International marketing takes place when a business directs its products and services towards consumers in a country other than the one in which it is located. While the overall concept of marketing is the same worldwide, the environment within which the marketing plan is implemented can be dramatically different from region to region. Common marketing concerns – such as input costs, price, advertising, and distribution – are likely to defer dramatically in the countries in which a firm elects to market its goods or services. Business consultants thus contend that the key to successful international marketing for any business – whether a multinational corporation or a small entrepreneurial venture – is the ability to adapt, manage, and coordinate an intelligent plan in an unfamiliar (and sometimes unstable) foreign environment.
Businesses choose to explore foreign markets for a host of sound reasons. In some instances, firms initiate foreign market exploration in response to unsolicited orders from consumers in those markets. Many others, meanwhile, seek to establish a business to absorb overhead costs at home, diversify their corporate holdings, take advantage of domestic or international or economic changes, or tap into new or growing markets. The overriding factor spurring international marketing efforts is, of course, to make money, and as the systems that comprise the global economy become ever more interrelated, many companies have recognized that international opportunities can ultimately spell the difference between success and failure. Advances in communication and transportation are making it easier to reach international customers. Product-market opportunities are often no more limited by national boundaries than are by state lines within a country. Around the world there are potential customers with needs and money to spend. Ignoring those customers doesn’t make any more sense than ignoring potential customers in the same town.
While companies choosing to market internationally do not share an overall profile, they seem to have two specific characteristics in common. First, the products that they market abroad, usually patented, are believed to have earning potential in foreign markets. Second, the management of companies marketing internationally must be ready to make a commitment to these markets. This entails more than simply throwing money at a new exporting venture. Indeed, a business that is genuinely committed to establishing an international presence must be willing to educate itself thoroughly on the particular countries it chooses to enter through a course of market research.
Developing Foreign Markets
There are several general ways to develop markets on foreign soil. They include: exporting products and services from the country of origin; entering into joint venture arrangements; licensing patent rights, trademark rights, etc., to companies abroad; franchising; contract manufacturing; and establishing subsidiaries in foreign countries. A company can commit itself to one or more of the above arrangements at any time during its efforts to develop foreign markets. Each method has its own distinct advantages and disadvantages.
New companies, or those that are taking their first step into the realm of international commerce, often begin to explore international markets through exporting (though they often struggle with financing). Achieving export sales can be accomplished in numerous ways. Sales can be made directly, via mail order, or through offices established abroad. Companies can also undertake indirect exporting, which involves selling to domestic intermediaries who locate the specific markets for the firm’s products or services. Many companies are able to establish a healthy presence in foreign markets without ever expanding beyond exporting practices.
International licensing occurs when a country grants the right to manufacture and distribute a product or service under the licenser’s trade name in a specified country or market. Although large companies often grant licenses, this practice is also frequently used by small and medium-sized companies. Often seen as a supplement to manufacturing and exporting activities, licensing may be the least profitable way of entering a market; nonetheless, it is sometimes an attractive option when an exporter is short of money, when foreign government import restrictions forbid other ways of entering a market, or when a host country is apprehensive about foreign ownership. A method similar to licensing, called franchising, is also increasingly common.
A fourth way to enter a foreign market is through a joint venture arrangement , whereby a company trying to enter a foreign market forms partnership with one or more companies already established in the host country. Often, the local firm provides expertise on the intended market, while the exporting firm tends to general management and marketing tasks. Use of this method of international investing has accelerated dramatically in the past 50 years. The biggest incentive to entering this type of arrangement is that it reduces the company’s risk by the amount of investment made by the host-country partner.
A joint venture arrangement allows firms with limited capital to expand into international arenas, and provides the market with access to its partner’s distribution channels. Contract manufacturing, meanwhile, is an arrangement wherein an exporter turns over the production reins to another company, but maintains control of the marketing process. A company can also expand abroad by setting up its own manufacturing operations in a foreign country, but capital requirements associated with this method generally preclude small companies from pursuing this option. Large corporations are far more likely to embrace this alternative, which often allows them to avoid high import taxes, reduce transportation costs, utilize cheap labor, and gain increased access to raw materials.
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