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Title: International Marketing
Description: Introduction to international marketing, definition, features. International marketing strategies, Implementation.

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Licensed to: iChapters User

Licensed to: iChapters User

International Marketing Strategy, 5th Edition
Isobel Doole and Robin Lowe
Publishing Director: John Yates
Publisher: Jennifer Pegg
Development Editor: Lucy Mills
Production Editor: Leonora Dawson-Bowling
Manufacturing Manager: Helen Mason
Senior Production Controller: Maeve Healy
Marketing Manager: Angela Lewis
Typesetter: Newgen, India
Cover design: Adam Renvoize

© 2008, Cengage Learning EMEA
ALL RIGHTS RESERVED
...

While the publisher has taken all reasonable care in the preparation of
this book, the publisher makes no representation, express or implied,
with regard to the accuracy of the information contained in this book and
cannot accept any legal responsibility or liability for any errors or
omissions from the book or the consequences thereof
...
info@cengage
...

For permission to use material from this text or product,
and for permission queries, email
clsuk
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com

Products and services that are referred to in this book may be
either trademarks and/or registered trademarks of their
respective owners
...

British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
...

For your lifelong learning solutions, visit
www
...
co
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bized
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uk

Printed by Seng Lee Press
1 2 3 4 5 6 7 8 9 10 – 10 09 08

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

The emergence of a more open world economy, the globalisation of consumer tastes and the unabated
expansion of Internet access globally all increase the interdependency and interconnections of nation
economies across the globe
...

In this chapter, the reader will be introduced to the concepts of international marketing, enabling them to
acquire an appreciation of the complexities of marketing on an international basis and of how this activity differs
from operating purely in domestic markets
...


LEARNING OBJECTIVES
After reading this chapter you should be able to:
I

Explain and use the SLEPT factors to assess international markets

I

Discuss the differences between export marketing, international and global marketing

I

Understand the criteria required to evaluate a company’s international marketing strategy

I

Appreciate the key steps in the international marketing planning process

3
Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
5 trillion and
world trade in services is estimated at around US$2
...
Whilst most of us
cannot visualise such huge amounts, it does serve to give some indication of the
scale of international trade today
...
6 billion people which is
expected to reach 10 billion by 2050 according to the latest projections prepared
by the United Nations
...
Increasing
affluence and commercial dynamism has seen nations across Asia, Central and
Eastern Europe emerge as high growth economies
...

Population growth and increased affluence together have helped create a
‘global youth culture’ – teenagers now account for 30 per cent of the population
globally
...
Everywhere adolescents project worldwide cultural icons, Nike, Coke, Gap and Sony Walkman,
as well as Sega, Nintendo and the Sony Playstation
...
Parochial, local and ethnic growth products may
face difficult times
...
They drive international cars, take foreign holidays, watch international
programmes on television, use international hardware and software
...
The top 500 companies in the world now account
for 70 per cent of world trade and 80 per cent of international investment
...

To strategically position themselves for global competitiveness, companies
are consolidating through mergers, acquisitions and alliances to reach the scale
considered necessary to compete in the global arena
...
In Europe last year mergers and acquisitions were
worth US$ 1
...
54 trillion
...
In Germany
e
...
GSK have a number of global alliances in the pharmaceutical market, creating the world’s largest research-based pharmaceutical
company
...
In the US, Morgan
Stanley and Dean Witter merged to offer global investment as well as global private
banking and credit card services
...
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
...
Information moves anywhere in the

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

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 analyse, plan and implement strategies across the globe
...

So perhaps now we should turn our attention to examining exactly what we
mean by international marketing
...
The Chartered Institute of Marketing defines marketing as the ‘Management
process responsible for identifying, anticipating and satisfying customer requirements profitably’
...


In this way, it is argued, the company or organisation best prepares itself to
achieve competitive advantage in the marketplace
...
e
...

How does the process of international marketing differ? Within the international
marketing process the key elements of this framework still apply
...
First, there are different levels at which international marketing can be
approached and, second, the uncontrollable elements of the marketing environment are more complex and multidimensional given the multiplicity of markets
that constitute the global marketplace
...


International marketing defined
At its simplest level, international marketing involves the firm in making one or
more marketing mix decisions across national boundaries
...
At one extreme there
are firms that opt for ‘international marketing’ simply by signing a distribution
agreement with a foreign agent who then takes on the responsibility for pricing,
promotion, distribution and market development
...
Thus, at its most
complex, international marketing becomes a process of managing on a global

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
These different levels of marketing can be expressed in the following terms:
I

I

I

Domestic marketing, which involves the company manipulating a series of
controllable variables such as price, advertising, distribution and the
product/service attributes in a largely uncontrollable external environment
that is made up of different economic structures, competitors, cultural
values and legal infrastructure within specific political or geographic
country boundaries
...
It is these
sorts of differences that lead to the complexities of international marketing
...
Here a company coordinates, integrates and controls
a whole series of marketing programmes into a substantial global effort
...


This type of strategy calls for managers who are capable of operating as
international marketing managers in the truest sense, a task which is far broader
and more complex than that of operating either in a specific foreign country or
in the domestic market
...
(2006) comment that ‘the
international marketing manager has a dual responsibility; foreign marketing
(marketing within foreign countries) and global marketing (co-ordinating
marketing in multiple markets in the face of global competition)’
...

International marketing could therefore be:
I

I

I

Export marketing, in which case the firm markets its goods and/or services
across national/political boundaries
...
Sometimes markets are typically perceived to be independent and a
profit centre in their own right, in which case the term multinational or
multidomestic marketing is often used
...


The first of these definitions describes relatively straightforward exporting
activities, numerous examples of which exist
...
Here the world is seen
as a market segmented by social, legal, economic, political and technological
(SLEPT) groupings
...

For all these levels the key to successful international marketing is being able
to identify and understand the complexities of each of these SLEPT dimensions

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
As in domestic marketing, the
successful marketing company will be the one that is best able to manipulate
the controllable tools of the marketing mix within the uncontrollable environment
...
It is these complexities that we will examine in the
following sections
...
An international manager needs a knowledge and
awareness of these complexities and the implications they have for international
marketing management
...
For the purposes of this textbook, we will use the SLEPT approach
and examine the various aspects and trends in the international marketing environment through the social/cultural, legal, economic, political and technological
dimensions, as depicted in Figure 1
...


Social/cultural environment
The social and cultural influences on international marketing are immense
...
It is this area that determines the
extent to which consumers across the globe are either similar or different and so
determines the potential for global branding and standardisation
...
It had to deal with a market that is
40 per cent vegetarian, had an aversion to either beef or pork among meat-eaters

FIGURE 1
...
All Rights Reserved
...


7

Licensed to: iChapters User
8

PART 1 ANALYSIS

and a hostility to frozen meat and fish, but with the general Indian fondness for
spice with everything
...
Customers buying vegetarian burgers
wanted to be sure that these were cooked in a separate area in the kitchen using
separate utensils and sauces like McMasala and McImli were developed to satisfy
the Indian taste for spice
...


Cultural factors
Cultural differences and especially language differences have a significant impact
on the way a product may be used in a market, its brand name and the advertising
campaign
...
They
managed to find a new pronunciation ‘Kee Kou Keele’ which means ‘joyful tastes
and happiness’
...

Pepsi Cola had to change its campaign ‘Come Alive With Pepsi’ in Germany as,
literally translated, it means ‘Come Alive Out of the Grave’
...
When Apple launched the iMac in France they discovered the brand name
mimicked the name of a well established brand of baby laxative – hardly the image
they were trying to project
...
Consider northern Europe
versus Latin Europe, the northwest of the USA versus the south or Bejing and
Taipei
...
A
campaign by Camay soap which showed a husband washing his wife’s back in the
bath was a huge success in France but failed in Japan, not because it caused
offence, but because Japanese women viewed the prospect of a husband sharing
such a time as a huge invasion of privacy
...
The dominance of a
number of world brands such as Microsoft, Intel, Coca-Cola, McDonald’s, Nike
etc
...

However, it is important not to confuse globalisation of brands with the
homogenisation of cultures
...

There are also a number of cultural paradoxes which exist
...

There are more than 600 000 Avon ladies now in China and a growing number of
them in Eastern Europe, Brazil and the Amazon (see Illustration 1
...

In northern Kenya you may find a Sambhuru warrior who owns a cellular telephone
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
Chapter 3 is devoted to
a full examination of the social and cultural influences in international marketing
...


Social factors
Growth and movement in populations around the world are important factors
heralding social changes
...
Two out of every five
people live in China and India
...

Over the next half century, Africa’s population will almost treble
...
2 billion to 1
...
With a population of 1
...
Europe is the only region where the population is expected to decline; any
increase in population in high income countries is entirely due to migration
...
By 2010, 50 per cent of the world’s population will live
in urban areas: the world is moving into gigantic conurbations
...

Cities such as Lagos, Buenos Aires and Djakarta will soon outstrip cities such as
Paris, London and Rome
...
1
The beautification of the ageing
baby boomers

SOURCE: ANTHONY GRIMES, UNIVERSITY OF HULL

Analysts at Goldman Sachs estimate that the global beauty
industry is worth about 100 billion US dollars a year and is growing at up to 7 per cent a year, more than twice the rate of the
developed world’s GDP
...
China, Russia and South Korea and Brazil are turning
into huge markets
...
Avon is expanding rapidly in
Eastern Europe and Russia as well as in South America
...

Global competition in the market is becoming increasingly
intense
...
Luxury product
manufacturers such as Dior, Chanel and Yves St Laurent are
moving into mainstream beauty products and many of the
global giants are growing by buying up smaller brands
...

The traditional global beauty brands established by such
companies as L’Oréal, Elizabeth Arden and Helena Rubenstein
are now having to fight hard in a global market where
traditionally they have earned huge margins and enjoyed
continuous growth for many years
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

This has powerful implications for international marketing
...
Urban dwellers require similar products (packaged
conveniently and easy to carry)
...
It also means, for
the incoming company, that customers are accessible
...
Table 1
...


Legal environment
Legal systems vary both in content and interpretation
...
Firms operating in the European Union
are facing ever-increasing directives which affect their markets across Europe
...
2)
...

In the USA, for instance, the MG sports car was withdrawn when the increasing
difficulty of complying with safety legislation changes made exporting to that
market unprofitable
...
Using EU law, Nestlé attempted
to stop the sale of Lifesavers in the EU purely to protect their market share
...
These laws constitute the ‘rules of the game’ for business activity
...
1

The world’s ten mega cities in 2015
Country

Population (millions)

Tokyo

Japan

26
...
1

Lagos

Nigeria

23
...
1

Sao Paulo

Brazil

20
...
2

Mexico City

Mexico

19
...
4

Jakarta

Indonesia

17
...
3

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

I

I

I

Local domestic laws
...

International law
...
Some are international laws covering piracy and hijacking,
others are more international conventions and agreements and cover items
such as the International Monetary Fund (IMF) and World Trade Organisation
(WTO) treaties, patents and trademarks legislation and harmonisation of legal
systems within regional economic groupings, e
...
the European Union
...
The organisation’s domestic (home
market) legal system is important for two reasons
...


It will be readily understandable how domestic, international and local legal
systems can have a major impact upon the organisation’s ability to market into

ILLUSTRATION 1
...

The ruling was a victory for the 200 or so producers of
Parma ham who had launched their legal action against
Asda, a UK food retailer
...
The Parma producers argued that slicing
the ham was an important process that had to be done
locally
...
The court showed it was more
concerned with the protection of the ham producers’ rights
than market efficiency
...


QUESTION

Do you think the court decision protects local
market diversity across European markets, or does it act as a
restrictive trade practice?

PHOTO CREDIT: CUBOIMAGES SRL/ALAMY

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
Laws will affect the marketing mix in terms of
products, price, distribution and promotional activities quite dramatically
...
Often firms operating internationally face ethical challenges
in deciding how to deal with differing cultural perceptions of legal practices
...
In Germany, for instance, environmental laws mean a firm is responsible for the retrieval and disposal of the packaging waste it creates and must
produce packaging which is recyclable, whereas in many emerging markets there
may be limited patent and trademark protection, still evolving judicial systems,
non-tariff barriers and an instability through an ever-evolving reform programme
...
However, this is now changing
...
Anheuser Busch (USA) and
Budvar (Czech Republic) have been in constant litigation over the right to use the
name Budweiser in the European Union and both companies have recently been
legally deemed the right to use it
...
Bootlegged software constitutes 87 per cent of all personal computer
software in use in India, 92 per cent in Thailand and 98 per cent in China, resulting
in a loss of US$8 billion for software makers each year
...
For example, shoes
cannot be imported in pairs but have to be imported one at a time – which causes
huge problems for shoe manufacturers who need to import shoes as production
samples
...
Companies such as Mercedes
Benz, Coca-Cola and Kellogg have found the vast potential of India’s market
somewhat hard to break into
...
Political squabbles, bureaucratic delays
and infrastructure headaches are also major obstacles
...
This understanding is important at a world level in terms of the world trading infrastructure
such as world institutions and trade agreements developed to foster international
trade, at a regional level in terms of regional trade integration and at a country/
market level
...

Amongst the 194 countries in the world, there are varying economic conditions,
levels of economic development and Gross national income (GNI) per capita
...
The United Nations
classes 75 per cent of the world’s population as poor, that is, they have a per capita
income of less than US$3470, and only 11 per cent of the population as rich,
meaning they have a per capita income of more than US$8000
...
Such disparities of incomes
set particular challenges for companies operating in international markets in
terms of seeking possible market opportunities, assessing the viability of potential

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

Another key challenge facing companies is the question as to how they can
develop an integrated strategy across a number of international markets when
there are divergent levels of economic development
...

The Economist ‘Big Mac’ Index ( Figure 1
...
It provides a rough measure of the purchasing power
of a currency
...
It divides the
price of a Big Mac by the average net hourly wage in cities around the world
...
This causes problems for McDonald’s in trying to pursue a standard product
image across markets
...
21, whereas in China it would be US$1
...

In order to examine these challenges further we divided the economies into
developed economies and less developed economies
...
For many
firms this constitutes much of what is termed the global market
...
In the European Union nearly 70 per cent of the
international goods traded are traded within the European Union; in NAFTA,
50 per cent of goods exported are to other members of NAFTA
...
It is from these
developed economies that the global consumer with similar lifestyles, needs and
desires emanates
...


FIGURE 1
...
All Rights Reserved
...


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14

PART 1 ANALYSIS

The emerging economies
In countries such as Brazil, Russia, India and China, (the BRIC economies) there is
a huge and growing demand for everything from automobiles to cellular phones
and all are viewed as key growth markets where there is an evolving pattern of
government-directed economic reforms, lowering of restrictions on foreign investment and increasing privatisation of state-owned monopolies
...

Such markets often have what is termed as a ‘dual economy’
...

Income distribution tends to be much more skewed between the ‘haves’ and the
‘have nots’ than in developed countries
...
Brazil and Indonesia have middle classes of 25 million each
...

The main features are a low GDP per capita, a limited amount of manufacturing
activity and a very poor and fragmented infrastructure
...
In addition,
the public sector is often slow-moving and bureaucratic
...
In many LDCs this product is
the main export earner
...
In addition, three-quarters of
LDCs depend on their main trading partner for more than one-quarter of their
export revenue
...
Falling commodity prices can result in large decreases in earnings for the whole country
...
In addition,
substantial decreases in market sizes within the country are probable
...
Some countries are small with few natural
resources and for these countries it is difficult to start the process of substantial
economic growth
...
At the same time, there are demands for public expenditure on
transport systems, communication systems and water control systems
...
1
How do you sell to subsistence farmers
in Africa ?
KickStart International is a non-profit organisation
that sells irrigation systems to subsistence farmers in
Africa
...
They live hours
from major cities and many are illiterate
...
The
other dilemma is given the levels of illiteracy, how do
they educate the farmers to use the equipment and
how do KickStart get their message across given the
small budget they have for such activities?

QUESTION

How should KickStart approach this market?

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
This is particularly the case for long-term
infrastructure projects and, as a result, important capital spending projects rely
heavily on world aid programmes
...
1
...
On top of all the normal vagaries of
markets, customer demands, competitive actions and economic infrastructures,
foreign exchange parities are likely to change on a regular if unpredictable
basis
...
Companies that guess wrongly as to which way a currency
will move can see their international business deals rendered unprofitable
overnight
...

In Europe, the formation of the European Monetary Union (EMU) and the
establishment of the Single European Payments Area (SEPA) has led to greater
stability for firms operating in the market
...


Political environment
The political environment of international marketing includes any national or
international political factor that can affect the organisation’s operations or its
decision making
...

Politics is intrinsically linked to a government’s attitude to business and the
freedom within which it allows firms to operate
...
This often means that the political arena is the most volatile
area of international marketing
...
The invasions of Afghanistan and Iraq have brought
market development opportunities for some but market devastation for others
and higher political risk in neighbouring markets for all
...
Lesser developed countries and
emerging markets pose particularly high political risks, even when they are
following reforms to solve the political problems they have
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...

The types of action that governments may take which constitute potential
political risks to firms fall into three main areas:
I

I

I

Operational restrictions
...

Discriminatory restrictions
...
The USA has
imposed import quotas on Japan in protest at non-tariff barriers which they
view as being imposed unfairly on US exporters
...
Such barriers tend to be
such things as special taxes and tariffs, compulsory subcontracting, or loss of
financial freedom
...
These actions are direct government interventions
such as confiscation without any payment of indemnity, a forced takeover
by the government, expropriation, nationalisation or even damage to
property or personnel through riots and war
...


Investment restrictions are a common way governments interfere politically in
international markets by restricting levels of investment, location of facilities,
choice of local partners and ownership percentage
...
The government not only wanted such an operating
system to be designed in China but also insisted on defining the coding standards
for Chinese characters’ fonts, something Microsoft had done independently
everywhere else in the world
...
But the
Chinese electronics industry threatened to ban Windows and president Jiang
Zemin personally admonished Gates to spend more time in China and ‘learn
something from 5000 years of Chinese history’
...

The World Trade Organisation has led negotiations on a series of worldwide
agreements to expand quotas, reduce tariffs and introduce a number of
innovative measures to encourage trade amongst countries
...
An understanding of these issues is
critical to the international marketing manager, which is why in Chapter 2
we examine in some detail the patterns of world trade, the regional trading
agreements and the development of world trading institutions intended to
foster international trade
...

The political and economic environments are greatly intertwined and, sometimes, difficult to categorise
...
Illustration 1
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
The impact of technological advances
can be seen in all aspects of the marketing process
...

Satellite communications, the Internet and the World Wide Web, client–server
technologies, ISDN and cable as well as email, faxes and advanced telephone
networks have all led to dramatic shrinkages in worldwide communications
...
At the touch of a button we can access information on the key factors that determine our business
...
Manufacturers wanting to know the price of coffee beans or the relevant
position of competitors in terms of their share price or new product activity have
it at their immediate disposal
...

They are bypassing terrestrial communication systems, enabling them to catch up

ILLUSTRATION 1
...
The ad carried the tagline:
‘I’m good
...
I’m too good to share
...

To make sure nobody missed the point, the ad’s creators laid
the ‘too good to share’ catch-line over a map of Kashmir
...
Arguments over Kashmir
have taken India and Pakistan to the brink of nuclear war:
using them to sell chocolate was perhaps not the wisest thing
to do
...
To
add insult to injury the advertisement was timed to appear on
15 August, India’s Independence Day
...
It was British
colonial rulers who, at partition in 1947, drew the boundary
line between India and Pakistan that the two nations have
battled over ever since
...


QUESTION
PHOTO CREDIT: BARRY LEWIS/ALAMY

What are the dangers of a company making
such blunders when it operates globally?

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
In emerging
economies consumers are jumping from no telephone to the latest in global communications technology
...
The use of Global System for Mobile Communications
(GSM) technology enables mobile phone operators to determine the location of a
customer globally to send them relevant and timely advertising messages
...

Increasingly companies are using India as a centre for their global online customer
service operations
...
4)
...
Airlines such as EasyJet and RyanAir have
helped completely change the way we book our airline reservations
...
Firms ranging from a few employees to large multinationals have
realised the potential of marketing globally online and so have developed the
facility to buy and sell their products and services online to the world
...

For many years Indian technicians have been beavering away
writing code to be sold as an American or European brand
...
Indian marketing professionals have been arguing for some time that IT exports would be more secure if they
relied less on outsourcing and were ‘products’, where the Indian

seller owns the intellectual property, not just the brainpower for
hire
...

At a time when there has been a protectionist backlash in
America and Europe against the outsourcing of IT jobs to India
and fears of decline in the industry as margins and costs are
being further reduced, Indian software firms are emerging
from the shadows and fighting in the global market under
their own brand names
...
2 per cent of a global market of
US$180 billion for software products
...
The product business depends on
heavy investment in sales, marketing and branding and the ability
to market globally against fierce and rich competitors
...
(FSI) in the USA to launch FLEXICUBE as a hosted offering to
community banks in the US
...


QUESTION
PHOTO CREDIT: FREDRIK RENANDER/ALAMY

How should new brands in developing
countries compete against established US global brands?

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
THEHINDUBUSINESSLINE
...
4

Licensed to: iChapters User
CHAPTER 1 AN INTRODUCTION TO INTERNATIONAL MARKETING

An estimated 1
...
However, for many this will be through public-based
Internet services in cafes etc
...

The Internet has meant huge opportunities for small and medium-sized
enterprises (SMEs) and rapid internationalisation for many
...
Because of the low entry costs of the Internet it has
permitted firms with low capital resources to become global marketers, in some
cases overnight
...

For all companies, the implications of being able to market goods and services
online have been far reaching
...
This has led to the increasing standardisation of prices
across borders or, at least, to the narrowing of price differentials as consumers
become more aware of prices in different countries and buy a whole range of
products via the net
...
The Internet, by
connecting end-users and producers directly, has reduced the importance of
traditional intermediaries in international marketing (i
...
agents and distributors) as more companies have built the online capability to deal direct with their
customers, particularly in B2B marketing
...
The critical resource possessed by this new breed of
‘cybermediary’ is information rather than inventory
...
Many global firms have developed supplier intranets through which
they source products and services from preferred suppliers who have met the
criteria to gain access to their supplier intranets
...

Thus the Internet produces a fundamentally different environment for international marketing and requires a radically different strategic approach affecting
all aspects of the marketing process
...
Many early dotcom high growth companies became ‘dot
...
Levi Strauss stopped its Internet
selling operation after finding the cost of servicing returned goods was greater
than the revenue generated from new sales
...
On the other
hand, to access this global village a person invariably needs a command of the
English language and access to a whole range of equipment
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
It is estimated that only 10 per cent of the world’s population has
direct access to a PC and only 7 per cent have direct access to the Internet
...
There are also major
disparities in the cost of accessing the Internet
...
However, in
Bangladesh the same amount of access is equivalent to 278 per cent of the average
income and in Madagascar 614 per cent, hardly making access to the Internet
feasible for the average person, even if it is technically available
...
This
often results in widespread production and distribution bottlenecks, which in
turn raises costs
...
Fragmented
and circuitous channels of distribution are a result of lack of adequate infrastructure
...
Pepsi Cola in Eastern Europe have a large number of
decentralised satellite bottling plants in an attempt to overcome the lack of a
distribution infrastructure
...
Chapter 12 of this edition is devoted to examining the implications
for the international marketing strategies of companies of such trends in the
technology environment
...
These can be summarised as follows:
1
2
3
4
5
6
7
8
9
10

Culture: often diverse and multicultural markets
Markets: widespread and sometimes fragmented
Data: difficult to obtain and often expensive
Politics: regimes vary in stability – political risk becomes an important
variable
Governments: can be a strong influence in regulating importers and foreign
business ventures
Economies: varying levels of development and varying and sometimes
unstable currencies
Finance: many differing finance systems and regulatory bodies
Stakeholders: commercial, home country and host country
Business: diverse rules, culturally influenced
Control: difficult to control and coordinate across markets
...
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CHAPTER 1 AN INTRODUCTION TO INTERNATIONAL MARKETING

The international competitive landscape
A major difference for managers operating on international markets is the impact
all these currents and cross-currents have on the competitive landscape
...
The task of achieving this in a competitive environment where
firms are subject to local, regional and global competition can be immensely
challenging
...

Across international markets, advanced countries are seeing significant
competition from both emerging markets and less developed countries who
are exploiting modern technology and their own low labour costs to compete in
markets no longer so protected by tariff walls
...

Given the nature of the challenges and opportunities identified above and the
speed of change within the international environment, this means that substantially different pressures are being placed upon management than if they were
purely operating in domestic markets
...

Perlmutter (1995) identified nine cross-cultural management incompetencies
which led to failure across a spread of country markets
...

The first three are interrelated and relate to the failure to be market driven
...

2 Unwillingness to adapt and update products to local needs
...

4 A vacillating commitment
...

5 Assigning the wrong people
...

6 Picking the wrong partners
...

7 Inability to manage local stakeholders
...

8 Developing mutual distrust and lack of respect between HQ and the affiliates
at different levels of management
...

If such mistakes are not to be made in your marketing strategies it is essential to
ensure that the company has a robust and rigourous approach to its international
marketing plannning processes
...


Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
For large global companies, the problem becomes one of
how to structure the organisation so that its increasingly complex and diverse
activities around the world can be planned and managed effectively, its goals can
be achieved and its stakeholders’ expectations satisfied
...


The planning process
The planning process is the method used by the management of the firm to
define in detail how it will achieve its current and future strategic aims and objectives
...

The international planning process must allow the company to answer the
following three marketing questions
...
There is an implication in these questions
that the future is likely to be significantly different from the past, so planning is
inevitably about forecasting and implementing change which determines the very
nature and future direction of the organisation
...
These goals cannot be
set in isolation, however, as the company’s history and current levels of success
in its different country markets are usually major determinants of its future
...

Too many firms, particularly smaller ones, fail to prepare contingency plans to
cope with the unexpected and, in some cases, even the predictable events in international markets: they are often surprised and unprepared for success too
...
Whilst it may be possible to survive in a relatively
uncomplicated domestic environment by reacting rapidly to new situations as
they arise, it is impossible to grow significantly in international markets, as an
overly reactive management style is usually wasteful of opportunities and resources
...
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CHAPTER 1 AN INTRODUCTION TO INTERNATIONAL MARKETING

23

In international markets, planning and control is essential for both day to day
operations and the development of long-term strategies in order to manage the
differences of attitudes, standards and values in the extended parts of the organisation and avoid the problems of poor coordination and integration of the
diverse activities
...

As a company moves into international markets, having previously been marketing solely to domestic markets, the processes of planning and control remain
largely the same, but the complexity of the process increases dramatically
...
More impersonal
communications, along with longer lead times, different cultures and the use of
different languages, results in seemingly inconsistent and often negative attitudes
in international managers
...
ADAPTED FROM WWW
...
COM AND WWW
...
CO
...
5)
...
5
Divine Chocolate Ltd
Kuapa Kokoo is a cooperative of small-scale cocoa farmers in
Ghana, who set up Divine Chocolate Ltd (formerly the Day
Chocolate Company)
...
Divine Chocolate have two brand names,
Divine and Dubble, which carry the Fairtrade Mark licensed by
the international Fairtrade Labelling Organisation (FLO)
...
Their milk chocolate recipe was developed with UK tastes in mind, and both
Divine and Dubble were created to a quality standard and
designed to compete with major brands
...

In July 2006 the Body shop donated their shares in Divine
Choclate Ltd to Kuapa Kokoo, which now owns 45 per cent of
the company
...

Armed with a delicious product and a compelling story,
and the clout of supporting charities such as Comic Relief (UK)
and Christian Aid, Divine Chocolate has succeeded in getting
both Divine and Dubble listed in all the top UK supermarkets,
as well as many independents
...
The
company now has the USA and other European markets in
their sights
...
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...


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24

PART 1 ANALYSIS

The unplanned stage: In its early stages of international marketing, the company
is likely to be preoccupied with finding new export customers and money to
finance its activities
...

The budgeting stage: As the business develops, a system for annual budgeting
of sales, costs and cash flow is devised, often because of pressure from external
stakeholders such as banks
...

Annual business planning: Companies begin to adopt a more formalised annual
approach to planning by including the whole of the business in the planning
review process
...
To be successful, this clearly requires the senior
managers to be closely in touch with all their international markets and for
the business to be relatively uncomplicated in the range of products or
services offered
...
Most of the strategic decisions
at McDonald’s and Coca-Cola are taken in the US, and by Sony in Japan
...
Whilst this encourages local initiative and
innovation, it can be difficult to manage as the sum of the individual parts
that make different demands on resources, financial returns and marketing
profiles rarely add up to a feasible international development plan
...
Financial
goals are then set for each part of the company, which has the responsibility
for developing individual strategies and plans to achieve these targets
...
This approach is
adopted particularly by companies that have a very diverse portfolio
of businesses and products
...
By developing strategies
for a five year timescale, it is possible to avoid short-term, highly reactive and
frequently contradictory and wasteful activity
...

The obvious benefits of strategic planning are that all staff can be better motivated
and encouraged to work more effectively by sharing a vision of the future
...
Long-term strategic plans often fail to cope
with the consequences of unexpected events, either environmental or political
...
What a manager in a foreign subsidiary might consider to be
a strategic issue, such as achieving a substantial market share increase in the

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...


The international marketing planning process
There are a number of elements in the international marketing plan, as detailed
in Figure 1
...


STAKEHOLDER EXPECTATIONS
The complexities of the international marketing environment mean another major
difference for companies competing on international markets is that the company
has many more organisations and people who have a stake in how they conduct their
business and so consequently many more stakeholders whose differing expectations
they have to manage
...
It is important to clearly identify the different
stakeholder groups, understand their expectations and evaluate their power,
because it is the stakeholders who provide the broad guidelines within which the
firm operates
...
4 identifies the typical stakeholders of a multinational
enterprise
...

Whilst the senior management of the firm aim usually to develop and adopt
strategies which do not directly oppose these stakeholder expectations, they do,
of course, frequently widen or alter the firm’s activities due to changes in the
market and competition
...
As a result of this, companies need to explain their strategies and

FIGURE 1
...
All Rights Reserved
...


25

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26

PART 1 ANALYSIS

plans to shareholders through more detailed annual reports, to staff through a
variety of briefing methods and to pressure groups and the community in general
through various public relations activities, particularly when their activities have an
impact on the local environment or economy
...

Particular attention should be paid to the different expectations of the
stakeholders and their power to influence the firm’s strategic direction
...
For example, shareholders usually want a high return on their investment and may expect the firm to find countries with low production costs, but
the workers in these countries want an adequate wage on which to live
...

International pressure groups are another important stakeholder MNEs have
to manage
...
Such has been the success of a number
of these, it is now the case that pressure-groups are seen by many global operators
as one of the key stakeholders to be considered in international strategy decision
making
...
Among those that have received wide press coverage
affecting international marketing strategies are:
I
I

I

the Greenpeace efforts to raise awareness to threats on the environment
the anti-globalisation lobby demonstrating against the perceived dark global
forces they see manifested in the World Trade Organisation
the anti-child labour movement
...
This only
exacerbated the anger of the pressure groups
...
4
Some typical stakeholders of
multinational enterprises

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...
May not be copied, scanned, or duplicated, in whole or in part
...
This pacified the pressure
group in the short term, but one is left wondering what Levi would do if they
subsequently discovered that there were another few thousand under-age
employees across other factories they use, or if there was a sudden influx of
employees that were recruited and then declared themselves under age in order
to seek educational support
...
In international marketing one of the key responsibilities is to establish
good practice to respond to publicity generated by pressure groups on issues
where they have been seen not to meet stakeholder expectations
...


Situation analysis
Situation analysis is the process by which the company develops a clear understanding of each individual market and then evaluates its significance for the
company and for other markets in which the business operates
...
Individual national markets can be both surprisingly
similar and surprisingly dissimilar in nature, and it is important to understand
these linkages and the implications of the changes which take place
...

The processes and procedures for segmenting international markets and
carrying out the necessary research to build the situational analysis are examined
in some depth in Chapter 4
...
The most frequently adopted approach by firms is to extrapolate past
trends
...
Firms are responding
to this uncertainty by developing a series of alternative scenarios as the basis of the
planning process
...


Resources and capabilities
In stressing the need to analyse and respond to external forces over which even
global companies have little control, there can be a temptation amongst some
managers to believe that the current capabilities of the organisation are inadequate
when facing the future
...
It is important therefore to audit not
just the most obvious company weaknesses but also the strengths of the company,
which are often taken for granted but which are really its source of competitive

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
This is particularly important in international markets as, for example,
customer and brand loyalty may be much stronger in certain markets than others,
and products which may be at the end of their life in the domestic market may be
ideal for less sophisticated markets
...
This will lead to a clearer
evaluation of the resources that are available or which must be acquired to ensure
the necessary actions are carried out
...
They have recognised the fact that it is the
pool of personal knowledge, skills and competencies of the firms’ staff that
provides its development potential and they have redefined themselves as
‘knowledge-based’ organisations
...
The growth potential can
only be exploited if the firm becomes a learning organisation in which the good
practice learned by individual members of staff can be ‘leveraged’, transferred and
built upon throughout its global activity
...
It is important to stress that there is a need for realism in this,
as too frequently corporate plans are determined more by the desire for short-term
credibility with shareholders than with the likelihood that they will be achieved
...
Consideration must also be given to developing alternative
scenarios so that realistic objectives can be set and accompanied by contingency
plans in case the chosen scenario does not materialise
...
At an operational level, the national managers need to have an achievable
and detailed plan for each country, which will take account of the local situation,
explain what is expected and how performance will be measured
...
This is discussed in much further detail in Chapter 5 from the viewpoint
of the SME and in Chapter 6 from the viewpoint of globally based organisations
...
2 helps you consider this question from the viewpoint of a government
trying to sell the strategic presence of a city
...
Decisions will need to be made
as to how the company will segment and target its international markets? How will

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
How will it add value to its
efforts through its product portfolio, communications, distribution and pricing
strategies? It is this that is at the heart of the following chapters of this book as
we take the reader through the detailed considerations in developing an international marketing strategy
...

This essential question will be examined as we go through different aspects of
international marketing strategy development and implementation
...
Firms usually allocate resources to
individual subsidiaries on a top-down basis, but this needs to be modified to
include the special allocations made to enable foreign subsidiaries to resource
specific market opportunities or difficulties encountered in particular markets
...
Detailed budgets and timescales can then be
set for all areas of marketing including those outside agencies (such as marketing
researchers, designers and advertising agencies) in order to ensure that their
contributions are delivered on time and within the budget
...

We have, so far, emphasised the need for careful, detailed and thorough
preparation of the plan, but it is essential that the plan is action oriented and
contains programmes designed to give clear direction for the implementation,
continuous evaluation and control of all the firm’s marketing activity
...


The control process
The final stage of the planning process is setting up an effective system for obtaining
feedback and controlling the business
...


DILEMMA 1
...
They
view this strategy as essential to attracting job-creating
investments to the province, which will also connect
Ontario’s companies with the contacts and information
they need to succeed in a global economy
...

However, it now wishes to ensure a more strategic
presence in three key regions – the Euro Zone,
China and Central America – and is trying to decide
whether it should take a different approach to setting
up its centres and where such centres should be
located in these regions
...
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...


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30

PART 1 ANALYSIS

There are three essential elements of the control process:
1 Setting standards: the standards that are set need to be relevant to the
corporate goals such as growth and profits reported by financial measures,
return on capital employed and on sales, and non-financial indicators,
e
...
market share
...
The standards
must be understandable, achievable and relevant to each local country situation
...
They also use benchmarking,
which allows comparisons of various aspects of the business, such as efficiency
of distribution, customer response times, service levels and complaints, with
other companies that are not necessarily from the same business sector
...

A checklist of the essential elements of the international marketing plan is
summarised in Figure 1
...


FIGURE 1
...
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...


Licensed to: iChapters User
CHAPTER 1 AN INTRODUCTION TO INTERNATIONAL MARKETING

Reasons for success
Hamel and Prahalad (1996) suggest the firms operating globally that succeed
are those that perceive the changes in the international environment and are
able to develop strategies which enable them to respond accordingly
...
Management foresight and
organisational learning are therefore the basis of a sustainable competitive
advantage in global markets
...
They have recognised the fact that it is the
pool of personal knowledge, skills and competencies of the firm’s staff that provides
its development potential and they have redefined themselves as ‘knowledgebased’ organisations
...
The growth potential of international
markets can only be exploited if the firm becomes a learning organisation in
which the good practice learned by individual members of staff in one market can
be leveraged and built upon throughout its global activity
...
Moreover, with the
increase in communications it is becoming more difficult to store, access and
apply the valuable knowledge that exists amongst the huge volume of relatively
worthless data that the company deals with
...
This means having Web-enabled database
systems that facilitate effective data collection, storage in data warehouses and
data mining (the identification of opportunities from patterns that emerge from
detailed analysis of the data held)
...
This is particularly important in international
markets as, for example, customer and brand loyalty may be much stronger in
certain markets than others, and products that may be at the end of their life
in the domestic market may be ideal for less sophisticated markets
...
6
...
International markets are dynamic entities
that require constant monitoring and evaluation
...
Innovation is an important
competitive variable, not only in terms of the product or service but throughout

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
6
Fisherman’s Friend
Fisherman’s Friend lozenges were initially developed for sailors
and Fleetwood fishermen who were working in the severe
weather conditions of the North Atlantic fishing grounds
...
However, when
Doreen Lofthouse joined the company she set about expanding the market by selling into towns throughout Lancashire and
Yorkshire
...
Norway was a logical starting point and it
is now the market with the highest sales per head of population
...
Italy was the largest export market at one point before
being overtaken by Germany
...
The
traditional concept has been the centre of advertising in the UK,
but overseas promotional themes are quite different
...
Fisherman’s Friend is now available in over 100 countries
worldwide and in many it is seen as a strong sweet, not as
medicated confectionery
...


QUESTION

What are the reasons for the success of
Fisherman’s Friend?

PHOTO CREDIT: ALL IMAGES REPRODUCED WITH PERMISSION FROM FISHERMAN’S FRIEND

Copyright 2008 Cengage Learning, Inc
...
May not be copied, scanned, or duplicated, in whole or in part
...
Countertrading, financial innovations, networking and
value-based marketing are all becoming increasingly important concepts in the
implementation of a successful international strategy
...

Doole (2000) identified three major components to the strategies of firms
successfully competing in international markets:
I

I

I

A clear international competitive focus achieved through a thorough
knowledge of the international markets, a strong competitive positioning and
a strategic perspective which was truly international
...

Well-managed organisations with a culture of learning
...


SUMMARY
I

In this chapter we have discussed the growing strategic importance of international marketing and
examined the issues associated with successfully competing in international markets
...


I

We have examined the major aspects of the SLEPT factors in the international marketing environment
...


I

It has been suggested that marketing managers need to have a properly planned approach to any
international activity because, without this, the costs and likelihood of failure are likely to increase
...


I

The reasons for success and failure on international markets were examined and it was
suggested the firms operating globally that succeed are those that perceive the changes in the
international environment and are able to develop strategies which enable them to respond
accordingly
...


I

The reader has been introduced to many of the concepts that are important to the
international marketing management process and will have gained an understanding of the
issues to be addressed
...
In Chapter 2
the international trading environment and the trends and developments in trading patterns
will be examined
...
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...


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34

PART 1 ANALYSIS

KEYWORDS
Cross-currents
Cultural paradoxes
Currents
Emerging economics
European Union
Export marketing
Global marketing

Global youth culture
Globalisation
Gross national income
International marketing
International trade
Less developed economies

Multinational enterprise
North American Free
Trade Area
Piracy
Purchasing power parity
World trade
World Trade Organisation

Flatbread goes round the world
Gruma S
...
B
...
V is located near Monterrey, Mexico, and
produces corn flour and other flour products, which it processes
into tortillas and related snacks for markets worldwide
...
Its customers
include supermarkets, mass merchandisers, smaller independent stores, restaurant chains, food service distributors and
schools
...
In the early
1970s, Gruma launched its product on the Central American
markets, specifically in Costa Rica
...
GRUMA
...
It now has plants in Europe and
most recently China
...
The company established their presence on continental
China in the first instance and then gradually expanded their
penetration of markets across Asia to the Middle East
...

How has a Mexican company with a niche food product
like cornflour succeeded so well in international markets?
According to Martinez and Haddock, the answer lies in the
fact that many of the markets they have focused on are
emerging markets which tend to follow the same path of
development
...
What Gruma are following in their
international expansion is the tried and tested method of
leveraging the similarities across from market to market and
growing their company accordingly
...

However, the other key factor has been their ability to adapt
their products to local market tastes
...
Most people from India do
not eat corn tortillas, but they do eat a flatbread called naan,
made from wheat, which Gruma sells in the United Kingdom
and plans to sell in India
...

Gruma also follow a policy of deploying a senior ‘beachhead’ team to enter the new market in which they are
building a presence
...
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...


SOURCE: ADAPTED FROM WWW
...
COM AND MARTINEZ AND HADDOCK (2007)’ THE FLATBREAD FACTOR’, STRATEGY AND BUSINESS, SPRING

CASE STUDY

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CHAPTER 1 AN INTRODUCTION TO INTERNATIONAL MARKETING

insights to feed into their marketing campaign
...


35

QUESTIONS
1 Evaluate the reasons behind the success of Gruma S
...
B
...
V
...


2 Using examples, examine the reasons why marketing strategies fail in international markets
...
Examine how they have influenced the international
marketing strategies of particular firms
...


5 How can marketing managers accommodate the multiplicity of international markets into a cohesive
international marketing strategy and plan?

References
Dicken, P (2007) Global shift-mapping the changing contours of the world economy, 5th edn
...


...
(2000) ‘How SMEs Learn to Compete Effectively on International Markets’, Ph
...

El-Kahal, S
...
McGraw-Hill
...

Haliburton, C
...

and Lowe, R
...

Hamel, G
...
K
...
Harvard Business School Press
...
(2003) Culture’s consequences: comparing values, behaviours, institutions and organisations across nations
international differences in work-related values, 2nd edn
...

Kotabe, M
...
(2008) Global marketing management, 4th edn
...
Wiley and Sons
...
(2005) The next global stage: the challenges and opportunities in our borderless world
...

Perlmutter, M
...

1 December
...
C
...
Macmillan
...
and Deshpande
...
(2004) The global market: developing a strategy to manage across borders
...

Rugimbana, R
...
(2003) Cross cultural marketing
...

Sarathy, R
...
C (2006) International marketing, 9th edn
...


...
and Gilligan, C
...


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...
May not be copied, scanned, or duplicated, in whole or in part
...
All Rights Reserved
...



Title: International Marketing
Description: Introduction to international marketing, definition, features. International marketing strategies, Implementation.