A global firm is one that operates in more than one country and captures R&D, production, logistical, marketing,

and financial advantages in its costs and reputation that are not available to purely domestic competitors.

Marketing in global environment

Domestic marketing (Home country) Main language Dominant culture Research is relatively straight forward Relatively stable environment Single currency Business conventions understood Product mix standardization required Consumer preferences vary in small extent International marketing (Foreign Country) Many languages Multicultural Research is complex Frequently unstable environment Exchange rate problems Conventions diverse and unclear Product mix adaptability required Vary from country to country

Reference The Global Marketing Environment Chapter 3

Global / International Marketing Environment

When an organization has decided upon an international market development strategy the organization has to choose which markets to enter.
Understanding the marketing environments of the countries of interest can help in the market selection process. Because of the complexity and unfamiliarity of the international marketing environment , successful international marketing requires vigilant attention to environmental factors. Marketing responds to A number of variables in the external environment. These variables also present the company with threats and opportunities in entering foreign markets. Reference Baines

Demographic Environment The demographic environment refers to the size, distribution, and growth rate of groups of people with different characteristics. The demographic characteristics of interest to marketers relate in some way to purchasing behavior, because people from different countries, cultures, age groups, or household arrangement often exhibit different purchasing behaviors. A global perspective requires that marketers be familiar with important demographic trends around the world. GLOBAL POPULATION SIZE AND GROWTH Population size and growth rates provide one indication of potential market opportunities . the world population is expected to grow by 1 billion during the decade of the 1990s. Approximately 95 percent of that growth will take place in developing countries in Asia, Africa, and Latin America

Socio cultural Environment:

Marketers pay close attention to socio cultural factors in international marketing.

Social factors can affect the terms of business conduct , marketing communications , product offering characteristics and market suitability. The changing social structure is an important consideration . The role of the women, the role of the elderly , can have an impact on product positioning and advertising . Also there is an increase in the rate of mothers returning to work in regions like UK,America and Australia. Japan has also started to loosen its immigration and employment policies in response to its ageing workforce. An awareness of changes and differences in social structure in therefore very important. Culture affects the ways people define their wants and needs through consumption. Language, education , religion , norms and values are some of the areas that culture covers.

For example DeBeers a world leader in gems and diamonds markets them to different countries according to the cultural norms. (In UK diamond ring is associated with engagement , in Spain it is associated with a childs birth , in Saudi Arabia it is an important wedding gift) Culture also influences the way we interact , relate and work together, In Uk some call centre jobs related to insurance claim have been shifted back from India following misunderstandings arising from cultural differences. Also customers with immersion heaters struggled to get heir message to Indian staff who didnt have such heaters. Also difficulties often arise due to the problem of people from different cultures working together. English managers tend to be practical and informal whereas the French are more analytical in approaching problems. Population movements through immigration is also influencing social factors through the migration of values and cultures.

Companies can best adapt to cultural differences by 1) self analysis recognizing the situation from the customers point of view 2) Cultural training for the employees 3) Direct recruitment from the international labour market

Values and attitudes can affect perceptions of a product , customer reactions or perception of the products origin. For ex china had long been unfriendly for mid range fashion , however in recent years due to the enlargement of young ,white collar , lower middle class women there is a demand for mid priced fashion. Some cultures are more resistant to foreign imports than others , For example Germans are more traditionalist whereas France and Italy are more open to foreign products. Some companies trade effectively based on their country of origin. For example Foster with Australian attitude , Ikea on Swedishness and Scandinavian design , Japan for precision and electronics. Language is critical for an international marketer. Nowadays the companies has to deal with the customer in his own language. Language is very important for marketing communications , be it brand names , company slogans, and advertising taglines or product packaging. All forms of marketing communications have to be translated and back translated to ensure correct interpretation and meaning.

Technological Factors

Technological development plays an important role in marketing communications , new product development , and the overall success of market entry.
In many international markets companies market more through email and web based marketing. But in developing markets radio still remains the main channel for marketing communications , with limited television diffusion. Compared to the world population people who have access to internet and subscription to mobile phone is very less. Many customer needs and wants are based on the technological infrastructure within which they reside. Ex : Wireless telephone penetration exceeds wire line penetration in developing countries. Nokia made durable mobile phones with dustproof keypads for India Motorola made mobile phones with only three essential functions to make the handsets more user friendly for people with poor literacy.

Economic Factors

The potential of any market is governed by the number of like customers within it and their ability to spend or purchasing power.
Typical ways to assess the economic potential of a market include 1. Measures of per capita income

2. Ownership rates of durables

3. Balance between urban and rural populations 4.Prevailing rate of inflation 5.GNP 6.Market size 7.Fluctuations in currency exchanges.

Political Legal Factors

Governments tend to intervene in international marketing by assisting their countrys industries and by placing obstacles in various ways for importers in order to protect domestic companies.
Measures adopted by governments to protect domestic industries are as follows

1) Quotas to limit the number of goods allowed in

2) Duties , Like a special tax on imports 3) Nan tariff barriers such as product legislation which means that expensive adaptation needs to be made before the item is legally saleable in the host country. Governments are also under pressure to reduce unemployment and stimulating economic activity. Hence many countries encourage foreign investment by providing tax concessions and support of various kinds to persuade international companies to start their manufacturing units in backward areas.

EX : Posco steel plant in orissa

Some countries are more politically stable than others. Political conditions can also cause severe difficulties for international marketers even to the point of withdrawing from a market ( ex coca cola from India ). Certain governments can restrict foreign investment and ownership and thus a company might be required to enter the market through a joint venture with a local company with the local company holding the larger percentage of ownership.

Other examples of political and legal factors include employment law, health and safety regulations, financial law , patent protection etc.
Legislation and regulation for marketing related activities differ across country. For example , vending machines are an important delivery mechanism for coca colas distribution strategy. However vending machines are practically impossible to place legally in Russia where all sales has to be conducted with a cash register.

Challenges in International Marketing

1) Huge Foreign Indebtedness :

Many countries have accumulated huge foreign debts on which it is difficult to pay even the interest. Ex : Greece 2) Unstable Governments:

High indebtedness , high inflation , and high unemployment in several countries

have resulted in high unstable governments that expose foreign firms to the risks of expropriation , nationalization and limits of profit repratriation.To help guard against these risks many companies buy political risk assessment reports which shows each countrys current risk level. 3) Foreign Exchange problems: High indebtedness and economic and political instability decrease the value of countrys currency.

4) Foreign government entry requirements and bureaucracy

Governments place many regulations on foreign firms. For example they might require joint ventures with the majority share going to the domestic partner , a high number of local nationals to be hired and limits on profit repatriation.

5. Tariffs and other trade barriers:

Governments often impose high tariffs to protect their industries. They also adopt invisible trade barriers such as slowing down important approvals, requiring costly product adjustments and slowing down inspection or clearance of arriving goods.
6.Corruption: Officials in several countries requires bribes to cooperate. They award business to the highest briber than the lowest bidder. 7. Technological Pirating A company locating its plant abroad worries about foreign managers learning the know how of its product and breaking away to compete openly. 8. High cost of product and communication adaptation: A company going abroad must study each foreign market carefully especially its economics , laws . Politics , and culture and adapt its products and communications to each markets tastes. Otherwise , it might make serious blunders. Source : Philip kotler old

Advantages of International marketing: 1.International marketing provides growth opportunities for the companies whose domestic market is maturing. For example, General motors focusing its strategies on the emerging markets like India 2. It brings the major portion of sales and profits to the company. For example, Unilevers major revenue comes from the Asian markets. 3. It generates employment: Indian textile sector which exports majority of the product produced is the largest employer after agriculture and retail. 4. International market also acts as survival place for the companies. If one market become unattractive either they establish their operation in another country or outsource the major functions to streamline the businesses. 5. It helps in improving the standard of living in the country. 6. Ability to leverage good ideas quickly and efficiently 7. Economies of scale in production and distribution Ex : Nike production in developing countries Reference : Sikkim Manipal

Disadvantages of International marketing

1. It ignores differences in consumer needs, wants and usage patterns for product 2. Ignores differences in consumer response to marketing mix elements 3. Ignores differences in brand and product development and the competitive environment. 4. Ignores differences in legal environment 5. Ignores differences in marketing institutions.

6. Ignores differences in administrative procedures.

Reference pearson ppt

Reasons for Global Expansion

1. Domestic markets are saturated and there is pressure to raise sales and profits. To realize that companies have to move out of their domestic markets
2. Domestic markets are small . Companies having huge ambitions have to look for bigger markets outside.

3. Domestic markets are growing slowly. To achieve high growth rates the companies have to obtain some of their sales from international markets.
4. Some companies will move out of their domestic markets when their competitors have done so. 5. Developed markets have high cost structures and companies may move their operations to regions where cost of productions is lower. 6. Companies do not like to concentrate all their efforts in limited regions and want to spread out their risk. Such companies will look for markets which are likely to behave differently from their existing ones in terms of economic parameters.

7. Even if a company wants to concentrate on domestic market but due to the entrance of MNCs there will be intense competition the company has no choice but to enter foreign markets to maintain market share and growth.
Reference : Arunkumar , Meenakshi

Major decisions in international marketing

1) Deciding whether to go abroad
2) Deciding which markets to enter 3) Deciding how to enter the market 4) Deciding on the marketing programme 5) Deciding on the marketing organization, Deciding whether to go abroad : Most companies would prefer to remain in domestic market. But the reasons for companies moving to international markets are as follows. Before moving abroad the company should be aware of several risks; 1. The company might not aware of foreign preferences and could fail to offer a competitively attractive product. 2. The company might not understand the foreign countrys business culture 3. The company might underestimate foreign regulations and incur unexpected loss 4.The company might lack managers with international experience

The internationalization process has four stages

1. No regular export activities

2. Export via independent representatives 3. Establishment of one or more sales subsidiaries 4. Establishment of production facilities abroad Deciding Which Markets to Enter:

How many markets to enter:

The company must decide how many countries to enter and how fast to expand.

Entry strategies;
Waterfall approach Gradually entering countries in sequence.ex .GE,BMW Sprinkler approach Entering many countries simultaneously.ex.Microsofts launch of windows.

Developed versus developing market:

One of the sharpest differences in global marketing is between developed and developing markets. The unsatisfied needs of the emerging or developing markets represent huge potential for food ,clothing , shelter , consumer electronics , appliances and many other goods.

Entering developing markets requires a special set of skills and plans.

a) Grameen phone marketed mobiles to 35000 villages in Bangladesh

b) Colgate Palmolive marketed in Indian villages through video vans c) Fiat developed palio for developing nations. Selling in developing markets cannot be business as usual. Apart from economic and cultural differences , there will be poor marketing infrastructure , and there may be tough local competition. Regional Economic integration the creation of trading agreements between blocs of countries has intensified in recent years.

SAFTA Bangla , Bhutan , India , Maldives , Nepal , Pakistan and Sri lanka
EU Formed in 1957 , 25 countries , common currency - Euro , NAFTA US , Mexico and Canada , produce and consume $ 6.7 trillion worth of goods and services

MERCOSUR Latin America Brazil , Argentina , Paraguay , Uruguay and Venezuela

ASEAN 10 countries Brunei , Cambodia , Indonesia, Laos, Malaysia , Myanmar , Philippines , Singapore, Thailand and Vietnam.

In general a company prefers to enter countries that a) Rank high on market attractiveness b) Rank low in market risk c) Possess a competitive advantage

Deciding How to Enter the Markets:

Strategies For entering International Markets ( Global Market Entry

Strategies ) - Scope of International marketing Once a company decides to target a particular country , it must determine the best mode of entry. The most important global market entry strategies are as follows Indirect and Direct Export: The normal way to get involved in an international market is through export.

In Indirect Exporting the companies work through independent intermediaries.

Domestic based export merchants buy the manufacturers products and them sell abroad.

Domestic based export agents seek and negotiate foreign purchases for a commission.
Export management companies agree to manage companys export activities for a fee.

Advantages of indirect export:

1) There is less investment as the firm does not have to develop an export department or a overseas sales force or international contacts.
2) There is less risk because international marketing intermediaries bring knowhow and services to the relationship , the seller will make fewer mistakes.

Direct Exporting
A company can carry on direct exporting in several ways a) Domestic based export department or division b) Overseas sales branch or subsidiary c) Traveling export sales representatives d) Foreign based distributors or agents Licensing

Licensing is a simple way to enter international markets. The licensor issues a license to a foreign company to use a manufacturing process , trademark , patent,
trade secret for a fee or royalty.

Licensing has potential disadvantages

1) The licensor has less control over the licensee

2) If the licensee is very successful the firm has to give up profits and by the contract ends it mat find by creating a competitor. To prevent this the licensor usually supplies some proprietary product ingredients or components. There are variations in licensing agreement. 1) Companies like Hyatt and Marriott sell management contracts to owners of foreign hotels to manage these businesses for a fee. 2) In contract manufacturing the firm hires local manufacturers to produce the product. Ex : Sears opened department stores in mexico 3) In Franchising the franchisor offers a complete brand concept and operating system. In return, the franchisee invests in and pays certain fees to the franchisor. Ex : McDonald's , KFC

Joint Ventures

Foreign investors often join with local investors to create a Joint venture company in which they share ownership and control.
Ex :Coke & Nestle joined together to sell ready to drink tea in Japan Pepsi joined with Tata global beverages to distribute mineral waters in India.

Insurance companies in India , Maruti Suzuki

Direct Investment In this form the foreign company can buy part or full interest in a local company or build its own facilities. Ex GM invests in various automobile companies across the globe. Reason for direct investment 1) If the market appears to be large foreign production facilities offer advantages like cheap labour and raw materials , government incentives and freight savings.

2) The firms image is strengthened in the home country as it creates jobs.

3) The firm develops a deeper relationship with government , customers, suppliers and distributors enabling it to better adapt the product to the local environment. 4) The firm has full control over its investment and therefore can develop

Manufacturing and marketing policies that serve its long term investment objective. The main disadvantage of direct investment is that the firm exposes a large investment to risk Deciding on the global marketing Programme International companies must decide how much to adapt their marketing strategy To local conditions. At one extreme are companies that use a standardized marketing mix worldwide, selling largely the same products and using the same marketing approaches worldwide. At the other extreme is an adapted marketing mix. In this case, the producer adjusts the marketing mix elements to each target group.

Product Five strategies allow for adapting product and promotion to a foreign market. Straight product extension means marketing a product in a foreign market without any change. Straight extension has been successful in some cases. Philips shavers, Kellogg cereals, Heineken beer, Coca-Cola are all sold successfully in about the same form around the world. Straight extension is tempting because it involves no additional product-development costs, manufacturing changes or new promotion. But in some cases it can be disastrous. Ex; Campbell soup company condensed soups failed in England. Product adaptation involves changing the product to meet local conditions or wants. For example, Philips began to make a profit in Japan only after it reduced the size of its coffee makers to fit into smaller Japanese kitchens and its shavers to fit smaller Japanese hands. Product invention consists of creating something new for the foreign market. This strategy can take two forms. Backward Invention reintroducing earlier product forms that happen to be well adapted to the needs of a given country. In Forward invention a company might create a new product to meet a need in another country. Companies such as Quaker Oats, Swift and Monsanto are researching the nutrition needs of less developed countries, creating new foods, and developing advertising campaigns to gain product trial and acceptance

Promotion: Companies can either adopt the same promotion strategy in different countries or change it for each local market called communication adaptation. If the company adapts both the product and the communications the company engages in dual adaptation.

Consider advertising messages. Some global companies use a standardized advertising theme around the world. Sometimes the copy is varied in minor ways to adjust for language differences
The second possibility is to use the same creative theme globally but adapt the specific execution to appropriate local markets.

One of the major issues that advertisers faces in South Asia is the complexity of multiple channels for communication. Price Companies also face several problems when setting their international prices. Companies selling their products abroad may face a price escalation problem due to the need to add the cost of transportation, tariffs, importer margin, wholesaler margin and retailer margin to their factory price. For example, a Gucci handbag may sell for a150 in Italy and the equivalent of a350 in Singapore. Depending on these added costs, the product may have to sell for two to five times as much in another country to make the same profit. Another problem involves setting a transfer price that is, the price that a company charges for goods that it ships to its foreign subsidiaries. If the company charges a foreign subsidiary too much, it may end up paying higher tariff duties even while paying lower income taxes in the foreign country. If the company charges its subsidiary too little, it can be charged with dumping that is, pricing exports at levels less than their costs or less than the prices charged in its home market. For example, the EU imposed anti-dumping duties of as much as 96.0 per cent on imports of broadcasting cameras made by some Japanese companies after an investigation by the European Commission found that Japanese exporters had, through unfair pricing, increased their share of the EU studio video camera market in the early 1990s

Distribution channels The international company must take a whole-channel view of the problem of distributing products to final consumers. The following figure shows the three main links between the seller and the final buyer.

The first link, the sellers headquarters organisation, supervises the channels and is part of the channel itself. The second link, channels between nations, moves the products to the borders of the foreign nations. The third link, channels within nations, moves the products from their foreign entry point to the final consumers. Some manufacturers may think their job is done once the product leaves their hands, but they would do well to pay more attention to its handling within foreign countries. Channels of distribution within countries vary greatly from nation to nation. First, there are the large differences in the numbers and types of intermediaries serving each foreign market. Another difference lies in the size and character of retail units abroad. Whereas large-scale retail chains dominate the British and US scene, most retailing in the rest of Europe and other countries, such as Japan and India, is done by many small independent retailers.

Deciding on marketing organization

Companies manage their international marketing activities in three ways through

Export department , international division and global organization Global organization These firms plan worldwide manufacturing facilities , marketing policies , financial flows , and logistics. Sometimes these companies follow Glocal strategy that standardizes certain elements and localizes other elements .

Country of origin effects

Country of origin perceptions are the mental associations and beliefs triggered by a country.
Building country images: Governments now recognizes that the images of their cities and countries affect more than tourism and have important value in commerce. Attracting foreign business can improve the local economy , provide jobs and improve infrastructure. Ex : New Zealand, Japan Consumer perceptions of country of origin:

Buyers hold distinct attitudes and beliefs about brands or products from different countries. Several studies highlight the following things,
1) The more favourable a countrys image the more prominently the ( Made in ) label should be displayed 2) The impact of country of origin vary with the type of product 3) Certain countries enjoy a reputation for certain goods, Japan for automobiles and electronics ,US for cigarettes ,soft drinks , France for wine and perfume 4) Sometimes country of origin perception can encompass an entire countrys products.EX ; Chinese cheap , Japan innovative , US Prestigious.