Chapter SeventeenChapter Seventeen

InternationalInternational

MarketingMarketing

Chapter ObjectivesChapter Objectives

Discuss primary drivers of internationalization in Discuss primary drivers of internationalization in the macroenvironment and microenvironment.the macroenvironment and microenvironment.

Discuss the primary internationalization Discuss the primary internationalization challenges and obstacles attributed to the challenges and obstacles attributed to the cultural environment, to governments, to cultural environment, to governments, to competition, and to the self-reference criterion.competition, and to the self-reference criterion.

Analyze the different levels of international Analyze the different levels of international involvement.involvement.

Address entry mode selection from a control and Address entry mode selection from a control and risk perspective.risk perspective.

Discuss the challenges presented by the Discuss the challenges presented by the international marketing mix.international marketing mix.

Why Firms Go International: Why Firms Go International: Internationalization DriversInternationalization Drivers

To take advantage of global market To take advantage of global market opportunities and reach a larger marketopportunities and reach a larger market

To keep pace with the competitionTo keep pace with the competition

To increase sales and market shareTo increase sales and market share

To prolong the product life cycleTo prolong the product life cycle

Drivers of International ExpansionDrivers of International Expansion

CompetitionCompetition Regional Economic and Political IntegrationRegional Economic and Political Integration TechnologyTechnology Improvements in Transportation and Improvements in Transportation and

TelecommunicationTelecommunication Economic Growth and Emerging Market Economic Growth and Emerging Market

EconomiesEconomies Converging Consumer NeedsConverging Consumer Needs

Container ship in the port of Rotterdam: Containerization has greatly facilitated international expansion.

Facilitators of International Trade:Facilitators of International Trade:The World Trade OrganizationThe World Trade Organization

Largest and most influential international Largest and most influential international trade organizationtrade organization

Ensures free flow of tradeEnsures free flow of trade

Functions:Functions:• Provides assistance to developing and Provides assistance to developing and

transition economiestransition economies• Offers help for export promotion Offers help for export promotion • Promotes regional trade agreements and Promotes regional trade agreements and

economic cooperationeconomic cooperation• Reviews members’ trade policies and engages Reviews members’ trade policies and engages

in routine notification of new trade measuresin routine notification of new trade measures

The World Trade OrganizationThe World Trade Organization

WTO agreements represent trade rules and WTO agreements represent trade rules and regulations and act as contracts regulations and act as contracts guaranteeing countries trade rights and guaranteeing countries trade rights and binding governments to free trade policies. binding governments to free trade policies.

Agreements:Agreements:• General Agreement on Tariffs and Trade (GATT)General Agreement on Tariffs and Trade (GATT)

• General Agreement on Trade in Services General Agreement on Trade in Services (GATS)(GATS)

• Trade-Related Aspects of Intellectual Property Trade-Related Aspects of Intellectual Property Rights (TRIPS) Rights (TRIPS)

Facilitators of International Trade:Facilitators of International Trade:Group of Seven (Eight)Group of Seven (Eight)––G7 (G8)G7 (G8)

Members from the most industrialized Members from the most industrialized countries: Canada, France, Germany, countries: Canada, France, Germany, Italy, Japan, United Kingdom, United Italy, Japan, United Kingdom, United States, and RussiaStates, and Russia• Yearly meetings involve heads of state, Yearly meetings involve heads of state,

government ministers, and directors of central government ministers, and directors of central banks.banks.

• Addresses: Biotechnology, food safety, Addresses: Biotechnology, food safety, economic development, disarmament, arms economic development, disarmament, arms control, organized crime, drug trafficking, control, organized crime, drug trafficking, terrorism, environmental issues, and tradeterrorism, environmental issues, and trade

Facilitators of International Trade: Facilitators of International Trade: The Development BanksThe Development Banks

The World BankThe World Bank• Largest international bank that Largest international bank that

sponsors economic developmentsponsors economic development• Employs international specialists Employs international specialists

in economics, finance, sectoral development in economics, finance, sectoral development • Focus on health and information technology Focus on health and information technology

African Development BankAfrican Development Bank Asian Development Bank Asian Development Bank European Bank for Reconstruction and Dev’t European Bank for Reconstruction and Dev’t Inter-American Development Bank Inter-American Development Bank

Facilitators of International Trade: Facilitators of International Trade: U.S. Government AgenciesU.S. Government Agencies

U.S. Agency for International Development (USAID)U.S. Agency for International Development (USAID) U.S. Department of Commerce U.S. Department of Commerce Export-Import Bank of the United StatesExport-Import Bank of the United States State and Local Government Agencies, such as the State and Local Government Agencies, such as the

U.S. Chamber of CommerceU.S. Chamber of Commerce

Regional Economic and Political IntegrationRegional Economic and Political Integration

Determinants of IntegrationDeterminants of Integration• Shared cultureShared culture• Shared historyShared history• Regional proximityRegional proximity• Similarity in level of Similarity in level of

economic developmenteconomic development

Types of IntegrationTypes of Integration Bilateral Agreements, Multilateral Forums and Bilateral Agreements, Multilateral Forums and

AgreementsAgreements• General agreements between two or more countries, General agreements between two or more countries,

typically industry specifictypically industry specific• OPEC, NATO, Commonwealth of Independent StatesOPEC, NATO, Commonwealth of Independent States

Customs UnionCustoms Union• Trade association that eliminates or greatly reduces all trade Trade association that eliminates or greatly reduces all trade

restrictions for member countries, also adopts common restrictions for member countries, also adopts common external tariffs on products imported from outside the area: external tariffs on products imported from outside the area: NAFTANAFTA

Common MarketCommon Market• Eliminate all tariff and barriers to trade, adopt common Eliminate all tariff and barriers to trade, adopt common

external tariffs, and allow for free movement of capital and external tariffs, and allow for free movement of capital and labor within the common market: Andean Common Market, labor within the common market: Andean Common Market, Southern Cone Common Market (MERCOSUR)Southern Cone Common Market (MERCOSUR)

Types of Integration (cont.)Types of Integration (cont.) • Monetary UnionMonetary Union

• Involves a common monetary policy, the Involves a common monetary policy, the creation of a unified central bank, and the creation of a unified central bank, and the use of a single currency:use of a single currency: EurolandEuroland

• Political UnionPolitical Union• Common governing and legislative bodies, Common governing and legislative bodies,

and enforcement powers: example: and enforcement powers: example: European UnionEuropean Union

Global ConsumersGlobal Consumers A global consumer culture is A global consumer culture is

attributed to the diffusion of products attributed to the diffusion of products from the United States to the rest of from the United States to the rest of the world. the world. • Entertainment (MTV, movies, CDs)Entertainment (MTV, movies, CDs)• Hamburgers and pizzaHamburgers and pizza• Jeans and running shoes, etc.Jeans and running shoes, etc.

Pepsi in Mauritius

The marketplace has obviously become more globalized …

LanguageLanguage Spoken/Written LanguageSpoken/Written Language

• Differences in meaning in different countries that share the same Differences in meaning in different countries that share the same languagelanguage

• Dealing with multiple dialectsDealing with multiple dialects• High costs of translationHigh costs of translation• High costs of translation blundersHigh costs of translation blunders

Nonverbal communication is essential in international Nonverbal communication is essential in international marketing and it differs across cultures.marketing and it differs across cultures.

ReligionReligion Defined as society’s relationship to the supernatural and Defined as society’s relationship to the supernatural and

determines dominant values and attitudesdetermines dominant values and attitudes Firms must adapt their offering to the local religion.Firms must adapt their offering to the local religion.

CultureCulture Culture influences consumption. Culture influences consumption. Elements of culture vary greatly across countries.Elements of culture vary greatly across countries.

… yet marketers need to respond to regional differences, such as …

Government BarriersGovernment Barriers Local governments control international market entrants Local governments control international market entrants

using arguments for protectionism:using arguments for protectionism:• Excess productive capacityExcess productive capacity• Excess laborExcess labor• Infant industry argument and industrialization Infant industry argument and industrialization • Natural resources conservation and environmental protectionNatural resources conservation and environmental protection• Consumer protectionConsumer protection• National defenseNational defense

Tariffs, Quotas, LicensesTariffs, Quotas, Licenses• Discourage imports of particular goods Discourage imports of particular goods • Penalize countries that are not politically aligned with the Penalize countries that are not politically aligned with the

importing countryimporting country• Generate revenuesGenerate revenues• US tariffs US tariffs are less than 10%; other countries can impose are less than 10%; other countries can impose

tariffs greater than 100% for protected products.tariffs greater than 100% for protected products.

Nontariff barriers are used by countries in the WTO, Nontariff barriers are used by countries in the WTO, NAFTA, and EU.NAFTA, and EU.

and other obstacles:

International CompetitionInternational Competition Competitors can erect entry barriers to entry.Competitors can erect entry barriers to entry. Effective entry barriers include:Effective entry barriers include:

• Price cutsPrice cuts• Blocking distribution channelsBlocking distribution channels• Binding retailers to exclusive contractsBinding retailers to exclusive contracts

The Self-Reference CriterionThe Self-Reference Criterion Individual’s reference to their own national culture, norms, and values as well Individual’s reference to their own national culture, norms, and values as well

as their knowledge in the process of making decisions in the host country.as their knowledge in the process of making decisions in the host country. Is a great impediment to adaptationIs a great impediment to adaptation Addressing the self-reference criterion:Addressing the self-reference criterion:

• Define the marketing goal in terms of one’s home country’s cultural traits, Define the marketing goal in terms of one’s home country’s cultural traits, norms, and values.norms, and values.

• Define the marketing goal in terms of the host country’s cultural traits, Define the marketing goal in terms of the host country’s cultural traits, norms, and values.norms, and values.

• Isolate the self-reference criterion influence and evaluate it to understand Isolate the self-reference criterion influence and evaluate it to understand how it affects the marketing issue.how it affects the marketing issue.

• Solve the marketing problem based solely on the unique conditions of the Solve the marketing problem based solely on the unique conditions of the

host country.host country.

Levels of Levels of International Marketing InvolvementInternational Marketing Involvement

Domestic marketingDomestic marketing

Export MarketingExport Marketing

International marketingInternational marketing

Global marketing Global marketing

THE BEST GLOBAL BRANDS

International Entry Mode SelectionInternational Entry Mode Selection

Exporting:Exporting: Either direct or indirect, low risk but low control Either direct or indirect, low risk but low control Licensing:Licensing: More risks, greater control. Involves a licensor who More risks, greater control. Involves a licensor who

offers the know-how or brand name, and a licensee, who pays offers the know-how or brand name, and a licensee, who pays royalties.royalties.

Franchising:Franchising: Is service industry’s equivalent of licensing. Is service industry’s equivalent of licensing. Joint Ventures:Joint Ventures: Involve a foreign company joining with a local Involve a foreign company joining with a local

company to set up a new corporate entitycompany to set up a new corporate entity Wholly Owned Subsidiaries:Wholly Owned Subsidiaries: Assumes long-term commitment Assumes long-term commitment

and has a high level of risks, but can be extremely profitableand has a high level of risks, but can be extremely profitable

Branch Offices:Branch Offices: Not separate entities, but part of the Not separate entities, but part of the international company. High level of control and lower risk than international company. High level of control and lower risk than subsidiarysubsidiary

Strategic Alliance:Strategic Alliance: All joint ventures, licensing, and All joint ventures, licensing, and franchising agreements, as well as low-commitment agreementsfranchising agreements, as well as low-commitment agreements

The International Marketing MixThe International Marketing Mix

Standardization versus adaptationStandardization versus adaptation ProductProduct

• Country of Origin EffectsCountry of Origin Effects Place (Distribution)Place (Distribution)

• Established vs. New ChannelsEstablished vs. New Channels PromotionPromotion

• Use of EnglishUse of English• RestrictionsRestrictions

PricePrice• DumpingDumping• Parallel imports (gray marketing)Parallel imports (gray marketing)

  

 

 

Introduction and Growth

MNC manufactures in developed

countries, exports to developing countries

Early Maturity

MNC moves production to developing countries,

begins importing to

home country

Late Maturity

Competitor from

developing country exports

product to MNC home

country.

Decline

Developing countries

remain viable target

markets; Home-country

market is diminishing.

Sales

Time

The International Product Lifecycle