The Scope and Challenge of International Marketing
The Scope and Challenge of International Marketing
Chapter 1 – The Scope and Challenge of International Marketing
1. To understand broad picture of the global environment within which business operates today and into the future.
2. To understand how the internationalization of business and markets influence all functions of business including marketing.
3. To understand how the internationalization or globalization of markets affects future manager regardless of where they work in business.
4. To understand the scope of the international marketing task.
5. To understand self-reference criterion & problems of it.
6. Stages of becoming international and the international marketing concepts used in international marketing management.
7. Importance of becoming globally aware.
1. An increasingly larger share of corporate profits are generated by international operations
2. Till last decade competition for the company comes from the local market only, now it is not so. It comes from all the country
Global Perspective: Recent Events
1. Information technology boom
2. Enron scandals
3. September 11th attacks on the World Trade Center and Pentagon
4. Wars in Afghanistan and Iraq
5. International conflict among China, Taiwan, and the United States
6. 2003 SARS outbreak in Asia
7. Global terrorism, e.g., Indonesia, Israel, India, and Morocco
8. Transcending these events, international commerce continued
Global Business Trends
1. The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA, the European Union, SAARC
2. General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe
3. Impact of the Internet and other global media on the dissolution of national borders, and
4. Managing global environmental resources
5. Increasing globalization of markets
6. Firms face competition on all fronts
7. Changing ownership structure (TATA CORUS) ,
8. Saturation of Demand in certain big market eg. USA, UK & emergence of it in certain market (China, India)
9. Technology & Excess surplus
10. Global peace & Dependence (No world war- 3)
“Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals”
International Marketing: A Definition
“International marketing is defined as the 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.”
Marketing concepts, processes, and principles are universally applicable all over the world
More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors, Consumer traditions, or any uncontrollable elements.
Reasons for Internationalisation
– Access to new markets
– Access to resources
– Against competitors with lower costs (due to increased access to resources)
• Leveraging Key Success Factors Abroad
• Follow Customers Abroad
• Pursuing Diversification
• Taking Advantage of Different Growth Rates of Economies
• Exploiting Product Life Cycle Differences
• Internationalising for Defensive Reasons
The Importance of Int’l Marketing
For US-based companies, 75% of sales potential is outside the US.
– About 90% of Coca-Cola’s operating income and 73 % of total revenue is generated outside the US.
For Japanese companies, 85% of potential is outside Japan.
For German and EU companies, 94% of potential is outside Germany.
The effects of uncontrollable and controllable both in the domestic and foreign environments
- International marketers deals with at least two uncontrollable Elements
- As the number of international market increases: uncontrollable layer increases
- Controllable elements : 4 ps (MARKETING MIX)
- Domestic Uncontrollable elements : Political & Legal, Competition, Economy, Culture & Technology
- Foreign Uncontrollable elements : Political & Legal, Competition, Economy, Culture, Technology, structure of distribution, Geography & infrastructure
Environmental Adaptation Needed
· Differences are in the uncontrollable environment of international marketing
· Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution)
Self-Reference Criterion (SRC) and Ethnocentrism: Major Obstacles
• SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions
• Ethnocentrism refers to the notion that one’s own culture or company knows best how to do things
• Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light
• Reactions to meanings, values, symbols, and behavior relevant to our own culture are different from those of foreign
• Relying on one’s SRC could produce an unsuccessful marketing program
Avoiding the Self Reference Criterion
To avoid SRC following steps should be followed
1. Define the business problem or goal in home-country cultural traits, habits, or norms
2. Define the business problem or goal in foreign-country cultural traits, habits, or norms. Make no value judgments
3. Isolate the SRC Influence in the problem and examine it carefully to see how it complicates the problem
4. Redefine the problem without the SRC influence and solve for the optimum business goal situation*
Developing a Global Awareness
To be globally aware is to have
1. Tolerant of Cultural Differences, and
2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends
Stages of International Marketing Involvement
In general, firms go through five different phases in going international:
1. The first phase includes those domestic firms which have no foreign business activity except those sales made to foreign customers who come directly to the firm.
2. The second phase includes domestic firms which have temporary surpluses which are sold abroad. Therefore, sales are made on an availability basis with little or no intention for continuing market representation.
3. The third phase includes the domestic firms that have permanent productive capacity which is utilized to produce goods which are sold on a continuing basis in foreign markets.
4. The fourth phase includes the international company that produces a product for the world market.
Conditions that have led to the development of global markets
According to the Professor Levitt and others who suggest that there is a global market for goods, this phenomenon has resulted from new communications technology, travel and other factors which have led to the markets of the world being more aware of different products and processes.
As a result of this awareness, there are segments in each market who have had similar experiences and thus have common needs.
These common needs are described as a demand for high quality, reasonably priced, standardized products.
There is a strong feeling that within each country’s market there is a growing segment that has been exposed to ideas from around the world and thus have had their tastes and perceived needs affected.
There is a strong feeling that world markets are being driven toward a converging commonality of taste and needs leading toward global markets.
Difference between a global company and a multinational company
“Global company assumes there are segments across countries which have the same needs and wants and designs a standardized, high quality, reasonably priced product for those segments and markets it as if there are no differences among the country markets”
“Multinational company operates in a number of countries and adjusts its products and marketing practices for each market. The multinational company has a specific marketing plan and adapts products for each country market. The philosophy for the multinational company is that there are cultural differences among countries that require specific adaptations for those markets”
Difference between three international marketing concepts.
Companies can be described by one of three orientations to international marketing management:
1. Domestic Market Expansion Concept: (Ethnocentric)
· The domestic company that seeks sales extension of its domestic products into foreign markets illustrates this orientation to international marketing.
· It views its international operations as secondary to and an extension of its domestic operations. The primary motive is to dispose of excess domestic production. Domestic business is its priority and foreign sales are seen as a profitable extension of domestic operations. While foreign markets may be vigorously pursued, the orientation remains basically domestic.
· The firm’s orientation is to market to foreign customers in the same manner the company markets to domestic customers. It seeks markets where demand is similar to the home market and its domestic product will be acceptable.
· This Domestic Market Expansion Strategy can be very profitable. Large and small exporting companies approach international marketing from this perspective.
2. Multi‑Domestic Market Concept: (Polycentric)
· A company guided by this concept has a strong sense that country markets are vastly different (and they may be, depending on the product) and that market success requires an almost independent program for each country.
· Firms with this orientation market on a country-by-country basis with separate marketing strategies for each country.
· Subsidiaries operate independently of one another in establishing marketing objectives and plans. The domestic market and each of the country markets have separate marketing mixes with little interaction among them. Products are adapted for each market with minimum coordination with other country markets, advertising campaigns are localized as are the pricing and distribution decisions.
· A company with this concept does not look for similarity among elements of the marketing mix that might respond to standardization.
· Control is typically decentralized to reflect the belief that the uniqueness of each market requires local marketing input and control.
3. Global Marketing Concept
· A company guided by this new orientation or philosophy is generally referred to as a global company, its marketing activity is global marketing, and its market coverage is the world.
· A company employing a Global Marketing Strategy strives for efficiencies of scale by developing a standardized product, of dependable quality, to be sold at a reasonable price to a global market (that is, the same country market set throughout the world).-Regiocentric & Geocentric.
· With this orientation a company attempts to standardize as much of the company effort as is practical on a world-wide basis
· Some decisions are viewed as applicable worldwide, while others require consideration of local influences. The world as a whole is viewed as the market and the firm develops a global marketing strategy.
Three factors necessary to achieve global awareness.
1) Objectivity; objective in assessing opportunities, evaluating potential, and responding to problems. Too often mistakes are made because companies are swept away with generalities and make investments only later to find out that their commitment or abilities were not sufficient to succeed,
2) Tolerance toward cultural differences: tolerance is understanding cultural differences and accepting and working with others whose behavior may be different from yours,
3) Knowledgeable; knowledgeable about cultures, history, world market potentials, and global economy and social trends is critical for a person to be culturally aware. To be successfully in international business and globally aware, a person needs to keep abreast of the enormous changes occurring throughout the world.
“A global orientation means operating as if all the country markets in a company’s scope of operations (including domestic market) are approachable as a single global market and to standardize the marketing mix where culturally feasible and cost effective or to adapt the marketing mix where culturally required and cost effective”.
Driving Forces in INT’ Market
Regional economic agreement
Market need & Wants
Transportation & Communication
Product development Cost
World economic trend
Int’l World Order
Fight against Int’l terrorism
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