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We can almost say that there are no companies that are not carrying out or
planning a strategy of international growth, and those few are nevertheless
obliged to suffer foreign competition in their home markets.
The main reasons for the growing importance of internationaliza-
tion are well known: economic globalization; the saturation of western
markets; the rise of the new economic powers (first China and India, but
also Brazil, Russia, the Arab countries, and South Africa); the progress of
technologies in transportations and communications; and the increasing
international articulation of value chains.
The extent of this phenomenon has not been demonstrated in statistical
data, because it is not only related to import/export and foreign direct invest-
ment flows, but also to all the corporate capabilities (from operations to
marketing, from finance to research and development (R&D), from human
resources (HR) to logistics and supply chain management). Moreover, the
qualitative aspect of the phenomenon – the strategic relevance of foreign
operations, the organizational articulation of foreign activities, the quality
of knowledge acquired abroad, the importance of international relation-
ships (even the ones not formalized by agreements) – evades statistics.
Generally, statistics cannot capture the change of perspective in business
choices, because of the priority gained by the international scenario.
The macroeconomic approach – mainly based on quantitative models
and data – is limited in understanding the real logics of internationaliza-
tion and the development paths of businesses. As a consequence, it is also
of little effectiveness in proposing proper lines of action to businesses and
policy makers. One rather needs firm-oriented approaches, able to identify
and analyse the business strategies with their own decision and managerial
problems on the one hand, and their impact on customers’ perceptions
and behaviors in the various markets on the other. Within this scope, mar-
keting takes on great importance in analysing the demand, selecting the
markets to enter, defining the entry strategies and modes, and choosing
the market position and the product offer.
2. EMERGING MARKETS
Since the ‘big contraction’, the recovery has slowly begun. Global growth
is over 4 percent, even though it differs greatly from one country to
another, and from one industry to another. Indeed, the emerging econo-
mies are growing even more than the industrialized ones; in this way sus-
taining a great part of the world recovery, including through the growth
of internal demand. The different trends are evident from the data related
to GDP (gross domestic product), international trade, and FDI (foreign
direct investment).2
UNCTAD data (Handbook of Statistics, 2011) concerning GDP points
out that, in the period 2007–2010, a new order of international economy
has emerged, characterized by wide fluctuations in economic activity and
by the fact that the emerging countries, unlike the advanced ones, seem
to have better absorbed the crisis. Considering the values of GDP in the
2005–2010 period, the world economy on the whole has grown 27.48
percent (122.83 per capita), the developed economies have registered
114.36 percent (111.84 percent per capita), the developing economies
162.21 percent (155.7 percent per capita), and the transition economies
149.65 percent (149.05 percent per capita).
With reference to the last two years (Table 0.1), between 2010 and 2011
the European Union countries (EU) and the United States still represent,
3
South Africa 3.6 −1.7 2.8 3.5 0.7 0.7 0.7 0.7 −7.1 −4.1 −2.8 −4.4
ASIA
Japan −1.2 −6.3 3.9 1.4 6.2 5.9 5.8 5.7 3.2 2.8 3.6 2.3
Asian Countries: 7.7 7.2 9.5 8.4 21.4 23.0 24.0 25.0 5.9 4.1 3.3 3.3
China 9.6 9.2 10.3 9.6 11.7 12.9 13.6 14.3 9.6 6.0 5.2 5.7
India 6.2 6.8 10.4 8.2 4.8 5.2 5.4 5.6 −2.0 −2.8 −3.2 −3.7
USA 0.0 −2.6 2.8 2.8 20.5 20.1 19.7 19.4 −4.7 −2.7 −3.2 −3.2
Southern Central 4.3 −1.7 6.1 4.7 8.6 8.5 8.6 8.6 −0.7 −0.6 −1.2 −1.4
America:
Brazil 5.2 −0.6 7.5 4.5 2.9 2.9 2.9 2.9 −1.7 −1.5 −2.3 −2.6
WORLD 2.9 −0.5 5.0 4.4 100 100 100 100 – – – –
Source: ICE processing on FMI data – World Economic Outlook, April 2011
12/12/2012 15:38
4 International marketing and the country of origin effect
respectively, rates ranging from 20 percent and 19.5 percent of the world’s
GDP, but they register very narrow growth rates (between 1.8 percent
and 2.8 percent). Other areas present a different trend in their GDP: in
2011 China had 14.3 percent of the world’s GDP, with 19.6 percent from
2010 to 2011, while India, which in 2011 represented 5.4 percent of the
world’s GDP, registered a 10.4 percent growth between 2010 and 2011.
Another interesting area in terms of GDP trend is South Central America,
whose GDP represents 8.6 percent on a world basis, and its growth during
2010–2011 is 4.7 percent.
An analysis of the import/export flows (Table 0.2) also shows that
the most advanced economy areas keep on catalyzing the most signifi-
cant traffic volumes. In 2010 the European Union and North America
economies together still hold an all-time record, with an overall rate of
46.7 percent of exports, and 52.1 percent of imports; whereas within the
country scope, China is first in exports and second in imports compared to
the United States, although with greater growth rates (from 2009 to 2010,
131.3 percent versus 121 percent in exports; 138.7 percent versus 122.6
percent in imports).
However, if one considers the average growth rates per single geo-
graphic area of import/export flows, the real growth trends of some
Table 0.3 Average growth rates of exports and imports per geographical
macro-areas
world areas with respect to the ones with a more advanced capitalism
emerge (Table 0.3). The world as a whole is growing 14.2 percent with the
developed economies growing 9.3 percent, the developing economies 19.7
percent and the transition economies 27.6 percent.
As for the outgoing FDI flows, it emerges that, with the exception of
the two decades 1980–1990 and 1990–2000, the most developed economies
are substantially keeping stable. The developing and transition economies,
on the other hand, register macroscopic increments in all the reference
decades, although the more exiguous starting bases are not to be over-
looked.3 This applies even more to the incoming FDI flows, where the
presence of strong elements of attractiveness of the less developed areas is
much more evident4 (Table 0.4).
The emerging countries therefore offer important opportunities for
development and, in some cases, unconventional performances for the
Western businesses that have advanced and already saturated markets
(Kos, 2010). Many businesses, in view of the slowdown of their domestic
demand, are looking closely at these new markets for the richness of their
natural resources, their strong economic development, the rise of their
Table 0.4 Outgoing and Ingoing FDI flows from 1980 to 2010 per macro-
areas (values in US $ mln)
middle classes and their growing demographic profile. This trend will prob-
ably strengthen further on: research by McKinsey (2012) tracks four likely
future scenarios among which the optimistic one foresees a global economic
growth of 3.6 percent in 2021, when the emerging countries’ GDP will reach
38 percent of the world’s GDP, compared to the current 28 percent.
can only gain with time. However, in some segments of less complicated
machines and equipment (including much full components production),
the competition from countries like China, Korea, India, Brazil, and of
some nations that recently joined the European Union (Hungary, Poland,
the Czech Republic, and Slovakia) is becoming stronger and stronger.
Italy shows, conversely, growing weakness (lower market shares, a
greater dependence on the internal demand from imports, a negative trade
balance and low multinational presence) in the two other groups located
in Pavitt’s (1984) taxonomy: (1) the science-based industries, that is the
high-intensity research and development sectors which are true generators
of technological innovation flowing in the rest of the system (computers,
electronic components, telecommunications, fine and pharmaceutical
chemistry, precision mechanics, aerospace, biotechnologies, etc.); and (2)
the scale-intensive industries, that is the typical oligopolistic competition
sectors where intermediate consumer products are produced in series (base
and mass consumer chemistry, metallurgy, motor vehicles, consumer elec-
tronics, software, etc.).
10
Non -European 40,795 12.1 19.6 37,719 10.3 12.4 536 3,076
countries
Russia 7,908 2.3 23.0 13,053 3.6 7.5 −5,710 −5,145
Switzerland 16,041 4.7 18.3 11,908 3.2 14.2 3,135 4,134
Turkey 8,033 2.4 42.1 5,158 1.4 16.6 1,230 2,875
North Africa 13,385 4.0 15.9 24,538 6.7 21.6 −8,640 −11,153
Other African countries 4,443 1.3 –2.1 5,691 1.6 31.7 219 −1,248
North America 22,713 6.7 18.5 12,638 3.4 18.8 8,529 10,075
United States 20,333 6.0 18.9 11,140 3.0 17.7 7,636 9,194
Southern Central 11,099 3.3 23 9,922 2.7 35.9 1,725 1,178
America
12/12/2012 15:38
M3045 - BERTOLI 9781781955604 PRINT.indd 11
Brazil 3,880 1.1 44.1 3,314 0.9 37.2 278 566
Middle East 16,140 4.8 6.9 20,993 5.7 74.1 3,036 −4,853
Central and Southern 5,681 1.7 11.7 8,012 2.2 45.2 −433 −2,331
Asia
India 3,387 1.0 23.8 3,823 1.0 31.6 −169 −437
Eastern Asia 24,559 7.3 20.2 44,245 12.1 40.1 −11,138 −19,686
11
China 8,610 2.5 29.9 28,790 7.8 48.9 −12,705 −20,180
Japan 4,032 1.2 8.5 4,288 1.2 10 −185 −257
Oceania 3,146 0.9 13.5 1,177 0.3 19.3 1,787 1,970
World 337,810 100 15.8 367,122 100 23.4 −5,876 −29,312
12/12/2012 15:38
12 International marketing and the country of origin effect
quality of the products sold abroad. Most likely, the biggest enterprises
– generally active in the industries less exposed to competition from the
new protagonists in world trade – have been more able to support the
costs of this transformation. In fact, the big enterprises – with foreign sales
revenue greater than €5m (which represent 4.4 percent of the total Italian
exporters) – produce 90 percent of Italian exports.
the distribution and selling modes of their products (from the selling price
to the kind of distribution channel, the geographic sales, and the nature
of the end customer). This is, of course, extremely negative because only
direct knowledge of local consumer behavior can enable the enterprises to
adapt their products to the local markets, to develop consistent branding
and communication policies and, in the last analysis, to obtain stronger
operational support in the market.
A solution that could help many of our enterprises to overcome these
limitations is the use of interfirm alliances (even in the form of formal
agreements like consortia). The current experiences are still limited, but
this could be a path worth following, for example through the opening
of collective showrooms that allow not only remarkable cost savings, but
also a physical rootedness in the local market, with the possibility of gath-
ering information on market trends, and local phenomena, while becom-
ing autonomous from the intermediary role.
Another front on which to intervene relates to the valorization and
active defense of products. In this regard, the brand – and, more widely,
the company image – plays an essential role. The problem does not
concern the high-range products, but rather the less famous brands and,
in general, the brands not belonging to the luxury industry. In the first
case, the big brands (such as Prada, Tod’s, Armani, Dolce e Gabbana,
etc.) also enjoy high notoriety and appreciation in many emerging coun-
tries. In these markets, the successful foreign brands are the ones able to
attract consumers, proving themselves as a reference in their industry.
For example, the fact that Chinese consumers buy luxury brands to show
their social status tends to reward the sales of the most easily recognizable
brands; leaders in their respective categories.
The situation of small and medium enterprises (SMEs) is totally differ-
ent. In this scenario, what do the successful Italian mid-sized firms do to
gain the emerging markets? Which are the marketing tools can they play
on? For these enterprises, two models seem to assert themselves on the
international markets (Coltorti et al., 2012, chapter 4). The first model –
prevailing in the consumer markets – is based on the brand–communica-
tion–retail trinomial; the brand development is strengthened not only by
the short distribution channel and the sales points (flagship and concept
stores) – which have the double role of collecting the information from
customers and of communicating to them the brand values of the enter-
prise image or product concept – but also by investments in communica-
tion to carry out the corporate campaigns. The second model – prevailing
in the business markets – associates niche positions, with high perform-
ance and quality products, to relationship-type marketing mainly with
business customers (manufacturer or traders).
6. VOLUME OVERVIEW
All the ‘Made in Italy’ enterprises, namely the ones that cannot make big
investments in communication, have to appropriately exploit the country
of origin (COO) effect, that gathers all the elements reflecting the mean-
ings associated with the Italian origin of the products (Busacca et al.,
2006). In many foreign markets, indeed, these meanings represented (and
still represent) an element of positive differentiation for many enterprises
working in the ‘Made in Italy’ industries. We refer, in particular, to SMEs
focused on niche productions in fashion, house furniture, food, and instru-
mental mechanics industries, and whose brands are not as strong as those
of the big companies.
By combining academic rigor and the desire to provide insightful mana-
gerial inputs, this volume analyses the impact of the COO effect on the
international development of Italian enterprises. At the same time, the
volume proposes strategies and tools that the companies might use to
develop their product offerings in the international markets, and suggests
public policies that might strengthen these efforts. The chapters in Part
II of the volume investigate the impact of the COO effect; the chapters in
Part III suggest the tools that can be used to exploit the effect.
Specifically, the book clarifies the dynamics of the emerging markets
such as the Asian ones, based on the assumption that those are the areas
where the core of the world economy is now located. All the findings are
analysed with the support of empirical analysis conducted on consumers
or companies through surveys or case studies.
The book publishes the results of a project run by seven research groups
that have worked jointly for two years, coordinated by Giuseppe Bertoli
and Riccardo Resciniti. Altogether, 23 of the most influential Italian
scholars of international marketing, from 12 Italian universities, joined
the project.
Recognized as an important competitive factor for the commercializa-
tion of a product in the foreign markets, the COO effect has been arousing
interest among marketing scholars for almost 50 years (Schooler, 1965). In
the latter years, this interest has been further excited by the phenomenon
of the process of productive delocalization in countries different from the
country of origin of the producer, and by the already widespread process
of integration of services and goods markets.
The country of origin represents an extrinsic cue used by the consumers
as an indicator of the quality of products of a country. The hypothesis is
that, in some cases, this country (and its image) is used by the consumer
as ‘substitute for information’, that is as an indicator of the features of the
product. The COO effect represents the effect through which consumers
NOTES
1. In the last ten years, GDP in Italy has grown less than 3 percent, in France less than 12
percent, in Great Britain less than 15 percent, in Finland less than 20 percent, and in
Sweden less than 22 percent.
2. For an analysis of the international scenario against which the internationalization of the
Italian businesses are evaluated, see also Matarazzo (2012).
3. Between 2002 and 2009, countries such as Saudi Arabia, Hungary, India, Brazil, Russia
registered the following percentage increases in outgoing FDI: 729.7 percent; 586.5
percent; 534.9 percent; 297.4 percent; 256.2 percent.
4. Among the incoming FDI increments: Hungary 17,974.90; India 11,796.70; Malaysia
1693.5 percent; China 1517.7 percent; Russia 1299.2 percent.
5. Moreover, in the current historical phase, the internationalization efforts of ‘Made in
Italy’ can also be supported by the Euro’s weakness, able to strengthen the competitive-
ness of many businesses. It is a sort of unparalleled discount for the European enter-
prises, above all in periods of urgent budget constraints.
REFERENCES