TOPIC ONE

INTRODUCTION TO INTERNATIONAL MARKETING

Topic 1- Nature and Scope of International Marketing

International marketing refers to marketing which is done globally in several nations. It is a

marketing which is done across national borders for fulfilling the needs of peoples worldwide.

International marketing is also known as Global marketing. It is the one which enables
companies in reaching out to customers internationally.

They are easily able to sell their products in several countries which increase their sale and
profitability. Brands are able to create a better position in the international market by conducting
their marketing operations on an international level. International marketing bring several nations
together for the purpose of trading by facilitating free trade at the international level.

International trade studies the causes and laws governing the Exchanges of goods and
services between the inhabitants of the different Countries in their interest to meet their
needs for scarce goods

It designs marketing mix as per the preference of people residing in different countries. Here
marketing strategies are formulated in the brand’s home country and distributed across several
offices. Customers are analyzed in foreign nations for recognizing the target audience.

Nature of International Marketing

Large Scale Operations

International marketing consists of large scale operations to be performed by business for

promoting their products in many countries. It requires huge amount of labor and capital for
meeting out the needs of large peoples at international level.

Broader Market

It provides wider platform for advertising products at an international level. Business can target
their products among large population residing in different nations. Marketing is not limited to
any local area or nation but is free for all across the globe.

Intense Competition
International marketing faces an intense competition due to the presence of both domestic and
international competitors. Organizations at a global level have to compete with both of these
competitors which leads to stiff competition in international market.

Higher Risk and Challenges

Marketing at an international level involves a large amount of risk and challenges as it is

dependent upon various factors and conditions. These risks arise due to political factors, cultural
and regional differences, language barriers, changing styles and fashions of customers, sudden
war or changes in government regulations.

International Restrictions

Organizations in international market need to follow all tariff and non-traffic constraints. There
are various restrictions imposed due to differences in rules and regulation among nations at
global level. All nations perform import and export following the restrictions imposed in
international market.

Controlling Nature

International market is dominated by developed countries and multinational corporations due to

their global presence. Developed countries due to the presence of advanced technology and
worldwide reach are able to perform business operations efficiently everywhere.

Subject to Diplomatic Relations

International marketing is subject to the diplomatic relations between countries. Organizations

enter into international market of those countries with which its home country share better
cordial relations. There is no trade in between the nations having clash with one another.

Scope of International Marketing

1. Import and Export

International marketing provide business an opportunity to enter global market for conducting
trade. Export refers to selling its products in another country for earning high revenues. Import
involves buying goods from foreign market and selling it in domestic market. These activities
help business in expanding their operations and earning better profits.

2. Re-export
Re-export is an activity under which companies imports semi-finished goods, process these
goods for transforming them into finished products and export them to foreign countries.

3. Contractual Agreement

International marketing exposes business to global market for expanding their operations.
Companies enters into contract with other companies overseas for performing certain operations.
Agreement are entered into in form of co-production, licensing and technical assistance. It raises
the customer base, expands the market and overall profitability of business.

4. Joint Venturing

Joint venture is the one where two brands associate with one another for starting a new business.
They perform all activities together and share revenue in pre-decided ratio. Partnership with
domestic brands in foreign land help companies in easily understanding the market dynamics.

5. Fully Owned Manufacturing

Under this, companies set up their own manufacturing unit in foreign land. They themselves
manufacture goods and promote on their own. It will help in minimizing cost and maintaining
the quality. Establishing of manufacturing unit in foreign company will overcome all issue like
cost differences, government policies and trade barriers.

Advantages of International marketing

1.Higher Sales

International marketing helps business in enhancing their sales by presenting them at

international level. It provides access to wider market globally through which business connects
with large number of customers. This boosts the sales volume and overall profitability of
organization.

2. Minimizes Cost

It help companies in reducing their cost by producing goods in large quantities. Companies when
trade in international market performs their operations at large scale which helps them in
attaining cost competency in both national and international market.

3. Earns Foreign Currency

International marketing is an important source for earning foreign revenue by nations.

Companies by trading in foreign market brings large amount of foreign reserves in their home
country. All business dealings are made in foreign currency by companies operating at an
international level.

4. Enhance Living Standards

International marketing helps people of different nations in enhancing their living styles. People
are easily able to purchase high quality goods which are not produced in their home country from
international brands. It serves as a platform where different reputed brands are able to sell their
products in various nations.

5.Create Employment

It generates employment opportunities in home country as well as in host country. International

marketing requires large scale operations to be performed by companies for meeting out the
demands of large population. Companies hires huge no. of employees for carrying out their
activities efficiently.

6.Rapid Industrial Growth

International marketing leads to rapid industrial growth of the country. It creates demand for new
products which enhances the scale of operations of industries. Various infrastructural facilities
such as transportation, insurance and banking are also guided by international marketing that
contributes to national economy.

7.Benefits at Time of Emergency

International marketing provides special benefits to nations facing emergency situations.

Whenever any country is adversely affected by situations like drought and flood, it gets help
from other nations in international market. Emergency supply of all goods and services for
fulfilling the urgent needs of peoples in such countries is facilitated through international market.

Disadvantages of International Marketing

1.Cultural Differences
International marketing faces many difficulties due to varying cultures and norms across the
globe. Different countries have their distinct norms, traditions, lifestyles, languages and
preferences. Companies may sometimes find it difficult to sell their products.
2.High Competition
The degree of competition in international marketing is very high due to the presence of large
competitors. Companies entering foreign market have to compete with both home brands as well
as various international brands.
3.Government Restrictions
International marketing is bound to follow various strict rules and regulations imposed by
government. Government impose high tax and duties on import and export of goods which
adversely affect the profitability and continuity of companies. Sometimes, it become difficult for
companies to abide by all the rules and regulations in host country.
4.War Situations
International marketing is adversely affected by tension and war like situation among nations. It
is subjected to diplomatic relation between countries and continues as long as these countries
shares friendly relations. If any tension is erupted in host country, companies incurs huge losses
and may lead to complete shutdown of their operations.
5.Distance Issues
Large geographical distance among nations is a major drawback in international marketing.
Companies requires large efforts in servicing customers at far distant places. Suppling of fresh
and perishable products to far nations becomes a challenging task for companies.
Challenges facing International Marketing
Different challenges faced by international marketing are as given below: -
i. Traffic Barriers
It refers to various tax and duties which are imposed on import and export of goods or
services. International marketers sometimes find it difficult to abide by all the rules and
regulations imposed by the foreign government. Such taxes may adversely affect their
profitability and create a problem for them.
ii. Variations in Exchange Rate
Every country has its own currency and need to be exchanged with each other while
doing international trade. There are fluctuations in the currency exchange rate every day.
It becomes a great challenge before international marketer for converting currencies in
case if fluctuations in exchanges rate sometimes goes extraordinary.
iii. Cultural Diversity
Cultural diversity means difference in culture and norms among people in several
nations. Every country’s people have distinct tastes, habits, language, preferences, buying
and consumption pattern. Companies may face difficulty in introducing their product in
international market.
iv. Distance Problem
Another major problem in international marketing is the large geographical distances
between countries. Trading with the nation at far distances is a quite challenging task as it
requires large time and effort. In case of supplying perishable and fresh goods, companies
may face a big problem.
 v. Political Environment
There is a difference in the political atmosphere of every country. These political
differences may pose threats or provide opportunity to companies. Government of foreign
countries has distinct priorities and approaches to international trade. Companies may
face restrictive trade policies imposed by the government of that country while trading
their products.
vi. Competition
Existence of high competition in the international market is another problem faced by
companies. It may become difficult for them to sell their products or compete with
existing companies in developed countries.
Importance of International Marketing
Importance of international marketing can be well-understood from points given below: -
i. Wider Market
International marketing provides an opportunity for doing business in a broader market. It
helps in connecting to a large number of customers worldwide. Companies are able to
sell their products to huge peoples and earn large profits.
ii. Earn Foreign Exchange
It serves as a medium for earning foreign exchange by nations. Companies by selling
their products in several nations abroad bring foreign currency in their home country.
iii. Spread Business Risk
It enables in spreading business risk by conducting business operations in several nations.
Business loss occurring in one country can be easily adjusted with high profits earned
from other countries.
iv. Raises Living Standards
International marketing enables in enhancing the living standards of people by providing
quality products. It provides a platform through which different reputed brands are able to
sell their products in many nations. People are able to avail high-quality products or
services which improves their lifestyle.
v. Ensures Optimum Utilization of Resources
It aims at the efficient allocation of resources by promoting free trade at the global level.
International marketing enables the nation in supplying their surplus materials to different
nations where they can be used properly for manufacturing goods and services.
vi. Facilitates Cultural Exchange
International marketing serves as a medium for exchanging culture and traditions among
several countries. By free movement of goods, nations are able to exchange their social
and cultural ideas. It aims at attaining cultural integration at world level.
vii. Promote World Peace
It focuses on promoting harmony and peace on the international level. International
marketing by facilitating international trade provides a platform where different countries
 are able to come together. It helps in developing mutual understanding and enables in
working in collaboration with each other.
International Trade Theory
Meaning of International Trade Theories
-International trade theories are various theories that analyze and explain the patterns of
international trade. These theories explain the mechanism of international trade that is how
countries exchange goods and services with each other.
-International trade refers to the trade that places across national borders. It is the means
through which countries exchange goods with each other and is served as an important means of
survival for many countries. Various countries that have limited resources depend on other
countries to fulfilling their needs.
-International trade theories help countries in deciding what should be imported and what
should be exported, in what quantity and with whom trade should be done internationally.
Initially, economists developed international trade theories on the basis of the country which
were termed as classical theories. However, these theories, later on, shifted from country-based
to firm or company based by the mid-twentieth century which was termed as modern theories.
-Different international theories are explained in detail as given below:-
International Trade Theories
1. Absolute Advantage Theory
-Absolute advantage theory was proposed by Scottish social scientist Adam smith in 1776. This
theory says that countries should focus on producing such products that they can produce
efficiently at a lower cost as compared to other countries.
-Manufacturing a product in which a particular country specializes is quite advantageous for
them. Countries should produce and export such products which can produce efficiently and
import those goods that they produce relatively less efficiently. This kind of trade will be
beneficial for both countries.
2. Comparative Advantage Theory
-David Ricardo in 1817 has given the comparative advantage theory.
-According to this theory, if a country cannot produce goods more efficiently than other
countries then it should only produce such goods in which it is most efficient.
-Countries should specialize and export such products in which it has a less absolute
disadvantage as compared to other products.
3. Heckscher-Ohlin Theory
-Heckscher-Ohlin theory of international trade was given by Eli Heckscher and Bertil Ohlin. It is
also called as factors proportions theory and states that the country will produce and export
those products whose production require those factories which are in great supply in-country and
have low manufacturing cost.
-Whereas it will import all such goods whose production requires nation’s scarce and expensive
factors and have high demand.
-According to this theory, trade patterns are recognized by factor endowment rather than
productivity. The cost of any factor or resource is simply the function of demand and supply.
4. Mercantilism Theory
-It is one of the oldest international trade theory which was developed in 1630. Mercantilism
theory states that nation’s wealth is determined by its gold and silver holdings.
-Every nation in order to increase its economic strength should increase it’s gold and silver
accumulation.
-It says that nations should favor export which leads to inflow of gold whereas they should
disfavor import which lead to the outflow of gold. Mercantilism theory focuses on creating a
trade surplus that is more exports than imports which will contribute to the accumulation of the
nation’s wealth.
5. Product Life Cycle Theory
-Product life cycle theory was developed in 1970 by Raymond Vernon, a Harvard Business
School professor. It says that initially new products will be produced and exported from the
home country of its innovation.
-Later on, when demand for the product grows, country will undertake foreign direct investment
in other countries and open several manufacturing plants to meet the request. Both locations of
production and sales of product changes along with its life cycle or as product get matured.
6. National Competitive Advantage Theory
-It was developed in 1990 by Harvard business school professor, Michael porter.
-This theory state that national competitiveness in a particular industry will depend upon the
environment that such industry is getting in the home country. The main source of innovation
and up-gradation for such industry is basically the environment in which they operate which
helps countries in getting a national competitive advantage. Porter determined four factors as
determinants of national competitive advantage of the nation. Local market resources and
capabilities, Local market demand, Local suppliers and complementary industries and
characteristics of local firms.