2 – Basics of International Marketing

Introduction:

Companies operating outside their nation or across national borders engage in international marketing. This strategy extends the strategies utilised in a firm’s home nation.

Applying marketing principles to more than one country is called international marketing. However, there is some overlap between what is often referred to as international marketing and global marketing, which are phrases used interchangeably.

The intersection is the product of the internationalisation process. Many American and European authors consider international marketing a straightforward extension of exporting, with the marketing mix 4Ps altered to account for changes in consumers and segments. As a result, global marketing takes a more uniform approach to worldwide markets and emphasises sameness or similarities in consumers and groups.

According to the American Marketing Association (AMA), international marketing is the multinational process of planning and executing the conception, pricing, promotion, and distribution of ideal goods and services to create exchanges that satisfy individual and organisational objectives.

This and succeeding lessons will teach you about many areas of international marketing. It is essential to notice that the word multinational has been added to the definition of marketing provided by other specialists. This term means that marketing activities are carried out in multiple countries and should be coordinated across borders.

2.1 International Marketing Concept

When a company crosses national borders, it becomes more complicated.

International marketing encompasses all of the operations associated with domestic marketing. A global marketing company must correctly discover, analyse, and interpret the demands of its overseas clients before carrying out integrated marketing operations to meet those needs. In other words, the fundamental functions of international and domestic marketing are the same.

At the same time, international marketing has some unique aspects. When a firm crosses a country’s national borders, it gets exponentially more complex. The issues and managerial situations span marketing, finance, and manufacturing. Many legal, political, cultural, and sociological elements add to the task’s complexity. The environmental and cultural dynamics of global markets are the factors that contribute the most to the complexity.

2.1.1 Global Market Environmental and Cultural Dynamics

Only by studying the respective people, their patterns of existence, their traditions, their social connections, their sensibilities, their religions and fancies can the environmental and cultural dynamics of different countries’ markets be understood. In other words, the international marketer must learn to speak another country’s language. He must connect with the people of those lands in their lingua franca and idiom.

Multinational enterprises must operate in a world of contrasts: ancient and new, primal and modern, pious and agnostic, unfathomably beautiful and sickeningly wretched, educated and stupid, progressive and stagnant, intelligent and naive, all of which are in perpetual flux. To interpret this fragile diversity and make sense of this apparent chaos, we must attempt to discover the underlying factors, the prime movers that drive global dynamics.

Modern communication and transportation networks have undoubtedly brought the world’s nations closer together, but cultural distinctions persist. Understanding cultural differences and nuances and responding to them in a manner and style that appeals to the international buyer becomes critical. It is insufficient for the global marketer to communicate in the buyer’s language. Culture comprises many different aspects, one of which is language. A nation’s history, social and religious heritage, its people’s value system, and the code of conduct passed down through generations are all components of a nation’s culture.

Furthermore, culture is not a fixed entity. It is in a constant state of change. As a result, assessing the cultural dynamics of the world’s markets is challenging. That explains why international marketing is so tricky.

2.1.2 Key Roles in International Marketing

Let’s take a quick look at the primary functions of international marketing. They are as follows:

• Choosing the primary path for global marketing
• Market and product selection
• Distribution channel selection
• Pricing strategy development
• International marketing communication
• Mastering procedural complications
• Organizational adaptations
• Dealing with business ethics

Choosing the Simple Route

The first step is to develop a well-thought-out entry strategy. There are five fundamental ways to join a foreign market:

• Exports
• Technology and know-how licencing
• International trade
• Joint venture
• Full-fledged international operation

We’ll go through the highlights of each of these routes.

The principal means of entering global markets is through exports. Many businesses abandon their foreign marketing efforts at this point. On the other hand, some companies go above and beyond, licensing their technology and know-how to foreign companies interested in importing it into their country. Companies in international commerce source products from all over the world and transport them to any location with a demand for the product. Creating joint ventures in foreign nations is another efficient technique for entering global marketplaces. The corporation gets close to overseas markets through joint ventures. Joint ventures allow a company to become a native in a foreign country, which is the surest path to forming a full-fledged MNC.

2.2 Domestic Marketing vs. International Marketing

The atmosphere in which international and domestic marketing takes place distinguishes them. The following are the key distinctions between international and domestic marketing:

1. Sovereign Political Entities: Because each country is a sovereign political entity, they set many limits on importing and exporting products and services to protect national interests. Multinational marketers must observe such constraints. These constraints could fall into one of the following categories:

• Tariffs and customs duties on importing and exporting products and services make them more expensive in the importing country while not fully prohibiting their admission into the country. Due to the formation of regional economic groupings and the efforts of the General Agreement on Tariffs and Trade (GATT), tariffs internationally and on a regional basis have dropped significantly in the post-war period.
• Quantitative limits are also applied to limit trade in specific commodities. The primary goal of the limitation is to shield domestic industries from foreign commodity competition.
• Exchange control is another restriction that practically every sovereign state imposes. In some circumstances, the government does not prohibit the entry of products into the country, but the importer is denied the necessary foreign exchange to pay for the commodities imported. However, exchange and quantitative controls are combined with issuing an import licence in other situations.
• Imposing extra local taxes on imported goods to make imported items more expensive is one constraint in international marketing.

2. Distinct Legal Systems: Diverse countries have different legal systems. The majority of countries adhere to English Common Law, as amended from time to time. Japan and the countries of Latin America are notable exceptions to this norm. Various legal systems complicate businessmen’s tasks because they are unsure which system will apply to their transactions. This problem does not occur in domestic trade because the laws are uniform throughout the country.

3. Different Monetary Systems: Each country has its monetary system, and the exchange rates for each country’s currency are established under the rules outlined by the International Monetary Fund and, hence, are more or less fixed. Exchange rates, however, have fluctuated in recent years and are subject to supply and demand dynamics. Some countries use multiple rates, meaning various rates apply to different transactions.

4. Lower Mobility of Production Factors: The mobility of various production factors is lower between nations than inside the country. However, with the introduction of air travel, labour mobility has expanded dramatically. Similarly, the growth of international banking has enhanced capital and labour mobility. Despite these advancements, the country’s labour and capital mobility are less intense.

5. Differences in Market Characteristics: Market characteristics vary by segment, e.g., demand patterns, means of distribution, techniques of promotion, and so on. Considering each country’s market, we can assume distinct market characteristics. The presence of government rules and regulations emphasises these distinctions. However, this is merely a difference in degree, even within a single country. In India and America, for example, these differences in market patterns can be found from state to state.

6. Differences in Procedure and Documentation: Each country’s centuries-old trade laws and customs demand different procedures and documentary requirements for importing and exporting goods and services. If traders in the territory want to import and export products and services, they must follow specific regulations and customs.

2.3 International Marketing Principles

Three major principles can summarise the core of international marketing. The first defines marketing’s aim and job, the second is its competitive reality, and the third is its primary means of attaining the first two.

2.3.1 The Value Equation and Customer Value

The goal of marketing is to outperform competitors in terms of customer value. The value equation guides this activity. As the equation suggests, increasing value for the consumer can be accomplished through expanding or improving product and service benefits, lowering the price, or a combination of these components. Price can be used as a competitive weapon by companies with a cost advantage. Customer knowledge paired with innovation and creativity can result in a holistic solution that provides higher customer value. If the benefits are compelling and valued by customers, a company does not need to compete on price to win clients.

2.3.2 Competitive or Distinctive Advantage

Competitive advantage is the second-most essential premise in international marketing. A competitive advantage is an entire offer that is more appealing to customers than equivalent competition. The advantage can be found in any aspect of the company’s offering: the product, the price, the advertising and point-of-sale marketing, or the product distribution. Offering a superior product at a lower price is one of the most effective techniques for entering a new national market. The pricing advantage will draw quick client attention, and the more excellent quality will impact those who purchase the product.

V = B / P

Where V stands for Value.

B is the sum of perceived benefits minus perceived costs.

Costs of switching, for example. P stands for price.

2.3.3 Focus

Focus, or the concentration of attention is the third international marketing principle. It is essential to succeed in delivering customer value at a competitive edge. Large and small businesses are successful because they grasp and use this fantastic idea. IBM flourished and became a great company because it was more explicitly focused on the requirements and desires of its customers than any other company in the developing data-processing industry.

One reason IBM was in trouble in the early 1990s was that its competitors had become far more focused on consumer demands and desires.

Dell and Compaq, for example, are focused on providing clients with computational capability at a low cost. IBM was charging more for the same processing power.

To mobilise the effort required to retain a differentiated advantage, a firm emphasis on customer needs and wants and a competitive offer are required. This is possible only by concentrating resources and efforts on producing a product that meets client needs and desires.

Domestic marketing concerns marketing techniques in the home country of researchers or marketers.

Foreign marketing includes domestic operations in a foreign country. A US corporation considers marketing in the United States domestic marketing, while marketing in the United Kingdom is regarded as foreign marketing.

Comparative marketing is used when the goal is to compare two or more marketing systems rather than studying a specific country’s marketing system for its own sake.

International trade involves the flow of commodities and services across national borders. The analysis focuses on commercial and monetary variables that influence the balance of payments and resource transfers.

On the other hand, international marketing is concerned with the micro level of the market and uses the firm as a unit of analysis.

Some authors use the phrase multinational (global or world) marketing because there is nothing alien or domestic about the global market and global opportunities. One can wonder if the distinction between international and multinational marketing is significant. In practice, it is merely a differentiation without a distinction. Global corporations make no distinction between the two terms. It is impossible to think that changing the corporate name to Multinational Business Machines will make International Business Machines more worldwide. Similarly, there is no logical reason for American Express and British Petroleum to rename themselves Global Express and Multinational Petroleum, respectively. International, global, and multinational marketing are all interchangeable terms in this context.

2.4 Management Attitudes

Management’s assumptions or ideas about the nature of the world—both conscious and unconscious—significantly impact the form and content of a company’s response to global business prospects. A company’s employees’ worldviews can be ethnocentric, polycentric, egocentric, or geocentric. Management at a company with a dominant ethnocentric orientation may consciously shift toward geocentrism. Figure 2.4 summarises the known orientations.

Orientations of Management and Companies

 

2.4.1 Ethnocentric

An ethnocentric viewpoint refers to the belief that one’s country is superior to the rest of the world. The ethnocentric approach implies that firm personnel observe only similarities between markets and presume that successful items and techniques in their native country would succeed anywhere due to their demonstrated superiority. The ethnocentric focus of some businesses means that prospects outside of the native country are overlooked. Such companies are sometimes referred to as “domestic corporations.” International corporations are ethnocentric enterprises that do business outside their home country; they believe that the items that thrive in their native country are superior and can thus be marketed worldwide without adaptation.

An ethnocentric corporation believes that “tried and true” headquarters knowledge and organizational capabilities may be implemented worldwide, although this can occasionally work in a company’s favour.

Their ethnocentric approach was straightforward during Nissan’s first few years of exporting cars and trucks to the United States. The automobiles, designed for moderate Japanese winters, proved challenging to start in many parts of the United States during the frigid winter months.

2.4.2 Polycentric

Polycentrism is the polar opposite of ethnocentrism. The term polycentric refers to management’s frequently unconsciously held perception or assumption that each country in which a corporation does business is distinct. This assumption establishes the foundation for each subsidiary to develop its own business and marketing strategy to flourish; the term multinational corporation is frequently used to describe such a structure. Until recently, Citicorp’s executive described the company: “We were like a mediaeval state.” There was the kind and his court, and they were in command, weren’t they? No. The land barons were the ones in charge. The kind and his court may proclaim this or that, but the land barons go about their business.” Recognizing the global nature of the financial services sector, CEO John Reed seeks to establish a deeper level of integration among Citicorp’s operating entities. Like Jack Welch at GE, Reed is working to instil a geocentric mindset throughout his organisation.

2.4.3 Orientations Regiocentric and Geocentric

With a regiocentric approach, a company’s management perceives regions as distinct and strives to develop an integrated regional strategy.

Example: A regiocentric corporation concentrates on the countries included in the North American Free Trade Agreement (NAFTA) – the United States, Canada, and Mexico. Similarly, a European corporation that talks about its focus on Europe is regiocentric. A corporation with a geocentric approach considers the entire world a potential market and works to establish an integrated global market strategy. A corporation with regiocentric or geocentric management is also called an international or multinational company.

The geocentric perspective combines ethnocentrism and polycentrism; it is a “worldview” that perceives similarities and differences in markets and countries and strives to develop a worldwide strategy entirely responsive for local needs and desires. A regiocentric manager has a regional perspective; the world outside the region of concern is regarded with an ethnocentric or polycentric viewpoint or a combination of the two.

The ethnocentric company’s marketing management is centralised, the polycentric company’s marketing management is decentralised, and the regiocentric and geocentric companies are integrated on a regional and worldwide scale, respectively. The underlying premise for each orientation is a critical distinction between them. The ethnocentric perspective is founded on the assumption that one’s home nation is superior.

It is possible that a geocentric corporation does not identify with any single country. As a result, determining the firm’s home nation is difficult, other than the location of the firm’s headquarters and corporate registration.

2.5 The Advantages of International Marketing

Consumers do not understand or appreciate the value of international marketing, even though they engage in it regularly. Government authorities, particularly bureaucrats, consistently highlight a bad element of international business. Many of their overseas marketing charges are more fictitious than actual. As a result, the advantages of foreign marketing must be fully communicated.

These advantages are as follows:

• Endurance: Every country does not have the same infrastructure, size, resources, or opportunities as the United States. As a result, they must trade with other countries to live. Similarly, not every country is as fortunate as India, which has so many natural resources and biodiversity treasures that it can exist even if resources are few. Even so, it must trade with other countries to obtain oil and munitions for survival. Hong Kong cannot thrive without Chinese food and water. Because most European countries are modest in size, the countries of Europe have had a similar experience. Without overseas markets, European firms would not have the economies of scale to compete with US firms.
• Expansion of overseas markets: Despite their low economies and significant marketing challenges, developing countries are good marketplaces. The United States has discovered that India is the world’s largest market for consumer and engineering items. Despite their potential in the global market, Latin America and Asia are experiencing the worst economic recessions, according to a report by the US Trade Representative for the US Congress. The American market cannot ignore the enormous potential of the worldwide market. The global market is four times the size of the US market. Japan is a larger market than the United States for Amway Corp., a privately held US manufacturer of cosmetics, soaps, and vitamins.
• Sales promotion: Foreign markets account for a significant portion of the business of many corporations that have cultivated markets abroad. Many significant US corporations have done quite well due to their overseas clientele. IBM and Compaq sell more computers outside the United States than at home. Coca-Cola demonstrates the significance of international markets. Coca-Cola is developing milk-based goods since the majority of Indians and Asians dislike the flavour of aerated drinks that contain caffeine and are addictive.
• Diversification: In the international market, cyclical factors such as recession and seasonal elements such as climate affect demand for most products. Because of these variables, sales variations occur, which are usually significant enough to necessitate layoffs. Consider international markets as a remedy for unpredictable demand as one approach to diversifying a company’s risk.
• Inflation and wholesale price index: Earning foreign exchange through exports is the best strategy to manage inflation. Imports can also be highly advantageous to a country because they are the local economy’s reserve capacity. Without imports, domestic firms have little incentive to lower their prices. Due to a lack of imported product alternatives, customers are forced to pay more, resulting in inflation and disproportionate profits for domestic enterprises. This development frequently serves as a forerunner for workers to seek greater salaries, worsening inflation. Import bans on Japanese automobiles enacted in the 1980s rescued 46,200 US manufacturing jobs but for $ 160 thousand per job per year.
• Employment and placements: Tariffs and trade restrictions in certain countries played a significant role in the Great Depression of the 1930s and could generate widespread unemployment again. On the other hand, unrestricted trade raises global GDP and creates jobs in all countries. India has significantly benefited from the entrance of foreign direct investment since the liberalisation of economic policy in 1991, and as a result, employment in the country has dramatically improved.
• Living standard/style: Trade allows countries and their citizens to live at a higher quality of living than would otherwise be possible. Product scarcity forces people to pay more for less in the absence of commerce. Coffee and bananas, which we take for granted, may become unavailable overnight. Life in most countries would be more difficult without the several strategic metals that must be imported. Trade also allows sectors to specialise and access raw resources while encouraging rivalry and efficiency.
• Marketing procedure: International marketing should be considered a subset of domestic marketing. As previously stated, there is virtually little difference between local and foreign marketing. The only difference is that the term multinational has been inserted into the international marketing process. Otherwise, the marketing mix for each is the same. Access to the international market has gotten easier with the advancement of information technology, as the entire world has shrunk to the size of a small global village.

2.6 New International Marketing Opportunities

Opportunities in a growing variety of industries and markets are becoming more global. Firms face increased competition in foreign and domestic markets as economic policies in many nations gradually liberalise.

1. Multinational Corporations (MNCs)

Multinational corporations (MNCs) are large international business actors. The mention of a multinational corporation (MNC) frequently provokes a mixed reaction among Indians. On the one hand, multinational corporations (MNCs) are associated with exploitation and cruelty. They are frequently chastised for shifting resources in and out of the country in pursuit of profit, with little concern for the country’s social welfare.

For example, Varity Corporation, a Canadian multinational corporation, was chastised in 1991 for relocating its headquarters from Toronto to Buffalo, New York, to take advantage of the US-Canada Trade Agreement. For a long time, India referred to multinational corporations as “agents of neo-colonialism.” It wasn’t until 1991 that India began to court multinational corporations. Despite this, MNCs are still not welcome in India. Many Indians regard multinational corporations (MNCs) such as Pepsi, Coca-Cola, Kentucky Food Corporation (KFC), and Enron Corporation as “foreign devils.” In defence of MNCs, an increasing number of them are attempting to be responsible members of society.

For example, Pepsi and Coke have significantly contributed to sports development, particularly cricket, in India. Conversely, MNCs have authority and prestige and generate social benefits to facilitate economic equilibrium. “With resources, capital, food, and technology unevenly spread over the globe and all in limited supply,” Miller explains, “the first need is an efficient instrument of quick and effective production and distribution of a complex of commodities and services.” The MNC is this instrument. Whether MNCs are seen positively or poorly, they are here to stay, and the critical point is to recognise when a company joins this select group. Multi-national corporations (MNCs) are not one-dimensional notions. Similarly, there is no single meaning for globalisation. No single criterion is always sufficient in recognising an MNC; whether a corporation is designated as an MNC or not is determined by many criteria.