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Lesson#1
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OVERVIEW OF INTERNATIONAL MARKETING
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OVERVIEW OF INTERNATIONAL MARKETING
Defining International Marketing:
• “Marketing is
defined as a process by which individuals and groups obtain what they need &
want by
creating and exchanging products and value with others.
• The term
“International Marketing” refers to
exchanges across national boundaries for the
satisfaction of human needs and wants.
• The extent of a
firm’s involvement abroad is a function of its commitment to the pursuit of
foreign
markets.
• Global industries
are defined as those where a firm’s competitive position in one country is
affected
by its position in other countries, and vice versa.
Evolution of Global Marketing:
Firms, depending on their level involvement in foreign markets,
pass through following five
evolutionary phases.
1. Domestic marketing
– Domestic
marketers tend to be ethnocentric (focus is solely on domestic market) & pay
little
attention to changes taking place in the global market place.
– Such firms
produce and sell products and services only in their home country.
– Firms that keep
focus only on their domestic markets may be vulnerable to the sudden changes
forced on them from foreign competition, when foreign firms
enter the markets or even when
foreign firms develop better or cheaper products.
2. Export marketing
– Exporting firms
fulfill unsolicited / solicited orders from foreign countries.
– For growth in
export marketing, however, a company requires physical, financial and managerial
resources.
– When a firm
attempts to export it faces many issues that include difficulties in
import/export
restrictions, cost and availability of shipping, exchange rate
fluctuations, collection of money,
development of distribution channels etc.
– Export marketers
still tend to take ethnocentric approach, since they mostly make products in
their home countries and have no direct involvement in the
foreign markets.
3. International marketing
– An international
marketing firm has polycentric orientation with emphasis on product and
promotional adaptation in foreign markets whenever necessary.
– They make
strategic decisions that are tailored to suit the cultures of the foreign
countries.
– The company may
establish an independent foreign subsidiary in each and every foreign market
it services – such efforts are also called multi-domestic
marketing.
4. Multinational marketing
– Multinational
firms are those that sell products or services in many countries.
– Economies of
scale in product development, manufacturing, and marketing are achieved by
multinational firms by consolidation of some of their activities
on regional basis.
– In this
regiocentric approach product planning may be standardized within a region (e.g.
a group
of contiguous and similar countries).
5. Global marketing Emphasizes
– Global marketing
firms sell products and services in most countries around the world.
– Through global
operations firms achieve reduction of cost inefficiencies and duplication of
efforts among their national and regional subsidiaries.
– Global operations
allow opportunities for the transfer of products, brands, and other ideas across
subsidiaries.
– Opportunities to
operate worldwide are supported by the emergence of global customers, and
– Improved linkages
among national marketing infrastructures leading to the development of a
global marketing infrastructure.
Dynamics of international marketing:
Modern marketers have to deal with customers who are changing;
– With channels of
distribution that are changing
– And with the
technological advances that are changing the nature of their products & services
and
requiring them to operate imaginatively & effectively in the
emerging markets.
The basic nature of Marketing does not change from domestic to
international marketing, but marketing
outside national boundaries poses special problems, such as
dealing with multiple environments,
managing operations in distant markets, optimizing businesses in
more than one countries, dealing with
foreign nationals etc.
International marketing therefore, unlike domestic marketing,
requires operating simultaneously in more
than one kind of environment, coordinating these operations, and
using the experience gained in one
country for making decisions in another country.
The demands are tough and the stakes are high. International
marketers not only must be sensitive to
different marketing environments internationally, but also must
be able to balance marketing moves
worldwide to seek optimum results for the company.
Globalization of markets:
It is widely asserted that we are living in an era in which the
greater part of social life is determined by
global processes, in which national cultures, national economies
and national borders are dissolving.
Central to this perception is the notion of a rapid and recent
economic globalization. “In France the
word is mondialisation. In Spain and Latin America it is
globalization. The Germans say
Globalisierung”.
Many authors cite Wallerstein as the first one to open up the
theme of ‘globalization’ in
his book “The
Capitalist World-Economy”, published in 1979. Since then the
topic has attracted much attention from
diverse perspectives. The common themes that run through the
discourse of globalization are:
a)
Ecological
interdependence: The recognition that most places on the earth are linked to
all
others by air, water, and overland links. Rapidly increasing
interdependence of world is
rendering national boundaries meaningless.
b)
Dominance and
dependency: Falling barriers to international trade and world’s markets
expose everyone to domination by most powerful players and role
of nations in weakening into
service structures for corporate interest.
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c)
Hologramatic
diversity: The argument that each place reflects the same ‘diversity’ as
each
other. What is perceived as human, social or cultural diversity
is essentially all the same.
d)
Homogenization of cultures: The view that both material and non-material
cultures are
becoming more the same wherever one goes and the argument that a
single
‘socioculturalpolitical’ system is the only viable solution for
the problems of interdependency.
e)
Ubiquitous
communication: The belief that communication is now becoming more and more
universal in all places at all times in all directions.
The above can probably be split into just two concerns:
i) The awareness of (and probably inevitability of) a global
ecosocial dynamics of
interdependency.
ii) Standardization in social, political, cultural, and material
life in order to limit or
control the chaos (or to maximize economic gain).
‘Globalization’ has been defined in many ways. Some definitions
are relatively concise while others are
more vague and evocative. A more precise definition of
‘globalization’ is as follows:
“A process (or set of processes) which embodies a transformation
in the spatial organization of social
relations and transaction … generating transcontinental or
interregional flows and networks of activity,
interaction, and the exercise of power”.
Globalization may not be a particularly attractive or elegant
word. But absolutely no one who wants to
understand their (and/or others’) prospects in future can ignore
it. According to the ‘globalists’ school of
thought, globalization represents;
- A convergence of tastes and increasing homogeneity that allows
for the use of standard products
and services worldwide.
- The process of integrating purchasing and manufacturing
processes on a global scale to achieve
cost efficiencies.
- Industries dominated by a few major players worldwide.
- Large organizations with global cultures and mindsets.
A number of scholars see globalization as a process driven by a
series of global industry drivers. These
drivers are
market drivers, such as common customer needs and the existence of global
channels; cost
drivers, such as global scale economies and global sourcing
efficiencies; economic drivers,
such as trade
policy and deregulation; and
competitive drivers, such as the
existence of global competitors.
Market Globalization Drivers - Market drivers depend on the
nature of customer behavior and the
structure of channels of distribution. Some common market
drivers are:
Common Customer Needs
Factors that affect whether customer needs are similar in
different countries include economic
development, climate, physical environment, and culture.
Global Customers and Channels
Global customers buy on a centralized or coordinated basis for
decentralized use. Their
existence affects the opportunity or need for global market
participation, global products and
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services, global activity location, and global marketing.
Transferable Marketing
Certain elements of the marketing mix, e.g., brand name, pricing
strategy, etc., may be
transferable across markets. The implications are that these
elements can be effectively used
both for increasing as well as reducing barriers.
Lead Countries
Lead countries represent countries where innovations in
particular industries are prone to take
place, e.g., Japan for consumer electronics, Germany for
industrial control equipment, and the
United States for computer software.
Cost Globalization Drivers - Cost drivers depend on the
economics of the business. These drivers
particularly affect production location decisions, as well as
global market participation and global
product development decisions. The most commonly cited cost
drivers are:
Global Economies of Scale and Scope
Global economies of scale apply when single-country markets are
not large enough to allow
competitors to achieve optimum scale. One of the most visible
examples of this has been in the
electronics industry. In many cases, economies of scope may be
available by using facilities and
processes in a single operating unit to produce a larger variety
of goods or services with or
without the presence of scale economies. Areas where economies
of scope may be visible
include consumer research, product development, and the creation
of marketing programs.
Steep Experience Curve
Besides economies of scope and scale, steep learning activity
associated with concentration of
activities can result in significant cost advantages.
Global Sourcing Efficiencies
Efficiencies arise out of coordination of the procurement
activities of raw materials and
components across the world. Ability to source from around the
world allows firms to reduce
costs of raw materials and productions while increasing their
qualities.
Favorable Logistics
A favorable ratio of sales value to transportation cost
increases the ability of global firms to
concentrate production in certain countries and take advantage
of economies of scale. Other
logistic factors that have a bearing on global strategy
development are nonperishability of
products, absence of time urgency, and little need for location
close to customer facilities.
Difference in Country Costs
This is based on the classical theories of differences in factor
costs that do exist and can be
exploited by firms to achieve comparative advantage. Beside
factor cost differences, exchange
rate differences also have a significant bearing on the absolute
costs and the stability of costs.
High Product Development Costs
High product development costs relative to the size of national
markets act as a driver to
globalization. These costs can be reduced by developing few
global or regional products.
Fast-Changing Technology
Fast-changing technologies in products or processes lead to high
product development costs,
which increase their globalization potential.
Government Globalization Drivers - Rules set by national
governments can affect the use of global
strategic decision-making. Governments around the world adopt
policies, formulate regulations and
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implement programs to support local businesses sell abroad and
to affect their international trade. These
rules/policies include the following:
Favorable Trade Policies
Import tariffs and quotas, non-tariff barriers, export
subsidies, local content requirements,
currency and capital flow restrictions, ownership restrictions,
and requirements on technology
transfer are some means governments can use to influence firm
behavior. These policies can
have a significant negative impact on standardization of
products and programs.
Compatible Technical Standards
Differences in technical standards among countries also affect
the extent of product
standardization.
Common Marketing Regulations
Restrictions on various marketing activities can also act as a
barrier to the use of uniform
marketing approaches. For example, restrictions on the use of
certain kinds of media for
advertisements, differences in ad content like the use of gender
and comparative advertising,
and so on.
Government-Owned Competitors
- The presence of
government-owned competitors spurs the development of global plans as a
means of counteracting the advantages of protected home markets.
Government-Owned Customers
- Presence of
government-owned customers could provide a barrier to globalization since such
customers usually favor national suppliers.
Competitive Globalization Drivers - Competitive drivers
raise the globalization potential of any
industry and spur the need for a response on the global strategy
levels. The common competitive drivers
include:
High Exports and Imports
The level of exports and imports of final and intermediate
products and services, i.e., the extent
of interaction between countries, has a significant bearing on
the use of a global strategy.
Competitors from Different Continents and Countries
Global competition among rivals from different continents trends
to be severe.
Interdependent Countries
Competitive interdependence among countries through shared
business activities can help such
firms to subsidize attacks on competitors to counterattack these
subsidies.
Globalized Competitors
When a business’s competitors use global strategy to exploit
industry globalization potential,
the business needs to match or preempt these competitors.
Other environmental drivers
Revolution in IT & telecoms, international financial markets,
reduction of tariffs, creation of trade
blocs, privatization drives
To conclude the discussion so far:
• A commitment to
international market place is important for sustained growth and superior
profitability.
• Doing business is
a creative enterprise. Doing business outside one’s own country is a much more
demanding and complicated enterprise.
• Business
environments of countries are different.
• International
business necessitates an awareness of the clash of cultural standards among
countries.
• In 1950’s and
60’s international business was a means of capitalizing on new opportunity,
today’s
changing economic environment has made international business
dealings vital for survival.
• North American
companies will take longer to reach outer limit than will companies in Singapore
(smaller market with less room to grow).
• Basic nature of
marketing does not change from domestic to international marketing but marketing
outside national boundaries poses special problems.
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