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International Column : Exclusive

Special Columns
Arindam Chaudhuri, Editor-in-Chief, 4Ps B&M Chief Consulting Editor's Desk
Rajita Chaudhuri
K.K.Srivastava Guest Column
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Have Europe and US Markets Recovered From Recession ?
While The Answer is in The Assertive, The Key Challenge for Companies Planning International Marketing & Operations lie in being ready for The Next Recession
Issue Date - 30/06/2011
Economic recession has radically changed the business and market landscape in Europe and the US. There is an urgent need to realign marketing strategies with the “new normal”. Recovery is bringing opportunities but also risks and challenges which make new strategic approaches a priority. The challenge for executives is re-examining the fundamentals of their business models and core capabilities to deliver the superior value demanded by post-recession customers – business has to change because markets and people have changed. As Jeff Immelt, CEO of GE notes, just “holding on” until things get back to normal is a mistake for most companies – what we are seeing now is the new “normal”, the new world order.

Executives planning their international marketing and operations need to consider several important issues in post-recession realities. Companies like GE, 3M and ITT have changed priorities to build major programmes of change to reset themselves for a new business reality. The key challenge may even be getting ready for the next recession!

What is Different About the New “Normal”
Strategy for the post-recession era should give careful attention to several seismic customer and market shifts.

A Consumer Shift to Thrift: Evidence from both the US and Europe underlines that a new type of shopper focused on value has emerged from the recession – consumers have adopted a “thriftiness” based on value and quality, and behavioural changes include cutting back on “aspirational” luxury shopping. There is growing consensus that this change in consumer purchase behaviour will endure. Harsh economic conditions in these markets have changed the way people shop and the buying patterns that result.

New Buyer and Seller Priorities: Successful marketing strategies will depend on understanding the new priorities of the post-recession consumer. In value chain relationships, the long-standing imperative to collaborate with important suppliers in areas like product innovation is likely to become yet more critical. The need for mutual support and collaboration in supply chains will continue. In Germany, Volkswagen, for example, has established a special team in its purchasing department which aims to prevent its suppliers from collapsing.

Scepticism and Lack of Trust: Western corporate behaviour has soured the public mood with business. The move from frustration and disappointment to hostility from some customers suggests that pre-recession marketing messages are unlikely to resonate with them. An emphasis on core values that align with changing consumer perceptions is becoming an imperative. Financial services giant Axa is attempting to establish trust as a key market differentiator, investing in a programme to get line managers and staff to understand the competitive importance of delivering on basic promises made to customers. Recovery in consumer confidence may rely as much on rebuilding trust and corporate reputation as it does on innovation in value and aggressive pricing.

New Market Structures and Escalating Competitiveness: Downturn and recession weed out weaker competitors and some fail. Stronger players take business from the fallen players. Companies like Hewlett-Packard, Southwest Airlines, Ryanair and Fedex have actively pursued strategies aimed at killing off smaller competitors. Many markets will have far higher degrees of concentration of power through processes of attrition, acquisition and market-share driven strategies. Competitiveness is escalating and many suppliers will be dealing with smaller numbers of more powerful customers.

Barriers to International Expansion: Many executives looking for promising growth prospects emphasize the importance of international growth. However, world finance is likely to be depressed for many years’ creating a “deglobalization” pressure. The impact of emerging 1930s-style curbs on international trade and the rise of nationalism underlines strong barriers to international expansion. Interestingly, companies from countries like India may be exceptionally well-placed to cater for the growing value-for-money segment in post-recession markets. Strong Asian companies like Haier, Cery and Tata have skills in providing high value products at very low cost to choosy middle-class customers, and can bring their value-oriented propositions to global markets.

Implications for Managers: New Strategic Thinking Is Required in Marketing
New times demand new strategies. For example, German engineering group Siemens has used the recession to reshape its business to refocus on core markets and reposition the firm as a “green infrastructure” company ready to partner with customers in economic recovery. An action agenda for addressing the challenges and opportunities in the post-recession West includes the following:

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