12 International Business Marketing McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved

12

International Business Marketing

McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved.

12-12-22

AgendaAgenda The Scope and Challenge of International Business The Scope and Challenge of International Business

MarketingMarketing Export Opportunities and ChallengesExport Opportunities and Challenges Stages of Economic DevelopmentStages of Economic Development The International Business EnvironmentThe International Business Environment International LawInternational Law Domestic Laws in Foreign MarketsDomestic Laws in Foreign Markets International Entry StrategiesInternational Entry Strategies Product and Service StrategyProduct and Service Strategy Managing the International Promotion EffortManaging the International Promotion Effort Managing the International Distribution SystemManaging the International Distribution System Pricing StrategyPricing Strategy

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The Scope and Challenge of The Scope and Challenge of

International Business MarketingInternational Business Marketing Three types of interactions that U.S. firms Three types of interactions that U.S. firms

may have with foreign firms:may have with foreign firms:

• They may be supplied by themThey may be supplied by them

• They may compete against them in this They may compete against them in this countrycountry

• They may export goods and/or services to a They may export goods and/or services to a foreign country and compete with them there.foreign country and compete with them there.

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Export Opportunities and ChallengesExport Opportunities and Challenges

Exporting allows companies to:Exporting allows companies to:• Increase growth potential beyond domestic capacityIncrease growth potential beyond domestic capacity• Expand into new markets with existing or new Expand into new markets with existing or new

products or servicesproducts or services• Add product or service linesAdd product or service lines• Extend product or service life cyclesExtend product or service life cycles• Improve profitability and competitivenessImprove profitability and competitiveness• Save existing jobs and generate new onesSave existing jobs and generate new ones• Gain favorable publicity and recognitionGain favorable publicity and recognition• Anticipate domestic market changesAnticipate domestic market changes• Meet the needs of global customersMeet the needs of global customers• Anticipate domestic market changesAnticipate domestic market changes

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Export Opportunities and ChallengesExport Opportunities and Challenges

To be successful in exporting, a company must:To be successful in exporting, a company must:• Analyze capabilities of business accurately.Analyze capabilities of business accurately.

• Know export potential of products and services.Know export potential of products and services.

• Identify foreign markets.Identify foreign markets.

• Understand export logistics and distribution channels.Understand export logistics and distribution channels.

• Understand culture!Understand culture!

• Develop international business relationships and Develop international business relationships and market entry strategies.market entry strategies.

For these reasons, many businesses never enter For these reasons, many businesses never enter the global marketplace; the task seems too the global marketplace; the task seems too daunting and time consuming.daunting and time consuming.

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International business marketing means travel.

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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.

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International Entry StrategiesInternational Entry Strategies

ExportingExporting The InternetThe Internet Contractual AgreementsContractual Agreements

• LicensingLicensing• FranchisingFranchising• Joint VenturesJoint Ventures

Direct Foreign InvestmentDirect Foreign Investment• ManufacturingManufacturing• Assembly OperationsAssembly Operations• Turnkey OperationsTurnkey Operations

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Product and Service StrategyProduct and Service Strategy Product PositioningProduct Positioning Adaptation Versus StandardizationAdaptation Versus Standardization

• Product adaptationProduct adaptation Strategically changing product to meet local Strategically changing product to meet local

needs.needs.

• ProductProduct standardizationstandardization Product originally designed for domestic market Product originally designed for domestic market

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

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Managing the International Managing the International Promotion EffortPromotion Effort

International AdvertisingInternational Advertising International Sales PromotionInternational Sales Promotion International PublicityInternational Publicity Trends in International Direct, Trends in International Direct,

Interactive, and Internet MarketingInteractive, and Internet Marketing

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Managing the International Managing the International Distribution EffortDistribution Effort

• American-based Export IntermediariesAmerican-based Export Intermediaries

Brokers and agentsBrokers and agents

Export management companies Export management companies (EMCs)(EMCs)

Export trading companies (ETCs)Export trading companies (ETCs)

Export trading company cooperativesExport trading company cooperatives

Piggyback arrangementsPiggyback arrangements

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Managing the International Managing the International Distribution EffortDistribution Effort

• Foreign-based Export IntermediariesForeign-based Export Intermediaries

Foreign sales agentsForeign sales agents

Foreign distributorsForeign distributors

• Direct MarketingDirect Marketing

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Managing the InternationalManaging the InternationalPricing EffortPricing Effort

Pricing StrategyPricing Strategy• Company FactorsCompany Factors

Global Corporate ObjectivesGlobal Corporate Objectives Cost-Based ApproachesCost-Based Approaches Transfer Price PoliciesTransfer Price Policies

• Market FactorsMarket Factors Income Levels and Market SegmentsIncome Levels and Market Segments Competitive StructureCompetitive Structure Channel StructureChannel Structure Gray MarketsGray Markets

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Managing the InternationalManaging the InternationalPricing EffortPricing Effort

Pricing StrategyPricing Strategy• Environmental FactorsEnvironmental Factors

Foreign Exchange RatesForeign Exchange Rates Inflation RatesInflation Rates Price ControlsPrice Controls CountertradeCountertrade

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CountertradeCountertrade

Half of Fortune 500 companies have used barter in some way.Half of Fortune 500 companies have used barter in some way. ~300,000 companies trade through corporate barter.~300,000 companies trade through corporate barter. More than 80 nations currently use CT.More than 80 nations currently use CT. More than 30 percent of world trade involves CT.More than 30 percent of world trade involves CT.

ExamplesExamples Xerox sells $100 million/year in copiers and printers to Brazil, Xerox sells $100 million/year in copiers and printers to Brazil,

with payment in Brazilian steel and Venetian blinds.with payment in Brazilian steel and Venetian blinds. General Dynamics sells F-16 fighter jets to Turkey in exchange General Dynamics sells F-16 fighter jets to Turkey in exchange

for Turkish products.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.

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The International Business The International Business EnvironmentEnvironment

The Buying ProcessThe Buying Process• Buying CentersBuying Centers

Although objectives of purchasing personnel may Although objectives of purchasing personnel may be universal, makeup of buying centers and be universal, makeup of buying centers and interactions between members of buying centers interactions between members of buying centers will vary by country. will vary by country.

In international marketing, it is often more difficult In international marketing, it is often more difficult to:to:

• Identify members of buying center.Identify members of buying center.

• DDetermine their role in buying processetermine their role in buying process..

• CCommunicate appropriate information to them. ommunicate appropriate information to them.

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Cultural DynamicsCultural Dynamics• Required AdaptationsRequired Adaptations

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

Marketers should be aware of complex Marketers should be aware of complex buying process, socio-cultural dynamics, buying process, socio-cultural dynamics, political-legal environment, and political-legal environment, and economic environment in foreign marketseconomic environment in foreign markets

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Cultural Dynamics Cultural Dynamics (continued)(continued)

• Cultural ImperativesCultural Imperatives - Business customs - Business customs and expectations that must be met and and expectations that must be met and conformed to if relationships are to be conformed to if relationships are to be successful.successful.

• Cultural AdiaphoraCultural Adiaphora - Behaviors and - Behaviors and customs that outsiders may wish to conform to customs that outsiders may wish to conform to or participate in, but that are not required.or participate in, but that are not required.

• Cultural ExclusivesCultural Exclusives - Customs or behaviors - Customs or behaviors from which the foreigner is excluded.from which the foreigner is excluded.

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Cultural Dynamics Cultural Dynamics (continued)(continued)

• Basic Requirements for International Marketing Basic Requirements for International Marketing Success Depends onSuccess Depends on

Knowledge of business culture, management Knowledge of business culture, management attitudes, and business methods existing in country attitudes, and business methods existing in country and willingness to accommodate differences.and willingness to accommodate differences.

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

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The Political and Legal EnvironmentThe Political and Legal Environment• Risks of confiscation, expropriation, and Risks of confiscation, expropriation, and

domestication.domestication.

• Personal risk.Personal risk.

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The Political and Legal EnvironmentThe Political and Legal Environment

• The Political EnvironmentThe Political Environment

In day-to-day operations, U.S. domestic business In day-to-day operations, U.S. domestic business marketers tend to ignore impact of political marketers tend to ignore impact of political environment.environment.

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

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

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The Political and Legal EnvironmentThe Political and Legal Environment• The Political EnvironmentThe Political Environment

Conflicting signals Conflicting signals Trade barriersTrade barriers

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

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

closed biddingclosed bidding Export subsidies Export subsidies —export financing on preferential —export financing on preferential

termsterms Lack of intellectual property protection—inadequate Lack of intellectual property protection—inadequate

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

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

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The Political and Legal EnvironmentThe Political and Legal Environment• The Legal EnvironmentThe Legal Environment

• Local Legal SystemsLocal Legal Systems Common law systemsCommon law systems Code (written) law systemsCode (written) law systems Islamic law systemsIslamic law systems

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Local Legal Systems ExplainedLocal Legal Systems Explained

Common law systemsCommon law systems base interpretation of law base interpretation of law on prior court rulings (legal precedents and on prior court rulings (legal precedents and customs). US system.customs). US system.

Code (written) law systemsCode (written) law systems rely on statutes and rely on statutes and codes for interpretation of law. There is little codes for interpretation of law. There is little "interpretation," so law must be detailed enough "interpretation," so law must be detailed enough to prescribe appropriate and inappropriate to prescribe appropriate and inappropriate actions. Majority of world's governments rely on actions. Majority of world's governments rely on code law system. code law system.

Islamic law systemsIslamic law systems rely on legal interpretation rely on legal interpretation of Koran.of Koran.

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The Political and Legal EnvironmentThe Political and Legal Environment• Antitrust LawsAntitrust Laws

• Foreign Corrupt Practices Act of 1977Foreign Corrupt Practices Act of 1977

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International LawInternational Law

Treaties of friendship, commerce, and Treaties of friendship, commerce, and navigation (FCNs)navigation (FCNs)

• usually guarantee “national treatment” to foreign usually guarantee “national treatment” to foreign company—that it will not be discriminated against company—that it will not be discriminated against by nation's laws and judiciaryby nation's laws and judiciary

International Monetary Fund (IMF)International Monetary Fund (IMF) and and General Agreement on Tariffs and Trade General Agreement on Tariffs and Trade (GATT) (GATT)

• part of limited body of effective international law. part of limited body of effective international law. Both agreements identify acceptable and Both agreements identify acceptable and nonacceptable behavior for member nations.nonacceptable behavior for member nations.

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International LawInternational Law

The United Nations Commission on The United Nations Commission on International Trade Law International Trade Law (UNCITRAL(UNCITRAL))

• promotes a uniform commercial code for whole world. promotes a uniform commercial code for whole world.

North American Free Trade Agreement North American Free Trade Agreement (NAFTA)(NAFTA)

• purpose is to increase trade and business between purpose is to increase trade and business between trading partners, U.S., Canada, and Mexicotrading partners, U.S., Canada, and Mexico

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Domestic Laws in Foreign MarketsDomestic Laws in Foreign Markets

Differing Legal SystemsDiffering Legal Systems

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ISO 9000 CertificationISO 9000 Certification

ISO = International organization for ISO = International organization for standardizationstandardization

ISO 9000 Certification: a series of standards that ISO 9000 Certification: a series of standards that include:include:• Effective quality systemEffective quality system

• Valid measurements and calibrationValid measurements and calibration

• Appropriate statistical techniquesAppropriate statistical techniques

• Lot control, part tracing, record keepingLot control, part tracing, record keeping

• Internal process auditingInternal process auditing

• Employee quality trainingEmployee quality training

(continued)

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Mandates:Mandates:

• Define appropriate quality standardsDefine appropriate quality standards

• Document processesDocument processes

• Prove consistent adherence to bothProve consistent adherence to both

Required by U.S. Dept. of Defense, Japan, Required by U.S. Dept. of Defense, Japan, European Community, and others. Requirement European Community, and others. Requirement includes second-tier subassembly and component includes second-tier subassembly and component makers (and their suppliers, etc.).makers (and their suppliers, etc.).

(continued)

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

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

(continued)

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Other International Standards receiving Other International Standards receiving attention:attention:

• AS 9000 (aerospace)AS 9000 (aerospace)

• ISO 14000 (environmental management)ISO 14000 (environmental management)

• SA 8000 (social accountability)SA 8000 (social accountability)

(continued)

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

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

(continued)

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Why Is ISO 9000 Why Is ISO 9000 a Marketing Issue?a Marketing Issue?

If customer does not require it, ISO 9000 If customer does not require it, ISO 9000 certification can be a differential advantage.certification can be a differential advantage.

If customer does require ISO 9000, marketers If customer does require ISO 9000, marketers ensure that customer needs are met. If ensure that customer needs are met. If marketing is confident that their quality marketing is confident that their quality department can handle ISO requirement, department can handle ISO requirement, marketing can deal with other aspects of marketing can deal with other aspects of customer’s needs. If marketing is not sure, then customer’s needs. If marketing is not sure, then they need to be involved until they are. This is they need to be involved until they are. This is true of any customer requirement (e.g., true of any customer requirement (e.g., technical, delivery, packaging).technical, delivery, packaging).

(continued)

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Why Is ISO 9000 Why Is ISO 9000 a Marketing Issue?a Marketing Issue?

Keep in mind that marketers decide which Keep in mind that marketers decide which customers to serve with what marketing customers to serve with what marketing mixes. For example, marketing can decide mixes. For example, marketing can decide that it is in the company’s best interest to that it is in the company’s best interest to target customers who require ISO 9000, but target customers who require ISO 9000, but not approach customers who require not approach customers who require aerospace 9000. aerospace 9000.

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SummarySummary

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

Documents

12 International Business Marketing McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved