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 CHAPTER ONE
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INTERNATIONAL MARKETING
CONCEPTS OF INTERNATIONAL MARKETING
 CHAPTER OBJETIVES

 D e f i n e T h e Te r m I n t e r n a t i o n a l M a r k e t i n g

 Differentiate Domestic Marketing Vs. International

Marketing
 U n d e r s t a n d I n t e r n a t i o n a l Tr a d e C o n c e p t s

 Understand Principle Of Absolute Advantage

 Understand Comparative Advantage Theory

 Understand Concepts Of Foreign Exchange And Balance Of

Payment
 U n d e r s t a n d B a r r i e r s To I n t e r n a t i o n a l Tr a d e
 Definitions of International Marketing
4
 According to Michael R. Czinkota and I. A. Ronkainen, ‘International

marketing is the process of planning and conducting transactions across

national borders to create exchanges that satisfy the objectives of
individuals and organizations.’

 According to Stuart Wall and B. Rees, ‘International marketing can simply

be defined as involving marketing activities that cross national borders.’

 According to Philip R. Cateora and John L. Graham, ‘International

marketing is the performance of business activities designed to plan, price,

promote, and direct the flow of company’s goods and services to consumers
or users in more than one nation for a profit.
 Definitions of international marketing
 A comprehensive definition is derived from AMA: “International marketing is the
5
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.” (AMA)
 The fundamentals of marketing apply to international marketing in the same way they apply

to domestic marketing.
 Marketing program should be built around a good product that is properly priced,

promoted, and distributed to a market that has been carefully selected.

 International markets create attractive opportunities, but the competition is intense. Success

goes to the firms that understand and adapt to the environmental factors that influence
international marketing.
 6

Differences between international trade and international marketing

International trade International marketing
May be continuous or not Continuous
Emphasis for profit Emphasis for customer satisfaction
Conducted traditionally Conduct in modern method
 Domestic Marketing Vs. International Marketing

Domestic market 7
International Markets
 It is concerned with the marketing practices
 Many languages, many nations, many cultures
with n a marketer’s home country.
 Markets are diverse and fragmented
 One language, one nation, one culture

 Market is much more homogeneous  Multiple currencies

 Single currency  Exchange controls and tariffs normal obstacles

 No problems of exchange controls, tariffs  Multiple and unstable business environments
 Relatively stable business  Due to national economic plans government
 Minimum government interference in business
influence usual in business decisions
decision  Marketing research very difficult, costly and
 Data in marketing research available, easily
cannot give desired accuracy, etc.
collected.
 Domestic and International Enterprises:

Characteristics and Practices Environment

 Similarities

1. Both in domestic marketing and

8 international marketing success
depend upon satisfying the basic requirements of consumers.
2. This necessarily involves finding out what the buyers want and
meeting their needs accordingly
2. It is necessary to build goodwill both in the domestic market and
international market.
If a firm is able to develop goodwill of consumers or customers, its
tasks will be simpler than the one, which has not been able to do so.
3. Research and development for product development and modification
is necessary both for international marketing and domestic marketing.
 Summary
Domestic marketing 9 International Marketing
 It is the production,  It is the production, promotion, distribution, and
promotion,
distribution, and sale of goods and sale of goods and services in a global market.
services in a local market
 Less risky and easier to conduct  Is more risky and more complex.
 Requires lesser financial resources 
Requires huge financial resources.
 Deals with only a single market 
Deals with several different countries and markets.
 Deals only with the laws and regulations

Is more challenging and requires more commitment
of one country. from the company because of the uncertainty and
differences in laws and regulations in the global
market.
 Deals only with one set of consumers  Deals with different types of consumers with
different tastes.
 The company can have the same policies
 Requires different strategies in the promotion of
and strategies their products.
 Why Firms Go International?

10
 Business Environment Drivers  Firms Specific Drivers

 Market Saturation  Product life cycle

 Competition  High new product development costs

 Standardization
 Regional Economic and Political
 Economies of scale
Integration
 Cheap Labor
 Advancement in Technology
 Excess Capacity
 Infrastructure Development
 Experience transfers

 Economic Growth  Geographic Diversification:

 Transition to a market Economy  Emergence of New Markets

 Globalization of Markets
 Converging consumer needs
 Con’ed

 International trade occurs because of:

11 a country cannot produce everything

and there are many things used by country but produced in other country.
 To full fill wants an international trade occurs. For example, in Ethiopia

there are no source of oil, to full fill it’s need of oil, Ethiopia import oil
from Arabian countries and in the reverse since Ethiopia is rich in cattle it
export meat to these countries. So it is called an international trade
between Ethiopia and Arabian countries.
 To provide their citizens with an increased standard of living

 Countries experience unequal endowments of natural resources, human

resources, capital, and, technology

Why firms go international?
12

04/01/2025
 Stages of International Involvement
In general, firms go through five different phases in going
13
international:
 14
 Stage 1: No Direct Foreign Marketing

 Not active foreign customer seekers

 Foreign markets is via domestic wholesalers/distributors
 Unsolicited/not asked for/ orders
 Internet

 Stage 2: Infrequent Foreign Marketing

 Variation in production levels or demands

 No commitment to foreign market representation
 If domestic demand , foreign activity 
 Foreign agents may approach
 Managers’ own foreign contacts
Stage 3: Regular Foreign Marketing
15
 Dedicated production capacity to foreign markets
 Own sales force/subsidiaries in foreign markets
 Domestic market is still the prime focus, but as the foreign demand ,
production/products are adapted to meet those customer needs
 Depend on foreign sales to meet goal (vs. as a bonus)

Stage 4: International Marketing

 Fully committed and involved in international marketing
 Planned productions for various foreign markets
 Production of goods in foreign markets as well
 At this stage, a firm is international or multi-national
 Cont…
16
Stage 5: Global Marketing
 Treats the world including home market as one
 Market segments are defined by demographic and psychographic
variables
 Half of its revenue should come from foreign market
 Global perspective is the focus
 Strategic Orientation
17

EPRG concept:
 Ethnocentric Orientation
 Polycentric Orientation
 Regio-centric Orientation
 Geocentric Orientation
 Cont..
1. Ethnocentric or Domestic Marketing Extension Orientation:
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 Extension of domestic products into foreign markets
 International marketing is viewed as secondary to domestic operations
 Prime focus market excess domestic products abroad
 Home country marketing practices will succeed elsewhere without adaptation
 Firm’s orientation is domestic

2. Polycentric or Multi-Domestic Marketing Orientation:

Opposite of ethnocentrism

Realizes the difference b/n domestic & foreign markets

Different countries need different products

Separate marketing strategies for each country

Subsidiaries operate independent of one another

Products are adapted, advertising is localized

Might not standardize products

 Con’ed
3. Regiocentric: Regional/Global Orientation
19
 Sees the world as one market and develops a standardized

marketing strategy for the entire world

 Truly global – single market
 Strive for efficiencies of scale by standardizing market mix across national borders,
whenever it is cost or culture effective
 Pursue a global strategy for major brands or multi-domestic strategy for other brands

4. Geocentric Orientation :
 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.
 The geocentric orientation represents a synthesis of ethnocentrism and polycentrism; it is a
20
“worldview” that sees similarities and differences in markets and countries and seeks to create

a global strategy that is fully responsive to local needs and wants.

 A regio-centric manager might be said to have a worldview on a regional scale; the world

outside the region of interest will be viewed with an ethnocentric or a polycentric orientation,

or a combination of the two.

 The ethnocentric company is centralized in its marketing management, the polycentric

company is decentralized, and the regio-centric and geocentric companies are integrated on a

regional and global scale, respectively.

 The ethnocentric orientation is based on a belief in home country superiority.

 The underlying assumption of the polycentric approach is that there are so many differences

in cultural, economic, and marketing conditions in the world that it is impossible and futile to

attempt to transfer experience across national boundaries.

 Summary of International Market Orientation
 Ethnocentric Strategy: Everywhere the same strategy as at home
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 Polycentric Strategy: Separate and distinct strategy for each foreign market

 Regiocentric Strategy: Separate and distinct strategy for each region –group of

similar countries
 Geocentric Strategy: One strategy for all countries worldwide

IM,Dep't Mgmt. By: Atilaw (MA. Marketing 04/01/2025

)
 International Marketing Management Process
Major decisions:
22

1. Looking at the global marketing environment

The international trade system
 Tariff- A tax levied by a government against certain imported products. Tariffs are designed to

raise revenue or to protect domestic firms.

 Quota- is a limit on the amount of goods that an importing country will accept in certain product

categories.
 Embargo- A (total) ban on the import of a certain product

 Exchange controls- Government limits on the amount of foreign exchange with other countries

and on the exchange rate against other currencies.

 Nontariff trade barriers- is nonmonetary barriers to foreign products, such as biases against a

foreign company's bids or product standards that go against a foreign company's product features.
 Con’ed
WTO and GATT
23
 GATT inception 1948 now more than 120 members
 World Trade Organization (WTO) established as part of the round

What is WTOs role?

 Umbrella organization for

 General Agreement on Trade and Tariffs (GATT)

 General Agreement on Trade in Services
 Mediates global disputes, imposes trade sanctions authorities that GATT

organization never had.

 Regional free trade zones or economic communities: A group of nations

organized to work toward common goals in the regulation of international

trade. E.g. EU.
Readiness for products and services

Depends on many factors, including: 24

 Economic

 Political-legal

 Cultural

2. Deciding whether to go international

 Not all companies need to go international to survive

 Reasons for going global

 Competitors attacks domestic market => counterattack

 Foreign markets with higher profit opportunities

 Reduce risk by expanding to different kinds of markets

 Company's customers expand abroad and require servicing there

Careful assessment: Careful assessment of strengths, weaknesses, opportunities,

threats
 3. Deciding which markets to enter
Decisions before going abroad
25
 International marketing objectives and policies
 Volume of foreign sales

 How many countries- In general, fewer countries with deeper penetration

better.
 Types of countries

 Depends on product match with country

 Screen and rank
4. Deciding how to enter the market
 Exporting
 Joint venturing
 Direct investment
 5. Deciding on the global marketing program
26
Standardized marketing mix- An international marketing
strategy for using basically the same product, advertising,
distribution channels, and other elements of the marketing mix
in all the company's international markets.
Adapted marketing mix- An international marketing strategy for

adjusting the marketing mix elements to each international target

market, bearing more costs but hoping for a larger market share
and return.
Marketing mix
 Reasons For Entering International Markets

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1. Large market size

2. Stability through diversification
3. Profit potential
4. Unsolicited orders
5. Proximity of market
6. Excess capacity
7. Offer by foreign distributor
8. Increasing growth rate
9. Smoothing out business cycles
 Reasons to avoid international markets

Despite attractive opportunities, most businesses do28

not enter foreign markets.

The reasons given for not going international are numerous.

The biggest barrier to entering foreign markets is seen to be a fear by these companies that their

products are not marketable overseas, and a consequent preoccupation with the domestic market.

The following points were highlighted by the findings in the previously mentioned study by Barker

and Kaynak, who listed the most important barriers:

 Too much red tape

 Trade barriers

 Transportation difficulties

 Lack of trained personnel

 Lack of incentives
 Cont..

 Lack of coordinated assistance29

 Unfavorable conditions overseas

 Slow payments by buyers

 Lack of competitive products

 Payment defaults

 Language barriers

 It is the combination of these factors that determines not only whether companies

become involved in international markets, but also the degree of any involvement.
 International Trade Concepts
Why Do Nations Trade?
30
 A nation trades because it expects to gain something from its trading partner.

 One may ask whether trade is like a zero-sum game, in the sense that one must

lose so that another will gain.

 The answer is no, because, though one does not mind gaining benefits at someone else’s

expense, no one wants to engage in a transaction that includes a high risk of loss.
 For trade to take place, both nations must anticipate gain from it

 In other words, trade is a positive-sum game.

 Trade is about “mutual gain.”

 The classical theories of international trade started with the simple truth that for

two nations to trade with each other voluntarily, both nations must gain.
 31

 There are a number of factors that influence a county’s decision

to import or export certain products.
 Some countries can produce items that most countries cannot.
 In this case they will want to export the product since they will be
able to gain a large part of the global market.
 Some that gained popularity, however, are the following ones:
1. Absolute advantage
2. Comparative advantage
 Absolute advantage
32

 A nation is said to have an Absolute Advantage (AA) over

another nation when its cost of production of the good is less

than the other nation’s cost of production of the good (Adam
Smith 1723-1790).
 Smith’s theory was that trade between countries was based on

who had the absolute advantage in producing a good or service.

 Absolute advantage is defined as the ability to produce a

specific product more efficiently than any other nation.

 Con’ed
 Smith proposed that free trade33between nations would actually

enlarge the wealth of countries because it would allow a country to

specialize in the production of products that it is good at producing

and trade for other products.

 A country is said to possess an absolute advantage over its trading

partner when it can produce more of an output with a given amount

of inputs.

 The country should then trade for goods and services that it is not

good at producing.
 Cont..
34

Theory of Absolute Advantage

 A country should export commodities with lower cost than other
nations.
 Import commodities at a higher cost than can other nations.
 The ability of a company to produce more of products than a competitor.
Product Ethiopia Djibouti
Coffee 20 10
Wheat 10 20
 In Coffee, Ethiopia has an absolute advantage because Ethiopia
can produce 20 tone coffee and Djibouti can only produce half
tones (i.e., Djibouti Produces 10 for every 20 the Ethiopia
produces).
 In Wheat, Djibouti has an absolute advantage because Ethiopia
makes only 10 tones of wheat for every 20 tones of farmed in
Djibouti.
 Comparative advantage
35

 A nation is said to have a Comparative Advantage over another

nation in the manufacturing of a good when its opportunity cost in the

manufacture of that good is less than the opportunity cost of the other
nation’s manufacture of the same good (David Ricardo 1772-1823).
 He believed that even if a country could produce their own goods

and services more economically than other countries they may still
decide to trade with another country.
 Comparative advantage is the ability of a nation to produce a specific

product more efficiently than any other product

 Cont..
36

Example of Comparative advantage

Necessary Labor (Hours - labor )
Product In America In Europe
1 Unit of food 1 3

1 Unit of clothing 2 4

1. America has lower labor costs in both food

and clothing; American labor productivity is
between 2 and 3 times Europe's (twice in
clothing, three in food)
2. America has comparative advantage in
food, while Europe has comparative
advantage in clothing because food is relatively
inexpensive in America while clothing is less expensive in
 International product life cycle
37

 Describes the diffusion process of an innovation across national boundaries.

 Products go through a cycle during which high income and mass

consumption countries initially export, then they gradually loss their

export market position and finally become importers of new products
from the country of invention and then shift from the position of importers
to exporters.
 Finally, least developing countries shift from being importers to exporters

of the product. These shifts correspond to the stages in the product life
cycle.
 Advanced nation becomes a victim of its own creation.
 38

There are five IPLC are here

Stage 0 – Local Innovation
Stages 1 –oversea innovation
Stage 2 – Maturity
Stage 3 – World Wide Imitation
.Stage 4 – Reversal
 Stage- 0 Local Innovation
39
 Stage 0, show vertical and horizontal axis
 Neither export nor import in this study ,because of
all product selling in original market.
 Innovations are most likely to occur in highly
developed countries ,b/c consumers in such
countries are large amount and have relatively
unlimited wants.
 Stage 1. Overseas Innovation
40

 In this stage product is well developed, its original market well cultivated,
and local demands adequately supplied, firm will look to overseas markets
for sake of expand its sales and profit.
 This stage is known as a “pioneering” or “International Introduction”
stage.
 Countries exported product to a nation have similar culture and less
territories for risk minimization
 Competition in this stage usually comes from US firms, since firms in
other countries may not have much knowledge about the innovation.
 Production cost tends to be decreasing at this stage
 In this stage more export from the United States and,
correspondingly, an increase in imports by other developed
countries.
 Stage 2. Maturity
41

 Growing demand in provides an impetus for firms

there to commit themselves to starting advanced
nations .
 In this stage exported goods of high
developed are stable and advanced nation
will be competition country

 The innovating firm’s sales and export volumes

are kept stable ,because Least developed
countries(LDCs) are now beginning to generate a
need the product.
 Introduction of the product in LDCs helps offset any
reduction in export sales to advanced countries.
 Stage 3 – World Wide Imitation
42

 This stage means tough times for the innovating

nation because of its continuous decline in
export.
 There is no more new demand anywhere to
cultivate.
 innovating firm’s production costs begin to rise
again and Entrepreneurial operating system (EOS).
other advanced nations Produce product within low
cost and selling lower prices
 As the product becomes more and more widely
disseminated, imitation picks up at a faster
pace.
 In this stage innovation firm produce product only
 Stage 4 – Reversal
43

The major functional characteristics of this

stage are product standardization and
comparative disadvantage
 The innovative country’s comparative
advantage has disappeared, and what is
left is comparative disadvantage.
 This means strong comparative advantage
possessed by LDCs
Less developed countries(LDCs) – the
last imitators – establish sufficient
production facilities to satisfy their own
domestic needs as well as to produce
 Concepts of Foreign Exchange and Balance of Payment

44
 Foreign exchange transactions involve the purchase or sale of one national
currency against another.
 Purchase of foreign goods and services can be thought of as involving two

sequential transactions: purchase of foreign currency and purchase of

foreign goods. Purchase of foreign currency is made through the foreign
exchange rate.
 Thus, an exchange rate is the rate at which one currency is converted into

another, or a ratio that measures the value of one currency in terms of

another currency.
 The foreign exchange rate is simply a price: the price of one national

currency as expressed by the value of another.

 Cont..
45

 The balance of payments is the record of all international trade and

financial transactions made by a country's residents.

 The balance of payments (BOP) is the method countries use to monitor all

international monetary transactions at a specific period of time. Usually,

the BOP is calculated every quarter and every calendar year.
 A balance of payments deficit means the country imports more goods,

services and capital than it exports.

 A balance of payments surplus means the country exports more than it

imports.
 Cont..
46

Components of Balance of Payment

Balance of payment is divided into two main sections, the

current account and the capital account. Each of them can

be further subdivided.
 Current account; refer to; income flows.
 Capital account refers to assets and liabilities
 BARRIERS TO INTERNATIONAL MARKETING
47

The major legal, political and economic

forces affecting international marketers are
barriers created by governments to restrict
trade and protect domestic industries.
Examples includes the following: -
Tariff: - a tax imposed on a product
entering a country. Tariffs are used to
protect domestic producers and / or to raise
revenue. (a government tax on import and
export product.)
 Cont..
48

Import quota: - a limit on the amount of a particular

product that can be brought into a country.
 Like tariffs, quotas are intended to protect local industry.
Unstable governments: - high in debt-ness, high
inflation, and high unemployment in several
countries have resulted in high unstable
governments that exposed foreign firms in business
risks and profit repatriation
 Embargoes: is the complete ban of trade by one country with
other
 Sanctions: are the trade prohibition on certain types of product
because of various reasons. It considered as partial embargoes.
 Cont..
49

Foreign exchange problems: - high

indebtedness and economic and political instability
decrease the value of a country’s currency. Profit
repatriation for foreign firms are not available in
many markets.
Foreign government entry requirements
and bureaucracy. Government places many
regulations on foreign firms.
For example: - they might require joint
ventures with the majority share going to the
domestic partner, a high number of nationals
to be hired, limits on profit.
 Cont..
50

Corruption: - officials in several countries requires bribes to

cooperate. They award business to the highest briber rather
than the lowest bidder. Etc.
 Technological pirating: - a company locating its plant abroad
worries about foreign managers learning how to make its product
and breaking away to compete openly. I.e. machinery,
electronics, chemicals, pharmaceuticals area .
 51

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