Onkvisit S., Shaw J. International Marketing: Analysis and Strategy

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applications. It should appeal to the instructor or student who wants substance and is tired of the simplistic

and repetitive approach employed by most other texts.The text is for the reader who prefers a rigorous treat-

ment of the subject as well as an integration of theories, applications, and managerial implications. The

approach is analytical and managerial rather than merely descriptive.

Because of the textbook’s rigor and sophistication, coupled with its strong application focus, the text

has been used at all education levels – undergraduate, MBA, and Ph.D.

Comprehensiveness: breadth and depth

The fourth edition provides solid foundations – strategically and theoretically. In terms of breadth and

depth of coverage, this text is the most complete and authoritative one.This text is more comprehensive

than the others in treating in depth a number of relevant and signiﬁcant topics. There are chapters on

marketing barriers, ﬁnancing, foreign exchange, consumer behavior, branding and packaging, and physical

distribution.There are two chapters for each of the four Ps of marketing. Discussed in detail are ﬁnancial

strategies, analysis and management of political risks, bribery, jurisdiction, counterfeiting, gray marketing,

subcultures, services, foreign trade zones, representation agreements, dumping, and countertrade.

An examination of the index should quickly reveal that the coverage of the text is far superior to that

of the other standard texts.The company and trademark index shows that the text is highly applications-ori-

ented and that it extensively covers real-world practices.The country index, in contrast, clearly demonstrates

the global perspective of the text.The subject index, on the other hand, lists all the critical topics, includ-

ing the latest developments. Finally, the name index and end notes leave no doubt as to the inadequacy of the

other popular texts in terms of theoretical and empirical substance.

A high degree of teaching/learning ﬂexibility is possible because the materials found in the text stress

decision making. As such, they are thought-provoking and may be used for a variety of assignments, class-

room discussions, term papers, and exams.

The best conceptual framework and theoretical coverage

Most well-known texts use a descriptive approach which merely reports isolated incidents based more on

casual and personal observation than on rigorous investigation. Naturally, the descriptive materials can

become obsolete very quickly.This simplistic approach does not serve the instructor and students well. A

competent textbook should not be basically a compilation of anecdotes (i.e., newspaper and magazine

examples). Clearly, there must be a conceptual/theoretical framework to understand international mar-

keting problems and guide marketing decisions.

The ﬁrst edition of International Marketing: Analysis and Strategy broke new ground by providing funda-

mental principles and a theoretical framework to understand international activities and/or pursue a man-

agerial career in international marketing. The approach has been very well received and widely praised

because it fulﬁlls a real need.The fourth edition continues this leading edge.

The text is highly distinctive in that it is essentially the only text that seriously uses scholarly sources

to provide theoretical explanation and empirical evidence to support the actual practices.The leading inter-

national journals (i.e., Journal of International Business Studies and Journal of World Business) are the major

sources of information.At the same time, we also rely on several other well-known international market-

ing journals (e.g., International Marketing Review, European Journal of Marketing).

To have a complete understanding, we have considered other marketing sources as well. In particular,

we rely on the two most inﬂuential sources: Journal of Marketing and Journal of Marketing Research. In addi-

PREFACE

tion, the two major advertising journals (i.e., Journal of Advertising Research and Journal of Advertising) provide

information on international advertising practices.

There is no other international marketing book which comes close to the fourth edition

of International Marketing: Analysis and Strategy in terms of scholarly substance. Unlike other texts which

still discuss the traditional concepts in a static manner, this text offers the latest ﬁndings which show the

advancement of those concepts. Students will greatly beneﬁt from this higher level of sophistication.

Strong application

In spite of its strong theoretical foundations, this text does not describe international marketing concepts

only in abstract terms. Actually, the text is highly applications-oriented. A great deal of effort has been

spent on meaningfully integrating the theoretical foundations, empirical evidence, and actual business prac-

tices.

The fourth edition of International Marketing: Analysis and Strategy is superior to other texts in terms of

application. Like others, we rely heavily on such leading business publications as Business Week, theWall Street

Journal, the Asian Wall Street Journal, and the Financial Times.This coverage is very extensive and second to

none.

Unlike others, we also rely on the most authoritative US government publications such as Export America.

At the international level, readers will beneﬁt from the publications of the International Monetary Fund

– IMF Survey and Finance & Development.

In addition, industry-speciﬁc publications such as PROMO are used to report the stories about

international promotional activities and foreign exchange activities.

The fourth edition is very user-friendly. First, the “marketing illustration” section begins each chapter.

Second, its unique feature is a collection of interesting advertisements to illustrate international marketing

activities.Third, the text includes discussion assignments and minicases to stimulate discussion.

To further emphasize the real-world applications, the fourth edition includes another innovative feature.

There are boxes of marketing illustrations included in each chapter. These boxes contain the “Marketing

strategy,” “It’s the law,” “Marketing ethics,” and “Cultural dimension” illustrations.These real-world exam-

ples illustrate the effects of the legal, ethical, and cultural dimensions on the one hand and the good and

poor strategies of business ﬁrms on the other.

In sum, the fourth edition employs a pragmatic approach by emphasizing actual applications in the real-

world marketplace. It uses numerous leading business publications extensively for pragmatism.

Revision

We do not believe that the revision of any textbook should merely update the business examples or that

it should list only new references for decorative reasons. Unlike consumer behavior texts which report the

latest theoretical developments and empirical ﬁndings, international marketing texts have a tendency to

report the latest anecdotes. Most international marketing texts contain references or footnotes that are

mainly magazine and newspaper articles.When theoretical and empirical sources are used at all, they are

not really part of the text discussion. A brief sentence in the text portion is not going to describe the

content of a reference, thus doing students a great disservice.

Unlike other books, this text incorporates the latest scholarly works into the text materials so as to

reﬂect the latest progress of academic works. At the same time, it reports the latest practice in the real

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PREFACE

world. The references used are the latest available, with about 50 percent of the sources of information

being from the 2000s.

LEARNING AIDS

The fourth edition gives the instructor a great deal of ﬂexibility. Each chapter includes discussion assign-

ments, minicases, and cases.As a result, the instructor and students are not restricted to only review ques-

tions.They can select from numerous assignments for active classroom discussion and class projects.The

fourth edition has added several new cases and minicases. In addition, there is an abundance of chapter-

opening vignettes, advertisements, exhibits, tables, and other illustrations that highlight the discussion and

show how the business concepts are used in practice.

Each chapter includes a number of pedagogical aids.The questions at the end of each chapter ask stu-

dents to review or explain the concepts. In addition, discussion assignments and minicases require students

to apply what they have learned in actual situations. In order to further stimulate ideas and debate so that

students can become actively involved in applying the concepts, there are cases of varying length for each

chapter.These cases were written speciﬁcally to address concepts and issues introduced in the chapter.

A unique feature of the book is the inclusion of two simulation games: one involving culture and another

focusing on foreign exchange.These games are easy to follow; they do not require the use of a computer.

They teach students about common international marketing problems. Although the games can begin at

almost any point during the ﬁrst half of the semester, they should be started early enough in order to max-

imize the potential beneﬁts. Students should ﬁnd them interesting and challenging.

In terms of research opportunities, the text suggests research topics and avenues. This will greatly aid

the reader who wants to pursue research on a particular topic. Students and instructors can expect up-to-

date and extensive coverage of the literature which may be useful for research purposes.

Because the instructor’s manual is an important teaching tool, the task of writing it was not relegated

to an outside party. Instead, the manual accompanying the text was completely written by us to ensure

the quality and relevance of the materials.The instructor is encouraged to contact us for any additional

teaching materials which we may have available.

READER RESOURCES

In addition to the learning tools included in this textbook, there is a website which provides additional

material for readers of this book (http://www.Routledge.com/textbooks/0415311330). Designed for

both lecturers and students, this additional learning resource includes extra material for study, as well as

downloadable presentation visuals and extra teaching materials not contained in the student text version.

ACKNOWLEDGMENTS

It is a pleasure to acknowledge the contribution of many individuals. First, we are grateful for

the support, assistance, and encouragement of the instructors, students, and users of the textbook. We

would like to thank a number of people who have given us kind encouragement and useful feedback.

Second, we want to thank our colleagues who have written cases for this book. Next, for those reviewers

who have given us their useful and insightful comments, we are thankful. We would like to express our

appreciation for the support of Routledge and all those who are involved in the preparation and produc-

xxii

PREFACE

tion of this textbook. In particular, we thank Francesca Poynter and Rachel Crookes for their encourage-

ment and patience.Their assistance is certainly valuable.

We are indebted to a number of companies and organizations for their permission to use their adver-

tisements and materials. Such materials provide valuable information. In particular, we would like to thank

Asia Paciﬁc Advertising Festival (and Vinit Suraphongchai and Vinai Uesrivong of Plannova) for providing

us with the 2003 AdFest video CDs and other information. Material from the 2003 AdFest video CDs are

made available to the instructors who adopt this textbook, courtesy of AdFest and its support of educa-

tion.AdFest is the largest advertising contest in Asia.These video CDs are available from the authors; please

email onkvis_s@cob.sjsu.edu for more details.

Writing a textbook is a major undertaking. The reward is not monetary. The true reward is the kind

comments received from the students and adopters of the book.We sincerely hope that this textbook has

played a meaningful role in advancing this important discipline of study.

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PREFACE

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We are citizens of the world – and citizens of every city and village where we do business.

Douglas N. Daft, Chairman and CEO,The Coca-Cola Company

CHAPTER OUTLINE

■ Process of international marketing

■ International dimensions of marketing

■ Domestic marketing vs. international marketing

■ The applicability of marketing

■ Multinational corporations (MNCs)

 Pros and cons

 Multinationality and market performance

 Characteristics of MNCs

■ The process of internationalization

■ Beneﬁts of international marketing

 Survival and growth

 Sales and proﬁts

 Diversiﬁcation

 Inﬂation and price moderation

 Employment

 Standards of living

 Understanding of marketing process

■ Conclusion

■ Case 1.1 Sony: the sound of entertainment

Nature of international

marketing

Challenges and opportunities

Chapter 1

NATURE OF INTERNATIONAL MARKETING

Henri Nestlé founded Nestlé SA in 1867 to market

his baby formula. The Swiss-based Nestlé is the

world’s largest food and beverage company, with $71

billion in annual sales and almost 230,000 employ-

ees around the world. It markets some 8000 brands

that include instant coffee (ﬁrst produced by the

company’s scientists in 1938).The company has more

than 500 factories in more than eighty countries.

Remarkably, its products are sold in every country in

the world, including in North Korea. During the past

two decades, the company spent $40 billion to acquire

Friskies in 1985, saucemaker Buitoni in 1988, and

Perrier in 1992. Recently, the company acquired

Ralston Purina Co., North America’s leading pet-food

manufacturer, for $11 billion.

Nestlé’s strategic goal involves a transformation

of far-ﬂung operations into a single global entity.

To increase its efﬁciency and competitiveness while

adding value to its products, Nestlé has consolidated

its production and marketing activities. Countries are

grouped or regrouped according to close geographic

links and similar consumption behavior. For example,

Thailand,Vietnam, Myanmar, and Cambodia comprise

one Indochina sub-region market. The other groups

include India and Pakistan, Singapore and Malaysia,

and Australia and New Zealand.This strategy aims to

develop brands and products on a regional basis so as

to create a larger critical mass.

Nestlé’s CEO, Peter Brabeck-Letmathe, certainly

reﬂects Nestlé’s international mentality.This native of

Austria started his ﬁrst foreign assignment in Chile.

Subsequently, he was a manager in Venezuela and

Ecuador. At home with his Chilean wife and children,

he speaks Spanish. In addition, he speaks French,

Italian, Portuguese, and English.

As a multinational corporation, Nestlé crosses

cultural borders. It understands that food is and has

always been a local product. A Bavarian soup will not

appeal to noodle lovers in Taiwan. As a result, the

company has been practicing a balancing act by trying

to simultaneously achieve economies of scale and yet

cater to a variety of cultural preferences. In effect,

Nestlé is a “glocal” company that thinks global but

acts local.

The Nestlé case exempliﬁes the importance of

international marketing and the desirability of trans-

forming a national company into a multinational ﬁrm.

In one of its advertisements Nestlé mentions that

Switzerland’s lack of natural resources forces the

company to depend on trade and adopt the geocen-

tric perspective (see Figure 1.1). Worldwide competi-

tion has been intensifying, and in time companies that

are not internationally inclined will be adversely

affected. Rather than being reactive or defensive,

a wise marketer must shed a rigid mentality and

embrace a more progressive and ﬂexible view of the

world market. Potential problems can thereby be

transformed into challenges and opportunities.

Sources:

“The Stars of Europe: Value Creators,”

Business

Week

, June 11, 2001, 78; “Nestlé: An Elephant Dances,”

Business Week E.BIZ

, December 11, 2000, EB 44;

“Nestlé Adopts Regional Strategy,”

Bangkok Post

, February

26, 1999;“Nestlé Starting to Slim Down at Last”,

Business

Week

, October 27, 2003, 56–7; and “The International

500,”

Forbes

, July 22, 2002, 124.

MARKETING ILLUSTRATION NESTLÉ: A “GLOCAL” COMPANY

PURPOSE OF CHAPTER

This chapter addresses the who, what, why, and how of international marketing by giving an overview of the

nature of international business. The discussion begins with an examination of how marketing in general is

deﬁned and how that deﬁnition works for international marketing. The chapter examines the criteria that

determine when a company has successfully transformed itself into a multinational ﬁrm. To dispel some

popularly held misconceptions, there is an explicit treatment of the beneﬁts of international trade.

PROCESS OF INTERNATIONAL

MARKETING

A study of international marketing should begin

with an understanding of what marketing is and

how it operates in an international context. A deﬁ-

nition adopted by the AMA (American Marketing

Association) is used as a basis for the deﬁnition of

international marketing given here: international

marketing is the multinational process of planning

and executing the conception, pricing, promotion,

and distribution of ideas, goods, and services to

create exchanges that satisfy individual and organi-

zational objectives. Only the word multinational

has been added. That word implies that marketing

activities are undertaken in several countries and

that such activities should somehow be coordinated

across nations.

This deﬁnition is not completely free of limita-

tions. By placing individual objectives at one end of

the deﬁnition and organizational objectives at the

other, the deﬁnition stresses a relationship between

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NATURE OF INTERNATIONAL MARKETING

Figure 1.1 MNC based

on the geocentricity

Source:

Reprinted with

permission of Nestlé Foods Corp.

a consumer and an organization. In effect, it fails

to do justice to the signiﬁcance of business-to-

business marketing, which involves a transac-

tion between two organizations. In the world of

international marketing, governments, quasi-

government agencies, and proﬁt-seeking and non-

proﬁt entities are frequently buyers. Companies

such as Boeing and Bechtel, for example, have

nothing to do with consumer products. Likewise,

Russia’s export agency, Rosoboronexport, has

adopted a Western-style marketing approach to sell

arms for the country’s 1700 defense plants. Its

cheery sales representatives and giant TV screens

show Russian jets and helicopters in action. In addi-

tion, Rosoboronexport offers competitive prices

and will modify the products to suit its customers.

Nonetheless, the deﬁnition does offer several

advantages by carefully describing the essential

characteristics of international marketing. First,

what is to be exchanged is not restricted to tangi-

ble products (goods) but may include concepts and

services as well.When the United Nations promotes

such concepts as birth control and breast-feeding,

this should be viewed as international marketing.

Second, the deﬁnition removes the implica-

tion that international marketing applies only to

market or business transactions. International non-

proﬁt marketing, which has received only scant

attention, should not be overlooked. Governments

are very active in marketing in order to attract

foreign investment. Religion is also a big business

and has been marketed internationally for centuries,

though most people prefer not to view it that

way. Even the Vatican is now using modern market-

ing. The Holy See has launched a mass-licensing

program that put images from the Vatican Library’s

art collection, architecture, and manuscripts on T-

shirts, glassware, and candles. The Vatican Radio,

wanting to market the Pope’s voice in the USA and

Europe, has hired a music distributor to market

compact disks and cassettes of Pope John II reciting

the rosary.

Third, the deﬁnition recognizes that it is

improper for a ﬁrm to create a product ﬁrst and then

look for a place to sell it. Rather than seeking

consumers for a ﬁrm’s existing product, it is often

more logical to determine consumer needs before

creating a product. For overseas markets, the

process may call for a modiﬁed product. In some

cases, following this approach may result in foreign

needs being satisﬁed in a new way (i.e., a brand new

product is created speciﬁcally for overseas markets).

Fourth, the deﬁnition acknowledges that “place”

(distribution) is only part of the marketing mix and

that the distance between markets makes it neither

more nor less important than the other parts of

the mix. It is thus improper for any ﬁrms to regard

their international function as simply to export

(i.e., move) available products from one country

to another.

Finally, the “multinational process” implies that

the international marketing process is not a mere

repetition of using identical strategies abroad. The

four Ps of marketing (product, place, promotion,

and price) must be integrated and coordinated

across countries in order to bring about the most

effective marketing mix. In some cases, the mix may

have to be adjusted for a particular market for

better impact. Coca-Cola’s German and Turkish

divisions, for example, have experimented with

berry-ﬂavored Fanta and a pear-ﬂavored drink

respectively. In other cases, a multinational mar-

keter may ﬁnd it more desirable to use a certain

degree of standardization if the existing market

differences are somewhat artiﬁcial and can be over-

come. As in the case of General Electric Co.’s GE

Medical Systems, it went too far in localizing its

medical imaging products to compete with local

competitors. Its managers designed and marketed

similar products for different markets. Overcus-

tomizing such big-ticket products is an expensive

and wasteful duplication of effort.

INTERNATIONAL DIMENSIONS OF

MARKETING

One way to understand the concept of international

marketing is to examine how international market-

ing differs from similar concepts. Domestic mar-

keting is concerned with the marketing practices

NATURE OF INTERNATIONAL MARKETING

within a researcher’s or marketer’s home country.

From the perspective of domestic marketing, mar-

keting methods used outside the home market are

foreign marketing.A study becomes compara-

tive marketing when its purpose is to contrast

two or more marketing systems rather than

examine a particular country’s marketing system for

its own sake. Similarities and differences between

systems are identiﬁed.

Some marketing textbooks differentiate inter-

national marketing from global marketing

because international marketing in its literal sense

signiﬁes marketing between nations (inter means

between).The word international may thus imply that

a ﬁrm is not a corporate citizen of the world

but rather operates from a home base. For those

authors, global or world marketing is the preferred

term, since nothing is foreign or domestic about the

world market and global opportunities.

One might question whether the subtle differ-

ence between international marketing and multi-

national marketing is signiﬁcant. For practical

purposes, it is merely a distinction without a differ-

ence.As a matter of fact, multinational ﬁrms them-

selves do not make any distinction between the two

terms. It is difﬁcult to believe that International

Business Machines will become more global if

it changes its corporate name to Multinational

Business Machines. Likewise, there is no compelling

reason for American Express and British Petroleum

to change their names to, say, Global Express and

World Petroleum. For purposes of the discussion in

this text, international, multinational, and global

marketing are used interchangeably.

DOMESTIC MARKETING VS.

INTERNATIONAL MARKETING

It would beg the question to say that life and death

are similar in nature, except in degree. As pointed

out by Lufthansa (see Figure 1.2), it would be just

as incorrect to say that domestic and international mar-

keting are similar in nature but not in scope, meaning

that international marketing is nothing but domes-

tic marketing on a larger scale.

Domestic marketing involves one set of uncon-

trollables derived from the domestic market. Inter-

national marketing is much more complex because a

marketer faces two or more sets of uncontrollable

variables originating from various countries. The

marketer must cope with different cultural, legal,

political, and monetary systems. Digital Microwave

Corporation’s annual report makes this point very

clear when it states:

The Company is subject to the risks of doing

business internationally, including unexpected

changes in regulatory requirements, ﬂuctua-

tions in foreign currency exchange rates, impo-

sition of tariffs and other barriers and restric-

tions, the burdens of complying with a variety of

foreign laws, and general economic and geopo-

litical conditions, including inﬂation and trade

relationships.

As shown in Figure 1.3, the two or more sets of

environmental factors overlap, indicating that some

similarities are shared by the countries involved. A

ﬁrm’s marketing mix is determined by the uncon-

trollable factors within each country’s environment

as well as by the interaction between the sets

(see Figure 1.4). For optimum results, a ﬁrm’s mar-

keting mix may have to be modiﬁed to conform to

a different environment, though wholesale modiﬁ-

cation is not often necessary.The degree of overlap

of the sets of uncontrollable variables will dictate

the extent to which the four Ps of marketing

must change – the more the overlap, the less the

modiﬁcation.

The varying environments within which the

marketing plan is implemented may often rule

out uniform marketing strategies across countries.

McDonald’s, although world renowned for its

American symbols and standardization, has actually

been ﬂexible overseas. Recognizing the importance

of foreign markets and local customs, the company

customizes its menu by region. In fact, it has even

excluded beef from its menu in India in deference

to the country’s Hindu tradition.

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NATURE OF INTERNATIONAL MARKETING