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IntroductionInternational Marketing

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Variables in International Market Environment

7

Poli

tical/legalforces

Economicforces

1

2

Environmentaluncontrollablescountry market A

Environmentaluncontrollablescountry

market B

Environmentaluncontrollablescountrymarket C

Competitivestructure Competitive

Forces

Level ofTechnology

Price Product

PromotionChannels of

distribution

Geographyand

Infrastructure

Foreign environment(uncontrollable)

Structure ofdistribution

Economic climate

Cultural

forces

3

45

6

7Political/

legal

forces

Domestic environment(uncontrollable)

(controllable)

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Internationalization Philosophies

Environment

Product Price Promotion Place

Economic

Competitive

Technological

Demographic

Geographic

Cultural

Political/legal

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Internationalization Philosophies

Low or no

international

commitment

Focus on

domestic

consumers and

home country

environment

Domestic focus

Limited

international

commitment

Involves direct

or indirect

export

Ethnocentric

Substantial

international

commitment

Focus on

different

international

countries

Polycentric

Extensive

international

commitment

Focus on

regions

market

segments

rather than

countries

Regiocentric

Geocentric

Raising commitment/ involvement to international markets

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Ethnocentric Orientation

Assumes home country is superior to the restof the world; associated with attitudes of

national arrogance and supremacy Management focus is to do in host countries

what is done in the home country

Sometimes called an international company Products and processes used at home are

used abroad without adaptation

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Polycentric Orientation Management operates under the

assumption that every country is

different; the company developscountry-specific strategies

Sometimes called a multinational company

Company operates differently in each hostcountry based on that situation

Opposite of ethnocentrism

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Regiocentric Orientation Region becomes the relevant

geographic unit (rather than by

country)

Management orientation is geared todeveloping an integrated regional

strategy European Union

NAFTA

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Geocentric Orientation

Entire world is a potential market

Managerial goal is to developintegrated world market strategies

Global companiesserve world marketsfrom a single country and tend toretain association with a headquarters

country Transnational companiesserve global

markets and acquire resourcesglobally; blurring of national identity

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International Expansion Drivers For US-based companies, 75% of

sales potential is outside the US.

About 90% of Coca-Colas operatingincome is generated outside the US.

For Japanese companies, 85% of

potential is outside Japan.

For German and EU companies,94% of potential is outside Germany.

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International Expansion DriversBusiness EnvironmentDrivers

Firm specific Drivers

CompetitionRegional Economic and PoliticalIntegration

Technology

Improvements in Transportationand Telecommunication

Economic Growth

Transition to Market Economy

ConvergingConsumer Needs

Product Life CycleHigh New ProductDevelopment Costs

Standardization

Economies of ScaleCheap Labor

Experience Transfers

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International Expansion Drivers:

Business Environment (contd.)Competition Example: McCann Erickson has been handling the

Coca-Cola account in 129 countries since 1942.

Therefore the advertising agency, followslongtime client, Coca Cola, Inc., to all countrieswhere Coke is present.Nevertheless Coca-Cola moved the managementof its dedicated Red Lounge China marketing unit

from McCann Erickson to Leo Burnett, a competingadvertising agency (2007). At the same time LeoBurnett lost some international accounts of itslongtime client, McDonald's.

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International Expansion Drivers:

Business Environment (contd.)

Example: Regional agreements suchas NAFTA, and the European Union(EU) lower and eliminate barriers andpromote trade within these markets.

Subsidiaries can be established inthese markets to take advantage offree trade within the region.

Regional Economic and PoliticalIntegration

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International Expansion Drivers:

Business Environment (contd.)Technology

Examples:

Consumers worldwide are exposedto similar products, services, andentertainment, and marketing

communications.

The Web and the Internet haverevolutionized the way companies

conduct business.

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International Expansion Drivers:

Business Environment (contd.)

Lower cost and higher qualitycommunication due to satellitetechnology, teleconferencing, ande-mail

Efficient transportation due tocontainerization and just-in-timetechnology

Transportation andTelecommunications

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Emerging middle class with increasing

buying power in big emergingmarkets such as Brazil and India.

Opening of new markets previously

closed, such as the markets of Chinaand Vietnam.

Economic Growth

International Expansion Drivers:Business Environment (contd.)

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Transition of the Eastern Bloc to a

market economy created importantnew markets.

Created opportunities to transform

inefficient government-ownedcompanies into successfulenterprises.

Transition to a Market Economy

International Expansion Drivers:Business Environment (contd.)

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International Expansion Drivers:Business Environment (contd.)

Transition to a Market Economy

Yum! Brands in

China and Taiwan(e.g. Taco Bell,

KFC, Pizza Hut)

do well -

in spite of E.coli

(East cost) and

rat infestation in NY

Yum! Brands is omnipresent in China and Taiwan

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Uniform consumer segments emerging

worldwide: Global teenagers

Global elite

Loyal to international brands (Nike, Levis,Coca-Cola, Heineken, Ralph Lauren, MTV,TV shows)

Converging Consumer Needs

International Expansion Drivers:Business Environment

http://www.atomicdogpublishing.com/MyBackpack/ContentDisplay3-0/content.asp?Sect=DL-254-3-108487&Session=774308FE-BDBE-4C07-BF7F-ECC7C6FB9ADA&DSG=falsehttp://www.atomicdogpublishing.com/MyBackpack/ContentDisplay3-0/content.asp?Sect=DL-254-3-108478&Session=774308FE-BDBE-4C07-BF7F-ECC7C6FB9ADA&DSG=false

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Consumers traveling abroad bring with

them product experiences and demandbrands that may not be available in thehome-country market.

Converging Consumer Needs

International Expansion Drivers:Business Environment

Bagel shop in Berlin (Potsdamer Platz)

http://www.atomicdogpublishing.com/MyBackpack/ContentDisplay3-0/content.asp?Sect=DL-254-3-108487&Session=774308FE-BDBE-4C07-BF7F-ECC7C6FB9ADA&DSG=falsehttp://www.atomicdogpublishing.com/MyBackpack/ContentDisplay3-0/content.asp?Sect=DL-254-3-108478&Session=774308FE-BDBE-4C07-BF7F-ECC7C6FB9ADA&DSG=false

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Firm-Specific Drivers(contd.)

Product Life Cycle Considerations: prolongingproduct lifecycle by entering growth markets

Sales

Intro Growth Maturity Decline

Profits

Sales

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Firm-Specific Drivers (contd)

High New Product Development Costs

Firm must look beyond home-country

market to recover investment costs. E.g. Nike: one year to develop a new

product, that last only half a year on the

shelves in the US

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Price competition during the maturity of the product lifecycle drives firm to new international markets in searchof cheap labor. The firm lowers coststhus pricesdueto economies of scale and saving from standardizationprocesses.

Firm-Specific Drivers

Standardization, Economies ofscale, Cheap Labor

Experience TransfersExperience in one country serves as basis for strategies innew international markets.

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Obstacles toInternationalization

within the company outside

FinancesPsychological:unknown environment

Self-ReferenceCriterion

Government BarriersBarriers imposed byInternationalCompetition

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Obstacles toInternationalization

Self-Reference Criterion

Conscious and unconscious reference to

own national culture while operating in thehost country.

To counter the impact of the self-reference

criterion, the corporation must selectappropriate personnel for internationalassignments and engage in sensitivity

training.

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Obstacles toInternationalization

Government Barriers

Restriction placed on foreign corporations

by imposing tariffs, import quotas andother limitations, such as restrictive importlicense awards.

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Obstaclesto Internationalization

Barriers imposed by InternationalCompetition

Blocked channels of distribution

Exclusive retailer agreements

Cutting prices

Advertising blitzes