Chap 16

Griffin and Pustay Third Edition
INTERNATIONAL
BUSINESS
A MANAGERIAL PERSPECTIVE
Chapter 16
International Marketing
1
Prentice
Prentice
Hall ©Hall
2002©International
2002 International
Business
Business
3e 3e
Chapter Objectives
After studying this chapter you should be able to:
• Characterize the nature of marketing management in
international business.
• Discuss the basic kinds of product policies and decisions
made in international business.
• Identify pricing issues and evaluate pricing decisions in
international business.
• Identify promotion issues and evaluate promotion decisions
in international business.
• Discuss the basic kinds of distribution issues and decisions
in international business.
2
Prentice Hall © 2002 International Business 3e
Wal-Mart Courts European
Shoppers
• In 1999 Wal-Mart entered the UK by buying the Asda
retailing chain, which operates more than 230 stores.
• Because other British retailers are accustomed to
higher profit margins, the Wal-Mart formula of low-
markup pricing has put pressure on rival chains such
as Tesco, Safeway, and Sainsbury and given smaller
stores even bigger headaches.
• Wal-Mart adopted an acquisition strategy to attack
the German market as well. In 1997 it acquired the
21-store Wertkauf chain, and a year later bought
other chain stores.
3
Wal-Mart Courts European
Shoppers (cont.)
• Because German rivals have much narrower
merchandise selection than Wal-Mart, shoppers gawk at
the huge selections.
• Few German stores allow credit payments, so Wal-Mart
is attracting shoppers by accepting major credit cards.
• The German Cartel Office has warned the company to
raise its prices on loss-leaders like flour, cooking oil, and
butter, which it had been selling below cost.
• While Wal-Mart has great hopes for its German
initiatives, they have yet to pay off. Analysts estimate
Wal-Mart lost between $120 and $150 million there in
1999.
4
Marketing
Marketing is “the process of

planning and executing the
conception, pricing, promotion, and
distribution of ideas, goods, and
services to create exchanges that
satisfy individual and organizational
objectives.”
5
The Marketing Mix
• After an international firm has decided to
enter a particular foreign market, further
marketing decisions must be made. In
particular, international marketing
managers must address four issues:
– How to develop the firm’s product(s)
– How to price those products
– How to sell those products
– How to distribute those products to the firm’s
customers
6
The Marketing Mix (cont.)
• These elements are collectively known

as the marketing mix and colloquially
referred to as the four P’s of marketing:
– Product
– Pricing
– Promotion
– Place (or distribution)
7
Standardization versus
Customization
• A firm's marketers usually choose from

three basic approaches in deciding
whether to standardize or customize
their firm’s marketing mix:
– Ethnocentric approach
– Polycentric approach
– Geocentric approach
8
The Ethnocentric Approach
• With this approach, the firm simply markets

its goods in international markets using the
same marketing mix it uses domestically,
thereby avoiding the expense of developing
new marketing techniques to serve foreign
customers. When some firms first
internationalize, they adopt this approach,
believing that a marketing mix that worked at
home should be as successful abroad.
9
The Polycentric Approach
• This approach is far more costly,

because international marketers attempt
to customize the firm’s marketing mix in
each market it enters in order to meet
the idiosyncratic needs of customers in
that market. Customization may
increase the firm’s revenues if its
marketers are successful in this task.
10
The Geocentric Approach
• This approach calls for standardization

of the marketing mix, allowing the firm
to provide essentially the same product
or service in different markets and to
use essentially the same marketing
approach to sell that product or service
globally.
11
Product Policy
• A key product policy decision facing international
marketers is the extent to which their firm’s
products should be standardized across markets
or customized within individual markets.
• The laws and regulations of host countries may
also affect the product policies adopted by
international firms. Countries often impose
detailed labeling requirements and health
standards on consumer products that firms, both
foreign and domestic, must follow strictly.
12
Product Policy (cont.)
• International firms often must adapt their products
to meet the cultural needs of local markets. One
typical adaptation is to translate the labeling on the
product’s package into the primary language of the
host country.
• A country’s level of economic development may
affect the desired attributes of a product.
Consumers in richer countries often favor products
loaded with extra performance features; more
price-sensitive consumers in poorer countries
typically opt for stripped-down versions of the same
products.
13
Product Policy (conc.)
• One element international firms often

like to standardize is the brand name of
a product. A firm that does this can
reduce its packaging, design, and
advertising production costs. It also can
capture spillovers of its advertising
messages from one market to the next.
14
Pricing Issues and Decisions
• International firms generally adopt one of three

pricing policies:
– Standard price policy
– Two-tiered pricing
– Market pricing
• An international firm following a geocentric
approach to international marketing will adopt a
standard price policy, whereby it charges the
same price for its products and services
regardless of where they are sold or the
nationality of the customer.
15
Pricing Issues and Decisions
(cont.)
• An international firm that follows an ethnocentric

approach will use a two-tiered pricing policy,
whereby it sets one price for all its domestic sales
and a second price for all its international sales.
• An international firm that follows a polycentric
approach to international marketing will use a
market pricing policy. A firm utilizing market
pricing customizes its prices on a market-by-
market basis to maximize its profits in each
market.
16
Market Pricing
• Two conditions must be met if a firm is to

successfully practice market pricing:
– The firm must face different demand and/or cost
conditions in the countries in which it sells its
products.
– The firm must be able to prevent arbitrage. The
firm’s market pricing policy will unravel if
customers are able to buy the firm’s products in a
low-price country and resell them profitably in a
high-price country.
17
Gray Market
A gray market is a market that

results when products are imported
into a country legally but outside the
normal channels of distribution
authorized by the manufacturer.
(This phenomenon is also know as
parallel importing.)
18
Promotion Issues and
Decisions
• Promotion encompasses all efforts by
an international firm to enhance the
desirability of its products among
potential buyers.
• For most international firms, especially
those selling consumer products and
services, advertising is the most
important element in the promotion mix.
19
Advertising
• As a firm develops its advertising strategy, it

must consider three factors:
– The message it wants to convey
– The media available for conveying the message
– The extent to which the firm wants to globalize its
advertising effort
• The message of an advertisement is to the
facts or impressions the advertiser wants to
convey to potential customers.
20
Advertising (cont.)
• The medium is the communication

channel used by the advertiser to
convey a message. A firm’s international
marketing manager must alter the media
used to convey its message from market
to market based on availability, legal
restrictions, standards of living, literacy
rates, the cultural homogeneity of the
national market, and other factors.
21
Advertising (conc.)
• A firm must also decide whether advertising

for its product or service can be the same
everywhere or must be tailored to each local
market it serves.
• Whether to choose a standardized or a
specialized advertising campaign also is a
function of the message the firm wants to
convey. Standardized advertisements tend to
contain less concrete information than do
more specialized advertisements.
22
Personal Selling
• Personal selling is the making of sales on the

basis of personal contacts.
• Personal selling has several advantages for an
international firm:
– Firms that hire local sales representatives can be
reasonably confident that those individuals
understand the local culture, norms, and customs.
– Personal selling promotes close, personal contact
with customers.
– Personal selling makes it easier for the firm to obtain
valuable market information.
23
Sales Promotion
• Sales promotion comprises specialized

marketing efforts such as coupons, in-
store promotions, sampling, direct mail
campaigns, cooperative advertising, and
trade fair attendance.
• Sales promotion activities may be narrowly
targeted to consumers and/or offered for
only a short time before being dropped or
replaced with more permanent efforts.
24
Public Relations
• Public relations consists of efforts aimed at

enhancing a firm’s reputation and image with
the general public, as opposed to touting the
specific advantages of an individual product
or service.
• The impact of good public relations is hard to
quantify, but over time an international firm’s
positive image and reputation are likely to
benefit it in a host country.
25
Distribution Issues and
Decisions
• Distribution is the process of getting
products and services from the firm into the
hands of customers. An international firm
faces two important sets of distribution
issues:
– Physically transporting its goods and services
from where they are created to the various
markets in which they are sold
– Selecting the means by which to merchandise
its goods in the markets it wants to serve
26
Channels of Distribution
• A distribution channel can consist of as many
as four basic parts:
– The manufacturer that creates the product or
service
– A wholesaler that buys products and services from
the manufacturer and then resells them to retailers
– The retailer, who buys from wholesalers and then
sells to customers
– The actual customer, who buys the product or
service for final consumption
27
Chapter Review
• International marketing is the process of planning and
executing the conception, pricing, promotion, and
distribution of ideas, goods, and services across
national boundaries to create exchanges that satisfy
individual and organizational objectives.
• International marketing management is a critical
organizational operation that should be integrated
with other basic functions such as operations and
human resource management.
• Product policy focuses on the tangible and intangible
factors that characterize the product itself.
28
Chapter Review (cont.)
• Pricing issues and decisions constitute the second

element of the marketing mix. What are the three
basic pricing philosophies?
• Promotion issues and decisions generally concern
the use of advertising and other forms of
promotion.
• International marketing managers must also plan
for distribution—getting products and services
from the firm to customers. Effective distribution
can have a significant impact on a firm’s
profitability.
29

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Griffin and Pustay Third Edition

Marketing is “the process of

• These elements are collectively known

• A firm's marketers usually choose from

• With this approach, the firm simply markets

• This approach is far more costly,

• This approach calls for standardization

• One element international firms often

• International firms generally adopt one of three

• An international firm that follows an ethnocentric

• Two conditions must be met if a firm is to

A gray market is a market that

• As a firm develops its advertising strategy, it

• The medium is the communication

• A firm must also decide whether advertising

• Personal selling is the making of sales on the

• Sales promotion comprises specialized

• Public relations consists of efforts aimed at

• Pricing issues and decisions constitute the second

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