MART326: Introduction and Rationale for international marketing

What shapes your perception of the world?
– Family context (where you were born, how you were brought up)
– Time spent overseas (acculturation)
– Media (what we have access to)
– Friends
– Interests
– Cosmopolitanism (being interested in other countries)
NZ’s top trading partners
1. Australia
2. China (trade agreement in 2008) – top destination for goods being exported.
3. European Union (UK is the top destination for exports in Europe)
4. USA
5. Japan
6. Singapore
7. Korea
What does NZ export?
1. Dairy products – top destination is China
2. Business and other personal travel – top destination is Australia and EU
3. Meat – top destination is USA and EU
4. Wood
5. Education travel
6. Fruit
7. Air transport
What does NZ export and where from?
Machinery and vehicles, business and other personal travel, petroleum and products, textiles (clothing), plastic.
China, EU (predominantly UK), Australia
Who is NZ’s top export market?
China (overtook Australia; exports have more than tripled since signing the FTA in 2008).

– Buying more meat, dairy products and pine logs.
– Largest source of foreign students.
– One of the fastest-growing sources of tourists.

NZ Food and Beverage exports
NZ food and beverage exports are growing (from NZ $7.76 billion in 1990 to NZ $22.9 billion in 2008). NZ accounts for just 2.5% of global trade in food.
NZ challenges
– Location (we are far away from other countries).
– Market size (we have a small domestic market).
– Capital (limited pool of domestic capital).
What is NZ’s top destination for exporting food and beverage?
East Asia (taken over from Europe)
Where might growth lie?
Growth in export markets might lie in Africa, Southern Asia and Eastern Asia in the future but we also must consider relative growth in income (whether citizens can afford to buy the things we export).
Largest exporting firm NZ
Fonterra
Supply Chain (lamb):
– Farmers
– Meat Processors
– Meat Packers
– Retailers (have often had a lot of control)
– Consumers
Supply Chain (milk):
– Farmers
– Dairy Processors
– Food Manufacturers
– Retailers
– Consumers
New Zealand’s International Success stories:
– New Zealand Honey Co (Otago-based and now stocked in 430 of the UK’s largest health food retailer Holland and Barret’s Stores).
– Whittaker’s (Now stocked in Asia as well, promoted by Nigella Lawson)
– RJ’s Licorice (competes with Nestle and Cadbury, 35% is exported, still NZ privately owned company)
Largest economies predicted for 2050
China, US, India, Japan
What is an Asian market challenge?
– Asian Tastes and Preferences – they don’t eat the same products or the same way as us. E.g. can’t market cereal to them as they eat different things for breakfast. Asians don’t tend to eat breakfast cereal. It’s too expensive for them.
What is international marketing?
“The process of planning and undertaking transactions across national boundaries that involve exchange”

Also fulfilling customer needs and wants across national boundaries.

International Marketing forms
“Its forms range from exporting to licensing to joint ventures to wholly owned acquisitions to management contracts” Fletcher & Crawford (2010, p. 8)
Outsourcing is a common form.
Czinkota & Samli, 2007; influence of globalisation
‘the increase in the frequency and duration of linkages between countries, leading to similarities in activities of individuals, practices of companies, and policies of governments’ (Czinkota, 2002).

We are moving towards countries being more similar than different.

Firms in international markets typically achieve…
lower costs and higher profits (because of economies of scale).
Why do many still refuse to participate in global markets?
Too risky/too unprepared.
The Four P’s
price, product, promotion, channels of distribution (place). These are generally the things we can control.
What are the various orientations of firms?
Ethnocentric
Polycentric
Regiocentric
Geocentric
Ethnocentric
“home country superior” (eg. meat, buy national campaigns). They think that what they do in their home country will work.

They think that the approach used in the home country should be applied to every other country.
This leads to the view that the products can be sold everywhere without adaptation.

Polycentric
recognises that each country is different, tailor products for each country (eg. Nestle).

opposite of ethnocentric. Recognises that each country is different and no country is inferior to another. Products must be tailored for each country (eg. Nestle).

Regiocentric
integrated strategies developed for the region taking into account both the similarities and differences between the home market and the region (the region is viewed as the market); the world outside viewed from either ethno- or polycentric perspective (eg. Kraft, L’Oreal, Toyota) Think about how we slice/divide the world up (e.g. divide Asia into different regions).

Focusing on a group of countries which have comparable market characteristics. Strategies are formed on the basis of the entire region rather than individual countries.

Geocentric
the entire world is a market; global approach (eg. Estee Lauder, Hyundai). More about standardisation. Consumers across the world are the same (e.g. students across the world).

Involves a world marketing strategy based on the recognition that countries have both similarities and differences.
Synthesis of the ethnocentric and polycentric approaches. Seeks to operate a global approach that is able to respond to local needs and wants.

“The Globalisation of Markets” – Theodore Levitt – the earth is flat
similarities or marketing universals more than differences (segmentation, global communities).
“The Globalisation of Markets” – Theodore Levitt – technology
“A powerful force drives the world toward a converging commonality”
“The Globalisation of Markets” – Theodore Levitt – ” almost everyone wants…
all the things they have heard about, seen or experienced” – global homogeneous need and modernity, e.g. yuppie international
Conclusion of Czinkota & Samli, 2007
There is a further flattening of the world; the world is so interconnected that it is almost impossible to tell the difference anymore.
Concepts underlying International Marketing
– Comparative advantage: countries should focus on what they do well rather than trying to produce everything.
– Product lifecycle extension: everything has a life cycle. Different economies at different stages will provide new growth markets for mature products. Products may become obsolete (not available anymore).
Developing Global Awareness
Tolerance of cultural differences
Knowledge of cultures and history
Knowledge of global economic, social and political trends
Avoidance of self-reference criteria and ethnocentrism (e.g. how close we stand to another person when talking to them, what time we turn up to meetings)
Study abroad for part of your degree
Learn a 2nd, 3rd or 4th language
What are the driving forces of international marketing? (x5)
1. Market needs: needs transcend national boundaries and exist in many countries. International marketing is about catering to these needs.
2. Technology: everyone aspires to the latest technology. Only the application is different.
3. Cost: economies of scale from supplying multiple countries can drive down costs.
4. Government: creation of policies and standards that are compatible with other countries.
5. Communication: new innovations become known throughout the world more rapidly.
What are the restraining forces of international marketing? (x4)
1. Differences between national markets: must adapt some elements of the marketing.
2. Control over entry and access by the other country: tariffs (however this has been reduced as a result of the WTO), non-tariff barriers.
3. Actual or perceived risk: commercial, cross-cultural, country (political and legal) and financial risks.
4. Myopia by managers (due to ethnocentric attitudes).
The reasons for undertaking international marketing can be
proactive or reactive and can come from either internal drivers or external opportunities.
Proactive – internal (x 5)
• Management desire: whether management wishes to have international involvement.
• Unique features of the offering: offer may be attractive to foreign buyers.
• Utilise excess capacity: only export if they have excess capacity.
• Small size of the domestic market: some products cannot survive on the domestic market alone and need to go overseas.
• Stagnant or declining domestic market: overseas market may provide relief if the domestic market is stagnant (e.g. recession).
Reactive – internal (x 2)
• Diversifying risk: being involved in international markets reduces risk overall.
• Reduce the disadvantage of seasonality: seasons in southern hemisphere are reverse in northern hemisphere and so can take advantage of this.
Proactive – external (x 2)
• Opportunities in foreign markets: research is done to find opportunities for business overseas.
• Other sources of stimulus: international involvement may be more attractive (e.g. if incentives or assistance are provided by international governments).
Reactive – external (x 1)
• Unsolicited order: many firms become involved overseas because they receive an ‘out of the blue’ order from overseas.
Approaches to international marketing
• From domestic to transnational
• From indirect exporting to foreign direct investment:
• From an export focus to a holistic focus:
From domestic to transnational
firms are considered in terms of their orientation.
Export marketing is the first stage in moving to an international market.
Following this is a greater commitment of resources to overseas (e.g. establishing direct representative in that country).
Then operating on a multinational basis: creating programmes specifically for each overseas market.
Finally, global or transnational marketing by playing on the differences in each country to create the most globally competitive offering.
From indirect exporting to foreign direct investment:
firms are classified according to the nature of their involvement in export-led or outward-driven international activities.
Initially firms may not export on a direct basis but rather through an export intermediary.
Next the firm will export directly, but appoint an agent to represent its interests overseas (most common).
The next step would be to establish a sales office in the market.
From an export focus to a holistic focus:
firm may also import inputs.
Initially the firm imports through an agent based in their home country and then imports direct from overseas. Then it may establish a buying office overseas. The next stage would involve manufacturing the foreign product in their home country under licence/franchise. The final stage could be foreign direct investment.
Comparative advantage
countries should focus on what they do well rather than trying to produce everything. It is beneficial for two countries to trade as long as one is more efficient producing goods and services wanted by the other. What matters is the relative efficiency of each producing the product or supplying the service (not the absolute cost).
Product lifecycle extension:
everything has a life cycle. Products proceed through stages in their life from their inception to their abandonment.
These stages are usually labelled ‘introduction’, ‘growth’, ‘maturity’ and ‘decline’.
The life of a product could be extended by exporting to an overseas market.
Product trade cycle:
the relationship between product and market proceeds through four stages.
1. Export to overseas market.
2. Production commences in that overseas market.
3. Overseas country then exports to nearby markets.
4. Because of rising production costs, it is no longer worthwhile producing in home country and overseas country begins supplying home firm.
Internalising:
replicating its domestic market operation in the overseas market in terms of activity, management and control.
The wheel of international marketing
– Product, price, promotion and distribution can be controlled by the firm.
– Regulations on exporting are imposed for many reasons and cannot be controlled. They are there for protection usually.
Global companies:
produce for the world market and production occurs where it can be done cheapest. Standardised high-volume production.
Transnational companies (multinationals):
produce goods and services or manage investments in more than one country. Blend market specific approach with standardised production.
Multi-domestic companies:
willing to customise their product and market strategy to different local conditions.