International Marketing and

Exporting
Chapter 1
Reasons why rapid growth in
international business will resume
 In addition to the changes in short-term economic conditions, five major
changes that have occurred during past decades will continue to drive
increasing globalization, and the ever-greater importance of international
marketing and export management. They are:
 The information revolution with the technological advances and lowered
costs in communications, the development of Internet and e-commerce,
and the development of increasingly sophisticated and diverse software to
support a wide variety of business functions.
 The further development of logistics and supply chain management,
drawing upon new concepts and methods, advances in information
technology in its most broad sense and major advances in physical
equipment and facilities.
Reasons why rapid growth in
international business will resume
 The increased importance of innovation as ideas and advances in
technologies, strategies and business models, spread more rapidly. The
advantages of being a head and the dangers of failing to adjust to new
conditions, have increased greatly.
 The recognition that increasing incomes, and the increasingly diverse
populations in some countries, have provided new and often more
segmented markets. Niche markets have emerged that provide additional
opportunities for small companies and the need for larger companies to
respond to the increasing diversity in demand.
 The lowering of governmental and other barriers to trade and investment,
the changes in international trade patterns, and changes in location of
some major economic activities.
 The increased competition and increased opportunities for companies of
all sizes, resulting from the greater mobility of goods, services, information
and ideas.
Increasing competitive demands on
business world wide
Success in marketing internationally, and in defending domestic markets
from increasing international competition, typically requires some combination
of:
 Customer focus
 Innovations in products and services, improvements in quality, increased
efficiency with lower cots or improved service, and/or better methods of
doing business;
 Identifying and exploiting appropriate market segments.
Exhibit 1.3 Succeeding internationally in the
21st century: customer focus, innovation,
market segmentation
 Brazil’s Embraer and Canada’s Bombardier. Most air travelers prefer to
travel in the quieter and smoother riding jets rather than propeller or turbo-
prop airplanes with their greater vibration. Airbus and Boeing concentrated
on building large jet aircraft with engines designed to attain maximum fuel
efficiency at high altitudes, and thus not well suited for shorter routes. Airline
companies typically used the larger aircraft for long flights and relied on
turbo-props, which had better fuel efficiency at lower altitudes, for the
shorter routes between smaller cities or feeding hubs. Bombardier and
Embraer met consumer preferences by designing and building mid-size
aircraft with engines that provided good fuel efficiency on shorter flights.
These planes, in the 50- to 100-passenger sizes, have become clear leaders
in the worldwide market for shorter-range
Problems and needs
 In addition to the competitive challenges, there are a number of serious problems, and
potential problems, caused by factors largely beyond the control of individual companies.
 Piracy on the high seas, most recently affecting the seizing of petroleum tankers and
cargo vessels and holding them for ransom, but a problem for private yachts for many
years.
 Piracy of goods by making unauthorized copies of goods (software, music, books, etc.) or
broadcasting them or using them without permission, costing many billions of dollars in
losses for producers of the goods.
 Fake/counterfeit products causing widespread deaths in the case of fake
pharmaceuticals, often causing injuries or other problems for users of other fake products,
and causing losses for and damaging the brands of legitimate producers.
 Contaminated food products and other unsafe products causing injuries or deaths.
 Terrorism and threats of terrorism often causing deaths and property damage and/or
declines in tourism, trade, etc.
 Wars and threats of wars, in addition to often causing terrible human suffering, disrupting
trade patterns, causing direct losses to many individuals, companies, and countries, while
providing opportunities for a few others.
Problems and needs
 Prohibition of exports of certain products to any country (such as agricultural
products in short domestic supply, or cotton when the government wants to
provide all of it to domestic industry).
 Prohibition of exports of specified or all types of goods to certain countries for
reasons of national security, public policy, etc.
 Embargos on all or certain imports from certain countries.
 Diseases leading to prohibitions of imports and/or exports, such as avian flu (bird
flu), bovine spongiform encephalopathy (mad cow disease) and related
diseases, hoof-and-mouth disease.
 Expropriation (nationalization, seizure) of some businesses, or types of businesses,
with or without compensation.
 Armed groups of people, who feel that they have been unfairly treated or
harmed, attacking government or private companies.
 Kidnapping of people for ransom.
Responding to increasing opportunities
and threats
A definition and unique requirements

The basic definition of international marketing is simple:

International marketing is the marketing of goods , services, and
information across political boundaries. Thus it includes the same elements as
domestic marketing: planning, promoting, distributing, pricing, and support of
the goods, services, and information to be provided to intermediate and
ultimate consumers.
International marketing, however, is typically more complex than domestic
marketing because of the need to accommodate key differences between
the home country’s domestic environment and the environment in the foreign
market. These may include differences in culture, consumer needs, and wants,
economic levels and structures, market structures and channels available,
ways of doing business, laws and regulations, and many other factors.
Examples of adjustments and potential
problems in foreign markets
 Kellogs is required to produce three different formulations of Corn Flakes in
the European Union in order to meet the requirements of the different
member nations for minimum and maximum allowable amounts of vitamin
and mineral supplements in cereals.
 France’s Carrefour withdrew from the Japanese market when the
company’s offerings and approach did not fit customer tastes and habits.
 Japan’s very successful Seven-Eleven convenience store chain has wide
differences in market penetration in various other countries as a result of
differing transportation patterns and consumers’ buying habits.
Examples of adjustments and potential
problems in foreign markets
 Phillips, the Dutch electrical and electronics company, needs to
manufacture its products in hundreds of different sizes and specifications to
meet the differing product standards in use in various European countries,
North and South America, Asia and Africa.
 A semiconductor manufacturer operating a plant on the island of Penang
(Malaysia) has provided three cafeteria lines in its workers’ lunch room to
accommodate indigenous ethnic Islamic Malays who do not eat pork,
ethnic Hindus from India who do not eat beef, and ethnic Chinese who like
both pork and beef.
 Many countries have restrictions on advertising and promotion such as
prohibiting comparisons of the company’s products with competing
products of other companies, offerings of free samples, advertising
considered offensive or against the public interest, etc.
 The business activities in marketing to
accommodate differences in the
international market
 The analysis of markets and potential markets;
 The planning and development of products and services that consumers
want, clearly identified in a suitable package;
 The distribution of products and services-including advertising and personal
selling- to inform and educate consumers about those products and
services, or persuade consumers to try new, improved, or different ways of
satisfying their wants and needs.
 The setting of prices that reflect both a reasonable value (or utility) of
products or services to the consumers, as well as satisfactory profit or return
on investment;
 The business activities in marketing to
accommodate differences in the
international market
 The technical and non-technical support given to customers- both before
and after a sale is made- to ensure their satisfaction, and thus pave the way
for possible future sales that are necessary for company survival, growth,
and perpetuation;
 The organization structure, management, and remuneration of foreign
employees.
Internationalization and the global
marketer
 International marketing refers to any marketing activity that is carried out across
national boundaries. Thus it could include anything from exporting one product
to one other country in response to an order, to a major effort to market a
number of products to many countries. It thus provides an appropriate title for a
book such as this one that addresses a wide variety of marketing objectives and
approaches.
 The term multinational marketing came into use to describe the approach used
by companies with a strong commitment to international marketing.
Additionally, in the minds of some, it became associated with companies that
treated each foreign market as separate and distinct, developing differentiated
products and marketing strategies specifically for each of the markets.
 The term global marketing originally came into use as a result of Theodore
Levitt’s discussion of the move toward global corporations that would operate
as if the entire world, or a major region of the world, were a single entity
Internationalizing

There are a number of strategies for market entry and development

available to a company that seeks to internationalize. These include:
 Exporting,
 Establishing a sales subsidiary abroad,
 licensing, and
 Establishing a production subsidiary abroad.
 Joint ventures may be used in establishing sales subsidiaries and production
facilities.
International marketing management

International marketing management is faced with three basic decisions.

 The first is whether to engage in international marketing activities at all.
 Second, if a company decides that it wants to do business in international
markets, then a decision has to be made concerning what specific
individual markets are to be served.
 Finally, the company must determine how it is going to serve these markets
– i.e., what method or system should be used to get product(s) into the
hands of the consumers in foreign countries.
International marketing management

The major dimensions of international marketing are as follows:

 Exporting: selling to foreign markets;
 Importing: purchasing from foreign areas;
 Management of international operations: all phases of business activity
wherever undertaken, including such activities as operating marketing and
sales facilities abroad, establishing production, assembly or service facilities
in foreign areas, creating licensing arrangements and other types of
strategic alliances, and engaging in countertrade transactions.
International marketing management

 Market-driven marketing
 Product or technology driven marketing
 Inside-out firms concentrate on themselves and their own resources. They
believe that if they optimize internal processes based on their unique sets of
resources then they will be as successful as they can be. Human resource
management, operations management, and employee-management
relationships are some of the key issues.
 Outside-in firms start from the needs and demands of the market and seek
to figure out how they can best satisfy the market based on their unique
resources.
International marketing management

Marketing activities are the controllable (by the firm) variables, and the
profusion of geographic, economic, sociological, political, and cultural
circumstances (in both domestic and foreign environments) as well as certain
firm characteristics are the uncontrollable (by the firm) variables. The state of
the uncontrollable variables influences the composition of the marketing mix
and the functional relationships between the elements in the marketing mix. A
business firm engages in marketing activities to adapt to its environment in a
way that the goals of the firm are being achieved. This is the essence of
marketing management, whether domestic or international (or export). The
relationship between the controllable and uncontrollable variables can be
used as the basis for formulating and testing a theory of the export marketing
mix.
Schematic model of the export
marketing mix
The relationship of exporting and
importing
Inward internationalization) may lead to exporting e.g. Japan, China, and
many countries in Southeast Asia and around the world have imported
technology and other intellectual property that they have then used in
creating products or services for export.
In some current models of Boeing aircraft, aluminum produced in the
United States was exported to Japan, machined in Japan, the components
then exported back to the United States, and finally used in making aircraft,
some of which were exported to Japan (as well as to many other countries
worldwide)
 Some similarities and differences in
foreign markets
 Similarities
 Basic marketing concepts such as the product life cycle and traditional marketing tools.
 The broad categories of environmental factors are the same (i.e., social, economic,
political, and geographic).
 The broad approach to the solution of marketing problems is identical, namely, the
consideration of various marketing methods to achieve the goals of the firm, in light of
the firm’s environment.
 Some similarities and differences in
foreign markets
 Differences
 Legal environment (Taxes and tariffs vary widely between countries, as do various restrictions on
trade, such as quotas or exchange controls.
 Type and characteristics of currencies.
 Exchange rates
 Governmental institutions and banking systems.
 Language
 Religion,
 Customs,
 Traditions, and other cultural differences,
 Geographical distances
 Climate variations
 Basic infrastructure.
Thus the analysis and solution of international marketing problems requires skills, background, and
insights in addition to those required to solve strictly domestic marketing problems.
Export marketing planning and
strategy
At a very simple level, export planning and strategy development have
three distinct components:
 1. Goal. The company exporting will have certain objectives that it wishes
to achieve, and which will serve as criteria for assessment of progress. The
basis of company goals will be identifying and measuring market
opportunity.
 2. Program. This involves developing the marketing mix at both strategic
and tactical levels.
 3. Organization. Developing an organization means putting together
company resources in order to operationalize the marketing mix. In short,
the strategy and tactics are put to work.
 Demand management

 A number of factors have led to efforts to control rather than just stimulate demand
for some products. These factors include concerns over the environment, pressures
due to increasing populations and higher income levels often leading to increased
consumption of limited natural resources, the cost and availability of resources
(such as fuels and electrical power generation facilities), changing regulations
related to restrictions on automobile emissions and the mix of traditional and low-
emission vehicles required, conscious attempts to restrict supply so as to keep
prices at desired levels (as in the case of OPEC and petroleum production),
attempts to reduce waste and increase recycling, etc.
 Shortages of products or services may be temporary (occurring only once or
occasionally), periodic (occurring repeatedly, though possibly at irregular intervals),
or chronic. Lost sales, and avoiding damaging relations with present and potential
customers because of unavailability of goods or services, are major concerns. The
cost of having excess unused capacity is also a problem.
 Some examples of problems related to
demand and efforts to solve them:
 Airlines (and hotels, restaurants, etc.) experience periods of little demand and periods of
excess demand. For many years, higher prices in peak seasons or times and lower prices in
off-seasons or times have been used to shift as much demand as possible from high to low
seasons or times. The Internet has made it possible for the system to become much more
flexible and responsive. In addition to regular seasonal differences in airfares offered, the
Internet can be (and is) used to change prices in real time by companies such as United
Airlines. Prices are increased as load factors for particular flights rise more rapidly than
expected, and/or prices are decreased as the load factors on certain flights are
unexpectedly low. The author has observed substantial increases in the Internet prices of
long-range flights in less than a five-minute time period, and substantial decreases in
prices at other times.
 During Christmas seasons, some Internet marketers have been unable to fill many orders
because of inability to forecast demand, lack of adequate inventories, and insufficient
staff. Performance has been improving as experience led to improved staffing, better
inventory control, use of air rather than surface shipments in cases where justified, and/or
arrangements with suppliers. Some problems continue to exist (as they do with ‘brick and
mortar’ stores) because of problems in predicting demand for individual items.
 Some examples of problems related to
demand and efforts to solve them:
 Electric power companies, faced with excess capacity in certain periods and excess
demand during other periods, have tried a number of methods of changing
demand levels. These include charging higher prices at peak times, offering lower
overall rates to customers that are willing to have power cut off in exceptionally high-
demand periods, and contracts with suppliers from other areas or countries to
exchange power at differing peak periods.
Various states of demand

 Negative demand
 No demand
 Latent demand.
 Falling demand
 Irregular demand
 Full demand
 Overfull demand
 Unwholesome demand
Obstacles to exporting
 Obstacles to exporting
How can a company cope?
 There are many things that a small company can do to overcome any barriers, in
addition to applying sound business practices. Businessweek presents the following
global guidelines for small business (Barrett, 1995, p. 97):
 Look to existing customers. Many companies can penetrate foreign markets by
selling products or services to their domestic customers’ units overseas.
 Make a commitment. Exporting is not a part-time effort. It requires extensive
research. Foreign business should be run by seasoned managers.
 Seek advice. Universities often have MBA students who work as consultants on
exporting. Some consulting firms, such as Accenture (formerly Arthur Andersen),
provide a free first-time consultation.
 Use trade shows. Trade promotions sponsored by government agencies abroad
draw big crowds. Cost-conscious companies can send a product without
attending.
 Obstacles to exporting
How can a company cope?
 Pick markets carefully. While potentially lucrative, fast-growing markets can tank
unexpectedly, consider customer quality, not just nationality.
 Manage growth. It takes time to line up financing and expand an organization to
handle exports. Many small exporters are overwhelmed by big orders.
 Use letters of credit. Some first-time exporters ship a product and hope they get
paid. A letter of credit protects against default by a weak or shady buyer.
 Be patient. Many foreign customers do business based on relationships. Small
companies must spend time cultivating contacts before racking up export orders.
 Choose partners carefully. An experienced freight forwarder at home is crucial for
handling Customs paperwork. An inept distributor abroad can ruin a company’s
reputation.
 The impact of Technology

 Advances in information technology and other areas of technology have affected

international marketing in at least two ways. First, trade in technology-related products
and services has grown rapidly. Secondly, the improvements in communications
technology and organization have led to the development of new channels of
communication, lowered costs, and an increased flow of information. This, in turn, has
led to the development of increasingly efficient and responsive production and
distribution systems.
 Advances in communications technology have included increasing bandwidth,
improved methods of compressing data, more secure connections, and sharply
reduced prices.
 High definition TVs, cellular phones and wireless communications networks have
changed the amount of information people receive, the way it is received, and what it
costs.
 Radio-frequency identification systems (RFID) are increasingly being used to improve the
effectiveness and efficiency of supply chain management.
 The development of e-business software has had an important effect on international
marketing
 Examples of international markets for
products with various levels of technology

 A plastic mechanical device that allows swimmers to talk to each other was invented by
a US schoolboy. He patented it, formed a company, sold 5000 units of his ‘Water Talkie’
to Toys я Us, and then developed other toys that he sold to retailers around the world.
After three years, and with projected sales of a million units, he sold his business to a
larger company for over $1 million.
 Michael Tseng appeared on the TV show ‘Shark Tank’ in 2014. He pitched a cover for
food which using suction can work with any normal kitchen plate. Lori Greiner was the
most interested, but in the end no deal was struck. The product was still a success with
annual sales of more than $10 million and shelf place in more than 1000 Wal-Mart stores.
 New products using wood treated with specialized non-toxic processes are producing
very strong materials that can be used to replace concrete and steel in forming the
structure of buildings. Earlier versions of such products have been used for many years in
Scandinavia, Switzerland, Germany and Austria. Current products are being used in
other parts of continental Europe, the United Kingdom and the United States. They have
an additional advantage in producing less CO2 than masonry with timber framing with
brick or wood siding (Richardson, 2010).
Entrepreneurial approaches to
international marketing
 Online marketplaces
 The virtual company
 Business–government alliances
 Exporting services of knowledge-industry workers
 Exporting business models
 Importing customers
Examples of successfully exported
business models
 eBay. Company founders recognized that the Internet could be used to
develop an entirely new type of market in which potential buyers and sellers
could participate in online auctions without ever having to meet. It grew rapidly
in the United States and then quickly spread overseas where its business
method, organization, and size gave it a competitive advantage. In 2009, eBay
had over 90 million active users worldwide and received 54% of its revenue from
overseas.
 Cirque du Soleil. The Canadian-based circus without animals ‘is one of the rare
companies that utterly redefined their industries.’ It has a dozen full-time talent
scouts searching the world for outstanding performers, heavy emphasis on
research and development, elaborate staging and costumes, and New Age
music. The company has put on performances in 300 cities on five continents. It
has 5,000 employees worldwide, including over 1,200 artists speaking 25
different languages.
Examples of successfully exported
business models
 Starbucks. There are coffee shops and chains around the world, but Starbucks
has successfully expanded to many countries by using a particular brand of
‘lifestyle marketing,’ selling the ‘Starbucks experience’ rather than just their
coffee (Sullivan, 2003). It aims to provide a community-gathering place to
enrich people’s daily lives through its particular ambience, friendly service, and
consistent quality of the coffee drinks and related products served. Started in
the United States, the company now has 13,500 stores in 39 countries.
 Ikea. The Swedish producer of high-quality furniture initially failed in its attempts
to market its products overseas because of their high cost. The company
lowered costs by developing ready-to-assemble products, reducing
manufacturing costs through standardization and mass production, and going
to international sourcing of materials. In a new and very successful effort at
international expansion they emphasized very large stores with easy
freeway/motorway access and plenty of parking. This enabled them to provide
furniture that is accessible, approachable and economical
 Examples of successfully exported
business models
 7-Eleven. This chain of convenience stores was started when a store selling blocks of ice
realized that their customers would be willing to pay premium prices for food products if
the company would supply them at hours when traditional food stores were closed. It
used this model, adding additional products and new locations, as it grew to become
the world leader in convenience retailing. 7-Eleven maintains its competitive advantage
by making continual improvements in its demand tracking, stocking, and delivery
systems to keep costs low and increase responsiveness to customer demands. The
introduction of additional services and products serves to create additional customer
traffic.
 McDonald’s. There were many hamburger stands and some chains of stores selling
hamburgers in the United States before McDonald’s was started. The McDonald’s
approach, unique at the time, was to organize the production and delivery (sale) of
hamburgers and associated products (French fries, milk shakes, etc.) on the model of a
factory assembly line. The products themselves, steps in production (assembly), and
presentation to the customer were all standardized in order to produce food quickly,
cheaply, and of consistent quality. Its initial advantage, coupled with a franchise system
of opening new outlets, allowed it to expand rapidly. It remains the world’s best-known
fast food chain.
 Evaluating the Firm’s Readiness for Internationalization:
from the Design to the Application of an International
Qualification Framework
Jean-Paul David & Guillaume Cariou
International Journal of Business and Management; Vol. 9, No. 7; 2014
ISSN 1833-3850 E-ISSN 1833-8119
Published by Canadian Center of Science and Education

In light of the major changes having marked the evolution of SME global
expansion over the past two decades, this article revisits export diagnostic
frameworks and advances updated approaches. As the conditions and
variables that have characterized the SME’s internationalization process have
been overhauled, a new framework is required to evaluate their readiness for
going global. Supported by research findings and by SMEs’ practical
experiences abroad, this article lays down an international qualification
framework that goes beyond the binary provision “Go or No Go” in that it casts
a wider focus upon the new realities facing the SME overseas. Indeed, the
international qualification framework proposed specifies the SME’s
preparedness for internationalization then defines preliminary axes in terms of
product-market couples and internationalization modalities
 Evaluating the Firm’s Readiness for Internationalization:
from the Design to the Application of an International
Qualification Framework

Qualification dimensions and respective criteria

Dimensions Short list of international qualification criteria raised by the experts

Competencies of Management • Training in international business

• Knowledge of foreign markets
• Knowledge of foreign languages
• Experience in international business
Heritage • Prominence, recognition of the firm globally
• Intellectual property held in certain countries
• Presence in foreign markets
• Lessons learned from the internationalization experience

Relationships • Branches, foreign subsidiaries etc.

• Established business relationships in certain countries
• Internet presence of the SME abroad
 Evaluating the Firm’s Readiness for Internationalization:
from the Design to the Application of an International
Qualification Framework
Qualification dimensions and respective criteria
Dimensions Short list of international qualification criteria raised by the experts

Offerings • Assets (strengths), handicaps (weaknesses) related to products, services or solutions

pertaining to an international expansion
• Adaptability of the SME’s products, services or solutions with respect to new foreign markets
• Adapted or adaptable pricing structure and financial modalities for foreign markets
Means Financial health of the SME
• Access to financing or new capital
• Available production (operational) capacity
Engagement • Top management’s availability to dedicate time to nternational activity
• Top management’s preparedness to invest in the international venture
• Level of risk tolerance
• Motivations, objectives, targets, scenarios and economic models pertaining to the
internationalization project