What is International Marketing?

Introduction to International Marketing

International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. For the purposes of this lesson on international marketing and those that follow it, international marketing and global marketing are interchangeable. The intersection is the result of the process of internationalization. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix is simply adapted in some way 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 sameness, in other words the similarities in consumers and segments. So let's take a look at some generally accepted definitions. What is International Marketing? "At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe." Doole and Lowe (2001). Note: Doole and Lowe differentiate between international marketing (simple mix changes) and global marketing (more complex and extensive). "International Marketing 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. " Cateora and Ghauri (1999) Note: Cateora and Ghauri consider international marketing in the absence of global marketing. "International marketing is the application of marketing orientation and marketing capabilities to international business. " Muhlbacher, Helmuth, and Dahringer (2006) Note: Muhlbacher et al consider international marketing in relation to marketing orientation and competences (see also Global Marketing).

"The international market goes beyond the export marketer and becomes more involved in the marketing environment in the countries in which it is doing business. " Keegan (2002) Note: Keegan's definition is typical of those that see international marketing a one stage of an internationalisation process. What is Global Marketing? "Global marketing refers to marketing activities coordinated and integrated across multiple country markets." Johansson (2000) Note: Jonny K. Johansson defines global marketing as a bigger brother to international marketing i.e. more of an extension. ". . . The result is a global approach to international marketing. Rather than focusing on country markets, that is, the differences due to the physical location of customers groups, managers concentrate on product markets, that is, groups of customers seeking shared benefits or to be served with the same technology, emphasizing their similarities regardless of geographic areas in which they are located. " Muhlbacher, Helmuth, and Dahringer (2006) Note: Muhlbacher et al delineate international marketing (adapted) and global marketing (standardised). "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. " Keegan (2002) Note: Keegan takes a strategic, corporate overview to define the transnational nature of global marketing. So, as with many other elements of marketing, there is no single definition of international marketing, and there could be some confusion about where international marketing begins and global marketing ends. These lessons will assume that both terms are interchangeable, and will define international marketing as follows: International marketing is simply the application of marketing principles to more than one country. Bibliography

Doole, I. and Lowe, R. (2001), International Marketing Strategy - Analysis, Development and Implementation, Thomson Learning, 3rd Ed. Johansson, J.K. (2000), Global Marketing - Foreign Entry, Local Marketing, and Global Management, Johansson, International Edition. Cateora, P.R., and Ghauri, P.N. (1999), International Marketing, McGraw-Hill Publishing Company, European Edition. Muhlbacher, H., Helmuth, L. and Dahringer, L. (2006), International Marketing - A Global Perspective, Thomson, 3rd Ed. Keegan, W.J., (2002), Global Marketing Management, Prentice Hall, 7th Ed.

The Global Market Place

Globalization of Markets and Competition: Trade is increasingly global in scope today. There are several reasons for this. One significant reason is technologicalbecause of improved transportation and communication opportunities today, trade is now more practical. Thus, consumers and businesses now have access to the very best products from many different countries. Increasingly rapid technology lifecycles also increases the competition among countries as to who can produce the newest in technology. In part to accommodate these realities, countries in the last several decades have taken increasing steps to promote global trade through agreements such as the General Treaty on Trade and Tariffs, and trade organizations such as the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and the European Union (EU). Stages in the International Involvement of a Firm. We discussed several stages through which a firm may go as it becomes increasingly involved across borders. A purely domestic firm focuses only on its home market, has no current ambitions of expanding abroad, and does not perceive any significant competitive threat from abroad. Such a firm may eventually get some orders from abroad, which are seen either as an irritation (for small orders, there may be a great deal of effort and cost involved in obtaining relatively modest revenue) or as "icing on the cake." As the firm begins to export more, it enters the export stage, where little effort is made to market the product abroad, although an increasing number of foreign orders are filled. In the international stage, as certain country markets begin to appear especially attractive with more foreign orders originating there, the firm may go into countries on an ad hoc basisthat is, each country may be entered sequentially, but with relatively little learning and marketing efforts being shared across countries. In the multi-national stage, some efficiency is pursued by standardizing across a region (e.g., Central America, West Africa, or Northern Europe). Finally, in the global stage, the focus centers on the entire World market, with decisions made optimize

the products position across marketsthe home country is no longer the center of the product. An example of a truly global company is Coca Cola. Note that these stages represent points on a continuum from a purely domestic orientation to a truly global one; companies may fall in between these discrete stages, and different parts of the firm may have characteristics of various stagesfor example, the pickup truck division of an auto-manufacturer may be largely domestically focused, while the passenger car division is globally focused. Although a global focus is generally appropriate for most large firms, note that it may not be ideal for all companies to pursue the global stage. For example, manufacturers of ice cubes may do well as domestic, or even locally centered, firms. Some forces in international trade. The text contains a rather long-winded appendix discussing some relatively simple ideas. Comparative advantage, discussed in more detail in the economics notes, suggests trade between countries is beneficial because these countries differ in their relative economic strengthssome have more advanced technology and some have lower costs. The International Product Life Cycle suggests that countries will differ in their timing of the demand for various products. Products tend to be adopted more quickly in the United States and Japan, for example, so once the demand for a product (say, VCRs) is in the decline in these markets, an increasing market potential might exist in other countries (e.g., Europe and the rest of Asia). Internalization/transaction costs refers to the fact that developing certain very large scale projects, such as an automobile intended for the World market, may entail such large costs that these must be spread over several countries.

Economics of International Trade

Exchange rates come in two forms:
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Floatinghere, currencies are set on the open market based on the supply of and demand for each currency. For example, all other things being equal, if the U.S. imports more from Japan than it exports there, there will be less demand for U.S. dollars (they are not desired for purchasing goods) and more demand for Japanese yenthus, the price of the yen, in dollars, will increase, so you will get fewer yen for a dollar. Fixedcurrencies may be pegged to another currency (e.g., the Argentine currency is guaranteed in terms of a dollar value), to a composite of currencies (i.e., to avoid making the currency dependent entirely on the U.S. dollar, the value might be 0.25*U.S. dollar+4*Mexican peso+50*Japanese yen+0.2*German mark+0.1*British pound), or to some other valuable such as gold. Note that it is very difficult to maintain these fixed exchange ratesgovernments must buy or sell currency on the open market when currencies go outside the accepted ranges. Fixed exchange rates, although they produce stability and predictability, tend to get in the way of market forcesif a currency is kept artificially low, a country will tend to export too much and import too little.

Trade balances and exchange rates. When exchange rates are allowed to fluctuate, the currency of a country that tends to run a trade deficit will tend to decline over time, since there

will be less demand for that currency. This reduced exchange rate will then tend to make exports more attractive in other countries, and imports less attractive at home. Measuring country wealth. There are two ways to measure the wealth of a country. The nominal per capita gross domestic product (GDP) refers to the value of goods and services produced per person in a country if this value in local currency were to be exchanged into dollars. Suppose, for example, that the per capita GDP of Japan is 3,500,000 yen and the dollar exchanges for 100 yen, so that the per capita GDP is (3,500,000/100)=$35,000. However, that $35,000 will not buy as much in Japanfood and housing are much more expensive there. Therefore, we introduce the idea of purchase parity adjusted per capita GDP, which reflects what this money can buy in the country. This is typically based on the relative costs of a weighted basket of goods in a country (e.g., 35% of the cost of housing, 40% the cost of food, 10% the cost of clothing, and 15% cost of other items). If it turns out that this measure of cost of living is 30% higher in Japan, the purchase parity adjusted GPD in Japan would then be ($35,000/(130%) = $26,923. (The Gross Domestic Product (GPD) and Gross National Product (GNP) are almost identical figures. The GNP, for example, includes income made by citizens working abroad, and does not include the income of foreigners working in the country. Traditionally, the GNP was more prevalent; today the GPD is more commonly usedin practice, the two measures fall within a few percent of each other.)

In general, the nominal per capita GPD is more useful for determining local consumers ability to buy imported goods, the cost of which are determined in large measure by the costs in the home market, while the purchase parity adjusted measure is more useful when products are produced, at local costs, in the country of purchase. For example, the ability of Argentinians to purchase micro computer chips, which are produced mostly in the U.S. and Japan, is better predicted by nominal income, while the ability to purchase toothpaste made by a U.S. firm in a factory in Argentina is better predicted by purchase parity adjusted income. It should be noted that, in some countries, income is quite unevenly distributed so that these average measures may not be very meaningful. In Brazil, for example, there is a very large underclass making significantly less than the national average, and thus, the national figure is not a good indicator of the purchase power of the mass market. Similarly, great regional differences

exist within some countriesincome is much higher in northern Germany than it is in the former East Germany, and income in southern Italy is much lower than in northern Italy.

Political and Legal Influences

The political situation. The political relations between a firms country of headquarters (or other significant operations) and another one may, through no fault of the firms, become a major issue. For example, oil companies which invested in Iraq or Libya became victims of these countries misconduct that led to bans on trade. Similarly, American firms may be disliked in parts of Latin America or Iran where the U.S. either had a colonial history or supported unpopular leaders such as the former shah. Certain issues in the political environment are particularly significant. Some countries, such as Russia, have relatively unstable governments, whose policies may change dramatically if new leaders come to power by democratic or other means. Some countries have little tradition of democracy, and thus it may be difficult to implement. For example, even though Russia is supposed to become a democratic country, the history of dictatorships by the communists and the czars has left country of corruption and strong influence of criminal elements. Laws across borders. When laws of two countries differ, it may be possible in a contract to specify in advance which laws will apply, although this agreement may not be consistently enforceable. Alternatively, jurisdiction may be settled by treaties, and some governments, such as that of the U.S., often apply their laws to actions, such as anti-competitive behavior, perpetrated outside their borders (extra-territorial application). By the doctrine known as compulsion, a firm that violates U.S. law abroad may be able to claim as a defense that it was forced to do so by the local government; such violations must, however, be compelledthat they are merely legal or accepted in the host country is not sufficient. The reality of legal systems. Some legal systems, such as that of the U.S., are relatively transparentthat is, the law tends to be what its plain meaning would suggest. In some countries, however, there are laws on the books which are not enforced (e.g., although Japan has antitrust laws similar to those of the U.S., collusion is openly tolerated). Further, the amount of discretion left to government officials tends to vary. In Japan, through the doctrine of administrative guidance, great latitude is left to government officials, who effectively make up the laws. One serious problem in some countries is a limited access to the legal systems as a means to redress grievances against other parties. While the U.S. may rely excessively on lawsuits, the inability to effectively hold contractual partners to their agreement tends to inhibit business deals. In many jurisdictions, pre-trial discovery is limited, making it difficult to make a case against a firm whose internal documents would reveal guilt. This is one reason why personal relationships in some cultures are considered more significant than in the U.S.since enforcing contracts may be difficult, you must be sure in advance that you can trust the other party.

Legal systems of the World. There are four main approaches to law across the World, with some differences within each:
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Common law, the system in effect in the U.S., is based on a legal tradition of precedent. Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue. Although the legislature can override judicial decisions by changing the law or passing specific standards through legislation, reasonable court decisions tend to stand by default. Code law, which is common in Europe, gives considerably shorter leeway to judges, who are charged with matching specific laws to situationsthey cannot come up with innovative solutions when new issues such as patentability of biotechnology come up. There are also certain differences in standards. For example, in the U.S. a supplier whose factory is hit with a strike is expected to deliver on provisions of a contract, while in code law this responsibility may be nullified by such an act of God. Islamic law is based on the teachings of the Koran, which puts forward mandates such as a prohibition of usury, or excessive interest rates. This has led some Islamic countries to ban interest entirely; in others, it may be tolerated within reason. Islamic law is ultimately based on the need to please God, so getting around the law is generally not acceptable. Attorneys may be consulted about what might please God rather than what is an explicit requirements of the government. Socialist law is based on the premise that the government is always right and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything). Former communist countries such as those of Eastern Europe and Russia are trying to advance their legal systems to accommodate issues in a free market.

U.S. laws of particular interest to firms doing business abroad. Anti-trust. U.S. antitrust laws are generally enforced in U.S. courts even if the alleged transgression occurred outside U.S. jurisdiction. For example, if two Japanese firms collude to limit the World supply of VCRs, they may be sued by the U.S. government (or injured third parties) in U.S. courts, and may have their U.S. assets seized.
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The Foreign Corrupt Influences Act came about as Congress was upset with U.S. firms bribery of foreign officials. Although most if not all countries ban the payment of bribes, such laws are widely flaunted in many countries, and it is often useful to pay a bribe to get foreign government officials to act favorably. Firms engaging in this behavior, even if it takes place entirely outside the U.S., can be prosecuted in U.S. courts, and many executives have served long prison sentences for giving in to temptation. In contrast, in the past some European firms could actually deduct the cost of foreign bribes from their taxes! There are some gray areas hereit may be legal to pay certain tips known as facilitating paymentsto low level government workers in some countries who rely on such payments as part of their salary so long as these payments are intended only to speed up actions that would be taken anyway. For example, it may be acceptable to give a

reasonable (not large) facilitating payment to get customs workers to process a shipment faster, but it would not be legal to pay these individuals to change the classification of a product into one that carries a lower tariff. Anti-boycott laws. Many Arab countries maintain a boycott of Israel, and foreigners that want to do business with them may be asked to join in this boycott by stopping any deals they do with Israel and certifying that they do not trade with that country. It is illegal for U.S. firms to make this certification even if they have not dropped any actual deals with Israel to get a deal with boycotters. Trading With the Enemy. It is illegal for U.S. firms to trade with certain countries that are viewed to be hostile to the U.S.e.g., Libya and Iraq.

Culture
Culture is part of the external influences that impact the consumer. That is, culture represents influences that are imposed on the consumer by other individuals. The definition of culture offered one text is That complex whole which includes knowledge, belief, art, morals, custom, and any other capabilities and habits acquired by man person as a member of society. From this definition, we make the following observations:
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Culture, as a complex whole, is a system of interdependent components. Knowledge and beliefs are important parts. In the U.S., we know and believe that a person who is skilled and works hard will get ahead. In other countries, it may be believed that differences in outcome result more from luck. Chunking, the name for China in Chinese, literally means The Middle Kingdom. The belief among ancient Chinese that they were in the center of the universe greatly influenced their thinking. Other issues are relevant. Art, for example, may be reflected in the rather arbitrary practice of wearing ties in some countries and wearing turbans in others. Morality may be exhibited in the view in the United States that one should not be naked in public. In Japan, on the other hand, groups of men and women may take steam baths together without perceived as improper. On the other extreme, women in some Arab countries are not even allowed to reveal their faces. Notice, by the way, that what at least some countries view as moral may in fact be highly immoral by the standards of another country.

Culture has several important characteristics: (1) Culture is comprehensive. This means that all parts must fit together in some logical fashion. For example, bowing and a strong desire to avoid the loss of face are unified in their manifestation of the importance of respect. (2) Culture is learned rather than being something we are born with. We will consider the mechanics of learning later in the course. (3) Culture is manifested within boundaries of acceptable behavior. For example, in American society, one cannot show up to class naked, but wearing anything from a suit and tie to shorts and a T-shirt would usually be acceptable. Failure to behave within the prescribed norms may lead to sanctions, ranging from being hauled off by the police for

indecent exposure to being laughed at by others for wearing a suit at the beach. (4) Conscious awareness of cultural standards is limited. One American spy was intercepted by the Germans during World War II simply because of the way he held his knife and fork while eating. (5) Cultures fall somewhere on a continuum between static and dynamic depending on how quickly they accept change. For example, American culture has changed a great deal since the 1950s, while the culture of Saudi Arabia has changed much less. Dealing with culture. Culture is a problematic issue for many marketers since it is inherently nebulous and often difficult to understand. One may violate the cultural norms of another country without being informed of this, and people from different cultures may feel uncomfortable in each others presence without knowing exactly why (for example, two speakers may unconsciously continue to attempt to adjust to reach an incompatible preferred interpersonal distance). Warning about stereotyping. When observing a culture, one must be careful not to overgeneralize about traits that one sees. Research in social psychology has suggested a strong tendency for people to perceive an outgroup as more homogenous than an ingroup, even when they knew what members had been assigned to each group purely by chance. When there is often a grain of truth to some of the perceived differences, the temptation to over-generalize is often strong. Note that there are often significant individual differences within cultures. Cultural lessons. We considered several cultural lessons in class; the important thing here is the big picture. For example, within the Muslim tradition, the dog is considered a dirty animal, so portraying it as mans best friend in an advertisement is counter-productive. Packaging, seen as a reflection of the quality of the real product, is considerably more important in Asia than in the U.S., where there is a tendency to focus on the contents which really count. Many cultures observe significantly greater levels of formality than that typical in the U.S., and Japanese negotiator tend to observe long silent pauses as a speakers point is considered. Cultural characteristics as a continuum. There is a tendency to stereotype cultures as being one way or another (e.g., individualistic rather than collectivistic). Note, however, countries fall on a continuum of cultural traits. Hofstedes research demonstrates a wide range between the most individualistic and collectivistic countries, for examplesome fall in the middle. Hofstedes Dimensions. Gert Hofstede, a Dutch researcher, was able to interview a large number of IBM executives in various countries, and found that cultural differences tended to center around four key dimensions:
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Individualism vs. collectivism: To what extent do people believe in individual responsibility and reward rather than having these measures aimed at the larger group? Contrary to the stereotype, Japan actually ranks in the middle of this dimension, while Indonesia and West Africa rank toward the collectivistic side. The U.S., Britain, and the Netherlands rate toward individualism. Power distance: To what extent is there a strong separation of individuals based on rank? Power distance tends to be particularly high in Arab countries and some Latin American ones, while it is more modest in Northern Europe and the U.S.

Masculinity vs. femininity involves a somewhat more nebulous concept. Masculine values involve competition and conquering nature by means such as large construction projects, while feminine values involve harmony and environmental protection. Japan is one of the more masculine countries, while the Netherlands rank relatively low. The U.S. is close to the middle, slightly toward the masculine side. ( The fact that these values are thought of as masculine or feminine does not mean that they are consistently held by members of each respective genderthere are very large within-group differences. There is, however, often a large correlation of these cultural values with the status of women.) Uncertainty avoidance involves the extent to which a structured situation with clear rules is preferred to a more ambiguous one; in general, countries with lower uncertainty avoidance tend to be more tolerant of risk. Japan ranks very high. Few countries are very low in any absolute sense, but relatively speaking, Britain and Hong Kong are lower, and the U.S. is in the lower range of the distribution.

Although Hofstedes original work did not address this, a fifth dimension of long term vs. short term orientation has been proposed. In the U.S., managers like to see quick results, while Japanese managers are known for take a long term view, often accepting long periods before profitability is obtained. High vs. low context cultures: In some cultures, what you see is what you getthe speaker is expected to make his or her points clear and limit ambiguity. This is the case in the U.S.if you have something on your mind, you are expected to say it directly, subject to some reasonable standards of diplomacy. In Japan, in contrast, facial expressions and what is not said may be an important clue to understanding a speakers meaning. Thus, it may be very difficult for Japanese speakers to understand anothers written communication. The nature of languages may exacerbate this phenomenonwhile the German language is very precise, Chinese lacks many grammatical features, and the meaning of words may be somewhat less precise. English ranks somewhere in the middle of this continuum. Ethnocentrism and the self-reference criterion. The self-reference criterion refers to the tendency of individuals, often unconsciously, to use the standards of ones own culture to evaluate others. For example, Americans may perceive more traditional societies to be backward and unmotivated because they fail to adopt new technologies or social customs, seeking instead to preserve traditional values. In the 1960s, a supposedly well read American psychology professor referred to Indias culture of sick because, despite severe food shortages, the Hindu religion did not allow the eating of cows. The psychologist expressed disgust that the cows were allowed to roam free in villages, although it turns out that they provided valuable functions by offering milk and fertilizing fields. Ethnocentrism is the tendency to view ones culture to be superior to others. The important thing here is to consider how these biases may come in the way in dealing with members of other cultures. It should be noted that there is a tendency of outsiders to a culture to overstate the similarity of members of that culture to each other. In the United States, we are well aware that there is a great deal of heterogeneity within our culture; however, we often underestimate the diversity within other cultures. For example, in Latin America, there are great differences between people

who live in coastal and mountainous areas; there are also great differences between social classes. Language issues. Language is an important element of culture. It should be realized that regional differences may be subtle. For example, one word may mean one thing in one Latin American country, but something off-color in another. It should also be kept in mind that much information is carried in non-verbal communication. In some cultures, we nod to signify yes and shake our heads to signify no; in other cultures, the practice is reversed. Within the context of language:
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There are often large variations in regional dialects of a given language. The differences between U.S., Australian, and British English are actually modest compared to differences between dialects of Spanish and German. Idioms involve figures of speech that may not be used, literally translated, in other languages. For example, baseball is a predominantly North and South American sport, so the notion of in the ball park makes sense here, but the term does not carry the same meaning in cultures where the sport is less popular. Neologisms involve terms that have come into language relatively recently as technology or society involved. With the proliferation of computer technology, for example, the idea of an add-on became widely known. It may take longer for such terms to diffuse into other regions of the world. In parts of the World where English is heavily studied in schools, the emphasis is often on grammar and traditional language rather than on current terminology, so neologisms have a wide potential not to be understood. Slang exists within most languages. Again, regional variations are common and not all people in a region where slang is used will necessarily understand this. There are often significant generation gaps in the use of slang.

Writing patterns, or the socially accepted ways of writing, will differs significantly between cultures.

In English and Northern European languages, there is an emphasis on organization and conciseness. Here, a point is made by building up to it through background. An introduction will often foreshadow what is to be said. In Romance languages such as Spanish, French, and Portuguese, this style is often considered boring and inelegant. Detours are expected and are

considered a sign of class, not of poor organization. In Asian languages, there is often a great deal of circularity. Because of concerns about potential loss of face, opinions may not be expressed directly. Instead, speakers may hint at ideas or indicate what others have said, waiting for feedback from the other speaker before committing to a point of view. Because of differences in values, assumptions, and language structure, it is not possible to meaningfully translate word-for-word from one language to another. A translator must keep unspoken understandings and assumptions in mind in translating. The intended meaning of a word may also differ from its literal translation. For example, the Japanese word hai is literally translated as yes. To Americans, that would imply Yes, I agree. To the Japanese speaker, however, the word may mean Yes, I hear what you are saying (without any agreement expressed) or even Yes, I hear you are saying something even though I am not sure exactly what you are saying. Differences in cultural values result in different preferred methods of speech. In American English, where the individual is assumed to be more in control of his or her destiny than is the case in many other cultures, there is a preference for the active tense (e.g., I wrote the marketing plan) as opposed to the passive (e.g., The marketing plan was written by me.) Because of the potential for misunderstandings in translations, it is dangerous to rely on a translation from one language to another made by one person. In the decentering method, multiple translators are used. The text is first translated by one translatorsay, from German to Mandarin Chinese. A second translator, who does not know what the original German text said, will then translate back to German from Mandarin Chinese translation. The text is then compared. If the meaning is not similar, a third translator, keeping in mind this feedback, will then translate from German to Mandarin. The process is continued until the translated meaning appears to be satisfactory. Different perspectives exist in different cultures on several issues; e.g.:
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Monochronic cultures tend to value precise scheduling and doing one thing at a time; in polychronic cultures, in contrast, promptness is valued less, and multiple tasks may be performed simultaneously. (See text for more detail). Space is perceived differently. Americans will feel crowded where people from more densely populated countries will be comfortable. Symbols differ in meaning. For example, while white symbols purity in the U.S., it is a symbol of death in China. Colors that are considered masculine and feminine also differ by culture. Americans have a lot of quite shallow friends toward whom little obligation is felt; people in European and some Asian cultures have fewer, but more significant friends. For example, one Ph.D. student from India, with limited income, felt obligated to try buy an airline ticket for a friend to go back to India when a relative had died. In the U.S. and much of Europe, agreements are typically rather precise and contractual in nature; in Asia, there is a greater tendency to settle issues as they come up. As a result, building a relationship of trust is more important in Asia, since you must be able to count on your partner being reasonable.

In terms of etiquette, some cultures have more rigid procedures than others. In some countries, for example, there are explicit standards as to how a gift should be presented. In some cultures, gifts should be presented in private to avoid embarrassing the recipient; in others, the gift should be made publicly to ensure that no perception of secret bribery could be made.

Cross-Cultural Market Research

Primary vs. secondary research. There are two kinds of market research: Primary research refers to the research that a firm conducts for its own needs (e.g., focus groups, surveys, interviews, or observation) while secondary research involves finding information compiled by someone else. In general, secondary research is less expensive and is faster to conduct, but it may not answer the specific questions the firm seeks to have answered (e.g., how do consumers perceive our product?), and its reliability may be in question. Secondary sources. A number of secondary sources of country information are available. One of the most convenient sources is an almanac, containing a great deal of country information. Almanacs can typically be bought for $10.00 or less. The U.S. government also publishes a guide to each country, and the handbook International Business Information: How to Find It, How to Use It (HF 54.5.P33 [1998] in the Reference Department of the Gelman Library), provides leads on numerous sources by topic. Stat-USA, a database compiled by the U.S. Department of Commerce and available through the Gelman Library (you can access it through the Links section of my web-site), contains a great deal of statistical information online. Excellent full text searchable indices to periodicals include Lexis-Nexis and RDS Business and Industry, also available through Gelman. Several experts may be available. Anthropologists and economists in universities may have built up a great deal of knowledge and may be available for consulting. Consultants specializing in various regions or industries are typically considerably more expensive. One should be careful about relying on the opinions of expatriates (whose views may be biased or outdated) or ones own experience (which may relate to only part of a country or a certain subsegment) and may also suffer from the limitation of being a sample of size 1. Hard vs. soft data. Hard data refers to relatively quantifiable measures such as a countrys GDP, number of telephones per thousand residents, and birth rates (although even these supposedly objective factors may be subject to some controversy due to differing definitions and measurement approaches across countries). In contrast, soft data refers to more subjective issues such as country history or culture. It should be noted that while the hard data is often more convenient and seemingly objective, the soft data is frequently as important, if not more so, in understanding a market. Data reliability. The accuracy and objectivity of data depend on several factors. One significant one is the motivation of the entity that releases it. For example, some countries may

want to exaggerate their citizens literacy rates owing to national pride, and an organization promoting economic development may paint an overly rosy picture in order to attract investment. Some data may be dated (e.g., a census may be conducted rarely in some regions), and some countries may lack the ability to collect data (it is difficult to reach people in the interior regions of Latin America, for example). Differences in how constructs are defined in different countries (e.g., is military personnel counted in people who are employed?) may make figures of different jurisdictions non-comparable. Cost of data. Much government data, or data released by organizations such as the World Bank or the United Nations, is free or inexpensive, while consultants may charge very high rates. Issues in primary research. Cultural factors often influence how people respond to research. While Americans are used to market research and tend to find this relatively un-threatening, consumers in other countries may fear that the data will be reported to the government, and may thus not give accurate responses. In some cultures, criticism or confrontation are considered rude, so consumers may not respond honestly when they dislike a product. Technology such as scanner data is not as widely available outside the United States. Local customs and geography may make it difficult to interview desired respondents; for example, in some countries, women may not be allowed to talk to strangers.

Country Entry: Decisions and Strategies

Segmentation, Targeting, and Positioning. Segmentation, in marketing, is usually done at the customer level. However, in international marketing, it may sometimes be useful to see countries as segments. This allows the decision maker to focus on common aspects of countries and avoid information overload. It should be noted that variations within some countries (e.g., Brazil) are very large and therefore, averages may not be meaningful. Country level segmentation may be done on levels such as geographybased on the belief that neighboring countries and countries with a particular type of climate or terrain tend to share similarities, demographics (e.g., population growth, educational attainment, population age distribution), or income. Segmenting on income is tricky since the relative prices between countries may differ significantly (based, in part, on purchasing power parity measures that greatly affect the relative cost of imported and domestically produced products). The importance of STP. Segmentation is the cornerstone of marketingalmost all marketing efforts in some way relate to decisions on who to serve or how to implement positioning through the different parts of the marketing mix. For example, ones distribution strategy should consider where ones target market is most likely to buy the product, and a promotional strategy should consider the targets media habits and which kinds of messages will be most persuasive. Although it is often tempting, when observing large markets, to try to be "all things to all people," this is a dangerous strategy because the firm may lose its distinctive appeal to its chosen segments.

In terms of the "big picture," members of a segment should generally be as similar as possible to each other on a relevant dimension (e.g., preference for quality vs. low price) and as different as possible from members of other segments. That is, members should respond in similar ways to various treatments (such as discounts or high service) so that common campaigns can be aimed at segment members, but in order to justify a different treatment of other segments, their members should have their own unique response behavior. Approaches to global segmentation. There are two main approaches to global segmentation. At the macro level, countries are seen as segments, given that country aggregate characteristics and statistics tend to differ significantly. For example, there will only be a large market for expensive pharmaceuticals in countries with certain income levels, and entry opportunities into infant clothing will be significantly greater in countries with large and growing birthrates (in countries with smaller birthrates or stable to declining birthrates, entrenched competitors will fight hard to keep the market share). There are, however, significant differences within countries. For example, although it was thought that the Italian market would demand "no frills" inexpensive washing machines while German consumers would insist on high quality, very reliable ones, it was found that more units of the inexpensive kind were sold in Germany than in Italyalthough many German consumers fit the predicted profile, there were large segment differences within that country. At the micro level, where one looks at segments within countries. Two approaches exist, and their use often parallels the firms stage of international involvement. Intramarket segmentation involves segmenting each countrys markets from scratchi.e., an American firm going into the Brazilian market would do research to segment Brazilian consumers without incorporating knowledge of U.S. buyers. In contrast, intermarket segmentation involves the detection of segments that exist across borders. Note that not all segments that exist in one country will exist in another and that the sizes of the segments may differ significantly. For example, there is a huge small car segment in Europe, while it is considerably smaller in the U.S.

Intermarket segmentation entails several benefits. The fact that products and promotional campaigns may be used across markets introduces economies of scale, and learning that has been acquired in one market may be used in anothere.g., a firm that has been serving a segment of premium quality cellular phone buyers in one country can put its experience to use in another country that features that same segment. (Even though segments may be similar across the cultures, it should be noted that it is still necessary to learn about the local market. For example, although a segment common across two countries may seek the same benefits, the cultures of each country may cause people to respond differently to the "hard sell" advertising that has been successful in one).

The international product life cycle suggests that product adoption and spread in some markets may lag significantly behind those of others. Often, then, a segment that has existed for some time in an "early adopter" country such as the U.S. or Japan will emerge after several years (or even decades) in a "late adopter" country such as Britain or most developing countries. (We will discuss this issue in more detail when we cover the product mix in the second half of the term). Positioning across markets. Firms often have to make a tradeoff between adapting their products to the unique demands of a country market or gaining benefits of standardization such as cost savings and the maintenance of a consistent global brand image. There are no easy answers here. On the one hand, McDonalds has spent a great deal of resources to promote its global image; on the other hand, significant accommodations are made to local tastes and preferencesfor example, while serving alcohol in U.S. restaurants would go against the family image of the restaurant carefully nurtured over several decades, McDonalds has accommodated this demand of European patrons. The Japanese Keiretsu Structure. In Japan, many firms are part of a keiretsu, or a conglomerate that ties together businesses that can aid each other. For example, a keiretsu might contain an auto division that buys from a steel division. Both of these might then buy from a iron mining division, which in turns buys from a chemical division that also sells to an agricultural division. The agricultural division then sells to the restaurant division, and an electronics division sells to all others, including the auto division. Since the steel division may not have opportunities for reinvestment, it puts its profits in a bank in the center, which in turns lends it out to the electronics division that is experiencing rapid growth.

This practice insulates the businesses to some extent against the business cycle, guaranteeing an outlet for at least some product in bad times, but this structure has caused problems in Japan as it has failed to "root out" inefficient keiretsu members which have not had to "shape up" to the rigors of the market.

Methods of entry. With rare exceptions, products just dont emerge in foreign markets overnighta firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available:
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Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country. Licensing and franchising are also low exposure methods of entryyou allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country. Contract manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor. Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market. Entry Strategies

Methods of entry. With rare exceptions, products just dont emerge in foreign markets overnighta firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available:
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Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country.

Licensing and franchising are also low exposure methods of entryyou allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country. Turnkey Projects. A firm uses knowledge and expertise it has gained in one or more markets to provide a working projecte.g., a factory, building, bridge, or other structureto a buyer in a new country. The firm can take advantage of investments already made in technology and/or development and may be able to receive greater profits since these investments do not have to be started from scratch again. However, getting the technology to work in a new country may be challenging for a firm that does not have experience with the infrastructure, culture, and legal environment. Management Contracts. A firm agrees to manage a facilitye.g., a factory, port, or airportin a foreign country, using knowledge gained in other markets. Again, one thing is to be able to transfer technologyanother is to be able to work in a new country with a different infrastructure, culture, and political/legal environment. Contract manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor. Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market.

Product Issues in International Marketing

Products and Services. Some marketing scholars and professionals tend to draw a strong distinction between conventional products and services, emphasizing service characteristics such as heterogeneity (variation in standards among providers, frequently even among different locations of the same firm), inseperability from consumption, intangibility, and, in some cases, perishabilitythe idea that a service cannot generally be created during times of slack and be stored for use later. However, almost all products have at least some service component e.g., a warranty, documentation, and distributionand this service component is an integral part of the product and its positioning. Thus, it may be more useful to look at the product-service continuum as one between very low and very high levels of tangibility of the service. Income tax preparation, for example, is almost entirely intangiblethe client may receive a few printouts, but most of the value is in the service. On the other hand, a customer who picks up

rocks for construction from a landowner gets a tangible product with very little value added for service. Firms that offer highly tangible products often seek to add an intangible component to improve perception. Conversely, adding a tangible element to a servicee.g., a binder with informationmay address many consumers psychological need to get something to show for their money. On the topic of services, cultural issues may be even more prominent than they are for tangible goods. There are large variations in willingness to pay for quality, and often very large differences in expectations. In some countries, it may be more difficult to entice employees to embrace a firms customer service philosophy. Labor regulations in some countries make it difficult to terminate employees whose treatment of customers is substandard. Speed of service is typically important in the U.S. and western countries but personal interaction may seem more important in other countries. Product Need Satisfaction. We often take for granted the obvious need that products seem to fill in our own culture; however, functions served may be very different in othersfor example, while cars have a large transportation role in the U.S., they are impractical to drive in Japan, and thus cars there serve more of a role of being a status symbol or providing for individual indulgence. In the U.S., fast food and instant drinks such as Tang are intended for convenience; elsewhere, they may represent more of a treat. Thus, it is important to examine through marketing research consumers true motives, desires, and expectations in buying a product. Approaches to Product Introduction. Firms face a choice of alternatives in marketing their products across markets. An extreme strategy involves customization, whereby the firm introduces a unique product in each country, usually with the belief tastes differ so much between countries that it is necessary more or less to start from scratch in creating a product for each market. On the other extreme, standardization involves making one global product in the belief the same product can be sold across markets without significant modificatione.g., Intel microprocessors are the same regardless of the country in which they are sold. Finally, in most cases firms will resort to some kind of adaptation, whereby a common product is modified to some extent when moved between some marketse.g., in the United States, where fuel is relatively less expensive, many cars have larger engines than their comparable models in Europe and Asia; however, much of the design is similar or identical, so some economies are achieved. Similarly, while Kentucky Fried Chicken serves much the same chicken with the eleven herbs and spices in Japan, a lesser amount of sugar is used in the potato salad, and fries are substituted for mashed potatoes. There are certain benefits to standardization. Firms that produce a global product can obtain economies of scale in manufacturing, and higher quantities produced also lead to a faster advancement along the experience curve. Further, it is more feasible to establish a global brand as less confusion will occur when consumers travel across countries and see the same product. On the down side, there may be significant differences in desires between cultures and physical environmentse.g., software sold in the U.S. and Europe will often utter a beep to alert the user when a mistake has been made; however, in Asia, where office workers are often seated closely together, this could cause embarrassment.

Adaptations come in several forms. Mandatory adaptations involve changes that have to be made before the product can be usede.g., appliances made for the U.S. and Europe must run on different voltages, and a major problem was experienced in the European Union when hoses for restaurant frying machines could not simultaneously meet the legal requirements of different countries. Discretionary changes are changes that do not have to be made before a product can be introduced (e.g., there is nothing to prevent an American firm from introducing an overly sweet soft drink into the Japanese market), although products may face poor sales if such changes are not made. Discretionary changes may also involve cultural adaptationse.g., in Sesame Street, the Big Bird became the Big Camel in Saudi Arabia.

Another distinction involves physical product vs. communication adaptations. In order for gasoline to be effective in high altitude regions, its octane must be higher, but it can be promoted much the same way. On the other hand, while the same bicycle might be sold in China and the U.S., it might be positioned as a serious means of transportation in the former and as a recreational tool in the latter. In some cases, products may not need to be adapted in either way (e.g., industrial equipment), while in other cases, it might have to be adapted in both (e.g., greeting cards, where the both occasions, language, and motivations for sending differ). Finally, a market may exist abroad for a product which has no analogue at homee.g., hand-powered washing machines. Branding. While Americans seem to be comfortable with category specific brands, this is not the case for Asian consumers. American firms observed that their products would be closely examined by Japanese consumers who could not find a major brand name on the packages, which was required as a sign of quality. Note that Japanese keiretsus span and use their brand name across multiple industriese.g., Mitsubishi, among other things, sells food, automobiles, electronics, and heavy construction equipment.

The International Product Life Cycle (PLC). Consumers in different countries differ in the speed with which they adopt new products, in part for economic reasons (fewer Malaysian than American consumers can afford to buy VCRs) and in part because of attitudes toward new products (pharmaceuticals upset the power afforded to traditional faith healers, for example). Thus, it may be possible, when one market has been saturated, to continue growth in another markete.g., while somewhere between one third and one half of American homes now contain a computer, the corresponding figures for even Europe and Japan are much lower and thus, many computer manufacturers see greater growth potential there. Note that expensive capital equipment may also cycle between countriese.g., airlines in economically developed countries will often buy the newest and most desired aircraft and sell off older ones to their counterparts in developing countries. While in developed countries, three part canning machines that solder on the bottom with lead are unacceptable for health reasons, they have found a market in developing countries. Diffusion of innovation. Good new innovations often do not spread as quickly as one might expecte.g., although the technology for microwave ovens has existed since the 1950s, they really did not take off in the United States until the late seventies or early eighties, and their penetration is much lower in most other countries. The typewriter, telephone answering machines, and cellular phones also existed for a long time before they were widely adopted. Certain characteristics of products make them more or less likely to spread. One factor is relative advantage. While a computer offers a huge advantage over a typewriter, for example, the added gain from having an electric typewriter over a manual one was much smaller. Another issue is compatibility, both in the social and physical sense. A major problem with the personal computer was that it could not read the manual files that firms had maintained, and birth control programs are resisted in many countries due to conflicts with religious values. Complexity refers to how difficult a new product is to usee.g., some people have resisted getting computers because learning to use them takes time. Trialability refers to the extent to which one can examine the merits of a new product without having to commit a huge financial or personal investmente.g., it is relatively easy to try a restaurant with a new ethnic cuisine, but investing in a global positioning navigation system is riskier since this has to be bought and installed in ones car before the consumer can determine whether it is worthwhile in practice. Finally,

observability refers to the extent to which consumers can readily see others using the product e.g., people who do not have ATM cards or cellular phones can easily see the convenience that other people experience using them; on the other hand, VCRs are mostly used in peoples homes, and thus only an owners close friends would be likely to see it. At the societal level, several factors influence the spread of an innovation. Not surprisingly, cosmopolitanism, the extent to which a country is connected to other cultures, is useful. Innovations are more likely to spread where there is a higher percentage of women in the work force; these women both have more economic power and are able to see other people use the products and/or discuss them. Modernity refers to the extent to which a culture values progress. In the U.S., new and improved is considered highly attractive; in more traditional countries, their potential for disruption cause new products to be seen with more skepticism. Although U.S. consumers appear to adopt new products more quickly than those of other countries, we actually score lower on homiphily, the extent to which consumers are relatively similar to each other, and physical distance, where consumers who are more spread out are less likely to interact with other users of the product. Japan, which ranks second only to the U.S., on the other hand, scores very well on these latter two factors.

International Promotion
Promotional tools. Numerous tools can be used to influence consumer purchases:
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Advertisingin or on newspapers, radio, television, billboards, busses, taxis, or the Internet. Price promotionsproducts are being made available temporarily as at a lower price, or some premium (e.g., toothbrush with a package of toothpaste) is being offered for free. Sponsorships Point-of-purchasethe manufacturer pays for extra display space in the store or puts a coupon right by the product Other method of getting the consumers attentionall the Gap stores in France may benefit from the prominence of the new store located on the Champs-Elysees

Promotional objectives. Promotional objectives involve the question of what the firm hopes to achieve with a campaignincreasing profits is too vague an objective, since this has to be achieved through some intermediate outcome (such as increasing market share, which in turn is achieved by some change in consumers which cause them to buy more). Some common objectives that firms may hold:
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Awareness. Many French consumers do not know that the Gap even exists, so they cannot decide to go shopping there. This objective is often achieved through advertising, but could also be achieved through favorable point-of-purchase displays. Note that since advertising and promotional stimuli are often afforded very little attention by consumers, potential buyers may have to be exposed to the promotional stimulus numerous times before it registers. Trial. Even when consumers know that a product exists and could possibly satisfy some of their desires, it may take a while before they get around to trying the product especially when there are so many other products that compete for their attention and wallets. Thus, the next step is often to try get consumer to try the product at least once, with the hope that they will make repeat purchases. Coupons are often an effective way of achieving trial, but these are illegal in some countries and in some others, the infrastructure to readily accept coupons (e.g., clearing houses) does not exist. Continued advertising and point-of-purchase displays may be effective. Although Coca Cola is widely known in China, a large part of the population has not yet tried the product. Attitude toward the product. A high percentage of people in the U.S. and Europe has tried Coca Cola, so a more reasonable objective is to get people to believe positive things about the producte.g., that it has a superior taste and is better than generics or store brands. This is often achieved through advertising. Temporary sales increases. For mature products and categories, attitudes may be fairly well established and not subject to cost-effective change. Thus, it may be more useful to work on getting temporary increases in sales (which are likely to go away the incentives are removed). In the U.S. and Japan, for example, fast food restaurants may run

temporary price promotions to get people to eat out more or switch from competitors, but when these promotions end, sales are likely to move back down again (in developing countries, in contrast, trial may be a more appropriate objective in this category). Note that in new or emerging markets, the first objectives are more likely to be useful while, for established products, the latter objectives may be more useful in mature markets such as Japan, the U.S., and Western Europe.

Constraints on Global Communications Strategies. Although firms that seek standardized positions may seek globally unified campaigns, there are several constraints:
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Language barriers: The advertising will have to be translated, not just into the generic language category (e.g., Portuguese) but also into the specific version spoken in the region (e.g., Brazilian Portuguese). (Occasionally, foreign language ads are deliberately run to add mystique to a product, but this is the exception rather than the rule). Cultural barriers. Subtle cultural differences may make an ad that tested well in one country unsuitable in anothere.g., an ad that featured a man walking in to join his wife in the bathroom was considered an inappropriate invasion in Japan. Symbolism often differs between cultures, and humor, which is based on the contrast to peoples experiences, tends not to travel well. Values also tend to differ between culturesin the U.S. and Australia, excelling above the group is often desirable, while in Japan, The nail that sticks out gets hammered down. In the U.S., The early bird gets the worm while in China The first bird in the flock gets shot down. Local attitudes toward advertising. People in some countries are more receptive to advertising than others. While advertising is accepted as a fact of life in the U.S., some Europeans find it too crass and commercial. Media infrastructure. Cable TV is not well developed in some countries and regions, and not all media in all countries accept advertising. Consumer media habits also differ dramatically; newspapers appear to have a higher reach than television and radio in parts of Latin America. Advertising regulations. Countries often have arbitrary rules on what can be advertised and what can be claimed. Comparative advertising is banned almost everywhere outside

the U.S. Holland requires that a toothbrush be displayed in advertisements for sweets, and some countries require that advertising to be shown there be produced in the country.

Some cultural dimensions:

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Directness vs. indirectness: U.S. advertising tends to emphasize directly why someone would benefit from buying the product. This, however, is considered too pushy for Japanese consumers, where it is felt to be arrogant of the seller to presume to know what the consumer would like. Comparison: Comparative advertising is banned in most countries and would probably be very counterproductive, as an insulting instance of confrontation and bragging, in Asia even if it were allowed. In the U.S., comparison advertising has proven somewhat effective (although its implementation is tricky) as a way to persuade consumers what to buy. Humor. Although humor is a relatively universal phenomenon, what is considered funny between countries differs greatly, so pre-testing is essential. Gender roles. A study found that women in U.S. advertising tended to be shown in more traditional roles in the U.S. than in Europe or Australia. On the other hand, some countries are even more traditionale.g., a Japanese ad that claimed a camera to be so simple that even a woman can use it was not found to be unusually insulting. Explicitness. Europeans tend to allow for considerably more explicit advertisements, often with sexual overtones, than Americans. Sophistication. Europeans, particularly the French, demand considerably more sophistication than Americans who may react more favorably to emotional appealse.g., an ad showing a mentally retarded young man succeeding in a job at McDonalds was very favorably received in the U.S. but was booed at the Cannes film festival in France. Popular vs. traditional culture. U.S. ads tend to employ contemporary, popular culture, often including current music while those in more traditional cultures tend to refer more to classical culture. Information content vs. fluff. American ads contain a great deal of puffery, which was found to be very ineffective in Eastern European countries because it resembled communist propaganda too much. The Eastern European consumers instead wanted hard, cold facts.

Advertising standardization. Issues surrounding advertising standardization tend to parallel issues surrounding product and positioning standardization. On the plus side, economies of scale are achieved, a consistent image can be established across markets, creative talent can be utilized across markets, and good ideas can be transplanted from one market to others. On the down side, cultural differences, peculiar country regulations, and differences in product life cycle stages make this approach difficult. Further, local advertising professionals may resist campaigns imposed from the outsidesometimes with good reasons and sometimes merely to preserve their own creative autonomy.

Legal issues. Countries differ in their regulations of advertising, and some products are banned from advertising on certain media (large supermarket chains are not allowed to advertise on TV in France, for example). Other forms of promotion may also be banned or regulated. In some European countries, for example, it is illegal to price discriminate between consumers, and thus coupons are banned and in some, it is illegal to offer products on sale outside a very narrow seasonal and percentage range.

Pricing Issues in International Marketing

Price can best be defined in ratio terms, giving the equation resources given up goods received

price =

This implies that there are several ways that the price can be changed:
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"Sticker" price changesthe most obvious way to change the price is the price tag you get the same thing, but for a different (usually larger) amount of money. Change quantity. Often, consumers respond unfavorably to an increased sticker price, and changes in quantity are sometimes noticed lesse.g., in the 1970s, the wholesale cost of

chocolate increased dramatically, and candy manufacturers responded by making smaller candy bars. Note that, for cash flow reasons, consumers in less affluent countries may need to buy smaller packages at any one time (e.g., forking out the money for a large tube of toothpaste is no big deal for most American families, but it introduces a greater strain on the budget of a family closer to the subsistence level). Change quality. Another way candy manufacturers have effectively increased prices is through a reduction in quality. In a candy bar, the "gooey" stuff is much cheaper than chocolate. It is frequently tempting for foreign licensees of a major brand name to use inferior ingredients. Change terms. In the old days, most software manufacturers provided free support for their programsit used to be possible to call the WordPerfect Corporation on an 800 number to get free help. Nowadays, you either have to call a 900 number or have a credit card handy to get help from many software makers. Another way to change terms is to do away with favorable financing terms.

Reference Prices. Consumers often develop internal reference prices, or expectations about what something should cost, based mostly on their experience. Most drivers with long commutes develop a good feeling of what gasoline should cost, and can tell a bargain or a ripoff. Reference prices are more likely to be more precise for frequently purchased and highly visible products. Therefore, retailers very often promote soft drinks, since consumers tend to have a good idea of prices and these products are quite visible. The trick, then, is to be more expensive on products where price expectations are muddier. Marketers often try to influence people's price perceptions through the use of external reference pricesindicators given to the consumer as to how much something should cost. Examples include:
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Manufacturer's Suggested Retail Price (MSRP). This is often pure fiction. The suggested retail prices in certain categories are deliberately set so high that even full service retailers can sell at a "discount." Thus, although the consumer may contrast the offering price against the MSRP, this latter figure is quite misleading. "SALE! Now $2.99; Regular Price $5.00." For this strategy to be used legally in most countries, the claim must be true (consistency of enforcement in some countries is, of course, another matter). However, certain products are put on sale so frequently that the "regular" price is meaningless. In the early 1990s, Sears was reported to sell some 55% of its merchandise on sale. "WAS $10.00, now $6.99." "Sold elsewhere for $150.00; our price: $99.99."

Reference prices have significant international implications. While marketers may choose to introduce a product at a low price in order to induce trial, which is useful in a new market where the penetration of a product is low, this may have serious repercussions as consumers may develop a low reference price and may thus resist paying higher prices in the future. Selected International Pricing Issues. In some cultures, particularly where retail stores are

smaller and the buyer has the opportunity to interact with the owner, bargaining may be more common, and it may thus be more difficult for the manufacturer to influence retail level pricing. Two phenomena may occur when products are sold in disparate markets. When a product is exported, price escalation, whereby the product dramatically increases in price in the export market, is likely to take place. This usually occurs because a longer distribution chain is necessary and because smaller quantities sold through this route will usually not allow for economies of scale. "Gray" markets occur when products are diverted from one market in which they are cheaper to another one where prices are highere.g., Luis Vuitton bags were significantly more expensive in Japan than in France, since the profit maximizing price in Japan was higher and thus bags would be bought in France and shipped to Japan for resale. The manufacturer therefore imposed quantity limits on buyers. Since these quantity limits were circumvented by enterprising exchange students who were recruited to buy their quota on a daily basis, prices eventually had to be lowered in Japan to make the practice of diversion unattractive. Where the local government imposes price controls, a firm may find the market profitable to enter nevertheless since revenues from the new market only have to cover marginal costs. However, products may then be attractive to divert to countries without such controls. Transfer pricing involves what one subsidiary will charge another for products or components supplied for use in another country. Firms will often try to charge high prices to subsidiaries in countries with high taxes so that the income earned there will be minimized.

Antitrust laws are relevant in pricing decisions, and anti-dumping regulations are especially noteworthy. In general, it is illegal to sell a product below your cost of production, which may make a penetration pricing entry strategy infeasible. Japan has actively lobbied the World Trade Organization (WTO) to relax its regulations, which generally require firms to price no lower than their average fully absorbed cost (which incorporates both variable and fixed costs). Alternatives to "hard" currency deals. Buyers in some countries do not have ready access to convertible currency, and governments will often try limit firms ability to spend money abroad. Thus, some firms have been forced into non-cash deals. In barter, the seller takes payment in some product produced in the buying countrye.g., Lockheed (back when it was an independent firm) took Spanish wine in return for aircraft, and sellers to Eastern Europe have taken their

payment in ham. An offset contract is somewhat more flexible in that the buyer can get paid but instead has to buy, or cause others to buy, products for a certain value within a specified period of time.

Psychological issues: Most pricing research has been done on North Americans, and this raises serious problems of generalizability. Americans are used to sales, for example, while consumers in countries where goods are more scarce may attribute a sale to low quality rather than a desire to gain market share. There is some evidence that perceived price quality relationships are quite high in Britain and Japan (thus, discount stores have had difficulty there), while in developing countries, there is less trust in the market. Cultural differences may influence the extent of effort put into evaluating deals (potentially impacting the effectiveness of odd-even pricing and promotion signaling). The fact that consumers in some economies are usually paid weekly, as opposed to biweekly or monthly, may influence the effectiveness of framing attempts"a dollar a day" is a much bigger chunk from a weekly than a monthly paycheck.

International Distribution
Promotional tools. Numerous tools can be used to influence consumer purchases:
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Advertisingin or on newspapers, radio, television, billboards, busses, taxis, or the Internet. Price promotionsproducts are being made available temporarily as at a lower price, or some premium (e.g., toothbrush with a package of toothpaste) is being offered for free. Sponsorships Point-of-purchasethe manufacturer pays for extra display space in the store or puts a coupon right by the product Other method of getting the consumers attentionall the Gap stores in France may benefit from the prominence of the new store located on the Champs-Elysees.

Promotional objectives. Promotional objectives involve the question of what the firm hopes to achieve with a campaignincreasing profits is too vague an objective, since this has to be

achieved through some intermediate outcome (such as increasing market share, which in turn is achieved by some change in consumers which cause them to buy more). Some common objectives that firms may hold:
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Awareness. Many French consumers do not know that the Gap even exists, so they cannot decide to go shopping there. This objective is often achieved through advertising, but could also be achieved through favorable point-of-purchase displays. Note that since advertising and promotional stimuli are often afforded very little attention by consumers, potential buyers may have to be exposed to the promotional stimulus numerous times before it registers. Trial. Even when consumers know that a product exists and could possibly satisfy some of their desires, it may take a while before they get around to trying the product especially when there are so many other products that compete for their attention and wallets. Thus, the next step is often to try get consumer to try the product at least once, with the hope that they will make repeat purchases. Coupons are often an effective way of achieving trial, but these are illegal in some countries and in some others, the infrastructure to readily accept coupons (e.g., clearing houses) does not exist. Continued advertising and point-of-purchase displays may be effective. Although Coca Cola is widely known in China, a large part of the population has not yet tried the product. Attitude toward the product. A high percentage of people in the U.S. and Europe has tried Coca Cola, so a more reasonable objective is to get people to believe positive things about the producte.g., that it has a superior taste and is better than generics or store brands. This is often achieved through advertising. Temporary sales increases. For mature products and categories, attitudes may be fairly well established and not subject to cost-effective change. Thus, it may be more useful to work on getting temporary increases in sales (which are likely to go away the incentives are removed). In the U.S. and Japan, for example, fast food restaurants may run temporary price promotions to get people to eat out more or switch from competitors, but when these promotions end, sales are likely to move back down again (in developing countries, in contrast, trial may be a more appropriate objective in this category).

Note that in new or emerging markets, the first objectives are more likely to be useful while, for established products, the latter objectives may be more useful in mature markets such as Japan, the U.S., and Western Europe. Constraints on Global Communications Strategies. Although firms that seek standardized positions may seek globally unified campaigns, there are several constraints:
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Language barriers: The advertising will have to be translated, not just into the generic language category (e.g., Portuguese) but also into the specific version spoken in the region (e.g., Brazilian Portuguese). (Occasionally, foreign language ads are deliberately run to add mystique to a product, but this is the exception rather than the rule). Cultural barriers. Subtle cultural differences may make an ad that tested well in one country unsuitable in anothere.g., an ad that featured a man walking in to join his wife in the bathroom was considered an inappropriate invasion in Japan. Symbolism often differs between cultures, and humor, which is based on the contrast to peoples

experiences, tends not to travel well. Values also tend to differ between culturesin the U.S. and Australia, excelling above the group is often desirable, while in Japan, The nail that sticks out gets hammered down. In the U.S., The early bird gets the worm while in China The first bird in the flock gets shot down. Local attitudes toward advertising. People in some countries are more receptive to advertising than others. While advertising is accepted as a fact of life in the U.S., some Europeans find it too crass and commercial. Media infrastructure. Cable TV is not well developed in some countries and regions, and not all media in all countries accept advertising. Consumer media habits also differ dramatically; newspapers appear to have a higher reach than television and radio in parts of Latin America. Advertising regulations. Countries often have arbitrary rules on what can be advertised and what can be claimed. Comparative advertising is banned almost everywhere outside the U.S. Holland requires that a toothbrush be displayed in advertisements for sweets, and some countries require that advertising to be shown there be produced in the country.

Some cultural dimensions:

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Directness vs. indirectness: U.S. advertising tends to emphasize directly why someone would benefit from buying the product. This, however, is considered too pushy for Japanese consumers, where it is felt to be arrogant of the seller to presume to know what the consumer would like. Comparison: Comparative advertising is banned in most countries and would probably be very counterproductive, as an insulting instance of confrontation and bragging, in Asia even if it were allowed. In the U.S., comparison advertising has proven somewhat effective (although its implementation is tricky) as a way to persuade consumers what to buy. Humor. Although humor is a relatively universal phenomenon, what is considered funny between countries differs greatly, so pre-testing is essential. Gender roles. A study found that women in U.S. advertising tended to be shown in more traditional roles in the U.S. than in Europe or Australia. On the other hand, some countries are even more traditionale.g., a Japanese ad that claimed a camera to be so simple that even a woman can use it was not found to be unusually insulting. Explicitness. Europeans tend to allow for considerably more explicit advertisements, often with sexual overtones, than Americans. Sophistication. Europeans, particularly the French, demand considerably more sophistication than Americans who may react more favorably to emotional appealse.g., an ad showing a mentally retarded young man succeeding in a job at McDonalds was very favorably received in the U.S. but was booed at the Cannes film festival in France. Popular vs. traditional culture. U.S. ads tend to employ contemporary, popular culture, often including current music while those in more traditional cultures tend to refer more to classical culture. Information content vs. fluff. American ads contain a great deal of puffery, which was found to be very ineffective in Eastern European countries because it resembled

communist propaganda too much. The Eastern European consumers instead wanted hard, cold facts. Advertising standardization. Issues surrounding advertising standardization tend to parallel issues surrounding product and positioning standardization. On the plus side, economies of scale are achieved, a consistent image can be established across markets, creative talent can be utilized across markets, and good ideas can be transplanted from one market to others. On the down side, cultural differences, peculiar country regulations, and differences in product life cycle stages make this approach difficult. Further, local advertising professionals may resist campaigns imposed from the outsidesometimes with good reasons and sometimes merely to preserve their own creative autonomy. Legal issues. Countries differ in their regulations of advertising, and some products are banned from advertising on certain media (large supermarket chains are not allowed to advertise on TV in France, for example). Other forms of promotion may also be banned or regulated. In some European countries, for example, it is illegal to price discriminate between consumers, and thus coupons are banned and in some, it is illegal to offer products on sale outside a very narrow seasonal and percentage range.

INTERNATIONAL MARKETING NOTES International Marketing Definition: International marketing is the performance of business activities designed to plan, price, promote, and direct the flow of companys goods & services to consumers in more than one nation for profit. Adaptation of the controllables (marketing mix elements) to the uncontrollable elements determines the ultimate outcome of the marketing enterprise. Domestic Uncontrollables Political / Legal o Political decisions involving domestic foreign policy o Any country has a right to restrict foreign trade when it adversely affects the security or economy of the country o Conversely there may be positive effects when there are changes in foreign policy and countries are given favored treatment (MFN)

 Domestic Economic Climate o Home based uncontrollable element o Direct impact on the capacity to invest in plants and facilities o Capital generated in the home country and then mobilized o Internal economic conditions will result in restrictions against foreign investment in order to strengthen the domestic economy Competition o In the home country Eg. Kodak & Fuji Foreign Uncontrollables Political / Legal Forces o E.g. China communist legal system where all the deals were done with the state to a commercial legal system Level of Technology o Technical expertise may vary o Technical Knowledge o Special training Alien Status of Foreign businesses o Foreigner control the business o Alien in the culture of the host country o E.g. Coke Cultural Forces Distribution Competitive forces (Soft Drink) For Global marketing to be a success environmental adjustments are needed. SRC Self Reference Criterion

- Unconscious reference to ones own cultural values, experiences and knowledge

Culture

Values Meanings History Beliefs Symbols

E.g. - Vicks / Germany Maharaja Mac Stages of International Marketing No direct foreign Marketing o No activity in cultivating customers outside domestic market o Distributors / Dealers / Foreign Customers coming directly to the firm o Web Pages (Indication) Infrequent Foreign Marketing o Product surplus in domestic market o No intention of maintaining continuous market representation o Few companies fir this model as customers always look for long term commitment Regular Foreign Marketing o Marketing goods on a continuous basis to foreign markets o Overseas Middlemen / Own Sales force / Sales subsidiary o Adaptation of the product to the foreign market International Marketing / Multinational Marketing o Fully committed & involved in international marketing o Markets all over the world o Production & marketing activities outside the home market o The company formulates a unique strategy for every country with which it conducts business E.g. Balsara Mint / Cinamint Global Marketing o At this stage, companies treat the world, including their home market as one o Maximize returns through global standardization of its business activities o Efficiency of scale by developing a standardized product, of dependable quality, to be sold at a reasonable price to a global market o The company standardizes its logo, image, store, processes o Wherever necessary due to cultural differentiation adaptations are made (Multidomestic & Global Marketing can exist simultaneously) International trade involves voluntary exchange of goods, services, assets, or money between residents of two different countries or between different countries. The

fundamental question that arises for most of us at the thought of international trade is why should a business firms of one country should to the another country, when the industries of that country also produce goods and market them. What is the basis of international business? A number of theories have been developed to explain the basis for international trade. The different trade theories include theory of absolute advantage, theory of comparative advantage, and classical trade theory. These theories discuss and analyze different nuances of trade for the trading partners and deal with the financial dynamics of the trading activity between two countries Theory of absolute advantage The Scottish economist Adam Smith first explained the theory of absolute advantage in 1776. He argued that a country has an absolute advantage in the production of a good when it can produce more of that good with a given amount of resources than another country. A simple economic model can be used to illustrate the principle of absolute advantage. The following economic model is based on the following assumptions and is just an example: There are only two countries, Australia and China. These two countries each produce only wheat and cloth. Each country has the same amount of resources (land, labor and capital), however the quality differs. Resources are transferable between the production of wheat and cloth. Production costs for each country are fixed. There are no trade barriers, such as tariffs between the two countries. Table 1 Absolute Advantage - Production before Specialization Wheat (units) Cloth (units) Australia 30 20 China 5 25 Total output 35 45 Table 1 shows the production for each country before specialization. With a given amount of resources Australia can produce 30 units of wheat and 20 units of cloth. While China can produce 5 units of wheat and 25 units of cloth. In this example Australia produces more wheat while China can produce more cloth. Australia then has an absolute advantage in the production of wheat and China an absolute advantage in the production of cloth. Table 2 Production gains after specialization Wheat (units) Cloth (units) Australia 60(+30) 0 (-20) China 0 (-5) 50 (+25)

Total output 60 (+25) (net gain) 50 (+5) (net gain) When each country specializes in the production of the goods they have a comparative advantage in, greater production of both goods could occur. This is illustrated in Table 2, were the production of wheat has increased by 25 units and production of cloth by 5 units. It is quite realistic to think that one country has an absolute advantage over another country in the production of some goods. Finland has done this recently by specializing in the production and distribution of Nokia telephones. Criticism: According to this theory every country should be able to produce certain products at low cost compared to other countries and should product certain other products at comparatively high price than other countries. International trade takes place only under such condition. But, in reality most of the countries do not have absolute advantage of producing at lowest cost and commodity, yet they participate in international business. Theory of comparative advantage Adam Smith's theory of absolute advantage is a simple explanation of the benefits of international trade. However, if one country has an absolute advantage in the production all goods, can there be benefits from trade. In 1817, David Ricardo, a classical economist developed the principal of comparative advantage to explain this situation. The principal is based on the relative efficiencies of production where each country has a comparative advantage in producing the commodity in which it has the lower opportunity cost. Opportunity costs are what must be given up in order to consume or produce another good. For example, going on an overseas holiday may involve giving up the purchase of a new car. The comparative advantage principle can be illustrated using Tables 3 and 4. Table 3 Comparative advantages: production before specialization Wheat (units) Cloth (units) Australia 20 10 China 5 5 Total Output 25 15 In Table 3, Australia has an absolute advantage in the production of both wheat and cloth. By using the theory of comparative advantage, both countries can gain from specialization and trade. Table 4 Opportunity costs Opportunity cost Country 1 unit of wheat 1 unit of cloth Australia 0.5 (10/20) units of cloth 2 (20/10) units of wheat China 1 (5/5) units of cloth 1 (5/5) units of wheat From Table 4: Australia has a comparative advantage in the production of wheat since it has to give up only 0.5 units of cloth to produce an extra unit of wheat, while China must give up 1 unit of cloth to produce an extra unit of wheat. So it is more practical for Australia to specialize in the production of wheat. China has a comparative advantage in the production of cloth since it has to give up

only 1 unit of wheat to produce an extra unit of cloth, while Australia must give up 2 units of wheat to produce an extra unit of cloth. Consequently it is more practical for China to specialize in the production of cloth. Australia has a comparative advantage in the production of wheat and China cloth. Trade between the two countries should be beneficial because of the different opportunity costs for these commodities. Table 5 Production levels after specialization Wheat (units) Cloth (units) Australia 40 (+20) 0 (-10) China 0 (-5) 10 (+5) Total output 40 (+15) (net gain) 10 (-5) (net gain) From Table 5 we can see that total output has increased when countries specialize in the production of goods and services based on comparative advantage. As both countries are using their resources more efficiently, trade will lead to higher standard of living than would be otherwise possible. A modern approach to comparative advantage Michael Porter The Comparative Advantage of Nations (London, Macmillan 1990), suggests that instead of different factor endowments being the basis for international trade much of the world's trade is taking place between nations with similar factor endowments. Factor endowments and comparative advantages are important in countries that have industries based on natural resources and where production does not rely on high levels of technology or where the labor force is relatively unskilled. Porter suggests that it is competitive advantage (based on lower costs, technological innovation and product differentiation) rather than comparative advantage that is becoming an important factor in determining the pattern and direction of international trade. Transnational corporations are playing a very important role in this development because they are able to coordinate their production activities by moving resources production components, investment funds, technology and labor across the world. Assumptions and Limitations a. It assumes countries are only driven by the maximization of production and consumption. b. It assumes only two countries are engaged in the production and consumption of two goods. c. It assumes no transportation costs. In reality, transportation costs are a major expense of international trade. d. It assumes labor is the only resource for production and is mobile within each nation but cannot be transferred. e. It assumes specialization does not result in gains in efficiency. In fact, specialization results in increased knowledge of a task and future improvements. The Opportunity Cost Theory Gottfried Harberler proposed the opportunity cost theory in 1969. The limitations of the comparative cost theory produced the basis of this theory. The opportunity cost is the value of alternatives, which have to be forgone in order to obtain a particular thing. For example Rs. 1000 is invested in the equity of Rama News Print Limited and earned a dividend of 6% in 1999, the opportunity cost of this investment is 10% interest, had this

The Scope and Challenge of International Marketing Chapter 1 The Scope and Challenge of International Marketing
CHAPTER OBJECTIVE 1. To understand broad picture of the global environment within which business operates today and into the future. 2. To understand how the internationalization of business and markets influence all functions of business including marketing. 3. To understand how the internationalization or globalization of markets affects future manager regardless of where they work in business. 4. 5. To understand the scope of the international marketing task. To understand self-reference criterion & problems of it.

6. Stages of becoming international and the international marketing concepts used in international marketing management. 7. Importance of becoming globally aware.

Important Points 1. An increasingly larger share of corporate profits are generated by international operations

2. Till last decade competition for the company comes from the local market only, now it is not so. It comes from all the country Global Perspective: Recent Events 1. 2. 3. 4. 5. 6. Information technology boom Enron scandals September 11th attacks on the World Trade Center and Pentagon Wars in Afghanistan and Iraq International conflict among China, Taiwan, and the United States 2003 SARS outbreak in Asia

7. 8.

Global terrorism, e.g., Indonesia, Israel, India, and Morocco Transcending these events, international commerce continued

Global Business Trends 1. The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA, the European Union, SAARC 2. General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe 3. 4. 5. 6. 7. Impact of the Internet and other global media on the dissolution of national borders, and Managing global environmental resources Increasing globalization of markets Firms face competition on all fronts Changing ownership structure (TATA CORUS) ,

8. Saturation of Demand in certain big market eg. USA, UK & emergence of it in certain market (China, India) 9. Technology & Excess surplus

10. Global peace & Dependence (No world war- 3) Marketing Process of planning and executing the conception pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organization goals International Marketing: A Definition International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a companys goods and services to consumers or users in more than one nation for a profit. Marketing concepts, processes, and principles are universally applicable all over the world The Difference More than one nation, Competition, Legal constraints, Govt. Control, Ecological factors, Consumer traditions, or any uncontrollable elements.

Reasons for Internationalisation Growth Access to new markets Access to resources

Survival Against competitors with lower costs (due to increased access to resources) Leveraging Key Success Factors Abroad Follow Customers Abroad Pursuing Diversification Taking Advantage of Different Growth Rates of Economies Exploiting Product Life Cycle Differences Internationalising for Defensive Reasons

The Importance of Intl Marketing For US-based companies, 75% of sales potential is outside the US. About 90% of Coca-Colas operating income and 73 % of total revenue is generated outside the US. For Japanese companies, 85% of potential is outside Japan. For German and EU companies, 94% of potential is outside Germany. The effects of uncontrollable and controllable both in the domestic and foreign environments - International marketers deals with at least two uncontrollable Elements 1. 2. Domestic International

- As the number of international market increases: uncontrollable layer increases

- Controllable elements - Domestic Uncontrollable elements Technology

: 4 ps (MARKETING MIX) : Political & Legal, Competition, Economy, Culture &

- Foreign Uncontrollable elements : Political & Legal, Competition, Economy, Culture, Technology, structure of distribution, Geography & infrastructure Environmental Adaptation Needed Differences are in the uncontrollable environment of international marketing

Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution) Self-Reference Criterion (SRC) and Ethnocentrism: Major Obstacles SRC is an unconscious reference to ones own cultural values, experiences, and knowledge as a basis for decisions Ethnocentrism refers to the notion that ones own culture or company knows best how to do things light Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true

Reactions to meanings, values, symbols, and behavior relevant to our own culture are different from those of foreign Relying on ones SRC could produce an unsuccessful marketing program

Avoiding the Self Reference Criterion To avoid SRC following steps should be followed 1. Define the business problem or goal in home-country cultural traits, habits, or norms

2. Define the business problem or goal in foreign-country cultural traits, habits, or norms. Make no value judgments 3. Isolate the SRC Influence in the problem and examine it carefully to see how it complicates the problem 4. Redefine the problem without the SRC influence and solve for the optimum business goal situation*

Developing a Global Awareness To be globally aware is to have 1. Tolerant of Cultural Differences, and

2. Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends Stages of International Marketing Involvement In general, firms go through five different phases in going international: 1. The first phase includes those domestic firms which have no foreign business activity except those sales made to foreign customers who come directly to the firm. 2. The second phase includes domestic firms which have temporary surpluses which are sold abroad. Therefore, sales are made on an availability basis with little or no intention for continuing market representation. 3. The third phase includes the domestic firms that have permanent productive capacity which is utilized to produce goods which are sold on a continuing basis in foreign markets. 4. The fourth phase includes the international company that produces a product for the world market. Conditions that have led to the development of global markets According to the Professor Levitt and others who suggest that there is a global market for goods, this phenomenon has resulted from new communications technology, travel and other factors which have led to the markets of the world being more aware of different products and processes. As a result of this awareness, there are segments in each market who have had similar experiences and thus have common needs. These common needs are described as a demand for high quality, reasonably priced, standardized products. There is a strong feeling that within each countrys market there is a growing segment that has been exposed to ideas from around the world and thus have had their tastes and perceived needs affected. There is a strong feeling that world markets are being driven toward a converging commonality of taste and needs leading toward global markets.

Difference between a global company and a multinational company Global company assumes there are segments across countries which have the same needs and wants and designs a standardized, high quality, reasonably priced product for those segments and markets it as if there are no differences among the country markets Multinational company operates in a number of countries and adjusts its products and marketing practices for each market. The multinational company has a specific marketing plan and adapts products for each country market. The philosophy for the multinational company is that there are cultural differences among countries that require specific adaptations for those markets Difference between three international marketing concepts. Companies can be described by one of three orientations to international marketing management: 1. Domestic Market Expansion Concept: (Ethnocentric)

The domestic company that seeks sales extension of its domestic products into foreign markets illustrates this orientation to international marketing. It views its international operations as secondary to and an extension of its domestic operations. The primary motive is to dispose of excess domestic production. Domestic business is its priority and foreign sales are seen as a profitable extension of domestic operations. While foreign markets may be vigorously pursued, the orientation remains basically domestic. The firms orientation is to market to foreign customers in the same manner the company markets to domestic customers. It seeks markets where demand is similar to the home market and its domestic product will be acceptable. This Domestic Market Expansion Strategy can be very profitable. Large and small exporting companies approach international marketing from this perspective. 2. Multi-Domestic Market Concept: (Polycentric)

A company guided by this concept has a strong sense that country markets are vastly different (and they may be, depending on the product) and that market success requires an almost independent program for each country. Firms with this orientation market on a country-by-country basis with separate marketing strategies for each country. Subsidiaries operate independently of one another in establishing marketing objectives and plans. The domestic market and each of the country markets have separate marketing mixes with little interaction among them. Products are adapted for each market with minimum coordination

with other country markets, advertising campaigns are localized as are the pricing and distribution decisions. A company with this concept does not look for similarity among elements of the marketing mix that might respond to standardization. Control is typically decentralized to reflect the belief that the uniqueness of each market requires local marketing input and control. 3. Global Marketing Concept

A company guided by this new orientation or philosophy is generally referred to as a global company, its marketing activity is global marketing, and its market coverage is the world. A company employing a Global Marketing Strategy strives for efficiencies of scale by developing a standardized product, of dependable quality, to be sold at a reasonable price to a global market (that is, the same country market set throughout the world).-Regiocentric & Geocentric. With this orientation a company attempts to standardize as much of the company effort as is practical on a world-wide basis Some decisions are viewed as applicable worldwide, while others require consideration of local influences. The world as a whole is viewed as the market and the firm develops a global marketing strategy. Three factors necessary to achieve global awareness. 1) Objectivity; objective in assessing opportunities, evaluating potential, and responding to problems. Too often mistakes are made because companies are swept away with generalities and make investments only later to find out that their commitment or abilities were not sufficient to succeed, 2) Tolerance toward cultural differences: tolerance is understanding cultural differences and accepting and working with others whose behavior may be different from yours, 3) Knowledgeable; knowledgeable about cultures, history, world market potentials, and global economy and social trends is critical for a person to be culturally aware. To be successfully in international business and globally aware, a person needs to keep abreast of the enormous changes occurring throughout the world. Global orientation A global orientation means operating as if all the country markets in a companys scope of operations (including domestic market) are approachable as a single global market and to

standardize the marketing mix where culturally feasible and cost effective or to adapt the marketing mix where culturally required and cost effective. Driving Forces in INT Market Regional economic agreement Market need & Wants Technology Transportation & Communication Product development Cost Product quality World economic trend Restraining Forces Management myopia Organizational culture National controls Intl World Order Fight against Intl terrorism

Introduction to International Marketing - Presentation Transcript

1. Introduction to International Marketing Management SHEKHAR AVAC IMM001 2. Global Trade o For quite a long time, global trade has grown faster than world output and the trend is likely to continue in future. 3. Focus o During the past few decades the focus of a Marketing Manager was only on his product and the ways to improve the product to make it better than the competitors. 4. o The objective of a firm was only Profit Making 5. Consumer Oriented o The marketers are supposed to understand the consumers, identify their needs and preferences and satisfy them, now it is Consumer oriented and not Product oriented. 6. History of International Marketing o International trade is not new; Archeologists have found Stone Age trading objects that were carried over long distances. One of the oldest trades is silk trading which resulted in finding out sea routes to China and Middle East. 7. Process of Marketing o Marketing is conceived as an integral part of two processes o Technical Process o Social Process 8. Technical Process o The technical process of a marketing activity includes non human factors i.e. 4ps of marketing o Product o Price o Place o Promotion o In this context home marketing and International marketing are considered same. 9. Social Process o As against this the social process of a marketing activity involves human elements namely the behavior pattern of consumers and the given characteristics of society such as customs, attitudes, values etc it is here the domestic and International differ the reason for being human behavior is not similar. 10. What is International Marketing? o International marketing is simply the application of marketing principles to more than one country. 11. Problems in doing International Business o Access to finance o Policy stability o Inadequate supply of infrastructure

Government Inefficiency Corruption Inflation Cont.. 12. Problems in doing International Business o Foreign currency regulations o Tax Rates o Tax Regulations o Crime o Labor restrictions 13. What is Global Marketing? o Global marketing refers to marketing activities coordinated and integrated across multiple country markets. 14. Difference Between International Marketing And Global Marketing? o Most people out in the field will say they mean the same thing. But we do actually see a slight difference, Heres an example of Global Marketing: 15. Nikes Slogan U.S.A: Just Do It! France: Just Do It! 16. Heres an example of International Marketing: McDonalds Slogan U.S.A: Im loving France: Cest tout que jaime 17. o Nike is just flying around the planet at its own speed. And McDonalds is a bit closer down to the people in each country. 18. Globalization o It is the process of Social, Political, Economical, Cultural and Technological integration among countries around the world. 19. Environment Factors o Trade Systems, o Economic Conditions, o Political-legal, and cultural conditions.
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International Marketing - Presentation Transcript

1. INTERNATIONAL MARKETING Marketing o Technical: o Domestic and international marketing are identical. o It involves the non human factor such as Product, Price, cost, Brand etc. o It has Universal applicability o Social: o Unique in both the marketing o It involves the human elements such aso Behaviour pattern of consumers. o Society: custom, attitudes, values, etc.

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Definition: International Marketing is the performance of business activities that direct the flow of goods and services to consumers or users in more than one nation. Existence of more than market necessarily complicates the marketing process. International marketing will have to take care of barriers to free trade. Even when there is free trade, logistic may create the problem. Human needs and wants will have different attribute in foreign market. International marketing will also has the concept controllable and uncontrollable factors.

3. The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets. o Competition, 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 . o Marketing principles and concepts are universally applicable, the environment within which the marketer must implement marketing plans can change dramatically from country to country or region to region. The difficulties created by different environments are the international marketers primary concern. o The more foreign markets in which a company operates, the greater the possible variety of foreign environmental factors with which to contend. Frequently, a solution to a problem in country market A is not applicable to a problem in country market B. 4. o International Trade to International Marketing : o Originally, the producer used to export their products to the nearby countries and gradually extended the export to far-off countries. o For e.g. India used to export raw cotton, raw jute and iron ore during the early 1990s. India, during 1980s could create markets for its products, in addition to mere exporting. o International Marketing to International Business : o The MNCs which were producing the products in their home countries and marketing them in foreign countries before 1980s started locating their plants and other manufacturing facilities in host countries. Later they started producing in one foreign country and marketing in other foreign countries. o For e.g. Uni lever established its subsidiary company in India, i.e Hl. HLL produces its products in India and markets them in Bangladesh, Sri lanka, Nepal etc. 5. o Why go International : o To achieve higher rate of profits: when the domestic markets do not promise a higher rate of profits, business firms search for foreign markets which promise for higher rate of profits. E.g. Apple earned US $ 390 million as net profit from the
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foreign markets and only US $ 310 million as net profit from its domestic market in 1994. Expanding the Production capacities beyond the Demand of the domestic country: to sell their excess in foreign country. E.g. Toyota of Japan Severe competition in foreign country Limited home market Political stability vs. Political instability: stability means continuation of same policies of the Govt. Availability of Technology and Managerial competence: Co.s from developing world is attracted by the developed countries due to this reason. High cost of transportations: Nearness to Raw materials Availability of Quality human resources at less costs Liberalisation and Globalisation To increase market share To avoid tariff and import quotas: Govt. imposed tariffs or duty on imports to protect the domest6ic company. E.g. sony, Honda and Toyata preferred direct investment in various countries by subsidiaries or through JV.

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7. Stages of Internalisation : Stage1. Domestic Company : Domestic company limits its operations, mission and vision to the national political boundaries. These companies focus its view on the domestic market opportunities, domestic suppliers, domestic financial companies, domestic customers etc. These companies analyse the national environment of the country, formulate the strategies to exploit the opportunities offered by the environment. o Stage2. International Company : o These companies select the strategy of locating the branch in the foreign market and extend the same domestic operations into foreign markets. These companies remain ethnocentric or domestic country oriented. Normally internalization process of most of the global companies starts with this stage of two processes. Many of the companies follow this strategy due to limited resources and also to learn from the foreign market gradually before becoming a global company without much risk. 8. Stage3. Multinational Company : This stage of multinational company is also referred as multidomestic company formulates different strategies for different market, thus the orientation shift from ethnocentric to polycentric. Under polycentric orientation the offices/branches/subsidiaries of a MNC work like a domestic company in each country where they operate with distinct policies and strategies suitable to that country concerned. Stage 4 Global Company : Global company is the one which has either produces in home country or in a single country and focuses on marketing these products globally and focuses on marketing these products domestically . 9. o Stage5. Transnational Company :
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Transnational company produces, market, invests and operate across the world. It is an integrated global enterprise which links global resources with global market at profits. There is no such pure transnational corporation. Characteristics of a Transnational Company: Geocentric Orientation : This Company thinks globally and acts locally. This co. adopts global strategy but allow value addition to the customer of a domestic country. The assets of a transnational company are distributed throughout the world, independent and specialized. The R&D facilities of a transnational co. are spread in many countries. Scanning or Information Acquisition : These cos. scan the environmental information regarding economic, political, social and cultural and technological environment. These cos. collect and scan the information regardless geographical and national boundaries. Vision and Aspiration : are global, global markets, global customers, and grow ahead of other global/transnational cos.

10. Geographical Scope : They analyse the global opportunities regarding the availability of resources, customers, markets, technology, research and development etc. The scope is not limited to certain countries in analysing opportunities, threat and formulating strategies. o Adaptation : Global and Transnational cos. Adapt their products, marketing strategies and other functional strategies to the environmental factor of the market concerned. For e.g. Mercedes Benz is a super luxury car in North America, luxury in Germany and standard taxi in Europe. o Extension : Some products do not require any change when they are marketed in other countries. Their market is just extension. E.g. Casio o Creation through Extension : Transnational cos. Create their global brand extending the product to the new market. For e.g. Rothmans cigarette extended its products in many Europeans and African countries. o HRM policy : it selects the best human resource and develops them regardless nationality, ethnic group. o Purchasing : Transnational Company procures world class material from the best source across the globe. 11. INTERNATIONAL BUSINESS APPROACHES Douglas Wind and Pelmutter advocated four approaches of international business. They are: Ethnocentric Approach : The excessive production more than the demand for the product, either due to competition or due to change in customer preferences push the co. to exports the excessive production to the foreign countries. The co. export the same product designed for domestic market to foreign market under this approach. Thus, maintenance of domestic approach towards international business is called ethnocentric approach. Polycentric Approach : The co establishes a foreign subsidiary company and decentralised all the operations and delegates decision making and policy making authority to its executives. The executives of the subsidiary formulate the policies and strategies, design the product based on the host countrys environment and the preferences of the local customer. Thus this approach mostly focuses on the conditions of the host country in policy formulation, strategy implementation and operations.
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12. Regiocentric Approach : The foreign subsidiary considers the regional environmental for formulating policies and strategies. It market more or less the same product designed under polycentric approach in other countries of the region, but with different market strategies. o Geocentric Approach : o Under this approach, the entire world is just like a single country for the company. They select the employees from the entire globe and operate with the number of subsidiaries. Each subsidiary functions like an independent and autonomous company in formulating policies, strategies, product design, human resource policies, operations etc.
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