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International Marketing
Management
Chapter I
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Slide 2
A1 ABC, 6/22/2010
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Types of International Business
1. International Trade ( ForeignTrade ) -- Comprises of
imports and exports i.e., buying and/or selling products and
services abroad to fulfill needs and objectives of company.
2. International Investment When a company applies
capital beyond home country for production and/or other
functions to earn profit, it is calledInternational
Investment.
3. International Marketing -- When a company identifies
and fulfills need and wants of customers abroad through
suitable products or services at profit for company, it is
calledInternational Marketing.
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Role of International Business / Marketing
* International business puts an end to economic isolation of
nations, thereby improve national income and standard of
living.
* It facilitates mobility of factors of production excepting land
and it opens up competition.
*Like Janus (the two faced Roman God), international businessdeliver opportunities and benefits out of imports and exports to
nations.
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B. SilkRoute trade to Globalisation
-- Selling and buying of goods beyond national frontiers is
thousands of years old. From India, clothing, silk, spices etc.
used to be traded with Egypt, Persia, Rome from more than
five thousand years
-- Trading between India, China, Rome, Greece etc. wereestablished before Christian era which was the major
reason of their prosperity in those days.
-- World trade and investments gradually assumed increasing
proportion to the betterment of national income and living.
-- Finally in last century, appeared multinational corporations
in the scene carrying out manufacturing, marketing and other
functions in nations globally.
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Paradigm shifts
-- From latter half of last century international businessunderwent major changes when large companies from U.S.,
Europe, Japan started expanding their operation beyond their
home countries.
-- These companies started identifying needs and wants ofcustomers in different nations and then provided them with
suitable products and service to satisfy; known as
multinational approach by firms like IBM, GM, Bayer,
Unilever, Toyota, Suzuki etc.
-- Next, with advent of newer technologies in telecom,
transportation and travel, national markets started integrating
with each other, thus same products and services started
finding their way into different country markets called
globalisation.
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These trans-border transactions came to be segregated as :
International Trade -- When products, service, technology,capital etc. flow across national borders for profit, it is called
international trade with orientation called ethnocentric.
International Marketing -- When companys objective is to
satisfy customers needs and wants at profit, it is calledinternational marketing; it embracespolycentric orientation e.g.
MNCs like Ranbaxy, HLL, Samsung, Petronas etc.
Global Marketing -- A global companystandardises its
marketing mix elements as far as possible to delivermaximum value to customers. It treats whole world as a
single market e.g., Harley Davidson, Sonys Walkman,
Walmart etc. Orientation of Global companies is mixed of
ethnocentric and polycentric orientation.
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Glocal Operations -- Global companies are increasingly
adopting structure and strategies to suit global operations forgreater value addition for customers all over but with focus on
local environments, in order to maximise satisfaction of those
local customers.
--For example,
Nokia is marketing mobile handsets in Indiathat provides SMS facility in Hindi and other Indian languages at
competitive prices.
-- Of course it increases marketing and other operational
complexities for company.
-- Strategy of these companies is to Think Global but Act
Local so called Glocal.
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C. Opportunities & Challenges of International Marketing
--It is well known that international business creates wealthfor individuals, companies and nations. Formation and also
decline of Roman empire was linked to international business.
Rise ofBritish empire to eminence in nineteenth and decline
in twentieth century was again due to international business.
Opportunities
-- Firms go global broadly because of TWO reasons :
1. Pull Factors -- it comprises of proactive reasons that pull
the firm to foreign transactions for
*Profit -- Generally international marketing is more profitable
compared to domestic.
*Top-line Growth -- At times of domestic recession, foreign
sales keeps company going.
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*Economy of Scale in operations.
*Spreading of risks -- Foreign markets reduce dependence of
firm on domestic market, as China is thriving now on U.S.
and Europe market.
*Uniqueness of product or service -- Unique attributes mayoffer enormous opportunity and very less competition abroad,
e.g. Indian herbal medicines, Chinese Tiger-balm etc.
*Stage in life
cycle
*Cheapercost of factors of production -- like cheap raw
material, labour, land etc.
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2.Push Factors -- drives the firm to explore opportunities like
*Home & Host Govt. Policies Tax benefits, subsidies etc.
*Spin-off Benefits Success in foreign markets boost
companys image in home market, also helps in introducing
newer products and services with enhanced brand image.
*Sharing of R&D costs -- MNCs can embark into ambitious
R&D projects compared to single-country companies as their
research expenses are shared between various country markets
*Competition -- Intense competition in home markets push
companies out to markets abroad.
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Challenges
--Difference in environment, competition, national income etc.give rise to formidable challenges in international marketing
*Political and Legalchallenges Generally political and
legal framework differs from country to country so
marketing approach is required to be tailored accordingly.
* CulturalEnvironment -- Behaviour pattern, liking and
disliking of customers differ from nation to nation, these are
to be accounted in assorting marketing mix elements.
*EconomicEnvironment -- Marketing strategy at host country
should be designed keeping in mind host markets nature of
economy, scenario and other policies.
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* Demographic and Technological Factors -- Population, its
growth rate, composition and level of technologicaladvancement influences marketing strategy in host nations.
*Business Infrastructure -- Availability of suitable banking
system, stock exchanges, market research & advertising
agencies, intermediaries are to be viewed in advance.
*Money and Monetary System Exchange rate of currencies,
its perpetual fluctuation offer major challenges in marketing
planning.
*Logistic Support System -- Availability of transport, its cost,
time, warehousing , inventory management and their expenses
are matters of serious concern.
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D. Internationalisation of Emerging market trades
-- Business operation of firms both in philosophy and style
undergo change as those emerge to occupy salient positions in
global trade.
-- Their focus and strategy changes in specific stages as under
Stage I -- Domestic Companies
-- Majority of companies start operation in their home country.
Theirfocus, vision and activities remain limited.
-- These companies focus upon domestic market, domestic
supplies and domestic competitors.-- Mindset of these companies is If it is not happening in
home country , it is not happening anywhere, neither it is worth
happening. It is called ethnocentric orientation.
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Stage II -- International Companies
-- On being attracted by opportunities abroad or otherwise,
these companies then extend one or more of their functions like
marketing, procurement, manufacture etc. to foreign countries to
provide greater value to customers. Thus it becomes a second
stageInternationalcompany.
-- But the company adopts same products, policies and
strategies as they follow in their home country.
-- Its orientation continue to remain ethnocentric.
-- So for all practical purposes, International operations are
extension of domestic operation.
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Stage III Multinational Companies
-- Next the company identifies difference in environments and
demand pattern in host countries.
-- So learns to change their approach, marketing mix elements
and strategies to satisfy different country customers.
-- Thus companys overall strategy comprises of a collection ofindividual strategies called multidomestic approach.
-- This type of operation is called Multinational operation.
Mindset of company also changes to Polycentric orientation.
-- Multinationalcompanies respond to different environment in
hostcountries and evolve different strategies to deliver
satisfaction to customers at profit.
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-- That is why, McDonalds market McAlu Tikki in India in
place ofB
igM
c with beef or ham as in U.S
. and Europe.
-- MNCs view the World as coglomoration of markets which
individually are different. So MNCs make strategy for each nation
as necessary.
-- That is, MNCs assort marketing mix elements like product
(service), price, path and promotion in a manner to satisfy local
customers.
--Overall strategy of
MNCs is to generate competitiveadvantage over other players through:
Manufacturing at lowest cost
Differentiation of product (service) from competitors
Evolving and exploiting market protection.
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Stage IV Global Companies
-- Next, the company attempts to add greater value to their
product or service for enhanced satisfaction to customers.
-- By focusing on eitherglobal sourcingorglobal marketing
approachbut notboth. It is referred to as Global Operation.
-- So, Global companies try to satisfy customers located all
over globe by sourcing products from home country. As is
done by Sonys Walkman or Harley Davidson motorcycles.
-- In the process, Sony or Harley Davidson introduce benefitsof Economy ofScale leading to low cost manufacture at one
location at Japan or U.S., compared to competitors.
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-- Similarly, Walmart procures value-addedproducts from all
over world to provide greatest satisfaction to US
customers atlower price through more than13000 retail outlets by harnessing
global sourcing & logistics strategy.
-- In Global companies, key activities are logistics and
marketingorsourcing. The suppliers and customers maintain a
hub and periphery relationship among themselves.
-- Orientation of Global companies is mixedof ethnocentric and
polycentric mindsets.
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Stage V Transnational Companies
-- Next, companies integrate global resources with global
markets at profit carried out through transnational operation
without consideration of national borders.
-- Philosophy of a Transnational company is to add best value to
product or service by using resources from wherever those are
best and economical globally so as to provide greatest
satisfaction to customers universally.
-- For example, News Corporation (I) Ltd. (Star TV of Rupert
Murdoch), Caterpillars Ltd. and most of automobile giants are
shifting from MNC to the TNC way.
-- Orientation of TNCs is Geocentrici.e. vasudaiva
kutumbakammeaning that whole world is my family.
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