Overview of international marketing


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Overview of international marketing

  1. 1. A DETAILED OVERVIEW OF INTERNATIONAL MARKETINGDefining International Marketing:The term “International Marketing” refers to exchanges across national boundaries for the satisfaction ofhuman needs and wants. This strategy uses an extension of the techniques used in the home country of afirm. It refers to the firm-level marketing practices across the border including market identification andtargeting, entry mode selection, marketing mix, and strategic decisions to compete in internationalmarkets. The extent of a firm‟s involvement abroad is a function of its commitment to the pursuit offoreign markets.Companies become involved in international markets for a variety of reasons. 1. Some firms simplyrespond to orders from abroad without any organized efforts of their own. But most companies take amore active role because they have determined that it is to their advantage to pursue foreign businessexport volume on an incremental basis.2. The profitability of a company can increase when fixed manufacturing costs are already committed andadditional economies of scale are achieved.3.Companies move into foreign markets to get additional volume.4.When a companys customers move overseas, many firms follow suit. Major U.S. banks have shifted toserve their U.S. clients in key financial centers around the world by opening branches.Companies also enter the international arena for purely defensive purposes.Whether companies participate for the pursuit of new opportunities or for any other reason, most havebeen able to enhance their overall competitiveness as a result of pursuing foreign ventures.MAJOR ACTORS IN INTERNATIONAL MARKETINGSeveral types of companies are major participants in international marketing. Among the leaders aremultinational corporations (MNCs), exporters, importers, and service companies. These firms may beengaged in manufacturing consumer or industrial goods, in trading, or in the performance of a full rangeof services. What all participants have in common is a need to deal with the complexities of theinternational marketplace.Multinational CorporationsMultinational corporations (MNCS) are companies that manufacture and market products or services inseveral countries. Typically an MNC operates a number of plants abroad and markets products through alarge network of fully owned subsidiaries.ExportersExporters are firms that market products abroad but produce largely in their home country. Most largeexporters have evolved into multinational companies.
  2. 2. ImportersImporting is as much an international marketing decision as exporting. Companies that neither export norhave multinational status may still participate in international marketing through their importingoperations.THE SCOPE OF INTERNATIONAL MARKETINGIt is generally understood that a company like Boeing, the worlds largest commercial airlinemanufacturer, engages in international marketing when it sells its aeroplanes to airlines across the globe.Likewise, Ford Motor Company, which operates large manufacturing plants in several countries, engagesin international marketing even though a major part of its output is sold in the country where it ismanufactured.Today, however, the scope of international marketing has broadened and includes many other businessactivities.The activities of large department store chains, include a substantial element of importing.When these stores search for new products abroad, they practice another form of international marketing.A whole range of service industries are involved in international marketing; many large advertising firms,banks, investment bankers, public accounting firms, consulting companies, hotel chains, and airlines nowmarket their services worldwide.Challenges in International MarketingFrom an international marketing managers point of view, the most cost-effective method to marketproducts or services worldwide is t use the same program in every country, provided environmentalconditions favour such an approach. However invariably local market characteristics exist that requiresome form of adaptation to local realities. One of the challenges of international marketing is todetermine the extent of standardization for any given local market. To do this, the international marketingmanager must become aware of any factors that would limit standardization. Factors limitingstandardization can be categorized into five major groups: market characteristics, industry conditions,marketing institutions, legal restrictions & Trade BarriersMarket CharacteristicsMarket characteristics can have a profound effect on international marketing strategy. The physicalenvironment of any country-determined by its climate, product use conditions, and population size oftenforces marketers to adjust products to local conditions. Many cars in Canada come equipped with a built-in heating system that is connected to an electrical outlet to keep the engine from freezing while turnedoff. In warmer climates, cars are not equipped with such a heating unit but are more likely to require airconditioning.A countrys population will affect the market size in terms of volume, allowing for lower prices in larger
  3. 3. markets. Market size or expected sales volume greatly affect channel strategy. Company-ownedmanufacturing and distribution are often possible in larger markets, whereas independent distributors areoften used in smaller countries.Macroeconomic factors also greatly affect international marketing strategy. The income level, or grossnational product (GNP) per capita, varies widely among nations. As can be expected, marketingenvironments will differ considerably according to income level. If the populations level of technical skillis low, a marketer might be forced to simplify product design to suit the local market. Since themotivation to purchase some products depends on a countrys income level, advertising and promotionstrategy may have to be adjusted for such changes.Pricing may be affected to the extent that countries with lower income levels show higher priceelasticities for many products compared to developed countries. Furthermore, convenient access to creditis often restricted to buyers in developing countries, impacting negatively on the sale of capital goods andconsumer durables. Exchange rate fluctuations distort prices among countries for many products thatotherwise might sell at similar prices. This leads to the problem of cross shipping products to takeadvantage of price gaps. Wage levels and the availability of manpower may influence a company tochoose a different approach for its sales force.Cultural and social factorsCustoms and traditions have the greatest effect on product categories when a countrys population has hadprior experience with a give product category.There are a number of key cultural elements that international marketers need to take into considerationwhen designing products, developing promotions and implementing distribution systems in foreignmarkets. These elements include values, beliefs, thought processes, symbols, traditions, religion andlanguage. You need to make yourself aware of the local culture to ensure that you dont accidently orcarelessly offend people. It is important that you remain sensitive and tolerant to different points of viewand ensure that your brand doesnt contain any symbolism that could be offensive in the local culture.Political ConditionsInternational marketing operations are affected by the varying political environments that exist around theworld. An effective manager needs to be fully aware of the circumstances they are getting themselves andtheir organisation into when approaching foreign markets.Before attempting to enter into a new market, managers should take the time to carefully observe thepolitical environment from a distance. Political environments can be highly volatile and can changesignificantly in a short period of time, so it is vital that you commit a reasonable amount of time toensuring that know what to expect from the market.Often emerging markets that present significant business opportunities feature governments that are far
  4. 4. from stable. You need to carefully weigh up the potential for problems that could adversely affect yourbusiness with the opportunities that the market presents before implementing any sort of marketing plan.The biggest contributor to political risk is the potential for nationwide conflict, war or violent change. Ifconflict broke out in country you were operating in, you would need to be prepared to deal with violencedirected at your property and employees. Conflict is also likely to have a significant negative impact onyour customer base and sales potential.A commonly overlooked issue that relates to the political environment is nationalism. This has become anincreasingly relevant issue as many countries attempt to preserve their local culture and industries.Nationalism is the level of pride that people hold for their country and exists to some extent in allcountries. It becomes a problem for international marketers when governments or local groups of peoplediscourage the use of products and services originating from overseas.The level of nationalism can change dramatically over time as conditions and attitudes change.Industry ConditionsIndustry conditions often vary by country since products frequently are in varying stages of the productlife cycle. New product introduction in a country without prior experience might affect the extent ofproduct differentiation since only one or two versions of the product might be introduced initially. Also, acompany might find itself in a situation where limited awareness or prior experience of a country willrequire a considerable missionary sales effort and primary demand stimulation, whereas in more maturemarkets the promotional strategy is likely to concentrate on brand differentiation. The level of localcompetition can be expected to vary substantially by country. The higher the technological level ofthe competition, the more an international company must improve the quality level of its products. Thevarying prices of local substitutes or low local production costs can be expected to influence pricingpolicy. In countries where competitors control channels and maintain a strong sales force, the strategy of amultinational company might differ significantly from that in a country where the company holds acompetitive advantage.Marketing InstitutionsFor historic and economic reasons, marketing institutions have assumed different forms in differentcountries. Practices in distribution systems often entail different margins for the same product, requiringa change in company pricing strategy. Availability of outlets is also likely to vary by country. Massmerchandisers such as supermarkets, discount stores, and department stores are widely available in theUnited States and other industrialised countries but are largely absent in less developed nations inSouthern Europe, Latin America, and other parts of the world. Such variations may lead to considerablydifferent distribution strategies. Likewise, advertising agencies and media are not equally accessible in allcountries; and the absence of mass media channels in some countries makes a "pull" strategy less
  5. 5. effective.Legal RestrictionsLegal restrictions also require consideration for the development of an international marketing strategy.Product standards issued by local governments must be observed. To the extent that they differ from onecountry to another, unified product design often becomes an impossibility. Tariffs and taxes may requireadjustments in pricing to the extent that a product can no longer be sold on a high volumebasis. Specific restrictions may also be problematic. Countries differ in their laws as well as in theirinterpretation of their laws. Some countries place a greater emphasis on the role of the court andlitigation system, whereas others encourage alternate dispute resolution wherever possible. It is crucialthat you have an understanding of international and local legal issues prior to entering into a new market.When engaging in international marketing, it is vital that you ensure you understand the local laws thatapply. If a legal dispute involving your organisation arises in a foreign country, it can place a significantburden on you and your business.You may need to stay within the country until the issue is resolved and pay numerous legal expenses.Dispute resolution processes vary, with many countries encouraging out of court settlements for disputesbetween organisations.Intellectual property protection is another issue that needs to be considered when entering new markets.Products, designs and trademarks that you have registered in one country may not apply internationally,leaving your organisation open to exploitation from other businesses.It is important that you seek legal advice and ensure you have the necessary protection prior to entering anew market. Ensure that you have a thorough understanding of not only international laws, but theramifications for breaking them as well.Conducting a thorough legal analysis will help you to develop your understanding of potentialinternational markets. You can combine your analysis with your research on the political and economicclimates and make an informed decision about entering a foreign market.Protectionism & Trade BarriersOrganisations face many government-imposed barriers when trying to conduct business internationally.Protectionism is still a significant problem despite the efforts of many to encourage free trade betweendifferent countries.Protectionism is the term given to government policies that are implemented to protect local industriesfrom foreign organisations. Governments resort to protectionist policies to protect their local market, keepinvestment within the country, maintain the standard of living, maintain national security and in somecases to protect nation culture. Policies can also be the result of ethical issues, retaliation or bargaining.There are a number of common trade barriers utilised by governments all around the world. Import quotas
  6. 6. limit the import of products based on their monetary value or total number of units. They are enforced byeither banning imports that exceed the quota limit or by charging fees for any imports that are above thequota limit. By limiting the import of products, local industry is able to secure the rest of the marketsdemand without foreign competition.Tariffs are popular as they are a tax on imports that generate income for governments whilst alsoprotecting local industry from foreign competition. Tariffs increase the cost of importing, either making itnot worthwhile or causing the price of the products to increase to a level close to the locally establishedprice.Trade embargoes and boycotts effectively ban trade between certain countries or organisations. Subsidiesare still used in many countries to assist local industry compete with international organisations. Subsidiesare financial assistance or tax breaks provided to local businesses by the government so that they caneither lower their prices to compete or use the funds to remain operational and financially viable.Increasing the amount of paperwork and slowing bureaucratic procedures has also been used as aneffective non-tariff trade barrier.International Marketing EnvironmentModern marketers have to deal with customers who are changing;– With channels of distribution that are changing– And with the technological advances that are changing the nature of their products & services andrequiring them to operate imaginatively & effectively in the emerging markets.The basic nature of Marketing does not change from domestic to international marketing, but marketingoutside national boundaries poses special problems, such as dealing with multiple environments,managing operations in distant markets, optimizing businesses in more than one countries, dealing withforeign nationals etc.International marketing therefore, unlike domestic marketing, requires operating simultaneously in morethan one kind of environment, coordinating these operations, and using the experience gained in onecountry for making decisions in another country.The demands are tough and the stakes are high. International marketers not only must be sensitive todifferent marketing environments internationally, but also must be able to balance marketing movesworldwide to seek optimum results for the company.Consequences Of International marketingIt is widely asserted that we are living in an era in which the greater part of social life is determined byglobal processes, in which national cultures, national economies and national borders are dissolving.Central to this perception is the notion of a rapid and recent economic globalization.
  7. 7. The common themes that run through the discourse of globalization are:a) Ecological interdependence: The recognition that most places on the earth are linked to all others byair, water, and overland links. Rapidly increasing interdependence of world is rendering nationalboundaries meaningless.b) Dominance and dependency: Falling barriers to international trade and world‟s markets exposeeveryone to domination by most powerful players and role of nations in weakening into service structuresfor corporate interest.Hologramatic diversity: The argument that each place reflects the same „diversity‟ as each other. What isperceived as human, social or cultural diversity is essentially all the same.d) Homogenization of cultures: The view that both material and non-material cultures are becoming morethe same wherever one goes and the argument that a single „socioculturalpolitical‟ system is the onlyviable solution for th problems of interdependency.e) Ubiquitous communication: The belief that communication is now becoming more and moreuniversal in all places at all times in all directions.The above can probably be split into just two concerns:i) The awareness of (and probably inevitability of) a global ecosocial dynamics of interdependency.ii) Standardization in social, political, cultural, and material life in order to limit or control the chaos (orto maximize economic gain).To conclude the discussion:• A commitment to international market place is important for sustained growth and superiorprofitability.• Doing business is a creative enterprise. Doing business outside one‟s own country is a much moredemanding and complicated enterprise.• Business environments of countries are different.• International business necessitates an awareness of the clash of cultural standards among countries.• In 1950‟s and 60‟s international business was a means of capitalizing on new opportunity, today‟schanging economic environment has made international business dealings vital for survival.• Basic nature of marketing does not change from domestic to international marketing but marketingoutside national boundaries poses special problems.