International Marketing

Primary data is needed for marketers to understand consumers’ buying behaviour in the country under investigation. Primary data should uncover significant cultural characteristics before a product is launched so that the marketing strategy is appropriate for the target market. (Dibb, Simkin, Pride, Ferrell).

The next step is to devise a marketing strategy and a marketing plan.

A Marketing Strategy is a summary of organisation’s products and position in relation to the competition. It should include the elements of product, people, place, promotion and distribution – a Marketing Mix.  Marketing Plans are the specific actions undertaken to achieve the goals of the marketing strategy.

The third step the organisation is to develop and make any necessary adjustments the products or services to meet customer needs. For example, in some markets, the taste and packaging of Coca-Cola has been adapted to suit local tastes.

The fourth step is to set prices and terms on the product or service that would be reasonable to customers while making a profit, and distributing the product or service so that they are easily available to the customers.

The organisation must then advertise its product to its potential customers and market it in such a way as to attract and hold the customers’ interest.

Finally, because it is new on the market, the organisation must be in a position to reassure the buyer and perform any after-sale service.

Alternative Strategies Available to the Organisation that can be used to enter the International Market.

There are several alternatives to directly entering the international market.

 Exporting is the easiest and most flexible (Dibb et al).  There are two ways of exporting to foreign countries.

One is to sell through an intermediary which could perform most marketing functions associated with selling to other countries (Dibb et al). This approach would require minimum effort and cost to the exporter and because there is no direct investment in the country, the risks are limited.

The other method is to seek out foreign buyers from companies and governments. This provides a direct method of exporting and cancels the need for an intermediary.

Licensing is an alternative to direct investment when the political stability of a country looks dubious or when resources are unavailable for direct involvement. The main reason for licensing is usually the exchange of management techniques or technical assistance. The owner of the foreign company (the licensee) pays commission or royalties on sales or supplies used in manufacturing to the manufacturer.

Franchising is a form of licensing which allows the franchisee the right to use property such as brand names, trademarks, designs, patent and copyrights. Like licensing, the franchisee pays to be allowed to carry out business under the trade name of the franchiser. However, the franchiser maintains control over the manner in which business is conducted and helps the franchisee in running the business. Companies such as Subway, KFC and MacDonald’s are all successful examples of international franchising.

Joint ventures and strategic alliances are very similar to each other in that they are both a partnership between a domestic organisation and a foreign firm or government. They are usually done in situations that require large sums of investments, such as the extraction of natural resources or car manufacturing.

Joint ventures and strategic alliances are often a political necessity because of nationalism and governmental restrictions on foreign ownership. The advantages are that local partners have first hand knowledge of the economic and socio-political environment and access to distribution networks.

Trading companies provide a link between buyers and sellers in different countries. They are not involved in manufacturing nor do they own any assets related to manufacturing. Trading companies lessen the risks involved for organisations trying to get into the international market as they undertake all the necessary activities for moving the product from one country to the other and supplying the customer. The East India Company is an example of a trading company.

Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. (wikipedia.org).  This is the strongest commitment to international marketing and involves the greatest risk and can be a huge drain on resources. Often the term ‘multinational enterprise is used for organisations that operate using FDI. This refers to organisations which have operations or subsidiaries located in several countries.

The parent company is usually based in one country while producing, managing and marketing in other countries. The organisation may also have subsidiaries which perform autonomously in order to deal with the needs of individual international markets. General Motors and Unilever are two examples of FDI organisations.

Barriers or Restrictions to International Market Entry

While a well organized, planned entrance into international markets will enhance the probability of success as well as the level of success (e.g., sales or profit volumes), many obstacles and challenges are likely to be encountered. These obstacles originate from sources both internal and external to the firm (www.allbusiness.com).  

Tariffs are taxes on products from other countries. Governments impose tariffs to either protect local producers or to earn revenue.

Quotas set absolute limits on the amount of goods that enter a country. An import quota can be a more serious restriction than a tariff because the organisation has less flexibility in responding to it (Dibb, Simkin, et al). Quotas might be imposed to stop foreign companies flooding the market with inferior goods, and to give local businesses a chance to compete.

 Exchange Control is a government monopoly of all dealings with foreign exchange.  This means that foreign exchange is scarce and the government is rationing it out according to its own priorities.  

Government measures other than tariffs that restrict trade flows are called non-tariff barriers (NTBs).  Examples include quota restrictions, import licensing, standards and conformance regulations. Non-tariff barriers have multiplied in recent years as tariffs have been reduced following decades-long negotiations under the General Agreement on Tariffs and Trade (GATT).  (www.un.org/news/press).  

Other problems that are not government-regulated that can be faced on initial international market entry include:

Technical barriers, this can be defined as government-enforced legal requirements imposed for health, safety or environmental reasons or to maintain consistency and quality standards.

Communication could be a hindrance to international marketing as the inability to speak a country’s language may pose a problem for the organisation. It could lead to difficulties when hiring personnel, or making negotiations.

Differing practices and customs could be seen as a barrier because what might be considered acceptable in one country or part of it, may not be the norm in another.

The costs of setting up offices, hiring staff and advertising in the foreign country may deter the organisation from international marketing.

Bibliography

Dibb, Simkin, Pride, Ferrell.  Marketing Concepts and Strategies, Third European Edition. (USA, Houghton Mifflin Company, 1997

Terpestra, Vern, Sarathy, Ravi.  International Marketing, Eight Edition (The Dryden Press, Harcourt College Publishers, 2000)