Emerging Markets

Once a firm commits to enter a new market, it enters a new phase marked by additional factors that make decision making increasingly complex. These factors, each of which has a significant impact on the marketing strategy, include technology, legal and ethical constraints, economic forces, customers, resource limitations, cultural and demographic influences, competition, and political forces. [3]

[3] Marketing Management by Winer, Russell S. (pp. 441-445), Prentice Hall, 2000. © Adapted by permission of Pearson Education, Inc., Upper Saddle River, NJ.

Because technological infrastructures vary greatly from market to market, marketers are frequently forced to treat each country separately, realizing that inequities impact their strategic initiatives.

An example of this is vividly provided by Wal-Mart, whose supply chain management system in the United States has helped the company become successful. With each of its stores and distribution centers technologically connected, Wal-Mart is able to streamline inventory and become very cost-effective. Because this infrastructure is not available in all countries, Wal-Mart must analyze and decide which foreign markets could best suit its technological capabilities and needs. In addition to potential technological concerns, labor and transportation matters also routinely influence new market penetration.

Ethical constraints are also an issue for international marketers. It is very easy for a firm to exploit a foreign country given that market's working conditions. In foreign markets, certain actions could be seen as ethical, whereas those same actions might be deemed unacceptable by American standards. Therefore, it is critical to strike a balance between domestic and global business practices when utilizing resources from foreign markets.

Economic forces also cause problems for those marketing abroad. The financial problems of Southeast Asia in the late 1990s, for example, had a drastic impact on firms too reliant on that region. Accordingly, it remains crucial that a firm hedges its risk by conducting market research before allocating resources to a new market.

Many service-oriented businesses, such as delis and drug stores, routinely open in cities after a major defense contract is awarded to a large manufacturer. However, by incorrectly assessing the true economic impact of the new contract to the local community, small businesses might not accurately assess the demand for the products and services they hope to offer.

A hotel chain might also open a new franchise in town to take part in the anticipated economic revitalization linked to the construction of a new sports stadium. However, without properly analyzing how business will fare on nonevent nights, or by not fully appreciating the sheer number of events likely to be held at the new stadium and their impact on tourism, the hotel chain's management might just be setting itself up to fail.

The fourth force is the customer. In each country, customers put different values on different product attributes. It is up to the marketer to determine what these values are and then, by extension, how best to position their product to reach intended target markets.

For example, former Los Angeles Lakers star Magic Johnson has built a successful $500 million business but not just because he brings national chains, like Starbucks, Loews movie theaters, and TGI Friday's, into inner-city neighborhoods. He goes one step further. Johnson has succeeded in positioning himself as the local "face" of these businesses, leading customers to believe that they have a local, high-profile advocate in their midst.

Before Johnson opened his first theater in 1994, he at the last minute told the manager that there had to be a strawberry drink among his fountain offerings because he believed many of his customers preferred the flavor. On the same point, his two TGI Friday's restaurants might have more fried foods than other Friday's franchises. His Starbucks might provide an ethnic favorite like a cobbler or pie. In short, he has succeeded, in part, because he has customized his product to meet customer preferences.

Natural, financial, and human resource limitations are also prevalent when marketing in a new area. For instance, if a firm entering a new market requires a certain skill set for its employees that cannot be satisfied in the local area due to language barriers or training costs, it could become cost-prohibitive for a company to conduct business in the region.

Many bobblehead dolls and sports figurines are made in China. Often, distributors that work in the United States are communicating with a manager overseas; a foreign manager who often conveys instructions to people who quite possibly have never seen much of the particular player whose likeness they are expected to reproduce.

When comic book mogul Todd McFarlane entered the sports action figure business, he immediately experienced trouble when attempting to have his product manufactured abroad.

For those making the figurines in China to have a better idea of how to scale the small water bottles that came attached to the figurines of hockey goalies, someone in McFarlane's company sent a water bottle to be mocked up. Soon, hundreds of the toys came back with small water bottles, except they all inadvertently had a Bell Helmets logo on them. This error was made because the particular water bottle that was sent had a Bell Helmets logo on it and it was incorrectly assumed that the logo was an essential marking on the toy. As it turns out, Bell Helmets has no relationship with the NHL, forcing the company to destroy the replica bottles.

The impact of cultural influences cannot be overstated. International marketers must carefully and with great tact adapt products, services, and, if need be, its own company culture to the local market culture if success is to be attained.

The competitive environment also presents challenges for international marketers. This competition comes not only from other firms trying to enter a new market, but also from local firms as well. Local firms routinely receive preferential treatment from local governments, resulting in a competitive advantage. Moreover, because government policies differ from country to country, firms must complete thorough due diligence to ensure that their core competencies will not and cannot be compromised by local political forces and relationships.

A different and ever-changing political environment also requires the undivided attention of marketers and frequently forces them to alter their strategy on a moment's notice. One recent example of this is the continued changes in the economic policies in India brought about by its government. This government interaction has forced many international firms to rethink their presence throughout the region, with many simply choosing to forgo business there entirely.

This framework for conducting international business applies quite well to the sports apparel industry. Until about 20 years ago, none of the major American companies, Nike included, had a significant presence in foreign markets. Even 10 years ago, less than a third of Reebok's and Nike's revenue was generated abroad. By 2001, those percentages grew to more than 40 percent for each company. Analysts now believe a majority of Nike's revenue will be generated abroad within a few years.

Conducting business abroad today, whether in the next city, county, country, or continent, brings with it significant challenges. Failing to understand the differences in market segments whether consumer, supplier, or government-related can devastate a company financially and harm its brand.

Successfully penetrating new markets requires tremendous planning, buttressed by finesse and tact. Focusing on the wants and needs of diverse customers, often against a backdrop of logistical and political uncertainties, remains one of business' largest challenges.



On the Ball. What You Can Learn About Business from America's Sports Leaders
On the Ball: What You Can Learn About Business From Americas Sports Leaders
ISBN: 013100963X
EAN: 2147483647
Year: 2003
Pages: 93

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