I n t e r n a t i o n a l M a r k e t i n g I n t e r n a t i o n a l M a r k e t i n g

The Scope and Challenge

of International Marketing

Chapter 1

1 4 t h E d i t i o nP h i l i p R. C a t e o r a

M a r y C. G i l l yJ o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All

rights reserved.

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What Should You Learn?What Should You Learn?

• The changing face of U.S. business• The scope of the international marketing task• The importance of the self-reference criterion

(SRC) in international marketing• The progression of becoming a global marketer• The increasing importance of global awareness

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Global Perspective: Global Commerce Causes Peace

Global Perspective: Global Commerce Causes Peace

• Global commerce during peace time– Commercial aircraft and space vehicle industries– Mobile phone industry– Individuals and small companies

• International markets are ultimately unpredictable– Flexibility means survival

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Events and Trends Affecting Global Business

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

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The Internationalization of U.S. Business

The Internationalization of U.S. Business

• Increasing globalization of markets• Increasing number of U.S. companies are

foreign controlled– $16.3 trillion in foreign investment in the U.S. – $2.6

trillion more than American overseas investment

• Increasing number of foreign companies building and buying manufacturing plants in the U.S.

• Increasing difficulty for domestic markets to sustain customary rates of growth

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Foreign Acquisitions of U.S. Companies

Foreign Acquisitions of U.S. Companies

Exhibit 1.1

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Selected U.S. Companies and Their International SalesSelected U.S. Companies

and Their International SalesExhibit 1.2

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International MarketingInternational Marketing

• 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

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The International Marketing TaskThe International Marketing Task

Exhibit 1.3

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Environmental AdaptationEnvironmental Adaptation

• Ability to effectively interpret 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

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The Self-Reference Criterion and Ethnocentrism

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

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SRC and EthnocentrismSRC and Ethnocentrism

• SRC is an unconscious reference to– One’s own cultural values, experiences, and

knowledge as a basis for decisions

• 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 an offensive to your hosts

• Ethnocentrism– Notion that one’s own culture or company knows best

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• 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

SRC and EthnocentrismSRC and Ethnocentrism

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Framework for Cross-cultural Analysis

Framework for Cross-cultural Analysis

1. Define business problem or goal • Home-country vs. foreign-country cultural traits,

habits, or norms• Consultation with natives of the target country

2. Make no value judgments

3. Isolate the SRC influence • Examine it carefully to see how it complicates the

problem

4. Redefine the problem • Without SRC influence 1. Solve for the optimum business goal situation

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Developing a Global AwarenessDeveloping 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

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Approaches to Global AwarenessApproaches 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 International Marketing InvolvementStages of International Marketing Involvement

• No direct foreign marketing• Infrequent foreign marketing• Regular foreign marketing• International marketing• Global marketing

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No Direct Foreign MarketingNo 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

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Infrequent Foreign MarketingInfrequent 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

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Regular Foreign MarketingRegular 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

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Global MarketingGlobal 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

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Strategic OrientationStrategic Orientation

• Domestic market extension orientation• Multidomestic market orientation• Global market orientation

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Domestic Market OrientationDomestic Market 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

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Multidomestic Market OrientationMultidomestic 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

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Global Market OrientationGlobal 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

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The Orientation of International Marketing

The Orientation of International Marketing

• An environmental/cultural approach to international strategic marketing

• Intended to demonstrate the unique problems of international marketing

• Discussion of international marketing ranges from the marketing and business practices of small exporters to the practices of global companies

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Foreign Policy’s Global Top 20Foreign Policy’s Global Top 20

Exhibit 1.4

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SummarySummary

• The internationalization of American 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

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• 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

SummarySummary

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SummarySummary

• Solutions to SLC and ethnocentrism– Global awareness– Sensitivity

• Strategic orientations found among managers of international marketing operations– Domestic market extension orientation– Multidomestic market orientation– Global market orientation