International Marketing

Week 3
Developing International Marketing Strategy

Objectives:
1. To be able to know what factors should a company review before
deciding to market internationally
2. To be able to know what marketing programs are the company need
to apply before to market internationally
3. To be able to know how can companies evaluate and select specific
foreign markets to enter

According to Kotler et al. the world is rapidly shrinking with the advent of
faster communication, transportation and financial flows. Products
developed in one country – Gucci purses, Nokia mobile phones, McDonald’s
hamburgers, Japanese sushi, Pierre Cardin suits, German BMW’S finding
enthusiastic acceptance in other countries. We would not be surprised to
hear about a Taiwanese businessman wearing an Italian suit meeting an
Australian friend at an Indian restaurant who later returns home to drink
French brandy and watch Baywatch on Hong Kong’s Pan-Asian station, Star
TV.

International Marketing implies planning strategy relative to markets

worldwide rather than on a country by country. This may result in the
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identification of opportunities for global products and brands and integrating
and coordinating strategy across national boundaries to exploit potential
synergies of operating on an international scale. Such opportunities should,
however, be weighed against the benefits of adaption to customer
characteristics.

Ironically, while companies need to enter and enter and compete in foreign
markets, the risks are high. There are many many challenges here, including
shifting borders, unstable governments, foreign-exchange problems,
corruption and technological piracy. However, companies selling in global
industries have no choice but to internationalize.

A Global Industry means an industry in which the strategic positions of

competitors in major geographic or national markets are fundamentally
affected by their overall global positions.

A Global firm is a firm that operates in more than one country and captures
R&D, production, logistics, marketing and financial advantages in its costs and
reputation that are not available to purely domestic competitors.

Global firms plan, operate and coordinate their activities on a worldwide basis

Toyota makes and markets its cars for Europe. It assembles its passenger cars
at Burnaston, Derby. Manufactures their engines at Shotton, North Wales and
has a distribution center in Antwerp. Toyota has a design center in Brussels
to give their models a European style. It recognizes that while its models suit

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Japanese road conditions and Japanese drivers’ preferences, they may not
appeal to European buyers’ tastes.

Major Decisions in International Marketing

1.Deciding which markets to enter

In deciding to market abroad, the company must define its international

marketing objectives and policies. What proportion of foreign to total sales it
will it seek? Most companies start small when they venture abroad. The
company must decide whether to market in a few countries or many
countries.

Initially a single-business company holding the Kentucky Fried Chicken

franchise in Singapore, it went on an acquisition spree in the late 1980’s and
early 1990’s, entering a wide variety of unrelated business in Singapore,
Malaysia, Indonesia, Philippines, Thailand, Hong Kong, Taiwan, China, Middle
East, Malta, Hungary, Poland, Mexico, Jamaica and the U.S.

2.Deciding how to enter the market

Once a company decides to target a particular country, it has to determine

the best mode of entry. Its broad choices are indirect exporting, direct
exporting, licensing, joint ventures and direct investment. Each succeeding
strategy involves more commitment, risk, control and profit potential.

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Indirect Export

Indirect exporting means selling to an intermediary, who in turn sells your

products either directly to customers or to importing wholesalers. When
selling by this method, you normally are not responsible for collecting
payment from the overseas customer, nor for coordinating the shipping
logistics.

In India there are a number of merchant exporters including export houses

and different categories of trading houses who export products procured from
many manufacturers. Some companies have established their own export
marketing subsidiaries (for example HMT International Ltd.)

Direct Export

Direct Exporting means that a producer or supplier directly sells its product to
an international market.

Queensland Sugar in Australia decides to use direct export entry strategy

when they directly participate in marketing and selling of its product in the
Abu Dhabi.

Licensing

Licensing represents a simple way for a manufacturer to become involved in

international marketing. Licensing is a business arrangement in which one
company gives another company permission to manufacture its product for a
specified payment.

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Coca-Cola carries out its international marketing by licensing bottlers around
the world.

Joint Ventures

This refers to a business arrangement in which two or more parties agree to

pool their resources for the purpose of accomplishing a specific business.

Sony Ericsson is another famous example of joint venture between Sony

Corporation and Ericsson Telecommunication Company. In this case, they
partnered in the early 2000s with the aim of being a world leader in mobile
phones.

Direct Investment

The ultimate form of foreign involvement is direct ownership of foreign-based

assembly or manufacturing facilities. This refers to an investment in a foreign
business enterprise designed to acquire a controlling interest in this
enterprise.

A Czech furniture company opens a warehouse in Rotterdam.

The Internationalization Process

The problem facing most international countries is that too few of their
companies participated in foreign trade in the past. This keeps the country
from earning sufficient foreign exchange to pay for needed imports.
Consequently, many international governments now sponsor aggressive

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export promotion programs. These programs should be based on a deep
understanding of how companies become internationalized.

Firms move through four stages in the internalization process:

1. No regular export activities

2. Export via independent representatives (agents)

3. Establishment of one or more sales subsidiaries

4. Establishment if production facilities abroad

Deciding in Marketing Programs

Companies that operate in one or more foreign markets must decide how
much to adapt their marketing-strategy mix to local conditions. At one
extreme are companies that use a standardized marketing mix worldwide.
Standardization of the product, advertising, distribution channels and other
elements of the marketing mix promises the lowest costs because no major
changes have been introduced.

Product

A product is the item offered for sale.

There are three adaption strategies of product to a foreign market.

1. Straight Extension means introducing the product in the foreign market

without any change.

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2. Product Adaption involves altering the product to meet local conditions
or preferences.

Kentucky Fried Chicken (KFC) with more than 19,000 stores in many countries
changed their recipe for various regions. Even within China, KFC serves
porridge for breakfast and Peking Duck burgers for lunch.

3. Product Invention consists of creating of something new for foreign

market.

Cadbury, long known for its premium chocolate is now developing products
for less affluent consumers in India and other developing economies.

Promotion

Promotion is a type of communication between buyer and the seller.

Companies can run the same advertising and promotion campaigns used in
the home market or change them for each local market, a process called
communication adaption. The company can change the message at three
different levels.

The first possibility is it can use one message everywhere, only varying the
language, name and colors.

In Hong Kong, Philip Morris changed its Cantonese name from mo li see
(meaning “no luck”) to mor ba li see (meaning “touch confers luck’).

The second possibility is to use the same theme globally but adapt the copy
to each local market.

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A Camay soap commercial showed a beautiful woman bathing. In Venezuela,
a man was seen in the bathroom; In Italy and France, only a man’s hand was
seen; and in Japan, the man waited outside.

The third possibility consists of developing a global pool of ads, from which
each country selects those they consider most appropriate. Some companies
allow their country managers to invest in creating country-specific ads within
guidelines.

Ajinomoto, a Japanese seasoning company, used alliterate phrasing in its TV

commercials to help consumers remember the product. For instance, in the
Philippines it is “Tak Tak”; in Indonesia, it is “Chup Chup” and in Thailand, it is
“ Thae Thae”.

Price

The price of goods and services in marketing is the amount of money or cost
the buyer is willing to pay in exchange for receiving them.

According to ssense.com the cost of Gucci shoes in Italy is $490.00 and

$565.00 in Japan. Why? Gucci has to add the cost of transportation, tariffs,
importer margin, wholesaler margin and retailer margin to its factory price.

Distribution Channels

A distribution channel is a chain of businesses or intermediaries through

which a good or service passes until it reaches the final buyer or the end
consumer.

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The international company must take a whole-channel, view of the problem
of distributing its products to the final users.

Figure shows the three major links between the seller and ultimate user.

In the first link, seller’s international marketing headquarters, the export

department or international division make decisions on channels and other
marketing mix elements. The second link, channels between nations gets the
products to the boarders of the foreign nation. It involves decisions on the
types of intermediaries. Intermediaries are individuals or organizations that
undertake the role of mediators or linkage between two parties like agents,
trading companies and the like. The third link, channels within foreign
nations, get products from their foreign entry point to the final buyers and
users.

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References:

Books:
Kotler,Philip , Swee Hoon Ang, Siew Meng Leong and Chin Tiong Tan (2009)
Marketing Management an Asian Perspective Second Edition. Prentice-
Hall:Singapore.
Jain, Subhash C. (2006) International Marketing Management. South-
Western College Publishing:Ohio.
Meloan, Taylor W. and John L. Graham (2005) International and Global
Marketing Concepts and Cases. R.R Donnelley & Sons Company:USA.
Miranda, Gregorio S. (1997) Basic Marketing. L&G Business House
Publisher:Laguna.

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