Transcript CHAPTER 1

CHAPTER 1
• SCOPE AND
CHALLENGE OF
INTERNATIONAL
MARKETING
Overview
• Business activities are global. No business
can escape the effect of globalization.
• View three major global trends:
• 1) Growth of free trade areas (EC, NAFTA,
AFTA)
• 2) Growth of the Free Market System
• 3) Emergence and evolution of large
markets (Brazil, China, India).
Overview
• All aspects of international business are
global - financing, marketing, technological,
production, pricing, accounting,
communication.
• All firms are affected by international
events. Therefore business people need to
be globally aware.
Internationalization of US
Business
• Many US firms and some well-known
brands are foreign controlled.
• Some firms enter the US market via
exporting and then built plants.
• US firms also invest in foreign countries &
foreign earnings contribute substantially to
the overall profit position.
Internationalization of US
Business
• US firms involved in international business
out performed those not involved. They
grow twice as fast and have significantly
higher returns on assets and equity.
• In many cases foreign sales prove to be
more profitable than domestic sales and
some firms earn a large share of their profits
from foreign operations.
% Profits from Global Operations
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Firm
Foreign Profits as % of Total
Du Pont
28.9
Procter & Gamble
36.9
Coca-Cola
67.8
McDonald’s
49.6
Avon
58.9
Motorola
92.4
International Marketing Task
• International marketing tasks more difficult
than domestic marketing tasks because of
the degree of environmental uncertainty.
• International marketers face home and also
foreign country environmental factors and
this makes for greater uncertainty
(controllable elements and TWO
uncontrollable environments).
Environmental Factors
• All environments contain SEVEN (7) social
institutions. These can be identified by the
acronym PELFREC. These seven social
institutions are present in ALL societies
regardless of how advanced or
underdeveloped the society.
• If you eliminate any of the institutions the
society as you know it dies.
The Seven Social Institutions
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Political - system of transferring power
Economic - method of wealth distribution
Legal - means of deciding right & wrong
Family - unit of procreation
Religious - - belief system
Education - means of passing on
information for preserving the society
• Culture - way of life of a people
Effect of Environmental Factors
• Marketers must interpret the effect of
environmental factors and adapt marketing
strategy.
• Marketers must be aware of the frame of
reference that they use when making
decisions. Differences in environments are
known to cause embarrassing and costly
misunderstandings.
Avoiding Environmental
Misunderstandings
• Be aware of the principle of marketing
relativism - people make judgements based
upon their culture and experiences. Since
international marketers may use their home
country culture to judge things
inappropriate strategies may be adopted.
Self-Reference Criterion - An
Obstacle
• Successful in international marketing call
for adapting to environmental differences
across markets. This takes effort.
• The main obstacle to success is a person’s
self-reference criterion [SRC] in making
decisions.
• SRC is a persons unconscious references to
their own cultural values, experiences, and
knowledge in making a decision.
Overcoming Self-Reference
Criterion
• The first step in overcoming SRC is to
recognize the need to be sensitive to
differences across cultures
• Second, ask questions of people in the
foreign culture.
Isolating SRC Influences
• Make a cross-cultural analysis to isolate
SRC influences.
• Define problem/goal in terms of home
country cultural norms.
• Define problem/goal in terms of foreign
country cultural norms.
• Isolate SRC influences
• Redefine problem without SRC
Developing Global Awareness
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To be globally aware is to have:
Objectivity
Tolerance of cultural differences
Knowledge of history and PELFREC on a
global scale.
International Involvement
• From a marketing perspective a firm may
adopt one of FIVE involvement stance:
• No Direct Foreign Marketing
• Infrequent Foreign Marketing
• Regular Foreign Marketing
• International Marketing
• Global marketing
International marketing Concepts
• Domestic Marketing Extension
• Multi-domestic Marketing
• Global Marketing
Globalization of Markets
• Is the world becoming a single market?
• Can we sell the same product the same way
every where?
• Should marketers customize (adapt) or
standardize marketing effort (4 P’s) - read
Levitt’s article.