International

marketing

Prof. dr Miloš D. Milovančević

1. What is marketing?

Fasten your seat belt!

Marketing is critical to the success of every company. Large

kompanies such as Procter & Gamble, Toyota, Carrefour, Apple,

etc. use marketing. But so do not-for-profit organizations such

as hospitals, museums, and even churches.

We already know a lot about marketing - it's all around us. You see

the results of marketing in your shopping mall, in the advertisements

in your TV screen, in magazines, mailbox, at home, at school, where

you work etc. Behind it all is a massive network of people and

activities competing for your attention and purchases.

We begin by:

- defining marketing and

- the marketing process.

Many people think of marketing only as selling and

advertising. However, selling and advertising are only the

tip of the marketing iceberg.

Today, marketing must be understood not in the old

sense of making a sale-"telling and selling"- but in the

new sense of satisfying customer needs.

- Broadly defined, marketing is a social and managerial

process by which individuals and organizations obtain what

they need and want through creating and exchanging value

with others.

- In a narrower business context, marketing involves

building profitable, valueladen exchange relationships

with customers.

You're about to start learning about marketing. Marketing, more

than any other business function, deals with customers. In this

chapter, I will first introduce you to the basic concepts.

Perhaps the simplest definition is this on: marketing is

managing profitable customer relationships.

The aim of marketing is to attract new customers by

promising superior value and to keep and grow current

customers by delivering satisfaction.

Hence, we define marketing as the process by which

companies create value for customers and build

strong customer relationships in order to capture

value from customers in return.

Wal-Mart has become the

world's largest company

(retailer) by delivering on its

promise, "Save money. Live

Better.“

- Apple fulfills its

motto to "Think

Different" with

excellent customer-

driven innovation

that captures

customer

imaginations and

loyalty.

- Its iPod grabs

more than 70

percent of the

music player

market.

Five steps in the marketing process

1) understanding customer needs

2) designing customer-driven marketing strategies and

3) designing customer-driven marketing programs

4) to building customer relationships and

5) capturing value for the firm (reap the rewards of

creating superior customer value)

2. The Marketing

Process Figure 1. presents a simple of the marketing process.

By creating value for consumers, companies in turn capture value from

consumers in the form of sales, profits, and long-term customer equity.

Understanding these basic concepts, and forming your own

ideas about what they really mean to you, will give you a

foundation for all that follows.

2.1. Understanding the Marketplace and Customer Needs

As a first step, marketers need to understand customer needs and

wants and the marketplace within which they operate. We now

examine five core customer and marketplace concepts:

(1) needs, wants, and demands;

(2) marketing offers (products, services, and experiences);

(3) value and satisfaction;

(4) exchanges and relationships; and

(5) markets

• The most basic concept underlying marketing is that of human

needs. They include:

- basic physical needs for food, clothing, warmth, and safety;

- social needs for belonging and affection; and

- individual needs for knowledge and self-expression.

• These needs were ; they are

a basic part of the human makeup.

• Wants are the form human needs take as they are shaped by

culture and individual personality. An American needs food but

wants a Big Mac, french fries, and a soft drink.

Needs Wants Demands

Form of

human needs Wants backed

by buying power

Wants are shaped by one's society and are described in terms of

objects that will satisfy needs. When backed by buying power, wants

become demands.

Outstanding marketing companies go to great lengths to learn

about and understand their customers' needs, wants, and

demands. They conduct consumer research and analyze of

customer data. Their people at all levels-including top management-

stay close to customers.

For example, Harley-

Davidson's chairman (Jim

Ziemer) regularly mounts his

Harley motorcycle and

rides with customers to get

feedback and ideas.

Jim Ziemer

And at Build-A-Bear

Workshop, one of the country's

fastest-growing retailers,

founder and chief executive

Maxine Clark regularly visits

her stores around the world,

meeting customers, chatting

with employees, and just

getting to know the young

people who buy her

products.

Maxine Clark

2.2. Market Offerings-Products, Services, and

Experiences

Consumers' needs and wants are fulfilled through market

offerings-some combination of products, services,

information, or experiences offered to a market to

satisfy a need or want.

Market offerings are not limited to physical products. They

also include services-activities or benefits offered for sale

that are essentially intangible and do not result in the

ownership of anything. Examples include:

banking,

airline,

hotel,

tax preparation, and

home repair services.

More broadly, market offerings also include other entities,

such as persons, places, organizations, information,

and ideas.

Many sellers make the mistake of paying more attention on

existing wants and lose sight of underlying customer needs.

These sellers suffer from marketing myopia. They forget that a

product is only a tool to solve a consumer problem.

- A manufacturer of quarter-inch

drill bits may think that the

customer needs a drill bit.

- But what the customer really

needs is a quarter-inch hole.

These sellers will have trouble if a

new product comes along that

serves the customer's need better

or less expensively. The customer

will have the same need but will

want the new product.

-For example, a ride on a Harley-

Davidson motorcycle or a visit to your

local Starbucks is an experience. "We're

not in the business of filling

bellies," says Starbucks founder Howard

Schultz, "we're in the business of

filling souls.” Howard Schultz

- Similarly, Hewlett-Packard recognizes that a

personal computer is much more than just a

collection of wires and electrical components.

It's an intensely personal user experience: “Your

personal computer is your backup brain. It's your

life .... It's your autobiography, written in a

thousand daily words."

Smart marketers look beyond the attributes of the

products and services they sell. They

.

2.3. Customer Value and

Satisfaction

- Consumers usually face a broad array of products and services

that might satisfy a given need. How do they choose among these

many market offerings?

- Customers form expectations about the

that various market offerings will deliver and buy

accordingly. Satisfied customers buy again. Dissatisfied

customers often switch to competitors.

Marketers must set the right

level of expectations.

- If they set expectations too

low, they may satisfy those who

buy but fail to attract enough

buyers.

- If they raise expectations too

high, buyers will be

disappointed.

Exchange is the act of obtaining a desired object from

someone by offering something in return. In the broadest

sense, the marketer tries to bring about a response to some

market offering. The response may be more than simply

buying products/services. A political candidate, for

example, wants votes, a church wants membership, and a

social action group wants idea acceptance.

2.4. Exchanges and

Relationships

Marketing consists of actions taken to build and maintain

desirable exchange relationships with target audiences

involving a product, service, idea, etc. Beyond simply

attracting new customers and creating transactions, the goal

is to retain customers and grow their business with the

company.

- Marketers want to build strong relationships by

consistently delivering superior customer value.

2.5. Markets

A market is the set of actual and potential buyers of a product. These

buyers share a particular need or want that can be satisfied through

exchange relationships.

Marketing means managing markets to bring about profitable

customer relationships. However, creating these relationships takes

work. Sellers must: - search for buyers,

- identify their needs,

- design good market offerings,

- set prices for them,

- promote them, and

- store and deliver them.

In addition to sellers, buyers also take carry

about marketing. Buyers do marketing when

they search for the goods they need at prices

they can afford.

Figure below shows the main elements in a modem marketing

system. Marketing involves serving a market of final

consumers in the face of competitors. The company and

competitors research the market and interact with consumers

to understand their needs and obtain their inputs. Then they

assemble and send their respective market offerings and

messages to consumers.

- All of the actors in the system are affected by major

environmental forces (demographic, economic, physical,

technological, political/legal, and social/cultural).

Procter & Gamble, one of the world's

largest companies. P&G makes and

markets a who's who list of consumer

megabrands, including the likes of

Tide, Crest, Bounty, Charm in, Puffs,

Pampers, Pringles, Gillette, Dawn,

Ivory, Febreze, Swiffer, Olay, Cover

Girl, Pantene, Scope, NyQuil,

Duracell, and a hundred more.

It's also the world's largest

advertiser, spending an eye-popping

$8.2 billion each year on

advertising worldwide, "telling and

selling" consumers on the benefits of

using its products.

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• But look deeper and you'll see that this premier marketer does far more than just "tell and sell." P&G's stated purpose is to provide products that "improve the lives of the world's consumers." The company's products really do create value for consumers by solving their problems. In return, customers reward P&G with their brand loyalty and buying dollars. You'll see this creating-customer-value-to-capture-value-in-return theme repeated throughout the first chapter.

3. What is International Marketing -

IM? IM is simply the application of marketing principles to

more than one country. However, there is a crossover between what is commonly expressed as IM and global marketing, which is a similar term.

For the purposes of this lesson, IM and global marketing are interchangeable.

- IM is the result of the process of internationalisation.

- Many American and European writers see IM as a simple

extension of exporting, whereby the marketing mix is simply

adapted to take into account differences in consumers and

segments.

- It then follows that global marketing takes a more

standardised approach to world markets and focuses upon

the similarities in consumers and segments. So let's take a look

at some generally accepted definitions.

Isobel Doole, and Robin Lowe (2001)

At its simplest level, IM involves the firm in making

one or more marketing mix decisions across

national boundaries. At its most complex level, IM

involves the firm in establishing manufacturing

facilities overseas and coordinating marketing

strategies across the globe.

Cateora Philip R. and Pervez N. Ghauri (2000)

- IM is the performance of business activities that direct

the flow of a company's goods and services to

consumers or users in more than one nation for a profit.

Note: Cateora and Ghauri consider IM in the absence of

global marketing.

Hans Muhlbacher, Helmuth Leihs , and Lee

Dahringer (2006)

IM is the application of marketing orientation and

marketing capabilities to international business.

- These writers consider IM in relation to marketing

orientation and competences Warren Keegan (2002)

• IM goes beyond the export

marketer and becomes more

involved in the marketing

environment in the countries in

which it is doing business.

- Accordingly, by W. Keegan, IM

is a one stage of an

internationalisation process.

W. Keegan

What is Global

Marketing?

Johny K. Johansson (2000)

Global marketing refers to marketing activities

coordinated and integrated across multiple country

markets.

Note: by Jonny Johansson, global marketing as a bigger

brother to international marketing i.e. more of an

extension.

Note: Muhlbacher, Helmuth, and Dahringer (2006)

delineate IM (adapted) and global marketing

(standardised).

W. Keegan (2002)

• Global/transnational marketing focuses upon leveraging a

company's assets, experience and products globally

and upon adapting to what is truly unique and different

in each country.

- Accordingly, Keegan takes a strategic, corporate overview

to define the transnational nature of global marketing.

So, there is no single definition of IM, and there

could be some confusion about where IM begins and

global marketing ends.

These lessons will assume that both terms are

interchangeable, and will define IM as follows:

•International marketing is simply the application of marketing principles to more than one country.

Definition IM

4. The Marketing Environment

The marketing environment surrounds and impacts upon the company.

There are three key

perspectives on the

marketing environment:

1) the 'macro-

environment,'

2) the 'micro-

environment' and

3) the 'internal

environment'

A) The macro-environment

This includes all factors that can influence on

organization, but that are out of their direct control.

1) A company does not generally influence any laws. It is

continuously changing, and the company needs to be flexible

to adapt.

2) There may be aggressive competition in a market.

Globalization means that there is always the threat of

substitute products and new entrants.

3) The environment is also ever changing, and the marketer

needs to compensate for changes in:

- politics

- economics

- socioculture

- technology

PEST

Analyse

Political

Factors

The political arena has a huge

influence upon the regulation

of businesses, and the

spending power of consumers.

You must consider issues such

as:

1. How stable is the political

environment?

2. Will government policy influence

laws that regulate or tax your

business?

3. What is the government's

policy on the economy?

4. Does the government have a

view on culture and religion?

5. Is the government involved in

trading agreements such as

EU, NAFTA, ASEAN, or others?

Global Political Risk Index scores for 24 emerging markets.

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Boycott of american goods after the start

of the US-led military action against Iraq

No more Coca-Cola or Budweiser, no

Marlboro, no American whiskey or even

American Express cards - a growing

number of restaurants in Germany were

taking everything American off their

menus to protest the war in Iraq.

Waiters in dozens of restaurants in

Hamburg, Berlin, Munich, and other

German cities were telling clients, 'Sorry,

Coca-Cola is not available any more due

to the current political situation.’

The boycotts appeared to be part of a worldwide movement.

One Web site, www.consumers-against-war.de, called for

boycotts of 27 top American firms from Microsoft to Kodak while

another, www.adbusters.org, urged the "millions of people

against the war" to "Boycott Brand America."

Berlin – The reaction people on

the war against Irak March 20, 2000

In Indonesia, Iraq war opponents have

pasted signs on McDonald's

restaurants, trying to urge Indonesians

to avoid them. A German bicycle

manufacturer, Riese

und Mueller GmbH,

canceled all business

deals with its

American suppliers.

In July 2002, it has been

announced that Coca-Cola, in

return for millions in incentives

from the Israeli government, is

to build a new plant on stolen

Palestinian land at Kiryat Gat. Kiryat Gat Industrial park

In 2007 Intel faced with legal problems for

building its chip plant on the same stolen land.

The Kiryat Gat industrial park is built on the

lands of the village of Iraq Al Manshiya whose

residents were ethnically cleansed in 1949 in

contravention of International law.

Economic Factors

Marketers need to consider the state of a trading economy in

the short and long-terms. You need to look at:

1. Interest rates (in Serbia, in EU, in USA)

2. The level of inflation (in Serbia, in EU).

3. Long-term prospects for the economy GDP per capita, etc.

The social and cultural influences on business vary from

country to country. It is very important that such factors are

considered. Factors include:

1. What is the dominant religion? (Christianity, Islam (Moslem)

2. What are attitudes to foreign products/services? (Boycott

American products in Iran- Coca Cola, Meca-Cola)

3. Does language impact upon the diffusion of products onto

markets?

4. What are the roles of men and women within society?

6. How long are the population living?

7. Do the population have a strong/weak opinion on green

issues?

Sociocultural Factors

Six Rules for Doing Business across

Cultures

1) Be prepared. Whether traveling abroad or selling from home, no one should approach a foreign market without doing his homework. You can talk about the same things or the news of the day.

-Knowing your customer is just as important anywhere in

the world as it is at home, whether one is aiming to sell

computers or soft drinks.

-Each culture has its logic, and within that logic are sensible

reasons for the way foreigners do things. If the salesperson

can figure out the basic pattern of the culture, he will be more

effective interacting with foreign clients. The following six rules

are helpful.

2) Slow down. Americans are clock-watchers. In many countries, Americans are seen to be unfriendly, and arrogant. You must learn to wait patiently.

3) Establish trust. Product quality, pricing, and clear contracts are not as important as the personal relationship and trust that are developed carefully and sincerely over time. The marketer must be established as simpatico, worthy of the business, and dependable in the long run.

4) Understand the importance of language. Translations must be done by a professional who speaks both languages fluently, who has a vocabulary sensitive to connotation, and who has talent with the idioms of each culture. An interpreter is often critical and may be helpful even when one of the parties speaks the other's language.

5) Respect the culture. Manners are important. The traveling

representative is a guest in the country and must respect the hosts'

rules. "Americans in foreign countries have a tendency to treat the

natives as foreigners, and they forget that actually it is they who

are the foreigners themselves!"

Technological Factors

Technology is a major driver of globalization. Consider the following points:

1. Does technology allow for products/services to be made more cheaply and to a better standard of quality?

2. Do the technologies offer consumers and businesses more innovative products/services such as Internet banking, new generation mobile telephones, etc?

3. How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?

4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management, etc?

6) Understand components of culture.

Attitudes

Styles

Believes

Values

The

external

environme

nt can be

audited in

more detail

using other

approaches

such as:

SWOT

Analysis

PEST

Analysis.

2) M. Porter's Five Forces Analysis

Five forces

analsysis looks at

five key areas

namely:

a) threat of entry,

b) power of

buyers,

c) power of

suppliers,

d) threat of

substitutes, and

e) competitive

rivalry.

Michael Porter

- Economies of scale e.g. the benefits associated with bulk

purchasing.

- The high or low cost of entry e.g. how much will it cost for

the latest technology?

- Ease of access to distribution channels e.g. Do our

competitors have the distribution channels sewn up?

- Cost advantages not related to the size of the company

e.g. personal contacts or knowledge that larger companies do

not own or learning curve effects.

- Will competitors retaliate?

- Government action e.g. will new laws be introduced that

will weaken our competitive position?

- How important is differentiation? e.g. The Champagne

brand cannot be copied.

a) The threat of entry

- This is high where there a few, large players in a market e.g. the large grocery chains. - If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains. - The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another.

b) The power of buyers

- The power of suppliers tends to be a reversal of the power of buyers. - Where the switching costs are high e.g. switching from one software supplier to another. - Power is high where the brand is powerful e.g. Cadillac, Microsoft. - There is a possibility of the supplier integrating forward e.g. Brewers buying bars. - Customers are fragmented (not in clusters) so that they have little bargaining power e.g. Gas/Petrol stations in remote places.

c) The power of suppliers

- Where there is product-for-product substitution e.g. email for fax - Where there is substitution of need e.g. better toothpaste reduces the need for dentists. - Where there is generic substitution (competing for the currency in your pocket) e.g. video suppliers compete with travel companies

d) The threat of substitutes

-This is most likely to be high where entry is likely; there is the threat of substitute products, and suppliers and buyers in the market attempt to control. -This is why it is always seen in the center of the diagram.

e) Competitive Rivalry

B) The micro-environment

This environment includes:

suppliers that deal directly or indirectly,

consumers and customers, and

other local stakeholders (community, non profit org .

etc.).

C) The Internal Environment

All factors that are internal to the organization are

known as the 'internal environment'.

-They are generally audited by applying the 'Five

Ms' which are:

- Men,

- Money,

- Machinery,

- Materials and

- Markets.

The internal environment is as important for managing change as the external. As marketers we call the process of managing internal change 'internal marketing.’

- The size and of foreign resources is increasing and they

have more resources to compete

- Competitors have the freedom to access international

markets and at the same time they are protected by their

governments in their own domestic market

- Competitors are becoming more aggressive in a way that

they do not conform to the traditional industrial rules of

competitive behavior.

- When we take a broader perspective, every organization is

a potential competitor as every player in the market is

fighting for a larger share of the consumer’s disposable

income.

- The new competition is between networks rather than

single organizations. Today, in order to compete

organizations form alliances with other market players either.

The nature of global competition is shaped by the following elements:

Discusion!