International Marketing
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International Marketing
Introduction
Over the past 40 years, the number of multinational corporations in the worlds fourteen richest countries has gone from 7,000 to 24,000 (Alden, p. 6-7). While many companies have marketed internationally for years, more and more companies are looking to enter the arena of global competition.
In todays business world, often companies simply cannot stay domestic and expect to maintain and increase their markets. A company must initially decide if it is beneficial to go international, and then define its international marketing policies and objectives to create an effective promotional campaign.
The Decision Whether to Market Internationally
A global industry is defined as “an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions” (Porter, 1980, p. 275). Though some U.S. businesses would prefer to eliminate foreign competition through restrictive legislation, a more effective way to compete is to continuously improve products and to contemplate marketing abroad (Kotler, 2000, p. 366).
There are several factors that attract more and more companies into the global marketplace, according to author Philip Kotler (2000, p. 367). For instance, global companies that offer superior products for lower prices can threaten a domestic companys market. Often this force attracts companies to enter the global marketplace. Another example is a company realizes that some foreign markets offer a higher profit prospect than the domestic market. In addition, the need for more customers often persuades a company that they must start to market their product internationally. Strategically, an international company is given more credence by buyers and partners than one who has conquered only the domestic market.
Yet, before deciding to market internationally, several risks must be contemplated. For example, according to Kotler, a company may not adequately understand foreign customer preferences and could potentially fail to offer a “competitively attractive product” (2000, p. 367). A frequently mentioned example of this type of blunder is when Hallmark cards introduced their greeting cards in France.
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Hallmark did not take into account that the French dislike syrupy sentiment and prefer to write their own cards (Kotler, 2000, p. 367.) Another example is when Coca-Cola had to remove its two-liter bottles from the market in Spain after learning that few Spaniards owned refrigerators with sections large enough to accommodate the large bottle (Kotler, 2000, p. 367).
Another risk that companies face when contemplating marketing products internationally is that the company might not adequately comprehend the foreign countrys business or social culture. This can lead to ineffective dealing with foreign nationals, which can hurt product sales (Kotler, 2000, p. 367). For example, in some Asian cultures it is extremely rude to touch someone on their head. In Arabic countries, it is considered unacceptable to point the bottoms of ones feet at another person. In many Latin American countries, it is proper to cultivate a friendly personal relationship before doing business.
Consequently, many companies simply choose to market to neighboring countries because they understand these countries well. Therefore, it is not surprising that the United States largest foreign market is Canada and that Swedish companies frequently choose to expand internationally only within Scandinavia (Kotler, 2000, p. 373).
In the end, the decision of where to expand is influenced by “the product, geography, income and population, political climate, and other factors” (Kotler, 2000, p. 370). Some business advisors have suggested that companies focus on doing business in the “triad markets”, which are the United States, Western Europe, and the Far East, because these account for a large percentage of all international trade (Kotler, 2000, p. 370).
In general, according to Kotler, it makes sense to function in fewer countries with a genuine commitment and infiltration in each (2000, p. 368). Authors Ayal and Zif have argued that companies should operate in fewer countries when: market entry and market control costs are high; product and communication adaptation costs are high; population and income size and growth are high in the chosen countries; and when dominant foreign companies can establish high barriers to entry (1979, pp. 84-94). Author Michael E. Porter concurs with Ayal and Zif, that to create a strong strategic position within a given market, a company must develop significant barriers to entry to thwart competitive forces (Porter, 1980).
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Therefore, if a company performs sufficient research and carefully ponders its international expansion, that company can be successful in expanding its market to an international level. The next step is to decide what international marketing techniques the company should employ.
International Marketing Techniques
When companies design international marketing campaigns, the major issues to contemplate are price and the promotional process.
With respect to price, there are several issues a multinational company must face: price escalation, transfer prices, dumping charges, and gray markets (Kotler, 2000, p. 383). Price escalation occurs when the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin are added to its factory price (Kotler, 2000, p. 383). A transfer price is the price a company charges to another