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12CMB42
INTERNATIONAL MARKETING
UNIT - I
INTRODUCTION
The modern world is organized on the theory that each nation state is sovereign and independent
from other countries. In reality, however, no country can completely isolate its internal affairs from
external forces. Even the most inward-looking regimes have realized the limitations of their own resources
as well as the benefits of opening up their borders. This major change in the orientation of most regimes
has led to an enormous amount of activity in the international marketplace.
Powerful economic, technological, industrial, political and demographic forces are converging to
build the foundation of a new global economic order on w hich the structure of a world economic and
market system will be built.
Whether or not a company wants to participate directly in international business, it cannot escape the
effect of the ever-increasing number of domestic firms exporting, importing, and/or manufacturing
abroad; the number of foreign-based firms operating in most markets; the growth of regional trade areas;
the rapid growth of world markets; and the increasing number of competitors for global markets.
International marketing is the performance of business activities designed to plan, price, promote,
and direct the flow of a companys goods and services to consumers or users in more than one nation for a
profit. The only difference between the definitions of domestic marketing and international marketing is
that in the latter case, marketing activities take place in more than one country. This apparently minor
difference, in more than one country, accounts for the complexity and diversity found in international
marketing operations. Marketing concepts, processes, and principles are universally applicable, and the
marketers task is the same, whether doing business in Dimebox, Texas, or Dares Salaam, Tanzania.
Businesss goal is to make a profit by promoting, pricing, and distributing products for which there is a
market.
Going International::
Evolution of a Multinational Company
1964
Phil Knight an accountant at Price Waterhouse and college track coach Bill Bowerman put in $500
each to start Blue Ribbon Sports.
1970
Bowerman, inspired by the waffle iron, dreams up new shoe treads, which becomes the best selling
U.S. training shoe.
1971
Blue Ribbon changes its name to Nike and adopts swoosh as its logo, designed by a college student
for $35. She later gets an undisclosed number of stocks.
1973
Steve Perfontaine, the long distance runner, becomes the first major athlete to wear Nike in
competitions.
1980
Nike goes public with 2.4 million shares at $11. After several splits, stock is worth $78 in September
2004.
1985
1987
Nike runs its first advertisement campaign Revolution based on a Beatles song.
1992
Magic Johnson, sponsored by Nike, wins a gold medal. The first Nike town opens.
1994
Nike enters the football by signing top players like Ronaldo from Brazil.
1999
Co-founder Bowerman dies and Knight takes total control under allegation of poor working
conditions in Asian factories producing Nike.
2003
More than half of the sales come from outside the U.S. for the first time. It passes Adidas as number
1 football shoe in Europe.
With revenues over $12 billion (2004), the company has come a long way from its early years when
Phil Knight used to sell sneakers out of his car trunk at tracks. As for advertising Nike spent $8 million in
1986 and $48 in 1987. These days it pays $100 million for one endorsement (e.g. Tiger Woods). It has
developed sophisticated computer systems to develop and market its products in more places in the world
more quickly. It has improved its gross margin from 39.9 percent in 1998 to 42.9 percent in 2004. It makes
only 3 percent of shoes without a firm order from a retailer (30 percent in 1998).
Today, like any other Multinational Company Nike is not just one product/ brand company. It started
diversifying already in 1988 when it bought Cole Haan (dresses and casual shoes) for $88 million, in 1995 it
bought Bauer (ice hockey skates) for $409 million, in 2002 it bought Hurley International (skateboard
equipment) for $95 million and Converse (retro-style sneakers) for $305 in 2003.
International marketing is the application of marketing principles in more than one country, by companies
overseas or across national borders. International marketing is based on an extension of a companys local
marketing strategy, with special attention paid to marketing identification, targeting, and decisions
internationally.
According to the American Marketing Association (AMA) "international marketing is the multinational
process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and
services to create exchanges that satisfy individual and organizational objectives."
DEFINITIONS OF INTERNATIONAL MARKETING
1. According to Kotler, "Global marketing is concerned with integrating and standardizing marketing actions
across a number of geographic markets."
2. According to Cateora, "International marketing is the performance of business activities that direct the flow
of goods and services to consumers and users in more than one nation."
3. According to Cateora and Graham, "International marketing is the performance of business activities
designed to plan, price, promote, and direct the flow of a companys goods and services to consumers or users
in more than one nation for a profit."
4. According to Terpstra and Sorathy, international marketing consists of finding and satisfying global
customer needs better than the competition, both domestic and international and of coordinating marketing
activities with in the constraints of the global environment.
International marketing is different from domestic marketing not only in scope but also in nature.
Following are the nature and scope of international marketing.
Nature of International Marketing
1. Broader market is available Unlike domestic marketing the market is not restricted to national
population. Population of other countries can also be targeted in international marketing.
2. Involves at least two set of uncontrollable variables In domestic marketing the marketers have to
interact with only one set of uncontrollable variables. In international marketing at least tw o set of
uncontrollable variables are involved or more if the marketing organization deals in more countries.
3. Requires broader competence Special management skills and broader competence is required in
international marketing/business.
4. Competition is intense An international marketing organization has to compete with both the
domestic competitors and the international competitors. Hence, the competition is intense in international
marketing.
5. Involve high risk and challenges International marketing is prove to various kinds of risk and
challenge like political risk, cultural differences, changes in fashion and style of foreign customers,
sudden war, changes in government rules and regulations, communication challenges due to language and
cultural barriers, etc,.
Companies selling goods that have customs restrictions, like food and live plants, must contend with a
more rigorous regulatory process before marketing their products internationally. While they may have a
more difficult time setting up their international export business, they also have the opportunity to expose
other countries to native products they couldnt access otherwise.
Other types of companies that often perform well internationally include those involved in export, joint
ventures, and direct investment.
Exporting is the practice of shipping goods directly to a foreign country. Prominent companies that do an
excellent job of marketing their foreign exports to the United States include Fanta soft drinks, Honda, and
retail giant H&M. In fact, H&M paid $3.5 million for a 30-second commercial during the 2012 Super Bowl,
a marketing bonanza that has long been dominated by American brands.
Joint venture companies refer to the combined efforts of two or more businesses to their mutual benefit.
One of the most famous international joint venture success stories is Sony-Ericsson, a partnership between
a Japanese electronics company and a Swedish telecommunications company. Their international
marketing strategy, comprised of bright colors and modern shapes, has helped make the joint venture
known the world over. (See also Cooperative Marketing)
A direct investment company places a fixed asset in a foreign country with the aim of manufacturing a
product, or part of a product, abroad. Dell computers, for example, is an American company with factories
in many other countries that assemble personal computers from parts made all around the world. Dell then
markets their computers with an exceptional emphasis on customer needs and customization unlike
other companies that sell pre-manufactured products; Dell computers are custom-assembled after
customers place their orders.
Exports and Imports: International trade can be a good beginning to venture into international
marketing. By developing international markets for domestically produced goods and services a
company can reduce the risk of operating internationally, gain adequate experience and then go on
to set up manufacturing and marketing facilities abroad.
Contractual Agreements: Patent licensing, turn key operations, co production, technical and
managerial know how and licensing agreements are all a part of international marketing.
Licensing includes a number of contractual agreements whereby intangible assets such as patents,
trade secrets, know how, trade marks and brand names are made available to foreign firms in
return for a fee.
Joint Ventures: A form of collaborative association for a considerable period is known as joint
venture. A joint venture comes into existence when a foreign investor acquires interest in a local
company and vice versa or w hen overseas and local firms jointly form a new firm. In countries
where fully owned firms are not allowed to operate, joint venture is the alternative.
Wholly owned manufacturing: A company with long term interest in a foreign market may
establish fully owned manufacturing facilities. Factors like trade barriers, cost differences,
government policies etc. encourage the setting up of production facilities in foreign markets.
Manufacturing abroad provides the firm with total control over quality and production.
Contract manufacturing: When a firm enters into a contract with other firm in foreign country to
manufacture assembles the products and retains product marketing with itself, it is known as
contract manufacturing. Contract manufacturing has important advantages such as low risk, low
cost and easy exit.
Management contracting: Under a management contract the supplier brings a package of skills that
will provide an integrated service to the client without incurring the risk and benefit of ownership.
Third country location: When there is no commercial transactions between two countries due to
various reasons, firm which wants to enter into the market of another nation, will have to operate
from a third country base. For instance, Taiwans entry into china through bases in Hong Kong.
Mergers and Acquisitions: Mergers and Acquisitions provide access to markets, distribution
network, new technology and patent rights. It also reduces the level of competition for firms which
either merge or acquires.
Strategic alliances: A firm is able to improve the long term competitive advantage by forming a
strategic alliance with its competitors. The objective of a strategic alliance is to leverage critical
capabilities, increase the flow of innovation and increase flexibility in responding to market and
technological changes. Strategic alliance differs according to purpose and structure.
Increase in consumption
Increase in production
More profitable
Reduce cost
Extension of industry
Image development.
international strategies that still function effectively in meeting local needs. Understanding the
complexities involved in developing powerful international marketing campaigns is a key element
in building successful sales advantages.
NEED AND IMPORTANCE:
In relation to the need or importance of international marketing, views of Philip Kotler are worth noted.
According to him, two forces essentiality the international marketing are pull forces and push forces. Push
forces lead to force the nation to sell its goods and services in other nations.
The push forces include lower national income, low per capita income, low domestic demand,
unfavourable approach of government, high rates of tax and duties, government force to export to earn
foreign exchange, tough local market, etc. These forces force the marketer to opt for international market.
Another set of forces is pull forces. The pull forces pull (attract) businessmen to sell their products in the
foreign market to exploits attractive opportunities in the foreign countries. To take benefits of more
profitable opportunities, they are pulled to business in other nations. The variable lead to international
market may fall either in pull forces or push forces or both.
Lets have brief explanation of several benefits available due to international marketing:
1. It ensures survival for a company and a country.
2. Nations can get benefits of division of work and specialization.
3. It also helps in balancing unequal distribution of natural resources.
4. Extending product life cycle by selling products in other nations.
5. It is important for controlling inflation and achieving price moderation.
6. Balancing demand and supply.
7. Promotion of invention and innovation globally.
8. Companies can take benefits of taxes and duties.
9. Technological Transmission among countries of the world is easily possible.
10. International marketing can improve standard of living of people.
11. Growth of international marketing results into social and cultural development.
12. Worldwide peace is possible due to interdependency among countries of the world
13. Global employment opportunities can help ease unemployment problems.
14. Growth of overseas market leads to global prosperity.
Morgan Stanley and Dean Witter merged to offer global investment as well as global private
banking and credit card services. There has also been an increase in the number of joint ventures
and international strategic alliances to compete in mature markets. Xerox entered into a joint
venture with Fuji to consolidate their global position and the Siemens and Fujitsu joint venture is
now the only computer hardware company in Europe following the global consolidation of that
sector.
The global marketplace is no longer the summation of a large number of independent
country markets but much more multilateral and interdependent, economically, culturally and
technically. Information moves anywhere in the world at the speed of light, the ease of transmission
being facilitated by the convergence of long distance telecoms, cuts in the cost of electronic
processing and the exponential growth in Internet access.
The combination of all these forces has meant that all companies need to develop a marketing
orientation which is international in nature and that companies need managers who have the skills
to analyze, plan and implement strategies across the globe. It is for these reasons that international
marketing has become such a critical area of study for managers and an important component of
the marketing syllabus of business faculties in universities.
Every day, the marketing is gaining greater importance, both to how micro macro level. In this context of
globalization, companies are subject to a lot of competition from other companies even coming from
foreign markets. In this sense, there are many companies that do not to lose market share, are forced to go
outside.
A first approximation to what is the International Marketing would be the strategy that allows you to take
better advantage of the opportunities offered by foreign markets and cope with international competition.
Global Strategy is a shortened term that covers three areas: global, multinational and international
strategies. Essentially, these three areas refer to those strategies designed to enable an organisation to
achieve its objective of international expansion.
In developing global strategy, it is useful to distinguish between three forms of international
expansion that arise from a companys resources, capabilities and current international position. If the
company is still mainly focused on its home markets, then its strategies outside its home markets can be
seen as international. For example, a dairy company might sell some of its excess milk and cheese supplies
outside its home country. But its main strategic focus is still directed to the home market.
International strategy: the organisations objectives relate primarily to the home market. However,
we have some objectives with regard to overseas activity and therefore need an international
strategy. Importantly, the competitive advantage important in strategy development is
developed mainly for the home market.
Multinational strategy: the organisation is involved in a number of markets beyond its home
country. But it needs distinctive strategies for each of these markets because customer demand and,
perhaps competition, are different in each country. Importantly, competitive advantage is
determined separately for each country.
Global strategy: the organisation treats the world as largely one market and one source of supply
with little local variation. Importantly, competitive advantage is developed largely on a global
basis.
On the basis of all this, International marketing is a strategy that is developed with the purpose of achieving
targets in foreign markets having as a base the capabilities of the company (strengths and weaknesses), the
situation of the environment and international competition (threats and opportunities).
Environment
The international environment is quite more complex than the domestic environment. Obviously in
international markets we will find different laws and legal regulations, languages and different
tastes, as well as various infrastructures... Therefore, the study of the environment is quite more
complex.
Competition
Will also be much more complex because in international markets there will be a greater number of
competitors and the offer of products and services will be much more extensive and in many cases
unknown to the company.
Selection of markets
It is exclusive to the International Marketing.