Currently, the trade relationship between countries is becoming more and more close, making business activities also transform in a global direction. The development orientation of globalization has appeared in the field of Marketing, creating a concept of "Global Marketing Environment". So what is the global marketing environment and what elements does it include? The global marketing environment is a complex system that can be difficult to understand. In this blog post, we will explore the elements of the global marketing environment and explain how they work together to help businesses succeed in today's world.
What is the Global Marketing Environment?
The global marketing environment is a complex system that can be more difficult to understand than a national marketing environment. In a national marketing environment, a business would be competing against a few other businesses in the same country. In a global marketing environment, a business is competing with many brands from around the world.
Why do international businesses need to care about the global marketing environment?
In the context of globalization taking place in all fields, to ensure continuous development to keep up with the times, international business enterprises need to pay special attention to the global marketing environment. Here are a few benefits that the global marketing environment brings to today's businesses:
1. It helps businesses easily adapt to the business environment in host countries
Due to differences in culture, politics, law, geographical conditions, economic development speed and customs, each country has a different business environment. This affects all activities of companies doing business in the foriegn country. On the other hand, if businesses invest effort in studying the global marketing environment, they will learn about economic factors in other countries such as tax policy, currency, interest rates, growth rate economic growth, economic models, influence of trade blocs, etc. to better understand the business environment in different countries and have sufficient knowledge about the characteristics of each business environment. From there, businesses can easily adapt to the business environment in the foreign country.
2. It helps enhance the ability to expand market share in new countries
Businesses interested in the Marketing environment will not miss the opportunity to expand their business activities and reach new markets anywhere in the world. Because in the process of learning about the global marketing environment, businesses will collect information about the economy, politics, society and changes in consumer demand in other countries and from there, Enterprises can choose the right market to expand their market share and bring their brand to the global market. In addition, the development of technology and digital innovations today also help businesses execute business strategies faster, reach more potential customers.
3. It helps optimize profits by country, market share
Profits of businesses depend on many factors such as production costs, transportation costs, materials and goods, regional financial situation and economic development speed of the country. Therefore, understanding the differences of each market share country, businesses will have a way to adjust their business plans accordingly, build an effective financial plan to achieve their goals. Since then, the business activities of the enterprise are more favorable and profits are increasing.
3. It helps diversify markets, less dependent on a single market
The development of a global marketing strategy will help businesses stabilize total revenue, in case the domestic market or any market has fluctuations. When studying Global Marketing, businesses can clearly understand the characteristics of other markets and choose suitable markets. Since then, the business market has been diversified and total revenue has also become more stable.
For example: When the weather turns cold, the demand to buy carbonated soft drinks decreases. However, winter does not occur in all countries at the same time, and in many countries around the world, the weather is warm and warm all year round. Therefore, beverage manufacturers can maintain a stable level of total revenue thanks to sales from overseas markets.
4. It helps limit the risk of legal differences in each country
Legal factors affect many of the company's activities. When entering a new market, businesses often carefully study the legal system and policies of the host country to have a business plan that complies with the law and limits legal risks.
Therefore, when understanding the global marketing environment, businesses can grasp legal differences to adjust all business activities and marketing strategies accordingly. On the other hand, understanding the legal differences of other countries will help businesses choose the right market for their business characteristics and development orientation.
5. It helps limit risks due to differences in culture and awareness in each country
Not only foreign businesses, but also domestic businesses can face problems arising from marketing activities that do not match the culture and perception of customers. Products/services promoted in the country may also face disagreements due to integration and globalization in that country.
Therefore, when businesses are interested in studying the global marketing environment, they will capture information about the culture, religion, politics and behavior of customers. From there, businesses can minimize the risk of unwanted conflicts or mixed reactions from customers.
6. It helps limit risks caused by the influence of large economic organizations
For the cooperation and sustainable development of businesses in the world, large economic organizations such as the Fed, World Bank, WTO, ASEAN... have formed. However, these organizations have a great influence on business activities, import and export activities or access to investment sources of international enterprises. If a business understands the factors related to the global marketing environment, it will easily adapt to changes in the trade agreements of these organizations.
7. It helps improve competitive position in foreign countries
If you understand the global marketing environment well, you can improve your competitive position in the foreign market thanks to your understanding of that market.
Specifically, after learning about the characteristics of the market in the host country, businesses can establish an effective competitive strategy, suitable to the conditions of that market. When collecting enough information about customers' needs and consumption behavior and competitors' business activities in foreign markets, enterprises can develop products/services to serve the needs of customers. products that competitors cannot meet. From there, businesses can expand their customer segments in the international market and improve their competitive position.
8. It shows how to optimize resources and supply capacity
Understanding the global marketing environment can help businesses know how to prepare the necessary resources and optimize supply capacity to serve business and export activities in foreign markets.
For example: When an enterprise wants to enter the US market - a very large market and geographical location very far from Vietnam, the enterprise needs to estimate expenses for trade promotion activities and business transactions. business and its supply capacity to meet the market demand and long-term development.
Elements of the Global Marketing Environment
In order to succeed in this challenging international marketplace, it is important for you as an international business to take into account all of the elements that contribute to a business's success on a global level: The international trade system, economic environment, political-legal environment, cultural environment.
1. The international trade system
The international trade system is the foundation of any international marketing activity, and businesses depend on it to stay competitive. Without an efficient international trade system, you would not be able to communicate with your potential customers or deliver your supplies in a timely manner.
Trade restrictions are a major barrier to international trade. Tariffs and duties can be used by governments as an incentive to force nations into favorable business practices, but they also prevent the free flow of goods across borders without taxation or other interference from one country's laws in another nation’s marketplace environment.
For example, the European Union (EU) recently placed import duties on Chinese solar panels after determining that Chinese companies were selling the panels in EU countries at under-market prices. To retaliate, the very next day, the Chinese government placed duties on EU wine exports to China. The duties targeted the wines of Spain, France, and Italy but spared Germany, which had taken China’s side in the solar panel dispute. The disputes were resolved when Chinese solar panel producers agreed to a minimum price in Europe and Europe agreed to help China develop its own wine industry in return for promoting European wines there.
There are many organizations that help facilitate world trade, including the World Trade Organization (WTO), North American Free-Trade Agreement (NAFTA), and Trans-Pacific Partnership (TPP). The World Trade Organization is an international organization of member nations that work to facilitate international trade. The goal of the World Trade Organization is to ensure fair and open trade between nations worldwide.
The Trans-Pacific Partnership is another important organization that emerged after World War II, helping many countries join together in order to strengthen their economies by reducing tariffs on imports. It has now evolved into an extensive free-trade agreement that spans the Pacific.
NAFTA is an agreement between Canada, Mexico, and the United States to promote free trade. This agreement originally came into effect in 1994, but it is currently being renegotiated by its members in order to expand its benefits for all three countries involved.
ASEAN, or the Association of Southeast Asian Nations, is one example of a free-trade agreement that was formed by southe countries in order to promote trade with each other. The original members were Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Brunei joined later followed by Vietnam, Laos, Myanmar (Burma), and Cambodia.
2. Economic environment
The economic environment consists of macroeconomic factors that impact a country’s economic system. These can include: Economic growth, inflation (the rate at which the prices of goods and services in an economy increase), unemployment rates, interest rates (how much it costs to borrow money in a country), and exchange rates (the value of one currency when converted to another).
The biggest economic problems in the twenty-first century that impact business operations in a global environment are:
Global Economic Crisis: When prices and demand for raw materials decline, companies experience low sales and lose money. They may also experience lower sales due to financial issues in their own country. This is common in resource rich countries, such as Mexico and Nigeria.
Currency Volatility: Increases in currency volatility (the fluctuation of the value of one currency in relation to another) make it harder for companies to predict how much revenue they will get from international sales. Currency fluctuations are often related to political issues, such as strikes, coups, or wars. This makes it hard for businesses to plan and to budget.
Income distribution disparity: Income distribution disparity is the difference between how much money people in different groups of society earn. There are various reasons for income distribution disparity, including: age, gender, race, education, occupation, social class, martial status...
3. Political-Legal Environment
The political-legal environment consists of factors that are relevant to a country’s legal system. These can include:
a. Government regulations
Government regulations on international companies in a country is always different from those in other countries. Some nations are very receptive to foreign firms; others are less accommodating.
- India has tended to bother foreign businesses with import quotas, currency restrictions, and other limitations that make operating there a challenge. In contrast, neighboring Asian countries such as Singapore, Vietnam, and Thailand court foreign investors and shower them with incentives and favorable operating conditions.
- In 2021, governments of many countries have forced Google and Facebook to set up their local server in order to allow them to track information on their own citizens.
b. Political and regulatory stability
Political and regulatory stability allows a nation to be a good place for foreign companies. A lot of government regulation is in place to keep business safe in health, environment, labor, trade wars, etc. The stability of the economy also plays an important role in whether or not a country is a good location for international businesses.
For example, Russia is consumed by corruption and governmental red tape, which the government finds difficult to control. The country’s recen geopolitical conflicts with Europe, the United States, and other countries have made doing business in Russia difficult and risky.
c. Regulatory quality
Regulatory quality is a measure of how closely regulations adhere to an ideal standard of good governance. International companies want to be sure that laws are being followed, regulations are clear.
For example, Vietnam has enacted a law limiting advertising on radio and television. However, the law is unclear about what frequencies are allowed for advertisement. This makes it difficult for businesses to make plans related to media marketing.
d. Judicial independence
Judicial independence refers to the power of a country’s judiciary to operate free from undue influence and interference by other branches of government.
For example, as Indonesia established new regulations for online business, such as prohibiting pornography websites and requiring that social media accounts be real names, the country's own president began making statements that undermined these new rules. He also made statements that were critical of the country’s independent Directorate for Cybercrime Investigation and suggested that Indonesia's constitutional Court had too much power.
This example shows how judicial independence can be compromised, which makes it difficult for online businesses to operate in such countries.
4. Cultural Environment
Each country has its own folkways, norms, and taboos. When designing global marketing strategies, companies must understand how culture affects consumer reactions in each of its world markets. Cultural environment consists of factors such as:
Ethnocentrism is the belief that one's own ethnic or social group is superior to those of other groups. This belief may be openly expressed, or it may be subconsciously held by a person. Ethnocentric individuals will naturally prefer people from their group and treat them in a favorable manner, while they will tend to look at those from other groups with suspicion or as inferiors.
For example, the United States has been a melting pot of cultures for well over a century. The U.S.'s dominant culture is that of Main Street America: family oriented, friendly, patriotic, and hardworking.
Religion is an important element of culture in many societies, and it can influence behavior toward international business.
For example: Malaysia has a sizable Muslim population that grows increasingly more devout as they see what changes take place due to globalization all around them. These people are becoming even more conservative and traditional about what they view as appropriate expressions of Islam.
c. Social conventions
Social conventions are deeply held rules governing behavior in a society, often unwritten and generally accepted through custom or practice. They vary widely by culture but can affect international business in significant ways. For example, in some societies it is considered rude to make direct eye contact with someone you do not know very well.
For example, although being very successful in many countries, McDonald's still cannot penetrate the Vietnamese fast-food market. McDonald's foods are fast but not fast enough than other Vietnamse traditional foods such as Banh mi, pho, bun...etc. In addition, the price to buy McDonald's foods is still higher in comparision with Vietnamse fast food standard. Therefore, although setting the first foot step in 2014, there are only 17 McDonald's stores are opened in Vietnam until now (2021).
d. Corporate social responsibility
CSR-The concept of corporate social responsibility has evolved over the last few decades and has become a popular topic in discourse of business, ethics and society. A business can use CSRs for their own advantage to portray an ethical image to customers, employees and suppliers.
As you can see, the global marketing environment is complex and it's important for marketers to have a firm grasp on how each of these factors affects their business. The global marketing environment brings many benefits and development opportunities for domestic and foreign businesses. However, in order to successfully pursue the global marketing environment, each organization needs to carefully study the market and the above core factors to seize the opportunity to expand the market and improve its adaptability. with any fluctuations arising in the global environment. This article has provided an overview of some key aspects that are vital to understanding before crafting your global marketing strategy.