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Transcript of Year 3-Marketing Specialization Week-1 Lecture. Module Title: International Marketing 2 Module...
Year 3-Marketing SpecializationWeek-1 Lecture
International Marketing
Module Title: International Marketing 2
Module Code:MK6065
Semester: Spring
Module Details….
Core texts
Kotabe M. and Helsen K. (2011) Global Marketing Management, 5th Edition, John Wiley & Sons Inc.
Hollensen, S. (2011) Global Marketing: A Decision-Oriented Approach, 5th Edition, Financial Times/ Prentice Hall.
Reading list
Globalization of markets Internationalization theories International Marketing research Marketing in emerging economies Cross Cultural consumer behavior and communications International sales negotiations International E-Marketing International Brand Management Social responsibility and Ethical issues in International
Marketing International Services Marketing
Important Topics covered….
Assessments-Compulsory Attendance
◦ Group Activities-50 % Group Presentation and feedback on others presentations
(Audio track submission)-10% Project report/Course Work-40%
◦ Unseen Examination-50%
◦ Minimum of 80% attendance is compulsory to attend the unseen examination
Module Details….
The world is shrinking rapidly with the advent of faster communication, transportation, and financial flows.
International trade is booming and accounts for 25% of U.S. GDP.
China is supplying goods to the entire world at cheaper price as a strategy.
China has surplus international trade. Most of the US companies consider the
world as their local market.
Some of the facts….
“International marketing consists of identifying and satisfying consumer needs abroad; better than the national and international competitors, under the constraints of the internationalization stage of the firm and the global environment”
By, Nathalie Prime
International Marketing
Domestic marketing vs. international marketing
DOMESTIC MARKETING Focus on domestic sales and markets Relatively homogenous market Data usually available and relatively easy
to collect Uniform financial climate Single currency Limited scope with reduced competition
DOMESTIC MARKETING (CONTD..) Within domestic markets, both domestic
and international companies can be found trading
What are the advantage for domestic companies compared to those of international?
Taxes and tariffs, or face regulatory barriers, Domestic companies receive assistance like
tax credits from the government.
DOMESTIC MARKETING (CONTD..) What should the country do….keep
supporting the domestic companies or allow international companies to operate more freely?
There should be balance
INTERNATIONAL MARKETING Fragmented and diverse markets Data collection formidable task, requiring
higher budget Political factors frequently vital Variety of financial climates Currencies differing in real value and
stability
EVOLUTION OF GLOBAL MARKETINGWorldview of a firm’s business activities can be described as the EPRG framework (Perlmutter, 1969; Chakravarthy and Perlmutter, 1985).
Its four orientations are1. Ethnocentric2. Polycentric3. Regiocentric4. Geocentric
ETHNOCENTRIC The home country is superior and the needs
of the home country are most relevant Controls are highly centralized The organization and technology implemented
in foreign locations will essentially be the same as in the home country.
Assumes products and practices that succeed at home will be successful everywhere
Leads to a standardized or extension approach E.g. export marketing.
POLYCENTRIC (MULTI DOMESTIC) Each country is unique and therefore
should be targeted in a different way Adapts to the different condition of
production and marketing in different location to maximize profit in each location.
This leads to localised product. Control with affiliates is highly
decentralized and The communication between them are also
limited.
REGIOCENTRIC (MULTINATIONAL) The world consists of regions (e.g. Europe, Asia, the
Middle East). The firm tries to integrate and coordinate its
marketing programme within regions, but not across them.
E.g. The NAFTA or European Union market◦ Some companies serve markets throughout the world
but on a regional basis Ex: General Motors had four regions for decades: GMNA:GM North America GME : GM Europe GMLAAM: GM Latin America/Africa/Mid-East GMAP: GM AsiaPacific
GEOCENTRIC (GLOBAL) Entire world is a potential market Strives for integrated global strategies Also known as a global or transnational company Retains an association with the headquarters
country Pursues serving world markets from a single
country or sources globally to focus on selected country markets
Leads to a combination of extension and adaptation elements
Think global, act local
7
The International Marketing Environment
Political/legalforces
Economicforces
1
2
Environmentaluncontrollablescountry market A
Environmentaluncontrollablescountrymarket B
Environmentaluncontrollablescountrymarket C
Competitivestructure Competitive
Forces
Level of Technology
Price Product
Promotion Place
Geography and
Infrastructure
Foreign environment(uncontrollable)
Structure ofdistribution
Economic climate
Cultural forces
3
45
6
7Political/
legalforces
Domestic environment(uncontrollable)
(controllable)
Cultural Differences…..
In Bulgaria shaking your head “no” means that the person is listening, not that they disagree with you.
Subway found difficulties in finding a type of floor for their stores in India.(it took two years to find it)
Sending a woman to conduct business negotiations in the Middle East might be offensive to some Middle Eastern businessmen who typically don't socialize in public with women.
Cultural differences….
In some Asian cultures, bowing, rather than shaking hands, is a more acceptable form of greeting.
Other etiquette concerns can include eating customs in business dinners, bringing and giving gifts when appropriate, differences in body language and dress and even methods of negotiation.
The MGM Grand, one of the largest hotels and casinos in Las Vegas, had to rebuild its multi-million dollarentrance because the tiger’s mouth that wasat the entrance was offensive to the Chinese customers visiting their location
When Nike learned that this stylized “Air” logo resembled “Allah” in Arabic script, it apologized and pulled the shoes from distribution.
Cultural Differences…..
Facebook and YouTube banned in China and Pakistan
Access Wikipedia and flickr are restricted in Pakistan
Social Differences…..
Tariff Barriers
Nontariff Barriers: ◦ Quota◦ Domestic Subsidy◦ Administrative delays◦ Boycotts and Embargoes◦ Local content requirements
Protectionism…..
Types of barriers Tariff
◦ Direct taxes and charges imposed on imports◦ Generally straightforward and easy for the
company to administer◦ They are visible and known quantity and so
can be accounted for by companies when developing their marketing strategies
◦ Used as a means for collecting revenues and protecting domestic industries
◦ Useful tool for politicians to show that they are actively trying to protect their home markets.
Types of barriers Tariff
◦ Common form of tariffs are Specific- charges are imposed on particular product by weight or
volume Ad valorem: charge is the straight percentage of the value of
goods Discriminatory: charge is for goods coming from particular
countries
For example, Company XYZ produces cheese in Scotland and exports the cheese, which costs $100 per pound, to the United States. A 20% ad valorem tariff would require Company XYZ to pay the U.S. government $20 to export the cheese. A specific tax would involve charging $30 dollars per pound of cheese whether cheese sold for $100 or $200 per pound.
Quotas A restriction on the amount of good that can
enter or leave a country during a period of time Two reason for imposing import quotas
◦ Protect domestic producers by placing the limit on amount of goods allowed to enter the country. Domestic producers win by protecting the market
share but consumers lose because of high price and less selection due to lower competition.
Other loser could be the domestic producers who need to import intermediate goods for the production.
◦ To force the companies of other nations to compete against one another for the limited amount of imports allowed.
Quotas Reason for imposing export quotas
◦ To maintain adequate supplies of product in the home market: for e.g. companies exporting natural resources
◦ Restrict supply on world markets to increase the price of the goods: for e.g. Middle east countries attempts to restrict the world’s supply of crude oil to earn greater profits.
Embargoes A complete ban on trade in one or more
products with a particular country Typically applied to accomplish political
goals Example: US embargo on trade with Cuba.
Administrative delays Regulatory controls designed to impair the
rapid flow of imports into a country Examples
◦ Requiring international air carriers to land at inconvenient airports
◦ Requiring product inspections that damage the product itself
◦ Purposely under staffing customs offices to cause unusual delays
◦ Requiring special licences that take long time to obtain
Local content requirements Law stating that a certain portion of end
product consists of domestically produced goods
Employ local resources in their production especially labour.
Proactive Profit and growth goals Managerial urge Technology
competence/unique product
Foreign market opportunities/market information
Economies of scale Tax benefits
Reactive Competitive pressures Domestic market: small
and saturated Overproduction/excess
capacity Unsolicited foreign
orders Extend sales of
seasonal products Proximity to
international customers/psychological distance
Major motives for starting exportInternationalization motives
Source: adapted from Albaum et al. (1994, p. 31)
9-32
Types of entry modes
Export
Intermediate
Hierarchical
Factors to be considered when undertaking foreign market entry Degree of control Degree of risk Commitment of organisational and financial
resources Flexibility
10-34
Export modes
11-35
Intermediate modes
Difference between licensing and franchising
Licensing Franchising
The term royalties is normally used
Management fees is regarded as the appropriate term
Products or even the single product are the common element
Covers the total business including know-how, goodwill, trademarks and business contracts
Usually taken by well established business
Tends to be start up situation
Terms of 16-20- years are common
Agreement is normally for 5 years sometime extending to 11 years.
Licensee are in strong position to operate the licence
Franchisee is very definitely selected by franchisor
Very little benefit from ongoing research is passed on to the licensee
The franchisor is expected to pass on to its franchisee the benefits of ongoing research programme 11-
36
12-37
Hierarchical modes
Domestic-based representatives
Resident sales representatives
Foreign sales subsidiary
Sales and production subsidiary
Region centres
12-38
Domestic-based sales representatives/
manufacturer’s own sales force
12-39
Residentsales representatives/
sales subsidiary
12-40
Sales and production subsidiary
12-41
Region center
China with international trade
A day in the global economy.
Globalisation Integration of world economies
through the reduction of barriers to the movement of trade, capital, technology, and people.
Broadening set of interdependent relationships among people from different parts of a world that happens to be divided into nations
The world economy - Glossary Gross Domestic Product (GDP)=A country’s total output of goods and
services Balance of (merchandise) trade=
exports-imports World output=sum of all countries’ GDPs World trade=total exports + imports Disposable income=total income-
essential purchases
The world economy - Glossary Foreign Direct Investment (FDI)=Foreign manufacturing/operations located
in a host country Foreign Portfolio investment=short
term foreign investment in equities, commodities, currencies etc.
These are a key source of financial flows between countries
FDI V FPI
FPI (Foreign Portfolio Investment) Passive ownership of foreign securities
such as stocks or bonds for the purpose of generating financial returns
Form of international investment but not direct investment which seeks control of business abroad and represents a long term commitment
Not more than 10% of ownership in the enterprise according to UN
WORLD TRADE *(exports + imports) and world output
World trade growing at <6%p.a 1990-2000.◦ 7.1% in 2007 (2008 forecast = 8.0%)
World GDP growing at <2% p.a. 1990-2000◦ 5.1% in 2007 (2008 forecast =4.6 %)
Exports and imports of goods % GDP (2000)
Region/country Exports Imports
N. America 17%(27) 23%(20)
W. Europe 40%(32) 40%(40)
Japan 8%(.4) 6%(1)
Asia 27%(14) 23%(14)
Latin America 6%(12) 6%(11)
( )=1948
Share of global exports and imports of services (2000) – top 5 exporters
Region/country Exports Imports
North America 19% 14%
U.K. 7% 6%
France 6% 4%
Germany 6% 9%
Japan 5% 8%
Recent international marketing trends
Changing balance of economic power Trading blocs Cultural convergence
Big Emerging Markets (2008 GDP forecast)
China (10.1)India (7.9%)
S. Korea (5.3%)Mexico (3.1%)Brazil (4.5%)
Argentina (5.7%)S. Africa (5.1%)Poland (5.1%)Turkey (5.3%)
Trade Blocs
‘Regional economic arrangements’ (from free trade to economic union)