Chapter 1 Government Barriers Local Governments Restrict International Firm

Unlock access to all the studying documents.

View Full Document

Chapter 1

Scope, Concepts, and Drivers of International Marketing

LEARNING OBJECTIVES

After studying this chapter students should be able to:

• Define international marketing and identify the different levels of international

involvement.

CHAPTER SPOTLIGHTS

• The Importance of International Marketing – Companies expand into international

markets in order to maximize their profits. Going international helps companies take

advantage of global market opportunities and keep pace with competition. It is essential

that companies constantly monitor the international environment for new market

opportunities.

• Levels of International Marketing Involvement – There are four levels of marketing

involvement: domestic marketing, export marketing, international marketing, and

global marketing.

CHAPTER OVERVIEW

This chapter examines the different levels of international involvement, from domestic

marketing to global marketing. Depending on the extent of the company’s international

involvement and the type of industry, the firm may hold different philosophies toward

CHAPTER OUTLINE

1-1 The Importance of International Marketing

International companies such as General Motors, Mitsubishi, Microsoft, and

1. To reach their full potential and the maximum return for their stockholders,

companies must expand into international markets and take advantage of

global market opportunities.

2. For many companies, their international presence is essential to their success.

1-2 Levels of International Marketing Involvement

1. Companies have different degrees of commitment to international

involvement; the four levels of commitment are:

a. Domestic marketing: The firm has the least commitment to

international marketing, with a focus solely on domestic consumers and

on the home-country environment. Yet, even the local company cannot

1-3 The EPRG Framework and International Marketing Concepts

1. Management’s philosophy regarding international involvement has direct impact

1-3a Ethnocentric Orientation

A firm with an ethnocentric orientation is guided by a domestic market extension

1-3b Polycentric Orientation

A firm with a polycentric orientation is guided by multidomestic market concept. The

1-3c Regiocentric Orientation

A firm with a regiocentric orientation is guided by the global marketing concept,

1-3d Geocentric Orientation

A firm with a geocentric orientation perceives the entire world a potential market with

homogeneous segments that need to be addressed with tailored marketing strategies.

1-4 Drivers of International Expansion

Most companies, even small local firms, are involved at some level in international

1-4a Drivers in the Business Environment:

1. Competition: Competitive pressure from international companies will force the

company to expand to new markets, even less profitable ones. (Example:

McCann Erickson advertising agency followed, until recently, its client Coca-

Cola around the world).

4. Improvements in the Transportation and Telecommunication Infrastructure:

Improvements in telecommunications have lowered costs and allowed faster

and more efficient methods of communicating across borders. Outsourcing of

customer service to other countries has become more popular due to

improvements in telecommunications. Efficient and fast travel allows for

frequent interaction between subsidiaries in foreign countries and the

headquarters. The introduction of containers in intermodal transportation and

1-4b Firm-Specific Drivers

1. Product Life-Cycle Considerations: Companies can prolong the product life

cycle of their brands that are in the late maturity stage of the product life cycle in

1-5 Obstacles to Internationalization

1-5a Self-Reference Criterion

The self-reference criterion is defined as individuals’ conscious and unconscious

1-5b Government Barriers

Local governments restrict international firm entry by imposing tariffs and import

1-5c International Competition

Competitors create barriers to new entrants using strategies such as blocking channels

KEY TERMS:

Drivers in the Business Environment: Elements in the business environment, such as

Domestic Marketing: Marketing that is focused solely on domestic consumers and on the

home environment.

Ethnocentric Orientation: Company strategies consistent with the belief that domestic

Export Marketing: Involvement in international marketing limited to the exporting function;

Firm-Specific Drivers: Elements specific to the firm, such as product life cycle, causing the

firm to become involved internationally.

Geocentric Orientation: Company strategies that are consistent with the belief that the entire

Global Marketing: International marketing activities that do not have a country or a region

International Marketing: The processes involved in the creation, production, distribution,

Multinational Marketing: Marketing in different countries without coordinating across

operations.

Obstacles to Internationalization: Impediments that the firm may encounter in the process

of internationalizing.

Polycentric Orientation: Company strategies predicated on the assumption that each

Self-Reference Criterion: Individuals’ conscious and unconscious reference to their own

DISCUSSION QUESTIONS:

1. Discuss the differences between firm internationalization philosophies.

There are four main internationalization philosophies/orientations: ethnocentric,

polycentric, regiocentric, and geocentric.

Ethnocentric firms follow strategies that are consistent with the belief that domestic

strategies, techniques, and personnel are superior to foreign ones, and therefore provide

2. Try to work backward from a company’s Web page and attempt to infer its

Web pages describing the company’s international involvement and its

international product mix. What orientation do you believe this company has and

why?

In the past, Procter & Gamble had a regiocentric orientation, and their Web site

allowed access to three main links (in addition to the basic US Site): the Balkans, Central

3. What are the drivers in the international business environment that lead a firm

to engage in international operations? What are some of the firm-specific drivers

leading to internationalization?

There are two types of drivers that lead to the firm’s internationalization. The first

category consists of business-environment drivers, which are usually the factors that cause

the firm to go international. These factors include pressure from competition, regional

political and/or economic integration, which significantly lower barriers between member

4. What is the “self-reference criterion”?

The “self-reference criterion” is the often unconscious reference to the individual’s

own national culture, home-country norms and values, as well as to the individual’s

5. How can governments and competitors prevent a firm from entering a particular

market?

Local governments may keep tight control over attempts of international firms to enter

the local market, allowing entrance to international firms based on criteria deemed

REVIEW QUESTIONS:

True/False

1. True

Multiple Choice

1. C

CASE 1-1

Zhang National Steel Company

1. What arguments should Liu Hong offer the company chairman in favor of

internationalization? What are the business environment internationalization

drivers and the firm drivers that are likely to lead to the internationalization of

the firm?

China is the top world steel producer and competition in the Chinese market is

intense; going international will allow Zhang to compete more effectively and to take

2. What product life-cycle stage is the steel industry in worldwide? Should Zhang

National Steel Company move its labor force overseas, to China’s neighboring

countries? Why? Why not?

As mentioned above, the steel industry is in the maturity stage of the product life-