Transcript Definition of International Marketing

Chapter 1
Nature of International
Marketing
Challenges and Opportunities
Process of International Marketing
 International Dimensions of Marketing
 Domestic Marketing vs. International Marketing
 Multinational Corporations (MNCs)
- Pros and Cons
- Multinationality and Market Performance
- Characteristics of MNCs
 The Process of Internationalization
 Benefits of International Marketing

Definition of marketing
‘Management process responsible for identifying,
anticipating and satisfying customer requirements
profitably’. Thus marketing involves:
 focusing on the needs and wants of customers
 identifying the best method of satisfying those
needs and wants
 orienting the company towards the process of
providing that satisfaction
 meeting organisational objectives.
Definition of International Marketing
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Multinational process of planning and executing the
conception, pricing, promotion, and distribution of
ideas, goods, and services and to create exchanges
that satisfy individual and organizational objectives
The example of International Marketing would be
where an English company would like to enter
Chinese market. It will be done by either developing
marketing strategy in their home country that will be
then introduced in new market or they will hire a
company to create such a plan. Within the
international marketing process the key elements of
this framework still apply.
Dimensions of Marketing
Consumer Marketing vs. Business-to-Business
Marketing
 Domestic Marketing vs. Foreign Marketing
 Comparative Marketing
 International Marketing vs. Global/Multinational
Marketing
 Domestic Marketing vs. International Marketing
- similar in nature but not in scope (scale)?
- different in degree but not in kind?

Domestic vs Foreign marketing

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Domestic marketing is concerned with the
marketing practices within a researcher’s or
marketer’s home country.
From the perspective of domestic marketing,
marketing methods used outside the home
market are foreign marketing.
Comparative Marketing

A study becomes comparative marketing
when its purpose is to contrast two or more
marketing systems rather than examine a
particular country’s marketing system for its
own sake. Similarities and differences
between systems are identified.
International marketing vs Global

International marketing is a marketing done
on international level. The International
Marketing is based on strategy created in
home country of company and distributed to
its other offices/affiliations. International
Marketing is very similar to Global marketing.
The main difference will be the fact that
Global Marketing is focusing on
intercontinental point of view.
MNCs

A corporation that has its facilities and other
assets in at least one country other than its
home country. Such companies have offices
and/or factories in different countries and
usually have a centralized head office where
they co-ordinate global management. Very
large multinationals have budgets that
exceed those of many small countries.
MNCs (MULTINATIONAL
CORPORATIONS)
Cons
- Exploitation
- Erosion of a Nation's Sovereignty
 Pros
- Power and Prestige
- Social Responsibility
- Market Performance

Characteristics of MNCs
Definition by Size
 The term MNC implies bigness. But bigness
also has a number of dimensions.(see Table 1.1).
- market value
- sales
- profits
- assets
- number of employees

Definition by size
Characteristics of MNCs
Definition by Structure
- number of countries in which the firm does
business
- citizenship of corporate owners and top
managers

Definition by structure

According to Aharoni, an MNC has at least three
significant dimensions: structural, performance, and
behavioral. Structural requirements for definition as
an MNC include the number of countries in which the
firm does business and the citizenship of corporate
owners and top managers. Pfizer, stating that it is a
truly global company, does business in more than
150 countries. Citicorp satisfies the requirement for
multinationalism through the citizenship of members
of its top management. The company has done as
much as other major American MNCs to diversify its
management.
Characteristics of MNCs
Definition by Performance
- commitment of corporate resources to foreign
operations
- amount of rewards from that commitment

Definition by performance

Depends on such characteristics as foreign
earnings, sales, and assets. These performance
characteristics indicate the extent of the
commitment of corporate resources to foreign
operations and the amount of rewards from that
commitment. The greater the commitment and
reward, the greater the degree of
internationalization. Japanese and British firms
have routinely shown willingness to commit their
corporate resources to overseas assets.
Characteristics of MNCs
Definition by Behavior
- ethnocentricity
- polycentricity
- geocentricity

Definition by behavior

Behavior is somewhat more abstract as a
measure of multinationalism than either structure
or performance, though it is no less important.
This requirement concerns the behavioral
characteristics of top management. Thus, a
company becomes more multinational as its
management thinks more internationally. Such
thinking, known as geocentricity, must be
distinguished from two other attitudes or
orientations, known as ethnocentricity and
polycentricity.
Behavior/ Attitude
Ethnocentricity
- orientation toward home country
- centralization of decision making
- efficient but not effective

Etnocentricity

Ethnocentricity is a strong orientation toward the
home country. Markets and consumers abroad
are viewed as unfamiliar and even inferior in
taste, sophistication, and opportunity. The usual
practice is to use the home base for the
production of standardized products for export in
order to gain some marginal business.
Centralization of decision making is thus a
necessity.
Behavior/ Attitude
Polycentricity
- strong orientation to host country
- decentralization of decision making
- effective but not efficient

Polycentricity

Polycentricity, the opposite of ethnocentricity, is a
strong orientation to the host country. The attitude
places emphasis on differences between markets
that are caused by variations within, such as in
income, culture, laws, and politics. The assumption
is that each market is unique and consequently
difficult for outsiders to understand. Thus,
managers from the host country should be
employed and allowed to have a great deal of
discretion in market decisions.
Behavior/ Attitude
Geocentricity
- world orientation
- centralization + decentralization +
coordination
- efficient and effective

Geocentricity

Geocentricity is a compromise between the two
ethnocentricity and polycentricity. It could be argued that
this attitude is the most important of the three.
Geocentricity is an orientation that considers the whole
world rather than any particular country as the target
market. As such, “international” or “foreign” departments
or markets do not exist because the company does not
designate anything international or foreign about a
market. Corporate resources are allocated without
regard to national frontiers, and there is no hesitation in
making direct investment abroad when warranted.
THE PROCESS OF INTERNATIONALIZATION
Many companies may have begun as domestic firms
concentrating on their own domestic markets before
shifting or expanding the focus to also cover international
markets. As they become more international, they are
supposed to move from being sporadic exporters to being
frequent exporters before finally doing manufacturing
abroad. It is thus useful to investigate the stages of
internationalization. One study found evidence to support
the hypothesis that there are four identifiable stages in a
firm’s internationalization. The four stages are:
nonexporters, export in tenders, sporadic exporters, and
regular exporters.
Based on his review of a number of the
internationalization models which specify the various
stages of internationalization, Andersen has proposed
his own U-model which has received mixed empirical
support. According to this model, there are four stages:
(1) no regular export activities, (2) export via independent
representatives (agent), (3) establishment of an overseas
sales subsidiary, and (4) overseas
production/manufacturing. The development is supposed
to take place initially within a specific country before
being repeated across countries.
Several Silicon Valley companies do not see the need to
have a business model first for the US market before
going overseas. Instead, their mission is global almost
from birth. As such, from the beginning, they may employ
engineers in India, manufacture in Taiwan, and sell in
Europe. At present, there is no conclusive evidence to
show that domestic firms have generally indeed
progressed from one stage to another as prescribed on
their way to becoming more internationally oriented.
Benefits of International Marketing
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Survival and Growth
Sales and Profits
Diversification
Inflation and Price Moderation
Employment
Standards of Living
Understanding of Marketing Process
Survival and growth
For companies to survive, they need to grow. Because most
countries are not as fortunate as the USA in terms of market
size, resources, and opportunities, they must trade with
others to survive. Since most European nations are
relatively small in size, they need foreign markets to achieve
economies of scale so as to be competitive with American
firms. International competition may not be a matter of
choice when survival is at stake. A study of five medical
sector industries found that international expansion was
necessary when foreign firms entered a domestic market.
Survival and growth
However, only firms with previously substantial market
share and international experience could expand
successfully. Moreover, firms that retrenched after an
international expansion disappeared. Even American
marketers cannot ignore the vast potential of
international markets. The world market is more than
four times larger than the US market. In the case of
Amway Corp., a privately held US manufacturer of
cosmetics, soaps, and vitamins, Japan represents a
larger market than the USA.
Sales and profits
Foreign markets constitute a large share of the total
business of many firms that have wisely cultivated markets
abroad. The case of Coca-Cola clearly emphasizes the
importance of overseas markets. International sales
account for more than 80 percent of the firm’s operating
profits. In terms of operating profit margins, they are less
than 15 percent at home but twice that amount overseas.
For every gallon of soda that Coca-Cola sells, it earns 37
cents in Japan – a marked difference from the mere 7
cents per gallon earned in the USA.
Sales and profits
The Japanese market contributes about $350
million in operating income to Coca- Cola (vs.
$324 million in the US market), making Japan
the company’s most profitable market. With
consumption of Coca-Cola’s soft drinks
averaging 296 eight-ounce servings per person
per year in the USA, the US market is clearly
saturated. Non-US consumption, on the other
hand, averages only about forty servings and
offers great potential for future growth.
Diversification
Demand for most products is affected by such cyclical factors as
recession and such seasonal factors as climate. The
unfortunate consequence of these variables is sales
fluctuations, which can frequently be substantial enough to
cause layoffs of personnel. One way to diversify a company’s
risk is to consider foreign markets as a solution to variable
demand. Such markets even out fluctuations by providing
outlets for excess production capacity. Cold weather, for
instance, may depress soft drink consumption. Yet not all
countries enter the winter season at the same time, and some
countries are relatively warm all year round.
Diversification
Bird, USA Inc., a Nebraska manufacturer of go-carts
and minicars for promotional purposes, has found that
global selling has enabled the company to have yearround production. A similar situation pertains to the
business cycle: Europe’s business cycle often lags
behind that of the USA. That domestic and foreign
sales operate in differing economic cycles works in the
favor of General Motors and Ford because overseas
operations help smooth out the business cycles of the
North American market.