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GLOBALISATION AND MARKET STRATEGIES OF MULTINATIONAL
COMPANIES: ACASE STUDY OF TOTAL KAMPALA UGANDA
BY
MWANGA RAMLAH
BIBA/36169/113/DU
A RESEARCH PROPOSAL SUBMITTED TO COLLEGE OF ECONOMICS .. AND
MANAGEMENT IN PARTIAL FULFILMENT OF REQUIREMENT FOR.THE
AWARD OF BACHELOR'S DEGREE IN INTERNATIONAL
BUSINESS ADMINSTRATION OF KAMPALA
INTERNATIONAL UNIVERSITY,
JULY;2014
DECLARATION
I MWANGA RAMLAH, hereby declare that this proposal is original and has not been
Published and/ or submitted for any other award to any other academic institution
before.
Signed
MWANGA RAMLAH
APPROVAL
I confirm that the work reported in this thesis was carried out by the candidate under
my supervision.
MR. MUGUME TOM (SUPERVISOR)
Date
ii
DEDICATION
This piece of work is dedicated to my parents Mr.Mwanga Suleiman and Mrs Umulisa
Jacqueline for the great love, support and proper upbringing.
iii
ACKNOWLEDGEMENT
First and foremost I thank the Almighty God, without whose inspiration, guidance
and wisdom, i would never have accomplished this report."For without Him I can do
nothing"
Special thanks go to Mr. Mugume Tom for his academic guidance and generous
contribution towards the completion of this report.
Special thanks go to the lecturers who shaped my academic reasoning like; Mr.
Tom Mugume and Ms.Wambui Carol for their great Ideas, techniques and procedures
towards this study.
The researcher also wishes to thank the respondents who filled up the
questionnaires and this has contributed greatly towards my academic achievement.
The researcher thanks all the people whose assistance enabled me to accomplish
my Bachelor's degree successfully; special thanks go to my parents, my aunty umubyeyi
Yvonne, sister and brothers rehma, ismaeil and shafik, still special thanks go to my
friends for the material support that they rendered towards my education ever since i
started studying.
Special thanks go to all branch managers and staff of Total petrol station for
having welcomed me to carry out my research from there and for cooperation they
showed me during data collection process.
iv
TABLE OF CONTENTS
DECLARATION ........................................................................................................... i
APPROVAL ................................................................................................................ ii
DEDICATION ........................................................................................................... iii
ACKNOWLEDGEMENT .............................................................................................. iv
TABLE OF CONTENTS ............................................................................................... v
LIST OF TABLES ..................................................................................................... viii
ABSTRACT .............................................................................................................. ix
CHAPTER ONE .................................................................................................... 1
INTRODUCTION ................................................................................................ 1
1.1 Background of the study ...................................................................................... 1
1.2 Statement of the Problem .................................................................................... 6
1.3 Purpose of the study ........................................................................................... 7
1.4 Research Objectives ............................................................................................ 8
1.4.1 General objective ............................................................................................. 8
1.4.2 Specific Objectives ........................................................................................... 8
1.5 Research Questions; ........................................................................................... 8
1. 6 Scope of the Study .............................................................................................. 8
1.6.1 Geographical Scope .......................................................................................... 8
1.6.2 Theoretical Scope ............................................................................................. 9
1.6.3 Content Scope ............................................................................................... 10
1.6.4 Time Scope .................................................................................................... 10
1. 7 Significance of the Study ................................................................................... 10
1.8 Operational of Definition of Key Operational Terms ............................................. 10
1.9 Conceptual Framework ...................................................................................... 11
CHAPTER TW0 ........................................•....•................................................... 14
LITERATURE REVIEW ...................................................................................... 14
2.1 Introduction ...................................................................................................... 14
V
2.2 Theoretical Framework ...................................................................................... 14
2.3 The impacts of Globalization on marketing strategies .......................................... 17
2.4 Globalization effects .......................................................................................... 18
2.4.1 Global market opportunities ............................................................................ 19
2.4.2 Global market threats ..................................................................................... 20
2.5 marketing strategies .......................................................................................... 22
2.6 The relationship between globalization and Marketing ......................................... 39
CHAPTER THREE •.........................................................................................•••. 43
RESEARCH METHODOLOGY ...........••..................•••••.....................................•... 43
3.0. Introduction ..................................................................................................... 43
3.1 Resea,ch Design ............................................................................................... 43
3.2 Study population ............................................................................................... 43
3.3 Sample size ...................................................................................................... 43
3.4 Data collection .................................................................................................. 44
3.5 Method of Data Collection .................................................................................. 44
3.5.1 Questionnaires ............................................................................................... 44
3.5.2 Interviews ..................................................................................................... 44
3.5.3 Observations .................................................................................................. 45
3.6 Data Analysis and interpretation ........................................................................ 45
3. 7 Ethical Procedure .............................................................................................. 45
3.8. Limitations of the study .................................................................................... 46
CHAPTER FOUR ................••...................••............................................•.••........ 47
DATA PRESENTATION, ANALYSIS AND INTERPRETATION ............................ 47
4.0 Introduction ...................................................................................................... 47
4.1 Demographic characteristics of the respondents ................................................. 47
4.2 Level of Globalisation ........................................................................................ 49
4.3 Level of marketing strategies ............................................................................. 50
4.4 Relationship between Globalisation and Marketing strategies ............................... 52
vi
CHAPTER FIVE ...........................................................................................•..... 54
SUMMARY OF FINDINGS, CONCLUSIONS, RECOMMENDATIONS AND AREAS
Of FURTHER STUDY ............••................•....................................•.•.................. 54
5.0 Introduction ...................................................................................................... 54
5.1 Summary of Findings ......................................................................................... 54
5.2 Discussion ........................................................................................................ 54
5.3 Conclusion ........................................................................................................ 55
5.4 Recommendation .............................................................................................. 56
5.5 Areas for further study ...................................................................................... 56
REFERENCES .......................................................................................................... 58
APPENDICES .......................................................................................................... 61
Appendix I: Questionnaire ....................................................................................... 61
APPENDIX II: RESEARCHER'S CURRICULUM VITAE ................................................... 65
vii
LIST OF TABLES
Table 1: Respondents' Profile .................................................................................. 48
Table 2: Level of Globalisation ................................................................................. 49
Table 3: Level of marketing strategies ...................................................................... 51
Table 4: Significant relationship between Globalisation and Marketing strategies ........ 52
viii
ABSTRACT
The purpose of this research was to examine the relationship between globalisation and
marketing strategies in Total petrol station limited. The study was guided by four
objectives namely; determining the level of globalisation, the level of marketing
strategies and determining the relationship between globalisation and marketing
strategies in Total petrol station limited. The study comprised of a population of 144
respondents from which a sample size of 105 respondents were selected, and a
descriptive research design was used to collect data from 105 respondents using self
administered questionnaires as the main data collection instrument. The leve of
globalisation was generally high (average mean==2.85) which implied that Total petrol
station in Kampala Central Uganda has established other production sites overseas, the
level marketing strategies was rated high (mean== 2.90), which implied that Total petrol
station in Kampala Central Uganda always apply flank attack strategies by attacking
their opponents in the same geographical area, and the two variables are positive and
significantly correlated ( r-value==.578 and sig==0.003), this means rejecting the null
hypothesis that there was a significant relationship between globalisation and marketing
strategies in Total petrol station limited. Arising from the findings, appropriate
recommendations and areas of further research were made. Recommendations based
on findings were that; Total petrol station should establish product plat foams in !ow
cost countries where intermediate products are made into finished products at lower
costs, should highly use internet which can help them reduce on the costs of
transmitting their products, and always make sure that their pricing strategy covers all
costs of production and this will help them increase on the level of profits.
ix
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
This chapter focuses on the background of the study, problem statement, purpose,
research objectives, research questions, scope, hypothesis and significance of the
study, validity, ethical consideration and limitations.
Historically, development of a sound marketing strategy is an essential part of starting a
business (GleAmet et al., 1993). The marketing strategy determines the use of the
company's resources and tactics to achieve its specific marketing objectives based on
the needs and desires of its stakeholders, including customers, employees, investors
and rivals (Burt, 1994). The marketing strategy is typically designed around three
elements selecting a target market, specifying the market strategy and creating a
marketing mix (Cairncross, 2001). Identifying the target market may be the most
important decision a company makes in the strategic planning process (Burrell,. 1996).
The company must first specify whom it is trying to attract based on its own strengths
and weaknesses, the intensity of the market competition and the potential costs and
gains (Cravens, 1998). Businesses may treat the entire market called mass marketing or
target one or more specific segments or groups in the market concentration or multi
segmentation (Cairncross, 2001).
Globalization is the term that is used to describe the integration of international
technology, communication and products. It is the linking and sharing of cultural and
economic activities between different countries. Over the last century the emphasis on
globalization has increased as countries have been more willing and able to
communicate and interact with one another. World governments, organizations and
businesses are continually working towards greater international integration as a way to
improve and develop the world as a whole. As globalization continues to be advanced
and encouraged it is important that we understand the advantages and disadvantages
of international integration.
1
With improvements in transportation and communication, international business grew
rapidly after the beginning of the 20th century. International business includes all
commercial transactions that take place between two or more regions, countries
andnations beyond their political boundaries (O'Ruourke et al., 1999). Such
international diversification is tied with firm performance and innovation, positively in
the case of the former and often negatively in the case of the latter (Kapferer, 1992).
Usually, private companies undertake such transactions for profit (Kuhn, 1996). These
business transactions involve economic resources such as capital, natural and human
resources used for international production of physical goods and services such as
finance, banking, insurance, construction and other productive activities(O'Ruourke et
al., 1999).
Modern technological and communication advances have made it easier than ever for
businesses to market their products and services internationally. Before new market
entry, a company should conduct a thorough cross-cultural analysis to eompare key
similarities and differences between country markets. The results of the cross-cultural
analysis and the type of product offered will determine the appropriate international
strategy global or multi-domestic (Laaksonen, 1994). A global marketing strategy
assumes all consumers in all countries or geographic regions are the same (Blattberg et
al., 1989). This strategy is best suited for standardized products such as fuel pumps
and petroleum products, where there is little to no need for product differentiation (Low
et al., 1994). Total, for instance, can be found all over the world, and is easily identified
as such. Global marketing has distinct advantages, allowing for centralized management
and coordination of critical business functions, such as human resources, finance and
product development (Schwarz, 2000).
International business arrangements have led to the formation of multinational
enterprises (MINE), companies that have a worldwide approach to markets and
production or one with operations in more than one country. A MNE may also be called
a multinational corporation (MNC) or transnational company (TNC). Well known Iv[NCs
include fast food companies such as McDonald's and Yum Brands, vehicle
2
manufacturers such as General Motors, Ford Motor Company and Toyota, consumer
electronics companies like Samsung, LG and Sony, and energy companies such as
ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national
markets (McKenna, 1991). Businesses generally argue that survival in the new global
marketplace requires companies to source goods, services, labour and materials
overseas to continuously upgrade their products and technology in order to survive
increased competition (Baker, 2008).
The brand centrality dimension reflects the extent to which a firm's brand portfolio
provides the underlying leitmotif for strategic formation and the development of
marketing activities (Bettis et al.,, 1995). This dimension runs from a tactical orientation
(Kapferer, 1992), where brands are conceptualized and managed as tactical
instruments appended to a product, to a brand orientation "in which the processes of
the organization revolve around the creation, development and protection of brand
identity with the aim of achieving lasting competitive advantages in the form of brands"
:urde, 1999, pp. 117- 118). Brands are managed as central platforms, in the form of
~uiding vision and values, and core expressions, in the form of particular marketing mix
:onfigurations, of an organization's strategic intent (Kapferer, 1992; Prahalad and
'l.amaswamy, 2000).While there is no lack of recent overviews of the globalization
fobate (Clark, 1997: 1-33; Clark, 1999: 1-15; Hurrell and Woods, 1995), very little
ittention has been devoted to the concept of globalization from other viewpoints than
:hose provided by globalization theory itself. To Ferguson (1992), the concept of
Jlobalization is little more than an expression of capitalist ideology; to Bourdieu and
Nacquant (1999: 42), the concept of globalization has the 'effect, if not the function, of
;ubmerging the effects of imperialism in cultural ecumenism or economic fatalism and
>f making transnational relationships of power appear as a neutral necessity' (Homburg
it el, 2009).
Vhether catering to the needs of globalization theorists or political paranoia, attempts
o analyze the concept of globalization normally start out lamenting its ambiguity,
3
sometimes to the point of arguing for its abolishment within scientific discourse
(Strange, 1996). As Bauman (1998: 1) has remarked, 'vogue words share a similar fate:
the more experiences they pretend to make transparent, the more they themselves
become opaque'. To Robertson and Khondker (1998), however, this ambiguity reflects
the fruitful ambiguities of different discourses on globalization and their globalization,
while to Rosenau (1996: 248) the same ambiguity indicates 'an early state in a
profound ontological shift'.
Indeed, reviews of marketing strategy implementation issue in an era of weaker
marketing paradigm contrasts traditional sequential flow models of implementation with
the "strategy implementation dichotomy" and leads to the emergence of procedural
view of implementation(Homburg et ci, 2009). The procedural view clarifies the
underlying behavioral and organizational factors that build strategy implementation
capabilities.
These underlying factors are at risk from marketing paradigm (Allenby et al., 1991).
The weakening of the marketing paradigm is discussed in terms of the downsizing and
disappearance of the marketing function, but more fundamentally in the loss of
strategic influence for marketing in the face of competing management paradigms such
as the lean enterprise and lean thinking mechanisms (Prahalad and Ramaswamy,
2000). In addition, the organization paradigm determines understanding of brands, the
process and content of brand strategy, potential contribution to marketing based
advantage (Urde, 1999). The increasing recognition, by managers and academics, of
significance of brands accentuate importance of validating and refining the premises
and models underlying marketing strategies and paradigms for brand promotions.
There has been accumulating evidence that the marketing life cycle (Piercy, 1985;
McDonald, 1994) is forcing many companies to confront anew the issue of the role to
be played by the conventional marketing department in the corporation of the future
(Hulten, 2000). It has become increasingly apparent that the question of marketing
organization extends far beyond the mainly administrative issues of internal structure
(McDonald, 1994). Marketing's role in the organization as fundamental customer-driven
4
process (McKenna, 1991) retains important implications for structuring and positioning
marketing. Marketing organization has become fundamental strategic issue concerned
with intra organizational relationships and inter-organizational alliances, and the
management of critical boundary spanning environmental interfaces (Shaw, 2012).
Kohli and Jaworski (Vol. 54 No. 2, pp. 1-18) produced such widely cited
conceptualization of market orientation, resting on the notion that market orientation
involves the organization wide dissemination of information and developing appropriate
responses related to current and future customer needs and preferences (Saari, 2006).
In fact, there has been one defining variable of the nature, sources and amount of
intelligence and information that flows is the structure of the organization (Aaker,
2008). Several studies have shown that promotions of national brands yield more effect
than those of store brands (Allenby and Rossi 1991; Biattberg and Wisniewski 1989).
However, the evolution of price quality data available from reports seems to reveal
reduction of the quality gap between store brands and national brands, while price
differences remain substantial (saari, 2011). Simultaneously, the share of private label
brands has increased, to study whether national brands may easily attract consumers
from store brands through promotions, whereas store brands are relatively ineffective in
attracting consumers from national brands by such means (Gormory, 2000). There
maybe asymmetric promotion effect in favor of quality price brands if and only if the
quality gap between the brands is sufficiently large in comparison with the price gap,
direction of promotion asymmetry is not unconditional (Peligrini, 1994). Promotion
effectiveness is increasing in this variable. Second, cross promotion effects between two
brands depend on their distance in the price/quality quadrant (Prhalad et al11 2000).
This variable impacts promotion effectiveness negatively and symmetrically for any pair
of brands. Thus, positioning advantage and brand distance are orthogonal components
of brand positioning, irrespective of the degree of correlation between available price
and quality levels in the market (Porter, 1990). The need to investigate role of brand
positioning in explaining cross promotion effects using variables, positioning advantage
and brand distance from readily available data on price and quality positioning after
obtaining estimates, measure promotion effectiveness by estimating choice share
5
changes in response to price discount, using choice model that does not contain any
information about quality/price ratios (Krugman et a!., 1995).
According to Smith (1956, p. 5), a firm tries 'bending the will of demand to the will of
supply.' That is, distinguishing or differentiating some aspect(s) of its marketing mix
from those of competitors, in a mass market or large segment, where customer
preferences are relatively homogeneous (or heterogeneity is ignored, Hunt, 2011, p.
80), in an attempt to shift its aggregate demand curve to the left (greater quantity sold
for a given price) and make it more inelastic (less amenable to substitutes). With
segmentation, a firm recognizes that it faces multiple demand curves, because
customer preferences are heterogeneous, and focuses on serving one or more specific
target segments within the overall market" (35)
1.2 Statement of the Problem.
Although globalization's vital in line with reduces international poverty, Contributes to
the spread of technology, Adds to the profitability of companies and corporations,
Builds stronger trade ties and dependencies between nations, Major motivation for
moving overseas is to exploit more lax labor laws and low environmental standards,
Homogenizes the world culture, both positively and negatively and Destroys entire
industries in developed countries. Few studies have reveals its impact on marketing
strategy. Due to globalization, many local brands and businesses in poorer developing
countries go bankrupt and cant survive the economic might of these rich countries due
to globalisation. Local cultures and traditions change. People no longer wear national
costumes because they all want to look like Hollywood stars and wear jeans. However
marketing strategy is the backbone of any business, it generates the required
awareness about your products or services among customers; a good marketing
strategy should correlate well with the long-term marketing plans and goals of the
business. But, due to a variety of reasons, businesses tend to go for flashy strategies or
outdated ones to market their products. Most firms are focusing on tactics not strategy,
not understanding what customers really want; failing to be unique and clearly
differentiated in your market. failing to monitor the external environment for
6
opportunities and threats, not understanding the motivations, strengths and
weaknesses of competitors; not being clear on exactly how you will earn a profit; not
identifying and managing risks - strategic, financial and operational; are you listening
banks? not creating a culture which encourages innovative thinking and action.
On addition, this has been as a result of Lack of marketing expertise , Lack direction,
Ignoring Internet marketing , thus, A marketing program will be futile if it fails in
targeting the desired audience. Many marketing professionals try to impress the
management instead of working on customer preferences and choices. But many
businesses become over ambitious and go for extreme marketing campaigns that are
not necessary for their business type. Potential obstacles to a successful multi-domestic
marketing strategy include legal, political, and cultural barriers, but culture is often the
biggest. Manager must be careful not to engage in ethnocentrism which is a result of
globalisation. According to Merriam-Webster's online dictionary, ethnocentrism is the
belief that your own culture or group is superior to all others. Ethnocentrism is
particularly harmful in the international business environment, as it could lead a country
manager neglecting the valuable insight of host country employees and contribute to
misunderstandings in the workplace. Whilst many of the biggest blunders may come
from a flawed strategy, there are many well established techniques for you to develop a
potentially effective strategy. It's up i this background that the researcher took
kininterest to investigate the relationship between the impacts of globalization
Marketing Strategy in Total Uganda limited, Kampala central division
1.3 Purpose of the study
This study anticipated majorly
(i) to test the null hypothesis of relationship between Globalization and Marketing
Strategy in Total Uganda limited, Kampala central division, Uganda; Contribute to
knowledge by this study findings and to bridge the gaps identified in the literature
reviewed.
7
1.4 Research Objectives
1.4.1 General objective
This study will establish the relationship between Globalization and Marketing Strategy
in Total Uganda limited, Kampala central division, Uganda.
1.4.2 Specific Objectives.
I. To establish the profile of respondents (age, gender, level of education, working
experience, position in the organization etc )
IL To determine the level of globalization in Total Uganda limited, Kampala central
division, Uganda.
III. To determine the level of Marketing Strategy in Total Uganda limited, Kampala
central division, Uganda.
IV. To establish whether there is a significant relationship between globalization and
marketing Strategy in Total Uganda limited, Kampala central division, Uganda.
1.5 Research Questions;
(i) What is the profile of respondents (age, gender, level of education, working
experience, position in the organization etc)?
(ii) What is the level of globalization in Total Uganda limited, Kampala central
division, Uganda?
(iii) What is the level of Marketing Strategy in Total Uganda limited, Kampala central
division, Uganda?
(iv) is there a significant relationship between globalization and Marketing Strategy
in Total Uganda limited, Kampala central division, Uganda?
1.6 Scope of the Study
1.6.1 Geographical Scope
This study was conducted in Total Uganda Ltd which is located in Kampala, Uganda,
Total Uganda Ltd is a company working in Petrol station business activities, where
globalization and marketing Strategy were examined.
8
1.6.2 Theoretical Scope
This research based on the Game Theory (Zagare 1984): Game-theoretic models
assume that firms are (hyper)rational utility maximizers, where rationality implies that
they strive to achieve the most preferred of outcomes subject to the constraint that
their rivals also behave in a similar fashion (Zagare 1984). While there may be
uncertainty regarding the expectations and actions of its rivals, a rational firm is
expected to overcome uncertainty by forming competitive conjectures, subjective
probability estimates of rivals' expectations and behavior. In effect, game-theoretic
models assume intelligent firms that can put themselves into the "shoes" of their rivals
and reason from their perspective.
Marketing strategy indicates the company's approach to marketing. Marketing theories,
in turn, shape the manager's frame of mind regarding the market. Many organizations
seek to become marketing-driven. In a marketing-driven company, all decisions are
made based on a marketing philosophy, and marketing is the job of everyone in the
company. Given the small number of employees and their direct contact with
customers, this approach is even more important for small companies.
In general, there are three aspects to the strategy of firms, regardless of the level of
the strategy: content, formulation process, and implementation. Strategy content (what
the strategy is) refers to the specific relationships, offerings, timing, and pattern of
resource deployment planned by a business in its quest for competitive advantage like
generic strategy of cost leadership versus differentiation; push versus pull strategy.
Strategy formulation process (how the strategy is arrived at) refers to the activities that
a business engages in for determining the strategy content for instance market
opportunity analysis, competitor analysis, decision-making styles. Strategy
implementation (how the strategy is carried out) refers to the actions initiated within
the organization and in its relationships with external constituencies to realize the
strategy for example organization structure, coordination mechanisms, control systems.
9
1.6.3 Content Scope
The study was confined to the impact of Globalization in terms of, competitiveness,
technology, corporation, market, Production, transportation, media, and skills as well as
Marketing Strategy in terms of selection of a target market, creation of marketing mix,
quality of products, selling methods, needs and wants of customers, branding/image
differentiation and positioning in Total Uganda limited, Kampala central division,
Uganda.
1.6.4 Time Scope
The study was conducted within four months; it started with writing proposal followed
by data collection, analysis and interpretation, submission of the final Proposal in July,
2014.
1.7 Significance of the Study
Researchers- this study will help future researchers to utilize the findings of this study
to support their related studies.
Total Uganda limited; the study will guide the management of Total Uganda Limited
on the most appropriate way of out competing their competitors.
Business community; this study will teach small scale business owners in
determining which marketing strategies to be used in order to earn more profits.
Stakeholders, the findings of the study will help Small businesses take the advantage
of global market opportunities, this will be done through franchising which is fast and
cost-effective way to expand a business into new markets.
1.8 Operational of Definition of Key Operational Terms
Globalization
According to this study, globalization is the process of international integration arising
from the interchange of world views, products, ideas, and other aspects of culture. It
put into consideration; competitiveness, technology, corporation, market, Production,
transportation, media, and skills
10
Marketing is the process of communicating the value of a product or service to
customers, for the purpose of selling that product or service. Marketing can be looked
at as an organizational function and a set of processes for creating, delivering and
communicating value to customers, and customer relationship management that also
benefits the organization.
Marketing strategy according to this study marketing strategy refers to a process
that can allow an organization to concentrate its resources on the optimal opportunities
with the goals of increasing sales and achieving a sustainable competitive advantage. It
includes all basic and long-term activities in the field of marketing that deal with the
analysis of the strategic initial situation of a company and the formulation, evaluation
and selection of market-oriented.
1.9 Conceptual Framework
Figure 1: Conceptual framework
lndcpend<:_nt Variable (l'V) Dependent Variable (])VJ
Globaiization Marketing Strategy
~
Selection of a target Intervening market Variable
V --► Creation of marketing
✓ Competitiveness mix
✓ Technology
✓ Corporation
✓ Market
✓ Production
I Quality of products ..,
✓ Experience ✓ Fluctuations I Selling methods I ,...-.. ✓ Regulations
✓ lransporlation, Needs and wants of ✓ media customers
Source: Primary Data (2014) Brandingiimage
I differentiation
Positioning I
11
Figure 1 above illustrates that impact of globalization and Marketing Strategy in Total
Uganda limited. Thus To be successful these days, even small businesses must plan
their marketing strategies to attract consumer interest outside of their local markets.
Although there are risks involved, there also are plenty of advantages to expanding a
business worldwide. If you don't offer a product on the world market, a competitor
probably will. When you are able to identify and profile your very-best customers you
can then focus on attracting more of them through your marketing tactics. Most
business owners don't want to miss any opportunities and end up chasing after a
number of bad deals and prospects, wasting valuable time and resources. When you
spend the time to create profiles of your best customers then you will stay focused on
spending your time and money on those prospects with the potential for the best
return.
Additionaliy, some types of businesses are more appropriate than others for global
market expansion. But any type of business can benefit as long as it requires few
changes in its marketing strategy to reach consumer markets anywhere in the world.
Even small businesses that have a Web site can connect with potential customers in
other countries. Taking a business worldwide lets you find new markets for your
company's products or services, reach new consumers overseas, and go into markets
with little competition.
The main benefit of globalization is that it lets you reach a lot more customers. As long
as there is demand in an overseas market for a product or service your business offers,
there is a customer base. A product that sells successfully at home will often do well in
international markets, says Wesley Johnston, a marketing professor at Georgia State
University. Electronics and other tech products are examples of consumer goods that
sell well on the global market.
Hence, before taking your business worldwide, make sure there is a market for it.
Consumers in other countries often have different preferences and needs and might not
have much interest in buying your product. For example, if you sell Canadian flags, you
12
might not find much demand in countries outside Canada. Another risk of going global
is that it can be costly. This is especially true if you decide to set up operations in other
countries. Finally, different countries have different regulatory standards. Products that
can be made and sold freely in some markets might run up against stiff regulatory
hurdles in other countries.
13
2.1 Introduction
CHAPTER TWO
LITERATURE REVIEW
This chapter concerned with reading and gathering information about what other
people have said about the topic under study.
2.2 Theoretical Framework
We draw from environmental organization literature since our study attempts to
establish the link between the external environment (i.e., globalization effects) and firm
performance. Due to the multi-level and multi-dimensional nature of the environmental
construct, the level and dimension of the environment to be studied must be clearly
specified to minimize conceptual ambiguity and overabstraction (Castrogiovanni, 1991).
Among the five levels of environmental conceptualization (i.e., resource pool, sub
environment, task environment, aggregation environment, and macro environment),
this paper focuses on investigating the macro environment (i.e., globalization), which is
the highest level of environmental conceptualization and encompasses all the other
lower levels of environmental construct mentioned above. It is the context containing
forces, which significantly influence organizational characteristics and outputs (Osborn
& Hunt, 1974).
The environment in which firms operate provides resources that influence their survival
and growth and the ability of new entrants to join the environment (Randolph & Desks,
1984). This refers to one of many environmental dimensions, the environmental
munificence, which can be defined as the scarcity or abundance of critical resources
needed by firms operating within an environment (Castrogiovanni, 1991; Desks &
Beard, 1984a; Pfeffer & Salancik, 1978). Three sub-dimensions of environmental
munificence include: 1) growth/decline, 2) capacity, and 3) opportunities/threats. Amid
globalization, firms are affected by the changes in both market opportunities and
threats (Frenkel & Peetz, 1998; Hitt et al., 1998; Kulmala, Paranko, & Uusi-Rauva,
2002). These opportunities and threats are two dimensions of the macro environment
14
emphasized in this study. They can also be regarded as forces, which affect
organizational outputs, i.e., firm performance. Hence, we hypothesize that there is a
direct relationship between these two dimensions of globalization effects and firm
performance (see Figure 1).
Global market opportunities can be defined as increases in market potential, trade and
investment potential and resource accessibility resulting from globalization (Contractor
& Lorange, 1988; Fawcett et al., 1993; Jones, 2002; Levitt, 1983). Developments in
information technology, removal of trade and investment barriers, privatization, and
deregulation of trade and investment policies have provided firms seeking international
markets with tremendous opportunities (Scully & Fawcett, 1994). Such changes in the
business environment enable firms to not only access new markets but also lower costs
by relocating their operations and exploiting cheap resources around the world (Czuchry
& Yasin, 2001). Firms can outsource their production in various locations to lower their
costs (Chimerine, 1997). Market transactions have also become more efficient due to
globalization of technology (Peterson, Welch, & Liesch, 2002). These new market
opportunities have eventually fostered rapid growth in various economic sectors in
many regions around the world (Graham, 1996). A large volume of cross-border flows
of trade, investment, and technology during the 1990s and early 2000s is excellent
evidence of increasing opportunities driven by globalization (UNCTAD, 2003).
As discussed earlier, globalization increases market potential, trade and investment
potential and resource accessibility of firms. It has become easier for firms to outsource
their production to different locations to gain benefits from location advantage since
less trade and investment barriers are present in today's global marketplace (Chimerine,
1997; Czuchry et al., 2001). Firms are able to reach out and serve many new untapped
markets around the globe. Liberal movements of financial and human capital also
facilitate their business transactions. Moreover, advances in communication technology
and information systems also lower search costs and improve efficiency (Peterson et al.,
2002). Hence, it is clear that globalization makes resources necessary for a firm's
15
growth and success more abundant. Given that these opportunities are likely to
enhance the firm performance, the first hypothesis of this study can be stated as:
Global market threats can be further categorized into 1) global competitive threats and
2) global market uncertainty. Global competitive threats are defined as the intensified
competition in global markets resulting from larger numbers of competitors in the global
marketplace (D'Aveni, 1994; Hafsi, 2002). Along with higher competition, another
threat posed by globalization is global market uncertainty, which refers to the
increasing complexity and demand uncertainty in the market (Burgers, Hill, & Kim,
1993; Chimerine, 1997; Courtney, 2001; Oxelheim & Wihlborg, 1991). These two types
of global market threats and their hypothesized relationships are discussed in detail in
the following sections.
Although globalization enhances a firm's market opportunities, it also increases the
amount and level of competition faced by such firms. Trade liberalization, technological
developments, and convergence of governmental macroeconomic policies associated
with globalization have made it easy for firms around the globe to enter different
geographic markets, and thus, intensify the competitive atmosphere for firms around
the world (Hafsi,2002; Harvey et al., 2002). Globalization has dramatically changed the
competitive terrain faced by firms from both developed and emerging economies (Nolan
et al., 2003; Scully et al., 1994). Firms operating at different levels--domestic, regional,
international and global--are now competing against one another. Hence, it is obvious
that globalization has brought about a new competitive landscape referred to as
"hypercompetitive markets" (Hitt et al., 1998, 24), one that presents enormous threats
to firms in every economic sector since it makes a firm's relative competitive advantage
very time-sensitive (Harvey et al., 2002).
In addition, globalization also enables consumers to gather information easier, faster,
and at lower costs. Thus, they become well aware of alternative products, and are
ready to switch. Given a growing number of competitors, resources are becoming
increasingly scarce (Castrogiovanni, 1991; Desks et al., 1984a; Porter, 1980). Such
16
hypercompetitive situations coupled with scarce resources is harmful to firm
performance (Beard & Desks, 1981). Firms are now faced with less pricing flexibility
due to intensified competition and buyers' resistance, which have led to a lower rate of
return (Chimerine, 1997). Therefore, we hypothesize that there is a negative
relationship between global competitive threats and firm performance.
Global market uncertainty, which refers to the increasing complexity and demand
uncertainty in the market (Burgers et al., 1993; Courtney, 2001; Oxelheim et al., 1991)
is another threat confronted by firms operating in the global marketplace. Firms are
faced with increasing difficulties in planning and making decisions (Chimerine, 1997;
Hitt et al., 1998). Demand has become hard to forecast for various reasons. Since a
growing number of firms now participate in the global marketplace, forecasting demand
and/or competitors' responses has become increasingly difficult. Moreover, technology
is changing at a rapid pace and information about new products is easily accessible by
consumers. This has enabled consumers to shift between producers, making demand
become less predictable and uncertain (Chimerine, 1997). Since operating in the global
marketplace increases the level of uncertainty encountered by firms, their performance
is affected. In addition, past studies found a negative relationship between perceived
uncertainty and firm performance (Downey & Slocum, 1982; Gerloff, Muir, &
Bodensteiner, 1991; Waddock & Isabella, 1989). Thus, global market uncertainty is
hypothesized to affect firm performance negatively.
2.3 The impacts of Globalization on marketing strategies
In the past two decades, the world has gone through the process of globalization, one
that causes increasing economic, financial, social, cultural, political, market, and
environmental interdependence among nations. Business, as well, is inevitably affected
by this process of change towards more interdependence. Many forms of organizational
restructuring (such as downsizing, reengineering, implementation of cooperative
strategies) have been witnessed as responses to globalization (Jones, 2002). Yet,
limited empirical studies have been conducted to investigate how globalization actually
affects firms. International business scholars (e.g., Clark and Knowles, 2003; Loughery,
17
2001; Eden and Leeway, 2001; Young, 2001) point out the need to explore further the
effects of globalization on firms. Therefore, we aim to investigate the effects of
globalization on firm performance.
Although much descriptive and theoretical literature is published on the impact of
globalization, very little empirical work exists that tests globalization effects. A few
exceptions of empirical studies examining the impact of globalization include, for
example, Loughery (2001), and Oxley and Schnietz (2001). While Loughery's (2001)
study is related to industry-level variables (i.e., domestic competition policy in the
airline industry), the study conducted by Oxley and Schmitz(2001) is more focused on
firm-level variables by relating globalization to firm performance. At the macro level,
globalization is found to undermine autonomy in domestic airline competition policy
(Loughery, 2001). At the micro level, globalization (operational zed as trade
liberalization) is found to improve the performance of U.S. multinational enterprises
(Oxley and Schmitz, 2001). From these two studies, we have learned that globalization
is a multi-faceted construct. Therefore, the classification of its effects into different
dimensions and the study of their impact on firms prove to be worthwhile.
2.4 Globalization effects
Since the 1980s, we have witnessed dramatic changes in the international and global
marketplace. Liberalization of world trade and capital markets led by globalization has
created a new and challenging competitive arena for all firms (Nolan and Zhang, 2003).
With the trend towards more interdependence among nations, several changes in the
business environment have emerged. There has been an emergence of global markets
for goods, services, labor and financial capital (Deardorff and Stern, 2002; Hansen,
2002). Consumers' demands around theworld have converged (Fram and Ajami, 1994;
Levitt, 1983; Ohmae, 1989a). Increasing trade and investment liberalization evoked by
advances in transportation and communication technologies has resulted in larger
volumes of international business transactions (Deardorff and Stern, 2002; Fawcett,
Clanton, and Smith, 1997; Fawcett and Closes, 1993).
18
These aforementioned trends have brought about two key effects of globalization,
global market opportunities and global market threats (Contractor and Lorange, 1988;
Fawcett and loss, 1993; Hitt, Keats, and Demure, 1998; Mole, 2002; Perl mutter and
Henan, 1986;Sanchez, 1997). It is obvious that globalization not only presents more
opportunities to firms, but also higher levels of threats (D'Aveni, 1994; Eng, 2001;
Jones, 2002; Oxley and Yeung,1998; Shocker, Srivastava, and Ruekert, 1994). While
opportunities can arise from globalization, competition and uncertainty are inevitable.
Although frequently mentioned in past literature, empirical studies relating these effects
to firm performance are still scarce. This calls for a need to study globalization
performance relationships. These two dimensions along with our theoretical framework
and hypotheses are discussed next.
2.4.1 Global market opportunities
Global market opportunities can be defined as increases in market potential, trade and
investment potential and resource accessibility resulting from globalization (Contractor
and Lorange, 1988;Fawcett and Closes, 1993; Jones, 2002; Levitt, 1983; Shocker,
Srivastava, and Ruekert, 1994).
Developments in information technology, removal of trade and investment barriers,
privatization, and deregulation of trade and investment policies have provided firms
seeking international markets with tremendous opportunities (Scully and Fawcett,
1994). Such changes in the business environment enable firms to not only access new
markets but also lower costs by relocating their operations and exploiting cheap
resources around the world (Czuchry and Yasin,2001). Firms can outsource their
production in various locations to lower their costs (Chimerine,1997). Market
transactions have also become more efficient due to globalization of
technology(Peterson, Welch, and Liesch, 2002).
As discussed earlier, globalization increases market potential, trade and investment
potential and resource accessibility of firms. It has become easier for firms to outsource
their production to different locations to gain benefits from location advantage since
19
less trade and investment barriers are present in today's global marketplace (Chimerine,
1997; Czuchry and Yasin, 2001). Firms are able to reach out and serve many new
untapped markets around the globe. Liberal movements of financial and human capital
also facilitate their business transactions. Moreover, advances in communication
technology and information systems also lower search costs and improve efficiency
(Peterson, Welch, and Liesch, 2002).
2.4.2 Global market threats
Global market threats can be further categorized into 1) global competitive threats and
2) global market uncertainty. Global competitive threats are defined as the intensified
competition in global markets resulting from larger numbers of competitors in the global
marketplace (D'Aveni,1994; Hafsi, 2002). Along with higher competition, another threat
posed by globalization is global market uncertainty, which refers to the increasing
complexity and demand uncertainty in the market (Burgers, Hill, and Kim, 1993;
Chimerine, 1997; Courtney, 2001; Oxelheim and Wihlborg, 1991). These two types of
global market threats and their hypothesized relationships are discussed in detail in the
following sections.
Global competitive threats
Although globalization enhances a firm's market opportunities, it also increases the
amount and level of competition faced by such firms. Trade liberalization, technological
developments, and convergence of governmental macroeconomic policies associated
with globalization have made it easy for firms around the globe to enter different
geographic markets, and thus, intensify the competitive atmosphere for firms around
the world (Hafsi, 2002; Harvey and Novicevic, 2002).
Globalization has dramatically changed the competitive terrain faced by firms from both
developed and emerging economies (Nolan and Zhang, 2003; Scully and Fawcett,
1994). Firms operating at different levels-domestic, regional, international and global
are now competing against one another. Hence, it is obvious that globalization has
brought about a new competitive landscape referred to as "hypercompetitive markets"
20
(Hitt, Keats, and Demure, 1998, 24), one that presents enormous threats to firms in
every economic sector since it makes a firm's relative competitive advantage very time
sensitive (Harvey and Novicevic, 2002).
In addition, globalization also enables consumers to gather information easier, faster,
and at lower costs. Thus, they become well aware of alternative products, and are
ready to switch.
Given a growing number of competitors, resources are becoming increasingly scarce
(Castrogiovanni, 1991; Desks and Beard, 1984; Porter, 1980). Such hypercompetitive
situations coupled with scarce resources is harmful to firm performance (Beard and
Desks, 1981; Singh, House, and Tucker, 1986). Firms are now faced with less pricing
flexibility due to intensified competition and buyers' resistance, which have led to a
lower rate of return (Ch:me;lne, 1997).The;efore, we hypothesize that there is a
negative relationship between global competitive threats and firm performance.
Global market uncertainty
Global market uncertainty, which refers to the increasing complexity and demand
uncertainty in the market (Burgers, Hill, and Kim, 1993; Courtney, 2001; Oxeiheim and
Wihlborg, 1991) is another threat confronted by firms operating in the global
marketplace. Firms are faced with increasing difficulties in planning and making
decisions (Chimerine, 1997; Hitt, Keats, and Demure, 1998). Demand has become hard
to forecast for various reasons. Since a growing number of firms now participate in the
global marketplace, forecasting demand and/or competitors' responses has become
increasingly difficult. Moreover, technology is changing at a
rapid pace and information about new products is easily accessible by consumers. This
has enabled consumers to shilt between producers, making demand become less
predictable and uncertain (Chimerine, 1997).
The causes of globalization.
According to Harvey and Novicevic (2002), various factors that drive increasing
globalization can be grouped under four broad categories: 1) Macro-economic factors,
21
2) political factors, 3)technological factors, and 4) organizational factors. Macro
economic factors include, for example, an acceleration of technology transfer among
countries and a rapid increase in populations in emerging economies (Harvey and
Novicevic, 2002; Manado, 1991). Political factors refer to privatization, deregulation and
trade liberalization of many nations in favor offeree flows of trade and investments
(Eden and Leeway, 2001; Hafsi, 2002). Technological forces such as advance
development in communication and transportation technologies, which promote growth
in international business transactions, are also key drivers of rapid
· globalization(Graham, 1996; Knight, 2000).
Organizations such as multinational enterprises are another major agent of this
process(Eden and Leeway, 2001; Harvey and Novicevic, 2002). Shifting organizational
strategic attention towards a more global mindset is an example of organizationai forces
of globalization.
Consequently, these forces have inevitably caused changes in the global marketplace.
Such changes can be viewed as effects of globalization, which ultimately have impact
on firms. These effects are discussed in detail in the following sections.
2.5 marketing strategies
Global Marketing Strategies:
A global marketing strategy that totally globalizes all marketing activities is not always
achievable or desirable (differentiated globalization). In the early phases of
development, global marketing strategies were assumed to be of one type only,
offering the same marketing strategy across the globe. As marketers gained more
experience, many other types of global marketing strategies became apparent. Some of
those were much less complicated and exposed a smaller aspect of a marketing
strategy to globalization. Amore common approach is for a company to globalize its
product strategy (product lines, product designs and brand names) and localize
distribution and marketing communication (Rindfleisch and Heide, 1997).
22
Integrated Global Marketing Strategy: When a company pursues an integrated
global marketing strategy, most elements of the marketing strategy have been
globalized. Globalization includes not only the product but also the communications
strategy, pricing and distribution as well as such strategic elements as segmentation
and positioning. Such a strategy may be advisable for companies that face completely
globalized customers along the lines. It also assumes that the way a given industry
works is highly similar everywhere, thus allowing a company to unfold its strategy along
similar paths in country by country. One company that fits the description of an
integrated global marketing strategy to a large degree is total. That company has
achieved a coherent, consistent and integrated global marketing strategy that covers
almost all elements of its marketing program from segmentation to positioning,
branding, distribution, bottling, advertising and more. Reality tells us that completely
integrated global marketing strategies will continue to be the exception. However, there
are many other types of partially globalized marketing strategies; each may be tailored
to specific industry and competitive circumstances (Tsang, 2000; Williamson, 1991).
Global Product Category Strategy
Possibly the least integrated type of global marketing strategy is the global product
category strategy. Leverage is gained from competing in the same category country
after country and may come in the form of product technology or development costs.
Selecting the form of global product category implies that the company while staying
within that category will consider targeting different segments in each category or
varying the product, advertising and branding according to local market requirements.
Companies competing in the multi-domestic mode are frequently applying the global
category strategy and leveraging knowledge across markets without pursuing
standardization. That strategy works best if there are significant differences across
markets and when few segments are present in market after market. Several traditional
multinational players who had for decades pursued a multi-domestic marketing
approach tailoring marketing strategies to local market conditions and assigning
management to local management teams- have been moving toward the global
23
category strategy. Among them are Nestle, Unilever and Procter Gamble, three large
international consumer goods companies doing business in food and household goods
(Tsang, 2000).
Global Segment Strategy
A company that decides to target the same segment in many countries is following a
global segment strategy. The company may develop an understanding of its customer
base and leverage that experience around the world. In both consumer and industrial
industries significant knowledge is accumulated when accompany gains in-depth
understanding of a niche or segment. A pure global segment strategy will even allow
for different products, brands or advertising although some standardization is expected.
The choices may consist of competing always in the upper or middle segment of a
given consumer market or for a particular technical application in an industrial segment.
Segment strategies are relatively new to global marketing (Chen and Chen, 2003).
Global Marketing Mix Element Strategies
These strategies pursue globalization along individual marketing mix elements such as
pricing, distribution, place, promotion, communications or product. They are partially
globalized strategies that allow a company that customize other aspects of its marketing
strategy. Although various types of strategies may apply, the most important ones are
global product strategies, global advertising strategies and global branding strategies.
Typically companies globalize those marketing mix elements that are subject to
particularly strong global logic forces. Accompany facing strong global purchasing logic
may globalize its account management practices or its pricing strategy. Another firm
facing strong global information logic will find it important to globalize its
communications strategy (Homage, 1989).
Global Product Strategy
Pursuing a global product strategy implies that a company has largely globalized its
product offering. Although the product may not need to be completely standardized
24
worldwide, key aspects or modules may in fact be globalized. Global product strategies
require that product use conditions, expected features and required product functions
be largely identical so that few variations or changes are needed. Companies pursuing a
global product strategy are interested in leveraging the fact that all investments for
producing and developing a given product have already been made. Global strategies
will yield more volume, which will make the original investment easier to justify (Bucklin
and Sengupta, 1993).
Global Branding Strategies
Global branding strategies consist of using the same brand name or logo worldwide.
Companies want to leverage the creation of such brand names across many markets,
because the launching of new brands requires a considerable marketing investment.
Global branding strategies tend to be advisable if the target customers travel across
country borders and will be exposed to products elsewhere.(Gulati,Nohria, and Zaheer,
2000; Jarillo, 1989; Mowery, Oxley, and Silverman, 1996).
Global branding strategies also become important if target customers are exposed to
advertising worldwide. This is often the case for industrial marketing customers who
may read industry and trade journals from other countries. Increasingly, global
branding has become important also for consumer products where cross-border
advertising through international TV channels has become common. Even in some
markets such as Eastern Europe, many consumers had become aware of brands offered
in Western Europe before the liberalization of the economies in the early 1990s. Global
branding allows a company to take advantage of such existing goodwill. Companies
pursuing global branding strategies may include luxury product marketers who typically
face a large fixed investment for the worldwide promotion of a product.(Hokinson, Hit,
and Ireland, 2004).
25
Global Advertising Strategy
Globalized advertising is generally associated with the use of the same brand name
across the world. However, a company may want to use different brand names partly
for historic purposes. Many global firms have made acquisitions another countries
resulting in a number of local brands. These local brands have their own distinctive
market and a company may find it counterproductive to change those names. Instead,
the company may want to leverage a certain theme or advertising approach that may
have been developed as a result of some global customer research. Global advertising
themes are most advisable when a firm may market to customers seeking similar
benefits across the world. Once the purchasing reason has been determined as similar,
a common theme may be created to address it.(Learned et al., 1965)"
Composite Global Marketing Strategy: The above descriptions of the various global
marketing models give the distinct impression that companies might be using one or
the other generic strategy exclusively. Reality shows, however, that few companies
consistently adhere to only one single strategy. More often companies adopt several
generic global strategies and run them in parallel. A company might for one part of its
business follow a global brand strategy while at the same time running local brands
another parts. Many firms are a mixture of different approaches, thus the term
composite (Hokinson, 2004).
Competitive Global Marketing Strategies
Two types of approaches emerge as of particular interest to us. First, there are a
number of heated global marketing duels in which two firms compete with each other
across the entire global chessboard. The second, game pits a global company versus a
local company- a situation frequently faced in many markets. One of the longest
running battles in global competition is the fight for market dominance between Coca
Cola and PepsiCo, the world's largest soft drink companies. Global firms are able to
leverage their experience and market position in one market forth benefit of another.
Consequently, the global firm is often a more potent competitor for local company.
26
Although global firms have superior resources, they often become inflexible after
several successful market entries and tend to stay with standard approaches when
flexibility is called for. In general, the global firms' strongest local competitors are
those who watch global firms carefully and learn from their moves in other countries.
With some global firms requiring several years before a product is introduced in all
markets, local competitors in some markets can take advantage of such advance notice
by building defenses or launching a preemptive attack on the same segment (Bucklin
and Sengupta, 1993).
3) Global Market Entry Strategies:
Exporting as an Entry Strategy:
Exporting represents the least commitment on the part of the firm entering a foreign
market (See appendix 2). Exporting to a foreign market is a strategy many companies
follow for at least some of their markets. Since many countries do not offer a large
enough opportunity to justify local production, exporting allows a company to centrally
manufacture its products for several markets and therefore to obtain economies of
scale. Furthermore, since exports add volume to an already existing production
operation located elsewhere, the marginal profitability of such exports tends to be high.
A firm has two basic options for carrying out its export operations. The form of
exporting can be directly under the firm's control or indirect and outside the firm's
control. It can contact foreign markets through a domestically located (in the
exporter's country of operation) intermediary-an approach called indirect exporting.
Alternatively, it can use an intermediary located in the foreign market-an approach
termed direct exporting.(Varadarajan and Cunningham, 1995).
Indirect Exporting: Indirect exporting includes dealing through export
managementcompanies of foreign agents, merchants or distributors. Several types of
intermediaries located in the domestic market are ready to assist a manufacturer in
contacting international markets or buyers. The major advantage for managers using a
domestic intermediary lies in that individual's knowledge of foreign market conditions.
Particularly, for companies with little or no experience in exporting, the use of a
27
domestic intermediary provides the exporter with readily available expertise. The most
common types of intermediaries are brokers, combination export and manufacturers'
export agents. Group selling activities can also help individual manufacturers in their
export operations.(Homage, 1989b ).(Hokinson, Hit, and Ireland, 2004; Webster, 1992).
Direct Exporting: Direct exporting includes setting up an export department within
the firm or having the firm's sales force sell directly to foreign customers or marketing
intermediaries. A company engages in direct exporting when it exports through
intermediaries located in the foreign markets. Under direct exporting, an exporter must
deal with a large number of foreign contacts, possibly one or more for each country the
company plans to enter. Although a direct exporting operation requires a larger degree
of expertise, this method of market entry does provide the company with a greater
degree of control over its distribution channels than would indirect exporting. The
exporter may select from two major types of intermediaries: agents and merchants.
Also, the exporting company may establish its own sales subsidiary as an alternative to
independent intermediaries. Successful direct exporting depends on the viability of
relationship built-up between the exporting firm and the local distributor or importer. By
building the relationship well, the exporter saves considerable investment costs (Eden
and Leeway, 2001).
The independent distributor earns a margin on the selling price of the products.
Although the independent distributor does not represent a direct cost to the exporter,
the margin the distributor earns represents an opportunity that is lost to the exporter.
By switching to a sales subsidiary to carry out the distributor's tasks, the exporter can
earn the same margin. With increasing volume, the incentive to start a sales subsidiary
grows. On the other hand, if the anticipated sales volume is small, the independent
distributor will be more efficient since sales are channeled through a distributor who is
maintaining the necessary staff for several product lines. The lack of control frequently
causes exporters to shift from an independent distributor to wholly owned sales
subsidiaries.(Jones, 2002).
28
Foreign Production as an Entry Strategy
Many companies realize that to open a new market and serve local customers better,
exporting into that market is not a sufficiently strong commitment to realize strong local
presence. As a result, these companies look for ways to strengthen their base by
entering into one of several ways to manufacture.
Licensing: Licensing is similar to contract manufacturing, as the foreign licensee
receives specifications for producing products locally, but the licensor generally receives
set fee or royalty rather than finished products. Licensing may offer the foreign firm
access to brands, trademarks, trade secrets or patents associated with products
manufactured. Under licensing, a company assigns the right to a patent (which protects
product, technology or process) or a trademark (which protects a product name) to
another company for a fee or royalty. Using licensing as a method of market entry,
accompany can gain market presence without an equity (capital) investment. The
foreign company, or licensee gains the right to commercially exploit the patent or
trademark on either an exclusive (the exclusive right to a certain geographic region) or
an unrestricted basis. Due to advantages of low risk and low investment, licensing is a
particularly attractive mode for small and medium-sized firms. Licensing also is an
effective mode for testing the future viability of more active involvement with a foreign
partner.
Licenses are signed for a variety of time periods. Depending on the investment needed
to enter the market, the foreign licensee may insist on a longer licensing period to pay
off the initial investment. Typically, the licensee will make all necessary capital
investments (machinery, inventory and so forth) and market the products in the
assigned sales territories, which may consist of one or several countries. Licensing
agreements are subject to negotiation and tend to vary considerably from company to
company and from industry to industry. Companies use licensing for a number of
reasons. For one, a company may not have the knowledge or the time to engage more
actively in international marketing. The market potential of the target country may also
be too small to support a manufacturing operation. A licensee has the advantage of
29
adding the licensed product's volume to an ongoing operation thereby reducing the
need for a large investment in new fixed assets. Accompany with limited resources can
gain advantage by having a foreign partner market its products by signing a licensing
contract. Licensing not only saves capital because no additional investment is necessary
but also allows scarce managerial resources to be concentrated on more lucrative
markets. Also, some smaller companies with a product in high demand may not be able
to satisfy demand unless licenses are granted to other companies with sufficient
manufacturing capacity.(Eden and Leeway, 2001; Hasid, 2002).
Franchising: Franchising is a special form of licensing in which the franchiser makes
atonal marketing program available including the brand name, logo, products and
method of operation. Usually the franchise agreement is more comprehensive than a
regular licensing agreement in as much as the total operation of the franchisee is
prescribed. It differs from licensing principally in the depth and scope of quality controls
placed on all phases of the franchisee's operation. The franchise concept is expanding
rapidly beyond its traditional businesses (such as service stations, restaurants and real
estate brokers) to include less traditional formats such as travel agencies, used car
dealers, the video industry and professional and health improvement services. About SO
percent of all McDonald's restaurants are franchised and as of 1999 the firm operated
about 24,SOOstores in 116 countries.
Local Manufacturing: A common and widely practiced form of market entry is the
local manufacturing of a company's products. Many companies find it to their
advantage to manufacture locally instead of supplying the particular market with
products made elsewhere. Numerous factors such as local costs, market size, tariffs,
laws and political considerations may affect a choice to manufacture locally. The actual
type of local production depends on the arrangements made; it may be contract
manufacturing, assembly or fully integrated production. Since local production
represents a greater commitment to a market than other entry strategies, it deserves
considerable attention before a final decision is made.
30
Under contract manufacturing, a company arranges to have its products manufactured
by an independent local company on a contractual basis. This is an entry mode in which
a firm contracts with a foreign firm to manufacture parts or finished products or to
assemble parts into finished products. The manufacturer's responsibility is restricted to
production. Afterward, products are turned over to the international company which
usually assumes the marketing responsibilities for sales, promotion and distribution. In
a way, the international company rents the production capacity of the local firm to
avoid establishing its own plant or to circumvent barriers set up to prevent the import
of its products. Contract manufacturing differs from licensing with respect to the legal
relationship of the firms involved. The local producer manufactures based on orders
from the international firm but the international firm gives virtually no commitment
beyond the placement of orders. Typically, the contracting firm supplies complete
product specifications to the foreign firm, sets production volume and guarantees
purchase.
Lower labor costs abroad are the major incentive for using this entry mode. Typically,
contract manufacturing is chosen for countries with a low-volume market potential
combined with high tariff protection. In such situations, local production appears
advantageous to avoid the high tariffs, but the local market does not support the
volume necessary to justify the building of a single plant. These conditions tend to exist
in the smaller countries in Central America, Africa and Asia. Of course, whether an
international company avails itself of this method of entry also depends on its products.
Usually, contract manufacturing is employed where the production technology involved
is widely available and where the marketing effort is of crucial importance in the
successor the product.
By moving to an assembly operation, the international firm locates a portion of the
manufacturing process in the foreign country. Typically, assembly consists only of the
last stages of manufacturing and depends on the ready supply of components or
manufactured parts to be shipped in from another country. Assembly usually involves
heavy use of labor rather than extensive investment in capital outlays or equipment.
31
Motor vehicle manufacturers and electronics industries have made extensive use of
assembly operations in numerous countries. Often, companies want to take advantage
of lower wage costs by shifting the labor intensive operation to the foreign market; this
results in a lower final price of the products. In many cases, however, the local
government forces the setting up of assembly operations either by banning the import
of fully assembled products or by charging excessive tariffs on imports. As a defensive
move, foreign companies begin assembly operations to protect their markets. However,
successful assembly operations require dependable access to imported parts. This is
often not guaranteed and in countries with chronic foreign exchange problems, supply
interruptions can occur.
To establish a fully integrated local production unit represents the greatest commitment
accompany can make for a foreign market. Since building a plant involves a substantial
outlay in capitai, companies only do so where demand appears assured. International
companies may have any number of reasons for establishing factories in foreign
countries. Often, the primary reason is to take advantage of lower costs in a country,
thus providing a better basis for competing with local firms or other foreign companies
already present. Also, high transportation costs and tariffs may make imported good
sun competitive.Some companies want to build a plant to gain new business and
customers. Such an aggressive strategy is based on the fact that local production
represents a strong commitment and is often the only way to convince clients to switch
suppliers. Local production is of particular importance in industrial markets where
service and reliability of supply are main factors in the choice of product or supplier.
Many times, companies establish production abroad not to enter new markets but to
protect what they have already gained through exporting. Changing economic or
political factors may make such a move necessary. The Japanese car manufacturers
who had been subject to an import limitation of assembled cars imported from Japan,
began to build factories in United States in the 1980s to protect their market share. As
mentioned above, Japanese manufacturers' reasons for the local production were
partly political as the United States imposed import targets for several years. Also, with
32
the value of the yen increasing to one hundred yen per US dollar, exports from Japan
became uneconomical compared with local production. Thus, to defend market
positions, Japanese car companies instituted a longer-term strategy of making cars in
the region where they aresold.Moving with an established customer can also be a
reason for setting up plants abroad. In many industries, important suppliers want to
keep a relationship by establishing plants near customer locations; when customers
build new plants elsewhere, suppliers move too.
Ownership Strategies
Companies entering foreign markets have to decide on more than the most suitable
entry strategy. They also need to arrange ownership, either as a wholly owned
subsidiary, in a joint venture, or more recently in strategic alliance.
Joint Ventures: In a joint venture, an investing firm owns roughly 25 to 75 percent of
a foreign firm, allowing the investing firm to affect management decisions of the foreign
firm. Under a joint venture (JV) arrangement, the foreign company invites an outside
partner to share stock ownership in the new unit. The particular participation of the
partners may vary, with some companies accepting either a minority or majority
position.
In most cases, international firms prefer wholly owned subsidiaries for reasons of
control; once a joint venture partner secures part of the operation, the international
firm can no longer function independently, which sometimes lead to inefficiencies and
disputes over responsibility for the venture. If an international firm has strictly defined
operating procedures, such as for budgeting, planning and marketing, getting the JV
Company to accept the same methods of operation may be difficult. Problems may also
arise when the JV partner wants to maximize dividend payout instead of reinvestment
or when the capital of the JV has to be increased and one side is unable to raise the
required funds.
Experience has shown that JVs can be successful if the partners share the same goals
with one partner accepting primary responsibility for operations matters. Despite the
33
potential for problems, joint ventures are common because they offer important
advantages to the foreign firm. By bringing in a partner the company can share the risk
for a new venture.
Furthermore, the JV partner may have important skills or contacts of value to the
international firm. Sometimes, the partner may be an important customer who is willing
to contract for a portion of the new unit's output in return for an equity participation.
In other cases, the partner may represent important local business interests with
excellent contacts to the government. A firm with advanced product technology may
also gain market access through the JV route by teaming up with companies that are
prepared to distribute its products. Many international firms have entered Japan, China
and Eastern Europe with JVs. But, not all joint ventures are successful and fulfill their
partners' expectations. Despite the difficulties involved, it is apparent that the future
will bring many more joint ventures. Successful international and global firms will have
to develop the skills and experience to manage JVs successfully often in different and
difficult environmental circumstances. And in many markets, the only viable access to
be gained will be through JVs.
Strategic Alliances: A more recent phenomenon is the development of a range of
strategic alliances. Alliances are different from traditional joint ventures in which two
partners contribute a fixed amount of resources and the venture develops on its own.
In an alliance, two entire firms pool their resources directly in a collaboration that goes
beyond the limits of a joint venture. Although a new entity may be formed, it is not a
requirement. Sometimes, the alliance is supported by some equity acquisition of one or
both of the partners. In an alliance, each partner brings a particular skill or resource
usually they are complementary-and by joining forces, each expects to profit from the
other's experience. Typically, alliances involve distribution access, technology transfers
or production technology with each partner contributing a different element to the
venture. Alliances can be in the forms of technology-based alliances, production based
alliances or distribution-based alliances.
34
Although many alliances have been forged in a large number of industries, the evidence
is not yet in as to whether these alliances will actually become successful business
ventures. Experience suggests that alliances with two equal partners are more difficult
to manage than those with a dominant partner. In particular, it is important to
recognize that the needs and aspirations of partners may change over the life of an
alliance and do so in divergent ways. Predicting what the goals and incentives of the
various parties will be under various circumstances is a critical part of effective
planning. Furthermore, many observers question the value of entering alliances with
technological competitors, such as between western and Japanese firms. The challenge
in making an alliance work lies in the creation of multiple layers of connections or webs
that reach across the partner organizations. Eventually such connections will result in
the creation of new organizations out of the cooperating parts of the partners. In that
sense, alliances may very well be just an intermediate stage until a new company can
be formed or until the dominant partner assumes control.
Entering Markei:s Through Mergers and Acquisitions: Although international firms
have always made acquisitions, the need to enter markets more quickly than through
building a base from scratch or entering some type of collaboration has made the
acquisition route extremely attractive. This trend has probably been aided by the
opening of many financial markets, making the acquisition of publicly traded companies
much easier. Most recently even unfriendly takeovers in foreign markets are now
possible.
Nevertheless, international mergers and acquisitions are difficult to make work. A major
advantage of acquisitions is that they can quickly position a firm in a new business. By
purchasing an existing player, a firm does not have to take the time to establish its
presence or develop for itself the resources it does not already possess. This can be
particularly important when the critical resources are difficult to imitate or accumulate.
Acquiring an existing firm also takes a potential competitor out of the market. Despite
these advantages, acquisitions can have serious drawbacks. First and foremost,
35
acquisitions can be a very expensive way to enter a market. In addition to the likelihood
of overbidding, acquisitions pose a number of other challenges. Most targets contain
bundles of assets and capabilities, only some of which are of interest to the acquirer.
Disposing of unwanted assets or maintaining them in the portfolio is often done at
significant cost, either in real terms or in management time. Although these obstacles
are serious, a number of acquisitions fail on another account: the post acquisition
integration process fails. Integrating an acquired company into a corporation is probably
one of the most challenging tasks confronting top management.
Preparing An Entry Strategy Analysis:
Of course, assembling accurate data is the cornerstone of any entry strategy analysis.
The necessary sales projections have to be supplemented with detailed cost data and
financial need projections on assets (managerial, financial, etc. resources). The data
need to be assembled for all entry strategies under consideration. Financial data are
collected not only on the proposed venture but also on its anticipated impact on the
existing operations of the international firm. The combination of the two sets of
financial data results in incremental financial data incorporating the net overall benefit
of the proposed move for the total company structure.
For best results, the analyst must take a long-term view of the situation. Asset
requirements, costs and sales have to be evaluated over the planning horizon of the
proposed venture, typically three to five years for an average company. Furthermore, a
thorough sensitivity analysis must be incorporated. Such an analysis may consist of
assuming several scenarios of international risk factors that may adversely affect the
success of the proposed venture. The financial data can be adjusted to reflect each new
set of circumstances. One scenario may include 20 percent devaluation in the host
country, combined with currency control and difficulty of receiving new supplies from
foreign plants. Another situation may assume a change in political leadership to a group
less friendly to foreign investments. With the help of a sensitivity analysis approach, a
company can quickly spot the key variables in the environment that will determine the
outcome of the proposed market entry. The international company then has the
36
opportunity to further add to its information on such key variables or at least to closely
monitor their development. It is assumed that any company approaching a new market
is looking for profitability and growth. Consequently, the entry strategy must support
these goals. Each project has to be analyzed for the expected sales level, costs and
asset levels that will eventually determine profitability. Sales, costs and assets levels
have to be estimated before. Also, profitability has to be estimated (past sales analysis,
market test method). In order to do this, assessing international risk factors,
maintaining flexibility and assessing total company impact are required. Market research
that focuses on buying patterns, customer segmentation on ability to pay especially in
developing countries, etc. (survey of buyers' intentions, composite of sales force
opinion, expert opinion) (SWOT Analysis-strengths, weaknesses, opportunities, threats)
Entry Strategy Configuration:
In reality, most entry strategies consist of a combination of different formats. We refer
to the process of deciding on the best possible entry strategy mix as entry strategy
configuration.
Rarely do companies employ a single entry mode per country. A company may open up
a subsidiary that produces some products locally and imports others to round out its
product line. The same foreign subsidiary may even export to other foreign subsidiaries,
combining exporting, importing and local manufacturing into one unit. Furthermore,
many international firms grant licenses for patents and trademarks to foreign
operations, even when they are fully owned. This is done for additional protection or to
make the transfer of profits easier. In many cases, companies have bundled such entry
forms into a single legal unit, in effect layering several entry strategy options on top of
each other. Bundling of entry strategies is the process of providing just one legal unit in
a given country or market. In other words, the foreign company sets up a single
company in one country and uses that company as a legal umbrella for all its entry
activities. However, such strategies have become less typical-particularly in larger
markets, many firms have begun to unbundle their operations.
37
When a company unbundles, it essentially divides its operations in a country into
different companies. The local manufacturing plant may be incorporated separately
from the sales subsidiary. When this occurs, companies may select different ownership
strategies, for instance, allowing a JV in one operation while keeping full ownership in
another part. Such unbundling becomes possible in the larger markets such as the
United States, Germany and Japan. It also allows the company to run several
companies or product lines in parallel. Global firms granting global mandates to their
product divisions will find that each division will need to develop its own entry strategy
for key markets.
Portal or E-Business Entry Strategies:
The technological revolution of the Internet with its wide range of connected and
networked computers has given rise to the virtual entry strategy. Using electronic
means, primarily web pages, e-mail, file transfer and related communications tools,
firms have begun to enter markets without ever touching down. A company that
establishes a server on the Internet and opens up a web page can be connected from
anywhere in the world. Consumers and industrial buyers who use modern Internet
browsers, such as Netscape, can search for products, services or companies and in
many instances even make purchases online. Whatever the forecasts, most experts
agree that the opportunity for Internet-based commerce will be huge. The Internet will
eliminate some of the hurdles that plagued smaller firms from competing beyond their
borders. Given the low cost of the Internet, it is very likely that many more established
firms will use the Internet as the first point of contact for countries where they do not
yet have a major base. However, there are many challenges to would-be Internet
based global marketers. One of the biggest is language. The second big challenge is the
fulfillment side of the e-business. Here, we are dealing with completing a sale, shipping,
collecting funds and providing after-sales service to customers all over the world.
38
Exit Strategies:
Circumstances may make companies want to leave a country or market. Other than the
failure to achieve marketing objectives, there may be political, economic or legal
reasons for a company to want to dissolve or sell an operation (management myopia).
International companies have to be aware of the high costs attached to the liquidation
of foreign operations; substantial amounts of severance pay may have to be paid to
employees and any loss of credibility in other markets can hurt future prospects.
Sometimes, an international firm may need to withdraw from a market to consolidate its
operations. This may mean a consolidation of factories from many to fewer such plants.
Production consolidation when not combined with an actual market withdrawal is not
really what we are concerned with here. Rather, our concern is a company's actual
abandoning its plan to serve a certain market or country.
2.6 The relationship between globalization and Marketing
Strategic alliances
A strategic alliance is one form of inter-organizational cooperative strategy to improve a
firms 'competitive position and performance and to achieve the goals of both individual
firms by integrating and sharing specific resources and skills of the partners (Hit, et al.,
2000; Ireland,Hitt, and Vaidyanath, 2002; Jarillo, 1988; Varadarajan and Cunningham,
1995). This type of alliances is worth further study for two main reasons. First, recent
literature in management and marketing suggest that there are well-developed theories
on vertical integration, but not on horizontal relationships (Rindfleisch and Moorman,
2001; Sheath and Sismondi, 1999). Second, although many studies have been
conducted on this type of alliance, little is known about how the degree of cooperation
in such alliances improves the performance of the participating firms.
In addition, strategic alliances among competitors comprise more than half of the total
number of alliances formed within a recent two-year period (Hokinson, Hit, and Ireland,
2004).
39
Since there is a wide array of organizational forms, e.g., long-term purchasing
agreements, co-marketing, licensing agreements, R&D collaboration teams, joint
ventures, etc.that constitute strategic alliances (Ireland, Hit, and Vaidyanath, 2002;
Spekman, et al., 1998;Spekman and Sawhney, 1990), a proper classification of strategic
alliances may provide a betteridea of the purposes and differences among types.
Following the most recent classification of Hokinson et al. (2004), four main types of
strategic alliances include 1) joint ventures, 2) equity strategic alliances, 3) non-equity
strategic alliances, and 4) strategic cooperative networks.
Due to the less formal and committed nature of a non-equity alliance, it is not
surprising to see a rapid growth in this type of strategic alliances in recent years (Das,
Sen, and Sengupta,1998). Moreover, non-equity alliances are deemed appropriate for
today's complex environment characterized by globalization (Ink pen, 2001). Therefore,
the emphasis of this paper is to explore the effects which globalization has on the
degree of cooperation in co-marketing alliances, which is one type of non-equity
alliance.
Co-marketing alliances
Co-marketing alliances are a form of strategic alliance (Bucklin and Sengupta, 1993;
Morgan and Hunt, 1994; Robson and Dunk, 1999). It is defined as "a form of working
partnership[which] involve[s] coordination among partners in one or more aspect of
marketing and may extend into research, product development, and even production"
(Bucklin and Sengupta, 1993,32). Working partnership here is referred to as the
presence of "mutual recognition and understanding that the success of each firm
depends in part on the other firm, with each firm consequently taking actions so as to
provide a coordinated effort focused on jointly satisfying the requirements of the
customer marketplace" (Anderson and Narks, 1990, 42).
A co-marketing alliance is a type of lateral relationship between two or more
independent and legally separated firms that operate at the same level of the value
added chain (Leiden, Lilly, and Winsor, 2002). From these definitions (Anderson and
40
Narks, 1990; Bucklin and Sengupta,1993), co-marketing alliances are considered
cooperative agreements between firms which indicate a non-equity structure of
strategic alliances. Members of the co-marketing alliance are expected to coordinate
their firms' resources towards a common marketing strategy, which adds value to
customers (Bucklin and Sengupta, 1993). Co-marketing alliances help collaborating
firms create customer awareness, leverage their unique resources, skills and capabilities
in order to enter into new markets, and gain stronger market positions (Adler, 1966;
Bucklin and Sengupta, 1993; Das, Sen, and Sengupta, 2003; Venkatesh, Mahajan, and
Eitan, 2000).
As mentioned in Webster (1994, 8), "in the global markets of the 1990s and
beyond,superior marketing will be a more sustainable source of unique competitive
advantage than superior technology." It is obvious that marketing has become an
important factor to help firms achieve a competitive advantage. Customer satisfaction is
then the key to this success (Webster,1994). In order to serve customers more
successfully in the globalization era, firms need to ally with other firms since it is
difficult or even impossible for one firm to do everything quickly, effectively, and
efficiently due to high competition and uncertainty in the markets (Ohmae,1989b).
Unlike other types of strategic alliances, co-marketing alliances are mainly designed to
help partners coordinate marketing activities with an objective of fulfilling customers'
needs(Bucklin and Sengupta, 1993; Das, Sen, and Sengupta, 2003). Thus, co-marketing
alliances then become a significant tool to help firms satisfy customers, stay on the
competitive edge, and gain market power in the global marketplace.
Building on the aforementioned definition of co-marketing alliances, the degree of
cooperation in co-marketing alliances is defined as the extent to which a firm
cooperates with other firms in the alliance in coordinating marketing activities such as
customer service, advertising, promotion, and sharing distribution channels (Das, Sen,
and Sengupta, 2003; Porter,1985; Venkatesh, Mahajan, and Eitan, 2000). Since
international marketing performance is crucial to the success of firms engaging in
international activities, only cooperation in international marketing activities is an
41
emphasis here. As such, the degree of co-marketing alliance in this study encompasses
only the degree of collaboration for international marketing activities, which range from
international marketing research to marketing plans of the firms in overseas markets.
42
3.0. Introduction
CHAPTER THREE
RESEARCH METHODOLOGY
This section gave an overview of the methodology used to conducting research. It
covers, research design, study population, Sample size and sampling procedures,
methods of data collection and data analysis.
3.1 Research Design
The researcher used different methods of data collection and all methods used in
evaluating the relationship between international procurement and cost reduction. The
data collected contained both qualitative and quantitative considering primary data and
secondary data, other methods were questionnaires.
3.2 Study population
The study population is defined as total number of units from which sample size is got
from. The total population was 144 respondents who were staff of Total Uganda limited
in Kampala.
3.3 Sample size
This is a fraction of the population that was selected to represent the entire population
and the researcher used Slovene's formula to come up with the appropriate size as
illustrated below
n =
=
=
=
N
l+N(e)2
144
1+144(0.05)2
144
1 + 144 (0.0025)
144
1+0.3
43
=
=
n =
144
1.3
105
.l.Q5:
Where n = required sample size,
N = population size,
e=level of significance which is equal to 0.05, and from this formula, the sample was
computed.
3.4 Data collection
Both primary and secondary sources of data collection were used. Primary data
included relevant data that was obtained from the field and this ensured reliability,
accuracy of information since it comprised of firsthand information. On the other hand,
secondary source employed textbooks, newspapers and internet and all these made this
paper look classical academic paper.
3.5 Method of Data Collection
3.5.1 Questionnaires
The questionnaires were designed in a way that allows the respondents to give simple
answers among the alternatives and express their view on asked questions. They were
both open ended and closed questionnaires.
3.5.2 Interviews
The researcher also used both formal and informal interviews. In formal interviews, the
researcher used guided questions to interview different categories of people such as the
managers and customers while taking into account the gender, age, education
background and other issues.
This was done in order to obtain clear information about globalization and marketing
strategies used by such multi-national companies while doing their businesses.
44
3.5.3 Observations
The involvement of the researcher in observing the activities of the focus groups that is
to say, the staff members and the customers in the study area gave enough and
authentic information about the topic of the study since this was a firsthand information
about the topic.
3.6 Data Analysis and interpretation
The collected data was mainly analysed using SPSS which a statistical package for
social scientists. The data was analysed using descriptive statistics such as frequency
tables, percentages, means and ranks. Also data from each questionnaire was
categorized and edited for accuracy and completeness of information. The information
obtained was further triangulated with information from secondary sources for
meaningful interpretation and discussion.
The following mean ranges and descriptions were used to interpret responses on both
variables (globalization and marketing strategies)
I Mean Range Response Mode Interpretation
3.26-4.00 Strongly agree Very high
2.51-3.25 Agree High
1.76-2.50 Disagree Low
1.00-1.75 Strongly disagree Very low
The Pearson's linear correlation coefficient was used to test the significant relationship
between the level of globalization and marketing strategies.
3.7 Ethical Procedure
45
The researcher chose a topic upon approval by the supervisor and obtained a letter of
introduction from Kampala international university, College of economics and
management. The researcher began to collect data using Questionnaires directed to
respondents and personally delivered them to the selected people. The researcher
ensured honesty and confidentiality in data collection. After computation of the Data,
the researcher prepared the final report and was submitted to Kampala international
university.
3.8. Limitations of the study
The researcher experienced inadequate funds to procure data collecting materials and
facilitation in terms of transport and food during field work. However, he used the little
personal savings and made sure that the research work was completed.
There was also limited time allocated for the research study but the researcher had to
put in some extra efforts and designed the time frame to enable him to complete the
work in the given time.
Respondents were scattered in different places and offices which was not easy to
accesses them but the researcher scheduled appropriate time and met them in their
respective offices and places of residence.
46
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 Introduction
This chapter shows the profile information of respondents, the level of globalisation,
level of marketing strategies and the significant relationship between the level of
globalisation and marketing strategies.
4.1 Demographic characteristics of the respondents
Respondents in this study included working staff of Toatal limited in Kampala Central
Uganda and their profile information in terms of gender, age and level of education
level was determined. In each case, respondents were asked to provide their profile
characteristics, using a closed ended questionnaire and their responses were analysed
using frequencies and percentages as indicated in tabie 1 below;
47
Table 1: Respondents' Profile
Respondent's demographic information Frequency Percent
Gender Male 60 57.1
Female 45 42.9 Total 105 100
Age 20-35 years
36 35
36-45 years 60 57
46+ 9 9
Total 105 100
Level of education
Certificate 9 8.6
Diploma 40 38.1
Degree 56 53.3
Total 105 100
Table 1 results indicated that upon gender, male respondents dominated in this sample
with (57.1%) and female (42.9%), as far as age is concerned most respondents in this
sample were between 36-45 years (57%), these were followed by those between 20-35
years (35%), hence implying that most staff are in their middle adult age. As regards
the education level, most of the staff are degree holders (53.3%) and very few
certificate holders (8.6%), and this therefore this implies that majority of workers are
generally qualified.
48
4.2 Level of Globalisation
The independent variable in this study was Globalisation and the first objective was to
determine the level of Globalisation in Total Uganda limited. To achieve this objective,
eight qualitative questions were asked in the questionnaire and each had four possible
responses ranging from 1= strongly disagree, 2=disagree, 3=agree and 4=strongly
agree. Respondents were asked to rate the level of Globalisation by indicating the
extent to which they agree or disagree with each item, and their responses were
summarized using means as indicated in table 2;
Table 2: Level of Globalisation
Items on G!obalisation Mea Interpretati
n on
You have established other production sites overseas 3.45 Very high
Digital communication has stimulated global trade in knowledge Very high products e.g. soft ware, out sourced services and media content. 3.35
You always use licensed technology and other intellectual High property in your business 3.06
Your business has extended product life-cycles by producing and High marketing products in new countries 2.98
You always sell products to overseas markets through sale 2.88 High
agents, distribution agreements or online.
You have earned higher profits and a stronger position and 2.56 High
market access in global markets.
You have established product plat foams in low cost countries where intermediate products are made into finished products at 2.30 Low lower costs.
Use of internet has helped you reduce on the costs of transmitting 2.22 Low your products Average mean 2.85
Source: primary data (2014)
49
Ran k
1
2
3
4
5
6
7
8
Score Answer Range Response mode Interpretation
1 1.00-1.75 Strongly disagree Very low
2 1.76-2.50 Disagree Low
3 2.51-3.25 Agree High
4 26-4.00 strongly agree Very high
The means in table 2 indicated that the respondents rated the level of globalisation as
being high and this was indicated by the average mean (mean=2.85), hence implying
that Total petrol station in Kampala Central Uganda have established other production
sites overseas.
Still results in table 2 indicated that the following items (questions) were rated very high
and these were; You have established other production sites overseas (mean=3.45);
Digital communication has stimulated global trade in knowledge products e.g. soft
ware, out sourced services and media content (mean=3.35), the following items were
rated high; You always use licensed technology and other intellectual property in your
business (mean=3.06); Your business has extended product life-cycles by producing
and marketing products in new countries (mean=3.98); You always sell products to
overseas markets through sale agents, distribution agreements or online (mean=2.88);
You have earned higher profits and a stronger position and market access in global
markets (mean=2.856), and the following items were rated low and these were; You
have established product plat foams in low cost countries where intermediate products
are made into finished products at lower costs (mean=2.30); Use of internet has helped
you reduce on the costs of transmitting your products (mean=2.22).
4.3 Level of marketing strategies
The dependent variable in this study was the level of marketing strategies, this variable
was measured using nine questions in the questionnaire and respondents were required to
so
show the extent to which they agree or disagree with the statements by indicating the
number which best describes their perceptions with the response rate ranging between
!=strongly agree, 2=agree, 3=Disagree and 4=strongly disagree. The responses were
analyzed and described using means as summarized below in table 3;
Table 3: Level of marketing strategies
Interpretatio Rank cateaories Mean n Items on marketina strateaies You always carry out sales promotion in order to 3.54 1 increase on the level of goods sold Very high You always apply flank attack strategies by attacking
3.26 2
your opponents in the same geographical area Very high
You always diversify and venture into new areas in · 3.17 High 3 the market
You always practice personal selling which has helped 3.02 High 4 you to examine the customer's needs
You always grade your products/ brand in relative of 2.90
High 5 other players in the market.
You always discover and promote new uses for the 2.85
High 6 products
You always carry out marketing research which links 2.76 High 7 vou to customers You always make sure that your pricing strategy 2.43 Low 8 covers a II costs You always carry out direct marketing which helps 2.18 Low 9 vou interact directlv in customers Average mean 2.90 High
Source: primary data (2014)
Score Answer Range Response mode Interpretation
1 1.00-1.75 Strongly disagree Very low
2 1.76-2.50 Disagree Low
3 2.51-3.25 Agree High
4 26-4.00 strongly agree Very high
51
The means in table 2 indicated that the respondents rated the level of marketing
strategies as being very high on the first two items namely; You always carry out sales
promotion in order to increase on the level of goods sold (Mean=3.54); and You always
apply flank attack strategies by attacking your opponents in the same geographical area
(Mean=3.26). The total mean (2.92) indicates that on average, the level of marketing
strategies is generally high, and this therefore implies that Total petrol station in
Kampala Central Uganda always apply flank attack strategies by attacking their
opponents in the same geographical area.
4.4 Relationship between Globalisation and Marketing strategies
The last objective in this study was to establish whether there is a significant
relationship between globalisation and marketing strategies, the researcher stated a
null hypothesis that there is a significant relationship between globalisation and
marketing strategies. The researcher tested the null hypothesis and found out that
there was a significant relationship between customer relationship globalisation and
marketing strategies using the Pearson's Linear Correlation Coefficient, and this is what
helped him to achieve this last objective as indicated in table 4;
Table 4: Significant relationship between Globalisation and Marketing
strategies
Variables Correlated R- Sig Interpretation Decision on
value Ho
Globalisation
Vs .578 .003 Significant Rejected
Marketing strategies relationship
Source: primary data (2014)
52
Results in table 4 indicated a positive and significant relationship between globalisation
and marketing strategies, since the sig. value (0.003) was less than 0.05, which is the
maximum level of significance required to declare a significant relationship in social
sciences. Therefore this implies that increase in the level of globalization also increases
the level of marketing strategies and vise vasa.
53
CHAPTER FIVE
SUMMARY Of FINDINGS, CONCLUSIONS, RECOMMENDATIONS AND AREAS
Of FURTHER STUDY
5.0 Introduction
This chapter presents the findings, conclusions, recommendations and suggested areas
that need further research following the study objectives and study hypothesis.
5.1 Summary of findings
Profile of respondents
Majority of respondents were male representing 57.1% and only 42.9% were female,
implying that male respondents dominated the sample, more of the respondents (57%)
were 36 -45 years of age and 53.3% of the respondents had only certificates as their
highest qualifications.
5.2 Discussion
From the research findings,
The level of globalisation was generally rated high and this was indicated by the
average mean (mean=2.85), hence confirming that Total petrol station in Kampala
Central Uganda has established other production sites overseas. This finding is also in
line with Peterson (2002) who noted that globalization increases market potential, trade
and investment potential and resource accessibility of firms. It has become easier for
firms to outsource their production to different locations to gain benefits from location
advantage since less trade and investment barriers are present in today's global
marketplace. Peterson also added that firms are able to reach out and serve many new
untapped markets around the globe since liberal movements of financial and human
capital also facilitate their business transactions.
The level of marketing strategies was rated as high and this was indicated by the
average mean of 2.90, implying that Total petrol station in Kampala Central Uganda
54
always apply flank attack strategies by attacking their opponents in the same
geographical area, and this finding is in line with Tsang (2000) who noted that
companies competing in the multi-domestic mode are frequently applying the global
category strategy and leveraging knowledge across markets without pursuing
standardization. Tsang added that strategy works best if there are significant
differences across markets and when few segments are present in market after market.
Several traditional multinational players who had for decades pursued a multi-domestic
marketing approach tailoring marketing strategies to local market conditions and
assigning management to local management teams have been moving toward the
global category strategy. Among them are Nestle, Unilever and Procter Gamble, three
large international consumer goods companies doing business in food and household
goods.
There is a positive significant relationship between globalisation and marketing
strategies, this was evidenced by the sig. value (0.003) which was less than 0.05, which
is the maximum level of significance required declare a significant relationship in social
sciences.
5.3 Conclusion
The researcher concluded that majority of respondents were male representing (57.1 %)
aging between 36-45 years (57%) and had only attained certificate as their highest
education qualification (53.3%).
The level of globalisation was generally rated high and this was indicated by the
average mean of 2.85, hence concluding that Total petrol station in Kampala Central
Uganda has established other production sites overseas.
The level of marketing strategies was rated as high and this was indicated by the
average mean of 2.90, hence leading to a conclusion that Total petrol station in
55
Kampala Central Uganda always apply flank attack strategies by attacking their
opponents in the same geographical area.
There is a positive and significant relationship between globalisation and marketing
strategies and this was connoted by the sig. value (0.000), hence concluding that
increase in the level of globalization also increases the level of marketing strategies and
low level of globalisation reduces it.
5.4 Recommendation
The researcher recommends that Total petrol station should establish product plat
foams in low cost countries where intermediate products are made into finished
products at lower costs.
The researcher still recommends that Total petrol station should highly use internet
which can help them reduce on the costs of transmitting their products.
Total petrol station limited should always make sure that their pricing strategy covers all
costs of production and this will help them increase on the level of profits.
Total petrol station limited should carry out direct marketing which can help them
interact directly with customers, hence increasing sales.
5.5 Areas for further study
The research does not and cannot guarantee that the study was completely exhausted.
In any case, the scope of the study was limited in accordance with the space, and
objectives. It is therefore, suggested that a national research covering the whole
country be undertaken.
Also, prospective researchers and even students should be encouraged to research into
the following areas;
56
1. Competition and marketing strategy in Total petrol station limited in Kampala
Central Uganda.
2. Globalisation and creation of marketing mix in Total petrol station limited in
Kampala Central Uganda.
3. Level of Technology and quality products in Total petrol station limited in
Kampala Central Uganda.
57
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60
APPENDICES
Appendix I: Questionnaire
Dear respondent,
This questionnaire has been designed to study the globalization on marketing strategies
as a requirement for the partial fulfillment for the award of a bachelor's degree in
business administration of Kampala international university. The information you
provide will help us understand the reasons globalization is a great impact on marketing
strategies.
Thank you very much for your time and cooperation.
Profile of respondents
(a) Gender
Male D
Female D
(b) Age __ _
c) What is your highest education level attained?
Certificate. __
Diploma __
Degree -----
Masters -------
61
SECTION B: GLOBALISATION
Direction: Please write your preferred option on the space provided before each item.
Kindly use the rating guide below:
Response Mode Rating
Strongly Agree
Agree
Disagree
Strongly Disagree
GLOBALIZATION
(3)
(2)
(1)
Description Legend
(4) you agree with no doubt at all SA
You agree with some doubt A
you disagree with some doubt D
You disagree with no doubt at all SD
1. ------Use of internet has helped you reduce on the costs of transmitting your
products.
2. ------Digital communication has stimulated global trade in knowledge products
e.g. soft ware, out sourced services and media content.
3. ------You have established other production sites overseas.
4. ------You always use licensed technology and other intellectual property in your
business
5. ------You always sell products to overseas markets through sale agents,
distribution agreements or online.
6. ------You have earned higher profits and a stronger position and market access in
global markets.
7. ------Your business has extended product life-cycles by producing and marketing
products in new countries.
8. ------You have established product plat foams in low cost countries where
intermediate products are made into finished products at lower costs.
62
SECTION C: MARKETING STRATEGIES
Direction: Please write your preferred option on the space provided before each item.
Kindly use the rating guide below:
Response Mode Rating
Strongly Agree
Agree
Disagree
Strongly Disagree
(3)
(2)
(1)
Description Legend
(4) you agree with no doubt at all
You agree with some doubt A
you disagree with some doubt D
You disagree with no doubt at all SD
1. -----You always make sure that your pricing strategy covers all costs.
2. -----You always discover and promote new uses for the products
SA
3. -----You always carry out direct marketing which helps you interact directly in
customers.
4. -----You always carry out sales promotion in order to increase on the level of
goods sold.
5. -----You always practice personal selling which has helped you to examine the
customer's needs.
6. -----You always grade your products/ brand in relative of other players in the
market.
7. -----You always diversify and venture into new areas in the market.
8. -----You always apply flank attack strategies by attacking your opponents in the
same geographical area.
9. -----You always carry out marketing research which links you to customers
63
Relationship between globalization and marketing strategies
1-----Is there any relationship between globalization and marketing strategies?
2----To what extent has globalization contributed marketing strategies to be use by
Total Uganda limited?
3----How has globalization influenced the extent of marketing strategies in Total
Uganda limited?
64
APPENDIX II: RESEARCHER'S CURRICULUM VITAE
PERSONAL INFORMATION
NAME
GENDER
DATE OF BIRTH
MARITAL STATUS
CONTUCT NUMBERS
EDUCATIONAL QUALIFICATIONS
INSTITUTION
mwanga ramlah
FEMALE
29/august/1992
single
+256775393396
AWARDS YEAR
1995-2003
2004-2007
2008-2010
2011-2014
Camp Kigali primary school
Lycee de kigali
P. L. E Certificate
RCE
Lycee de kigali ACE
Kampala international university
Work Experience
YEAR EMPLOYER POSITION
2010-2011 Inyange Accountant
2012-2013 Internship kenllyoid Accountant
logistics
65
Other qualifications
Certificate of Computer
Personal Skills
• Computer skills MS word, Excel, Power point, and Internet browser.
• Efficient in the use of modern Office equipment
• Good customer care and time management
• Records and store keeping
• Good interpersonal skills
• Creative and easily adaptable to new environments
• Sensitive and understanding of different people's needs.
Hobbies
Reading
Listening to radio
Watching television
Languages Spoken
English
French
66
Referees
1. Mr. Mugume Tom
Administrator
Kampala International University
P.O Box 20000
Kampala
Tel; 0777295599
2. Mr.Kasiita Hatwib
Territory Manager at Shell Uganda
Kampala Uganda
Tel. 0772 754013
3. Asaba Julius
Commercial manager Libia Oil ltd
Tel. 0776004332
67
