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International Marketing Scope and Challenges
- 1. The Scope and Challenge of International Marketing Chapter 1 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
- 2. Learning Objectives LO1 The benefits of international markets LO2 The changing face of U.S. business LO3 The scope of the international marketing task LO4 The importance of the self-reference criterion (SRC) in international marketing LO5 The increasing importance of global awareness LO6 The progression of becoming a global marketer Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 2
- 3. Global Commerce Causes Peace Global commerce thrives during peacetime Economic boom in North America in the late 1990s largely due to: • the end of the Cold War • opening of the former communist countries to world trading system Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 3
- 4. Events and trends affecting global business Natural disasters Wars and national conflict Advancement in information technology Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 4 ©MilosBicanski/GettyImages
- 5. The Internationalization of U.S. Business Companies have to: • deal with foreign customers, competitors, and suppliers • face competition from domestic and foreign firms Foreign direct investment in the United States is more than $3 trillion. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 5
- 6. Foreign-Owned Companies in the U.S. Exhibit 1.1 lists some of the brands that most people think are American, but are actually foreign-owned. Foreign investment is present in almost all industries: • Automobiles (Honda, BMW, Mercedes) • Appliances (LG Electronics, Frigidaire) • Convenience stores and restaurants (7-Eleven, Ben & Jerry’s) • News and entertainment (The Wall Street Journal, Pearle Vision, Universal Studios, RCA) • Hotels (Holiday Inn, Waldorf Astoria) Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 6
- 7. Exhibit 1.1 (1 of 2) Foreign Acquisitions of U.S. Companies Sources: Compiled from annual reports of listed forms, 2015. U.S. Companies/Brands Foreign Owner 7-Eleven Japan Ben & Jerry’s (ice cream) U.K. Budweiser Belgium Chrysler Italy Chrysler Building (NYC) Abu Dhabi Church’s Chicken Bahrain CITGO Venezuela Columbia Pictures (movies) Japan French’s Mustard U.K. Firestone (tires) Japan Frigidaire Sweden Genentech Switzerland Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7
- 8. Exhibit 1.1 (2 of 2) Foreign Acquisitions of U.S. Companies Sources: Compiled from annual reports of listed forms, 2015. U.S. Companies/Brands Foreign Owner Gerber Switzerland Holiday Inn U.K. Huffy Corp. (bicycles) China Oroweat (breads) Mexico Radio Shack Mexico Random House (publishing) Germany RCA (television) France/China Smith & Wesson (guns) U.K. Swift & Company (meatpacking) Brazil The Wall Street Journal Australia T-Mobile Germany Waldorf Astoria Hotel (NYC) China Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 8
- 9. Mexico’s supermarket chain in California Gigante, one of Mexico’s largest supermarket chains, now has several stores in Southern California, including this one in Anaheim. On store shelves are a variety of Bimbo bakery products. Grupo Bimbo, a growing Mexican multinational, has recently purchased American brand-named firms such as Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread. 9Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©JohnGraham
- 10. Revenues from International Sales Exhibit 1.2 illustrates how important revenues generated on investments abroad are to U.S. companies. • In most cases, foreign sales overtake those in the U.S. • In ten years, Apple’s total revenues skyrocketed from $6 billion in 2003 to $171 billion in 2013. As a result, many companies are now seeking foreign markets, and companies with existing foreign operations feel the need to be more competitive to succeed against multinationals. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 10
- 11. Exhibit 1.2 Selected U.S. Companies and Their International Sales Source: S&P 500, 2013: Global Sales Year in Review (September 2014). Company Global Revenues (billions) Percent Revenues from Outside the U.S. Apple $170.9 61.3% Avon 10.0 85.4 Boeing 86.6 56.6 Chevron 211.6 75.9 Direct TV 31.8 21.0 Ford 146.9 41.8 IBM 99.8 65.1 Intel 52.7 82.8 Johnson & Johnson 71.3 55.3 Mondelez (Oreos, etc) 35.3 80.2 Walmart 474.3 29.0 Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 11
- 12. International Marketing Defined The 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 • Unfamiliar problems • Different levels of uncertainty • Molding the controllable elements of the marketplace (product, price, promotion, distribution, and research) within the framework of the uncontrollable elements (competition, politics, laws, consumer behavior, level of technology, and so forth) in such a way that marketing objectives are achieved Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 12
- 13. The International Marketing Task The total environment of an international marketer is illustrated in Exhibit 1.3 • The inner circle depicts the controllable elements • The second circle shows the uncontrollable domestic elements that have some effect on foreign-operation decision • The third (outer) circle represents the uncontrollable elements of the foreign environment for each foreign market • Each foreign market presents different problems involving some or all of the uncontrollable elements • Greater possibility of variety of foreign environmental factors to deal with 13Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
- 14. Exhibit 1.3 The International Marketing Task Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 14 back
- 15. Successful Marketing Program A program designed for optimal adjustment to the uncertainty of the business climate The inner circle in Exhibit 1.3 shows the areas under the marketing manager’s control • The marketing manager blends price, product, promotion, channels- of-distribution, and research activities to capitalize on anticipated demand, assuming the necessary overall corporate resources, structures, and competencies that can limit or promote strategic choice. The outer circles represent the levels of uncertainty • The marketing manager must actively evaluate, and if needed, adapt to the uncontrollable elements in order to determine the outcome of the marketing enterprise. 15Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
- 16. Domestic Environment The second circle in Exhibit 1.3 corresponds to the uncontrollables in the domestic environment • Political and legal forces • political decision involving foreign policy can have a direct effect on a firm’s international marketing success • Economic climate and competition • if internal economic conditions deteriorate, restrictions against foreign investment and purchasing may be imposed to strengthen the domestic economy Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 16
- 17. Foreign Environment The outer circle in in Exhibit 1.3 corresponds to a significant source of uncertainty, the uncontrollables in the foreign environment • Political stability • Political/legal forces • Class structure • Competitive forces • Level of technology • Geography • Cultural forces • Economic climate • Structure of distribution • Infrastructure Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 17
- 18. A Citibank branch in the heart of Brazil on a rainy day. The address on the Avenida Paulista is 1776— how American! One of the world’s great multinational corporations barely survived the financial debacle of October 2008. Perhaps its red, white, and blue umbrella logo protected it from “adverse weather” on Wall Street? Indeed, during the past few years, its international operations have performed much better than its domestic ones. In particular, emerging markets such as China, India, and Brazil proved relatively resilient during the global financial crisis that began in 2008. Citibank in Brazil 18Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. ©JohnGraham
- 19. Cultural Adjustment Most challenging and most important while confronting international markets • International marketers must: • adjust marketing efforts to cultures which they are not attuned to • be aware of frames of reference they are using in making decisions or evaluating the potential of the market – an important factor in determining or modifying a marketer’s reaction to situations—social and even nonsocial In any study of the market systems of different peoples, their political and economic structures, religions, and other elements of culture, foreign marketers must constantly guard against measuring and assessing the markets against the fixed values and assumptions of their own cultures. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 19
- 20. The Self-Reference Criterion and Ethnocentrism The Self-Reference Criterion (SRC) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions. Ethnocentrism is the notion that people in one’s own company, culture, or country know best how to do things. Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 20
- 21. The Self-Reference Criterion When confronted with a set of facts, we react spontaneously on the basis of knowledge assimilated over a lifetime—knowledge that is a product of the history of our culture. • We seldom stop to think about a reaction—we simply react instinctively and refer to our SRC for a solution. • These reactions are based on meanings, values, symbols, and behavior of our own culture, usually different from those of the country we are dealing with. • Prevent us from being aware of the importance of cultural differences. • We fail to recognize the need to take action. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 21
- 22. Isolate SRC Influences and Be Vigilant of Ethnocentrism Define the business problem or goal in home-country cultural traits, habits, or norms. Define the business problem or goal in foreign-country cultural traits, habits, or norms through consultation with natives of the target country. Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem. Redefine the problem without the SRC influence and solve for the optimum business goal situation. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 22
- 23. Developing a Global Awareness To be globally aware is to have: tolerance of cultural differences and knowledge of cultures, history, world market potential, and global economic, social, and political trends Global awareness also involves knowledge of world market potentials and global economic, social, and political trends. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 23
- 24. Factors Favoring Faster Internationalization Companies with either high technology and/or marketing-based resources are better equipped to internationalize than more traditional manufacturing companies Smaller home markets and larger production capacities favor internationalization Firms with key managers well networked internationally are able to accelerate the internationalization process Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 24
- 25. International Marketing Involvement The first two types are more reactive in nature, and do not involve careful strategic thinking about international marketing • No Direct Foreign Marketing • Infrequent Foreign Marketing The next three types are involved in strategic planning and decisions about international marketing • Regular Foreign Marketing • International Marketing • Global Marketing Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 25
- 26. No Direct Foreign Marketing A company that does not actively cultivate customers outside the country • Products may reach foreign market via domestic wholesalers/distributors who sell abroad without the knowledge of the producer • Sales done by trading companies/foreign customers who directly contact the firm • Products gain popularity to foreign buyers through websites • This can ignite the interest of the company to seek additional international sales. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 26
- 27. Infrequent Foreign Marketing A company with temporary surpluses caused by variations in production levels or demand may send their products for marketing overseas • Sales to foreign markets are made as goods become available • As domestic demand increases and absorbs surpluses, foreign sales are withdrawn Few companies fit his model because international customers seek long-term commercial relationships. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 27
- 28. Regular Foreign Marketing A firm with permanent productive capacity devoted to the production of goods and services to be marketed in foreign markets • Employs foreign or domestic overseas intermediaries, or may have its own sales force or sales subsidiaries in important foreign markets • Primary focus of operations and production is to service domestic market needs • As overseas demand grows, production is allocated for foreign markets • Products may be adapted to meet the needs of individual foreign markets • Company becomes dependent on profit from foreign markets to meet its goals Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 28
- 29. International Marketing A firm that is fully committed to international sales • Seeks markets all over the world and sells products that are a result of planned production for markets in various countries • Planning generally entails not only the marketing but also the production of goods outside the home market Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 29
- 30. Global Marketing Companies that treat the world, including their home market, as one market • Market segments are defined by income levels, usage patterns, or other factors that frequently span countries and regions • More than half of sales revenues come from abroad Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 30
- 31. Success in International Marketing Awareness of the environment with which marketing programs will be implemented • Ability to assess and adjust properly to the impact of a strange environment • A thorough study of foreign marketing environments, people, and cultures, and their influences on the total marketing process Exhibit 1.4 shows the most recent ranking of countries on their extent of globalization. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 31
- 32. Exhibit 1.4 The KOF Globalization Index (top ten plus selected other countries) 32Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Economic Globalization Measures Social Globalization Measures Political Globalization Measures
- 33. The Orientation of International Marketing Environmental/cultural approach Relate the foreign environment to the marketing process Illustrate how culture influences the marketing task • The cultural environment within which the marketer must implement marketing plans can change dramatically from country to country Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 33
- 34. Summary American business is going global, and the markets and competition need to pay attention to global environment. The self-reference criterion and ethnocentrism limit the international marketer’s abilities to understand and adapt to differences prevalent in foreign markets. Some companies see international marketing as ancillary to the domestic operations, whereas others see international marketing as a crucial aspect of sales revenue generation. Global orientation views the globe as the marketplace, and market segments are no longer based solely on national borders. Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 34
Notes de l'éditeur
- In times of peace, international trade flourishes as relationships between countries improve. This has a ripple effect and a positive impact on the economies of all countries involved.
- Natural disasters like tsunamis, the recent wars in the Middle East, and the manner in which technology plays a big part in conducting business nowadays will shape the future of international business.
- More and more foreign investors flock to the United States to partner or completely take over their companies. The United Kingdom leads the group of investors, with companies from Japan, the Netherlands, Canada, and France following, in that order.
- The ownership of many U.S. businesses is located with companies headquartered outside of the U.S. It is interesting to see that a company like Ben & Jerry’s is British and 7-Eleven is Japanese, brands in our daily life that we consider “American.”
- The ownership of many U.S. businesses is located with companies headquartered outside of the U.S. It is interesting to see that a company like Ben & Jerry’s is British and 7-Eleven is Japanese, brands in our daily life that we consider “American.”
- More and more foreign investors flock to the United States to partner or completely take over their companies. The United Kingdom leads the group of investors, with companies from Japan, the Netherlands, Canada, and France following, in that order.
- Revenues generated on investments abroad are important to U.S. companies. In many cases, foreign sales are greater than U.S. sales, demonstrating the global reach of these American brands.
- Marketing concepts, processes, and principles are universally applicable, and the marketer’s task is the same. The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets.
- What makes international marketing so much more complicated than domestic marketing are the various uncontrollable factors that companies have to encounter in international markets in addition to all the uncontrollable factors they would normally face in domestic markets. The uncontrollables in a foreign country could range from political or legal regulations that are unique to a country, competition, or consumer tastes and socio-cultural differences that are new to the company. Exhibit 1.3: The International Marketing Task illustrates the environment in which a firm operates in global markets. Case 1–1, Starbucks--Going Global Fast, is a good way to think about the marketing mix and the effects of uncontrollables and controllables both in the domestic and foreign environments. How would you have done things differently to overcome some of the problems illustrated in the case? Starbucks is looking to boost its overall rate of growth by applying its business formula to other nations that lack a Starbucks-type chain. In doing so, it is helping to change aspects of the material culture of those countries it enters, to feel more like the U.S. At the same time, Starbucks has found that to succeed internationally, it must customize aspects of its operations and marketing to local conditions, by introducing new versions of its basic drinks that appeal to local tastes for example.
- The need to customize products and operations to local conditions that Starbucks encountered is a consistent theme in international marketing. Similarly, Starbucks' decision to take on foreign partners to help expand internationally is one that many companies must deal with. It also illustrates that it is inevitable for companies not to be influenced by Self Reference Criterion (SRC) or Ethnocentric attitudes, it is important that they consciously pay attention to overcome these attitudes while entering foreign markets. A person from one culture is often not aware that a reaction is influenced by one’s cultural background and that those from another culture may have a different perspective. The nature of the SRC is that whenever confronted by some aspect of another culture one’s reaction and evaluation is routinely clouded by one’s own cultural experiences. For example, it is common for one to frown upon the foods of another country when the same feelings may be expressed when people from that country visit other world regions. It is how one is raised and the foods one is accustomed to—such as pepperoni topping on pizza in the U.S., a topping which most of the rest of the world is not familiar with. When this topping was requested by an American tourist in Germany, she received a pizza topped with “pepperoncini” peppers. In Korea, it is common to top ice cream with canned corn, which most of the western world may view with distaste at first reaction which is a natural reaction based on one’s own SRC and ethnocentric values.
- To avoid errors in business decisions, the knowledgeable marketer will conduct a cross-cultural analysis that isolates the SRC influences and maintain vigilance regarding ethnocentrism.
- Tolerance for cultural differences is crucial in international marketing. Tolerance is understanding cultural differences and accepting and working with others whose behaviors may be different from ours. Global awareness also involves knowledge of world market potentials and global economic, social, and political trends. Over the next few years, there will be major changes in the socio-economic and political scenes around the world, particularly in the developed world. Global awareness is not simply recognizing that your world views are different from others, but also accepting the diverse perspectives of others. For example, that slurping and burping is a sign of respect for the host’s cooking and not bad manners--it means that the guests are thoroughly enjoying the food. Behaviors are not standard across countries; what’s acceptable in one country may be completely taboo in another.
- Once a company has decided to go international, it has to decide the degree of marketing involvement and commitment it is prepared to make. These decisions should reflect considerable study and analysis of market potential and company capabilities—a process not always followed. Research has revealed a number of factors favoring faster internationalization.
- No Direct Foreign Marketing In this stage, a company does not send its products overseas directly, but its products may become available in other countries through intermediaries or middlemen such as trading companies. Occasional internet sales because of a request from an overseas customer may also fall into this category. Infrequent Foreign Marketing Temporary surpluses in inventory may cause companies to sell their excess product in overseas markets. Note that in the first two stages of International Marketing Involvement, the strategies are reactive rather than proactive. Regular Foreign Marketing In this stage a firm has committed permanent resources toward international marketing and engages in it regularly on a proactive basis. The firm may use intermediaries to engage in international marketing. International Marketing In this stage a firm has planned production and marketing to many countries around the world with specific targets for each overseas country market. It involves not only marketing but also production of goods in overseas markets. Global Marketing In the global marketing stage, the firm starts viewing the world, including their home market as one market. The major change is the orientation toward world markets and the activities directed at supporting this view. When exploring the different stages of international marketing involvement, it is important that we understand the differences between global markets and global products. We also need to understand that a global marketing orientation does not necessarily mean standardization across all markets. Instead it may mean operating as if all country markets in a company’s scope of operations (including the domestic market) are approached as a single global market that may have multiple market segments extending across national borders and that the company may be seeking commonalties across country markets in order to standardize the marketing mix where it is culturally feasible and cost effective.
- The text addresses issues relevant to any company marketing in or into any other country or groups of countries, however slight the involvement or the method of involvement. Hence this discussion of international marketing ranges from the marketing and business practices of small exporters, such as a Colorado-based company that generates more than 50 percent of its $40,000 annual sales of fish-egg sorters in Canada, Germany, and Australia, to the practices of global companies such as Microsoft, Mary Kay, and Johnson & Johnson, all of which generate more than 50 percent of their annual profits from the sales of multiple products to multiple country-market segments all over the world.