Introduction to International Marketing “If we distributed pictures only in the United States, we’d lose money. It takes the whole world now to make the economics of movie-making work.” - William Mechanic President, 20th Century Fox “Half the people in the world have yet to take their first picture. The opportunity is huge, and it’s nothing fancy. We just have to sell yellow boxes of film.” - George M.C. Fisher CEO, Eastman Kodak Co. International Marketing Today we live in a world of Global outsourcing. Global Trade is at its potential high and the trend is going to grow in future. Peter Drucker says, “No Institution, whether a business, a university or a hospital, can hope to survive, let alone to succeed, unless it measures up to the standards set by the leaders in its field any place in the world.” So also, the Indian business environment has seen a sea change in the level of competition since the opening up of the domestic markets for participation of MNC’s. In 1950, the International Trade was worth $55 billion. From here, it has raised to $10120 billion in 2005. Germany ranks the first in exports and exported goods worth $912.3 billion with a global share of 10% in 2004. USA ranked second with $818.8 billion and 8.9% share. India was 30th with exports of $75.6 and a share of 0.8%. In imports, the USA has imported goods worth $1525.5 billion with a global share of 16.1%. India ranks 23rd with imports of $97.3 billion and 1% of the global share. This data shows that India has to go a long way in international Trade and the scope is tremendous. International Marketing ...is the marketing of goods and services across national frontiers. … is the marketing operations of any company that sells and / or produces within a given country when : The organization is a part of, or associated with an enterprise which also operates in other countries, and There is some degree of influence or control on its activities from outside the country in which it sells and / or produces The process of planning and conducting transactions across national borders to create exchanges that satisfy the objectives of individuals and organizations. Difference between Domestic and International Marketing What is the difference between marketing domestically and internationally Marketing concepts are universal (goal is to make a profit by satisfying customers) Difference is that in international marketing ALL environments have to be taken into consideration when the marketing plan is developed and executed • Must consider the legal environment, governmental controls, climate & weather, cultural beliefs, buyer behavior… (uncontrollable elements) Global Marketing Environment Global Regional Local Marketing Mix Environment Major International Marketing Decisions Special Problems of IM Political & Legal differences. Cultural differences. Economic differences. Differences in the currency units & their fluctuations. Differences in language. Differences in marketing infrastructure. ( In terms of promotion channels, distribution channels etc ) Trade restrictions.( Import controls ) High cost if distance coverage.( Has an impact on time, mode of transport, obsolesce and goods perishing costs) Differences in Trade Practices. Why Go Global Firms are motivated to expand their markets internationally for two reasons : Push factors : Refer to the compulsion of domestic markets like saturation of markets, international competition etc that amount to reactive reasons for going global. Pull factors : Refer to proactive reasons, that attract firms to global markets. This talks about the potential in the global markets to be more profitable and high growth prospects. Why Go Global Reasons to consider going global: Foreign attacks on domestic markets Foreign markets with higher profit opportunities Stagnant or shrinking domestic markets Need larger customer base to achieve economies of scale Reduce dependency on single market Follow customers who are expanding Driving Forces Liberalization MNC’s Technology Transportation and communication revolution Product development costs and efforts. Rising aspirations and wants Competition World economic trends Regional integration Leverages Participants of IM Private Firms. MNC’s Other large firms SME’s Public sector undertakings Trading companies Individuals. Objectives Of International Marketing Identifying the needs and wants of International Customer : Undertaking IMR & analyzing market segments, seeking to understand similarities & differences in customer groups across different countries. Achieving Global customer satisfaction : Adapting products and services & other elements of the MM to satisfy different customer needs across countries Objectives Of International Marketing Staying ahead of the competitors by providing better products / services : Assessing, monitoring & responding to global competition by offering better value, developing superior Brand Image & product positioning , broader product range, competitive price, high quality, good performance, better distribution & after sales service. Objectives Of International Marketing Co-coordinating marketing activities : Coordinating and integrating marketing strategies across countries, regions and global markets, which involve centralization, delegation, standardization & local responsiveness. Market Entry Strategies Exporting Low investment Low control of promotion Licensing Low investment Low control of promotion, positioning, and quality Able to benefit from existing distribution and market knowledge Joint venture Considerable investment More control Able to benefit from partner’s experience Must work with partner Direct investment Large investment Risky Greater control May lack knowledge of market Modes of Entry Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a “win-win” situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country Exporting Need for limited finance Less Risk Proactive and reactive motivations. Forms of Exporting : Indirect Exporting Direct exporting Intracorporate transfers. Types of Export Intermediaries Export Management companies International Trading Companies Manufacturer/s agents Manufacturers export agents Export and import brokers Freight forwarders. Modes of Entry Licensing and franchising are also low exposure methods of entry—you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country. Modes of Entry Contract manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor. Direct entry Direct entry strategies, where the firm either acquires a firm or builds operations “from scratch” involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market. International Strategic Alliances Advantages: Ease of market entry. It may be useful for a firm to partner with another that already has a presence in and knowledge of a market. For example, Kentucky Fried Chicken (KFC) partnered with the Mitsubishi Keirishi in entering Japan. By doing so, KFC was assured of managerial talent to deal with local regulations and handling logistics (e.g., labor and construction) while Mitsubishi in turn got the use of an authentic American brand name. Advantages of International Alliances Shared risk. Some projects are just too big for any one company to approach alone. Boeing can partner with Rolls Royce, with the latter making the engines for the aircraft, while Boeing makes the frame. Many times, deep sea oil exploration is too big a commitment for any one oil company, so two or more may together. International Strategic Alliances Shared knowledge and expertise. Intel, known for its cutting edge innovations in computer chips, can partner with a Japanese firm do to its manufacturing. Synergy and competitive advantage. “Synergy” refers to the idea that the resources held by two firms, when combined, add up to more than the sum of their parts. Disadvantages of International Alliances Legal obstacles. Since both firms have their own interests, complicated legal agreements may have to be made up. Also, there may be limitations on market concentration, and there may be some concern about the legality of technology transfer. In some countries, as previously mentioned, it may be difficult to enforce agreements. Complacency: If two firms join forces where they previously competed, they may become complacent in developing new products, improving quality, and lowering costs and prices. When competition is place, firms tend to maintain greater discipline, which is needed for competitive ability in the long run. Disadvantages of International Alliances Costs of coordination. When two firms have different cultures (e.g., individualistic vs. collective or authoritarian vs. more participative), more effort may be needed in circulating information and reaching decisions. For example, Oracle, an aggressive computer firm in the Silicon Valley with a strong emphasis on meritocracy might have difficulty working with a collectivistic Japanese firm. Blurred lines between areas of competition and cooperation. Suppose Sony and Compaq, which both make computers, want to collaborate on making memory chips. To do so, they may have to share information about other computer technology in areas where they may compete. There is now a question of what to share and what to hold back. Not only is time spent deciding whether to share or withhold, but essential information may end up not being available to those who need it.