Transcript Chapter 1

Scope, Concepts, and Drivers of
International Marketing
Dana-Nicoleta Lascu
Chapter 1
Copyright Atomic Dog Publishing, 2008
Chapter Objectives
• Define international marketing and identify the
different levels of international involvement.
• Describe the different company orientations and
philosophies toward international marketing.
• Identify environmental and firm-specific drivers that
direct firms toward international markets.
• Identify obstacles preventing firms from successful
international ventures.
Copyright Atomic Dog Publishing, 2008
Importance of International Marketing
•
International marketing helps companies reach their full
potential and the maximum return for their stockholders.
•
Many companies find that, to keep up with competition, they
must reach for new international consumers.
•
For many companies, an international presence is essential to
their success.
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•
Exxon, General Motors, Microsoft and Mitsubishi earn profits higher
than the gross domestic product of many low-income countries.
Many small businesses can attribute their success and even
survival to international markets.
Companies with products in late stages of the product life cycle
find that emerging markets offer them new life

Privatization in countries where government monopolies had
dominated for decades has made it possible for multinationals to
compete for local energy, airline, railway, and telecommunications
industries.
Copyright Atomic Dog Publishing, 2008
Levels of International Marketing
Involvement

Domestic marketing:
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Export marketing:
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
The firm is indirectly or directly involved in exporting.
The firm considers the international market as an extension of the
domestic market.
International marketing:
-

The firm has the least commitment to international marketing
Focus on domestic consumers and on the home-country environment.
The firm focuses on international consumers in one or more countries.
Firm’s sales offices, subsidiaries, joint ventures are in different countries.
International activities are not coordinated across different countries.
Global marketing:
-
The firm coordinates its marketing activities across different countries
without focusing primarily on national or regional segmentation.
The strategy is possible due to the emergence of uniform global
consumer segments.
The strategy entails an efficient global allocation of company resources.
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Levels of International Marketing
Involvement (summarized)
Domestic
Marketing
Export
Marketing
International
Marketing
• Low or no
international
commitment
• Limited
international
commitment
• Domestic focus
• Direct or indirect • Focus on
exporting
countries or
regions
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• Substantial
international
commitment
Global
Marketing
• Extensive
international
commitment
• Focus on
market segments
rather than
countries or
regions
Internationalization Philosophies
Human
Resources
Management
internationalization
philosophy affects all functional areas of
the corporation.
Impact on resource allocation, response to global threats/opportunities
Finance
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Ethnocentric Orientation
• Guided by domestic market extension concept.
• Domestic strategies, techniques, and personnel are
perceived as superior.
• International markets are secondary, regarded
primarily as outlets for surplus domestic production.
• International marketing plans are developed in-house
by the international division.
Disneyland Resort Paris
emphasizes a U.S. (domestic)
theme: Main Street USA.
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Polycentric Orientation
• Guided by the multidomestic marketing concept.
• Focuses on the importance and uniqueness of each
international market.
• Firms establish independent businesses in each
target country.
• Fully decentralized, minimal coordination with
headquarters.
• Marketing strategies are specific to each country
• Outcomes:



no economies of scale.
duplicated functions.
higher final product costs.
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Regiocentric Orientation
• Guided by the global marketing concept.
• Considers world regions that share economic,
political, and/or cultural traits as distinct markets .
• Divisions are organized based on location.
• Regional offices coordinate marketing activities, using
a region-wide marketing approach.
• Example: Regional brands such as Unilever’s
Domestos (household cleaning agent containing
bleach, sold in Central Europe)
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Geocentric Orientation
• Guided by the global marketing concept.
• Marketing strategies aimed at market segments,
rather than geographic locations.
• Maximizes efficiencies worldwide and provides
standardized product or service throughout the
world.
• Example: Visa.
Visa is omnipresent in world markets.
This ad suggests to French consumers
that Visa is widely used.
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International Expansion: Drivers in
the Business Environment
• The primary drivers in the business
environment are:
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Competition
Regional Economic and Political Integration
Technology
Improvements in Transportation and
Telecommunication
Economic Growth
Transition to a Market Economy
Converging Consumer Needs
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Drivers in the Business Environment
(contd.)
Competition
• Competitive pressure from international
companies will force the company to expand
to new markets, even less profitable ones.

Example: McCann Erickson, the advertising agency,
followed longtime client, Coca Cola, Inc., to all
countries where Coke was present – until recently.
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Drivers in the Business Environment
(contd.)
Regional Economic and Political Integration
• Integration facilitates international trade for
companies in member countries, and for companies
from countries outside of the area.
• Example: Regional agreements such as NAFTA,
MERCOSUR, and the European Union lower and
eliminate barriers and promote trade within these markets.
Subsidiaries can be established in these markets to take
advantage of free trade within the region.
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Drivers in the Business Environment
(contd.)
Technology
• Examples:
• Media development exposes consumers worldwide to
foreign programming.
Consumers worldwide are exposed to similar
products, services, and entertainment, and
marketing communications.
• The Internet offers small and medium enterprises in both
high- and low-income countries unlimited international
exposure.
Technology offers a broad reach to these
businesses whose advertising budget cannot cover
the high cost of international broadcast and print
advertising.
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Drivers in the Business Environment
(contd.)
Transportation and Telecommunications
• Lower cost and higher quality communication due to
satellite technology, teleconferencing, and e-mail.
• Allow for frequent interaction between subsidiaries in foreign
countries and the headquarters.
• Allow for outsourcing of customer service.
• The introduction of containers in intermodal
transportation and electronic communication between
suppliers and customers greatly facilitates the
transportation of physical goods.
Container ship in the port of
Rotterdam
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Drivers in the Business Environment
(contd.)
Economic Growth
• Economic growth created markets of high potential
for international brands, while also opening
previously closed markets.
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Emerging middle class with increasing buying power in big
emerging markets such as those of Brazil and India.
Opening of new markets that were previously closed, such
as those of China and Vietnam, and those of the former
Eastern Bloc.
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Drivers in the Business Environment
(contd.)
Transition to a Market Economy
• Transition to a market economy created
important new markets and opportunities to
transform inefficient government-owned
companies into successful enterprises.
• Poland, the Czech Republic, Slovakia, Slovenia,
Hungary, Romania, and Bulgaria are members of the
European Union.
• Slovenia is already a member of the European
Monetary Union.
• China and Vietnam are opening doors to
multinationals.
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Drivers in the Business Environment
(contd.)
Converging Consumer Needs
• Consumers’ exposure (through media, travel) to
global brands created demand for global
products and worldwide loyalty to international
brands.
• The emergence of uniform consumer segments
facilitates marketing strategies worldwide.
• Examples of consumer segments worldwide:
• global teenagers
• global elite
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Firm-Specific Drivers of International
Expansion
• The primary firm drivers for international
expansion are:
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Product Life Cycle
High New Product Development Costs
Standardization
Economies of Scale
Cheap Labor
Experience Transfers
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Firm-Specific Drivers (contd.)
Product Life Cycle Considerations: Companies
prolong the product life cycle of their late-maturity
brands by entering growth markets.
Intro
Growth
Maturity
Decline
Sales
Sales
Profits
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Firm-Specific Drivers (contd.)
High New Product Development Costs:
•
New-product-development costs are rapidly
increasing and product life cycles are decreasing. As
a result, firms must look beyond the home-country
market to fully recover the high product development
costs and to make a profit.
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Firm-Specific Drivers (contd.)
Standardization, Scale Economies, Cheap Labor
Price competition during the maturity stage of the
product life cycle drives firm to new international
markets in search of cheap labor.
The firm lowers costs – and prices – as it takes
advantage of:

Economies of scale

Standardization, and

Cheap labor.
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Firm-Specific Drivers (contd.)
Experience Transfers
Companies benefit from lessons they learn in
different parts of the world and transfer their
knowledge to other markets they serve.
.
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Obstacles to Internationalization
• The primary obstacles to internationalization are
the self-reference criterion, government barriers,
and competitive barriers.
• Self-reference Criterion
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Conscious and unconscious reference to own
national culture and home-country norms while
operating in the host country, which can prevent firms
from adapting to local business environments and
serving the needs of local consumers.
To counter the impact of the self-reference criterion,
the corporation must:
- Select adaptable personnel for international assignments.
- Sensitize expatriates to the local culture.
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Obstacles to Internationalization
(contd.)
• Government Barriers

Restrictions placed on international corporations
by imposing:
- Tariffs
- Import quotas
- Other limitations, such as restrictive import license
awards.
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Obstacles to Internationalization
(contd.)
• Barriers Imposed by International Competition

Among the competitive barriers international
companies commonly encounter are:
-
Blocked channels of distribution
Exclusive retailer agreements
Price cutting
Advertising blitzes
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Chapter Summary
• Discussed different levels of international involvement –
domestic, export, international, and global marketing.
• Addressed internationalization philosophies:
Ethnocentric, polycentric, regiocentric, and geocentric.
• Discussed the drivers of international expansion:


Environmental (competition, regional integration, removal of
trade barriers, improvements in transportation,
telecommunications and technology, and converging consumer
needs).
Firm-specific (prolonging product lifecycle, recovering new
product development costs, price competition, standardization,
economies of scale and cheap labor, experience transfers).
• Addressed obstacles to entry – the self-reference
criterion, government barriers, and competitive barriers.
Copyright Atomic Dog Publishing, 2008