Download Nature of International Marketing

QUESTIONS
1. What are the strengths and limitations of the AMA's definition of marketing as
adapted for the purpose of defining international marketing?
The strengths of the AMA's new definition of marketing are:
a) recognition of the need to integrate all 4 Ps (place being only one of the 4 Ps and not
being more important than the other 3 Ps)
b) recognition of the need to coordinate marketing activities across countries
c) recognition of marketing of intangibles (ideas and services)
d) recognition of nonprofit marketing
e) recognition of the importance of determining consumer needs before creating a
product.
One limitation of the AMA's new definition of marketing is that it overemphasizes
consumer marketing. The definition fails to recognize the importance of industrial marketing
(involving purchases made by governments, quasi-government agencies, business firms, and
nonprofit entities).
2. Distinguish among: (a) domestic marketing, (b) foreign marketing, (c)
comparative marketing, (d) international marketing, (e) multinational marketing, (f)
global marketing, and (g) world marketing.
Domestic marketing is the marketing practices within a marketer's home country.
Foreign marketing is the domestic operations within a foreign country (i.e., marketing methods
used outside the home market). Comparative marketing analytically compares two or more
countries' marketing systems to identify similarities and differences.
International marketing studies the “how” and “why” a product succeeds or fails abroad
and how marketing efforts affect the outcome. It provides a micro view of the market at the
company level.
Multinational, global, and world marketing are all the same thing. Multinational
marketing treats all countries as the world market without designating a particular country as
domestic or foreign. As such, a company engaging in multinational marketing is a corporate
citizen of the world, whereas international marketing implies the presence of a home base.
However, the subtle difference between international marketing and multinational marketing is
probably insignificant in terms of strategic implications.
3. Are domestic marketing and international marketing different only in scope but
not in nature?
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It is erroneous to state that domestic marketing and international marketing are similar in
nature but not in scope. This is not unlike stating that national marketing and local marketing,
except for the scope, are similar. International marketing is not domestic marketing on a larger
scale. Whereas domestic marketing involves one set of uncontrollable variables, international
marketing has at least two sets which interact with each other. Furthermore, the variables in
each set are not identical in terms of number, degree, or kind.
4. Explain the following criteria used to identify MNCs: (a) size, (b) structure, (c)
performance, and (d) behavior.
a) size. The term MNC implies bigness, and it is not unusual for corporate size in terms
of sales to be used as a primary requirement for judging whether or not a company is
multinational. Although most multinational corporations are large, corporate sales should not be
used as the sole criterion for multinationalism. Many large U.S. companies are very local in
nature.
b) structure. Structural requirements for the definition of MNC include the number of
countries in which the firm does business and the citizenship of corporate owners and top
managers. Examples: Tambrands does business in 135 foreign countries, and Benetton operates
5,000 stores in 79 countries. In the case of NEC, it ships its products to 145 countries. Among
NEC's 25 factories outside Japan are 7 factories in the United States which employ more than
7,000 workers.
c) performance. Definition of MNC by performance depends on such characteristics as
earnings, sales, and assets. These performance characteristics indicate the extent of the
commitment of corporate resources to foreign operations and the amount of rewards from that
commitment. The greater the commitment and reward, the greater the degree of
internationalization. One good example is Matsushita Electric Industrial which has 56 overseas
manufacturing subsidiaries in 27 countries. Matsushita's overseas factories are responsible for
almost a third of the firm's international sales. The company has regional headquarters in
Singapore for Asia, London for Europe, and New Jersey for the United States, each with its own
manufacturing, marketing, and R&D capability. Furthermore, the top executives at all three
headquarters are important board members, and most local decisions are made locally. In South
America, Matsushita's air conditioners are 100 percent locally sourced.
d) behavior. The behavior requirement as a measure of multinationalism concerns the
behavioral characteristics of top management. Thus, a company becomes more multinational as
its management thinks more internationally. Apple Computer Inc. has begun to exhibit
international orientation, and it views the United States as simply one of the marketplaces.
According to Michael H. Spindler, the company's former chief executive officer, "a global
company does not have a ... nationality. Global leaders do not think in the color of their
passport. They think in terms of where the opportunity is." One of the ways Apple has become
a global company involves the view that all R&D wisdom does not reside in Silicon Valley. As
a result, Apple has built a product development laboratory in Paris and has carried out product
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research work in Tokyo. Apple also makes an effort to achieve similar expense ratios across the
three geographic areas.
5. Distinguish among: (a) ethnocentricity, (b) polycentricity, and (c) geocentricity.
Ethnocentricity is a strong orientation toward the home country. Markets and consumers
abroad are viewed as unfamiliar and even inferior in taste, sophistication, and opportunity.
Polycentricity is the opposite of ethnocentricity. It is a strong orientation to the host
country. The attitude places emphasis on differences between markets that are caused by
variations within, such as in income, culture, laws, and politics. The assumption is that each
market is unique and consequently difficult for outsiders to understand.
Geocentricity considers the whole world rather than any particular country as the target
market. Corporate resources are allocated without regard to national frontiers, and there is no
hesitation in making direct investment abroad when warranted. Geocentric firms take the view
that while countries may differ, differences can be understood and managed. The company thus
adapts its marketing program to meet local needs within the broader framework of its total
strategy. The approach combines aspects of centralization and decentralization in a synthesis
that allows some degree of efficiency and flexibility.
Although Japanese firms have done remarkably well in marketing their products
internationally, it is debatable whether they are ethnocentric or geocentric. Being proud of their
racial purity while viewing ethnic diversity as a weakness, Japanese politicians have from time
to time made outrageous comments about women, other Asians, and Americans in general and
certain minority groups in the United States in particular. Nevertheless, they have been quick
and skillful enough to repair the damage. Apparently, being ethnocentric does not seem to
adversely affect Japan’s trade performance.
6. What are the benefits of international marketing?
The benefits of international marketing are many. First, it can help a nation survive by
trading its resources for what it lacks. Second, it provides a means for growth as many overseas
markets often grow at a faster rate. Third, those foreign markets can provide more sales and
profits. Fourth, international marketing is a reasonable route for risk diversification. Fifth,
international marketing keeps prices relatively stable and moderates the inflation rate. Sixth, it
generates more employment. Seventh, it promotes the higher standards of living. Finally,
international marketing provides insights for the understanding of the marketing process.
One example of growth opportunity is Whirlpool's international efforts (see “Whirlpool
Goes Off on a World Tour,” Business Week, 3 June 1991, 98, 100). Only 14 percent of European
households have clothes dryers, and 19 percent own dishwashers. The ownership rate is
practically zero in Eastern Europe. The next 10 years should witness an increase in appliance
sales of 4 percent annually in Europe but only 2 percent in the United States.
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According to a survey conducted by Ernst & Young, in the late 1980s, 53 percent of U.S.
electronics companies were strictly North American domestic operations in the sense that these
companies felt that the United States was their only important market (see “More U.S.
Technology Firms Are Looking Overseas for Business Opportunities,” San Jose Mercury News,
31 March 1993). By 1993, the figure dropped to 17 percent. It is expected that the figure will
drop further to 9 percent by the late 1990s.
DISCUSSION ASSIGNMENTS AND MINICASES
1. Before becoming IBM’s chairman and chief executive officer, Louis V. Gerstner,
Jr. was a vice-chairman of American Express. While at American Express, he stated that
“the split between international and domestic is very artificial--and at times dangerous.”
Do you agree with the statement? Offer your rationale.
One good way of covering this assignment is to relate it to ethnocentricity, polycentricity,
and geocentricity. It is conceivable that Americans are more likely than others to make a
distinction between the international and domestic dimensions. This of course is an indication of
ethnocentricity. Citizens and corporations of many countries however do not see any need to
make this split. To them, international business is a natural occurrence. International marketing
complements domestic marketing, one being the natural extension of the other. As such, smart
marketers look at domestic marketing and international marketing as being highly interrelated-both of which they must encounter everyday in conducting business. It is thus dangerous to
believe that there is a certain point which domestic marketing ends and international marketing
starts.
2. Do you feel that marketing is relevant to and should be used locally as well as
internationally by: (a) international agencies (e.g., the United Nations); (b) national, state,
and/or city governments; (c) socialist/communist countries; (d) LDCs, and (e) priests,
monks, churches, and/or evangelists?
Marketing is universal and thus can be and should be used in each of the following cases:
a) international agencies such as the United Nations have used international marketing to
promote such ideas as breast feeding, birth control, and fight against hunger.
b) national, state, and city governments have long used marketing to lure tourists and
investment. To attract foreign investment, American recruiters have exploited the stereotypes
that many foreigners have about certain states or regions. To give lasting impressions with
foreign executives, the city of Atlanta has used peanuts and peaches while hiring models to
impersonate characters from Gone with the Wind. Tennessee officials learned from their trip to
Japan in the 1970s that all that Japanese executives knew about Tennessee was Jack Daniel’s, the
Tennessee Waltz, and country music. As a result, while hosting receptions in Tokyo, state
representatives served Jack Daniel’s and taught their Japanese guests how to dance to the
Tennessee Waltz. Now when the Japanese visit Tennessee, the recruiters take them to the Grand
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Ole Opry in Nashville and give dulcimers as gifts. (See “The Boom Belt,” Business Week, 27
September 1993, 98ff.)
c) socialist/communist countries such as China and the Commonwealth of Independent
States have begun to carefully embrace marketing due to the recognition of the important role
which marketing plays in modernizing their economies. Marketing is being adopted in order to
increase efficiency and generate innovations.
d) LDCs likewise need marketing in order to improve the standard of living. Marketing
is necessary in expanding exports and improving market efficiencies domestically.
e) nonprofit and religious entities, knowingly or not, have used marketing, domestically
as well as internationally, long before the highly publicized use of TV by TV evangelists to raise
money. Jimmy Swaggart's religious TV programs were shown in a number of countries. It must
be pointed out that religious figures everywhere have almost always promoted their ideas and
sought donations. While many well-known U.S. religious figures rely on the high-tech way of
raising funds, temples and churches in many countries employ traditional marketing techniques
to attract donations. Well-known religious persons or those associated with mystic power are
likely to be able to attract large sums of donations for their temples or churches. The use of
marketing for religious purpose is thus nothing new. As a matter of fact, the exportation and
promotion of religions in a foreign land were and are a mission of many religious entities.
3. Some of the best-known business schools in the United States want to emphasize
discipline-based courses and eliminate international courses, based on the rationale that
marketing and management principles are applicable everywhere. Is there a need to study
international marketing? Discuss the pros and cons of the discipline-based approach as
compared to the international approach.
This assignment is challenging in two aspects--whether it is desirable to split domestic
from international and whether a certain educational approach is geocentric or ethnocentric. The
subject matter covered here is highly related to the first assignment.
Several well-known business schools see no need to offer international courses, with the
rationale that the basic disciplines and principles of marketing, management, and so on are
universal. As such, they argue that marketing is marketing, and there should be nothing which is
domestic or international about it. The discipline-based approach may appear to be appropriate
on this count.
However, the above assessment is incomplete. Although one probably should not say
that certain marketing methods are domestic or international, it still does not mean that the
international dimension should be neglected. The shortfall with the discipline-based approach is
that the disciplined-based courses as designed and taught in American business schools at the
present time are ethnocentric. As a rule, such courses only consider the U.S. perspective. As
commented by Thorelli, "to the extent that what we teach is U.S.-oriented, it's literally specious,
lacking in external validity." Apparently, business schools need to take on a greater
responsibility in internationalizing the teaching and research carried out in their programs. (See
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Hans B. Thorelli, "Internationalizing the Marketing Curriculum Calls for an Entirely New
Philosophy of Teaching Marketing," Marketing Educator 2 (Fall 1983): 1-5.)
It is not sound to state that U.S. marketing is marketing and to also hold as true the
opposite. In actual truth and practice, they are not one and the same. As explained by Lyman
W. Porter and Lawrence E. McKibbin (Management Education and Development: Drift or
Thrust into the 21st Century?, New York: McGraw-Hill, 1988, 320), “America's future
managers need to understand the degree to which U.S. methods are unique rather than universal
and the related ethnocentric character of their own attitudes ..... The question, then, is whether
American business school graduates can afford to continue to be as parochial--as culturally and
internationally naive--as they have been in the past. We doubt it.”
4. Do MNCs provide social and economic benefits? Should they be outlawed?
MNCs definitely should not be outlawed. They provide social and economic benefits.
With scarce resources distributed unevenly around the world, MNCs provide a quick and
productive means to effectively utilize such resources to produce goods and services. MNCs
thus maintain economic balance and economic order while creating jobs. In addition, MNCs are
willing to perform business functions in any locations that offer them the greatest degree of cost
effectiveness, and their activities have thus integrated national economies. As such, their
strategies have fostered worldwide economic integration even in the absence of formal
agreements among governments in the area of economic cooperation.
5. According to Dan Okimoto, a professor of political science at Stanford
University, “universities in the twenty-first century will have to be international
universities serving a collective good, not simply a national good.” Traditionally, American
universities have served their international customers by simply admitting them to study in
the United States.
Nowadays, no longer content to let foreign students and managers come to them,
several American universities are going to their customers instead. The University of
Rochester’s Simon Graduate School, in conjunction with Erasmus University in
Rotterdam, offers an executive MBA program. Tulane University’s Freeman School of
business has a joint program with National Taiwan University. The University of
Michigan has set up a program in Hong Kong for Cathay Pacific Airways managers. The
University of Chicago's Graduate School of Business has transplanted its executive MBA
program to Barcelona.
Discuss the merits and potential problems of American business schools offering
their graduate programs in a foreign land.
This minicase should make it clear to students that college education is not immune to
the force of globalization. Unlike European universities that have always been active in
international education, American universities were once quite passive since they simply let
foreign students come to them. More recently, U.S. colleges have begun to be more active in
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recruiting international students. Education, just like tangible goods, can be exported and
perhaps even produced abroad for local consumption.
Like the two-year Rhodes Scholarship program that recruits about 100 high-achieving
students from 18 English-speaking countries to study at Oxford, Stanford University wants to
become the Oxford of the Pacific Rim. Stanford has designed a highly selective scholarship
program to nurture Asia’s next generation of leaders. The program has an endowment of $7
million, more than $5 million coming from a Hong Kong multimillionaire. Stanford’s goal is to
become America’s pre-eminent institution in the 21st century for the Pacific Rim.
The case of The University of Chicago is an interesting one. By setting up a facility in
Europe, the business school has acted in the manner like an American firm setting up a European
subsidiary. In order to pick the best location for its overseas venture, the University employed
two consulting firms to do marketing research. The firms interviewed executives at nearly 180
European companies. Barcelona was finally chosen because of its easy airport access and also
because it is an attractive city to visit.
Chicago expects to benefit from its European program in more way than one. One
benefit is a great deal of cross-fertilization. Professors who teach in Barcelona are expected to
research international business problems. Their European experiences should subsequently
benefit their home classrooms. (See B-Schools Bitten by the Global Bug,” Business Week, 25
October 1993, 106.)
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