International Marketing

Prof. Roshni Sawant

Scenario
The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows. International trade is booming Between 1996 and 2006, U.S. exports are expected to increase 51%. Global competition is intensifying

Cont

To compete, many International companies are continuously improving their products, expanding into foreign markets, International firms face several major problems:

Inflation, and unemployment have resulted in highly unstable governments & currencies, Governments placing more regulations on foreign firms Protectionist policies and trade barriers, Corruption.

NIKE: a cultural issue

When Nike learned that this stylized Air logo resembled Allah in Arabic script, it apologized and pulled the shoes from distribution

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

Objectives of IM
To establish trade relation among the nations and to maintain cordial relation among nations for maintaining world peace To provide better life and welfare to people To bring countris closer for trading purpose and to encourage large scale free trade among the countris of the world.

To provide assistance to developing countries in their economic and industrial growth and to remove or reduce gap between the develop n developing countries . To keep international trade free and fair to all countries by avoiding trade barriers. To ensure optimum utilization of resource at the global level.

Call for Int. Marketing /Trade

International interdependence of countries: no country in the world is self sufficient. Absence of uniform geographic & climatic condition. Availability of comparative cost advantage Growing needs of countries To solve the problem of surplus/shortage of production in countries.

Bridge the gap between developed and developing nation: i.e. transfer of technical know how and skills . International cooperation and world peace Facilitates culture exchange Provides higher standard of living Special benefits during emergency situations Company exporting abroad may earn substantial profits out of its operation

Orientation to IM

Ethnocentric Orientation

In the ethnocentric company, overseas operations are viewed as secondary to domestic operations and primarily as a means of disposing of surplus domestic production. The top management views domestic techniques and personnel as regional level.

A person who assumes his or her home country is superior compared to the rest of the World is said to have an ethnocentric orientation. Ethnocentric companies that do conduct business outside the home country can be described as global companies; they adhere to the notion that the products that succeed in the home country are superior and, therefore, can be sold every where without adaptation

In the ethnocentric global company, foreign operations are viewed as being secondary or subordinate to domestic ones.

Geocentric Orientation A geocentric company views the entire world as a single market and develops standardized marketing mix, projecting a uniform image of the company and its products, for the global market. The business of the geocentric multinational is usually characterized by sufficiently distinctive national markets that the ethnocentric approach is unworkable, and where the importance of learning curve effects in marketing, production technology and management makes the polycentric philosophy substantially suboptimal.

Regiocentric Orientation A Regiocentric company views different regions as different markets. A particular region with certain important common marketing characteristics is regarded as a single market, ignoring national boundaries. Strategy integration, organizational approach and product policy tend to be implemented at

Objectives are set by negotiation between headquarters and regional Headquarters on the one hand and between regional HQ and individual subsidiaries on the other.

In a company with a Regiocentric orientation, management views regions as unique and seeks to develop an integrated regional strategy.

For example, a U.S. company hat focuses on the countries included in the North American Free Trade Agreement (NAFTA) the United States, Canada, and Mexico has a Regiocentric orientation. Similarly, a European company that focuses its attention on the EU or Europe is Regiocentric. A company whose management has a Regiocentric or geocentric orientation is sometimes known as a global or transnational company.

Polycentric Orientation The polycentric orientation is the opposite of ethnocentrism .The term polycentric describes managements often unconscious belief or assumption that each country in which a company does business is unique.

This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies in order to succeed; the term multinational company is often used to describe such a structure. local personnel and techniques are best suited to deal with local market conditions. Subsidiaries are established in overseas markets, and each subsidiary operates independently of the others and establishes its own marketing objectives and plans.

Major International Marketing Decisions International business decision: Present & future domestic /overseas market opportunities Resources of company (skill, experience ,production and market capabilities and finance Company objectives

Market selection Decision: Selecting the most appropriate market. Entry and operational decision: Marketing Mix Decision: International organization decision

Looking at the International Marketing Environment

i.e. Tariff, Quota, Exchange Control, and Non-tariff Trade Barriers Treaty designed to promote world trade by reducing tariffs and other international trade barriers Group of nations organized to work toward common goals in the regulation of international trade

The International Trade System

The World Trade Organization and GATT

Regional Free Trade Zones

Patterns of Trade

Trade in goods: commodities, raw materials,part or finished goods-between different locations Trade in services:travel and tourism,financial services,consultancy,education and trainingexpanding markets E-commerce and E-business: using IT to trade across borders B2B changing relationships Business with Governments and Agenciesimpact of privatization and economic development

Stages of Marketing
Export Marketing: Ethnocentric: e.g smaller players International marketing: some overseas activity: e.g Hidesign Multinational: marketing in countries or regions which differ significantly Global marketing-Integrated to exploit global opportunities

Export Marketing
Domestic market remains of prime importance Profitable by product of its domestic strategy Challenge is to select appropriate markets, determination of appropriate product modifications to meet the requirements and development of export channels

International Marketing
Go beyond exporting and become more directly involved in the local marketing environment within a given country. Have its own sales subsidiaries,develop entire marketing strategies to fit new market demands. Need to understand different environments

Multinational Marketing

Result of development of Multinational corporations. Characterized by extensive development of assets abroad,operate in several foreign countries as if the firms were local companies. This has led to the development of many domestic strategies also called multi-domestic strategy-whereby a MNC competes with many strategies, each tailored to a particular local market.

Cont
Challenge is to find the best possible adaptation of a complete marketing strategy for an individual country. Maximum localization

Global Marketing
Single strategy for a product,service, or company for the entire global market. E.g Dell Aimed at leveraging the commonalities across many markets Last stage in the development of the field of International Marketing

Why enter foreign markets?

Increase market share:Domestic market may lack the size to support efficient scale manufacturing facilities. Example: Japanese electronics or automobile manufacturers Mature or saturated home markets: European Conglomerates

Preferential trading agreements: India-Pakistan

Return on investment: Large investment projects may require global markets to justify the capital outlays Example: Aircraft manufacturers Boeing or Airbus Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators

Why enter foreign markets

Economies of scale:

Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution Can spread costs over a larger sales base Increase profit per unit New Market creation:Channel, Hidesign Competitor attacking all markets: Mercedes and BMW, Dell and Toshiba.

Location Advantages:Low cost markets may aid in developing competitive advantage May achieve better access to: raw materials, low cost labor, key suppliers, Key customers, Natural resources

Deciding whether to go International or not

Not all companies need an international presence Globalization may be triggered by several factors Risk and the ability to operate globally must be carefully assessed

International Marketing Environment

Economic Environment

Industrial structure

Subsistence economies Raw material exporting economies Industrializing economies Industrial economies

Income distribution

Cont

Political-Legal Environment
Attitudes toward international buying Government bureaucracy Political stability Monetary regulations

Barter,

compensation

Cont

Cultural Environment

Impact of Culture on Marketing Strategy and viceversa

Cultural traditions, preferences, behavior 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. E.g:T-shirts with prints of religious deities.

Deciding which markets to enter

Define international marketing polices and objectives, and sales volume goals Decide how many countries to target Decide on the types of countries to enter Screen and rank each of the possible international markets using several criteria

Market size, market growth, cost of doing business, competitive advantage, risk level

Deciding How to Enter the Market

Choice of International Entry Mode

Exporting
Common way to enter new international markets No need to establish operations in other countries Establish distribution channels through contractual relationships

May have high transportation costs

May encounter high import tariffs May have less control on marketing and distribution Difficult to customize products

Choice of International Entry Mode

Licensing
Firm authorizes another firm to manufacture and sell its products Licensing firm is paid a royalty on each unit produced and sold Licensee takes risks in manufacturing investments Least risky way to enter a foreign market Licensing firm loses control over product quality and distribution Relatively low profit potential A significant risk is that licensor learns technology and competes when license expires

Choice of International Entry Mode

Strategic Alliances
Enable firms to shares risks and resources to expand into international ventures
Most joint ventures (JVs) involve a foreign company with a new product or technology and a host company with access to distribution or knowledge of local customs, norms or politics May experience difficulties in merging disparate cultures

May not understand the strategic intent of partners or experience divergent goals

Choice of International Entry Mode

Acquisitions
Enable firms to make most rapid international expansion
Can be very costly

Legal and regulatory requirements may present barriers to foreign ownership

Usually require complex and costly negotiations Potentially disparate corporate cultures

Choice of International Entry Mode

New Wholly-Owned Subsidiary
Most costly and complex of entry alternatives Achieves greatest degree of control Potentially most profitable, if successful Maintain control over technology, marketing and distribution May need to acquire expertise and knowledge that is relevant to host country
Could require hiring host country nationals or consultants at high cost

Joint Ownership
KFC entered Japan through a joint ownership venture with Japanese conglomerate Mitsubishi.

Problems or difficulties in IM
Payment difficulty Government restriction Language problem Problem related to communication Documentation & Procedures