UNIT 1: AN OVERVIEW OF INTERNATIONAL MARKETING

1.1. Nature and Scope of International Marketing

1.1.1 Domestic Vs International Marketing
1.2. International Market Orientation and Involvement
1.2.1 International Market Orientation
1.2.2 International Market Involvement
1.3. International Marketing Tasks
1.4. International Marketing Information System

1.1 Nature and Scope of International Marketing

Whether an organization markets its goods and services domestically or internationally, the definition of
marketing still applies. However, the scope of marketing is broadened when the organization decides to sell
across international boundaries, this being primarily due to the numerous other dimensions which the
organization has to account for. When a company becomes a global marketer, it views the world as one market
and creates products that will only require weeks to fit into any regional marketplace. Marketing decisions are
made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing
the same way everywhere. Let us, firstly define "Marketing" and then see how, by doing marketing across
multinational boundaries, differences, where existing, have to be accounted for.

S. Carter defines marketing as:

"The process of building lasting relationships through planning, executing and controlling the
conception, pricing, promotion and distribution of ideas, goods and services to create mutual exchange
that satisfy individual and organizational needs and objectives".

Philip Kotler and Armstrong define marketing as:

Marketing is about identifying and meeting human and social needs. One of the

shortest good definitions of marketing is “meeting needs profitably.”

AMA defines marketing as:

Marketing is a social and managerial process by which individuals and groups

obtain what they need and want through creating and exchanging products and

value with others.

1.1.2 Domestic Vs International Marketing
Domestic marketing and International marketing are the same when it comes to the fundamental principle of
marketing. Though, fundamentally international business operations look like domestic business operations,
yet some important distinctions can be perceived following an in-depth insight. The firms having an experience
of domestic business can probably have an edge while diversifying into international operations. Keeping this
in mind, a leading management guru, Michael E. Porter has observed that firms aspiring to be successful
globally must attempt at being successful in the domestic market first. Most firms like IBM, Coca Cola,
Unilever, Proctor and Gamble, Suzuki, Sony operating globally in fact started initially as domestic companies.
As the magnitude of their operations grew, they found it profitable to venture abroad by setting up
manufacturing and distribution centers in other countries. Some of the points of difference between
international and domestic marketing are:

Domestic Marketing

The marketing strategies that are employed to attract and influence customers within the political boundaries
of a country are known as Domestic marketing. When a company caters only to local markets, even though it
may be competing against foreign companies operating within the country, it is said to be involved in domestic
marketing. The focus of companies is on the local customer and market only and no thought is given to overseas
markets. All the product and services are produced keeping in mind local customers only.

International Marketing

When there are no boundaries for a company and it targets customers overseas or in another country, it is said
to be engaged in international marketing. As such, and in a simplified way, it is nothing but application of
marketing principles across countries. It is very complex and requires a huge amount of financial resources.

To summarize the difference between domestic and international marketing

Domestic marketing is the production, promotion, distribution, and sale of goods and services in a local market
while international market is the production, promotion, distribution, and sale of goods and services in a global
market.

 Domestic marketing is less risky and easier to conduct while international marketing is more
risky and more complex.
 Domestic marketing requires lesser financial resources while international marketing requires
huge financial resources.
 Domestic marketing deals with only a single market while international marketing deals with
several different countries and markets.
  Although both use all the basic marketing principles, international marketing is more
challenging and requires more commitment from the company because of the uncertainty and
differences in laws and regulations in the global market while domestic marketing deals only
with the laws and regulations of one country.
 Domestic marketing deals only with one set of consumers while international marketing deals
with different types of consumers with different tastes.
 In domestic marketing, the company can have the same policies and strategies while
international marketing requires different strategies in the promotion of their products.
 In domestic marketing there are no barriers but in international marketing there are many
barriers such as cross cultural differences, language, currency, traditions and customs.

1.2 International Market Orientation and Involvement

1.2.1 International market orientation
The degree and nature of involvement in international business or the international orientations of companies
vary very widely. The analysis provided by Wind, Douglas and Perl mutter within the framework of the
modified EPRG scheme is helpful in understanding the levels of involvement of firms in international business.

The EPRG framework identifies four types of attitudes or orientations towards internationalization that are
associated with successive stages in the evolution of international operations. These four orientations are:

1. Ethnocentric (home country orientation);

2. Polycentric (host country orientation),

3. Regiocentric (regional orientation); and

4. Geocentric (world orientation).

These stages are assumed to reflect the goals and philosophies of the company in so far as international
operations are concerned and lead to different management strategies and planning procedure for international
operations.

1. Ethnocentric Orientation

The companies guided by this are casual players in overseas markets. For them the overseas markets serve as
conduits for directing surplus production. They use overseas markets as a buffer for checking the demand
fluctuations in the domestic market. The main focus of the company remains domestic markets.
This concept is usually preferred by small companies, or even by large companies operating in a competitive
industry. The overseas operations of such companies are usually restricted to exports in certain niches such
approach is also known as ethnocentric in the EPRG schema.

This orientation assumes that:

 Domestic strategies, techniques, and personnel are perceived as superior

 International customers are considered as secondary
 Guided by domestic market extension concept
 International markets are regarded primarily as outlets for surplus domestic production
 International marketing plans are developed in-house by the international division
 try to market those product in other countries which have demand equal to domestic market

2. Polycentric Orientation

As the overseas operations of the companies grow, they recognize the need for a different approach to
international marketing. The operations of companies can acquire forms of overseas joint ventures, licensing
agreements, overseas manufacturing and marketing. The subsidiaries operating in overseas markets are
recognized as independent business units with autonomy to operate in their markets. Within their respective
markets, the subsidiaries behave as domestic companies, deriving only strategic guidelines from their head
offices. The companies usually become multinational corporations at this stage. The controls are decentralized
to facilitate local operations under the EPRG schema, such firms are classified as polycentric.

 Guided by the multi-domestic market concept

 Focuses on the importance and uniqueness of each international market
 Likely to establish businesses in each target country
 Fully decentralized, minimal coordination with headquarters
 Marketing strategies are specific to each country
 in the effort to satisfy local customer needs and wants, full product modification is implemented or
separate product lines are developed

3. Regiocentric Orientation

A regiocentric company views different regions as different markets. A particular region with certain important
common marketing characteristics is regarded as a single market, ignoring national boundaries. “Strategy
integration, organizational approach and product policy tend to be implemented at regional level. Objectives
are set by negotiation between headquarters and regional HQ on the one hand and between regional HQ and
individual subsidiaries.
  Guided by the global marketing concept:
 World regions that share economic, political, and/or cultural traits are perceived as distinct markets
 Divisions are organized based on location
 Regional offices coordinate marketing activities

4. Geocentric Orientation

As the companies direct their approach to become a global company, they acquire a global perspective in their
operations. Such companies look for lucrative business and investment opportunities on global basis. They
derive synergy by sourcing the resources from across the globe by selecting those markets which can provide
the inputs to business in most cost-effective manner. Such companies do not treat the SBU‘s operating in
different markets as totally independent entities, but as the SBU‘s which are contributing towards the growth
of the company as a whole. Certain degree of the controls and policy matters may extend to all the SBUs,
although allowances may be made to accommodate regional diversities. Under the EPRG schema, global
companies are often classified as regiocentric or geocentric companies.

 Guided by the global marketing concept

 The world is perceived as a total market with identifiable, homogenous segments
 Targeted marketing strategies aimed at market segments, rather than geographic locations
 Achieve position as low-cost manufacturer and marketer of product line
 Provides standardized product or service throughout the world
 analyze and manage the marketing strategies with integrated global marketing program
 The objective of a geocentric company is to achieve a position as a low-cost manufacturer and marketer
of its product line. Such firms achieve competitive advantage by developing manufacturing processes
that add more value per unit cost to the final product than do their rivals

1.2.2 Stages of International Market Involvement

1. Domestic marketing
Marketing that is aimed at a single market, the firm‘s domestic market, is referred to as domestic
marketing. In domestic marketing, the firm faces only one set of competitive, economic, and market
issues and, essentially, must deal with only one set of customers, although the company may serve
several segments in this one market. Domestic marketing is concerned with the marketing practices
with in a marketer‘s home country.
2. Export marketing
The field of export marketing covers all those marketing activities involved when a firm markets itsproducts
outside its main (domestic) base of operation and when products are physically shipped from one market or
country to another. Under export marketing, the domestic marketing operation remains of primary importance.

When practicing international marketing, a company goes beyond exporting and becomes much more
directly involved in the local marketing environment within a given country or market. The
international marketer is likely to have its own sales subsidiaries and will participate in and develop
entire marketing strategies for foreign markets.

International marketing involves:

 Identifying needs and wants of customers in international markets
 Taking marketing mix decisions related to product, pricing, distribution and communication
keeping in view the diverse consumer and market behavior across different countries on one
hand and firm‘s goals towards globalization on the other hand
 Penetrating into international markets using various mode of entry and taking decisions in
view of dynamic international marketing environment.

Once a company establishes its manufacturing and marketing operations in multiple markets, it begins
to consolidate its operations on regional basis so as to take advantage of economies of scale in
 manufacturing and marketing mix decisions. Various markets are divided into regional sub-
segments on the basis of their similarity to respond to marketing mix decisions. It is known
as multinational marketing.

A global marketing strategy involves the creation of a single strategy for a product, service, or
company, for the entire global market, that encompasses many markets or countries simultaneously
and is aimed at leveraging the commonalties across many markets. Rather than tailor a strategy
perfectly to any individual market, the company aims at settling on one general strategy that will guide itself
through the world market. The management challenge is to design marketing strategies that work well across
many market.

International marketing tasks include deciding about the foreign ratio to total sales the company
would want to achieve, the decision to market in few or more countries, the type of countries to
consider, ranking and screening the identified countries, deciding how to enter the market and
deciding the overall marketing program.

Fig 1.1. Major international marketing decisions/tasks

i.

Most companies would prefer to remain domestic if their domestic market were large enough.
Managers would not need to learn other languages and laws, deal with volatile currencies, face
political and legal uncertainties, or redesign their products to suit different customer needs and
expectations. Business would be easier and safer. Yet several factors can draw companies into the
international arena:

 Some international markets present better profit opportunities than the domestic market.
 The company needs a larger customer base to achieve economies of scale.
 The company wants to reduce its dependence on any one market.
 The company decides to counterattack global competitors in their home markets.
 Customers are going abroad and require international service.

For example, Coca-Cola has emphasized international growth in recent years to offset stagnant or
declining U.S. Soft drink sales.

ii.

In deciding to go abroad, the company needs to define its marketing objectives and policies. What
proportion of international to total sales will it seek? Most companies start small when they venture
abroad. Some plan to stay small; others have bigger plans. The company also needs to choose in how
many countries it wants to market. Typical entry strategies are the waterfall approach, gradually
entering countries in sequence, and the sprinkler/shower/ approach, entering many countries
simultaneously. Increasingly, firms-especially technology intensive firms-are born global and market to
the entire world from the outset. The company must also choose the countries to consider based
on the product and on geography, income and population and political climate.
 Deciding How to Enter the Market

Once a company decides to target a particular country, it must determine the best mode of entry.
Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct
investment, shown in Figure 1.2. Each succeeding strategy entails more commitment, risk, control,
and profit potential.

Fig 1.2. Five modes of entry to international market

Deciding on the Marketing Program

Companies that operate in one or more foreign markets must decide how much, if at all, to adapt
their marketing strategies and programs to local conditions. At one extreme are global companies
that use standardized international marketing, essentially using the same marketing strategy
approaches and marketing mix worldwide. At the other extreme is adapted international
marketing. In this case, the producer adjusts the marketing strategy and mix elements to each target
market, bearing more costs but hoping for a larger market share and return.

The question of whether to adapt or standardize the marketing strategy and program has been much
debated over the years. On the one hand, some global marketers believe that technology is making
the world a smaller place, and consumer needs around the world are becoming more similar. This
paves the way for ―global brands‖ and standardized global marketing. Global branding and
standardization, in turn, result in greater brand power and reduced costs from economies of scale.

On the other hand, the marketing concept holds that marketing programs will be more effectiveif tailored
to the unique needs of each targeted customer group. If this concept applies within a country, it should apply
even more across international markets. Despite global convergence, consumers in different countries still have
widely varied cultural backgrounds. They still differ significantly in their needs and wants, spending power,
product preferences, and shopping patterns.
Because these differences are hard to change, most marketers today adapt their products, prices,
channels, and promotions to fit consumer desires in each country. For example there are five
international product and communication strategies that is depicted on thefollowing diagram:

Fig 1.3. Five international product and communication strategies

v. Deciding on the Marketing Organization

Companies manage their international marketing activities in three ways: through export departments,
international divisions, or a global organization.

Export Department: A firm normally gets into international marketing by simply shipping out its
goods.

International Division: Sooner or later, companies that engage in several international markets and
ventures create an international division to handle all this activity. The unit is headed by a division
president who sets goals and budgets and is responsible for the company‘s international growth.

Global Organization: their top corporate management and staff plan worldwide manufacturing
facilities, marketing policies, financial flows, and logistical systems. The global operating units report
directly to the chief executive or executive committee, not to the head of an international division.
The firm trains its executives in worldwide operations, recruits management from many countries,
purchases components and supplies where it can obtain them at least cost, and makes investments
where anticipated returns are greatest.
 A. Macro level benefits in national perspective:

International trade results in macro-economic effects for each economy. The imports and exports
influence the employment, national income and technology. The direct and indirect benefits
emanating from international business are listed below:
i. Increase in national Income: A country‘s export activity promotes industrial and
trade activity that generates employment and income for various sections of society.
The multipliereffect of income increases the level of output and growth rate of
economy. Especially the export of wage-goods can help a developing country to break the
vicious circle of poverty and raise the realincome of the country.
ii. Efficiency: While exporting, the countries try to attain specialization in production
of goods.In this process, there is optimum and efficient utilization of the resources.
The limited domestic market may act as a deterrent to the growth of industry and a
resultant under-utilization of resources. The international trade can help industry grow
and achieve scale and experience economies.
iii. Employment generation: Exports constitute a significant portion of different nations
andbreed opportunities for more and gainful employment. In addition to reducing
direct unemployment, foreign trade reduces underemployment, e.g. exports of Swiss
watches engages the farmers in the watch industry during their free time resulting into
gainful utilization of their skills.
iv. Increased linkages: The staple theory of economic growth recognizes that
foreign traderesults into increased backward and forward linkages with other
sectors of the economy. The industrial and trade linkages cause the development of
new industries and enhance efficiency ofexisting industries
v. Optimal utilization of resources: International business makes possible the
utilization of agricultural resources as the farmers get a greater access to the overseas
markets. This transformseven the subsistence sector into monetized sector raising
the standards of living of rural populations.
vi. Educative effect: Exports and international business exposes the executives to
overseas marketwhich develops greater skills in them. This removes a great
hindrance, often acknowledged asgreater than scarcity of capital goods. The
entrepreneurial and management expertise generally helps an economy grow faster, and
traditional factors of production can be used more effectively.
vii. Promotes Foreign Direct Investment: The level of international business of a country
 often becomes a basis for the flow of foreign direct investment in a country. In today‘s
economic environment, it is difficult to grow in absence of FDI. Several economies have
grown following theheavy investments from other parts of the world.
viii. Stimulates Competition: International business fosters healthy competition and helps
in checking inefficient monopolies. It is established that growth of competitive economies
is higher than the growth rate of protective economies. In recent times, the nations
have realized the benefits of healthy competition. Several developing and erstwhile
communist countries are promoting the same. Switching over to market-led growth
which invokes substantially internationaloperations in business, services and
technology.
ix. Technology Sourcing: In today‘s rapidly changing world, it is important to keep pace
with the changing technology. This is possible only when there exist linkages with other
national economies through international trade and business. The technology driven
industries such as information technology telecommunications, automobiles derive
immense synergy by their participation in tradeacross the world.

B. Micro level effects of International Business:

An individual firm can reap several benefits by resorting to international marketing and
international business.
i. Growth: By all standards, domestic markets have a limitation of growth potential. After a
particular level, it is very difficult for a firm to achieve growth. So, it is left with the option
of either product innovation or extending operations to other markets. The latter option
is a better way of sustaininggrowth as the product life can increase significantly when it is
sold into the world markets.
ii. Fighting Competition: As the protectionist measures by nations are being reduced, firms
operatingin domestic market only are facing increased levels of competition. Instead of
utilizing their resources infighting competitions, firms continue to look at markets in other
countries to cope up with domestic competition. Hence, international business operations
provide avenues for both survival and growth.
iii. Increased efficiency: By operating on global scale, a firm can select for its expansion
lucrativeopportunities. Also, it can reduce its product costs through global sourcing and
utilise world level technology and talent for business operations. All this makes the business
operations more efficient and as a result it can realize higher return per unit investment.
This boosts up shareholder‘s value andthe company image.
iv. Scale economics: Higher level operations on account of international operations
 produce benefitsof scale and thus enhance the profitability of firm.
v. Innovation: By operating in large markets, companies can afford to invest in research
and technology development. It is established that compared to traditional and mind set
firms, innovationdriven firms can compete effectively
vi. Risk Cover: By operating on global scale, the fluctuations of demand levels in an individual
countrydoes not make much difference on the aggregate sales. Consequently, the
uncertainties arising outof risk factors on the operations localized to a country are
reduced. Even the financial risks, physical risks, politico-legal risks etc. can be managed
more effectively by virtue of global operations.

1.4 International Marketing Information System

A marketing information system (MIS) is an integrated network of information designed to provide marketing
managers with relevant and useful information at the right time and place for planning, decision making, and
control. As such, the MIS helps management identify opportunities, become aware of potential problems, and
develop marketing plans.
Marketing Information System is defined as
“An interacting, continuing, future-oriented structure of people, equipment and procedures which is
designed to generate and process an information flow to aid decision-making in company’s marketing
program.”
The marketing information system handles both external and internal data; in marketing research, the emphasis
is on handling external information. While the marketing information system is a ‘system’ which operates
continuously, marketing research often operates in a fragmented, intermittent fashion. MIS is an integral part
of the broader management information system. For example, Benetton’s stores around the world are linked
by computer. When an item is sold, its color is noted. The data collected make it possible for Benetton to
determine the shade and amount of fabric to be dyed each day, enabling the firm to respond to color trends very
quickly. In spite of computer and other advanced technologies, “dark age” methods of data collection and
maintenance are still prevalent. In many parts of the world, a knowledge and application of modern
management systems is nonexistent.

In many offices, scores of desks are crammed together in the same room. Each employee may have his or her
own unique and disorganized system for filing documents and information. New employees inherit these filing
and accounting systems and modify them to fit their needs. The unindexed filing system, a long honored
custom, makes each employee practically indispensable since no one knows how to find a document that has
been filed by someone else. Such problems are not confined only to less developed countries. Advanced nations
such as some European countries and Japan are still struggling with the automation of their information
systems. There is often a misconception that an MIS must be automated or computerized. Although many
firms’ systems are computerized, it is possible for a company to set up and use a manual system that can later
be computerized if desired. With modern technology and the availability of affordable computers, it seems
quite worthwhile for an international firm to install a computer-based information system. Yet no one should
assume that the computer is a panacea for all system problems, especially if flaws are designed into the MIS.
A poorly designed system, whether computerized or not, will never perform satisfactorily.