WHY IS INTERNATIONAL MARKETING IMPORTANT FOR COMPANIES?
Category : International Marketing, Marketing Plan
INTERNATIONAL MARKETING IMPORTANT FOR COMPANIES?
Table of Contents
The emergence of globalisation has made the world much a smaller place. Nations has become virtually a partition demarcating certain geographical areas of an enormous community. The business sector may well be the foremost area which is influenced by the increase in proximity among nations. Commerce has become a transnational affair. Along with these developments, the major principles of business are also taken into consideration. More importantly, the context of marketing has to undergo changes in order to fit the demands of international businesses. This paper will be taking a close look on the importance of international marketing for organisation seeking to operate in the international setting. In the same manner, the study will be covering the areas on which international marketing influences. Specifically, a look in international marketing environment, dynamics of domestic and international marketing, international marketing strategies, implications of culture differences, international market research, the operations of small and medium sized enterprises (SMEs) in the international market, types of market entry, and the typically employed market communications initiatives in the international setting. The observations and arguments used in the following discussions are to be based on the journals and academic articles that deal directly with international marketing and international marketing theories.
Trading internationally is a phenomenon that dates back in the ancient civilisations when galleons and junks were the foremost modes of transportation to send out merchandise from one country to another. In recent times, international trade is driven by “market, cost, government, competition and other factors.” (Stone and McCall 2004, 3) In looking at this definition, it appears that a lot is laid on the line for every company who seeks to operate in an international level. Any wrong decision or any indiscretion that the company may undertake could spell success and failure of the international venture. Thus, the need to understand and become well acquainted with the international market is a key ingredient in every company’s pursuit to eliminate the possibility of failure. In looking at this claim, it appears that the environment holds the answer for company who seeks to enter the international market. As mentioned in the work of Rao (1998, 256) “the international environment directly affects the firm's strategic options.” This therefore reinforces the importance of knowing the minutiae of the international environment before taking on initiatives towards operating in an international level. In this regard, any company that seeks to indulge on its international operations would have to make their strategy fit every aspect of the environment. (p 256) Taking this into consideration, it appears that planning is an essential part of the process. As Stone and McCall (2004, 221) mentioned in their work, the process of international marketing involves more that the basic elements of planning. More specifically, international marketing entails “careful planning to achieve the organization's strategic goals.” (p 221)
The major driver of international trading, as indicated above, is globalisation. Studies have defined globalisation as the union and interrelationship of systems of production and distribution of cultural differences among the diverse economic systems in the world. (Connell 2004, 78) Thus, the attempt to develop the economy is the primary thrust of countries to trade with other nations to satisfy both their self-serving ends. In the same regard, the mobility of capital between the countries make trading vital for the operations of any economic system. With such capital, economies are able to acquire both economic growth and economic development. Lam and Kwok (2001, 466) defined economic growth as “the process of growth in the total and per capita income, accompanied by a fundamental change in the institutional dimensions of the economy.” This means that along with the improvements in the potential of the economic features of the state, the state seeks to improve the social conditions for the state. On the other hand, states also encourage international trading because they seek to secure capital accumulation on a consistent level. (Hayami and Godo 2005, 85) This is basically what is characterised as economic development.
It has been established that states welcome any form of trading with other countries provided that they fulfil some self-serving interests. However, like any other endeavour, it is more likely that impediments and problems are to be expected in the process. Though there has been an established legal framework that deals with free trading in the global setting, states sometimes find a way to ratify protectionist policies to look after their local industries. Such policies could include the imposition of quotas, subsidies, tariffs, and other trade restrictions. (Ruggie, 1994, 2) Other barriers could also be seen in the existing legal frameworks that a particular country employs as a part of their responsibilities as members of a regional bloc or a different trade agreement.
The concepts of domestic and international marketing often fall under the need of companies of market research. More specifically, the two concepts tend to emulate the paradox on which London and Hart (2004) have established: internationalisation and localisation. Altogether, this is labelled as the native capability. Essentially, the relationship of international and domestic marketing reflects the need for companies to employ a comprehensive review of the existing market through a marketing mix applicable in the said market. To do so, companies tend to find features of the market to create a strategic fit that will complement the ends of the organisation. (Melawar and Saunders 1999, 583) This thus manifest the importance of the considering the social standards and social institutions of the local market before embarking on a serious internationalisation effort in terms of marketing.
Based on the discussions above, it shows that the two concepts actually work hand-in-hand for the organisation that seeks to operate in an international level. In the same account, it establishes the need for information before embarking on a head-on attempt to break-in to the international scene. For instance, Nachum and Wymbs (2005, 415) indicated that for companies to make the most of their operations overseas, they have to be aware of the competitive elements present like the competitive pricing schemes. Other information like the competitors and the reputation of their brands are also noted factors in the process. Upon cowing these information about the local market, the company seeking internationalisation thus have the capability to alter their strategy that will allow them to maximise their assets and take advantage of the weaknesses of their competitors.
International marketing strategies has been defined numerous times as it is discussed numerous times in studies of international businesses. The study of Lim, Acito, and Rusetski (2006, 499) summarised three definitions of the term based on several other works in the international marketing literature. The first definition is based on the “differentiation of the degree of standardisation (vs adaptation) pursued with respect to one or more marketing mix element.” (p499) Basically, this perspective uses the standardisation and adaptation strategies as general characteristics of marketing strategies. The second definition covers the concentration-dispersion perspective. Essentially, this perspective claims that a “multinational firm should seek an optimal geographic spread of its value-chain activities such that synergies and comparative advantages across different locations can be maximally exploited.” (p502) Looking at this claim, this indicates a closer regard on the economic aspect of the strategy. The third perspective looks on the integration-independence point of view. Plainly speaking, this type of perspective attempts to establish “competitive marketing activities across country markets are orchestrated.” (p503)
Business studies have consistently pointed out the importance of culture in the construction of plans and other tools used to measure the performance of the organisation. More specifically, studies have constantly cited the work of Hofstede (1980, in Katz, Zarzeski, and Hall 2000, 119) indicating the dimensions of culture that any multinational organisation must recognise. These include “individualism-collectivism, masculinity-femininity, high-low power distance and high-low uncertainty avoidance.” (p. 120) Basically, culture has a considerable effect on the “development and implementation of strategies used to accomplish the firm’s competition goals.” In using the perspective of Hofstede, it shows that the individual’s decision to purchase goods and services are based on the existing norms and standards in their environment. This means that consumer behaves differently in considering the geographical locations. More specifically, the study of Katz, Zarzeski, and Hall (2000, 119) they mentioned that the national culture have a great impact on the manner in which financial analysts interpret the future performance of any organisation. This is apparently the same in the use of advertising as a marketing tool in international business. Basically, studies have indicated that the consideration of language skills and culture tends to establish the level of success that an advertising campaign could achieve. In some other studies, it has been said that consumers from different countries react differently when subjected to a particular brand or to the country of origin of a particular product or service. (Peterson and Jolibert 1995, 883) This show that the consumers have preconceived regard on the quality of the product based on the country on which it was made or even the mere brand name used to sell the product.
Having an international market research conducted in the course of the internationalisation process is basically the foundation on which the consequent development and implementation strategies are to be based on. Basically, this considered as “one of the most important factors in predicting international performance for the firms.” (Brouthers and Nakos 2005, 363) Conducting an international market research also provides a systematic way of coming to a decision based on the marketing outcomes of the international performance of the firm. This similarly provides the idea that strategic decisions could provide a company a guaranteed rate of success given that the decisions that they implement are based on scientific, systematic, and accurate international market research outcomes. Another role of international market research is to ensure that the company will have a sustained development in the market. (Vredenburg and Westley 1999, 239) This is done by carrying out market opportunity studies present in a particular host country. In this regard, trends as well as the minor quirks of the market tend to become more apparent to those who will be making the strategic management plan of the organisation. Uncovering these ideas tends to establish the possibilities on which the company can make optimal use as they go along the process. This is especially true in cases of market-driven companies.
Another role in which international market research is deemed useful is for segmenting the market of the country on which the company seeks to enter. Craft (2004, 40) defines international market segmentation as “the division of a market into groups of customers who share certain characteristics or propensities toward a product or service.” In essence, the process is done to provide a detailed account on the attractiveness of the market on which a company intends to enter. At the same time, the use of international market research takes into account the other areas of the market on which the company could take advantage. One major problem in this part of international marketing is the veracity of the data used by the researcher. They have to make sure that the data used are up to date and accurate. Basically, this problem is encountered because of the use of secondary data as a main source of the analysis. Unless the company is able to acquire data for themselves through directly conducting a survey, then the next best thing that they could do is to be vigilant and recognise whether the data that they are to employ could be trusted or otherwise. Failing to do so is a sure way of bringing the international marketing plan into shambles the moment it goes to its implementation stage.
Studies have indicated significant amounts of organisation that operate in the international setting are considered as Small and Medium-Sized Enterprises. (Brouthers and Nakos 2004, 229) This shows that entering into the international market is significantly appealing for any organisation regardless of size. In the same account, it shows that the ability of the company to take measures and establish stable operations tend to be one of the determinant of international success. The size of the company would only be deemed at fault in a negligible extent.
This is reinforced by other studies maintaining that in order for these SMEs to prevail over the odds of their operations, they have to eliminate a significant amount of risk in their respective markets. (Hart and Tzokas 1999, 63) In order to do these, massive amounts of marketing information should be amassed by SMEs so as to provide a clear picture of the environment on which these companies are to operate, both domestic and international.
Furthermore, it has been indicated that SMEs has been among the forerunners in the export businesses. (Brouthers and Nakos 2005, 363) Studies have indicated that these companies tend to be successful in the area because of a couple of factors: “influence of decision-maker characteristics on the export behavior of the firm and its performance” and “firm-specific characteristics that influence a firm's international behavior.” (p363) It is seen therefore that the structure of the company, being compact allows for a much expedient way of carrying out decisions. In doing so, the SMEs are able to act timely. In the same way, if the company did make some sort of mistake or miscalculated their actions, then evasive measures could also be done surreptitiously as the decision-makers could detect it quickly.
Entering a new market is a complex choice which has to be given focus and understanding. With the purpose of establishing a business that would be well-known and sustained by consumers, entrepreneurs are ever more trying to break through the market hastily. (Herrmann and Datta, 2002, 551) Among the factors that egg on businesses to go international is the opportunity set by an investment to support a company which in turn becomes a more a competitive entity among the other players in their respective industries.
If a business entity has decided to break into the international market, there are a lot of options available to them. These options may possibly be composed of the cost, risk and the degree of control that the company will encounter. (Griffith, Russell, Tihanyi, 2005, 270) In having an international business endeavour, it is very important that the management of the company should be competent of selecting a marketing entry system so as to make the business be more competitive (Brouthers and Nakos, 2004, 229). International business scholars make use of the expression “modes of entry” to represent the varied means and methods functional to enter markets and perform trade in other states.
In choosing joint ventures, the company has quite a few advantages to work to their favour. (Choi, and Beamish, 2004, 201) One would be the sharing of information with the associate company. This indicates that the learning curve with reference to the market that the company intends to enter would be rather brief. Likewise, the reputation of the company may similarly develop if a competent associate is selected in the target state. And deciding a competent associate will similarly bring about the prospect of the associate to institute high profit margins. This means that choosing a perfect partner in a joint venture entails the option of establishing obstacles to possible competitors in the same region.
On another hand, companies could break in to a new market through the use of the internet. Leamer and Storper (2001) maintained that the appearance of the internet as a commercial instrument established a “new economy.” (p. 641) Other academics have similarly maintained that the emergence of such technologies online have brought about the “death of distance” and even “end of geography.” (Buckley and Ghauri, 2004, p. 81) Though these assertions may emerge to be rather threatening international businesses have employed these conditions to their advantage. The internet has provided the modern organisation an opportunity to look into new potentials of transmitting correspondence through ICTs. (Leamer and Storper, 2001, p 643) This denotes that a company is capable of operating in opposite sides of the planet devoid of any considerable possibility of loss. Nowadays, manufacturing firms have the propensity to have a head office in a particular location and operational plants in another. (Leamer and Storper, 2001, p 643) This demand even created a new variety of trade. This is seen in Dot.com companies, providers, and developers that present their services to those who have admittance to the internet and those who are determined to employ this medium as their prime channel to success.
Marketing communications normally deals with the capability of the company to convey messages to their core clientele. Nowadays, the use of the internet and even mobile technology are often included in the marketing communications plan of a company. (Neumann and Sumser 2002, 9) In creating a sound communications plan, the organisation avoids any loss in productivity, false starts, and personal loss. (p10) Basically, this shows that marketing communications is important to the company because it allows the organisation to be more efficient and capable of creating more revenue.
Cleaving to the idea of conveying the product to the market, it manifests a close connection to advertising and even brand management. (Chan-Olmsted 2002, 641) Other forms of conveying information from the company to its external environment is seen in person selling, trade fairs, advertising and public relations. In the context of person selling, the product is presented by a salesperson in a one-to-one basis. (Sheshunoff 1999, 22) Some example of this method is door-to-door sales pitches and telemarketing.
On the other hand, trade fairs are now considered not only as one of the quickest way to enter a market, but also the quickest way to establish social ties in the host market. Ellis (2000, 443) mentioned in his article that this types of initiated exchange tends to be characterised as a fortuitous encounter. This means that the participation in such areas tend to involve three parties: buyer, seller, or a third party.
Advertising, on the other hand, essentially applies the traditional methods used in invitations to treat and direct advertisements to the consumers. There have been numerous studies that have manifested that what tend to improve lives for people are those that are considered successful advertisements. (Bright, 2000, p. 12) These articles maintain that the employment of “mass markets, aggressive advertising, and expanded distribution networks” has developed organisations a lot in the context of gaining competitive advantages. This consecutively has made developments in existing products and services for the consumers. Along with traditional advertising, there are also those that fall under alternative methods of marketing. One such approach is the employment of “word-of-mouth marketing.” In the study of Hogan, Lemon, and Libai (2004, 271) maintained that organisations have ceaselessly abandoned the possibility of word-of-mouth marketing. Another alternative marketing method is called "guerrilla marketing.” (Werner, 2003, 239) In the study of Werner (2003), he indicated a number of marketing activities are considered guerrilla marketing. Product placements in films and in the small screen have been among the forerunners of this kind of marketing.
Globalisation may well be the most significant contribution of the 20th century. As possibilities still emerge on a daily basis, the global community will continue to develop into a dynamic entity capable of great things and opportunities to those who seek its assistance. The discussions above have provided a clear explanation of the importance of international marketing in for businesses, both big and small. Essentially, the study have maintained that companies that engage in international marketing would only be as successful if they are able to be well acquainted with the individual markets in which the international company operates. The demand for flexibility has become intense for companies. Aside from considering the needs for an international presence, companies are similarly seeking ways to address the local needs of their customers. In using international marketing and its strategies, these companies are able to recognise where they could improve on. With the use of international market research, they are able to recognise the courses of action to address these demands. In any case, the paper has provided an analysis of the importance of the international marketing concepts as well as the strategies that comes along with it.
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