Management of Multinational Corporations ( MNCS )
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Chapter 13 : Challenges of Globalization
The Globalization Movement
Customer Centricity in Globalization
Customer Value Expectation
Global Customer Loyalty
Improving Global Customer Service
Pitfalls of Global Marketing.
Neo-classical economists propounded the theory that
customers are rational and given a choice, they maximize their benefits and
minimize their costs. With the growth in communication technology, the decision
making power has shifted from the producers and the governments to the
Management thinkers like Theodore Levitt recommend that companies should
standardize their marketing mix since the tastes and preferences of consumers
all over the world are homogeneous. Levitt's argument is somewhat extreme, since
the tastes and preferences of consumers in developing countries continue to
remain divergent. While tastes and preferences for certain products like
packaged foods are naturally divergent, those for products like cars and
electronic equipment are homogeneous.
Though global standardization can lead to economies of scale, the benefits are
offset by the costs of managing the supply chain. Companies that embrace
globalization must strike a balance between the standardization and adaptation.
The test of globalization is in its ability to understand and respond to the
needs and business systems of each market.
Integration of the world's capital markets has been the major driving force
behind globalization. Deregulation of the markets by the governments and
technological developments have added fillip to the process of globalization.
Though globalization has been a much talked about subject for more than a decade
now, the current pace of globalization is amazing.
Customers demand more sophisticated and more innovative products. Economies of
scale through mass production no longer help in gaining competitive advantage.
The erstwhile practices of mass production and gradual improvement are being
replaced by customization, customer relationships and business process
Price and quality have become order qualifiers i.e. they are essential to remain
in competition but are not sufficient to beat competition. Responsiveness to
customer demands is the ability to stay above competition by creating unique
value to the customer. To retain and increase the list of customers, a company
must make customer-centric decisions.
Companies must create customer value either by charging less for the same
benefits or providing more benefits for the same price as that of the
competitors. An important element in managing customer relationships is time.
Waiting time for a customer is attributed to non-value added activity, quality
problems and forecast errors. Simplifying processes, shortening cycle times and
eliminating queues are necessary for customer satisfaction.
Global customization has broken the traditional belief that customization and
cost efficiency do not go together. Customization avoids the pitfalls of mass
production which depends on demand forecasts that may not be accurate. Mass
customization postpones production till the last minute to incorporate as many
changes as the customer desires. The purpose of mass customization is to give
exactly what the customer wants.
Customer retention is important because of its potential impact on the future
stream of cash flows. Customer loyalty is the final stage after awareness and
image about the product, trial and repeat purchase and satisfaction with the
company's product and service. Customer service is an important element that
determines customer satisfaction and loyalty.
In case of tangible goods, the higher the level of technical sophistication in
the product, the greater the need for service. Customer loyalty can be ensured
• Improving communication between customers and employees
• Supporting the customer by rectifying errors and replacing products if
• Giving an estimate about when the product or service will be rectified or
• Focussing on improvement
The pitfalls of global marketing i.e. the stumbling blocks in the process of
global marketing include:
• Insufficient research
• Poor follow-up and
• Poor program co-ordination.