International Marketing

International marketing takes place when a business directs its products and services toward consumers in a country other than the one in which it is located. While the overall concept of marketing is the same worldwide, the environment within which the marketing plan is implemented can be dramatically different from region to region. Common marketing concerns—such as input costs, price, advertising, and distribution—are likely to differ dramatically in the countries in which a firm elects to market its goods or services.

Business consultants thus contend that the key to successful international marketing for any business—whether a multinational corporation or a small entrepreneurial venture—is the ability to adapt, manage, and coordinate an intelligent plan in an unfamiliar (and sometimes unstable) foreign environment.

Businesses choose to explore foreign markets for a host of sound reasons. In some instances, firms initiate foreign market exploration in response to unsolicited orders from consumers in those markets. Many others, meanwhile, seek to establish a business to absorb overhead costs at home, diversify their corporate holdings, take advantage of domestic or international political or economic changes, or tap into new or growing markets. The overriding factor spurring international marketing efforts is, of course, to make money, and as the systems that comprise the global economy become ever more interrelated, many companies have recognized that international opportunities can ultimately
spell the difference between success and failure.

While companies choosing to market internationally do not share an overall profile, they seem to have two specific characteristics in common. First, the products that they market abroad, usually patented, are believed to have high earnings potential in foreign markets. Second, the management of companies marketing internationally must be ready to make a commitment to these markets. This entails far more than simply throwing money at a new exporting venture. Indeed, a business that is genuinely committed to establishing an international presence must be willing to educate itself thoroughly on the particular countries it chooses to enter through a course of market research.

DEVELOPING FOREIGN MARKETS

There are several general ways to develop international markets. They include: exporting products and services from the country of origin; entering into joint venture arrangements; licensing patent rights, trademark rights, etc. to companies abroad; franchising; contract manufacturing; and establishing subsidiaries in foreign countries. A company can commit itself to one or more of the above arrangements at any time during its efforts to develop foreign markets. Each method has its own distinct advantages and disadvantages.

New companies, or those that are taking their first steps into the realm of international commerce, often begin to explore international markets through exporting (though they often struggle with financing). Achieving export sales can be accomplished in numerous ways. Sales can be made directly, via mail order, or through offices established abroad. Companies can also undertake indirect exporting, which involves selling to domestic intermediaries who locate the specific markets for the firm’s products or services. Many companies are able to establish a healthy presence in foreign markets without ever expanding beyond exporting practices.

International licensing occurs when a country grants the right to manufacture and distribute a product or service under the licenser’s trade name in a specified country or market. Although large companies often grant licenses, this practice is also frequently used by small and medium-sized companies. Licensing is often viewed as a supplement to manufacturing and exporting activities, and in some cases may be the least profitable way of entering a market. Nonetheless, it is sometimes an attractive option when an exporter is short of money, when foreign government import restrictions forbid other ways of entering a market, or when a host country is apprehensive about foreign ownership. A method similar to licensing, called franchising, is also increasingly common.

A fourth way to enter a foreign market is through a joint venture arrangement, whereby a company trying to enter a foreign market forms a partnership with one or more companies already established in the host country. Often, the local firm provides expertise on the intended market, while the exporting firm tends to general management and marketing tasks. Use of this method of international investing has accelerated dramatically in the past 25 years. The biggest incentive to entering this type of arrangement is that it reduces the company’s risk by the amount of investment made by the host-country partner. A joint venture arrangement allows firms with limited capital to expand into international arenas, and provides the marketer with access to its partner’s distribution channels. Contract manufacturing, meanwhile, is an arrangement wherein an exporter turns over the production reins to another company, but maintains control of the marketing process.

A company can also expand abroad by setting up its own manufacturing operations in a foreign country, but capital requirements associated with this method generally preclude small companies from pursuing this option. Large corporations are far more likely to embrace this alternative, which often allows them to avoid high import taxes, reduce transportation costs, utilize cheap labor, and gain increased access to raw materials.

MARKETING STRATEGIES

International market efforts take many forms. Companies that conduct international business in several nations often favor what is known as an "individualized" marketing strategy. This approach, which also is often utilized by smaller businesses involved in only one or two foreign markets, typically involves a comprehensive market research component and a significant effort to tailor a product or service to each individual target market. Under this approach, political, social, and economic factors are important components of the marketing process.

Another strategy that is sometimes used is commonly called the Global Marketing Strategy (GMS). This controversial approach largely ignores differences between nations. Instead, its proponents claim that while a business that sells its products in the same way in every market may suffer losses in isolated instances, it will reap compensatory savings elsewhere. "GMS is based on the notion that consumers around the world are growing more and more similar and that a standardized product and marketing mix can achieve enormous economies, especially in advertising, packing, and distribution because they would not be changed," summarized Alexander Hiam and Charles D. Schewe in The Portable MBA in Marketing.

Furthermore, they state, "Proponents of this strategy believe that modern technology has created a commonalty among people around the world. Global travel and communication have exposed more and more people to products and services that they have heard about, actually seen, or even experienced—and now want. Although differences exist in consumer preferences, shopping behavior, cultural institutions, and promotional media, those who support GMS believe that these preferences and practices can and will change to be more similar." Many companies have embraced a hybrid of the GMS and individualized marketing strategies.

Small businesses are discouraged from relying on the GMS strategy. Analysts note that whereas large multinational companies can afford to take a hit on a poorly marketed product on occasion, most small businesses are not so strong.
For small enterprises, then, market research becomes an essential component of operations. After all, a single misstep in the international market can cripple a young company, or at least make it apprehensive about future forays.

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