International Marketing

U nit 1

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 Global Perspective:
Global Commerce Causes Peace
• Global commerce thrives during peacetime
– Boeing company
– Commercial aircraft and space vehicle industries
– Mobile phone industry
– Individuals and small companies
• International markets are ultimately
unpredictable
– Flexibility means survival

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 International Marketing
• International Trade
– which arises due to divergent scarcities between nations,
points out the possibilities and advantages of trade
• International Marketing
– the process through which international trade takes place
• International Business
– wider in scope than international marketing. It includes
besides marketing, investments abroad including
establishment of subsidiaries and joint ventures abroad.

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 Scope and Significance of
International Marketing
• Opening a branch / subsidiary abroad for
processing, packaging, assembly or even
complete manufacturing through direct
investment.
• Negotiating licensing / franchising arrangements
• Establishing joint ventures in foreign countries
for manufacturing and/or marketing
• Offering consultancy services and undertaking
turnkey projects abroad

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 Scope and Significance of
International Marketing
• Counter trade
– Counter trade is exchanging goods or services which
are paid for, in whole or part, with other goods or
services, rather than with money
► Offset (airplanes and computer equipment worth 1
million)
► Buyback (steel)
► Bilateral (controlled or centrally planned economies )

• Important for export production

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 Foreign Acquisitions
of U.S. Companies
Exhibit 1.1

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 Selected U.S. Companies
and Their International Sales
Exhibit 1.2

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 Strategic Importance of
International Marketing
• Survival and Growth
• Sales and Profit
• Obtaining Scale Economies
– Standarization
– Coca-cola: brand name, concentrate formula,
positioning and advertising theme – that has been
virtually the same throughout the world. Only the
artificial sweetner and packaging differ across countries
• Desirable global Brand associations
– Japanese firms: Yamaha, Sony, Canon, Honda
(technology and product quality are important)
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 Strategic Importance of
International Marketing
• Access to Low-Cost Labor or Materials
– Eg: manufacture a computer (Suppliers)
– SCA (Sustainable Competitive Advantage)
• Access to National investment incentives
– Achieve economic objectives for target industries or
depressed areas
– British government offered Japanese car manufacturers
a cash bonus to locate a plant in UK
• Cross-Subsidization
– Use the resources accumulated in one part of the world
to fight a competitive battle in another
► Retaliation (market share)
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 Strategic Importance of
International Marketing
• Dodge Trade Barriers
– Eg: caterpillar
• Access to strategically important Markets
– Market size
– Raw material supply
– Labor cost
– Technology
– New trends and development
• Inflation and price moderation
• Standard of living
• Understanding of marketing process
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The International Marketing Task
Exhibit 1.3

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 Environmental Adaptation
• Ability to effectively interpret the influence and
impact of the culture in which you hope to do
business
– Cultural adjustments (react in a manner acceptable to
society)
• Establish a frame of reference
– White is a symbol of mourning in Asia whereas in
western culture it is used for bridal gowns

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 Environmental Adaptation
– Hand gesture: wanting to say ok, many people in US
raise a hand and make a circle with thumb and
forefinger, zero or worthless to French, money to
Japanese, and a general sexual insult in Greece
• Avoid measuring and assessing markets against
the fixed values and assumptions of your own
culture

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 The Self-Reference Criterion
and Ethnocentrism
• The key to successful international marketing is
adaptation to the environmental differences
from one market to another (uncontrollable
factors and marketing mix)
• Primary obstacles to success in international
marketing
– SRC
– Associated ethnocentrism

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 SRC and Ethnocentrism
• SRC is an unconscious reference to
– One’s own cultural values, experiences, and
knowledge as a basis for decisions
► Personal space between people of different cultures
► Americans refuse foods and drinks when offered which is
offensive in Asia

• 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

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 SRC and Ethnocentrism
• Ethnocentrism
– Notion that one’s own culture or company knows best
• Ethnocentrism and the SRC can influence an
evaluation of the appropriateness of a
domestically designed marketing mix for a
foreign market
– Cookies: US & Japan
– Unilever in Brazil: no washing machines; simpler soap
formula, packaged in small low priced packages.
– McDonald’s in India

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 SRC and Ethnocentrism
• The most effective way to control the influence
of ethnocentrism and the SRC is to recognize
their effects on our behavior
– In German: Vicks sounds like intercourse, so the
name was changed to wicks before entering the
market

• To avoid errors in business decisions, the

knowledgeable marketer conducts a cross-
cultural analysis

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 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

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 Framework
for Cross-cultural Analysis
3. Isolate the SRC influence
• Examine it carefully to see how it complicates the
problem

4. Redefine the problem

• Without SRC influence
• Solve for the optimum business goal situation

American sales manager and Japanese sales

representative

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Developing a Global Awareness
• Tolerance of cultural differences:
– Understanding cultural differences and accepting and
working with others whose behavior may be different
from yours
► Punctual

• Knowledge of cultures, history, world market

potential, and global economic, social, and
political trends

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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

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 Stages of International
Marketing Involvement
• No direct foreign marketing
• Infrequent foreign marketing
• Regular foreign marketing
• International marketing
• Global marketing

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 No Direct Foreign Marketing
• Products reach foreign markets indirectly
– Trading companies
– Foreign customers who contact firm
– Wholesalers
– Distributors
– Web sites
• Foreign orders pique a company’s interest to
seek additional international sales

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 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

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 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

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 International Marketing
• Entails not only marketing but also the
production of goods outside the home market
• Venture

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 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 (orgn
str, production, marketing)

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 Strategic Orientation
Differences in complexity and sophistication of a
company’s marketing activity depend on which
orientation guides its operations
•Domestic market extension orientation
•Multidomestic market orientation
•Global market orientation

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 Domestic Market Extension
Orientation
• International operations viewed as secondary
• Prime motive is to market excess domestic
production
• Firm’s orientation remains basically domestic
• Minimal, if any, efforts are made to adapt
product or marketing mix to foreign markets
• Firms with this approach are classified as
ethnocentric

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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
– Marketing mix are localized
• Control is decentralized
• Polycentric
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 Global Market Orientation
• Company guided by global marketing orientation
– Marketing activity is global
– Market coverage is the world
• Thrives for efficiencies of scale: firm develops a
standardized marketing mix applicable across national
boundaries wherever it is cost and culturally effective
– Markets are still segmented
– Each country or region is considered side by side with
a variety of other segmentation variables, such as
consumer characteristics (age, income, language
group), usage patterns, and legal constraints
– Fits the regiocentric or geocentric classifications
– Coca-cola company, Ford Motor company, Intel
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 The Orientation
of International Marketing
• The successful international marketer possesses
the best qualities of the anthropologist, sociologist,
psychologist, diplomat, lawyer, prophet and
business person
• An environmental/cultural approach to
international strategic marketing
• Discussion of international marketing ranges from
the marketing and business practices of small
exporters to the practices of global companies

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 The Orientation
of International Marketing
Exhibit 1.4

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Differences between International
and Domestic Marketing
• Scope (territory)
• Benefits
– To nations
– To firms
• Market Fluctuations (sharing profits and losses)
• Mode of entry (options and formalities)
• Customs (trade barriers and tariffs)

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Differences between International
and Domestic Marketing
• Sharing of technology
• Political relations
• Factor of Productions
• Investment
• Marketing Mix

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 Trends in Foreign Trade
• Foreign trade is defined as an exchange of
goods and services between persons and firms
of different countries.
• Methods of globalization
– Export trade, Import trade, Entrepot trade
– Licensing (royalty) and Franchising
– Fully Owned Manufacturing Facilities
– Joint Ventures
– Mergers and Acquisitions
– Strategic Alliances (collaborative agreements, global strategic
partnerships)
► The big airlines like Lufthansa, Singapore Airlines, Thai Internaties, Korean
Airlines, etc have formed strategic alliances with other airlines.

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 Trends in Foreign Trade
• 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
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 Trends in Foreign Trade
• Globalized Production: many brands of a single product
• Global Outsourcing: to take advantage national
differences in costs and quality of resources- labor and
raw materials (car manufacturer)
• Shifting from manufacturing to services: as service
sector has flourished in developed countries, labor force
is declining in manufacturing and increasing in service
sector in U.S., U.K and Japan
• Global Corporations: keep in touch with technology and
market trends all around the world: IBM-workers from
diversfied culture, Whirlpool (U.S.) in Mexico and Europe

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 Trends in Foreign Trade
• Increasing number of companies are foreign
controlled
• Increasing number of foreign companies building
and buying manufacturing plants: Dabur Nepal,
Nepal Unilever

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 World Economic Growth
• For the next decade, China and other emerging
markets will account for 75% of the world’s total
growth
• The stage of economic growth in a country
affects the attitudes toward foreign business
activity, the demand for goods, distribution
systems within a country, and the entire
marketing process

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 United Nations Economic
Development System
• More-Developed Countries (MDC)
– (e.g., Canada, England, France, Germany, Japan, U.S.)

• Less-Developed Countries (LDC)

– (many in Asia and Latin America)

• Least-Developed Countries (LLDC)

– (found in Central Africa and parts of Asia)

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 Newly Industrialized Countries

• Not classified by the UN, but countries that

are experiencing rapid economic expansion
and industrialization and do not exactly fit as
LDCs or MDCs (e.g., Chile, Brazil, Mexico,
South Korea, Singapore and Taiwan).

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 Common Traits of
Big Emerging Markets
• Are physically large

• Have significant populations

• Represent considerable markets for a wide

range of products
• Have strong rates of growth or the potential for
significant growth
• Have undertaken significant programs of
economic reform

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 Common Traits of
Big Emerging Markets
• Will engender further expansion in neighboring
markets as they grow
• Are regional economic drivers

• Are of major political importance within their

regions

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 Economic Advancements in
Emerging Markets
• Energy available in large amounts at low cost
per unit
• High level of GDP and Income
• High levels of per capita consumption
• Relatively low rate of population growth
• Complex modern facilities for transportation and
communication
• Substantial amount of capital for investment

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Effects of Trends in Foreign Trade
• Import Penetration: increasing difficulty for
domestic markets to sustain: soap industries
• FDI
• Multinational Companies: look for countries that
offer favorable government policy, sizeable
market and cheap labor
• Competitive Environment

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 Nepal’s Foreign Trade
• Import is greater than export
• Nepal’s foreign trade relations exists with more
than 80 countries
• Nepalese exports reach to about 68 countries
and imports come from nearly 74 countries
• Nepal has signed bilateral treaty with 17
countries
• To facilitate transit and port facilities, Nepal has
entered into transit agreements with India and
Bangladesh
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THANK YOU
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