Economies of scale:
Companies with global market would be able to gain an advantage in production economies of scale since the level of production is relatively high compare to just targeting a specific market. Buying and negotiation power in everything from raw materials to advertising would also increase due to the higher budget and spending. For companies which do not have a unique advantage on their product, the advantage of economies of scales becomes even more important as the production costs can be lower so as to increase its competitiveness.
Consistency in brand image
Helps to establish relationships outside of the “political arena”
The challenge of global marketing is to capture the benefits of globalization and at the same time without ignoring the responsiveness from the local market. However, global marketing does not only imply opportunities, it also gives challenges to companies. The global market would be difficult to control as there are so many external factors affecting the market.
Underperform in global market
According to an ongoing research study, “foreign investment profitability gap”, conducted by the Templeton Global Performance Index, it shows that many of the world’s biggest multinational companies have suffered continuing declines in profitability, as well as losses in some cases.
The findings also indicates that there are numbers of large multinational corporations find it difficult on implementing the single strategy for the entire global market into a specific country (area), which lead to a diseconomies of scale. According to the research, there were 70 percent of the sample (companies) was below the median in terms of profit performance in foreign markets. The data also indicates that a number of companies closed down the least profitable national units and stopped on international expansion. McDonald’s would be one of the examples: it decided to retreat from some international markets in some countries by closing down stores around the world and completely exited several countries.
Overestimation of market potential:
Companies sometimes overestimate the market size in one particular area, especially in less developed economies due to the lack of information gathered. Developing countries such China and India do imply a huge potential, however companies would bear the risk that they may need to suffer a certain degree of lost before the market potential can be explored.
Struggle to create a single strategy for the entire global market: Although the market knowledge can be easily transferred and exchanged due to the upgrade communication platform, cultural and language differences still remain as one of the biggest challenges for marketing a product globally. The taste, wants, and needs of customers are different and sometimes it is difficult to eliminate those differences. For instant, eastern countries such as China perceive red as luck, whereas western countries such as U.S perceive red as violence and death. These cultural difference would directly affect the performance in a particular market which companies may experience lose, or even failure.
Global marketing usually is costly and time consuming. It requires a period of time for research before the strategy can actually be implemented. Suddenly change in local regulations and laws may give a big impact on marketing a product in the particular area. For instant, Cathy Pacific attempted to enter the China aviation market since the previous decade. It spots on potential of the rapid economic growth in China and the demand for flight trip between China and U.S. is expected to increase dramatically. Cathy Pacific spent much effort on maintaining good relationship with the Chinese Government since connection acts as a major role on do business in China. On the other hand, the Chinese Government attempts to open the aviation market to foreign investors recently. In the U.S. –China Strategic and Economic Dialogue (S&ED), new agreements such as increasing the maximum number of daily round-trip flights between China and U.S. which American airlines allowed from ten to twenty-three per day (within five years), the United Airlines has also won the bid for the flight from Washington D.C. to Beijing; these political factors has no-doubt affect the performance of Cathy Pacific in the China aviation market.