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Essay on International Marketing
| Date: |
07-25-98 10:54am |
| Subject: |
Business |
| Word Count: |
3069 |
| Page Count: |
12.28 |
International Marketing
International Marketing
A firm’s international marketing program
must generally be modified and adapted to foreign markets. This international
marketing program uses strategies to accomplish its marketing goals.
Within each foreign nation, the firm is likely to find a combination of
marketing environment and target markets that are different from those
of its own home country and other foreign countries. It is important
that in international marketing, product, pricing, distribution and promotional
strategies be adapted accordingly. In order for an international
firm to function properly, cultural, social, economic, and legal forces
within the country must be clearly understood. The task of International
marketing is more difficult and risky than expected by many firms.
One of the most controlling factors
of international marketing is management. It is very important for
managers to recognize the differences as well as similarities in buyer
behavior. Many mistakes can occur if managers fail to realize that
buyers differ from country to country. It is the international differences
in buyer behavior, rather than similarities, which cause problems in successful
international marketing. An international marketing manager is a
manager responsible for facilitating the exchange of products between the
organization and its customers or clients. Sometimes an international
marketing manager will find difficulties in completing the exchange of
products. Many surprises in international business are undesirable
human mistakes. An international corporation must fully understand
the foreign environment before pursuing business matters. Problems
constantly crop up and many times have unexpected results. Sometimes
these unexpected results are unavoidable. Other times they are avoidable.
To be sure those avoidable situations do not occur, international marketing
managers must be aware of cultural differences.
Cultural differences take place among
most nations of the world. Differences in culture are one of the
most significant factors in an international company. All nationalities
posses unique characteristics, which are unknown to many foreigners.
Many of the top international businesses are unaware of these cultural
differences. It is very important to understand these cultures in
order to market a product successfully. As an example, different
nationalities have different beliefs on how business matters should take
place. Where some countries prefer to work with a deadline other
countries can take this as being offensive. Many countries feel it
is an insult to be asked to work under a set time period. A country
may feel that a deadline is threatening and may feel backed into a corner.
On the other hand, other countries try to expedite matters by setting deadlines.
To be effective in a foreign market it is necessary to understand the local
customs. Knowing what to do in a foreign country is as important
as knowing what not to do. Failure to understand local customs can
lead to serious misunderstandings between business people. The simple
rejection of a cup of coffee can lead to total confusion. The decline
of an invite is sometimes considered an affront. To avoid making
blunders, a person must be able to discern the difference between what
is acceptable behavior and what is not acceptable behavior. Violations
of a local custom can be insulting, and can cause uncomfortable situations.
To be a successful manager of international marketing, one must be able
to discern the differences as to what must and must not be done.
It is almost impossible to attain complete knowledge and understanding
of a foreign culture.
As established, culture plays an
important role in the drama of international marketing. Of all the
cultural aspects, communication may be the most critical. It is certain
that communication has been involved in a number of cultural confusion.
Good communication linkages must be set between a company and its customers,
suppliers, its employees, and the governments of the countries where it
performs business activities. Poor communication can obviously cause
various difficulties. One source of difficulty among starting companies
is that of effective communication with potential buyers. The problem
is that there are many possible communication barriers. Sometimes
messages can be translated incorrectly, regulations overlooked, and economic
differences can be ignored. Other times when the message does arrive,
its ineffectiveness can cause it to be of no value. Every now and then
a buyer will receive the message, but to the companies disappointment,
the message was sent incorrect. It is normal in multinational businesses
to send and receive messages on a regular basis. Many well-known
people have incapacitated public speech introductions by using inaccurate
titles and names. Not all communication problems are verbal.
Some serious problems have occurred as a result of non-verbal communication.
Non-verbal communication exist in numerous forms. Sometimes a person’s
appearance can convey a stronger message than intended. Untidy attire,
for example, can be more offensive in some nations than in others.
The local people often are willing to overlook most of the mistakes made
by tourist. On the other hand, locals are less tolerant of the errors
of business people. It is very important to be able to interpret
the different means of communication in international marketing.
In America, we sometimes take for
granted the display of products on the market. However, in other
nations such product array and selection do not always exist. It
is important to understand that even if local customers can afford a certain
product, they may not always want it. If by chance are interested,
it may be only if it is substantially modified to fit their local preferences
and taste. These adaptations exist in the form of product and package.
The alteration of a material product is sometimes required to match the
product to local taste and conditions. Adaptation of the package
is often needed to attract customers to the product. Many times adaptation
is also used to maintain a product’s righteousness in a unique environment.
A firm is occasionally forced to modify both the product and the package
to create an appropriate product for the new market. Some products may
require more technical modification than others may. Measurement
systems vary between countries, and often components need to be adjusted
to cleave to local standards. The need for product adaptation has
existed for many years. In 1857 England’s East India Company possibly
lost control of India because it failed to modify a product it provided.
A product may be well acceptable in markets, but may not sell if housed
in an inappropriate package. Packages promote the product and they
protect it. International packaging must be able to withstand the
journey. Some countries have exported their products only to witness
the return of crushed and half-empty containers. Packaging can sometimes
bring embarrassment to a company. Medical containers made in the
U.S. drew unwanted attention because they carried the instructions "Take
off top and push in bottom." These messages was harmless here in
America, but were sexual and humorous connotations to the British.
Often the choice of package and product is difficult. Sometimes companies
have failed to sell their products overseas because of the packaging of
a product. Each firm must determine the area most appropriate for
its product. Determining the region where it is most appropriate
to market a product is not an easy task. Wherever the location of
these places, they must be found because market testing is essential in
international marketing.
Many countries maintain regulations
concerning their products and packages. Countries have expectations
that foreign marketers will adhere to the rules. Failure to abide
by the rules of a country can prove to be very costly. The legal
and political atmosphere varies across national borders. Different
countries have different legal policies. There are laws to which
a marketer must abide by when marketing internationally. Some countries
enact laws to protect consumers or to preserve a competitive atmosphere
in the marketplace. Since many countries maintain regulations concerning
their products and packages, the wording or color of a package can create
difficulties. In some countries giving gifts to authorities is a
standard business procedure. In other countries, such as the United
States, these gifts would be considered as bribes or payoffs and are strictly
illegal. If an error occurs it can be costly, but with the appropriate
alterations it can be corrected. The General Agreement on Tariffs
and Trade (GATT) reforms imposes on national governments the obligation
to sacrifice local and state laws that protect customers, and the environment.
Plans were developed in the mid-1980s to broaden GATT’s mandate by extending
its police powers to the areas of foreign investment and trade in services.
If such reforms are enacted, GATT will have the authority to remove barriers
to foreign investment and to override or knock out local laws for protecting
a nation’s insurance, brokerage, an banking businesses. Removing
local laws can definitely make the international work place easier, when
it comes to the legal aspect.
In the field of marketing, a product
promotion can be the most difficult. Timing is the most critical
element in the launching of a new product. Most firms understand
this and also perceive that varied peoples hold different conceptions of
time. Since some nationalities are more conscious of time factors
than others, extra time must often be allocated to guarantee that everything
is completed as schedule. An international marketer can adopt several
strategies regarding its product and promotion. Marketing a product
internationally through a single promotional message worldwide can be effective
for products that have standardized appeal for the majority of the people.
Most times this could be the least expensive strategy. When it is
hard to translate promotional messages or to adapt an overall promotion
to local customs, companies market one product. This promotion is designed
to market one product but vary its promotions. Some products
are well known among the nation and need little advertising. The
advertisement can be on American influence located in China. If a
theme works exceedingly well in one country, then it naturally becomes
very tempting for a firm to want to use it in another country. There
is a big risk involved in doing this, because admirable themes are culturally
oriented. For example, consider the very popular Marlboro advertisements.
The Marlboro man projects a strong masculine image in America and in Europe.
In Hong Kong, attempts to use this advertisement were unsuccessful because
the urban people did not identify with horseback riding in the countryside.
Several firms have tried to use old, reliable promotional methods in countries
where they simply do not work. Billboard advertisements, for
example, are perfectly legal in most parts of the Middle East, but it does
not mean one should use them. In some cases companies have been know
to advertise in the wrong language. Such mistakes can cause major
problems.
It is often the promotional strategy
that creates mistakes. The perception of the product characteristics
plays an important role in the international marketing strategy.
One must realize that the importance’s of a certain product traits vary
from country to country. Multinational corporations, therefore, must
consider varying promotional tactics. Adapting the product but using
the same promotional mix is a strategy used when a product will not appeal
to different local tastes. For example an American cheese company
may need to use different ingredients when making cream cheese for the
markets of different countries. The most expensive strategy is adapting
to both the product and its promotion. This strategy may be required
when neither the existing product nor its promotion would appeal to foreign
markets. In some cases, the international firm may develop a completely
new product for a foreign market. It can be very costly to create
a new product line for a foreign market. The distribution strategy
used sometimes depends on the firm’s international organization.
It does not matter if it is licensing, exporting, or manufacturing in the
host country. International marketers use existing distribution channels
for the most part. Distribution channels link the producer of a product
to the consumer or industrial user. This international marketing
channel is sequence of marketing organizations from nation to nation that
directs the flow of products. Most industrial products use shorter
channels.
One of the most basic levels of international
marketing is licensing. A license is a contractual agreement in which
one firm permits another to produce and market its product and use its
brand name in return for a royalty or other compensation. This grant
may be in the form of a direct sale of rights or be limited to a certain
period of time. International licensing can be tied to joint ventures between
the parent and the subsidiary. For example, an American candy
manufacturer might enter into a licensing arrangement with a British firm.
The British producer would be entitled to use the American firm’s candy
formula, and packaging to advertise the candy as though it were its own.
The advantage of licensing is that it provides a simple method of expanding
into a foreign market with no investment. However, if the licensee
does not maintain the licensor’s product standards, the product’s image
may be damaged. Another disadvantage is that a licensing arrangement
does not usually provide the original producer with any foreign marketing
experience. Technology licensing is a conceivable alternative to
the exportation of finished products through intermediaries or to the different
types of capital involvement, which could be chosen as an international
strategy. Many companies use intercompany licenses to protect the
intellectual property of the parent company that is held by the subsidiary,
and to allow for payments by the subsidiary to the parent of certain license
fees. Licensing is also dependent upon product characteristics.
Products subject to rapid technological change are also good licensing
candidates. For most large companies licensing is designed as a means
to enter secondary markets. The potential licensor must look at legal
and financial considerations. Many times the decision to license
has been made since the company has no other alternative because the government
restricts direct investment through controls on foreign ownership or because
it restricts the development of marketing network by a number of tariff
barriers. Licensing allows the licensor to enter into foreign markets
with a low financial risk. The decision to license is a complex one.
Many licensing relationships do not succeed because the parties fail to
understand each other’s agenda.
The creation of joint ventures sometimes
prevents all the problems encountered by a company when going overseas
from occurring. With the combined expertise and efforts of local
and foreign firms, many problems will be eliminated. A joint venture
is a partnership that is formed to achieve a specific goal or to operate
for a specific period of time. International corporations may enter
into joint ventures. Most joint ventures were formed to share the
extremely high cost of exploring for offshore products. A company
should create a joint venture only after giving it some consideration.
Many problems occur when company’s fail to thoroughly investigate potential
partners. Licensing decisions are as difficult to analyze as those
decisions involving the creation of a joint venture. Failure to make
the correct decisions at the right time can result in the loss of substantial
long-range business prospects and profits.
A firm can also manufacture its products
in its home country and export them for sale in foreign markets.
Like licensing, exporting can be a relatively low-risk method of entering
foreign markets. Unlike licensing, it is not an easy task.
Exporting opens up several levels of involvement to the exporting firm.
On the basic level, the exporting firm may sill its products to an export/import
merchant. This merchant assumes all the risks of product ownership,
distribution, and sale. It may purchase the good’s in the producer’s
home country and assume responsibility for exporting the product.
The exporting firm may also ship its products to an export/import agent.
The export/import agent arranges the sale of the products of foreign intermediaries
for a commission or fee. The agent is an independent firm that sells
and may perform other marketing functions for the exporter. The exporter
retains title to the products during shipment and until they are sold.
An exporting firm may also establish its own sales offices in foreign countries.
These installations are international extensions of the firm’s distribution
system. The exporting firm maintains control over sales, and it gains
both experience and knowledge of foreign markets. Eventually, the
firm may develop its own sales force to operate in conjunction with foreign
sales offices or branches.
Pricing is a very important factor in international
business. The pricing system more common in international marketing
is cost-based pricing. Cost-based pricing is not as popular in domestic
marketing as it is in international marketing. Using this simple
method of pricing, the seller first determines the total cost of producing
or purchasing one unit of the product. The seller then adds the amount
to cover additional cost and profit. The cost added is called the
markup. The total cost of the markup is the selling price of the
product. Many smaller firms calculate the markup as a percentage
of their total cost. Markup pricing is easy to apply, and it is used
by most businesses. However, it has two major flaws.
The first is the difficulty of determining an effective markup percentage.
If this percentages too costly, the product may be overpriced for its market.
On the other hand, if the markup percentage is too low, the seller is "giving
away" profit that could have earned simply by assigning a higher price.
In other words, the markup percentage needs to be set to account for the
working of the market, and that is very difficult to do. The second problem
with markup pricing is that it separates pricing from other business functions.
The product is priced after production quantities are decided upon, after
cost are incurred, and almost without regard for the market or the marketing
mix. To be effective, the various business functions should be integrated.
The different types of pricing can vary
in international marketing. Geographic pricing strategies deal with
delivery cost. The seller may assume all delivery cost, no matter
where the buyer is located. The seller may share transportation cost
with the buyer to pay the greatest part of delivery cost. When a
foreign product enters a country, there is a tax added to the cost.
Import duties are designed to protect specific domestic industries by raising
the prices of competing imported products. The importer first pays
most of the import duties. After the importer pays the price
it is then passed on to the customers through higher prices. These
higher prices are usually less competitive. The cost of shipping
and complying with other various regulations can also add to the pricing
method. Prices are also effected by exchange rates, especially by
changes in these rates. Financial limitations are normally imposed
through exchange rates. It is required to convert local currency
to foreign currency at government-imposed exchange rates. Because
of the added cost and uncertainties in the exchange rate, prices tend to
be higher in foreign markets than in domestic markets.
An important economic consideration
is the distribution of income. The distribution of income, especially
discretionary income, can widely vary from nation to nation. Discretionary
income is of particular interest to marketers because consumers have more
input in the spending of it. Income creates purchasing power.
International marketers tend to concentrate on higher income countries
as either personal, disposable, or discretionary. For obvious reasons,
marketers tend to concentrate on higher income countries. Some producers
have found that their products are more likely to sell in countries with
low income. As in domestic marketing, the determining factor is how
well the product satisfies its target market.
International marketing encompasses
all business activities that involve exchanges across national boundaries.
A firm may enter the international market for many reasons. Whatever
the reason international marketing can provide and efficient way of entering
the market. A firm’s marketing program must be adapted to foreign
markets to account for differences in the business environment and target
markets form nation to nation. The marketing mix may require the
modification of cultural, social, economic, and legal differences. Foreign
marketing requires the understanding of various additional costs, which
tend to increase the prices of exported goods. The marketing program
of an international company must adapt to the necessities of a foreign
market. The strategies it uses to accomplish a firm’s marketing goal should
be the main priority of the marketing program. False assumptions frequently
cause expensive mistakes in the market. The importance of international
marketing
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