Definition of International Marketing 1

International Marketing

Joy D. Caliao, M.M

Post WWII developments in Trade

• Post WWII change in attitudes• GATT was born, resulting lowering in tariff barriers

for industrial products• Uruguay Round (1996), replaced by WTO.• WTO tackling issues preventing more liberal world

trade system• (non tariff barriers, agricultural products, services

trade, & investment issues)

More recently…• Characterised by emergence of trade groupings

(increased interdependence)– ASEAN, EU, NAFTA, APEC

• Vary in degree of loss of sovereignty.

• Sustained world peace and the end of the cold war promoted growth of international economy.

• Evolution of large emerging markets, Argentina, China, Hungary, Poland etc

Communications and transport

• Transport– Globe has shrunk, time to deliver and cost have

reduced– Containerisation, larger vessels, improved waterside

efficiency & rationalisation of shipping services.– Jet aircraft, facilitate face-to-face meetings & business

travel, speed and cost

Technology

• WWW, gather, analyse & disseminate data with ease

• Facilitates production around the world

• Advances allow “marketspace” B2C / or new business forms

• Pace of innovation

• Underpins communications B2B

Other Drivers

• Convergence of consumer tastes

• Emergence of global niche markets

The New Nike Economy

• Air Max Penny Basketball Shoes– Designed Oregon & Tennessee– Developed jointly by US & Asian technicians, Oregon,

Taiwan, S Korea– Produced in S Korea (Mens) & Indonesia (Boys)– 52 components from 5 different countries (US,

Taiwan, S Korea, Indonesia & Japan)– Single pair is touched by 120 pairs of hands during

production processSource: Nike, Far Eastern Economic Review, 29th August, 1996

What is International Marketing?

Marketing – A Definition:

Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably. (CIM)

International Marketing - Definition

The definition of International Marketing is different from the general definition of Marketing only in that goods and services are marketed across political boundaries.

(Albaum)

International Marketing is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for profit.

(Cateora)

International Marketing – Definition (cont.)

When practising international marketing, a company goes beyond exporting and becomes much more involved in the local marketing environment within a given country or market.

(Jeannet/Hennessey)

What is International Marketing

• Made up of many facets, that is levels of involvement

– Domestic Marketing– Export Marketing– International Marketing

• Multi National Marketing

• Global Marketing

Domestic Marketing

• One set of Competitors

• One Economy

• One set of market pressures

• One set of Customers

Domestic Market

• Manipulate a series of variables– Controllable by business

• Price

• Advertising

• Distribution

• Product

– Uncontrollable by business• Economic structure

• Competitors

• Cultural

• Legal

Export Marketing

• Where the company markets its goods or services across national or political boundaries

• Usually a reactive situation• Emphasis on product modification, if required.• Most traditional and least complicated form of

international marketing.


• Entire marketing strategy will need to be adapted.• Understanding of different environments becomes

essential.

• Several markets• Differing controllable variables across markets• Differing uncontrollable variables across markets


• Giving– Differing infrastructures– Differing advertising/promotions– Differing complexity of market


• Multinational marketing– Where similar activities apply to more than one country– Some limited control on the market place variables– Markets may be independent profit centres– Marketing strategy can be tailored to local market,

individual strategy per location, can have many and varied strategies

International Marketing – Definition (cont.)

• Pan-Regional Marketing:– Marketing strategies for regions rather than countries.– Eg Asia, fastest growing market for West’s top brands.

(Dior, Rolex, Cartier, Calvin Klein, Versace, Gucci)– Singapore, Jakarta, K Lumpur, Hong Kong, Tokyo– French luxury goods sales here are now 35% of output,

soon will be market for almost 50%

Global Marketing

• The whole organisation exploits one strategy on a worldwide basis

• No individual country influence, although often some form of local modification necessary.

• One strategy fits all– Efficiencies of scale– Needs significant market segments with similar demand

world over– Might need marketing mix tweaked per region?

Why is international marketing different

• Culture Diverse, Multi-cultured

• Markets Widespread, Fragmented,different

• Data Difficult to get, expensive

• Politics Varying stability and attitudes

• Governments Attitudes towards foreign trade

• Competitiors Varying levels

• Economies Varying levels & Systems

What makes international marketing different

• Finance Varying systems &

regulatory bodies

• Currencies Varying & Fluctuating

• Businesses Cross Cultural Influences

• Control Remote & Difficult

SLEPT Factors(Framework to analyse macro environment)

• S ocial & cultural values

• L egislation affecting trade

• E conomic conditions

• P olitical systems & attitudes

• T echnological level & infrastructure,

& Competition within the market

Problems of international trade

• Debt

• Unstable countries

• Protection of intellectual rights

• Tariff regulations

• Instability in Foreign exchange markets

• Non tariff barriers, eg specifications

Barriers to International Marketing

• Control

• Language

• Red tape

• Cash flow

• Logistics

• Lack of trained staff

International Marketing Decisions

• Corporate Strategy– Information on Potential Markets– Objectives– Decision to go international

International Marketing Decisions

• Business strategy– Resource Commitments– Selections of Target Markets– Selection of entry methods

International Marketing decisions

• Operational Strategy– Marketing Plan– Organisation– Allocation of tasks

ENGAGING IN INTERNATIONAL BUSINESS

31

Introduction

• Why firms engage in international business?

– To expand their sales

– To obtain resources

– To diversify their sources of sales and supplies

– To minimize competitive risk

32

Introduction

• Reasons for Recent International Business Growth– Expansion of technology

• Business is becoming more global because– Transportation is quicker– Communications enable control from afar– Transportation and communications costs are more conducive

for international operations

– Liberalization of cross-border movements• Lower governmental barriers to the movement of goods,

services, and resources enable companies to take better advantage of international opportunities

33

Introduction

– Development of supporting institutional arrangements• Institutional arrangements

– Are made by business and government– Ease flow of goods– Reduce risk

– Increase in global competition• More companies operate internationally because

– New products quickly become global– Companies can produce in different countries– Domestic companies’ competitors, suppliers, and customers

become international

34

Modes of International Business

• Merchandise exports and imports– Tangible items (e.g., cars, televisions, e.t.c)

• Service exports and imports– Tourism and transportation

– Performance of services

– Use of intangible assets

35


• Investments

– Direct investmentDirect investment : Key features are

– Control

– Access to foreign markets

– Access to foreign resources

– Higher foreign sales than exporting (often)

– Partial ownership (sometimes)

36


• Investments

– Portfolio investmentPortfolio investment: Key features

• It is used for diversification purposes

• Noncontrol of foreign operations

• Financial benefit (for example, loans)

37

Patterns of international competition

• The pattern of international competition differs from industry to industry.– Multidomestic industries

• Competition in one country does not affect competition in other countries.

– Global industries• A firm’s competitive position in one country is significantly affected by its

position in other countries

38

External Competitive Environment

• Economic forces determine competitive advantage and comparative advantage.

• The role of government is excessive in international markets.

• The competitive environment created by other companies.– The next slide illustrates the international business

environment.

39

International Business: Operations and Influences

40

International Strategy Evolution

• Patterns of international expansion:– Strategies for heavy international commitments usually evolve

gradually from

• Passive to active expansion

• External to internal handling of operations

• Deepening mode of commitment

• Geographical diversification

– Leapfrogging of Expansion

The Global Trade Environment:

Regional Market Characteristics and Preferential Trade

Agreements

GATT

• General Agreement on Tariffs and Trade– treaty among nations to promote trade among members

• Handled trade disputes• Lacked enforcement power• Replaced by World Trade Organization in 1995

The World Trade Organization

• Provides forum for trade-related negotiations among 141 members– based in Geneva– serves as dispute mediators– empowered with ability to enforce rulings

• Countries found in violation of WTO rules are expected to change policies or else face sanctions

Recent WTO Cases

Preferential Trade Agreement

• is a mechanism that confers special treatment on select trading partners. By favoring certain countries, such agreements frequently discriminate against others. For that reason, it is customary for countries to notify the WTO when they enter into preference agreements. Over the past 10 years, more than 150 preferential trade agreements have been notified to the WTO.

Preferential Trade Agreements

• Many countries seek to lower barriers to trade within their regions– Free Trade Areas– Customs Unions– Common Market– Economic Unions

North America

• Canada, United States, Mexico

• NAFTA established free trade area– all three nations pledge to promote economic growth

through tariff reductions and expanded trade and investment

– no common external tariffs– restrictions on labor and other movements remain– Effective date: January 1, 1994

© 2005 Prentice Hall 3-48

NAFTA Income and Population

Latin America

• Caribbean, Central, and South America

• 4 preferential trade agreements in place– Central American Integration System – Andean Community– Common Market of the South– Caribbean Community and Common Market

Andean Community

• Bolivia, Colombia, Ecuador, Peru, Venezuela

• Customs union– Agreement abolished

foreign exchange, financial and fiscal incentives, and export subsidies

– Common external tariffs were established

Common Market of the South (Mercosur)

• Argentina, Brazil, Paraguay, Uruguay• Customs union, seeks to become common

market– internal tariffs eliminated– common external tariffs up to 20% established– in time, factors of production will move freely

through member countries

• Chile and Bolivia - – associate members– participation in free trade area but not customs

union


Caribbean Community and Common Market (CARICOM)• Antigua, Barbuda, Bahamas, Barbados,

Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts, St. Lucia, St. Vincent, the Grenadines, Trinidad, Tobago

• Replaced Caribbean Free Trade Association

• Agreed to establish economic union with common currency in 1998


Asia-Pacific

• Includes 23 countries and 56% of world population– Japan – Newly industrializing economies– Association of Southeast Asian Nations


Japan

• Generates 14% of world’s GNP

• Key factors– population density– geographic isolation

• Recent economic struggles despite status as high income country

• Strong culture requires flexibility and commitment from global marketers


Newly Industrializing Economies (NIEs)

• Strong economic growth in recent decades– foreign investment– export-driven industrial development

• Sometimes called the 4 Tigers of Asia– South Korea– Taiwan– Singapore– Hong Kong


Association of Southeast Asian Nations (ASEAN)

• Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Cambodia, Laos, Burma

• Goal to implement a free trade area by 2003– Tariffs of 20+% will be reduced to 0 - 5%

• Singapore represents great success among ASEAN nations


Europe

• European Union

• European Free Trade Area

• European Economic Area

• The Lome Convention

• Central European Free Trade Association (CEFTA)


European Union

• Initially began with the 1958 Treaty of Rome

• Objective to harmonize national laws and regulations so that goods, services, people and money could flow freely across national boundaries

• 1991 Maastricht Treaty set stage for transition to an economic union with a central bank and single currency (the Euro)


European Free Trade Area and the European Economic Area

• Austria, Finland, Sweden, Norway, Iceland, Liechtenstein, Switzerland

• Free trade area • Members (excluding Switzerland) chose to

establish European Economic Area (EEA)– Non-EU members of the EEA are expected to adopt

EU guidelines

• Norway, Iceland, Liechtenstein, and Switzerland maintain free trade agreements with other countries as well


The Lome Convention

• An accord between EU and 71 countries in Africa, Caribbean, and the Pacific

• Promotes trade and provides poor countries with financial assistance from a European Development Fund

• Currently working to establish a successor agreement


Central European Free Trade Association (CEFTA)

• Hungary, Poland, Czechoslovakia

• Allows for cooperation in many areas including:– infrastructure and telecommunications– sub-regional projects– inter-enterprise cooperation– tourism and retail trade


The Middle East• Afghanistan, Cyprus, Bahrain, Egypt, Iran,

Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates, Yemen– Primarily Arab, some Persian and Jews– 95% Muslim

• 3 key regional organizations– Gulf Cooperation Council– Arab Maghreb Union– Arab Cooperation Council


Africa

• 53 nations over three distinct areas– Republic of South Africa– North Africa– Black Africa

• Regional agreements– Economic Community of West African States– East African Cooperation– South African Development Community


Economic Community of West African States (ECOWAS)

• Benin, Burkina Faso, Cape Verde, The Gambia, Ghana, Guinea, Guinea-Bissau, Ivory Coast, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo

• Free trade area with unified monetary zone


East African Cooperation

• Kenya, Uganda, Tanzania

• Free trade area with possibility of expansion to a customs union


South African Development Community (SADC)

• Angola, Botswana, Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Seychelles, Swaziland, Tanzania, Zambia, Zimbabwe

• Mechanism to promote trade, cooperation, and economic integration by black-ruled states

• Ultimately seeks to form customs union


Free Trade Areas

• Two or more countries agree to abolish all internal barriers to trade amongst themselves

• Countries continue independent trade policies with countries outside agreement


Free Trade Areas

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Customs Unions

• Evolution of Free Trade Area

• Includes the elimination of internal barriers to trade (as in FTA) AND

• Establishes common external barriers to trade

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Common Market

• Includes the elimination of internal barriers to trade (as in free trade area) AND

• Establishes common external barriers to trade (as in customs union) AND

• Allows for the free movement of factors of production, such as labor, capital, and information

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Economic Unions

• Includes the elimination of internal barriers to trade (as in free trade area) AND

• Establishes common external barriers to trade (as in customs union) AND

• Allows for the free movement of factors of production, such as labor, capital, and information (as in common market) AND

• Coordinates and harmonizes economic and social policy within the union


Economic Unions

• Full evolution of economic union

– creation of unified central bank

– use of single currency

– common policies on issues ranging from agriculture to taxation

– requires extensive political unity

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Philippines Trade Agreement

• PDF file

• DOC file

• Summary of goods exported

Definition of International Marketing 1

Documents

albauminternational

local marketing environment

international marketingmade

international marketingjoy

services trade

s koreaproduced

companys goods

emergence of trade groupings