Basics Of International

Marketing
Flow Of Presentation
 Definitions & Concepts
 International Environment Scanning

 EPRG Framework

 Methods of Entry
Definition
 IM is the performance of business activities
designed to plan, price, promote & direct the
flow of company’s goods & services to
consumers or users in more than one nation
for a profit.
Trends affecting global business
 WTO & Regional Free Trade Areas
 Acceptance of free market system by
developing countries
 The burgeoning impact of Internet & other
global media
Difference b/w Domestic &
International Marketing


 Marketing concepts are universally applicable

 The answer lies not with the concepts of
marketing but with the environment

Need/ factors For IM


1. Business Factors

2. Competitive Factors
 BUSINESS FACTORS
 Profitability

 Achieving Economies of Scale

 Marketing due to life-cycle

 Uniqueness of Product / Services

 Access to imported inputs

COMPETITIVE FACTORS

 The company’s domestic market might be

attacked by global firm’s offering better
products or at lower prices.
 Counterattack by the domestic firm in the
competitors home market.

Business Environment in IM
 Domestic Environment has profound effect on
firm’s foreign market operations e.g. Lack of
demand in domestic markets, export
incentives etc
 Foreign Environment- Firms are generally not
aware of these factors. The problem gets
complicated with increase in no. of foreign
markets
 Global environment- Has influence over both
domestic & foreign markets.
Relevance of International business
environment
 No two countries have similar business
environments & demand different business
strategies.
 It becomes imperative for the firm to have in-
depth knowledge of all environments.

Analysis of the components of the
Foreign environment
 Depends on the nature of the firm. Exporting
unit or manufacturing plant

Geographical environment
 Affects the demand pattern
 - Climatic conditions- Rolls Royce cars from
England, required extensive body work and
renovations in Canada because the salted sand.
 Firms plant decision location- Foreign country's
nearness to other markets and its strategic
location on major trade routes are other equally
important considerations.
 Location of a country on the world map- It affects
its trade prospects with other countries.
Landlocked countries such as Bolivia, Zambia
and Zimbabwe ,are not only costly to reach but
are also difficult to penetrate as trading with
these countries depend upon their relations with
neighboring countries through which goods have
to cross.

Economic environment
 Economic Development
 Income

 Sectoral distribution of GNP

 Income Distribution

 Per Capita income

 Expenditure Pattern

 Infrastructure- Affects firms ability to reach

various market segments
financial environment
 Monetary & Fiscal policies
 Commercial & Foreign Investment policies

 Balance Of payments account- Countries

running deficit in their balance of payment
accounts generally impose controls on
movement of foreign exchange into and out
of their economies. These controls prompts
the MNCs to resort to transfer pricing
mechanism, i.e., over invoicing of imports
and under pricing of exports so as to move
out more than permitted funds from such
countries.
Socio- cultural environment
 Influences all aspects of human behavior
 A single national and political boundary does not
necessarily mean a single cultural entity.
Canada, for instance, is divided between its
French and English heritages, although politically
the country is one.
 Language- e.g. Nova
 Aesthetics- The colour of mourning is black in the
United States, but it is white in the Far East.
Green is restful colour to Americans, but it is
disliked by people in Malaysia where it connotes
illness and death. Symbols also need to be
interpreted correctly, Seven, for instance,
signifies good luck in the United States but just
opposite in Singapore, Ghana and Kenya
 Education- Availability of educated
manpower like skilled labour, technicians
and professional.
 Media to be used by a company for promoting
its products. The conventional forms of printed
communications do not work in countries
where literacy rates are low
 Religion & Superstitions- Location of a
building and its architecture in many Asian
countries is governed by the principles of
'vastushastra' rather than purely
geographical and economic considerations
 Attitudes & Values- Americans are more risk
taking
 Material Culture

 Business customs & Practices- In countries

like the United States it is necessary to have
final agreement in writing, this practice is
not much appreciated in many West Asian
countries where oral agreement alone is
considered more than sufficient.
EPRG Framework
 This is four types of attitudes or orientations
towards internationalization that are
associated with successive stages of
evolution
Ø Ethnocentrism- Home Country Orientation
Ø Polycentrism- Host Country Orientation
Ø Regiocentrism- Regional Orientation
Ø Geocentrism- World Orientation

 Management’s orientation- Management’s
assumptions and beliefs:
 How it views the new market opportunity

 How it plans to enter the foreign market

 How it views the culture, preferences of

customers in foreign market etc.
The Ethnocentric Orientation

 It is a belief which considers- one’s own

country/ culture, products as superior
 It views similarities in all markets/ foreign
country market
 Products/ services/ management practices/
methods that is being offered/ followed in
one’s own country/ successful in one’s own
country will be acceptable in other world
markets, anywhere.
 Adaptation of the product is not required.
Criticism of Ethnocentrism
 Ignore foreign market and therefore loose
great opportunities.
 No Adaptation in marketing


The Polycentric Orientation
 Opposite of Ethnocentrism
 It views each country as unique.

 Each subsidiary is to develop its own unique

business.
 Each subsidiary to develop its own marketing
strategies to succeed in its own right

The Regiocentric Orientation
 Management views regions as unique.
 Management seeks to develop an integrated
regional strategy, to market
product/services- in
the particular identified region.
 Regions are considered to be one- i.e.
consumers having one taste, choices,
preferences, one regional identity etc.
 NAFTA, EU etc are examples

The Geocentric Orientation


 The Company views the entire world as a

potential market.
 Company strives to develop integrated world
market strategies.
 It views similarities and differences in markets
and countries.
 It seeks to create a global strategy- responsive
to local needs and wants.

Entry Strategies

 FOREIGN MARKET
 ENTRY

MANUFACTURING MANUFACTURING INVESTMENT

AT HOME ABROAD ENTRY

EXPORTING CONTRACTUAL

INDIREC ACQUISITION
DIREC LICENSING / CONTRACT
T /
T FRANCHISING MANUF . SELF - BUILT

JOINT
VENTURES
Export Appropriateness:
 The volume of foreign market is not large enough to
justify production in the foreign market.
 Cost of production is higher in the foreign market.
 Production bottlenecks like infrastructural
problems, problems of materials supply, labour
unrest, etc.
 Political or other risks of investments in the
foreign country.
 No guarantee of the market available for longer
period.
 Foreign investment is not encouraged by the
concerned foreign government.
 Excess production capacity in the domestic market
 Expansion of existing facility is less expensive
and easier than setting up production facilities
abroad.
 Very attractive incentives are available in the
country for establishing facilities for export
EXPORT
 Advantage  Disadvantages

 Economies of scale  - Higher unit

 Easy to implement
cost to consumer
– Likely lower
 Least Risky
market share
– Limited learning
on country
market
characteristic
s

Indirect Exporting
 A third party arranges the documentation
shipping and selling of an organization’s
goods abroad.
 Lowest level of commitment to international
marketing
 The third party refers to independent
middlemen

ADVANTAGES
 No investment of resources in collecting marketing
intelligence for setting up of export department
etc. and can receive instant foreign market
knowledge.
 In case the export house works on commission
basis, there is incentive for the export house to
expand sales.
 Export house will be effecting consolidated
shipments, there is a possibility of reduction in
unit freight.
 The reputation of export house will enable the
manufacturer to get better representation for his
products abroad.
 In case the export house is selling complementary
products, sales might increase.
Disadvantages
 The export house, in order to earn more
through commission may take an too many
unrelated lines resulting in the producer
getting neither the expertise nor the
attention he is looking for.
 Manufacturer depends on the export house
and not developing export expertise himself.
 Export house will be pushing the product
abroad on its own name and reputation.
 Direct Export
 As foreign sales grow, an organization often
begins to make a limited commitment,
frequently documenting itself/ deciding to
handle their own exports.

Licensing
 Here the licensor licenses a foreign company to
use a manufacturing process, trademark, patent,
trade secret, or other item of value for a fee or
royalty.
 The licensor gains entry into the foreign market at
little risk
 The licensee gains production expertise or a well-
known product or name without having to start
from scratch.
 Advantage
 Very flexible
 Import restrictions in the foreign market.
 When the transportation costs are higher in
relation to product value.
Franchising
 Franchising is a special form of licensing in
which a parent company (the franchiser)
grants another independent company (the
franchisee) the right to do business in a
prescribed manner.
 In this arrangement, the franchiser makes a
total marketing programme(including the
brand name, logo, and the method of
operation) available to the franchisee.
Contract Manufacturing
 Advantages  Disadvantages

– Faster start – “Training” of

– Reduced competitor
investment in 
manufacturing
– Ability to take
advantage of
established
manufacturer’s
experience and
cost structure
(experience
curve)

Joint Ventures
 Extensive form of participation and
commitment towards international
marketing.
 Share ownership and control.

 Might be necessary or desirable for economic

or political reasons.
 The foreign firm might lack the financial,
physical, or managerial resources to
undertake the venture alone.
 Particular foreign government might require
joint ownership as a condition for entry.
Direct Entry--Acquisitions
 Advantages  Disadvantages

– Control – Large investment;

– Learning about risk
country market – Risk of
– Inorganic growth nationalizatio
n
–
– May take longer

to be
successful


e.g. DRL's Acquisition of  Betapharma
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