Management of Multinational Corporations ( MNCS )

Chapter 13 : Challenges of Globalization

The Globalization Movement
Market Dynamics
Customer Centricity in Globalization
Customer Value Expectation
Global Customization
Global Customer Loyalty
Improving Global Customer Service
Pitfalls of Global Marketing.

Chapter Summary

Neo-classical economists propounded the theory that customers are rational and given a choice, they maximize their benefits and minimize their costs. With the growth in communication technology, the decision making power has shifted from the producers and the governments to the customers.

Management thinkers like Theodore Levitt recommend that companies should standardize their marketing mix since the tastes and preferences of consumers all over the world are homogeneous. Levitt's argument is somewhat extreme, since the tastes and preferences of consumers in developing countries continue to remain divergent. While tastes and preferences for certain products like packaged foods are naturally divergent, those for products like cars and electronic equipment are homogeneous.

Though global standardization can lead to economies of scale, the benefits are offset by the costs of managing the supply chain. Companies that embrace globalization must strike a balance between the standardization and adaptation. The test of globalization is in its ability to understand and respond to the needs and business systems of each market.

Integration of the world's capital markets has been the major driving force behind globalization. Deregulation of the markets by the governments and technological developments have added fillip to the process of globalization. Though globalization has been a much talked about subject for more than a decade now, the current pace of globalization is amazing.

Customers demand more sophisticated and more innovative products. Economies of scale through mass production no longer help in gaining competitive advantage. The erstwhile practices of mass production and gradual improvement are being replaced by customization, customer relationships and business process re-engineering.

Price and quality have become order qualifiers i.e. they are essential to remain in competition but are not sufficient to beat competition. Responsiveness to customer demands is the ability to stay above competition by creating unique value to the customer. To retain and increase the list of customers, a company must make customer-centric decisions.

Companies must create customer value either by charging less for the same benefits or providing more benefits for the same price as that of the competitors. An important element in managing customer relationships is time. Waiting time for a customer is attributed to non-value added activity, quality problems and forecast errors. Simplifying processes, shortening cycle times and eliminating queues are necessary for customer satisfaction.

Global customization has broken the traditional belief that customization and cost efficiency do not go together. Customization avoids the pitfalls of mass production which depends on demand forecasts that may not be accurate. Mass customization postpones production till the last minute to incorporate as many changes as the customer desires. The purpose of mass customization is to give exactly what the customer wants.

Customer retention is important because of its potential impact on the future stream of cash flows. Customer loyalty is the final stage after awareness and image about the product, trial and repeat purchase and satisfaction with the company's product and service. Customer service is an important element that determines customer satisfaction and loyalty.

In case of tangible goods, the higher the level of technical sophistication in the product, the greater the need for service. Customer loyalty can be ensured through,

• Improving communication between customers and employees
• Supporting the customer by rectifying errors and replacing products if necessary
• Giving an estimate about when the product or service will be rectified or restored.
• Focussing on improvement

The pitfalls of global marketing i.e. the stumbling blocks in the process of global marketing include:

• Insufficient research
• Over-standardization
• Poor follow-up and
• Poor program co-ordination.

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