38 International Marketing

Manpreet Arora

1. Learning Outcome:

After completing this module the students will be able to:

To know the meaning of International Marketing
To understand about various orientations of International Business
To gain knowledge about international marketing decisions
To know about the challenges of international marketing

2. Introduction

As the businesses are crossing the national boundaries and becoming global the relevance of International marketing is also increasing. Increase in International business means more foreign exchange in the country through foreign trade. The world market is huge and ever expanding. Businesses have to be more dynamic to gain the advantages of foreign markets. The marketing environment of international business is entirely different from the domestic business environment and thereby the marketing strategies. Every market has its own characteristics and its peculiar features. Therefore the marketing strategies for the different regions will be also different.

Since liberalization in the early 1990’s India is moving progressively to achieve a significant place in the International market. Due to technology advancements the globe has become a single market and hence India has also become an attractive marketplace in the globe. As the technological advancements take place world has become a single market, Products manufactured in one country are easily accepted in other countries due to their brand name. Globalization has posed enormous challenges as well as opportunities for the business that cross the national boundaries and sell their products overseas. Today consumers have wide variety of options in terms of substitutes. Therefore it becomes very important for the organization to meet the needs of the global customer in order to sustain for a longer period of time. Such products which are sold across borders in different markets cannot be sold with similar/ identical marketing strategies. Therefore international marketing efforts are required which not only takes care of selling the products in global market but also take care of language, culture, market circumstances, customer behaviors and global market environment. In this module we will understand what international marketing is and why it is done.

3. International Marketing: Meaning and Definition

The fundamental basis for a successful international marketing plan/ program is the core of marketing as a discipline. It is the process of en cashing the opportunities available in the market by focused use of organizational resources. The earlier concept of marketing which focused only on product has now shifted to providing a better product based on standards and international benchmarks. The focus of marketing mix was on four “P’s” i.e product, price, place and promotion. Now it has extended to seven “P’s” i.e product, price, place, promotion, packaging, positioning and people. With the advent of globalization the seven P’s concept of marketing demanded a strategic development and thereby just knowing the customer was not enough. Thus the international concept of marketing demanded that the customer must be viewed in the light of changing circumstances, global requirements, growing competition, changing economic, social and political conditions.

International Marketing is the exchange/transfer of goods and services across different national markets. According to the American Marketing Association, “International Marketing is the multi-national process of planning and executing the conception, prices, promotion and distribution of ideal goods and services to create exchanges that satisfy the individual and organizational objectives.”

With the Availability of new and advanced communication techniques, better transportation means the physical distance among the countries of the globe has shrunk immensely.

Almost all the nations of the world are participating in the global market opportunities which have given them better growth prospects. Now a day’s customer’ needs and wants are not confined or limited to the products and services produced and marketed within the national boundaries. The buyer of today has an access to the goods or services produced and marketed by the foreign companies situated in diverse parts of the world. For instance, LG TV, Gucci purses, Coca-Cola, Rayban Glasses, Toyota and Ford vehicles, Levy’s Jeans, , McDonald’s Fast Food, and many other products of foreign companies are easily available anywhere.

In the same manner the products of producers are not meant for sale in domestic market only. Through Internet, e-commerce facilities, e-business, advanced technology, better transportation and other related advancements have created all sort of possibilities to generate access and take benefits of the products or services of any company throughout the world. The products are now demanded globally, their production is also done globally and thereby it becomes pertinent that they follow international marketing strategies to reach the international customer. Businesses not only export their products, but they enter into joint ventures, franchise agreements, strategic alliances, do foreign investments, create strategic business units in foreign countries to meet the demand of international customers.

Thus In international marketing the product or service is sold in the international market by way of directly entering into the foreign market or by exporting it or entering into a joint venture. For entering into foreign markets different strategies are required as compared to the strategies opted in the domestic markets. International marketing takes care of all the aspects of market aspects which affect the marketing aspect of the organization as a whole.

The prime purpose of International Marketing is to see and take appropriate action, formulate and implement marketing strategies by looking at the international environment for the foreign markets. For availing the benefits of huge foreign markets it is important to correctly identify the factors effecting the marketing decisions in international context. The international market scenario is unknown, complex and full of uncertainties. The company must identify all the factors appropriately in order to gain competitive advantage and gain success. The organizations entering into foreign markets should develop their marketing strategies in convergence of their own marketing perspectives which are used for domestic markets.

4. Management Orientation towards International Market

The reaction of a company to international market opportunities largely depends on the top level management’s beliefs, values and assumptions. In case of Indian companies sometimes cultural factors and traditions act as a hindrance to the growth of the company. The extent of commitment involved in multinational marketing differs between firms. Some companies or national or domestic market oriented. They do not regard foreign market a very important for their marketing decisions. On the other hand there can be other firms who have global outlook and for whom the global market is the fundamental basis on which the business strategies are planned. The EPRG framework provided by Wind, Douglas and Perlmutter explains the level of involvement of firms in international business. The view of company’s workforce can be studied in the direction of following orientations:

1. Ethnocentric orientation /Ethnocentrism (Home country orientation)

A company following ethnocentrism views overseas operations as secondary and is focused only on domestic or home country operations. Foreign markets are just a means of disposing their surplus for these organizations. The top management assumes that domestic operations, techniques of production, personnel are superior to foreign markets. All the strategies for operating in the foreign markets is decided at the home country and home office. The policies and procedures which are used in domestic market are identical to the one used in foreign markets. Generally such organizations create a separate international division or export division to control their international operations. All the marketing decisions are similar to the domestic market strategies. The domestic product market mix is sold in the overseas market without any major modification. Thus, in ethnocentrism international marketing is just an extension strategy.

2. Polycentric Orientation

Polycentrism is defined as an orientation which reflects the host countries objectives or goals with respect to follow separate/ different management strategies, policies, plans, procedures with regard to international operations. In this perspective, the top level management believes that for carrying out international operations, the business practices local tastes, preferences; techniques are usually found most appropriate if dealt with the local market conditions separately. Under this view it is assumed that culture, way of workings, marketing strategies of various countries is different. The philosophy of this approach lies in the fact that local ways of doing things; techniques used at the local conditions are best suited to deal with market conditions. The organization believes in creating a subsidiary abroad which acts independently. It has its own marketing plans; objectives and marketing mix independent of the home country realizing the fact that local conditions are always best suited to operate globally. But a polycentric approach creates problems of coordination and control.

The Marketing of the company’s products is done on a country to country basis, and marketing research is also conducted independently in each country. It is believed in this approach that local nationals have more and better understanding of the national markets. The pricing decisions, channels of distribution, product characteristics, marketing research all are done in accordance to local market conditions.

3. Regiocentric and Geocentric Orientations

A company which follows regiocentric approach views different regions as different markets. A region with some similar features/ characteristics will be regarded as a single market. The strategies, organizational approaches, product policies are implemented at the regional level. On the other hand a geocentric company views the entire globe as a single market. It develops single set of standardized marketing mix, in all the countries. Such businesses project a uniform image of the company as well as its products for the global market.

There can be several reasons for which firms want to go international. A number of strategic steps have to be taken by the firms’ for achieving its objectives of growth and profitability. The following can be the reasons for which companies want to go international:

When the output of the company is exceeding the demand in the home country i.e the home market is not able to absorb the whole of company’s output, exporting may be of help to such companies.
When company wants to increase its ale it has to tap to new markets and thereby it tries to find out international markets to increase its turnover. Sometimes to finance its imports company’s do trading overseas and export a portion of their output.
Some organizations that are socially responsible they may promote export activities. Export is vital to any economy’s growth. It helps to earn foreign exchange for the economy and contributes toward the economic development of the country. Therefore some socially responsible companies may promote export to contribute to the national effort and help the nation to earn valuable foreign exchange.
Growth and development is another important aspect of going international. When the domestic market is fully exploited then the firm’s enlarge their business operations and enter into foreign markets. Most of the MNC’s are technologically sound as they spend huge sum of money on research and development. To support their research and development activities they enter into various foreign markets to enlarge their scale of operations. Ultimately they are able to support their activities by achieving competitive advantages and earning economies of scale.
Business across nations helps a company to create a positive image of the company in the home country. It has been seen that the company’s which sell their product in foreign market have a positive goodwill in the home country.
Various developing nations like India offer huge incentives to the businesses which are export oriented to stimulate exports. Therefore international business may offer certain benefits to the company.
Gaining profit advantage is yet another incentive of international business. It is seen in case of many products that international business is more profitable than the domestic business.
Competition is another important and sometimes indispensible driving force behind internationalization. Many companies take an offensive international competitive strategy by way of counter competition.
In some businesses for achieving monopoly power; company’s want to go international.
Some companies have a business policy of systematically and growing internationally with the passage of time. After achieving a set market share they expand their operations across various nations and want to become global.

5. International Marketing Decisions

The marketing concepts for all type of businesses remain same as basic ingredients of marketing are same but the international marketing decisions are more complex than domestic market decisions. The international market environment is uncontrollable and the factors are quite heterogeneous. The decision making process in international situations is quite challenging.

A firm which wants to operate internationally has to undertake series of strategic decisions. They are the following:

1. Going International

The preliminary decision for any business is of course regarding going international. This decision is based on various considerations like the vision of the organization, the mission to beat the international opportunities etc. any business by looking at its present resources and future orientations will decide to go for international operations. Factors like skill availability of the business, production capacity, marketing expertise, product range, financial capabilities, company’s short term and long term goals play an important role in deciding a company’s decision regarding going international.

2. Market Selection Decision

The next step for a business is to select a suitable / appropriate market. For selecting a market it is important to analyze the potential alternatives critically in the light of objectives and resources available with the concern. An in-depth analysis of the market conditions and the knowledge of dominant factors prevalent are necessary while deciding the oversees market for the concern.

3. Mode of Entry and operating decisions

After selection of market the mode of entry should be chosen. It can be a direct entry, or a joint venture or a strategic alliance or collaboration.

4. Marketing mix Decisions

The success of international business lies in the selection of appropriate marketing mix. In the foreign markets the external factors pose various challenges and are uncontrollable. Therefore the international marketing plays a dominant role in making the product successful across nations. The marketing mix includes decisions regarding product, promotion, price, physical distribution. They should be so decided that the factors influencing the overseas markets should be taken care of same.

5. International Organization Decision

Organization structure should be carefully decided for the concerns operating internationally. The organization structure should be decided carefully considering the factors like nature of the product, nature of foreign markets, the size and the resources of the organization, types of human resource with the organization, the export orientations etc.

6. Challenges or Problems in International Marketing

Although the principles of domestic marketing and International marketing are same as marketing concept is universal in nature but still in international marketing the strategies opted are different from the domestic ones. Some of the peculiar problems which are faced by the organizations while deciding and implementing the international marketing objectives are listed below:

The foreign markets are largely affected by their respective political and legal environmental factors, which are generally quite different from the domestic scenarios. The business decisions from marketing perspectives are quite difficult in such cases if the number of nations where the product has to be marketed is many. Therefore the marketing decision at international level is a tedious and complex decision.
Now a day the major difficulty to be dealt with in the international business decisions is the cultural diversity. Cultural differences have a great bearing on the international marketing decisions and can pose a great threat to such decisions.
The economic environment, the living standard of people, per capita income, and the spending habits varies from nation to nation. It is a great challenge to international marketing decisions.
The monetary system, currency convertibility, the money denominations volatility in financial markets, can also pose threat to international marketing decisions.
Different languages are used across the nations with same words having different connotations and meanings. The communication barrier is the most drastic one which is encountered by the international marketers around the world. This needs special attention and focus as proper communication is the key to successful marketing plan.
The nature of marketing facilities varies from country to country. For instance one type of marketing or advertising may be successful in developed nations may not reap the same results in under developed nations.
Import controls, trading barriers, trade restrictions are other factors which affect the international marketing decisions.
Trade practices, trading customs vary from country to country thereby posing threat to international marketing decisions.

7. Summary

The fundamental principles of marketing whether it is for domestic marketing or for international marketing remain same. But the marketing environment of different countries/ nations/ regions can be different thereby organisations need different marketing strategies to tap up the potential of one market to another. The objective of a business that wants to sell its product overseas can range from selling the surplus output to achieve growth in sales. They may also strive for growth through going international. There are some peculiarities of international marketing. They may arise due to differences in economic environment, different political and legal environment, and cultural differences across different nations, gaps in economic environment, difference in marketing infrastructure or even differences in trade practices. A firm has to make many strategical decisions if it wants to go global. Marketing mix decisions ae vital for the successful international business orientations.

Suggested Readings

Cherunilam Francis (2010). International Business. Prentice Hall of India Private Limited. New Delhi.
Cherunilam Francis (2013). Global Economy and Business Environment. Himalaya Publishing House, New Delhi.
Conklin David w. (2011). The Global Environment of Business. Sage Publications.
Mithani D M. (2009). Economics of Global Trade and Finance. Himalaya Publishing House New Delhi.
Cherunilam Francis (2011). International Business Environment. Himalaya Publishing House, New Delhi.
Saleem Shaikh (2010). Business Environment. Pearson Education, New Delhi.
Sundharam K.P.M. and Datt Ruddar (2010). Indian Economy, S. Chand & Sons, New Delhi.
Sharan Vyptakesh (2003). International Business: Concept, Environment and Strategy. Pearson Education, New Delhi
Cullen. (2010). International Business. Routledge.
Bennett Roger (2011). International Business. Pearson Education, New Delhi
Paul Justin (2010). Business Environment-Text and Cases. Tata McGraw Hill, New Delhi.
Warren J. Keegan (2002). Global Marketing Mangement. Printice Hall of India, New Delhi.