The implications of pursuing a global marketing strategy are that organizations must continually expand into what are likely to be less attractive markets, perhaps tertiary opportunities from Harrell and Kiefer’s Model or incipient markets in Gilligan and Hird’s Model. Typically these will be the less attractive markets because of the associated political and economic risks of entering less developed markets, more difficult trading conditions and barriers to ‘free’ trade. By comparison with the firms’ existing markets, to achieve similar short-term business gains, these emerging markets may demand disproportionately high investment in management time and financial resources as well as involving the firm in considerable additional risk.
There are, however, some significant advantages of entering newly emerging markets. The following three factors may be the reasons why emerging markets are becoming attractive:
- Global companies with good reputation can gain customers relatively quickly in these markets which in the past have been starved of well-known branded products.
- Eighty per cent of global income comes from the triad but there is increased maturation of these developed markets because of low birth-rates and aging populations. This means that future growth will be ever more difficult to achieve in developed, operationally less risky markets which are also subjects to more intense competition.
- Typically the average rate of growth of the emerging market economies in much higher than in the industrial nations.
The risks associated with specific emerging country market involvement can be substantial, however, and include some of all of the following:
- financial loss associated with inappropriate investment, such as buying unusable assets, being unable to achieve acceptable levels of performance from the purchased assets, losing the assets by misappropriation to the host country government or to partners;
- damage to the firm’s reputation through association with the country, its government and intermediaries, especially where they are seen to be corrupt, engage in unacceptable social or business practices, or have close relationships with other countries or organizations which are considered to be corrupt;
- litigation arising from offering an unacceptable product and/or service to the country, or becoming involved in questionable business practices;
- prompting an unexpected international competitor response by attacking a market which it considers to be its home territory;
- initially making arrangements with joint venture partners, distributors, agents or government agencies to secure entry but which become inappropriate in the medium to long term;
- damage to the firm’s reputation through insensitivity in its operations in the country, when it might be accused of exploiting local labor, the countries resources or causing environmental damage to the country.