Ethnocentrism should be encouraged in international marketing

 1: The Scope and Challenge of International Marketing

CHAPTER OUTLINE

Global Perspective: Global Commerce Causes Peace

The Internationalization of U.S. Business

International Marketing Defined

The International Marketing Task

Marketing Decision Factors

Aspects of the Domestic Environment

Aspects of the Foreign Environment

Environmental Adaptation Needed

The Self-Reference Criterion and Ethnocentrism: Major Obstacles

Developing a Global Awareness

Stages of International Marketing Involvement

No Direct Foreign Marketing

Infrequent Foreign Marketing

Regular Foreign Marketing

International Marketing

Global Marketing

Strategic Orientation

Domestic Market Extension Orientation

Multidomestic Market Orientation

Global Market Orientation

The Orientation of International Marketing

CHAPTER LEARNING OBJECTIVES

What you should learn from Chapter 1:

• The changing face of U.S. business

• The scope of the international marketing task

• The importance of the self-reference criterion (SRC) in international marketing

• The progression of becoming a global marketer

• The increasing importance of global awareness

Global Perspective: GLOBAL COMMERCE CAUSES PEACE

Global commerce thrives during peacetime. The economic boom in North America during the late 1990s was in large part due to the end of the Cold War and the opening of the formerly communist countries to the world trading system. However, we should also understand the important role that trade and international marketing play in producing peace.

Boeing Company, America’s largest exporter, is perhaps the most prominent example. Although many would argue that Boeing’s military sales (aircraft and missiles) do not exactly promote peace, over the years, that business has constituted only about 20 percent of the company’s commercial activity. Up until 2002, of Boeing’s some $60 billion in annual revenues, about 65 percent came from sales of commercial jets around the world and another 15 percent from space and communications technologies. Unfortunately, these historical numbers are being skewed by American military spending and the damage done to tourism by terrorism.1 Even so, the company still counts customers in more than 90 countries, and its 150,000+ employees work in 70 countries. Its more than 11,000 commercial jets in service around the world carry about one billion travelers per year. Its NASA Services division is the lead contractor in the construction and operation of the 16-country International Space Station, first manned by an American and two Russians in the fall of 2000. The Space and Intelligence Systems Division also produces and launches communications satellites affecting people in every country.

All the activity associated with the development, production, and marketing of commercial aircraft and space vehicles requires millions of people from around the world to work together. Moreover, no company does more2 to enable people from all countries to meet face-to-face for both recreation and commerce. All this interaction yields not just the mutual gain associated with business relationships but also personal relationships and mutual understanding. The latter are the foundation of global peace and prosperity.

Another class of companies that promotes global dialogue and therefore peace is the mobile phone industry. During 2007, more than one billion new mobile phones were purchased around the world, connecting more than one-quarter of all people on the planet. Nokia (Finland), the market leader, is well ahead of the American manufacturer Motorola, Samsung (S. Korea), LG (S. Korea), and Sony Ericsson (Japan/Sweden).

Individuals and small companies also make a difference—perhaps a subtler one than large multinational companies, but one just as important in the aggregate. Our favorite example is Daniel Lubetzky’s company, Peace Works. Mr. Lubetzky used a fellowship at Stanford Law School to study how to foster joint ventures between Arabs and Israelis. Then, following his own advice, he created a company that combined basil pesto from Israel with other raw materials and glass jars supplied by an Arab partner to produce the first product in a line he called Moshe & Ali’s Gourmet Foods. The company now sells four different product lines in 5,000 stores in the United States and has its headquarters on Park Avenue in New York, as well as business operations in Israel, Egypt, Indonesia, Turkey, and Sri Lanka. Again, beyond the measurable commercial benefits of cooperation between the involved Arabs, Israelis, and others is the longer-lasting and more fundamental appreciation for one another’s circumstances and character.

International marketing is hard work. Making sales calls is no vacation, even in Paris, especially when you’ve been there 10 times before. But international marketing is important work. It can enrich you, your family, your company, and your country. And ultimately, when international marketing is done well, by large companies or small, the needs and wants of customers in other lands are well understood, and prosperity and peace are promoted along the way.3

Sources: http://www.boeing.com and http://www.peaceworks.com—both are worth a visit; mobile phone sales data are available at http://www.gartner.com.

Never before in American history have U.S. businesses, large and small, been so deeply involved in and affected by international business. A global economic boom, unprecedented in modern economic history, has been under way as the drive for efficiency, productivity, and open, unregulated markets sweeps the world. Powerful economic, technological, industrial, political, and demographic forces are converging to build the foundation of a new global economic order on which the structure of a one-world economic and market system will be built.

When we wrote those words eight years ago to open the eleventh edition of this book, the world was a very different place. The nation was still mesmerized by the information technology boom of the late 1990s. Most did not visualize the high-tech bust of 2001 or the associated Enron and WorldCom scandals. No one could have imagined the September 11, 2001, disasters, not even the perpetrators. The new wars in Afghanistan and Iraq were not on the horizon. The major international conflict grabbing headlines then was the series of diplomatic dustups among China, Taiwan, and the United States. Who could have predicted the disruptions associated with the 2003 SARS outbreak in Asia? The great Indian Ocean tsunami of 2004 was perhaps impossible to anticipate. Oil priced at more than $100 per barrel was also unthinkable then—the price seemed to have peaked at about $40 per barrel in late 2000.4 We wrote about the promise of the space program and the international space station, whose future is now clouded by the Columbia shuttle tragedy and associated NASA budget cuts.

Through all these major events, American consumers continued to spend, keeping the world economy afloat. Layoffs at industrial icons such as United Airlines and Boeing and a generally tough job market didn’t slow the booming American housing market until the fall of 2007. Lower government interest rates had yielded a refinancing stampede, distributing the cash that fueled the consumer spending, which finally flagging in early 2008. And seeing into the future is harder now than ever. Most experts expect global terrorism to increase, and the carnage in Bali, Madrid, and London seem to prove the point. Finally, as the global economy continues to wobble, international trade tensions take on new importance.5 Competition from new Chinese companies has begun to raise concerns in the United States.6 The steady growth of the U.S. trade and balance of payment deficits is particularly worrisome, particularly those with China.7

International marketing is affected by and affects all these things. For the first time in history, McDonald’s has pulled out of international markets in both Latin America and the Middle East.8 Slow economies, increasing competition, and anti-Americanism have impacted sales in both regions. Moreover, recall that the September 11 attacks targeted the World Trade Center in New York City. Indeed, the salient lesson for those involved in international commerce at the turn of the 21st century is to expect the unexpected. Any executive experienced in international business will verify that things never go as planned in global commerce. You still have to plan and forecast, but markets, particularly international ones, are ultimately unpredictable. The natural fluctuations in markets are best managed through building strong interpersonal and commercial relationships and broad portfolios of businesses. Flexibility means survival.

Perhaps now, more than ever, whether or not a U.S. company wants to participate directly in international business, it cannot escape the effects of the ever-increasing number of North American firms exporting, importing, and manufacturing abroad.

Aside from the tragic loss of life resulting from the terrorism of September 11, the event also represents a direct attack on the world trading system. The destruction of the New York City World Trade Center, it is hoped, will be the low point for global commerce and peace as the remainder of the second millennium unfolds. (© Sean Adair/Reuters/Corbis)

Nor can it ignore the number of foreign-based firms operating in U.S. markets, the growth of regional trade areas, the rapid growth of world markets, and the increasing number of competitors for global markets.

Of all the events and trends affecting global business today, four stand out as the most dynamic, the ones that will influence the shape of international business beyond today’s “bumpy roads” and far into the future: (1) the rapid growth of the World Trade Organization and regional free trade areas such as the North American Free Trade Area and the European Union; (2) the trend toward the acceptance of the free market system among developing countries in Latin America, Asia, and eastern Europe; (3) the burgeoning impact of the Internet, mobile phones, and other global media on the dissolution of national borders; and (4) the mandate to manage the resources and global environment properly for the generations to come.

Here the planet grows a little closer together. The European Parliament votes to start discussions with Turkey about joining the EU. Trade is beginning to bridge the religious divide between Christian Europe and Muslim Asia Minor. (AP/Photo/Str)

Today most business activities are global in scope. Technology, research, capital investment, and production, as well as marketing, distribution, and communications networks all have global dimensions. Every business must be prepared to compete in an increasingly interdependent global economic and physical environment, and all businesspeople must be aware of the effects of these trends when managing either a domestic company that exports or a multinational conglomerate. As one international expert noted, every American company is international, at least to the extent that its business performance is conditioned in part by events that occur abroad. Even companies that do not operate in the international arena are affected to some degree by the success of the European Union, the export-led growth in South Korea, the revitalized Mexican economy, the economic changes taking place in China, military conflicts in the Middle East, and global warming.

Trade also is easing tensions among North Korea, its close neighbors, and the United States. A rail link between North and South Korea has opened for the first time in nearly 60 years to provide transportation of raw materials and managers from the South, bound for a special economic development zone at Kaesong in the North.9 (AP/Photo/Lee Jin-man)

The challenge of international marketing is to develop strategic plans that are competitive in these intensifying global markets. For a growing number of companies, being international is no longer a luxury but a necessity for economic survival. These and other issues affecting the world economy, trade, markets, and competition are discussed throughout this text.

CROSSING BORDERS 1.1: What Do French Farmers, Chinese Fishermen, and Russian Hackers Have in Common?

They can all disrupt American firms’ international marketing efforts.

Thousands of supporters and activists gathered recently to show support for a French sheep farmer on trial for vandalizing a local McDonald’s. Jose Bove has become an international legend of antiglobalization. Leader of the French Peasant Confederation, he has demonized the fast-food chain as the symbol of American trade “hegemony” and economic globalization. He and nine other farmers served six weeks in jail and paid fines for partially destroying the restaurant. Most recently, Bove has been thrown in jail again, this time for 10 months, for damaging fields of genetically modified rice and corn.

Local fishermen demanded suspension of the reclamation and dredging of a bay near Hong Kong, where Disney has built Hong Kong Disneyland. The fishermen claimed that the work has plunged water quality near the site to levels much worse than predicted, killing huge numbers of fish. The spokesman for the fishermen claims they have lost some $30 million because of depleted and diseased fish stocks.

St. Petersburg has, in a decade, become the capital of Russian computer hackers. These are the same folks that are reputed to have invaded Microsoft’s internal network. Russia’s science city has become the natural hub for high-tech computer crime. Dozens of students, teachers, and computer specialists hack into computers, seeing themselves as members of an exciting subculture that has flourished since the fall of communism. Before glasnost and perestroika, those who were dissatisfied with official Soviet culture turned to samizdat literature and bootleg tapes of Western pop music. But the Gorbachev era left little to rebel against. Today Russia’s hackers, who even have their own magazine, entitled Khacker, have created a new underground culture that perhaps offers more excitement than passing around banned poetry. The city also benefits from being near the Baltic states. Programs are copied on the black market; the latest Windows pirate always arrives in Russia months before it appears in the West. Yes, fines and prison terms are consequences if caught. But computers are readily accessible at universities and increasingly in homes.

Sources: Agnes Lam, “Disney Dredging Killing Fish,” South China Morning Post, November 5, 2000, p. 4; John Tagliabue, “Activist Jailed in Attack on Modified Crops,” The New York Times, February 27, 2003, p. 6; Clifford J. Levy, “Russian Hackers: On the Right Side of Soft Laws,” International Herald Tribune, October 22, 2007, p. 3.

The Internationalization of U.S. Business

Current interest in international marketing can be explained by changing competitive structures, coupled with shifts in demand characteristics in markets throughout the world. With the increasing globalization of markets, companies find they are unavoidably enmeshed with foreign customers, competitors, and suppliers, even within their own borders. They face competition on all fronts—from domestic firms and from foreign firms. A huge portion of all consumer products—from CD players to dinnerware—sold in the United States is foreign made. Sony, Norelco, Samsung, Toyota, and Nescafé are familiar brands in the United States, and for U.S. industry, they are formidable opponents in a competitive struggle for U.S. and world markets.

Many familiar U.S. companies are now foreign controlled or headed in that direction.10 When you drop in at a 7-Eleven convenience store or buy Firestone tires, you are buying directly from a Japanese company. Some well-known brands no longer owned by U.S. companies are Carnation (Swiss), The Wall Street Journal (Australian), and the all-American Smith & Wesson handgun that won the U.S. West, which is owned by a British firm. The last U.S.-owned company to manufacture TV sets was Zenith, but even it was acquired by South Korea’s LG Electronics, Inc., which manufactures Goldstar TVs and other products. Pearle Vision, Universal Studios, and many more are currently owned or controlled by foreign multinational businesses (see Exhibit 1.1). Foreign investment in the United States is more than $16.3 trillion, some $2.6 trillion more than American overseas investments. Companies from the United Kingdom lead the group of investors, with companies from the Netherlands, Japan, Germany, and Switzerland following, in that order.

Exhibit 1.1: Foreign Acquisitions of U.S. Companies

Other foreign companies that entered the U.S. market through exporting their products into the United States realized sufficient market share to justify building and buying manufacturing plants in the United States. Honda, BMW, and Mercedes are all manufacturing in the United States. Investments go the other way as well. Ford bought Volvo; PacifiCorp acquired Energy Group, the United Kingdom’s largest electricity supplier and second-largest gas distributor; and Wisconsin Central Transportation, a medium-sized U.S. railroad, controls all U.K. rail freight business and runs the queen’s private train via its English, Welsh & Scottish Railway unit. It has also acquired the company that runs rail shuttles through the Channel Tunnel. Investments by U.S. multinationals abroad are nothing new.