Imm unit-01 (framework of global marketing management)

07/06/10 1
By :
Prof. Amit Kumar

07/06/10 2
International marketing has become a major concern
for business schools to develop global strategies
to lead and sustain in the much expanded and
competitive arena. Liberalization thus catalyzing
market competition, poses challenge for the
managers in handling the rigors of expanding
global marketplace.
Syllabus aims at providing contemporary
knowledge & skills on issues of global
marketing management.
IILM-GSM
Importance of this course
Global Marketing Management

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Course: International Marketing Management
1. Framework of Global Marketing Management
2. Global Marketing Research
3. Decision Making in International Marketing
4. Foreign Market Entry & Export Marketing
5. Product Planning & Development
6. Global Pricing Strategies
7. Global Distribution System
8. Promoting Product Internationally
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IILM-GSM
Global Marketing Management Framework of Global Marketing Management

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Contents
• Growing Importance of International Marketing
• Drivers of International Marketing
• International Marketing Vs Domestic Marketing
• Motives for Entering International Market
• Towards GLOCAL Marketing
• Orientations Towards International Marketing
Case study: Geocentric approach- The Boeing Way
• Process of International Marketing
• Internationalization of Firm’s Value Chain
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International marketing (IM) or global marketing
refers to marketing carried out by companies
overseas or across national borderlines.
This strategy uses an extension of the techniques used
in the home country of a firm.
It refers to the firm-level marketing practices across the
border including market identification and targeting,
entry mode selection, marketing mix, and strategic
decisions to compete in international markets.
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International Marketing Management
‘International marketing is the multinational
process of planning and executing the
conception, pricing, promotion and
distribution of ideas, goods, and services to
create exchanges that satisfy individual and
organizational objectives.’
- American Marketing Association (AMA)
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Growing Importance of Global Marketing
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• In the 21st
century, international marketing is proving to be
of ever-increasing importance to companies of all sizes
and to national economies.
• Consumers worldwide are familiar with international
brands and additionally are using locally produced goods
that include materials or components supplied from
abroad.
• The increasing importance of international markets over
the past 20 years has been the result of a number of
interrelated factors i.e. known as DRIVERS OF
INTERNATIONAL MARKETING.

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“The term ‘drivers’ refers to the global forces that
have fueled the process of globalization. These
global factors have acted as catalyst that have
contributed to the growth of international marketing”.
1. Declining Trade and Investment Barriers
2. Technological Change
3. Emergence of Global Institutions
4. Increasing Competition
Drivers of International Marketing
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1. Declining Trade and Investment Barriers
• The economic liberalization in India-1991, refers to
ongoing reforms in India. After Independence in 1947,
India adhered to socialist policies. The extensive
regulation was sarcastically dubbed as the "License Raj";
the slow growth rate was named the "Hindu rate of
growth". In the 1980s, the Prime Minister Rajiv Gandhi
initiated some reforms. His government was blocked by
politics. In 1991, the government of P. V. Narasimha Rao
and his finance minister Manmohan Singh started
breakthrough reforms (proposed LPG).
• Declining trade and investment barriers (by government)
have vastly contributed to globalization.
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2. Technological Change
• Most powerful instrument that triggered globalization is
technology. Technology is expanding, especially in:
• Microprocessors and Telecommunication
• Internet and World Wide Web
• Transportation Technology
• Thus we find that telecommunications is creating a
global audience and transport is creating a global
village. From Delhi to Beijing to Boston ordinary
people watching MTV, wearing Levi’s jeans and
listening to i-pods as they commute to work.
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2. Technological Change (cont’)
Microprocessors and Telecommunication
• Single most important innovation of this century has
been the microchip enabling the explosive growth of
high-power, low-cost computing, enabling huge amounts
of information to be processes by individual and firms.
• This has been accompanied by developments in
satellite, optical fiber and wireless technologies resulting
in communication revolution.
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Internet and World Wide Web
• In 1990 there were less than 1 million users of internet. The
number had gone up to 655 million by 2002 and 1.12 billion
users by 2005.
• The internet and world wide web are the information
backbone of the global economy.
• The value of web-based transaction rose to $657 billion in
2000 from virtually nothing in 1994, to $6.8 trillion by 2004.
These transactions include both business to business and
B2C or e-commerce.
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Transportation Technology
• Several major innovation in transportation technology since
World War-II, are development of commercial jet aircraft and
super-freighter, and
• Introduction of containerization, which simplifies
transshipment from one mode of transport to another and
lowering the cost of shipping goods over long distances.
• There has also been an increase in the share of cargo
traveling by air as a result of improvements in air travel.
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3. Emergence of Global Institutions
• Trading block, WTO (and its predecessor the GATT)
seeks to promote international business by removing
trade and investment barriers.
• The United Nations, along with its associated financial
institutions (World Bank, IMF), is committed to
preserving world peace through international
cooperation and collective security.
• Regional trading blocks (EU, NAFTA, ASEAN) are
adding to the pace of globalization
North American Free Trade Agreement
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4. Increasing Competition
• Competition has become more global.
• Developing markets have huge markets. Many MNCs
are locating their subsidiaries in low wage and low cost
countries to take advantage of low cost production.
• Four countries from developing world- Brazil, Russia,
India and China (BRIC)- are seen as future global
leaders in the world economy.
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• Large MNCs such as Toyota, Honda and Mitsubishi
started operations in the domestic market before
expanding into the international market. Indian Ranbaxy,
Satyam, Asian Paints, Wipro, Infosys, NIIT also started
operations domestically before entering into international
market.
• Although international marketing is often an extension of
domestic marketing, there are significant differences
between the two.
1. Diverse Business Environment
2. Enhanced Risk and Uncertainty
3. Operational Complexities
International Versus Domestic Marketing
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• International marketing/business operates in a
diverse business environment (PEST), since it is
located in different countries.
• Differences are primarily in the areas of
Currency, Interest rates, Inflation, Taxation
systems, Government regulation, Language,
Cultural and Economic barriers, which gives rise
to complexities for the business firms.
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http://www.worldwide-tax.com/

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McDonald’s, which has a presence in almost
all countries of the world, adapts its menu
according to local taste and religious
learning.
In India it has replaced beef products with chicken
and in the Muslim countries of the Middle-
East it does not serve any pork products.
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2. Enhanced Risk and Uncertainty
• Business firms face risks (PEST Related) on
account of the unpredictability of operational and
financial outcomes.
• More diverse business environment means more
risks. Also risks related to payments in different
currencies, supply and demand conditions etc.
• Uncertainty refers to the unpredictability of the
environmental or organizational conditions that
affect firm performance.
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www.allaboutrisk.com/
www.eurasiagroup.net

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3. Operational Complexities
• Operationally, international business is often more difficult
and costly to manage than activities in the domestic
market alone. Example, local employees and expatriates
(employees from foreign country) may have trouble getting
along with each other because of cultural and language
differences.
• Cultural diversity encountered when operating in several
countries may create problems of communication,
coordination and motivation in employees of the
organization.
• Organizational principles and managerial philosophies
differ widely across nations, increasing complexity of
operation and management of international business.
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Daimler Chrysler Merger Failed

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Motives behind International
Marketing
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1. Increased Profits
• The basic raison de etre of a business is to
maximize profits through increased revenues
and/or reduced costs.
• The rapid growth of outsourcing industry is an
example of the ability of firms in developed
parts of the world being able to take advantage
of the low cost skilled labor force in countries
such as India, Ireland and Philippines, to lower
costs and maximize profits
Motives behind International Marketing
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2. Optimum Capacity Utilization
• Maximization of profits possible only when it can
minimize costs.
• This requires production at a scale which may be
constrained due to lack of demand in the domestic
market.
• A firm can increase its scale of operation if it is able
to tap into demand in foreign markets.
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3. Market Motives
• Firms often need to protect and hold their market
power or competitive position in the face of threats
from domestic rivals or changes in government
policy. Dell, a leading personal computer company,
invested in Europe, Asia, Latin America and Africa
due to strong competitions in the US domestic
market.
• A firm may decide to seek international market
opportunities in foreign countries through trade or
investment. Companies such as Avon and Amway
have entered India in early 1990s in search of
opportunities in its direct marketing business.
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4. Strategic Motives
• Firms often participate in international business
for strategic reasons and able to take
advantage of vertical integration in different
countries.
• This leads the firm to advantages of
technological leadership, brand image,
customer loyalty, competitive position and ‘first
mover’.
• MNEs with this intension often establish global
strategic alliances or acquire local firms.
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1-27
Philosophy of Marketing
The Production Concept
The Product Concept
The Selling Concept
The Marketing Concept
The Holistic Marketing Concept
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1-28
Philosophy of International
Marketing
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Orientations Towards International Marketing
An increasing number of companies are operating on
a global or regional rather than a national scale.
International marketing managers are asking
themselves how they should cope with the
new scope of operations and whether they
can apply domestic strategies to
international markets.
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Some guidelines for developing international
marketing strategies and other issues may be
provided by EPRG Framework.
A key assumption in EPRG framework is that
the degree to which management is
committed (or willing to move towards)
affects the specific international strategies
and decision rules of the firm.
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• The degree and nature of involvement in international
business, or International orientations of MNEs, vary
very widely.
• Four types of attitudes or orientations towards
internationalization are:
• Ethnocentrism (Home country orientation)
• Polycentric (Host country orientation)
• Regiocentrism (Regional orientation)
• Geocentrism (World orientation)
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Ethnocentrism (Home country orientation)
• An MNE with an ethnocentric orientation relies on the values
and interests of the parent company in formulating and
implementing its internationalization plans.
• In the ethnocentric company, overseas operations are viewed as
secondary to domestic operations and primarily as a means of
disposing of ‘surplus’ domestic production.
• Firms trying to sell the same product abroad that they sell at
home use. Even if consumer needs or wants differ from those in
the home country, those differenced are ignored at
headquarters.
• This orientation appears to be appropriate for a small company
just entering international operations and looks for minimum risk
& commitment to overseas markets.
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Ethnocentrism (Home country orientation)
Nissan’s ethnocentric orientation was quite apparent
during its first few years of exporting cars and
trucks to the United States. Designed for mild
Japanese winters, the vehicles were difficult to
start in many parts of the United States during the
cold winter cars.
Until the 1980s, activity outside the United States was tightly
controlled by headquarters at Japan and focused on
selling products originally developed for the US market.
Today, however, ethnocentrism is one of the
biggest internal threats a company faces.
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Polycentric (Host country orientation)
• The polycentric orientation is the opposite of
ethnocentrism.
• The term polycentric describes management’s belief that
each country in which a company does business is unique.
This assumption lays the groundwork for each subsidiary
to develop its own unique business and marketing
strategies in order to succeed.
• The term multinational company is often used to describe
such a company.
• The important merit of polycentrism is the adaptation of the
marketing strategies to the local conditions.
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Regiocentrism (Regional 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.
• Categorization of regions may be based on cultural traits
e.g. the Asia-Pacific or on economic and political
characteristics such as European Union.
• For example, a US company that focuses on the countries
included in the NAFTA is a regiocentric orientation.
Similarly, a European company that focuses its attention
on the Europe is regiocentric.
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Geocentrism (World orientation)
Geocentric approach is an orientation whereby
executives believe that a global view (entire world as
a single market & develops a standardized marketing
mix) is needed in both headquarters of the parent
company and its various subsidiaries.
The best individuals, regardless of home or host country
origin, should be utilized to solve company problems
anywhere in world.
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Geocentrism (World orientation)
Geocentric approach is the most
difficult to achieve because it requires
that managers acquire both local and
global knowledge.
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The Boeing Company is a major aerospace and
defense corporation, founded by William E. Boeing
in Seattle, Washington on July 15, 1916. In the
beginning of the 1970s, Boeing faced a new crisis.
Sales began to slow down in the early 1970s
because of several reasons.
Managing Diversity-The Boeing
Way
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The Apollo program (NASA's Apollo Program ran from 1961
until 1975 ), in which Boeing had participated significantly
during the preceding decade, was almost entirely
canceled. Once more, Boeing hoped to compensate with
sales of its commercial airliners. At that time, however,
there was a heavy recession in the airlines industry so that
Boeing did not receive any orders for more than a year.
Another problem was that in 1971, the U.S. Congress
decided to stop the financial support for the development
of the supersonic 2707. Boeing's answer to the British-
French Concorde, forcing the company to discontinue the
project. The company had to reduce the number of
employees from over 80,000 to almost half, only in the
Seattle area.
Problem Analysis-The Boeing Way
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‘When sales began to slow down in the early 1970s, a
group of Boeing engineers began to recognize that
they had not given enough attention to a major
potential market, the developing regions of the world’.
Through visits abroad, the engineers found that
runways in developing countries were generally
too short for the 737 and were mainly asphalt, a
softer material than concrete.
Problem Analysis-The Boeing Way
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“A geocentric approach helped
Boeing save its 737 airplane”.
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•Consequently they redesigned the wings to allow
shorter landings on soft pavement and changed the
engine so that take-offs would be quicker.
•They also developed a new landing gear and installed
low-pressure tires.
•Boeing soon began to get small orders for the 737 from a
number of developing countries, which later bought larger
Boeing planes because of their satisfaction with the 737.
The Boeing 737 ultimately became the best
selling commercial jet in aviation history and is
still selling well.
Geocentric approach in Managing
Diversity-The Boeing Way
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Empirical Support for EPRG
An exploratory study was recently conducted to
provide some initial insight into the validity of this
framework. The perceptions and preferences of
international executives towards the current and
future appropriateness of each of these
alternative orientations and associated strategies
were assessed.
The sample consisted of 40 key international
executives of one large US firm whose
product lines are composed of frequently
purchased household items.
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Each respondent was presented with a set of 4
alternative strategies (one for each orientation)
for each of 15 marketing decisions areas. For
example for the brand name decision, the set
was as follows:
A) Branding policy in overseas companies stresses
the parent country as a unifying feature but not
necessarily the origin of the parent country
(ethnocentric).
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B) Each local company brands products on an
independent basis and consistent with local
country criteria (polycentric).
C) Overseas companies brand products uniformly
within the region (regiocentric).
D) A world wide branding policy exists only for those
brands, which are acceptable world wide
(geocentric).
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Result of Empirical Support for EPRG
Studies suggested that the polycentric orientation is
the dominant approach in the case of price,
customer service, market research, channel of
distribution and least marked in the case of brand
name and product quality.
In both (brand name and product quality) areas
ethnocentric approaches were used by one-fifth
and geocentric approaches by one-third of
sample.
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PRESENT
SITUATION
ETHNOCENTRIC
REGIOCENTRIC
GEOCENTRIC
POLYCENTRIC

07/05/10
DESIRED
SITUATION
ETHNOCENTRIC
REGIOCENTRIC
GEOCENTRIC
POLYCENTRIC

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Exploratory Research: EPRG
A second exploratory study was undertaken to
examine the conditions under which different
EPRG marketing strategies are appropriate.
The study was based on unstructured in-depth
interviews with senior international marketing
executives from 10 US corporations.
Respondents were asked to describe their company’s
current strategies, their planned strategies and
their opinion concerning EPRG strategies.
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Exploratory Research EPRG:
The result of these interviews suggest that the:
• Ethnocentric position appears most appropriate when
the absolute or relative volume of overseas sales is
insignificant. In these situations product modifications
are generally viewed as uneconomic.
“We simply can’t afford to produce different products
for foreign buyers, …may not be justified by low
anticipated revenue…and appropriate to export to
countries with similar characteristics”.
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Exploratory Research EPRG: Polycentric
• Most executives interviewed tended to regard the
polycentric position as currently most desirable one.
• Several executives felt that local nationals has a
better understanding and awareness of national
market conditions than home office personnel.
“I don’t presume to tell the Germans how to sell
to the German”.
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Exploratory Research EPRG: Regiocentric
• Geocentric was viewed as entailing high costs in
collecting information and administering policies on a
worldwide basis. In this respect, the regiocentric
appeal was generally viewed as more economical
and manageable.
• Because of the national huge differences, geocentric
position may be more advantageous for production
and research development than for marketing.
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Exploratory Research EPRG: Regiocentric
In brief, the desirability of a particular international
Orientation – E, P, R or G - seems to depend on
several factors:
• Size of the firm
• Experience in overseas market
• The size and degree of heterogeneity of the potential
market
• The nature of the product .
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Towards GLOCAL Marketing
IILM-GSM
Time
Marketing
Complexity Global
Marketing
GLOCAL
Marketing
International
Marketing
Exporting
Domestic

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Companies in this case seek markets all over the world
and sell products that are a result of planned
production for markets in various countries.
This generally entails not only the marketing but also the
production of goods outside the home market. At this
point company becomes an international or
multinational firm.
International Marketing
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The experience of Fedders, largest manufacturer of air
conditioners in the US, the firm faced constraints in the
domestic market.
• Its sales were growing steadily, but sales of air conditioners (the
company’s only product) are seasonal and thus domestic sales
at times do not even cover fixed costs.
• Furthermore, US market is mature, with most customers buying
only replacement units. Any growth would have to come from a
rival’s market share, and the rivals, Whirlpool and Matsushita,
are formidable.
Fedders decided that only way to grow was to venture abroad.
Fedders Experience in
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Fedders decided that Asia, with its steamy climate and
expanding middle class, offered the best opportunity.
China, India and Indonesia were seen as the best
prospects.
• China was selected because sales of room air conditioners had
grown from 500,000 to over 4 million in five years, which still
accounted for only 12% of the homes in cities like Beijing,
Shanghai.
• Finally, Fedders entered a joint venture with a small Chinese air
conditioner company that was looking for a partner; new
company, Fedders Xinle, was formed.
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The company immediately found that it needed to redesign its
product for its market.
• In China, air conditioners are a major purchase seen as a
status symbol, not as a box to keep a room cool, as in US.
• The Chinese also prefer a split-type air conditioner.
• Since Fedders did not manufacture split models, it designed a
new product that is lightweight, energy efficient, and packed
with features such as remote control and automatic air-
sweeping mechanism.
Fedders expands into other markets and makes other
commitments internationally.
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At this stage, companies treat the world, including their home
market, as one market, offering a single standard product.
• Market segmentation decisions are no longer focused on
national borders. Instead, market segments are defined by
income levels, usage patterns, or other factors that often span
countries and regions.
• In this case, more than half of its revenues coming from abroad.
• The best people in the company begin to seek international
assignments, and the entire operation- organization structure,
sources of finance, production in low-cost location, marketing
and so forth- begin to take on a global perspective.
Ford Motor, Intel, IBM, Nestle are the best example.
Global Marketing
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Process of International Marketing
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Motivation for International Marketing
SWOT Analysis
International Marketing Decisions
Growth
Profitability
Risk Spread
Access to Imported Inputs
Uniqueness of Product/ Services
Spreading R & D Costs

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Process of International Marketing
IILM-GSM
Enter International Markets
International Marketing Decisions
Market Identification & targeting
Entry Mode Selection
Product Decisions
Distribution Channels Decisions
Market Promotion Decisions
Review Performance & Marketing Efforts

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Each value-adding activity is subject to internationalization;
that is, it can be performed abroad instead of at home.
The most typical reasons for locating value-chain activities in
particular countries are to reduce the costs of R&D and
production or to gain closer access to customers.
IILM-GSM
Internationalization of Firm’s Value Chain
Stages in the Firm’s Value Chain
R&D
Procurement
(Sourcing)
Manufacturing Marketing Distribution Sales &
Services
Global Business Management Globalization

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The pharmaceutical firm Pfizer conducts R&D in Singapore,
Japan and other countries to gain access to scientific talent
or collaborate with local partner firms.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

07/05/10 66
Office furniture manufacturer Steelcase sources low-cost
parts from suppliers in China and Mexico.
Dell has business processes such as data entry, call
centers and payroll processing performed in India.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

07/05/10 67
Genzyme Crop. Does much of the manufacturing and
testing of its surgical and diagnostic products in Germany,
Switzerland and the UK.
Renault produces cars via low-cost factories in eastern
Europe.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

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BMW and Honda locate marketing subsidiaries in the US to
more effectively target their vehicles to the huge US market.
Carrefour and Barclays Bank establish worldwide networks
of stores and offices to be near their customers.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

07/05/10 69
Wolverine World Wide, marketers of popular shoe brands
( e.g. Hush Puppies, Bates), contracts with independent
retail stores abroad to reach its customers.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

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Direct sales company such as Amway and Avon employ
their own independent sales office in China, Mexico and
elsewhere, in order to reach end-users.
Toyota maintains sales & customer service operations
abroad in order to meet customer requirements more
effectively.
IILM-GSM
R&D
Procurement
(Sourcing)
Services

Imm unit-01 (framework of global marketing management)

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