INTRODUCTION TO INTERNATIONAL MARKETING
UNIT-II
Prepared by
Dr. L.SHANTHI Assistant Professor
Department of Business Administration Government Arts College
Coimbatore-641018.
Reference Book:
1. Foreign Trade- Theory, Procedures, Practices and Documentation- Dr. Khushpat S.jain, Dr.Apexa V.Jain- Himalaya Publishing House.
Phases of International Marketing-Process of International Marketing- Concept of International Marketing- Research I-Need for International Marketing Research- International Marketing Research Process- Scope of International Marketing Research – Special problems of International Marketing- Domestic Marketing vs International Marketing- ’12C’ Framework for International Marketing.
PHASES OF INTERNATIONAL MARKETING:
The levels of involvement of domestic firms in international market vary from firm to firm, depending upon their internal and external factors. Internal factors are the monetary and non-monetary resources and external factors are the government policies and market potential. After a company decides to enter into international market, it must decide the degree of marketing involvement. The degree to which a firm decides to get involved in international market is also termed as phases of international marketing.
(a) Indirect Foreign Marketing: In this stage, a firm doesn't involve itself in international marketing. It focuses to operate in the domestic market No serious efforts are made by the firm to enter the foreign market. However, its products enter the international market indirectly. The indirect ways of entering a foreign market are:
• The firm sells the products to foreign buyers who actually come for tourism and purchase the products according to their needs.
• The firm sells its products to export house, or to some domestic manufacturers or to other agencies who ultimately export them.
(b) Infrequent Foreign Marketing: In this stage, the firm gets involved in foreign marketing just to dispose its temporary surplus or to utilise excess capacity. The firm at this stage prefers to operate in markets similar to home market in terms of domestic, geographic and cultural factors. Temporary surplus may be caused by fluctuations in production or demand.
For example, export of aluminium in the last decade was only of temporary nature because its export was permitted only when domestic demand was lower than production. Here, the firm does not take any serious efforts for internationalisation.
(c) Regular Foreign Marketing: During this stage, a domestic firm fully devotes its resources for international market operations. The firm makes serious efforts to develop its trade in foreign markets. It may appoint foreign or domestic middlemen or set up its own distribution channel and sales force in foreign markets to explore the marketing potentials.
(d) International Marketing: In this phase, the firm completely dedicates its operations to marketing internationally. Some firms may gradually reduce their domestic operations and expand international operations. The firm develops different marketing mix and marketing strategies for domestic market and international market. Some firms may also set up their production facilities in foreign markets to reduce cost and respond to market changes more effectively. This may be termed as multinational marketing. For example, Unilever and Nestle are truly multinational firms.
(e) Global Marketing: At this stage, companies treat the whole world, including their home market as one market. All marketing strategies regarding products, pricing, advertising, distribution, etc. are formulated considering the entire population of the world. For example, Coca~ cola and Pepsi are the firms which may be said to involve in global market. In the first two stages of involvement, the firm relies more on others for marketing its products in foreign markets while in the later stages, it may engage its own personnel in selling the products. The marketing task in the earlier stages is simpler. i.e, only selling, while in the later stages, serious research efforts are to locate and satisfy the needs of the customer’s .However, before entering in to the international market. the firm should undertaken thorough analysis of the markets and its resources to get a success.
PROCESS OF INTERNATIONAL MARKETING:
International marketing process comprises of the following six steps:
PROCESS OF INTERNATIONAL MARKETING Motivation for International
Marketing
Situation Analysis
International Marketing Research
Decision to Enter International Markets
International Marketing Mix Decision
Implementation and Control
(a) Motivation for International Marketing: The process of International marketing begins with the motivation for entering international market. There are various factors which may motivate a firm to internalise. Some of these factors are proactive while some others are reactive. Higher profits, goodwill and reputation, financial benefits and Incentives, technological edge, tax, incentives, etc. are proactive factors while domestic market saturation, competitive pressure, domestic recession, excess capacity, government policies, etc.
(b) Situation Analysis: Once the decision to enter International market has been taken, a thorough analysis of the internal and external factors should be undertaken to identify opportunities and threats. The firm must evaluate its own capabilities to serve international markets. Various external factors such as economic, social, cultural, technical, regulatory, etc.
must be well understood before internationalising. There are several tools such as PEST analysis, SWOT analysis ,etc which can be used to serve the purpose.
(c) International Marketing Research: Information is the key component in developing successful marketing strategies and avoiding marketing failures, especially in the international market. Information need ranges from the general data required to assess market opportunities to specific market information for decisions about product, price, promotion and distribution. This is where International marketing research is significant Marketing research links an organisation to its markets through information collection and analysis.
(d) Decision to Enter International Markets: After the identification of potential opportunities in the International market, a decision is taken to internationalise. It consists of a number of inter-related decisions such as identification of potential buyers, demand forecasting, market segmentation and targeting, market positioning and decision on mode of entering the market. There are various modes of entry available in the International market such as direct exporting, Indirect exporting, franchising licensing foreign collaboration, point ventures.etc.
(e) International Marketing Mix Decision: Marketing Mix is referred to as the set of four controllable variables: - Product, Price, Place and Promotion that the firm blends to produce a response it wants in the target market. A firm's marketing mix will normally have to be adapted fm international marketing in the view of many national differences that exist in relation to the Stages of economic development, social systems, technological environment, legal framework, competitive situation, business practices and cultural perspectives.
(f) Implementation and Control: During this stage, the marketing plan is developed and the product is launched in the international market, Planning and developing a good marketing programme is not enough. International marketing operations need to be monitored and controlled effectively. The international marketing environment is highly volatile. Therefore,
continuous adaptation to changes in the marketing environment is a key to successful international marketing operations.
CONCEPT OF INTERNATIONAL MARKETING RESEARCH
Information is the key component in developing successful marketing strategies and avoiding marketing failures, especially in the global market. Information need ranges from the general data required to assess market opportunities to specific market information for decisions about marketing variables, viz., product, price, promotion and distribution. Sometimes, the information can be sought from trusted research vendors or export promotion agencies and organisations. However, with the broadening scope of operations of global marketing, the need for current and accurate information is magnified. This is where international marketing research is significant. Marketing research is the function that links an organisation to its markets through information collection and analysis. It involves the systematic gathering, recording and analysis of data about the problems related to marketing of goods and services.
International marketing research is a study conducted to assist 'decision-making in more than one country.
International marketing research can be defined as research that cross national borders and involve respondents and researchers from different countries and cultures. It may be conducted simultaneously in a number of countries or sequentially over a period of time.
NEED FOR INTERNATIONAL MARKETING RESEARCH
International marketing research plays an important role to understand the diverse demand patterns and consumer behaviours in different foreign markets. Various factors which are essential for effective marketing decisions differ widely from market to market and this diversity is more profuse in the international markets. Therefore, it is necessary for an
NEED FOR INTERNATIONAL MARKETING RESEARCH
To identify marketing opportunities and threats
To understand International marketing environment
To facilitate smooth introduction of new products
To take pricing decisions
To select suitable distributionchannel
To decide promotion mix
To formulate marketing strategies
To improve managerial decision- making
international marketer to understand these factors well and formulate marketing policies and strategies to respond to these factors more effectively than the competitors. It is the marketing research which helps to understand these diversities and assists international marketers in making effective marketing decisions. Some of the factors which necessitate international marketing research are:
(a) To identify marketing opportunities and threats: International market is huge and dynamic. Various factors such as economic, social, cultural, technological and legal in the international marketing environment keep changing these changes provide new marketing opportunities and pose threats. It is through marketing research that the marketer can grab new opportunities and prevent threats
.
(b) To understand International marketing environment: International marketing environment more complex and dynamic A firm operating in International market encounters three different sets of environment- domestic environment, foreign environment and global environment. Marketing research helps international marketer in understanding the complexities of environmental issues and accordingly formulate his plan and strategy.
(c) To facilitate smooth introduction of new products: Product is the starting point of all marketing activities. International product research helps in understanding various dimensions of product viz., product planning and development, product life cycle, branding and packaging aspects from the perspective of foreign markets. It assists the marketers in taking crucial decisions like product standardisation and/or product adaptation.
(d) To take pricing decisions: Price is the value of utility of goods and services expressed in terms of money. It is one of the important factors that determine the success of an international marketer. International market is highly competitive and therefore, the marketer should take into consideration all the factors such as quality, cost, competition, demand, etc., before arriving at the final price. This information is provided to the marketer by price research.
(e) To select suitable distribution channel: Distribution channel includes a set of intermediaries which direct the flow of goods or services from the producer to the ultimate consumers. In the international market, two categories of channels are involved channels between the nations and channels within the foreign markets. There are direct as well as indirect channels. Place research helps international marketer in selecting the most appropriate and effective channel for his products.
(f)To decide promotion mix: In an era of micro-rather than mass-marketing ,communication plays a vital role. Marketing research uses promotional research to study media mix, media habits, advertising effectiveness and integrated promotion tools for promotion of goods and services in the international market. It also provides information about customs, cultures and beliefs of customers. All these information help devising an effective communication mix.
(g) To formulate marketing strategies: Today, markets are no more local. They have become global. Manufacturers find it difficult to contact customer sand control distribution
channels. Competition is equally severe. The consumer needs are unpredictable. Market segmentation is a complicated task. Therefore, it is necessary to have detailed and first-hand information about these issues not only for framing but also for implementing marketing strategies.
(h) To improve managerial decision- making: Marketing research plays a vital role in the decision making processes by supplying relevant, up-to-date and accurate data to the decision-makers. Managers need up-to-date information to access customer needs and wants, market situation, technological change and extent of competition in international market.
Such information is provided to international marketers by marketing research.
International marketing research follows the same path as domestic research, but there are a few more problems that may arise. Customers in different countries vary in terms of customs, cultures and expectations. Although customers within the same country differ widely, this difference becomes more profuse and complex in the international market. This makes international marketing research process more time-consuming and costly. At the same time, gathering primary data may be hindered by language. literacy and access to technology.
INTERNATIONAL MARKETING RESEARCH PROCESS
International marketing research is of immense importance for the international marketers as it provides up-todate information about markets, customers and competitors in the international market. Various steps in the global international marketing process are:
(a) Problem Identification: It is very crucial to define global marketing problem as precisely as possible. It may include one or more of the following:
• Whether to remain in domestic market or to internationalise.
• Product identification for international markets.
• Deciding international market for entry.
• Deciding mode of entry for international market.
• Deciding international marketing mix.
• Implementing and controlling strategic market plan.
(b) Elimination of the Influence of SRC: A well-defined problem is half-solved. However, the problem identification in global market is influenced by marketers self-reference criteria (SRC). SRC is the unconscious reference to one's own cultural values in comparison to other cultures. While planning for international market, it is necessary for a marketer to keep aside his own culture and consider cultural values and customs of foreign market. For example, when McDonald’s entered India, they started selling products like aloo tikki burgers instead of beef burgers. A marketer can avoid influence of SRC in the following ways:
• Defining the marketing research problem by considering the customs and culture of the home country.
• Defining the marketing research problem by considering the customs and culture of the foreign market.
• Comparing the two research problems and locating the major differences in the two.
isolating the influence of SRC and redefining the research problem without the influence of SRC.
(c) Appointment of Research Agency: Global market is highly diverse and spread over the globe. It is not possible for an individual firm to undertake market research in such a varied marketing environment with a large number of marketing variables. Thus, it is a common practice among international marketers to appoint a research agency for conducting research in the overseas market A good research agency provides benefits of expertise, objectivity and cost-effectiveness. The terms and conditions of the contract should be finalised well in advance so as to avoid any conflict and confusion in future
.
(d)Formulating the Research Methodology: Research methodology depends upon the nature of marketing problem. There are different types of marketing research for different marketing decisions. For example.
• Decision on product includes motivation research, product testing, etc.
• Decision on pricing requires price sensitivity studies.
• Decision on distribution requires dealers' survey.
• Decision on advertising requires pre-testing of advertising effectiveness.
Considering the nature and scope of the problem, an appropriate research methodology should be selected.
(e) Deciding Data Need: Once the problem is identified and the methodology is decided for marketing research, detailed data needs are worked out. The basic information required for entry in an international market are: -
• Decision on entry in foreign market: Trends in exports from the country, both product-wise and country-wise.
• Estimating market size: Total population of the importing country, its domestic production, trends in its imports, etc.
• Assessing market access: Foreign trade policies of exporting and importing country and international trade agreements.
• Market selection: Prioritising markets on the basis of their size and attractiveness in terms of accessibility and returns.
• International marketing mix decision: Competition analysis, consumer behaviour, pricing policy, foreign exchange rules ,marketing channels ,etc.
• Implementation and controlling marketing plan: Turnover and profit analysis, market share and growth analysis.
(f) Identifying Source of Information: Secondary information plays an important role in global marketing research as carrying out overseas field survey is a time-consuming and costly affair. Besides, it may be impractical and infeasible to conduct field surveys in
overseas markets. In such cases, secondary data related to market estimation, competitors turnover and profit, etc. may be more reliable. Some of the international sources of secondary data are:
• US Department of Commerce.
• International Monetary Fund.
• National Technical Information Services.
• United Nations.
• World Bank.
• World Trade Organisation.
Some of the Indian sources of secondary data for global marketing research are:
• Ministry of Commerce.
• Ministry of Finance.
• National Centre for Trade Information.
• Export Promotion Councils.
• Department of Commercial Intelligence and Statistics.
• Director General of Foreign Trade.
• Chambers of Commerce.
• Reserve Bank of India.
(g) Preparing Research Design: Research design is the blueprint of steps to be taken and methods to be followed for collecting and analysing data. Research design is a conceptual framework for conducting research. There are different types of research designs:
Exploratory research: It is a preliminary research conducted to get insight into problem under consideration. For example, possibility of entering a foreign market.
Descriptive Research: It is conducted to describe some aspects of international marketing environment. For example, profile and attitude of customers. –
Causative Research: It is conducted to test the hypothesis and establish cause and effect relation between the variables. For example, finding causes of falling sales in some markets.
(h) Collection of Data: As stated earlier, it is advisable to rely on secondary or published information in the global market rather than conducting a field survey. However, certain marketing problems cannot be solved through secondary data. In such cases, the marketer should make use of primary data. Primary data can be collected by field survey, observation or experimentation.
• Field Survey: Field survey is a costly method of collecting data. Some of the methods of field survey are telephonic interview, mail survey, electronic survey and personal interview.
• Observation: Observation is the process of recording the behaviour of people in a natural setup. A researcher may personally visit a shop and observe buying pattern of consumers.
• Experimentation: Experimental method involves the creation of simulated controlled situations in order to secure information by survey method or observation method.
(i) Analysis and Interpretation of Data: Although data analysis techniques in global marketing research and domestic marketing research are same, the number of variables in international marketing may be more. This calls for the use of multivariate techniques of data analysis such as analysis of variance, discriminate analysis, co-joint analysis, factor analysis, cluster analysis and multi-dimensional scaling. Data analysis helps to describe data, to test hypotheses and to make predictions or estimates. .
(j) Preparing the Research Report: The most important and concluding activity in the process of marketing research is the preparation and presentation of research report The research report should consist of title of the report, table of contents, introduction to marketing problem, research methodology used, findings, conclusions and recommendations.
It should be concise, accurate, clear, complete and understandable. As far as possible, report should use internationally accepted language. Although the marketing research procedure comes to an end as soon as the marketing research report is submitted to the marketer, yet it is useless unless follow-up action is taken and the measures suggested in the report are implemented in their true spirit. The research report also serves as the basis of evaluation of the steps taken by the marketing manager to solve the marketing problems.
SCOPE OF INTERNATIONAL MARKETING RESEARCH
Marketing research embraces all research activities carried on in connection with the management of marketing activity. The scope of marketing research deals with the possible applications of marketing research in the corporate environment. The sellers in domestic as well as international market undertake bulk of research to measure consumer needs and wants. Besides, marketing research is carried out to assess the impact of past marketing actions. Some research is done to understand the competitive, technological, social, economic, cultural, political or legal environments of the market.
The scope of marketing research in domestic market as well as in the international market is almost same. The only difference is that the geographical dimensions of the research area in international marketing increases and the individual factors within each component of marketing research becomes more complex. The following points explain some important areas of international marketing research:
(a) Consumer Research: Consumer research is that part of marketing research which studies preferences, motivations and buying behaviour of the targeted customers. Consumer research includes:
• Identifying consumer needs and requirements.
• Identifying buying behaviour and buying pattern.
• Determining demographic variables such as age, sex, income, education, etc.
• Assessing consumer satisfaction level.
• Assessing consumer brand preference.
b) Market Research: Market research is the process of gathering, analysing and interpreting information about a market, its location, attractiveness in terms of demand and market share.
Market research broadly includes:
• Measuring the size of the present and potential market.
• Ascertaining competitors' marketing strategy.
• Ascertaining market conditions.
• Ascertaining demand and sales forecasting. Measuring the impact of various laws on market demand.
(c) Product Research: Product research helps companies to understand what the customers really want, so that the product can be tailored to match the needs of the customer. Product research includes:
• Evaluating product performance in terms of customer satisfaction and profit
• Determining new applications or new uses of the existing product. Determining new markets for the existing product or modified product.
• Determining modification in the existing products.
• Assessing the need for product withdrawal.
(d) Sales Research: Sales research is the detailed analysis of selling activity of the company so as to understand periodic variations and forecast sales for future. Sales research includes:
• Determining and appraising sales activity, selling methods and system.
Assessing sales, sales potentials and market share.
• Assessing sales force in terms of recruitment, training and compensation.
• Assessing sales territories and sales quota.
• Evaluating sales policies, credit policy, customer credit and rating system.
(e) Advertising Research: Advertising research is conducted to improve the effectiveness or efficiency of advertisement or advertising campaign. Advertising research includes:
• Determining the advertising message and product appeal.
• Determining the right type of copy after assessing alternate copies.
• Determining the most effective media.
• Determining the time and duration of advertisement campaigns. Evaluating advertising effectiveness before and after the campaign.
(f)Sales Promotion Research: Sales promotions are the set of marketing activities undertaken to boost sales of the product or service. Sales promotion research includes:
• Determining the nature and type of sales promotion.
• Evaluating the sales promotion campaign of the competitors. .
• Determining the extent, duration and timing of sales promotion.
• Assessing the impact of sales promotion strategy on sales and profit.
• Evaluating the customers' reaction to sales promotion campaigns.
(g)Other Marketing Mix Research: some of the other areas of international marketing research are as follows:
• Identifying the appropriate intermediaries and distribution network.
Evaluating the existing distribution network.
• Determining the motivating factor for dealers' performance.
• Determining the pricing policies and strategies vis-a-vis that of competitors.
• Evaluating consumer response to product quality and its price.
• Determining the most economic and effective transportation route.
• Determining the most economical and speedy mode of transportation..
SPECIAL PROBLEMS OF INTERNATIONAL MARKETING:
The globalisation of business and commerce has become an increasingly significant reality worldwide. The rise of globalisation posits a number of challenges to a business seeking international presence. Numerous strategic aspects must be taken into account prior to commitment at an international level, and afterwards. Constant flexibility is required to adapt to changing patterns at local, regional and international levels.
Some of the challenges for international business are:
(a) Diverse Marketplace: International market is highly diverse. For example,
• Political diversity as world markets may be governed by autocracies (chiefs, kings, dictators, one-party governments) or democracies.
• Economic diversity as national wealth disparities vary from $107 per capita per year in Burundi to over $71,000 per capita in Norway.
• Cultural/linguistic diversity with the world's 200 nations, divided into about 10,000 linguistic/cultural groups.
(b) Increasing Competition: With the establishment of WTO, globalisation has become a global phenomenon. The number of companies competing at the global level has increased rapidly. This has made competition at global level fiercer than ever. An international business faces competition from three angles:
• Competitors from other countries of the world.
• Competitors from the country of origin of international business.
• Local business houses in host country.
(c) Recession in Developed Economies: Most of the developed economies are facing the problem of recession and stagnation. The markets in these economies are saturated. Many of
these economies are also passing through financial turmoil. As a result, large MNCs are turning towards rising markets in the Asian countries. The recession in large economies may spread to other economies, if not handled properly and collectively. This poses the climate of uncertainty for international business houses.
(d) Foreign Exchange Rate Risk: Foreign exchange rate is determined by the free operations of demand and supply forces. Besides demand and supply forces, the foreign exchange rate also depends upon market sentiments, natural factors and natural hazards, international developments and like. An international business is always prone to exchange risk due to adverse movement in foreign exchange rates. These risks can be minimised to a greater extent by entering into forward exchange rate agreements.
(e) Legal Risks: An international business is subject to laws of its own country as well as the laws of the foreign country where it operates. There are health standards, packing and packaging standards, environmental laws, labour laws, etc., which need to be complied with.
In addition to the local laws in the home country and the host country, there are several international laws and regulations framed by the international bodies like WTO, World Bank, IMF, etc. All these factors make international business more complex.
(f) Commercial Risks: Commercial risks are associated with business transactions. These risks are more profuse in international business. Some examples of commercial risks are:
• Commercial disputes including quality dispute raised by the buyer.
• Buyer's failure to obtain import license/exchange authorisation in his country;
• Insolvency or default of an agent of the exporter or the collecting banks;
• Foreign exchange fluctuations.
(g) Political Risks: Political risks arise due to political action or political change in any economy. Political risks mainly arise due to non-market factors such as:
• Change in macroeconomic policies such as fiscal policy, monetary policy, policies related to trade, investment, labour. etc.
• Events related to political instability such as terrorism, riots, coups, civil war and insurrection
(h) Technological Changes: Technology is related to the application of scientific knowledge to improve techniques of production, quality of goods and productivity. Technology exercises a considerable influence on international business. Technology changes more rapidly than it is absorbed. It is a creative destruction, i.e., creation of new technology makes old technology outdated and useless. Therefore, international business houses need to be ever alert to adapt to the rapidly changing technology. In spite of these challenges, an international business offers a large number of advantages to a local business.
DOMESTIC MARKETING INTERNATIONAL MARKETING (A) MEANING:
Domestic marketing is the process of planning, International marketing is the process of planning, organising, directing and controlling activities organising, directing and controlling activities E related to exchange of goods between different related to exchange of goods between different regions of the same country.
International marketing is the process of planning, organising, directing and
controlling activities related to exchange of goods between different countries of the world
(b) SCOPE
The scope of domestic marketing is narrow and it' is restricted to the political boundaries of a country.
The scope of international marketing is wider as the of a whole world constitutes a market for international marketer.
(c)TRADE BARRIERS
In domestic market, artificial restrictions or trade barriers in the form of tariff, and quota, and negligible or not present at all.
International market is subject to severe barriers in the form of tariff, quota, international standards and licensing
(d) SOCIO-ECONOMIC ENVIRONMENT:
Socio-economic environment prevailing in the domestic market is same and therefore, marketing activities become comparatively easy
Socio-economic environment differs from country to country. Hence, international marketing is a big challenge, specially for small and new marketers.
(e) PRODUCT STRATEGY:
Since the socio-economic environment in the domestic market is same, a single product (Product Standardisation Strategy) can be marketed throughout the country.
Since the socio-economic environment differs from country to country, products of different quality standards (Product Adaptation Strategy) are required to be produced for different markets
(f) COMPETITION:
The degree of competition in domestic market is low as these markets are generally protected by the government from external competition.
There is intense competition in the international market as sellers from different countries compete with one another in the international market
(g) SCALE OF OPERATIONS:
Due to limited competition in domestic market, a firm can afford to operate on a smaller scale.
Since the international market is highly competitive, a firm has to operate at the optimum level.
(h) MOBILITY OF FACTORS OF PRODUCTION:
Factors of production such as land, labour and capital are freely mobile in the domestic market.
There are strict restrictions on the mobility of factors of production in the international market.
‘12C’FRAMEWORK FOR INTERNATIONAL MARKETING
Phillips, Doole and Lowe have suggested a model to help companies identify the information to be collected while entering an overseas market.
The 12Cs of this model are:
1.Country General information, environmental factors.
2.Choices Competition, strengths and weaknesses of
competitors
3.Concentration Structure of market segments, geographical spread
4.Culture Major characteristics, consumer behaviour,
decision making style.
5.Consumption Existing and future demand, growth
potential.
6.Capacity to pay Pricing, prevailing payment terms
7.Currency Presence of exchange controls, degree of
convertibility.
8.Channels General behaviour, distribution costs and
existing distribution infrastructure.
9.Commitment Market access, tariff and non-tariff barriers.
10.Communication Existing media Infrastructure, commonly
used promotion
11. Contractual obligations Business practices, insurances, legal obligations.
12. Caveats Special precautions to be taken.
The contents in this E- Material has been taken from the text and reference books as given in the syllabus.
