International marketing Environment
The key difference between domestic marketing and marketing on an international scale is the multidimensionality and complexity of the many foreign country markets a company may operate in. An international manager needs a knowledge and awareness of these complexities and the implications they have for international marketing management.
Environmental Influences on International Marketing
1. Social/cultural environment
The social and cultural influences on international marketing are immense. Differences in social conditions, religion and material culture all affect consumers’ perceptions and patterns of buying behaviour. It is this area that determines the extent to which consumers across the globe are either similar or different and so determines the potential for global branding and standardisation. A failure to understand the social/cultural dimensions of a market are complex to manage, as McDonald’s found in India. It had to deal with a market that is 40 per cent vegetarian, had an aversion to either beef or pork among meat-eaters and a hostility to frozen meat and fish, but with the general Indian fondness for spice with everything. To satisfy such tastes, McDonald’s discovered it needed to do more than provide the right burgers. Customers buying vegetarian burgers wanted to be sure that these were cooked in a separate area in the kitchen using separate utensils and sauces like McMasala and McImli were developed to satisfy the Indian taste for spice. Interestingly however, these are now innovations they have introduced into other markets.
2. Legal environment
Legal systems vary both in content and interpretation. A company is not just bound by the laws of its home country but also by those of its host country and by the growing body of international law. This can affect many aspects of a marketing strategy – for instance advertising – in the form of media restrictions and the acceptability of particular creative appeals. ). Product acceptability in a country can be affected by minor regulations on such things as packaging and by more major changes in legislation. It is important, therefore, for the firm to know the legal environment in each of its markets. These laws constitute the ‘rules of the game’ for business activity. The legal environment in international marketing is more complicated than in domestic markets since it has three dimensions:
(i) local domestic law;
(ii) international law;
(iii) domestic laws in the firm’s home base.
- Local domestic laws. These are all different! The only way to find a route through the legal maze in overseas markets is to use experts on the separate legal systems and laws pertaining in each market targeted
- International law. There are a number of international laws that can affect the organisation’s activity. Some are international laws covering piracy and hijacking, others are more international conventions and agreements and cover items such as the International Monetary Fund (IMF) and World Trade Organisation (WTO) treaties, patents and trademarks legislation and harmonisation of legal systems within regional economic groupings, e.g. the European Union.
- Domestic laws in the home country. The organisation’s domestic (home market) legal system is important for two reasons. First, there are often export controls which limit the free export of certain goods and services to particular marketplaces, and second, there is the duty of the organisation to act and abide by its national laws in all its activities, whether domestic or international.
India is regarded by many firms as an attractive emerging market beset with many legal difficulties, bureaucratic delay and lots of red tape. For example, shoes cannot be imported in pairs but have to be imported one at a time – which causes huge problems for shoe manufacturers who need to import shoes as production samples. The way many of them overcome the problem is by importing the left shoe via Madras and the right shoe via Mumbai. Companies such as Mercedes Benz, Coca-Cola and Kellogg have found the vast potential of India’s market somewhat hard to break into. Its demanding consumers can be difficult to read and local rivals can be surprisingly tough. Political squabbles, bureaucratic delays and infrastructure headaches are also major obstacles.
3. Economic environment
The purchasing power of people in a country is a crucial factor in determining the demand for products. Marketers must pay close attention to major trends in income and consumer spending patterns. In short, the economic conditions of a country – the nature of the economy, the stage of development of the economy, economic resources, the level and distribution of income, etc. are all very important factors in marketing. Further economic factors like inflation, productivity, shortages, unemployment etc have a tremendous impact on prices and incomes. Hence, marketers must incorporate these factors while preparing marketing programmes. This understanding is important at a world level in terms of the world trading infrastructure such as world institutions and trade agreements developed to foster international trade, at a regional level in terms of regional trade integration and at a country/ market level. Firms need to be aware of the economic policies of countries and the direction in which a particular market is developing economically in order to make an assessment as to whether they can profitably satisfy market demand and compete with firms already in the market.
4. Political Environment
The political environment of international marketing includes any national or international political factor that can affect the organization’s operations or its decision making. Politics has come to be recognized as the major factor in many international business decisions, especially in terms of whether to invest and how to develop markets. Politics is intrinsically linked to a government’s attitude to business and the freedom within which it allows firms to operate. Unstable political regimes expose foreign businesses to a variety of risks that they would generally not face in the home market. This often means that the political arena is the most volatile area of international marketing. The tendencies of governments to change regulations can have a profound effect on international strategy, providing both opportunities and threats.
Political Factors include:
A. Laws
There are laws in some countries that will greatly affect your ability to do business in them or prohibit it altogether. One such example is Thailand which has specific laws stating no foreign person or company can own more than 49% of business in Thailand, so you must be willing to take on a Thai partner in order to do business there. You must be aware of laws like this if part of your product marketing strategy includes manufacturing or distributing your wares in a foreign target market country.
B. Licensing and Permits
There is a chance that the only way you can do business in a foreign country is to give out an expensive permit or license of another business in that country to manufacture and sell your product for you. Governments do these things as a way of making sure a larger percentage of income from sales stays in the home country. An example of this is Pepsi’s license to Heineken to bottle and sell Pepsi products in the Netherlands.
C. Taxes
Taxes are another way that governments can cash in on foreign businesses operating and selling products in their country, so their citizens’ spending does not allow much money to leave the country. Taxes can and do impact your ability to make a profit selling goods and services in a foreign country and will shape your international marketing strategy because of that. High tax rates on goods sold, like those in the USA, can make it hard for a business to stay on the right side of that fine line between profit and loss.
D. Fees
When you market your products for sale in a foreign country, you may be subject to pay certain fees for the right to do that. These fees can be a one-time deal or recurring, and they can also be quite high in some circumstances if they involve what might be considered luxury items.
E. Tariffs
Tariffs have long been used to balance trade between countries and to protect national companies from losing business to foreign competitors. This can be a big factor when it comes to international trade and marketing your company’s products or services for sale. An example of this is China’s 105.4% tariff on chicken that is shipped from the USA; it is easy to see how a high tariff like this can push a country’s citizens toward buying domestically raised chicken.
F. Currency risks
There are always risks when doing business in the currency of a foreign country that you are marketing your product or services to. If you have your money tied up in a foreign currency and economic events fall just right, your company could stand to lose millions.
G. Other Political Risks and Restrictions
- Investment restrictions:Many countries have strict requirements on who can own businesses and do other business-related investments in their country. Your marketing department needs to be aware of these things. For instance in Malaysia, if you are an agricultural business and you want to buy land to produce fruits and vegetables to sell there, any land purchase over $163,000 is subject to approval by the government and may come with other restrictions too.
- Operational restrictions:Just how much operational control you will have over your overseas business remains to be seen, and that is a concern for some. Because of some of the restrictions that have been discussed and other requirements for doing business in a foreign country, chances are your business will need an international management team. This will affect the operational control of your business and has to be factored into any marketing decisions that your company makes.
- Discriminatory restrictions:Discriminatory practices in a foreign country may inhibit or prohibit marketing your goods and services to that country too. The USA has imposed import quotas on Japan in protest at non-tariff barriers which they view as being imposed unfairly on US exporters. They have also imposed bans on imports from Libya and Iran in the past. Such barriers tend to be such things as special taxes and tariffs, compulsory subcontracting, or loss of financial freedom.
5. Technological environment
Technology is a major driving force both in international marketing and in the move towards a more global marketplace. The impact of technological advances can be seen in all aspects of the marketing process. The ability to gather data on markets, management control capabilities and the practicalities of carrying out the business function internationally have been revolutionised in recent years with the advances in electronic communications. Satellite communications, the Internet and the World Wide Web, client–server technologies, ISDN and cable as well as email, faxes and advanced telephone networks have all led to dramatic shrinkages in worldwide communications. Shrinking communications means, increasingly, that in the international marketplace information is power.
The technological changes result in changes in consumption pattern and marketing systems. A new technology may improve our lives in one area while creating environmental and social problem in another area. The marketers should monitor the following trends in technology: the pace of change, the opportunities for innovation, varying research and development budgets, and increased regulation. He should watch the trends in technology and adopt the latest technology so as to stay alive in the field.
