International Marketing

14th Edition P h i l i p R. C a t e o r a M a r y C. G i l l y John L. Graham

The Scope and Challenge of International Marketing

Chapter 1
McGraw-Hill/Irwin International Marketing 14/e

Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Chapter 1: What Should You Learn?

The scope of the international marketing task

The importance of the self-reference criterion (SRC) in international marketing

The progression of becoming a global marketer

The increasing importance of global awareness

States of international marketing involvement Global Marketing Strategic orientation of international marketing
Copyright 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Adapted by Hoa Pham
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Discussion
What is Marketing? What is International Marketing?

What are the most important and fundamental thing in Marketing?

Why doing business outside the firms country? What are the major advantages and disadvantages of international marketing? Multinational Company vs. Global Company? Self-Reference Criterion vs. Ethnocentrism?

Global Awareness
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1.What is Marketing?
The American Marketing Association: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

Essentially:

Marketing deals with identifying and meeting human and social needs. It is essentially about meeting

needs profitably.

Marketing basic model

Target Customers
Need Physical Emotional

Capability Product Price Place Promotion

Value
Company

Competition Quality Price

Competitors

What is Marketing Management?

Marketing management is the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.
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Marketing Management Tasks

Develop market strategies and plans Capture marketing insights Connect with customers Build strong brands

Shape market offerings

Deliver value Communicate value Create long-term growth
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So What International Marketing is all about?

Create value for customers by improving benefits or reducing price
Improve the product Find new distribution channels Create better communications Cut monetary and non-monetary costs and prices

See the video The $2 daily P&G China Toyota, Nissan make significant gains in the American market in 1980s by creating superior value propostition Higher quality and lower prices than those make by GM, Ford

Value=Benefits/Price

Global Marketing
Global vs. Regular Marketing
- Scope of activities are outside the home-country market

GLOBAL INDUSTRIES
An industry is global to the extent that a companys industry position in one country is interdependent with its industry position in another country Indicators of globalization:
Ratio of cross-border investment to total capital investment Proportion of industry revenue generated by al companies that compete in key world regions Ratio of cross-border trade to worldwide production Coca Cola spent $5 billion worldwide on promotions and marketing in 2010

COMPETITIVE ADVANTAGE, GLOBALIZATION & GLOBAL INDUSTRIES

Focus
Concentration and attention on core business and competence

Nestle is focused: We are food and beverages. We are not

running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touchWe have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.
Nestl SA~
~Helmut Maucher, former chairman of

GLOBAL MARKETING: What It Is & What It Isnt

Single Country Marketing Strategy
Target Market Strategy Marketing Mix
Product Price Promotion Place

Global Marketing Strategy

Global Market Participation Marketing Mix Development
4 Ps: Adapt or Standardize?

Concentration of Marketing Activities Coordination of Marketing Activities Integration of Competitive Moves

STANDARDIZATION vs. ADAPTATION

Globalization (Standardization)
Developing standardized products marketed worldwide with a standardized marketing mix Essence of mass marketing

Global localization (Adaptation)

Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction Essence of segmentation Think globally, act locally

STANDARDIZATION vs. ADAPTATION

Adaptation of the marketing mix to these environmental factors, determines the successful outcome of MNCs marketing

But how?
Must interpret effectively the influence and impact of each of the uncontrollable element

2.International Marketing
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

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The International Marketing Task

Exhibit 1.3

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The International Marketing Task

Controllable factors

o Corporate resources, structures, and core competencies that can limit or promote strategic choices o 4Ps, channels-of-distribution, research activities to capitalize on anticipated demand

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The International Marketing Task

Aspect of foreign environment (uncontrollable)

o o o o o o o

Economic forces Political and legal forces Cultural forces Competitive forces Level of technology Structure of distribution Geography and infrastructure

So how these uncontrollable factors impact on MNCs marketing strategy?

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The International Marketing Task

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The International Marketing Task

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The International Marketing Task

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STANDARDIZATION vs. ADAPTATION

The Faces of Coca-Cola Around the World
Arabic
Read right to left

Chinese delicious/happiness

McDonalds Global Marketing

Case 1-1 Starbucks Going Global Fast

1. Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets 2. What are the major sources of risk facing the company and discuss potential solutions 3. Critique Starbucks overall corporate strategy 4. How might Starbucks improve profitability in Japan?

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3.SRC and Ethnocentrism

SRC is an unconscious reference to
Ones own cultural values, experiences, and knowledge as a basis for decisions

Dangers of the SRC

Failing to recognize the need to take action Discounting the cultural differences that exist among countries Reacting to a situation in an offensive to your hosts

Ethnocentrism
Notion that ones own culture or company knows best
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SRC and Ethnocentrism

Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior

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Environmental Adaptation
Ability to effectively interpret the influence and impact of the culture in which you hope to do business
Cultural adjustments

Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

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The Self-Reference Criterion and Ethnocentrism

The key to successful international marketing is adaptation to the environmental differences from one market to another Primary obstacles to success in international marketing
SRC Associated ethnocentrism E.g., Pepsi Cola changed in name to Lehar Pepsi to gain as much political and cultural support as possible

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STANDARDIZATION vs. ADAPTATION

The Faces of Coca-Cola Around the World
Arabic
Read right to left

Chinese delicious/happiness

McDonalds Global Marketing

Global Market Orientation

Standardized vs. Localized
Standardized its process, logo, most of its advertising and store dcor and layouts whenever and wherever as possible Standardized Big Mac but localized McAloo Tikka potato burger (India), and vetergian menu Advertising slogan Im lovinit, but Hawaii surfing hula promotion in Japan Prices: $5.79 in Norway or $3.54 in the U.S but $1.85 in China

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Framework for Cross-cultural Analysis

1. Define business problem or goal

Home-country vs. foreign-country cultural traits, habits, or norms Consultation with natives of the target country

2. Make no value judgments 3. Isolate the SRC influence

Examine it carefully to see how it complicates the problem Without SRC influence Solve for the optimum business goal situation
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4. Redefine the problem

Developing a Global Awareness

Tolerance of cultural differences:
Understanding cultural differences and accepting and working with others whose behavior may be different from yours

Knowledge of cultures, history, world market potential, and global economic, social, and political trends

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Approaches to Global Awareness

Select individual managers specifically for their demonstrated global awareness Develop personal relationships in other countries Have a culturally diverse senior executive staff or board of directors

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4. Stages of International Marketing Involvement

No direct foreign marketing

Infrequent foreign marketing

Regular foreign marketing International marketing Global marketing

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No Direct Foreign Marketing

Products reach foreign markets indirectly
Trading companies Foreign customers who contact firm Wholesalers Distributors Web sites

Foreign orders pique a companys interest to seek additional international sales

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Infrequent Foreign Marketing

Caused by temporary surpluses
Variations in production levels Increases in demand

Firm has little or no intention of maintaining continuous market representation

Foreign sales decline when demand or surplus decreases May withdraw from international markets

Little or no change in company organization or product lines

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Regular Foreign Marketing

Firm has production capacity devoted to foreign markets Firm employs domestic or foreign intermediaries
Uses its own sales force Sales subsidiaries in important markets

Products allocated or adapted to foreign markets as demand grows Firm depends on profits from foreign markets

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International Marketing
Companies are fully committed to and involved in international marketing activities Seeking markets all over the world Planning entails not only the marketing but also the production of goods outside the home market.

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Global Marketing
Company treats world, including home market as one market Market segmentation decisions no longer focused on national borders
Defined by income levels, usage patterns, or other factors

More than half of revenues come from abroad Organization takes on global perspective

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4.Strategic Management Orientation

Domestic market extension orientation

Multidomestic market orientation

Global market orientation

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Domestic Market Orientation

International operations viewed as secondary

Prime motive is to market excess domestic production

Firms orientation remains basically domestic

Minimal efforts are made to adapt product or marketing mix to foreign markets
Firms with this approach are classified as ethnocentric

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Domestic Market Orientation

Ethnocentric Orientation
Home country is superior to others Sees only similarities in other countries Assumes products and practices that succeed at home will be successful everywhere Leads to a standardized or extension approach

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Examples of Domestic Orientation

Nissans earliest exports were cars and trucks that designed for Japan vehicles were difficult to start in many parts of the U.S during the winter months. We tried for a long time to design cars in Japan and shove them down the American consumers throat. That did not work very well Cell phone divisions of Toshiba, Sharp focused domestic market. Later realized that Nokia, Motorola and Samsung already dominated key world markets CEO of Toshiba We were thinking only about Japan, we really missed out chance
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Multidomestic Market Orientation

Companies have a strong sense that foreign country markets are vastly different Market success requires an almost independent program for each country
Separate marketing strategies Subsidiaries operate independently of one another in establishing marketing objectives and plans Products are adapted for each market

Control is decentralized

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Multidomestic Market Orientation

Country-by-country basic

Advertising campaign are localized

o Unilever, Rexona brand had 30 different package designs and 48 different formulation

o Nestle, Nescafe, Nestle Gau in Vietnam

o Classified as Polycentric Orientation

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Multidomestic Market Orientation

Polycentric Orientation (a tm)
Each country is unique
Each subsidiary develops its own unique business and marketing strategies Often referred to as multinational Leads to a localized or adaptation approach that assumes products must be adapted to local market conditions

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Global Market Orientation

Company guided by global marketing orientation
Marketing activity is global Market coverage is the world

Firm develops a standardized marketing mix applicable across national boundaries

Markets are still segmented Each country or region is considered side by side with a variety of other segmentation variables Fits the regiocentric or geocentric classifications
E.g., P&G pursue global strategy for disposal diapers but a multi domestic strategy in Asia market for detergent
http://money.cnn.com/video/news/2012/01/25/n_davos_coca_cola_growth.cnnmoney/ http://money.cnn.com/video/news/2011/01/06/n_proctor_and_gamble_two_dollar_a_day_co nsumer.fortune/
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Global Market Orientation

Regiocentric Orientation (Trung tm)
A region is the relevant geographic unit Some companies serve markets throughout the world but on a regional basis
Ex: Ex:

The NAFTA or European Union market

General Motors had four regions for decades

European Union

Global Market Orientation

Geocentric Orientation
Entire world is a potential market Strives for integrated global strategies Also known as a global or transnational company Retains an association with the headquarters country Pursues serving world markets from a single country or sources globally to focus on select country markets Leads to a combination of extension and

adaptation elements

Example - The Case of General Motors (GM)

GMs Global Brand Hierarchy Global brand International brand Local brand

Global

International

Europe, Middle East, Asia

North America, Middle East, Europe

North America, Asia

North America

North America

Local
United Kingdom Australia Korea

Global
Pressures of global integration
High
Global Standardisation Centralisation

Transnational
Transnational

Low

Export
International

Multidomestic
Multinational Adaptation Autonomy

Low

High

Pressures of local responsiveness

Type of MNC Industry Environment Marketing Strategy Marketing Structure Export, Multidomestic, Global, Transnational International, Multinational, Global, Transnational Standardisation, Adaptation Centralisation, Autonomy

At Global Corporate Level Perspective GI-LR Framework

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Discussion questions
Discuss the phases of international marketing involvement. Discuss the conditions that have led to the development of global markets. Differentiate between a global company and a multinational company. Differentiate among the three international marketing concepts.

Discuss the three factors necessary to achieve global awareness.

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Summary
The internationalization of American business is proceeding with increasing pace The globalization of markets and competition necessitates all managers to pay attention to the global environment International marketing is defined as the performance of business activities across national borders

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Summary
Environmental differences must be taken into account if firms are to market products and services at a profit in other countries
Laws Customs Cultures

Self-reference criteria and ethnocentrism limit international marketers abilities to understand and adapt to differences prevalent in foreign markets

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Summary
Solutions to SLC and ethnocentrism
Global awareness Sensitivity

Strategic orientations found among managers of international marketing operations

Domestic market extension orientation Multidomestic market orientation Global market orientation

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The Value Chain (Porter)

Standardization vs. Adaptation debate

Standardization Trends Homogenous market need: information, communication, transportation, technology development Economies to scale, scope, learning curve Customization Different needs in different countries due to culture, language, economic development level, political, legal, customer value and life styles. Better satisfy local need. Source of differentiation Marketing program is largely a local issue and the best course of action for a product ought to differ from market to market Contingency S and C are two extreme of one continuum. S and C is very situationspecific issue. Company has to position itself in the continuum.

Marketing aspects

Global group of customer: global citizen, global language (English), global market (Triad) Standardization of marketing program is essential to compete in global market (high quality product at a competitive price)

depends on internal and external factors: target market, market position, nature of product, environment, and organization factors.

Globalization Drivers
(Total Global Strategy II, Goege Yip)
Market Drivers

Industry
Cost Drivers Globalization

Government Drivers

Competitive Drivers

Market Drivers
Homogeneous needs

Global customers
Global Language Global Culture Global Currency Global Channels

Transferable marketing

Costs Drivers
Economies of scale and scope

Learning and experience

Sourcing efficiencies Favorable logistics Differences in country costs and skills Product development costs

Government Drivers
Favorable trade policy

Compatible technical standards

Common marketing regulations

Competitive Drivers
Interdependence of countries

Competitors globalized or might globalize

The concept of Inter Linked Economy (ILE) - Kenichi Ohmae

Global business has become more and more important and vital for nations, industries, and firms. Nation can no longer close it door and applies protectionism. Nations and citizens around the world are more interlinked than ever before, giving greater opportunity to a borderless world. Trends leading to borderless world: global citizen, global language (English), global products, and global competitors.

The concept of Inter Linked Economy (ILE) - Kenichi Ohmae

ILE Interlinked economy of the Triad, which consists three major players in global marketplace, i.e. US, Europe, and Japan (now expand to be Latin American, Europe, and Asia). Interdependencies of economy create opportunities and basic security. The policy objective for ILE will be ensuring the free flow of information, money, and services, as well as the free migration of people and corporations. ILE has become so powerful and has made the national borders almost invisible (borderless world). Participation in the ILE is the key to prosperity for traditional isolationist nations.

Discussion Questions
What are the basic goals of marketing? Are these goals relevant to global marketing? What is meant by global localization? Is Coca-Cola a global product? Explain

Case Discussion
McDonalds Expand Globally While Adjusting Its Local Recipe

Q1. Identify the key elements in McDonalds global marketing strategy. In particular, how does McDonalds approach the issue of standardization? Q2. Do you think government officials in developing countries such as Russia, China and India welcome McDonalds. Do consumers in these countries welcome McDonalds? Why or why not? Q3. Is it realistic to expect that McDonalds or any wellknown company can expand globally without occasionally making mistakes or generating controversy? Why do antiglobalization protesters around the world frequent target McDonalds?

Looking Ahead
Read Chapter 4 and 5 Cultural Dynamic Management Style Be prepared for case study Samsung class discussion in replacement for Quiz 1