Importance of International Marketing

Jump to: SWOT Analysis | External Analysis | Marketing Mix Analysis

International marketing is an important aspect of a business’s planning process if they wish to go global.

Today, almost every marketing organisation, large or small, is touched in some way by global competition- from the America florist that buys its flowers from Dutch nurseries, to the Melbourne clothing retailer that sources its merchandise in Asia, to the American electronics manufacturer competing in its home markets with giant Japanese rivals, to the Australian consumer goods designer leading the way with new products for international markets. Kotler P, Brown L, Adam S, Burton S, Armstrong G (2007).

Before an organisation makes the decision to go global and sell its products to a new market they must research their potential markets in terms of the political and legal environment, the economic structure of the market and who the organisation will market its products to and how it will do this.

This essay focuses on why international marketing is important and how an organisation can seek out opportunities and eliminate threats.

Body

Kotler P, et al (2007) states “Marketing is an organisational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organisation and its stakeholders.”

Managing the consumer relationship as well as the stakeholders requires understanding the different needs and wants of the different parties involved. The consumers want the best quality product at the cheapest price however this comes at a cost for the organisation because they also have a duty of care in managing the relationship with the stakeholders for example the shareholders who want to make a high return on their investment.

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Businesses wanting to move their products in the global market use International marketing when they gather information about their target market. The information gathered would include such things as; the demographics of the market, the current political environment, what economic system the country operates under and the culture of the country.

International marketing is essential for businesses to survive in the global marketplace. Not taking international marketing seriously could lead to the business failure in their overseas markets. However using the right tools the organisation can avoid this.

Why is International Marketing important?

International marketing is important for businesses wanting to grow in the global market where businesses compete for consumers’ last dollar. International marketing looks at what it currently does e.g. who they market to, how they do this. However in the global sense, it looks at what it has to change to get the new market and what can it keep the same as back home. What other competition exists in the new market, what laws exists that may affect the businesses operations, how can the product adopt the different culture.

Market Opportunity

The business may use a SWOT analysis to determine what its current position is in the market place is. The SWOT analysis looks at the organisations internal and external factors and assess what it needs to do to increase the strengths and eliminate the weaknesses and use the opportunities available to decrease any threats.

Internal

S: Strengths

This includes the businesses capabilities, for example experience and knowledge in the market place, whether the organisation has any competitive advantage, for example the right people working for the organisation, the quality of the product and at a price that its competitors can’t beat. Another factor to consider is the brand image, whether the brands image is established or not, and whether it is easy to recognise.

W: Weaknesses

This may include gaps in the capabilities of the organisation, for example, a lack of cash flow, a lack of knowledge in the certain area or a lack of leadership.

External

O: Opportunities

An opportunity can be that the organisations products or service can fill a niche in the market place, the new market maybe closer to the businesses supply chain resulting in a lower cost for the product.

T: Threats

The political structure of the market, the legal barriers, changing customer expectations.

Economic environment

There are four main types of economic structures: Market capitalism, centrally planned socialism, centrally planned capitalism, and market socialism.

As described by Keegan & Green (2005) Market capitalism is an economic system in which individuals and firms allocate resources and production resources are privately owned. Therefore consumers decide what goods they desire and firms determine what and how much to produce; the role of the state is to promote competition and ensure consumer protection.

This is currently the most common economic system around the world. Countries operating under Market capitalism are the easiest to get into, but also have the most competition, which means businesses wanting to move into countries with market capitalism will have to put the time into looking at whether the organisation has any sources of competitive advantage, and if it does not, what it can do to be able to gain a competitive advantage.

As described by Keegan & Green (2005) Centrally Planned Socialism is where the state has the broad power to serve the public interests as it sees fit. State planners make ‘top down’ decisions about what goods and services are produced and in what quantities and therefore consumers spend their money on what is available.

Organisations wanting to move their products and/or services into countries that operate under centrally planned socialism have to have a clear plan for its entry into the marketplace. There will be less economic freedom in centrally planned socialist countries because the state makes the decision on who receives resources. This is the most difficult market to get into due to the controls placed on organisations by the state. If an organisation is wanting to operate in this particular marketplace, it may have to enter into a partnership agreement with the government.

Political Risk factors

As stated by Kotabe and Helsen (2008) the political environment in every country is regularly changing. New social pressures can force governments to make new laws or to enforce old policies differently. Policies that supported international investment may change towards isolationism or nationalism. The environment in each target market should be analysed to determine its level of economic and political risk and opportunity.

Organisations moving into the global market, it must assess the political risk, the organisation must be aware of the history of the political and economic structure of the country as well as the current systems which the country operates under.

Political risk is the risk of a change in the political environment or the government’s policy, which could adversely affect a company’s ability to operate effectively and profitability. If the political risk is too high in a country, foreign investment is going to be low.

Some of the political risks involved for international marketing are;

The political structure of the country; how rapidly are the government of the country is changed. This factor relates to the governments polices and the level of bureaucracy involved in the system. Other factors include how prevalent corruption is in the normal day to day operations of the business. This will affect the businesses ethical and social responsibility and may have a negative on its brand image.

An example of how the political situation can change rapidly and have a negative impact on organisations is Cuba. Under the Batista dictatorship foreign investment, mostly from the United States of America flowed in, eventually reaching around 2 billion dollars. However communist revolutionaries commanded by Fidel Castro seized Havana and overthrew Batista in 1959, and proceeded to nationalise much of the assets owned by foreign investors.

Market segmentation

Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants, resources, location, buying attitudes and buying practices. Because buyers have unique needs and wants, each buyer is potentially a separate market.

Organisations have to choose parts of the market which they want to target rather than competing for the entire market; this is what market segmentation is, breaking the market into different groups of people, based on their needs and wants, as well as what makes them want to buy a product. This all allows the organisation to determine who their products are aimed at.

Demographic segmentation

This involves dividing the market into groups based on each demographic variable, for example, the age, gender, family size, family life-cycle, income, occupation, education, religion and nationality of individuals who buy the businesses products.

For example China’s population is 300 times larger of New Zealand’s. Therefore the organisation must break these groups of the potential buyer of the product.

Behavioural segmentation

Behaviour segmentation focuses on whether or not people buy and use a product, as well as how often and what quantity consumers use or consume. Researching this information about the new market, the business may find opportunities such as there is a niche in the market that consumers look for in a product. Behavioural segmentation is about the potential benefits people look for in a product.

Psychographic segmentation

Psychographic segmentation involves grouping people in terms of their attitudes, value, and lifestyles. This information is usually obtained through surveys and questionnaires and other types of studies.

Marketing Mix

Product

Introducing your product in the international market comes with a whole new marketing mix analysis. When opening an organisations product to a new market the organisation has to assess what the product is, what it stands for and how the organisation is going to market this product. If there are already similar products in this market, how is the business going to different the product from its competition?

The brand image of the product may be a source of competitive advantage to the organisation. Whether the product is locally made or made in another country, is all part of the brand image. This plays out in the perception that if a product is made in Asia, it might not be of the same quality as it would be if it was made in New Zealand.

Going into a new market, the organisation has to take into account the religion and the culture of the country. For example selling NZ pork in Indonesia; Indonesia is the largest Muslim country in the world. How does an organisation market this product?

Through the market segmentation, the organisation should be able to break down different groups of people in that country for example how many non-Muslims live in that country, which can help the organisation market its product. The organisation must also figure out how it can do this without upsetting the main religion of the country.

Price

Selling the product at the right price that best suits the product. Going to a new market the organisation may have to change its pricing strategies to match the country. This all depends on several factors, such as how much competition there is in the market, whether the product the organisation is selling is in a low income area, which would have the result of many people not being able to afford to buy the product if it is too expensive.

Promotion

When an organisation is promoting their product and/or service in the international marketplace, it has to consider factor such as, what the organisation does currently to promote its product/service and how or if they can change this form of promotion to reach a new target market. The type of promotion that the organisation used domestically may not work the same in the foreign marketplace due to different demographics, culture etc.

When Fisher & Paykel launched its product line in China earlier this year, they launched it at the biggest appliance show in China, knowing that there would be a lot of viewers and potential buyers of their products at this show.

Placement

Placement is the distribution of an organisations product and is an important aspect of entering a foreign marketplace. In order to sell their products an organisation has to have an effective distribution network, and establishing one can often be a very expensive and time consuming job. One way to gain a distribution network is to acquire wholely an existing business that sells a competing product.

Conclusion

International Marketing is important for businesses that are thinking of going global or already have. How the organisation reached its target market domestically may not work the same in the new marketplace. There are different tools that the businesses can use to find opportunities, and also many strategies to use in the new marketplace which will improve the chances of a return on the time and money the organisation invested in its new marketplace

Before entering the new marketplace the organisation may carry out research to find out which countries will provide the best return for the organisation, this can be done by analysing the country’s economic system and the level of political risk present.

An organisation may use a SWOT analysis to look at its current internal and external environment. A SWOT analysis will outline the organisations strengths, whether it has any competitive advantages and if so how can they use this to their benefit. The SWOT analysis also highlights the organisations weakness and any opportunities threats that may arise for the organisation.

The organisation may use market segmentation as another tool to analyse who its target market is through demographic, psychographic and behavioural segmentation, as well as who may use their product/service, when they may use the product/service, how this product could be used and why and how it can reach all of its target market.

Another tool that the organisation may use is a marketing mix analysis, this analyses what its products are, what pricing strategy it will use in the new market, how the organisation can promote the product, whether it will keep the same promotion method as it does domestically or promote it differently and how will they get the products to the consumers.

International marketing is more than just selling your products in a new marketplace, it is about building relationships with the consumers, for the organisation to do this it must understand what the needs and wants of their consumers are, and at price will they pay to get this.

Reference

Keegan, W.J., & Green, M.C. (2005). Global Marketing. (4TH ed.). Upper Saddle River, N, J: Prentice Hall. p. 151, 154,155,228,235,237,49

Kotabem M., & Helsen, K. (2008). Global Marketing Management. (4TH ed.). Hoboken, N, J: John Wiley & Sons, Inc.

Kotler, P, Brown, L, Adam, S, Burton, S, Armstrong G. (2007). (7TH ed.). Frenchs Forest, NSW; Pearson Education Australia. p.25, 7