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.