CHAPTER 12

INTERNATIONAL BUSINESS MARKETING

Most international trade arrives on ships.

(Image courtesy ofMaersk Sealand)

Export Opportunities Increase growth potential beyond

domestic capacity Expand into new markets with existing or

new products or services Add product or service lines Extend product or service life cycles Improve profitability and competitiveness Save existing jobs and generate new ones Gain favorable publicity and recognition

Export Challenges To be successful in exporting, a company must:

Analyze capabilities of business accurately. Know export potential of products and services. Identify foreign markets. Understand export logistics and distribution

channels. Develop international business relationships and

market entry strategies. For these reasons, many businesses never enter

global marketplace; the task seems too daunting and time consuming.

A huge volume of international business marketing transactions are continuously in process between companies in countries all over the world.

The process has been going on since products started to be produced and sold.

International Business Environment Buying Process:

Different cultural systems can produce divergent negotiating styles shaped by each nation’s culture, geography, history, and political system.

Cultural Dynamics: Marketers should be aware of complex buying

process, socio-cultural dynamics, political-legal environment, and economic environment in foreign markets.

International Business Environment (cont.) The Political and Legal Environment:

Structure of government in home country, political risk, unstable governments, trade barriers, corruption, bribery

Basic Requirements for International Marketing Success Knowledge of business culture, management

attitudes, and business methods existing in country and willingness to accommodate differences.

Ability to understand the other market’s perspective is critical. Most of us tend to think everyone else sees things as we do (known as self-reference error ). Marketing mix should be based on customer’s preferences, not your own.

Political Environment In day-to-day operations, U.S. domestic

business marketers tend to ignore impact of political environment.

U.S. political environment is relatively stable and predictable … but this is not true everywhere.

Political change can mean new competitive disadvantages for foreign companies or even a company’s expropriation (or even confiscation).

Legal Environment Common law systems base interpretation of law on prior

court rulings (legal precedents and customs). Code (written) law systems rely on statutes and codes

for interpretation of law. There is little "interpretation," so law must be detailed enough to prescribe appropriate and inappropriate actions. Majority of world's governments rely on code law system.

Islamic law systems rely on legal interpretation of Koran.

Foreign Trade Barriers Import policies—tariffs and other import charges,

restrictions, licensing, or barriers Standards, testing, labeling, and certification Government procurement—”buy national” policies and

closed bidding Export subsidies—export financing on preferential terms Lack of intellectual property protection—inadequate

patent/trademark protection Service barriers—regulation of international data flows Investment barriers—restrictions on transferring

earnings and capital Regulations and standards and discriminatory taxation Other barriers—bribery and corruption

International Law and Treaty Agreements

Treaties of friendship, commerce, and navigation (FCNs): Usually guarantee “national treatment” to foreign company—

that it will not be discriminated against by nation's laws and judiciary

International Monetary Fund (IMF) and General Agreement on Tariffs and Trade (GATT): They are part of limited body of effective international law. Both

agreements identify acceptable and nonacceptable behavior for member nations.

European Union NAFTA The United Nations Commission on International Trade Law

(UNCITRAL): It promotes a uniform commercial code for whole world.

International Standards Organization (ISO): It is working toward development of uniform international

standards.

Entry Strategies

Exporting Licensing Joint ventures Manufacturing

Manufacturing Assembly operations Free Trade zones Franchising Turnkey Operations

Product Strategies Product adaptation:

Strategically changing product to meet local needs.

Product standardization: Product originally designed for domestic

market is exported to other countries with virtually no change, except perhaps for translation of words and other cosmetic touches.

ISO 9000 Certification ISO= International Organization for Standardization ISO 9000 Certification: a series of standards that

include: Effective quality system Valid measurements and calibration Appropriate statistical techniques Lot control, part tracing, record keeping Internal process auditing Employee quality training

Mandates: Define appropriate quality standards Document processes Prove consistent adherence to both

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ISO 9000 Certification (cont.) Required by U.S. Dept. of Defense, Japan,

European Community, and others. Requirement includes second-tier subassembly and component makers (and their suppliers, etc.).

Prior to ISO 9000, most companies had their own versions of quality systems (many modeled on military specifications).

Certification assures customers that suppliers have capabilities and systems to provide high-quality goods. (Doesn’t assure that particular products are high quality, just the standards of the system they were produced under.)

ISO 9000 Certification (cont.) Other International Standards receiving attention:

AS 9000 (aerospace) ISO 14000 (environmental management) SA 8000 (social accountability)

ISO creates standards; typically, consultants help company adapt systems to meet the standards. When ready, a certification company audits the systems and awards certification (and provides periodic checking).

Adoption cost = ~$250,000–$500,000 for average-size plan operation.

Countertrade

Half of Fortune 500 companies have used barter in some way.

300,000 companies trade through corporate barter. More than 80 nations currently use CT. More than 30 percent of world trade involves CT.

Examples Xerox sells $100 million/year in copiers and printers to

Brazil, with payment in Brazilian steel and Venetian blinds.

General Dynamics sells F-16 fighter jets to Turkey in exchange for Turkish products.

Global trade does not always involve cash; instead, countertrade (CT), or barter, involves one-time exchange of goods/services for other goods/services.

Summary Message

To be a successful international marketer, you need to appreciate other cultures and be a continuously learning student of their dynamic business practices, cultures, legal systems, political systems, and competitive environments.

As a check of how much we have to learn:

• Name our major trading partners in NAFTA. • List their major political parties and what each stands

for.• Describe their legal systems.• Describe how each differs from us culturally and how

that would impact business transactions.