International Marketing 11e: Terpstra, Foley, Sarathy
1
Distinguish between international and
domestic marketing.
Describe the global environment in which
marketing takes place.
Show a variety of ways in which a firm may
practice international marketing.
Discuss current global trends affecting
global marketing.
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The key difference between international and domestic
marketing is that international marketing crosses borders.
International
marketing and
domestic
marketing
share the
same issues,
also known as
the 4 P’s of
Marketing:
• Product: Does product meet needs of
customers?
• Price: What is the price of my product and
what are my competitors charging?
• Promotion: Do people know about my
product?
• Place: Is the product properly distributed
so my customers can purchase it?
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Marketing - the collection of activities undertaken by a firm to
assess and satisfy customer needs, wants, and desires.
Marketing Management - the planning and coordinating of
activities to achieve a successfully integrated marketing program.
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International Marketing - the act of marketing across
borders including marketing between countries as well as within each
country.
•
International marketing crosses national borders but addresses
similar issues as in domestic marketing, including customer
identification, product development, product distribution, promotion,
and pricing.
•
The international marketer moves products across national
boundaries in addition to moving products within each market the
company serves.
International Marketing 11e: Terpstra, Foley, Sarathy
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The objectives of International Marketing include:
Identifying and understanding
global consumer needs
Recognizing
the constraints
of the global
environment
Coordinating
marketing
activities
International Marketing 11e: Terpstra, Foley, Sarathy
Satisfying
customer
needs
Being better
than the
competition
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Identifying
and
Understanding
Global
Consumer
Needs
International Marketing 11e: Terpstra, Foley, Sarathy
Research helps a firm
understand consumer
needs in different
markets and determine
whether those needs
are different from those
of the customers it
currently serves.
Companies also need to
analyze market
segments across
countries to be able to
position their products
appropriately for entry
into international
markets.
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Satisfying
Customer
Needs
International Marketing 11e: Terpstra, Foley, Sarathy
Well-developed
distribution is needed to
make sufficient
quantities of goods and
services available at the
point of sale (POS).
If needs differ across
countries and regions, a
company must consider
how to adapt its products
and the various elements
of the marketing mix to
best satisfy customers.
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Being Better
than the
Competition
International Marketing 11e: Terpstra, Foley, Sarathy
Firms must contend with
competitors in their
home markets and
competitors in the
foreign markets in which
they operate.
Multinational companies
have a more extensive
set of experiences to
draw upon and generally
have access to additional
resources.
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Coordinating
Marketing
Activities
International Marketing 11e: Terpstra, Foley, Sarathy
International
marketing creates a
new level of
complexity because
firms must
coordinate their
marketing activities
across countries.
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Complexity increases as
the number of markets
served increases.
Recognizing
Constraints
of the Global
Environment
International Marketing 11e: Terpstra, Foley, Sarathy
Differences exist in
culture and economic
conditions, marketing
infrastructure,
government policy, and
financial issues.
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Competitors come
from all over the
world
Global
competition
requires greater
flexibility within a
firm to be
successful
Competitors have
different strengths
and weaknesses
International Marketing 11e: Terpstra, Foley, Sarathy
Global
competition
presents a need
for an infinitely
more complex
marketing strategy
than is needed for
dealing with
domestic markets
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In the global environment, international marketing
managers must be sensitive to different forms of
government, cultures, and income levels.
Overall, global managers must deal with all
uncontrollable and controllable factors as well as
the differences between these factors from country
to country.
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Controllable elements include the 4 P’s of marketing
although some elements are not totally under the
marketer’s influence.
Uncontrollable elements include things such as the legal
environment and the different kinds of risk associated
with international marketing (political, legal, economic,
and financial). Marketers can exert pressure on and effect
change in these “uncontrollable” elements.
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The principle rationale of MNCs is that synergy is created
within international operations through the implementation
of a division of labor and a transfer of knowledge.
As a result, the
• Foreign Marketing - marketing
within foreign countries.
international
marketing
• Global Marketing - coordinating
marketing in multiple markets in
manager has a dual
the face of global competition.
responsibility:
This dual responsibility creates concern over issues in
BOTH domestic and international markets.
International Marketing 11e: Terpstra, Foley, Sarathy
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Where the Buyers Are
Where the Ideas Are
Sometimes foreign
markets may be the only
markets in which a
company’s products can
be sold.
Sometimes, the best ideas
and innovations occur in
foreign markets as
opposed to only the
domestic market.
Success may stem from
combining an overseas
product with local
technology to develop an
entirely new line of
products.
International Marketing 11e: Terpstra, Foley, Sarathy
Risks and Differences of
Foreign Markets
Ben & Jerry’s and
Walmart examples show
challenges with logistics,
partner selection,
consumer preferences,
and pricing when doing
business in Russia and
Germany.
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Developing new products
Developing relationships with suppliers, distributors, and customers
Fewer but stronger global competitors
Growing price competition
Greater regional integration and government regulation
Developing a marketing culture
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The textbook provides a number of
examples of companies that have
expanded internationally:
•
•
•
•
•
Disney
Robotech
Mattel
Maui Jim
Walmart
International Marketing 11e: Terpstra, Foley, Sarathy
•
•
•
•
Iconics, Inc.
Gantec, Inc.
Ben & Jerry's
Starbucks
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Firms have a variety of motives to expand internationally:
Taking advantage of the potential of world markets
Diversifying geographically
Using experience-curve economies and economies of scale
Extending the life cycle of a product
Overseas markets are a source of new products and ideas
Foreign companies may provide capital and/or market access
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Past success does not necessarily mean future success and
strategies may need changing:
•
Walmart’s failure in Germany demonstrates how even
large, experienced companies cannot always repeat prior
success.
•
Strategies used in the home market may need to be
adapted for local consumers as shown in the Disneyland
Paris example.
•
The entry strategy used by a firm can vary considerably
from simply exporting to more complex and risky
investments involving marketing, distribution, and
manufacturing.
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Developing
universal
products
can be very
difficult
International Marketing 11e: Terpstra, Foley, Sarathy
Each international
market has its own
tastes and preferences.
These can be extremely
hard to identify.
Disney struggled with
Disneyland Paris when
it tried to give
European consumers
the same experience it
gives American
consumers.
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Provides enormous opportunities to companies
seeking to expand
Also generates new global competitors
The growing middle classes in China and India
have increased the number of consumers for
international firms and their domestic
competitors.
The role of emerging (and emerged)
economies as both consumer and
competitor has increased
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The service sector is the fastest-growing
segment of internationalization, representing
about 20 percent of world trade.
The United States has a trade surplus in
services, but a trade deficit in products.
This is especially true for services like
transportation and healthcare.
Continued growth and
strength of the service sector
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Many countries, such as Brazil, are
opening up their markets to foreign
franchises, and evidence suggests that
foreign franchises have tremendous
growth opportunities
Franchising offers growth
opportunities
Some franchises in Brazil:
http://www.franchisedirect.com/internationalfranchises/brazil/30/
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The global business environment continues to change as
communication becomes cheaper, product development
cycles shorten, and competitors become more
numerous
These changes result in a greater need for resources,
speed, and flexibility
This changing environment puts even greater pressure
on the international marketing manager to understand
these changes
Ongoing change and
increasing risk are the new
normal
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It means lower trade barriers and low costs of doing
business
It can also mean new competitors
It also means an increase in economic agreements like
NAFTA, ASEAN, and MERCOSUR
Marketing managers must look to current events for
news, like what is happening with the EU, that could
impact the firm negatively or positively
Increasing economic integration
and cooperation between countries
includes opportunity and risk
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Renewed concerns about globalization
Workers question open borders while
facing job losses and government deficits
Businesses need the benefits of
globalization, but they must defend their
actions to workers and politicians.
The global financial crisis of 2008-2009
has undermined any growing support
for globalization
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Small can
be big
New
communication
technologies and
social media are
important
influences
International Marketing 11e: Terpstra, Foley, Sarathy
relatively small companies can
be big international players
marketers must recognize their
growing influence, and integrate
new technologies into their
global business plan
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Product life
cycles are
shortening
Import and
export
regulations
are
increasing
International Marketing 11e: Terpstra, Foley, Sarathy
consumers are increasingly
demanding the “best and latest”
terrorism concerns and the need
to limit weapons of mass
destruction mean governments
will continue to enforce and likely
increase import and export
regulations
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International Marketing 11e: Terpstra, Foley, Sarathy
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Discuss how the global economic environment differs from the
domestic economic environment.
Analyze different international trade theories and their influence on
government policies in support or constraint of trade.
Discuss the balance of payments (BoP) as a leading indicator of the
international economic health of a country.
Describe how the World Trade Organization (WTO), the United Nations
Conference on Trade and Development (UNCTAD), and other global
organizations influence trade.
Detail the five levels of regional economic integration and their
implications for the international marketing manager.
International Marketing 11e: Terpstra, Foley, Sarathy
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International Trade Theory
Balance of Payments
Government Policy and Trade
Institutions in the World Economy
Regional Economic Integration
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International Trade Theory
Firms expanding internationally must appreciate
how their international activities match with a
country’s goals for international trade.
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Balance of Payments
A leading indicator of the international
economic health of a country and may directly
influence a firm’s expansion decisions.
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Government Policy and Trade
Firms are directly impacted by government
policies in areas such as tariffs and non-tariff
barriers.
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Institutions such as the World Trade
Organization and the World Bank greatly
influence trade policies, and ultimately can
influence a firm’s global strategy.
Institutions in the World Economy
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Firms generally benefit from economic integration
through lower costs of doing business. However it
can also lead to stronger competitors.
Regional Economic Integration
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International trade
theory seeks to answer
two basic questions:
Three key international trade
theories:
Why do nations
trade?
Absolute Advantage
absolute efficiency of
production
What goods do they
trade?
Comparative Advantage
relative efficiency of
production
Product Life Cycle
trade patterns and
production over time
International Marketing 11e: Terpstra, Foley, Sarathy
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Absolute Advantage - a country's ability to produce a good at
a lower cost, in terms of real resources, than another country.
Comparative Advantage - a country's ability to produce a
good at a lower cost, relative to other goods, compared to another
country; a country tends to produce and export those goods in which it
has the greatest comparative advantage and import those goods in
which it has the least comparative advantage.
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Four Phases of the
Product Life Cycle
Phase 2:
foreign
production
starts
Phase 3:
foreign
production
becomes
competitive
in export
markets
Phase 4:
import
competition
begins
Phase 1:
the U.S.
exports the
product
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Quantity
Developed Nation
Time
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Quantity
Developing Nation
Time
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The Product
Life Cycle may
not explain
trade and
production
patterns as well
anymore due to:
Short gap
between
phases
“Born globals”
may skip some
phases
Born Globals - a term used to refer to companies that begin
operations with both domestic and foreign sales from the outset.
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Balance of Payments (BoP) - statements of the economic
transactions between one country and all other countries over a period
of time, usually one year.
The BoP is the principal source of information about a
country’s international trading activity
It essentially indicates how much money is going into and
out of a country
When a country receives money, it is a ‘credit’ to the BoP
When a country pays out money, it is a ‘debit’ to the BoP
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Deficits - in the context of balance of payments, the shortfall that
results when country-level spending exceeds country-level saving.
Surpluses - in the context of balance of payments, an overage that
results when country-level saving exceeds country-level spending.
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Current Account - a specific balance of payment account that
includes transactions in manufactured goods and services as well as
unilateral transfers.
Goods
(Merchandise)
Services
Unilateral
Transfers
Capital Account - a specific balance of payment account that
includes flows such as direct and portfolio investments, private
placements, and bank and government loans.
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Impact on
marketing
decisions
International Marketing 11e: Terpstra, Foley, Sarathy
BoP is an indicator of
a country’s economic
health
BoP data can help the
marketing manager
identify competitors’
and consumers’
locations
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The capital account,
over time, reflects a
country’s solvency
Financial
considerations
Steady loss of foreign
exchange reserves may
lead to trade
restrictions such as
exchange controls
A firm’s pricing policies
and profit repatriation
may also be impacted
by a country’s BoP
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Commercial Policy - government regulations dealing with
foreign trade.
Primary tools of commercial policy are tariffs, quotas,
exchange controls, and non-tariff barriers
Tariff - a tax on products imported from other countries.
Earns revenue and
makes foreign goods
more expensive
Firms may use tariff
engineering to
minimize the impact of
tariffs on their products
International Marketing 11e: Terpstra, Foley, Sarathy
Trade agreements and
the GATT/WTO have
significantly reduced
tariffs over the past 50
years
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Specific Duty - a tariff levied based on quantity.
Ad Valorem Duty - a tariff levied as a percentage of
the value of the goods.
Tariff Engineering - a process of minimizing the impact of
tariffs by modifying the form in which the product is imported.
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Quotas - quantitative restrictions that limit the amount of goods
that may enter a country.
• Fewer options for firms to ‘work around’ quotas
Exchange Control - a government monopoly on all dealings in
foreign exchange, often resulting in a government’s rationing it out
according to its own priorities.
• Government monopoly on foreign trade
• Foreign trade is administered through a central office
Non-tariff Barriers (NTBs) - trade barriers that include
customs documentation requirements, marks of origin, food and drug
laws, labeling laws, antidumping laws, “buy national” policies, and
subsidies.
International Marketing 11e: Terpstra, Foley, Sarathy
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World Trade
Organization
(WTO)
International
Monetary
Fund (IMF)
United
Nations
Conference
on Trade and
Development
(UNCTAD)
International Marketing 11e: Terpstra, Foley, Sarathy
Organization
for Economic
Cooperation
and
Development
(OECD)
The World
Bank Group
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World Trade Organization (WTO) - an association of
over 150 countries focused on cooperation and agreements concerning
the trade of goods and services. Its primary goal is to provide a
framework for multilateral trade negotiations.
Promotes the reduction of
trade barriers
WTO
Originally called the GATT,
there have been 8 major
rounds of trade negotiations
since 1947
Calls for nondiscrimination:
each WTO member must
grant each other WTO
member ‘most favored nation’
status
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Nondiscrimination - a policy such that each contracting
party must grant all others the same rate of import duty; a trade
concession granted to one trading partner must be extended to all
members.
• WTO provides forums for consultation, mediation, and
rulings on trade disputes between members
Consultation - a stage in the WTO process for managing trade
disputes between countries whereby the countries have a chance to talk
to each other and attempt to resolve the dispute before it goes to a
mediator or a panel of experts.
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UNCTAD - the United Nations Conference on Trade and
Development; a permanent organ of the United Nations General
Assembly with the primary goal to further the development of emerging
nations.
Benefits to increased world trade have not
been distributed equally and developing
countries have been growing dissatisfied with
the WTO process
UNCTAD
UNCTAD has established a tariff preference
system favoring the export of manufactured
goods from developing economies
UNCTAD has succeeded in securing
preferential tariff treatment from developed
economies like the U.S. and EU
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The WTO’s success has meant that a foreign
firm is more price competitive in host countries
and is more likely to work with a host
government when issues arise.
UNCTAD also
impacts a
firm’s
strategy:
• An international firm that combines expertise
from its home market with resources of the
local market can create a powerful local
competitor.
• International firms can also bring innovative
marketing strategies to the local market.
International Marketing 11e: Terpstra, Foley, Sarathy
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International Monetary Fund (IMF) - an organization
that acts as a forum for monetary and fiscal discussions that affect the
world economy and that supplies financial assistance (loans) and
technical assistance (economic consultants).
IMF
Originally designed to help nations
control exchange rate (currency)
fluctuations and thereby stabilize
trade
The system failed in the 1970s, and
now most currencies ‘float’ or vary by
supply and demand
The IMF now provides:
• A forum for global monetary and fiscal discussions
• Financial assistance (loans) to countries with BoP issues
• Technical assistance and economic consultants to countries to help them design
and implement sound economic policies
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Exchange rate instability:
• Results from large changes in the exchange rate between a
country’s currency and that of another currency
• Exchange rates between currencies are difficult to predict
• Exchange rate instability makes doing business in that
country more difficult
Foreign Exchange Rate - the domestic price of a foreign
currency.
• In other words, the amount of $US it will cost to buy (or
exchange for) foreign currency
• Changes in the exchange rate changes the cost of imported
goods (into the home country) and exported goods (into a
firm’s international markets)
International Marketing 11e: Terpstra, Foley, Sarathy
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World Bank - an institution whose goal is to promote economic
growth, to provide loans for infrastructure development, and to
improve the living conditions of the world’s population.
World
Bank
Originally called the International
Bank for Reconstruction and
Development (IBRD), its primary
mission was to help rebuild
infrastructure after World War II
The World Bank still provides
loans for infrastructure
development, mostly in developing
economies
World Bank Group includes:
•
•
•
•
•
The IBRD
The International Development Association (IDA)
The International Finance Corporation (IFC)
The International Centre for Settlement of Investment Disputes (ICSID)
The Multilateral
Investment
International
Marketing 11e: Terpstra,
Foley, SarathyGuarantee Agency (MIGA)
30
Organization for Economic Cooperation and
Development (OECD) - a membership organization of over
30 countries committed to democracy and market economics, with a
focus on research and a sharing of policies and best practices.
Although it is a small organization,
OECD has a powerful global voice on
employment issues, living standards,
financial security, sustainable
economic growth, and trade issues
OECD
OECD provides statistics, up-to-date
publications on economics and public
policy, and information on the key
industries of member countries
Being an OECD member can bring
more foreign investment from firms
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Regional Economic Integration - economic
cooperation within geographic regions to pursue common
economic gains.
There has been tremendous growth in regional economic
integration in the last 50 years.
Free Trade Area
The five major levels
of integration are:
Customs Union
Common Market
Economic Union
Political Union
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Multilateral trade
agreement - trade
agreement between more
than two countries.
Bilateral trade agreement trade agreement between two countries.
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Rise of regional groupings means that fewer but
larger economic entities are gradually replacing
nearly 200 national markets.
A firm's operations within a regional
group will tend to be more uniform and
self-contained than they would be in
ungrouped national markets.
In response to global forces
and economic integration, a
firm's marketing program will
be modified over time.
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International Marketing 11e: Terpstra, Foley, Sarathy
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Discuss concepts critical to nations, such as sovereignty and security, in order
to understand political risk.
Describe the role of firms in the political and legal environment—how firms
are shaped by it and how firms shape the laws and politics of a nation.
Identify the areas of the home country environment that affect a firm’s
international marketing.
Explain how U.S. export controls, antitrust laws, and tax laws affect the
feasibility and profitability of a U.S. firm’s international marketing.
Discuss the effect of international organizations such as the IMF and the
WTO and regional groups such as the EU on the international legal
environment.
Describe international conventions designed to protect intellectual property.
International Marketing 11e: Terpstra, Foley, Sarathy
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Political Environment - any national or international
political factors that can affect the operations of a business.
Political
Environment is
typically related to
relations between
host and home
countries of an
international firm,
or host country
and international
firm.
• Crisis in the EU: What will happen in
Spain, Portugal, Italy, and Greece?
• Arab Spring: How to operate safely
around continuing turmoil
• Expropriation of companies by local
governments
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Host Country
Political
Environment
• Host country national interests
• Government actions: quotas,
exchange control, expropriation,
nationalization
Political Risk
Assessment
International
Political
Environment
International Marketing 11e: Terpstra, Foley, Sarathy
• Possibility that government
actions adversely impact
businesses
• A firm’s profile in the
country is related to its risk
• Country relationships with
each other
• Membership in NGOs
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Host Country National Interests:
National Sovereignty - a nation's right to govern itself without
outside interference.
Positive impact of foreign firms to the economic, social, and/or
technological welfare of the nation
Entry restrictions
Potential Problems:
Trade barriers (quotas and tariffs)
Exchange controls
Forced asset transfer
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Confiscation - government seizure of assets without
remuneration.
Expropriation - government seizure of assets with some
compensation, usually less than fair market value or the firm's
valuation of the assets.
Nationalization - government seizure of entire industries,
regardless of nationality.
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Political Risk - the possibility that actions or policies by a
government may adversely affect a firm’s operations and profits.
Assessing political risk is a difficult task
for the international marketing manager.
Encompasses the whole of a country’s business
environment and includes risks due to forced asset
transfer, terrorism, social unrest, regulatory
change, political instability, trade policies, etc.
External resources are available to help determine political risk
such as U.S. Department of Commerce and private companies
(e.g., Euler Hermes, PRS Group, and Moody’s).
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Firm’s home country
Product or industry
External Factors that
Impact Political Risk
Size and location of operations
Visibility of the firm
Host country political situation
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Company behavior
Contributions of the firm to the
host country
Localization of operations
Company Factors that
Impact Political Risk
Subsidiary dependence
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(continued)
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The International Political Environment involves
political relations between two or more countries.
An international firm becomes involved in a host
country’s relations which may increase political risk.
Challenges
exist
when:
• Host and home country do not have good relations
• Host country has poor relations with other countries
• Host country is not a member of any NGO’s, which
reflects the ease of doing business with the host
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The Home
Country
Political
Environment
can:
• Constrain international and domestic
operations, like South Africa after the
U.S. left and Myanmar when PepsiCo
left
• Limit growth into other countries
• Affect third country (not host or home
country) relations, like the boycott
against Nestle in the 1970s
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There are three dimensions
to the legal environment in
international marketing:
U.S. Laws
Export controls, antitrust controls, etc.
International
Law
In some cases, they have
conflicting goals and laws.
International Marketing 11e: Terpstra, Foley, Sarathy
Domestic
Laws in each
of the Firm’s
Foreign
Markets
Tax treaties, international
organizations, standards
organizations, and intellectual
property protection
Legal systems, contract
considerations, impact on the 4 P’s
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Export Controls - laws enacted by a government that
determine what products may be exported and to which countries and
buyers.
• Military and weapons technology
• Commercial goods with ‘dual-use’
Dual-use Goods - products that have both commercial
and military or weapons proliferation applications.
• Fines and other penalties, including criminal charges, are
applied for firms and individuals not following U.S. export
regulations
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U.S. Department
of Commerce –
Bureau of
Industry and
Security
U.S. Customs and
Border Protection
U.S. Department
of the Treasury –
Office of Foreign
Assets Control
U.S. Department
of State – The
Directorate of
Defense Trade
Controls
• Controls exports of
dual use goods and
technology, and
maintains directory
of individuals and
companies of
concern to the U.S.
• Helps keep U.S.
safe by preventing
illegal entry of
goods
• Ensures counterfeit
goods are not
imported
• Maintains system
for electronic entry
of exports (AES
Direct)
• Enforces U.S.
economic and trade
sanctions such as
the Cuba embargo
• Regulates exports
of defense articles
and services
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U.S. courts have jurisdiction if the act
produces consequences in the United States
• When a U.S. firm acquires a foreign firm
Three
situations
are
particularly
relevant:
• When it engages in a joint venture with a
foreign firm
• When it enters into an overseas
marketing agreement with a foreign firm
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Two agencies
have
jurisdiction
over antitrust
regulations:
• The Department of Justice
• The Federal Trade Commission
Predatory Pricing - the practice of pricing a product at a very
low price, sometimes below cost, to gain market share and take
business away from competitors.
Foreign agencies may also have to approve certain
activities (e.g., GE-Honeywell merger)
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Foreign Corrupt Practices Act (FCPA) - U.S. law that
prohibits U.S. firms or its subsidiaries from paying bribes to foreign
officials for the purpose of obtaining or keeping business.
• Prohibits U.S. companies from paying bribes to get business
• Focuses on bribes to foreign officials, not private businesses
Anti-terrorism regulation:
• Includes a variety of U.S. laws designed to monitor
terrorism and stop financing terrorism
• USA PATRIOT Act expands reporting requirements and
increases scrutiny on U.S. and foreign companies
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Antiboycott Regulations - laws enacted to prohibit U.S.
firms from participating in foreign government boycotts that thee
United States did not sanction.
• Arab league boycott of Israel: U.S. companies cannot boycott
trade with Israel if requested by a member of the Arab
League.
• The regulations apply to any boycott in place the U.S. does
not support.
• Violations carry significant fines including a fine of $6
million against Baxter International – a medical products
manufacturer.
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International Law:
• Comprises the collection of treaties, conventions, and
agreements between nations that carry, more or less, the
force of law
• Involves ‘mutuality’ of two or more countries agreeing on
regulations or standards
Tax treaties
Aspects of
International Law
include:
International organizations
(IMF, WTO, UN, OECD, etc.)
Standards organizations
Intellectual property rights
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Tax treaties
•
Often reduce or eliminate double taxation
•
May be bilateral or multilateral
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IMF and WTO
•
Both organizations are multilateral
agreements among members to improve
world trade and increase economic growth
and stability
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UN, OECD, and
Other International Organizations
•
Often concerned about economic and
social well-being
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•
International Standards Organization
(ISO) promotes worldwide standards
•
Regional and national product safety
standards exist (e.g., CE and UL marks)
Standards Organizations
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Intellectual Property exists in four major forms:
Patents - intellectual property protection for products, technology, and
inventions.
Trademarks - intellectual property protection for words, phrases,
symbols, and designs that distinguish one product from another.
Copyrights - intellectual property protection for artistic or literary
works such as books, paintings, music, and software.
Trade Secrets - proprietary company information that is highly secret
to the company but not officially registered with a patent, trademark, or
copyright.
Intellectual property rights
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Lack of Intellectual Property (IP) protection hurts
International Firms:
•
•
•
•
Lost sales
Less innovation
Potential risks for consumers
Loss of reputation and brand name
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Paris Union - a multilateral agreement offering trademark and
patent protection among member countries. The agreement offers extended
time in which to file for IPP in a member country.
•
includes 173 nations and allows registration in one country to
result in short-term IP protection in other member countries
(after which the firm needs to apply for protection in those
countries).
Berne Convention - a multilateral agreement offering protection
of literary and artistic works among member countries.
• includes 161 members.
Madrid Agreement - a multilateral agreement offering a single
international application for trademark protection.
• includes 70 member nations.
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Patent Cooperation Treaty (PCT) - a cooperative union for
the filing of patents among member countries.
• provides a cooperative union for 120 member nations to file
applications for patents.
World Intellectual Property Organization (WIPO)
- part of the United Nations and focuses on intellectual property
protection.
World Trade Organization (WTO) - an association of over
150 countries focused on cooperation and agreements concerning the trade
of goods and services.
• also requires some IP protection amongst member nations.
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Each foreign market a firm enters has laws that
impact a firm’s business activities, especially differing
legal systems:
Common
Law
English (UK) in
origin
Case law oriented
(based on
precedent)
Civil or
Code Law
Extensive and
comprehensive
set of written
laws
Relies on
detailed
contracts and the
“letter of the law”
Islamic
Law
Usually a mix of
civil, common,
religious, and
indigenous laws
Often based on
Shari’a, or
Islamic law
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Foreign Laws
Challenge the
International
Marketing
Manager on each
of the 4 P’s:
Product
• Product safety, labeling, and brand and
trademark registration
Pricing
Resale Price Maintenance (RPM) - the effect of rules
imposed on manufacturers, wholesalers, or retailers on their own
products to prevent them from competing too fiercely on price and thus
driving profits down from the reselling activity.
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Foreign Laws
Challenge the
International
Marketing
Manager on each
of the 4 P’s:
International Marketing 11e: Terpstra, Foley, Sarathy
Distribution (Place)
• Not all channels may be available, regulations and
laws on distributors and agents vary
Promotion
• Advertising restrictions vary widely as do sales
promotion techniques such as contests and free
samples
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Whose Law? Whose Courts?
•
When conducting business across
borders, which legal system settles
commercial disputes?
•
Jurisdiction is often determined by
who is suing whom
•
Choice of Law clauses in contracts
pre-specify which country’s legal
system will address disputes
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Arbitration or Litigation?
•
Arbitration involves a neutral 3rd
party to resolve disputes
•
The ICC in Paris is a common
arbiter of disputes
•
The International Centre for
Dispute Resolution (ICDR) has
cooperative agreements with 62
agencies in 44 countries
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• Privacy
(e.g., protection of customers’ records)
Growing ecommerce
and internet
sales have
created new
legal issues
and
challenges:
• Taxation
(e.g., governments’ increasing
enforcement of tax policies that have
previously been avoided by internet
sales)
• Internet and email marketing extends
the firm beyond the borders of the
countries where it has a physical
presence
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The
Marketer is
Not a
Lawyer
• Hiring a legal expert is necessary to
navigate complex international law
• As the international legal world
becomes more complex, firms are
beginning to have both international
lawyers at headquarters and local
lawyers in foreign subsidiaries
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International Marketing 11e: Terpstra, Foley, Sarathy
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Identify a framework in which a firm may develop its
global strategy.
Discuss strategy issues specific to global marketing.
Identify the foundational analysis used to develop a global
strategy: organizational, structural, and country/regional
analysis.
Discuss the relationship between competitive advantage
and a firm’s value chain and address their impact on
global strategy.
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Detail the way a global marketing strategy is implemented
and various strategic perspectives that may be used in
support of that implementation.
Identify the impact of competitors and global strategy.
Discuss the pressure to standardize or adapt products and
services when developing the global marketing strategy.
Discuss how the global marketing system must be
coordinated.
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(Continued)
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(Continued)
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Situational Analysis is used to identify internal issues
that will impact the firm.
Internal
situational
analysis should
include all
departments
and identify
strengths and
weaknesses for
the firm as it
grows
internationally.
International Marketing 11e: Terpstra, Foley, Sarathy
The Internal
assessment is
sometimes
called the
“organizational
readiness to
export”.
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Situational Analysis is used to identify external issues that will
impact the firm.
• Porter’s Five Forces
Industry
Analysis
• Identify competitors, barriers to entry,
consumers, and trends
• Porter: low cost, differentiation, niche
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Competitive
Advantage
and the
Value Chain
Firms need to evaluate which activities to perform
and which to outsource.
Which activities create competitive advantage?
Where to perform each activity?
• Principles of comparative advantage may
come into play
Competitive Advantage - in the context of firm-level strategy, this reflects the
firm’s basis or ability to compete, generally by becoming the lowest cost producer,
providing a differentiated product or service, and/or focusing on a niche opportunity.
Value Chain - the sum of activities a firm performs to create value (profitability).
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Separate
product
strategies or
one global
strategy?
How homogenous or different is each product line?
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After
organizational and
situational
analysis, a firm
must consider
individual markets
(either countries
or regions).
What are the goals
– and
corresponding
strategies to meet
the goals – of each
product line and
each market?
Global
marketing
involves all of a
firm’s foreign
markets and
understanding
commonalities
and synergies
between them.
International Marketing 11e: Terpstra, Foley, Sarathy
The interaction
between productline goals and
environmental
analysis is
recursive and
leads to more
integrated global
marketing
strategy.
Do marketspecific
differences cause
the firm to
change its
marketing
policies and
activities?
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Strategies must be correctly implemented.
How well they are implemented depends on
organizational structure and personnel assigned
to a given country.
Feedback on results is critical for
continued monitoring.
The global environment
changes over time, as do the
company’s competitive
advantages.
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Products developed
in home market
extended to foreign
markets
Market-extension Perspective - a firm’s
Each market treated
as independent, not
interdependent
Multidomestic Perspective- a firm's
Markets treated as
interdependent
international expansion philosophy highlighted by
unplanned and short-term exploitation of foreign
markets while the domestic market remains the focus of
the company.
international expansion philosophy highlighted by
careful consideration of foreign markets and with a
clearly separate orientation toward each country
market.
Global Perspective- a firm’s international
expansion philosophy highlighted by formulating its
strategic plans in order to direct special attention to the
interdependence among national markets and
competitors’ actions in those markets.
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Assessing
Global
Competition
• Sources of competition and likely responses to
competition
• Review competition’s strengths and weaknesses
• National champions may require special
treatment
National Champions - firms that have dominant positions in their
national markets and often receive government support.
Where Do
Global
Competitors
Originate?
• From domestic markets to foreign markets
• From other product markets to new product
markets
• Forward or backward integration
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Global marketing strategy cannot be separated from
overall corporate strategy.
Buyer profiles
Marketing infrastructure
Standardization
or Adaptation:
Market
Differences
Transportation and communications
systems
Different legal provisions
Distribution systems
Standardization reduces complexity but
some local adaptations are usually
necessary
The real question is how much to adapt?
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Coordination of global marketing activities is essential
and can take place in the following ways.
Using similar
methods to
carry out
marketing
activities
across
countries.
Transferring
marketing
know-how
and
experience
from one
country to
another,
particularly
from lead
markets to
other
countries.
International Marketing 11e: Terpstra, Foley, Sarathy
Sequencing
marketing
programs so
that successful
elements are
gradually
introduced
into different
markets.
Integrating
efforts across
countries so
that
international
clients with
operations in
many
countries can
be offered the
same service
in each
country.
A firm must
also determine
whether its
strategy is
effective or
requires
modifications
as the
business
environment
changes (see
Chapter 15).
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