THE EVOLUTION OF INTERNATIONAL MARKETING

Vern Terpstra, Professor of International Business, University of Michigan, Ann Arbor, Michigan

Reviewing the pre- and post-1970 global environment, the author discusses the implications of changes for international marketers. The discussion is organ- ised around the topical categories of international financial system, inter- national trade patterns, commercial policy, technological changes, and global competition. The author also elaborates on the likely future developments in international marketing.

Marketing is adaptation to the market. The market is a complex set of supply and demand forces including both macro and micro elements. As we look at international marketing in the last part of the 20th century, it is useful to consider some of the major global developments that have shaped inter- national marketing practice. Figure 1 gives a schematic though incomplete view of the kinds of relationships we will discuss.

Going back to about 1970 we can observe the global environment of that time. Then coming up to the present we can note changes that have occurred and see what effect these have had on international marketers. With that background, we may conjecture about developments for the remainder of our present century. Thus, this will be a retrospective and prospective look at the world of international marketing (see also Terpstra 1969 and 1985).

The World of 1970 Our historical review will be brief, rather than exhaustive. We will merely try to indi- cate the nature of some important relationships. International finance. At the beginning of 1970 the Bretton Woods monetary system was still operating.

In general th'is had meant a high valued dollar relative to most other currencies. This led U.S. firms to conduct the majority of their

international marketing by foreign invest- ment rather than by exporting. They had done this with such success that Servan Schreiber was led to write his famous book Le Defi Anrericain in 1966 predicting that by 1981 the third economic power would be, not Western Europe but American industry in Western Europe. That illustrates the danger of forecasting. (Servan Schreiber did not foresee the arrival of the Japanese.) The rela- tively low value placed on other currencies such as the DM and the yen encouraged Germany and Japan to market abroad via exports rather than foreign production. The leading international marketing nations thus had different strategies for conquering world markets: the U.S. with primary dependence on foreign investment; Japan and Germany depending almost entirely on exports; and Britain with a relatively even balance between exports and foreign investment. International trade. The international trade statistics for 1970 give an incomplete but reasonable picture of the participants and patterns of international marketing for that period.

Table 1 shows the top twenty importers in 1970 and Table 2 shows the top twenty exporters. Looking first at the demand or market side, Table 1 shows the list of major markets largely dominated by the OECD countries. It is not until number 15 that we find a non-OECD market, the USSR.

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Figure 1 GLOBAL DEVELOPMENTS AFFECTING LNTERNATIONAL MARKETING

INTERNATIONAL MARKFnNG MANAGEMENT

GLOBAL DEVELOPMENTS AND PARAMETERS\ I Market OF INTERNATIONAL MARKETING Research I Product I Price I Promotion I Distribution

1. International Financial System I I I I I I Floating rates I I

Exchange control I I I

I I I Balance of payments deficits I

2. International Trade Patterns I I Shifting comparative advantage I I I I

I I I

Countertrade I I I New markets I I I I New suppliers I ! I I

3. Commercial Policy I I

GATT I I I

I I

I I I

UNCTAD I I

I Protectionism I I i I

4. Technology Change I I I Transportation

I I I I

Communication I I I I

I R & D

I I I I Production

I I I I

5. Global Competition I I

I I

I I

New competitors I I New strategies I I I

I I

Strategic alliances I I I I I

Table 1 I Table 2 TOP TWENTY LMPORTERS, 1970 TOP TWENTY EXPORTERS, 1970

Country Imports (Million U.S. $)

1. United States 43,959 2. West Germany 29,949 3. United Kingdom 21.728 4. France 19,114 5. Japan 18,Wl 6. Canada 15,391 7. Italy 14,936 8. Netherlands 13,394 9. Belgium 11,353

10. Sweden 7,005 11. Switzerland 6,487 12. Australia 4,994 13. Spain 4,748 14. Denmark 4,404 15. U.S.S.R. 4,018 16. South Africa 3,923 17. Norway 3,697 18. Austria 3,549 19. Hong Kong 2,905 20. Yugoslavia 2,876

SOURCE: IME Dircction of Trnde Statistics, 197'2

Country Exports (Million U.S. $)

1. United States 43,227 2. West Germany 34,232 3. United Kingdom 19,352 4. Japan 19,318 5. France 17,935 6. Canada 16,745 7. Italy 13,185 8. Netherlands 11.764 9. Belaurn 11,595

10. Sweden 6,782 11. Switzerland 5,154 12. Australia 4,788 13. U.S.S.R. 3,716 14. Denmark 3.355 15. Venezuela 3,203 16. Austria 2,858 17. Brad 2,739 18. Hong Kong 2,515 19. Norway 2,455 20. Saudi Arabia 2,424

SOURCE: IMF Dircction of Trnde Statistics. 1972

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49 THE EVOLUTION OF INTERNATIONAL MARKETING

Table 2, the top twenty exporters, shows us the supply side, the countries doing most of the international marketing in 1970. Not surprisingly, the list again is dominated by OECD countries. It is not until number 13 that we find a non-OECD country exporter and again it is the Soviet Union. In short, in 1970 - as evidenced by international trade statistics - the only part for which we can get hard data, inter- national marketing was a game played largely by OECD countries. They were conducting almost two-thuds of world trade among themselves. Commercial Policy. The 1970 commercial policy environment was favourable for inter- national marketers.

GATT had just concluded the Kennedy Round, perhaps the most successful of all of its trade liberalising negotiations. Though many of its concessions had not yet been implemented, the climate was good for inter- national exchange. East-West trade was the principal area where political restrictions prevented much exchange between the protagonists. With China, Russia, and Eastern Europe included, the Eastern bloc excluded a large portion of the world from free exchange. In the industrial market econ- omies, however, international marketers had some discretion about how they would serve the market - either by exports or some k i d of local production. The micro side. We looked at the macro side of international marketing - the nations which were the leading suppliers and markets in 1970.

Looking at the micro side, the firms doing the international marketing, it is much more d i c u l t to get data. Sewan-Schretber was probably right in 1966 when he identified the dominant players as the American firms. Lists of the top ten or fifteen firms in almost

any industry during the 60's showed Amer- ican firms predominating. One evidence o! American preeminence is the fact that Amer- ica's 1970 exports were greater than those of Britain and Japan combined even though American f m s depended on foreign subsidiary sales for most of their inter- national marketing volume.

Looking at the ways firms conducted inter- nahonal marketing in 1970, we note that they used the methods described in the textbooks. American firms used the broadest mix of exporting, licensing, and foreign investment. The Germans, by contrast, were primarily exporters to foreign agents and distributors, and the Japanese relied mostly on the Japanese trading companies to reach foreign markets. Whatever channel was employed to reach foreign markets, however, inter- national marketing was largely done by firms acting alone, as individual enterprises. Apart from the occasional joint ventures, or licensing arrangement, the only collaborator for the intemational marketer was the foreign distributor or a trading company. The academic side. A final way of looking at intemational marketing in 1970 is to consider the academic situation in the field at that time. We can only get imperfect indicators but they can give us a feel for the situation.

International business was a young academic discipline in 1970, but international marketing was a leading sector in the field. The first AIB cumculum survey in 1969 was confined to American schools but it showed that the most frequently taught intemational course was International Marketing. There were 65 U.S. schools reportmg at least one International Marketing course but only 50 teaching International Management and 40 with a course in International Finance. The s w e y found, however, only 4 doctoral programmes covering the subject.

On the publications side, there was already

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pretty good coverage of international marketing also. There were several texts and related books for teaching the subject. Looking at publications in a broader sense, Fayenveather's bibliographic service Tkc lnternational Executive was listing about 100 articles and citations a year on international marketing. Many of these were not academic joumals, however, because these joumals did not have many articles on the subject. Indeed, 1970 was the first year of publication of the Journal of lnternatioizal Busiizess Studies. Interestingly, the lead article in the first issue was entitled "Marketing Policies in Multin- ational Corporations."

The World of the Mid 1980s International finance. The international monetary system of the 1980s is characterised by uncertainty and floating exchange rates for the major currencies.

There were periods with a declining dollar and periods with a strong dollar ending finally with a very strong yen. The main characteristic, however, was exchange rate uncertainty which complicated logistics plan- ning for all producers. It is no longer suffitient to have an export only or a foreign investment only strategy. Most firms need some production capability both at home and abroad to market internationally.

Developments in the international financial System reinforced by high oil prices from 1973 increased the number and size of national balance of payments defiats. These chronic deficits forced more countries to continue their international trade by barter and countertrade. Thus this ancient form of trade became an important element in "modem" international marketing. International trade. The world trade situ- ation as revealed by international trade stat- istics for 1985 shows the OECD countries

continuing to dominate the top 20 importers and exporters.

However, looking at the demand side in Table 3 we see that rising income and econ- omic development in other parts of the world, primarily the Pacific, are opening new markets for international marketers. Four European countries drop out of the top 20 importers along with South Africa and are replaced by four Pacific nations and Saudi Arabia. The four new Pacific import markets are China (number lo), South Korea, Singa- pore, and Taiwan.

Table 3 TOP TWENTY IMPORTERS, 1985

Country Imports (Billion U.S. $)

I. United States 362 2, westGermany 158

:: !:;Ed Kingdom 131 5,

109 108

6. Italy 91 7. Canada 81 8. Netherlands 65 9, Belgium 56

10. China 43 ll. U.S.S.R. 39 12. Switzerland 31

South Korea 30 14. Spain 30 '5. "0% 30 16. Sweden 28 17, 26 18. Australia 26 19. Saudi Arabia 24 20. Taiwan 24

SOURCE: IMF Dirwtion of Trade Statistics, 1986

Table 4, the supply side, shows similar changes among the top 20 exporters. The changes reflect the new competition among international marketing nations. Four OECD countries and Venezuela drop from the top 20 and are replaced by three Pacific nations and Spain and Mexico. The rise of Spain and Mexico as 19 and 20 in the top 20 results from various special factors in each case. The

5 1 THE EVOLUTION OF INTERNATIONAL MARKETING

Table 4 TOP TWFNTY EXPORTERS, 1985

international marketing'& the mid-1980s, the most dramatic chance is the ~rominent

major competitive change, however, is again in the Pacific where South Korea, China, and Taiwan come in at numbers 14, 16 and 18 respectively with Singapore just short at number 21.

Although exporting remains an important form of international marketing, today's protectionist pressures are forcing many more firms to include more local content in their forelgn marketing. The micro side. Lookinpc at the micro side of

International Marketing Review

Country Exports (Billion U.S. $)

1. United States 213 2. West Germany 184 3. Japan 177 4. France 102 5. United Kingdom 101 6. Canada 90 7. Italy 79 8. Netherlands 68 9. Belgium 54

10. U.S.S.R. 31 11. Sweden 30 12. Hong Kong 30 13. Saudi Arabia 30 14. Korea 29 15. Switzerland 27 16. China 27 17. Brazil 26 18. Tawan 25 19. Spain 24 20. Mexico 24 21. Singapore 23

SOURCE: IMF Direction of Trade Statistics, 1986

Commercial policy. The commercial policy situation of the mid-1980s presents a mixed picture.

Continuing deficits in a majority of the world's nations led to protectionist actions and threats. The Multifibre Agreement renewal was a kind of multilateral protec- tionism. At the same time, GATT was moving toward a new round of negotiations. International trade volume moved sideways during the first half of the '80s and inter- national marketers had to rely more on local production to serve foreign markets. The Japanese, as the major surplus country, felt the greatest pressure to localise. The rising yen accelerated their move offshore.

- position of Japanese firms.

Their tremendous growth has been largely at the expense of American firms who lost their previous dominance. European firms have also suffered from the Japanese success. A further dimension of change is the emerg- ence of multinationals from the periphery, from countries such as South Korea and Taiwan. Pi contemporay list of the world's largest companies in any industry is more varied and cosmopolitan than in 1970. Competition is much more international.

Looking at the ways international marketing is being conducted today, we see firms from all countries using a wider variety and combination of approaches than in 1970. All the classic methods are being used but there are many innovations and variations in them. The most significant change is the increased use of international cooperative ventures or strategic alliances of various kinds to accomplish one or more aspects of the international marketing task. Firms who are often competitors from different coun- tries, are joining together in production, product development, market entry, distri- bution, promotion and branding, and senrice arrangements. It is getting hard to find a multinational which is going it alone in its international marketing. They are going beyond internalization. The academic side. Intemational business and international marketing have become well established in business school curricula compared to 1970.

Most schools in the U.S. have some inter-

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national dimension according to the 1986 AIB curriculum survey (Thanopoulos and Leonard 1986). International marketing was again the international business course most frequently offered by schools. About two- thirds of undergraduate and graduate busi- ness school programmes offered a course in international marketing. By 1986 there were many more doctoral programmes in inter- national business than in 1970 and 37 per cent of them also offered a course in inter- national marketing.

On the publications side of international marketing, there is some expansion compared to 1970. Surprisingly, there are no more textbooks on the subject than there were in 1970, but the lineup has changed with new authors coming in and others drop- ping out. There are, however, new specialist texts on areas like international advertising or marketing research. These represent an expansion of teaching materials along with the video resources now available.

According to The International Executive for 1985, the international marketing atations were about the same number as in 1970 and the topical distribution was very similar also. In that sense, there was little change or expansion over the 15 years since 1970. As noted earlier, however, many of those citations are not from academic journals. Looking only at academic journals, there was a rather significant expansion in the number of international marketing articles. There is even a new journal devoted exclusively to the subject, the 1nternationalMarketing Review. This quarterly publication, all by itself, publishes 25 to 30 refereed articles a year on international marketing.

The future There will be three major forces affecting international marketing in the remaining years of this century. One will be the

continrring integration of the world economy. Second will be technological change. The relent- less march of technology in communications, information, and transportation is creating, not only a global village, but also a global marketplace. People in international finance already speak of 24 hour markets, for example. Third, these forces together help to create a more globalised competitive environment. These forces have ramifications for all aspects of international marketing. We will examine them by looking at the various marketing functions.

My discussion here is based on my study of international marketing over the past 24 years and my interpretation of current trends. The forecasts are obviously conjec- ture, though there is some empirical evidence for most of them. They can be considered as hypotheses for future testing. Marketing research. A major development here is that marketing research agencies will expand both their geographic coverage and their services.

This will be necessary to meet the needs of their more internationalised clients. It will be facilitated by continuing progress in computers and communications. It will prob- ably also be helped by the mergers taking place among advertising agencies, many of whom do marketing research. The logic underlying the international mergers we see among financial institutions, accounting firms, and advertising agencies applies also to marketing research agencies. Service organizations need to be as global as possible to serve their multinational clients. They also need economies of scale to offer the breadth and depth of service required. Mergers or alliances will often be necessary to meet these constraints.

A second development is that the quality and variety of marketing research services will improve. This will be aided both by tech-

THE EVOLUTION OF INTERNATIONAL MARKETING

nology and mergers of research organiz- ations. One new kind of service already avail- able is the global product pickup service for consumer packaged goods manufacturers. A firm offers to pick up client or competitive products from supermarkets in up to 120 countries. Alternatively, it can monitor a variety of information on a set of products in all those countries. This represents a great advance in competitive intelligence capability in international marketing. It also illustrates how geographic spread and computer and communications technology will help to improve the intelligence function in the firm.

In a similar vein, the U.K. company Adtrack will monitor no less than 600 Asian publications for its advertising clients. Photo- copies of ads will be available. The Asian programme is a geographic expansion of their services which previously were limited to European media. These examples are models for the future development of marketing senices.

A third development will be an upgrading of the in-house marketing research capabili- ties of international marketing firms. Because of their greater dependence on foreign markets and the stronger international competition they face, firms will need to increase their investment in marketing research. This expansion will occur both in foreign markets and at corporate head- quarters. The activities will include competi- tive intelligence as well as marketing intelli- gence. Because competition is more inter- national, the firm will want to monitor competitor's activity in every market poss- ible. This will mean more work in foreign markets and more coordination by headquarters. Product development. In the area of product, there are four trends that will continue into the future. One is growing internationalis- ation of product development. Another is

increased collaboration in product develop- ment. A thud is the shortening of the product life cycle. The fourth is the further globalis- ation of products.

Product development is already quite inter- nationalised. Many multinational firms have R & D in several countries. They have a division of labour between these facilities but also cooperation and coordination on specific projects. For example, when Procter & Gamble developed its new liquid Tide deter- gent, it drew on special skills and conditions in both its Japanese and European labs as well as work done in corporate headquarters in Cincinnati. Though this was a new devel- opment for Procter & Gamble it was more common for many other multinationals.

This kind of intemationalised product development will be increasing both because of necessity and feasibility. It is becoming more necessary for two reasons: (1) because of the growing internationalisation of markets (or "globalisation" as Levitt (1983) called it) and (2) because of the growing number of international market segments as noted by Ohmae (1985). It is becoming more feasible for two reasons also.

Fist, as firms gain experience with such coordination it becomes part of their manage- ment skills and competitive advantage. Second, improvements in communications technology will facilitate it. Staff in different countries can not only talk together, they can share pictures and data on their screens. In the global corporate boardroom, it will be possible to have good audiovisual communi- cahon without expensive travel.

Another factor encouraging intemationa- lisation of R. & D is the availability of lower- cost research talent in countries other than the multinational's home market. Such coun- tries as India, Israel, the Philippines, and Taiwan offer numbers of skilled people at much lower rates than in Europe, Japan, or

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the United States. For example, India has the thud largest number of engineers after the U.S. and the U.S.S.R. Because of this low cost resource, electronics firms such as Texas Instruments have put R & D facilities there. India is developing its own version of Silicon Valley in Bangalore.

Another aspect of the internationalisation of product development is the increasing amount of collaborative development between nominally competitive firms, frequently from different countries. Siemens joins with Phiips, Honda joins with British Leyland, and Kodak gets products from the Japanese. These are just illustrations of hundreds of collaborations found in Europe, Japan and the United States.

These strategic parmerings or international cooperations are not maniages of love but of necessity. The increasing cost of product development is going beyond the resources of even many very large firms. As an example, in one collaboration, Siemens and Philips are putting up $4001~1 each and their governments are putting up another $400111. In the U.S., the antitrust group in the govem- ment is allowing cooperative R & D by a large number of computer and electronics companies because these firms cannot afford to compete on an individual firm basis.

The declining life span of the international product life cycle is another pressure on product development. It raises the costs and encourages collaboration in the search for new products. Historically, when firms invested in R & D, they had a reasonable time to recoup that investment through the sales of the new products coming out of that R & D. From now on, the period of monopoly rents from new products is likely to be much shorter. The intensity of competition and the speed of technology change with computer- assisted R & D have reduced the time any innovator can be king of the mountain. For

individual firms, that means increased R &

I D budgets and a search for strategic collabor- ations to sunrive as a competitor in this volatile environment. As Ohmae has noted, high R & D budgets mean global exploitation of new products is essential. Most firms need strategic partners either for the increased R & D budget or for the necessary international distribution, or both.

The number and size of international market segments should continue to grow. That, along with other factors, will mean an increasing emphasis on internationalised or globalised products. Even with these devel- opments, however, Levitt's world of globally homogenised products is not just around the comer. We are likely to enter the year 2001 with many products still requiring national- ised adaptation. The European Common Market has been with us for more than 25 years. The persistence of national differences within that grouping illustrates the slowness and difficulty of achieving standardisation in marketing and products, even among neigh- bouring countries. Cultural change is a very slow process compared to technological

' change. A noteworthy U.S. development should be

mentioned here. Some American mass marketers are beginning to experiment with regionalised products and marketing wlfhin the U.S. This illustrates the continuing tension between standardised and localised prod- ucts. (Business Week 1987). Promotion. The field of international promotion is responding to two forces: the integration of the world economy and the push of technology. Several aspects of promotion will be affected by these forces. Advertising Messages and Media. The debate about standardisation of international advertising messages has been going on at least a quarter of a century.

It has not been resolved and will not be

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5 5 THE EVOLUTION OF INTERNATIONAL MARKETING

resolved before the end of this century. However, we will see a gradual and steady increase in the globalisation of advertising messages. Several different factors will support this ongoing development.

One factor is the continuing integration and growth of the international advertising agencies. Some agencies followed their clients abroad more than 60 years ago. This behaviour became a major trend, however, only in more recent decades with the growth and spread of the multinationals. Inter- nationalisation became the path of growth and even survival for many agencies. Perhaps the greatest comparative advantage of the international agency in bidding for an account against a purely national agency is its ability to coordinate international campaigns. As a result, these international agencies are among the major proponents of inter- national, as opposed to national, advertising messages. Saatchi & Saatchi is the leading example. Wherever intemational campaigns are feasible, these agencies will be developing them and persuading their clients to use them. It is noteworthy that Saatchi and Saatchi have put Levitt on their board, thus gaining a major academic spokesman in support of their global approach.

A second factor supporting the expansion of international campaigns and messages will be the growth of international market segments. These will increase in number and size as was noted above. Along with this will be the increase in the number of globalised products, also noted earlier. Both of these developments reflect the growing homogen- eity of demand and marketing conditions in certain product areas. As these products and market segments become more standardised or globalised, the advertising addressed to those segments will also become more standardised. Advertising media. A third factor facilitating

the globalisation of advertising messages will be the further internationalisation of the advertising media.

Many of the print media have been inter- national for many years, especially the English-language publications. Yet, they are continually on the lookout to expand their international domain. For example, The Financial Times explores the U.S. and The Wall Street Jourml expands into Asia and Europe. Even the China Daily, China's official English language newspaper, is published simul- taneously on three continents: in China, in New York and San Francisco for North America, and in London for Western Europe. Business Mreek is now going into China.

While print media are going more global, it is radio and television that are the premier intemational media of the future. More than anything else, it is radio and TV that will create the "Global Village" envisioned by MacLuhan. As the British Peacock committee discovered, the future of broadcasting will be decided, not by committees nor by govern- ments, but by the galloping progress of tech- nology. Government's ability to make purely national regulations about the commercialis- ation of their broadcast media will be increas- ingly bypassed by the new technology. The expanding internationalisation of the media will bring more and more of the world's population into the global village. In so doing, it ~vill encourage the globalisation of advertising messages.

Recognising these globalising trends must not blind us to the fact that for the foreseeable future, most advertising will continue to be done on a national, rather than global basis. In making this observation there are two models we might compare. One is the United States. For many decades, the United States was a collection of fragmented regional markets. Gradually, transportation and communication advances created the

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national market we know today. Even today, however, the majority of advertising in the United States is done locally in local media.

The other model is the European Common Market. Though these neighbouring coun- tries were gathered together expressly to form a common market - or regional village in MacLuhan's terminology - national media and national advertising continue their almost total dominance. International media and advertising will gain market share, especially in broadcast media, but will not become the major factor.

In looking at the development of adver- tising messages and media for the world economy as a whole, the European Common Market experience appears to be a better predictor of the future than the U.S. experi- ence, at least for the rest of this century. Ad agencies. Ad agencies were among the early internationalists. Their international expansion, usually by mergers or acqui- sitions, has been going on for a few decades.

It was led historically by the large Amer- ican agenaes but the current number one is the young British agency, Saatchi & Saatchi. The continuing integration of the world economy, the globalisation of markets, and improving communications technology will encourage further acquisitions and alliances. Many national agenaes who wish to grow will acquire or be acquired. Dentsu, for example, is a giant agency, but to go inter- national it depends on alliances andlor acquisitions.

All of this getting together will result in a large international oligopoly, with a greater market share than it has today. However, this will not mean the end of purely national agencies. These will always find purely national clients and niche markets. Neither does it mean that a half dozen agencies will rule the world. Jagdish Sheth predicted recently that just three mega-agencies will

Summer 1987

emerge by 1990: Dentsu, Young and Rubicam, and a French agency. That illus- trates again the danger of forecasting. One could easily criticise Sheth's choice of agencies (where is Saatchi & Saatchi, for example?) but the major disagreement must be with the idea that only three agencies will dominate the world market. That is not to be. There will continue to be a much larger number of major intemational agencies in the oligopoly. There are several reasons for this, among them, diseconomies of scale and client concern about competitive secrecy.

Along with the growth and geographic expansion of the large intemational agencies, there will be an expansion of their services. The term "full service agency" will take on broader meaning. They will offer more one- stop marketing s e ~ c e s , including marketing research, public relations, and marketing consulting. Their traditional advertising services will just be one part of a broader line of marketing services. Other promotion. There will be evolution in other areas of promotion besides advertising. The major forces for change will be the same, however, - internationalisation and advances in technology. Sales prontotion sewices will become more international. They will prob- ably become one of the international marketing services offered by the major inter- national ad agencies. More firms will want to consider sales promotion activities as part of their international marketing programme. Sales promotion offers greater promotional variety for the very competitive environment which is coming. It would be easier for marketers to integrate this if the same supplier had marketing capabilities beyond just advertising and could offer a whole promotional mix.

Technological progress will increase the use of impersonal utays of communicating with customers. Personal selling will be replaced

57 THE EVOLUTION OF INTERNATIONIAL MARKETING

in some cases, but mostly it will be enhanced by technology. International 800 telephone numbers will increase greatly and become an important form of telemarketing and customer contact just as they are already in the domestic U.S. market. Overseas distribu- tors and industrial customers can be brought much closer to the seller by this means. The technology is obviously available but so far no firm has organised and offered a fully international service.

The use of video in international marketing will increase. Well designed videos can improve the sales presentation in both consumer and industrial markets. They provide the opportunity for uniformly high quality presentations in different markets, minimising the importance of differences in the capabilities of sales personnel. Interactive video presentations also will allow for reductions in the size of the sales staff. Growing computer links between the selling f i and different levels in the distribution channel will reinforce these developments. Barter and countemade. Willingness to countemade is a form of promotion for firms wishing to sell to chronic deficit countries.

Countertrade has become an important form of international trade and marketing that will not diminish in the rest of this century. Because of its continuing import- ance, improved mechanisms and organis- ational arrangements will arise to enable firms to do a better job of dealing with the complications of countertrade. As Behrman (1986) points out, both coproduction and countertrade are popular with customer countries. This is because they perceive in them an acceptable distribution of the benefits from the international marketing transaction. Therefore, dealing with demands for coproduction and countertrade will become a necessary part of firms' inter- national marketing skills. For large firms,

countertrade will frequently be integrated or intemalised into their organisation rather than being handled outside the firm. Distribution. The fum faces three distri- bution tasks in its international marketing.

First, finding an entry method into the foreign market. Second, distribution within the foreign market. Third, coordinating global logistics. Developments will be occur- ring in all three areas but we will focus on the first two.

Concerning entry into foreign markets, Ohmae (1985) and others have noted two considerations. One is the need to enter many markets, and the other is the import- ance of being an insider. The need to enter many markets arises from the high cost of new product development and the global nature of competition. A firm must enter many markets to cover its development costs and to remain a viable competitor in the global oligopolies that are emerging.

This internationalisation of leading companies is already going on as noted by Dunning and Pearce (1985) in their study of The World's Largest Industrial Enterprises. It will continue because of the economic and competitive imperatives. International marketers will face increasingly globalised competitors. Competition within individual foreign nnarkets will also become tougher. Because many firms will not be able to enter a sufficient number of markets by themselves, they will form a variety of international coop- erative ventures or strategic partnerships to get the international coverage needed. AT& T, once the largest corporation in the world, has entered several strategic alliances in an attempt to become a global player as opposed to a purely American giant. To be a survivor, it will not be sufficient merely to be the largest firm in the domestic market, even if that domestic market is the United States.

The need to be an insider arises primarily

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from the need to get around protectionist barriers. It is reinforced by marketing considerations such as the need for local responsiveness and flexibility. Again in this situation, many firms won't have the capa- bility or the inclination to become an insider by going it alone. Thus they will again seek local collaborators, partners or - for the wealthy - acquisitions. This increasing inter- nationalisation of markets will be a further pressure and encouragement to more global- ised marketing practice.

In terms of market entry, then, we see the development of global oligopolies in many industries resulting in more firms entering more markets. One effect of this will be the heating up of the competitive environment. Another effect will be a wide variety and innovation in entry methods. This is because many new market entries will be via strategic partnerships rather than through more traditional means. Many of these innovations will not involve equity participation but will be ad hoc alliances meeting the specific needs of each partner. Distribution within foreign markets. I have just three observations here. One is to note that there will be a steady and gradual modernisation of wholesaling and retailing in most countries of the world. Technological progress will be one factor behind this devel- opment. Another factor will be the further internationalization of retailing, which is occurring through acquisitions and affili- ations. The spread of international fran- chising will also play a role. A fourth factor will be the pressures from the larger number of international marketers operating in more markets. They will want more efficient distri- bution in all their markets and their demands will help to bring it about.

A related development will be the increase in large scale retailing in many countries now dominated by small retailers. Although

"Mom and Pop" stores and the laws favouring them will not disappear, there will be strong pressures for evolution. These forces include economic pressures, consumer pressures, and producer pressures. Collec- tively, they will result in more efficient and larger scale retailing. There are signs of this even in China. As this occurs it may have some negative effects for international marketers in that the larger retailers will have more power vis a vis the producer. This can impact on pricing, branding, and other aspects of the finn's marketing in that country. The United Kingdom provides a model of what will be coming eventually in other countries along this line.

As we noted, international marketers will have their own impact on modernisation of the channel. One way they will do this is by having closer ties with their larger interme- diaries or customers. International 800 numbers and computer links with important customers will help the firm to market better and improve the performance of the channel at the same time. General Motors and Levi Strauss already have computer links with their retail customers in Europe. Such ties give them a competitive advantage that will lead to imitation by others.

Conclusion International marketing will continue to evolve as it adapts to its environment. It will be constrained by developments in the inter- national financial system and continued protectionist pressures. It will adjust to threatening world political developments. International marketers will challenged by the continued globalisation of competition and markets. The successful ones will respond by formulating global strategies, by sharpening their skills, and seeking alliances to meet specific needs in their international marketing programme. They will be aided

Summer 1987

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59 THE EVOLUTION OF INTERNATIONAL MARKETING

by technological progress which gives them better information and communication with their markets.

Because most people in the world want to live in the global village which is becoming a global marketplace, international marketers will find rewarding opportunities for the remainder of this century. Over 200 years ago, Adam Smith noted that specialisation and intemational exchange promoted the wealth of nations. International marketers will have increasing opportunities to partici- pate in that process.

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International Marketing Review