international marketing

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International Marketing, 8th EditionMichael R. Czinkota and Ilkka A. Ronkainen

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Czinkota, Michael R.International marketing / Michael R.

Czinkota, Ilkka A. Ronkainen. 8th ed.p. cm.

1. Export marketing. I. Ronkainen,Ilkka A. II.Title.HF1416.C953 2007658.8'4dc22

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One really big surprise of the postwar era has been thathistoric enemies, such as Germany and France or Japanand the United States, have not had the remotest threatof war from each other since 1945.Why should they?Anything Japan has that the United States wants can bebought, and on very easy credit terms, so why fight for it?Why should the Japanese fight the United States and loseall those profitable markets? France and Germany, linkedintimately through marketing and the European Union,are now each others largest trading partners.

Closed systems build huge armies and waste theirresources on guns and troops;open countries spend theirmoney on new machines to crank out Barbie dolls orsome other consumer products. The bright young peopleof open countries figure out how to run machines orprovide services,not how to fire the latest missile. Forsome reason, they not only get rich fast but also lose inter-est in military adventures. Japan, that peculiar superpowerwithout superguns, confounds everyone simply because noone has ever seen a major world power that got that wayby selling you to death,not shooting you to death.

Freedom is about options. A true option provides theopportunity to make a meaningful decision, to exercisevirtue. International marketing contains the freedom ofalmost unlimited growth potential. However, the cost offreedom is rising. Terms like free trade or free choice aremisleading because they come with a price. We are all

paying a higher price due to global terrorism.Marketerspay the higher cost of preparing their shipments, scrutinizingtheir customers,and conforming to government regulations.Local participants,employees, and investors pay with theirsuffering and economic loss after a terrorist attack.

In most instances, terrorism is not an outgrowth ofchoice, but rather the lack of it. Terrorists do not succeedin increasing their freedom through their actions, but onlydecrease the freedom of others. International marketersin turn can invest in the worlds poorest markets andincrease their own revenue while decreasing poverty.The expansion of trade creates jobs, improves health andeducation standards, and raises overall standards of livingin impoverished regionsall of which bring a new senseof hope that turns aside the false appeal of terrorism. U.S.trade agreements with Vietnam, Bahrain, and Russia, andthe slashing of tariffs on Pakistani textiles by the EuropeanUnion, showcase the might of international marketing.

However, much effort continues to be required from theglobal community. Trade-based progress toward globalwealth must include extensive health-care and environ-mental aid, massive debt write-offs, and substantial tariffand quota reductions for steel, textile, and agriculturalexports from impoverished regions.SOURCES: Czinkota, Michael R.On Freedom and International Marketing. Congressional Record, May 9, 2005; Farmer, Richard N.WouldYou Want Your Daughter to Marry a Taiwanese Marketing Man? Journal ofMarketing 51 (October 1987): 114115.

International Marketing: Bringing Peace, Fighting Terrorism

The International MARKETPLACE 1.1

The Global MarketingImperative

1Chapter

3

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You are about to begin an exciting, important, and necessary task: the explo-ration of international marketing. International marketing is exciting because itcombines the science and the art of business with many other disciplines.Economics, anthropology, cultural studies, geography, history, languages,

jurisprudence, statistics, demographics, and many other fields combine to help youexplore the global market. Different business environments will stimulate your intellectualcuriosity, which will enable you to absorb and understand new phenomena. Internationalmarketing has been compared by many who have been active in the field to the task ofmountain climbing: challenging, arduous, and exhilarating.

International marketing is important because the world has become globalized.Increasingly, we all are living up to the claim of the Greek philosopher Socrates, whostated, I am a citizen, not of Athens or Greece, but of the world. International market-ing takes place all around us every day, has a major effect on our lives, and offers newopportunities and challenges. After reading through this book and observing internationalmarketing phenomena, you will see what happens, understand what happens, and, atsome time in the future, perhaps even make it happen. All of this is much better than tostand by and wonder what happened.

International marketing is necessary because, from a national standpoint, economicisolationism has become impossible. Failure to participate in the global marketplaceassures a nation of declining economic capability and its citizens of a decrease in theirstandard of living. Successful international marketing, however, holds the promise of animproved quality of life, a better society, more efficient business transactions, and even amore peaceful world, as The International Marketplace 1.1 highlights.

This chapter is designed to increase your awareness of what international marketing isabout. It describes current levels of world trade activities, projects future developments,and discusses the repercussion on countries, institutions, and individuals worldwide. Boththe opportunities and the threats that spring from the global marketplace are highlighted,and the need for an international marketing approach on the part of individuals andinstitutions is emphasized.

This chapter ends with an explanation of the major organizational thrust of this book,which is a differentiation between the beginning internationalist and the multinationalcorporation. This theme ties the book together by taking into account the concerns, ca-pabilities, and goals of firms that will differ widely based on their level of international ex-pertise, resources, and involvement. The approach to international marketing taken herewill therefore permit you to understand the entire range of international activities andallow you easily to transfer your acquired knowledge into practice.

What International Marketing Is

In brief, international marketing is the process of planning and conducting transactionsacross national borders to create exchanges that satisfy the objectives of individuals andorganizations. International marketing has forms ranging from exportimport trade tolicensing, joint ventures, wholly owned subsidiaries, turnkey operations, and manage-ment contracts.

As this definition indicates, international marketing very much retains the basic mar-keting tenets of satisfaction and exchange. International marketing is a tool used toobtain improvement of ones present position. The fact that a transaction takes placeacross national borders highlights the difference between domestic and international mar-keting. The international marketer is subject to a new set of macroenvironmental factors,to different constraints, and to quite frequent conflicts resulting from different laws, cul-tures, and societies. The basic principles of marketing still apply, but their applications,complexity, and intensity may vary substantially. It is in the international marketing fieldwhere one can observe most closely the role of marketing as a key agent of societalchange and as a key instrument for the development of societally responsive business

Part 1 The International Marketing Environment4

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Chapter 1 The Global Marketing Imperative 5

strategy. When we look, for example, at the emerging market economies of China andRussia, we can see the many new challenges confronting international marketing. Howdoes the marketing concept fit into these societies? How can marketing contribute to eco-nomic development and the improvement of society? How should distribution systems beorganized? How can we get the price mechanism to work? Similarly, in the internationalareas of social responsibility and ethics, the international marketer is faced with a multi-cultural environment with differing expectations and often inconsistent legal systemswhen it comes to monitoring environmental pollution, maintaining safe working condi-tions, copying technology or trademarks, or paying bribes.1 In addition, the long-termrepercussions of marketing actions need to be understood and evaluated in terms of theirsocietal impact. These are just a few of the issues that the international marketer needs toaddress. The capability to master these challenges successfully affords a company thepotential for new opportunities and high rewards.

The definition also focuses on international transactions. The use of the term recog-nizes that marketing internationally is an activity that needs to be pursued, often aggres-sively. Those who do not participate in the transactions are still exposed to internationalmarketing and subject to its changing influences. The international marketer is part of theexchange, and recognizes the constantly changing nature of transactions. This need foradjustment, for comprehending change, and, in spite of it all, for successfully carrying outtransactions highlights the fact that international marketing is as much art as science.

To achieve success in the art of international marketing, it is necessary to be firmlygrounded in its scientific aspects. Only then will individual consumers, policymakers, andbusiness executives be able to incorporate international marketing considerations intotheir thinking and planning. Only then will they be able to consider international issuesand repercussions and make decisions based on answers to questions such as:

Should I obtain my supplies domestically or from abroad?

What marketing adjustments are or will be necessary?

What threats from global competition should I expect?

How can I work with these threats to turn them into opportunities?

What are my strategic global alternatives?

If all these issues are integrated into each decision made by individuals and by firms,international markets can become a source of growth, profit, needs satisfaction, and qual-ity of life that would not have existed for them had they limited themselves to domesticactivities. The purpose of this book is to aid in this decision process.

The Importance of World Trade

World trade has assumed an importance heretofore unknown to the global community. Inpast centuries, trade was conducted internationally but never before did it have the broadand simultaneous impact on nations, firms, and individuals that it has today. Within fiveyears alone, world trade in merchandise has expanded from $6.2 trillion in 2000 to over$9 trillion in 2005. World trade in services has expanded from $1.5 trillion to $2.1 trillionin the same period of time. That represents a growth of nearly 150 percent for trade inboth merchandise and services!2 Such economic growth is exceptional, particularly since,as Exhibit 1.1 shows, trade growth on a global level has usually outperformed the growthof domestic economies in the past few decades. As a result, many countries and firmshave found it highly desirable to become major participants in international marketing.

The Iron Curtain has disintegrated, offering a vast array of new marketing opportunitiesalbeit amid uncertainty. Firms invest on a global scale, with the result that entire indus-tries shift their locations. International specialization and cross-sourcing have made pro-duction much more efficient. New technologies have changed the way we do business,allowing us to both supply and receive products from across the world by using theInternet. As a result, consumers, union leaders, policymakers, and sometimes even thefirms themselves are finding it increasingly difficult to define where a particular product

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6was made. There are trading blocs such as the European Union in Europe, NAFTA inNorth America, Mercosur in Latin America, and ASEAN in Asia. These blocs encouragetrade relations between their members, but, through their rules and standards, they alsoaffect the trade and investment flows of nonmember countries.

Individuals and firms have come to recognize that they are competing not onlydomestically but also globally. World trade has given rise to global linkages of markets,technology, and living standards that were previously unknown and unanticipated. At thesame time, it has deeply affected domestic policy-making and has often resulted in theemergence of totally new opportunities as well as threats to firms and individuals. TheInternational Marketplace 1.2 provides an example.

Global LinkagesWorld trade has forged a network of global linkages that bind us allcountries, institu-tions, and individualsmuch more closely than ever before. These linkages were firstwidely recognized during the worldwide oil crisis of 1970, but they continue to increase.A drought in Brazil and its effect on coffee production and prices are felt around theworld. The 2004 tsunami in the Indian Ocean resulted in massive casualties in SouthAsia, caused worldwide disruptions in manufacturing and trade, and devastated thetourism industry of many countries. For example, in the Maldives, which are locatedmore than 2,500 kilometers (1.6 kilometers 1 mile) from the quakes epicenter,tourism is the largest industry, contributing 30 percent of its GDP of $1.25 billion.3 Theindustry is estimated to have suffered at least $100 million of damage in addition toanother $250 million in business losses as an indirect result of the tsunami.4 The com-bined effects of hurricanes Katrina and Rita on the Gulf Coast of the United States in thefall of 2005 caused the production loss of nearly 75 million barrels of oil, or 13.6 percentof the annual oil production in the Gulf of Mexico. The result was a spike in the priceof gasoline worldwide, which raised the transportation costs for countless industries andbusinesses.5

These linkages have also become more intense on an individual level. Communicationhas built new international bridges, be it through music or international programstransmitted by CNN, BBC, Al Arabiya, and other networks. New products have attained

Part 1 The International Marketing Environment

PercentChange

Year1997 1998 1999 2000

Growth in World Trade

2001 2002 2003 2004 2005 2006

Real GDP

0

2

4

6

8

10

12

14

Growth of World Output in Trade (19972006)

1.1Exhibit

SOURCE: International Monetary Fund, World Economic Outlook 2005, Statistical Appendix, 205, 233.

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Public discussion has long highlighted companies thatoutsource their manufacturing facilities or their technicalsupport call centers.When outsourcing first began, manylawmakers and citizens were worried about the loss ofproduction jobs within the United States. Companiesargued that while some jobs may be lost, other moreskilled and higher paying jobs would emerge.Today,however, companies are outsourcing informationtechnology, software support and, most importantly,their innovation.

In October 2005, General Motors announced that itwould open its newest research and development facilityin Russia.According to the United Nations Conferenceon Trade and Development, GM has the sixth-largestresearch and development budget of any company in theworld, annually spending $5 billion on R & D alone. Itsresearch and development branch has historically beenheadquartered in Warren, Michigan, but the supply oftechnical expertise and engineering knowledge the carmaker needs today is more available in countries such asIndia, Brazil, and Russia.

Similarly, global competition and time pressures forcethe pharmaceutical industry to speed up the develop-ment process while simultaneously cutting costs.TheItalian pharmaceutical company, Congenia, has outsourceda portion of its drug formulation capabilities to Indiansoftware giant Tata Consultancy Services Ltd. Previously,Tata had been used by many companies as a source oflow-cost computer services and support. Pfizer, anotherpharmaceutical company, which has a center in Mumbai,outsources chemical synthesis, drug development, drug

manufacturing, and even clinical trials.While all drugsthat companies plan to sell in the United States must beapproved at every step of the process by U.S. regulatoryagencies, companies are finding it cheaper and faster totake parts of the innovation process abroad.

U.S. and Western European companies are turning tocountries that have a technically educated population, butrelatively low levels of domestic capital. Initially, theseconditions offer low cost production facilities. However,as workers gain more experience in particular fields, theybecome poised to become the innovators themselves.HelloSoft, an Indian company providing technology forvoice-over-internet protocol communications, has raisedover $16 million from U.S. venture capitalists.

Industrialized countries have long recruited talent fromaround the world.Today, Indian and Eastern Europeanscientists, mathematicians, and engineers no longer needto emigrate, but can work from their home countries.Governments and companies must learn to adapt to achanging global technology-intensive climate in whichmost projects can be completed by teams from aroundthe world and seamlessly combined into a final product.Lawmakers, workers, and consumers need to changetheir policies and outlooks on outsourcing in order for acountry to stay globally competitive. Otherwise,innovation will not just be outsourced, it will be comingfrom entirely different regions of the world.

SOURCES: Hamm, Steve,Scrambling up the Development Ladder,Business Week, August 22/29 2005, 112; Smolchenko,Anna,GM to OpenRussian R&D Center, The Moscow Times, Issue 3280, October 24, 2005, 7.

Outsourcing Innovation?


international appeal and encouraged similar activities around the worldwhere many ofus wear jeans, dance to the same music on our iPods, and eat kebobs, curry, and sushi.Transportation linkages let individuals from different countries see and meet each otherwith unprecedented ease. Common cultural pressures result in similar social phenomenaand behaviorfor example, more dual-income families are emerging around the world,which leads to more frequent, but also more stressful, shopping.6

World trade is also bringing about a global reorientation of corporate processes, whichopens up entirely new horizons. Never before has it been so easy to gather, manipulate,analyze, and disseminate informationbut never before has the pressure been so great todo so. Ongoing global technological innovation in marketing has direct effects on theefficiency and effectiveness of all business activities. Products can be produced morequickly, obtained less expensively from sources around the world, distributed at lowercost, and customized to meet diverse clients needs. As an example, only a decade ago, itwould have been thought impossible for a firm to produce parts for a car in more thanone country, assemble the car in yet another country, and sell it in still other nations.

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Today, such global investment strategies coupled with production and distribution shar-ing are becoming a matter of routine. Of course, as The International Marketplace 1.2explains, these changes increase the level of global competition, which in turn makes itan ongoing effort if one wants to stay in a leadership position.

Advances in technology also allow firms to separate their activities by content and con-text. Firms can operate in a market space rather than a marketplace7 by keeping thecontent while changing the context of a transaction. For example, a newspaper can nowbe distributed online globally rather than house-to-house on paper, thereby allowing out-reach to entirely new customer groups.

The level of global investment is at an unprecedented high. The shifts in financial flowshave had major effects. They have resulted in the buildup of international debt by gov-ernments, affected the international value of currencies, provided foreign capital for firms,and triggered major foreign direct-investment activities. For example, well over one-thirdof the workers in the U.S. chemical industry toil for foreign owners. Many of the officebuildings Americans work in are owned by foreign landlords. The opening of plants cantake the place of trade. All these developments make us more and more dependent onone another.

This interdependence, however, is not stable. On almost a daily basis, realignmentstaking place on both micro and macro levels make past trade orientations at least partiallyobsolete. For example, for the first 200 years of its history, the United States looked toEurope for markets and sources of supply. Today, U.S. two-way trade with Asia far out-paces U.S. trade with Europe.

Not only is the environment changing, but the pace of change is accelerating as well.Ataris Pong was first introduced in the early 1980s; today, action games and movies aremade with computerized humans. The first office computers emerged in the mid-1980s;today, home computers have become commonplace. E-mail was introduced to a massmarket only in the 1990s; today, many college students hardly ever send personal notesusing a stamp and envelope.8

These changes and the speed with which they come about significantly affect coun-tries, corporations, and individuals. One change is the role participants play. For example,the United States accounted for nearly 25 percent of world merchandise exports in the1950s, but by 2005 this share had declined to less than 9 percent. Also, the way countriesparticipate in world trade is shifting. In the past two decades the role of primary com-modities in international trade has dropped precipitously, while the importance of manu-factured goods has increased. The increase in the volume of services trade has been evenhigher. In a few decades, international services went from being a nonmeasured activityto a global volume of more than $2.1 trillion in 2005.9 Exhibit 1.2 shows how substantialthe growth rates for both merchandise and services trade have been. Most important, thegrowth in the overall volume and value of both merchandise and services trade has hada major impact on firms, countries, and individuals.

Domestic Policy RepercussionsThe effects of closer global linkages on the economics of countries have been dramatic.Policymakers have increasingly come to recognize that it is very difficult to isolatedomestic economic activity from international market events. Decisions that once wereclearly in the domestic purview have now become subject to revision by influences fromabroad, and domestic policy measures are often canceled out or counteracted by theactivities of global market forces.

A lowering of interest rates domestically may make consumers happy or may be polit-ically wise, but it quickly becomes unsustainable if it results in a major outflow of fundsto countries that offer higher interest rates. Agricultural and farm policies, which histori-cally have been strictly domestic issues, are suddenly thrust into the international realm.Any policy consideration must now be seen in light of international repercussions due toinfluences from global trade and investment.

To some extent, the economic world as we knew it has been turned upside down.For example, trade flows traditionally have been used to determine currency flows and


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therefore the level of the exchange rate. In the more recent past, currency flows took on alife of their own. Independent of trade, they set exchange rates, which are the values ofcurrencies relative to each other. These exchange rates in turn have now begun to deter-mine the level of trade. Governments that wish to counteract these developments withmonetary policies find that currency flows outnumber trade flows by 100 to 1. Also,private-sector financial flows vastly outnumber the financial flows that can be marshaledby governments, even when acting in concert. Similarly, constant rapid technologicalchange and vast advances in communication permit firms and countries to quickly emu-late innovation and counteract carefully designed plans. As a result, governments are oftenpowerless to implement effective policy measures, even when they know what to do.

Policymakers therefore find themselves with increasing responsibilities yet with fewerand less effective tools to carry out these responsibilities. At the same time that more partsof a domestic economy are vulnerable to international shifts and changes, these parts arebecoming less controllable. The global market imposes increasingly tight limits on na-tional economic regulation and sovereignty.

To regain some of their power to influence events, policymakers have sought to restrictthe impact of global trade and financial flows by erecting barriers, charging tariffs, de-signing quotas, and implementing other import regulations. However, these measures toohave been restrained by international agreements that regulate trade restrictions, particu-larly through the World Trade Organization (WTO) (http://www.wto.org). Global trade hastherefore changed many previously held notions about nation-state sovereignty and ex-traterritoriality. The same interdependence that has made us more affluent has also left usmore vulnerable. Because this vulnerability is spread out over all major trading nations,however, some have credited international marketing with being a pillar of internationalpeace, as The International Marketplace 1.1 showed. Clearly, closer economic relationscan result in many positive effects. At the same time, however, interdependence bringswith it risks, such as dislocations of people and economic resources and a decrease in anations capability to do things its own way. Given the easeand sometimes thedesirabilityof blaming a foreign rather than a domestic culprit for economic failure, itmay well also be a key task for the international marketer to stimulate societal thinkingabout the long-term benefits of interdependence.

PercentageGrowth

Countries

0

200

400

600

800

1000

AfricaEU 15*UnitedStates

JapanIndiaChinaBrazilAustralia

ServicesMerchandise

1199414010897 129

760

321

980

856

210207152

117161 156

*Report for 2003

Key

Changes in Exports (19902004)

1.2Exhibit

* Report for 2003

SOURCE: WTO Statistics Database, accessed November 20, 2005

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Opportunities and Challenges in International Marketing

To prosper in a world of abrupt changes and discontinuities, of newly emerging forces anddangers, of unforeseen influences from abroad, firms need to prepare themselves and de-velop active responses. New strategies need to be envisioned, new plans need to be made,and the way of doing business needs to be changed. The way to obtain and retain leader-ship, economically, politically, or morally, isas the examples of Rome, Constantinople,and London have amply demonstratednot through passivity but rather through a contin-uous, alert adaptation to the changing world environment. To help a country remain aplayer in the world economy, governments, firms, and individuals need to respondaggressively with innovation, process improvements, and creativity.10

The growth of global business activities offers increased opportunities. Internationalactivities can be crucial to a firms survival and growth. By transferring knowledge aroundthe globe, an international firm can build and strengthen its competitive position. Firmsthat heavily depend on long production runs can expand their activities far beyond theirdomestic markets and benefit from reaching many more customers. Market saturation canbe avoided by lengthening or rejuvenating product life cycles in other countries. Produc-tion sites once were inflexible, but now plants can be shifted from one country to anotherand suppliers can be found on every continent. Cooperative agreements can be formedthat enable all parties to bring their major strengths to the table and emerge with betterproducts, services, and ideas than they could produce on their own. In addition, researchhas found that multinational corporations face a lower risk of insolvency and pay higherwages than do domestic companies.11 For example, in the United States, jobs supportedby goods exports pay 1316 percent above the average wage.12 At the same time, inter-national marketing enables consumers all over the world to find greater varieties of prod-ucts at lower prices and to improve their lifestyles and comfort.13

International opportunities require careful exploration. What is needed is an awarenessof global developments, an understanding of their meaning, and a development of capa-bilities to adjust to change. Firms must adapt to the international market if they are to besuccessful.

One key facet of the marketing concept is adaptation to the environment, particularlythe market. Even though many executives understand the need for such an adaptation intheir domestic market, they often believe that international customers are just like theones the firm deals with at home. It is here that many firms commit grave mistakes thatlead to inefficiency, lack of consumer acceptance, and sometimes even corporate failure.As The International Marketplace 1.3 explains, there are quite substantial differences inthis world between consumer groups.

Firms increasingly understand that many of the key difficulties encountered in doingbusiness internationally are marketing problems. Judging by corporate needs, a back-ground in international marketing is highly desirable for business students seeking em-ployment, not only for today but also for long-term career plans.

Many firms do not participate in the global market. Often, managers believe that inter-national marketing should only be carried out by large multinational corporations. It is truethat there are some very large players from many countries active in the world market. Butsmaller firms are major players, too. For example, 50 percent of German exports are createdby firms with 19 or fewer employees.14 Nearly 97 percent of U.S. exporters are small andmedium-sized enterprises, with two-thirds of U.S. exporters having less than 20 employ-ees.15 Increasingly we find smaller firms, particularly in the computer and telecommunica-tions industries, that are born global, since they achieve a worldwide presence within avery short time.16

Those firms and industries that are not participating in the world market have torecognize that in todays trade environment, isolation has become impossible. Willing orunwilling, firms are becoming participants in global business affairs. Even if not by choice,most firms and individuals are affected directly or indirectly by economic and politicaldevelopments that occur in the international marketplace. Those firms that refuse to


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participate are relegated to react to the global marketplace and therefore are unpreparedfor harsh competition from abroad.

Some industries have recognized the need for international adjustments. Farmersunderstand the need for high productivity in light of stiff international competition. Carproducers, computer makers, and firms in other technologically advanced industries havelearned to forge global relationships to stay in the race. Firms in the steel, textile, andleather sectors have shifted production, and perhaps even adjusted their core business, inresponse to overwhelming onslaughts from abroad. Other industries in some countrieshave been caught unaware and have been unable to adjust. The result is the extinction offirms or entire industries, such as VCRs in the United States and coal mining and steelsmelting in other countries.

The Goals of This Book

This book aims to make you a better, more successful participant in the international mar-ketplace by providing information about what is going on in international markets and byhelping you to translate knowledge into successful business transactions. By learningabout both theory and practice, you can obtain a good conceptual understanding of thefield of international marketing as well as become firmly grounded in the realities of theglobal marketplace. Therefore, this book approaches international marketing in the waythe manager of a firm does, reflecting different levels of international involvement and theimportance of businessgovernment relations.

Firms differ widely in their international activities and needs, depending on their levelof experience, resources, and capabilities. For the firm that is just beginning to enter theglobal market, the level of knowledge about international complexities is low, thedemand on time is high, expectations about success are uncertain, and the internationalenvironment is often inflexible. Conversely, for a multinational firm that is globally

Global Consumers in the New Century


In Canada he will share one square mile with eight otherpeople.

In Italy she will be living in a city, as 90 percent of thepopulation does.

The Baby of the Less-Developed World:

In Sierra Leone she will live to the age of 36, while hewill live to the age of 34.

In Niger there is a 20 percent chance that she will useadequate sanitation.

In Uganda her family income is likely to be about $1,360.

In China he will share one square mile with 352 otherpeople.

In India she will be living in a rural area, as 72 percent ofthe population does.

SOURCE: Population Reference Bureau, Data Finder,http://www.prb.org/, accessed March 4, 2005.

One of the drivers behind the move toward globalmarketing strategies has been the notion that consumerneeds are becoming more alike around the world.Yetdrastic differences in the development of various regionsof the world remain, and they are bound to continue wellinto the new century.

Such differences warrant differentiation in both marketingand pricing strategies. Here are just a few examples ofwhat a baby in the Western world and a baby in the less-developed world may face upon birth.

The Western Baby:

In Switzerland she will live to the age of 83, while he willlive to the age of 77.

In the Netherlands there is a 100 percent chance thatshe will use adequate sanitation.

In the United States her familys income will likely bearound $36,110 per annum.

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JAMAICAHAITI

GUATEMALAEL SALVADOR

COSTA RICA

PANAMA

CANADA

UNITED STATES

CUBA

VENEZUELA

COLOMBIA

GUYANASURINAME

FRENCH GUIANA

ECUADOR

BRAZIL

BOLIVIA

PERU

CHILE

URUGUAY

GREEN(DENM

NICARAGUA

HONDURAS

U. S.

DOMINICAN REPUBLIC

ARGENTINA

PARAGUAY

MEXICO

Total Gross Domestic Productby Region

(in billions of U.S. $)United States

Japan

East Asia and Pacific

China and India

Latin America and Caribbean

Europe and Central Asia

Canada

South Asia

Middle East and North Africa

Sub-Saharan Africa

$4,301

$10,949*

$2,033

$2,018

$1,741

$1,403

$857

$765

$745

$439

*http://www.bea.doc.gov (accessed March 3, 2003).SOURCE: Based on The Little Data Book 2002, The World Bank.

International Trade as a Percentage of Gross Domestic Product

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MOROCCO

ALGERIA LIBYA EGYPT

TUNISIA

WESTERNSAHARA

MAURITANIA MALINIGER

CHAD SUDAN DJIBOUTISENEGAL

GAMBIAGUINEA-BISSAU GUINEA

SIERRA LEONELIBERIA

CTE DIVOIRE

NIGERIA

CAMEROON

CENTRAL AFRICAN REP.

GABONRWANDA

BURUNDIDEM. REP. OFTHE CONGO

UGANDAKENYA

ANGOLAZAMBIA

MALAWIZIMBABWE

BOTSWANA

SWAZILAND

LESOTHO

SOUTHAFRICA

LEBANONISRAEL

JORDAN

SYRIA

QATARBAHRAIN

IRAN

NLANDMARK)

KAZAKHSTAN

SAUDI ARABIA

BURKINAFASO

TANZANIA

EQUATORIALGUINEA

CYPRUS

BENINTOGO

GEORGIAARMENIA

TURKEY

ERITREA

UNITEDKINGDOMIRELAND

SPAIN

FRANCE

BELG.

NETH.

DEN.

GERMANY

ICELANDFINLAND

SWITZ.AUS.

GREECE

LUX.

POLAND

EST.

LATVIA

LITH.

BELARUS

UKRAINECZECH.REP.MOLDOVA

ROMANIAHUNG.

BULG.ALB.

PORTUGAL

SLOVAKIA

NAMIBIA

ETHIOPIA

OMAN

IRAQKUWAIT

KYRGYZSTANTAJIKISTAN

BHUTAN

INDIA

BANGLADESH

MYANMAR

THAILAND

LAOS

CAMBODIAVIETNAM

BRUNEI

SINGAPORE

M A L A Y S I A

TAIWAN

CHINA JAPAN

MONGOLIA

PHILIPPINES

NORTHKOREA

SOUTHKOREA

AUSTRALIA

NEWZEALAND

RUSSIA

PAPUANEW GUINEA

SRILANKA

AZERBAIJAN

U. A. E.

MADAGASCAR

I N D O N E S I AI N D O N E S I A

Exports + Imports GDP

= International Trade Percentage

ITALY

GHANA

CONGO

MOZAMBIQUE

SOMALIA

YEMEN

TURKMENISTAN

AFGHANISTAN

PAKISTAN

UZBEKISTAN

NEPAL

SWEDENNORWAY

UNITEDKINGDOM

IRELAND

SPAIN

FRANCE

BELG.

NETH.

DEN.

GERMANY

ICELAND

FINLAND

SWITZ. AUSTRIA

LUX.

POLAND

EST.

LATVIA

LITH.

RUSSIA

BELARUS

UKRAINECZECHREP.

MOLDOVA

ROMANIA

BULG.

ALB.PORTUGAL

TURKEY

MACE.

SLOVENIACROATIA

BOSNIA-HERZEGOVINA

GREECE

YUGO.

HUNG.

ITALY

SLOVAKIA

NORWAY

SWEDEN

0% to 20%21% to 40%41% to 60%61% to 80%81% to 100%greater than 100%

No current data available

Trade as a Percentage of GDP

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oriented and employs thousands of people on each continent, much more leeway existsin terms of resource availability, experience, and information. In addition, the multina-tional firm has the option of responding creatively to the environment by shiftingresources or even shaping the environment itself. For example, the heads of large corpo-rations have access to government ministers to plead their case for a change in policy, analternative that is rarely afforded to smaller firms.

To become a large international corporation, however, a firm usually has to start outsmall. Similarly, to direct far-flung global operations, managers first have to learn the ba-sics. The structure of this text reflects this reality by presenting initially a perspective ofthe business environment, which covers national marketing and policy issues and theircultural, economic, financial, political, and legal dimensions.

Subsequently, the book discusses in detail the beginning internationalization of thefirm. The emphasis is on the needs of those who are starting out and the operationalquestions that are crucial to success. Some basic yet essential issues addressed are: Whatis the difference between domestic and international marketing? Does the applicability ofmarketing principles change when they are transferred to the global environment? Howdo marketers find out whether there is a market for a product abroad without spending afortune in time and money on research? How can the firm promote its products in foreignmarkets? How do marketers find and evaluate a foreign distributor, and how do theymake sure that their firm gets paid? How can marketers minimize government red tape yettake advantage of any governmental programs that are of use to them?

These questions are addressed both conceptually and empirically, with a strong focuson export and import operations. We will see how the international commitment is de-veloped and strengthened within the firm.

Once these important dimensions have been covered, we make the transition to themultinational corporation. The focus is now on the transnational allocation of resources,the coordination of multinational marketing activities, and the attainment of global syner-gism. Finally, emerging issues of challenge to both policymakers and multinational firms,such as countertrade, marketing to economies in transition, and the future outlook of theglobal market, are discussed.

All the marketing issues are considered in relation to national policies so as to famil-iarize you with the divergent forces at play in the global market. Governments increasedawareness of and involvement with international marketing require managers to be awareof the role of governments and also to be able to work with them in order to attain mar-keting goals. Therefore, the continued references in the text to businessgovernmentinteraction demonstrate a vital link in the development of international marketing strategy.In addition, we give full play to the increased ability of firms to communicate with aglobal market. Therefore, we develop and offer, for firms both small and large, our ideasand strategies for viable participation in electronic commerce.

We expect that this gradual approach to international marketing will permit you notonly to master another academic subject, but also to become well versed in both the op-erational and the strategic aspects of the field. The result should be a better understand-ing of how the global market works and the capability to participate in the internationalmarketing imperative.


Summary

Over the last few decades, international trade in mer-chandise has expanded at astounding rates to reach over$9 trillion in 2005. In addition, trade in services hasgrown at particularly high rates within the last decade toreach $2.1 trillion in 2005. As a result, nations are muchmore affected by international business than in thepast. Global linkages have made possible investment

strategies and marketing alternatives that offer tremen-dous opportunities. Yet these changes and the speed ofchange also can represent threats to nations and firms.

On the policy front, decision makers have come to re-alize that it is very difficult to isolate domestic economicactivity from international market events. Factors such ascurrency exchange rates, financial flows, and foreign

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Key Terms

international marketingglobal linkages

currency flowsexchange rates

Questions & Discussion

1. What are the recent trends in world trade? Willexpansion of world trade in the future follow thesetrends?

2. Does increased world trade mean increased risk?3. What impact do global linkages have on firms and

consumers?

4. Can you think of examples of internationalmarketing contributing to world peace?

5. Describe some opportunities and challenges ininternational marketing created by new advancesin information technology.

Internet Exercises

1. Using World Trade Organization data (http://www.wto.org), identify the following: (a) thetop ten exporting and importing countries in worldmerchandise trade and (b) the top ten exportingand importing countries of commercial services.

2. Please compare the top ten exporting countries toeach other. Highlight similarities and differences;

considering factors such as geographic location,population, Gross Domestic Product, and inflation.Financial indicators are available online from theWorld Bank, World Trade Organization, andInternational Monetary Fund.

economic actions increasingly render the policymakerpowerless to implement a domestic agenda. Interna-tional interdependence, which has contributed to greateraffluence, has also increased our vulnerability.

Both firms and individuals are greatly affected byinternational trade. Whether willing or not, they areparticipating in global business affairs. Entire industrieshave been threatened in their survival as a result of inter-national trade flows and have either adjusted to new mar-ket realities or left the market. Some individuals have losttheir workplace and experienced reduced salaries. At thesame time, global business changes have increased the

opportunities available. Firms can now reach many morecustomers, product life cycles have been lengthened,sourcing policies have become variable, new jobs havebeen created, and consumers all over the world can findgreater varieties of products at lower prices.

To benefit from the opportunities and deal withthe adversities of international trade, business needsto adopt the international marketing concept. The newset of macroenvironmental factors has to be under-stood and responded to in order to let internationalmarkets become a source of growth, profit, and needssatisfaction.

Notes

1. Robert W. Armstrong and Jill Sweeney, Industrial Type, Culture,Mode of Entry, and Perceptions of International Marketing EthicsProblems: A Cross-Culture Comparison, Journal of BusinessEthics 13, 10: 775785.

2. World Trade Organization, http://www.wto.org, StatisticsDatabase, accessed November 20, 2005.

3. CIA, The World Factbook,http://www.cia.gov/cia/publications/factbook/index.html,accessed December 1, 2005.

4. UNEP 2005 (quoted inhttp://student.ulb.ac.be/~nroeck/index_files/Page2550.html),accessed October 17, 2005.

Recommended Readings

Friedman, Benjamin. The Moral Consequences ofEconomic Growth. New York: Knopf, 2005.

Friedman, Thomas. The World Is Flat. New York: Farrar,Straus, and Giroux, 2005.

Prestowitz, Clyde. Three Billion New Capitalists: TheShift of Wealth and Power to the East. New York:Basic Books, 2005.

Stiglitz, Joseph. Globalization and Its Discontents. NewYork: W. W. Norton, 2003.

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5. Mineral Management Services Report, http://www.mms.gov/ooc/press/2005/press1031.htm, accessed October 17, 2005.

6. Eugene H. Fram and Riad Ajami, Globalization of Markets and Shopping Stress: Cross-Country Comparisons, BusinessHorizons (JanuaryFebruary 1994): 1723.

7. John J. Sviokla and Jeffrey F. Rayport, Mapping theMarketspace: Information Technology and the New MarketingEnvironment, Harvard Business School Bulletin 71 (June 1995):4951.

8. Michael R. Czinkota and Sarah McCue, The STAT-USA Companionto International Business, Economics and Statistics Admin-istration (U.S. Department of Commerce, Washington, DC,2001), 16.

9. World Trade Organization, International Trade Statistics 2005,http://www.wto.org.

10. Peter R. Dickson and Michael R. Czinkota, How the U.S. CanBe Number One Again: Resurrecting the Industrial PolicyDebate, The Columbia Journal of World Business 31, 3 (Fall1996): 7687.

11. Howard Lewis III and J. David Richardson, Why GlobalCommitment Really Matters (Washington, DC: Institute forInternational Economics, 2001).

12. World Trade Organization, http://www.wto.org/english/thewto_e/minist_e/min99_e/english/about_e/ 22fact_e.htm,accessed December 15, 2005.

13. Czinkota, Michael R., Freedom and International Marketing:Janis Joplins Candidacy as Patron of the Field, ThunderbirdInternational Business Review, 47 (1), JanuaryFebruary 2005:113.

14. Cognetics, Cambridge, MA, 1993.15. Small & Medium-Sized Exporting Companies: Statistical

Overview, 2003, http://ita.doc.gov/td/industry/otea/sme_handbook/SME_index.htm, accessed December 15, 2005.

16. Michael Kutschker, Internationalisierung der Wirtschaft,Perspektiven der Internationalen Wirtschaft, Wiesbaden, GablerGmbH, 1999: 22.

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Basics of Marketing

This appendix provides a summary of the basicconcepts in marketing for the reader whowishes to review them before applying themto international marketing. The American

Marketing Association defines marketing as an organiza-tional function and a set of processes for creating, com-municating, and delivering value to customers, and formanaging customer relationships in ways that benefit theorganization and its stake-holders.1

It is useful to focus on the definitions components tofully understand its meaning. Marketing as an organiza-tional function interprets it as part of a thrust that givesdirection to a unit. Set of processes highlights the idea thatthe activity goes beyond a single transaction. Creating,communicating, and delivering emphasizes that the mar-keting discipline takes leadership in its activities from be-ginning to end and that the art and the practical imple-mentation dimensions of the discipline are crucial in theirsimultaneity. Value to customers indicates the core focusof marketing. Physicians have as their overriding princi-ple the Hippocratic Oath do no harm. Marketers shouldconsider any action under the prism of are customersbetter off ? Managing customer relationships in turn indi-cates the dyadic aspects of marketingthere is an inter-action between the firm and the customers, as well as therelationships among the customers themselves. It is mar-ketings responsibility to handle both types of relation-ship. Customers need to be content in their assessment ofthe rapport they have with the firm. However, they alsocontinue to be part of a network that is defined by theirinteraction with fellow customers. Since marketers will bemajor influencers on this relationship they need to takeinto account the repercussions that their actions are likelyto have on these linkages. The term relationship is key,since it is indicative of the fact that actions build uponeach other and are instrumental in forging bonds andinflaming disagreements. The marketer therefore cannotsee any product or effort as an isolated event. Rather ithas to be understood as a component of an entire seriesof steps that define the bridge between entities. Usingthis perspective, marketing has a very broad mission. Thediscipline is not narrowly confined to relationships thatemerge when money is exchanged for goods. Rather,marketing has its application just as well when there isperformance of a service (say, coaching Little League orfundraising for a charity) in exchange for obtaining agood feeling and a sense of fulfillment.

The fact that marketing is to benefit the organiza-tion is critical. Marketing needs to be seen, after all, inthe context of a planned and purposeful activity. Itseeks a definite, favorable outcome for the institutionconducting the marketing pursuit. Again, it is importantto recognize that this benefit need not be seen strictlyin terms of mammon. Rather, the organization itself isthe one that defines what it determines to be benefi-cial. Therefore, there is ample room for both macrobenefits such as more positive images of our country,as well as micro benefits such as increase desire to goto work, in addition to the business benefits custom-arily seen to be in the purview of organizations. As aresult, marketing finds a full range of applicability innot-for-profit areas, such as medicine, the arts, or gov-ernment areas typically wrongfully excluded from theneed for marketing. The use of the term stakeholder isalso indicative of this breadth of marketing in that itgives recognition to others who have an interest in eitherthe process or the outcome of marketing activities.

As you can see, this definition packs a lot of punch,and lets marketing make a major contribution to thewelfare of individuals and organizations. Nevertheless,based on our view of marketing, we will expand thisdefinition on several dimensions. First, we believe thatthe terms create, deliver and value overemphasize trans-actions as one-time events. Therefore, we add the termsmaintain and value stream to highlight the long-termnature of marketing that encourages customers to con-tinue to come back. We also believe that, as the scope ofmarketing is broadened, societal goals need to be addedto individuals and organizations, properly reflecting theoverarching reach and responsibility of marketing as asocial change agent that responds to and develops socialconcerns about the environment, technology, and ethics.Equally important is the need to specifically broaden our marketing understanding beyond national borders.Today, sourcing and supply linkages exist around theglobe, competition emerges from all corners of the earth,and marketing opportunities evolve worldwide. As a re-sult, many crucial dimensions of marketing need to bereevaluated and adapted in a global context.

Based on these considerations, our expanded defini-tion of marketing is an organizational function and aset of process for creating, communicating, delivering,and maintaining value streams to customers and formanaging customer relationships in ways that benefit the

AAppendix

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organization, its stakeholder, and society in the contextof a global environment.2

The concepts of satisfaction and exchange are at thecore of marketing. For an exchange to take place, two ormore parties must come together in person, through themail, or through technology, and they must communi-cate and deliver things of perceived value. Potential cus-tomers should be perceived as information seekers whoevaluate marketers efforts in terms of their own drivesand needs. When the offering is consistent with theirneeds, they tend to choose the product; if it is not, theychoose other alternatives. A key task of the marketer isto recognize the ever-changing nature of needs andwants. Increasingly, the goal of marketing has been ex-panded from sensing, serving, and satisfying individualcustomers to taking into consideration the long-term in-terests of society.

Marketing is not limited to business entities but involvesgovernmental and nonbusiness units as well. Marketingtechniques are applied not only to goods but also to ideas(for example, the Made in the U.S.A. campaign) and toservices (for example, international advertising agencies).The term business marketing is used for activities directedat other businesses, governmental entities, and varioustypes of institutions. Business marketing accounts for wellover 50 percent of all marketing activities.

Strategic Marketing

The marketing managers task is to plan and executeprograms that will ensure a long-term competitive ad-vantage for the company. This task has two integralparts: (1) the determining of specific target markets and(2) marketing management, which consists of manipulat-ing marketing mix elements to best satisfy the needsof individual target markets.

Target Market SelectionCharacteristics of intended target markets are of criticalimportance to the marketer. These characteristics canbe summarized by eight Os: occupants, objects, occa-sions, objectives, outlets, organization, operations, andopposition.3

Occupants are targets of the marketing effort. Themarketer must determine which customers to approachand also define them along numerous dimensions, suchas demographics (age, sex, and nationality, for exam-ple), geography (country or region), psychographics(attitudes, interests, and opinions), or product-relatedvariables (usage rate and brand loyalty, for example).Included in this analysis must be the major influences onthe occupants during their buying processes.

Objects are what is being bought at present to satisfy a particular need. Included in this concept are physicalobjects, services, ideas, organizations, places, and persons.

Occasions are moments when members of the targetmarket buy the product or service. This characteristic isimportant to the marketer because a products consump-tion may be tied to a particular time periodfor exam-ple, imported beer and a festival.

Objectives are the motivations behind the purchase oradoption of the marketed concept. A computer manufac-turer markets not hardware but solutions to problems.Additionally, many customers look for hidden value in theproduct they purchase, which may be expressed, for ex-ample, through national origin of the product or throughbrand name.

Outlets are places where customers expect to be ableto procure a product or to be exposed to messages aboutit. Outlets include not only the entities themselves butalso location within a particular place. Although asepticpackaging made it possible to shelve milk outside therefrigerated area in supermarkets, customers acceptanceof the arrangement was not automatic: the product wasnot where it was supposed to be. In the area of services,outlet involves (1) making a particular service availableand communicating its availability, and (2) selectingthe particular types of facilitators (such as brokers) whobring the parties together.

Organization describes how the buying or acceptanceof a (new) idea takes place. Organization expands theanalysis beyond the individual consumer to the decision-making unit (DMU). The DMU varies in terms of its sizeand its nature from relatively small and informal groupslike a family to large groups (more than ten people) toformal buying committees. Compare, for example, thedifferences between a family buying a new home-entertainment center and the governing board at auniversity deciding which architectural firm to use. Ineither case, to develop proper products and services, themarketer should know as much as possible about thedecision-making processes and the roles of variousindividuals.

Operations represent the behavior of the organizationbuying products and services. Increasingly, industrial or-ganizations are concentrating their purchases with fewersuppliers and making longer-term commitments. Super-markets may make available only the leading brands in aproduct category, thereby complicating the marketersattempts to place new products in these outlets.

Opposition refers to the competition to be faced in themarketplace. The nature of competition will vary from di-rect product-type competition to competition from otherproducts that satisfy the same need. For example, Princetennis rackets face a threat not only from other racketmanufacturers but also from any company that providesa product or service for leisure-time use. Competitive sit-uations will vary from one market and from one segmentto the next. Gillette is number one in the U.S. market fordisposable razors, with Bic a distant runner-up; however,elsewhere, particularly in Europe, the roles are reversed.In the long term, threats may come from outside the

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Chapter 1 Appendix A: Basics of Marketing 19

industry in which the marketer operates. As an example,digital watches originated in the electronics industryrather than the watch industry.

Analyzing the eight Os, and keeping in mind otheruncontrollable factors in the environment (cultural,political, legal, technological, societal, and economic),the marketer must select the markets to which efforts willbe targeted. In the short term, the marketer has to adjustto these environmental forces; in the long term, they canbe manipulated to some extent by judicious marketingactivity. Consumerism, one of the major forces shapingmarketing activities, is concerned with protecting theconsumer whenever an exchange relationship existswith any type of organization. Manifestations of theimpact of consumerism on marketing exist in labeling,product specifications, promotional campaigns, recyclingexpectations, and demands for environmentally friendlyproducts.

Because every marketer operates in a corporate envi-ronment of scarcity and comparative strengths, the targetmarket decision is a crucial one. In some cases, themarketer may select only one segment of the market(for example, motorcycles of 1,000 cc) or multiple seg-ments (for example, all types of motorized two-wheeledvehicles), or the firm may opt for an undifferentiatedproduct that is to be mass-marketed (for example,unbranded commodities or products that satisfy thesame need worldwide, such as Coca-Cola).

Marketing ManagementThe marketing manager, having analyzed the character-istics of the target market(s), is in a position to specifythe mix of marketing variables that will best serve eachtarget market. The variables the marketing manager con-trols are known as the elements of the marketing mix, orthe four Ps: product, price, place, and promotion.4 Eachconsists of a submix of variables, and policy decisionsmust be made on each.

Product policy is concerned with all the elements thatmake up the good, service, or idea that is offered by themarketer. Included are all possible tangible characteris-tics (such as the core product and packaging) and intan-gible characteristics (such as branding and warranties).Many products are a combination of a concrete productand the accompanying service; for example, in buyingan Otis elevator, the purchaser buys not only the prod-uct but an extensive service contract as well.

Pricing policy determines the cost of the product to thecustomera point somewhere between the floor createdby the costs to the firm and the ceiling created by thestrength of demand. An important consideration of pric-ing policy is pricing within the channel of distribution;margins to be made by the middlemen who assist in themarketing effort must be taken into account. Discounts tomiddlemen include functional, quantity, seasonal, andcash discounts, as well as promotional allowances. An

important point to remember is that price is the only rev-enue-generating element of the marketing mix.

Distribution policy covers the place variable of themarketing mix and has two components: channel man-agement and logistics management. Channel manage-ment is concerned with the entire process of setting upand operating the contractual organization, consisting ofvarious types of middlemen (such as wholesalers,agents, retailers, and facilitators). Logistics managementis focused on providing product availability at appropri-ate times and places in the marketing channel.5 Place isthe most long term of all the marketing mix elements; itis the most difficult to change in the short term.

Communications policy uses promotion tools to inter-act with customers, middlemen, and the public at large.The communications element consists of these tools:advertising, sales promotion, personal selling, and pub-licity. Because the purpose of all communications is topersuade, this is the most visible and sensitive of themarketing mix elements.

Blending the various elements into a coherent pro-gram requires trade-offs based on the type of productor service being offered (for example, detergents versusfighter aircraft), the stage of the products life cycle (anew product versus one that is being revived), andresources available for the marketing effort (money andpersonnel), as well as the type of customer at whom themarketing efforts are directed.

The Marketing Process

The actual process of marketing consists of four stages:analysis, planning, implementation, and control.

Analysis begins with collecting data on the eight Osand using various quantitative and qualitative techniquesof marketing research. Data sources will vary from sec-ondary to primary, internal to external (to the company),and informal to formal. The data are used to determinecompany opportunities by screening a plethora of envi-ronmental opportunities. The company opportunitiesmust then be checked against the companys resourcesto judge their viability. The key criterion is competitiveadvantage.

Planning refers to the blueprint generated to react toand exploit the opportunities in the marketplace. Theplanning stage involves both long-term strategies andshort-term tactics. A marketing plan developed for aparticular market includes a situation analysis, objec-tives and goals to be met, strategies and tactics, andcost and profit estimates. Included in the activity is theformation of a new organizational structure or adjust-ments in the existing one to prepare for the executionof the plan.

Implementation is the actual carrying out of theplanned activity. If the plans drawn reflect market condi-tions, and if they are based on realistic assessments of

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the companys fit into the market, the implementationprocess will be a success. Plans must take into accountunforeseeable changes within the company and environ-mental forces, and allow for corresponding changes tooccur in implementing the plans.

For this reason, concurrently with implementation,control mechanisms must be put into effect. The market-place is ever dynamic and requires the monitoring of en-vironmental forces, competitors, channel participants,and customer receptiveness. Short-term control tools in-clude annual plan control (such as comparing actual salesto quota), profitability control, and efficiency control.

Long-term control is achieved through comprehensive orfunctional audits to make sure that marketing not only isdoing things right but is doing the right things. The resultsof the control effort provide valuable input for subse-quent planning efforts.

These marketing basics do not vary, regardless of thetype of market one is planning to enter or to continueoperating within. They have been called the technicaluniversals of marketing.6 The different environments inwhich the marketing manager must operate will givevarying emphases to the variables and will cause the val-ues of the variables to change.

Key Terms

marketingproduct policyprice

placepromotion toolsanalysis

planningimplementationcontrol mechanisms

Notes

1. Marketing Definitions, http://www.marketingpower.com/content4620.pho, accessed May 11, 2006.

2. Czinkota Michael R. and Masaaki Kotabe, MarketingManagement (3rd ed.), (Cincinnati: Atomic Dog Publishing,2005, 45.

3. Philip Kotler presents the eight Os in the eighth edition ofMarketing Management: Analysis, Planning, and Control(Englewood Cliffs, NJ: Prentice-Hall, 1994), 174175.

4. The four Ps were popularized originally by E. Jerome McCarthy.See William Perreault and E. Jerome McCarthy, Basic Marketing:A Global Managerial Approach, 15th ed. (Burr Ridge, IL: Irwin/McGraw-Hill, 2005).

5. Bert Rosenbloom, Marketing Channels: A Management View, 7th ed.(Mason OH: Thomson Business & Professional Publishing, 2003).

6. Robert Bartels, Are Domestic and International MarketingDissimilar? Journal of Marketing 36 (July 1968): 5661.

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Geographical Perspectiveson International Marketing

The globalization of business has made geogra-phy indispensable for the study of interna-tional marketing. Without significant attentionto the study of geography, critical ideas and in-

formation about the world in which business occurs willbe missing.

Just as the study of business has changed significantlyin recent decades, so has the study of geography. Onceconsidered by many to be simply a descriptive inventorythat filled in blank spots on maps, geography hasemerged as an analytical approach that uses scientificmethods to answer important questions.

Geography focuses on answering Where? questions.Where are things located? What is their distributionacross the surface of the earth? An old aphorism holds,If you can map it, its geography. That statement istrue, because we use maps to gather, store, analyze, andpresent information that answers Where? questions.Identifying where things are located is only the firstphase of geographic inquiry. Once locations have beendetermined, Why? and How? questions can be asked.Why are things located where they are? How do differ-ent things relate to one another at a specific place? Howdo different places relate to each other? How have geo-graphic patterns and relationships changed over time?These are the questions that take geography beyondmere description and make it a powerful approach foranalyzing and explaining geographical aspects of a widerange of different kinds of problems faced by those en-gaged in international marketing.

Geography answers questions related to the locationof different kinds of economic activity and the transac-tions that flow across national boundaries. It provides in-sights into the natural and human factors that influencepatterns of production and consumption in differentparts of the world. It explains why patterns of trade and

exchange evolve over time. And because a geographicperspective emphasizes the analysis of processes that re-sult in different geographic patterns, it provides a meansfor assessing how patterns might change in the future.

Geography has a rich tradition. Classical Greeks,medieval Arabs, enlightened European explorers, andcontemporary scholars in the United States and else-where have organized geographic knowledge in manydifferent ways. In recent decades, however, geographyhas become more familiar and more relevant to manypeople because emphasis has been placed on fivefundamental themes as ways to structure geographicquestions and to provide answers for those questions.Those themes are (1) location, (2) place, (3) interaction,(4) movement, and (5) region. The five themes are nei-ther exclusive nor exhaustive. They complement otherdisciplinary approaches for organizing information, someof which are better suited to addressing specific kinds ofquestions. Other questions require insights related to twoor more of the themes. Experience has shown, however,that the five themes provide a powerful means for intro-ducing students to the geographic perspective. As a re-sult, they provide the structure for this discussion.

Location

For decades, people engaged in real estate develop-ment have said that the value of a place is a product ofthree factors: location, location, and location. Thisstatement also reflects the importance of location forinternational marketing. Learning the location and char-acteristics of other places has always been important tothose interested in conducting business outside theirlocal areas. The drive to learn about different areas,especially their resources and potential as markets, hasstimulated geographic exploration throughout history.Explorations of the Mediterranean by the Phoenicians,Marco Polos journey to China, and voyages undertakenby Christopher Columbus, Vasco da Gama, HenryHudson, and James Cook not only improved generalknowledge of the world but also expanded businessopportunities.

BAppendix

21

NOTE:This appendix was contributed by Thomas J. Baerwald. Dr. Baerwald isa senior science advisor and geography program director at the NationalScience Foundation in Arlington,Virginia. He is coauthor of Prentice-Hall WorldGeographya best-selling geography textbook.

SOURCE: Darrell Delamaide, The New Superregions of Europe ( New York:Dutton, 1994); Joel Garreau, The Nine Nations of North America ( New York:Houghton Mifflin Co., 1981).

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Assessing the role of location requires more thansimply determining specific locations where certain ac-tivities take place. Latitude and longitude often are usedto fix the exact location of features on the earths surface,but to simply describe a places coordinates providesrelatively little information about that place. Of muchgreater significance is its location relative to other features.The city of Singapore, for example, is between 1 and2 degrees North latitude and is just west of 104 degreesEast longitude. Other locational characteristics are farmore important if you want to understand why Singaporehas emerged as such an important locale for interna-tional business. Singapore is at the southern tip of theMalay Peninsula near the eastern end of the Strait ofMalacca, a critical shipping route connecting the IndianOcean with the South China Sea. For almost 150 years,this location made Singapore an important center fortrade in the British Empire. After it attained independ-ence in 1965, Singapores leaders diversified its economyand complemented trade in its bustling port with numer-ous manufacturing plants that export products to nationsaround the world. Singapore quickly became one of theworlds leading manufacturers of disk drives and otherelectronic components, using its pivotal location onglobal air routes to quickly ship these light-weight, high-value goods around the world. The same locationaladvantages have spurred its rise in recent decades as abusiness and financial services center for eastern Asia.

An understanding of the way location influences busi-ness therefore is critical for the international marketingexecutive. Without clear knowledge of an enterpriseslocation relative to its suppliers, to its market, and to itscompetitors, an executive operates like the captain of afogbound vessel that has lost all navigational instrumentsand is heading for dangerous shoals.

Place

In addition to its location, each place has a diverse set ofcharacteristics. Although many of those characteristicsare present in other places, the ensemble makes eachplace unique. The characteristics of placesboth naturaland humanprofoundly influence the ways that busi-ness executives in different places participate in interna-tional economic transactions.

Natural Features Many of the characteristics of a place relate to its naturalattributes. Geologic characteristics can be especially im-portant, as the presence of critical minerals or energy re-sources may make a place a world-renowned supplier ofvaluable products. Gold and diamonds help make SouthAfricas economy the most prosperous on that continent.Rich deposits of iron ore in southern parts of the

Amazon Basin have made Brazil the worlds leadingexporter of that commodity, while Chile remains a pre-eminent exporter of copper. Coal deposits provided thefoundation for massive industrial development in theeastern United States, in the Rhine River Basin of Europe,in western Russia, and in northeastern China. Because ofabundant pools of petroleum beneath desert sands, stan-dards of living in Saudi Arabia and nearby nations haverisen rapidly to be among the highest in the world.

The geology of a place also shapes its terrain. Peopletraditionally have clustered in lower, flatter areas, be-cause valleys and plains have permitted the agriculturaldevelopment necessary to feed the local population andto generate surpluses that can be traded. Hilly andmountainous areas may support some people, but theirpopulation densities are invariably lower. Terrain alsoplays a critical role in focusing and inhibiting the move-ment of people and goods. Business leaders throughoutthe centuries have capitalized on this fact. Just as feudalmasters sought control of mountain passes in order tocollect tolls and other duties from traders who traversedan area, modern executives maintain stores and offerservices near bridges and at other points where terrainslows down travel.

The terrain of a place is related to its hydrology.Rivers, lakes, and other bodies of water influence thekinds of economic activities that occur in a place. In gen-eral, abundant supplies of water boost economic devel-opment, because water is necessary for the sustenanceof people and for both agricultural and industrial pro-duction. Locations like Los Angeles and Saudi Arabiahave prospered despite having little local water, becauseother features offer advantages that more than exceedthe additional costs incurred in delivering water suppliesfrom elsewhere. While sufficient water must be availableto meet local needs, overabundance of water may poseserious problems, such as in Bangladesh, where devel-opment has been inhibited by frequent flooding.

The character of a places water bodies also is impor-tant. Smooth-flowing streams and placid lakes can stim-ulate transportation within a place and connect it moreeasily with other places, while waterfalls and rapids canprevent navigation on streams. The rapid drop in eleva-tion of such streams may boost their potential for hydro-electric power generation, however, thereby stimulatingdevelopment of industries requiring considerable amountsof electricity. Large plants producing aluminum, forexample, are found in the Tennessee and Columbia rivervalleys of the United States and in Quebec and BritishColumbia in Canada. These plants refine materials thatoriginally were extracted elsewhere, especially bauxiteand alumina from Caribbean nations like Jamaica andthe Dominican Republic. Although the transport costsincurred in delivery of these materials to the plants ishigh, those costs are more than offset by the presence ofabundant and inexpensive electricity.

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Chapter 1 Appendix B: Geographical Perspectives on International Marketing 23

Climate is another natural feature that has profoundimpact on economic activity within a place. Many activi-ties are directly affected by climate. Locales blessed withpleasant climates have become popular recreationalhavens, attracting tourists whose spending fuels thelocal economy. Florida, the Cote dAzur of France, theCrimean Peninsula of Ukraine, and the Gold Coast ofnortheastern Australia are just a few examples of popu-lar tourist destinations whose primary attribute is a salu-brious climate. Agricultural production is also influencedby climate. The average daily and evening temperatures,the amount and timing of precipitation, the timing offrosts and freezing weather, and the variability ofweather from one year to the next all influence the kindsof crops grown in an area. Plants producing bananas andsugar cane flourish in moist tropical areas, while coolerclimates are more conducive for crops such as wheatand potatoes. Climate influences other industries as well.The aircraft manufacturing industry in the United Statesdeveloped largely in warmer, drier areas, where condi-tions for test flights were more beneficial throughout theyear. In a similar way, major rocket-launching facilitieshave been placed in locations where climatic conditionsare most favorable. As a result, the primary launch site ofthe European Space Agency is not in Europe at all, butrather in the South American territory of French Guiana.Climate also affects the length of the work day and thelength of economic seasons. For example, in some re-gions of the world, the construction industry can buildonly during a few months of the year because per-mafrost makes construction prohibitively expensive therest of the year. Construction demand can be spurred byclimate-related disasters, however, as occurred followingmassive devastation along the central Gulf Coast in thesouthern U.S.

Variations in soils have a profound impact on agricul-tural production. The worlds great grain-exportingregions, including the central United States, the PrairieProvinces of Canada, the Fertile Triangle stretchingfrom central Ukraine through southern Russia intonorthern Kazakhstan, and the Pampas of northernArgentina, all have been blessed with mineral-rich soilsmade even more fertile by humus from natural grass-lands that once dominated the landscape. Soils are lessfertile in much of the Amazon Basin of Brazil and incentral Africa, where heavy rains leave few nutrients inupper layers of the soil. As a result, few commercialcrops are grown.

The interplay between climate and soils is especiallyevident in the production of wines. Hundreds of vari-eties of grapes have been bred in order to take advan-tage of the different physical characteristics of variousplaces. The wines fermented from these grapes areshipped around the world to consumers, who differenti-ate among various wines based not only on the grapesbut also on the places where they were grown and theconditions during which they matured.

Human FeaturesThe physical features of a place provide natural resourcesand influence the types of economic activities in whichpeople engage, but its human characteristics also are crit-ical. The population of a place is important because farmproduction may require intensive labor to be successful,as is true in rice-growing areas of eastern Asia. The skillsand qualifications of the population also play a role in de-termining how a place fits into global economic affairs.Although blessed with few mineral resources and a ter-rain and climate that limit agricultural production, theSwiss have emphasized high levels of education andtraining in order to maintain a labor force that manufac-tures sophisticated products for export around the world.In recent decades, Japan and smaller nations such asSouth Korea and Taiwan have increased the productivityof their workers to become major industrial exporters.

As people live in a place, they modify it, creating abuilt environment that can be as important as or more im-portant than the natural environment in economic terms.The most pronounced areas of human activity and theirassociated structures are in cities. In nations around theworld, cities grew dramatically during the twentieth cen-tury. Much of the growth of cities has resulted from themigration of people from rural areas. This influx of newresidents broadens the labor pool and creates vast newdemand for goods and services. As urban populationshave grown, residences and other facilities have replacedrural land uses. Executives seeking to conduct business inforeign cities need to be aware that the geographic pat-terns found in their home cities are not evident in manyother nations. For example, in the United States, wealthierresidents generally have moved out of cities, and as theyestablished their residences, stores and services followed.Residential patterns in the major cities of Latin Americaand other developing nations tend to be reversed, withthe wealthy remaining close to the city center whilepoorer residents are consigned to the outskirts of town. Astore-location strategy that is successful in the UnitedStates therefore may fail miserably if transferred directly toanother nation without knowledge of the different geo-graphic patterns of that nations cities.

Interaction

The international marketing professional seeking to takeadvantage of opportunities present in different placeslearns not to view each place separately. The waya place functions depends on the presence and form ofcertain characteristics as well as the interactions amongthem. Fortuitous combinations of features can spur a re-gions economic development. The presence of high-grade supplies of iron ore, coal, and limestone poweredthe growth of Germanys Ruhr Valley as one of Europesforemost steel-producing regions, just as the proximity ofthe fertile Pampas and the deep ch

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