International Marketing

Defined
Cateora and Graham define
international marketing as the
performance of business activities
designed to plan, price, promote,
and direct the flow of a companys
goods and services to consumers
or users in more than one nation
for a profit.
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The term International
Marketing refers to exchanges
across national boundaries for
the satisfaction of human
needs and wants.

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The International
Marketing Task
The international marketers task is more
complicated than that of the domestic
marketer because the international marketer
must deal with at least two levels of
uncontrollable uncertainty instead of one.
Uncertainty is created by the uncontrollable
elements of all business environments, but
each foreign country in which a company
operates adds its own unique set of
uncontrollable factors.

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.
In International marketing, each
company face three types of factors:
1. Marketing Decision Factors
2. Aspects of the Domestic
Environment
3. Aspects of the Foreign
Environment

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1. Marketing Decision
Factors
These factors are found within the
company environment where the
marketer has control over them.
These factors are:
Price
Promotion
Product
Place (Channels of Distribution)

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2. Domestic Environment Factors
These factors are related to how the domestic
environment affects your marketing decisions.
These tend to be more uncertain to the
marketer, but on some level may still be
controllable.
These factors are:
Political/Legal Forces

Economic Climate

Competitive Structure

6
3. Foreign Environment Factors
These factors are related to how
the foreign environment affects
your marketing decisions.
These tend to be the most
uncertain to the marketer, and is
very difficult to be controlled.

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.
These factors are:
Political/Legal Forces
Cultural Forces
Geography and Infrastructure
Structure of Distribution
Level of Technology
Competitive Forces
Economic Forces

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Self-Reference Criterion
The Self-Reference Criterion (SRC)
is when you as the marketer
unconsciously expect that
everyone is like you.
You expect that they have:
The same cultural values
Experiences
Knowledge

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Ethnocentrism
This is the idea that things done in
your culture is the correct or best
way of doing things.
You tend not to look through the
eyes of the foreign consumer.

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The Problem with SRC and
Ethnocentrism
Letting these two issues cloud your
judgment can cause you to not
understand the other culture.
This in turn will make it so you cannot
provide the product that the
consumer wants.

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Developing a Global
Awareness
When doing international
marketing, you need to do the
following:
Be tolerant of other peoples culture
Understand and absorb knowledge of
cultures, geography, social trends,
political trends, and economic trends

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International Marketing
Stages
No Direct Foreign Marketing
here company doesnt actively generate
customers outside national boundaries.
Products may reach foreign markets indirectly.

Infrequent Foreign Marketing

Usually a company markets in foreign countries
when supply is greater than domestic demand.
Here as domestic demand increases and
surpluses, foreign sales activity is withdrawn.

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International Marketing
Stages Cont.
Regular Foreign Marketing
Some production in the company is targeted
to foreign markets.
Here companies have permanent productive
capacity devoted to the production of goods
in foreign markets.
International Marketing
These companies tend to have production
both domestic and abroad. Companies in
this stage are fully committed and involved
in international marketing activities.

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International Marketing
Stages Cont.
Global Marketing
This is when companies treat foreign and
domestic markets roughly the same.
At this stage, companies treat the world,
including their home market, as one
market
Usually the headquarters of the
company can be located anywhere in the
world.

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Strategic Orientation
Domestic Market Extension
Orientation
The view of the company is that foreign
markets are secondary to the domestic
market.
Multi-domestic Market Orientation
Companies with this strategy have a
country-by-country marketing plan, with
separate strategies for each country.

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Strategic Orientation Cont.
Global Marketing Orientation
Here marketing activity is global and
its coverage is the world and the
product is standardized. Identifying
groups of prospective buyers with
similar needs as a global market
segment.
These companies tend to develop
global marketing strategies which
emphasize economies of scales.

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18
Balance of Payments
It represents the difference
between receipts from foreign
countries and payments made to
them.
The positive side is represented by
exports.
The negative side is represented by
imports.

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Balance of Payments Cont.
Current Account
A record of all merchandise exports,
imports, and services plus unilateral
transfers of funds.
Capital Account
A record of direct investment, portfolio
investment, and short-term capital
movements to and from a country.

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Balance of Payments Cont.
Official Reserve Account
A record of exports and imports of
gold, increases and decreases of
foreign exchange, or increases and
decreases in liabilities to foreign
central banks.

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Protectionism
Protectionism is the act of putting
a trade barrier in place in order to
protect a domestic industry or
company.

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Arguments for
Protectionism
Protection of an infant industry
Protection of the home market
Need to keep money home
Encouragement of capital
accumulation
Maintenance of standard of living and
real wages
Conservation of natural resources
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Arguments for
Protectionism Cont.
Industrialization of a low wage
nation
Maintenance of employment and
reduction of unemployment
National defense
Increase of business size

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Types of Protectionism
Tariffs
A tax imposed by the government on goods
coming in domestically.
Quotas
A specific unit or dollar amount allowed for a
particular type of good.
Voluntary Export Restraints
This is where the two countries trading agree
on a certain restriction on the volume of
exports.

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Types of Protectionism
Cont.
Boycotts
A complete prohibition on the
purchase and importation of certain
goods from other countries.
Monetary Barriers
Blocked currency
Differential exchange rates
Government approval requirements for
securing foreign exchange

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Types of Protectionism
Cont.
Standards
This is a non-tariff barrier which
requires the imported item to have a
particular set of characteristics.
Antidumping Penalties
A penalty assessed on products that
are sold below their cost of
production.

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28
Geography and Global
Markets
Climate and Topography
Geography, Nature and Economic
Growth
Social Responsibility and
Environmental Management
Resources

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Climate and Topography
When appraising a market, climate
and topography need to be assessed.
Climatic conditions, such as altitude,
humidity, and temperature, can have
an effect on products.
Topographical issues can have a
profound effect on the distribution
channels of the product.

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Geography, Nature and
Economic Growth

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Social Responsibility and
Environmental
Management
One requirement of an

international marketer is to be
socially responsible to
environmental management.
The marketer must consider what
are the environmental
ramifications of their product.

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Resources
The natural resources of the country
being marketed to can have an affect
on the business environment that the
marketer will have to contend with.
An under or overexploited resource
base can have a potential future
affect on the product being
marketed.

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Dynamics of Global
Population trends
Controlling Population Growth
Rural/Urban Migration
Population Decline and Aging
Worker Shortage and Immigration

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World Trade Routes
International marketers must have an
excellent sense of the workings of trade
routes.
A trade route is a way that goods get from
one country to another.
The key thing to know about trade routes is
that the most direct route is not necessarily
the best way to get your product to the
country you are marketing in.

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Communication Links
An international marketer must understand
the communication infrastructure of the
country they are working in.
Without current information coming from
the foreign market due to a poor
understanding of the communication
infrastructure, the international marketer
may not be able to adequately service the
consumer.

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Culture Defined
The sum of the values, rituals,
symbols, beliefs and thought
processes that are learned and
shared by a group of people, then
transmitted from generation to
generation

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CHARACTERISTICS OF CULTURE

Universality:
Variability
Learned
Shared
Transferable
Changing

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..
Universality:
Culture is universal. There is no
society without culture. As part of
the cultures there are many
aspects that are found in almost all
the societies.

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Variability
There is variability in the universals of culture,
Joint families and nuclear families, single earner
families and dual earner families. Similarly one
comes across variations in religion all over the
world. Govt forms also vary like Kingship,
dictatorship, democracy, parliamentary form of
democracy or presidential form.
Economic systems also vary from the extremes
of socialism and capitalism to any variation on
the scale.

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Learned:
Culture is learned through the process of
interaction with others. We learn to talk, to
walk, and to act as our elders train us.
Shared:
Culture is not the property of one individual
or of a group. It is shared with other
members of society.

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Transmitted/Transferable
Culture does not end with the death of a
person or a group. During its lifetime that
Individual or group tries to pass on its
culture to the future generation.

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Changing:
Culture is continuously changing. The
patterns of behavior transmitted by one
generation to another are continuously in
the process of modification for catering to
the changing needs of time and demands
of people. With the increase in the
contact between different societies the
cultures are changing very fast and may
be moving toward some kind of global
culture. 43
 Symbol
Language
Values
Belief
Norms

ELEMENTS OR COMPONENT OF
CULTURE
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.
Symbols:
Anything that carries a particular
meaning recognized by people who
share culture. Whistle, flashing light,
thumbs up are all symbols.
Even the buildings, dress, the flag, and a
type of color may be taken as symbols
indicating some aspect of human
behavior as well as societys outlook.

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.
Language
System of symbols that allows members
of a society to communicate with one
another. Symbols may be oral and these
could be written words. We have oral
cultural traditions. Human beings have
developed different alphabet as part of
written language. Language is the major
means of cultural transmission.

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.
Values
Culturally defined standards of desirability,
goodness, and beauty that serve as broad
guidelines for social living. What ought to be.
Examples of values: Equal opportunity,
Achievement or success, Freedom, Physical
fitness, Wealth, Education, Competition and
Merit. Honesty, Patriotism. Justice and
Democracy, Environmental protection, Charity
and Development.

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.
Beliefs
Specific statements that people
hold to be true. Values are broad
principles that underlie beliefs.
Values are abstract standard of
goodness, while beliefs are
particular matters that individuals
consider to be true or false.
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..
Norms
Rules and expectations by which a society
guides the behavior of its members.
These are the shared expectations of the
people that govern their behavior.
Proscriptive norms: Mandating what we
should not do. Forbidding from certain
actions.
Prescriptive norms: What we should do.

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CAUSES
InnovationOF CULTURAL
The process of creating new cultural
CHANGE
elements
Discovery
Finding something that already exist
Diffusion
The spread of cultural traits from one
society to another
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Dimensions of national Cultures
Cultural values can be broken-up into
the following four primary dimensions:
Individualism/Collective Index
Focuses on self-orientation
Power Distance Index

Focuses on authority orientation
Uncertainty Avoidance Index

Focuses on risk orientation
Masculinity/Femininity Index
Focuses on assertiveness and achievement

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Degree of adaptation
Adaptation does not require
business executives to forsake
their ways and change to local
customs; rather, executives must
be aware of local customs and be
willing to accommodate to those
differences that can cause
misunderstanding.
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Business Considerations
An international marketer needs to
have an understanding of the
cultural:
Imperatives
Adiaphora
Exclusives

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Cultural Imperatives
Cultural imperatives are the
cultural customs that must be met
and conformed when doing
business.
These practices must be followed,
otherwise you run the risk of
insulting the person you are doing
business with.
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Cultural Electives
Cultural electives relate to areas of
behavior or to customs that cultural
aliens may wish to conform to or
participate in but that are not required.
Participating in these customs may go a
long way in building a good rapport with
the client.

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Cultural Exclusives
Cultural Exclusives are the business
practices or customs that are
reserved exclusively for the local
which are forbidden to foreigners.
Many of these exclusivities are
related to religion.
You should attempt to avoid most
political discussion in conversation.

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Management Styles around the
World
Authority and Decision Making
Management Objectives and
Operations
Communication Styles
P-time versus M-time
Negotiations Emphasis
Marketing Orientation
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..
Authority and Decision Making
Top level management making
Decentralized decision
Committee or Group decision

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..
Management Objectives and
Operations
Security and Mobility
Personal Life
Affiliation and Social Acceptance
Power and Achievement

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..
Communication Styles
Face to face communication
Internet communication
P-time versus M-time
Negotiations Emphasis

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..
Marketing Orientation
Production oriented
Product oriented
Selling oriented
Marketing oriented

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The Political Environment

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Stability of Government Policies
The ideal political climate for a
multinational firm is a stable, friendly
government. Unfortunately, governments
are not always stable and friendly, nor do
stable, friendly governments remain so.
Government might change or now
political parties might be elected, but the
concern of the multinational corporation
is the continuity of the set of rules.

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Continue.
Forms of Government
Political parties
Nationalism
Targeted Fear and Animosity
Trade Disputes

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..
Forms of Government
Three fundamental forms of Govt.
Rule by One
Rule by the Few
Rule by many

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..
Political parties
A political party is a group of people who
come together in politics that share many
common economic and societal goals.
An international marketer needs to
understand the philosophies of the major
political parties because any one of them
might become dominant and alter
prevailing business climate

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Nationalism

Nationalism has been defined by

Cateora as an intense feeling of
national pride and unity, an
awakening of a nations people to
pride in their country.

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..
Nationalistic tendency tend to focus on
what is better for the state rather than
the world.
Nationalism can cause:
Restriction on imports
Tariffs
Restrictive barriers
A desire to only buy commodities produced
in the home country

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..
Targeted Fear and Animosity
No nation-state, however secure,
will tolerate penetration by a
foreign company into its market and
economy if it perceives a social,
cultural, economic or political threat
to its well being
Trade Disputes
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Lessening Political vulnerability
Although a company cannot
directly control the political
environment of the country within
which it operates, a specific
business venture can take
measures to lessen its degree of
susceptibility to politically induced
risks.
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..
Joint Venture
Expanding the investment Base
Licensing
Planned Domestication
Political Bargaining
Political Payoff

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..
Joint ventures:
A joint venture with locals helps
minimize anti-MNC feelings, and a
joint venture with another MNC
adds the additional bargaining
power of a third country.

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..
Expanding the Investment Base:
Including several investors and
banks in financing an investment in
the host country is another strategy.
This approach has the advantage of
engaging the power of the banks
whenever any kind of govt takeover
or harassment is threatened.

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..
Licensing:
A strategy that some firms find
eliminates almost all risks is to
license technology for a fee. It is
effective when technology is
unique.

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..
Planned Domestication:
The most effective long range
solution is planned phasing out.
Planned domestication is, in
essence, a gradual process of
participating with nationals in all
phases of company operations.

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..
Political bargaining:
MNCs must engage in lobbying and
other sorts of political bargaining to
avoid potential political risks.
Political Payoffs:
An attempt to lessen political risks by
paying those in power to intervene on
behalf of the multinational company.

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Political Risk of Global Business
Confiscation, Expropriation and
Domestication
Economic Risks
Exchange control
Local content laws
Import restrictions
Tax control
Price controls
Political Sanctions
Political and Social Activist
Violence and Terrorism

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Confiscation
One of the major political risks that can
occur is the confiscation of assets.
This is when a government goes into a
business and seizes all of its assets
without compensation.
Expropriation is a lesser form of
confiscation because the government
will make some compensation available
for seizing the assets.

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Domestication
Domestication is when a foreign
government tries to take foreign
investment and transfer it to
national control and ownership.

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Domestication Cont.
Domestication can occur by the
government mandating the following:
Transfer ownership to nationals
Managers in the company must be
nationals
Decisions must be made by nationals
Inputs for the product are produced
locally

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Economic Risks
Exchange controls (foreign reserve and capital)
Local-content laws (external companies cant
localize there product in domestic having raw
materials of local)
Import restrictions ( purchase locally)
Tax controls (charge tax on external)
Price controls (Economic risk on essential
products which commands public interest etc
are subjected to price control)
Labor problems (labor union have Govt backup
to get desired from the business world)
forbidden profit also called layoff

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Other Political Risks
Political Sanctions
This is when countries pose trade
restrictions on other countries in
order to cause change.
Political and Social Activist
This is a group of people who have a
political or social agenda who see
your company as a means to further
their agenda.

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Other Political Risks Cont.
Violence and Terrorism
There are times when your product
and/or company may be seen as a
symbol of a particular country in
which a group of people seek to do
harm to that country by acts of
violence.

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Legal Environments:
National legal systems vary on
the following aspects;
The rule of law:
The role of lawyers:
Access to legal system:
The burden of proof:
The right to judicial review:
And the laws:

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..
The rule of law:
Some country have strong rule of
law in that laws are applied strictly,
quickly and fairly, while in others
laws are not applied for various
reasons, such as corruption, strong
nationalism, weak legal institutions
etc.
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..
The role of lawyers:
International business firms are
affected by the role of lawyers in
foreign countries. In some countries
there are few lawyers and it is difficult
of very costly to engage a good
lawyer. In some countries lawyers may
be corrupt or biased in favor of locals.

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..
Access to legal system:
Access to legal system also varies
from country to country, especially
for foreign entities. In some
countries foreigners can easily
access courts to seek remedies
while in other countries there may
be restrictions.
87
..
The burden of proof:
In some countries the burden of proof,
in case of any litigation, is on the
defendant, while in other countries the
applicant / plaintiff has to first prove
that there is a case for the court to
proceed against someone. It may
become difficult for foreigners to get
proofs in certain situations.
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..
The right to judicial review:
Various countries have different
legal provisions for appeals and
review of lower court or earlier
judgments.
These provisions may also vary for
foreign entities.

89
..
And the laws:
Laws relevant to businesses
(including foreign firms) also vary
from country to country.

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Bases/Types of Legal
Systems
There are four primary basis of
legal systems across the world:
Common Law
Civil or Code Law
Islamic Law
Marxist-Socialists Law

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Common Law
Common law is based on tradition, past
practices, and legal precedents set by
interpretations of statutes, legal legislation,
and past rulings.
Found in US, England, Canada, etc.
Common law based on cumulative wisdom
of judges decisions on individual cases over
time. Relevant judgments of upper courts
have bearings on lower court decisions.

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Code Law/Civil Law
Code law is considered an all inclusive
system of written laws which can be broken
up into commercial, civil, and criminal.
Tends to be in Germany, Japan, and France.
Civil law based on codification and detailed
listings. Laws, their applications and
penalties are all detailed and judges have
little flexibility compared with common
based law systems.

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Major Differences in
Common Versus Code Law
In common law, ownership is usually
established by use, where as in code
law, ownership is established under
registration.
Under common law, only forces of
nature are reasons for not complying
with the fulfillment of a contract,
whereas in code law, unforeseeable
events are enough.

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Islamic Law
Islamic law is based on the interpretation
of the Quran.
It encompasses both religious and secular
aspects as to how a human may act.
Understanding Islamic law means
understanding both the intent of the
writers of the Quran, as well as, the
interpretation by the locals that are using
the law.

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Marxist-Socialist Laws
Since the fall of the Soviet Union,
many of the laws that existed in
those respective countries have
had to change with the time.
Many of the laws are still being
written which can imply an
unstable legal system?

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 Dispute Resolution

Conciliation
Arbitration

Litigation

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Resolving the Dispute
Informally
When a problem arises between
you and another party over a
commercial transaction, your first
option is to informally resolve it.
This may be the cheapest form of
dealing with a dispute.

98
Conciliation
This is when the disputing parties
bring in a third party to mediate
the issue without entering into a
binding agreement.
Conciliation sessions tend to be
private and confidential and what
is said in them cannot be used
later in other legal recourses.
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Conciliation Cont.
Conciliation is usually one of the
cheapest ways of handling a
dispute.
Some countries, such as China,
would prefer to use conciliation
over other forms of dealing with
disagreements or issues.

100
Arbitration
Arbitration is a more formal version of
conciliation and tends to be the next
step if conciliation does not work.
In arbitration both parties agree on
binding themselves to the decision of a
disinterested arbitrator(s) which
referee the discussion and make
judgment based on the merits of the
case.
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Arbitration Cont.
There are many formal arbitrators in the
global market.
The Inter-American Commercial Arbitration
Commission
The London Court of Arbitration
The International Chamber of Commerce
It is usually advantageous to write a
clause in the contract that says you will
try arbitration before litigation.

102
Litigation
Litigation is when you take an
issue to a public court.
It tends to be very expensive and
time consuming.
Litigation should be the last thing
you try to get resolution of an
issue.

103
Deterrents to Litigation
Creating a poor image that
damages your public relations
Unfair treatment in foreign court
Greater difficulty of collecting a
judgment
High cost and time required
Loss of confidentiality

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105
Approaches to
International Pricing
A marketer wants to sell her goods at a
price above costs that is acceptable to
the market.
There are multiple approaches for pricing
your product in an international market:
Full Cost Pricing
Variable Cost Pricing
Skimming
Penetration Pricing

106
Full-Cost Pricing
A marketer sells the product for
the total cost of the product.
This pricing method is used when
variable costs own a relatively
large share of the total costs.

107
Variable-Cost Pricing
Variable cost pricing is when the marketer sets price at
the incremental cost of bringing the product to market
and does not incorporate fixed costs as part of the price.
Usually this pricing method is used when a company has
large fixed costs or views it sales overseas as net profit
producing.
The objective is to achieve a desired contribution
towards fixed costs and profit.

Contribution per unit can be defined as: SELLING PRICE

less VARIABLE COSTS
The desired level of target profit (i.e. contribution less
fixed costs)
A marketer must be cautious when using this strategy
because some countries may view it as dumping.

108
Skimming
Skimming is when you set the price of your
product high to capture the consumers that
are relatively insensitive to prices.
This pricing scheme is used when:
Supply of the good may be low for the foreign
market
The product is viewed by the consumer as new
and innovative
The population is segmented into rich and poor,
and the cost is prohibitive to reaching the
poorer consumers.

109
Penetration Pricing
Penetration pricing is when a marketer
sets her prices low to stimulate market
growth and/or capture market share.
In a competitive setting for the product,
penetration pricing may be used to
acquire and hold market share.
Even with low competition, the tradeoff in
low price may more than compensate for
the stimulated demand for the product.

110
Price Escalation
Price escalation is when there is a
disproportionate difference in prices
between the exporting and importing
country.
Sources of price escalation:
Taxes, Tariffs, and Administrative Costs
Inflation
Exchange Rate Fluctuation
Varying Currency Values
Middlemen and Transportation Costs

111
Approaches to Lessening
Price Escalation
There are four major ways to lower
price escalation:
Lowering cost of goods
Lowering tariffs
Lowering distribution costs
Using foreign trade zonez
Dumping

112
Dumping
Dumping is when the products
imported are lower than there cost of
production plus transaction costs.
Another definition of dumping is when
you sell a product in a foreign country
below the cost of the same good in
that country.
Dumping is illegal in many countries.

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Countertrade as a Pricing
Tool
Countertrade is when a company sells a
product in another country and receives
some form of compensation other than
strictly money.
There are four general types of countertrade:
Barter
Compensation deals
Counterpurchase /Offset
Buy-back

114
Types of Countertrade
Barter
The direct exchange of goods, with no
money and no third party involved.
Compensation Deals
This is when a company accepts
payment both in currency and goods.
The seller receives some percentage of
the payment in cash and the rest in
products.

115
Types of Countertrade
Cont.
Counter purchase/Offset
The seller receives full payment in cash
but agrees to spend a substantial
amount of the money in that country
within a stated time period.

116
Types of Countertrade
Cont.
Product Buy-Back
This is when a company sells a
productive product/asset to someone
in another country and takes as
payment both cash and product
produced from the asset.

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Problem with Countertrade
Since in most cases of countertrade,
the seller is receiving a good in
exchange for cash payment, it can
be difficult for the seller to value the
traded good.
This issue can be alleviate by doing
some research on potential products
that can be countertraded.

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