International Marketing

Stated simply, international marketing is marketing across national boundaries. Since the end of World War II, improved travel, communications, and technology have fostered a tenfold increase in trade among nations.

The General Agreement on Tariffs and Trade (GATT) was an international agreement established in 1948 that sought to “liberalize world trade and place it on a secure basis, thereby contributing to economic growth and development and to the welfare of the world’s peoples”. It assisted in reducing trade barriers around the world and in creating more favourable conditions for world trade. Since GATT was established, this agreement has helped build world trade from $60 billion to $6 trillion annually. However, GATT negotiations “to liberalize world trade” could bog down and extend for years because of the desire of countries to protect jobs in their domestic industries.

Benefits and difficulties. A company choosing to enter international markets can achieve many benefits, but it can also encounter many difficulties.

The main reason for companies to do international marketing is to exploit a better business opportunity in terms of increased sales and profits. Either firms are limited in their home country or their opportunities are great in the foreign countries.

Many companies find themselves with little room for growth in their domestic market. Competition may increase and leave a smaller portion of the pie to enjoy, or demand may shift to a newer, better product. The economic environment in the home country may be undesirable because of higher taxes or a recession. It would seem logical to turn to other markets in any of these cases, as Japan’s Honda has done.

So foreign markets can offer an opportunity for growth. A product that is mature and facing dwindling sales at home may be new and exciting in other countries. For example, France’s Sodima whose Yoplait yogurt was in a mature phase of its product life cycle at home, was happy to license its product to General Mills for sale in the United States, where yogurt sales were growing rapidly. Similarly, Kellogg hopes that its Corn Flakes will catch hold in France, where the product is at an early stage in its product life cycle and competition in the ready-to-eat cereal market is less intense than in the United States. The following figure summarizes the main reasons why U.S. companies consider entering international markets.

1. To counter adverse economic factors in the home market.

2. To extend a product’s life cycle.

3. To reduce or avoid competition.

4. To enhance economies of scale in production and marketing.

5. To spread fixed costs over more units sold.

6. To dispose inventories.

7. To export (and import) new technology.

8. To increase profits/shareholder economic well-being.

Is international marketing easy? Not in the least. For U.S. firms anxious to enter the Japanese market and make profits quickly, strategy consultant Kenichi Ohmae reminds them it took perhaps 50 years to build their U.S. firm and 15 years to develop their European business. So he asks these firms to recognize that in entering the Japanese market - one of the toughest markets in the world - it may take at least 25 years to achieve the same success it found in the United States or Europe. Although international marketing involves the same principles of domestic marketing, those principles must be applied with care.

Campbell Soup, the company with 60 percent market share in the U.S. wet soups category, lost $30 million in Great Britain. The problem was that Campbell didn’t clearly communicate that the soup was condensed, and consumers saw it was a poor value compared with the larger cans stocked next to it.

Americans recognize the brand names of foreign products that have been introduced successfully here: Honda and BMW cars, Sony TV sets, Nestle candy bars, and Shell gasoline products.

Global versus customized products. As international marketing grows, firms selling both consumer and industrial products in foreign countries face a dilemma: should they use a global or customized strategy in the products they sell, or a strategy in between?

A global approach is an international marketing strategy that assumes that the way the product is used and the needs it satisfies are universal. Therefore, the marketing mix need not be adjusted for each country. In contrast, a customized approach (or local approach) is an international marketing strategy that assumes that the way the product is used and the needs it satisfies are unique to each country. This then requires a marketing mix tailored to the needs, values, customs, languages, and purchasing power of the target country. The global approach is less common but has been successful for some firms.

McDonald’s - the undisputed world hamburger rule - seems to have achieved the ideal hybrid between a global and a customized strategy. Although it has standardized much of its menu, it gives a degree of flexibility to franchisees to allow for local customer preferences in their countries. Experts have coined the term globalization to describe the McDonald’s approach, which is an international marketing strategy that seeks to combine the best features of both the global and customized (local) approaches by encouraging local managers to modify the global strategy, where appropriate, to the needs of customers in their country.

McDonald’s in Germany and France has beer on its menu, and its restaurants in Japan offer saki. In the Philippines, where noodle houses are popular, its customers can find - what else? - McSpaghetti!

Speak on the following:

1. Benefits and difficulties of international marketing.

2. The main reasons and alternatives of entering international marketing.

3. Global versus customized product.