International Marketing
Global Perspective
By
Prof Srikanth Venkataswamy
Global Marketing: An overview
Module-1
Introduction to Global Marketing
What Is International marketing?
International marketing is the process
of focusing the resources and objectives
of a company on International
opportunities.
Marketing is a set of concepts, tools,
theories, practices & procedures and
experience.
Together these elements constitutes a
teachable and learnable body of
knowledge.
3
International Marketing (contd,)
International Marketing consists of finding
and satisfying global customer needs better
than competition, both domestic and
international
and of coordinating marketing activities
within the constraints of global environment
The task of responding to uncontrollable factors in the
firm’s environment.
4
Marketing In the new MillenniumChallenges and Issues
1. Seamless Global society
2. Basis For competitive advantage
3. Business at the speed of thought
4. Virtual Enterprises
5. Customer: Co-producer of products and
services.
6. Customer: A warehouse of information
7. The Death of business and consumer
marketing
5
Marketing In the new MillenniumChallenges and Issues, Contd,
8. The role Of Distribution Channels
9. The Poor as Market Segment
10. Environment Protection
11. Diversity and Convergence Coexist
6
Marketing In the new MillenniumChallenges and Issues
1. Seamless Global society
The physical Distance, information and
Knowledge, has now become redundant.
Emergence Of global Society and universal
values.
Universal value relates to concept of time.Which
is an indicator of opportunity.
By this More and more customers are willing to
accept global products and services.
Further, emergences of these values has altered
concept of space,time and Location.
7
Marketing In the new MillenniumChallenges and Issues
2. Basis For competitive advantage
Technological changes has lead to significant shifts
in Competitive leadership.
The present Day environment, Knowledge
management has become crucial armour for
competitive survival.
8
A = Your point of differentiation. Some questions to
consider:
How sustainable is this?
Is this really as large as we’d like it to be?
How can we make it larger and more sustainable?
B = Points of parity. Some questions to consider:
What do we want to do with these?
C = Competitors’ points of differentiation. Some
questions to consider:
Is this area growing?
How difficult would it be for us to move these to B or A?
D = Opportunity. Some questions to consider:
How do we go after this so we move it into A and not B?
How do we prevent our competitors from moving it to B
or C?
Why is this space so large and A so small?
The only way to do this analysis in a useful way is to get
the information from your target market. Don’t
9
Marketing In the new MillenniumChallenges and Issues
3.Business at the speed of thought
The marketing Challenges Lies In enabling
Customers To overcome their resistance to change.
The Product Life Cycles will Be far shorter.
Interactive technologies will eliminate several roles
in marketing of products and services.
Products will be further standardized and hence the
opportunities to differentiate will no longer exists.
10
Marketing In the new MillenniumChallenges and Issues
4. Virtual Enterprises
In this era of Digital Darwinism and virtual
reality, size and location of an enterprise will
have a very little or no role to play.
A Virtual Enterprise (VE) is a temporary alliance of
enterprises that come together to share skills or core
competencies and resources in order to better respond to
business opportunities, and whose cooperation is supported
by computer networks.
It is a manifestation of collaborative networks
The enterprise is more of an action, rather than
an institution.
11
Marketing In the new MillenniumChallenges and Issues
5.Customer: Co-producer of products
and services.
The Producer will take the product up to certain
level in the value chain and then leave it for the
buyer to customize it to his or her requirements.
Ex- Asian Paints Shade Bay.
McDonald: Customers not only collects the order
but also cleans up after the food is consumed.
Color Worlds are altering the manner in
which products are distributed and
sold.
12
13
Marketing In the new MillenniumChallenges and Issues
6.Customer: A warehouse of information
In this internet and speed age, the customers has
access to huge bank of information from various
national and global sources.
Hence the era of standardization is today replaced
by mass customization.
14
Marketing In the new MillenniumChallenges and Issues
7.The Death of business and consumer
marketing
The differentiation between business and
consumer marketing, urban & rural
marketing and domestic & global marketing
will get more blurred.
The physical difference between the
product & services will cease to exist.
15
Marketing In the new MillenniumChallenges and Issues
8.The role Of Distribution Channels
The conventional dealer and distributors will no
longer Viable.
Service and customized will be the order of the day.
Global SCM will emerge and converge.
16
Marketing In the new MillenniumChallenges and Issues
9.The Poor as Market Segment
Globalization has widened the gap between
the rich and the poor.
Poor people world wide are now a large
segment which get not be ignored.
This segment offers more attractive
opportunity than the rich segment.
17
Globalization Of The Economy
Depends on:
•
•
•
•
The role of human migration,
International trade,
Movement of capital, and
Integration of financial markets
18
Globalization:
Globalization refers to increasing global connectivity,
integration and interdependence in the economic,
social, technological, cultural, political, and ecological
spheres.
Globalization is an umbrella term and is perhaps best
understood as a unitary process inclusive of many
sub-processes such as• Enhanced economic
• Interdependence,
• Increased cultural influence,
• Rapid advances of information technology, and
• Novel governance and
• Geopolitical challenges that are increasingly binding
people and
• The biosphere more tightly into one global system.
19
Globalization:
• Globalisation of the world economy has
been especially pronounced after World
War II and the Great Depression of the
1930’s in the USA.
• The rise in the volume of trade between
the developed and the developing
countries,
• Increase in cross-border transactions, rise
in immigration and
• Transfer of technology are some of the
key issues of globalisation
20
Innovators
Percentage of Adopters
Early Majority
Early
Adopters
Late Majority
34%
Laggards
34%
16%
13.5%
2.5%
Early
Time of Adoption
Late
21
Marketing In the new MillenniumChallenges and Issues
10.Environment Protection
The biggest Challenge for the new millennium
marketer is protection Of environment.
Be it in product development ,use or disposal,
The marketer will have to make a conscious efforts
to protect and maintain the environment.
This has led To development of eco-friendly
Products ex: Hotels, watches, food products, cars ,
fuels, packaging materials etc
22
Levi’s Eco Jeans Promotes
Sustainability
23
Bio Fuels
•Biodiesel
•Bioethanol
24
Marketing In the new MillenniumChallenges and Issues
11.Diversity and Convergence Coexist
Markets are diverse. The diversity is not just Based
on Demographic & geographical location of the
customers, but also on their response in changes
epically to technological changes for which
converges of needs is also a fact.
It is not only product related but will based on the
organization's culture, systems and hence quality.
Ex- long term vision ,Financial soundness, top-end
technological development, Investment ,Innovation
and new product & market development.
25
Marketing Management Concepts or
Philosophies
There are Five Marketing Management
concepts:
1. Production Orientation Concept
2. Product Orientation Concept
3. Sales Orientation Concept
4. Market Orientation Concept
5. Societal Orientation Concept
26
Global Marketing
Additional Reading
An Insight
Benefits
1.
2.
3.
4.
5.
6.
Survival
Growth in Sales
Profits
Diversification
Price moderation
Consumer
Benefits
7. National Benefits
28
Challenges
Globalization
Globalization refers to increasing global
connectivity, integration and
interdependence in the economic,
social, technological, cultural, political,
and ecological spheres.
Definition Of Globallsation. :
• During the Last few decades, human dynamics,
institutional change, political relations and the
global environment have become successively
more intertwined.
• While increased global economic integration,
global forms of governance, globally interlinked social and environmental developments
are often referred to as globalization,
• there is no unanimously-agreed upon definition
of globallsation.
• It means different things to different people.
Globalization:
Globalization is an umbrella term and is perhaps
best understood as a unitary process inclusive
of many sub-processes such as• Enhanced economic Interdependence,
• Reduction In cost & Distance
• Increased cultural influence,
• Rapid advances of information technology,
• Novel governance
• Geopolitical challenges that are increasingly
binding people
• Emergence of Global institutions
• The biosphere more tightly into one global
system.
32
Globalization Of The Economy
Depends on:
• The role of human migration,
• International trade,
• Movement of capital, and
• Integration of financial
markets
33
THE 3 I’s (eyes) Of International
Business:
1. Interdependence
2. Integration
3. Immigration
Need Based Economy
–Global Competition
–Liberalized Economy
–Compete or Perish
–Change Agents Needed
35
Research &
Product
Process
Development
Design
Development
Raw
Materials
Goods
Labor
Services
Technology
After-Sale
Infrastructure
Country A
Country C
Country B
Country D
36
The Global Supply Chain: Intra-Firm Coordination.
Distributor Storage with
Carrier Delivery Dell inventory
Factories
Warehouse Storage by
Distributor/Retailer
Customers
Product Flow
Information Flow
37
Lead Time
Dealing with Product Variety:
Mass Customization
Long
Short
Mass
Customization
High
Low
Low
High
38
Benefits Of International
Business
Benefits
1.
2.
3.
4.
5.
6.
7.
8.
9.
Survival
Growth in Markets
Sales & Profits
Diversification
Inflation & Price
moderation
Standard of living
Immigration &
Employment
Consumer Benefits
National Benefits
40
Benefits of Competitiveness
Increased
standard of
living
Reduction
trade deficit
More and
better jobs
Stronger
national
security
Decreased
budget deficit
Increased
competitiveness in world
market
Improved domestic
performance
Human
resources
Technology
Capital
High productivity of resources
What the customer
wants in products
and services
START HERE
41
Driving Forces Of International Business
1.
2.
3.
4.
5.
6.
7.
8.
Growth
Profits
Market Needs
Technology
Cost
Quality
Communications and Transportation
Leverage
42
A.
B.
C.
D.
E.
Systems
Experience
Scale
Resources Utilizations
Global Strategy
WHAT MAKES INTERNATIONAL Business
CHALLENGING?
OPERATIONS IN A MULTI-COUNTRY CONTEXT
Different Environments
0Economic/Financial
0Political/Legal
0Social/Cultural
Differences in Customer Behavior/Market Segments
Differences in Competition
Different Marketing Infrastructures
0Media
0Distribution
0Logistics
NEED TO:
Adjust to These Differences
44
The International Business Task
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Promotion
Competitive Competitive
structure
Forces
Product
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
45
ll
The International Business Task
Foreign environment
(uncontrollable)
The international Business
Political/legal
Economic
must deal with two levels of
forces
forces
uncontrollable uncertainty
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Promotion
Competitive Competitive
structure
Forces
Product
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
46
ll
The International Business Task
Foreign environment
(uncontrollable)
The international marketer
Political/legal
Economic
must deal with two levels of
forces
forces
uncontrollable uncertainty
Domestic environment
(uncontrollable)
Cultural
forces
Political/
legal
forces
Marketing
(controllable)
Price
Promotion
Product
Each foreign country in
which
a company operates
Competitive
Competitive
structure
addsForces
its own unique set of
uncontrollables
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic climate
Level of
Technology
Structure of
distribution
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
47
ll
The International Business Task
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic environment
(uncontrollable)
Marketing controllable
Cultural
forces
Political/
legal
forces
Price
Price
Promotion
Promotion
Geography
and
Infrastructure
Competitive Competitive
structure
Forces
Product
Product
Channels of
Channels
distribution
of
Distribution
Economic climate
Structure of
distribution
Level of
Technology
Environmental
uncontrollables
country market A
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
48
The International Marketing Task
Foreign environment
(uncontrollable)
Political/legal
forces
Economic
forces
Domestic uncontrollables
Political/
legal
Political/legal
Cultural
forces
forces
forces
Marketing
(controllable)
Price
Promotion
Competitive Competitive
Competitive
structure
structure Forces
Product
Channels of
distribution
Environmental
uncontrollables
country market A
Geography
and
Infrastructure
Economic
climate
Economic climate
Structure of
distribution
Level of
Technology
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
49
The International Business Task
Foreign
environment
Foreign
uncontrollable
(uncontrollable)
Political/legal
forces Domestic environment
(uncontrollable)
Cultural
Cultural
forces
forces
Political/
legal
forces
Marketing
(controllable)
Price
Promotion
Geography
Geography
and
and
Infrastructure
Infrastructure
Economic
forces
CompetitiveCompetitive
Competitive
structure
Forces
forces
Product
Channels of
distribution
Environmental
uncontrollables
country market A
Economic climate
Structure
Structure ofof
distribution
distribution
Level
of
Level of
Technology
Technology
Environmental
uncontrollables
country market B
Environmental
uncontrollables
country market C
50
Domestic VS International Business
Domestic Business
Global Business
1.
One nation, same language
and culture.
Transport cost is one of the
major expenses.
One currency
1.
Market is relatively
homogeneous.
Political environments and
factors are the same.
4.
2.
3.
4.
5.
6.
No problem of exchange
control and tariffs
2.
3.
5.
6.
Many nations, Many
languages and cultures
Transport cost influences to
some extent.
Different currencies in
different countries.
Markets are diverse and
highly heterogeneous.
Different political
environments and factors in
different countries and are
vital.
There are problem of
exchange controls and
tariffs.
51
Domestic VS International (contd,.)
Domestic Business
Global Business
7.
7.
8.
Data Collection relatively
easy, accurate and at less
cost.
Relative freedom from Govt.
Interferences.
9. Individual company has little
effect on environment.
10. Relatively stable business
Environment.
11. Chauvinism helps.
12. Uniform Financial climate
Data Collection a formidable
task, requiring significantly
higher budgets and
personnel allocation.
8. Govt. influences business
decisions.
9. “Gravitational” distortion by
Large companies.
10. Multiple environments, many
of which are highly unstable.
11. Chauvinism hinders.
12. Variety of financial climates ,
procedures. to wildly
inflationary.
52
Domestic VS International Business (contd,.)
Domestic Business
Global Business
13. No major Legal & taxation
issues
14. No major constrains in
advertisements &
promotions (messages,
language, costs, medium
etc..)
15. Marketing costs: is minimal,
Traveling, communication,
Presentations
16. Business “rules of the
game” mature and
understood
13. Legal & taxation issues not
relatively Smooth.
14. Advertisements &
promotions have to be
carefully handled.
(messages,language,costs,
medium etc..)
15. Marketing costs: is a
Variable,
16. Rules
diverse,varied,changeablean
d unclear sometimes.
53
The process (stages) of
Internationalization
Stages
1.
2.
3.
4.
5.
Domestic
Export
International
Multinational
Global/Transnational
55
Stages
56
ALTERNATIVE STRATEGIES
Global Co-ordination
ordination Integration
High
Low
Global
TransNational
International
MultiNational
Low
National differentiation, Responsiveness
High
57
Multinational corporation:
• A corporation that has its facilities and other
assets in at least one country other than its
home country.
• Such companies have offices and/or
factories in different countries and usually
have a centralized head office where they coordinate global management.
• Very large multinationals have budgets that
exceed those of many small countries.
Sometimes referred to as a "transnational
corporation".
Multinational corporation:
1. Having operations, subsidiaries, or
investments in more than two
countries: a multinational corporation.
2. Of or involving more than two
countries: a multinational research
project.
n. A company or corporation operating in
more than two countries.
The formal division of the organization intosubunits
such as product divisions, national operations,
and functions (Horizontal differentiation)II. The
location of decision making responsibilitieswithin
that structure (centralized ordecentralized) –
Vertical DifferentiationIII. The establishment of
integrating mechanismsto coordinate the
activities of subunits includingcross-functional
teams and or pan-regionalcommittees –
integrating mechanisms
Types of Multinational
corporations:
There are four types of multinational
corporations:
1. Decentralized in management nature+ strong
home country presence example: metro cash &
carry
2. Centralized + economies of scale ; example:
nestle
3. A company which open up in deferential
regions with same technology as in parent
company. i.e,
4. Transnational alliances: combination of the
above three types; example: KFC, Pizza Hut,
MacDonald
Stages
62
Management Orientation and
Global Marketing
•
Different Management Orientations in the
Global Arena – EPRG Framework
Polycentric
Ethnocentric
Regiocentric
Geocentric
63
Managerial Orientation
Ethnocentricity – Orientation to home
country
Polycentricity – Orientation to host country
Regiocentricity – Orientation to a region
Geocentricity – Orientation to the whole
world.
64
Theories of International
Trade
66
The Theory of Absolute Advantage -Adam Smith
• Different countries produce some goods
more efficiently. This may due to
differences in factors such as climate,
quality of land, natural resources, labour,
technology, capital or entrepreneurship.
• If each country specializes in the product
for which it has absolute advantage, each
can use its recourses more effectively.
Possible Product Outputs
(for certain resources & lab our)
68
Country A
Country B
Product X
20
10
Product Y
10
20
68
The Theory of Comparative
Advantage -- David Ricardo
• A country specializes in those
products that it can produce most
efficiently than other products without
regard to absolute advantage.
• A country would focus on the product
with greatest comparative advantage
or a product with the least comparative
disadvantage
Possible Product Outputs
(for certain resources & labour)
Country
Country A
B
70
Product X
20
10
Situation
Product Y
1
10
20
Product X
20
10
Situation
Product Y
2
30
20
70
71
Ugra Raj Enterprises Privated Limited
71
72
72
73
73
Heckscher-Ohlin Theory of Factor
Endowment
• Argues that comparative advantage arises
from differences in Factor Endowment.
• Extent to which a country is endowed with
such resources as Land, labour and
capital.
• Different nations have different factor
endowments and different factor
endowments explain differences in factor
costs.
• The more abundant a factor, the lower is
74
74
the cost.
Defects in the theory
•
•
•
•
•
•
•
Unrealistic Assumption of labour Cost.
Static nature of the theory
Neglect of transport costs.
Assumption of constant costs.
Factors Immobile Internally
Unrealistic theory based on assumptions.
Inadequate explanation of comparative
cost.
• Demand conditions ignored.
• Complete specialization is impossible.
75
75
• Although nations are nominally committed
to free trade they tend to intervene in
international trade to protect the interests of
politically important groups or promote the
interests of key domestic producers.
• For example, In the United States agricultural
subsidies have helped to protect relatively
inefficient cotton farmer from being exposed to
the full forces of competition in the global
marketplace.
• The subsidies were put in place due to the
political influence that cotton farmers exert on
the United States Congress this unfortunate, for
these subsidies have stimulated overproduction
of cotton in the United States, which has driven
down the price of cotton on world markets.
Trade barriers:
• Restriction that renders importation of some
goods into a country
• Trade barriers are government-induced
restrictions on international trade trade barrier
• Government imposed restriction on the free
international exchange of goods or services.
Types of Barriers:
Trade barriers are generally classified as
• Tariffs
• Non-tariff barriers to trade
Trade Policy Uses Seven Main
Instruments
1.
2.
3.
4.
5.
6.
7.
Tariffs,
Subsidies,
Import quotas,
Voluntary export restraints,
Local content requirements,
Administrative policies, and
Antidumping law.
TARIFFS –
It is a tax levies on goods entering into the market
/imports (or exports).
Tariffs fall into two categories.
1. Specific tariffs : assessed per unit of import
Or example, $3 per barrel of oil.
2. Ad valorem tariffs : Based on value of
import /are levied as a proportion of the value
of the imported good.
3. Compound Tariffs /Combination of Two:
Tariff produces revenues for the government
and protect domestic producers.
For example:,
• In march 2002 the U.S. government placed an
ad valorem tariff of 8% to 30% on imports of
foreign steel.
• The effect however was to raise the price of
steel products in the United States by
between 30 and 50 percent.
• A number of U.S. steel consumers, ranging
fro appliance makers to automobile
companies, objected that the steel tariffs
would raise their costs of production and
make it more difficult for them to compete in
the global marketplace.
In general, two conclusions can be derived from
economic analysis of the effect o import tariffs:
1. Tariffs are unambiguously pro-producer
and anti-consumer while they protect
producers from foreign competitors
this restriction of supply also raises
domestic prices.
For example: a study by Japanese economist
calculated that tariffs on import of food
stuffs, cosmetics, and chemicals into Japan
cost the average Japanese consumer about
$890 in the form of higher prices.
2) Import tariffs reduce the overall efficiency of the
world economy.
They reduce efficiency because a protective tariff
encourages domestic firms to produce products at
home than, in theory, could be produced more
efficiently abroad. The consequence is an inefficient
utilization of resources.
• For example: tariffs on importation of rice into South
Korea have led to an increase in rice production in that
country; however rice farming is a non-productive per se
of land in South Korea. It would make more sense for the
South Koreans to purchase their rice from lower cost
foreign producers and to utilize the land now employed in
rice production.
Tariff on Exports :
• Sometimes tariffs are levied on exports
of a product from a country.
• First, to raise revenue for the
government and
• second, to reduce exports from a
sector often for political reasons.
• For example: In 2004, China imposed a
tariff on textile exports. The primary
objective ,it moderates the growth in
exports of textiles from China.
NON-TARIFFS: