Revision 1: “Introduction to International Marketing” Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. A company that engages in international marketing focuses its resources on international market opportunities and threats. Successful international marketers such as Nestlé, Coca-Cola, and Honda use familiar marketing mix elements—the four Ps—to create international marketing programs. Marketing, R&D, manufacturing, and other activities compose a firm’s value chain; firms configure these activities to create superior customer value on a international basis. The value equation (V = B/P) expresses the relationship between value and the marketing mix. International companies also maintain strategic focus while relentlessly pursuing competitive advantage. The marketing mix, value chain, competitive advantage, and focus are universal in their applicability, irrespective of whether a company does business only in its home country or has a presence in many markets around the world. However, in a international industry, companies that fail to pursue international opportunities risk being pushed aside by stronger international competitors. A firm’s international marketing strategy (GMS) can enhance its worldwide performance. The GMS addresses several issues. First is the nature of the marketing program in terms of the balance between a standardized (extension) approach to the marketing mix elements and a localized (adaptation) approach that is responsive to country or regional differences. Second is the concentration of marketing activities in a few countries or the dispersal of such activities across many countries. Companies that engage in international marketing can also engage in coordination of marketing activities. Finally, a firm’s GMS addresses the issue of international market participation. The importance of international marketing today can be seen in the company rankings compiled by The Wall Street Journal, Fortune, the Financial Times, and other publications. Whether ranked by revenues or some other measure, most of the world’s major corporations are active regionally or internationally. The size of international markets for individual industries or product categories helps explain why companies “go international.” International markets for some product categories represent hundreds of billions of dollars in annual sales; other markets are much smaller. Whatever the size of the opportunity, successful industry competitors find that increasing revenues and profits means seeking markets outside the home country. Company management can be classified in terms of its orientation toward the world: ethnocentric, polycentric, regiocentric, or geocentric. These terms reflect progressive levels of development or evolution. An ethnocentric orientation characterizes domestic and international companies; international companies pursue marketing opportunities outside the home market by extending various elements of the marketing mix. A polycentric worldview predominates at a multinational company, whose country managers operate autonomously adapt the marketing mix. When management moves to integrate and coordinate activities on a regional basis, the decision reflects a regiocentric orientation. Managers at international and transnational companies are geocentric in their orientation and pursue both extension and adaptation strategies in international markets. The dynamic interplay of several driving and restraining forces shapes the importance of international marketing. Driving forces include market needs and wants, technology, transportation and communication improvements, product costs, quality, world economic trends, recognition of opportunities to develop leverage by operating internationally, and innovation and entrepreneurship. Restraining forces include market differences, management myopia, organizational culture, and national controls such as nontariff barriers (NTBs). Chapter 1 Questions 1. Explain the Ansoff Matrix (market penetration, product development, market development, diversification), using examples. The Ansoff Matrix is a fundamental framework that visualizes the various approaches a company may explore when considering expansion opportunities. It features Product on the X-axis and Market (New Segment of consumer or a new location) on the Y-axis. Market Penetration Product Extension Increasing sales of an existing product in a existing market through increasing marketing efforts, price reductions or streamlining distribution processes. Starbucks: New Promotional Offers such as discounts or marketing campaigns Focuses on introducing new products into an existing market through investing in R&D or creating a new/updated product line. Starbucks: New line of Seasonal Drinks (Fall Drinks) Market Development Diversification Focuses on selling existing products into new markets by catering to a new segment of customer, entering a new domestic region or foreign market through regional and international expansion. Starbucks: Starbucks opening a new subsidiary in Italy The concept of entering a new market with a new product altogether. Considered a s a high-risk endeavor but can reap huge profits for a company. Starbucks: Starbucks acquired Teavana catering to a new customer base (Tea Drinkers) with a new product. 2. Explain the four management orientations (ethnocentric, polycentric, regiocentric, geocentric), using examples. Ethnocentric Orientation Home country is superior to others. Sees only similarities in other countries. Assumes that product and practices successful in-home country will be successful everywhere. Leads to a standardized or extension approach. Panasonic ( Japanese Firms) Polycentric Orientation Regiocentric Orientation A region is the relevant geographic unit. Serve markets throughout the world but on a regional basis. Honda Motor Car Company Each country is unique. Each subsidiary develops its own unique business and marketing strategies. Often referred to as an MNC Leads to an adaption and localized approach as products need to be suited to the needs of the local market McDonald’s ( USA Brand offering Veg options in subsidiary in India) Geocentric Orientation The entire world is a potential market. Strives for integrated international strategies. Also known as international or Transnational companies Retains association with headquarters company. Pursues selling world markets from a single country or sources internationally to focus on select country markets. Leads to a combination of adaption and extension elements Coca-Cola and Pepsi Revision 2: “Economic Environment” The economic environment is a major determinant of international market potential and opportunity. In today’s international economy, capital movements are the key driving force, production has become uncoupled from employment, and capitalism has vanquished communism. Based on patterns of resource allocation and ownership, the world’s national economies can be categorized as market capitalism, centrally planned capitalism, centrally planned socialism, and market socialism. The final years of the twentieth century were marked by a transition toward market capitalism in many countries that had been centrally controlled. Nevertheless, great disparity still exists among the nations of the world in terms of economic freedom. Countries can be categorized in terms of their stage of economic development: low income, lower-middle income, uppermiddle income, and high income. Gross domestic product (GDP) and gross national income (GNI) are commonly used measures of economic development. The 50 poorest countries in the low-income category are sometimes referred to as least-developed countries (LDCs). Upper-middle-income countries with high growth rates are often called newly industrializing economies (NIEs). Several of the world’s economies are notable for their fast growth; for example, the BRICS nations include Brazil (lower middle income), Russia (upper-middle income), India (low income), China (lowermiddle income), and South Africa (upper-middle income). The Group of Seven (G-7), the Group of Eight (G-8), the Group of Twenty (G-20), and the Organization for Economic Co-operation and Development (OECD) represent efforts by high-income nations to promote democratic ideals and free market policies throughout the rest of the world. Most of the world’s income is located in Japan and Greater China, the United States, and Western Europe; companies with international aspirations generally have operations in all three areas. Market potential for a product can be evaluated by determining product saturation levels in light of income levels. A country’s balance of payments is a record of its economic transactions with the rest of the world; this record shows whether a country has a trade surplus (value of exports exceeds value of imports) or a trade deficit (value of imports exceeds value of exports). Trade figures can be further divided into merchandise trade and services trade accounts; a country can run a surplus in both accounts, a deficit in both accounts, or a combination of the two. Although the U.S. merchandise trade deficit was $752 billion in 2016, the United States enjoys an annual services trade surplus. Overall, the United States is a debtor; China enjoys an overall trade surplus and serves as a creditor nation. Foreign exchange provides a means for settling accounts across borders. The dynamics of international finance can have a significant impact on a nation’s economy as well as the fortunes of individual companies. Currencies can be subject to devaluation or revaluation as a result of actions taken by a country’s central bank. Currency trading by international speculators can also lead to devaluation. When a country’s economy is strong or when demand for its goods is high, its currency tends to appreciate in value. When currency values fluctuate, international firms face various types of economic exposure. Firms can manage exchange rate exposure by hedging. Balance of Payments: Record of all economic transactions between the residents of a country and the rest of the world Current Account: Record of all recurring trade in merchandise and services and humanitarian aid Trade Surplus: Positive Current Account Trade Deficit: Negative Current Account Capital Account: all transactions made between entities in one country with entities In the rest of the world Foreign Exchange allows companies to do business globally with different currencies. Devaluation: Reduction of Nations currency against other currencies Mercantilism: Countries do not allow their currency to fluctuate Chapter 2 Essay Questions 1. Explain the four types of economy (Market Capitalism, Market Socialism, Centrally Planned Capitalism, Centrally Planned Socialism) using examples. PRIVATE RESOURCE OWNERHSIP RESOURCE ALLOCATION MARKET COMMAND Market Capitalism Centrally Panned Capitalism Individual and private firms allocate resources. Production resources are privately owned. Driven by Consumers The government’s role is to promote competition among firms and ensure customer protection. US/UK Market Socialism STATE An economic system in which command resource allocation is used extensively in private resource ownership. Less Freedom as resources are controlled by the government. Sweden Centrally Planned Socialism The highly centralized social ownership within a framework of a market economy to retain supply and demand signals. Belarus State holds power in order to serve public interest. Decided on what goods/services to produce and in what quantities. The government owns the entire industry and control distribution. Lack of freedom as consumers can only spend on what is available. Demands typically exceeds supply. Less focus on marketing with little reliance on product differentiation, advertising and pricing strategies. China 2. Explain the World Bank’s four categories of country development (Low-income, Lower-middle income, Upper-middle income, High-income) using examples. Low Income Limited industrialization High percentage of population in the primary sector High birth rates Low literacy rates Heavy reliance on foreign aid Political instability Sub-Saharan Africa . Lower Middle Income Upper Middle income Rapidly industrializing, less agriculture employment Increasing urbanization Rising wages High literacy rates Lower wage costs Chins Rapidly expanding consumer markets Cheap motivated labor Mature, standardized, labor-intensive industries. India High Income Sustained Economic Growth through disciplined innovation. Households have extremely high ownership level of basic products. Importance of information processing and exchange Dominant power of knowledge over capital, intellectual over machine technology, scientists and professionals over engineers and semiskilled workers. Future Oriented Importance of Interpersonal relationships Australia Revision 3: “Trade Environment” This chapter examines the environment for world trade, focusing on the institutions and regional cooperation agreements that affect trade patterns. The multilateral World Trade Organization, created in 1995 as the successor to the General Agreement on Tariffs and Trade, provides a forum for settling disputes among member nations and tries to set policy for world trade. The world trade environment is also characterized by preferential trade agreements among smaller numbers of countries on regional and subregional bases. These agreements can be conceptualized on a continuum of increasing economic integration. Free trade areas such as the one created by the North American Free Trade Agreement (NAFTA) represent the lowest level of economic integration. The purpose of a free trade agreement (FTA) is to eliminate tariffs and quotas. Rules of origin are used to verify the country from which goods are shipped. A customs union, such as Mercosur, represents a further degree of integration in the form of common external tariffs. In a common market, such as the Central American Integration System (SICA) and the East African Community, restrictions on the movement of labour and capital are eased in an effort to further increase integration. An economic union, such as the EU, the highest level of economic integration, is achieved by unification of economic policies and institutions. Harmonization, the coming together of varying standards and regulations, is a key characteristic of the EU. Other important cooperation arrangements include the Association of Southeast Asian Nations (ASEAN) and the Gulf Cooperation Council (GCC). In Africa, the two main cooperation agreements are the Economic Community of West African States (ECOWAS) and the South African Development Community (SADC). Chapter 3 Essay Questions 1. Explain the Preferential Trade Agreements (PFT) Hierarchy (Free Trade Area, Customs Union, Common Market, Economic Union), using examples. Cause discrimination for countries not in the agreement Not mandatory to inform the WTO Lowers Trade barriers PTA 1 - Free Trade Area PTA 2- Custom Union Two or more countries agree to abolish tariffs and other barriers to trade amongst themselves. Countries continue independent trade policies with countries outside the trade agreement. Rules of origin requirements restrict transshipment of goods from the country with the lowest tariff to another. The United States and Mexico Evolution of FTA Groups of countries that apply one common system (CET) of procedures, rules and tariffs on imports/exports. Includes the elimination of internal barriers to trade and establishes common external barriers CET’s to trade. GGC PTA 3 – Common Markets FTA+ Elimination of internal barriers of trade Establishes common external barriers to trade. Allows for the free movement of FOP’s (Labor. Capital and Information) ASEAN PTA 4 – Economic Union FTA + establishes common external barriers to trade+ allows for free movement of FOP’s. Coordinates and Harmonizes economic and Social Policy within the union. Economic Union Revision 4: “Social & Cultural Environment” Culture, a society’s “programming of the mind,” has both a pervasive and a changing influence on each national market environment. International marketers must recognize the influence of culture and be prepared to either respond to it or change it. Human behavior is a function of a person’s own unique personality and that person’s interaction with the collective forces of the particular society and culture in which he or she has lived. In particular, attitudes, values, and beliefs can vary significantly from country to country. Also, differences pertaining to religion, aesthetics, dietary customs, and language and communication can affect local reaction to a company’s brands or products as well as the ability of company personnel to function effectively in different cultures. A number of concepts and theoretical frameworks provide insights into these and other cultural issues. Cultures can be classified as high or low context; communication and negotiation styles can, in turn, differ from country to country. Hofstede’s social values typology helps marketers understand culture in terms of power distance, individualism versus collectivism, achievement versus nurturing, uncertainty avoidance, and long-term versus short-term orientation. By understanding the self-reference criterion, international marketers can overcome people’s unconscious tendency for perceptual blockage and distortion. Rogers’s classic study on the diffusion of innovation helps explain how products are adopted over time by different adopter categories. The adoption process that consumers go through can be divided into a multistage hierarchy of effects. Rogers’s findings concerning the characteristics of innovations can also help marketers successfully launch new products in international markets. Research has suggested that Asian adopter categories differ from those found in the Western model. An awareness of environmental sensitivity can help marketers determine whether consumer and industry products must be adapted to the needs of different markets. Global consumer: cultures are emerging, sharing meaningful sets of consumption related symbols. Standardized: Universal aspects of the cultural environment represents opportunities. International Differences: Aesthetic/Color, Music, Dietary Preferences, Semiotics (Communication and Meaning), Pronunciation problems Hofstede’s Cultural Typology Individualistic: People look after their own and their family’s interest Collectivistic: People expect the group to look after and protect them High Power Distance: Accepts differences in power: respect authority Low Power Distance: Plays down inequalities: employees are not afraid to approach nor are they in awe of the boss High Uncertainty Avoidance: Threatened by ambiguity and experience high anxiety Low Uncertain Avoidance: Comfortable with risks: tolerant of different behavior and opinions Achievement: Values such as assertiveness, money, goods, competition prevails Nurturing: Values such as relationships and concern for others prevail Long-term orientation: People look after future and value persistence Short-term orientation: People value tradition and the past Diffusion Theory: The adoption Process -The mental stages through which an individual passes from the time of first knowledge of an innovation to the of product adoption or purchase Chapter 4 Essay Questions 1. Explain Spoken Language (Syntax, Semantics, Phonology, Morphology), using country examples. Spoken Language: 4 linguistic categories. Unspoken Language :Gestures touching, body language. Syntax Rule of sentence formation Unlike the English language that has a fixed word order to form accurate sentences, Russian has relatively free word order. Semantics System of meaning Japanese works convey nuances of feeling for which other languages lack correlations Phonology System of Sound Patterns English and Russian both have I and R sounds however Japanese does not distinguish between the sounds I or R Morphology Word formation/Sound Russian is a highly inflected language with 6 different case endings for nouns and adjectives however English has fewer inflections that is regional accents and meanings. 2. Explain High vs. Low Context Cultures (Lawyers, Persons Word, Error Responsivity, Space, Time, Negotiation, Bidding), using example countries. High Context Cultures: Information resides in context. Emphasis on background, basic values, societal status. Less emphasis on legal paperwork in comparison to personal reputation. Example: Asian and Arab Countries Low Context Cultures: Messages are explicit and specific. Words carry all the information Reliance on legal Paperwork and focus on non-personal documentation of credibility. Example: United States of America, Switzerland 3. Explain Self-Reference Criterion (Home Country, Host Country, Influence, Solution), using an example country. Unconscious reference to one’s own cultural values creates cultural myopia. Below are 4 Steps to reduce Cultural Myopia. Step 1 Define the Problem or goals in terms of home country cultural traits. Disney Executives believed that there was an unlimited demand for American Cultural Exports globally which is why they assumed that their new venture for a new Disney Land in France should be a carbon copy of the one in the US and other countries around the world. Step 2 Define the Problem in terms of the host country cultural traits, without value judgments. European, French in particular are sensitive about American Culture imperialism and have their own real castles which created a conflict. Step 3 Isolate the SRC influence and examine it Steps 1 and 2 enables the executive team to compare the problems that creates conflict. This called for a modification of the Disneyland design in order for it be a success in the French market. Step 4 Redefine the problem without SRC influence and solve for the host country situation. Finally, a theme park with European touch is what Disney Officials opted for in order to reflect European and French norms allowing the French to put their own identity to it. Revision 5: “Segmentation, Targeting & Positioning” The international environment must be analysed before a company pursues expansion into new geographic markets. Through international market segmentation, a company can identify and group customers or countries according to common needs and wants. Demographic segmentation can be based on country income and population, age, ethnicity, or other variables. Psychographic segmentation groups people according to attitudes, interests, opinions, and lifestyles. Behaviour segmentation utilizes user status and usage rate as segmentation variables. Benefit segmentation is based on the benefits buyers seek. International teens and international elites are two examples of international market segments. After marketers have identified segments, the next step is targeting: The identified groups are evaluated and compared, and one or more segments with the greatest potential are selected. The groups are then evaluated on the basis of several factors, including segment size and growth potential, competition, and compatibility and feasibility. Target market assessment also entails a thorough understanding of the product market in question and determining marketing model drivers and enabling conditions in the countries under study. The timing of market entry should take into account whether a first-mover advantage is likely to be gained. After evaluating the identified segments, marketers must decide on an appropriate targeting strategy. The three basic categories of international target marketing strategies are standardized international marketing, niche marketing, and multisegmented targeting. Positioning a product or brand to differentiate it in the minds of target customers can be accomplished in various ways: positioning by attribute or benefit, positioning by quality/price, positioning by use or user, and positioning by competition. International consumer culture positioning (GCCP), foreign consumer culture positioning (FCCP), and local consumer culture positioning (LCCP) are additional strategic options in international marketing. Segmentation Demographic: Age, Gender, Ethnicity, Religion, Level of Education, Occupation, Income, Family Structure Psychographic: Beliefs, Value, Lifestyle, Social Status, interest and opinions Behavioral: Purchase Behavior, Occasion/Timing, Benefits Sought, Customer loyalty, Customer journey Stage, Engagement, Satisfaction Benefit :Based on the marketers’ superior understanding of the problem the product solves or the benefits it offers Targeting: Market Strategy Options Standardized/ Undifferentiated Int. Marketing Mass marketing on a global scale Standardized marketing mix Minimal product adaptation Intensive distribution Lower production costs Lower communication costs Concentrated Int. Marketing Niche marketing Single segment of global market Look for global depth rather than national breadth Targeting: Position Attributes Attribute/Benefit Economy/ Reliability/Durability Quality and Price High quality/Price or High price to good value Use or User Associates the brand with the user or class of users Competition Implicit or Explicit reference to competition Differentaited Int. Marketing Multisegmented targeting Two or more distinct markets Wider market Coverage Chapter 5 Essay Questions 1. Explain Selecting Target Markets (Market Size, Growth Rate, Competitive Position, Market Accessibility, Customer Fit), using country examples. Criteria’s for selecting a target market Market Size Refers to how large the segments is in size because larger the segment higher the profitability and sustainability (Number of potential Customer) Example: The Bahraini Market is smaller than the market in the USA in term of the total population Growth Rate Refers to how fast is the segment growing and how much potential to generate revenue (Lifecycle Stage) Example: Competitive Position The less competitive offerings are available for the target segment, the more likely the company is to gain a large market share. (First Mover Advantage) Example: Market Accessibility The more cost-effectively and quickly a segment can be reached , the more attractive it will be (Low Entry Barriers) Example: Internet in African countries may make it difficult to access the customer base easily. Customer Fit The more compatible the segment is with the company’s brand and resources the more likely it is that sales will follow. Example: A fast food chain setting up with Halal Food would be considered a fit with the Kuwaiti Market 2. Explain Product-Market Decisions (Country Segment vs. Product Categories), using country examples. Customer Segment: Different Countries Product Categories: Range of Products Compare the various criteria’s of a market and how to decide which product line fits best for the new market. McDonald’s in France Vs McDonald’s in India 3. Explain International Positioning Strategies (Global, Foreign & Local Consumer Culture Positioning), using country examples. Global Consumer Culture Positioning Local Consumer Culture Positioning Foreign Consumer Culture Positioning Identifies Brand as a symbol of a particular global culture or segment. Identifies with the local cultural meanings. Consumed by local people. Locally produced for local people (Food/Personal/Household Non-durables) Example: IKEA Swedish Heritage Pick in Kuwait Associates the brand’s users, use occasions, or product origins with a foreign country or culture. High-touch and high-tech products. Example: Apple as a brand appeal to the global market and is seen as a high quality brand appealed to audiences globally. Example:
