International Marketing (mid ex)
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ipptchap001.pptxThe Scope and Challenge of International Marketing
Chapter 1
McGraw-Hill/Irwin
Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
LO1 The benefits of international markets
LO2 The changing face of U.S. business
LO3 The scope of the international marketing task
LO4 The importance of the self-reference criterion (SRC) in international marketing
LO5 The increasing importance of global awareness
LO6 The progression of becoming a global marketer
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Global Commerce Causes Peace
Global commerce thrives during peacetime
Economic boom in North America in the late 1990s largely due to the end of the cold war
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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 of the economies of all countries involved.
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The Internationalization of U.S. Businesses
Exhibit 1.1 Foreign Acquisitions of U.S. Companies, Sources: Compiled from annual reports of listed forms, 2012.
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The ownership of many U.S. businesses is located with companies headquartered outside of the U.S. It is interesting to see that a company like Burger King is British and Seven Eleven is Japanese, brands in our daily life that we consider “American.”
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Gigante, one of Mexico’s largest supermarket chains, now has several stores in Southern California, including this one in Anaheim. On store shelves are a variety of Bimbo bakery products. Grupo Bimbo, a growing Mexican multinational, has recently purchased American brand-named firms such as Oroweat, Webers, Sara Lee, and Mrs. Baird’s Bread.
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The International Marketing Task
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What makes international marketing so much more complicated than domestic marketing are the various uncontrollable factors that companies have to encounter in international markets in addition to all the uncontrollable factors they would normally face in domestic markets. The uncontrollables in a foreign country could range from political or legal regulations that are unique to a country, competition, to consumer tastes and socio-cultural differences that are new to the company. Exhibit 1.3: The International Marketing Task illustrates the environment in which a firm operates in global markets.
Case 1–1, Starbucks-Going Global Fast, is a good way to think about the marketing mix and the effects of uncontrollables and controllables both in the domestic and foreign environments. How would you have done things differently to overcome some of the problems illustrated in the case? Starbucks is looking to boost its overall rate of growth by applying its business formula to other nations that lack a Starbucks-type chain. In doing so, it is helping to change aspects of the material culture of those countries it enters, to feel more like the U.S. At the same time, Starbucks has found that to succeed internationally, it must customize aspects of its operations and marketing to local conditions, by introducing new versions of its basic drinks that appeal to local tastes for example.
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Exhibit 1.2 Selected U.S. Companies and Their International Sales
Source: Compied from annual reports of listed firms, 2012
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The changing world economy has created unique opportunities for marketers. A product that has reached the end of its lifecycle in a mature western market may have tremendous potential in emerging markets such as Brazil, Russia or China. The reduced barriers and access to cross-border trade makes it possible for firms to source from various countries, reduce costs and sell worldwide. Deregulated markets in the former USSR and Eastern Europe, increasing competition, and open foreign investment policies in Asia, South America, and Africa have created new opportunities. It has allowed businesses to expand internationally.
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Photo Caption:
A Citibank branch in the heart of Brazil on a rainy day. The address on the Avenida Paulista is 1776—how American! One of the world’s great multinational corporations barely survived the financial debacle of October 2008. Perhaps its red, white, and blue umbrella logo protected it
from “adverse weather” on Wall Street? Indeed, during the past few years, its international operations have performed much better than
its domestic ones. In particular, emerging markets such as China, India, and Brazil proved relatively resilient during the global financial
crisis that began in 2008.
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Self-Reference Criterion & Ethnocentrism
Self-Reference Criterion (SRC) is an unconscious reference to one’s own cultural values, experiences, and knowledge as a basis for decisions.
Ethnocentrism is the notion that people in one’s own company, culture, or country know best how to do things.
Both the SRC and ethnocentrism impede the ability to assess a foreign market in its true light.
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The need to customize products and operations to local conditions that Starbucks encountered is a consistent theme in international marketing. Similarly, Starbucks' decision to take on foreign partners to help expand internationally is one that many companies must deal with. It also illustrates that it is inevitable for companies not to be influenced by Self Reference Criterion (SRC) or Ethnocentric attitudes, it is important that they consciously pay attention to overcome these attitudes while entering foreign markets. A person from one culture is often not aware that a reaction is influenced by one’s cultural background and that those from another culture may have a different perspective. The nature of the SRC is that whenever confronted by some aspect of another culture one’s reaction and evaluation is routinely clouded by one’s own cultural experiences. For example, it is common for one to frown upon the foods of another country when the same feelings may be expressed when people from that country visit other world regions. It is how one is raised and the foods one is accustomed to, such pepperoni topping on pizza in the U.S., a topping which most of the rest of the world is not familiar with. When this topping was requested by an American tourist in Germany, she received a pizza topped with “pepperoncini” peppers. In Korea, it is common to top ice cream with canned corn, which most of the western world may view with distaste at first reaction which is a natural reaction based on one’s own SRC and ethnocentric values.
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Developing Global Awareness
To be globally aware is to have:
tolerance of cultural differences and
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 socio-economic and political scenes round 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 Marketing Involvement
No Direct Foreign Marketing
Infrequent Foreign Marketing
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 towards 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 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 towards 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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Factors Favoring Faster Internationalization
Companies with either high technology and/or marketing-based resources are better equipped to internationalize than more traditional manufacturing companies (Tseng et. al., 2007)
Smaller home markets and larger production capacities favor internationalization (Fan & Phan, 2007) and
Firms with key managers well networked internationally are able to accelerate the internationalization process (Freeman and Cavusgil, 2007)
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Refer to text page 20, footnotes for the references on this slide.
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The Orientation of International Marketing
Environmental/cultural approach
Relate the foreign environment to the marketing process
Illustrate how culture influences the marketing task
The cultural environment within which the marketer must implement marketing plans can change dramatically from country to country
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The text addresses issues relevant to any company marketing in or into any other country or groups of countries, however slight the involvement or the method of involvement. Hence this discussion of international marketing ranges from the marketing and business practices of small exporters, such as a Colorado-based company that generates more than 50 percent of its $40,000 annual sales of fish-egg sorters in Canada, Germany, and Australia, to the practices of global companies such as Microsoft, Mary Kay, and Johnson & Johnson, all of which generate more than 50 percent of their annual profits from the sales of multiple products to multiple country-market segments all over the world.
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