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CHAPTER 16
International Marketing
Chapter Objectives
After studying this chapter, students should be able to:
2. Discuss the basic kinds of product policies and decisions made in
international business.
4. Identify promotion issues and evaluate promotion decisions in
international business.
5. Discuss the basic kinds of distribution issues and decisions in
international business.
LECTURE OUTLINE
OPENING CASE: Novica Opens Doors across National Boundaries
Novica is an online retailer that unites thousands of master artists from around the world
with customers in the United States. They specialize in handmade home décor, art,
jewelry, and other unique items from Brazil, Ghana, India, Indonesia, Mexico, Peru, and
Thailand.
Key Points
• The business launched in 1997 and was designed to link artisans from the
developing world with customers from the United States. The plan was unique, not
just for the business model; it actually was an attempt to change the world.
• The focus on the product line was to restore the importance of traditional culture and
skills.
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• Novica gained financial strength when National Geographic decided to partner with
them by taking a minority stake in the company.
CHAPTER SUMMARY
Chapter 16 explores the issue of international marketing. It begins with a discussion of
Teaching Note:
Students, particularly those who have traveled to other countries, are
usually familiar with some products that are sold around the world, such
as Coca-Cola and Levi jeans. Instructors may wish to begin the discussion of
international marketing by asking students how and why such products are marketed
differently in other countries.
INTERNATIONAL MARKETING MANAGEMENT
International marketing affects and is affected by virtually every other organizational
activity. Therefore, it is a critical component of international business success. Discuss
Figure 16.1 here.
International Marketing and Business Strategies
• International marketing strategy should support the firm’s overall business strategy,
whether it is differentiation, cost leadership, or focus (see Chapter 11). For example,
if a firm is following an overall strategy of differentiation, managers should develop a
marketing strategy that differentiates the firm’s products or services from those of
competitors.
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EMERGING OPPORTUNITIES
Pretty Garlic
This box describes the business of a small Chinese garlic exporter, John Huang.
Given his lack of a marketing budget, Huang decided to use the Internet to build
• Decisions about whether and how to enter a particular market must also be
consistent with the firm’s overall strategy. Chapter 12 discusses the various
techniques used to assess the potential of foreign markets.
The Marketing Mix
• International marketing managers must address four issues: how to develop the
firm’s product(s); how to price those products; how to sell those products; and how to
distribute those products to the firm’s customers. The elements are collectively
Standardization versus Customization
• International marketing managers usually choose among the following approaches
when deciding the extent to which to standardize their firm’s marketing mix: an
ethnocentric approach (market products internationally the same way it does
domestically), a polycentric approach (customize the marketing mix to meet the
needs of each target market), or a geocentric approach (adopt a standardized
marketing mix for all markets based on an analysis of customer needs).
• The ethnocentric approach is easy to use; however, it may not be desirable
because sales may be lost as a result of failing to consider the needs of foreign
customers. The polycentric approach, while costly, may actually serve to increase
a firm’s revenues because the needs of local customers are being met. Finally, the
geocentric approach, because it involves the standardization of the marketing mix,
allows a firm to sell essentially the same product using essentially the same
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PRODUCT POLICY
Product comprises both the set of tangible factors (the physical product and its
Standardized Products or Customized Products?
• Firms must decide to what extent they will standardize or customize their product
offerings across markets. The text provides an example of Toyota’s decision
Legal Forces
Cultural Influences
• Product policies may have to be adapted to meet the differing cultural needs of a
firm’s target markets. For example, packaging may need to be changed to reflect the
E-WORLD
E-Translation
This box discusses the benefits and drawbacks of using software programs to
translate Web pages. More than half of U.S. business Web sites are still offered only
in English – but American firms must reach out to a multicultural customer base or
risk losing business to foreign competitors.
Economic Factors
• Product policies may be affected by economic factors. For example, a country’s
level of economic development might affect product feature decisions; a country’s
Brand Names
• Firms that are able to standardize brand names may achieve substantial reductions
in packaging, design, and advertising production costs. Firms with standardized
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brand names may also benefit from spillover effects from one market to the next.
Various examples of firms with standardized brand names are given in the text.
PRICING ISSUES AND DECISIONS
Pricing directly impacts a firm’s revenues and helps shape a firm’s competitive
Pricing Policies
• International firms typically use one of the following pricing policies: standard pricing,
two-tiered pricing, or market pricing.
• A standard price policy (the same price is charged for products regardless of
where they are sold or the nationality of the customer) is usually used by a firm that
sells goods that are easily tradable and transportable. Firms selling commodity
goods in competitive markets also frequently adopt this strategy.
Market Pricing
• A firm following a market pricing policy calculates and then charges the profit-
• This type of policy can enable firms to capitalize on differing price tolerances across
markets and allocate relevant local costs against local sales in each market.
However, the strategy requires that decision making be decentralized and it requires
a constant monitoring of the firm’s situation in each market so that prices can be
adjusted when appropriate.
• Firms must be aware of three additional risks associated with a market pricing
strategy. First, a firm may damage its brand name if it sells a product in the premium
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PROMOTION ISSUES AND DECISIONS PP 16-22
Promotion encompasses all efforts by an international firm to enhance the desirability of
its products among potential buyers. The promotion mix – advertising, personal
Advertising
Teaching Note:
Students generally not only find it amusing to watch videos of
advertisements that run in other countries, but also may find them to be a
good basis for discussing advertising within the context of customization and adaptation.
• A firm must consider three factors when developing its advertising strategy: the
message it wants to convey, the media available to convey the message, and the
• Medium. The medium is the communication channel used by the advertiser to
convey a message. Media must be adapted to the local, cultural, and legal
BRINGING THE WORLD INTO FOCUS
Sailing for Sales
This “Bringing the World into Focus” box discusses one of the hottest forms of
advertising currently used in Egypt. It involves the felucca, or ancient sailboats that
travel up and down the Nile. Coca-Cola started the trend when, frustrated with the
other available options, it displayed its trademark on the large, white sails of one of
Egypt’s largest felucca operators. The new advertising medium quickly caught on as
other firms adopted the method. This box fits in well with the discussion of
advertising media.
• Global versus Local Advertising. The question of customization versus
standardization also affects advertising as firms decide whether to use the same
Personal Selling
• Personal selling involves making sales on the basis of personal contacts. Firms
that are in the early stages of foreign market expansion may subcontract personal
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selling to local organizations, while firms that are most established in foreign markets
may hire local sales representatives.
Sales Promotion
• Sales promotion comprises specialized marketing efforts, such as coupons, in-store
Public Relations
• Public Relations consists of efforts aimed at enhancing a firm’s reputation and
image with the general public, as opposed to touting the specific advantages of an
individual product or service. An effective public relations effort results in the firm
DISTRIBUTION ISSUES AND DECISIONS
• Distribution is getting products and services from the firm into the hands of
customers. Chapter 17 will discuss the role of distribution in international logistics
management.
International Distribution
• A firm must select the mode(s) of transportation for its products from their point of
origin to their destination. The choice typically involves a tradeoff between time and
money. The text provides an example of how the choice of a particular
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Channels of Distribution
• Firms must also determine how best to manage the distribution channels used to
merchandise the firms’ products in the markets they serve. A distribution channel can
consist of many parts: the manufacturer or creator of the product; a wholesaler, who
buys products and services from the manufacturer and then resells them to retailers;
• International marketing managers must find the optimal distribution channel for the
firm, taking into account the firm’s strengths, weaknesses, opportunities, and threats
in each of the markets it serves. Most firms use a variety of channels.
• A firm’s distribution strategy may also be an important component of its promotion
strategy. The text provides examples of how several firms have incorporated
distribution into their promotions strategy.
CHAPTER REVIEW
1. What are the basic factors involved in deciding whether to use standardization or
customization?
A firm following a policy of standardization simply markets its products the same way
2. How do legal, cultural, and economic factors influence product policy?
Legal, cultural, and economic factors influence product policy in numerous ways. In some
3. Why are brand names an important marketing tool for international business?
4. What are the three basic pricing policies?
The three basic pricing strategies are standard pricing, two-tiered pricing, and market
pricing. Firms following a standard pricing policy charge the same price for their products
5. What are the problems that a firm using market pricing might encounter?
A firm using market pricing may damage its brand name if a product is sold as a premium
product in one market, but as an economy product in another market. A firm using market
6. What are some of the fundamental issues that must be addressed in international
advertising?
7. What is a distribution channel? What options does an international firm have in developing
its channels?
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QUESTIONS FOR DISCUSSION
1. What are the similarities and differences between domestic and international marketing?
2. Identify several products you think could be marketed in a variety of foreign markets with
little customization. Identify other products that would clearly require customization.
Students, depending on how they define “some” and “little” will probably find it easier to
identify products that would require some customization when sold in foreign countries, as
3. How do legal, cultural, and economic factors in your home country affect product policy for
foreign firms?
For most students, the home country will probably be the United States. They will probably
be able to identify several ways legal, cultural, and economic factors in the United States
affect product policy for foreign firms. For example, many students may suggest that the
4. What are the pros and cons of trying to use a single brand name in different markets, as
opposed to creating unique brand names for various markets?
A standardized brand name offers a firm several benefits. First, firms using a single brand
5. What are the advantages and disadvantages of each pricing policy? Why do most
international firms use market pricing?
The three types of pricing policy are standard pricing, two-tiered pricing, and market pricing.
Standard pricing offers firms the convenience of charging the same price for its goods and
services regardless of where they are sold. However, because it does not recognize
6. The ethnocentric approach and the geocentric approach both suggest standardization of the
marketing mix. What is the difference between these two approaches, if both lead to
standardization?
The ethnocentric approach to marketing involves using the same marketing mix as is used
at home. It enables a firm to avoid the costs of developing new marketing techniques to
7. What are some basic differences you might expect to see in TV ads broadcast in France,
Japan, Saudi Arabia, and the United States?
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TV ads for U.S. products broadcast in France and Japan might emphasize the U.S. origins
BUILDING GLOBAL SKILLS
Essence of the exercise
This exercise asks students to develop a marketing plan for Ajax Alarms, a mid-sized U.S.
company that sells alarm clocks.
Answers to the follow-up questions:
There are no specific follow-up questions to this exercise, rather each student or group of
students is asked to devise a marketing plan for Ajax Alarms. The company currently markets
and distributes Korean-made clocks throughout the U.S. and Canada, but wants to expand its
operations to include Mexico.
CLOSING CASE
A Call for Progress
The closing case describes the cell phone market and marketing strategies employed by
companies in developing countries. The case discusses Millicom International Cellular, Nokia,
and Ericsson, and references operations in India, China, and Bangladesh.
Key Points
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• Changes in communications technology and the cell phone have had a dramatic
impact on business and economic progress throughout the developing world.
Case Questions
1. Identify and describe the roles of product policy, pricing, promotion, and distribution
in the cell phone market in developed countries.
All Ps of the marketing mix play a role in marketing cell phones in the developed
2. Identify and describe the roles of product policy, pricing, promotion, and distribution
in emerging markets.
All Ps of the marketing mix play a role in these markets. The product is tailored to
3. What are the relative opportunities for standardization and customization in the cell
phone industry?
4. What are the roles of legal forces and cultural influences in the cell phone industry?
Businesses in the cell phone industry (cell phone manufacturers or service providers)
would be assuming large risks if they did not realize that many legal forces will affect