Nature of International Marketing

Challenges and Opportunities
Process of International Marketing
International Dimensions of Marketing
Domestic Marketing vs. International Marketing
Multinational Corporations (MNCs)
The Process of Internationalization
Benefits of International Marketing

Definition of FEA 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

Dimensions of Marketing
Consumer Marketing vs. Business-to-Business Marketing
Domestic Marketing vs. Foreign Marketing
Comparative Marketing
International Marketing vs. Global/Multinational Marketing
Domestic Marketing vs. International Marketing
- similar in nature but not in scope (scale)?
- different in degree but not in kind?

Internationalization Philosophies
Raising commitment/ involvement to international markets

MNCs (MULTINATIONAL CORPORATIONS)
Cons
- Exploitation
- Erosion of a Nation's Sovereignty
Pros
- Power and Prestige
- Social Responsibility
- Market Performance

Transnationality Index (TNI)
Foreign Assets/Total Assets
Foreign Sales/Total Sales
Foreign Employment/Total Employment

Characteristics of MNCs
Definition by Size
- market value
- sales
- profits
- assets
- number of employees

Characteristics of MNCs
Definition by Structure
- number of countries in which the firm does business
- citizenship of corporate owners and top managers

Characteristics of MNCs
Definition by Performance
- commitment of corporate resources to foreign operations
- amount of rewards from that commitment

Characteristics of MNCs
Definition by Behavior
- ethnocentricity
- polycentricity
- geocentricity

Behavior/ Attitude
Ethnocentricity
- orientation toward home country
- centralization of decision making
- efficient but not effective

Ethnocentric Orientation
Guided by domestic market extension concept
Domestic strategies, techniques, and personnel are perceived as superior.
International markets are secondary, regarded primarily as outlets for surplus domestic production.
International marketing plans are developed in-house by the international division.
E.g. Disney resort in France: Disneyland Resort Paris had to adapt it to local preferences: European fairy tales, food, and dress code for staff.

Behavior/ Attitude
Polycentricity
- strong orientation to host country
- decentralization of decision making
- effective but not efficient

Polycentric Orientation
Guided by the multidomestic marketing concept
Focuses on the importance and uniqueness of each international market
Firms establish independent businesses in each target country.
Fully decentralized, minimal coordination with headquarters
Marketing strategies are specific to each country.
Outcomes:
No economies of scale
Duplicated functions
Higher final product costs

Regiocentric Orientation
Guided by the global marketing concept
World regions that share economic, political, and/or cultural traits are perceived as distinct markets. (e.g. EU, NAFTA*)
Divisions are organized based on location.
Regional offices coordinate marketing activities.
*North American free trade agrement

Behavior/ Attitude
Geocentricity
- world orientation
- centralization + decentralization + coordination
- efficient and effective

Geocentric Orientation
Guided by the global marketing concept
Marketing strategies aimed at market segments, rather than geographic locations
Maximizes efficiencies worldwide and provides standardized product or service throughout the world
E.g. McDonalds

Internationalization Process
Stages of Internationalization
Domestic business
Sporadic exporting
Frequent exporting
Overseas manufacturing
Born Global
Mission of being global from birth
Resources committed to international activities

Benefits of International Marketing
Survival and Growth
Sales and Profits
Diversification
Inflation and Price Moderation
Employment
Standards of Living
Understanding of Marketing Process

International Expansion Drivers

International Expansion Drivers: Business Environment (contd.)
Competition
Example: McCann Erickson has been handling the Coca-Cola account in 129 countries since 1942. Therefore the advertising agency, follows longtime client, Coca Cola, Inc., to all countries where Coke is present.
Nevertheless Coca-Cola moved the management of its dedicated Red Lounge China marketing unit from McCann Erickson to Leo Burnett, a competing advertising agency (2007). At the same time Leo Burnett lost some international accounts of its longtime client, McDonald's.

International Expansion Drivers: Business Environment (contd.)
Example: Regional agreements such as NAFTA, and the European Union (EU) lower and eliminate barriers and promote trade within these markets.
Subsidiaries can be established in these markets to take advantage of free trade within the region.
Regional Economic and Political Integration

International Expansion Drivers: Business Environment (contd.)
Technology
Examples:
Consumers worldwide are exposed to similar products, services, and entertainment, and marketing communications.
The Web and the Internet have revolutionized the way companies conduct business.

International Expansion Drivers: Business Environment (contd.)
Lower cost and higher quality communication due to satellite technology, teleconferencing, and e-mail
Efficient transportation due to containerization and just-in-time technology
Transportation and Telecommunications

Emerging middle class with increasing buying power in big emerging markets such as Brazil and India.
Opening of new markets previously closed, such as the markets of China and Vietnam.
Economic Growth
International Expansion Drivers: Business Environment (contd.)

Transition of the Eastern Bloc to a market economy created important new markets.
Created opportunities to transform inefficient government-owned companies into successful enterprises.
Transition to a Market Economy
International Expansion Drivers: Business Environment (contd.)

International Expansion Drivers: Business Environment (contd.)
Transition to a Market Economy
Yum! Brands in
China and Taiwan
(e.g. Taco Bell,
KFC, Pizza Hut)
do well -
in spite of E.coli
(East cost) and
rat infestation in NY
Yum! Brands is omnipresent in China and Taiwan

Uniform consumer segments emerging worldwide:
Global teenagers
Global elite
Loyal to international brands (Nike, Levi’s, Coca-Cola, Heineken, Ralph Lauren, MTV, TV shows)
Converging Consumer Needs
International Expansion Drivers: Business Environment

Consumers traveling abroad bring with them product experiences and demand brands that may not be available in the home-country market.
Converging Consumer Needs
International Expansion Drivers: Business Environment
Bagel shop in Berlin (Potsdamer Platz)

Firm-Specific Drivers (contd.)
Product Life Cycle Considerations: prolonging product lifecycle by entering growth markets
e.g. Cigarette industry
in emerging markets

Firm-Specific Drivers (contd)
High New Product Development Costs
Firm must look beyond home-country market to recover investment costs.
E.g. Nike: one year to develop a new product, that last only half a year on the shelves in the US

Price competition during the maturity of the product life cycle drives firm to new international markets in search of cheap labor. The firm lowers costs—thus prices—due to economies of scale and saving from standardization processes.
Firm-Specific Drivers
Standardization, Economies of scale, Cheap Labor
Experience Transfers
Experience in one country serves as basis for strategies in new international markets.

Obstacles to Internationalization

Obstacles to Internationalization
Self-Reference Criterion
Conscious and unconscious reference to own national culture while operating in the host country. (e.g. eye contact US-Japan)
To counter the impact of the self-reference criterion, the corporation must select appropriate personnel for international assignments and engage in sensitivity training.

Obstacles to Internationalization
Government Barriers
Restriction placed on foreign corporations by imposing tariffs, import quotas and other limitations, such as restrictive import license awards.

Obstacles to Internationalization
Barriers imposed by International Competition
Blocked channels of distribution
Exclusive retailer agreements
Cutting prices
Advertising blitzes