Learning Objectives
8.1 What factors should a company review before
deciding to go abroad?
8.2 How can companies evaluate and select specific
international markets to enter?
8.3 What are the differences between marketing in a
developing and a developed market?
8.4 What are the major ways of entering a foreign
market?
8.5 To what extent must the company adapt its products
and marketing program to each foreign country?
8.6 How do marketers influence country-of-origin
effects?
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Competing on a Global Basis
• Global industry
– Competitors’ strategic positions in major geographic or
national markets are affected by their overall global
positions
• Global firm
– Operates in more than one country and captures R&D,
production, logistical, marketing, and financial
advantages not available to purely domestic competitors
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Figure 8.1 Decisions In International
Marketing
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Deciding Whether to Go Abroad (1 of 2)
• Factors that draw companies into the
international arena
– Some international markets present better profit
opportunities than domestic market
– Firm needs larger customer base to achieve economies
of scale
– Firm wants to reduce dependence on any one market
– Firm counterattacks global competitors in home markets
– Customers going abroad require international service
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Deciding Whether to Go Abroad (2 of 2)
• Before making a decision to go abroad, the
company must also weigh several risks
– Firm might not understand foreign preferences, failing to
offer competitively attractive product
– Firm might not understand foreign country’s culture
– Firm might underestimate foreign regulations and incur
unexpected costs
– Firm might lack managers with international experience
– Foreign country might change commercial laws, devalue
currency, or expropriate foreign property
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Internationalization Process
Stage 1: No export activities
Stage 2: Export via independent representatives
Stage 3: Establishment of sales subsidiaries
Stage 4: Establishment of production facilities abroad
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Deciding Which Markets to Enter
• How many markets to enter
Waterfall Approach
Sprinkler Approach
Born Global
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Evaluating Potential Markets
• Neighboring countries
• Psychic proximity/cultural distance
• Fewer countries
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Succeeding in Developing Markets (1 of 7)
• BRICS
– Brazil, Russia, India,
China, and South Africa
• CIVETS
– Columbia, Indonesia,
Vietnam, Egypt, Turkey,
and South Africa
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Succeeding in Developing Markets (2 of 7)
• Brazil
‒ Biggest economy in Latin America
‒ Sixth largest economy in the world
‒ Fifth-largest country of digital users
‒ High cost of transporting products
‒ Crime and corruption exist
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Succeeding in Developing Markets (3 of 7)
• Russia
‒ Largest exporter of natural gas
‒ Second-largest exporter of oil
‒ Third-largest exporter of steel/aluminum
‒ Make heavy use of social media
‒ Dwindling workforce/poor infrastructure
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Succeeding in Developing Markets (4 of 7)
• India
‒ Lively democracy/youthful population
‒ World’s second most populous nation
‒ One of the youngest large economies
‒ Has fully embraced mobile technology
‒ Poor infrastructure/public services
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Succeeding in Developing Markets (5 of 7)
• China
‒ Largest auto market in the world
‒ Emerging urban middle class
‒ World’s top consumer of luxury goods
‒ Fierce competition among foreign firms
‒ Opaque and arbitrary bureaucracy
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Succeeding in Developing Markets (6 of 7)
• South Africa
‒ Access point to the African region
‒ Increasing discretionary income
‒ Consumers are brand conscious
‒ Increasing reliance on mobile phones
‒ Logistical/infrastructure problems
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Succeeding in Developing Markets (7 of 7)
• Indonesia
‒ Increasing political stability
‒ Increasing economic growth
‒ Largest Muslim country
‒ Consumers are brand conscious
‒ Distribution/infrastructure limitations
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Figure 8.2 Modes of Foreign
Market Entry
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Deciding How to Enter the Market (1 of 5)
• Indirect exporting
– Working through independent intermediaries
Domestic-based export merchants
Domestic-based export agents
Cooperative organizations
Export-management companies
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Deciding How to Enter the Market (2 of 5)
• Direct exporting
– Handling one’s own exports
Domestic-based export department
Overseas sales branch
Traveling export sales representatives
Foreign-based distributors
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Free Information About Trade
and Exporting
http://www.trade.gov/
U.S. Department of Commerce’s
International Trade
Administration
http://www.exim.gov/ Export-Import Bank of the United
States
https://www.sba.gov/ U.S. Small Business
Administration
https://www.bis.doc.gov/
Bureau of Industry and Security,
a branch of the Commerce
Department
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Deciding How to Enter the Market (3 of 5)
• Licensing
– Licensor issues a license to
a foreign company to use a
manufacturing process,
trademark, patent, trade
secret, or other item of
value for a fee or royalty
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Deciding How to Enter the Market (4 of 5)
• Joint ventures
– Foreign investors have often joined local investors in a
joint venture company in which they share ownership
and control
• Direct Investment
– The foreign company can buy part or full interest in a
local company or build its own manufacturing or
service facilities
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Deciding How to Enter the Market (5 of 5)
• Acquisition
– Acquiring local brands for their brand portfolio
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Deciding on the Marketing
Program (1 of 3)
Advantages
• Economies of scale
• Lower marketing costs
• Power and scope
• Consistency in brand image
• Ability to leverage good ideas
• Uniformity of marketing
practices
Disadvantages
• Differences in consumer needs,
wants, usage patterns
• Differences in consumer
response to marketing programs
• Differences in brand
development process
• Differences in legal environment
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Table 8.1 Globally Standardized Marketing Pros and Cons
Deciding on the Marketing
Program (2 of 3)
Advantages
Economics of scale in production and distribution
Lower marketing costs
Power and scope
Consistency in brand image
Ability to leverage good ideas quickly and efficiently
Uniformity of marketing practices
Disadvantages
Ignores differences in consumer needs, wants, and usage patterns for products
Ignores differences in consumer response to marketing programs and activities
Ignores differences in brand and product development and the competitive environment
Ignores differences in the legal environment
Ignores differences in marketing institutions
Ignores differences in administrative procedures
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Deciding on the Marketing
Program (3 of 3)
• Global similarities and differences
– The Internet, cable and satellite TV, and global linking of
telecommunications networks have led to a convergence
of lifestyles
• Hofstede four cultural dimensions
– Individualism versus collectivism
– High versus low power distance
– Masculine versus feminine
– Weak vs. strong uncertainty avoidance
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Marketing Adaptation (1 of 2)
• Product features
• Labeling
• Colors
• Materials
• Sales promotion
• Prices
• Advertising media
• Brand name
• Packaging
• Advertising execution
• Advertising themes
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Marketing Adaptation (2 of 2)
Table 8.2 McDonald’s Global Menu Variations
Country Noteworthy Menu Items
United States Big Mac, Chicken McNuggets, Filet-o-Fish, Egg McMuffin, Fries
India McVeggie, Chicken Maharaja-Mac, McSpicy Paneer
France Le McBaguette, Le Croque McDo, Le Royal with Cheese
Egypt Beef N Pepper, McArabia (grilled kofta), McFalafel
Israel Mckebab, McFalafel, Big New York and Big Texas (hamburgers)
Japan Ebi Filet-O, Mega Teriyaki Burger, Bacon Egg and Lettuce Wrap,
Shaka Shaka Chicken
China Prosperity Burger, Taro Pie, McWings, McNuggets with Chili Garlic
sauce
Brazil Banana Pie, McNifico Bacon, Cheddar McMelt, Big Tasty
Mexico Big Mac, McChicken, Fries, etc.
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Global Product Strategies (1 of 4)
• Product standardization
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Figure 8.3 Product & Communication
Strategies
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Global Product Strategies (2 of 4)
• Product invention
– Backward invention: reintroduces earlier product
forms well adapted to a foreign country’s needs
– Forward invention: creates a new product to meet
a need in another country
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Global Product Strategies (3 of 4)
• Companies have three choices for setting prices
in different countries
– Uniform price everywhere
– Market-based price
– Cost-based price
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Global Product Strategies (4 of 4)
• Transfer price
• Dumping
• Arm’s-length price
• Gray markets
• Counterfeit products
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Global Distribution Strategies
• Channel entry
– Figure 8.4: Whole-Channel Concept
for International Marketing
• Channel differences
– Various distribution systems
– Size and character of retail units
Fig. 8.4 Whole-Channel Concept
for International Marketing
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Country-of-Origin Effects
• Mental associations and beliefs triggered by a country
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