Seventeen Chapter International Marketing
Dana-Nicoleta Lascu Kenneth E. Clow
Copyright Copyright Atomic Dog Publishing, 2004
Chapter Objectives
Discuss primary drivers of internationalization in the macroenvironment and microenvironment Discuss the primary internationalization challenges and obstacles attributed to the cultural environment, to governments, to competition, and to the selfreference criterion Analyze the different levels of international involvement Address entry mode selection from a control and risk perspective Discuss the challenges presented by the international marketing mix
Copyright Copyright Atomic Dog Publishing, 2004
Why Go International?
To take advantage of global market opportunities and reach a larger market To keep pace with the competition To increase sales and market share To prolong the product life cycle
Copyright Copyright Atomic Dog Publishing, 2004
Drivers of International Expansion
Competition Regional Economic and Political Integration Technology Improvements in Transportation and Telecommunication Economic Growth and Emerging Market Economies Converging Consumer Needs
Copyright Copyright Atomic Dog Publishing, 2004
Facilitators of International Trade: The World Trade Organization
Largest and most influential international trade organization Ensures free flow of trade Functions:
Provides assistance to developing and transition economies Offers help for export promotion Promotes regional trade agreements and economic cooperation Reviews members trade policies and engages in routine notification of new trade measures
Copyright Copyright Atomic Dog Publishing, 2004
The World Trade Organization (cont.)
WTO agreements represent trade rules and regulations and act as contracts guaranteeing countries trade rights and binding governments to free trade policies. Agreements:
General Agreement on Tariffs and Trade (GATT) General Agreement on Trade in Services (GATS) Trade-related Aspects of Intellectual Property Rights (TRIPS)
Copyright Copyright Atomic Dog Publishing, 2004
Facilitators of International Trade Group of Seven (Eight) - G7 (G8)
Members from the most industrialized countries: Canada, France, Germany, Italy, Japan, United Kingdom, United States, and Russia
Yearly meetings involve heads of state, government ministers, and directors of central banks. Addresses: Biotechnology, food safety, economic development, disarmament, arms control, organized crime, drug trafficking, terrorism, environmental issues, and trade
Copyright Copyright Atomic Dog Publishing, 2004
Facilitators of International Trade: The Development Banks
The World Bank
Largest international bank that sponsors economic development Employs international specialists in economics, finance, sectoral development Focus on health and information technology
Copyright Copyright Atomic Dog Publishing, 2004
Facilitators of International Trade: The Development Banks
African Development Bank Asian Development Bank European Bank for Reconstruction and Development Inter-American Development Bank
Copyright Copyright Atomic Dog Publishing, 2004
Facilitators of International Trade: U.S. Government Agencies
U.S. Agency for International Development (USAID) U.S. Department of Commerce Export-Import Bank of the United States State and Local Government Agencies, such as the U.S. Chamber of Commerce
Copyright Copyright Atomic Dog Publishing, 2004
Regional Economic and Political Integration
Determinants of Integration
Shared culture Shared history Regional proximity Similarity in level of economic development
Copyright Copyright Atomic Dog Publishing, 2004
Types of Integration
Bilateral Agreements, Multilateral Forums and Agreements
General agreements between two or more countries, typically industry specific OPEC, NATO, Commonwealth of Independent States Trade association that eliminates or greatly reduces all trade restrictions for member countries, also adopts common external tariffs on products imported from outside the area Eliminate all tariff and barriers to trade, adopt common external tariffs, and allow for free movement of capital and labor within the common market: Andean Common Market, Southern Cone
Customs Union
Common Market
Common Market (MERCOSUR)
Copyright Copyright Atomic Dog Publishing, 2004
Types of Integration
Monetary Union
Involves a common monetary policy, the creation of a unified central bank, and the use of a single currency: Euroland
Political Union
Common governing and legislative bodies, and enforcement powers: European Unionmember countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom Central and Eastern European countries have pending membership status
Copyright Copyright Atomic Dog Publishing, 2004
Culture and International Marketing
Definition: A continuously changing totality of learned and shared meanings, rituals, norms, and traditions among the members of an organization or society
Culture influences consumption Elements of culture vary greatly across countries
Copyright Copyright Atomic Dog Publishing, 2004
Language
Spoken/Written Language
Differences in meaning in different countries that share the same language Dealing with multiple dialects High costs of translation High costs of translation blunders
Nonverbal communication is essential in international marketing and it differs across cultures.
Copyright Copyright Atomic Dog Publishing, 2004
Nonverbal Language High- Versus Low-Context Culture
Low-context cultures:
What is said is what is meant. Characteristic of the U.S., Canada, Germany
High-context cultures:
The context of the message, including the nonverbal communication, contains as much meaning as the words. Characteristic of the Middle East, Asia, North Africa
Copyright Copyright Atomic Dog Publishing, 2004
Religion
Defined as societys relationship to the supernatural and determines dominant values and attitudes Firms must adapt their offering to the local religion. World Religions, a Synopsis:
Protestant Religionstresses hard work and frugality Judaismstresses education and development Islamfocus on rules for social interaction Hinduismencourages family orientation and dictates strict dietary constraints Buddhismstresses sufferance and avoidance of worldly desires
Copyright Copyright Atomic Dog Publishing, 2004
Government Barriers
Local governments control international market entrants using arguments for protectionism:
Excess productive capacity Excess labor Infant industry argument and industrialization Natural resources conservation and environmental protection Consumer protection National defense Discourage imports of particular goods Penalize countries that are not politically aligned with importing the country Generate revenues US tariffs are less than10%; other countries can impose tariffs greater than 100% for protected products
Tariffs, Quotas, Licenses
Nontariff barriers are used by countries in the WTO, NAFTA, and EU.
Copyright Copyright Atomic Dog Publishing, 2004
International Competition
Competitors can erect entry barriers to entry. Effective entry barriers include:
Price cuts Blocking distribution channels Binding retailers to exclusive contracts
Copyright Copyright Atomic Dog Publishing, 2004
The Self-Reference Criterion
Individuals reference to their own national culture, norms, and values as well as their knowledge in the process of making decisions in the host country. Is a great impediment to adaptation Addressing the self-reference criterion:
1) Define the marketing goal in terms of ones home countrys cultural traits, norms, and values 2) Define the marketing goal in terms of the host countrys cultural traits, norms, and values 3) Isolate the self-reference criterion influence and evaluate it to understand how it affects the marketing issue 4) Solve the marketing problem based solely on the unique conditions of the host country
Copyright Copyright Atomic Dog Publishing, 2004
Levels of International Marketing Involvement
Domestic marketing Export Marketing International marketing Global marketing
Copyright Copyright Atomic Dog Publishing, 2004
International Entry Mode Selection
Exporting: Either direct or indirect, low risk but low control Licensing: More risks, greater control. Involves a licensor who offers the know-how or brand name, and a licensee, who pays royalties. Franchising: Is service industrys equivalent of licensing. Joint Ventures: Involve a foreign company joining with a local company to set up a new corporate entity Wholly Owned Subsidiaries: Assumes long-term commitment and has a high level of risks, but can be extremely profitable Branch Offices: Not separate entities, but part of the international company. High level of control and lower risk than subsidiary Strategic Alliance: All joint ventures and licensing and franchising agreements, as well as low-commitment agreements
Copyright Copyright Atomic Dog Publishing, 2004
The International Marketing Mix
Standardization versus adaptation Global Standardization: Standardization of products across markets and standardization of the marketing mix worldwide
Addresses needs of global consumers (homogeneous consumer groups sharing similar interests and product/brand preferences) International travel (brand awareness build through exposure to identical communication worldwide) Consumer preference for higher quality and lower price Allows for global branding using the same brand name, logo, image, and positioning everywhere in the world
Regional Standardization Global Localization
Modular Adaptation Core Product Strategy
Copyright Copyright Atomic Dog Publishing, 2004
Product
Country of Origin Country of Manufacture In the absence of other product information, country of origin impacts consumers product evaluation. Service Entry BarriersExamples:
Requirement to use national service providers Prohibition against employment of foreign nationals Direct competition from government providers Restrictions on movement Tariffs on international services
Copyright Copyright Atomic Dog Publishing, 2004
The International Product Lifecycle
Introduction and Growth MNC manufactures in developed countries, exports to developing countries Early Maturity MNC moves production to developing countries, begins importing to home country Late Maturity Competitor from developing country exports product to MNC home country Decline Developing countries remain viable target markets; home-country market is diminishing
Sales
Copyright Copyright Atomic Dog Publishing, 2004
Time
Distribution
Using Established Channels
Could charge high prices Could be blocked by competition Choice is a long-term decision.
Building Channels
Necessary if there are no channels at all and if the existing channels do not conform to ...