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Mod 6

International Marketing

Units 19 - 22

Key Concepts of International

Marketing

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The US Scenario

• 1 out of every 3 U.S. farm acres is producing for export

• 1 of every 6 U.S. manufacturing jobs produces for export

• $1 of every $7 of U.S. sales goes abroad

• 1 of every 3 cars, 9 out of 10 TVs, 2 out of 3 suits, and

every CD Player sold in the U.S. is imported.

• Travel and tourism is the #1 source of U.S. foreign

exchange.

• $1 of every $4 of U.S. bonds & notes is issued to

foreigners.

International Marketing

• Scope and Challenge• International Marketing - is concerned with planning

and conducting transactions across international borders to satisfy the objectives of individuals and organizations.

• “Identifying and satisfying consumer needs abroad; better than the national and international competitors, under the constraints of the internationalization stage of the firm and the global environment” - Nathalie Prime

• Some Governments pursue economic policies aimed at increasing export earnings on a national scale.

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Rationale Behind International

Marketing

• There is a trend toward a global economy.

• Excess Capacity

• Competitive Pressures

• Markets across the world being sought after by more competitors

• Explosion of international trade

• Global linkages are becoming important• Economies of scale and scope• Saturated markets in the home country• New trade agreements

International Marketing

• “If we only distributed pictures in the U.S., we’d lose money. It takes the whole world now to make the economics of movie-making work”

- William Mechanic

President, 20th Century Fox

• “Half the people in the world have yet to take their first picture. The opportunity is huge, and it’s nothing fancy. We just have to sell yellow boxes of film.”

- George M.C. Fisher

CEO, Eastman Kodak Company

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International Marketing

Comparing Domestic and International Marketing

• Similarity:

- Both carry out transactions that meet the needs of

individuals and organizations

• Differences:

- International markets have greater growth potential

- Some tasks associated with international marketing not

included (or less intense ) than in domestic marketing (e.g.,

cultural research, political factors, exchange rates, trade

laws, long distance distribution.)

IM and Exporting

International Marketing is more than exporting, because it involves:

• Marketing products that have been manufactured or assembled in the target country

• Establishing a permanents presence in the foreign country

• Licensing and franchising

• Sourcing components from foreign states.

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IM and Multinational Marketing

• International marketing means marketing across national frontiers.

• Multinational Marketing means the integrated coordination of the firm’s marketing activities throughout the world.

IM – Opportunities & Challenges

• Opportunities

– Integrate global knowledge

– Expand long-run production

– Lengthen and rejuvenate product life cycles

– Competitive supply chains

• Challenges

– International logistics

– Small business mindset

– Political and economic stability

– Increased competition

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IM – Small Business Mindset

• Many believe only

MNCs must carry out

international

marketing

– Smaller firms can also

be major players: 50%

of German exports

from firms with 19 or

fewer employees

Roadmap When Going for Global Market

• It is about the international trade system, economic,

political-legal, and cultural environments affect a

company’s international marketing decisions.

• Three key approaches to entering international

markets.

• Companies adapt their marketing mixes for

international markets.

• Three major forms of international marketing

organization.

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Globalisation

Many U.S.

companies

have made

the world

their market.

Major International Marketing

Decisions

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The Global Marketing Environment

The International Trade System:

Restrictions—tariffs, quotas, embargos, exchange controls,

and non-tariff trade barriers.

The World Trade Organization and GATT:

Helps Trade—reduces tariffs and other international trade

barriers.

Regional Free Trade Zones:

Groups of nations organized to work toward common goals in

the regulation of international trade.

Political – Legal Environment

• Attitudes towards International Buying

• Government Bureaucracy

• Political Stability

• Monetary Regulations

• Geopolitics

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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

products internationally.

Deciding Whether To Go Global

• Reasons to consider going global:

– Foreign attacks on domestic markets

– Foreign markets with higher profit opportunities

– Stagnant or shrinking domestic markets

– Need larger customer base to achieve economies

of scale

– Reduce dependency on single market

– Follow customers who are expanding

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Deciding Which Markets to Enter

• Before going abroad, the company should try to define its international marketing objectives and policies.

• What Volume of Foreign Sales is Desired?

• How Many Countries to Market In?

• What Types of Countries to Enter?

• Choose Possible Countries and Rank Based on Market Size, Market Growth, Cost of Doing Business, Competitive Advantage, and Risk Level

Colgate Goes to China

• Using aggressive promotional and educational

programs, Colgate has expanded its market

share from 7% to 35% in less than a decade.

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Market Entry Strategies

Market Entry Strategies

• Exporting:– Indirect: working through independent international

marketing intermediaries.

– Direct: company handles its own exports

• Joint Venturing:– Joining with foreign companies to produce or market

products or services.

• Approaches:– Licensing

– Contract manufacturing

– Management contracting

– Joint ownership

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Joint Ownership

• KFC entered Japan through a joint ownership

venture with Japanese conglomerate

Mitsubishi.

Market Entry Strategies

• Direct Investment:

– The development of foreign-based assembly or

manufacturing facilities.

– This approach has both advantages and

disadvantages

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IM- Marketing Mix Strategies

• Three approaches for marketing a product or service at an international level:– Standardisation refers to the approach taken in which the

marketing mix is used in the same way in different countries.

– Selling largely the same products and using the same marketing approaches worldwide

– Adaptation relates to the approach in which the business strategy is deliberately changed so that it relates to each market.

– Producer adjusts the marketing mix elements to each target market, bearing more costs but hoping for a larger market share and return.

– Globalisation looks like an extreme form of standardisation but does not depend upon it.

Marketing Mix Adaptation

• In India, McDonald’s serves chicken, fish, and vegetable burgers, and the

Maharaja Mac—two all-mutton patties, special sauce, lettuce, cheese,

pickles, onions, on a sesame-seed bun.

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Five Global Product & Marketing

Strategies

Global Product Strategies

• Straight Product Extension:

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

• Product Adaptation:

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

• Product Invention:

– Creating new products or services for foreign markets.

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Global Product Strategies

• Product –This is a part of the marketing mix that

many companies aim to standardise.

– The augmented view of the product includes the

physical product plus the brand and company name

and trademarks.

– It includes the packaging, warranties and guarantees.

It is possible, therefore, to standardise part of the

product and adapt other elements.

– Some companies will keep the same physical product,

but may change the packaging and the labeling.

– Language change is an obvious adaptation.

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 in each country will pay.

– Use a standard markup of costs everywhere.

• International prices tend to be higher than domestic prices because of price escalation.

• Companies may become guilty of dumping –a foreign subsidiary charges less than its costs or less than it charges in its home market.

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Global Pricing Strategies

• Price - Very difficult to standardise price because it is influenced by so many country factors. – Many differences in the tariff rates charged for

imports, value added tax rates, distribution channel margins and the prices set by the main competitors.

– There are considerable differences in the ability of consumers to pay a particular price level.

– Whilst a company can have a policy to charge good value prices in the middle of the market and, therefore, have a standardised process approach, the practical implementation will give rise to many detailed adaptations.

International Pricing

• The European Union countries have adopted the euro as a common

currency, creating “pricing transparency” and forcing companies to

harmonize their prices throughout Europe.

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Whole-Channel Concept for

International Marketing• Place (Distribution)–This is a marketing mix element

that is strongly influenced by market and country forces. – It is difficult to standardise the implementation of

distribution although the initiatives of organisations such as Tesco and Wallmart the phenomenon of the hypermarket is becoming global.

Global Promotion Strategies

• Can use a standardized theme globally, but

may 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.

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Global Promotion Strategies

• Promotion–The selling part of promotion is usually adapted. – The reason for this is the interface between the sales

force and the country distribution channel.

– Because distribution channel members are strongly influenced by the culture in the country, the sales force, if it is to be successful, has to adapt to local requirements.

• Public relations and sales promotions are also often adapted to fit local requirements. It is the advertising decision that stands the best chance of standardisation. – Use of media that are less culturally specific

Global People Strategies

• People – One of the most difficult elements of

the services marketing mix to standardise.

– By definition, people are individuals and in

addition people differ between different cultures.

– Standardisation can be achieved to some extent

through careful and methodical training.

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Global Process Strategies

• Process– The process element of the services marketing mix relates to things such as how the service is delivered, ordering systems and so on.

– Compared to the people element, process is generally much easier to standardise

– Eg, McDonald’s processes for taking orders, cooking these orders and treating customers in their outlets are very highly standardisedthroughout the world.

Global Physical Evidence Strategies

• Physical Evidence– Like process, this element

can be standardised to a high degree.

– Eg at McDonalds where the layout and décor is

more or less standardised throughout the world.

– Standardising physical evidence is particularly

important in trying to develop a uniform company

image, and is often a key part of franchise services

marketing.

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Deciding on the Global Marketing

Organisation

• Organize an export department

• Create international divisions

– Geographical organizations

– World product groups

– International subsidiaries

• Become a global organization