CHAPTER ONE

1.1 An overview of international marketing

Today most business activities are global in scope. Technology, research, capital investment,
production and marketing, distribution and communication networks all have global dimensions.
Every business must be prepared to compete in an increasingly interdependent global economic
environment and all business people must be aware of the effects of these trends when managing
a domestic company that exports or a multinational conglomerate.

Current interest in international marketing can be explained by changing competitive structures

coupled with shifting in demand characteristics in markets throughout the world, with the
increasing globalization of markets, companies, find they are unavoidably enmeshed with
foreign customers, competitors and suppliers, even within their own borders. They face
competition on our fronts from domestic firms and from foreign firms. It helps to identify major
marketing mixes in order to provide products in the market place.

1.1.1 Introduction to International Marketing

International Marketing Defined
There are many different definitions of international marketing. When a company crosses its
national frontiers to market its product, it is entering international marketing. As defined by
Phillip Cateora and John M. Hess (2006) "International marketing is the performance of
business activities that direct the flow of a company's goods and services to consumers or
users in more than one nation."
Yet, the definition sounds very similar to that of marketing, for it is meant to be, the only
difference being that marketing task is carried out in more than one nation. This fact by itself
adds many complexities to the marketing task (as we shall see later on). As per the definition'
given by the American Marketing Association, " Marketing is the process of planning and
executing the conception, pricing, promotion and distribution of goods, services and ideas
to create exchanges that satisfy individual and organizational objectives." This definition
can be extended to define international marketing as “The process of planning and executing the
conception, pricing, promotion and distribution of goods, services and ideas to create exchanges

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that satisfy individual and organizational objectives, in more than one nation". It means in
international marketing, activities are undertaken in several countries and such activities should
be coordinated across nations. Thus international marketing is the coordinated marketing process
undertaken in several countries.
In the common parlance, the terms international marketing and foreign trade are used
interchangeably. But actually they are different and deal with different issues. The term foreign
trade is used when we want to talk about trade between nations. It has a macro perspective
whereas international marketing (IM) has a managerial perspective. IM deals with issues which
concern a firm and not the nation as a whole

What do you think are the basic differences between domestic marketing, exporting,
international marketing, multinational marketing and global/transnational marketing?

We have just now discussed in detail the meaning and scope of international marketing. In the
context of international marketing, you come across several terms such as domestic marketing,
export marketing, multinational marketing, global marketing, etc. Before we proceed further, it
is necessary for you to understand these concepts, their interlinkage and differentiation. Now let
us study these concepts in detail one by one

Domestic marketing: is marketing that is targeted exclusively at the home-country market. A

purely domestic company operates only domestically. A company engaged in domestic
marketing may be doing this consciously as a strategic choice or it may be unconsciously
focusing on the domestic market in order to avoid the challenge of learning how to market
outside the home country.

Export marketing: Is the first stage when the firm steps out of the domestic market and explore
market opportunities outside the home country. The export marketer target markets outside the
home country and relies upon home country Production to supply product for these markets. In
the export marketing, the main aim of the firm is to expand the market size. Firm produces all its
goods in the home country and exports the surplus production to other countries.

International marketing: here the focus changes from just exporting to marketing in foreign
countries. Company establishes subsidiaries in the foreign countries to undertake marketing
operations. These subsidiaries may be working either through direction from the headquarters in

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the domestic country or independently, but the key positions in such concerns are managed by
nationals of domestic country.

When the firm decides to pursue market opportunities outside the home country, it extends
marketing, manufacturing, and other activities outside the home country. The marketing strategy
of the firm is an extension; that is, products, promotion, pricing, and business practices
developed for the home-country market are ‘extended’ into markets around the world. The
underlying philosophy is that given limited resources and experience, companies must focus on
what they do best. When a company decides to go international, it makes sense at the beginning
to extend as much of the business and marketing mix (product, price, promotion, and place or
channels of distribution) as possible so that learning can focus on how to do business in foreign
countries.

Multinational Marketing: As you know, in international marketing the firm extends the
domestic marketing mix to all countries. The firm realizes that the extension of domestic
marketing mix is not effective as the business environment in other countries differ from
domestic country. The differences in markets across the countries necessitate modification of the
marketing mix suitably to the environment in each country. Therefore, marketing mix should be
unique for respective country in which the firm conducts its business. This is multinational
marketing approach. Thus multinational marketing is the adaptation of the domestic marketing
mix suitable to the market differences in market environment in each country of operation. The
guiding philosophy of multinational marketing is that markets and ways of doing business
around the world are so unique that the only way to succeed internationally is to adapt to the
different aspects of each national market. Subsidiaries are formed in each country or group of
countries to handle all marketing operations in that country/region. Each foreign subsidiary is
managed as if it were an independent unit. The subsidiaries are part of an area structure in which
each country is part of a regional organization that reports to world headquarters in the domestic
country. It makes no distinctions in its personnel policy between national and non-national. The
role of headquarters in such concerns is that of coordination among the subsidiaries.

Global marketing, strictly speaking, is where a company has recognized that customers
belonging to similar segments exist in a number of different national markets. As a result

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marketing activities are directed at standardizing as much as possible of the product or service
and reaching the customers with similar communication, pricing and distribution strategies.

International trade and International marketing

International marketing must be distinguished from international trade.

International trade is concerned with the flow of goods and capital across national borders. The
focus of the analysis is on commercial and monetary conditions that affect balance of payment
and resource transfers.

This economics approach provides a macro view of the market at the national level, with no
specific attention given to companies’ marketing intervention.

The study of international marketing, on the other hand, is more concerned with the micro
level of the market and uses the company as a unit of analysis. The focus of the analysis is on
how and why a product succeeds or fails abroad and how marketing efforts affect the outcome.

The term foreign trade is used when we want to talk about Trade between nations. It has a
macro perspective whereas International marketing (IM) has a managerial (micro)
perspective.IM deals with issues which concern a firm.

Similarities between Domestic and International Marketing

 Marketing concepts, processes and principles are universally applicable. That is they
are applicable in both of them. In international marketing like domestic marketing
retains the basic marketing principles of customer satisfaction and exchange.

 The marketers’ activities are the same wherever one is performing business. There must
be product, exchange, people, setting fair price, accessing the product to the buyers etc.
In any marketing, we need the blending of the four ingredients of marketing mix.

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Differences between Domestic and International Marketing
Factors / forces affecting the domestic market:

 Controllable factors: the four Ps, organization objectives, resources (financial,

manpower, facilities etc), management etc.
 Uncontrollable factors: government policies, and regulations (tax, VAT, price
ceiling and floor), political, technological, physical, demographic, economic
and cultural environment of own country.

Factors affecting the international market:

 International marketing involves large number of uncontrollable variables

than the domestic marketing like competition, legal restraints, government
controls, politics, inconsistent consumer behavior, different levels of
technology, and levels of economic development of domestic and foreign
countries in which the international marketer operates. The international
marketer faces two or more sets of uncontrollable variables originating from
various countries.
 The domestic marketer faces relatively homogeneous market while the
international marketer faces fragmented and diverse markets. Etc.

1.1.2 SCOPE OF INTERNATIONAL MARKETING

International marketing is a part of total marketing process. All the marketing activities like
buying, selling, transportation, storage and warehousing, financing, risk bearing, pricing,
advertising and sales promotion etc when performed in foreign markets across the national
border is called international marketing.

The scope of international marketing essentially includes exporting of goods and services in
foreign markets. The exporter performs various activities, other than exporting the goods and
services. These activities are;

1. Establishing a branch in foreign market for processing, packaging or

assembling the goods according to the needs of the markets. Sometimes

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 complete manufacturing is carried out by the branch through direct
investments.

2. Joint Ventures and collaborations.

International marketing includes establishing joint ventures and collaboration in foreign

countries with some foreign firms for manufacturing or marketing the product. Under these
arrangements, the company works in collaboration with the foreign firm in order to exploit the
foreign markets.

3. Licensing Arrangements

The company establishes licensing arrangements with the foreign firm whereby they are granted
the right to use the exporting company’s know-how, i.e. patents, processes or trademarks
according to the terms of agreement.

4. Consultancy services

The exporting company offers consultancy services by undertaking turnkey projects in foreign
countries. For this purpose, the exporting company sends its consultants and experts in foreign
countries who guide and direct the manufacturing activities.

5. Technical and managerial know how

The scope of international marketing also includes the technical and managerial know how
provided by the exporting company to the importing company. The technicians and managerial
personnel of the exporting company guide and train the technicians and managers of the
importing company.

1.2 International market orientation and involvement

A. Stages of International Marketing Involvement

Once a company has decided to go international, it has to decide the degree of marketing
involvement and commitment it is prepared to make. These decisions should reflect considerable
study and analysis of market potential and company capabilities a process not always followed.

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 Many companies begin tentatively in international marketing, growing as they gain experience
and gradually changing strategy and tactics as they become more committed.

Others enter international marketing after much research and with fully developed long range
plans prepared to make investment to acquire a market position.

In general one of five (some times overlapping) stages can describe the international marketing
involvement of a company. A firm may begin its international involvement at any one stage or
be in more than one stage simultaneously.

1. No Direct Foreign Marketing:

A company in this stage:

 Does not actually cultivate customers outside national boundary;

 However, this company’s products may reach foreign markets.

 Sales may be made to trading companies as well as foreign customers who come directly to
the firm. OR

 Products may reach foreign markets via domestic wholesalers, or distributors who sell abroad
without explicit encouragement or even knowledge of the producer.

2. Infrequent Foreign Marketing:

 Temporary surplus caused by variations in production levels or demand may result in

infrequent marketing overseas.

 Sales to foreign markets are made as goods are available, with little or no intention of
maintaining continuous market representation.

 As domestic demand increases and absorbs surpluses, foreign sales activity is withdrawn

 In this stage, there is little or no change in company organization or lines. However, few
companies use this model because customers around the world increasingly seek long-term
commercial relationships.

3. Regular Foreign Marketing:

At this level:

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  The firm has permanent productive capacity devoted to the production
of goods to be marketed in foreign markets.

 The firm may employ foreign or domestic overseas intermediaries or it

may have its own sales force or sales subsidiaries in important foreign
market.

 The primary focus of operations and production is to service domestic

market needs. However, as overseas demand grows, production is allocated
for foreign markets, and products may be adapted to meet the needs of
individual foreign markets.

 Profit expectations from foreign markets move from being seen as a

bonus to regular domestic profits to a position in which the company
becomes dependent on foreign sales and profits to meet it goals.
4. International Marketing:

In this stage:

 Companies are fully committed and involved in international marketing

activities.
 Such companies seek markets all over the world and sell products that are a
result of planned production for markets in various countries.
 This generally needs not only the marketing but also the production of goods
and services outside the home market. At this point a company becomes an
international multinational marketing firm.
5. Global Marketing:

In this stage:
 The most profound changes are the orientation of the company toward
markets and associated planning activities.
 Companies treat the world, including their home markets, as one market.
 Market segmentation decisions are no longer focused on national
boundaries instead by income levels, usage patterns, and other factors.
 Global marketing treat the world market as one market. Hence, global
marketers say no need of different strategies to the world one market.
They tend to adapt same products, promotional efforts and distribution

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 strategies. Some examples of global companies can be general motors,
Toyota Company, IBM, etc.
 Two factors do contribute for the development of such orientation of
global marketing are: Increasing similarities in marketing environments
and customer requirements and the need to expand market coverage in
order to recover large investments made in technology, logistics, etc.

B. International marketing orientations

The way a company responds to international market opportunities depends on management’s
assumptions and beliefs about the world and the international activities. The orientations a
company’s management and personnel can have are collectively known as the EPRG framework:
(ethnocentric, polycentric, regiocentric and geocentric.)

A. The ethnocentric
Assumes that the home country is superior compared to the rest of the world. It is also known
as the domestic market extension concept. The company assumes that products and practices
that were successful in the home country will be successful anywhere, due to their proven
superiority in the home market. The international operations are seen as secondary to its
domestic production, the company exports excess production, this being the main reason for
selling abroad. The foreign sales are only extensions of the domestic sales and usually they take
the form of export. No systematic marketing research is conducted outside the home country and
no major modifications are made to the products. Even if consumer needs and wants in foreign
markets are different from those in the home country, those differences are ignored. These
companies miss opportunities outside the home countries. Today such an approach is one of the
largest internal threats for a company.

B. The polycentric
Is the opposite the ethnocentric one. It is also known as the multi-domestic or multinational
concept. The company that bases its activity on this orientation recognizes the importance of
market differences and develops one marketing program for each market. The management
believes that each country with which the company does business is unique. Consequently each
subsidiary will develop its own unique marketing strategy in order to succeed. The company
guided by this orientation thinks that success requires adaptation to local country markets. The

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company will adapt the product for each market, will have localized advertising and will make
local decisions on pricing and distribution strategies. There will be no co-ordination with other
country market.

C.The regiocentric orientation

Belongs to those managers who view regions as unique and try to develop regionally integrated
marketing strategies. Such approaches are usually used in the case of geographic regions that
have been integrated economically (such as European Union or NAFTA).

D. Geocentric
Stands for the philosophy when management considers that there is only one market, the world.
These companies are looking for standardization in order to obtain economies of scale and they
search for global market segments.
Companies guided by the global marketing concept see the world as being one market. They are
looking for market segments that are similar, that have similar demands all over the world. They
are looking at markets for commonalities, that can be standardized across regions or country
market sets. By serving a global market segment, the marketing plan wishes to be standardized
wherever it is cost and cultural effective. This can mean:

 Standard product but country specific advertising.

 A standard brand (image), but adapted products.
 A standard advertising theme, but country specific appeals.

1.4 Marketing information system (MIS)

Definition:
A marketing information system (MIS) consists of people, equipment, and procedures to gather,
sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing
decision makers.
A marketing information system process:
1. Assessing Marketing Information Needs
2. Developing Marketing Information
3. Analyzing Marketing Information

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 4. Distributing and Using Marketing Information

1. Assessing Marketing Information Needs

The marketing information system primarily serves the company’s marketing and other
managers. However, it may also provide information to external partners, such as suppliers,
resellers, or marketing services agencies. In designing an information system, the company must
consider the needs of all of these users. A good marketing information system balances the
information users would like to have against what they really need and what is feasible to offer.
what executives would like to have, with the information being precisely related to the major
decisions which marketing manager have to make – the decisions concerning the product, place,
price and promotional aspects of market performance. The company begins by interviewing
managers to find out what information they would like. The MIS must monitor the marketing
environment in order to provide decision makers with information they should have to make key
marketing decisions.
Sometimes the company cannot provide the needed information, either because it is not available
or because of MIS limitations. For example, how competitors will change their advertising
budgets next year and how the change will affect industry market shares. The information on
planned budgets probably is not available. Even if it is, the company’s MIS may not be advanced
enough to forecast resulting changes in the market share.
Finally, the cost of obtaining, processing, storing, and delivering information can mount quickly.
The company must decide whether the benefits of having additional information are worth the
cost of providing it.

2. Developing Marketing Information

Marketers can obtain the needed information from the following source
 Internal company records
 Marketing intelligence activities
 Marketing research
Internal Records
Many companies build extensive internal databases-electronic collections of information
obtained from data sources within the company, i.e., various departments, Reports of orders,

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sales, prices, costs, inventory levels, receivables, payables, and so on. By analyzing this
information, they can spot out important opportunities and problems.
Internal database usually can be accessed more quickly and cheaply than other information
sources, but it also presents some problems. Because the internal information was collected for
other purposes, it may be incomplete or in the wrong form for making marketing decisions
Marketing Intelligence
Marketing Intelligence is systematic collection and analysis of publicly available information
about competitors and developments in the market place. The goal of marketing intelligence is to
improve strategic decision making, assess and truck competitors’ actions, and provide early
warning of opportunities and treats. Marketing intelligence acts as a mirror of marketing
environment reflecting precisely how things are going on in the market. The marketer can obtain
important intelligence from suppliers, resellers, and key customers. And also can buy special
marketing intelligence services from outside professional marketing research agencies. It can buy
and analyze competitor’s products.
With all the legitimate intelligence sources available, a company does not have to break the law
or accepted codes of ethics to get good intelligence.

Marketing Research

In addition to information about competitors and market place happenings, marketers often need
formal studies of specific situations. For example Toshiba wants to know how many and what
kinds of people or companies will buy its new superfast tablet PC. In such situations, marketing
intelligence will not provide the detailed information needed. Managers will need marketing
research- systematic design, collection, analysis and reporting of data relevant to specific
marketing situation facing an organization.
Management science system
Management science or operations research is the latest addition to marketing information
system. Operation Research analysis help marketing executive in decision-making in such areas
as new product development, marketing-mix planning, location of row warehouses, inventory
control and so on.

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 3. Analyzing Marketing Information

Information gathered in internal database, through marketing intelligence, and marketing

research usually requires more analysis. Managers may need help in applying the information to
their marketing problems and decisions. This help may include advanced statistical analysis to
learn more about both the relationships within a set of data and their statistical reliability. Such
analysis allows managers to go beyond means and standard deviations in the data and to answer
questions about markets, marketing activities, and outcomes.
4. Distributing and using Marketing Information

Marketing information has no value until it is used to make better marketing decision. Thus the
MIS must make the information available to the managers and others who make marketing
decisions or deal with customers on a day-to-day basis. In some cases, this means providing
managers with regular performance reports, intelligence updates, and reports on the results of
research studies.
Many firms use a company intranet to facilitate this process. The intranet provides ready access
to research information, stored reports, shared work documents, contact information for
employees and other stalk holders, and more

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