introduction- class im1

8/8/2019 Introduction- Class Im1

http://slidepdf.com/reader/full/introduction-class-im1 1/34

Amity School of Business

1


BBA, V Semester

International Marketing

Prof. Ruchi Khandelwal

Introduction




2

Concept of GlobalizationGlobalization constitutes multiplicity of linkages and

interconnections that transcend the nation states (and by

implication the societies) which make up the modern

world system.It defines a process through which events, decisions and

activities in one part of the world can come to have a

significant consequence for individuals and communities

in quite distant parts of the globe.Globalization is manifested in

economic growth and development,

political structures and relations, and

social and cultural movements and transformations.




3

Need for International Marketing Exploiting worldwide market imperfections

Seeking markets abroad

Seeking to make themselves more efficient

Seeking new avenues for innovation and knowledge creation

Factor inputs could be sourced or extracted cheaper

Firm-based knowledge capital could be improved

Oligopolistic interdependence

Environmental reasons

Responding to macro-economic imperatives for globalization Globalization of capital markets

Declining costs of transportation and communication

Growth of regional and international trading arrangements

Exploiting competitive advantage of nations.




4

Defining International Marketing Cateor a defines international marketing as, ³the performance

of business activities that direct the flow of goods and servicesto consumers and users in more than one nation.´

International marketing, therefore is µmarketing carried onacross boundaries.¶

According to a definition adopted from AMA¶s definition of marketing, µInternational Marketing is the multinational

process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to

create exchanges that satisfy individual and organizationalobjectives.




5

International Marketing Vs. DomesticMarketing

Sovereign Political Entities

Different Legal Systems Different Monetary Systems

Lower mobility of factors of production

Differences in market characteristics

Differences in procedures and documentation

Greater degree of risk

Cultural dimensions of international marketing




6

Multinational Corporations Definition by size

Business Week magazine focuses on market value.

Forbes magazine ranks the world¶s largest public companies by using acomposite ranking of sales, profits, assets and market value.

World Investment report of U NCTAD rank TNCs by their foreign assets. Definition by structure

Structural requirements include the number of countries in which the firmdoes business and the citizenship of corporate owners and top managers.

Definition by performance

Depends on foreign earnings, sales and assets which indicate the extent of commitment of corporate resources to foreign operations and the amount of rewards from that commitment.

Definition by behavior Orientation of company management in decision making- ethnocentric/

polycentric/geocentric behavior.




7

Stages of International Marketing Involvement

No direct Foreign Marketing

Global Marketing

International Marketing

Regular Foreign Marketing

Infrequent Foreign Marketing




8

Evolutionary Process of Global MarketingStage Market Focus Orientation Marketing Mix

Domestic

marketing

Domestic markets Ethnocentric Focused on

domestic customers

Export marketing Overseas

(targeting and

entering markets)

Ethnocentric Focused mainly on

domestic customers

Overseas

marketing-

generally anextension of

domestic marketing

Decisions made at

headquarters




9


International

Marketing

Differentiation in

country markets

by way of acquiring or

developing new

brands

Polycentric Developing local

products depending

upon country needs

Decisions at

individual

subsidiaries

Multinational

Marketing

Consolidation of

operations onregional basis

Regio-centric Product

standardizationwithin regions but

not across them on

regional basis




10


Global Marketing Consolidating

firm¶s operations

on global basis

Geocentric Globalization of

marketing mix

decisions with localvariations

Joint decision

making across

firm¶s global

operations

towards

GLOCAL MARKETING




11

Self Reference Criterion and Ethnocentrism

The phenomenon of making unconscious

reference to one¶s own cultural values,experiences and knowledge as a basis for

decision is known as

SRC (Self Reference Criterion).




12

SR C creates problems«




13

H

ow to deal with SR C???

To avoid SR C influences:

± Define the business problem or goal in home country¶s

cultural traits, habits or norms.

± Define the business problem or goal in foreign country¶scultural traits, habits or norms. Make no value judgments.

± Isolate the SR C influence in the problem and examine it

carefully to see how it complicates the problem.

± Redefine the problem without the SR C influence and solvefor the optimum business goal situation.




14

What has changed the world trade scene? Transition from socialist to market-driven economies

Liberalization of trade and investment policies in

developing countries

Transfer of public-sector enterprises to the private

sector

Rapid development of regional market alliances




15

Major Trading BlocsEUROPE, ASIA, AMERICA

Fully Industrialized Countries (Germany, Japan, Us)

Rapidly Industrializing Countries (Mexico, Poland, South Korea)Other Countries Achieving Economic Development at more Modest Rate

I NDO NESIA, MALAYSIA, THAILA ND A ND THE PHILLIPI NES




16

Marketing and Economic Development Stage of economic growth affects

± The attitude towards foreign business activity

± The demand for goods

± The distribution system

± The marketing process

In static economies, marketing is typically nothing more than a supply effortwhereas in dynamic economies, marketing is constantly faced with the challengesof demand creation and supplying to fulfill needs and wants.

U N classifies countries stage of economic development based on its level of industrialization: ± MDCs (more developed countries, such as Canada, England, France, Germany, Japan

and the United States)

± LDCs (less-developed countries, such as Asia and Latin America)

± LLDCs (least-developed countries, as those found in Central Africa and parts of Asia)

U N Classification lacks to explain countries that are experiencing rapid economicexpansion and industrialization, the NICs ( Newly Industrialized countries), such asChile, Brazil, Mexico, South Korea, Singapore and Taiwan.




17

NIC

Growth Factors Political stability in policies

Economic and legal reforms

Entrepreneurship ± free enterprise in tha hands of the self employed.

Strong central planning

Outward orientation Outsourcing factors of production

Incentives to force a high domestic rate of savings and to directcapital to update the infrastructure, transportation, housing,education, and training.

Strategically directed industrial and international trade policies

Privatization of state-owned enterprises (SOEs) that placed a drainon national budgets.

Large accessible markets with low tariffs.

Growth of Information Technology




18

Market Indicators in Selected Countries (World Bank, 2003)

Country Population (inmillions)

GDP (per capita)USD

Cars (per 1000people)

TVs (per 1000people)

PCs (per 1000people)

United States 290.8 35566 759 871 659

Argentina 36.8 7165 181 326 82

Australia 19.9 21688 601 722 565

Brazil 176.6 3510 79 369 75

Canada 31.6 24222 582 707 487

China 1288.4 5196 12 350 119

France 59.8 22723 592 632 347

Germany 82.5 22868 529 675 485

India 1064.4 511 9 84 7

Indonesia 214.6 781 25 153 12

Italy 57.6 19090 591 494 231

Japan 127.6 38222 581 785 382

Kenya 31.9 341 13 44 6

South Korea 47.9 12232 292 458 558

United Kingdom 59.3 25742 424 950 406




19

Marketing in a Developing Country

Marketing efforts have to be keyed to each situation, custom tailored for each set of circumstances, they can¶t be superimposed from one economyto another.

Level of Market development : the more developed an economy, thegreater variety of marketing functions demanded and the moresophisticated and specialized the institutions become to perform marketingfunctions.

Demand in a developing country: co-existence of three distinct kinds of markets- the traditional rural/agricultural sector, the modern urban/high-income sector and the often very large transitional sector usuallyrepresented by low income urban slums. Each of these markets can prove

profitable but requires its own customized marketing program. Bottom-of-the-Pyramid Markets (BOPMs): About 4 billion people acrossthe globe with annual incomes of less than $1200 are commercially viablemarkets having long term potential.




20

DevelopingC

ountries and Emerging Markets Traits: ± Are all physically large

± Have significant populations

± Represent considerable markets for a wide range of products

± Have strong rates of growth or the potential for significantgrowth

± Have undertaken significant programs of economic reform.

± Are of major political importance within their regions.

± Are ³regional economic drivers´

± Will engender further expansion in neighboring markets asthey grow.




21

Big Emerging Markets (BEMs) Latin America ± Most of the countries have moved from military dictatorships to

democratically elected governments.

± Import substitution and protectionism has been replaced by privatization and trade policy reforms.

± The market of nearly 460 million people has attracted investment of billion of dollars in manufacturing plants, airlines, banks, public works,and telecommunications systems.

± However, Argentina, Brazil, Mexico, the three BEMs in Latin Americasuffered severely due to economic meltdown and financial crisis. Nevertheless, Latin America is still working towards economic

reforms. ± The exports of Latin America are also very big, like Meat and Agro products from Argentina, Tiles from Brazil.

± Mexico is the gateway market for the countries like Honduras, PuertoRico, Costa Rica etc. Mexico in itself is a very big market.




22

Big Emerging Markets (BEMs) Eastern Europe and the Baltic States

± Several countries in central Europe are fully integrated with the world economy andhave joined the European Union, while some countries in the former Soviet Union,and the Balkans are still struggling, e.g. Poland¶s economic output has continued ata steady pace upward since 1990, whereas Ukraine¶s has shrunk by half in production, but if taken uranium and nuclear reserves of Ukraine, it the biggest eastEuropean economy.

± In Eastern Europe different countries have fared differently depending upon howquickly they allowed transformation into free market pricing systems, relaxingimport controls, privatizing SOEs. (Czech Republic Vs Hungary, Poland andRomania). Yugoslavia plagued with internal strife over ethnic divisions and four of its republics (Croatia, Slovenia, Macedonia and Bosnia/Herzegovina) secede from

the federation, leaving Serbia and Montenegro. An ethnic war broke out inC

roatiaand Bosnia/Herzegovina decimating their economies.

± The Baltic states- Estonia, Latvia, and Lithuania adopted good policies and withtime progressed. Estonia, soon after regaining independence, dropped the ruble, privatized companies and land and adopted the freest trading regime of the threecountries. Though the other two countries also steadily grew but common problemslike bureaucracy, corruption still exist.




23

Big Emerging Markets (BEMs) Asia ± Fastest growing area in the world for the past three decades.

± In spite of the serious financial crisis which culminated in the meltdown of Asian stock market, the leading economies (Japan, Hong Kong, South Korea,Singapore and Taiwan) were able to contribute about 29% to the global output by the year 2000.

± The ³four tigers´ across the Asian-Pacific Rim were first ones , besides Japan,to move to the status of NICs from developing countries. From suppliers of component parts and assemblers of Western products , they have become major competitors in electronics, shipbuilding, heavy machinery etc.

± China¶s dual economic system (socialism along with many tenets of capitalism), ability to deregulate industry, import modern technology, privatize,overstaffed, inefficient SOEs has produced an economic boom that can only

match US or Japan. China¶s entry to WTO and United States¶ granting Chinanormal trade relations on a permanent basis (P NTR) have a profound effect onChinese economy. Because of China¶s size, diversity and political organization,each of its six regions can be viewed as different markets. China needs toimprove on its human rights and legal systems. In the long run, the economicstrength of China will not be as an exporting machine but as a vast market.




24

Big Emerging Markets (BEMs) Asia

± In 1997, Hong Kong became a special administrative region (SAR) of the People¶s Republic of China. Hong Kong is the largest investor inChina, investing more than $100 billion in the last few years infactories and infrastructure. The keys to Hong Kong¶s economicsuccess are its free market philosophy, entrepreneurial drive, absence of trade barriers, well-established rule of law, low and predictable taxes,transparent regulations, and complete freedom of capital movement.

± China and Taiwan¶s economic ties have to be refurbished as both sidesimplement WTO provisions. Trade fits well with both countries¶ needs,C

hina offers a limitless pool of cheap labor and engineering talent aswell as a huge consumer market for Taiwan¶s tech powerhouses.




25

Big Emerging Markets (BEMs)

The newest emerging markets are those of Vietnam and SouthAfrica.

Vietnam has the ingredients of becoming another Asian tiger viz., highly educated and motivated population, and

government¶s commitment towards economic growth. Alsothe bilateral trade agreement between US and Vietnam leadingto NTR status for Vietnam is going to aid in boostingcountry¶s exports and in bringing foreign capital andtechnology.

South Africa¶s economic growth increased significantly after

U N lifted the economic embargo. South Africa has a goodindustrial base, as well as well developed infrastructuremaking it a good access point for nearby markets. The countryhas a domestic market of nearly $500 billion with mostinvestor-friendly investment policies and free marketorientation.




26

Basis of International Trade Trade- a zero-sum game or positive-sum game?

Trade: the route to economic development




27

Production Possibility Curve

Units of automobiles

Units of

computer

0

C

B

A

Basis for International Trade (contd.)




28

Principle of Absolute Advantage : A country should export

a commodity that can be produced at a lower cost than can

other nations; and conversely, should import a commodity

that can only be produced at a higher cost than can other

nations.

EXAMPLE Product USA JAPAN

CASE 1 Computers 20 10

Automobiles 10 20

Basis for InternationalT

rade (contd.)




29

Principle of Comparative/Relative advantage: A country

may be better than another country in producing many

products but should produce only what it produces best. It

should export a product with the greatest comparative

advantage and import a product which has greatest

comparative disadvantage.

EXAMPLE

Product USA JAPAN

CASE 2 Computers 20 10

Automobiles 30 20

Basis of International Trade (contd.)




30

Exchange Ratios,T

rade and Gain International trade is a function of varying domestic

exchange ratios, and these ratios cause variations in

comparative costs or prices.

Theoretically, trade should equalize the previouslyunequal domestic exchange ratios and bring about a

new ratio, known as the world market exchange

ratio, or terms of trade. However, it should be noted

that such benefits from trade do not imply that trademust always take place and that all nations will

always gain from trade.




31

To examine the extent of trading gain, countries consider

the domestic exchange ratio.(DER)

Product USA JAPA N

CASE2 Computers 20 10

Automobiles 30 20

CASE3 Computers 20 10

Automobiles 40 20

Japan¶s DER ± 1:2

US¶s DER ± 1:1.5

Japan¶s DER ± 1:2

US¶s DER ± 1:2

Exchange Ratios, Trade and Gain




32

Factor Endowment Theory One basic assumption of Relative and absolute advantage theories is that

the advantage is solely determined by labor in terms of time and cost. Thuscountries with high labor cost should be in serious trouble, but that is notthe case with Germany or Japan.

It is misleading to analyze labor cost without analyzing the quality of that

labor. Price of a product is not necessarily determined by the amount of labor it

embodies, other factors of production must be taken into consideration.

The varying factor inputs and proportions for different commoditiestogether with the uneven distribution of such factors of production indifferent regions of the world, are the basis of the Heckscher-Ohlin theory

of factor endowment. This theory holds that the inequality of relative prices is a function of

regional factor endowments and that comparative advantage is determined by the relative abundance of such endowments.




33

Traditionally, factors of Comparative Advantage for countries: ± Land

± Location

± Natural resources ± Labor

± Local Population size

Determinants of International Competitiveness: ± Firm Strategy, Structure and Rivalry

± Demand Conditions ± Related Supporting Industries

± Factor Conditions

Additional Variables: ± Government

± C

hance events

The Competitive Advantage of Nations




34

FIRM¶S STRATEGY

STRUCTURE A ND

RIVALRY

FACTOR

CO NDITIO NSDEMA ND CO NDITIO NS

RELATED A ND

SUPPOR TI NG

I NDUSTRIES

GOVERNEMNT

CHANCE

EVENTS

Porter¶s Diamond Model for The Competitive

Advantage of Nations

introduction- class im1

Documents