Chapter 12
International Business Marketing
Chapter Outline
• The Scope and Challenge of International Business
Marketing
• Export Opportunities and Challenges
• Stages of Economic Development
• The International Business Environment
• International Law
• Domestic Laws in Foreign Markets
• International Entry Strategies
• Product and Service Strategy
• Managing the International Promotion Effort
• Managing the International Distribution System
• Pricing Strategy
Most international trade arrives on ships.
(Image courtesy of
Maersk Sealand)
Export Opportunities
• Increase growth potential beyond domestic capacity
• Expand into new markets with existing or new products
or services
• Add product or service lines
• Extend product or service life cycles
• Improve profitability and competitiveness
• Save existing jobs and generate new ones
• Gain favorable publicity and recognition
Export Challenges
• To be successful in exporting, a company must:
– Analyze capabilities of business accurately.
– Know export potential of products and services.
– Identify foreign markets.
– Understand export logistics and distribution
channels.
– Develop international business relationships and
market entry strategies.
• For these reasons, many businesses never enter global
marketplace; the task seems too daunting and time
consuming.
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International business marketing means travel.
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A huge volume of international business marketing
transactions are continuously in process between
companies in countries all over the world.
The process has been going on since products started
to be produced and sold.
Corporate Participation in a U.S.
International High-Tech Trade Mission
• Boosts U.S. high-tech exports.
• Establishes and expanded business relationships
between executives and host country governments and
industry leaders.
• Highlights U.S. leadership and competitiveness in hightech sectors.
• Identifies new and upcoming commercial high-tech
opportunities in region.
• Demonstrates high-visibility U.S. support for local
economies.
International Business Environment
• Different cultural systems can produce divergent negotiating
styles shaped by each nation’s culture, geography, history, and
political system.
• Marketers should be aware of complex buying process,
socio-cultural dynamics, political-legal environment, and
economic environment in foreign markets.
Buying Centers
• Although objectives of purchasing personnel may be
universal, makeup of buying centers and interactions
between members of buying centers will vary by country.
• In international marketing, it is often more difficult to:
– Identify members of buying center.
– Determine their role in buying process.
– Communicate appropriate information to them.
Basic Requirements for
International Marketing Success
• Knowledge of business culture, management attitudes,
and business methods existing in country and
willingness to accommodate differences.
• Ability to understand the other market’s perspective is
critical. Most of us tend to think everyone else sees
things as we do (known as self-reference error ).
Marketing mix should be based on customer’s
preferences, not your own.
Key Definitions
• Cultural imperatives: Business customs and expectations
that must be met and conformed to if relationships are to be
successful.
• Cultural adiaphora: Behaviors and customs that outsiders
may wish to conform to or participate in, but that are not
required.
• Cultural exclusives: Customs or behaviors from which the
foreigner is excluded.
Political Environment
• In day-to-day operations, U.S. domestic business marketers
tend to ignore impact of political environment.
• U.S. political environment is relatively stable and predictable …
but this is not true everywhere.
• Political change can mean new competitive disadvantages for
foreign companies or even a company’s expropriation (or even
confiscation).
Legal Environment
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Common law systems base interpretation of law on prior court
rulings (legal precedents and customs).
Code (written) law systems rely on statutes and codes for
interpretation of law. There is little "interpretation," so law
must be detailed enough to prescribe appropriate and
inappropriate actions. Majority of world's governments rely on
code law system.
Islamic law systems rely on legal interpretation of Koran.
Foreign Trade Barriers
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Import policies—tariffs and other import charges, restrictions,
licensing, or barriers
Standards, testing, labeling, and certification
Government procurement—”buy national” policies and closed
bidding
Export subsidies—export financing on preferential terms
Lack of intellectual property protection—inadequate
patent/trademark protection
Service barriers—regulation of international data flows
Investment barriers—restrictions on transferring earnings and
capital
Regulations and standards and discriminatory taxation
Other barriers—bribery and corruption
International Law and Treaty
Agreements
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Treaties of friendship, commerce, and navigation (FCNs) usually
guarantee “national treatment” to foreign company—that it will not
be discriminated against by nation's laws and judiciary
International Monetary Fund (IMF) and General Agreement on
Tariffs and Trade (GATT) are part of limited body of effective
international law. Both agreements identify acceptable and
nonacceptable behavior for member nations.
The United Nations Commission on International Trade Law
(UNCITRAL), promotes a uniform commercial code for whole world.
International Standards Organization (ISO) is working toward
development of uniform international standards.
Entry Strategies
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Exporting
Licensing
Joint ventures
Manufacturing
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Manufacturing
Assembly operations
Franchising
Turnkey Operations
Product Strategies
• Product adaptation: Strategically changing product
to meet local needs.
• Product standardization: Product originally designed for
domestic market is exported to other countries with virtually no
change, except perhaps for translation of words and other
cosmetic touches.
Channel Alternatives
(Distribution and Facilitators)
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American-based export intermediaries
Brokers and agents
Export management companies (EMCs)
Export trading companies (ETCs)
Export trading company cooperatives
Piggyback arrangements
Foreign-based export intermediaries
Foreign sales agents
Foreign distributors
Direct marketing
ISO 9000 Certification
• ISO= International Organization for Standardization
• ISO 9000 Certification: a series of standards that include:
– Effective quality system
– Valid measurements and calibration
– Appropriate statistical techniques
– Lot control, part tracing, record keeping
– Internal process auditing
– Employee quality training
• Mandates:
– Define appropriate quality standards
– Document processes
– Prove consistent adherence to both
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ISO 9000 Certification
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Required by U.S. Dept. of Defense, Japan, European Community,
and others. Requirement includes second-tier subassembly and
component makers (and their suppliers, etc.).
Prior to ISO 9000, most companies had their own versions of
quality systems (many modeled on military specifications).
Certification assures customers that suppliers have capabilities
and systems to provide high-quality goods. (Doesn’t assure that
particular products are high quality, just the standards of the
system they were produced under.)
(continued)
ISO 9000 Certification
• Other International Standards receiving attention:
– AS 9000 (aerospace)
– ISO 14000 (environmental management)
– SA 8000 (social accountability)
• ISO creates standards; typically, consultants help
company adapt systems to meet the standards. When
ready, a certification company audits the systems and
awards certification (and provides periodic checking).
• Adoption cost = ~$250,000–$500,000 for average-size plan
operation.
Why Is ISO 9000
a Marketing Issue?
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If customer does not require it, ISO 9000 certification can be a
differential advantage.
If customer does require ISO 9000, marketers ensure that customer
needs are met. If marketing is confident that their quality
department can handle ISO requirement, marketing can deal with
other aspects of customer’s needs. If marketing is not sure, then
they need to be involved until they are. This is true of any customer
requirement (e.g., technical, delivery, packaging).
Keep in mind that marketers decide which customers to serve with
what marketing mixes. For example, marketing can decide that it is
in the company’s best interest to target customers who require ISO
9000, but not approach customers who require aerospace 9000.
Today’s marketers will need to be familiar with ISO specifications.
Find out more at www.ISO.ch and www.bsi.org.uk.
Countertrade
Global trade does not always involve cash; instead, countertrade
(CT), or barter, involves one-time exchange of goods/services for
other goods/services.
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Half of Fortune 500 companies have used barter in some way.
~300,000 companies trade through corporate barter.
More than 80 nations currently use CT.
More than 30 percent of world trade involves CT.
Examples
• Xerox sells $100 million/year in copiers and printers to Brazil,
with payment in Brazilian steel and Venetian blinds.
• General Dynamics sells F-16 fighter jets to Turkey in exchange
for Turkish products.
Summary Message
To be a successful international marketer, you need to
appreciate other cultures and be a continuously learning
student of their dynamic business practices, cultures, legal
systems, political systems, and competitive environments.
Summary Quiz
As a check of how much we have to learn:
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Name our major trading partners in NAFTA.
List their major political parties and what each stands for.
Describe their legal systems.
Describe how each differs from us culturally and how that
would impact business transactions.
Chapter 13
Ethical Considerations in
Business-to-Business Marketing
Chapter Outline
• Marketing Ethics: An Overview
• Marketing Strategy and Ethics
• An Ethical Issue: The Organizational Buying Function and
Buyer-Seller Relationships
• Ethical Issues in Marketing Research
• Ethics and the Management of the Pricing Function
• Ethics and Sales Force Management
• Ethics and Advertising Strategy
Ethics: An Overview
• Marketers must be capable of formulating and
implementing policies based not only on economic
reasoning, but on ethical and professional values as well.
• Influencing factors:
– Individual factors—attitudes and values.
– Opportunity presenting itself—likelihood of
punishment, no professional codes of ethics, no
corporate policies to discourage unethical decision
making.
– Values, attitudes, and behaviors of others—peers,
supervisors, top management.
Reputation for Integrity
• Takes years to earn.
• Takes one bad decision to destroy.
• Once a bad decision is made, it is often impossible to
reverse and may end business relationships.
Respect, Honor, Integrity
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How would you feel about working for someone who had no
integrity?
How would you feel about purchasing important products from
someone with no integrity?
How would you feel about having people with no integrity working for
you (where you are responsible for what they do)?
Perhaps this “Personal Characteristics Expected” section from a
recent job ad will convince doubters that companies do have clear
ethical expectations:
– Salary: $115,000 base (neg.), plus 20-30% incentive bonus, car,
and executive benefits.
– Personal characteristics: Must be a person of high integrity and
impeccable character, whom people will trust and respect; have
emotional maturity; be growing as a person, with a sense of
purpose; bring credibility by demeanor, professional knowledge,
and approach.
Ethics in the Future
Businesses are increasingly operating as part of society, not only
in their traditional role of improving standard of living (by
generating jobs, offering products and services, and paying
taxes), but also via a sensitivity that supports employees,
empowers customers and investors, and deals with needs of
local, national, and international communities.
Three Views on Corporate Management
Responsibility
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Invisible hand: True and only social responsibilities of business
organizations are to make profits and obey laws. Morality,
responsibility, and conscience reside in invisible hand of freemarket system, not with managers or organizations.
Hand of government: Corporation has no moral responsibility
beyond legal obedience. Regulatory hand of law and political
process turn these objectives into common good.
Hand of management: Encourages corporations to exercise
independent, noneconomic judgment over matters of morals and
ethics that face them.
Sample Corporate Code of Ethics
Integrity and ethics exist in the individual or they do not exist at
all. They must be upheld by the individual or they are not
upheld at all. In order for integrity and ethics to be
characteristics of this company, we who make up the
corporation must strive to be honest and trustworthy in all our
relationships. . .
(Courtesy of Boeing Company)
Ethical Issues in Selling
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Overselling
Promising more than can be delivered
Exaggerated claims and lying
Failing to keep confidences or promises
Accepting bribes or gifts
Offering inappropriate or illegal entertainment
Ethical Issues in Marketing Research
• Society’s rights
– The right to be informed of research results that may
impact society as a whole
– The right to expect objective research results
• Clients’ rights
– The right to confidentiality
– The right to expect quality research
• Researcher’s Rights
– The right for protection against improper solicitation
of proposals
– The right to accurate presentation of findings
– The right to confidentiality of proprietary information
on techniques
Ethics and Pricing
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Setting an unfair price
Altering product quality without changing price
Practicing price discrimination with smaller accounts
Price fixing
Using competitor’s quote to requote or rebid
Forced reciprocity
Ethics in Purchasing
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An underlying principle of purchasing practice is avoidance of
situations that might inappropriately influence, or even appear to
influence, purchasing decisions.
Advocated by National Association of Purchasing Management
(NAPM)
Can you think of some examples of situations to avoid?
Salesperson Ethics in Dealing
with Employers
• Moonlighting: Holding more than one job.
• Changing jobs to a competitor: May unavoidably involve
taking company training, customer knowledge, customer
goodwill, or confidential information.
• Expense accounts: Present special temptations and are
most frequent areas for ethical abuse.
• Motivational contests: May result in stockpiling orders
until contest begins, selling unneeded products to friends
for later return, overselling.
Ethics and Advertising Strategy
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It is immoral to:
– Lie, mislead, or deceive in advertising.
– Fail to indicate dangers that are not normally expected.
It is not immoral to:
– Use a metaphor or other figure of speech if these will be
understood as figurative language.
– Persuade as well as to inform.
Comparative advertising
– If comparisons are made, then they must be accurate.
– Care must be taken not to imply that if a product is superior to
competition in one characteristic, then it is superior overall.
– Better to point out competitive differences, leaving business
customer to judge superiority of product.