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International Marketing
Dr. Kay Peters
Day 1 – Section 1
© 2011 Dr. Kay Peters
International Marketing – U Muenster – Autumn 2011
1
Welcome – About me
•
MBA and PhD, University of Kiel, Germany
(Marketing, Econometrics, Innovation)
•
2005-2009 Managing Director of CIM,
Center for interactive Marketing & Media Management,
University of Muenster, Germany
•
2010-2012 Visiting Ass. Professor of Marketing, UC Davis
•
Co-Founder and –Owner of software & consulting companies
•
Expat Assignment >1yr in Latin America
2
Welcome – About me
•
Extensive International Executive Training,
among others for 3M, Metro, J&J, Brady Corp.,
Haniel Group, Several Banks across Europe
•
Areas of Expertise:
- (Interactive) Communication
- CRM
- International Product Diffusion & Marketing
•
Co-edited Books on
- eCommerce (German)
- Marketing for Interactive Media (German)
- International Direct Marketing (German, English, French)
3
Now it is Your Turn…
What is
•
… your background
•
… your international marketing exposure?
•
… your expectation?
Let us assess your learning…
4
What is “International Marketing”?
Any idea?
•
What may be criteria for International Marketing?
•
Why do you think it is different from „normal“ Marketing?
5
What is “normal” Marketing?
• Marketing involves the planning and execution of the
conception, pricing, promotion, and distribution of ideas,
products, and services (AMA).
• Marketing involves customer’s current and future needs,
and also their satisfaction.
• Marketing is more than selling, involves the entire company.
It is about market orientation!
• Companies are always under competitive pressure to move
forward, both reactively and proactively.
6
Do You Think these Definitions are Adequate?
•
What is the purpose of defining International Marketing?
•
What are the consequences of the following definitions?
7
Classic Interpretations of International Marketing…
Author(s)
Definition of International Marketing
Kahler/Kramer (1977)
Export or international business
Bradley (2005)
Establishment of long-term organizations for handling
international markets in two or more countries
Stahr (1993)
Entity of a company’s activities in selected countries
Czinkota/Ronkainen (2010)
Planning and execution of (market) transactions across
country borders
Meffert/Bolz (2001)
Analysis, planning, execution, coordination and controlling of activities directed towards actual and potential international markets
Mühlbacher/Daringer/Leihs
(2006)
Adoption of market orientation and marketing
techniques into international business
8
… and their Key Elements.
Author(s)
Definition of International Marketing
Kahler/Kramer (1977)
Export or international business
Bradley (2005)
Establishment of long-term organizations for handling
international markets in two or more countries
Stahr (1993)
Entity of a company’s activities in selected countries
Czinkota/Ronkainen (2010)
Planning and execution of (market) transactions across
country borders
Meffert/Bolz (2001)
Analysis, planning, execution, coordination and controlling of activities directed towards actual and potential international markets
Mühlbacher/Daringer/Leihs
(2006)
Adoption of market orientation and marketing
techniques into international business
9
Do You Think these Definitions are Adequate?
Keywords
•
Export
•
International markets – in two or more countries
•
Activities in selected countries
•
Transactions across country borders
•
Activities towards actual and potential international
markets
•
…into international business
•
Anything missing?
•
What are the implications of these definitions?
10
Implications of Classic Interpretations
• The classic interpretations of international marketing are characterized
by an emphasis on cross-border activities.
• They are very similar to the general definition of marketing in a
national context.
• Strengths: Sensitizes managers for the differences (cultural, ways of
business conduct, consumer attitudes, etc.) between country markets;
emphasize increased risk and informational needs.
• Weaknesses: It does not become clear
why international marketing constitutes a field in its own right.
What are its conceptionally distinct features
(of international marketing as well as the underlying business activity)?
• The approach risks to marginalize international marketing to a special
case of national marketing.
11
Let Us Get Some Inspiration… Are They Different?
•
USA
http://www.youtube.com/watch?v=k5PGRWxJjtU
•
South Korea
http://www.youtube.com/watch?v=jgAElkZG-bE&NR=1
•
Germany
http://www.youtube.com/watch?v=r_t4ZCle_po&NR=1
•
Argentina
http://www.youtube.com/watch?v=KPoOmKnAHgg
•
South Africa
http://www.youtube.com/watch?v=d1rwH0HQFI&feature=PlayList&p=572624B1AC0F2818
•
India
http://www.youtube.com/watch?v=26MLjHFK4Jk
12
Is it only Local Flavor that Makes the Difference?
What is different? What did you notice?
•
•
•
•
•
•
•
Context
Stories
Humor
Culture
Colors
Language
Product Usage
•
But same product? Same Brand?
13
Observation by Quack (1995, p.9)
Example international pricing problems:
•
Apply traditional marketing knowledge
•
Local experiments in NY and Bejing
•
Same results – same conclusions?
Far from it:
•
Already the precise formulation of experiments will be very
different
•
Different structuring, function of business activities,
communication, language & behavior need be considered
•
Comparability of results cannot be taken for granted
•
Final TV spot very different – naked shoulder from West is
considered pronographic content and forbidden in China
Source:
Backhaus/Bueschken/Voeth, International Marketing, 2005, p. 15.
14
Challenges in International Marketing
•
Additional Informational Needs
- but information is often hard to find
•
Increased Risk
- little information increases associated risk
•
Complexity and Managerial Challenges
- both rise with degree of differentiation of marketing tasks
- reciprocal effects across countries
•
Co-ordination Needs
- national activities have to be coordinated,
especially with respect to eCommerce
Source:
Backhaus/Bueschken/Voeth, International Marketing, 2005, p. 15.
15
Dynamic Classification of Characteristics
• Additional need for information
• Increased market risk
Entry into new
country
• Resource allocation links countries
• Production links countries
• Marketing links countries
Ongoing
operations
(dynamic)
• Links lead to interdependencies
• Interdependencies require coordination
16
Reasons for the Need to Coordinate
If the markets or target markets of an international company are not linked by
any kind of interdependency these country markets can be dealt with in isolation.
This kind of issue is well addressed by the classical approach to international
marketing.
The need to coordinate arises when what a firm does in one market depends
on its activities and positioning in another country market, i.e. interdependencies
exist between the markets (or target markets). This kind of issues needs to be
addressed in a coordination-oriented framework of international
marketing.
17
Causes for International Need to Coordinate
Interdependencies
Competition-based
interdependence
• Competition network &
Intensity of competition
Supplier-based
interdependence
• Configuration of international
activities
• Costs
Demand-based
interdependence
• Information exchange
• Exchange of goods and
services
• Cross-border corporate
objectives
18
Interdependencies
Competition-based
interdependence
Supplier-based
interdependence
activities
• Costs
Demand-based
interdependence
services
objectives
19
Example: „Intensity of Competition“ (I)
Domestic Market
Target Country 2
Cust
Comp
Prod
ucer
Cust
Cust
Comp
Comp
Comp
Target Country 1
Other Countries
20
Example: „Intensity of Competition“ (II)
100
Opel/ Vaux hall Holden
100
Saab
49
General
Motors
(13,3)
20
10
20
Fuji Heavy
Industries
Maruti
(0,4)
Alfa Romeo
Volvo Cars
33,4
100
5
Lada
(0,7)
Audi
Rover /MG
(0,3)
Lamborghini
100
100
100
34
Freigtliner
DaimlerChrysler
(6,1)
Aston
Martin
Mitsubishi
MMC
(1,4)
1,3
Hyundai /Kia
(2,0)
Sterling
Seat
100
Skoda
VW
(4,9)
Rolls Royce /
Bentley 1
Bugatti
100
Navistar
(0,1)
Ford
(8,3)
99
100
Iveco
(0,2)
Mazda
(1,0)
Paccar
(0,07)
Land Rover
Yamaha
BMW
(0,7)
Lancia
100
Hino
(0,05)
Toyota
(5,5)
Daihatsu
Daewoo
(1,0)
Suzukii
(1,3)
50
Jaguar
51,2
Peugeot Citroën (2,4)
5
Fiat Auto
(2,3)
33,8
Honda
(2,4)
Isuzu
(0,5)
Scania
(0,05)
100
18,7
45
MAN
(0,06)
Samsung
(0,01)
Porsche
(0,05)
1
5
8
Proton
(0,2)
10
15
Volvo Truck
(0,3)
Renault
Nutzfahrz .
Dacia
(0,1)
51
70
36,8
Nissan
(2,5)
Renault
(5,0)
22,5
Nissan
Diesel
(0,04)
Source: FAZ (4.7.2000).
21
Example: „Intensity of Competition“ (IIIa)
Lan Chile
Iberia
American Airlines
Qantas
Finnair
British Airways
Aer Lingus
Cathay Pacific
Air Canada
Air New Zealand
ANA
Asiana Airlines
Austrian Airlines
British Midland
Lauda Air
Lufthansa
Mexicana
SAS
Singapore Airlines
Thai Airways
Tyrolean
United
Varig
Delta
Air France
Aeromexico
Korean Air
Alitalia
Czech Airlines
Swiss
SN Brussels Airlines Air Portugal
KLM
Northwest
22
Example: „Intensity of Competition“ (IIIb)
Lan Chile
Iberia
American Airlines
Qantas
Finnair
British Airways
Aer Lingus
Cathay Pacific
Air Canada
Air New Zealand
ANA
Asiana Airlines
Austrian Airlines
British Midland
Lauda Air
LOT
Lufthansa
Mexicana
SAS
Singapore Airlines
South African Airways
Spanair
Thai Airways
Tyrolean
United
U.S. Airways
Varig
Delta
Air France
Aeromexico
Korean Air
Alitalia
Czech Airlines
Continental Airlines
Swiss
SN Brussels Airlines Air Portugal
KLM
Northwest
23
Interdependencies
Competition-based
interdependence
Supplier-based
interdependence
activities
• Costs
Demand-based
interdependence
services
objectives
Also compare ipod example later
24
Interdependencies
Competition-based
interdependence
Supplier-based
interdependence
activities
• Costs
Demand-based
interdependence
services
objectives
25
Example: „Information Exchange“ (I)
CNN (USA)
CNN (Mexico)
26
Example: „Information Exchange“ (II)
27
Interdependencies
Competition-based
interdependence
Supplier-based
interdependence
activities
• Costs
Demand-based
interdependence
services
objectives
28
Example: „Exchange of Goods“ (I)
29
Example: „Exchange of Goods“ (II)
ca. 215 €
30
Interdependencies and Coordination
Supplier-based
interdependencies
Demand-based
interdependencies
Competition-based
interdependencies
Coordination of
business activities
Coordination of
national
marketing activities
Control of
interdependencies
31
Defining and Delineating
„International Marketing“?
International marketing in a narrow sense is therefore
• the management of market-related interdependencies and
• the reciprocal coordination of marketing activities in various
country markets
• guided by cross-border corporate objectives
(e.g. overall profit maximization).
32
Definitions of
„International Marketing“
in a broad sense
Multinational Marketing
in a narrow sense
33
Evolution of International Marketing (I)
Ethnocentric Orientation




Polycentric Orientation
Geocentric Orientation
home country is superior and the needs of the home market are most relevant
operating in external country markets in a manner characterized strongly by the domestic market
mostly only a few, selected country markets are operated
the focus of internationalization is on using marketing knowledge gained in the home market
("looking for similarity“)
Characteristics
National
Marketing
Export
Marketing
Product Planning
Focus only on
domestic markets
Product
development for
home country
customers
Sporadic
foreign
activities in
countries with
low exit
barriers
Product development
determined primarily
by the need of the
home country
customers
Marketing Mix
Decisions
Made at
headquarters
Made at
headquarters
34
Evolution of International Marketing (II)
 apart from its home market, an enterprise covers additional foreign markets
 the seller is in this case willing to consider the particular characteristics of the foreign market and to
develop and implement country-specific strategies
 adaptation to national preferences is the key to success
 control with affiliates is highly decentralized
Characteristics
Multinational
Marketing
Low level of
interdependencies
 mainly autonomous
subsidiaries
Product Planning
Marketing Mix
Decisions
Local product
development based
on local needs
Made in each
country
35
Evolution of International Marketing (III)
 the objective of a geocentric marketing orientation is to integrate all corporate activities into an
overall system
 the large number of individual country markets are served with partly standardized products
 in the long run economies of scale and economies of scope can be achieved
Characteristics
Global
Marketing
International
Marketing
The world is
one market
Many
interdependent
markets
Product Planning
Marketing Mix
Decisions
Global product with
local variations
Made jointly
with mutual
consultation
Integrate and
coordinate marketing
programme across
borders
Made by
international
teams
36
Positioning the Tasks in International Marketing
Strong Country Market
Interdependencies
international
marketing
approaches
International Marketing:
national
marketing
Going
International
Focus on
Home
Country Market
Being
International
Focus on
many
Country Markets
national
marketing
Multinational Marketing
Weak Country Market
Interdependencies
37
Course Structure
Part I
Part II
Conceptual
Essentials
Going
International
International
Marketing
Part IV
Part III
Application of
Knowledge
Being
International
38
Central Issues to be Covered in
Conceptual Essentials:
•
Globalization & Localization
•
Main Drivers:
- Different Environments & Cultures
- Interdependencies!
Going International:
•
Global Market Entry (Market Selection)
•
International Market Research
•
Global Segmentation
•
International Diffusion & Timing Entry/Exit
Kotabe/Helsen,
Global Marketing
Management (GMM),
5th edition, 2010
Being International:
•
Global Marketing Mix Issues
39
Additional resources included in class material
Sources: Czinkota/Ronkainen, Principles of International Marketing, 2009, 9th edition
Doole/Lowe, International Marketing Strategy, 2008, 5th edition
Ghauri/Cateora, International Marketing, 2006, 2nd edition
40
Lectures Build the Foundation for
We start with 4 lectures covering all fundamentals on Day 1 & 2
•
Section 1: Essentials: Globalization, Localization,
Diversity, & Interdependencies
•
Section 2: Going International:
Global Market Entry (Market Selection),
Int. Marketing Research, & Global Segmentation
•
Section 3: International Diffusion & Timing of Entry/Exit,
•
Section 4: Being International:
Dynamics of Country Markets, Coordination
Challenges, & Global Marketing Mix
41
Implementation Issues to be Covered in
HBR Cases to implement learnings in teams…
•
Case 1:
Lincoln Electric
Market Entry to Asia
•
Case 2:
Caterpillar Tractor
Globalization, Strategy &
International Competition
•
Case 3:
Gilette Indonesia
Market Development,
Product Line, & Distribution
•
Case 4:
Mary Kay Cosmetics Marketing-Mix for
Emerging Markets
42
Exam on
Exams will cover only the lectures (sections 1-4)
•
Dates & Time available from „Prüfungsamt“
•
At end of sections presentation on Exam, Q&A
Any other questions?
43
Cross-Cultural Training Methods
Source:
Czinkota/Ronkainen (2009), p. 118
44
Ranking of Factors for Acquiring
International Expertise
Source:
45
Administrative Issues
•
Schedule – External Speakers & Flexibility
•
Required Readings
•
Cases:
- Teams
- Assignments/Questions (given 2 weeks in advance)
- Presentations due 2 days before class at 9am by mail
- We try to have as many presentations as possible
- (Individual) write-ups & Presentations
•
Any other issues? (Smartsite)
46
Course Structure
Part I
Part II
Conceptual
Essentials
Going
International
International
Marketing
Part IV
Part III
Application of
Knowledge
Being
International
47
Relevance and Evolution of Global Marketing
1.
Why Global Marketing is Imperative
2.
Globalization of Markets: Convergence
3.
Globalization of Markets: Divergence & Localization
4.
General Framework for International Marketing
5.
A firm’s Evolution to International Marketing
48
Trade as Major Engine of Wealth in Ancient Times
• All major civilizations in history have been thriving on
trade across „borders“.
• Extending back beyond the Silk Road that once
connected East with West from Xian (China) to Rome
(Italy).
49
What Trade Routes look like Today…
• Shipping lines mark major trade routes…
Source:
Kotabe/Helsen (2010), p. M-11
50
The Same in Numbers…
• Trade is growing rapidly, making it a global business
environment for any company.
Source:
WTO 2010
51
Merchandise Exports & Imports as % of World Total
Source:
52
Long-tail of World Trade Gains Importance
Widening Gap
Long-tail of Trade
• Trade is growing, but the share of Triad is falling rapidly.
Source:
WTO 2010
53
Exports & Imports of Goods and Services pc
Source:
54
World Trade Flows
Source:
Doole/Lowe (2008), p. 38
55
Relevance (4)
• The Triad Regions (North America, Western Europe, and
Japan) of the world collectively produce over 78 percent of
world GDP in 2004.
• Now have a look at 2008:
56
Trade as a Percentage of GDP
Ratio of exports and imports of goods and commercial services to GDP, 2008
(Percentage based on current dollar values)
0 - 30
30 - 60
60 - 100
≥ 100
Data not available
Note : Colours and boundaries do not imply any judgement on the part of WTO as to the legal status or frontier of any territory.
Source:
http://www.wto.org/english/res_e/statis_e/looking4_e.htm#summary
57
Trade Barriers
Source:
58
World Population: Present &
Shape of Things to Come
Source:
59
Future of Growth attributed to BRIC
Source:
Kotabe/Helsen (2010), p. 44
60
World Economic Pyramid
Source:
61
Percentage of Household Owning Appliances
• Aren’t these supposedly similarly advanced countries?
• Why do we have such big differences in appliance ownership?
Source:
62
Market Potential of 27 Emerging Markets (2008)
Source:
63
Relevance (5)
• The share of GDP and Trade of the Triad is falling rapidly.
• BRIC countries (Brazil, Russia, India, China)
are gaining importance rapidly.
• Other hot area of growth is ASEAN states.
• Long tail of GDP and trade distribution is becoming more
important than ever.
• International Markets & Marketing are getting more complex by
the day.
We have to prepare ourselves – that‘s why we‘re here.
64
Why World Wide Trade is Beneficial to Everybody?
Any idea on why trade is good and produces only winners?
Three theories explain how trade works
a)
Comparative Advantage
b)
International Product Life Cycle
c)
Transactions Cost
65
a) Comparative Advantage Theory (1/2)
•
Absolute Advantage
•
Comparative Advantage
•
Commodity Terms of Trade
•
Principles of International Trade
•
Factor Endowment Theory
66
a) Comparative Advantage Theory (2/2)
Relative Advantage
is key, not absolute!
Source:
67
b) International Product Cycle Theory (1/4)
− Economies of Scale
− Economies of Scope
− Technological Gap
− Preference Similarity
68
b) International Product Cycle Theory – Stages (2/4)
− Introduction Stage
• US company innovates on a new product in home country
− Growth Stage
• Product standards emerge;
mass production becomes feasible
− Maturity Stage
• Many US and foreign companies vie for market share in
international markets
− Decline Stage
• Companies in the developing countries begin producing the
product and marketing it in the rest of the world
69
b) International Product Cycle Theory – Stages (3/4)
Source:
70
b) Examples for Product Life Cycles (4/4)
71
c) Internalization/Transaction Cost Theory
• Internalization/Transaction Cost Theory
– Appropriability Regime
– Dominant Design
– Manufacturing and Marketing Ability
72
Comparative Advantage & Product Life Cycles
Result in Complex Value Structures
The retail value of the 30-gigabyte video iPod that the authors
examined was $299.
The most expensive component in it was the hard drive,
which was manufactured by Toshiba and costs about $73.
The next most costly components were the display module (about $20),
the video/multimedia processor chip ($8) and the controller chip ($5).
They estimated that the final assembly, done in China, cost only about $4 a unit.
One approach to tracing supply chain geography might be to attribute the cost of
each component to the country of origin of its maker.
Source:
Hal Varian, NY Times, June 18, 2007
73
So $73 of the cost of the iPod would be attributed to Japan
since Toshiba is a Japanese company,
and the $13 cost of the two chips would be attributed to the United States, since
the suppliers, Broadcom and PortalPlayer, are American companies, and so on.
But this method hides some of the most important details.
Toshiba may be a Japanese company, but it makes most of its hard drives in the
Philippines and China. So perhaps we should also allocate part of the cost of
that hard drive to one of those countries.
The same problem arises regarding the Broadcom chips, with most
of them manufactured in Taiwan.
So how can one distribute the costs of the iPod components across the
countries where they are manufactured in a meaningful way?
Source:
74
The researchers estimated that of the iPod’s $299 retail value
$163 was captured in the United States by American companies and workers,
breaking it down to
$75 for distribution and retail costs,
$80 to Apple,
$8 to various domestic component makers.
Japan contributed about $26 to the value added (mostly the Toshiba disk drive),
while Korea contributed less than $1. The unaccounted-for parts and labor costs
involved in making the iPod came to about $110.
Ultimately, there is no simple answer to who makes the iPod or where it is made.
Source:
75
The real value of the iPod doesn’t lie in its parts
or even in putting those parts together.
The bulk of the iPod’s value is in the conception and design of the iPod.
That is why Apple gets $80 for each of these video iPods it sells, which is by far the
largest piece of value added in the entire supply chain.
Those clever folks at Apple figured out how to combine 451 mostly generic parts
into a valuable product.
They may not make the iPod, but they created it.
In the end, that’s what really matters.
Source:
76
Who Manages International Trade?
• International trade and foreign production activities are
managed on a global basis.
• Growth of Multinational Corporations (MNCs) and intrafirm trade is a major aspect of global markets.
• Intra-firm trade =
trade between MNCs and their foreign affiliates
 34% of World Trade
• Exports between MNCs and their affiliates:
 33% of World Trade
• 67% of World Trade is managed by MNCs.
77
Change in the World’s 100 Largest Companies
(1970 - 2009): Asia & BRIC gain, Triad loses
Source:
78
International Trade versus
International Business
• International Trade consists of exports and imports.
• International Business includes international trade and foreign
production.
• Extensive international penetration of companies is called
Global Reach.
79
Importance Summary
• International trade has always been key to wealth
- it is beneficial to everybody
• Trade is growing faster than GDP
• Widening Gap between world trade and the triad‘s share
• Long-tail of trade is grwoing in importance, ever more
countries participate
• World economic pyramid is changing fast
• Complex value structures for any product, almost intractable
• 2/3 of international trade handled by MNCs
80
1.
2.
3.
4.
5.
81
Different Levels of Multinational Cooperation
- Any may Lead to more Convergence
Source:
Ghauri/Cateora (2006), p. 213
82
Regional Economic Arrangements (1)
• An evolving trend in international economic activity:
formation of multinational trading blocs
• Over 120 regional free trade areas worldwide
• Market groups take many forms, depending on the
degree of cooperation and inter-relationships
different levels of integration among the
participating countries
83
Types
• Free Trade Areas:
Formal agreement among two or more countries to
reduce or eliminate customs duties and nontariff
barriers (e.g., NAFTA, MERCOSUR, CAFTA-DR & FTAA)
• Customs Union:
Addition of common external tariffs to the provisions of
free trade agreements. (e.g., ASEAN)
• Common Market:
Eliminates all tariffs and other barriers, adopts a
common set of external tariffs on nonmembers, and
remove all restrictions on the flow of capital and labor
among member nations. (e.g., European Union)
84
Types
• Monetary Union:
Represents the fourth level of integration with a single
currency among politically independent countries.
(e.g., EU and the euro)
• Political Union:
Highest level of integration resulting in a political union.
Sometimes, countries come together in a loose political
union for historical reasons.
(e.g., the British Common-wealth which exists as a
forum for discussion and common historical ties)
85
Proposed Company Responses
to European Integration
Source:
86
Convergence (1/2)
• Per capita income =
important determinant of consumer buying behavior
• If country’s per capita income less than $10,000
 much of the income is spent on food & necessities
 very little disposable income remains
• If country’s per capita income > $20,000

the disposable portion of income increases dramatically

increased disposable income level results in increased
convergent pressures on consumer buying behavior
Worldwide Income Levels
87
Convergence (2/2)
• People with higher incomes tend to enjoy
- similar educational levels,
- desires for material positions,
- ways of spending leisure time, and
- aspirations for the future.
• Globalization does not suffocate local cultures, but rather
liberates them from the ideological conformity of nationalism,
with consumers becoming more receptive to new things.
• Consumers also have a wider, more divergent
“choice set” of goods and services to choose from.
The divergence of consumer needs is taking place at
the same time – increased heterogeneity, but global
88
What do Whitestrips, Spin-Brush,
and the Swiffer have in Common?
89
… Adressing the Needs of the New „Affluent“
Between 1970 and 2000, a major shift took place in the
distribution of (U.S.) household earnings!
90
Attend the New Middle Ground…
• dramatic shift in the distribution of household incomes
• opening a vast new middle ground:
• previously mass vs. high-end choices:
Distinction is history – don‘t leave money on the table
Most promising route to profitable growth:
Capturing that ground!
91
Lagging Spending by Top Earners Worldwide…
While incomes have been rising, the average household
expenditure as % of income followed a downward
trajectory!
92
„Segment of One“? Take a Second Look…
• Spending patterns did not keep pace with income increases of
the last 30 years
• Lagging consumption expenditures behind earnings growth
suggests a failure by marketers:
they simply did not address households´ needs and desires
• Marketing theory and practice promote the „market of one“:
marketers having tools to target great customers …
BUT
… in the single-minded pursuit of wallet share,
they‘ve failed to see the forest for the triage…
93
Update Your Form of Mass Marketing
• We might simply think…
• … that goods are being consumed in greater quantity
• … that prices of basic products are now rising in step with
income
BUT
• … the best chances for growth:
Updated form of mass marketing
with its central tenets continuing to be
- scale production and
- sales largely to anonymous customers
94
What to Do?
1. Rethink how to position your offerings,
reconsider the entire „position map“
2. Design or modify your offerings
with a more affluent mass market in mind
3. Adjust how you go to market,
both in terms of retail channels and promotions
 Success at mass marketing comes
not from obeying its timeworn rules
but from reinventing the rules for today‘s mass market
95
Dental Care: Whitestrips
$ 35
96
How do You find a New Middle Ground?
1. Identify ALL the benefits your existing offering delivers
2. Consider ALL really expensive high-end offerings
that satisfy the customer needs that your product does
 this expands the positioning map
3. Pick a price point that is substantially higher than your
category‘s average but still below the high-end solution
4. Imagine what you could possibly offer given the freedom to
spend – on development as well as delivery –
what these price points would give you?
97
Another Driver of Convergence/Global Marketing
is the Internet
• Internet revolution:
The Internet and electronic commerce (e-commerce) are
bringing major structural changes to the way companies
operate worldwide.
The term “global” epitomizes both the competitive
pressure and expanding market opportunities.
Whether a company operates domestically or across
national boundaries, it can no longer avoid competitive
pressures from around the world.
98
World Internet Usage (2008)
Potential
Source:
Speed
99
World Internet Network & Capacity (2007)
Source:
Kotabe/Helsen (2010), p. M10/11
100
Value of Intellectual Property in the
Information Age
• Information technology and the changing nature of
competition have created many challenges for the firms
• Over the Internet, any piece of electronically represented
intellectual property can be copied
• Trade Related Aspects of Intellectual Property Rights (TRIPS)
Agreement was concluded as part of the GATT Uruguay
Round
Make sure you are well prepared when going online,
or you might have to buy yourself into subsequent markets:
Paid 50m USD after 6 months for German copycat startup…
101
Value of Intellectual Property in the
Information Age
• IP protection is very heterogeneous across & within countries
Source:
102
Proliferation of E-Commerce and Regulations
• Countries’ regulators have not kept pace with the rapid
proliferation of international e-commerce and Internetrelated activities.
• In many countries, rules and regulations are vague regarding
e-commerce transactions
• The United Nations Commission on International Trade Law
(UNCITRAL) has formed a Working Group on Electronic
Commerce to reexamine these treaties
103
Convergence Summary
• Regional Economic Arrangements lead to more trade and to
rising and more homogeneous income patterns
• Increasing incomes worldwide lead to more convergence in
consumption patterns:
New opportunities for the new global affluents
• The Internet is driving globalization, as any website
automatically is internationally accessable
- a firm cannot „avoid“ international customers 
• Whether customers buy is a function of benefit and price per
income (in PPP).
• However, local marketing practices vary substantially due to
the „how“, i.e., communication, distribution, features may
vary due to local conditions, habits, and “culture“
104
1.
2.
3.
4.
5.
105
Introduction
• Consumer behavior & needs are driven by cultural norms
• Global business means dealing locally with
consumers, strategic partners, distributors, &
competitors with different cultural mindsets.
• Within a given culture,
consumption processes can include 4 stages:
–
–
–
–
Access
Buying behavior
Consumption characteristics
Disposal
• Each of these stages is heavily influenced by culture in
which consumer thrives
106
The A-B-C-D Paradigm
Source:
107
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
Cross-Cultural Comparisons
d.
Adapting to Cultures
e.
Cultures and the Marketing Mix
f.
Organizational Cultures
108
Definition of Culture
• Numerous definitions of culture
• Culture (in a business setting) can be defined as being a
– learned, shared, compelling, interrelated …
– set of symbols …
– whose meanings provide a set of orientations …
– for members of society.
• Cultures may be defined by national borders, especially
when countries are isolated by natural barriers.
• Cultures contain subcultures that have little in common
with one another.
109
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
d.
e.
f.
110
A Cultural Framework
Source:
111
Elements of Culture (1)
Source:
112
• Culture consists of many interrelated components
• Knowledge of a culture requires a deep understanding
of its different parts
• Following are the elements of culture:
– Material life
•
technologies that are used to produce, distribute, and
consume goods and services
– Language
•
language has two parts: the spoken and the silent language
– Social Interaction & Institutions
•
social interactions among people; nuclear family, extended
family; reference groups
113
– Aesthetics
•
ideas and perceptions that a culture upholds in terms of
beauty and good taste
– Religion
•
community’s set of beliefs that relate to a reality that
cannot be verified empirically
– Education
•
One of the major vehicles to channel from one generation to
the next
– Value System & Beliefs
•
shape people’s norms and standards
(Law/Politics & Technology)
114
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
d.
e.
f.
115
1. High- versus Low-Context Cultures
• Cultures differ from one another,
but usually share certain aspects
• Recent social psychology research reveal key cultural
differences between East (high) and West (low) context
cultures in how people perceive reality and reasoning:
– High-context cultures
• Interpretation of messages rests on contextual cues;
e.g., China, Korea, Japan.
– Low-context cultures
• Put the most emphasis on written or spoken words;
e.g., USA, Scandinavia, Germany.
• But even between USA and Germany, there are huge
differences, e.g., in being „straight“
116
High- versus Low-Context Cultures:
Contextual Background of Various Countries
Japanese
High context
IMPLICIT
Arabian
Latin American
Spanish
Italian
English (UK)
French
English (US)
Scandinavian
Low context
German
Swiss
EXPLICIT
117
2. Hofstede’s Cultural Classification Scheme (1)
– Power Distance
• Degree of inequality among people that is viewed as
being equitable
– Uncertainty Avoidance
• Extent to which people in a given culture prefer
structured situations with clear rules over unstructured
ones
– Individualism
• Degree to which people prefer to act as individuals
rather than group members
118
2. Hofstede’s Cultural Classification Scheme (2)
– Masculinity
• Importance of male
(assertiveness/success/competitive drive/achievement)
vs.
female values
(solidarity/quality of life)
– Long-term Orientation
• Future vs. versus short-term focus/orientations
119
2. Uncertainty Avoidance versus Power Distance (3)
Uncertainty Avoidance
Power Distance
Source:
Power Distance
Uncertainty Avoidance
120
3. Project GLOBE (1)
GLOBE =
Global Leadership and Organizational
Behavior Effectiveness
•
Large-scale ongoing research project that explores cultural
values and their impact on organizational leadership in 62
countries
•
First 3 dimensions same as Hofstede’s constructs:
– Uncertainty Avoidance
– Power Distance
– Collectivism
121
• Additional 6 dimensions include:
– Collectivism II
– Gender Egalitarianism
– Assertiveness
– Future Orientation
– Performance Orientation
– Humane Orientation
122
Source:
123
4. World Value Survey (1)
• Organized by the University of Michigan
• WVS has been conducted multiple times
• Population covered is much broader than in other similar
studies
• WVS encompasses two broad categories:
– Traditional vs. Secular values
– the Quality of Life
124
Source:
125
Note
Dynamics
126
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
d.
e.
f.
127
Adaptation to Cultures
• Global marketers need to become sensitive to cultural biases
that influence their thinking, behavior, and decision making.
• Self-reference criterion (SRC):
Refers to the people’s unconscious tendency to resort to their
own cultural experience and value systems to interpret a
given business situation.
• Ethnocentrism refers to the feeling of one’s own cultural
superiority.
128
Requisites for Cultural Adaptation
Source:
129
Written Language –
What you Should Avoid
Source:
130
Localizing Websites
Source:
131
Color Symbolism in Different Countries
Country
Austria
Color
Brazil
Denmark
Finland
France
• Sorrow
• Sorrow
• Death
• Secret
• Sorrow
• Anxiety
• Anxiety
• Jealousy
• Anxiety
• Drunkenness
• Jealousy
• Pessimism
White
• Innocence
• Peace
• Cleanliness
• Purity
• Innocence
• Purity
• Innocence
• Cleanlinness
• Purity
• young
Red
•
•
•
•
• Love
• Danger
• Fire
•
•
•
•
Black
Green
Blue
Yellow
Source:
Anger
Love
Passion
Fire
•
•
•
•
•
•
Warmth
Passion
Hate
Fire
Anger
Violence
• Hope
• Hope
• Freedom
• Immaturity
• Illness
• Loyalty
• Silence
• Coldness
• Indifference
• Jealousy
•
•
•
•
•
Happiness
Sun
Luck
Envy
Illness
Anger
Love
Passion
Fire
•
•
•
•
Anger
Heat
Delight
Shyness
Italy
• Depression
• Innocence
• Fear
• unsuccessful
• Love affair
Pakistan
• Sorrow
• Helplessness
• Sorrow
• Sobriety
• Elegance
Portugal
Sweden
• Sorrow
• Anxiety
• Hunger
• Depression
• Anxiety
• Peace
• Innocence
• Purity
• Kindness
War
Blood
Passion
Fire
Switzerland
1
2
• Pessimism
• illegal
3
4
• Purity
5
• Innocence
6
7
• Anger
• Fire
8
• Anger
• Danger
• Fire
• Anger
• Wedding
promise
(women)
•
•
•
•
• Envy
• Youth
• Scarcity of
money
• Depressive trouble
• Luck
• Devoutness
• Eternal
life
• Hope
• Envy
• Envy
• Inexperience
• Kindness
• Illness
• Immaturity
• Jealousy
• Difficulty
to solve
problems
•
•
•
•
naive
gullible
frozen
cold
• Rage
• Anger
• Romance
• Desperation
• Menace
• Without
money
• Hope
• Boredom
• Health
• Hope
• Envy
• Youthful
• Fear
• Quality
• Coldness
• Without
money
• Innocent
• Anger
• Fear
• Fear
• Danger
• Falseness
• Envy
(no special
meaning)
• Illness
• Anger
(no special
meaning)
• Virginity
• Weakness
• Anger
• Anger
• Rage
• Fire
• Envy
Berndt/Altobelli/Sander, Internationales Marketing-Management, 2005, p. 30.
132
Color Symbolism in Different Countries
Source:
133
Color Symbolism in “Different” Countries.
PR of China vs. Taiwan
134
The Symbolism of Colors is reflected in Cars…
Europe
Source:
India
Japan
Mexico
135
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
d.
e.
f.
136
Cultural Influence on Buying Behavior
Source:
137
A Model of Cross-Cultural Behavior
Source:
138
Buying Motives for Cars
Hofstede Measures
139
Cultural Values & Their Relevance to
Consumer Behavior
Source:
140
Differences in Buyer-Seller Relationship Styles
Source:
141
Culture and the Marketing Mix (1)
•
Culture is a(n often unnoticed) key pillar of the market place
•
Product Policy
– Certain products are more culture-bound than other products
Remember the cell phone?
– Food, beverages, and clothing products tend to be very culturebound
•
Pricing
– Pricing policies are driven by four Cs:
• Customers
• Company (costs, objectives, strategy)
• Competition
• Collaborators (e.g., distributors)
142
Culture and the Marketing Mix (2)
•
Distribution
– Cultural variables may also dictate distribution strategies
– Slow pace of change in customs, e.g., in India
•
Promotion
– Promotion is the most visible marketing mix
– Culture will typically have a major influence on a firm’s
communication strategy
– Local cultural taboos and norms also influence advertising styles
143
Overview on Culture
a.
Defining Culture
b.
Elements of Culture
c.
d.
e.
f.
144
• Most companies characterized by their organizational
(corporate) culture
• Model of organizational culture types includes the following
four cultures:
– Clan culture
– Adhocracy culture
– Hierarchy culture
– Market culture
145
A Model of Organizational Types
Source:
146
Preferred Management Styles in Different Cultures
Participatory
Management
Style
Countries
• USA
• Netherlands, Sweden
• Great Britain
Authoritarian
Management
Style
Source:
Examples
• Management by common decision preparation
• Formal standards deter arbitration from misuse of
power
• Low security requirements of employees
• Belgium, France
• Management interested in / follows advice and
opinion of employees
• Denmark, Norway, Australia,
Japan
• Medium level of delegation
• Spain, Germany, Italy
• Employees do not expect high levels of decisionmaking authority
• Greece, Turkey, South
America
• Low level of delegation, centralized decision-making
• Malaysia, Indonesia,
Thailand
• Status symbols and privileges for managers
apparent and legitimate
• Arabian countries
• Authority not questioned but accepted
• India, Pakistan
• Hardly any flow of information between different
levels
147
Culture Summary
• Culture: Everyone has one, but it is hard to define
• Several definitions, several attempts to measure
• All attempts have limitations, so be careful what you use
• All measurement attempts at the national level,
disregarding local heterogeneity!
• Overall, culture may rarely impact whether someone buys
• Rather, it may influence the “how“ of marketing,
i.e., communication, distribution, eventually product features
148
1.
2.
3.
4.
5.
149
Global parameters
General Framework of International Marketing (1)
Source:
Factors
Examples
• Economic factors
• Market size
• Gross national product
• Per-capita income
• Development of interest rate
• Development of exchange rate
• Cost of labor
• Political and legal
factors
• Right of residence
• International law
• Political stability
• Industrial action
• Economic agreement
• Tariff and non-tariff barriers
• Sociocultural
factors
• Language and religion
• Values and norms
• Conventions
• Educational background
• Social institutions and social behavior
• Geographic
factors
• Climate
• Topography
• Resources
• Infrastructure
150
Global parameters
Industry
& Competition
Source:
Factors
Examples
• Industry
structure
• Type of market
• Barriers of entrance
• Capital intensity (within the industry)
• Value added (within the industry)
• Technological change (within the industry)
• Competitors
• Character, number and size of competitors
• Degree of competition
• Product mix of competitors
• Share of market
• Suppliers
• Concentration rate of suppliers
• Character, number and size of suppliers
• Quality of raw materials and pre-products
• Labor supply
• Consumers
End consumer:
• Demand behavior
• Structure of needs
• Character and size of market
segments
• Willingness to pay
Retail market:
• Power of demand
• Purchasing volume
• Concentration rate
• Structures of distribution
151
Company Specific
Source:
Factors
Examples
• Business
Objectives
• Ultimate business objective / business philosophy
• Country-specific marketing objectives
• Financial Power
• Capital structure
• Liquidity
• Creditworthiness
• Product
Characteristics
• Language and religion
• Product quality
• Additional Services
• Staff
• Qualification
• International experience
• Production
Capacity
• Available capacity
• Degree of capacity utilization
152
Exposure to Political Risk
(Example in Market Selection Later)
Source:
153
Environmental Shortcomings of the
Investment Climate
Source:
154
Example on Economic Framework:
Changing Country Competitiveness (1)
• Country competitiveness refers to the productiveness of a
country, which is represented by its firms’ domestic and
international productive capacity.
• Country competitiveness is not a fixed thing -> Dynamic!
• The role of human skill resources has become increasingly
important as a primary determinant of industry and country
competitiveness.
155
Example on Economic Framework:
Changing Country Competitiveness (2)
• Competitiveness is not static.
• Changes every year as all countries compete all the time.
Source:
156
Planning Process in Global Marketing:
International Marketing is even more Complex!
Situation analysis
Global parameters
• Economic factors
• Political and legal factors
• Sociocultural factors
• Geographic factors
Company specific parameters
Industry and competition
• Industry structure
• Competitors
• Suppliers
• Consumers
Company specific parameters
• Business objectives
• Financial Power
• Product characteristics
• Staff
• Production capacity
Prediction
Strategic International Marketing Planning
Strategic target planning
Market segmentation and market selection
Planning of market approach strategy
Planning of market development strategy
Planning of International Marketing Policy
Tactical and operational target planning
International action planning
International
product policy
International
contracting policy
International
communication policy
International
distribution policy
International marketing mix
Realization of International Business Activities
Organization
Coordination
Control
Control of International Business Activities
Marketing audits
Source:
Goal-oriented control
157
1.
2.
3.
4.
5.
158
Drivers of Firm Internationalization
• Saturation of domestic markets - Opportunities:
Domestic-market saturation in the industrialized parts of the
world and marketing opportunities overseas are evident in
global marketing.
• Global competition – Reaction to foreign entries:
Competition around the world and proliferation of the
Internet have been on the rise and are now intensifying.
• Global Sourcing - Need for global cooperation on costs:
Global competition brings global cooperation.
159
The Five Stages in the Evolution of
Global Marketing (1)
1. Domestic Marketing
• domestic focus
• home country customers
• ethnocentric orientation
2. Export Marketing
•
•
•
•
indirect vs. direct exporting
country choice
ethnocentric orientation
home country customers
3a. Multinational Marketing
•
•
•
•
many markets
consolidation on regional basis/multidomestic marketing
regiocentric orientation
standardization within regions
160
3b. International Marketing
•
•
•
•
markets in many countries
polycentric orientation
use of multidomestic marketing when no interdependencies
complex when interdependencies present
4. Global Marketing
• international, multinational & geocentric orientation
• company’s willingness to adopt a global perspective
• global products with local variations
161
Different Definition
Source:
162
Degree of complexity
Evolution of Organizational Structures
of Internationally Active Businesses
• Complete
integration
• Centralization decentralization
• Centralization
• Supervision of all
marketing
functions by
headquarters
• Functional
• Organic / nonspecific
• Product-based
customers /
segments /
regions / nations
• Divisional
• Market-oriented
• Product / region
• Function / region
• Region / function
• Matrix
• Strategically
global business
• Multinational
concern
• Regional market
centre
• Multinational
concern
• Export division
• Subsidiary
Organization of
international operations
Structure
• Export
Focus
Duration of international operations
Source:
163
Multinational Corporations (1)
• U.S. government defines a multinational corporations (MNC)
as a company that …:
– owns or controls 10 percent or more of the voting securities or
the equivalent
– of at least one foreign business enterprise
• Currently: 70,000 MNCs with 690,000 affiliates in foreign
countries
• MNCs’ total sales exceed $19 trillion
• Intra-firm activities account for one third of multinational
companies’ trade
• Remember, 67% of world trade in goods and services is
controlled by MNCs
164
• Of the 100 largest economies in the world,
51 are corporations
• The sovereignty of nations will perhaps continue to weaken
due to MNCs and the increasing integration of economies
• In 1970: more than half of the 7,000 MNCs either from the
U.S. or Britain
• By 1995: less than half of the 36,000 MNCs came from four
countries: the U.S., Japan, Germany, and Switzerland
• Nation-state is considerably weaker than its nineteenth
century counterpart, but likely to remain alive and well
165
• Current factors that helped multinationals from other
countries to join the cross-border fray:
–
–
–
–
currency movements,
capital surpluses,
faster growth rates, and
falling trade and investment barriers
• Not unusual for a startup firm to become global at its
inception
“Born Globals” – Especially Internet Startups
166
A Comparison of Assumptions about
Global & Multinational Companies
Source:
167
Global Product and Marketing Strategies of Globalizing
Internationals and Global Businesses
Stage in
internationalization
process
International market entrance and
market penetration
Strategic approach
Globalizing
Internationals
Born Globals
Global orientation
Globalizing
Internationals
Born Globals
• Global integration,
coordination as well as
orientation
• Focus on core
competences
• Vertical and increasingly
horizontal integration by
cooperation
• Identification of global
segments
• Global orientation
• Focus on core
competences
• Horizontal integration
by cooperation
• Identification of global
niches
Cross-national
standardization of product
and marketing campaigns
as well as management
processes
Standardization of
product and marketing
campaigns as well as
management processes
right from the beginning
Central strategic
dimensions
• Entrance and
penetration of
international markets
• Market exploitation
• Utilization of available
resources
• Identification of new
market segment
Standardization of
product and
marketing strategy
Adaption of product and
marketing campaigns as
well as of management
processes in target
countries
Cooperation within
strategic networks
Vertical cooperations in
marketing and product
management
Vertical and increasingly
horizontal cooperations in
management
Horizontal cooperations in
management
Typical businesses
in the IT sector
Medium to large
diversified businesses
with ethnocentric
orientation
Large businesses, first
internationalizing then
globalizing
Small businesses,
globalizing right from
the beginning
Source:
Global businesses skip
different phases and act
globally right from the
beginning
168
Global Marketing
• Global marketing refers to marketing activities that
emphasize the following:
− Standardization efforts
− Coordination across markets
− Global integration
• Global marketing does not necessarily mean that
products can be developed anywhere on a global scale.
• The economic geography, climate, and culture affect the
way in which companies develop certain products.
• The Internet adds a new dimension to global marketing.
169
Executive Summary (1)
•
Convergence:
- income convergence
- usage pattern convergence
•
Divergence:
- Local culture and environment create different conditions
für marketing
- Elements of culture and their influence on marketing/
adaptation process needed
- Using convergence for scale while coordinating local
marketing activities for adaptation
•
General framework for international/global marketing
•
Firm‘s evolution from local to global
170
Executive Summary (2)
•
Definition of International Marketing:
- key difference are interdependencies that require reciprocal
coordination in international teams
- Marketing in different but linked & dynamic environments
to people with different backgrounds and needs
•
Challenges:
- additional information, increased risk, more coordination
- more complexity with feedback loops
•
Imperative due to integrated economies, increasingly open
trade, harmonized regulation (e.g., NAFTA), etc.
•
Tremendous opportunities in BRIC and hot spots
apart form developed countries -> Long Tail -> Complexity
171

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