Exploring Global Marketing Strategies

The Taking the Biz Hot Topics Guidebook is now available. Packed with tips about how to analyze and evaluate some of the most frequently examined topics in A-level business, you can head to takingthebiz.com to purchase your copy now. Hello and welcome to Taking the Biz. This is a channel dedicated to A-level business students just like you. And in this video, we're going to be taking a look at the topic of global marketing. And we'll be explaining the different strategies that firms might towards their marketing when competing in overseas countries. So we can arrange these three different global marketing strategies on a continuum. At one end of the continuum, we'll have the ethnocentric approach to global marketing. At the other end of the continuum, we'll have the polycentric approach to global marketing. And the hybrid or the middle ground between the two is what's known as the geocentric approach. to marketing. Now, for our exams, obviously, we're going to have to have an understanding of what these three different strategies involve. So we'll begin with the ethnocentric approach. When a firm adopts a ethnocentric approach to its global marketing strategies, what that essentially means is that the firm is not going to adapt or tailorize the products that it has in its product range to the different local markets. of the countries that it would like to compete in. Essentially, the business is not going to engage or indulge in any kind of local customization of its products. It's going to have one standard variation of each of its products, and it's going to try and sell that same uniform version of its product in market after market after market. So regardless of the country that the business is selling its goods in. That good is going to be the same. It's going to be standardized. It's not going to be customized for the bespoke needs of consumers in that nation. Now, there are some firms that very successfully use this strategy. Microsoft might be a good example with products such as Windows, or particularly with products such as the Xbox. That product is standard. It's uniform. Microsoft don't tweak or change or... adapt that product for the needs of the local market. The Microsoft Xbox that you might buy in America might be the same as the one you'd buy in the UK and be the same as the one that you might buy in Japan. Aside from maybe adapting how you plug that product in to account for different power supplies in different nations, that product is standardized. That product is not differentiated for the needs of the local market. Apple might be another good example of firms that adopt this ethnocentric approach. If you were to buy an iPhone in different countries around the world, Apple haven't made that product different or bespoke for the needs of consumers in different nations. It is standardized. Now that contrasts to the polycentric approach to global marketing, which is essentially the opposite philosophy. This time the business is going to try and capture customers in... different markets and different nations by specializing in customizing what they produce, changing the product, adapting the product to more closely meet the needs of consumers in that nation. So this time they're going to conduct more market research, find out whether customers in a new country might have their own unique or specific needs that might differ from other countries that the business is selling its goods and services in. and the business is going to adapt what it sells it's going to create something more customized more bespoke for the needs of the local market now again there are examples of businesses that have used this strategy to varying degrees of success tesco's are an example of a uk supermarket that are the uk market leader when it comes to grocery sales but when they decide to try and set up operations in overseas markets They don't use their successful UK business model and simply transplant that onto foreign markets. Instead, they change the product that they have for sale in their grocery stores. They conduct research into what the needs of the local market might be, rather than assuming that the needs of customers in the UK will be the same as the needs of customers elsewhere. Polycentric approaches to global marketing might even extend to the business not even using its brand name that's established in one market when it's competing in other countries. So it may be that Tesco's, for example, trades under a different name when it sells in China and other countries in Asia. Certainly when Tesco's try to penetrate the American market, they decided that rather than trade under their UK brand name of Tesco's, they would create a new brand name to try and target the American market called Fresh and Easy. So polycentric approaches to global marketing are far more sympathetic. to the needs of each group of customers in each new international market. Now, the middle ground between the two is a geocentric approach to marketing. This time, we're going to try and continue to use the business's global brand name. So we try and consolidate or create one global identity for the organization. But we might have some sympathy and some consideration towards the need to tweak and... adapt and customize the products that we sell to the more bespoke needs of customers in different countries. Perhaps we won't do that to a huge extent. We won't create a completely different product range for a new market, but we might invest in researching the needs of customers in different countries and trying to do some mild adaptations to our product range to make it more suitable and pertinent to customers in that country. McDonald's would be a nice example of a business that adopts this geocentric approach. They trade under the McDonald's brand name internationally. They have the same selling proposition, the same kind of business strategy in each nation, but they will make adaptations and changes and tweaks to the menus in each of the countries that they sell in. So the products that they have in the menus of America or some Western European countries might not appear on the menus when they're selling in countries like Japan or Israel or other nations around the world. Pepsi might be another example of a business that uses this geocentric approach, this hybrid between the ethnocentric and the polycentric strategies. Pepsi again will trade under their global brand name. And it may well be that the packaging that they use may be consistent throughout the world. But Pepsi do make some tweaks to the flavour and the recipe of the products that they sell. So in order to cater to the palates of different nations, they may make their products sweeter or less sweet as they sell them in different countries around the world, just slightly customising and adapting the product that they sell to suit the needs of different markets. so in particular it might be useful to know the potential benefits of these different approaches to global marketing with the ethnocentric approach to global marketing perhaps the major benefit is the huge potential it offers for economies of scale because we're not adapting our products because we're just selling this one global standardized version of each of the products in our range it means that any sales we accumulate in global markets will allow us to benefit from economies of scale because we're not adapting what we sell. So we might benefit from huge purchasing economies of scale because all of the components and raw materials we need, we can buy and create one standardized version of our product for the global marketplace. A further benefit of the ethnocentric approach might be the reduction in R&D costs that we're able to experience. So because we're not tweaking or adapting what we sell for consumers in different markets, we don't need to constantly be researching and developing tweaks and adaptations and new versions of our products. So this is going to drive down the R&D costs of the organization and coupled with the economies of scale that we might materialize, this means that the business might be able to have lower costs overall, potentially sell at lower prices in global markets. making ethnocentric businesses potentially more price competitive when trading abroad. But the obvious downside is that the sales of our products might suffer. Because we are hoping that consumers in one country will have the same needs and wants as consumers in the other, it might be that we stumble our way into some international markets and find that customers don't demand the variation of product that we are selling. so by not meeting the local needs of customers in different nations we might be damaging our sales when it comes to the polycentric approach obviously the opposite is true the big advantage is is that now we will be meeting the more specific localized needs of customers in different countries now that might mean that the sales of our products overall are going to be greater it may even mean that consumers in those nations might just pay a slightly higher price for the goods and services that we sell because they are hitting their consumer needs more closely. But the trade-off of this is obviously that we are going to have higher costs. We're going to have to conduct lots of market research to find out what consumers in each of these global nations want. And we're also going to have the research and development costs of having to create adaptation. expectations and changes to our product range for each of these markets. So this is why businesses might be drawn towards a geocentric approach where they're trying to achieve an amalgamation of the benefits of both of these two extremes. Hopefully that video helps you with this topic. We will see you very soon and you keep on taking the beers.

And we'll be explaining the different strategies that firms might towards their marketing when competing in overseas countries. So we can arrange these three different global marketing strategies on a continuum. At one end of the continuum, we'll have the ethnocentric approach to global marketing.

At the other end of the continuum, we'll have the polycentric approach to global marketing. And the hybrid or the middle ground between the two is what's known as the geocentric approach. to marketing. Now, for our exams, obviously, we're going to have to have an understanding of what these three different strategies involve.

So we'll begin with the ethnocentric approach. When a firm adopts a ethnocentric approach to its global marketing strategies, what that essentially means is that the firm is not going to adapt or tailorize the products that it has in its product range to the different local markets. of the countries that it would like to compete in. Essentially, the business is not going to engage or indulge in any kind of local customization of its products. It's going to have one standard variation of each of its products, and it's going to try and sell that same uniform version of its product in market after market after market.

So regardless of the country that the business is selling its goods in. That good is going to be the same. It's going to be standardized.

It's not going to be customized for the bespoke needs of consumers in that nation. Now, there are some firms that very successfully use this strategy. Microsoft might be a good example with products such as Windows, or particularly with products such as the Xbox.

That product is standard. It's uniform. Microsoft don't tweak or change or... adapt that product for the needs of the local market. The Microsoft Xbox that you might buy in America might be the same as the one you'd buy in the UK and be the same as the one that you might buy in Japan.

Aside from maybe adapting how you plug that product in to account for different power supplies in different nations, that product is standardized. That product is not differentiated for the needs of the local market. Apple might be another good example of firms that adopt this ethnocentric approach.

If you were to buy an iPhone in different countries around the world, Apple haven't made that product different or bespoke for the needs of consumers in different nations. It is standardized. Now that contrasts to the polycentric approach to global marketing, which is essentially the opposite philosophy.

This time the business is going to try and capture customers in... different markets and different nations by specializing in customizing what they produce, changing the product, adapting the product to more closely meet the needs of consumers in that nation. So this time they're going to conduct more market research, find out whether customers in a new country might have their own unique or specific needs that might differ from other countries that the business is selling its goods and services in. and the business is going to adapt what it sells it's going to create something more customized more bespoke for the needs of the local market now again there are examples of businesses that have used this strategy to varying degrees of success tesco's are an example of a uk supermarket that are the uk market leader when it comes to grocery sales but when they decide to try and set up operations in overseas markets They don't use their successful UK business model and simply transplant that onto foreign markets. Instead, they change the product that they have for sale in their grocery stores.

They conduct research into what the needs of the local market might be, rather than assuming that the needs of customers in the UK will be the same as the needs of customers elsewhere. Polycentric approaches to global marketing might even extend to the business not even using its brand name that's established in one market when it's competing in other countries. So it may be that Tesco's, for example, trades under a different name when it sells in China and other countries in Asia. Certainly when Tesco's try to penetrate the American market, they decided that rather than trade under their UK brand name of Tesco's, they would create a new brand name to try and target the American market called Fresh and Easy.

So polycentric approaches to global marketing are far more sympathetic. to the needs of each group of customers in each new international market. Now, the middle ground between the two is a geocentric approach to marketing. This time, we're going to try and continue to use the business's global brand name. So we try and consolidate or create one global identity for the organization.

But we might have some sympathy and some consideration towards the need to tweak and... adapt and customize the products that we sell to the more bespoke needs of customers in different countries. Perhaps we won't do that to a huge extent. We won't create a completely different product range for a new market, but we might invest in researching the needs of customers in different countries and trying to do some mild adaptations to our product range to make it more suitable and pertinent to customers in that country. McDonald's would be a nice example of a business that adopts this geocentric approach.

They trade under the McDonald's brand name internationally. They have the same selling proposition, the same kind of business strategy in each nation, but they will make adaptations and changes and tweaks to the menus in each of the countries that they sell in. So the products that they have in the menus of America or some Western European countries might not appear on the menus when they're selling in countries like Japan or Israel or other nations around the world.

Pepsi might be another example of a business that uses this geocentric approach, this hybrid between the ethnocentric and the polycentric strategies. Pepsi again will trade under their global brand name. And it may well be that the packaging that they use may be consistent throughout the world. But Pepsi do make some tweaks to the flavour and the recipe of the products that they sell. So in order to cater to the palates of different nations, they may make their products sweeter or less sweet as they sell them in different countries around the world, just slightly customising and adapting the product that they sell to suit the needs of different markets.

so in particular it might be useful to know the potential benefits of these different approaches to global marketing with the ethnocentric approach to global marketing perhaps the major benefit is the huge potential it offers for economies of scale because we're not adapting our products because we're just selling this one global standardized version of each of the products in our range it means that any sales we accumulate in global markets will allow us to benefit from economies of scale because we're not adapting what we sell. So we might benefit from huge purchasing economies of scale because all of the components and raw materials we need, we can buy and create one standardized version of our product for the global marketplace. A further benefit of the ethnocentric approach might be the reduction in R&D costs that we're able to experience.

So because we're not tweaking or adapting what we sell for consumers in different markets, we don't need to constantly be researching and developing tweaks and adaptations and new versions of our products. So this is going to drive down the R&D costs of the organization and coupled with the economies of scale that we might materialize, this means that the business might be able to have lower costs overall, potentially sell at lower prices in global markets. making ethnocentric businesses potentially more price competitive when trading abroad.

But the obvious downside is that the sales of our products might suffer. Because we are hoping that consumers in one country will have the same needs and wants as consumers in the other, it might be that we stumble our way into some international markets and find that customers don't demand the variation of product that we are selling. so by not meeting the local needs of customers in different nations we might be damaging our sales when it comes to the polycentric approach obviously the opposite is true the big advantage is is that now we will be meeting the more specific localized needs of customers in different countries now that might mean that the sales of our products overall are going to be greater it may even mean that consumers in those nations might just pay a slightly higher price for the goods and services that we sell because they are hitting their consumer needs more closely. But the trade-off of this is obviously that we are going to have higher costs. We're going to have to conduct lots of market research to find out what consumers in each of these global nations want.

And we're also going to have the research and development costs of having to create adaptation. expectations and changes to our product range for each of these markets. So this is why businesses might be drawn towards a geocentric approach where they're trying to achieve an amalgamation of the benefits of both of these two extremes.

Hopefully that video helps you with this topic. We will see you very soon and you keep on taking the beers.

Transcript for:Exploring Global Marketing Strategies

Transcript for:
Exploring Global Marketing Strategies