International Marketing

14th Edition P h i l i p R. C a t e o r a M a r y C. G i l l y John L. Graham

The Scope and Challenge of International Marketing

Chapter 1
McGraw-Hill/Irwin International Marketing 14/e

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

What Should You Learn?

The changing face of U.S. business The scope of the international marketing task The importance of the self-reference criterion (SRC) in international marketing The progression of becoming a global marketer The increasing importance of global awareness

1-2

Global Perspective: Global Commerce Causes Peace

Global commerce during peace time
Commercial aircraft and space vehicle industries Mobile phone industry Individuals and small companies

International markets are ultimately unpredictable

Flexibility means survival

1-3

Events and Trends Affecting Global Business

The rapid growth of the World Trade Organization and regional free trade areas The trend toward the acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe The burgeoning impact of the Internet, mobile phones, and other global media on the dissolution of national borders

The mandate to properly manage the resources and global environment for the generations to come
1-4

The Internationalization of U.S. Business

Increasing globalization of markets Increasing number of U.S. companies are foreign controlled
$16.3 trillion in foreign investment in the U.S. $2.6 trillion more than American overseas investment

Increasing number of foreign companies building and buying manufacturing plants in the U.S.

Increasing difficulty for domestic markets to sustain customary rates of growth

1-5

Foreign Acquisitions of U.S. Companies

Exhibit 1.1

1-6

Selected U.S. Companies and Their International Sales

Exhibit 1.2

1-7

International Marketing
Performance of business activities designed to
Plan Price Promote, and Direct the flow of a companys goods and services to consumers or users in more than one nation for a profit

1-8

The International Marketing Task

Exhibit 1.3

1-9

Environmental Adaptation
Ability to effectively interpret the influence and impact of the culture in which you hope to do business
Cultural adjustments

Establish a frame of reference Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

1-10

The Self-Reference Criterion and Ethnocentrism

The key to successful international marketing is adaptation to the environmental differences from one market to another Primary obstacles to success in international marketing
SRC Associated ethnocentrism

1-11

SRC and Ethnocentrism

SRC is an unconscious reference to
Ones own cultural values, experiences, and knowledge as a basis for decisions

Dangers of the SRC

Failing to recognize the need to take action Discounting the cultural differences that exist among countries Reacting to a situation in an offensive to your hosts

Ethnocentrism
Notion that ones own culture or company knows best
1-12

SRC and Ethnocentrism

Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior

1-13

Framework for Cross-cultural Analysis

1. Define business problem or goal

Home-country vs. foreign-country cultural traits, habits, or norms Consultation with natives of the target country

2. Make no value judgments 3. Isolate the SRC influence

Examine it carefully to see how it complicates the problem Without SRC influence Solve for the optimum business goal situation
1-14

4. Redefine the problem

Developing a Global Awareness

Tolerance of cultural differences:
Understanding cultural differences and accepting and working with others whose behavior may be different from yours

Knowledge of cultures, history, world market potential, and global economic, social, and political trends

1-15

Approaches to Global Awareness

Select individual managers specifically for their demonstrated global awareness Develop personal relationships in other countries

Have a culturally diverse senior executive staff or board of directors

1-16

Stages of International Marketing Involvement

No direct foreign marketing Infrequent foreign marketing Regular foreign marketing

International marketing
Global marketing

1-17

No Direct Foreign Marketing

Products reach foreign markets indirectly
Trading companies Foreign customers who contact firm Wholesalers Distributors Web sites

Foreign orders pique a companys interest to seek additional international sales

1-18

Infrequent Foreign Marketing

Caused by temporary surpluses
Variations in production levels Increases in demand

Firm has little or no intention of maintaining continuous market representation

Foreign sales decline when demand or surplus decreases May withdraw from international markets

Little or no change in company organization or product lines

1-19

Regular Foreign Marketing

Firm has production capacity devoted to foreign markets Firm employs domestic or foreign intermediaries
Uses its own sales force Sales subsidiaries in important markets

Products allocated or adapted to foreign markets as demand grows

Firm depends on profits from foreign markets

1-20

Global Marketing
Company treats world, including home market as one market Market segmentation decisions no longer focused on national borders
Defined by income levels, usage patterns, or other factors

More than half of revenues come from abroad

Organization takes on global perspective

1-21

Strategic Orientation
Domestic market extension orientation Multidomestic market orientation Global market orientation

1-22

Domestic Market Orientation

International operations viewed as secondary Prime motive is to market excess domestic production Firms orientation remains basically domestic Minimal efforts are made to adapt product or marketing mix to foreign markets Firms with this approach are classified as ethnocentric

1-23

Multidomestic Market Orientation

Companies have a strong sense that foreign country markets are vastly different Market success requires an almost independent program for each country
Separate marketing strategies Subsidiaries operate independently of one another in establishing marketing objectives and plans Products are adapted for each market

Control is decentralized

1-24

Global Market Orientation

Company guided by global marketing orientation
Marketing activity is global Market coverage is the world

Firm develops a standardized marketing mix applicable across national boundaries

Markets are still segmented Each country or region is considered side by side with a variety of other segmentation variables Fits the regiocentric or geocentric classifications

1-25

The Orientation of International Marketing

An environmental/cultural approach to international strategic marketing Intended to demonstrate the unique problems of international marketing

Discussion of international marketing ranges from the marketing and business practices of small exporters to the practices of global companies

1-26

Foreign Policys Global Top 20

Exhibit 1.4

1-27

Summary
The internationalization of American business is proceeding with increasing pace The globalization of markets and competition necessitates all managers to pay attention to the global environment International marketing is defined as the performance of business activities across national borders

1-28

Summary
Environmental differences must be taken into account if firms are to market products and services at a profit in other countries
Laws Customs Cultures

Self-reference criteria and ethnocentrism limit international marketers abilities to understand and adapt to differences prevalent in foreign markets

1-29

Summary
Solutions to SLC and ethnocentrism
Global awareness Sensitivity

Strategic orientations found among managers of international marketing operations

Domestic market extension orientation Multidomestic market orientation Global market orientation

1-30