INTERNATIONAL MARKETING

MODULE 1 – Understanding International Marketing

OVERVIEW

The topics here reflects the many changes that have taken place in the vast world of international
trade and commerce within the decade. International marketing attempts to present to readers the
exciting world of international trade in the Philippines set up.
Over and above all these is the unpredictable tsunami of fear of globalization rushing to the
shares of all nations specially the small and the developing areas. The cases, updates the latest
concepts and trends in international marketing. It also not an option for every firm and one has to
deal with a myriad of challenges in the foreign market such as import and export restrictions,
labelling requirements, environmental laws, etc.
What is important in international marketing is the ability to respect to the differences and
changes from one market to another. On should be able to adopt marketing mix to the
uncontrollable forces in the foreign market.

OBJECTTIVES
After the lesson ends, the students should be able to:
1. Define the meaning of international marketing.
2. Describe the differences of domestic and international marketing.
3. Determine the phases of international marketing
4. Explain the reasons why companies venture to international marketing
5. Know the factors influencing international marketing.
DISCUSSION
 International Marketing is defined as the performance of business activities design to
plan, price, and direct the flow of a company’s goods and services to consumers or users
in more than one nation for a profit.
.
Cateora and Graham (2004) define international marketing as the performance of business
activities that direct the flow of a company’s goods and services to consumers or users in more
than one nation for a profit.
State that the primary obstacle to success in international marketing is a person self-reference
criterion (SRC) in making decisions.
- International marketers are faced with unique situations as they have more uncontrollable
forces in the macroenvironment to deal with, these includes politics, culture, geography
and infrastructure, distribution, technology and competition which also vary from one
country to country. Risks are greater in international marketing compared to domestic
marketing.
They define SRC as the unconscious reference to one’s cultural values, experiences, beliefs and
knowledge as basis for decisions. SRC can cause misunderstanding between different cultures.
The most effective way of handling SRC is to recognize that it exists. Further, there is also a
need for a firm to understand the culture of its target market when it becomes involved in
international marketing.
Example – Time concept of the Filipinos vs. the time value of the Americans.

 Domestic vs. International Marketing

Compared to domestic marketing, international marketing involves greater arena, more complex
and higher stakes. It is important that companies early on that foreign markets comprise a
lucrative portion of the total world market.

- No matter domestic or international the marketing objective remains the

same for marketers.

The four 4P’s of marketing (product, price, place, promotion) do not change from domestic to
international marketing. For instance, in domestic marketing, you deal with one familiar market;
in international marketing, you deal with countries whose markets are diverse and unfamiliar.
Domestic marketing does not require much effort in contrast to international marketing where
you will operate and coordinate your business in different environments. Decisions must be
made carefully in order to optimize business opportunities in each market. It is difference that
accounts for the complexity and diversity of marketing activities. (Cateora and Graham, 2004)
 TABLE 1 – INTERNATIONAL MARKETING ACTIVITIES
Activities
 Detailed analysis and potential marketers;
 Planning and development of products clearly-defined in suitable package-that
consumers want;
 Distributions of products through channels that provide the services or convenience
demanded by purchasers;
 Product promotion to inform and educate consumers about the goods or services;
 Setting of prices which reflects reasonable value (or utility) of products to consumers;
and
 A technical and non-technical customer service-both before and after a sale is made.

TABLE 2 – DOMESTIC VS. INTERNATIONAL MARKETING

Domestic Marketing International Marketing

A Filipino manufacturer A Filipino marketer selling to
selling locally a U.S. importer
Consumer Filipinos like it sweet American prefer it bland
Purchasing Power Low High
Product or Packaging Remains the same Changes may be needed
Currency Peso Dollar
Payment Terms Cash or kind Through Banks
Physical Distribution Short haul Longer haul
Language Filipino or English English
Communication Cheaper Make expensive

 Currencies acceptable to the Philippine Banking System

U. S. Dollar Singapore Dollar
U. K. Pound Sterling Hongkong Dollar
Canadian Dollar Australian Dollar
Swiss Franc Saudi Riyal
Japanese Yen Kuwaiti Dinar
Euro Bahrain Dinar
New Taiwan Dollar Indonesian Rupiah
Thai Baht Brunei Dollar
UAE Dirham Philippine Peso
  Phases of International Marketing
Companies may get involved in a marketer to a certain extent. They can choose to be an
exporter, domestic exporter, regional exporter, international exporter, international to global
exporter, and global exporter. Sabhas Jain (1995) in his book, International Marketing
Management, defines or describe them as follows:
1. Domestic exporter – operates exclusively within a single country.
2. Regional exporter – operates to a geographically define region that crosses national
boundaries. Markets are served economically and are culturally homogeneous. If activity
occurs outside the home region, it is opportunistic.
3. Exporters – run operations from a central office in the home region, exporting finished
goods to various countries, same marketing, sales and distribution occur outside the home
region.
4. International exporter – regional operations are somewhat autonomous but key decisions
are made and coordinated from the central office in the home region. Both finished goods
and intermediate products are exported outside the home region.
5. International to global exporter – runs independent and mainly self-sufficient
subsidiaries in a range of countries. While some key functions (Research and
Development (R&D), sourcing, financing) are decentralized the home region is still the
primary base for many functions.
6. Global exporter – highly decentralized organization operating across a broad range of
countries. Each function-including R&D, sourcing, manufacturing, marketing and sales-is
performed in the location(s) around the world most suitable for that function.

Many factors may push a firm to go international. One important reason is to utilize excess
production capacity which the domestic market cannot absorb. Another reason is that when there
is no domestic market for a product, exporting, becomes an opinion. In contrast, it may also
happen that there is domestic demand, but there is no local supplier, and thus, importing is the
only viable option.
Whatever their reasons are for going international, firms according to Cateora and Graham
(2004), get involved in five distinct overlapping phases of international marketing as follows:
1. No Direct Marketing
- Concentrating on the home market, the firm’s products may reach foreign markets
through trading companies, wholesalers, distributors and foreign buyers who come
directly to the firm. Although there is no direct effort to promote foreign sales, the firm’s
interests may be stimulated when there is an order from a foreign buyer.

2. Infrequent Foreign Marketing

- There are only sales to foreign markets when a firm’s experiences temporary surpluses.
At this stage, there is no formal effort to maintain foreign sales. When the domestic
market absorbs the temporary surpluses, foreign sales activity is withdrawn.
 3. International Marketing
- Fully committed to international marketing activities, a firm in this phase seek markets
for its products throughout the world. Products sold in foreign markets are a result of a
planned and regular production for these target markets. This is also a stage when the
firm has become multinational or international firm dependent on foreign revenues.
Further, the firm views the world as a series of separate markets, including its home
market, with different characteristics, and thus, employs various marketing strategies.

4. Global Marketing
- At this stage, the firm treats its home and international markets as one. standardized
products are produced as markets are treated as similar. This leads to a cost-effective
global strategy. What cannot be sold for one season in the domestic market may be sold
to other countries, and thus, the seasonal through are in demand are filled up and the
company’s activities are continued the whole year round.

With so much efforts involved and risks to take, why would anyone
engage in international marketing?

- Well, there are quite a number of benefits to consider:

a. The use of indigenous materials, as in the case of a country that showcases what is
uniquely hers, results in the better use of natural resources.
b. Increased overall level of technological development as international marketers that
employ the most advanced technology tend to be competitive.
c. Expansion and development beyond the home market.
d. Decrease in the employment rate as more labor-intensive companies are established.
e. Increased foreign exchange earnings
f. Use of excess production capacity
g. Level out seasonality of the products

The most common reply to the question why Filipino firms are engaged in international
marketing is they need to earn profits in dollars. There is a shared belief that in one wants to get
rich and quickest and most effective way, one has to earn dollars. This view is substantiated by
the success stories of Filipino exporters and importers who become very rich that they could
afford anything from luxury cars to foreign vacations and big houses. Moreover, overseas
Filipino workers who get paid in foreign currency always bring home the bacon after their
rewarding work abroad.
  Reasons Why Companies Venture into International Marketing
Whether there is a need to earn dollars to become truly profitable., there are many other reasons
why companies venture into international marketing. Dalgic (1997) explains international and
external reasons.
1. INTERNAL REASONS

a. To utilize the firm’s excess capacity

- If the domestic market cannot fully absorb the firm’s optimal production capacity, selling
the surplus production overseas will give the firm an opportunity to generate more
profits.
- Many Japanese firms have to sell overseas as the Japanese market is not able to absorb
their optimal production capacities. Likewise, American farmers want to sell their surplus
rice overseas, specially to the Japanese. (Cateora and Graham, 2004)

b. To take advantage of higher purchasing power in overseas markets

- Where the domestic market experiences an economic recession and the consumers’
purchasing power is greatly affected, a viable option is to find on overseas market that
can be afford to purchase the firm’s product or a higher price. Many Filipino exporters
want to sell to Japanese importers as they are known to pay premium prices for high-
quality products.

c. To take advantage of the government’s export promotion drive.

- The Philippine Department of Trade and Industry (DTI) supports government’s export
promotion drive through referrals to foreign buyers, assistance in trade fair participation,
product development and assistance and export training programs. Part of this training
program was the strategic planning course offered by the Association of Training
Institutions of Foreign Trade in Asia and the Pacific (ATIFTAP) and the Philippine Trade
and Training Center for exporters and would-be exporters. Further, Filipino exporters
through the Export Development Act enjoy the exemption from payment of advance
duties in imports of raw materials and equipment.

d. To find other markets on the firm’s product experiences to decline in sales in

the home market.
- If the firm’s experiences continuous decline in sales in the home market, it may be forced
to find an overseas market for its products to survive.

e. To find other markets as stiff competition in the domestic or home market has
reduced the firm’s sales
- If the competition in the foreign market is not too fierce, firms may engage in overseas
sales instead of concentrating in the home market. These firms may not be able to
 withstand the competition posed by other local manufacturers or importers. However, this
is a tough choice to make since the firm that will venture into international marketing
may lose its homegrown advantage.

f. To diversify the firms power base in different geographic locations

- A firm may resort to this course of action to prevent its vulnerability in a specific
geographic base which may be experiencing political and economic instability. A global
firm may pull out from a restive or politically unstable country and transfer its
headquarters to a more peaceful location. By comparison, another firm may simply pull
out from one foreign country to escape tax regulations and customs restrictions, and
transfer to another more accommodating and liberal country.

2. EXTERNAL REASONS

a. To take advantage of tax incentives and promotional packages offered by certain

countries to foreign investors
- Firms in developed countries may take advantage of incentives and promotional packages
offered by governments of developing countries to foreign investors.

b. To take advantage of law labor and raw materials costs in foreign countries
- Labor and raw materials costs are inexpensive in developing countries. Thus, firms in
developed countries may set up assembly and manufacturing plants in these countries.
- The Philippines, with its inexpensive labor and raw material costs, is home to global
companies such as Intel, Motorola, and Texas Instruments.

c. To take advantage of access to new technologies in foreign countries

- A firm may have more opportunities to be exposed to new technologies in foreign
countries vis-a-vis in the home market.

d. To take advantage of the government’s import promotion drive

- In Japan, firms are encouraged to impart, to improve the country’s balance of payments.
As such, the Japanese government has established import promotion offices known as the
Japanese External Trade Office (JETRO) worldwide. JETRO offices may organize a
Japanese buying mission to certain countries to encourage to importation. Likewise,
JETRO may organize a selling mission composed of foreign exporters who will promote
their products in the Japanese market.
- Other import promotion in the world includes the Center for Promotion of Imports (CPI)
in the Netherlands, the Norwegian Import Promotion Office (NORIMPOD) and the
Swedish Import Promotion Office.
  Factors Influencing International Marketing
Cateora and Graham (2004) have designed a framework of factors confronting or influencing
international marketers. These factors are either controllable or uncontrollable.
The 4P’s of marketing are the controllable factors. These are the variable that easily manipulate
to achieve objectives and enable to adjust to changing marketing conditions. For one, you can
dictate which product to sell, its functions, design and characteristics you can decide on the
selling price as well as the distribution outlets and you can choose the sales promotion strategy.
In a nutshell, it can be said that the uncontrollable factors are those which cannot be used to
predict what will happen to the country or to the economy should one decide to engage to
international trade.
INTERNATIONAL MARKETING VARIABLES

Controllable Controllable
Uncontrollable
(International)
 Product  Cultural forces
 Competition
 Price  Distribution
 Political forces
 Place  Geography and
 Economic situation
 Promotion Infrastructure
 Physical  Level of technology
distribution  Economic forces
 Presentation  Political forces
 Competition

EVALUATION
1. Define international marketing. What are the activities involved in international
marketing?
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2. What are the benefits in engaging in international marketing?
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3. Differentiate domestic marketing from international marketing.

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4. Surf w.w.w.cake.com. what are the international marketing variables (controllable and
uncontrollable that will affect Cake?
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5. Surf w.w.w.jollibee.com. ph. Find out the international outlet of Jollibee. Cateora states
that there are various phases of international marketing, one of them is the regular foreign
marketing phase. Why is Jollibee considered to be in this phase? Justify your answer.
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