Scope of international marketing Sample Assignment
Scope of international marketing
It is a set of activities performed to research about customers and product, set pricing, promote and distribute the services and goods of a company to its users in more than one country. In short, expanding your marketing activities in more than one country to operate your business is international marketing (Johansson, 2000). The concepts, process, techniques and criteria are applicable universally whether you are conducting business in California, Germany or London but the marketing strategies can be changed drastically due to difference in environment. Implementation of marketing differs with the change in country due to the problems arising from unknown reasons. The task of marketing in international market is far more challenging than conducting it in domestic country. Because when a company is going international, there are some uncontrollable elements which should not be tried to control but to adapt accordingly by effectively molding the factors of marketing which are controllable like product, pricing, advertisement and distribution (Chen, 2005).
Conducting business in foreign markets often give shocks regarding the cultural, economical, legal and political environment which are uncontrollable factors. To mold the controllable elements of marketing in foreign market, it is of utmost importance to effectively evaluate the impact of each uncontrollable factor to your business. International marketing depends heavily on deciding about choosing your standardize marketing strategy across all countries or adapt it to local environmental needs of each foreign market. The questions regarding the development of marketing mix is also crucial in international marketing. Not only the overall strategy but each element of marketing mix needs standardization or adoption to new environment (Tihany et al, 2005).
Rationale and routes to enter international market:
There are multiple reasons to go international for marketing to conduct your business multi nationally. First and the basic reason are to grow revenue and profits by expanding your market base which is the core reason of conducting a business. Increase in number of potential customers increases the probability of company’s sales growth which ultimately leads to higher profits. Increase in sales due to large market base will eventually help company to gain economies of scale which will help to decrease cost and automatically improve profits. This decrease in profits due to economies of scale can provide company a competitive edge which will not only help the growth in new market but it can also help to neutralize or impressively fight against the cut throat competition in existing market. This low cost due to extended customer base and higher sales volume can give competitive advantage and it can be sustained for a long period of time as it is not easy to intimate by competitors. It is possible to increase the market share of existing market just because of economies of scales created by entering into new market (Johansson, 2000).
Expanding to new markets will bring innovation in your products and processes of conducting business due to involvement of people belonging to entirely different business environment. This diverse nature of work force will give different ideas to your company to develop products and to operate business. By having multiple markets for a business, company is not dependant on the single market. If a specific country’s market is low, you can be stable due to increase in sale in other country’s market which actually decreases your dependability on a single market (Biggs, 2013).
Cut throat competition in home market is one of the main reasons companies go global. Due to saturation of market in their home country, the chances of future growth declines along with the level of profitability. In order to survive or grow in this situation, companies try to find a market less saturated to boost sales and maintain a continuous growth for future. Another rationale to go international by exporting your product is the rebate on exports by the government of country. Countries often provide rebates or other incentives to those companies who put efforts in increasing the exports of countries. Exporting your product to other companies does not only help the company’s growth and profits but it also enhances the stability of overall economy. Other than incentives by your countries, there are some countries who want to attract the foreign investment by giving multiples financial incentives to new entrants. For Example, if a country wants to grow in Automobile industry, it can attract the Automobile manufacturers of world by making this industry a tax free industry for next five years. This benefit will give additional benefits by cutting down the cost to 20 to 30 percent of already existing market (Biggs, 2013).
There are different feasible and profitable routes to enter into a particular market. The feasibility of each rout depends upon the company as well as the environment of the new market. Company must have the abilities to conduct business according to chosen form of entry mode. According to Blomstermo et al (2006) , there are few routes to enter into new market which are franchising, having joint ventures, Greenfield project , doing mergers and acquisitions , becoming an exporter , making a strategic alliance , through foreign direct investment and whole subsidiary ownership. Each route with its advantages and disadvantages along with examples will be discussed in detail later in the report.
Criteria to enter international market:
Companies need to think with extreme care when deciding about which country to expand international as it is not an easy decision to make out of 200 countries. The company can sort out the attraction in terms of region and then go deep to analyze the attraction of a country. The attraction of the region or country’s new market does not only depend on country’s elements but it also depends on the type of business and their internal capabilities. Company must analyze if they have enough capabilities to run an international business or they need to upgrade its capabilities (AMC Agency, 2015).
There are few elements which must be given importance while selecting a new market. Starting with analyzing the growth potential of each market and how much this country needs the products and services your company offers. It is important to identify the economic stability and growth, GDP ratio, income level and purchasing power of the people of country. Along with this, find out the level of need of your product in the new market. Next is to find out the level of competition within the market which is crucial to see if it is saturated or have enough long term growth. The attractiveness of market in terms of competition can be found out by applying Porter’s five forces model. It will give an in depth view of market attraction for your company’s product. If the foreign market seems to be attractive after the analysis of Porter’s five forces, it would be a good choice to move with further analysis on this market (Canabal and White, 2008).
The nature of market regarding products and services should be researched to know if the market requires adopting the local existing products or it can gain enough sales with your original products. This happens mostly in case of food business where sometimes the chain has to adopt the product according to local taste. Adoption is not bad if the cost of adoption is smaller than expected return from the market. For example, if McDonald start selling and promoting its hamburger in an Islamic country, this would be a failure due to prohibition in their religion. It is must for McDonalds’ to adopt its products according to their religious requirements to be successful in the country. Along with prohibition of Hamburgers, the meat used by McDonalds’ must also be Halal (Canabal and White, 2008).
Financial structure needs to be asses regarding how to fund the expansion? Whether to take loan from home country or host country and what are the financial systems of host country including tax systems and incentives to business? When company is entering into new market, it should realize if they need to change their operating model or the same model can be replicated. The operating environment of new market can be harmful but it can be profitable and less cost effective and generate economies of scale (AMC Agency, 2015).
Companies have to decide how to market and sell their products in new markets. While advertising, the language barrier may generate difficulties in translating core marketing strategies of company. This department needs special attention to translate the core objectives with same meaning in local language and style without having different perceptions. Companies require skills human resource to operate business and when you are entering in a new market, the availability of required resource is vital. Company has to see if the required level of expert or manual human resource is available or not. If yes, what about the cost? And if not, is it possible to export your home country human resource to new market with same effectiveness (AMC Agency, 2015).
The last important element to consider is the tax and regulation in the country. Is the country safe to conduct business and your assets are protected? Regulations regarding, export, import, manufacturing, trading and taxation can hugely impact the business in country. There are countries whose taxation and regulations are welcoming for new business while in some cases, the regulations are the biggest hurdle for entering in the market (AMC Agency, 2015).
A well thought out analysis of all above mentioned factors will help a company to understand the attraction of a new market, the potential of its long term growth and the abilities a company require to operate business in new market. This home work would eliminate many future hurdles a business can face in new market. Adapting this proper process of entering into new market can defend company to make harmful decisions.
International market entry strategies:
According to Belu and Caragin (2008), there are different ways of entering into a new foreign market which has impact on company’s abilities in terms of finance, marketing and human resource. Adopting a method of entry hugely depends on the type of capabilities organization posses. Choosing the mode of entering into new market is the most critical decision of expanding your business (Boso et al. 2016). A right choice of entry can lead to proposed success otherwise it can become a disaster for company as in the case of Merrill Lynch in Japan. Hill was unable to get success in Japan initially due to adoption of an entry mode which was inconsistent with the environment of country. Hill researched about the market attractive which was positive but he did not pay much attention to find out how to enter in Japanese market? Despite of industry attractive, if company does not adopt a suitable way of entering, the chances of success are least (Hill, 2002).
There are some factors which impact the strategies of entering into new market which includes the distance between the host and home country, the government attitude towards welcoming a new business, competition in market, entry barriers , legislation , taxation , economic and political stability. Keeping in mind all above factors, a company decides about the feasible mode to enter into a particular foreign market. There are some countries where it would be extremely difficult to conduct business without partnering with local companies. So it all depends on the above mentioned factors along with the internal capabilities of company to choose the mode of entry. If a new market requires acquisition to enter, a company has to see if it has the abilities to operate in an acquisition. Contradiction in capabilities with the entry mode would affect the operations of company (Isa et al, 2012).
Blomstermo et al (2006) states the feasible methods of entering into new foreign markets which are franchising, having joint ventures, Greenfield project , doing mergers and acquisitions , becoming an exporter , making a strategic alliance , through foreign direct investment and whole subsidiary ownership.
Franchising is a type of entry mode which is used extensively by international companies to expand their business into new foreign market. It is a method where a company sells its concept of business along with brand name getting a franchising fee along with a fixed proportion of profits. The advantages include, the local business who are purchasing the franchise understands the environment of market while profit sharing and limited control over operations are the disadvantages (Doherty ,2007).IKEA a multinational retails store dealing in furniture , is an example of entering into new markets like Sweden , India, Germany and many others through successful implementation of franchising strategy (Isa et al, 2012).
Exporting is a method where you manufacture the product in your country and sell it in the other country. There are three types of exporting method which are direct exporting, indirect exporting and cooperative exporting. Apple, Axon mobile and Chevron are all examples of expanding internationally through exporting (Belu and Caragin, 2008). Wholly owned subsidiary method includes acquisitions and green field projects. Acquisition is an extensive way of expanding into new market where two companies merged into one or one buys the other company to better conduct a business. Dell and EMC, Microsoft and Skype are the examples of this kind of expansion (Belu and Caragin, 2008).
Joint venture is a way where you make partnerships mostly with the local company of new market to better understand the operations of business. In this, the foreign company agrees to share equity and resources with the local company of host country or sometimes government authorities. Two types of joint ventures can be done which are, equity based and cooperative based joint ventures. The main benefit of this type of entry is, the host country get to know the tactics of working in new foreign market and it helps the company to deal with local hurdles effectively as the ventured partner knows the environment. Company possesses most of the control over the operations in joint venture as compare to other forms of entry modes. Vodafone and Telefonica mad e joint venture partnership to share mobile network. BMW and Toyota joined together on a research project regarding hydrogen fuel cells (Blomstermo et al., 2006).
Global versus local debate:
There has been a long debate from decades over the extent of adapting to foreign environment versus standardization of marketing practices while company is expanding its business in foreign markets. A basic strategic but most important decision is to decide whether to go for standardization of marketing mix and strategies and having a unique strategy across all countries or whether to adjust the marketing mix according to the unique attribute of each foreign market.
Standardization of marketing approach means keeping a common approach of researching and advertising about your market and product when going to conduct business multinational. Papavassiliou and Stathakopoulos (1997) claimed four reasons to use standardize marketing strategy. First, it allows companies to maintain a consistent identity and brand recognition across the globe. Secondly, it minimizes the confusion between the travelling consumers regarding brand. Thirdly, it helps company to develop a single useful and deep sighted approach as the same single approach is focused across the countries. And the last one is taking advantage of economies of scale for operations as well as marketing tactics. Standardization of marketing tactics across different countries is taken as mass marketing among the potential buyers across the globe. The factor which is key to success in multinational business is the standardization of its products, services and marketing as they view the market across the globe homogenous in nature. Factors which are favoring the standardization include economies of scale in research and development along with marketing and centralized management of internal operations (Keegan and Green, 2000).
On the other hand, adoption requires the company to adopt its marketing strategy according to the environment of new foreign market. Companies has faced several difficulties and failed miserable by having standardization marketing strategies in foreign markets.the lack of adaption to local requirements were the real cause of failures. Thus, the need of adoption according to new market environment is necessary to become successful (Kanso and Kitchen, 2004). There are enormous differences in wants, needs and perceptions of people across different regions. An image or style or logo can be perceived entirely different in two different countries. International marketing is subject to environmental factors like climate, income levels, cultures, education level, cost of labor, technological advancements and perceptions. A deep expert level analysis is required for all the factors to develop a strong and successful strategy to enter a new market (Paliwoda and Thomas ,1999).
There are authors who believed in maintaining a balance between adaptations versus standardization by rejecting the extreme approaches to either (Hennessey 2001). When a company involves in international marketing, local environmental factors are become more involved and impactful towards the decisions of a business and adoption of local marketing tactics by firm become a main concern in developing the strategy. But the adoption involves huge cost and overcome the benefit of standardization. So, it is vital for multinational companies to adjust the beneficial element of both approaches in their marketing tactics. Striking a balance between standardization and adoption is key to develop and implement an effective marketing strategy (Vrontis 2003).
For Primark as a retail fashion store, it is important to keep the elements of standardization which are helpful for going multinational. But as it’s a fashion brand and trend and perception of fashion changes with the change in culture and region. So, Primark must incorporate local elements of attracting customers in devising its marketing strategy. Deep researched combination of both approaches will help Primark to reap the benefits of both the concepts by taking advantage of low cost and maintaining a standard image of brand from standardize marketing and taking benefits of fulfilling and matching the perceptions and needs of local market by adoption. As Primark is a product which sells clothing directly to end consumers, so the perception of customers regarding the product is of most importance. By keeping the standardization elements of promoting themselves as a pillar of quality and comfort across any region, they can built a healthy image in the mid of customers.
International marketing mix:
When conducting business in new foreign markets, business has to realize which factors of marketing mix are required to be standardized and which required to be adopted by local needs. To what extent these factors should be standardized or adapted according to the environment and companies abilities. As discussed above , it is of vital importance to find out the balance for each factors of marketing mix in terms of standardization and adaption , let’s see each factor in detail that how it differentiates in international marketing (Doole & Lowe, 2004).
Standardization versus adaption of products:
Product or service is something which is offered to potential customers for some price charged by company which should satisfy the needs and wants of customers. No matter which market you are operating, it is necessary for the company to develop a product which offers the most benefits to customers to gain competitive advantage. It can happen if the product features meets the requirements of local consumers (Onkvisit & Shaw, 2004). In case of product, the objectives of business define how too much to adopt or standardize the product. Many multinational companies use standard industrial products in countries where the cultures are similar to each other. The requirements quiet match with the host country and keeping the product standard is beneficial in all terms to company. But if the cultural aspect and perceptions and requirements differ too much, then it is must for the company to change the product. If it is a food chain, a company has to adapt the taste of food according to host country. If chain is going to sell the hamburgers in as Islamic country, it would be a total failure (Hollensen, 2001).
In case of Primark, marketing department must consider the requirements of local market. Entering into new European or American country would not require many changes but if they enter into African or Asian market, it is important to adapt its fashion according to culture and the climate. Primark cannot sell the same fabric in the hot region of Asian or African market; they have to change its product which should be weather friendly. Primark has to keep in mind the culture, color preferences, brand names and packaging preferences of new market. Ignoring these factors would bring a stressful situation for the company in new foreign market.
Standardization vs. Adaptation of pricing:
Price is the amount of money charged against the product company is offering to its customers. The decision between standardization and adaption of pricing depends on several factors. Factors which enhance the important of adaption for pricing of products are high cost of operating in new market, high inflation rate, regulations and tariffs, and competitive environment of market. Factors which support the standardization of pricing includes decreasing transportation cost, reduction of trade barriers and improved communication (Keegan & Schlegelmilch, 2001). Companies normally set standardized pricing set by head office across the countries for business to business products as they are less sensitive towards pricing. While in case of consumer products, managers in the local market research about customer’s preferences and what can they pay for the required features and then establish the pricing accordingly. This will help company to gain greater success in new market success (Onkvisit & Shaw, 2004).
In case of Primark as it is a fashion brand which directly sells to customers, Primark should adapt the option of taking the local requirements of pricing into account. Research about what they are willing to pay for the fashion, quality, design and brand name of Primark. This will help Primark to gain the benefit of economies of scale by growing and expanding international.
Standardization vs. Adaptation of promotion:
Promotion is the process of communicating about your product by advertising, sales promotion, direct marketing and personal selling. Company has to decide about whether to create an advertising which work in all countries or it has be different with respective country (Keegan & Schlegelmilch, 2001). Standardize advertisement minimize the cost of company but it is important not to forget the people are different in different countries. It can be affected by language, religious factors, perceptions, culture and even body language. This shows the importance of adaption of advertising strategy but a minor change in advertisement according to needs can bring fruitful results by having little cost (Theodosiou & Leonidous, 2002).
Primark should modify its advertisement strategy and should communicate the required message to its customers without being effected by their perceptions and language. Primark must be able to communicate what it wants to communicate by deeply giving importance to such factors. It is vital for Primark to conduct a research about the perceptions of customers regarding particular type of advertisement to find out the best way to communicate your message.
Standardization vs. Adaptation of distribution (Place):
Distribution is the process of pricing company’s products to its customers for their ease and maintaining profitability for company. Standardization distribution is difficult because of the difference in transportation and distribution channels across the countries. The decision regarding distribution depends on the factors which are customers, local distribution systems and products. Company can standardize very little in terms of distribution but the room for adaptability is larger due to differences in local environment (Onkvisit & Shaw, 2004)..
For Primark, it is important ot find out what the customers local markets prefer in terms of distribution. Do they prefer to purchase it from local markets? Shops? Or super markets? Or online selling is the most feasible option for the customers. Depending upon the answers from the research about the above mentioned questions, Primark can devise an adapted distribution plan which is in the comfort zone of customers along with maintaining profitability for company.
International marketing approaches:
After deciding about standardization or adaption of marketing mix, companies needs to focus which approach to apply in achieving the success of marketing strategy. There are two main approaches to international marketing which are centralized and decentralized marketing.
In centralized marketing, the headquarters of the company takes most of the decisions regarding planning, execution and control of marketing strategy. This marketing approach is adapted when company decided to go for standardization of marketing mix across countries. Marketing requires little localization and the products are highly globalized. It would need to maintain a unique, stable and consistent marketing strategy across the globe which can be achieved effectively if the major decisions regarding marketing are made by central head office. It would keep the marketing strategy aligned across the globe for the company. For this, a marketing team of the company has to be competent enough to understand the variants of different countries and how to implement according to each country. Centralized marketing creates slower growth so it is important eliminate the hurdles causing the resistance in growth. But in case of localized marketing mix, applying the centralized marketing approach can lead to disaster due to lack of knowledge regarding the local requirements. Even if they are provided with the data, still it is less effective to develop a marketing plan by sitting in some other country when you are changing you marketing mix according to the local market (Destigter, 2014).
In this case of marketing mix, a company has to adapt the approach of decentralized marketing according to which most of the marketing activities are performed by the local department of marketing hired by the company, they posses better information regarding local requirements and they can develop and implement a more effective strategy as compare to people who are sitting in the head office. A major direction can be provided by the head office but main operational activities of marketing are developed by local marketers due to high involvement of localization in marketing mix. In case of standardized products, this approach would not work as this would not be able to align the strategy across the countries. The brand image of company will differ in each country which will damage its reputation. Company would also not be able to provide the exact message they want to at global level (Destigter, 2014).
In case of Primark , as localization in marketing mix is required at high level so the best approach would be to choose a decentralized marketing team who seeks the major guidance from head office. Then, develop a strategy which aligns with major head office directions and fulfills all the requirements of localize marketing mix. This would help Primark to actually implement the adaption made in marketing mix to promote its product and grow sales revenue by expanding its business.
Assessing competition in local versus international market:
The basic concepts will be same either the company is assessing local or international competition. But the extent and scope will be changed according to change in scope of market. There are four steps to analyze the competition in market which starts from conduction research, gather information regarding your competitors, analyze it and determine your position. In case of local market, the only competitors are companies in local market while in foreign markets; you have to deal with foreign as well as local markets. Keeping your position well maintained is important for foreign success. Because if you are losing your position in local market, chances of gaining economies of scale will be lower this will affect the foreign market operations. The scope of Porter’s five forces will be greater in international competition as compare to local competition. If the company has selected a particular country to grow in the whole region, then completion in the region including other countries should also be assessed in order to achieve regional growth. While in case of local, you are only required to assess the local competitors on the factors of Port’s five forces (Magee, 2007).
One important factor to consider the competition in new foreign market versus local market is the law regarding patents. In developing countries especially in sub continent, the patent laws are not executed properly and companies breaking the laws by copying the processes and products of other companies. Having a patent law can be considered the strongest and sustainable competitive advantage but in case of foreign market, it may not be sustainable due to weak legal system. This can create a huge impact on your assessment of market’s competition. There are economies in market where black economy is in large portion. The analysis of this type of completion where the black economy exist to large extent would be different as compare to your home country where every small business is documented and little elements of black economy is present. This black economy can lead you wrong information regarding the competition in existing market. So, its needs to be given special attention to find out the existence of extent of black economy (Magee, 2007).
Expanding business globally is the need of the day to sustain a continuous and future oriented growth. This has increased the importance of international marketing to develop and communicate your products and services to new market. Selecting a new foreign market is a difficult task which needs effort to find out the attraction of a particular foreign market. International marketing is also a challenging task for a company as it has to understand local dynamic and plan accordingly. There is a tradeoff between standardization and adopting of local environment when developing internal marketing strategy. We have seen in report the best approach is to use a balance of both in marketing mix of international products. The success of multinational business vastly depends on the balanced combination of standardization and adoption in terms of developing product and advertising it to its customers. This will help the company to maintain low cost, same brand image along with fulfilling the needs of new foreign market.
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