Introduction to International Marketing

Introduction to Introduction to International MarketingInternational Marketing

““If we distributed pictures only in If we distributed pictures only in the United States, we’d lose the United States, we’d lose money. It takes the whole world money. It takes the whole world now to make the economics of now to make the economics of movie-making work.”movie-making work.”

- - William MechanicWilliam MechanicPresident, 20th Century FoxPresident, 20th Century Fox

““Half the people in the world have Half the people in the world have yet to take their first picture. The yet to take their first picture. The opportunity is huge, and it’s opportunity is huge, and it’s nothing fancy. We just have to nothing fancy. We just have to sell yellow boxes of film.”sell yellow boxes of film.”

-- George M.C. Fisher George M.C. FisherCEO, Eastman Kodak Co.CEO, Eastman Kodak Co.

International MarketingInternational Marketing Today we live in a world of Global outsourcing. Today we live in a world of Global outsourcing.

Global Trade is at its potential high and the trend Global Trade is at its potential high and the trend is going to grow in future. is going to grow in future.

Peter Drucker says, “No Institution, whether a Peter Drucker says, “No Institution, whether a business, a university or a hospital, can hope to business, a university or a hospital, can hope to survive, let alone to succeed, unless it measures survive, let alone to succeed, unless it measures up to the standards set by the leaders in its field up to the standards set by the leaders in its field any place in the world.”any place in the world.”

So also, the Indian business environment has So also, the Indian business environment has seen a sea change in the level of competition seen a sea change in the level of competition since the opening up of the domestic markets for since the opening up of the domestic markets for participation of MNC’s. participation of MNC’s.

In 1950, the International Trade was worth In 1950, the International Trade was worth $55 billion. From here, it has raised to $55 billion. From here, it has raised to $10120 billion in 2005.$10120 billion in 2005.

Germany ranks the first in exports and Germany ranks the first in exports and exported goods worth $912.3 billion with a exported goods worth $912.3 billion with a global share of 10% in 2004. USA ranked global share of 10% in 2004. USA ranked second with $818.8 billion and 8.9% second with $818.8 billion and 8.9% share. India was 30share. India was 30thth with exports of $75.6 with exports of $75.6 and a share of 0.8%. and a share of 0.8%.

In imports, the USA has imported goods In imports, the USA has imported goods worth $1525.5 billion with a global share of worth $1525.5 billion with a global share of 16.1%. India ranks 2316.1%. India ranks 23rdrd with imports of with imports of $97.3 billion and 1% of the global share. $97.3 billion and 1% of the global share.

This data shows that India has to go a This data shows that India has to go a long way in international Trade and the long way in international Trade and the scope is tremendous.scope is tremendous.

International MarketingInternational Marketing ...is the marketing of goods and services across national ...is the marketing of goods and services across national

frontiers.frontiers. … … is the marketing operations of any company that sells is the marketing operations of any company that sells

and / or produces within a given country when :and / or produces within a given country when : The organization is a part of, or associated with an The organization is a part of, or associated with an

enterprise which also operates in other countries, andenterprise which also operates in other countries, and There is some degree of influence or control on its There is some degree of influence or control on its

activities from outside the country in which it sells and / activities from outside the country in which it sells and / or producesor produces

The process of planning and conducting transactions The process of planning and conducting transactions across national borders to create exchanges that satisfy across national borders to create exchanges that satisfy the objectives of individuals and organizations.the objectives of individuals and organizations.

Difference between Domestic and Difference between Domestic and International MarketingInternational Marketing

What is the difference between marketing domestically What is the difference between marketing domestically and internationallyand internationally Marketing concepts are universal (goal is to make a Marketing concepts are universal (goal is to make a

profit by satisfying customers)profit by satisfying customers) Difference is that in international marketing ALL Difference is that in international marketing ALL

environments have to be taken into consideration environments have to be taken into consideration when the marketing plan is developed and executedwhen the marketing plan is developed and executed• Must consider the legal environment, Must consider the legal environment,

governmental controls, climate & weather, governmental controls, climate & weather, cultural beliefs, buyer behavior… (uncontrollable cultural beliefs, buyer behavior… (uncontrollable elements)elements)

Global Marketing EnvironmentGlobal Marketing Environment

GlobalGlobal

RegionalRegionalLocalLocal

Marketing MixMarketing Mix

EnvironmentEnvironment

Major International Marketing DecisionsMajor International Marketing Decisions

Special Problems of IMSpecial Problems of IM Political & Legal differences.Political & Legal differences. Cultural differences.Cultural differences. Economic differences.Economic differences. Differences in the currency units & their fluctuations.Differences in the currency units & their fluctuations. Differences in language.Differences in language. Differences in marketing infrastructure. ( In terms of Differences in marketing infrastructure. ( In terms of

promotion channels, distribution channels etc )promotion channels, distribution channels etc ) Trade restrictions.( Import controls )Trade restrictions.( Import controls ) High cost if distance coverage.( Has an impact on time, High cost if distance coverage.( Has an impact on time,

mode of transport, obsolesce and goods perishing costs) mode of transport, obsolesce and goods perishing costs) Differences in Trade Practices.Differences in Trade Practices.

Why Go GlobalWhy Go Global Firms are motivated to expand their markets Firms are motivated to expand their markets

internationally for two reasons :internationally for two reasons : Push factors : Refer to the compulsion of Push factors : Refer to the compulsion of

domestic markets like saturation of markets, domestic markets like saturation of markets, international competition etc that amount to international competition etc that amount to reactive reasons for going global.reactive reasons for going global.

Pull factors : Refer to proactive reasons, that Pull factors : Refer to proactive reasons, that attract firms to global markets. This talks about attract firms to global markets. This talks about the potential in the global markets to be more the potential in the global markets to be more profitable and high growth prospects. profitable and high growth prospects.

Why Go GlobalWhy Go Global

Reasons to consider going global:Reasons to consider going global: Foreign attacks on domestic marketsForeign attacks on domestic markets Foreign markets with higher profit Foreign markets with higher profit

opportunitiesopportunities Stagnant or shrinking domestic marketsStagnant or shrinking domestic markets Need larger customer base to achieve Need larger customer base to achieve

economies of scaleeconomies of scale Reduce dependency on single marketReduce dependency on single market Follow customers who are expandingFollow customers who are expanding

Driving ForcesDriving Forces LiberalizationLiberalization MNC’sMNC’s TechnologyTechnology Transportation and communication revolutionTransportation and communication revolution Product development costs and efforts.Product development costs and efforts. Rising aspirations and wantsRising aspirations and wants CompetitionCompetition World economic trendsWorld economic trends Regional integrationRegional integration Leverages Leverages

Participants of IMParticipants of IM

Private Firms.Private Firms. MNC’sMNC’s Other large firmsOther large firms SME’sSME’s Public sector undertakingsPublic sector undertakings Trading companiesTrading companies Individuals.Individuals.

Objectives Of International Objectives Of International MarketingMarketing

Identifying the needs and wants of International Identifying the needs and wants of International Customer : Undertaking IMR & analyzing market Customer : Undertaking IMR & analyzing market segments, seeking to understand similarities & segments, seeking to understand similarities & differences in customer groups across different differences in customer groups across different countries.countries.

Achieving Global customer satisfaction : Achieving Global customer satisfaction : Adapting products and services & other Adapting products and services & other elements of the MM to satisfy different customer elements of the MM to satisfy different customer needs across countries needs across countries

Objectives Of International Objectives Of International MarketingMarketing

Staying ahead of the competitors by Staying ahead of the competitors by providing better products / services : providing better products / services : Assessing, monitoring & responding to Assessing, monitoring & responding to global competition by offering better value, global competition by offering better value, developing superior Brand Image & developing superior Brand Image & product positioning , broader product product positioning , broader product range, competitive price, high quality, range, competitive price, high quality, good performance, better distribution & good performance, better distribution & after sales service.after sales service.

Objectives Of International Objectives Of International MarketingMarketing

Co-coordinating marketing activities : Co-coordinating marketing activities : Coordinating and integrating marketing Coordinating and integrating marketing strategies across countries, regions and strategies across countries, regions and global markets, which involve global markets, which involve centralization, delegation, standardization centralization, delegation, standardization & local responsiveness. & local responsiveness.

Market Entry StrategiesMarket Entry Strategies ExportingExporting

Low investmentLow investment Low control of promotionLow control of promotion

LicensingLicensing Low investmentLow investment Low control of promotion, Low control of promotion,

positioning, and qualitypositioning, and quality Able to benefit from Able to benefit from

existing distribution and existing distribution and market knowledgemarket knowledge

Joint ventureJoint venture Considerable investmentConsiderable investment More controlMore control Able to benefit from Able to benefit from

partner’s experiencepartner’s experience Must work with partnerMust work with partner

Direct investmentDirect investment Large investmentLarge investment RiskyRisky Greater controlGreater control May lack knowledge of May lack knowledge of

marketmarket

Modes of EntryModes of Entry ExportingExporting is a relatively low risk strategy in which few is a relatively low risk strategy in which few

investments are made in the new country.  A investments are made in the new country.  A drawback is that, because the firm makes few if any drawback is that, because the firm makes few if any marketing investments in the new country, market marketing investments in the new country, market share may be below potential.  Further, the firm, by share may be below potential.  Further, the firm, by not operating in the country, learns less about the not operating in the country, learns less about the market (What do consumers really want?  Which market (What do consumers really want?  Which kinds of advertising campaigns are most kinds of advertising campaigns are most successful?  What are the most effective methods of successful?  What are the most effective methods of distribution?)  If an importer is willing to do a good distribution?)  If an importer is willing to do a good job of marketing, this arrangement may represent a job of marketing, this arrangement may represent a “win-win” situation, but it may be more difficult for the “win-win” situation, but it may be more difficult for the firm to enter on its own later if it decides that larger firm to enter on its own later if it decides that larger profits can be made within the country profits can be made within the country

Exporting Exporting Need for limited financeNeed for limited finance Less RiskLess Risk Proactive and reactive motivations.Proactive and reactive motivations.

Forms of Exporting :Forms of Exporting : Indirect ExportingIndirect Exporting Direct exportingDirect exporting Intracorporate transfers.Intracorporate transfers.

Types of Export IntermediariesTypes of Export Intermediaries

Export Management companiesExport Management companies International Trading CompaniesInternational Trading Companies Manufacturer/s agentsManufacturer/s agents Manufacturers export agentsManufacturers export agents Export and import brokersExport and import brokers Freight forwarders.Freight forwarders.

Modes of EntryModes of Entry Licensing Licensing and and franchisingfranchising are also low exposure are also low exposure

methods of entry—you allow someone else to use your methods of entry—you allow someone else to use your trademarks and accumulated expertise.  Your partner trademarks and accumulated expertise.  Your partner puts up the money and assumes the risk.  Problems puts up the money and assumes the risk.  Problems here involve the fact that you are training a potential here involve the fact that you are training a potential competitor and that you have little control over how the competitor and that you have little control over how the business is operated.  For example, American fast food business is operated.  For example, American fast food restaurants have found that foreign franchisers often fail restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness.  Similarly, to maintain American standards of cleanliness.  Similarly, a foreign manufacturer may use lower quality ingredients a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in in manufacturing a brand based on premium contents in the home country. the home country.

Modes of EntryModes of Entry

Contract manufacturingContract manufacturing involves having involves having someone else manufacture products while someone else manufacture products while you take on some of the marketing efforts you take on some of the marketing efforts yourself.  This saves investment, but again yourself.  This saves investment, but again you may be training a competitor. you may be training a competitor.

Direct entryDirect entry Direct entryDirect entry strategies, where the firm either strategies, where the firm either

acquires a firm or builds operations “from acquires a firm or builds operations “from scratch” involve the highest exposure, but also scratch” involve the highest exposure, but also the greatest opportunities for profits.  The firm the greatest opportunities for profits.  The firm gains more knowledge about the local market gains more knowledge about the local market and maintains greater control, but now has a and maintains greater control, but now has a huge investment.  In some countries, the huge investment.  In some countries, the government may expropriate assets without government may expropriate assets without compensation, so direct investment entails an compensation, so direct investment entails an additional risk.  A variation involves a additional risk.  A variation involves a joint joint ventureventure, where a local firm puts up some of the , where a local firm puts up some of the money and knowledge about the local market. money and knowledge about the local market.

International Strategic AlliancesInternational Strategic Alliances

Advantages:Advantages: Ease of market entryEase of market entry.  It may be useful for a firm .  It may be useful for a firm

to partner with another that already has a to partner with another that already has a presence in and knowledge of a market.  For presence in and knowledge of a market.  For example, Kentucky Fried Chicken (KFC) example, Kentucky Fried Chicken (KFC) partnered with the Mitsubishi Keirishi in entering partnered with the Mitsubishi Keirishi in entering Japan.  By doing so, KFC was assured of  Japan.  By doing so, KFC was assured of  managerial talent to deal with local regulations managerial talent to deal with local regulations and handling logistics (e.g., labor and and handling logistics (e.g., labor and construction) while Mitsubishi in turn got the use construction) while Mitsubishi in turn got the use of an authentic American brand name. of an authentic American brand name.

Advantages of International Advantages of International AlliancesAlliances

Shared riskShared risk.  Some projects are just too .  Some projects are just too big for any one company to approach big for any one company to approach alone.  Boeing can partner with Rolls alone.  Boeing can partner with Rolls Royce, with the latter making the engines Royce, with the latter making the engines for the aircraft, while Boeing makes the for the aircraft, while Boeing makes the frame.  Many times, deep sea oil frame.  Many times, deep sea oil exploration is too big a commitment for exploration is too big a commitment for any one oil company, so two or more may any one oil company, so two or more may together. together.

International Strategic AlliancesInternational Strategic Alliances

Shared knowledge and expertiseShared knowledge and expertise.  Intel, .  Intel, known for its cutting edge innovations in known for its cutting edge innovations in computer chips, can partner with a computer chips, can partner with a Japanese firm do to its manufacturing. Japanese firm do to its manufacturing.

Synergy and competitive advantageSynergy and competitive advantage.  .  “Synergy” refers to the idea that the “Synergy” refers to the idea that the resources held by two firms, when resources held by two firms, when combined, add up to more than the sum of combined, add up to more than the sum of their parts. their parts. 

Disadvantages of International Disadvantages of International AlliancesAlliances

Legal obstaclesLegal obstacles.  Since both firms have their own .  Since both firms have their own interests, complicated legal agreements may have to be interests, complicated legal agreements may have to be made up.  Also, there may be limitations on market made up.  Also, there may be limitations on market concentration, and there may be some concern about concentration, and there may be some concern about the legality of technology transfer.  In some countries, as the legality of technology transfer.  In some countries, as previously mentioned, it may be difficult to enforce previously mentioned, it may be difficult to enforce agreements. agreements.

ComplacencyComplacency:  If two firms join forces where they :  If two firms join forces where they previously competed, they may become complacent in previously competed, they may become complacent in developing new products, improving quality, and developing new products, improving quality, and lowering costs and prices.  When competition is place, lowering costs and prices.  When competition is place, firms tend to maintain greater discipline, which is needed firms tend to maintain greater discipline, which is needed for competitive ability in the long run. for competitive ability in the long run.

Disadvantages of International Disadvantages of International AlliancesAlliances

Costs of coordinationCosts of coordination.  When two firms have different cultures .  When two firms have different cultures (e.g., individualistic vs. collective or authoritarian vs. more (e.g., individualistic vs. collective or authoritarian vs. more participative), more effort may be needed in circulating participative), more effort may be needed in circulating information and reaching decisions.  For example, Oracle, an information and reaching decisions.  For example, Oracle, an aggressive computer firm in the Silicon Valley with a strong aggressive computer firm in the Silicon Valley with a strong emphasis on meritocracy might have difficulty working with a emphasis on meritocracy might have difficulty working with a collectivistic Japanese firm. collectivistic Japanese firm.

Blurred lines between areas of competition and cooperationBlurred lines between areas of competition and cooperation.  .  Suppose Sony and Compaq, which both make computers, want Suppose Sony and Compaq, which both make computers, want to collaborate on making memory chips.  To do so, they may to collaborate on making memory chips.  To do so, they may have to share information about other computer technology in have to share information about other computer technology in areas where they may compete.  There is now a question of areas where they may compete.  There is now a question of what to share and what to hold back.  Not only is time spent what to share and what to hold back.  Not only is time spent deciding whether to share or withhold, but essential information deciding whether to share or withhold, but essential information may end up not being available to those who need it. may end up not being available to those who need it.