Abstract
International marketing is an important requirement for global companies to succeed in the international market. However, some companies have failed to get it right. This paper explains why this is so. It shows that technological, political, social, legal, and economic factors affect international marketing strategies. Additionally, four case studies show that social and political factors are the most common considerations for developing international marketing strategies. Alternatively, this paper proposes that, for purposes of future research, marketing scholars should investigate the role of ethics in international marketing strategies because this is an unexplored area in this field.
Introduction
International marketing strategies premise on the principle of varying needs and requirements across different global demographics (Czinkota & Ronkainen, 2012). Stated differently, international marketing recognizes that different people have different needs and requirements. Some global brands, such as Coca Cola and Gillette, have capitalized on this fact and built successful brands. Although most of such brands have a global appeal, their competencies in circumnavigating regional differences have helped them to have a successful marketing mix (Zou & Fu, 2011). Based on the potential of global trade, many global companies are positioning themselves to exploit the advantages of global commerce (Czinkota & Ronkainen, 2012). They have adopted several strategies for global competitiveness, such as franchising, mergers, acquisitions, and direct entry strategies (Brady, 2014). Some of them adopt these strategies to reach the scale of global competitiveness required in international marketing (Brady, 2014). At the same time, these companies struggle to reach international standards of trade because global companies prefer to trade using a set of internationally recognized standards of operation (global standardization) (Zou & Fu, 2011). American and European mergers and acquisitions have a combined value of more than $3 billion (Doole & Lowe, 2008). Based on such statistics, Doole and Lowe (2008) say, “The global marketplace is no longer the summation of many independent country markets, but much more multilateral and interdependent, economically, culturally and technically” (p. 4).
Differences in values, customs, cultures and beliefs emphasize the importance of international marketing strategies because the success, or failure, of one product, in one region, may not give the same outcome in a different geographical area (Czinkota & Ronkainen, 2012). Indeed, just as companies dedicate many resources to understanding their local markets, they need to allocate similar resources to understand their foreign markets as well. However, because it is more difficult to get information from foreign markets, compared to local markets, there is a need for an integrated marketing mix that captures prevailing social, economic, and political dynamics. This research should reveal important details that affect international marketing strategies, such as the nature of competition, market size, and promotional differences (among other factors) (Zou & Fu, 2011). The scale of international investments and organizational dynamics are also other considerations that affect international marketing strategies. To come up with successful marketing mix strategies, it is important to understand different aspects of global marketing strategies. This paper builds on this need, introduces the concept of international marketing, and explains the unique operational dynamics of this strategy. Furthermore, it acquaints us with the complexities of international trade and helps us to understand present market trends in international trade.
The Strategic Importance of International Marketing
In 2010, the total value of global merchandise exchanged through international trade exceeded $10 trillion (Doole & Lowe, 2008). The total value of services exchanged through this platform exceeded $2 trillion (Doole & Lowe, 2008). While many people cannot fathom how such amounts of money would look like, such statistics show us the large-scale nature of international trade and its untapped potential. Today, population health experts believe that the global population is seven billion people (Doole & Lowe, 2008). By 2050, this population should rise to ten billion people. The rising population numbers complement international trade by providing a huge market for goods and services. The rising income per capita indices (in many countries) and the emergence of middle-income communities in some developing countries also complement this trend through a high demand for goods and services. Relative to this development, Czinkota and Ronkainen (2012) say, with the growing affluence in many parts of the world, consumers will quickly be seeking new purchasing choices. Consequently, global companies will intensify their marketing campaigns to exploit the growing disposable income in the international marketplace. The main research questions appear below.
Research Questions
- What are the challenges of developing an international marketing strategy?
- What are the considerations of developing an international marketing strategy?
Literature Review
The liberalization of the global economy, and the globalization of consumer tastes and preferences (among other factors) have increased the level of interconnectedness among global economies, thereby heightening the need to understand international marketing skills (Czinkota & Ronkainen, 2012). Globally, managers recognize the need to develop useful skills, attitudes, and aptitude to operate in the global market (Czinkota & Ronkainen, 2012). Therefore, managers have to demonstrate prudence in exploiting international marketing opportunities through their quest to learn new skills. However, their success largely depends on understanding what international marketing is all about.
International Marketing – A Definition
Doole and Lowe (2008) say international marketing involves making marketing mix decisions across international boundaries (this is a simple definition of the concept). Comparatively, in its complex form, international marketing involves setting up new plants around the world and overseeing the associated marketing operations remotely (Zou & Fu, 2011). Occasionally, some international companies develop a marketing mix strategy by simply appointing an international marketing agency to manage their overseas operations (Brady, 2014). However, some companies have a notable global market presence in all their overseas markets and choose to have a direct control of their global operations. For example, Ford oversees most of its global operations in more than 150 countries where it operates (Doole & Lowe, 2008). Thus, a complex understanding of international marketing describes the direct management of global marketing operations. International marketing operations emerge at different levels. They appear below:
- Domestic Marketing: Domestic marketing involves the manipulation of a selected set of variables to gain a competitive advantage over the competition (Doole & Lowe, 2008). For example, companies often manipulate price, advertisement, and product/service attributes to gain a competitive advantage over their competitors (Zou & Fu, 2011). Such activities often occur within an uncontrollable external environment that has unique social, economic, and political dynamics (mostly within a national boundary).
- International Marketing: As mentioned in this report, international marketing refers to implementing a marketing mix strategy across different geographic segments (Doole & Lowe, 2008). Typically, different markets have unique and uncontrollable factors that affect marketing strategies (Czinkota & Ronkainen, 2012). However, within the same model, controllable market factors, such as price variations and opportunities for advertising also vary across different geographical areas. These variations often define the complexities associated with international marketing.
- Global Marketing Mix: Experts consider the global marketing mix as a larger and more complex marketing operation, compared to international marketing and domestic marketing operations (Doole & Lowe, 2008). In a global marketing mix, “companies design, integrate and control a whole series of marketing programs into a substantial global effort” (Doole and Lowe, 2008, p. 6). The primary objective of global marketing is to create synergy in the international market. This strategy strives to exploit exchange rate fluctuations, minimize the tax burden, and lower labor costs when undertaking international business transactions (Brady, 2014). Organizations that exploit these advantages benefit from improved corporate synergy because, through global marketing, the entire business will have a greater value than a sum of its parts (Brady, 2014).
The Adaptation to International Marketing Requirements
The varying dynamics of international marketing require most organizations to seek the services of competent managers who can circumnavigate the challenges of the global business environment (Brady, 2014). These professionals have a broad task of overseeing the operations of a multinational firm in the domestic and foreign market. This is why Doole and Lowe (2008) say, “the international marketing manager has a dual responsibility; foreign marketing (marketing within foreign countries) and global marketing (coordinating marketing in multiple markets in the face of global competition)” (p. 6). Based on this statement, Doole and Lowe (2008) believe that the definition of international marketing mostly depends on a company’s level of involvement in international trade. Based on this understanding, international marketing could involve export marketing, international marketing and global marketing (Czinkota & Ronkainen, 2012). These marketing categories describe relatively straightforward marketing activities. However, global marketing and international marketing are more complex and formal marketing procedures, compared to export marketing (Brady, 2014). They also operate using a different marketing philosophy from export marketing. For example, their marketing philosophy largely depends on market segmentation through social, legal, economic, political and economic dynamics. Brady (2014) says comprehending the complexities of these international trade dynamics and knowing how they affect international marketing strategies is the key to developing successful international marketing operations. Similar to successful domestic marketing campaigns, the most successful international marketing strategy easily manipulates these factors for the benefit of an organization’s marketing goals (Brady, 2014). Based on this understanding, it follows that understanding the impact of these international trade dynamics in an uncontrolled business environment is the main challenge experienced by international marketing companies in global commerce (Czinkota & Ronkainen, 2012). Several internal and external factors affect the success of these international marketing strategies. They appear in the subsequent sections of this literature review
The International Marketing Environment
As mentioned in this report, the most notable difference between domestic marketing and international marketing is the complexity or simplicity of the market involved. International marketing involves complex marketing strategies that aim to navigate through the unpredictable business dynamics of different countries (Brady, 2014). Comparatively, domestic markets have fewer social, political and economic issues that make it plausible to adopt a simple marketing strategy (Czinkota & Ronkainen, 2012). However, the following issues affect the success of such strategies in the international marketing environment.
Social/Cultural Environment
It is difficult to ignore the social or cultural characteristics of a domestic market if a company wants to succeed in its international market operations (Doole & Lowe, 2008). This need emerges from research studies, which show that some differences in social conditions and religious characteristics could explain why people in a foreign country may shun, or embrace, new products (Czinkota & Ronkainen, 2012). Stated differently, social factors affect consumer perceptions, attitudes, and patterns of buying behavior. These differences also explain consumer differences around the world. In the same fashion, they explain the potential for global branding and standardization (Zou, Andrus, & Norvell, 1997). Therefore, the failure to comprehend the social or cultural dynamics of a market could lead to disastrous consequences for multinational companies (see the case studies mentioned in chapter three). The following social and cultural factors are important to note.
Language
Language, as a cultural factor in international trade, has either built or destroyed international brands in foreign markets. Brady (2014) says language is an important component of marketing communications because it defines how people would use a product and how a company would design a marketing campaign. Many international brands have encountered the potential pitfalls of language miscommunication in international trade. For example, Coca Cola encountered this challenge when it ventured into the Chinese market because its brand name sounded like “Kooke Koula,” in Chinese, which translates to “a thirsty mouthful of candy wax” (Doole & Lowe, 2008, p. 12). Based on this challenge, the company had to redesign its marketing campaign and change the pronunciation of the brand name to sound like “Kee Kou Keele,” which translates to “joyful happiness” (Doole & Lowe, 2008, p. 11). General Motors Company has also experienced the same challenge as Coca Cola because its brand name “Nova” did not make sense in Spain as it translated to “no go” (Doole & Lowe, 2008). Pepsi also encountered the same language barrier in Germany when it launched a marketing campaign titled “Come alive with Pepsi.” Germans translated it as “resurrecting from the grave” (Doole & Lowe, 2008). McDonald’s marketing failure in Japan also stemmed from a cultural gap between the marketers and the local population because the Japanese people viewed the “white” face of Ronald McDonald, which the marketers used in the marketing campaign, as the “face of death” (Doole & Lowe, 2008). These examples show that the success of an international marketing campaign largely depends on the competency of participating companies to understand language and cultural differences across markets. These differences vary across different parts of the world. For example, there are considerable cultural differences between North America and South America and East and West Europe. They show that it is common for international firms to encounter significant cultural gaps when they first enter new markets. As shown in chapter three of this paper, these differences commonly emerge when western international firms venture into Asian markets. For example, Camay Soap launched a successful marketing campaign in France, which showed a man washing his wife’s back. However, the campaign failed to report the same outcome in Japan because Japanese women viewed the action (a man washing a woman’s back) as an invasion of the wife’s privacy (Doole & Lowe, 2008).
Although many researchers have emphasized the importance of understanding cultural differences in marketing research, some of them claim that cultural convergence in the global marketplace has significantly diminished the inhibitions caused by cultural factors in international trade (Brady, 2014; Czinkota & Ronkainen, 2012). The success of selected international brands, such as Microsoft, Intel and Coca Cola, shows that most consumers are slowly embracing a global identity that makes it easy for international companies to operate (Doole & Lowe, 2008). For example, experts project that a growing youth culture in the international market will surpass all other market segments (Czinkota & Ronkainen, 2012). Older customers are also embracing a global identity. For example, Doole and Lowe (2008) say, “They drive international cars, take foreign holidays, watch international programs on television, use international hardware and software” (p. 4). On the supply side, many global companies are increasingly gaining international prominence by developing immense global power that the world has never witnessed before. However, it is crucial to understand the difference between the globalization of a product and the convergence of multiple cultures. The above-mentioned phenomenon defines the latter.
Legal Environment
When global multinationals operate in foreign markets, they not only subscribe to the laws of their parent companies, but also those of foreign markets (Czinkota & Ronkainen, 2012). Additionally, they have to subscribe to a proxy set of international laws. The diversity of these laws often affects different aspects of their marketing strategies. For example, market research shows that legal changes often affect advertising strategies (Doole & Lowe, 2008). Such limitations would happen through media restrictions and the acceptability of creative media campaigns. Legislative changes could also affect minor aspects of a marketing mix strategy, such as packaging and pricing. MG Sports Cars and Craft Foods are examples of international brands that had to withdraw their operations from the U.S. and Europe (respectively) because of legislative pressures (Doole & Lowe, 2008). Based on these dynamics, international companies have to understand the implications of the legal environment on their marketing operations because their international operations are subject to complicated legal requirements (Czinkota & Ronkainen, 2012). This complication arises from the combination of local domestic laws, international laws, and domestic laws in the parent countries.
Economic Environment
The United Nations (U.N.) claims that more than one-third of the global population is poor (Doole & Lowe, 2008). This statistic means that their purchasing power parity is lower than $3,400 (the global poverty benchmark). The U.N. also claims that only 11% of the global population has a per capita income of more than $8,000 (benchmark for rich people in the world) (Doole & Lowe, 2008). However, a more startling revelation by the UN is that 50 million rich people of the world have the same amount of wealth that 300 million people of the global population have (Doole & Lowe, 2008). This statistic shows that although the global purchasing power parity is high ($62 trillion), it has an uneven distribution across different countries (Doole & Lowe, 2008). These economic factors affect international marketing decisions by affecting consumer-purchasing decisions (Zou & Fu, 2011). Similarly, they make it difficult for international companies to identify lucrative market opportunities (Czinkota & Ronkainen, 2012). Such companies also encounter the challenge of developing an integrated marketing strategy across different regions of the world that have varying economic potential.
Globally, the economic environment could affect international marketing through the activities of international institutions, or through international trade agreements (Zou & Fu, 2011). In the same breadth of analysis, international companies need to understand global economic patterns to exploit trends that may complement their growth patterns (Czinkota & Ronkainen, 2012). Similarly, they need to understand the regional economic policies of a country to protect themselves from punitive economic policies (Zou & Fu, 2011). Such information is also useful in assessing whether a company would be profitable when venturing in a market, or if it could compete with the existing competition.
Political Environment
Political issues that affect a marketing campaign refer to national, or international, issues that affect international marketing strategies (Czinkota & Ronkainen, 2012). Global marketing research shows that politics is among the top three considerations when developing international marketing decisions (Zou & Fu, 2011). Political issues affect decisions about whether to invest in a market, or the nature of the marketing strategies to use after investing (Czinkota & Ronkainen, 2012). Such issues that affect international marketing strategies depend on a government’s attitude towards business and the freedom it gives international firms to trade in their economies (Brady, 2014). Unstable governments are unattractive to international investors because they expose them to investment risks that they would otherwise not encounter in other markets. Alternatively, stable regimes attract many international investors because they minimize the business risk of these firms. This finding led Doole and Lowe (2008) to say, “The political environment is the most volatile aspect of the international marketing mix” (p. 17). Czinkota and Ronkainen (2012) hold a different view from researchers who believe that political instability is always a negative attribute for international investors. They say that most unstable governments expose international investors to trade risks and opportunities. Consequently, they believe that political instability is not necessarily “bad” because companies could find new opportunities to trade or develop marketing mix strategies that appeal to both conservative and liberal markets. For example, America’s political activities in Afghanistan and Iraq brought new market opportunities for international companies (especially those that operated in the technology and military sector). However, it led to the collapse of the business environment for local Afghan and Iraqi businesses. It also created higher political risks for countries that bordered the nations. From this background, the political instabilities in the Middle East and the ever-present threat of terrorism have forced many international companies to reevaluate the political risk of their international engagements before venturing into new markets.
Research shows that the highest political risks are in developing countries (Brady, 2014). Even those that are on the reform path still pose the same high risk. Evidences from Indonesia, Venezuela and the Philippines show that their political instabilities could easily cause civil strife and inhibit efforts by multinational firms to profit from their investments (Doole & Lowe, 2008). Nonetheless, comprehensively, political risks could affect international market strategies through several ways – discriminatory practices, operational restrictions, and physical actions (confistication). To affirm these different types of political interference, Doole and Lowe (2008) say, “Investment restrictions are a common way governments interfere politically in international markets by restricting levels of investment, location of facilities, choice of local partners and ownership percentage” (p. 16). Many international companies have encountered such problems. For example, when Microsoft ventured into the Chinese market, it wanted to supply it with products that it had designed and developed from its Taiwan operations (Doole & Lowe, 2008). However, the Chinese government rejected its strategy because it wanted the California-based company to design and produce its products in China. Furthermore, it wanted to have a stake in the computer programming process to make sure that the fonts displayed in the products were Chinese (Doole & Lowe, 2008). As a counter strategy, Microsoft’s founder, Bill Gates, argued that the Chinese government should not dictate how it should market or develop its products; instead, it proposed that market-based pressures should dictate their operations (Doole & Lowe, 2008). They lost this argument and accepted the demands of the Chinese government. Such is the nature of political pressure affecting international businesses.
Technology
When international companies venture into foreign markets, they bring new technology to these markets. Such technologies improve the quality of their investments. For example, the Indian agricultural sector benefitted from improved technology after Pepsi brought the latest agricultural equipment from China to increase local agricultural production (Muthu, 2014).
In today’s digital age, technological advancements have changed marketing strategies. The growing access to the internet and the increasing prominence of social media are the main drivers of this trend. For example, more than 1.2 billion people in the world today have gained access to the internet (Doole & Lowe, 2008). This demographic has created a $10 trillion market (Doole & Lowe, 2008). This is why marketers today have to have a strong social media presence. Nonetheless, technology has also helped to improve other aspects of marketing, such as data gathering and management control. It has also helped companies to manage their global operations remotely. Based on these contributions, Doole and Lowe (2008) say, “Satellite communications, the Internet and the World Wide Web, client–server technologies, ISDN and cable as well as email, faxes and advanced telephone networks have all led to dramatic shrinkages in worldwide communications” (p. 17). These developments show that in today’s global society, geographical access is paving the way for information access. Therefore, the latter is becoming the new and most powerful marketing tool. The power of technological advancements manifests through the growing dominance of internet-based companies, such as E’Toy and Amazon. For example, E’toy does not engage in the brick and mortar business, but has a higher market capitalization than Toys ‘R’ us (Doole & Lowe, 2008). This trend shows that the influence of technology would continue to dominate global marketing strategies.
The following diagram summarizes the main factors affecting international marketing strategies:
A combined understanding of the above-mentioned factors reveals the need for companies to develop sound international marketing strategies. The same pressures have created a need for companies to seek managers who have developed international marketing skills to exploit these international trade opportunities. These reasons explain why international marketing is of great importance not only to the business community, but also to higher institutions of education, which experience an increased need to churn qualified graduates who understand international marketing issues.
Methodology (Case Study Analyses)
This paper chose a case study research design to answer the research questions. The cases chosen showed the failures of international marketing strategies in the global marketplace. They appear below:
Case 1: Google’s Entry into China
Google is arguably the largest online search engine in the world. It has reported tremendous success in many parts of the world. However, its entry in China did not mirror its global success. The California-based company entered the Chinese market in 2000 (Hamilton & Zhang, 2011). It received a lot of attention from Chinese users and consequently gained significant market share. However, after several years of trading, its market share declined. Part of the reason for Google’s failure in china was the failure to understand local political dynamics of the Chinese market. Particularly, the company ignored the government’s intolerance to free speech (Plunkett, 2007). Consequently, many Google users in China experienced inordinate delays when accessing internet content. Baidu (a competitor) understood the local political and social dynamics of China, better than Google did, and consequently displaced the American company as the leading search engine company in China (Hamilton & Zhang, 2011). As a counter strategy, Google launched a Chinese version of its website that contained censored content (Hamilton & Zhang, 2011). Broadly, its main undoing was failing to censor its content (not adhering to the wishes of the government and a section of the Chinese society). This case highlights the need for political and cultural sensitivity when venturing into international markets. In fact, such issues explain why Google had to censor its contents and conform to the local political and social dynamics of China. Baidu had understood this fact better. Therefore, it remains the dominant search engine company in China (Plunkett, 2007).
Case 2: Wal-Mart in Japan
Wal-Mart started operating in 1962 as a small retail company (Needle, 2010). However, over the years, it has evolved to become the world’s most recognizable brand in the retail market segment. The company is arguably the biggest retail company in the world. Wal-Mart has a global market presence in 28 countries (Brunn, 2006). It trades under different brand names, depending on the local economic and social dynamics of its host economy. Its global business is worth billions of dollars (Needle, 2010). In fact, many countries want the retail giant to trade in their countries because of the sheer volume of trade that the company could bring to foreign markets. Its key business strategy includes low-cost selling, and an aggressive market strategy that thrives on discounts and promotional activities. This low-cost business strategy has often worked, but failed in others. Its failures have prompted the retail giant to exit some international markets, such as Germany, Indonesia and South Korea (Needle, 2010). However, using the same strategy, the company has reported tremendous success in other locations, such as Mexico and Canada (Needle, 2010). While its performance is mixed, the company’s marketing strategy failed in Japan because the local population did not understand the essence of buying “cheap” products (Brunn, 2006). This failure stems from the Japanese association of cheap products to poor quality. Indeed, it caused Wal-Mart to lose a lot of money because of cultural, managerial, and perceptual factors. Wal-Mart’s failure in Japan has created new concerns for economic experts who believe the company’s future success depends on its ability to learn from its mistakes.
Wal-Mart’s Mistakes
Cultural Ignorance
Wal-Mart entered the Japanese market in 2002 through a joint venture agreement with a local Japanese retail company. The joint venture agreement was supposed to help it overcome the economic and political challenges of operating in the Japanese market (Brunn, 2006). The company prefers to use this strategy in its international ventures because it allows it to gain control of the joint venture by increasing its investments. Nonetheless, Wal-Mart entered the Japanese market with a lot of optimism because the country has a huge population (about 127 million people) that could provide a good market for its goods and services (Brunn, 2006). Similarly, Japan has among the highest income per capita in the world, thereby increasing the prospects of an international company realizing profitability quickly (Needle, 2010). Although these social and economic aspects are attractive to global retailers, such as Wal-Mart, the company failed to understand how Japan’s local consumer and retail environment could affect its business. For example, experts argue that the company failed to adapt to the local social and economic practices of the country after wrongly believing that the local population would adapt its norms and practices (Needle, 2010). They also failed to understand the local market needs of the Japanese population. For instance, they failed to recognize the need for local store customization, as a requirement for retail success. They also failed to understand the differences between Japanese and American consumer behaviors. For example, they did not understand that many Japanese customers preferred to buy goods in small quantities, but shopped regularly, as opposed to their American counterparts who preferred to buy goods in bulk. Furthermore, many Japanese people could not accept the idea of shopping in large retail stores; instead, they preferred to shop in small stores (Brunn, 2006). This consumer behavior explained why small stores in Japan reported the highest growth rates in the country. Similarly, Wal-Mart did not understand that part of the consumer buying behavior in Japan was the preference for fresh foods, as opposed to canned foods (Wal-Mart does not specialize in fresh foods). In an unrelated analytical context, the Japanese people associate price variations with quality variation. For example, they associate high prices with high quality goods and services. This perception explains why this demography buys 40% of the world’s luxury goods (Brunn, 2006). However, Wal-Mart does not stock luxury products, as its core business strategy. Lastly, the Japanese attach a lot of value to the aesthetic properties of goods and services. Indeed, packaging and design attributes influence their purchasing decisions (Brunn, 2006). However, Wal-Mart did not pay attention to these properties. Generally, Wal-Mart did not conduct a proper market research to understand these cultural dynamics. This omission partly contributed to its failure in this market.
Low-cost Pricing Strategy
Based on the cultural dynamics of the Japanese market, Wal-Mart was bound to fail if it used a low-cost price strategy. Through their failure in this market, they understood that the Japanese did not appreciate a low-cost strategy as their Mexican, American, or Canadian markets did. Instead, Wal-Mart stuck to its mass-market strategy because this strategy was the only one that contributed to the company’s profits (in the past). However, it should have used a “differentiation” strategy because it makes more sense to use it in the Japanese market as it aligns with their love of luxury and expensive products. Albeit these challenges explained Wal-Mart’s failure in the Japanese market, the company had already made more than $5 billion worth of investments in this market (Needle, 2010). Although the company claims to make some profits today, market evidence still shows that its existing international strategies still do not work because it has recently closed more than 30 stores (Needle, 2010). Therefore, a better understanding of local cultural dynamics would have helped the retail giant to realize better success in Japan.
Case 3: Pepsi in India
In the late 1980s, Pepsi realized that the US market was saturated and had to expand to foreign markets to maintain its profitability (Center for Management Research, 2003). India was a potential market because of its huge population. Furthermore, India’s per capita consumption of soft drinks was lower than its peers’ per capita consumption. For example, Egypt’s consumption of soft drinks per capita was 63, while India’s was three (Center for Management Research, 2003). These statistics showed an immense potential for Pepsi in India. Furthermore, the increased familiarity of global brands in India, through globalization, prompted the American company to believe that it would realize market success quickly (Muthu, 2014). Consequently, it sought permission from the Indian government to trade in its economy. However, it quickly found out that the government was opposed to its entry. Many political factions in the country also shared the same view (Center for Management Research, 2003). Therefore, officials from Pepsi resolved to lobby prominent political figures to support their entry. This strategy failed (Center for Management Research, 2003). Consequently, they had to come up with an attractive package for India that would automatically attract government support (Muthu, 2014). Since Pepsi’s market entry strategy involved importing a cola concentrate and selling the same product under the Pepsi brand, the company decided to entice the government by promising to set up a fresh juice processing facility in Northern India and exporting its products to overseas market (Center for Management Research, 2003). In this agreement, Pepsi would not only import products into the Indian market, but also help to improve the local economy by increasing its exports. The company wanted the Indian government to understand its willingness to contribute to India’s social and economic growth. To reflect this new vision, Pepsi changed the goal of its Indian operations to “promoting and developing the export of Indian agro-based products and introducing and developing PepsiCo’s products in the country” (Center for Management Research, 2003, p. 4). However, the government rejected Pepsi’s initiative again because it had reservations about importing a concentrate for production in India. Similarly, it objected the company’s demand to use Pepsi as the official brand name for its products (Center for Management Research, 2003). After this rejection, Pepsi had to rethink its strategy again. It found out that it could exploit the government’s sensitivity to the social and political problems of Punjab by drafting a proposal that would improve the social, political, and economic problems of the region. Consequently, the company strategized to link its market entry strategy to the development of the region. The region was also strategic to the company’s operations because Punjab was a highly productive agricultural area (Center for Management Research, 2003). Therefore, officials of Pepsi drafted a new entry agreement that emphasized the company’s commitment to improve the agricultural productivity of Punjab and reduce its unemployment levels. The company went a step further to say its investments would reduce terrorism by making radical youth to return home to work (Muthu, 2014). The government later accepted its proposal and allowed the company to operate in India. Through this agreement, India believed it could benefit from Pepsi’s entry in many ways. For example, it knew that it could benefit from the company’s entry into the country through stimulus economic programs (Muthu, 2014). The greatest benefits were in the agricultural sector because the company contracted farmers to supply its Punjab plants with fresh produce (Muthu, 2014). Tomatoes were the most sought after products and because of Pepsi’s Indian operations, the country’s production increased from 4.24 million tons to 5.44 million tons (Muthu, 2014). The company also introduced agricultural research centers to benefit farming communities and improve the quality of their produce.
Case 4: McDonald in India
McDonald first entered the Indian market in 1996 through a joint venture agreement with a local fast food company – Vikram Bakshi (Kulkarni & Lassar, 2009). The most common product offered by McDonald was the Big Mac, which the Indian people knew as Maharaja Mac (Kulkarni & Lassar, 2009). After launching its Indian business, McDonald opened more than 200 stores in the country (Kulkarni & Lassar, 2009). However, the global fast-food chain has been struggling to improve its sales through aggressive marketing campaigns aimed to make its products more affordable to the people. For example, in 2014, the company slashed the price of its products by more than 15%. Similar to Wal-Mart’s market failure in Japan, McDonald failed to replicate its global success in India because of its failure to understand the social and cultural dynamics of its host market. For example, it ignored the huge vegetarian population in India and instead offered different meat products to the market (Kulkarni & Lassar, 2009). The manager of McDonald admits to this mistake by saying it had only one “vegetarian option” when it started its business in the subcontinent (Kulkarni & Lassar, 2009). Therefore, most of its products contained beef or pork. However, because of religious reasons, most of the people avoided these products. When McDonald realized this fact, it was too late to change its menu because it had already created the perception that it was a meat-based fast-food company. This is why even when the company changed its menu to offer vegetarian products, the customers demanded that the company prepares its products in a separate section of the kitchen. They also demanded that the company prepare these products with separate utensils (Kulkarni & Lassar, 2009).
Results and Findings
The literature review section of this paper revealed that technological, political, social, and economic factors mainly influenced international marketing mix strategies. This paper analyzed four cases involving the failed marketing strategies of four international companies (McDonald, Wal-Mart, Pepsi, and Google). By most measures, these companies have reported tremendous success in their global markets. However, this paper shows that they can also fail. Social and political factors emerged as the main reasons for the failure of these international companies. Here, social and cultural factors accounted for the failure of McDonald, Wal-Mart, and Google. However, Pepsi’s failure in India stemmed from its ignorance of political factors prevalent in India. Based on these findings alone, correctly, we could say cultural and social factors account for the failure of international marketing mix strategies. This finding is premised on the fact that social factors accounted for three-quarters of the marketing mix failures in this paper.
Based on the nature of the case studies highlighted in this paper, a noteworthy finding is that all the cases involved the failure of western firms in Asia. Two cases highlighted the failure of two western companies (Pepsi and McDonald) in India, while the other two cases highlighted the failure of western firms in China and Japan. The case studies differed on the basis that the firms did not operate in the same sector. Google is in the technology business, Wal-Mart is in the retail business, while Pepsi and McDonald are in the food and beverage sectors. This diversity shows the commonality of market failures across different investment sectors.
The outcomes of these case studies could highlight the cultural differences that exist between America and Asian nations. Furthermore, they highlight the differences in political systems between America and some Asian countries. The market failures of these firms reveal the need for a careful market research if western firms want to venture into Asian markets. Here, it would be interesting to investigate if these firms would succeed by venturing into the markets that share the same social and political structures.
Discussions and Conclusion
This paper sought to find out the main challenges of international marketing. This paper reveals that technological, political, economic, and social factors are the main impediments to proper international marketing. This paper also sought to understand the main consideration for the development of sound international marketing strategies. The findings revealed that proper market research could help international firms identify potential barriers to trade, which could affect the efficacy of the proposed marketing strategies. The marketing literature described in this paper points to the strategic contents of international firms when seeking new markets, globally. The literature shows that these international firms formulate these strategies to realize a competitive advantage over their peers, but because of external and international environmental factors, their outcomes may vary. The failures of the four international organizations highlighted in this paper emphasize the findings of the institutional theory, which argues that a firm’s success often depends on its knowledge and belief systems. The knowledge systems of these organizations failed to capture the social or political considerations that should have informed their marketing mix strategies. Based on the nature of operations undertaken by these firms, it was important for them to undertake proper market research and understand how they could shape their marketing strategies to avoid a clash with local politicians or cultural systems. For example, Pepsi should have conducted prior market research to understand the political environment of India and its effects on its intent to venture into this market. If it did so, it would have learnt that the same fate affected its archrival, Coca Cola, in the same market, because the government made it untenable for the business to continue its operations in India after they failed to agree on selected political issues that concerned branding and company operations (Center for Management Research, 2003). However, based on Pepsi’s failure to secure political support for its operations, it understood the sensitivity and importance of the welfare of residents of Punjab to the Indian government. This is the reason for the company’s commitment to align its development goals with the national welfare of the region. In its proposal to the Indian government, the company emphasized its contribution to Punjab’s agricultural sector and promised that it would help to reduce the country’s unemployment burden. Based on its alignment with India’s social welfare growth, the Indian government allowed Pepsi to start its operations in 1989 (Center for Management Research, 2003). According to its agreement with the government, the company introduced a processing plant for fruits and vegetables in India and signed many contracts with Indian farmers to supply fresh fruits and vegetables for processing (Center for Management Research, 2003). Although most of the literature highlighted in this paper is rich, some important aspects of market research have remained unexplored for a long time. For example, this paper has failed to highlight the ethical issues that should inform international marketing strategies. Scholars should conduct further research to fill this research gap. Lastly, the case studies sampled in this paper mainly highlight the market entry strategies and outcomes of western firms in Asian countries. Researchers should conduct further research to investigate the same issue using a different set of companies and regions.
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