International Marketing

15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
 International Marketing 1

• International marketing is defined as 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 nations
for a profit.
• The difference is the “environment”
– Competition, legal restraints, government controls,
weather, fickle consumers, economic conditions,
technological constraints, infrastructure concerns,
culture, and political situations.

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 1
The International Marketing Task

Exhibit 1.3

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 1
The International Marketing Task

Marketing Decision Domestic Environment Foreign Environment

• Firm • Political forces • Political forces

Characteristics • Legal forces • Legal forces
• Product • Economic forces • Economic forces
• Price • Competition • Competition
• Place • Level of
• Promotion technology
• Research • Geography
• Culture

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Environmental Adaptation 1

• The most challenging and important adaptation

international marketers must make is cultural
adjustments.
• Must establish a frame of reference
– Time-conscious Americans vs. Time-is-not-an-
asset thinking Latin Americans
– Hand gestures vary between countries
• “Cultural Conditioning” – be aware of home
cultural references before making decisions

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 Obstacles to Adaptation 1

• Adaptation is a conscious effort on the part of

the international marketer to anticipate the
influences of both the foreign and domestic
uncontrollable factors on a marketing mix and
then to adjust the marketing mix to minimize
the effects.
• Two primary obstacles are:
– Self-Reference Criterion (SRC)
– Ethnocentrism

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 Self-Reference Criterion 1

(SRC)
• Self-Reference Criterion (SRC) is an
unconscious reference to one’s own cultural
values, experiences, and knowledge as a basis
for decision.
• Risk of SRC:
– Prevent you from becoming aware of cultural
differences
– Influence the evaluation of the appropriateness
of a domestically designed marketing mix for a
foreign market

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 Ethnocentrism 1

• The notion that people in one’s own company,

culture, or country know best how to do things.
• Risk of Ethnocentrism:
– Impedes the ability to assess a foreign market in
its true light

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 Beyond Obstacles 1

to Adaptation
• The most effective way to control the influence
of SRC and Ethnocentrism is:
– To recognize the effects on our behavior
– To recognize that there may be more similarities
than differences between countries
– To conduct cross-cultural analysis

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 Cross-Cultural Analysis 1

1. Define business problem or goal in home-

country cultural traits, habits, or norms
2. Define business problem or goal in foreign-
country cultural traits, habits, or norms
through consultation with natives of target
country
3. Isolate the SRC influence and examine it
carefully to see how it complicates the problem
4. Redefine the problem without SRC influence
and solve for the optimum business goal
situation
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 Developing 1

Global Awareness
• Tolerance of cultural differences
– You do not have to accept as your own the
cultural ways of another, but you must allow
others to be different and equal
• Knowledge of cultures, history, world market
potential, and global economic, social, and
political trends

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 Approaches to 1

Global Awareness
• Select individual managers that express a
global awareness orientation
• Develop personal relationships in foreign
countries
• Must have the support of a culturally diverse
senior executive staff or board of directors

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International Marketing 1

Involvement - Stages

No Direct Infrequent Foreign

Foreign Marketing Marketing
Global
Marketing
Regular Foreign International
Marketing Marketing

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 No Direct Foreign 1

Marketing – Reactive
• Products “indirectly” reach foreign markets
• Trading companies
• Foreign customers who contact firm
• Domestic wholesalers/distributors
• Web orders
• Foreign orders stimulate a company’s interest
to seek additional international sales

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 Infrequent Foreign 1

Marketing – Reactive
• Caused by temporary surpluses
– Sales to foreign markets are made as goods
become available
• Firm has little or no intention of maintaining
continuous market representation
• Foreign sales activity declines and is
withdrawn when domestic demand increases

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 Regular Foreign 1
Marketing – Proactive
• Dedicated production capacity for foreign
markets
• Strategy:
– Firm employs domestic or foreign intermediaries
– Uses its own sales force or sales subsidiaries
• Products are adapted for foreign markets as
domestic demand grows
• Firms depend on profits from foreign markets

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 International Marketing – 1
Proactive
• Fully committed and involved in foreign markets
and international activities
• Production takes place on foreign soil earning
firms the MNC (Multinational Corporation) title
• Fedders being “proactive:”
– Looked to Asia for future growth after stymied
U.S. sales
– Designed new types of air conditioner unit for the
Chinese market
– Plan to introduce new product in the U.S!
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 Global Marketing – 1

Proactive
• The firm sees the world as one market!
• Market segmentation is now defined by income
levels, usage patterns, or other factors that span
the globe
• More than half of its revenues come from abroad
• The firm has a global perspective

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Global Market Orientation 1

• This orientation entails operating as if all the

country markets in a company’s scope of operations
(including the domestic market) were approachable
as a single global market and standardizing the
marketing mix where culturally feasible and cost
effective.
• Depending on the product and market, firms may
pursue a global market strategy for one product
(global market orientation – P&G diapers) but a
multidomestic strategy for another product
(international market orientation = P&G
detergents).
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 International Marketing
15th edition

Philip R. Cateora, Mary C. Gilly, and John L. Graham

Roy Philip 2
 Protection 2
Logic and Illogic
• Arguments for protectionism:
– Protection of infant industry
– Protection of the home market
– Need to keep money at home
– Encouragement of capital accumulation
– Maintenance of the standard of living and real wages
– Conservation of natural resources
– Industrialization of a low-wage nation
– Maintenance of employment and reduction of unemployment
– National defense
– Increase of business size
– Retaliation and bargaining

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 Does Protectionism Help? 2

• A recent study on 21 protected industries showed that

while jobs are protected, consumers pay much higher
prices because of protectionism:
– U.S. consumers pay about $70 billion per year in
higher prices because of tariffs and other protective
restrictions.
– At the same time, the average cost to consumers for
saving one job in these protected industries was
$170,000 per year.
• Protectionism is politically popular, particularly during
times of declining wages, and/or high employment, but it
rarely leads to renewed growth in a declining industry.

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 Trade Barriers 2

1. Tariffs
2. Quotas and Import Licenses
3. Voluntary Export Restraints (VER)
4. Boycotts and embargoes
– Embargo: A trading ban in trade terminology, is the partial or
complete prohibition of commerce and trade with a particular country
or a group of countries.
5. Monetary barriers
1. Blocked currency
2. Government approval

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 Trade Barriers 2

1. Tariffs are taxes imposed by a government on

goods entering its borders.

Inflationary pressures, special interests’ privileges,

Increase government control and political considerations in
economic matters, and the number of tariffs

Weaken Balance-of-payment positions, supply and demand

patterns, and international relations by starting trade
wars

Restrict Manufacturer’s supply sources, choices available to

consumers, and competition

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 Trade Barriers 2

2. Quotas and Import Licenses

– Quota is a specific unit or dollar limit applied to a
particular type of good (increases price of good)
– Import licenses limits quantities on a case-by-case basis
– Japan and foreign rice; Banana wars between the United
States and the EU
3. Voluntary Export Restraints (VER)
– Often used in the 1980s is an agreement between the
importing country and the exporting country for a
restriction on the volume of exports.
– Japan’s VER on U.S. automobiles

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 The World 2
Trade Organization (WTO)
• WTO which is an institution, not an agreement, was founded
in 1994.
– Sets many rules governing trade between its 148 members
– Provides a panel exports to hear and rule on trade disputes
between members
– Issues binding decisions
– All member countries will have equal representation
– Member countries have open their markets and to be bound by
the rules of the multilateral trading system
• U.S. ratification concerns
– Possible loss of sovereignty over its trade laws to WTO
– Lack of veto power
– Role U.S. would assume when a conflict arises over an individual
state’s laws that might be challenged by a WTO member
• China became member of the WTO (2001); Vietnam (2007)
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International Monetary Fund 2
(IMF)
• Because of inadequate money reserves
and unstable currencies, the IMF was
created to assist nations in becoming and
remaining economically viable
• Objectives of the IMF
– Stabilization of foreign exchange rates
– Establishment of freely convertible currencies
to facilitate the expansion and balanced
growth of international trade

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 World Bank Group 2

• By promoting sustainable growth and investment in people,

the World Bank Group is an institution created in 1944 to
reduce poverty and improve standard of living
• The World Bank has five institutions which perform the
following services:
– Lending money to the governments of developing countries
– Providing assistance to governments for developmental projects
to the poorest developing countries (per capital incomes of $925
or less)
– Lending directly to the private sector
– Providing investors with guarantees against “noncommercial
risk”
– Promoting increased flows of international investment

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 What Is A Political Economy?
➢Political economy of a nation - how the
political, economic, and legal systems of a
country are interdependent
➢they interact and influence each other
➢they affect the level of economic well-being in
the nation

2-1
 What Is A Political System?
➢Political system - the system of
government in a nation
➢Assessed according to
➢the degree to which the country emphasizes
collectivism as opposed to individualism
➢the degree to which the country is democratic
or totalitarian

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 What Is Collectivism?
➢Collectivism stresses the primacy of
collective goals over individual goals
➢can be traced to the Greek philosopher, Plato
(427-347 BC)
➢Today, collectivism is equated with
socialists (Karl Marx 1818-1883)
➢advocate state ownership of the basic means
of production, distribution, and exchange
➢manage to benefit society as a whole, rather
than individual capitalists

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 How Does Modern-Day
Socialism Look?
➢ In the early 20th century, socialism split into
1. Communism – socialism can only be achieved
through violent revolution and totalitarian
dictatorship
➢ in retreat worldwide by mid-1990s
2. Social democrats – socialism is achieved
through democratic means
➢ retreating as many countries move toward free
market economies
➢ state-owned enterprises have been privatized

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 What Is Individualism?
➢ Individualism refers to philosophy that an
individual should have freedom in his own
economic and political pursuits
➢ can be traced to Greek philosopher, Aristotle (384-
322 BC)
➢individual diversity and private ownership are
desirable
➢ individual economic and political freedoms are the
ground rules on which a society should be based
➢ implies democratic political systems and free market
economies

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 What Is Democracy?
➢ Democracy - a political system in which
government is by the people, exercised either
directly or through elected representatives
➢ usually associated with individualism
➢ pure democracy is based on the belief that citizens
should be directly involved in decision making
➢ most modern democratic states practice
representative democracy where citizens periodically
elect individuals to represent them

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 What Is Totalitarianism?
➢ Totalitarianism - form of government in
which one person or political party
exercises absolute control over all
spheres of human life and prohibits
opposing political parties

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 What Is Totalitarianism?
➢ Four major forms of totalitarianism exist today
1. Communist totalitarianism – found in states where
the communist party monopolizes power
2. Theocratic totalitarianism - found in states where
political power is monopolized by a party, group, or
individual that governs according to religious
principles
3. Tribal totalitarianism - found in states where a
political party that represents the interests of a
particular tribe monopolizes power
4. Right-wing totalitarianism - permits some individual
economic freedom, but restricts individual political
freedom

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 What Is The Link Between Political
Ideology and Economic Systems?
➢ Political ideology and economic systems
are connected
➢ countries that stress individual goals are
likely to have market based economies
➢ in countries where state-ownership is
common, collective goals are dominant

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What Is An Economic System?
➢ There are three types of economic
systems
1. Market economies - all productive
activities are privately owned and
production is determined by the
interaction of supply and demand
➢ government encourages free and fair
competition between private producers

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What Is An Economic System?
2. Command economies - government plans the
goods and services that a country produces,
the quantity that is produced, and the prices as
which they are sold
➢ all businesses are state-owned, and
governments allocate resources for “the
good of society”
➢ because there is little incentive to control
costs and be efficient, command economies
tend to stagnate

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What Is An Economic System?
3. Mixed economies - certain sectors of the
economy are left to private ownership
and free market mechanisms while other
sectors have significant state ownership
and government planning
➢ governments tend to own firms that are
considered important to national security

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 What Is A Legal System?
➢ Legal system - the rules that regulate behavior
along with the processes by which the laws are
enforced and through which redress for
grievances is obtained
➢ the system in a country is influenced by the
prevailing political system
➢ Legal systems are important for business
because they
➢ define how business transactions are executed
➢ identify the rights and obligations of parties involved
in business transactions

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 What Are The
Different Legal Systems?
➢ There are three types of legal systems
1. Common law - based on tradition, precedent,
and custom
2. Civic law - based on detailed set of laws
organized into codes
3. Theocratic law - law is based on religious
teachings

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 How Are Contracts Enforced
In Different Legal Systems?
➢ Contract - document that specifies the conditions
under which an exchange is to occur and details
the rights and obligations of the parties involved
➢ Contract law is the body of law that governs
contract enforcement
➢ under a common law system, contracts tend to be
very detailed with all contingencies spelled out
➢ under a civil law system, contracts tend to be much
shorter and less specific because many issues are
already covered in the civil code

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 Which Country’s Laws Should
Apply In A Contract Dispute?
➢ The United Nations Convention on Contracts for
the International Sale of Goods (CIGS)
➢ establishes a uniform set of rules governing certain
aspects of the making and performance of everyday
commercial contracts between buyers and sellers
who have their places of business in different nations
➢ Ratified by the U.S. and about 70 countries
➢ but, many larger trading nations including Japan and
the U.K. have not agreed to the provisions of CIGS
and opt for arbitration instead

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 How Are Property Rights
And Corruption Related?
➢ Property rights - the legal rights over the
use to which a resource is put and over
the use made of any income that may be
derived from that resource

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 How Are Property Rights
And Corruption Related?
➢ Property rights can be violated through
1. Private action – theft, piracy, blackmail
2. Public action - legally - ex. excessive
taxation or illegally - ex. bribes or
blackmailing
➢ high levels of corruption reduce foreign direct
investment, the level of international trade, and
the economic growth rate in a country

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Cultural Influences on
International Business

1
Learning Outcomes

 Define Culture
 Characteristics of Culture
 Importance of Culture
 Cultural Influences on Business and Society.
 Elements of Culture

2
Culture
 Culture is the characteristics and knowledge of a
particular group of people, encompassing language,
religion, cuisine, social habits, music and arts.

 "Culture encompasses religion, food, what we wear, how

we wear it, our language marriage, music, what we
believe is right or wrong, how we sit at the table, how
we greet visitors, how we behave with loved ones, and a
million other things,“

 Culture is learned by socialization

3
Characteristics of Culture

 Learned behavior
 Interrelated elements
 Adaptive
 Shared

4
Importance of Culture
 Managers of International Businesses must understand
cultural differences among nations Because:
a. To communicate effectively with stakeholders
b. To negotiate effectively.
c. To predict how trends in social behaviour affect the
company’s foreign operations.
d. To understand Social Responsibility and ethics in a
particular country.
e. To predict how cultural differences affect the
company’s advertisement and promotional activities.

5
Cultural Influences on Business and Society.

 Business Environments
 Marketing
 Social Attitudes

6
Components/Elements of culture
 Culture was defined earlier as the symbols, language,
beliefs, values, and artifacts that are part of any society.
 The first type, called nonmaterial culture, includes
the values, beliefs, symbols, and language that define a
society.
 The second type, called material culture, includes all
the society’s physical objects, such as its tools and
technology, clothing, eating utensils, and means of
transportation.

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Elements of Culture

Language

Artifacts
Communicati
on

Culture
Symbols and
Norms Religion

Social Structure Values/Attitudes

8
Symbols and Norms
 Every culture is filled with symbols, or things that stand for
something else and that often evoke various reactions and
emotions.
 Cultures differ widely in their norms, or standards and
expectations for behaving.
 Norms are often divided into two types, formal
norms and informal norms.
 Formal norms, also called laws, refer to the standards of
behavior considered the most important in any society. E.g
Traffic Laws.
 Informal norms, also called folkways and customs, refer to
standards of behavior that are considered less important but
still influence how we behave. E.g Table Manners

9
Social Structure
 Individuals, families, and groups
▪ Importance of family
▪ Definition of family
▪ Importance of individual relative to the group

 Social stratification – categorization based

on birth, occupation, educational
achievements

 Social mobility – ability to move from one

stratum of society to another
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Language
 3000+ different languages worldwide
 10,000+ different dialects
 Primary delineator of cultural groups
 Lingua Franca
◦ English is the common language of international
business

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Forms of Nonverbal Communication_1
 Hand gestures
 Facial expression
 Posture and stance
 Clothing/ hair style
 Walking behavior
 Interpersonal distance
 Touching
 Eye contact
 Architecture/ Interior design
 Artifacts and non-verbal symbols

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Forms of Nonverbal Communication_2
 Art and rhetorical forms
 Smell
 Speech rate, pitch, inflection, volume
 Color symbolism
 Synchronization of speech and movement
 Taste, symbolism of food, oral gratification
 Cosmetics
 Sound signals
 Time symbolism
 Timing and pauses
 Silence

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Values and Attitudes

 Values: accepted principles and standards

 Attitudes: actions, feelings, and thoughts
that result from values
◦ Time
◦ Age
◦ Education
◦ Status

14
Religion
 Christianity
◦ Catholicism
◦ Protestant
◦ Eastern Orthodox
 Islam
 Hinduism
 Buddhism

15
Artifacts
 The last element of culture is the artifacts, or material
objects, that constitute.
 In the most simple societies, artifacts are largely limited
to a few tools, the huts people live in, and the clothing
they wear. e a society’s material culture.
 The iPhone is just one of the many notable cultural artifacts
in today’s wireless world.
 Sometimes people in one society may find it difficult to
understand the artifacts that are an important part of
another society’s culture.

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 Lecture No 11
Cultural Influences on
International Business

1
Learning Outcomes
 Key Components of Corporate Culture.
 Types of Organizational Culture.
 Elements of a Great Company Culture

2
Key Components of Corporate Culture
 Corporate culture is often defined as a set of shared
beliefs and values that influence the behaviors and
actions of employees.

 It can also be helpful to think of culture as the

personality of the organization.

 In a survey of 1,800 global CEOs and CFOs conducted

by Duke’s Fuqua School of Business, 78 percent named
culture as one of the top five factors impacting overall
company value.

3
1.Vision and Values
 The backbone of an organization’s culture is the
organization’s vision and purpose and how these things
will help it survive and compete in the market.

 Values describe the employee behaviors and mindset

required to achieve the company vision.

 Together, the vision and values serve as guidelines for

how employees are expected to lead, behave, and
communicate.

4
1.Vision and Values
 Some of your company values may be aspirational, while
others may already be a part of your culture. For
example, a technology company may have core values of
zero-defect product delivery (aspirational) and
innovation (a value they already possess).

 At all times, however, employees need to understand

the vision and values, as well as the associated behaviors
that are expected of them.

5
2. Practices and People
 Perhaps the most important component of corporate
culture is the people.

 Customers, prospective hires, and other stakeholders

will understand your company culture from their
interactions with and observations of employees.

 Because employee behaviors impact corporate culture,

targeted skills training can be used to teach employees
the behaviors that support the culture you want to
build.

6
2. Practices and People Cont’d
 Employee behaviors, both innate and learned, define
corporate culture. Some examples include:

▪ Traits and skills of leaders: the degree to which

individuals lead by example and cultivate desired
behaviors in others.

▪ Communication: how employees share information

and deliver feedback.

7
2. Practices and People Cont’d

 Teamwork/collaboration: the degree to which

individual input and perspective is respected and
considered in group problem-solving and decision-
making.

 Camaraderie: how employees have fun and build a

sense of community within the organization how
employees have fun and build a sense of community
within the organization

8
3. Narrative
 Every organization has a unique story that undeniably
shapes its culture.

 When elements of the company’s narrative are shared

and retold over time, they become a significant part of
the culture.

 Examples of narrative/storytelling activities that help

shape corporate culture include:

9
3. Narrative Cont’d
 Celebrations that remind employees of important
company milestones and successes.

 Rituals and routines, such as annual meetings, that

recognize newly promoted employees, or a program
that brings a special guest to speak to employees at the
same time each year.

 Company folklore and legends.

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4. Environment/Place
 The environment in which people do their work,
collaborate, and make decisions is a critical component
of corporate culture.

 For example, geographic regions tend to attract

different kinds of companies and employees, as in the
case of Silicon Valley for tech firms.

 Within companies, location can help shape culture as

well.

11
4. Environment/Place
 Trading floors in brokerage firms engender a culture of
loud conversation and a lightning-fast pace of work.

 In many office environments, flexible-use gathering

places and conference-type rooms support a
collaborative culture among employees.

12
Types of Organizational Culture

13
Types of Organizational Culture
 Clan oriented cultures are family-like, with a focus on
mentoring, nurturing, and “doing things together.”
 Adhocracy oriented cultures are dynamic and
entrepreneurial, with a focus on risk-taking, innovation,
and “doing things first.”
 Market oriented cultures are results oriented, with a
focus on competition, achievement, and “getting the job
done.”
 Hierarchy oriented cultures are structured and
controlled, with a focus on efficiency, stability and “doing
things right.”

14
Elements of a Great Company Culture
1. If you want to be trusted, you must trust.
 A culture of trust is imperative. If you behave like a
helicopter parent, overseeing, or worse, taking over
every project, it will directly conflict with the building of
trust.
 Give your employees clear guidelines and let them
spread their wings.
2. Give employees the opportunity to get to know
one another.
 How can people know, like, and trust one another if
they don't have the opportunity to play together?

15
Elements of a Great Company Culture
 An occasional party or outing is not enough to build
and maintain these relationships.

 Create little rituals at employee meetings, have themes

for certain days of the week and holidays, and engage
in community projects together.

 Find ways to celebrate success, no matter how small,

and certainly create friendly competition; both work-
related and personal.

16
Elements of a Great Company Culture
3. Create a cool space.
• Our external environment has a significant impact on our
internal thought process.

• Design a creative corner with bean bag chairs, chalk boards, and
a lighthearted theme throughout.

• Allow employees to bring fun decorations to add to their work

area.

• A creative environment sets the bar for innovation.

• Creating a "culture of cool" attracts the kind of people who

value the kind of culture you're trying to build.

17
Elements of a Great Company Culture
 4. Give them free stuff.
 Everyone loves free stuff! If you can't afford to
supply personal computers or tablets, stock
options, and grand parties--no worries, those things
will come.
 In the meantime Friday morning breakfasts,
afternoon smoothies, fun work tools, and
inexpensive merchandise will go a long way.
 This will contribute to a work-hard, play-hard
environment, making for happy, productive, and
creative employees.

18
Elements of a Great Company
Culture
5. No jerks allowed.
 Hiring for skill alone will doom you to misery.
 Hire nice people who fit in with the intention design of
your culture.
 Hire people who have a proven work ethic and are
team players.
 Hire for creativity and personality. Sure, experience and
skill are important, but not nearly enough to take you to
the top of your industry.

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Elements of a Great Company Culture
 6. Encourage growth and ownership.
 A strong company culture isn't just about fun: it's about
encouraging your employees to see their job as more than
just a job--to own their job and their ideas.
 Once you've build this collaborative, trusting environment,
your employees will bring ideas to the table.
 If it's their idea, put them in charge of it! If an employee
wants to learn something new, provide the support for them
to do it.
 Today, innovative companies don't hire employees to remain
in one job for an eternity; they hire innovators who will
contribute to the future of the company in a powerful way.

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Elements of a Great Company Culture
 7. Communicate, communicate, communicate.
 Communication about processes and workflow
aren't enough.
 Drill your values into your employees with ideas
like those above and by demonstrating them in
your own behavior.
 Be authentic and, at times, vulnerable.
 If an employee isn't performing up to par, don't let
your frustration and disappointment grow; engage
in thoughtful conversations about it and create a
plan for improvement. If an employee has a win,
celebrate!
21