International Marketing

International marketing is the process of marketing outside and across national borders and is a key component of any international business activity. The term, international marketing, is often used interchangeably with global marketing. Due to the improvements in communication and transportation since the 1940s and 1950s, consumers worldwide have been able to learn about and purchase goods and services available beyond their national borders.

Key Terms:

• Marketing: The process of developing, promoting, and distributing products in order to satisfy customers’ needs and wants.   

• International Marketing: Marketing outside and across national borders.

• Marketing Plan: The plan that outlines and directs a company’s marketing efforts.

• Marketing Mix: The combination of decisions involving the 4 P’s; product, price, promotion and place.

• Products: Both goods and services.

• Goods: Items you can touch or hold in your hand, tangible items.

• Services: Intangible products, usually a series of tasks performed for a customer.

International Involvement

There are a number of reasons businesses turn towards the international market to sell their products. The most common include:

•  The home market is saturated with little room for growth.

• Overseas competition may be less than home competition.

• The organization may have excess manufacturing capacity.

• The organization may have a comparative advantage for a product, skill or technology.

• Financial incentives.

Generally speaking, the business which turns toward the international market because it wishes to expand on an already successful business venture will do better than the business which does so because they have not been successful in the domestic market and wish to try something different. Success or failure at home can be an indicator of how a business is likely to do elsewhere.

Some businesses find themselves involved in international business not because of rational, but rather because of a series of chance decisions. This seems to occur in the following stages:

1. Business has no interest in international trade, will not fill unsolicited foreign orders.
2. Fills unsolicited orders but does not seek to export actively.
3. Active exporting considered.
4. Experimental activity in some psychologically close country.
5. Company becomes established in that market.
6. Possibilities of other psychologically more distant countries are considered.

Many businesses, although not all, are finding success with international marketing whether they became involved in it by chance, or by making a rational decision to do so in an effort to create a more successful business.

Once a business has made the decision to become involved in international business and marketing, it faces the critical decision of determining the degree of involvement that this portion of its business will encompass. This decision will directly affect the amount of resources which are allocated to marketing, financial, operational and human resource functions. Different levels of involvement include:

• Active exporting: The organization allocates some resources specifically to its exports and commits to finding foreign business.

• Joint venture: These vary from exclusive franchise agreements, a license to manufacture, selling agents, and partnerships where two organizations share production and marketing cost on a partnership basis.

• Foreign subsidiaries: This involves a further commitment by an organization through its physical presence in the foreign market.

• Foreign production & marketing: This is the ultimate level of international commitment. Most international business activities are carried out in foreign markets, except for some centralized functions, such as R & D, corporate structuring, etc.

• Freight Forwarder: Marketers involve freight forwarders in the distribution process. They are an intermediary who specializes in moving goods from the exporter to the required destination. They often combine shipments from various exporters in order to create a larger shipment and reduce the freight rates.

The level of involvement will vary from business to business depending on an organization’s resources, international expertise and business goals. Research on past foreign investment has found a strong association between a gradual involvement in international business and marketing, and success. Businesses are generally better off if they refrain from attacking too many markets at once. The danger lies in spreading resources and effort too thinly to be successful. When a business involves itself gradually it has more time to develop expertise while taking less risk. The level of risk is a factor of the amount of resources allocated to a specific task and the amount of expertise that the entity has to accomplish that task.

Once a company has become involved, or made the decision to become involved, in the international marketplace, it must decide how to market its product or products. Although the environment in which international marketing takes place and the level of control which can be exercised is different from domestic marketing, the basic principles and functions of marketing remain the same, regardless of the particular market an organization is working with. As you will recall, marketing is the process of developing, promoting, and distributing products in order to satisfy customers’ needs and wants.

There are nine basic marketing functions, they are:

1. Research and information management

2. Product planning

3. Financing

4. Purchasing of goods and services for a business operation

5. Pricing

6. Promotion

7. Selling

8. Distribution

9. Risk Management

Each of these functions needs to be researched and evaluated in order to achieve success when marketing to the international marketplace.

Global Marketing Mix

The marketing mix is the combination of decisions involving product, price, place and promotion. Marketing mix planning and decision making is important regardless of how a company decides to operate in the global market. There are two viewpoints regarding marketing planning. The first is a localized approach and views marketing as a local issue and focuses on the differences among countries in terms of customers, distribution, and marketing techniques. The second is a standardized approach in which marketing is considered a process which can be transferred across borders. The most effective way to develop a successful marketing plan is to use some of both views in which local issues are considered and, at the same time, some standardization in a company’s marketing exist.

Product selection and design is the first decision to be considered in the marketing mix. Culture, language, government, taste, preference and need are often unique to different nations. These differences put pressure on marketers to adapt to each unique environment. Some global (standardized) products do exist, such as gasoline, but usually international (adapted) products are what is being marketed. There is little doubt that most organizations would prefer to market a single product or service, however, given the many different market environments, this would likely result in a failed marketing effort. In addition to the actual product, product’s packaging needs to be tailored to individual markets as well. Issues effecting product packaging include; language, level of literacy, transportation and distribution systems, and legal requirements. These vary widely among different nations and must be considered for each market. Brands and trade marks need evaluation as well to see if they integrate well into a particular market.  

Pricing policy is also influenced by different international markets. This is due to a number of factors which will vary from market to market. Those factors include tariffs, quotas, inflation, average income level, average discretionary income, monetary rates of exchange, company goals, etc.  Because of these variables, it is not possible to have a common price for all markets. It is, however, important to maintain a uniform pricing strategy which places the product in the same relative price position in each market. Often times price is determined by a cost-plus approach. This means that the price of the product is determined by first determining the cost of the product and then adding some level of profit to it.

There have been examples of companies selling products in foreign markets at below cost. The usual reason for this is to build market share or because the demand for a product is no longer there and this is the only way to sell it. The practice of selling products below cost is called dumping and is usually detrimental to countries trying to negotiate open trade policies.

Place planning in world markets presents a major challenge within international markets. This process involves making decisions on how and where a product will be distributed. The availability and quality of distribution channels varies widely amongst countries and thus, unique methods of distribution need to be employed.

Promotion methods are very dependent on a market’s culture. Many of the same issues raised above effect promotional policy. Language barriers will limit the scope of any international campaign. Lower literacy rates and education levels will limit the effectiveness of print media. Where income levels are low, television ownership will also be low, thus limiting what can be done with that form of media. It has been found that when TV ownership is low, movie (motion picture) advertising can be a very effective alternative method of advertising. The most effective means of advertising to low income markets is radio. An audience does not need much money or education to listen to and understand what a radio is broadcasting. Media availability varies among nations, as well as the availability of qualified advertising agencies. A firm must become familiar with these variances and a market’s culture in order to promote a product effectively. Only when markets have similar cultures and buying motives can a firm use the same promotional themes. Successful international marketers understand that what works in one market may not work in another market, and evaluate each based on its own set of variables. 

The media available to advertisers can be categorized into either international media or foreign media, depending on the audience they serve. International media refers to media which serves several nations, usually without change. In the past, international media has been limited to newspapers and magazines. Publishers like Time and McGraw-Hill circulate international editions of their magazines abroad. Newspapers such as The Wall Street Journal and the International Herald Tribune are also read world wide. In addition to newspapers and magazines, television is also becoming a form of international media, one example is the broadcast of CNN around the world. 

Foreign Media is considered to be the local media within any individual country. This is often the most effective method of targeting an audience in a particular country. 

Although every country has some form of communications media, it is not always available for commercial use, especially television and radio, and if they are available, there are limitations on what and how marketers can advertise. 

Personal selling is one of the most effective ways to promote a product in other countries. This sales approach involves a salesperson making an oral presentation to a potential buyer. Many of the restrictions placed on other kinds of promotion are not a factor in personal selling. An advantage of personal selling in foreign markets is the lower cost of labor often associated with them, allowing for a larger sales force. In addition, by hiring local salespeople a company can easily overcome language barriers that may exist and at the same time be in touch with the local culture. 

The main attraction to this form of promotion lies in its flexibility and ability to be individualized. Some disadvantaged do exist with personal selling. The fact that a salesperson can only help one person at a time may result in needing a larger sales force. Also, personal selling requires a high degree of knowledge about both the product being sold and the sales process in order to ensure continued sales and goodwill. This requires additional training which adds to the cost of operation.

An underlying factor which will influence the marketing mix in other nations is technology. The United States is on the cutting edge of this issue, but this is not the case in many foreign markets. The level of technology in a market place will have an impact on many marketing functions. One of the obvious impacts would be on product planning. For example, although marketing a new home computer system may be successful in the United States, it would be a failure in a country where most of the people do not have electricity in their homes.

Technology will also influence the type of promotion used in a marketplace. For example, radio and television ads will only work if the target audience has radios and televisions. The internet is evolving rapidly and many marketers are turning towards its use as an inexpensive means of promoting its products. The relative low cost and ability to tap into a very large audience is what makes use of the internet so appealing. However, it must first be determined if the target audience actually uses it before it could be determined if it would be an effective marketing tool. Technology will also directly impact channels of distribution, how a company moves its product to market. Issues include, availability and condition of roads, rail systems, airports, seaports and other infrastructure.

The development and advancements of computers, CD-ROM technology and the Internet are leading to new media options. Newspapers and magazines are rushing to make alliances with cable, regional telephone, and online companies to get a foothold in this new and emerging interactive information market. In some sense this industry is still in its developmental stage and its exact effectiveness and impact, although not completely known, will certainly be substantial.

Successful international marketing requires research and evaluation of a market’s social, cultural, legal, technological and geographical factors. This research can then be used to make decisions regarding the marketing mix and development of a marketing plan. 

Consumer and Commercial Markets

Markets can be divided into two general categories, the consumer market and the commercial market. Consumer markets consist of customers who purchase goods or services to meet their personal needs and wants. These people are considered to be the final/ultimate consumer. Commercial markets consist of consumers who purchase products that will allow them to produce or provide a service or product. Commercial markets are also known as business markets. Both markets require the marketer to understand the decision-making process of buyers and the factors which influence that process. 

Most people can directly relate to the consumer market because we all play the part of a consumer. The items which influence the consumer market fall into three main categories which then contain several variables. They are:

One of the challenges of marketing consumer products to other countries is the variation you find in the variables listed above. Try and think of some examples that you may know of that would be very different from where you live.

Commercial markets present some of the same challenges as the consumer market in the international marketplace. The commercial markets also have additional variables which the consumer market doesn’t. Where the consumer market deals with final products, the commercial market is composed of many different categories of products. Business-To-Business products fall into the following categories:

Business Services

Services one business performs for another.

Heavy Equipment

Equipment used in the production of other goods, usually attached to the physical plant.

Supplies

Goods which are consumed by a business everyday.

Component Parts

Goods which are incorporated into a final good with little alteration.

Raw Materials

Products mined or extracted form the earth used to make the final products.

Processed Materials

Manufactured products used in the production process by other manufacturers.

Goods for Resale

Products purchased by wholesalers and retailers which require no alterations.

In addition to different types of products there are also different types of markets which the commercial market is composed of. They include:

• Manufacturers

• Wholesalers

• Retailers

• Governments

• Institutions

• Small Businesses

Other differences between consumer and commercial markets include:

• Demand:  Demand for consumer goods arises from the needs and  wants  of the consumers. The demand that the commercial markets place on business goods comes from the need to meet the needs and wants of the final consumer and not the actual business, this is referred to as Derived Demand.

• Market Size: The consumer market, in terms of participants, is much larger than the business market. For example, the number of participants in the consumer market for cars is in the millions but there are only a relative few participants in the business market producing cars. In other words, one supplier can meet the needs of many users.

• Promotion:  Promotional techniques will vary between the two markets in large part because of the number of participants. Establishing personal relationships and grooming those relationships is a very important part of the commercial marketplace. It is not uncommon for 100 to 250 customers to account for a substantial portion of a commercial marketer’s business, thus making each account very important. In the consumer markets, advertising and other forms of promotion often take the place of personal selling and one account may only be a small fraction of the overall business.

• Individuals:   It is also worth noting that the individuals in the consumer market are generally limited in the amount of buying expertise they have and make decisions based on emotional appeal. The commercial markets are different in the fact that buyers should have a high level of buying expertise and make their decisions based on a rational appeal.

As can be seen, there are many differences between the consumer and the commercial market. When marketing a product it is important to recognize these differences and clearly identify your target market and the variables which are part of it. 

Marketing Research

The American Marketing Association adopted the following definition of marketing research in 1987.

Marketing research is the function which links the consumer, customer, and public to the marketer through information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.

Marketing research specifies the information required to address these issues; designs the method for collecting information; manages and implements the data collection process; analyzes the results; and communicates the findings and their implications.

In simpler terms, marketing research is the process of gathering and analyzing information about a market in order to determine that market’s needs and wants. There are eight stages in the marketing research process, they are:

1. Establishing the need for research information

2. Specifying research objectives and information needs

3. Determining the sources of data

4. Determining the data collection method

5. Planning the collection effort

6. Collecting the data

7. Processing and analyzing the data

8. Presenting the research results

When determining the sources of the data, step three above, it is important to recognize the two basic types of marketing data, primary and secondary. Primary data is information which has been newly collected for the problem at hand, it can be expensive and time consuming to gather. Secondary data is information which was collected for another purpose and already exist. The availability of secondary data should be investigated before any primary data is gathered. The reason is that secondary data can be gathered more quickly and at less cost then primary data. Because secondary data is often collected by others, it must be closely analyzed to determine its quality and relevance to the current marketing problem. The advantage of primary data is that market researchers have control over both these factors. These two data types are not mutually exclusive to marketers, in fact, marketers can use a combination of both, if that will address their problem most effectively.

Secondary Data for International Marketing Data

A company has several sources of secondary data which it can investigate for the international market. If it has already been involved in the international market it may find existing information in its internal records, which may hold valuable information for its new marketing attempts. If it has no international experience it may still find a correlation between the domestic market it has been working in and the international market being investigated.

Many governments publish information and statistics about their countries and population. Although this can be a very good source of secondary data, it is not always available. The level of information gathered by governments about their countries is extremely variable throughout the world. The United States performs a census of its population every ten years and makes this data available to the public. China last conducted one in 1982, and the last one before that had been 29 years before. Some countries may not have any data available from the government at all. When examining government collected data it should be studied to determine if it has been manipulated or skewed for any reason. Issues such as collection method, government objectives, political elections, trade negotiations, humanitarian aid, etc., are all reasons to question and attempt to verify existing information. 

Another source of secondary data pertaining to international markets may be found from research companies and other businesses who are already working in that arena.

 A company may be able to approach another company and negotiate a fair exchange for any data on the market which they may have. If the company being approached is a competitor, it will likely be a more difficult negotiation. There are examples when having multiple competitors actually brings in additional business. A good example of this in our domestic market is car retailers. It is common for these retailers to group their businesses together or in close proximity to each other in order to take effect of the dynamics created by additional competition.

Successful international marketing is dependent on how well the target market is defined and how well marketing decisions are directed towards that market. The international market has more variances then the domestic market because of the substantial differences among countries around the world. Some of the more common differences include legal, cultural, technological and infrastructure differences. This situation forces marketers to pay special attention to market research and analysis in order to be successful international marketers.