Companies in this stage are fully committed and involved in international marketing activities. Such companies seek markets all over the world, and sell products that are a result of planned production for markets in various countries. This generally entails not only the marketing but also the production of goods outside the home market. At this point a company becomes an international or multinational marketing firm.
The experience of Fedders, a manufacturer of room air conditioners, typifies that of a company that begins its international business at this stage. Even though it is the largest manufacturer of air conditioners in the United States, the firm faced constraints in its domestic market. Its sales were growing steadily, but sales of air conditioners (the company’s only product) are seasonal and thus domestic sales at times do not even cover fixed costs. Furthermore, the US market is mature, with most customers buying only replacement units. Any growth would, have to come from a rival’s market share, and the rivals, Whirlpool and Matsushita, are formidable. Fedders decided that the only way to grow to venture abroad.
Fedders decided that Asia, with its steamy climate and expanding middle class, offered the best opportunity. China, India, and Indonesia were seen as the best prospects. China was selected because sales of room air conditioners had grown from 500,000 units to over 4 million in five years, which still accounted for only 12 percent of the homes in cities like Beijing, Shanghai, and Guangzhou. The company saw China as a market with terrific growth potential. After careful study, Fedders entered a joint venture with a small Chinese air conditioners company that was looking for a partner; a new company, Fedders Xinle, was formed. The company immediately found that it needed to redesign its product for this market. In China air conditioners are a major purchase seen as a status symbol, not as a box to keep a room cool, as in the United States. The Chinese also prefer a spoilt type air conditioner, with the unit containing te fan inside the room and the heat exchanger mounted on a wall outside. Since Fedders did not manufacture split models, it designed a new product that is lightweight, energy efficient, and packed with features such as a remote control and an automatic air sweeping mechanism.
The joint venture appears to e successful, and the company is exploring the possibility of marketing to other Asian markets and Japan and maybe even back to the United States with the new product that it developed for the Chinese market. As Fedders expands into other markets and makes other commitments internationally, it continues to evolve as an international or multinational company. The company may remain in this stage, as most companies do, or go through a change in orientation and become a global company.
At the global marketing level, the most profound change is the orientation of the company toward markets and associated planning activities. At this stage, companies treat the world, including their home market, as one market. Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by income levels, usage patterns, or other factors that often span countries and regions. Often this transition from international marketing to global marketing catalyzed by a company’s crossing the threshold of more than half its sales revenues coming from abroad. The best people in the company begin to seek international assignments, and the entire operation – organizational structure, sources of finance, production, marketing and so forth – begins to take on a global perspective.
The example of Coca-Cola’s transition from international to global is instructive. Coca-Cola had actually been a globally company for years; the mid 1990as organizational change was the last step in recognizing the changes that had already occurred. Initially all international divisions reported to an executive vice president in charge of international operations, who, along with the vice president of US operations, reported to the president. The new organization consists of six international divisions – five Coca-Cola divisions and one Coca-Cola Foods divisions. The US business unit accounts for about 20 percent of profits and has been downgraded to just part of one of the six international business units in the company’s global geographic regions. The new structure does not reduce the importance of the company’s North American business; it just puts other areas on an equal footing. It is recognition however, that future growth is going to come from emerging markets outside the United States.
International operations of businesses in global marketing reflect the heightened copetitiveness brought about by the globalization of markets, interdependence of the world’s economies, and the growing number of competing firms from developed and developing countries vying for the world’s markets. Global companies and global marketing are terms frequently used to describe the scope of operations and marketing management orientation of companies in this stage.