MODULE 1 – International Marketing Environment

Nature and scope of International Marketing and management orientations

Nature:

1. Broader Market: Targets populations beyond national borders.

2. Multiple Uncontrollable Variables: Deals with various uncontrollable factors such as political,
economic, and cultural differences.

3. Requires Border Competence: Demands specialized management skills and broader competencies.

4. Intense Competition: Competes with both domestic and international competitors.

5. High Risk and Challenge: Faces risks like political instability, cultural differences, and communication
challenges.

Scope:

1. Export: Sending goods produced in one country to another for sale or use.

2. Import: Bringing goods or services into one country from another for use or sale.

3. Re-export: Importing semi-finished goods, further processing them, and then exporting finished goods.

4. Management of International Operations: Includes operating marketing and sales facilities abroad,
establishing production facilities in foreign markets, and monitoring the practices of other multinational
companies.

Management Orientations:

1. Production Orientation:

 Focuses on production efficiency and cost reduction.

 Assumes that products will sell themselves without much marketing effort.

2. Product Orientation:

 Emphasizes product quality and innovation.

 Believes that superior products will lead to customer loyalty and sales.

3. Sales Orientation:

 Focuses on aggressive sales techniques to stimulate demand.

 May use heavy promotion and personal selling to increase sales.

4. Market Orientation:

 Puts customer needs and wants at the center of business decisions.

 Focuses on understanding and meeting customer needs better than competitors.

5. Societal Orientation:

 Considers the broader societal welfare in addition to profits.

 Takes into account ethical and social responsibilities in business practices.

6. Global Orientation:

 Adopts a worldwide perspective in all aspects of business operations.

 Embraces diversity and cultural differences in marketing strategies.

7. Environmental Orientation:

 Focuses on sustainability and environmental responsibility.

 Seeks to minimize the negative impact of business operations on the environment.

EPRG Scheme:

Introduction of EPRG Framework: Introduced by Howard V. Perlmutter in 1969, the EPRG framework
categorizes four orientations or approaches to global marketing and staffing: ethnocentric, regiocentric,
polycentric, and geocentric.

1. Ethnocentric Orientation: The company follows its home country’s policies and procedures
without adapting products for foreign markets. Management believes that home country employees are
better suited to drive the company’s overseas growth.
2. Regiocentric Orientation: Assumes that countries in the same geographic region share economic,
social, cultural, or political similarities. Strategies developed for one country are applied throughout the
region.
3. Polycentric Orientation: Marketing strategies are based on the disparities of the countries where
subsidiaries are located. The company adapts its strategies to suit local economic, political, and cultural
differences.
4. Geocentric Orientation: Views the world as a single potential market, assuming that consumers
have similar needs across countries. This approach aims for a unified strategy but may face challenges in
overcoming labor and customer preference differences.

Examples:

PepsiCo: Follows a regiocentric orientation, tailoring its strategies to specific regions’ needs, allowing it to
cover a wide range of emerging markets.

Apple: Adopts a geocentric orientation, treating every foreign market as a global market, reflected in its
universal product appeal, particularly with products like the iPhone.

Google: Takes a polycentric approach, creating region-specific Google Doodles to market its services to
specific countries, tailoring its offerings to specific cultural events and celebrations.

Key Takeaways: The EPRG framework guides how companies manage operations between their
headquarters and foreign subsidiaries based on assumptions about international marketing, categorizing
strategies into ethnocentric, regiocentric, polycentric, and geocentric orientations.

Self Reference Criterion (SRC):

Definition: SRC is a concept in international marketing where marketers unconsciously use their own
cultural, religious, and values-based reference points. This can create mental constraints and biases in
marketing efforts, leading to misplaced strategies as marketers assume their own vision aligns with the
target market, which may become outdated over time.

Importance of SRC:

1. Filtering Potential Ideas: Acts as a filter for evaluating potential marketing ideas, particularly in
international strategies.

2. Time and Cost Savings: Helps save time and costs by providing a framework for decision-
making.

3. Cultural Understanding: Helps people develop an understanding of the taboos, values, and
culture of a place, aiding in making vital decisions and planning future steps.

4. Adapting to New Markets: When multinational companies (MNCs) expand to new countries,
they hire host nationals to understand the new market through their SRCs developed over time.

Effect of Self Reference Criterion in International Marketing

Self reference criterion can sometimes have an adverse effect in international markets when

compared to businesses done in the home country. Certain steps to avoid adverse impact of self

reference criterion are:

1. Understand foreign market in terms of traits, culture, values, beliefs

2. Compare and differentiate with home or local country
3. Separate the parameters as per self reference criterion
4. Solve the problem in the foreign market without impact of self reference criterion

Advantages of Self Reference Criterion (SRC)

Some advantages of self reference criterion are:

1. Gives the marketers an advantage while choosing among new ideas

2. Saves time while decision making
3. Dynamic individuals give a criterion that helps the company do things outside the box
4. Better products in adherence of the local taste

Disadvantages of Self Reference Criterion (SRC)

Certain drawbacks of self reference criterion are:

1. It is very difficult to capture specific niche demands with the help of SRC of a selected few
2. Too much dependence on SRC can lead to missing out on good marketing ideas
3. Niche segments cannot be addressed properly with heavy reliance on SRC

Examples of SRC:

McDonald's in India: McDonald's initially assumed that people in India ate meat like in other countries.
However, they later realized that half of the population was vegetarian. They had to change their menu and
kitchen operations to cater to the local demand, showing how SRC had to be adjusted for the foreign
market.

Significance, Opportunities & Challenges

To Marketers:

1. Market Access: Offers access to a variety of markets, allowing businesses to grow, gain global
recognition, expand their customer base, and increase revenues and profits.

2. Utilization of Surplus Production: Enables businesses to export excess production to other countries,
preventing wastage of resources.

3. Competitive Advantages: Helps businesses gain access to latest technologies, advanced knowledge,
and skilled staff, providing a competitive edge.

To the Economy:

1. Foreign Exchange: Brings foreign exchange into the domestic economy, balancing exchange rates and
improving the country's financial health in the international market.

2. Prevention of Economic Downturn: Provides an extra source of income that can help avoid economic
downturns and ensure economic stability.

3. Increased Standard of Living: Allows people to consume goods and services produced in other
countries, improving their standard of living.

Opportunities of International Marketing:

1. Increased Customer Base: Expands the market size and provides access to new customers, leading to
greater sales revenue and market share.

2. Economies of Scale: Operating on a larger scale internationally can lead to cost savings and higher
profit margins.

3. Increased Brand Recognition: Standardized marketing strategies can lead to greater international
brand recognition and loyalty.

4. Risk Diversification: Operating in different international markets reduces the risk of being affected by
economic changes in any single country.

5. Extended Product Life Cycle: Finding new markets for existing products can extend the product life
cycle and increase sales.

6. Greater Choice for Customers: Freer international trade provides customers with a greater choice of
products at competitive prices.

Challenges in International Marketing:

1. Political and Legal Environment: Foreign markets are affected by political and legal factors different
from domestic markets, making international marketing decisions complex.

2. Cultural Diversity: Cultural differences can pose challenges in international marketing decisions.

3. Economic Environment: Economic factors such as per capita income and spending habits vary across
nations, affecting marketing decisions.

4. Monetary System: Currency convertibility and volatility in financial markets can impact international
marketing decisions.

5. Communication Barriers: Different languages and communication styles can hinder effective
marketing communication.
6. Marketing Facilities: Marketing strategies that work in developed nations may not be successful in
underdeveloped nations.

7. Trade Restrictions: Import controls, trading barriers, and trade restrictions can affect international
marketing decisions.

8. Trade Practices: Trading customs and practices vary across countries, affecting international marketing
strategies.

Cultural dynamics & management

 Culture Definition: Culture refers to a set of values, norms, rituals, symbols, beliefs, and thought
processes shared by a group of people, learned and transmitted from generation to generation. It shapes
how people consume and satisfy their needs.
 Learning Culture: Individuals learn culture through socialization (growing up in a particular culture),
acculturation (adjusting to a new culture), and application (making decisions about consumption and
production).
 Impact on Business: Cultural dynamics play a crucial role in global business, influencing consumer
behavior, market preferences, negotiation styles, and business practices. Factors such as language, religion,
values, and traditions significantly impact how products and services are perceived in different markets.
 Management Strategies: To succeed in international markets, businesses must conduct thorough market
research to understand cultural nuances. This helps in building relationships, establishing trust, and
effectively marketing products or services. Failure to consider cultural differences can lead to
misunderstandings and business failures.
 Cultural Intelligence: Businesses need to develop cultural intelligence, which is the ability to understand
and navigate diverse cultural contexts effectively. This involves acquiring knowledge about different
cultures, demonstrating cultural sensitivity, and adapting communication and business practices
accordingly.
Key Aspects to Consider:
 Approaches of society towards business

 Influence of cultural, social, and religious factors on product acceptability

 Lifestyle and product usage patterns

 Level of acceptance or resistance to change

 Demand for specific products for particular occasions

 Values attached to products (e.g., functional or possessive value)

 Consumption patterns of buyers

Strategies for Success: Companies should develop cross-cultural competence, build strong relationships
based on trust and mutual respect, and tailor offerings to meet local preferences. This involves partnering
with local firms, employing local talent, and adapting marketing messages and business practices to align
with cultural norms.

Political, Legal & Regulatory Environments, Intellectual Property Rights

Legal & Regulatory Environments:
 Growth of Knowledge as a Tradable Asset: Knowledge, in various forms, has become a tradable asset,
influencing economies worldwide.
 Pressure to Change Policies: Major countries exporting intellectual property rights have pressured other
countries to change their weak or non-existent intellectual property rights-related policies, often arguing
that these changes will benefit the pressured country economically.
 TRIPS Agreement: The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS),
established in the mid-1990s as part of the World Trade Organization (WTO), has been instrumental in
linking international trade activity with intellectual property rights.
 Regional and Bilateral Agreements: Many regional and bilateral trade agreements, as well as
plurilateral arrangements like the Anti Counterfeiting Trade Agreement (ACTA), include standards and
enforcement obligations related to intellectual property rights.
Intellectual Property Rights (IPR):
Definition: Intellectual property rights are rights given to individuals over the creations of their minds,
granting the creator exclusive rights over the use of their creation for a certain period.
Copyright: Protects the rights of authors of literary and artistic works, performers, producers of
phonograms, and broadcasting organizations. Copyright typically lasts for a minimum of 50 years after the
author's death, aiming to encourage and reward creative work.
Industrial Property: Protects distinctive signs such as trademarks and geographical indications, aiming to
stimulate fair competition and protect consumers. It also protects innovations, designs, and trade secrets to
stimulate innovation and technology creation. Protection for industrial property is typically for a finite
term, such as 20 years for patents.
Social Purpose: The social purpose of intellectual property rights is to encourage creativity, innovation,
and the development of technology. It also aims to facilitate the transfer of technology through foreign
direct investment, joint ventures, and licensing.
Limitations and Exceptions: While intellectual property rights grant exclusive rights to creators, they are
subject to limitations and exceptions to balance the interests of right holders and users.
Balance: A functioning intellectual property regime should balance the legitimate interests of right holders
and users, ensuring fair competition, consumer protection, and the promotion of innovation and creativity.

Technological Factors
Definition: The technological environment encompasses factors related to the machines and materials used
in manufacturing services and goods.
Key Aspects to Consider:
 Level of Technological Developments: Evaluate the extent of technological advancements in the country
and specific business sectors.
 Pace of Technological Changes: Assess the speed at which technologies are evolving and becoming
obsolete.
 Sources of Technology: Identify where technologies are sourced from, whether through internal R&D,
partnerships, or acquisitions.
 Facilities and Restrictions for Technology Transfer: Consider the ease or difficulty of transferring
technology into and out of the organization.
 Time Taken for Technology Absorption: Determine how quickly the organization can adopt and
integrate new technologies into its operations.
Impact on Organizations:
 Production Techniques: Includes mass production, batch production, job production, Just-In-Time
production, and flexible manufacturing systems.
 Information and Communication Resources: Encompasses the use of digital technologies such as
computers, smartphones, internet, social media, email, and software.
 Logistic Technologies: Includes Internet of Things (IoT), Artificial Intelligence (AI), 3D Printing, Drone
Delivery, and Driverless Cars.
 Marketing Technologies: Comprises advertising, analytics, content management, customer relationship
management (CRM), and social media tools.
 E-commerce Technologies: Essential for running a successful e-commerce business.

Building an Effective Website:

 Domain Name: Unique business address used to find the company on the internet.

 SSL (Secure Socket Layer): Digital certificate for website security.

 E-commerce Platform: Enables setting up an online store and selling products on the internet.

Seamless payment processing with payment gateway: A payment gateway helps business securely
accept payments online
Efficient inventory management:
Chatbots for quicker customer support: Chatbots are AI-enabled tools that can have a text conversation
with users and offer basic assistance around the clock.
Data-driven decisions with website analytics
Emerging Technology Trends in E-commerce:
 Live chat support
• E-wallet integration
• Integrating popular E-wallet services like Apple Pay, Google Pay, and PayPal can
 simplify the checkout process and offer a secure shopping experience for customers.
• Augmented Reality (AR) and Virtual Reality (VR)
• Voice search integration
• Social search
• Buy-now-pay-later (BNPL) options
• Click-and-collect services
Impact on Operations: Technological factors affect how an organization operates, sells its products, and
interacts with customers, suppliers, and competitors.

Economic Environment
Definition: The economic environment refers to the factors contributing to a country's attractiveness to
foreign businesses. It can vary from one nation to another and includes infrastructure, education,
healthcare, and technology, which are associated with high levels of economic development. Economic
activities, infrastructure, education, and government control influence business operations.

Key Aspects to Consider:

 Economic System: Identify the economic system in the business sector.

 Stage and Pace of Economic Growth: Determine the level of economic growth and its rate.

 National GDP and Per Capita Income: Analyze the national GDP and per capita income.

 Taxation: Understand the tax system, including direct and indirect taxes.

 Infrastructure: Assess the available infrastructure facilities and challenges.

 Raw Materials: Evaluate the availability and cost of components and raw materials.

 Financial Resources: Identify sources of financial resources and their costs.

 Workforce Availability: Consider the availability of skilled workers, their salary, and wage structures.

Competitive Environment:

Definition: The competitive environment is influenced by political, economic, and cultural factors and
determines the degree and type of competition in a country.

Sources of Competition:

 Private or public sector.

 Large or small organizations.

 Domestic or global organizations.

 Traditional or new competitors.

Entering International Market

Definition: Market entry strategies are the methods companies use to plan, distribute, and deliver goods to
international markets.

Factors Influencing Strategy Choice:

1. Type of Product: Companies consider the type of product they sell, its value, and whether special
handling procedures are required for shipping.

2. Competition: Companies analyze their current competition in the target market.

3. Consumer Needs: Understanding consumer needs in the target market is crucial.

4. Budget Alignment: Companies align their budgets with their product considerations to improve
revenue chances.

Primary Factors Affecting Choice:

1. Marketing: Companies analyze which countries contain their target market and how to market their
product effectively.

2. Sourcing: Companies decide whether to produce the products locally, source them from overseas, or
work with manufacturers abroad.

3. Control: Companies decide whether to enter the market independently or through partnerships.

Importance of Market Entry Strategies:

1. Organizational Planning: Market entry strategies help companies plan their international expansion
effectively.

2. Market Understanding: These strategies require companies to understand consumer needs,

competition, and regulatory environments.

3. Opportunity to Find the Right Fit: Various market entry strategies allow companies to choose one
that best fits their needs and goals.

Key aspects of market entry strategies:

1. Exporting:

 Direct Exporting: Involves selling products directly to international markets without involving
intermediaries. Companies may set up their own sales offices, distribution networks, or use e-commerce
platforms.

 Indirect Exporting: Involves using intermediaries such as export agents, trading companies, or export
management companies to sell products in international markets. This method is suitable for companies
with limited international experience or resources.

2. Piggybacking:

 This strategy involves leveraging the distribution channels of another company already operating in
international markets. Companies can add their products to the existing distribution network, reducing the
need for establishing their own distribution channels.

3. Countertrade:

 Countertrade involves trading goods or services for other goods or services instead of currency. This
method is often used in countries with limited access to foreign currency or where traditional payment
methods are restricted.

4. Licensing:

 Licensing allows a company in one country (licensor) to grant permission to another company in
another country (licensee) to use its intellectual property, such as patents, trademarks, copyrights, or
proprietary technology, in exchange for a fee or royalty.

5. Joint Ventures:

 Joint ventures involve two or more companies from different countries forming a new entity to pursue a
specific business opportunity. Joint ventures allow companies to share resources, risks, and profits in the
target market.

6. Company Ownership:

 Acquiring a foreign company or establishing a wholly-owned subsidiary in the target market. This
method provides full control over operations but requires significant investment and involves higher risks.

7. Franchising:
 Franchising involves granting the right to use a company's business model, brand, and products to a
franchisee in another country. Franchising allows for rapid international expansion with lower investment
and risk for the franchisor.

8. Outsourcing:

 Outsourcing involves contracting with a third-party provider to handle certain business functions or
processes. Companies can outsource manufacturing, customer service, or other functions to companies in
other countries to reduce costs or access specialized expertise.

9. Greenfield Investments:

 Greenfield investments involve establishing a new business or facility in a foreign market. This method
allows companies to build operations tailored to the local market but requires substantial investment and
carries higher risks.

10.Turnkey Projects:

 Turnkey projects involve delivering a complete project to a client who can then "turn the key" and start
using the facility immediately. This method is common in construction, infrastructure, and technology
projects.