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SLM-Unit-15-MB0046

Oct 24, 2014

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Marketing Management

Unit 15

Unit 15

International Marketing Management

Structure: 15.1 Introduction Learning Objectives 15.2 Nature of International marketing concept 15.3 International marketing concept 15.4 International market entry strategies 15.5 Approaches to international marketing 15.6 International product policy 15.7 International promotions policy 15.8 International branding 15.9 Country of origin effects 15.10 International pricing 15.11 Summary 15.12 Terminal questions 15.13 Answers

15.1 IntroductionIn the previous units our study was focused on how marketing strategies are formulated, implemented and controlled in the Indian marketing. After the globalization and liberalization of the Indian economy in the year 1991, Indian enterprises started facing the competition from the global brands. In this context it has become inevitable for all the companies small or big to analyze the international marketing environment and strategies to adapt to it. The companies which were operating in the domestic market are also aggressively redrafting their policies and strategies to suit the global needs. Companies express their desire to enter into the international market because of the following reasons: 1. It identified potential growth opportunities in the foreign markets for its products. 2. The domestic market is matured. 3. Existing customers demand for the international availability of organizations products and services.

Sikkim Manipal University

Page No. 306

Marketing Management

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Learning Objectives After studying this unit, you will be able to: Understand the nature of international market. Analyze the appropriate entry strategies for the firm in international market. Examine the approaches to the international market. Asses the importance of components of marketing mixes in the international market. Bring out the importance of country of origin effects.

15.2 Nature of International Marketing ConceptInternational marketing is defined as The performance of business activities designed to plan, price, promote and direct the companys flow of goods and services to consumers or users in more than one nation for a profit. A company that wants to sell their product in other than domestic market should understand the environmental factors, consumer behavior, market forces and other characters relevant to the international market. After understanding the definition, several questions may arise in your mind like why marketer should go to the international market? And what is the difference between international marketing and domestic marketing? As we discussed in the introduction part, companies enter into the international market to tap the potential, to support the customer requirements or to avoid the unprofitable domestic market. The differences between domestic marketing and international marketing are listed below:Characteristics 1. Culture 2. 3. 4. 5. Data accessibility Data reliability Control Consumer preferences 6. Product mix 7. Business operation 8. Currency exposure International Marketing Multi culture Very difficult Very Low Difficult Vary from country to country Adaptability required More than one country Required Domestic Marketing Single culture and in some cases multi culture Easy High Relatively easy Vary in small extent Standardization required Home country only Required only if there is importing Page No. 307

Sikkim Manipal University

Marketing Management

Unit 15

Advantages of International marketing: 1. International marketing provides growth opportunities for the companies whose domestic market is maturing. For example, General Motors focuses its strategies on the emerging markets like India 2. It brings the major portion of sales and profits to the company. For example, Unilevers major revenue comes from the Asian markets. 3. It generates employment: Indian textile sector which exports majority of the product produced is a large employer after agriculture and retail. 4. International market also acts as survival place for the companies. If one market becomes unattractive, either they establish their operations in another country or outsource the major functions to streamline the businesses. 5. It helps in improving the standard of living in the country.

15.3 The International Marketing ConceptThe marketing concept is the idea that a firm should seek to evaluate market opportunities before production, assess potential demand for goods, determine the product characteristics desired by the consumers, predict the prices consumers are willing to pay and then supply goods corresponding to the needs and wants of target markets. Adherence to marketing concept means the firm conceives and develops products to satisfy consumer wants. In international marketing this means the integration of the international side of the companys business with all aspects of its operations and the willingness to create new products and adapt existing products to satisfy the needs of world markets. Products may have to be adapted to suit the tastes, needs and other characteristics of consumers in specific regions, rather than to assume that an item which sells well in one country will be equally successful elsewhere.

15.4 International Market Entry StrategiesOrganizations that plan to go for international marketing should know the answers for some basic questions like a. In how many countries would the company like to operate? b. What are the types of countries it plans to enter?

Sikkim Manipal University

Page No. 308

Marketing Management

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Thats why companies evaluate each country against the market size, market growth, and cost of doing business, competitive advantage and risk level. Checklist for country evaluationCharacteristics 1. Political rights 2. Civil liberties 3. Control of corruption 4. Government effectiveness 5. Rule of law or legal issues 6. Health expenditure 7. Education expenditure 8. Regulatory quality 9. Cost of starting a business 10. Days to start a business 11. Trade policy 12. Inflation 13. Fiscal policy 14. Consumption patterns 15. Competition weightages score

Once the market is found to be attractive, companies should decide how to enter this market. Companies can enter the international market by adoptingany one of the following strategies. They are a. Exporting b. Licensing c. Contract manufacturing d. Management contract e. Joint ownership f. Direct investment Exporting is the technique of selling the goods produced in the domestic country in a foreign country with some modifications. For example, Gokaldas textiles export the cloth to different countries from India. Exporting may be indirect or direct. In case of indirect exporting, company works with independent international marketing intermediaries. This is cost effectiveSikkim Manipal University Page No. 309

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and less risky too. Direct exporting is the technique in which organization exports the goods on its own by taking all the risks. Maruti Udyog Limited, Indias leading car manufacturer exports its cars on its own. Company can also set up overseas branches to sell their products. Adani Exports, another leading exporter from India has international office in Singapore. Licensing: According to Philip Kotler, licensing is a method of entering a foreign market in which the company enters into an agreement with a license in the foreign market, offering the right to use a manufacturing process, trademark, patent, or other item of value for a fee or royalty. For example, Torrent Pharmaceuticals has license to sell the cardiovascular drugs of Chinese manufacturer Tasly. Licensing may cause some problems to the parent company. Licensee may violate the agreement and can use the technology of the parent company. Contract manufacturing: Company enters the international market with a tie up between manufacturer to produce the product or the service. For example, Gigabyte Technology has contract manufacturing agreement with D- link India to produce and sell their mother boards. Another significant manufacturer is TVS Electronics; it produces key boards in its own name as well as for other companies too. Management contracting: In this case, a company enters the international market by providing the know how of the product to the domestic manufacturer. The capital, marketing and other activities are carried out by the local manufacturer, hence it is less risky too. Joint ownership: A form of joint venture in which an international company invests equally with a domestic manufacturer. Therefore it also has equal right in the controlling operations. For example, Barbara, a lingerie manufacturer has joint venture with Gokaldas Images in India. Direct Investment: In this method of international market entry, Company invests in manufacturing or assembling. The company may enjoy the low cost advantages of that country. Many manufacturing firms invested directly in the Chinese market to get its low cost advantage. Some governments provide incentives and tax benefits to the company which manufactures the product in their country. There is government restriction in some countries to opt only for direct investment, as it produces the jobs to the local people.Sikkim Manipal University Page No. 310

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This mode also depends on the country attractiveness. It may become risky if the market matures or unstable government exists. Exhibit 1 Shale Gas the next big global opportunity in the fuel market Reliance Industries, which has executed the worlds single largest refinery complex at one place, and one of the most complex gas projects in the depth of the Bay of Bengal on the East coast of India, may join global oil majors in search of shale gas. RIL has bee