Discuss the global marketing environment, the international trade
system and the economic,
political-legal, and cultural environments that affect marketing
decisions. Outline the key elements
of deciding whether to go international, deciding which markets to
enter, and deciding how to
enter the market, either through exporting, joint venturing, or direct
investment. Explain the
primary issue of deciding on the global marketing program, whether to
use a standardized or
adapted marketing mix, or some combination of the two. Distinguishing
among the ways
companies manage their global marketing organizations, through export
divisions and becoming a global organization.
A. GLOBAL MARKETING
Companies today can no longer afford to pay attention only to their
domestic market, no matter
how large it is. Many industries are global industries, and those firms
that operate globally achieve
lower costs and higher brand awareness. At the same time, global
marketing is risky because of
variable exchange rates, unstable governments, protectionist tariffs and
trade barriers, and several
other factors. Given the potential gains and risks of international
marketing, companies need a
systematic way to make their international marketing decisions. The
company must understand
the international marketing environment.
The l990s mark the first decade in which companies around the world must
start thinking globally.
Time and distance are shrinking rapidly with the advent of faster
and financial flows. Products developed in one country are finding
enthusiastic acceptance in
other countries. Domestic companies that never thought about foreign
competitors suddenly find
these competitors in their own backyards. The firm that stays at home to
play it safe not only
might lose its chance to enter other markets but also risks losing its
home market. A company
faces six major decisions in international marketing.
a. Getting involved in international marketing:
Before getting involved in the international marketing some important
aspects should be considered by the organization, these include the
basic decisions that why should we go international than in which
specific market to enter, how to reorganize the resources and the impact
of the international operations on local or domestic operations should
also be considered major decisions that company takes in involving into
international marketing are:
Major International Marketing Decisions:
1. Understanding - comes from looking at the international marketing
Multinational companies operating in many countries have proliferated
and in a global
economy more companies must consider international markets if they are
2. Deciding - whether to go abroad may be the best growth opportunity,
even for relatively small
companies. More foreign markets can increase volume.
3. Which Markets - to enter is also based upon environmental conditions.
4. How to Enter - involves choices about how to compete.
5. The Marketing Program - appropriate to international markets includes
variations on the
product and promotion.
6. The Marketing Organization - choices available in international
marketing include export
department, international division, and global organization.
b. LOOKING AT THE GLOBAL MARKETING ENVIRONMENT
A myriad of forces are coming together in the late 1990's which are
triggering the globalization of
industries, companies and individuals. Trade blocks are forming which
are consolidating market
regions; global communications and media are bringing information,
services, cultures and brands
to all corners of the world. Industries such as finance, computers,
telecommunications and media
have become global.
ii. International Trade System
Trade system concerns identify opportunities and obstacles for US
firms abroad. Companies
should investigate tariffs (taxes on imported goods), quotas (which
restrict import amounts), and
other obstacles such as non-tariff barriers that may affect ability to
1. The General Agreement on Tariffs and Trade - GATT: This is a
45-year-old treaty designed to
promote world trade by reducing tariffs and other international trade
2. Regional Free Trade Zone: Certain countries have formed free trade
zones or economic
communities–groups of nations organized to work toward common goals in
the regulation of
international trade. One such community is the European Community (EC)
When selling aboard, the firm faces various restrictions. Examples are:
1). A tariff is a tax levied by a government against certain imported
products, which is designed
to raise revenue or to protect domestic firms. This is the most common
barrier. The tariff may
be designed either to raise revenue or to protect domestic firms.
2). A quota is a limit on the amount of goods that an importing country
will accept in certain
product categories. It is designed to conserve on foreign exchange and
to protect local industry
3). An embargo is a ban on the import of a certain product (the
strongest form of quota).
4). Exchange controls are limits placed by a government on the amount of
its foreign exchange
with other countries and on its exchange rate against other countries.
5). Non tariff trade barriers are no monetary barriers to foreign
products, such as biases against a
foreign company’s bids or product standards that go against a foreign
company’s product features.
c. Looking at the Global Marketing Environment
i. Economic Environment.
Concerns relate to the industrial structure of the host country.
Subsistence and raw-material
exporting countries may be limited markets for some kinds of consumer
ii. Political/Legal Environments.
Regulations and government attitudes vary from country to country and
in each country in their
attitude toward foreign firms. Scrutiny of legal regulation is a must.
At least four political—legal
factors should be considered when considering whether to do business in
a given country.
1. Attitudes towards international buying: Some nations are quite
receptive to foreign firms and
others are quite hostile.
2. Political Stability: Stability is another issue. Governments change
hands, sometimes violently.
Even without a change a government may decide to respond to new popular
3. Monetary Regulations: Firms need to assess the government and
currency regulations within a
country to determine if any restrictions exist and if they will play a
negative role in the
international business in that country. Besides currency limits, a
changing exchange rate also
creates high risks for the seller. International trade usually involves
cash transactions; however
in some instances a barter system can be developed, this practice has
been called counter trade
and now accounts for about 25% of all world trade.
iii. Cultural Environment.
Cultural differences are very important in international marketing.
Most advertising and even
product images are culturally based and may be inappropriate,
ineffective, and even offensive in
another culture. Care is required.
d. DECIDING WHETHER TO GO INTERNATIONAL
Not all companies need to venture into foreign markets to survive.
For example, many companies
are local businesses that need to market well only in the local
marketplace. However, companies
that operate in global industries, where their strategic positions in
specific markets are affected
strongly by their overall global positions, must think and act globally.
Any of several factors might
draw a company into the international arena. International competitors
might attack the
company’s domestic market by offering better products or lower prices.
The company might want
to counterattack these competitors in their home markets to tie up their
resources. Or the
company might discover foreign markets that present higher profit
opportunities than the
domestic market does. The company’s domestic market might be shrinking,
or the company
might need an enlarged customer base in order to achieve economies of
scale. Or it might want to
reduce its dependence on any one market so as to reduce its risk.
Finally, the company’s
customers might be expanding abroad and require international servicing.
e. DECIDING WHICH MARKETS TO ENTER
Before going abroad, the company should try to define its
international marketing objectives and
policies. First, it should decide what volume of foreign sales it wants.
Second, the company must
choose how many countries it wants to market in. Third, the company must
decide on the types of
countries to enter. Possible international markets should be ranked on
several factors, including
market size, market growth, and cost of doing business, competitive
advantage, and risk level.
f. DECIDING HOW TO ENTER THE MARKET
Exporting may be of two kinds.
1. Indirect Exporting: works through independent international
intermediaries and involves less
investment by the exporter.
2. Direct Exporting: involves more risk and investment as the firm sets
up its own presence in
the host country but the potential return is also greater.
ii. Joint Venturing.
Firms have four types of joint venture available to them.
1. Licensing: occurs when a company enters into an agreement with a
licensee in the foreign
market. Licensing means little risk but also little control.
2. Contract Manufacturing: arranges for a foreign producer to make
products in the host country
for that market.
3. Management Contracting: has the exporting firm provide the management
team with the host
country supplying the capital.
4. Joint Ownership consists: of one company joining with another in the
host country to create
a local business in which they share owner ship and control.
iii. Direct Investment
Direct investment occurs when the exporting firm enters a foreign
market by developing foreignbased assembly or manufacturing facilities.
g. DECIDING ON THE INTERNATIONAL MARKETING PROGRAM
Global or multinational?
Although the issue has been vigorously debated, there is increasing
recognition that a global strategy can possess sufficient flexibility to
have a standardized business strategy and yet still market and deliver
products adapted for many different markets.
i. Product Strategies.
1. Straight Product Extension: involves marketing a product in the
foreign market without
making any changes. Some products may have very strong brand awareness
and already be
desired as is in the new market.
2. Product Adaptation: involves changing the product to meet local
conditions or wants. Often
product forms need to be altered. Size and tastes, for example, are
usually at least partially
preferred on some culturally related dimensions.
3. Product Invention: consists of creating something entirely new for
the foreign market.
1. Communication Adaptation: is often required. Although some
companies can use a single
theme and meaning internationally, it is often the case that the local
variation on even a
universal theme may require some modification. Also, media vary in the
effectiveness, even their availability.
2. Dual Adaptation: involves a combination of promotion and product
alternations for the
International pricing: Regardless of method used to calculate prices,
they will probably be higher
than domestic prices. Issues relate to transfer pricing, dumping (The
controversial trade practice
of selling a product in a foreign market at a lower price than it
commands in the producer’s
domestic market.) and grey market.
iv. Distribution channels
1. Whole-channel view: This view involves designing channels that
take into account all
the necessary links in distributing the seller’s products to final
buyers, including the
seller’s headquarters organization, channels between nations and
h. THE GLOBAL STRATEGY FRAMEWORK
i. Three Step Global Strategy
Every industry has aspects that are global or potentially global -
global meaning that there are inter
country connections. A strategy is global to the extent that it is
integrated across countries. George
Yip suggests that a total global strategy usually has three separate
steps or components:
1. Step one is the development of a core strategy which is the basis of
the firm’s competitive
2. Step two involves the internationalization of the strategy through
expansion of activities and
adaptation of the core strategy to several country markets.
3. Step three integrates the strategy across countries. At this stage
globalization is achieved. This
involves managing for worldwide business leverage and competitive
ii. Globalization strategy
1. Market participation relates to the choice of country markets and
the level of activity in these
2. Product/Service standardization involves the extent to which
standardization or differentiation
exists in each country.
3. Location of value adding activities requires choices of location of
each of those activities in the
business's value chain from R & D to service back-up.
4. Marketing involves choices about worldwide use of brand names,
advertising, sales strategies
5. Competitive moves relate to the extent to which moves in specific
countries form part of a
global competitive strategy.
i. DECIDING ON THE MARKETING ORGANISATION
i. Export Department.
During early international marketing efforts, companies typically
just create a new department to
coordinate international operations. The sales manager may take on
larger staff if and as the
international business grows in importance and more marketing services
are needed to support it.
ii. International Division.
As the level of involvement in and complexity of international
operations increases, companies
commonly organize an international division. In addition to running
international operations, the
division oversees strategic growth and investigates different types of
foreign entry opportunities in
new countries. Operating units in foreign markets under division control
may be organized by
geographical organization, world product groups, or international
iii. International Organization.
For many large companies, the scope of operations grows to the point
where they are no longer a
firm involved in many foreign markets, they are a truly a multinational
management, suppliers, manufacturing, and financing are no longer linked
to a single-country mentality. The entire world becomes a single market
whose segmentation is base upon strategic
and tactical competitive advantage, not national affiliation.
j. BASIC COMPETITIVE STRATEGY PROFILES
i. Global Leader Strategy
Innovator in technologies, products and markets with high global
share and wide country market
ii. Global Challenger Strategy 1
Frontal or encirclement attack on the leader in all markets with
increasing country market coverage
and high global share but less than the leader.
iii. Global Challenger Strategy 2
Flanking or bypassing world leader with increasing country market
coverage and high global share
but less than the leader.
iv. Global Follower Strategy
Rapid imitation of leader or challenger with moderate country market
coverage and emphasis on
price sensitive markets. The result is overall moderate share with high
shares in selected country
v. Global Niche Strategy 1
Rapid penetration of narrow market segments by selective targeting of
country markets and small
share of overall market.
vi. Global Niche Strategy 2
Infiltration - slow penetration of selected narrow markets with focus
on selected country markets
and low share of the overall market.
vii. Global Collaborator Strategy
Innovations in research and development of technologies, products and
markets, set standards and
shares them with other firms. This shows small or moderate country
market shares but high shares
when all strategic "standards users" are included.