“Marketing Challenges In The 1990s” Marketing operates within a dynamic global environment. Every decade calls upon marketing managers to think freshly about their marketing objectives and practices. Rapid changes can quickly make yesterday’s winning strategies out of date. As management thought-leader Peter Drucker once observed, a company’s winning formula for the last decade will probably be its undoing in the next decade.
What are the marketing challenges of the 1990s? With the end of the cold war, today’s companies are wrestling with increased global competition, environmental decline, economic stagnation, and a host of other economic, political, and social problems. However, these problems also provide marketing opportunities. We now look more deeply into three key forces that are changing the marketing landscape and challenging marketing strategy: rapid globalization, the changing world economy, and the call for more socially responsible actions.
The world economy has undergone radical change during the past two decades. Geographical and cultural distances have shrunk with the advent of jet planes, fax machines, global computer and telephone hookups, world television satellite broadcasts, and other technical advances. This has allowed companies to greatly expand their geographical market coverage, purchasing, and manufacturing. The result is a vastly more complex marketing environment, for both companies and consumers.
Today, almost every company, large or small, is touched in some way by global competition—from the neighborhood florist that buys its flowers from Mexican nurseries, to the small New York clothing retailer that sources its merchandise in Asia, to the U.S. electronics manufacturer competing in its home markets with giant Japanese rivals, to the large American consumer goods producer introducing new products into emerging markets abroad.
American firms have been challenged at home by the skillful marketing of European and Asian multinationals. Companies like Toyota, Siemens, Nestle, Sony, and Samsung often have outperformed their U.S. competitors in American markets. Similarly, U.S. companies in a wide range of industries have found new opportunities abroad. General Motors, Exxon, IBM, General Electric, Du Font, Coca-Cola, and dozens of other American companies have developed truly global operations, making and selling their products worldwide. The following are just a few of countless examples of U.S. companies taking advantage of international marketing opportunities:
Coca-Cola and Pepsi, fierce competitors in the United States, recently have watched the domestic soft-drink market go flat, growing at only about 1 percent per year. Thus, both now have treated new marketing strategies to attack .Western Europe; a market growing at an 8 percent clip. Coca-Cola has invested millions of dollars in marketing at the Barcelona Olympics and in the opening of Euro Disneyland Coke makes about 80 percent of its profits outside of America, and it has always led Pepsi abroad. Still, Pepsi thinks that it can compete successfully with Coke in Europe. It plans to invest almost $500 million in European businesses during the next two years in what both companies view as their next big battleground.
Toys ‘R’ Us spent several years slogging through the swamps of Japanese bureaucracy before it was allowed to open the very first large U.S. discount store in Japan, the world’s No. 2 toy market behind the United States; The entry of this foreign giant has Japanese toy-makers and retailers edgy. The typical small Japanese toy store stocks only 1,000 to 2,000 items, whereas toys ‘R’ Us stores carry as many as ! 5,000. And the discounter will likely offer toys at prices 10 percent to 15 percent below those of competitors. The opening of the first Japanese store was “astonishing,” attracting more than 60,000 visitors in the first three days. Toys ‘R’ Us plans to open ten new Japanese stores each year from 1993 through the end of the decade. If the company’s invasion of Japan succeeds as well as its recent entry into Europe, Japanese retailers will have their hands full. Toys ‘R’ Us began with just five European stores in 1985 but now has 76 and growing. European sales, now about $800 million, are growing at triple the rate of total sales.
After ten years of relentless growth in America, Music Television’s (MTV) home market has become saturated. Now the company is looking abroad for growth. It recently set up MTV Europe, which reaches 27 countries and 25 million homes. It is “aggressively pan-European”—its programming and advertising are the same throughout Europe, and they are ail in English. But MTV may find it difficult to repeat its phenomenal American success abroad. The challenge will be to convince advertisers that a true “Euroconsumer” exists. If successful in Europe, the company will soon follow with MTV Asia.
Today, companies are not only trying to sell more of their locally produced goods in international markets, they also are buying more components and supplies abroad. Consider the following example:
In the past, most American clothing was made and sold in America. Much cutting and sewing were done in New York and New England “sweatshops” by immigrant laborers working long hours. The workers then joined unions and wages rose. Searching for lower labor costs, many clothing manufacturers moved their manufacturing first to Southern states, and then to Asia. Today, Bill Blass, one of America’s top fashion designers, will examine cloth woven from Australian wool with printed designs from Italy. He will design a dress and fax the drawing to a Hong Kong agent who will place the order with a mainland China factory. Finished dresses will be airfreighted to New York, where they will be redistributed to department and specialty stores around the country.
Many domestically purchased goods and services arc “hybrids,” with design, materials purchases, manufacturing, and marketing taking place in several countries. Americans who decide to “buy American” might reasonably decide to avoid Hondas and purchase Dodge Colts. Imagine their surprise when they learn that the Colt actually was made in Japan, whereas the Honda was primarily assembled in the United States from American-made parts.
Thus, managers in countries around the world are asking: Just what is global marketing? How does it differ from domestic marketing? How do global competitors and forces affect our business? To what extent should we “go global”? Many companies are forming strategic alliances with foreign companies, even competitors, who serve as suppliers or marketing partners. The past few years have produced some surprising alliances between competitors such as Ford and Mazda, General Electric and Matsushita, and AT&T and Olivetti. Winning companies in the 1990s may well be those that have built the best global networks.
The Changing World Economy
A large part of the world has grown poorer during the past few decades. A sluggish world economy has resulted in more difficult times for both consumers and marketers. Around the world, people’s needs are greater than ever; but in many areas, people lack the means to pay for needed goods. Markets, after all, consist of people with needs and purchasing power. In many cases, the latter currently is lacking. In the United States, although wages have risen, real buying power has declined, especially for the less skilled members of the work force. Many U.S. households have managed to maintain their buying power only because both spouses work. However, many workers have lost their jobs as manufacturers have “downsized” to cut costs.
Current economic conditions create both problems and opportunities for marketers. Some companies are facing declining demand and see few opportunities for growth. Others, however, are developing new solutions to changing consumer problems. Many are finding ways to offer consumers “more for less.” America’s largest retailer, Wal-Mart, rose to market leadership on two principles, emblazoned on every Wal-Mart store: “Satisfaction Guaranteed” and “We Sell for Less—Always.” Consumers enter a Wal-Mart store, are welcomed by a friendly greeter, and find a huge assortment of good-quality merchandise at everyday low prices. The same principle explains the explosive growth of factory outlet malls and discount chains—these days, customers want value. This even applies to luxury products: Toyota introduced its successful Lexus luxury automobile with the headline “Perhaps the First Time in History that Trading a $72,000 Car for a $36,000 Car Could Be Considered Trading Up.”
The Call for More Ethics and Social Responsibility
A third factor in today’s marketing environment is the increased call for companies to take responsibility for the social and environmental impact of their actions. Corporate ethics has become a hot topic in almost every business arena, from the corporate boardroom to the business school classroom. And few companies can ignore the renewed and very demanding environmental movement.
The ethics and environmental movements will place even stricter demands on companies in the future. Consider recent environmental developments. The West was shocked after the fall of communism to find out about the massive environmental negligence of the former Eastern Bloc governments. In many Eastern European countries, the air is fouled, the water is polluted, and the soil is poisoned by chemical dumping. In June 1992, representatives from more than one hundred countries attended the Earth Summit in Rio de Janeiro to consider how to handle such problems as the destruction of rain forests, global warming, endangered species, and other environmental threats. Clearly, in the future, companies will be held to an increasingly higher standard of environmental responsibility in their marketing and manufacturing activities.
The New Marketing Landscape
The past decade taught business firms everywhere a humbling lesson. Domestic companies learned that they can no longer ignore global markets and competitors. Successful firms in mature industries learned that they cannot overlook emerging markets, technologies, and management approaches. Companies of every sort learned that they cannot remain inwardly focused, ignoring the needs of their customers.
The most powerful U.S. companies of the 1970s included General Motors, Seajs, and RCA. But all three of these giant companies failed at marketing, and today, all three are struggling. Each failed to understand its changing market-place, its customers, and the need to provide value. Today, General Motors is still trying to figure out why so many consumers around the world have switched to Japanese and European cars. Mighty Sears has lost its way, losing share both to fashionable department and specialty stores on the one hand, and to discount mass merchandisers on the other. RCA, inventor of so many new products, never quite mastered the art of marketing and now puts its name on products largely imported from Asia.
In the 1990s, companies must become customer oriented and market driven in all that they do. It’s not enough to be product or technology driven—too many companies still design their products without customer input, only to find them rejected in the marketplace. It is not enough to be good at winning new customers—too many companies forget about customers after the sale, only to lose their future business. Not surprisingly, we are now seeing a flood of books with titles such as The Customer Driven Company, Keep the Customer, Customers for Life, Total Customer Service: The Ultimate Weapon, and The Only Thing that Matters: Bringing the Customer into the Center of Your Business. These books emphasize that for the 1990s and beyond, the key to success will be a strong focus on the market-place and a total marketing commitment to providing value to customers.