International Business

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Objective
 Explain the nature of International Marketing

 Compare International Marketing with Domestic Marketing  State & Explain major benefits of International Marketing  Identify major activities of International Marketing

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Nature of International Marketing Case Study

 Wal-Mart is all set to enter Indian Market by venturing with Bharti Group.  Wal-Mart is known for very aggressive marketing strategy.  As they were biggest retail chain in US market, hence international expansion was the key for continued growth.  The companys initial internationalization in early 1990s was Mexico & Canada.  By end of decade, they sighted on more complex & lucrative market Europe.  Wal-Mart first entered UK by buying ASDA, with 230 outlets, it meshed well, because of aggressive marketing strategy & low prices.  New management team enhanced ASDAs competitiveness by cutting prices & sending competitors scrambling to meet or beat price tags.  British retailers were accustomed to high profit margins, but Wal-mart low prices have put pressure on rival chains e.g. Tesco, Safeway, Sainsbury & given smaller stores bigger headache.  ASDA raised its share to 10.5% from 8.4%, it had, before Wal-Mart took over.  Wal-Mart adopted acquisition strategy to enter German market, first acquired 21 store Wertkauf & then bought Spar Handels AG.  It hung an American Flag outside each store to symbolize superior service & selection. Page 3

In Continuum
       The companys Always Low Price Policy upset German regulators, fearing small retailers out of business. German Cartel Office forced retail giant to raise its prices on loss leaders like flour, cooking oil & butter, which was sold below cost. It underestimated the ferocity of its primary German competitors, Aldi & Lidi, company did not carry on its expansion plans rather to be cautious & grow slowly. It kept them in reaching economies of scale to become profitable. Finally, in mid 2006, it announced ceasing operations in Germany. Though Wal-Mart failed in Germany, its overall international operations are paying dividends. Wal-Mart is doing very well in UK, Canada, Mexico & Brazil & have just opened an office in India.

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Definition of International Marketing

International marketing refers to the process of identifying the goods & services that customers outside the home country want & then provide them at the right price & right place.

Viewed from this perspective, International Marketing & Domestic Marketing are similar, but there are differences.

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Domestic & International Market

Environmental Factors - Controllable factors  Pricing, Product, Promotion - Uncontrollable factors  Economic, Legal, Political & Competition The Domestic marketer must understand these factors objectively & come out with appropriate marketing strategies. Page 6

Domestic & International Market

International marketing is much more complex It faces several uncontrollable forces originating from different countries. Marketing mix need to be modified to confirm different environments. Varying environments may rule out uniform marketing strategies. McDonalds Renowned for standardization & American Symbol, has been flexible overseas, the company customizes its menu as Beef excluded in India. Pricing is more complex in International Marketing, because of additional problems associated with Tariffs, Dumping Laws, Inflation & Currency conversion. Problems arises in International advertising too Language Translation. Problems in selecting media. Problems in selecting agency to prepare & place companys advertisements. Problem is to hire local ad agency or multinational ad agency. Page 7

Benefits of International Marketing

Survival Standards of Living

Overseas Markets

International Marketing

Inflation & Price Moderation

Sales & Profits

Diversification

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Benefits of International marketing

Survival Many countries need to trade globally for survival, e.g. Hongkong,
without food & water from China, the British colony would not have survived long. Europe have had similar experience Most European nations are smaller in size, without Foreign markets, European firms would not have economies of scaleto be competitive with US firms. e.g. Nestle, had to depend on foreign market because Switzerland is very small. potential markets for international business, such as, Latin America & Asia Pacific region. History is evident that that firms have achieved dominance worldwide through foray into overseas markets . Home country markets smaller in size, successful global firm from Netherlands in Western Europe have become giants worldwide Philips(Electronics), Shell(Petrol), Uniliver (Consumer Products) etc. Page 9

Growth of Overseas Markets Developing countries are growing

Benefits of International Marketing

Sales & profits - For many firms, foreign market constitute larger share of
business cultivated markets abroad, such as, Coca Colas foreign sales account for over 80% of its total revenue. No international business can ignore this.

Diversification Demand for most products in domestic market is affected

by cyclical factors Recession or seasonal factors Climate & are likely to cause a drop in sales often forcing firms to lay off professionals. Overseas markets avoid such possibility, foreign markets remove fluctuations by providing outlets for excessive production capacity. e.g. Cold Weather may depress soft drink sales, but not all countries enter the winter season at the same time. Imports can be beneficial to a country. Without imports, there is no force on domestic firms to moderate their prices. Absence of foreign imported products compel consumers to buy domestic products at higher prices, resulting in inflation & excessive profits. Page 10

Inflation & Price Moderation

Benefits of International Marketing

Standards of Living of living than otherwise possible. Without trade, people will be forced to pay more for less. Trade also makes it easier for industries to gain access for raw material. Time Fostering to competition & efficiency. A diffusion of innovations across nationals is useful by-product of international trade. Trade affords participating nations better standards

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Major Activities in International Marketing

Product
Product that includes physical goods, services, experiences, events, persons, places, properties, information/ideas.

Place
Place refers to distribution. Distribution involves two issues: decision on channels & mode of shipping

Mix of the four elements: Product, Price, Place & Promotion Promotion
Promotion includes all efforts undertaken to enhance acceptability of the product by potential buyers. Branding is part of promotion.

Price
International business can follow either standard policy, Two-tiered Pricing or Market Pricing

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International Market Assessment

International Marketing starts with identification of the market It follows three steps:

1. Assess alternative Foreign Markets 2. Evaluate the respective costs. 3. Select those that hold the most potential for entry or expansion.
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Assessing Alternate Foreign Market

The number, size & financial strength of the competition. Their Market share. Their apparent marketing strategy Their apparent effectiveness of promotional programs The quality levels of their product lines The source of their products Imported or locally produced Their Pricing policies The levels of their after sales service Their distribution channels Their coverage of the market Page 14

Evaluation of Costs, Benefits & Risks

Next step in assessing carefully the cost, benefits & Risks associated with: There are two types of costs Direct & Opportunity Direct Cost The firm incurs in setting up operations abroad, such as, Setting up Business Operations, Transfer Managers to manage the factory, shipping equipment and parts. Opportunity Cost - Foregoing one option for another. As firm has limited resources, entering one market may delay its entry into another. Entering new market offers many benefits Increased Sales & profits, Lower acquisition or manufacturing costs, foreclosing of markets for competitors, access on new technology & opportunity to achieve synergy with other operations. There are risks associated & IB is no exception MNC bears Opportunity Cost, Additional Operational Complexities, Direct financial losses due to inadequate assessment, Exchange Rate fluctuations. It also faces the risk of wars or terrorism, Page 15 losses through Government Regulations.

Selecting Markets for Entry or Expansion

For any firm, different circumstances will dictate the market it enters or the market with in which it expands. - All international business have operations in N.America, Europe & Asia-Pacific Region, complex question surround the decision to enter the markets of S.America, Africa, Eastern Europe & other region. In most cases SWOT analysis of the firm, scanning of environment & frequent visits give insightful decisions.
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Thank You

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