Chapter 1

INTRODUCTION TO
INTERNATIONAL
BUSINESS/MARKETING
 The importance of studying
IB/IM

Marketing Concepts, Principles & Importance

Awareness of global marketing & issues

Understanding business environments

Understanding the interdependence of business

forces
Local employment in management, Career in

international organizations
 Chapter Objectives
 Understanding the dramatic internationalization of markets.
 Understand the various names given to firms that have
substantial operations in more than one country.
 Understanding the effect of the Internet on many international
business firms.
 Understanding the drivers that are leading international firms
to the globalization of their operations.
 Comprehend why international business differs from
domestic business.
 Describe the three environments--domestic, foreign, and
international-- in which an international company operates.
 Marketing Concepts, Principles &
Importance
 Marketing is series of activities leading to an exchange
transaction between a seller and a buyer at a profit. It
centers on an organization's efforts to satisfy customer
wants and needs with products and services that offer
competitive value
 Global Marketing differs from Local marketing interms
of its scope of activities and it involves understanding of
specific concepts, considerations and applying skillful
strategies to ensure success in Global markets
 Marketing Concepts, Principles,
Importance & Orientations
 Marketing Mix (Product, Price, Place &
Promotion) are marketer’s primary tools for
marketing activities
 Other P’s like People, Process, Physical
Evidence (packing) & Probe (Research) were
added to give Customer – Value, Differential
advantage over competitor by Focusing or
concentrating resources and efforts on customer
needs and wants
 History of international Business
• International business as a business
practice began as early as:
• 1600 British East India Company
• shipping routes to the east opened by
Dutch Companies in 1590
• American colonial traders of the 1700's
• Singer Sewing Machine 1868 (Scotland)
Discussion 1

Mention Some Reasons Why Going

International Is Important For a
Country’s National Economy
Discussion 2

Mention Some Reasons Why The

US/Indian Policy Was Too Careful in
The Globalization Process
 Need & Importance of
International Marketing
 To take advantage of Opportunities for growth and
Expansion & To survive – to avoid being pushed by
Global competitors from the domestic markets.
 Other Driving Forces: Market needs and wants,
Technology advances, Pressure to cut costs,
 Pressure to Improve quality, Improvement in
communication & Transportation technology,
 global economic growth, Culture, Free markets,
Economic Integration, Peace, Management vision,
Strategy & Action and opportunities for leverage
Difference between International
Marketing & domestic Marketing
 Tendency from Local to Exports – Comparative
Advantage, Cost & Scale of Production
 Large Margin, Size & Big market
 Market Research, Long-term Planning
 DTC, Door-to-Door, Wholesale/Retail Market
 Lengthy process, International Restrictions/Trade
Barriers/Legal
 Economics –Forex, BOT/BOP
 Technology &
 Culture -Westernization
 Definitions
 International Business
 is a business whose activities are carried
out across national borders. Includes
international trade, foreign manufacturing,
transportation, tourism, advertising,
construction, retailing, wholesaling, and
mass communication.
 Definitions (cont.)
 A Multinational Company
 has multicountry affiliates, each of which
formulates its own business strategy based on
perceived market differences.

 A Global Company
 attempts to standardize and integrate
operations worldwide in all functional areas.
 International Business
Terminologies
 The United Nations uses transnational
instead of multinational to describe a firm
doing business in more than one country.
 Business people define a transnational as a
company formed by a merger of two firms
of approximately the same size that are
from two different countries.
 International Business
Terminology
 Four of the largest transnationals
 Unilever (Dutch-English, food)
 Shell (Dutch-English, oil)
 Pharmacia & Upjohn (Swedish-American,
pharmaceuticals)
 ABB (Swedish-Swiss, electrotechnical, power
generating)
 Managerial Behavior Models
 In international business, an
international manager can apply any of
the following to a concept or a technique
employed in domestic operations.
 Transfer it intact (ethnocentrism)
 Adapt it to local conditions (polycentrism)
 Not use it overseas
(geocentrism/regiocentrism)
 TERMINOLOGIES:
MANAGERIAL ATTITUDES
• Ethnocentrism:
preference for putting home-country people in key
positions everywhere in the world rewarding them more
handsomely for work.
Considers Home Country as Superior & sees similarities in
foreign countries
• Polycentrism:
the attitude that cultures of various countries are quite
dissimilar; it is the belief that the natives would perform
better than the people from the parent company. Each
host country is unique, sees differences in foreign
countries
 TERMINOLOGIES:
MANAGERIAL ATTITUDES (CONT.)
 Geocentrism/Regiocentrism:
the attitude of integrating diverse regions
through a global systems approach to
decision making. The best place of
production, distribution and management is
chosen. World view; sees similarities and
differences in home and host countries.
Regiocentrism used for countries included in
North American Free Trade Agreement
(NAFTA) – the US, Canada & Mexico
 Globalization
 Globalization is a process of developing an
integral market for the global customers. It is
the ultimate stage in the growth of business and
world is considered as potential market.
 Globalization must be taken for granted. There
will be only one standard for corporate success
‘International market share’. The winning
corporations will win by finding markets all over
the world.
 Forces behind Globalization

• Political forces
• Reduction of barriers to trade

• The end of cold war, Cooperation of International Agencies,

• Unification of the global community, Economic Cooperation &

Liberalization, Support of Govt.

• Technological forces
• Cheaper Air and water transportation

• computers and communications

• Market factors – Integration of markets

• Cost factors -Large Scale operation/production
• Competitive forces, MNC’s,
• Movement of Capital and Labour
 Why Globalization?
 Economic Growth & Foreign Exchange
 Relative Profitability – Management of
Capital and common pool of resources
 Survival in competitive Environment
through use of production facilities
 Less Business/Credit/Control Risk
 Technology growth & Common Strategy
 Stages of Globalization
 Exporting through Local Dealer/Agent
 Direct Export
 Establishing Production & Marketing operations in
foreign countries
 Becoming ‘Insider’ in other countries by having its
own R & D, HR etc like Coke, Levers
 Having Joint Ventures, M & A’s, Licensing and
franchising and Strategic Alliances
 Global Marketing Strategy
 Through:
 Brand Name – Coke, Philip Morris,
DaimlerChrysler
 Product Design –McDonald’s, Toyota, Ford
 Product Positioning-Unilever, Harley-Davidson
 Packaging -Gillette
 Distribution - Benetton
 Customer Service -Caterpillar
 Sourcing –Toyota, Honda
QUIZ
 When greeting a person in France, should
you address the person by their first name or
last name?
 Are flowers considered a good gift for a
hostess in Germany?
 Is it polite to inquire about the family in Saudi
Arabia?
 In Sweden, if you are invited to a business
dinner, should the spouse accompany you?
 Explosive Growth
 Foreign Direct Investment
 World stock of FDI rose from $519 billion in
1980 to $4.117 trillion in 1998.
 The United States, the nation with the
highest sales of companies in 1999, was
replaced by the United Kingdom as the
largest acquirer of foreign companies.
Number of International
Companies
 In 1998, only 23 nations had gross national
products greater than the total annual sales
of General Motors, the world’s largest
international company.
 Also in 1998, the total amount of money
spent in Wal-Mart worldwide was greater
than the sum of the GNPs of over 100
nations.
Diminishing of American
Dominance?
Fortune List of Top 100 Industrial
Firms in the World According to Sales
Country 1980 1996 1999
United States 45 32 35
Western Europe 42 38 45
Japan 8 23 20
 The 18 Guiding Principles of
Marketing Company
 The Principle of the Co – Marketing is a Strategic
Business concept
 The Principle of the Community-Marketing is Everyone’s
business
 The Principle of Competition- Marketing War is about
Value War
 The Principle of Retention – Concentrate on Loyalty, Not
just on satisfaction
 The Principle of Integration – Concentrate on
differences, not just on averages
 The Principle of Anticipation – concentrate on
Proactively, not just on reactivity
 The 18 Guiding Principles of
Marketing Company contd..
 The Principle of Brand – Avoid the commodity like Trap
 The Principle of Service- Avoid the Business –Category
Trap
 The Principle of Process – Avoid the function –
Orientation trap
 The Principle of Segmentation – view ur market
creatively
 The Principle of Positioning – Lead your customers
credibly
 The Principle of Targeting – Allocate Your Resources
Effectively
 The 18 Guiding Principles of
Marketing Company contd..
 The Principle of Differentiation –Integrate your content,
context and Infrastructure
 The Principle of Marketing Mix – Integrate Your offer,
logistics and communications
 The Principle of selling – Integrate your company,
customers and relationships
 The Principle of totality – balance your strategy, tactic
and value
 The Principle of Agility – balance your what, why and
How
 The Principle of utility – balance your present, future
and gap
 The Anatomy of Marketing
 STV Model
 Marketing Strategy – How to Win the Mind
Share of consumers by Segmentation,
Positioning, Targeting
 Marketing Tactic – How to win the market share
by Differentiation, Selling & Marketing Mix
 Marketing Value - How to Win the Heart Share
of target markets by Brand, Process and Service
Discussion 3
Why is International Business
is more Complex than
Domestic Business?
International Business Environment

 International business transactions take

place across national borders and may
involve three environments.
 Domestic
 Foreign
 International
1-12 Table 1.3-I
Business Environments (3-
DIMENSIONAL)

Domestic Factors Foreign Factors

International Factors
 Domestic Environment
 Composed of all the uncontrollable forces
originating in the home country that
surrounds and influences the life and
development of the firm.
 Foreign Environment
 Operates differently than the domestic
environment for the following reasons
 Different force values
 Changes difficult to assess
 Forces interrelated
International Environment
 The International Environment is
 the interaction between the domestic
environmental forces and the foreign
environmental forces.
 the interaction between the foreign
environmental forces of two countries
when an affiliate in one country does
business with customers in another.
 Forces in the Environment
 Environment
 The sum of all forces surrounding and
influencing the life and development of
the firm.
 Forces can be classified as external or
internal.
 External forces are uncontrollable
 Internal forces are controllable
Internal Environmental Forces
 Factors of production
 Capital, raw material, and people
 Activities of the organization
 Personnel, finance, production, and
marketing
External Environmental Forces
 Competitive  Physical
 Distributive  Political
 Economic  Sociocultural
 Socioeconomic  Labor
 Financial  Technological
 Legal
Discussion 4
What is the Impact of
Economy, Social, Culture,
Political, Legal & Regulatory
Environment on International
Marketing/Global Business?
ENVIRONMENTAL
FORCES INFLUENCES
MARKETING DECISIONS
 Economic Forces
 Political, Legal, and Regulatory Forces
 Technological Forces
 Sociocultural Forces
 Competitive Forces
 For Marketing Mix – All P’s
Economic Environment – The World
Economy – An Overview
 Capital Movement over Trade as driving
force
 Severance of Production from employment
 Supremacy of world economy over
national economies
 Growth of e-commerce diminishing
national barriers
Economic Environment –Economic
Allocation system
 Market Allocation system (Capitalist) –Based on
People need and want or goods of customers choice
–Triad countries – US, EU & Japan
 Command Allocation system (Socialist) – Command
or Central plan allocation – economies of shortages –
Cuba, Vietnam & Laos
 Mixed System –No pure market or command
allocation – India etc
 Basis of Degree of Economy Freedom – Free (HK,
S’pore, UK), Mostly Free (Canada, UAE), Mostly
unfree (China) & Repressed (Iraq, N. Korea)
 Economic Environment – Stages of
Market Development – Based on Per
Capita Income, (Income & PPP)
 High Income Countries >$9656 –US/EU
 Upper-Middle Income Countries >$3126
but<$9655 -Malaysia
 Lower Middle Income countries >$785 but
<$3125 - Indonesia
 Low Income countries <$785 – India
 Basket Cases –Dangerous areas with socio-eco-
political problems like Ethiopia, Mozambique,
Iraq, Afghanistan
 Economic Environment –Marketing &
Economic Development
 Strategy based on Country to Country
 Economic Risk-1997 South East Asian Currency Crisis
 Balance of Trade/Payments
 Trade Patterns – Merchandise Trade, Services Trade
 International Trade Alliances –Degree of Economic
Cooperation through:
 Free Trade Area, Customs Union, Common Market &
Economic Union
 The World Trade Organization and GATT
 Regional Economic Organizations- EU, NAFTA, ASEAN,
SAARC etc
Social and Cultural Environment
 What is a Culture? “A Society’s programming
of the mind”
 Basic aspects of Society and Culture –one
generation to next
 The search for Cultural Universals:-
 The Anthropologist’s Standpoint
 High-and Low-context cultures
 Communication and Negotiation
 Social Behaviour –Intercultural socialization
Social and Cultural Environment-
contd..
 Analytical approaches to cultural Factors:
 Maslow’s Hierarchy of needs
 Hofstede’s cultural typology
 The Self-reference Criterion and Perception
 Environmental Sensitivity
 Social and Cultural Environments: Impact on
marketing Industrial products
 Social and Cultural Environments: Impact on
marketing Consumer products
 Suggested Solutions and Training in Cross-Cultural
competency
The Political, Legal and Regulatory
Environments of Global Marketing
 The Political Environment:
 Nation-states and sovereignty
 Political Risk, Taxes
 Dilution of Equity Control
 Expropriation
 International Law:
 Common Versus Code Law
The Political, Legal and Regulatory
Environments of Global Marketing
 Sidestepping Legal Problems : Important Business Issues
 Establishment of Trade
 Jurisdiction
 Intellectual property: Patents and trademarks
 Antitrust Laws
 Licensing and Trade Secrets
 Bribery and corruption: Legal and ethical issues
 Confliction Resolution, Dispute Settlement and Litigation –
Alternatives to litigation for dispute settlement
The Political, Legal and Regulatory
Environments of Global Marketing
 The Regulatory Environment
 The European Union
 The WTO and its role in International
Trade
 Ethical Issues like child labour etc
By -
Outlandish deepak
….for
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