UNIT I

Introduction-International Marketing: Definitions, Concepts, Scope, Importance and Growth of

International Marketing, Domestic vs. International Marketing, Opportunities and Challenges,

Process of Internationalization, Management Orientations.

INTRODUCTION

Broadly, international marketing refers to the exchange process across nations. Fewer and

fewer companies these days can focus only on their domestic markets. Increasingly, businesses

need to understand, consider the plan for international markets. It has gained prominence with

the ever- increasing global trade and linkages. Whether or not a company wants to participate

directly in international business, it cannot escape the effect of numerous companies engaged

in exports, imports, and/or manufacturing abroad and the multinationals operating in the

domestic markets giving direct and indirect competition. The growth of international markets,

in all its facets, represents probably one of the most significant commercial development in

recent years .The advances in information technology have facilitated the process of

marketing across countries. Specifically, international markets represents one of the most

significant source of business opportunities ( and threats).This trend of globalization of the

scope of business has made it essential for the corporate managers to understand

international marketing operations.

Just consider for a moment some of the following facts:

Initial forecasts of world trade in the year 2000 suggest that the total value of goods and

services traded will reach nearly $7 trillion.

China alone represents a total potential market of some 6 billion people.

Approximately $1 trillion crosses national boundaries each and every day.

The world’s largest 500 companies derive on average approximately 70% of their sales

and profits from international markets.

As a prologue to understanding how to analyse international markets and to develop and

implement business strategies for them, we need first to understand some of the background to

the nature, growth and scope of international marketing.

DEFINITIONS OF INTERNATIONAL MARKETING

Some of the definitions of international marketing are:

International Marketing can be defined as exchange of goods and services between different

national markets involving buyers and sellers.

According to the American Marketing Association, “International Marketing is the multi-

national process of planning and executing the conception, prices, promotion and

distribution of ideal goods and services to create exchanges that satisfy the individual and

organizational objectives.”

According to Terpstra and Sarathy, international marketing is “finding out what customers

want around the world and then satisfying these wants better than other competitors, both

domestic and international.” They observe that international marketing has dual aspects, viz.

foreign marketing ( marketing within foreign countries) and global marketing (coordinating

marketing in multiple markets, in the face of global competition).

Cateora (1997) defines international marketing as “performance of business activities

that direct the flow of company’s goods and services to consumers in more than one

nation for profit.”

Jain (1989) refers to international marketing as exchanges across national

boundaries for the satisfaction of human needs and wants.

Terpestra (1972) looks upon int e r na t io na l marketing as marketing carried on

across the national boundaries.

Keegan (1997) comprehends that international marketing as going beyond the export

marketing and becoming more involved in the marketing environment in which it is

doing business.

Another view is that, “international marketing is simply an attitude of mind, the

approach of a company with a truly global outlook, seeking its profit impartially

around the world, ‘home’ market included, on a planned and systematic basis.”

Another definition of international marketing is that “it is the marketing function

of multinational companies.”

CONCEPTS OF INTERNATIONAL MARKETING

I. Domestic Marketing: Domestic Marketing is concerned with marketing practices within the

marketer’s home country.

II. Foreign Marketing: It refers to domestic marketing within the foreign country.

III. Comparative Marketing: when two or more marketing systems are studied, the subject of

study is known as comparative marketing. In such a study, both similarities and dis-similarities

are identified. It involves an analytical comparison of marketing methods practiced in different

countries.

IV. International Marketing: It is concerned with the micro aspects of a market and takes the

company as a unit of analysis. The purpose is to find out as to why and how a product succeeds

or fails in a foreign country and how marketing efforts influence the results of international

marketing.

V. International Trade: International Trade is concerned with flow of goods and services between

the countries. The purpose is to study how monetary and commercial conditions influence

balance of payments and resource transfer of countries involved. It provides a macro view of the

market, national and international.

VI. Global Marketing: Global Marketing consider the world as a whole as the theatre of

operation. The purpose of global marketing is to learn to recognize the extent to which marketing

plans and programmes can be extended world wide and the extent to which they must be

adopted.

SCOPE OF INTERNATIONAL MARKETING

International Marketing constitutes the following areas of business:-

Exports and Imports: International trade can be a good beginning to venture into international

marketing. By developing international markets for domestically produced goods and services a

company can reduce the risk of operating internationally, gain adequate experience and then go

on to set up manufacturing and marketing facilities abroad.

Contractual Agreements: Patent licensing, turn key operations, co – production, technical and

managerial know – how and licensing agreements are all a part of international marketing.

Licensing includes a number of contractual agreements whereby intangible assets such as

patents, trade secrets, know – how, trade marks and brand names are made available to foreign

firms in return for a fee.

Joint Ventures: A form of collaborative association for a considerable period is known as joint

venture. A joint venture comes into existence when a foreign investor acquires interest in a local

company and vice versa or when overseas and local firms jointly form a new firm. In countries

where fully owned firms are not allowed to operate, joint venture is the alternative.

Wholly owned manufacturing: A company with long term interest in a foreign market may

establish fully owned manufacturing facilities. Factors like trade barriers, cost differences,

government policies etc. encourage the setting up of production facilities in foreign markets.

Manufacturing abroad provides the firm with total control over quality and production.

Contract manufacturing: When a firm enters into a contract with other firm in foreign country

to manufacture assembles the products and retains product marketing with itself, it is known as

contract manufacturing. Contract manufacturing has important advantages such as low risk, low

cost and easy exit.

Management contracting: Under a management contract the supplier brings a package of skills

that will provide an integrated service to the client without incurring the risk and benefit of

ownership.

Third country location: When there is no commercial transactions between two countries due to

various reasons, firm which wants to enter into the market of another nation, will have to operate

from a third country base. For instance, Taiwan’s entry into china through bases in Hong Kong.

Mergers and Acquisitions: Mergers and Acquisitions provide access to markets, distribution

network, new technology and patent rights. It also reduces the level of competition for firms

which either merge or acquires.

Strategic alliances: A firm is able to improve the long term competitive advantage by forming a

strategic alliance with its competitors. The objective of a strategic alliance is to leverage critical

capabilities, increase the flow of innovation and increase flexibility in responding to market and

technological changes. Strategic alliance differs according to purpose and structure. On the basis

of purpose, strategic alliance can be classified as follows:

i. Technology developed alliances like research consortia, simultaneous engineering agreements,

licensing or joint development agreements.

ii. Marketing, sales and services alliances in which a company makes use of the marketing

infrastructure of another company in the foreign market for its products.

iii. Multiple activity alliance involves the combining of two or more types of alliances. For

instance technology development and operations alliances are generally multi- country alliances.

On the basis of structure, strategic alliance can be equity based or non equity based. Technology

transfer agreements, licensing agreements, marketing agreements are non equity based strategic

alliances.

Counter trade: Counter trade is a form of international trade in which export and import

transactions are directly interlinked i.e. import of goods are paid by export of goods. It is

therefore a form of barter between countries. Counter trade strategy is generally used by UDCs

to increase their exports. However, it is also used by MNCs to enter foreign markets. For

instance, PepsiCo’s entry in the former USSR. There are different forms of counter trade such as

barter, buy back, compensation deal and counter purchase. In case of barter, goods of equal value

are directly exchanged without the involvement of monetary exchange. Under a buy back

agreement, the supplier of a plant, equipment or technology. Payments may be partly made in

kind and partly in cash. In a compensation deal the seller receives a part of the payment in cash

and the rest in kind. In case of a counter purchase agreement the seller receives the full payment

in cash but agrees to spend an equal amount of money in that country in a given period.

THE IMPORTANCE AND GROWTH OF INTERNATIONAL MARKETING

International markets represent one of the largest and fastest growing areas of commercial and

marketing activity. They represents one of the significant areas of business opportunities for the

organisation. A number of factors serve to underpin the size and growth of international

activities, some of the most important of which are considered below.

The Changing Nature of the International Business Environment In all business situations, opportunities and threats stem from changes in the environment. In

environments which are not dynamic and changing, few such opportunities and threats arise,

There is little doubt that the international environment is very dynamic in nature which gives

rise to major opportunities for international marketing.

Some of the examples of the major changes in the international business environment in recent

years include the following:

The growth of whole new trading blocs and major changes to existing ones, e.g. the

expansion of the European Union(EU), the formation of the Association of South East

Asian Nations (ASEAN) and the Andean Common Market(ANCOM).

Newly emerging markets with significant growth potential, e.g. The Chinese Economic

Area, Indonesia, India, South Korea and Mexico.

Fundamental changes to the economic systems in some countries/regions of the world,

for example the

Importance of International Marketing

(A) Macro level benefits in national perspective: International trade results in

macro-economic effects for each economy. The imports and exports influence the

employment, national income and technology. The direct and indirect benefits

emanating from international business are listed below:

i) Increase in national Income: A country’s export activity promotes industrial

and trade activity that generates employment and income for various sections

of society. The multiplier effect of income increases the level of output and growth

rate of economy. Especially the export of wage-goods can help a developing country

to break the vicious circle of poverty and raise the real income of the country.

ii) Efficiency: While exporting, the countries try to attain specialization in production

of goods. In this process, there is optimum and efficient utilization of the

resources. The limited domestic market may act as a deterrent to the growth of

industry and a resultant under-utilization of resources. The international trade can

help industry grow and achieve scale and experience economies.

iii)Employment generation: Exports constitute a significant portion of

different nations and breed opportunities for more and gainful employment. In

addition to reducing direct unemployment, foreign trade reduces

underemployment, e.g. exports of Swiss watches engages the farmers in the watch

industry during their free time resulting into gainful utilisation of their skills.

iv) Increased linkages: The staple theory of economic growth recognizes that foreign

trade results into increased backward and forward linkages with other sectors of the

economy. The industrial and trade linkages cause the development of new

industries and enhance efficiency of existing indutries.

v) Optimal utilization of resources: International business makes possible the

utilisation of agricultural resources as the farmers get a greater access to the

overseas markets. This transforms even the subsistence sector into monetized sector

raising the standards of living of rural populations. The strengths of Indianagriculture

are likely to open new vistas of business opportunities in the days to come as the

world trade is likely to become more liberalised as a result of WTO provisions.

vi) Educative effect: Exports and international business exposes the executives to

overseas market which develops greater skills in them. This removes a great

hindrance, often acknowledged as greater than scarcity of capital goods. The

entrepreneurial and management expertise generally helps an economy grow faster,

and traditional factors of production can be used more effectively.

vii)Promotes Foreign Direct Investment: The level of international business of a

country often becomes a basis for the flow of foreign direct investment in a country.

In today’s economic environment, it is difficult to grow in absence of FDI. Several

economies have grown following the heavy investments from other parts of the

world.

viii) Stimulates Competition: International business fosters healthy

competition and helps in checking inefficient monopolies. It is established that

growth of competitive economies is higher than the growth rate of protective

economies. In recent times, the nations have realized the benefits of healthy

competition. Several developing and erstwhile communist countries are promoting the

same. Switching over to market-led growth which invokes substantially

international operations in business, services and technology.

ix)Technology Sourcing: In today’s rapidly changing world, it is important to keep

pace with the changing technology. This is possible only when there exist linkages

with other national economies through international trade and business. The technology-

drivenindustries such as information technology

telecommunications, automobiles derive immense synergy by their participation in

trade across the world.

(B) Microlevel effects of International Business: An individual firm can reap several

benefits by resorting to international marketing and international business.

i) Growth: By all standards, domestic markets have a limitation of growth

potential. After a particular level, it is very difficult for a firm to achieve growth. So,

it is left with the option of either product innovation or extending operations to other

markets. The latter option is a better way of sustaining growth as the product life can

increase significantly when it is sold into the world markets.

ii)Fighting Competition: As the protectionist measures by nations are being

reduced, firms operating in domestic market only are facing increased levels of

competition. Instead of utilizing their resources in fighting competitions, firms

continue to look at markets in other countries to cope up with domestic

competition. Hence, international business operations provide avenues for both

survival and growth.

iii)Increased efficiency: By operating on global scale, a firm can select for its

expansion lucrative opportunities. Also, it can reduce its product costs through

global sourcing and utilise world level technology and talent for business

operations. All this makes the business operations more efficient and as a result it

can realise higher return per unit investment. This boosts up shareholder’s

value and the company image.

iv) Scale economics: Higher level operations on account of international

operations produce benefits of scale and thus enhance the profitability of firm.

v) Innovation: By operating in large markets, companies can afford to invest in

research and technology development. It is established that compared to

traditional and mind set firms, innovation driven firms can compete effectively.

vi) Risk Cover: By operating on global scale, the fluctuations of demand levels

in an individual country does not make much difference on the aggregate sales.

Consequently, the uncertainties arising out of risk factors on the operations

localized to a country are reduced. Even the financial risks, physical risks, politico-

legal risks etc. can be managed more effectively by virtue of global operations.

DIFFERENCE BETWEEN DOMESTIC MARKETING AND INTERNATIONAL

MARKETING

Marketing is the process of focusing the resources and objectives of an organisation on

environmental opportunities and needs. It is a universal discipline. 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. 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

ploy 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. However, markets and

customers are different and hence the practice of marketing should be fine tuned and adjusted to

the local conditions of a given country. The marketing man must understand that each person is

different and so also each country which means that both experience and techniques obtained and

successful in one country or countries. Every country has a different set of customers and even

within a country there are different sub-sets of customers, distribution channels and media are

different. If that is so, for each country there must be a unique marketing plan. For instance,

nestle tried to transfer its successful four – flavour coffee from Europe to the united states lost a

1% market share in the us. It is important in international marketing to recognize the extent to

which marketing plans and programmes can be extended to the world and the extent to which

marketing plans must be adapted. Prof.Theodore Levitt thought that the global village or the

world as a whole was a homogeneous entity from the marketing point of view. He advocated

organisation to develop standardized high quality word products and market them around the

world using standardized advertising, pricing and distribution. The companies who followed

Prof. Levitt’s prescription had to fail and a notable failure amongst them was Parker pen. Carl

Spiel Vogel, Chairman and CEO of the Backer Spiel Vogel Bates worldwide advertising agency

expressed his view that Levitt’s idea of a homogeneous world is non – sensible and the global

success of Coca Cola proved that Prof. Levitt was wrong. The success of Coca Cola was not

based on total standardization of marketing mix. According to Kenichi Ohmae, Coke succeeded

in Japan because the company spent a huge amount of time and money in Japan to become an

insider. Coca Cola build a complete local infrastructure with its sales force and vending machine

operations. According to Ohmae, Coke’s success in Japan was due to the ability of the company

to achieve global localisation or ‘Glocalisation’ i.e. the ability to be an insider or a local

company and still reap the benefits of global operations. Think global and act local is the

meaning of Glocalisation and to be successful in international marketing, companies must have

the ability to think global and act local. International marketing requires managers to behave

both globally and locally simultaneously by responding to similarities and dissimilarities in

international markets. Glocalisation can be a source of competitive advantage. By adapting sales

promotion, distribution and customer service to local needs, Coke capture 78% of soft drink

market share in Japan. Apart from the flagship brand Coca Cola, the company produces 200

other non- alcoholic beverages to suit local beverages. There are other companies who have

created strong international brands through international marketing. For instance, Philip Morris

has made Marlboro the number one cigarette brand in the world. In automobiles, Daimler

Chrysler gained global recognition for its Mercedes brand like his competitor Bayerische. Mc

Donald’s has designed a restaurant system that can be set up anywhere in the world. Mc

Donald’s customizes its menu in accordance with local eating habits.

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.

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.

I n t e r n a t i o n a l o r i e n t a t i o n s a n d Approaches to International

Marketing

The differences in international orientation and approach can be used to categorize

the international marketing into different forms. A domestic company may

initially start with ethnically close markets and extend its operations across the

world in its final stage.

Domestic marketing extension (Ethno-centric) concept.

Multi domestic market (Poly-centric) concept

Global marketing (Regio-centric) concept

Domestic Marketing Extension (Ethnocentric) concept: Inthe ethnocentric

company, overseas operations are viewed as secondary to domestic operations

and primarily as a means of disposing of surplus domestic production. The

companies guided by this are casual players in overseas markets. For them the

overseas markets serve as conduits for directing surplus production. They use

overseas markets as a buffer for checking the demand fluctuations in the domestic

market. The main focus of the company remains domestic markets. This concept

is usually preferred by small companies, or even by large companies operating in

a competitive industry. The overseas operations of such companies are usually

restricted to exports in certain niches such as approach is also known as

ethnocentric in the EPRG schema.

Multi domestic marketing (polycentric) concept: As the overseas operations

of the companies grow, they recognize the need for a different approach to

international marketing. The company begins to recognise the importance of inherent

differences in overseas market. The operations of companies can acquire forms of

overseas joint ventures, licensing agreements, overseas manufacturing and

marketing. The subsidiaries operating in overseas markets are recognized

as independent business units with autonomy to operate in their markets.

Within their respective markets, the subsidiaries behave as domestic companies,

deriving only strategic guidelines from their head offices. The companies

usually become multinational corporations at this stage. The controls are

decentralized to facilitate local operations under the EPRG schema, such firms are

classified as polycentric.

Regiocentric orientations:

A regiocentric company views different regions as different markets. A

particular region with certain important common marketing characteristics is

regarded as a single market, ignoring national boundaries.

Global Marketing (Geocentric) Concept: As the companies direct their

approach to become a global company, they acquire a global perspective in their

operations. A geocentric company views the entire world as a single market

and develops standardised marketing mix, projecting a uniform image of the

company and its products , for the global market. Such companies look for

lucrative business and investment opportunities on global basis. They derive

synergy by sourcing the resources from across the globe by selecting those

markets which can provide the inputs to business in most cost-effective manner.

Such companies do not treat the SBUs operating in different markets as totally

independent entities, but as the SBUs which are contributing towards the growth of

the company as a whole. Certain degree of the controls and policy matters may

extend to all the SBUs, although allowances may be made to accommodate

regional diversities. Under the EPRG schema, global companies are often classified

as regiocentric or geocentric companies.

The process of internationalisation of business.

The studies of corporates expanding as MNCs indicate that firms attain the

multinational character over time. Mostly, this process does not occur through

conscious design at early stage. Usually it is the unplanned result of a series of

corporate responses to a wide-variety of threats and opportunities appearing at

random. These responses result into progressively more elaborate and

sophisticated strategies leading to internationalization of their business

operations. The firms move from a relatively low risk return, export-oriented strategy

to a higher risk-higher return strategy emphasizing international production. In

effect, the firm is investing in information, learning enough at each stage to significantly

improve chances at the next stage.

The firms usually start as domestic firms. As they take decision to go international,

exports are the first step. Next in the sequence comes setting up a foreign sales

subsidiary and securing licensing agreements. In the wake of sustainable

market, a firm could eventually establish its own production facility in most

markets. The following diagram shows a typical sequence of operations

expanding overseas.

Exporting: In view of changing demand and business conditions and

competition, a company may look for exporting as an additional outlet for excess

production to foreign markets. The exports provide direct benefits of low capital

requirement and start up costs. The risk is low in exports and the profits are

immediate with almost negligible gestation periods. Exports also provide

significant learning opportunities to the managers operating in domestic

market. The understanding of demand and other market conditions,

competition, channels of distribution, payment conventions and export

operation helps the companies to plan their future courses of action. Initially, a

small company may start exports through intermediaries and later acquire the

control of markets themselves. How companies imbibe export orientation shall

be described in the subsequent discussion on export behaviour theories

Licensing: When the companies do not want to make a heavy investment, wait long

for returns and take high risks, licensing comes as a viable option to direct investment

in production facilities abroad. Often, licensing is a precursor to setting up

overseas production facilities. The companies license a local firm in foreign

country to manufacture company’s products in return for royalties and other

forms of payment. This mode of entry is used where host governments

restrict FDI, or the volume of operations is not viable to support investment by

not achieving economies of scale . The local partner may be able to control the local

factors more efficiently than a foreign company. Licensing is a preferred mode of

entry in technology-driven businesses such as software, electronic hardware,

pharmaceuticals etc.

The disadvantage of licensing is that there might be difficulty of control of foreign

operations. The licensee may not adhere to the quality and other operational

norms which may damage the credibility of licenser. Also, chances of

fraudulence etc. by licensee also exist which may put licenser at losses.

Joint Ventures: The joint ventures are established by MNCs with local partners

with the aim of reducing the risks associated with working in foreign markets.

The local partners are not MNCs themselves in order to ensure longer stability of

partnerships. The MNCs provides inputs that give firms specific advantage

e.g. technology, capital, knowledge etc to the operation coupled with the local

capabilities of the partner. The levels of investment and risks associated with

working in a foreign market are less in joint ventures as compared to overseas

production. In certain cases, local government also makes it essential for the

MNCs to engage local partners. The disadvantages associated with joint

ventures are inadequacy of control and difference in working styles of two

partners which can lead to premature termination of partnerships.

Turnkey project: A turnkey project is a package deal in which the MNCs

construct a production facility and provide training for the personnel necessary to

operate it, such that the facility is ready to begin operations on the competition of

the project. Usually, turnkey projects are for production of standardized product.

Thus, a turnkey project involves the sale of what will be a fully operational

production facility. The MNCs provide a package deal to a host nation, firm or

government. On occasions, during the negotiations over a project, the MNCs may

decide to be forced to retain a small share of the project.

The turnkey project can be an alternative to exporting or to MNC activity when

a host government has imposed restrictions on these modalities. In addition, the

host country’s market may be too small or the risk of FDI too high to warrant an

investment by the MNC. An added benefit of the turnkey project can also

expect to license additional managerial or technological expertise to host nation.

However, the MNC must give up some control to the host government (which

usually owns the facility). For this reason, the MNC risks dissipation of its firm-

specific advantage. The MNC must determine whether the plant and personnel

involved in the turnkey project can eventually become an international competitor

against the MNC before it enters into such a venture..

Overseas Production: Exporting and other techniques may limit a company to

release sales potentials for various products. Also in case of exporting, it is

difficult to establish brands and have a direct contract with the customers. So,

the ultimate aim of all companies aspiring to be multinational corporations is

to start overseas production facilities. However, the investment and risks

associated with the same are tremendous. The capital requirement in foreign

currency is huge and the overseas projects have long gestation periods. The

companies have to operate in uncertain business environments of foreign

countries. The examples of Cargill salt, Enron and Thermax who started their

operations in India show how difficult it is to cope up with national political and

economic scenario of overseas operations.

Nevertheless, the overseas production can result in tremendous

opportunities and benefits. Once it is over with teething problems, overseas plants

become lucrative business profit centres contributing to corporate growth. The

operations of Unilevers in India in the form of Hindustan Levers Ltd has been a

lucrative profit centre for the parent company. The ROI of HLL is higher even

than the parent company Unilevers. Once a company acquires a multinational

character, significant proportions of revenue are contributed by overseas

production.

Exporting Vs International Marketing

Exporting is often considered as the first step in the process of internationalization

of a business. In general, the firms engaged in export operations have to concentrate

on managing the 4 p’s of marketing mix i.e. product, price, place and promotion.

Exporting is primarily a transactional approach to marketing wherein goods are

exchanged for value on deal to deal basis. International marketing on the other hand

extends from identifying the customer needs to achieving customer satisfaction.

Internationals marketing requires greater commitment of the executives’ time and

resources than exporting.

Exporting is usually a short-term solution to an immediate problem of under-

capacity of production or over-capacity of the stocks. However, international

marketing is a long-term approach to sustained business from a market. It helps

to bridge the information gap between a company and the final consumer of its

product. While, exporting may involve agents or intermediaries, the market and

marketers are more close in marketing. The differences in exporting and

international marketing can be shown in the form of the following table.

Opportunities and Challenges in International Marketing:

To prosper in a world of abrupt changes and discontinuities, of newly emerging forces and

dangers, of unforeseen influences from abroad, firms need to prepare themselves and develop

active responses. New strategies need to be envisioned, new plans need to be made, and the way

of doing business needs to be changed. The way to obtain and retain leadership, economically,

politically, or morally, is—as the examples of Rome, Constantinople, and London have amply

demonstrated—not through passivity but rather through a continuous, alert adaptation to the

changing world environment. To help a country remain a player in the world economy,

governments, firms, and individuals need to respond aggressively with innovation, process

improvements, and creativity.

The growth of global business activities offers increased opportunities. International activities

can be crucial to a firm’s survival and growth. By transferring knowledge around the globe, an

international firm can build and strengthen its competitive position. Firms that heavily depend on

long production runs can expand their activities far beyond their domestic markets and benefit

from reaching many more customers. Market saturation can be avoided by lengthening or

rejuvenating product life cycles in other countries. Production sites once were inflexible, but now

plants can be shifted from one country to another and suppliers can be found on every continent.

Cooperative agreements can be formed that enable all parties to bring their major strengths to the

table and emerge with better products, services, and ideas than they could produce on their own.

In addition, research has found that multinational corporations face a lower risk of insolvency

and pay higher wages than do domestic companies. For example, in the United States, jobs

supported by goods exports pay 13–16 percent above the average wage.At the same time,

international marketing enables consumers all over the world to find greater varieties of products

at lower prices and to improve their lifestyles and comfort. International opportunities require

careful exploration. What is needed is an awareness of global developments, an understanding of

their meaning, and a development of capabilities to adjust to change. Firms must adapt to the

international market if they are to be successful. One key facet of the marketing concept is

adaptation to the environment, particularly the market. Even though many executives understand

the need for such an adaptation in their domestic market, they often believe that international

customers are just like the ones the firm deals with at home. It is here that many firms commit

grave mistakes that lead to inefficiency, lack of consumer acceptance, and sometimes even

corporate failure. Firms increasingly understand that many of the key difficulties encountered in

doing business internationally are marketing problems. Judging by corporate needs, a

background in international marketing is highly desirable for business students seeking

employment, not only for today but also for long-term career plans. Many firms do not

participate in the global market. Often, managers believe that international marketing should

only be carried out by large multinational corporations. It is true that there are some very large

players from many countries active in the world market. But smaller firms are major players, too.

For example, 50 percent of German exports are created by firms with 19 or fewer employees.

Nearly 97 percent of U.S. exporters are small and medium-sized enterprises, with two-thirds of

U.S. exporters having less than 20 employees. Increasingly we find smaller firms, particularly in

the computer and telecommunications industries, that are born global, since they achieve a

worldwide presence within a very short time. Those firms and industries that are not

participating in the world market have to recognize that in today’s trade environment, isolation

has become impossible. Willing or unwilling, firms are becoming participants in global business

affairs. Even if not by choice, most firms and individuals are affected directly or indirectly by

economic and political developments that occur in the international marketplace. Those firms

that refuse to participate are relegated to react to the global marketplace and therefore are

unprepared for harsh competition from abroad. Some industries have recognized the need for

international adjustments. Farmers understand the need for high productivity in light of stiff

international competition. Car producers, computer makers, and firms in other technologically

advanced industries have learned to forge global relationships to stay in the race. Firms in the

steel, textile, and leather sectors have shifted production, and perhaps even adjusted their core

business, in response to overwhelming onslaughts from abroad. Other industries in some

countries have been caught unaware and have been unable to adjust. The result is the extinction

of firms or entire industries, such as VCRs in the United States and coal mining and steel

smelting in other countries.

Management orientations

The form and substance of a company’s response to global business opportunities depend greatly

on management’s assumptions or beliefs –both conscious and unconscious – about the nature of

the world. The worldview of a company’s personnel can be described as ethnocentric,

polycentric, regiocentric, and geocentric. Management at a company with a prevailing

ethnocentric orientation may consciously make a decision to move in the direction of

geocentricism.

Figure: Orientations of Management and Companies

Ethnocentric- The ethnocentric orientation mans company personnel see only similarities in

markets and assume the products and practices that succeed in the home country will, due to

their demonstrated superiority, be successful anywhere. At some companies, the ethnocentric

orientation means the opportunities outside the home country are ignored. Such companies are

sometimes called domestic companies. Ethnocentric companies that do conduct business outside

the home country can be described as international companies; they adhere to the notion that the

products that succeed in the home country are superior and, therefore, can be sold everywhere

without adaptation.

Polycentric-The polycentric orientation is the opposite of ethnocentrism. The term polycentric

describes management’s often-unconscious belief or assumption that each country in which a

company does business is unique. This assumption lays the groundwork for each subsidiary to

develop its own unique business and marketing strategies in order to succeed; the term

multinational company is often used to describe such a structure.

Regiocentric and geocentric orientations-In a company with a regiocentric orientation,

management views regions as unique and seeks to develop an integrated regional strategy. For

example, a U.S. company that focuses on the countries included in the North American Free

Trade Agreement (NAFTA) – the United States, Canada, and Mexico – has a regiocentric

orientation.

Effect on international marketing

In a firm’s internationalization process, one key strategic decision is international market

selection. Entering new markets, in particular foreign markets, involves a major commitment of

recourses (strategic, technical, managerial, and financial). Due to the limitation of resources, a

firm has to make a strategic decision on which markets to enter and allocate resources

accordingly. This decision is especially important in the case of companies that decide to be

international from the inception.Firms can use their international market orientation to overcome

cultural distance problems, especially information asymmetry, opportunistic behaviour, and

uncertainty.