Jusi, Caristine M.

BSA 2A International Marketing

January 19, 2012 Prof. Betita

International marketing occurs when a business directs its products and services toward consumers in more than one country. While the overall concept of marketing is the same worldwide, the environment within which the marketing plan is implemented can be drastically different. Common marketing concernssuch as input costs, price, advertising, and distributionare likely to differ dramatically in the countries in which a firm elects to market. Furthermore, many elements outside the control of managers, both at home and abroad, are likely to have a large impact on business decisions. The key to successful international marketing is the ability to adapt, manage, and coordinate a marketing plan in an unfamiliar and often unstable foreign environment. At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. At its most complex level, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe. (Source: http://www.referenceforbusiness.com, Doodle and Lowe 2001) Businesses choose to explore foreign markets for a host of sound reasons. Commonly, firms initially explore foreign markets in response to unsolicited orders from consumers in those markets. In the absence of these orders, companies often begin to export to: establish a business that will absorb overhead costs at home; seek new markets when the domestic market is saturated; and to make quick profits. Marketing abroad can also spread corporate risk and minimize the impact of undesirable domestic situations, such as recessions. (Source: http://www.referenceforbusiness.com) The opposite of international marketing is domestic marketing. Domestic marketing means that the company has to market its products within the national jurisdiction of the country without considering the effects of global competition. The product might face global competition but marketing campaigns are targeted to the local consumer segments. Product development and competition from the outside competitors are not considered and sole stress is put on the local competition and local customer segments. The disadvantage of domestic marketing could be the ignorance of global market competition which might snatch their market share in the local market in the future. Ive read some articles why businesses prefer to venture internationally than domestically. I will be presenting the differences between domestic and international marketing using a table. International Marketing Endless opportunities and scope There is an added incentive of foreign currency that is important from the point of Domestic Marketing Limited and will eventually dry up Less than in international marketing.

Scope Benefits

Scope and Technology Political Relations

Barriers

view of the home country as well. Allows use and sharing of latest technologies. Leads to improvement in political relations between countries and also increased level of cooperation as a result. There are many barriers such as cross cultural differences, language, currency, traditions and customs.

limited in the use of technology Nothing to do with political relations

There are no barriers

As you can see, doing your marketing internationally might give you more profit, but with this you would take with you a lot of risk. While in domestic marketing, it might give you less profit but you have a lesser risk to take in your venture. Many businesses choose to do their marketing internationally than domestically. Majority of the articles Ive read states that, international markets have greater growth potential. Some tasks associated with international marketing not included (or less intense) than in domestic marketing (e.g., cultural research, political factors, exchange rates, trade laws, long distance distribution.). In contrast of these differences is one similarity, both carry out transactions that meet the needs of individuals and organizations. There are various ways to distribute your product internationally. Some of these ways are exporting, licensing, franchising, joint venture, and wholly owned subsidiary. Exporting is the most common and least risky way to distribute products internationally. Exporting is also the selling goods in foreign markets as a way to earn profits. On the other hand, the most risky and the most costly type of distribution is the wholly owned subsidiary. An Export Business is a venture where a firm buys or represents products or services produced in one country and sells them in other countries. Based on what Ive read in various internet articles, there some reasons why exporting is the most convenient way to distribute products internationally. These articles always states these 2 criteria why exporting is always better that the other way of marketing products internationally; First is it increase sales, because it extends the market for a product that has proved popular at the domestic level. Respond to overseas buyer with whom a profitable business relationship has emerged. Lengthen a product's life cycle by selling in foreign markets once a product's popularity declines in the home market and wanting to take advantage of seasonal differences (e.g., when it is summer in America, it is winter in Australia!).; The other one is avoid changing domestic conditions, because, it turn to different markets when a company feels the regulations on its product become too strict at home. (e.g., Cigarette industry in the U.S. is being litigated). Exportation being the most common way to distribute products internationally still has pros and

cons. Let first state the advantages first; 1.) Increased market size and brand (global brand) awareness 2.) Currency benefits -Changes in exchange rates can prove advantageous when selling to a customer whose currency is stronger than your own. 3.) Protection against a downturn in the domestic market. 4.) Protection in the event of world recession - it is unlikely that all countries will be equally affected by an economic downturn. 5.) Economies of scale from manufacturing in larger batches. Meanwhile the disadvantages of exporting are: 1.) Increased costs. E.g. Traveling abroad to obtain orders; High management fees, shipping charges, agent's fees, etc., 2.) Understanding and following import laws and regulations, which vary and change rapidly and dramatically in some cultures. 3.) Transportation policy. Shipping rules and regulations complicated. 4.) Currency. The earlier advantage of a strong currency in exchange for a weak dollar might, in alternative circumstances, prove detrimental to the exporter. 5.) Collecting long-standing payments and debts can prove difficult. Licensing can offer you lower risk, but with that you will also earn lower profit. Based on what I have read Licensing is the practice of leasing a legally protected property (such as a trademarked or copyrighted name, logo, likeness, character, phrase or design) to another party in conjunction with a product, service or promotion. It is based on a contractual agreement between the owner of the property (or its agent) known as the licensor; and a licensee normally a manufacturer or retailer. It grants the licensee permission to use the property subject to specific terms and conditions, which may include the purpose of use, a defined territory and a defined time period. In exchange for this usage, the licensor receives financial remuneration - normally in the form of a guaranteed fee and/or royalty on a percentage of sales. Most agreements are set out in a licensing agreement. Licensing, like exporting have benefits for the licensor, as well as the licensee. For the Licensor: 1.) it increases its brand name presence in an outlet or retail distribution store. 2.) It creates further brand awareness to support its core products and services. 3.) Supporting and enhancing its core values by associations with the licensed products/services or category (e.g. association with a healthy food or with a cutting edge mode of fashion) 4.) Enters in new markets which were unfeasible, with its own resources. 5.) Generates new revenue streams, often with little involvement or additional financial or other resource implication. For the licensee: 1.) transfers the values and consumer favour towards the property to the licensed product or service. 2.) provides added value and differentiation from competitive offerings. 3.) Provides additional marketing support or momentum from the core propertys activity provided by the licensor. 4.) Appeals to new target markets who have not historically been interested in a licensees product or service. 5.) Gives credibility for moving into new market sectors through product extension. 6.) Gains additional retail space and favour The third way to enter a foreign market is to franchise, or franchising. Franchising may be defined as a business arrangement which allows for the reputation, (goodwill) innovation, technical know-how and expertise of the innovator (franchisor) to be combined with the energy, industry and investment of another party (franchisee) to conduct the business of providing and selling of goods and services. The fact that, as a

method of doing business, franchise arrangements have grown so rapidly in the last 10 or 20 years (worldwide) is due simply to the fact that franchises are an effective way of combining the strengths, skills and needs of both the franchisor and the franchisee. To be truly successful, the one is reliant on the other. In most instances, franchising combines the know-how of the franchisor with the where-with all of the franchisee and, in the more successful franchising systems, the energy of both. (Source: Wipo.int) According to what I have read in wipo.int, in a basic franchising arrangement the franchisor has developed a system for conducting business. The system has been found to be successful. The franchisor wishing to emulate the success of that business system, usually in a different geographic area, establishes a blueprint for others also wishing to emulate this success to operate the same business using the same name and same systems. The main advantage of owning a franchise is the feeling of freedom that being self-employed brings. This freedom is tempered with the knowledge that the owner has invested in a proven system and has the training, support and encouragement of other franchisees and the franchisor. Owning a franchise should also provide a semi-monopoly environment in which to conduct business in a particular area. Generally, there is also an informed ready-made customer base. There will of course be competitors but the franchisee will be granted the sole franchise for a given area and often will be given client listings or job sheets. Most importantly though, being part of a franchise ensures the franchisee is part of an instantly recognisable brand, the product or service expectations that a brand brings, and the reputation gained by the brand over time. A franchise also offers the franchisee with the ability to capitalise on the know-how and systems that have been proven to be successful. The quality of the product or service provided is therefore in many ways guaranteed. Some of the advantages a franchise offers are: 1.) Freedom of employment. 2.) Proven product or service outcomes. 3.) Semi-monopoly; defined territory or geographical boundaries. 4.) Proven brand, trade mark, recognition. 5.) Shared marketing, advertising, business launch campaign costs. 6.) Industry know-how. 7.) Reduced risk of failure. 8.) Access to proprietary products or services. 9.) Bulk buying advantages. 10.) On-going research and development. A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal. This partnership can happen between goliaths in an industry. In example is the alliance between Coca-Cola and San Miguel in our country. It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors. Companies with identical products and services can also join forces to penetrate markets they wouldn't or couldn't consider without investing tremendous resources. Furthermore, due to local regulations, some markets can only be penetrated via joint venturing with a local business. In some cases, a large company can decide to form a joint venture with a smaller business in order to quickly acquire

critical intellectual property, technology, or resources otherwise hard to obtain, even with plenty of cash at their disposal. A parent company owns 100 percent of a wholly owned subsidiary, which usually operates independently with its own senior management structure, products and clients. However, the parent company has significant control over the strategic direction of the subsidiary. The advantages and disadvantages of this business model fall into financial, operational and strategic categories. (Source: Ehow.com) There are advantages and disadvantages in wholly owned subsidiary, and we can view it in 3 structures first is in financial structure, second is operational structure, third is the strategic structure. The financial advantages of a wholly owned subsidiary include simpler reporting and more financial resources. The parent company can consolidate the results of its wholly owned subsidiaries into one financial statement. It can also use the subsidiary's earnings to grow the business or invest in other assets and businesses to generate a higher rate of return. Additionally, the two companies can integrate their financial and other information technology systems to streamline business processes and reduce costs. The financial disadvantage is that an execution error or malfeasance at a subsidiary can seriously affect the financial performance of the parent company. In operational structure on the other hand, the parent company usually maintains direct or indirect operational control over its wholly owned subsidiaries. The degree of control varies, but it is implicit in the relationship. For example, the parent company often initiates management changes at its wholly owned subsidiaries. The parent and the subsidiary can also use their combined size to negotiate better terms with suppliers. Additionally, they can take advantage of one another's management and technical expertise, reduce administrative overlap and better integrate new product development and launch initiatives. The disadvantages to this type of structure include a concentration of risk and a loss of operational flexibility. For example, if a company enters a foreign market through a wholly owned subsidiary, it has to rely on the subsidiary to develop a distribution channel, recruit a sales force and establish a customer base. In other words, success depends entirely on the subsidiary's execution. The operational risk is concentrated in one company rather than spread across multiple entities. The speedy execution of strategic priorities is another advantage of a wholly owned subsidiary. For example, a parent company could ask one of its foreign wholly owned subsidiaries to dedicate all of its resources toward a new product launch. Faster execution means faster market penetration. Synergies in marketing, research and development and information technology mean cost efficiencies and long-term strategic positioning. The strategic disadvantage is that cultural differences often lead to problems integrating a subsidiary's people and processes into the parent company's system. There are lots of ways to enter the international market. You just have to choose the best way to market your product internationally, because in every way theres always a pros and cons. Marketing products internationally can never be that easy. A marketer ought to know that there are lots of uncertainties in markets all around the world, besides marketers should cut the cultural differences of each nation. To make it

short, there are a lot of things to consider when you want to market your products internationally. References: http://www.referenceforbusiness.com/encyclopedia/Int-Jun/InternationalMarketing.html#b http://marketingteacher.com/lesson-store/lesson-international-marketing.html http://www.entrepreneur.com/encyclopedia/term/82412.html http://entrepreneurs.about.com/od/beyondstartup/a/jointventures_3.htm http://www.ehow.com/info_8627934_advantages-disadvantages-wholly-ownedsubsidiary.html http://www.wipo.int/sme/en/documents/franchising.htm