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I n t e r n a t i o n a l M a r k e t i n g The Scope and Challenge of International Marketing Chapter 1 1 4 t h E d i t i o n P h i l i p R. C a t e o r a M a r y C. G i l l y J o h n L . G r a h a m McGraw-Hill/Irwin International Marketing 14/e Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Page 1: Chap001

I n t e r n a t i o n a l M a r k e t i n g I n t e r n a t i o n a l M a r k e t i n g

The Scope and Challenge

of International Marketing

Chapter 1

1 4 t h E d i t i o n

P h i l i p R. C a t e o r a

M a r y C. G i l l y

J o h n L . G r a h a m

McGraw-Hill/IrwinInternational Marketing 14/e

Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Page 2: Chap001

1-2

What Should You Learn?What Should You Learn?

• The changing face of U.S. business

• The scope of the international marketing task

• The importance of the self-reference criterion (SRC) in international marketing

• The progression of becoming a global marketer

• The increasing importance of global awareness

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1-3

Global Perspective: Global Commerce Causes Peace

Global Perspective: Global Commerce Causes Peace

• Global commerce during peace time

– Commercial aircraft and space vehicle industries– Mobile phone industry– Individuals and small companies

• International markets are ultimately unpredictable

– Flexibility means survival

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1-4

Events and Trends Affecting Global Business

Events and Trends Affecting Global Business

• The rapid growth of the World Trade Organization and regional free trade areas

• The trend toward the acceptance of the free market system among developing countries in Latin America, Asia, and Eastern Europe

• The burgeoning impact of the Internet, mobile phones, and other global media on the dissolution of national borders

• The mandate to properly manage the resources and global environment for the generations to come

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The Internationalization of U.S. Business

The Internationalization of U.S. Business

• Increasing globalization of markets

• Increasing number of U.S. companies are foreign controlled

– $16.3 trillion in foreign investment in the U.S. – $2.6 trillion more than American overseas investment

• Increasing number of foreign companies building and buying manufacturing plants in the U.S.

• Increasing difficulty for domestic markets to sustain customary rates of growth

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Foreign Acquisitions of U.S. Companies

Foreign Acquisitions of U.S. Companies

Exhibit 1.1

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Selected U.S. Companies and Their International SalesSelected U.S. Companies

and Their International SalesExhibit 1.2

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International MarketingInternational Marketing

• Performance of business activities designed to

– Plan– Price – Promote, and – Direct the flow of a company’s goods and services to

consumers or users in more than one nation for a profit

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The International Marketing TaskThe International Marketing Task

Exhibit 1.3

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Environmental AdaptationEnvironmental Adaptation

• Ability to effectively interpret the influence and impact of the culture in which you hope to do business– Cultural adjustments

• Establish a frame of reference

• Avoid measuring and assessing markets against the fixed values and assumptions of your own culture

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The Self-Reference Criterion and Ethnocentrism

The Self-Reference Criterion and Ethnocentrism

• The key to successful international marketing is adaptation to the environmental differences from one market to another

• Primary obstacles to success in international marketing

– SRC– Associated ethnocentrism

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SRC and EthnocentrismSRC and Ethnocentrism

• SRC is an unconscious reference to

– One’s own cultural values, experiences, and knowledge as a basis for decisions

• Dangers of the SRC– Failing to recognize the need to take action– Discounting the cultural differences that exist among

countries– Reacting to a situation in an offensive to your hosts

• Ethnocentrism

– Notion that one’s own culture or company knows best

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• Ethnocentrism and the SRC can influence an evaluation of the appropriateness of a domestically designed marketing mix for a foreign market

• The most effective way to control the influence of ethnocentrism and the SRC is to recognize their effects on our behavior

SRC and EthnocentrismSRC and Ethnocentrism

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Framework for Cross-cultural Analysis

Framework for Cross-cultural Analysis

1. Define business problem or goal • Home-country vs. foreign-country cultural traits, habits,

or norms• Consultation with natives of the target country

2. Make no value judgments

3. Isolate the SRC influence • Examine it carefully to see how it complicates the

problem

4. Redefine the problem • Without SRC influence • Solve for the optimum business goal situation

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1-15

Developing a Global AwarenessDeveloping a Global Awareness

• Tolerance of cultural differences:

– Understanding cultural differences and accepting and working with others whose behavior may be different from yours

• Knowledge of cultures, history, world market potential, and global economic, social, and political trends

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Approaches to Global AwarenessApproaches to Global Awareness

• Select individual managers specifically for their demonstrated global awareness

• Develop personal relationships in other countries

• Have a culturally diverse senior executive staff or board of directors

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Stages of International Marketing InvolvementStages of International Marketing Involvement

• No direct foreign marketing

• Infrequent foreign marketing

• Regular foreign marketing

• International marketing

• Global marketing

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No Direct Foreign MarketingNo Direct Foreign Marketing

• Products reach foreign markets indirectly

– Trading companies– Foreign customers who contact firm– Wholesalers– Distributors– Web sites

• Foreign orders pique a company’s interest to seek additional international sales

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Infrequent Foreign MarketingInfrequent Foreign Marketing

• Caused by temporary surpluses

– Variations in production levels– Increases in demand

• Firm has little or no intention of maintaining continuous market representation

– Foreign sales decline when demand or surplus decreases

– May withdraw from international markets

• Little or no change in company organization or product lines

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Regular Foreign MarketingRegular Foreign Marketing

• Firm has production capacity devoted to foreign markets

• Firm employs domestic or foreign intermediaries

– Uses its own sales force– Sales subsidiaries in important markets

• Products allocated or adapted to foreign markets as demand grows

• Firm depends on profits from foreign markets

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Global MarketingGlobal Marketing

• Company treats world, including home market as one market

• Market segmentation decisions no longer focused on national borders

– Defined by income levels, usage patterns, or other factors

• More than half of revenues come from abroad

• Organization takes on global perspective

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Strategic OrientationStrategic Orientation

• Domestic market extension orientation

• Multidomestic market orientation

• Global market orientation

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Domestic Market OrientationDomestic Market Orientation

• International operations viewed as secondary

• Prime motive is to market excess domestic production

• Firm’s orientation remains basically domestic

• Minimal efforts are made to adapt product or marketing mix to foreign markets

• Firms with this approach are classified as ethnocentric

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Multidomestic Market OrientationMultidomestic Market Orientation

• Companies have a strong sense that foreign country markets are vastly different

• Market success requires an almost independent program for each country

– Separate marketing strategies – Subsidiaries operate independently of one another in

establishing marketing objectives and plans– Products are adapted for each market

• Control is decentralized

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Global Market OrientationGlobal Market Orientation

• Company guided by global marketing orientation

– Marketing activity is global– Market coverage is the world

• Firm develops a standardized marketing mix applicable across national boundaries

– Markets are still segmented– Each country or region is considered side by side with

a variety of other segmentation variables– Fits the regiocentric or geocentric classifications

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The Orientation of International Marketing

The Orientation of International Marketing

• An environmental/cultural approach to international strategic marketing

• Intended to demonstrate the unique problems of international marketing

• Discussion of international marketing ranges from the marketing and business practices of small exporters to the practices of global companies

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Foreign Policy’s Global Top 20Foreign Policy’s Global Top 20

Exhibit 1.4

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SummarySummary

• The internationalization of American business is proceeding with increasing pace

• The globalization of markets and competition necessitates all managers to pay attention to the global environment

• International marketing is defined as the performance of business activities across national borders

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• Environmental differences must be taken into account if firms are to market products and services at a profit in other countries

– Laws– Customs– Cultures

• Self-reference criteria and ethnocentrism limit international marketer’s abilities to understand and adapt to differences prevalent in foreign markets

SummarySummary

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SummarySummary

• Solutions to SLC and ethnocentrism

– Global awareness– Sensitivity

• Strategic orientations found among managers of international marketing operations

– Domestic market extension orientation– Multidomestic market orientation– Global market orientation