CHAPTER ONE

Concepts of International
Marketing

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 INTRODUCTION
The internationalization and evaluation of markets
causes that companies focuses on marketing from a
global perspective. Thus, they give value to
consumers in order to satisfy all their needs and they
get market advantage over competitive in the world.
A study of international marketing should begin with
an understanding of:
What international marketing is? and
How it operates in an international context ?

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 Definition of International marketing
Jain (2001) opines that the term international marketing

refers to exchanges across national boundaries for the

satisfaction of human needs and wants.
“International marketing is the performance of business

activities that direct the flow of a company’s goods and

services to consumers or users in more than one nation.”
International marketing is simply the application of

marketing principles to more then one Country.

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 Cont.….
International marketing is “the multinational process of

planning and executing the conception, pricing, promotion, and

distribution of ideas, goods, and services to create exchanges
that satisfy individual and organizational objectives.” AMA’s
International marketing is consists of finding and satisfying

global customer needs better than the competition, both

domestic and international, and of coordinating marketing
activities within the constraints of the global environment.

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 Cont.….
Now let us have a brief look at each of the components of
international marketing emphasized in the above definition.
Identifying Global Customer Need: carrying out international
marketing research and analyzing market segments.
Satisfying Global Customers :- adapting products, services
and elements of the marketing mix to satisfy different customer
needs across countries and regions.
Being Better Than Competition: -assessing, monitoring and
responding to global competition by offering better value,
developing superior brand image and product positioning;
broader product range, low prices, high quality, god
performance, and superior distribution advertising and service.
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Coordinating Marketing Activities: coordinating and
integrating marketing strategies and implementing them
across countries, regions and the global market, which
involves centralization, delegation, standardization, and
local responsiveness.
Recognizing Constraints of the Global Environment:-

 governmental, protectionist, and industrial policies,

 Cultural and economic differences
 Marketing infrastructure differences
 Financial constraints due to exchange rate variation and
 differences in inflation rate
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 Dimensions/Stages of International Marketing
Firm may begin its international involvement at any stage or be in
more than one stage simultaneously.
 Domestic marketing: is concerned with the marketing practices within a

marketer’s home country.

 Foreign marketing: is marketing methods used outside the home country.

- No Direct Foreign Marketing

- Infrequent Foreign Marketing

-Regular Foreign Marketing
 International marketing in its literal sense signifies marketing between nations

(inter means between).

 Global Marketing: companies treat the world, including their home

market, as one market. 7

Features of International Trade:
Heterogeneous market
Different national groups
Different political unit
Different national policies
Government intervention
Different currencies
Immobility of factor.
 Why Firms /nations Go International
Marketing?
Profit
Enhances the standard of living:
Expanding the production capacities:
Severe Competition in the home country
Limited home market
Political stability Vs Political instability
Availability of technology & managerial competence
Nearness (proximity) to raw materials
Availability of quality human resources at less cost
To increase market share
 Reduced risks
To avoid tariffs and import quotas
 Domestic Vs International Marketing

 It is just incorrect to say that international marketing is nothing but

domestic marketing on a larger scale.

 Domestic marketing involves one set of uncontrollable derived from the

domestic market.

 International marketing is much more complex than domestic market

because a International marketer faces two or more sets of uncontrollable

variables originating from various countries; different cultural, legal,

political, and monetary systems.

The differences between Domestic and International marketing as

given in table below:- 10

 The differences between Domestic and
International marketing as follow:-
Decision
variable Domestic Marketing International Marketing
Market Single market and sub markets
Multiple markets, multiple sub
Segment markets
More difficult as new variables like
Easier as only a single market culture, religion, government policy
Market and sub market is served and others enter the scale of
Control decisions
Awareness of domestic market
Market is high, hence one can often do very important
Research without market research

Single market, single message, Multiple market, multiple message

Advertising question of adaptation limited depending on the emphasis
to sub segments, media choice, demanded by each market message
known with certainty may be adapted to new markets or
could be universal-complex media
availability

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 Cont….
Administra As the control is over a single Multiple markets, multiple mix of
tion set up, administration is marketing variables demand a new
relatively easy set up of administrative machinery

The decision is made solely on Though the decision grounds are

Product Mix the basis of providing better identical, market adaptability and
service to increase revenue- acceptability become a question
stage of PLC may be ignored
Product May be placed anywhere on With the production function,
Quality the BCG matrix of product and product quality is normally high
price even if the technology is New
Product As the product is designed for Product has to be adapted to every
Design the market, question of market segment
adapting does not raise
Product Is required when the product May move to new markets where it
Development reaches end of its life cycle or may be in growth or introduction
when it is withdrawn stage
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 International Marketing Concepts/Approachs
• The EPRG frameworks identify four types of attitudes or
orientations towards internationalization that are
associated with successive stages in the evolution of
international operations these four orientations are:
1. Ethnocentric Approach(home country orientation)
extension of its domestic products into foreign markets without
Is the
making any changes But the excessive production more than the
demand for the product , either due to competition or due to
changes in customer preferences
2. Polycentric Approach(host country orientation)
The domestic companies which are exporting to foreign
countries using the ethnocentric approach find that the
foreign market needs a altogether different approach.
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 Cont..
3. Regio-centric Approach(regional orientation)
The company operating successfully in a foreign country
thinks of exporting to the neighbouring countries of the
host countries. At this stage the foreign subsidiary
considers the regional environment for formulating
policies and strategies.
4. Geocentric Approach(world orientation )
Under this approach company views the entire world as a
single market and develops standardized marketing mix,
projecting a uniform image of the company and its
products, for the global market.

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 The Applicability of Marketing
Marketing is a universal activity that is widely applicable.

 However, it does not mean that consumers in all parts of the

world must or should be satisfied in exactly the same way.

One basic principle states regardless of their nationalities,

marketers everywhere should be customer-oriented.

However, to be customer-oriented does not mean that the same

marketing strategy should be repeated in a different environment.

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 Basis For International Trade
Why do nations trade?
No nations are completely self-sufficient: A nation

trades because it expects to gain something from its

trading partner.

Trade is a positive-sum game. It is “mutual gain.”

How gain is derived from trade?

Country’s production possibility curve
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 Production Possibility curve
Without trade, a nation would have to produce all

commodities by itself in order to satisfy all its needs.

Production possibility curve shows the maximum number

of units manufactured when different products are produced

in various combinations, within the limit of available
resources.

Example: Assume a country with a decision concerning the

production of two products: computers and automobiles.
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Fig.1: Production possibility curve
Constant opportunity cost

Computer Point A is a point where the country decide to produce

only “A” number of computer and zero Automobile
A given its available resources

Point B is a point where the country decide to

produce only “B” amount of Automobile and zero
C Computer

B
Automobile

Point C is no election of specialization. Only

specified # of each will be produced.

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Each country has a unique set of resources; & each country

possesses unique production possibility curve.

How can this be a notion for an international trade?

How the production possibility curve enables a country

to determine what to export and what to import?

This leads us to the principles of absolute advantage &

relative advantage.

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Principles of Absolute Advantage States
A country should export a commodity that can be

produced at a lower cost than can other nations.

It should import a commodity that can only be

produced at a higher cost than can other nations.

Adam Smith

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 Example for Absolute Advantage
Assume the following production figures for the USA and
Japan for two products: the computer and the automobile.

Case Product USA JAPAN

Case 1 Computer 20 10
Automobile 10 20
Case 2 Computer 20 10
Automobile 30 20
Case 3 Computer 20 10
Automobile 40 20

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 Explanation of why nations trade?
Consider Case 1 above, USA produces 2 times computer than

Japan, and Japan produces 2 times automobile than USA.

 For computer, USA has absolute advantage over Japan

 For Automobile, Japan has absolute advantage over USA.

Based on principles of Absolute advantage, USA should

have to specialize in computer production and import

Automobile from japan.
Japan should have specialize in Automobile production and

import Computer from USA.

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 Limitation of Absolute Advantage
What if one country has absolute advantage for all products
over the other?
Assume case 2 in the example above,
Case 2 USA Japan

Computer 20 10
Automobile 30 20
USA produces computer 2 times than Japan and Automobile
1.5 than Japan.
Do you think trade will exist between the two countries based
on absolute advantage? No
Relative /comparative advantage has been evolved to fit this
limitation.
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 Relative /comparative advantage
david ricardo

Argue that relative production costs determine what trade

should take place and what items to export or import than

absolute production costs.
One country may be better than another country in producing

many products but should produce only what it produces

best.
It should concentrate on either a product with the greatest

comparative advantage or a product with the least

comparative disadvantage.
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In the example; case 2, USA has comparative advantage
over Japan in producing both computers and Automobiles.
Relative advantage for Computer; 2:1; 100% advantage
for USA,

Ratio for automobiles, 1.5:1, only 50% advantage for

USA.
USA has greater comparative advantage in producing
Computers than automobiles. So that it better for USA to
concentrate on producing computer.

Japan has higher comparative advantage in producing

Automobiles than computers. Japan has to import
Computer and concentrate in producing automobiles.
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 Factor Endowment Theory
Heckscher–ohlin
Different commodities require different factor inputs

and that no country is well endowed in all production

factors.
The varying proportion of these factors embodied in

various goods has a great deal of impact on what a

country should produce.
 Varying factor of inputs required

 Proportion of factor input embodied if d/t commodities

 Uneven distribution of factor inputs in d/t region

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 Barriers to international Trade
Trade barrier
 “government laws, regulations, policies, or practices that

either protect domestic producers from foreign competition or

artificially stimulate exports of particular domestic products.”
Restrictive business practices and government regulations

designed to protect public health and national security are

not considered as trade barriers.

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 Cont’d
In practice, free trade is woefully/unhappily ignored by virtually

all countries, and nations inclined to discourage free trade.

Why do nations impede free trade irrationally?
Why governments interfere with free marketing?
The reason is to protect local industries in one of the following
forms;
 Protection of home market
 Keeping money at home,
 Reducing unemployment,
 Equalizing cost and price,
 Enhancing national security,
 Protecting infant industry
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 Trade Barrier
To encourage development of domestic industry and protect

existing industry, governments may establish barriers to

trade which can be categorized into;

1. Tariff barrier
2. Non-tariff barrier
1. Tariff Barrier:
Tariff, (French) meaning rate, price, or list of charges, is a
customs duty or a tax on products that move across
borders. 29
 2. Nontariff Barriers
Government participation in Customers and entry
trade procedures
Administrative guidance Product classification
Subsidies Product valuation
Government procurement Documentation, License or
State trading permit
Product requirements Inspection

Product standards Health and safety

Packaging, labeling, and Quotas: export quota &

marking import
Product testing & Exchange control
specifications Multiple exchange rates
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