International Marketing
I – From Export Marketing to Global Business
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The process of internationalization
 Traditional sequential development:
 Serve domestic market
 Export to overseas markets
 Establish sales outlet in overseas market
 Establish production overseas
Alternative models of internationalization:
 The Uppsala model: an incremental process of diversification by market and mode of
operation.
 Successive stages of internationalization represent higher degrees of commitment
 A gradual acquisition, integration and use of knowledge of foreign markets
 Commitment increases with more experience and knowledge of markets
 Firms enter knew markets with successively greater psychic distance
 The transaction model
 Producer – driver chains
Manufacturer to Traders to Retailers: Spread the risk in different activities
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Buyer – driven chains
Traders to Factories to Overseas buyers to Brand-names to Merchandiser to Retailers
So: Complex network of subcontractors, Own no production facilities, Main activities are
marketing, research, coordination and management of parties
Strategic model of internationalization
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Export Marketing (ethnocentric)
International Marketing (polycentric)
Global Marketing (geocentric)
 Market drivers
 Global consumers : need the same product or service in several countries and want to
buy from suppliers with global presence (e.g. Hilton hotels)
 Global channels : distribution outlets logistics firms and which provide the same retail
environment or seamless transportation (e.g. Carrefour)
 Transferable marketing : using the same marketing ideas in different countries (same
brand name, same packaging)
 Competitive drivers
 Trying to match a competitor’s move
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The presence of competitor in a firm’s home market increases the need to go abroad
 Cost drivers
 Economies of scale: unit cost reduction made possible by long series when more than
one market is supplied.
 Economies of scope: gains from spreading activities across multiple product lines.
 Global sourcing advantages: cost-savings via supply from low-wage countries.
 Government drivers
 Favorable trade policies, acceptance of foreign investment, removal of trade barriers
 Compatible technical standards (e.g. format of computer keys, food safety...)
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Acquisitions and mergers – the motor car industry
Licensing – the brewery industry
Franchising – in the fashion retail sector
Global manufacturing – in the food sector
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Organizational buying behavior
Global sourcing
Just-in-time management
Centralized buying
Formalized strategic partnerships
Focus on value chain management
- Global trends in distribution
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Initially slow to internationalize, but global distributions are beginning to dominate
Polarization of retail forms (International retail groups (hotels, supermarket); Small,
flexible niche operators)
Balance of power in marketing moving from manufacturer to retailer
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Opportunities for globalization
Flexible production methods
Enhanced international transport network
Telecommunications and internet
Elimination of barriers to trade
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Becoming a global player in the world market
Global trends in competition
Downward price pressure
Collapse of traditional differences between industry and service sectors
Erosion of traditional bases of competitive advantage
Rising promotional costs, lower promotional returns.
II – Product mix decision
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Alternatives strategies
Export domestic products
Acquire foreign operations and add to product portfolio
Develop new products internally
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Building global brands
Single name or symbol for a uniform image worldwide
Created to serve a common denominator of preference
Enables costs savings and greater efficiency in product development and promotion
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Mandatory adaptation
Technical (voltage supply, plugs)
Legal (health & safety, trade description)
Measurement system (US/metric measure)
Language
III – Pricing for export and international markets
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Two perspectives on pricing
Price as generator of revenue determines / is determined by profit margins
Price as a marketing instrument determines / is determined by positioning
 perception of value and quality.
 Influence of market environment on prices (Size and maturity (produce eco of scales);
Transport and distribution infrastructures…)
 Influence of internet on prices (comparison, competition…)
 Prices and regulatory environment (VAT, government control on pricing)
 Currency fluctuations
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Price escalation in international trade
Transportation costs
Importer margins
Foreign exchange rate
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Currency fluctuation
Inflation risk
Import taxes
Sales taxes
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 higher prices
Approaches to global pricing
Extension price (ethnocentric) : set identical price-per-unit worldwide
Adaptation price : price set by local sales offices
Geocentric pricing: pricing influenced by local market conditions but in line with global
price strategy.
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Illegal and grey areas in national pricing
Parallel imports : To buy something in another country because it is cheaper
Price fixing : Cooperation between companies to maintain high price of a product
Dumping : To sell goods at a low price to eliminate the competition
IV – Market Entry Strategy
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Home country production
 Direct export (German producer in Munich sells to customer in Shanghai)
 Domestic based export department
 Dependant organizations
 Independent organizations
 Indirect export (German producer in Munich sells to export merchant in Berlin. Export
merchant sells to customer in Shanghai)
 Domestic based export merchant
 Domestic based export agents
 Cooperative indirect export
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Overseas production
 Wholly-owned operation
 Marketing goals: avoid import tariffs/quotas; lower production costs; obtain national
producer status.
 Full manufacturing: total control of sales; shorter lead time for delivery; image in host
country; quality control.
 Assembly only: goods are exported in CKD (Completely Knocked Down) form;
assembly operation in host country with lower labor costs.
 Strategic alliance
 Licensing
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Franchising
Contract manufacturing (for home company by 3rd party manufacturers)
Joint-venture
V – International distribution
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National typologies in distribution channels
 Import-oriented systems (typical in developing markets)
 No developed distribution infrastructures
 Importing agents set prices in a seller market
 Local distribution
 Few intermediaries
 US system (largest single national market)
 Mass low-cost distribution to vast national market
 Highly deregulated (few restrictions (hours, prices))
 Significant concentration
 Large retailers often buy direct from manufacturers
 Low retail prices
 European system (not a real single market but bigger than US)
 Vast single market, still with many barriers
 Logistic not comparable with US
 Both regional and national distribution systems common
 EU working hard to remove barriers to trade – simplified system
 Large retail and wholesale group with previously only natural presence now expending
across Europe
 Cultural and language barriers unchanged
 North-south and west-east characteristics manifest in distribution system
 Japanese system
 Dense infrastructure with several layers of intermediaries
 Retail distribution typified by small stores (opposite of US)
 Keinetsu = wholesaler-dominated channels, controlled by long-term
relationships based on trust and loyalty.
 Many small stores selling small quantities to frequent purchaser
 Very high prices to consumer
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National and local regulatory system determine
Trading hours
Restrictions on road deliveries
Restrictions on large store locations
Employment regulation for shop staff
trading
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Decisions in channel selection
Identify target markets within national markets
Specify marketing goals : volume, market share, profit margins
Determine financial commitment to specific markets
Identify control, length of channels, terms of sale and channel ownership
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Constraints in channel selection
Line breadth : wholesalers and retailers carry different lines cross nationally
Services provided by channel intermediaries (physical distribution, repair &
maintenance, promotional support, staff training)
Selective and exclusive distributors
Costs and margins : the high the price will be to consumer
Inventory decisions and delivery schedules
Multi-tiers distribution: 3 or 4 different ways to the consumer (small stores, internet…)
Infrastructure constraints (e.g. refrigerated or secure distribution)
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Exporting intellectual property
Licensing : alternative for manufacturing products near market place (low capital costs ;
maintain control over technology ; overcome import barriers ( more technology))
Franchising : widely-used for retail service operations to build brand presence
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Grey market, black markets
Grey markets : unauthorized distribution by retailers of (typically) branded goods
imported from other countries
Undermines price discrimination in global pricing strategy
Difficult to prevent, difficult and costly to pursue litigation
Black markets : illegal trading of stolen or undeclared goods
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VI. International promotion and advertising
 Factors in international advertising and promotion: kind of ad, which tools
 Language and cultural difference
 Media availability
-Infrastructure: access to different media types
-Frequency & scheduling: when, how often
-Reach: how people can have access to the media
-Lead time: time of preparation (news paper 3 days)
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Stage of market development: product is life style
-Young market require more educative, informative approach
-Mature market focus more on USPS
-Compare: breakfast cereal in GB/F/CZ and Private pension in US/D
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Intermediary availability
-Legal restriction
-Image (especially nudity, violence)
-Comparative advertising
-Prohibited goods (tobacco, alcohol, drugs)
-Time restriction on TV ad (length and number)
-% copy restriction in press
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Competition activity
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Media technology
- increased media availability, multiplicity of channels, titles
-growth in media driven by private broadcasters
-global broadcasting
-media groups are global giants
-but: TV scheduling still mostly national
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Promotional mix
-Advertising, sale promotion, personal selling, publicity & public relation
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Media advertising
-Decision: one message, different methods
-Advertising style: informative, persuasive, escapist
-Media selection
-Budget
-Integration of media ad with other marketing communication
-Standardization or adaptation?
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The message
-Represent the company’s values
-Consistent message across cultures
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Advertising Style :
Informative approach:
A) Direct and factual
B) Demonstrations testimonials expertise.
Persuasive advertisement:
Person-focused; interactive
Endorsement, product merits, superlatives
-Escapist:
-Symbolic and artistic
-Drama, emotion, sensuality
-Media Selection
-Balance between audio-visual, press and outdoor.
- Media buzzing national & local
- TV campaigns – high costs favor international organization, national executions
- Radio campaigns locally organized
- Outdoor campaigns – national local organization.
- Press
- International press: Generalist (Herald Tribune, Time, Economist) on specialist
- National titles: daily and weekly generalist, specialist, periodicals
- Local or regional titles, mostly generalist
- Budget considerations:
- Media budget must difficult to fix: combination of strategic considerations, % of
sales, and share of voice.
- Production (fixed) and media (variable) costs
- Media sales highly competitive and prices negotiated
-Why standardized advertising?
- Cost reduction
- Centralize control
- Facilitate coordination
- Global brands require global image
- Common image for global organization.
-What can be standardized?
-Copy (language issues)
- Brand names
- Slogans (language and culture)
-Images (People, scenary, households, animals)
- Routines & mutuals (family meals, events, bath time)
- Ideas, messages
- Information
-Personal selling
-Most adapted and adaptable element of promotion
- Highest cost for B2B goods, and most SMEs
- Highest costs are fixed costs
- SMEs combine sales and marketing functions for export countries
- Sales promotion
-B2B one size (mostly) lits all
-Trade fairs
- Catalogue/ sales brochure
-Samples
- Presentation tools
-Consumer markets: local conditions prevail
-pos promotion
-consumer promotion
-discounts
-Coupons
- Free gifts
- Competition
Differs in each country.
-Publicity
-large organizations may plan coordinated effort to communicate news to press
agencies around the world
-SMEs dependent on local sales activities and cooperation with local partners for local
events.
-Global Advertising Strategy
-Fully Standardized
- One brand, one story, one language
- Often simple theme with pictures, music, no text
-Semi-standardized
- One them within a particular lifestyle on using a metaphor
-Semi-standardized II: One form using different executional elements.
- Adapted: different brand names, one from, different execution.