International Marketing: Definitions, Scope, Need, Fallacies & Advantages

Everything you need to know about international marketing. International marketing may be defined as an activity related to the sale of goods and services of one country in the other, subject to the rules and regulations framed by the countries concerned.

In simple words, it refers to marketing activities and operations among the countries of the world following different political and economic systems.

In international marketing, a company sells its product in many countries. As the customers are varied, a company tries to develop a product in accordance with the local needs of a specific country.

Once that product is successful, the company replicates the success in other countries, which has similar profile of customers.

International marketing transaction is always conducted in large or bulk quantity. It is not conducted on a retail basis, but on the wholesale basis. This is necessary for securing the advantages of large scale operations as regards transportation, handling and warehousing.

Learn about:-

1. Definition of International Marketing 2. Scope of International Marketing 3. Characteristics 4. Need 5. Activities 6. Environment

7. Determinants 8. International Marketing Mix 9. Developing International Marketing Plan 10. Control Management 11. Product Positioning 12. Pricing

13. Promotion 14. Organizing 15. Fallacies of International Trade 16. Opportunities 17. Reasons 18. Advantages.

International Marketing: Definitions, Scope, Need, Activities, Determinants, Pricing, Fallacies and Advantages

Content:

Definitions of International Marketing
Scope of International Marketing
Characteristics of International Marketing
Need of International Marketing
Activities in International Marketing
International Marketing Environment
International Marketing Determinants
International Marketing Mix
Developing International Marketing Plan
International Marketing & Control Management
Product Positioning in International Marketing
Pricing for International Markets
International Market Promotion
Organizing International Marketing
Fallacies of International Trade
International Market Opportunities
Reasons for Going International
Advantages of International Marketing

International Marketing – Definitions Provided by Hess and Cateora, Keegan and American Marketing Association

International marketing is the marketing across the national frontiers. If refers to the strategy, process, and implementation of the marketing activities in the international arena.

International marketing may be defined as an activity related to the sale of goods and services of one country in the other, subject to the rules and regulations framed by the countries concerned. In simple words, it refers to marketing activities and operations among the countries of the world following different political and economic systems.

International marketing is marketing abroad i.e., beyond the political boundaries of the country. International marketing brings countries closer due to economic needs and facilitates understanding and co-operation among them. It is essentially a constructive economic and commercial activity which is useful and beneficial to all participating countries. International marketing act as an instrument of global growth and development.

According to Hess and Cateora international marketing is ‘the performance of business activities that direct the flow of goods and services to consumers or users in more than one nation.’ Marketing may be understood as human activity directed at satisfying needs and wants through exchange process. It means working with markets.

It means attempting to actualise potential exchange for the purpose of satisfying human needs and wants. It includes analysing the markets for their potentials in order to assess the needs of the customers. International marketing is a part of total marketing process. It is marketing activities carried on by a marketer in more than one nation.

It may be defined as ‘marketing carried on across national boundaries.’ Marketing activities, i.e., buying, selling, transportation, storage and warehousing, financing risk bearing, pricings, standardising, advertising and sales promotion etc. may be called international marketing when performed in foreign markets across the national border.

International marketing means marketing across borders. When a company expands its operations beyond the national boundaries, it is said to be doing International Marketing.

Sometimes the term global marketing is also used to denote International Marketing.

Keegan has defined global marketing from a strategic point of view and said ‘Global or, transnational marketing focuses upon leveraging a company’s assets, experience and products globally and upon adapting to what is truly unique and different in each country.’

American Marketing Association (AMA) has defined ‘international marketing as the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.’

In the AMA definition, only the word multinational has been added to differentiate marketing from international marketing. International marketing is nothing but, just marketing internationally.

If we check out the similarities, there are many similarities. Both in domestic marketing and international marketing, a company needs to identify and fulfill the needs of the customers. In accordance with the needs of different customers, a company needs to do research and development to come out with innovative products to suit the need.

It has also been found that the products or services, which are successful in domestic markets, are sold across the border to replicate its success there. Colgate, Dove, Lux, Gillette, McDonalds, Starbucks are few of the examples, which replicated its success in hundreds of countries.

Just like a domestic marketer, an international marketer can only be successful, if he caters to the needs of the customers with the right kind of products or services, with attractive pricing. The products or services also need to be widely available and the communication needs to be effective.

Once the product fits these parameters, customers will be more than willing to buy the product. The same has been proved again and again. Whether it is Ford Ecosport or Mercedes S class, there are customers all across the world, which are ready to buy it.

In international marketing, a company sells its product in many countries. As the customers are varied, a company tries to develop a product in accordance with the local needs of a specific country. Once that product is successful, the company replicates the success in other countries, which has similar profile of customers.

For example – Unilever, an American MNC launched Wheel detergent powder in India through its subsidiary Hindustan Unilever Limited (HUL), after facing a tough competition from Nirma in the lower segment. Once Wheel became successful in India, Unilever pic transported the business principles (not the product or the brand) to create a new detergent market among the poor in Brazil.

The detergent brand Ala has been a runaway success in Brazil. Even more importantly, Unilever has adopted the bottom of the pyramid as a strategic priority at the corporate level. Ford Ecosport was launched in Brazil and now it is selling in India and other countries.

International Marketing – Scope

Since World War II, international marketing has received increased attention from the governments of developing countries who wish to revamp their economy. Many geo-political changes have taken place in the global marketing scenario because of the external affairs policies of developed nations. Exports have been one of the major determinants to measure the economic growth of a country.

Hence, international marketing rose into prominence in the global economic order and emerged as a discipline in itself for studying the technical, managerial, socio-cultural and economic processes of a country. Observing the dynamism of the international market was viewed as a major strategy to control a substantial share of the trade of a country in the world market.

Such attempts were made by the developing nations in the eighties. Later, in the early nineties, the new GATT proposal and evolution of the WTO opened new horizons in the field of international marketing by pushing the export-oriented economy worldwide. Today, the scope of international marketing has grown and includes the manufacturing sector and its services. International marketing broadly includes export and import activities that govern the marketing environment.

In order to understand international marketing, one has to define basic marketing functions:

(a) Customer satisfaction,

(b) Integrated marketing organization, and

These functions are woven around the product strategy, communication system, distribution mechanisms and pricing approaches. The combination of these is referred commonly as marketing- mix. The basic concepts of international marketing and general marketing are the same. The difference however lies in its execution over a larger geographical area – one or more than one country. International marketing may be defined as the performance of marketing activities across two or more countries.

International marketing can be classified into three groups:

(a) Single-country marketing.

(b) Dual-country marketing.

In some situations only one or two countries are involved while in other situations many more countries are involved in trade at various levels. International marketing occurs in consequence to the marketing decisions that bind more than just one country.

International marketing does not always require the physical movement of products since the franchising of consumer products, capital goods and services takes care of international business between countries. International marketing encompasses many related fields. In its broadest term international marketing is a sub-set of international business.

It may be understood as the performance of all business functions between different countries. International business includes activities related to international production, financial management and international marketing. The reason for building commercial relations between nations can be understood by the international trade theory. This theory explains that products flow between two or more countries in the form of exports or imports.

International Marketing – 10 Important Characteristics: Large Scale Operations, Dominance of Multinationals, Need of Marketing Research and a Few Others

1. Large Scale Operations:

2. Dominance of Multinationals:

Multinational corporations dominate the international marketing scene. Such enterprises have worldwide contacts. They conduct business operations more efficiently and economically. They are in a better position to adopt global approach which is necessary in international marketing.

Multinational corporations usually market their products in large number of countries and thereby dominate developing countries. Along with multinationals, industrially developed countries like the USA and Japan dominate international marketing due to their massive production capacity. Such countries supply goods to all countries and earn huge profits.

3. International Restrictions and Trading Blocs:

International marketing is not free like internal marketing. There are various restrictions or barriers (tariff and non-tariff) because of the protective policies followed by different countries. Tariff barriers are adopted practically by all countries. Foreign exchange regulations also impose various restrictions on imports and exports.

The scope of international marketing is also restricted due to various trading blocs like CMEA, ASEAN and LAFTA. These blocs impose artificial barriers on free movement of goods and services among the countries. Regional trading blocs or regional groupings like EEC also impose restrictions on international marketing.

Such restrictions may be in the form of quotas and other direct restrictions on free imports. Efforts of GAIT and UNCTAD are not very effective in removing such trade barriers. The growth of international marketing is adversely affected due to such trade restrictions.

4. Need of Marketing Research:

International marketing requires marketing research in the form of marketing surveys, product surveys and product testing as it is highly competitive.

5. Sensitive Character:

International marketing is also highly sensitive and flexible in character. A product may suddenly become unfavourable or the market may come down quickly due to political and economic reasons. Even the use of advanced technology by the competitors or the introduction of new products by a competitor may affect the sale.

6. Importance or Advanced Technology:

International marketing is extremely dynamic and competitive. In such a type of marketing, an enterprise must be able to sell the best quality articles at competitive prices. Countries like the USA, Japan and Germany have a dominating position in international marketing because of the use of advanced technology in production and marketing of goods.

They are able to promote exports and capture world markets due to their ability to sell superior quality goods at competitive prices. At present, world markets are flooded with Japanese goods. This is the result of intensive use of automation and advanced computer technology in Japan.

Expansion of international marketing is basically due to the growth of modern technology. Technological developments facilitate large scale production. This brings the need to find out new markets. Secondly, technological developments are required to maintain these markets.

7. Keen and Acute Competition:

International marketing is highly competitive. Moreover, this competition is between developed and developing countries which are unequal partners. Such competition is made severe due to special facilities and incentives provided by the government to the exporters for export promotion. World markets are dynamic and this makes it necessary to use competitive techniques for export promotion.

8. Need for Specialised Institutions:

International marketing is risky and complicated. It requires lengthy procedures and formalities. Professional experts are necessary for dealing with various aspects of international marketing. Similarly, financial support is also necessary. Specialised institutions like indent houses, exchange banks and export houses are established world over for effective participation in international marketing.

9. Need for Long Term Planning:

International marketing requires long term marketing planning. The marketing situation in different countries changes because of social, economic and political factors. This stresses the need for long term planning in international marketing. A comprehensive and dynamic marketing programme can be prepared through such planning.

10. Develops Cultural Relations and Maintains World Peace:

International marketing brings different countries closer and also develops cultural relations among them. Closer cultural relations improve the quality of life of people in different countries. Finally, international marketing brings interdependence among the countries of the world. The participating countries have to maintain friendly relations among themselves. This situation ensures cordial relations among the nations of the world and also ensures world peace.

International Marketing, even though it has certain distinct characteristics, is essentially similar to domestic marketing in terms of certain technical attributes. Marketing can be conceived as an integral part of two processes, viz., technical and social. So far as the technical process is concerned, domestic and international marketing are identical.

The technical process includes non-human factors such as product, price, cost, brand, etc. The basic principles regarding these variables are of universal applicability. But the social aspect of marketing is unique in any given stratum, because it involves human elements, namely, the behaviour pattern of consumers and the given characteristics of a society, such as customs, attitudes, values, etc.

It is obvious that marketing as a social process will be different in varying environments and international marketing, to the extent it is visualised as a social process, will be different from domestic marketing.

International Marketing – 7 Factors that Necessitate International Marketing: Rapid Industrialisation, Cost Benefit, Raised Standard of Living, Cultural Exchanges & a Few Others

International Marketing grows and prospers because of certain economic and political factors. The existence of global marketing over many centuries justify its existence. Some of the industrially advanced nations enjoy huge production capacity and surplus of goods. National market becomes inadequate to them. They must export so that their economies develop and expand.

The need for international marketing is universally accepted because it is beneficial to all the countries. More than ever before international marketing has become important, now, because fastest means of transport and communication has well-linked all the countries.

The following factors necessitate international marketing:

(1) Rapid Industrialisation:

Countries are economically dependent on one another. Every country has to import certain goods and also to export so as to pay for imports. The third world countries are dependent on the western countries for superior technology to achieve faster economic growth. International marketing has become, prominent because of international interdependence and growing industrialisation.

(2) Cost Benefits:

Due to certain favourable factors, some countries can produce certain commodities with low cost of production. International marketing is favoured by all in order to enjoy the comparative cost benefits. International marketing becomes the only option to exchange goods and export such goods where the countries enjoy cost benefit. A country will import such goods which either it cannot produce or will produce at a higher cost.

(3) Raised Standard of Living:

There is consciousness all over the world and people desire to raise their standard of living through the consumption of best quality goods procured from nook or corner of the world. International marketing also mobilises foreign investments, superior technology and international understanding.

The standard of living of the people can be raised only by enabling them to consume quality products at reasonable prices, no matter from where they are procured. Even perishable goods are marketed within minimum possible time due to well-organised network of transport and communication.

(4) Cultural Exchanges:

Peaceful co-existence to a very great extent depends on economic, social and cultural exchanges. International relations can improve when people move to different countries on goodwill visits. Cultural differences separate the countries from one another. This gap can be well connected through international trade and exchange of culture.

(5) Fulfils Economic Needs:

The increase in the rate of population growth has brought pressure on the Government to fulfil economic needs of growing number of its people. In order to provide basic amenities and luxuries to the increasing population imports and exports become obligatory. The growth of international trade is certainly because of increasing world population.

(6) Maintaining International Prices:

It is not possible that varying prices will prevail in international marketing for long. Various countries market their goods at competitive rates. The comparative cost benefits enjoyed by one country in a particular item can be shared by other countries.

(7) Helps both Developed and Developing Countries:

International marketing is also required to narrow the gulf between advanced countries and less developed or developing countries. Even advanced nations must export their surplus so that under-developed countries can obtain their requirements. In turn, advanced countries must provide concessional terms so that developing countries have no option but to import superior technical know-how from developed countries.

It is though international marketing that industrially advanced nations provide assistance to developing countries in their struggle towards economic growth. International marketing improves economic relations and reduces the chances of international conflicts.

International Marketing – Top 8 Activities: Market and Product Selection, Market Entry, Distribution Channel, Pricing for Global Market and a Few Others

International marketing involves all the activities that form part of domestic marketing. A business organisation designing to be involved in international marketing has to correctly identify, assess and interpret the needs of the overseas customers and carry out integrated marketing to satisfy those needs.

Possible global markets should be ranked on several factors, including market size, markets growth, cost of doing business, competitive advantage and risk level. The marketer must decide which markets offer the greatest long run return on investment.

International marketing involves the performance of marketing functions of buying, selling, transportation, storage, warehousing, financing, risk-bearing, pricing, standardisation, and promotion in foreign markets.

The main activities of international marketing are described in brief as under:

1. Market and Product/Service Selection:

Proper market selection is an integral part of the strategies for international marketing. Market segmentation and market targeting are concepts which are useful. Through careful market selection, the opportunities can be exploited and the risk involved can be minimised.

Product/Service selection is also equally important.

All aspects of the product/service such as the basic product constitutes, the secondary features, brand names, packaging, aesthetics, labeling and usage instructions may need adaptation, depending on the situation, they have to be matched with the needs of the specific overseas markets.

2. Market Entry:

Export of products is the primary route to entry into global markets. Through joint ventures, a firm may get close to foreign markets. In recent years, both exporting nations and importing nations have among themselves formed powerful cartels for various commodities.

Establishment of joint ventures and collaborations in foreign countries with same foreign firms far marketing the products and/or manufacturing.

A firm will have to determine the most appropriate method of entering into those international markets which offer good and feasible marketing opportunities.

3. Distribution Channels:

The International marketers must take into account channels between nations and also channels within nations.

Channels between nations export through middlemen in one country or direct export to foreign customers who may be end-users or middlemen in foreign countries.

Marketers should take interest with the entire channel of distribution from produce to the final buyer. The whale channel concept for each market is necessary for good in international marketing.

4. Pricing for Global Markets:

Generally, the principles and techniques of pricing are the same in domestic and international marketing. Firms which have a short term interest in the foreign markets may provide cost plus pricing strategy provided markets can be found at the price. However, firms with long-term interest in the foreign markets have to adopt a marketer oriented pricing policy. They have to take into account the condition in each country and in each distinct market segment and formulate appropriate pricing strategies for each market segment.

5. International Marketing Research:

Marketing planning should rest on the foundation of marketing research. This is all the more true in the case of international marketing planning.

Without reliable marketing information gathered through detailed marketing research, major decisions in international marketing cannot be taken.

All the relevant information on the overseas target markets must be systematically collected, updated, analysed and stored.

6. International Marketing Communications:

In international marketing, a marketer has to handle unfamiliar people, unfamiliar media and unfamiliar purchase motivation.

Marketing communication has to be adapted to suit the foreign markets and the foreign audience. Advertising, trade promotion and high level personal selling are the major components of international marketing communication.

7. Procedural Complexities:

A businessman is required to understand a variety of procedural complexities covering a numbers of areas like export-import licence, customs, foreign exchange, terms of payment, documentation, insurance regulations and quality norms etc.

8. Organisation for International Marketing:

Firms manage their international marketing activities in at least three different ways. Most firms first organise an export department, then create an international division and ultimately become a multinational organisation.

A firm normally, gets into international marketing by simply shipping out the goods.

If its international sales expand, the company organises an export department consisting of an Export Manager and a few assistants.

Many companies set involved in several international markets and venture. A company may export to one country, licence to another, have a joint ownership venture in a third, and own a subsidiary in a fourth. Sooner or later it will create an international division or subsidiary to handle all its international activity.

Several firms have passed beyond the international division stage and become truly multinational organisations. They stop thinking of themselves as national marketers who venture abroad and start thinking of themselves as global marketers.

International Marketing – 4 Main Elements of International Marketing Environment: Culture, Economic, Commercial, Political and Legal Environment

Due to environmental differences, international marketing is complex. The four marketing decision variables-product, price, promotion and distribution are related to international marketing. There are international marketing segments based on demographic, social and cultural factors influencing consumer buying process.

The main elements of international marketing environment include cultural, economic, commercial, legal and political forces. Each of these forces represents international inputs which shape the typical marketing-mix for a specific international marketing region.

1. Culture:

Social, educational, family and religious systems of a country have influence on marketing. Culture consisting of life style, social-customs, language religion and tradition including aesthetic feelings influence the consumer behaviour.

2. Economic Environment:

Economic status of a society plays a significant role in the purchase decision. The per capita income, a common measure of economic development of a nation has created the developed, developing and the third world countries in the world.

Fortunately, the middle and lower income groups people in the developing and the third world countries are adopting improved pattern of consumption and better life styles thanks due to the process of globalisation and the wide-spread of education.

Multinational companies are particularly interested in the developing countries because that countries account for a sizeable world’s population.

A developing country like India offers a good marketing opportunity, even better than the developed nations, due to ever growing demand for consumer goods and plants and machineries.

3. Commercial Practices:

Commercial practices include the business rules and regulations, business ethics and business customs and practices in a country. An international marketer must have adequate knowledge of such business customs and procedures in order to gain the confidence and support of local buyers, middlemen and business agencies in the foreign market.

4. Political and Legal Environment:

A stable political environment favours international marketing system. The following political and government factors are taken into consideration by an international marketer while deciding to enter a foreign market –

(i) Consistency of government policies

(ii) Nature of political relationship between the target country and the international marketer’s controls.

(iii) The degree of government’s controls on foreign exchange restrictions, imports and prices etc.

(iv) Government’s policies in the target country regarding foreign investment and protection of patent rights etc.

The legal environment of the target country is also important for an international marketer. This includes existence of Business laws, Labour laws, Income-tax laws and the Patent and the trade marks laws which directly or indirectly support the growth of international business in the target country.

International Marketing – 3 Important Determinants: Market Characteristics, State of the Firm, Legal and Political Environment

International marketing is the most cost-effective method to market goods and services across countries provided the marketing manager possesses thorough knowledge of market characteristics, the condition of the firm or the manufacturing unit, existing and potential marketing institutions and the legal environment.

The market characteristics comprising of the physical environment, macro-economic and socio-cultural factors largely influence the functions related to the 4Ps (product, price, place and promotion) and sales management.

1. Market Characteristics:

The climate and product use conditions which are part of the physical environment and determine the product design of the firm looking for international marketing avenues. The market size, another factor of the physical environment, largely influences the pricing distribution channels and sales force management in the process of international marketing.

The macro- economic factors which determine the decisions on product design are at the level of technical skills and income while the pricing is governed by the extent of credit availability and trend in the foreign exchange rates. The wage rates for fixing remunerations to the sales force and more importantly, the availability of manpower are the major determinants at the macro-economic level.

Purchase motivation is also an important variable in the macro-environment of international marketing. Traditions and beliefs, as socio-cultural factors, influence the product designing process – international marketing. The demand for goods and services determine the pricing strategy.

Credit linkages in sales are the key factor that determines pricing approaches across countries. The shopping styles of customers, which are influenced by their social system, invariably form the core of the distribution process. The attitude towards selling and marketing, largely determines the approach to organize sales force and promotional activities in international marketing.

2. State of the Firm:

The manufacturing of marketing firm engaged in international trade needs to exercise flexibility in its operational decisions for a consistent performance. The extent of product diversification, elasticity of demand, availability of distribution outlets, missionary zeal in organizing the sales force and comprehensive promotion form the state of art of an international marketing firm.

These factors largely determine the 4Ps under competitive stress. Besides understanding competition, analyzing the business environment and evolving strategies for short and long term advantages is an important task for a marketing firm at the international level. Achieving efficiency in this area is largely determined by the quality of technology adoption, pricing policies of substitutes, competitors’ channel control mechanisms, sales management and advertising styles.

3. Legal and Political Environment:

The legal environment is one of the major limiting factors in international marketing as it is often difficult for a firm to set its function in accordance with the legal restrictions imposed in different countries for product.

It is necessary to carry out specific marketing programs for each country, analyzing the local laws and marketing environment, for successful international marketing.

The global political amphitheater has been witness to forces of a centralized and decentralized nature that govern the economic power of a nation. Some developed countries enjoyed either of these forces and made a dent on the global economy. However, today, groups of nations have formed unions based on their political and commercial interests that have been more effective in building up regional markets. In the early 1990s more than 50 such regional organizations existed.

The major ones are listed below:

i. European Economic Community (EEC)

ii. European Free Trade Associations (EFTA)

iii. Council for Mutual Economic Assistance (COMEON)

iv. Arab Common Market (ACM)

v. Association of South-East Asian Nations (ASEAN)

vi. Economic Community of West African States (ECOWAS)

vii. Central American Common Market (CACM)

viii. North American Free Trade Agreement (NAFTA)

ix. Caribbean Common Market (CARICOM)

The political systems of different countries also affect the international marketing performance to a large extent. For instance, democratic, communistic and capitalistic political systems can never accept a common international program under normal conditions.

A capitalist country will look for a liberalized market environment while a communist country may like to protect its trade movements. Similarly, developing nations (in order to streamline their economy) insist on trade protection as a prominent political measure.

International Marketing – 4P’s of Marketing Mix: Product, Price, Place and Promotion (With Examples)

In International marketing also, the marketing mix i.e. 4Ps of marketing – product, price, place and promotion remains as effective as in case of domestic marketing. But, it needs to be tweaked in terms of the changes in culture, language, currency etc. Let us check out the product first.

1. Product:

If we talk about product, then in international marketing, a company needs to plan its strategy in accordance with its product or service portfolio. Certain products like Consumer Electronics items, Mobile Phones, MP3 players, LCD & LED TVs, Digital Cameras & Camcorders, Laptops, Desk-tops and so on, require no adaptation and can be sold directly in all the international markets.

Like, currently Apple iPhone is selling in around 100 countries all across the world, while Dell is present in 180 countries across the globe. But few other products like food products, clothing, shoes, furniture etc. require adaptation by a company.

To be successful in the International markets, a company needs to revalidate and rethink its marketing mix elements to suit that market, as Mc Donald’s is doing in different countries all across the world. In India, you won’t find a beef burger due to cultural considerations, sold by McDonalds, which has operations in 122 countries to be precise.

While in US, you won’t find a Mc Aloo Tikki Burger. In Germany, the burgers are served with a chilled beer – Pilsner, not with a Pepsi. In Japan, they serve shrimp burger called Ebi Filet-0 and a green tea flavored milkshake. In Costa Rica, McDonald’s serve rice. They call it Gallo Pinto, which means rice and beans in Spanish.

In Hong Kong also, you will not find a bun, instead you will get rice burgers served between two rice patties. It means McDonalds needs to set up its menu in accordance with the local requirements of a country.

2. Price:

Price is a crucial factor in international marketing. A product may have a sound value proposition in one country, but it may not be the same in other. A country like India is too price sensitive for foreign marketers. In India, Apple has not been a great success in selling iPhones, as the pricing was conducive only for the upper class customers. But the strategy of selling iPhones on EMIs has done wonders for the company and the business has grown by an amazing 400%.

On the other hand, Samsung has played their cards well in India through their Galaxy range in the middle and upper segments and guru series in the lower segments of customers. McDonalds sells its burgers at different prices in different countries, based on its cost structure and the customers’ affordability. LG is very successful in India with its value pricing with respect to the domestic consumer durable companies in India.

Suzuki is the leader in four wheeler category with the right kind of price strategy in the Indian markets. On the whole, the pricing of a product should justify the value in the respective country.

3. Place:

A company’s distribution channel is also equally important for the success in the foreign markets. Every market is different and in accordance with the local requirements, a distribution channel needs to be set up. While coming to India, Apple adopted it’s tried and tested strategy of supplying the iPhones with network providers, as it has done in the USA.

But this strategy of supplying the iPhones with network providers such as Airtel and Aircel has not worked in India. That’s why Apple has to adopt the strategy of signing up with national level distribution partners such as Redington and Ingram Micro, to ensure nationwide presence, both in small shops and in the big retail brands. Initially in India, Fiat formed a distribution alliance with Tata. But the strategy did not work. Now Fiat is on their own and building their own dealer base in India.

In fact, many foreign automobile giants like Ford, Nissan, Renault etc. are struggling to expand the dealer base, which, in turn, has been hampering their growth.

4. Promotion:

Besides the above 3Ps, a company also needs the fourth P i.e. promotion to excel in the market. A company should have the right kind of communication strategy to be successful in the foreign markets. The same communication message may not work in all the countries. It needs to be adapted to the local environment, as there are cultural limitations also.

Sometimes, the meaning of a word or colours may signify something else in different countries. Mitsubishi changed the name of its SUV Pajero to Montero in USA, as pajero in Spanish, is used as a slang term for sexual self-gratification. Similarly colour purple is a mourning colour in Japan, while it is associated with death in most of Latin America. In European countries, purple is a colour of royalty.

Media also needs to be chosen carefully, in accordance with the different countries’ requirements. In some countries, newspapers may be very popular; while in some other TV may do a great job.

Thus, a company needs to ‘Think Global and Act Local’, which is also known as ‘Glocal’ as Japanese call it. This is also the philosophy for MNCs like Hindustan Unilever Limited (HUL), Tata, Birla, Dabur, Marico, Unilever, Sony, LG, Samsung, Maruti Suzuki etc., which has been highly successful in international marketing.

HUL, a subsidiary of Unilever in India, calls itself multi-local multinational, with market presence in more than 100 countries for their food and beverages and home and personal care products.

International Marketing – Developing International Marketing Plan

An international marketing plan is prepared considering various factors that determining marketing functions across various countries.

However, the marketing plan primarily needs to be designed considering the principal business components as stated below:

i. Commitment on decisions taken by the marketing firm.

ii. Selection of country or cluster of countries (trade region).

iii. Mode of entry in the market.

iv. Appropriate marketing strategy in tune with the marketing environment of the identified country or region.

v. Building effective marketing organization.

The selection of a country is a critical exercise that involves the examination of all the above variables besides undertaking the demand analysis and financial estimates. The commitment of the firm to its trading decisions in the selected country, benefit cost ratio study and market operational methods largely determine the mode of entry of the firm into the international marketing avenue.

The marketing strategy needs to be evolved assessing the objectives of the firm in the local markets in order to acquire differential advantage. Once the marketing-mix is critically analyzed, an implementation strategy can be formulated by the marketing firm. However, to ensure effective implementation of marketing policies, the marketing organization needs to be strengthened first.

The decentralized organizational structure at regional levels (like Central Asia, South-East Asia, Middle-East, Far-East, etc.) would be appropriate for a marketing firm when planning for international marketing in more than one country.

Such an organizational set-up would facilitate monitoring of demand, supply, price trend and political interventions more comprehensively. The centralized set-up would be of greater cost but less effective in exercising the marketing implementation and control measures.

A two-stage selection process is required for the firm in identifying the product, market and services for international marketing. In this process first, potential international markets need to be explored. Secondly, comparison of the domestic market of the firm with those abroad needs to be carried out in order to ensure that marketing at the international level has cooperative advantages over the domestic market.

Identifying a marketing region is always better than restricting to an individual country for the purpose of cost effective distribution networking. In addition, the tariff walls at the border countries need to be studied carefully. The firm involved in the international marketing should also make efforts to develop export markets in the initial stage.

This would help in product specialization. International business firms have found that exporting is cheaper than manufacturing in overseas markets. There still remain some basic issues to be examined by the firm engaged in international marketing.

These are:

i. Size and growth.

ii. Marketing potential of a country or region.

iii. Similarities in host countries.

iv. Free trade area, customs, common market.

v. Economic and political unions.

vi. Appropriate economies of scale in managing business.

vii. Accessibility, infrastructure and its cost.

viii. Possibilities of decentralizing business activities.

ix. Geographical boundaries of the markets.

x. Long run market segmentation.

Exporting firms should understand that the export operations are subordinate to the domestic market policies and that the policy of the business firm to market the surplus home produce in the international market, would largely be determined by the opportunities offered by the host country or regional markets.

However, the considerations on:

(i) The firm’s extent of awareness on varying requirements of consumers,

(ii) Market response to the design and packaging of the product,

(iii) The impact of the pre-launch promotion among the focus groups, and

(iv) The size of the market – influence the adaptation process of goods and services at the international markets level.

The firms preparing for international marketing should also keep track of the international subsidies provided to the developing countries. A strong political and economic information system would help the firms in preparing international marketing plans more effectively. The synthesis of these inputs for planning is essential in pursuing global strategies.

Thus, integration of this information with the border-country profiles is a pre-requisite for sound plans. The selection of a market place at international level is a critical process and is required to be filtered at many intermediate levels to select the core business country.

International Marketing – International Marketing and Control Management

A control feedback system is one of the core components of international marketing management and it serves to assess performance. Monitoring is one of the tools to measure the degree of the success of international marketing and needs to be incorporated in the plan itself. The marketing plans need to specify the periodicity of the control exercises and its prime objective.

The monitoring calendar for international marketing firms may be designed keeping the following checks in mind:

i. Budgetary control.

ii. Plan implementation.

iii. Performance of marketing functions (9Ps) (product, price, place, promotion, packaging, pace, people, performance and psychodynamics).

iv. Periodical appraisals of marketing information.

v. Social, cultural and political changes.

The overall objective of these checks and controls is to determine the achievement of targeted results on time. These points need to be administered from the corporate office of the business firm in a centralized manner in order to enable effective planning and execution process. The standardization of marketing-mix is usually centralized to ensure the quality of all the components of the mix across the markets in the operational region.

Besides, it is important to provide a common business language across markets which would help in understanding local markets more analytically. The checks need to be exercised at different levels of the marketing plan execution and to build-up a strong communication and information system.

A consolidated document of the target group index (TGI) may be an appropriate tool for information processing and analysis. The variables which need to be covered in the TGI include consumer goods, industrial goods, services, spatial and temporal trend of demand and price, distribution patterns, marketing budgets, response to advertising, communication services and the like.

International marketing research needs to be conducted on specific issues of interest and inferences may be tagged along with the Monitoring and Evaluation (M&E) process. Nevertheless, M&E should be conducted periodically as a tool of control.

International Marketing – Product Positioning: Diffused Preferences, Clustered Preferences and Homogeneous Preferences

Product positioning is a process which involves market segmentation, assessment of consumer behavior and competition. Market segments may be defined as the large groups of consumers of common interests which would help the marketer to sell the products to them.

Product positioning is the art of placing the right product in the right market for a consistent, sustained performance. The first step in product positioning is the act of identifying the distinct groups of consumers who require an effective administration of marketing-mix. This step is followed by product promotion and an image building exercise.

There are various approaches followed in product positioning. Commonly the markets are segmented in view of the place, the operational limits of the place, physical factors, socio-economic factors, psychographic factors and the behavioral dimensions of consumers.

The product in the international market may be positioned keeping in mind any of the three consumer behaviors discussed below:

1. Diffused Preferences:

Markets are identified as independent entities in the given region and the marketing-mix is administered therein separately. In such an approach it is difficult to monitor marketing activities like distribution, user reviews, price trend and demand for the product or a range of products. In diffused positioning there always exists a threat from competitors as there will always be operational demarcations for conducting business.

2. Clustered Preferences:

In this approach the identified markets are grouped in terms of their operation area, business profile and consumer preferences. This would be a more scientific method of positioning the product in the segmented markets. This approach makes for better performance and administration of marketing strategies than when compared to the other two approaches.

3. Homogeneous Preferences:

Pooling of marketing activities in places of larger common interest of the consumers and positioning the product therein may also be an appropriate strategy. For instance, in any one country of the EEC (UK, for example), markets show a market segment which has emerged out of the common consumer behavior.

Product positioning is to be done carefully considering number of variables in reference to the business targets, product characteristics and physical and financial resources available with the organization.

Based on the above parameters the marketing firm can position the product or range of products in the targeted market or region. However, having evaluated the important variables, the firm may exercise the following five options to select the market for introducing the product.

They are:

i. One product in one market,

ii. All products in one market,

iii. Different products in different markets,

iv. One product in all markets, and

v. All products in all markets.

The international marketing firm should take into consideration the factor of product quality across the markets in the entire business performance. Hence, standardization plays an important role in multi-product or multi-market product positioning and needs to be attended to carefully. Besides, a more critical assessment of the adaptation of products is required in the international markets in order to strengthen the base for product positioning.

The standardization of products in the international markets needs to be followed considering the factors listed below:

i. Principal function of the product.

ii. Durability.

iii. Quality.

iv. User benefits.

v. Technology, maintenance and services.

vi. Appropriateness of the product.

Thus, it is always better to develop a regional marketing policy than one exclusively for individual countries. This would take care of the standardization aspects in international marketing.

International Marketing – 3 Major Pricing Systems: Value Pricing, Pricing with Demand Curve and Penetration Pricing

An appropriate pricing policy has a positive impact on profit making and sales realization. Pricing is a factor directly related to the profit and sale of products under different market conditions. The adopted pricing policy will reflect the positioning of the product in the market.

These issues may be viewed as either high-price or low- price policies. Effective pricing strategies may be charted according to product age in the market – embryonic, growth, mature and aging. There are various factors that affect designing of price strategy for international markets. Cost components largely influence the pricing policy of a product.

However, these components are subject to change under the pressure of the external factors discussed in the above table. The determinants of the product-cost broadly consist of production costs, transportation, storage, packaging, taxes and duties besides the administrative charges that are incurred towards wages, salaries and rewards to the employees.

The nature and size of the market, economic conditions of the buyers with reference to their income and purchasing power, their propensity to purchase and their attitude towards prevailing brands also affects pricing decisions. The environmental factors, more prominently the foreign exchange rate trend influences the process of pricing products for international markets.

The changing currency values, devaluation of home country currency and any such changes in the international stocks widen existing price gaps among the trading countries. Similarly, the inflation rates that differ from country to country also make a considerable dent in evolving international pricing strategies.

However, price and general trade controls exercised by countries frequently make the product price unstable in international markets. Such measures are generally taken to check the dumping attempts made by the international firms to enter the market.

The transfer of prices takes place largely between the subsidiary units of the same company operating at the international level. Companies may deviate from arms-length prices for two reasons- (i) to maximize profit, and (ii) to minimize risk and uncertainty.

In order to maximize its profit a company might lower transfer prices for the product obtained from the subsidiaries while increasing transfer prices for the products shipped from other firms. There are some internal factors that need to be considered for transfer.

They are as follows:

i. Artificial reduction of prices and profits.

ii. Resource position of the firm.

iii. Implication on tax structure.

iv. Ethical values in business.

Some other pricing mechanisms used by companies in the domestic market can be considered for international markets with regional country specific limitations.

Value Pricing:

Embryonic stage refers to such products that are newly introduced in the market and whose recognition with the consumers is yet to be established. Value pricing may be an appropriate strategy to practice with new products. It is also knows as ‘skimming the market.’ In this process, high price is set for the product to ‘cream off’ all available command.

This price is maintained for some time, to allow customers, who regard the product as important, to upgrade themselves into the high price bracket. In a broad sense it is product segmentation. However, the value pricing approach would prove advantageous only when enough product awareness is created among consumers through advertisements, demonstrations and effective consumer services.

In the long run such an approach would create a specific group of customers or customer segment for the product. For instance, the electronic products of some companies (like BPL-Sanyo, Philips, etc.) among capital goods and some household consumable goods (such as packed food, condiments, etc.) coming from capital intensive units constitute such consumers’ segments for their products.

Under the value pricing approach the advantage of high profit is anticipated in the long run, provided there is consumer segmentation for the product together with high recognition. However, in this approach, the selling cost may shoot-up thus greatly reducing the profit margin in the initial stages.

In value pricing, another important factor to be considered is territorial characteristics, viz., the purchasing power, rural and urban consumer segments. In the former the marginal propensity of consumption and the income level of consumers are low. Here, value pricing, with its high product price areas where there are low income group consumers, product segmentation can be done by formulating a dumping policy at a low price.

The price of the product can be raised to the maximum in coherence with the consumers purchasing and paying capacity in long run, after the product gets proper consumer recognition and makes headway in the market. Under such circumstances, the selling cost will, however, be lower when compared to the overhead costs.

Pricing with Demand Curve:

This approach may be followed for pricing such products as already exist in the market and are mature with regard to sales realization in the open market condition. In this process, unlike getting customers to upgrade themselves and form segments, the pricing approach calls for widening the market and matching the product price with product demand. In this process a high price may be set initially but there is a sealing down of the price and a mopping up of all available demand at each price level.

The likely demand at various price levels is difficult to estimate but the response revealed in surveys can be used in pricing. The sales estimates represent the demand schedule and in a firm the curve can be drawn even with three points. To estimate the demand for a product, certain preconditions have to be viewed- (i) the number of potential buyers, (ii) their propensity to purchase and the intensity of sales, and (iii) product attributes to attitude building.

The demand curve is inextricably linked to these pre-conditions. For instance, if the price is changed there will be a movement along the demand curve. If any of the pre-conditions of demand changed there is a scope for a shift in the demand curve to the higher or the lower side. In case the demand for the product is elastic the price should not be kept high for any product.

Pricing strategies are subject to the very nature of the product. If it is a core product that has been produced without great expenditure, then it can be priced at higher margins as it is not threatened by any close competitor. Marketing of such products depends on the pricing strategies deemed suitable at each level of the distribution network.

Penetration Pricing:

This policy may be adopted to penetrate the market as quickly as possible in order to secure cost advantages by pushing products in a high volume. In case new quality products similar to those already existing in the market have to be introduced for crash sales in the market, the price may be fixed in relation to its competitive products.

The important issue that needs to be kept in mind is the anticipated selling cost and the volume of sales when determining prices. The penetration price always needs to be little lesser than the price of similar existing products. The penetration price is conceptually an artificial pricing approach to push the product in the market. The real price may be fixed later when assessing the demand elasticity of the product in the primary and subsequent markets.

International Marketing – Promotion

Similar to the concept of general marketing promotion, a mix of components determines the international market promotion. These consist of communication and advertisement, sales promotion, direct marketing and international relations. However, the process is not as smooth as it is in the domestic markets due to many socio-cultural and economic barriers.

Some of the important factors that need to be understood for building an effective promotion-mix are listed below:

i. Buying behavior.

ii. Buying criteria.

iii. Language.

iv. Business protocol.

v. Negotiation skills.

vi. Leadership qualities.

These approaches are largely useful in promoting consumer products in international markets. There are some specific approaches which are largely used to promote the marketing of industrial products at the international level.

The methods involved in promoting industrial products are effected through:

(i) International industrial fairs,

(ii) Specialized trade fairs,

(iii) Bidding process, and

(iv) Consortium selling.

A consortium is a group of companies of common business interest that is shared in a contract form. Consortium marketing not only helps in promoting products in the international market but also generates competitiveness among the members by offering turnkey solutions to the buyers.

Some of the common approaches of consortiums towards international market promotion are as follows:

i. On-store price reduction.

ii. Generating competition of buyers.

iii. Trade discounts.

iv. Promotional packs with additional quantity.

v. Free gift packs.

vi. Sales coupons.

vii. Display promotions (in-store and outside).

viii. Free samples.

ix. Special offers.

x. Premiums (also on-pack).

xi. Bonus packs.

xii. Refund offers.

Apart from the above approaches, sports promotions and sponsorship of international events are also one of the major promotional tools. It provides the advantage of visual identification of goods and services of the companies to millions of viewers. To take advantage of global sports or events, a company should have substantial advertising material – an attractive logo or a brand name and appealing language that can catch international attention.

Advertising, direct marketing and public relations are the important tools for the promoting international marketing. The process of advertising in an international business begins with a market situation analysis conducted to assess marketing opportunities for the product in the existing market.

On identifying the target segments, marketing strategies are formulated and supported by communication linkages. Advertising strategies are developed in accordance with the marketing plan and advertisements are released according to the media plan. Hence, commercials seen by the consumer are like the tip of an iceberg emerging from a situation analysis, trade goals and strategies that have been evolved by the marketing and advertising managers.

However, it is difficult to establish whether advertising is the first or the last component in the entire process of marketing. Despite numerous research efforts on the function of advertising, a unified theory has not yet emerged.

International Marketing – Organising International Marketing

Marketing is an integrated effort of various elements linked with the corporate objective of the organization. The marketing environment is volatile and keeps changing according to the business policy of competing firms, fashion, legal interventions and innovations. Thus, in the modern era, most companies put great efforts into organizing their marketing avenues with response to significant changes in the market.

In such a process, it is essential to know consumer orientation at the very beginning. The research and development wing of the company needs to concentrate on new ideas and engineer them to manufacture the products desired by the consumers.

Some of the essential determinants on the process are as given below:

i. Consumer feedback.

ii. Product improvement.

iii. Distribution and purchase.

iv. Marketing set-up.

v. Zero defects.

In a marketing organization there should be a continuous flow of information from the consumers which will enable the manufacturer to according to improve the product. The ideas generated through the feedback of consumers’ needs to be evaluated with the view of accelerating the product improvement process.

However, the company should develop a proper match with the supply and distribution system to ensure the availability of the products to the consumers. The marketing department in an organization should consist of a chain of functionaries for managing various marketing operations such as consumer survey, production, research and development, distribution, pricing, marketing finance, sales, promotion, administration and the like.

The functionaries should have a horizontal and a vertical network in order to perform their tasks efficiently and to provide feedback to the decision managers. The horizontal networking needs to promote product distribution, sales and promotion at a grass-root level. It is better to spread geographically covering all the sensitive marketing points in the hinterland of the operation of the company.

The networking of a marketing organization can also be built in a pyramidal structure wherein the administration, monitoring and evaluation is done in a synchronized manner. The top management exercises the highest powers while the middle and the lower management are answerable to the personnel of the top management.

This is a centralized marketing system where the middle and lower levels of management executives are not given functional autonomy. The service functions have to be coordinated, monitored and evaluated at the middle management level while the planning functions need to be taken care of by the top management of the organization.

The service functions include administration of sales personnel, promotion, marketing research and market surveys. Functions pertaining to strategic planning, product planning, marketing research and decisions about the new projects comprising the planning and program functions rest with the top management.

The area functionary in a marketing organization should provide regular feedback to the middle management to enable them to evaluate product performance and modify the marketing strategies as and when required. The product managers’ role is to develop product plans and to administer them in the selected market segments.

Other important functions such as the job chart of the product manager are stated below:

i. Formulation of sustainable and competitive product plans.

ii. Formulating annual operational marketing plans.

iii. Forecasting sales.

iv. Planning sales force.

v. Developing sales promotion strategies.

vi. Managing the market information system.

vii. Analyzing marketing problems, consumer grievances and working out suitable solutions for them.

viii. Suggesting product improvement.

The product manager has to interact with different types of interest groups in order to ensure the smooth functioning of a marketing organization. On the product front, the interactions of the product managers are marked with the personnel of research and development, production, distribution, promotion, media, consumer services, packaging, purchase, sales, fiscal and legal department (to ensure that the product on sale is not violating any regulations stipulated by the government).

Often, in a vertical organizational network the problem of striking a balance of operational decisions between the apex and the lower level functionaries occurs. The operational decisions consist of marketing and non-marketing functions. The marketing functions consist of planning, program, implementation, monitoring and evaluation while the non-marketing functions comprise research and development and public relations.

The balance needs to be struck as what mix of these activities will be attended by apex and grassroots level functionaries. An important point to remember is that along with functional decentralization there remains chances of duplication of efforts.

In such circumstances, networking decisions have to be taken on the basis of the extent of the expenditure incurred while performing the tasks. However, there exist advantages and disadvantages of functional centralization and otherwise.

Some of the main considerations for organizing marketing are as follows:

i. Lines of authority and tasks need to be unambiguous and clearly stated to the functionaries at various levels.

ii. The structure of the marketing organization must be acceptable, conducive and dynamic to perform the functions on time.

iii. All the sub-activities should be properly coordinated.

iv. Information on marketing activities needs to be collected by an efficient department of the organization and the relevant facts must be made available to all the functional units to set their strategies.

v. It is essential to maintain integrity among the marketing personnel in an organization.

International Marketing – 2 Important Fallacies: Unfair Competition and The Imbalance of Balance of Payments

The most frequently heard argument is the fallacy of unfair competition from imported goods, particularly when those goods are produced in countries with low wage levels. The protectionist’s cry of “unfair competition” has been heard for many years, and the tariff has been the response. Just what is the unfair competition argument, and is there a response to it other than tariffs?

Unfair Competition:

A tariff is essentially a device for removing the competitive advantage that an imported good might have in a domestic market; and if the domestic country has a tariff, we should know the effect tariff removal would have on domestic industry. Import quotas have also been used as a protectionist device, particularly with respect to petroleum. “Buy domestic” regulations similarly protect domestic manufacturers from foreign competition.

If, we include all Indian industries hiding behind some protectionist device, we are talking about several million workers. Indeed, one protectionist voice regularly claims that five million Indian jobs are vulnerable to import competition. However, the basis for such a figure is not clear.

Despite the claims of the protectionists, however, there is another side to the matter of “import employment.” Imports can and to create jobs; for if imports increase, countries earning by exporting also tend to increase their purchases of Indian goods, and this export effect increases employment. Import of raw materials for producing textiles is a good example of this point.

We should not, of course, be unsympathetic to those firms directly affected by import competition, because the problems of unemployed workers cannot be minimized. Nevertheless, in our competitive system the inability to compete with more efficient firms, whether they happen to be located down the road, in another state, or in another country, results in firms either improving their performance or going out of business; this is what keeps our economic system efficient.

The vulnerability to competition of any firm reflects the working of the principle of comparative advantage, whether the advantage is one that is exploited by a neighboring firm or by a firm on the other side of the world.

A neighboring firm may find its comparative advantage in having a more efficient management or more modern equipment; a firm on the other side of the world may exploit a raw material advantage or a lower labor costs advantage. The competitive system works because of the freedom of firms to exploit advantages, thereby bringing about the most efficient use of resources.

Basically there is no difference between a raw material advantage, managerial advantage, and a wage cost advantage. All the same, the protectionist argues that wage cost advantages are different, and that they are something we must protect ourselves against; yet the protectionist says nothing about raw material or managerial advantages.

A country with a substantial wage cost advantage does not normally enjoy a continuing advantage in international trade. If it exports much more than it imports, domestic market demand pressures will tend to put upward pressure on the domestic monetary unit, and the cost advantage will decrease.

Wages, moreover, constitute only one factor of production, and in most industries they constitute a relatively small percentage of total cost. Low labor costs provide a real advantage only in the production of goods in which labor costs constitute a high proportion of total cost.

Productivity, which is a measure of the efficiency of resource use, determines the extent of the disadvantage that a high wage cost constitutes in the production of goods. In the United States most industrial firms have productivity levels that are higher than those of competing firms in other countries. But today United States industries such as the watch industry, the hand-fashioned glassware industry, the china industry, and the woolen and worsted industry are vulnerable to competition from low- labor-cost foreign competition.

Techniques of production limit the extent to which productivity increases can be obtained; thus high wage costs in these industries put them at a competitive disadvantage with foreign producers who use quite similar production techniques but have the benefit of low-cost labor.

Who benefits from the working out of comparative advantage? For example, United States has many industries that enjoy a comparative cost advantage over foreign competitors. If trade is allowed to take place freely, these industries will find overseas markets and their earnings should offset the earnings of those industries which export to the United States; this is known as the balance of trade.

Perhaps more important than the benefits that free trade brings to export industries are the general benefits that accrue to the consumer. If he can buy a foreign-produced car for Rs.20,000 less than a domestically produced car, he saves Rs.20,000. If tariffs prevent the consumer from making this purchase, he is, in effect, forced to pay a Rs.20,000 subsidy to the manufacturer who produces the domestic car.

The Imbalance of Balance of Payments:

Later we will examine in detail the balance of payments problem that has been discussed too much in recent years. We bring it up this time to look briefly at the fallacious arguments that are sometimes advanced in connection with the problem. One argument, for instance, states that international trade has created a serious balance of payments deficit, and that withdrawal from international trade would remove the problem. This, however, is not so.

Our balance of payments account consists of two parts:

(1) The trade or current account covering the balance of trade, and

(2) The capital account covering capital transactions.

In recent years the deficit in our balance of payments has been caused by capital outflows exceeding capital inflows, and were it not for the contribution made by the surplus (favorable balance) in the trade account, the deficit would be much larger than it is.

Our export trade has improved our balance of payments problem considerably. However, attempts to solve the balance of payments problem by limiting imports, which some have advocated, are likely to increase the imbalance, since foreign nations would retaliate by limiting our exports to them.

All this does not mean that an adverse balance is of no concern. Actually, the considerable increase in the volume of world trade has been made possible by the willingness of the United States to permit the dollar to be used as an international currency, convertible into gold on demand.

But the dollar by itself cannot be expected to play this role indefinitely, and some international financial solution is urgently needed, so that the countries of Western Europe, Japan, and others can contribute to the financing of international trade as they develop favorable international balances.

International Marketing – Opportunities: Foreign Market Surveys, Cultural Empathy, Policy Research, Information Gap, Foreign Marketing Research and a Few More

In developing a foreign operation you should develop a marketing strategy to be used for both domestic and foreign business. Many a firm’s interest in the export business began with an inquiry from an overseas buyer, thereby making the firm realize that there was a need for its product in a foreign market. However, since a steady flow of such foreign inquiries is not likely to continue without promotional help, you should be fully aware that marketing opportunities are not confined to the home market. You should always consider foreign countries as potential markets.

Domestic markets will be challenged by foreign imports in the future; we must, therefore, expand our markets to include foreign markets. Firms with diversified products in a purely domestic market may be as vulnerable to foreign competition as is the one- product firm suddenly faced with a decline in demand for that product. We should therefore “think internationally”, there are very few products that cannot be marketed outside the United States.

The difficulties involved in successfully marketing products overseas should not be underrated. However, developing overseas markets is no more difficult than managing the marketing function in domestic markets. Some changes in technique will be involved, of course. Overseas market research has some intricate aspects, and foreign market intelligence will have to be obtained on a continuing basis.

It may be necessary to make changes in your product in order to adapt it to foreign markets; or you may have to design products especially for foreign markets. Packaging problems will be different, and distribution channels will have to be developed with particular care. Traditional methods of sales promotion and selling may have to be changed, and the public relations dimension will have some new wrinkles.

Such changes cannot be made unless top management is convinced that it can obtain additional profits by making the changes. Marketing managers must therefore prepare thoroughly to win over management. International marketing efforts will most certainly fail if top management regards overseas business as merely an extension of, or an adjunct to, its domestic business.

After all, additional resources will have to be committed to foreign operations, and in some cases profit from foreign operations will not be easily made. Management must be made aware of both the risks and the opportunities inherent in a foreign marketing operation.

Foreign Market Surveys:

One of the most critical phases of international marketing is the assessment of foreign marketing opportunities. Planning, organizing, and controlling an export marketing effort cannot be accomplished without a thorough assessment of the opportunities that exist in foreign markets.

Cultural Empathy:

Marketing research in foreign markets differs from domestic research. Although people the world over are fundamentally the same, the human differences that are displays in the various countries are subtle in nature, because these differences in the behavior are subtle, they are easily overlooked. They are not insignificant, however. Many business blunders have been made by ignoring the refinements of cultural empathy.

Cultural empathy is an understanding of what is distinctive about the way of life of a particular group of people. Many differences in behavior stem from social and religious customs. Language is also a reflection of cultural history. Only a thorough understanding of a country’s culture and its attitudes toward markets and products will provide researchers with the ability to correctly interpret foreign market data.

Policy Research:

Another aspect which is not involved in domestic research, but which plays an important role in foreign marketing research, is political research. Foreign governments may, for instance, harbor hostile attitudes toward foreign marketers and foreign investors, or toward Americans in particular.

Such attitudes may be so fickle that established markets and investments cannot be considered safe. In such countries free enterprise may not be accepted. Moreover, hostile foreign attitudes may be exemplified in embargoes, trade agreements, licensing, and customs regulations.

On the other hand, political research may help uncover positive information about a country. Not all nations are protectionistic; in fact, many foreign markets prefer American goods because of the consumers’ appreciation of their inherent prestige or quality.

There may even be a bright side to political turmoil within a foreign nation, for political restlessness may indicate a “coming of age” for a nation and its economy, and consequently for its ability to purchase imported goods and support foreign investment. In all cases, marketing research must pass on to management information pertaining to the general foreign political “climate” as it affects the prospective marketing and investment decision.

The Information Gap:

Closing the information gap is the fundamental problem of marketing research both at home and abroad. This problem, which was common in the United States until people began to understand the purpose of market research, is perhaps the major problem encountered in conducting foreign marketing research. Foreign industrialists and governments often do not understand the function of the marketing research man. They are suspicious of what he is trying to do; and quite often they do not have the information that he wants.

Furthermore, data that is available may be found to fall into categories that are too broad to be meaningful; or the information may be inaccurate. Standards for the collection and preparation of data for market research in the United States are the highest in the world. In other foreign markets, on the contrary, research is at about the same stage of development that domestic market research reached twenty-five years of ago.

Primary and Secondary Sources of Information:

Primary and secondary sources of information on foreign markets are available. The United Nations, for example, provides statistics on such items as gross national product, foreign trade, and population, and on other pertinent matters. Such information enables marketing researchers to construct reliable economic models.

Search for secondary source data is hampered in foreign /research; even primary research is difficult. Information gaps may not allow the establishment of reliable sampling plans for some areas, due, for example, to the lack of census data. For projective studies and depth interviews, it is often hard to find psychologists with the appropriate commercial backgrounds. In addition, obtaining interviews in foreign countries often meets opposition from persons previously unexposed to surveys and to being asked a lot of “personal” questions by a stranger.

A further distinction in foreign market research as compared to much domestic research is that the researcher in a foreign country is not directed to go out and find a foreign product void. Rather, his research is directed toward discovering markets for existing domestic products.

The foreign marketing researcher gathers information that will also allow his firm to successfully tailor an existing product line, so that foreign market acceptance may be more easily accomplished. Ideally, domestic management should not use this extension approach; instead, it should orient itself to the global marketplace. Products could then be developed for foreign markets instead of being altered to fit foreign needs.

If a company is internationally oriented and adopts a policy of” international product development (beyond the international selling of its domestic product), it should direct its energy to products that have the greatest demand in foreign markets.

Market research has shown that there are two types of products that are easily accepted internationally- (1) Products that fill a basic need; and (2) Products that are innovative, simply because people have not had time to build prejudices against these products.

Filling the Information Gap:

A domestic research staff or a foreign research agency will have to be used by any firm wishing to obtain foreign market data, and each has its pros and cons. When a foreign-based research agency is not available, the problem of making a choice is eliminated; but it also means that the firm will not be able to make use of the foreign agency’s experience. A foreign agency can offer objectivity, experience, and expert knowledge concerning foreign markets, advantages that cannot be matched by the local research agency.

On the other hand, the use of a foreign agency is expensive, and there is some loss of control over the research function. Another disadvantage in using a foreign firm is that it does not have the thorough knowledge of the product that is possessed by the domestic researcher. Despite these disadvantages, whenever foreign agencies having satisfactory credentials are available it is best to make use of their services.

Foreign marketing research must be tailored to the foreign market; but the making of foreign market studies requires use of the same principles followed in domestic research. More planning will be necessary, however, because of the absence of the “a priori” knowledge available from domestic studies. Foreign research must also find information on many variables. These variables include customs, traditions, media exposure, institutional preferences, income distribution, and attitudes toward credit, plus other variable but pertinent factors.

Some of these variables are non- quantifiable and therefore hard to compare; this is a knotty problem to overcome when multinational marketing research is undertaken. Comparison and analysis of information are difficult because of “interforeignness,” and because of inconsistencies in defining measuring units and in the connotations of language itself.

Because of such foreign market variances, marketing research should plan a preliminary screening to identify export markets that warrant further research. This preliminary screening strategy enables the export-oriented firm to single out those foreign markets that justify further research.

National differences affect the priority of market targets and influence the entire marketing mix, which is a blend of product, pricing, distribution, and promotional policies. The decisions involved in planning the policies of a particular marketing mix will be examined in detail later. Because of differences in consumer preferences, even the smallest alteration in the foreign marketing mix may get excellent results.

Foreign Marketing Research:

Foreign marketing research will be more qualitatively oriented than is research within the country because the researcher usually starts out with zero information. Information is required about non-quantifiable factors such as social taboos, traditional tastes, and general consumer attitudes. Knowledge of such factors is basic to the development of marketing and selling themes. Such knowledge, moreover, will minimize the use of promotional points that may offend potential customers.

For instance, the “attribute” of keeping rats from eating the grain in a modern grain elevator was not a persuasive point for an Indian, who in his spiritual wisdom believes that “rats, as well as people, must eat.”

Research in foreign markets should search out attitudes in general, not merely attitudes toward a particular product. This does not mean that detailed information is unnecessary; after all, the same standards apply to foreign as well as to domestic marketing research. But there are some differences. Thus there is a need for an overall examination of social and cultural attitudes in foreign markets, whereas such differences may be given only marginal treatment in the United States.

The significance of the subtle characteristics to be found in foreign marketing cannot be overlooked. Foreign marketing research must be comprehensive and exhaustive.

Reasons for Foreign Marketing Failures:

Arthur C. Nielsen, Jr., of the A.C. Nielsen Company, a marketing research organization, has developed the following general list of reasons for the failure of marketing efforts in foreign markets –

1. Failure to adapt the product to the market.

2. Failure to gauge the underlying impact of customs, traditions, and racial and religious differences.

3. Failure to exploit markets in the proper sequence.

4. Failure to enter potentially profitable markets because of personal repugnance toward political institutions.

5. Failure to appreciate differences in the connotations of words in the language of the foreign market.

6. Failure to understand differences in advertising.

7. Failure to achieve a domestic personality; that is, a personality acceptable to the foreign market.

8. Failure to understand and weigh correctly the relative importance of the various types of retailers for distribution of the product.

9. Failure to grasp the consumer’s attitude toward the relationship between price and quality.

10. Failure to appraise properly the degree of acceptance of the competitive economy principle.

Obtaining detailed and comprehensive research from foreign countries is expensive. Foreign research costs are higher than domestic research costs because the sheer distance and resulting logistical entanglements increase costs above the domestic level.

Foreign research expenses are further increased because of the depth to which foreign projects must be researched and because of the difficulty of obtaining foreign marketing information. Basically, foreign marketing research is more expensive because there is less information to begin with and more to be researched.

Investigation of Market Potentials:

The first type of marketing research likely to be performed by companies interested in export markets will be an investigation of market potentials. There are wide variations in the approaches that can be used for measuring foreign market opportunities.

The National Industrial Conference Board (of America) study “Researching Foreign Markets” reviews the current practices of a number of American companies and provides a useful source of ideas. Business International some years ago published a helpful classification of factors which will be of value to export management.

Of important to the potential exporter is the background information which a company should have on every country in which it is interested. Countries from which orders or inquiries have been received will, of course, be researched first, though top management may decide to limit the scope of such research to general surveys.

The potential exporter should, however, investigate as many markets as possible, so that no export opportunities are overlooked. Exporters should then direct their initial attention to those markets that seem to offer the best opportunities for trade.

International Marketing – Reasons for Going International: Insufficiency of Domestic Demand, Growth and Diversification, Minimising Business Risks and a Few Other Reasons

Now the question arises, why does a company go international? Is it just the need of the hour or are there different reasons for going international. A company may go international for growth and diversification. It may also look out for minimising competitive risk, gaining economies of scale or may look forward to cushioning the economic cycle.

Following are the different reasons:

1. Insufficiency of Domestic Demand:

Before getting into production, a company does lot of research to forecast the demand for the products. But sometimes, it does not match the actual demand. Based on the inputs of a thorough market research, Tata Motors decided to put up a plant for 20,000 Tata Nano per month.

But the actual sale is hovering below 2000 units every month, which leads to a lot of unutilized capacity in the plant. In that scenario, a company like Tata Motors looks out abroad to sell Tata Nano in other countries. Now Nano is selling in Sri Lanka, Nepal and Indonesia. Tata Motors is even planning to launch in Europe and USA. Thus, in case of insufficient domestic demand, a company looks forward to international markets.

2. Growth and Diversification:

Every company faces competition in whichever market, it operates. The market may be hyper competitive with more than 8 to 15 competitors in the market and thus limiting the chances of a market player to grow the market share. It happens more with the market leader and the market challenger in the market. In this scenario, the only way to go forward is to look out for new markets.

Airtel has been facing the same situation for the last few years in Indian market. It has been the leader for quite some time, but the growth is not very encouraging in the hyper competitive telecom market. Now the only option left to Airtel is to get into new markets and that’s what they have done.

In 2010, Airtel acquired the African operations of the Kuwait based Zain Telecom, which gave access to the markets of 17 countries. Now, Airtel is the world’s third largest mobile telecommunications company by subscriber base and operates across 20 countries with over 275 million subscribers.

3. Minimising Business Risks:

Business risks can also be minimized by a company, if it has got international operations. The downward fluctuation in one country may be mitigated by the growth in the other country. It may be due to competitive and other forces in the economy.

It happened with Tata Motors in 2013, when it was badly hit in the Indian market due to the competitive forces. But overall Tata Motors did well due to its international markets, which was contributed mostly by its Jaguar Land Rover (JLR) operations.

4. Cushioning the Economic Cycle:

A company can also minimize the risk from the fluctuations in the business cycle, if it operates in many countries. So, if there is slowdown in one country, it can be made up by another one. But if the market is concentrated just in one country or few countries, it will have to bear the impact.

It happened with the leading IT companies in India like Infosys, TCS, Wipro etc., when these companies were badly hit by the recession in European and American markets. These companies were too much dependent on these markets, which lowered their growth pattern.

5. Economies of Scale:

A company needs to invest a lot of money in the research and development to develop a new product. Once the product is developed, a company can put up plant in all its markets, as it may not be viable. That’s why a company looks forward to take the advantage of economies of scale, so that the production costs can be lowered. The same has also been by done by Renault Duster and Ford Ecosport, besides others.

In India, Renault has put up a plant to produce Duster and it also exports the same to UK, Ireland and South Africa. Having production base in one country and exporting it to other countries provide economies of scale for the companies. Besides producing Duster in India, Renault caters to Brazil, Argentina and Chile market from its plant in Brazil, while it sells duster from Columbian plant to Mexico, Ecuador and Columbia.

6. Obtaining Cheaper Inputs:

To manufacture a product, a company require lots of inputs. The inputs may not be available in all the countries. That’s why a company expands internationally to take the advantage of obtaining cheaper raw materials and supplies, to produce the products. A Korean conglomerate POSCO, the world’s fourth largest steel producer wants to put up a plant in India at Odisha to take the advantage of ease and cheaper cost of raw materials for the steel industry.

All the above are the reasons for going international. Whatever may be the reason; this is the need of the hour to go international. Otherwise, a company may not maintain its growth trajectory. A company like Tata Motors would have been stranded in 2013-14, if there would not have been a company like JLR as a subsidiary with them.

International Marketing – 12 Important Advantages

International Marketing has number of advantages.

Some of these briefly summarised below:

(i) Availability of goods which cannot be produced in the home country due to geographical factors and other natural limitations.

(ii) Provision of better standard of living to citizens by providing them with wide variety of goods and services.

(iii) Industrial development of the country, provision of massive employment opportunities to the people and full utilisation of natural resources available.

(iv) Rational allocation of resources and the best use of the resources available at the international level.

(v) Benefits of comparative cost difference as suggested in the theory of comparative costs. The benefits of division of labour and specialisation at the international level are also available through international marketing.

(vi) Social and cultural exchanges between different countries of the world.

(vii) International economic, political and cultural co-operation and world peace.

(viii) Effective utilisation of surplus domestic production, introduction of new varieties of goods, improvement in the quality of production and promotion of mutual co-operation among countries.

(ix) Special benefits during the period of emergency like famines and floods.

(x) Removal of deficit in the balance of trade and payments of participating countries through export promotion and import substitution.

(xi) Easy availability of foreign exchange for import of capital goods, modern technology and other essential requirements.

(xii) Rapid expansion of tertiary sector which includes transport, insurance and shipping.

It may be marked that the above mentioned advantages or benefits are available only when international marketing is reasonably free from various restrictions and regulations. Unfortunately, almost all countries have imposed various restrictions on the free movement of goods. Such commercial restrictions are undesirable as they restrict the scope of free and fair international marketing.

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