Chapter 12

1. Chapter 12 International Business Marketing

2. Chapter Outline • The Scope and Challenge of International Business Marketing • Export Opportunities and Challenges • Stages of Economic Development • The International Business Environment • International Law • Domestic Laws in Foreign Markets • International Entry Strategies • Product and Service Strategy • Managing the International Promotion Effort • Managing the International Distribution System • Pricing Strategy

3. Most international trade arrives on ships. (Image courtesy ofMaersk Sealand)

4. Export Opportunities • Increase growth potential beyond domestic capacity • Expand into new markets with existing or new products or services • Add product or service lines • Extend product or service life cycles • Improve profitability and competitiveness • Save existing jobs and generate new ones • Gain favorable publicity and recognition

5. Export Challenges • To be successful in exporting, a company must: • Analyze capabilities of business accurately. • Know export potential of products and services. • Identify foreign markets. • Understand export logistics and distribution channels. • Develop international business relationships and market entry strategies. • For these reasons, many businesses never enter global marketplace; the task seems too daunting and time consuming. (continued)

6. International business marketing means travel. (continued)

7. A huge volume of international business marketing transactions are continuously in process between companies in countries all over the world. The process has been going on since products started to be produced and sold.

8. Corporate Participation in a U.S. International High-Tech Trade Mission • Boosts U.S. high-tech exports. • Establishes and expanded business relationships between executives and host country governments and industry leaders. • Highlights U.S. leadership and competitiveness in high-tech sectors. • Identifies new and upcoming commercial high-tech opportunities in region. • Demonstrates high-visibility U.S. support for local economies.

10. International Business Environment • Different cultural systems can produce divergent negotiating styles shaped by each nation’s culture, geography, history, and political system. • Marketers should be aware of complex buying process, socio-cultural dynamics, political-legal environment, and economic environment in foreign markets.

13. Buying Centers • Although objectives of purchasing personnel may be universal, makeup of buying centers and interactions between members of buying centers will vary by country. • In international marketing, it is often more difficult to: • Identify members of buying center. • Determine their role in buying process. • Communicate appropriate information to them.

14. Basic Requirements for International Marketing Success • Knowledge of business culture, management attitudes, and business methods existing in country and willingness to accommodate differences. • Ability to understand the other market’s perspective is critical. Most of us tend to think everyone else sees things as we do (known as self-reference error ). Marketing mix should be based on customer’s preferences, not your own.

15. Key Definitions • Cultural imperatives: Business customs and expectations that must be met and conformed to if relationships are to be successful. • Cultural adiaphora: Behaviors and customs that outsiders may wish to conform to or participate in, but that are not required. • Cultural exclusives: Customs or behaviors from which the foreigner is excluded.

16. Political Environment • In day-to-day operations, U.S. domestic business marketers tend to ignore impact of political environment. • U.S. political environment is relatively stable and predictable … but this is not true everywhere. • Political change can mean new competitive disadvantages for foreign companies or even a company’s expropriation (or even confiscation).

18. Legal Environment • Common law systems base interpretation of law on prior court rulings (legal precedents and customs). • Code (written) law systems rely on statutes and codes for interpretation of law. There is little "interpretation," so law must be detailed enough to prescribe appropriate and inappropriate actions. Majority of world's governments rely on code law system. • Islamic law systems rely on legal interpretation of Koran.

19. Foreign Trade Barriers • Import policies—tariffs and other import charges, restrictions, licensing, or barriers • Standards, testing, labeling, and certification • Government procurement—”buy national” policies and closed bidding • Export subsidies—export financing on preferential terms • Lack of intellectual property protection—inadequate patent/trademark protection • Service barriers—regulation of international data flows • Investment barriers—restrictions on transferring earnings and capital • Regulations and standards and discriminatory taxation • Other barriers—bribery and corruption

20. International Law and Treaty Agreements • Treaties of friendship, commerce, and navigation (FCNs) usually guarantee “national treatment” to foreign company—that it will not be discriminated against by nation's laws and judiciary • International Monetary Fund (IMF) and General Agreement on Tariffs and Trade (GATT) are part of limited body of effective international law. Both agreements identify acceptable and nonacceptable behavior for member nations. • The United Nations Commission on International Trade Law (UNCITRAL), promotes a uniform commercial code for whole world. • International Standards Organization (ISO) is working toward development of uniform international standards.

21. Entry Strategies • Exporting • Licensing • Joint ventures • Manufacturing • Manufacturing • Assembly operations • Franchising • Turnkey Operations Product Strategies • Product adaptation: Strategically changing product to meet local needs. • Productstandardization: Product originally designed for domestic market is exported to other countries with virtually no change, except perhaps for translation of words and other cosmetic touches.

22. Channel Alternatives(Distribution and Facilitators) • American-based export intermediaries • Brokers and agents • Export management companies (EMCs) • Export trading companies (ETCs) • Export trading company cooperatives • Piggyback arrangements • Foreign-based export intermediaries • Foreign sales agents • Foreign distributors • Direct marketing

23. ISO 9000 Certification • ISO= International Organization for Standardization • ISO 9000 Certification: a series of standards that include: • Effective quality system • Valid measurements and calibration • Appropriate statistical techniques • Lot control, part tracing, record keeping • Internal process auditing • Employee quality training • Mandates: • Define appropriate quality standards • Document processes • Prove consistent adherence to both (continued)

24. ISO 9000 Certification • Required by U.S. Dept. of Defense, Japan, European Community, and others. Requirement includes second-tier subassembly and component makers (and their suppliers, etc.). • Prior to ISO 9000, most companies had their own versions of quality systems (many modeled on military specifications). • Certification assures customers that suppliers have capabilities and systems to provide high-quality goods. (Doesn’t assure that particular products are high quality, just the standards of the system they were produced under.) (continued)

25. ISO 9000 Certification • Other International Standards receiving attention: • AS 9000 (aerospace) • ISO 14000 (environmental management) • SA 8000 (social accountability) • ISO creates standards; typically, consultants help company adapt systems to meet the standards. When ready, a certification company audits the systems and awards certification (and provides periodic checking). • Adoption cost = ~$250,000–$500,000 for average-size plan operation.

26. Why Is ISO 9000 a Marketing Issue? • If customer does not require it, ISO 9000 certification can be a differential advantage. • If customer does require ISO 9000, marketers ensure that customer needs are met. If marketing is confident that their quality department can handle ISO requirement, marketing can deal with other aspects of customer’s needs. If marketing is not sure, then they need to be involved until they are. This is true of any customer requirement (e.g., technical, delivery, packaging). • Keep in mind that marketers decide which customers to serve with what marketing mixes. For example, marketing can decide that it is in the company’s best interest to target customers who require ISO 9000, but not approach customers who require aerospace 9000. • Today’s marketers will need to be familiar with ISO specifications. Find out more at www.ISO.ch and www.bsi.org.uk.

27. Countertrade • Half of Fortune 500 companies have used barter in some way. • ~300,000 companies trade through corporate barter. • More than 80 nations currently use CT. • More than 30 percent of world trade involves CT. Examples • Xerox sells $100 million/year in copiers and printers to Brazil, with payment in Brazilian steel and Venetian blinds. • General Dynamics sells F-16 fighter jets to Turkey in exchange for Turkish products. Global trade does not always involve cash; instead, countertrade (CT), or barter, involves one-time exchange of goods/services for other goods/services.

28. Summary Message To be a successful international marketer, you need to appreciate other cultures and be a continuously learning student of their dynamic business practices, cultures, legal systems, political systems, and competitive environments. Summary Quiz As a check of how much we have to learn: • Name our major trading partners in NAFTA. • List their major political parties and what each stands for. • Describe their legal systems. • Describe how each differs from us culturally and how that would impact business transactions.

29. Chapter 13 Ethical Considerations in Business-to-Business Marketing

30. Chapter Outline • Marketing Ethics: An Overview • Marketing Strategy and Ethics • An Ethical Issue: The Organizational Buying Function and Buyer-Seller Relationships • Ethical Issues in Marketing Research • Ethics and the Management of the Pricing Function • Ethics and Sales Force Management • Ethics and Advertising Strategy

31. Ethics: An Overview • Marketers must be capable of formulating and implementing policies based not only on economic reasoning, but on ethical and professional values as well. • Influencing factors: • Individual factors—attitudes and values. • Opportunity presenting itself—likelihood of punishment, no professional codes of ethics, no corporate policies to discourage unethical decision making. • Values, attitudes, and behaviors of others—peers, supervisors, top management.

32. Reputation for Integrity • Takes years to earn. • Takes one bad decision to destroy. • Once a bad decision is made, it is often impossible to reverse and may end business relationships.

33. Respect, Honor, Integrity • How would you feel about working for someone who had no integrity? • How would you feel about purchasing important products from someone with no integrity? • How would you feel about having people with no integrity working for you (where you are responsible for what they do)? • Perhaps this “Personal Characteristics Expected” section from a recent job ad will convince doubters that companies do have clear ethical expectations: • Salary: $115,000 base (neg.), plus 20-30% incentive bonus, car, and executive benefits. • Personal characteristics: Must be a person of high integrity and impeccable character, whom people will trust and respect; have emotional maturity; be growing as a person, with a sense of purpose; bring credibility by demeanor, professional knowledge, and approach.

34. Ethics in the Future Businesses are increasingly operating as part of society, not only in their traditional role of improving standard of living (by generating jobs, offering products and services, and paying taxes), but also via a sensitivity that supports employees, empowers customers and investors, and deals with needs of local, national, and international communities.

35. Three Views on Corporate Management Responsibility • Invisible hand: True and only social responsibilities of business organizations are to make profits and obey laws. Morality, responsibility, and conscience reside in invisible hand of free-market system, not with managers or organizations. • Hand of government: Corporation has no moral responsibility beyond legal obedience. Regulatory hand of law and political process turn these objectives into common good. • Hand of management: Encourages corporations to exercise independent, noneconomic judgment over matters of morals and ethics that face them.

36. Sample Corporate Code of Ethics Integrity and ethics exist in the individual or they do not exist at all. They must be upheld by the individual or they are not upheld at all. In order for integrity and ethics to be characteristics of this company, we who make up the corporation must strive to be honest and trustworthy in all our relationships. . . (Courtesy of Boeing Company)

37. Ethical Issues in Selling • Overselling • Promising more than can be delivered • Exaggerated claims and lying • Failing to keep confidences or promises • Accepting bribes or gifts • Offering inappropriate or illegal entertainment

38. Ethical Issues in Marketing Research • Society’s rights • The right to be informed of research results that may impact society as a whole • The right to expect objective research results • Clients’ rights • The right to confidentiality • The right to expect quality research • Researcher’s Rights • The right for protection against improper solicitation of proposals • The right to accurate presentation of findings • The right to confidentiality of proprietary information on techniques

39. Ethics and Pricing • Setting an unfair price • Altering product quality without changing price • Practicing price discrimination with smaller accounts • Price fixing • Using competitor’s quote to requote or rebid • Forced reciprocity Ethics in Purchasing • An underlying principle of purchasing practice is avoidance of situations that might inappropriately influence, or even appear to influence, purchasing decisions. • Advocated by National Association of Purchasing Management (NAPM) Can you think of some examples of situations to avoid?

40. Salesperson Ethics in Dealing with Employers • Moonlighting: Holding more than one job. • Changing jobs to a competitor: May unavoidably involve taking company training, customer knowledge, customer goodwill, or confidential information. • Expense accounts: Present special temptations and are most frequent areas for ethical abuse. • Motivational contests: May result in stockpiling orders until contest begins, selling unneeded products to friends for later return, overselling.

41. Ethics and Advertising Strategy • It is immoral to: • Lie, mislead, or deceive in advertising. • Fail to indicate dangers that are not normally expected. • It is not immoral to: • Use a metaphor or other figure of speech if these will be understood as figurative language. • Persuade as well as to inform. • Comparative advertising • If comparisons are made, then they must be accurate. • Care must be taken not to imply that if a product is superior to competition in one characteristic, then it is superior overall. • Better to point out competitive differences, leaving business customer to judge superiority of product.