INTERNATIONALBUSINESS MANAGEMENT

BUS 4012

Leah Ogesa

1. International Marketing

Today, the marketing organizations are not restricted to their national borders. The entire world

is open for them. New markets are springing forth in emerging economies like – China,

Indonesia, India, Korea, Mexico, Chile, Brazil, Argentina, and many other economies all over

the world. In today’s global market opportunities are on a par with the expansion of economies,

with the increasing purchasing power, and with the changing consumer taste and preferences.

The economic, social, and political changes affect the practice of business worldwide, the

business organizations have to remain flexible enough to react rapidly to changing global trends

to be competitive.

When a company contemplates marketing abroad or expanding existing international marketing

activity, management faces five major decisions:

1.International marketing decision i.e. initial and fundamental decision on whether or not to

market or expand abroad.

2. The market selection decision i.e. determination of which market to enter.

3. The market entry decision i.e. determination of the most appropriate methods of entry into

those markets, e.g. exporting, licensing, manufacturing abroad.

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4. The Marketing Mix decision i.e. planning and implementing a marketing mix appropriate to

the market environment.

5. The Organization decision i.e. determining the appropriate organization structures.

1.1 Definitions of International Marketing

According to Kotler, “Global marketing is concerned with integrating and standardizing

marketing actions across a number of geographic markets.”

According to Cateora, “International marketing is the performance of business activities that

direct the flow of goods and services to consumers and users in more than one nation.”

According to Cateora and Graham, “International marketing is the performance of

business activitiesdesigned to plan, price, promote, and direct the flow of a company’s goods and

services to consumers or users in more than one nation for a profit.”

According to Terpstra and Sorathy, “international marketing consists of finding and satisfying

global customer needs better than the competition, both domestic and international and of

coordinating marketing activities within the constraints of the global environment.”

1.2 Nature of International Marketing

1. Broader market is available– Unlike domestic marketing the market is not restricted to

national population. Population of other countries can also be targeted in international marketing.

2. Involves at least two set of uncontrollable variables – In domestic marketing the marketers

have to interact with only one set of uncontrollable variables. In international marketing at least

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two set of uncontrollable variables are involved or more if the marketing organization deals in

more countries.

3. Requires broader competence– Special management skills and broader competence is required

in international marketing/business.

4. Competition is intense – An international marketing organization has to compete with both the

domestic competitors and the international competitors. Hence, the competition is intense in

international marketing.

5. Involve high risk and challenges – International marketing is prove to various kinds of risk

and challenge like – political risk, cultural differences, changes in fashion and style of foreign

customers, sudden war, changes in government rules and regulations, communication challenges

due to language and cultural barriers, etc.

1.3 Scope of International Marketing

International Marketing constitutes the following areas of business:

1. 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.

2. Contractual Agreements

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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.

3. 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.

4. 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.

5. 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.

6. Management contracting

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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.

7. 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.

8. 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.

9. 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:

1. Technology developed alliances like research consortia, simultaneous engineering

agreements, licensing or joint development agreements.

2. 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.

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 3. 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.

10. 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.

1.4 Objectives of International Marketing

 To bring countries closer for trading purpose and to encourage large scale free trade

among the countries of the world.

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  To bring integration of economies of different countries and there by to facilitate the

process of globalization of trade.

 To establish trade relations among the nations and thereby to maintain cordial relations

among nations for maintaining world peace.

 To facilitates and encourage social and cultural exchange among different countries of

the world.

 To provide better life and welfare to people from different countries of the world. In

addition, to provide assistance to countries facing natural calamities and other

emergencies situations.

 To provide assistance to developing countries in their economic and industrial growth

and thereby to remove gap between the developed and developing countries.

 To ensure optimum utilization of resources (including surplus production) at global level.

 To encourage world export trade and to provide

benefits of the same to all participating countries.

 To offer the benefits of comparative cost advantage to all countries participating in

international marketing.

 To keep international trade free and fair to all countries by avoiding trade barriers.

1.5 Target market selection

Target market is that segment of the market that a company focuses its attention on so that the

consumers will be satisfied. In international business, when we discuss target market selection, we

are looking at countries for possible target market within which the companies are willing to operate.

To do this, we need to:

 identify potential markets for entry

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  expand selectively over time, across areas that are deemed attractive.

1.5.1 International Screening

Identification and screening has four stages or processes. It starts with general criteria and ends with

specific market analysis. Data for screening are got from secondary and primary sources.

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The four processes of screening countries that will serve as target market include the followings.

1. Preliminary Screening

It relies solely on secondary data to know the general country factors either favourable or

unfavourable to you and the generic product specific factor. If both are positive on your side it means

you have gotten prospective target countries and if unfavourable, you reject the countries and look

for a more favourable country.

2. Estimating Market Potential

Market potential is the sales in physical or monetary units that might be available to all firms in an

industry during a given period under a given level of industry, marketing effort and given

environmental condition.

There is the feeling of whether it is favourable or unfavourable after using the income, elasticity of

demand, market audit, analogy and longitudinal analysis to measure the market. You either reject the

market if unfavourable and if favourable, you proceed to what we call high market potential

countries.

3. Estimate Sales Potential

After studying the market and believing that the market has prospect, there is need for estimating the

sales potential of the target market. You need data to help you look at competition, market, consumer,

product and channel structure. If they are favourable, you go to the next stage of referring to the target

as highest sales potential control and if not, you either reject the country or look at other target

markets.

4. Identifying Segment

There is need to identify the most profitable target relying mostly on primary data, if it is favourable,

you proceed to optimal segment mix in target market and if not favourable, you reject segment and look

for a more favourable one.

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1.5.2 Concentration versus Diversification
Czinkota (2002) stated that concentration is a small number of markets while diversification is

characterised by growth in a relatively large number of markets in the early stages of international

market expansion. Expansion alternatives have two options. You may concentrate in a small area i.e.

a segment or you go into a broad market if the resources are available.

Expansion alternatives depend on the following factors.:

 Sales response function

 Competition lead time

 Spillover effects

 Need for product adaptation

 Need for communication adaptation

 Economics of scale in distribution

 Extents of constraints

 Programme control requirement.

1.5.3 Marketing Management

Czinkota et al (2002) believes that after target markets are selected, the next step is the determination

of marketing efforts at appropriate levels. A key question in international marketing concerned itself

with the extent to which the elements of the marketing mix-product, price, place and distribution

should be standardized. The market also faces the specific challenge of adjusting each of the mix

elements in the international market place.

1.5.4 Standardisation versus Adaptation

These are the factors to be considered under standardisation or adaptation.

a. Make no special provision for international market place rather, identify potential target

markets and then choose products that can easily be marketed with little or no modification.

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 b. Adapt to local condition in every target market (multi domestic approach).

c. Incorporate differences into a regional or global strategy that will allow for local difference in

implementation (globalisation approach).

Factors Affecting Adaptation

a. The market(s) targeted

b. The product and its characteristics

c. Company characteristics including factors such as resources and policy.

1.5.5 Product Policy

There are lots of factors that affect product adaptation in an international market; they are broadly

divided into three.

1. Regional, Country or Local Characteristics

They may include government regulations, non-tariff barriers; customers characteristics

(expectations and preferences) purchase patterns, economic status of potential users, stages of

economic development, competitive offerings, climate and geography.

2. Product Characteristics

They include, product consistency brands, function, attributes, features, method of operation or

usage, durability, quality, ease of installation, maintenance, after sales services, country of origin, etc.

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Product Line Mangement

International market product line must be local, regional and global brand.

Product Counterfeiting

Is a general problem worldwide which involves producing inferior products to look like the original

ones? The four ways of fighting it, is through legislative action, bilateral and multinational negotiations,

joint private sector action and measures by individual firms.

3. Company Consideration

These factors include profitability, market opportunities, (e.g. market potential, product-make fit) cost of

adapting, policies, (e.g. commonality, consistency) organisation resources.

1.5.6 Pricing Policy

Pricing has to do with revenue generation; there are four categories of international pricing situation.

 Export pricing

Are dual pricing that differentiate products that are domestic or international. In dual pricing, cost plus

marginal cost methods are mostly used; while market differentiated pricing is used based on demand

oriented strategy. If not carefully used, it can lead to price

escalation or dumping.

 Foreign Market Pricing

International product pricing is when the manufacturer operation is defined by corporate objectives,

costs, customer behaviour and market conditions, market structure and environmental constraints.

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  Price Coordination

Calls for price coordination of products have increased because of the introduction of the Euro.

Environmental factors will continue to affect price coordination worldwide; it is difficult to

coordinate prices worldwide.

 Transfer Pricing

Transfer or inter-company pricing is the pricing of sales to members of corporate family. It means

charging almost the same price for all products in the same industry.

1.5.7 Distribution Strategy

This is what connects the manufacturers with the buyers; it takes time for a decision to be arrived at.

Distribution strategy takes into account the following:

 Channel design - The length and width of the channel employed is affected by so many

factors i.e. product, market etc.

 Selection and screening of intermediaries - You have to look for appropriate channel

members.

 Managing the Channel Relationship - Conflict arises among members because it is like a

marriage; you continue to manage these members so as to reduce conflict, if conflicts are not

settled, it could affect the company.

 Economic - There has been an increase in sales on the net, companies will continue to

embrace it.

1.5.8 Promotional Policy

An international businessman must think of the most appropriate promotional mix for his products.

Basically, advertising, personal selling, sales promotion and public relations are used for

international business promotion.

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Advertising- Majorly, advertising decision focuses its attention on which strategy to use. The

promotional messages and the organisation of the promotional programme must conform to the

market being served.

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  Personal Selling- Is one on one selling in international business. Industrial goods,

high-priced items, require more of personal selling.

 Sales Promotion - Any method of attracting customers for more purchases apart

from advertising, personal selling or publicity is sales promotion. They include,

coupons, samplings, premiums, point of purchase and direct mail which are good

examples of sales promotions. Any of these could be used for international marketing

depending on the product and the environment.

 Public Relations. Czinkota et al (2002) argue that PR is the marketing

communication function charged with executing programmes to earn public

understanding and acceptance which means both internal and external

communication.

CONCLUSION

International business cannot succeed except marketing activities are employed. Marketing activities

involve selecting the target market and marketing management. Marketing management involves

monitoring and applying the marketing mix appropriately to satisfy consumers

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