Diversity in International Markets
If the world of uniform and homogeneous would not exist. Common sense brings forward evident differences: languages, social habits, lifestyles, foods and so on. However, some innovations - the mobile phone and Internet, for example - appear simultaneously in all countries and develop in spite of these true differences. Marketing typically deal with international issues only from the point of view of consumer goods or services. Differences between countries are typified through such criteria as standard of living (Gross National Product), the structure of consumption patterns (the respective claims on disposable income of food, clothing, furniture, leisure and so on), a national preference for certain type of consumption, and local regulations. These criteria are not particularly relevant to business-to-business environments. A new technology - such as an innovative sensor bearing for the car industry - is likely to offer solutions acceptable to any customer in any country, whatever the nationality or language. But the bearing manufacturer may not meet the same degree of success in all the countries concerned, even if it expended the same effort throughout. This chapter seeks to explore why this might be so.
Reasons Behind Diversity
The most obvious international dimension is geography. Remoteness creates a kind of mental or psychic distance between a decision centre and a large number of operational fields. One spontaneous and historical trend is to simplify this variety through clustering countries within geographical areas. So, for example, IBM's world is divided into EMEA (Europe, Middle East and Africa), the Americas, and the Pacific Rim. From a purely marketing point of view this is based on the assumption that these areas present a high degree of homogeneity on numerous criteria (and in IBM's case, the time differences in between units in one area are minimised). But this homogeneity is not universally true.
Differences in required performances come for any country from its degree of technical sophistication: the general level of education, technical training of engineers and technicians, standards 'of the research centres, level of the industrial equipment both in general and for a particular sector, and so on. This degree of sophistication is closely correlated with a more general indicator, the Gross National Product per head. The behaviour of a firm in a country is closely connected to the 'local' resources that it may call for. This is a direct application of the cluster theory. The performance and development of a firm are partly determined by the conditions of its environment. The proximity of professional practices combines several points that may have led national firms to adopt similar practices:
Norms and regulations intervene in all domains. They still playa protectionist role in many countries. Most often they are the result of joint work between public authorities and the profession. It suffices here to note how Electricite de France has been able to establish French norms in terms of transport and distribution of electricity. In has succeeded in influencing the performance of the firms acting in the sector. A firm that is used to meeting high performances is not adapted to produce simpler products at low cost. Conversely, firms used to lower performance norms do not easily comply with higher norms. Norms may slow down the entry of foreign firms as much as the export capacity of national firms does. It may be the inability to adapt to other norms or the refusal to support the related costs. Nevertheless, the trend is towards an increased influence of international norms (ISO, EC standards. and so on.).
National networks and value chains also establish particular practices: different division or allocation of the tasks from one value chain to another, different roles from the supporting industries, the impact of various public authorities and so on. All these dimensions shape different market structures from one country or area to another. In order to sell small electrical motors to a car manufacturer, a foreign supplier had no choice other than to approach the usual supplier of this manufacturer. Trying to force an entry, typical practice in Europe or North America, is not a possibility in Japan: this is a general comment concerning the Japanese car industry. Let us note that each car manufacturer has built its own network that should be examined specifically.
These dimensions take on precise forms within a given environment. In their concrete form, they make for a basis for international segmentation.
The Forms of Diversity
The forms of diversity vary according to the industrial sector concerned and the nature of the customers' problems to be solved. An example to illustrate our point concerns the purchasing of office furniture. This decision is linked to several criteria:
- The size and location of the office: enclosed offices for 1 or 2 staff or open-plan spaces for 3-50 staff
- The size of the firm
- The firm status: public or private.
In spite of its simplicity, this example does show how compromises have to be made in order to design 'European office furniture'. The same furniture does not fit an enclosed office for one person and an open space for 20. The habit of large open spaces, as in the UK or Spain, creates a demand for furniture adapted to this particular type of environment. A large group requiring refurbishment may present requirements for adaptations that a smaller firm would not. Because of the relatively large number of bigger firms, a pan-European supplier could expect more requirements for adaptation from the UK, Germany or France than from other countries, the presence in France of a large public sector is likely to drive prices down.