is unexpected competition from emerging global marketers. Due to insufficient attention given to changes in the global marketplace, domestic marketers may be unaware of a leading competitor operating on three continents until they establish 20 stores simultaneously in the Northeastern U.S.

These marketers can be seen as ethnocentric because their primary concern is how they are perceived in their home country. They are not only focused on standard marketing approaches, strategies, and tactics but also on global operations and distribution, government relations, global human capital management and resource allocation, distributed technology development and management, global business logic, interference with global competitiveness, exporting, joint ventures, foreign direct investments, and global risk management. They also make country-by-country decisions on how the product is distributed, taking into account the competition in the target market.

The use of vending machines varies across cultures, as demonstrated by Coca-Cola. In the United States, beverages are commonly sold in bulk at warehouse stores, whereas

in India this is not the case. When deciding where to position a product, its market placement needs to be considered. For example, a high-end product would not be appropriate for distribution through a discount store in the United States. Similarly, a budget-friendly option promoted in France would face difficulties in a luxurious boutique. Pricing naturally varies across different markets.

Various factors contribute to the pricing of a product, including development expenses (whether it is locally produced or imported), ingredient costs, delivery costs (such as transportation and tariffs), and more. Additionally, the product's positioning in relation to competitors impacts its profit margin. How the product is perceived, whether luxurious and expensive or budget-friendly and affordable, determines its pricing. Effective global advertising strategies exist; however, it is essential to test advertising concepts using a reliable marketing research system that can provide comparable outcomes across different countries.

Maximizing economies of scale involves the ability to identify the elements or moments of an advertisement that contribute to its success. Market research measures such as Flow of Attention, Flow of Emotion, and branding moments offer insights into the effectiveness of an ad in any country, as they focus on visual rather than verbal elements. In the case study of McDonald's global expansion (CASE 1-2), the fast-food chain was founded in 1937 by two brothers, Richard and Maurice McDonald. The brothers implemented innovative food processing and assembly line techniques at a small drive-in restaurant located in Pasadena, California.

Ray Crock, a salesman of milk-shake mixers, saw an opportunity in the market in 1954. He successfully negotiated a franchise agreement to exclusively franchise McDonald's in the USA. Other franchising companies charged

up to $50,000 for restaurant and ice-cream franchises, but Mr. Crock only asked for $950. He also kept a service fee of 1.9% of sales and gave the McDonald brothers a royalty of 0.5% of sales. In 1961, the McDonald brothers sold their share for $2.7 million. Additionally, McDonald's expanded internationally with its first venture in Canada in 1967.

In 1968, George Cohn purchased the license for McDonald's in eastern Canada and opened his initial restaurant. Cohn subsequently established a network of 640 restaurants, making McDonald's in Canada more profitable than any other McDonald's outside of the United States. The utilization of franchising has been crucial to McDonald's global triumph. By franchising to local individuals, the local population automatically translates the delivery and interpretation of American brand culture in terms of both product and service.

McDonald's has a global presence, operating in more than 100 countries with over 20,000 restaurants. About 80% of these locations are franchise-owned. This demonstrates the difference between globalization and internationalization, where standardized products are marketed uniformly in various regions. Globalized companies use consistent products, promotional campaigns, prices, and distribution channels across all markets. Standardizing brand names, product features, packaging, and labels is relatively easy compared to other aspects of marketing mix. A strong commitment to international marketing is vital for successfully expanding into global markets as it views the world as one unified marketplace.

For instance, global brands like Nikkei trainers, Levies' jeans, and Coca-Cola have expanded their reach across international boundaries. However, even in these cases, some modifications to the message can be noticed. Internationalization entails adapting marketing strategies to cater to specific target markets in different regions of

the world, taking into account cultural, regional, and national differences. To achieve a standardized marketing mix, the strategy should categorize countries based on similarities in social, cultural, technological, political, and economic aspects. Omaha (1989) argues that "large companies must embrace a more global approach to remain competitive."

Companies need to shift their mindset from treating their foreign operations as secondary to viewing the entire world as a single borderless market. Levity (1983) argues that success lies in the ability to globalize as markets become more similar and global. Cantata and Roentgen (1995) suggest that multinational companies must adjust their entire marketing strategy, including sales and distribution, to meet new market demands. Altering the marketing mix is crucial to cater to local tastes, meet special needs, and satisfy non-identical consumer requirements (Cantata and Roentgen, 1995). However, Taylor (1991) supports using both internationalization and globalization elements to create a competitive advantage by thinking globally and acting locally. The company's structure should align with its international environment while maintaining internal flexibility to execute its strategic goal (Taylor, 1991).

The ongoing debate between two schools of thought continues as trade barriers decrease worldwide, leading to more companies entering the global market. With the increasing internationalization of tastes and buying patterns, the creation of global and regional brands has become more feasible (Doyle, 1994). Consequently, organizations are shifting their focus from gradually expanding into a global company to becoming a "born global" entity. Born global companies operate on a global scale from their inception instead of developing gradually over time.

The idea of "think global, act local" has become a prominent business phrase in the twentieth century and is highly

relevant in the ongoing discussion between internationalization and globalization. It is essential for even small businesses to expand their reach across borders, both physically and online, in order to stay competitive. McCarthy (1975) introduced the marketing mix concept, which consists of the components of product, price, promotion, and place. These elements have long served as the core principles for constructing a marketing plan.

However, theorists have recognized additional variables for the marketing mix in recent years, particularly in services marketing. Field and Gilligan (1996) identified these variables as an integral part of the marketing mix, including process, physical, product, place, price, promotion, people, and physical aspects of the service. McDonald's aims to create a standardized set of items that taste the same worldwide but also understands the importance of adapting to local environments for success. Hence, McDonald's has embraced the concept of "think global, act local." Adaptation is necessary to cater to consumer preferences and laws/customs.

In different countries, McDonald's has made product adaptations based on religious laws and customs. In Israel, some outlets serve Big Macs without cheese to adhere to the requirement of separating meat and dairy products in kosher restaurants, although this change was initially met with protests. In India, McDonald's offers Vegetable Nuggets and a Maharaja Mac (Big Mac) made with mutton to cater to dietary restrictions such as Hindus not consuming beef, Muslims avoiding pork, and Gains (among others) abstaining from all types of meat.

In Malaysia and Singapore, McDonald's went through extensive inspections by Muslim clerics to guarantee ritual cleanliness. As a result, the chain received a certificate indicating that there were no pork products present, which signifies cleanliness

and acceptability. The responsibility of ensuring the quality of McDonald's food products lies with Quality Assurance teams. These teams monitor the quality at every stage of production, conducting regular visits, inspections, and audits at production facilities, distribution centers, and restaurants, both announced and unannounced.

To ensure adherence to strict specifications, visits are conducted to secondary suppliers such as farms to assess crops in the field and examine seeds for planting. The specifications cover precise amounts and quality of raw materials, as well as final product size. Thorough inspection procedures are also mandated. McDonald's reviews production records from suppliers and regularly samples stock at distribution centers to verify compliance with these specifications.

McDonald's maintains food quality controls throughout the entire process, including delivery to restaurants. Before accepting any deliveries, a set of rigorous checks for quality and safety must be conducted. All restaurant staff undergo comprehensive training in food safety, hygiene, and preparation protocols. This practice is implemented globally and sets McDonald's apart as a fast-food chain. Presently, there are over 24,500 McDonald's restaurants across 116 countries worldwide. The company remains dedicated to prudent and strategic expansion while effectively managing capital expenditures.

In 1998, 1,668 restaurants were added to the company's system-wide, including those operated by the company, franchisee, or Joint venture. This number decreased from 2,110 in 1997 and 2,642 in 1996. In the following year, McDonald's anticipated primarily adding restaurants outside the USA. McDonald's recognizes the potential for growth in international markets and intends to leverage the knowledge gained from their experience in the USA. Notably, they used to add around 300-400 restaurants annually in the USA, disregarding circumstances. This approach created a significant

gap between McDonald's and their competition.

Despite the hindsight of realizing they could have opened more restaurants during a less competitive time, McDonald's has incorporated this lesson into their rapidly expanding global business. Their primary focus has been on markets with less intense competition. For instance, in 1998, they introduced 41 new restaurants in Japan, constituting a quarter of all system-wide restaurant additions. Moving forward, they anticipate that countries such as China, Italy, and Mexico will contribute significantly to their future restaurant expansions.

While McDonald's strategy demonstrates globalization, it maintains a "global" focus as it can now exchange ideas, best practices, and human resources between borders. This further strengthens its leadership position and enhances its advantage. McDonald's acknowledges that success often comes from adapting to specific environments, despite the cost savings of standardization. This is evident in its localization-based pricing strategy rather than a globalized approach.

This text showcases the comparison of Big Mac prices, the flagship brand of McDonald's, across different countries. It effectively demonstrates that McDonald's has implemented diverse pricing strategies based on specific markets. It is noteworthy that McDonald's does not merely adopt a single pricing policy for the Big Mac in these countries, but rather carefully selects the appropriate price for each market. The highest comparative price for the Big Mac can be seen in our own country, the UK. However, what factors influence McDonald's pricing decisions?

The pricing decisions for each country involve a rigorous process to determine the price in that market. According to Vaginal et al. (1999), the process is as follows: 1. (1) Selecting the price objective; 2. (2) Determining demand; 3. (3) Estimating costs; 4. (4)

Analyzing competitors' costs, prices, and offers; 5. (5) Selecting a pricing method; and 6. (6) Selecting a final price. This process provides the basic framework for McDonald's to establish localized pricing. McDonald's overall pricing goal is to increase market share.

The cost of McDonald's items differs across countries depending on the product demand. In the United States, a Big Mac with fries is equivalent to 14 minutes' worth of earnings for a Chicago office worker. However, in other nations, this meal is seen as more luxurious than an everyday item and would be considerably more expensive relative to income. For example, in Nigeria, a comparable meal would necessitate 11 hours and 23 minutes of work for someone residing in Lagos. Hence, consumer perception plays a crucial role in determining the price of McDonald's products.

Delhi's McDonald's conducted a market analysis in India in October 1996, which included studying its competitor Nirvana's, a local food chain. The purpose was to determine the appropriate price for Indian customers. In June 1994, a comparative study on prices was also carried out in Hong Kong to further improve the pricing strategy. This study found that McDonald's prices were either the same or lower than those of its fast food competitors.

McDonald's is remarkable in its ability to effectively compete in the fast food industry while also offering competitive prices compared to other food providers. In Hong Kong, for example, an average meal at McDonald's costs less than half the price of a basic noodles meal. The company continuously expands its global presence by opening a new location every eight hours, with approximately two thirds of the 1,200 to 1,500

new restaurants opened annually being situated outside of the United States. Currently, McDonald's has over one million employees and anticipates doubling this number in the future.

Before entering a new country, McDonald's HR department has specific questions that must be answered. These questions cover labor laws, the possibility of implementing part-time and flexible work schedules, and any limitations on employees' working hours. As a result, McDonald's adapts its practices to suit each individual situation, making the process truly "global". Additionally, the company prioritizes hiring local individuals and promoting from within. This strategy guarantees that McDonald's has managers who understand both the corporate culture and local customs.

The main focus during the recruitment process is on finding applicants who are customer-focused, as the company believes that having the right attitude is more crucial than technical skills. The company strongly believes in satisfying all customers consistently, as this is considered the best way to differentiate themselves from competitors. This emphasis on customer satisfaction is evident in their recruitment advertising and initial screening process, which follows a global standard and aligns with their globalization strategy. In Illinois, USA, there is a hamburger university that offers advanced operations courses specifically designed for managers, assistant managers, and potential franchisees.

The training courses provided are available in 22 languages and aim to teach a standard practice for use in restaurants globally. However, the teaching approach is modified to cater to the specific requirements of international students. Additional training centers can be found in Munich, Tokyo, Sydney, London, and mainland China. These centers offer managers comprehensive training on various aspects including cooking hamburgers at the correct temperature and conducting facility inspections to

maintain quality standards. Furthermore, managers are educated on giving performance reviews, active listening skills, and handling defensive individuals.

Within the restaurant structure in the I-J there are three main levels of recruitment at McDonald's - hourly paid employees, Junior business managers and business management trainees. Managers transmit the details to their staff. The management development programmer is designed for recruits who are at least 21 and possess some management experience. It provides a direct path to management after completing a rigorous and structured training programmer. The training in business management commences with an intensive course that covers the fundamental aspects of restaurant operation.