Consumer Ethnocentrism
Recent developments such as the creation of regional trading agreements, unification of European countries and fall of the former Soviet improved the integration among trading nations (Hitt, Hoskisson & Ireland, 2003). Thus, there is an opportunity for a smoother international marketing, of say, professional services. For example, a professional services firm can create an image on a global scale minimizing marketing and advertising costs. Also, the ability of a firm’s reputation especially if it has a client base composed of multinational entities can have favorable impacts to subscription of future clients (Proctor, 2003).
However, there are indications that this may not be always true or more specifically globalization phenomena like domestic and general marketing are classified into segments or niches. An illustration is that of PricewaterhouseCoopers who is one of the big four auditing firms known globally. At least 80% of its market is based on Europe and North America and less on other regions (PcW Website). In the case of the customer services arm of Dell, the customer contact centers of Dell are criticized by U.S. clients especially in the advent of offshore solutions (Dell Website). These centers are located in developing countries and employing local workers whose primal language is non-American causing slow transactions and difficulties of problem resolution.
In both cases, there is a challenge for professional service companies that are currently using international marketing to determine other critical factors aside from globalization. The test is a closer look on the weaknesses of international marketing especially when host country specific characteristics are emphasized. In basic framework, consumer ethnocentrism is included in these factors along with macro-factors such as politics, economy and level of technological progress. The formal definition of consumer ethnocentrism is a reflection of consumer’s belief to purchase foreign-made brands motivated by some moral grounds (Kotler et al., 1999). It is the inability of a foreign brand to be a success in the host economy due to cultural differences.
The essential argument of consumer ethnocentrism is that when it is applied to a certain country (e.g. U.S., Japan or Saudi Arabia) the responses in buying an outside brand are generally bad or immoral. With this, the use of marketing based on globalization concept is ineffective (Lowson, 2002). It would only cause criticisms from the host countries and the business of foreign marketers would obviously fall. Marketing would be costly, inefficient and there is a slight chance that the foreign firm will be accepted in the host market (Porter, 1980). This results for international marketers to move away from the opportunities of globalization.
Although it is largely attached to cultural and demographic variables of the host country, there are empirical studies that showed consumer ethnocentrism is shaped and motivated by two distinct factors; namely, consumer involvement and quality perceptions (Proctor, 2000). Both of these factors are able to explain how at what degree can consumer ethnocentrism can affect the purchase behavior of the host country market. More importantly, they can determine whether international marketing would be effective and efficient when applied in the host country (Porter, 1980). Therefore, these factors have the ability bring back the benefits of international marketing and globalization.
In general, a product or service that considers high consumer involvement in design, development and delivery of the brand is typically successful. In professional services, consumer involvement is extensive. There are arguments that the inability of a professional service organization to consider multiculturalism of its diverse clients is unethical. This is especially true when a professional service provider such as PricewaterhouseCoopers extend services to Asian countries such as Japan. Due to the closeness of suppliers, corporations and horizontal competitors in Japan, PwC is under an uncertain environment. Therefore, there is a need to apply closer consumer involvement. Thus, marketing campaigns will be adapted to the based on the culture of the host country. However, when doing business in Europe, there is a minimum need for customer involvement due to similarity and familiarity.
In the case of quality perception, the higher the host market has knowledge of positive quality to the international marketer, the less need of adapting the latter marketing campaign to the host preferences. In the case of Japan expansion, PcW can minimize marketing cost by an amount that be deducted through word-of-mouth marketing. This is where reputation comes in that can infiltrate even national boundaries as long as there is a host country exposure of the service provider credentials. Assuming that the Japan market is not used to outsourcing professional services, PcW would have an advantage. On the contrary, competing in European market is the reverse. As the market is vigorously fought by other service providers, each competitor must highlight its competitive advantages and continuously enforced its reputation. With the market saturated, aggressiveness of marketing is necessary.
Market Entry Modes
The following table shows how an international professional service firm can use the different entry modes to succeed in the host markets. However, selecting one is strategic in nature especially on the professional service wherein there is a huge market information failure.
Choice of Entry Mode
Type of Entry
Characteristics
Exporting
High cost, low control
Licensing
Low cost, low risk, little control, low returns
Strategic Alliances
Shared costs, shared resources, shared risks, problems of integration
Acquisition
Quick access to new market, high cost, complex negotiations, problems of merging with domestic operations
New Wholly Owned Subsidiary
Complex, often costly, time consuming, high risk, maximum control, potential above-average returns
The choice of entry mode differs from the service and product markets because of the more complex factors that must be addressed in the former (Lowson, 2002). As observed in the preceding discussion about consumer ethnocentricity, service markets requires more consumer involvement due to the vitality to business and dynamism of requirements. Also, quality perception is less attachable to international marketers because of their foreignness and potential cultural differences that may caused distortions of quality criteria. The same position is the international service provider in terms of entry mode. There are numerous variable under consideration that the entry alternative must be rationalize.
Exporting and licensing is a way for international service providers to get away from rigors of cultural adjustment (Proctor, 2000). However, this is only applicable to the product markets. Professional services like auditing is an expertise, continuous and crucial job to practice. With intense involvement and unknown quality, the last three alternatives which include entry into the local market must be used. The market for cars and it regulatory regime is not changed over a short period. Unlike the professional service industry, regulation of national governments and international bodies are apparent because of their crucial role in nation-building and resource allocation. Thus, the primary motivation of selecting the internalization alternatives (e.g. alliances, joint ventures and wholly-owned subsidiary) all goes down to building-up a brand name.
Branding is an efficient and effective mechanism for a firm to implement marketing endeavors to satisfy customer and other stakeholder needs (Kotler et. al, 1999). A firm uses branding to limit the cost of advertisement as observed on its limited press releases in websites and store facade. With minimal operating expense to be profitable and sell its products, a firm is able to effectively gain market presence in the industry. This is due to its ability to differentiate its product from competition with the use of branding for value-orientation. As a result, it is able to transfer excessive marketing and discount costs on providing new, durable and service-oriented products. Brand management is a business concept intended to protect the brand of the firm from strategic or legal demise and continue harvesting profits from its establishment.
The brand management process (BMP) initially involves internal auditing and external scanning. Questions will emerge such as “Who the brand is for?”, “Where is the company now?” and “What is the market going or how competition going?” (TMC Vision Pool, 2006). For a firm to carry BMP and improve performance/ efficiency, it should re-evaluate the positioning of its brand and its impact to stakeholders including competitors. This is signaled by partially identifying the threat of loosing potential customers within the working class earlier as their products may be perceived too expensive. BMP offers a platform to determine the weaknesses of branding and enhancement of its strengths as inputs are set for analysis. As marketing is a battle of perceptions not products, the innovation-focus of a company could be in a loophole. In effect, the scanning stage of BMP can rationalize its current branding.
Controlling is very important to maintain the lifeblood of the company which is observed in its financial resources (Ruskin-Brown, 1999). Brand equity can be a useful measure to rationalize the effectiveness of the plan implementation. Controlling can be attained firsthand when direct marketing is implemented wherein there is a close communication between the firm and the customers. However, the plan can be out of control (thus, leading to excessive marketing loss) customer feedback is not obtained or repeat purchase takes ample time to happen. BMP assures that a company can test the quality of the implemented plan by installing measurement techniques. Lastly, evaluation of the plan performance is necessary to determine its overall effectiveness and usability in the future engagements of the firm. Record-keeping is will result to accurate evaluation which is largely based on historical data, corporate reports and external conditions. Since the plan can help the firm in two ways, that is to learn or readily earn, evaluation classifies the plan and identifies its weakness to come-up with profitable plan.
Bibliography
Dell Website,viewed 03 March 2008, <www.dell.com>
Hitt, M, Hoskisson, R & Ireland 2003, Strategic Management: Competitiveness and Globalization, 5th Edition, South Western; Thomson Learning, Singapore.
Kotler, P et al. 1999, Principles of Marketing (2nd European ed.). London: Prentice Hall.
Lowson, R 2002, Strategic Operations Management: The New Competitive Advantage, Routledge, New York.
PcW Website, viewed 03 March 2008, <www.pwc.com>
Porter, M 1980, Competitive Strategy, Free Press, New York.
Proctor, T 2000, Strategic Marketing: An Introduction, Routledge, London.
Ruskin-Brown, I 1999, Mastering Marketing: A Comprehensive Introduction to the Skills of Developing and Defending Your Company's Revenue, Thorogood, London.
TMC Vision Pool 2006, viewed 03 March 2008, <www.tmcvisionpool.com>
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