087AP03 GlobalMarket p162-163 - staging.files.cms.plus.com

162 COVER FEATURE inform • April 2003 • Volume 14 (4)
It’s a global market out there
Barbara Jewett
There is little doubt that more and more business
is being conducted on a global level.
Agricultural products have been traded
around the world for decades. But now, logos
from multinational corporations are recognized
around the globe—from soft drinks
and hamburgers to running shoes, hotel chains,
and detergents. It is commonplace for products
to have components manufactured in
one country and be assembled in another. In
fact, you probably use globalization’s greatest
product every day: the Internet.
Global focus
The concept of global brands is increasingly
common in today’s business climate
as corporations, particularly the large multinationals,
focus on reducing product ranges,
streamlining manufacturing operations,
and maintaining or increasing market share.
“There are advantages of global brands,”
explained William Lesch, professor of international
marketing at the University of
North Dakota in Grand Forks. “Corporations
can take advantage of the economies of
scale in production, distribution, and advertising,
which can ultimately save them millions
of dollars.”
Globalization of a brand is not, however,
as easy as one might think, cautioned
Lesch. “There are many factors which need
to be considered when introducing a brand
across country lines,” he said. “Are there
legal hurdles to overcome? For instance,
at one time Italy had a short list of approved
sweeteners and your product had to use one
of the ones on their list or you couldn’t sell
it in Italy. Another factor to consider: Is the
product of such a nature that it will be
received differently in different countries?
Are the country factors in place to allow
the product/brand to transfer, or does the
product need to be adapted?”
An example, said Lesch, would be
soap. A soap and detergent manufacturer
considering expansion to a new world market
needs to consider water quality and
whether the product, as formulated, will
deliver the promised results when used in
the water in the new market area. In addition,
noted Lesch, potable water in many
countries is available only a few hours a
day, which would affect marketing strategies.
Multinationals expand
According to the United Kingdom’s
Leatherhead Food International (netlink:
www.leatherheadfood.com), mergers and
acquisitions have occurred in most of the
regions of the world, although the major
deals have involved corporations based in
Europe or the United States. Sectors such
as bakery products, dairy products, confectionery,
pet foods, and beer saw significant
acquisition activity the past two years,
they noted.
The most common reasons for acquisitions,
said Leatherhead, are to enter new markets
or territories, extend the range of products
or brands, achieve economies of scale, add
to internal capabilities, such as research and
development or distribution, or counter
increased buying power by retailers.
Although acquisitions are common
among small- and medium-sized companies,
in recent years the world has seen
an increasing number of acquisitions among
large corporations. Acquisitions of large
food and drink manufacturers by companies
already in the world’s top 10, reports
Leatherhead, resulted in sales increases of
nearly16% in two years. The largest acquisition,
noted Leatherhead in their January
2003 edition of food news, was Unilever’s
(Rotterdam, The Netherlands) $21.3 billion
purchase of Bestfoods in 2000, followed
by Kraft Foods’ (Northfield, Illinois)
$19.2 billion payout for Nabisco that same
year.
The global food industry has seen a
slowdown in merger activity following the
megadeals of 2000, said Leatherhead, but
they predict merger and acquisition activity
will rise as the economic situation
improves. “The trend towards consolidation
will create increasingly powerful multinationals
with a portfolio of strong brands,”
they noted.
World-class brands
The University of Texas at Brownsville
(UTB) has an ongoing study of global branding,
said Betsy V. Boze, dean of the School
of Business. The study, originated by Charles
R. Patton (who has since retired from UTB
and is now a professor emeritus), focuses
on the “big three” soapmakers—Procter &
Gamble (P&G), Cincinnati, Ohio; Colgate-
Palmolive, New York, New York; and
Unilever—and is updated every few years.
Although the emphasis is on the corporation’s
household cleaner and fabric care
brands, the study also explores toilet soap
and toothpaste; other products the companies
manufacture are not included in the
study.
Field research began in the mid-1990s
and has been completed in 135 countries,
said Boze. Early research identified 263
brands of soap and detergent. Surprisingly,
in using the parameter established by UTB
researchers that the brand must be distributed
in 20 or more countries to be considered
a global brand, only 22 of the hundreds
of brands identified were classified as global.
They were: Ajax, Dynamo, Fab, and
Palmolive, all manufactured by Colgate-
Palmolive; Ariel, Bounce, Cascade, Comet,
Downy, Joy, Mr. Clean (also known as
Maestro Limpio, Maestro Lindo, Meister
Proper, M. Net, and M. Propre in different
nations), Spic & Span, and Tide from P&G;
and Comfort, Jif, Omo, Rinso, Snuggle,
Sun, Sunlight, Surf, and Vim from Unilever.

inform • April 2003 • Volume 14 (4) COVER FEATURE 163
(Note: Comet is retailed in North America
by Prestige Brands; Spic & Span is retailed
in North America by the Shansby Group,
San Francisco, California.) Surprisingly,
six of these brands—Ariel, Comfort, Jif,
Omo, Sun, and Vim—are not sold in the
United States, which is the world’s largest
cleaning products market. (An exception
to this statement, noted UTB researchers,
is Ariel—a small quantity of Ariel is shipped
from Mexico to United States border cities
with a large Hispanic population.)
Advertising the brands
If a product crosses country lines, does the
advertising follow suit?
“Sometimes,” replied Marie McNeely,
executive vice president, global equity
director, for Saatchi & Saatchi, a worldwide
advertising agency with offices in 82
countries that is owned by Paris-based
Publicis Group, S.A. McNeely is based
in the agency’s New York office where she
oversees the worldwide advertising for
P&G’s fabric and home-care business.
According to Advertising Age’s Special
Report (November 11, 2002), P&G leads
the media spending of global marketers,
spending $3.82 billion in 2001. Unilever
was third, spending slightly over $3 billion,
and Colgate-Palmolive ranked 42nd,
with expenditures of nearly $5.5 million.
It should be noted that these spending totals
reflect expenditures for all brands, not just
household cleaners and fabric care.
Most aspects of advertising and marketing
are cross-cultural, said McNeely.
For instance, the concept that consumers
buy with their feelings, then later rationalize
the purchase decision. Or, she said,
the fact that the human mind makes narrative,
designing causal links to form stories
that create a plot-line of experience and
then serve as a comparator to the next
moment. These stories usually are based
on emotion, not logic, explained McNeely.
“Where marketers trip,” said McNeely,
“is that they are very often confident about
who they are, what they offer in each country
around the world, but they often are less
sure of the real wants, needs, and sensibilities
of their consumers. The best marketing
is based on building a long-term
relationship, not next week’s transaction.
And that means paying attention to whom
you want to marry you, and understanding
how you can show that person that you love
and appreciate him or her.
“When the topic of global/local marketing
comes up,” she continued, “the
process always gets the attention. Does one
centralize and adapt locally or the other
way ’round? What doesn’t get the attention
and should, I think, is an understanding
of the brand’s relationship with the
consumer in a market, relative to its competition
and its history. If we looked at
global marketing that way, chances are
you’ll find your brand in a handful of relationship
states [similar to interpersonal
romantic relationships] with its consumers
across markets—courting, happily married,
married but straying, divorced.
Advertising can be developed and reapplied
based on the relationship state then,
rather than the geography.”
Global trends reshaping
business strategies
The World Business Council for Sustainable
Development (WBCSD), headquartered in
Geneva, Switzerland (netlink: www.
wbcsd.org), is a coalition of chief executive
officers from 160 international companies
(representing more than 30 countries and 20
major industrial sectors) working together
with the shared belief that the pursuit of sustainable
development is good for business
and business is good for sustainable development.
Sustainable development, says
the group, is about improving the quality of
life for everyone, now and in the future.
In their report “Sustainability Through
the Market: Seven Keys to Success,” issued
in April 2001 (netlink: www.wbcsd.org/news
center/2001.htm), the group describes strategies
to creating open markets that can benefit
business by generating growth through
innovation and new markets, while also utilizing
cost efficiencies.
Businesses that wish to survive and
thrive in a global economy must respond
to major social and environmental trends,
according to an April 2002 report issued
jointly by the United Nations Environmental
Program, WBCSD, and the World Resources
Institute. The report, entitled “Tomorrow’s
Market: Global Trends and Their Implications
for Business” (netlink: www.wbcsd.org/news
center/2002.htm), focuses on the rising interest
in using market solutions to address some
of the world’s most pressing problems, such
as severely degraded natural resources, ecosystems,
health, education, population, energy,
emissions, fresh water, urbanization, and
many other issues.
Globalization foes
Although globalization has integrated the
world technologically, economically, and
politically and is credited with stimulat-
ing innovation and technological progress,
it is also blamed for increasing the gap
between rich and poor, accelerating the
destruction of the environment, and threatening
human rights. This, according to
Anthony J. Daboub, an assistant professor
in the School of Business at UTB, and Jerry
M. Calton, an associate professor in the
School of Business at the University of
Hawaii–Hilo, has resulted in intensely
angry feelings of many people around the
world, directed primarily at the multinational
corporations.
The issues involved in the antiglobalization
movement are as complex and
varied as the actors in the drama, say
Daboub and Calton, noting that antiglobalization
demonstrators blame the major
brands for a variety of ills ranging from
child labor, low wages, and sweatshops to
global warming, destruction of the natural
environment, and genetically modified
foods. Global institutions are targeted, as
movement members believe these institutions
are responsible for channeling
money into investments that promote the
interests of corporations and do little for
the people of a region.
In recent years the antiglobalization
movement has staged protests at meetings
of the World Trade Organization, the
European Union, the World Bank, the
International Monetary Fund, the World
Economic Forum, and the G-8. The violence
peaked in 2001 at the G-8 summit in
Genoa, Italy, where a demonstrator was
shot and killed by police. Despite that incident,
thousands of people turn out for demonstrations
against globalization. (Nearly
8,000 police officers and soldiers were
required to control the crowds at a demonstration
in Barcelona, Spain, last year).
Although there is no simple solution
to the messy, but very real, problems associated
with globalization, say Daboub and
Calton, progress is being made. Executives
of multinational corporations are learning
new ways to communicate with, and relate
to, the various groups that feel they have
a stake in the company’s actions.
Daboub and Calton foresee the emergence
of a new global corporate citizenship,
one in which companies seek to do good
while also doing well. The pair also envisions
the day when multinational corporations
and antiglobalization forces learn to
work together to address the problems that
threaten sustainable global economic development.
■
Barbara Jewett is managing editor of
inform.