WILEY IM CHAP 1
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1. The document discusses the increasing globalization of markets and importance of understanding international marketing. It outlines theories of international trade and the evolution of global marketing strategies from domestic to multinational and global approaches. 2. Key points covered include the growth of emerging Asian and Latin American markets, factors driving companies to look beyond domestic markets, and how marketing strategies must adapt from ethnocentric to geocentric approaches over time. 3. Theories of comparative advantage, international product cycles, and internalization are presented in the context of international trade and investment strategies. Stages in the evolution of global marketing and examples of each stage are also summarized.
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WILEY IM CHAP 1
- 1. Chapter 1 INTRODUCTION TO INTERNATIONAL MARKETING Prepared by Robin Roberts Griffith University
- 10. Top 100 largest organisations Table 1.1 The world’s 100 largest organisations, by country, 1970 - 2009
- 14. Evolution of global marketing
Editor's Notes
- Refer to header: Overview Asking students to review the scene setter is good starter for this chapter. The scene setter illustrates the potency of globalisation and international marketing. The environment forms the critical background for international marketing planning and strategy development. Strategic action is based on and tailored to environmental conditions. Corporate success and failure, to a large extent is determined by the anticipation of and preparation for the future.
- Refer to header: The Asian century Triad Regions – North America, western Europe and Japan which collectively produced 80% of the world’s GDP for much of the twentieth century. BEM’s – emerging economies expected to be the next major markets – include CEA (Chinese Economic Area), India, South Korea, Mexico, Brazil, Argentina, south Africa, Poland, Turkey and ASEAN (the Association of South-East Asian Nations). The achievement of Asia’s potential will not be easy. The infrastructure and energy needs will be enormous and the importation of some of these resources is fraught with political and economic difficulties (e.g. corruption and political instability in nations such as Thailand and Indonesia).
- Refer to header: The Asian century This desire for modernity fuels and is fueled by a substantial increase in the middle class in places like China and India.
- Refer to header: Why understanding international marketing is imperative Several factors make understanding international marketing imperative. First, and at the most fundamental level, the saturation of domestic markets in the industrialised parts of the world has forced many organisation to look for marketing opportunities beyond their own national boundaries. Second, a profound change has occurred in our view of the competition around the world – in market share, country source and global reach.
- Refer to header: Why understanding international marketing is imperative Third, international competition also brings about global co-operation. This is most obvious in the information technology industry. For example, Japan’s Toshiba and Sony, and US computer manufacturer IBM agreed to jointly develop advanced semiconductor processing technologies for next generation chips. Fourth, in the last decade there has been the proliferation of the internet and electronic business (e-business). E-business is an all-inclusive term that describes the use of electronics to conduct all aspects of the organisations business.
- Refer to header: Why understanding international marketing is imperative Fifth, an examination of the top 100 largest organisations in the world vividly illustrates the profound changes that have occurred in the countries of origin of competitors in the international market place (see table 1.1 in next slide). The number of Japanese organisations in the list has fallen from 24 in 1999 to 10 in 2009. The number of US organisations has fallen from 64 in 1970 to 33 in 1990 and then rose to 36 in 2002 and fell again in 2009 to 29. Today's business environment is characterised not only by much more competition from around the world, but by more fluid domestic and international market conditions than in the past. Lastly, an organisation can no longer avoid competitive pressure from around the world and global environmental events, even if it operates only in a domestic market. Therefore it is essential that future marketing professionals have a solid basis for marketing planning in response to environmental changes and an understanding of the intense competitive pressures and expanding market opportunities that exist globally.
- Refer to header: Why understanding international marketing is imperative
- Refer to header: International trade versus international business In order to appreciate these complexities of global competition, it is necessary to understand the distinction between international trade and international business. International trade consists of exports and imports between a nation and other countries in the world. International business, however is a broader concept and includes international national trade and foreign production. Australian organisations typically market their products in 3 ways. They can export their products from Australia They can invest in foreign production on their own and manufacture products overseas for sale there They can contract manufacturing out in whole or in part to an organisation in a foreign country, through licensing or joint-venture agreements.
- Refer to header: Evolution of international and global marketing The classic marketing management paradigm (consumer orientation, analysis and strategy development, manifested in their final form as the 7 P’s) was developed in and is ground in the US cultural ethos. Organisations generally develop different marketing strategies according to their degree of experience and the nature of their operations in international markets. Organisations tend to evolve over time, accumulating international business experience and learning the advantages and disadvantages associated with the complexities of manufacturing and marketing around the world.
- Refer to header: Evolution of international and global marketing Researchers have an evolutionary perspective of an organisation’s internationalisation, just like the evolution of species over time. The stages are shown in the slide above. Before discussing these stages in detail, it should be noted that many organisations are constantly under competitive pressure to move forward both reactively (responding to changes in the market competitive environments) and proactively (anticipating the change).
- Refer to header: Evolution of international and global marketing - Domestic marketing
- Refer to header: Evolution of international and global marketing - Domestic marketing Domestic marketing is the first stage in the evolution of marketing across national boundaries. Before entering into international markets, many organisation solely focus on their domestic market. Their strategy is developed based on information about domestic customer needs and want, industry trends and economic, technological and political environments at home.
- Refer to header: Evolution of international and global marketing - Domestic marketing
- Refer to header: Evolution of international and global marketing The second stage is export marketing. In general, in the early stage of export marketing involvement, the internationalisation process is a consequence of incremental adjustments to the changing conditions of the organisation and its environment. Ethnocentricity emphasizes the notion that things should be viewed from one cultural perspective usually to the exclusion of all others.
- Refer to header: Evolution of international and global marketing
- Refer to header: Evolution of international and global marketing Once export marketing becomes an integral part of the organisations marketing activity, it will begin to seek new directions for growth and expansion by entering the international (country–by-country) marketing stage. A unique feature of international marketing is its polycentric orientation, with emphasis on product and promotional adaptation in foreign markets, whenever necessary.
- Refer to header: Evolution of international and global marketing
- Refer to header: Evolution of international and global marketing In moving to multinational (region-by-region) marketing, the organisation markets its products in many countries around the world. The organisations management comes to realise the benefit of economies of scale in product development, manufacturing and marketing by consolidating some of its activities on a regional basis.
- Refer to header: Evolution of international and global marketing
- Refer to header: Evolution of international and global marketing The international (country-by-country) or multinational (region-by-region) orientation while enabling consolidation of operations within countries or regions, will nonetheless tend to result in market fragmentation worldwide. Operational fragmentations lead to higher costs. This leads to global marketing which refer to marketing activities by organisations that emphasise: Standardisation efforts Coordination across markets Global integration. The organisation participates in many major world markets. It gains competitive leverage and effective integration of its competitive campaigns across these markets by being able to subsidise operations in some markets with resources generations in other and responding to competitive attacks in one market by counterattacking in others.
- Refer to header: Evolution of international and global marketing
- Refer to header: Evolution of international and global marketing Global marketing does not necessarily mean that products can be developed anywhere on a global basis. Geography, climate and culture, among other things, affect the way in which organisations develop certain products and consumers want them. Additionally, the internet adds a new dimension to global marketing. While some claim that the internet and e-commerce has change the marketing paradigm, the basic functions of marketing have not changed, although a new mode for promotion, pricing and distribution, as well as new product type has appeared.
- Refer to header: Evolution of international and global marketing
- Refer to header: International marketing planning and strategy development The objective of any international marketing course is to enumerate the processes and develop the skills necessary for developing, evaluating and implementing a marketing strategy. Part of the process entails the systematic and objective scan of the global environment to identify opportunities for new product development or new market development or expansion. Planning is a general term that broadly refers to management's attempt to control, predict and achieve a desired future. There have been many different approaches to the definition of planning but the classic by Dror appears to capture all the components: “ Planning is the process of preparing a set of decisions for actions in the future, directed at achieving goals by preferable means” .
- Refer to header: Theories of international trade and the multinational organisation At the aggregate level, countries trade with one another for fundamentally the same reasons that individuals exchange goods and services – for their mutual benefit. Comparative advantage theory , is an arithmetic demonstration made by the English economics David Ricardo almost 180 years ago. Definition shown on slide.
- Refer to header: Theories of international trade and the multinational organisation The principles of international trade include: Principle 1. Countries benefit from international trade Principle 2. International trade increases worldwide production through specialisation Principle 3. Exchange rates are determined primarily by traded goods. Factor endowment theory can be explained further. For example, Australia is not only capital-abundant but also abundant with high educated labour force. Therefore, it is easy to predict that Australia has a comparative advantage in skill-intensive industries, such as computers and biotechnology, and exports a lot for computers and genetically engineered ethical drugs around the world and import manual labour-intensive products such as textiles and shoes from labour abundant countries like China and Brazil.
- Refer to header: Theories of international trade and the multinational organisation When business people think of competition they usually refer to intra-industry competition. Why and how does competition tend to evolve over time and across national boundaries in the same industry? How does an organisation develop its marketing strategy in the presence of both domestic and overseas competitors? International product cycle theory addresses all these questions. Several speculations have been made: Organisations focus on economies of scale (utilisation of mass production to reduce average unit cost) Economies of scope – benefits gained from an increase in the efficiencies of marketing and distribution Focussing on technological innovation can provide an innovative organisation with competitive advantage Per capita income level will determine consumers’’ preference similarity By combining these forces with the earlier comparative advantage theory, international product cycle theory was developed to explain a realistic dynamic change in international competition over time and place. This comprehensive theory describes the relationships between trade and investment over the product life cycles. The four stages are Introduction, Growth, Maturity and Decline.
- Refer to header: Summary
- Refer to header: Summary