Professional Documents
Culture Documents
VP/Editorial Director:
Jack W. Calhoun
Art Director:
Stacy Jenkins Shirley
VP/Editor-in-Chief:
Dave Shaut
Publisher:
Neil Marquardt
Manufacturing Coordinator:
Diane Lohman
Cover Images:
Getty Images
Production House:
Interactive Composition Corporation
Photography Manager:
John Hill
Marketing Manager:
Nicole C. Moore
Printer:
Edwards Brothers
Ann Arbor, MI
Photo Researcher:
Rose Alcorn
COPYRIGHT 2007
Thomson South-Western, a part of
The Thomson Corporation.Thomson,
the Star logo, and South-Western are
trademarks used herein under license.
Printed in the United States of
America
1 2 3 4 5 10 09 08 07 06
ISBN 0-324-31702-6
Czinkota, Michael R.
International marketing / Michael R.
Czinkota, Ilkka A. Ronkainen. 8th ed.
p. cm.
1. Export marketing. I. Ronkainen,
Ilkka A. II.Title.
HF1416.C953 2007
658.8'4dc22
2006020788
For more information about our
products, contact us at:
Thomson Learning Academic
Resource Center
1-800-423-0563
Thomson Higher Education
5191 Natorp Boulevard
Mason, OH 45040
USA
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Chapter
1
The Global Marketing
Imperative
The International MARKETPLACE
1.1
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
ou are about to begin an exciting, important, and necessary task: the exploration of international marketing. International marketing is exciting because it
combines the science and the art of business with many other disciplines.
Economics, anthropology, cultural studies, geography, history, languages,
jurisprudence, statistics, demographics, and many other fields combine to help you
explore the global market. Different business environments will stimulate your intellectual
curiosity, which will enable you to absorb and understand new phenomena. International
marketing has been compared by many who have been active in the field to the task of
mountain climbing: challenging, arduous, and exhilarating.
International marketing is important because the world has become globalized.
Increasingly, we all are living up to the claim of the Greek philosopher Socrates, who
stated, I am a citizen, not of Athens or Greece, but of the world. International marketing takes place all around us every day, has a major effect on our lives, and offers new
opportunities and challenges. After reading through this book and observing international
marketing phenomena, you will see what happens, understand what happens, and, at
some time in the future, perhaps even make it happen. All of this is much better than to
stand by and wonder what happened.
International marketing is necessary because, from a national standpoint, economic
isolationism has become impossible. Failure to participate in the global marketplace
assures a nation of declining economic capability and its citizens of a decrease in their
standard of living. Successful international marketing, however, holds the promise of an
improved quality of life, a better society, more efficient business transactions, and even a
more peaceful world, as The International Marketplace 1.1 highlights.
This chapter is designed to increase your awareness of what international marketing is
about. It describes current levels of world trade activities, projects future developments,
and discusses the repercussion on countries, institutions, and individuals worldwide. Both
the opportunities and the threats that spring from the global marketplace are highlighted,
and the need for an international marketing approach on the part of individuals and
institutions is emphasized.
This chapter ends with an explanation of the major organizational thrust of this book,
which is a differentiation between the beginning internationalist and the multinational
corporation. This theme ties the book together by taking into account the concerns, capabilities, and goals of firms that will differ widely based on their level of international expertise, resources, and involvement. The approach to international marketing taken here
will therefore permit you to understand the entire range of international activities and
allow you easily to transfer your acquired knowledge into practice.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
strategy. When we look, for example, at the emerging market economies of China and
Russia, we can see the many new challenges confronting international marketing. How
does the marketing concept fit into these societies? How can marketing contribute to economic development and the improvement of society? How should distribution systems be
organized? How can we get the price mechanism to work? Similarly, in the international
areas of social responsibility and ethics, the international marketer is faced with a multicultural environment with differing expectations and often inconsistent legal systems
when it comes to monitoring environmental pollution, maintaining safe working conditions, copying technology or trademarks, or paying bribes.1 In addition, the long-term
repercussions of marketing actions need to be understood and evaluated in terms of their
societal impact. These are just a few of the issues that the international marketer needs to
address. The capability to master these challenges successfully affords a company the
potential for new opportunities and high rewards.
The definition also focuses on international transactions. The use of the term recognizes that marketing internationally is an activity that needs to be pursued, often aggressively. Those who do not participate in the transactions are still exposed to international
marketing and subject to its changing influences. The international marketer is part of the
exchange, and recognizes the constantly changing nature of transactions. This need for
adjustment, for comprehending change, and, in spite of it all, for successfully carrying out
transactions highlights the fact that international marketing is as much art as science.
To achieve success in the art of international marketing, it is necessary to be firmly
grounded in its scientific aspects. Only then will individual consumers, policymakers, and
business executives be able to incorporate international marketing considerations into
their thinking and planning. Only then will they be able to consider international issues
and repercussions and make decisions based on answers to questions such as:
If all these issues are integrated into each decision made by individuals and by firms,
international markets can become a source of growth, profit, needs satisfaction, and quality of life that would not have existed for them had they limited themselves to domestic
activities. The purpose of this book is to aid in this decision process.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Exhibit
1.1
14
12
Growth in World Trade
10
Percent
Change
8
6
4
Real GDP
2
0
1997
1998
1999
2000
2001
2002
Year
2003
2004
2005
2006
SOURCE: International Monetary Fund, World Economic Outlook 2005, Statistical Appendix, 205, 233.
was made. There are trading blocs such as the European Union in Europe, NAFTA in
North America, Mercosur in Latin America, and ASEAN in Asia. These blocs encourage
trade relations between their members, but, through their rules and standards, they also
affect the trade and investment flows of nonmember countries.
Individuals and firms have come to recognize that they are competing not only
domestically but also globally. World trade has given rise to global linkages of markets,
technology, and living standards that were previously unknown and unanticipated. At the
same time, it has deeply affected domestic policy-making and has often resulted in the
emergence of totally new opportunities as well as threats to firms and individuals. The
International Marketplace 1.2 provides an example.
Global Linkages
World trade has forged a network of global linkages that bind us allcountries, institutions, and individualsmuch more closely than ever before. These linkages were first
widely recognized during the worldwide oil crisis of 1970, but they continue to increase.
A drought in Brazil and its effect on coffee production and prices are felt around the
world. The 2004 tsunami in the Indian Ocean resulted in massive casualties in South
Asia, caused worldwide disruptions in manufacturing and trade, and devastated the
tourism industry of many countries. For example, in the Maldives, which are located
more than 2,500 kilometers (1.6 kilometers 1 mile) from the quakes epicenter,
tourism is the largest industry, contributing 30 percent of its GDP of $1.25 billion.3 The
industry is estimated to have suffered at least $100 million of damage in addition to
another $250 million in business losses as an indirect result of the tsunami.4 The combined effects of hurricanes Katrina and Rita on the Gulf Coast of the United States in the
fall of 2005 caused the production loss of nearly 75 million barrels of oil, or 13.6 percent
of the annual oil production in the Gulf of Mexico. The result was a spike in the price
of gasoline worldwide, which raised the transportation costs for countless industries and
businesses.5
These linkages have also become more intense on an individual level. Communication
has built new international bridges, be it through music or international programs
transmitted by CNN, BBC, Al Arabiya, and other networks. New products have attained
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
1.2
Outsourcing Innovation?
Public discussion has long highlighted companies that
outsource their manufacturing facilities or their technical
support call centers.When outsourcing first began, many
lawmakers and citizens were worried about the loss of
production jobs within the United States. Companies
argued that while some jobs may be lost, other more
skilled and higher paying jobs would emerge.Today,
however, companies are outsourcing information
technology, software support and, most importantly,
their innovation.
In October 2005, General Motors announced that it
would open its newest research and development facility
in Russia.According to the United Nations Conference
on Trade and Development, GM has the sixth-largest
research and development budget of any company in the
world, annually spending $5 billion on R & D alone. Its
research and development branch has historically been
headquartered in Warren, Michigan, but the supply of
technical expertise and engineering knowledge the car
maker needs today is more available in countries such as
India, Brazil, and Russia.
Similarly, global competition and time pressures force
the pharmaceutical industry to speed up the development process while simultaneously cutting costs.The
Italian pharmaceutical company, Congenia, has outsourced
a portion of its drug formulation capabilities to Indian
software giant Tata Consultancy Services Ltd. Previously,
Tata had been used by many companies as a source of
low-cost computer services and support. Pfizer, another
pharmaceutical company, which has a center in Mumbai,
outsources chemical synthesis, drug development, drug
international appeal and encouraged similar activities around the worldwhere many of
us wear jeans, dance to the same music on our iPods, and eat kebobs, curry, and sushi.
Transportation linkages let individuals from different countries see and meet each other
with unprecedented ease. Common cultural pressures result in similar social phenomena
and behaviorfor example, more dual-income families are emerging around the world,
which leads to more frequent, but also more stressful, shopping.6
World trade is also bringing about a global reorientation of corporate processes, which
opens up entirely new horizons. Never before has it been so easy to gather, manipulate,
analyze, and disseminate informationbut never before has the pressure been so great to
do so. Ongoing global technological innovation in marketing has direct effects on the
efficiency and effectiveness of all business activities. Products can be produced more
quickly, obtained less expensively from sources around the world, distributed at lower
cost, and customized to meet diverse clients needs. As an example, only a decade ago, it
would have been thought impossible for a firm to produce parts for a car in more than
one country, assemble the car in yet another country, and sell it in still other nations.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Today, such global investment strategies coupled with production and distribution sharing are becoming a matter of routine. Of course, as The International Marketplace 1.2
explains, these changes increase the level of global competition, which in turn makes it
an ongoing effort if one wants to stay in a leadership position.
Advances in technology also allow firms to separate their activities by content and context. Firms can operate in a market space rather than a marketplace7 by keeping the
content while changing the context of a transaction. For example, a newspaper can now
be distributed online globally rather than house-to-house on paper, thereby allowing outreach to entirely new customer groups.
The level of global investment is at an unprecedented high. The shifts in financial flows
have had major effects. They have resulted in the buildup of international debt by governments, affected the international value of currencies, provided foreign capital for firms,
and triggered major foreign direct-investment activities. For example, well over one-third
of the workers in the U.S. chemical industry toil for foreign owners. Many of the office
buildings Americans work in are owned by foreign landlords. The opening of plants can
take the place of trade. All these developments make us more and more dependent on
one another.
This interdependence, however, is not stable. On almost a daily basis, realignments
taking place on both micro and macro levels make past trade orientations at least partially
obsolete. For example, for the first 200 years of its history, the United States looked to
Europe for markets and sources of supply. Today, U.S. two-way trade with Asia far outpaces U.S. trade with Europe.
Not only is the environment changing, but the pace of change is accelerating as well.
Ataris Pong was first introduced in the early 1980s; today, action games and movies are
made with computerized humans. The first office computers emerged in the mid-1980s;
today, home computers have become commonplace. E-mail was introduced to a mass
market only in the 1990s; today, many college students hardly ever send personal notes
using a stamp and envelope.8
These changes and the speed with which they come about significantly affect countries, corporations, and individuals. One change is the role participants play. For example,
the United States accounted for nearly 25 percent of world merchandise exports in the
1950s, but by 2005 this share had declined to less than 9 percent. Also, the way countries
participate in world trade is shifting. In the past two decades the role of primary commodities in international trade has dropped precipitously, while the importance of manufactured goods has increased. The increase in the volume of services trade has been even
higher. In a few decades, international services went from being a nonmeasured activity
to a global volume of more than $2.1 trillion in 2005.9 Exhibit 1.2 shows how substantial
the growth rates for both merchandise and services trade have been. Most important, the
growth in the overall volume and value of both merchandise and services trade has had
a major impact on firms, countries, and individuals.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Exhibit
1.2
980
1000
Key
856
Merchandise
800
Services
760
600
Percentage
Growth
400
321
207 210
200
117
0
152
Australia
97
Brazil
China
India
129
Japan
108
161
140
United
States
94
EU 15*
119
156
Africa
Countries
therefore the level of the exchange rate. In the more recent past, currency flows took on a
life of their own. Independent of trade, they set exchange rates, which are the values of
currencies relative to each other. These exchange rates in turn have now begun to determine the level of trade. Governments that wish to counteract these developments with
monetary policies find that currency flows outnumber trade flows by 100 to 1. Also,
private-sector financial flows vastly outnumber the financial flows that can be marshaled
by governments, even when acting in concert. Similarly, constant rapid technological
change and vast advances in communication permit firms and countries to quickly emulate innovation and counteract carefully designed plans. As a result, governments are often
powerless to implement effective policy measures, even when they know what to do.
Policymakers therefore find themselves with increasing responsibilities yet with fewer
and less effective tools to carry out these responsibilities. At the same time that more parts
of a domestic economy are vulnerable to international shifts and changes, these parts are
becoming less controllable. The global market imposes increasingly tight limits on national economic regulation and sovereignty.
To regain some of their power to influence events, policymakers have sought to restrict
the impact of global trade and financial flows by erecting barriers, charging tariffs, designing quotas, and implementing other import regulations. However, these measures too
have been restrained by international agreements that regulate trade restrictions, particularly through the World Trade Organization (WTO) (http://www.wto.org). Global trade has
therefore changed many previously held notions about nation-state sovereignty and extraterritoriality. The same interdependence that has made us more affluent has also left us
more vulnerable. Because this vulnerability is spread out over all major trading nations,
however, some have credited international marketing with being a pillar of international
peace, as The International Marketplace 1.1 showed. Clearly, closer economic relations
can result in many positive effects. At the same time, however, interdependence brings
with it risks, such as dislocations of people and economic resources and a decrease in a
nations capability to do things its own way. Given the easeand sometimes the
desirabilityof blaming a foreign rather than a domestic culprit for economic failure, it
may well also be a key task for the international marketer to stimulate societal thinking
about the long-term benefits of interdependence.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
1.3
participate are relegated to react to the global marketplace and therefore are unprepared
for harsh competition from abroad.
Some industries have recognized the need for international adjustments. Farmers
understand the need for high productivity in light of stiff international competition. Car
producers, computer makers, and firms in other technologically advanced industries have
learned to forge global relationships to stay in the race. Firms in the steel, textile, and
leather sectors have shifted production, and perhaps even adjusted their core business, in
response to overwhelming onslaughts from abroad. Other industries in some countries
have been caught unaware and have been unable to adjust. The result is the extinction of
firms or entire industries, such as VCRs in the United States and coal mining and steel
smelting in other countries.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
12
Japan
$4,301
GREEN
(DENM
$2,033
CANADA
UNITED STATES
$1,741
MEXICO
CUBA
DOMINICAN REPUBLIC
JAMAICA
$1,403
GUATEMALA
EL SALVADOR
Canada
HAITI
HONDURAS
NICARAGUA
COSTA RICA
VENEZUELA
PANAMA
COLOMBIA
$857
GUYANA
SURINAME
FRENCH GUIANA
ECUADOR
South Asia
$765
BRAZIL
PERU
BOLIVIA
CHILE
PARAGUAY
$745
URUGUAY
Sub-Saharan Africa
ARGENTINA
$439
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
ICELAND
SWEDEN
Exports + Imports
= International Trade Percentage
GDP
FINLAND
NORWAY
RUSSIA
EST.
LATVIA
NLAND
MARK)
IRELAND
DEN.
UNITED
KINGDOM
LITH.
BELG.
ICELAND
POLAND
GERMANY
ITALY
UNITED
KINGDOM
SLOVAKIA
AUSTRIA HUNG.
SWEDEN
SLOVENIA
NORWAY
SPAINIRELAND
UKRAINE
CZECH
REP.
LUX.
FRANCE SWITZ.
PORTUGAL
BELARUS
NETH.
DEN.
LITH.
RUSSIA
BULG.
YUGO.
LATVIA
MACE.
ALB.
BELARUS
NETH.
GERMANY
BELG.
LUX.
FRANCE
MOLDOVA
ROMANIA
FINLAND
CROATIA
BOSNIAHERZEGOVINA
EST.
POLAND
CZECH.
REP.
SWITZ.
TURKEY
GREECE
UKRAINE
SLOVAKIA
AUS.
KAZAKHSTAN
MOLDOVA
HUNG.
MONGOLIA
ROMANIA
BULG.
ITALY
PORTUGAL
GEORGIA
ARMENIA
TURKEY
ALB.
SPAIN
GREECE
TU
RK
ALGERIA
IRAQ
SENEGAL
GAMBIA
GUINEA-BISSAU GUINEA
MALI
EGYPT
GHANA
CTE DIVOIRE
ERITREA
CHAD
KUWAIT
TOGO BENIN
EQUATORIAL
GUINEA
CONGO RWANDA
KENYA
BURUNDI
DEM. REP. OF
THE CONGO
ZAMBIA
ZIMBABWE
SOUTH
KOREA
JAPAN
BHUTAN
NEP
AL
MYANMAR
INDIA
TAIWAN
BANGLADESH
LAOS
THAILAND
VIETNAM
CAMBODIA
SRI
LANKA
PHILIPPINES
BRUNEI
MALAYSIA
PAPUA
NEW GUINEA
SINGAPORE
I N D O N E S I A
TANZANIA
ANGOLA
NAMIBIA
OMAN
SOMALIA
UGANDA
GABON
U. A. E.
ETHIOPIA
CENTRAL
AFRICAN REP.
CAMEROON
CHINA
YEMEN
DJIBOUTI
SUDAN
NIGERIA
SIERRA LEONE
LIBERIA
AFGHANISTAN
BAHRAIN
QATAR
NIGER
NORTH
KOREA
KYRGYZSTAN
TAJIKISTAN
TA
TAN
PAKISTAN
LIBYA
BURKINA
FASO
NIS
IRAN
SAUDI ARABIA
MAURITANIA
KIS
ME
AZERBAIJAN
JORDAN
WESTERN
SAHARA
BE
SYRIA
CYPRUS
LEBANON
ISRAEL
TUNISIA
MOROCCO
UZ
MOZAMBIQUE
MADAGASCAR
MALAWI
BOTSWANA
AUSTRALIA
SWAZILAND
SOUTH
AFRICA
LESOTHO
NEW
ZEALAND
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
14
oriented and employs thousands of people on each continent, much more leeway exists
in terms of resource availability, experience, and information. In addition, the multinational firm has the option of responding creatively to the environment by shifting
resources or even shaping the environment itself. For example, the heads of large corporations have access to government ministers to plead their case for a change in policy, an
alternative that is rarely afforded to smaller firms.
To become a large international corporation, however, a firm usually has to start out
small. Similarly, to direct far-flung global operations, managers first have to learn the basics. The structure of this text reflects this reality by presenting initially a perspective of
the business environment, which covers national marketing and policy issues and their
cultural, economic, financial, political, and legal dimensions.
Subsequently, the book discusses in detail the beginning internationalization of the
firm. The emphasis is on the needs of those who are starting out and the operational
questions that are crucial to success. Some basic yet essential issues addressed are: What
is the difference between domestic and international marketing? Does the applicability of
marketing principles change when they are transferred to the global environment? How
do marketers find out whether there is a market for a product abroad without spending a
fortune in time and money on research? How can the firm promote its products in foreign
markets? How do marketers find and evaluate a foreign distributor, and how do they
make sure that their firm gets paid? How can marketers minimize government red tape yet
take advantage of any governmental programs that are of use to them?
These questions are addressed both conceptually and empirically, with a strong focus
on export and import operations. We will see how the international commitment is developed and strengthened within the firm.
Once these important dimensions have been covered, we make the transition to the
multinational corporation. The focus is now on the transnational allocation of resources,
the coordination of multinational marketing activities, and the attainment of global synergism. Finally, emerging issues of challenge to both policymakers and multinational firms,
such as countertrade, marketing to economies in transition, and the future outlook of the
global market, are discussed.
All the marketing issues are considered in relation to national policies so as to familiarize you with the divergent forces at play in the global market. Governments increased
awareness of and involvement with international marketing require managers to be aware
of the role of governments and also to be able to work with them in order to attain marketing goals. Therefore, the continued references in the text to businessgovernment
interaction demonstrate a vital link in the development of international marketing strategy.
In addition, we give full play to the increased ability of firms to communicate with a
global market. Therefore, we develop and offer, for firms both small and large, our ideas
and strategies for viable participation in electronic commerce.
We expect that this gradual approach to international marketing will permit you not
only to master another academic subject, but also to become well versed in both the operational and the strategic aspects of the field. The result should be a better understanding of how the global market works and the capability to participate in the international
marketing imperative.
Summary
Over the last few decades, international trade in merchandise has expanded at astounding rates to reach over
$9 trillion in 2005. In addition, trade in services has
grown at particularly high rates within the last decade to
reach $2.1 trillion in 2005. As a result, nations are much
more affected by international business than in the
past. Global linkages have made possible investment
strategies and marketing alternatives that offer tremendous opportunities. Yet these changes and the speed of
change also can represent threats to nations and firms.
On the policy front, decision makers have come to realize that it is very difficult to isolate domestic economic
activity from international market events. Factors such as
currency exchange rates, financial flows, and foreign
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Key Terms
international marketing
global linkages
currency flows
exchange rates
2.
3.
4.
5.
Internet Exercises
1.
2.
Recommended Readings
Friedman, Benjamin. The Moral Consequences of
Economic Growth. New York: Knopf, 2005.
Friedman, Thomas. The World Is Flat. New York: Farrar,
Straus, and Giroux, 2005.
Notes
1.
2.
3.
4.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
15
16
5.
6.
7.
8.
9.
10.
14.
15.
16.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Appendix
Basics of Marketing
his appendix provides a summary of the basic
concepts in marketing for the reader who
wishes to review them before applying them
to international marketing. The American
Marketing Association defines marketing as an organizational function and a set of processes for creating, communicating, and delivering value to customers, and for
managing customer relationships in ways that benefit the
organization and its stake-holders.1
It is useful to focus on the definitions components to
fully understand its meaning. Marketing as an organizational function interprets it as part of a thrust that gives
direction to a unit. Set of processes highlights the idea that
the activity goes beyond a single transaction. Creating,
communicating, and delivering emphasizes that the marketing discipline takes leadership in its activities from beginning to end and that the art and the practical implementation dimensions of the discipline are crucial in their
simultaneity. Value to customers indicates the core focus
of marketing. Physicians have as their overriding principle the Hippocratic Oath do no harm. Marketers should
consider any action under the prism of are customers
better off ? Managing customer relationships in turn indicates the dyadic aspects of marketingthere is an interaction between the firm and the customers, as well as the
relationships among the customers themselves. It is marketings responsibility to handle both types of relationship. Customers need to be content in their assessment of
the rapport they have with the firm. However, they also
continue to be part of a network that is defined by their
interaction with fellow customers. Since marketers will be
major influencers on this relationship they need to take
into account the repercussions that their actions are likely
to have on these linkages. The term relationship is key,
since it is indicative of the fact that actions build upon
each other and are instrumental in forging bonds and
inflaming disagreements. The marketer therefore cannot
see any product or effort as an isolated event. Rather it
has to be understood as a component of an entire series
of steps that define the bridge between entities. Using
this perspective, marketing has a very broad mission. The
discipline is not narrowly confined to relationships that
emerge when money is exchanged for goods. Rather,
marketing has its application just as well when there is
performance of a service (say, coaching Little League or
fundraising for a charity) in exchange for obtaining a
good feeling and a sense of fulfillment.
The fact that marketing is to benefit the organization is critical. Marketing needs to be seen, after all, in
the context of a planned and purposeful activity. It
seeks a definite, favorable outcome for the institution
conducting the marketing pursuit. Again, it is important
to recognize that this benefit need not be seen strictly
in terms of mammon. Rather, the organization itself is
the one that defines what it determines to be beneficial. Therefore, there is ample room for both macro
benefits such as more positive images of our country,
as well as micro benefits such as increase desire to go
to work, in addition to the business benefits customarily seen to be in the purview of organizations. As a
result, marketing finds a full range of applicability in
not-for-profit areas, such as medicine, the arts, or government areas typically wrongfully excluded from the
need for marketing. The use of the term stakeholder is
also indicative of this breadth of marketing in that it
gives recognition to others who have an interest in either
the process or the outcome of marketing activities.
As you can see, this definition packs a lot of punch,
and lets marketing make a major contribution to the
welfare of individuals and organizations. Nevertheless,
based on our view of marketing, we will expand this
definition on several dimensions. First, we believe that
the terms create, deliver and value overemphasize transactions as one-time events. Therefore, we add the terms
maintain and value stream to highlight the long-term
nature of marketing that encourages customers to continue to come back. We also believe that, as the scope of
marketing is broadened, societal goals need to be added
to individuals and organizations, properly reflecting the
overarching reach and responsibility of marketing as a
social change agent that responds to and develops social
concerns about the environment, technology, and ethics.
Equally important is the need to specifically broaden
our marketing understanding beyond national borders.
Today, sourcing and supply linkages exist around the
globe, competition emerges from all corners of the earth,
and marketing opportunities evolve worldwide. As a result, many crucial dimensions of marketing need to be
reevaluated and adapted in a global context.
Based on these considerations, our expanded definition of marketing is an organizational function and a
set of process for creating, communicating, delivering,
and maintaining value streams to customers and for
managing customer relationships in ways that benefit the
17
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Strategic Marketing
The marketing managers task is to plan and execute
programs that will ensure a long-term competitive advantage for the company. This task has two integral
parts: (1) the determining of specific target markets and
(2) marketing management, which consists of manipulating marketing mix elements to best satisfy the needs
of individual target markets.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
important point to remember is that price is the only revenue-generating element of the marketing mix.
Distribution policy covers the place variable of the
marketing mix and has two components: channel management and logistics management. Channel management is concerned with the entire process of setting up
and operating the contractual organization, consisting of
various types of middlemen (such as wholesalers,
agents, retailers, and facilitators). Logistics management
is focused on providing product availability at appropriate times and places in the marketing channel.5 Place is
the most long term of all the marketing mix elements; it
is the most difficult to change in the short term.
Communications policy uses promotion tools to interact with customers, middlemen, and the public at large.
The communications element consists of these tools:
advertising, sales promotion, personal selling, and publicity. Because the purpose of all communications is to
persuade, this is the most visible and sensitive of the
marketing mix elements.
Blending the various elements into a coherent program requires trade-offs based on the type of product
or service being offered (for example, detergents versus
fighter aircraft), the stage of the products life cycle (a
new product versus one that is being revived), and
resources available for the marketing effort (money and
personnel), as well as the type of customer at whom the
marketing efforts are directed.
Marketing Management
The marketing manager, having analyzed the characteristics of the target market(s), is in a position to specify
the mix of marketing variables that will best serve each
target market. The variables the marketing manager controls are known as the elements of the marketing mix, or
the four Ps: product, price, place, and promotion.4 Each
consists of a submix of variables, and policy decisions
must be made on each.
Product policy is concerned with all the elements that
make up the good, service, or idea that is offered by the
marketer. Included are all possible tangible characteristics (such as the core product and packaging) and intangible characteristics (such as branding and warranties).
Many products are a combination of a concrete product
and the accompanying service; for example, in buying
an Otis elevator, the purchaser buys not only the product but an extensive service contract as well.
Pricing policy determines the cost of the product to the
customera point somewhere between the floor created
by the costs to the firm and the ceiling created by the
strength of demand. An important consideration of pricing policy is pricing within the channel of distribution;
margins to be made by the middlemen who assist in the
marketing effort must be taken into account. Discounts to
middlemen include functional, quantity, seasonal, and
cash discounts, as well as promotional allowances. An
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
19
20
Key Terms
marketing
product policy
price
place
promotion tools
analysis
planning
implementation
control mechanisms
Notes
1.
2.
3.
4.
5.
6.
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Appendix
Geographical Perspectives
on International Marketing
he globalization of business has made geography indispensable for the study of international marketing. Without significant attention
to the study of geography, critical ideas and information about the world in which business occurs will
be missing.
Just as the study of business has changed significantly
in recent decades, so has the study of geography. Once
considered by many to be simply a descriptive inventory
that filled in blank spots on maps, geography has
emerged as an analytical approach that uses scientific
methods to answer important questions.
Geography focuses on answering Where? questions.
Where are things located? What is their distribution
across the surface of the earth? An old aphorism holds,
If you can map it, its geography. That statement is
true, because we use maps to gather, store, analyze, and
present information that answers Where? questions.
Identifying where things are located is only the first
phase of geographic inquiry. Once locations have been
determined, Why? and How? questions can be asked.
Why are things located where they are? How do different things relate to one another at a specific place? How
do different places relate to each other? How have geographic patterns and relationships changed over time?
These are the questions that take geography beyond
mere description and make it a powerful approach for
analyzing and explaining geographical aspects of a wide
range of different kinds of problems faced by those engaged in international marketing.
Geography answers questions related to the location
of different kinds of economic activity and the transactions that flow across national boundaries. It provides insights into the natural and human factors that influence
patterns of production and consumption in different
parts of the world. It explains why patterns of trade and
Location
For decades, people engaged in real estate development have said that the value of a place is a product of
three factors: location, location, and location. This
statement also reflects the importance of location for
international marketing. Learning the location and characteristics of other places has always been important to
those interested in conducting business outside their
local areas. The drive to learn about different areas,
especially their resources and potential as markets, has
stimulated geographic exploration throughout history.
Explorations of the Mediterranean by the Phoenicians,
Marco Polos journey to China, and voyages undertaken
by Christopher Columbus, Vasco da Gama, Henry
Hudson, and James Cook not only improved general
knowledge of the world but also expanded business
opportunities.
21
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
22
Place
In addition to its location, each place has a diverse set of
characteristics. Although many of those characteristics
are present in other places, the ensemble makes each
place unique. The characteristics of placesboth natural
and humanprofoundly influence the ways that business executives in different places participate in international economic transactions.
Natural Features
Many of the characteristics of a place relate to its natural
attributes. Geologic characteristics can be especially important, as the presence of critical minerals or energy resources may make a place a world-renowned supplier of
valuable products. Gold and diamonds help make South
Africas economy the most prosperous on that continent.
Rich deposits of iron ore in southern parts of the
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Human Features
The physical features of a place provide natural resources
and influence the types of economic activities in which
people engage, but its human characteristics also are critical. The population of a place is important because farm
production may require intensive labor to be successful,
as is true in rice-growing areas of eastern Asia. The skills
and qualifications of the population also play a role in determining how a place fits into global economic affairs.
Although blessed with few mineral resources and a terrain and climate that limit agricultural production, the
Swiss have emphasized high levels of education and
training in order to maintain a labor force that manufactures sophisticated products for export around the world.
In recent decades, Japan and smaller nations such as
South Korea and Taiwan have increased the productivity
of their workers to become major industrial exporters.
As people live in a place, they modify it, creating a
built environment that can be as important as or more important than the natural environment in economic terms.
The most pronounced areas of human activity and their
associated structures are in cities. In nations around the
world, cities grew dramatically during the twentieth century. Much of the growth of cities has resulted from the
migration of people from rural areas. This influx of new
residents broadens the labor pool and creates vast new
demand for goods and services. As urban populations
have grown, residences and other facilities have replaced
rural land uses. Executives seeking to conduct business in
foreign cities need to be aware that the geographic patterns found in their home cities are not evident in many
other nations. For example, in the United States, wealthier
residents generally have moved out of cities, and as they
established their residences, stores and services followed.
Residential patterns in the major cities of Latin America
and other developing nations tend to be reversed, with
the wealthy remaining close to the city center while
poorer residents are consigned to the outskirts of town. A
store-location strategy that is successful in the United
States therefore may fail miserably if transferred directly to
another nation without knowledge of the different geographic patterns of that nations cities.
Interaction
The international marketing professional seeking to take
advantage of opportunities present in different places
learns not to view each place separately. The way
a place functions depends on the presence and form of
certain characteristics as well as the interactions among
them. Fortuitous combinations of features can spur a regions economic development. The presence of highgrade supplies of iron ore, coal, and limestone powered
the growth of Germanys Ruhr Valley as one of Europes
foremost steel-producing regions, just as the proximity of
the fertile Pampas and the deep channel of the Rio de la
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
23
Plata combined to make Buenos Aires the leading economic center in southern South America.
Interactions among different features change over
time within a place, and as they do, so does that places
character and economic activities. Human activities can
have profound impacts on natural features. The courses
of rivers and streams are altered as dams are erected and
meanders are straightened. Soil fertility can be improved
through fertilization. Vegetation is transformed, with naturally growing plants replaced by crops and other varieties that require careful management.
Many human modifications have been successful. For
centuries, the Dutch have constructed dikes and drainage
systems, slowly creating poldersland that once was covered by the North Sea but that now is used for agricultural
production. But other human activities have had disastrous impacts on natural features. A large area in Ukraine
and Belarus was rendered uninhabitable by radioactive
materials leaked from the Chernobyl reactor in 1986. In
countless other places around the globe, improper disposal of wastes has seriously harmed land and water
resources. In some places, damage can be repaired, as has
happened in rivers and lakes of the United States following the passage of measures to curb water pollution in the
latter third of the 20th century, but in other locales, restoration may be impossible. At times, human activity can have
counterproductive results for unforeseen reasons. In large
parts of Bangladesh and the West Bengal state of India,
arsenic concentrations in drinking water drawn from wells
is far above acceptable levels, and increasing numbers of
residents are exhibiting signs of arsenic poisoning. Ironically, the wells were drilled to provide a supposedly safer
alternative to the highly polluted surface water on which
residents previously relied.
Growing concerns about environmental quality have
led many people in more economically advanced nations to call for changes in economic systems that harm
the natural environment. Concerted efforts are under
way, for example, to halt the destruction of forests in the
Amazon Basin, thereby preserving the vast array of different plant and animal species in the region and saving
vegetation that can help moderate the worlds climate.
Cooperative ventures have been established to promote
selective harvesting of nuts, hardwoods, and other products taken from natural forests. Furthermore, an increasing number of restaurants and grocers are refusing to
purchase beef raised on pastures that are established by
clearing forests.
Market mechanisms have also been developed to try
to facilitate environmentally friendly practices. Emissions
trading has emerged as an administrative approach that
can be instituted by a central unit to limit the overall
level of pollution that is released in the area under that
administrative units authority. The administrative unit
can be a local government, state, nation, or even a set of
nations. Based on historical patterns and other factors,
maximum emission levels are established for subunits in
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Movement
Whereas the theme of interaction encourages consideration of different characteristics within a place, movement
provides a structure for considering how different places
relate to each other. International marketing exists because movement permits the transportation of people
and goods and communication of information and ideas
among different places. No matter how much people in
one place want something found elsewhere, they cannot
have it unless transportation systems permit the good to
be brought to them or allow them to move to the location of the good.
The location and character of transportation and communication systems long have had powerful influences
on the economic standing of places. Especially significant have been places on which transportation routes
have focused. Many ports evolved to be prosperous
cities because they channeled the movement of goods
and people between ocean and inland waterways. New
York became the largest city in North America because
its harbor provided sheltered anchorage for ships crossing the Atlantic and the Hudson River provided access
leading into the interior of the continent. In eastern Asia,
Hong Kong grew under similar circumstances, as British
traders used its splendid harbor as an exchange point for
goods moving in and out of southern China.
Businesses also have succeeded at well-situated
places along overland routes. The fabled oasis of
Timbuktu has been an important trading center for
centuries because it had one of the few dependable
sources of water in the Sahara. Chicagos ascendancy as
the premier city of the U.S. heartland came when its
early leaders engineered its selection as the termination
point for a dozen railroad lines converging from all
directions. Not only did much of the rail traffic moving
through the region have to pass through Chicago, but
passengers and freight passing through the city had to be
transferred from one line to another. This process generated numerous jobs and added considerably to the
wealth of many businesses in the city.
In addition to the business associated directly with the
movement of people and goods, other forms of economic activity have become concentrated at critical
points in the transportation network. Places where transfers from one mode of transportation to another were
required often were chosen as sites for manufacturing
activities. Buffalo was the most active flour-milling center in the United States for much of the twentieth century
because it was the point where Great Lakes freighters
carrying wheat from the northern Great Plains and
Canadian prairies were unloaded. Rather than simply
transfer the wheat into rail cars for shipment to the large
urban markets of the northeastern United States, millers
transformed the wheat into flour in Buffalo, thereby
reducing the additional handling of the commodity.
Global patterns of resource refining also demonstrate
the wisdom of careful selection of sites with respect to
transportation systems. Some of the worlds largest oil
refineries are located at places like Bahrain and Houston,
where pipelines bring oil to points where it is processed
and loaded onto ships in the form of gasoline or other
distillates for transport to other locales. Massive refinery
complexes also have been built in the Tokyo and Nagoya
areas of Japan and near Rotterdam in the Netherlands to
process crude oil brought by giant tankers from the Middle
East and other oil-exporting regions. For similar reasons,
the largest new steel mills in the United States are near
Baltimore and Philadelphia, where iron ore shipped from
Canada and Brazil is processed. Some of the most active
aluminum works in Europe are beside Norwegian fjords,
where abundant local hydroelectric power is used to
process imported alumina.
Favorable location along transportation lines is beneficial for a place. Conversely, an absence of good transportation severely limits the potential for firms to succeed in a specific place. Transportation patterns change
over time, however, and so does their impact on places.
Some places maintain themselves because their business
leaders use their size and economic power to become
critical nodes in newly evolving transportation networks.
New Yorks experience provides a good example of this
process. New York became the United States foremost
business center in the early nineteenth century because
it was ideally situated for water transportation. As railroad networks evolved later in that century, they sought
New York connections in order to serve its massive market. During the twentieth century, a complex web of
roadways and major airports reinforced New Yorks supremacy in the eastern United States. In similar ways,
London, Moscow, and Tokyo reasserted themselves as
transportation hubs for their nations through successive
advances in transport technology.
Failure to adapt to changing transportation patterns
can have harmful impacts on a place. During the middle
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
25
Region
In addition to considering places by themselves or how
they relate to other places, regions provide alternative
ways to organize groups of places in more meaningful
ways. A region is a set of places that share certain characteristics. Many regions are defined by characteristics
that all of the places in the group have in common.
When economic characteristics are used, the delimited
regions include places with similar kinds of economic
activity. Agricultural regions include areas where certain
farm products dominate. Corn is grown throughout the
Corn Belt of the central United States, for example,
although many farmers in the region also plant soybeans
and many raise hogs. Regions where intensive industrial
production is a prominent part of local economic activity
include the manufacturing belts of the northeastern
United States, southern Canada, northwestern Europe,
and southern Japan.
Regions can also be defined by patterns of movement.
Transportation or communication linkages among places
may draw them together into configurations that differentiate them from other locales. Studies by economic
geographers of the locational tendencies of modern
high-technology industries have identified complex
networks of firms that provide products and services to
each other. Because of their linkages, these firms cluster
together into well-defined regions. The Silicon Valley
of northern California, the Western Crescent on the
outskirts of London, and the Technopolis of the Tokyo
region all are distinguished as much by connections
among firms as by the economic landscapes they have
established.
Economic aspects of movement may help define
functional regions by establishing areas where certain
types of economic activity are more profitable than others. In the early nineteenth century, German landowner
Johann Heinrich von Thunen demonstrated how different costs for transporting various agricultural goods to
market helped to define regions where certain forms of
farming would occur. Although theoretically simple, patterns predicted by von Thunen can still be found in the
world today. Goods such as vegetables and dairy products that require more intensive production and are
more expensive to ship are produced closer to markets,
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Key Terms
geologic characteristics
terrain
hydrology
climate
soils
population
built environment
Kyoto Protocol
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
27
Copyright 2007 Thomson Learning, Inc. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.