Transcript Introduction to International Marketing

Introduction to
International Marketing
“If we distributed pictures only in
the United States, we’d lose
money. It takes the whole world
now to make the economics of
movie-making work.”
- William Mechanic
President, 20th Century Fox
“Half the people in the world have
yet to take their first picture. The
opportunity is huge, and it’s
nothing fancy. We just have to
sell yellow boxes of film.”
- George M.C. Fisher
CEO, Eastman Kodak Co.
International Marketing
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Today we live in a world of Global outsourcing.
Global Trade is at its potential high and the trend
is going to grow in future.
 Peter Drucker says, “No Institution, whether a
business, a university or a hospital, can hope to
survive, let alone to succeed, unless it measures
up to the standards set by the leaders in its field
any place in the world.”
 So also, the Indian business environment has
seen a sea change in the level of competition
since the opening up of the domestic markets for
participation of MNC’s.
 In
1950, the International Trade was worth
$55 billion. From here, it has raised to
$10120 billion in 2005.
 Germany ranks the first in exports and
exported goods worth $912.3 billion with a
global share of 10% in 2004. USA ranked
second with $818.8 billion and 8.9%
share. India was 30th with exports of $75.6
and a share of 0.8%.
 In
imports, the USA has imported goods
worth $1525.5 billion with a global share of
16.1%. India ranks 23rd with imports of
$97.3 billion and 1% of the global share.
 This data shows that India has to go a
long way in international Trade and the
scope is tremendous.
International Marketing
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...is the marketing of goods and services across national
frontiers.
… is the marketing operations of any company that sells
and / or produces within a given country when :
The organization is a part of, or associated with an
enterprise which also operates in other countries, and
There is some degree of influence or control on its
activities from outside the country in which it sells and /
or produces
The process of planning and conducting transactions
across national borders to create exchanges that satisfy
the objectives of individuals and organizations.
Difference between Domestic and
International Marketing
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What is the difference between marketing domestically
and internationally
 Marketing concepts are universal (goal is to make a
profit by satisfying customers)
 Difference is that in international marketing ALL
environments have to be taken into consideration
when the marketing plan is developed and
executed
• Must consider the legal environment,
governmental controls, climate & weather,
cultural beliefs, buyer behavior… (uncontrollable
elements)
Global Marketing Environment
Global
Regional
Local
Marketing Mix
Environment
Major International Marketing Decisions
Special Problems of IM
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Political & Legal differences.
Cultural differences.
Economic differences.
Differences in the currency units & their fluctuations.
Differences in language.
Differences in marketing infrastructure. ( In terms of
promotion channels, distribution channels etc )
Trade restrictions.( Import controls )
High cost if distance coverage.( Has an impact on time,
mode of transport, obsolesce and goods perishing costs)
Differences in Trade Practices.
Why Go Global
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Firms are motivated to expand their markets
internationally for two reasons :
 Push factors : Refer to the compulsion of
domestic markets like saturation of markets,
international competition etc that amount to
reactive reasons for going global.
 Pull factors : Refer to proactive reasons, that
attract firms to global markets. This talks about
the potential in the global markets to be more
profitable and high growth prospects.
Why Go Global
 Reasons
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to consider going global:
Foreign attacks on domestic markets
Foreign markets with higher profit
opportunities
Stagnant or shrinking domestic markets
Need larger customer base to achieve
economies of scale
Reduce dependency on single market
Follow customers who are expanding
Driving Forces
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Liberalization
MNC’s
Technology
Transportation and communication revolution
Product development costs and efforts.
Rising aspirations and wants
Competition
World economic trends
Regional integration
Leverages
Participants of IM
 Private
Firms.
 MNC’s
 Other
large firms
 SME’s
 Public sector undertakings
 Trading companies
 Individuals.
Objectives Of International
Marketing
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Identifying the needs and wants of International
Customer : Undertaking IMR & analyzing market
segments, seeking to understand similarities &
differences in customer groups across different
countries.
 Achieving Global customer satisfaction :
Adapting products and services & other
elements of the MM to satisfy different customer
needs across countries
Objectives Of International
Marketing
 Staying
ahead of the competitors by
providing better products / services :
Assessing, monitoring & responding to
global competition by offering better value,
developing superior Brand Image &
product positioning , broader product
range, competitive price, high quality, good
performance, better distribution & after
sales service.
Objectives Of International
Marketing
 Co-coordinating
marketing activities :
Coordinating and integrating marketing
strategies across countries, regions and
global markets, which involve
centralization, delegation, standardization
& local responsiveness.
Market Entry Strategies
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Exporting
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Low investment
Low control of promotion
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Licensing
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Low investment
Low control of promotion,
positioning, and quality
Able to benefit from
existing distribution and
market knowledge
Joint venture
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Considerable investment
More control
Able to benefit from
partner’s experience
Must work with partner
Direct investment
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Large investment
Risky
Greater control
May lack knowledge of
market
Modes of Entry
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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
Exporting
 Need
for limited finance
 Less Risk
 Proactive and reactive motivations.
 Forms
of Exporting :
 Indirect Exporting
 Direct exporting
 Intracorporate transfers.
Types of Export Intermediaries
 Export
Management companies
 International Trading Companies
 Manufacturer/s agents
 Manufacturers export agents
 Export and import brokers
 Freight forwarders.
Modes of Entry
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Licensing and franchising are also low exposure
methods of entry—you 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.
Modes of Entry
 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
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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.
International Strategic Alliances
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Advantages:
 Ease of market entry. It may be useful for a firm
to partner with another that already has a
presence in and knowledge of a market. For
example, Kentucky Fried Chicken (KFC)
partnered with the Mitsubishi Keirishi in entering
Japan. By doing so, KFC was assured
of managerial talent to deal with local
regulations and handling logistics (e.g., labor
and construction) while Mitsubishi in turn got the
use of an authentic American brand name.
Advantages of International
Alliances
 Shared
risk. Some projects are just too
big for any one company to approach
alone. Boeing can partner with Rolls
Royce, with the latter making the engines
for the aircraft, while Boeing makes the
frame. Many times, deep sea oil
exploration is too big a commitment for
any one oil company, so two or more may
together.
International Strategic Alliances
 Shared
knowledge and expertise. Intel,
known for its cutting edge innovations in
computer chips, can partner with a
Japanese firm do to its manufacturing.
 Synergy and competitive
advantage. “Synergy” refers to the idea
that the resources held by two firms, when
combined, add up to more than the sum of
their parts.
Disadvantages of International
Alliances
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Legal obstacles. Since both firms have their own
interests, complicated legal agreements may have to be
made up. Also, there may be limitations on market
concentration, and there may be some concern about
the legality of technology transfer. In some countries, as
previously mentioned, it may be difficult to enforce
agreements.
Complacency: If two firms join forces where they
previously competed, they may become complacent in
developing new products, improving quality, and
lowering costs and prices. When competition is place,
firms tend to maintain greater discipline, which is needed
for competitive ability in the long run.
Disadvantages of International
Alliances
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Costs of coordination. When two firms have different cultures
(e.g., individualistic vs. collective or authoritarian vs. more
participative), more effort may be needed in circulating
information and reaching decisions. For example, Oracle, an
aggressive computer firm in the Silicon Valley with a strong
emphasis on meritocracy might have difficulty working with a
collectivistic Japanese firm.
Blurred lines between areas of competition and
cooperation. Suppose Sony and Compaq, which both make
computers, want to collaborate on making memory chips. To
do so, they may have to share information about other
computer technology in areas where they may compete. There
is now a question of what to share and what to hold back. Not
only is time spent deciding whether to share or withhold, but
essential information may end up not being available to those
who need it.