chap-01 introduction' 2007

Chapter 1

The Scope and Challenge of International Marketing

PowerPoint byShaikh Rafiqul

IslamM.Com (DU),MBA (Australia)

Associate Professor

Department of Marketing

Jagannath University

The Trends Affecting Global Business Today

Rapid growth of WTO & regional free trade areas such as NAFTA, EU etc

Free market system among developing countries in Latin America, Asia, & Eastern Europe

Impact of Internet & other global media on the dissolution of national borders

The mandate to manage resources & global environment for the generations to come

-As a result, most business activities, like technology, research, capital investment, production, marketing, distribution & communications networks are global in scope

2S.R.Islam, Assoc. Prof, JnU

New and Future Multinational Market Groups or Trading Blocks of the 21st Century

European Union European Economic Area (EC and EFTA) North American Free Trade Area Southern Cone-Mercosur Asian Free Trade Area (AFTA) Commonwealth of Independent States (CIS) Central European Free Trade Area (CEFTA)


New and Future Multinational Market Groups or Trading Blocks of the 21st Century

Western Hemisphere Free Trade Areas (WHFTA) Canada to Argentina

Asia-Pacific Economic Cooperation (APEC) Pacific Rim Countries including U.S. U.S./ Canada/Mexico/Japan South American Free Trade Area (SAFTA) Andean Pact and Mercosur Chinese Economic Area (CEA) Hong Kong, Taiwan, Coastal Provinces of So. China U.S./European Union Many possibilities of Republics of Russia, Baltic States

Possible Regional Trade Groups


Why internationalization?

Saturation of U.S. markets Higher ROI in foreign markets Need to establish early position in world markets US firms exporting, importing and/or

manufacturing abroad Foreign-based firms operating in U.S. markets Growth of regional trade areas Rapid growth of world markets


Why internationalization?

Increasing number of competitors for global markets U.S. multinationals increasingly face competition for

lucrative markets from companies from developing countries

Political and economic changes in Latin America, Asia, Eastern Europe and the former Soviet Union, India etc.

Growth of new markets


International Marketing Defined ‘The performance of business activities designed to

plan, price, promote, & direct the flow of a company’s goods & services to consumers/users in more than one nation for a profit’

The only difference in the definitions of DM and IM is.... in more than one nation

This minor difference accounts for complexity & diversity in IM Marketing concepts, processes, & principles are universally

applicable & the marketer’s task is the same in anywhere Business’s goal is to make a profit by promoting, pricing and

distributing products for which there is a market.


The difference lies with the environment within which marketing plans/strategies must be implemented

The uniqueness of IM comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different level of uncertainty

Marketing consists of controllables & uncontrollables

International Marketing Defined

-Natural question is ‘what’s the difference between IM and DM?


Molding the controllables within the framework of uncontrollables of the marketplace to achieve marketing objectives is more interesting

Complexity of IM task depends on the number of countries in which a marketer operates

Every country adds a set of unique problems

Every solution is unique and can not fit to others

The International Marketing Task


7

Political/legalforces

Economicforces

1

2

Environmentaluncontrollables

country market A


countrymarket B


countrymarket C

Competitivestructure Competitive

Forces

Level of Technology

Price Product

Promotion Channels of distribution

Geography &

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural forces

3

45

6

7Political/legal

forces

Domestic environment(uncontrollable)

(controllable)




Marketing decision factors-Product

-Price

-Place

-Promotion

Aspects of the domestic environment-Political/legal forces

-Competitive structure

-Economic climate



Aspects of the foreign environment-Political/legal forces

-Cultural forces

-Geography and infrastructure

-Structure of distribution

-Level of technology

-Competitive forces

-Economic forces



Marketing decision factors

Construct a marketing program with 4 Ps for optimal adjustment to uncontrollables assuming corporate resources and constraints

Controllables can be altered to adjust to changing market conditions, consumer tastes, or corporate objectives.

Uncontrollables must be evaluated & marketing program must be adapted to them .

Success depends on the amount of successful adaptation of marketing mix to these uncontrollables



Domestic Uncontrollables

Any political decision involving domestic foreign policy has a direct effect on IM- positive or negative

-Impact of U.S. government’s ban on trade with South Africa to protest apartheid and then the withdrawal of apartheid

Domestic economic climate has far‑reaching effects on IM

-Capacity to invest in plants and facilities in either market depends on domestic economic vitality

Competition within home country affects a company's domestic as well as international plans.

-Eastman Kodak dominated US film market and competitive structure changed when Fuji Photo Film became formidable by cutting prices


The International Marketing TaskForeign Uncontrollables

Assessing foreign uncontrollables involves substantial doses of cultural, political, & economic shock

Polar extremes in political stability, class structure, & economic climate exist

Some dynamic upheavals create the problems of dramatic change in cultural, political, & economic climates

-China moved from a communist legal system to free market economy

These are major sources of uncertainty to which cope with



Foreign Uncontrollables

Political shifts may result in expropriation/confiscation/ domestication /imposing restrictions and need close attention

Different strategies are needed due to differences in political climate, stages of economic development, level of technology

Political details and ramifications are less transparent Sometimes corruptions prevail and marketers may receive

unfair treatment and law may be different



Foreign Uncontrollables

Alien status increases the difficulty of assessing & forecasting business climate because:

-foreigners control the business

-culture of the host country is alien to management

-For example, Indian govt gave Coca‑Cola the choice of either revealing its secret formula or leaving the country


The International Marketing TaskForeign Uncontrollables

Level of technology and expertise is a problem due differences in economic development

Cultural conditioning is like an iceberg All other factors also pose lots of uncertainty Influencing factors are:

-Geography and infrastructure-Structure of distribution-Level of technology-Competitive forces-Economic forces


Environmental Adaptation Needed

Interpret the influence of uncontrollables on marketing plan The task of adjustment is most challenging In domestic market marketer’s response is automatic based

on inherited (acquired) frame of reference (FOR)

-A Frenchman ‘knows’ how to behave and operate in France

FOR, a highly persistent aspect, can be a serious constraint when operating abroad


Environmental Adaptation Needed

Adjust marketing efforts to cultures to which one is not attuned

-A westerner must learn that white is a symbol of mourning in some parts of Asia not bridal gowns

-Circle with thumb and forefinger: OK in USA, Zero or worthless in France, Money in Japan, Sexual insult in Greece

Cultural conditioning is like an iceberg of which 9/10 is unknown


SRC and Ethnocentrism: Major Obstacles

The key to success in IM is adaptation

-Adaptation is a conscious effort to anticipate the influences of foreign and domestic uncontrollables on marketing mix and then to adjust marketing mix

The primary obstacle to this is SRC and Ethnocentrism

-SRC- an unconscious reference to one’s own cultural values, experiences & knowledge as basis for decisions

-Ethnocentrism- the notion that one’s own culture/company knows the best how to do things



Both affect our ability to observe, interpret and respond

Misunderstanding & misinterpretation is created, like body language, personal space

SRC prevents us from being aware of cultural differences

Both influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market



Both impede the ability to access a foreign market

Taking time to look beyond his SRC gives positive result Everything may not be different The best way to control is to recognize their influences on

our behavior


Steps suggested to isolate SRC influences and to maintain a vigilance regarding ethnocentrism

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 traits, habits, or norms through consultation with natives of the target country. Make no value judgments.

3. Isolate the SRC influence in the problem & examine it carefully to see how it complicates the problem.

4. Redefine the problem without the SRC influence & solve for the optimum business goal situation.

-Example ‘An American sales manager newly posted to Japan decided that his Japanese sales representatives did not need to come into Japanese office every day for an early morning meeting before beginning calls on clients in Tokyo’. 24S.R.Islam, Assoc. Prof, JnU

Developing Global Awareness

Opportunities waits for those who are prepared to face myriad obstacles with optimism, and learn new ways

Globally awareness needs: Tolerance for cultural differences

-Tolerance is understanding differences and accepting and working with others whose behavior is different

Knowledgeable about:-cultures-history-world market potential, -global economic, social and political trends

Be globally aware through personal relationships Be aware of falling in love with other country cultures


Stages of International Marketing Involvement

Marketer must decide the degree of marketing

involvement and commitment

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



No direct foreign marketing

Does not actively cultivate customers in foreign market Products reach foreign markets via domestic wholesalers

or distributors Foreigners may come directly to the firm Many firms receive orders from international Web surfer



Infrequent foreign marketing

Temporary surpluses result in infrequent foreign marketing Increased domestic demand may withdraw foreign task Little or no change in company organization or product

line Few companies today fit this model



Regular foreign marketing

Permanent productive capacity devoted to production of goods Employ foreign or domestic overseas middlemen or own sales

force or sales subsidiaries in foreign countries Primary focus is to serve domestic market needs As overseas demand grows, production is allocated for foreign

markets Products are adapted to meet the needs of individual foreign markets



International marketing

Fully committed to & involved in IM Seek markets all over the world & sell products of

planned production in various countries Offer region/country-specific marketing & production Become an international or multinational marketing firm



Global marketing

Treat the world as a single market Based on global homogeneity Market segments are defined by income levels, usage

patterns, or other factors that span countries and regions Major profit comes from abroad Entire operation begins to take on a global perspective

- Coca-Cola’s transition from international to global


Strategic Orientation

Management thinking and management orientation is reflected

Each strategic orientation also reflects philosophical orientation of activities

Three strategic orientations are:-Domestic market extension orientation-Multi-domestic market orientation-Global orientation



Domestic market extension orientation

Domestic product sales extension into foreign markets International operations is secondary Primary motive is to market excess domestic

production Firms with this marketing approach are classified as

ethnocentric in the EPRG schema



Multi-domestic market orientation

The importance of differences in overseas markets and offshore business is recognized

Marketing programs are adapted Subsidiaries operate independently of one another Control is typically decentralized Firms with this orientation would be classified in the

EPRG schema as polycentric.



Global orientation

Marketing activity is global, and market coverage is the world

Strives for efficiencies of scale by developing a standardized marketing mix

The global marketing company would fit the regiocentric or geocentric classifications



EPRG framework

Ethnocentric

Polycentric

Regiocentric

Geocentric


Ethnocentric Orientation

Assumes home country is superior to the rest of the world; associated with attitudes of national arrogance and supremacy

Management focus is to do in host countries what is done in the home country

-Sometimes called an international company

-Products and processes used at home are used abroad without adaptation


Polycentric Orientation

Management operates under the assumption that every country is different; the company develops country-specific strategies

-Sometimes called a multinational company

-Company operates differently in each host country based on that situation

Opposite of ethnocentrism


Regiocentric Orientation

Region becomes the relevant geographic unit (rather than by country)

Management orientation is geared to developing an integrated regional strategy

-European Union

-NAFTA


Geocentric Orientation

Entire world is a potential market Managerial goal is to develop integrated world market

strategies

-Global companies serve world markets from a single country and tend to retain association with a headquarters country

-Transnational companies serve global markets and acquire resources globally; blurring of national identity


Last Words……

Most problems encountered by the foreign marketer result from the strangeness of the environment within which marketing programs must be implement

Success hinges on the ability to assess & adjust properly to the impact of a strange environment

The successful international marketer possesses the best qualities of anthropologist, sociologist, psychologist, diplomat, lawyer, prophet, and businessman


chap-01 introduction' 2007

Documents

global media

global marketsu

resources global environment

economic changes

marketing plansstrategies

growth of new markets

developing countries

latin america