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.

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.

Figure 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).

Figure 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.

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.

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

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.

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.