Crafting strategies for global marketing in the new millenium

Business Horizons, Sept-Oct, 1996 by William L Shanklin, David A. Griffith

One way to provoke an animated conversation among top executives of multinational companies is to broach the issue of whether a standardized or localized approach to world markets is superior. Advances in communication technologies are giving new life to this old debate and must change conventional thinking in an increasingly information-oriented world economy. To a Dunn & Bradstreet or a Lloyds of London, the demarcation between domestic and international business is disappearing as new and improved means of communicating and conducting business from afar make a client in Paris virtually as close as one down the street.

In his 1995 bestseller The Road Ahead, Microsoft cofounder Bill Gates coined the phrase "friction-free capitalism." It describes the Internet's capacity for directly connecting worldwide buyers and sellers, or their computer surrogates acting as agents, and thereby enabling them to share information, negotiate with one another, and transfer funds. As the need for middlemen and other intermediaries is reduced or eliminated, a friction-free exchange between buyer and seller takes place. Innumerable services or intangibles can be tailored to suit individual customer needs--call it mass customization--and offered instantaneously without regard to constraints imposed by time and space.

FOUNDATIONS FOR CORPORATE STRATEGY

The starting point for formulating corporate strategy is for upper-echelon executives to determine what the organization's main appeal will be to customers. A differential competitive advantage originates from this process. In the popular book The Discipline of Market Leaders, authors Michael Treacy and Fred Wiersema (1995) masterfully explained why identifying a corporation's major "value discipline" is tantamount to being a first cause of how a company evolves:

Choosing to pursue a value discipline is not the same as choosing a strategic goal. A value discipline can't be grafted onto or integrated into a company's normal operating philosophy. It is not a marketing plan, a public relations campaign, or a way to chat up stockholders. The selection of a value discipline is a central act that shapes every subsequent plan and decision a company makes, coloring the entire organization, from its core competencies to its culture. The choice of value discipline, in effect, defines what a company does and therefore what it is.

Treacy and Wiersema's research and experiences as consultants have led them to conclude that market leaders perfect at least one of three principles--or, put differently, deliver at least one of three primary benefits to customers: operational efficiency (lowest costs), customer intimacy (exceptional service), or product leadership (technological superiority). Companies whose strategic recipe calls for excellence in all three--to be all things to all customers--typically reap mediocre results because of the trade-offs involved. Of course, companies vigorously pursuing their chosen principle do not abandon the other two. Gateway Computer may have built its reputation on low prices made possible by direct selling, but it does not give short shrift to customer service and product development.

This concept of the pivotal strengths of corporate leaders is similar to what many executives and academicians call "core competencies." These underlying capabilities of an organization enable management to offer potential and current customers low-priced products and services, or inordinate customer service, or cutting-edge technological solutions to problems or needs.

Our contention is that the idea of core competency or value discipline is the missing theoretical link for resolving the longtime debate about whether a standardized or localized marketing strategy is superior in doing business globally. This dispute has simmered because there is no universal right answer. The appropriate international marketing strategy for a specific company is contingent on its major core competency. What works well for a cost-driven firm will yield poor results for a corporation focused on customer service.

Once top management adopts a guiding principle, the implementation or "how to" phases of the decision, both domestically and abroad, become easier. Management knows better whether the multinational can standardize its marketing programs in a one-size-fits-all tack to foreign markets or whether it will be required to adapt strategies to local conditions as dictated by differences in culture and buying behavior. Incipient communication technologies are increasing management's capabilities to experiment with innovative strategies.

SEGUE FROM VALUE DISCIPLINE TO GLOBAL MARKET STRATEGY

Executives in multinationals have wrestled

for years with the issue of whether marketing strategy is best standardized (globalized), regionalized, or localized. The task is one of estimating when a particular strategy, combined with the firm's main core competency, has a high probability of producing a potent mixture. Tim right strategy for a company offering lowest prices would be wrong for one with a reputation for superb personal attention to customer needs. Rolls Royce customers would not accept the standardized marketing programs associated with cost-driven automobile manufacturers.