© 2004 mcgraw-hill companies inc. 12-1 chapter 12 international business marketing

© 2004 McGraw-Hill Companies Inc.© 2004 McGraw-Hill Companies Inc. 12-12-11

Chapter 12Chapter 12

International Business MarketingInternational Business Marketing


Chapter OutlineChapter Outline The Scope and Challenge of International Business MarketingThe Scope and Challenge of International Business Marketing Export Opportunities and ChallengesExport Opportunities and Challenges Stages of Economic DevelopmentStages of Economic Development The International Business EnvironmentThe International Business Environment International LawInternational Law Domestic Laws in Foreign MarketsDomestic Laws in Foreign Markets International Entry StrategiesInternational Entry Strategies Product and Service StrategyProduct and Service Strategy Managing the International Promotion EffortManaging the International Promotion Effort Managing the International Distribution SystemManaging the International Distribution System Pricing StrategyPricing Strategy


Most international trade arrives on ships.

(Image courtesy ofMaersk Sealand)


The Scope and Challenge of The Scope and Challenge of International Business MarketingInternational Business Marketing

Three types of interactions that U.S. firms may Three types of interactions that U.S. firms may have with foreign firms:have with foreign firms:

• They may be supplied by themThey may be supplied by them

• They may compete against them in this countryThey may compete against them in this country

• They may export goods and/or services to a foreign They may export goods and/or services to a foreign country and compete with them there.country and compete with them there.


Export Opportunities and Export Opportunities and ChallengesChallenges

Exporting allows companies to:Exporting allows companies to:• Increase growth potential beyond domestic capacityIncrease growth potential beyond domestic capacity• Expand into new markets with existing or new Expand into new markets with existing or new

products or servicesproducts or services• Add product or service linesAdd product or service lines• Extend product or service life cyclesExtend product or service life cycles• Improve profitability and competitivenessImprove profitability and competitiveness• Save existing jobs and generate new onesSave existing jobs and generate new ones• Gain favorable publicity and recognitionGain favorable publicity and recognition


Export Opportunities and Export Opportunities and ChallengesChallenges

To be successful in exporting, a company must:To be successful in exporting, a company must:• Analyze capabilities of business accurately.Analyze capabilities of business accurately.• Know export potential of products and services.Know export potential of products and services.• Identify foreign markets.Identify foreign markets.• Understand export logistics and distribution channels.Understand export logistics and distribution channels.• Develop international business relationships and Develop international business relationships and

market entry strategies.market entry strategies. For these reasons, many businesses never enter For these reasons, many businesses never enter

global marketplace; the task seems too daunting global marketplace; the task seems too daunting and time consuming.and time consuming.


International business marketing means travel.

(continued)


A huge volume of international business marketing transactions are continuously in process between companies in countries all over the world.

The process has been going on since products started to be produced and sold.


The International Business The International Business EnvironmentEnvironment

The Buying ProcessThe Buying Process

• Buying CentersBuying Centers Although objectives of purchasing personnel may Although objectives of purchasing personnel may

be universal, makeup of buying centers and be universal, makeup of buying centers and interactions between members of buying centers interactions between members of buying centers will vary by country. will vary by country.

In international marketing, it is often more difficult In international marketing, it is often more difficult to:to:

• Identify members of buying center.Identify members of buying center.• DDetermine their role in buying processetermine their role in buying process.. • CCommunicate appropriate information to them. ommunicate appropriate information to them.



Cultural DynamicsCultural Dynamics

• Required AdaptationsRequired Adaptations Different cultural systems can produce Different cultural systems can produce

divergent negotiating styles shaped by each divergent negotiating styles shaped by each nation’s culture, geography, history, and nation’s culture, geography, history, and political system.political system.

Marketers should be aware of complex Marketers should be aware of complex buying process, socio-cultural dynamics, buying process, socio-cultural dynamics, political-legal environment, and economic political-legal environment, and economic environment in foreign marketsenvironment in foreign markets


Please replace with new Exhibit 12-2



Cultural Dynamics Cultural Dynamics (continued)(continued)

• Cultural ImperativesCultural Imperatives - Business customs and - Business customs and expectations that must be met and conformed to if expectations that must be met and conformed to if relationships are to be successful.relationships are to be successful.

• Cultural AdiaphoraCultural Adiaphora - Behaviors and customs that - Behaviors and customs that outsiders may wish to conform to or participate in, but outsiders may wish to conform to or participate in, but that are not required.that are not required.

• Cultural ExclusivesCultural Exclusives - Customs or behaviors from - Customs or behaviors from which the foreigner is excluded.which the foreigner is excluded.



Cultural Dynamics Cultural Dynamics (continued)(continued)

• Basic Requirements for International Marketing Success Basic Requirements for International Marketing Success Depends onDepends on

Knowledge of business culture, management attitudes, and Knowledge of business culture, management attitudes, and business methods existing in country and willingness to business methods existing in country and willingness to accommodate differences.accommodate differences.

Ability to understand the other market’s perspective is critical. Ability to understand the other market’s perspective is critical. Most of us tend to think everyone else sees things as we do Most of us tend to think everyone else sees things as we do (known as (known as self-reference error self-reference error ). Marketing mix should be ). Marketing mix should be based on customer’s preferences, not your own.based on customer’s preferences, not your own.



The Political and Legal EnvironmentThe Political and Legal Environment• Risks of confiscation, expropriation, and Risks of confiscation, expropriation, and

domestication.domestication.



The Political and Legal EnvironmentThe Political and Legal Environment

• The Political EnvironmentThe Political Environment In day-to-day operations, U.S. domestic business In day-to-day operations, U.S. domestic business

marketers tend to ignore impact of political environment.marketers tend to ignore impact of political environment.

U.S. political environment is relatively stable and U.S. political environment is relatively stable and predictable … but this is not true everywhere.predictable … but this is not true everywhere.

Political change can mean new competitive Political change can mean new competitive disadvantages for foreign companies or even a disadvantages for foreign companies or even a company’s expropriation (or even confiscation).company’s expropriation (or even confiscation).



The Political and Legal EnvironmentThe Political and Legal Environment• The Political EnvironmentThe Political Environment

Conflicting signals Conflicting signals Trade barriersTrade barriers


Foreign Trade BarriersForeign Trade Barriers Import policies Import policies —tariffs and other import charges, restrictions, —tariffs and other import charges, restrictions,

licensing, or barrierslicensing, or barriers Standards, testing, labeling, and certificationStandards, testing, labeling, and certification Government procurement Government procurement —”buy national” policies and closed —”buy national” policies and closed

biddingbidding Export subsidies Export subsidies —export financing on preferential terms—export financing on preferential terms Lack of intellectual property protection—inadequate Lack of intellectual property protection—inadequate

patent/trademark protectionpatent/trademark protection Service barriers Service barriers —regulation of international data flows—regulation of international data flows Investment barriers—restrictions on transferring earnings and Investment barriers—restrictions on transferring earnings and

capitalcapital Regulations and standards and discriminatory taxationRegulations and standards and discriminatory taxation Other barriers Other barriers —bribery and corruption—bribery and corruption



The Political and Legal EnvironmentThe Political and Legal Environment• The Legal EnvironmentThe Legal Environment

• Local Legal SystemsLocal Legal Systems Common law systemsCommon law systems Code (written) law systemsCode (written) law systems Islamic law systemsIslamic law systems


Local Legal Systems ExplainedLocal Legal Systems Explained

Common law systemsCommon law systems base interpretation of law on base interpretation of law on prior court rulings (legal precedents and customs). prior court rulings (legal precedents and customs).

Code (written) law systemsCode (written) law systems rely on statutes and codes rely on statutes and codes for interpretation of law. There is little "interpretation," so for interpretation of law. There is little "interpretation," so law must be detailed enough to prescribe appropriate law must be detailed enough to prescribe appropriate and inappropriate actions. Majority of world's and inappropriate actions. Majority of world's governments rely on code law system. governments rely on code law system.

Islamic law systemsIslamic law systems rely on legal interpretation of rely on legal interpretation of Koran.Koran.



The Political and Legal EnvironmentThe Political and Legal Environment• Antitrust LawsAntitrust Laws

• Foreign Corrupt Practices Act of 1977Foreign Corrupt Practices Act of 1977


International LawInternational Law Treaties of friendship, commerce, and navigation Treaties of friendship, commerce, and navigation

(FCNs)(FCNs)

• usually guarantee “national treatment” to foreign usually guarantee “national treatment” to foreign company—that it will not be discriminated against by company—that it will not be discriminated against by nation's laws and judiciarynation's laws and judiciary

International Monetary Fund (IMF)International Monetary Fund (IMF) and and General General Agreement on Tariffs and Trade (GATT) Agreement on Tariffs and Trade (GATT)

• part of limited body of effective international law. Both part of limited body of effective international law. Both agreements identify acceptable and nonacceptable agreements identify acceptable and nonacceptable behavior for member nations.behavior for member nations.


International LawInternational Law The United Nations Commission on International The United Nations Commission on International

Trade Law Trade Law (UNCITRAL(UNCITRAL))

• promotes a uniform commercial code for whole world. promotes a uniform commercial code for whole world.

International Standards Organization (ISO)International Standards Organization (ISO)

• working toward development of uniform international working toward development of uniform international standards. standards.

North American Free Trade Agreement (NAFTA)North American Free Trade Agreement (NAFTA)

• purpose is to increase trade and business between trading purpose is to increase trade and business between trading partners, U.S., Canada, and Mexicopartners, U.S., Canada, and Mexico


ISO 9000 CertificationISO 9000 Certification ISO = International Organization for standardizationISO = International Organization for standardization

ISO 9000 Certification: a series of standards that ISO 9000 Certification: a series of standards that include:include:• Effective quality systemEffective quality system

• Valid measurements and calibrationValid measurements and calibration

• Appropriate statistical techniquesAppropriate statistical techniques

• Lot control, part tracing, record keepingLot control, part tracing, record keeping

• Internal process auditingInternal process auditing

• Employee quality trainingEmployee quality training

(continued)


ISO 9000 CertificationISO 9000 Certification Mandates:Mandates:

• Define appropriate quality standardsDefine appropriate quality standards

• Document processesDocument processes

• Prove consistent adherence to bothProve consistent adherence to both

Required by U.S. Dept. of Defense, Japan, European Required by U.S. Dept. of Defense, Japan, European Community, and others. Requirement includes second-Community, and others. Requirement includes second-tier subassembly and component makers (and their tier subassembly and component makers (and their suppliers, etc.).suppliers, etc.).

(continued)


ISO 9000 CertificationISO 9000 Certification

Prior to ISO 9000, most companies had their own Prior to ISO 9000, most companies had their own versions of quality systems (many modeled on versions of quality systems (many modeled on military specifications).military specifications).

Certification assures customers that suppliers Certification assures customers that suppliers have capabilities and systems to provide high-have capabilities and systems to provide high-quality goods. (Doesn’t assure that particular quality goods. (Doesn’t assure that particular products are high quality, just the standards of products are high quality, just the standards of the system they were produced under.)the system they were produced under.)

(continued)


ISO 9000 CertificationISO 9000 Certification Other International Standards receiving Other International Standards receiving

attention:attention:

• AS 9000 (aerospace)AS 9000 (aerospace)

• ISO 14000 (environmental management)ISO 14000 (environmental management)

• SA 8000 (social accountability)SA 8000 (social accountability)

(continued)


ISO 9000 CertificationISO 9000 Certification ISO creates standards; typically, consultants ISO creates standards; typically, consultants

help company adapt systems to meet the help company adapt systems to meet the standards. When ready, a certification company standards. When ready, a certification company audits the systems and awards certification (and audits the systems and awards certification (and provides periodic checking).provides periodic checking).

Adoption cost = ~$250,000Adoption cost = ~$250,000––$500,000 for $500,000 for average-size plan operation.average-size plan operation.

(continued)


Why Is ISO 9000 Why Is ISO 9000 a Marketing Issue?a Marketing Issue?

If customer does not require it, ISO 9000 certification If customer does not require it, ISO 9000 certification can be a differential advantage.can be a differential advantage.

If customer does require ISO 9000, marketers If customer does require ISO 9000, marketers ensure that customer needs are met. If marketing is ensure that customer needs are met. If marketing is confident that their quality department can handle confident that their quality department can handle ISO requirement, marketing can deal with other ISO requirement, marketing can deal with other aspects of customer’s needs. If marketing is not aspects of customer’s needs. If marketing is not sure, then they need to be involved until they are. sure, then they need to be involved until they are. This is true of any customer requirement (e.g., This is true of any customer requirement (e.g., technical, delivery, packaging).technical, delivery, packaging).

(continued)


Why Is ISO 9000 Why Is ISO 9000 a Marketing Issue?a Marketing Issue?

Keep in mind that marketers decide which Keep in mind that marketers decide which customers to serve with what marketing mixes. For customers to serve with what marketing mixes. For example, marketing can decide that it is in the example, marketing can decide that it is in the company’s best interest to target customers who company’s best interest to target customers who require ISO 9000, but not approach customers who require ISO 9000, but not approach customers who require aerospace 9000. require aerospace 9000.

Today’s marketers will need to be familiar with ISO Today’s marketers will need to be familiar with ISO specifications. Find out more at www.ISO.ch and specifications. Find out more at www.ISO.ch and www.bsi.org.uk. www.bsi.org.uk.


Domestic Laws in Foreign MarketsDomestic Laws in Foreign Markets Differing Legal SystemsDiffering Legal Systems


International Entry StrategiesInternational Entry Strategies

ExportingExporting The InternetThe Internet Contractual AgreementsContractual Agreements

• LicensingLicensing• FranchisingFranchising• Joint VenturesJoint Ventures

Direct Foreign InvestmentDirect Foreign Investment• ManufacturingManufacturing• Assembly OperationsAssembly Operations• Turnkey OperationsTurnkey Operations


Product and Service StrategyProduct and Service Strategy Product PositioningProduct Positioning Adaptation Versus StandardizationAdaptation Versus Standardization

• Product adaptationProduct adaptation Strategically changing product to meet local Strategically changing product to meet local

needs.needs.

• ProductProduct standardizationstandardization Product originally designed for domestic market Product originally designed for domestic market

is exported to other countries with virtually no is exported to other countries with virtually no change, except perhaps for translation of words change, except perhaps for translation of words and other cosmetic touches. and other cosmetic touches.


Managing the International Managing the International Promotion EffortPromotion Effort

International AdvertisingInternational Advertising International Sales PromotionInternational Sales Promotion International PublicityInternational Publicity Trends in International Direct, Interactive, Trends in International Direct, Interactive,

and Internet Marketingand Internet Marketing


Managing the International Managing the International Distribution EffortDistribution Effort

• American-based Export IntermediariesAmerican-based Export Intermediaries

Brokers and agentsBrokers and agents

Export management companies (EMCs)Export management companies (EMCs)

Export trading companies (ETCs)Export trading companies (ETCs)

Export trading company cooperativesExport trading company cooperatives

Piggyback arrangementsPiggyback arrangements



• Foreign-based Export IntermediariesForeign-based Export Intermediaries

Foreign sales agentsForeign sales agents

Foreign distributorsForeign distributors



• Direct MarketingDirect Marketing



Pricing StrategyPricing Strategy• Company FactorsCompany Factors

Global Corporate ObjectivesGlobal Corporate Objectives Cost-Based ApproachesCost-Based Approaches Transfer Price PoliciesTransfer Price Policies

• Market FactorsMarket Factors Income Levels and Market SegmentsIncome Levels and Market Segments Competitive StructureCompetitive Structure Channel StructureChannel Structure Gray MarketsGray Markets



Pricing StrategyPricing Strategy• Environmental FactorsEnvironmental Factors

Foreign Exchange RatesForeign Exchange Rates Inflation RatesInflation Rates Price ControlsPrice Controls CountertradeCountertrade


CountertradeCountertrade

Half of Fortune 500 companies have used barter in some way.Half of Fortune 500 companies have used barter in some way. ~300,000 companies trade through corporate barter.~300,000 companies trade through corporate barter. More than 80 nations currently use CT.More than 80 nations currently use CT. More than 30 percent of world trade involves CT.More than 30 percent of world trade involves CT.

ExamplesExamples Xerox sells $100 million/year in copiers and printers to Brazil, with Xerox sells $100 million/year in copiers and printers to Brazil, with

payment in Brazilian steel and Venetian blinds.payment in Brazilian steel and Venetian blinds. General Dynamics sells F-16 fighter jets to Turkey in exchange for General Dynamics sells F-16 fighter jets to Turkey in exchange for

Turkish products.Turkish products.

Global trade does not always involve cash; instead, countertrade (CT), or barter, involves one-time exchange of goods/services for other goods/services.


Summary MessageSummary Message

To be a successful international marketer, you need to appreciate To be a successful international marketer, you need to appreciate other cultures and be a continuously learning student of their other cultures and be a continuously learning student of their dynamic business practices, cultures, legal systems, political dynamic business practices, cultures, legal systems, political systems, and competitive environments. systems, and competitive environments.


As a check of how much we have to learn:As a check of how much we have to learn: Name our major trading partners in NAFTA. List their major political parties and what each stands

for. Describe their legal systems. Describe how each differs from us culturally and how

that would impact business transactions.

Summary QuizSummary Quiz


Corporate Participation in a U.S. Corporate Participation in a U.S. International High-Tech Trade MissionInternational High-Tech Trade Mission

Boosts U.S. high-tech exports.Boosts U.S. high-tech exports. Establishes and expanded business relationships Establishes and expanded business relationships

between executives and host country governments between executives and host country governments and industry leaders.and industry leaders.

Highlights U.S. leadership and competitiveness in Highlights U.S. leadership and competitiveness in high-tech sectors.high-tech sectors.

Identifies new and upcoming commercial high-tech Identifies new and upcoming commercial high-tech opportunities in region.opportunities in region.

Demonstrates high-visibility U.S. support for local Demonstrates high-visibility U.S. support for local economies.economies.

© 2004 mcgraw-hill companies inc. 12-1 chapter 12 international business marketing

Documents

international promotion

capabilities of business

international marketing

new products

foreign firms

foreign country

export potential of

new markets