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Saturday, April 11, 1998

Orient your company to the global market 

A firm needs to an appropriate orientation for the world market. While looking for orientation, it is important to understand the EPRG framework. Ethnocentric (E) orientation refers to home country organisation. Here the firm's reference point is the home market. Generally, when the firm is ethnocentric, it looks for foreign markets to sell its currents products and surpluses. There is hardly any or minimal product adaptation for the foreign markets. Maybe some minor changes are made to suit hot or importing country's legal requirements, like in packaging, the firm may have to comply with statutory declarations.

As one can make out, this orientation leads to exporting the product. Hence the most common market entry strategy is export. the firm's objective is to seek overseas customers for its existing product line.

The firm may do so either by bidding or sell to an export house or to an overseas buyer or its representative. At times, the overseas buyer may give his requirements, as in the case ofready-made garments, to the firm, which then makes it and delivers it to the customer.

Here, for gaining competitive advantage, the firm will have to ensure that its meets the buyer's specifications in terms of features, quality and delivery. The issue of pricing and payment terms is also important. Normally, a firm may have to work on a marginal cost method to price its products and get paid through a confirmed irrevocable letter of credit.

Should there be a problem in product clearance or selling in the importing country, the firm may have at times no alternative other than either to get it back or destroy it there or accept other cuts in its price. An ethnocentric firm always looks for help from the home country government.

A polycentric firm (P) is one that exports to not just one market but to several markets. It looks for customers in different markets. But still it is interested in selling its existing product line in the existing form. Its reference country is still home country. the differencebetween and ethnocentric and polycentric firm is the number of foreign markets served and the fact the latter is more actively involved in soliciting foreign buyers. Exporting here is a more serious business than in an ethnocentric firm, where it is done in an ad hoc basis. a polycentric firm may even expand its capacity or put a new line for the foreign markets. Manufacturing is still in the home country only.

Regiocentricism (R) occurs when a firm is focussed a particular region, for example, Europe or North America or Asia-Pacific. Here, the firm researches the markets, understands customers and competition in the region and evolves competitive strategies.

It may examine several market entry strategies but common ones are joint ventures, or subsidiary operations in the target region. For example, a firm targeting Europe may set up a manufacturing base in one of the European countries to bypass EC's requirements or quota restrictions.

It may homogenise the product for the EC. Homogenisation mayinvolve making product environment friendly, ie, its purchase, consumption and use should not create pollution or even developing special features in the product to enable it to suit local weather and other conditions.

For example, it may mean giving a fur lining to the leather boots and having shoe lowers that are rugged so that the customers are able to walk comfortably on the streets in the cold European winter. this will make the leather firm's products more acceptable.

For the automobile firm firm, this homogenisation involves providing safety belts (which are legally required), air bags for protecting the driver in a collusion and even converting the vehicle from left hand to right hand drive and from standard transmission to automatic transmission. Its hare that international marketing takes shape.

Geocentric (G) firms are those that consider the world as their home market. those firms evolve strategies to globally maximise their resources. They are not interested in the market shares of just onemarket but keenly pursue goals of global market leadership. Hence, for them, market entry strategy is a choice among the myriad ones. Some of these besides exporting, joint ventures, overseas subsidiaries, etc are strategic alliances, acquisitions, mergers, brand franchising, manufacturing in low cost centres, etc. This is the firm which is a global firm. Global marketing now takes birth. The erstwhile multinational firms have now realised that they cannot survive in the world market if they do not change their orientation and objectives. Until recently multinational firms had looked at Asian, African, Latin American and other markets only from the point of view of selling their products and brands. They did not consider these economies worthy of investment. Their prime goal has been to earn as much profits with least investment in these economies. The board of most transnational companies continued to be dominated by the home country citizens. A global firm has a global board that gives adequaterepresentation to the local aspirations. Its the local or country managers who provide the local perspective to the firm's strategy and hence, to an extent, let us take the example of Coke. In 1977, Coke left India when asked to dilute its equity. It felt that it could not risk losing the Cola formula that made Coke "the real thing". Besides, at that time it had not accepted anywhere in the world the idea of joint ventureship or minority role in a firm. It had hundred per cent subsidiaries in different part of the world and India was no exception. Further, it had not done anything to either develop the soft drink market or industry and most Coke bottlers operated slow speed bottling plants. But in the 1990s, Coke is different. It considers local markets, local government aspirations and competition to decide its market entry and marketing strategy. So in 1993, Coke re-entered India not as a 100 per cent owned subsidiary of its Atlanta parent, but through a strategic alliance with Parle. Same is true for IBM,which re-entered India in 1992 in joint collaboration with Tatas. So, today's firms, some of which are yesterdays multinationals, have the dream of responding to the world Customer through myriad strategies.

A global firm sources its inputs from different countries with a prime concern of getting them at the lowest cost. It processes them or adds value or manufactures finished goods in countries where it can derive the maximum economies of scale, so that it can pursue low cost differentiated strategy in the world markets. as we shall see in our subsequent sections, this strategy is the most viable one as markets round the world become price sensitive and competitive.

Thus, it is a geocentric orientation that makes a firm succeed in today's and tomorrow's market. Indian firms will have to fast change their current orientation as otherwise they will be out of business. For one, in tomorrows market there will be nothing like "home market" for any firm, and the Indian economy cannot ignore this fact. It hasto be a mainstream player in the global economy.

Principal driving force in global marketing: A careful reader will understand that the prime motivation for global marketing is global competition. Perhaps, it may be wise today to think that the earth is flat. Though in terms of physics it is round, space is curved, but for everyday life it is not so. Customers and economies today are reaching out to cost reducing global firms. Understanding the global customer and competition is the first step in challenging a global competitor. "While the pattern of cross subsidisation and retaliation describes the battle, world dominance is what the global (marketing) war is all about." Several Japanese, South Korean, U.S. and European companies have realised this and are actively pursuing this strategy. For they know, that their only salvation now lies in creating and competitively retaining a satisfied global customer. They can little afford to ignore world markets. They also know that the only way to fight price warsat a global level is to have a presence of a global brand in the market place. If otherwise, their products will not be in the shopping plaza but only in the "dollar street".

Marketing management

Rajan Saxena

Published by Tata McGraw-Hill publishing Co Ltd

Price: Rs 210

Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.

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