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International Marketing

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International Marketing

Large companies like Coca-Cola and Nestle operate in numerous countries globally. Starting as a drink sold for 5 cents in a pharmacy in Atlanta¹, Coca-Cola now operates in over 200 countries worldwide. So how did Coca-Cola become a global success? Beyond the refreshing soft drink and famously recognized logo, the company also places significant emphasis on its international marketing strategy. Read on to learn more about the marketing process of entering new markets.

International Marketing Definition

International marketing plays a significant role in many companies' marketing strategies. To understand the definition of international marketing, let's first look at what a global firm is.

A global firm is an organization that operates in more than one country to gain competitive advantages that are not available domestically.

The advantages that global firms may benefit from include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. The decision-making process is as follows:

  1. Conduct research to examine the global marketing environment

  2. Decide whether to expand internationally

  3. Decide which markets to enter

  4. Decide how to enter the chosen market(s)

  5. Create an international marketing plan

  6. Decide on organizational factors

International Marketing Concepts

Before entering a new market, firms must research potential threats and opportunities. Let's now look at international marketing concepts essential for all firms to consider before expanding globally.

International trade

When analyzing the marketing environment, it is essential to examine international trade restrictions. International firms may face trade barriers when importing/exporting. For example, a country may impose tariffs (a type of tax) on certain products to increase domestic revenues and discourage the trade of a particular product.

On the other hand, quotas are another trade barrier, limiting the number of imports into a country or region. For example, The European Union might impose a quota on certain foreign agricultural products to encourage domestic agriculture.

Similarly, exchange controls are imposed to limit foreign exchange and the fluctuation of exchange rates.

That said, certain organizational bodies and treaties are in place to encourage trade between countries. For example, the World Trade Organization (WTO) was established to promote global trade, whilst certain countries and regions (e.g. European Union) have signed free trade agreements to reduce trade barriers.

International marketing International trade barriers StudySmarterFigure 1. International Trade Barriers - StudySmarter

Economic environment

Similarly, it is essential to examine the economic environment when expanding internationally. Income distribution is often observed, indicating whether a market is attractive for a certain product type. One of the other methods used includes examining a country's industrial structure, which indicates the market's needs:

  • Subsistence economies - economies that engage in simple agriculture and individuals consume the output they produce.

  • Industrial economies - economies that import and export many products/services.

  • Emerging economies - economies that are experiencing high economic growth and trade expansion.

Political and legal environment

Finally, the political and legal environment may also significantly impact international marketing expansion. A firm should consider:

  • Political stability,

  • Employment law,

  • Potential legislative changes,

  • Attitude to international trade,

  • Government policy,

  • Bureaucracy,

  • Monetary factors, etc.

International Marketing Strategy

Once a company has established which market to enter, it needs to develop an international marketing strategy. This includes determining how it will enter the market. The three main methods are exporting, creating a joint venture, and direct investment (see Figure 1 below).

International marketing New market entry methods StudySmarterFigure 2. Market Entry Methods - StudySmarter

Exporting

Exporting includes selling products directly to foreign markets. Companies produce the products in their home country and may trade them in foreign marketplaces without any modifications to the product. There are two types of exporting:

  1. Indirect exporting - involves selling products through an intermediary

  2. Direct exporting - involves selling the products directly to the customer in a foreign market

Joint ventures

Joint venturing includes partnering with another company in a foreign market to produce and sell products. There are four types of joint ventures:

  1. Licensing: entering a foreign market through selling the manufacturing, product, trademark, etc., rights to a licensee in the foreign market.

  2. Contract manufacturing: entering a foreign market by contracting with local manufacturers to produce a good or service.

  3. Management contracting: entering a foreign market by supplying management services to a local firm.

  4. Joint ownership: entering a foreign market by partnering with a local company through investment; both parties share ownership and control.

Direct investment

The final market entry method is direct investment.

Direct investment includes entering a new market by setting up facilities in the foreign market.

This method is often pursued by companies who have earned significant profit from exporting their products to a specific foreign market. If demand for their product is high and the market is large enough, it might be advantageous to set up a manufacturing facility in the foreign market. Additionally, it may lead to lower costs and new job opportunities.

International Marketing Examples

International firms should decide whether to adapt their marketing strategies to cater to local tastes or keep their strategy as it is. There are two distinct strategies companies can undertake:

  1. A standardized marketing strategy uses the same marketing strategy in all markets.

  2. An adapted marketing strategy uses a different marketing strategy for each market segment.

For example, the company IKEA uses a standardization strategy, whereby all products are marketed similarly in all markets. IKEA also sells almost the same collection of products (similar product lines) in every country it operates globally. This leads to IKEA saving costs on marketing - as all products are standardized - and results in economies of scale.

Now, let's consider a company that uses an adapted marketing strategy.

On the other hand, Netflix uses an adapted marketing strategy, whereby its product is adapted to fit the needs of each target market. The selection of films and series are slightly different depending on the country in which the consumer is watching Netflix. The company also considers language preferences (e.g. the availability of German subtitles for Netflix films in Germany). Netflix does this to cater to local preferences. The streaming service's pricing is also adapted to local market conditions. For example, a standard Netflix subscription in the UK is £10.99; in Egypt, it is EGP 165 (around £7.20).²

Challenges of International Marketing

However, international marketing comes with its own set of challenges. For example, when it comes to culture, each country has its own set of values and norms. As a result, if a product is successful in one country, it does not guarantee its success in another. Due to cultural differences, consumers in different countries may react differently to specific products and advertisements, and cultural blunders are likely to arise. Similarly, translation errors can often cause lead to unfavorable outcomes.

Coors, a beer manufacturer from the US, launched its 'Turn It Loose' campaign in Spain, hoping it would convince Spanish consumers to buy the product. However, when translated into Spanish, the campaign's name was far off from what the American company tried to convey. As it turned out, the campaign's tagline translated into a Spanish expression interpreted as "suffer from diarrhea" .³ This caught the Spanish market's attention for all the wrong reasons.

Another challenge for companies lies in deciding whether even to go global. As global competition is rising, due to many companies engaging in international trade, home markets may present fewer opportunities than abroad. However, certain businesses, such as local businesses adapted to specific local needs, may not have to venture overseas to remain successful. On the other hand, companies that operate in global industries might be forced to expand internationally to stay competitive; or risk losing to multinational companies from abroad. As a result, global competition may pose a significant challenge to those that delay international expansion.

International Marketing - Key takeaways

  • A global firm is an organization that operates in more than one country to benefit from competitive advantages that are not available domestically.
  • International firms may face trade barriers when importing/exporting. Trade barriers include:
    • Tariffs,
    • Quotas,
    • Exchange controls.
  • There are three main types of international marketing strategy:
    • Exporting includes selling products directly to foreign markets. The two types of exporting are direct and indirect exporting.
    • Joint venturing includes partnering with another company in a foreign market to produce and sell products. Joint venture types include: licensing, contract manufacturing, management contracting, and joint ownership.
    • Direct investment includes entering a new market by setting up facilities in the foreign market.
  • Companies can undertake two distinct international global marketing strategies: standardization and adaptation.
  • Cultural differences, global competition, and the decision to expand internationally are vital challenges marketers face when making international marketing decisions.

References

  1. The Coca-Cola Company. The Birth of a Refreshing Idea. 2022
  2. Netflix. Plans and Pricing. 2022.
  3. Skye Schooley. Lost in Translation: 13 International Marketing Fails. 2022.

Frequently Asked Questions about International Marketing

International marketing plays a significant role in many companies' marketing strategies. Many global firms use international marketing. A global firm is an organisation that operates in more than one country to gain competitive advantages that are not available domestically.

Organisations use international marketing to enter new markets and explore new opportunities. The advantages that global firms may benefit from engaging in international markets include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. 

The four basic marketing strategies are often referred to as the marketing mix. The marketing mix is made up of the 4Ps including product, price, place, and promotion. 

The key concepts of international marketing include making decisions on how a firm should enter new markets. Some of the key methods for entering new markets include exporting, joint ventures, and direct investment. 

The importance of international marketing for most firms includes the advantages they may gain from entering global markets. The advantages that global firms may benefit from include marketing, financial, or production advantages. To attain these advantages, firms must make several international marketing decisions. 

Final International Marketing Quiz

Question

A ________ is an organisation that operates in more than one country in order to benefit from _______ advantages that are not available domestically.

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Answer

A global firm is an organisation that operates in more than one country in order to benefit from competitive advantages that are not available domestically.

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Some examples of the advantages global firms may benefit from include marketing, financial, or production advantages. 

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True

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Outline the international marketing decision-making process.

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Answer

  1. Conduct research to examine the global marketing environment

  2. Decide whether to expand internationally 

  3. Decide which markets to enter

  4. Decide how to enter the chosen market(s)

  5. Create an international marketing plan

  6. Decide on organisational factors

Show question

Question

International firms may face _______ when importing/exporting.


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Answer

trade barriers

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What are quotas?

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Answer

Quotas are trade barriers limiting the number of imports into a country or region.

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What are exchange controls?

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Answer

Exchange controls are imposed to limit foreign exchange and the fluctuation of exchange rates. 

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Question

One of the methods used to evaluate the economic environment includes examining the country's trade structure, which indicates the market’s needs.

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Answer

False

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Question

Economies that import and export a large number of products/services are


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Industrial economies

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Economies that are experiencing high economic growth and trade expansion are

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Answer

Emerging economies

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What are the two types of exporting?

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Answer

Direct and indirect exporting.

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_______ involves selling products through an intermediary


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Answer

Indirect exporting

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Direct _____ includes entering a new market by setting up facilities in the foreign market.


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Answer

investment

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What are the four types of joint ventures?

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Answer

Licensing, contract manufacturing, management contracting, and joint ownership.

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Question

Entering a foreign market by partnering with a local company through investment - resulting in both parties sharing ownership and control is known as


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Answer

Joint ownership

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Question

A ______ marketing strategy means using the same marketing strategy in all markets.

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Answer

standardised

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Using a different marketing strategy for each market segment is known as _______ .


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Answer

adapted marketing strategy

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Name two challenges companies may face when marketing internationally.

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Answer

1. Cultural differences

2. Global competition

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Question

What is a joint venture?

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Answer

A joint venture is an agreement between two or more parties to combine their available resources with those of the other party (or parties) to complete a particular objective. 

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What are the four primary motivations for companies to join joint ventures?

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Cost savings, leverage resources, combined expertise, and entering foreign markets.

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Explain how cost savings may motivate companies to form a joint venture.

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By making use of economies of scale, both enterprises participating in the joint venture can leverage their production at a lower cost per unit than they could achieve individually. 

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Explain how leveraging resources motivates companies to form a joint venture.

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When two businesses form a joint venture, they can pool their resources and work toward a common objective more effectively. One business may have a well-established production process, while the other company may have more robust distribution methods. 

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Explain how combined expertise motivates companies to form a joint venture.

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Two firms or parties creating a joint venture can have distinctive histories, skill sets, and areas of expertise. When brought together in a joint venture, each firm may reap the benefits of the other's knowledge and ability inside their organisation.

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Explain how entering a new market may motivate companies to form a joint venture.

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Another widespread use of joint ventures includes joining forces with a local company to break into an international market. Suppose a firm wishes to expand its distribution network into other nations. In that case, engaging in a joint venture arrangement with a local business may be beneficial.

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What is joint venture marketing?

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Joint venture marketing refers to an agreement between two or more parties to combine their marketing resources in the pursuit of expanding their respective shares of the market and their respective revenues.

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What's the difference between partnership and joint venture marketing?

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When businesses decide to work together in a partnership, they integrate all aspects of their operations and manage the institution as if it were a single unit.


On the other hand, when it comes to joint venture marketing, the focus is exclusively on a combined marketing strategy meant to assist both businesses in achieving their financial and marketing objectives.

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What is one of the main benefits of joint venture marketing?

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The target audience of businesses participating in joint venture agreements grows, enabling such companies to reach more potential consumers. 

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One of the main advantages of joint ventures is that it enables companies to develop quickly, be more productive, and make more money.

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Answer

True

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What are some of the advantages of joint ventures?

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  • Enables companies to develop quickly,
  • It makes it possible for companies to access other distribution networks and new markets,
  • Combined expertise and knowledge.

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What are some of the disadvantages of joint ventures?

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  • Limits the companies participating in a joint venture to outside opportunities.
  • Unequal distribution of work and resources

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Explain how a joint venture may limit the outside opportunities of the companies participating in a joint venture agreement.

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Some joint venture agreements require each firm to sign an exclusivity or non-compete agreement that will impact their existing ties with various business contacts and suppliers.  


These agreements aim to keep the focus on accomplishing the joint venture's aims while reducing the possibility of potential conflicts of interest.

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What are some examples of joint ventures?

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Caradigm - Microsoft and GE

United Launch Alliance (ULA) - Lockheed Martin and Boeing

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What is a partnership?

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Partnership refers to the form of business that entails having two or more people sharing ownership, including the company's income and losses.

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What are some of the differences between joint ventures and partnerships?

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Two or more people create a legally recognised business partnership. A joint venture might include people, organisations, governments, or enterprises. 


A partnership's objective is operating a company or long-term venture rather than a particular project or aim. Joint ventures have a special purpose. Each party contributes to a task. The joint venture may not seek profit at all.

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What is market entry strategy?

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Market entry strategy is the planned expansion into a new market, typically meaning a city, state or province, nation, or even continent. Firms will need to decide how, when, and to what extent to enter a new market to sell their goods and services.

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___________ can extend the level of profitability by allowing the firm to benefit from access to other economies of scale, labor pools, and consumers who find the product new and exciting.


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Entering a new market

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Which of the following is not a reason why firms enter a new market?

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Lower revenues

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What are the reasons a business enters a new market?

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Increasing the customer base.

No growth opportunities in the market they are currently in.

Diversify risk.

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Which of the following is not an example of a market entry strategy?

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Answer

Increasing the volume of production.

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______ involves moving manufacturing to countries with lower operating costs. 


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Answer

Outsourcing 


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What is market entry strategy framework?

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A market entry strategy framework is a tool used to assess whether or not a firm should expand into a new market.

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What are some of the steps taken in market entry strategy framework?

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Answer

First, firms exploring market entry need to look at their existing market share. Is there room for growth in the current market?

The next step involves comparing competitors. How much competition exists in the current market versus the potential new market? 

Firms need to look at consumer habits in the potential market.

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What are the type of market entry strategies?

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Market entry strategy types include: licensing, direct exporting, franchising, acquiring a company.

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A company grants another company the right to utilize its product or service under the terms of a _______ agreement, which is a very complex kind of business transaction


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Licensing

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_______ occurs when a company sells its products directly in a new foreign market.


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Direct exporting

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What is required for the franchising model to work?

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For the franchising model to work as a market entry strategy, a brand must be well-known in the location it is planning to expand.

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What is the advantage of acquiring a foreign company?

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Answer

A significant advantage of this type of market entry strategy is that the company already has an established customer base. 

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Question

__________ are local firms that are purchased entirely by the entering firm.


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Answer

wholly-owned subsidiaries

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What are two main ways businesses enter international markets?

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Answer

joint ventures and wholly-owned subsidiaries 

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Question

Global marketing means marketing the company’s products and services considering ________________.

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Answer

the global market as one.

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Question

Global marketing adopts a ________ marketing approach to all locations. 

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Answer

uniform

Show question

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