Academic journal article Journal of Global Business Issues

The Global Impact of Customer Relationship Marketing

Academic journal article Journal of Global Business Issues

The Global Impact of Customer Relationship Marketing

Article excerpt

ABSTRACT

The rapidly changing global marketplace and increased competition have created a need for the leadership of firms to develop new sources of sustainable competitive advantage. When sustainable competitive advantage and perceived customer differentiation are not present the leadership of firms becomes forced to pursue tactics designed to reduce costs and lower prices. Leadership of firms enters global markets to lower prices through economies of scale and lower labor costs. Additionally, leadership decisions to enter new markets are based on the objective of reaching new user groups. When leadership attempts to gain economies of scale through high-volume production and lower labor costs, there is a corresponding high incidence of standardization of products. With a high degree of standardization comes a corresponding low incidence of differentiation. High volume/low differentiation production models in the global environment yield lower profit margins than products with a high-perceived customer value. Customer Relationship Marketing (CRM) strategies are critical to leveraging internal sources of sustainable competitive advantage. Increasingly competitive global markets have created a greater need for differentiation and focus strategies that can lead to more profitable customers who are loyal and less sensitive to price. Entering global markets for the benefits of economies of scale or lower labor costs will not differentiate firms from competitors in a lasting way. CRM strategies have replaced economies of scale and mass marketing as the predominant factors for success in global markets.

The global impact of customer relationship marketing

The need for the creation of new sources of sustainable competitive advantage in global markets

The rapidly changing global marketplace and increased competition have created a need for the leadership of firms to develop new sources of sustainable competitive advantage (Armstrong, 2005). Leadership of firms entering global markets with the sole objective of escaping heavy domestic competition and maturing or declining industry life cycles poses extreme risk (Dess, 2010). Risk of domestic flight to global markets is heightened because leadership of firms unsuccessful in attempts to differentiate away from domestic competition have significantly lower success probabilities in exponentially more volatile global markets (Schermerhorn, 2009).

A central challenge for organizations today is to remain agile, to be able to design and redesign its structures, products, services, and delivery systems in response to changing global environmental demands (Newstrom, 2004). Leadership of firm entering global markets must be aware of the extreme risk that will be present as a result of the radical and largely uncontrollable external environment (Mehta, 2008). The growing volatility of the radical and uncontrollable external environment necessitates the need for the creation of new forms of sustainable competitive advantage (Leonard, 2008).

Increasingly competitive markets have created a greater need for differentiation and focus strategies that can lead to more profitable customers who are loyal and less sensitive to price (Dess, 2010). According to Mehta (2008) when leadership of firms are unable to differentiate from competitors in a lasting way, customers in global markets who perceive no differentiation will seek lowest price. Without differentiation, price wars result and firms engaged in price wars as a result of having no form of sustainable competitive advantage will die a slow death of declining profit margins (Peppers, 2005).

Firms attempting global initiatives often fall short of desired objectives according to Brookfield (2003). This failure to achieve global objectives a result of an over-estimation of opportunity, an under-estimation of risk, a belief that product life cycles will be longer and an absence of significant threats from competition. …

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