Chap001 Scope and Challenges of International Marketing Modified March14

I n t e r n a t i o n a l M a r k e t i n g

The Scope and Challenge

of International MarketingChapter 1

1 4 t h E d i t i o nP h i l i p R. C a t e o r a

M a r y C. G i l l yJ o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights

reserved.

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Chapter 1: What Should You Learn?

• The scope of the international marketing task• The importance of the self-reference criterion (SRC) in international marketing

• The progression of becoming a global marketer• The increasing importance of global awareness• States of international marketing involvement• Global Marketing• Strategic orientation of international marketing

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved. Adapted by Hoa Pham

Discussion• What is Marketing? What is International Marketing?

• What are the most important and fundamental thing in Marketing?

• Why doing business outside the firm’s country?

• What are the major advantages and disadvantages of international marketing?

• Multinational Company vs. Global Company?• Self-Reference Criterion vs. Ethnocentrism? • Global Awareness

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COMPETITIVE ADVANTAGE, GLOBALIZATION & GLOBAL INDUSTRIES

• Focus– Concentration and attention on core business and competence

“Nestle is focused: We are food and beverages. We are not running bicycle shops. Even in food we are not in all

fields. There are certain areas we do not touch…We have no soft drinks because I have said we will either buy Coca-Cola or we leave it alone. This is focus.”

~Helmut Maucher, former chairman of Nestlé SA~

1.What is Marketing?– The American Marketing Association:

“Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders”.

– Essentially: ► Marketing deals with identifying and meeting human and

social needs. It is essentially about “meeting needs profitably.”

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Marketing – basic model

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Target Target CustomersCustomers

CompanyCompany CompetitorsCompetitors

Need PhysicalEmotional

CompetitionQualityPrice

CapabilityProductPricePlacePromotion

ValueValue

What is Marketing Management?

Marketing management is theart and science

of choosing target markets and getting, keeping, and growing

customers throughcreating, delivering, and communicating

superior customer value.

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Marketing Management Tasks

• Develop market strategies and plans• Capture marketing insights• Connect with customers• Build strong brands• Shape market offerings• Deliver value• Communicate value• Create long-term growth

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• Create value for customers by improving benefits or reducing price– Improve the product– Find new distribution channels– Create better communications– Cut monetary and non-monetary costs and prices

– See the video “The $2 daily P&G China– Toyota, Nissan make significant gains in the American market in 1980s by creating superior value propostition

– Higher quality and lower prices than those make by GM, Ford… Value=Benefits/

Price

So What Marketing is all about?

GLOBAL MARKETING: What It Is & What It Isn’t

Single Country Marketing Strategy

• Target Market Strategy

• Marketing Mix – Product– Price– Promotion– Place

Global Marketing Strategy

• Global Market Participation• Marketing Mix Development

– 4 P’s: Adapt or Standardize?

• Concentration of Marketing Activities

• Coordination of Marketing Activities

• Integration of Competitive Moves

STANDARDIZATION vs. ADAPTATION

• Globalization (Standardization)– Developing standardized products marketed worldwide with a standardized marketing mix

– Essence of mass marketing

• Global localization (Adaptation)– Mixing standardization and customization in a way that minimizes costs while maximizing satisfaction

– Essence of segmentation– Think globally, act locally


► Adaptation of the marketing mix to these environmental factors, determines the successful outcome of MNCs’ marketing

• But how?– Must interpret effectively the influence and impact of each of the uncontrollable element

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2.International Marketing• Performance of business activities designed to – Plan– Price – Promote, and – Direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit

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The International Marketing Task

Exhibit 1.3

Controllable factorso Corporate resources, structures,

and core competencies that can limit or promote strategic choices

o 4Ps, channels-of-distribution, research activities to capitalize on anticipated demand

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Aspect of foreign environment (uncontrollable)o Economic forceso Political and legal forceso Cultural forceso Competitive forceso Level of technologyo Structure of distributiono Geography and infrastructure So how these uncontrollable

factors impact on MNCs’ marketing strategy?


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The Faces of Coca-Cola Around the World

Arabic Read right to left

Chinese “delicious/happiness”


McDonald’s Global Marketing

Case 1-1 Starbucks – Going Global Fast

1. Identify the controllable and uncontrollable elements that Starbucks has encountered in entering global markets

2. What are the major sources of risk facing the company and discuss potential solutions

3. Critique Starbucks’ overall corporate strategy

4. How might Starbucks improve profitability in Japan?

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3.SRC and Ethnocentrism• SRC is an unconscious reference to

– One’s own cultural values, experiences, and knowledge as a basis for decisions

• Dangers of the SRC– Failing to recognize the need to take action– Discounting the cultural differences that exist among countries

– Reacting to a situation in an offensive to your hosts

• Ethnocentrism– Notion that one’s own culture or company knows best

– Problem with US company, dominance world economy during the late 1990s

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• Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market

• The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior

SRC and Ethnocentrism

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Environmental Adaptation• Ability to effectively interpret the influence and impact of the culture in which you hope to do business– Cultural adjustments

• Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

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The Self-Reference Criterion and Ethnocentrism

• The key to successful international marketing is adaptation to the environmental differences from one market to another

• Primary obstacles to success in international marketing– SRC– Associated ethnocentrism– E.g., Pepsi Cola changed in name to Lehar Pepsi to gain as much political and cultural support as possible

The Faces of Coca-Cola Around the World

Arabic Read right to left

Chinese “delicious/happiness”


McDonald’s Global Marketing

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Standardized vs. Localized• Standardized its process,

logo, most of its advertising and store décor and layouts whenever and wherever as possible

• Standardized Big Mac but localized McAloo Tikka potato burger (India), and vetergian menu

• Advertising slogan “I’m lovin’it”, but “Hawaii surfing hula” promotion in Japan

• Prices: $5.79 in Norway or $3.54 in the U.S but $1.85 in China

Global Market Orientation

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Framework for Cross-cultural

Analysis1. Define business problem or goal

• Home-country vs. foreign-country cultural traits, habits, or norms

• Consultation with natives of the target country

2. Make no value judgments3. Isolate the SRC influence

• Examine it carefully to see how it complicates the problem

4. Redefine the problem • Without SRC influence • Solve for the optimum business goal situation

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Developing a Global Awareness

• Tolerance of cultural differences:– Understanding cultural differences and accepting and working with others whose behavior may be different from yours

• Knowledge of cultures, history, world market potential, and global economic, social, and political trends

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Approaches to Global Awareness

• Select individual managers specifically for their demonstrated global awareness

• Develop personal relationships in other countries

• Have a culturally diverse senior executive staff or board of directors

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4. Stages of International Marketing Involvement

• No direct foreign marketing• Infrequent foreign marketing• Regular foreign marketing• International marketing• Global marketing

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No Direct Foreign Marketing

• Products reach foreign markets indirectly– Trading companies– Foreign customers who contact firm– Wholesalers– Distributors– Web sites

• Foreign orders pique a company’s interest to seek additional international sales

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Infrequent Foreign Marketing

• Caused by temporary surpluses– Variations in production levels– Increases in demand

• Firm has little or no intention of maintaining continuous market representation– Foreign sales decline when demand or surplus decreases

– May withdraw from international markets• Little or no change in company organization or product lines

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Regular Foreign Marketing• Firm has production capacity devoted to foreign markets

• Firm employs domestic or foreign intermediaries– Uses its own sales force– Sales subsidiaries in important markets

• Products allocated or adapted to foreign markets as demand grows

• Firm depends on profits from foreign markets

International Marketing• Companies are fully committed to and involved in international marketing activities

• Seeking markets all over the world• Planning entails not only the marketing but also the production of goods outside the home market.

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Global Marketing• Company treats world, including home market as one market

• Market segmentation decisions no longer focused on national borders– Defined by income levels, usage patterns, or other factors

• More than half of revenues come from abroad

• Organization takes on global perspective

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4.Strategic Management Orientation

• Domestic market extension orientation

• Multidomestic market orientation• Global market orientation

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Domestic Market Orientation

• International operations viewed as secondary

• Prime motive is to market excess domestic production

• Firm’s orientation remains basically domestic

• Minimal efforts are made to adapt product or marketing mix to foreign markets

• Firms with this approach are classified as ethnocentric

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• Ethnocentric Orientation

– Home country is superior to others

– Sees only similarities in other countries

– Assumes products and practices that succeed at home will be successful everywhere

– Leads to a standardized or extension approach

Domestic Market Orientation

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Examples of Domestic Orientation

• Nissan’s earliest exports were cars and trucks that designed for Japan – vehicles were difficult to start in many parts of the U.S during the winter months.

• “We tried for a long time to design cars in Japan and shove them down the American consumer’s throat. That did not work very well…”

• Cell phone divisions of Toshiba, Sharp focused domestic market. Later realized that Nokia, Motorola and Samsung already dominated key world markets – CEO of Toshiba “We were thinking only about Japan, we really missed out chance…”

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Multidomestic Market Orientation

• Companies have a strong sense that foreign country markets are vastly different

• Market success requires an almost independent program for each country– Separate marketing strategies – Subsidiaries operate independently of one another in establishing marketing objectives and plans

– Products are adapted for each market• Control is decentralized

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• Country-by-country basic• Advertising campaign are localizedo Unilever, Rexona brand had 30 different package designs and 48 different formulation

o Nestle, Nescafe, Nestle Gau in Vietnam

o Classified as Polycentric Orientation

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• Polycentric Orientation (Đa tâm)– Each country is unique

– Each subsidiary develops its own unique business and marketing strategies

– Often referred to as multinational

– Leads to a localized or adaptation approach that assumes products must be adapted to local market conditions


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Global Market Orientation• Company guided by global marketing orientation– Marketing activity is global– Market coverage is the world

• Firm develops a standardized marketing mix applicable across national boundaries– Markets are still segmented– Each country or region is considered side by side with a variety of other segmentation variables

– Fits the regiocentric or geocentric classifications

– E.g., P&G pursue global strategy for disposal diapers but a multi domestic strategy in Asia market for detergent

– http://money.cnn.com/video/news/2012/01/25/n_davos_coca_cola_growth.cnnmoney/

http://money.cnn.com/video/news/2012/01/25/n_davos_coca_cola_growth.cnnmoney/

• Regiocentric Orientation (Trung tâm)

– A region is the relevant geographic unit► Ex: The NAFTA or European Union market

– Some companies serve markets throughout the world but on a regional basis► Ex: General Motors had four regions for decades

European Union


• Geocentric Orientation– Entire world is a potential market– Strives for integrated global strategies– Also known as a global or transnational company– Retains an association with the headquarters country

– Pursues serving world markets from a single country or sources globally to focus on select country markets

– Leads to a combination of extension and adaptation elements


Example - The Case of General Motors (GM)

• GM’s Global Brand Hierarchy• Global brand• International brand• Local brand

Global

International

Local

Europe, M iddle East, Asia

North Am erica, M iddle East, Europe North Am erica, Asia

North Am erica North Am erica

United Kingdom Australia Korea

GlobalGlobal

StandardisationCentralisation

TransnationalTransnational

ExportInternational

M ultidomesticMultinationalAdaptationAutonomy

H igh

Low

Low H igh

Pressures of local responsiveness

Pressu

res of globa

l integ

ration

Type of MNC Export, Multidomestic, Global, TransnationalIndustry Environment International, Multinational, Global, TransnationalMarketing Strategy Standardisation, AdaptationMarketing Structure Centralisation, Autonomy

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At Global Corporate Level Perspective GI-LR Framework

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Discussion questions• Discuss the phases of international

marketing involvement. • Discuss the conditions that have led

to the development of global markets. • Differentiate between a global

company and a multinational company.• Differentiate among the three

international marketing concepts. • Discuss the three factors necessary

to achieve global awareness.

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Summary• The internationalization of American business is proceeding with increasing pace

• The globalization of markets and competition necessitates all managers to pay attention to the global environment

• International marketing is defined as the performance of business activities across national borders

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• Environmental differences must be taken into account if firms are to market products and services at a profit in other countries– Laws– Customs– Cultures

• Self-reference criteria and ethnocentrism limit international marketer’s abilities to understand and adapt to differences prevalent in foreign markets

Summary

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Summary• Solutions to SLC and ethnocentrism

– Global awareness– Sensitivity

• Strategic orientations found among managers of international marketing operations– Domestic market extension orientation– Multidomestic market orientation– Global market orientation

The Value Chain (Porter)

Standardization vs. Adaptation debate

Standardization Customization Contingency

Trends Homogenous market need: information, communication, transportation, technology developmentEconomies to scale, scope, learning curve

Different needs in different countries due to culture, language, economic development level, political, legal, customer value and life styles.Better satisfy local need. Source of differentiation

S and C are two extreme of one continuum. S and C is very situation-specific issue.Company has to position itself in the continuum.

Marketing aspects

Global group of customer: global citizen, global language (English), global market (Triad)Standardization of marketing program is essential to compete in global market (high quality product at a competitive price)

Marketing program is largely a local issue and the best course of action for a product ought to differ from market to market

depends on internal and external factors: target market, market position, nature of product, environment, and organization factors.

Industry Globalizat

ion

Market Drivers

Cost Drivers Government Drivers

Globalization Drivers(Total Global Strategy II, Goege Yip)

Market Drivers• Homogeneous needs• Global customers• Global Language• Global Culture• Global Currency• Global Channels• Transferable marketing

Costs Drivers

• Economies of scale and scope• Learning and experience• Sourcing efficiencies• Favorable logistics• Differences in country costs and skills

• Product development costs

Government Drivers

• Favorable trade policy• Compatible technical standards• Common marketing regulations

Competitive Drivers

• Interdependence of countries• Competitors globalized or might globalize

The concept of Inter Linked Economy (ILE) - Kenichi Ohmae• Global business has become more and more important and vital for nations, industries, and firms. Nation can no longer close it door and applies protectionism. Nations and citizens around the world are more interlinked than ever before, giving greater opportunity to a borderless world.

• Trends leading to borderless world: global citizen, global language (English), global products, and global competitors.

• ILE – Interlinked economy of the Triad, which consists three major players in global marketplace, i.e. US, Europe, and Japan (now expand to be Latin American, Europe, and Asia). Interdependencies of economy create opportunities and basic security.

• The policy objective for ILE will be ensuring the free flow of information, money, and services, as well as the free migration of people and corporations.

• ILE has become so powerful and has made the national borders almost invisible (borderless world). Participation in the ILE is the key to prosperity for traditional isolationist nations.

The concept of Inter Linked Economy (ILE) - Kenichi Ohmae

• What are the basic goals of marketing? Are these goals relevant to global marketing?

• What is meant by “global localization?” Is Coca-Cola a global product? Explain

Discussion Questions

• Q1. Identify the key elements in McDonald’s global marketing strategy. In particular, how does McDonald’s approach the issue of standardization?

• Q2. Do you think government officials in developing countries such as Russia, China and India welcome McDonald’s. Do consumers in these countries welcome McDonald’s? Why or why not?

• Q3. Is it realistic to expect that McDonald’s – or any well-known company – can expand globally without occasionally making mistakes or generating controversy? Why do anti-globalization protesters around the world frequent target McDonald’s?

Case DiscussionMcDonald’s Expand Globally While Adjusting Its Local

Recipe

• Read Chapter 4 and 5 Cultural Dynamic Management Style

• Be prepared for case study Samsung class discussion in replacement for Quiz 1

Looking Ahead

Chap001 Scope and Challenges of International Marketing Modified March14

Documents

Transcript of Chap001 Scope and Challenges of International Marketing Modified March14