Topic 1 The rationale for international marketing Learning objectives • identify underlying concepts of international marketing • explain the beneficial role of international marketing in firms’ overall marketing activity • assess the driving and restraining forces for international marketing • recognise the various approaches being adopted • explain the position and interests of individual countries such as Australia and New Zealand in international trade Introduction No “one size fits all” approach in international marketing Global versus local approach Asia-Pacific region is dominated by exporters who are: • Indigenous small and medium-scale exporters (SMEs) • Local subsidiaries of transnational firms What is globalisation? Globalisation is the process by which firms operate on a global basis, organising their structure, capabilities, resources, and people in such a way as to address the world as one market Globalisation The world is becoming increasingly globally linked in terms of: • Production • Technology • Capital • People • Information • Business Global strategy Company competes on the basis of its entire combination of competencies, infrastructure and products in all its markets rather than on a country-by-country basis Requires integration of activities and communication between managers in different countries • Serve the world as one market • Maximise the capabilities and advantages of individual countries • Organise the firm’s operations, organisational structure, capabilities, people, and resources • Strategic decisions – technology, people and alliance partners – no nationality bias • Global competitive advantage 7 Stakeholders of the international firm The new international marketing environment What has been driving the change? • Communications revolution • Dynamic international trading scene • Increasing role of multi-stakeholders’ interests • Holistic marketing and corporate social responsibility Communications revolution Power of information in decision making • Enhanced access to international data • Diminishing role of traditional communication forms • Diverse impact of technology on firms and consumers Dynamic international trading scene World Trade Organization (WTO) and disillusionment Increased emphasis on bilateral trade agreements Influence of trading blocs Focus on stakeholders as well as shareholders Beyond shareholder interests —a new paradigm New focus for firms on diverse stakeholders, who can influence firms through: • Withdrawal of support • Damage to firm’s image or reputation Holistic marketing Relationship marketing Integrated marketing Internal marketing Social responsibility marketing International corporate social responsibility • Product use: focus on the contribution of products to assisting in wellbeing and quality of life • Business practice: focus on good governance and environmental sensitivity • Distribution of profits: equitably and with a just return to the host community What is international marketing? International marketing is the process of planning and undertaking transactions across national boundaries that involve exchange of value Driving forces in international marketing Market needs Technology Cost Government Communications Standardisation vs. Adaptation: An introduction Restraining forces in international marketing Political systems Legal requirements Cultural norms Economic development Restraining forces in international marketing (cont.) • Controls over entry and access to markets • Actual or perceived risk • Commercial • Cross-cultural • Country • Financial • Myopia 19 Risks in international marketing Drivers of growth in the international economy: Summary • Change in management orientation • International monetary framework • World trading system • Communications and transport • Technology Drivers of growth in the international economy (cont.) Management orientations • Ethnocentric orientation: the approach in the home country should be applied in every country • Polycentric orientation: each country is different and should develop its own unique marketing approach • Regiocentric orientation: views the region as the market and develops region-based strategies • Geocentric orientation: views the world as the market with the flexibility to respond to local needs and wants Drivers of growth in the international economy (cont.) International monetary framework • Increased liquidity to facilitate the trade of goods and services across economies • Cessation of fixed exchange rates from 1969 World trading system • Since 1945 there have been a succession of international trade agreements • Rise of regional trade groups Drivers of growth in the international economy (cont.) Communications and transport • Time and costs involved in transporting goods have fallen significantly over time • Improved communications and data exchange have increased efficiencies in international trade Technology • Easier to gather, analyse and disseminate information • Rise of the ‘marketspace’ Motivations for international marketing Reasons for undertaking international marketing can be proactive or reactive, internal or external Leads to four possible reason combinations: • Proactive internal • Reactive internal • Proactive external • Reactive external Internal rationales Proactive – internal • Management desire • Unique offering • Utilise excess capacity • Size of domestic market • Stagnant or declining domestic market Reactive – internal • Diversification risk • Reduce problems of seasonality External rationales Proactive – external • Opportunities in foreign markets • Other sources of stimulus e.g., government grants Reactive – external • Unsolicited order or approach International marketing approaches: Summary • From domestic to transnational • From indirect exporting to foreign direct investment • From an export focus to a holistic focus Approaches to international marketing (cont.) From domestic to transnational • First stage in the firm exploring opportunities outside the home country • Domestic orientation – export to overseas agent • Move to international marketing – commit resources to overseas market • Take multinational stance – adapt for the market • Move to global marketing – provide competitive global offering leveraging global assets From indirect exporting to FDI • Use Australian agent • Export to overseas intermediary • Set up a sales office overseas • Arrange for an overseas firm to manufacture under license • FDI in overseas market to avoid import restrictions, for example Approaches to international marketing (cont.) From export to holistic focus • Import through Australian agent • Import direct • Establish overseas buying office • Manufacture the foreign product in Australia under license • Overseas firm sets up factory in Australia Approaches to international marketing (cont.) Concepts underlying international marketing: Summary • Comparative advantage • Product lifecycle extension • Internalisation • Relationships and networks International marketing concepts: Comparative advantage The theory of comparative advantage says that countries should focus on what they do well rather than trying to produce everything By specialising in the production of the good in which the country has lower comparative disadvantage, and importing other goods, the total goods available will increase http://youtu.be/FpTBjRf8lGs International marketing concepts: PLC extension • Different economies at different stages will provide new growth markets for mature products • Product trade cycle refers to the lifecycle of the market and assumes that a product will originate in an advanced country, trickle down to developing countries and then to less developed countries in a waterfall effect 35 International trade cycle International marketing concepts: Internalisation • Internalisation refers to the extent to which firms retain control over their product in the international market by keeping activities in-house or relinquish control, for example, through the use of agents • The greater the internalisation the greater the cost Problems which may be reduced by internalisation • Management of the relationship with the overseas government • Control over purchases and conditions of sale • Consistency in the volume and content of promotional activities • Control over marketing outlets • Integration of activities in the overseas country with activities in third country markets as well as the home country Problems which may be reduced by internalisation (cont.) • Search and negotiating costs • Protection of the firm’s reputation • Costs of contracts being broken • Buyer uncertainty as to quality and maintenance of quality International marketing concepts: Relationships and Networks • Relationships and networks have an equal, and often greater, impact on international marketing success than the product and financial aspects of the offering • Linking into local networks increases the effectiveness of international marketing • Influence of Asian firms on networking in international trade • Network membership can reduce risk The wheel of international marketing model components • Hub consists of the marketing mix variables of product, price, place and promotion • Spokes are the interactions between the firm and foreign environment including political/legal, economic, financial, social/cultural, technological, geographical and infrastructure factors • Rim represents the modifications required to interact in foreign environment The wheel of international marketing Importance of World Trade •Global linkages and growth of international trade •Commercial relationships and diplomacy •Changing composition of international tradeservices growth • Global companies—produce for the world market and production occurs where it can be done cheapest • Transnational companies (multinationals)—produce goods and services or manage investments in more than one country and blend the market-specific approach with standardised production methods • Multi-domestic companies—aim for maximum local responsiveness, but are willing to customise both their product offering and market strategy to different local conditions The dilemma of definition • The trading environment generally comprises a country’s imports, exports, services trade and major trading partners. o The trading environment is usually viewed from the perspective of the country in which one is located. o These activities provide an overview of a country’s position in the international trading environment. The trading environment Australia’s trading environment: export activity 2015 exports worth A$316 billion Main export partners: • China, Japan, USA, Republic of Korea, Singapore, New Zealand, UK, Thailand, Malaysia and Germany Main exports: • minerals, energy products, travel, beef, wheat http://dfat.gov.au/about-us/publications/Pages/composition-of-trade.aspx Australia’s trading environment: import activity 2015 imports worth A$353 billion Major suppliers: China, USA, Japan, Singapore, Germany, UK, Thailand, and New Zealand Main imports – fuel, automobiles, medicine, IT Australia’s trading environment: service sector Service exports rose 10% to A$66.2 billion in 2015 Imports increased by 8.4% to A$76.3 billion in 2015 Increasing in relative importance Main service exports: travel, international education, business services, freight Main imports: travel, IT, freight Australia’s trading environment: Australia-Asia trade Historical affinity with for Europe and USA decreasing in importance relative to Asia Drive to expand and strengthen links with Asian countries Importance for Australia Australia recorded a trade deficit of A$36.2 billion in 2015, a rise of $26.3 billion on the deficit of $9.8 billion in 2014 Exports to more than 200 countries Exports generate >20% of Australia’s GDP. Both exports and imports create employment: •one in five Australian jobs is related to trade Australia’s total trade with China in 2015 was A$155.5 billion. China was Australia’s largest two-way trading partner, our largest export market and biggest source of imports. The impact of internet on international marketing The power of the internet leads to questions about the fundamental nature of international marketing including: • Barriers to internationalisation • Incremental internationalisation • Need for overseas intermediaries • Country screening Digital Marketing Top 10 Internet penetration worldwide Quick adoption of new technology Mobile internet 43% have internet phones 30% of those use it regularly Bandwidth Availability Bill shock Importance for students Opportunities for: • challenging and interesting careers • higher salaries • international travel The dilemma of definition • Global companies- produce for the world market and production occurs where it can be done cheapest • Transnational companies (multinationals)- produce goods and services or manage investments in more than one country and blend the marketspecific approach with standardised production methods • Multi-domestic companies- aim for maximum local responsiveness, but are willing to customise both their product offering and market strategy to different local conditions Summary • Introduced reasons for undertaking international marketing • Described the dynamics of the international business environment • Examined rationale for international marketing • Explored approaches to international marketing Next Week Lecture: International Legal/Political Environment Readings: Chapter 2 Fletcher & Crawford 2017 See Interact
Drivers of International Marketing
Due date: 09-Aug-2017
Return date: 30-Aug-2017
Length: 500 words
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Alternative submission method
The first assessment is designed to help ensure you have two key skills you will need throughout this subject: (1) applying theory to real world situations and (2) referencing. If you can do both these things well, many of the issues associated with preparing and producing work for this subject will be reduced. We have provided four resources for you to use to help you with Assessment One. Even if you feel very confident about your researching and referencing skills, please go to each resource before you begin the assessment as you will need to use them to complete the task.
Access the following in your Resources folder on Interact:
- Online research using Google Scholar
- Finding sources using Primo Search
- Referencing using APA style
- How to apply theory to practice
Then, select an Australian-based organisation with which you are familiar. This may be where you work, where a friend or family member works, or a well-known organisation in which you would like to work after graduation.
Using the drivers of international marketing from Topic 01 (Ch1, p.8-9), explain to the manager of this organisation why they need to expand their involvement with international marketing. Use theory and real world examples to illustrate your points.
- Market needs
- Cost – scale
This assessment develops skills in researching organisations and their environments, and applying theory to practice. It also demonstrates that you are engaging with the subject.
This criterion is about linking theory to a specific context, explaining how it relates to a product/company
|There is no or limited application to the context or case study, no examples provided||The case study or context was described and identified. The context was connected briefly to theory.||The case study or context was described and identified. The context was connected to theory with clear links.||The case study or context was described and identified and insightful evaluations were made. The context was connected to theory with clear logical links.||The case study or context was described and identified and insightful evaluations were made. The context is connected to theory with exceptional, logical and meaningful links.|
This criterion is about the application of APA referencing
|There was limited or no attempt at in-text or end of text referencing||There was an attempt to apply referencing, but style and application were inconsistent||There was consistent style, but application was not consistent with some errors||The style is consistent throughout the text and end reference list. Application was still inconsistent with some points remaining unreferenced.||Both in-text and reference list were consistent in terms of style and application of APA|
Report format is appropriate, with subheadings to show changes in topic. Fully referenced using APA 6th style. Please refer to the CSU referencing guide http://student.csu.edu.au/study/referencing-at-csu. In addition a very useful tool for you to use that demonstrates how to correctly use in text referencing and the correct way to cite the reference in your reference list can be found at https://apps.csu.edu.au/reftool/apa-6
An ideal assignment is your opinion, supported by evidence from respected/reliable sources, expressed in your own words, and fully referenced as to the source of ideas, facts and quotations. ‘In your own words’ is critical in displaying your understanding of the material, rather than being expert at copy and paste.
Use Turnitin to check that you have fully paraphrased all your material. Any Turnitin result >15% (excluding reference list) suggests that you have over used other people’s words. Revise, and resubmit your paper to Turnitin.
Any use of Wikipedia as a source for the assignment will result in an automatic zero mark, as it is not a reliable source.