Supplementary texts

International markets offer new opportunities

In the clothing business Shibuya is the place to be. The downtown Tokyo shopping neighborhood generates retail cash flows higher than anywhere else in the world. Club Monaco, Canada’s first major retailing venture in Japan, is now located in the heart of Shibuya and customers are streaming in.

Founded in 1985, the Toronto-based fashion «concept retailer» sells a line of brand label men’s and women’s casual wear and accessories. The Japanese deal called for Club Monaco’s Japanese partner, a subsidiary of the Seibu Saison Group, to open at least 10 Club Monaco stores in Japan.

The key to Club Monaco’s success in Japan—at least the first few days out— wasn’t hard to find. Customers can’t believe the prices. While Club Monaco’s $ 80 pair of jeans and $ 69 cotton-knit shirt may not seem like a bargain to the average Canadian shopper, in Japan such prices would be a great bargain.

The Japanese first became interested in the Club Monaco concept after visiting the store in San Francisco. Part of the store’s success lies in the Japanese attraction to things that are European or North American. But while the store carries much of the same mix of casual basics that Canadian Club Monaco stores offer, Japanese stylists may be added to produce certain products specific to the Japanese Market.

As this case shows, a marketing manager may find exciting opportunities in international markets. Moreover, the same ideas we’ve been discussing throughout this book apply to international markets. But planning strategies for international markets can be even harder than for domestic markets. Cultural differences are more important and the other uncontrollable variables may vary more. Each foreign market may need to be treated as a separate market with its own sub-markets. Simply lumping together all people outside Canada as «foreigners» or assuming they’re just like Canadian customers almost guarantees failure of countries and the policies of governments. The new catchword used to describe these changes is globalization. Accompanying this globalization of markets is a restructuring of the world’s economic activities. Other countries have emerged to challenge U.S. dominance in foreign trade. Many other changes have also occurred. Implementation of a Canada-U.S. Free Trade Agreement, the possibility of a North American free trade zone that includes Mexico, the integration of Europe, the liberalization of Eastern Europe, and the continued rise of the Asia-Pacific region all point to a continuation of global interdependence.

Globalization means increased opportunities for business as well as fiercer global competition. Businesses now have to be poised to take advantage of opportunities in places with which they’re unfamiliar. Doing business abroad means dealing with different cultural norms, reacting to different economic systems, and being exposed to greater political and financial risks.

The would-be global marketer has to acquire new skills to exploit opportunities abroad. Even on their «home turf» marketers may lose the «home field» advantage if they’re unprepared for foreign entry. The truly successful firms will be those capable of facing the new challenges globalization presents.

For Canada, major changes in the global economy and the newly introduced Free Trade Agreement with the United States spell new opportunities and challenges for Canadian businesses. Before looking at decision factors in international marketing, we’ll first examine the nature of Canada’s foreign trade.

Canada relies heavily on foreign trade. Approximately 27 percent of its GNP is accounted for by exports. Canada’s economy is among the most reliant on exports of the major world economies. Canada is overwhelmingly dependent on the United States for both exports and imports, although this dependence is declining somewhat. The United States in recent years has received just under two thirds of all Canadian exports. Canada’s exports to the Pacific Rim and the European Economic Community (EEC) are each now running in excess of 10 per­cent. These changes are even more dramatic in some provinces such as British Columbia, whose exports to the Asia-Pacific region (40 percent) about equal exports to the United States (41 percent).

Canada is still basically an exporter of natural resources and an importer of finished products. On the other hand, our large trading partners are big importers of primary products and large exporters of manufactured goods. Motor vehicles and parts now account for about two thirds of Canada’s exports of manufactured end products. Other sales of end products have averaged between 10 and 12 percent of total exports. Why are motor vehicle exports so high? A duty-free market in automotive and related products was created by the Canada-U.S. Automotive Agreement of 1965.

What kinds of multinational factors make it difficult for Canadian manufacturers to compete in world markets? What products can Canadian manufacturers successfully produce? What items cannot be profitably manufactured because of foreign competition? Here’s what one observer considers «significant Canadian conditions and circumstances» affecting new product development.

The Canadian market is a relatively small one stretching for 3,500 miles. Often, large parts of that total market can be reached more cheaply by foreign manufacturers than they can by firms producing elsewhere in Canada. This nation has high labor costs and its productivity relative to other countries has steadily declined.

A more recent study cited higher wages, diseconomies of small scale, difficulties in obtaining adequate financing, tax costs and administrative burdens of big government as problems confronting Canadian manufacturers. Despite these problems, the study showed that Canadian producers could succeed by meeting one or more of the following conditions: (1) product superiority either in terms of technical product leadership or high quality; (2) process or manufacturing superiority, either technical process superiority or a unique combination of two or more processes within the same firm; (3) management philosophy and style, leading to the ability to compete economically in cost-sensitive markets despite Canada’s disadvantages cited previously; (4) customizing the product package, which generally involved a unique combination of product, process, and engineering skill, though not necessarily technological superiority.

Carefully engineered, well-designed Canadian products that meet the needs of specific customer segments are being successfully marketed both in Canada and abroad. Some examples include most of Northern Telecom’s electronic equipment, hockey equipment from Cooper Canada, Ltd., and sailboats from Performance Sailcraft, Inc.

Many Canadian manufacturers are subsidiaries of foreign-owned corporations. Such organizations could compete successfully abroad if they were allowed to market certain products internationally. In other words, the Canadian subsidiary might be given a «world product mandate» for certain items. The Canadian firm with such a mandate would design, engineer, and manufacture in Canada. A worldwide marketing effort would also be directed from this country. Such man­dates are, in fact, beginning to be assigned to Canadian subsidiaries.

World product mandating is an exciting new development that may significantly increase Canada’s exports of manufactured goods. It may mean that more Canadian subsidiaries will advance beyond the stage of branch manufacturing plant.