Three challenges when the world is your key market

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Multinational corporations (MNCs) range from global brands like Apple and Ford to small firms in emerging economies. Together they form a business juggernaut accounting for 25 percent of the world’s GDP and employing millions of workers across the world.

In terms of marketing, they are also adopting increasingly diverse and complex channels to sell their products worldwide.

In a recent study, we found three unique challenges that marketing managers in MNCs should be aware of, including a few suggestions on how to face them.

Economic and social interactions

Operating across hundreds of countries and touching billions of customers, MNCs are characterised by a headquarters (HQ) located in their home country and subsidiaries located in foreign markets. The latter, under mandate from the former, serve their foreign markets through local channel partners.

Thus, MNC channel management involves economic and social interactions between two different, yet interlinked relationships: The HQ-subsidiary relationship and the subsidiary-channel partner relationship.

Moreover, individual foreign markets differ much in their customer preferences, norms and institutions. As a result, effective management of MNC marketing channels is complex and challenging.

Key challenges

We found the following three challenges that merit special consideration with regard to channel management:

• Different perspectives: Both HQ and subsidiaries have inputs into foreign channel partner management, but each bring a different perspective. Subsidiaries might be overly sensitive to local market consideration, but less responsible to HQ’s global concerns, which can trigger HQ-subsidiary conflict. In turn, the subsidiary-HQ intrafirm relationship can potentially have a negative influence on relations between subsidiary and their channel partners.
• The outsider issue: As local countries embed MNC channels, different cultural and legal environments affect them directly. In foreign markets where a company is viewed as an outsider, the institutional environment becomes essential for acquiring legitimacy and influencing channel partners.
• Networks: Quite often, the MNCs have a substantial number of subsidiaries that form a network that influences the information, knowledge and mindset that the individual subsidiaries possess. Managers should consider what impact these network-based factors can have on the management of MNC channels.

Five tips for marketing managers

In our study, we propose a conceptual framework for how marketing activities can be organised by MNCs. Based on this framework, we have created five tips for MNC marketing managers, including relevant case examples.

1. Show flexibility towards your subsidiaries and their decision-making abilities
   Mattel, the maker of Barbie among other toys, responded to deteriorating global sales by retooling its internal organisation. Their HQ realised they had to become more flexible with regards to how they approached different markets, and therefore opted for more informal decision-making with subsidiaries to boost their channel performance.
2. Create global strategy ambassadors and restructure your organisation accordingly
   Nestlé resolved a similar issue differently, by shuffling employees across the subsidiary network in order to promote company-wide goals. In other words, they made sure every subsidiary had employees who shared a mutual understanding for their global strategy and ambitions.
3. Expand your local networks to include key stakeholders
   Companies like Shell and Vodafone received an unpleasant jolt when Indian authorities altered tax laws retroactively. Negotiating such scenarios might require subsidiary managers to build relationships with third-party mediators, such as local industry associations and appellate tribunals in the host country.
4. Appreciate and understand the local culture in foreign markets
   Home Depot had to shut down several stores in China, because they failed to realise that the do-it-yourself ethos is rare in a country where maintenance people are easily available and widely used. To avoid such blunders, subsidiary managers can create dedicated roles and hire local staff to foster cultural sensitivity.
5. Spend serious money on branding
   Chinese phone maker Huawei has a pronounced manufacturing orientation, yet they have underinvested in branding in key developed markets. Without strong resonance with local channel partners and consumers, the brand has remained vulnerable in the United States and Europe. For emerging-market MNCs, it is therefore critical to commit marketing resources to foreign channel partners to build a stronger presence in the downstream market.

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Reference:

Grewal, Rajdeep; Saini, Amit; Kumar, Alok; Dwyer, F. Robert; Dahlstrøm, Robert. (2018). Marketing Channel Management in Foreign Markets: Integrative Framework for Multinational Corporations. Journal of marketing 2018; Volum 82. (4) s. 49-89 BI. 

Text: Eivind Lindkvist Johansen, Communications Advisor, BI