International Marketing

International Marketing
The performance of business activities designed to plan, price, promote, and direct flow of a company’s goods and services to consumers or users in more than one nation for profit.
Differences between domestic and international marketing,
The difference is the environment in within which marketing plans must be implemented.
Uncontrollable Elements
are competition, legal restraints, government controls, weather, fickle consumers, and natural disasters.
Domestic Uncontrollable Elements
Competitive structure
Political/legal forces
Economic climate
Foreign Uncontrollable Elements
Competitive structure
Political/legal forces
Economic climate
Cultural forces
Geography and infrastructure
Structure of distribution
Level of technology
Controllable Elemets
Can be altered in the long run and usually in the short run to adjust to changing market conditions, consumers’ taste or corporate objectives.
Controllable Elements
EX.
Firm characteristics
Price
Promotion
Product
Channels of distribution (Place)
Research
Adoption
in order to adapt marketers must be able to interpret effectively the influence and impact of each of the uncontrollable environmental elements on the marketing plan for each foreign market, which they hope to do business in.
Self-reference criterion
The primary obstacle to success in international marketing. Is an unconscious reference to one’s own cultural values, experiences, knowledge as a basis for decisions. (impede the ability to assess a foreign market in its true light)
Examples of SRC
McVitie’s chocolate biscuits
Unilever washing detergent
McDonald’s in India
Ethnocentrism
is the notion that people in one’s own company, culture, or country know best how to do things. (impede the ability to assess a foreign market in its true light)
To be globally aware is to have:
Tolerance of cultural differences and
Knowledge of cultures, history, world market potential, and global economic, social, and political trends
The stages of international marketing involvement
1: No direct foreign market
2:Infrequent foreign marketing
3: Regular foreign Marketing
4: International Marketing
5: Global Marketing
Balance-of-payments
a system of recording all of a country’s economic transactions with the rest of the world over a period of one year. Its record is maintained on a double-entry bookkeeping system that must always be in balance. It is a record of condition, not a determinant of condition. It presents an overall view of its international economic position and is an important economic measure used by treasuries, central banks, and other government agencies whose responsibility is to maintain external and internal economic stability.
Tariff
A tax imposed by a government on goods entering at its borders to generate revenue or to discourage the importation of goods. They may be used as revenue-generating taxes or to discourage the importation of goods, or for both reasons.
Non-Tariff
Other non-tax measures used to protect local industry and minimize imports (quotas, boycotts, monetary barriers, and market barriers)
Tariff Barriers tend to INCREASE…
1) inflation
2) Special interests’ privileges
3) Government control in economic matters
4) The number of tariffs on the home country due to reciprocity
Tariff Barriers tend to WEAKEN…
1) Balance-of-Payments positions
2) Supply-and-Demand Patterns
3) International Relations (they can start trade wars)
Tariff Barriers tend to RESTRICT…
1) Manufacturer’ supply sources
2) Choices available to consumers
3) Competition
Types of Non-Tariff Barriers
1) Quotas
2) Import licensing requirements
3) Voluntary Export Restraints (VER)
4) Boycotts
5) Embargoes
6) Monetary Barriers
Quotas
a specific unit or dollare limit applied to a particular type of good
Predatory pricing
A practice by which a foreign producer intentionally sells its products in another country for less than the cost of production to undermine the competition and take control of the market.
GATT
A forum for member countries to negotiate a reduction of tariffs and other barriers to trade. It became part of the world trade organization in 1995 and its 117 original members moved into a new era of free trade.
The GATT Covers 3 Basic Areas
1) Trade shall be conducted on a nondiscriminatory basis
2) Protection shall be afforded domestic industries through customs tariffs, not through such commercial measures as import quotas
3) Consultation shall be the primary method used to solve global trade problems
WTO
World Trade Organization. The organization formed in 1994 that encompasses the GATT structures and extends it to new areas that had not been adequately covered previously. The WTO adjudicates trade disputes. All member countries have equal representation.
The World Bank Group has 5 institutions, each of which performs the following services
1) Lending money to the governments of developing countries to finance developing projects in education, health, and infrastructure
2) Providing assistance to governments for developmental projects to the poorest developing countries
3) Lending directly to help strengthen the private sector in developing countries with long-term loans, equity investments, and other financial assistance
4) Providing investors with investment guarantees against “noncommercial risk,” such as foreign investment
5) Promoting increased flows of international investment by providing facilities for the conciliation and arbitration of disputes between governments and foreign investors.
World Bank
AKA the International Bank for Reconstruction and Development. It was created to aid countries in financing their balance of payment difficulties and maintaining a relatively stable currency, the World Bank was initially intended for the financing of postwar reconstruction and development, and later for infrastructure building projects in the developing world.
International Monetary Fund
the stabilization of foreign exchange rates and the establishment of freely convertible currencies to facilitate the expansion and balanced growth of international trade.
Anti-dumping
They were designed to prevent foreign producers from “predatory pricing,” a practice whereby a foreign producer intentionally sells its products in the US for less than the cost of production to undermine the competition and take control of the market.
Geography
the study of Earth’s surface, climate, continents, countries, peoples, industries, and resources, is an element of the uncontrollable environment that confronts every marketer but that receives scant attention.
Sustainable development
An approach towards economic growth that has been described as a cooperative effort among businesses, environmentalist and others to seek growth with” wise resources management, equitable distribution of benefits and reduction of negative efforts on people and the environment from the process of economic growth.
Culture
A society’s accepted basis for responding to external and internal events.The human-made part of human environment—the sum total of knowledge, beliefs, arts, morals, laws, customs, and any other capabilities and habits acquired by humans as members of society.
Agents of change
Acculturation
The process of how a person learns and adjusts to a new culture.
Ex: Michele Phillips has just begun to understand French culture, even though she has lived in France for two years. She is nearly fluent in French. However, learning to live in France will take some time.
Socialization
a continuing process whereby an individual acquires a personal identity and learns the norms, values, behavior, and social skills appropriate to his or her social position.
Ex: Socialization Means- growing up
Innovation
An idea perceived as new by a group o people; when applied to a product, an innovation may be something completely new or something that is perceived as new in a given country or culture.
Hofstede’s elements of culture
He found that a wide variety of business and consumer behaviors patterns are associated with three of the four demensions.
1) Individualism/Collectivism Index (IDV)
2) Power Distance Index (PDI)
3) Uncertainty Avoidance Index (UAI)
4) Masculinity/Femininity Index (MAS)
Individualism/Collectivism Index (IDV)
Focuses on self-interest. The Individualism/Collective Index refers to the preference for behavior that promotes one’s self-interest
High IDV cultures reflect an “I” mentality and tend to reward and accept individual initiative
Low IDV cultures reflect a “we” mentality and generally favor the group over the individual
Collectivism pertains to societies in which people (from birth) are integrated into strong, cohesive groups, which protect them in exchange for unquestioning loyalty.
Power Distance Index (PDI)
Focuses on authority orientation. The Power Distance Index represents the extent of hierarchy in a society
(relationship between superiors and subordinates). Cultures with high PDI scores tend to be hierarchical and value power and social status. High PDI cultures think that those who hold power are entitled to privileges. Cultures with low PDI scores value equal opportunity and reflect egalitarian views.
Uncertainty Avoidance Index (UAI)
Focuses on risk orientation. The Uncertainty Avoidance Index measures the tolerance of uncertainty and ambiguity among members of a society. High UAI cultures are highly intolerant of ambiguity, experience anxiety and stress, believe a high level of authority is a means of avoiding risk. Low UAI cultures are associated with a low level of anxiety and stress, a tolerance of dissent, and a willingness to take risks.
Masculinity/Femininity Index (MAS)
Focuses on assertiveness and achievement.
Rituals
Patterns of behavior and interaction that are learned and repeated.
Ex – Marriage ceremonies and Funeral
Linguistic distance
The measure of difference between languages; an important factor in determining the amount of trade between nations.
Aesthetics
Philosophically, the creation and appreciation of beauty; collectively, the arts, including folklore, music, drama, and dance
ex.Aesthetic differences affect design, colours, packaging, brand names and media messages
Cultural sensitivity
an awareness of the nuances of culture so that a culture can be viewed objectively, evaluated and appreciated; an important part of foreign market.
Cultural borrowing
The phenomenon by which societies learn from other cultures ways and borrow ideas to solve problems or improve conditions.
Cultural congruence
a marketing strategy in which products are marketed in a way similar to the marketing of products already in the market in a manner as congruent as possible with existing cultural norms.
Planned change
a marketing strategy in which a company deliberately sets out to change those aspects of a foreign culture resistant to predetermined marketing goals.
Similar but Different
creates illusions of similarity that usually do not exist. Several nationalities can speak the same language or have similar race and heritage, but it does not follow that similarities exist in other respects—that a product acceptable to one culture will be readily acceptable to the other, or that a promotional message that succeeds in one country will succeed in the other.
“Many in the US see globalization as a negative. The text highlights a number of positives. What are concerns here for citizens opposed to foreign trade?”
“As noted in the group, globalization sparks many fears among US citizens. The losses of jobs and, in fact, entire industries have been discussed endlessly in the media. How the US competes in the world has been called into question. Additionally, we see other countries prospering at the expense of our interests. Compounding this is the fact that we hear that some countries manipulate their currency or subsidize their manufacturers giving them an unfair advantage in trade relations. All of these factors “add up” to make many citizens want to somehow distance themselves from globalization and protect the country’s interests.”
“The marketer’s task is the same whether applied to Dimebox, Texas, or Dar es Salaam, Tanzania. .”
The group’s comments were well target and quite informative. I agree with the group that the marketer’s task of managing and delivering value is important both here and worldwide. This part is universal and makes the marketer’s task the same. Still, we must keep in mind that more factors need to be considered and perhaps adapted to in foreign markets in order to accomplish this task. So, the “correct” answer here is one that recognizes both sides of the argument. Good!”
“What is the likely impact the worldwide recession will have on global marketing?”
The recession could also be looked upon as both a negative and a positive for global marketing. On the negative side, fewer buyers might mean fewer sales for all firms. As such, there are fewer jobs. Communities might “buy local” to preserve whatever wealth nearby. On the positive side, less demand may force firms to understand markets in greater detail in order to maintain their competitive footing. In such markets, it is important for firms to control costs yet at the same time remaining active to meet competitive moves as well as seek out (relatively risk-free) opportunities on the global stage. In strategy, theorists sometime write about firms engaging in “active waiting”. That is, they poise themselves to remain nimble, watching for not for “golden opportunities” or “dire threats” (both of which happen infrequently) but rather small adjustments that can provide continued growth and add to the firm’s competitive capacity. Good work!”
“What myths do you think many students have about global marketing?”
“This question often generates a lot of thoughts. Students’ comments fall along the lines of several themes. First, many students believe that you can market a product or service the basically the same way worldwide. Coupled with this belief is the notion that global marketing is relatively “easy” as a result. There is a lot of research required to understand how foreign markets are different and may require revisions to the firm’s business model. Also, with some diligence, trade barriers and obstacles can overcome. Often these barriers and obstacles are overstated by those not familiar with global trading. Second, many students fail to appreciate how cultural differences impact global (sales) marketing efforts. One needs to “do their homework” to anticipate how to position a product as well as conduct business with other professionals worldwide. Good!”
“The text holds that being globally aware is important in order to take advantage of business opportunities worldwide. Assume that you are applying to work for a major corporation. What indicators would you look for or notice as you “size up” your potential employer that they are “globally aware?”
“You would get a sense of how global a company is on your first visit by seeing how many foreign nationals were working there as well as how international marketing efforts were organized (e.g., is there an international division?). If their brands were selling well overseas you would have some reason to assume that the company was “globally aware” and able to work well in other cultures worldwide. This cultural/global awareness might help guide any social responsibility efforts to give back to the diverse communities that have helped make the company a worldwide success.”
“How globally aware should a student be at this point in their training and career development? What practical advice (given time and financial restraints that most students face) would you have for someone who wants to make their resume more “global?”
“Admittedly, it is hard to globalize your resume given the time and money constraints that many students face. Still, technology nowadays provides students with ready access to the world. As such, you can learn about markets and economic developments that are shaping the work world that you will be entering in upon graduation. Other ideas included in the discussion were studying abroad and enrolling in language classes. In some way you are trying to create “evidence” that you have global interests and ambitions. You might, for example, list the global courses/electives you took in college on your resume as a testimony to your interest and readiness to work in an interconnected world.”
“Given that there are many advantages for regional economic integration, why don’t we see more integration in the world economy?
“Your group noted a number of obstacles that prevent countries from engaging in trade. One noted in your discussion was the tension often found between countries who question if they will come out ahead in any trading agreements may stifle integration. Also, there are a large number of factors that have to line up (e.g., develop a common currency or banking system) in order to (fully) integrate economies. Even dropping some trade barriers is dependent upon countries being close by each other (physically) as well as sharing some common cultural or history. Even when these factors are shared, the process of negotiating other differences and giving up some political sovereignty in the process can be daunting. Also, to begin such a process of integration we need to find economies that are poised to complement each other (e.g., one supplies capital, the other supplies other factors of production like skilled labor, land…) to ensure that all develop economically over the long haul. Still, despite the number of obstacles involved we find hundreds of trade agreements in place worldwide. Some have been successful, others less so.”
Many people in the US and other countries as well believe that nations should protect their economies from the uncertainties of global commerce. Discuss how practical this is and the merits of this thinking.”
“During tough economic times nations want to protect themselves. Doing so, however, does have its costs in terms of consumers paying more for goods and restraining domestic growth (which may cut into job growth/opportunities). Perhaps the strategic thinking that is needed here is to somehow to simultaneously plan to protect key industries in the short term while taking steps to make them more competitive in open world markets ASAP. Doing so might strike a balance here between “stopping the bleeding” and “taking some necessary (at times painful) steps to mend the economy.”
“Are tariffs and quotas fair? Remember that fair requires one to balance the benefits and burdens of some action (e.g., a tariff) on all affected parties.
“The group’s overall consensus was that tariffs and quotas are somewhat fair. The rationale was that these maneuvers if used properly may balance out the benefits and burdens of all involved parties. Of course, this may be difficult to do or convince all parties that the tariff or quota in question works and that all are burdened and profit to the same degree. Tariffs and quotas might be justified to the degree that they “level the playing field.” That is, they remove any unfair advantages a nation may enjoy at the time to get all trading on the same footing or basis. Think of it as a handicap in bowling or golf. Still, quotas and tariffs are often used for political reasons like retaliating for human rights violations and lose sight of somehow balancing out economic benefits and burdens. As such, often these measures are seen as unfair. In sum, tariffs and quotas have mixed impacts for different parties and as such generate a lot of discussion.”
“Explain to a small business manager how the GATT and/or WTO have changed his/her industry or market over time. Each student might discuss one gain or challenge that these institutions have had on the average business person.”
“The group did a great job of identifying a number of trade initiatives championed by the GATT and WTO to assist small business owners to more readily enter global markets. The harmonization of product standards, the promotion of intellectual property rights, restricting dumping, and lowering of excessive tariff barriers make it possible for small business to enter foreign markets, earn a profit and protect their competitive position as well. Often students will note that the opening up markets may advantage large multinational firms more and thus place small businesses at a disadvantage in their home markets. This is true also. In sum, the plight of a small business in the more expansive global marketplace depends more now than ever on the strategic thinking and maneuvering of the small business owner.”
“Examine exhibit 2.2 on page 28 of your text. Knowing that many countries contribute to building some products, discuss the challenge of using trade barriers (e.g., nontariff and tariff) to protect the US economy from any given foreign economy/nation.”
“The group had a lively and quite detailed debate focusing on the tension that may exist between trading partners who are all working together to bring a product to market. Missed in the discussion, however, was the notion that it is difficult at times to see the “roots” of any trade imbalance (which may prompt the use of tariffs and quotas) since a product may require many nations to contribute to its production (e.g., Ipads and Iphones). Typically, the last country to “touch” the product and export it to the US gets “tagged” as the product’s country of origin. A tariff or quota levied against the “tagged nation” may work for its intended purposes but we may lose sight of who are real competitors are and how to deal more effectively with them.”
“Nontariff and tariff trade barriers will become obsolete soon as a means to protect economies and direct trade.
“Most believe that in time the use of trade barriers will decline some as markets develop and the trading field levels out over time. As such, firms will compete increasingly on the merits of their marketing offers and less on some temporary advantage (e.g., lower wages in a developing economy). How and when this will come about is anyone’s best guess.”
Why study geography in international marketing?”
All agreed that geography was important. Marketers need to know where they are at in order to know what might be sold and how. Weather conditions, for example, effects how a product is packaged, stored and made available for retail. Geography also influences what products may be in demand in a given area (e.g., high powered bug sprays in the tropics) as well as what products might be manufactured or produced there as well (e.g., rubber from the tropics). Good work!
What role does sustainable development play in international marketing now and in the future as well?”
“As discussed by your classmates, sustainable development delivers a “win-win” solution for businesses and consumers alike. Companies employing sustainable development will make wiser use of resources (driving down product costs). This makes it more likely that they will be able to make their products affordable to more markets. Also, many emerging economies (e.g., China) are beginning to require companies to be more ecologically-minded to protect citizens and the environment. In the near-term, entry and access to foreign markets may be dependent upon a firm not only having a product demanded by consumers but also one that wisely incorporates sustainable development in its design.”
“Can marketers act as cultural change agents? How? To what degree are marketers responsible for the consequences that result from the introduction of an innovation into a market that does change lifestyles and social patterns?”
Marketers act as change agents. They do so by introducing new products and services that change consumption patterns in the host country. Marketers need to be “Out in front of the changes.” That is, marketers must do some up front work to anticipate how some new product or service will be received in the foreign market. Some of this is simply a part of the job of doing business. Marketers are always trying to understand and predict consumer demand. Marketers may also want to understand reactions beyond sales figures. That is, how might other stakeholders in the market react as well? Might some new product threaten the community in some way and prompt the media or legislators to react? Still, one side of the argument often overlooked involves positive cultural changes. Do marketers ever get praise or recognition when they change a culture for the better (e.g., introduce exercise products to increase the overall health of some segment of the population)? The community (e.g., consumers and the government) also have a responsibility to assess the impact of new product and services. Thus, the responsibility is “shared” though often students feel that marketers bear the bulk of load here.”
“”It is stated that members of a society borrow from other cultures to solve problems that they face in common. What does this mean? What is the significance to marketing?”
“Cultures represent “solutions” to problems in living faced by its members. Other cultures may face similar difficulties and in addition to “trial and error” might turn to neighboring nations for solutions. Thus, cultures have borrowed from each other for centuries. Along these lines, marketers might frame new product introductions as “solutions” that others facing similar difficulties have used. This way, consumers’ resistance to change could be anticipated and encourage them to try out the innovation. Still, cultural borrowing and sharing requires the marketer to continue to be sensitive and responsive to important cultural differences.”
What is the importance of cultural empathy to foreign marketers? How do they acquire cultural empathy?”
“All readily agreed, that cultural empathy is vitally important as marketers try to understand consumers’ buying preferences. Still, the challenge is becoming culturally astute. It is unlikely that all will have the necessary background or training to take on this task. Some people are “naturally” more sensitive than others. In addition to having the right people “in place” the company needs to act rapidly and accurately to the insights they provide. Good work!”
“Suppose you were asked to prepare a cultural analysis for a potential market. What would you do? What would be important to include in your report?”
“Overall, the group opted to do a “deep dive” on understanding the market’s cultural underpinnings by researching a number of relevant topics. The list admittedly is quite long. In addition to doing the usual “desk research,” students often recommend visiting the culture to get a feel for the market as well. The final report would include some synopsis of the values, mores and history of the people to understand their preferences in greater detail.”
International marketing can be defined as:
the performance of business activities to sell a company’s goods and services for a profit in more than one nation.
Domestic marketing differs from international marketing as domestic marketing:
involves business activities like pricing, production and distribution, aimed toward a single market.
Which of the following would be considered an uncontrollable element in the foreign environment?
Cultural forces
Which of the following is a domestic environment uncontrollable that can have a direct effect on the success of a foreign venture?
Economic climate
Elements such as structure of distribution and cultural forces are regarded as _____.
foreign environment uncontrollables
Which of the following uncontrollable elements is likely to have an adverse effect on a company’s competitive position in foreign markets due to its influence on the company’s investment capabilities?
Disturbed domestic economy
When Rita Thomas’ clothing company began to market its line of inexpensive cotton shirts in Africa, it assumed that it would be able to use its television and print advertising measures that had worked very well in the United States and other countries. However, the company soon learned that literacy rates and ability to access television in other areas of the world were not comparable to the level prevalent in the home country. This pushed the company to think of other promotional measures that were not heavily dependent on literacy and technology. The factors that created difficulties for Rita’s company in this scenario can be regarded as:
foreign environment uncontrollables.
Allen’s is a cosmetics company in the UK. When Allen’s ventured into the Chinese market by setting up a manufacturing plant in China, the activists in China rallied against the company claiming that they are exploiting the cheap labor available there. They demanded that the manufacturing plant be closed down. Which of the following foreign environment uncontrollables is posing a challenge to Allen’s in the above scenario?
Political/legal forces
Sean Jay’s, a successful retail chain from Spain, failed to establish their market in Germany. The main reasons for their failure were designing their retail outlets in the same way as in Spain and selling their products at low prices. The people in Spain like to purchase products at prices they feel as bargain price, whereas people in Germany often associate low prices with a poor quality product. This shows that Sean Jay’s failed to adapt to which of the following uncontrollable factors?
Cultural influences
One of Phillipe Ortiz’s difficulties in marketing his line of Philippine cabinetry in Los Angeles is that he is still tied culturally to the business models that work in the Philippines. These models do not work well in the United States. Which of the following best explains the difficulty Philippe is experiencing?
Self-reference criterion
_____ is generally a problem when managers from affluent countries work with managers and markets in less-affluent countries.
Ethnocentrism
Which of the following is true of global awareness in the context of international marketing?
Global awareness can be generated by selecting individual managers specifically for their demonstrated levels of global awareness.
A company whose products reach foreign markets even though the company is not actively involved in cultivating customers outside the national boundaries is at the _____ stage of international marketing.
no direct foreign marketing
Randy, the marketing manager at Bryte Systems Inc., decides to sell to foreign markets as goods are available in surplus amounts. He has little or no intention of maintaining continuous market representation. Randy’s firm is at which of the following stages of international marketing involvement?
Infrequent global marketing
At the _____ stage of international marketing involvement, a firm has permanent productive capacity devoted to the production of goods and services to be marketed in foreign markets. In addition to this, the primary focus of operations and production is to service domestic market needs.
regular foreign marketing
The World Bank estimates that five countries whose share of world trade is barely one-third that of the European Union will, by 2020, have a 50 percent higher share than that of the European Union. Which of the following is one of the countries included in this list?
Russia
_____ refers to the system of accounts that records a nation’s international financial transactions.
Balance of payments
Which of the following is true regarding balance-of-payments records?
The fact that assets and liabilities balance does not mean that a nation is in particularly good financial condition.
Which of the following is most likely to be recorded on the minus side of the U.S. balance of payments?
New overseas investments
Which of the following would be the balance-of-payments account that records all merchandise exports, imports, and services plus unilateral transfers of funds?
Current account
A(n) _____ is a tax imposed by a government on goods entering at its borders.
tariff
In general, tariffs restrict:
manufacturers’ supply sources.
Iternational marketers are most likely to consider _____ to be “customs and administrative entry procedures.”
antidumping practices
Exporting countries agree to voluntary export restraints (VERs) generally as an alternative to the threat of:
stiffer quotas and tariffs.
Which of the following barriers require the importers who want to buy a foreign good to apply for an exchange permit?
Government approval
_____ is the practice whereby a foreign producer intentionally sells its products in a market for less than the cost of production to undermine the competition and take control of the market.
Predatory pricing
Which of the following is true with respect to the importance of culture to an international marketer?
Culture is pervasive in all marketing activities and the marketer’s efforts are a part of the fabric of culture.
An understanding of the origins and differences of culture will help international marketers:
foresee changes in current markets of operation.
Michele Phillips has just begun to understand French culture, even though she has lived in France for two years. She is nearly fluent in French. However, learning to live in France will take some time. The process of how a person learns and adjusts to a new culture is called:
acculturation.
Which of the following is true of family in the context of global marketing?
Family forms and functions vary substantially around the world.
In the context of Hofstede’s four dimensions, the _____ Index measures the tolerance of social inequality within a social system.
Power Distance
The adoption of yoga as a means of physical fitness in the U.S. demonstrates:
cultural borrowing.
Which of the following is true of the strategy of planned and unplanned change in global marketing?
Protein-rich diets were marketed using the strategy of planned change.