International Marketin

g The Scope and Challenge

of International Marketing

Chapter 1

PP Presentation by
Dr. Shaikh Rafiqul Islam
PhD (Malaysia), MBA(Australia), M.Com(DU)
Professor
Department of Marketing
Jagannath University

McGraw-Hill/Irwin
International Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
 What Should You Learn?
• The changing face of business
• The scope of the international marketing task
• The importance of the self-reference criterion
(SRC) in international marketing
• The progression of becoming a global marketer
• The increasing importance of global awareness

1-2
 Global Perspective:

Global Commerce Causes Peace
• Global commerce during peace time
– Commercial aircraft and space vehicle industries
– Mobile phone industry
– Individuals and small companies
• International markets are ultimately
unpredictable
– Flexibility means survival

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 Events and Trends

Affecting Global Business
• The rapid growth of the World Trade Organization
and regional free trade areas
• The trend toward the acceptance of the free
market system among developing countries in
Latin America, Asia, and Eastern Europe
• The burgeoning impact of the Internet, mobile
phones, and other global media on the dissolution
of national borders
• The mandate to properly manage the resources
and global environment for the generations to
come

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 The Internationalization

Business
• Increasing globalization of markets
• Increasing number of U.S. companies are foreign
controlled
– $16.3 trillion in foreign investment in the U.S. – $2.6
trillion more than American overseas investment
• Increasing number of foreign companies
building and buying manufacturing plants in the
U.S.
• Increasing difficulty for domestic markets to
sustain customary rates of growth

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 Foreign Acquisitions

of U.S. Companies
Exhibit 1.1

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 Selected U.S. Companies

and Their International Sales
Exhibit 1.2

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 Why internationalization?
• Saturation of U.S. markets
• Higher ROI in foreign markets
• Establish early position in world markets
• US f irms exporting, importing and/or manufacturing
abroad
• Foreign-based firms operating in U.S. markets
• Growth of regional trade areas
• Rapid growth of world markets [cont.]
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 International Marketing
• 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

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 Why internationalization? [cont.]

• Increasing number of competitors for global

markets
• U.S. multinationals increasingly face competition
for lucrative markets from companies from
developing countries
• Political and economic changes in Latin America
, Asia, Eastern Europe and the former members
of the Soviet Union, India etc.
• Growth of new markets
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 International Marketing Defined
• ‘The performance of business activities designed to plan, price,
promote, & direct the f lo w of a company’s goods & services to
consumers/users in more than one nation for a profit’

• The only difference in the def in itions of domestic & international

marketing is.... in more than one nation

• This minor difference accounts for complexity and diversity in international

marketing

• Marketing concepts, processes, & principles are universally applicable &

the marketer’s task is the same whether doing business in Texas or
Tanzania
• Business’s goal is to make a prof it by promoting, pricing and distributing
products for which there is a market.
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International Marketing Defined

Natural question is ‘what’s the difference between

international & domestic marketing?’

• The difference lies with the environment within which

marketing plans/strategies must be implemented

• The uniqueness of international marketing comes from the range of

unfamiliar problems and the variety of strategies necessary to cope
with different level of uncertainty

• Marketing consists of controllable & uncontrollable elements

• Molding the controllables within the framework of uncontrollables

of the marketplace to achieve marketing objectives is more
interesting 1-12




The International Marketing Task

International marketing task is more complicated

depending on the number of countries in which a
marketer operates as because of uncontrollables

Every country adds a set of unique problems

A solution to a problem in one market is not

applicable to a problem in other markets

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The International Marketing Task
Exhibit 1.3

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 The International Marketing Task
Marketing decision factors
o Product
o Price
o Place
o Promotion
Aspects of the domestic environment
o Political/legal forces
o Competitive structure
o Economic climate
Aspects of the foreign environment
o Political/legal forces
o Cultural forces
o Geography and infrastructure
o Structure of distribution
o Level of technology
o Competitive forces
o Economic forces 1-15


The International Marketing Task

Marketing decision factors

• Construct a marketing program with 4 Ps for optimal adjustment to

uncontrollables assuming corporate resources to capitalize on
anticipated demand.

• The controllables can be altered to adjust to changing market

conditions, consumer tastes, or corporate objectives.

• The uncontrollable factors must be evaluated & marketing program

must be adapted to them .

• The success depends on the amount of successful adaptation of

marketing mix to these environmental factors.
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 The International Marketing Task

Aspects of the domestic environment


(uncontrollable but has impact)

• Any political decision involving domestic foreign policy has a

direct effect on ………..(+ve or-ve)
For example, the U.S. government placed a total ban on trade with Libya or
South Africa to protest apartheid and withdrawal of apartheid

• Domestic economic climate has far‑reaching effects on...

For example, the capacity to invest in plants and facilities in either market
depends on domestic economic vitality.

• Competition within home country affects a company's

domestic as well as international plans.
For example, Eastman Kodak dominated the US film market and competitive
structure changed when Fuji Photo Film became formidable by cutting
prices 1-17
 The International Marketing Task

Aspects of the foreign environment

• A marketer in home country feels comfortable because….

• The process of evaluating the uncontrollables involves substantial

doses of cultural, political, & economic shock.

• A multinational company might f in d polar extremes in political

stability, class structure, & economic climate.

• The dynamic upheavals in some countries create the problems of

dramatic change in cultural, political, & economic climates
For example: China moved from a communist legal system to free market
economy

• More signif ic ant e le m e nt s in uncont rollable int e rnat ional1-18

environment are in outer circle which constitute the principal
 The International Marketing Task

Aspects of the foreign environment


Political/legal forces


Political shifts in govt. may result in expropriation/conf iscation/ domestication
/imposing restrictions
It needs for a close study of the uncontrollable elements in every country
Different strategies are needed due to differences in political climate, stages of
economic development, level of technology etc
“Alien status" increases the dif ficulty of properly assessing & forecasting business
climate

2 dimensions of alien status:

foreigners control the business
the culture of the host country is alien to management.

For example, Indian govt gave Coca‑Cola the choice of either revealing its secret
formula or leaving the country

Others: Cultural forces Geography and infrastructure

Structure of distribution Level of technology
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Competitive forces Economic forces
 Environmental Adaptation Needed
 Marketer must interpret the inf luence of all uncontrollables (culture)
on marketing plan

 The task of adjustment is most challenging

 In domestic market marketer’s response is automatic based on

inherited (acquired) frame of reference

For example,a Frenchman ‘knows’ how to behave and operate in France

 Frame of reference can be a serious constraint when operating

abroad

 Adjust marketing efforts to cultures to which one is not attuned

For example, a westerner must learn that white is a symbol of….…..
Or Gesturing OK symbol
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 Cultural conditioning is like an iceberg of which 9/10 is unknown
 Environmental Adaptation
• Ability to effectively interpret the influence and
impact of the culture in which you hope to do
business
– Cultural adjustments
• Establish a frame of reference
• Avoid measuring and assessing markets against
the fixed values and assumptions of your own
culture

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 SRC and Ethnocentrism: Major Obstacles

• The key to success is adaptation meaning a conscious effort to anticipate
the inf luences of foreign and domestic uncontrollables on marketing mix
and then to adjust marketing mix
• The primary obstacle to this is SRC and Ethnocentrism
• SRC means an unconscious reference to one’s own cultural values,
experiences & knowledge as basis for decisions
• Ethnocentrism is the notion that one’s own culture/company knows the
best how to do things
• Both affect our ability to observe & interpret which might lead to
misunderstanding & misinterpreting of …..
(Example: Body language, personal space)

• SRC can prevent us from being aware that there are cultural differences
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 The Self-Reference Criterion

and Ethnocentrism
• The key to successful international marketing is
adaptation to the environmental differences
from one market to another
• Primary obstacles to success in international
marketing
– SRC
– Associated ethnocentrism

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 SRC and Ethnocentrism: Major Obstacles

• SRC and Ethnocentrism can influence an evaluation of the

appropriateness of a domestically designed marketing mix for a foreign
market

• Both impede the ability to access a foreign market

• When a marketer takes time to look beyond his SRC, the results are
positive

• The best way to control is to recognize their influences on our behavior

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Steps suggested to isolate SRC influences and
to maintain a vigilance regarding ethnocentrism
1. Def ine the business problem or goal in home-country
cultural traits, habits, or norms.

2. Def ine the business problem or goal in foreign-country

traits, habits, or norms through consultation with natives
of the target country. Make no value judgments.

3. Isolate the SRC inf luence in the problem & examine it

carefully to see how it complicates the problem.

4. Redef ine the problem without the SRC inf luence & solve
for the optimum business goal situation.
• Example ‘An American sales manager newly posted to Japan decided that
his Japanese sales representatives did not need to come into Japanese
of fice every day for an early morning meeting before beginning calls on
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 SRC and Ethnocentrism
• SRC is an unconscious reference to
– One’s own cultural values, experiences, and
knowledge as a basis for decisions
• Dangers of the SRC
– Failing to recognize the need to take action
– Discounting the cultural differences that exist among
countries
– Reacting to a situation in an offensive to your hosts
• Ethnocentrism
– Notion that one’s own culture or company knows best

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 SRC and Ethnocentrism
• Ethnocentrism and the SRC can influence an
evaluation of the appropriateness of a
domestically designed marketing mix for a
foreign market
• The most effective way to control the influence
of ethnocentrism and the SRC is to recognize
their effects on our behavior

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Stages of International Marketing Involvement

Marke te r must d e c id e the d e gre e o f marke ting

involvement and commitment

No direct foreign marketing

Infrequent foreign marketing
Regular foreign marketing
International marketing
Global marketing

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 Stages of International Marketing
Involvement
No direct foreign marketing

 Does not actively cultivate customers in foreign market

 P r o d u c t s r e a c h fo r e i gn m a r k e t s v i a d o m e st i c
wholesalers or distributors
 Foreigners may come directly to the firm
 Many firms receive orders from international Web surfer

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 Stages of International Marketing
Involvement
Infrequent foreign marketing
 Temporary surpluses result in infrequent foreign
marketing
 Increased domestic demand may withdraw foreign task
 Little or no change in company organization or product
line
 Few companies today fit this model

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 Stages of International Marketing
Involvement

Regular foreign marketing

 Permanent productive capacity devoted to production of

goods
 Employ foreign or domestic overseas middlemen or
own sales force or sales subsidiaries in important
foreign countries
 Primary focus is to serve 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
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 Stages of International Marketing
Involvement
International marketing
 Fully committed to & involved in international marketing
 Seek markets all over the world & sell products that are
a result of planned production for markets in various
countries
 Offer region/country-specific marketing & production
 Becomes an international or multinational marketing
firm

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Stages of International Marketing Involvement
• Global marketing
 Treat the world as a single market
 Based on global homogeneity
 Market segments are def in ed by income levels, usage
patterns, or other factors that often span countries and
regions
 Major profit comes from abroad
 Entire operation begins to take on a global perspective

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 Strategic Orientation
Domestic market extension concept

• Orientation is to serve markets with the same programs

• Export excess production - no real attempt to adjust to

foreign conditions

• International operations are secondary & an extension

of ….

• Seek markets where demand is similar to the home

market

• Firms with this marketing approach are classif ie d as

ethnocentric in the EPRG schema 1-34
 Strategic Orientation

Multidomestic market concept

• Recognition of country differences

• Market on a country-by-country basis with separate

marketing strategies for each country

• Control is typically decentralized

• Firms with this orientation would be classif ie d in the

EPRG schema as polycentric

 Multinational Company 1-35

 Developing Global Awareness

• Opportunities awaits those who are prepared to confront
myriad obstacles with optimism and globally aware
• To be globally aware is to have
Tolerance of cultural differences
understanding differences and accepting and working with
others
beware of trap of falling in love with another culture

Objectivity
know oneself, one’s own cultural biases
Knowledge of:
► cultures
► history
► world market potential
► global trends: economic, social and political 1-36
 Strategic Orientation
EPRG framework

Ethnocentric
Polycentric
Regiocentric
Geocentric

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 Strategic Orientation: EPRG Schema
Generally, four distinctive approaches dominate strategic thinking in
international marketing:
1. Ethnocentric or Domestic Marketing Extension Concept:
Home country marketing practices will succeed elsewhere
without adaptation; however, international marketing is
viewed as secondary to domestic operations

2. Polycentric or Multi-Domestic Marketing Concept:

Opposite of ethnocentrism
Management of these multinational firms place importance
on international operations as a source for profits
Management believes that each country is unique and
allows each to develop own marketing strategies locally
 Strategic Orientation: EPRG Schema
Generally, four distinctive approaches dominate strategic thinking in
international marketing:
3. Regiocentric:
Sees the world as one market and develops a standardized
marketing strategy for the entire world

4. Geocentric:
Regiocentric and Geocentric are synonymous with a Global
Marketing Orientation where a uniform, standardized
marketing strategy is used for several countries, countries in
a region, or the entire world
 Framework

for Cross-cultural Analysis
1. Define business problem or goal
• Home-country vs. foreign-country cultural traits,
habits, or norms
• Consultation with natives of the target country
2. Make no value judgments
3. Isolate the SRC influence
• Examine it carefully to see how it complicates the
problem
4. Redefine the problem
• Without SRC influence
• Solve for the optimum business goal situation
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Developing a Global Awareness
• Tolerance of cultural differences:
– Understanding cultural differences and accepting and
working with others whose behavior may be different
from yours
• Knowledge of cultures, history, world market
potential, and global economic, social, and
political trends

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