TAPPING INTO

GLOBAL
MARKETS Chapter 8
 LEARNING OBJECTIVES
1. What factors should a company review before deciding to go
abroad?
2. How can companies evaluate and select specific international
markets to enter?
3. What are the differences between marketing in a developing
and a developed market?
4. What are the major ways of entering a foreign market?
5. To what extent must the company adapt its products and
marketing program to each foreign country?
6. How do marketers influence country-of-origin effects?
 COMPETING ON A GLOBAL
BASIS
 Global industry
Competitors’ strategic positions in major geographic or national
markets are affected by their overall global positions
 Global firm
Operates in more than one country and captures R&D, production,
logistical, marketing, and financial advantages not available to
purely domestic competitors
 Global competition is intensifying in more product
categories as new firms make their mark on the international
stage. Competition from developing-market firms is also
heating up.
 FIGURE 8.1
DECISIONS IN INTERNATIONAL MARKETING
 DECIDING WHETHER TO GO ABROAD
 Factors that draw companies into the international arena
 Some international markets present better profit opportunities than
domestic market
 Firm needs larger customer base to achieve economies of scale
 Firm wants to reduce dependence on any one market
 Firm counterattacks global competitors in home markets
 Customers going abroad require international service

 Most companies would prefer to remain domestic if their domestic

market were large enough. Managers would not need to learn other
languages and laws, deal with volatile currencies, face political and
legal uncertainties, or redesign their products to suit different
customer needs and expectations. Business would be easier and safer.
 DECIDING WHETHER TO GO
ABROAD
 Before making a decision to go abroad, the company must
also weigh several risks
 Firm might not understand foreign preferences, failing to offer
competitively attractive product
 Firm might not understand foreign country’s culture
 Firm might underestimate foreign regulations and incur unexpected costs
 Firm might lack managers with international experience
 Foreign country might change commercial laws, devalue currency, or
expropriate foreign property.
 Some companies don’t act until events thrust them into the
international arena.
INTERNATIONALIZATION
PROCESS
DECIDING WHICH MARKETS TO ENTER

How Many Markeys To Enter

EVALUATING POTENTIAL MARKETS


Neighboring countries

Psychic
proximity/cultural
distance

Fewer countries
 SUCCEEDING IN DEVELOPING
MARKETS
 BRICS
 Brazil, Russia, India, China, and South Africa
 CIVETS
 Columbia, Indonesia, Vietnam, Egypt, Turkey, and South
Africa
 The unmet needs of the developing world represent huge
potential markets for food, clothing, shelter, consumer
electronics, appliances, and many other goods. Many market
leaders are relying on developing markets to fuel their growth.
 SUCCEEDING IN DEVELOPING
MARKETS
Brazil
Biggest economy in Latin America
Sixth largest economy in the world
Fifth-largest country of digital users
High cost of transporting products
Crime and corruption exist
Brazil boasts large and well-developed agricultural,
mining, manufacturing, and service sectors.
 SUCCEEDING IN DEVELOPING
MARKETS
Russia
Largest exporter of natural gas
Second-largest exporter of oil
Third-largest exporter of steel/aluminum
Make heavy use of social media
Dwindling workforce/poor infrastructure
 SUCCEEDING IN DEVELOPING
MARKETS
India
Lively democracy/youthful population
World’s second most populous nation
One of the youngest large economies
Has fully embraced mobile technology
Poor infrastructure/public services
SUCCEEDING IN DEVELOPING
MARKETS
China
Largest auto market in the world
Emerging urban middle class
World’s top consumer of luxury goods
Fierce competition among foreign firms
Opaque and arbitrary bureaucracy
SUCCEEDING IN DEVELOPING
MARKETS
South Africa
Access point to the African region
Increasing discretionary income
Consumers are brand conscious
Increasing reliance on mobile phones
Logistical/infrastructure problems
SUCCEEDING IN DEVELOPING
MARKETS
Indonesia
Increasing political stability
Increasing economic growth
Largest Muslim country
Consumers are brand conscious
Distribution/infrastructure limitations
 FIGURE 8.2
MODES OF FOREIGN MARKET ENTRY
 DECIDING HOW TO ENTER THE
MARKET
Direct Exporting
 Handling one’s Export
 Free information about trade and exporting
Successful companies adapt their Web sites to provide country-specific content
and services to their highest-potential international markets, ideally in the local
language. Finding free information about trade and exporting has never been
easier. Here are some places to start a search. Many states’ export-promotion
offices also have online resources and allow businesses to link to their sites.
 DECIDING HOW TO ENTER
THE MARKET
Licensing
 Licensor issues a license to a
foreign company to use a
manufacturing process,
trademark, patent, trade secret,
or other item of value for a fee
or royalty
 DECIDING HOW TO ENTER
THE MARKET
 Joint ventures
 Foreign investors have often joined local investors in a joint venture
company in which they share ownership and control
 Direct Investment
 The foreign company can buy part or full interest in a local company
or build its own manufacturing or service facilities.
 A joint venture may be necessary or desirable for economic or political
reasons. The foreign firm might lack the financial, physical, or
managerial resources to undertake the venture alone, or the foreign
government might require joint ownership as a condition for entry.
 If the market is large enough, direct investment offers distinct advantages
 DECIDING HOW TO ENTER THE MARKET
 Acquisition
 Acquiring local brands for their brand portfolio
DECIDING ON THE MARKETING
PROGRAM
Advantages Disadvantages
Economies of scale  Differences in consumer
Lower marketing costs needs, wants, usage patterns
Power and scope  Differences in consumer
Consistency in brand image response to marketing
Ability to leverage good ideas programs
Uniformity of marketing  Differences in brand
practices development process
 Differences in legal
environment
DECIDING ON THE MARKETING
PROGRAM
DECIDING ON THE
MARKETING PROGRAM
 Global similarities and differences
The Internet, cable and satellite TV, and global linking of
telecommunications networks have led to a convergence
of lifestyles
 Hofstede four cultural dimensions
Individualism versus collectivism
High versus low power distance
Masculine versus feminine
Weak vs. strong uncertainty avoidance
 HOFSTEDE FOUR CULTURAL DIMENSIONS
THAT DIFFERENTIATE COUNTRIES:
 1. Individualism versus collectivism—In collectivist societies, the
self-worth of an individual is rooted more in the social system than in
individual achievement (high collectivism: Japan; low: United States).
 2. High versus low power distance—High power distance cultures
tend to be less egalitarian (high: Russia; low: Nordic countries).
 3. Masculine versus feminine—This dimension measures how much
the culture reflects assertive characteristics more often attributed to
males versus nurturing characteristics more often attributed to females
(highly masculine: Japan; low: Nordic countries).
 4. Weak versus strong uncertainty avoidance—Uncertainty
avoidance indicates how risk-aversive people are (high avoidance:
Greece; low: Jamaica
 MARKETING ADAPTATION
 Product features  Advertising media
 Labeling  Brand name
 Colors  Packaging
 Materials  Advertising execution
 Sales promotion  Advertising themes
 Prices  cost if adapted.

 of all these differences, most products require at least some adaptation. Even
Coca-Cola is sweeter or less carbonated in certain countries. Rather than
assuming it can introduce its domestic product “as is” in another country, a
company should review the following elements and determine which add
more revenue than cost if adapted.
MARKETING ADAPTATION

 McDonald’s allows countries and regions to customize its basic layout and menu staples (see
Table 8.2). In cities plagued by traffic tie-ups like Manila, Taipei, Jakarta, and Cairo,
McDonald’s delivers via fleets of motor scooters.
Global product strategies
Product standardization
Some products cross borders without adaptation
better than others, and consumer knowledge
about new products is generally the same
everywhere because perceptions have yet to be
formed. Many leading Internet brands—such as
Google, eBay, Twitter, and Facebook—made
quick progress in overseas markets.
 FIGURE 8.3
PRODUCT & COMMUNICATION STRATEGIES
 GLOBAL PRODUCT STRATEGIES
Product invention
Product invention creates something new. It
can take two forms
Backward invention: reintroduces earlier
product forms well adapted to a foreign country’s
needs
Forward invention: creates a new product to
meet a need in another country
GLOBAL PRICING STRATEGIES
Companies have three choices for setting prices in
different countries
 GLOBAL PRICING STRATEGIES
Transfer price
Dumping
Arm’s-length price
Gray markets
Counterfeit products
GLOBAL DISTRIBUTION STRATEGIES
Channel entry
Figure 8.4: Whole-Channel
Concept for International
Marketing
Channel differences
Various distribution systems
Size and character of retail units
 COUNTRY-OF-ORIGIN EFFECTS
 Mental associations and beliefs triggered by a country
 Government officials want to strengthen their country’s image to help
domestic marketers that export and to attract foreign firms and investors.
Marketers want to use positive country-of-origin perceptions to sell their
products and services. Governments now recognize that the images of their
cities and countries affect more than tourism and have important value in
commerce. Foreign business can boost the local economy, provide jobs, and
improve infrastructure. Image can also help sell products.
 Global marketers know that buyers hold distinct attitudes and beliefs about
brands or products from different countries. These perceptions can be
attributes in decision making or influence other attributes in the process (“If
it’s French, it must be stylish”). Coca-Cola’s success against local cola
brand Jianlibao in China was partly due to its symbolic values of U.S.
modernity and affluence.
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