Chapter1TheScopeandChallengeofInternationalMarketing?McGraw-HillEducation.Allrightsreserved.Authorizedonlyforinstructoruseintheclassroom.

NoreproductionorfurtherdistributionpermittedwithoutthepriorwrittenconsentofMcGraw-HillEducation.LearningObjectives1-1 Thebenefitsofinternationalmarkets1-2 ThechangingfaceofU.S.business1-3 Thescopeoftheinternationalmarketingtask1-4 Theimportanceoftheself-referencecriterion(SRC)ininternationalmarketing1-5 Theincreasingimportanceofglobalawareness1-6 TheprogressionofbecomingaglobalmarketerGlobalCommerceCausesPeace1of3GlobalcommercethrivesduringpeacetimeEconomicboominNorthAmericainlate1990sTheendoftheColdWarOpeningformercommunistcountriestoworldtradingsystemGlobalCommerceCausesPeace2of3InternationaltradeisimportantLackofconsistentandpredictabletradepoliciescanleadtotensionManyworldeventsaffecttradeCompanyscandalsandlayoffsWarsandpoliticalunrestNaturaldisastersFinancialandeconomicdisruptionsPopulistdevelopmentsU.K.breakwiththeEuropeanUnionviaBrexitvotePopulistcandidateslikeDonaldTrumpintheU.S.areelectedGlobalCommerceCausesPeace3of3FourTrendsAffectingGlobalBusinessGrowthoftheWTOandopentradeagreementsDevelopingcountriesmovingtowardfreetradeTheInternet,cellular,andnetworkedcommunicationAmandatetomanagetheglobalenvironmentforthefutureInternationalTradeandPeaceArailhasbeenbuilttolinkNorthandSouthKoreaforthefirsttimeinnearly60yearstotransportmaterials.Thisshowsasteptowardpeaceandinternationaltrade.?HanMyung-guTheInternationalizationofU.S.BusinessGlobalizationofmarketsincreasingMoreforeigncustomers,competitors,suppliersCompetitioncomesfromdomesticandforeignfirmsManyforeign-controlledcompaniesinU.S.ForeigndirectinvestmentinU.S.isabove$3trillionForeign-ownedcompaniesinalmostallindustries:Automobiles(Honda,BMW,Mercedes)Appliances(LGElectronics,Frigidaire)Conveniencestoresandrestaurants(7-Eleven,Ben&Jerry’s)Newsandentertainment(TheWallStreetJournal,PearleVision,UniversalStudios,RCA)Hotels(HolidayInn,WaldorfAstoria)Exhibit1.1ForeignAcquisitionsofU.S.Companies1of2U.S.Companies/BrandsForeignOwner7-ElevenJapanBen&Jerry’s(icecream)U.K.BudweiserBelgiumChryslerItalyChryslerBuilding(NYC)AbuDhabiChurch’sChickenBahrainCITGOVenezuelaColumbiaPictures(movies)JapanFrench’sMustardU.K.Firestone(tires)JapanFrigidaireSwedenGenentechSwitzerlandSource:Compiledfromannualreportsoflistedfirms,2018.Exhibit1.1ForeignAcquisitionsofU.S.Companies2of2U.S.Companies/BrandsForeignOwnerGerberSwitzerlandHolidayInnU.K.HuffyCorp.(bicycles)ChinaOroweat(breads)MexicoPurina(petfood)SwitzerlandRandomHouse(publishing)GermanyRCA(television)France/ChinaSmith&Wesson(guns)U.K.SmithfieldFoods(pork)ChinaSwift&Company(meatpacking)BrazilTheWallStreetJournalAustraliaT-MobileGermanyWaldorfAstoriaHotel(NYC)ChinaSource:Compiledfromannualreportsoflistedfirms,2018.MexicanBrandsintheU.S.AlongwithNAFTAhavecometwoofMexico’smostprominentbrandnames.Gigante,oneofMexico’slargestsupermarketchains,nowhasseveralstoresinSouthernCalifornia,includingthisoneinAnaheim.GrupoBimbo,agrowingMexicanmultinational,hasrecentlypurchasedAmericanbrand-namedfirmssuchasOroweat,Webers,SaraLee,andMrs.Baird’sBread.?JohnGrahamRevenuesfromInternationalSalesAmericanbrandshaveaglobalreachImportantforU.S.businessestothriveInmanycases,foreignsalesexceeddomesticsalesForeigninvestmentsgeneratealotofrevenueApplehadrevenueof$215billionin2016;60percentoftotalrevenuefrominternationalsalesExhibit1.2SelectedU.S.CompaniesandTheirInternationalSalesCompanyGlobalRevenues(billionsofdollars)PercentRevenuesfromOutsidetheU.S.Amazon136.033.6Apple215.160.0Boeing94.659.0DowChemical48.265.5Exxon197.573.5Ford151.838.5GeneralElectric119.770.3Intel59.478.2Johnson&Johnson71.947.4Procter&Gamble65.358.7Walmart482.224.5Source:S&P500,2016:GlobalSalesYearinReview(July2017).InternationalMarketingDefinedTheperformanceofbusinessactivitiesPlan,price,promote,directflowofgoodsandservicesforprofitForconsumersorusersinmorethanonenationUniquefromdomesticmarketingManyunfamiliarproblemsrequireuniquestrategiestocopewithproblemsLevelofuncertaintyanduncontrollablesinforeignmarketsTheInternationalMarketingTaskUncontrollableuncertaintyComprisedofuncontrollableelementsinbusinessenvironmentsEachinternationalmarkethasownsetoffactorsExhibit1.3TheInternationalMarketingTaskJumptolongimagedescription.MarketingDecisionFactors1of2AmarketingprogramisdesignedforoptimaladjustmenttouncertaintyControllableelementsindomesticenvironmentBlendallelementstocapitalizeonanticipateddemandCanalterelementsifneededChangingmarketconditions,consumertastes,andcorporateobjectivesMarketingDecisionFactors2of2UncontrollableelementsindomesticenvironmentActivelyevaluateelementstomakeadjustmentsDeterminetheoutcomeofthemarketingenterpriseAspectsoftheDomesticEnvironmentDomesticEnvironmentUncontrollablesPoliticalandlegalforcesEconomicclimateCompetitionLeveloftechnologyStructureofdistributionGeographyandinfrastructureCulturalforcesAspectsoftheForeignEnvironmentForeignEnvironmentUncontrollablesPoliticalandlegalforcesEconomicforcesCompetitiveforcesLeveloftechnologyStructureofdistributionGeographyandinfrastructureCulturalforcesCitibankinBrazilACitibankbranchintheheartofBrazil.Oneoftheworld’sgreatmultinationalcorporationsbarelysurvivedthefinancialdebacleofOctober2008.Indeed,duringthepastfewyears,itsinternationaloperationshaveperformedmuchbetterthanitsdomesticoneswiththeexceptionofthoseinBrazil.Inparticular,emergingmarketssuchasChina,India,andthePhilippinesprovedrelativelyresilientsincethefinancialcrisisthatbeganin2008.?JohnGrahamEnvironmentalAdaptationNeededCulturaladjustment:themostchallengingandimportanttaskDutiesofinternationalmarketersInterpretinfluenceofeachuncontrollableelementonmarketAdjustmarketingeffortstoculturesinwhichtheyarenotattunedBeawareofownframeofreferencewhenevaluatingmarketsOftenbasedoffacculturationinhomecountryTheSelf-ReferenceCriterionandEthnocentrismBothimpedeabilitytoaccuratelyassessforeignmarketSelf-ReferenceCriterion(SRC)Unconsciousreferencetoownculturalvalues,experiences,knowledgeProblematicwhenusedasbasisfordecisionsEthnocentrismOne’sowncountry,culture,orcountryisbestMostproblematicwhenaffluentcountriesworkwithlessaffluentBeVigilantofSRCandEthnocentrismtoAvoidBusinessErrorsDefinesituationinhome-country’sculturaltraits,habits,ornorms.Definesituationinforeign-country’sculturaltraits,habitsornormsthroughconsultationwithnatives.Makenovaluejudgments.IsolateSRCinfluenceinsituationandcarefullyexaminehowitcomplicatestheissue.RedefinesituationwithouttheSRCinfluenceandsolveforoptimumbusinessgoalsolution.DevelopingaGlobalAwarenessMaincomponentsToleranceofandwillingnesstolearnaboutculturaldifferencesKnowledgeofcultures,history,worldmarketpotential,andglobaleconomic,social,andpoliticaltrendsStagesofInternationalInvolvementMaincharacteristicsofcompaniesthatinternationalizequicklyHigh-technologyand/ormarketing-basedresourcesSmallerhomemarketsandlargerproductioncapacitiesMangerswhoarewell-networkedinternationallyStagesofInternationalMarketingInvolvementMorereactiveandlessstrategicNodirectforeignmarketingInfrequentforeignmarketingMoreinvolvedinstrategicplanningRegularforeignmarketingInternationalmarketingGlobalmarketingExhibit1.4

TheKOFGlobalizationIndex(toptenplusselectedothercountries)Jumptolongimagedescription.Source:SavinaGygli,FlorianHaelg,andJan-EgbertStrum,Gygli,Savina,FlorianHaelg,andJan-EgbertSturm(2018):TheKOFGlobalisationIndex–Revisited,KOFWorkingPaper,No.439(2018).AppendixofImageLongDescriptionsAppendix1Exhibit1.3TheInternationalMarketingTaskThegraphicshowsthreeconcentriccircleslabeledwithelementsofthemarketplace.TheinnermostcircleislabeledFirmCharacteristicsandincludescontrollableelements:product,price,research,promotion,andplaceordistribution.ThenextcircleislabeledDomesticEnvironmentandincludesuncontrollableelements:politicalandlegalforces,economicclimate,andcompetitivestructure.TheoutermostcircleislabeledForeignEnvironmentandincludesuncontrollableelements:politicalandlegal,cultural,economic,andcompetitiveforces;geographyandinfrastructure;structureofdistribution;andleveloftechnology.Thegraphicshowstheseelementsforthesample