Importance & Characteristics of International Marketing

Pesewa Presentat ions

Increasing importance of international markets due to:

– (a) lowering of barriers to trade and investment– (b) improvements in transportation and logistics– (c) new goods and services with international appeal– (d) advances in communications and emergence of e-commerce– (e) increasing linkages among businesses– (f) internationalization of capital markets– (g) excess capacity in many industries– (h) rapid growth of world trade.

• Innovations and changes create opportunities for some, challenges and threats to others.

• Combination of firm factors, home country market factors, host company factors, and global factors explain movement toward internationalization.

What Is International Marketing?

• International marketing -the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organisations“satisfaction” and “exchange”

• Forms - export-import trade, licensing, joint ventures, wholly owned subsidiaries, turnkey operations, management contracts

Key Questions to be Answered

• How will my idea, good, or service fit into the international market?

• 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?

Differences between domestic and international marketing - marketing variables

• Interactions with, or ways of manipulating, marketing variables are different

• Firm’ domestic approach can be counterproductive, inefficient or illegal in foreign markets

• Two more Ps – political power and public opinion formation -> mega-marketing (Kotler), which has two implications: – (1) enlarging the multiparty marketing concept; – (2) blurring the distinction between environmental and

controllable variables

International, multinational, and global marketingTerms sometimes used interchangeably, but imply differences in approach.

• International marketing is a broad term for any type of marketing across national boundaries.

• Multinational marketing implies a strong commitment to international marketing, and may be taken to mean that the marketer develops differentiated products and marketing strategies for each of its markets. Associated with adjusting products and practices in each country, with attendant relatively higher costs.

• Global marketing generally implies that the company tries to standardize products and marketing practices worldwide in order to achieve economies of scale and lower prices.

Types of International Operations

• Ethnocentric (or monocentric) - the identity of the foreign subsidiary is strongly identified with the parent company.

• Polycentric - few international subsidiaries that are well integrated and operate on a decentralised basis

• Geocentric - cosmopolitan outlook, high integration and close co-ordination

Three states of international involvement

• 1. Experimental international involvement – need stimuli

• 2. Active international involvement – systematic exploration of foreign market opportunities

• 3. Committed international involvement – constantly making choices in resource allocation for foreign markets

International product life cycle

Export

Time

Foreign country A

Foreign country B

International marketing management• Three basic decisions:

– (1) whether to engage in international marketing activities; – (2) markets to be served; – (3) methods or systems to be used.

• Major dimensions of international marketing: exporting, importing, and management of international marketing operations to and in foreign countries.

• The marketing program or mix is the planned and coordinated combination of marketing methods or tools used to achieve a predetermined goal.

• Market-driven versus product- or technology-driven firms; tendency to move towards market-driven.

• Profitability of any marketing program is situation-specific and influenced by many variables.

Questions for Discussion

• Compare and contrast domestic and international marketing.

• Describe some opportunities and challenges in international marketing created by new advances in information technology.

• Find the ten largest multinational corporations and briefly explain their key products. You may wish to use the websites of publications such as Forbes, Fortune, Wirtschaftswoche, etc.

Questions for Discussion• Will the future expansion of world trade be similar to the past?• Does increased world trade mean increased risk?• Is it beneficial for nations to become dependent on one another?• Using WTO data (www.wto.org), identify the following:

– a) the top ten exporting and importing countries in the world merchandise trade and

– b) the top ten exporting and importing countries of commercial services

Questions for Discussion• Why is international trade important to a nation?• Discuss the role of “voluntary import restraints” in

international marketing.• What is meant by multilateral negotiations?• How have consumer demands changed international

trade?• Discuss the impact of import restrictions on

consumers

International trade

Dr Svetla MarinovaMSc International Business,

International Marketing 2006, Lecture 1, Part B

World Trade Importance

• World trade has grown tremendously in the past three decades.

• The Iron Curtain is gone and capitalism has replaced the old economic doctrines.

• Firms invest on a global scale.• New technologies have changed the way we do

business.• New trading blocs are emerging.

Growth in World Trade

• World trade in merchandise has grown from $6.2 trillion in 2000 to over $9 trillion in 2005.

• World trade in services has expanded from $1.5 trillion in 2000 to $2.1 trillion in 2005.

Trade and Domestic Growth Rates

Export Growth Rates

The Effects of Trade

Regional Economic Blocs• NAFTA• EU• Mercosur• The Gulf Co-operation Council• ACEAN

Export Promotion Efforts Reasons

• National need to earn foreign currency.• Encouragement of domestic employment.• Increase in domestic economic activity

Environmental ScanningCountry Market Analysis

Cultural, Economic, Political, Financial and Legal Environment

Dr Svetla Marinova, MSc International Business, 2006

International Marketing, Lecture 1, Part C

The Social Environment

• The product or service should be acceptable to the society for which it is intended

• Levels at which the marketing mix operates as a possible agent for change:– a/ Conventions– b/ Morals– c/ Laws

The Cultural Environment • Various definitions of culture but generally culture may be

viewed as the sum of a group’s learned behavior patterns, attitudes, and material things. Usually changes slowly over time, though governmental or other organizations may attempt to force more rapid change. There are cultural universals that all cultures have: language, sports, status differentiation, etc.

• The self-referencing criteria when assessing a foreign culture• Maslow’s hierarchy of needs:

– physiological needs, safety needs, love and belonging, esteem and social acceptance, self actualisation

• Most global American brands are ethnocentric but with global acceptance - why? Can we explain that with Maslow’s hierarchy of needs?

Success and Culture

An understanding of cultural differences allows marketers to determine when adaptation may be necessary and when commonalities allow for regional or global approaches

Defining Culture

• An integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society.

• The definition encompasses a wide variety of elements, from materialistic to the spiritual

Elements of Culture

• Elements of Culture

Language• verbal• non-verbalReligionValues and Attitudes

Manners and CustomsMaterial ElementsAestheticsEducationSocial Institutions

Language

• Verbal– How words are spoken.– Gestures made.– Body position assumed.– Degree of eye contact.

• Local language capability’s important role in international marketing– Aids in information gathering and evaluation.– Provides access to local society.– Important to company communications.– Allows for interpretation of contexts.

Nonverbal Language

• Hidden language of cultures– Time flexibility and sensibility.– Social acquaintance and rapport.– Personal physical space and personal touching.– Non-verbal gestures and signaling.

Manners and Customs

• Potential problem areas for marketers arise from an insufficient understanding of:– different ways of thinking.– the necessity of saving face.– knowledge and understanding

of the host country.– the decision-making process

and personal relations.– the allocation of time

for negotiations.

The Cultural Environment

• Edward Hall• High context cultures - the silent culture of

communication• Low context cultures• Monochronic use of time - do one thing at a time

and adhere to pre-set schedules, M-type people are called ‘agenda’ cultures

• Polychronic use of time - do many things at a time and easily modify pre-set schedules, more committed to persons than to schedules

Context Cultures

• High-context culture– is where the social context in which what is said strongly

affects the meaning of the message. – Examples: Japan and Saudi Arabia

• Low-context culture– is where the meaning of the message is explicitly

expressed by the words and is less affected by the social context.

– Example: North America

The Cultural Environment

• Hofstede– Individualism vs. Collectivism– Power distance– Uncertainty avoidance– Masculinity vs. Femininity

• What are the implications for marketers?

Implications of Culture on Marketing:Cultural affinity zones in Europe

Germany Germany

LuxemburgBelgium

Sweden, Norway, Denmark, Finland

HollandGermanyAnglo-Saxon

EuropeUKIreland

AustriaFranceSwitzerland

France/Italy

SpainPortugalGreeceItaly

Implications of Culture on Marketing:Cultural affinity zones

• Cultural affinity classes exist in terms of age brackets and across socio-demographic categories (example: the teenagers in France, Japan, USA)

• Cultural affinity zones correspond to national cultural groups or cultural groups with similar dimensions(example: the teenagers in Scandinavia)

• Understanding the general patterns and themes of culture is not enough for the international marketer. He/she must learn the specifics of the culture which affect the marketing of the firm’s products or services.

Making Culture Work

Embrace local culture.Build relationships.Employ locals to gain cultural knowledge.Help employees understand you.Adapt products and processes to local

markets.Coordinate by region.

The Economic Environment

• Population/household/urbanization

• GDP per capita

• Income/Purchasing Power Parities (PPP) - how many units of currency are needed in one country to buy the amount of goods and services that one unit of currency will buy in another country

• What about self-produced or bartered consumption?

• Variations in market potential in individual markets

The Economic Environment

• Non-tariff barriers /”invisible tariffs”/– quotas and trade control– “buying national”– restrictive customs procedures, reducing the number of

ports of entry for any foreign good– selective monetary controls - example: advance deposit equal

to the value of the imported good

– restrictive administrative and technical regulations

The Economic Environment

• Dumping– Sporadic - where surplus is unloaded abroad at

advantageous prices not to be sold in the domestic market at lower prices as that can create a precedent for future behaviour

– Predatory - when foreign producers use low prices to weaken indigenous competition abroad

– Persistent - the continued sales of products at prices lower than those of its country of origin

The Economic Environment

Infrastructure• Transportation• Communications• Energy• Organisations providing infrastructure support

services• Diffusion of Internet technology• Multinational corporations operating in a market

The Financial Environment

• Commercial risk - refers to the insolvency of, or protracted payment default by an overseas buyer, called commercial as it refers to transactions and commercial banks

• Political risk - beyond the control of either the buyer or seller

• Foreign exchange risk - related to exchange rate fluctuations

The Financial Environment

• Credit policy – favourable credit terms to the buyer– financing packages (often developed with the help of the

government)

• The extent of credit offered is determined by:– Firm specific factors

– such as size, experience in international trade

– Market characteristics – such as degree of economic development, availability of means of payment

– Factors relating to a particular transaction,– such as the amount of payment and the need for protection, terms

offered by competitors, the relative strength and attractiveness of the trading partner

The Political Environment

• Home country:– Intellectual property rights– Legislation on payments by companies for environmental

protection– The government help against grey market activities– The government may work towards lowering trade barriers– Governmental restrictions on international marketing

The Political Environment

• Host country– Political risk

• Ownership risk - expropriation, confiscation, domestication• Operating risk• Transfer risk• Often business become targets for expressing politicalviews • Exchange controls - on the movement of capital or goods• Tax rates• Price controls (in high sensitive sectors such as food or health care)

The Legal Environment

• Theocratic law - a mix of societal, legal and spiritual guidelines (Islamic law, Hebrew law

• Common law - based on tradition, precedent and custom and less dependent on written codes

• Code law - based on comprehensive set of written clauses. All possible legal rules are spelled out explicitly. Based on Roman law, rigid in nature

The Legal Environment

• Antidumping laws• Laws requiring import and export licensing• Health and safety standards• Rules on genetically modified foods• Rules on advertising• Lobbying providing access to policymakers and

legislators

The Legal Environment• International law

– European Patent Convention – International Convention for the protection of

Industrial Property– Madrid Arrangement for International Registration of

trademarks– Inter-American Convention for Trademark Protection– Bilateral treaties of friendship, commerce and

navigation– International Jurisdiction disputes/arbitration vs.

litigation