09-Jun-12

International Marketing
1 4 or 15 t h E d i t i o n
P h i l i p R. C a t e o r a
M a r y C. G i l l y
John L. Graham

The Scope and Challenge

of International Marketing

Learning objectives
• The changing face of business
• The scope of the international marketing task
• The importance of the self-reference criterion
(SRC) in international marketing
• The progression of becoming a global marketer
• The increasing importance of global awareness

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Global Perspective:
Global Commerce Causes Peace
• Global commerce during peace time
– Commercial aircraft and space vehicle industries
– Mobile phone industry
– Individuals and small companies
• International markets are ultimately unpredictable
– Flexibility means survival

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Events and Trends

Affecting Global Business
• The rapid growth of the World Trade Organization
and regional free trade areas
• The trend toward the acceptance of the free market
system among developing countries in Latin
America, Asia, and Eastern Europe
• The burgeoning impact of the Internet, mobile
phones, and other global media on the dissolution of
national borders
• The mandate to properly manage the resources and
global environment for the generations to come

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The Internationalization
of U.S. Business
• Increasing globalization of markets
• Increasing number of U.S. companies are foreign
controlled
– $16.3 trillion in foreign investment in the U.S. – $2.6
trillion more than American overseas investment
• Increasing number of foreign companies building
and buying manufacturing plants in the U.S.
• Increasing difficulty for domestic markets to
sustain customary rates of growth

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US Multinationals in Europe - 60s

Fifteen years from now the world’s third

greatest industrial power, just after the
United States and Russia, may not be
Europe, but American industry in
Europe.~

J.S. Servan Schreiber:

Le Defi American, 1967

What Happened?
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The 1975 Fortune 500 lists huge, respected

corporations such as Esmark, Gulf & Western, Polaroid,
and Singer that have essentially vanished. They didn't
vanish overnight and they didn't vanish voluntarily. Even
some survivors from 1975 are studies in falling short rather
than flying high. Sears, Roebuck was founded in 1893 and
moved into the Sears Tower in 1973, when Wal-Mart was a
corporate toddler. Today, Wal-Mart is five times the size of
Sears, and Sears has left the building.

Mark Chussil

Chussil, M. (2005), With all this intelligence, why don't we have better strategies? Journal of Business Strategy, 1-7
VOL. 26 NO. 1, pp. 26-33.

Fortune top 100

• 2011 • 2005 • 1995
1. Wal-Mart – US (retail) 1. Wal-Mart 1. Mitsubishi (NA)
2. Royal Dutch Shell – UK (oil) 2. BP 2. Mitsui (NA)
3. Exxon Mobil - US (oil) 3. ExxonMobil 3. Itochu (NA)
4. BP – UK (oil) 4. Royal Dutch Shell 4. Sumitomo (NA)
5. Sinopec – China (oil) 5. General Motors 5. General Motors (NA)
6. China National Petroleum – 6. DaimlerChrysler 6. Marubeni (NA)
China (oil) 7. Toyota 7. Ford motors (NA)
7. State Grid – China (power) 8. Ford 8. Exxon (3)
8. Toyota Motors – Japan (Auto) 9. General Electric 9. Nissho Iwai (NA)
9. Japan Post Holdings – Japan 10.Total 10.Royal Dutch Shell
(Diversified) (2)
10.Chevron – US (Oil)

FORTUNE GLOBAL 500 , 1-8

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Foreign Acquisitions
of U.S. Companies
Exhibit 1.1

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Selected U.S. Companies

and Their International Sales
Exhibit 1.2

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Reasons for Going International

• Saturated home market

• Competition
• Excess Capacity
• Advantage in product, skill or technology
• Product life cycle differences
• Geographic diversification
• Organizational reasons
• Financial reasons

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Definition of Marketing
Marketing is a societal process by which individuals
and groups obtain what they need and want
through creating, offering, and freely exchanging
products and services of value with others.
- Philip Kotler

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International Marketing Defined

IM is the performance of business activities designed to
plan, price, promote and direct the flow of a company’s
goods and services to consumers or users in more than
one nation for a profit.

The multinational process of planning & executing the

conception, pricing, promotion and distribution of ideas,
goods and services to create exchanges that satisfy
individual & organizational objectives.

Is that the only difference between domestic and

International marketing?

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International Marketing
• Performance of business activities designed to
– Plan
– Price
– Promote, and
– Direct the flow of a company’s goods and services to
consumers or users in more than one nation for a profit

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The International Marketing Task

Foreign environment
(uncontrollable)
Political/legal 1 Economic
forces forces
Domestic environment
(uncontrollable)
2
7 Competitive
Political/
legal (controllable) structure Competitive
Cultural Forces
forces
forces Environmental
Price Product
uncontrollables
7 3 country market A
Channels of
Promotion Environmental
distribution
6 uncontrollables
country
market B
Geography Level of
Economic climate Technology Environmental
and
Infrastructure uncontrollables
4 country
5
Structure of market C
distribution
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Environmental Adaptation
• Ability to effectively interpret the influence and
impact of the culture in which you hope to do
business
– Cultural adjustments
• Establish a frame of reference
• Avoid measuring and assessing markets against
the fixed values and assumptions of your own
culture

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The Self-Reference Criterion

and Ethnocentrism
• The key to successful international marketing is
adaptation to the environmental differences
from one market to another
• Primary obstacles to success in international
marketing
– SRC
– Associated ethnocentrism

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The Self-Reference Criterion

and Ethnocentrism

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SRC and Ethnocentrism

• SRC is an unconscious reference to
– One’s own cultural values, experiences, and
knowledge as a basis for decisions
• Dangers of the SRC
– Failing to recognize the need to take action
– Discounting the cultural differences that exist among
countries
– Reacting to a situation in an offensive to your hosts
• Ethnocentrism
– Notion that one’s own culture or company knows best

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SRC and Ethnocentrism

• Ethnocentrism and the SRC can influence an
evaluation of the appropriateness of a
domestically designed marketing mix for a foreign
market
• The most effective way to control the influence of
ethnocentrism and the SRC is to recognize their
effects on our behavior

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Framework
for Cross-cultural Analysis
1. Define business problem or goal
• Home-country vs. foreign-country cultural traits,
habits, or norms
• Consultation with natives of the target country
2. Make no value judgments
3. Isolate the SRC influence
• Examine it carefully to see how it complicates the
problem
4. Redefine the problem
• Without SRC influence
• Solve for the optimum business goal situation

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Developing a Global Awareness

• Tolerance of cultural differences:
– Understanding cultural differences and accepting and
working with others whose behavior may be different
from yours
• Knowledge of cultures, history, world market
potential, and global economic, social, and
political trends

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Approaches to Global Awareness

• Select individual managers specifically for their
demonstrated global awareness
• Develop personal relationships in other countries
• Have a culturally diverse senior executive staff or
board of directors

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Specific Managers

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Develop Relationships

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Culturally Diverse Executives

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Stages of International
Marketing Involvement
• No direct foreign marketing
• Infrequent foreign marketing
• Regular foreign marketing
• International marketing
• Global marketing

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No Direct Foreign Marketing

• Products reach foreign markets indirectly
– Trading companies
– Foreign customers who contact firm
– Wholesalers
– Distributors
– Web sites
• Foreign orders stimulate a company’s interest to
seek additional international sales

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Infrequent Foreign Marketing

• Caused by temporary surpluses
– Variations in production levels
– Increases in demand
• Firm has little or no intention of maintaining
continuous market representation
– Foreign sales decline when demand or surplus
decreases
– May withdraw from international markets
• Little or no change in company organization or
product lines

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Regular Foreign Marketing

• Firm has production capacity devoted to foreign
markets
• Firm employs domestic or foreign intermediaries
– Uses its own sales force
– Sales subsidiaries in important markets
• Products allocated or adapted to foreign markets
as demand grows
• Firm depends on profits from foreign markets

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Global Marketing
• Company treats world, including home market as
one market
• Market segmentation decisions no longer focused
on national borders
– Defined by income levels, usage patterns, or other
factors
• More than half of revenues come from abroad
• Organization takes on global perspective

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Strategic Orientation
• Domestic market extension orientation
• Multidomestic market orientation
• Global market orientation

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Domestic Market Orientation

• International operations viewed as secondary
• Prime motive is to market excess domestic
production
• Firm’s orientation remains basically domestic
• Minimal efforts are made to adapt product or
marketing mix to foreign markets
• Firms with this approach are classified as
ethnocentric

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Multidomestic Market Orientation

• Companies have a strong sense that foreign
country markets are vastly different
• Market success requires an almost independent
program for each country
– Separate marketing strategies
– Subsidiaries operate independently of one another in
establishing marketing objectives and plans
– Products are adapted for each market
• Control is decentralized

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Global Market Orientation

• Company guided by global marketing orientation
– Marketing activity is global
– Market coverage is the world
• Firm develops a standardized marketing mix
applicable across national boundaries
– Markets are still segmented
– Each country or region is considered side by side with a
variety of other segmentation variables
– Fits the regiocentric or geocentric classifications

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The Orientation
of International Marketing
• An environmental/cultural approach to
international strategic marketing
• Intended to demonstrate the unique problems of
international marketing
• Discussion of international marketing ranges from
the marketing and business practices of small
exporters to the practices of global companies

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Thank You
@RamyKhodeir

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