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Chapter 1
The Scope and
Challenge of
International
Marketing Access the text alternative for slide images.

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 Learning Objectives

1-1 The benefits of international markets

1-2 The changing face of U.S. business
1-3 The scope of the international marketing task
1-4 The importance of the self-reference criterion
(SRC) in international marketing
1-5 The increasing importance of global awareness
1-6 The progression of becoming a global marketer

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 Global Commerce Causes Peace 1 of 3

Global commerce thrives during peacetime

Economic boom in North America in late 1990s.
• The end of the Cold War.
• Opening former communist countries to world trading
system.

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 Global Commerce Causes Peace 2 of 3

International trade is important

Lack of consistent and predictable trade policies can lead
to tension.
Many world events affect trade.
• Company scandals and layoffs.
• Wars and political unrest.
• Russia-Ukraine conflict reigniting Cold War tensions.
• Natural disasters and pandemics.
• Financial and economic disruptions.
• High inflation following COVID-19 pandemic.
• Populist developments such as Brexit and Trump election.

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 Global Commerce Causes Peace 3 of 3

Four Trends Affecting Global Business

1. Growth of the WTO and open trade agreements
2. Developing countries moving toward free trade
3. The Internet, cellular, and networked
communication
4. A mandate to manage the global environment for
the future

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 International Trade and Peace
A rail has been built to link North and South Korea for the first time in
nearly 60 years to transport materials. This shows a step toward peace
and international trade.

© McGraw Hill LLC Myung-Gu/EPA/Shutterstock 6

 International Trade and COVID-19
An empty container ship at anchor off the Port of Los Angeles well
represents the long-term disruption of international supply chains
caused by COVID-19.

© McGraw Hill LLC (Tim Rue/Bloomberg/Getty Images) 7

 The Internationalization of U.S. Business 1 of 2

Globalization of markets increasing

• More foreign customers, competitors, suppliers.
• Competition comes from domestic and foreign firms.

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 The Internationalization of U.S. Business 2 of 2

Many foreign-controlled companies are in U.S.

Foreign direct investment in U.S. is above $4.6 trillion.
Foreign-owned companies in almost all industries:
• Automobiles (Honda, BMW, Mercedes).
• Appliances (LG Electronics, Frigidaire).
• Convenience stores and restaurants (7-Eleven, Ben & Jerry’s).
• News and entertainment (The Wall Street Journal, Pearle
Vision, Universal Studios, RCA).
• Hotels (Holiday Inn, Waldorf Astoria).

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 Exhibit 1.1 Foreign Acquisitions of U.S.
Companies 1 of 2
U.S. Companies/Brands Foreign Owner
7-Eleven Japan
Ben & Jerry’s (ice cream) U.K.
Budweiser Belgium
Chrysler Italy
Chrysler Building (NYC) Abu Dhabi
Church’s Chicken Bahrain
CITGO Venezuela
Columbia Pictures (movies) Japan
Firestone (tires) Japan
French’s Mustard U.K.
Frigidaire Sweden
Genentech Switzerland
Source: Compiled from annual reports of listed firms, 2022.

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 Exhibit 1.1 Foreign Acquisitions of U.S.
Companies 2 of 2
U.S. Companies/Brands Foreign Owner
Gerber Switzerland
Holiday Inn U.K.
Huffy Corp. (bicycles) China
Oroweat, Sara Lee (bakery goods) Mexico
Purina (pet food) Switzerland
Random House (publishing) Germany
RCA (television) France/China
Smith & Wesson (guns) U.K.
Smithfield Foods (pork) China
Swift & Company (meatpacking) Brazil
The Wall Street Journal Australia
T-Mobile Germany
Waldorf Astoria Hotel (NYC) China
Source: Compiled from annual reports of listed firms, 2022.

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 Mexican Brands in the U.S.

Along with NAFTA have come

two of Mexico’s most prominent
brand names. Gigante, one of
Mexico’s largest supermarket
chains, now has several stores
in Southern California, including
this one in Anaheim. Grupo
Bimbo, a huge and growing
Mexican multinational, has
purchased American brand-
named firms such as Oroweat,
Weber’s, Sara Lee, and Mrs.
Baird’s Bread.

© McGraw Hill LLC (©John Graham) 12

 Revenues from International Sales

American brands have a global reach

• Important for U.S. businesses to thrive.
• In many cases, foreign sales exceed domestic sales.
• Foreign investments generate a lot of revenue.

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 Exhibit 1.2 Selected U.S. Companies and
Their International Sales

Company Percent Revenues from Percent Revenues from

Outside the U.S. 2016 Outside the U.S. 2019
Amazon 33.6% 30.4%
Apple 60.0 60.7
Exxon 73.5 48.4
Ford 38.5 36.7
General Electric 70.3 58.7
Intel 78.2 78.3
Johnson & Johnson 47.4 47.4
Procter & Gamble 58.7 57.8
Walmart 24.5 23.2
Source: S&P 500, 2016: Global Sales Year in Review (July 2017); United Nations Conference on Trade and Development, World Investment Report, online, 2020.

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 International Marketing Defined

The Plan, price, promote, direct flow of goods and

performance of services for profit
business For consumers or users in more than one
activities nation

Unique from Many unfamiliar problems require unique

domestic strategies to cope with problems
marketing Level of uncertainty and uncontrollables in
foreign markets

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 The International Marketing Task

Uncontrollable uncertainty
• Created by uncontrollable elements in business
environments.
• Each international market has own set of factors.

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 Exhibit 1.3 The International Marketing
Task

Access the text alternative for slide images.

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 Marketing Decision Factors 1 of 2

A marketing program is designed for optimal

adjustment to uncertainty
Controllable elements in domestic environment
Blend all elements to capitalize on anticipated
demand.
Can alter elements if needed.
• Changing market conditions, consumer tastes, and corporate
objectives.

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 Marketing Decision Factors 2 of 2

Uncontrollable elements in domestic

environment
• Actively evaluate elements to make adjustments.
• Determine the outcome of the marketing enterprise.

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 Aspects of the Domestic Environment

Domestic Environment Uncontrollables

• Political and legal forces.
• Economic climate.
• Competition.
• Level of technology.
• Structure of distribution.
• Geography and infrastructure.
• Cultural forces.

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 Citibank in Brazil

A Citibank branch in the heart of Brazil. One of the world’s great multinational
corporations barely survived the financial debacle of October 2008. During the past
decade, the company has withdrawn from a number of markets in the United States
and abroad. But its operations in Brazil remain quite an important part of the
company’s international portfolio.

© McGraw Hill LLC (©John Graham) 21

 Aspects of the Foreign Environment

Foreign Environment Uncontrollables

• Political/legal forces.
• Economic forces.
• Competitive forces.
• Level of technology.
• Structure of distribution.
• Geography and infrastructure.
• Cultural forces.

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 Cell phones in Tanzania and Peru
On the left are Maasai tribesmen in Tanzania with their cell phones and
on the right is the famous central market of Pisac in the Urubamba
Valley, aka the Sacred Valley of the Inca, resting between Cusco and
Machu Picchu.

© McGraw Hill LLC (©John Graham) 23

 Environmental Adaptation Needed

Cultural adjustment: the most challenging and

important task
Duties of international marketers
Interpret influence of each uncontrollable element on
market.
Adjust marketing efforts to cultures in which they are not
attuned.
Be aware of own frame of reference when evaluating
markets.
• Often based off acculturation in home country.

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 The Self-Reference Criterion and
Ethnocentrism: Major Obstacles
Both impede ability to accurately assess foreign
market

Self-Reference Unconscious reference to own cultural values,

Criterion (SRC) experiences, knowledge
Problematic when used as basis for decisions

Ethnocentrism One’s own country, culture, or country is best

Most problematic when affluent countries work
with less affluent

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 Be Vigilant of SRC and Ethnocentrism to
Avoid Business Errors
1. Define the business problem or goal in home-
country cultural traits, habits, or norms.
2. Define the business problem or goal in foreign-
country cultural traits, habits, or norms through
consultation with natives of the target country.
Make no value judgments.
3. Isolate the SRC influence in the problem and
examine it carefully to see how it complicates
the problem.
4. Redefine the problem without the SRC influence
and solve for the optimum business goal solution.

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 Developing a Global Awareness

Main components
• Tolerance of and willingness to learn about cultural
differences.
• Knowledge of cultures, history, world market
potential, and global economic, social, and political
trends.

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 Stages of International Marketing
Involvement 1 of 2
Main characteristics of companies that
internationalize quickly:
• High-technology and/or marketing-based resources.
• Smaller home markets and larger production
capacities.
• Managers who are well-networked internationally.

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 Stages of International Marketing
Involvement 2 of 2

More reactive and 1. No direct foreign marketing

less strategic 2. Infrequent foreign marketing

More involved in 3. Regular foreign marketing

strategic planning 4. Multidomestic or international
marketing
5. Global marketing

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 Exhibit 1.4 The KOF Globalization Index (top
ten plus selected other countries)

Access the text alternative for slide images.

© McGraw Hill LLC Sources: Savina Gygli, Florian Haelg, and Jan-Egbert Strum, “The KOF Globalisation Index—Revisited,” KOF Working Paper No. 439 (2018); see kof.ethz.ch, 2022, for details. 30
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