International Marketing

Group – 8

Mathew P Varghese 2009SMN6720Balvinder S Chabbra 2009SMN6722Ranu Srivastava 2009SMN6723Subhajit Saha 2009SMN6724Kaushal K Verma 2009SMN6734

Introduction• Marketing: Process by which companies create

customer interest in goods or services. It generates the strategy that underlines sales techniques, business communication, and business development. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves

• International Marketing: Focuses resources on global market opportunities and threats; the main difference is the scope of activities because global marketing occurs in markets outside the organization’s home country.

A powerful force drives the world toward a converging commonality, and that force is technology: Levitt

What is different about IM • Linguistic problems.• language >>>culture.• translation relatively easy - culture more complex.• How does law affect marketing?• Prohibition.• Restrictions.

• Obligations• Packaging

– contents, languages, child-proof• Environmental standards

– emissions, disposal• Ownership and access to market

– mandatory joint ventures

Political-Legal environment

• Attitude toward International Buying.

• Government Bureaucracy.

• Political Stability.

• Monetary regulations.

Management Orientation

• The form and substance of a company’s response to global markets opportunities depends greatly on management’s assumptions and beliefs about the nature of the world.

• The world view of a company’s personnel can be described as :

- Ethnocentric- Polycentric- Regiocentric, &- Geocentric

Ethnocentric Orientation

• A person who assumes his or her home country superior compared to the rest of the world is said to have an Ethnocentric orientation. The ethnocentric orientation means company personnel see only similarities in markets and assume the product and practices that succeed in the home country will, due to their demonstrated superiority, be successful anywhere.

Ethnocentric Orientation( Contd..)

• At some companies, the ethnocentric orientation means that the opportunity outside the home country is ignored. Such companies are called domestic companies.

• Ethnocentric companies that do conduct business outside the home country can be described as international companies. They adhere to the notion that the products that succeed in the home country are superior and therefore can be sold everywhere without adaptation.

• In the ethnocentric international company, foreign operations are viewed as being secondary or subordinate to domestic ones.

Ethnocentric Orientation( Contd..)

• Valuable managerial knowledge and experience in local markets may go unnoticed.

• For mfg. firm, ethnocentric means foreign markets are viewed as a means of disposing of surplus domestic production.

• Even if consumers needs and demands differ from that of home country, those differences are ignored at headquarters.

Polycentric Orientation

• The polycentric orientation is the opposite of ethnocentric. The term polycentric describes management’s belief that each country in which a company does business is unique. This assumption lay the ground work for each subsidiary to develop its own unique business and marketing strategies in order to succeed.

• The term multinational companies are often used to describe such a company.

Regiocentric Orientation

• In a company, with regiocentric orientation, management views region as unique and seeks to develop an integrated regional strategy.

• For example, a US company that focuses on the counties included in the NAFTA is a regiocentric orientation.

• Similarly, an Indian company that focuses its attention on SAARC countries is regiocentric.

Geocentric Orientation

• A company with a geocentric orientation views the entire world as potential market and strive to develop integrated world market strategies.

• A company who’s management has a regiocentric or geocentric orientation is known as a global or transnational company.

Examples of Pitfalls

• Apocryphal stories of marketing blunders

Pepsi & KFC

• In Taiwan, the translation of the Pepsi slogan “Come alive with the Pepsi Generation” came out as “Pepsi will bring your ancestors back from the dead.”

• Also in Chinese, the Kentucky Fried Chicken slogan “finger-lickin’ good” came out as “eat your fingers off.”

Coke

• The name Coca-Cola in China was first rendered as Ke-kou-ke-la. Unfortunately, the Coke company did not discover until after thousands of signs had been printed that the phrase means “bite the wax tadpole” or “female horse stuffed with wax” depending on the dialect.

Coke get it right

• Coke then researched 40,000 Chinese characters and found a close phonetic equivalent “ko-kou-ko-le”, which can be loosely translated as “happiness in the mouth”.

IM in 21st century

• The world is shrinking rapidly with the advent of faster communication, transportation and financial flows.

• International trade is booming and India’s trade accounts for 24% of our GDP( India export 155B in 2009).

• Global competition is intensifying.

• Higher risk with Globalization.

Contents

• What factors should a company review before deciding to go abroad?

• How can companies evaluate and select foreign markets to enter?

• What are the major ways of entering a foreign market?

• To what extent must the company adapts its product and marketing program to each foreign country?

• How should the company manage and organize its international activities?

Your company does not belong in markets where it cannot be the best - Philip Kotler

Competing over a Global basis• Global Industry• Global Firm

Fig1: Major decisions in International Marketing

Driving factors to move Global• Global firms offering better products or lower

prices can attack the company’s domestic market.• The company discovers that some foreign

markets present higher profit opportunities than the domestic market.

• The company needs a larger customer base to achieve economies of scale.

• The company wants to reduce its dependence on any one market.

• Follow customers who are expanding. • Product Life cycle stage.

Risk Factors• The company might not understand foreign

customer preferences and fail to offer a competitively attractive product.

• The company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals.

• The company might underestimate foreign regulations and incur unexpected costs.

• The company might realize that it lacks managers with international experience.

• The foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate property.

Few examples….• Hallmark cards failed when they were introduced in France.

The French dislike syrupy sentiment and prefer writing their own cards.

• Philips began to earn a profit in Japan only after its coffeemakers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands.

• Coca Coca-two Cola had to withdraw its two-liter bottle in Spain after discovering that few Spaniards owned refrigerators with large enough compartments to accommodate it.

• General Foods’ Tang initially failed in France because it was positioned as a substitute for orange juice at breakfast. The French drink little orange juice and almost none at breakfast.

• Kellogg’s Pop-Tarts failed in Britain because the percentage of British homes with toasters was significantly lower than in the United States and the product was too sweet for British tastes.

Which market to enter…

• Ayal and Zif contend that a company should enter fewer countries when:

- Market entry and market costs are high

- Product and communication costs are high

- Population and income size and growth are high in the initial countries chosen

- Dominant foreign firms can establish high barriers to entry

Ref: Ayal, I. & Zif, J. (1979). Market expansion strategies in multinational marketing. Journal of Marketing, Spring, 84-94.

How to enter the market…

• Five models to enter into foreign market

Direct & Indirect Export

• Occasional exporting.

• Active exporting.

• Indirect exporting.

• Domestic Domestic-based export merchants.

• Domestic Domestic-based export agents.

• Cooperative organizations.

• Export Export-management companies.

Direct Exports….

• Domestic-based export department or division.

• Overseas sales branch or subsidiary.

• Traveling export sales representatives.

• Foreign-based distributors or agents.

Licensing

• Management contracts.

• Contract manufacturing.

• Franchising.

Contd…• Joint Ventures

• Direct Investment

• Johanson and Wiedersheim-Paul identified four stages in the internationalization process:- No regular export activities- Export via independent representatives (agents)- Establishment of one or more sales subsidiaries- Establishment of production facilities abroad

Ref: The Role of Knowledge in Firms’ internationalization Process: Wherefrom and Whereto - Johanson and Wiedersheim-Paul

Marketing Program…• Standardized Marketing Mix:

- Selling largely the same products and using the same marketing approaches worldwide.

• Adapted Marketing Mix:- Sellers adjust the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.

Marketing Mix adaptation

• McDonald’s serve chicken, fish and vegetable burgers and the Maharaja Mac- to all mutton patties, special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun.

Five Global Product and Promotion Strategies

Global Product Strategies

• Straight Product extension:

- Marketing a product in a foreign market without any change.

• Product Adaptation:

- Adapting a product to meet the local conditions or wants in foreign markets.

• Product Invention:

- Creating a new product or services for foreign markets.

Global Promotion Strategies

• Use a standardized theme globally, but have to make adjustments for language or cultural differences.

• Communication Adaptation:

- Fully adapting an advertising message for local markets.

• Changes may have to be made due to media availability.

Cultural Environment

• Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program.

• Business norms vary from country to country.

• Companies that understand cultural nuances can use them to advantage when positioning product internationally.

Cultural differences

• When Nike learned that this stylized Air logo resembles Allah in Arabic script, it apologized and pulled the shoes from distribution.

Global Pricing Strategies• Companies face many problems in setting their

international prices.• Possible approaches include:

- charge a uniform price all around the world.- charge what consumers of each country will pay.- Use a standard markup of costs everywhere.

• International prices tend to be higher than domestic prices due to Price Escalation.

• Companies may guilty of dumping- a foreign subsidiary charges less than its cost or less than it charges in its home market.

International Pricing

• Twelve European Union countries have adopted the euro as common currency, creating “price transparency” and forcing companies to harmonize their prices throughout Europe.

Whole-channel concept for IM

Forms of International Enterprise

TypesMultinational Enterprise

Global Enterprise International Enterprise

Strategic competency

Responsiveness efficiency i.e. output per unit of input

transfer of learning

Structures lose federations of enterprises; national subsidiaries solve all operative tasks and some strategical.

tightly centralized enterprise; national subsidiaries primarily seen as distribution centres; all strategic and many operative decisions centralized

Somewhere in between multinational and global enterprises; some strategic areas centralized, some decentralized

Examples P & G, Unilever Exxon, Nestle IBM, Erricson

Marketing Organization• Export department.

• International division.

- Geographical organizations- World product groups- International subsidiaries

Marketing Organization

• Global organization• Bartlett and Ghoshal distinguish three

organizational strategies:

- A global strategy treats the world as a single market.

- A multinational strategy treats the world as a portfolio of national opportunities.

- A “global” strategy standardizes certain core elements and localizes other elements.

Ref: Managing Across Borders: The Transnational Solution Bartlett & Ghoshal 2002

Thank You