Marketing Management II - Approach for Entry and Expansion into Global Markets (2024)

Entry and ExpansionDecisions

Entry and expansion decisions in international markets can be approached in different ways, depending on the company's objectives, resources, and risk appetite. Three common approaches are the Waterfall approach, Sprinkler approach, and Born Global approach:

Waterfall Approach

The Waterfall approach involves a sequential and cautious entry into international markets. It follows a step-by-step process of expanding into one market at a time before moving on to the next. This approach allows the company to thoroughly understand and establish a strong presence in each market before expanding further. It is often used by companies with limited resources or those seeking to minimize risks.

Example: A company decides to enter international markets using the Waterfall approach. It begins by carefully selecting and entering a single target market, such as Germany. The company focuses on understanding the market dynamics, building relationships with local partners, and adapting its products or services to suit local preferences. Once it establishes a successful presence in Germany, it moves on to expand into another market, such as France, using the knowledge and experience gained from the previous market entry.

Sprinkler Approach

The Sprinkler approach involves simultaneous entry into multiple markets. It is characterized by a broader and more aggressive expansion strategy, where the company enters several markets at once or in quick succession. This approach allows for rapid market coverage and capitalizes on economies of scale and scope. It is often used by companies with ample resources and a high-risk tolerance.

Example: A technology company decides to enter international markets using the Sprinkler approach. It simultaneously expands its operations into multiple markets, such as the United States, United Kingdom, Australia, and Japan. The company invests in local marketing campaigns, distribution networks, and customer support teams in each market to establish a strong presence and gain market share.

Born Global Approach

The Born Global approach involves companies that are "born global" from the start, meaning they have a global mindset and intent to operate in multiple markets right from their inception. These companies leverage technology, digital platforms, and strategic partnerships to quickly enter and scale in international markets. They typically focus on niche markets or innovative products and services.

Example: A software startup develops a cutting-edge mobile application and adopts a Born Global approach. From its inception, the company designs the app to cater to a global audience and plans for international expansion. Leveraging online platforms, the company launches the app simultaneously in multiple countries, targeting tech-savvy users. It utilizes digital marketing strategies and partnerships with local influencers to create awareness and drive adoption in each market.

Each approach has its advantages and considerations. The Waterfall approach offers a more cautious and controlled expansion, allowing companies to learn from each market entry before moving forward. The Sprinkler approach enables rapid market coverage and economies of scale but may require significant resources and risk management. The Born Global approach focuses on immediate global reach but requires a strong understanding of international markets and adaptability to diverse cultures and business practices.

Cultural Dimensions Differentiating Countries

Cultural dimensions are a framework used to understand and compare cultural values, beliefs, and behaviors across different countries. One of the most well-known models of cultural dimensions is the Hofstede's Cultural Dimensions Theory, developed by Geert Hofstede. The model identifies six dimensions that differentiate countries:

1. Power Distance: This dimension measures the extent to which a society accepts and expects unequal distribution of power. Countries with high power distance have a hierarchical structure and respect authority, while countries with low power distance have a more egalitarian and participative approach.
2. Individualism vs. Collectivism: This dimension refers to the degree of emphasis placed on individual goals and interests versus group or collective goals. Individualistic cultures prioritize personal freedom, independence, and individual achievements, whereas collectivistic cultures emphasize group harmony, cooperation, and interdependence.
3. Masculinity vs. Femininity: This dimension explores the extent to which a society values traditionally masculine traits such as competition, achievement, and assertiveness, versus traditionally feminine traits such as collaboration, caring for others, and quality of life.
4. Uncertainty Avoidance: This dimension measures the extent to which a society feels threatened by uncertainty and ambiguity and seeks to avoid them. Cultures with high uncertainty avoidance value rules, stability, and structure, while cultures with low uncertainty avoidance are more tolerant of uncertainty, risk-taking, and adaptability.
5. Long-term Orientation vs. Short-term Orientation: This dimension reflects the extent to which a society values long-term planning, perseverance, and thriftiness, versus short-term results, tradition, and fulfilling social obligations.
6. Indulgence vs. Restraint: This dimension examines the degree to which a society allows gratification of natural human desires and impulses. Cultures with high indulgence prioritize enjoyment, leisure, and self-expression, while cultures with high restraint emphasize self-discipline, strict norms, and suppression of gratification.

It's important to note that cultural dimensions are generalizations and should not be used to stereotype individuals or cultures. They provide a framework for understanding broad cultural tendencies and differences. Countries may also vary within themselves based on regional, ethnic, or socioeconomic factors.

By considering these cultural dimensions, businesses can gain insights into consumer behavior, communication styles, decision-making processes, and management practices in different countries. This understanding helps companies adapt their marketing strategies, product offerings, and business practices to effectively engage with diverse cultural contexts.

Glocalization

Glocalization is a strategic approach that combines the benefits of global standardization with local customization. It involves tailoring products, services, and marketing strategies to suit the specific needs and preferences of local markets while maintaining a consistent global brand image. Glocalization recognizes the importance of adapting to local cultures, languages, regulations, and consumer behaviors, while leveraging economies of scale and brand recognition.

Here are some reasons why glocalization is considered an effective strategy:

• Local Relevance: Glocalization allows companies to cater to the unique preferences, tastes, and cultural nuances of local markets. By customizing products and services to align with local needs, companies can better connect with customers, build trust, and enhance customer satisfaction.
• Market Penetration: Adapting products and marketing strategies to local markets increases the likelihood of successful market penetration. It enables companies to address specific market requirements, overcome cultural barriers, and differentiate themselves from competitors.
• Brand Consistency: Glocalization ensures that companies maintain a consistent global brand identity while adapting to local markets. This approach allows companies to leverage the strength of their global brand while addressing local market requirements.
• Competitive Advantage: Glocalization enables companies to gain a competitive edge by offering products and services that resonate with local customers. It allows for better understanding of local competition, consumer behavior, and market dynamics, leading to more effective marketing strategies and superior customer experiences.
• Cost Efficiency: Glocalization allows companies to achieve cost efficiencies through the standardization of certain global processes and resources. By leveraging economies of scale in production, procurement, and supply chain management, companies can reduce costs while still accommodating local variations.
• Localization of Marketing Communications: Glocalization recognizes the importance of adapting marketing communications to local languages, cultural references, and communication channels. By tailoring advertising, promotions, and messaging to local markets, companies can effectively engage with customers and convey their brand value.
• Compliance with Local Regulations: Glocalization helps companies navigate local regulations, legal requirements, and cultural norms. By understanding and adapting to local rules and regulations, companies can ensure compliance and avoid potential legal or cultural challenges.

Successful examples of glocalization include fast-food chains like McDonald's and KFC, which adapt their menus and marketing campaigns to local tastes and cultural preferences in different countries. Global technology companies like Apple and Google also implement glocalization strategies by providing localized versions of their products, incorporating regional languages, and customizing features to suit local markets.

Glocalization allows companies to strike a balance between global standardization and local customization, enabling them to effectively serve diverse markets and meet the unique needs of customers around the world.