Chapter-1

The Scope and Challenge of

International Marketing
Events and Trends Affecting Global
Business
 The growth of the WTO and regional free
trade areas (NAFTA, EU, SAARC etc.)
 The open acceptance of the free market
system among developing countries in Latin
America, Asia, and Eastern Europe
 The huge impact of Internet, mobile phones
and other global media on the dissolution of
national borders
 The mandate to manage resources and global
environment for the generations to come
Events and Trends Affecting Global
Business
 Global business activities and communications
networks
 Interdependence of global economic and
physical environment
 Domestic businesses have to care the effects
of the following global trends
 Internationalization of domestic economy
 The rapid growth of emerging markets
 The success of European Union
 The growth of export-led South Korea, economic
changes in China, revitalization of Mexico etc.
Why Internationalization? China and Indian Car
market??!!
 Saturation of domestic markets
 Higher ROI in foreign markets
 Need to establish early position in world markets
 Domestic firms exporting, importing and
manufacturing abroad and foreign-based firms
are operating in home markets
 Growth of world markets and regional trade
areas
 Political and economic changes in Latin America,
Asia, Eastern Europe, India and the former USSR
International Marketing Defined
 ‘The performance of business activities
designed to plan, price, promote, and direct
the flow of a company’s goods and services
to consumers or users in more than one
nation for a profit’. So is about culture n environment
 ‘More than one nation’ accounts for lots of
complexity and diversity in IM
 Marketing concepts, processes, principles, and
business goals are universally applicable, and
thus, a marketer’s task is the same in anywhere
International Marketing Defined
 If this is true, then why should IM be studied as a
separate course?
 Actually, the difference lies with the environment
within which marketing plans and strategies are to
be implemented
 The uniqueness of IM comes from the range of
unfamiliar problems and the variety of strategies
necessary to cope with different levels of uncertainty
 Thus, international marketing is much more
complicated and sophisticated than domestic
marketing
The International Marketing Task
 International marketer must operate on
three different planes simultaneously
 Some of these planes are related to:
 Company environment and directly controllable
 Domestic environment and normally uncontrollable
(or partially controllable)
 IBA, BP and UNDP ---Environment
 Foreign environment and totally uncontrollable
The International Marketing Task
Foreign environment
gal (uncontrollable) Eco
l/le 1 n
c a
liti rces forc omic
o
P fo es
Domestic environment 2 Environmental
(uncontrollable) uncontrollables
7 Political/ Competitive market A
legal Company structure Competitive
Cultural Forces
forces (controllable)
forces
Price Product 3 Environmental
7 Uncontrollables
Channels of
Promotion
distribution
market B
6
Ge a tru

Level of
og nd ctu
Inf

Economic climate Technology Environmental

rap
ras

hy

4 Uncontrollables
market C
re

5 Structure of
distribution
The International Marketing Task
 The task of IM is to mold the controllables
within the framework of uncontrollables to
achieve marketing objectives. (Cosmetics
market in Middle East!!!)
 The complexity of IM task depends on the number
of countries in which a marketer operates
 Since every country adds a set of unique problems
and every solution is unique and case-specific
The International Marketing Task
 The decisions factors are composed of 4 Ps
over which a marketer has absolute control
 These factors can be altered to adjust to
changing market conditions, consumer tastes,
or corporate objectives (July in Bhutan)
 Marketers construct marketing programs with 4 Ps
for optimal adjustment to uncontrollables
 They evaluate the impact of uncontrollables and
adapt the marketing program to them
 The final success depends on adaptation of
marketing mix to these uncontrollables
The International Marketing Task

 The second circle comprises the domestic

uncontrallables which are somewhat
uncertain, and normally uncontrollable
 Thus, a marketer needs to construct his/her
marketing program to adapt to these forces
The International Marketing Task
 Any political decision involving domestic
foreign policy directly affects IM
 In 2009, Bangladesh government has made a
political decision to raise tax on imported cars. As
a result, the sale and profit of imported cars are
likely to reduce
 Likewise, when US government imposed some
sanctions on trade with Iran, Iraq, US marketers
were not able to do business with them and their
businesses were adversely affected
The International Marketing Task
 Domestic economic factors have far-reaching
effects on IM, because:
 The capacity to invest in plants in either market
depends on domestic economic vitality
 Capital general tends to flow toward optimum use

 Domestic competition affects a company's

domestic and international plans
 Eastman Kodak dominated US film market, but
competitive structure changed when Fuji Photo
Film became formidable by cutting prices
The International Marketing Task
 Thethird circle comprises seven foreign
uncontrollable forces which are mostly
uncertain
 Assessing their influence on marketing programs
involves substantial doses of cultural, political,
and economic shock, because of the existence of
polar extremes in political stability, class
structure, and economic climate
The International Marketing Task

 When China moved from a communist system to

free market economy, their political, and economic
climates became changed dramatically and IM was
directed affected
The International Marketing Task

 Differences in level of technology and expertise

create when operating in foreign market
 Technical expertise may not be available or general
population may lack technical knowledge to maintain
equipment
 If technical support is not available, then company
will have to provide these support
The International Marketing Task
 Usually, foreigners impose alien status and
view marketers as outsiders, which increases
the difficulty of assessing and forecasting
business climate
 In1970s, India gave Coca‑Cola the choice of either
revealing its secret formula or leaving the country
 Sometimes, major political shifts may result in
confiscation, expropriation, domestication etc.
The International Marketing Task
 The task in foreign market is more complicated
because:
 Political and legal events are less transparent
 Corruptions may prevail
 Marketers may receive unfair treatment
 Laws may be so different that they are misinterpreted
 (Bhutan: month in June)
The International Marketing Task
 The IM task become more complicated due to
differences in:
 Competitive forces/ Economic forces/Stages of
economic development/Political climate/Geography
and infrastructure/ Structure of distribution

 Distribution cost for BD VS AUS

Environmental Adaptation Needed

 “A conscious effort to anticipate the

influences of foreign and domestic
uncontrollables on marketing mix and then
to adjust marketing mix to achieve
marketing objectives.
 BTL (Communist country) and ATL (Capitalist
country) for different culture
Environmental Adaptation Needed

 Adaptation is more difficult due to different

cultures to which a marketer is not attuned
 Circle with thumb and forefinger means:
 OK in USA

 Zero or worthless in France

 Money in Japan

 Sexual insult in Greece

The Self Reference Criterion
 “An unconscious reference to one’s own
cultural values, experiences and knowledge
as a basis for decisions.”
(Philip Cateora and John L. Graham)
 The SRC is when you as a marketer/demand creator
unconsciously expect that everyone is like you.
 You expect that they have:
 The same cultural values
 Experiences
 Knowledge
Ethnocentrism
 The notion that one’s own culture or
company knows best how to do things
 This is the idea that things done in your culture
is the correct or best way of doing things
 You don’t look through the eyes of the foreign
consumer
The SRC and Ethnocentrism
 Both impede the ability of a marketer to assess the
foreign market in its true light.
 The dangers of the SRC and associated
ethnocentrism are:
 Marketers may fail to take right action
 Marketers may discount the cultural differences that
exist among countries (Surf excel)
 Marketers may react to a situation in a foreign market
in a way that is offensive to foreign customers
The SRC and Ethnocentrism
 Both can directly influence an evaluation of
the appropriateness of a domestically
designed marketing mix for a foreign market.
 If SRC is operative, a marketer needs to cultivate
cultural empathy that can help him to avoid the
influence of SRC and associated ethnocentrism
when evaluating foreign market.
The SRC and Ethnocentrism

 A successful marketer must go beyond the

jurisdiction of SRC and ethnocentrism to
evaluate the foreign market in its true light
 Going beyond SRC helps marketer design the
right marketing mix suitable for foreign market
Framework for Cross-cultural Analysis

 Cross-cultural framework is a model used to

avoid errors in business decisions
 Cross-cultural framework helps marketer:
 To isolate the influence of SRC
 To maintain a vigilance regarding ethnocentrism
Steps of Cross-cultural Analysis
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
traits, habits, or norms through consultation with
natives of the target country. Make no value judgments.
3. Isolate the SRC influence in the problem & examine it
carefully to see how it complicates the problem.
4. Redefine the problem without the SRC influence &
solve for the optimum business goal situation.
An Example: Cross-cultural Analysis

An American sales manager newly posted to

Japan decided that his Japanese sales
representatives did not need to come into
Japanese office every day for an early morning
meeting before beginning calls on clients in
Tokyo. My first day at BAT!!!
Developing a Global Awareness
 A successful marketer will have global awareness
and a frame of reference that goes beyond a
region and encompasses the world.
 A globally aware marketer must have:
 The ability to maintain objectivity
 Tolerance for cultural differences
 Knowledge of cultures, history, world market potential,
global economic, social and political trends (Local
people are preferred for sales team).
Developing a Global Awareness
 Global awareness can and should be obtained or built
in organizations using the following approaches:
 Select individual managers specifically for their demonstrated
global awareness
 Develop long-term, personal relationships with foreign
customers, agents and partners (Bata for Dhamrai)
 Employ a culturally diverse senior executive staff or board of
directors BUT
 Don’t fall in love with other country culture
Stages of International Marketing
Involvement

 A marketer must decide the degree of marketing

involvement and commitment he is prepared to
make
 It may range from no or little actual market investment
to large sums of market investment (ROBI)!!
 These decisions should be made based on careful
analysis of market potential and company
capabilities
Stages of International Marketing
Involvement

 No direct foreign marketing

 Infrequent foreign marketing
 Regular foreign marketing
 International marketing
 Global marketing
No direct foreign marketing
 In this stage, firm does not actively cultivate
customers in foreign market, although
products reach via domestic wholesalers or
distributors
 Sometimes, foreigners may come directly to the
firms and buy products.
 Firms may receive orders from Web surfer

 Here, marketers are not directly involved in

foreign marketing.
Infrequent foreign marketing
 Here, marketers are not regularly involved
foreign marketing.
 Temporary surplus may result in infrequent
marketing overseas
 When domestic demand rises, foreign marketing
task is withdrawn
 There is little or no change in company
organization or product line.
 Few companies fit this model, because
customers seek long-term relationship
 Regular foreign marketing
 At this level, the firm has permanent productive
capacity for foreign markets
 A firm may employ foreign or domestic overseas
middlemen or it may have its own sales force in
important foreign markets

 The primary focus is to serve domestic market

needs
 Products may adapted to meet the needs of
individual foreign markets
International or multinational marketing
 In this stage, firms are fully committed to international marketing

 They seek markets all over the world and sell products that are a

result of planned production for markets in various countries

 Here, firms offer region or country-specific marketing programs

 Overtime, these companies move to become global companies

(COKE)
 Global marketing
 Here, companies treat the world as a single market
based on global homogeneity
 Market segmentation decisions are no longer focused on
national boundaries
 Markets are defined by income levels, usage patterns, or
other factors that span countries and regions
 Global companies’ major profits come from foreign
market
 GILLETTE
 Global marketing
 Theodor Levitt was the pioneer of this model
 In reality, it is almost impossible to become a
100% global marketer
 Since each country varies in many respects, it is
necessary to accommodate the local differences to
fully satisfy customers
 Thus some marketers are applying “Glocal”
marketing concept
 Coca-Cola is in transition from international to global
Strategic Orientation
 Strategic orientation reflects management
thinking and philosophical orientation of
activities
 Three strategic orientations are:
 Domestic market extension orientation
 Multi-domestic market orientation
 Global orientation
Domestic market extension orientation
 Here, domestic firms seek the sale of
domestic product into foreign markets
 International operations are viewed as
secondary and an extension of domestic
operations
 Primary motive is to market excess
domestic production
 Firms with this approach are classified as
ethnocentric (Keya)
Multi-domestic orientation
 Here, the importance of offshore business to
the firm is recognized
 Firms guided by this concept recognize the
vast differences in foreign markets and adapt
independent program for each country
 Subsidiaries operate independently of one
another and control is decentralized
 Firms with this orientation are classified as
polycentric (Rahimafroz)
Global orientation

 Firms’ marketing activity is global, and

market coverage is the world
 They strive for efficiencies of scale by
developing a standardized marketing mix
 The global marketing company would fit
the regiocentric or geocentric classifications
EPRG Framework

Ethnocentric
Polycentric
Regiocentric
Geocentric
Ethnocentric Orientation

 Assumes home country is superior to the rest

of the world and is associated with attitudes of
national arrogance and supremacy
 Management focus is to do in host countries
what is done in the home country
 Sometimes called an international company
 Products and processes used at home are used
abroad without adaptation
Polycentric Orientation

 Management operates under the assumption

that every country is different and company
develops country-specific strategies
 Sometimes called a multinational company
 Company operates differently in each host
country based on that situation
 Opposite of ethnocentrism
Regiocentric Orientation

 Region becomes the relevant geographic unit

(rather than by country)
 Management orientation is to develop an
integrated regional strategy
 European Union
 NAFTA
Geocentric Orientation

 Entire world is a potential market

 Managerial goal is to develop integrated world

market strategies
 Global companies serve world markets from a single
country and tend to retain association with a
headquarters country
 Transnational companies serve global markets and
acquire resources globally, blurring of national identity