Understand global marketing strategy

Introduction
Globalization has changed the way many businesses operate and influenced brands
that participate on an international scale to adopt global marketing strategies to succeed in the
global market. There are many definitions of global brands, but for this chapter, a global
brand is one with a global geographic presence and generates a percentage of sales outside
the brand’s home market.
For the last two decades, the market economy has changed significantly with most of
the economic development taking place in emerging markets. Emerging markets are
categorized as economies moving towards more sustainable and rapid growth. Hence,
presenting new opportunities for global brands especially those brands from mature
economies in the United States, Western Europe, and Japan. Emerging markets have changed
over the past 20 years and the rate of economic growth is growing at a 4% compared to 2% of
that of developed economies (European Commission, n.d) and according to one report
(Woetzel, Madgavkar, Seong, Bughin & Manyika, 2018), emerging markets are responsible
for two thirds of the world’s economic growth. “By 2030, the emerging markets will account
for 62% of the total growth in global consumption and about 15.5 trillion in spending”
(Donnelly, 2018a). Not to mention, countries such as China, India, South Korea, Indonesia,
Thailand, and Singapore now provide a new set of opportunities for business expansion for
global brands. Anu Madgavkar, a partner at McKinsey Global Institute in the research
department identified that these countries all had at least a 3.5% real GDP per capita year
over year for the past 50 years (Donnelly, 2018b).
Who is it for?
This chapter is geared towards individuals who want to understand the survival
strategies for global brands in emerging markets. That is to say, includes investors and global
brands.

Emerging markets offer investors the benefits of diversification. Emerging markets do
perform differently from developed markets and present opportunities for international
investors to diversify their investment portfolios due to economic downturns in countries
especially in mature markets (Terzo, 2018). In other words, economic downturns in countries
like the United States can be offset by growth in an emerging market.
For Global brands looking to expand, emerging economies offer room for revenue
improvement, become a buffer towards recession, as well as increase cooperation amongst
multinational institutions (Pendleton, 2019). Since there is a rise of middle-class consumers
in emerging markets, global brands have been attracted into expansion into these markets
(Court & Narsimhan, 2010). This chapter will include many other challenges that global
brands need to be aware of to successfully grow in emerging markets, as well as emerging
market strategies that global brands can use to overcome these challenges.

Challenges
Global brands face many challenges that need to be taken into consideration when
expanding into multiple emerging markets around the world. These challenges are cultural
differences, political and government forces, and competition from local companies. Our
world is very complex, and each country has its unique mix of embedded cultural differences
such as lifestyle, language, education, demographic, and economic situation. All these factors
create complications that multinational corporations must pay attention to if they want to
survive for the long term in the international market. These cultural differences affect
consumer’s motives, attitudes, behaviours, and buying patterns, which must be tailored to or
else international companies face uncertainty and risk (Rothaermel, Kotha & Steensma,
2006). DuPont Teflon expansion into China is an example of when a company fails to adapt
to cultural differences that led to the failure of a company in a foreign market (Neupert,
1999). Expanding to the Chinese markets was a great opportunity because of the improving

economic situation. However, DuPont failed to adjust to the consumer needs and cooking
habits of the Chinese people. Traditional Chinese cooking methods include different methods
and utensils compared to cooking methods in western markets (Neupert, 1999). Other
differences include the size between western and Chinese kitchens, as well as the availability
of cooking gases only accessible to a small part of the Chinese population (Neupert, 1999).
Business and politics are connected and influenced by one another, especially when
global brands enter emerging markets where both political and government systems involved
influence almost every institution in the country. According to Rothaermel, Kotha, &
Steensma, (2006),” A country’s political risk and forces, often represent underlying societal
tension and unrest, may cause drastic changes in a country’s business environment that may
prove detrimental to foreign business interests” (p. 59). In some instances, global brands need
to comply with government rules, restrictions, and regulations, to participate in the local
market. Corruption and fraud are also risks to global brands looking to grow in emerging
markets. When Google expanded to China, it faced lots of obstacles imposed by the Chinese
government. The freedom of information and press is limited in China due to the censorship
of search engines imposed by the Chinese government (Quelch & Jocz, 2010). Google was
not willing to comply with restrictions that go against their core beliefs and values. This led
to the end of its expansion in China. Although Google had good intentions when expanding
into China, they questioned whether it would be a good business decision to enter China with
its existing political situation. The political situation and position of a country should be one
of the top priorities to a company as it could be a direct factor to the success or failure of a
global brand.
Local brands in emerging markets over time have increased their economic growth,
innovation, and ability to pose a legitimate competition to international corporations.
According to Santos & Williamson, (2015), “Increasingly, powerful local companies are

winning out against multinational competitors. This is especially true in emerging markets”
(p.45). Global brands have a disadvantage when it comes to the lower-value activities which
were often outsourced to emerging economies (Santos & Williamson, 2015). This allowed
local players to adopt or essentially copy products that were very similar or even better than
those of global brands. According to Santos & Williamson, (2015), “Modularization and
outsourcing allowed Xiaomi to produce smartphones that became number one in the Chinese
market with a 13.7% share in the fourth quarter of 2014, outpacing both Apple and Samsung”
(P.47). The rise of globalization has led emerging markets to gain an advantage with the
increasing number of talented and knowledgeable workforce. Also, global brands can acquire
products, technology, and talent from other places in the world to get a competitive edge
(Santos & Williamson, 2015). Local markets also have an advantage because they are
integrated with local commercial networks and have a much deeper understanding of
consumer needs and societal culture (Santos & Williamson, 2015). An example would be the
competition between Uber and Didi. Didi is one of Uber’s local competitors in China (Wu,
Chen, & Su, 2016). China is an increasingly growing market in ride-hailing services due to
an increased population who all own smartphones (Wu, Chen, & Su, 2016). Didi had
financing from major companies in China and had evolved to using messaging and payment
apps which created an innovative advantage to the company (Wu, Chen, & Su, 2016).

Strategies
Based on the traits of emerging market countries, three sub-markets can be
recognized, and each sub-market has its strategy.
Product Market – Brand Positioning
The consumers in emerging markets have suffered for decades because of the closed
economies and limited selection of low-quality goods which come from domestic
manufacturers. However, these emerging market countries such as Brazil, India, and China

have opened up their markets growing rapidly during recent years. With the economic
liberalization, free trade policy and higher income, consumers in emerging market countries
are hungry for high-end products (Gingrich, 1999). There is a research result shows that the
percentage of consumers claiming to have increased their spending on luxury goods in the
last 5 years was 70 percent, which is 23 percent higher than those mature markets (Elena,
2017). Since emerging market’s consumer behavior has shifted from “money-oriented” to
“product-oriented”, finding an appropriate product position which fits the characteristic of an
emerging market is critical for global brands. Furthermore, the product market in emerging
countries is affected by “word-of-mouth”, which is a local phenomenon in those markets and
is more general than in developed market countries. The research shows that 92 percent of
people received recommendations from families and friends before purchasing in Egypt
while only 29 percent in the United Kingdom (Atsmon, Kuentz, & Seong, 2012). One of the
reasons is that emerging market-consumers generally live close to friends and families.
Meanwhile, the product markets generally acknowledge that if a product is used by more
people, this product would have a smaller chance to fall apart (Atsmon, Kuentz, & Seong,
2012). Hence, finding a positive and clear brand positioning is quite important especially in
emerging markets.
Labor Market – Innovation Strategy
To fully leverage the opportunities afforded by emerging markets, global brands should
apply innovation strategies by establishing R&D hubs in emerging economies. The most
important reason is fitness between R&D hubs and labor market in emerging markets. For
global brands, an international platform of R&D hubs is critical. As we mentioned before,
there are lots of cultural differences which will impact on customer preferences and
purchasing behavior in emerging economies. The lowest-cost, stripped-down products and a
“one-size-fits-all” will not work anymore in emerging markets. Local R&D capabilities help

position products for local markets and customer requirements. According to research,
technology firms with global R&D activities can demonstrate better financial performance.
Global brands that restrict foreign R&D to a few locations and focus on low-wage countries
such as China and India also see above-average financial success. (Jaruzelski & Dehoff,
2008)
Global brands are not just moving to countries due to cost reduction. The increased
talent pool in labor markets of emerging economies also is another important reason why we
recommend adopt innovation strategy in emerging markets. Skilled people who are a
prerequisite for boosting innovative performance are enjoying a brain gain as the number of
young skilled workers increases. For example, the BRIC countries (Brazil, Russia, India, and
China) had a total of 18 universities in the ranking of the global 500 universities in 2003, but
this grew to 40 universities in the 2015 ranking. (Between 2000 and 2015 the number of
domestic invention patent applications in China grew by a factor of 38 – from about 25,300
to more than 968,000 applications per year (Dutta, Lanvin,& Wunsch-Vincent,(Eds.), 2016).
Emerging markets also encourage innovation through legal, regulatory and economic
assistance. The application of innovation strategy by establishing R&D hubs in emerging
markets already be an essential part of globalization. Prominent global brands such as
Microsoft, PepsiCo, IBM, Cisco, Nokia, and GE have also established R&D hubs in
emerging markets to conduct scientific and engineering research and explore sustainable
business models and organizational structures.
Capital Market – International Joint Venture (IVJ)
The development of economies gives developing countries a large capital market
potential. For example, deeper capital markets in emerging Asia could free USD 8000 billion
in funding annually, mostly for mid- to large-sized corporations and infrastructure
accelerating economic growth and potentially lifting millions from poverty.

There are many different kinds of methods to invest in emerging markets for global
brands, for example, cross border mergers and acquisitions, and establishing international
strategic alliances such as joint ventures. We believe that successful joint venture can present
valuable opportunities while reducing costs and risks across the board.
The capital and financial markets in developing countries are remarkable for their lack of
sophistication. Apart from a few stock exchanges and government-appointed regulators, there
aren’t many reliable intermediaries like credit-rating agencies, investment analysts, merchant
bankers, or venture capital firms. For foreign companies, especially for the global brands
which first time to enter emerging markets, IJV will simply help then to share ideas, share
capital, share profits, share work and share culture even the risks of a business because it is a
win-win situation. For example, with the help of joint venture partner – the Moscow city
administration, McDonald overcome the local supply chain issue (Thing, 2010).

Besides, because of domestic regulatory regulations and/or the nature of the host-
country market, global brands are often left with little choice, but to form joint ventures with

local companies. IJV can be very useful in sourcing cheap local inputs and materials and
access to established local distribution networks, and can also provide insurance against
political risks. For example, China required all automotive companies to enter Chinese
markets via joint ventures a few years ago. Except for consideration of the features of the
emerging capital market, establishing IJV relationship will help MNCs protect their
intellectual property. The technique rated most effective was forming a joint venture with a
large Chinese partner, incentivizing that partner with outsized ownership, and relying on its
self-interest to defend the IP. For example, BYD had a poor reputation for copying foreign
competitors such as Toyota. However, Toyota announced it entered an agreement to jointly
develop all battery-electric vehicles for China market in July 2019 (Wu, Chen & Tong, n.d).

Conclusion
Growth in emerging markets presents both huge opportunities and challenges for global
brands. Investors and global brands can increase their brand awareness and revenue by
entering into emerging markets since there is increasing economic activities. Although there
are opportunities for global brands to grow in emerging markets, it is difficult to sustain.
Challenges including cultural differences, political and government forces, and competition
with local companies can interfere with growth. According to research, these challenges can
be overcome by strategies for instance brand positioning, innovative strategies, and joint
venture strategies developed by global brands. By understanding these survival strategies,
global brands will be able to position products to meet customer requirements, increase their
talent pool, improve organizational structures, and adopt a win-to-win situation between
themselves and competitors. They should develop both counter and cooperative strategies
and by no means underestimate local competition attempting to take their brands globally as
they break out into emerging markets. The bottom line, global brands must carefully execute
strategies to offset challenges and risks. An emerging market strategy, if chosen wisely, can
lead to sustainability and growth.

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