This presentation defines international marketing, international marketing decisions, challenges of international marketing, and driving and restraining forces of international marketing. It goes on to discuss the process of market selection, firm related, market related and other factors effecting market selection. It also reflects on various modes of entry into foreign markets such as exporting (commercial strategy, commercial mode), foreign direct investment (industrial strategy, integrated modes) and associated or contractual modes (contractual strategy, competitive alliances). The presentation closes with a case study on the experience of Proctor and Gamble (P&G) in various international markets like Japan, China and India.

1. International Marketing, Market
Selection, Modes of Entry in
International Markets
International Business Management
Mrs. Charu Rastogi, Asst. Prof.

2. What is Marketing?
 “Marketing is a social and managerial process by
which individuals and groups obtain what they need
and want through creating, offering, and
exchanging products of value with others.” (Kotler)
Process, Exchange, Value
Mrs. Charu Rastogi, Asst. Prof.

3. Marketing process
Capture
Create value for customers and value from
build customer relationships customers
in return
Understand Design a Construct a Build profitable Capture
the customer- marketing relationships value from
marketplace driven program that and create customers to
and customer marketing delivers customer create profits
needs and strategy superior satisfaction and
wants value customer
quality
Marketing Global Ethics and
technology markets social responsibility
Mrs. Charu Rastogi, Asst. Prof.

4. What is international marketing?
- “International marketing is the process of planning and
conducting transactions across national borders to create
exchanges that satisfy the objectives of individuals and
organizations” (Czinkota and Ronkainen)
- “International marketing focuses its resources on global market
opportunities and threats” (Keegan and Green)
- “International marketing is the motor of the internationalization
process of the firm” (Usunier)
- It is a tool used to obtain improvement of the firm’s position in
the global market
- Strategy and action, global and local
Mrs. Charu Rastogi, Asst. Prof.

5. International Marketing Decisions
Deciding whether to go abroad
Deciding which markets to enter
Deciding how to enter the market
Deciding on the marketing program
Deciding on the marketing organization
Mrs. Charu Rastogi, Asst. Prof.

6. What are the similarities and differences between
international marketing and domestic marketing?
 Similarities: basic concepts, practices and tools
are almost identical, key success factors are the
same…
 Differences: more strategic, more variables, more
complex, cultural differences, legal constraints,
information sources, managing distances, entry
mode choice…
Mrs. Charu Rastogi, Asst. Prof.

7. Driving Forces of International Marketing
 Technology
 Culture
 Market Needs
 Costs
 Free Markets
 Economic Integration
 Peace
 Strategic Intent
 Management Vision, Strategy and Action
Mrs. Charu Rastogi, Asst. Prof.

8. Restraining Forces of International
Marketing
 Culture
 Market Differences
 Costs
 National Controls
 Nationalism
 Peace vs. War/ Stability
 Management Myopia
 Organization History
 Domestic Focus
Mrs. Charu Rastogi, Asst. Prof.

9. International Marketing Challenges
 Unstable governments
 Political restrictions
 Incompatibility of technical standards
 Foreign-exchange problems
 Government bureaucracy/Corruption
 Tariffs and other trade barriers
 Technological pirating
 High cost of product and communication adaptations
Mrs. Charu Rastogi, Asst. Prof.

10. Standardization vs. adaptation
 Factors encouraging standardization
 Economies of scale in production
 Economies in R&D
 Economies in marketing
 Global competition
 “Shrinking” of world market Degree of
standardization,
 “Converging, homogeneous cultures”
Degree of
adaptation,
 Factors encouraging adaptation global/local
 Differing use conditions paradox
 Government and regulatory influences
 Local competition
 Differing consumer behavior patterns
 “True” to marketing concept
Mrs. Charu Rastogi, Asst. Prof.

11. Need for adaptation
High
Degree of
cultural
grounding
Low
Industrial/Technology intensive Consumer
Nature of product
Mrs. Charu Rastogi, Asst. Prof.
Source: Czinkota and Ronkainen

12. Market Selection
 Firm related factors
 Market related factors
 Other factors
Mrs. Charu Rastogi, Asst. Prof.

13. Market Selection: Firm related factors
 Ethnocentric: everything is centered on the domestic
market.
 Polycentric: several important foreign markets exist.
 Regiocentric: the market is composed of several large
economic regions.
 Geocentric: the world is one large global market.
Mrs. Charu Rastogi, Asst. Prof.

14. Market Selection: Firm related factors
Ethnocentric Polycentric Geocentric
Approach International Each country is The world is one
operations are relatively common market
secondary independent
Vision Centered on the Each market is Global vision of
domestic market unique the world
Priority Searching for Taking into Unifying
identical consideration differences in
segments in differences in the world
foreign markets foreign markets market
Planning National Subsidiary in World
center headquarters each country headquarters
Structure International Division for Matrix structure
division each zone
Mrs. Charu Rastogi, Asst. Prof.

15. Market Selection: Firm related factors
Ethnocentric Polycentric Geocentric
Staff Citizens from Citizens from Most qualified
the domestic each market
market
Marketing Extension Adaptation Extension,
strategy Adaptation,
Creation
Management Centralized Decentralized Integrated and
style interactive
Production Domestic Local Low-cost
sources of
supply
Partnerships Agent, licensing Joint-ventures Strategic
alliances
Performance Domestic Local market World market
measures market share Charu Rastogi, Asst. Prof.
Mrs. share share

16. Market Selection: Market related factors
 A)General factors
 economic factors
 business regulations
 political factors
 B) Specific factors
 trends in domestic market
 trends in export and import
 nature of competition
 supply conditions of raw materials
Mrs. Charu Rastogi, Asst. Prof.

17. Market Selection: Other Factors
 Political restrictions
 Special requirements
 Product specification
 Distant location
 Market accessibility
 Business community
Mrs. Charu Rastogi, Asst. Prof.

18. Market Selection Process
International
marketing
objectives
Commercial Parameters for
production selection
Preliminary
Test marketing
screening
Evaluation and Short listing of
selection markets
Mrs. Charu Rastogi, Asst. Prof.

19. Entry mode choice
 Considered by many as the most important
aspect of a firm’s internationalization strategy
 Entry mode will determine long-term success or
withdrawal from foreign markets
 Poor decisions can be very costly for the firm
Mrs. Charu Rastogi, Asst. Prof.

20. Factors in the entry mode decision
Target country Target country Target country Home country
market factors environmental production factors
factors factors
External factors
Entry mode
decision
Internal factors
Company product Company resource
factors and commitment
factors
Mrs. Charu Rastogi, Asst. Prof.

21. Elements of market entry strategies
Entry
operation
Choice of target Setting objectives Choice of Design the Target
product/market and goals entry mode marketing plan market
Control systems:
monitoring operations /
Revising entry strategy
Mrs. Charu Rastogi, Asst. Prof.

22. Different types of entry modes
 Exporting (commercial strategy, commercial
modes)
 Foreign direct investment (industrial strategy,
integrated modes)
 Associated or contractual modes (contractual
strategy, competitive alliances)
Mrs. Charu Rastogi, Asst. Prof.

23. Entry mode continuum
Exporting Contractual modes FDI
- +
Commitment, risk, control, profit potential
Mrs. Charu Rastogi, Asst. Prof.

24. Types of exporting
 Indirect exporting
 Distributor / export merchants
 Export agent
 EMC
 Direct exporting
 Export department
 Export sales representatives
 E-business
 Cooperative exporting
 Export groups
 Piggyback exporting
Mrs. Charu Rastogi, Asst. Prof.

25. Foreign direct investment (FDI)
 The ultimate form of foreign involvement
 Direct ownership of foreign-based assembly,
manufacturing or sales facilities
 The company can buy part or full interest in a
local company (M&A) or build its own facilities
 Considered the “preferred” mode of entry
Mrs. Charu Rastogi, Asst. Prof.

26. Advantages and disadvantages of FDI
Advantages
- Cost economies (labor, raw materials, incentives, freight savings, etc…)
- Better image in host country
- Deeper relationship with government, customers, local suppliers,
distributors
- Better adaptation
- Full control of investments
- Long term objectives
Disadvantages
- High initial and operating costs
- High level of risk
Mrs. Charu Rastogi, Asst. Prof.

27. FDI options
 Make-or-buy decision
 Greenfield investment
 Mergers and acquisition
 Branch or subsidiary
 Structure
 Legal status
 Analyzing FDI project
 Assessing profitability
 Discounted cash flow analysis
Mrs. Charu Rastogi, Asst. Prof.

28. Associated entry modes
 Newest, most recent forms of international business
 Transfer of technology or know-how between two firms
 Shared risks
 Only option in countries where the government requires
foreign firms to use local capital
 Better access to local market knowledge
Mrs. Charu Rastogi, Asst. Prof.

29. Types of associated entry modes
 Joint venture: foreign and local investors share ownership and control
of local operations
 Licensing: licensor licenses a foreign company to use a
manufacturing process, trademark, patent, trade secret or other item of
value for a fee
 Management contracts: firm exports management services instead of
a product, separation between ownership and management
 International Franchising: contractual association between a
franchisor (manufacturer, wholesaler or service organization) and
franchisees (independent business people who buy the right to own
and operate units in the franchise system). Franchising is based on
some unique product, service or method of doing business.
 Industrial franchising
 Distribution franchising
 Service franchising
Mrs. Charu Rastogi, Asst. Prof.

30. Comparing different entry mode options
High Franchising FDI
Licensing Wholly owned
subsidiary (M&A)
Contribution of know-
Management contract
Branch office
AD / Concessionaire
Minority shareholding
through partial acquisition
how
ITC / distributor
Majority JV investment
Foreign buying (local partner know-how)
Low department
Low Level of ownership High
Mrs. Charu Rastogi, Asst. Prof.

31. Case Study: DIFFERENT FOR GAMBLE
 Procter and Gamble (P&G), a global consumer products giant,
“stormed the Japanese market with American products, American
managers, American sales methods and strategies. The result was
disastrous until the company learnt how to adapt products and
marketing style to Japanese culture. P&G which entered the
Japanese market in 1973 lost money until 1987, but by 1991 it
became its second largest foreign market.”
 P&G, acclaimed as “the World’s most admired marketing machine”
entered India, which has been considered as one of the largest
emerging markets, in 1985. It entered the Indian detergent marketing
in the early nineties with the Ariel brand through P&G India (in which
it had a 51 percent holding which was raised to 65 per cent in
January 1993, the remaining 35 percent being held by the public).
P&G established P&G Home products, a 100 percent subsidiary
later (1993) and the Ariel was transferred to it. Besides soaps and
detergents, P&G had or introduced later product portfolios like
shampoos (Pantene) medical products (Vicks Prof.
Mrs. Charu Rastogi, Asst.
range, Clearasil and
Mediker) and personal products (Whisper feminine hygiene products,

32.  The Indian detergents and personal care products market was
dominated by Hindustan Lever Ltd. (HLL). In some segments of the
personal care products market the multinational Johnson & Johnson
has had a strong presence. Tata group’s Tomco, which had been in
the red for sometime, was sold to Hindustan Lever Ltd.(HLL).
 HLL, a subsidiary of P&G’s global competitor, has been in India for
about a century. The take over of Tomco by HLL further increased its
market dominance. In the low priced detergents segment Nirma has
established a very strong presence. Over the period of about one
and a half decades since its entry in India, P&G invested several
thousand crores. However, dissatisfied with its performance in India,
it decided to restructure its operations, which in several respects
meant a shrinking of activities - the manpower was drastically cut
and thousands of stockists were terminated. P&G, however holds
that, it will continue to invest in India. According to Gary Cofer, the
country manager, “ it takes time to build a business category or brand
in India. It is possibly an even more demanding geography than
Mrs. Charu Rastogi, Asst. Prof.
others.”

33.  China, on the other hand, with business worth several
times than in India in less than 12 years, has emerged as
a highly promising market for P & G. When the Chinese
market was opened up, P & G was one of the first MNCs
to enter. Prior to the liberalisation, Chinese consumers
had to content with shoddy products manufactured by
government companies. Per capita income of China is
substantially higher than India’s and the Chinese
economy was growing faster than the Indian. Further, the
success of the single child concept in China means
higher disposable income.
 Further it is also pointed out that for a global company
like P&G, understanding Chinese culture was far easier
since the expat Chinese in the US was not very different
from those back home where as most Indian expats
tended to adapt far more to the cultural nuances of the
immigrant country.
Mrs. Charu Rastogi, Asst. Prof.

34.  One of P & G’s big bets in India was the compact technology premium
detergent brand Ariel. After an initial show, Ariel, however, failed to generate
enough salesconsumers seem to have gone by the per kilo cost than the
cost per wash propagated by the promotion. To start with, P&G had to import
the expensive state-of-the –art ingredients, which attracted heavy customs
duties. The company estimated that it would cost Rs. 60 per kilo for Ariel
compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee
devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms
was soon Rs. 41 by the time the product was launched. HLL fought Ariel
back with premium variants of Surf like Surf Excel.
 It is pointed out that, “in hindsight, even P & G managers privately admit that
bringing in the latest compact technology was a big blunder. In the eighties,
P & G had taken a huge beating in one of its most profitable markets, Japan,
at the hands of local company Kao. Knowing the Japanese consumer’s
fondness for small things, Kao weaved magic with its new-found compact
technology. For a company that prided itself on technology, the drubbing in
Japan was particularly painful. It was, therefore, decided that compacts
would now be the lead brand for the entire Asia-Pacific region.
Mrs. Charu Rastogi, Asst. Prof.

35.  When P & G launched Ariel in India, it hoped that the Indian consumer would
devise the appropriate benchmarks to evaluate Ariel. As compacts promised
economy of use, P & G hoped that consumers would buy into the low-cost-
per wash story. But selling that story through advertising was particularly
difficult, especially since Indian consumers believed that the whasing wasn’t
over unless the bar had been used for scrubbing. Even though Ariel was
targeted at consumers with high disposable income, who represented half
the urban population, consumers simply baulked at the outlay.
 Thereafter, one thing led to another. Ariel’s strategy of introducing variants
was a smart move to Flank Lever at every price point by cleverly using the
brand’s halo effect. And by supporting the brand in mass media and retaining
the share of voice. By 1996, it had become clear that Ariel’s equity as a high-
performance detergent had begun to take a beating. Its equity as a top-of-
the-line detergent was getting eroded... Nowhere in P&G’s history had a
concept like Super Soaker been used to gain volumes.... It was decided that
Super Soaker would no longer be supported, nor would Ariel bar be
supported in media.”
Mrs. Charu Rastogi, Asst. Prof.

36. Questions
 Discuss the reasons for the initial failure of P&G in
Japan.
 Where did P&G go wrong (if it did) in the evaluation
of the Indian market and its strategy ?
 Discuss the reasons for the differences in the
performance of P&G in India and China.
Mrs. Charu Rastogi, Asst. Prof.