1 2 international marketing and exporting 3 globalization the shift towards a more integrated and...

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International Marketing and Exporting

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GlobalizationGlobalization

The shift towards a more integrated and The shift towards a more integrated and interdependent world economy.interdependent world economy.

Two components:Two components: The globalization of markets.The globalization of markets. The globalization of production.The globalization of production.

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Global DriversGlobal DriversPositive

Technology

Open Markets

Economic Integration

Peace

Corporate Strategy

Global Focus

Negative

Culture

Market Barriers

National Barriers

War

Corporate Strategy

Local Focus

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Globalization of MarketsGlobalization of Markets

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Globalization of Markets Globalization of Markets

Global Perspective:Global Perspective: Boeing Company exampleBoeing Company example Peace Works company examplePeace Works company example

Recent events that have impacted international Recent events that have impacted international marketingmarketing High tech and dot.com company bust in early 2000’sHigh tech and dot.com company bust in early 2000’s September 11September 11thth terrorist attacks in U.S. terrorist attacks in U.S. Wars in Afghanistan and IraqWars in Afghanistan and Iraq

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4 Prevailing trends that have the most impact on 4 Prevailing trends that have the most impact on international business in the future:international business in the future: 1. Growth of the World Trade Organization and region 1. Growth of the World Trade Organization and region

free trade areas (NAFTA, European Union..)free trade areas (NAFTA, European Union..) 2. Trend of developing countries (such as Asia, Latin 2. Trend of developing countries (such as Asia, Latin

America, Eastern Europe) accepting the “free market America, Eastern Europe) accepting the “free market system”system”

3. Impact of the internet and other global media companies 3. Impact of the internet and other global media companies (CNN)(CNN)

4. Mandate for companies to properly manage resources4. Mandate for companies to properly manage resources

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Why international marketing is so important:Why international marketing is so important: Companies can no longer ignore the effects of internationally Companies can no longer ignore the effects of internationally

marketingmarketing Competition no longer exists just from domestic companies (exhibit 1.1 Competition no longer exists just from domestic companies (exhibit 1.1

pg. 7)pg. 7) In order to sustain profitability and growth margins of the In order to sustain profitability and growth margins of the

past, companies have to look for alternative methods of past, companies have to look for alternative methods of marketing their products and servicesmarketing their products and services

““In a study conducted on U.S. manufacturing companies In a study conducted on U.S. manufacturing companies of all sizes, it was found that multinational companies of all sizes, it was found that multinational companies outperformed their strictly domestic U.S. counterparts outperformed their strictly domestic U.S. counterparts by by more than twicemore than twice as fast in sales and earned much as fast in sales and earned much greater returns on equity and assets..” (exhibit 1.2 pg. 9)greater returns on equity and assets..” (exhibit 1.2 pg. 9)

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Definition of International Marketing:Definition of International Marketing: ““The performance of business activities designed to plan, price, The performance of business activities designed to plan, price,

promote and direct the company’s flow of goods and services to promote and direct the company’s flow of goods and services to consumers or users in more than one nation for a profit” (4 P’s)consumers or users in more than one nation for a profit” (4 P’s)

What is the difference between marketing What is the difference between marketing domestically and internationallydomestically and internationally Marketing concepts are universal (goal is to make a profit)Marketing concepts are universal (goal is to make a profit) Difference is that in international marketing ALL environments have to Difference is that in international marketing ALL environments have to

be taken into consideration when the marketing plan is developed and be taken into consideration when the marketing plan is developed and executedexecuted

Must consider the legal environment, governmental controls, climate & Must consider the legal environment, governmental controls, climate & weather, cultural beliefs, buyer behavior… (uncontrollable elements)weather, cultural beliefs, buyer behavior… (uncontrollable elements)

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International vs Domestic BusinessInternational vs Domestic Business

Countries are different.Countries are different. Range of problems are wider and more Range of problems are wider and more

complex.complex. Government intervention in trade and Government intervention in trade and

investment creates problems.investment creates problems. International investment is impacted by International investment is impacted by

different currencies.different currencies.

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Levels of Involvement in International Marketing

Exporting

Contractual AgreementsFranchising

Foreign LicensingSubcontracting

International Direct InvestmentAcquisitions

Joint VenturesOverseas Divisions

Low

High

Degreeof Risk

andControl

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International Trade TheoriesInternational Trade Theories

Absolute AdvantageAbsolute Advantage Comparative AdvantageComparative Advantage Heckscher-Olin Theory Heckscher-Olin Theory

(Factor Proportion Theory)(Factor Proportion Theory) Product Life Cycle TheoryProduct Life Cycle Theory

© McGraw Hill Companies, Inc.,2000

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An Overview of Trade TheoryAn Overview of Trade Theory Free TradeFree Trade occurs when a government does not occurs when a government does not

attempt to influence, through quotas or duties, what its attempt to influence, through quotas or duties, what its citizens can buy from another country or what they citizens can buy from another country or what they can produce and sell to another country.can produce and sell to another country.

The Benefits of TradeThe Benefits of Trade allow a country to specialize allow a country to specialize in the manufacture and export of products that can be in the manufacture and export of products that can be produced most efficiently in that country.produced most efficiently in that country.

The Pattern of International Trade The Pattern of International Trade displays patterns displays patterns that are are easy to understand (Saudi Arabia/oil or that are are easy to understand (Saudi Arabia/oil or Mexico/labor intensive goods). Others are not so easy Mexico/labor intensive goods). Others are not so easy to understand (Japan and cars).to understand (Japan and cars).


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Theory of Absolute AdvantageTheory of Absolute Advantage

Capability of one country to produce more of a product Capability of one country to produce more of a product with the same amount of input than another country.with the same amount of input than another country.

Produce only goods where you are Produce only goods where you are mostmost efficient, trade for efficient, trade for those where you are not efficient.those where you are not efficient. Trade between countries is, therefore, beneficial.Trade between countries is, therefore, beneficial.

Assumes there is an Assumes there is an absolute advantage absolute advantage balance among nations.balance among nations.


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Theory of Comparative AdvantageTheory of Comparative Advantage

Extends free trade argumentExtends free trade argument Efficiency of resource utilization leads to more Efficiency of resource utilization leads to more

productivity.productivity. Should import even if country is more efficient in the Should import even if country is more efficient in the

product’s production than country from which it is product’s production than country from which it is buying. buying.

LLook to see how much more efficient. If only ook to see how much more efficient. If only comparatively efficient, than import.comparatively efficient, than import.

Makes better use of resourcesMakes better use of resources


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Heckscher (1919)-Olin (1933) Heckscher (1919)-Olin (1933) (Factor Proportion)Theory(Factor Proportion)Theory

Export goods that intensively use factor Export goods that intensively use factor endowments which are locally abundant.endowments which are locally abundant. Corollary: import goods made from locally scarce Corollary: import goods made from locally scarce

factors.factors. Patterns of trade are determined by differences in Patterns of trade are determined by differences in

factor endowments - not productivity.factor endowments - not productivity. Remember, focus on relative advantage, Remember, focus on relative advantage, notnot

absolute advantage.absolute advantage.© McGraw Hill Companies, Inc.,2000

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Factor EndowmentsFactor Endowments Taken from Heckscher-OlinTaken from Heckscher-Olin Basic factorsBasic factors::

natural resources,natural resources, climate,climate, location.location.

Advanced factors:Advanced factors: communications,communications, skilled labor,skilled labor, technology.technology.


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Product Life-Cycle TheoryProduct Life-Cycle Theory((Raymond Vernon, 1966Raymond Vernon, 1966))

As products mature, both location of sales and As products mature, both location of sales and optimal production changes.optimal production changes.

Affects the direction and flow of imports and Affects the direction and flow of imports and exports.exports.

Globalization and integration of the economy makes Globalization and integration of the economy makes this theory less valid. this theory less valid.


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• Demand. Do foreign consumers need the company’s good or service.

• Competition. How do supplies currently reach the market?

• Economic environment. What is the state of the nation’s economic health?

• Social-cultural environment. How do cultural factors affect business opportunities?

• Political-legal environment. Do any legal restrictions complicate entering the market?

Entering a Foreign Market: Areas of Focus

1 2 international marketing and exporting 3 globalization the shift towards a more integrated and...

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