International Marketing

Understand the importance of international marketing Appreciate the opportunities and challenges offered by international marketing Recognize the effect of the global environment on international marketing activities Understand the process of market selection

Recognize the process of internationalization. Appreciate the different forms of market entry Comprehend the international adjustment of the marketing mix Understand the steps necessary for the implementation of an international marketing strategy

WHAT INTERNATIONAL MARKETING IS: International marketing is the process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations.

PLANNING FOR INTERNATIONAL MARKETING How will my product fit into the international market? What marketing adjustments are or will be necessary? What threats from global competition should I expect? How can these threats be turned into opportunities?

TABLE 3.1 Top 25 Multinational Firms

TABLE 3.1 Opportunities Integrate global knowledge Expand long-run production Lengthen and rejuvenate product life cycles

THE INTERNATIONAL MARKETING ENVIRONMENT Cultural Environment Socioeconomic Environment Legal and Political Environment

THE INTERNATIONAL MARKETING ENVIRONMENT International marketer surveys:  Depth of traditional beliefs and attitudes and dominant cultural elements  Power of opinion leaders and change agents  Communication from different media Socioeconomic Environment Political/Legal Cultural Environment

Four Dimensions of Culture  Degree of Individualism  Level of Equality  Uncertainty Avoidance  Material Achievement

Four Dimensions of Culture Cultural Environment

Socioeconomic Environment Population  Age Distribution  Income  Infrastructure

Socioeconomic Environment Population and its characteristics  Aging of world populations for example Economic Integration  NAFTA, EU, MERCOSUR Socioeconomic Environment Political/Legal Cultural Environment

Socioeconomic Environment Political/Legal Cultural Environment Elderly population boom changes U.S. market characteristics Source: Growth Rate Decades

Legal and Political Environment Legal and Political Issues Facing Marketers  Intellectual Property Rights  World Trade Organization (WTO)  Common Law  Code Law  Antidumping Laws

Legal and Political Environment Host country  Minimum wage legislation  Regulatory measures  Lack of enforcement Home country  Import/Export restrictions, etc. Socio-Economic Environment Political/Legal Cultural Environment

Legal and Political Environment Socio-Economic Environment Political/Legal Cultural Environment Intellectual property rights Common law Vs Code law  Tradition/ precedence vs comprehensive written statutes  Often a mixture of two systems

Legal and Political Environment Socio-Economic Environment Political/Legal Cultural Environment International Law World Trade Organization  Defines economically acceptable practices for its member nations  Intent is to provide stable markets

INTERNATIONAL MARKET SELECTION Identification of Potential Markets Selectively expanding

Figure 3.3 Screening Process in Target Market Choice

Market potential Level of sales that might be available to all marketers in an industry in a given market.

Sales potential Share of the market potential that a particular marketer may hope to gain over the long run.

Expansion – Concentration versus Diversification Concentration – market development strategy that involves focusing on a smaller number of markets Diversification – marketing development strategy that involves expansion to a relatively large number of markets.

THE INTERNATIONALIZATION PROCESS Major Motivations to Internationalize Proactive Profit advantage Unique products Technological advantage Exclusive information Tax benefit Economies of scale

Reactive THE INTERNATIONALIZATION PROCESS Major Motivations to Internationalize Competitive pressures Overproduction Declining domestic sales Excess capacity Saturated domestic markets Proximity to customers/ports

ALTERNATIVE ENTRY STRATEGIES Indirect Exporting and Importing Direct Exporting and Importing Licensing (Franchising) Foreign Direct Investment

ALTERNATIVE ENTRY STRATEGIES First Tier  Direct exporting/importing  Indirect exporting/importing  Licensing and franchising Second Tier  Foreign Direct Investment  Joint ventures  Contract manufacturing

ALTERNATIVE ENTRY STRATEGIES Indirect Exporting and Importing  Intermediary used to deal with foreign customers or firms  Low management commitment  Often unintended or unaware

ALTERNATIVE ENTRY STRATEGIES Direct Exporting and Importing  Control international activities better  Can lead to further growth with trading partners  Must find customers, markets

ALTERNATIVE ENTRY STRATEGIES Intermediaries  Importers/Exporters frequently use them Export Management Companies (EMC) Trading Company

ALTERNATIVE ENTRY STRATEGIES Licensing  Use of intellectual property for compensation  Low capital investment and involvement  Capitalize on R&D  Can create competition

ALTERNATIVE ENTRY STRATEGIES Franchising  Grant by parent company to independent entity to do business in a prescribed manner  Sell franchiser’s products using name and marketing techniques or business approach  Franchise must offer high uniqueness with high standardization

ALTERNATIVE ENTRY STRATEGIES Foreign Direct Investment  Generally large MNC due to capital and risk factors  Need for wide market access remedied by acquisition  Circumvent barriers to trade  Government incentives

ALTERNATIVE ENTRY STRATEGIES Full Ownership - often desirable and often impossible Joint Venture - collaboration between 2+ organizations  Share assets, risks, profits  Partner brings local expertise, influence

ALTERNATIVE ENTRY STRATEGIES Strategic Alliances - Informal or formal arrangements between 2+ companies with common objective  Flexible to environmental conditions  Pooling of expertise

ALTERNATIVE ENTRY STRATEGIES Contractual Arrangements  Cross-marketing  Outsourcing  Contract manufacturing

Figure 3.4 Complementary Strengths Create Value

Figure 3.5 COMPREHENSIVE VIEW OF INTERNATIONAL EXPANSION

International Expansion 3 Factors to Market Approach Government regulations Customer characteristics, expectations, and preferences Purchase patterns State of economic development Competitive offerings Climate and geography Market Characteristics

International Expansion 3 Factors to Market Approach Government regulations Customer characteristics, expectations, and preferences Purchase patterns State of economic development Competitive offerings Climate and geography Market Characteristics Product constituents BrandPositioningPackaging Country of origin Product Characteristics

International Expansion 3 Factors to Market Approach Government regulations Customer characteristics, expectations, and preferences Purchase patterns State of economic development Competitive offerings Climate and geography Market Characteristics Product constituents BrandPositioningPackaging Country of origin Product Characteristics Profitability Market opportunity Policies Company Considerations

International Expansion

Mandates most marketing-mix adjustments Government regulations are most prevalent  Standards (language, ISO 9000, etc.) Product positioning changes

International Expansion Global products  Only changes possible are to positioning  Product timing based on economic growth Price competition  Foreign exchange factor  Extra costs incurred (shipping, etc.)

International Expansion Climate and geography  Food product distribution is different in many countries

International Expansion Cannot contain features/ingredients in violation of law/custom Standardization applied most successfully in culturally similar markets Promotional features and packaging often varied

International Expansion “Is it worth it?” Can the company justify internationalization?

Adjusting the Marketing Mix Standardized Approach Multi-domestic Approach Globalization Approach

Figure 3.6 Factors Affecting Marketing-Mix Adjustments

Product Decisions Design Branding Packaging Labeling

Promotion Decisions Positioning Copy

Figure 3.7 Promotion Decisions

Distribution Decisions Tactical and Market-by-market

Pricing Decisions Price Escalation Due to Costs Foreign-exchange Rates

IMPLEMENTING MARKETING PROGRAMS WORLDWIDE Management Process Organization Structure

IMPLEMENTING MARKETING PROGRAMS WORLDWIDEHeadquarters Division A Division B Division C

IMPLEMENTING MARKETING PROGRAMS WORLDWIDEHeadquarters Division A Division B Division C Management Process  Information flows between headquarters and country organizations  Information flows between country organizations

IMPLEMENTING MARKETING PROGRAMS WORLDWIDE Management Process  Personnel exchange  Headquarters coordinates and leverages combined resources  Centralized marketing strategy with local marketing augmentations  Certain marketing-mix aspects are left localized (distribution channels, etc.)

IMPLEMENTING MARKETING PROGRAMS WORLDWIDE Organization Structure  Matrix style has replaced the country division model  Product groups coordinate efforts at headquarters

Supplemental Material

International Expansion 3 Ways to Approach International Markets Make no special provisions

International Expansion 3 Ways to Approach International Markets Make no special provisions Adapt to local conditions in each target market (multi- domestic approach)

International Expansion 3 Ways to Approach International Markets Make no special provisions Adapt to local conditions in each target market (multi- domestic approach Incorporate differences into a regional/global strategy to allow for local implementation (globalization approach)