The International marketing management requires the ability to look across a broad cross section of marketing situations, on to develop professional skills and to understand their differences as well as commonalities. It is aimed to identify appropriate marketing strategies in each instance.
The exposure among different marketers regarding the marketing problems and strategies in different types of industries is still quite of organizations facing parallel situations in other service industries.
The scope of international marketing essentially includes exporting of goods and services in foreign markets. The exporter has to perform various activities during the course of exporting goods and services.
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.
Learn about:-
1. Introduction to International Marketing 2. Scope of International Marketing 3. Needs 4. Characteristics 5. Factors Influencing 6. Decisions 7. Difference between International and Domestic Marketing
8. Planning 9. Process 10. Environment 11. Risks Involved 12. Benefits 13. Social and Ethical Issues 14. Challenges.
International Marketing: Scope, Need, Characteristics, Factors, Planning, Process, Risk Involved, Benefits and Other Details
International Marketing – Introduction
It would not be incorrect to state that a large number of marketers in India whether they be wholesalers/retailers, large producers/small producers, hardly understand and practice the modern marketing concept. Despite this, they stay in business and make profits probably due to the fact that there are shortage conditions in many sectors of the Indian economy.
If we shift the scene from a predominantly sellers’ market like India to overseas markets where several marketers compete to clinch a sale in a highly competitive environment, we will confront a market situation where the only pass word for success is “marketing orientation” to international/export marketing activities. International marketing by overseas marketers or exporters requires a marketing orientation. Simply due to the fact that the export market is a highly competitive buyers’ market.
Whether it is a developing market of a country in Africa/Asia or a developed market of a European or a North American country, exporting products involves fierce competition between numerous exporters/international firms from a number of countries. Some exporters may take the view that exporting is merely a supplement to the classical export function of selling products produced for traditional reasons.
Export promotion of traditional products may lead to initial success but stagnation of exports is bound to occur. Preoccupation with production of the traditional items may lead to over production, as is the case of the Indian jute industry. The modern concept of marketing is not trying to sell existing or traditional products to foreign markets but producing those that consumers need and will buy in the foreign markets.
The significant difference between international marketing and domestic marketing in a buyers’ market is that in international marketing the emphasis is on product adaptation for different markets based on market research and market intelligence, foreign exchange and banking activities.
Therefore in international marketing, the transfer of marketing methods from one country to another requires extremely careful handling because there exist many difference in views and customs among sellers and buyers and in socio-economic, political and cultural systems.
International marketing is an economic activity where the nature of market—a buyers’ market, brings the modern marketing concept into full play. Irrespective of the fact that an exporting firm is functioning in a protected and predominantly sellers’ market at home, if it goes international. The only way to success in overseas sales is by changing its marketing philosophy.
Success can only come if it’s marketing philosophy gives the consumer top priority and it accordingly tries to change each element of the marketing mix to suit the needs of the consumer. This change in elements of the marketing mix will be effective only if the exporter tries to gather as much intelligence and information on the overseas markets by personal visits or market research.
The International marketing management requires the ability to look across a broad cross section of marketing situations, on to develop professional skills and to understand their differences as well as commonalities. It is aimed to identify appropriate marketing strategies in each instance. The exposure among different marketers regarding the marketing problems and strategies in different types of industries is still quite of organizations facing parallel situations in other service industries.
It is of course from marketing experience in the manufacturing sector. The marketers from the different sectors also find that then part experience has not made them well for working on some of the problems that are posed to challenge service marketers. It is further argued that development of more sophisticated services for marketing will be advantageous if we can find new ways to group services other than by current industry classifications. It will be more useful approach to segment services into different clusters and thereafter to share certain relevant marketing characteristics.
International Marketing – Scope
The scope of International Marketing is very wide. It has a broader meaning in marketing context.
1. Establishment of a Branch Abroad – As the needs of the foreign customers vary. So in order to serve them in a better way a firm may establish a branch abroad through direct investment for carrying out processing, packaging, assembling or even complete manufacturing operations.
2. Joint Venture – A joint venture may be done with a foreign firm in international marketing. In this a domestic firm joins hand with a foreign firm for exploiting the opportunities which are present in the foreign market.
3. Licensing Arrangements – Licensing is an agreement in which a domestic firm gives permission to foreign firms to use its name, technique, trademark, patent as per the agreed terms and conditions. This may or may not involve investment.
4. Franchising Arrangements – It is a sort of licensing. The only difference lies here is that a standard package of goods and services are transferred by one party to another. The one who supplies is the owner or the franchisor and who receives is called as franchisee. A franchising arrangement involves centralisation of expertise and decentralisation of functions. It is commonly found in hotel industry, fast foods, retail sector, entertainment industry etc.
5. Consultancy Services – Consultancy services are provided to foreign firms in international marketing. This is done by sending experts to foreign countries.
6. Turnkey Contracts – In turnkey contracts projects are designed and made by foreign enterprises and then handed over to the local enterprises. Personnel of local enterprise are trained for running the project. Basically these kinds of contracts are common in construction industries.
7. Sub Contracting – An arrangement by manufacturer in the developed country with one in the developing country under which the latter agrees to supply the parts and components (mainly in labour intensive units) and or do assembly operations for the former, on a long term basis is generally known as international sub-contracting.
8. Counter Trading – Counter trading involves trading arrangements between private firm and government or government agencies such as foreign trade organisation like export promotion councils, state trading corporations etc. by which the seller is obliged to accept certain specific goods or services against the supplies of goods and services such as technology or industrial licenses etc. from the buyer. Where cash may or may not involve but there is always a link between the imports and exports transactions. In other words, imports are paid out of exports in counter trade.
The scope of international marketing essentially includes exporting of goods and services in foreign markets. The exporter has to perform various activities during the course of exporting goods and services. These activities come under the scope of international marketing.
These activities are:
1. Establishing a Branch:
International marketing may be done by establishing a branch in foreign country. Through branches, the exporter establishes sales organisation in foreign markets, takes up all marketing and promotional efforts, and provides after sales services and other facilities in the foreign market. Establishment of foreign branch involves a lot of investment. Foreign branches maintain ready stock. Necessary staff is also appointed.
2. Licensing Arrangement:
Licensing also comes under the scope of international marketing. Licensing involves transfer of industrial property rights i.e., patents, trademarks, technical know-how etc., from a licensor in one country to a licensee in other country. In other words, licensing is an agreement between the company which is seeking to do business in foreign market and any party of the local market.
Therefore under licensing, the company gives licence to a foreign company to manufacture the company’s product for sale in that foreign country and sometimes in other specified market also. The licence is given for a fee or royalty. Thus under licensing, foreign firm is permitted to use patent, trademark and copyright in foreign market. For example, Coca Cola and Pepsi are doing their business in India through licensing.
3. Franchising:
Franchising also comes under the scope of international marketing. Franchising is a special form of licensing in which franchiser grants the franchisee, the right to do business in a prescribed manner. In this arrangement, the franchiser makes a total marketing programme (including the brand name, logo and the method of operation) available to the franchisee.
In other words in a franchise agreement, a foreign firm adopts the franchise agreement, a foreign firm adopts the franchiser’s entire business format in the local market, its name, trademarks, business policies, specific set of procedures, methods and layout of premises etc. The franchiser retains complete control over how the product is marketed and also provides training, technical advice and stock control.
Usually, the franchise agreement is more comprehensive than a regular licensing agreement, another common form of franchising is where the franchiser supplies an important ingredient (part, material, etc.) for the finished product. For example, Coca Cola has franchise arrangement with their bottling units all over the world.
International franchising has become a powerful mode of international marketing for companies that have products and services that can be reproduced by independent franchiser. Few examples are Mc Donald’s, KFC (Kentucky Fried Chicken), Pizza Hut.
4. Joint Venture and Collaboration:
Joint venture and collaboration with foreign firm is another method to enter foreign markets. Joint venture is an enterprise formed by the international business company sharing ownership and control with a local company in the foreign country. The main feature of joint venture is that the ownership and management are shared between a foreign firm and a local firm.
5. Foreign Agent and Distributor:
For exporting to foreign market another method used is to appoint an agent or distributor in foreign country. Under this system an agent is appointed to collect orders from foreign country. The manufacturer exports the goods direct to customer in response to the orders forwarded by the agent.
6. Strategic Alliance:
Strategic alliance is another form to enter foreign markets. Alliances are different from joint ventures. In an alliance, two firms pool their resources directly in a collaboration that goes beyond the limits of a joint venture. Strategic alliances enable companies to increase resource productivity and profitability by avoiding duplication of investment.
7. Consultancy Services:
Offering consultancy services are also covered in international marketing scope. The exporting company offers consultancy services by undertaking turnkey projects in foreign countries. For this purpose, the exporting company sends its consultants and experts to foreign countries to guide and direct the manufacturing activities on the spot.
8. Technical and Managerial Knowledge:
The scope of international marketing also includes the technical and managerial know-how provided by the exporting company to the importing company. The technicians and managerial personnel of the exporting company guide and train the technicians and managers of the importing company.
International Marketing – 7 Important Reasons for which International Marketing is Needed
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 international marketing is needed for the following reasons:
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. 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.
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 mobilizes 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. 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.
5. 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.
6. Cost Benefits – Due to certain favorable factors, some countries can produce certain commodities with low cost of production. International marketing is favored 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.
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.
International Marketing – Characteristics
International marketing is simply the application of marketing principles to more than one country.
Characteristics of International Marketing:
Characteristic # 1. Large Scale Operations:
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.
Characteristic # 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.
Characteristic # 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.
Characteristic # 4. Sensitive Character:
International marketing is also highly sensitive and flexible in character. A product may suddenly become unfavorable 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.
Characteristic # 5. 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.
Characteristic # 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.
Characteristic # 7. 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.
Characteristic # 8. 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.
Characteristic # 9. 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.
Characteristic # 10. 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.
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 visualized as a social process, will be different from domestic marketing.
The other important characteristics explain the nature of international marketing which are as follows:
1. Large Scale Operations – International marketing is always conducted on a large scale. It is done on a wholesale basis and not on a retail basis, to get the advantage of large scale operations regarding transportation, handling and warehousing.
2. Wide Scope – International marketing has a wide scope. The important areas covered by international marketing are product planning, product development, pricing, packaging, branding, advertising, marking, labeling, communication, procedural formalities, sales promotion, international marketing research etc.
3. Dominance of MNCs and Developed Countries – Multinational corporations (MNCs) having worldwide contacts dominate the scene of international marketing. MNCs conduct business more efficiently and economically. MNCs adopt global approach which is needed in international marketing.
4. Advanced Technology – International marketing is very dynamic and competitive. Thus, an organisation must be able to sell goods of the best quality, at competitive prices. Advanced countries like U.S.A., Japan and Germany dominate in international marketing because they use advanced or sophisticated technology in production and marketing of goods.
5. International Restrictions – In domestic marketing, there are no restrictions. In international marketing, there are various trade restrictions (tariff and non-tariff) due to the protective policies followed by different countries. Trade barriers are adopted practically by all countries.
6. Presence of Trading Blocs – Certain nations of a region have come together to form trading bloc for and their mutual benefit, economic development and to reduce or eliminate trade barriers among member nations. International marketing is influenced by the presence of such trading blocs. The most powerful trading blocs are NAFTA (North American Free Trade Area) and EU (European Union).
7. International Marketing Research – In international markets, it is required to know about customers, dealers and competitors. In international marketing, marketing research is a must due to different social, cultural, economic and political environment of far off markets.
8. Three-Faced Competition – Suppliers have to face competition from three angles in international marketing. They have to face competition from the other suppliers of the exporter’s country, from the local producers of importing country and from the exporter’s of competing nations.
9. International Forums – International trade is regulated by international forums like WTO and UNCTAD. International marketers should have a deep knowledge of the forums rules and regulations.
10. Sensitive and Flexible – International marketing is very sensitive and flexible in character. Due to political and economic reasons, a product may suddenly become unpopular or market may come down quickly. The sale at the international level may be affected by competitors or due to the introduction of a new product by a competitor.
11. Lengthy and Time-Consuming – International marketing is lengthy and time consuming due to long distances, restrictions imposed by different countries, payment difficulties because of the use of different currencies, and lengthy procedural formalities.
12. Long Term Marketing Planning – International marketing needs long term marketing planning. The need for long term planning in international markets is because the marketing situation in different countries changes due to social, economic and political factors.
13. Advantages to All Participating Countries – International marketing is advantageous to all the countries participating in international marketing. It helps in having smooth and good relations between countries and thereby ensures world peace. But, the advantages of international marketing are not shared in a fair proportion by all participating countries rich and poor countries. But, some benefits are availed by all participating countries.
International Marketing – Factors Influencing International Marketing Policies
There is difference between various international markets as it differs from the domestic markets. The diversity in the environments of these factors are to be considered before planning any strategy of international marketing.
Following are the factors that act a determinants of the international marketing policies:
1. Cultural Factors:
Social values become the distinguishing factor between domestic and international marketing. Before stepping in the international market in any way, it is essential to understand the cultural dynamics of these foreign markets. The marketer must consider the cultural factors of the country in which it wants to enter in the international marketing.
Culture has a board meaning. According to M.J. Herks Kovits, “culture may be viewed as the sum total of man’s knowledge, beliefs, arts, morals, loves, customs and any other capabilities and habits acquired by man as a member of society”. To be more precise, culture is the, “distinct, way of life of a group of people, their complete design for living”. Man has tried to solve the problems by borrowing from other cultures the various alternatives and by adopting it according to his environment and what is more appropriate for his society.
The borrowing by one society from another society is a process which is systematic and unending. It rather goes on inter-stingily. The adoption of a borrowed system or techniques is restricted to the environment of the society which is borrowing. This is why one product which is radially acceptable by one society is not liked by another society.
In the like manner, a technique of selling workable in one society may not be successful in another society. These differences occur because of differences in the way of living, customs, habits, beliefs, morals etc.
The existence of subculture i.e., a culture within a nation’s culture, is again a matter that attracts serious thought. Sub-culture arises due to differences existing within a culture. For instance in India, there is a distinction between the northern and the southern part of the country.
Sub-cultures, may exist in the geo-political boundaries and sometimes they spread across all the political boundaries. For example, Bangladesh is very much like the West Bengal in India, as far as the cultural similarities are concerned. From the point of view of international marketing these differences between cultures and sub-customs, are very important because of their influence on the marketing plan as well as on the decisions about the selection of these markets.
The demand for a product, influenced by cultural factors, must be ascertained to achieve success in the field of international marketing.
A marketer willing to enter an international market, must study following aspects of cultural background of a foreign market:
(a) Material Culture – This includes, technology and Economic aspects of that country.
(b) Social Institutions – This includes, the consideration of social organisation, education system, and political system of the foreign country.
The belief and family system, its kinds, is also to be considered.
In addition to these, the Aesthetic part of culture including graphic and plastic art, folk love, folkways and mores, music, drama, dance, etc. are also the aspects to be given consideration. And the last but not the least, is the language of the foreign market.
Regarding culture, the changes that often take place in every society from time to time must also be considered as these caste effective impact on various aspects of people’s life. A firm desirous of entering international market must consider these factors and it should also evaluate the degree of influence and involvement of these factors, on the decision of international marketing policies.
There exists a feature of resistance of the Cultural change. This reflects a certain degree of surprise on and apprehension about new products, ideas, and techniques. The degree and extent of this resistance differ from economy to economy. It has also been noticed that changes affecting the very basic structure of the culture face maximum resistance.
There is also a tendency, commonly present in all economies, to regard foreign goods as the things of social status. One more reason for the indication towards foreign products is the inferior nature of the domestic products, this feature is more common to the developing economies.
Thus for a successful international marketing, proper understanding of the culture is essential.
2. Political Considerations:
Political environment is another factor affecting the foreign market. It is necessary for an international marketer to assess the political environment since these affect has success as well as existence in such markets.
The study and assessment of the political environment include the following:
(i) Political Systems:
The type of government i.e., whether it is Socialistic, Capitalistic, Democratic etc. must be analysed, since the philosophy of the government is reflected in its policies.
(ii) Philosophy of the Government:
It is essential to study government’s philosophy in particular about, policy towards private sector and foreign business. Generally, the governments of the target foreign countries, specify their priority areas in which foreign business is encouraged.
Many rules exist in the different countries. For example in India Foreign Exchange Regulation Act 1973, specifies guidelines for foreign private investment.
Infact, the government’s philosophy towards foreign capital goes under change with the change of the party in power at a given period of time. From all this view points, it is essential for an international marketer, to assess the philosophy of the government in power, as well as the long run political prospective.
(iii) Permanency and Stability of the Policy of the Government:
It is necessary to examine the extent of permanency and stability of government policy of the target foreign market. The marketer must always be careful about such changes in policy that lead to its destabilisation. It also involves the assessment of the long-run predictability of the government’s policy.
The policy of a government in the field of trade may be rendered unstable, because of anyone of the following factors:
a. Change in Governments.
b. Growing aspirations of nationalism.
c. Shifting of political parties reaching the government at different levels.
Due to certain causes, the products become politically vulnerable. The attempt of the international marketer should be to minimise it.
3. Economic Factors:
An international marketer should assess the level of economic development of the concerned country. Since the level of development of the countries is not the same, so marketer must act according to making his best contribution to the economic development. It is also essential to assess the economic aspirations of the concerned countries. The factor of ‘market potential’ should always be kept in mind while studying the levels of economic development of a country.
A marketer should study following indications, in regard:
(a) Gross National Product.
(b) Per Capita Income.
(c) Purchasing power of the consumers.
(d) Rate of Economic Growth.
(e) Level and degree of industrialisation.
(f) The form of marketing channels and related infrastructure.
These factors play tremendous role in chalking out the marketing strategy of the firm deciding to enter the international marketing arena.
In addition to these factors, an international marketer should also study the policies, programmes and objectives of the international economic institutions like GATT, UNCTAD, UNBDO, IMF, World Bank, Asian Development Bank etc.
International Marketing – Strategic Decisions
International Marketing presents a more complex task than domestic marketing because of the uncontrollable international marketing environment and their heterogeneity. Hence, though the basic marketing decisions to be made are similar in international and domestic marketing, making international marketing decision is generally more challenging.
In international marketing, a company has to make, broadly four strategic decisions:
1. International Marketing Decision:
The first decision a company has to make, is whether to take up international marketing or not. This decision is based on a serious consideration of a number of important factors, such as the present and future overseas opportunities, present and future domestic market opportunities, the resources of the company in terms of skills, experience, production and marketing capabilities and finance, company objectives etc.
2. Market Selection Decision:
Once it has been decided to do international marketing, the next important step is the selection of the most appropriate market. For this purpose, a thorough study of potentials of the various overseas markets and their respective marketing environment is essential. Company resources and objectives may not permit a company to do business in all the overseas markets. Further, some markets are not potentially good, and it may be suicidal to waste company resources in such markets. A proper selection of the overseas markets therefore is very important.
3. Entry and Operating Decisions:
Once the market selection decision has been made, the next important task is to determine the appropriate mode of entering the foreign market such as export, contract manufacturing, direct manufacturing plant etc. on the basis of this decision, proper arrangements must be made to continue the activities of marketing.
4. Marketing Mix Decision:
As in the domestic marketing, the success highly depends upon the applicability of proper Marketing Mix, in International marketing also; Marketing Mix plays a major role. The elements of marketing mix – product, promotion, price and physical distribution should be suitably designed so that they may be adapted to the characteristics of the overseas market.
International Marketing – Key Differences between International and Domestic Marketing
Difference # International Marketing:
1. Definition – When marketing activities are carried out across the national boundaries.
2. Currency – Deals with different currencies.
3. Legal system – Legal system varies from country to country.
4. Exchange rate – Exchange rates are determined.
5. Political environment – Countries differ in political environment.
6. Mobility of labour – Labour is less mobile.
7. Documents & Procedures – Lots of documents and procedures are required.
8. Culture – Culture differs among countries.
9. Risk – More risk is involved.
10. Market attributes – Countries vary in their market attributes.
11. Language – Many nations, many languages are followed.
12. Consistency – Markets are heterogeneous.
13. Transport Cost – Transport cost influences marketing decisions to a great extent.
14. Government Interference – More interference of government in business decisions.
15. Control – More control over marketing activities is required.
Difference # Domestic Marketing:
1. Definition – When marketing activities are carried out with in the national boundaries.
2. Currency – Deals with one currency.
3. Legal system – Laws are more or less same.
4. Exchange rate – No determination of exchange rate is required.
5. Political environment – It remains same within the country.
6. Mobility of labour – Labour is more mobile.
7. Documents & Procedures – Relatively less documents and procedures are required.
8. Culture – Culture is more or less same.
9. Risk – It involves less risk.
10. Market attributes – Market attributes remain same with in the country.
11. Language – One nation, same language is followed.
12. Consistency – Markets are more or less homogeneous.
13. Transport Cost – Transport cost influences marketing decisions to a small extent.
14. Government Interference – Less interference of government in business decisions.
15. Control – Generally less control over marketing activities is required.
International Marketing – Planning: Meaning, Aspect and Levels
The international marketing planning is a process, which take place at all levels in the corporate organization. It is observed that most of the multinational companies exercise planning more in the domestic sales organization than in the international. Further the planning function should encompass all the factors which are dealing with the variables of marketing mix and the consideration of environments.
If the lack of appreciation and understanding of planning or control is noted in the overall process there, it will be because of lack of top management will lack of knowledge or lack of multinational efforts by the top management in this regard. It is pertinent to mention here that a positive approach is required in this regards to make the things happen.
In most of the cases the marketing research process is carried out after the event to know whether a particular new concept or product will be acceptable to the customers or not. Further a continuous research programme is required to monitor systematically, the changing needs of the customers.
The modern marketing research programmes are conducted on a country-to-country basis. The major question, which remain in the main focus, that whether a company should extend its strategic marketing planning programmes to new markets or to adjust the same to the local circumstances.
In the previous era such type of practices may probably be considered most appropriate or may be appropriate to some companies of modern era. Further it is not very difficult to know a number of failures in overseas marketing activities.
A systematic and continuous assessment of buyer’s needs and requirements is aimed to take care of following aspects:
(a) In most of the developing nations, the potential markets are situated mainly in the metropolitan areas.
(b) Stratifying and clustering the metropolitan area is considered to be more meaningful from marketing point of view.
(c) There is a greater possibility to find out similarities between metropolitan areas across the countries.
3. The systematic and continuous assessment of customer needs and requirements should be based upon the data collected at micro level. It may comprise, such as data collected at household or business unit level. Finally it can be said that to focus on customer needs tends to avoid the myopic tendency. This is a most enduring concept and most of the multinational companies are always likely to fall into, as its products stage turn into maturity level in their life cycle.
4. Sometime the management expects that the plans should be realised as per the planned parameters. It can also be a reason for the failure of the plan.
5. Too much detail is attempted.
6. The failure of the management to implement the plan properly.
7. Mismatch between financial projections and planning process.
8. The informational input may be inadequate.
9. The over emphasize on the few aspects of planning.
10. Lack of co-ordination between international units.
11. The planning process may not be accepted by the management. It may also be a cause for the failure of planning process.
12. Sometime the organizational climate, language or diversity can also be a reason of failure to “take off”.
Levels of International Marketing Planning:
The international marketing planning can be divided into three levels:
1. Operational planning level
2. Strategic planning level
3. Corporate planning level –
(a) Protective planning
(b) Opportunity planning.
1. Operational Planning Level:
This kind of planning is the responsibility of each overseas operating units. This kind of planning is done for one to three year planning. The plans are formulated at units level and integrated at regional levels and after that it is forwarded to the headquarters.
2. Strategic Planning Level:
These kinds of the strategies are formed at the operating level. Most of which are having national in scope are asked on a longer basis for new products, which might be developed from within or acquired. Headquarters deliberately provide any general guidelines as to how far a field or a local operation might explore. This is done to encourage the local manager to increase their outlook. However the plans are subjects to review at headquarters.
3. Corporate Planning Level:
This kind of planning is done at international headquarters. There are worldwide plans, developed at international headquarters, tied closely to overall corporate objectives and plans.
This kind of planning is having following two types:
(a) Protective Planning
(b) Opportunity Planning
(a) Protective Planning – It is a strategic and long range planning in character. It anticipates worldwide changes in markets and business conditions relating to the present scope of the operations.
(b) Opportunity Planning – It is directed towards seeking new business direction for growth and diversification.
Over all, corporate expectations of planning must emphasize on the following particulars:
(a) It must minimize the negative consequences of a variety of adverse exogenous and endogenous conditions.
(b) It must balance the available corporate resources against the set of global opportunities and alternatives.
(c) It must co-ordinate and integrate the activities of necessarily decentralized organisation.
(d) It must create a frame work for a communication system. It must ensure that all parts of the organisation are striving toward the same set of overall objectives and in doing so are using policies which are beneficial for the corporation as a whole rather than just individual part of it.
International Marketing – 5 Steps Involved in the Process
The international marketing management process comprises of five steps which marketers have to take as part of their integrated marketing effort.
Steps involved in international marketing management are as follows:
Step # 1. Analysing International Marketing Opportunities:
The first step in the process of international marketing management process is to analyse international marketing opportunities. This step is taken to identify unfulfilled or under fulfilled needs that a marketer may satisfy through its products or services. This analysis can be done through information seeking and analysis or through market research (secondary or primary data collection and analysis).
A marketer have two options here:
(a) A marketer may have a product or service concept developed first and looks for the needs in the market that can be satisfied by these products or services.
(b) The marketer may also first identify unfulfilled or under fulfilled needs in the market and then develop a suitable product or service offer to satisfy these identified needs.
Step # 2. Selecting Target Markets:
Once me marketer has identified the potential opportunities in the first step now is the time to select the groups of potential international customers (target markets) to whom to sell the products or services.
This step also involves identifying the potential buyers, demand measurement & forecasting, market segmentation, market targeting & market positioning.
Segmentation involves identifying groups of potential customers from the total potential market that are homogeneous on certain aspects of identity and behaviour and are heterogeneous on the same aspects from others in the target population. The aspects on which the segments are based must be relevant for the marketer to develop its products and services and the marketing programmes.
This step also requires the marketers to decide what key benefits in a product or service to offer to the selected target customers and on what aspects to differentiate from the competition.
Step # 3. Adopting Appropriate Business and Marketing Strategies:
Since a firm needs to offer best value to the potential customers to makes its products and services more salable compared with competitors, firms have to adopt appropriate business and marketing strategies.
Many activities are to be undertaken in a firm by many people and in a number of departments to produce and deliver final products and services to its customers, this requires aligning and coordinating numerous activities and efforts. At the same time to achieve best value for the buyer and net profits for the firms, the firm needs to optimise all the activities, efforts undertaken and resource utilisation. This requires the firm to adopt a coherent and appropriate logic or strategy to direct and control the alignment, coordination and optimisation of its business and marketing effort.
Various researchers have studied successful companies around the world and attempted to identify how these firms have aligned and coordinated their activities and efforts. Porter has concluded that successful firms have adopted one of the three strategies, i.e., cost leadership, differentiation or focus.
Other scholars have identified that successful firms adopted strategies that were aligned with their market position, i.e., a market leader, challenger, follower & nicher strategies. Other researchers have asserted that firms have achieved success in markets through adopting one of the three value discipline strategies, i.e., operational excellence, customer intimacy or product leadership.
Step # 4. Developing International Marketing Mix:
The fourth step in the marketing management process is developing the international marketing mix, i.e., product, place, price & promotion. Marketing mix identifies four key areas for developing a well-coordinated marketing strategy. To create a strong marketing impact a firm needs to develop appropriate programmes in these four key areas and also need to ensure that all these four aspects of a firms marketing programme are well coordinated and in conformity with each other to give a clear image to the target market of the firm’s brands and its products.
Step # 5. Implementing and Controlling Marketing Programmes:
Developing a good marketing program is not good enough for success. A firm also needs to manage the international marketing effort properly. Quite often firms fail not because they did not have a viable marketing programme, but that they failed in properly implementing their well-designed plans. Firms also need proper analysis, planning, implementation and control of their marketing programmes.
International Marketing – Environment
There are a lot of features in common between a marketing strategy design for the internal market, and a world market marketing strategy. However, one of the main distinctive issues between domestic and international marketing is that between local and world markets there exists a series of differential factors.
These differences can be of different character. They configure in each external market (or country-market) certain international environments that differentiate them from the national environment.
These environments differ from country-market to country- market, even though similarities between the environments may appear. This fact creates psychological proximity between the markets, which generates a more propitious field to market the products.
The differences presented in these environments and their variation from country to country (and, in some cases, the existence of different internal sub environments in a country), are what precisely makes international marketing activity complex.
The entrepreneur must know and handle these differential features efficiently in order to adapt the most appropriate strategy for each market. Later, some strategies like standardization, which minimizes the impact of the differences will be developed (by offering the product attributes without modification to the different markets).
The most important environments are:
i. Economic, financial and technological.
ii. Cultural.
iii. Political and legal.
i. Economic, Financial and Technological Environments:
The economic, financial and technological environment consists of different factors that vary remarkably from one country to another. It is very relevant to adequately consider this environment when establishing marketing strategies. Every one of these factors interpenetrates the competition and consumption activities in the destination market.
Some of the components of this environment are part of a structure of resources (in a wide sense) of a country like the climate, natural resources, etc., and other factors that are determined by the interaction between companies, consumers and state activity (GDP, per capita income, unemployment rate, etc.).
The economic, financial and technological environment comprises the following items:
i. Domestic gross product and gross national product.
ii. Number of inhabitants and demographic growth rate.
iii. Population composition by age groups and its distribution in the national territory.
iv. Per capita income and income distribution structure.
v. Productive structure and national strategic sectors.
vi. Productive and commercial structure concentration levels.
vii. Number of national small and medium enterprises and their features.
viii. Economic development level.
ix. Composition of average family.
x. Indebtedness level.
xi. Money and inflation rates.
xii. Indebtedness level and public sector financing options.
xiii. Technological development level in the different sectors of economy.
xiv. Level of state intervention in economic and commercial activity.
xv. Entrepreneurial financing options.
xvi. Foreign trade and international operation incentive supporting programmes.
xvii. Country risk (this is a political and economic factor).
xviii. Imports volume and discrimination by sector and product.
xix. Exports volume and discrimination by sector and product.
xx. Balance of payments.
xxi. Infrastructure (communication, road system, transport, distribution, etc.).
xxii. Features of the national financial system (capital market, money market and foreign exchange).
xxiii. Development of technological segments.
xxiv. Private and State investment level in R + D (research and development).
xxv. Exchange system and exchange rate risk.
xxvi. Degree of economy liberalization (existence of tariff and paratariff barriers).
xxvii. Policies of external investment promotion.
xxviii. Economic growth rate.
xxix. Country participation in a regional market and its relative importance.
xxx. Existing natural resources.
xxxi. Human resources (or human capital) and environmental care policy.
xxxii. Geographical features (climatic, topographic, etc.)
xxxiii. Life quality and unemployment level.
xxxiv. Tax burden and structure.
ii. Cultural Environment:
The cultural environment is composed by multiple factors, it is multidimensional. Culture is made up by a series of behaviours, beliefs and values that constitute every social activity. Cultural tradition is transmitted from generation to generation. There is a great resistance to change in the cultural aspects and these factors persist almost invariably through time.
Cultural sensitivity or culturization is the adaptation capacity of a company to a specific cultural environment. Cultural incompetence refers to the entrepreneur’s incapacity to detect and interpret the cultural differences between the national and the external markets.
Cultural imperialism implies the determination of an entrepreneurial strategy that does not consider cultural differences between the countries of origin and destination. This attitude promotes the imposition of cultural values of one country upon another.
Some international cultural environments give great relevance to the context in which operations develop. These are cultures of high context, like, for example, the Arab countries and Japan. Words have a less explicit meaning in these cultures, but there is a greater consideration of the person as a guarantee of commitment and responsibility in the compliance of his or her obligations. These environments require less legal formalities to make commercial deals.
There are some other cultural scenarios in which context is not so important. In these fields, words transmit the whole message in an explicit way (i.e. the United States). In this type of cultural environment, the safety of a commitment comes from the fixing of some formalities and legal precautions that relate the parties in the compliance of their responsibilities. The important thing is not the person, but the agreements and documents that he or she signs (low context cultures).
The sharp existing differences in the cultural and international environments involve a responsible analysis of the environments mentioned. A strategy of access that takes into account foreign values, features, uses and customs has to be defined. The entrepreneur is required to have an emphatic attitude (as if he or she were from the foreign market) considering the cultural particularities of every external market. A simplified analysis based on the local cultural features of the market of origin has to be avoided.
Some of the main variables about the different cultural international environments that the company has to consider are:
i. Language and shades of meaning (language is relevant to communicate the product attributes and to get information about the destination market).
ii. Religious factors and popular beliefs.
iii. Consumers’ lifestyles.
iv. Consumers’ attitudes to everything foreign.
v. Usage and consumption of a specific product.
vi. Social values (solidarity, cooperation, etc.).
vii. Main social institutions recognized by society.
viii. Aesthetic issues (this has to do with the use of specific colours, design preferences, shapes or materials, etc.).
ix. Factors that encourage the purchase, and different social behaviour patterns.
x. Non-verbal language (useful to negotiate commercial agreements with external market representatives, or when devising advertising strategies).
xi. Education levels of the population (possibility of gain access to basic education, illiteracy rate, percentage of the population with superior studies).
xii. Social stratification features.
xiii. Society access to new technological forms.
xiv. Customs and uses.
xv. Other features (individualism, importance of woman in society, average family size, ecological care, attitude towards elderly people, and importance of ethics).
iii. Political and Legal Environment:
Auto determination as regards legislation and the establishment of a political system that protects the activities performed by the institutions and inhabitants of a country is a feature of sovereignty. As it is already known, regulations change sensibly from one market to the other, according to particular economic cycles that belong to each nation.
The entrepreneur has to analyze numerous political and legal variables, which may directly or indirectly affect the marketing of the product in a particular external market.
Among them, the most important are:
i. Present political system.
ii. State intervention degree in economic activity (regulation of some operations, creation of bureaucratic bodies of control).
iii. Existence of pressing groups (lobby).
iv. Different commercial barriers (tariff and paratariff barriers), that hinder the access of products from other countries.
v. Existing level of political risk in the country that may affect security in the development of commercial activities (existence of war conflicts, coups d’état, revolutions, strikes, terrorism).
vi. Governmental activities that may affect the constitutional real property and others (confiscation, expropriation, etc.).
vii. Relationship between state and religion.
viii. Force of laws against disloyal commerce practices (dumping, subsidies).
ix. Imposition of commercial penalties to particular countries.
x. Features of national regulations protective of copyrights (patents, trademarks, designs, etc.).
xi. Enforcement of environmental protection laws. Character of the prevailing legal system (based on written laws or customary law).
xii. Existence of economic policies that affect the international flow of commerce (fixation of maximum prices, controlled foreign exchange system, etc.). Legal system that tolerates corrupting activities in the private and public environments. Bilateral or multilateral political or international agreements that might achieve more beneficial marketing conditions.
xiii. Validity of regulations that promote the organization of international marketing associative activities.
xiv. Existing customs regulations.
xv. Legislation about foreign direct investment introduction (IDE).
xvi. Other type of important regulations are those that deal with the following topics- commercial contracts and documents, functioning and regulation of normal and multimodal transport, promotion of capital goods or critical supply imports, consumer protection, competition.
International Marketing – Risks Involved in International Marketing (With Measures)
With the start of globalised era the scope of International Marketing has increased manifold. Business organisations can no longer depend only on their domestic markets, they have to search for new opportunities to sell their products abroad. Risk is a fact of business life. Experienced businessmen are aware of risks involved in business and, by instinct, they try to minimise their risks. International marketing helps in the maximum utilisation of the economics of scale but at the same time there are many risks involved in it.
The various types of risks that an international marketer may face can be divided as follows:
1. Commercial Risks:
Change in supply and demand conditions, change in price, unsuitability of product for the market or otherwise, entry of new competitors and loss from financial adjustments are some of the examples of commercial risks. There is a slight difference between commercial and credit risks. To stop payment by the importer due to unsuitability of goods is the example of commercial risk where as to spot payment by the importer due to bankruptcy is the example of credit risk. In brief it may be said that the export trade is more risky than the domestic trade.
Causes of Commercial Risks:
Commercial risks may arise due to following reasons:
(i) Lack of Knowledge:
The exporter is unlikely to know as much about the foreign markets as he does about domestic markets. He does not have same feel nor does he have adequate information about the foreign market as the domestic market.
(ii) Inability to Cope with Changes:
Inability to adopt to the environment creates commercial risks, change in technology, change in fashion are the part of today’s business environment.
(iii) Long Distances:
Greater transit time involved due to greater distance causes commercial and other risks.
(iv) Fluctuations in Exchange Rates:
Fluctuations in exchange rates of currency either of the importer’s country or of exporter’s country may affect the price of the country’s competitive capacity. The competitive capacity may be improved by the depreciation of the domestic currency and it may severely be reduced by the depreciation in foreign currencies.
(v) Increase in Carriage Rates:
In case of heavy goods and raw materials, increase in carriage rates may seriously affect the competitiveness country’s exports. Commercial risk does not arise in case of f.o.b. (free on board) contracts and even in c.i.f. (Cost, Insurance and Freight) contracts where importer and exporter are agreed upon escalation clause that any increase in carriage charges would be passed on to the importer. In case of contracts without this escalation clause, the problem may be serious.
(vi) Increase in Import Duties:
Increase in import duties or tariff barriers might cause an increase in prices and that might be resulted into serious commercial risk. Tariffs have been substantially reduced and are now fairly stable through the efforts of the GATT. But the possibility of changes in the non-tariff barriers still persists.
(vii) Changing Foreign Market Situations:
Demand for the imported product in the importing country may be reduced by the local production. Market may also be affected by the entry of new competitors. In case the goods are not accepted by the importer, the exporter might have to bring the goods back or be prepared to sell them at lower prices.
Corrective Measures to Manage the Commercial Risks:
The exporters cannot shift most of the commercial risks to professional risk bearers (Insurance Companies) and they would have to bear these risks themselves. Commercial risks can be managed by continuous effective management and marketing. Keeping a watch on the changing business environment in the importer’s country and also on the international economy as a whole, use of forecasting techniques, preparation of emergency plan for any adverse change and to take corrective measures as soon as possible in the adverse situation, are some steps to be taken to reduce the commercial risks. The modern trend to reduce the tariffs is that the exporters are being induced to establish manufacturing facilities in the importer’s country.
2. Political Risks:
The political situation is likely to be different in different countries. The market strategy is also likely to be different. In the regulated market, government rules over the market and the resources are diverted as per the directions of government. The welfare aspect is more important than profitability. Uplifting the rural social welfare and other development aspects is important.
Political risks are those risks which emerge due to the action of the government like government interference or other political reasons.
The political environment of a country plays a vital role in influencing the market. Price, size of market coverage, advertisement etc., influence the market. The market policy has to be decided on this basis. The industrial development or growth depends on free/controlled policy adopted by the country. This indicates that the political factors play a vital role.
Political risks are of two types:
(i) Country Specific Risk:
Political risk against a specific country arises when that country deals in business with another country. Before performing business activities, it is necessary to know the political system of that country. On observing the political activities of that country, one should also look into the encouragement for market activities. Considering the political environment one should see the support or opposition of the international market.
(ii) Company Specific Risk:
This is the second picture of political environment. The political risk of a county is not similar for all companies. Many of the international companies have to face much risk although they work in the same country. Specific risk can be due to many reasons, such as size of the company, its popularity and product etc.
Sometimes the product of the company is such that the government of the country does not want to get it manufactured by international company. For this reason the attitude of the government change towards such country. Moreover, national companies can’t compete with international companies.
Therefore national companies oppose multinational companies and put pressure on the government to check their activities so that the national businessmen may be encouraged. An international marketing company should always careful regarding its activities and feel like a guest in that country. Therefore, its activities should be according to the sentiments of the people and government of that country, otherwise that government may take steps against that company.
It is very important to see the political risks and one should make pre-planning before starting business activities.
This planning can be made in many ways:
(i) One should not start business with that country.
(ii) One should insure the risk.
(iii) One should make agreement with the government or agent of that country regarding risk.
(iv) As far as possible marketing activities should not be confined to one market or country but to extend it in many countries or markets. If one faces greater risk in one market, one can make up deficiency by doing more marketing.
3. Legal Risks:
Different countries have different laws with different meanings, therefore, they emphasise to implement these laws to selected areas. Generally the area of these laws is of national concern. The laws of the country are introduced in the same country but not in foreign. The powers of the courts of that country are applicable to its people and their activities and not across the border. But in one country the working laws of courts are applied to all people whether they are countrymen or foreigners. Therefore, the foreigners have to follow the same laws as the countrymen do.
Producers and exporters must be careful in regarding their activities in foreign markets. If they do not get the legal registration of their company in foreign markets then there is a provision of heavy fine also according to their laws. To avoid any trouble in future the exporter in foreign countries must study and obey the laws of that country before appointing agents, distributors and other persons etc.
Sale agreements made in foreign country are equally important for both seller and buyer. These agreements include cost of the product, place of delivering the goods, credit conditions, payment conditions etc., and must be clear and complete in written.
In foreign trade financial matters are considered very important. In this regard main financial documents such as credit letters, drafts and bills of exchange must be carefully filled. It is necessary to obtain the full knowledge of legal rules regarding these documents.
The exporter must have a specialised lawyer to regulate his activities so that he may take action according to the law of that country and may safeguard the welfare of his client. If the lawyers are experts, the exporters need not worry about foreign laws and actions.
If a foreign debtor delays the payments deliberately then a case can be filed on him in domestic court rather than foreign court. The reason is that legal action in foreign is very expensive. Moreover that foreign debtor has his dealings with other firms in the domestic market therefore it he comes easy to put Govt., check on his accounts in domestic markets.
There are many countries where Indian goods have attractive market and Indian exporters want to increase their business so these countries implement their income tax rules very strictly. Therefore the exporters must have the knowledge of these rules. An Indian company working in foreign market should pay the income tax on its earned profit to that country. This develops friendly trade relations among different countries.
Exporters should also know the labour-laws of different countries. The exporters have to pay to the foreign labourers who are working in the established office, godown, factories or other organisations and this payment is made according to the labour law of that foreign country. Their rights and given facilities are considered carefully. Only then Indian exporters can run their organisations and offices very efficiently.
In export trade it is very important to give serious attention to the symbol i.e., patent, and trademark. The exporters must take the help of specialised advisors so that they may take proper action in foreign. Although registration of patents and trademark is compulsory, the negligence of it can cause serious consequences. The government approves the patents that encourages inventions. The permission for the use of patents is given for a fixed period. It becomes easy for the producers to sell their goods in the foreign markets.
The registration of trade symbol is also necessary so that nobody may copy it. Due to trademark the products are sold easily and also get popularity. Therefore, the exporters should get the registration of their trademark in foreign countries very soon so that the foreign producers may not copy it.
4. Foreign Exchange Risks:
There is always a risk of rate variations of different currencies. It may cause a sharp decline in the realisation of export proceeds in terms of rupees.
Foreign exchange rate plays a vital role in the price fixing in international marketing. For example when rupee falls against dollar an importer hesitates in filling tender. An importer has to pay more rupees per dollar. In such circumstances rupee is considered to have become weaker against dollar.
Fixing exchange rates is a difficult process. Moreover, due to changes in exchange rate it is difficult to decide on which day the payment should made. If an exchange rate is decided then it is possible that it may change on the day of payment. In such a situation the payer would not know how much money he needs.
Government controls the exchange rate which causes problems in international payment. These controls cause a lot of delay in payment and businessmen suffer losses. Due to these control exports and imports are limited.
It will be useful for the exporter to know the various factors that influence the exchange rates. By a study of these factors and the trend of movements in the value of a particular currency, an experienced businessman may be able to forecast the possible future movement of that currency. This will enable him to determine whether it would be worthwhile for him to carry the risk.
There are three possible ways to cover the risk of exchange rate variation:
(i) The first possible solution to the problem is to quote the prices in Indian rupees. In such cases, the realization to the exporter will not, in any way, be affected by the fluctuation in exchange rate.
(ii) The second solution is, if the buyer insists on quoting the price in his country’s currency, to add a clause to the effect that the quotation is based on present exchange parity or current exchange rate and any change will be on buyer’s account.
(iii) The third alternative is to take insurance policy to cover the exchange risk from the insurance company.
5. Credit Risks:
In the present scenario of growing global competition export business is not possible without selling goods on credit. But the credit selling has its own problems. On one hand the exporter has to arrange enough funds to offer credit to his foreign buyers of goods and on the other hand he faces so many risks. If export business yields sufficient profits, then the funds may be arranged from the financial institutions.
Export on credit creates so many risks. National calamities like earthquake or typhoon or war in importer’s country may wreck his fortunes. The foreign buyer may go bankrupt or he may default. The government of importer country may suddenly restrict the imports, there may be moratorium and there may be exchange restrictions.
Protections Available from ECGC against Credit Risk:
The Export Credit Guarantee Corporation (ECGC) protects the exporter against credit risks. The main function of ECGC is to provide guarantees to the banks to enable them to provide adequate finance to the exporters.
The ECGC issues the covers to the exporters in the following way:
(i) ECGC issues financial guarantees to banks against the risk involved in providing finance to exporters;
(ii) ECGC protects the exporters against the risk of not receiving payments from importers by issuing standard policies;
(iii) Insurance cover for buyer’s credit, transfer guarantee, line of credit, joint ventures and oversea investment are some special schemes of ECGC available to exporters.
(iv) Risk of not receiving payment involved in export on deferred payment terms, construction work undertaken abroad and services rendered to foreign parties is covered by specific policies issued to Indian exporters.
6. Economic Risks:
Economic factors are one of the most important factors to be considered for formulation of international marketing strategy. Many variations in marketing systems originate in straight forward economic differences. Most prominent are those caused by the range of standard of living found around the world. Economic development, income including national income, per capita income, and expenditure pattern, all affect marketing strategies. In the context of economic environment the most important factor which affects the marketing strategy is geography.
In geography we study the conditions which affect natural resources of that country, climate and transportation. Geographical conditions also affect the living standard of people. The economy of the country becomes capital oriented where the natural resources are in plenty, for example, Saudi Arabia and Venezuela.
Although some countries lack natural resources there is an environment of prosperity because goods are easily transported due to efficient means of transport. For example, Japan and Britain import raw material and export manufactured goods in large quantity. These characteristics play an important role in the international marketing planning.
7. Technological Risks:
In International Marketing, a marketer faces technological risks also. Science and technology are fast changing. These types of factors obviously affect the market. For example, manufacture of cotton cloth has decreased. Factories have stopped the production of cotton cloth and started producing mix fabrics which are in demand. Now, due to growth of science and technology messages are broadcast through satellites.
The use of Television, Radio, Computer, Internet etc., has increased. Its adverse-affect lies on gramophone and film industry. Many industries develop due to ongoing research such as xerox machine, readymade block for house construction, refrigeration, cold storage, electric motor, automobile equipment etc. Its adverse-affects are also visible on many industries. Management should make required changes in their method of production after considering the new technological changes to maintain the market share.
8. Cargo Risks:
Cargo risks include various types of risks during transportation of goods from exporter to importer. However, a lot of developments have taken place in modern transport system but a long and dreary list of hazards is always present during transportation of goods. Theft, collision, storm, leakage, spoilage, explosion etc., are some of the transit disasters in export business. All these cargo risks are always present during transportation whether the goods are being sent by marine cargo or air cargo. Generally the exporters consign the goods by marine transport due to low cost of transportation.
Cargo risks can be transferred to professional risk bearers. The professional risk bearers are also known as underwriters. Various policies of marine insurance are available today to manage the cargo risk during marine transport. Every exporter should be aware of the elements of marine insurance so that he knows whether he is getting the protection he needs at the minimum costs. Similar management of cargo risks is possible in case of air cargo.
International Marketing – Benefits to Consumers, Business Firms and Economy
International marketing is beneficial for consumers, business firms as well as to an economy.
Some of the advantages are as follows:
1. Helpful in importing industrial inputs – Developing and under-developed countries depend on others for their growth and industrialisation. So international marketing enables them to import raw material, equipments and technical know-how for developing their industries.
2. Optimum utilisation of natural resources – International marketing leads to the optimum utilisation of natural resources which were earlier under utilised or unutilised. Required equipment and machinery can be imported for their profitable exploitation.
3. Employment generation – It generates many employment opportunities for the people of a nation. Encouragement to exports leads to enlargement of production resulting in employment generation.
4. Leads to economic growth – International marketing takes the economy on the path of growth by generating employment opportunity and increasing per capita income.
5. Less demand at domestic level – If there is less demand of goods at domestic level in comparison to production, So that surplus production may be utilised by entering the foreign market.
6. Relatively profitable – Relative profitability of international market is more as compared to domestic market due to the various export incentives and assistances provided by the government.
7. Less business risks – Exports help in diversifying the risk of the manufacturer as downfall in one market may be covered by the upswings in the another market.
8. Enhanced productivity – International marketing helps in importing technical know-how and equipments. As a result productivity is increase due to enlarged production.
9. Better trade relations – As goods travel from one country to another. So do the culture. Due to international marketing people from different countries come in contact with one another and share their culture for developing better trade relations.
10. Generates political harmony – Countries with different political ideologies are doing international trade because they are not self-sufficient in themselves. This interdependence generates political harmony among them.
11. International unions – Exports lead to the formation of unions at international level. For example, EU, OPEC, SAARC etc. These unions help the member countries to do trade by formulating common policies.
12. Technological upgradation – Benefits of technological advancements are exchanged by the country through international trade. This enables a country to produce quality products and compete at world level.
13. Obsolete products – International marketing may open new markets for the obsolete product of domestic market. Hence the life cycle of a product increases by introducing it into foreign market.
14. Social responsibility – Manufacturers fulfill their social responsibility towards a nation by indulging themselves in export activities.
15. Legal restrains – Some legal restrictions may be imposed by the government in domestic country such as restriction on expansion, restriction on production or distribution of goods or any other kind of obligation or restriction related to exports. A manufacturer under all the circumstances looks for foreign market.
16. Improvement in standard of living – International marketing helps to generate employment opportunities and increases the purchasing power of the people. Moreover it makes available variety of goods in a country at lower prices. Hence there is improvement in the standard of living of the people.
17. Helpful in facing competition – Several incentives and assistances announced by the government enables a manufacturer to produce goods for foreign market with latest technology at minimum cost. The advantage of improved quality product at minimum cost will help a manufacturer in acing competition both at domestic and international level.
18. Helpful in utilisation of excess capacity – Demand for goods in a domestic market may be less as comparison to the production capacity of the plant. So international marketing helps in the fullest utilisation of this excess capacity by producing goods and exporting them to different foreign markets.
19. Contribution of exports to national income – Exports contribute to the growth of national income. Any increase in the exports will lead to the increase in the national income. So government should announce various incentives and assistances for encouraging exports.
20. Helpful in meeting debt obligation – Industrially backward economies take external aid for their development. These economies also import goods from other countries. As a result they have to increase their export earnings for covering both imports and debt obligation.
Thus, it can be concluded that international marketing provides huge benefits and becomes an indispensable part of the economy.
International Marketing – 3 Social and Ethical Issues
The business institutions are social institutions. They do have to operate their activities under certain code of conduct. These codes are based upon certain traditions, culture, law and personal ethics. They are called by the name of ‘Corporate culture’. The codes of conduct are not always static. They tend to change constantly.
The business houses are also affected by the changes of such kinds in their social and cultural environment. The code of conduct tells how the businesses are to be organised. It states that what are the social obligations of a business. It also spells out that what should be the qualifications of a business manager and what should be the style of functioning of all these persons.
The social and ethical environmental rules for a business vary among different nations. It also has the tendency to vary region to region and city to city. The cues are much harder to read when a business person superimposes his/her own cultural factors for business activities and relationships. Further the international marketing managers must understand the rules for conducting business activities in an environment quite alien to their own business environment.
If a manager is not sensitive to such issues, because of differences in authority or decision making styles, he or she can never be able to make the first sale.
(1) Business Structures and Values:
The corporate form of a business enterprise is a key factor in the increased Size of business firms and to broaden the scope of its operations. The corporation tends to dominate economic activities in developed countries and in modern sectors of developing economics all over the world. In international markets you are likely to encounter environments where the corporate form of business ownership is not the predominant one.
The business manager needs to become familiar with other types of business ownership and how they can affect the way in which business is conducted. These firms may be the suppliers, competitors, distributors, customers etc. The decision making styles of a business manager differ significantly across cultures even with in the corporate form of business. For example the American managers are more ambitious and are more participatory.
On the other hand the Japanese managers are more likely loyal to the company. They usually take and believe on consensus decision making. Furthermore the kind of people attracted to business management and ownership are different in different cultures.
(2) The Family Firm:
Until the nineteenth century, the public stock corporation appeared as a source of equality capital and friends and family resources were the limits of an entrepreneur’s investment capital. The business changes their forms of ownership with growth are not culturally universal. It requires acceptance of the corporate form of ownership as a customary form of business.
In many countries most of the business houses are family owned and are operated by them. The others are family held corporations. In some countries, many family firms are unwilling to grow if it means that family members cannot effectively control all areas of management.
Therefore many family-owned firms remain small and conservative. There owners want an acceptable level of income but are uninterested in further growth. The type of business with family firm is the one that predominates in underdeveloped countries and in less progressive sector of advanced economics.
(3) Public and Co-Operative Enterprises:
There are many reasons with government to form public enterprises. The purpose in some countries is purely ideological and strictly consistent with the political philosophies of the country. In some cases the government is willing to control some strategic industries such as petroleum or communication. As the political atmosphere of a country changes, the public enterprises become more or less influential in a country’s business life.
Another form of business is the co-operations. It is very common in few countries. A co-operative may be buyer owned, labour owned or a combination of producers with in an industry. Some co-operations behave differently in the businesses and have different or distinct decision making styles.
The International marketing manager should anticipate, doing business with both of these types of businesses in many foreign markets.
International Marketing – Challenges Faced by Exporters
These are certain factors which makes international marketing more complex than domestic marketing.
Due to this exporter faces several kind of difficulties in international marketing which are described below:
1. Different Rules and Regulations – International marketing includes marketing activities across the national boundaries. Countries differ in terms of their rules and regulations. So an exporter needs to understand the rules of not only his own country but of the another country also which is a very time consuming and difficult task.
2. Difference in Languages – Different languages are used in different countries. When exporter travels from one country to another he comes across the problem of language difference which sometimes may result into the loss of business.
3. Long Distance – Another problem that comes in international trade is that of long distance. International trade involves many countries which are dispersed geographically. Exporter in order to meet his customers has to travel from one country to another. Moreover goods are also exposed to risk during transit. So distance creates several complications for the exporter.
4. Involves High Risk – International Marketing involves high risk as due to long distance goods are exposed to several kinds of dangers or uncertainties. For example, uncertainty of payment, uncertainty of exchange rate or uncertainty due to transportation.
5. More Transportation Cost – International trade involves more transportation cost as goods have to travel a long distance. Moreover means of transportation are also less.
6. Presence of Intermediaries – International trade involves several countries. It becomes very difficult for exporter to reach each and every country. So he takes the help of middlemen for selling his product and for getting market information. Middlemen charge commission for their services which makes exporter’s product dearer in foreign market.
7. Difference in Culture – Countries differ in terms of their culture. Customs and traditions which are followed by one country may not be followed by another. So an exporter needs to keep in mind the culture of a country while manufacturing goods.
8. Excessive Custom Formalities – Custom formalities are more in case of international marketing as comparison to domestic marketing. Several duties are imposed by the government in order to protect their home industries. So exporter and importer have to fulfill all the custom formalities for the smooth flow of goods.
9. Economic Integration – Countries integrate with one another to form economic unions. This will help in the free flow of goods among member countries. In this member countries trade with one another on negotiated terms and conditions. But these unions create complications for non- member countries and prohibit free world trade. The examples of such unions are EU (European Union), SAARC (South Asian Association of Regional Cooperation), NAFTA (North American Free Trade Agreements etc.)
10. Transfer Obsolete Technology – Developing countries depend on the developed countries for latest technology and equipment. But developed nations transfer that technology which becomes obsolete in their own country. Moreover they are charging high prices in the form of remuneration. Goods manufactured by this technology cannot compete at world level.
11. Difference in Policies and Practices – In foreign trade exporter deals with several countries. Policies and practices related to trade varies from country to country. Certain restrictions are imposed through these policies and practices. So the exporter needs to consider the trade policies and practices of different countries for getting best results.
12. Procedural Formalities – Government of different countries impose several procedural formalities on imports and exports of goods. These are imposed to safeguard the interest of the nation. These procedural formalities create complications and make the free flow of goods difficult.
13. Policy of Self-Sufficiency – Some countries want to become self-sufficient in the production of consumer goods. So they put restrictions on international trade. They allow the import of capital goods only. Such types of restrictions restrict the growth of free world trade.
14. Requires Insurance – In International marketing insurance of goods is an essential part as goods have to travel long distances, which may or may not be required in domestic market.
15. Difference in Market Aspects – Another problem arises in international trade is that of difference in market aspects. Countries differ in terms of currencies, weights, measurements and marketing strategies.
16. Difficulty in Payment – There is difficulty in the payment of foreign trade due to the involvement of several currencies and differences in exchange rate. As a result settlement of accounts becomes very difficult.
17. Lack of Knowledge – There is lack of knowledge on the part of exporters regarding various incentives and assistances provided by government. As a result they are not undertaking exports as a regular activity. Hence exports are less.
18. Inflation – Due to inflation there is rise in the prices of raw material and hence finished products. As a result domestic goods become costlier in the world market and there will be less demand of goods in international market.