International Marketing (chapter 1)

International Mark eting P h i l i p R. C a t e o r a John L. Graham

The Scope and Challenge of International Marketing Chapter 1 McGraw-Hill/Irwin International Marketing

Iftekhar Amin Chowdhury (IAC)

Foreign Acquisitions of U.S. Companies Exhibit 1.1

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Selected U.S. Companies and Their International Sales Exhibit 1.2

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International Marketing • Multinational process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services and to create exchanges that satisfy individual and organizational objectives • 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 1-4

The International Marketing Task Exhibit 1.3

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Environmental Adaptation • Ability to effectively interpret the influence and impact of the culture in which you hope to do business – Cultural adjustments

• Establish a frame of reference • Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

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Environmental Adaptation (Examples) • Color of Mourning - Westerner: Black (White considers bridal dress) - Easterner: White • Raise a hand and make a circle with the thumb and forefinger (like zero) -

In US: OK

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In France: Zero / Worthless

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In Japan: Money [See the photographs at Page 14]

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The Self-Reference Criterion and Ethnocentrism • The key to successful international marketing is adaptation to the environmental differences from one market to another • Primary obstacles to success in international marketing – SRC – Associated ethnocentrism

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SRC and Ethnocentrism • SRC is an unconscious reference to – One’s own cultural values, experiences, and knowledge as a basis for decisions

• Dangers of the SRC – Failing to recognize the need to take action – Discounting the cultural differences that exist among countries – Reacting to a situation in an offensive to your hosts

• Ethnocentrism – Nation that one’s own culture or company knows best

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SRC and Ethnocentrism • Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market • The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior

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The Self-Reference Criterion and Ethnocentrism (Examples) • Communication Distance (American Vs Asian) • Refuse the hospitality (American Vs Asian) • Real Example: US experience regarding “Esso” (The brand name of gasoline)…in Japan, it means ‘stalled car’.

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The Self-Reference Criterion and Ethnocentrism (Examples)

Successful Stories:

1. A British Manufacturer In America: Cookies In Japan: Chocolate Biscuits (McVitie) 2. Unilever In UK: Paper pack and big in size In Brazil: Plastic pack and small in size 3. McDonald’s In America and Europe: Big Mac (with beef patties) In India: Maharaja Mac (with mutton patties) 1-12

Framework for Cross-cultural Analysis 1. Define business problem or goal • •

Home-country vs. foreign-country cultural traits, habits, or norms Consultation with natives of the target country

1. Make no value judgments 2. Isolate the SRC influence •

Examine it carefully to see how it complicates the problem

1. Redefine the problem • •

Without SRC influence Solve for the optimum business goal situation 1-13

Framework for Cross-cultural Analysis (Real Story) Story of an American CEO, who was posted in Japan and changed the meeting schedule… What happened ultimately??????

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Developing a Global Awareness • Tolerance of cultural differences: – Understanding cultural differences and accepting and working with others whose behavior may be different from yours

• Knowledge of cultures, history, world market potential, and global economic, social, and political trends

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Approaches to Global Awareness • Select individual managers specifically for their demonstrated global awareness • Develop personal relationships in other countries • Have a culturally diverse senior executive staff or board of directors

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Stages of International Marketing Involvement • No direct foreign marketing • Infrequent foreign marketing • Regular foreign marketing • International marketing • Global marketing

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No Direct Foreign Marketing • Products reach foreign markets indirectly – – – – –

Trading companies Foreign customers who contact firm Wholesalers Distributors Web sites

• Foreign orders pique a company’s interest to seek additional international sales

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Infrequent Foreign Marketing • Caused by temporary surpluses – Variations in production levels – Increases in demand

• Firm has little or no intention of maintaining continuous market representation – Foreign sales decline when demand or surplus decreases – May withdraw from international markets

• Little or no change in company organization or product lines 1-19

Regular Foreign Marketing • Firm has production capacity devoted to foreign markets • Firm employs domestic or foreign intermediaries – Uses its own sales force – Sales subsidiaries in important markets

• Products allocated or adapted to foreign markets as demand grows • Firm depends on profits from foreign markets Example: Meter-Man (Producer of agricultural measuring devices) 1-20

Regular Foreign Marketing • Director of Sales and Marketing of Meter-Man quoted – • “When you start exporting, you say to yourself, this will be icing on the cake; but now, I say going international has become critical to our existence.”

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International Marketing • Companies are fully committed and involved in international marketing activities. This generally entails not only the marketing but also the production of goods outside home country. Example: The story of Fedders (Largest manufacturer of Air conditioner in US) in China (Sales increased from 5 lacs to 4 million in five years) 1-22

Global Marketing • Company treats world, including home market as one market • Market segmentation decisions no longer focused on national borders – Defined by income levels, usage patterns, or other factors

• More than half of revenues come from abroad • Organization takes on global perspective 1-23

Strategic Orientation • Domestic market extension orientation • Multidomestic market orientation • Global market orientation

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Domestic Market Orientation • International operations viewed as secondary • Prime motive is to market excess domestic production • Firm’s orientation remains basically domestic • Minimal efforts are made to adapt product or marketing mix to foreign markets • Firms with this approach are classified as ethnocentric Example of Meter-Man

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Multidomestic Market Orientation • Companies have a strong sense that foreign country markets are vastly different • Market success requires an almost independent program for each country – Separate marketing strategies (mostly polycentric) – Subsidiaries operate independently of one another in establishing marketing objectives and plans – Products are adapted for each market

• Control is decentralized Example of Fedders

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Global Market Orientation • Company guided by global marketing orientation – Marketing activity is global – Market coverage is the world

• Firm develops a standardized marketing mix applicable across national boundaries – Markets are still segmented – Each country or region is considered side by side with a variety of other segmentation variables – Fits the regiocentric or geocentric classifications

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Global Market Orientation (Example) McDonald’s: – – – –

Process is standardized in every country Logo is same Most of the advertisements are similar Store decoration and layout almost alike

BUT

– Wine in France and Beer in Germany – A Filipino Style spicy burger in Manila – Pork burgers in Thailand

P&G pursue a global strategy for disposable diapers, but a multidomestic strategy in Asian markets for detergents. (The strategy differs product to product)

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The Orientation of International Marketing • An environmental/cultural approach to international strategic marketing • Intended to demonstrate the unique problems of international marketing • Discussion of international marketing ranges from the marketing and business practices of small exporters to the practices of global companies

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