International Marketing
14th Ed i tio 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
Joh n L. Gr ah am
The Scope and
Challenge
of International
Marketing
Chapter 1
McGraw-Hill/Irwin
International Marketing 14/e
Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
What Should You Learn?
• The changing face of U.S. 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
1-2
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
1-3
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
1-4
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
1-5
Foreign Acquisitions
of U.S. Companies
Exhibit 1.1
1-6
Selected U.S. Companies
and Their International Sales
Exhibit 1.2
1-7
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
1-8
The International Marketing Task
Exhibit 1.3
1-9
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
1-10
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
1-11
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
1-12
1-13
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
1-14
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
1-15
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
1-16
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
1-17
Stages of International
Marketing Involvement
• No direct foreign marketing
• Infrequent foreign marketing
• Regular foreign marketing
• International marketing
• Global marketing
1-18
No Direct Foreign Marketing
• Products reach foreign markets indirectly
–
–
–
–
–
Trading companies
Foreign customers who contact firm
Wholesalers
Distributors
Web sites
• Foreign orders pique a company’s interest to
seek additional international sales
1-19
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
1-20
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
1-21
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
1-22
Strategic Orientation
• Domestic market extension orientation
• Multidomestic market orientation
• Global market orientation
1-23
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
1-24
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
1-25
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
1-26
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
1-27
Foreign Policy’s Global Top 20
Exhibit 1.4
1-28
Summary
• The internationalization of American business is
proceeding with increasing pace
• The globalization of markets and competition
necessitates all managers to pay attention to
the global environment
• International marketing is defined as the
performance of business activities across
national borders
1-29
Summary
• Environmental differences must be taken into
account if firms are to market products and
services at a profit in other countries
– Laws
– Customs
– Cultures
• Self-reference criteria and ethnocentrism limit
international marketer’s abilities to understand
and adapt to differences prevalent in foreign
markets
1-30
Summary
• Solutions to SLC and ethnocentrism
– Global awareness
– Sensitivity
• Strategic orientations found among managers of
international marketing operations
– Domestic market extension orientation
– Multidomestic market orientation
– Global market orientation
1-31