International Marketing

433 Pages·2007·2.99 MB·English

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International Marketing
Subject: INTERNATIONAL MARKETING Credits: 4

SYLLABUS

Introduction to International Marketing
Strategic concept of Marketing, Market needs and wants, guiding principles of the Marketing Company.

Global Marketing Environment
Introduction, Economic Environment-The World economy, International Trade Theory, Legal Environment,
Social and cultural Environment.

Targeting Global Opportunities
Global market Segmentation, Targeting and global product Positioning,

Global Marketing Strategy
Entry and Expansion Strategies- Marketing and sourcing, Planning process and entry strategies, Cooperative
strategies and global strategic partnerships, Competitive analysis and strategy, Strategic Positioning and Intent,

Global Marketing Programs
Product decisions, International product strategies, Moving toward world product.

Branding
Branding and packaging decisions, marketing industrial products, International marketing of services, Basic
pricing concepts.

Advertising
Global promotion, Channels of Distribution, Physical distribution and documentation.

Suggested Readings:
1. International Marketing, Warren Keegan, Pearson Education Asia Ltd and Tsinghua University Press.
2. Strategic Planning for Export Marketing, Franklin R Root Scranton, International Textbook Co.
3. International Trade and Investment, Franklin R Root Scranton, International Textbook Co.
4. International Marketing Management, Philip Kotler Prentice-Hall International, Inc Prentice-Hall
International, Inc
5. International Marketing, Philip R Cateora and John L Graham Irwin/McGraw-Hill, Boston
6. International Marketing (Analysis and strategy): Sak Onkvisit & John J Shaw, Pearson Education Asia
Ltd and Tsinghua University Press.
7. International Marketing, Vern Terpstra and Ravi Sarathy New York Holt, Rinehart and Winston Inc
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COURSE OVERVIEW
Today the corporate world cannot survive with restricting international perspective is maintained throughout the text. The
themselves within the domestic boundaries. As the consumers objective of the problems is to enhance the student’s under-
across countries become more universal in nature, the need to standing of analytical techniques- more emphasis on policy and
look at the whole world as a market is growing. The aim of this managerial implications of International Marketing. The
unit is to introduce the students to International Marketing, module focuses on International skills required to be an
which explains how International Markets operate in an effective manager. It will develop the student’s ability to identify
International Environment. An elementary approach is used in and appreciate effective ways of getting the objective fulfilled. It
the module, which emphasizes the reasons for undertaking also develops practical applications ability and knowledge and
International Market analysis and their interpretation. An how these can be used in the decision-making process.
Reference Books
1. International Marketing: Warren Keegan
2. Strategic Planning for Export Marketing: Warnklin R. Root
3. International Trade And Investment: Framklin R. Root
4. International Marketing Management: Philip Kotler
5. International Marketing: Philip R.Cateora & John L. Graham
6. International Marketing, Analysis & Strategy: Sak Onkvisit & John J. Shaw
7. International Marketing: Vern Terpstra & Ravi Sarathy
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CONTENT L

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Unit No. Lesson No. Topic Page No. R
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Lesson 1 Introduction to International Marketing 1
Lesson 2 Introduction to International Marketing-2 9
Lesson 3 Economic Environment-The World Economy 15
Lesson 4 Economic Environment- Foreign Economies 21
Lesson 5 International Trade Theory 27
Lesson 6 Political Environment 33
Lesson 7 Legal Environment 40
Lesson 8 Social & Cultural Environment 48
Lesson 9 Business Customs in Global Marketing 57

Lesson 10 Business Ethics and Bribery 66
Tutorial A 73
Trade Distortions and Marketing Barriers 77
Case 1 : Selling U.s. Ice Cream In Korea 83
Case 2 : Unilever And Nestle-an Analysis 85
Case 3 : Nestle-the Infant Formula Incident 86
Euro Disney (A) 90
Euro Disney (B) 95
Lesson 11 Global Marketing Information Systems and Research 99

Lesson 12 International Marketing Intelligence 109
Lesson 13 Segmentation, Targeting and Positioning 119
Tutorial C : Swatch Watch U.s.a.: Creative Marketing Strategy 126
Oriflame 131
Lesson 14 Entry and Expansion Strategies: Marketing and Sourcing 140

Lesson 15 Planning Process & Entry Strategies 148
Lesson 16 Cooperative Strategies and Global Strategic Partnerships 158
Lesson 17 Competitive Analysis and Strategy 165
Lesson 18 Strategic Positioning and Intent 174
Case 1 : Metro Corporation : Technology Licensing Negotiation 178
Case 2: Ascom Hasler Mailing Systems Inc. :
Competing in the Shadow of a Giant 182
Case Study : Kodak Versus Fuji 187
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Lesson 22 Branding Decisions 218

Lesson 23 Branding and Packaging Decisions 226
Lesson 24 Marketing Industrial Products 234

Lesson 25 Nternational Marketing of Services 239
Lesson 26 Basic Pricing Concepts 247
Lesson 27 Dumping & Countertrade 255
Lesson 28 Transfer Pricing and Other Pricing Approaches 264
Lesson 29 Global Advertising 271

Lesson 30 Advertising School of Thoughts 278
Lesson 31 Global Promotion 285
Lesson 32 Channels of Distribution 292
Lesson 33 Channel Development & Adaptation 302
Lesson 34 A Guide for Developing a Marketing Plan 309
Lesson 35 Physical Distribution & Documentation 315
Lesson 36 Global E-Marketing 326

Case Study 1 : Baseball : The Japanese Game 341
Case Study 2 : Sony Corp 343
Case Study 3 : Sony in 1996 345
Case Study 4 : Enron: supplying Electric Power in India 348
Lesson 37 Sources of Financing and International Money Markets 351

Lesson 38 Negotiating with International Customers,
Partners and Regulators 361
Lesson 39 Implication of Negotiations Differences for Managers 366
Lesson 40 Leading, Organizing, and Monitoring the
Global Marketing Effort 374
Lesson 41 The Future of Global Marketing 383
Case Study : Parker Pen Co. (A) 388
Parker Pen Co. (B) 391
Parker Pen Co. (C) 394
CEAC-China 395
Nokia and the Cellular Phone Industry 408
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UNIT I
INTRODUCTION
LESSON 1: UNIT 1
INTRODUCTION TO INTERNATIONAL
MARKETING
Learning Objectives from the lesson: to stakeholder benefits. Stakeholders are individuals or groups
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1. Understanding of international marketing. who have an interest in the activity of a company. They include N
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the employees and management, customers, society, and E
2. Distinguish between international and domestic marketing. R
government, to mention only the most prominent. There is a N
3. The various management orientations. A
growing recognition that profits are a reward for performance T
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4. Why is international marketing required? (defined as satisfying customers in a socially responsible or O
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5. Benefits of international marketing. acceptable way). To compete in today’s market, it is necessary to A
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have an employee team committed to continuing innovation
We live in a global marketplace. As you read this chapter, you M
and to producing quality products. In other words, marketing A
may be sitting in a chair imported from Brazil or at a desk R
must focus on the customer in context and deliver value by K
imported from Denmark. You may have purchased these items E
creating stakeholder benefits for both customers in context and T
form IKEA, the Swedish global furniture retailer. The com- I
deliver value by creating stakeholder benefits for both customers N
puter on your desk could be a sleek new IBM ThinkPad G
and employees. This change is a revolutionary idea that is
designed and marketed worldwide by IBM and manufactured in
accepted today by a vanguard minority of marketing practitio-
Taiwan by Acer, Inc., or perhaps a Macintosh designed and
ners.
marketed worldwide by Apple and manufactured in Ireland.
Your shoes are likely to be from Italy, and the coffee you are Profitability is not forgotten in the strategic concept. Indeed, it
sipping is form Latin America or Africa. is a critical means to the end of creating stakeholder benefits.
The means of the strategic marketing concept is strategic
Marketing: A Universal Discipline
management, which integrates marketing with the other
The foundation for a successful global marketing program is a
management functions. One of the tasks of strategic manage-
sound understating of the marketing discipline. Marketing is
ment is to make a profit, which can be a source of funds for
the process of focusing the resources and objectives of an
investing in the business and for rewarding shareholders and
organization on environmental opportunities and needs. The
management. Thus, profit is still a critical objective and measure
first and most fundamental fact about marketing is that it is
of marketing success, but it is not an end in itself. The aim of
universal discipline. Marketing is a set of concepts, tools,
marketing is to create value for stakeholders and the key
theories, practices and procedures, and experience. Together,
stakeholder is the customer. If your customer can get greater
these elements constitute a teachable and learnable body of
value for stakeholders, and the key stakeholder is the customer.
knowledge. Although marketing is universal, marketing practice,
If your customer can get greater value form your competitor
of course, varies form country to country. Each person is
because your competitor is willing to accept a lower level of
unique, and each country is unique. This reality of differences
profit reward for investors and management, the customer will
means that we cannot always directly apply experience form one
choose your competitor, and you will be out of business. The
country to another. If the customers, competitors, channels of
spectacular inroads of the “ clones” into IBM’s PC market
distribution, and available media are different, it may be
illustrate that even the largest and most powerful companies can
necessary to change our marketing plan.
be challenged by competitors who are more efficient or who are
The Strategic Concept of Marketing willing to accept lower profit returns.
By the 1990s, it was clear that the “new” concept of marketing Finally, the strategic concept of marketing has shifted the focus
was outdated and that the times demanded a strategic concept of marketing form a microeconomics maximization paradigm
the strategic concept of marketing, a major evolution in the to a focus of managing strategic partnerships and positioning
history of marketing thought, shifted the focus of marketing the firm between vendors and customers in the value chain with
from the customer or the product to the customer in the the aim and purpose of creating value foe customers. This
context of the broader external environment. Knowing expanded concept of marketing was termed boundary less
everything there is to know about the customer is not enough. marketing by Jack Welch, chairperson and chief executive officer
To succeed, marketers must know the customer in a contact (CEO) of General Electric. Marketing, in addition to being a
including the competition, government policy and regulation, concept and philosophy is a set of activities and a business
and the broader economic, social, and political macro forces that process. The marketing activities are called the four Ps; product,
shape the evolution of markets. In global marketing this may price, place (distribution), and promotion (or communications).
mean working closely with home –country government trade These four Ps can be expanded to five Ps by adding probe
negotiators and other officials and industry competitors to gain (research). The marketing management process is the task of
access to a target country market. focusing the resources and objectives of the organization on
A revolutionary development in the shift to the strategic opportunities in the environment. The three basic principles
concept of marketing is in the marketing objective : from profit that underlie marketing are discussed next.
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I The Three Principles of Marketing Global Marketing: What It is and What It
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A ing, the second the completive reality of marketing, and the sound understanding of the marketing discipline. Marketing is
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A a. Customer Value And The Value Equation organization on environmental opportunities and needs. The
L M The task of marketing to create customer value that is greater first and most fundamental fact about marketing is that it is a
universal discipline. Marketing is a set of concepts, tools,
A than the value created by competitors. Expanding or improving
R theories, practices and procedures, and experience. Together
K product and / or service benefits, by reducing the price, or by a
E these elements constitute a teachable and learnable body of
T combination of these elements, can increase value for the
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competitive weapon. Knowledge of the customer combined Although the marketing discipline is universal, markets and
with innovation and creativity can lead to a total offering that customers are quite differentiated. This means that marketing
offers superior customer value. If the benefits are strong practice must vary from country to country. Each person in
enough and valued enough by customers, a company does not unique, and each country are unique. This reality of differences
need to be the low-price competitor to win customer. means that we cannot always directly apply experience form one
country to another. If the customers, competitors, channels of
b. Competitive or Differential Advantage
distribution, and available media are different, it may be
The second great principle of marketing is competitive advan-
necessary to change our marketing plan.
tage. A competitive advantage is a total offer, vis-à-vis relevant
Companies who don’t appreciate this fact will soon learn about
competition that is more attractive to customers. The advantage
it if they transfer irrelevant experience form one country or
can exist in any element of the company’s offer; the product, the
region to another. Nestle, for example, sought to transfer its
where
great success with a four – flavor coffee line from Europe to the
V= value
United States. Its U.S competitors were delighted. The transfer
B= perceived benefits – perceived costs (for example, switching led to a decline of 1 percent in U.S. market share! An important
costs) task in global marketing is learning to recognize the extent to
P= price which marketing plans and programs can be extended world-
wide, as well as the extent to which they must be adapted.
Price, the advertising and point of sale promotion, or the
distribution of the product. One of the most powerful Much of the controversy about marketing dates to professor
strategies for penetrating a new national market is to offer a Theodore Levitt’s 1983 seminal article in the Harvard Business
superior product at a lower price. The price advantage will get Review, “ The Globalization of Markets.” Professor Levitt
immediate customer attention, and, of those customers who argued that marketers were confronted with a “homogenous
purchase the product, the superior quality will make an impres- global village.” Levitt advised organizations to develop
sion. standardized, high-quality world products and market them
around the globe using standardized advertising, pricing, and
c. Focus
distribution. Some well-publicized failures by parker pen and
The third marketing principle is focus, or the concentration of
other companies seeking to follow Levitt’s advice brought his
attention. Focus is required to succeed in the task of creating
proposals into question. The business press frequently quoted
customer value at a competitive advantage. All great enterprise,
industry observers who disputed Levitt’s views. For example,
large and small, is successful because they have understood and
Carl Spielvogel, chairman and CEO of the Backer spiel Vogel
applied this great principle. IBM succeeded and became a great
Bates Worldwide advertising agency, tale The wall street Journal,
company because it was more clearly focused on customer needs
”Theodore Levitt’s comment about the world becoming
and wants than any other company in the emerging data-
homogenized is bunk. There are about two products that lend
processing industry.
themselves to global marketing—and one of them is Coca-
One of the reasons IBM found itself in crisis in the early 1990s
Cola.”
was that its competitors had become much more clearly focused
Indeed, it was global marketing that made Coke a worldwide
on customer needs and wants. Dell and Compaq, for example,
success. However, that success was not based on a total
focused on giving customers computing power at low prices;
standardization of marketing mix elements. In his book, The
IBM was offering the same computing power at higher prices.
Borderless world, kenichi Ohmae explains that Coke’s success in
A clear focus on customer needs and wants and on the competi- Japan could be achieved only by spending a great deal of time
tive offer is required to mobilize the effort needed to maintain a and money becoming an insider. That is, the company built a
differential advantage. This can be accomplished only by complete local infrastructure with its sales force and vending
focusing or concentrating resources and efforts on customer machine operations. Coke’s success in Japan, according to
needs and wants and on how to deliver a product that will meet Ohmae, was a function of its ability to achieve “global localiza-
those needs and wants. tion,” the ability to be as much of an insider as local company
nut still reaping the benefits that result form world-scale
operations.
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What does the phrase global localization really mean? In a Cisco systems, which makes local area network routers that IN
nutshell, it means a successful global marketer must have the allow computers to communicate with each other, designs new T
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ability to “think globally and act locally.” As we will see many products that can be programmed to operate under virtually any N
times in this book, “ global” marketing may include a combina- conditions in the world. A
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tion of standard (e.g., the actual product itself) and Unilever uses a teddy bear in various world markets to commu- IO
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nonstandard (e.g., distribution or packaging) approaches. A nicate the benefits of the company’s fabric softener. A
“global product” may be “ the same” product everywhere and Harley-Davidson’s motorcycles are positioned around the world L
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yet “ different.” Global marketing requires marketers to behave as the all –American bike. Gillette uses the same packaging for A
in a way that is global and local at the same time by responding its flagship sensor razor everywhere in the world. Italy’s RK
to similarities and differences in world markets. Benetton utilizes a sophisticated distribution system to quickly ET
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As the Coca-Cola Company has demonstrated, the ability to deliver the latest fashions to its worldwide network of stores. N
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think globally and act locally can be a source of competitive
The backbone of Caterpillar’s global success is a network of
advantage. By adapting sales promotion, distribution, and
dealers that supports a promise of “24 hour parts and service”
customer service efforts to local needs. Coke established such
anywhere in the world. The success of Honda and Toyota in
strong brand preference that the company claims a 78 percent
world markets was initially based on exporting cars form
share of the soft drink market in Japan. At first, Coca Cola
factories in Japan. Now, both companies have invested in
managers did not understand the Japanese distribution system.
manufacturing facilities in the United States and other countries
However, with considerable investment of time and money,
form, which they export. In 1994, Honda earned the distinction
they succeeded in establishing a sales force that was as effective
of being the number one exporter of cars form the United
in Japan is it was in the United States. To complement Coke
States by shipping more than 100,000 accords and civics to
sales, the Japanese unit has created products such as Georgia –
Japan and 35 other countries. Gap focuses its marketing effort
brand canned coffee and Lactia, a lactic, no carbonated soft drink
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that promotes healthy digestion and quick refreshment
expressly for the Japanese market. TABLE 1.1 Examples of Global Marketing
Global Marketing Company/ Home Country
Coke is a product embodying marketing mix elements that are
Strategy
both global and local in nature. In this book, we do not Brand Name Coca-Cola (U.S.), Philip Morris (U.S.), Daimler Chrysler (Germany)
McDonald’s (U.S), Toyota (Japan), Ford (U.S.), Cisco systems (U.S.)
propose that global marketing is a “knee-jerk” attempt to Product Design Unilever (Great Britain / Netherlands), Harley-Davidson (U.S)
impose a totally standardized approach to marketing around Gillette (U.S.)
Product Benetton (Italy)
the world. A central issue in global marketing is how tailors the positioning Caterpillar (U.S.)
Toyota (Japan), Honda (Japan), Gap (U.S.)
global marketing concept to fit a particular product or business.
Packaging
Finally it is necessary to understand that global marketing does Distribution
Customer service
not mean entering every country in the world. Global marketing Sourcing
does mean widening business horizons to encompass the
worlds when scanning for opportunity and threat. The decision The United States but relies on apparel factories in low-wage
to enter markets outside the home country depends on a countries to supply most of its clothing.
company’s resources, managerial mind –set, and the nature of
The particular approach to global marketing that a company
opportunity and threat. The Coca-Cola Company’s soft-drink
adopts will depend on industry conditions and its source or
products are distributed in almost 200 countries in fact, the
source or sources of competitive advantage. Should Harley
theme vice.” Coke is the best known, strongest brand in the
Davidson start manufacturing motorcycles in a low –wage
world its enviable global position has resulted in part form the
country such as Mexico or china? Will U.S. consumers continue
Coca-cola symbol is available globally, the company also
to snap up U.S. –built Toyotas? The answer to these questions
produces over 200 other nonalcoholic beverages to suit local
is “ it all depends,” because Harley’s competitive advantage is
beverage preferences.
based in part on its “made in the U.S.A.” positioning, shifting
A number of other companies have successfully pursued global production outside the united states is not advisable at this
marketing by creating strong global brands. Philip Morris, for time. Toyota’s success in the United States is partly attributable
example, has example, has made Marlboro the number one to its ability to transfer world –class-manufacturing skills to the
cigarette brand in the world. In automobiles, Daimler Chrysler united states while using advertising to stress that its Camry is
has gained global recognition for its Mercedes nameplate BMM built by American, with many components purchased in the
automobiles and motorcycles. united states.
Global marketing strategies can also be based on product or Toyota has positioned itself as a global brand independent of
system design, product positioning, packaging, distribution, any country of origin link. A Toyota wherever it is made. The
customer service, and sourcing considerations. For example, Mc same thing is true for thousands of companies that have
Donald’s has designed a restaurant system that can be set up successfully positioned their brand independent of country of
virtually anywhere in the world. Like Coca-cola, McDonald’s also origin. A Harley- Davidson motorcycle made China would
customizes its menu offerings in accordance with local eating shock Harley buyers; the brand at this stage of its development
customs. In Jakarta. Indonesia, for example, McDonald’s is is linked to a single country of origin, the United States.
upscale dinning. It is the place to be and to be seen in Jakarta.
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IN The Process of Internationalization country are superior and, therefore, can be sold everywhere
TE For certain firms, they may have started at the outset as without adaptation.
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N international firms in the sense that their mission is to be In the ethnocentric international company, foreign operations
TA involved in international business activities. For many others, are viewed as being secondary or subordinate to domestic ones.
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A on their own domestic markets before shifting or expanding “tried and true” headquarters’ knowledge and organizational
L the focus to also cover international markets. It is thus useful to capabilities can be applied in other parts of the world. Although
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Andersen has proposed his own U – model which ahs received domestic production. Plans for overseas markets are developed
mixed empirical support. According to this model, there are utilizing policies and procedures identical to those employed at
four stages: (1) no regular export activities, (2) Export via home. No systematic marketing research is conducted outside
independent representatives (agent) (3) establishment of an the home country, and no major modifications are made to
overseas sales subsidiary, and (4) overseas production/ manu- products. Even if consumer needs or wants in international
facturing. The development is supposed to take place first markets differ form these in the home country, those differences
within a specific country before being repeated across countries. are ignored at headquarters.
Another study found evidence to support the hypothesis that Nissan’s ethnocentric orientation was quite apparent during its
there are four identifiable stages in a firm’s internationalization. first few years of exporting cars and trucks to the united state.
The four stages are: (1) nonexporters, (2) export intenders. (3) Designed for mild Japanese winters, the vehicles were difficult
Sporadic exporters, and (4) regular exporters. The process to start in many parts of the United States during the cold
shows how firm were initially constrained by resource limita- winter cars. Nissan’s assumption was that Americans would do
tions and a lack of expert commitment and how they can the same thing. Until the 1980s, Eli Lilly and company operated
become more and more internationalized as more resources are as an ethnocentric company in which activity outside the United
allocated to international activity. States was tightly controlled by headquarters and focused on
At present, there is no conclusive evidence to show that selling products originally developed for the U.S market.
domestic firms have generally indeed progressed from one stage Fifty years ago, most business enterprise- and specially those
to another as prescribed on their way to become more interna- located in a large country such as the United States could operate
tionally oriented. Likewise, no empirical evidence has been quite successfully with an ethnocentric orientation. Today,
provided so far to support a competing hypothesis that some however, ethnocentrism is one of the biggest internal threats a
firms are ”born global” in the sense that their mission from the company faces.
outset is to become MNCs.
b. Polycentric Orientation
Management Orientations The polycentric orientation is the opposite of ethnocentrism.
The form and substance of a company’s response to global The term polycentric describes management’s often-uncon-
market opportunities depend greatly on management’s scious belief or assumption that each country in which a
assumptions or beliefs— both conscious and unconscious— company does business is unique. This assumption lays the
about the nature of the world. The worldview of a company’s ground work for each subsidiary to develop its own unique
personnel can be described as ethnocentric, polycentric, egocen- business and marketing strategies in order to subsidiary to
tric, and geocentric. Management at a company with a prevailing develop its own unique business and marketing strategies in
ethnocentric orientation may consciously make a decision to order to succeed; the term multinational company is often used
move in the direction of geocentricism. The orientations are to describe such a structure. Until recently, Citicorp’s financial
collectively known as the EPRG framework. services around the world operated on a polycentric basis. James
Bailey, a Citicorp executive, offered this description of the
a. Ethnocentric Orientation
company; “ we were like a medieval state. There was the king
A person who assumes his or her home country is superior
and his court and they were in charge, right? No. It was the land
compared to the rest of the world is said to have an ethnocen-
barons went and did their thing. Realizing that the financial
tric orientation. The ethnocentric orientation means company
services industry is global zing; CEO John Reed is attempting
personnel see only similarities in markets and assume the
to achieve a higher degree of integration between Citicorp’s
products and practices that succeeded in the home country will,
operating units. Like Jack Welch at GE, Reed is moving to
due to their demonstrated superiority, be successful anywhere.
instill a geocentric orientation throughout his company.
At some companies, the ethnocentric orientation means that
opportunities outside the home country are ignored. Such c. Regiocentric and Geocentric Orintatons
companies are sometimes called domestic companies. Ethno- In a company with a regiocentric orientation, management
centric companies that do conduct business outside the home views regions as unique and seeks to deep an integrated strategy.
country can be described as international companies; they adhere For example, a U.S. company that focuses on the countries
to the notion that the products that succeed in the home included in the North American Free Trade Agreement
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(NAFTA)—the United States, Canada, and Mexico — has a regional scale; the world outside the region of interest will be IN
regiocentric orientation. Similarly, a European company that viewed with an ethnocentric or a polycentric orientation, or a T
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focuses its attention on the EU or Europe is regiocentric. A combination of the two. Jack Welch’s quote at the beginning of N
company with a geocentric orientation views the entire world as this chapter that “globalization must be taken for granted” A
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a potential market and strives to develop integrated world implies that at least some company managers must have a IO
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market strategies. A company whose management has a geocentric orientation. However, some research suggests that A
regiocentric or geocentric orientation is sometimes known as a many companies are seeking to strengthen their regional L
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global or transnational company. competitiveness rather than moving directly to develop global
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responses to changes in the competitive environment. R
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Philips and Matsushita: How Global The ethnocentric company is centralized in its marketing T
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Companies Win G
regiocentric and geocentric companies are integrated on a
Until recently, Philips Electronics, headquartered in Eindhoven, the
regional and global scale, respectively. A crucial difference
Netherlands, was a classic example of a company with a polycentric
between the orientations is the underlying assumption for each.
orientation. Philips relied on relatively autonomous national organizations
The ethnocentric orientation is based on a belief in home
(called Nos in company parlance) in each country. Each No developed its
country superiority. The underlying assumption of the
own strategy. This approach worked quite well until Philips faced
polycentric approach is that there are so many differences in
competition form matsushita and other Japanese consumer electronics
cultural, economic, and marketing conditions in the world that
companies in which management’s orientation was geocentric. The
it is impossible and futile to attempt to transfer experience
difference in competitive advantage between Philips and its Japanese
across national boundaries.
competition was dramatic.
Benefits of International Marketing
For example, Matsushita adopted global strategy that focused its resources
International marketing daily affects consumers in many ways,
on serving a world market for home entertainment products. In television
though its importance is neither well understood nor appreci-
receivers, matsushita offered European customers tow models based on a
ated. Government officials and other observers seem always to
single chassis. In contrast, Philips’s European cos offered customers seven
point to the negative aspects of international business. Many of
different models based on four different chassis. If customers had
their charges are more imaginary than real. The benefits of
demanded this variety, Philips would have been the stronger competitor.
international marketing must be explicitly discussed in order to
Unfortunately, the product designs created by the Nos were not based on
dispel such notions.
customer preferences. Customers wanted value in the form of quality,
features, design –and price. Philips’s decision to offer greater design Survival
variety was based not on what customers were asking for but, rather, on Because most countries are not as fortunate as the United States
Philips’s structure and strategy. Watch major country organization had its in terms of market size, resources, and opportunities, they
won engineering and manufacturing group. Each country unit had its own must trade with others to survive. Hong Kong has historically
design and manufacturing operations. This polycentric, multinational underscored this point well, for without food and water form
approach was part of Phillips’s heritage and was attractive to Nos that China proper, and The British colony would not have survived
had grown accustomed to functioning independently. However, the long. The countries of Europe have had similar experience,
polycentric orientation was irrelevant to consumers, who were looking for since most European nations are relatively small in size.
value. They were getting more value from matsushita’s global strategy than Without foreign markets, European firms would not have
from Philips’s multinational strategy. Why? Matsushita’s global strategy sufficient economies of scale to allow them to be competitive
created value for consumers by lowering costs and, in turn, prices. with U.S. firms. Nestle mentions in one of its advertisements
that its own country, Switzerland, lacks natural resources, forcing
As a multinational company, Philips squandered resources in a
it to depend on trade and adopt the geocentric perspective.
duplication of effort that led to greater product variety. Variety entailed
higher costs, which were passed on to consumer with no offsetting increase International competition may not be a matter of choice when
in consumer benefit. It is easy to understand how the right strategy resulted survival is at stake. A study of five medical – sector industries
in matsushita’s success in the global consumer electronics industry. found that international expansion was necessary when foreign
Because the matsushita strategy offered greater customer value, Philips firms entered a domestic market. However, only firms with
executives consciously abandoned the polycentric multinational approach previously substantial market share and international experience
and adopted a more geocentric orientation. A first step in this is direction could expand successfully. Moreover firms that retrenched after
was to create industry groups in the Netherlands responsible for developing an international expansion disappeared.
global strategies for research and development (R&D), marketing, and
Growth of Overseas Markets
manufacturing.
Developing countries, in spite of economic and marketing
problems, are excellent markets. According to a report prepared
The geocentric orientation represents a synthesis of ethnocen- for U.S. Congress by the U.S. Trade Representative. Latin
trism and polycentrism; it is a “worldview” that sees similarities America and Asia / Pacific are experiencing the strongest
and differences in markets and countries and seeks to create a economic growth.
global strategy that is fully responsive to local needs and wants. The conference Board is a business information service that
A regiocentric manager might be said to have a worldview on a assists senior executives and other leaders in arriving at sound
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