International Marketing

Today, the marketing organisations are not restricted to their national

borders. The entire world is open for them. New markets are springing
forth in emerging economies like – China, Indonesia, India, Korea,
Mexico, Chile, Brazil, Argentina, and many other economies all over the
world. In today’s global market opportunities are on a par with the
expansion of economies, with the increasing purchasing power, and with
the changing consumer taste and preferences.

The economic, social, and political changes affect the practice of

business worldwide, the business orgaisations have to remain flexible
enough to react rapidly to changing global trends to be competitive.

The objective of this post is to make you understand the term

‘International Marketing’ and nature and scope of international
marketing.

Definitions of International Marketing

According to Kotler, "Global marketing is concerned with integrating and
standardizing marketing actions across a number of geographic
markets."

According to Cateora, "International marketing is the performance of

business activities that direct the flow of goods and services to
consumers and users in more than one nation."

According to Cateora and Graham, "International marketing is the

performance of business activities designed to plan, price, promote, and
direct the flow of a company’s goods and services to consumers or
users in more than one nation for a profit."

According to Terpstra and Sorathy, “international marketing consists of

finding and satisfying global customer needs better than the competition,
both domestic and international and of coordinating marketing activities
with in the constraints of the global environment.”
International marketing is different from domestic marketing not only in
scope but also in nature. Following are the nature and scope of
international marketing.

Nature of International Marketing

1. Broader market is available – Unlike domestic marketing the market
is not restricted to national population. Population of other countries can
also be targeted in international marketing.

2. Involves at least two set of uncontrollable variables – In domestic

marketing the marketers have to interact with only one set of
uncontrollable variables. In international marketing at least two set of
uncontrollable variables are involved or more if the marketing
organization deals in more countries.
3. Requires broader competence – Special management skills and
broader competence is required in international marketing/business.
4. Competition is intense – An international marketing organization has
to compete with both the domestic competitors and the international
competitors. Hence, the competition is intense in international marketing.
5. Involve high risk and challenges – International marketing is prove
to various kinds of risk and challenge like – political risk, cultural
differences, changes in fashion and style of foreign customers, sudden
war, changes in government rules and regulations, communication
challenges due to language and cultural barriers, etc,.

Scope of International Business

The significance of international business is better than ever as companies
around the world become enhanced connected. It is always played a major
role in a country’s growth and economy. International business is very
important for the sustenance of a country as the gross domestic product or the
GDP is reliant on good foreign business. It is a very broad term because it
holds various types of rules and regulations. It refers to business activities that
take place transversely national frontiers.
 The scope of International Business

International business is much broader than international trade. It includes not

only international trade (i.e., export and import of goods and services) but also
a wide variety of other ways in which the firms operate internationally.
International Management professionals are familiar with the language,
culture, economic and political environment, and business practices of
countries in which multinational firms actively trade and invest.

Major forms of business operations that constitute international business are

as follows.

 Merchandise exports and imports

Merchandise means goods that are tangible, i.e., those that can be seen and
touched. When viewed from this perceptive, it is clear that while merchandise
exports mean sending tangible goods abroad, merchandise imports means
bringing tangible goods from a foreign country to one’s own country.

 Service exports and imports

Service exports and imports involve trade in intangibles. It is because of the

intangible aspect of services that trade in services is also known as invisible
trade.

 Licensing and franchising

Permitting another party in a foreign country to produce and sell goods under
your trademarks, patents or copyrights in lieu of some fee is another way of
entering into international business. It is under the licensing system that Pepsi
and CocaCola are produced and sold all over the world by local bottlers in
foreign countries.

 Foreign investments

Foreign investment is another important form of international business.

Foreign investment involves investments of funds abroad in exchange for
financial return. Foreign investment can be of two types: direct and portfolio
investments.

 Monopoly Power

It might arrive from patent rights, technological advantages, product

segregation etc. Another reason for internationalization is limited market
information.

 Benefiting from currency exchange

 Those who add an international business to their assortment may also
advantage from currency fluctuations. For example, when the U.S. dollar is
down, you might be able to export more as foreign customers benefit from the
favorable currency exchange rate.

 Limitations of Domestic Market

Some demographic trends such as a contraction in birth rate decline in

domestic demand, fully tapped market potential have adverse effects on some
businesses. When the domestic market is small, international business is the
option for growth. Depression in the home market drives companies to explore
foreign markets.

 Increased revenues

One of the top advantages of international business is that you may be

capable to enlarge your number of probable clients. Each country you add to
your list can open up a new path to business growth and increased revenues.

 Growth opportunities

Foreign markets both developed country and developing country provide

considerable expansion opportunities for the firms from a developing country.
MNCs are interested in no. of developing countries due to initially increasing in
their income and population of the predictable 1 billion increases in world
population during 2000 to 2015; only about 3% will be in the high-income
countries, foreign markets, both developed and developing countries after
ample opportunities for developing country firms also.

 Expand and diversify

International business can enlarge and expand its activities. This is because it
earns very high profits. It also gets financial help from the government.

 Opportunity to specialize

International markets can open up avenues for a new line of service or

products. It can also give you an opportunity to specialize in a different area to
serve that market.

Types of International Business

International business refers to any business activities conducted
across national boundaries. There are number of ways to
internationalizing the business. Business can choose among these
five basic activities to start.

1. Importing & exporting

Imports: a good or service brought into one country from another.
Exports: a good or service produced in one country then get
marketed to other country.
Import-export is the most fundamental and the largest international
business activity, and it is often the first choice when the businesses
decide to expand abroad as it is the easiest way to enter the market
with a small outlay of capital.

2. Licensing
Licensing is one of other ways to expand the business
internationally. Licensing is the arrangement between a firm, called
licensor, allows another one to use its intellectual property such as
brand name, copy right, patent, technology, trademark and so on
for a specific period of time. The licensor gets benefits in term of the
royalty. The company may choose to sell the products under the
licensing when the domestic production costs are too high, strict
government regulations, or the company wants to sell and produce
standardized products everywhere.

3. Franchising
Franchising is closely related to licensing. Franchising is a parent
company (franchiser) gives right to another company (franchisee)
to do business using the franchiser’s name and products in a
prescribed manner. Franchising is different from the licensing in
terms of the franchisees have to follow much stricter guidelines.
Moreover, licensing is more about the manufacturers while
franchising is more popular with restaurants, hotels, and rental
services. For example, McDonald, KFC, Pizza Hut and so on.

4. strategic partnetships & Joint venture

A strategic partnership or alliance is a positive aspect of the
cooperation of two or more companies in different countries are
joined together for mutual gain. A joint venture is a special type of
strategic alliance, where the partners across globe collectively found
a company to product goods and services. The cooperation between
the companies allow them to share the production cost,
technologies, development, and sales networks. The resources will
be pooled to mutual advantages and put the companies in win-win
situations. For example, Motorola and Toshiba joined a strategic
partnership to develop manufacturing processes for
microprocessors.

5. foreign direct investment (fdi)

Foreign direct investment is a company’s physical investment such
as into the building and facilities in the foreign country, and acts as
a domestic business with a full scale of activity. Companies practice
FDI to get benefits from cheaper labor costs, tax exemptions, and
other privileges in that foreign country. The host country will get
benefits by the introduction of new products, services, technologies
and managerial skills. Also, FDI helps facilitate progressive
internal policy reforms of the host country, and enhance the
economic situation. For example, Intel, which is United States based
company, has made the FDI in many countries in Southeast Asian.
Importance of International Business
The following points highlight the three importance of International
business. The importance are: 1. National Economy 2. Importance
to Exporting Firm 3. Importance from Other Points of View.

International Business Importance # 1. National Economy:

1. It is important to meet imports of industrial needs.

2. Debt Servicing: This means to grant loan for and for their
industrial development.

3. For rapid economic growth.

4. For profitable use of natural resources.

5. To face competition successfully-better quality goods production

having lower or moderate prices. To improve the image of the
producer as well as of the country in the minds of foreign
customers.

6. Increase in employment opportunities.

7. To increase national income.

8. Increase in standard of living of the people.

International Business Importance # 2. Importance to

Exporting Firm:
Business and industrial firms/exporting firms are also benefitted
from the international business,

(a) Insufficiency of Domestic Demand:

If the domestic demand for the product is not sufficient to consume
the production, the firm may take a decision to enter the foreign
market. In this way he can equalize the production and demand.

(b) To Utilise Installed Capacity:

If the installed capacity of the firm is much more than the level of
demand of the product in the domestic market, it can enter the
international market and utilise its un-utilised installed capacity. In
this way it can export the surplus production.

(c) Legal Restrictions:

Sometimes the Government of a country imposes certain
restrictions on the growth and expansion of certain firms or on the
production and distribution of certain commodities in the domestic
market in order to achieve certain social objectives.

(d) Relative Profitability:

The export business is more attractive for its higher rate of
profitability. The higher profitability rate also gives extra strength to
the firm.

(e) Less Business Risk:

A diversified export business helps the exporting firm in mitigating
the risk of sharp fluctuations in the business activity of the firm.

(f) Increased Productivity:

Due to certain social and technological developments the industrial
production has increased to a great extent. The production will be
higher at cheaper rate. The surplus production can be exported.

(g) Social Responsibility:

In order to meet the social responsibility some business firms take
the decision to contribute to the National Exchequer by exporting
their products.

(h) Technological Improvements:

Technological improvements also attract the business firm to enter
foreign markets. It introduces new products with latest
technological improvements and faces the competition successfully
in the international markets.

(i) Product Obsolescence:

If a product becomes obsolete in domestic market it may be in
demand in International markets. The firm has to make a survey for
introducing the product in those markets.
International Business Importance # 3. Importance from Other
Points of View:
The importance of export business can also be viewed
from some other angles:
(i) International Collaboration:
Developed countries fix their import quotas for different countries
and for different commodities. A county can export various
commodities to these developed countries to the extent of its quota.

(ii) International Business Brings Various Countries

Closer:
Better business relations are established among the countries.
Government and non-government business commissions or
business representatives visit other countries from time to time. The
local representatives and other related persons came into contact
with foreign representatives and come to know their habits and
customs.

(iii) Helps in Maintaining Good Political Relations:

The economic relations between two countries help each other to
improve their political relations. Various countries having different
political ideologies import or export their products. To conclude it is
now undisputable that export business contributes to the national
economy, national exchequer, individual exporting firms and
maintains international, economic cultural and political relations
among various countries. Countries have come closer on account of
international business.
Reason for Growth in
International Business
International business has growth dramatically in recent years because of
strategic imperatives and environmental changes.

Strategic imperatives include the need to leverage core competencies, acquire

resources, seek new markets, and match the actions of rivals. Although
strategic imperatives indicate why firms wish to internationalize their
operations, significant changes in the political and technical environment have
no doubt facilitated the explosive growth in international business activity that
has since World War 2. The growth of the internet and other information
technologies is likely to redefine global competition and ways of doing
international business once again.

There are many reasons why international business is growing at such a rapid
pace. Below are some of those reasons:

1. Saturation of Domestic Markets

In most of the countries due to continuous production of similar products over

the years has led to the saturation of domestic markets. For example in Japan
95% of people have all types of electronic appliances and there is no growth
of organization there, as a result they have to look out for new markets
overseas.

2. Opportunities in Foreign Markets

As domestic markets in some countries have saturated, there are many

developing countries where these markets are blooming. Organizations have
great opportunities to boost their sales and profits by selling their products in
these markets. Also countries that are attaining economic growth are
demanding new goods and services at unprecedented levels.

3. Availability of Low Cost Labor

When we compare labor cost in developed countries with respect to

developing countries they are very high as a result organizations find it
cheaper to shift production in these countries. This leads to lower production
cost for the organization and increased profits.
4. Competitive Reasons

Either to stem the increased presence of foreign companies in their own

domestic markets or to counter the expansion of their domestic markets more
and more organizations are expanding their operations abroad. International
companies are using overseas market entry as a counter measure to increase
competition.

5. Increased Demands

Consumers in counties that did not have the purchasing power to acquire
high-quality products are now purchasing them due to improved economic
conditions

6. Diversification

To counter cyclical patterns of business in different parts of the world, most of

the companies expand and diversify their business, to attain profitability and
uncover new markets. This is one of the reasons why international business is
developing at a rapid pace.

7. Reduction of Trade Barriers

Most of the developing economics are now relaxing their trade barriers and
opening doors to foreign multinationals and allowing their companies to set-up
their organizations abroad. This has stimulated cross border trade between
countries and opened markets that were previously unavailable for
international companies.

8. Development of communications and Technology

Over last few years there has been a tremendous development in

communication and technology, which has enabled people sitting at their
home at one part of the world to know about demands, products and services
offered in other part of the world. Adding to this is the reducing cost of
transport and improved efficiency has also led to people expanding their
business.

9. Consumer Pressure

Innovations in transport and communication as led to development of more

aware consumer. This has led to consumers demanding new and better
goods and services. The pressure has led to companies researching, merging
or entering into new zones.

10. Global Competition

More companies operate internationally because

– New products quickly become known globally

– Companies can produce in different countries

– Domestic companies, competitors, suppliers have becomes international

As international companies venture into foreign markets, these companies will

need managers and other personals who understand and are exposed to the
concepts and practices that govern international companies. Therefore the
study of international business may be essential to work in global environment