The Scope

and
Challenge of
International
Marketing

Chapter 1

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives

LO1 The benefits of LO2 The changing face of

international markets U.S. business

LO4 The importance of the

LO3 The scope of the self-reference criterion
international marketing task (SRC) in
international marketing

LO5 The increasing

LO6 The progression of
importance of global
becoming a global marketer
awareness

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The Global Perspective • All the activity associated with the
development, production and marketing of
Global Commerce commercial aircraft and space vehicles require
Thrives During Peace millions of people from around the world to
work together
Boeing 787

1-2
The mobile phone industry promotes global dialogue and
therefore peace.

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Events and Trends
Affecting Global Business
The rapid growth of the World Trade
Organization and regional free trade areas
(EU)

The trend toward the acceptance of the free

market system among developing countries
in Latin America, Asia, and Eastern Europe

The growing impact of the Internet, mobile

phones, and other global media on the
dissolution of national borders

1-4
 Increasing globalization of
markets

The Increasing number of U.S.

Internationalization companies that are foreign
of U.S. Business controlled

Increasing number of foreign

companies building and
buying manufacturing plants
in the U.S.

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Brands Nationality

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Exhibit 1.1 Foreign Acquisitions of U.S. Companies, Sources: Compiled from
annual reports of listed forms, 2012.

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Exhibit 1.1 Foreign Acquisitions of U.S. Companies, Sources:
Compiled from annual reports of listed forms, 2012.

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International Marketing
• The Performance of International business
activities has to be designed to:
• Plan
• Price
• Promote, and
• Direct the flow of a company’s goods
and services to consumers or users in
more than one nation for a profit
• Difference between International and
Domestic Marketing
• The Uniqueness of Foreign Marketing

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The
International
Marketing
Task

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 ▪ Ability to effectively interpret
the influence and impact of the
culture in which you hope to do
business
• Cultural adjustments
Environmental ▪ Be aware of the frame of
Adaptation reference to modify your
reaction to situations
▪ 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 right adaptation to the
environmental differences from one
market to another
• Primary obstacles to success in
international marketing
• SRC (self-reference criterion)
• Associated ethnocentrism

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 ▪ Self-Reference
Criterion (SRC) is an
unconscious reference
to one’s own cultural
values, experiences,
and knowledge as a
basis for decisions.

Self-Reference
Criterion
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Ethnocentrism

▪ Ethnocentrism is
the notion that
people in one’s own
company, culture,
or country know
best how to do
things.

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Self-Reference
Criterion &
Ethnocentrism

▪ Both the SRC and ethnocentrism

impede the ability to assess a foreign
market in its true light.
• 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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 Home-country vs. foreign-country cultural traits,
Define business problem or goal habits, or norms
Consultation with natives of the target country

Make no value judgments

Examine it carefully to see how it complicates

Isolate the SRC influence the problem

Without SRC influence

Redefine the problem Solve for the optimum business goal situation

Framework
for Cross-cultural Analysis Read
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Developing Global
Awareness
To be globally aware is to have:
▪ tolerance of cultural differences;
Understanding cultural differences
and accepting and working with
others whose behavior may be
different from yours
▪ knowledge of cultures, history, world
market potential, and global
economic, social, and political trends

1-19
 Read
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 NO DIRECT FOREIGN
MARKETING
INFREQUENT FOREIGN
MARKETING
REGULAR FOREIGN
MARKETING

International
Marketing
Involvement
INTERNATIONAL GLOBAL MARKETING
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 stimulate a
company’s interest to seek
additional international sales

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 Temporary surpluses caused by
variations in production levels or
demand may result in infrequent
marketing overseas. Sales to foreign
markets are made as goods are
available, with little or no intention of
maintaining continuous market
representation.
Infrequent Foreign Marketing
As domestic demand increases and
absorbs surpluses, foreign sales
activity is reduced or withdrawn. In
this stage, little or no change is seen
in company organization or product
lines.
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Firm has permanent Products allocated
Firm employs Firm depends on
production capacity or adapted to
domestic or foreign profits from foreign
devoted to foreign foreign markets as
intermediaries markets
markets demand grows

Uses its own sales Sales subsidiaries in

force important markets

Regular Foreign Marketing

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 Company treats Market segmentation
More than half of
world, including decisions no longer
revenues come from
home market as one focused on national
abroad
market borders

The best people in The entire operation

the company begin to begins to take on a
seek international global perspective.
assignments

Global Marketing
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 1-Domestic Market
Orientation

Strategic 2-Multidomestic
Orientation Market Orientation

3-Global Market
Orientation

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Domestic Market Orientation

DOMESTIC INTERNATIONAL PRIME MOTIVE IS FIRM’S MINIMAL EFFORTS

COMPANY SEEKING OPERATIONS TO MARKET ORIENTATION ARE MADE TO
TO EXTEND THE VIEWED AS SURPLUS REMAINS ADAPT PRODUCT
SALES OF ITS SECONDARY TO DOMESTIC BASICALLY OR MARKETING
DOMESTIC AND AN PRODUCTION DOMESTIC MIX TO FOREIGN
PRODUCTS INTO EXTENSION OF ITS MARKETS
FOREIGN DOMESTIC
MARKETS, OPERATIONS

FIRMS WITH THIS

APPROACH ARE
CLASSIFIED AS
ETHNOCENTRIC

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Multidomestic Market Orientation

Company recognizes the importance & differences of offshore business

to the organization, its orientation may shift to a multi-domestic market
strategy.

Company acts such that market success requires an almost independent

program for each country:
separate marketing strategies for each
market on a country-by-country basis,
country
separate marketing mixes, (little
interaction with each other, products
independently marketing objectives
are adapted for each market,
and plans,
advertising campaigns are localized,
pricing and distribution decisions)

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Figure 7.24: Baked beans flavored
with curry? This H. J. Heinz product is
very popular in the United Kingdom.
• Similarly, food company H. J. Heinz adapts
its products to match local preferences.
Because some Indians will not eat garlic and
onion, for example, Heinz offers them a
version of its signature ketchup that does not
include these two ingredients.
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Global Market Orientation

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

Firm strives for

efficiencies of scale so • Markets are still segmented
develops a • Each country or region is considered side by side
with a variety of other segmentation variables such
standardized marketing as consumer characteristics (age, income, language
mix applicable across group), usage patterns, and legal constraints
national boundaries

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 International
Strategy
A firm using a multidomestic strategy sacrifices efficiency
in favor of emphasizing responsiveness to local
requirements within each of its markets

A firm using a global strategy sacrifices responsiveness to

local requirements within each of its markets in favor of
emphasizing efficiency.

A firm using a transnational strategy seeks a middle

ground between a multidomestic strategy and a global
strategy. Such a firm tries to balance the desire for
efficiency with the need to adjust to local preferences
within various countries.

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Factors Favoring Faster
Internationalization
COMPANIES WITH EITHER HIGH
TECHNOLOGY AND/OR MARKETING-BASED
RESOURCES ARE BETTER EQUIPPED TO
INTERNATIONALIZE THAN MORE
TRADITIONAL MANUFACTURING
COMPANIES (TSENG ET. AL., 2007)
SMALLER HOME MARKETS AND LARGER
PRODUCTION CAPACITIES FAVOR
INTERNATIONALIZATION (FAN & PHAN,
2007) AND
Read
FIRMS WITH KEY MANAGERS WELL
NETWORKED INTERNATIONALLY ARE ABLE
TO ACCELERATE THE
INTERNATIONALIZATION PROCESS
(FREEMAN AND CAVUSGIL, 2007)
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 Read
The Orientation of International
Marketing

ENVIRONMENTAL/CULTURAL RELATE THE FOREIGN ILLUSTRATE HOW CULTURE THE CULTURAL ENVIRONMENT
APPROACH ENVIRONMENT TO THE INFLUENCES THE MARKETING WITHIN WHICH THE MARKETER
MARKETING PROCESS TASK MUST IMPLEMENT
MARKETING PLANS CAN
CHANGE DRAMATICALLY FROM
COUNTRY TO COUNTRY

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 Read

Foreign
Policy’s
Global Top
20

Exhibit 1.4

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World Trade Organization
▪ The World Trade Organization is an
intergovernmental organization that regulates
international trade. The WTO officially commenced
on 1 January 1995 under the Marrakesh Agreement,
signed by 124 nations on 15 April 1994, replacing the
General Agreement on Tariffs and Trade, which
commenced in 1948.

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Free Trade Area
▪ A free-trade area is the region encompassing a trade
bloc whose member countries have signed a free-
trade agreement. Such agreements involve
cooperation between at least two countries to
reduce trade barriers – import quotas and tariffs –
and to increase trade of goods and services with
each other.

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Free Market System
▪ In economics, a free market is a system in which the
prices for goods and services are determined by the open
market and by consumers. In a free market the laws and
forces of supply and demand are free from any
intervention by a government, or by other authority.
▪ A 2007 study showed that the most economically free
countries in the world are Hong
Kong, Singapore, Australia and the United States. In a free
market economy the law of supply and demand regulates
production and labor.

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