Professor Paul Herbig

Second Lecture Series--International Marketing

Session 1: The Importance of International Marketing

Simply put, international marketing is the performance of business

activities in more than one nation. But it is more than that. Not just simply more
than one nation but more than one culture. And not necessarily in one nation. A
company could perform all of its business in the same country and still be
considered involved in international marketing. How? If the company does
business with domestic subsidiaries of a multinational located in another country,
it can still be considered involved in international marketing. And since over 70
percent of all companies in the United States either source from or count among
their customers, international concerns, it is would not be rare to do so; indeed it
would be rare if any company could consider all its customers and suppliers to be
purely domestic entities. So in all likelihood, any and every company is involved,
in one way or another, in international marketing. If a company is not going
global, it is either buying or selling to foreign firms or American subsidiaries of
foreign firms. In the U.S., the last bastion of parochial beliefs, even small
companies are realizing they have but three options: go global, get out of the
business, or go broke. International marketing must exist for the survival of the
firm, any firms, all firms.
Why is international marketing important? In one word, no, actually two,
international trade. The growth in international trade since 1970 has seen
unparalleled increases: $314 billion in trade in 1970 versus $5 Trillion in 1995,
a three fold increase in real terms (5% annual increases). Annual increases
during the nineties averaged 11%. Trade exceeds twenty-five percent of total
global GNP; experts indicate that this percentage will continue to increase in the
decades to come. Many European countries have total trade volume (imports
plus exports) that surpasses 70% of their GDP. Considerably smaller, the United
States’ trade component has been traditionally low due to its geographical
isolation and resource self sufficiency. Yet, DRI/McGraw-Hill estimates American
exports (manufactured goods and services) will exceed $1 Trillion by 2000.
American exports and imports combined, total trade will exceed $2 Trillion by the
new millennium; yet this is still less than 30% of Gross National Product. Other
countries’ ratio of trade to GNP approaches 70 percent, Sweden for example.
Overall world trade is a multitrillion dollar annual endeavor whose growth not
only continues but escalates. Interactions between countries are growing
exponentially.
Foreign Direct Investment in the United States exceeds $400 billion; U.S.
FDI overseas exceeds even that amount. Many familiar corporate names are not
American but foreign-owned. In many U.S. companies, international sales
exceed that of their domestic units; more often than not, the majority of profits is
obtained from overseas endeavors. Like it or not, the global economy is with us
and international business aspects of corporate America is a linchpin of
economic success.
So? We all agree the growth of international trade and crossnational
investments have been phenomenal and are still increasing. What’s all this got
to do with International marketing? Why is it so important? International trade
involves the movement of goods or services across borders. But what must
happen before the goods are transported? They must first be marketed than
sold. International marketing is important because it first must take place before
any trade is enacted. It is, simply put, the catalyst behind the actual international
trade transaction. With this startling but obvious, once you think about it, fact in
mind, the importance of international marketing as the impetus to trade becomes
apparent.

International Marketing

International Trade
 International Marketing also must involve cleansing the mind of
preconceptions and domestic mindsets. Being ethnocentric in one’s thinking (i.e.,
if it plays in Peoria, it should play in Beijing) has led many a company down the
path to unexpected, painful, and sometimes overwhelming failure. Federal
Express showed its ethnocentric tendencies when it entered the European
marketplace: all company brochures, promotional materials and shipping bills
were in American English. To keep arrival times constant, package pickup
deadlines were set for 5:00 pm in the evenings, even though many Europeans
have workdays that normally end later, for example 8:00 pm for the Spanish.
Fed-X had assumed that life-styles and work schedules were the same in Europe
as in the U.S. Federal Express tried to put a round peg in a square hole and, not
surprisingly, failed as a result.
This Self-Reference Criterion is the primary obstacle to success in
international marketing, an unconscious reference to one’s own cultural values,
experiences, and knowledge as a basis for decisions. This reaction is typical,
when confronted with a problem, one tends to use previous experience and
accumulated knowledge as reference in solving the problem (if it worked then it
should work now). However, experienced and knowledge is extremely culture
bound and in international marketing, cultural assumptions can not only be
dangerous but sometimes fatal as well.
Jolly Green Giant was translated into Arabic as ‘Intimidating Green Ogre.’
Ford introduced a low cost truck, the “feira,” into some of the less developed
countries of Latin America, the name means “ugly old woman” in Spanish. Its top
of the line automobile was introduced in Mexico as “Caliente;” this is slang there
for a street walker. A food company advertised its giant burrito as “Burrad.”
Colloquially, this meant ‘Big Mistake.’ Olympia’s Roto photocopier did not sell
well because ‘roto’ refers to the lowest class in Chile; ‘roto’ in Spanish means
‘broken.’ Americans are not the only ones who err: In Japan, a soft drink called
“Pocari Sweat” was a success. To the Japanese, this name conveyed a positive,
healthy, thirst-quenching image. Japanese consumers react to brand names
strictly based on its foreign name, not the content or meaning. This product’s
name, however, did not transfer well to the American consumer.

Self Reference Criterion

*

The classic 1990s example of how not to do international marketing

comes from EuroDisney. Walt Disney Company had successfully launched
Tokyo Disneyland years before. However, it was only a licenser, garnering but a
small fraction of the revenues as the price for its name and mystique while
another company owned the park. Two mistakes in its sparkled past would not
be repeated in Europe: it would own and control the park and it would own
enough land for its own hotels. Disney was fanatically intent on bringing
Americana to the Europeans. After prolonged negotiations with a variety of
European countries, Disney passed on a site in sunny Spain for a location twenty
miles east of Paris, which it believed projected a more central location. Of the $4
billion price tag for the project, Disney invested only $160 million; the French
Government assumed the bulk of the financial risk, including the construction of
two adjoining freeway exits and a connecting suburban train line to Paris.
Why should Disney have worried? It had been successful in Tokyo, why
shouldn’t it be successful in Paris as well? Tokyo has more than three times as
many inhabitants as Paris with a per capita income 50% higher than the Parisian
native. Tokyo Disneyland is only six miles from Downtown Tokyo while
EuroDisney is 20 miles outside Paris. Europeans have ease of access to
American Parks while the Japanese have no practical alternative. Winter
temperatures in Tokyo, while cold, are still bearable while French winters are
cold and snowy and unbearable. Attendance at EuroDisney in winter could have
been anticipated to be four to six times less than Tokyo Disneyland.
Early on, omens were unambiguous. The cultural elite in Paris lambasted
the project as an affront to French cultural traditions (Responding to their
concerns, Disney decided French would be the first official language at
EuroDisney). Farmers protested the manner in which the French government
had condemned their land so that it could be sold to Disney. The rigid legal
approach was offensive to the French, who consider depending on lawyers to be
a last, not first, resort. The firm found itself defending its conservative dress
codes (Disney prohibited facial hair and limited the use of make-up and jewelry),
regimented training practices and plans to ban alcohol from park facilities.
Enhancements were added and the park, originally budgeted at $2 billion, ended
up costing nearly $4 billion, pushing EuroDisney’s breakeven parameters sharply
higher and perhaps far beyond its ability to deliver.
Disney had worked hard to adapt EuroDisney to European tastes.
Fantasyland focused on the Grimm Brothers fairy tales and Alice in Wonderland.
Discoveryland exhibits drew attention to Vernes, H.G. Wells and Leonardo da
Vinci. EuroDisney’s castle is called Le Chateau de la Belle au Bois Dormant
(Sleeping Beauty). A theater featured a movie on European history. The
Visionarium was a 360 degree movie about French culture. Signs are in multiple
languages. Pirates of the Caribbean played pirate songs in three languages:
English, French, and Dutch. A multilingual staff was available (the reservations
center had separate phone lines for each of twelve different languages).
EuroDisney had Mickey Mouse and Donald Duck with French accents. Basically,
however, the Disney strategy was to transplant the American park to Paris. The
American management system was exported in total; Disney knew it would work
because they were Disney and it had always worked in the past. This arrogance
worsened relations with the local French.
In April 1992, EuroDisney opened its doors. A pre-opening party provided
spare ribs without providing the silverware; French visitors were perplexed. Start-
up problems abounded. Disney planners presumed hotel guests would stay an
average of 3-4 days as they do in Orlando, the actual average was closer to 2
days. (Many guests arrive early in the morning, rush to the park, come back late
at night, check out the next morning before heading to the park for the second
day.) Disney thought Monday would be a light day with Fridays heavy and
allocated staff accordingly; the reality was the reverse. These shorter stays
lowered occupancy rates and placed an unanticipated burden on the hotel’s
operations because of the unexpectedly high volume of check in and check out
activity.
Attendance was highly seasonal and peaked during the summer months:
Europeans typically took one long vacation in the summer instead of short visits
typical of Americans (Their family vacation budgets are more modest than
Americans and more carefully rationed to sustain the longer vacations.) Disney
executives believed incorrectly that they could change French attitudes of not
wanting to take their children from school during the school year and to take
shorter breaks many times a year rather than one long vacation in the summer.
The dismal Central European winter inhibits attendance for one-third of the year.
Visitors spent 12 percent less on food and souvenirs than expected. Instead of
riding the expensive trams, Europeans preferred walking.The high American
service level available at Disneyworld and Disneyland was not easily exportable:
EuroDisney’s youthful French employees did not see the need to cut their hair,
dress uniformly, smile incessantly, and provide world-class service to the park
attendees. For an European who had visited the American parks, the experience
was second-rate and often not considered worth the high prices charged.
Alcohol was not served since Disney felt a family theme park should not
do so: Disney failed to consider the European penchant for drinking wine and
beer with meals. The park did not offer sufficient restaurant seating for its
European customers, who enjoy a leisurely meal and expected to sit down at the
accustomed dinner hour. Breakfast was erroneously initially downplayed (Disney
ended up trying to serve 2500 breakfasts in a 350 seat restaurant); instead of
croissants and coffee, full breakfasts were desired. Instead of jammed parking
lots, bus lots were jammed with insufficient facilities for bus drivers. Food prices
were too high inside the park and hotel prices were too high outside of it. (Why
stay at a Disney hotel when one could stay in Paris where rooms were abundant
and inexpensive?)
The Disney team again and again disregarded the advice of locals. They
did not adequately take into consideration the cultural factors that differed
between Disneyland, Disneyworld, Disneyworld Japan and the European
marketplace. Europeans wanted more local content in their parks. Whereas the
Japanese are fond of American pop culture, the Europeans wanted their own.
To them, detail and craftsmanship were more important than heart-stopping
rides. The Magic Kingdom concept alone was not compelling enough to entice
Europeans to extend their stay beyond one or two days. The solution was to
have been the now delayed adjacent MGM movie theme park, which was then
put on indefinite hold.

* Is Not
*

EuroDisney’s first year resulted in a loss; forecasted attendance was

nearly twelve million visitors the first year; although actual attendance was
substantial (9.5 million), it was far below the operating break-even level of 11
million. Fewer French came than were predicted (although French nationals were
still the largest group of visitors, accounting for 29% of all attendance). What
went wrong? Its high admission price (30% higher than Orlando’s park even
though conditions in Europe—lower disposable income, recession, conservative
vacation and spending habits—suggested the opposite) made visitors keen to
take as many rides as possible and perform less shopping. Visitors’ average
length of stay was well below plan. In retrospect, Disney, although
adapting the Park itself, failed to take the time to understand their potential
customers better and, in essence, assumed the unassumable, the Self
Reference Criterion: they had a formula that had succeeded in the United States
and (presumably) Japan, they saw no reason to tamper with it and it should also
work in France. Arrogance and poor planning lead to a tarnishing of the Disney
mystique, which is still being fixed. On March 15, 1994, Disney and its partners
announced a restructuring agreement. The Euro prefix was intended to provide
the theme park with a pan-European branding; that this did not work out was
indicated when the name of the park was changed during 1995 to Disneyland
Paris. As of 1996, the park was still losing money, abet at a smaller rate.
It is admirable to learn from one’s mistakes; it is yet more fruitful not to
make them in the first place. Right on the throes of Disney’s EuroDisney
disaster, Disney proposed an American historical theme park planned for
Virginia. Disney failed to learn its lesson about harmonizing with the host
community by demanding the community put up $160 million or it will go
elsewhere. And again, it was surprised by a controversy it had failed to
anticipate (the potential desecration the park’s sprawl might cause to Bull Run
civil war battlegrounds nearby). Disney has since withdrawn its proposal from
Virginia.
Use the following steps to avoid the Self Reference Criterion (SRC). As an
example, examine marketing Texan Ice Tea to the United Kingdom.
a. Examine those cultural and environmental attributes of
the product you wish to market that make it a success in your home market (e.g.
ice tea in Texas: hot, dry climate, preference for sweetness, caffeine).
b. Compare these attributes to those found in the target
market (e.g., hot dry climate versus wet cold climate, less sweetness desired).
c. Note those particular attributes where substantial
differences exist. (e.g. Hot dry Texas versus Cold wet England)
d. Changes in the product or promotion must be made to
account for the differences noted. In some cases, differences are too great and
the best option is not to enter. This is not a hypothetical example.
An example of SRC and the failure to follow the above rules is Snapple.
Snapple sales fell in Japan to 120,000 bottles a month (in April 1996) from 2.4
million bottles a month the previous year. Quaker Oats stopped shipping
Snapple to Japan altogether. Why? Japanese consumers loathe some of the
very traits that made Snapple popular in the U.S.: the cloudy appearance of the
teas, the sweet fruit-juice flavorings, stuff floating with a taste too sweet for the
typical Japanese. Yet Quaker wouldn’t change its drinks to suit local tastes.
Quaker also skimped on marketing research and marketing. In the beginning
sales were strong as Snapple’s unusual shaped bottle and its American image
had initially attracted millions of curious buyers, but they weren’t becoming repeat
purchasers. Other products that were SRC failures in Japan include Ruffles and
Cheetos: Ruffles chips were too salty for Japan; Cheetos were too cheesy and
Japanese didn’t like their fingers turning orange. However, unaltered snickers
bars and M&Ms sell well in Japan.
In summary, international marketing exists everywhere; in this global era,
a company cannot do any business anywhere without having to take into account
the international dimension. It is the driving force behind international trade. And
one has to be careful not to allow one’s prejudices and prior experiences to rule
one’s international activities. The ancient slogan, “When in Rome. . .” was
paramount to success then and still is today.

AVOIDING THE SRC

a. Examine those cultural and environmental attributes of

the product you wish to market that make it a success in your home market

b. Compare these attributes to those found in the target

market

c. Note those particular attributes where substantial

differences exist.

d. Changes in the product or promotion must be made to

account for the differences noted. In some cases, differences are too great and
the best option is not to enter.