MODULE 1: NATURE OF INTERNATIONAL MARKETING: CHALLENGES

AND OPPORTUNITIES
Most Essential Learning Outcomes:

Indicative Content:

• Why all businesses need to think international

• What is International Marketing?
• What are the roles of International Marketing?
• Challenges of International Marketing
• Process of international marketing
• Domestic marketing vs. international marketing
• Multinational corporations (MNCs)
• Benefits of international marketing

WHY ALL BUSINESSES NEED TO THINK INTERNATIONAL

Everybody is talking about globalization. Globalization is a term used to describe how trade
and technology have made the world into a more connected and interdependent place.
Globalization influences all our lives.

Consider the following scenario: you wake up in the Hilton hotel to the sound of your iPhone
alarm. You turn on the Sony television and tune into CNN for the world news. The latest merger
in the pharmaceuticals sector is the lead story; already shares in the sector have risen in all
major markets. You call into the office via your Samsung cellphone and leave voicemail for
your colleagues in the US, Asia Pacific and Europe regions. You will see them later at the
scheduled videoconference. You call room service and order your usual Del Monte Fruit Juice,
Kellogg’s Cornflakes and Nescafé. You get dressed, putting on your Armani suit. Picking up
your Louis Vuitton briefcase you leave the room and head out into the streets, already teeming
with cars made by Ford, Nissan and BMW. The City feels alive and vibrant – you love doing
business in . . . You could be in virtually any major city in the world ready to meet customers
from any place.

Globalization affects us all as customers, and therefore has an impact on every business. Every
day small companies are creating global networks of customers using the latest technology to
bridge geographic and cultural barriers. If your business is not out there working to exploit
literacy levels and drive the demand for certain products. The market for business training in
south-east Asia has been booming fuelled by a generally high level of domestic education
infrastructure. If we are employing local representatives in specialist areas then analysis of
general education levels may not reveal sufficient detail. We may need to employ bilingual
people with strong IT skills. Research must be appropriate to the objectives of the organization.

What is International Marketing?

International Marketing is basically using marketing principles internationally. Repetition is
it? Okay, international marketing occurs when activities are carried out in more than one
country. It seeks to satisfy the wants and needs of people across borders. International
marketing is also known as Global Marketing.

A company has the right to deal in domestic marketing or international marketing as decided
by some factors. Some do not have enough to cater for an extensive market and do not want to
get caught up in rules and laws of the international marketing.

If for nothing, international marketing is practiced by organization because of:

• Relatively huge market share
• High profit
• International marketing benefits and
• Improved economies of scale

What are the roles of International Marketing?

It opens door for future opportunities
Organizations that involve in international marketing know how to play their cards right by
keeping their friends and connects even closer in business. When an organization X sells to an
organization Y, X remains open to what Y has to offer in the future and vice versa.

Brand reception
It is very true people choose what they want if it is internationally available. International
marketing rightly boosts brand reputation because services or things sold globally are believed
or perceived to be better than the domestic ones.

It expands target market

Focus is widened with international marketing because an organization must cater for an
increased customer base. Domestic marketing does not call for this but with international
marketing comes an automatic large market share.

Process of International Marketing

There are five processes that need to be followed in international marketing. These processes
are:

1. Proper analysis of existing opportunities in international marketing. It is a norm to witness

several innovations or brands every year trying to solve different problems. In international
marketing, there are two methods of making your brand or innovation. First is, you build the
brand without prior knowledge of what the international market really want and then try to tune
it to global needs or make a proper analysis of what is lacking and needed and then make a
brand that cater for customers.

2. Selection of international customers then follows after analysis has been made. You decide
to whom to sell and to whom to buy from. Market positioning, targeting, identification are all
done here. Who you choose to deal with is your target market. Your identification of
international customers plays a major role in the development of your brand.

3. Marketing and business strategies are then incorporated to make products, goods and
services delivery. There are idiosyncrasies that need to be looked into when it comes to
international trade and a company must look into them.

4. The fourth process is developing international product, price, marketing mix and promotion.
For a proper reputation in the international market, these four processes must be taken into
consideration.

5. The final process is all about market management. Implementations of ideas, plan, control
and analysis need to be done constantly.

Challenges of International Marketing

Effective communication
International marketing is about dealing with nations across border. If your business partners
do not speak your language, communication might seem difficult for a start and pose a little
threat. Cultural factors may creep in too. But with time, business organizations tend to
understand each other better.

Competition and innovation

As a company willing to go international, you’d have to rival competitors and innovators by
being better. New markets evolve daily with better brands or easier and timely way of having
things done than what was before.

Demographics
Population of proposed country international market may be another challenge for market. A
company whose focus is on youth material or brand may find it difficult engaging some
countries because of their aged ones. Challenges like this are solved through proper research
and analysis.

Steps Involved in the International Marketing Process.

A firm which plans to go international has to take a series of strategic decisions or steps.
Following are the major steps in the process of international marketing:
1. Deciding to Internationalize.
2. Market Selection.
3. Product Selection.
 4. Selection of Entry Mode.
5. Selection of Marketing Strategy.
6. Selection of Marketing Organization.

Deciding to Internationalize.
The first decision is whether the firm should take up international marketing or not. This
decision is based on number of important factors:
• Present and future overseas opportunities.
• Present and future domestic opportunities.
• Resources of the company.
• Company objectives.
International marketing offers a number of advantages. At the same time, international
marketing is subject to a number of risks. The decision to internationalize requires the
evaluation of international strengths, weaknesses, opportunities and threats. This is done by
SWOT analysis. If the SWOT analysis is favorable to the firm, the firm should decide to
venture into the foreign market.

Market Selection.
Once it has been decided to internationalize, the next important step is the selection of most
appropriate market i.e., identifying the target customers. For this purpose, a thorough analysis
of the potentials of the various overseas markets and their respective marketing environments
is essential. A careful exercise to shortlist overseas markets becomes necessary since all
products cannot be sold by the firm to all countries at all times. It is considered better to exert
maximum pressure on a minimum area to achieve the best results.

Following are some important criteria which may be used in the market selection:
o Geographical proximity: The first criterion of market selection is the geographical
proximity. Geographical proximity facilitates a firm to reach the product fast to a
nearby country and service the market quickly and more effectively. Besides, there will
be low transportation cost leading to lesser price of the product.
o Market potential of the country: A company may select its target markets on the basis
of market potential of the country. Market potential of the country can be assessed by
the prosperity of the country, the size and growth of its imports, etc.
o Market Access: Another yardstick that a country may use in market selection relates
to the market access. A country’s import policy is an important factor, because it may
be biased in favor of some items and/or some countries. It is advisable for a company
to select countries which do not discriminate against the country of the firm and whose
import policy is not restrictive.

It would be highly beneficial for a company if it selects countries having good political
and economic relationships with home country or having some preferential trading
arrangement also or having least restrictions on imports.
 o Market characteristics: Another factor to be considered in the selection of the market
is the market characteristics of the country. A company would like a market having
similar cultural factors, trade practices and customs.

Product Selection.
Once the market selection decision has been made, the next important task is to determine the
products for export. Following are some important criterion which may be used in the product
selection:
o Elasticity of supply: A company would not face any supply constraint in exporting the
products having elastic supply. Elastic supply is the result of natural resource
endowment or acquired skills and assets. A company may also select a product because
the product is unique i.e., it has developed it by research and development and it is
likely to take some time before competitors come out with a suitable substitute. A
company should not prefer exports of the products which are heavily dependent on
imported inputs.
o Demand of the Products: A company should identify the products that are in demand
and likely to continue to be in demand in an overseas country. For this the company has
to make the analysis of a country’s imports and production of various commodities
including substitutes and the likely future policies and plans regarding such
commodities.

Selection of Entry Mode.

After the selection of market and product, the next important decision is to determine the
appropriate mode of entering the foreign market. At one extreme a company may decide to
produce the product domestically and export it to the foreign market. In this case, the company
need not make any investment overseas.

On the other extreme, the company may establish manufacturing facilities in, the foreign
country to sell the product there. This policy requires direct foreign investment by the company.
In between these two extremes, there are several options each of which demand different levels
of foreign investment.

Following are various entry modes in the foreign markets:

o Exporting: Exporting means sale of domestically produced goods in other country

without any marketing or production or organization overseas. Exporting may be of
two types: Direct exporting and Indirect exporting. Direct exporting means sale of
goods abroad without involving middlemen. In case of indirect exporting, a firm sells
its products abroad through middlemen.
o Licensing: Under licensing an international business firm (licensor) allows a foreign
company (licensee) to manufacture its product for sale in the licensee’s country and
sometimes in other specified markets.
 o Franchising: Franchising is a special form of licensing in which an international
business company (franchiser) grants another independent company (franchisee) right
to do its (franchiser’s) business in a prescribed manner. Franchiser makes a total
marketing programme available to the franchisee.
o Contract Manufacturing: Under contract manufacturing, an international marketing
company enters into contract with a local enterprise abroad to manufacture its product
and undertakes the marketing responsibility on its own.
o Joint Venture: An international joint venture is an enterprise formed abroad by the
international business company sharing ownership and control with a local company in
that foreign country.
o Strategic Alliance: Under strategic alliance, two or more competing firms pool their
resources in a collaboration to leverage their critical capabilities for common gain.
Although a new entity may be formed, it is not an essential requirement.
o Assembly: Under assembly an international business firm produces most of the
components or ingredients in one or more countries and carries out the labor intensive
assembling in the foreign country where labor is cheap and abundant.
o Mergers and Acquisitions: Under merger an international business firm absorbs one
or more enterprises abroad by purchasing the assets and taking over liabilities of those
enterprises on payment of an agreed amount. Under acquisition, an international
business enterprise takes over the management of an existing company abroad by taking
the controlling stake in the equity of that company at a determined price.

Each of these strategies has certain advantages and disadvantages. Each of these strategies
require different levels of investment ranging from no additional investment to full investment
in manufacturing facilities abroad, and the risks also increase with increase in the investment
level Similarly, control over the market may be higher if the company involves itself directly
in manufacturing by investments in production facilities.

Various entry strategies must be analyzed in following respects:

• Expected sales.
• Costs of operations in a foreign country.
• Assets.
• Profitability.
• Risk factors.

The selection of a company’s best method of entry into foreign markets depends on
following factors:
• Number of markets covered.
• Level of penetration within markets.
• Degree of feedback available.
• Control.
• Possibility of sales volume over a period of time.
Selection of Marketing Strategy or Marketing Mix Decision.
The foreign market is characterized by a number of uncontrollable variable Marketing
mix consists of internal factors which are controllable. The success of the international
marketing therefore, depends to a large extent on the appropriateness of the marketing mix.

Following are the elements of the marketing mix:

o Product strategy: In the present day competitive global market environment
marketing begins with customer and ends with the customer. The importers will import
only those items which are in demand from the customers.
The exporters have to, therefore, identify what the consumers in the overseas markets require.
It is imperative that the product selected for exports should be unique, creative and innovative
in comparison to the similar item being offered by the competitors. As the, consumer
preferences, tastes and regulations governing product, quality, safety, health, environment
protection, packaging and packing vary from one market to another, same item cannot be
offered in all the markets.
An analysis should be made of any modifications required in the products, packaging changes
needed, labeling requirements, brand name and after-sales services expected.
Many products must undergo significant modifications if they are to satisfy consumer and
market requirements abroad. Other products require changes at the discretion of the producer
only to enhance their appeal on export markets. Products may be modified in respect of quality,
size, shape, color, material etc. Product strategy includes packaging, branding and product
service.

o Pricing strategy: Pricing decision is one of the basic marketing decisions. Most
importers would decide to buy the product finally on the basis of comparison of price
of competing products. Pricing, strategy is closely linked to the cost of the product and
other factors influencing the cost. In setting the export price, the business firm should
consider additional costs that do not enter into pricing for the domestic market.

These include such items as international freight, insurance charges, product adaptation costs,
import duties, commissions for import agents and foreign exchange risk coverage. A company
should decide whether it should charge the same net price for a particular product in all its
markets or different prices in different markets.

Export pricing analysis should begin with these questions: What value does the target market
segment place on the business firm’s product? How do differences in the product add to, or to
detract from its market value? In practice, these are difficult questions to research but analyzing
the prices and product characteristics of existing competitive products may reveal critical
information.
In practice, it is not the cost that determines the product’s price but the customer’s perception
of that value. A firm may not have much choice in export pricing beyond a point because it has
to match competitor’s price. Extension of credit is part of the pricing strategy.
 o Distribution strategy: A company should work out its distribution strategy very
carefully so that its product reaches the consumer at the right place and right time with
reasonable cost. The potential exporter should consider the following distribution on
options:
• Exporting through a domestic exporting firm that will take over full responsibility for
finding sales outlets abroad.
• Setting up its own export organization.
• Selling through representatives abroad.
• Using warehouses abroad.
• Establishing a subsidiary.

The choice of distribution channel will depend on the firm’s export strategy and export market.
A company should be very clear about the division of risks, responsibilities and privileges
between it and the distributors and the cost of distribution. Part of the distribution strategy
relates to agency arrangements in overseas countries.
When it is intended to create greater awareness of the product, it is better to appoint an agent
who does not handle many products and can allocate the time needed to promote that product.

o Promotion strategy: The company should decide on the optimum promotion mix i.e.,
advertisement, personal selling and sales promotion. The export marketing plan should
provide details on the following aspects of the promotional strategy:
• Publicity methods.
• Advertising (who will be responsible for it and how much the firm can allocate to it).
• Trade missions.
• Buyer’s visits.
• Local export assistance.

Promotion strategy to be adopted by the exporter should be in tune with the environmental
rules and regulations of the host country. Further, promotion strategy should take into account
the culture of the target segment in terms of its practices, beliefs, likes and dislikes, religion
etc.

International Organization Decision.

The last step involved in the international marketing process involves decision regarding the
international organization. There are different organizational structures for doing international
business.

The structure is determined by the following factors:

• Extent of commitment of the organization to the international business.
• Nature of international orientation.
• Size of international business and expansion plans.
 • Number and consistency of product lines
• Characteristics of the foreign markets.

A firm may organize its international marketing operations in three ways:

• Creation of export department.
• Setting up an international division.
• Development of a global organization.

The export department is the simplest form of export organization and easiest to establish. A
separate export department is established to take effective care of all the activities connected
with the export business. The internal organizational structure of the export department may
be based upon functions, territory, product or a combination of these. A separate export
department may be located at the most suitable place which may not be the headquarters of the
company.

When the activities of the firm further expand, it may create a full-fledged international
division. The international division may be organized in following three ways:
• Geographical organization, where managers are responsible for the marketing activities
of their respective countries.
• World product groups, where managers are responsible for sale of a particular product
group.
• International subsidiaries where managers are responsible for its sales and profits like
a subsidiary.
• Now-a-days firms have preferred to develop itself as global organization where
manufacturing and marketing are planned globally.

Domestic versus International Marketing

Domestic Marketing
Domestic marketing is also called marketing activities. These activities are employed on a
national scale. Marketing strategies were created to catch the customers in a small area. They
also make their strategy to attract the people based on the local time of that particular country.
And it serves the people of a specific country. Digital marketing has a lot of advantages, like
fewer communication barriers, deep knowledge about the need of the customer, knowledge
about customer taste, less communication, easy access to the data, and social and political
issues. There is only one disadvantage, i.e., the growth is also limited due to the limited market
size.

International Marketing
When the market can adopt the global market, then this market is called international
marketing. Generally, start-up companies start their business in their own country, and after
that, when their business achieves success, they expand their business internationally. After so
much achievement, the company tries to enter the global market of several countries. Then this
business is known as the transnational company. So the company must know the rules and
regulations to enter the international market. International marketing has no barriers. Its main
plan is to focus on the worldwide customer. There are some disadvantages to global marketing.
These disadvantages are challenges for expanding the business at the international level, socio-
cultural differences, currency, languages, different habits of customers, and so on.

Multinational Corporation
A multinational corporation (MNC) is a company that operates in its home country, as well as
in other countries around the world. It maintains a central office located in one country, which
coordinates the management of all of its other offices, such as administrative branches or
factories.

It isn’t enough to call a company that exports its products to more than one country a
multinational company. The multinational needs to maintain actual business operations in other
countries and must make a foreign direct investment there.

4 Types of Multinational Corporations

1. Decentralized corporation
Decentralized corporations may have multiple offices, facilities and assets in foreign countries,
but they still maintain a powerful presence in their home country. Typically, decentralized
corporations don't have a central headquarters. Each country they operate in may have its own
management structure. This helps the corporation scale quickly while ensuring it adheres to the
regulations in each geographic area.

McDonald’s is a decentralized multinational corporation. Although the fast-food king has a

presence in over 100 countries, it has the largest operations in its home country, the United
States, with around 18,322 stores (2021). Each McDonald's store runs on its own and can adapt
the menu and marketing strategies to attract regional customers. As a result, there is a variety
of menu options in different McDonald's locations. The franchising business model also allows
new restaurants to be set up quickly in any part of the world at no cost to the main office.

2. Global centralized corporation

A centralized global corporation may have a head office in its home country, where the chief
executive officer and other senior leaders reside. These corporations often look for
opportunities to increase revenue by purchasing cheap resources and materials from foreign
countries. The same management team typically handles both domestic and international
decisions. They also oversee all global operations.

For example, Apple is a global centralized corporation that outsources the production of iPhone
components to countries like China, Mongolia, Korea, and Taiwan.

3. International division
Corporations may keep their domestic operations separate from their international operations
by creating an international division. This new division oversees all the corporation's
operations in foreign countries. While this structure can help companies reach a wider audience
and make decisions that appeal to different cultures, it can also be challenging to maintain a
cohesive brand image.

Each Coca-Cola branch can develop its own product design and marketing campaigns to
attract local customers.

4. Transnational enterprise
A transnational enterprise may exist within a parent-subsidiary relationship. This allows them
to access many of the parent corporation's resources, such as their research and development
(R&D) team, even though they may operate in separate countries. Typically, the parent
company oversees the transnational enterprise and makes decisions on its behalf. While they
typically follow a centralized leadership structure, this can vary from one corporation to the
next.

Nestle is an example of a transnational enterprise with a decentralized organizational structure.

Although the headquarters are responsible for making major decisions, each subordinate enjoys
a high level of independence over its daily operations. Its long history from a small village
operation to a world food manufacturing leader has also demonstrated Nestle's great capacity
to adapt to changing business environments without losing its core values.

Importance of International Marketing

Important to expand target market – The target market of a marketing organization will be
limited if it just concentrates on the domestic market. When an organization thinks globally, it
looks for overseas opportunities to increase its market share and customer base.

Important to boost brand reputation – International marketing may give a boost to a brand’s
reputation. The brand that sold internationally is perceived to be better than the brand that sold
locally. People like to purchase products that are widely available. Hence, international
marketing is important to boost brand reputation.

Important to connect business with the world – Expanding business into an international
market gives a business an advantage to connect with new customers and new business
partners. Apple - the tech giant designs its iPhone in California; outsources its manufacturing
jobs to different countries like - Mongolia, China, Korea, and Taiwan; and markets them across
the world. Apple has not restricted its business to a nation, rather expanded it to throughout the
world. The opportunities for networking internationally are limitless. The more "places" a
business is, the more connections it can make with the world.

Important to open doors for future opportunities – International marketing can also open
doors for future business opportunities. International marketing not only increases market share
and customer base, but also helps the business to connect to new vendors, a larger workforce,
and new technologies and ways of doing business. For example – American organizations
investing in Japan have found programs like – Six Sigma and Theory Z which are helpful in
shaping their business strategies.