convergence and divergence: developing a semiglobal marketing

82 Journal of International Marketing

Globalization is widely viewed as one of, if not the,dominant imperative driving business strategy inthe twenty-first century. As markets become

increasingly integrated, more firms from all parts of theworld are expanding operations on a global scale (Ghe-mawat 2007, 2010; Gupta, Govindarajan, and Wang2008, Peng 2009). Furthermore, this trend is not con-fined to large multinational corporations (MNCs) butincludes firms of all sizes, from medium-sized firms toentrepreneurial companies that can identify and satisfyneeds of niche markets throughout the world (Knightand Cavusgil 2009). In the past, the internationalizationtrend was largely confined to firms from highly devel-oped countries of the “industrial triad” (i.e., the UnitedStates, Europe, and Japan) with attention focused on

expansion in these areas. However, this emphasis haschanged dramatically in recent years.

The plateauing of growth in the developed world hasresulted in a costly battle for market share. Driven by agrowth imperative and faced with slackening demand intraditional markets, firms have been compelled toincrease promotional expenses and innovate (e.g., devel-oping new products or product variants) to maintainmarket position. As a result, many firms are looking fornew growth opportunities outside the developed world.These include both large emerging markets, such asIndia, China, and Brazil (Wilson and Purushothaman2003), and second-tier emerging markets (referred to asthe Next 11), such as Indonesia, Turkey, Egypt, Nigeria,Mexico, the Philippines and Vietnam—all of which have

Convergence and Divergence: Developing a Semiglobal MarketingStrategySusan P. Douglas and C. Samuel Craig

ABSTRACTMany markets are converging, as communications and logistic networks become more integrated and firms from allparts of the world are expanding operations on a global scale. At the same time, other markets are becoming morediverse, and marketers are increasingly encountering economic and cultural heterogeneity. The authors examine theimplications of these trends and the extent to which they necessitate rethinking and refocusing global marketingstrategy. First, they examine the perspective of global marketing strategy as an evolutionary process. Next, they dividemarkets into five major spheres, examining the economic and cultural diversity of markets in each. Next, they discussthe resultant need to develop and implement different strategies for markets in each of these spheres. Some conclusionsare drawn relating to the difficulties involved in developing a coherent strategy in international markets. The authorsadvocate developing a semiglobal marketing strategy, which involves following different directions in different parts ofthe world, resulting in greater autonomy at the local level.

Keywords: global marketing strategy, emerging markets, economic and cultural diversity, country groupings

Journal of International Marketing

©2011, American Marketing Association

Vol. 19, No. 1, 2011, pp. 82–101

ISSN 1069-0031X (print) 1547-7215 (electronic)

Susan P. Douglas was the Paganelli-Bull Professor of Marketingand International Business (e-mail: [email protected]),and C. Samuel Craig is the Catherine and Peter Kellner Pro-fessor and Director of the Entertainment, Media and Tech-nology Program (e-mail: [email protected]), Stern Schoolof Business, New York University.

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Developing a Semiglobal Marketing Strategy 83

growth rates far in excess of those in the United States,Europe, and Japan (Wilson and Stupnytska 2007).1

The dramatic changes in the global marketplace haveimportant implications for the marketing strategies ofMNCs from developed countries. Such companies needto reformulate their global marketing strategy, adoptinga broader focus (Ghemawat 2010). On the one hand,this entails developing new initiatives to stimulate andcapture demand in their traditional markets (developedcountries and global or regional market segments); onthe other hand, they must formulate new strategies totarget the wide range of growth opportunities in othercountries throughout the world. For example, ReckittBenckiser has managed to increase its overall revenue,despite a decline in Europe, because it has movedaggressively into developing markets (Carolan 2010). Inthe automotive industry, General Motors sales in theUnited States have declined, but the growth opportuni-ties have arisen elsewhere. Emerging markets are animportant avenue for growth: Currently, GeneralMotors sells more cars in China than it does in theUnited States (Barboza and Bunkley 2010).

The purpose of this study is to examine the implicationsof these changes in the global marketplace for the designof global marketing strategy by MNCs from developedcountries. In particular, it highlights the extent to whichthese trends necessitate rethinking and refocusing globalmarketing strategy. First, we examine the perspective ofglobal marketing strategy as an evolutionary processand review the various stages in its evolution, togetherwith the current phase of expansion into a range of tra-ditional and new emerging markets. Next, we dividemarkets into five major spheres or types of markets andexamine the economic and cultural diversity of marketsin each. Then, we discuss the resultant need to developand implement different strategies in each sphere. Wedraw some conclusions regarding the difficultiesinvolved in developing a coherent integrated strategy forglobal markets. We advocate developing a semiglobalmarketing strategy that involves following differentdirections in different parts of the world, relying ongreater decision making and authority at the local man-agement level.2

GLOBAL MARKETING AS AN EVOLUTIONARYPROCESSPrevious research in both management and marketingliterature has typically viewed international marketexpansion as an evolutionary process (Anderson 1993;

Contractor 2007; Douglas and Craig 1989; Johanssonand Vahlne 1977, 1990; Westney and Zaheer 2001).Johannson and Vahlne’s (1977) seminal stages theory ofinternationalization is based on a study of the pattern ofinternationalization of Swedish firms. The theory indi-cates that the perceived risk associated with inter-national expansion leads firms to enter proximate, morefamiliar markets first, gradually expanding into moredistant markets as experience is gained in operating ininternational markets. In a similar vein, in examiningevolutionary and multistage perspectives of internation-alization, Contractor (2007) and Contractor, Kundu,and Hsu (2003) identify three phases: early internation-alization, later internationalization, and “excessive”internationalization.

Similarly, Westney and Zaheer (2001, p. 350) point outthat evolution has been a central feature of MNC mod-els in the management literature insofar as “internation-alization of activities is a process that unfolds acrosstime and space.” They identify several phases these mod-els have gone through over time from the 1960s to thelate 1990s. To a large extent, these phases parallel theinternational expansion of the MNC as internal pres-sures arise from the increasing scale and growing com-plexity of international operations and external pres-sures arising from operations in multiple countries drivechanges in the MNC’s organizational structure andmanagerial processes. In particular, the integration–responsiveness framework (Bartlett and Ghoshal 1989;Prahalad and Doz 1987) was influential in thinking andresearch on the MNC in the 1980s and 1990s. Thisframework identifies the increase in pressures forglobal integration coupled with pressures for localresponsiveness as key forces influencing the MNC’sorganizational design. Subsequent studies also viewedthese forces as having an important role in strategy for-mulation (Ghoshal 1987). By the 1990s, as MNCsexpanded and pressures for synergy and improved effi-ciency became more critical, issues of innovation andknowledge transfer became increasingly central (Doz,Santos, and Williamson 2001). As a result, attentionshifted to examining network models of the MNC andthe role of subsidiaries in internationalization andstrategy formulation. However, the primary focus hasbeen on the MNC’s organization and related managerialprocesses.

Similarly, the marketing literature has viewed inter-national expansion as an evolutionary process (Ander-sen 1993; Malhotra, Agarwal, and Ulgado 2003),though attention has often been focused on the mode of

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entry adopted. Douglas and Craig (1989) adopt a morecomprehensive view, suggesting that the firm’s inter-national market expansion can be viewed as a sequen-tial decision-making process. They view this as reflect-ing the typical pattern of large U.S. MNCs’ internationalexpansion, particularly in consumer product markets.Douglas and Craig identify three phases: initial marketentry, local market expansion, and global marketrationalization. In the initial entry phase, the firmselects countries (markets) to enter as a base for futureexpansion, decides how to enter each country (i.e. themode of operation: exporting, joint venture, or whollyowned operations), and determines the timing andsequencing of international market entry. Here, the firmneeds to focus on realizing potential economies of scaleby entering international markets, in terms of eithertangible (e.g., production, advertising scale economies)or intangible (e.g., brand image, country-of-origin asso-ciations) assets.

After establishing an initial foothold in different for-eign markets, the firm focuses on local market expan-sion. The firm’s strategic thrust changes as it aims toexpand outward and develop sales from its base withineach country. This entails developing new products andservices tailored to specific customer demand charac-teristics of that market or adapting existing products tomarket characteristics, extending the product line, andso on. In each case, the firm aims to achieve economiesof scope, spreading shared costs across multiple prod-uct lines. For example, these could include sharing pro-duction and design costs by using the same facilities toproduce multiple products, sharing warehousing anddistribution costs across multiple products, and sharingknowledge and experience relating to a specific coun-try market.

The third phase is global rationalization; this is whenthe firm attempts to rationalize its far-flung operations.The growing integration of markets gives rise to pres-sures to shift away from country-centered strategies touse skills and resources developed in a given country ona worldwide basis. Research-and-development skillsdeveloped in one country can be used to develop prod-ucts for other markets, and production, engineering, ormanagement techniques developed in one context canoften be applied in another. At this point, MNCs shouldalso pay greater attention to coordinating and integrat-ing operations at different stages of the value chainacross countries, ranging from sourcing and productionto branding strategies (Yip 2003).

The principal goal of restructuring and rationalizationof operations on a global scale is the desire to achievesubstantial synergies. The concept of serving a series ofdomestic markets disappears and is replaced by that ofmeeting needs in a group of interrelated markets world-wide. Scale efficiencies in production and marketing areachieved by organizing operations regionally or globallyrather than on a country-by-country basis. Highlyskilled expertise in production, design management, andmarketing can be employed, which would not be eco-nomical in more fragmented operations. Knowledge,experience, and successful best practices can be trans-ferred from one region to another, resulting in world-class products and operations.

However, as Contractor (2007) notes, as the firm beginsto expand the geographic scope of its operations, itenters a wide range of markets, and the degree of cul-tural and economic diversity between these marketsincreases sharply. Costs of coordination and informa-tion acquisition increase sharply, resulting in disec-onomies, which have a negative impact on profit. As aresult, the MNC enters a new phase of operations andneeds to reassess its strategy and organization.

ENTERING THE FOURTH PHASE OF GLOBALMARKETING STRATEGYIn the first three phases of international expansion,MNCs—in particular, those in consumer goods mar-kets—place primary emphasis on opportunities in devel-oped countries, particularly the United States, WesternEurope, and Japan, all of which have affluent popula-tions with high per capita income, highly developed mar-keting infrastructures, and predictable operating envi-ronments. However, in recent years, these consumermarkets have become saturated, and rates of growthhave slowed. As a result, competition for market sharehas accelerated, requiring additional promotional expen-ditures and effort to expand or even maintain sales.

At the same time, rates of growth in large emerging-market economies, such as Brazil, Russia, India, andChina (BRIC markets), and in a range of smaller coun-tries, such as Turkey, Egypt, Indonesia, and Vietnam(i.e., the Next 11 markets) have risen rapidly, providingnew opportunities. Although average levels of income inthe BRIC markets are low, ranging from US$15,200 percapita in Russia to US$3,100 per capita in India, the sizeof these markets is vast: India and China alone accountfor more than a third of the world’s population (World

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Bank 2010). Both countries have a sizeable and rela-tively large middle class who constitute a large marketfor consumer goods and services. In particular, the moreaffluent members of the middle class, often successfulprofessionals or entrepreneurs, provide a prime targetfor higher-end Western brands in categories such asfashion and watches.

New sources of competition, notably from firms fromthese new market economies, have given rise to newchallenges for MNCs from developed countries. In par-ticular, large companies from large emerging-marketcountries such as China, India, and Brazil are increas-ingly becoming important competitors for MNCs inworld markets. These firms are able not only to leveragethe advantages of a low cost base, including both lowresource and labor costs in the home country, but alsoto learn to adopt the technologies and managementskills of developed country firms (Hoskinsson et al.2000). As a result, firms from developed countries needto counterattack in the home markets of these firms,both to undercut the position of their rivals in theirhome markets and to take advantage of low-costresources in these markets and master the other sourcesof their rivals’ competitive advantages.

As managers become increasingly mobile and moveacross national borders from one country to another,increasing cultural diversity in their outlook createsgreater interest and sensitivity to culturally and econom-ically diverse market opportunities. As a result, empha-sis shifts from developed markets to identifying oppor-tunities in a diverse range of markets throughout theworld. Often, there is also considerable diversity withinthese markets due to inequality in income distribution aswell as differences in living conditions and demandcharacteristics between rural and urban areas. Further-more, educational progress in emerging markets hasspawned the growth of a new generation of engineers,scientists, and managers. This provides a new talentbase for new product development and stimulates thehiring of local managers. It has also facilitated improve-ment in the management and competitiveness of localprivately owned firms.

Technological advances—in particular, those that havereduced the scale at which production and distributionefficiencies are achieved—have acted as a further cata-lyst to this phase of international expansion. Theseadvances have aided small and medium-sized firms intargeting specialized market segments in internationalmarkets, such as medical equipment and computer soft-

ware (Knight and Cavusgil 2009). At the same time,such developments have enabled large firms to serveinternational niche markets efficiently. Intentional andunintentional transfer of technology through licensing,contract manufacturing, and other types of collabora-tive agreements has also enabled a broader range offirms—in particular, those lacking the resources andexpertise to compete in these markets alone—and hasincreased the level of competition. In some cases, thishas stimulated growth of competition in foreign marketsand resulted in the entry of foreign competitors or for-mer collaborators into the domestic markets of their for-mer partners.

The spread of communication links between and withincountries has further facilitated the firm’s ability todevelop market knowledge competencies (Yeniyurt,Cavusgil, and Hult 2005) in relation to customers, com-petitors, and suppliers as well as the market and institu-tional infrastructure in countries across the world. Atthe same time, the growth and increasing sophisticationof both internal information systems and the externalcommunications infrastructure (e.g., the Internet,broadband, satellite telecommunications) enables firmsto improve coordination and integration of operationsat different stages in the value chain as well as geograph-ically across countries and different regions of theworld. As a result, the ability to focus efforts on high-potential-opportunity areas and to deploy resourcesacross broader geographic regions and different parts ofthe world has substantially increased.

Despite the dramatic changes taking place in world mar-kets, the marketing literature seems to remain focusedon the issues involved in the development of a globallyintegrated marketing strategy (Birkinshaw, Morrison,and Hulland 1995; Quelch and Despandé 2004; Yip2003) and its impact on performance (Xu, Cavusgil, andWhite 2006; Zou and Cavusgil 2002). In their study of434 business units based in the United States, Zou andCavusgil (2002) find that units with a globally inte-grated marketing strategy had higher levels of perform-ance and enabled the firm to gain a competitive advan-tage in international markets.

The changes taking place in the configuration of worldmarkets suggest that MNCs are entering a new phasewith new challenges. As a result, global marketingstrategy needs to be reassessed to adjust to these newand diverse sources of market growth and opportunity,as well as differences in competitive activity. These mayrequire different strategies and new skills, as well as an

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improved understanding of substantial differences incustomer needs and interests, the nature of competition,and the market infrastructure in emerging markets. Inparticular, MNCs need to adopt a broader perspective indeveloping a global marketing strategy. Rather thanadopting an integrative perspective and focusing pri-marily on developed-country markets, the key impera-tive is for firms to develop a more complex, multifacetedapproach to designing different strategies for a broadarray of diverse and rapidly growing markets.

As markets outside the industrial triad grow in impor-tance and become a key component of global markets,firms need to shift their attention from developed-countrymarkets to focus on exploiting potential in markets inother parts of the world. This includes not only largeemerging countries, such as China, India, and Brazil, butalso Next 11 countries (see the Appendix). These coun-tries are experiencing rapid rates of growth in terms ofboth population and gross domestic product (GDP) percapita and are perceived as good investment prospects(Wilson and Stupnytska 2007).

However, it is important to recognize that these marketsdiffer in terms of demand characteristics, the nature ofcompetition, and the development of the market infra-structure. Factors such as customer interests, taste pref-erence, purchasing patterns, and, in particular, price sen-sitivity differ substantially among countries. Also, thenature, importance, and tactics of local competitors andthe degree of sophistication and development of themarket infrastructure vary considerably. As a result,firms must adapt and develop new and different strate-gies tailored to a region or country’s unique characteris-tics. Consequently, the firm’s focus needs to shift awayfrom global integration, coordination of strategy, andissues such as global branding to development of diver-gent strategies geared to different customer needs, com-petitors, and market conditions in different geographiclocations. In turn, this requires a local or regional,rather than a centralized, focus and greater reliance onlocal skills, capabilities, and knowledge.

DEVELOPING A SEMIGLOBAL MARKETINGSTRATEGY

In the semiglobal marketing strategy development phaseof global market expansion, the MNC must be able tofocus on multiple goals simultaneously in different mar-kets throughout the world. It must maintain its competi-tive position and market share in developed marketswhile focusing on establishing a presence in divergent

emerging markets. Here, at least five major spheres canbe identified: two types of markets that MNCs have tra-ditionally targeted (developed countries and globalurban/regional market segments) and three new marketconfigurations that are attracting increased interest: (1) large emerging-market countries, such as China,India, and Brazil, for which country-centric strategiescan be developed; (2) second-tier emerging-market clus-ters (i.e., the Next 11), which may be grouped to estab-lish a viable market size based on geographic proximity,similarity in customer interests, or infrastructure, so thatproducts, ideas, strategies, skills, and so on, can be lever-aged across two or more of these markets; and (3) largerural markets or the urban poor, which can be identifiedwithin the large emerging-market countries or the second-tier emerging markets.

Because these markets are characterized by dramaticallydifferent customers, competitors, and institutional envi-ronments, firms need to balance tensions in adapting todifferent demands in radically divergent markets andlocations that require different skills and resources whileattempting to transfer learning between their establishedmarkets and these new markets. Strategies for these newmarkets need to be geographically focused, whichrequires attention to the acquisition of local marketknowledge as well as utilization of local skills andresources. Operating in multiple dissimilar marketspulls the firm in different directions and places a strainon the firm’s financial and managerial resources.

Firms face a wide range of different competitors inworld markets, including large MNCs and small andmedium-sized entrepreneurial companies from thedeveloped world, as well as large companies fromemerging markets that are becoming an increasinglyimportant force in international markets. In addition,regional and smaller local competitors are prevalentworldwide and not only have a more intimate knowl-edge of market conditions but are also more nimble andmay have lower operating costs.

The most visible source of competition is likely to beother MNCs from developed countries. Thus, rivalryamong these firms expands from developed countriesinto other markets worldwide. In contrast, small andmedium-sized entrepreneurial companies are likely totarget specific market segments worldwide. The growthof the Internet and international communication net-works enables them to identify and interact with poten-tial customers, customizing products and services tomeet their specific needs. Large domestic-market firms

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and, in many cases, small local competitors also providemajor sources of competition. They benefit not onlyfrom substantial experience operating in these marketsand in-depth understanding of local customer attitudes,preferences, and behavior patterns but also from inti-mate knowledge of local market conditions and contactswith local distributors and agents.

In many cases, small local competitors may provide themost formidable and difficult challenge. Often, theycover only a region or a small area within a country andare therefore highly responsive. Because of lower oper-ating costs and low-cost local sources, they can under-cut foreign competitors on price and respond rapidly tomarket changes. In some markets, they are also notclosely regulated or monitored and engage in deceptivepractices, such as copying products, brand names, andlogos and direct counterfeiting. In addition, local com-petitor strategies are often highly unpredictable and dif-ficult to track. They may actually lack a clearly definedstrategy and simply respond to specific market condi-tions or competitor moves as they occur. This creates afurther element of uncertainty and complexity that for-eign companies need to deal with and makes it impossi-ble to establish a unified competitive strategy.

In developing this phase of its expansion strategy, theMNC needs to determine the geographic scope of opera-tions in both established markets and a range of differ-ent emerging markets. Each sphere requires strategiestailored to specific demand and competitor characteris-tics that take into account the available resources andlevel of infrastructure development. Consequently,selecting which markets to target and which should havepriority requires determining the appropriate balancebetween different opportunities based on growth poten-tial, costs, and associated risks (Douglas and Craig1996). Whether more than one sphere, and which coun-try within a given sphere, is targeted depends partly onthe firm’s available resources and market potential forthe specific products and services the firm offers. How-ever, to ignore key spheres ultimately means that thefirm’s long-term growth and future viability could belimited.

Designing effective strategies to compete in differentspheres poses a significant challenge. Although in somecases, firms may be able to leverage elements of theirstrategies as well as ideas and experience in developedmarkets to emerging markets, considerable caution andprior understanding of local market conditions is nec-essary when following this approach, particularly with

regard to marketing and service activities. When mar-ket conditions are radically different (e.g., in rural mar-kets), MNCs must develop strategies completely denovo (i.e., from the ground up) (Arnold and Quelch1998). This requires the development of new skills andtechniques and input from local sources. In some cases,collaboration with local organizations such as non-government organizations in rural markets or joint ven-tures with local marketing firms may be effective,though these are typically difficult to manage. Alterna-tively, the firm can consider hiring local nationals withknowledge of local market conditions and resourceavailability. The next section discusses the key strategicimperatives and challenges in developing strategies foreach of the five geographic spheres in more depth (fora summary, see Table 1).

Developed Markets

In the past, the primary focus of MNCs’ internationalmarketing strategy has been affluent developed countries,notably those in the industrial triad and particularly thoseengaged in marketing consumer goods. These marketshave fueled growth and been a key source of profits.Although these markets remain important and the core ofthe firm’s activities and organizational structure, morerecently attention has shifted toward markets in othercountries, particularly those in emerging markets such asChina, India, and Brazil, which have large populationsand are growing rapidly. However, despite this newemphasis, firms must still compete aggressively in devel-oped markets to maintain and grow market share.

Challenges. Low growth rates and product market satura-tion in many developed countries, particularly in moremature mass-market product categories, create an increas-ing struggle for market share. This is further compoundedby slow or negative economic growth, recessionary pres-sures, and high rates of unemployment due to the declineof the industrial sector, high levels of consumer debt, andan aging population. Although the impact of these forcesvaries with the product market and the degree of marketglobalization, this constitutes a major challenge for manyMNCs in consumer markets. Increased market segmenta-tion and rising media costs limit potential scale economiesand add to marketing costs.

In addition, MNCs in developed countries are facingincreasing competition from large and medium-sizedfirms from emerging-market countries. Not only are thesefirms able to leverage the advantages of low labor andresource costs in their domestic markets to build their

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Tabl

e 1.

Com

pone

nts

of S

emig

loba

l Mar

ketin

g St

rate

gy

Global and

Rural M

arkets

Developed M

arkets

Regional Segments

Country-Centric Elements

and Urban Poor

Country Clusters

Key challenges

Strategic

imperatives

• Low

-growth and

satu-

rated markets

• Increasing

com

peti-

tion

from emerging

-market firm

s

• Identifying segm

ents

• Identifying effective

media and

distribu-

tion

cha

nnels

• Ta

iloring

implem

enta-

tion

to specific m

arket

context witho

ut lo

s-ing glob

al im

age

• Local com

petition

• Increased econ

omic

and cultural

nation

alism

• Ada

pting to rap

idly

chan

ging

con

sumer

tastes and

market

grow

th patterns

• Con

sumer

heterogeneity

• Low

levels of con-

sumer in

come

• Lack of basic m

arket

infrastructure

• Institutiona

l voids

• Fragmented markets

• Con

sumer heterog

eneity

across m

arkets

• Develop

ing the market

infrastructure w

ithin coun

-tries an

d across cou

ntry

clusters

• Variation

in m

edia avail-

ability across markets

• Differences in

distribution

structure

• Inno

vation

in produ

ctan

d prom

otiona

lstrategies

• Greater in

tegration

and coordina

tion

of

strategy and

strategy

implem

entation

across

nation

al bou

ndaries

• Transferring prod

ucts,

ideas, skills, a

nd best

practices across

coun

tries

• Identifying an

d reach-

ing consum

ers with

simila

r tastes and

preferences across

coun

tries an

d region

s

• Develop

ing prod

ucts

and prom

otiona

lstrategies w

ith glob

alan

d region

al app

eals

• Ta

iloring

produ

ct and

prom

otiona

l strategies

to distinctive cou

ntry

deman

d pa

tterns and

tastes

• Adjusting

implem

en-

tation

to local m

arket

infrastructure

• Using

local m

anage-

ment resources an

dinpu

t

• Develop

ing local m

ar-

ket kn

owledg

e an

dun

derstand

ing of

social embedd

edness

of con

sumer needs

and beha

viors

• Develop

ing low-cost

function

al produ

cts

• Need to build distri-

bution

access

• Using

localized pro-

motiona

l too

ls

• Empo

wering

consum

ers

• Develop

ing local m

arket

know

ledg

e

• Using

local m

anagem

ent

resources an

d inpu

t

• Ada

pting strategy and

tac-

tics to local m

arket cond

i-tion

s

• Identifying markets w

ith

simila

r needs/cond

itions

within coun

try clusters

• Identifying op

portun

ities

for tran

sfer of prod

ucts

and best practices across

markets

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position in global markets, but they are also learning toadopt the technologies and management skills of devel-oped country firms, in some cases surpassing them interms of innovative and creative skills. For example,Brazil’s Embraer has surged past Canada’s Bombardier tothe number three spot in the aircraft manufacturingindustry (Engardio 2006). Similarly, China’s Haier is cap-turing an increasing market share in consumer electronicsworldwide, and from India, Mahindra and Mahindra isentering the low-cost agricultural equipment market inthe United States, Infosys is providing information sys-tems and consultancy services worldwide, and Tata isexpanding its automobile and consultancy services intonew markets.

Strategic Imperatives. In developed countries, given thesaturation and low growth rates of many product mar-kets, a key imperative is innovation in the developmentof new products and promotional strategies. In manycases, firms are developing lower-priced versions of suc-cessful brands to meet increased consumer price sensi-tivity due to heightened economic uncertainty. Promo-tional strategies need to embrace changes in technologyand the emergence of new media such as the Internet,mobile phones, and social networking sites and increas-ingly use techniques such as viral marketing and greaterinteraction with consumers to reach target audiences.Adopting such tactics is assuming increased urgencygiven the slowdown in many consumer markets inhighly industrialized countries.

Products and strategies targeted to consumers in onedeveloped country typically entail some adaptation tomeet differences in the marketing infrastructure as wellas cultural and regulatory factors in other countries.However, in general, substantial integration and coordi-nation can be achieved, including standardized productand positioning strategies, use of uniform branding, andpromotional and distribution strategies. When feasible,global advertising and promotional strategies can bedeveloped with minimal local modification. Greater effi-ciencies and global synergies can be achieved by empha-sizing global or regional brands and eliminating low-performing brands. However, firms must pay attentionto consumer attitudes toward various alternatives. Insome cases, consumers may support local cultural prod-ucts, particularly food products, to preserve their cul-tural identity and support the local economy (Van Itter-sum and Wong 2010). For example, in the EuropeanUnion, several products are classified as PDO (protecteddesignation of origin) and may only be produced in adesignated geographic area.

In general, emphasis on integration or coordination ofstrategy across countries and markets results in centrali-zation of strategy development at either the regional orglobal level, though marketing and promotional strate-gies are typically executed locally. Regional managementstructures or procedures can be established to formulateand implement strategy adaptation and manage mobi-lization, coordination, and deployment of firm capabili-ties across national and regional markets. Experienceacquired in adapting and implementing strategy in onemarket can be applied in formulating and implementingstrategy in other markets. Knowledge-based skills andcapabilities (e.g., design skills, production know-how,best practices relating to brand management or market-ing techniques) can effectively be transferred from onemarket to another. At the same time, mechanisms toensure effective transfer of information and best prac-tices (e.g., internal information systems, videoconferenc-ing, regional or global management teams) need to beestablished.

Global and Regional Segments

With increasing communication and travel acrossnational boundaries and the spread of global marketing,global or transnational segments (i.e., consumers withsimilar tastes and preferences and response patterns indifferent countries) are becoming an increasingly signifi-cant component of global markets. In the past, global seg-ments were commonly viewed as comprising affluent con-sumers (e.g., those targeted by Prada, Gucci, Bulgari,Burberry, or Rolex; teenagers with similar tastes in music,entertainment, and casual clothing worldwide; Craig andDouglas 2006). However, increasingly, with widespreadaccess to the Internet and the growth of global media,other segments are appearing, including environmentallyand socially concerned consumers targeted by companiessuch as the Body Shop, Aveda, fair-trade stores, andretailers selling organic products, as well as young mar-ried couples targeted by companies such as IKEA withlow-priced furniture and ING with financial products.Similarly, as a middle class begins to emerge in a broadrange of developing countries, a range of products forthose consumers who have similar preferences and tastessuch as mobile phones, personal banking, and consumerelectronics can be modified and targeted to this marketsegment (Court and Narasimhan 2010).

Challenges. Firms aiming to target such segments faceseveral challenges. First, they need to be able to identifythese segments and assess their size and accessibility. Inmany cases, the major source of growth is in markets

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outside the industrial triad. This poses some difficultiesbecause of the lack of data on consumers in these mar-kets. Equally, reaching such segments, which are typi-cally located in major urban areas, requires the develop-ment of marketing strategies geared to their distinctivepreferences as well as the availability of media and retailoutlets targeted to these segments. Furthermore, if thesesegments are widely perceived as having potential, othercompetitors are likely to target them as well. Firmswould also need to carefully monitor rapidly changingconsumer tastes, preferences, and fashions, includingshifts in interests from global brands to local brands.Consequently, innovation and adaptation to marketchanges is essential for targeting such segments to besuccessful.

Strategic Imperatives. Because the number and size ofthese segments is increasing in significance, they providean attractive target for MNCs. This is particularly truein markets in which global consumer images, symbols,and preferences, originating primarily in the West, arereplacing those of traditional local cultures (Zhou andBelk 2004). For example, some researchers have arguedthat a global consumer culture (Alden, Steenkamp, andBatra 2006) is emerging. Members of this culture aspireto wear clothing and buy furnishings that are perceivedas being “in demand” or as markers of membership inthis culture as well as preferring global to local brands.Similarly, cosmopolitan or world-minded consumerscan be identified as those who are open to and interestedin products, ideas, information, and lifestyles from othercountries (Cleveland, Laroche, and Papadopoulos 2009,Nijssen and Douglas 2008).

Little local adaptation is typically required in productsand services targeted to global segments such as affluentconsumers, ecologically concerned consumers, andmembers of the global consumer culture, because theseconsumers have similar tastes, preferences, and responsepatterns worldwide. However, in some cases (e.g.,young adults/teens), consumers will interpret globallytargeted strategies within the local context (Kjellegaardand Askegaard 2006). Consequently, although in princi-ple strategies can be developed centrally, they need to beinserted into the local context. In some cases, minorchanges may be required in products or marketingstrategies because of local product or promotional regu-lations or cultural factors. For example, advertisementsmay require translation and some local adaptation,requiring local input. Moreover, although distributionstrategies may follow similar principles (e.g., usingdepartment stores or specialty stores versus wholly

owned retail outlets), some modification of this strategymay be required in certain countries because of the localinfrastructure.

Country-Centric Marketing Strategies

Development of country-centric marketing strategies islikely to be particularly effective in relation to largeemerging markets (e.g., the BRIC markets), which arenot only growing rapidly but also developing a strongnational identity. These strategies require the nationalmarket to be sufficiently large and consumer prefer-ences, competition, and the market infrastructure to besufficiently distinctive to warrant a strategy targeted tothese specific characteristics. This also entails relying onlocal resources, including information inputs, localmanagement and marketing personnel, and local know-how and technology.

Challenges. In the past, consumers in emerging markets,especially the more affluent elite and middle-class con-sumers, tended to prefer Western products and brandsto local products in many categories. Upscale consumerspurchased brands such as Gucci, Prada, Louis Vuitton,Ralph Lauren, and Estée Lauder, all of which are viewedas symbols of the affluent Western lifestyle to whichsuch consumers aspired. For younger consumers, ath-letic clothing and footwear brands such as Nike, Adidas,and Levi’s jeans occupied a similar position. Because thesize of the internal market was small due to low con-sumer income and thrifty savings habits, local clothingmanufacturing was geared to export markets.

Because emerging markets have experienced rapid ratesof economic growth and as they become an increasinglyimportant force in geopolitics, a well-to-do middle classthat can afford products such as home remedies, babyhygiene products, ethnic snacks, personal banking,mobile telephones, and motorcycles has begun to growin size and importance (Court and Narasimhan 2010).The size of this market segment is estimated to be sig-nificantly larger in India, at approximately 300 million,compared with an estimated 100 million–200 million inChina, because of the larger number of entrepreneursand family-owned businesses in India and the domi-nance of state-owned or -controlled companies in China(Lee 2010).

In some cases, consumers in these countries are increas-ingly taking pride in their own culture and heritage andhave shifted to buying domestic brands and productsrather than Western goods. This trend is reinforced by

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improvement in the quality of domestic brands and thedesign of products to meet specific local preferences thatincorporate traditional styles, aesthetics, and other fea-tures. For example, in China, local brands such as Haierhousehold appliances, Aigo computers, TCL televisionsand mobile phones, Gome electronics, Geely cars andscooters, and LiNing athletic clothing and shoes havenow become popular (Prasso 2007; Roberts 2004).Often, there is also considerable diversity in tastes, pref-erences, and affluence between different regions andcities within countries. For example, in Shanghai, peopleare more likely to watch local rather than national tele-vision but are less likely to prefer Chinese brands. InIndia, sales of local brands such as Wills clothing, Tan-ishq and TBZ jewelry, Amul dairy products, and Titanwatches are growing rapidly.

Russia seems to be somewhat of an anomaly. Althoughcharacterized by a moderate rate of economic growth(see the Appendix) and the highest GDP per capita ofthe four BRIC countries in terms of purchasing powerparity, it has the smallest population and a high rate ofinflation. It is typically viewed as having high politicalrisk and presents difficult market conditions due to eco-nomic and political uncertainty. Nonetheless, majorMNCs such as Procter & Gamble, Unilever, and Nestléare targeting the Russian market with global brandssuch as Tide, Ariel, Pampers, Axe, Dove, Knorr, andMaggi, all of which have major market share in theirrespective categories and view Russia as a major long-term growth market (www.pg.com, www.unilever.com,www.nestle.com).

Strategic Imperatives. This growth in nationalist senti-ments and shift toward domestic products and brandsimplies that Western companies need to adapt their mar-keting strategies to respond to changing consumer pref-erences. For countries such as China, India, and Brazil,firms must develop strategies independently for eachcountry and tailor them the specific customer prefer-ences, competition, and marketing infrastructure. Fewopportunities are likely to exist for integration or coor-dination of marketing strategies with developed-countrymarkets, or across different countries within this groupother than in relation to global segments because oftheir idiosyncratic characteristics. In some product mar-kets, products and brands marketed in developed coun-tries can be successfully marketed in these countries(e.g., Coca-Cola, Fritos, Head & Shoulders shampoo).However, product positioning and promotional and dis-tribution strategies should be tailored to specific cus-tomer and market characteristics. In addition, these

markets likely will require some product adaptation andextension of the product line to include variants adaptedto local preferences, (e.g., smaller sizes, lower price vari-ants, different tastes or formulas). For example, in India,PepsiCo has developed a product called Kurkure, aCheeto-like snack targeted to younger consumers. Itcomes in flavors such as Masala Munch, Chili Chatka,and Tamatar Hydrabadi and is one of the most popularsnacks in India. Moreover, in Africa, SAB has retooledits factories to make beer from locally sourced ingredi-ents, such as sorghum, cassava, and sugar, to make thebeer more affordable to low-income consumers (Courtand Narasimhan 2010).

In general, products should be developed that incorpo-rate features adapted to local needs in addition to meet-ing specific local tastes and aesthetic preferences.Designs may be adapted to local color and style prefer-ences. At the same time, promotional strategies must bedeveloped that tap into a sense of national identity andreflect appeals that are attractive to local consumers.Increasingly, use of local sports or media personalities,such as Chinese athlete Yao Ming and Indian cricketingpersonalities, such as Sachin Tendulkar, AmitabhBachchan, and Aamir Khan, to endorse products isreplacing that of Western personalities and role models.In some cases, a focus on, for example, family values inBrazil and the group rather than the individual in Chinamay be desirable (Doctoroff 2005).

Similarly, in Russia, modification of branding and pro-motional strategy is often needed to appeal to the grow-ing economic and cultural nationalism. In some cases,this may require developing new products and lower-priced product variants (e.g., Pampers Sleep & Play) toreach the low-tier market sector. Russian companiessuch as MTS and Beeline cell phones, Baltika beer, andKrasny Confectionery are engaging in marketing andrebranding initiatives, creating growing competition forWestern MNCs in mid- and low-tier market segments(Interbrand Zintzmeyer & Lux 2005). At the same time,increasing affluence due to energy exports has triggeredgrowing interest in and ability to afford more luxuryand premium products.

Formulation and implementation of marketing strate-gies tailored to the distinctive characteristics and condi-tions in each market needs to take place locally, usinglocal talent and resources. Local management is mostlikely to have a clear understanding of customer andmarket specifics, as well as sensitivity to the cultural cli-mate and market conditions. Furthermore, they are in


the best position to identify local suppliers, distribu-tors, and service organizations and to manage relation-ships effectively with these organizations. Consequently,hiring competent local managers and giving them sub-stantial autonomy in both formulating and implement-ing strategy is likely to be critical to success in thesemarkets.

In essence, in developing strategies for country-centricmarkets, it is essential to develop strategy from scratchand tailor it to specific market conditions and contexts.Assumptions that strategies or even experience andskills that are effective in developed countries can beleveraged in these markets must be carefully evaluated(Dawar and Chattopadhyay 2002). In general, a freshstart, relying heavily on local skills, expertise, andexperience, is likely to provide the best results. Althoughsubstantial investment in building a distinctive strategyand operations centered on the specific needs andresources of that country is required, the size andgrowth potential of these countries suggest that it islikely to pay off in the long run. It may also provide abasis for expanding operations to proximate or cultur-ally similar markets and to immigrants from that coun-try in other parts of world.

Rural Markets and Urban Poor

Much of the preceding discussion focuses on targetingaffluent consumers and the growing middle class inemerging-country markets; however, many emergingcountries also have either a sizeable rural population(e.g., China, India) or a substantial number of urbanpoor (e.g., Brazil, Mexico). These consumers typicallyhave low incomes, less than $1–$2 per day, and low lev-els of formal education; they constitute the bottom ofthe pyramid (Mahajan and Banga 2006; Prahalad2006). Nonetheless, their large numbers offer sizeablemarket potential. In rural areas, many are small farmerswho grow much of their own food, particularly staplessuch as grain and rice as well as vegetables. Often thereis substantial bartering and a sizable informal economythat does not appear in official statistics. Consequently,the low figures for per capita income underestimate theactual standard of living and the ability to purchasenonfood items. In addition, increased awareness ofgrowing consumer affluence in urban areas and growingavailability of branded goods at a range of differentprice points generates aspirations among rural andurban poor to purchase branded goods that offer prom-ise of better quality and represent symbols of belongingto a more affluent lifestyle.

Challenges. Linguistic, cultural, and social heterogeneitywithin these markets results in market fragmentation. InIndia, attitudes toward the role and status of women dif-fer, affecting the use of marketing appeals to women andcreating barriers to the employment of women as distri-bution agents or in personal selling roles. Low levels offemale literacy may result in greater need for use ofvisual symbols and, consequently, greater vulnerability toknockoffs, which imitate symbols and logos used bynational brands and are sold by unscrupulous traders. Inboth India and China, there are marked regional differ-ences in food preferences, often related to differences inagricultural production. For example, in northern India,wheat is a staple crop, and bread products such as naansand chapattis are a key component of diet (Singh andSharma 2010). In Southern India, rice is a staple, andvegetarian dietary preferences are common. Similarly, inChina, there are substantial differences in food consump-tion patterns and diet, ranging from the spicier dishespopular in Szechuan to the sweet and sour tastes of Can-tonese cuisine (Roberts and Rocks 2005).

Another important issue in rural markets is accessibilityand the lack of a market infrastructure. Villages areoften scattered and difficult to reach. In many cases, dirtroads provide the only means of access, and there is lit-tle or no public transportation to smaller villages.

Markets selling food products and other items may existin some centers, but in smaller villages, there may be onlyone or two small stores providing basic essentials, whichoften take advantage of their monopoly position. Insome cases, itinerant retailers also visit such villages.Similarly, the urban poor are served by small stores thatcarry limited inventory but often also provide credit.Because many workers are paid on a daily rather than aweekly basis and future income is often uncertain, peoplefrequently shop two or three times a day for immediateneeds and purchase in small amounts according to theiravailable cash. As a result, the retail infrastructure istypically poorly developed and highly fragmented.

Furthermore, institutional voids impede market devel-opment (Ricart et al. 2004). In addition, effective regu-lation of product and marketing activities is often lack-ing. Even when product and promotional regulationexists, effective mechanisms to ensure its implementa-tion are often absent. As a result, hawkers and tipstersabound, selling counterfeit products and knockoffs ofpopular brands and engaging in deceptive promotionaland pricing practices. For example, contracts with dis-tributors, exclusive agreements, and other arrangements


are often difficult to enforce, resulting in a high degreeof market instability and uncertainty.

Although rural markets in country-centric markets (andcountry clusters) offer substantial opportunities due totheir size and growing untapped potential, realizing thispotential poses significant challenges to an MNC. Theinadequacy of the basic, or hard, infrastructure (i.e.,water, electricity, and roads) creates a major obstacle inreaching these markets and limits their growth. The limi - tations of the soft infrastructure (i.e., advertising andmarketing research agencies) and what have been called“institutional voids” (i.e., the lack of regulation of mar-keting and distribution practices and of mechanisms forenforcing contracts with distributors and other interme-diaries) constitutes yet another hurdle to marketing torural consumers (Ricart et al. 2004).

Strategic Imperatives. The unique characteristics of con-sumer demand in emerging markets, combined with theinadequacy of the hard and soft infrastructures mean thatproducts and strategies, as well as experience and skillsdeveloped in industrialized countries, are likely to be oflimited value in emerging markets. Rather, firms need tostart by gathering basic knowledge about the fundamen-tal underpinnings of consumption and the ways in whichlocal resources and capabilities (e.g., labor, communica-tions, social networks) can be developed and utilized tomeet consumer needs (London and Hart 2004).

In some cases, product modification entailing use ofcheaper components, simpler or cheaper packaging, orelimination of more elaborate product features thatenable products to be sold at lower prices could helpexpand the market. For example, Nokia has focused ondeveloping inexpensive functional mobile phones forlow-income consumers in emerging markets (Ewing2008). In other cases, product variants of popularbrands are sold at lower price points. For example, inurban areas in China, Procter & Gamble sells Crest inexotic flavors such as Icy Mountain Spring and Morn-ing Lotus Fragrance. In contrast, for rural areas, thecompany developed Crest Salt White, which sells forone-half the price of the exotic versions. The develop-ment of this flavor was based on the belief among Chi-nese in rural areas that salt helps whiten teeth (Roberts2007). In India, where Cadbury controls 70% of thechocolate market, the company has introduced CadburyDairy Milk Shots—pea-size chocolate balls sold for tworupees (approximately four U.S. cents) for a packet oftwo to make them more accessible to low-income con-sumers (Misquitta 2009).

Low-cost functional products also must be developed tomeet the needs of low-income consumers. Developingbasic functional products (e.g., low-priced functionalmobile phones without the services such as instant mes-saging or cameras that are typical in the developedworld) provides a means to develop products that matchthe needs of rural consumers (London and Hart 2004).Similarly, lack of electricity in rural areas requires thedevelopment of products that rely on other sources ofenergy, for example, solar-powered computers orwindup radios (Einhorn 2006; Murphy 2002).

Consumer packaged companies seeking to develop salesin low-income rural areas also need to find ways toincrease the ability of rural consumers to afford theirproducts. In some cases, this can be achieved by inte-grating potential consumers into the value chain. Forexample, potential consumers could be employed as dis-tributors or producers, and consumers could be inte-grated into the value chain. A noteworthy example isProject Shakti, launched in 2002 by Hindustan Lever(now Hindustan Unilever Ltd.) to improve its rural dis-tribution targeted at villages with populations under2000 (Hindustan Unilevel Ltd. 2008). One woman ineach village is designated “the Shakti entrepreneur” andtrained to promote Unilever products. She is providedwith a computer to facilitate ordering and inventorymanagement and could also sell time on her computer tolocal children to help them learn English and computerskills. The product line was limited to 150 stockkeepingunits consisting primarily of laundry detergents and per-sonal wash products. The system worked well, and thewomen were able to expand their income by sellingproducts to retail outlets and directly to consumers. Theprogram was supported by educational programs using“communicators,” who traveled to rural villages to pro-vide hygiene and health information to self-help groups.

Innovative promotional strategies adapted to the spe-cific context, in which mass media do not reach ruralareas, are also needed. Again, these must rely onresources available in the local area (e.g., local perform-ers and traveling troupes, film shows, vans that provideproduct demonstrations) and locally available media,such as wall advertising banners and slogans at localmarkets and fairs. In general, this requires creativity aswell as a deep understanding of available resources andthe sociocultural context (Murphy 2002).

Similarly, in the case of distribution, understanding of thelimitations of the marketing infrastructure and use of cre-ative strategies to compensate for these limitations (e.g.,


the Shakti system in rural India) are required. Often,training a pool of qualified talent to promote and distrib-ute the firm’s products is essential. In some cases, tech-nology can be instrumental in building an effective mar-keting infrastructure, as the case of ITC in southern Indiademonstrates (Sivakumar 2007; www.itcportal.com).However, substantial resources are required to build boththe hard and soft infrastructure needed to reach ruralareas. Consequently, only firms willing and capable ofmaking the investment required to build this infrastruc-ture are likely to adopt this approach.

The unique characteristics of rural areas mean that it iscritically important to develop strategies for these mar-kets at the outset rather than attempting to leveragestrategies and experience gained in other markets(Arnold and Quelch 1998). This requires collectinginformation and building an understanding of the livingconditions and broad socioeconomic context in whichthese are embedded. In addition to videotaping daily lifein rural areas, some firms require executive and manage-ment trainees to experience these conditions firsthandby living with a rural household for two to threemonths. In some cases, it may be feasible to transferproducts, ideas, and approaches that are successful inrural markets in one country to another. However, thediversity of conditions both within and between coun-tries due to differences in climate, culture, and socioeco-nomic conditions means that this must be done withcaution and monitored carefully.

In essence, a radically different strategy is needed to taprural markets in emerging markets effectively comparedwith more sophisticated urban consumers. Typically, thisrequires developing an in-depth understanding of con-sumer needs and their socioeconomic context and engag-ing in collaborative efforts with private and governmentorganizations and the local community, organizationsnot traditionally part of the marketing effort. Conse-quently, the firm should focus its efforts on building,consolidating, and leveraging learning from the bottomup to develop a new capability of social embeddednessthat emphasizes reliance on and utilization of localresources if it is to respond effectively to the unique chal-lenges of emerging markets (London and Hart 2004).

Country Clusters

The final sphere consists of second-tier, high-growthemerging-market countries that can be grouped intoclusters to provide a viable economic unit for MNCs totarget. According to Goldman Sachs (Wilson and Stup-

nytska 2007), these countries consist of one developedcountry (South Korea), three newly industrialized coun-tries (Mexico, the Philippines, and Turkey), six develop-ing countries (Egypt, Indonesia, Iran, Nigeria, Pakistan,and Vietnam), and one large underdeveloped market(Bangladesh). All have rapid rates of economic growthand are believed to provide promising opportunities.They all have large rapidly growing populations and sig-nificant industrial capacity, which suggest a growingconsumer market with increasing earning capacity, cre-ating a favorable climate for MNCs. Several countries inthe former Soviet Union (e.g., Ukraine, Romania,Belarus) are also growing rapidly and are becomingimportant centers for software outsourcing due to thelarge number of information technology and engineer-ing graduates in these countries (Matlack 2010).

Challenges. Although the size of the market in thesecountries, which, with the exception of South Korea, arepredominantly lower-middle- or low-income economies,is typically not sufficient to warrant developing a sepa-rate or country-centric strategy, their population sizeand high growth rate suggests substantial consumermarket potential over the medium and long run.Although these countries are highly diverse and are atdifferent levels of economic development, identifyingand targeting selected countries or groupings of thesecountries can provide an effective strategy for foreignMNCs. In some cases, low labor costs make them prom-ising locations for outsourcing manufacturing, thusincreasing economic growth and consumer marketpotential (Einhorn 2010).

Although these countries share the characteristics of arapidly growing population and high rates of economicgrowth, they differ with regard to demand preferencesand structure as well as certain macroeconomic charac-teristics (see the Appendix). Continued political instabil-ity and corruption in countries such as Pakistan andBangladesh and terrorist activities in Indonesia, thePhilippines, Nigeria, and Turkey create an unstable eco-nomic context and contribute to economic uncertainty.In addition, to the extent that countries such as Nigeria,Mexico, and Iran are oil exporters and other countriesexport basic commodities, fluctuations in global com-modity prices can affect economic growth.

Similarly, to the extent that such countries are low- orlower-middle-income emerging economies, they fre-quently lack a well-developed marketing and logisticalinfrastructure, particularly outside urban areas. There-fore, firms will likely be required to invest in building or

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developing that infrastructure. The distribution struc-ture is often highly fragmented. Often, a large propor-tion of the population, lacking mobility or means oftransportation, shops in small mom-and-pop shops,which also provide a social function in the local com-munity. This poses a major challenge for MNCs inestablishing an effective distribution system to reachand promote their products to both distributors andlower-income consumers.

Strategic Imperatives. Multinational corporations tar-geting these countries need to do so selectively becausemajor investment may be required both in developingdemand and building the logistical and distributioninfrastructure to reach consumers. These may includeestablishing contracts with multiple tiers of distributorsand assisting them in financing inventory as well as sup-porting small retailers and providing them with equip-ment (e.g., refrigerators), promotional materials, andguidance in managing and developing their business.Although such investment may pay off in the long run,the instability of these markets and the fragmentation ofdemand suggest that it also carries substantial risk.

As in the case of country-centric markets, local know-how and understanding market conditions is essential tobe successful in these markets. Hiring local nationalswith knowledge and experience in managing operationsin a given country and developing cooperative agree-ments with local firms to gain input into the develop-ment and implementation of marketing strategies canhelp the firm tailor its strategy to the local market.Again, this frequently requires extensive sales trainingprograms and understanding of local negotiation tac-tics, which may vary considerably from one country toanother.

At the same time, potential similarities in conditionsbetween different markets (e.g., fragmentation of thedistribution structure, dealing with local competitors,developing promotional strategies) implies that transferof know-how or experience across these markets may befeasible. In some product categories (e.g., consumerelectronics, household durables), for which demand andlocal market conditions are similar, it may also be feasi-ble to market products developed in one country inother countries. An example in the case of food prod-ucts is that of Danone’s Dolima brand of yogurt. Aim-ing to target low-income consumers in emerging mar-kets, Danone launched the ten-cent drinkable yogurt inIndonesia in 2004. The product was an instant success,and Danone subsequently marketed it in Senegal,

Bangladesh, and several other emerging markets (Pas-sariello 2010).

Because countries in this sphere are in many respectsextremely diverse, often characterized by relativelysmall market sizes compared with the major emerging-market economies, and populated with strong localcompetitors, particularly in the lower end of the market,MNCs need to target these markets selectively. In addi-tion, given their size, MNCs need to develop strategiesthat will enable them to achieve cost economies and torespond to specific local market characteristics. Firmsshould identify opportunities for leveraging products,ideas, assets, skills, and experience either across coun-tries within this group or with other countries with simi-lar characteristics.

One alternative is to develop a satellite strategy. Thisentails coordinating or leveraging strategy with a proxi -mate member of the country-centric group with whomthe focal country shares some common characteristics(e.g., cultural affinity, distribution infrastructure). Forexample, if products have been developed specificallyfor or in that market, they may also be appropriate forthe satellite country, though some tailoring of strategyto cultural specifics, customer characteristics, competi-tion, and market conditions in the country may berequired. Strategy developed within the Chinese marketmay provide the prototype for the Vietnamese or Thaimarkets. Similarly, strategies developed for the Indianmarket may be adapted for Bangladesh. Moreover,experience, knowledge, and management capabilitiesdeveloped in relation to the country-centric market maybe leveraged in the satellite country. However, caremust be taken to ensure that leveraging can be effec-tively implemented and to monitor when and whereadjustments are needed. Consequently, as in the case ofcountry-centric strategies, knowledge and understand-ing of the local market and input from local manage-ment is essential.

A second alternative is to develop a common strategyprototype for countries within a cluster that share cer-tain common characteristics. Then, firms can adapt theexecution of this prototype to country-specific charac-teristics. For example, several countries in the Next 11group (e.g., Egypt, Pakistan, Bangladesh, Turkey, Iran,Nigeria) are either Muslim or have a substantial Muslimpopulation. However, these countries are significantlydifferent in terms of other factors (e.g., income levels,market openness), requiring country-specific tailoring ofmarketing strategies.


Given these differences, limited opportunities exist forstrategy integration and coordination or transfer of bestpractices across these countries. Sensitivity to local dif-ferences in customer tastes and preferences, particularlyin relation to culturally embedded products, such asfood and entertainment, is critical. Consequently, as inthe case of country-centric markets, use of local talentand resources as well as local management autonomy indeveloping, adapting, and implementing strategies forthe local market is essential.

The may be some hurdles in identifying commonalitieswithin country-centric markets in the case of a satellitestrategy or across clusters of markets within this group-ing, but certain issues and problems may be sufficientlysimilar to make use of similar strategies feasible. Conse-quently, although responsiveness to specific local char-acteristics is critical in designing strategy for these mar-kets, some coordination in the organization ofoperations relative to these countries or clusters of coun-tries within this group should be established to facilitatetransfer of information and experience relative to effec-tive strategies, best practices, successful managementsystems, and so on.

MANAGERIAL IMPLICATIONS

The diversity of market conditions both between andwithin these different spheres, such as customer hetero-geneity (including marked cultural and economic diver-sity), the nature of competition, and radical differencesin the market infrastructure, means that development ofa globally integrated strategy is likely to be impractica-ble. Consequently, firms can no longer focus on devel-oping a uniform globally integrated marketing strategyto achieve synergies through the transfer of products,skills, experience, and learning across markets. Rather,strategy needs to be redesigned and reengineered toestablish direction, exploit opportunities, and manageoperations in a range of multiple, highly diverse marketsspread across the world in which conditions differ sub-stantially from those in markets in which MNCs havetraditionally operated. Some exceptions to this occur incertain product markets, notably in business-to-businessmarkets (e.g., aerospace, information systems, invest-ment banking), but even in these markets some adapta-tion of marketing and service activities is likely to berequired.

Expansion into an increasingly broad and diversearray of international markets also implies that firms

have to deal with marketing under a wide range of dif-ferent environmental and contextual market condi-tions. Countries differ in terms of economic character-istics, such as income, financial stability, political risk,ease of doing business, population growth, and distri-bution, as well as cultural factors, such as ethnic diver-sity, age distribution, religious preferences, nationalidentity, ecological concerns, and social change. Allthese factors affect the design of marketing strategy,potential market opportunities, and target segmentsand imply that tailoring strategy to local market char-acteristics and customer tastes, preferences, andbehavior becomes a key imperative. At the same time,competition from emerging-market firms is becomingmore intense in developed-country markets becausesuch firms acquire technology and apply managementskills and techniques learned from developed countryMNCs. As a result, the latter no longer have exclusivecontrol of developed-country markets but increasinglyneed to respond to challenges from emerging-marketfirms.

Therefore, MNCs must pay greater attention to under-standing consumer behavior and its underlying determi-nants. In particular, it is important to examine not onlythe values and beliefs that affect purchase and use ofproducts but also the basic living conditions and socialcontext in which consumers live and the infrastructurethat underlies and supports consumption and purchas-ing decisions. These may differ significantly from onecountry or sphere to another and have an importantimpact on consumer purchase choice and decision mak-ing. As Caves (1971, p. 5) points out, “ the foreignenterprise must pay dearly for what the native hasacquired at no cost to the firm (because it was part ofthe entrepreneur’s general education) or can acquiremore cheaply (because as it were the native knowswhere to look).” However, there is some potential forleveraging intangibles (e.g., skills, experience, knowl-edge). It is important to recognize that local input (i.e.,knowledge and skills) is likely to be critical in develop-ing and implementing effective marketing strategies.Highly centralized firms, particularly those in consumerproducts, are likely to have the most difficulty survivingin this environment.

Mobilizing and deploying the firm’s assets and capabili-ties to implement these divergent strategies requirescareful consideration of the extent to which they caneffectively be leveraged across and within differentspheres (Sirmon, Hitt, and Ireland 2007). Although asubstantial degree of integration and mobilization of

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capabilities is likely to be feasible across global segmentsand developed-country markets (principally the indus-trial triad), the distinctive characteristics of the country-centric group as well as the country clusters and therural and urban poor suggest that it is likely to becomedifficult within these spheres. In these groups, formula-tion and implementation of effective marketing strategydepends heavily on development of local managementskills and capabilities, and considerable input from localmanagement is crucial. In some cases, collaboration andinput from local organizations, including nongovern-ment organizations and governmental agencies, will benecessary.

Redirection of marketing strategy toward greateremphasis on local market preferences rather than focus-ing on commonalities among consumers and marketconditions across countries implies that decision mak-ing shifts to the local level. Not only should local man-agement become responsible for implementing strategydeveloped at the regional or corporate level, but itshould also have greater autonomy with regard tolocal decision making. At the same time, the role oflocal management should provide local input andinformation into the design of global marketingstrategy, and the extent to which greater local respon-siveness is needed becomes crucial, as well as how thismight best be achieved. This empowering of local man-agement facilitates more effective response to diversemarket and competitive conditions across a broadrange of markets.

As a result, the design of a successful and effectiveglobal marketing strategy is becoming increasingly com-plex. The key imperatives no longer center on improvedintegration and coordination of strategy and operationsacross countries. In the developed markets of the indus-trial triad and in relation to global market segments,MNCs may successfully continue to develop globally orregionally integrated marketing strategies. However,outside these markets, MNCs need to develop new andinnovative strategies based on a deep understanding oflocal market conditions and priorities, often making useof local resources and skills. This entails not only devel-oping organizational structures and processes that pro-vide greater input and strategy implementation by localmanagement but also investment in building the market

infrastructure, educating consumers, and developingdistribution networks.

In essence, the MNC needs to be able to focus onachieving multiple and sometimes conflicting goalssimultaneously through the pursuit of divergent strate-gies throughout the world. On the one hand, the firmneeds to place substantial emphasis on local autonomyin strategy formulation to respond effectively to demandunder widely differing market conditions and environ-mental contexts. On the other hand, opportunities forthe transfer of ideas, products, and skills and capabili-ties across emerging markets with similar market condi-tions and challenges may help achieve operational effi-ciencies. Thus, the key challenge is to synthesizedivergent strategies into a functioning, but not neces-sarily integrated, whole.

CONCLUSION

As firms expand operations across a much broader geo-graphic base, they are facing an increasingly complexrange of scenarios. This makes it difficult to develop aunified and integrated strategy for global markets.Rather, firms should establish direction and manageoperations in multiple, highly diverse markets spread outacross the world. These markets differ not only in theirrate of growth and market potential, the level of compe-tition, and ease of market access but also in terms of theirsimilarity or diversity and the degree of market intercon-nectedness. In turn, this affects the extent to which thefirm can pursue similar strategies across these markets.

Ultimately, the biggest challenge for the firm is to man-age the diversity of strategies it must pursue to be suc-cessful. Large MNCs whose goal is to continue toincrease sales must operate in all five spheres anddevelop marketing strategies for each of them. Often,these strategies have little in common and must be man-aged at the local level to be successful. At the same time,the firm must also strive to achieve efficiencies and syn-ergies whenever possible. Thus, while the firm pursues asemiglobal marketing strategy following different direc-tions in different parts of the world, it must attempt toachieve a synthesis by combining elements of thesestrategies into a coherent whole.

jim

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NOTES

1. See the Appendix for basic economic information onall 15 countries.

2. Ghemawat (2003) uses the term “semiglobalization”to indicate his view that markets are typicallyregional rather than global. Our use of the term is dif-ferent and indicates that some markets are trulyglobal and some are much more fragmented andrequire unique strategies. In our view, the challengethat firms face is to be able to manage both simulta-neously.

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THE AUTHORS

Susan P. Douglas was the Paganelli-Bull Professor ofMarketing and International Business at New YorkUniversity’s Stern School of Business. She received herPhD from the University of Pennsylvania. Before join-ing New York University, Professor Douglas taught atCentre-HEC, Jouy-en-Josas, France, and was a facultymember of the European Institute for Advanced Studiesin Management in Brussels. Professor Douglas waselected as a fellow of the Academy of InternationalBusiness in 1991 and was made a fellow of the Euro-pean Marketing Academy in 2002. Professor Douglascoauthored Global Marketing Strategy (McGraw-Hill)and International Marketing Research, 3d ed. (JohnWiley & Sons). Her research has been published inJournal of Marketing, Journal of Consumer Research,Journal of Marketing Research, Journal of Inter-national Business Studies, Columbia Journal of WorldBusiness, International Journal of Research in Market-ing, International Marketing Review, Journal of Inter-national Marketing, and other publications. This articlewas accepted in August 2010. Susan Douglas, a vision-

ary in the field of international marketing, passed awayin early January 2011.

C. Samuel Craig is the Catherine and Peter Kellner Pro-fessor, Professor of Marketing and International Business,and Director of the Entertainment, Media and Tech-nology Program at New York University’s Stern School ofBusiness. He received his PhD from the Ohio State Uni-versity. Before joining the New York University faculty,Professor Craig taught at Cornell University. ProfessorCraig is coauthor of Consumer Behavior: An InformationProcessing Perspective (Prentice Hall), Global MarketingStrategy (McGraw-Hill), and International MarketingResearch, 3rd edition (John Wiley & Sons). His researchhas been published in Journal of Marketing Research,Journal of Marketing, Journal of Consumer Research,Journal of International Business Studies, Columbia Jour-nal of World Business, International Journal of Researchin Marketing, Journal of International Marketing, Inter-national Marketing Review, and other publications. Hisresearch interests focus on the entertainment industry,global marketing strategy, and methodological issues ininternational marketing research.

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