The International Marketing Environmental Factors That Affect Global Companies In Their International Marketing Decisions

Introduction:

Engrained in potential clients’ behaviour, cultural and social factors are of paramount importance to the international companies aiming to expand their business globally, as exemplified by the Kellogg’s case study excerpt above (Lee & Carter, 2012). The business model, strategy and tactics of a company are naturally influenced by the environment where the corporation is formed (Christmann, 2004). For a company operating in a limited geographical sphere the marketing techniques usually follow a linear model, which needs little alteration based on general market trends applicable to a particular area (Cui & Liu, 2000). When a company extends into other cultures, however, their marketing must be adapted to suit the clientele that they are targeting in the new regions (Root, 1998). The advantages of internationalisation are evident, as expansion usually brings along increased profits, due to a larger population that can purchase a company’s products or services (Bartlett & Ghoshal, 1999). However, there are certain disadvantages associated with globalisation of business, including the costs incurred by the company in adapting their operations and marketing tactics to a region’s specific demands or the potential failure in conquering a new market (Craig & Douglas, 2005). 

Globalisation, the vague and highly debated term, usually indicates that businesses can extend their operation to the entire globe through launching their product in a new geographical region (Porter, 1986). The more culturally sensitive term of glocalisation indicates that internationalisation of business can succeed when a company’s management takes into account the various elements that are unique to a region the firm is aiming to conquer (Robertson, 2012). As such, this paper will take into account the environmental factors that influence the international marketing strategy of a multinational company (MNC), aiming to demonstrate the value of glocalisation and the importance of effectively employing an environmental analysis model. The model chosen for this particular paper is the PESTLE (political, economic, social, technological, legal and environmental factors) analysis model, a strategic tool used to determine the prevalence of specific regional factors in international business operations.

The Importance of Internationalisation and Glocalisation:

The innovative term of glocalisation is a hybrid concept that links the two extreme approaches of companies of globalising or localising their operations (Swyngedouw, 2004). The golden middle between imposing a well-established model unique to a certain region into all of the targeted international markets and the adaptation to each of the existing cultural biases of a new region, glocalisation is a fusion between the present practice of a firm and the elements which may encounter cultural barriers in a new region (Kraidy, 1999). In other words, aiming to introduce innovative products in a new market while remaining culturally sensitive to the customer behaviour of the region can be the key to success in the internationalisation of businesses. 

Many successful MNCs have adopted the glocalisation approach in their international expansion, including McDonalds, Starbucks and Coca-Cola (Vignali, 2001). These companies, amongst other successful businesses, demonstrated a sensitivity and responsiveness to the existing cultural biases in their operations and their marketing tactics. For example, Starbucks has diversified their product offerings in the Asian market to include green tea based products to their clients based on the existing customer behaviour patterns which indicated a high consumption of green tea (Briggs, 2012).

Another example offered by Starbucks is the change in the store design aimed to suit the existing attitudes towards coffee shops in France. Although the American company relies on quick and efficient service in their stores across the world, with a surge in takeaway sales in some regions, they designed a more comfortable experience for their clients in France, who enter coffee shops seeking a pleasurable and sociable experience, rather than a quick service (Alderman, 2012). Throughout their efforts to seek out the most important cultural elements in particular regions, Starbucks remained faithful to its initial concept and strategy of delivering freshly roasted quality coffee to their clients and allowing them to use the space in Starbucks stores as a meeting point with their friends or to use the store’s free Wi-Fi (Simon, 2009). This company, therefore, provides a perfect example of glocalisation, as their international expansion kept contributing to their reputation and brand recognisability, but they have adapted to the existing cultural biases of the regions they expanded into (Thompson & Arsel, 2004).

PESTLE analysis: 

Internationalisation, as presented above, has its challenges and rewards for companies aiming to take over a share of the global market. Marketing in an international context is a costly and complicated function of the business, as the same debate as above about operational decisions in internationalisation applies to the marketing practices of the firm (Craig & Douglas, 2005). The distinct environmental elements influencing the international marketing tactics of MNCs are more stringent in instances when companies expand into diametrically different cultures (Tse, Lee, Vertinsky, & Wehrung, 1988). Using Hofstede’s cultural dimensions framework, one can identify the Western cultures (i.e. the UK or US) diametrically opposed to the Asian cultures (i.e. China, Japan) from a cultural and business conduct perspective (Hofstede, 1984). In consequence, when a Western company expands its operations into Asia, culture comes into play when it comes to devising a successful marketing strategy. However, culture is just one of the important factors that can influence the success of a firm within a particular region. The research and development (R&D) function of a MNC must take into account political, environmental technological or legal elements that can influence the success of a business in a new region (Theodosiou & Leonidou, 2003).

International companies allocate a high budget to the development of their marketing strategy and tactics, usually adapting this to incorporate emergent trends in the market, such as the increased focus on digital media (Cavusgil & Zou, 1994). With this in mind, it is clear why many global companies sustain that the ability to maintain a standard approach to marketing irrespective of the region targeted ensures lower costs and higher profitability (Boddewyn, Soehl, & Picard, 1986). However, taking into account macro-environmental factors impacting the businesses’ operations, such as the technological advances specific to a country can indicate that standardisation of marketing may be counter-productive in the long term (Doole & Lowe, 2008). To exemplify, the budget allocated by an MNC to digital media marketing in the UK has an excellent return on investment (ROI), whilst the same efforts in a country like Peru, where a small percentage of the population has access to social media, may be a waste of time and money for the marketing department (Heim, 2011). The PESTLE analysis aids companies to take into account all of the macro-environmental factors that can have a significant impact on the international marketing. Its variables will be critically examined in the following paragraphs, referring specifically to the expansion of large global corporations. The analysis of the PESTLE variables will outline the barriers international firms can encounter due to each macro-environmental factor and the potential benefits that companies can enjoy from implementing a promotional strategy that adapts to the regional markets.

Political factors:

The region where a business is expanding has a political background that can influence the desire of a company to expand their operations within a particular country (Luo & Tung, 2007). The tax policies, controlled by the government, can tempt a particular business to expand into regions where the taxes paid by businesses are significantly lower than the ones in their country of origin (Gilpin, 2001). Political stability of a region can also influence the success of international business in a particular country (Barkema, Bell, & Pennings, 1996). In terms of a multinational’s marketing tactics in a new region, companies must invest time and effort into uncovering the sensitivity of the local customer base to particular messages, when it comes to words with concealed political meaning (Lock & Harris, 1996). For instance, marketing campaigns of Nike promote the fight for freedom and, in areas where political freedom is a sensitive subject; Nike’s intended message might be interpreted in the wrong way given the political background of the region (Moth, 2013).

Government initiatives, which support local producers in certain regions, may work against international firms when it comes to their competitiveness in a foreign region (Dawar & Frost, 1999). In order to combat this barrier in the global expansion, MNCs must demonstrate through their marketing tactics that their efforts to sustain local economy and the labour market within a foreign market makes them a valuable contributor to the prosperity of the region (Young, Hood, & Peters, 1994).

Economic Factors:

Arguably one of the most important elements of the PESTLE micro-environmental analysis tool, economic factors have a considerable influence on the marketing techniques of MNCs (Sadgrove, 2015). Customer behaviour and their purchase intention are often linked to the consumers’ financial status, their emotional relationship with certain products and the ability to preserve or build upon their social status (Solomon, Russell-Bennett, & Previte, 2013). Marketing and advertising in any context rely on emotional response to certain messages and the potential of customers to associate an individual lifestyle with their products (Bagozzi, Gopinath, & Nyer, 1999). Luxury brands, from apparel to automobile or cosmetics firms, design their marketing to appeal to financially potent target audiences (Kapferer & Bastien, 2009). However, this approach has to be adapted to the region that a brand is penetrating. In affluent countries, these brands rarely advertise their products relying instead on their well-established name and loyal customers, whilst in emerging markets the need to invest in the marketing and advertising techniques increases, as the potential target audience for these brands are less brand-conscious (Wang, Siu, & Hui, 2004). Product placement in local television and local celebrity endorsement are just two of the marketing techniques that international companies must take into account when launching their product into an emerging market (Spry, Pappu, & Cornwell, 2011).

On the other hand, marketing price competitiveness of a brand may have a greater impact in particular regions where customers are concerned with savings costs and finding cheaper alternatives to what local brands are offering (Prahalad & Doz, 1987). Giant supermarket chains like Lidl or Tesco have enjoyed a great success in Eastern European markets, as they offered cheaper alternatives to the local supermarkets, through their no-frills operational approach (Seth & Randall, 2001). However, to succeed in these markets, the chain supermarkets had to ensure that local produce is introduced in their range, to increase their relevance to the customer base targeted.

Social Factors:

The socio-cultural factors present in a region influences a great deal of the local customers’ behaviour (Solomon, Russell-Bennett, & Previte, 2013). Demographics, the level of education and the age distribution all contribute to the marketing initiatives carried out by individual MNCs into any particular region (Steenkamp, 2001). Hofstede’s (1984) analysis of cultural factors indicates that cultural sensitivity is of paramount importance in the business sphere, which extends to the marketing tactics of international companies. Customers’ motivation for purchases of products and services often stems from the perceived importance of a product for their lifestyle (Arnould & Thompson, 2005). Close examination of the traditions, values or social interactions between customers within a region can lead to more successful marketing messages and tactics developed by the international company in a new area (Soares, Farhangmehr, & Shoham, 2007). If a customer cannot identify the perceived benefits of a product or service promoted by a company, the chances are that they will not purchase those particular goods (Zeithaml, 1988). There are very slim chances that all cultures will perceive a product and its benefits in an identical manner and Hofstede’s cultural analysis of distinct regions informs companies of the most significant differences that international brands must keep in mind when globalising their business.

One dimension highlighted by Hofstede is the importance associated with the gender roles within cultures and how the masculine and feminine cultures have distinct perspectives on the role of men and women in society and business (Hofstede, Hofstede, & Minkov, 1997). To exemplify, international magazines like Cosmopolitan must take this into account when expanding into new regions, as their focus on female empowerment in the UK could be negatively perceived in Middle Eastern countries for instance (Nelson & Paek, 2007). At the same time, individuals identify themselves with those with whom they share a cultural background; so featuring celebrities from the Western world in other regions where the magazine is published may lead to a lack of success of an international magazine. Success in extending the geographical reach of an international publication is, therefore, a much more complex issue that goes beyond merely translating the editorials into the local language (Doole & Lowe, 2008). That demonstrates how the socio-cultural factors contribute to the potential impact that an international brand can have in a new region. The Kellogg example at the beginning of this paper demonstrates that the well-established name and recognisability of a brand is sometimes not enough to overcome the existing cultural biases within a country, and the tendency to take this approach may lead to a lack of success of MNCs in penetrating a new region (Lee & Carter, 2012).

Technological Factors: 

As mentioned previously, marketing efforts must take into account not only the general market trends for a particular industry, but also the extent to which the targeted audience has access to certain technologies (Dunning, 2013). The majority of businesses in the Western world have focused on developing easily accessible mobile sites, as the number of smartphone users in this region has seen an incredible surge over the past decade (Bauer, Barnes, Reichardt, & Neumann, 2005). Enabling customers to make purchases via their smartphone contributes to the success and profits of businesses in the UK or US, but this is not the result of the number of users of smartphones, but also the level of confidence of customers in these regions in online payment systems (Miyazaki & Fernandez, 2001). Whilst companies may experience a surge in sales through developing user-friendly smartphone applications and websites, investing time and effort into this in some regions (emerging economies) may be counterproductive, due to the level of confidence in online shopping in these particular countries (Park & Kim, 2003). Access to modern technologies, as well as the degree of trust in using these technologies must precede the marketing efforts of international companies in new regions in order to guarantee success (Grabner-Kraeuter, 2002).

Although international trends in marketing place an increasing importance on social media promotional techniques, a global brand must ensure that the customer base of a region is prepared to respond to the digital media efforts carried out by a particular brand (Kaplan & Haenlein, 2010). Research abilities of a marketing department should inform the strategy and tactics of an MNC in a specific region (Deshpande & Webster Jr., 1989). If technology is an important element of the marketing efforts of a business, their focus should instead be on educating the potential customer base, rather than taking knowledge for granted, and based on the response of clients in an existing region.

Legal Factors: 

Consumer protection, trade regulations and restrictions are just some of the legal factors that companies must be aware of in their international marketing efforts (Vogel, 1997). To start with an example; L’Oreal, the well-established global cosmetics brand, must censor the marketing and packaging of their products to comply with the rules and regulations present in the Middle Eastern regions. Although marketing and advertising in the Western world, particularly in the fashion and beauty industries, relies heavily on provocative imagery and messages, this would not only go against the socio-cultural perception of potential customers in Middle Eastern countries, it would also be illegal (Elbashier & Nicholls, 1983). Altering their marketing tactics in these regions is, therefore, a prerequisite for MNCs penetrating this market from a legal perspective.

Global companies have often been accused of attempting to monopolise certain industries, which negatively impacts on the overall reputation of the firm and often influences the local customers to perceive multinationals as a threat, rather than healthy competition for existing competitors (Eicher & Kang, 2005). Monopoly of an industry is a threat to customers at large, as the leader of the trade can set their prices and, without any competition; they can decrease the quality of the services or products offered (Kessides, 2004). Although national and international authorities that regulate the trade (i.e. the Competition Commission) ensure that the monopoly of the market will not take place through mergers and acquisitions of a market leader, international marketing has a significant role to play in maintaining a company’s reputation intact (Jackson, 1997). The ability to communicate, through marketing messages, that the pricing strategies and level of customer services offered by a company is maintained even after mergers and acquisitions ensures that the customers can continue to perceive a company as ethical.

Environmental Factors:

The extent to which a customer’s purchase decision is influenced by the ethical behaviour of a firm in relation to the environment is often country-specific or, at least, region specific (Singh & Del Bosque, 2008). The level of education and awareness of local consumers in relation to the importance of firms’ corporate social responsibility (CSR) contributes to the extent to which companies should be focusing on promoting their ethical behaviour in a particular region. Whilst international trade regulations have, to a great extent, imposed strict rules in relation to the impact of businesses on the environment, marketing social responsibility is only relevant in some regions (Sen & Bhattacharya, 2001). In other words, whilst focusing the marketing efforts to change the branding tactics of a company to reflect a more environmentally friendly strategy may lead to success in some countries, it may well be an ineffective tactic in others. The attitude of consumers in the region towards environmental impact must be first and foremost analysed before a company launches an extensive rebranding campaign that focuses on the green approach of the company in their operations (Maignan, 2001). This is yet another piece of evidence which proves that the standardisation of marketing strategies can be counter-productive in the long run for any global business, as the awareness of what the local customer desires to see and hear in the marketing messages precedes any other previous research findings that set the foundation for the marketing strategy and tactics.

Conclusion: 

The macro-environmental factors presented above indicate that the one size fits all approach is not indicated for the international marketing strategy and tactics of MNCs. The influence of each of the factors listed in relation to the specifics of the region where a firm aims to globalise their operations must be incorporated into any marketing related efforts of the company in order to ensure success in the market entry and survival of a multinational in relation to its local competitors. Going back to the issue of glocalisation, it is clear that there is an advantage in launching a recognisable global brand within a new region, but failure to comply with particular macro-environmental factors unique to the region may limit the success of the MNC. Standardised global marketing initiatives may also prove detrimental to the company from a cost perspective due to the fact that, though research and country specific marketing departments require a financial effort, this can prove to be less costly to the business in the long-run, as the local marketing department can uncover how to cut costs based on the most relevant marketing initiatives unique to the region. Whilst global trends to focus on mobile marketing for instance, to assume that implementing this across a company’s entire global reach will lead to increased profits may be a flawed perspective, as the paper demonstrates that access to technology and trust of customers in online shopping is different in each region.

Showing a willingness to understand the culture of the area and then apply any specific differences in the operations and marketing initiatives of the firm proves that a multinational is interested in understanding their consumer base. The opposite approach of standardising all transactions and tactics shows that the company is only interested in the potential for increased profits from sales in a new location. The latter approach often leads to resistance of the new customer base to any marketing initiatives of the firm, which in turn leads to failure in conquering a new market. There are, therefore, potential financial and reputation related advantages linked to understanding the macro environmental elements affecting the international marketing tactics of a global company. All in all, international marketing efforts of brands tailored to each culture in particular ensure that multinationals can compete with the local business an efficient manner, building the reputation of the company in the region and increasing the brands’ profits.