Chapter One
An Overview: International Marketing
1.1. Concepts of International Marketing
The multinational process of planning and executing
conception, pricing, promotion and distribution of ideas,
goods, and services to create an exchange that satisfy
individual and organizational objectives.
The application of marketing in international context.
The performance of business activities that direct the flow
of company’s goods and services to consumer or user in
more than one nation for a profit.
The business activities that involve crossing of national
boundary.
Types of Marketing
1. Domestic Marketing
Marketing practices with n a marketer’s home country.
Involves are set of uncontrollable derived from the
domestic market.
One language, one nation, one culture.
Market is much more homogeneous
Single currency
No problems of exchange controls, tariffs
Relatively stable business
Minimum government interference in business decision
Data in marketing research available, easily collected, and
accurate etc.
2. International Market
Marketers face two or more sets of uncontrollable variables
originating from various countries.
Many languages, many nations, many cultures
Markets are diverse and fragmented
Multiple currencies
Exchange controls and tariffs normal obstacles
Multiple and unstable business environments
Due to national economic plans government influence usual
in business decisions
Marketing research very difficult, costly and cannot give
desired accuracy, etc.
1.2. International Trade vs International Marketing
International Trade
The flow of goods and capital across national borders.
The focus of the analysis is on commercial and monetary
conditions that affect balance of payment and resource transfers.
Provides a macro view of the market at the national level, with
no specific attention given to companies marketing intervention.
International Marketing
The flow of goods and capital across more than one national
boundaries.
more concerned with the micro level of the market and uses the
company as a unit of analysis.
The focus of the analysis is on how and why a product succeeds
or fails abroad and how marketing efforts affects the outcome.
3. comparative Marketing
Two or more marketing systems rather than examine a particular
country’s marketing system for its own sake.
Similarities and differences between systems are identified.
Involves two or more countries and an analytical comparison of
marketing methods used in countries.
4. Foreign Marketing
Domestic marketing methods used outside the home market.
Encompasses the domestic operation with in a foreign country.
5. Global marketing
customers belonging to similar segments exist in a number of
different national markets.
marketing activities are directed at standardizing of the product or
service and reaching the customers with similar
communication, pricing and distribution strategies.
Why a firm moves beyond domestic markets into international
trade:
1) Product Life Cycle: the existence of foreign markets.
product at the end of its life cycle in one market may not
be introduced in another.
2) Competition: to avoid competition in the domestic market
and less intense in the overseas market.
3) Excess Capacity: to minimize its fixed cost per unit and
utilize its capacity fully, the firm may undertake foreign
orders.
4) Geographic Diversification: to adopt a firm.
Instead of extending its product line the firm wants to
expand its market.
5) Increasing the Market size: to expand its operation.
7) Comparative advantage in product, skill or
technology: to gain comparative advantage against local
competition in the foreign market.
8) Financial reasons
investment incentives in overseas markets
the availability of venture capital and option to maximize
profits or minimize losses through international rather than
simple domestic operations.
Characteristics of international marketing
Broader market is available
Involves at least two set of uncontrollable variables
Requires broader competence
Competition is intense
International restrictions
Sensitive character
Involves high risk and challenges
Large-scale operation
Domination of multinationals and developed countries
1.3. Strategic International Marketing Theories
According to Adam Smith there are two theories of IM:
a) Theory of Absolute Advantage
A country should export commodities with lower cost than other
nations.
Import commodities at a higher cost than can other nations.
The ability of a company to produce more of products than a
competitor.
Product Ethiopia Djibouti
Coffee 20 10
Wheat 10 20
In Coffee, Ethiopia has an absolute advantage because Ethiopia can
produce 20 tone coffee and Djibouti can only produce half tones(i.e.,
Djibouti Produces 10 for every 20 the Ethiopia produces).
In Wheat, Djibouti has an absolute advantage because Ethiopia makes
b) Comparative advantage
The ability of a company to produce products for a lower
opportunity cost than competitors in terms of labor hours.
Export of goods at relatively low cost/more efficient than other
countries.
Import goods
Laborathrs.
high cost or in less efficient
America thanRussi
other countries.
a
Minutes for one 30 60
Computer
Minutes for one Car 45 120
Opportunity cost A= A/B of B or B= B/A of A
America
Opportunity cost of Russia in Comp= 60/120 cars
= ½ cars
Opportunity cost of one car= 120/60 Computers
= 2 Computers
Russia
Opportunity cost of Computer= 30/45 Cars
= 2/3 cars
Opportunity cost of car= 45/30 computers
= 1.5 cars
Therefore,
Russia has a comparative advantage for computer because
she can produce Computers at a lower opportunity cost: ½
cars < 2/3 cars.
In Cars, Russia has a comparative advantage by producing
1.5 less than 2 cars.
Major reasons for new products failures at
international level
Inadequate market analysis and market appraisal
Insufficient marketing support
Bad timing of entry
Failure to recognize changing market environment
Absence of formal product planning and development
proceeds
Failure to the product to fill consumer needs
Technical or production problems
New entrants
Poor on forecasting the strength of competition
1.4. Benefits and Barriers of International Marketing
Benefits of IM
Meet imports of industrial needs
Debt servicing: receiving external aid
Rapid economic growth
Facing competition successfully
Profitable use of natural resources
Increase in employment opportunities
Role of exports in national income
Improve standard of living
International collaboration
Closer cultural relations
Help in political peace
Barriers of IM
Tariff: - a tax imposed on a product entering a country.
Import quota: - a limit on the amount of a particular product that
can be brought into a country.
Unstable governments: - high indebt-ness, high inflation, and
high unemployment in several countries.
Foreign exchange problems: - high indebtedness and economic
and political instability decrease the value of a country’s currency.
Foreign government entry requirements and bureaucracy
Corruption: bibbers
Technological pirating
Boycotts: A government boycott is an absolute restriction against
the purchase and importation of certain goods from other countries.
Marketing factors: economic, social, political, physical, ..
Stages of international marketing involvement
1. No direct foreign marketing
a company does not actively cultivate customers outside
national boundaries.
company’s products may reach foreign markets.
Sales may be made to trading companies and other foreign
customers.
2. Infrequent foreign marketing
Temporary surpluses caused by variations in production
levels.
Goods are sold to foreign markets with little or no intention
of maintaining continuous market representation.
little or no change in company organization or product lines.
3rd: Regular foreign marketing
the firm has permanent productive capacity and devoted to
the production of goods marketed on a continuing basis in
foreign markets.
A firm may employ foreign or domestic overseas middlemen.
Focused on serve domestic market needs.
4th: International marketing
Companies are fully committed and involved in international
marketing activities.
companies seek markets all over the world and sell products
in various countries.
entails not only the marketing but also the production of
goods outside the home market.
6th: Global marketing
the most profound change is the orientation of the company
towards markets and its planning.
a company treat the world, including their home market, as
one market.
Develop unique set of market characteristics in the world
including their home market.
organization structure, sources of finance, production,
marketing, and so forth, take on a global perspective.
1.5. Multinational Cooperation
a) Global industry: an industry affected by
the strategic positions of competitors in major geographic
national markets
b) Global firm: a firm that operates in more than one country
and captures R&D, production, logistical, marketing, and
financial advantages in its costs and reputation that are not
available to purely domestic competitors. “
According to Aharoni, an MNC has at least three significant
dimensions or characteristics: structural, performance and
behavior.
1. Structural
MNC include the number of countries does business
and the citizenship of corporate owners and top
2. Performance
The extent of the commitment of corporate resources
to foreign operations and the amount of rewards from
the commitment.
3. Behavior
a) Ethnocentricity
strong orientation toward the home country.
Markets and consumers viewed as unfamiliar and inferior
in taste, sophistication and opportunity.
Centralization of decision-making is thus a necessity.
use the home base for the production of standardized
products.
b)Polycentricity
strong orientation to the host country.
Decentralize across the overseas divisions.
The attitude places emphasize on differences between
markets caused by variation with income, culture, laws and
politics.
Market is a unique and consequently difficult for outsiders
to understand.
Managers from the host country employed and allowed to have
a great deal of discretion in market decision.
c)Geocentricity
An orientation of the whole world and any particular country.
Company thought as denationalized or supranational.
International or foreign departments or markets do not exist.
