Overview

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 2

Theoretical Paradigms,Issues, and Debates

Masaaki Kotabe and Kristiaan Helsen

Marketing is essentially a creative corporateactivity involving the planning and executionof the conception, pricing, promotion, anddistribution of ideas, products, and servicesin an exchange that not only satisfies cus-tomers’ current needs but also anticipates andcreates their future needs at a profit.1

Marketing is not only much broader thanselling; it also encompasses the entire com-pany’s market orientation toward customersatisfaction in a competitive environment. Inother words, marketing strategy requiresclose attention to both customers and com-petitors. Quite often marketers have focusedexcessively on satisfying customer needswhile ignoring competitors. In the process,competitors have outmaneuvered them in themarketplace with better, less-expensive prod-ucts. The same logic applies to research ininternational marketing. Research focus onboth customers and competitors is equallyimportant.

Companies generally develop different mar-keting strategies depending on the degree ofexperience and the nature of operations in inter-national markets. Companies tend to evolveover time, accumulating international businessexperience and learning the advantages and

disadvantages associated with complexitiesof manufacturing and marketing around theworld. As a result, many researchers haveadopted an evolutionary perspective on inter-nationalization of the company just like theevolution of species over time. In the follow-ing pages we will formally define andexplain five stages that characterize the evo-lution of international marketing. Of course,not all companies go through the completeevolution from a purely domestic marketingstage to a purely global marketing stage. Anactual evolution depends also on the eco-nomic, cultural, political, and legal environ-ments of various national markets in whichthe company operates, as well as on thenature of the company’s offerings. A keypoint here is that many companies are con-stantly under competitive pressure to moveforward both reactively (responding to thechanges in the market and competitive envi-ronments) and proactively (anticipating thechange).

Marketing products and services aroundthe world, transcending national and politicalboundaries, is a fascinating phenomenon. Thephenomenon, however, is not entirely new.Products have been traded across borders

1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 3

throughout recorded civilization, extendingback beyond the Silk Road that once con-nected East with West from Xian to Rome onland and the recently excavated sea-traderoute between the Roman Empire and Indiathat existed 2,000 years ago. However, sincethe end of World War II, the world economyhas experienced a spectacular growth ratenever witnessed before in human history,largely led by big US companies in the 1950sand 1960s, then by European and Japanesecompanies in the 1970s and 1980s, and mostrecently joined by new emerging marketfirms, such as Lenovo, Mittal Steel, andCemex. In particular, competition comingrecently from the so-called BRIC countries2

has given the notion of global competition atouch of extra urgency and significance.

On a political map, country borders are asclear as ever. But on a competitive map,financial, trading, and industrial activitiesacross national boundaries have renderedthose political borders increasingly irrele-vant. Of all the forces chipping away at thoseboundaries, perhaps the most important arethe emergence of regional trading blocs (e.g.,NAFTA, the European Union), technologydevelopments (particularly in the IT area)and the flow of information. Today peoplecan see for themselves what tastes and pref-erences are like in other countries. Forinstance, people in India watching CNN andStar TV now know instantaneously what ishappening in the rest of the world. A farmerin a remote village in Rajasthan in Indiamight ask the local vendor for Surf (thedetergent manufactured by Unilever) becausehe has seen a commercial on TV. More than10 million Japanese traveling abroad everyyear are exposed to larger-size homes andmuch lower consumer prices abroad. Suchinformation access creates demand thatwould not have existed before.

The availability and explosion of informa-tion technology such as telecommunicationshas forever changed the nature of globalcompetition. Geographical boundaries anddistance have become less of a constraint indesigning strategies for the global market.

The other side of the coin is that not onlyfirms that compete internationally, but alsothose whose primary market is home-based,will be significantly affected by competitionfrom around the world.

We often hear terms such as global mar-kets, global competition, global technology,and global competitiveness. In the past, weheard similar words with ‘international’ or‘multinational’ instead of global attached tothem. What has happened since the 1980s?Are these terms just fashionable concepts ofthe time without some deep meanings? Orhas something inherently changed in oursociety?

EVOLUTION OF MARKETING ACROSSNATIONAL BOUNDARIES

There are five identifiable stages in the evo-lution of marketing across national bound-aries. Therefore, knowing the dynamics ofthe evolutionary development of interna-tional marketing involvement is importantfor two reasons. First, it helps in the under-standing of how companies learn and acquireinternational experience and how they use itfor gaining competitive advantage over time.This may help an executive to be better pre-pared for the likely change needed in thecompany’s marketing strategy. Second, withthis knowledge, a company may be able tocompete more effectively by predicting itscompetitors’ likely marketing strategy inadvance.

Domestic marketing

The first stage is domestic marketing. Beforeentry into international markets, many compa-nies focus solely on their domestic market.Their marketing strategy is developed based oninformation about domestic customer needsand wants, industry trends, economic, techno-logical, and political environments at home.When those companies consider competition,

4 CHAPTER 1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 4

they essentially look at domestic competi-tion. Today, it is highly conceivable that com-petition in a company’s home market is madeup of both domestic competitors and foreigncompetitors marketing their products in thehome market.

Domestic marketers tend to be ethnocen-tric and pay little attention to changes takingplace in the global marketplace, such aschanging lifestyles and market segments,emerging competition, and better productsthat have yet to arrive in their domesticmarket. Ethnocentrism is defined here as apredisposition of a firm to be predominantlyconcerned with its worldwide viability andlegitimacy only in its home country – that is,where all strategic actions of a company aretailored to domestic responses under similarsituations. As a result, they may be vulnera-ble to the sudden changes forced on them byforeign competition. US automobile and consumer electronics manufacturers sufferedfrom this ethnocentrism in the 1960s and 1970s as a result of their neglect ofimminent competition from Japanese low-costmanufacturers.

Export marketing

The second stage is export marketing.Usually, initial export marketing begins withunsolicited orders from foreign customers.When a company receives an order fromabroad, it may reluctantly fill it initially, butit gradually learns the benefit of marketingoverseas. In general, in the early stage ofexport marketing involvement, the interna-tionalization process is a consequence ofincremental adjustments to the changingconditions of the company and its environ-ment, rather than a result of its deliberatestrategy. Such a pattern is due to the conse-quence of greater uncertainty in internationalbusiness, higher costs of information, and thelack of technical knowledge about interna-tional marketing activities. At this earlyexport marketing stage, exporters tend toengage in indirect exporting by relying on

export management companies or tradingcompanies to handle their export business.

Some companies progress to a moreinvolved stage of internationalization bydirect exporting, once three internal condi-tions are satisfied. First, the management ofthe company develops favorable expectationsof the attractiveness of exporting based on itsearlier experience. Second, the company hasaccess to key resources necessary for under-taking additional export-related tasks. Suchavailability of physical, financial, and mana-gerial resources is closely associated withfirm size. Particularly, small companies mayhave few trained managers and little time forlong-term planning as they are preoccupiedwith day-to-day operational problems, andconsequently find it difficult to becomeinvolved in exporting. Third, management iswilling to commit adequate resources toexport activities. The company’s long-termcommitment to export marketing depends onhow successful management is in overcom-ing various barriers encountered in interna-tional marketing activities. An experiencedexport marketer has to deal with difficultiesin maintaining and expanding export involve-ment. These difficulties include import/exportrestrictions, cost and availability of shipping,exchange rate fluctuations, collection ofmoney, and development of distributionchannels, among others. Overall, favorableexperience appears to be a key component ingetting companies involved in managingexports directly without relying on special-ized outside export handlers. To a largedegree an appropriate measure of favorable-ness for many companies consists of profits.An increase in profits due to a certain activ-ity is likely to increase the company’s inter-est in such activity.

External pressures also encourage compa-nies into export marketing activities.Saturated domestic markets may make it difficult for a company to maintain salesvolume in an increasingly competitivedomestic market; it will become much moreserious when foreign competitors begin mar-keting products in the domestic market.

THEORETICAL PARADIGMS, ISSUES AND DEBATES 5

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 5

Export marketers begin paying attention totechnological and other changes in the globalmarketplace that domestic marketers tend toignore. However, export marketers still tend totake an ethnocentric approach to foreign mar-kets as being an extension of their domesticmarket and export products developed prima-rily for home country customers with limitedadaptation to foreign customers’ needs.

International marketing

Once export marketing becomes an integralpart of the company’s marketing activity, itwill begin to seek new directions for growthand expansion. This stage is called interna-tional marketing. A unique feature of interna-tional marketing is its polycentric orientationwith emphasis on product and promotionaladaptation in foreign markets, whenever necessary. Polycentric orientation refers to apredisposition of a firm to the existence ofsignificant local cultural differences acrossmarkets, necessitating the operation in eachcountry being viewed independently (i.e., allstrategic decisions are thus tailored to suit thecultures of the concerned country). As thecompany’s market share in a number ofcountries reaches a certain point, it becomesimportant for the company to defend its posi-tion through local competition. Because oflocal competitors’ proximity to, and familiar-ity with, local customers, they tend to have aninherent ‘insider’ advantage over foreign com-petition. To strengthen its competitive posi-tion, the international marketer could adapt itsstrategy, if necessary, to meet the needs andwants of local customers in two alternativeways. First, the company may allocate a cer-tain portion of its manufacturing capacity toits export business. Second, because of trans-portation costs, tariffs, and other regulations,and availability of human and capitalresources in the foreign markets, the companymay even begin manufacturing locally.

If international marketing is taken to theextreme, a company may establish an inde-pendent foreign subsidiary in each and every

foreign market and have each of the sub-sidiaries operate independently of each otherwithout any measurable headquarters con-trol. This special case of international mar-keting is known as multidomestic marketing.Product development, manufacturing, andmarketing are all executed by each sub-sidiary for its own local market. As a result,different product lines, product positioning,and pricing may be observed across thosesubsidiaries. Few economies of scale benefitscan be obtained. However, multidomesticmarketing is useful when customer needs areso different across different national marketsthat no common product or promotionalstrategy can be developed.

Multinational marketing

In this stage the company markets its prod-ucts in many countries around the world.Management of the company comes to real-ize the benefit of economies of scale in product development, manufacturing, andmarketing by consolidating some of its activ-ities on a regional basis. This regiocentricapproach suggests that product planning maybe standardized within a region (e.g., a groupof contiguous and similar countries), such asWestern Europe, but not across regions.Products may be manufactured regionally aswell. Similarly, advertising, promotional, anddistribution costs may also be shared by sub-sidiaries in the region. In order for the com-pany to develop its regional image in themarketplace, it may develop and acquire newregional brands to increase up its regionaloperations. Even when having difficultyoccupying a market, a firm may think out ofthe box regarding an alliance or a partnershipthat can lead it into the market.

Global marketing

The international (country-by-country) ormultinational (region-by-region) orientation,while enabling the consolidation of operations

6 CHAPTER 1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 6

within countries or regions, tends to result inmarket fragmentation worldwide, nonethe-less. Operational fragmentation leads tohigher costs. As many Japanese companiesentered the world markets as low-cost manu-facturers of reliable products in the 1970s,well-established US and European multina-tional companies were made acutely awareof the vulnerability of being high-cost manu-facturers. Levitt (1983), an ardent globaliza-tion proponent, argues:

Gone are accustomed differences in national orregional preference. Gone are the days when acompany could sell last year’s models – or lesserversions of advanced products – in the less developedworld .... The multinational and the global corpo-ration are not the same thing. The multinationalcorporation operates in a number of countries,and adjusts its products and practices in each – athigh relative costs. The global corporation operateswith resolute constancy – at low relative cost – asif the entire world (or major regions of it) were asingle entity; it sells the same things in the sameway everywhere.

Global marketing refers to marketing activitiesby companies that emphasize the following:

1 Standardization efforts – standardizing market-ing programs across different countries particu-larly with respect to product offering,promotional mix, price, and channel structure.Such efforts increase opportunities for the trans-fer of products, brands, and other ideas acrosssubsidiaries and help address the emergence ofglobal customers.

2 Coordination across markets – reducing costinefficiencies and duplication of efforts amongtheir national and regional subsidiaries.

3 Global Integration – participating in many majorworld markets to gain competitive leverage andeffective integration of the firm’s competitivecampaigns across these markets by being able tosubsidize operations in some markets withresources generated in others and responding tocompetitive attacks in one market by counterat-tacking in others (Zou and Cavusgil 2002).

Although Levitt’s view is somewhat extreme,many researchers agree that global marketingdoes not necessarily mean standardization ofproducts, promotion, pricing, and distribu-tion worldwide, but rather it is a company’s

proactive willingness to adopt a global per-spective instead of country-by-country orregion-by-region perspective in developing amarketing strategy. Clearly, not all compa-nies adopt global marketing. Yet, an increas-ing number of companies are proactivelytrying to find commonalities in their market-ing strategy among national subsidiaries.

Although this evolutionary perspectiveholds true, it by no means suggests that allcompanies develop their marketing strategiesalong a unidirectional evolutionary trajec-tory. As the reader can see below, marketingstrategies reflect the climate of the time aswell as executives’ belief systems. In thisbook, the term international marketing,unless otherwise specified, will refer to mar-keting across national boundaries, whetherthe firm’s orientation is multidomestic orglobal.

THE CLIMATE OF THE TIME

International marketing has undergone fun-damental changes in the last two decades.Global political and economic liberalizationtrends and the explosive growth of informa-tion technology have created tremendousbusiness opportunities and challenges forinternational marketers. The opening up ofnew markets in Eastern Europe and a ten-dency toward economic liberalization in theemerging markets around the world havespawned new business opportunities. In par-ticular, China and India, two leading emerg-ing economic powers, stand out in the crowdwith an annual growth rate of 7–10 per centand 4–7 per cent, respectively, since thedawn of the twenty-first century. Similarly,the emergence of regional trading blocs inthe form of the EU (European Union), theNAFTA (North American Free TradeAgreement), and MERCOSUR (MercadoComún del Sur) have necessitated reorganiza-tion in the production and marketing strategiesof firms. Advances in information technol-ogy, including obviously the Internet, have

THEORETICAL PARADIGMS, ISSUES AND DEBATES 7

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 7

further added immediacy and permeability tothe effect of these developments. Thechanges in strategy include serving differentmarkets from one production source or theshifting of production facilities for greaterefficiency.

At the same time, the Asian financial crisisin the latter half of the 1990s also provided asignificant reality check on the wisdom ofglobally integrated strategy development.Wildly fluctuating exchange rates make itdifficult for multinational companies tomanage globally integrated but geographi-cally scattered activities. Indeed, many com-panies are scurrying to speed steps towardmaking their procurement, manufacturing,and marketing operations in Asian countriesmore local. Japanese companies seem to beone step ahead of US and European competi-tors in this localization strategy. Since theyen’s sharp appreciation in the mid-1980s,Japanese manufacturers have moved to buildan international production system less vul-nerable to currency fluctuations by investingin local procurement and local marketing(Kotabe 2002).

TWO COUNTERACTING FORCES AT WORK

Over the years, two fundamental counteract-ing forces have shaped the nature of market-ing in the international arena. The samecounteracting forces have been revisited bymany authors in such terms as ‘standardiza-tion vs. adaptation’ (1970s), 'globalization vs.localization’ (1980s), ‘global integration vs.local responsiveness’ (1990s and beyond).

During the 1960s and 1970s, being awareof economic and cultural diversities aroundthe world, marketers in general believed thatadapting marketing activities to local marketswas of utmost importance. In the 1980s and1990s, however, being swayed by the seem-ingly converging and intertwined marketeconomies around the world, marketers gave a high priority to developing globallyintegrated marketing strategy in pursuit of

economic efficiency. Most recently, we havecome a full circle to realize that it is not aneither/or issue (e.g., Ghemawat, 2007). Termsmay have changed, but the quintessence of thestrategic dilemma that multinational compa-nies face today has not changed and will prob-ably remain unchanged for years to come.

Markets are neither as homogeneous noras dominated by the traditional Triad Powersof the world – the United States, WesternEurope, and Japan – as believed in the1980s–1990s. The dawn of this new centuryhas already shown that emerging economiesare increasingly important drivers of globaleconomic development. As a result, forward-looking, proactive firms seriously have topossess the willingness and develop the abil-ity to pursue the benefit of operational integration for economic efficiency and sen-sitivity to local markets simultaneously.

RESEARCH IN INTERNATIONALMARKETING

In a way, the climate of the time is reflectedin the research streams in international mar-keting. The market trends mentioned earlierhave imparted added importance to researchin international marketing. Past reviews ofinternational marketing research (Douglasand Craig 1992; Aulakh and Kotabe 1993;Pieters et al. 1999; Kotabe, 2003) high-lighted deficiencies of the discipline in two aspects – that international marketingresearch was fragmentary and exploratorywithout a strong theoretical framework, andthat it lacked the methodological rigor com-pared to most other areas of academic mar-keting research. One symptom of the latterphenomenon is the fairly small number ofpublications of international marketingrelated research in two of marketing’s mostprestigious journals: the Journal of Marketingand the Journal of Marketing Research (see Table 1.1). While the first deficiency ininternational marketing research was attrib-uted to the opportunistic nature (Albaum andPeterson 1984) and lack of synthesis

8 CHAPTER 1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 8

(Bradley 1987) of international marketingresearch, the latter was attributed to theinherent difficulties encountered in researchinvolving more than one country (Aulakhand Kotabe 1993). Difficulties stemmedfrom financial constraints in data collection,problems of data comparability in cross-cul-tural research and the implementation ofmethodological techniques in foreign mar-kets. There have been various attempts toaddress the problems encountered in interna-tional marketing research (e.g., Craig andDouglas 2000).

Our objective is to organize and highlightthe development of various research streamsin international marketing. This handbook,consisting of 26 chapters written by authori-ties in their respective areas, promises tomake a mark in the state-of-the-art develop-ment of the research streams in internationalmarketing.

First, this handbook provides a fairlybroad timeframe for the reader to probe anysignificant changes in the field, both in termsof the substance of research and methodolo-gies used. Second, it helps the reader see towhat extent these two fundamental concernsraised in the 1980s have been addressed.Third, it addresses new and/or neglected areasof research that will gain in importance.

An overview

The micro-context of research in interna-tional marketing constitutes the bulk ofresearch conducted in the field. Althoughthere is no single best way to arrange varioustopics, they are arranged as follows. Section1 surveys research in key market environ-mental factors that affect international mar-keting strategy; namely, globalization issues,political and institutional environment, andlegal environment. Section 2 examinesresearch in consumer behavior as it repre-sents the initial interfaces between firms andcustomers. In particular, the effect of countryof origin in consumer behavior has receiveda significant amount of research attentionover the years. Section 3 details research invarious modes of entry and exit strategiesand their performance implications.

Section 4 addresses various issues relatedto global competitive strategy, encompassingresearch issues related to competitive strategy, marketing standardization, andglobal sourcing. These chapters provide the-oretical, managerial, and empirical insightsinto the workings of global marketing strat-egy. Marketing strategy is a subset of com-petitive strategy. As such, the literature oncompetitive strategy has had a profound

THEORETICAL PARADIGMS, ISSUES AND DEBATES 9

Table 1.1 Number of articles labeled as ‘International Marketing’ in the Journal ofMarketing and the Journal of Marketing Research*

Number of articles in Number of Articles in Year Journal of Marketing Year Journal of Marketing Research1991–95 14 (230) 1992–96 01996 0 (77) 1997 01997 3 (72) 1998 01998 3 (89) 1999 11999 5 (137) 2000 12000 1 (78) 2001 12001 3 (81) 2002 12002 1 (90) 2003 02003 1 (91) 2004 02004 1 (119) 2005 02005 0 (140) 2006 02006 2 (126) 2007 02007 2 (147)

*As classified in each volume’s final issue; the number between parentheses is the total number of articles classified (somearticles have multiple classifications).

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 9

impact on the development of global marketingliterature.

With these issues in the background,Section 5 focuses on the development ofglobal marketing strategy, covering productdevelopment and diffusion, global branding,pricing, communication, distribution, retail-ing, and sales management. Section 6 focuseson emerging issues including the role andeffect of the Internet, marketing strategies foremerging markets, small multinational enter-prises, and marketing ethics.

CLOSING REMARKS

International marketing as an academic disci-pline has come a long way. The compilationof research work represented in this hand-book was a daunting task as chapter authorsas well as reviewers are all world-classresearchers and are busy people. They werekind enough to allocate a good amount oftheir precious time in developing thesethoughtful and insightful chapters. Thishandbook is comprehensive. Researchers,including those pursuing research careers ininternational marketing, will find it useful toconsult with this handbook as the first step tounderstanding the nature and scope ofresearch in the various areas of research thatcollectively constitute the discipline. We sin-cerely hope that this handbook will helpjunior researchers to develop the disciplinefurther and even influence the direction ofresearch in related disciplines such as man-agement and strategy. As stated earlier, inter-national marketing researchers complementmanagement and strategy researchers in sub-jecting supply-side theories to demand-sideconsiderations.

NOTES

1 This definition is modified from the AmericanMarketing Association’s definition of marketing, andis strongly influenced by Drucker’s conception of two

entrepreneurial functions – marketing and innova-tion – that constitute business. Contemporary think-ing about marketing also suggests the task of themarketer is not only to satisfy the current needs andwants of customers, but also to innovate productsand services, anticipating their future needs andwants. See Peter F. Drucker, The Practice ofManagement (New York: Harper & Brothers, 1954),pp. 37–39; and also Frederick E. Webster, Jr., ‘TheChanging Role of Marketing in the Corporation,’Journal of Marketing, 56 (October 1992), pp. 1–16.

2 Brazil, Russia, India, and China.

REFERENCES

Albaum, G. and Peterson, R. A. (1984)‘Empirical research in international market-ing,’ Journal of International BusinessStudies, 15 (Spring/Summer): 161–173.

Aulakh, P. S. and Kotabe, M. (1993) ‘AnAssessment of theoretical and methodologicaldevelopment in international marketing:1980–1990,’ Journal of InternationalMarketing, 1(2): 5–28.

Bradley, M. F. (1987), ‘Nature and significanceof international marketing: A review’,Journal of Business Research, 15: 205–219.

Craig, C. S. and Douglas, S. P. (2000)International Marketing Research, 2nd edn.,New York: Wiley.

Douglas, S. P. and Craig. C. S. (1992) ‘Advancesin international marketing’, InternationalJournal of Research in Marketing, 9(4):291–318.

Drucker, P. F. (1954) The Practice ofManagement, New York: Harper & Brothers.

Ghemawat, P. (2007) Redefining GlobalStrategy: Crossing Borders in a World WhereDifferences Still Matter, Boston: MA: HarvardBusiness School Press.

Kotabe, M. (2002) ‘To Kill Two Birds with One Stone: Revisiting the Integration-Responsiveness Framework’, in Michael Hitt and Joseph Cheng (eds), ManagingTransnational Firms, New York: Elsevier,59–69.

Kotabe, M. (2003) ‘State-of-the-Art Review of Research in International MarketingManagement’, Chapter 1, in Subhash C. Jain(ed.), Handbook of Research in InternationalMarketing, Northampton, MA: Edward ElgarPublishing, 3–41.

10 CHAPTER 1

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 10

Levitt, T. (1983) ‘The globalization of markets,’Harvard Business Review, 61(3), 92–102.

Pieters, R., Baumgartner, H., Vermunt, J. andBijmolt, T. (1999) ‘Importance and similarityin the evolving citation network of theInternational Journal of Research inMarketing’, International Journal of Researchin Marketing, 16 (June): 113–127.

Webster, F. E., Jr. (1992) ‘The changing role ofmarketing in the corporation’, Journal ofMarketing, 56 (October): 1–16.

Zou, S. and Cavusgil, S. T. (2002) ‘The GMS: A broad conceptualization of global marketing strategy and its effect on firm performance,’ Journal of Marketing, 66(October): 40–56.

THEORETICAL PARADIGMS, ISSUES AND DEBATES 11

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 11

5178-Kotabe-Chap-01 8/7/08 2:43 PM Page 12