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Introduction to International Marketing

CH: 1

Chapter

1
Introduction to
International Marketing

Copyright 2010, P K Vasudeva

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P K Vasudeva

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CH: 1

Introduction to International Marketing

International
Marketing:
Meaning,
Differences With Domestic Marketing

1 2

Scope

and

Definition of marketing should be acceptable as long as it captures the


essential idea and as long as the strength and the weaknesses of the
definition are acknowledged.
Marketing can be conceived as an integral part of two processes viz.
technical and social. So far as the technical process is concerned, domestic
and international marketing are identical. The technical process includes
non-human factors such as produce, price, cost, brand etc.
According to Philip Kotler marketing is analysing, organising, planning, and
controlling of the firms customers impinging resources, policies, activities
with a view to satisfying the needs and wants of a chosen customer group at
a profit.
According to AMA, international marketing is the multinational process of
planning and executing the conception, pricing, promotion, and distribution
of ideal goods and services to create exchanges that satisfy individual and
Prof.S Guha
organisational objectives.
Cont.
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International Marketing (4th Edition)

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Introduction to International Marketing

CH: 1

The definition of international marketing has various connotations:

Firstly, it makes it clear that what is to be exchanged is not restricted to


tangible products but can include concepts and services as well.

Secondly, the definition removes the implication that international marketing


applies only to market or business transactions.

Thirdly, the definition recognises that it is improper for a firm to create a


product first and then look for a place to sell it.

Finally, the multinational process implies that the international marketing


process is not a mere repetition of using identical strategies abroad. The 4
Ps of marketing (product, place, promotion and price) must be integrated
and coordinated across countries in order to bring about the most effective
marketing mix.

Prof.S Guha

Cont.

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Introduction to International Marketing

CH: 1

Scope
The scope of international marketing is to have a borderless world like the
multinational companies Coca Cola, Pepsi, McDonald, Gillette and so on. Their
products and body marketing mix elements are both international and local in
nature. A central issue in international marketing is how to tailor the international
marketing concept to fit a particular product or business.
Differences with Domestic Marketing
The striking difference between international and domestic marketing lies in the
environment in which the two take place. The important points of differences
between international and domestic marketing are:
1.

Sovereign political entities.

2.

Different Legal Systems

3.

Different Monetary Systems

4.

Lower Mobility Factors of Production

5.

Differences in Market Characteristics

6.
1 4

Differences in Procedure and Documentation


International Marketing (4th Edition)

Prof.S Guha

Cont.

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CH: 1

Introduction to International Marketing

Concepts Of International Marketing

The New Concept Of Marketing And The Four Ps

The Strategic Concept Of Marketing

The Three Principles Of Marketing

Customer Value And The Value Equation

Competitive Or Differential Advantage

Boundary less
Marketing

Customer needs and


wants

Marketing

R&D

Engineering

Customer
Value

Manufacturing

Cont.
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Introduction to International Marketing

CH: 1

Differences: Domestic Marketing, International Marketing, International


Trade and International Business
Domestic Marketing
International marketing is identical to the domestic marketing as far as
technical aspect is concerned but international marketing, to the extent, it is
visualised as a social process, differs from domestic marketing.
International Marketing
International marketing refers to marketing carried out by companies
overseas or across national borders. This strategy uses an extension of the
techniques used in the home country of a firm.
International Trade
International trade is exchange of capital, goods, and services across
international borders or territories.
International Business
International business is a term used to collectively describe topics relating
to the operations of firms with interests in multiple countries.
Cont.
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Introduction to International Marketing


International Market Segmentation
Geographic Segmentation
Importance of Market Definition Criteria

4
3.5

Region

Quality

2.5

Price Level

Product/Technology

1.5

Customer Group

Application

0.5
0

Source: Hermann Simon, Hidden Champions: Lessons from 500 of the World's Best Unknown Companies (Boston, MA:
Harvard Business School Press, 1996), p.45. Copyright 1996 by Harvard Business School Publishing Corporation.
Reprinted by permission of Harvard Business School Press.
Cont.
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Introduction to International Marketing


Psychographic Segmentation

Psychographic segmentation involves grouping people in terms of their attitudes,


values, and lifestyles.
Psychographic Profiles of Porsche's American Customers
Category

All Owners

Top Guns

27%

Driven and ambitious: Care about power and control; expect


to be noticed.

Elitists

24%

Old money; a car-even an expensive one - is just a car, not an


extension of one's personality.

Proud Patrons

23%

Ownership is what counts; a car is a trophy, a reward for working


hard; being noticed doesn't matter.

Bon Vivants
Fantasists

17%
9%

Description

Cosmopolitan jet setters and thrill seekers; car heightens


excitement.
Car represents a form of escape; don't care about impressing
others; may even feel guilty about owning car.

Source: ALEX III, Taylor, Porsche Slices up its Buyers, Fortune 16th January, 1995 p. 24
Cont.
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Introduction to International Marketing

Backer Spielvogel & Bates International Scan


BSB's International Scan Segmentation Study

120%
100%

Adapters

80%

Traditionals

60%

Pressured

40%

Achievers

20%

Strivers
Kingdom

United

States

United

Japan

0%

Cont.
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Introduction to International Marketing

Young & Rubicams Cross-Cultural Consumer Characterizations (4Cs)


Attitudes
Resigned Poor
Unhappy
Distrustful
Struggling Poor
Unhappy
Dissatisfied
Mainstreams
Happy
Belong
Aspirers
Unhappy
Ambitious
Succeeders
Happy
Industrious
Transitionals
Rebellious
Liberal
Reformers
Inner growth
Improve world

Work

Lifestyle

Purchase Behaviour

Labor
Unskilled

Shut-in
Television

Staples
Price

Labor
Craftsmen

Sports
Television

Price
Discount stores

Craftsmen
Teaching

Family
Gardening

Habit
Brand loyal

Sales
White collar

Trendy sports
Fashion magazines

Conspicuous
Credit

Managerial
Professional

Travel
Dining out

Luxury
Quality

Student
Health field

Arts/Crafts
Special-interest magazines

Impulse
Unique Products

Professional
Reading
Entrepreneur
Cultural events

Ecology
Homemade/grown

Source: Strategic Marketing Management, Planning implementation , Richard M.S. Wilson & Colin Gilligan, 2007

1 10

International Marketing (4th Edition)

Cont.

Prof.S Guha
Copyright
2010, P K Vasudeva

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Introduction to International Marketing

CH: 1

Influences On Marketing Plans And Budgets


In preparing a budget or plan, the following factors are important:

Market Potential

Competition

Impact of Substitute Products

Process

Share of Market

Informal Control Methods

Similarities between International Marketing and Domestic Marketing

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CH: 1

Characteristics of Multinational Corporations

Multinational Corporations (MNCs) are major players in the world of


international business. In India, the mention of an MNC usually elicits mixed
reaction among the Indians.

In defence of MNCs more and more of them have been trying to be


responsible members of the society. For example, Pepsi and Coke are
contributing a lot for the development of sports especially cricket in India.

The term MNC implies bigness but bigness also has a number of
dimensions such as market value, sales, profits, and return on equity when
used to identify the largest MNCs will yield varying results.

TNI is the abbreviation for transnationality index. The transnationality index


is calculated as the average of three ratios: foreign assets to total assets,
foreign sales to total sales and foreign employment to total employment.

According to Ahroni, an MNC has three significant dimensions: structural,


Prof.S Guha
performance, and behavioural.
Cont.
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Introduction to International Marketing

100Ranking by:
Foreign
assets

TNI

II

Corporation
General
Electric

Home
Economy

Industry

Assets
Foreign

Total

Sales
Foreign

Employment
Total

Foreign

No. of affiliates

(Per
cent)

Foreign

Total

II

1184

1527

77.5

82.4

77

210

36.7

335000

42.9

91

158

57.6

78100

96200

79.4

417

602

69.3

United States

Electrical &
electronic
equipment

412692

673342

59815

149702

155000

316000

50.1

United
Kingdom

Telecommunications

196396

220499

39497

52428

51052

61672

United States

Motor vehicles

175254

476078

65288

192604

194000

United
Kingdom

Petroleum
expl./ref./distr/

161174

206914

200293

253621

70

42

94

85

72

16

61

29

80

Royal Dutch /
Shell Group

United
Kingdom,
Netherlands

Petroleum
expl./ref./distr/

151324

219516

184047

306731

92000

109000

71.1

507

964

52.3

38

43

ExxonMobil

United States

Petroleum
expl./ref./distr/

143860

208335

248402

358955

52920

84000

67.1

256

331

77.3

64

95

Japan

Motor vehicles

131676

244391

117721

186177

107763

285977

51.6

141

391

36.1

79

56

Toyota Motor
Corporation
Ford Motor

United States

119131

269476

80325

177089

160000

300000

47.6

201

285

70.5

27

55

Total

108098

125717

132960

178300

64126

112877

72.5

401

567

70.7

10

94

36

91478

202431

26060

63578

17801

161560

32.4

218

276

79

11

73

51

France

Telecommunications

87186

129514

25634

61071

82034

203008

49.9

175

243

72

12

51

54

Electricite de
France
France
Telecom
Volkswagen

Motor vehicles
Petroleum
expl./ref./distr/
Electricity, Gas and
water

Germany

82579

157621

85896

118646

165849

345214

57.6

199

279

71.3

13

63

74

RWE Group

Germany

82569

128060

23390

52081

42349

85928

52.9

248

432

57.4

14

53

88

Chevron Corp

United States

81225

125833

99970

193641

32000

59000

56.8

106

234

45.3

15

77

73

E.ON

Germany

80941

149900

29148

83177

45820

79947

48.8

367

639

57.4

16

24

52

Suez

France

Motor vehicles
Electricity, Gas and
water
Petroleum
expl./ref./distr/
Electricity, Gas and
water
Electricity, Gas and
water

78400

95085

39565

51670

96741

157639

73.5

440

613

71.8

17

87

59

Deutsche
Telekom AG

Germany

Telecommunications

78378

151461

31659

74230

75820

243695

41.8

266

382

69.6

Germany

Electrical &
electronic
equipment

66854

103754

64447

96002

296000

461000

65.3

877

1177

74.5

18

40

47

Vodafone
Group PLC
General
Motors
British
Petroleum
Company
PLC

Siemens AG

France
France

Cont.

1 13

TNI

Total

International Marketing (4th Edition)

Copyright 2010, P K Vasudeva

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Introduction to International Marketing

19

12

20

11

Honda Motor
Japan
Company Ltd.
Hutchison
Hong Kong,
17
Whampoa
China
70

Motor vehicles

66682

89923

69791

87686

126122

144785

80.3

141

243

58

Diversified

61607

77018

24721

31101

165590

200000

80.8

75

83

90.4

Top 20 MNCs Assets, Sales, Employment, TNI, No. of Affiliations

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Introduction to International Marketing

Process of Internationalisation
Andersen has proposed his own U-Model, which has received mixed empirical
support. According to this model, there are four stages:

There are no regular export activities.

The export is via independent representatives (agents).

Establishment is of an overseas sales subsidiary.

There is overseas production/manufacturing.

Another study found evidence to support the hypothesis that there are four
identifiable stages in a firms internationalization. These four stages are:
i.

Non exporters.

ii.

Export intenders.

iii.

Sporadic exporters.

iv.

Regular exporters.

Prof.S Guha
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Introduction to International Marketing

CH: 1

Benefits of International Marketing

Endurance

Progress of overseas markets

Sales promotion

Diversification.

Inflation and wholesale price index

Employment and placement

Standard of living/ style.

Understanding Marketing Process

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Introduction to International Marketing

Transnational Corporations
2007 Sales (Millions)

2007 Market Share

General Motors

8.8

16.2%

Ford

8.9

12.0

Toyota

12.8

21.0

Volkswagen

6.6

9.9

Chrysler/Daimler-Benz

6.0

9.4

Fiat

3.9

6.3

Chrysler

3.9

6.3

Nissan

3.8

6.2

Peugeot Citrogen

3.1

4.9

Honda

3.0

4.8

Mitsubishi

3.9

4.6

Renault

2.9

4.5

Suzuki

2.8

4.4

Hyundai

2.2

3.3

BMW

2.2

3.2

Daimler-Benz

2.1

3.1

Total Vehicle Sales Worldwide


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Cont.

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Introduction to International Marketing

Diesel Vehicle Sales


1100
1000
900
800
700
600
500
(thousand)
2004
2005
2006
2007
2008
2009

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

683

665

974

802

800

897

796

521

844

800

802

769

752

696

1015

850

820

962

792

681

883

778

819

813

772

724

1089

819

821

974

803

579

879

817

620

769

796

706

1083

822

899

991

880

623

883

895

883

839

806

777

1029

904

846

886

766

492

784

717

597

619

551

535

Prof.S Guha

Cont.

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Introduction to International Marketing

Worldwide HEV (Hybrid Electric Vehicle) Sales


60
55
50
45
40
35
30
25
20
15
10
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2004

10.2

11.9

18.1

13.2

14.5

14.3

15.3

12.1

12.9

13.8

13.2

13.7

2005

14.7

17.2

24.6

26.1

24.1

25.5

25.3

30.4

27.9

24.1

24.3

26.2

2006

23.8

22.2

28.8

29.1

32.8

34.1

37.2

38.2

388

31.7

31.3

34.8

2007

28.8

35.4

81.7

38.3

31.3

30.1

43.2

37.1

38.1

38.3

48.3

43.3

2008

38.8

36.6

31.6

38.1

50.3

42.8

48.1

38.5

41.1

37.8

30.2

20.2

2009

21.8

Cont.
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Introduction to International Marketing

World Market
Highest Returns on Revenues
Global
500
Rank

Ran
k

Highest Returns on Assets


2007
Profits
as % of
revenues

Globa
l 500
Rank

Rank

Biggest Employers

2007
Profits
as % of
assets

Global
500
Rank

Rank

2007
number
of
employees

Akzo Nobel

455

69.1

Akzo Nobel

455

45.4

Wal Mart Stores

2055000

CVRD

235

36.7

BHP Billiton

183

23.1

State Grid

24

1486000

Rosneft Oil

203

35.5

Microsoft

136

22.3

China National Petroleum

25

1117345

BHP Billiton

183

34

Royal Ahold

137

19.7

U.S. Postal Service

83

785929

Novartis

181

30

Schlumberger

358

18.6

Sinopec

16

634011

Groupe Danone

423

28.4

Norsk Hydro

472

18.3

Hon Hai Precision Industry

132

550000

Microsoft

136

27.5

Nokia

88

17.9

Carrefour

33

490042

Petronas

95

27.4

Rosneft Oil

203

17.2

Deutsche Post

55

475100

National Grid

351

27.3

Altria Group

190

17.1

Agricultural Bank of China

223

447519

10

Occidental Petroleum

420

26.7

10

Petronas

95

17.1

10

Gazprom

47

436096

11

Altria Group

190

25.7

11

Glaxosmithkline 151

16.9

11

United Parcel Service

142

425300

12

Anglo American

266

24.7

12

Exxon Mobil

16.8

12

China Telecommunications

288

3919864

13

Rio Tinto Group

263

24.6

13

America Movil

283

16.8

13

McDonalds

359

390000

14

Oracle

462

23.7

14

3M

327

16.6

14

Hitachi

48

389752

15

Glaxosmithkline

151

23

15

Pepsico

184

16.3

15

International Business Machines

46

386558

16

Kookmin Bank

461

22.3

16

Anglo American 266

16.3

16

Siemens

37

386200

17

Schlumberger

358

22.2

17

Lukoil

90

16

17

Indus. & Comm. Bank of China

133

381713

18

China Construction Bank

181

22

18

181

15.8

18

Citigroup

17

380500

19

Sabic

227

21.4

19

Novartis
Oil & Natural
Gas

335

15.8

19

Target

102

366000

20

U.S. Bancorp

417

21.3

20

CVRD

235

15.4

20

Compass Group

401

365630

Source: Fortune Vol 158, No. 2, July 21, 2008

Cont.

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CH: 1

Introduction to International Marketing


Management Orientations

The orientations- collectively known as the EPRG framework are summarised


in Figure.
Orientations of Management and Companies

Ethnocentricity
Home country is
superior; sees
similarities in foreign
countries

Regiocentric
Sees similarities and differences in a world region; is
ethnocentric or polycentric in its view of the rest of the
world.

Polycentric
Each host country is unique;
sees differences in foreign
countries

Geocentric
World view; sees similarities
and differences in home and
host countries

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