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International*Marketing*MKTG301*
Richard Hordern-Gibbings
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Table&of&Contents&Introduction to International Marketing ................................................................................................. 11!
Overview ............................................................................................................................................... 11!
The Asian century ................................................................................................................................. 11!
Why understanding international marketing is imperative .................................................................... 12!
International trade versus international business ................................................................................. 13!
Evolution of international and global marketing .................................................................................... 13!
Domestic marketing .......................................................................................................................... 14!
Export marketing ............................................................................................................................... 15!
International (country-by-country) marketing .................................................................................... 15!
Multinational (region-by-region) marketing ....................................................................................... 15!
Global marketing ............................................................................................................................... 15!
Impact of environmental factors on global marketing .................................................................... 16!
Impact of the internet on global marketing .................................................................................... 16!
International marketing planning and strategy development ................................................................ 16!
Theories of international trade and the multinational organisation ....................................................... 17!
Comparative advantage theory ......................................................................................................... 17!
International product cycle theory ..................................................................................................... 18!
Internalisation/transaction cost theory .............................................................................................. 18!
Economic and Financial Environment .................................................................................................. 19!
Overview ............................................................................................................................................... 19!
Intertwined World Economy .................................................................................................................. 19!
Australia’s main export and import destinations ................................................................................... 20!
Intertwined world economy ................................................................................................................... 20!
Evolution of cooperative trade agreements .......................................................................................... 20!
‘Most Favoured Nation’ principle .......................................................................................................... 21!
Progressive trade liberalisation in GATT multilateral negotiating rounds ............................................. 21!
Regional economic arrangements ........................................................................................................ 21!
Major regional trade blocs ................................................................................................................. 22!
Regional economic arrangements ........................................................................................................ 22!
Marketing in euro-land .......................................................................................................................... 23!
Ramifications of the euro for marketers ............................................................................................ 23!
Price transparency ........................................................................................................................ 23!
Intensified competitive pressure .................................................................................................... 24!
Streamlined supply chains ............................................................................................................ 24!
Adaption of internal organisational structures ............................................................................... 24!
EU regulations crossing national boundaries ................................................................................ 24!
Economic uniformity ...................................................................................................................... 24!
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Development of today’s international monetary system ....................................................................... 24!
The Bretton Woods Conference ....................................................................................................... 24!
The International Monetary Fund (IMF) ............................................................................................ 25!
The World Bank ................................................................................................................................ 25!
Fixed versus floating exchange rates ................................................................................................... 25!
Currency blocs .................................................................................................................................. 26!
Foreign exchange and foreign exchange rates .................................................................................... 26!
Nature and functions of the foreign exchange market ...................................................................... 26!
Purchasing power parity ................................................................................................................... 26!
Forecasting exchange rate fluctuations ............................................................................................ 26!
Spot versus forward foreign exchange ............................................................................................. 27!
Economic and financial turmoil around the world ................................................................................. 27!
The Asian financial crisis and its aftermath ....................................................................................... 27!
The US subprime mortgage loan crisis and the subsequent global financial crisis .......................... 27!
Europe’s complicated financial problems .......................................................................................... 28!
Political and Legal Environment ........................................................................................................... 29!
Overview ............................................................................................................................................... 29!
Political environment: individual governments ...................................................................................... 29!
Home country versus host country ................................................................................................... 29!
Structure of government – ideology .................................................................................................. 30!
Structure of government ................................................................................................................... 30!
Political environment: individual governments ...................................................................................... 30!
Government policies and regulation ................................................................................................. 30!
1. Economic Trade Control ............................................................................................................ 31!
2. Political Trade Control ............................................................................................................... 31!
Government policies and regulation ................................................................................................. 31!
Political environment ............................................................................................................................ 32!
Managing the political environment .................................................................................................. 32!
Terrorism and the world economy ........................................................................................................ 32!
International agreements ...................................................................................................................... 33!
International law and the local legal environment ............................................................................. 33!
International Law ........................................................................................................................... 33!
Local legal systems and laws ........................................................................................................ 34!
Jurisdiction ........................................................................................................................................ 35!
Issues transcending national boundaries ............................................................................................. 35!
ISO 9000 and 14000 ......................................................................................................................... 35!
Intellectual property protection .......................................................................................................... 35!
International treaties for intellectual property protection ................................................................... 36!
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Corrupt practices ............................................................................................................................... 36!
Cultural Environment ............................................................................................................................ 37!
Overview ............................................................................................................................................... 37!
Defining culture ..................................................................................................................................... 37!
Elements of culture ............................................................................................................................... 38!
Identity .............................................................................................................................................. 38!
Material life ........................................................................................................................................ 38!
Language .......................................................................................................................................... 38!
Social interactions ............................................................................................................................. 39!
Aesthetics ......................................................................................................................................... 39!
Religion ............................................................................................................................................. 39!
Education .......................................................................................................................................... 39!
Value systems ................................................................................................................................... 40!
Cross-cultural comparisons .................................................................................................................. 40!
High-context versus low-context cultures ......................................................................................... 40!
Hofstede’s classification scheme ...................................................................................................... 41!
Adapting to cultures .............................................................................................................................. 41!
Self-Reference Criterion (SRC) ........................................................................................................ 41!
Culture and the marketing mix .............................................................................................................. 42!
Product policy ................................................................................................................................... 42!
Pricing ............................................................................................................................................... 42!
Distribution ........................................................................................................................................ 42!
Promotion .......................................................................................................................................... 43!
Organisational cultures ......................................................................................................................... 43!
Understanding International Consumers .............................................................................................. 44!
Overview ............................................................................................................................................... 44!
The changing international marketplace ............................................................................................... 44!
Standardise or adapt? .......................................................................................................................... 44!
Glocalisation versus localisation ........................................................................................................... 45!
Drivers of consumer behaviour ............................................................................................................. 45!
Values ............................................................................................................................................... 46!
Reference groups ............................................................................................................................. 46!
Commercial and Social Information .................................................................................................. 46!
Situation conditions ........................................................................................................................... 46!
Demographics ................................................................................................................................... 46!
Lifestyles ........................................................................................................................................... 46!
Motivation .......................................................................................................................................... 46!
Social class ....................................................................................................................................... 47!
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Evolving global consumer culture ......................................................................................................... 47!
Global brands ................................................................................................................................ 48!
Emergence of a global consumer ......................................................................................................... 48!
Myth or reality? ................................................................................................................................. 48!
Global tribes ...................................................................................................................................... 49!
International Marketing Research ......................................................................................................... 50!
Overview ............................................................................................................................................... 50!
International marketing research process ............................................................................................ 50!
Research problem formulation .......................................................................................................... 50!
Secondary marketing research ............................................................................................................. 51!
Secondary data sources ................................................................................................................... 51!
Problems with secondary data research ........................................................................................... 52!
Accuracy of data ............................................................................................................................ 52!
Age of data .................................................................................................................................... 52!
Reliability of data overtime ............................................................................................................ 52!
Comparability of data .................................................................................................................... 52!
Lumping data ................................................................................................................................. 52!
Primary marketing research ................................................................................................................. 52!
Focus groups .................................................................................................................................... 53!
Survey methods for cross-cultural marketing research ..................................................................... 53!
Questionnaire design .................................................................................................................... 53!
Construct equivalence ................................................................................................................... 54!
Measure equivalence .................................................................................................................... 54!
Sampling ....................................................................................................................................... 55!
Collecting the information .............................................................................................................. 55!
International issues for focus groups .................................................................................................... 55!
Market size assessment ....................................................................................................................... 56!
New market information technologies .................................................................................................. 56!
Managing international marketing research ......................................................................................... 56!
Marketing selection and entry strategies .............................................................................................. 57!
Overview ............................................................................................................................................... 57!
Deciding to go overseas ....................................................................................................................... 57!
Selecting a country to enter .............................................................................................................. 57!
Selecting a target market .................................................................................................................. 58!
Choosing the mode of entry ................................................................................................................. 58!
External decision criteria for mode of entry ....................................................................................... 58!
Market size and growth ..................................................................................................................... 58!
Risk ............................................................................................................................................... 59!
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Government regulations ................................................................................................................ 59!
Local infrastructure ........................................................................................................................ 59!
Internal decision criteria for mode of entry ........................................................................................ 59!
Organisational objectives .............................................................................................................. 59!
Need for control ............................................................................................................................. 59!
Internal resources, assets and capabilities ................................................................................... 60!
Flexibility ........................................................................................................................................ 60!
Choice of mode of entry: a transaction-cost explanation .................................................................. 60!
Exporting .............................................................................................................................................. 60!
Indirect exporting .............................................................................................................................. 61!
Cooperative exporting ....................................................................................................................... 61!
Direct exporting ................................................................................................................................. 61!
Local office .................................................................................................................................... 61!
Internal exporting department ........................................................................................................... 61!
Licensing .............................................................................................................................................. 62!
Franchising ........................................................................................................................................... 62!
Contract Manufacturing ........................................................................................................................ 63!
Joint ventures ....................................................................................................................................... 63!
Drivers behind successful international joint ventures .................................................................. 64!
Wholly owned subsidiaries ................................................................................................................... 64!
Strategic alliances ................................................................................................................................ 65!
Timing of entry ...................................................................................................................................... 65!
Exit strategies ....................................................................................................................................... 65!
Developing new goods and services for international marketers ......................................................... 66!
Standardisation versus customisation .................................................................................................. 66!
International product strategies ............................................................................................................ 67!
Strategic option 1 – Product and communications extension – dual extension ................................ 67!
Strategic option 2 – Product extension – communications adaption ................................................ 67!
Strategic option 3 – Product adaption – communications extension ................................................ 67!
Strategic option 4 – Product and communications adaption – dual adaption ................................... 67!
Strategic option 5 – Product invention .............................................................................................. 68!
Multinational diffusion ........................................................................................................................... 68!
Individual differences ........................................................................................................................ 68!
Personal influences ........................................................................................................................... 68!
Product characteristics ...................................................................................................................... 68!
Developing new products for international markets .............................................................................. 69!
Idea ................................................................................................................................................... 69!
Screening .......................................................................................................................................... 69!
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Test marketing .................................................................................................................................. 71!
Timing of entry .................................................................................................................................. 71!
International NPD and culture .............................................................................................................. 71!
Marketing Goods and Services ............................................................................................................ 72!
Overview ............................................................................................................................................... 72!
Managing multinational product lines ................................................................................................... 72!
Customer preferences ...................................................................................................................... 72!
Price spectrum .................................................................................................................................. 72!
Competitive climate ........................................................................................................................... 72!
Organisational structure .................................................................................................................... 72!
History ............................................................................................................................................... 73!
Product piracy ....................................................................................................................................... 73!
Strategic options against product piracy ........................................................................................... 73!
Lobbying activities ......................................................................................................................... 73!
Legal action ................................................................................................................................... 73!
Customs ........................................................................................................................................ 73!
Product policy decisions ................................................................................................................ 74!
Communications options ............................................................................................................... 74!
Online searches ............................................................................................................................ 74!
Country-of-origin stereotypes ............................................................................................................... 74!
Country-of-origin influences on consumers ...................................................................................... 74!
Strategies to cope with country-of-origin stereotypes ....................................................................... 74!
Product policy ................................................................................................................................ 75!
Pricing ........................................................................................................................................... 75!
Distribution .................................................................................................................................... 75!
Communication ............................................................................................................................. 75!
International branding strategies .......................................................................................................... 75!
Global brands .................................................................................................................................... 75!
Local branding .................................................................................................................................. 75!
Global or local brands? ..................................................................................................................... 76!
Brand name changeover strategies .................................................................................................. 76!
Co-branding ...................................................................................................................................... 76!
Umbrella (corporate) branding .......................................................................................................... 76!
Protecting brand names .................................................................................................................... 76!
Global marketing of services ................................................................................................................ 77!
Challenges in marketing services internationally .............................................................................. 77!
Protectionism ................................................................................................................................. 77!
Immediate face-to-face contacts with service transactions ........................................................... 77!
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Difficulties in measuring customer satisfaction overseas .............................................................. 77!
Opportunities in the global service industries ................................................................................... 77!
Deregulation of service industries ................................................................................................. 77!
Increasing demand for premium services ..................................................................................... 77!
Increased value consciousness .................................................................................................... 77!
Global service marketing strategies .................................................................................................. 78!
Capitalise on cultural forces in the host market ............................................................................. 78!
Standardise or customise .............................................................................................................. 78!
Central role of information technologies ........................................................................................ 78!
Add value by differentiation ........................................................................................................... 78!
Establish global service networks ................................................................................................. 78!
International Marketing Communication ............................................................................................... 79!
Overview ............................................................................................................................................... 79!
International advertising and culture ..................................................................................................... 79!
Language .......................................................................................................................................... 79!
Other cultural barriers ....................................................................................................................... 79!
Setting the international advertising budget ......................................................................................... 79!
Percentage of sales method ............................................................................................................. 80!
Competitive parity method ................................................................................................................ 80!
Objective-and-task method ............................................................................................................... 80!
Creative strategy .................................................................................................................................. 80!
To standardize or adapt .................................................................................................................... 80!
The merits of standardization ........................................................................................................ 80!
Barriers to standardization ............................................................................................................ 81!
Approaches to creating advertising copy ...................................................................................... 82!
International media decisions ............................................................................................................... 82!
Media infrastructure .......................................................................................................................... 82!
Media limitations ............................................................................................................................... 82!
Developments in the media landscape ............................................................................................. 83!
Advertising regulation ....................................................................................................................... 83!
Advertising clutter ............................................................................................................................. 83!
Comparative advertising ................................................................................................................... 83!
Advertising targeting children ............................................................................................................ 83!
Choosing an advertising agency .......................................................................................................... 83!
Coordinating international advertising .................................................................................................. 84!
Other elements of the marketing communication mix .......................................................................... 84!
Sales promotion ................................................................................................................................ 84!
Direct marketing ................................................................................................................................ 84!
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Event sponsorships ........................................................................................................................... 84!
Trade shows ..................................................................................................................................... 85!
Personal selling ................................................................................................................................. 85!
Logistics: Sourcing and Distribution ..................................................................................................... 85!
Overview ............................................................................................................................................... 85!
International logistics ............................................................................................................................ 85!
Modes of transportation .................................................................................................................... 86!
Ocean shipping ............................................................................................................................. 86!
Air freight ....................................................................................................................................... 87!
Intermodal transportation .............................................................................................................. 87!
Warehousing and inventory management ........................................................................................ 87!
Third-party logistics (3PL) ................................................................................................................. 88!
Types of 3PL providers ................................................................................................................. 88!
Fourth-party logistics (4PL) ........................................................................................................... 88!
International logistics and the internet .............................................................................................. 88!
International sourcing ........................................................................................................................... 89!
Value chain and functional interfaces ............................................................................................... 89!
Types of sourcing strategy ................................................................................................................ 90!
Intrafirm sourcing ........................................................................................................................... 90!
Outsourcing (contract manufacturing) ........................................................................................... 90!
Outsourcing of service activities .................................................................................................... 90!
International distribution ....................................................................................................................... 91!
Channel configurations ..................................................................................................................... 91!
Channel management ....................................................................................................................... 91!
International retailing ............................................................................................................................ 92!
‘Push’ versus ‘pull’ ............................................................................................................................ 92!
On-time retail information management ............................................................................................ 92!
Reduced inventory ........................................................................................................................ 92!
Market information at the retail level ............................................................................................. 93!
Retailing differences across the world .............................................................................................. 93!
Online retailing ...................................................................................................................................... 93!
Export and Import Management ........................................................................................................... 94!
The role of exporting for Australian organisations ................................................................................ 94!
Snapshot of Australian exports and imports ......................................................................................... 94!
Organising for exports .......................................................................................................................... 94!
Research for exports ............................................................................................................................ 95!
Indirect exporting options ..................................................................................................................... 95!
Direct exporting .................................................................................................................................... 96!
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Direct and indirect exporting ................................................................................................................. 96!
Mechanics of exporting ......................................................................................................................... 97!
Terms of shipment and sale ................................................................................................................. 97!
Payment terms ..................................................................................................................................... 98!
Role of governments in promoting exports ........................................................................................... 99!
Managing imports ................................................................................................................................. 99!
Model of importer buyer behaviour ..................................................................................................... 100!
Mechanics of importing ....................................................................................................................... 100!
Import duties ....................................................................................................................................... 101!
Grey markets ...................................................................................................................................... 101!
International Pricing ............................................................................................................................ 102!
Overview ............................................................................................................................................. 102!
Drivers of foreign market pricing ......................................................................................................... 102!
Organisation goals .......................................................................................................................... 103!
Customer demand .......................................................................................................................... 103!
Competition ..................................................................................................................................... 103!
Distribution channels ....................................................................................................................... 103!
Government policies ....................................................................................................................... 104!
Managing price escalation .................................................................................................................. 104!
Pricing in inflationary environments .................................................................................................... 105!
Courses of action to deal with price controls: ................................................................................. 105!
International pricing and currency movements ................................................................................... 105!
Currency gain/loss pass through ........................................................................................................ 106!
Currency quotation ............................................................................................................................. 106!
Transfer pricing ................................................................................................................................... 106!
International pricing and antidumping regulation ................................................................................ 107!
Price coordination ............................................................................................................................... 107!
Global-pricing contracts ...................................................................................................................... 107!
Aligning pan regional prices ............................................................................................................... 108!
Pricing policies and the euro .............................................................................................................. 108!
Countertrade ....................................................................................................................................... 108!
Global Marketing Strategy .................................................................................................................. 109!
Global strategy ................................................................................................................................... 109!
Competitive structure .......................................................................................................................... 110!
Hyper competition ............................................................................................................................... 110!
Global strategy approaches ................................................................................................................ 110!
Global marketing strategy ................................................................................................................... 111!
Planning a global marketing strategy ................................................................................................. 111!
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Global marketing strategy choice .................................................................................................... 111!
Limitations to globalisation ................................................................................................................. 112!
Regionalisation of global marketing strategy ...................................................................................... 112!
The evolving global marketplace ........................................................................................................ 114!
Overview ............................................................................................................................................. 114!
Information technology and global competition .................................................................................. 114!
Consequences of globalisation ........................................................................................................... 115!
The growth in world trade and the global market place .................................................................. 116!
Structural and other changes in the global population .................................................................... 116!
Global market segments ................................................................................................................. 116!
Meeting local and regional customer needs ................................................................................... 116!
For/Against ...................................................................................................................................... 117!
Changing political realities and world trade ........................................................................................ 117!
Bilateral trade agreements ................................................................................................................. 118!
The changing face of international marketing ..................................................................................... 118!
Impact of terrorism .......................................................................................................................... 119!
Industry consolidation ..................................................................................................................... 119!
Ethics and governance ................................................................................................................... 119!
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Introduction*to*International*Marketing*Overview**
♥ There is a growing significance of social media and the online market space for
international marketers amidst a global environment of economic turmoil
♥ Environment forms the critical background for international marketing planning and
strategy development.
♥ Strategic action is based on and tailored to environmental conditions.
♥ Whether an organisation operates domestically or across national boundaries does not
mean it avoids competitive pressure from around the world
♥ In developing the marketing strategy for an organisation, therefore, any marketing
manager needs to understand the nature of, and the changes within, the international
environment in order to devise a strategy that satisfies consumer needs and achieves
corporate success.
The*Asian*century*
♥ Extent of Asian economic development has been extraordinary, despite uneven progress,
even in the face of the recent European financial crisis and localised disasters
♥ Economic transformation initiated by the rise of Japan as an economic power, emergence
of newly industrialised countries (NICs) e.g. South Korea, Taiwan and Philippines, and
materialisation of the economic power of India and China.
♥ Over 61 per cent of the world’s population is represented in the Asia-Pacific region
♥ The progress that is occurring in the Asian region is being driven by a number of
socioeconomic and political trends – e.g. privatisation and deregulation in the financial,
transportation and energy industries
♥ For much of the twentieth century, large economies and large trading partners were
located mostly in the world’s triad regions – North America, Western Europe and Japan –
which collectively produced for than 80 per cent of the world’s GDP
♥ However, in the next 10 to 20 years, the greatest commercial opportunities are expected
to be found increasingly in the ten big emerging markets (BEMs). These are the Chinese
Economic Area (CEA), including China, Hong Kong and Taiwan; India; South Korea;
Mexico; Brazil; Argentina; South Africa; Poland; Turkey; and the Association of South-East
Asian Nations (ASEAN), including Indonesia, Brunei, Malaysia, Singapore, Thailand, the
Philippines and Vietnam.
♥ Triad: America, Japan and the European Union. For much of the 20th century these triad
regions have dominated world trade.
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♥ The achievement of Asia's potential will not be easy. The infrastructure and energy needs will be enormous and the importation of some of these resources is fraught with political and economic difficulties (e.g. corruption and political instability in nations such as Thailand and Indonesia). Also legal system is weak and needs to be modified. Does not help when it comes to international business, or if a foreign company wants to market into that country.
Why*understanding*international*marketing*is*imperative***********************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************************
♥ Several factors make understanding international marketing imperative
1. The saturation of domestic markets in the industrialised parts of the world has
forced many organisations to look for marketing opportunities beyond their own
national boundaries
2. Profound change occurred in our view of competition around the world – in market
share, country source and global reach.
3. International competition brings about global cooperation
4. In last decade there has been the proliferation of the internet and electronic
business (e-business: the use of electronics to conduct all aspects of an
organisation’s business). Electronic commerce (e-commerce) may then be
described as a subset of e-business dealing with the facilitation of transactions
and sale of goods and services online, through the internet or any other
telecommunications network. The growing area of mobile e-commerce refers to
the use of mobile telecommunications networks involving portable devices such as
mobile phones and handheld technologies.
5. Examination of top 100 largest organisations in world illustrates the profound
changes that have occurred in the countries of origin of competitors in the
international marketplace.
6. Domestic companies cannot avoid competitive pressure from globally oriented
firms
♥ There is much more competition from a wider spectrum of countries and more varied
competition from cheaper products that are often more carefully tailored to environmental
trends.
♥ Today’s business environment is characterised not only by much more competition from
around the world, but also by more fluid domestic and international market conditions than
in the past.
♥ The same competitive pressure equally applies to managers of foreign organisations.
♥ In the past several years, many political and economic events have also affected the
nature of global competition.
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International*trade*versus*international*business*
♥ International trade consists of exports and imports between a nation and other countries
in the world.
♥ International business, however, is a broader concept and includes international trade
and foreign production of goods for sale, either by manufacturing products overseas for
sale there or by contracting out manufacturing to an organisation in a foreign country.
♥ Australian organisations typically market their products in three ways:
1. They can export their products from Australia, which is recorded as an Australian
export.
2. They can invest in foreign production on their own and manufacture products
overseas for sale there.
3. They can contract out manufacturing in whole or in part to an organisation in a
foreign country, either through licensing or a joint-venture agreement.
♥ International trade and foreign production are increasingly managed on a global basis.
Furthermore, international trade and foreign production are also intertwined in a complex
manner. Foreign trade may occur at different levels within regions, within industries and
within organisations. It may also vary in the nature of interchange and foreign direct
investment (FDI).
♥ Multinational companies (MNCs) are increasingly managing the international trade flow
internally (i.e. among their subsidiaries). This is called intrafirm trade (trade that flows
within the organisation itself). Intrafirm trade makes trade statistics more complex to
interpret, since part of the international flow of products and components is taking place
between affiliated organisations within the same organisational system, transcending
national boundaries.
Evolution*of*international*and*global*marketing*
♥ Classic marketing management paradigm (consumer orientation, analysis and strategy
development, manifested in their final form as the seven Ps) was developed in and is
grounded in the US cultural ethos. Has major implications.
♥ Global financial crisis is a demonstration of how effective but unregulated marketing
practices can be used unethically or deceptively on consumers with severe implications for
society at large.
♥ Many organisations are constantly under competitive pressure to move forward both
reactively (responding to the changes in the market and competitive environments) and
proactively (anticipating the change)
♥ Thus, knowing the dynamics of the evolutionary development of international and global
marketing involvement is important for two reasons:
o Helps in understanding how organisations learn and acquire international
experience and how they use it for gaining competitive advantage over time.
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Export&marketing&
♥ This is a marketing approach in which organisations sell their good or service directly or
indirectly to overseas buyers.
♥ This is the second stage
♥ In the early stage of export marketing involvement, the internationalisation process is a
consequence of incremental adjustments to the changing conditions of the organisation
and its environment, rather than a result of its deliberate strategy.
♥ Exporters tend to engage in indirect exporting by relying on export management
organisations or trading organisations to handle their export business.
♥ Some progress to a more involved stage or internationalisation by direct exporting
♥ Also tend to make an ethnocentric approach to foreign markets
International&(country;by;country)&marketing&
♥ This marketing is characterised by overseas expansion focusing on a polycentric
orientation, whereby marketing functions are adapted to foreign market demands.
♥ This stage occurs when export marketing has become an integral part of organisation’s
marketing activity.
♥ Unique feature is its polycentric orientation, with emphasis on product and promotional
adaption in foreign markets, whenever necessary.
♥ In the extreme of this stage, an organisation may establish an independent foreign
subsidiary in each and every foreign market, and have each of the subsidiaries operate
independently of one another without any measurable headquarters control. This is known
as multi-domestic marketing
Multinational&(region;by;region)&marketing&
♥ Organisation markets its products in many countries around the world
♥ The organisation’s management comes to realise the benefit of economies of scale in
product development, manufacturing and marketing by consolidating some of its activities
on a regional basis.
Global&marketing&
♥ A marketing approach in which an organisation strives for efficiencies of scale by
developing a standardised marketing mix across national, regional and global markets.
♥ International and multinational orientation, while enabling consolidation of operations
within counties or regions, will nonetheless tend to result in market fragmentation
worldwide.
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♥ Operational fragmentation leads to higher costs. This leads to global marketing which
refers to marketing activities by organisations that emphasise the following:
1. Standardisation efforts: the organisation uses standardising marketing programs
across different countries, particularly with respect to product offering, promotional
mix, price and channel structure.
2. Coordination across markets: this reduces cost inefficiencies and duplication of
effort among the organisation’s national and regional subsidiaries.
3. Global integration: the organisation participates in many major world markets.
Gains competitive leverage and effective integration of its competitive attacks in
one market by counterattacking in others.
♥ Global marketing is viewed as an organisation’s proactive willingness to adopt a global
perspective instead of a country-by-country or region-by-region perspective in developing
a marketing strategy.
Impact*of*environmental*factors*on*global*marketing*
♥ Geography, climate and culture, among other things, affect the way in which organisations
develop certain products and consumers want them.
♥ Location – Dubai is a major airline stopover hub, Australia and NZ struggle with location
and must develop technology and transport solutions to overcome location challenges.
♥ Availability of both natural and human resources is major determinant of industry location.
♥ Products that organisations can offer competitively may be determined by the availability
of natural and human resources, by unique consumer needs in different countries or
regions, or by both.
Impact*of*the*internet*on*global*marketing*
♥ Basic functions of marketing have not changed, although a new mode for promotion,
pricing and distribution, as well as a new product type, has appeared.
♥ Information and communication technology (ICT) and the internet have the capacity to
allow small businesses and individuals to reach international markets
International*marketing*planning*and*strategy*development*
♥ The process for developing, evaluating and implementing a marketing strategy in an
international context entails in part the systematic and objective scan of the global
environment to identify opportunities for new product development or new market
development or expansion.
♥ This step is followed by comprehensive marketing research activities that will generate the
information required for managers to make decisions on how to capitalise on such
opportunities.
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♥ To make good decisions about the nature of the marketing mix, the decision maker needs
to fit the strategy to the environment. The environment is not under the decision maker’s
control, so has to be continuously evaluated.
♥ Planning is a general term that broadly refers to management’s attempts to control, predict
and achieve a desired future.
♥ Different approaches to the definition, but Dror captures all components: ‘Planning is the
process of preparing a set of decisions for actions in the future, directed futures or
outcomes of strategies that may be classified according to preference.’
♥ Definition implies a set of possible futures or outcomes of strategies that may be classified
according to preference.
♥ Planner must decide what type of future is desired. Then they have to examine set of
paths (strategies) that are likely to lead to specific outcomes and choose one distinct path
or strategy that is most likely to lead to the goal. Must then implement chosen strategy.
When plan has been activated, it must be continually monitored to ensure successful
progress towards the achievement of the goal.
♥ International marketing planning has same concerns, except that major interest is with
international marketing variables.
♥ Procedure for marketing planning is the same as for any other type of planning.
♥ Marketing planning is concerned with the specification of the existing situation and future
trends and, on this basis, with the development of a set of alternatives for action.
Theories*of*international*trade*and*the*multinational*organisation*
Comparative&advantage&theory&
♥ A theory that states that a country can gain from engaging in trade even if it has an
absolute advantage or disadvantage.
♥ Absolute advantage is the situation in which one region can produce goods with lower
unit labour requirements than any other region and so is only able to export those goods.
♥ Comparative advantage is the situation where one nation has a lower opportunity cost of
producing a good than do other countries; trade between two countries can, therefore,
benefit both countries if each exports the goods in which it has a comparative advantage.
♥ Commodity terms of trade: export commodity price divided by the price of imports
♥ Principles of international trade (general statements concerning the effects of trade
between nations):
o Principle 1: countries benefit from international trade
o Principle 2: international trade increases worldwide production through
specialisation
o Principle 3: exchange rates are determined primarily by traded goods.
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♥ Factor endowment theory: the theory based on the notion that nations possess different
amounts of land, labour and capital (i.e. factors of production) that determine a nation’s
comparative advantage; the countries are hypothesised to export products in which they
have an advantage in factor(s) of production and import products in which they have
disadvantages in factors of production. Products that require inputs that are locally plentiful
will be cheaper to produce than those that require inputs that are locally scarce.
International&product&cycle&theory&
♥ International product cycle theory: this is a theory developed to explain a realistic, dynamic
change in international competition over time and place
♥ Economies of scale: the notion that as an organisation’s size increases and it takes
advantage of mass production and mass marketing, the long-term average unit cost of its
products decreases
♥ Economies of scope: the benefits gained from an increase in the efficiencies of
marketing and distribution
♥ Technological gap: the difference in technological capacities between competitors
because of innovation
♥ Preference similarity: the similarity in product preference and choice that may exist
across nations and regions.
♥ International product cycle theory suggests that new products are developed primarily to
address the needs of the local consumers, only to be demanded by foreign consumers
who have similar needs and purchasing power. As the new products and their
manufacturing processes become widely disseminated over time, the products eventually
become mass-produced standard products around the world.
♥ Knowledge of comparative advantage theory helps an organisation identify where strong
low-cost competitors tend to appear and how the organisation should plan in its production
locations.
♥ The international product cycle argument holds true as long as it can be assumed that
innovator organisations are not informed about conditions in foreign markets, whether in
industrialised countries or in the developing world.
♥ As an explanation of international business behaviour, international product cycle theory
has limited power.
Internalisation/transaction&cost&theory&
♥ This is a theory that focuses on the internal costs of economic exchanges within a
multinational company (MNC)
♥ The organisation’s expertise can be channelled through three routes to gain competitive
advantage: appropriability regime, dominant design and manufacturing/marketing ability
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o Appropriability regime refers to aspects of the commercial environment that
govern an organisation’s ability to retain its technological advantage.
o Dominant design is a narrow class of product designs that begins to emerge as a
‘standard’ design and obtains the dominant status within the market. It has an
absolute competitive advantage over its competition.
o Manufacturing and marketing ability: an organisation’s capacities, experience and
expertise in manufacture and marketing – this is required in almost all cases for
successful commercialisation of a product innovation.
♥ These three sources of competitive advantage are not independent of each other.
Economic'and'Financial'Environment*Overview*
♥ There are major changes underway that affect the marketer
o Greater economic and financial interdependence than even before – at no other
time in history have countries been more economically and financially independent
o Emergence and increased access to global markets
o Breaking down of trade barriers
o Slump in the US and European economies since 2001 have increased awareness
of global economy’s vulnerability.
o An organisation that is operating in only the Australian and New Zealand market,
for example, is not immune to the influence of economic and financial activities
outside these markets
o Organisations operating in an international business environment need to have a
thorough understanding of these interdependencies, especially the functions and
effects of multilateral and bilateral agreements on their business
Intertwined*World*Economy*
♥ Increasing interdependence between the economies of countries – there is no doubt that
the global economy is becoming more intertwined as countries are becoming more
interdependent
♥ Shift in traditional partners
o China playing an increasing role in cross border trade for many countries
o China’s relative importance to Australia, for example, is indisputable. It is already
Australia’s third largest trading partner (behind the United States and Japan)
♥ India is also becoming an increasingly attractive market
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o Its knowledge economy and knowledge society have emerged as major global
forces, particularly in information and communication technology, based on its
large pool of scientific infrastructure and creative power in terms of human
resources and research facilities.
Australia’s*main*export*and*import*destinations*♥ But the European Union (EU) is still Australia’s largest two-way trading partner
(merchandise, services and FDI) .... only just!
Intertwined*world*economy*
There are two types of investments other than trade flows that shape the global economy
1. Foreign Direct Investment: an investment in manufacturing and service facilities in a foreign
country with an intention to engage in managing and controlling them
2. Portfolio Investment: purchases of foreign shares, bond or other securities, in which investors
have no controlling interest in the typically short-term investment
Evolution*of*cooperative*trade*agreements*♥ International Trade Organisation (ITO) established after World War II – it never existed in
reality ♥ The ITO would have been an international organisation operating under the umbrella of
the United Nations (UN) ♥ Brenton Woods Agreement – World Bank, International Monetary Fund, ITO. Third one
came along later. ♥ 1950 – US advised they would not support and the GATT agreement was formed ♥ Because America blocked the ITO, it could not be formed, and so GATT, a more loose
forum, was formed instead o It was a forum, not an organisation, where countries came together to try to come
to an agreement to reduce trade barriers. Meet every so often to figure out ways around trade barriers. 1950s-1955
♥ World Trade Organisation (WTO) o Superseded GATT o Is a member-based organisation o Now has more than 154 member countries o Must operate as an open market, why China was originally refused membership
♥ Deals with the rules of international trade ♥ Oversees flows of trade between nations – mandate to liberate and expand trade as much
as possible ♥ WTO:
o Involves a series of negotiations or ‘rounds’ o At the Doha Round, agriculture and agricultural subsidies were key issues o Dispute settlement mechanism
! The WTO dispute settlement mechanism is a faster, more automatic and therefore much less susceptible to blockages than the old GATT system
! Once a country indicates to the WTO that it has a complaint about the trade practices of another country, an automatic schedule kicks in
