Management Consulting/Intl Mktg
Discuss the challenges faced by an international marketer while implementing his/her
advertising campaign across international markets. Give suitable examples in support of your answer.
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Discuss the challenges faced by an international marketer while implementing his/her advertising campaign across international markets. Give suitable examples in support of your answer.
At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex, it
involves the firm in establishing manufacturing/processing facilities around the
world and coordinating marketing strategies across the globe.
At one extreme there are firms that opt for ‘international marketing’ simply by signing a distribution
agreement with a foreign agent who then takes on the responsibility for pricing, promotion, distribution and market development. At the other extreme, there are
huge global companies such as Ford with an integrated network of manufacturing plants worldwide and who operate in some 150 country markets. Thus, at its most
complex, international marketing becomes a process of managing on a global
■ International marketing, which involves operating across a number of foreign country markets in which not only do the uncontrollable variables differ
significantly between one market and another, but the controllable factors in the form of cost and price structures, opportunities for advertising and
distributive infrastructure are also likely to differ significantly. It is these sorts of differences that lead to the complexities of international marketing.
■ Global marketing management, which is a larger and more complex international operation. Here a company coordinates, integrates and controls
a whole series of marketing programmes into a substantial global effort.
Here the primary objective of the company is to achieve a degree of synergy in the overall operation so that by taking advantage of different exchange
rates, tax rates, labour rates, skill levels and market opportunities, the organisation as a whole will be greater than the sum of its parts.
This type of strategy calls for managers who are capable of operating as international marketing managers in the truest sense, a task which is far broader
and more complex than that of operating either in a specific foreign country or in the domestic market. ---that ‘the international marketing manager has a dual responsibility; foreign marketing
(marketing within foreign countries) and global marketing (co-ordinating marketing in multiple markets in the face of global competition)’.
Thus, how international marketing is defined and interpreted depends on the level of involvement of the company in the international marketplace.
International marketing could therefore be:
■ Export marketing, in which case the firm markets its goods and/or services across national/political boundaries.
■ International marketing, where the marketing activities of an organisation
include activities, interests or operations in more than one country and where there is some kind of influence or control of marketing activities
from outside the country in which the goods or services will actually be sold. Sometimes markets are typically perceived to be independent and a
profit centre in their own right, in which case the term multinational or multidomestic marketing is often used.
■ Global marketing, in which the whole organisation focuses on the selection
and exploitation of global marketing opportunities and marshals resources
around the globe with the objective of achieving a global competitive advantage.
Here the world is seen
as a market segmented by social, legal, economic, political and technological (SLEPT) groupings.
the international marketing issues faced
by firms, be they involved in export, international or global marketing.
For all these levels the key to successful international marketing is being able to identify and understand the complexities of each of these SLEPT dimensions
PART 1 ---ANALYSIS
of the international environment and how they impact on a firm’s marketing strategies across their international markets. As in domestic marketing, the
successful marketing company will be the one that is best able to manipulate the controllable tools of the marketing mix within the uncontrollable environment. It follows that the key problem faced by the international marketing
manager is that of coming to terms with the details and complexities of the international environment.
The environmental influences on
THE INTERNATIONAL MARKETING
The key difference between domestic marketing and marketing on an international
scale is the multidimensionality and complexity of the many foreign country markets
a company may operate in. An international manager needs a knowledge and
awareness of these complexities and the implications they have for international
There are many environmental analysis models which the reader may have
come across. For the purposes of this textbook, we will use the SLEPT approach
and examine the various aspects and trends in the international marketing envi-
ronment through the social/cultural, legal, economic, political and technological
The social and cultural influences on international marketing are immense.
Differences in social conditions, religion and material culture all affect consumers’
perceptions and patterns of buying behaviour. It is this area that determines the
extent to which consumers across the globe are either similar or different and so
determines the potential for global branding and standardisation.
A failure to understand the social/cultural dimensions of a market are complex to manage, as McDonald’s found in India. It had to deal with a market that is
40 per cent vegetarian, had an aversion to either beef or pork among meat-eaters and a hostility to frozen meat and fish, but with the general Indian fondness for
spice with everything. To satisfy such tastes, McDonald’s discovered it needed to do more than provide the right burgers. Customers buying vegetarian burgers
wanted to be sure that these were cooked in a separate area in the kitchen using separate utensils and sauces like McMasala and McImli were developed to satisfy the Indian taste for spice. Interestingly however, these are now innovations they have introduced into other markets.
Cultural differences and especially language differences have a significant impact on the way a product may be used in a market, its brand name and the advertising
Initially, Coca-Cola had enormous problems in China as Coca-Cola sounded like ‘Kooke Koula’ which translates into ‘A thirsty mouthful of candle wax’. They
managed to find a new pronunciation ‘Kee Kou Keele’ which means ‘joyful tastes and happiness’.
Other companies who have experienced problems are General Motors whose brand name ‘Nova’ was unsuccessful in Spain (‘no va’ in Spanish means ‘no go’).
Pepsi Cola had to change its campaign ‘Come Alive With Pepsi’ in Germany as, literally translated, it means ‘Come Alive Out of the Grave’. In Japan McDonald’s
character Ronald McDonald failed because his white face was seen as a death mask. When Apple launched the iMac in France they discovered the brand name
mimicked the name of a well established brand of baby laxative – hardly the image
they were trying to project.
Operating effectively in different countries requires recognition that there may be considerable differences in the different regions. Consider northern Europe
versus Latin Europe, the northwest of the USA versus the south or Bejing and Taipei. At the stage of early internationalisation it is not unusual for Western firms
to experience what appear to be cultural gaps with their counterparts in Latin America and Asian countries as well as in different regions of those countries. A
campaign by Camay soap which showed a husband washing his wife’s back in the
bath was a huge success in France but failed in Japan, not because it caused offence, but because Japanese women viewed the prospect of a husband sharing
such a time as a huge invasion of privacy.
On the other hand, some commentators argue there are visible signs that social and cultural differences are becoming less of a barrier. The dominance of a
number of world brands such as Microsoft, Intel, Coca-Cola, McDonald’s, Nike etc., all competing in global markets that transcend national and political boundaries, are testimony to the convergence of consumer needs across the globe.
However, it is important not to confuse globalisation of brands with the homogenisation of cultures. There are a large number of global brands but even
these have to manage cultural differences between and within national country
There are also a number of cultural paradoxes which exist. For example, in Asia, the Middle East, Africa and Latin America there is evidence both for the west-
ernisation of tastes and the assertion of ethnic, religious and cultural differences.
There are more than 600 000 Avon ladies now in China and a growing number of them in Eastern Europe, Brazil and the Amazon .
In northern Kenya you may find a Sambhuru warrior who owns a cellular telephone. Thus, whilst there is a vast and, sometimes, turbulent mosaic of cultural Differences.
The social/cultural environment is an important area for international marketing managers .
Growth and movement in populations around the world are important factors heralding social changes. Eighty per cent of the world’s population live in devel-
oping countries; by 2025 this is likely to reach 85 per cent. Two out of every five people live in China and India. However, whilst world population is growing
dramatically, the growth patterns are not consistent around the world.
Over the next half century, Africa’s population will almost treble. China’s population will rise much more slowly from 1.2 billion to 1.5 billion. With a popu-
lation of 1.53 billion people, India will have more inhabitants than China in 50 years’
time. Europe is the only region where the population is expected to decline; any increase in population in high income countries is entirely due to migration.
There are also visible moves in the population within many countries, leading
to the formation of huge urban areas where consumers have a growing similarity
of needs across the globe. By 2010, 50 per cent of the world’s population will live
in urban areas: the world is moving into gigantic conurbations. The population
of greater Tokyo is soon to be close to 30 million and Mexico City 20 million.
Cities such as Lagos, Buenos Aires and Djakarta will soon outstrip cities such as
Paris, London and Rome. In the year 2015, no European city will be in the top countries. China, Russia and South Korea and Brazil are turning into huge markets. In India, sales of anti-ageing creams are growing by 40 per cent a year. Avon is expanding rapidly in
Eastern Europe and Russia as well as in South America. Brazil now has more than 900 000 Avon ladies.
Global competition in the market is becoming increasingly intense. Unilever and Procter and Gamble, facing maturity in many of their traditional businesses, are devoting more resources to developing global beauty brands. Luxury product manufacturers such as Dior, Chanel and Yves St Laurent are
moving into mainstream beauty products and many of the
global giants are growing by buying up smaller brands. Japan’s Kao have gone into the hair dye market by buying John Frieda while Estée Lauder has acquired Stila, MAC and Bobbi Brown,
all of which are innovative and growing make-up brands.
The traditional global beauty brands established by such
companies as L’Oréal, Elizabeth Arden and Helena Rubenstein are now having to fight hard in a global market where
traditionally they have earned huge margins and enjoyed
continuous growth for many years.
three dimensions: (1) local domestic law; (2)
international law; (3) domestic laws in the firm’s home base.
■ Local domestic laws. These are all different! The only way to find a route through the legal maze in overseas markets is to use experts on the separate
legal systems and laws pertaining in each market targeted.
■ International law. There are a number of international laws that can affect the organisation’s activity. Some are international laws covering piracy and hijacking,
others are more international conventions and agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organisation
(WTO) treaties, patents and trademarks legislation and harmonisation of legal systems within regional economic groupings, e.g. the European Union.
■ Domestic laws in the home country. The organisation’s domestic (home
market) legal system is important for two reasons. First, there are often export
controls which limit the free export of certain goods and services to particular
marketplaces, and second, there is the duty of the organisation to act and
abide by its national laws in all its activities, whether domestic or international.
It will be readily understandable how domestic, international and local legal
systems can have a major impact upon the organisation’s ability to market into
particular overseas countries. Laws will affect the marketing mix in terms of
products, price, distribution and promotional activities quite dramatically. For
many firms, the legal challenges they face in international markets are almost a
double-edged sword. Often firms operating internationally face ethical challenges
in deciding how to deal with differing cultural perceptions of legal practices.
In many mature markets they face quite specific and, sometimes, burdensome
regulations. In Germany, for instance, environmental laws mean a firm is respon-
sible for the retrieval and disposal of the packaging waste it creates and must
produce packaging which is recyclable, whereas in many emerging markets there
may be limited patent and trademark protection, still evolving judicial systems,
non-tariff barriers and an instability through an ever-evolving reform programme.
China earned notoriety in the past for allowing infringements of copyright and
blatent piracy. However, this is now changing. Some governments are reluctant to
develop and enforce laws protecting intellectual property partly because they
believe such actions favour large, rich, multinationals. Anheuser Busch (USA) and
Budvar (Czech Republic) have been in constant litigation over the right to use the
name Budweiser in the European Union and both companies have recently been
legally deemed the right to use it.
Piracy in markets with limited trademark and patent protection is another
challenge. Bootlegged software constitutes 87 per cent of all personal computer software in use in India, 92 per cent in Thailand and 98 per cent in China, resulting
in a loss of US$8 billion for software makers each year.
India is regarded by many firms as an attractive emerging market beset with
many legal difficulties, bureaucratic delay and lots of red tape. For example, shoes
cannot be imported in pairs but have to be imported one at a time – which causes
huge problems for shoe manufacturers who need to import shoes as production
samples. The way many of them overcome the problem is by importing the left
shoe via Madras and the right shoe via Mumbai. Companies such as Mercedes
Benz, Coca-Cola and Kellogg have found the vast potential of India’s market
somewhat hard to break into. Its demanding consumers can be difficult to read
and local rivals can be surprisingly tough. Political squabbles, bureaucratic delays
and infrastructure headaches are also major obstacles.
It is important that the international marketer has an understanding of economic
developments and how they impinge on the marketing strategy. This under-
standing is important at a world level in terms of the world trading infrastructure
such as world institutions and trade agreements developed to foster international
trade, at a regional level in terms of regional trade integration and at a country/
market level. Firms need to be aware of the economic policies of countries and
the direction in which a particular market is developing economically in order to
make an assessment as to whether they can profitably satisfy market demand and
compete with firms already in the market.
Amongst the 194 countries in the world, there are varying economic conditions,
levels of economic development and Gross national income (GNI) per capita.
Gross national income in the world is US$62 trillion (purchasing power parity
[ppp]); however, it is not shared equitably across the world. The United Nations
classes 75 per cent of the world’s population as poor, that is, they have a per capita
income of less than US$3470, and only 11 per cent of the population as rich,
meaning they have a per capita income of more than US$8000. Perhaps more
startling is the UN claim that the richest 50 million people in the world share the
same amount of wealth as the poorest 3000 million. Such disparities of incomes
set particular challenges for companies operating in international markets in
terms of seeking possible market opportunities, assessing the viability of potential
markets as well as identifying sources of finance in markets where opportunities
are identified but where there is not capacity to pay for goods.
Another key challenge facing companies is the question as to how they can
develop an integrated strategy across a number of international markets when
there are divergent levels of economic development. Such disparities often make
it difficult to have a cohesive strategy, especially in pricing.
The Economist ‘Big Mac’ Index ( Figure 1.2) is a useful tool which illustrates
the difficulties global companies have in trying to achieve a consistent pricing
strategy across the world. It provides a rough measure of the purchasing power
of a currency. UBS, a bank in the USA, uses the price of the Big Mac burger to
measure the purchasing power of local wages around the world. It divides the
price of a Big Mac by the average net hourly wage in cities around the world. A
worker from Jakarta must work for almost 11–2 hours to buy a Big Mac, but a
Moscow wage buys the burger in 25 minutes and a Tokyo salary buys one in just
ten. This causes problems for McDonald’s in trying to pursue a standard product
image across markets. Priced in US dollars, a Big Mac in Switzerland would cost
US$5.21, whereas in China it would be US$1.31.
In order to examine these challenges further we divided the economies into
developed economies and less developed economies.
The developed economies
The developed economies of the North American Free Trade Area (NAFTA),
European Union (EU) and Japan account for 80 per cent of world trade. For many
firms this constitutes much of what is termed the global market. Even though
many companies call themselves global, most of their revenues and profits will be
earned from these markets. In the European Union nearly 70 per cent of the
international goods traded are traded within the European Union; in NAFTA,
50 per cent of goods exported are to other members of NAFTA. This leads some
commentators to argue that most competition, even in today’s global market-
place, is more active at a regional level than a global level. It is from these
developed economies that the global consumer with similar lifestyles, needs and
desires emanates. However, emerging markets are now becoming more econom-
ically powerful and moving up the ranks, especially such countries as Brazil,
Russia, India and China.
The emerging economies
In countries such as Brazil, Russia, India and China, (the BRIC economies) there is
a huge and growing demand for everything from automobiles to cellular phones
and all are viewed as key growth markets where there is an evolving pattern of
government-directed economic reforms, lowering of restrictions on foreign invest-
ment and increasing privatisation of state-owned monopolies. All these emerging
economies herald significant opportunities for the international marketing firm.
Such markets often have what is termed as a ‘dual economy’. Usually there tends
to be a wealthy urban professional class alongside a poorer rural population.
Income distribution tends to be much more skewed between the ‘haves’ and the
‘have nots’ than in developed countries. From negligible numbers a few years ago,
China now has a middle class of 100 million which is forecast to grow to 500 million
in the next century. Brazil and Indonesia have middle classes of 25 million each.
Less developed countries
This group includes underdeveloped countries and less developing countries.
The main features are a low GDP per capita, a limited amount of manufacturing
activity and a very poor and fragmented infrastructure. Typical infrastructure
weaknesses are in transport, communications, education and healthcare. In addition,
the public sector is often slow-moving and bureaucratic.
It is common to find that less developed countries (LDCs) are heavily reliant
on one product and often on one trading partner. In many LDCs this product is
the main export earner. In Angola, for instance, the sole export is oil and in the
Sudan oil accounts for 99 per cent of their exports. In addition, three-quarters of
LDCs depend on their main trading partner for more than one-quarter of their
export revenue. The risks posed to the LDC by changing patterns of supply and
demand are great. Falling commodity prices can result in large decreases in earn-
ings for the whole country. The resultant economic and political adjustments may
affect exporters to that country through possible changes in tariff and non-tariff
barriers, through changes in the level of company taxation and through restric-
tions on the convertibility of currency and the repatriation of profits. In addition,
substantial decreases in market sizes within the country are probable.
A wide range of economic circumstances influences the development of the
less developed countries in the world. Some countries are small with few natural
resources and for these countries it is difficult to start the process of substantial
economic growth. Poor health and education standards need money on a large
scale, yet the pay-off in terms of a healthier, better-educated population takes time
to achieve. At the same time, there are demands for public expenditure on
transport systems, communication systems and water control systems. Without
build brand loyalty which is difficult in a market where
there is a lack of trust in a foreign US company .The
other dilemma is given the levels of illiteracy, how do
they educate the farmers to use the equipment and
how do KickStart get their message across given the
small budget they have for such activities?
QUESTION How should KickStart approach this market?
How do you sell to subsistence farmers
in Africa ?
KickStart International is a non-profit organisation
that sells irrigation systems to subsistence farmers in
Africa. The customers are hard to reach. They live hours
from major cities and many are illiterate. Even though
they are a non-profit organization, KickStart needs to
Copyright 2008 Cengage Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. real prospects for rapid economic development, private sources of capital are
reluctant to invest in such countries. This is particularly the case for long-terminfrastructure projects and, as a result, important capital spending projects rely
heavily on world aid programmes. Marketing to such countries can be problematic,
Whilst we have examined economic factors within markets, we also need to bear
in mind that in international marketing transactions invariably take place between
countries, so exchange rates and currency movements are an important aspect of
the international economic environment. On top of all the normal vagaries of
markets, customer demands, competitive actions and economic infrastructures,
foreign exchange parities are likely to change on a regular if unpredictable
basis. World currency movements, stimulated by worldwide trading and
foreign exchange dealing, are an additional complication in the international
environment. Companies that guess wrongly as to which way a currency
will move can see their international business deals rendered unprofitable
overnight. Businesses that need to swap currencies to pay for imported
goods, or because they have received foreign currency for products they have
exported, can find themselves squeezed to the point where they watch their
In Europe, the formation of the European Monetary Union (EMU) and the
establishment of the Single European Payments Area (SEPA) has led to greater
stability for firms operating in the market. The formation of the European
Monetary Union and the introduction of the single currency across Europe has
had important implications for company strategies.
The political environment of international marketing includes any national or
international political factor that can affect the organisation’s operations or its
decision making. Politics has come to be recognised as the major factor in many
international business decisions, especially in terms of whether to invest and how to develop markets.
Politics is intrinsically linked to a government’s attitude to business and the
freedom within which it allows firms to operate. Unstable political regimes
expose foreign businesses to a variety of risks that they would generally not face
in the home market. This often means that the political arena is the most volatile
area of international marketing. The tendencies of governments to change regula-
tions can have a profound effect on international strategy, providing both opportunities and threats. The invasions of Afghanistan and Iraq have brought
market development opportunities for some but market devastation for others
and higher political risk in neighbouring markets for all. The instability in the Middle East and the continued threat of global terrorism have served to heighten
firms’ awareness of the importance of monitoring political risk factors in the international markets in which they operate. Lesser developed countries and
emerging markets pose particularly high political risks, even when they are
following reforms to solve the political problems they have. The stringency of
such reforms can itself lead to civil disorder and rising opposition to governments,
as has been seen recently in Indonesia, Venezuela, Brazil and Argentina.
gradual change in a local political environment that is disadvantageous or counter productive to foreign
firms and markets.
The types of action that governments may take which constitute potential
political risks to firms fall into three main areas:
■ Operational restrictions. These could be exchange controls, employment
policies, insistence on locally shared ownership and particular product
■ Discriminatory restrictions. These tend to be imposed on purely foreign
firms and, sometimes, only firms from a particular country. The USA has
imposed import quotas on Japan in protest at non-tariff barriers which they
view as being imposed unfairly on US exporters. They have also imposed
bans on imports from Libya and Iran in the past. Such barriers tend to be
such things as special taxes and tariffs, compulsory subcontracting, or loss of
■ Physical actions. These actions are direct government interventions
such as confiscation without any payment of indemnity, a forced takeover
by the government, expropriation, nationalisation or even damage to
property or personnel through riots and war. In 2001 the Nigerian
government claimed ownership of Shell’s equipment and machinery
without any prior warning.
Investment restrictions are a common way governments interfere politically in
international markets by restricting levels of investment, location of facilities,
choice of local partners and ownership percentage. When Microsoft opened its
Beijing office, it planned to use its Taiwan operations to supply a Mandarin
language version of Windows. The government not only wanted such an operating
system to be designed in China but also insisted on defining the coding standards
for Chinese characters’ fonts, something Microsoft had done independently
everywhere else in the world. In a flurry of meetings with officials, Bill Gates
argued that the marketplace, not the government, should set standards. But the
Chinese electronics industry threatened to ban Windows and president Jiang
Zemin personally admonished Gates to spend more time in China and ‘learn
something from 5000 years of Chinese history’. Gates sacked the original
management team and promised to cooperate with Beijing.
The World Trade Organisation has led negotiations on a series of worldwide
agreements to expand quotas, reduce tariffs and introduce a number of
innovative measures to encourage trade amongst countries. Together with the
formation of regional trading agreements in the European Union, North and
South America and Asia, these reforms constitute a move to a more politically
stable international trading environment. An understanding of these issues is
critical to the international marketing manager,
The political and economic environments are greatly intertwined and, some-
times, difficult to categorise. It is important, however, that a firm operating in
international markets assesses the countries in which it operates to gauge the
economic and political risk and to ensure they understand the peculiarities and
characteristics of the market they wish to develop.
Technology is a major driving force both in international marketing and in the
move towards a more global marketplace. The impact of technological advances
can be seen in all aspects of the marketing process. The ability to gather data on
markets, management control capabilities and the practicalities of carrying out
the business function internationally have been revolutionised in recent years
with the advances in electronic communications.
Satellite communications, the Internet and the World Wide Web, client–server
technologies, ISDN and cable as well as email, faxes and advanced telephone
networks have all led to dramatic shrinkages in worldwide communications.
Shrinking communications means, increasingly, that in the international
marketplace information is power. At the touch of a button we can access infor-
mation on the key factors that determine our business. News is a 24 hours a day
service. Manufacturers wanting to know the price of coffee beans or the relevant
position of competitors in terms of their share price or new product activity have
it at their immediate disposal.
As wireless technology renders land cables and telephone lines redundant,
developing countries are abandoning plans to invest in land-based communication.
They are bypassing terrestrial communication systems, enabling them to catch up Cadbury’s in political faux pas
The Indian division of Cadbury-Schweppes suffered
embarrassment around the world and incensed large
swathes of Hindu society by running a newspaper advertisement
comparing its Temptations chocolate to the war-torn region of
Kashmir. The ad carried the tagline:
‘I’m good. I’m tempting. I’m too good to share. What am I?
Cadbury’s Temptations or Kashmir?’.
To make sure nobody missed the point, the ad’s creators laid
the ‘too good to share’ catch-line over a map of Kashmir.
The ad caused a national outcry. Arguments over Kashmir
have taken India and Pakistan to the brink of nuclear war:
using them to sell chocolate was perhaps not the wisest thing
to do. Indian politicians were shocked at the very mention of
sharing the territory and threatened nationwide protests. To
add insult to injury the advertisement was timed to appear on
15 August, India’s Independence Day. Cadbury’s British roots
may have made the ad even harder to swallow. It was British
colonial rulers who, at partition in 1947, drew the boundary
line between India and Pakistan that the two nations have
battled over ever since.
Though Cadbury India has apologised, it does show that in
global markets, multi-nationals can’t hide their blunders for long.
In emerging economies consumers are jumping from no telephone to the latest in global com-
munications technology. Wireless application protocol (WAP) technology allows
online services to be available to mobile phone users on the move, wherever they
happen to be in the world. The use of Global System for Mobile Communications
(GSM) technology enables mobile phone operators to determine the location of a
customer globally to send them relevant and timely advertising messages.
British Airways operates its worldwide online operations from Mumbai: every-
thing from ticketing to making an ‘exceptional request’ facility, such as wheelchair
assistance needed for a passenger can be managed from the centre in Mumbai.
Increasingly companies are using India as a centre for their global online customer
service operations. The ease of hiring computer-literate graduates by the hundred,
who are intelligent, capable, keen and inexpensive to hire, as is local property to
rent, makes India an attractive location
THE INTERNET AND THE WORLD WIDE WEB (WWW)
The Internet and the access gained to the World Wide Web has revolutionised
international marketing practices. Airlines such as EasyJet and RyanAir have
helped completely change the way we book our airline reservations. EToys, a virtual
company based in the US, has no retail outlets but a higher market capitalisation
than Toys’R’Us. Firms ranging from a few employees to large multinationals have
realised the potential of marketing globally online and so have developed the
facility to buy and sell their products and services online to the world.
seller owns the intellectual property, not just the brainpower for
hire. Mixing his metaphors wildly, Rajesh Hukku, the founder and chairman of i-flex, argues that Indian firms otherwise risk being
doomed forever to providing ‘the cheap labour at the bottom of the food chain’.
At a time when there has been a protectionist backlash in
America and Europe against the outsourcing of IT jobs to India
and fears of decline in the industry as margins and costs are
being further reduced, Indian software firms are emerging
from the shadows and fighting in the global market under
their own brand names.
Last year, Nasscom, the Indian industry’s lobby group, esti- mated that India captured just 0.2 per cent of a global market of
US$180 billion for software products. It expects that to increase, but recognises the obstacles. The product business depends on
heavy investment in sales, marketing and branding and the ability
to market globally against fierce and rich competitors.
A recent success has been the tie up with Financial Services
Inc. (FSI) in the USA to launch FLEXICUBE as a hosted offering to
community banks in the US. FLEXCUBE will help community
banks in the USA to compete with large banks and financial
institutions on an equal footing.
FLEXCUBE is the world’s best-selling banking-software product.
For many years Indian technicians have been beavering away
writing code to be sold as an American or European brand. Now
India’s own brands are starting to fight in the global markets in
their own right. Indian marketing professionals have been argu-
ing for some time that IT exports would be more secure if they
relied less on outsourcing and were ‘products’, where the Indian
An estimated 1.2 billion people – some 17 per cent of the global population – now
have access to the Internet. However, for many this will be through public-based
Internet services in cafes etc. The United Nations estimate that global e-business
is now worth more than US$10 trillion, most of which is business-to-business
(B2B), not business-to-consumer (B2C) purchases.
The Internet has meant huge opportunities for small and medium-sized
enterprises (SMEs) and rapid internationalisation for many. It has enabled them
to substantially reduce the costs of reaching international customers, reduce
global advertising costs and made it much easier for small niche products to find
a critical mass of customers. Because of the low entry costs of the Internet it has
permitted firms with low capital resources to become global marketers, in some
For all companies, the implications of being able to market goods and services
online have been far reaching. The Internet has led to an explosion of information
to consumers, giving them the potential to source products from the cheapest
supplier in the world. This has led to the increasing standardisation of prices
across borders or, at least, to the narrowing of price differentials as consumers
become more aware of prices in different countries and buy a whole range of
products via the net. In B2C marketing this has been most dramatically seen in
the purchase of such things as flights, holidays, CDs and books. The Internet, by
connecting end-users and producers directly, has reduced the importance of
traditional intermediaries in international marketing (i.e. agents and distribu-
tors) as more companies have built the online capability to deal direct with their
customers, particularly in B2B marketing. To survive, such intermediaries have
begun offering a whole range of new services, the value added element of their
offering no longer being principally in the physical distribution of goods but
rather in the collection, collation, interpretation and dissemination of vast
amounts of information. The critical resource possessed by this new breed of
‘cybermediary’ is information rather than inventory. The Internet has also
become a powerful tool for supporting networks both internal and external to
the firm. Many global firms have developed supplier intranets through which
they source products and services from preferred suppliers who have met the
criteria to gain access to their supplier intranets. It has become the efficient
new medium for conducting worldwide market research and gaining feedback
Thus the Internet produces a fundamentally different environment for inter-
national marketing and requires a radically different strategic approach affecting
all aspects of the marketing process. Not all forays into Internet marketing have
been successful. Many early dotcom high growth companies became ‘dot.bombs’
when they failed to sustain their early promise. Levi Strauss stopped its Internet
selling operation after finding the cost of servicing returned goods was greater
than the revenue generated from new sales.
The dual technological/cultural paradox
On one hand commentators view technological advancement and shrinking
communications as the most important driving force in the building of the global
village where there are global consumers who have similar needs. On the other
hand, to access this global village a person invariably needs a command of the
English language and access to a whole range of equipment. In many markets we
stumble against the paradox that whilst in some countries there is a market of
well-educated and computer-literate people, in other countries the global
electronic highway completely bypasses them.
Despite all that has been said in previous sections, many developing and
emerging markets are characterised by poor, inadequate or deteriorating
infrastructures. It is estimated that only 10 per cent of the world’s population has
direct access to a PC and only 7 per cent have direct access to the Internet.
Essential services required for commercial activity, ranging from electric power to
water supplies, from highways to air transportation and from phone lines to
banking services are often in short supply or unreliable. There are also major
disparities in the cost of accessing the Internet. In the USA, accessing the Internet
for 20 hours per month would cost 1 per cent of a person’s average income;
in Mexico it would cost 15 per cent of a person’s average income. However, in
Bangladesh the same amount of access is equivalent to 278 per cent of the average
income and in Madagascar 614 per cent, hardly making access to the Internet
feasible for the average person, even if it is technically available.
The huge population shifts discussed earlier have also aggravated the technical
infrastructure problems in many of the major cities in emerging markets. This
often results in widespread production and distribution bottlenecks, which in
turn raises costs. ‘Brown outs’, for instance, are not uncommon in the Philippines,
even in the capital city Manila, where companies and offices regularly lose electric
power and either shut down in those periods or revert to generators. Fragmented
and circuitous channels of distribution are a result of lack of adequate infrastruc-
ture. This makes market entry more complicated and the efficient distribution
of a product very difficult. Pepsi Cola in Eastern Europe have a large number of
decentralised satellite bottling plants in an attempt to overcome the lack of a
DIFFERENCES BETWEEN INTERNATIONAL
AND DOMESTIC MARKETING
As we have seen in the previous sections, there are many factors within the
international environment which substantially increase the challenge of inter-
national marketing. These can be summarised as follows:
1 Culture: often diverse and multicultural markets
2 Markets: widespread and sometimes fragmented
3 Data: difficult to obtain and often expensive
4 Politics: regimes vary in stability – political risk becomes an important
5 Governments: can be a strong influence in regulating importers and foreign
6 Economies: varying levels of development and varying and sometimes
7 Finance: many differing finance systems and regulatory bodies
8 Stakeholders: commercial, home country and host country
9 Business: diverse rules, culturally influenced
10 Control: difficult to control and coordinate across markets.
The international competitive landscape
A major difference for managers operating on international markets is the impact
all these currents and cross-currents have on the competitive landscape.
define marketing as ‘getting the competitive advantage
and keeping it’. The task of achieving this in a competitive environment where
firms are subject to local, regional and global competition can be immensely
challenging. This is especially so if indigenous local competitors are supported
by the government of the country.
Across international markets, advanced countries are seeing significant
competition from both emerging markets and less developed countries who
are exploiting modern technology and their own low labour costs to compete in
markets no longer so protected by tariff walls.
The complexity of competition is also heightened by the strategic use of inter-
national sourcing of components by multinationals and global firms to achieve
Given the nature of the challenges and opportunities identified above and the
speed of change within the international environment, this means that substan-
tially different pressures are being placed upon management than if they were
purely operating in domestic markets. It follows from this that the manager of
international marketing needs a detailed knowledge and understanding of how-
particular environmental variables impact on a firm’s international marketing
nine cross-cultural management incompetencies
which led to failure across a spread of country markets. He defined these
core incompetencies as ‘the bundle of activities and managerial skills that are
mis-matched in a great variety of countries where firms do business’.
The first three are interrelated and relate to the failure to be market driven.
1 Inability to find the right market niches.
2 Unwillingness to adapt and update products to local needs.
3 Not having unique products that are viewed as sufficiently higher added
value by customers in local markets.
4 A vacillating commitment. It takes time to learn how to function in countries
such as Japan.
5 Assigning the wrong people. Picking the wrong people or the wrong top
team in an affiliate.
6 Picking the wrong partners. There is a list of difficulties in building alliances;
a main limitation is picking partners who do not have the right bundle of
capabilities to help reach the local market.
7 Inability to manage local stakeholders. This includes incompetence in
developing a satisfactory partnership relationship with unions and
8 Developing mutual distrust and lack of respect between HQ and the affiliates
at different levels of management.
9 Inability to leverage ideas developed in one country to other countries
If such mistakes are not to be made in your marketing strategies it is essential to
ensure that the company has a robust and rigourous approach to its international
marketing plannning processes
In international marketing the very complexity of handling the diverse range of
factors that must be considered make planning and control a difficult activity to
carry out satisfactorily. For large global companies, the problem becomes one of
how to structure the organisation so that its increasingly complex and diverse
activities around the world can be planned and managed effectively, its goals can
be achieved and its stakeholders’ expectations satisfied.
In this section we look at the international marketing planning and control
process and consider how managers can respond to the challenges posed in the
previous sections by ensuring they have robust strategy development and market
The planning process
The planning process is the method used by the management of the firm to
define in detail how it will achieve its current and future strategic aims and objec-
tives. In doing this, it must evaluate the current and future market opportunities,
assess its own current and potential capabilities and attempt to forecast how
those changes over which it has no control might help or hinder its efforts to
reach its objectives.
The international planning process must allow the company to answer the
following three marketing questions.
1 Where is the company now?
2 Where does it want to go?
3 How might it get there?
These questions are fundamental for the majority of businesses whether they are
large or small, simple or complex, and they emphasise the firm’s need to prepare for
the future to ensure its own survival and growth within the increasingly
competitive international environment. There is an implication in these questions
that the future is likely to be significantly different from the past, so planning is
inevitably about forecasting and implementing change which determines the very
nature and future direction of the organisation.
The starting point of the planning process for any company is to set long-term
goals and objectives which reflect its overall aspirations. These goals cannot be
set in isolation, however, as the company’s history and current levels of success
in its different country markets are usually major determinants of its future. Other
factors, too, over which the company has little control in international markets,
such as the economic and political situation of the countries in which it is operating,
the response of the competition and the diverse background, behaviour and
expectations of its customers, all have a major impact upon the company’s
operations and will have a significant effect on determining whether or not it will
meet its goals.
Too many firms, particularly smaller ones, fail to prepare contingency plans to
cope with the unexpected and, in some cases, even the predictable events in inter-
national markets: they are often surprised and unprepared for success too. When
unexpected events occur, many companies too easily ignore the plan and develop
new strategies as they go along. Whilst it may be possible to survive in a relatively
uncomplicated domestic environment by reacting rapidly to new situations as
they arise, it is impossible to grow significantly in international markets, as an
overly reactive management style is usually wasteful of opportunities and resources.
In international markets, planning and control is essential for both day to day
operations and the development of long-term strategies in order to manage the
differences of attitudes, standards and values in the extended parts of the organ-
isation and avoid the problems of poor coordination and integration of the
diverse activities. The plans which are developed must be sufficiently flexible to
cope with unfamiliar cultures, rapidly changing political, economic and competi-
tive environments, and the effects of unexpected events which affect global com-
panies in one way or another throughout the world on an almost daily basis.
As a company moves into international markets, having previously been mar-
keting solely to domestic markets, the processes of planning and control remain
largely the same, but the complexity of the process increases dramatically. In a
domestic situation misunderstandings between different departmental managers
can be relatively quickly sorted out with a face to face discussion, but in the inter-
national situation this is much harder and often impractical. More impersonal
communications, along with longer lead times, different cultures and the use of
different languages, results in seemingly inconsistent and often negative attitudes
in international managers.
Major evolutionary stages of planning
As most companies move gradually into international markets they go through the
major evolutionary stages of planning: the unplanned stage, the budgeting stage,
the annual business planning and the strategic planning stage .
The unplanned stage: In its early stages of international marketing, the company
is likely to be preoccupied with finding new export customers and money to
finance its activities. Frequently business is very unpredictable and is conse-
quently unplanned, so that a short-term ‘crisis management’ culture emerges.
The budgeting stage: As the business develops, a system for annual budgeting
of sales, costs and cash flow is devised, often because of pressure from external
stakeholders such as banks. Being largely financial in nature, budgets often take
little account of marketing research, product development or the longer term
potential of international markets.
Annual business planning: Companies begin to adopt a more formalised annual
approach to planning by including the whole of the business in the planning
review process. One of three approaches to the process of international market
planning generally emerge at this stage:
1 Top-down planning: this is by far the simplest approach, with senior
managers setting goals and developing quite detailed plans for middle and
senior staff to implement. To be successful, this clearly requires the senior
managers to be closely in touch with all their international markets and for
the business to be relatively uncomplicated in the range of products or
services offered. It has the advantage of ensuring that there is little
opportunity for misinterpretation by local managers, but the disadvantage
of giving little opportunity for local initiative. Most of the strategic decisions
at McDonald’s and Coca-Cola are taken in the US, and by Sony in Japan.
2 Bottom-up planning: in this approach the different parts of the company
around the globe prepare their own goals and plans and submit them to
headquarters for approval. Whilst this encourages local initiative and
innovation, it can be difficult to manage as the sum of the individual parts
that make different demands on resources, financial returns and marketing
profiles rarely add up to a feasible international development plan.
3 Goals down, plans up: in an attempt to benefit from the positive elements
of the first two approaches, this third approach is based upon senior
management assessing the firm’s opportunities and needs, setting corporate
global objectives and developing broad international strategies. Financial
goals are then set for each part of the company, which has the responsibility
for developing individual strategies and plans to achieve these targets.
For this approach to work effectively the senior management generally
allows considerable flexibility in the way that the goals are achieved by
the component parts of the firm around the globe. This approach is
adopted particularly by companies that have a very diverse portfolio
of businesses and products.
The strategic planning stage: So far, the stages discussed have been concerned
with relatively short-term planning (one to two years), but for many aspects of
international marketing such as new market entry, growth strategies and brand
management, much longer-term planning is essential. By developing strategies
for a five year timescale, it is possible to avoid short-term, highly reactive and
frequently contradictory and wasteful activity. The annual marketing plan then
becomes a more detailed version of the five year strategic plan which can be
rolled forward year on year.
The obvious benefits of strategic planning are that all staff can be better motivated
and encouraged to work more effectively by sharing a vision of the future. There
are, however, potential dangers too. Long-term strategic plans often fail to cope
with the consequences of unexpected events, either environmental or political.
There is often confusion between managers over what are strategic issues and what
are operational tactics. What a manager in a foreign subsidiary might consider to be
a strategic issue, such as achieving a substantial market share increase in the
country, might be regarded as an operational matter by a senior manager at the
headquarters, which does not consider success in that particular country a priority
for the company.
The international marketing planning process
There are a number of elements in the international marketing plan,
The complexities of the international marketing environment mean another major
difference for companies competing on international markets is that the company
has many more organisations and people who have a stake in how they conduct their
business and so consequently many more stakeholders whose differing expectations
they have to manage. The ability of a company to pursue its chosen marketing
strategy is determined to a large degree by the aims and expectations of the stake-
holders, who directly or indirectly provide the resources and support needed to
implement the strategies and plans. It is important to clearly identify the different
stakeholder groups, understand their expectations and evaluate their power,
because it is the stakeholders who provide the broad guidelines within which the
Whilst the senior management of the firm aim usually to develop and adopt
strategies which do not directly oppose these stakeholder expectations, they do,
of course, frequently widen or alter the firm’s activities due to changes in the
market and competition. Moreover, a wide range of stakeholders influence what
multinational enterprises (MNEs) do by giving greater attention to the political,
commercial and ethical behaviour of the organisations as well as taking more
interest in the actual operation of the business and the performance and safety
of the products. As a result of this, companies need to explain their strategies and
plans to shareholders through more detailed annual reports, to staff through a
variety of briefing methods and to pressure groups and the community in general
through various public relations activities, particularly when their activities have an
impact on the local environment or economy. In international marketing it is
particularly important that the firm addresses the concern of its host country stake-
holders, who may be physically and culturally very distant from the headquarters.
Particular attention should be paid to the different expectations of the
stakeholders and their power to influence the firm’s strategic direction. Given
the different expectations of the firm’s stakeholders it is inevitable that conflicts
will occur. For example, shareholders usually want a high return on their invest-
ment and may expect the firm to find countries with low production costs, but
the workers in these countries want an adequate wage on which to live. It is often
the firm’s ability to manage these potential conflicts that leads to success or
failure in international marketing.
International pressure groups are another important stakeholder MNEs have
to manage. Global communications and the ability of the Internet to draw together
geographically dispersed people with shared interests have led to the growing
power of globally based pressure groups. Such has been the success of a number
of these, it is now the case that pressure-groups are seen by many global operators
as one of the key stakeholders to be considered in international strategy decision
making. The role of pressure groups in global markets tends to be to raise aware-
ness of issues of concern. Among those that have received wide press coverage
affecting international marketing strategies are:
■ the Greenpeace efforts to raise awareness to threats on the environment
■ the anti-globalisation lobby demonstrating against the perceived dark global
forces they see manifested in the World Trade Organisation
■ the anti-child labour movement.
Gap, the clothes manufacturer and retailer, responded to a revelation that
companies who had a licence to produce their products were using child labour
by applying the employment guidelines and dismissing the ‘child’. This only
exacerbated the anger of the pressure groups. Levi, another target of the anti-child
labour movement, finding themselves exposed to the same bad publicity, dis-
missed the child but agreed to fund the child’s education up to the point
when they would be eligible to seek employment. This pacified the pressure
group in the short term, but one is left wondering what Levi would do if they
subsequently discovered that there were another few thousand under-age
employees across other factories they use, or if there was a sudden influx of
employees that were recruited and then declared themselves under age in order
to seek educational support.
One of the main roles of international public relations is to try to manage the
expectations and aspirations of pressure groups and all the stakeholders of a
company. In international marketing one of the key responsibilities is to establish
good practice to respond to publicity generated by pressure groups on issues
where they have been seen not to meet stakeholder expectations.
As the international business environment becomes more competitive, dynamic
and complex, there is a greater need for individual managers to be aware not
simply of their immediate situation, but also of the possible impact of changes
taking place in surrounding areas too.
Situation analysis is the process by which the company develops a clear under-
standing of each individual market and then evaluates its significance for the
company and for other markets in which the business operates. As the inter-
national business environment becomes more competitive, dynamic and complex,
there is a greater need for individual managers to be aware not simply of their
immediate situation, but also of the possible impact of changes taking place in
surrounding areas too. Individual national markets can be both surprisingly
similar and surprisingly dissimilar in nature, and it is important to understand
these linkages and the implications of the changes which take place.
The processes and procedures for segmenting international markets
A detailed analysis of each of these factors as they affect both the local and
international market environments is necessary in order to forecast future
changes. The most frequently adopted approach by firms is to extrapolate past
trends. However, with so many factors to consider and the increasing frequency
with which unexpected events seem to occur, it may be extremely difficult and
misleading to build up one all-embracing vision of the future. Firms are responding
to this uncertainty by developing a series of alternative scenarios as the basis of the
planning process. An effective, robust strategy needs to contain contingency plans
to deal with a variety of situations in which the company might find itself.
Resources and capabilities
In stressing the need to analyse and respond to external forces over which even
global companies have little control, there can be a temptation amongst some
managers to believe that the current capabilities of the organisation are inadequate
when facing the future. A more thorough analysis of the firm’s situation is needed
and the SWOT framework (analysing the firm’s strengths, weaknesses, opportunities
and threats) is appropriate for this purpose. It is important therefore to audit not
just the most obvious company weaknesses but also the strengths of the company,
which are often taken for granted but which are really its source of competitive
advantage. This is particularly important in international markets as, for example,
customer and brand loyalty may be much stronger in certain markets than others,
and products which may be at the end of their life in the domestic market may be
ideal for less sophisticated markets. SWOT analysis should, therefore, be carried
out separately on each area of the business by function, product or market
and focus upon what action should be taken to exploit the opportunities and
minimise the threats that are identified in the analysis. This will lead to a clearer
evaluation of the resources that are available or which must be acquired to ensure
the necessary actions are carried out.