At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries.
It is the total system of business activities designed to plan, price, promote and distribute goods and services to potential foreign customers. It is the act of marketing goods and services of a country in another country.
At one extreme, there are firms that opt for ‘international marketing’ simply by signing a distribution agreement with a foreign agent who then takes on the responsibility for pricing, promotion, distribution and market development. the other extreme, there are huge global companies such as Ford with an integrated network of manufacturing plants worldwide and who operate in some 150 country markets. Thus, at its most complex, international marketing becomes a process of managing on a global scale. These different levels of marketing can be expressed in the following terms:
- Domestic marketing: This involves the company manipulating a series of controllable variables such as price, advertising, distribution and the product/service attributes in a largely uncontrollable external environment that is made up of different economic structures, competitors, cultural values and legal infrastructure within specific political or geographic country boundaries.
- International marketing: This involves operating across a number of foreign country markets in which not only do the uncontrollable variables differ significantly between one market and another, but the controllable factors in the form of cost and price structures, opportunities for advertising and distributive infrastructure are also likely to differ significantly. It is these sorts of differences that lead to the complexities of international marketing.
- Global marketing: Which is a larger and more complex international operation. Here a company coordinates, integrates and controls a whole series of marketing programmes into a substantial global effort. Here the primary objective of the company is to achieve a degree of synergy in the overall operation, so that by taking advantage of different exchange rates, tax rates, labour rates, skill levels and market opportunities, the organisation as a whole will be greater than the sum of its parts.
REASONS FOR INTERNATIONAL TRADING BETWEEN COMPANIES
Amongst individual companies there is an increasing need for them to expand their markets into the international arena for a number of reasons, namely:
- To increase the overall level of total profits.
- Because the home market might be saturated.
- To take advantage of an innovative world product or service.
- To satisfy the goals of corporate management who might wish as a general matter of policy that the company should be committed to international operations.
- To enjoy the corporate tax advantages offered in overseas countries.
- To enjoy the funding benefits from setting up manufacturing and assembly bases in certain overseas countries which might also offer access to the trading block to which that country belongs.
- To obtain economies of larger scale operation.
- The reason a company might wish to enter the international arena is to escape competition in the home market. One of the principal reasons that has spurred a number of UK companies to unwillingly enter EU markets is because UK markets have now been legitimately opened up to other EU countries and the only way for them to keep market share is to enter EU markets.
- To dispose of surplus production or to utilise surplus manufacturing capacity. This is a negative factor, but a number of companies dispose of their surplus production overseas at cost or even below cost rather than cut their prices on the domestic market.
IMPORTANCE OF INTERNATIONAL MARKETING
- Counteract Slowing Growth: Companies in some industries have found that the rate of growth of their traditional markets is slowing or even stagnant. To sustain the revenue growth which the company has achieved in the past, it is necessary to build the international side of their business. For companies which have gone public, slower growth in earnings per share can result in a declining price for the company’s stock.
- Entering Markets Before Competitors Do: A first-to-market advantage means bringing your company’s goods or services to a new market or market segment ahead of your competitors. Over time a company may lose this advantage domestically as new competitors arise and begin to gain market share. But international markets for these same goods or services may not yet be exploited. The company can be a trailblazer in the new international market and rapidly build revenues there.
- Better Utilize Productive Capacity: Building international sales allows a manufacturing company to increase its factory utilization and lower its unit production costs for the company as a whole, because fixed operating costs are now spread over more units produced.This can be particularly advantageous if the company has overbuilt its domestic capacity in expectation of increased sales opportunities that did not materialize. Without the possibility of international sales, the alternative would be shutting down plants, selling off equipment and laying off workers.
- Synergies Between Domestic and Overseas Operations: A successful international marketing strategy brings about synergistic benefits that strengthen the organization as a whole. By establishing sales operations overseas, the company may discover opportunities to save costs by having some of the manufacturing or assembly of products done in the foreign country where labour costs are lower. The company’s international presence may open up opportunities to secure raw materials at favorable prices for both its parent country and international manufacturing activities.
- International market also makes goods and services produced in domestic market available in foreign markets.
- It is a source of foreign exchange for a country.
- It creates employment opportunities.
INTERNATIONAL TRADE SYSTEM
Trade plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of trade to development depends a great deal on the context of it works and the objectives it serves. In recent decades, a number of developing countries, most notably the East Asian newly industrializing countries, have been able to purposefully use the elemental force of trade to boost growth and development within a relatively short time span. At the same time many other developing countries, especially the least developed countries (LDCs), have embarked on unilateral trade liberalization in recent years, with very limited results at best in terms of increased growth and development.
HISTORY OF INTERNATIONAL TRADE
International trade has been and is today an economic force that has spurred commerce, promoted technology and growth, spread cultural patterns, stimulate exploration and colonization, and frequent fanned the flames of war.
The history of international trade has gone hand in hand with the development of civilizations. From very ancient times, international trade brought about the exchange of products and raw materials between one land or nation and another. Although such trade was often conducted in barter form and was of small volume by today’s standard, this interchange of products was important in economic and historic development.
International trade in its early beginnings was necessary, not just because it provided one society with products such as cowries from West Africa to other areas, international trade also formed the cultural interchange, thus trading not only on product, but also on lifestyles, customs and technology.
In addition international trade prompted the development of monetary system of record keeping and accounting, and of an entire vocation of commerce. Infact international trade added in public displeasure towards usury (interest in excess of legal rate charged to a borrower for the use of money).
One can state that the economic and political development of the entire western world was spurred and enhanced by international trade.
Another distinct contribution of international trade was the strong promotion given to the field of exploration, map making, and ship construction technology. Early international trade routers ranged over vast expanses, thus requiring advances in transportation to make possible further search for new products and markets.
Let us not forget, of course, that such desire for new trade routes products, and markets was the driving force that launched explorations leading to the discovery of the New World.
Columbus set out, as you can recall, not to settle in a new nation, but to discover a new trade route of the Orient. The interest upon his return to Europe center not on his accounts of forest and soil, but on the new products available such as tobacco, corn and cowries.
As international trade progressed and technology developed, these explorations were to turn up another area of foreign trade, still important today. This was the import of raw materials by a nation and the re-export of finished and manufactured products. As a result, not only living standards advanced, but national incomes were also increased.
DEFINITION OF INTERNATIONAL TRADE
International trade deals with the economic and financial interdependence among nations, international trade is a part of our daily life, international trade plays a vital role in shaping economic and social performance and prospects of countries around the world, especially those of developing countries. No country has grown without trade. However, the contribution of international trade to economic growth depends a great dealon the context it works and the objectives it serves.
International trade is the exchange of capital goods and services across borders or territories. Through international trade countries supply the world economy with the commodities that they produce relatively cheap and demand from the world economy the goods that are made relatively cheaper elsewhere.
In other to know what is happening in the course of international trade, governments keep track of the transactions among nations.
The records of such transactions are made in the balance of payment accounts. International trade and balance of payment are therefore two important aspects in the relationship between nations.
IMPORTANCE OF INTERNATIONAL TRADE
There are many areas in which the importance of trade can be established. Perhaps the most critical of these areas concerns economic growth. During the 19th and 20th centuries, trade has played a leading role in bringing about global economic growth. In addition to its role as an ” engine of growth” for the world economy, international trade has also played a pivotal role in bringing about rapid economic growth and development in several countries. The 19th century was perhaps the important century for (primary commodity) export-led growth. Expansion of exports can lead to growth through stimulating technical change and investment, or by spilling demand over other sectors.
Expansion of primary commodity exports often led to growth in the 19th century particularly in Sweden, Australia and Canada. In Sweden, growth was propelled by the exportation of timber and wood products and in Australia , growth was driven by the exportation of wool, lamb and mutton meat from shop. In Canada , growth was propelled by the export of wheat. This gave rise to the so-called “staple theory” of growth. In practice, different primary products will have different effects on economic growth because they differ as regards conditions of supply and demand. Those primary products with high income and price elasticities of demand are likely to be more growth-inducing than others. Of course, the most favourable situation is when exports (with high elasticities) are sold in an expanding market at rising prices as was the case with Swedish exports into the U.K. providing foreign exchange for buying capital imports. In the 20th century, for a host of reasons, there have been no good examples of primary product led-growth, but there are several examples of industrial led growth. These include the city-states of Hong Kong, Singapore, Taiwan and South Korea.
REASONS FOR INTERNATIONAL MARKETING
There are numerous reasons we should proceed internationally, however the objective of every company for going international is to expend its business, searching new market and expend its customer base. There are several reasons listed below for entering in international market:
- Growth and Profitability: A lot of companies turn to global markets for growth. Introducing new products internationally can broaden their customer base, sales and revenue.
- Economics of Scale: Expanding size and scope of markets help to achieve economics of scale. International approaches give economics of scale while sharing of costs and risks between markets. Economics of scale occur when the unit cost of a product declines as production volume increases.
- Risk Diversification: Several companies move worldwide so that they can diversify. Selling products in numerous countries reduces the companies exposure to economic as well as political instability within the country.
- Uniqueness of Product or Services: The product with distinctive attributes is not likely to meet competition in the overseas markets and enjoy massive options throughout worldwide market places.
- Spreading R and D costs: Through spreading the marketplace, a firm rapidly recovers the cost incurred in R and D. it is especially true with regard to products including higher cost associated with R and D. As a result of the large marketplace and also due to larger coverage of the right market segments in international markets, it facilitates speedy recovery of such costs.
- Resources and Ideas: Due to unavailability of resources in domestic country or at better competitive rate companies turn into global market. Also companies proceed internationally to collect the different ideas in the different lifestyle of various countries as well as to broaden their workforce.
- Employees: All organizations want skilled and well trained employees, as company goes to worldwide market place to find alternative source of labour at a lower cost.
FEATURES OF INTERNATIONAL MARKETING
1) Economic: International marketing activities are favoured by appropriate economic environment. The secure economic environment could be judged by the international marketer through some market’s characteristics such as population, income, consumption pattern, infrastructures, geography and attitudes towards foreign investments.
The population growth rate serves for estimation and active population is the main source of labour a company may need. Markets require not only people but also purchasing power, which is a function of income, prices, savings, and credit availability. The share of income spent on products will provide an indication of the market development level as well as an approximation about how much money left for other purchases. So, information on the percentage of households in a market that own a particular product, allow a further evaluation of market potential. The successful economic environment involves the presence of basic economic infrastructures. They consist of transportation (roads, railways, highways, and airports) the so-called linear development, energy (water supply, electricity, oil, gas), and communication systems (television, media, telephone, internet).
Regional economic groupings are powerful factors an international marketer should never neglect. In fact, economic integration in world markets transactions poses unique opportunities and challenges for corporate international marketing systems. Removing barriers between member markets and erecting new ones for non members will call for adjustments in past strategies to fully exploit the new situations.
2) Political/Legal: Assessing the political environment is an important part in any business decision. Laws and regulations passed by either local, regional and central government bodies can affect foreign firms’ operations. Also, firms are comfortable assessing the political climates in their home countries. However, assessing the political climates in other countries is still problematic. The political environment includes the characteristics and policies of the political parties, the nature of the constitution and government system and policies Regulation of the quality, prices, packaging labelling, etc.
The following political/legal Factors should be considered when considering whether to do business in a given country.
- Attitudes towards international buying: Some nations are quite receptive to foreign firms and others are quite hostile.
- Political Stability: Stability is another issue . Governments change hands, sometimes violently. Even without a change a government may decide to respond to new popular feelings.
- Monetary Regulations: Firms need to assess the government and currency regulations within a country to determine if any restrictions exist and if they will play a negative role in the international business in that country. Besides currency limits, a changing exchange rate also creates high risks for the seller. International trade usually involved cash transactions; however in some instances a barter system can be developed, this practice has been called counter trade and now accounts for about 25% of all world trade.
3) Social: The social environment encompassing the religious aspects; language; customs, traditions and beliefs, tastes and preferences, social stratification, social institution, buying and consumption habits etc. Social environment of different markets differ vastly.
4) Cultural: The ways people appreciate manufactured items, express their specific needs, and purchase, are deeply rooted in their culture. Culture itself is a collection of values, beliefs, behaviours, customs, and attitudes that distinguish and define a society. It is often said that culture is learned, shared and transmitted from one generation to the next. Nevertheless, in the context of international marketing, it seems not appropriate to learn a culture, we have to live it. That is why Stephen Kobin, classified business travel and assignment overseas as the top two factors considered critical and important for culture knowledge. However, at least the factual knowledge of culture can be learned and the interpretive one be acquired through experience.
International marketer needs both knowledge to master language, religion, values and attitudes, manners and customs, aesthetics, technology, education and social institutions, which all determine a given culture.
5) Financial: The international marketer should make a careful analysis of the financial environment, since this area faces several risks. Even political risks are part of the financial risks, among many other such commercial risks, foreign exchange risks, inflation and so forth. international business, the two concerns for the manager are how to get paid and how to avoid the above mentioned risks. As money should flow between countries, credible financial infrastructures like facilitating agencies, commercial banks, research firms, are necessary. In some part of the world, the international firm may have to be an integral partner in developing the various infrastructures before it can operate, whereas in others, it may greatly benefit from their high level of sophistication.
In West Africa, every single country has its own national commercial banks. However, transactions towards neighbouring countries are sometimes restricted to some amount of money and take time to be done.
There are some commercial banks like Citibank, and Ecobank that offer faster service, since they are established in several countries. Also, Western Union and Money Gram are specialized money transfer agencies, which enable fluidity in transactions.
6) Demographic: Size of population, population growth rates, age composition, family size, nature of the family, income levels e.t.c. have very significant implications for business. The size of the population is an important determinant of demand for many products.