INTERNATIONAL MARKETING

Domestic vs International Marketing Why International Marketing? Nature and Benefits of International Marketing Mode of Entry

Reported by: IVY LOUCILLE N. FERNANDEZ Investment and Portfolio Management Sat 8A 5P

Why International Marketing? (5 core benefits on a businessmans point of view)

1. Freedom International marketing is a notion of freedom. It removes boundaries between nations and grants more opportunities to gain better skills and exposure to different cultures. Opportunity and contentment International marketing is the best way to raise national power and status for nations with limited resources and territory. It is a key factor that strengthens both nations and individuals. International marketing is an efficient way of doing business globally. The aim of international marketing is to unite the world with a better era for the human race as competitive cooperation supersedes the rules of total competition. Prosperity and Innovation International marketing gives hope to countries that have been in the dark by offering better job prospects and improved skills. It predicts for more certainty in the future and enhances standards of living worldwide. Many products would not be economically viable without a global market. International marketing rewards excellence, accelerating innovation and development. People have more opportunities to present their ideas and show their competitiveness to a wider audience. International marketing leverages the capabilities and resources that exist, lets us learn continuously and endows us with much more enthusiasm. Culture International marketing helps us to better understand our fellow human beings. Homogenization of cultures does not indicate that our aptitudes, likes and behaviours would be the same. Rather, we would accept cultural differences and adapt them to our own culture, making us an amalgamation of different cultures. Global markets force companies and their employees to learn about other cultures and to develop relationships with foreigners. This way, people get more exposure to various cultures, which lead to changes in the human character. International marketing enables individuals to think thoughts that are more wide ranging, developing many of us into a better person. Fairness Nations that trade are more interdependent. With merchandise promoted internationally, people can now easily make price comparisons, reducing selective exploitation due to knowledge monopolies. Markets have a watchdog role to play to ensure that exploitation does not occur. There is a market conscience. Such a conscience results from the greater understanding that consumers develop about the consequences of their buying decisions on others. The information boom makes it easier for markets to deliver on their supervisory role. Markets themselves are a form of democracy. Consumer support will reinforce societally desirable firm behaviour and punish acts that are deemed socially unacceptable.

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Nature and benefits of International Marketing

Enhances the domestic competitiveness Takes advantage of international trade technology Increase sales and profits Extend sales potential of the existing products Maintain cost competitiveness in your domestic market Enhance potential for expansion of your business Gains a global market share Reduce dependence on existing markets Stabilize seasonal market fluctuations

Mode of Entry
1. Export This represents the least commitment on the part of the firm entering a foreign market. Exporting to a foreign market is a strategy many companies follow for at least some of their markets. Since many countries do not offer a large enough opportunity to justify local production, exporting allows a company to centrally manufacture its products for several markets and therefore to obtain economies of scale. Furthermore, since exports add volume to an already existing production operation located elsewhere, the marginal profitability of such exports tends to be high. Advantages: Limited investment; Low risk Disadvantages: Higher unit cost to consumer Likely lower market share Limited learning on country market characteristics Possible preemption by competitors Licensing A contractual agreement whereby one company (the licensor) makes an asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation (Example: patent, trade secret, brand name, product formulations) Under licensing, a company assigns the right to a patent (which protects a product, technology or process) or a trademark (which protects a product name) to another company for a fee or royalty. Using licensing as a method of market entry, a company can gain market presence without an equity (capital) investment. The foreign company, or licensee gains the right to commercially exploit the patent or trademark on either an exclusive (the exclusive right to a certain geographic region) or an unrestricted basis. Due to advantages of low risk and low investment, licensing is a particularly attractive mode for small and medium-sized firms. Licensing also is an effective mode for testing the future viability of more active involvement with a foreign partner. Franchising License to sell companys products or operate a business that carries that companys name Franchising is a special form of licensing in which the franchiser makes a total marketing program available including the brand name, logo, products and method of operation. Usually the franchise agreement is more comprehensive than a regular licensing agreement in as much as the total operation of the franchisee is prescribed. It differs from licensing principally in the depth and scope of quality controls placed on all phases of the franchisee`s operation. The franchise concept is expanding rapidly beyond its traditional businesses (such as service stations, restaurants and real-estate brokers) to include less traditional formats such as travel agencies, used car dealers, the video industry and professional and health improvement services. Advantages of Licensing and Franchising: Low investment Limited direct exposure Lower exit costs Rapid entry Possible reduction in counterfeiting Disadvantages: Limited control (contract = enforceability) Quality, Promotion, Image Difficulty in terminating relationship

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*Difference of licensing from franchising: o Franchisees can expect to have a much closer relationship with their parent company than their licensee counterparts. Franchisees typically retain rights to the parent companys trademark and logo. This is important because it is a visible representation of the connection between franchisor and franchisee. o The relationship between licensees and the licensing company is looser than the relationship between franchisors and franchisees. In most cases, the licensee does not retain rights to use the companys trademark. Instead, the licensee is expected to establish its own identity in the marketplace. 4. Contract Manufacturing A company arranges to have its products manufactured by an independent local company on a contractual basis. This is an entry mode in which a firm contracts with a foreign firm to manufacture parts or finished products or to assemble parts into finished products. The manufacturer`s responsibility is restricted to production. Afterward, products are turned over to the international company which usually assumes the marketing responsibilities for sales, promotion and distribution. Typically, the contracting firm supplies complete product specifications to the foreign firm, sets production volume and guarantees purchase. Lower labor costs abroad are the major incentive for using this entry mode. Advantages: Faster start Reduced investment in manufacturing Ability to take advantage of established manufacturers experience and cost structure Disadvantages: Training of competitor Still left with marketing responsibilities (need country presence) Joint Venture (JV) Entry strategy for a single target country in which the partners share ownership of a newlycreated business entity Under a joint venture arrangement, the foreign company invites an outside partner to share stock ownership in the new unit. Advantages: Successful if the partners share the same goals with one partner accepting primary responsibility for operations matters. The JV partner may have important skills or contacts of value to the international firm. Sometimes, the partner may be an important customer who is willing to contract for a portion of the new unit`s output in return for an equity participation. Disadvantages: If an international firm has strictly defined operating procedures, such as for budgeting, planning and marketing, getting the JV company to accept the same methods of operation may be difficult. When the JV partner wants to maximize dividend payout instead of reinvestment or when the capital of the JV has to be increased, one side is unable to raise the required funds.

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Domestic vs International Marketing

1. Selling Products Domestic marketing is the selling of a companys products within a local financial market. It deals with only one set of competition and economic issues which make it more convenient to do. International Marketing (IM) on the other hand is the promotion and sale of a companys products to consumers in different countries. It is very complex and requires a huge amount of financial resources. Language There are no language barriers in domestic marketing and obtaining and interpreting data on local marketing trends and consumer demands is easier and faster to do. It helps the company make decisions and develop marketing strategies that are more effective and efficient. The risks are also lesser with domestic marketing and it needs lesser financial resources. International marketing on the contrary must adapt to foreign countrys language Resources Domestic marketing requires lesser financial resources while international marketing requires huge financial resources. Market Domestic marketing deals with only a single market while international marketing deals with several different countries and markets. Laws and Regulations Although both use all the basic marketing principles, international marketing is more challenging and requires more commitment from the company because of the uncertainty and differences in laws and regulations in the global market while domestic marketing deals only with the laws and regulations of one country. Every country has its own laws on business and a company that aims at entering into business in another country must first know about them. Consumer tastes and preferences may also differ so marketing strategies must be formulated to cater to the needs of different consumers. Consumers Domestic marketing deals only with one set of consumers while international marketing deals with different types of consumers with different tastes. Strategies In domestic marketing, the company can have the same policies and strategies while international marketing requires different strategies in the promotion of their products.

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