International marketing

Global Marketing Vs. Marketing
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of goods, ideas, and services to create exchanges that satisfy individual and organizational goals.
Global marketing focuses on global market opportunities and threats.
Nature of Activities
Scope of Activities

Reasons for Global Marketing
Growth
Access to new markets
Access to resources
Survival
Against competitors with lower costs (due to increased access to resources

Keys to Global Success
Value creation
Competitive Advantage
Focus

Value Creation
Value = Benefits/Price
Price is a function of money, time, and effort
Benefits result from the product, promotion, and distribution
2 methods of value creation
Improved benefits
Lower prices

Competitive Advantage
Success over competition in industry at value creation
Achieved by integrating and leveraging operations on a worldwide scale

Focus
Concentration and attention on core business and competence
Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all fields. There are certain areas we do not touch…..We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.
Helmut Maucher

Globalization or Global Localization?
Globalization
Developing standardized products marketed worldwide with a standardized marketing mix
Essence of mass marketing
Global localization
Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction
Essence of segmentation
Think globally, act locally

Examples of Global Marketers
Coca-Cola
Philip Morris
Daimler-Chrysler
McDonald’s
Toyota
Ford
Unilever
Gillette
IBM
USA
USA
Germany
USA
Japan
USA
UK/ Netherlands
USA
USA

Why Go Global?
For US-based companies, 75% of sales potential is outside the US.
About 90% of Coca-Cola’s operating income is generated outside the US.
For Japanese companies, 85% of potential is outside Japan.
For German and EU companies, 94% of potential is outside Germany.

Globalisation Drivers
Market - common customer needs, global customers, global channels, transferable marketing, leading markets
Competitive - common competitors using global strategies
Cost - scale economies, scope economies, sourcing advantages, avoidance of duplication
Government - favourable trade policies, compatible technical standards, common marketing regulations

Competition in a Shrinking World
Five key factors
Communications and logistics
Financial and non-monetary settlement
World wide dedication to trade (eg. WTO, GATT)
Role of multinationals (large, dominant, subsidiaries in many countries)
Importance of peace

Barriers to Globalisation
Large domestic market - no short term need
Ignorance and uncertainty of foreign trade
Ethnocentricity
Political and economic risk
Barriers to trade - difficulty of penetration

Multinational v Global Markets
Multinational
Markets defined by country borders
Significant customer differences by country
Segments defined locally
Local competition
Relative market isolation
Locally based strategies
Global
Markets transcend borders
Significant customer similarities by country
Trans-national segments
Global competition
Interdependent markets
Global strategies

Multinational versus Global Organisations
Multinational firms combine various market entry strategies, with modification of approach based on local needs
Global corporations treat the entire world as a single entity. Products and brands are standardised world-wide

Risk Assessment
Category One - Inherent
Governmental and political environment
Stability of the host nation
Economic climate and prognosis
Possibility of nationalisation, expropriation, taxes, strikes, riots, revolutions
Category Two - Developing
Interaction between the host government and other nations, world organisations, NGOs/groups, movements
Possibility of retaliatory tariffs and quotas, boycotts, embargoes, deteriorating relationships, terrorism etc.

Culture and International Marketing
Culture shapes demand
Culture affects business relationships and communications

Understanding Culture
Culture:
The accumulation of shared meanings, rituals, norms, and traditions among the members of an organization or society.
A society’s personality
Consumption choices cannot be understood without cultural context.
A consumer’s culture determines the priorities the consumer attaches to activities and products.

What Is Culture?
Culture is “the collective programming of mind which distinguishes one category of people from another.”
Geert Hofstede
Culture is learned behaviour and value systems learned from
One’s environment
Family & friends
Society at large

Culture’s Components

Interpreting symbols
7 bad luck in Kenya
7 good luck in the Czech Republic
7 magical in Benin, Africa
10 is bad luck in Korea
4 is related to death in Japan
Red represents witchcraft and death in many African countries, but is a positive in Denmark
Avoid triangular shapes in Hong Kong, Korea & Taiwan
It is a negative shape
SOURCE: Business America, July 12, 1993

Four Dimensions of Cultural Variability
(Hofstede 1980)
Power Distance
Uncertainty Avoidance
Masculinity/femininity
Individualism
Collectivist Cultures: People sub-ordinate their personal goals to those of a stable in-group
Individualist Cultures: Attach more importance to personal goals, and people are more likely to change memberships when the demands of the group become too costly.

Characterizing Dimensions
Relation to authority
hierarchical relations (power distance)
Relation to self
self-concept and personality (individualism)
Relation to risk
tolerance for unknown and deviations (uncertainty avoidance, tightness)
Propensity to change
receptivity of changes (Long term orientation)
Source: Clark (1990)

Individualism v Collectivism
Individualism is the extent to which individuals are integrated into groups
Individualist societies
Others seen as resources
Task prevails over relationship
Calculative employer-employee relationship
e.g. USA (91) UK (89) Netherlands
Collectivist societies
Others seen as group members
Relationship prevails over task
Moral model of employer-employee
e.g. Pakistan (14) Hong Kong (25) Taiwan, (mid-range Japan India Spain)

Countries (1980)
Individualism
United States
Great Britain
Canada
Italy
Australia
Collectivism
Japan
Iran
Taiwan
Colombia

Power Distance
Power distance is the extent to which the less powerful members of an organisation accept the inequality

Small Power Distance Societies
Small power distance society
Hierarchy means inequality of roles is established for convenience
Subordinates expect to be consulted
Ideal boss is a resourceful democrat
Examples
Austria PDI 11
Israel PDI 13
UK PDI 35

Masculinity v Femininity
Hofstede (1998) Masculinity & Femininity
Masculine societies
Assertiveness is appreciated
Oversell yourself
Stress on careers
Decisiveness
Strong:Japan MAS 95, Italy MAS 70
Moderate: UK MAS 66
Feminine societies
Assertiveness ridiculed
Undersell yourself, be modest
Emphasis on quality of life
Intuition
Strong: Sweden MAS 5
Moderate: France MAS 43

Long/short term orientation or Confucian Dynamic
High
Many truths
(time, context)
Pragmatic
Long-term orientation
Acceptance of change
Perseverance
Thrift for investment
Low
Absolute truth
Conventional/traditional
Short term orientation
Concern for stability
Quick results expected
Spending for today

What correlates with Hofstede’s dimensions? (Hofstede 2001)
Individualism
purchase insurance, have dogs, own a motor home for leisure, read more books, have an answering machine
Masculinity
status purchases (watches, jewellery), importance of car engine power, business class travel, confidence in advertising
Partner involvement in car choice, women as main shoppers
Power Distance
confidence in the press, lack of confidence in police, child obedience
Uncertainty Avoidance
buying new (vs used) cars, buying precious metals and gems, use of mineral water
buying stocks, use of internet and other media, eating ice-cream, frozen food, confectionary and snacks

Socio-cultural environment
Family – Individualism & Collectivism
Extent of group/family influence on attitudes and buying behaviour?
Consumer behaviour reflects self-actualize individual identity or group belonging?
Social class
Is it locally important?
Is class belonging demonstrated through consumption?
Type of products or services? Exclusive shops?

Socio-cultural environment
Sex roles
Division of labour?
Who makes buying decisions? Who shops?
Age influences
Do people know their age?
Value of younger and older people in society?
Influence processes across age groups?
Purchasing power distribution across generations?

Loyalty – brand, product, store …
USA – value opportunity
Assumed disloyal
Enjoy change more than stability
Price competition
Asian – value certainty
High level of since brand dominance
Rely on information from reference group, word of mouth is important
Follow group consensus until proved wrong

Key Issues
Time
Language, forms of address
Non-verbal communication, dress code
Responsibility
Introductions
Negotiations

The Great Divide - Deal v Relationship
Deal Moderately Relationship
Focused Deal-Focused Focused
Northern Europe Britain Arab World
Germany South Africa Africa
North America S Europe Latin America
Australia & NZ Hong Kong Asia
Singapore
Source: Gesteland, RR 1999 Cross-cultural Business Behaviour
Copenhagen Business School Press

Euroconsumer: Fact or Fiction?
Levitt (1983) “The world’s needs and desires have become irrevocably homogenised.”
Technology
Communications
Media & travel
Country of origin effects - do they persist?

International Marketing Environment

IT Environment
New Challenges in Marketing
The Age of Technological Discontinuities
The Economic Environment
Stages of Market Developmet
Marketing and Economic Development
The Political Environment
Issues
Current Trends
Ways to avoid legal problems
Overview

E-Commerce
Intranet
Internet
Portals
Web Browser
World Wide Web
Virtual Reality
EDI (electronic data exchange)
IT Environment

The Age of Technological Discontinuities
The rapid advances in ICT are profoundly affecting the way global marketing is conducted (New Economy)
additional distribution and communication channels (e-commerce)
precise targeting (segment of one), customisation and interaction
fundamentally new business models (network organisations)
empowered customers

The Economic Environment
World Economy has changed profoundly during the last 50 years
Emergence of global markets
Integration of world economy
Capital movements are driving force of world economy
Production is “uncoupled” from employment
Macroeconomics of individual countries no longer control economic outcomes

Economic Systems:
Rankings of economic freedom among countries
Free:
E.g., Hong Kong, Singapore, US, Japan, UK, Taiwan, Bahrain
Mostly Free
E.g., Canada, Germany, Austria, Estonia, France, Sweden, Hungary
Mostly Unfree
E.g., Turkey, Mexico, Israel, Malta, Russia, Bulgaria, Philippines
Repressed
E.g., North Korea, Haiti, Moldova, Angola, Cuba
Index of Economic Freedom (Source: Heritage Foundation)
Variables considered include such things as:
Trade policy Banking policy
Wage and price controls Taxation policy
Property rights

Stages of Market Development
High income countries
Upper-middle income countries
Lower-middle income countries
Low income countries
Categories developed by The World Bank
Stages based on GNP

China
India
Indonesia
South Korea
Brazil
BEMs: Big Emerging Markets
Mexico
Argentina
South Africa
Poland
Turkey

The Political Environment
Global marketing activities influenced by governmental institutions, political parties, and organisations
Environment determines attitude towards
Sovereignty
Global market integration erodes economic sovereignty
Political risk
A lower level of political risk tends to attract higher investments
Taxes
Many companies make efforts to minimise tax liability by shifting locations of income
Dilution of equity control
Political pressure often causes companies to take local partners (strategic alliances, joint-ventures)
Creeping Expropriation
severe limitations on economic activities. E.g., limitations on repatriation of profits, content requirements, quotas for hiring locals, price controls

Privatization
Moves an economy toward free-market direction
Evidence that governments are changing how they exercise sovereign power
Current Trends
Global Integration
— Countries in advanced preferential trade agreements sacrifice many sovereign rights to improve economy

Ways to Avoid Legal Problems (1)
Scope of legal regulations
Know about treaties of friendship, commerce, and navigation
Jurisdiction
Specify which nation’s laws apply, when a transaction crosses boundaries
Intellectual Property
Ensure that patents and trademarks are registered in each country business is conducted

Ways to Avoid Legal Problems (2)
Intellectual Property (cont.)
Beware of counterfeiting: the unauthorized copying and production of a product
Beware of piracy: the unauthorized publication or reproduction of copyrighted work
Know about international treaties, e.g.
World Intellectual Property Organization
The Patent Cooperation Treaty
European Patent Convention

Ways to Avoid Legal Problems (3)
Licensing
Contractual agreement in which a licensor allows a licensee to use patents, trademarks, technology or other intangible assets in return for royalty payments
In many countries, elements of licensing are regulated by governmental agencies, e.g.
- Duration of agreement
- Amount of royalties a company can receive

Institutions in the World Economy
World Trade Organisation (WTO)
Since 1947 it sponsored 8 major multilateral trade negotiations (GATT)
Uruguay round being the latest (1986-93)
resulted in reduction of tariff rates of ten of thousands of items
Establishment in 1995 as a permanent institution with more decision making power
HQ: Geneva 145 members

Institutions in the World Economy
World Trade Organisation (WTO) cont..
Main Roles
Provide a framework for multilateral trade negotiations
Ensure that trade flows are as smooth, predictable and as free as possible
Further the Principle of Non-discrimination
a tariff concession to one trading partner must be extended to all WTO members under the MFN clause
Consultation
Acts as mediator in global trade disputes

Regionalisation of Markets (1)
Many different forms of economic co-operation between countries
Free trade areas
free movement of goods
no tariffs or quotas imposed against goods coming from other members
Customs unions
more ambitious requirements
common external tariff

Regionalisation of Markets (2)
European Union (EU)
15 European member countries
Market of 379 million people
North American Free Trade Agreement (NAFTA)
United States, Canada, Mexico
Market of 381 million people
Association of Southeast Asian Countries (ASEAN)
10 member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam)
LAFTA, MERCOSUR, SAARC

Regionalism and the MNC
Relevant market area will shape the firm’s decisions
logistics: supply from within a region rather than to export it
face local competition
greater uniformity will occur in marketing to the member countries; economies of scale in NPD, pricing, distribution, promotion

International Financial System
Exchange Rate Stability
major currencies are ‘floating’
ER fluctuations can affect profits
impacts logistics and pricing
IMF
monitors currency fluctuations
provides short-term liquidity to countries with problems
World Bank
provides long-term capital to aid economic development
long-term loans at very low interest rates
international firms benefit: higher level of economic activities in recipient countries, new markets

International Financial System
Exchange Rate Stability
major currencies are ‘floating’
fluctuations can affect profits
impacts logistics and pricing
IMF
monitors ER fluctuations
provides short-term liquidity to countries with problems
World Bank
provides long-term capital to aid economic development
long-term loans at very low interest rates
international firms benefit: higher level of economic activities in recipient countries, new markets

Jurisdiction
Employees of foreign companies should understand the extent to which they are subject to jurisdiction of host-country courts
Courts have jurisdiction if it can be demonstrated that the company is doing business in the state the court sits

Today…
Product Concepts
Global Product Planning:
Strategic Alternatives - Adaptation Vs Standardisation
Global Brand Leadership
Country of Origin effect
New Products