The Scope and Challenge of International Marketing Why is International Marketing Important? Canada’s Exports and Imports Elements of the (International) Marketing Mix The International Marketing Task Self-Reference Criterion (SRC) Phases of International Marketing Involvement International Marketing Concepts Being Globally Aware
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The Scope and Challenge of International Marketing
Why is International Marketing Important?
Canada’s Exports and Imports
Elements of the (International) Marketing Mix
The International Marketing Task
Self-Reference Criterion (SRC)
Phases of International Marketing Involvement
International Marketing Concepts
Being Globally Aware
Why is International Marketing Important?
Business environments are becoming increasingly more global
Exports are the driving force behind Canada’s economic expansion
Canada exports 60% of the value of all goods produced
$ 1 billion in additional exports creates about 11,000 new jobs
Trends in Global Business
Internationalization of markets
Internationalization of companies
Growth of Regional Trade Areas
Move toward free market system by countries in Latin America, Asia, Eastern Europe
Large Emerging Markets (China, India, Argentina, Brazil, South Korea)
Theory of Comparative AdvantageBalance of PaymentsForces Driving GlobalizationForces Restraining GlobalizationWorld Trade Organization (WTO)Trade BarriersInternational Strategic AlliancesInternational Mergers and Acquisitions
Theory of Comparative Advantage
Adam Smith: Principle of Absolute AdvantageDavid Ricardo: Principle of Comparative AdvantageFactors of production (factor endowment)Domestic exchange ratios (different)World market exchange ratioDifference between domestic and world market exchange ratio determines country’s patterns of specialization and international tradeInternational trade is not a “zero-sum game”.
Balance of Payments
... the system of accounts that records a nation’s international economic transactions
Double-entry bookkeeping system (credits and debits offset each other)
3 Accounts:Current Account (trade in goods and services)
Capital Account (investment, capital movements)
Official Reserves Account
Forces Driving Globalization
Global Market NeedsConvergence of TechnologyCommunications / MediaInternational Mobility Transportation InfrastructureCosts (R&D, marketing, etc.)Leverage
Experience TransferSystems TransferEconomies of ScaleResource UtilizationStrategy
Forces Restraining Globalization
Market Differences
History
Management Myopia
Organizational Culture
Barriers to Entry
World Trade Organization (WTO)
Established: January 1, 1995Successor to the GATTCreated by: Uruguay Round negotiations (1986-94)Membership: 132 countries (as of Sept. 1997)Location: Geneva
WTO Objectives:Administering WTO trade agreementsForum for trade negotiationsHandling trade disputesMonitoring national trade policiesTechnical assistance and training for developing countriesCooperation with other international organizations (UN, IMF, WB)
Trade Barriers
Tariffs (Duties)Government-imposed taxes on imported goods
Objectives:
Generate revenues
Discourage imports
Non-Tariff BarriersObjective:
Discourage imports
Types of Non-Tariff Barriers (1)
Specific Limitations on Trade:QuotasImport licensing requirementsProportion restrictions of foreign to domestic goods (local content requirements)Minimum import price limitsEmbargoes
Customs and Administrative Entry Procedures:Valuation systemsAntidumping practicesTariff classificationsDocumentation requirementsFees
Standards:Standard disparitiesIntergovernmental acceptances of testing methods and standardsPackaging, labeling, marking standards
Types of Non-Tariff Barriers (2)
Government Participation in Trade:Government procurement policiesExport subsidiesCountervailing dutiesDomestic assistance programs
SOURCE: A.D. Cao, “Nontariff Barriers to U.S. Manufactured Exports,” The Columbia Journal of World Business, Summer 1980, P.94.
International Strategic Alliances
Keiretsu (Japan)Chaebol (South Korea)Strategic Partnership / Joint VentureConsortium
Objectives of International Strategic Alliances:Pool resourcesShare expertiseAchieve synergiesReach “critical mass”Reduce competition
International Mergers and Acquisitions
Objectives:
Enter foreign market rapidlyTake over brand names“Buy” market shareAcquire knowledgeBuy into distribution networksAchieve economies of scaleReduce competition
Toyota’s Keiretsu
Toyota has a typical Keiretsu family with financial ties to its most important suppliers. Some of those companies, with the percentage of each that Toyota owns:
SOURCE: Adapted from “Japan: All in the Family,” Newsweek, June 10, 1991, p 38.
Ford’s Keiretsu
VEHICLE ASSEMBLYCompany Country Percent Equity
Mazda Japan 25%Kia Motors Korea 10%Aston Martin Lagonda Britain 75%Autolatina Brazil-Argentina 49%Iveco Ford Truck Britain 48%
PARTS PRODUCTIONCompany Country Component Percent Equity
Cummins U.S. Engines 10%Excel Industries U.S. Windows 40%Decoma International Canada Body Parts, Wheels 49%
SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55.
Ford’s Keiretsu
Financial Services
Through seven wholly owned units, Ford extends consumer and commercial credit. It issues car loans, mortgages, and credit cards, does industrial leases and finances dealer purchases of cars.
MarketingOwns 49 percent of Hertz.Hertz and other car rentals are among Ford’s largest customers.
Research and DevelopmentFord belongs to eight consortiums that do research into environmental issues, better engineering techniques, materials, electric car batteries, and the Chrysler and General Motors “precompetitive research” on batteries and materials.
SOURCE: Adapted from “Learning from Japan,” Business Week, January 27, 1992, p. 55.
Cultural Aspects of International Marketing
World Population Trends
International Trade Flows
Elements of Culture
Taboos
Cultural Differences in Lifestyles
Cultural Differences in Social Life
Language and Cultural Differences
World Population and Life Expectancy by Major Areas
* Order determined by total dollar value of exports and imports.
For additional trade data see: "Indicators of Market Size for 115 Countries,Part I," Crossborder Monitor, August 27, 1997, pp. 4-8.
Country* Exports Imports Total
Elements of Culture
Material CultureTechnologyEconomics
Social InstitutionsSocial OrganizationEducationPolitical Structures
Belief SystemsAesthetics
Graphic and Plastic ArtsFolkloreMusic, Drama, and Dance
Language
Examples of Taboos in Different CulturesNever touch the head of a Thai or pass an object over it.(The head is considered sacred in Thailand.)
Avoid using triangular shapes in Hong Kong, Korea, and Taiwan. (The triangle is considered a negative shape.)
Red represents witchcraft and death in many African countries. Red is a positive color in Denmark.
The number 7 is considered bad luck in Kenya, but good luck in the Czech Republic and has a magical connotation in Benin, Africa.
The number 10 is bad luck in Korea.
The number 4 means death in Japan.SOURCE: Business America, July 12, 1993
Cultural Differences between Japanese and North American Lifestyles
Clear expression of joy and sorrow
Unequivocal expression of “Yes/No”
Strong self-assertion
Strong personality
Direct and efficient negotiating
Priority of self-interest
Ambiguous expression of Joy/Sorrow
Equivocal expression of “Yes/No”
Weak self-assertion
Weak personality
Extensive and inefficient negotiating
Priority of harmony with others
Japanese:A Culture of Self-restraint
North Americans:A Culture of Self-expression
SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50.
Cultural Differences between Japanese and North Americans: Social Life
Japanese Society:“In the Same Boat” Concept
North American Society:Dignity of Individuals
Dignity of individuals
Individual work ethic
Great individual freedom
An open and transparent society
Multi-cultural society
A society excelling in creativity and versatility
Individual decisions
Human relations oriented
Dependence on the group
Lack of individual freedom
A closed society, lacking in transparency
Mono-cultural society
An orderly and uniform society
Dependence on consensus
SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone Tomorrow,” Tokyo Business, February 1995, p.50.
Language and Cultural Differences (1)
Cracking an international market is a goal of most growing corporations. It shouldn't be that hard, yet even the big multi-nationals run into trouble because of language and cultural differences. For example...
Scandinavian vacuum manufacturer Electrolux used the following in an American ad campaign: "Nothing sucks like an Electrolux."
In Taiwan, the translation of the Pepsi slogan "Come alive with the Pepsi Generation" came out as "Pepsi will bring your ancestors back from the dead."
Language and Cultural Differences (2)
The name Coca-Cola in China was first rendered as Ke-kou-ke-la. Unfortunately, the company did not discover until after thousands of signs had been printed that the phrase means "bite the wax tadpole” or "female horse stuffed with wax" depending on the dialect. Coke then researched 40,000 Chinese characters and found a close phonetic equivalent, "ko-kou-ko-le," which can be loosely translated as "happiness in the mouth.”
Also in Chinese, the Kentucky Fried Chicken slogan "finger-lickin’ good" came out as "eat your fingers off.”
Colgate introduced a toothpaste in France called Cue, the name of a notorious porno mag.
Language and Cultural Differences (3)
When Parker Pen marketed a ballpoint pen in Mexico, its ads were supposed to say "It won't leak in your pocket and embarrass you.” However, the company mistakenly thought the Spanish word "embarazar” meant embarrass. Instead the ads said that "It wont leak in your pocket and make you pregnant.”
Chicken-man Frank Perdue's slogan, "It takes a tough man to make a tender chicken," got terribly mangled in another Spanish translation. A photo of Perdue with one of his birds appeared on billboards all over Mexico with a caption that explained "It takes a hard man to make a chicken aroused."
Language and Cultural Differences (4)
The American slogan for Salem cigarettes, "Salem -Feeling Free," got translated in the Japanese market into "When smoking Salem, you feel so refreshed that your mind seems to be free and empty.”
In Italy, a campaign for Schweppes Tonic Water translated the name into Schweppes Toilet Water.
Hunt-Wesson introduced its Big John products in French Canada as Gros Jos before finding out that the phrase, in slang, means "big breasts.” In this case, however, the name problem did not have a noticeable effect on sales.
Language and Cultural Differences (5)
When General Motors introduced the Chevy Nova in South America, it was apparently unaware that "no va" means "it won't go." After the company figured out why it wasn't selling any cars, it renamed the car in its Spanish markets to the Caribe.
Ford had a similar problem in Brazil when the Pinto flopped. The company found out that Pinto was Brazilian slang for "tiny male genitals". Ford pried all the nameplates off and substituted Corcel, which means horse.
Business Practices and Customs in International Marketing
Cultural Adaptation
Contextual Background of Various Countries
Cultural Differences between Japanese and North American Business
Ethics and International Marketing
Corrupt Business Practices
Cultural Adaptation
Cultural ImperativesCultural Imperatives
Cultural AdiaphoraCultural Adiaphora
Cultural ExclusivesCultural Exclusives
Contextual Background of Various Countries
High Context
(Implicit)Japanese
Arabian
Latin American
Spanish
Italian
English (UK)French
North American (US)
Scandinavian
German
SwissLow Context
(Explicit)
Cultural Differences between Japanese and North American Business (1)
Game concept: Business is a game in pursuit of profits under the rules of laws and contracts
Efficiency-oriented
Approximate accuracy, simplicity, and quickness
Quantity-oriented
Short-term performance evaluation
Japanese BusinessNorth American Business
Mutual trust-oriented business: business is based on trusting relationship among people rather than the rules of game
Highly precision-oriented
Perfectionism
Quality-oriented
Mid- to long-term evaluation
SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51.
Cultural Differences between Japanese and North American Business (2)
Top-down management
Low mutual dependence between employers and employees
Control of business by stockholders and management
Easy layoffs and dismissals of employees, and selling of businesses
Limited loyalty and incentive-oriented work ethics
Bottom-up management
High mutual dependence between employers and employees
Joint management of business by employers and employees
High job security
Strong loyalty and fewer incentives
Japanese BusinessNorth American Business
SOURCE: Norihiko Shimizu, “Today’s Taboos may be gone tomorrow,” Tokyo Business, February 1995, p.51
Three Ethical Principles
Utilitarian ethics Does the action optimize the "common good" or benefits of all constituencies?
Rights of the parties Does the action respect the rights of the individuals involved?
Justice or fairness Does the action respect the canons of justice or fairness to all parties involved?
Principle Question
Incorporating Ethical and Social Responsibility Issues into Multinational Business Decisions
Does the decision efficiently optimize the common good or benefits of:
Society?CultureOrderJustice“The good life”Other
The Individual?FreedomHealth and welfareSelf-realizationHuman dignityOpportunityOther
The Business firm?StockholdersManagementProfitsGrowthOther
The Economy?Economic growthAllocation of resourcesProduction and distribution of goods and servicesOther
Are there critical factors that justify suboptimizing these goals and satisfactions?
Does the decision respect the rights of individuals involved.
Reject decision
Are there critical factors that justify the abrogation of a right.
Does the corporate decision respect the canons of justice or fairness to all parties involved?
Rejectdecision
Are there critical factors that justify the violation of a canon of justice?
Rejectdecision
Accept decision
YESNO
YES
NO
YES YES
NO
NO
YES YES
NO
NO
Corrupt Business Practices
Bribery... money voluntarily offered by someone seeking an unlawful advantage
Subornation... large sum of money designed to entice an official to commit an illegal act
Lubrication... small sum of money or other gift presented to a low-ranking official for the purpose of facilitating or expediting the normal, lawful performance of a duty
Extortion... payments extracted by someone in authority from a company seeking only what it is lawfully entitled to
Globalization & Market Entry Strategies
Multinational vs. Global Orientation
Benefits of Global Orientation
Organizational Structure for Global Marketing
The International Marketing Planning Process
Alternative Market Entry Strategies
Timing of Multiple Market Entries
Multinational vs. Global Orientation
Multinational GlobalProduct Design
Product Life Cycle
View of Customer
Market Segmentation
Production
Pricing
Distribution
Promotion
Benefits of Global Orientation
Economies of Scale
Transfer of Experience and Know-How
Uniform Global Image
Control and Coordination
Sample Organizational Structure for Global Marketing
.... products for which the country of production (COP) is different from the brand’s country of origin.
Selected Empirical Findings
Alpine Ski Study
CD-Player Experiment
Mercedes-Benz Study
Alpine Ski Study
Experimental Design
Brands
Tyrolia Elan Rossignol Voelkl
Austria y1 y5 y9 y13
Slovenia y2 y6 y10 y14
CountriesFrance y3 y7 y11 y15
Germany y4 y8 y12 y16
Alpine Ski Study: Strength of Brand-Country Association
Scale: 1 = very weak association , 6 = very strong association
Sample: 284 Austrian skiers
Häubl and Elrod (1999)
5.05
4.43
5.25
4.82
4 4.2 4.4 4.6 4.8 5 5.2 5.4
Elan-Slovenia
Voelkl-Germany
Rossignol-France
Tyrolia-Austria
Alpine Ski Study: Mean Quality Ratings
Häubl and Elrod (1999)
Scale: 1 = very low quality , 6 = very high quality
Mean Quality Rating
3 5 3 5
Slovenia
France
Germany
Austria
CO
P
Voelkl Elan Tyrolia Rossignol
3 5 3 5
Sample: 284 Austrian skiers
Alpine Ski Study: Mean Quality Ratings Controlling for COP Effects
Häubl and Elrod (1999)
Scale: 1 = very low quality , 6 = very high quality
4 5
Mean Quality Rating Controlling for COP Effects
Slovenia
France
Germany
Austria
CO
P
Voelkl Elan Tyrolia Rossignol
4 5 4 54 5
Sample: 284 Austrian skiers
Alpine Ski Study: Effects on Quality Judgments
Elan-Slovenia
Voelkl-Germany
Rossignol-France
Tyrolia-Austria
Congruity Effects:
Slovenia
Germany
France
Austria
COP Main Effects:
Elan
Voelkl
Rossignol
Tyrolia
Brand Main Effects:
Standard Deviation
0.2 0.6 1.00.4 0.80.0
Mean
-0.6 -0.2 0.2 0.6 1.0-0.4 0.4 0.80.0
Häubl and Elrod (1999)
Estimates obtained from Random Coefficient Model.
Sample: 284 Austrian skiers
AiwaDenonJVCPioneerSonyTechnics
“Made in Japan” vs. “Made in Singapore”
Brands:
CD-Player Experiment
CD-Player Experiment
Technicsmade inJapan
Technicsmade in
Singapore
Aiwamade in
Singapore
Aiwamade inJapan
JVCmade in
Singapore
JVCmade inJapan
Denonmade inJapan
Denonmade in
Singapore
Pioneermade inJapan
Pioneermade in
Singapore
Sonymade in
Singapore
Sonymade inJapan
CD-Player Experiment: Impact of Country of Production on Perceived Sound Quality
Scale: 0 = extremely poor , 200 = extremely high
130.2
152.7
146
151.6
159.9
149.5
129.7
148.9
144.6
149.2
154.6
142.4
120 130 140 150 160 170
Aiwa
Denon
JVC
Pioneer
Sony
Technics
JapanSingapore
“Made in Japan” vs. “Made in Singapore”
*
*
Difference not significant at p = .05.
*
Sample: 219 Austrian Consumers
Häubl and Otter (1999)
CD-Player Experiment: Impact of Country of Production on Expected Durability
126.3
149.5
143.1
152.8
159.6
141.2
123.1
141.1
140.3
146.4
150.6
134.2
120 130 140 150 160 170
Aiwa
Denon
JVC
Pioneer
Sony
Technics
JapanSingapore
“Made in Japan” vs. “Made in Singapore”
Scale: 0 = extremely poor , 200 = extremely high
*
Difference not significant at p = .05.
*
Sample: 219 Austrian Consumers
Häubl and Otter (1999)
Mercedes-Benz Study
Samples: 1,640 German New-Car Buyers1,264 French New-Car Buyers
Countries of Production:
GermanyUSAGreat BritainCzech RepublicSouth Korea
Mercedes-Benz Study: ConstructsHäubl (1996)
1
EVALUATION OFCARS MADE INTHE COUNTRY
COGNITIVEEVALUATIONOF COUNTRY 3
OF COUNTRY
AFFECTIVEEVALUATION
1 OF COUNTRY
EVALUATION OFCOUNTRY'S
CAR INDUSTRY2
4
EVALUATION OFTHE MODEL'SAPPEARANCE
2BRAND
IMAGE 6
ATTITUDE
THE MODELTOWARD
7BEHAVIORAL
INTENTION
5
EVALUATION OFTHE MODEL'S
FEATURES
Mercedes-Benz Study: Path Coefficients
OF COUNTRY
1
2
3
AFFECTIVEEVALUATION
1
2
COGNITIVE
EVALUATION OF
EVALUATION OFEVALUATION
COUNTRY'S
CARS MADE INOF COUNTRY
CAR INDUSTRY
THE COUNTRY
BRAND
IMAGE
4
5
6 7
EVALUATION OF
EVALUATION OF
ATTITUDE
THE MODEL'S
THE MODEL'S
THE MODEL
BEHAVIORAL
INTENTION
APPEARANCE
FEATURES
TOWARD
CFI = 0.951
NFI = 0.930
0.730
0.691 0.868
0.104
0.065
0.033
0.130
0.015
0.2180.132
0.329
0.228
0.533
0.327
0.322 0.393
OF COUNTRY
0.457
Häubl (1996)
International Distribution Strategy
• Distribution Issues
• Functions Performed by Intermediaries
• International Channel-of-Distribution Alternatives
• International Retail Patterns
• Factors Affecting Channel Choice: The 6 Cs of International Channel Strategy
Distribution Issues
• Intermediaries
• Stages in the Channel of Distribution
• Control over Retail Price
• Channel Power
• Agent Middlemen vs. Merchant Middlemen
• Disintermediation
Functions Performed by Intermediaries
• Inventory Financing
• Storage
• Assistance with Sales Promotions
• Merchandise Returns
• Provide Product Information and Assistance to Buyers
• Collect Data about Buyers
International Channel-of-Distribution Alternatives
Home Country
Domestic producer or marketer sells to or through
Open distribution via domestic wholesale middlemen
Export management company or company sales force
Exporter ImporterForeign agent or merchant wholesalers
Foreign retailers
Foreign consumer
Foreign Country
International Retail Patterns
Retail Outlets Population EmployeesCountry (000) per Outlet per OutletArgentina 787.0 40 3Canada 134.5 185 9South Korea 716.8 60 2Australia 160.2 100 6India 3,140.0 259 --Malaysia 148.3 124 9Mexico 825.0 109 3Philippines 118.5 531 29U.S.A. 1,872.5 228 11Japan 1,821.0 68 3
SOURCES: International Marketing Data and Statistics, 18th ed. (London: Euromonitor Publications, 1994), and "Indicators of Market Size for 117 Countries," Crossborder Monitor, August 31, 1994.
Factors Affecting Channel Choice: The “6 Cs” of International Channel Strategy
• Cost
• Capital Requirement
• Control
• Coverage
• Character
• Continuity
International Business-to-Business Marketing and Personal Selling
• Characteristics of Business-to-Business Markets
• Business-to-Business Marketing: Product Quality
• International Personal Selling: Cultural Skills
Characteristics of Business-to-Business Markets
• Small Number of Buyers
• Group Decision Making
• Small Number of Transactions
• Relationship Marketing
• Service
• Importance of Personal Selling
• Importance of Trade Shows
Business-to-Business Marketing:Product Quality
• Conformance to Standards (e.g., ISO 9000)
• Market Perceived Quality
• Quality and Competition
• Quality Improvements:
Incremental Improvements
Technological Improvements
International Personal Selling:Cultural Skills
• Communicate Respect for People and their Culture
• Tolerate Ambiguity
• Display Empathy
• Be Nonjudgmental
• Recognize and Control Your SRC
International Advertising andThe Internet & International Marketing
• Creative Challenges of International Advertising
• Standardization vs. Adaptation in International Advertising
• Internet & International Marketing: Facets of Interactivity
• Internet & International Marketing: Advantages & Disadvantages
Creative Challenges of International Advertising
Legal and Tax ConsiderationsLegal and Tax Considerations
Language LimitationsLanguage Limitations
Cultural DiversityCultural Diversity
Media LimitationsMedia Limitations
Production and Cost LimitationsProduction and Cost Limitations
Standardization vs. Adaptation in International Advertising
• Creative Strategy
• Message Appeal
• Ad Execution
• Media Mix
• Agency
Interactive Media & International Marketing
• Rapid growth of the Internet (WWW)
• International adoption of the WWW
• Corporate sites
• WWW advertising
• Online shopping
• Common media platform for all countries
• Netcasting
• Convergence of media
Internet & International Marketing: Facets of Interactivity (1)
• Initiation of information exchange
• Control over the sequence, pacing, and presentation format of communication process
• Degree to which the information content may be customized for individual customers
• Receiver’s ability to organize information content
• Quantity of information available
• Quality / richness of information cues
Internet & International Marketing: Facets of Interactivity (2)
• Level of sophistication of information agents
• Degree to which the environment facilitates feedback
• Ability to simulate consumption or usage
• Degree of playfulness
• Amount of socialization among (potential) customers
• Ease of access to other relevant information sources
Internet & International Marketing: Advantages
• Instant world-wide presence
• Low barriers to entry
• Market segmentation
• Information on demand / audience self-selection
• Convenience for customers (24 hrs. a day)
• Ability to provide vast amounts of information
• Customer feedback / measuring ad effectiveness
• “Level playing field”
Internet & International Marketing: Disadvantages
• Source credibility
• Limited access to certain segments
• Language
• Presentation of product information (e.g., prices)