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INTRODUCTION TO INTERNATIONAL MARKETING

 

INTRODUCTION

 

Today, more and more businesses are exporting, importing and/or manufacturing their goods with other countries.  The companies that are not involved in international business also feel the effects of their customers and competitors that are doing business overseas.  As competition continues to increase, the number of companies doing business with  the United States will  only  continue to decrease.1

 

There are many companies that sell  a large portion of their goods overseas and depend on those profits to survive.  Now companies do not look at the United States as their only opportunity for business but look at the whole world as a possible place for their business activities.

 

When companies decide to go overseas with their products there are many environmental forces that the marketer will have to confront and adapt to.  For example, the foreign uncontrollable elements include:  political/legal forces, economic, competitive   social  and cultural forces, the level of technology, physical  and geographical.  The marketer may find it easier to deal with the marketing controllable, i.e.,  marketing mix or 4 P's and domestic uncontrollable as compared to the foreign uncontrollable.

 

This chapter will explain what international marketing is, its task and how to deal with the marketing controllable and domestic and foreign uncontrollable.  Also addressed is the issue of adjusting to the environment and the effective use of the SRC.  Next, steps will be discussed on how a company becomes international and how to make the marketing effort successful.

 

INTERNATIONALISM OF UNITED STATES BUSINESS

 

Because of the increased competition that the United States is facing from domestic and foreign firms, the United States has been selling its products in foreign countries.  Many products that the average American uses or comes in contact with are not made in the United States. Japanese products are more widely bought in the United States  For example, 30% of television sets and 50% of radios and motorcycles that are bought in the United States are Japanese products.

 

Many foreign firms have also made names for themselves in the United States such as Norelco (Holland), Libby (Swiss), Baskin Robbins (English), etc.2

 

The United States has found that the return on foreign investments is usually higher than on investments in the United States.  Reasons for this include use of cheap labor and an increase in the economic well-being of other countries which created a ready-made market for United States made products.3

 

Other reasons for the increased international business is the remarkable growth of the international economy after World War II.  For example, the international monetary framework was developed and this facilitated the transfer of goods and services between countries.  Also the International Monetary Fund (IMF) was created which set guidelines for the devaluation and reevaluation of currencies.4

 

Improvements in communication systems have made it possible to travel all over the world (thus encouraged face-to-face communication); information systems have improved thereby increasing the ability to transmit data electronically.5

 

INTERNATIONAL MARKETING DEFINITION AND TASK

 

International marketing is the performance, in more than one nation, of business activities that direct the flow of a company's goods and services to consumers or users for a profit.6  It is the human activity directed at satisfying consumer needs and wants through an exchange process across national boundaries.  This definition differs from domestic marketing in that international marketing involves marketing in more than one country.  The marketing processes and concepts are universally accepted when marketing in a domestic or foreign country.

 

What makes international marketing so uniquely different from domestic marketing lies within the environment in which the marketer is concerned.  Most American firms prefer domestic to foreign marketing.7  Domestic marketing is simpler and safer.  Foreign marketing involves a range of unfamiliar problems, as well as strategies to deal with  uncertainties found in a foreign market.  International marketing involves many cultural differences that affect the success or failure of a marketing plan in a foreign country.

 

There are many uncontrollable elements that can affect the outcome of marketing plans.  Such elements as competition, culture, legal, and government controls can determine the outcome of the plan.  Marketers cannot control the uncontrollable elements, but must learn to adapt to them or, in other words, must manage them.  International marketers find the challenge in dealing with these uncontrollable elements by learning to mold the controllable elements - price, product, promotion and place (distribution) - within the framework of the uncontrollable elements.8  More about the controllable and uncontrollable elements will be discussed later on.  Even though the marketing concepts are the same in marketing domestically or internationally, the environment is extremely important because it is changing within each country, as well as from country to country.

 

The international marketer's main task or concern is to understand and deal with the problems created by these changing environments.  There are many similar uncontrollable elements common to many countries, as well as unique uncontrollable pertaining to each foreign country.  It is the marketer's job to be able to recognize these uncontrollable and implement an appropriate plan in relation to them.

 

CONTROLLABLE ELEMENTS

 

The marketer is highly concerned with the controllable elements in the marketplace.  These controllable are product, price, place and promotion.  The marketer can get a  product produced or develop  an attractive product at a price consumers would be willing to pay, as well as adopt a successful marketing plan that would aid in moving the product quickly through the distribution system and onto the final customer.  The marketer must adapt these controllable elements to the changing market conditions encountered in a foreign country.  The marketer adjusts these four P's around the consumers' needs and wants.

 

There are different product strategies that can be applied when marketing internationally:  straight extension, which is marketing the same product without a change; product adaptation, which alters the product to meet the cultural differences; and product innovation, which is creating a totally new product.

 

When promoting a product abroad, marketers may choose to use the same advertising theme in all countries they market to or develop a new advertisement especially for that country.  Both strategies can be successful depending on the particular product and the country involved.

 

Marketers will usually offer a lower priced product in a foreign country.  This depends on the average income of the country involved.  When deciding what channels of distribution are to be used, the marketer has to determine if the use of wholesalers or retailers, or direct selling would work best in the particular country.

 

Again, companies have to decide on the extent to which their product, promotion, price, and distribution should be adapted to individual foreign markets.

 

UNCONTROLLABLE ELEMENTS

 

The domestic environmental elements can have a direct effect on the success of a foreign venture and these include political forces, legal structure and the economic situation in the home country.

 

A political decision that involves domestic foreign policy can have a direct effect on a firm's international marketing success.  For example, the United States can restrict trade with another country.9  If the United States is experiencing unemployment, it may restrict imports so the economy can be stabilized.

 

The foreign uncontrollable elements include: political and legal forces, economic forces, competitive forces, level of technology, social and cultural, and physical and geographical.  The international marketer must analyze all these elements in order to assess the opportunities and threats that exist in a particular world market. More importantly, marketers must also analyze the company's capabilities and weaknesses.  By doing this, the marketer can determine if the company can survive in a foreign market.10 In simple words, if a company markets to 150 countries, it must then manage 150 uncontrollable elements, i.e., 150 social and 150 legal.

 

Governments' influences in foreign countries are an important consideration - there are various tariffs, taxes, regulations and codes that may hinder a company's survival if the company does not adhere to these codes properly.  For example, when a company ships their goods to a foreign country and they are improperly packaged, that country can impose severe penalties  to the company.11

 

The cultural factors in a country can also affect a company's marketing plan in a foreign country.  For example, when trying to research a market, the company may not be able to find out correct information on national production goals, Gross  National Product, and per capita income because this information is either not published or is unavailable. If it is available, the data is usually inflated or deflated.  Conducting surveys to assess a country's needs is also difficult because people may not understand what is being asked and may be interpreted differently. There are also problems in countries where there are no telephones or numbers on houses and street corners.12

 

ENVIRONMENTAL ADJUSTMENTS AND SELF REFERENCE CRITERIA/ FRAME OF REFERENCE

 

As mentioned earlier, uncontrollable elements are a strong determinant when marketing in a foreign country.  In order to adjust or adapt the marketing plan to a foreign country, the influence and impact of these uncontrollable elements has to be examined very closely by the marketer.

 

Basically, the uncontrollable elements make up the culture of the country.  When  marketers market a product in the United States, they usually are unaware of the impact culture has on their marketing plan.  They  react in a manner acceptable to our society without thinking about it because they are culturally responsive to our environment.13

 

Cultural Adjustment

 

Probably one of the biggest mistakes a marketer can make is to assume that a product socially accepted in the United States will also be accepted in a foreign country.  The most challenging task for international marketers is the task of cultural adjustment.  They have to adjust their marketing plan to a culture that is new and unfamiliar to them. The other problem is to keep up with the changing culture. Culture is human made. We constantly add new cultural variables to it. Once upon a time  lolly-pops were distributed in schools and now condoms are about to be.  

 

The way in which people consume the priority of needs and wants they attempt to satisfy, and the manner in which they satisfy them are all effects of the culture in which they live.  Culture is the sum of beliefs, knowledge, customs, laws, religion, and various other elements acquired by people in the society in which they live.14  It is known that many segments of the American public differ in such cultural elements.  If such diversity exists between segments of a similar culture, then even more diversity exists between the members of two or more societies.  International marketers must understand the differences in different societies so that they can develop appropriate marketing strategies to effectively penetrate each foreign market of interest.15

 

When marketing a product or service in a foreign country, the marketer must be aware of self reference criteria (SRC) or, simply stated, the frame of reference he or she is using when making marketing decisions.  "Judgments are derived from experience, which is the result of the cultural process."16  Many times marketing efforts have failed because of unconscious decisions by the marketers based on their frame of reference that was acceptable in their own culture.

 

Value of Time

 

A person's self reference criteria can lead to failure of a marketing plan when making a decision based on one's own cultural values, experiences, and knowledge as the basis for the decision.  When faced with a marketing decision in another country, marketers tend to react instinctively to their own cultural experience.  An example of this is the meaning and understanding of "time" in a foreign country.  Americans tend to be rushed and when a business appointment is for a particular time, we find it very rude to be late for that appointment.  But in many other cultures it is sociably acceptable to be very late to an appointment. It shows authority and power to come late; meaning that you do not have to  answer to anybody. On the other hand, people feel that the clock is human made, therefore, they do not have to worry about it.

 

One's SRC tends to prevent us from understanding that there are cultural differences and from being aware of these differences.  Understanding and dealing with the self reference criteria are important tasks for the international marketer.  The most effective way to control the influence the SRC has on us is to recognize when we are relying on it to make a decision.

 

When making a business decision, it is appropriate for the marketer to engage in cross-culture analysis excluding the difference of one's SRC.  This analysis will aid the marketer with sufficient understanding of the differences in culture to facilitate the design of effective marketing strategies for the country involved.

 

            The following are steps for the analysis:

 

            1.  Define the problem or goal in terms of United States culture.

 

            2.  Define the problem or goal in terms of the foreign culture, making no judgments.

 

            3.  Isolate the SRC influence and try to see how it distorts the problem or goal.

 

            4.  Redefine the problem or goal without the SRC and find an optimal solution.

 

It is important to note that much of this analysis requires extensive understanding of the cultures involved and this can be difficult because much of our cultural behavior stems from the unconscious level.

 

BECOMING INTERNATIONAL

 

When a company decides to become international, it must decide how to enter the market and how involved it wants to be in international operations.  There are six basic decisions that a company will consider when deciding to market internationally.  The first decision involves appraising the marketing environment.  This includes looking at the economic, political, and cultural environment of the country.  The second decision is to decide whether to go abroad.  In this stage the company appraises its objectives and goals and decides if the opportunity to market abroad is appropriate. In the third decision, the company has to determine which markets to enter.  It looks at such elements as market size, growth and the risk level.  The fourth decision to make involves how to enter the market.  Should the company export or manufacture abroad?  The fifth decision involves deciding on the marketing program.  The four P's play an important part in this decision.  And the sixth question is based on deciding on the marketing organization.  Should the corporation extend its headquarters abroad or just retain  exporting departments within the corporation in the United States?17

 

There are also certain degrees of marketing involvement.  The first degree of international marketing involvement is actually no foreign marketing.  The company at its present state does not actively pursue foreign customers and just relies on sales with trading companies and other foreign customers who come directly to the firm.18  The next phase is infrequent foreign marketing.  In this phase, most companies start selling overseas by accident.  A temporary surplus of goods may prompt the company to do this.  As time goes on, the foreign customers will begin to ask for them; thus demand is created.19  This is the next stage - regular foreign marketing.  In this stage, the United States company is actively committed to producing certain goods for foreign markets and adapts to their specific needs.  Usually the company has an office or manufacturing plant in that foreign country.  The final state is having global market operations.  Here, companies are totally committed in international marketing operations.  Companies make up specific marketing strategies and targets for the markets and will modify the marketing plan to adapt to the current market conditions.20

 

CHANGES IN MARKETING ORIENTATION

 

As a company moves through each of these stages it will have to increase the amount of marketing activity in the foreign country.  At first a company will just export goods and rely on the export firm to handle the marketing activities.  When the company becomes fully committed to international marketing, it will take on the marketing itself and create a marketing plan with goals and objectives.21  Marketers must also adapt their plan to the changing environments, communication problems, and countless other difficulties that they will encounter in foreign markets.22

 

GLOBAL MARKETING

 

Marketers use many words when referring to the term international marketing; they may use foreign marketing, multinational marketing, or transnational marketing.  They all basically imply marketing in more than one country.

Global marketing is a newer term and most marketers agree that it has a somewhat different meaning than the above words.  The global marketer "sells the same thing in the same way everywhere."23  Many feel that segmenting markets on political boundaries and producing special products for each country is cost inefficient.  The global corporation views the world as one market and sells a global product.  Many marketers have not accepted this definition because it fails to include the cultural adaptation needed to market in different countries.  Many feel that it depends on the type of product when determining if global marketing can be successful.  Some products require more adaptation than others.  Coca-Cola is acceptable in most countries and requires little adaptation; while snake meat would require much adaptation to be successfully marketed in the United States

 

ORIENTATION OF INTERNATIONAL MARKETING

 

In order to be successful in international marketing the marketer must begin by acquiring knowledge of the environments within which they will be working and what influences the environment will have on the marketing process.

 

Aspects such as the cultural and social orientation of the country, its stage of development, its language, distribution systems, legal environments, and many more uncontrollable elements must be taken into consideration and adapted to the specific market.