Chapter 1

Introduction to
International Marketing

Prepared by Nicole Feetham

University of South Australia
 Learning objectives

After studying this chapter you should be able to:

• Describe the growth of Asian markets and
the implications for global trade and international
marketing
• Explain the aspects of the international
trade and business environment that have made
understanding international marketing imperative
 Learning objectives

• Discuss the evolution of global marketing

• Outline key processes involved in planning,
implementing and monitoring an international
marketing strategy
• Understand the comparative advantage,
international product cycle and internalisation
theories in relation to international trade and
investment
 Overview

• Increasingly global environment for today’s marketing

manager
• However, not a new phenomenon
– the Silk Road
– trade routes from ancient Rome
• The focus should be not the nature but the rate and
type of change
– US$14.8 trillion in world trade in 2010 vs.
US$6.2 trillion in 2000
 The Asian century

• For much of the 20th century the triad regions

dominated world trade
– North America, Western Europe and Japan
• Increasingly, it is the Big Emerging Markets (BEMs)
which are now having an impact
– China, Hong Kong, Taiwan, India, South Korea,
Mexico, Brazil, Argentina, South Africa, Poland,
Turkey & ASEAN
 The Asian century

• An increasing number of competitors are expected to

originate from these emerging economies
– Asia had fastest real export growth of any region
in 2010
• Asia represents the world’s fastest growing consumer
market
– projected to overtake the US by 2020
• Infrastructure and energy needs will be enormous
 Why understanding international
marketing is imperative
1. Saturation of domestic markets forces companies to
look elsewhere
2. The nature of competition has changed
– in terms of market share, country source and
global reach
 Why understanding international
marketing is imperative
3. International competition also brings about global
cooperation
– partnerships between Toshiba and Sony, from
Japan with US computer manufacturer IBM

4. The impact that the internet and e-business has

made on the global business landscape
– growing area of mobile e-commerce
– social networking and marketing
 Why understanding international
marketing is imperative
5. Changing nature of the world economy
– shift in the world’s largest companies
• less US and Japanese centric
– consider the make up of the largest 100
companies in the world

6. Domestic companies cannot avoid competitive

pressure from globally oriented firms
Top 100 largest organisations

Table 1.1
 International trade versus international
business
• International trade
– the process of exporting and importing goods
between a nation and other countries in the world

• International business
– a combination of international trade and foreign
production of goods for sale
 Evolution of international and global
marketing
• Shift in management paradigms
– traditional paradigm rooted in US management
theory
– more of a ‘global approach’ now
• Marketing strategies are based on an organisation’s
degree of experience and nature of operations in
international markets
– organisations do, however, evolve over time
 Evolution of international and global
marketing
Five stages

1. Domestic marketing
2. Export marketing
3. International (country-by-country) marketing
4. Multinational (region-by-region) marketing
5. Global marketing
Evolution of global marketing

Fig. 1.3
 Evolution of international and global
marketing
Domestic marketing
• An approach where organisations focus on the
domestic market and domestic competition only
– ethnocentric
– product development for home country customers
– marketing mix decisions made at head office level
 Evolution of international and global
marketing
Domestic marketing examples:
• Your local pizza shop
• Your car mechanic
• A national bank that does not operate outside the
boundaries of the country
 Evolution of international and global
marketing
Export marketing
• Organisations sell their product or service directly or
indirectly to overseas buyers
– ethnocentric
– product development mainly determined by home
market needs
– marketing mix decisions made at head office level
 Evolution of international and global
marketing
Export marketing examples:
• A clothing company that exports to the country
adjacent to it
• A food company that exports its produce to another
country without changing anything about the
product
 Evolution of international and global
marketing
International marketing (country-by-country)
• Marketing functions are adapted to foreign market
demands
– polycentric
– local product development based on local needs
– marketing mix decisions made in each country
 Evolution of international and global
marketing
International marketing examples:
• A food marketer who changes the taste of the
product to suit local tastes
• A retailer who adapts their stores to allow for
aesthetics and tastes of locals
– can also include ‘multi-domestic’
• foreign subsidiaries operating independently of one
another without control from the organisation’s head
office
 Evolution of international and global
marketing
Multinational marketing (region-by-region)
• The organisation realises economies of scale by
standardising operations on a regional basis
– regiocentric
– product planning is standardised within region but
not across
– marketing mix decisions made regionally
 Evolution of international and global
marketing
Multinational marketing examples:
• A bookstore chain that makes adjustments to its
store layout and product range within (rather than
across) regions
• A jewellery store that uses a different celebrity
endorsement in Asian markets compared to North
American markets
 Evolution of international and global
marketing
Global marketing
• An organisation strives for efficiencies of scale by
developing a standardised marketing mix across
national, regional and global markets
– geocentric
– global products with local variations
– marketing mix decisions made jointly with mutual
consultation
 Evolution of international and global
marketing
Global marketing examples:

• A global hair care brand adjusts the product formula

to allow for different conditions in different countries

• A global advertising agency maintains its global

branding but adjusts its mix to allow for local
conditions such as access to media
 Evolution of international and global
marketing
• Key challenges of global marketing
– impact of environmental factors on global
marketing, e.g.
• location: Dubai is now a major airline stopover hub
• natural and human resources: Chinese have major
environmental pollution problems and are becoming
increasingly concerned about future quality of the
environment
– impact of the internet on global marketing
 International marketing planning and
strategy development
• Changing the controllable variables
– the ‘marketing mix’
• Understanding the need to fit the strategy to the
environment
• The necessity for effective planning
– same concerns as domestic marketing planning,
except the major interest is with international
marketing variables
 Theories of international trade and the
multinational organisation
• Comparative advantage theory
– English economist, David Ricardo
– a country can gain from engaging in trade even if it
has an absolute advantage or disadvantage

• Absolute advantage
– the situation in which one region can produce
goods with lower unit labour requirements than
any other region and so is only able to export
these goods
 Theories of international trade and the
multinational organisation
• Principles of international trade
1. Countries benefit from international trade
2. International trade increases worldwide production
through specialisation
3. Exchange rates are determined primarily by traded
goods
• Factor endowment theory
– based on notion that nations possess different
amounts of land, labour, capital that determine a
nation's comparative advantage
 Theories of international trade and the
multinational organisation
• International product cycle theory
– explains a realistic, dynamic change in international
competition over time and place through:
• economies of scale and scope
• technological gap
• preference similarity
 Theories of international trade and the
multinational organisation
• Internalisation / transaction cost theory
– focuses on the internal costs of economic
exchanges within a multinational company
– appropriability regime
– dominant design
– manufacturing and marketing ability
 Summary

You should now have an understanding of:

• The growth of Asian markets and
the implication for global trade and international
marketing
• The aspects of the international
trade and business environment that have
made understanding international marketing
imperative
• The evolution of global marketing
 Summary

• The key processes involved in planning,

implementing and monitoring an international
marketing strategy
• The role of comparative advantage, international
product cycle and internalisation theories in
relation to international trade and investment