Hand out # 1
International Marketing
Topics:
Section 1: Understanding International marketing
a. Introduction to international marketing
b. Theories and concept in international Trade
c. World Trade Restriction
d. Entry Modes in International Marketing
e. International Trade Terms
A. Introduction to international marketing
International Marketing Definition
Cateora and Graham (2004) define IM as the performance of business activities that direct the flow of a company’s goods
and services to consumers or users in more than one nation for a profit.
According to American Marketing Association (AMA)
o 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 organizational objectives
International Marketing (IM) is the application of marketing principles to across national boundaries. However, there is a
cross over between what is marketing and Global marketing, which is a similar term.
International marketing involves 2 or more country.
Global marketing is involving the entire world.
Domestic vs. International Marketing
• The main difference between them is that the marketing activities take place in more than one country.
• More complicated, at least two levels of uncontrollable uncertainty instead of one.
Table 1: International Marketing Activities
Table 1:International marketing activities
Activities
Detailed analysis and potential marketers
Planning and development of products- clearly defined in suitable package- that consumer wants.
Distribution of products through channels that provide the services or convenience demanded by
purchasers;
Product promotion to inform and educate consumers about the goods or services
A technical and non- technical customer service- both before and after a sale is made
Table 2: Domestic vs. International Marketing
Stages of International Marketing Involvement
1. No direct foreign marketing
2. Infrequent Foreign Marketing
3. Regular Foreign Marketing
4. International Marketing
5. Global marketing
Companies may choose to be:
1. Domestic exporter
2. Regional exporter
3. Exporter
4. International exporter
5. International to global exporter
6. Global exporter
Reasons
Domestic International why
companies
A Filipino manufacturer A Filipino manufacturer selling to a US importer venture
selling locally into
Consumer Filipinos like it sweet American prefer it bland
Purchasing Power Low High
Product or Packaging Remains the same Changes may be needed
Currency Peso Dollars
Payment Terms Cash or kind Through Bank
Physical distribution Short haul Longer Haul
Language Filipino or English English
Communication Cheaper More expensive
International Marketing
1. Internal Reasons
a) To utilize the firm’s excess capacity
b) To take advantage of higher purchasing power in overseas market
c) To take advantage of the government’s export promotion drive
d) To find other markets as the firm’s product experience a decline in sales in the home market
e) To find other markets as stiff competition in the domestic or home market has reduced the firm’s sale
f) To diversify the firm's power base in different geographic locations
2. External Reasons
a) To take advantage of tax incentives and promotional packages offered by certain countries to foreign investors
b) To take advantage of low labor and raw material costs in foreign countries
c) To take advantage of access to new technologies in foreign countries
d) To take advantage of the government’s import promotion drive
Factors Influencing International marketing
Figure 1: International Marketing Variables
Foreign environment
(Uncontrollable)
Political/legal Economic forces
Forces Domestic environment
(Uncontrollable)
(Controllable)
Political/ legal 4P’s Competitive
Cultural forces Forces structure Competitive forces
Product
Price
Promotion
Place
Economic
Geography and infrastructure climate Level of technology
Structure of distribution
B. Theories and concept in international Trade
The classical theories of international trade basically assume the following:
1. There are only two countries which will trade
2. There are two products to trade with
3. There is only one factor of production- the input- in order to come up with a product
Theories of International trade
a. Smith’s theory of absolute advantage
b. Ricardo’s theory of comparative advantage
c. Neo- classical trade theory
d. Heckscher- Ohlin trade theory of factor proportions
e. Leontief validation of the Heckscher- Ohlin theory
Why are there trade barriers?
1. Infant industry
2. Industrialization
3. Conservation of natural resources
4. National defense
5. Dumping
a. Predatory dumping
b. Persistent dumping
6. Retaliation
Types of Tariff Barriers
1. Specific duty
2. Ad valorem duty
3. Compound tariff
Types of Non- Tariff Barriers
1. Quotas
2. Monetary barriers (Actual control exchange restrictions)
a. Blocked currency
b. Differential exchange rates
c. Government approval to secure foreign exchange
3. Embargoes
4. Boycotts
5. Customs and administrative entry procedures
a. Valuation system
b. Anti- dumping practices
c. Tariff classification
d. Documentation requirement
e. Fees
6. Standards
7. Government participation in trade
a. Procurement policies
b. Countervailing duties
c. Export subsidies
d. Domestic assistance programs
Definition of Terms
Balance of Payment
The balance of payments (BOP) of a country is the record of all economic transactions between the residents of a country and
the rest of the world in a particular period (over a quarter of a year or more commonly over a year).
Protectionism
Those pressures on individual governments to protect their local markets from incursion of foreign competition, in the guise
of tariff and non- tariff barriers.
Tariff
A tariff is a tax or duty on imported goods.
These are restrictions on the trading of goods among countries applied explicitly in terms of quantitative restrictions
Non- Tariff
These are implicit attempts and strategies to curb the influx of foreign goods into a country.
These are restriction on the case of stringent standard requirements.
Dumping
An international discrimination practice in which an exporting firm deliberately sells merchandise at a lower price in a
foreign market than it charges in other markets
Trade Barriers
These are measures that governments or public authorities introduce to make imported goods or services less competitive
than locally produced goods and services.
Quotas
These refers to the restrictions imposed by a government on the amount, number of pieces, weight of goods or services that
may be traded within a given period.
Embargoes
A trade embargo is the refusal to sell to a specific country.
Boycott
These is the refusal to buy goods from a certain country.
Blockage
Refusing to allow importers to exchange their national currency for the reseller’s currency.
C. Easing world trade restrictions
World trade organizations (WTO)
The WTO aims to ensure that trade flows smoothly and freely
Functions
o Administers WTO agreements
o Serves as a forum for trade negotiations
o Handles trade disputes
o Monitors national trade policies
o Provides technical assistance and training for developing countries
o Cooperates with other international organizations
Trade policy review body (TPRB)
o The TPRB is a forum for the entire membership to review the trade policies of member countries.
Formation of Trading Blocs
a. Four types of Trade Blocs
i. Free trade area
ii. Customs union
iii. Common market
iv. Full economic union
The International Monetary Fund
o IMF activities
Surveillance
Technical assistance
Lending
D. Entry Modes in International marketing
a. Different Entry modes
i. Franchising
1. Advantage
2. Disadvantages
ii. Licensing
1. Advantage
2. disadvantage
iii. Manufacturing
a. Assembly plant
b. Contract manufacturing
c. Joint venture
d. Wholly- owned plant
1. Advantage
2. disadvantage
iv. Management contracts
v. Exporting
1. Advantage
2. Disadvantage
E. International trade Term
13 INCOTERMS
o FOUR INCOTERMS CATEGORIZED
Departure (E)
1. Ex- Works Factory (EXW)
Main carriage unpaid by the seller (F)
2. Free Carrier (FCA)
3. Free alongside ship (FAS)
4. Free on Board vessel (FOB)
Main carriage paid by the seller (C)
5. Cost and Freight (CFR)
6. Cost, Insurance Freight (CIF)
7. Carriage paid to (CPT)
8. Carriage and insurance paid (CIP)
Arrival at stated destination (D)
9. Delivered at frontier (DAF)
10. Delivered Ex-Ship (DES)
11. Delivered Ex-quay (DEQ)
12. Delivered Duty unpaid (DDU)
13. Delivered duty paid (DDP)
