International Marketing Chapter Notes 1 to 3 PDF

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International Marketing (Philip R. Cateora )

Chapter 1 to 3 Summary Note

Created by: Asaduzzaman Department of Marketing University of Dhaka

Chapter 1 International Marketing Defined International marketing is the 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.

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 marketer’s task is the same, whether doing business in Dime box, Texas, or Dar es Salaam, Tanzania. Business’s goal is to make a profit by promoting, pricing, and distributing products for which there is a market. If this is the case, what is the difference between domestic and international marketing. The answer lies not with different concepts of marketing but with the environment within which marketing plans must be implemented. The uniqueness of foreign marketing comes from the range of unfamiliar problems and the variety of strategies necessary to cope with different levels of uncertainty encountered in foreign markets. Competition, legal restraints, government controls, weather, fickle consumers, and any number of other uncontrollable elements can, and frequently do, affect the profitable out-come of good, sound marketing plans. Generally speaking, the marketer cannot control or influence these uncontrollable elements but instead must adjust or adapt to them in a manner consistent with a successful outcome. What makes marketing interesting is the challenge of molding the controllable elements of marketing decisions (product, price, promotion, distribution, and research) within the framework of the uncontrollable elements of the marketplace (competition, politics, laws, consumer behavior, level of technology, and so forth) in such a way that marketing objectives are achieved. Even though marketing principles and concepts are universally applicable, the environment within which the marketer must implement marketing plans can change dramatically from country to country or region to region. The difficulties created by different environments are the international marketer’s primary concern.

The key to successful international marketing is adaptation to environmental differences from one market to another. Adaptation is a conscious effort on the part of the international marketer to anticipate the influences of both the foreign and domestic uncontrollable factors on a marketing mix and then to adjust the marketing mix to minimize the effects. Self-Reference Criterion (SRC) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decision. Risk of SRC: – Prevent you from becoming aware of cultural differences – Influence the evaluation of the appropriateness of a domestically designed marketing mix for a foreign market

To avoid errors in business decisions, the knowledgeable marketer will conduct a cross-cultural analysis that isolates the SRC influences and maintain vigilance regarding ethno-centrism. The following steps are suggested as a framework for such an analysis. 1. Define the business problem or goal in home-country cultural traits, habits, or norms. 2. Define the business problem or goal in foreign-country cultural traits, habits, or norms through consultation with natives of the target country. Make no value judgments. 3. Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem. 4. Redefine the problem without the SRC influence and solve for the optimum business goal situation. Much of the cultural influence on market behavior remains at a subconscious level and is not clearly defined.

International Marketing Involvement stages: Five Stages (no need to be in a specific order, can overlap) 1. No direct foreign marketing: No active cultivation of customers outside national boundaries, products reach market via domestic wholesalers or distributors 2. Infrequent foreign marketing: Sales to foreign market are made as goods become available, with little or no intention of maintaining continuous market representation As domestic demand increases, foreign sales activity is reduced or even withdrawn Disadvantage: customers around the world increasingly seek long-term commercial relationships; financial returns from expansions are limited 3. Regular foreign marketing: Permanent productive capacity of goods to be marketed, Primary focus of production and operation to domestic market needs, profit expectations from foreign market seen as a bonus addition. 4. International marketing: full commitment to and involvement in international Marketing activities, evolvement as an international or multinational company. 5. Global Marketing: Domestic and foreign market seen as one market with a global perspective, heightened competitiveness, globalization of markets, interdependence of world economies is reflected

Global Marketing Orientation This orientation entails operating as if all the country markets in a company’s scope of operations including the domestic market) were approachable as a single global market and standardizing the marketing mix where culturally feasible and cost effective. Depending on the product and market, firms may pursue a global market strategy for one product (global market orientation –P&G diapers) but a multidomestic strategy for another product (international market orientation = P&G detergents).

Chapter 3 –History and Geography: The Foundations of Culture

The importance of history and geography in understanding international markets Culture can be defined as a society’s accepted basis for responding to external and internal events. To understand fully a society’s actions and its points of view, you must have an appreciation for the influence of historical events and the geographical uniqueness to which a culture has had to adapt. To interpret behavior and attitudes in a particular culture or country, a marketer must have some idea of a country’s history and geography. History helps defi ne a nation’s “mission,” how it perceives its neighbors, how it sees its place in the world, and how it sees itself. Insights into the history of a country are important for understanding attitudes about the role of government and business, the relations between managers and the managed, the sources of management authority, and attitudes toward foreign corporations. To understand, explain, and appreciate a people’s image of itself and the attitudes and unconscious fears that are reflected in its view of foreign cultures, it is necessary to study the culture as it is now as well as to understand the culture as it was—that is, a country’s history. History and Japan Typical Japanese behavior: loyalty to family, country, work and social groups and the strong drive to cooperate, to work together for a common purpose Confucian philosophy: emphasizes the basic virtue of loyalty from friend to friend, wife to husband, child to parent, subject to lord (which is the country)

History is Subjective Historical events are viewed from one’s own biases and SRC, our perspective influences our view of any matters (Example: Relationship between Mexico and US differently viewed from each part)

The effect of geographic diversity on economic profiles of a country Geography, the study of Earth’s surface, climate, continents, countries, peoples, industries, and resources, is an element of the uncontrollable environment that confronts every marketer but that receives scant attention. The tendency is to study the aspects of geography as isolated entities rather than as important causal agents of the marketing environment. Geography is much more than memorizing countries, capitals, and rivers. It also includes an understanding of how a society’s culture and economy are affected as a nation struggles to supply its people’s needs within the limits imposed by its physical makeup. Thus, the study of geography is important in the evaluation of markets and their environment.

Why marketers need to be responsive to the geography of a country Altitude, humidity, and temperature extremes are climatic features that affect the uses and functions of products and equipment. Products that perform well in temperate zones may deteriorate rapidly or require special cooling or lubrication to function adequately in tropical zones. Manufacturers have found that construction equipment used in the United States requires extensive modifications to cope with the intense heat and dust of the Sahara Desert. A Taiwanese company sent a shipment of drinking glasses to a buyer in the Middle East. The glasses were packed in wooden crates with hay used as dunnage to prevent break-age. The glasses arrived in shards. Why? When the crates moved to the warmer, less humid climate of the Middle East, the moisture content of the hay dropped significantly and shriveled to a point that it offered no protection. Within even a single national market, climate can be sufficiently diverse to require major adjustments Climate and Topography Altitude, humidity and temperature extremes are climatic features that affect functions of products and equipment within even a single market climate can be sufficiently diverse to require major adjustments Geographic hurdles have a direct effect on a country’s economy, markets ad related activities of communication and distribution (China, Russia, India and Canada) inventions in infrastructure

Geography, Nature and Economic Growth Less-privileged countries suffer disproportionally from natural and humanassisted catastrophes from effective solutions

each disaster pushes developing countries further away

Dams projects

good solutions (create electricity, help control floods, provide

water, rich source of fish) BUT: displaces people Need for gigantic projects must be measured against their social and environmental costs During the last part of the 20th century

effort to develop better ways to control

nature and allow industry to grow while protecting the environment

Social Responsibility and Environmental Management Environmental protection is an essential part of doing business (special concern to governments and businesses: pollution & clean up decades of neglect) China is world’s top polluter, by 2020 it’s greenhouse-gas emissions will double the US Sustainable development: joint approach among those who seek economic growth with reduction of negative effects on people and environment

Resources Availability of minerals and the ability to generate energy are foundations of modern technology Locations of earth’s resources and energy are geographical accidents Petroleum-related products dominate energy usage because of versatility and ease of storage and transport Many self-sufficient countries have become net importers of petroleum and increasingly become dependent on foreign sources (US from 33% to over 66%) China’s world’s second-largest oil importer Growth of market-driven economies and increasing reliance on petroleum supplies from areas of political instability create a global interdependence of energy resources

profound impact on oil prices and on economies of

industrialized/industrializing countries

Global demand for resources intensifies and prices rise, resources will continue to increase in importance among the uncontrollable elements in marketer’s decisions.

3) Dynamics of Global Population Trends

Current population, population shifts, rates of growths, age levels and population control determine demand for categories of goods Demand for goods can affect migration pattern (financial crisis in 2008 caused migration from urban to rural areas) Most people settle in urban areas; more jobs need to be created

Controlling Population Growth Procreation as one of the most culturally sensitive uncontrollable factors (Economics, self-esteem, religion, politics and educations play critical roles in attitudes about family size) Prerequisites to population control: income, literacy level, education for women, access to healthcare, family planning, nutrition, cultural beliefs in importance of large families India: improved health conditions and changing beliefs and lower infant mortality

greater longevity

population will exceed Chinas by 2050

In many countries the prestige of a man depends on his family size Economists believe, a decline in fertility rate is a function of economic prosperity and will come only with economic development Rural/Urban Migration Result of a desire for better access to education, health care and better job opportunities

More than 40% of the world’s population live in urban areas and the trend is increasing

without investment in services, this trend can lead to serious

problems! (Excessive pressure on sanitations, water supplies and social services) Population Decline and Aging Birth-rates in western Europe and Japan have decreased, more women decide for careers than for children Population growth is declining, but more aging people exist Elderly require higher government outlays for healthcare and hospitals special housing and nursing homes, pension and welfare assistance There will be fewer workers to support future retirees Could result in intolerable tax burdens on future workers or pressure to allow mass-migration to stabilize worker-to-retiree ratio

Worker Shortage and Immigration Europe the most affected region regarding aging population (Spain, then Italy) Spain has opened borders to all South Americans with Spanish descent US needs another 600 million immigrants until 2050 Cultural opposition to immigration needs to be overcome

Communication infrastructures are an integral part of international commerce An underpinning of all commerce is effective communications—knowledge of where goods and services exist and where they are needed and the ability to communicate instantaneously across vast distances. Continuous improvements in electronic communications have facilitated the expansion of trade. Each revolution in technology has had a profound effect on human conditions, economic growth, and the manner in which commerce. Each new communications technology has spawned new business models; some existing businesses have reinvented their practices to adapt to the new technology, while other businesses have failed to respond and thus ceased to exist. The Internet and mobile phone revolutions will be no different; they too affect human conditions, economic growth, and the manner in which commerce operates. As we discuss in subsequent chapters, the combination of the Internet and the dramatic increase in the mobile phone subscribers worldwide has already begun to shape how international business is managed.

Chapter 2 The importance of balance-of-payment figures to a country’s economy In short, over a period of time, there is a constant flow of money into and out of a country. The system of accounts that records a nation’s international financial transactions is called its balance of payments . A balance-of-payments statement includes three accounts: the current account , a record of all merchandise exports, imports, and services plus unilateral transfers of funds; the capital account , a record of direct investment, portfolio investment, and shortterm capital movements to and from countries; and the official reserves account , a record of exports and imports of gold, increases or decreases in foreign exchange, and increases or decreases in liabilities to foreign central banks. A nation’s balance-of-payments statement records all financial transactions between its residents and those of the rest of the world during a given period of time—usually one year. Because the balance-of-payments record is maintained on a double-entry bookkeeping system, it must always be in balance. As on an individual company’s financial statement, the assets and liabilities or the credits and debits must offset each other. And like a company’s statement, the fact that they balance does not mean a nation is in particularly good or poor financial condition. A balance of payments is a record of condition, not a determinant of condition. Each of the nation’s financial transactions with other countries is reflected in its balance of payments.

The effects of protectionism on world trade International business executives understand the reality that this is a world of tariffs, quotas, and nontariff barriers designed to protect a country’s markets from intrusion by foreign companies. Although the World Trade Organization has been effective in reducing tariffs, countries still resort to measures of protectionism .Nations utilize legal barriers, exchange barriers, and psychological

barriers to restrain the entry of unwanted goods. Businesses work together to establish private market barriers, while the market structure itself may provide formidable barriers to imported goods. The complex distribution system in Japan is a good example of a market structure creating a barrier to trade. However, as effective as it is in keeping some products out of the market, in a legal sense, it cannot be viewed as a trade barrier.

Countless reasons to maintain government restrictions on trade are espoused by protectionists, but essentially all arguments can be classified as follows: (1) protection of an infant industry, (2) protection of the home market, (3) need to keep money at home, (4) encouragement of capital accumulation, (5) maintenance of the standard of living and real wages, (6) conservation of natural resources, (7) industrialization of a low-wage nation,

Economists in general recognize as valid only the arguments regarding infant industry, national defense, and industrialization of underdeveloped countries. The resource conservation argument becomes increasingly valid in an era of environmental consciousness and worldwide shortages of raw materials and agricultural commodities. A case might be made for temporary protection of markets with excess productive capacity or excess labor when such protection could facilitate an orderly transition. Unfortunately, such protection often becomes long term and contributes to industrial inefficiency while detracting from a nation’s realistic adjustment to its world situation.

The several types of trade barriers To encourage development of domestic industry and protect existing industry, governments may establish such barriers to trade as tariffs and a variety of nontariff barriers including, quotas, boycotts, monetary barriers, and market barriers. Barriers are imposed against imports and against foreign businesses. While the inspiration for such barriers may be economic or political, they are encouraged by local industry. Whether or not the barriers are economically logical, the fact is that they exist. A tariff , simply defined, is a tax imposed by a government on goods entering at its borders. Tariffs may be used as revenue-generating taxes or to discourage the importation of goods, or for both reasons. Quotas and Import Licenses. A quota is a specific unit or dollar limit applied to a particular type of good. Great Britain limits imported television sets; Germany has established quotas on Japanese ball bearings. Even more complicated, the banana war between the United States and the European Union resulted in a mixed system wherein a quota of bananas is allowed into the European Union with a tariff, then a second quota comes in tariff-free. The fundamental difference between quotas and import licenses as a means of controlling imports is the greater flexibility of import ...