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.
6) Saturated home /domestic market: If the home market saturated or
intense, it can no longer gain any market share. Therefore, the company
want to extending its market activity in an oversee market.
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.
1.3. 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
 Tariff: a tax imposed on a product entering a country.
Import quota: a limit on the amount of a particular
product brought from other nations.
Unstable governments: problem in social, political,
regional, cultural issues.
Foreign exchange problems: high indebt-ness, high
Barriers inflation, and high unemployment in several countries.
of IM Foreign gov’t entry requirements and bureaucracy:
policies, ….
Corruption: bibbers
Technological pirating
Boycotts: an absolute restriction against the purchase
and importation of certain goods from other countries.
Marketing factors: economic, social, political, physical,
 Broader market
Involves at least two set of uncontrollable
variables
Requires broader competence
Intense competition
Characteristics
International restrictions
of IM
Sensitive/complex
high risk and challenges
Large-scale operation
Domination of multinationals and developed
countries
1.4. Stages of International Marketing Involvement
1st: No direct foreign marketing
a company doesn’t cultivate customers outside national boundaries.
company’s products reach foreign markets.
Sales made to trading companies and other foreign customers.
2nd: 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.
 • the firm has permanent/continuous productive capacity in FM.
• A firm employ domestic or oversea middlemen.
3rd: Regular
FM • Focused on serve domestic market needs.

• Companies are fully committed and involved in IM activities.

• companies seek markets all over the world and sell products in
various countries.
4th: IM • involves in marketing and production of goods outside the home
market.
• a company becomes an international or multinational firm.
 A firm becomes the most profound or
intense in IM.
a company treat the world, including their
home market, as one market.
6th: Global Develop unique set of market
marketing characteristics in the world including their
home market.
Taking organization structure, sources of
finance, production, marketing, and so
forth/back-forward globally.
1.5. Strategic International Marketing Theories
According to Adam Smith there are two theories of IM:
a) Theory of Absolute Advantage
A country should export more commodities with lower cost than other nations.
Import commodities at a higher cost than other nations.
The ability of a company to produce more of products than a competitor.
Product Ethiopia Sudan
Coffee 20 10
Wheat 10 20
In Coffee, Ethiopia has an absolute advantage because Ethiopia can produce 20
tone coffee and Sudan can only produce half tones(i.e., Sudan Produces 10
for every 20 the Ethiopia produces).
In Wheat, Sudan has an absolute advantage because Ethiopia makes only 10
tones of wheat for every 20 tones of farmed in Sudan.
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 low cost/more efficient than other countries.
Import goods at high cost or in less efficient than other countries.
Labor hrs. America Russia
Minutes for one Computer 30/A 60/A
Minutes for one Car 45/B 120/B

Opportunity cost A= A/B of B or B= B/A of A

Russia
Opportunity cost of Russia in Computer= 60/120 cars
= 1 computer of 2 cars (1/2)
Opportunity cost of one car= 120/60 Computers
= 2 cars of 1 computer (2/1)
America
Opportunity cost of Computer= 30/45 Cars
= 2 computers of 3 cars (2/3)
Opportunity cost of car= 45/30 computers
= 3 cars of 2 computers (3/2)
Therefore,
In Computers, America has a comparative advantage because she can
produce Computers at a lower opportunity cost: ½ cars < 2/3 cars.
In Cars, Russia has a comparative advantage by producing at lower
opportunity cost: 2 < 3/2 computers.
 Inadequate market analysis
Inadequate market appraisal
Insufficient marketing support
Bad timing of entry
Failure Factors market environment
for New Absence of formal product planning and
products at IM development proceeds
product may not fill consumer needs
Technical or production problems
New entrants
Poor planning and forecasting of
competition
1.6. Multinational Cooperation
According to Aharoni, an MNC has three dimensions or characteristics:
1) structural
2) Performance
3) behavior.
1. Structural
MNC include the number of countries does business and the citizenship
of corporate owners and top managers.
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.
emphasize on d/ces on markets due to income, culture, laws and politics.
Market is a unique and consequently difficult for outsiders.
Managers of host country has a great 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.