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

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THE APPLICABILITY OF MARKETING

Marketing is a universal activity that is widely applic-

able, regardless of the political, social, and eco-

nomic systems of a country. However, it does not

mean that consumers in all parts of the world must

or should be satisﬁed in exactly the same way.

Consumers from various countries are signiﬁcantly

different due to varying culture, income, level

of economic development, and so on. Therefore,

NATURE OF INTERNATIONAL MARKETING

Figure 1.2 Domestic marketing vs. international marketing

Source:

Courtesy of Lufthansa German Airlines.

consumers may use the same product without

having the same need or motive, and in turn may

use different products to satisfy the same need. For

example, different kinds of foods are used in differ-

ent countries to satisfy the same hunger need.

Further, Americans and Europeans may use gas or

electric heat to keep warm, whereas people in India

may meet the same need by burning cow dung.

Too often, marketing mix is confused with

marketing principles. Sound marketing principles

are universal. One basic principle states that mar-

keters should adopt the marketing concept (i.e.,

using the integrated marketing approach to satisfy

both customers’ and corporate goals). Regardless of

their nationalities, marketers everywhere should be

customer-oriented. However, this universal princi-

ple in no way implies a uniform marketing mix for

all markets.To be customer-oriented does not mean

that the same marketing strategy should be repeated

in a different environment.

MULTINATIONAL CORPORATIONS

(MNCs)

Pros and cons

Multinational corporations (MNCs) are

major actors in the world of international business.

The mention of MNCs usually elicits mixed reac-

tions. On the one hand, MNCs are associated with

exploitation and ruthlessness (see Marketing Ethics

1.1 and It’s the Law 1.1).They are often criticized

for moving resources in and out of a country, as

they strive for proﬁt without much regard for the

country’s social welfare. In addition, they erode a

nation’s sovereignty. One study found that global-

ization undermined domestic airline competition

policy.

Is globalization detrimental to environment? This

question is based on a premise that globalization

encourages location of polluting industries in coun-

tries with low environmental regulations. Based on

survey data from companies in China, globalization

has positive environmental effects because of self-

regulation pressures on ﬁrms in low-regulation

countries. “Multinational ownership, multinational

customers, and exports to developed countries

increase self-regulation of environmental perform-

ance.”

According to another study, the size of a

domestic market and other factors are much more

important than pollution costs.The attractiveness of

China is due more to its market size than its rela-

tively lax pollution-control laws. From the 1970s

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NATURE OF INTERNATIONAL MARKETING

Foreign

country 1

Foreign

country 2

Home

country

Figure 1.3 Environmental divergence and

convergence

Foreign

country

Unique mix Identical mix

Home

country

Product Place

Promotion Price

Figure 1.4 Environmental effect on international

marketing mix

NATURE OF INTERNATIONAL MARKETING

In order to cut operating costs, the tanker industry

goes to any country that has few regulatory controls.

As a result, ships are often registered in such offshore

nations as Liberia and Panama. These “ﬂags of con-

venience” enable shipowners to sidestep national rules

that mandate the use of expensive domestic crews as

well as limit their liabilities. As in the case of the

World Prodigy tanker, it was made in Greece, regis-

tered in Liberia, insured by a Bermuda-based group

managed from London, and managed by a Greek

shipping magnate.

Carnival Corp., the world’s largest cruise line, has

advantages over its competitors. The company is

incorporated in Panama and has registered many

ships in Liberia. As a result, Carnival can escape

duties on liquor, often its biggest shipboard money

maker. In contrast, the US-ﬂagged American Hawaii

pays at least 25 percent more than foreign-ﬂagged

vessels. In addition, Carnival is able to skip paying US

corporate income tax on most operations. Over a

stretch of three years, it paid just $19 million in

income taxes on its $2 billion in operating income.

It costs cruise lines hundreds of thousands of

dollars a year per ship to dispose of their waste.

Naturally, it is tempting for them to simply and ille-

gally dump it instead. Several cruise lines have been

ﬁned for dumping oil and refuse. A Royal Caribbean

cruise ship, for example, was alleged to have dumped

oil in 1994 and 1998. While Royal Caribbean has its

headquarters in Miami, it is a Liberian corporation.

It claims that, because its ships ﬂy foreign ﬂags, it is

immune from criminal prosecution.

Source:

“Few Icebergs on the Horizon,”

Business Week

June 14, 1999, 80, 83.

IT’S THE LAW 1.1 FLAGS OF CONVENIENCE

Starbo, a moniker of an old mining camp in Seattle,

later became Starbucks, after the ﬁrst mate in Moby

Dick. The founders of Starbucks Coffee felt that the

name evoked seafaring romance of early coffee traders

and thus chose the mermaid logo.The idea for the mod-

ern Starbucks format was copied from a Milan coffee

bar. The number of Starbucks coffee shops has zoomed

from seventeen in Seattle less than two decades ago

to almost 6000 in twenty-eight countries.

Starbucks Coffee’s strategy is to cluster stores so

as to increase total revenue and market share.

Clustering fosters efﬁciency in terms of delivery and

management, and leads to domination of a local

market. The strategy is not without controversy.

Critics are unhappy with the company’s brutal busi-

ness tactics that have driven many small coffee shops

out of business. One tactic is its “predatory real

estate” that involves its willingness to pay above-

market rate rents in order to keep out competitors.

Starbucks has portrayed itself as a responsible

global citizen. It has participated in various programs

that aim to increase farmers’ wages and improve the

local environment. Yet in 2002, it bought only

150,000 pounds of fair-trade coffee from COOCAFE

(Consortium of Coffee Cooperatives of Guanacaste

and Montes de Oro in Costa Rica). It is the only spe-

cialty coffee company that refuses to certify 5 percent

of its coffee as “fair trade.” In the meantime, with the

price of coffee beans at an extremely depressed level,

growers are suffering.

Sources:

Mark Pendergrast,

Uncommon Grounds: The

History of Coffee and How It Transformed Our World

, Basic

Books, 2000; and “For Coffee Growers, Not Even a Whiff

of Proﬁts,”

Business Week

, September 9, 2002, 101ff.

MARKETING ETHICS 1.1 STARBUCKS: FAIR TRADER OR PREDATOR?

through the early 1990s, the average amount spent

by US manufacturers to comply with pollution-

control laws accounted for about 1 percent of their

total costs, and this cost of pollution control is not

high enough to justify international relocation.

On a positive note, MNCs have power and pres-

tige. Also in defense of MNCs, more and more of

them have been trying to be responsible members

of society. In addition, MNCs create social beneﬁt

by facilitating economic balance. Given the fact that

natural resources and factors of production are

unevenly distributed around the globe, MNCs can

act as an effective and efﬁcient mechanism to use

these precious resources.

Multinationality and market performance

At one time, it was thought that the relationship

between a ﬁrm’s degree of multinationality and its

market performance was a linear and positive one.

While studies have found a relationship, the linkage

is not straightforward.

One recent study found a curvilinear relation-

ship instead. Increasing levels of multinationality

provide signiﬁcant performance beneﬁts up to a

certain optimum level. Once that optimum level is

achieved, any further increase of multinationality

results in decelerating beneﬁts and accelerating

costs. In other words, multinationality has both pos-

itive and negative impacts on performance. The

positive impacts originate in MNCs’ ability to lever-

age scale economies, access new technologies, and

arbitrage factor cost differentials across multiple

locations.The negative effects later emerge because

of higher costs associated with coordination and

control,administrative systems to manage culturally

distinct markets, and diverse human resources.

Other factors further complicate the relation-

ship. One cross-sectional analysis of twelve indus-

tries over a seven-year period found that the “impact

of multinationality on both ﬁnancial and operational

performance is moderated by a ﬁrm’s R&D and

marketing capabilities.”

Characteristics of MNCs

MNC is not a one-dimensional concept.There is no

single criterion that proves satisfactory at all times

in identifying an MNC. Varying deﬁnitions are not

necessarily convergent. As a result, whether or not

a company is classiﬁed as an MNC depends in part

on what set of criteria is used.

Deﬁnition by size

The term MNC implies bigness. But bigness also has

a number of dimensions. Such factors as market

value, sales, proﬁts, assets, and number of employ-

ees,when used to identify the largest multinationals,

will yield varying results (see Table 1.1).As an exam-

ple, although General Motors is No. 118 in terms of

market value, it is No. 3 in terms of sales.

While

Business Week magazine focuses on market value,

Forbes magazine ranks the world’s largest public com-

panies by using a composite ranking of sales, proﬁts,

assets, and market value (see Table 1.2).

In the case

of the World Investment Report of the United

Nations Conference on Trade and Development

(UNCTAD), it ranks transnational corporations

(TNCs) by their foreign assets (see Table 1.3).

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NATURE OF INTERNATIONAL MARKETING

Table 1.1 Global leaders based on market value, sales, and proﬁts

Rank Market value Sales Proﬁts

1 General Electric Wal-Mart Stores Citigroup

2 Microsoft ExxonMobil General Electric

3 ExxonMobil General Motors Altria Group

4 Pﬁzer Royal Dutch/Shell Exxon/Mobil

5 Wal-Mart Stores BP Royal Dutch/Shell

Source:

Adapted from “Top Global Companies,”

Business Week

, July 14, 2003, 60.

Many multinational corporations are indeed

large. According to UNCTAD, there are some

65,000 transnational corporations (TNCs) world-

wide with more than 250,000 foreign afﬁliates.

Some TNCs are even bigger than a number of coun-

tries (see Exhibit 1.1). TNCs control one-third

of the world’s private sector productive assets.

Ownership of foreign assets is highly concentrated

since half of the total is owned by just 1 percent of

TNCs.Interestingly, multinationals’ overseas invest-

ment has progressed to the point where sales gen-

erated by them outside their country of origin even

exceeded the world trade volume (total world

exports).

Is corporate size an accurate indicator of inter-

national orientation? According to conventional

thought, ﬁrm size should positively inﬂuence export

intensity. The empirical ﬁndings have been mixed.

One recent study of the Italian manufacturing

industry has falsiﬁed the proposition concerning the

positive relationship between ﬁrm size and export

intensity.

Another study of 14,072 Canadian

manufacturers found a positive but only modest

relationship between ﬁrm size and export propen-

sity. Apparently, although smaller ﬁrms have fewer

resources, they are still able to engage in inter-

national activities.

It is not unusual for corporate size to be used as

a primary requirement for judging whether or not

a company is multinational. However, based on this

criterion, some 300,000 small and medium-sized

German companies do not qualify, even though

these ﬁrms (called the Mittelstand, or midranking)

contribute mightily to Germany’s export success.

These medium-sized ﬁrms account for two-thirds of

the country’s gross national product and four-ﬁfths

of all workers. It should be noted that IBM did

not become multinational because it was large but

rather that it became large as a result of going inter-

national. Therefore, corporate size should not be

used as the sole criterion for multinationalism.

Deﬁnition by structure

According to Aharoni, an MNC has at least three

signiﬁcant dimensions: structural, performance, and

behavioral.

Structural requirements for deﬁnition

as an MNC include the number of countries in

which the ﬁrm does business and the citizenship of

corporate owners and top managers. Pﬁzer, stating

that it is a truly global company, does business in

more than 150 countries.

NATURE OF INTERNATIONAL MARKETING

Table 1.2 Global leaders based on a composite

ranking

Rank Company Employees

(thousands)

1 Citigroup 253.8

2 General Electric 311.5

3 American Intl Group 76.9

4 ExxonMobil 98.8

5 Bank of America 142.7

6 BP 109.2

7 HSBC Group 176.7

8 Fannie Mae 4.3

9 Royal Dutch/Shell 90.0

10 ING Group 112.0

Source:

Adapted from “The International 500,”

Forbes

,July

22, 2002, 124.

Table 1.3 The world’s top nonﬁnancial TNCs,

ranked by foreign assets (millions of US dollars)

Rank Company Foreign Total

assets assets

1 Vodafone 221,238 222,326

2 General Electric 159,188 437,006

3 ExxonMobil 101,728 149,000

4 Vivendi Universal 93,260 141,935

5 General Motors 75,150 303,100

6 Royal Dutch/Shell 74,807 122,498

7 BP 57,451 75,173

8 Toyota Motor 55,974 154,091

9 Telefonica 55,968 87,084

10 Fiat 52,803 95,755

Source:

Adapted from

World Investment Report 2002:

Transnational Corporations and Export Competitiveness

Division on Investment,Technology and Enterprise

Development (DITE), UNCTAD, 2002, 86.

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NATURE OF INTERNATIONAL MARKETING

There is no doubt that TNCs have been growing in size

at rates exceeding those of many economies.The sales

of the 500 largest ﬁrms in the world nearly tripled

between 1990 and 2001,

while world GDP in current

prices increased 1.5 times between these two years.

UNCTAD’s 100 TNCs also increased their total sales,

from $3.2 trillion to almost $4.8 trillion between

1990 and 2000.

However, a comparison of the sales of ﬁrms with

the GDP of countries is conceptually ﬂawed, since GDP

is a value-added measure and sales are not. A compa-

rable yardstick requires that sales be recalculated as

value added. For ﬁrms, value added can be estimated

as the sum of salaries and beneﬁts, depreciation and

amortization, and pre-tax income. Based on this mea-

sure,the world’s largest TNC was ExxonMobil,with an

estimated $63 billion in value added in 2000;it ranked

45th in a combined list of countries and non-ﬁnancial

companies.The size of this company equals the size of

the economies of Chile or Pakistan in terms of value

added. In the top 100 of a combined country–company

list for 2000, there were twenty-nine TNCs; half of the

largest value-added entities ranked between 51 and

100 were individual ﬁrms.

Source:

Adapted from

World Investment Report 2002:

Transnational Corporations and Export Competitiveness,

Division on Investment, Technology and Enterprise Develop-

ment (DITE), UNCTAD, 2002, 90.

EXHIBIT 1.1 ARE SOME TNCs BIGGER THAN COUNTRIES?

Rank Name of TNC/ Value Rank Name of TNC/ Value Rank Name of TNC/ Value

economy added

(billions of (billions of (billions of

dollars) dollars) dollars)

1 USA 9810

2 Japan 4765

3 Germany 1866

4 United Kingdom 1427

5 France 1294

6 China 1080

7 Italy 1074

8 Canada 701

9 Brazil 595

10 Mexico 575

11 Spain 561

12 Republic of Korea 457

13 India 457

14 Australia 388

15 Netherlands 370

16 Taiwan 309

17 Argentina 285

18 Russian Federation 251

19 Switzerland 239

20 Sweden 229

21 Belgium 229

22 Turkey 200

23 Austria 189

24 Saudi Arabia 173

25 Denmark 163

26 Hong Kong 163

27 Norway 162

28 Poland 158

29 Indonesia 153

30 South Africa 126

31 Thailand 122

32 Finland 121

33 Venezuela 120

34 Greece 113

35 Israel 110

36 Portugal 106

37 Iran 105

38 Egypt 99

39 Ireland 95

40 Singapore 92

41 Malaysia 90

42 Colombia 81

43 Philippines 75

44 Chile 71

45 ExxonMobil 63

46 Pakistan 62

47 General Motors 56

48 Peru 53

49 Algeria 53

50 New Zealand 51

Notes

1 GDP for countries and value added for TNCs. Value added is deﬁned as the sum of salaries, pre-tax proﬁts and

depreciation and amortization.

2 Value added is estimated by applying the 30 percent share of value added in the total sales, 2000, of sixty-six

manufacturers for which the data were available.

Citicorp satisﬁes the requirement for multina-

tionalism through the citizenship of members of its

top management.The company has done as much as

other major American MNCs to diversify its man-

agement. In Asia, a native of Pakistan is in charge of

the ﬁrm’s $800 million ﬁnance business for all

of Asia apart from Japan. His colleague, an Indian

national, heads the consumer business.They are two

of the eight non-Americans in the elite group of

ﬁfteen executive vice-presidents.

Deﬁnition by performance

Deﬁnition by performance depends on such charac-

teristics as foreign earnings, sales, and assets.These

performance characteristics indicate the extent of

the commitment of corporate resources to foreign

operations and the amount of rewards from that

commitment. The greater the commitment and

reward, the greater the degree of internationaliza-

tion. Japanese and British ﬁrms have routinely

shown willingness to commit their corporate

resources to overseas assets.

Kraft, North America’s largest food company,

has long dominated US grocery-store shelves with

such powerful brands as Philadelphia Cream

Cheese, Oreo cookies,Tang, Jell-O, Kool-Aid, Life

Savers, Planters peanuts, and Lunchables prepack-

aged meals for kids. Remarkably, it has sixty-one

brands with more than $100 million in sales.

Virtually all US grocery stores need some of Kraft’s

products. Internationally, it is a different matter. In

Australia, Kraft Macaroni & Cheese and Oscar

Mayer hot dogs are not readily available.While Kraft

derives 27 percent of its total revenues from over-

seas, the ﬁgure pales when compared with H.J.

Heinz’s 44 percent, McDonald’s 50+ percent, and

Coca-Cola Co.’s 80+ percent. Furthermore, Kraft

trails Nestlé and Unilever in foreign markets, with

only 9 percent of its sales coming from developing

countries.

Human resources or overseas employees are cus-

tomarily considered as part of the performance

requirements rather than as part of the structural

requirements, though the desirability of separating

lower level employees from top management is

questionable.A preferable analysis would be to treat

the total extent of the employment of personnel in

other countries as another indicator of the structure

of the company. In any case, the willingness of

a company to use overseas personnel satisﬁes a

signiﬁcant criterion for multinationalism. Avon, for

example, employs 370,000 Japanese women to sell

its products house to house across Japan. Siemens,

well known worldwide for its consumer and indus-

trial products, has some 300,000 employees in 124

countries.

Deﬁnition by behavior

Behavior is somewhat more abstract as a measure of

multinationalism than either structure or perform-

ance, though it is no less important. This require-

ment concerns the behavioral characteristics of top

management. Thus, a company becomes more

multinational as its management thinks more inter-

nationally. Such thinking, known as geocentricity,

must be distinguished from two other attitudes or

orientations, known as ethnocentricity and poly-

centricity.

Ethnocentricity

Ethnocentricity is a strong orientation toward the

home country. Markets and consumers abroad are

viewed as unfamiliar and even inferior in taste,

sophistication, and opportunity. The usual practice

is to use the home base for the production of stan-

dardized products for export in order to gain some

marginal business. Centralization of decision

making is thus a necessity. Caterpillar Inc.’s chair-

man recalled that, while making sales calls in Africa

in his younger days, pricing decisions were often

forced upon him from headquarters even though

those decisions did not ﬁt the local market.

Polycentricity

Polycentricity, the opposite of ethnocentricity, is a

strong orientation to the host country.The attitude

NATURE OF INTERNATIONAL MARKETING

places emphasis on differences between markets

that are caused by variations within, such as in

income, culture, laws, and politics.The assumption

is that each market is unique and consequently dif-

ﬁcult for outsiders to understand. Thus, managers

from the host country should be employed and

allowed to have a great deal of discretion in market

decisions.A signiﬁcant degree of decentralization is

thus common across the overseas divisions.

A drawback of polycentricity is that it often

results in duplication of effort among overseas sub-

sidiaries. Similarities among countries might well

permit the development of efﬁcient and uniform

strategies.

Geocentricity

Geocentricity is a compromise between the two

extremes of ethnocentricity and polycentricity. It

could be argued that this attitude is the most

important of the three. Geocentricity is an orienta-

tion that considers the whole world rather than any

particular country as the target market. A geocen-

tric company might be thought of as denationalized

or supranational.As such, “international” or “foreign”

departments or markets do not exist because the

company does not designate anything international

or foreign about a market. Corporate resources are

allocated without regard to national frontiers, and

there is no hesitation in making direct investment

abroad when warranted.

There is a high likelihood that a geocentric

company does not identify itself with a particular

country. Therefore, it is often difﬁcult to deter-

mine the ﬁrm’s home country except through the

location of its headquarters and its corporate regis-

tration. According to Ohmae, business is “national-

ityless,” and companies should attempt to lose their

national identity. As such, a corporation should not

mind moving its headquarters to a more hospitable

environment.

The chairman of Japanese retail

giant Yaohan International Group, for example,

moved the ﬁrm’s headquarters as well as his family

and personal assets to Hong Kong to take advantage

of Hong Kong’s low taxes and hub location in Asia.

To reward his faith in China, the Chinese govern-

ment permitted Yaohan to build shopping malls in

China.

Geocentric ﬁrms take the view that, even though

countries may differ, differences can be understood

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Ten commandments for tourists (as found in a hotel).

1 Thou shalt not expect to ﬁnd things as thou hast

at home, for thou hast left home to ﬁnd things

different.

2 Thou shalt not take anything too seriously, for a

carefree mind is the start of a good holiday.

3 Thou shalt not let the other travelers get on thy

nerves, for thou hast paid good money to enjoy

thyself.

4 Remember to take half as many clothes as thou

thinkest and twice the money.

5 Know at all times where thy passport is, for a

person without a passport is a person without

a country.

6 Remember that if we had been expected to stay

in one place we would have been created with

roots.

7 Thou shalt not worry, for he that worrieth hath no

pleasure, and few things are that fatal.

8 When in a strange land, be prepared to do some-

what as its people do.

9 Thou shalt not judge the people of a country by

a person who hath given thee trouble.

10 Remember thou art a guest in other lands and

he that treats his host with respect shall be

honored.

CULTURAL DIMENSION 1.1 HOW TO BE A MULTINATIONAL PERSON

and managed. In coordinating and controlling the

global marketing effort, the company adapts its

marketing program to meet local needs within the

broader framework of its total strategy. It is import-

ant to coordinate the activities of local subsidiaries

and those of the headquarters. One study found

important divergence between home and away in

various aspects of the marketing process.This diver-

gence may result in poor relationships, dysfunc-

tional conﬂict, and ineffectiveness.

The geocentric approach combines aspects of

centralization and decentralization in a synthesis

that allows some degree of ﬂexibility.The ﬁrm may

designate one country subsidiary as its research and

development center while appointing another sub-

sidiary in another country to specialize in manufac-

turing certain products. Although the corporation

provides overall guidance so as to achieve maximum

efﬁciency of its global system, the various aspects of

the local operations may or may not be centralized

as long as they meet local market needs. Geocentric

ﬁrms compete with each other on a worldwide basis

rather than at a local level.

There is evidence that geocentricity and com-

panies’ international practices are related. One

study found that managers’ worldmindedness was

a signiﬁcant determinant of international trade

propensity.

Another study employed the GEO-

CENTRIC scale to measure international human

resources managers’ mind-set concerning the

impact of nationality on the selection and careers of

managers (see Exhibit 1.2).The index of a geocen-

tric mind-set was found to be signiﬁcantly related

to the percentage of sales and employees abroad as

well as the number of countries with manufactur-

ing operations.

A study of the EPRG (ethnocentrism, polycen-

trism, regiocentrism, and geocentrism) framework

found that ﬁrms exhibiting an ethnocentric orienta-

tion emphasize the home market and export to psy-

chologically close markets. In addition, these ﬁrms

believe that marketing adaptation is not necessary.

NATURE OF INTERNATIONAL MARKETING

Researchers have used a number of criteria to identify

ﬁrms and managers that are international in outlook.

Such indicators as foreign sales and foreign employ-

ees are relatively easy to measure. However, attitudes

are more abstract, and it is more difﬁcult to measure

a person’s attitudes toward overseas consumers and

markets.

The GEOCENTRIC scale was designed to measure

geocentricity. The scale consists of ﬁve questionnaire

items. These ﬁve statements are constructed as the

Likert scale which requires a respondent to indicate

the extent of agreement or disagreement with each

statement on a 5-point scale.The ﬁve statements are:

1 A manager who began his or her career in any

country has an equal chance to become CEO of my

company.

2 In the next decade, I expect to see a nonUS CEO

in my ﬁrm.

3 In the next decade, I expect to see one or more

nonUS nationals serving as a senior corporate

ofﬁcer on a routine basis.

4 In my company, nationality is unimportant in

selecting individuals for managerial positions.

5 My company believes that it is important that

the majority of top corporate ofﬁcers remain

American.

A person’s index of a geocentric mind-set is a simple

sum of these ﬁve index items with the order of the last

reversed. Higher values represent a more geocentric

mind-set. Firms with higher scores frequently use pre-

departure training for expatriates and make good use

of managers returning from overseas assignments.

Source:

Adapted from Stephen J. Kobrin, “Is There a

Relationship between a Geocentric Mind-Set and Multi-

national Strategy?”

Journal of International Business

Studies

25 (No. 3, 1994): 493–511.

EXHIBIT 1.2 ARE YOU INTERNATIONALLY INCLINED?

In contrast, polycentric, regiocentric, and geocen-

tric ﬁrms export to psychologically distant markets.

Adaptation increases as psychological distance

between home and host markets increases.

THE PROCESS OF

INTERNATIONALIZATION

The literature describes a number of stages of inter-

nationalization. Many companies may have begun as

domestic ﬁrms concentrating on their own domes-

tic markets before shifting or expanding the focus

to also cover international markets.As they become

more international, they are supposed to move

from being sporadic exporters to being frequent

exporters before ﬁnally doing manufacturing

abroad. It is thus useful to investigate the stages of

internationalization.

One study found evidence to support the hypoth-

esis that there are four identiﬁable stages in a ﬁrm’s

internationalization. The four stages are: nonex-

porters, export intenders, sporadic exporters, and

regular exporters. The process shows how ﬁrms

were constrained initially by resource limitations

and a lack of export commitment, and how they

are able to become more and more internationalized

as more resources are allocated to international

activity.

Based on his review of a number of the interna-

tionalization models which specify the various

stages of internationalization, Andersen has pro-

posed his own U-model which has received mixed

empirical support.

According to this model, there

are four stages: (1) no regular export activities, (2)

export via independent representatives (agent), (3)

establishment of an overseas sales subsidiary, and (4)

overseas production/manufacturing. The develop-

ment is supposed to take place initially within a spe-

ciﬁc country before being repeated across countries.

More recently, an increasingly global economy

has given birth to a new theory which states that

some companies are destined to go global from the

outset, thus bypassing the stages of internationaliza-

tion. Several Silicon Valley companies do not see

the need to have a business model ﬁrst for the US

market before going overseas. Instead, their mission

is global almost from birth.As such, from the begin-

ning, they may employ engineers in India, manu-

facture in Taiwan, and sell in Europe.

At present, there is no conclusive evidence to

show that domestic ﬁrms have generally indeed pro-

gressed from one stage to another as prescribed on

their way to becoming more internationally ori-

ented. Likewise, no empirical evidence has been

provided so far to support the competing hypothe-

sis that some ﬁrms are “born global” in the sense that

their mission is to become MNCs which engage in

international business activities from the outset.

BENEFITS OF INTERNATIONAL

MARKETING

International marketing daily affects consumers in

many ways, though its importance is neither well

understood nor appreciated. Government ofﬁcials

and other observers seem always to point to the

negative aspects of international business. Many of

their charges are more imaginary than real.

Survival and growth

For companies to survive, they need to grow.

Because most countries are not as fortunate as the

USA in terms of market size, resources, and oppor-

tunities, they must trade with others to survive.

Since most European nations are relatively small

in size, they need foreign markets to achieve

economies of scale so as to be competitive with

American ﬁrms.

International competition may not be a matter of

choice when survival is at stake. A study of ﬁve

medical sector industries found that international

expansion was necessary when foreign ﬁrms

entered a domestic market. However, only ﬁrms

with previously substantial market share and inter-

national experience could expand successfully.

Moreover, ﬁrms that retrenched after an inter-

national expansion disappeared.

Even American marketers cannot ignore the vast

potential of international markets. The world

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NATURE OF INTERNATIONAL MARKETING