MARK2071: International and Global Marketing Overview 1. The scope and challenge of international marketing Global business trends 1. The rapid growth of the WTO and regional free trade areas e.g. NAFTA and the EU. 2. General acceptance of the free market system among developing countries in Latin America, Asia and Eastern Europe. 3. Impact of the Internet and other global media on the dissolution of national borders. 4. Managing global environmental resources. Why global marketing is imperative Saturation of domestic markets: Domestic market saturation in the industrialised parts of the world and marketing opportunities overseas are evident in global marketing. Global competition: Competition around the world and proliferation of the Internet have been on the rise and are now intensifying. Need for global cooperation: Global competition brings global cooperation. Internet revolution: The Internet and e-commerce are bringing major structural changes to the way companies operate worldwide. Whether a company operates domestically or across national boundaries, it can no longer avoid competitive pressures from around the world. The international marketing task International marketing: Performance of business activities designed to plan, price, promote and direct the flow of a company s goods/services to consumers in more than one nation for a profit. Involves moulding controllable elements of marketing decisions within the framework of the uncontrollable elements of the marketplace in a way that marketing objectives are achieved. Under control of marketing manager Elements at home that have some effect on foreignoperation decisions Elements of foreign environment for each foreign market within which marketer operates Marketer must blend a marketing mix from controllable elements and adapt this to uncontrollable elements of foreign market
Company has alien status : alien in that foreigners control business and in that culture of host country is alien to management. Domestic environment uncontrollables Home-country elements that can have a direct effect on the success of a foreign venture Political decision re foreign policy e.g. foreign trade bans; permanently normalized trade relations (PNTR). Economic conditions e.g. restrictions against foreign investment to strengthen domestic economy. Competition can effect company s domestic and international plans. Foreign environment uncontrollables Elements of foreign business climate that have an effect on international marketing effort Technology population in developing countries may not have technical knowledge to maintain equipment. Developing legal systems e.g. corruption and lack of due process. Degree of adaptation vs standardization determined by 7 environmental factors. 1. Political/legal forces 2. Economic forces 3. Competitive forces 4. Level of technology 5. Structure of distribution 6. Geography and infrastructure 7. Cultural forces 5 stages of international marketing involvement: 1) No direct foreign marketing 2) Infrequent foreign marketing 3) Regular foreign marketing 4) International marketing 5) Global marketing The self-reference criterion and ethnocentrism Adaptation is a conscious effort on part of international marketer to: a) IMPACT: Anticipate influences of both foreign and domestic uncontrollable factors on a marketing mix; and; b) ADJUST: Modify marketing mix to minimise effects. Primary obstacle to international marketing success are a person s: (i) Self-reference criterion (SRC): unconscious reference to one s own cultural values, experiences and knowledge as a basis for decisions. (ii) Ethnocentrism: notion that one s own culture/company knows best how to do things. Both impede awareness of culture differences and ability to assess a foreign market in its true light. When faced with a problem in another culture, react instinctively and refer to SRS for solution.
Reactions are based on meanings, values, symbols and behaviour relevant to our own culture and usually different from those of a foreign culture. Relying on one s own SRC could produce an unsuccessful marketing program can influence an evaluation of appropriateness of a domestically designed marketing mix for a foreign market. Must look beyond own SRC to successful adapt marketing mix to a foreign market. Marketer must conduct a cross-cultural analysis that isolates SRC influences and maintain vigilance regarding ethnocentrism: 1) Define business problem/goal in home-country cultural traits/habits/norms. 2) Define business problem/goal in foreign-country cultural traits/habits/norms through consultation w/ natives of target country. Make no value judgments. 3) Isolate SRC influence in problem and examine it carefully to see how it complicates problem. 4) Redefine problem w/out SRC influence and solve for optimum business goal situation. Developing a global awareness To be globally aware is to be: a) Tolerant of cultural differences; b) Knowledgeable about: i. Culture ii. History iii. World market potential iv. Global economic, social and political trends Marketer must have frame of reference that goes beyond a particular region/country. Embedding global awareness: 1. Select individual managers specifically for their demonstrated global awareness. 2. Establish long-term personal and business relationships in other countries e.g. foreign agents/partners. 3. Have a culturally diverse senior executive staff / board of directors. Orientation of international marketing Success in international marketing Awareness of the environment with which marketing programs will be implemented. Ability to assess and adjust properly to the impact of a strange environment. A thorough study of foreign marketing environments, people and cultures and their influences on the total marketing process.
2. The dynamic environment of international trade World trade trends History WWI - WWII Major worldwide economic depression. o US Smoot-Hawley Act (1930) raised average US tariffs on more than 20,000 imported goods to more than 60%. o In retaliation 60 countries erected high tariff walls. o International trade stalled worldwide recession led to Great Depression. Industrialised world destroyed by 2 World Wars. Disrupted traditional trade patterns.
Post WWII 1950s 1970s 1980s 2000s US set out to infuse capitalism throughout the world and give foreign economic assistance. Measures to help create a strong world economy: o Marshall Plan to assist in rebuilding Europe. o Financial and industrial development assistance to rebuild Japan. o Funds channelled through the Agency for International Development to foster economic growth in underdeveloped world. Resulted in returns in the form of purchases of US agricultural products, manufactured foods and services. Vast manufacturing base built to supply WWII and swelling labour supply of returning military created a production capacity beyond US domestic needs. Led to major economic boom and increased standard of living. GATT was created as a forum to negotiate trade barriers. Rapid growth of war-torn economies and previously underdeveloped countries led to new global marketing opportunities. Rising standards of living. Broad consumer and industrial markets abroad created exportation and investment opportunities. Large investments by US businesses in Europe and Latin America. In 1950 US accounted for 39% of world GDP. By the end of 1960s, US MNCs faced: a) Resistance to direct investment other economies feared threat of US domination. b) Increasing competition in export markets after worldwide economic growth. o Incl Japan and Germany. o Newly industrialized countries (NICs) such as Brazil, Mexico, South Korea, Hong Kong experienced rapid industrialisation in select industries (e.g. steel, textiles, automobiles). o Developing countries incl Chile and Venezuela established state-owned enterprises (SOEs) that operated in other countries. Economic power became more evenly distributed among countries. Global GDP and manufacturing output grew. Changing role of US in world trade trade deficit of $2 billion by 1971; $160 billion in 1987; declined but then increased again to over $700 billion in 2011. US growth slowed dramatically in 2009 during GFC. Increasing world trade trends: NAFTA, American Free Trade Area (AFTA), Asia- Pacific Economic Cooperation Conference (APEC). Future Org for Economic Cooperation and Development (OECD) estimates that economies of member countries will expand an average of 3% annually for next 25 years (same rate as past 25 years). Economies of developing world growing at faster rates from annual rate of 4% in past quarter century to 6% over next 25 years. World Bank estimates that Brazil, China, India, Indonesia and Russia (w/ share of world trade 1/3 of EU) will have a 50% higher share than EU by 2020. World trade in 21 st century
21 st century characterised by greater: a) Increased interdependence of countries/economies. b) Opportunities for international trade. c) Potential for increased demand. d) Increased competitiveness. Contributing factors to increased world trade Proliferation of trade and emergence of the global economy. Intensification of global competition. More emerging markets. Developments in technology allow communication with global consumers and movement of goods. Stable and consistent political ideology. Foreign Economic Assistance. Reasonable free trade structure (i.e. WTO). Increased standard of living. Top 10 export products in 2015 1. Oil ($3.1 trillion) 2. Electronic Equipment ($2.1 trillion) 3. Machines, Engines, Pumps ($2 trillion), 4. Vehicles ($1.3 trillion) 5. Gems, precious metals, coins ($600 billion) 6. Plastics ($581 billion) 7. Medical, technical equipment ($545 billion) 8. Pharmaceuticals ($487 billion) 9. Organic chemicals ($450 billion) 10. Iron and steel ($392 billion) Collectively top 5 export nations accounted for 40% of global trade in 2015. Triad Regions (US, Western Europe and Japan) collectively produced < 50% of world GDP (down from 60% in 2007 and 78% in 2004). China now produces nearly as much as entire EU.