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.