International marketing is the application of marketing principles, methods and techniques to markets beyond immediate vicinity of the organization. This vicinity is described in terms of geographical distance.
Reasons for international Marketing
1) Securing market share is one of the reasons why we embark on international marketing
2) Capitalize on new product development
3) Increase profits through large scale economies, ie increased number of production at reduced price
5) Political commitment eg NEPA in other west African countries
Process (Stages) of international Marketing
1) Collection of information
2) Evaluation of internal strength and weaknesses e.g product, personnel, organization, financial status, logistics.
Criteria for Market selection
1) Size of the market: Market size in terms of value. It should be relative to your size. One should also consider the characteristics of the market in terms of dispersion, segmentation, life cycle (class of people consuming the product), values, target
2) Complexity of supporting mix: We need finance, distribution, promotion and organization.
a) Promotion: They include agents to be used.
b) Distribution: Distribution outlet by your organization
c) Finance: Facilities for foreign exchange to get back to you.
d) Organization: Supporting organizations abroad
3) Government trading or economic policies: It must be in line with specifications (speed, limit, heater, and air condition) which must be met by intending exporters. Things to consider attracting investors include security, power supply and tax incentives.
4) Margins: consider the overhead cost and the exchange rate in the intending export country. Consider the hidden cost you may incur abroad. All these must be based on profitability.
5) Competition: Things to analyze include Structure of competition, operating strategies and strength and weaknesses.
Strategies for Market Entry
1) Exporting: This is the best and the least risky. There are two types which are direct exporting and indirect exporting (middlemen and agents). Direct exporting involves the use of advertisement through media, and selling to organizations. Indirect exporting on the other hand involves the use of local middlemen or export merchants. The idea is to reduce risks.
Exporting could either be active or occasional exporting. Active exporting is a continuous one while occasional exporting occurs when there is a glut, and some products are sent to foreign markets to reduce excesses.
2) Licensing: Licensing is a better way of entering a foreign market. The licensee is given by the licensor the right, patent, trade mark, secrets. On the part of the licensor, no capital investment is required and rapid entry into the market is guaranteed. This is one can be used by a company like Coca Cola. The idea is to give out the license of producing its product to another company in a foreign nation, while the second company pays royalty to the initiator country which in this case is Coca Cola. It depends on the agreement, in some cases the raw materials or plant may be brought to the intending country eg Smithkline Beechem, Macleans. In this case, the recipe is given to the intending country.
Some problems that may arise as a result of licensing include
a) A competitor could result
b) If their agreement is successful, the licensor might have thrown away a substantial amount
c) The licensee may not be able to fully exploit the market
d) The licensee fully has the autonomy to operate
3) Franchising: In this case of sales outlets of fast moving goods, eg Mr Biggs, royalty is paid for using your recipe but the difference is that only retailing is involved. But in the case of licencing, manufacturing products are involved.
4) Joint Ventures: Examples are Ajaokuta steel Nigeria and Russia , ASCON, LNG, Mobil / NNPC. This is a form of partnership whereby the foreign operators jointly set up operations overseas. The reasons for joint ventures are as follows:
a) Technical competence
b) Managerial competence
c) Financial capacity
5) Set up subsidiary companies overseas. It could be sales or manufacturing plant. This is the most risky as it involves so much investments and profits.
Criteria for selecting an option
Some of the criteria’s for selecting an option from the above include:
a) Product consideration
b) The degree of market penetration required
c) How stable the country is
d) How volatile or intensive the host country is
e) Past experiences
f) Trade restrictions
g) Availability of marketing or general business services in the target market
Prospects and challenges of international marketing
1) Unstable government policy
2) Foreign exchange problem
3) Foreign government entry requirements and bureacracy (red-tapism)
4) Tarriffs and other trade restrictions
6) High cost of product and communication adaptation
7) Huge foreign indebtedness
1) High profit opportunities in a new market
2) It helps reduce dependence in old markets
3) It is a source of foreign exchange earnings
4) Availability of technical support from a sister company
5) It is a sure way out of over capacity
6) It gives an opportunity of servicing a current customer going abroad.
Decisions to be made in international marketing
Decisions to be made include:
1) Deciding whether to go abroad
2) Deciding which market to enter
3) Deciding on how to enter the market
4) Deciding on the marketing program
5) Deciding on the marketing organization
Schewe, Charles D., and Alexander Hiam, The Portable MBA in Marketing
Gary Armstrong., and Philip Kotler, Marketing an Introduction
Philip Kotler., and Kevin Lane keller, Marketing Management (14th Edition)