10 – Negotiation and Decision Making

Introduction

According to the marketing principle, the company must find a way to discover unmet customer wants and bring items to market that meet those demands. The process can be modelled as a series of steps: the situation is studied to find possibilities, a strategy for a value proposition is developed, tactical decisions are taken, the plan is implemented, and the results are monitored.

10.1 International Marketing Concept

International marketing (IM) or global marketing refers to marketing conducted by businesses outside of their home country or beyond national borders. This strategy extends the strategies utilised in a firm’s home nation. It relates to cross-border marketing activities such as market identification and targeting, entry mode selection, marketing mix, and strategic decisions to compete in foreign markets at the company level. “International marketing is the transnational process of planning and executing the creation, pricing, promotion, and distribution of ideas, commodities, and services to produce exchanges that satisfy individual and corporate objectives,” according to the American Marketing Association (AMA). In contrast to the definition of marketing, only the term multinational has been included.

In a nutshell, international marketing is the application of marketing ideas across national boundaries. However, there is some overlap between what is typically referred to as international marketing and global marketing, which is a synonym.

The intersection is the consequence of the internationalisation process. Many American and European authors consider international marketing a straightforward extension of exporting, in which the marketing mix 4Ps are tweaked to accommodate changes in consumers and segments. As a result, global marketing takes a more uniform approach to worldwide markets and emphasises similarity among consumers and groups.

Distinctions between domestic and international marketing

Multinational corporations adopt worldwide international marketing strategies to provide a shared brand platform for their products and brands. The strategy is then forwarded to each local or domestic market, which adapts it for its country and handles execution. A system like this assures global brand uniformity, price, and messaging. It can also save money because significant advertising and marketing initiatives can be developed centrally.

Globalization has resulted in unique marketing behaviours, opportunities, and problems, distinguishing international marketing from domestic marketing. Companies can market in, and customers may buy from, nearly any country worldwide because of deregulation and technical breakthroughs in transportation and communication. In this environment of increased competition, businesses must produce products that would be of interest in the global marketplace and tailor their product and service features to each country’s unique culture and values. They must decide what to manufacture and how to sell and promote their products in light of various legal and political variances, linguistic issues, and currency swings.

Entry into the International Market

A means of entry into an international market is the mechanism by which your company enters a new market. This lesson covers a few significant options but understands many and varied possibilities. This section will discuss the Internet, Exporting, Licensing, International Agents, International Distributors, Strategic Alliances, Joint Ventures, Overseas Manufacturing, and International Sales Subsidiaries. Finally, we look at the Internationalization Stages.

It is worth mentioning that not all international marketing authorities agree on which form of entry should be used where. Some consider franchising a separate form, but others consider it a licensing component. In reality, the most crucial aspect is to evaluate all relevant entrance routes into international markets, regardless of which pigeonhole they fall into.

Most executives understand that international marketing differs from home-country marketing, and most multinational corporations want their senior executives to have foreign experience in their credentials. Despite this pragmatic understanding of the global marketplace’s uniqueness, there has been little agreement on the precise nature of this distinction. Academics and business analysts have argued about this topic for a long time without concluding. They only agree on the valid but obvious fact that international marketing is more complicated and uncertain than marketing in a single country. This is because of things like consumer behaviour and government regulations. This implies that the distinctions between domestic and foreign marketing are differences of degree rather than fundamental differences of sort. In truth, there are certain distinguishing features in international operations that, although not establishing international marketing as a separate theoretical subdomain of marketing, significantly impact managerial decisions.

Foreign market penetration is a zero-sum game. At the point of market entry, the foreign entrant has no existing business and little or no market expertise, especially regarding the managerial skills required to operate in the new market environment. As a result, in the years following market entry, the pace of change in the firm’s country-specific marketing capabilities is likely to be greater than the rate of change in the market environment, and firm effects may outweigh market effects in influencing strategy. This is especially significant in today’s corporate environment, where new business growth is more important than efficiency in operating a relatively stable business. This usually means:

(a) entering the market through a partnership with a local distributor or other marketing agent rather than through a directly controlled marketing unit and

(b) a relatively rapid sequence of changes to the marketing strategy (such as new product introductions or distribution expansion) or to the marketing organisation (e.g., taking over marketing responsibility from the local distributor).

A company’s prior experience is sure to have an impact when it enters a market in a second country. The more national markets a corporation engages in, the more likely it is to strive to manage them as a network rather than as individual entities. In this situation, marketing strategy decisions in one country may be made using extra-market factors. Pricing levels, for example, may be established to minimise market differences and preserve a price corridor rather than merely reflect local market realities. Similarly, a multinational corporation may subsidise pricing levels in one area for strategic reasons while making up the difference in another. This ability to leverage a global network is sometimes referred to as “the global chess game,” and it is increasingly regarded as one of the key advantages enjoyed by a worldwide firm relative to local players, owing in part to the increasing globalisation of firms and the opportunities to integrate national operations that have resulted. In practice, this typically leads to asymmetric competition in any single market, with different competitors pursuing different goals and establishing varying performance criteria. As explained later in this section, one company may be in the market to learn and thus tolerate poor profitability, whereas others are pursuing more conventional profit maximisation aims.

Companies enter international markets for various reasons, and the multiple aims at the moment of entry should result in distinct strategies, performance goals, and even market participation forms. Nonetheless, businesses usually adhere to a traditional market entry and development strategy. The most frequent method of market penetration, which will be discussed in the following section, is sometimes referred to as the “growing commitment” pattern, in which market entry is via an independent local distributor or partner, with a subsequent transfer to a directly-owned subsidiary. This method stems from a desire to grow a firm in the country market as rapidly as possible, but with a degree of patience brought about by the initial desire to limit risk and the necessity to learn about the country and market from a low base of knowledge. These may be regarded as primary financial objectives centred on long-run profit maximisation in the country, making this internationalisation strategy the default option.

Of course, the primary reason for entering a new market must be potential demand, but it is typical to find additional reasons driving investment and performance measurement decisions, such as:

1. Learning in Lead Markets: Sometimes, a corporation may enter a foreign market not for financial reasons but to learn. For example, the Turkish conglomerate Koc’s white goods branch entered Germany, recognised as the world’s leading market for dishwashers, refrigerators, freezers, and washing machines in terms of customer sophistication and product specification. In doing so, it acknowledged that its unknown brand would struggle to achieve a significant market share in this intensely competitive sector. However, Koc believed that, as an ambitious worldwide firm, it would profit from participating in the world’s leading market and that its product design and marketing would improve, allowing it to perform better globally. 4 Participation in the “lead market” would be required in most sectors to qualify as a global leader, even if profits in that lead market were minimal. The leading market will differ depending on the industry: the United States for software, Japan for consumer electronics and telecommunications, France or Italy for fashion, etc. The crucial point about such a market entry purpose is that it will alter the calculus of the market entry mode decision. For example, a corporation must engage with its subsidiary and a cadre of its leaders to optimise learning from a leading market. Learning indirectly through a local distributor or other partner is less successful. It will contribute less to the company’s development as a global player, even if the short-term profitability is more significant due to the smaller investment required.
2. Competitive attack or defence: In some cases, a competitor’s move rather than some alluring characteristics of the nation found during a market research exercise motivates market entry. The most prevalent situation is market entry as a follower move, in which a company enters the market because a large competitor has already done so. The idea that allowing the competitor to operate alone in that market would give it a significant advantage is what drives it most frequently in consolidated or even duopolistic industries. Another common situation is “offence as defence,” in which a corporation joins a competitor’s home market—usually in retribution for an earlier foray into its domestic market. In this situation, the goal is also to drive the competitor to devote more resources to a more intense level of competitiveness. In both circumstances, a company’s strategy must be tailored to the specific strategic stakes rather than focusing on market development; the corporation will establish market share goals and be willing to accept lower profitability and higher marketing investment levels. This necessitates different performance requirements and budgets than the typical low-risk entry and long-term development scenario, and the company’s control system must be adaptable enough to accommodate this. The overarching competitive goal should be considered when deciding whether and how to enter the market with a local distributor or partner. Low-intensity entry modes, such as import agents and trading houses, would be improper unless the local partner tolerates reduced profit expectations.
3. Scale economies or marketing clout: Several goals are achieved due to internationalisation, also called a “replication strategy,” in which a corporation seeks a giant market arena to leverage advantage. Internationalization, for example, can help a corporation attain larger economies of scale in various industrial industries, particularly for companies from smaller native country markets. In other circumstances, a corporation may strive to capitalise on a distinguishing asset (typically protected as intellectual property), such as a brand, service model, or patented product. In both cases, the emphasis is on “more of the same,” with little adaptation to local markets, which would jeopardise scale efficiencies or reduce the profits from replicating the winning model. To fulfil either of these goals, a corporation needs to maintain some control, which allows it to enter markets with relatively high-intensity modalities, such as joint ventures. Because both are built on protected and predetermined assets, franchising and licensing are business models that are naturally adapted for the rapid replication of firms through unit expansion. Apart from these many marketing goals, it is also usual for governments to “incentivize” their country’s companies to export, in which case the company may enter markets it would not have entered otherwise.
4. In conclusion, given that rapid business evolution is one of the distinguishing features of international markets, it is reasonable to assume that most companies’ global operations will consist of a patchwork of country-market operations that pursue different objectives at any given time. As a result, most corporations would use distinct entry strategies for various markets. On the other hand, companies frequently have a template that is followed in practically all markets. This typically begins with market entry through an indirect distribution route, usually a local independent distributor or agent.

These distinct goals mean that marketing strategy in the international arena shifts quickly as the organisation expands or fails to thrive. Significantly, it is driven not only by market features (the theoretical or pure basis for marketing strategy), but also by organisational development as the local marketing unit’s economics and knowledge develop. Indeed, it is frequently impossible to separate the market development process from the organisational development process. However, it is possible to detect patterns across organisations in this internationalisation process and define the typical evolution of foreign marketing strategy. Such a framework must begin by acknowledging that different market entry objectives can result in varied outcomes regarding entry technique and marketing strategy.

10.2 International Marketing Process

The steps of International Marketing are as follows:

Locating International Markets

They are analyzing foreign marketing prospects to find unsatisfied or under-satisfied needs that a marketer may be able to meet with its products or services. Both information gathering and analysis, as well as market research (secondary or primary data collection and analysis), are options for this analysis. A marketer may first develop a product or service concept and then hunt for market demands that these products or services can meet. The marketer may also identify unfilled or under-satisfied market needs before developing a suitable product or service to meet these needs.

The entire world is your oyster. You can enter any country you want. So, you do nation identification, which entails conducting a broad overview of potential new markets. There could be a simple match, such as two countries sharing a common heritage, such as the United Kingdom and Australia, or a common language, such as the United States and Australia, or even a common culture, political ideology, or religion, such as China and Cuba. At this stage, selecting is frequently simpler.

Example: A country like Canada or the United States is close. Alternatively, your export market is in the same trading zone as the European Union. Again, it is early days, and potential export markets could be added or excluded for various reasons.

International Market Segmentation

Global segmentation can be approached in two ways:

The Macro Approach

Countries can be thought of as sectors.

For example, only nations with specific income levels will have a strong market for pricey drugs, and entry chances for newborn clothes will be significantly greater in countries with large and expanding birth rates.

However, there are significant differences between countries.

For example, it was predicted that the Italian market would demand “no frills” inexpensive washing machines, whereas German consumers would demand high-quality, very reliable ones. However, it was discovered that more units of the cheap kind were sold in Germany than in Italy—even though many German consumers fit the predicted profile, there were large segment differences within that country.

The Micro Approach

This strategy caters to sub-national segments. There are two approaches to this:

• Intra-market Segmentation: This entails segmenting the markets of each country. In this case, the corporation is entering a new market niche to better understand it. For example, an American company entering the Indian market might conduct research to segment Indian consumers without considering US shoppers’ knowledge. The premise here is that each country’s market is distinct from the others and, as a result, must be treated accordingly. This is a long-term strategy that necessitates extensive research and expenditure.
• Inter-market Segmentation: This entails detecting segments that exist across borders. For example, the compact car category is enormous in India but much smaller in the United States. Inter-market segmentation has various advantages.

Products and promotional campaigns can be used across markets, introducing economies of scale, and learning gained in one market can be applied in another. For example, a company that caters to a segment of premium-quality cell phone buyers in one country can use its experience in another country that features that same segment. (While segments may be comparable across cultures, it should be highlighted that learning about the local market is still required.

For example, even though a product’s target market in two countries seeks the same benefits, the cultures of each country may drive individuals to react differently to it.

International Markets Selection

After the marketer has identified possible prospects in the first step, it is time to choose the groups of potential overseas clients (target markets) to whom the items or services will be sold.

This process also includes identifying potential buyers, measuring and forecasting demand, segmentation, targeting, and positioning.

A final shortlist of possible nations has been determined. Managers would consider strategic aims and look for a match in the countries at hand. To determine firmer market entrance costs, the company could look at close competitors or similar domestic enterprises that have already entered the market. Managers could also look at other countries, and it has expanded to see if there are any commonalities or lessons learned that can be applied to decision-making in this case. A final grading, ranking, and weighting based on more specific criteria can be performed. Following this procedure, the marketing manager should aim to visit the final few countries on the shortlist.

Segmentation entailed finding groups of potential customers from the entire potential market that are homogeneous in specific identification and behaviour characteristics but differ from others in the target population in the same factors. This step also necessitates marketers deciding what key benefits a product or service offers the selected target customers and how to differentiate from the competition.

Because a firm must provide the best value to potential customers to make its products and services more saleable compared to competitors, it must implement proper business and marketing strategies.

To develop and deliver finished products and services to clients, a company must carry out various tasks by various people and departments; this necessitates aligning and coordinating various operations and efforts. At the same time, to provide the best value to the buyer and maximise profits for the firm, all operations, efforts, and resource utilisation must be optimised. This necessitates adopting a coherent and appropriate logic or strategy to manage and regulate the alignment, coordination, and optimization of the firm’s business and marketing efforts.

Various scholars have analysed successful corporations worldwide to determine how these businesses linked and coordinated their activities and efforts. Porter concluded that successful companies used one of three strategies: cost leadership, distinctiveness, or focus. Other studies have discovered that successful organisations utilised market-aligned strategies, such as market leader, challenger, follower, and niche strategies. Other academics claim that organisations have achieved market success by implementing one of the three value discipline strategies: operational excellence, customer intimacy, or product leadership. Details on these techniques can be found in books and strategy subjects.

Creating an International Marketing Mix

The fourth step in the marketing process is to create the worldwide marketing mix, which includes product, place, pricing, and promotion. The marketing mix identifies four critical elements for establishing an effective marketing strategy. To make a strong marketing impact, a company must develop appropriate programmes in these four key areas and ensure that all four aspects of a company’s marketing programme are well coordinated and coordinated by one another to present a clear image to the target market of the company’s brands and products.

Creating a competent marketing programme is not enough to ensure success. A company must also appropriately handle its foreign marketing efforts. Quite often, businesses fail not because they lack a strong marketing campaign but because they fail to implement their well-designed programmes adequately.

10.3 International Market Analysis Tools

Tools for international market analysis enable a corporation to examine external elements that influence how it sells goods or services to consumers. Independent studies, PEST analysis, and using a third-party company are all standard tools. Each market analysis tool delivers distinct information to businesses so that they can make judgments. In a nutshell, they add knowledge to the company’s decision-making mechanism. More information increases an individual’s or company’s business intelligence, helping them be more knowledgeable and competitive in the economy.

1. Market Research Surveys: Surveys help gather information about consumer preferences, buying behaviour, and market trends in different countries.
2. Market Segmentation Analysis: Identifying and segmenting target markets based on demographics, psychographics, and geographic factors across various countries.
3. PESTLE Analysis: Evaluating the Political, Economic, Social, Technological, Legal, and Environmental factors impacting a market’s attractiveness and potential risks.
4. SWOT Analysis: Assessing the Strengths, Weaknesses, Opportunities, and Threats of entering a new international market.
5. Competitor Analysis: Analyzing competitors’ strategies, market share, strengths, and weaknesses in different countries.
6. Market Entry Strategy Matrix: This matrix examines different market entry strategies, such as exporting, licensing, joint ventures, or wholly-owned subsidiaries, and selects the most suitable approach.
7. Country Risk Assessment: Evaluating the political stability, economic conditions, legal framework, and cultural factors of target countries to assess potential risks.
8. Cultural Analysis: Understanding cultural differences, values, beliefs, and communication styles that may impact marketing strategies and consumer behaviour.
9. Market Potential Analysis: Estimating the size of the target market, growth potential, and consumer demand in different countries.
10. Market Opportunity Analysis: Identifying unmet needs, emerging trends, and untapped market segments in international markets.

Independent research frequently focuses on a specific component of a bigger market, population, or economy.

For example, a corporation may be interested in learning more about a particular group of consumers, a market location, or the international economy. The independent study’s global market analysis tools then zero in on the necessary facts for the intended target. Demographics, competition information, resource availability, and other data may all be included in the independent study. These studies may have multiple minor components that combine to form a much larger report for a company’s management team.

All markets contain some or all of these elements. Any intervention by a government agency is considered a political factor. Regulations, legislation, and taxes can all have an impact, both positively and negatively. Economic issues often outside the company’s control are inflation, money supply, fiscal policy, and other factors. The government may be involved in both of these elements in many circumstances.

Social variables in PEST market analysis tools frequently deal with consumer views of a company or its products. This can also involve environmental factors, such as a company’s utilisation of natural resources. Any application of technology by the corporation or its competitors is referred to as a technological factor. For example, a corporation that fails to implement technology may lose market share as competitors capitalise on those prospects. This approach allows market analysis tools to incorporate data from numerous marketplaces or economic situations.

Sometimes, a company may lack the necessary market analysis tools. In this case, third-party companies or consultants can tailor market analysis tools for the company. This enables a corporation to pay for tools that include all relevant data. Third-party resources may be more expensive but provide better knowledge or expertise in some areas. As a result, the information is more accurate and comprehensive than an internal report.