Introduction to International Marketing

INTERNATIONAL MARKETING

Section 1-A

International Marketing (IM) – is the performance of business activities that direct the flow of a company’s goods and services to consumers or users in more than one nation for a profit.

Factors to be considered in International Marketing

·         Uncontrollable forces in the macro environment.

·         Politics, culture, geography, infrastructure, distribution, technology, and competition which vary from country to country.

·         Risks are greater in international marketing.

·         One should be able to adapt the marketing mix to uncontrollable forces in the foreign market.

Self Reliance Criterion (SRC)

          This is the primary obstacle to success in international marketing. It is the unconscious reference to one’s cultural values, experiences, beliefs, and knowledge as basis for decisions.

          SRC can cause misunderstanding between different cultures. It is therefore very necessary to understand the concerned country’s culture. Example – the concept of time. (Filipino time versus American time)

International Marketing Activities:

          The Marketing Mix does not change in IM

·         Detailed analysis and potential marketers.

·         Planning and development of products – clearly defined in suitable packages that consumers want.

·         Distribution of products thru channels that provide service or convenience demanded by purchasers.

·         Product promotion to inform and educate about the goods and services.

·         Setting of prices which reflect the reasonable value (or utility) of products to consumers.

·         A technical and non-technical customer service both before and after a sale is made.

Differences between Domestic Marketing and International Marketing

1.       Consumer: You will be serving a different consumer, a different culture, a different taste.

Example:  In India, beef is unacceptable since Hinduism regards cows as sacred. McDonalds uses lamb meat for hamburgers. In the Philippines, contraceptive companies have to deal with Roman Catholic moral values while in other countries it is different. Taboos in other countries are acceptable in another.

2.       Purchasing Power: Developed countries has high purchasing power than developing ones.

3.       Product & Packaging: Example: In MacDonald’s, it is only here in the Philippines where spaghetti is served as part of the menu. MacDonald’s decided to include Filipino dishes in its menu. For Japan, burgers are served as teriyaki.

4.       Currency: Foreign Currency is a system that enables a country to exchange its currency with another country. In the Philippines, Banko Sentral ng Pilipinas (Central Bank of the Philippines) has 18 acceptable currencies in international transactions.

1.       US Dollar                                              10. Singapore Dollar

2.       UK Pound Sterling                           11. Hongkong Dollar

3.       Canadian Dollar                                 12. Australian Dollar

4.       Swiss Francs                                       13. Saudi Riyal

5.       Japanese Yen                                    14. Kuwaiti Dinar

6.       Euro                                                       15. Bahrain Dinar

7.       New Taiwan Dollar                          16. Indonesian Rupiah

8.       Thai Baht                                             17. Brunei Dollar

9.       UAE Dirham                                        18. Philippine Peso

5.       Payment Terms: In the Philippines, domestic trade payments are in cash, credit or in kind. In IM, payments are made through banks. The foreign customer opens an account with a local or a correspondent bank in his homeland in favor of the exporter in his Philippine bank.

6.       Physical Distribution: Locally in the Philippines have shorter haul. In IM, longer haul (time of shipment of the goods).

7.       Language: English is the international business language. In some instances it depends on the country concerned.

8.       Communication: Modern technology is being used.

-          Cellular phones, Short Messaging Service (SMS)

-          LAN (Local Area Network) installations

-          Mobile Computers (Laptop)

-          WiFi (Wireless Fidelity) Hotspots in restaurants, hotels, airports and other areas.

Marketing Choices for companies in IM:

1.       Domestic Exporter: Operates exclusively within a single country.

2.       Regional Exporter: Operates within a geographically defined region that crosses national boundaries. Markets served are economically and culturally homogenous. If activity occurs outside the home region, it is opportunistic.

3.       Exporter: Runs operations from a central office in the home region, exporting finished goods to various countries. Some marketing, sales and distribution occurs outside the home region.

4.       International Exporter: Regional operations are somewhat autonomous, but key decisions are made and coordinated from the central the central office in the home region. Manufacturing and assembly, marketing and sales are centralized beyond the home region. Both finished goods and intermediate products are exported outside the home region.

5.       International to Global Exporter: Runs independent and mainly self sufficient subsidiaries in a range of countries. While some key functions (research and development, sourcing, financing) are decentralized. The home region is still the primary base for many functions.

6.       Global Exporter: Highly decentralized organization operating across a broad range of countries. Each function- including R&D, sourcing, manufacturing, marketing, & sales- is performed in the location(s) around the world most suitable for that function.

Reasons why companies venture into IM:   The main reason is Profit – (Dollars).

 Internal Reasons:

a.       To utilize the firm’s excess capacity – the domestic market can’t fully absorb optimal production capacity. Example: Japan (small country with big production)

b.      To take advantage of higher purchasing power in the overseas market – especially when there is recession in the domestic market.

c.       To take advantage of government export promotion drive – many governments encourage and support firms to go international to generate foreign exchange. Incentives may include financial, technical, and administrative assistance.

d.      To find other markets – as a firm’s product experiences a decline in sales at home market. To survive.

e.      To find other markets – as stiff competition in the domestic has reduced home sales. This is a risky choice because it may lose its home advantage.

f.        To diversify the firm’s base in different geographic locations.

-          To prevent its vulnerability in a specific geographic location which may be experiencing political and economic instability.

-          It may pull out from a restive/politically unstable location and transfer to a more peaceful location.

-          It may simply pull out to escape the regulations and customs restrictions and transfer to a more liberal country.

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External Reasons:

a.       To take advantage of tax incentives & promotional packages – some countries especially developing nations offered offer these to foreign investors.

b.      To take advantage of low labor and raw materials – Production costs are cheaper in developing countries. Firms from developed countries may set up assembly and manufacturing plants in developing countries.

c.       To take advantage of access to new technologies in foreign countries – more technological exposure in foreign countries vis-à-vis the home market.

d.      To take advantage of the government’s import promotion drive- in Japan, firms are encouraged to import to improve the balance of payments.

Five Phases (Stages) of International Marketing (These phases can be overlapping)

1.       No Direct Marketing – concentrates on the home market. Products may reach foreign markets through trading companies, wholesalers, distributors, and foreign buyers who come directly to the firm. There is no direct sales effort, the firm’s interest is stimulated when there is an order.

2.       Infrequent Foreign Marketing – there is foreign sales when a firm experiences temporary surplus. No formal effort to maintain foreign sales. When domestic market can absorb temporary surplus, foreign sales activity is withdrawn.

3.       Regular Foreign Market – The firm allots a part of its production capacity to be marketed regularly to foreign markets. It may have its own sales force to market its products or employ middlemen who will do foreign marketing.

4.       International Marketing – Fully committed to international marketing. It seeks markets throughout the world. There is planned and regular production. At this stage, the firm becomes multinational or international firm dependent on foreign revenues. The firm views the world as a series of separate markets, including its home market, with different characteristics and employing different strategies.

5.       Global Marketing – The firm treat its home and international markets as one. Standardized products are produced as markets are treated as similar. This leads to a cost-effective global strategy.

International Marketing  has so  much effort and risks then why Filipinos go marketing internationally.

Benefits: Most common benefit – Filipinos want dollars.

·         Use of indigenous materials

·         Increased overall level of technological development

·         Expansion and development beyond the home market

·         Decrease in unemployment rate as more labor intensive companies are established (job creation)

·         Increase foreign exchange earnings

·         Use of excess production

·         Level out seasonality of products

Factors Influencing International Marketing

International Marketing Variables

Controllable	Uncontrollable Domestic	Controllable International
Product	Competition	Cultural Forces
Price	Political forces	Distribution
Promotion	Economic Situation	Geography & Infrastructure
Place		Level of Technology
Physical Distribution		Economic Forces
Presentation		Political Forces
		Competition