INTERNATIONAL MARKETING

INTERNATIONAL MARKETING

International Marketing and Exporting

Globalization • The shift towards a more integrated and interdependent world economy. • Two components: • The globalization of markets. • The globalization of production.

Global Drivers Positive Negative Technology Open Markets Economic Integration Peace Corporate Strategy Global Focus Culture Market Barriers National Barriers War Corporate Strategy Local Focus

Globalization of Markets

Globalization of Markets • Global Perspective: • Boeing Company example • Peace Works company example • Recent events that have impacted international marketing • High tech and dot.com company bust in early 2000’s • September 11th terrorist attacks in U.S. • Wars in Afghanistan and Iraq

Globalization of Markets • 4 Prevailing trends that have the most impact on international business in the future: • 1. Growth of the World Trade Organization and region free trade areas (NAFTA, European Union..) • 2. Trend of developing countries (such as Asia, Latin America, Eastern Europe) accepting the “free market system” • 3. Impact of the internet and other global media companies (CNN) • 4. Mandate for companies to properly manage resources

Globalization of Markets • Why international marketing is so important: • Companies can no longer ignore the effects of internationally marketing • Competition no longer exists just from domestic companies (exhibit 1.1 pg. 7) • In order to sustain profitability and growth margins of the past, companies have to look for alternative methods of marketing their products and services • “In a study conducted on U.S. manufacturing companies of all sizes, it was found that multinational companies outperformed their strictly domestic U.S. counterparts by more than twice as fast in sales and earned much greater returns on equity and assets..” (exhibit 1.2 pg. 9)

Globalization of Markets • Definition of International Marketing: • “The performance of business activities designed to plan, price, promote and direct the company’s flow of goods and services to consumers or users in more than one nation for a profit” (4 P’s) • What is the difference between marketing domestically and internationally • Marketing concepts are universal (goal is to make a profit) • Difference is that in international marketing ALL environments have to be taken into consideration when the marketing plan is developed and executed • Must consider the legal environment, governmental controls, climate & weather, cultural beliefs, buyer behavior… (uncontrollable elements)

International vs Domestic Business • Countries are different. • Range of problems are wider and more complex. • Government intervention in trade and investment creates problems. • International investment is impacted by different currencies.

Levels of Involvement in International Marketing High International Direct Investment Acquisitions Joint Ventures Overseas Divisions Degree of Risk and Control Contractual Agreements Franchising Foreign Licensing Subcontracting Exporting Low

International Trade Theories • Absolute Advantage • Comparative Advantage • Heckscher-Olin Theory (Factor Proportion Theory) • Product Life Cycle Theory © McGraw Hill Companies, Inc.,2000

An Overview of Trade Theory • Free Tradeoccurs when a government does not attempt to influence, through quotas or duties, what its citizens can buy from another country or what they can produce and sell to another country. • The Benefits of Tradeallow a country to specialize in the manufacture and export of products that can be produced most efficiently in that country. • The Pattern of International Trade displays patterns that are are easy to understand (Saudi Arabia/oil or Mexico/labor intensive goods). Others are not so easy to understand (Japan and cars). © McGraw Hill Companies, Inc.,2000

Theory of Absolute Advantage • Capability of one country to produce more of a product with the same amount of input than another country. • Produce only goods where you are most efficient, trade for those where you are not efficient. • Trade between countries is, therefore, beneficial. • Assumes there is an absolute advantage balance among nations. © McGraw Hill Companies, Inc.,2000

Theory of Comparative Advantage • Extends free trade argument • Efficiency of resource utilization leads to more productivity. • Should import even if country is more efficient in the product’s production than country from which it is buying. • Look to see how much more efficient. If only comparatively efficient, than import. • Makes better use of resources © McGraw Hill Companies, Inc.,2000

Heckscher (1919)-Olin (1933) (Factor Proportion)Theory • Export goods that intensively use factor endowments which are locally abundant. • Corollary: import goods made from locally scarce factors. • Patterns of trade are determined by differences in factor endowments - not productivity. • Remember, focus on relative advantage, notabsolute advantage. © McGraw Hill Companies, Inc.,2000

Factor Endowments • Taken from Heckscher-Olin • Basic factors: • natural resources, • climate, • location. • Advanced factors: • communications, • skilled labor, • technology. © McGraw Hill Companies, Inc.,2000

Product Life-Cycle Theory(Raymond Vernon, 1966) • As products mature, both location of sales and optimal production changes. • Affects the direction and flow of imports and exports. • Globalization and integration of the economy makes this theory less valid. © McGraw Hill Companies, Inc.,2000

Entering a Foreign Market: Areas of Focus • Demand. Do foreign consumers need the company’s good or service. • Competition. How do supplies currently reach the market? • Economic environment. What is the state of the nation’s economic health? • Social-cultural environment. How do cultural factors affect business opportunities? • Political-legal environment. Do any legal restrictions complicate entering the market?

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INTERNATIONAL MARKETING