Transcript Chapter 17
Chapter Seventeen International Marketing Chapter Objectives Discuss primary drivers of internationalization in the macroenvironment and microenvironment. Discuss the primary internationalization challenges and obstacles attributed to the cultural environment, to governments, to competition, and to the self-reference criterion. Analyze the different levels of international involvement. Address entry mode selection from a control and risk perspective. Discuss the challenges presented by the international marketing mix. Why Firms Go International: Internationalization Drivers To take advantage of global market opportunities and reach a larger market To keep pace with the competition To increase sales and market share To prolong the product life cycle Drivers of International Expansion Competition Regional Economic and Political Integration Technology Improvements in Transportation and Telecommunication Economic Growth and Emerging Market Economies Converging Consumer Needs Container ship in the port of Rotterdam: Containerization has greatly facilitated international expansion. Facilitators of International Trade: The World Trade Organization Largest and most influential international trade organization Ensures free flow of trade Functions: • Provides assistance to developing and transition economies • Offers help for export promotion • Promotes regional trade agreements and economic cooperation • Reviews members’ trade policies and engages in routine notification of new trade measures The World Trade Organization WTO agreements represent trade rules and regulations and act as contracts guaranteeing countries trade rights and binding governments to free trade policies. Agreements: • General Agreement on Tariffs and Trade (GATT) • General Agreement on Trade in Services (GATS) • Trade-Related Aspects of Intellectual Property Rights (TRIPS) Facilitators of International Trade: Group of Seven (Eight)–G7 (G8) Members from the most industrialized countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States, and Russia • Yearly meetings involve heads of state, government ministers, and directors of central banks. • Addresses: Biotechnology, food safety, economic development, disarmament, arms control, organized crime, drug trafficking, terrorism, environmental issues, and trade Facilitators of International Trade: The Development Banks The World Bank • Largest international bank that sponsors economic development • Employs international specialists in economics, finance, sectoral development • Focus on health and information technology African Development Bank Asian Development Bank European Bank for Reconstruction and Dev’t Inter-American Development Bank Facilitators of International Trade: U.S. Government Agencies U.S. Agency for International Development (USAID) U.S. Department of Commerce Export-Import Bank of the United States State and Local Government Agencies, such as the U.S. Chamber of Commerce Regional Economic and Political Integration Determinants of Integration • • • • Shared culture Shared history Regional proximity Similarity in level of economic development Types of Integration Bilateral Agreements, Multilateral Forums and Agreements • General agreements between two or more countries, typically industry specific • OPEC, NATO, Commonwealth of Independent States Customs Union • Trade association that eliminates or greatly reduces all trade restrictions for member countries, also adopts common external tariffs on products imported from outside the area: NAFTA Common Market • Eliminate all tariff and barriers to trade, adopt common external tariffs, and allow for free movement of capital and labor within the common market: Andean Common Market, Southern Cone Common Market (MERCOSUR) Types of Integration (cont.) • Monetary Union • Involves a common monetary policy, the creation of a unified central bank, and the use of a single currency: Euroland • Political Union • Common governing and legislative bodies, and enforcement powers: example: European Union The marketplace has obviously become more globalized … Global Consumers A global consumer culture is attributed to the diffusion of products from the United States to the rest of the world. • Entertainment (MTV, movies, CDs) • Hamburgers and pizza • Jeans and running shoes, etc. Pepsi in Mauritius … yet marketers need to respond to regional differences, such as … Language Spoken/Written Language • Differences in meaning in different countries that share the same language • Dealing with multiple dialects • High costs of translation • High costs of translation blunders Nonverbal communication is essential in international marketing and it differs across cultures. Religion Defined as society’s relationship to the supernatural and determines dominant values and attitudes Firms must adapt their offering to the local religion. Culture Culture influences consumption. Elements of culture vary greatly across countries. and other obstacles: Government Barriers Local governments control international market entrants using arguments for protectionism: • • • • • • Excess productive capacity Excess labor Infant industry argument and industrialization Natural resources conservation and environmental protection Consumer protection National defense Tariffs, Quotas, Licenses • Discourage imports of particular goods • Penalize countries that are not politically aligned with the importing country • Generate revenues • US tariffs are less than 10%; other countries can impose tariffs greater than 100% for protected products. Nontariff barriers are used by countries in the WTO, NAFTA, and EU. International Competition Competitors can erect entry barriers to entry. Effective entry barriers include: • Price cuts • Blocking distribution channels • Binding retailers to exclusive contracts The Self-Reference Criterion Individual’s reference to their own national culture, norms, and values as well as their knowledge in the process of making decisions in the host country. Is a great impediment to adaptation Addressing the self-reference criterion: • Define the marketing goal in terms of one’s home country’s cultural traits, norms, and values. • Define the marketing goal in terms of the host country’s cultural traits, norms, and values. • Isolate the self-reference criterion influence and evaluate it to understand how it affects the marketing issue. • Solve the marketing problem based solely on the unique conditions of the host country. Levels of International Marketing Involvement Domestic marketing Export Marketing International marketing Global marketing THE BEST GLOBAL BRANDS International Entry Mode Selection Exporting: Either direct or indirect, low risk but low control Licensing: More risks, greater control. Involves a licensor who offers the know-how or brand name, and a licensee, who pays royalties. Franchising: Is service industry’s equivalent of licensing. Joint Ventures: Involve a foreign company joining with a local company to set up a new corporate entity Wholly Owned Subsidiaries: Assumes long-term commitment and has a high level of risks, but can be extremely profitable Branch Offices: Not separate entities, but part of the international company. High level of control and lower risk than subsidiary Strategic Alliance: All joint ventures, licensing, and franchising agreements, as well as low-commitment agreements The International Marketing Mix Standardization versus adaptation Product • Country of Origin Effects Place (Distribution) • Established vs. New Channels Promotion • Use of English • Restrictions Price • Dumping • Parallel imports (gray marketing) The International Product Lifecycle Introduction and Growth Early Maturity Late Maturity Decline MNC manufactures in developed countries, exports to developing countries MNC moves production to developing countries, begins importing to home country Competitor from developing country exports product to MNC home country. Developing countries remain viable target markets; Home-country market is diminishing. Sales Time