International Marketing International Marketing

Prof. Roshni SawantProf. Roshni Sawant

ScenarioScenario

The world is shrinking rapidly with the The world is shrinking rapidly with the advent of faster communication, advent of faster communication, transportation, and financial flows.transportation, and financial flows.

International trade is boomingInternational trade is boomingBetween 1996 and 2006, U.S. exports are Between 1996 and 2006, U.S. exports are

expected to increase 51%.expected to increase 51%.Global competition is intensifyingGlobal competition is intensifying

Cont…Cont…

To compete, many International companies are To compete, many International companies are continuously improving their products, continuously improving their products, expanding into foreign markets, expanding into foreign markets,

International firms face several major problems:International firms face several major problems: Inflation, and unemployment have resulted in highly Inflation, and unemployment have resulted in highly

unstable governments & currencies, unstable governments & currencies, Governments placing more regulations on foreign Governments placing more regulations on foreign

firmsfirms Protectionist policies and trade barriers,Protectionist policies and trade barriers, Corruption.Corruption.

NIKE: a cultural issueNIKE: a cultural issue

When Nike learned When Nike learned that this stylized that this stylized

““Air” logo resembled Air” logo resembled “Allah” in Arabic “Allah” in Arabic script, it apologized script, it apologized and pulled the shoes and pulled the shoes from distributionfrom distribution

Colgate Goes to China Colgate Goes to China

Using aggressive promotional and educational programs, Colgate has Using aggressive promotional and educational programs, Colgate has expanded its market share from 7% to 35% in less than a decadeexpanded its market share from 7% to 35% in less than a decade

Objectives of IMObjectives of IM

To establish trade relation among the To establish trade relation among the nations and to maintain cordial relation nations and to maintain cordial relation among nations for maintaining world among nations for maintaining world peace peace

To provide better life and welfare to people To provide better life and welfare to people To bring countris closer for trading To bring countris closer for trading

purpose and to encourage large scale free purpose and to encourage large scale free trade among the countris of the world.trade among the countris of the world.

To provide assistance to developing To provide assistance to developing countries in their economic and industrial countries in their economic and industrial growth and to remove or reduce gap growth and to remove or reduce gap between the develop n developing countries .between the develop n developing countries .

To keep international trade free and fair to all To keep international trade free and fair to all countries by avoiding trade barriers.countries by avoiding trade barriers.

To ensure optimum utilization of resource at To ensure optimum utilization of resource at the global level. the global level.

Call for Int. Marketing /TradeCall for Int. Marketing /Trade International interdependence of countries: International interdependence of countries:

no country in the world is self sufficient.no country in the world is self sufficient.Absence of uniform geographic & climatic Absence of uniform geographic & climatic

condition.condition.Availability of comparative cost advantageAvailability of comparative cost advantageGrowing needs of countriesGrowing needs of countriesTo solve the problem of surplus/shortage To solve the problem of surplus/shortage

of production in countries.of production in countries.

Bridge the gap between developed and Bridge the gap between developed and developing nation: i.e. transfer of technical developing nation: i.e. transfer of technical know how and skills .know how and skills .

International cooperation and world peaceInternational cooperation and world peaceFacilitates culture exchange Facilitates culture exchange Provides higher standard of living Provides higher standard of living Special benefits during emergency Special benefits during emergency

situations situations Company exporting abroad may earn Company exporting abroad may earn

substantial profits out of its operation substantial profits out of its operation

Orientation to IMOrientation 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

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.

• Objectives are set by negotiation betweenheadquarters and regional Headquarters on the one hand andbetween regional HQ and individual subsidiaries on the other.”

• In a company with a Regiocentric orientation, managementviews regions as unique and seeks to develop an integratedregional strategy.

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

Polycentric OrientationThe polycentric orientation is the opposite

of ethnocentrism .The term polycentric describes management’s often unconscious belief or assumption that each country in which a company does business is unique.

Patterns of TradePatterns of Trade

Trade in goods: commodities, raw materials,part Trade in goods: commodities, raw materials,part or finished goods-between different locationsor finished goods-between different locations

Trade in services:travel and tourism,financial Trade in services:travel and tourism,financial services,consultancy,education and training-services,consultancy,education and training-expanding marketsexpanding markets

E-commerce and E-business: using IT to trade E-commerce and E-business: using IT to trade across bordersacross borders

B2B changing relationshipsB2B changing relationships Business with Governments and Agencies-Business with Governments and Agencies-

impact of privatization and economic impact of privatization and economic developmentdevelopment

Stages of MarketingStages of Marketing

Export Marketing: Ethnocentric: e.g Export Marketing: Ethnocentric: e.g smaller playerssmaller players

International marketing: some overseas International marketing: some overseas activity: e.g Hidesignactivity: e.g Hidesign

Multinational: marketing in countries or Multinational: marketing in countries or regions which differ significantlyregions which differ significantly

Global marketing-Integrated to exploit Global marketing-Integrated to exploit global opportunitiesglobal opportunities

Export MarketingExport Marketing

Domestic market remains of prime Domestic market remains of prime importanceimportance

Profitable by product of its domestic Profitable by product of its domestic strategystrategy

Challenge is to select appropriate markets, Challenge is to select appropriate markets, determination of appropriate product determination of appropriate product modifications to meet the requirements modifications to meet the requirements and development of export channelsand development of export channels

International MarketingInternational Marketing

Go beyond exporting and become more Go beyond exporting and become more directly involved in the local marketing directly involved in the local marketing environment within a given country.environment within a given country.

Have its own sales subsidiaries,develop Have its own sales subsidiaries,develop entire marketing strategies to fit new entire marketing strategies to fit new market demands.market demands.

Need to understand different environmentsNeed to understand different environments

Multinational MarketingMultinational Marketing

Result of development of Multinational Result of development of Multinational corporations.corporations.

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

Cont…Cont…

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

Maximum localizationMaximum localization

Global MarketingGlobal Marketing

Single strategy for a product,service, or Single strategy for a product,service, or company for the entire global market. E.g company for the entire global market. E.g DellDell

Aimed at leveraging the commonalities Aimed at leveraging the commonalities across many marketsacross many markets

Last stage in the development of the field Last stage in the development of the field of International Marketing of International Marketing

Why enter foreign markets?Why enter foreign markets? Increase market shareIncrease market share:Domestic market may lack the size to :Domestic market may lack the size to

support efficient scale manufacturing facilities. support efficient scale manufacturing facilities. Example: Example: Japanese electronics or automobile manufacturersJapanese electronics or automobile manufacturers

Mature or saturated home markets: European ConglomeratesMature or saturated home markets: European Conglomerates

Preferential trading agreements: India-PakistanPreferential trading agreements: India-Pakistan

Return on investment: Return on investment: Large investment projects may require Large investment projects may require global markets to justify the capital outlaysglobal markets to justify the capital outlays

Example: Example: Aircraft manufacturers Boeing or AirbusAircraft manufacturers Boeing or Airbus

• Weak patent protectionWeak patent protection in some countries implies that firms should in some countries implies that firms should expand overseas rapidly in order to preempt imitatorsexpand overseas rapidly in order to preempt imitators

Why enter foreign marketsWhy enter foreign markets

Economies of scaleEconomies of scale:: Expanding size or scope of markets helps to achieve economies of scale in Expanding size or scope of markets helps to achieve economies of scale in

manufacturing as well as marketing, R & D or distributionmanufacturing as well as marketing, R & D or distribution Can spread costs over a larger sales baseCan spread costs over a larger sales base Increase profit per unitIncrease profit per unitNew Market creation:Channel, Hidesign New Market creation:Channel, Hidesign

Competitor attacking all marketsCompetitor attacking all markets: Mercedes and BMW, Dell and : Mercedes and BMW, Dell and Toshiba.Toshiba.

Location AdvantagesLocation Advantages::Low cost markets may aid in developing Low cost markets may aid in developing competitive advantagecompetitive advantage

May achieve better access to: raw materials, low cost labor, key suppliers, Key May achieve better access to: raw materials, low cost labor, key suppliers, Key customers, Natural resourcescustomers, Natural resources

Deciding whether to go Deciding whether to go International or notInternational or not

Not all companies need an international Not all companies need an international presencepresence

Globalization may be triggered by several Globalization may be triggered by several factorsfactors

Risk and the ability to operate globally Risk and the ability to operate globally must be carefully assessedmust be carefully assessed

InternationalInternational Marketing EnvironmentMarketing Environment

Economic EnvironmentEconomic Environment Industrial structureIndustrial structure

Subsistence economiesSubsistence economies Raw material exporting economiesRaw material exporting economies Industrializing economiesIndustrializing economies Industrial economiesIndustrial economies

Income distributionIncome distribution

Cont…Cont…

Political-Legal EnvironmentPolitical-Legal EnvironmentAttitudes toward international buyingAttitudes toward international buyingGovernment bureaucracyGovernment bureaucracyPolitical stabilityPolitical stabilityMonetary regulationsMonetary regulations

Barter, compensationBarter, compensation

Cont…Cont…

Cultural EnvironmentCultural Environment Impact of Culture on Marketing Strategy and vice-Impact of Culture on Marketing Strategy and vice-

versaversa Cultural traditions, preferences, behaviorCultural traditions, preferences, behavior

Sellers must examine the ways consumers in different countries Sellers must examine the ways consumers in different countries think about and use products before planning a marketing program.think about and use products before planning a marketing program.

Business norms vary from country to country.Business norms vary from country to country. Companies that understand cultural nuances can use them to Companies that understand cultural nuances can use them to

advantage when positioning products internationally.advantage when positioning products internationally.

E.g:T-shirts with prints of religious deities.E.g:T-shirts with prints of religious deities.

Deciding which markets to enterDeciding which markets to enter

Define international marketing polices and Define international marketing polices and objectives, and sales volume goalsobjectives, and sales volume goals

Decide how many countries to targetDecide how many countries to target Decide on the types of countries to enterDecide on the types of countries to enter Screen and rank each of the possible Screen and rank each of the possible

international markets using several criteriainternational markets using several criteria Market size, market growth, cost of doing business, Market size, market growth, cost of doing business,

competitive advantage, risk levelcompetitive advantage, risk level

Deciding How to Enter the MarketDeciding How to Enter the Market

Common way to enter new international marketsCommon way to enter new international markets

No need to establish operations in other countriesNo need to establish operations in other countries

May have high transportation costsMay have high transportation costs

May have less control on marketing and distributionMay have less control on marketing and distribution

May encounter high import tariffsMay encounter high import tariffs

Difficult to customize productsDifficult to customize products

Establish distribution channels through contractual Establish distribution channels through contractual relationshipsrelationships

Choice of International Entry ModeChoice of International Entry ModeChoice of International Entry ModeChoice of International Entry Mode

ExportingExportingExportingExporting

Choice of International Entry ModeChoice of International Entry ModeChoice of International Entry ModeChoice of International Entry Mode

LicensingLicensingLicensingLicensing

Firm authorizes another firm to manufacture and Firm authorizes another firm to manufacture and sell its productssell its products

Licensing firm is paid a royalty on each unit Licensing firm is paid a royalty on each unit produced and soldproduced and sold

Licensee takes risks in manufacturing investmentsLicensee takes risks in manufacturing investments

Least risky way to enter a foreign marketLeast risky way to enter a foreign market

Licensing firm loses control over product quality Licensing firm loses control over product quality and distributionand distribution

Relatively low profit potentialRelatively low profit potential

A significant risk is that licensor learns technology A significant risk is that licensor learns technology and competes when license expiresand competes when license expires

Choice of International Entry ModeChoice of International Entry ModeChoice of International Entry ModeChoice of International Entry Mode

Strategic AlliancesStrategic AlliancesStrategic AlliancesStrategic Alliances

Enable firms to shares risks and resources to expand into Enable firms to shares risks and resources to expand into international venturesinternational ventures

Most joint ventures (JVs) involve a foreign company Most joint ventures (JVs) involve a foreign company with a new product or technology and a host company with a new product or technology and a host company with access to distribution or knowledge of local with access to distribution or knowledge of local customs, norms or politics customs, norms or politics

May experience difficulties in merging disparate May experience difficulties in merging disparate culturescultures

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

Choice of International Entry ModeChoice of International Entry ModeChoice of International Entry ModeChoice of International Entry Mode

AcquisitionsAcquisitionsAcquisitionsAcquisitions

Enable firms to make most rapid international Enable firms to make most rapid international expansionexpansion

Can be very costlyCan be very costly

Legal and regulatory requirements may present Legal and regulatory requirements may present barriers to foreign ownershipbarriers to foreign ownership

Usually require complex and costly negotiationsUsually require complex and costly negotiations

Potentially disparate corporate culturesPotentially disparate corporate cultures

New Wholly-Owned SubsidiaryNew Wholly-Owned Subsidiary

Choice of International Entry ModeChoice of International Entry ModeChoice of International Entry ModeChoice of International Entry Mode

Most costly and complex of entry alternativesMost costly and complex of entry alternatives

Achieves greatest degree of controlAchieves greatest degree of control

Potentially most profitable, if successfulPotentially most profitable, if successful

Maintain control over technology, marketing Maintain control over technology, marketing and distributionand distribution

May need to acquire expertise and knowledge May need to acquire expertise and knowledge that is relevant to host countrythat is relevant to host country

Could require hiring host country Could require hiring host country nationals or consultants at high costnationals or consultants at high cost

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

conglomerate Mitsubishi.conglomerate Mitsubishi.

Problems or difficulties in IM Problems or difficulties in IM

Payment difficulty Payment difficulty Government restrictionGovernment restrictionLanguage problem Language problem Problem related to communicationProblem related to communicationDocumentation & Procedures Documentation & Procedures