International Marketing Strategies For Global Competitiveness

Prafulla Agnihotri
Narsee Monjee Institute of Management Studies, India

Hemalatha Santhanam
Jamnalal Bajaj Institute of Management Studies, India

ABSTRACT

Most of the firms are eyeing at the global marketplace to improve their competitiveness. Considerable controversy has
arisen in recent years, concerning the most appropriate strategy in international markets. Deciding how to deal with the
globalization of markets, poses tough issues and choices for managers and their firms. They must consider both –
external environmental forces and internal organizational factors, before they arrive at an international marketing
strategy.
The growing integration of international markets as well as the growth of competition on a worldwide scale
implies adoption of a global perspective in planning marketing strategy. The paper is divided into three parts. The first
part deals with the factors that enable the industry to globalize. The second part examines the concept of global
competitiveness and studies the factors leading to global competitiveness. Finally, in the third part, on the basis of the
points discussed in the two earlier parts, a general approach is suggested for the firms to achieve global competitiveness.
In this paper, ideas from available literature are integrated in a comprehensive conceptual framework in which
strategies can be formulated. The paper, further presents a basis for developing international marketing strategies
alongwith a comprehensive discussion on developing global competitiveness.

Introduction
Globalization can be defined generally as the growth of economic activity spanning politically defined national and
regional boundaries. It finds expression in the increased movement across the boundaries of goods and services, viz.
Trade and investment, and often of people via migration. It is driven by the actions of individual economic actors –
firms, banks, people – usually in the pursuit of profit and often spurred by the pressures of competition.
According to Theodore Levitt (1983), new commercial reality – the emergence of global markets have
come up because of advances in technology, communication, transport, etc. Those corporations geared to the new
reality, benefit from enormous economies of scale in production, distribution, marketing and management. By
translating those benefits into reduced world prices they can decimate competitors that still live in the disabling grip
of old assumptions about how the world works.
An industry does not globalize on its own and every industry cannot be a global one. There are certain
drivers which determine the potential for industry globalization.

Industry Globalization Drivers

There are four broad groups of industry globalization drivers – market, cost, Government and competition (Table-1
below). Together, these four sets of drivers cover all the major critical industry conditions that affect the potential
for globalization. Drivers are primarily uncontrollable by the worldwide business. Each industry has a level of
globalization potential that is determined by these external drivers.

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 Table 1: INDUSTRY GLOBALIZATION DRIVERS

Market Drivers Cost/ Economic drivers

• Convergence of lifestyles & taste • Continuing push for economies of scale.
• Increased travel creating global consumer • Accelerating technological innovation
• Growth of global and regional channels • Advances in transportation
• Establishment of world brands • Emergence of NIC
• Push to develop global advertising • Increasing cost of product development
• Shortening product life cycle

Government Drivers Competitive Drivers

• Reduction of tariff barriers • Increase in level of world trade
• Creation of trading blocs • Increase in foreign acquires of corporation
• Decline in role of government • Companies becoming globally centered
• Reduction in non-tariff barriers • Increased formation of global strategic alliances
• Shift in open market economies • Globalization of financial markets

Source: Yip, G.S. (1991)

However, as mentioned earlier, every industry cannot be a global industry, and some have to adopt ‘multi-
domestic strategy’. Table-2 lists five dimensions and their respective positions under pure multi-domestic strategy
and a pure global strategy. For each dimension, a multi-domestic strategy seeks to improve worldwide performance
by maximizing local competitive advantage, revenue or profits. On the other hand, a global strategy seeks to
maximize worldwide performance through sharing and integration.

Table 2: INTERNATIONAL MARKETING STRATEGIES

Dimensions Setting for Pure Multi-domestic Setting for Pure Global Strategy
Strategy
Market Participation No particular pattern Significant share in major markets
Product offering Fully customized in each countryFully standardized world wide
Location of Value-added Activities All activities in each country Concentrated one activity in each
(different) country
Market Approach Local Worldwide uniform
Competitive Moves Stand-alone by country Integrated across country
Source: Henry Mintzberg, James Brian Quinn, 1996, The Strategy Process Concepts, Contests, Cases.

Strategic Implications of Globalization

As pattern of international competition shifts towards globalization, there are many implications for strategy
formulation. In a global industry, functions of finance, marketing, business and Government relationship change
according to global configuration and co-ordination.

(a) International Alliances:

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 International alliance is another implication of globalization. International coalition, linking firms of the
same industry based in different countries have become an even more important part of global strategy.

(b) Organizational Challenges :

The need to configure and co-ordinate globally in complex ways creates some obvious organizational
challenges such as organizational structure, reporting hierarchies, communication linkages and reward
mechanisms.

(c) Government Relations:

In the globalized era, the selection of foreign market to enter and the mode of entry will, by and large,
depends on the negotiations with the foreign Government, and the ‘muscle power’ of the global firm can be
crucial in deciding the shift of power equilibrium. A global firm must ‘manage’ its relationship with the
foreign Government to its advantage. A shining example of what happens if it fails to do so is Enron in
India.

(c) Competition:
A global firm may be in a better position to compete with its global rival as it can augment its resources
globally.
These implications of globalization will lead companies to take care of these issues forcing them to formulate an
appropriate strategy to handle them.

Strategy for Global Competitiveness

The research carried out in the past reveals that competitiveness depends upon internal as well as external factors. It
also depends on the macro-environmental factors such as the policies of the home country Government (whether
favoring competition, support offered to the industries in terms of taxation, rebates and incentives, fiscal and credit
policies, etc.), the degree of consumerism in the home country, the nature of competition. However, there is lack of a
single model for measuring global competitiveness.

Competitiveness

Competitiveness depends upon internal as well as external factors. However, there is a lack of a single model for
measuring global competitiveness. Various scholars have done research on global competitiveness either on one or
only on a few functional based competitiveness parameters.
According to Hoff, Fisher, & Miller (1997), the term competitiveness can be applied to firms, industries,
markets, and nations. The relationship between organizational competitiveness and market, industry, or national
competitiveness is not well understood. In fact, economists have not yet devised a formal definition or theory of
competitiveness. Neoclassical economists tend to associate competitiveness with external, market-based concepts
such as comparative advantage, market distortions and price.
Hoff, Fisher, & Miller (1997) have summarized the work done by scholars of industrial organization.
These scholars have cited internal determinants of efficiency and quality as aspects of competitiveness. Jusran
(1992), has suggested that competitive analysis must include: first, an evaluation of competitiveness of product
features; and second, an evaluation of the features of the process or internal operations used to produce the products
and the subsequent process yields. According to Skiner (1984), competitiveness is connected to the internal
operations of a firm and the technology used in those operations. Martin et al. (1991), defines competitiveness as
the “Sustained ability to profitably gain and maintain market share”.
Cook and Bredahl (1991), argue that an adequate definition of competitiveness must include place, product
and time.

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 Competitiveness

According to Hoff, Fisher & Miller (1997), competitiveness is the ability to produce goods and services
that meet or exceed quality expectations of the customer; deliver these goods or services at the time, place and price
required by the customer; deliver these goods or services in the form and quantity required by the customer.
However, a different viewpoint is presented by the scholars from area of strategic management.
Barlett and Ghoshal (1989) have developed an understanding as to why a few could overcome the problems
whereas the others could not. They reached following major conclusions that “by the mid-1980s, the forces of 1) global
global integration, local differentiation, and worldwide innovation had all become strong and none could be ignored. competitiveness
To compete effectively, a company had to develop global competitiveness, multinational flexibility and worldwide 2) Multinational
learning capability simultaneously.” Let’s elaborate each feature: flexibility
3) Worldwide
learning
(a) Global Competitiveness: capability
To achieve global competitive advantage, cost and revenue have to be managed simultaneously; efficiency
For global competitive
advantage:
and innovation are both important, since innovations can take place in different parts of the organization,
1) Manage cost and selective decisions have to be made instead of centralizing or decentralizing assets.
revenue
2) Efficiency &
Certain resources and capabilities are best centralized within the home country operation, not only to
Innovations is important realise scale of economies, but also to protect certain core competencies and to provide necessary
3) Made selective supervision of corporate management, such as R&D activities.
decisions instead of
centralizing & Some resources may be decentralized, on a local basis, either because of small potential economies of scale
decentralizing assets. compared to the benefits of differentiation or because of the need to create flexibility and to avoid exclusive
Centralize resources & dependence on a single facility.
capabilities with the home The result is a complex configuration of assets and capabilities that are distributed; yet specialized. The
country operations
Protect core
Figure-1 below shows this complex configuration.
competencies
Provide supervision of
corporate management. Distributed, specialized
resources and capabilities

Large flows of components,

products, resources, people
and information among
interdependent units

Complex process of coordination and cooperation in an

environment of shared decision making

Source: Barlett Christopher A. & Ghoshal Sumantra, 1989, Managing Across borders - The transnational solution.

Fig 1: INTEGRATED NETWORK

Global competitiveness increasingly requires the simultaneous optimization of scale, scope, and factor cost
economies, along with the flexibility to cope with unforeseen changes in exchange rates, tastes, and
technologies.

(b) Multinational Flexibility

The real challenge today is not only to be responsive, but also to build the capability to remain responsive
as tastes, technologies, regulations, exchange rates, and relative prices change. Flexibility in sourcing,
pricing, product design, and overall strategies is now the key to maintaining differentiation.

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(c) World-wide Learning
The pressure of competition has led companies to develop an ability to sense emerging trends, to develop
creative responses, and to diffuse their innovations worldwide. This has certainly been the case in the
telecommunications industry. Learning is also rapidly becoming the central game in consumer electronics
and is emerging as a key competitive capability in branded package goods. Centrally designed products
and processes still play an important global role, but innovations are created by the subsidiaries as well.

Porter’s Global Strategy: Configuration and Co-ordination of Organizational Resources

According to Porter (1986), “Competitive advantage is a function of either providing comparable buyer value more
efficiently than competitors (low cost), or performing activities at comparable cost but in unique ways that create
more buyer value than competitors and, hence, command a premium price”.
A global strategy can be defined as one in “which a firm seeks to gain competitive advantage from its
international presence through either a concentrated configuration, co-ordinating among dispersed activities or
both”.
In the above definition, configuration refers to firm’s activities worldwide, where each activity in the value
chain is performed in different places; whereas co-ordination refers to the way similar or linked activities performed
in different countries, are co-ordinated with each other.
A firm has a choice of options in both configuration and co-ordination. Configuration options range from
concentrated performing of an activity in one location and serving the world from it, for example, one R&D lab, one
large plant – to dispersed, that is performing the activity in every country. In the extreme case, each country would
have a complete value chain.
Co-ordination potentially allows the sharing and accumulation of know-how and expertise among dispersed
activities. A firm co-ordinating internationally may also receive early warning of industry changes by spotting them
in one or two leading countries before they become broadly apparent in other countries. So, they can transfer the
knowledge to guide other activities elsewhere. Co-ordination may also allow a firm to respond to shifting
comparative advantage, where movements in exchange rates and factor costs are significant and hard to forecast.

Managing Time as a Competitive Advantage

According to George Stalk Jr. (1991), time is the next source of competitive advantage. He argues that like
competition itself, competitive advantage is a constantly moving target. The key is not to get stuck with a single
simple notion of its source of advantage. The best competitors know how to keep moving and always stay on the
cutting edge. He states that time is the determinant factor to become competitive. The way companies manage time
– in the area of production, development and marketing –represent the most powerful new sources of competitive
advantage. In fact, as a strategic weapon, time is equivalent of money, productivity, quality even innovation. For
example, in 1980s, managing time has enabled top Japanese companies not only to reduce their cost but also to offer
broad product lines, cover more market segments, and upgrade the technological sophistication of their products.
These companies were time-based competitors.

Global Competitiveness
What drives companies to become globally competitive? Is it vision or ambition that will bring global
competitiveness? As mentioned by Hamel and Prahalad (1989), leading global companies of the last two decades
invariably began with ambitions that were out of proportion to their resources and capabilities. They created an
obsession with winning at all levels of the organization and then sustained that obsession over 10 to 20 years' quest
for global leadership. The desire of a company to achieve global competitiveness together with technology,
innovation, quality, productivity, efficiency, etc. will bring global competitiveness.

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 A company's desire to achieve global competitiveness is communicated through vision. Hence,
communication vision and strategy implementations are the next steps.
Stace and Dunphy (1991) emphasize the fact that the strategic process is more important than the
repositioning of the strategy. According to them, there is too much attention on the strategic repositioning of the
organization and "Writers representing this strategic emphasis are Porter (1980 and 1985); Miller (1986); Harrigan
(1985); Murray (1988); and Ohmae (1987) : theirs is an emphasis on content, direction and repositioning rather than
process. Yet, a critical factor in the successful repositioning is the internal capability of the organization, generated
appropriately chosen change and human resource strategies".
Strategy formulation and strategy implementation can be best described with two words: 'What' and 'How'.
As Kogut and Bownan discuss "The 'how' and 'what' are linked …… what a company wants to be capable of doing,
depends on how it does things". It has happened too often in the past that an attractive idea has turned out to be a
nightmare in the implementation process.
In international competition, companies compete with global strategies, involving not only in trade but also
in foreign investment. A nation must provide a favorable home base for companies that compete internationally.
The home base (Porter; 1986 calls it as Global Platforms) is the nation in which the essential competitive advantages
of the companies are created and sustained. According to the Porter a country is the desirable platform in an industry
if it provides an environment yielding firms domiciled in that country an advantage in competing globally in that
particular industries. Porter has identified two determinants of a good global platform in an industry. The first is
comparative advantage, or the factor endowment of the country as a sight to perform particular activities in that
industry. Today, simple factors such as low-cost unskilled labor and natural resources are increasingly less important
to global competition compare to complex factors such as skilled scientific and technical personnel and advanced
infrastructure. The second factor is the characteristics of the countries' demand. Local demand conditions provide
two potentially powerful sources of competitive advantages to a global competitor. The first is first - mover
advantages in perceiving and implementing the appropriate global strategy. Pressing local needs, particularly
peculiar ones, lead firms to embark early to solve local problems and gain proprietary know-how. This is then
translated into scale and learning advantages as firms move early compete globally. The other potential benefit of
local demand conditions is a base load of demand for product varieties that will be sought after in international
markets.
Apart from the two factors identified by Porter, the third determinant for a global platform is the support
lent by the government of the country where the headquarter of the company is situated in. The government can
support a firm by offering incentives, having low tax-structure or encouraging internationalization of it’s activities
by offering various subsidies/ incentives.
Effective strategies start from what the company is distinctively good at, not from what it would like to be
good at, and is adaptive and opportunistic in exploiting what is distinctive in these capabilities. Strategies should be
adaptive and opportunistic. Planning should start with an assessment of the firms’ distinctive capabilities. Building
distinctive capabilities is a task of exceptional difficulty because if it were not, the capability would soon cease to be
distinctive. It is easier to identify distinctive capabilities than to create them. Strategy begins with an understanding
of what these distinctive capabilities are.
A capability can only be distinctive if it is derived from a characteristic which other firms lack, yet it is not
enough for that characteristic to be distinctive. It is necessary also for it to be sustainable and appropriable. A
distinctive capability is sustainable only if it persists over time. A distinctive capability is appropriable only if it
exclusively or principally benefits the company which holds it (Kay 1993).

From Capabilities to Competitive Advantages

A distinctive capability becomes a competitive advantage when it is applied in an industry and brought to a market.
The market and industry have both, product and geographic dimensions. Sometimes, the choice of market follows
immediately from the nature of a distinctive capability. An innovation usually, suggests its own market.

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 Some firms have distinctive capabilities based on their architecture and the same architecture advantage
can often been employed in a wide range of industries and markets.
Reputations are another distinctive capability. They are created in specific markets. A reputation
necessarily relates to a product or a group of products. It is bounded geographically too.
Many reputations are very local in nature. For instance, a doctor or a good retail store. But an increasing
number of producers of manufactured goods like Coca Cola, IBM, Sony, etc. have established reputations
worldwide and branding has enabled international reputations to be created and exploited.
A firm can only enjoy a competitive advantage relative to another firm in the same industry. A competitive
advantage is a feature of a particular market. The value of a competitive advantage will depend on the strength of
the firm’s distinctive capability, the size of the market and the overall profitability of the industry. If there is an
excess capacity in the industry – as in automobiles – then even the last competitive advantage may not yield
substantial profits. Profits come not only from distinctive capabilities but from possession of strategic assets –
competitive advantages which arise from the structure of the market rather than from the specific attributes of firms
within that market.
The theme of this research is based on the premise that the competition is dynamic and evolving; it
attempts to seek answers to questions like - Why some companies based in some countries are more competitive
than others?

Business Forms and Competitiveness: New Age Organizations

Beinhocker (1997) used a metaphor to describe the complexity of environment and to develop strategies : "Anthills
are marvelous things. With elaborate labyrinths of tunnels, layouts reflecting their occupants' social hierarchies,
chambers dedicated to specific functions and carefully cited entrances and exits. Yet, who is the engineer? Where
is the blueprint?"
There is no layout, of course. Rather, the community of ants is an example of a complex adaptive system
(CAS). A CAS has three features:

They are open, dynamic systems

They are made up of interacting agents

Complex adaptive systems exhibit emergence and self-organization

Moving from CAS, number of economists started to say that economies are CASs. Although this work is
still in its infancy, there is enough evidence to suggest what the key features could be: "First the new economics will
be based on a realistic model of cognitive behaviour. Second, the new economics will see agents as interacting with
one another in a dynamic web of relationships. Third, markets will be viewed as inherently dynamic rather than
static systems". It seems promising regarding the fact that "traditional economics has never been able to explain
innovation and growth" (Beinhocker 1997).

Achieving Global Competitiveness

Many companies today are struggling to achieve a global competitiveness and a globally integrated organization
retains the capability for local flexibility and responsiveness. Organization provides the vehicle by which strategy
can be formulated and implemented. The nature of organization also affects the kind of strategy that can be
developed. This is particularly true of global strategy. Building the kind of company capable of formulating and
implementing total global strategy is not easy. The task is achievable if managers break it down into digestible
pieces and if they relate changes in organization to the specific changes needed in global strategy.
The following four factors affect a company's ability to formulate and implement global strategy (Yip, et. al
1988):

 Organization structure comprises the reporting relationships in a business - the 'boxes and lines'.

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 Management process comprises the activities such as planning and budgeting that make the business run.
 People comprise the human resources of the worldwide business and include both managers and all other
employees.
 Culture comprises the values and unwritten rules that guide behavior in a corporation.

These four factors are explained further in the Figure-2 below:

Market Factors

• Homogeneous market needs

• Global customers
• Shortening product lifecycle
• Transferable brands and advertising
• Internationalizing distribution channels

Economic Factors Environmental Factors

• Worldwide economies • Falling

of scale in Potential for transportation costs
manufacturing or Global • Improving
distribution communications
Strategy
• Steep learning curve • Government policies
• Worldwide sourcing • Technology change
efficiencies
• Significant differences
in country costs
• Rising product
development costs

Competitive Factors

• Competitive interdependence
among countries
• Global moves of competitor
• Opportunity to preempt a
competitor’s global moves

Source: Yip, et. al. (1988)

Fig.2: EXTERNAL DRIVERS OF INDUSTRY POTENTIAL FOR GLOBALIZATION

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 Besides these, to become globally competitive, the company needs to focus on the following:
♦ Developing a marketing plan with universal appeal.
♦ Help employees understand the company's global vision.
♦ Benchmark off mistakes that other have made in the past.
♦ Select the right partners for joint ventures overseas.
Figure-3 below illustrates these points

Assemble
Global Team

Define
Business

Identify Identify Key

Key Markets Competitors

Check Core
Strategy

Check Country
Selection

Diagnose Industry
Globalization Potential

Evaluate Use of Evaluate Organization

Global Strategy Capacity

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 Develop Global
Program

Fig. 3: STRATEGY FOR GLOBAL COMPETITIVENESS

Managers responsible for marketing in a multinational enterprise must design appropriate marketing
programs for each national market. To some extent, each country must be treated as a separate marketplace because
each has it’s own currency, legal and political requirements, and methods of doing business. However, by co-
ordinating operations on a regional or global scale, multinationals can gain important competitive advantages. Fig.-3
above illustrates some of the major issues involved in the development of international marketing strategy for global
competitiveness.
Success in world competition turns on efficiency in production, distribution, marketing and management
and inevitably becomes focused on price. The most effective world competitors incorporate superior quality and
reliability into their cost structures. They sell in all national markets, the same kind of price, quality, reliability and
delivery for products that are globally identical with respect to design, function and even fashion (T Levitt ;
Harvard Business Review. "The Globalization of Markets" - May/June 1983).
The growing integration of international markets as well as the growth of competition on a worldwide scale
implies that adoption of a global perspective in planning marketing strategy. However, to conclude that this
mandates the adoption of a strategy of global standardization appears over-generalized. It ignores the inherent
complexity of operations in international markets and the formulation of strategy to penetrate these markets. While
global products and brands may be appropriate for certain market ad in targeting certain segments, adopting such an
approach as a universal strategy in relation to all markets may not be desirable and may lead to major strategic
blunders. Moreover, it implies a product orientation and a product-driven strategy, rather than a strategy based on a
systematic consumer behavior and market characteristics3.

Summary
Global competitors must have the capacity to think and act in complex ways. They must understand and accept the
fact that this is an era of competition and only those who are competitive will remain in the race. They must,
therefore, design their strategies such that they manage the cost and revenue simultaneously. Due credit must be
given to efficiency and innovations.
Globally competitive firms would know how to manage their resources globally and how to strike a
balance between centralization and decentralization, so that they take advantages of both - economies of scale and
the benefits of differentiation and adaptation. They will have to learn to adopt combinations of these alternatives.
The key to success is a careful analysis of the obstacles to this approach. Both should be carefully
evaluated on the basis of company's strength and the company's competitive advantage in exploiting them before
arriving at an international marketing strategy.

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End Notes
1. For the purpose of this article, the term global industry is defined as one which has
standardized products, specialized activities like R & D performed only at the headquarter,
uniform market positioning, and an integrated competitive strategy and a multi-domestic
industry is defined as one in which the products may be adapted to suit the needs of different
markets, specialized activities performed at various locations, differing market positioning
strategies in different markets, and different competitive strategy for each region or even
country.
2. There is no common and globally accepted definition of the term competitiveness. In fact
there are as many versions of the meanings and definitions of ‘competitiveness’ as the number
of experts in this field. Hence, the term is defined in this paper as the ability of a firm to
compete effectively in international markets.
3. For a discussion, see Agnihotri Prafulla (1997), “Achieving Global Competitiveness Through
Flexibility in Management: A Conceptual Analysis”. A research paper presented at and
published by IIT, New Delhi.

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