Case study 1
INeal
Chp118thE.pptxChapter 1
The Scope and Challenge of International Marketing
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Learning Objectives
1-1 The benefits of international markets
1-2 The changing face of U.S. business
1-3 The scope of the international marketing task
1-4 The importance of the self-reference criterion (SRC) in international marketing
1-5 The increasing importance of global awareness
1-6 The progression of becoming a global marketer
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Global Commerce Causes Peace 1 of 3
Global commerce thrives during peacetime
Economic boom in North America in late 1990s
The end of the Cold War
Opening former communist countries to world trading system
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In times of peace, international trade flourishes as relationships between countries improve. This has a ripple effect and a positive impact on the economies of all countries involved.
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Global Commerce Causes Peace 2 of 3
International trade is important
Lack of consistent and predictable trade policies can lead to tension
Many world events affect trade
Company scandals and layoffs
Wars and political unrest
Natural disasters
Financial and economic disruptions
Populist developments
UK break with the EU via Brexit vote
Populist candidates like Donald Trump in the US are elected
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Global Commerce Causes Peace 3 of 3
Four Trends Affecting Global Business
Growth of the WTO and open trade agreements
Developing countries moving toward free trade
The Internet, cellular, and networked communication
A mandate to manage the global environment for the future
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International Trade and Peace
A rail has been built to link North and South Korea for the first time in nearly 60 years to transport materials. This shows a step toward peace and international trade.
©Han Myung-gu
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This shows a step toward increasing the prospects for a more peaceful world and setting the stage for increased international trade
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The Internationalization of U.S. Business
Globalization of markets increasing
More foreign customers, competitors, suppliers
Competition comes from domestic and foreign firms
Many foreign-controlled companies in U.S.
Foreign direct investment in U.S. is above $3 trillion
Foreign-owned companies in almost all industries:
Automobiles (Honda, BMW, Mercedes)
Appliances (LG Electronics, Frigidaire)
Convenience stores and restaurants (7-Eleven, Ben & Jerry’s)
News and entertainment (The Wall Street Journal, Pearle Vision, Universal Studios, RCA)
Hotels (Holiday Inn, Waldorf Astoria)
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More and more foreign investors flock to the United States to partner or completely take over their companies. The United Kingdom leads the group of investors, with companies from Japan, the Netherlands, Canada, and France following, in that order.
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Exhibit 1.1 Foreign Acquisitions of U.S. Companies 1 of 2
| U.S. Companies/Brands | Foreign Owner |
| 7-Eleven | Japan |
| Ben & Jerry’s (ice cream) | U.K. |
| Budweiser | Belgium |
| Chrysler | Italy |
| Chrysler Building (NYC) | Abu Dhabi |
| Church’s Chicken | Bahrain |
| CITGO | Venezuela |
| Columbia Pictures (movies) | Japan |
| French’s Mustard | U.K. |
| Firestone (tires) | Japan |
| Frigidaire | Sweden |
| Genentech | Switzerland |
Compiled from annual reports of listed firms, 2018.
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Exhibit 1.1 Foreign Acquisitions of U.S. Companies 2 of 2
| U.S. Companies/Brands | Foreign Owner |
| Gerber | Switzerland |
| Holiday Inn | U.K. |
| Huffy Corp. (bicycles) | China |
| Oroweat (breads) | Mexico |
| Purina (pet food) | Switzerland |
| Random House (publishing) | Germany |
| RCA (television) | France/China |
| Smith & Wesson (guns) | U.K. |
| Smithfield Foods (pork) | China |
| Swift & Company (meatpacking) | Brazil |
| The Wall Street Journal | Australia |
| T-Mobile | Germany |
| Waldorf Astoria Hotel (NYC) | China |
Compiled from annual reports of listed firms, 2018.
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The ownership of many U.S. businesses is with companies headquartered outside of the U.S. It is interesting to see that a company like Ben & Jerry’s is British and 7-Eleven is Japanese, brands in our daily life that we consider “American.”
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Mexican Brands in the U.S.
Along with NAFTA have come two of Mexico’s most prominent brand names. Gigante, one of Mexico’s largest supermarket chains, now has several stores in Southern California, including this one in Anaheim. Grupo Bimbo, a growing Mexican multinational, has recently purchased American brand-named firms such as Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread.
© John Graham
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NAFTA and now USMCA agreements have allowed two of Mexico’s most prominent brand names to move into the U.S. Gigante, one of Mexico’s largest supermarket chain, now has several stores in Southern California. Group Bimbo, a growing Mexican multinational, has recently purchased American-named firms Oroweat, Webers, Sara Lee and Mrs. Baird’s Bread.
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Revenues from International Sales
American brands have a global reach
Important for U.S. businesses to thrive
In many cases, foreign sales exceed domestic sales
Foreign investments generate a lot of revenue
Apple had revenue of $215 billion in 2016; 60% of total revenue from international sales
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With $215 Billion of revenue in 2016, 60% of their revenue was generated by international sales
As a result, many companies are now seeking foreign markets, and companies with existing foreign operations feel the need to be more competitive to succeed against multinationals.
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Exhibit 1.2 Selected U.S. Companies and Their International Sales
| Company | Global Revenues (billions of dollars) | Percent Revenues from Outside the U.S. |
| Apple | 215.1 | 60.0 |
| Amazon | 136.0 | 33.6 |
| Boeing | 94.6 | 59.0 |
| Dow Chemical | 48.2 | 65.5 |
| Exxon | 197.5 | 73.5 |
| Ford | 151.8 | 38.5 |
| General Electric | 119.7 | 70.3 |
| Intel | 59.4 | 78.2 |
| Johnson & Johnson | 71.9 | 47.4 |
| Procter & Gamble | 65.3 | 58.7 |
| Walmart | 482.2 | 24.5 |
S&P 500, 2016: Global Sales Year in Review (July 2017).
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International Marketing Defined
The performance of business activities
Plan, price, promote, direct flow of goods and services for profit
For consumers or users in more than one nation
Unique from domestic marketing
Many unfamiliar problems require unique strategies to cope with problems
Level of uncertainty and uncontrollables in foreign markets
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The International Marketing Task
Uncontrollable uncertainty
Comprised of uncontrollable elements in business environments
Each international market has own set of factors
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Figure 1.3 The International Marketing Task
Jump to long image description.
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Marketing Decision Factors 1 of 2
A marketing program is designed for optimal adjustment to uncertainty
Controllable elements in domestic environment
Blend all elements to capitalize on anticipated demand
Can alter elements if needed
Changing market conditions, consumer tastes, and corporate objectives
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Marketing Decision Factors 2 of 2
Uncontrollable elements in domestic environment
Actively evaluate elements to make adjustments
Determine the outcome of the marketing enterprise
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Aspects of the Domestic Environment
Domestic Environment Uncontrollables
Political and legal forces
Economic climate
Competition
Level of technology
Structure of distribution
Geography and infrastructure
Cultural forces
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Aspects of the Foreign Environment
Foreign Environment Uncontrollables
Political/legal forces
Economic forces
Competitive forces
Level of technology
Structure of distribution
Geography and infrastructure
Cultural forces
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Citibank in Brazil
A Citibank branch in the heart of Brazil. One of the world’s great multinational corporations barely survived the financial debacle of October 2008. Indeed, during the past few years, its international operations have performed much better than its domestic ones with the exception of those in Brazil. In particular, emerging markets such as China, India, and the Philippines proved relatively resilient since the financial crisis that began in 2008.
© John Graham
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A Citibank branch in the heart of Brazil.
One of the world’s great multinational corporations, Citibank barely survived the financial debacle of 2008. Since 2008, its international operations, with the exception of Brazil, have performed much better than domestic U.S. operations. During this same period, emerging markets such as China, India, and the Philippines proved relatively resilient.
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Environmental Adaptation Needed
Cultural adjustment: the most challenging and important task
Duties of international marketers
Interpret influence of each uncontrollable element on market
Adjust marketing efforts to cultures in which they are not attuned
Be aware of own frame of reference when evaluating markets
Often based off acculturation in home country
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In any study of the market systems of different peoples, their political and economic structures, religions, and other elements of culture, foreign marketers must constantly guard against measuring and assessing the markets against the fixed values and assumptions of their own cultures.
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The Self-Reference Criterion and Ethnocentrism
Both impede ability to accurately assess foreign market
Self-Reference Criterion (SRC)
Unconscious reference to own cultural values, experiences, knowledge
Problematic when used as basis for decisions
Ethnocentrism
One’s own country, culture, or country is best
Most problematic when affluent countries work with less affluent
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Be Vigilant of SRC and Ethnocentrism to Avoid Business Errors
Define situation in home-country’s cultural traits, habits, or norms.
Define situation in foreign-country’s cultural traits, habits or norms through consultation with natives. Make no value judgments.
Isolate SRC influence in situation and carefully examine how it complicates the issue.
Redefine situation without the SRC influence and solve for optimum business goal solution.
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Developing a Global Awareness
Main components
Tolerance of and willingness to learn about cultural differences
Knowledge of cultures, history, world market potential, and global economic, social, and political trends
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Tolerance for cultural differences is crucial in international marketing. Tolerance is understanding cultural differences and accepting and working with others whose behaviors may be different from ours. Global awareness also involves knowledge of world market potentials and global economic, social, and political trends. Over the next few years, there will be major changes in the socioeconomic and political scenes around the world, particularly in the developed world. Global awareness is not simply recognizing that your world views are different from others, but also accepting the diverse perspectives of others. For example, that slurping and burping is a sign of respect for the host’s cooking and not bad manners--it means that the guests are thoroughly enjoying the food. Behaviors are not standard across countries; what’s acceptable in one country may be completely taboo in another.
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Stages of International Involvement
Main characteristics of companies that internationalize quickly
High-technology and/or marketing-based resources
Smaller home markets and larger production capacities
Mangers who are well-networked internationally
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Stages of International Marketing Involvement
More reactive and less strategic
No direct foreign marketing
Infrequent foreign marketing
More involved in strategic planning
Regular foreign marketing
International marketing
Global marketing
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No Direct Foreign Marketing In this stage, a company does not send its products overseas directly, but its products may become available in other countries through intermediaries or middlemen such as trading companies. Occasional Internet sales because of a request from an overseas customer may also fall into this category.
Infrequent Foreign Marketing Temporary surpluses in inventory may cause companies to sell their excess product in overseas markets. Note that in the first two stages of International Marketing Involvement, the strategies are reactive rather than proactive.
Regular Foreign Marketing In this stage a firm has committed permanent resources toward international marketing and engages in it regularly on a proactive basis. The firm may use intermediaries to engage in international marketing.
International Marketing In this stage a firm has planned production and marketing to many countries around the world with specific targets for each overseas country market. It involves not only marketing but also production of goods in overseas markets.
Global Marketing In the global marketing stage, the firm starts viewing the world, including their home market, as one market. The major change is the orientation toward world markets and the activities directed at supporting this view.
When exploring the different stages of international marketing involvement, it is important that we understand the differences between global markets and global products. We also need to understand that a global marketing orientation does not necessarily mean standardization across all markets. Instead it may mean operating as if all country markets in a company’s scope of operations (including the domestic market) are approached as a single global market that may have multiple market segments extending across national borders and that the company may be seeking commonalties across country markets in order to standardize the marketing mix where it is culturally feasible and cost effective.
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Figure 1.4
The KOF Globalization Index (top ten plus selected other countries)
Jump to long image description.
Savina Gygli, Florian Haelg, and Jan-Egbert Strum, Gygli, Savina, Florian Haelg and Jan-Egbert Sturm (2018): The KOF Globalisation Index – Revisited, KOF Working Paper, No. 439. 2018
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Appendix of Image Long Descriptions
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Appendix 1 Figure 1.3 The International Marketing Task
The graphic shows three concentric circles labeled with elements of the marketplace.
The innermost circle is labeled Firm Characteristics and includes controllable elements: product, price, research, promotion, and place or distribution.
The next circle is labeled Domestic Environment and includes uncontrollable elements: political and legal forces, economic climate, and competitive structure.
The outermost circle is labeled Foreign Environment and includes uncontrollable elements: political and legal, cultural, economic, and competitive forces; geography and infrastructure; structure of distribution; and level of technology.
The graphic shows these elements for the sample country layered on top of three separate circles. Each circle represents three international markets, each with its own environmental elements.
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Appendix 2 Figure 1.4 The KOF Globalization Index
A bar chart shows 20 countries that are ranked by their political, social, and economic globalization.
The political globalization measures include trade flows, FDI flows, income payments to foreigners, mean tariff rates, and taxes on international trade.
The social globalization measures include telephone traffic, international tourism, foreign population, Internet users, and televisions.
The economic globalization measures include embassies in country, membership in international organizations, international treaties, and participation in UN missions.
The highest rates countries are Netherlands, Ireland, Belgium, and Austria, in that order. The lowest rated countries are Brazil, China, Mexico, and Egypt, in that order. The U.S. ranks towards the middle of the 73 countries rated.
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