International Marketing

What is International Marketing?

The process of focusing the resources (people, money, and physical assets) and objectives of an organisation on global market opportunities and threats Keegan 1995

The Three Principles of Marketing

Customer value and the value equation

i.e.

value greater than competitors Value equation is: VALUE = PERCEIVED BENEFITS / PRICE

Competitive or differential advantage

advantage

vis--vis competition

Driving forces
Global Village Mashall Macluhan Market needs - X-Box for leisure Technology - Third Generation phones (3G) Cost - low cost production e.g.Chotukool Quality - Is now taken for granted. Communications and Transportation

Driving forces (2)

Leverage (i.e. advantages of operating in numerous markets simultaneously)

experience

transfers systems transfers scale economies resource utilisation global strategy. Scanning the globe!

Restraining forces
Market

differences - diversity History - Guanxi Management myopia as a barrier Organisational culture as a barrier National controls/Barriers to entry e.g tariffs and Quotas.

Underlying forces
Dr. Howard Perlmutter Orientation of Management and Companies International money framework and exposure to currency fluctuations post WWII World trading system - WTO (GATT) Global peace - post September 11th Arrival of global/transnational companies

Why International Marketing Has Developed . . .

Comparative Advantage Economic Trends Demographic Trends

GROWTH OF INTERNATIONAL MARKETING

Technology Trends Cultural and Social Trends

Political Trends alliances trade agreements

Barriers to Trade, Strangle Trade

Customs & administrative procedures Tariff classifications (taxes levied on imports) Quotas: government-set limits on the quantity of goods that can be imported over time. Patent Restrictions & licensing requirements Standards (Safety Inspections) labeling & marking standards packaging Insurance rates & valuation subsidies to companies

What Worries Poor Countries

$120 $100 $80 $60 $40 $20 $0 2002 total farm support estimates in selected nations, in billions of dollars.
Miller, Scott. In Trade Talks, the Gloves Are Off. WSJ, A12, July 15, 2003.

E.U. U.S. Mexico Turkey Australia

Farm Subsidies
70% 60% 50% 40% 30% 20% 10% 0% Percent that goes to top 10% of farms
Prairie Plutocrats. WSJ, A18, Feb. 1, 2002.

Iowa Minnesota Missouri South Dakota Montana

What Worries Rich Countries

4 3 3 2 2 1 1 0 Selected governments based on perceived degree of corruptness on 1-10 scale, 1 as most corrupt.
Miller, Scott. In Trade Talks, the Gloves Are Off. WSJ, A12, July 15, 2003.

Bangladesh Nigeria Indonesia Russia Egypt

Commercial Corruption
Least Corrupt Most Corrupt 1. Iceland 70. Egypt/Poland/ 2. Finland/New Zealand /Saudi Arabia 4. Denmark 78. China 16. Germany 17. USA 126. Russia 18. France 152. Nigeria 32. Taiwan 156. Haiti/Turkmenistan 40. Hungary/Italy 158. Bangladesh/Chad
Source: Transparency.0rg (July2006) Surveys-Indices, 2005, Perceptions of 158 countries by employees of multinational firms, institutions & experts.

Sweatshops: an exploitation of labor and/or a political and social issue

Issue: Sweatshops Are Better Than No Shops!

destroying jobs will not alleviate poverty (+) decreases cost of goods (+/-) human dignity issue, social value(-)

Kids at Work: a political, social & economic issue

Estimated percentages of children who work selected countries (1995) Kenya Bangladesh Haiti Turkey Pakistan Mexico
Visit www.freethechildren.org or www.coopamerica.org

42% 30% 25% 24% 17% 7%

Estimated total =246 million

Womens Non Farm Wages

Tanzania Australia USA China Japan*

92% of mens 91% 75% (80%-2000) 59% 50%

* Biggest disparity among industrial countries. ** Women perform 60% of worlds work, own 1% of worlds land & earn 10% of worlds income.

Source: WSJ,29Aug1995,A1

World & Regional Trade Alliances*

GATT -- Dumping OECD WTO OPEC NAFTA NATO CAFTA MERCOSUR

*Facilitate free trade among members

Population Growth Rates 1994 to 2020

Europe
Russia Canada Argentina Austria

2%
Peru Columbia 2-9.9% U.S.A China Brazil 1019.9%

20%+

International Financial Exchanges

Exchange Rates - indicate the value of one

nations money in terms of the money of another nation

Foreign Exchange Market - Manufacturers and

foreign traders want payment in their own currencies. Money is exchanged (bought and sold) through this market

Balance of Payments - The flow of funds between

nations. A favorable balance of payments (surplus) exists when more funds come into a country than go out. Balance of Trade - a total accounting of the goods and services bought from and sold to other countries

Balance of Trade: Deficit/Surplus

US (1997) Exports $932.3 Imports $1,050 Deficit $113.7 (1999) 663 bil 912 bil 249 bil. (2005) x x 759bil.

Imports
Exports

Exports and GNP

Exports as a Percentage of GNP USA 7-11% Japan 13% United Kingdom 21% Germany 27% Canada 29%

Expensive Manpower
$30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $0.00 Average Hourly Wage East Germany West Germany Norway Sweden Denmark Belgium U.S. Japan Finland Netherlands Luxembourg

Rhoads, Christopher. In Deep Crisis, Germany Starts To Revamp Vast Welfare State. WSJ, A1, July 10, 2003.

Labor Costs
30 25 20 15 10 5 0 Germany Japan U.S. U.K
Average Manufacturing Sector Wages in U.S. Dollars
Rhoads, Christopher. Burden of History. WSJ, A1, December 6, 2002

1980 1990 1996 2001

Examples of Cultural Differences

Singapore People do not like to waste food or money. Taking leftovers is expected. Bangkok leftovers are the norm, even scalding hot soup is poured into clear plastic bags tied with a red rubber band. (WSJ,5Oct06,D1) Japan discourages public self expression - 20% read internet blogs ex. demon wife diaries (WSJ.
5Oct.2006,B1) Some governments are wary of public criticism. Bangkok has monarchy laws & Singapore prohibits outdoor demonstrations & politicians have defamation lawsuits to protect their reputations from slander.

Global Environment: Consumer Ethnocentrism

Affirmative: Consumers should be discouraged (ex., peer pressure) from purchasing foreign products . . (because it adversely affects this nations productivity.)
Negative: Consumers should not be discouraged from purchasing foreign goods . . (because competition will force domestic manufacturers to become more efficient and produce higher quality products.)

Consumer Ethnocentrism Made In America

Consumers that believe American made products are better than foreign products by education. 61%
45%

No college
Some college

College graduate

39%
(Am. Demographics (1986)

Global Corporation

Operates throughout the world (or major regions) the world is a single entity

Customization Versus Globalization of Marketing Strategy

Globalization

Customization Versus Globalization of International Marketing Strategies Customization

Strategy Decisions For Multinational Markets

Standardized--------------------------Customized Marketing Strategy Criteria: <Similarity of Cultures and Customer Behavior? <Access to shared media & product ? <Available distribution ?, Buying Power ?, etc...

Successful companies realize a simple truth:

All consumers are not alike

Alternative Methods of Market Entry and Risk Levels

Indirect Exporting
Via domestic export management companies

Direct Exporting

Licensing Franchise or technical contracts

Joint Ventures

Direct Investment Wholly-owned facilities in host country

Via in-house dept. overseas sales office independent distress Minimum Risk Moderate Risk

Joint ownership of foreign facilities

Maximum Risk

Global Economy

Ideal: goods, services, skills and ideas move freely across geographic borders.
Reality: produces global cutthroat competition and constant churning forces that may result in economic turmoil for some. Constant changes such as... - Growth and retrenchment. - Hiring and firing. - Optimism and fear ALL AT THE SAME TIME!

Global Economy
Dark Side Of Freer Global Markets

- Political Backlash From Middle Class (Workers) Over Growing Job Insecurity

Freer Global Markets - Increase Income Gaps Between and Within Nations