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Scope and Challenges of International Marketing
Transcript of Scope and Challenges of International Marketing
FACTORS AFFECTING GLOBAL MARKETING
Today, most business activities are global in scope. Technology, research, capital, investment, production, marketing distribution and communication networks all have global dimensions.
INTERNATIONAL MARKETING CONCEPTS
Domestic Market Extension Concept
In the Domestic Market Extension Concept, the firm views its international operations as secondary to and as an extension of its domestic operations; its primary motive is to market excess domestic production.
Multi-Domestic Market Concept
The Multi-domestic Market Concept requires the company to market their product on a country-to-country basis.
THE INTERNATIONALISATION OF BUSINESS AND MARKETS
A number of significant changes can be seen in the US market and they include the following scenarios:
INTERNATIONAL MARKETING DEFINED
International marketing is the performance of business activities designed to plan, price, promote, and direct the flow of a company's goods and services to consumers or users in more than one nation for a profit.
Global Marketing Concept
In the Global Marketing Concept, a company that is guided by this orientation is generally referred to as a global company. Its marketing activity is global marketing; and its market coverage is the world.
Regional Economic Agreements
A number of multilateral trade agreements have accelerated the pace of global integration. For example, the General Agreement on Tariffs and Trade (GATT), ratified by more than 120 countries, created the World Trade Organisation to promote and protect free trade.
Market Needs and Wants
Marketers play the role of a change agent.
Marketers deliberately create needs in consumers.
People need water to quench their thirst but they do not necessarily need a soft drink.
However, today's marketers have successfully changed people's behavior as, for example, the consumption of soft drinks in some countries exceeds the consumption of water.
Evidence has shown that consumer needs and wants around the world are converging and this creates an opportunity for global marketing.
Technology is a universal factor that cuts across national and cultural boundaries.
The Internet and World Wide Web are also driving forces of globalisation.
When a company establishes a site on the Internet, it automatically becomes global, at least in terms of its potential to reach international customers with information.
With the increased globalisation of markets, companies face competition on all fronts, from domestic firms and from foreign firms.
Companies from the United Kingdom lead the group of investors with companies from the Netherlands, Japan, Germany and Switzerland following in that order.
Domestic firms in the US may now have to share what was previously or once their private domain with a variety of foreign companies and products.
THE CHALLENGE OF INTERNATIONAL MARKETING
International marketing is more complicated than domestic marketing because the international marketer must deal with at least two levels of uncontrollable uncertainty instead of just one.
Uncertainty is created by the uncontrollable elements of all business environments, and each foreign country in which a company operates adds its own unique set of uncontrollable elements.
CROSS-CULTURAL ANALYSIS TO ISOLATE THE SRC INFLUENCES
In this concept, firms find that products have to be adapted for each market without coordination in other country markets.
A company with this concept does not look for similarity among elements of the marketing mix that might respond to standardisation; rather it aims for adaptation to local country markets. A firm perceives each host country as unique, and sees differences in foreign countries.
This concept is characterised by a decentralisation of both control and development of marketing strategies.
This orientation can be classified in the E
RG schema as
A global company strives for efficiencies of scale by developing a standardised product, of dependable quality to be sold at a reasonable price at a global market, that is, the same country market set throughout the world.
Based on Jim Harvey's speech structures
Reesha Abdul Munnim
Improvements in Transportation and Communication Technology
The time and cost barriers associated with distance have fallen tremendously in the past decade.
The advent of new communication technologies such as e-mail, fax and video teleconferencing enable managers, executives and customers to link up electronically from virtually any part of the world without travelling at all
Global Economic Growth (World Economic Trends)
Most developing countries are achieving higher and higher growth rates every year.
For example, during the decade of 1975 to 1985, the five fastest growing economies of the world were Saudi Arabia, South Korea, Brazil, Singapore and Oman.
Similarly, Taiwan, Hong Kong, and Malaysia have been growing exceedingly fast as well. In the 1990s India and China, two large emerging markets, provided business opportunities as their economies become market- oriented.
Thus, less developed countries (LDCs) provide new opportunities for business corporations to expand business overseas.
Opportunities for Leverage
In industries which require large-scale plants to be efficient, single markets are rarely sufficient to generate economies of scale.
Other cost drivers include global sourcing advantages, which include cost savings via supply from a low-wage country, improved logistics and distribution systems, and the growth of inexpensive global telecommunications.
A major strength of the global company is its ability to scan the entire world to identify people, money and raw materials that will enable it to compete more effectively in world markets.
Many familiar US companies are now foreign-owned or controlled.
Foreign investment in the US is in excess of $1.5 trillion.
Other foreign companies that have entered the US market by exporting their product were able to capture a big market share and build manufacturing plants in the country.
Companies that operate only in the domestic markets have found it increasingly difficult to sustain their growth and thus seek foreign markets for expansion. Companies that have never ventured abroad are now seeking foreign markets.
Evolution of a Multinational Company - NIKE
More than half of the sales come from outside the U.S. for the first time. It passes Adidas as number 1 football shoe in Europe.
Bowerman, inspired by the waffle iron, dreams up new shoe treads, which becomes the best selling U.S. training shoe.
Phil Knight an accountant at Price Waterhouse and college track coach Bill Bowerman put in $500 each to start Blue Ribbon Sports.
Blue Ribbon changes its name to Nike and adopts swoosh as its logo, designed by a college student for $35. She later gets an undisclosed number of stocks.
Steve Perfontaine, the long distance runner, becomes the first major athlete to wear Nike in competitions.
Nike goes public with 2.4 million shares at $11. After several splits, stock is worth $78 in September 2004.
Air Jordan, the best selling athletic shoe, ever, is introduced
Nike runs its first advertisement campaign ‘Revolution’ based on a Beatles song.
Magic Johnson, sponsored by Nike, wins a gold medal. The first Nike town opens.
Nike enters the football by signing top players like Ronaldo from Brazil.
Co-founder Bowerman dies and Knight takes total control under allegation of poor working conditions in Asian factories producing Nike.
Uncontrollable elements of all business environments
Marketing practices vary from country to country, for the simple reason that the countries and people of the world are different.
These differences mean that a marketing approach that has proven successful in one country will not necessarily succeed in another country.
Frequently, the solution to a problem in one countrys market is not applicable to a problem in another country.
Customer preferences, competitors, channels of distribution and communication media may differ.
An important skill in global marketing is learning to recognise the extent to which marketing plans and programmes can be extended worldwide, as well as the extent to which they must be adapted.
Domestic Uncontrollable Elements
Examples of such elements include political and legal forces. A political decision involving domestic firms on foreign policy can have a direct effect on a firms international marketing success.
Foreign Uncontrollable Elements
A business operating in its home country undoubtedly feels comfortable in forecasting the business climate and adjusting business decisions to these elements.
The process of evaluating the uncontrollable elements in an international marketing programme, however, often involves substantial doses of cultural, political and economic shock.
To adjust and adapt a marketing programme to foreign markets, marketers must be able to effectively interpret the influence and impact of each of the uncontrollable environmental elements on the marketing plan for each foreign market in which they hope to do business.
The uncontrollable elements constitute the culture. The difficulty the marketer faces in adjusting to the culture lies in recognising their impact. In our domestic market, we tend to be culturally responsive because culture is part of our history .
Our frames of reference are developed from past experiences that determine or modify our reactions to the situations we face.
Cultural conditioning is like an iceberg; we are not aware of nine tenths of it.
Foreign marketers must guard against measuring and assessing the markets against the fixed values and assumptions of their own cultures. They must be aware of the home-cultural reference in their analyses and decision-making.
Self-Reference Criterion (SRC) – An Obstacle
Self-reference criterion or SRC is an unconscious reference to one's own cultural values, experiences and knowledge that is a basis for making decisions.
Our SRC can prevent us from being aware of cultural differences, and from recognising the importance of those differences. Thus, we either fail to recognise the need to take action, discount the cultural differences that exist among countries, or react to a situation in a way offensive to our hosts.
Domestic market extension concept
Multi-domestic market concept
Global marketing concept.
It is to be expected that differences in the complexity and sophistication of a company’s marketing activity depend on which of these orientations guides its operations.
The ideas expressed in each concept reflect the philosophical orientation that also can be associated with successive stages in the evolution of the international operations in a company.
Another term that is used to describe the different orientations that evolve in a company in different stages of international marketing from casual exporting to global marketing is the often-quoted EPRG Schema
The authors of this schema suggest that firms can be classified as having an Ethnocentric, Polycentric, Regio- centric or Geocentric orientation (EPRG) depending on the international commitment of the firm.
‘A key assumption underlying the EPRG framework is that the degree of internationalisation to which management is committed or willing to move towards affects the specific international strategies and decision rules of the firm’
The EPRG schema is incorporated into the discussion of the three concepts that follows in that the philosophical orientations described by the EPRG schema help explain management’s view when guided by one of the orientations.
In this concept, domestic business is the firm's priority and foreign sales are seen as a profitable extension of domestic operations. Minimal efforts are made to adapt the marketing mix to foreign markets.
The firms orientation is to market to foreign customers in the same manner the company does to domestic customers.
It seeks markets where demand is similar to the home market and its domestic products will be accepted.
In short, the firm perceives its home country as superior and seeks its similarities in foreign countries.
Firms with this marketing approach are classified as
The global marketing concept is based on the premise that world markets are being driven toward a converging commonality. A company could study these significant market segments by identifying their common needs and desires.
The global marketing concept orientation would fit the regiocentric or geocentric classifications of the EPRG schema.
A company whose management has a regiocentric or geocentric orientation is sometimes known as a global or transnational company.