UNIT 2

Unit 2 International Marketing Strategy
Structure
2.1 Perspectives of International Business
2.1.1 Ethnocentric Perspective
2.1.2 Polycentric Perspective
2.1.3 Regional Perspective
2.1.4 Geocentric Perspective
2.2 Major Decisions
2.2.1 Local Versus International Business
2.2.2 Market attractiveness
2.2.3 Resource allocation
2.2.4 Building and sustaining competitive advantage
2.3 Business Environments
2.3.1 Macro-environment
2.3.2 Operating environment
2.3.3 Internal environment
2.4 Approaches to International Marketing
2.4.1 Multinational marketing
2.4.2 Global marketing
2.4.2.1 Experience curve effects
2.5 Standardisation versus Adaptation
2.5.1 Factors influencing standardisation potential of marketing programmes
2.5.1.1 Macro Environment
2.5.1.2 The Market
2.5.1.3 The Product
2.5.1.4 Internal Environment

2.6 The International Marketing Decision Process
2.6.1 Potential Market Assessment
2.6.2 Basic strategic decisions


Learning objectives:
After studying this unit you will be able to
 Understand different perspectives of international business.
 Understand major decisions to be taken before a film decides to go
international.
 Understand International marketing environment and importance of various
elements in the environment.
 Differentiate and understand different approaches to international marketing –
Multinational and Global and the arguments favouring these approaches.
 Understand standardisation of marketing programmes and its benefits; how
adaptation is inevitable under certain circumstances.
 Understand various factors influencing standardisation of international
marketing programmes.
 Understand international marketing decision process.


2.1 Perspective of International Business
The critical element for success in international business is not so much the size
of the company but an approach or business perspective of top management that
seeks to do business where it can be done with the greatest success. Business
Managers can approach business from various perspectives. One classification
of potential views is EPRG: ethnocentric, polycentric, regional, geocentric.


2.1.1 Ethnocentric Perspective
An ethnocentric manager sees the domestic market as most important, reacting
defensively to international markets, if at all. For example US car manufacturers
in the 1960s held this view when they argued that imports such as VW 'beetle',

and later Toyota's cars, wouldn't sell well, since only Detroit knew what US
customers wanted. The price of maintaining such a perspective in terms of sales
and profit was very high, as Japanese cars have gained nearly 30 percent of the
US market.


2.1.2 Polycentric perspective
A polycentric manager sees international market as a series of domestic (or
national) markets. The US based Ford Motor Company or the Netherlands based
Philips NV. For example, evolved to this orientation as evidenced by their
multiple production plants and marketing organisations throughout the world.


2.1.3 Regional Perspective
A manager with a regional orientation focuses on a clearly limited 'product
market', which is defined by specific benefits delivered to a group of customers
by the use of certain technologies. In serving the product market, the firm seeks
opportunities for coordinating and possibly standardising procurement,
production and marketing, but usually within a geographic or perhaps culturally
homogeneous region.


2.1.4 Geocentric Perspective
A manager with a geocentric view is continually seeking out opportunities for
procurement, production and marketing coordination and standardisation in a
world wide product-market, independent of national borders.

2.2 Major Decisions
Entrepreneurs and top managers who have overcome an ethnocentric
perspective of international business have to answer four fundamental questions:
 Should our firm go international or not ?
 Which markets should be served and in what sequence ?
 How much of our resources should we spend for what purposes ?
 How should we build and sustain our film's competitive advantages ?


The answers to these questions will depend on external and internal stimuli
facing a company's decision makers, their personal motives, and the major
company objectives agreed upon by the dominant management group in the firm
(fig. 2.1)

2.2.1 Local Versus International Business:
External and internal stimuli serve as triggers for decision-making processes.
External stimuli may include unsolicited orders from foreign customers, perceived
market opportunities, competitive pressures in the home market or government
programs to encourage exports.
Internal stimuli may include unique products, strong marketing skills or excess
capacities in the areas of production, finance, marketing or management. Going
international exposes managers to unknown environments, such as different
buyer behaviour, which increases their perceived risk. Management may have
heard of important differences, such as different symbolic meaning of colour. (For
example, white is a symbol of death in Japan. Therefore products packaged in white boxes do not sell as well as they in the USA, where white symbolises purity.)

2.2.2 Market Attractiveness
When management has decided to internationalise the business of their firm, the
question of which markets should be served arises. Because this decision will
bind the company's resources for a substantial amount of time, the risk involved
is high. To take a rational decision, management needs to undertake a market
assessment procedure that allows them to evaluate carefully the attractiveness
of different product and geographic (country) markets.

2.2.3. Resource Allocation
The resources of a company, even the world's largest are not unlimited. Hence
management has to answer another major question. How much of our resources
should we spend for what purpose ?
In answering this question, management has to find a balance between choosing
too many markets, which inevitably leads to a lack of sufficient resources in some
or each of the served markets, and deciding upon too small a number of markets,
keeping the firm from efficiently exploiting its opportunities. Depending upon a
number of factors such as the relative size of its home market, the competitive
situation these compared to other markets, the degree of globalisation of
competitors, growth objectives set by corporate policy, or the kind and
importance of competitive advantages, management will choose the degree of
globalisation for its company.

2.2.4 Building and Sustaining Competitive Advantage
The company choosing new markets in internationalising the business must be
able to offer a benefit to potential customers that is more attractive to them than
what those customers have experienced before. Competitive advantages are not available to a company forever. Management therefore has to answer another
important question: How to build and sustain the firm's competitive advantage ?
To answer that question, management will need to find out the success factors,
that is, the specific resources and capabilities a firm needs to be successful in a
market, in the market it plans to serve, and to compare their company's strength
and weaknesses to those of its major competitors concerning those success
factors.
In the discussion of the four major decisions to be taken in international business,
it is clear that the environment relevant to the decisions has to be defined, and
information has to be researched, analysed and structured.

2.3 Business Environments
When taking and implementing decisions concerning the internationalisation of
their business, a firm's management has to be aware of the considerably higher
complexity of the environment to be considered than for a strictly local firm.




Fig 2.2 shows a general nested model of a firm's environments. It demonstrates
that the decision makers of a company live in their firm's internal environment
which is embedded in the operative environment of the company which, in turn,
is surrounded by the macro environment.

2.3.1 Macro-Environment
A company's macro-environment is generally defined as the political, legal,
economic, ecological, social, cultural and technological dimensions of the
universe in which the operating environment of the firm is embedded. The macroenvironment
of a company strongly influences the structure and state of its
operating environment.

2.3.2 Operating Environment
The operating environment of a firm contains individuals or people representing
organisations and institutions, who have aspirations concerning the behaviour
and performance of the company in doing its business. Those are customers,
competitors, supplies, intermediaries, potential and existing workforce, owners,
shareholders, banks, media, trade unions, and other so called stake -holders of
the company.
The operating and macro-environment of a company are not separated from
each other by objectives and clear-cut boundaries.

2.3.3 Internal Environment
Company decision makers play their role as part of an organisation which has an
implicit, if not an explicitly stated, corporate policy that lays out the ground rules
of how it wants to function. It follows a competitive strategy a basic indication of
where to do business and how, based on management systems such as the
organisation structure or the controlling system as well as on resources and
capabilities-personnel, capital, know-how, which result in specific actions. These
elements make up the internal environment of the firm.


2.4 Approaches to International Marketing
There are two different ways in which marketing managers can approach
international business: a multinational and global approach.

2.4.1 Multinational Marketing
Multinational marketing concentrates largely on country-markets, developing a
distinct marketing strategy for each market.

2.4.2 Global Marketing
Global marketing is one where a company's managers concentrate on productmarkets,
that is, group of customers seeking shared benefits or to be served with
the same technology, emphasizing their similarities regardless of the geographic
areas in which they are located, rather than focus on country-markets, i.e.,
differences due to the physical location of customer groups. However, a global
approach to international marketing does not ignore differences among local
market segments. These differences are taken into account when implementing
marketing programme. For example, most Indian grocery stores are quite small,
requiring wholesale distribution and more frequent delivery of smaller quantities
than French hypermarkets which can be served directly from one central
production unit.


2.4.2.1. Experience Curve Effects: The most powerful argument in favour of a
global product-market orientation is the opportunity to benefit from experience
curve effects.


This concept has two dimensions: increased efficiency due to size effects and
increased effectiveness due to experience (accumulated know-how) effects. The
size effects result from decreasing fixed cost per unit sold.
For an internationally operating firm, an important source of economies of scale
is the marketing mix. When a company can use the same marketing mix in
several different countries, with only a few adjustments such as translation of
advertising copy, the average cost of marketing per unit declines.
Increased efficiency is more easily attained by larger than by smaller companies
if costs for increased coordination needs and substantially rising transportation
costs are kept under close control, and by serving a global rather than local
product-market.
Increased effectiveness occurs when a company learns by doing. The second
time a worker or manager does a job, he or she usually does it better than the


first time, thereby becoming more effective. Similarly, when a company enters its
second foreign market using what it learned when it entered its first such market,
it should be more effective.

2.5 Standardisation Versus Adaption
The degree of similarity among a company's international product-markets
largely determines the extent to which its marketing activities can be the same or
similar across country-markets i.e. to what extent they can be standardised.
Standardisation may occur either in marketing programmes or in marketing
processes. Marketing programmes contain the marketing strategies, policies and
activities of a company. Marketing processes are the procedure followed by a
firm in making marketing decisions, implementing them and controlling their
outcomes. The greatest experience curve effects occur when programmes and
processes are standardised.

2.5.1 Factors influencing Standardisation Potential of Marketing Programs
When evaluating foreign markets and deciding whether to standardise the
marketing programme for those market, several factors must be taken into
consideration. These factors are:
a) the macro-environment
b) the market
c) the product and
d) the internal environment

2.5.1.1 a) Macro-Environment: The important macro-environmental forces that
affect a firm in standardisation of marketing programmes are political, legal,
cultural and geographic.
When a product is politically sensitive in a particular country-market an adapted
marketing campaign is called for.


If legal regulations concerning taxes, patent, and trademark protection, product
liability, norms of hygiene, licensing and registration prerequisites etc. in the
country-markets served by a company are similar, marketing programme
standardisation is facilitated.
One reason for using an adapted strategy may be that technical specifications
are different in the target markets. Technical norms such as measurement units
(centimetre versus inch, for example) or industrial conventions can represent
insurmountable obstacles to standardisation. For example, US producers of
manufacturing equipment are at a disadvantage against local competitors in
Europe because they have to adapt every machine and tool for those markets a costly
process. Similarly, cars may have to be adapted for different markets, depending on
the safety and pollution-control standards of the country in which they are sold.
Social norms involve a wide variety of patterns of living, including behaviour
norms such as those regarding diet or styles of dresses. They play a major role
in determining what can and cannot be done in a given market.
In a market with unique cultural characteristics, a standardised strategy from
another culture is likely to be unsuccessful.
A society's attitudes towards change or the rate of change also affect the viable
degree of standardisation in particular markets. Rather conservative consumers
in a country market may not accept a marketing strategy that originates in a more
liberal society.
Variations in geography, such as climate may make it necessary to adapt either a
product or its distribution or promotion for different country-markets. For example,
Toyota has stripped out unnecessary items from the special version of its 'Tercel'
model destined for markets in southeast Asia, such as heaters because the
warm climate renders then unnecessary.

2.5.1.2 b) The Market: If a standardised marketing programme is to succeed, the
country-markets of interest must have certain characteristics in common, at least
to some degree. For example, customers must seek similar benefits or use the product or service in a similar way, the available distribution infrastructure must
be similar, or customers must be comparable in their reaction to prices.
An important factor influencing the standardisation of marketing programmes is
the stage of product life cycle a market is in. For a standardised marketing
programme to be successful, the product should be in the same stage of lifecycle
in all the country-markets involved. When the stages of life-cycle are
different, variations in the degree and type of competition, the rate of growth in
sales, and the most effective form of promotion distribution and pricing require
adapted marketing programmes.
The degree to which a market is urbanised is another important factor in deciding
whether to standardise a marketing programme. A programme that was
developed for a highly urbanised market like Hong Kong or Singapore might not
be able to reach enough potential customers in countries like India, where more
than half the population lives in rural areas or very small towns.
The structure of distribution system available in most international consumer
product markets is far from being similar. In some countries consumer products
retailing is concentrated whereas in some other countries wholesalers and
retailers play a major role in distribution. Hence standardisation of distribution for
consumer product is very difficult.
The distribution of industrial products and services in most cases is more direct
and relies on personal selling. Therefore, the distribution system can be more
easily standardised.
When the customers in a market are mainly interested in the technology of a
product, a higher degree of marketing programme standardisation is possible.
Whether the life cycle of a firm's product is driven by technological or cultural
factors is an additional important consideration. A firm that is faced with two
country-markets in which its product is in the growth stage of the life cycle might
assume that a standardised marketing programme could be used in both
markets. But if one market is driven by technology and the other by cultural
factors, a standardised campaign is unlikely to be successful.
Price also plays an important role in standardisation potential of marketing
programmes products or services that are purchased largely on the basis of low price, which means that potential buyers are willing to give up satisfaction of
individual expectations in exchange for a good with lower price, can be marketed
through relatively standardised marketing programmes.

2.5.1.3 c) The Product: product is another important factor influencing the
decision regarding standardisation of marketing programmes. Industrial products
are said to be marketed relatively easier with standardised marketing programmes
than consumer goods. Which, in turn, allow more standardised marketing
programmes than services. However, in business practices many consumer
products have maintained standardised marketing programmes. (e.g., McDonald's)
Many food products, in particular those with high cultural specificity must be
marketed through adopted programmes in other countries where the cultural
background is different.

2.5.1.4 d) Internal Environment: The amount of international experience a firm's
management has accumulated will influence their attitudes. An experienced firm is
likely to seek a close match between its current offerings and the demand of new
country-markets, so that only minimal adaptation of the marketing mix is required.
Internationally more experienced managers will have a higher degree of flexibility and
acceptance of change that may support more adaptation of marketing programmes.
The successful management of differentiated products, multiple communication
campaigns, different distribution systems and various pricing scheme requires a
flexible corporate view and culture, one which accepts quick change and multiple
perspectives on who the customer is, and what benefits is being sought.
Finally, if research and development costs of a product are low, an individualised
marketing programme may be appropriate. But if these costs are high, such as
for pharmaceutical products largely standardised marketing programme are essential.

2.6 The International Marketing Decision Process
A Strategic approach to global business is very closely related to marketing
analysis and decision. For international marketing to be effective and efficient,
analysis and decisions need to follow a specific sequence which is called
international marketing decision process (Fig. 2.5)

2.6.1 Potential Market Assessment
This is the first step after corporate policy has been set up and the productmarkets
to be served are identified. Assessment of potential country-markets
include assessment of their economic, cultural, political and legal environment as
well as the specific operating environments of the local product-markets have to
be carefully analysed to determine the most attractive markets.


2.6.2 Basic Strategic decisions
The comparison with major competitors will help the firm identify whether it can
excel in any of the success factors. Management will then assess existing
strategic alternatives based on those distinctive competencies which can be
transformed into customer benefits based on firm's competitive advantages.
Management will develop an international portfolio strategy, that is, it will choose
the product and country-markets to serve as well as select the technologies
necessary to satisfy the existing and potential aspirations of customers and
stakeholders in those markets. Management will also decide the most promising
competitive strategy choosing the alternatives ranging from frontal attack on any
competitor to co-operative agreements.
In addition, the company must decide as to how it should position itself in every
country market selected. It should also differentiate low-risk markets from high
risk markets for proper resource allocation decisions.
Finally, decisions are made regarding marketing mix (product, distribution, sales
management, pricing and promotions). Country market managers, however are
given enough flexibility in setting prices, establishing product characteristics and
service levels and managing market communication to adopt to local market
conditions. All the analysis made and the decisions taken to reach that point are
summarised in an international marketing plan. This plan also indicates what and
how much resources are to be spent, and how the planned activities are to be
financed.


Questions
1. What are the various perspectives of international business ?
2. What are the major decisions to be taken when a firm decides to go
international ?
3. What are the various business environments of international marketing ? Why
are these environments important for a firm ?
4. How does multinational approach to international marketing differ from global
approach ?
5. What is meant by experience curve effects ? What is the importance of this
experience curve effect in international marketing decisions ?
6. What is meant by standardisation of marketing programmes ? How does
standardisation of marketing programmes help a firm ?
7. Is it possible to standardise all marketing programmes ? What are the factors
that affect the standardisation potential of marketing programmes ?
8. What are the various steps in international marketing decision process ?
9. What is the role of marketing mix in international marketing decision process ?