An International Marketing Issues & Strategies
Executive Summary:
Many companies after successfully capturing the domestic market involve their selves into international marketing. A domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading. In domestic trading, a firm faces only one set of competitive, economic, and market issues and essentially must deal with only one set of customers, although the company may have several segments in a market. When companies expands their activities outside the one country and involves into other countries boundaries called international marketing. There are set of problems which are faced by the different companies when they begin to establish their influence into international marketing. Those problems are discussed somehow into this project. The main aim of international marketing is to provide solid foundations that are useful for explanation, prediction and control of the international business activities. In this topic we have discussed the 7 P’s; Price, Place, Promotion, Product, politics, physical evidence and people. There are some other heads which are discussed also in this project. They are creating the problem for the companies to survive into international marketing. Ethical Issues in International Marketing, country entry decisions, and strategies are also discussed.
Marketing:
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large”
The Concept of Domestic, International, Global Marketing:
Domestic Marketing:
The focus of domestic marketing is primarily marketing carried out within a defined national or geographic boundary where the marketer is relatively free to plan, implement and control marketing plans, including decisions on the marketing mix, within a relatively known and easily researchable marketing environment
International Marketing:
International marketing takes place when the marketer explores markets outside the national boundaries of the domestic market. This often begins with direct or indirect exporting to a neighboring country. The focus is to find markets which have needs similar to those in the domestic market and can be satisfied with similar products and services.
Global Marketing:
The concept of global marketing begins with the notion that the world has no centre. The ‘borderless’ global marketplace encompasses the participation of all countries—not only the industrialized and the newly industrialized nations, but also the emergent economies such as China and India—in international competition. This new ‘market internationalism’ is coupled with more integrative global structures, including free trade areas, common markets and multilateral agreements (e.g. World Trade Organization) which link international markets more closely.
Why International Marketing? There is a trend toward a global economy. ? ? ? ? No longer enough to look at domestic market Markets across the world being sought after by more competitors Explosion of international trade Global linkages become important
Comparing Domestic and International Marketing:
Similarity:
? Both carry out transactions that meet the needs of individuals and organizations
Differences: ? ? International markets have greater growth potential Some tasks associated with international marketing not included (or less intense ) than in domestic marketing (e.g., cultural research, political factors, exchange rates, trade laws, long distance distribution.)
7 p’s in international marketing:
? ? ? ? ? ? ? Price Place Promotion Product Physical Evidence Politics People
1) Price:
Drivers in Foreign Market Pricing: Many different factors come into play when setting prices for the same product in different countries. Major influencers are labeled the 4 C’s: 1. 2. 3. 4. Company (costs, company goals) Customers (price sensitivity, segments, consumer preferences) Competition (market structure and intensity of competition) Channels (of distribution)
International Pricing Issues:
?
Export Price Escalation: Exporting products requires more steps and higher risks than selling products domestically. To make up for incremental costs, such as shipping, insurance and tariffs, foreign retail prices may often become much higher than prices in the home country of where a product is produced. The most important questions to ask your self as a marketer are: will my customers pay an inflated price for our products/services? Will the price of our product make allow us to compete successfully with other firms? If the answers to these questions are negative, then there are 2 approaches to dealing with price escalation. The first way is find a way to
cut the export price, and the second is to position the product as a exclusive or premium brand.
?
Inflation: Intense and unrestrained inflation rates in countries can become a huge obstacle for multinational corporations. In places where inflation rates are rampant, setting prices and controlling costs are imperative, often involving complete dedication by marketing and financial divisions of an organization. There are many alternatives to protect against the affects of inflation. Common plans include modifying components of products or packaging materials, getting raw materials from low-cost suppliers, shortening credit terms, including escalator clauses in longterm contracts (used in many b2b situations), quoting prices in stable currencies and pursuing rapid inventory turnovers. When governments impose price controls, which may accompany wage freezes, companies must also adapt several plans of action. Often in these circumstances, businesses will alter their product lines to minimize negative affects from price controls, change defined market segments, launch new products, spark negotiations with the government, and try to better predict when pricing controls may occur. In extreme cases, companies may choose to exit foreign markets when inflation or pricing controls become too costly to the company. If, however, a company can better manage these challenges, they will gain a long-term competitive advantage by creating higher barriers to entry for potential new competitors.
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Currency Movements: Exchange rates represent how much one form of currency is worth in terms of another. Political and economic conditions cause exchange rates to constantly fluctuate. With these rates so unstable, setting a price strategy that can combat these changes can be difficult. The two main pricing issues for managers are how much of the exchange rate gain or loss should be transferred to customers (the passthrough issue), and deciding what currency price quotes are given in.
?
Transfer Pricing: Another challenge facing organizations operating globally is how they handle sales transactions between related parts of the same company. Transfer pricing are the prices charged for transactions involving the trade of raw materials, components, finished goods, or services. Transfer pricing decisions involve the need to balance the interests of a variety of stakeholders including: the parent company, local country
managers, host governments, domestic governments, and joint-venture partners. Some of the factors that influence transfer pricing decisions are the following: tax regimes, local market conditions, market imperfections, joint venture partners and the morale of local country managers. There are two major transfer pricing strategies, market-based transfer pricing and nonmarket-based pricing.
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Anti-dumping Regulations: Dumping occurs when imports are sold at an unfair price. Recently the removal of trade barriers (tariffs, quotas) has caused countries to switch to non-tariff barriers such as anti-dumping laws in order to protect their local industries. It is important for multinational corporations to take into account anti-dumping laws when they determine their global pricing policy. If firms price too aggressively, this may cause anti-dumping measures that will hurt their competitive position. It is important to monitor how anti-dumping laws affect similar companies in your industry.
?
Price Coordination: The last issue that affects pricing in the global environment is price coordination. Price coordination is the relationship that exists between prices charged in different countries. Although the laws of economics indicate that prices should vary across region so that overall profits are maximized, reality is just not that simple. In the majority of instances, markets cannot be separated perfectly, and too much price differentiation creates gray markets. So, when deciding on how to coordinate your pricing strategy, consider these factors:
? ? ? ? ? ? ?
The nature of your customers The amount of product differentiation Nature of your distribution channels Nature of you competition Market Integration Characteristics if your internal organization Government regulations
2) Physical Evidence:
Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organization. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lie down! Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organizations’ perceptual plan of the service. When you sell tangible goods, you can offer your customer the chance to ‘try before they buy’, or at least see, touch or smell. With services, unless you offer a free trial, your customer will often be buying on trust. And to help them do so you need to provide as much evidence of the quality you will be providing as possible. So physical evidence refers to all the tangible, visible touch points that your customer will encounter before they buy, from your reception area and signage, to your staff’s clothing and they images you include in you corporate brochure. People have different perception in different countries. Organizations must know the preferences and mindsets of the targeted customers in the targeted country. Organizations have same kind of physical evidence in different countries but in one country they are successful but in another country they are extreme failure because the customers have different perceptions in both countries.
3) People:
An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptitude, and service knowledge to provide the service that consumers are paying for. Many British organizations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards.
The impact that your people can have on your marketing cannot be underestimated. At its most obvious, this element covers your front line sales and customer service staff who will have a direct impact on how your product is perceived. You need to consider the knowledge and skills of your staff; their motivation and Investment in supporting your brand. Any element of the marketing mix will also have its impact on other elements of your business, but the people element is one where the importance of regarding marketing as an integral part of the way you do business is crystal clear. The issues which are being faced by marketers; that when they are willing to do international marketing, they always get into a trouble because every country has different language, different people, different culture etc. It is very hard to train people according to the targeted country requirements. Your people must know the culture, language, preferences of other country in which the organization is willing to market their product. To work in another country the organization selects employees carefully. If the organization selects the employees of host country then they need to train the employee about the internal environment of the firm. If the organization decides to send their local employee to work overseas then they need to train employee about language, culture etc of that country.
4) Promotion:
INTERNATIONAL PROMOTIONS: ? Communication: Marketing communications in international markets needs to be conducted with care.
Cultural Issues and International Marketing Communications: There are a whole range of cultural issues that international marketers need to consider when communicating with target audiences in different cultures. Language will always be a challenge. One cannot use a single language for an international campaign.. Of course language choice could affect branding choices, and the names of products and services. Hidden messages and humor would be especially tricky to convey.
Personal Selling in International Marketing: Personal selling has a number of pros and cons:
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It is beneficial where wages tend to be low, since staffing costs will be comparatively low. Where there are many languages, you'll need trained sales personnel that can convey your message in specific tongues. The sales force will need to be supported. Commercial administration staff will have to take care of sales enquiries, send out product literature and samples, and make quotations - often online. You'll need to invest time and effort in recruiting, motivating, organizing and training a local sales force. Recruits will need to know about products and markets, language and culture, the location of target segments, customer buyer behavior - and that's just the beginning.
5) Product: Product Issues in International Marketing:
Products and Services: Some marketing scholars and professionals tend to draw a strong distinction between conventional products and services, emphasizing service characteristics such as heterogeneity (variation in standards among providers, frequently even among different locations of the same firm), inseperability from consumption, intangibility, and, in some cases, perishability—the idea that a service cannot generally be created during times of slack and be “stored” for use later. However, almost all products have at least some service component—e.g., a warranty, documentation, and distribution—and this service component is an integral part of the product and its positioning. Thus, it may be more useful to look at the product-service continuum as one between very low and very high levels of tangibility of the service.
Product Need Satisfaction: We often take for granted the “obvious” need that products seem to fill in our own culture; however, functions served may be very different in others —for example, while cars have a large transportation role in the U.S., they are impractical to drive in Japan, and thus cars there serve more of a role of being a status symbol or providing for individual indulgence.
Approaches to Product Introduction: Firms face a choice of alternatives in marketing their products across markets. An extreme strategy involves customization, whereby the firm introduces a unique product in each country, usually with the belief tastes differ so much between countries that it is necessary more or less to start from “scratch” in creating a product for each market. On the other extreme, standardization involves making one global product in the belief the same product can be sold across markets without significant modification—e.g., Intel microprocessors are the same regardless of the country in which they are sold. Finally, in most cases firms will resort to some kind of adaptation, whereby a common product is modified to some extent when moved between some markets— e.g., in the United States, where fuel is relatively less expensive, many cars have larger engines than their comparable models in Europe and Asia; however, much of the design is similar or identical, so some economies are achieved. Branding: While Americans seem to be comfortable with category specific brands, this is not the case for Asian consumers. American firms observed that their products would be closely examined by Japanese consumers who could not find a major brand name on the packages, which was required as a sign of quality. The International Product Life Cycle (PLC): Consumers in different countries differ in the speed with which they adopt new products, in part for economic reasons (fewer Malaysian than American consumers can afford to buy VCRs) and in part because of attitudes toward new products (pharmaceuticals upset the power afforded to traditional faith healers, for example). Thus, it may be possible, when one market has been saturated, to continue growth in another market—e.g., while somewhere between one third and
one half of American homes now contain a computer, the corresponding figures for even Europe and Japan are much lower and thus, many computer manufacturers see greater growth potential there. Note that expensive capital equipment may also cycle between countries—e.g., airlines in economically developed countries will often buy the newest and most desired aircraft and sell off older ones to their counterparts in developing countries. While in developed countries, “three part” canning machines that solder on the bottom with lead are unacceptable for health reasons, they have found a market in developing countries.
7)Place:
This is probably the most critical decision for the international marketer and the principal choice is between direct representation from the company or through some kind of commission agent or distributor. If the decision is to use direct representation from the company, then this can be very expensive in terms of costs and expenses, especially if the representative is required to live permanently in the overseas country. There is also the problem of culture and indeed in some countries it would not be possible for a ‘foreigner’ to conclude negotiations single-handedly and some kind of local intermediary would be required. Many local companies offer their services as commission agents working simply on commission for the goods they sell and leaving the commercial transactions to the supplying company and the customers they sell to. At the other extreme there are distributors who purchase and stock the products and then resell them in the overseas market in addition to providing service facilities. Place, of course, has a logistics implication and here the process is far more complicated than for domestic marketing.
Sales channels
Before a company establishes its marketing arrangement in an overseas country it should research appropriate distribution possibilities and its export marketing research will suggest the best distribution arrangement among the following alternatives:
Licensing
These arrangements can take a number of forms. A company may negotiate a licence for a foreign company to produce and market its products overseas or simply to market the goods. Alternatively, the company might grant a franchise to an overseas company that will involve the granting of rights to sell certain goods or services in defined markets using methods agreed by the supplier. The advantages offered by licensing is that it is a low risk option with low investment costs and speedy entry to the overseas market.
Use of intermediaries
A number of possibilities exist for this kind of arrangement and it is the means through which the majority of trade by small and medium sized companies is done. These are now examined separately under their respective categories:
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Export houses are export merchants who are based in the home country and who buy goods from the home producer and sell to their clients overseas. In this type of arrangement risks are reduced, but there is no control over exports. Confirming houses are similar to export houses, but here they act on behalf of overseas buyers of goods, finding sources of supply in return for a commission from the buyer. Buying offices are used by a number of large overseas companies and their specific function is to arrange initial contacts between overseas companies and prospective suppliers. They will then see through any contract that might result to its completion, right up to export documentation and final settlement if necessary. Agents are probably the most popular kind of intermediary used in international marketing. A commission agent acts on behalf of a principal (the exporting company). The agent then secures orders, and receives an agreed percentage commission on these orders.
? Distributors are the final category and they represent the most complicated end of the continuum that starts with the simple commission agent. They actually purchase goods from the manufacturer and then market these, in some cases also carrying out functions like packaging and producing promotional material plus follow-up duties like the provision of service facilities and ensuring spare parts availability.
Political and Legal Issues
The political situatation. The political relations between a firm’s country of headquarters (or other significant operations) and another one may, through no fault of the firm’s, become a major issue. For example, oil companies which invested in Iraq or Libya became victims of these countries’ misconduct that led to bans on trade. Certain issues in the political environment are particularly significant. Some countries, such as Pakistan, have relatively unstable governments, whose policies may change dramatically if new leaders come to power by democratic or other means. Some countries have little tradition of democracy, and thus it may be difficult to implement. Laws across borders. When laws of two countries differ, it may be possible in a contract to specify in advance which laws will apply, although this agreement may not be consistently enforceable. Alternatively, jurisdiction may be settled by treaties, and some governments, such as that of the U.S., often apply their laws to actions, such as anti-competitive
behavior, perpetrated outside their borders (extra-territorial application). By the doctrine known as compulsion, a firm that violates U.S. law abroad may be able to claim as a defense that it was forced to do so by the local government; such violations must, however, be compelled—that they are merely legal or accepted in the host country is not sufficient. Legal systems of the World. There are four main approaches to law across the World, with some differences within each: Common law, the system in effect in the U.S., is based on a legal tradition of precedent. Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue. Although the legislature can override judicial decisions by changing the law or passing specific standards through legislation, reasonable court decisions tend to stand by default. Code law, which is common in Europe, gives considerably shorter leeway to judges, who are charged with “matching” specific laws to situations—they cannot come up with innovative solutions when new issues such as patentability of biotechnology come up. There are also certain differences in standards. For example, in the U.S. a supplier whose factory is hit with a strike is expected to deliver on provisions of a contract, while in code law this responsibility may be nullified by such an “act of God.” Islamic law is based on the teachings of the Koran, which puts forward mandates such as a prohibition of usury, or excessive interest rates. This has led some Islamic countries to ban interest entirely; in others, it may be tolerated within reason. Islamic law is ultimately based on the need to please God, so “getting around” the law is generally not acceptable. Attorneys may be consulted about what might please God rather than what is an explicit requirements of the government. Socialist law is based on the premise that “the government is always right” and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything). Former communist countries such as those of Eastern Europe and Russia are trying to advance their legal systems to accommodate issues in a free market.
Other Issues in International Market:
1) Country Entry: Decisions and Strategies
The importance of STP: Segmentation is the cornerstone of marketing, almost all marketing efforts in some way relate to decisions on who to serve or how to implement positioning through the different parts of the marketing mix. For example, one’s distribution strategy should consider where one’s target market is most likely to buy the product, and a promotional strategy should consider the target’s media habits and which kinds of messages will be most persuasive. Although it is often tempting, when observing large markets, to try to be "all things to all people," this is a dangerous strategy because the firm may lose its distinctive appeal to its chosen segments. In terms of the "big picture," members of a segment should generally be as similar as possible to each other on a relevant dimension (e.g., preference for quality vs. low price) and as different as possible from members of other segments. That is, members should respond in similar ways to various treatments (such as discounts or high service) so that common campaigns can be aimed at segment members, but in order to justify a different treatment of other segments, their members should have their own unique response behavior. Approaches to global segmentation: There are two main approaches to global segmentation. ? ? Macro level Micro level
At the macro level, countries are seen as segments, given that country aggregate characteristics and statistics tend to differ significantly. For example, there will only be a large market for expensive pharmaceuticals in countries with certain income levels, and entry opportunities into infant clothing will be significantly greater in countries with large and growing birthrates (in countries with smaller birthrates or stable to declining birthrates, entrenched competitors will fight hard to keep the market share). At the micro level, where one looks at segments within countries. Two approaches exist, and their use often parallels the firm’s stage of international involvement. Intra-market segmentation involves segmenting each country’s markets from scratch—i.e., an American firm going into the Brazilian market would do research to segment Brazilian consumers
without incorporating knowledge of U.S. buyers. In contrast, inter-market segmentation involves the detection of segments that exist across borders. Not all segments that exist in one country will exist in another and that the sizes of the segments may differ significantly.
Positioning across markets: Firms often have to make a tradeoff between adapting their products to the unique demands of a country market or gaining benefits of standardization such as cost savings and the maintenance of a consistent global brand image. There are no easy answers here. On the one hand, McDonald’s has spent a great deal of resources to promote its global image; on the other hand, significant accommodations are made to local tastes and preferences—for example, while serving alcohol in U.S. restaurants would go against the family image of the restaurant carefully nurtured over several decades, McDonald’s has accommodated this demand of European patrons.
2) Ethical Issues In International Marketing:
Ethics studies the differences between right and wrong Due to the globalization of markets and production, ever increasing number of international marketing personnel have to deal with ethical issues in cross-cultural settings. asserted two decades ago that “as more firms move into multinational marketing, ethical issues tend to increase .Actually, international marketers are often criticized for ethical misconduct. In a cross-cultural environment, marketers are exposed to different values and ethical norms which ethical position should marketers take when acting in a foreign culture? In other words, whose ethics do we use in international marketing? , is very important to be answered. The moral question of what is right or appropriate poses many dilemmas for domestic marketers. Even within a country, ethical standards are frequently not defined or always clear. The problem of business ethics is infinitely more complex in international marketplace, because value judgments differ widely among culturally diverse groups. That which is commonly accepted as right on one country may be completely unacceptable in another. Giving business gifts of high value, for example, is generally condemned in the United States, but in many countries of the world gifts are not only accepted but also expected. After studying the literature related to international marketing, ethics have been most prominent. Major International Marketing Ethical Problems are:
Traditional Small Scale Bribery: Involves the payment of small sums of money, typically to a foreign official in exchange for him/her violating some official duty or responsibility or to speed routine government actions (grease payments, kickbacks) Large Scale Bribery: A relatively large payment intended to allow a violation of the law or designed to influence policy directly or indirectly (e.g., political contribution). Gifts/Favors/Entertainment: includes a range of items such as: lavish physical gifts, opportunities for personal travel at the company`s expense, gifts received after the completion of transaction and other extravagant expensive entertainment. Pricing: includes unfair differential pricing, questionable invoicing – where the buyer requests a written invoice showing a price other than the actual price paid, pricing to force out local competition, dumping products at prices well below that in the home country, pricing practices that are illegal in the home country but legal in host country (e.g, price fixing agreements). Products/Technology: includes products and technology that are banned for use in the home country but permitted in the host country and/or appear unsuitable or inappropriate for use by the people of the host country. Illegal/Immoral Activities in the Host Country: practices such as: polluting the environment, maintaining unsafe working conditions; product/technology copying where protection of patents, trademarks or copyrights has not been enforced and short weighting overseas shipments so as to charge a country a phantom weight. Questionable Commissions to Channel Members: unreasonably large commissions of fees paid to channel members, such as sales agents, middlemen, consultants, dealers and importers.. Involvement in Political Affairs: related to the combination of marketing activities and politics including the following: the exertion of political influence by multinationals, engaging in marketing activities when either home or host countries are at war and illegal technology transfers.
AN INTERNATIONAL MARKETING TOOLS THE INTERNET STRATEGY: For international marketing purposes, the internet is an invaluable tool to reach the global marketplace. If your business already has a website, then you are one step closer to effectively reaching the international market. The development of the internet and other new technologies is still at the very early stage .We may be even earlier on the learning curve for harnessing these technologies to create a truly unique advantage in the international marketplace. Even as businesses try to absorb the revolution of the internet, teenagers in Europe and Asia are already shaping the next revolution in mobile communication and commerce. This revolution will play out differently in different parts of the world, and will probably play out differently from what we expect, unless we understand the new hybrid consumers. The demand for customization means that the process of developing products and going-to-market has been transformed. The establishment of physical and virtual communities means that the nature of the interaction of companies with customers has changed. The creation of new channels means that companies need to manage across complex webs of marketing and distribution. The following are some reasons why the internet is your ultimate international marketing tool: ? ? ? No other medium enables you to so quickly and inexpensively communicate with, learn from, and sell to, a highly targeted, global audience. While it does not allow for physical meetings, it facilitates interactive, multi-media and almost instant communication between people from around the world. You can conduct customer research on the Internet to help modify or develop products based on the needs and demands of different buyers (i.e. buyers from different countries). With this knowledge, you can tailor different products to different buyers. You can use the Internet as your interface with customers regarding their product and service inquiries. The Internet can be used for international orders, payments and distribution.
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Therefore, the new challenge for global marketers is not just to catch up with and stay ahead of new technologies but also to learn and benefit from how consumers interact with the technologies.
References:
? ? ? ? ? ? www.consumerpsychologist.com/intl_Product.html www.business.com http://www.easy-marketing-strategies.com ‘Marketing in the new millennium’, European Journal of Marketing International Research Journal of Finance and Economics International Business (Ricky W. Griffin , Michael W. Pustay)
doc_632136203.docx
Executive Summary:
Many companies after successfully capturing the domestic market involve their selves into international marketing. A domestic market is a financial market. Its trades are aimed toward a single market. A domestic market is also referred to as domestic trading. In domestic trading, a firm faces only one set of competitive, economic, and market issues and essentially must deal with only one set of customers, although the company may have several segments in a market. When companies expands their activities outside the one country and involves into other countries boundaries called international marketing. There are set of problems which are faced by the different companies when they begin to establish their influence into international marketing. Those problems are discussed somehow into this project. The main aim of international marketing is to provide solid foundations that are useful for explanation, prediction and control of the international business activities. In this topic we have discussed the 7 P’s; Price, Place, Promotion, Product, politics, physical evidence and people. There are some other heads which are discussed also in this project. They are creating the problem for the companies to survive into international marketing. Ethical Issues in International Marketing, country entry decisions, and strategies are also discussed.
Marketing:
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large”
The Concept of Domestic, International, Global Marketing:
Domestic Marketing:
The focus of domestic marketing is primarily marketing carried out within a defined national or geographic boundary where the marketer is relatively free to plan, implement and control marketing plans, including decisions on the marketing mix, within a relatively known and easily researchable marketing environment
International Marketing:
International marketing takes place when the marketer explores markets outside the national boundaries of the domestic market. This often begins with direct or indirect exporting to a neighboring country. The focus is to find markets which have needs similar to those in the domestic market and can be satisfied with similar products and services.
Global Marketing:
The concept of global marketing begins with the notion that the world has no centre. The ‘borderless’ global marketplace encompasses the participation of all countries—not only the industrialized and the newly industrialized nations, but also the emergent economies such as China and India—in international competition. This new ‘market internationalism’ is coupled with more integrative global structures, including free trade areas, common markets and multilateral agreements (e.g. World Trade Organization) which link international markets more closely.
Why International Marketing? There is a trend toward a global economy. ? ? ? ? No longer enough to look at domestic market Markets across the world being sought after by more competitors Explosion of international trade Global linkages become important
Comparing Domestic and International Marketing:
Similarity:
? Both carry out transactions that meet the needs of individuals and organizations
Differences: ? ? International markets have greater growth potential Some tasks associated with international marketing not included (or less intense ) than in domestic marketing (e.g., cultural research, political factors, exchange rates, trade laws, long distance distribution.)
7 p’s in international marketing:
? ? ? ? ? ? ? Price Place Promotion Product Physical Evidence Politics People
1) Price:
Drivers in Foreign Market Pricing: Many different factors come into play when setting prices for the same product in different countries. Major influencers are labeled the 4 C’s: 1. 2. 3. 4. Company (costs, company goals) Customers (price sensitivity, segments, consumer preferences) Competition (market structure and intensity of competition) Channels (of distribution)
International Pricing Issues:
?
Export Price Escalation: Exporting products requires more steps and higher risks than selling products domestically. To make up for incremental costs, such as shipping, insurance and tariffs, foreign retail prices may often become much higher than prices in the home country of where a product is produced. The most important questions to ask your self as a marketer are: will my customers pay an inflated price for our products/services? Will the price of our product make allow us to compete successfully with other firms? If the answers to these questions are negative, then there are 2 approaches to dealing with price escalation. The first way is find a way to
cut the export price, and the second is to position the product as a exclusive or premium brand.
?
Inflation: Intense and unrestrained inflation rates in countries can become a huge obstacle for multinational corporations. In places where inflation rates are rampant, setting prices and controlling costs are imperative, often involving complete dedication by marketing and financial divisions of an organization. There are many alternatives to protect against the affects of inflation. Common plans include modifying components of products or packaging materials, getting raw materials from low-cost suppliers, shortening credit terms, including escalator clauses in longterm contracts (used in many b2b situations), quoting prices in stable currencies and pursuing rapid inventory turnovers. When governments impose price controls, which may accompany wage freezes, companies must also adapt several plans of action. Often in these circumstances, businesses will alter their product lines to minimize negative affects from price controls, change defined market segments, launch new products, spark negotiations with the government, and try to better predict when pricing controls may occur. In extreme cases, companies may choose to exit foreign markets when inflation or pricing controls become too costly to the company. If, however, a company can better manage these challenges, they will gain a long-term competitive advantage by creating higher barriers to entry for potential new competitors.
?
Currency Movements: Exchange rates represent how much one form of currency is worth in terms of another. Political and economic conditions cause exchange rates to constantly fluctuate. With these rates so unstable, setting a price strategy that can combat these changes can be difficult. The two main pricing issues for managers are how much of the exchange rate gain or loss should be transferred to customers (the passthrough issue), and deciding what currency price quotes are given in.
?
Transfer Pricing: Another challenge facing organizations operating globally is how they handle sales transactions between related parts of the same company. Transfer pricing are the prices charged for transactions involving the trade of raw materials, components, finished goods, or services. Transfer pricing decisions involve the need to balance the interests of a variety of stakeholders including: the parent company, local country
managers, host governments, domestic governments, and joint-venture partners. Some of the factors that influence transfer pricing decisions are the following: tax regimes, local market conditions, market imperfections, joint venture partners and the morale of local country managers. There are two major transfer pricing strategies, market-based transfer pricing and nonmarket-based pricing.
?
Anti-dumping Regulations: Dumping occurs when imports are sold at an unfair price. Recently the removal of trade barriers (tariffs, quotas) has caused countries to switch to non-tariff barriers such as anti-dumping laws in order to protect their local industries. It is important for multinational corporations to take into account anti-dumping laws when they determine their global pricing policy. If firms price too aggressively, this may cause anti-dumping measures that will hurt their competitive position. It is important to monitor how anti-dumping laws affect similar companies in your industry.
?
Price Coordination: The last issue that affects pricing in the global environment is price coordination. Price coordination is the relationship that exists between prices charged in different countries. Although the laws of economics indicate that prices should vary across region so that overall profits are maximized, reality is just not that simple. In the majority of instances, markets cannot be separated perfectly, and too much price differentiation creates gray markets. So, when deciding on how to coordinate your pricing strategy, consider these factors:
? ? ? ? ? ? ?
The nature of your customers The amount of product differentiation Nature of your distribution channels Nature of you competition Market Integration Characteristics if your internal organization Government regulations
2) Physical Evidence:
Where is the service being delivered? Physical Evidence is the element of the service mix which allows the consumer again to make judgments on the organization. If you walk into a restaurant your expectations are of a clean, friendly environment. On an aircraft if you travel first class you expect enough room to be able to lie down! Physical evidence is an essential ingredient of the service mix, consumers will make perceptions based on their sight of the service provision which will have an impact on the organizations’ perceptual plan of the service. When you sell tangible goods, you can offer your customer the chance to ‘try before they buy’, or at least see, touch or smell. With services, unless you offer a free trial, your customer will often be buying on trust. And to help them do so you need to provide as much evidence of the quality you will be providing as possible. So physical evidence refers to all the tangible, visible touch points that your customer will encounter before they buy, from your reception area and signage, to your staff’s clothing and they images you include in you corporate brochure. People have different perception in different countries. Organizations must know the preferences and mindsets of the targeted customers in the targeted country. Organizations have same kind of physical evidence in different countries but in one country they are successful but in another country they are extreme failure because the customers have different perceptions in both countries.
3) People:
An essential ingredient to any service provision is the use of appropriate staff and people. Recruiting the right staff and training them appropriately in the delivery of their service is essential if the organization wants to obtain a form of competitive advantage. Consumers make judgments and deliver perceptions of the service based on the employees they interact with. Staff should have the appropriate interpersonal skills, aptitude, and service knowledge to provide the service that consumers are paying for. Many British organizations aim to apply for the Investors In People accreditation, which tells consumers that staff are taken care off by the company and they are trained to certain standards.
The impact that your people can have on your marketing cannot be underestimated. At its most obvious, this element covers your front line sales and customer service staff who will have a direct impact on how your product is perceived. You need to consider the knowledge and skills of your staff; their motivation and Investment in supporting your brand. Any element of the marketing mix will also have its impact on other elements of your business, but the people element is one where the importance of regarding marketing as an integral part of the way you do business is crystal clear. The issues which are being faced by marketers; that when they are willing to do international marketing, they always get into a trouble because every country has different language, different people, different culture etc. It is very hard to train people according to the targeted country requirements. Your people must know the culture, language, preferences of other country in which the organization is willing to market their product. To work in another country the organization selects employees carefully. If the organization selects the employees of host country then they need to train the employee about the internal environment of the firm. If the organization decides to send their local employee to work overseas then they need to train employee about language, culture etc of that country.
4) Promotion:
INTERNATIONAL PROMOTIONS: ? Communication: Marketing communications in international markets needs to be conducted with care.
Cultural Issues and International Marketing Communications: There are a whole range of cultural issues that international marketers need to consider when communicating with target audiences in different cultures. Language will always be a challenge. One cannot use a single language for an international campaign.. Of course language choice could affect branding choices, and the names of products and services. Hidden messages and humor would be especially tricky to convey.
Personal Selling in International Marketing: Personal selling has a number of pros and cons:
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It is beneficial where wages tend to be low, since staffing costs will be comparatively low. Where there are many languages, you'll need trained sales personnel that can convey your message in specific tongues. The sales force will need to be supported. Commercial administration staff will have to take care of sales enquiries, send out product literature and samples, and make quotations - often online. You'll need to invest time and effort in recruiting, motivating, organizing and training a local sales force. Recruits will need to know about products and markets, language and culture, the location of target segments, customer buyer behavior - and that's just the beginning.
5) Product: Product Issues in International Marketing:
Products and Services: Some marketing scholars and professionals tend to draw a strong distinction between conventional products and services, emphasizing service characteristics such as heterogeneity (variation in standards among providers, frequently even among different locations of the same firm), inseperability from consumption, intangibility, and, in some cases, perishability—the idea that a service cannot generally be created during times of slack and be “stored” for use later. However, almost all products have at least some service component—e.g., a warranty, documentation, and distribution—and this service component is an integral part of the product and its positioning. Thus, it may be more useful to look at the product-service continuum as one between very low and very high levels of tangibility of the service.
Product Need Satisfaction: We often take for granted the “obvious” need that products seem to fill in our own culture; however, functions served may be very different in others —for example, while cars have a large transportation role in the U.S., they are impractical to drive in Japan, and thus cars there serve more of a role of being a status symbol or providing for individual indulgence.
Approaches to Product Introduction: Firms face a choice of alternatives in marketing their products across markets. An extreme strategy involves customization, whereby the firm introduces a unique product in each country, usually with the belief tastes differ so much between countries that it is necessary more or less to start from “scratch” in creating a product for each market. On the other extreme, standardization involves making one global product in the belief the same product can be sold across markets without significant modification—e.g., Intel microprocessors are the same regardless of the country in which they are sold. Finally, in most cases firms will resort to some kind of adaptation, whereby a common product is modified to some extent when moved between some markets— e.g., in the United States, where fuel is relatively less expensive, many cars have larger engines than their comparable models in Europe and Asia; however, much of the design is similar or identical, so some economies are achieved. Branding: While Americans seem to be comfortable with category specific brands, this is not the case for Asian consumers. American firms observed that their products would be closely examined by Japanese consumers who could not find a major brand name on the packages, which was required as a sign of quality. The International Product Life Cycle (PLC): Consumers in different countries differ in the speed with which they adopt new products, in part for economic reasons (fewer Malaysian than American consumers can afford to buy VCRs) and in part because of attitudes toward new products (pharmaceuticals upset the power afforded to traditional faith healers, for example). Thus, it may be possible, when one market has been saturated, to continue growth in another market—e.g., while somewhere between one third and
one half of American homes now contain a computer, the corresponding figures for even Europe and Japan are much lower and thus, many computer manufacturers see greater growth potential there. Note that expensive capital equipment may also cycle between countries—e.g., airlines in economically developed countries will often buy the newest and most desired aircraft and sell off older ones to their counterparts in developing countries. While in developed countries, “three part” canning machines that solder on the bottom with lead are unacceptable for health reasons, they have found a market in developing countries.
7)Place:
This is probably the most critical decision for the international marketer and the principal choice is between direct representation from the company or through some kind of commission agent or distributor. If the decision is to use direct representation from the company, then this can be very expensive in terms of costs and expenses, especially if the representative is required to live permanently in the overseas country. There is also the problem of culture and indeed in some countries it would not be possible for a ‘foreigner’ to conclude negotiations single-handedly and some kind of local intermediary would be required. Many local companies offer their services as commission agents working simply on commission for the goods they sell and leaving the commercial transactions to the supplying company and the customers they sell to. At the other extreme there are distributors who purchase and stock the products and then resell them in the overseas market in addition to providing service facilities. Place, of course, has a logistics implication and here the process is far more complicated than for domestic marketing.
Sales channels
Before a company establishes its marketing arrangement in an overseas country it should research appropriate distribution possibilities and its export marketing research will suggest the best distribution arrangement among the following alternatives:
Licensing
These arrangements can take a number of forms. A company may negotiate a licence for a foreign company to produce and market its products overseas or simply to market the goods. Alternatively, the company might grant a franchise to an overseas company that will involve the granting of rights to sell certain goods or services in defined markets using methods agreed by the supplier. The advantages offered by licensing is that it is a low risk option with low investment costs and speedy entry to the overseas market.
Use of intermediaries
A number of possibilities exist for this kind of arrangement and it is the means through which the majority of trade by small and medium sized companies is done. These are now examined separately under their respective categories:
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Export houses are export merchants who are based in the home country and who buy goods from the home producer and sell to their clients overseas. In this type of arrangement risks are reduced, but there is no control over exports. Confirming houses are similar to export houses, but here they act on behalf of overseas buyers of goods, finding sources of supply in return for a commission from the buyer. Buying offices are used by a number of large overseas companies and their specific function is to arrange initial contacts between overseas companies and prospective suppliers. They will then see through any contract that might result to its completion, right up to export documentation and final settlement if necessary. Agents are probably the most popular kind of intermediary used in international marketing. A commission agent acts on behalf of a principal (the exporting company). The agent then secures orders, and receives an agreed percentage commission on these orders.
? Distributors are the final category and they represent the most complicated end of the continuum that starts with the simple commission agent. They actually purchase goods from the manufacturer and then market these, in some cases also carrying out functions like packaging and producing promotional material plus follow-up duties like the provision of service facilities and ensuring spare parts availability.
Political and Legal Issues
The political situatation. The political relations between a firm’s country of headquarters (or other significant operations) and another one may, through no fault of the firm’s, become a major issue. For example, oil companies which invested in Iraq or Libya became victims of these countries’ misconduct that led to bans on trade. Certain issues in the political environment are particularly significant. Some countries, such as Pakistan, have relatively unstable governments, whose policies may change dramatically if new leaders come to power by democratic or other means. Some countries have little tradition of democracy, and thus it may be difficult to implement. Laws across borders. When laws of two countries differ, it may be possible in a contract to specify in advance which laws will apply, although this agreement may not be consistently enforceable. Alternatively, jurisdiction may be settled by treaties, and some governments, such as that of the U.S., often apply their laws to actions, such as anti-competitive
behavior, perpetrated outside their borders (extra-territorial application). By the doctrine known as compulsion, a firm that violates U.S. law abroad may be able to claim as a defense that it was forced to do so by the local government; such violations must, however, be compelled—that they are merely legal or accepted in the host country is not sufficient. Legal systems of the World. There are four main approaches to law across the World, with some differences within each: Common law, the system in effect in the U.S., is based on a legal tradition of precedent. Each case that raises new issues is considered on its own merits, and then becomes a precedent for future decisions on that same issue. Although the legislature can override judicial decisions by changing the law or passing specific standards through legislation, reasonable court decisions tend to stand by default. Code law, which is common in Europe, gives considerably shorter leeway to judges, who are charged with “matching” specific laws to situations—they cannot come up with innovative solutions when new issues such as patentability of biotechnology come up. There are also certain differences in standards. For example, in the U.S. a supplier whose factory is hit with a strike is expected to deliver on provisions of a contract, while in code law this responsibility may be nullified by such an “act of God.” Islamic law is based on the teachings of the Koran, which puts forward mandates such as a prohibition of usury, or excessive interest rates. This has led some Islamic countries to ban interest entirely; in others, it may be tolerated within reason. Islamic law is ultimately based on the need to please God, so “getting around” the law is generally not acceptable. Attorneys may be consulted about what might please God rather than what is an explicit requirements of the government. Socialist law is based on the premise that “the government is always right” and typically has not developed a sophisticated framework of contracts (you do what the governments tells you to do) or intellectual property protection (royalties are unwarranted since the government ultimately owns everything). Former communist countries such as those of Eastern Europe and Russia are trying to advance their legal systems to accommodate issues in a free market.
Other Issues in International Market:
1) Country Entry: Decisions and Strategies
The importance of STP: Segmentation is the cornerstone of marketing, almost all marketing efforts in some way relate to decisions on who to serve or how to implement positioning through the different parts of the marketing mix. For example, one’s distribution strategy should consider where one’s target market is most likely to buy the product, and a promotional strategy should consider the target’s media habits and which kinds of messages will be most persuasive. Although it is often tempting, when observing large markets, to try to be "all things to all people," this is a dangerous strategy because the firm may lose its distinctive appeal to its chosen segments. In terms of the "big picture," members of a segment should generally be as similar as possible to each other on a relevant dimension (e.g., preference for quality vs. low price) and as different as possible from members of other segments. That is, members should respond in similar ways to various treatments (such as discounts or high service) so that common campaigns can be aimed at segment members, but in order to justify a different treatment of other segments, their members should have their own unique response behavior. Approaches to global segmentation: There are two main approaches to global segmentation. ? ? Macro level Micro level
At the macro level, countries are seen as segments, given that country aggregate characteristics and statistics tend to differ significantly. For example, there will only be a large market for expensive pharmaceuticals in countries with certain income levels, and entry opportunities into infant clothing will be significantly greater in countries with large and growing birthrates (in countries with smaller birthrates or stable to declining birthrates, entrenched competitors will fight hard to keep the market share). At the micro level, where one looks at segments within countries. Two approaches exist, and their use often parallels the firm’s stage of international involvement. Intra-market segmentation involves segmenting each country’s markets from scratch—i.e., an American firm going into the Brazilian market would do research to segment Brazilian consumers
without incorporating knowledge of U.S. buyers. In contrast, inter-market segmentation involves the detection of segments that exist across borders. Not all segments that exist in one country will exist in another and that the sizes of the segments may differ significantly.
Positioning across markets: Firms often have to make a tradeoff between adapting their products to the unique demands of a country market or gaining benefits of standardization such as cost savings and the maintenance of a consistent global brand image. There are no easy answers here. On the one hand, McDonald’s has spent a great deal of resources to promote its global image; on the other hand, significant accommodations are made to local tastes and preferences—for example, while serving alcohol in U.S. restaurants would go against the family image of the restaurant carefully nurtured over several decades, McDonald’s has accommodated this demand of European patrons.
2) Ethical Issues In International Marketing:
Ethics studies the differences between right and wrong Due to the globalization of markets and production, ever increasing number of international marketing personnel have to deal with ethical issues in cross-cultural settings. asserted two decades ago that “as more firms move into multinational marketing, ethical issues tend to increase .Actually, international marketers are often criticized for ethical misconduct. In a cross-cultural environment, marketers are exposed to different values and ethical norms which ethical position should marketers take when acting in a foreign culture? In other words, whose ethics do we use in international marketing? , is very important to be answered. The moral question of what is right or appropriate poses many dilemmas for domestic marketers. Even within a country, ethical standards are frequently not defined or always clear. The problem of business ethics is infinitely more complex in international marketplace, because value judgments differ widely among culturally diverse groups. That which is commonly accepted as right on one country may be completely unacceptable in another. Giving business gifts of high value, for example, is generally condemned in the United States, but in many countries of the world gifts are not only accepted but also expected. After studying the literature related to international marketing, ethics have been most prominent. Major International Marketing Ethical Problems are:
Traditional Small Scale Bribery: Involves the payment of small sums of money, typically to a foreign official in exchange for him/her violating some official duty or responsibility or to speed routine government actions (grease payments, kickbacks) Large Scale Bribery: A relatively large payment intended to allow a violation of the law or designed to influence policy directly or indirectly (e.g., political contribution). Gifts/Favors/Entertainment: includes a range of items such as: lavish physical gifts, opportunities for personal travel at the company`s expense, gifts received after the completion of transaction and other extravagant expensive entertainment. Pricing: includes unfair differential pricing, questionable invoicing – where the buyer requests a written invoice showing a price other than the actual price paid, pricing to force out local competition, dumping products at prices well below that in the home country, pricing practices that are illegal in the home country but legal in host country (e.g, price fixing agreements). Products/Technology: includes products and technology that are banned for use in the home country but permitted in the host country and/or appear unsuitable or inappropriate for use by the people of the host country. Illegal/Immoral Activities in the Host Country: practices such as: polluting the environment, maintaining unsafe working conditions; product/technology copying where protection of patents, trademarks or copyrights has not been enforced and short weighting overseas shipments so as to charge a country a phantom weight. Questionable Commissions to Channel Members: unreasonably large commissions of fees paid to channel members, such as sales agents, middlemen, consultants, dealers and importers.. Involvement in Political Affairs: related to the combination of marketing activities and politics including the following: the exertion of political influence by multinationals, engaging in marketing activities when either home or host countries are at war and illegal technology transfers.
AN INTERNATIONAL MARKETING TOOLS THE INTERNET STRATEGY: For international marketing purposes, the internet is an invaluable tool to reach the global marketplace. If your business already has a website, then you are one step closer to effectively reaching the international market. The development of the internet and other new technologies is still at the very early stage .We may be even earlier on the learning curve for harnessing these technologies to create a truly unique advantage in the international marketplace. Even as businesses try to absorb the revolution of the internet, teenagers in Europe and Asia are already shaping the next revolution in mobile communication and commerce. This revolution will play out differently in different parts of the world, and will probably play out differently from what we expect, unless we understand the new hybrid consumers. The demand for customization means that the process of developing products and going-to-market has been transformed. The establishment of physical and virtual communities means that the nature of the interaction of companies with customers has changed. The creation of new channels means that companies need to manage across complex webs of marketing and distribution. The following are some reasons why the internet is your ultimate international marketing tool: ? ? ? No other medium enables you to so quickly and inexpensively communicate with, learn from, and sell to, a highly targeted, global audience. While it does not allow for physical meetings, it facilitates interactive, multi-media and almost instant communication between people from around the world. You can conduct customer research on the Internet to help modify or develop products based on the needs and demands of different buyers (i.e. buyers from different countries). With this knowledge, you can tailor different products to different buyers. You can use the Internet as your interface with customers regarding their product and service inquiries. The Internet can be used for international orders, payments and distribution.
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Therefore, the new challenge for global marketers is not just to catch up with and stay ahead of new technologies but also to learn and benefit from how consumers interact with the technologies.
References:
? ? ? ? ? ? www.consumerpsychologist.com/intl_Product.html www.business.com http://www.easy-marketing-strategies.com ‘Marketing in the new millennium’, European Journal of Marketing International Research Journal of Finance and Economics International Business (Ricky W. Griffin , Michael W. Pustay)
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