1 intl mktg concepts

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Concepts of International Marketing

Asian School of Business Management


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Objectives

To appreciate marketing shifts under globalization

To explain the concept of international marketing

To distinguish between domestic and international marketing decisions

To identify the reasons for entering international markets

To understand the evolutionary process of global marketing

To understand the international marketing process


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Why International Marketing?

During the last century, marketing activities around the world witnessed an unprecedented

change.

Breakthroughs in information and communication technology and means of transport havecontributed to the convergence in tastes and preferences of the consumers around the world.

Competitors have become global in their outlook and approach to business and are ready to

experiment and adopt different competitive marketing strategies in various markets.

These developments have led to interdependency in international trade among nations.

Income growth has triggered the consumers desire for more and newer varieties of goods,thereby creating markets for foreign products.

Lower trade barriers have triggered a new global organization of production to take advantage ofdiversity in comparative advantage across the world.

Technological progress and income growth have been spurred by increased global competitionand efficiency gains through global markets.

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Globalization

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Globalization is defined as the process of economic integration of the entireworld through the removal of barriers to free trade and capital mobility aswell as through diffusion of knowledge and information.

It is a historical process of moving at different speeds in different countries

and in different sectors.

Firms, whose output was previously significantly more limited by the size oftheir domestic market, now have the chance to reap greater advantagesfrom economies of scale by beingglobal.

Global firms rely on technological innovation to enhance their capabilities.

Growing importance of trade in world economy is an indication of increasingglobal integration.


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Globalization Index

The level of globalization varies among countries. According to a survey byA.T.Kearney in 2004, Ireland is the most global country followed bySingapore, Switzerland, Netherlands and Finland.

The key components of global integration are:

Economic Integration: trade, foreign direct investment, investmentincome

Personal Integration: telephone, travel, remittances, personal transfers

Technology Integration: Internet users, Internet hosts, secure Internetservices

Political Organizations: international organizations, UN peacekeeping,treaties


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Globalization of Production and Markets

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The process of globalization for a firm mainly consists of globalization of

production and globalization of markets.

Globalization of Production

The firms evaluate various locations worldwide for manufacturing activities soas to take advantage of local resources and optimize their manufacturingcompetitiveness.

The firms from the USA, the EU and Japan manufacture at overseas locationsmore than three times of their exports output produced in their home country.

Toyota, one of the worlds leading automakers, has a total of 51 overseasmanufacturing companies in 26 countries and markets cars worldwide throughits overseas network consisting of more than 160 m and numerous dealers.


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Globalization of Markets

Technology strides in telecommunication, transport and travel havecreated a new consumer segment in the isolated places of the world.

Standardized products are increasingly finding markets across the globe.

The globalization of the world market has increased the scope formarketing activities internationally and has also increased the competitiveintensity of the global brands in the market.


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Concept of International Marketing

International marketing would involve:

Identifying needs and wants of customers in international markets.

Taking marketing mix decisions related to product, pricing, distribution

and communications keeping in view the diverse consumer and marketbehavior across different countries on one hand and firms goals towardsglobalization on the other hand.

Penetrating into international markets using various modes of entry

Taking decisions in view of dynamic international marketing environment

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Terms in International Marketing

Domestic Marketing: Marketing practices within the domestic markets.

Foreign Marketing: Methods and practices used in the home market andalso applied in overseas markets with little adaptation. For instance, anIndian firm using domestic marketing methods for the European market isknown as foreign marketing.

Comparative Marketing: Comparative study of two or more marketingsystems to find out the differences and similarities.

International Trade: A macro-economic term used at national level with a

focus on flow of goods, services and capital across national borders. Italso involves analysis of commercial and monetary conditions and theireffect on transfer of resources and balance of payment.


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Terms in International Marketing (contd)

International Business: A much wider term encompassing all commercialtransactions that take place between two countries. These transactions,including sales, investment and transportation may be initiated bygovernment or private companies with an objective to make profit or not.

International Marketing: It focuses on the firm-level marketing practices

across the border including market identification and targeting, entry modeselection, marketing mix and strategic decisions to compete in theinternational markets.

Global/World Marketing: Global marketing treats the whole world as a

single market and standardizes the marketing mix of the companies as faras feasible. A global company does not differentiate between the homecountry and a foreign country and considers itself as a corporate citizen ofthe world.


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Domestic Marketing and International Marketing Decisions

International marketing is not simply an extension of domestic marketing.

The marketing strategy which is effective in domestic markets can hardlybe extended to the overseas markets.

An international marketer has to deal with environmental challenges which

are beyond the firms control in the international markets and varysignificantly among country markets.

Environmental challenges in each country market influence the marketingstrategy of a firm.

The interaction among the environmental factors within a country marketand its impact on the marketing mix need to be evaluated while designingan international marketing strategy so as to achieve the desired marketingoutput.


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Domestic Environmental Challenges

The environmental challenges such as economic, legal and infrastructure

affect a firm even though it is marketing solely in the domestic market.

Economic Environment

The domestic tariff structure and various import duty exemption schemes

offered by the home government determine the cost of imported inputswhich contribute to the final cost of production and therefore affect the costof competitiveness.

The exchange rates and the foreign exchange regulations of the country

influence the cost of imported inputs and options available for making andreceiving payments from the international market.

The national policies on FDI determine the kind and magnitude of foreigninvestment in the country and the entry mode for foreign firms.


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Legal Environment

The changes in trade policies, fiscal policies and other matters related tobilateral and multilateral trade are made in view of the political priorities ofgovernments in power.

The change in government policy also affects the trade policy changes in

a country.

National governments have the rights to impose restrictions oninternational trade transactions on the grounds of national security,integrity and preservation of moral and cultural values.


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Infrastructure

The development of physical, financial, human and institutionalinfrastructure has a positive impact on firms and also encourages themto market internationally.

The constraints faced by developing countries including India in terms

of physical infrastructure, such as roads, telecommunications and port-handling capacities hinder international marketing efforts and add to thecost of logistics for international trade.

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Overseas Environmental Challenges

The environmental factors which are beyond a firms control in the

international markets make the tasks much more complex than marketing

domestically. The major factors are:

Political

Economic

Legal

Cultural and Social

Competition

Marketing Channels

Technology4/13/2012 15


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Political Factor

The political stability and the government policies greatly affect theinternational markets.

The CIS countries passing through a transition phase make the businessenvironment very unpredictable for an international marketer.

A firm needs to adopt a risk-avoidance marketing strategy in such cases.

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Economic Factor

The economic stability in the target market facilitates an internationalmarketers task.

Economic uncertainties generate severe problems related to certainty ofpayment and call for specific strategies to manage delayed payments

under inflationary conditions.

The situation becomes graver in case the payment is to be received inthe currency of the importing country

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Legal Factor

Well-developed sound legal systems in the target market help to reducethe marketing risks and a firm can expect a relatively unbiased and fairtreatment.

Countries at a higher stage of economic development and democratic

form of government generally provide a relatively independent and morejust legal system.

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Cultural and Social Factors

Countries which have cultural similarity in the target market segmentscan generally be approached more easily as compared to countries withcultural diversities.

The culture of the target market affects product modification especially in

case of consumer products such as garments and foodstuffs.

Social environment also affects the motives to make a buying decisionand the communication strategies need to be customized as per thevaried social traits for different markets.

The socio-cultural factors greatly influence the buyer-seller relationshipin various markets. One has to carefully study the socio-cultural traits ofthe buyers before designing the marketing strategy.

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Competition

A firm generally faces more severe competition in international marketsthan in its domestic markets.

The competition in international markets includes products imported fromvarious parts of the world produced locally and competitors from the

exporters own country.

The products imported from other competing countries which havesignificantly different business environments affect the competitivenessof the products.

Various marketing barriers (tariff and non-tariff) make the marketing mixdecisions much more complex in international markets.

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Technology

There are vast variations in the availability of technology betweendeveloped and emerging markets.

Cost-effective technology finds easy access into the markets indeveloping and least developed countries.

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Reasons for Entering International Markets

The reasons for entering international markets vary from firm to firm and country to

country depending upon the market characteristics. However, firms often decide toenter into international markets due to the following reasons:

Growth

Profitability Achieving Economies of Scale

Risk Spread

Access to Imported Inputs

Uniqueness of Products and Services

Marketing Opportunities due to Life Cycle

Spreading R&D Cost

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Growth

Firms enter international markets when the domestic market potentialsaturates and they are forced to explore alternative marketingopportunities overseas.

Countries with smaller market size, such as Singapore, Hong Kong and

others had no other option but to internationalize.

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Profitability

The price differential among markets also serves as an importantincentive to internationalize. Exporters benefit from the higher profitmargins in the foreign markets.

Strong competition in domestic market limit a firms profitability in that

market. Price differentials and enhanced profits in the internationalmarkets are some of the fundamental motives for exporting.

Some of the policy incentives such as exemption from indirect taxes andduties, several incentives by the governments for export-oriented

production and marketing support schemes contribute to enhance theprofitability of firms in international marketing.

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Achieving Economies of Scale

Large scale production capacities necessitate domestic firms to disposetheir goods in international markets once the domestic markets becomesaturated.

One of the basic reasons behind the internationalization of Great Britain

during the Industrial Revolution was domestic market saturation.

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Risk Spread

A company operating in domestic markets is highly vulnerable toeconomic upheavals in the home market.

Overseas markets provide an opportunity to reduce their dependence onone market and spread the market risks.

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Access to Imported Inputs

The national trade policies provide for import of inputs used for exportproduction.

There are a number of incentive schemes which provide duty exemptionor remission on import of inputs for export production.

It helps the companies in accessing imported inputs and technicalknow-how to upgrade their operations and increase theircompetitiveness.

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Uniqueness of Product or Service

The products with unique attributes are unlikely to meet any competitionin the overseas markets and enjoy enormous opportunities ininternational markets.

Herbal and medicinal plants, handicrafts, value-added BPO services and

software development at competitive prices provide Indian firms an edgeover other countries and smoothen their entry into international markets.

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Market Opportunities due to Life Cycle

Each market shows a different stage of life cycle for different products,which varies widely across country markets.

When a product or service gets saturated in the domestic market, a firmmay make use of such challenges and convert them into marketing

opportunities by operating into international markets.

Strategies to launch new products in the existing markets or identify newmarkets for existing products may be adopted.

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Spreading R&D Costs

By way of spreading the potential market size, a firm quickly recoversthe costs incurred on research and development.

It is especially true for products involving higher R&D costs.

International markets facilitate speedy recovery of such costs because ofthe large market size and also due to larger coverage of the right marketsegments in international markets.

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Evolutionary Process of Global Marketing

Domestic Marketing

Export Marketing

International Marketing

Multinational Marketing

Global Marketing

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Domestic Marketing

Market Focus: Domestic

Orientation: Ethnocentric

Marketing Mix Decisions: Focused on domestic customers

Ethnocentrism is defined as the predisposition of a firm to be predominantly

concerned with its viability and legitimacy only in its home country.

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Export Marketing

Marketing Focus: Overseas (Targeting and entering foreign markets)

Orientation: Ethnocentric

Marketing Mix Decisions:

- Focused mainly on domestic customers

- Overseas marketing generally an extension of domestic marketing

- Decisions made at headquarters

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International Marketing

Marketing Focus: Differentiation in country markets by way of developingor acquiring new brands.

Orientation: Polycentric


- Developing local products depending on country needs

- Decisions by individual subsidiaries

The polycentric orientation recognizes the differences among markets and

the need to respond to the market forces with market-specific strategies.

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Multinational Marketing

Marketing Focus:

- Consolidation of operations on regional basis

- Gains from economies of scale

Orientation: Geocentric


- Globalization of marketing mix decisions with local variants- Joint decision making across firms global operations

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Globalization of Markets

The globalization of markets leads to:

Reduction of cost efficiencies and duplication of efforts among nationaland regional subsidiaries.

Opportunities for the transfer of products, brands and other ideas acrosssubsidiaries.

Emergence of global customers.

Improved linkages among national marketing infrastructures leading to thedevelopment of a global marketing infrastructure.

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Process of International Marketing

Motivation for International Marketing

SWOT Analysis

Decision to enter International Markets

International Marketing Decisions Enter International Markets

Review Performance

Consolidate marketing efforts to Global Marketing

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International Marketing Decisions

Market Identification and Targeting

Entry Mode Selection

Product Decisions

Distribution Channels Market Promotion Decisions

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