OVERVIEW OF INTERNATIONAL MARKETING:Domestic marketing, Multinational marketing, Globalization of markets

INETRNATIONAL MARKETING PROCESS:Situation Analysis, Implementation and Control, Relationship >>

International Marketing MKT630

Lesson # 1

OVERVIEW OF INTERNATIONAL MARKETING

Defining International Marketing:

· "Marketing is defined as a process by which individuals and groups obtain what they need & want by

creating and exchanging products and value with others.

· The term "International Marketing" refers to exchanges across national boundaries for the

satisfaction of human needs and wants.

· The extent of a firm's involvement abroad is a function of its commitment to the pursuit of foreign

markets.

· Global industries are defined as those where a firm's competitive position in one country is affected

by its position in other countries, and vice versa.

Evolution of Global Marketing:

Firms, depending on their level involvement in foreign markets, pass through following five

evolutionary phases.

1. Domestic marketing

Domestic marketers tend to be ethnocentric (focus is solely on domestic market) & pay little

attention to changes taking place in the global market place.

Such firms produce and sell products and services only in their home country.

Firms that keep focus only on their domestic markets may be vulnerable to the sudden changes

forced on them from foreign competition, when foreign firms enter the markets or even when

foreign firms develop better or cheaper products.

2. Export marketing

Exporting firms fulfill unsolicited / solicited orders from foreign countries.

For growth in export marketing, however, a company requires physical, financial and managerial

resources.

When a firm attempts to export it faces many issues that include difficulties in import/export

restrictions, cost and availability of shipping, exchange rate fluctuations, collection of money,

development of distribution channels etc.

Export marketers still tend to take ethnocentric approach, since they mostly make products in

their home countries and have no direct involvement in the foreign markets.

3. International marketing

An international marketing firm has polycentric orientation with emphasis on product and

promotional adaptation in foreign markets whenever necessary.

They make strategic decisions that are tailored to suit the cultures of the foreign countries.

The company may establish an independent foreign subsidiary in each and every foreign market

it services such efforts are also called multi-domestic marketing.

4. Multinational marketing

Multinational firms are those that sell products or services in many countries.

Economies of scale in product development, manufacturing, and marketing are achieved by

multinational firms by consolidation of some of their activities on regional basis.

International Marketing MKT630

In this regiocentric approach product planning may be standardized within a region (e.g. a group

of contiguous and similar countries).

5. Global marketing Emphasizes

Global marketing firms sell products and services in most countries around the world.

Through global operations firms achieve reduction of cost inefficiencies and duplication of

efforts among their national and regional subsidiaries.

Global operations allow opportunities for the transfer of products, brands, and other ideas across

subsidiaries.

Opportunities to operate worldwide are supported by the emergence of global customers, and

Improved linkages among national marketing infrastructures leading to the development of a

global marketing infrastructure.

Dynamics of international marketing:

Modern marketers have to deal with customers who are changing;

With channels of distribution that are changing

And with the technological advances that are changing the nature of their products & services and

requiring them to operate imaginatively & effectively in the emerging markets.

The basic nature of Marketing does not change from domestic to international marketing, but marketing

outside national boundaries poses special problems, such as dealing with multiple environments,

managing operations in distant markets, optimizing businesses in more than one countries, dealing with

foreign nationals etc.

International marketing therefore, unlike domestic marketing, requires operating simultaneously in more

than one kind of environment, coordinating these operations, and using the experience gained in one

country for making decisions in another country.

The demands are tough and the stakes are high. International marketers not only must be sensitive to

different marketing environments internationally, but also must be able to balance marketing moves

worldwide to seek optimum results for the company.

Globalization of markets:

It is widely asserted that we are living in an era in which the greater part of social life is determined by

global processes, in which national cultures, national economies and national borders are dissolving.

Central to this perception is the notion of a rapid and recent economic globalization. "In France the

word is mondialisation. In Spain and Latin America it is globalization. The Germans say

Globalisierung".

Many authors cite Wallerstein as the first one to open up the theme of `globalization' in his book "The

Capitalist World-Economy", published in 1979. Since then the topic has attracted much attention from

diverse perspectives. The common themes that run through the discourse of globalization are:

a) Ecological interdependence: The recognition that most places on the earth are linked to all

others by air, water, and overland links. Rapidly increasing interdependence of world is

rendering national boundaries meaningless.

b) Dominance and dependency: Falling barriers to international trade and world's markets

expose everyone to domination by most powerful players and role of nations in weakening into

service structures for corporate interest.

International Marketing MKT630

c) Hologramatic diversity: The argument that each place reflects the same `diversity' as each

other. What is perceived as human, social or cultural diversity is essentially all the same.

d) Homogenization of cultures: The view that both material and non-material cultures are

becoming more the same wherever one goes and the argument that a single

`socioculturalpolitical' system is the only viable solution for the problems of interdependency.

e) Ubiquitous communication: The belief that communication is now becoming more and more

universal in all places at all times in all directions.

The above can probably be split into just two concerns:

The awareness of (and probably inevitability of) a global ecosocial dynamics of

interdependency.

ii)

Standardization in social, political, cultural, and material life in order to limit or

control the chaos (or to maximize economic gain).

`Globalization' has been defined in many ways. Some definitions are relatively concise while others are

more vague and evocative. A more precise definition of `globalization' is as follows:

"A process (or set of processes) which embodies a transformation in the spatial organization of social

relations and transaction ... generating transcontinental or interregional flows and networks of activity,

interaction, and the exercise of power".

Globalization may not be a particularly attractive or elegant word. But absolutely no one who wants to

understand their (and/or others') prospects in future can ignore it. According to the `globalists' school of

thought, globalization represents;

A convergence of tastes and increasing homogeneity that allows for the use of standard products

and services worldwide.

The process of integrating purchasing and manufacturing processes on a global scale to achieve

cost efficiencies.

Industries dominated by a few major players worldwide.

Large organizations with global cultures and mindsets.

A number of scholars see globalization as a process driven by a series of global industry drivers. These

drivers are market drivers, such as common customer needs and the existence of global channels; cost

drivers, such as global scale economies and global sourcing efficiencies; economic drivers, such as trade

policy and deregulation; and competitive drivers, such as the existence of global competitors.

Market Globalization Drivers - Market drivers depend on the nature of customer behavior and the

structure of channels of distribution. Some common market drivers are:

Common Customer Needs

Factors that affect whether customer needs are similar in different countries include economic

development, climate, physical environment, and culture.

Global Customers and Channels

Global customers buy on a centralized or coordinated basis for decentralized use. Their

existence affects the opportunity or need for global market participation, global products and

International Marketing MKT630

services, global activity location, and global marketing.

Transferable Marketing

Certain elements of the marketing mix, e.g., brand name, pricing strategy, etc., may be

transferable across markets. The implications are that these elements can be effectively used

both for increasing as well as reducing barriers.

Lead Countries

Lead countries represent countries where innovations in particular industries are prone to take

place, e.g., Japan for consumer electronics, Germany for industrial control equipment, and the

United States for computer software.

Cost Globalization Drivers - Cost drivers depend on the economics of the business. These drivers

particularly affect production location decisions, as well as global market participation and global

product development decisions. The most commonly cited cost drivers are:

Global Economies of Scale and Scope

Global economies of scale apply when single-country markets are not large enough to allow

competitors to achieve optimum scale. One of the most visible examples of this has been in the

electronics industry. In many cases, economies of scope may be available by using facilities and

processes in a single operating unit to produce a larger variety of goods or services with or

without the presence of scale economies. Areas where economies of scope may be visible

include consumer research, product development, and the creation of marketing programs.

Steep Experience Curve

Besides economies of scope and scale, steep learning activity associated with concentration of

activities can result in significant cost advantages.

Global Sourcing Efficiencies

Efficiencies arise out of coordination of the procurement activities of raw materials and

components across the world. Ability to source from around the world allows firms to reduce

costs of raw materials and productions while increasing their qualities.

Favorable Logistics

A favorable ratio of sales value to transportation cost increases the ability of global firms to

concentrate production in certain countries and take advantage of economies of scale. Other

logistic factors that have a bearing on global strategy development are nonperishability of

products, absence of time urgency, and little need for location close to customer facilities.

Difference in Country Costs

This is based on the classical theories of differences in factor costs that do exist and can be

exploited by firms to achieve comparative advantage. Beside factor cost differences, exchange

rate differences also have a significant bearing on the absolute costs and the stability of costs.

High Product Development Costs

High product development costs relative to the size of national markets act as a driver to

globalization. These costs can be reduced by developing few global or regional products.

Fast-Changing Technology

Fast-changing technologies in products or processes lead to high product development costs,

which increase their globalization potential.

Government Globalization Drivers - Rules set by national governments can affect the use of global

strategic decision-making. Governments around the world adopt policies, formulate regulations and

International Marketing MKT630

implement programs to support local businesses sell abroad and to affect their international trade. These

rules/policies include the following:

Favorable Trade Policies

Import tariffs and quotas, non-tariff barriers, export subsidies, local content requirements,

currency and capital flow restrictions, ownership restrictions, and requirements on technology

transfer are some means governments can use to influence firm behavior. These policies can

have a significant negative impact on standardization of products and programs.

Compatible Technical Standards

Differences in technical standards among countries also affect the extent of product

standardization.

Common Marketing Regulations

Restrictions on various marketing activities can also act as a barrier to the use of uniform

marketing approaches. For example, restrictions on the use of certain kinds of media for

advertisements, differences in ad content like the use of gender and comparative advertising,

and so on.

Government-Owned Competitors

- The presence of government-owned competitors spurs the development of global plans as a

means of counteracting the advantages of protected home markets.

Government-Owned Customers

- Presence of government-owned customers could provide a barrier to globalization since such

customers usually favor national suppliers.

Competitive Globalization Drivers - Competitive drivers raise the globalization potential of any

industry and spur the need for a response on the global strategy levels. The common competitive drivers

include:

High Exports and Imports

The level of exports and imports of final and intermediate products and services, i.e., the extent

of interaction between countries, has a significant bearing on the use of a global strategy.

Competitors from Different Continents and Countries

Global competition among rivals from different continents trends to be severe.

Interdependent Countries

Competitive interdependence among countries through shared business activities can help such

firms to subsidize attacks on competitors to counterattack these subsidies.

Globalized Competitors

When a business's competitors use global strategy to exploit industry globalization potential,

the business needs to match or preempt these competitors.

Other environmental drivers

Revolution in IT & telecoms, international financial markets, reduction of tariffs, creation of trade

blocs, privatization drives

To conclude the discussion so far:

· A commitment to international market place is important for sustained growth and superior

profitability.

· Doing business is a creative enterprise. Doing business outside one's own country is a much more

International Marketing MKT630

demanding and complicated enterprise.

Business environments of countries are different.

International business necessitates an awareness of the clash of cultural standards among countries.

In 1950's and 60's international business was a means of capitalizing on new opportunity, today's

changing economic environment has made international business dealings vital for survival.

North American companies will take longer to reach outer limit than will companies in Singapore

(smaller market with less room to grow).

Basic nature of marketing does not change from domestic to international marketing but marketing

outside national boundaries poses special problems.

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