International Marketing

Unit 1

Unit 1

Introduction to International Marketing

Structure: 1.1 Introduction Objectives 1.2 Scope of International Marketing 1.3 International Marketing vs. Domestic Marketing 1.4 Principles of International Marketing Customer value and the value equation Competitive or differential advantage Focus 1.5 Management Orientations Ethnocentric Polycentric Regiocentric and geocentric orientations 1.6 MNCs and TNCs Transnational corporations 1.7 Benefits of international marketing 1.8 Summary 1.9 Terminal questions 1.10 Answers

1.1 Introduction
International marketing refers to marketing carried out by companies overseas or across national borders. This strategy uses an extension of the techniques used in the home country of a firm. International marketing is simply the application of marketing principles to more than one country. However, there is a crossover between what is commonly expressed as international marketing and global marketing, which is a similar term. The intersection is the result of the process of internationalisation. Many American and European authors see international marketing as a simple extension of exporting, whereby the marketing mix 4Ps is simply adapted in some way to take into account differences in consumers and segments. It, then, follows that global marketing takes a more standardised approach to
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world markets and focuses upon sameness, in other words the similarities in consumers and segments. According to American Marketing Association (AMA), international marketing is the multinational process of planning and executing the conception, pricing, promotion, and distribution of ideal goods and services to create exchanges that satisfy individual and organisational objectives. In this unit and subsequent units, you will learn various aspects of international marketing. You must note that in the definition, the word multinational has been added to the definition of marketing given by other experts. That word implies that marketing activities are undertaken in several countries and such activities should somehow be coordinated across nations. Objectives: After studying this unit, you should be able to: State the scope of international marketing Differentiate between international and domestic marketing List the principles of international marketing Discuss the management orientations and emergence of MNCs and TNCs Identify the benefits of international marketing

1.2 Scope of International Marketing

The foundation for a successful international marketing programme is a sound understanding of the marketing discipline. Marketing is the process of focusing the resources and objectives of an organisation on environmental needs and opportunities. The first and the most fundamental fact about marketing is that it is a universal discipline. The marketing discipline is equally applicable from China to India, United States to Japan and Australia to Zanzibar. Marketing is a set of concepts, tools, theories, practices and procedures and experience. Although the marketing discipline is universal, markets and customers are quite differentiative. This means that marketing practices must vary from country to country. Each person is unique and each country is unique. This reality of differences means that we cannot always directly apply experience from one country to another. If the customers, competitors, channels of
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distribution and available media are different, it may be necessary to change our marketing plan. The scope of international marketing is to have a borderless world like the multinational companies Coca Cola, Pepsi, McDonald, Gillette and so on. Their products and body marketing mix elements are both international and local in nature. A central issue in international marketing is how to tailor the international marketing concept to fit a particular product or business. Self Assessment Questions 1. Marketing is a universal principle. (True/False) 2. Though marketing is universal, different marketing approaches are required for different countries. (True/False)

1.3 International Marketing vs. Domestic Marketing

The striking difference between international and domestic marketing lies in the environment in which the two take place. The important points of differences between international and domestic marketing are: 1. Sovereign Political Entities: Each country is a sovereign political entity and, therefore, they for importing and exporting the goods and services in order to safeguard their national interest impose several restrictions. The traders in international marketing have to observe such restrictions. These restrictions may fall in any of the following categories. i) Tariffs and customs duties on import and export of goods and services in order to make them costly in the importing country and not to ban their entry into the country completely. In the post war period, through the efforts of General Agreement on Tariffs and Trade (GATT) there has been a significant reduction in tariff globally and on regional basis due to the emergence of regional economic groupings. ii) Quantitative restrictions are also imposed with an intention to restrict trade in some specific commodities. The major objective behind the restriction is the protection of home industries from the competition of the foreign commodities. iii) Exchange control is another restriction imposed by almost every sovereign state. The Government, in some cases, does not ban the entry of goods in the country but the importer is not allowed the
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necessary foreign exchange to make the payment for the goods imported. But, in some cases, exchange control and quantitative controls are put together along with the grant of import licence. iv) Imposition of more local taxes on imported goods with an object to make the imported goods costly is one of the restrictions in international marketing. 2. Different Legal Systems: Different countries operate different legal systems and they all differ from each other. In most of the countries follow English Common Law as modified from time to time. Japan and Latin American countries are important exceptions to this rule. The existence of different legal systems makes the task of businessmen more difficult as they are not sure as to which particular system will apply to their transactions. This difficulty does not arise in the domestic trade, as laws are the same for the whole country. 3. Different Monetary Systems: Each country has its own monetary system and the exchange rates for each countrys currency are fixed under the rules framed by the International Monetary Fund and, therefore, they are more or less fixed. However, in recent years the exchange rates are fluctuating and are being determined by demand and supply forces. Some countries operate multiple rates; i.e. different rates are applicable to different transactions. 4. Lower Mobility Factors of Production: Mobility of different factors of production is less as between nations than in the country, itself. However, with the advent of air transport, the mobility of labour has increased manifold. Similarly, the development of international banking has increased the mobility of capital and labour. In spite of these developments, the mobility of labour and capital is not as much as it is within the country itself. 5. Differences in Market Characteristics: Market characteristics in each segment are different, i.e. demand pattern, channels of distribution, methods of promotion etc. are quite different from market to market. If we take each country a separate market, we can assume different market characteristics there. These differences are accentuated due to the existence of government controls and regulations. However, this is a difference of degree only. Even in one single country, for example, India
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and America, these differences in market patterns may be found from state to state. 6. Differences in Procedure and Documentation: The centuries old laws and customs of trade in each country demand different procedures and documentary requirements for the import and export of the goods and services. The traders residing in the territory have to comply with these regulations and customs if they want import and export of goods and services. Activity 1: Trace the journey of Unilever and P&G, right from their inception till date covering how they became global giants and what major marketing initiatives they took that helped them to be major players in India. Self Assessment Questions 3. The main objective of imposing quantitative restrictions on imports is to increase the demand for home made items. (True/False) 4. The mobility of labour and capital in the international market is smoother than in the domestic market. (True/False)

1.4 Principles of International Marketing

The essence of international marketing can be summarized in three great principles. The first identifies the purpose and task of marketing, the second the competitive reality of marketing and the third the principal means for achieving the first two. 1.4.1 Customer value and the value equation The task of marketing is to create customer value that is greater than the value created by competitors. The value equation is a guide to this task. As suggested in the equation, value for the customer can be increased by expanding or improving product and/or service benefits, by reducing the price, or by a combination of these elements. Companies with a cost advantage can use price as a competitive weapon. Knowledge of the customer combined with innovation and creativity can lead to a total offering that offers superior customer value. If the benefits are strong enough and

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valued enough by customers, a company does not need to be the low-price competitor to win customers. 1.4.2 Competitive or differential advantage The second great principle of international marketing is competitive advantage. A competitive advantage is a total offer, vis--vis relevant competition that is more attractive to customers. The advantage can exist in any element of the companys offer: the product, the price, the advertising and point-of-sale promotion, or the distribution of the product. One of the most powerful strategies for penetrating a new national market is to offer a superior product at a lower price. The price advantage will get immediate customer attention, and, for those customers who purchase the product, the superior quality will make an impression. V = B/P Where, V = Value B = perceived benefits perceived costs (for example, switching costs) P = price 1.4.3 Focus The third international marketing principle is focus, or the concentration of attention. Focus is required to succeed in the task of creating customer value at a competitive advantage. All great enterprises, large and small, are successful because they have understood and applied this great principle. IBM succeeded and became a great company because it was more clearly focused on customer needs and wants than any other company in the emerging data-processing industry. One of the reasons IBM found itself in crisis in the early 1990s was that its competitors had become much more clearly focused on customer needs and wants. Dell and Compaq, for example, focused on giving customers computing power at low prices: IBM was offering the same computing power at higher prices. A clear focus on customer needs and wants and on the competitive offer is required to mobilize the effort needed to maintain a differential advantage. This can be accomplished only by focusing or concentrating resources and efforts on customer needs and wants and on how to deliver a product that will meet those needs and wants.
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One way to understand the concept of international marketing is to examine how international marketing differs from such similar concepts as domestic marketing, foreign marketing, comparative marketing, international trade, and multinational marketing. Domestic Marketing is concerned with researchers or marketers home country. marketing practices within

Foreign Marketing encompasses the domestic operations within the foreign country. A US company considers marketing in United States as domestic marketing and marketing in Great Britain as foreign marketing. Comparative Marketing is the one when its purpose is to contrast two or more marketing systems rather than examine a particular countrys marketing system for its own sake. International Trade is concerned with the flow of goods and services across national borders. The focus of the analysis is on commercial and monetary conditions that affect balance of payment and resource transfer. International Marketing on the other hand, is more concerned with micro level of market and uses the company as a unit of analysis Multinational (Global or World) Marketing is the preferred term for some of the authors since nothing is foreign or domestic about the world market and global opportunities. One might question whether the subtle difference between the international marketing and multinational marketing is significant. For practical purposes, it is merely a distinction without a difference. As a matter of fact, multinational firms themselves do not make any distinction between the two terms. It is difficult to believe that International Business Machines will become more global if it changes its corporate name to Multinational Business Machines. Likewise, there is no compelling reason for American Express and British Petroleum to change their name to say Global Express and Multinational Petroleum. For purposes of discussion, international, global and multinational marketing are interchangeable.

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Self Assessment Questions 5. A clear focus on its profit goals and sales maximisation can give the company a distinct advantage. (True/False) 6. International marketing and multinational marketing are very similar to each other, infact almost the same thing. (True/False)

1.5 Management Orientations

The form and substance of a companys response to global business opportunities depend greatly on managements assumptions or beliefs both conscious and unconscious about the nature of the world. The worldview of a companys personnel can be described as ethnocentric, polycentric, regiocentric, and geocentric. Management at a company with a prevailing ethnocentric orientation may consciously make a decision to move in the direction of geocentricism. The orientations- collectively known as the EPRG framework are summarised in Figure 1.1
Polycentric Each host country is unique; sees differences in foreign countries

Ethnocentricity Home country is superior; sees similarities in foreign countries

Regiocentric Sees similarities and differences in a world region; is ethnocentric or polycentric in its view of the rest of the world.

Geocentric World view; sees similarities and differences in home and host countries

Figure 1.1: Orientations of Management and Companies

1.5.1 Ethnocentric A person who assumes his or her home country is superior compared to the rest of the world is said to have an ethnocentric orientation. The ethnocentric orientation mans company personnel see only similarities in markets and assume the products and practices that succeed in the home country will, due to their demonstrated superiority, be successful anywhere. At some companies, the ethnocentric orientation means the opportunities outside the home country are ignored. Such companies are sometimes
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called domestic companies. Ethnocentric companies that do conduct business outside the home country can be described as international companies; they adhere to the notion that the products that succeed in the home country are superior and, therefore, can be sold everywhere without adaptation. In the ethnocentric, international company, foreign operations are viewed as being secondary or subordinate to domestic ones. An ethnocentric company operates under the assumption that tried and true headquarters knowledge and organisational capabilities can be applied in other parts of the world. Although this can sometimes work to a companys advantage. Nissans ethnocentric orientation was quite apparent during its first few years of exporting cars and trucks to the United States. Designed for mild Japanese winters, the vehicles were difficult to start in many parts of the United States during the cold winter months. 1.5.2 Polycentric The polycentric orientation is the opposite of ethnocentrism. The term polycentric describes managements often-unconscious belief or assumption that each country in which a company does business is unique. This assumption lays the groundwork for each subsidiary to develop its own unique business and marketing strategies in order to succeed; the term multinational company is often used to describe such a structure. Until recently, Citicorps executive, offered this description of the company: We were like a medieval state. There was the kind and his court and they were in charge, right? No. It was the land barons who were in charge. The kind and his court might declare this or that, but the land barons went and did their thing. Realizing that the financial services industry is global sing; CEO John Reed is attempting to achieve a higher degree of integration between Citicorps operating units. Like Jack Welch at GE, Reed is moving to instill a geocentric orientation throughout his company. 1.5.3 Regiocentric and geocentric orientations In a company with a regiocentric orientation, management views regions as unique and seeks to develop an integrated regional strategy. For example, a U.S. company that focuses on the countries included in the North American Free Trade Agreement (NAFTA) the United States, Canada, and Mexico has a regiocentric orientation. Similarly, a European company that discuses
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its attention on Europe is regiocentric. A company with a geocentric orientation views the entire world as a potential market and strives to develop integrated world market strategies. A company whose management has a regiocentric or geocentric orientation is sometimes known as a global or transnational company. The geocentric orientation represents a synthesis of ethnocentrism and polycentrism; it is a worldview that sees similarities and differences in markets and countries, and seeks to create a global strategy that is fully responsive to local needs and wants. A regiocentric manager might be said to have a worldview on a regional scale; the world outside the region of interest will be viewed with an ethnocentric or a polycentric orientation, or a combination of the two. The ethnocentric company is centralized in its marketing management, the polycentric company is decentralized, and the regiocentric and geocentric companies are integrated on a regional and global scale, respectively. A crucial difference between the orientations is the underlying assumption for each. The ethnocentric orientation is based on a belief in home-country superiority. The underlying assumption of the polycentric approach is that there are so many differences in cultural, economic, and marketing conditions in the world that it is impossible and futile to attempt to transfer experience across national boundaries. There is likelihood that geocentric company does not identify itself with any particular country. Therefore, it is difficult to determine the firms home country except the location of its headquarter and its corporate registration. Activity 2: Prepare a comparative analysis on Ethnocentrism vs. Polycentrism. Give few examples to bring out the comparison. Self Assessment Questions 7. As per _____________ approach, every country has a unique business environment and therefore should be dealt with differently. 8. European Union is based on _________________ orientation. 9. Ethnocentric companies are __________________ in their business approaches.
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1.6 MNCs and TNCs

Multinational Corporations (MNCs) are major players in the world of international business. In India, the mention of an MNC usually elicits mixed reaction among the Indians. On the one hand, MNCs are associated with exploitation and ruthlessness. They are often criticised for moving resources in and out of the country as they strive for profit without much regard for the countrys social welfare. For example, Varity Corporation, an MNC of Canada was criticised for its action in 1991 to relocate its headquarters from Toronto to United States (Buffalo) in order to take advantage of the US Canadian Trade Agreement. For a long time, India referred to MNCs as agents of neo-colonialism. It was not until 1991 that India began to woo MNCs. Yet several years later, MNCs are still not welcome to India. To many Indians, such MNCs as Pepsi, Coca-Cola, Kentucky Food Corporation (KFC) and Enron Corporation are all foreign devils. In defence of MNCs more and more of them have been trying to be responsible members of the society. For example, Pepsi and Coke are contributing a lot for the development of sports especially cricket in India. On the other hand, MNCs have power and prestige; additionally, they create social benefit for facilitating economic balance. As explained by Miller, with resources, capital, food, and technology unevenly distributed around the planet and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is the first essential. This instrument is the MNC. Regardless of whether MNCs are viewed positively or negatively, they are here to stay and the important point is to understand when a company becomes a member of this elite group. MNC is not a onedimensional concept. Similarly, globalisation does not have a single definition. There is no single criterion that proves satisfactory at all times in identifying an MNC. Whether a company is identified as MNC or not depends on a number of criteria used. Various definitions of multinational corporations By Size: The term MNC implies bigness but bigness also has a number of dimensions such as market value, sales, profits, and return on equity when
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used to identify the largest MNCs will yield varying results. For example, Daimler Chrysler AG is number 1 in terms of sales but it is number 7 in terms of assets. General Motors is no. 2 in terms of assets and no. 4 in terms of sales. TNI is the abbreviation for transnationality index. The transnationality index is calculated as the average of three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment. Industry classification for companies follows the United States Standard Industrial Classification as used by the United States Securities and Exchange Commission (SEC). Foreign assets, sales and employment are outside Europe. Foreign assets, sales and employment are outside Australia and Asia Foreign assets, sales and employment are outside North America Foreign employment is outside Europe, Australia and New Zealand. It is not unusual for corporate size in terms of sales to be used as a primary requirement for judging whether a company is multinational or not. According to United Nations Department of Economic and Social Affairs, companies with less than $ 100 million sales can safely be ignored. Based on this definition, more than 300 thousand small and mid sized German companies do not even qualify to be MNCs though these firms contribute mightily to Germanys export success. These mid sized firms account for two thirds of countrys gross national product and four fifths of all workers. By Structure: According to Ahroni, an MNC has three significant dimensions: structural, performance, and behavioural. Structural requirements include the number of countries in which the firm does business and the citizenship of corporate owners and top managers. For instance, Singer Corporation sells its sewing machines in 181 countries, thus, satisfying the requirements with regard to the number of countries. Citi Corporation satisfies the requirement for multinationalism through the citizenship of members of top management. The company has done as much as other major American MNCs to diversify its management. In Asia, a Pakistani is in-charge of the firms $ 800 million finance business for all Asia except Japan. His colleague, an Indian national heads the consumer

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business. They are the two of the eight non-American in the elite group of 15 Executive Vice Presidents. Table 1.1 shows the top 20 multinationals in terms of revenues, profits assets stock holders and employees.
Table 1.1: Top 20 MNCs Assets, Sales, Employment, TNI, No. of Affiliations
100Ranking by: Corporation TNI II Foreign assets 1 70 42 General Electric 2 3 4 5 8 85 16 29 94 Vodafone Group PLC 72 General Motors 61 British Petroleum Company PLC 80 Royal Dutch / Shell Group 43 ExxonMobil 95 Toyota Motor Corporation 56 Ford Motor 55 Total 36 Electricite de France 51 France Telecom 54 Volkswagen 74 RWE Group 88 Chevron Corp 73 E.ON 52 Suez 70 Honda Motor Company Ltd. 17 Hutchison Whampoa Home Economy United States United Kingdom United States United Kingdom United Kingdom, Netherlands United States Japan United States France France France Germany Germany United States Germany France Japan Hong Kong, China Industry Assets Foreign Total 673342 220499 476078 206914 219516 Sales Foreign Total 59815 39497 65288 200293 184047 149702 52428 192604 253621 306731 Employment Foreign Total 155000 51052 194000 78100 92000 316000 61672 335000 96200 109000 TNI (Per cent) 50.1 82.4 42.9 79.4 71.1 No. of affiliates Foreign Total II 1184 77 91 417 507 1527 210 158 602 964 77.5 36.7 57.6 69.3 52.3 Electrical & electronic 412692 equipment Telecommunications 196396 Motor vehicles Petroleum expl./ref./distr/ Petroleum expl./ref./distr/ Petroleum expl./ref./distr/ Motor vehicles Motor vehicles Petroleum expl./ref./distr/ Electricity, Gas and water Telecommunications Motor vehicles Electricity, Gas and water Petroleum expl./ref./distr/ Electricity, Gas and water Electricity, Gas and water Motor vehicles Diversified 175254 161174 151324

6 7 8 9 10 11 12 13 14 15 16 19 20

38 64 79 27 94 73 51 63 53 77 24 12 11

143860 131676 119131 108098 91478 87186 82579 82569 81225 80941 78400 66682 61607

208335 244391 269476 125717 202431 129514 157621 128060 125833 149900 95085 89923 77018

248402 117721 80325 132960 26060 25634 85896 23390 99970 29148 39565 69791 24721

358955 186177 177089 178300 63578 61071 118646 52081 193641 83177 51670 87686 31101

52920 107763 160000 64126 17801 82034 165849 42349 32000 45820 96741 126122 165590

84000 285977 300000 112877 161560 203008 345214 85928 59000 79947 157639 144785 200000

67.1 51.6 47.6 72.5 32.4 49.9 57.6 52.9 56.8 48.8 73.5 80.3 80.8

256 141 201 401 218 175 199 248 106 367 440 141 75

331 391 285 567 276 243 279 432 234 639 613 243 83

77.3 36.1 70.5 70.7 79 72 71.3 57.4 45.3 57.4 71.8 58 90.4

Performance depends upon such characteristics as earnings, sales and assets. These performance characteristics indicate the extent of commitment of corporate resources to foreign operations and the amount of rewards from that commitment. The greater the commitment and reward, the greater is the degree of internationalization. For example, Hutchison Whampoa Limited with 80% of sales coming from overseas is more multinational than Petroleos de Venezuela and more multinational than Samsung Corporation whose overseas sales account only 20% of overall sales. It has been found that out of the top 20 MNCs assets, sales, employment TNI and number of affiliations. General Electric of the US tops the list followed by Vodafone Group, United Kingdom, British Petroleum Company PLC, United Kingdom, General Motors, United States and at the bottom the list are Siemens AG, Germany, Honda Motor Company Ltd., Japan and Hutchison Whampoa of Hongkong, China. As per the employment figures, Siemens AG tops the list with 4,61,000 employees followed by Volkswagen
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3,45,214, General Electric 3,16,000, For Motor 3,300,00 and Toyota Motors Corporation 2,85,977 employees. Japanese multinationals have shown willingness to commit their corporate resources to overseas assets. NEC has 25 manufacturing and 45 marketing and service subsidiaries overseas, which employ 22,000 people. Hitachi, a worldwide giant has 47 manufacturing subsidiaries and 130 sales and service companies worldwide. It makes TVs, automobile parts, PBXs, computer products, and large capacity magnetic discs in the United States; TV tubes in Singapore; CD players and Room Air conditioners in Taiwan, Refrigerators in Thailand and parts for Turbine Generators in Canada. Human Resources of overseas employees are customarily considered as part of the performance requirement rather than as part of the structural requirements, though the desirability of separating lower level employees from top-level management is questionable. The willingness of a company to use overseas personnel satisfies the significant criterion for multi nationalism. Avon, for example, employs 370,000 Japanese women to sell its products house to house across Japan. Siemens, well known for its consumer and industrial products, has some 300,000 employees in 124 countries. 1.6.1 Transnational corporations The largest national market in the world, the United States, today represents roughly 25 percent of the total world market for all products and services. Thus, U.S. companies wishing to achieve maximum growth potential must go global because 75 percent of world market potential is outside their home country. Coca-cola is one American-based company that understands this; 82 percent of its 1995 operating income and 71 percent of revenues were generated by its soft-drink business outside the United States. Non-U.S. companies have an even greater motivation to seek market opportunities beyond their own borders; their opportunities include the 260 million people in the United States. For example, even though the dollar value of the home market for Japanese companies is the second largest in the free world (after the United States), the market outside Japan is 85 percent of the world potential for Japanese companies. For European countries, the picture is even more dramatic. Even though Germany is the

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largest single-country market in Europe, 94 percent of the world market potential for German companies is outside of Germany. Many companies have recognized the importance of conducting business activities outside, the home country. Industries that were strictly national in scope only a few years ago are dominated today by a handful of global companies. The rise of the global corporation closely parallels the rise of the national corporation, which emerged from the local and regional corporation in the 1880s and the 1890s in the first quarter of the 20th century, there were thousands of auto companies in the world, and more than 500 in the United States alone. Today, fewer than 20 companies remain worldwide, and only 2 of them are American. In most industries, the companies that will survive and prosper in the next country will be global enterprises. Some companies that do not respond to the challenges and opportunities of globalisation will be absorbed by more dynamic enterprises; others will simply disappear. Activity 3: List the Top 20 most trusted companies that operate in the global business environment. Self Assessment Questions 10. The companies that sell products in the global market without making any adaptations to their home made product are called ___________. 11. Samsung Electronics is a MNCs with its base in _______________. 12. _____________ marketing and multinational marketing are very similar to each other, infact almost the same thing.

1.7 Benefits of International Marketing

The importance of international marketing is neither understood nor appreciated by the consumers though they are carrying out international marketing daily. The Government officials especially the bureaucrats seem always to point a negative aspect of international business. Many of their charges on international marketing are imaginary than real. Hence, it is essential that the benefits of international marketing be explicitly discussed.

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These benefits are: Endurance Every country is not that fortunate as USA in terms of infrastructure, size, resources and opportunities. Hence, they must trade with other countries to survive. Similarly, every country is not fortunate as India, which has abundant natural resources and treasure of biodiversity that it can survive within its resources even if there is a resource crunch. Even then it has to carry out trading with other countries to get oil and armaments for its own survival. Hongkong cannot survive without food and water from China. The countries of Europe have had similar experience since most of the European nations are relatively small in size. Without foreign market, European firms would not have sufficient economies of scale to allow them to be competitive with US firms. Progress of overseas markets Developing countries, inspite of poor economy having serious marketing problems are excellent markets. The US has found that India is the biggest market in the world for consumer and engineering products. According to a report prepared by US Congress by the US Trade Representative, Latin America and Asia are experiencing the worst economic recession though they have the potential in the world market. American market cannot ignore the vast potential of international market. The world market is four times larger than US market. In the case of Amway Corp., a privately held US manufacturer of cosmetics, soaps, and vitamins, Japan represents a larger market than the US. Sales promotion Foreign markets constitute a large share of total business of many firms that have cultivated market abroad. Many large US companies have done very well because of their overseas customers. IBM and Compaq sell more computers abroad than at home. The case of Coca-Cola clearly emphasizes the importance of overseas markets. Coca-cola is coming up with milk based products as majority of the Indians and Asians do not relish the taste of aerated drinks which are supposed to be having caffeine and is addictive.

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Diversification In the international market cyclical factors such as recession and seasonal factors such as climate affect the demand for most of the product. Due to these variables there are sales fluctuations, which frequently are substantial enough to cause lay off of personnel. One way of diversifying a companys risk is to consider foreign markets as a solution for variable demands. Inflation and wholesale price index The best way to control inflation is to earn foreign exchange through exports. Imports can also be highly beneficial to a country because they constitute reserve capacity of the local economy. Without imports, there is no incentive for domestic firms to moderate their prices. The lack of imported product alternatives forces consumers to pay more, resulting in inflation and excessive profits for local firms. This development usually acts as a prelude to workers to demand higher wages, further exacerbating the problem of inflation. Import quotas imposed on Japanese automobiles in 1980s saved 46,200 US production jobs but at a cost of $ 160 thousand per job per year. Employment and placements Tariff barriers and trade restrictions in certain countries contributed significantly to the great depression of 1930 and have the potential to cause widespread unemployment again. Unrestricted trade on the other hand, improves the worlds GNP and enhances employment generally for all nations. With the liberalization of economic policy 1991 India has gained tremendously with the inflow of foreign direct investment as a result of which the employment in the country has tremendously improved. Standard of living/style Trade affords countries and their citizens higher standard of living than otherwise possible. Without trade, product shortages force people to pay more for less. Products taken for granted such as coffee and bananas may become unavailable overnight. Life in most of the countries will be more difficult were it not being for the many strategic metals that must be imported. Trade also makes it easier for industries to specialize and gain access to raw materials, while at the same time fostering competition and efficiency.

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Marketing process International marketing should be considered a special case of domestic marketing. It has earlier been explained that there is very little difference between domestic and international marketing. Only thing is that the world multinational has been added in the international marketing process. Otherwise, the marketing mix is the same for both. With the improvement in information technology the access to international market has become easy as the whole world has become a small global village. Self assessment questions 13. For USA _______________ is the biggest market in the world for consumer and engineering products. 14. According to experts, the best way to control inflation is to earn ____________ through exports

1.8 Summary
International marketing is the process of focusing the resources and objectives of a company on marketing opportunities at international level. Companies are engaged in international marketing for two reasons: firstly, to take advantage of opportunities of growth and expansion, and secondly, to eventually lose their domestic markets because they will be pushed aside by stronger and more competitive international competitors. The basic goals of marketing are to create customer value and competitive advantage by maintaining focus. Company management can be classified in terms of its orientation towards the world: ethnocentric, polycentric, regiocentric, and geocentric. An ethnocentric orientation characterises domestic and international companies that pursue marketing opportunities outside the home market by extending various elements of the marketing mix. A polycentric world view predominates at a multinational company, where country managers operating autonomously adapt the marketing mix. Managers at international and transnational companies are regiocentric or geocentric in their orientation and pursue both extension and adaptation strategies in international markets. International marketing importance today is shaped by the dynamic interplay of several driving and restraining forces. The former include market needs
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and wants, technology, transportation improvements, costs, quality, international peace, world economic growth, and recognition of opportunities to develop leverage by operating internationally. Restraining forces include market differences, management myopia, organisational culture and national controls. Glossary Polycentric Orientation: this orientation believes that every country is unique Regiocentric Orientation: this orientation believes that each region is unique Ethnocentric Orientation: in this people consider his home country superior to rest of the world Geocentric Orientation: this orientation views entire world as one big potential market Multinational Corporations: organizations that manage production or offer services in more than on country

1.9 Terminal Questions

1. How is international marketing different from domestic marketing? 2. How can creating value for customer and customer focus give competitive advantage to the companies? 3. Discuss the EPRG framework. 4. Define Multinational Corporation. What guides their performance in the international business environment? 5. What is the importance of international marketing? Explain in brief.

1.10 Answers
Answers to Self Assessment Questions 1. True 2. True 3. True 4. False 5. True 6. False 7. Polycentric
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8. 9. 10. 11. 12. 13. 14.

Regiocentric Centralized International Companies South Korea International India Foreign Exchange

Answers to Terminal Questions 1. Refer to 1.3 There are differences in political and legal environment, market characteristics, monetary systems etc. 2. Refer to 1.4 Customers are the king in todays world so if they value the benefits provided by the company, company automatically gets a competitive edge. 3. Refer to 1.5 EPRG framework discusses Ethnocentric, Polycentric, Regiocentric and Geocentric Orientations. 4. Refer to 1.6 Multinational companies operate in many countries. Their performance is guided by values and customer focus. 5. Refer to 1.7 International marketing offers many benefits like expansion to overseas market and diversification etc. Mini-case Carpet industry in India In this era of globalisation, every company and every industry wants to go global. India also wants to sell carpets to the foreign markets. This can only be done through exports when the profits in the exports increase we go in for International Marketing, which lead to international trade and international business. How it happens? This happens only when our company becomes international, multinational and transnational. The carpet industry at present is passing through international marketing stage. The carpets that are exported follow the concept of Ethnocentricity. In order to make the carpet industry an MNC the export of carpets have to increase to more than $ 100 million turnover per annum. This can only happen in case this industry is properly organized and given more incentives by the Government being a labour intensive industry.

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International Marketing

Unit 1

The question of its becoming transnational cannot arise unless this industry falls in the hands of MNC itself and a large number of carpet weavers are trained on a large scale through Carpet Management Schools which is a far off dream. However, effort should be made to give more incentives to the carpet weavers so that the child labour in this industry is completely abolished and the objection of the importers on the use of child labour is removed. Question How can the present status of carpet industry be revived? Hint answer: To revive the carpet industry, it must be organised and government should provide more incentives to promote the industry. Source: International Marketing-3rd Edition, PK Vasudeva, Excel Books

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