International Marketing

International MarketingInternational Marketing Vs. Domestic MarketingUncertainty is created by the uncontrollable elements of all business environments, but each foreign country in which a company operates adds its own unique set of uncontrollable.

International Marketing Vs. Domestic MarketingCompetition, legal restraints, government controls, weather, fickle consumers, and any number of other uncontrollable elements can, and frequently do, affect the profitable outcome of good, sound marketing plans.

International Marketing Vs. Domestic MarketingThe main difference between them is that the marketing activities take place in more than one country. more complicated, at least two levels of uncontrollable uncertainty instead of one.

International Marketing Vs. Domestic MarketingMarketer can not control or influence these uncontrollable elements, but instead must adjust or adapt to them in a manner consistent with a successful outcome.

International Marketing Vs. Domestic MarketingMarketing objectives are achieved in a way that mold the controllable elements of marketing decisions (product, price, promotion and distribution) within the framework of the uncontrollable elements of marketplace (competition, politics, laws, consumer behavior, level of technology, and distribution).

International Marketing Environment

(controllables)Domestic environment(uncontrollable)Economic climateCompetitive structurePolitical/ legal forces

Political/legal forcesForeign environment(uncontrollable)Economic forcesCultural forcesCompetitive forcesGeography and infrastructureStructure of distributionLevel of technologyEnvironmental uncontrollables country market ASource: Philip R. Cateora. International Marketing. Ninth edition Philip R. Cateora. International Marketing. Ninth editionational Marketing. Ninth editionInternational environmental forcesMarketing controllables: The successful manager constructs a marketing program designed for optimal adjustment to the uncertainty of the business climate. Domestic uncontrollables: This includes home-country elements that can have a direct effect on the success of a foreign venture: political forces, legal structure, and economic climate. Foreign uncontrollable: The problem of uncertainty is further complicated by a frequently imposed alien status that increases the difficulty of properly assessing and forecasting the dynamic international business climate. International environmental forcesThus a strategy successful in one country can be rendered ineffective in another by differences in political climate, stage of economic development, level of technology, or other cultural variation.

International marketingInternational marketing is often not as simple as marketing your product to more than one nation. Companies must consider language barriers, ideals, and customs in the market they are approaching. Language barrier Due to a language barrier, it is more difficult to obtain and interpret research data in international marketing. Promotional messages need to consider numerous cultural differences between different countries. This includes the differences in languages, expressions, habits, gestures, ideologies and more.

Language barrier United States - "okay" Mediterranean - "zero" or "the worstTunisia - "I'll kill you" Japan - "money".

Language barrier 74 English-speaking nations a word with the same meaning can differ greatly from each other

Bar: pub (Britain), hotel (Australia), boozer (Australia, Britain, New Zealand)Bathroom: Loo (Britain), Dunny (Australia)Ghost or monster: Wendigo (Canada), Duppy (Caribbean), Taniwha (New Zealand)Truck: Lorry (Britain and Australia)Sweater: Jumper (England)French fries: Chips (Britain)Soccer: Football (the rest of the world)Language barrier: Misinterpretation On a sign in a Bucharest hotel lobby: The lift is being fixed for the next day. During that time, we regret that you will be unbearable.From a Japanese information booklet about using a hotel air conditioner: Cooles and Heates: If you want just condition of warming your room, please control yourself.

SRC And Ethnocentrism: Major ObstaclesSRC- Self-reference criterion The key to successful international marketing is all about adaptation to the environmental differences between markets. SRC And Ethnocentrism: Major ObstaclesAn unconscious reference to ones own cultural values, experiences, and knowledge as a basis for decisions. SRC impedes the ability to assess a foreign market in its true light. SRC And Ethnocentrism: Major ObstaclesCross-cultural analysis isolating the SRC influencesDefine the business problem or goal in home-country cultural traits, habits, or norms.Define the business problem or goal in foreign-country cultural traits, habits, or norms. Make no value judgments.Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem.Redefine the problem without the SRC influence and solve for the optimum business goal situation.

Stages Of International Marketing InvolvementNo Direct Foreign Marketing: trading companies, foreign customers, domestic wholesalers, distributorsInfrequent Foreign Marketing: Temporary surpluses caused by variations in production levels or demand, few companies today fit this modelRegular Foreign Marketing: foreign or domestic overseas intermediaries, own sales force or sales subsidiaries Stages Of International Marketing InvolvementInternational Marketing: fully committed and involved in international marketing activities. Such companies seek markets all over the world and sell products that are a result of planned production for markets in various countries. Global Marketing: Market segmentation decisions are no longer focused on national borders. Instead, market segments are defined by income levels, usage patterns, or other factors.

The Marketing EnvironmentThe marketing environment consists of all factors external to an organization that can affect the organizations marketing activities.

22Identifying Market Opportunities and ThreatsMany firms use environmental scanning to identify important trends and determine whether they represent present or future market opportunities or threats.

23SocialEnvironmentNumber of PeopleCharacteristicsBehaviorGrowthProjectionThe Social EnvironmentThe social environment includes all factors and trends related to groups of people, including their number, characteristics, behavior, and growth projections.24The Demographic EnvironmentThe demographic environment refers to the size, distribution, and growth rate of groups of people with different characteristics. The demographic characteristics of interest to marketers relate in some way to purchasing behavior, because people from different countries, cultures, age groups, or household arrangements often exhibit different purchasing behaviors. A global perspective requires that marketers be familiar with important demographic trends around the world as well as within the hoe country.25Population Estimate Year 2025

26Demographic TrendsWorld and country population statistics are important, but most marketers target subgroups. Trends in population subgroups are typically the most useful to marketers, for example, the growth of the urban population.

27Demographic TrendsAnother interesting trend is the aging of the population. The aging of the population is especially evident in Italy, Japan, Britain, and the United States.

28CulturalFactorsValuesIdeasAttitudesSubgroupActivitiesBeliefsThe Cultural EnvironmentThe cultural environment refers to factors and trends related to how people live and behave.29Cultural DiversityCultural differences are important in both international and domestic markets.Much of the population and buying power growth in the United States is and will be from multicultural groups.

30Changing RolesAs more women enter the workforce and household compositions change, typical household roles are altered.Tremendous market opportunities exist for firms that can develop effective strategies for appealing to these changing roles.31Emphasis on Health & FitnessThe pursuit of a more healthful lifestyle includes:eating more nutritious foodsexercising regularlyparticipating in various sports activitiesfocusing on wellness. This translates into potential market opportunities for firms that provide products and services geared toward improving health and fitness.32The Desire for ConvenienceIncreased desire for convenience created by: Changes in household compositionIncreases in the number of working womenGeneral shortage of time33ConsumerismConsumerism is the movement to establish and protect the rights of buyers.One increasingly important consumer issue is environmentalism.Successful marketers can respond by developing environmentally safe products and communicating their environmental contributions.34The Economic EnvironmentThe economic environment includes factors and trends related to income levels and the production of goods and services.Economic trends in different parts of the world can affect marketing activities in other parts of the world.The gross domestic product (GDP) represents the total size of a countrys economy measured in the amount of goods and services produced.

35The Political/Legal EnvironmentThe political/legal environment encompasses factors and trends related to governmental activities and specific laws and regulations that affect marketing practice.

Political LegalEnvironmentGlobalTrendsLegislationRegulation36Global Political TrendsIn todays world economy, international political events greatly affect marketing activities. For example the impact of the war on terrorism on the travel and security industries.A second important political trend is movement toward free trade and away from protectionism. Studies show that countries with the freest trade have the highest GDP growth.37Legislation

38Regulations and Regulatory AgenciesMost legislation in the United States is enforced through regulations developed by a variety of agencies, and marketers must often work with regulatory authorities at the federal, state, and local levels.

39The Technological EnvironmentThe technological environment includes factors and trends related to innovations that affect the development of new products or the marketing process. These technological trends can provide opportunities for new product development, affect how marketing activities are performed, or both.40The Competitive EnvironmentThe competitive environment consists of all the organizations that attempt to serve similar customers.

Product CompetitorsOffer different types of products to satisfy the same general need. Dominos Pizza, McDonalds, and Kentucky Fried Chicken are product competitors.Brand CompetitorsThe most direct competition, offering the same types of products as competing firms. For example, Nike is a brand competitor of Reebok as both companies manufacture shoes.41The Institutional EnvironmentThe institutional environment consists of all the organizations involved in marketing products and services.

Market Research FirmsAdvertisingWholesalersRetailersSuppliersCustomers42The World Economy An OverviewThe new realities:Capital movements have replaced trade as the driving force of the world economyProduction has become uncoupled from employmentThe world economy, not individual countries, is the dominating factor2-4343The first change is the increased volume of capital movements. The dollar value of world trade in merchandise is running at roughly $9.2 trillion per year. However, the London foreign exchange market turns over $450 billion each working day; overall, foreign exchange transactions are running at approximately $1.5 trillion per day worldwidefar surpassing the dollar volume of world trade in goods and services.

The second change concerns the relationship between productivity and employment. Although employment in manufacturing remains steady or has declined, productivity continues to grow.

The third major change is the emergence of the world economy as the dominant economic unit. Company executives and national leaders who recognize this have the greatest chance of success. For example, the real secret of the economic success of Germany and Japan is the fact that business leaders and policy makers focus on world markets and their respective countries competitive positions in the world economy. This change has brought two questions to the fore: How does the global economy work, and who is in charge? Unfortunately, the answers tothese questions are not clear cut.The World Economy An OverviewThe new realities continued:75-year struggle between capitalism and socialism has almost endedE-Commerce diminishes the importance of national barriers and forces companies to re-evaluate business models

2-4444The fourth change is the end of the Cold War. The demise of communism as an economic and political system can be explained in a straightforward manner: Communism is not an effective economic system. The overwhelmingly superior performance of the worlds market economies has given leaders in socialist countries little choice but to renounce their ideology.

Finally, the personal computer revolution and the advent of the Internet era have in some ways diminished the importance of national boundaries. Two-thirds of American households have PCs; worldwide, an estimated 500 million personal computers are installed in homes and businesses. In the so-called Information Age, barriers of time and place have been subverted by a transnational cyber-world that functions 24/7.

Economic Systems4 main types of economic systemsMarket CapitalismCentrally planned socialismCentrally planned capitalismMarket socialism2-45Economic Systems2-46 Market CommandMarket Capitalism CentrallyPlanned CapitalismMarket SocialismCentrallyPlanned SocialismPrivate

Resource Ownership

StateResource Allocation46This classification is based on the dominant method of resource allocation (market versus command) and the dominant form of resource ownership (private versus state).

Economic FreedomRankings of economic freedom among countriesRanges from free to repressedVariables considered include such things as:Trade policyTaxation policyBanking policyWage and price controlsProperty rights2-47Economic FreedomFreeHong KongSingaporeIrelandNew ZealandUnited StatesUnited KingdomNetherlandsAustraliaSwitzerlandRepressedBosniaVietnamLaosIranCubaIraqLibyaNorth KoreaCongo2-48Stages of Market DevelopmentWorld Bank has defined four categories of developmentHigh-income countriesUpper-middle income countriesLower-middle income countriesLow-income countriesBased upon Gross National Product (GNP)2-4949Although the income definition for each of the stages is arbitrary, countries within a given category generally have a number of characteristics in common. Thus, the stages provide a useful basis for global market segmentation and target marketing.

Stages of Market Development

2-50Big Emerging MarketsChinaIndiaIndonesiaSouth KoreaBrazilMexicoArgentinaSouth AfricaPolandTurkey

2-51

51These countries are known as Big Emerging Markets (BEMs) because of the incredible growth potential within each market. Each one has experienced rapid economic growth during the past decade. These BEMs cut across the four stages of economic development; per capita income ranges from $10,879 in South Korea to $489 in India. China is the largest, with a population of 1.3 billion people; Argentina is the smallest, with a population of 38 million people. Despite these contrasts, experts predict that the BEMs will be key players in global trade even as their track records on human rights, environmental protection, and other issues come under closer scrutiny by their trading partners. The BEM government leaders will also come under pressure at home as their developing market economies create greater income disparity.

Marketing Opportunities in LDCsCharacterized by a shortage of goods and servicesLong-term opportunities must be nurtured in these countriesLook beyond per capita GNPConsider the LDCs collectively rather than individuallyConsider first mover advantageSet realistic Deadlines2-5252One of marketings roles in developing countries is to focus resources on the task of creating and delivering products that are best suited to local needs and incomes. Appropriate marketing communications techniques can also be applied to accelerate acceptance of these products. Marketing can be the link that relates resources to opportunity and facilitates need satisfaction on the consumers terms.

Influencing the World EconomyGroup of Seven (G-7)Organization for Economic Cooperation and DevelopmentThe Triad2-53Balance of PaymentsRecord of all economic transactions between the residents of a country and the rest of the worldCurrent account record of all recurring trade in merchandise and services, private gifts, and public aid between countriestrade deficittrade surplusCapital account record of all long-term direct investment, portfolio investment, and capital flows2-54Overview of International FinanceForeign exchange makes it possible to do business across the boundary of a national currencyCurrency of various countries are traded for both immediate (spot) and future (forward) deliveryIncreases the risk to organizations that are involved in global marketing2-55Managed Dirty Float?DefinitionsFloat refers to the system of fluctuating exchange ratesManaged refers to the specific use of fiscal and monetary policy by governments to influence exchange ratesDevaluation is a reduction in the value of the local currency against other currencies2-56Managed Dirty Float?DefinitionsDirty refers to the fact that central banks, as well as currency traders, buy and sell currency to influence exchange rates2-57Foreign Exchange Market DynamicsSupply and Demand interactionCountry sells more goods/services than it buysThere is a greater demand for the currencyThe currency will appreciate in value2-58

58The table shows how fluctuating currency values can affect financial risk, depending on the terms of payment specified in the contract. Suppose, at the time a deal is made, the exchange rate is 1.10 = $1. How is a U.S. exporter affected if the dollar strengthens against the euro (e.g., trades at 1.25 = $1) and the contract specifies payment in dollars? What happens if the dollar weakens (e.g., 0.85 = $1)? Conversely, what if the European buyer contracts to pay in euros rather than dollars?

Purchasing Power Parity (PPP) The Big Mac Index

Is a certain currency over/under- valued compared to another?Assumption is that the Big Mac in any country should equal the price of the Big Mac in the US after being converted to a dollar price2-5959A countrys currency would be overvalued if the Big Mac price (converted to dollars) is higher than the U.S. price. Conversely, a countrys currency would be undervalued if the converted Big Mac price is lower than the U.S. price. Economists use the concept of purchasing power parity (PPP) when adjusting national income data to improve comparability. In its survey of earnings around the world, Zurich-based UBS also uses the Big Mac as a reference point. The survey assesses purchasing power around the world in terms of how long the average wage earner must work to earn enough money to pay for a Big Mac. According to its 2003 survey, employees in Zurich, Geneva, Tokyo, Luxembourg, and New York have the highest take-home pay. Workers in Nairobi, Bombay, Shanghai, Budapest, Moscow, and Manila rank at the bottom in terms of take-home pay.

Managing Economic ExposureEconomic exposure refers to the impact of currency fluctuations on the present value of the companys future cash flowsTransaction exposure is from sales/purchasesReal operating exposure arises when currency fluctuations, together with price changes, alter a companys future revenues and costs2-60Managing Economic ExposureNumerous techniques and strategies have been developed to reduce exchange rate riskHedging involves balancing the risk of loss in one currency with a corresponding gain in another currencyForward Contracts set the price of the exchange rate at some point in the future to eliminate some risk2-61Market CapitalismIndividuals and firms allocate resourcesProduction resources are privately ownedDriven by consumersGovernment should promote competition among firms and ensure consumer protection2-62Centrally Planned SocialismOpposite of market capitalismState holds broad powers to serve the public interest; decides what goods and services are produced and in what quantitiesConsumers can spend on what is availableGovernment owns entire industriesDemand typically exceeds supplyLittle reliance on product differentiation, advertising, pricing strategy2-63Centrally-Planned CapitalismEconomic system in which command resource allocation is used extensively in an environment of private resource ownershipExamples:SwedenJapan

2-64Market SocialismEconomic system in which market allocation policies are permitted within an overall environment of state ownershipExamples:ChinaIndia2-65Low-Income CountriesGNP per capita of $785 or lessCharacteristicsLimited industrializationHigh percentage of population involved in farmingHigh birth ratesLow literacy ratesHeavy reliance on foreign aidPolitical instability and unrestOf these, only China and India are BEMs2-66Lower-Middle-Income CountriesGNP per capita between $786 and $3,125Sometimes called less-developed countries (LDCs)CharacteristicsEarly stages of industrializationCheap labor marketsFactories supply items such as clothing, tires, building materials, and packaged foods3 BEMs: Poland, Turkey, Indonesia2-67Upper-Middle-Income CountriesGNP per capita between $3,126 to $9,655CharacteristicsRapidly industrializingRising wagesHigh rates of literacy and advanced educationLower wage costs than advanced countriesSometimes called newly industrializing economies (NIEs)3 BEMs: Argentina, Brazil, Mexico, South Africa2-68High-Income CountriesGNP per capita above $9,656Sometimes referred to as post-industrial countries CharacteristicsImportance of service sector, information processing and exchange, and intellectual technologyKnowledge as key strategic resourceOrientation toward the future2-69Group of Seven (G-7)Leaders from these high income countries work to establish prosperity and ensure monetary stabilityUnited StatesJapanGermanyFranceBritainCanadaItaly2-70Organization for Economic Cooperation and Development30 nations each with market-allocation economic systems Mission: to enable its members to achieve the highest sustainable economic growth and improve the economic and social well-being of their populations

2-71The TriadDominant economic centers of the worldJapanWestern EuropeUnited StatesExpanded Triad Pacific RegionNorth America European Union2-7272The ascendancy of the global economy has been noted by many observers in recent years. One of the most astute is Kenichi Ohmae, former chairman of McKinsey & Company Japan. His 1985 book Triad Power represented one of the first attempts to develop a coherent conceptualization of the new emerging order. Ohmae argued that successful global companies had to be equally strong in Japan, Western Europe, and the United States. These three regions, which Ohmae collectively called the Triad, represented the dominant economic centers of the world. Today, roughly 70 percent of world income as measured by GNP is located in the Triad.

The FutureThe only certainty about the future is that it will be uncertain, and change will occur at an increasing rate. It will also be more complex. Businesses and consumers now must operate in an era of terrorism and lack of trust.73Overview of marketingMarketing is one of the functional areas of BusinessMarketing can also be thought of as one of the activities that, alongwith product design, manufacturing, and transportation and logistics comprise a firms Value ChainHistorically, marketing was considered as just another link in the chainToday many organisations are emphasising the effective coordination of marketing with other functional areasBoundaryless MarketingCompetitive pressures have prompted many firms to involve marketers in design, manufacturing, and other value-related decisions from the startThis approach is known in some circles as boundaryless MarketingRather than linking marketing sequentially with other activities, the goal is to eliminate the communication barriers between marketing and other functional areasProperly implemented boundaryless marketing ensures that a marketing orientation permeates all value generating activities in a company It also gives employees at all levels and in all departments the opportunity to be involved in marketing ( ex-GE)Value equationFor any organisation, the essence of marketing is to surpass competition at the task of creating perceived value for customersThe value equation is a guide to this task: Value = Benefits/ PriceMarketing mix is integral to this equation because benefits are a combination of the product, promotion and distributionValue equationAs a general rule value as perceived by the customer can be increased in two basic waysMarketers can offer customers an improved bundle of benefits Or offer lower prices ( or both)Marketers may strive improve the product itself, to design new and improved channels of distribution, to create better communication strategies or a combination of all threeMarketer may also seek to increase value by finding ways to cut costs and prices