A firms international marketing program must generally be modified and adapted to foreign markets. This international marketing program uses strategies to accomplish its marketing goals. Within each foreign nation, the firm is likely to find a combination of marketing environment and target markets that are different from those of its own home country and other foreign countries. It is important that in international marketing, product, pricing, distribution and promotional strategies be adapted accordingly.
In order for an international firm to function properly, cultural, social, economic, and legal forces within the country must be learly understood. The task of International marketing is more difficult and risky than expected by many firms. One of the most controlling factors of international marketing is management. It is very important for managers to recognize the differences as well as similarities in buyer behavior. Many mistakes can occur if managers fail to realize that buyers differ from country to country.
It is the international differences in buyer behavior, rather than similarities, which cause problems in successful international marketing. An international marketing manager is a manager responsible for facilitating the exchange of roducts between the organization and its customers or clients. Sometimes an international marketing manager will find difficulties in completing the exchange of products. Many surprises in international business are undesirable human mistakes. An international corporation must fully understand the foreign environment before pursuing business matters.
Problems constantly crop up and many times have unexpected results. Sometimes these unexpected results are unavoidable. Other times they are avoidable. To be sure those avoidable situations do not occur, international marketing managers must be aware of ultural differences. Cultural differences take place among most nations of the world. Differences in culture are one of the most significant factors in an international company. All nationalities posses unique characteristics, which are unknown to many foreigners. Many of the top international businesses are unaware of these cultural differences.
It is very important to understand these cultures in order to market a product successfully. As an example, different nationalities have different beliefs on how business matters should take place. Where some countries prefer to work with a deadline other ountries can take this as being offensive. Many countries feel it is an insult to be asked to work under a set time period. A country may feel that a deadline is threatening and may feel backed into a corner. On the other hand, other countries try to expedite matters by setting deadlines.
To be effective in a foreign market it is necessary to understand the local customs. Knowing what to do in a foreign country is as important as knowing what not to do. Failure to understand local customs can lead to serious misunderstandings between business people. The simple rejection of a cup of coffee can lead to total confusion. The decline of an invite is sometimes considered an affront. To avoid making blunders, a person must be able to discern the difference between what is acceptable behavior and what is not acceptable behavior.
Violations of a local custom can be insulting, and can cause uncomfortable situations. To be a successful manager of international marketing, one must be able to discern the differences as to what must and must not be done. It is almost impossible to attain complete knowledge and understanding of a foreign culture. As established, culture plays an important role in the drama of international marketing. Of all the cultural aspects, communication may be the most critical. It is certain that communication has been involved in a number of cultural confusion.
Good communication linkages must be set between a company and its customers, suppliers, its employees, and the governments of the countries where it performs business activities. Poor communication can obviously cause various difficulties. One source of difficulty among starting companies is that of effective communication with potential buyers. The problem is that there are many possible communication barriers. Sometimes messages can be translated incorrectly, egulations overlooked, and economic differences can be ignored. Other times when the message does arrive, its ineffectiveness can cause it to be of no value.
Every now and then a buyer will receive the message, but to the companies disappointment, the message was sent incorrect. It is normal in multinational businesses to send and receive messages on a regular basis. Many well-known people have incapacitated public speech introductions by using inaccurate titles and names. Not all communication problems are verbal. Some serious problems have occurred as a result of non-verbal communication. Non-verbal communication exist in numerous forms. Sometimes a persons appearance can convey a stronger message than intended.
Untidy attire, for example, can be more offensive in some nations than in others. The local people often are willing to overlook most of the mistakes made by tourist. On the other hand, locals are less tolerant of the errors of business people. It is very important to be able to interpret the different means of communication in international marketing. In America, we sometimes take for granted the display of products on the market. However, in other nations such roduct array and selection do not always exist. It is important to understand that even if local customers can afford a certain product, they may not always want it.
If by chance are interested, it may be only if it is substantially modified to fit their local preferences and taste. These adaptations exist in the form of product and package. The alteration of a material product is sometimes required to match the product to local taste and conditions. Adaptation of the package is often needed to attract customers to the product. Many times adaptation is also used to maintain a products righteousness in a unique environment. A firm is occasionally forced to modify both the product and the package to create an appropriate product for the new market.
Some products may require more technical modification than others may. Measurement systems vary between countries, and often components need to be adjusted to cleave to local standards. The need for product adaptation has existed for many years. In 1857 Englands East India Company possibly lost control of India because it failed to modify a product it provided. A product may be well acceptable in markets, but may not sell if housed in an inappropriate package. Packages promote the product and they protect it. International packaging must be able to withstand the journey.
Some countries have exported their products only to witness the return of crushed and half-empty containers. Packaging can sometimes bring embarrassment to a company. Medical containers made in the U. S. drew unwanted attention because they carried the instructions “Take off top and push in bottom. ” These messages was harmless here in America, but were sexual and humorous connotations to the British. Often the choice of package and product is difficult. Sometimes companies have failed to sell their products overseas because of the packaging of a product.
Each firm must determine the area most appropriate for its product. Determining the region where it is most appropriate to market a product is not an easy task. Wherever the location of these places, they must be found because market testing is essential in international marketing. Many countries maintain regulations concerning their products and packages. Countries have expectations that foreign marketers will adhere to the rules. Failure to abide by the rules of a country can prove to be very costly. The legal and political atmosphere varies across national borders.
Different countries have different legal policies. There are laws to which a marketer must abide by when marketing internationally. Some countries enact laws to protect consumers or to preserve a competitive atmosphere in the marketplace. Since many countries maintain regulations concerning their products and packages, the wording or color of a package can create difficulties. In some countries giving gifts to authorities is a standard business procedure. In other countries, such as the United States, these gifts would be considered as bribes or payoffs and are strictly illegal.
If an error occurs it can be costly, but with the appropriate alterations it can be orrected. The General Agreement on Tariffs and Trade (GATT) reforms imposes on national governments the obligation to sacrifice local and state laws that protect customers, and the environment. Plans were developed in the mid-1980s to broaden GATTs mandate by extending its police powers to the areas of foreign investment and trade in services. If such reforms are enacted, GATT will have the authority to remove barriers to foreign investment and to override or knock out local laws for protecting a nations insurance, brokerage, an banking businesses.
Removing local laws can definitely make the international ork place easier, when it comes to the legal aspect. In the field of marketing, a product promotion can be the most difficult. Timing is the most critical element in the launching of a new product. Most firms understand this and also perceive that varied peoples hold different conceptions of time. Since some nationalities are more conscious of time factors than others, extra time must often be allocated to guarantee that everything is completed as schedule. An international marketer can adopt several strategies regarding its product and promotion.
Marketing a product internationally through a single promotional message orldwide can be effective for products that have standardized appeal for the majority of the people. Most times this could be the least expensive strategy. When it is hard to translate promotional messages or to adapt an overall promotion to local customs, companies market one product. This promotion is designed to market one product but vary its promotions. Some products are well known among the nation and need little advertising. The advertisement can be on American influence located in China.
If a theme works exceedingly well in one country, then it naturally becomes very tempting for a firm to want to se it in another country. There is a big risk involved in doing this, because admirable themes are culturally oriented. For example, consider the very popular Marlboro advertisements. The Marlboro man projects a strong masculine image in America and in Europe. In Hong Kong, attempts to use this advertisement were unsuccessful because the urban people did not identify with horseback riding in the countryside. Several firms have tried to use old, reliable promotional methods in countries where they simply do not work.
Billboard advertisements, for example, are perfectly legal in most parts of the Middle East, but it oes not mean one should use them. In some cases companies have been know to advertise in the wrong language. Such mistakes can cause major problems. It is often the promotional strategy that creates mistakes. The perception of the product characteristics plays an important role in the international marketing strategy. One must realize that the importances of a certain product traits vary from country to country. Multinational corporations, therefore, must consider varying promotional tactics.
Adapting the product but using the same promotional mix is a strategy used when a product will not appeal to different ocal tastes. For example an American cheese company may need to use different ingredients when making cream cheese for the markets of different countries. The most expensive strategy is adapting to both the product and its promotion. This strategy may be required when neither the existing product nor its promotion would appeal to foreign markets. In some cases, the international firm may develop a completely new product for a foreign market. It can be very costly to create a new product line for a foreign market.
The distribution strategy used sometimes depends on the firms international organization. It does not matter if it is licensing, exporting, or manufacturing in the host country. International marketers use existing distribution channels for the most part. Distribution channels link the producer of a product to the consumer or industrial user. This international marketing channel is sequence of marketing organizations from nation to nation that directs the flow of products. Most industrial products use shorter channels. One of the most basic levels of international marketing is licensing.
A license is a contractual agreement in which one firm permits another to produce and market its product and se its brand name in return for a royalty or other compensation. This grant may be in the form of a direct sale of rights or be limited to a certain period of time. International licensing can be tied to joint ventures between the parent and the subsidiary. For example, an American candy manufacturer might enter into a licensing arrangement with a British firm. The British producer would be entitled to use the American firms candy formula, and packaging to advertise the candy as though it were its own.
The advantage of licensing is that it provides a simple method of expanding into a foreign market with no investment. However, if the licensee does not maintain the licensors product standards, the products image may be damaged. Another disadvantage is that a licensing arrangement does not usually provide the original producer with any foreign marketing experience. Technology licensing is a conceivable alternative to the exportation of finished products through intermediaries or to the different types of capital involvement, which could be chosen as an international strategy.
Many companies use intercompany licenses to protect the intellectual property of the parent company that is held by the subsidiary, and to allow for ayments by the subsidiary to the parent of certain license fees. Licensing is also dependent upon product characteristics. Products subject to rapid technological change are also good licensing candidates. For most large companies licensing is designed as a means to enter secondary markets. The potential licensor must look at legal and financial considerations.
Many times the decision to license has been made since the company has no other alternative because the government restricts direct investment through controls on foreign ownership or because it restricts the development of marketing network y a number of tariff barriers. Licensing allows the licensor to enter into foreign markets with a low financial risk. The decision to license is a complex one. Many licensing relationships do not succeed because the parties fail to understand each others agenda. The creation of joint ventures sometimes prevents all the problems encountered by a company when going overseas from occurring.
With the combined expertise and efforts of local and foreign firms, many problems will be eliminated. A joint venture is a partnership that is formed to achieve a specific goal or to operate for a specific period of time. International corporations may enter into joint ventures. Most joint ventures were formed to share the extremely high cost of exploring for offshore products. A company should create a joint venture only after giving it some consideration. Many problems occur when companys fail to thoroughly investigate potential partners.
Licensing decisions are as difficult to analyze as those decisions involving the creation of a joint venture. Failure to make the correct decisions at the right time can result in the loss of substantial long-range business prospects and profits. A firm can also manufacture its products in its home ountry and export them for sale in foreign markets. Like licensing, exporting can be a relatively low-risk method of entering foreign markets. Unlike licensing, it is not an easy task. Exporting opens up several levels of involvement to the exporting firm. On the basic level, the exporting firm may sill its products to an export/import merchant.
This merchant assumes all the risks of product ownership, distribution, and sale. It may purchase the goods in the producers home country and assume responsibility for exporting the product. The exporting firm may also ship its products to an export/import agent. The export/import gent arranges the sale of the products of foreign intermediaries for a commission or fee. The agent is an independent firm that sells and may perform other marketing functions for the exporter. The exporter retains title to the products during shipment and until they are sold.
An exporting firm may also establish its own sales offices in foreign countries. These installations are international extensions of the firms distribution system. The exporting firm maintains control over sales, and it gains both experience and knowledge of foreign markets. Eventually, the firm may develop its own sales force to operate in onjunction with foreign sales offices or branches. Pricing is a very important factor in international business. The pricing system more common in international marketing is cost-based pricing. Cost-based pricing is not as popular in domestic marketing as it is in international marketing.
Using this simple method of pricing, the seller first determines the total cost of producing or purchasing one unit of the product. The seller then adds the amount to cover additional cost and profit. The cost added is called the markup. The total cost of the markup is the selling price of the product. Many smaller firms calculate the markup as percentage of their total cost. Markup pricing is easy to apply, and it is used by most businesses. However, it has two major flaws. The first is the difficulty of determining an effective markup percentage.
If this percentages too costly, the product may be overpriced for its market. On the other hand, if the markup percentage is too low, the seller is “giving away” profit that could have earned simply by assigning a higher price. In other words, the markup percentage needs to be set to account for the working of the market, and that is very difficult to do. The second problem with markup pricing is that it separates pricing rom other business functions. The product is priced after production quantities are decided upon, after cost are incurred, and almost without regard for the market or the marketing mix.
To be effective, the various business functions should be integrated. The different types of pricing can vary in international marketing. Geographic pricing strategies deal with delivery cost. The seller may assume all delivery cost, no matter where the buyer is located. The seller may share transportation cost with the buyer to pay the greatest part of delivery cost. When a foreign product enters a country, there is a tax added to the cost. Import duties are designed to protect specific domestic industries by raising the prices of competing imported products. The importer first pays most of the import duties.
After the importer pays the price it is then passed on to the customers through higher prices. These higher prices are usually less competitive. The cost of shipping and complying with other various regulations can also add to the pricing method. Prices are also effected by exchange rates, especially by changes in these rates. Financial limitations are normally imposed through exchange rates. It is required to convert local currency to oreign currency at government-imposed exchange rates. Because of the added cost and uncertainties in the exchange rate, prices tend to be higher in foreign markets than in domestic markets.
An important economic consideration is the distribution of income. The distribution of income, especially discretionary income, can widely vary from nation to nation. Discretionary income is of particular interest to marketers because consumers have more input in the spending of it. Income creates purchasing power. International marketers tend to concentrate on higher income countries as either personal, disposable, or discretionary. For obvious reasons, marketers tend to concentrate on higher income countries. Some producers have found that their products are more likely to sell in countries with low income.
As in domestic marketing, the determining factor is how well the product satisfies its target market. International marketing encompasses all business activities that involve exchanges across national boundaries. A firm may enter the international market for many reasons. Whatever the reason international marketing can provide and efficient way of entering the market. A firms marketing program must be adapted to foreign markets to account for ifferences in the business environment and target markets form nation to nation.
The marketing mix may require the modification of cultural, social, economic, and legal differences. Foreign marketing requires the understanding of various additional costs, which tend to increase the prices of exported goods. The marketing program of an international company must adapt to the necessities of a foreign market. The strategies it uses to accomplish a firms marketing goal should be the main priority of the marketing program. False assumptions frequently cause expensive mistakes in the market.