Chapter 1 -Introduction to

International Marketing
1-1 Principles of Marketing
Value equation:
4p:
The important of global marketing:
Examining the size of individual product
markets, measured in terms of annual
sales, provides another perspective on
global marketing’s importance
Management orientation:
-> Ethnocentric Orientation: people assume
that their country is superior to the rest of
the world
-> Polycentric orientation: management’s
assumption that each country/business is
unique
-> Regiocentric orientation: region becomes
the relevant geographic unit
-> Geocentric orientation: views the entire
world as a potential market and strives to
develop integrated global strategies
2. Transportation and Communication
Improvements
3. Product Development Costs
4. Quality
5. World Economic Trends
6. Leverage (type of advantage that a
company enjoys by virtue of the fact
that it has experience in more than
one country)
7. Restraining Forces
Chapter 2 - The Global Economic
Environment
2-1 Economic System
4 Types of economic system
- Market capitalism: individuals and
firms allocate resources and
production resources are privately
owned
- Centrally Planned Socialism: where
the state has broad powers to serve
the public interest as it sees fit
- Centrally planned capitalism: where
command resources allocation is
used extensively in an environment
of private resource ownership
- Market socialism: ??

1-2 Forces Affecting Global

Integration and Global Marketing
1. Multilateral Trade Agreements
-> General Agreement on Tariffs and
Trade (GATT), World Trade
Organization (WTO), Europe Union 2-2 Stages of Market Development
World Bank divide 4 categories based on
GNI -> useful for STP
1. Low Income Countries
GNI per capita: < $996.
The characteristics:
- Limited industrialization
- High birth rates, short
expectancy
- Low literacy rates
- Heavy reliance on foreign aid
- Political instability and unrest
- Concentration in Africa south of the
Sahara
2. Lower-middle income countries
GNI per capita: $996 - $3,945
The characteristics:
- Consumer markets in these
countries are expanding rapidly
- have a major competitive advantage
in mature, standardized,
labor-intensive light industry
- represent an increasing competitive
threat as they mobilize their
relatively cheap
3. Upper-middle income countries
(developing countries)
GNI per capita: $3,946 - $12,195.
The characteristics:
- percentage of the population
engaged in agriculture drops sharply
as people move to the industrial
sector and the degree
urbanization increases
- High literacy rates and strong
education systems
4. High income countries (OECD)
GNI per capita: $12,196 or higher
The characteristics:
● The service sector accounts for
more than half of the national output
● Knowledge trumps capital as the key
strategic resource
● Intellectual technology is more
important than machine technology
Marketing Implications:
- Guide for marketers in evaluating
product saturation levels /
life percentage of potential buyers
- Market entry and strategies
- Economic downturns
- Global marketing
2-3 Balance of Payments
-> The records of all economic transactions
between residents of a country and the rest
of the world
1. Current account: Merchandise
(manufactured goods) and services
trade (intangible)
Surplus: outflow < inflow
Deficit: outflow > inflow
2. Capital account: A record of all
long-term direct investment, portfolio
investment, and other short and
long-term flows
Minus signifies outflow
-> The important fact to recognize about the
overall balance of payments is that it is
always in balance. Imbalances occur in
subsets of the overall balance
2-4 Trade in Merchandise and
of Services
-> The fastest-growing sector of world trade
is trade in services
-> Services include travel and
entertainment; education; business
services, such as accounting, advertising,
engineering, invest- ment banking, and legal
services; and royalties and license fees that
represent payments for intel- lectual
property
-> a country can run a surplus in both
accounts, a deficit in both accounts, or a
combination of the two (merchandise or
service trade accounts)
International finance: - Call option: the right, but not the
Foreign exchange markets is where buyers obligation, to buy the foreign
and sellers meet to trade currencies currency
- Spot market: immediate transaction
- Forward market: future date and
Chapter 3 - The Global Trade
price
-> Devaluation -> reduction in the value of a
Environment
nation’s currency against other currencies
3-1 WTO & GATT
Economic exposure: the impact of currency
GATT:
fluctuations on a company’s financial
performance ● Established in 1947
-> If a company expects the foreign ● Goal: Promote international trade by
currency to weaken, it can hedge to prevent reducing barriers and tariffs
transaction losses.
-> Conversely, if the foreign currency is WTO:
expected to strengthen, it can anticipate
gains when converting foreign revenues into ● Established in 1995
the home currency. ● Goal: Facilitate global trade
-> To protect themselves in global relations and simplify customs
transactions companies can use; ● Established TFA
- Internal hedging: forward contracts and
currency options 3-2 Preferential Trade Agreement
- External hedging: price adjustment
-> A mechanism that confers special
clauses
treatment on selecting trading partners.
Favoring certain countries, it leads to such
Managing exchange rate exposure: ways of
agreements to frequently discriminate
managing cash flows to eliminate or reduce
against other countries
exchange rate risks
- Free trade area: formed when two or
Techniques:
more countries agree to eliminate
- Hedging exchange rate: establishing
tariffs and other barriers that restrict
an offsetting currency position such
trade
that the loss or gain of one currency
- Customs union: logical evolution of a
position is offset by a corresponding
free trade area
gain or loss in some other currency
- Common market: the removal of
- Forwards market: mechanism for
internal barriers to trade and the
buying and selling currencies at a
establishment of common external
preset price for future delivery
tariffs, the common market allows for
Option:
free movement of factors of
- The put option: gives the buyer the
production, including labor and
right, not the obligation, to sell a
capital
specified number of foreign currency
- Economic union: common
units at a fixed price, up to the
marketplace not only for goods but
option’s expiration date.
also for services and capital

Hierarchy:
North America and Trade Agreement:
Canada, US, Mexico
- High product ownership levels -
associated with high income and
relatively high receptivity to
innovations and new ideas
NAFTA:
- To promote economic growth
through tariff elimination and
expanded trade and investment
- At present, there are no common
external tariffs nor have restrictions
on labor and other factor movements
have been eliminated
- The issue of illegal immigration from
Mexico to the US remains a
contentious one
3-4 Latin America
-> Caribbean and Central and South
America
3-5 Asia-Pacific
Asia-Pacific: The Association of Southeast
Asian Nations
ASEAN: Association of Southeast Asian
Nations
-> Established in 1967 as an organization
for economic, political, social, and cultural
cooperation among its member countries.
Countries: Brunei, Indonesia, Malaysia,
Philippines, Singapore, and Thailand were
the original six members.
-> Vietnam became the first Communist
nation in the group when it was admitted to
ASEAN in July 1995.
-> Cambodia and Laos were admitted at the
organization’s 30th anniversary meeting in
July 1997.
-> Myanmar joined in 1998
ASEAN Free Trade Area (AFTA): has
resulted in intraregional tariff reductions
among the six founding ASEAN members.
Challenge:
● ASEAN countries are in different
stages of development.
● The new AFTA removes tariffs on 90
percent of traded goods among the
partners.
3-6 Western, Central, and Eastern
Europe
3-7 Middle East
3-8 Africa
Chapter 4 - Social and Cultural
Environments
4-1 dd
Chapter 5 - The Global Customer
5-1 The Political Environment
political culture -> relative importance of the
government and legal system and provides
a context within which individuals and
corporations understand their relationship to
the political system
Sovereignty: supreme and independent
political authority.
- considered free and independent
- regulated trade, managed the flow of
people into and out of its
boundaries, and exercised undivided
jurisdiction over all persons and
property within its territory
- had the right, authority, and ability to
conduct its domestic affairs without
outside interference and to use its
international power and influence
with full discretion
Political Risk
-> the possibility of a change in a country’s
political environment or government policy that
would adversely affect a company’s ability to
operate effectively and profitably
Chapter 6 -
Global Marketing
Information System and Research
6-1 IT and Business Intelligence for
Global Marketing
IT -> organization’s processes for creating,
storing, exchanging, using, and managing
information
MIS -> a system of hardware and software
that a company uses to manage information
Big Data -> Extremely large data sets that
can be subjected to computation analysis to
reveal patterns and trends
Intranet -> A private network that allows
authorized company personnel or outsiders
to share information electronically in a
secure fashion without generating papers
- A 24-hour nerve center
- Allows a company to operate as
real-time enterprises (RTEs)
Electronic Data Interchange (EDI) -> Allows
a company’s business unit to submit orders,
issue invoices, and conduct business
electronically with other company units as
well as with other companies
- Improves inventory management
and restocks
Efficient Consumer Response (ECR) ->
Joint initiative of members of supply chain to
benefit customers
- Utilizes electronic point of sale
(EPOS) – Data gathered by
checkout scanners to help retailers
identify product sales patterns and
consumer preferences
Customer Relationship Management (CRM)
-> Two-way communication between
company and customers
- Allows companies to determine
which customers are valuable and
 react in a timely manner with
customized product and service that
matches the customers’ needs
- Enhance profitability and employee
productivity
- Benefits customer by providing
value-added products and services
Sales Force Automation (SFA) -> A
software system that automates routine
aspects of sales and marketing functions
such as lead assignment, contact follow-up,
and opportunity reporting
6-2 Formal Market Research
Sources of Market Information:
- Personal sources
- Direct sensory perception
(Information gathered from seeing,
feeling, hearing, smelling, tasting)
Process of collecting data and converting it
into useful information steps:
1. information requirement
2. problem definition
3. choose unit of analysis
4. examine data availability
5. assess value of research
6. research design
7. data analysis
8. interpretation and presentation
Market research:
Factor analysis: grouping the segments ->
sampling analysis
Cluster analysis: grouping the
market/customer (characteristics)
Emic Analysis -> Comparing a country’s
data with the host country's data
Etic Analysis -> Comparing a country data
with another country’s data
Chapter 7 - STP
7-1 Global Market Segmentation
-> the process of identifying specific
segments whether they be country groups
or individual consumer groups of potential
customers with homogeneous attributes
who are likely to exhibit similar responses to
a company’s marketing mix
-> Premise: companies should attempt to
identify consumers in different countries
who share similar needs and desires.
Demographic Segmentation -> based on
measurable characteristics of populations
(income, population, age distribution,
gender, education, and occupation)
Psychographic Segmentation -> grouping
people in terms of their attitudes, values,
and lifestyles
Behavior Segmentation -> whether people
buy and use a product & how often and how
much they use or consume
Benefit Segmentation -> based on
marketers’ superior understanding of the
problem a product solves, the benefit it
offers, or the issue it addresses, regardless
of geography (focus B in V B/P)
Ethnic Segmentation -> subcultures are
composed of people whose similar outlooks
and aspirations
Criteria for assessing opportunity in global
target markets:
- Current size of the segment and
anticipated growth potential
- Potential Competition
- Compatibility with the company’s
overall objectives
- Feasibility of successfully reaching a
designated target.
Framework for selecting target market
 - Marketing model driver: factor
required for business to take root
and grow in a particular country
market environment

General positioning strategies:

- Attribute or benefit
- Quality and price
- Use or user
- Enabling condition: structural market - Competition
characteristics whose presence or Additional positioning strategies:
absence can determine whether the - Global consumer culture positioning
marketing model can succeed - Local consumer culture positioning
- Foreign consumer culture
7-2 Targeting and Target Market positioning
Strategy Options
Standardized Global Marketing Chapter 8 - Importing, Exporting,
(undifferentiated target marketing): mass and Sourcing
marketing in a single country by creating the
same marketing mix for a broad mass 8-1 Export Selling and Export
market of potential buyers
Marketing
-> premise: a mass market exists around
the world Export selling -> does not involve tailoring
the product, the price, or the promotional
Concentrated Global Marketing: devising a material to suit the requirements of global
marketing mix to reach a niche (a segment) markets

Differentiated Global Marketing Export Marketing -> targets the customer in

(Multisegment targeting): targeting two or
more distinct market segments with multiple
marketing mix offerings
7-3 Positioning
-> process of developing strategies for
“staking out turf” or “filling a slot” in the mind
of target customers by attribute or benefit,
quality and price, use or user, or competitor
the context of the total market environment
(sets prices to fit the marketing strategy and
does not merely extend home-country
pricing to the target market)
Requirements:
1. An understanding of the target
market environment
2. The use of marketing research and
identification of market potential
3. Decisions concerning product
design, pricing, distribution and
 channels, advertising, and
communications—the marketing mix
8-2 Organizational Export Activities
Stages of exporting:
1. The firm is unwilling to export; it will
not even fill an unsolicited export
order. This may be due to perceived
lack of time (“too busy to fill the
order”) or to apathy or ignorance.
2. The firm fills unsolicited export
orders but does not pursue
unsolicited orders. Such a firm is an
export seller.
3. The firm explores the feasibility of
exporting
4. The firm exports to one or more
markets on a trial basis.
5. The firm is an experienced exporter
to one or more markets.
6. After this success, the firm pursues
country- or region-focused marketing
based on certain
criteria (all countries where English
is spoken or all countries where it is
not necessary
to transport by water).
7. The firm evaluates global market
potential before screening for the
“best” target markets to
include in its marketing strategy and
plan.
Pro-export government programs:
- Tax incentives (applying a lower rate
to earnings from these activities or
by refunding taxes already paid on
income associated with exporting)
- Outright subsidies (direct or indirect
financial contributions or incentives
that benefit producers)
- Governmental assistance to
exporters (Companies can avail
them- selves of a great deal of
government information concerning
the location of markets and credit
risks)
- Export promotion (take the lead in
setting up trade fairs and trade
missions designed to promote sales
to foreign customers)
Trade show: pop up store to different
countries -> conduct market assessment
8-3 Tariff Systems
-> one of against-import government
programs (including duties and import
charges)
Single-column tariff: a schedule of duties in
which the rate applies to imports from all
countries on the same basis.
Two-column tariff: “general” duties plus
“special” duties indicating reduced rates
determined by tariff negotiations with other
countries
-> Preferential tariff: reduced tariff rate
applied to imports from certain countries
Categories of CUSTOM DUTIES
- Ad valorem duty: Percentage of the
value of the goods -> to be price
competitive with local producers
- Specific duty: specific amount per
unit (the sale of merchandise in
export markets at unfair prices)
- Combination of both method
-> Dumping: the sale of merchandise in
export markets at unfair prices
-> Countervailing duties (CVDs): additional
duties levied to offset subsidies granted in
the exporting country
KEY EXPORT PARTICIPANTS
- Foreign purchasing agents: variously
referred to as buyer for export,
export commission house, or export
confirming house
- export broker: receives a fee for
bringing together the seller and the
overseas buyer
- Export merchants/jobbers: identify
market opportunities in one country
or region and make purchases in
other countries to fill these needs
- export management company
(EMC): independent marketing
intermediary that acts as the export
department for two or more
manufacturers (principals) whose
product lines do not compete with
each other
- manufacturer’s export agent (MEA):
export distributor or as an export
commission representative
- Export distributor: pays for the goods
and assumes all financial risks
associated with the foreign sale; it
handles all shipping details
- Export commission representative:
handles several accounts and hence
is also known as a combination
export management company
- Cooperative exporter/export
vendor/mother hen: export
organization of a manufacturing
company retained by other
independent manufacturers to sell
their products in foreign markets
- Freight forwarders: licensed
specialists in traffic operations,
customs clearance, and shipping
tariffs and schedules
Arrangements for handing exports:
1. As a part-time activity performed by
domestic employees.
2. Through an export partner affiliated
with the domestic marketing
structure that takes
possession of the goods before they
leave the country.
3. Through an export department that
is independent of the domestic
marketing structure.
4. Through an export department within
an international division.
5. For multidivisional companies, each
of the preceding options is available.
Selection of the options depends on:
- Assessment of the export marketing
opportunity
- Management orientation
- Resource allocation strategy
Organizing for exporting in the market
country:
Direct market representation
- (+) gain control concerning business
development
- (+) Assurance over the
implementation of necessary effort in
developing the market
- (+) Obtain wider access to
information and feedback from the
market
- (-) Costly
- (-) Involve management of HR
Indirect
-
8-3 Trade Financing and Methods of
Payment
1. Letter of Credit (L/C): a document
stating that a bank has substituted
its creditworthiness for that of the
importer/buyer
 2. Documentary collection (Draft):
method of payment that uses a bill of
exchange (payment instrument that
transfers all the risk of nonpayment
onto the exporter-seller)
3. Cash in Advance
4. Sales on open account: exchange
controls are minimal and exporters
have had long-standing relations
with good buyers in nearby or
long-established market
Issue of export and import:
-> Duty drawback: refunds of duties paid on
imports that are processed or incorporated
into other goods and then re-exported
8-4 Sourcing
Sourcing: the procurement of supplies from
legally independent activities / the purchase
of goods or services that were previously
provided internally
-> Whether a company makes or buys its
products as well as where it makes or buys
its products
Outsourcing (Offshoring): shifting production
jobs or work assignments to another
company to cut costs
Insourcing: the assignment of a project to a
person or department within a company
rather than to a third party
Factors into sourcing decision:
- Management vision
- factor costs and conditions
- customer needs
- public opinion
- Logistics
- country infrastructure
- the political environment
- exchange rates
Chapter 9 - Global Market Entry
Strategies
9-1 Licensing
-> contractual arrangement whereby one
company (the licensor) makes a legally
protected asset available to another
company (the licensee) in exchange for
royalties, license fees, or some other form
of compensation
-> Disadvantage: limit market control & the
agreement may have a short life if the
licensee develops its own know-how and
begins to innovate in the licensed product or
technology area
Contract manufacturing -> provide technical
specification to a subcontractor / local
manufacturer
Franchising -> contract between a parent
company-franchiser and a franchisee that
allows the franchisee to operate a business
developed by the franchisor in return for a
fee and adherence to franchise-wide
policies and practices
9-2 Investment
FDI -> Investment made by individuals,
businesses, or governments in one country
into assets or enterprises located in another
country
- Advantages Host Country:
● Economic growth
● Infrastructure development
● Knowledge and skills transfer
● Global competitiveness
- Advantages Home Country:
● Market access
● Resource acquisition
● Cost savings
● Technology transfer
 - Challenges: 9-3 Global Strategic Partnerships /
● Political and regulatory risks Strategic alliances
● Cultural and legal differences
-> linkages between companies from
● Economic fluctuations
different countries to jointly pursue a
● Operational challenges
common goal
Characteristics:
Joint Venture -> entry strategy for a single
target country in which the partners share
ownership of a newly created business
entity
-> Types:
- Equity Joint Venture – Participants
create a new legal entity (e.g., a
corporation or partnership) and each
holds a share of ownership in the
joint venture
Success factor: mission, strategy,
- Contractual Joint Venture – Parties
governance, culture, organization, and
agree to collaborate on a project
management
without necessarily forming a new
Challenges:
legal entity
- Must carefully select skills and
- Limited Liability Joint Venture – This
technologies
structure combines elements of both
- Develop safeguards against
equity and contractual joint ventures,
unintended informal transfers of
allowing participants to limit their
information
liability while collaborating on a
- Limit transparency of their operation
specific project
Ex: Chaebols in South Korea
-> Advantages: Risk sharing, Access to
expertise, Market entry, Resource pooling,
Risk diversification, Shared costs and 9-4 Market Expansion Strategies
investments
-> Disadvantages: Conflict and
disagreements, Loss of control, Shared
profits, Dependency on partners, Intellectual 1. Country and market concentration
property concerns, Exit difficulties, Cultural - Narrow focus
and communication challenges - Targeting a limited number of
customer segments in a few
- Investment via Equity Stake: simply countries
an investment; if the investor owns 2. Country concentration and market
fewer than 50 percent of the shares, diversification
it is a minority stake; ownership of - Country focus
more than half the shares makes it a - A company serves many
majority markets in a few countries
- Full Ownership: the investor has 100 3. Country diversification and market
percent control concentration
 - Country diversification
- A company seeks out the
world market for a product
4. Country and market diversification
- Global diversification
- Corporate strategy of a
global, multi business
company