International Marketing

G-local Strategy
Case of Sony: Nature of international marketing
Name - Latin word sonus means sound and English
word sonny
It is the recognized brand in USA outranking coke
and Mc Donalds
It is number 25 among worlds top brand
It is been traded in 23 stock exchanges
Some years ago company moved into local overseas
manufacturing and 35% of manufacturing is happening
overseas







Ex: Sony makes TV sets in Wales and USA, established
technology center in Taiwan which deals with product
design, engineering and procurement, Video products
manufacturing has been moved to Malaysia and China to
utilize cheap labor.
It has some 151,400 employees world wide, 90,092 of
whom are non- Japanese.
In USA, only 150 out of 7,100 employees are Japanese.
Sony has a policy of giving top position in its foreign
operation to a local national.
Howard Stringer was in charge of Sony Corp. of America
before becoming the first foreigner to lead the entire
Sony Corp.

Under his leadership, the company has become G-local
To account for local conditions, Regional managers are able
to tailor the products to satisfy varying taste across the
world.
Americans executives can decide to reject products that
originate in Japan. Ex: Walkman was rejected because its
screen was too small to compete against the dominant
iPod.
There is also better cooperation among units
Ex: Mylo handheld web browsing and text messaging
device was jointly designed in Japan and USA to target
teens.
A successful launch in USA led to an introduction in Japan.
Cases.
High price and high quality Palmolive
soaps are marketed in European
countries and the economy range are
exported and marketed in developing
countries like Ethiopia, Pakistan, Kenya,
India, Cambodia etc
Accurate and timely
information
Coca cola enter the European market
based on timely information, whereas
Pepsi entered late.
Indian software also made timely
decision in the case of Europe
Bata based on accurate data entered
European market.
Daewoo segments its market as North
America, Europe, Africa, Indian sub-
continent and Pacific markets

Prentice Hall grouped India, Nepal, Pakistan,
Bangladesh, Srilanka etc into one category
based on the customers ability to pay and
designed the same quality product and sell
them at the same price in all these countries.
Similarly Dr. Reddys lab does the same for
its products to sell in the African countries

IBM, P&G sales are more in foreign countries
than in USA
Eritrea an African country is roughly equal to that of UK in
terms of land area and size of the population
Fiji people attend family activities at
least 3 times a day. Therefore the
companies operating in that country
allow their workers to go their home 3
times.
Impact of culture of Switzerland housewives
on marketing of dishwashers
Dishwashers simply made their life easy and
this conflicted with her Calvinistic work
ethnic. The ad companies were forced to
change their message from ease and
convenience to hygiene and health. They
emphasized that dishwasher used
temperature higher than hand-hot, the
process was more hygienic.
To increase Market share
Ball corporation, the third largest
beverage can manufacturer in USA,
bought the European packaging
operations of continental can company.
High cost transportation
Mobil which was supplying the petroleum
products to Ethiopia, Kenya, Eritrea . Sudan
etc from its refineries in Saudi Arabia,
established its refinery facilities in Eriteria
in order to reduce the cost of transportation.
Most of the US based and European based
companies located their manufacturing
facilities in Saudi Arabia, Bahrain, Qatar,
Oman, Iran and other middle east countries
due to availability of petroleum.
Tariff and import quotas
USA imposed tariffs and quotas regarding import of
automobiles and electronics from Japan
Harley Davidson of USA sought and got 5 years of
tariffs protection from Japanese imports.
Japan places high tariffs on import of rice and other
agricultural goods from USA
Global company
A global company is one which has either global marketing
strategy or a global strategy. Global company either
produces in home country or in a single country and
focuses on marketing these products globally or produces
the products globally and focuses on marketing these
products domestically.
Ex: Harley design and produces super heavy weight motor
cycles in USA and markets in the global market.
Ex: Dr Reddys lab designs and produces drugs in India and
markets globally.
Ex: Gap procures product in the global countries and market
the products in its retail organization in USA.
Transnational company
Transnational company produces, markets,
invests and operates across the world. It is an
integrated global enterprise which links global
resources with global markets at profit. There
is no pure transnational corporation. However,
most of the transnational companies satisfy
many of the characteristics of global
corporation.
Process of International
marketing
Definition of International Marketing - is the
multinational process of planning and executing the
marketing mix ( product, price, promotion, place or
distribution) to create exchanges that satisfy individual
and organizational objectives. The world multinational
implies that marketing activities are undertaken in several
countries.
Limitations
It fails to do justice to B2B. In the world of international
marketing, government, quasi-government agencies, and
profit seeking and non profit seeking entities are frequent
buyers.
Ex: Companies such as Boeing and Bechtel has nothing to
do with consumer products

Ex: Russias export agency Rosoboronexport sells arms
to governments all over the world.

Definition Advantages:
What is to be exchanged is not restricted to tangible
goods but may include concepts and services as well
Ex: When United Nations promote birth control and
breast feeding, this should be viewed as international
marketing.
The definition removes the implications that
international marketing applies only to market or
business transaction.


Ex: Governments are very active in marketing in order
to attract investments. Religion is also a big business
and has been marketed internationally for centuries.
Ex: Vatican uses modern marketing by launching mass
licensing program that puts images from Vatican
librarys art collection, architecture and manuscripts
on T- shirts, glass ware and candles.
The definition recognizes that it is improper for a
firm to create a product first and then look out place
to sell it. Instead, it is more logical to determine the
consumer need before creating a product.



Ex: For overseas market, the process may call for a
modified product. In some cases, a brand new
product can be created specifically for over seas
market.
The definition acknowledges that place (
distribution) is only part of the marketing mix and
distance between markets makes it neither more or
less important. It is thus improper for a firm to
consider international function as simply to export
(move) available product from one country to other.

Finally the Multinational process implies that
international marketing process is not a mere
repetition of using identical strategies abroad. The
4Ps of marketing must be integrated and coordinated
across the countries in order to bring about the most
effective marketing mix to facilitate exchange.
Ex: Coca colas German and Turkish division have
experimented with berry flavored fanta and pear
flavored drink respectively.
Ex: GE medical system went about localizing its medical
imaging to compete with local competitors.
International dimensions of
marketing
Domestic marketing concerned with marketing
practices within marketers home country.
Foreign marketing marketing methods used outside
the home market.
Comparative marketing Similarities and differences
between two systems are identified.
International marketing in its literal sense signifies
marketing between nations(inter means between). The
word international may imply that a firm is a not a
corporate citizen of the world but rather operates
from a home base.


For practical purpose international marketing and
multinational marketing is merely a distinction
without difference.
Ex: It is difficult to believe that International
Business Machine will become more Global if it
changes its corporate name to multinational business
machine?
Ex: American express to Global express
Ex: British Petroleum to World Petroleum
As a matter of fact multinational firms do not make any
distinction in these two terms.
Domestic marketing Vs
International Marketing
Domestic marketing involves one set of uncontrollable
variables derived from the domestic market.
International marketing is complex because it faces two or
more sets of uncontrollable variables originating from various
countries.
Ex: Intel in its annual report makes this point very clear that the
company is subject to risks associated with doing business
globally. The risk include security concerns, health concerns,
natural disasters, inefficient and limited infrastructure and
disruptions, differing employment practices and labor issues,
local business and cultural factors, regulatory requirements
that differ between jurisdiction and government restrictions

In addition fluctuations in the exchange rate, changes in
tariff and import regulations.
For optimum results, firm marketing mix may have to be
modified to confirm to different environment, though
wholesale modification is not often necessary. The
degree of overlap of the sets of uncontrollable
variables will dictate the extent to which the 4Ps of
marketing must change the more the overlap, the
less the modification.
Ex: McDonalds although renowned for its American
symbols and standardization has actually been
flexible overseas. It has excluded beef from its menu
in India in deference to the countrys Hindu tradition.

Ethnocentric is a strong orientation towards the home
country. The usual practice is to use the home base for
the production of standardized products for export in
order to gain some marginal business.
Polycentric is a strong orientation to the host country. A
significant degree of decentralization is common across
the overseas division. Ex: Toyota
Geocentric is an orientation that considers the whole
world rather than any particular country as target market.
Ex: Nestle, Caterpillar
In case of caterpillar, manufacturing and assembly facilities
are located in many countries. Components are shipped for
assembly and the assembled product us shipped to the
place of the customer

The process of
Internationalization
Stage and
company
1
Domestic
2
International
3
Multi-domestic
4
Global
5
Transnational
Strategy
Model
Domestic
NA
International
Co-ordinated
Multi-domestic
Decentralized
Global
Centralized hub
Global
Integrated
model
View of the
world
Home country Extension
markets
National
markets
Global markets
or resources
Global markets
and resources
Orientation Ethnocentric Ethnocentric Polycentric Mixed Geocentric
Key assets Located in
home country
Core
centralized,
others
dispersed
Decentralized
and self
sufficient
All in home
country except
marketing or
sourcing
Interdependent
and specialized
Role of country
units
Single country Adapting and
leveraging
competencies
Exploiting local
opportunities
Marketing or
sourcing
Contributions to
company world
wide
Knowledge Home country Created at
center and
transferred
Retained within
operating units
Marketing
developed
jointly and
shared
All functions
developed
jointly and
shared
The process of
internationalization.
Many companies may have begun as domestic firms
before shifting or expanding to cover international
markets. As they become more international, they are
suppose to be sporadic exporters to being frequent
exporters before finally doing manufacturing abroad.
More recently, an increasing global economy has given
birth to a new theory which states that some
companies are destined to go global from the outset.
Ex: Several silicon valley companies do not need to
have business model first for US before going to
overseas. From the beginning they employ engineers
from India, manufacture in Taiwan and sell in Europe.
The definition of born global is a business
organization that , from inception seeks to derive
significant competitive advantage from .. The sale of
outputs in multiple countries. Their origin are
international in the sense that management has a
global focus and that resources are committed to
international activities. The performance is enhanced
due to managerial emphasis on foreign customer focus
and marketing competence.
Multinational company
Case: Toyopet cars from Toyota
Toyoto exported Toyopet cars produced from Japan to
USA in 1957. It was not successful in USA as these cars
were over priced and underpowered and build like tanks.
These cars were not suitable for US market. The unsold
cars were shipped back to Japan. Toyota took this failure
as a rich learning experience and as a source of invaluable
intelligence but not as failure. Toyota based on this
experience designed new models of cars suitable for the
US market. The international companies turn into
multinational companies when they start responding to the
specific needs of the different country markets regarding
product, price and promotion.

Benefits of International
marketing
1) Survival and growth
- Most countries are not fortunate as USA in terms of
market size, resources and opportunities. They must
trade for survival
- World is flattening because an explosion of digital
technology increasingly interconnected the world
- World market is 4 times larger than the US market
- In case of Amway corp. US manufacturer of soaps,
cosmetics and vitamins, Japan represent larger
market than USA
- Recent report by Goldman Sachs, India will grow by
8% a year until 2020.
Indian economy will overtake those of Italy, France
and Britain by 2017. India will surpass Germany in 12
years and Japan in 18 years.
The forecast is that India will overtake USA to
become worlds largest economy after China by 2042.
2) Sales and Profits
- KFC clearly emphasize the importance of overseas
market.
- KFC sales in China increased by 28% while sales
dropped by 7% in USA in 2006.
3) Diversification
- Demand for most products is affected by cyclical
factors as recession and seasonal factors such as
climate.
- To diversify companys risk consider foreign market
Ex; Cold weather may depress soft drinks consumption.
Yet not all countries enter winter season at the same
time
Ex: Nebraska, manufacturer of go-carts and mini-cars
found that global selling has enabled the company to
have year round production
Ex: General motors and Ford because of overseas operations
help smooth out the business cycle of North America
4) Inflation and price moderation
- Imports can be beneficial to a country because they
constitute reserve capacity for local community. Lack of
imported products alternatives forces consumers to pay
more resulting in inflation and excessive profit to local
firms.
- Benefits of exports are self evident
5) Employment
- Unrestricted trade improves world GDP and enhance
employment generally for all nations
6) Standards of living
- Without trade, product shortages force people to pay
more for less
- Products such as gasoline, coffee and bananas may
become unavailable overnight
- Easier for industries to specialize and gain access to
raw materials
- Fosters competition and efficiency
- Diffusion of innovation across national boundaries is a
useful by-product of international trade
- Lack of such trade would inhibit flow of innovative
ideas

Increased openness to trade is associated with
reduction if poverty.
Open trade has offered developing nations
widespread gains in material well being, as well as
gains in literacy, education and life expectancy.
7) Understanding of marketing process
- IM should not be considered a subset or special case
of domestic marketing
- When an executive observes marketing in other
cultures, the real benefit is that the executive
actually develops a better understanding of marketing
in ones own culture.
.
Ex: Coca Cola
applied the lessons
learned from Japan
to the US and
European markets
-IM provides
insights for
understanding of
behavioral pattern
Marketing Barriers: tariffs
1) Direction import and export tariff
Ex: When export tariffs are levied, they usually apply
to an exporting countrys resources or raw materials.
2) Purpose- protective and revenue tariff
Protective tariff protect home industry, agriculture,
labor against foreign competitors
Revenue tariff generate tax revenue for the
government. Ex: EU applies tariff upto 236% on
meat and 180 % on cereals while its tariff on raw
material and electronic rarely exceed 5%. Compared
to protective tariff, revenue tariff is low.
3) Length tariff surcharge vs countervailing
A tariff surcharge is temporary action, wheras countervailing
is permanent.
Ex: Harley Davidson claimed that it needed time to adjust to
Japanese imports.
Countervailing duties are imposed on certain imports when
products are subsidized by foreign governements.
4) Rates: specific, ad valorem and combined
Specific duties are fixed or specified amount of money per
unit of weight or gauge or other measure of quantity.
Ex: 350 euros/ton on sugar imports
Ad valorem are duties according to value. They are
fixed percentage of invoice value and are applied at a
percentage to the durable value of the imported
goods.
Ex: The absolute amount of total duties collected will
increase or decrease with the price of imported
product.
Combined rates are a combination of the specific and
advalorem
Ex: The tariff may be 10 cents per pound and 5 percent
ad valorem.
5) Distribution point : distribution and consumption taxes
Taxes are collected at a particular point of distribution
These indirect taxes are of 4 kinds
1) Single stage sales tax is a tax that is collected only at
one point in the manufacturing and distribution chain. The
single stage tax is not collected until products are
purchased by customers
2) A VAT is a multistage, noncumulative tax on
consumption. It is national sales tax levied at each stage
of production and distribution system, though only on the
value added on that stage i.e tax collected at a certain
stage is based on the added value and not the total value
of the product at that point.


3) Cascade taxes are collected at each point in the
manufacturing and distribution chain and are levied on the
total value of a product., including taxes borne by the product
at earlier stage. This appears to be the most severe of them all
4) Excise tax is a one time charge levied on the sales of a
specified product. Ex; Alcohol beverages and cigarettes.

Marketing barriers: Non tariff
Government participation in trade
1) Administrative guidance
Ex: Japan has been doing this on a regular basis to help
implement its industrial policies. Administrative council
are influential enough to make importers restrict their
purchases
2) Government procurement and state trading
Ex: State engages in commercial operations either directly
or indirectly. US govt. is required by the Buy America Act
to give a bidding edge to US suppliers in spite of their
higher prices.

3) Subsidies - includes cash, interest rate, value
added tax, corporate income tax, sales tax,
freight, insurance and infrastructure.
Subsidized loans for priority sector
4) Sheltered profits a country may allow a
corporation to shelter its profit from abroad. Ex:
Boeing was allowed to avoid $130 mn in US
taxes in 1998, about 12% of its entire earning

Customs and entry procedures

1) Classification the way in which product is classified
determines its duty status.
Ex: Sony argued that Playstation 2 equipped with 128 bit
microprocessor, DVD player and internet connections sholud
qualify as Computer. But British customs viewed playstation2
in the video game category. Had sony got it as computer
then there would be no import tax.
2) Valuation how products are classified, each product must
still be valued. A customs appraiser is the one who
determines the value.
Ex; In Japan, a commodity tax is applied to the FOB factory price
of Japanese cars.
3) Documentation without documentation goods will not be cleared
by the customs.
Ex: France requiring custom documentation to be in French
4) License or permit import of distilled spirits, wines, malt beverages,
arms, ammunition, and explosives into USA require a license issued
by the bureau of alcohol, tobacco, and firearms.
5) Inspection is an integral part of product clearance
6) Health and safety regulations many products are subject to health
and safety measures
Ex: It is not only restricted to agricultural products but also apply to TV
receivers, microwave ovens, X ray devices, cosmetics, chemical
substances and clothing.
Product requirements
1) Product standards
Ex: Mexican agricultural commodities are barred from entering
USA
2) Packaging, labeling and marking
Ex: Canada requires instruction on packages must be in
English and French
3) Product testing
4) Product specification
Quotas
1) Absolute quota limits in absolute terms the amount
imported during a quota period.
Ex; Japanese impose strict quota on oranges and beef

Private barriers
Ex: In Germany, banks like Deutsche Bank, own at least 10%of
some 70 companies and its bank executives sit on some 400
corporate boards. As such, it is in a position to encourage its
clients to do business with ach other rather than with
outsiders.
Challenges of IM
Political instability
Huge foreign indebtedness becoz of less
purchasing power, developing countries are
lured into debt trap by operations of MNCs
Ex: Mexico, Brazil, Poland, Romania.
Entry requirements Ex: MNC can enter
Eritrea only through joint venture.
Tariff, quota and trade barriers
Corruption

Bureaucratic practices of government
Technological pirating
High cost involves market survey, product
improvement, quality up gradation etc

WTO
To prevent or atleast to alleviate any
problems, there is a world organization in
Geneva known as WTO.
GATT was its predecessor
Created in Jan 1948, the objective of GATT is
to achieve a broad, multilateral and free world
wide system of trading.
The 4 basic principles of GATT are
1) Member countries will consult each other
concerning trade problems
2) The agreement provides a framework for
negotiation and embodies results of
negotiations in a legal instrument
3) Countries should protect domestic industries
only through tariff, when needed and if
permitted. There should be no other restrictive
devices such as quotas prohibiting imports.

4) Trade should be conducted on a
nondiscriminatory basis.