International Marketing Concept

Globalization
‡ Globalization is defined as a process of economic integration of the entire world through the removal of barriers to free trade and capital mobility as well as through the diffusion of knowledge and information It is a historical process of moving at different speeds in different countries and in different sectors One of the results is that firms, whose output was previously significantly more limited by the size of their domestic market, now have the chance to reap greater advantages from economies of scale by µbeing global¶

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The revolution in information and communication technology (ICT) in the last 10-15 years has also made communication much cheaper and faster The transaction costs of transferring ideas and information have decreased enormously and the arrival of the Internet has accelerated this trend This implies that countries with advanced technologies are best placed to innovate further Moreover, unlike in the past when inventions and innovations were considered breakthroughs, today they are a regular occurrence This implies that the transformation process is continuous and has far-reaching consequences both for the overall organization of firms and for policy making

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Global firms rely on technological innovation to enhance their capabilities In this sense, technology is both driven by and is a driver of globalization and makes it possible to speak of the new µtechnologically-driven character¶ of the global economy.

Globalization Index
‡ ‡ Ireland is the most global country followed by Singapore, Switzerland, Netherlands, and Finland For arriving at a globalization index, the following key components of global integration have been assessed ‡ Economic Integration: Trade, portfolio, foreign direct investment , and investment income ‡ Personal Integration: Telephone, travel, remittances, and personal transfers ‡ Technology Integration: Internet users, Internet hosts, and secure Internet services

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Political Integration: International organizations, UN peacekeeping, treaties, and government transfers. India ranks as the 61st global integrated country out of the 62 countries.

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Globalization of Production
‡ The firms evaluate various locations worldwide for manufacturing activities so as to take advantage of local resources and optimize their manufacturing competitiveness The firms from the USA, the EU, and Japan manufacture at overseas locations more than three times of their exports output produced in their home country The intra-firm export-import transactions constitute about one-third of their international trade Toyota, one of the world¶s leading automakers, has a total of 51 overseas manufacturing companies

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in 26 countries and markets, and markets cars worldwide through its overseas network consisting of more than 160 importers/distributors and numerous dealers.

Globalization of Markets
‡ Marketing gurus in the last two decades have extensively argued over the benefits of globalization of markets over customized marketing strategies Prof. Theodore Levitt in his path-breaking paper µGlobalization of Markets¶ strongly argued in favour of the emergence of global markets at a previously unimagined magnitude Technology as the most powerful force has driven the world towards converging commonality Technological strides in telecommunication, transport, and travel have created a new consumer segment in the isolated places of the world

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Prof. Kenichi Ohmae also advocates the concept of a borderless world and need for universal products for global markets Standardized products are increasingly finding markets across the globe The products from global brands such as General Electric, Kodak, Colgate, Sony, Benetton are few of the several brands preferred and bought by the consumers around the world Such globalization of the world market has increased the scope for marketing activities internationally and has also increased the competitive intensity of the global brands in the market.

The Concept of International Marketing
‡ ‡ In the mid-fifties, the orientation of markets shifted from selling to marketing Earlier, under the selling concept, the focus was on selling products through aggressive selling and sales promotion programmes leading to sales maximization, which in turn was expected to maximize a firm¶s profit earnings On the other hand, under the marketing concept, the target market is the starting point and the focus is on customers¶ needs The profit maximization under the marketing concept is achieved through customer satisfaction by way of integrated marketing efforts

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Prof. Theodore Levitt explains this distinction by stating that selling focuses on the needs of the sellers while marketing focuses on the needs of the buyers Selling is preoccupied with the seller¶s need to convert his product into cash; marketing involves the idea of satisfying the needs of the customers by means of the product and the whole cluster of things associated with creating, delivering, and finally consuming it The marketing guru Phillip Kotler defines marketing as µthe human activity directed at satisfying needs and wants through exchange processes¶ Achieving customer satisfaction is given the utmost importance in the marketing concept as getting a new

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customer costs much more (estimated to be five times) than retaining an existing one It is likely to cost 16 times as much to bring the new customer to the same level of profitability as the lost customer Emphasizing exchange processes, the American Marketing Association defines marketing as the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals With manifold increase in competitive intensity in the present marketing era, the focus is shifting fast to market orientation Under the traditional concept, a respective

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finds a stated need and fulfils it A step further is the anticipative marketer who looks ahead at the customer¶s needs in the near future However, a creative marketer discovers and produces solutions that a customer did not ask for but would enthusiastically respond to The development of products like walkman, VCRs, CDs, ATMs, and cellular phones are a few of the illustrations of creative marketing The fundamental principles of marketing, especially related to its technical aspects in domestic and international markets, remain more or less the same

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However, the differences in marketing environment make international marketing a distinct discipline In simple terms, international marketing is defined as the marketing activities carried out across national boundaries Every firm has to operate in a given set of environmental factors over which it has little control Although the fundamentals of marketing remain the same and have universal applicability, the flexibility of marketing decisions is limited by a variety of uncontrollable factors, such as social, economic, political, legal, and technological environment

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These environmental factors are known as uncontrollable elements on which a marketer hardly has any influence, but the marketing challenge is to adapt the controllable elements of marketing mix, i.e. product, price, distribution, and promotion, so as to ensure marketing success Cateora defines international marketing as the performance of business activities designed to plan, price, promote, and direct the flow of company¶s goods and services to consumers or users in more than one nation for a profit International marketing takes place when marketing/trade is carried out µacross the border¶ or between µmore than one nation¶

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Global marketing is the process of focusing the resources and objectives of an organization on global marketing opportunities and needs International marketing is all about identifying and satisfying global customers¶ needs better than the competitors, both domestic and international, and coordinating marketing activities within the constraints of the global environment.

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International marketing would involve: (i) identifying needs and wants of customers in international markets, (ii) taking marketing mix decisions related to products, pricing, distribution, and communication keeping in view the diverse consumer and market behavior across different countries on one hand and firms¶ goals towards globalization on the other hand, (iii) penetrating into international markets using various modes of entry, and (iv) taking decision on view of dynamic international market environment.

Terms in International Marketing
‡ The traders should develop a thorough understanding of the nuances of commonly used terms in international marketing which are sometimes used interchangeably Some of these terms are as follows: ‡ Domestic Marketing: marketing practices within the domestic markets ‡ Foreign Marketing: Methods and practices used in the home market and also applied in overseas markets with little adaptation For instance, an Indian firm using domestic marketing methods for the European market is known as foreign marketing.

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Comparative Marketing: Comparative study of two or more marketing systems to find out the differences and similarities International Trade: A macroeconomic term used at national level with a focus on flow of goods, services, and capital across national borders It also involves analysis of commercial and monetary conditions and their effect on transfer of resources and balance of payment As international trade views international markets at the national level from a macroeconomic perspective, little attention is given to the company-level marketing methods and strategies.

‡ International Business: A much wider term encompassing all commercial transactions that take place between two countries These transactions, including sales, investment, and transportation, may be initiated by government or private companies with an objective to make profit or not. ‡ International Marketing: It focuses on the firm-level marketing practices across the border including market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in the international markets. ‡ Global/World Marketing: Global marketing treats the whole world as a single market and standardizes the marketing mix of the companies as far as feasible

A global company does not differentiate between the home country and a foreign country and considers itself as a corporate citizen of the world The differences in transnational, multinational, world, and global marketing are subtle in nature and have little effect on their strategic implementation.

Evolutionary Process of Global Marketing
Domestic marketing
Market Focus : Domestic Orientation : Ethnocentric Marketing Mix : Focus on domestic Decision customers ‡ The marketing mix decisions are invariably based on the needs and wants of the domestic customers ‡ These decisions are taken so as to respond competitively and effectively to the domestic environmental factors

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Ethnocentrism is defined as the predisposition of a firm to be predominantly concerned with its viability and legitimacy only in its home country Neglect of competition from low-cost Japanese manufacturers of consumer electronics by the US manufacturers in the 1960s and 1970s as a result of their ethnocentric approach was the major reason behind their inability to cope with forced competition in the US market.

Export Marketing
Market Focus : Overseas (Targeting and entering foreign markets) Orientation : Ethnocentric Marketing Mix : Focused mainly on Decision domestic customers, Overseas marketinggenerally an extension of domestic marketing, Decisions made at headquarters ‡ The stage models suggest that generally a firm focused on domestic markets begins to export

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unintentionally by receiving unsolicited orders from overseas markets The firm tries to fulfill such orders reluctantly with little strategic orientation Thus, the initial entry of a firm in international markets may be characterized as a consequence of responding to unsolicited export enquiries However, the positive experience in fulfilling such overseas market requirements serves as a stimulus to look for repeat orders.

International marketing
Differentiation in country markets by way of developing or acquiring new brands Orientation : Polycentric Marketing Mix : Developing local products Decision depending upon country needs decision by individual subsidiaries ‡ Over a period of time, the exporting company starts catering to the specific needs of a few overseas markets and establishes noticeable share in the market Marketing focus :

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Polycentric orientation refers to the predisposition of a firm to the existence of significant cultural variations across the markets It recognizes the differences among markets and the need to respond to the market forces with market-specific strategies The polycentric strategy has a strong orientation towards the target markets The products are manufactured in the home country with separate product adaptation for different markets However, the marketing decisions, such as decisions about product development, branding, distribution, pricing, and promotion, are taken independently by the marketing department in each country.

Multinational Marketing
Consolidation of operations on regional basis gains from economic of scale Orientation : Regiocentric Marketing Mix : Product standardization Decision within regions but not across them on regional basis ‡ Once a company establishes its manufacturing and marketing operations in multiple markets, it begins to consolidate its operations on regional basis so as to take advantage of economies of scale in manufacturing and marketing mix decisions Marketing focus :

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Various markets are divided into regional subsegments on the basis of their similarity to respond to marketing mix decisions It is known as multinational marketing, where marketing mix decisions are standardized within the region but not across the region Marketing mix decisions are based on regional basis which brings economies of scale.

Global Marketing
Consolidating firm¶s operations on global basis Orientation : Geocentric Marketing Mix : Globalization of marketing Decision mix decisions with local variations joint decisions making across firm¶s global operations ‡ The extreme view of global marketing refers to the use of a single marketing method across the international markets with little adaptation ‡ Global marketing hardly means complete standardization of the marketing mix decisions, but it Marketing focus :

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increasingly means a strategic approach to have a global perspective to have economies of scale The objective is to find out some commonality in the customers¶ needs and strive for a uniform marketing strategy as far as feasible in various country markets.

Global Marketing: What it is and What it is Not
‡ ‡ ‡ ‡ Although the marketing discipline is universal, markets and customers are quite differentiated This means that marketing practice must vary from country to country Each person is unique, and each country is unique This reality of differences means that we cannot always directly apply experience from one country to another If the customers, competitors, channels of distribution, and available media are different, it may be necessary to change our marketing plan

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Companies who don¶t appreciate this fact will soon learn about it if they transfer irrelevant experience from one country or region to another Nestle, for example, sought to transfer its great success with a four-flavour coffee line from Europe to the United States Its U.S. competitors were delighted: The transfer led to a decline of 1% in US market share An important task in global marketing is learning to recognize the extent to which marketing plans and programs can be extended worldwide, as well as the extent to which they must be adapted Much of the controversy about global marketing dates to Professor Theodore Levitt¶s 1983 seminal

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article in the Harvard Business Review, ³The globalization of Markets´ Professor argued that the marketers were confronted with a ³homogeneous global village´ Levitt advised organizations to develop standardized high quality world products and market them around the globe using standardized advertising, pricing, and distribution Some well-publicized failures by Parker Pen and other companies seeking to follow Levitt¶s advice brought his proposals into question Indeed, it was global marketing that made Coke a worldwide success However, that success was not based on a total standardization of marketing mix elements

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In his book, The Borderless World, Kenichi Ohmae explains that Coke¶s success in Japan could be achieved only by spending a great deal of time and money becoming an insider That is, the company built a complete local infrastructure with its sales force and vending machine operations Coke¶s success in Japan, according to Ohmae, was a function of its ability to achieve ³global localization,¶ the ability to be as much of an insider as a local company but still reap the benefits that result from world-scale operations What does the phrase global localization really mean?

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In a nutshell, it means a successful global marketer must have the ability to ³think globally and act locally´ As we will see many times in this book, ³global´ marketing may include a combination of standard (e.g. the actual product itself) and nonstandard (e.g. distribution or packaging) approaches A ³global product´ may be ³the same¶ product everywhere and yet ³different´ Global marketing requires marketers to behave in a way that is global and local at the same time by responding to similarities and differences in world markets As the Coca-Cola Company has demonstrated,

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the ability to think globally and act locally can be a source of competitive advantage By adapting sales promotion, distribution, and customer service efforts to local needs, Coke established such strong brand preference that the company claims a 78% shares of the soft-drink market in Japan At first, Coca-Cola managers did not understand the Japanese distribution system However, with considerable investment of time and money, they succeeded in establishing a sales force that was as effective in Japan as it was in the United States To complement Coke sales, the Japanese unit has created products such as Georgia-brand canned

and Lactia, a lactic, noncarbonated soft drink that promotes healthy digestion and quick refreshment expressly for the Japanese market.

Towards GLocal Marketing
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As achieving greater market share and improved profitability is more critical to a firm rather than achieving economies of scale, the global marketing firm finds it difficult to overlook the local expectations and finer marketing nuances Besides, the growing level of expectations of the target market necessitates the global firms to give more attention to the customers in view of their local requirements thus, the term GLOCAL refers to global marketing with a local focus

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This is turn increases the marketing complexity for a firm, but helps it to fulfill the customer expectations more competitively and secure greater market share.

International Marketing Marketing Complexity Multinational Marketing

GLOCAL (Global Marketing With Local Focus)

Exporting

Global Marketing

Domestic

Time

Process of Internationalization

Reasons for Entering International Markets
Why should a firm enter international markets? a) b) c) d) e) f) g) h) Growth Profitability Risk Spread Achieving Economics on Scale Access to Imported Inputs Uniqueness of Products or Service Marketing opportunities due to Life Cycles Spreading R&D Costs

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