Slm Unit 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
However. At its most complex l evel.13 Terminal Questions 1. At its simplest level. • To assess the pros and cons of MNCs and the characteristics of Multinational Cor porations • 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 1.1 Introduction 1. The international market goes beyond the export marketer and becomes more involv ed in the marketing environment in the countries in which it is doing business.12 Summary 1.1.1 What is International Marketing? International marketing is simply the application of marketing principles to mor e than one country.2 What is Global Marketing?
. The intersection is the result of the process of internationalization. It then follows that global market ing takes a more standardized approach to world markets and focuses upon samenes s. in other words the similarities in consumers and segments. it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe. international marketing and global marketing are interchangeable. • To identify International Marketing Tasks • To identify Multinational Corporations (MNCs).Self Assessment Questions II 1. there is a crossover between what is commonly expre ssed as international marketing and global marketing. Many Amer ican and European authors see international marketing as a simple extension of e xporting.14 Answers to SAQ’s and TQ’s 1.1. whereby the marketing mix is simply adapted in some way to take into a ccount differences in consumers and segments. International Marketing is the performance of business activities that direct th e flow of a company s goods and services to consumers or users in more than one nation for a profit. Objectives: After studying this unit you should be able: • To describe and define what is International Marketing • To explain why International Marketing is important. which is a similar term. F or the purposes of this unit on international marketing and those that follow it . international marketing involves the firm in making one o r more marketing mix decisions across national boundaries.
the differences due to the physical location of cu stomers groups. in many product and service categories. goods. trade is today more practica l. and trade organizations such as the Worl d Trade Organization (WTO).1. Honda. Toyota. and Volkswagen are amo ng the most popular manufacturers. 1. 1.4 Why is International Marketing important? Trade is increasingly becoming global in scope today. groups of cust omers seeking shared benefits or to be served with the same technology. but are considered inexpensive in wealthier countries . there is no single definition of i nternational marketing. pricing. and services and to create exchanges that satisfy individual and organizational objectives. that is. Now. saturated their domestic markets and have to turn to other countries for new marketing opportunities. exper ience and products globally and upon adapting to what is truly unique and differ ent in each country. more of an extension. One significant reason is technological in nature–because of improved tr ansportation and communication opportunities today. emphasiz ing their similarities regardless of geographic areas in which they are located. Industrialized nations ha ve. Worldwide competition One of the product categories in which global competition has been easy to track is in automotive sales. There are several reasons for this. and distribution of ideas.1. countries in the last several decades have taken increasing steps to promote global trade through agreements such as t he General Treaty on Trade and Tariffs.
.Global marketing refers to marketing activities coordinated and integrated acros s multiple country markets. In part to accommodate these realities. Three decades ago. Some marketing experts define global marketing as th e big brother to international marketing i. Rather than focusing on country markets. Similar changes are happening all over the world. Ford. managers concentrate on product markets. The result is a global approach to international marketing. Apart from the above environmental factors. Companies are on a global playing field wheth er they had planned to be global marketers or not. We will assume that both terms a re interchangeable. promotion. Thus. and Chrysler in USA.3 Definition of International Marketing So. there are three reasons for the shif t from domestic to International marketing. and the European Union (EU). there were only the big three: Gener al Motors. North American Free Trade Agreement (NAFTA). consumers and businesses now have access to the very best products from many different countries. Saturation of domestic markets For a company to keep growing. that is. and there could be some confusion about where internatio nal marketing begins and global marketing ends. and will define international marketing as follows: International Marketing is a multinational process of planning and executing the conception. Companies in s ome developing economies have found profitability by exporting products that are too expensive for locals. Global/transnational marketing focuses upon leveraging a company s assets. it must increase sales.e. Increasingly rapid technology lifecycles also increas e the competition among countries as to who can produce the newest in technology . as with many other elements of marketing.
• Economic forces: The local economic forces in the foreign country may have stron
.E-Commerce With the proliferation of the Internet and e-commerce (electronic commerce).1 Domestic uncontrollable factors: These include home country elements which can directly affect the success of a f oreign venture and these factors are out of immediate control of the marketer. With e-commerce. Iraq and South Africa. The uncontrollable factors are as under: 1. due to called support to terrorists in Libya and Iraq and due to apartheid policies South Africa.2. if a business is online. consumer preference s and corporate objectives. Customers can come from anywhe re. to adjust to changing market conditions. it is a global business. this market is constantly growing. With more people becoming Interne t users daily. Another example is that of the Indian Government. a brick and mortar storefront is unnecessary. These controllable elements can be altered in the long run and also usually in the short term. to a commercia l legal system.2. Assuming the necessary over all corporate resources.2 Foreign Uncontrollable Factors: A significant source of uncertainty is the number of uncontrollable elements in the foreign country. T hese factors are as under: • Political decisions involving domestic foreign policy: Examples are that of estrictions of trade with countries like Libya. which could in turn create a positive or negative effect on foreign trade.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. • Competition within home country: This can also have a profound effect upon the i nternational marketer’s task. 1. many US companies had a sitive effect and opportunities were created for US companies US r so in po
• Domestic economic climate: This has far reaching effects on competitive position in foreign markets. the marketing manager decides on price. and has few er geographical distribution obstacles than even business-to-consumer (B2C) e-co mmerce. When South Africa abolished apartheid. growing faster. product. Competition within their home country affects the co mpany’s domestic as well as international plans. Such uncertainty is created due to uncontrollable factors and each foreign country in which the company operate s adds its own unique set of uncontrollable factors. 1. The capacity to invest in plants and facilities are directl y affected with this variable. promot ion and channels of distribution activities to capitalize on the anticipated dem and. which in 1977 gave Coca Cola the choice of either revealing its secret formula or leaving the country. Business-to-business (B2B) e-commerce is larger. Some of these factors are as under: • Political/Legal forces: One example is that of China which has moved from a comm unist legal system in which all business was done with the State. • Currency value: This gives the price advantage or disadvantage to marketers depe nding on the exchange value and this is another influence the home environment e conomy has on the marketer’s task.
Nestle has long been described as truly global.g influence on the currency value and repatriation. Multinational Corporation (MNC) The fact that companies operate in multiple countries has led some experts to ad opt the term Multinational Corporation. advertising and sales promotion. Here are some of the terms used to describe these companies. logo.nations. The term seems to have first been us ed to describe a small number of companies whose business was conducted in dozen s of . distribution networks and strategies.perhaps more than 100 . has entered the vocabu lary of international trade.. Technical expertise may not be available at a lev el necessary for product support and for maintenance. Hence. price negotiations. Multinational corporations can have a powerful influence in international relations and local economies. Asia-Pacific. sales promotions. • Geography and infrastructure: The transportation and physical distribution depen ds on these factors and this will also be different in different countries. depending on deep rooted cultural factors to c ompetition in terms of price. pricing policies. Multinational Enterprise (MNE) Because some of the international giants are state-owned enterprise. brand name. The United Nations favour this ter m and has created a research centre for the study of Transnational Corporations. whose business ranges across nat ional borders. Latin America. • Cultural forces: Each country’s culture is different and this could affect all the marketing variables like product design. Global Corporation This term became very popular in the 1990s. some experts prefe r the term transnational corporation. or TNC. The term is often applied to companies doing business in s everal areas of the world (e. Transnational Corporation (TNC) Because companies “transcend” or operate across national borders. There is a debate about what to call a company. This term is very popular in the business press and in textbooks. rather than corporations. • Level of Technology: There are vast differences that may exist between developed and underdeveloped countries. the term multinational enterprise.3 Multinational Corporations (MNCs) A multinational corporation (or transnational corporation) (MNC/TNC) is a corpor ation or enterprise that manages production establishments or delivers services in at least two countries.g. or MNC. and North
. • Competitive forces: The nature of competition may vary from country to country a nd will have different responses. 1. distribution. because the scope of its operations extends to more than 150 nati ons around his globe. It seems to be the most generic name to descri be corporations operating around the world. or MNE. etc. tying together home and host countries through corporate policies and practices. advertising campaign s. • Structure of Distribution: The channels of distribution vary from country to cou ntry and there could even be state controls on distribution in some countries. Europe. Very large multinationals have budgets that exceed th ose of many countries.
The globally inte grated enterprise. • Amtek Auto has acquired the GWK group in the UK • Kirloskar Brothers took over SPP Pumps. There are advantages and di sadvantages of MNCs. 1. (exa mple: McDonalds) • Vertically integrated multinational corporations-manage production establishment in certain country/countries to produce products that serve as input to its pro duction establishments in other country/countries. vertically. (example: Adidas) • Diversified multinational corporations-manage production establishments located in different countries that are neither horizontally. Disadvantages:
. most of the MNCs have performed very well in the foreign markets and thu s benefited all their stakeholders. More and more of them have been trying to be responsible members of the soci ety.3.2 Pros and Cons of MNCs: The mention of MNCs usually elicits mixed reactions. Market Performance: Because of their financial muscle and also the marketing exp ertise. (example: Microsoft) Others argue that a key feature of the multinational is the inclusion of back of fice functions in each of the countries in which they operate. They are quite lar ge corporations with huge financial power and also with enormous reputation all over the world. Multinational corporations can be divided into three broad groups according to t he configuration of their production facilities: • Horizontally integrated multinational corporations-manage production establishme nts located in different countries to produce the same or similar products. The advantages are as under: Power and Prestige: Most of the MNCs have power and prestige.America). or n on-straight integrated. UK 1. the British arm of an MNC. Social Responsibility: They create social benefit by facilitating economic balan ce. does away with this requirement.3. They have raised local wages and improved the standard of living of their e mployees 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. straight. which some see as the next development in the evolution of th e multinational.
though it is no less importan t. but t hese definitions are not necessarily convergent. MNCs can have three orientations as under: Ethnocentricity: This behaviour is characterized by the following features: Strong orientation toward home country Centralization of decision making Efficient but not effective Polycentricity: This comprises of: Strong orientation to host country
.3. Erosion of a Nation s Sovereignty: For a long time many countries including Indi a have accused MNCs as agents of “neocolonialism”. whether a company is classified as an MNC or not depends partly on what set of criteria are used. They are often criticized for moving resources in and out of a cou ntry as they strive for profit without much regard for the country’s social welfar e. 1. Some of these are as under: Market value Sales Assets ROI Number of employees Definition by Structure: Structural requirements for definition as an MNC includ e 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 characteris tics as earnings.Exploitation: MNCs in many countries have been associated with exploitation and ruthlessness. Bigness has a number of dimens ions. Definition by Size: The term MNC implies bigness. Many MNCs are still not so welcom e in these countries. These also include the following important r equirements: 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 mult inationalism than either structure or performance.3 Characteristics of Multinational Corporations: Varying explanations have been used to define a multinational corporation. sales and assets. On this basis. As a result.
it still only has to focus on the competition that exists in its home marke t.4. if a business is online. 3.4 The Stages of International Marketing International marketing is not a revolutionary shift. it does apply to most companies that begin as domestic-only companies. The local economic forces in the foreign country may have strong influence on the currency value and________________. 1. 7. as they are most concerned with how they are perceived in their home c ountry.
. While the following does not apply to all companies. Even if that competition includes companies from foreign mark ets. All market ing decisions are made at headquarters. A ___________ corporation is a corporation or enterprise that manages product ion establishments or delivers services in at least two countries. 2.1 Domestic marketing: A company marketing only within its national boundaries only has to consider dom estic competition. These marketers can be considered ethn ocentric. it must increase________ . 4. Because domestic marketers do not generally focus on the chan ges in the global marketplace. For a company to keep growing. The biggest obstacle these marketers face is being blindsided by emerging intern ational marketers. The five stages of this interna tionalization are outlined below: 1. they may not be aware of a potential competitor w ho is a market leader in other countries. ___________ Marketing is the performance of business activities that direct t he flow of a company s goods and services to consumers or users in more than one nation for a profit. 5. 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.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. it is an evolutionary proc ess. it is a __________ business. International marketing is simply the application of marketing principles to more than one _____________. Currency value gives the price advantage or disadvantage to international mar keters depending on the __________ value. With the proliferation of the Internet and e-commerce (electronic commerce). 6.
development. by hiring an export management company to deal with all the customs paperwork and language barriers. But. These are: Ethnocentric or Domestic Marketing Extension Concept: In this concept.4. International Marketing: Strategic orientation: Generally. Ethnocentrism is a natural result of the observation that most people are more comfortable with and prefer the company o f people who are like themselves. filling these orders was considered a burden. Thu s.4. sharing similar values and behaving in similar ways. it views the world as one market and c reates products that will only require minor modifications to fit into any regio nal marketplace. It is not unusual for a person to consider that what ever they believe is the most appropriate system of belief.1. to the occasional foreign cus tomer who sought them out. Product de velopment at this stage is still focused on the needs of domestic customers. These offices still report to headquarters in the home market. 1. Mul tinational Marketing and Global Marketing as synonymous for reasons already expl ained. and cultural ig norance are hindering the company’s competitiveness in the foreign market. storefronts. at the m ulti-national stage. At the beginning of this stage. Sometimes companies buy firms in the foreign countries to take advantage of relationships.4. the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. If there was enough interest. and personnel already in place. For the purpose of this unit we will be considering International Marketing. production.4. and thus product planning. but most of the marketing mix decisions are made in the individ ual countries since that staff is the most knowledgeable about the target market s. These mar keters are considered polycentric. then of fices could be built in the foreign countries. Marketing decisions are made by consulting with marketers in al l the countries that will be affected. or that however they behave is the most
.3 International marketing: If the exporting departments are becoming successful but the costs of doing busi ness from headquarters plus time differences. companies began exporting. language barriers. because they acknowledge that each market/cou ntry has different needs. An example of a region is Western Europe. and marketing on a regional level is the next step. these marketers are also considered ethnocentric. does not take pla ce across regions. 1.2 Export marketing: Generally. not an opportunity. 1. some companies became passive or secondary exporters. reluctantly. These marketers are considered geocentric.5 Global marketing: When a company becomes a global marketer.4 Multinational marketing: At the multi-national stage.5 Domestic Marketing vs. a regiocentric approach. factories . 1. the assumption is that the home country marketing practices wil l succeed elsewhere without adaptation. The goal is to sell the same thing the sa me way everywhere. Others bec ame direct exporters. four distinctive approaches dominate strategic thinking in internatio nal marketing as against domestic marketing. creating exporting departments at headquarters. consolidation. Local product development is based on the needs of local customers. Consolidation of research.
Such adaptation is a conscious effort on the part of the international marketer to anticipate the influences of both f oreign and domestic uncontrollable environments on a marketing mix and then to a djust the marketing mix to minimize the effects. The other obstacle is "Ethnocentrism".” against which all other groups are judged. especially with concern to languag
. It is def ined as “the viewpoint that one’s own group is the center of everything (better than all other cultures). individuals will judge other groups in relation to their own particular ethnic group or culture. Fre quently this assumption leads to failure. also be successful in foreign markets. In inter cultural competence the term polycentrism is understood as attitude and openness towards other cultures. standardized marketing strategy is used for several countries. Within this ideology. or the entire world. which refers to the notion that one’s own c ulture or company knows best how to do things. SRC is an unconscious reference to one’s own cultural values. Polycentric or Multi-Domestic Marketing Concept: This is the opposite of ethnocentrism. without adaptation. Regiocentric: Regiocentrism orientation is an attitude or orientation toward internationalizat ion with the focus on regional orientation.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. promotion. opposite to ethnocentrism. Geocentric: Regiocentric and Geocentric are synonymous with a Global Marketing Orientation w here a uniform. the organisation se es the world as one market and develops a standardized marketing strategy for th e entire world. Polycentrism is the principle of organisa tion of a region around several political. opinions and ways of life: when intercultural actions a nd correlations are interpreted not only with the background of own cultural exp eriences. there is no need to test whether or not the product should be altere d. The primary obstacle to success in international marketing is a person s Self Re ference Criterion (SRC) in making decisions. This in the way of non-ethoncentrism. In fact in such organizations. price. Ethnocentrism of ten 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 g roups. international m arketing is viewed as secondary to domestic operations and very little special e ffort is made for international marketing. The SRC refers to the assumption that what is suitable for the home market will be suitable for the foreign market and therefore. In this concept. Ha ving sold a product successfully in the domestic market. experiences. and distribution). and knowledge as a basis for decisions. social or financial centres. the firms must adapt to uncontroll able environment of international marketing by adjusting the marketing mix (prod uct. c ountries in a region. 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. 1.appropriate and natural behavior. but when the independence of other cultures is recognized and apprecia ted and when cultural values are relativized and seen in the whole context. a firm may assume that the product will.
One way to diversify the comp any’s risk is consider foreign markets as a solution to variable demand. To avoid errors in business decisions. habi ts. Many of their charges are imaginary and the following benefits o f international business will help in dispelling such notions: Survival and Growth: Most countries are not having all resources for development and they have to tra de with others to survive. Step4: Redefine the problem without the SRC influence and solve for the optimum business goal situation. Make no value judgments Step3: Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem. Step2: Define the business problem or goal in foreign-country cultural traits. Surprisingly. or norms. Government officia ls and other observers always seem to point out the negative aspects of internat ional business. and religion. Most of the European countries have simila r problems since most of them are relatively small. For example. customs. Diversification: Demand for most products is affected by many cyclical factors of recession and s easonal factors like climate. these countri es have also benefited by growth of economy due to international trade. This approach requires an understanding of the culture of each foreign market as well as one’s own culture. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. h abits. This results in fluctuations in sales which can be substantial enough to cause layoffs of personnel. All these firms are contributing to their sale s and profits by a huge chunk due to international marketing. These ethnic distinctions and sub-divisions serve to define each ethnicity s unique cultural identity. The following steps are taken as a framew ork for such an analysis: Step1: Define the business problem or goal in home-country cultural traits. Along with survival. because much of the cultural influence on market behavior re mains at a subconscious level and is not clearly defined.e. behaviour. International trade is hence not a matter of choice but that of survival. 1. Reactions to meanings. understanding one’s own culture may requir e additional study. Hong Kong would not have survived withou t food and water from Mainland China. values. 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. symbols.7 Benefits of International Marketing International Marketing affects consumers daily in many ways. Inflation and Price Moderation:
. Sales and Profits: Foreign markets constitute a large share of the total business of many firms tha t have cultivated markets abroad. it is necessary to make a cross cultural analysis isolating the SRC influences. or norms.
The lack of imported product forces the consumers to pay more. with IBM and Macintosh becoming household names. Many MNCs have applied their knowledge of their experience in foreign countries to their domestic marketing with highly profitable results. Farm machinery. agricultural commodities. etc. Coca Cola can be universally advertised as "Adds Life". suitings. The more culturally unbounded the product is. requires volume to generate
. as an ingredient in shirtings. Computers in agriculture and other applications are used universally. thus helping fir ms to improve quality. Some of these are as under: Driving Forces: Market Needs: Many global opportunities have arisen because of the clustering of market opportunities worldwide. Kuala Lumpur or Harare. Without international trade. One can see in the streets of New York. the benefi t derived is not so much the understanding of the foreign culture. Technology has been one of the single most powerful driving forces to internati onalism. Standards of Living: Trade affords countries and their citizens higher standards of living than other wise possible. but that i s not the point. These include market and marketi ng related variables. youth with the same style and brand of basketball shirts or American Football shorts. Technology: This standardized approach can be aided and abetted with technology. Organizations have found that similar basic seg ments exist worldwide and. Employment: Unrestricted trade has been proven to improve world’s GNP and enhance employment g enerally for all nations. for example. Rarely is technology culturally bound. can be met with a global orientation. This is certainly true of many veterinary p roducts. and curtain material can be globall y marketed as natural and fashionable. Life in many countries would have been much more difficul t had it not been for the import of strategic materials like many important meta ls. Without imports there is no incentive for the domestic firms to moderate their prices.8 Driving and Restraining forces affecting International Marketing Over the last few decades internationalism has grown because of a number of mark et factors which have been driving development forward. The imports can also be highly benefic ial to a country because they constitute reserve capacity for the local economy. product shortages would force people to pay more for less. 1. L ondon. The need to recoup large costs of re search and development in new products may force organizations to look at global markets to recoup their investment. the more a global clustering can take place and the more a standardized approach can be made in t he design of marketing programs. A new pesticide is available alm ost globally to any agricultural organization as long as it has the means to buy it. or appeal to a basic instinct " You can t beat the Feeling" or "Com e alive" as with the case of Pepsi. therefore. resulting in inflation and excessive profits for local firms. Cott on. over and above those fac tors which have been attempting to restrain it.The benefits of export are quite evident. The real bene fit is that the executive develops the knowledge of the marketing process in one’s own culture also. Global volumes allow continuing investment in R and D. Understanding of Marketing Process: When an executive is required to observe marketing in other cultures. One can question "what feeling?".
threats and re sources. • Scale Economics: The global company can take advantage of greater manufacturing volume to obtain traditional economies of scale in a single factory. Nestlè. Massey Ferguson and ICI find themselves "under pressure" from the market place and distributors alike to position their brands globally. whereby it failed to realize that th e ability to find. the expanding mem bership of the European Union is lowering barriers to trade within the region. Value added manufacturers like Cadbury. Beyer. Matsushita. that its international leverage is huge. Product Development Costs: The pressure for globalization is intense when new pr oducts require major investments and long periods of development time.profits for the development of new products. Sony. In Europe. GM. money and raw materials to enable it to c ompete most efficiently in world markets. GE. boiled water for its preparations. Toyota. trends. • A multi-product global giant like Nestle . Also. The h uge costs of developing new molecules cannot be recovered by any single national market and it has to be necessarily recovered in the global marketplace. Regional Economic Agreements: A number of multilateral trade agreements like NAF TA have accelerated the pace of global integration. Communications and Transport: Communications and transport are shrinking the glo bal market place. etc. buys so much raw material from a variety of out g rowers of different sizes. as well as packaging and instructions. with over £10 billion turnover annually . Leverage: Marketing globally also provides the marketer with four types of "leve rage" or "advantages". then it is in a position to dom inate terms. The pharm aceutical industry provides a striking illustration of this driving force. International Marketing does not work without a strong local team that can provide information about local marke t conditions. coupled with the literacy level to read the instructions properly. were not universal phenomena. Norsk Hydro. Kelloggs. Quality: International Marketing can generate greater revenue and greater operat ing margins. • Resource utilization: A major strength of a global company is its ability to sca n the entire world to identify people. which can hence be ploughed back for quality improvements and desig n. National Controls and Barriers: Every country protects local enterprise and inte
. finis hed products can be made by combining components manufactured in scale efficient plants in different countries. Nestle will not be in a hurry to repeat its disastro us experience of the "Infant formula" saga. In many c ases this may mean an adaptation in advertising appeals or messages. These are: • Experience Transfers: A global company can leverage its experience in any market in the world and apply them in other comparable markets. If it consum es a third of the world s cocoa output annually. are able to achieve world class quality. That is the reason why global companies like Nissan. Caterpillar. Restraining Forces: Management Myopia and Organizational culture: A company which is short sighted a nd ethnocentric will not expand geographically. • Global strategy: A global strategy is built on an information system that scans the world business environment to identify opportunities. operates in so many markets.
African and Caribbean countries enjoy favo ured status with EU member countries. f oreign investment. and peace in Vietna m as examples. was recently concluded in April 199 4 and ratified by most countries in early 1995. for example. The liberation of economies under World Bank sponsored struct ural adjustment programs has also given opportunities. helped reduce barriers. therefore. aided by the World Bank and the European Development Bank. . Some of these are as under: Economic Blocs: The principal forces have been the development of economic blocs like the Europe an Union (EU) and then the "economic pillars". have opened up the way for domestic growth and also. This is very true of coun tries like Zambia and Zimbabwe. Now an international reserve facility is available. 1.rests by maintaining control over market access and entry in both low and high t ech industries and advertising.9 The International Developments aiding International Marketing Several factors have contributed to the growth of the international economy post World War II. the world trading system had been restricted by discriminating trade practices. The latest round. The most favoured nation concept (MFN). Rec ently. liquidity was eased by the agreement that member nations to the IMF accept the Special Drawing Rights (SDR) in settli ng reserve transactions. non tariff barriers like exclusion deals. Under this deal. Encouraged by th is and the availability of finance. Foreign Exchange Base: Until 1969. This atmosphere of peace has also allowed the steady upward trend of domes tic growth and again opened up market opportunities domestically to foreign firm s. the World Bank has taken a very active role in the reconstruction and dev elopment of developing country economies. The only way global companies can overcome these barriers is to become “insiders” in every country in which they do business. A similar system exists with the European Union. whereby each country agrees to extend to all countries the most favourable terms that it negotiates with any country.8 bil lion of foreign investment in the stock exchange and mining projects have occurr ed in the early 1990s. Despite these trade agreements. This a ffected liquidity drastically. Uruguay. standards and administrative delays ar e more difficult to deal with. over Z$2. GATT: Until the General Agreement on Tariffs and Trade (GATT) after World War II. The break up of the former Soviet Union has opened up vast o pportunities to investors. global corporations have been able to expand into many markets. the Internationa l Monetary Fund (IMF) and the evolution of the World Trade Organization from the original General Agreement on Tariffs and Trade (GATT). the world economy traded on a gold and foreign exchange base.the World Bank (or International Bank for Reconstruction and Development to give its full name). where in the latter. Global Peace: Relative global peace has engendered confidence in world trade. GATT had the intention of producing a set of rules and principles to liberalize trad e. the "normalization" of South Africa. Peace in Mozambique. a point which will be expanded on late r.the Lomè convention. The "round" of talks began with Kennedy in the 60s and Tokyo of the 70s. After 1969. Acts of GOD:
This is often typical o f small scale organizations. This gradual chang e may involve moving from geographically adjacent markets to another. visits. ASEAN. but opened up opportunities for transport businesses and ser vices to serve the drought stricken areas. for ex ample. do mestic based export agents. In the case of fresh cut flowers . or products which can be imported on more favo urable terms.11 Liberalization and International Marketing Liberalization has been the dominant force in international business in the deve
. Other sources: These may include banks. espe cially yellow maize from the USA and South America. for example from Ha rare to London or Amsterdam and Frankfurt. and. exhibiti ons. Intermediaries: These may be of four types . This may happen in a number of ways: Foreign customers: Unsolicited enquiries through word of mouth. Not only did this give a mar ket for maize only. mangoes in the UK. developed country consumer centres. which gives the impetus to more formal and larger operations . 1. not all globalization takes place like this. market opportunities open up through "Acts of God". New countries are trying to join these blocs all the time. Sometimes an intermediary ma y provide export services in an attempt to reduce their own costs on the export of their own produce. Lusaka or Nairobi may never see Zimba bwe flowers. because of the economic. Importers: Importers may be looking for products unavailable in domestic markets .Sometimes. An example of these is flowers from Kenya to Holland. Behavior as an international marketing impetus: It was seen earlier in the inter nationalization process that organizations may evolve from exporting surplus or serving ad hoc enquiries to a more committed global strategy. Canada and Mexico have created market opp ortunities and challenges. 1. peop le can see what is happening elsewhere and this can cause desire levels to rise dramatically. Only recently has television been introduced into Tanzania. say. These will be expanded on later in this text. Speedy communications like air transp ortation and electronic data transmission and technology have "shrunk" the world . as they strive to get into the new market based economies rising fr om the ruins. Similarly . and experience through others may result in orders. for e xample from the Southern African Development Conference (SADC) to Europe.domestic based export merchants. social and other advantages they bring. Thi s is called "piggybacking". Collapse of old Communist blocs: No doubt a great impetus to global trade was br ought about by the development of economic blocs. Costs and time have reduced enormously and with the advent of television. Development Author ities or even individual executives. The great drought of 1992 in Southern Africa necessitated a large influx of foreign produce. Howeve r. by the collap se of others. closer to the average Tan zanian. these may go to major. for example. and this has brought the world and its markets. In analyzing behavior one has not to generalize. conversely. export organizations.10 Impetus to International Marketing involvement Individuals or organizations may get involved in International Marketing in a ra ther unplanned way. export management companies or cooperative organizat ions. the North American Free Trade Agreement (NAFTA) with the USA. by acting as a representative for other organizations. the collapse of the old communist blocs has given rise to opportunities for or ganizations. What is certain is that in all stages. the balance of opportunity and risk is considered. Blocs like the European Union (EU).
liberalization has spread to many other sectors of the economy. The two ways that this is achieved are by privati zation and deregulation. as well as opening the sector to other entrants. allowing expansion within the sector or diversification into other sectors. There were four main reasons for the direct invo lvement of the state in a country’s industrial structure in the past fifty years. Some have travelled further down the path than others. first it is necessary to place the issues in an historic al perspective.which typically d ominates the operations of a private sector company . with the theme being the exposure of the public sector pr oduction process to free market forces. Spread of Liberalization: On May 1. then there may be a case for the government to step in. One example of market failure is externalities (which is an economist’s word for side effects). It is likely to remain important and deve loping countries will increasingly feel its effects. but in terms of direction it has been one-way traffic.mor e competition. The concept was that the benefits from the efficient operation of the enterprise would be felt by the whole population
. iii. Deregulation: Easing the rules under which a firm or an industry operates. with increasing speed. US financial markets were subjected to a burst of deregulation w hich triggered a price war in the market for financial services. It is worth ending a moment looking at the reasons why industrie s were nationalized and markets were regulated in the post-war world. communications. Although the mechanisms and motivations involved can be complex. Market failure: If the market is not allocating resources efficiently. Strategic: Some industries were seen as key to the military strength of a nat ion.can be replaced by other o bjectives defined by the state. there are very few states which impose a higher degree of regulation on economic acti vity than was the case two decades previously. The most commonly understood meaning is the sale of state owned enterprises. across the globe. ii. Ideology: State ownership was firmly embedded in the political ideology of the left wing parties of many countries. but it can also refer to the contracting ou t of a service to a private enterprise. Definition of Liberalization: Liberalization is the act of reducing government-imposed constraints on the beha vior of actors in the economy. Privatization: Several aspects exist. transport. The conseq uence of public sector involvement is that the profit motive . Fewer restrictions on price is another recurring theme . more opportunities for strong firms and fewer places to hide for weak ones. Steel. i. energy and aerospace are examples of indu stries which were frequently brought under public ownership for reasons of natio nal security. 1975. In the two deca des since then. Background of Liberalization: Before considering how privatization and deregulation have changed the global en vironment for business. while the theme crossed the Atlantic into Western Europe and has since traveled. the consequences are straightforward . In the second half of the 1990s.loped world over the past two decades.
. Increased competition is usually most apparent in the product market. It will move from acting in a way prescribed by the government to being primarily governed by the search for profits. In a diluted form. Note that the British coal mini ng industry collapsed after the privatisation of electricity utilities. or on achieving some level of efficiency. Utilities such as water. The quality of the product or the service provided by a nationalized industry was frequently poor a nd as it was often a monopoly supplier. the consumer suffered. as did management which was more bureaucratic than entrepreneurial. Without the discipline of market forces. Transfer of ownership from the public to the private sector leads to a change in the objectives of the firm. more produc tive enterprises would be the result.and not just the rich. By the 1970s. It also occurs in the market for inputs for example privatizing and splitting up a national electricity generator will c reate pressure on prices of inputs such as coal. the price mechanism had not functioned to link the wishes o f consumers with the responses of producers. heavy state involvement meant slow growth and stagnant incomes. iv. nationalized industries were often inefficient and were a burden on the public purse. By exp osing firms to greater competition it was anticipated that stronger. Labor militancy and restrictive working practices added to the problems. The system had also failed to insti ll in companies any sense that their survival was dependent on providing a certa in level of quality. The Economic Case for Liberalization: The rise of right-of-center parties in several developed democracies in the 1980 s meant a shift away from left-wing attitudes and towards a stronger belief in t he merits of free markets and a more limited role for the government. objectives of economic efficiency (such as setting prices equal to marginal costs) were often overridden by political factors such as favoring cer tain interest groups or supporting macroeconomic objectives like low inflation. improved quality and more innovative behavior. Technology: Many industries were seen as “natural” monopolies and it appeared im practical to have competition in some sectors. In addition. the end resul t should be that the consumer receives a better service and a wider choice at a lower price. it was becoming apparent that there were fundamental problems with some nationalized or heavily regulated industries. which meant the removal of the underlying subsidy to coal producers that h ad resulted from the nationalized electricity generator buying British coal at a bove market prices. as firms try to make better products at lower costs. The most extreme example of a change in attitude was seen in Eastern Europe afte r 1989. the probl ems were similar to those. when there was a radical reappraisal of the role of the state in the eco nomy. Heavily regulated industries lacked innovation and dynamism. as one r esult was a search for the lowest price input (which was either gas or foreign c oal). Prior to that. gas and electricity supply and telecommunications are common examples. This was l argely predicted on the “Chicago school” argument that the state did not have enough information to be able to direct resources as efficiently as the market. with priva tized airlines or telecommunications providers more eager to improve service and cut prices to generate new business. Projected across th e whole economy. which eventually proved fatal to the former Eastern B loc. It is this se arch that brings the benefits to the economy in the form of more efficient use o f resources. If the process is a success.
Polycentricism is the same as ethnocentrism. Similarly. A company marketing only within its national boundaries only has to consider domestic competition. looking across the whole economy in what is labeled “general equilibrium analysis” must be generated by raising taxes on other efficient private sector producers. the consequences are straight forward . a poor telecom munications network has a negative impact on all users of telecoms.Inefficiency aspects of state control are more complex than simply noting the fa ct that a nationalized car company makes unreliable cars and lose money. with the focus on regional orientation. 2. or that a state-owned telecommunications company takes months to install a new phone. it views the world as one market an d creates products that will only require minor modifications to fit into any re gional marketplace. Demand for most products is not affected by many cyclical factors of recessio n and seasonal factors like climate. International marketing is a revolutionary shift. 3. it is not an evolutionary p rocess. This inevitably plac es them at a disadvantage against foreign competition. more opportunities for strong firms and fewer places to hide for weak ones. When a company becomes a global marketer. 6. It is likely to remain impor tant and developing countries will increasingly feel its effects. 4. Regiocentrism orientation is an attitude or orientation toward internationali zation. T he car company will be soaking up government revenues which.
. handicapping all business users in the economy. 5. Self Assessment Questions II State whether the following statements are true or false: 1. Although the m echanisms and motivations involved can be complex.more competition. Liberalization has been the dominant force in expansion of international busines s in the developed world over the past two decades.