REASONS FOR ENTERING INTERNATIONAL MARKETS (IM 20 Aug 2020)

REASONS FOR ENTERING INTERNATIONAL MARKETS

1. Domestic Market Saturated: Domestic markets are saturated and there is pressure to raise sales and profits. Most companies have very ambitious sales and profit targets. If such figures have to be realized, companies have to move out of their domestic markets.

2. Domestic Market are Small: Companies which have ambitions to become big will have to look for bigger markets outside their boundaries.

3. Slow Growth of Domestic Market: Domestic markets are growing slowly. Most companies are no longer content to grow incrementally. If such companies have to achieve high growth rates, they have to obtain some of their sales from international markets.

4. Suppliers follow their Customers Internationally: In some industries like advertising, customers want their suppliers to have international presence so that suppliers can contribute in most of the markets where the buyer is operating. For instance, a multinational will choose an advertising agency which has a presence in all the markets where the multinational is selling its product. The customer does not want the hassle of hiring a separate advertising agency for each of its markets. This process will be replicated in more industries.

A multinational company seeking materials and equipment’s would want its supplier to supply to all its international manufacturing locations. The supplier is forced to develop competencies and resources at many international locations to be able to serve the international manufacturing locations of its buyer.

5. Competitive Pressures: Some companies will have to move out of their domestic markets when their competitors have done so, if they want to maintain their market share. If the competitor is allowed to pursue its international growth alone, the competitor is likely to plough back some of the earnings from its international operations to the domestic market, making it difficult for the companies which refrained from pursuing international markets, to focus on the domestic market. In other cases, a domestic player would start operations in the home country of its global competitor, to divert the attention and resources of its competitor towards operations at home to safeguard its home market.

6. Attractive Cost Structures Globally: Developed markets have high cost structures and companies may move their operations to regions and countries where costs of production are lower. Once a company starts operating in a geographical region, it becomes easier and profitable to market their products in that area.

7. Growth Rate and Potential: Countries and regions are at different stages of development, and their growth rates and potential are different. Companies do not like to concentrate all their efforts in limited regions and want to spread out their risk. Such companies will look for markets which are likely to behave differently from their existing ones in terms of economic parameters like growth rate, size, affluence of customers, stage of market development, etc.

A company would not like all its markets to be under recession or inflation simultaneously, and would not like all its markets to be in mature stage, or in growth stage. Having different type of markets will make revenues and profits more consistent. The investment requirements would also be more balanced.

Even if a company decides to concentrate on its domestic market, it will not be allowed to pursue its goals unhindered. Multinational companies will enter its market and make a dent in its market share and profit. The company has no choice but to enter foreign markets to maintain its market share and growth.

8. Compete Successfully in Domestic Market: Companies are realizing that it is no longer an option to stay put in one’s domestic market. The ability to compete successfully in domestic markets will depend upon their ability to match the resources and competencies of multinational companies, with whom they have to compete in their domestic markets.

And once they decide to take on the multinational companies on their home turf, they have to improve their resources and competencies to be able to match those of the multinational companies. They will also learn about the ways of operation of multinational companies. This experience will be helpful when they have to protect their domestic markets against the multinational companies.

The boundary between a company’s domestic market and other markets is getting blurred. Only a company which is internationally competitive can protect its domestic market. No market is or will be protected from incursion by multinational companies. A company’s only choice is to go global, even if its prime interest is to protect its domestic turf.

Important similarities between international business and domestic business (IM 18 Aug 2020)

Important similarities between international business and domestic business

(1)  Consumer satisfaction: In domestic marketing and international marketing, success depends upon satisfying the basis requirements, of the consumers. It involves finding out what the buyers want and meeting their needs accordingly.

(2)  R. & D.:  In domestic marketing and international marketing, research and development for product improvement and adaptation is required.

(3)  Goodwill: In domestic market and international market, building goodwill is required. Building consumer goodwill is very important. The days of caveat emptor have gone and the days of caveat vendor have come. Liberal guarantees and after sales service have to be provided on a massive scale, to win over customers.

(4)  Non-human factors: Non-human factors like product, price, cost, etc. are similar to both the markets.

Similarities :

1. Satisfying the basic needs of the consumers is the prime importance:

It involves to find out what the customer’s wants and how to meet their needs.

2. Creation of Goodwill:

It is necessary in both the markets for this:

(a) Liberal guarantees, and

(b) Sale services to the customers on fairly extensive scale.

3. Research and development:

It is necessary in both by research new facts are found and in the light of these facts products are improved.

4. The technique of marketing: i.e., non-human factors such as:

(i) Product,

(ii) Price,

(iii) Costs are similar to both the markets.

Global Marketing vs International Marketing (IM 18 Aug 2020)

Global Marketing vs International Marketing

International marketing involves the marketing tactics adopted by knowledgeable marketers in different countries specific to the markets of those countries. Global marketing, on the other hand is a marketing concept which involves the marketing efforts put in for the unique worldwide market.

In the words of Oxford University Press, global marketing is when an organization utilizes an exact promotional tactic all over the world – like Nike or Wal-Mart. The entire world is deemed one market and does not adjust the products or services, distribution channels or the communication to regional requirements.

International marketing refers to a situation wherein a company opens a subsidiary in a new country and permits that subsidiary to look after the market in that region and pay consideration to local customs like religion, dietary and lifestyle habits.

International Marketing vs Global Marketing

Service or Product offering

In global marketing, a company provides the exact product or service offerings to the customers in all countries that it operates. For example, banks, insurance companies and big retail chains such as Wal-Mart. In international marketing however, each of the individual market is served with specific tailored products especially suited to the customers in that market only. Let’s talk about the Sharia finance products that are only offered to Muslim customers in Muslim countries or non-Muslim countries for that matter.

Marketing personnel

The marketing staffs of companies employing the global marketing strategy work at the company’s head office and are generally quite different from each other in terms of ethnicity, age, gender and also nature of work. They have distinct skills from each other which when combined produce effective results for the company and its global view. On the other hand, in international marketing, there is much less dissimilarity amongst the team members and hail generally from the country of origin of the company itself.

Marketing Budget

The marketing budget of a company adopting the global marketing policy is finalized and approved from the corporate headquarters. For example, Nike finalizes a said amount of budget at its headquarters which then drops down to local branch offices subsequently. However, in international marketing, the budget gets segregated into each of the subsidiary offices which can also formulate its own budget as well. For example, McDonald’s runs ads in local languages and according to local traditions that can be found in those regions only.

Promotion tactics

In global marketing, the company tries to make and air (on TV and radio) ads that are in sync with the worldwide audience and similarly does other marketing efforts. An appropriate example for this would be the ads that were aired on television during the 2014 FIFA World Cup. It was a mix of all: global event, passionate viewers and the game of football.

In international marketing, all the marketing efforts including television commercials are tailored for the local market.

Marketing Autonomy

In global marketing, every marketing strategy is devised and implemented from the corporate headquarters whereas in international marketing the marketing efforts are generated from within the domestic markets.

Use of Social Media

Just by reviewing their social media pages, one can contemplate as to what type of marketing policy the company has adopted. For example, brands like McDonald’s have separate Facebook pages for numerous countries such as Malaysia, Brazil, Italy and Spain. Whereas, companies like Nike and Caterpillar have just a solitary Facebook page for their customers irrespective of any region or country.

Customers’ engagement

Customers’ engagement is more visible in International Marketing. A company can better connect with its customers by installing in place better communication channels. Global marketing is also as effective when it comes to customers’ engagement only the international marketing strategies are little different. However, it is proved that international marketing seems to create greater amount of engagement than global marketing does.

Advertising

In the global marketing concept the advertisements are typically aired on worldwide mediums; however in international marketing companies tend to air the advertisements in local markets or markets with similar characteristics. There are some global marketing products which respond well to global advertising, however there are others that which cannot exist in certain countries due to legal restrictions.

R&D and marketing research

In real terms, marketing research and R&D are as thorough and widespread in global marketing as they are in international marketing. There are some instances when companies don’t do their international marketing research properly and thus their products fail miserably in the global market. For example, the Ben-Gay Aspirin, McDonald’s Arch Deluxe, and Redux Beverages’ Cocaine Energy drink. 

INTERNATIONALIZATION STAGES (IM 18 Aug 2020)

 Stages of international market development

Stage 1: Domestic Operations The firm’s market is exclusively domestic. Eg. Patanjali have currently its major operations in India Only.
Stage 2: Export Operations The firm expands its market to include other
countries, but retains production facilities within domestic borders. Eg. Indian firms exporting textiles jute, spices, nuts, rice all around the world.
Stage 3: Subsidiaries or Joint Ventures The firm physically moves some of its operations out of the home country. Eg. A joint venture between Maruti (Indian Conpany) and Suzuki (Japanese Company)
Stage 4: Multinational Operations The firm becomes a full-fledged multinational corp. (MNC) with assembly and production facilities in several countries and regions of the world.

Some decentralization of decision making is common, but many personnel decisions are still made at corp. headquarters. Eg. Mc Donalds is a MNC operating world wide.

Stage 5: Transnational Operations Firms that reach this stage are often called transnational because they owe little allegiance to their country of origin. Operations are highly decentralized, with each business unit free to make personnel decisions with very loose control from corp. headquarters. Eg. Coca-Cola, Nestle.

Introduction to International Marketing (IM 18 Aug 2020)

 Introduction 

Domestic marketing and International marketing are same when it comes to the fundamental principle of marketing. Marketing is an integral part of any business that refers to plans and policies adopted by any individual or organization to reach out to its potential customers. A web definition defines marketing as a process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals. With the world shrinking at a fast pace, the boundaries between nations are melting and companies are now progressing from catering to local markets to reach out to customers in different parts of the world. Marketing is a play that is used to attract, satisfy and retain customers. Whether done at a local level or at the global level, the fundamental concepts of marketing remain the same.

Domestic Marketing

The marketing strategies that are employed to attract and influence customers within the political boundaries of a country are known as Domestic marketing. When a company caters only to local markets, even though it may be competing against foreign companies operating within the country, it is said to be involved in domestic marketing. The focus of companies is on the local customer and market only and no thought is given to overseas markets. All the product and services are produced keeping in mind local customers only.

International Marketing

When there are no boundaries for a company and it targets customers overseas or in another country, it is said to be engaged in international marketing. If we go by the definition of marketing given above, the process becomes multinational in this case. As such, and in a simplified way, it is nothing but application of marketing principles across countries. Here it is interesting to note that the techniques used in international marketing are primarily those of the home country or the country which has the headquarters of the company. In America and Europe, many experts believe international marketing to be similar to exporting. According to another definition, international marketing refers to business activities that direct the flow of goods and services of a company to consumers in more than one country for profit purposes only.

International Marketing

Definition: The International Marketing is the application of marketing principles to satisfy the varied needs and wants of different people residing across the national borders.

Simply, the International Marketing is to undertake the marketing activities in more than one nation. It is often called as Global Marketing, i.e. designing the marketing mix (viz. Product, price, place, promotion) worldwide and customizing it according to the preferences of different nation people.

International Marketing is defined as 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. The only difference between the definitions of domestic marketing and international marketing is that in the latter case, marketing activities take place in more than one country. No matter domestic or international the Marketing objective remains the same for marketers. The objective is to make profit by selling products or services in geographies which have a demand for them.

Definition of International Marketing

According to the American Marketing Association (AMA) "international marketing is the multinational process of planning and executing the conception, pricing, promotion and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives."

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.”

The foremost decision that any company has to make is whether to go international or not, the company may not want to globalize because of its huge market share in the domestic market and do not want to learn the new laws and rules of the international market.

But however, there are following reasons that attract the organization to be global:

§     Increased Economies of Scale

§     High-profit opportunities in the international market than the domestic market

§     Huge Market Share

§     Elongated life of the product

§     Untapped International Market

 

Difference between domestic marketing and international marketing

As explained earlier, both domestic as well as international marketing refer to the same marketing principles. However, there are glaring dissimilarities between the two.

Scope – The scope of domestic marketing is limited and will eventually dry up. On the other end, international marketing has endless opportunities and scope.

Benefits – As is obvious, the benefits in domestic marketing are less than in international marketing. Furthermore, there is an added incentive of foreign currency that is important from the point of view of the home country as well.

Sharing of technology – Domestic marketing is limited in the use of technology whereas international marketing allows use and sharing of latest technologies.

Political relations – Domestic marketing has nothing to do with political relations whereas international marketing leads to improvement in political relations between countries and also increased level of cooperation as a result.

Barriers – In domestic marketing there are no barriers but in international marketing there are many barriers such as cross cultural differences, language, currency, traditions and customs.

 

1. Domestic marketing is the production, promotion, distribution, and sale of goods and services in a local market while international market is the production, promotion, distribution, and sale of goods and services in a global market.
2. Domestic marketing is less risky and easier to conduct while international marketing is more risky and more complex.

3. Domestic marketing requires lesser financial resources while international marketing requires huge financial resources.

4. Domestic marketing deals with only a single market while international marketing deals with several different countries and markets.

5. Although both use all the basic marketing principles, international marketing is more challenging and requires more commitment from the company because of the uncertainty and differences in laws and regulations in the global market while domestic marketing deals only with the laws and regulations of one-country.

6. Domestic marketing deals only with one set of consumers while international marketing deals with different types of consumers with different tastes.

7. In domestic marketing, the company can have the same policies and strategies while international marketing requires different strategies in the promotion of their products.

8. The actions of creation or production, promotion, advertising, distribution, selling and customer satisfaction within one’s own country is known as Domestic marketing. International marketing is when marketing activities are undertaken at the international level.

9. In domestic marketing, there is less authority influence as compared to international marketing because the company has to contend with rules and regulations of numerous countries.

10. A small survey will demonstrate helpful to know the market conditions, whereas international marketing probes deep examine on the foreign market due to lack of knowledge, which is just the opposite in the case of domestic marketing.

11. In domestic marketing, business activities made in one country only whereas in international marketing, the business activities conducted in multiple countries.

12. The element of danger and challenges are comparatively less in the case of domestic marketing. The risk involved and difficulties in case of international marketing are very high due to some causes like sociology-cultural differences, exchange rates, setting an international price for the product and so on.

13. In domestic marketing, the executive’s faceless problem while dealing with the people because of a similar nature. However, concerning international marketing, it is quite difficult to deal with customers of different tastes, habits, preferences, segments, etc.

Difference between International Marketing and Domestic Marketing

Basis	Domestic Marketing	International Marketing
Definition	“It is concerned with the marketing practices within the researchers or Marketers home country (domestic market).”	“It 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.”
Role of Politics	Political factors are of minor importance.	Political factors play a vital role.
Languages & Cultures	One language and culture.	Many languages and differences in cultures.
Financial Climate	Uniform financial climate.	Variety of financial climate.
Risk Involved	Normal risk is involved.	Higher risks of different nature are involved.
Control of Marketing Activities	Control of marketing activities is easy as compared to international activities.	Control of marketing activities is difficult because of different factors like – regional, cultural, political, etc.
Payment	Minimum payment and credit risks.	Considerable payment and credit risks.
Familiarity	Well familiarity with domestic market.	Lack of Familiarity with foreign markets, research becomes essential.
Knowledge Requirement	Management knowledge is required.	Specific management knowledge and competence is required.
Product Mix	Product mix is decided keeping in view the satisfaction and more sales.	Product mix is decided according to foreign market.
Product Planning and Development	Product planning and development according to domestic market.	Product planning and development according to foreign market.
Focus	Focus of interest is on general information.	Focus of interest is on strategic emphasis.
Market Aspect	Market is much more homogeneous and different segments.	Different or diverse markets fragmented in nature.

 

Role of Advertising in Marketing Mix (A&BM 26Aug2020)

 Advertising – An Element of Marketing Mix

The communications view suggests many uses of advertising. Yet the bulk of advertising is directed toward facilitating and enhan­cing the sales of specific products and brands. Advertising is most often intended to be a supporting component in a marketing mix. This does not mean that it is any the less important than the product or other marketing decision areas.

It may, however, be clarified here that advertising is one of the components of the promotion mix the other being personal selling, sales promotion, publicity, etc. Adver­tising decisions must be integrated and coordinated with the rest of the marketing mix, particularly product/brand decisions.

Marketing is a particular blend of controllable marketing varia­bles which the firm uses to achieve its objectives in the market. Product, place, price and promotion are essential to a marketing mix. In fact, they are interdependent. But is any one more important than the others? Generally speaking, the answer is no.

When a marke­ting mix is selected, all decisions about the product, place, price and time should be made at the same time. All these should focus on the customer. We develop a product that we feel will satisfy the custo­mers. Then we find a way (place) to reach our target customers. Promotion (advertising and personal setting) tells the target customers about the availability of the product that has been designed for them.

Then the price is established in the light of expected customer reaction to the total offering and the cost of selling and getting it to them.

Advertising facilitates widespread distribution. It permits communication to large numbers of potential customers at the same time. Today, most promotion blends contain the two elements of advertising and personal selling. Advertising is more visible to the average consumer and, in many ways, more controversial.

How does the company choose the appropriate marketing mix for the target market? The answer is that it must examine the wants of the market and the position of competitors, and it must make a decision on what it wants to offer competitively to that market. The company arrives at its marketing mix by deciding on the competitive position it wants to occupy in the target market.

The product manager should consider the possibility of stimula­ting sales by altering one or more elements of the marketing mix. One tactic is to cut prices in order to attract new as well as the competi­tor’s customers. Another is to develop a more effective advertising campaign that attracts the consumers’ attention and interest. A more direct way to attract other brand users is by aggressive promotion trade deals, paise off, gifts, etc.

The company may also consider moving into higher volume market channels, particularly if these channels are in a growth stage. The company may also offer new or improved services to the buyer as a patronage-building step.

If a product is improperly designed, or if inadequate channels are used, or if cost plus pricing is resorted to, advertising may become costly. It is often relied upon to overcome previous miscalculations. It is because of this fact that some Advertising Managers resort to tricks or even at times to unethical practices to sell goods.

Often, even if a good job is done on the rest of the marketing strategy, advertising turns out to be inefficient and costly. The Advertising Manager may not co-operate, in the belief that his own technique is the most effective one and does not need the support of another. In other instances, the Advertising Manager may not communicate at all.

Until recently, in many firms only lip service was paid to the value of consumer research. Many advertising executives still feel that all an advertising campaign needs is their creative genius. The difficulty of checking the results of advertising sometimes encourages carelessness and sloppy thinking; as a result of which some agencies often do poor jobs without detection.

The amount of the marketing budget allocated to advertising is the advertising budget. In evaluating the advertising budget, there­fore, it is important to keep in mind that the incremental amounts of money put into advertising must be more useful than the same amounts put into distribution or product refinement, or even reduced prices. Understanding consumer motivation and behavior is a most significant factor in advertising decision making and in developing a marketing mix.

A manager’s view of who his consumers are, how they behave, and what motivates them determines, to a considerable extent, how a marketing strategy develops. The product should be designed and packed, the price set, the distribution methods decided and the advertising copy and appeals designed with a particular type of consumer in mind.

Role of Advertising in Marketing Mix

Marketing Mix: The marketing mix refers to the set of actions, or tactics, that a company uses to promote its brand or product in the market.

The 4Ps make up a typical marketing mix – Product, Place, Promotion & Price.

Role of advertising in promotion of the product are as follows:

1. Awareness:

One of the important roles of advertising is to create awareness of the product or services such as brand name and price. The awareness of the product or services can be created through highlighting the unique features of the brand. Nowadays, due to intense competition it is not just enough to create awareness, but top of mind awareness is needed.

2. Information:

Advertising helps to inform the target audience about the product. Providing information is closely related to creating awareness of the product. Potential customers must know about a product, such as product features and uses.

Product information is very much required, especially when the product is introduced in the market, or when product modification is undertaken. Proper product information can help the consumers in their purchase decision.

3. Persuasion:

When business firms offer similar products, the firm must not only inform the customers about the product’s availability, but also persuade them to buy it. Through persuasive messages, the marketers try to provide reasons regarding the superiority of their products as compared to others available in the market. Persuasion can be undertaken through creative advertising messages, product demonstration at trade fairs, offering free gifts, premium offers and organizing contests.

4. Attitudes:

Promotion is required to build or reinforce attitudes in the minds of target audience. The marketers expect the target audience to develop a favourable attitude towards their brands. Positive attitude towards the brand helps to increase its sales. Through promotional techniques like advertising, the mar­keter can correct negative attitude towards the product, if any. Negative attitude can also be corrected through public relations and advertising.

5. Reminder:

If target customers already have a positive attitude towards a firm’s product or service, then a reminder objective may be necessary. The reminder objective is necessary because the satisfied customers can be targets for competitors’ appeals. Well-established brands need to remind the customers about their presence in the market. For instance, ‘Raymond – the complete man’ campaign is designed to remind the customers.

6. Brand Loyalty:

Advertising helps to develop brand loyalty. Brand loyalty results in repeat purchases and favourable recommendations to others by existing customers. Sales promotion, effective personal selling, timely and efficient direct marketing, and other techniques help to develop brand loyalty.

7. Brand Image:

An advertiser helps to develop a good image of the brand in the minds of target audience. There are several factors that can be of help to audience. There are several factors, such as the character of the personality that endorses the brand, the content of the advertising message, the nature and type of pack­aging and the type of programmes or events sponsored, that can help to develop brand image in the minds of target audience.

8. Counter Competitors’ Claims:

The marketer may counter the claims made by the major competitors. For instance, competitive advertising is undertaken to counter the claims made by competitors either directly or indirectly. With the help of creative advertising, the marketers can claim the superiority of their brand. The marketer may also undertake aggressive sales promotion to counter the competition in the market.

9. Expansion of Markets:

Successful ads results in expansion of the markets. A marketer may intend to expand markets from the local level to the regional level, from the regional level to the national level, and from the national level to the international level. For this purpose, the marketer may undertake various techniques of promotion.

10. Educating the Customers:

Promotion may be undertaken to educate the customers. For instance, some of the advertising is undertaken to educate the audience regarding the use of the product, handling operations, and so on. Public awareness campaigns also educate the public regarding the negative effects of noise, air and dirt pollution, social evils, and so on.