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Reggie Aspelund

International Marketing Mid-Term Paper (Fall 2014)

Professor Seltzer, MKTG 330-01

Scope and Challenge of International Marketing

There has never been a time in history when businesses, regardless of size, have been involved

in and affected by international business, as present.1 International trade account for 20% of global

domestic product (GDP), and as trade expands throughout the globe, firms and foreign customers

become increasingly interconnected.2 The role of the international marketer is no small task but

rather a complicated process because there are at least two levels of uncontrollable uncertainty

instead of one in a domestic market (see Appendix for International Marketing Task).3

International markets examine external and internal environments with a holistic viewpoint since

actions in one market can have an impact in other markets, even markets one is considering entry.4

The controllable elements are product, price, placement, promotion, and packaging (5 Ps) that

should be adjusted in the short term to adjust to changing consumer behavior, industry trends, and

the competitive environment. Understanding why and how environmental adaptation is required

in emerging markets is critical for international marketers to yield successful marketing plans.

1 Cateora, Philip, Gilly, Mary, Graham, John, International Marketing, Sixteenth Edition, p.4. 2 Samaha, Stephen, Beck, Joshua, Palmatier, Rober, “The Role of Culture of in International Relationship Marketing,” Journal of Marketing, Vol. 78 (September 2014),p.78. 3 Cateora, Philip, Gilly, Mary, Graham, John, International Marketing, Sixteenth Edition, p.11. 4 See Hamilton et al., “Google in China: A Manager-Friendly Heuristic Model for Resolving Cross-Cultural Ethical Conflicts, Journal of Business Ethics (2009) 86:143-157 in Appendix. One will note Google decision to self-censor had adverse effects in their domestic market and the potential to hinder growth in other foreign markets.

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In The Fortune at the Bottom of the Pyramid, C.K. Prahalad presents a compelling argument

for firms to consider emerging markets not as a society of poor individuals but a 4 billion market

opportunity that will not only benefit the firm but even help alleviate poverty. Firms, however,

should not make haste assumptions and enter into foreign markets without the proper due diligence

of evaluating the market opportunity, modify the product or service to meet the needs of the target

market(s), and leverage scale and innovation to create real value. But before one can begin to

assess the market, one must understand the power of dominate logic.

C.K. Prahalad cautions against one’s own biases from socialization that result in a “one size

fits all” approach to marketing and general management in a foreign market that can have adverse

effects for consumers and the firm (cf. Case2-1 EuroDisney). Another term for this bias is a

person’s self-reference criterion (SRC) that are obstacles in decision making and result in

misunderstandings that can damage relationships with collaborators, consumers, and employees.

To overcome this bias, one needs to develop a global awareness that goes beyond identifying

cultural difference but tolerance and knowledge of cultures.

In order to fully understand cultural differences, one must understand the foundations of culture

that include a comprehensive study of a country’s history, geography, climate, and global

economic, social and political trends. An example of the importance of understanding culture in

order to create, communicate, deliver value to consumers in a foreign market is White Appliance

microwave ovens (Case 1-4). In this case, White Appliance is losing market share because of its

inability to understand India’s cultural values and cooking customs. With the increase of

competition and the need to lavage scale and innovation to develop a product that would meet the

needs of the consumer at an affordable price is salient need in order to remain competitive.

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Assessing Global Markets

Before one can create innovative solutions for foreign consumers, an extensive cultural

assessment should be conducted. This is important to note this because marketers can often skip

this step and go into assessing the economic opportunity without taking the cultural influences that

shape consumers’ beliefs, habits, rituals, in order to modify the offering to address the needs of

the foreign market. The Coke and Pepsi case (Case1-3) provided insights regarding climate,

cultural preferences and rituals that shaped consumer behavior proved to be a challenging learning

curve for Coke-Cola in order to maintain market share that perhaps could have been minimalized

had there been an in-depth examination of India’s culture. That case also revealed a negative

perception of American companies because consumers associated the brand with a profound

wound of colonialism that repressed the country and the identity. In Elephant and the Dragon,

Robyn Meredith provides insights into a general skepticism of consumerism and Western

companies that conflict with their religious and moral believes. A marketer must explore the

foreign markets perceptions and beliefs toward the brand to determine if entry will be successful

in the long term and what market entry strategies, i.e., joint venture or foreign direct investment,

would be the prudent course (see Cheerios Detective assignment General Mills & Nestle Joint

Venture).

If there is any constant in marketing, particularly international marketing, it is change. A salient

example of cultural change occurring presently is with the young adults in China. China is

undergoing major changes in societal values (from a collectivist to individualist) that has increased

advertising revenues and a radical change in positioning. The central message and new cultural

belief is to “follow their own paths to pursue their dreams of happiness” that is changing the view

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of one self.5 The situation is China is fluid but does highlight the importance for international

marketers to stay attune to ongoing marketing research studies and developments as young adults

will radically shape consumer behavior and needs within this segment.

In international marketing, firms must always change the product, packaging, labeling and other

aspects of the offering to meet the needs of the consumer but also remain compliant to the

regulatory environment in a given foreign market. Another example of how a firm modified its

product in order to provide value in its offering is Dell. In 2007, Dell developed its EC280 personal

computer that provided the necessary utility for its target market at an affordable price.6 The

laptop was designed to be smaller than its competitors not because it need to be in order to be

profitable, but to meet the needs of consumers who lived in very small urban apartments.

There are significant demographic changes (aging population) occurring throughout the world

that not only have short term implications but very dramatic long term implications with health

care needs but will result in a change of economic power.7 By 2035, more than 1.1 billion people

(13% of the population) will be above the age of 65. One can expect China, followed by India, to

be the largest economies in the world and overtake the United States and other European countries.

This shift in power and demographics will have implications for marketers and hence the need for

continued market research and cultural awareness.

Ethical Implications

In examining the Nestle (Case 1-2) with the Fair & Lovely (Case 2-2), one will note the ethical

challenges associated with marketing activities. Both cases presented a slippery slope as to the

5 Tong, Luding, “The Young and the Restless:’ Grappling with the Young Chinese Consumer Mindset.” Review of Business and Finance Studies, Vol.6, No.2, 2015, p.21. 6 Einhorn, Bruce, “Dell’s New PC for the China Masses.” Business Week Online. March 22, 2007. P.24. 7 “Age Invaders.” The Economist, April 26th 2014.

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ethical boundaries of exploiting cultural and religious values along with various educational levels

for consumers to be fully informed in order to make a rational choice. In stark contrast, Fair &

Lovely had full information regarding its product’s inability to perform its promise to consumers,

whereas Nestle failed in its due diligence to assess the market and uncover the water and sanitation

challenge along with the need to inform consumers on how to use their product safely and

sustainably. Notwithstanding the regulatory institution for both countries were not developed,

examining and assessing these foreign markets through an ethical and best practices lens could

have changed the outcome of these cases had marketers and the firm chosen to do so.

In the Starnes-Brenner case (Case 2-3) along with Airbus (Case 204), rises ethical questions

about how the role of culture, particularly the foreign country, conducts relationship marketing in

an international business-to-business (B2B) marketing plan. While one can argue these cases are

relatively less ambiguous when considering the Foreign Corrupt Practices Act, there are additional

considerations, particularly with the Starnes-Brenner case that could be addressed. For example,

part of the problem could have been wages for dock workers that would have provided enough

incentive to maintained a more efficient timetable for containers to be unloaded of the ship instead

of using “grease money” that would only incentive the opposite of the desired effect. The case

also mentioned a local custom to, what one might refer to “tipping, that was part of the relationship

marketing in B2B. While these external factors are outside of what markets can control, these

cases do reflect a lack of due diligence in assessing the global market. One helpful method that

could have predicted these attitudes and a proclivity for cash incentives is to conduct a market

assessment using Hofstede’s cultural dimensions.

Along with the Hofstede method, there are new methods to assess and resolve cross-cultural

ethical conflicts and a new method to assess how to execute relationship marketing in foreign

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markets.8 Both methods are intended to compliment Hofstede’s cultural method in order to assess

risk and predict cross-cultural ethical differences that marketers and managers can determine a

strategy in how to manage those that are either unlawful (lowest standard) or is incongruent with

a firm’s ethics and promise to shareholders (higher standard). Both articles demand attention by

researchers and marketers that have positive implications. For example, if a firm choses to use its

own ethical standard’s a benchmark, but the “questionable practice” (QP) does not violate local or

host country law, there is an opportunity to work with the culture to create a positive change,

assuming the firm has barging power and uses it carefully to lead and not bully.9 There is a

compelling argument in the latest research for Western firms not to impose their ethical standards

on developing countries that are not willing and able to adopt such practices. To what extent a

firm is willing to be patient and compromise on “questionable practices” (QP) that does not violate

law is going to be determined by the firm.

Conclusion

All firms in the United States, regardless of size, must determine what their international

marketing strategy and implications of an increasing globalized market place.10 While the study

of international marketing is broad, the starting point for marketers is to determine where they are

in their domestic market and if they should increase their participation in international marketing.

While most firms will leverage scale, successful strategies demand more than scale but an

8 See both 8 Samaha, Stephen, Beck, Joshua, Palmatier, Rober, “The Role of Culture of in International Relationship Marketing,” Journal of Marketing, Vol. 78 (September 2014) and Hamilton et al., “Google in China: A Manager-Friendly Heuristic Model for Resolving Cross-Cultural Ethical Conflicts, Journal of Business Ethics (2009) in Appendix. 9 Hamilton et al., “Google in China: A Manager-Friendly Heuristic Model for Resolving Cross-Cultural Ethical Conflicts, Journal of Business Ethics (2009) 86:143-157 10 See http://www.nbclosangeles.com/news/local/Port-of-Long-Beach-Labor-Dispute-Could-Hit-Holiday-Retail-Season-282388101.html

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innovative business model that will meet the cultural needs of the target market(s) and comply

with political and legal environments. But most of all, a value proposition that will be sustainable

and create real value for stakeholders.

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Appendix:

Exhibit 1.3

This illustrates the total international environment for marketers and the ecosystem or holistic

approach required in planning and decision making since these environments are closely linked

and actions have a “ripple effect.”

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This model, similar to the “Three Levels of a Product,” illustrate the various modifications required

in international marketing, i.e., labeling, warranties, packaging, and even the core offering.