MK0009-Unit-01-Nature of International Marketing

Unit-01-Nature of International Marketing Structure: 1.1 Introduction Objectives 1.1.1 What is International Marketing? 1.1.2 What is Global Marketing? 1.1.3 Definition of International Marketing 1.1.4 Why is International Marketing important? 1.2 International Marketing Task 1.2.1 Domestic Uncontrollable Factors 1.2.2 Foreign Uncontrollable Factors 1.3 Multinational Corporations (MNCs) 1.3.1 Some of the Indian MNCs 1.3.2 Pros and Cons of MNCs 1.3.3 Characteristics of Multinational Corporations Self Assessment Questions I 1.4 The Stages of International Marketing 1.4.1 Domestic marketing 1.4.2 Export marketing 1.4.3 International marketing 1.4.4 Multinational marketing 1.4.5 Global marketing 1.5 Domestic Marketing vs. International Marketing: Strategic orientation

1.6 The process of International Marketing 1.7 Benefits of International Marketing 1.8 Driving and Restraining forces affecting International Marketing 1.9 The International Developments aiding International Marketing 1.10 Impetus to International Marketing involvement 1.11 Liberalization and International Marketing Self Assessment Questions II 1.12 Summary 1.13 Terminal Questions 1.14 Answers to SAQ¶s and TQ¶s 1.1 Introduction 1.1.1 What is International Marketing? International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. For the purposes of this unit on international marketing and those that follow it, international marketing and global marketing are interchangeable. The intersection is the result of the process of internationalization. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix is simply adapted in some way to take into account differences in consumers and segments. It then follows that global marketing takes a more standardized approach to world markets and focuses upon sameness, in other words the similarities in consumers and segments. At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe. International Marketing is the performance of business activities that direct the flow of a company¶s goods and services to consumers or users in more than one nation for a profit. The international market goes beyond the export marketer and becomes more involved in the marketing environment in the countries in which it is doing business. Objectives:

that is. emphasizing their similarities regardless of geographic areas in which they are located. consumers and businesses now have access to the very best products from many different countries. · To assess the pros and cons of MNCs and the characteristics of Multinational Corporations · To compare Domestic Marketing and International Marketing · To describe the driving and restraining forces affecting International Marketing · To identify the International Developments aiding International Marketing 1. Some marketing experts define global marketing as the big brother to international marketing i. the differences due to the physical location of customers groups.1. promotion. groups of customers seeking shared benefits or to be served with the same technology. We will assume that both terms are interchangeable. pricing. 1. that is.3 Definition of International Marketing So. and services and to create exchanges that satisfy individual and organizational objectives. more of an extension. There are several reasons for this. . and distribution of ideas. The result is a global approach to international marketing. · To identify International Marketing Tasks · To identify Multinational Corporations (MNCs). as with many other elements of marketing.2 What is Global Marketing? Global marketing refers to marketing activities coordinated and integrated across multiple country markets. experience and products globally and upon adapting to what is truly unique and different in each country. and will define international marketing as follows: International Marketing is a multinational process of planning and executing the conception. goods. trade is today more practical. Global/transnational marketing focuses upon leveraging a company¶s assets. Rather than focusing on country markets.e. Thus.After studying this unit you should be able: · To describe and define what is International Marketing · To explain why International Marketing is important. and there could be some confusion about where international marketing begins and global marketing ends.1. managers concentrate on product markets.4 Why is International Marketing important? Trade is increasingly becoming global in scope today.1. One significant reason is technological in nature±because of improved transportation and communication opportunities today. 1. there is no single definition of international marketing.

to adjust to changing market conditions. Apart from the above environmental factors. there are three reasons for the shift from domestic to International marketing. Customers can come from anywhere.1 Domestic uncontrollable factors: . a brick and mortar storefront is unnecessary. 1. Similar changes are happening all over the world. Toyota. The uncontrollable factors are as under: 1. North American Free Trade Agreement (NAFTA). and has fewer geographical distribution obstacles than even business-to-consumer (B2C) e-commerce. Worldwide competition One of the product categories in which global competition has been easy to track is in automotive sales. Honda. if a business is online. Companies are on a global playing field whether they had planned to be global marketers or not. saturated their domestic markets and have to turn to other countries for new marketing opportunities. but are considered inexpensive in wealthier countries. With more people becoming Internet users daily. product. countries in the last several decades have taken increasing steps to promote global trade through agreements such as the General Treaty on Trade and Tariffs. Business-to-business (B2B) ecommerce is larger. Three decades ago. Companies in some developing economies have found profitability by exporting products that are too expensive for locals.Increasingly rapid technology lifecycles also increase the competition among countries as to who can produce the newest in technology. Now. there were only the big three: General Motors. consumer preferences and corporate objectives. it must increase sales. Such uncertainty is created due to uncontrollable factors and each foreign country in which the company operates adds its own unique set of uncontrollable factors. In part to accommodate these realities. These controllable elements can be altered in the long run and also usually in the short term. Assuming the necessary overall corporate resources. it is a global business. growing faster. With e-commerce. E-Commerce With the proliferation of the Internet and e-commerce (electronic commerce). the marketing manager decides on price. Ford. in many product and service categories. and trade organizations such as the World Trade Organization (WTO). and the European Union (EU). this market is constantly growing.2 International Marketing Task The task of the international marketer is more complicated since he has to deal with two levels of uncertainties instead of one.2. Saturation of domestic markets For a company to keep growing. promotion and channels of distribution activities to capitalize on the anticipated demand. and Volkswagen are among the most popular manufacturers. Industrialized nations have. and Chrysler in USA.

distribution. · Competition within home country: This can also have a profound effect upon the international marketer¶s task.These include home country elements which can directly affect the success of a foreign venture and these factors are out of immediate control of the marketer. . advertising and sales promotion. When South Africa abolished apartheid. Iraq and South Africa.2. Another example is that of the Indian Government. which in 1977 gave Coca Cola the choice of either revealing its secret formula or leaving the country. · Economic forces: The local economic forces in the foreign country may have strong influence on the currency value and repatriation. · Structure of Distribution: The channels of distribution vary from country to country and there could even be state controls on distribution in some countries. depending on deep rooted cultural factors to competition in terms of price. 1. · Competitive forces: The nature of competition may vary from country to country and will have different responses. · Level of Technology: There are vast differences that may exist between developed and underdeveloped countries. many US companies had a positive effect and opportunities were created for US companies · Domestic economic climate: This has far reaching effects on competitive position in foreign markets. Technical expertise may not be available at a level necessary for product support and for maintenance. to a commercial legal system. These factors are as under: · Political decisions involving domestic foreign policy: Examples are that of US restrictions of trade with countries like Libya. Some of these factors are as under: · Political/Legal forces: One example is that of China which has moved from a communist legal system in which all business was done with the State. The capacity to invest in plants and facilities are directly affected with this variable. · Currency value: This gives the price advantage or disadvantage to marketers depending on the exchange value and this is another influence the home environment economy has on the marketer¶s task. due to so called support to terrorists in Libya and Iraq and due to apartheid policies in South Africa. · Geography and infrastructure: The transportation and physical distribution depends on these factors and this will also be different in different countries. which could in turn create a positive or negative effect on foreign trade.2 Foreign Uncontrollable Factors: A significant source of uncertainty is the number of uncontrollable elements in the foreign country. Competition within their home country affects the company¶s domestic as well as international plans.

This term is very popular in the business press and in textbooks. rather than corporations. and North America). the term multinational enterprise. Europe. It seems to be the most generic name to describe corporations operating around the world.g.. sales promotions.3 Multinational Corporations (MNCs) A multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries. etc. (example: McDonalds) . Hence. has entered the vocabulary of international trade. There is a debate about what to call a company. Transnational Corporation (TNC) Because companies ³transcend´ or operate across national borders. or MNE. tying together home and host countries through corporate policies and practices. The term seems to have first been used to describe a small number of companies whose business was conducted in dozens of ± perhaps more than 100 ± nations. The term is often applied to companies doing business in several areas of the world (e.· Cultural forces: Each country¶s culture is different and this could affect all the marketing variables like product design. Very large multinationals have budgets that exceed those of many countries. brand name. some experts prefer the term transnational corporation. Nestle has long been described as truly global. Multinational corporations can have a powerful influence in international relations and local economies. Multinational Corporation (MNC) The fact that companies operate in multiple countries has led some experts to adopt the term Multinational Corporation. Global Corporation This term became very popular in the 1990s. Here are some of the terms used to describe these companies. whose business ranges across national borders. The United Nations favour this term and has created a research centre for the study of Transnational Corporations. Asia-Pacific. Multinational Enterprise (MNE) Because some of the international giants are state-owned enterprise. distribution networks and strategies. logo. pricing policies. Multinational corporations can be divided into three broad groups according to the configuration of their production facilities: · Horizontally integrated multinational corporations-manage production establishments located in different countries to produce the same or similar products. 1. advertising campaigns. Latin America. price negotiations. because the scope of its operations extends to more than 150 nations around his globe. or TNC. or MNC.

straight. the British arm of an MNC. · Amtek Auto has acquired the GWK group in the UK · Kirloskar Brothers took over SPP Pumps.3. vertically. The globally integrated enterprise. More and more of them have been trying to be responsible members of the society. The advantages are as under: Power and Prestige: Most of the MNCs have power and prestige. does away with this requirement. They are quite large corporations with huge financial power and also with enormous reputation all over the world. They have raised local wages and improved the standard of living of their employees and associates.1 Some of the Indian MNCs: · Tata Motors to takeover Daewoo in South Korea for $118 million · Ambanis to takeover Flag International for $211 million · Ranbaxy to takeover RPG Aventis a France based firm · Wockhardt acquired CP Pharmaceutical and Wallis Laboratories ± both of Britain · Hindalco took over Mount Garden and Nifty ± copper mines in Australia · Sundaram Fasteners has acquired Dana Spicer Europe.· Vertically integrated multinational corporations-manage production establishment in certain country/countries to produce products that serve as input to its production establishments in other country/countries. Market Performance: Because of their financial muscle and also the marketing expertise. UK 1.2 Pros and Cons of MNCs: The mention of MNCs usually elicits mixed reactions.3. or non-straight integrated. 1. Disadvantages: . (example: Microsoft) Others argue that a key feature of the multinational is the inclusion of back office functions in each of the countries in which they operate. Social Responsibility: They create social benefit by facilitating economic balance. which some see as the next development in the evolution of the multinational. (example: Adidas) · Diversified multinational corporations-manage production establishments located in different countries that are neither horizontally. most of the MNCs have performed very well in the foreign markets and thus benefited all their stakeholders. There are advantages and disadvantages of MNCs.

Definition by Size: The term MNC implies bigness.3 Characteristics of Multinational Corporations: Varying explanations have been used to define a multinational corporation. sales and assets. Erosion of a Nation¶s Sovereignty: For a long time many countries including India have accused MNCs as agents of ³neocolonialism´. 1. though it is no less important. Some of these are as under: Market value Sales Assets ROI Number of employees Definition by Structure: Structural requirements for definition as an MNC include the following characteristics: Number of countries in which the firm does business Citizenship of corporate owners and top managers Definition by Performance: Definition by performance depends on such characteristics as earnings. MNCs can have three orientations as under: Ethnocentricity: This behaviour is characterized by the following features: Strong orientation toward home country . They are often criticized for moving resources in and out of a country as they strive for profit without much regard for the country¶s social welfare. On this basis. but these definitions are not necessarily convergent.3. As a result. Many MNCs are still not so welcome in these countries.Exploitation: MNCs in many countries have been associated with exploitation and ruthlessness. These also include the following important requirements: Commitment of corporate resources to foreign operations Amount of rewards from that commitment Definition by Behavior: Behaviour is somewhat more abstract as a measure of multinationalism than either structure or performance. Bigness has a number of dimensions. whether a company is classified as an MNC or not depends partly on what set of criteria are used.

Currency value gives the price advantage or disadvantage to international marketers depending on the __________ value. The local economic forces in the foreign country may have strong influence on the currency value and________________. 7. 5.Centralization of decision making Efficient but not effective Polycentricity: This comprises of: Strong orientation to host country Decentralization of decision making Effective but not efficient Geocentricity: which consists of: World orientation Centralization + decentralization + coordination Efficiency and effectiveness Self Assessment Questions I Fill in the blanks: 1.4 The Stages of International Marketing . International marketing is simply the application of marketing principles to more than one _____________. With the proliferation of the Internet and e-commerce (electronic commerce). if a business is online. For a company to keep growing. 1. 4. it must increase________ . A ___________ corporation is a corporation or enterprise that manages production establishments or delivers services in at least two countries. 6. it is a __________ business. ___________ Marketing is the perfo rmance of business activities that direct the flow of a company¶s goods and services to consumers or users in more than one nation for a profit. 2. 3.

Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. An example of a region is Western Europe. 1. it is an evolutionary process. but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. and marketing on a regional level is the next step. At the beginning of this stage. All marketing decisions are made at headquarters.4 Multinational marketing: At the multi-national stage. Product development at this stage is still focused on the needs of domestic customers. does not take place across regions. But.3 International marketing: If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences. 1. These offices still report to headquarters in the home market.1 Domestic marketing: A company marketing only within its national boundaries only has to consider domestic competition. Consolidation of research. Others became direct exporters. and personnel already in place. filling these orders was considered a burden. the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. factories. it does apply to most companies that begin as domestic-only companies.International marketing is not a revolutionary shift. because they acknowledge that each market/country has different needs. While the following does not apply to all companies. language barriers. production. consolidation. These marketers are considered polycentric. not an opportunity.4. it still only has to focus on the competition that exists in its home market. companies began exporting. creating exporting departments at headquarters. by hiring an export management company to deal with all the customs paperwork and language barriers. The five stages of this internationalization are outlined below: 1. storefronts. and thus product planning. at the multi-national stage. Sometimes companies buy firms in the foreign countries to take advantage of relationships. Because domestic marketers do not generally focus on the changes in the global marketplace. development. then offices could be built in the foreign countries. Local product development is based on the needs of local customers. Even if that competition includes companies from foreign markets. these marketers are also considered ethnocentric. reluctantly. 1. a regiocentric approach. some companies became passive or secondary exporters. and cultural ignorance are hindering the company¶s competitiveness in the foreign market. they may not be aware of a potential competitor who is a market leader in other countries. The biggest obstacle these marketers face is being blindsided by emerging international marketers. These marketers can be considered ethnocentric.4. 1.5 Global marketing: .4.4. If there was enough interest.4.2 Export marketing: Generally. as they are most concerned with how they are perceived in their home country. Thus. to the occasional foreign customer who sought them out.

These marketers are considered geocentric. This in the way of non-ethoncentrism. Multinational Marketing and Global Marketing as synonymous for reasons already explained. Polycentrism is the principle of organisation of a region around several political. Polycentric or Multi-Domestic Marketing Concept: This is the opposite of ethnocentrism.When a company becomes a global marketer. It is not unusual for a person to consider that what ever they believe is the most appropriate system of belief. The goal is to sell the same thing the same way everywhere. opinions and ways of life: when intercultural actions and correlations are interpreted not only with the background of own cultural experiences. Marketing decisions are made by consulting with marketers in all the countries that will be affected. For the purpose of this unit we will be considering International Marketing.5 Domestic Marketing vs. it views the world as one market and creates products that will only require minor modifications to fit into any regional marketplace. the assumption is that the home country marketing practices will succeed elsewhere without adaptation. four distinctive approaches dominate strategic thinking in international marketing as against domestic marketing. In this concept. In intercultural competence the term polycentrism is understood as attitude and openness towards other cultures. social or financial centres. opposite to ethnocentrism. Ethnocentrism is a natural result of the observation that most people are more comfortable with and prefer the company of people who are like themselves. In fact in such organizations. These are: Ethnocentric or Domestic Marketing Extension Concept: In this concept. the organisation sees the world as one market and develops a standardized marketing strategy for the entire world. or that however they behave is the most appropriate and natural behavior. 1. International Marketing: Strategic orientation: Generally. international marketing is viewed as secondary to domestic operations and very little special effort is made for international marketing. Geocentric: . Management of such multinational firms place importance on international operations as a source for profits and the management believes that each country is unique and allows each to develop its own marketing strategies locally. Regiocentric: Regiocentrism orientation is an attitude or orientation toward internationalization with the focus on regional orientation. sharing similar values and behaving in similar ways. but when the independence of other cultures is recognized and appreciated and when cultural values are relativized and seen in the whole context.

1. habits. values. promotion. The other obstacle is "Ethnocentrism". symbols. especially with concern to language. individuals will judge other groups in relation to their own particular ethnic group or culture. standardized marketing strategy is used for several countries. The SRC refers to the assumption that what is suitable for the home market will be suitable for the foreign market and therefore. countries in a region. and knowledge as a basis for decisions. Reactions to meanings.6 The process of International Marketing In order to succeed in international markets. Ethnocentrism is the tendency to look at the world primarily from the perspective of one¶s own culture. Step2: Define the business problem or goal in foreign-country cultural traits.Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a uniform. and behavior relevant to one¶s own culture are different from those of foreign lands and relying on one¶s SRC could produce an unsuccessful marketing program. there is no need to test whether or not the product should be altered. Ethnocentrism often entails the belief that one¶s own race or ethnic group is the most important and/or that some or all aspects of its culture are superior to those of other groups. The primary obstacle to success in international marketing is a person¶s Self Reference Criterion (SRC) in making decisions. and distribution). Such adaptation is a conscious effort on the part of the international marketer to anticipate the influences of both foreign and domestic uncontrollable environments on a marketing mix and then to adjust the marketing mix to minimize the effects. it is necessary to make a cross cultural analysis isolating the SRC influences. SRC is an unconscious reference to one¶s own cultural values. also be successful in foreign markets.´ against which all other groups are judged. Having sold a product successfully in the domestic market. Frequently this assumption leads to failure. experiences. . the firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product. or norms. Make no value judgments Step3: Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem. customs. habits. without adaptation. and religion. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. To avoid errors in business decisions. It is defined as ³the viewpoint that one¶s own group is the center of everything (better than all other cultures). which refers to the notion that one¶s own culture or company knows best how to do things. price. The following steps are taken as a framework for such an analysis: Step1: Define the business problem or goal in home-country cultural traits. behaviour. These ethnic distinctions and sub-divisions serve to define each ethnicity¶s unique cultural identity. a firm may assume that the product will. or norms. Within this ideology. or the entire world.

Sales and Profits: Foreign markets constitute a large share of the total business of many firms that have cultivated markets abroad.Step4: Redefine the problem without the SRC influence and solve for the optimum business goal situation. The lack of imported product forces the consumers to pay more. Inflation and Price Moderation: The benefits of export are quite evident. For example. Employment: Unrestricted trade has been proven to improve world¶s GNP and enhance employment generally for all nations. Hong Kong would not have survived without food and water from Mainland China. Surprisingly. Diversification: Demand for most products is affected by many cyclical factors of recession and seasonal factors like climate. because much of the cultural influence on market behavior remains at a subconscious level and is not clearly defined. International trade is hence not a matter of choice but that of survival. understanding one¶s own culture may require additional study. All these firms are contributing to their sales and profits by a huge chunk due to international marketing.7 Benefits of International Marketing International Marketing affects consumers daily in many ways. Without imports there is no incentive for the domestic firms to moderate their prices. resulting in inflation and excessive profits for local firms. Along with survival. Many of their charges are imaginary and the following benefits of international business will help in dispelling such notions: Survival and Growth: Most countries are not having all resources for development and they have to trade with others to survive. Government officials and other observers always seem to point out the negative aspects of international business. This approach requires an understanding of the culture of each foreign market as well as one¶s own culture. . 1. these countries have also benefited by growth of economy due to international trade. Most of the European countries have similar problems since most of them are relatively small. One way to diversify the company¶s risk is consider foreign markets as a solution to variable demand. This results in fluctuations in sales which can be substantial enough to cause layoffs of personnel. The imports can also be highly beneficial to a country because they constitute reserve capacity for the local economy.

Kuala Lumpur or Harare. over and above those factors which have been attempting to restrain it. agricultural commodities. the more a global clustering can take place and the more a standardized approach can be made in the design of marketing programs. One can see in the streets of New York. The real benefit is that the executive develops the knowledge of the marketing process in one¶s own culture also. One can question "what feeling?". Technology: This standardized approach can be aided and abetted with technology. thus helping firms to improve quality. can be met with a global orientation. This is certainly true of many veterinary products. and curtain material can be globally marketed as natural and fashionable. Life in many countries would have been much more difficult had it not been for the import of strategic materials like many important metals. Without international trade.8 Driving and Restraining forces affecting International Marketing Over the last few decades internationalism has grown because of a number of market factors which have been driving development forward. 1. etc. These include market and marketing related variables. . London. Understanding of Marketing Process: When an executive is required to observe marketing in other cultures. but that is not the point. The more culturally unbounded the product is. Computers in agriculture and other applications are used universally. requires volume to generate profits for the development of new products. A new pesticide is available almost globally to any agricultural organization as long as it has the means to buy it. with IBM and Macintosh becoming household names. Some of these are as under: Driving Forces: Market Needs: Many global opportunities have arisen because of the clustering of market opportunities worldwide. Cotton. suitings.Standards of Living: Trade affords countries and their citizens higher standards of living than otherwise possible. Global volumes allow continuing investment in R and D. therefore. The need to recoup large costs of research and development in new products may force organizations to look at global markets to recoup their investment. the benefit derived is not so much the understanding of the foreign culture. Farm machinery. or appeal to a basic instinct " You can¶t beat the Feeling" or "Come alive" as with the case of Pepsi. product shortages would force people to pay more for less. youth with the same style and brand of basketball shirts or American Football shorts. Rarely is technology culturally bound. Organizations have found that similar basic segments exist worldwide and. Technology has been one of the single most powerful driving forces to internationalism. for example. as an ingredient in shirtings. Coca Cola can be universally advertised as "Adds Life". Many MNCs have applied their knowledge of their experience in foreign countries to their domestic marketing with highly profitable results.

Regional Economic Agreements: A number of multilateral trade agreements like NAFTA have accelerated the pace of global integration. In Europe. Restraining Forces: . · Scale Economics: The global company can take advantage of greater manufacturing volume to obtain traditional economies of scale in a single factory. In many cases this may mean an adaptation in advertising appeals or messages. that its international leverage is huge. operates in so many markets. trends. · Global strategy: A global strategy is built on an information system that scans the world business environment to identify opportunities. Product Development Costs: The pressure for globalization is intense when new products require major investments and long periods of development time. These are: · Experience Transfers: A global company can leverage its experience in any market in the world and apply them in other comparable markets. buys so much raw material from a variety of out growers of different sizes. money and raw materials to enable it to compete most efficiently in world markets. Nestle will not be in a hurry to repeat its disastrous experience of the "Infant formula" saga. Quality: International Marketing can generate greater revenue and greater operating margins. as well as packaging and instructions. Leverage: Marketing globally also provides the marketer with four types of "leverage" or "advantages". Caterpillar. GM. Kelloggs. The huge costs of developing new molecules cannot be recovered by any single national market and it has to be necessarily recovered in the global marketplace. Beyer. GE. · Resource utilization: A major strength of a global company is its ability to scan the entire world to identify people. are able to achieve world class quality. Matsushita. coupled with the literacy level to read the instructions properly. boiled water for its preparations. · A multi-product global giant like Nestle¶. the expanding membership of the European Union is lowering barriers to trade within the region. That is the reason why global companies like Nissan. The pharmaceutical industry provides a striking illustration of this driving force. Sony.Communications and Transport: Communications and transport are shrinking the global market place. threats and resources. were not universal phenomena. If it consumes a third of the world¶s cocoa output annually. Norsk Hydro. Value added manufacturers like Cadbury. Also. whereby it failed to realize that the ability to find. etc. Massey Ferguson and ICI find themselves "under pressure" from the market place and distributors alike to position their brands globally. with over £10 billion turnover annually. then it is in a position to dominate terms. Nestlè. finished products can be made by combining components manufactured in scale efficient plants in different countries. which can hence be ploughed back for quality improvements and design. Toyota.

GATT: Until the General Agreement on Tariffs and Trade (GATT) after World War II. Foreign Exchange Base: Until 1969. GATT had the intention of producing a set of rules and principles to liberalize trade. the world trading system had been restricted by discriminating trade practices. aided by . ± the Lomè convention. 1. Despite these trade agreements. Now an international reserve facility is available. The break up of the former Soviet Union has opened up vast opportunities to investors. National Controls and Barriers: Every country protects local enterprise and interests by maintaining control over market access and entry in both low and high tech industries and advertising. whereby each country agrees to extend to all countries the most favourable terms that it negotiates with any country. The most favoured nation concept (MFN). African and Caribbean countries enjoy favoured status with EU member countries. Some of these are as under: Economic Blocs: The principal forces have been the development of economic blocs like the European Union (EU) and then the "economic pillars". the world economy traded on a gold and foreign exchange base. the International Monetary Fund (IMF) and the evolution of the World Trade Organization from the original General Agreement on Tariffs and Trade (GATT). Recently. The "round" of talks began with Kennedy in the 60s and Tokyo of the 70s. global corporations have been able to expand into many markets. After 1969. non tariff barriers like exclusion deals. standards and administrative delays are more difficult to deal with.the World Bank (or International Bank for Reconstruction and Development to give its full name). a point which will be expanded on later. The latest round. the World Bank has taken a very active role in the reconstruction and development of developing country economies. The only way global companies can overcome these barriers is to become ³insiders´ in every country in which they do business.Management Myopia and Organizational culture: A company which is short sighted and ethnocentric will not expand geographically. Under this deal. helped reduce barriers. liquidity was eased by the agreement that member nations to the IMF accept the Special Drawing Rights (SDR) in settling reserve transactions. International Marketing does not work without a strong local team that can provide information about local market conditions. was recently concluded in April 1994 and ratified by most countries in early 1995. A similar system exists with the European Union. Encouraged by this and the availability of finance. Global Peace: Relative global peace has engendered confidence in world trade. Uruguay.9 The International Developments aiding International Marketing Several factors have contributed to the growth of the international economy post World War II. This affected liquidity drastically.

over Z$2. and. where in the latter. and experience through others may result in orders. Acts of GOD: Sometimes. Only recently has television been introduced into Tanzania.8 billion of foreign investment in the stock exchange and mining projects have occurred in the early 1990s. Similarly. and peace in Vietnam as examples. visits. by acting as a representative for other organizations. or products which can be imported on more favourable terms. by the collapse of others. have opened up the way for domestic growth and also. Peace in Mozambique. Importers: Importers may be looking for products unavailable in domestic markets.10 Impetus to International Marketing involvement Individuals or organizations may get involved in International Marketing in a rather unplanned way. foreign investment. for example. These will be expanded on later in this text. for example. therefore. closer to the average Tanzanian. Blocs like the European Union (EU). New countries are trying to join these blocs all the time. . the North American Free Trade Agreement (NAFTA) with the USA.the World Bank and the European Development Bank. mangoes in the UK. and this has brought the world and its markets. Canada and Mexico have created market opportunities and challenges. market opportunities open up through "Acts of God". especially yellow maize from the USA and South America. Intermediaries: These may be of four types ± domestic based export merchants. ASEAN. 1. conversely. people can see what is happening elsewhere and this can cause desire levels to rise dramatically. because of the economic. This may happen in a number of ways: Foreign customers: Unsolicited enquiries through word of mouth. export management companies or cooperative organizations. Costs and time have reduced enormously and with the advent of television. This is very true of countries like Zambia and Zimbabwe. Not only did this give a market for maize only. as they strive to get into the new market based economies rising from the ruins. Sometimes an intermediary may provide export services in an attempt to reduce their own costs on the export of their own produce. This is often typical of small scale organizations. Collapse of old Communist blocs: No doubt a great impetus to global trade was brought about by the development of economic blocs. Speedy communications like air transportation and electronic data transmission and technology have "shrunk" the world. which gives the impetus to more formal and larger operations. An example of these is flowers from Kenya to Holland. but opened up opportunities for transport businesses and services to serve the drought stricken areas. This atmosphere of peace has also allowed the steady upward trend of domestic growth and again opened up market opportunities domestically to foreign firms. The great drought of 1992 in Southern Africa necessitated a large influx of foreign produce. for example. social and other advantages they bring. The liberation of economies under World Bank sponsored structural adjustment programs has also given opportunities. the "normalization" of South Africa. exhibitions. This is called "piggybacking". domestic based export agents. the collapse of the old communist blocs has given rise to opportunities for organizations.

across the globe. Some have travelled further down the path than others. Privatization: Several aspects exist. say. but in terms of direction it has been one-way traffic. What is certain is that in all stages. The most commonly understood meaning is the sale of state owned enterprises. but it can also refer to the contracting out of a service to a private enterprise. It is likely to remain important and developing countries will increasingly feel its effects. In the second half of the 1990s. Spread of Liberalization: On May 1. the balance of opportunity and risk is considered. Development Authorities or even individual executives. . In the case of fresh cut flowers. In analyzing behavior one has not to generalize. In the two decades since then. 1. Definition of Liberalization: Liberalization is the act of reducing government-imposed constraints on the behavior of actors in the economy. not all globalization takes place like this. more opportunities for strong firms and fewer places to hide for weak ones. while the theme crossed the Atlantic into Western Europe and has since traveled. with increasing speed. the consequences are straightforward ± more competition. there are very few states which impose a higher degree of regulation on economic activity than was the case two decades previously. for example from Harare to London or Amsterdam and Frankfurt. 1975. allowing expansion within the sector or diversification into other sectors.Other sources: These may include banks.11 Liberalization and International Marketing Liberalization has been the dominant force in international business in the developed world over the past two decades. US financial markets were subjected to a burst of deregulation which triggered a price war in the market for financial services. for example from the Southern African Development Conference (SADC) to Europe. developed country consumer centres. these may go to major. export organizations. as well as opening the sector to other entrants. Deregulation: Easing the rules under which a firm or an industry operates. Behavior as an international marketing impetus: It was seen earlier in the internationalization process that organizations may evolve from exporting surplus or serving ad hoc enquiries to a more committed global strategy. with the theme being the exposure of the public sector production process to free market forces. However. Although the mechanisms and motivations involved can be complex. liberalization has spread to many other sectors of the economy. The two ways that this is achieved are by privatization and deregulation. Fewer restrictions on price is another recurring theme. This gradual change may involve moving from geographically adjacent markets to another. Lusaka or Nairobi may never see Zimbabwe flowers.

Projected across the whole economy. The concept was that the benefits from the efficient operation of the enterprise would be felt by the whole population and not just the rich. ii. nationalized industries were often inefficient and were a burden on the public purse. In a diluted form. The quality of the product or the service provided by a nationalized industry was frequently poor and as it was often a monopoly supplier. i. One example of market failure is externalities (which is an economist¶s word for side effects). it was becoming apparent that there were fundamental problems with some nationalized or heavily regulated industries. gas and electricity supply and telecommunications are common examples. the consumer suffered. iv. Labor militancy and restrictive working practices added to the problems. as did management which was more bureaucratic than entrepreneurial. transport. There were four main reasons for the direct involvement of the state in a country¶s industrial structure in the past fifty years. the problems were similar to those. first it is necessary to place the issues in an historical perspective. Ideology: State ownership was firmly embedded in the political ideology of the left wing parties of many countries. Steel. energy and aerospace are examples of industries which were frequently brought under public ownership for reasons of national security. Utilities such as water. This was largely predicted on the ³Chicago school´ argument that the state did not have enough information to be able to direct resources as efficiently as the market. Strategic: Some industries were seen as key to the military strength of a nation. Without the discipline of market forces. In addition. By the 1970s. which eventually proved fatal to the former Eastern Bloc.Background of Liberalization: Before considering how privatization and deregulation have changed the global environment for business. The Economic Case for Liberalization: The rise of right-of-center parties in several developed democracies in the 1980s meant a shift away from left-wing attitudes and towards a stronger belief in the merits of free markets and a more limited role for the government. By exposing firms to greater competition it was anticipated that . It is worth ending a moment looking at the reasons why industries were nationalized and markets were regulated in the post-war world. heavy state involvement meant slow growth and stagnant incomes. then there may be a case for the government to step in. Heavily regulated industries lacked innovation and dynamism. iii. The consequence of public sector involvement is that the profit motive ± which typically dominates the operations of a private sector company ± can be replaced by other objectives defined by the state. Technology: Many industries were seen as ³natural´ monopolies and it appeared impractical to have competition in some sectors. Market failure: If the market is not allocating resources efficiently. objectives of economic efficiency (such as setting prices equal to marginal costs) were often overridden by political factors such as favoring certain interest groups or supporting macroeconomic objectives like low inflation. communications.

stronger. A company marketing only within its national boundaries only has to consider domestic competition. It will move from acting in a way prescribed by the government to being primarily governed by the search for profits. The most extreme example of a change in attitude was seen in Eastern Europe after 1989. Transfer of ownership from the public to the private sector leads to a change in the objectives of the firm. This inevitably places them at a disadvantage against foreign competition. more productive enterprises would be the result. Prior to that. improved quality and more innovative behavior. If the process is a success. Self Assessment Questions II State whether the following statements are true or false: 1. Similarly. handicapping all business users in the economy. as one result was a search for the lowest price input (which was either gas or foreign coal). It is likely to remain important and developing countries will increasingly feel its effects. . it is not an evolutionary process. looking across the whole economy in what is labeled ³general equilibrium analysis´ must be generated by raising taxes on other efficient private sector producers. or that a state-owned telecommunications company takes months to install a new phone. Although the mechanisms and motivations involved can be complex. It is this search that brings the benefits to the economy in the form of more efficient use of resources. more opportunities for strong firms and fewer places to hide for weak ones. the end result should be that the consumer receives a better service and a wider choice at a lower price. with privatized airlines or telecommunications providers more eager to improve service and cut prices to generate new business. International marketing is a revolutionary shift. Inefficiency aspects of state control are more complex than simply noting the fact that a nationalized car company makes unreliable cars and lose money. the consequences are straightforward ± more competition. when there was a radical reappraisal of the role of the state in the economy. the price mechanism had not functioned to link the wishes of consumers with the responses of producers. The car company will be soaking up government revenues which. It also occurs in the market for inputs ± for example privatizing and splitting up a national electricity generator will create pressure on prices of inputs such as coal. The system had also failed to instill in companies any sense that their survival was dependent on providing a certain level of quality. or on achieving some level of efficiency. Liberalization has been the dominant force in expansion of international business in the developed world over the past two decades. Note that the British coal mining industry collapsed after the privatisation of electricity utilities. a poor telecommunications network has a negative impact on all users of telecoms. which meant the removal of the underlying subsidy to coal producers that had resulted from the nationalized electricity generator buying British coal at above market prices. as firms try to make better products at lower costs. Increased competition is usually most apparent in the product market. 2.

4. 5. A multinational corporation (or transnational corporation) (MNC/TNC) is a corporation or enterprise that manages production establishments or delivers services in at least two countries There are four distinctive approaches that dominate strategic thinking in international marketing as against domestic marketing. Polycentricism is the same as ethnocentrism. Thus. Communications and transport are expanding the global market place. Liberalization has been the dominant force in international business in the developed world over the past two decades. 6. 7. Regiocentrism orientation is an attitude or orientation toward internationalization. There are several reasons for this. it views the world as one market and creates products that will only require minor modifications to fit into any regional marketplace. . When a company becomes a global marketer. which can hence be ploughed back for quality improvements and design. 1.12 Summary International marketing is simply the application of marketing principles to more than one country. with the focus on regional orientation. there is a crossover between what is commonly expressed as international marketing and global marketing. 8. 10. consumers and businesses now have access to the very best products from many different countries.3. Until the General Agreement on Tariffs and Trade (GATT) after World War II. which is a similar term Global marketing refers to marketing activities coordinated and integrated across multiple country markets Trade is increasingly becoming global in scope today. Demand for most products is not affected by many cyclical factors of recession and seasonal factors like climate. 12. 9. 11. However. the world trading system had been restricted by discriminating trade practices. One significant reason is technological in nature±because of improved transportation and communication opportunities today. trade is today more practical. International Marketing can generate greater revenue and greater operating margins. Many global opportunities have arisen because of the clustering of market opportunities worldwide. A company which is short sighted and ethnocentric can expand geographically.

5) Identify and explain the different stages of International Marketing. Global 5. True 4. International Marketing. False 7.13 Terminal Questions 1) What is International Marketing? 2) Explain why International Marketing is important 3) Describe the domestic uncontrollable factors and the Foreign Uncontrollable Factors in International Marketing Task. 7) Explain the driving and restraining forces affecting International Marketing. Multinational SAQ II 1. Country 2. True 3. 1. True . International 3. Repatriation 7. False 2. False 5. True 6.14 Answers to SAQ¶s and TQ SAQ I 1. Exchange 6. Sales 4. 4) Describe some of the pros and cons of MNCs.1. 6) Compare strategic orientations in Domestic Marketing vs.

False 11. True 12.4 3.4 6. True TQ¶s 2.1. False 9. Refer to Section 1. Refer to Section 1.Refer to Section 1.8 .5 7. Refer to Section 1. Refer to Section 1. Refer to Section 1.3. True 10.1 and 1.2. Refer to Section 1.2 5.2 4.

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