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International Business

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Objective

Explain the nature of International Marketing

Compare International Marketing with Domestic Marketing

State & Explain major benefits of International Marketing

Identify major activities of International Marketing

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Nature of International Marketing – Case Study Wal-Mart is all set to enter Indian Market by venturing with Bharti Group. Wal-Mart is known for very aggressive marketing strategy. As they were biggest retail chain in US market, hence international expansion

was the key for continued growth. The company’s initial internationalization in early 1990s was Mexico & Canada. By end of decade, they sighted on more complex & lucrative market – Europe. Wal-Mart first entered UK by buying ASDA, with 230 outlets, it meshed well,

because of aggressive marketing strategy & low prices. New management team enhanced ASDA’s competitiveness by cutting prices &

sending competitors scrambling to meet or beat price tags. British retailers were accustomed to high profit margins, but Wal-mart low prices

have put pressure on rival chains e.g. Tesco, Safeway, Sainsbury & given smaller stores bigger headache.

ASDA raised it’s share to 10.5% from 8.4%, it had, before Wal-Mart took over. Wal-Mart adopted acquisition strategy to enter German market, first acquired 21

store Wertkauf & then bought Spar Handels AG. It hung an American Flag outside each store to symbolize superior service &

selection.

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In Continuum……

The company’s Always Low Price Policy upset German regulators, fearing small retailers out of business.

German Cartel Office forced retail giant to raise it’s prices on loss leaders like flour, cooking oil & butter, which was sold below cost.

It underestimated the ferocity of it’s primary German competitors, Aldi & Lidi, company did not carry on it’s expansion plans rather to be cautious & grow slowly.

It kept them in reaching economies of scale to become profitable. Finally, in mid 2006, it announced ceasing operations in Germany. Though Wal-Mart failed in Germany, it’s overall international operations are paying

dividends. Wal-Mart is doing very well in UK, Canada, Mexico & Brazil & have just opened an

office in India.

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Definition of International Marketing

• International marketing refers to the process of identifying the goods & services that customers outside the home country want & then provide them at the right price & right place.

• Viewed from this perspective, International Marketing & Domestic Marketing are similar, but there are differences.

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Domestic & International Market

Environmental Factors

- Controllable factors Pricing, Product, Promotion

- Uncontrollable factors Economic, Legal, Political & Competition

The Domestic marketer must understand these factors objectively & come out with appropriate marketing strategies.

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Domestic & International Market

• International marketing is much more complex • It faces several uncontrollable forces originating from different countries.• Marketing mix need to be modified to confirm different environments.• Varying environments may rule out uniform marketing strategies.• McDonald’s – Renowned for standardization & American Symbol, has been flexible

overseas, the company customizes it’s menu as Beef excluded in India.• Pricing is more complex in International Marketing, because of additional problems

associated with Tariffs, Dumping Laws, Inflation & Currency conversion.• Problems arises in International advertising too – Language Translation.• Problems in selecting media.• Problems in selecting agency to prepare & place company’s advertisements.

Problem is to hire local ad agency or multinational ad agency.

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Benefits of International Marketing

International Marketing

Standards of Living

Inflation & Price Moderation

Diversification

Survival

Overseas Markets

Sales & Profits

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Benefits of International marketing

• Survival – Many countries need to trade globally for survival, e.g. Hongkong, without food & water from China, the British colony would not have survived long.

• Europe have had similar experience – Most European nations are smaller in size, without Foreign markets, European firms would not have economies of scaleto be competitive with US firms. e.g. Nestle, had to depend on foreign market because Switzerland is very small.

• Growth of Overseas Markets – Developing countries are growing potential markets for international business, such as, Latin America & Asia Pacific region.

• History is evident that that firms have achieved dominance worldwide through foray into overseas markets .

• Home country markets smaller in size, successful global firm from Netherlands in Western Europe have become giants worldwide – Philips(Electronics), Shell(Petrol), Uniliver (Consumer Products) etc.

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Benefits of International Marketing

• Sales & profits - For many firms, foreign market constitute larger share of business cultivated markets abroad, such as, Coca Cola’s foreign sales account for over 80% of it’s total revenue. No international business can ignore this.

• Diversification – Demand for most products in domestic market is affected by cyclical factors – Recession or seasonal factors – Climate & are likely to cause a drop in sales often forcing firms to lay off professionals.

• Overseas markets avoid such possibility, foreign markets remove fluctuations by providing outlets for excessive production capacity. e.g. Cold Weather may depress soft drink sales, but not all countries enter the winter season at the same time.

• Inflation & Price Moderation - Imports can be beneficial to a country. Without imports, there is no force on domestic firms to moderate their prices.

• Absence of foreign imported products compel consumers to buy domestic products at higher prices, resulting in inflation & excessive profits.

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Benefits of International Marketing

• Standards of Living - Trade affords participating nations better standards of living than otherwise possible.

• Without trade, people will be forced to pay more for less.

• Trade also makes it easier for industries to gain access for raw material.

• Time Fostering to competition & efficiency.

• A diffusion of innovations across nationals is useful by-product of international trade.

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Major Activities in International Marketing

Mix of the four elements:

Product, Price, Place &

Promotion

ProductProduct that includes physical goods, services, experiences,

events, persons, places, properties, information/ideas.

PriceInternational business can follow

either standard policy, Two-tiered Pricing or Market Pricing

PromotionPromotion includes all efforts

undertaken to enhance acceptability of the product by

potential buyers. Branding is part of promotion.

PlacePlace refers to distribution.

Distribution involves two issues: decision on channels & mode of

shipping

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International Market Assessment

International Marketing starts with identification of the market – It follows three steps:

1. Assess alternative Foreign Markets

2. Evaluate the respective costs.

3. Select those that hold the most potential for entry or expansion.

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Assessing Alternate Foreign Market

• The number, size & financial strength of the competition.• Their Market share.• Their apparent marketing strategy• Their apparent effectiveness of promotional programs• The quality levels of their product lines• The source of their products – Imported or locally

produced• Their Pricing policies• The levels of their after sales service• Their distribution channels• Their coverage of the market

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Evaluation of Costs, Benefits & Risks

• Next step in assessing carefully the cost, benefits & Risks associated with:• There are two types of costs – Direct & Opportunity

Direct Cost – The firm incurs in setting up operations abroad, such as, Setting up Business Operations, Transfer Managers to manage the factory, shipping equipment and parts.

Opportunity Cost - Foregoing one option for another. As firm has limited resources, entering one market may delay it’s entry into another.

Entering new market offers many benefits – Increased Sales & profits, Lower acquisition or manufacturing costs, foreclosing of markets for competitors, access on new technology & opportunity to achieve synergy with other operations.

There are risks associated & IB is no exception – MNC bears Opportunity Cost, Additional Operational Complexities, Direct financial losses due to inadequate assessment, Exchange Rate fluctuations. It also faces the risk of wars or terrorism, losses through Government Regulations.

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Selecting Markets for Entry or Expansion

• For any firm, different circumstances will dictate the market it enters or the market with in which it expands.

- All international business have operations in N.America, Europe & Asia-Pacific Region, complex question surround the decision to enter the markets of S.America, Africa, Eastern Europe & other region.

• In most cases SWOT analysis of the firm, scanning of environment & frequent visits give insightful decisions.

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Thank You