The Scope and Challenge of International Marketing

1. 1 The Scope and Challenge of International Marketing Chapter

2. Key Areas • Events & trends affecting global business • What is international marketing (IM)? • Scope of the international marketing task • Importance of the self-reference criterion (SRC) in IM • Increasing importance of global awareness • Progression (stages) towards becoming a global marketer • EPRG Scheme & Strategic Orientations

3. Events and Trends Affecting Global Business • The rapid growth of the World Trade Organization and regional free trade areas • The trend toward the acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe • The burgeoning impact of the Internet, mobile phones, and other global media on the dissolution of national borders • The mandate to properly manage the resources and global environment for the generations to come

4. International Marketing Defined • Performance of business activities 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

5. International Marketing Defined • The process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organisations • A tool to improve domestic and global position • Subject to constantly changing macro-environmental factors

6. Difference between domestic & international marketing? • NOT in terms of marketing concepts, processes & principles, which are universally applicable, • BUT rather in terms of the ENVIRONMENT within which marketing plans must be implemented  uniqueness of foreign marketing derives from the range of unfamiliar problems & the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets.

7. International Marketing Questions • Should I obtain my supplies domestically or from abroad? • What marketing adjustments are or will be necessary? • What threats from global competition should I expect? • How can I work with these threats to turn them into opportunities? • What are my strategic global alternatives?

8. The International Marketing Task • Uncontrollable variables (competition, legal restraints, govt. controls, weather, fickle consumers) can affect the profitable outcome of good marketing plans. • Marketers generally cannot control/ influence these uncontrollable elements  the challenge, however, is to mold the controllable variables of marketing decisions (4Ps), within the framework of the uncontrollable factors of the marketplace (competition, politics, laws, consumer behavior, level of technology, etc.) in such a way that marketing objectives are achieved.

9. The International Marketing Task Domestic Uncontrollables :– • Political/legal forces within the home country • Domestic economic climate • Competition within the home country Foreign Uncontrollables :- • Political/legal forces in the host country(ies) • Host country(ies) economic forces • Host country(ies) competitive forces/structure • Cultural forces in the host country(ies) • Host country(ies) geography & infrastructure • Structure of distribution in the host country(ies) • Level of technology in the host country(ies)

10. The International Marketing Task Exhibit 1.3

11. The International Marketing Task • The international marketer’s task is more complicated than the domestic marketer’s because of the needs to deal with at least 2 levels of uncontrollable uncertaintyinstead of 1. Uncertainty is created by the uncontrollable elements of all business environments, but each foreign country in which a company operates adds its own unique set of uncontrollable factors. • Uncertainty of different foreign business environments  need for close study of uncontrollable elements within each new country. A strategy successful in one country may be completely ineffective in another due to differences in the political climate, stage of economic development, level of technology or some other cultural variation.

12. Need for Environmental Adaptation • Be able to interpret effectively the influence and impact of the culture in which you hope to do business • Cultural adjustments • Establish a frame of reference • Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

13. The Self-Reference Criterion and Ethnocentrism • The key to successful international marketing is adaptation to the environmental differences from one market to another. • Primary obstacles to success in international marketing: • SRC • Associated ethnocentrism SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for analysis & decisions-making Ethnocentrism is the notion that one’s own culture or company knows best how to do things – a strong orientation towards the HOME country - usually a problem when managers from developed/affluent countries work with managers & markets in less developed/affluent countries

14. The Self-Reference Criterion and Ethnocentrism • Dangers of the SRC: • Failing to recognize the need to take action • Discounting the cultural differences that exist among countries • Reacting to a situation in a way offensive to your hosts • Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market. • The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior.

15. Developing a Global Awareness • 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

16. 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

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

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

19. Infrequent Foreign Marketing • Caused by temporary surpluses • Variations in production levels • Increases in demand • Firm has little or no intention of maintaining continuous market representation • Foreign sales decline when demand or surplus decreases • May withdraw from international markets • Little or no change in company organization or product lines

20. Regular Foreign Marketing • Firm has production capacity devoted to foreign markets • Firm employs domestic or foreign intermediaries • Uses its own sales force • Sales subsidiaries in important markets • Products allocated or adapted to foreign markets as demand grows • Firm depends on profits from foreign markets

21. International Marketing Company fully committed & involved in international marketing activities  seeks markets all over the world & sells products resulting from planned production for various country markets. Not only marketing but also production of goods outside home market  becomes international/ multinational marketing firm.

22. Global Marketing • Company treats world, including home market as one market • Market segmentation decisions no longer focused on national borders • Defined by income levels, usage patterns, or other factors • More than half of revenues come from abroad • Organization takes on global perspective

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

24. The Importance of Going Global • For U.S. companies, 70% of total world market for goods and services is outside the country • Coca-Cola earns 75% of operating income and two-thirds of profit outside of North America • For Japanese companies, 90% of world market is outside the country • 94% of market potential is outside of Germany for its companies

25. Strategic Orientation • Domestic market extension orientation • Multidomestic market orientation • Global market orientation

26. EPRG Scheme & Strategic Orientation EPRG Scheme: • firms can be classified as having an Ethnocentric, Polycentric, Regiocentric, or Geocentric orientation (EPRG), depending on their international commitment • key assumption underlying framework  degree of internationalization to which management is committed affects firm’s specific international strategies • 3 approaches dominate strategic thinking in international marketing firms

27. EPRG Scheme & Strategic Orientation Concept EPRG Schema Domestic Market Extension (Ethnocentric) Multi-Domestic Market (Polycentric) Global Marketing (Regio/Geocentric)

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

29. Multidomestic Market Orientation • Companies have a strong sense that foreign country markets are vastly different • Market success requires an almost independent program for each country • Separate marketing strategies • Subsidiaries operate independently of one another in establishing marketing objectives and plans • Products are adapted for each market • Control is decentralized

30. Global Market Orientation • Company guided by global marketing orientation • Marketing activity is global • Market coverage is the world • Firm develops a standardized marketing mix applicable across national boundaries • Markets are still segmented • Each country or region is considered side by side with a variety of other segmentation variables • Fits the regiocentric or geocentric classifications

31. Summary • The internationalization of business is proceeding with increasing pace • The globalization of markets and competition necessitates all managers to pay attention to the global environment • International marketing is defined as the performance of business activities across national borders

32. Summary • Environmental differences must be taken into account if firms are to market products and services at a profit in other countries • Laws • Customs • Cultures • Self-reference criteria and ethnocentrism limit international marketer’s abilities to understand and adapt to differences prevalent in foreign markets

33. Summary • Solutions to SRC and ethnocentrism • Global awareness • Sensitivity • Strategic orientations found among managers of international marketing operations • Domestic market extension orientation • Multidomestic market orientation • Global market orientation