The Scope and Challenge of International Marketing Chapter 1 McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

Chapter Learning Objectives 1. The changing face of U.S. business 2. The scope of the international marketing task 3. The increasing importance of global awareness 4. The progression of becoming a global marketer 5. The importance of the self-reference criterion (SRC) in international marketing

Preface “Never before in American history have U.S. businesses, large and small, been so deeply involved in and affected by international business. A global economic boom, unprecedented in modern economic history, has been under way as the drive for efficiency, productivity, and open, unregulated markets sweeps the world. Powerful economic, technological, industrial, political, and demographic forces are converging to build the foundation of a new global economic order on which the structure of a one-world economic and market system will be built” (Cateora and Graham) “Never before in American history have U.S. businesses, large and small, been so deeply involved in and affected by international business. A global economic boom, unprecedented in modern economic history, has been under way as the drive for efficiency, productivity, and open, unregulated markets sweeps the world. Powerful economic, technological, industrial, political, and demographic forces are converging to build the foundation of a new global economic order on which the structure of a one-world economic and market system will be built” (Cateora and Graham)

Top 15 cities to do business 1.Ahmedabad – India 2.Gurgao – India 3.Chengdu - china 4.Changquing – china 5.Austin – US 6.Salt lake city – US 7.Vancouver – Canada 8.Doha - Qatar 9.Melbourne 10.Bogota 11.San José 12.Santiago – Chile 13.Lagos – Nigeria 14.Warsaw – Poland 15.Stockholm - Sweden

Global Perspective: Recent Events Information technology boom of the late 1990s Wars in Afghanistan and Iraq September 11th attacks on the World Trade Center and Pentagon Enron and WorldCom scandals The high-tech bust of 2001

Global Perspective: Recent Events 2003 SARS outbreak in Asia Global terrorism, e.g., Indonesia, Israel, India, and Morocco Global terrorism, e.g., Indonesia, Israel, India, and Morocco Transcending these events, international commerce continued International conflict among China, Taiwan, and the United States International conflict among China, Taiwan, and the United States

Global Business Trends 1.The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA and the European Union 1.The rapid growth of the World Trade Organization and regional free trade areas, e.g., NAFTA and the European Union 2. General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe 2. General acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe 3. Impact of the Internet and other global media on the dissolution of national borders, and 3. Impact of the Internet and other global media on the dissolution of national borders, and 4. Managing global environmental resources 4. Managing global environmental resources

Internationalization of U.S. Business Increasing globalization of markets Increasing globalization of markets Firms face competition on all fronts Firms face competition on all fronts Many U.S. companies are now foreign controlled: Carnation (Swiss), Daimler-Chrysler (German) Many U.S. companies are now foreign controlled: Carnation (Swiss), Daimler-Chrysler (German) U.S. firms seeking foreign markets to increase profits U.S. firms seeking foreign markets to increase profits

International Marketing: A Definition International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit International marketing is defined as the performance of business activities designed to plan, price, promote, and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit Marketing concepts, processes, and principles are universally applicable all over the world

Why go International? Domestic Market constraint Competition Government Policies Monopoly Power Spin off benefits Profit Motive

The International Marketing Task 7 3. Economy Environmental uncontrollables country market A Environmental uncontrollables country market B Environmental uncontrollables country market C 1. Competition 2. Technology PriceProduct Promotion Place or Distribution 6. Geography and Infrastructure Foreign Environment (Uncontrollables) 7. Structure of Distribution 3. Economy 5. Political- Legal Domestic environment (Uncontrollables) (Controllables) 2.Technology 4. Culture 5. Political- Legal 4. Culture Target Market

Aspects of the Domestic Environment Domestic Foreign Policy Economic Climate Competition

Bangladesh continue following bans and restrictions on Israel. 1. Whenever any Letter of Credit (L/C) is established from a Bangladeshi bank, there is a specific clause in the L/C document stating, the good to be imported by Bangladesh) cannot be carried in 'Israeli flag' vessels. 2. Bangladesh Postal Service does not accept any letter or postal materials bound Israel nor it delivers anything from Israel. 3. Bangladesh blocks telephone and fax communications with Israel. 4. Travel Ban: Bangladesh continues travel ban on Israel. In all Bangladeshi passports, issued to civilians it is clearly written, "Valid for all countries in the world, except Israel", 5. Trade Ban: Because of the mentioned point 1,2,3 and 4, there is no business relations between Dhaka and Jerusalem.

Domestic v/s International Similarities Differences Understanding buyers needs Building Goodwill Research Development Understanding buyers needs Building Goodwill Research Development Political Entities Legal systems Cultural differences Different monetary systems Marketing infrastructure Trade Restrictions Procedures and documentations Highly unpredictable Political Entities Legal systems Cultural differences Different monetary systems Marketing infrastructure Trade Restrictions Procedures and documentations Highly unpredictable

Environmental Adaptation Needed Differences are in the uncontrollable environment of international marketing Differences are in the uncontrollable environment of international marketing Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution) Firms must adapt to uncontrollable environment of international marketing by adjusting the marketing mix (product, price, promotion, and distribution) Adaptation (of Marketing Mix) Standardization (of Marketing Mix) Continuum INFLUENCED BY 7 ENVIRONMENTAL FACTORS

Self-Reference Criterion (SRC) and Ethnocentrism:Major Obstacles SRC is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions Ethnocentrism refers to the notion that one’s own culture or company knows best how to do things Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light Reactions to meanings, values, symbols, and behavior relevant to our own culture are different from those of foreign Relying on one’s SRC could produce an unsuccessful marketing program

Avoiding the Self Reference Criterion To avoid the SRC, the following steps are suggested: 1: Define the business problem or goal in home-country cultural traits, habits, or norms 2: Define the business problem or goal in foreign-country cultural traits, habits, or norms. Make no value judgments 3: Isolate the SRC Influence in the problem and examine it carefully to see how it complicates the problem 4: Redefine the problem without the SRC influence and solve for the optimum business goal situation*

Developing a Global Awareness To be globally aware is to have: 1. Objectivity 2. Tolerant of Cultural Differences, and 2.Knowledgeable of: (a) Culture, (b) History, (c) World Market Potential, (d) Global Economic, Social and Political Trends

Stages of International Marketing Involvement In general, firms go through five different phases in going international: Infrequent Foreign Marketing No Direct Foreign Marketing International Marketing Regular Foreign Marketing Global Marketing

Pizza Hut: most popular pizza toppings by country US-pepperoni England-corn and tuna India-pickled ginger Japan-squid Guatemala-black bean sauce Australia-eggs Bahamas-barbecued chicken

So, when can we standardize? Consumer products bought on functional characteristics –stereos, computers, cameras Common cross-border segments, especially high end, image products –jewelry, cosmetics

When can we standardize? (continued) Industrial products –airplane engines, semiconductors, medical equipment, etc Services –banking, accounting Brands positioned on country-of-origin –Fosters’ beer, Marlboro cigarettes

When is standardizing least likely to work? Consumer products where unique taste differences are important –foods –personal care products –clothing

For example, potato chips in China Frito-Lay found that sales went way down in summer –Chinese culture includes balance (yin/yang) in foods: in summer, foods emphasizing cooling are eaten, in winter the opposite. –Fried foods are associated with yang…associated with heat. Solution: cool lemon flavor potato chips packaged with cool pastel colors…best selling new product ever for Lays in China

Global Marketing A global marketing strategy involves the creation of a single strategy for a product, service, or company for the entire global market –A basic strategy –Flexibility to adapt to local market conditions where necessary

Global Localization- Think Globally, Act Locally Global Marketing requires marketers to behave in a way that is global and local at the same time by responding to similarities and differences in world markets.

Coca-Cola Attempting to maintain core global brands –global positioning –modified where necessary Local managers have autonomy to develop local brands for local reasons –MezzoMix and Berry Fanta in Germany –Pear drink in Turkey –Iced coffee in Japan

Strategic Orientation: EPRG Schema Orientation EPRG Schema Domestic Marketing Extension Multi-Domestic Marketing Global Marketing (Ethnocentric) (Polycentric) (Regio/Geocentric)

Generally, four distinctive approaches dominate strategic thinking in international marketing: Strategic Orientation: EPRG Schema 1. Ethnocentric or Domestic Marketing Extension Concept: 2. Polycentric or Multi-Domestic Marketing Concept: Opposite of ethnocentrism Management of these multinational firms place importance on international operations as a source for profits Management believes that each country is unique and allows each to develop own marketing strategies locally Home country marketing practices will succeed elsewhere without adaptation; however, international marketing is viewed as secondary to domestic operations

Generally, four distinctive approaches dominate strategic thinking in international marketing: Strategic Orientation: EPRG Schema 3. Regiocentric: 4. Geocentric: Regiocentric and Geocentric are synonymous with a Global Marketing Orientation where a uniform, standardized marketing strategy is used for several countries, countries in a region, or the entire world Sees the world as one market and develops a standardized marketing strategy for the entire world