Today, the marketing organizations are not restricted to their national borders. The entire world is open for them. New markets are springing forth in emerging economies like – China, Indonesia, India, Korea, Mexico, Chile, Brazil, Argentina, and many other economies all over the world. In today’s global market opportunities are on a par with the expansion of economies, with the increasing purchasing power, and with the changing consumer taste and preferences.
The economic, social, and political changes affect the practice of business worldwide, the business organizations have to remain flexible enough to react rapidly to changing global trends to be competitive.
When a company contemplates marketing abroad or expanding existing international marketing activity, management faces five major decisions:
1.International marketing decision i.e. initial and fundamental decision on whether or not to market or expand abroad.
2. The market selection decision i.e. determination of which market to enter.
3. The market entry decision i.e. determination of the most appropriate methods of entry into those markets, e.g. exporting, licensing, manufacturing abroad.
4. The Marketing Mix decision i.e. planning and implementing a marketing mix appropriate to the market environment.
5. The Organization decision i.e. determining the appropriate organization structures.
Definitions of International Marketing
According to Kotler, “Global marketing is concerned with integrating and standardizing marketing actions across a number of geographic markets.”
According to Cateora, “International marketing is the performance of business activities that direct the flow of goods and services to consumers and users in more than one nation.”
According to Cateora and Graham, “International marketing is the performance of business activitiesdesigned to plan, price, promote, and direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit.”
According to Terpstra and Sorathy, “international marketing consists of finding and satisfying global customer needs better than the competition, both domestic and international and of coordinating marketing activities with in the constraints of the global environment.”
Nature of International Marketing
1. Broader market is available– Unlike domestic marketing the market is not restricted to national population. Population of other countries can also be targeted in international marketing.
2. Involves at least two set of uncontrollable variables – In domestic marketing the marketers have to interact with only one set of uncontrollable variables. In international marketing at least two set of uncontrollable variables are involved or more if the marketing organization deals in more countries.
3. Requires broader competence– Special management skills and broader competence is required in international marketing/business.
4. Competition is intense – An international marketing organization has to compete with both the domestic competitors and the international competitors. Hence, the competition is intense in international marketing.
5. Involve high risk and challenges – International marketing is prove to various kinds of risk and challenge like – political risk, cultural differences, changes in fashion and style of foreign customers, sudden war, changes in government rules and regulations, communication challenges due to language and cultural barriers, etc.
Scope of International Marketing
International Marketing constitutes the following areas of business:
1. Exports and Imports
International trade can be a good beginning to venture into international marketing. By developing international markets for domestically produced goods and services a company can reduce the risk of operating internationally, gain adequate experience and then go on to set up manufacturing and marketing facilities abroad.
2. Contractual Agreements
Patent licensing, turn key operations, co – production, technical and managerial know – how and licensing agreements are all a part of international marketing. Licensing includes a number of contractual agreements whereby intangible assets such as patents, trade secrets, know – how, trade marks and brand names are made available to foreign firms in return for a fee.
3. Joint Ventures
A form of collaborative association for a considerable period is known as joint venture. A joint venture comes into existence when a foreign investor acquires interest in a local company and vice versa or when overseas and local firms jointly form a new firm. In countries where fully owned firms are not allowed to operate, joint venture is the alternative.
4. Wholly owned manufacturing
A company with long term interest in a foreign market may establish fully owned manufacturing facilities. Factors like trade barriers, cost differences, government policies etc. encourage the setting up of production facilities in foreign markets. Manufacturing abroad provides the firm with total control over quality and production.
5. Contract manufacturing
When a firm enters into a contract with other firm in foreign country to manufacture assembles the products and retains product marketing with itself, it is known as contract manufacturing. Contract manufacturing has important advantages such as low risk, low cost and easy exit.
6. Management contracting
Under a management contract the supplier brings a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership.
7. Third country location
When there is no commercial transactions between two countries due to various reasons, firm which wants to enter into the market of another nation, will have to operate from a third country base. For instance, Taiwan’s entry into china through bases in Hong Kong.
8. Mergers and Acquisitions
Mergers and Acquisitions provide access to markets, distribution network, new technology and patent rights. It also reduces the level of competition for firms which either merge or acquires.
9. Strategic alliances
A firm is able to improve the long term competitive advantage by forming a strategic alliance with its competitors. The objective of a strategic alliance is to leverage critical capabilities, increase the flow of innovation and increase flexibility in responding to market and technological changes. Strategic alliance differs according to purpose and structure. On the basis of purpose, strategic alliance can be classified as follows:
- Technology developed alliances like research consortia, simultaneous engineering agreements, licensing or joint development agreements.
- Marketing, sales and services alliances in which a company makes use of the marketing infrastructure of another company in the foreign market for its products.
- Multiple activity alliance involves the combining of two or more types of alliances. For instance technology development and operations alliances are generally multi- country alliances.
On the basis of structure, strategic alliance can be equity based or non equity based. Technology transfer agreements, licensing agreements, marketing agreements are non equity based strategic alliances.
10. Counter trade
Counter trade is a form of international trade in which export and import transactions are directly interlinked i.e. import of goods are paid by export of goods. It is therefore a form of barter between countries. Counter trade strategy is generally used by UDCs to increase their exports. However, it is also used by MNCs to enter foreign markets. For instance, PepsiCo’s entry in the former USSR. There are different forms of counter trade such as barter, buy back, compensation deal and counter purchase. In case of barter, goods of equal value are directly exchanged without the involvement of monetary exchange. Under a buy back agreement, the supplier of a plant, equipment or technology. Payments may be partly made in kind and partly in cash. In a compensation deal the seller receives a part of the payment in cash and the rest in kind. In case of a counter purchase agreement the seller receives the full payment in cash but agrees to spend an equal amount of money in that country in a given period.
Objectives of International Marketing
- To bring countries closer for trading purpose and to encourage large scale free trade among the countries of the world.
- To bring integration of economies of different countries and there by to facilitate the process of globalization of trade.
- To establish trade relations among the nations and thereby to maintain cordial relations among nations for maintaining world peace.
- To facilitates and encourage social and cultural exchange among different countries of the world.
- To provide better life and welfare to people from different countries of the world. In addition, to provide assistance to countries facing natural calamities and other emergencies situations.
- To provide assistance to developing countries in their economic and industrial growth and thereby to remove gap between the developed and developing countries.
- To ensure optimum utilization of resources (including surplus production) at global level.
- To encourage world export trade and to provide benefits of the same to all participating countries.
- To offer the benefits of comparative cost advantage to all countries participating in international marketing.
- To keep international trade free and fair to all countries by avoiding trade barriers.
Components of International Marketing Environment & importance:
The various components of the international marketing environment are the major determinants of marketing opportunities. As such, it is the responsibility of an international firm to have clear grasp of international marketing environment to formulate effective marketing decisions regarding Marketing Mix variables.
The International Marketing Environment consists of following elements:
- Economic Environment
- Financial Environment
- Cultural Environment
- Social Environment
- Political Environment
- Legal Environment
- Competition Environment
- Technological Environment
1. Economic Environment
The economic environment is comprised of the following economic variables at least:
a) National Income.
b) Gross Domestic Product (GDP).
c) Industrial Structure.
d) Currency floating (Open/fixed) issue.
e) Demand patterns.
f) Balance of Payment (BOP) status
g) Economy base (Import/Export).
h) Rate of Economic Growth.
i) Occupational Pattern.
j) State of Inflation.
k) Consumer Mobility.
The international marketer tries to understand economic environmental variables of the global markets for identifying the right marketing opportunities for the enterprise.
2. Financial Environment
Financial environment refers to the financial system study of a country in which the international marketer intends to operate. A financial system of a country refers to the following two variables such as: a) Money Market. b) Capital Market.
3. Cultural Environment
Culture is everything that people have, think and do as members of the society. It is the sum total of knowledge, beliefs, arts, morals, laws, customs and any other capabilities and habits acquired by humans as members of the society. The environment which is comprised of norms, taboos, religious sentiments, habits that determines the lifestyle, attitude towards different goods and buying decisions is regarded as cultural environment.Since consumer behaviour is highly influenced by cultural environment, a firm pursuing international marketing must know the cultural differences in which international efforts are made.
4. Social Environment
Human beings live in a society. A contemporary society is comprised of various social classes depicting a wide range of values, attitudes and behaviour.Each class is shown in terms of social status, relative wealth and prestige. Individuals belonging to a particular class are found to lead their lives as per the norms and values of the concerned class. Thus social environment refers to social stratifications of a society and its behavioural implications. The international marketer intends to provide an insight into the social environment to know the constituents of a foreign society and to understand how social classes differ in their buying habits, brand choice and living patterns.
Research on social environment has come out with the following social classification and their buying/consumption pattern which are helping international marketer to decide about their strategy:
a)Upper Class: Consumers belonging to Upper Class serve as a reference group for others to the extent that their consumption decisions trickle down and are imitated by other social classes. They constitute a good market for jewellery, antiques, homes and vacations.
b)Lower Upper Class: This class tends to show patterns of conspicuous consumption to impress those belonging to less than their social position. They seek to buy the symbols of status for themselves and their children, such as, expensive homes, schools, automobiles etc.
c)Upper Middle Class: This class is a quality market for good homes, clothes, furnitures and appliance. They seek to run gracious home, entertaining friends and clients.
d)Middle Class: This class constitutes a major market for do it yourself products. This group is involved in religious activities and tries to avoid highly styled clothings.
e)Working Class: This class basically aims at meeting salient human needs. They also strive for security and interested in items that enhanced their leisure.
f)Upper lower Class: The upper lowers are found to be sports fan, heavy smokers. In view of their financial conditions, they tend to show interest in the low priced consumer goods.
g)Lower-lower Class: Individuals belonging to this class usually have broken down homes, dirty clothes and raggedy possessions.
5. Political Environment
Political environment refers to the variables like below:
a) Stability of Government Policies.
b) Philosophies of the political parties.
c) State of Nationalism.
d) Kinds of Political risks
e) State of bureaucracy.
f) Economic Risks.
g) Attitude toward foreign investment.
6. Legal Environment
An International Marketer intends to provide an insight into international legal environment to conduct marketing operations in compliance with international laws, originate from the various sources. Proper understanding of legal environment may assist an international firm to handle legal disputes effectively.
Following are some variables which constitute the legal environment:
a) Rules for exporting and importing goods.
b) Rules for People
c) Rules for Services
d) Rules for money across national boundaries.
e) Health regulations
f) Safety Standards
g) Product Packaging and labelling
h) Product Advertising and promotion etc.
International Marketer also needs to understand the legal dispute settlement process to protect his justifiable interest. We know that legal disputes can arise in three situations such as:
a) Between Governments
b) Between Company and a Government
c) Between Two Companies.
Dispute between Governments can be settled by the International Courts but disputes of other two categories must be settled through Arbitration or in the courts of the country of one of the parties involved in the dispute.
Most International Marketing disputes can be settled by any of the following three methods:
7. Competition Environment
To plan effectively international marketing strategies, the international marketer should be well-informed about the competitive situation in the international markets. By Competitive environment we mean the following variables:
a) Nature of competition
b) Players in the competition
c) Strategical weapons used by the participants
Following are the ways an international marketer can handle competition:
a) Proper knowledge about the competitors
b) Knowledge of Competitor’s objectives
c) Competitor’s strategies
d) Competitor’s reaction patterns
e) Knowledge of Competitors strengths and weakness.
8. Technological Environment
The most dramatic force that shaping the destiny of an international firm is technological environment. Technological know-how impacts all spheres of an international marketer’s operations including production, information system, marketing etc. The international marketers must understand technological development and its impact on its total operations. The marketing intelligence system may help the international firm to know technological orientations of other enterprises and to update it’s own technologies to remain competitive. Research and Development (R&D) has a vital role to play in increasing technological ability of a firm.