MODULE 1.

GLOBAL MARKETING AN OVERVIEW

Globalization reflects the trend of firms buying, selling and distributing products and services in most
countries and regions of the world.

Domestic marketing involves managing controllable variables such as attributes of products/services,

price, distribution and advertising in a largely uncontrollable external environment made up of
different economic and financial structures, political and legal infrastructure, competitors, socio-
-cultural environment and within specific country boundaries.
International marketing involves operations across a number of foreign country markets in which
except the uncontrollable variables also the controllable factors (in the form of cost and price
structures, opportunities for advertising and distributive infrastructure) differ significantly between
one market and another. These sorts of differences then lead to the complexities of international
marketing.

Global marketing management is an even larger and more complex international operation where a
company coordinates, integrates and controls a whole series of marketing programmes into a
substantial global effort. The primary and main objective of the company here is to achieve a degree
of synergy in the overall operation, so that the organisation as a whole will be greater than the sum
of its parts, by taking advantage of different exchange and tax rates, labour rates, skill levels and
market
opportunities.

How international marketing is presented depends on the level of involvement of the company in the
international marketplace. International marketing could therefore be:
Export marketing, when the firm markets its goods/services across national or political boundaries.
International marketing/multinational marketing, where an organisation carries out activities or
operations in more than one country, with some influence or control of marketing activities from
outside the country in which the goods/services will actually be sold. Multinational or multidomestic
marketing is often used on markets perceived to be independent and a profit centre in their own
right. International marketing involves activities from basic marketing mix decision-making across
national boundaries to more complex operations such as establishing manufacturing or processing
facilities around the world and coordinating marketing strategies across the globe.
Global marketing, in which the whole organisation focuses on the selection and exploitation of
global marketing opportunities and gathers resources around the globe with the objective of
achieving a global competitive advantage (Doole and Lowe, 2008). Global marketing further
represents the firm’s commitment to coordinate its marketing activities across national boundaries in
order to find and satisfy global customer needs better than competitors do, therefore the firm is able
to:
 develop a global marketing strategy, based on both similarities and differences between
markets;
 exploit the knowledge of the headquarters (home organization) through worldwide diffusion
(learning) and adaptation;
 transfer knowledge and best practice between served international markets.
Definitions of international marketing
AMA (American Marketing Association) describes International Marketing as the multinational
process of planning and executing the conception, pricing, promotion and distribution of ideas,
goods and services to create exchanges that satisfy individual and organizational objectives.
According to Kotler, ”Global marketing is concerned with integrating and standardizing marketing
actions across a number of geographic markets.”

Advantages and Disadvantages of International Marketing

Advantages
– opportunity to create economies of scale Disadvantages
– opportunity for growth, if the domestic – the cost of the customization of marketing
trade is limited mix
– opportunity to avoid fierce competition at – risk of governments instability
home – risk of currencies instability
– keep up with international competition – difficult entry requirements, different
– create an international brand image or standards, legislation and regulations
provide – difficulty understanding the local culture,
international services to multinational clients customs, values and norms
– opportunity to dispose large stocks – difficulty in entering the local distribution
– opportunity to increase profits by using the channel
excess capacity

Objectives of International Marketing

• Bringing countries closer for trading purpose and to encourage large scale free trade among the
countries of the world and integration of economies of different countries and there by to
facilitate the process of globalization of trade.
• Establishing and strengthening trade relations among the nations.
• To facilitates and encourage social and cultural exchange among different countries of the world.
• To provide better life and welfare to people from different countries of the world.
• To provide assistance to developing countries in their economic and industrial growth and
thereby to remove gap between the developed and developing countries.
• To encourage world export trade and to provide benefits of the same to all participating
countries

Domestic Marketing International Marketing

The activities of production, promotion, Marketing activities are undertaken across the
advertising, distribution, selling and customer globe.
satisfaction within one’s own country.
There is less government influence Companies have to deal with rules and
regulations of various countries
More reliance on indigenous technology There is an advantage that the business
organizations can have access to the latest
technology of numerous countries
Cultural adjustment issues are less Cross cultural adjustment issues are very
challenging challenging
The risk factor and challenges are The risk involved and challenges in case of
 comparatively less in the case of domestic international marketing are very high due to
marketing. some factors like socio-cultural differences,
exchange rates, setting an international price
for the product and so on.

Reasons for Entering International Markets

Growth: Firms enter international markets when the domestic market potential saturates and they
are compelled to explore alternative marketing opportunities overseas. Firms aim at exploring and
tapping enormous opportunities available in the international market to grow and expand beyond
boundaries.

Profitability: The price differential among markets also serves as an important incentive and
motivation to internationalize. Exporters benefit from the higher profit margins in the foreign
markets than in the domestic market. Sometimes, strong competition in domestic market limits a
firms’ profitability in that market. Price differentials and enhanced profits in the international
markets are some of the fundamental motives for exporting. For eg. EBay, Macy’s are now shipping
their imported products to India during the recent Black Friday deals with minimum charges, thereby
increasing its customer base beyond national boundaries.

Access to Imported Inputs: The national trade policies provide for import of inputs used for export
production, which are otherwise restricted. Besides, there are a number of incentive schemes and
support to the domestic companies to export and to invest in foreign countries. Duty exemption or
remission on import of inputs for export production, such as advance licensing, duty drawback, duty
exemption, export promotion, capital goods schemes are provided to the firms. For example -In
India, units established in the Export Processing Zones (EPZs) and 100% Export Oriented Units (EOUs)
get excise and tax related benefits.

Uniqueness of Product or Service: The products with unique attributes are unlikely to meet any
competition in the overseas markets and enjoy enormous opportunities in international markets. For
instance, herbal and medicinal plants, handicrafts, value-added BPO services, and software
development at competitive prices provide Indian and edge over other countries and ease their
entry into international markets. For Example – Patanjali products are accepted and used world wide
by the consumers.

Marketing Opportunities due to Life Cycles: Easy market shows a different stage of life cycle for
different products, which varies widely across country markets. When a product or service gets
saturated in the domestic or an international market, a firm way make use of such challenges and
convert them into marketing opportunities by entering and operating into international markets. For
example- Apple - the technology giant designs its iPhone in California; outsources its
manufacturing jobs to different countries like - Mongolia, China, Korea, and Taiwan; and markets
them across the world. Apple have not restricted its business to a nation rather expanded it to
throughout the world. The opportunities for networking internationally are limitless. The more
“places” a business is, the more connections it can make with the world.

Spreading R&D costs: By spreading the potential market size, a firm attempts to quickly cover its cost
on R&D. Use of price skimming strategies facilitate faster recovery of costs incurred, such as
software, microprocessor etc. International markets help in speedy recovery of such costs because of
the large market size in international markets

Spreading risk: A diversified export business may help in reducing sharp fluctuations in the overall
activity of a firm. When a firm is selling in number of markets, the downward fluctuations in sales in
one market may be fully or partially counterbalanced by rise in the sales in the other markets. For
example, the US economy showed slowed down in 2001, while Indian and Chinese economies were
doing well.

Scope International Marketing

• Opening a branch/subsidiary abroad for processing, packaging, assembly or even complete
manufacturing through direct investment.
• Negotiating licensing/franchising arrangements whereby foreign enterprises are granted the
right to use the exporting company’s know-how. viz. patents, processes or trademarks, with or
without financial investment.
• Establishing joint ventures in foreign countries for manufacturing and/or marketing.
• Offering consultancy services and undertaking turnkey projects abroad.
• Sub-contracting and countertrade: and
• Importing for export production

Theories of International Trade

Mercantilism theory
 ‘to increase our wealth, sell more to strangers yearly than we consume of theirs in value’-
Thomas Mu
Absolute Cost Advantage Theory
The basic principle of absolute advantage refers to the ability of a party (an individual, or firm, or
country) to produce a greater quantity of a good, product, or service than competitors, using the
same amount of resources. Theory propose that if two countries specialize in production of different
products (in which each has an absolute advantage) and trade with each other, both countries will
have more of both products available to them for consumption.

Assumptions of the Theory

• Trade is between two countries
• Only two commodities are traded
• Free Trade exists between the countries
• The only element of cost of production is labor

Criticism
• No absolute advantages for many countries.
• Country size varies.
• Country by country differences in specialization
• Deals with labor only and neglects other factors (Variety of resources)
• Neglected Transport cost (It plays significant role)

Comparative Advantage

It refers to the ability of a party to produce a particular good or service at a lower marginal and
opportunity cost over another. Even if one country is more efficient in the production of all goods
(absolute advantage in all goods) than the other, both countries will still gain by trading with each
other, as long as they have different relative efficiencies.

Assumptions of Comparative Advantage

1. There are only two nations and two commodities.
2. Free Trade: there are no barriers to trade. There are no regulations on trade between the two
countries.
Labor theory of value: Labor is the only factor of production. In other words, the cost of production
of the commodities is measured by the labor time involved in producing them.
4. Absence of transportation costs.

The Product Life-Cycle Theory

This theory was proposed in 19602 s by Raymond Vernon. This theory attempts to explain global
trade patterns. It suggests that many products go through a cycle during which high-income, mass
consumption countries which are initial exporters, lose their export markets and finally become
importers of the product. At the same time other countries, particularly less developed but not
exclusively so, shift from being importers to exporters.
• From a high income country point of view:
• Phase 1- involves exporting, based on domestic product strength and surplus
• Phase 2, when foreign production begins
• Phase 3 when production in the foreign country becomes competitive,
• Phase 4 when import competition begins.
EPRG Concept
• Ethnocentric approach
• Polycentric approach
• Regiocentric approach
• Geocentric approach

COMPONENTS OF INTERNATIONAL MARKETING

Economic Environment Economic factors at a macroeconomic level affect the nature and location of
global marketing opportunities. The major economic environment indicators influencing
international marketing decisions are as follows: a) National Income. b) Gross Domestic Product
(GDP). c) Industrial Structure. d) Currency floating (Open/fixed) issue. e) Demand patterns. f) Balance
of Payment (BOP) status g) Economy base (Import/Export). h) Rate of Economic Growth. i)
Occupational Pattern. j) State of Inflation. k) Consumer Mobility.

Financial Environment Financial environment refers to the financial system study of a country in
which the international marketer intends to operate. A financial system of a country refers to the
following two variables such as: a) Money Market. b) Capital Market.

Cultural Environment Culture is everything that people have, think and do as members of the
society. It is the sum total of knowledge, beliefs, arts, morals, laws, and customs and any other
capabilities and habits acquired by humans as members of the society. The environment which is
comprised of norms, taboos, religious sentiments, habits that determines the lifestyle, attitude
towards different goods and buying decisions is regarded as cultural environment. Since consumer
behavior is highly influenced by cultural a firm pursuing international marketing must know the
cultural differences in which international efforts are made. For Example : Mountain Dew, one of the
fastest growing brands across the Pepsi portfolio are huge in India, Pakistan and across the world.
It is almost a Rs1000 crore brand. Though the formulation, packaging, look and positioning of
Mountain Dew is global, but advertising and distribution is completely local. The brand addresses
the message – “Darr ke agey jeet hai” is specially designed for India and Pakistan as it is presumed
that here in these countries the youth have certain fear to overcome ,for which they need courage

Social Environment
The social and cultural influences on international marketing are immense. The international
marketer intends to provide an insight into the social environment to know the constituents of a
foreign society and to understand how social classes differ in their buying habits, brand choice and
living patterns. Differences in social conditions, religion and material culture all affect consumers’
perceptions and patterns of buying behaviour. It is this area that determines the extent to which
consumers across the globe are either similar or different and so determines the potential for global
branding and standardisation. A failure to understand the social/cultural dimensions of a market are
complex to manage, as McDonald’s found in India. It had to deal with a market that is 40 per cent
vegetarian, had an aversion to either beef or pork among meat-eaters and a hostility to frozen meat
and fish, but with the general Indian fondness for spice with everything. To satisfy such tastes,
McDonald’s discovered it needed to do more than provide the right burgers.

Political Environment The political environment of international marketing includes any national or
international political factor that can affect the organization’s operations or its decision making.
Politics has come to be recognized as the major factor in many international business decisions,
especially in terms of whether to invest and how to develop markets. Politics is intrinsically linked to
a government’s attitude to business and the freedom within which it allows firms to operate.
Unstable political regimes expose foreign businesses to a variety of risks that they would generally
not face in the home market.

Legal Environment An International Marketer intends to provide an insight into international legal
environment to conduct marketing operations in compliance with international laws, originate from
the various sources. Legal systems vary both in content and interpretation. A company is not just
bound by the laws of its home country but also by those of its host country and by the growing body
of international law. This can affect many aspects of a marketing strategy – for instance advertising –
in the form of media restrictions and the acceptability of particular creative appeals.).

Technological Environment The most dramatic force that shaping the destiny of an international firm
is technological environment. Technological know-how impacts all spheres of an international
marketer’s operations including production, information system, marketing etc. The international
marketers must understand technological development and its impact on its total operations. The
marketing intelligence system may help the international firm to know technological orientations of
other enterprises and to update its own technologies to remain competitive. Research and
Development (R&D) has a vital role to play in increasing technological ability of a firm.