International Marketing

Introduction:

Marketing is “the process of planning and executing the conception,

pricing, promotion and distribution of ideas,goods and services to
create exchange that satisfy individual and organisational objectives”.
Extension of these activities across the globe is referred to as
International Marketing. Companies entering into international
markets must deal with varying economic, social, cultural, political
and legal environments and advertising media and distribution
channels. International marketing managers capture synergies byi
efficient coordination of the markets. Environmental factors in
different countries make the marketing different from one country to
another country.
Domestic marketing managers mostly go for standard products. But a
standard product may not be acceptable to their customers of a foreign
country. Hence international marketing managers have a dilemma whether
to standardise the product or customise it .

The standardisation are vanishing due to the different tastes and preferences
of and increased purchasing power of the customers of the different
countries. The increased competition forced companies to go for designing,
producing and selling the product based on the customer taste rather than
simply selling what it can produce.

International marketing managers have three options regarding the trade-off

in between standardisation and customisation in marketing mix:
Ethnocentric approach:
Under this approach, companies market the products in various
countries in the same way they do domestically.

Polycentric approach:
Under this approach, the company customises the marketing mix to
meet the taste, performance and needs of the customers of each
international market.

Geocentric approach:
Under this approach, the company analyses the taste, preference and
needs of the customers in all foreign markets and adopts a
standardised marketing mix for all the foreign markets.
International Marketing Mix - 4 Ps of marketing:

A. Product
● Product Development
● Product Life Cycle
● Branding Decisions
● Packaging Decisions

B. Price
● Pricing decisions
● Pricing Policies
● Factors affecting International Pricing
● Price Quotations
● Dumping
● Counter trade
C. Place

● Direct Selling
● Indirect selling/Market
Intermediaries

D. Promotion

● Advertising
● Personal Selling
● Sales Promotion
● Public Relations
(A) Product:
A product is something both tangible and intangible. Sometimes both tangible and
intangible are combined to give a total product. The global markets must see the
total product which includes tangible and intangible.
The study of product in the international market includes:
1. Product Development: There are six stages in the product development:
When commercialising the product, the manufacturer has to keep in
mind the following:

● Market Segmentation
● Product Positioning
● Product Adoption
● Compatibility with local customs and habits
● Observability
● Complexity of the product
2. Product Life Cycle: A product life cycle is the length of time from a product first
being introduced to consumers until it is removed from the market. A product’s life
cycle is usually broken down into four stages; introduction, growth, maturity, and
decline.
International Product life cycle: In International market, it is
necessary to plan and develop a product according to taste and
preferences of foreign customers. In this process, a product and its
stages play a crucial role.

Features of International Product Life Cycle

● It is the aging process of a product.
● No two product have same product life cycle i.e. it is different for different products.
● Duration of each stages can be different for different product. It may be from one day to
few months or years.
● It helps in developing efficient and effective marketing strategies for the different stages
of a product.
● It is not necessary that all product have to pass through all stages. Some product can
fail in initial stage and others may reach at maturity stage.
● Speed can be vary in different stages. Some product can directly move from
introduction to maturity or decline stage or from introduction to growth or decline stage.
Stages of International Product Life cycle:

Stage 0: Local Innovation: The product in this stage is a familiar product

in the local market. Product innovations take place mostly due to the
changing wants of the local people.

Stage 1: Overseas Innovation: After a product is successful in the

domestic market, the producer desires exporting it to the foreign markets
due to excess production compared to the demand in the domestic country.

Stage2: Maturity: The development of the product reaches the peak stage
even in foreign markets. The producer modifies it and develops it based on
taste and preference of the customers in foreign markets. The producer
exports the products even to less developed countries in this stage.
Stage 3: Worldwide Imitation: The local manufacturers in various foreign
countries start to imitate the popular foreign products. They modify those
products slightly based on the local needs and produce the same at less
cost and sell them at cheaper prices.

Stage 4: Reversal: Competitive advantage and innovative or original

manufacturer disappears at this stage as producers in many foreign
countries imitate the product, develop it further and produce it at less cost.
This stage also results in product standardisation and competitive
disadvantage. The product at this stage does not have to be either Capital
intensive o;r technology intensive, but it becomes labour -intensive ---- a
strong competitive advantage possessed by developing countries. A
Extension of Product Life Cycle
After the declining stage, a product is almost dead as like human being.
But the product life cycle of a product can be extended for some time
with some effort.
To extend the PLC of a product the marketer takes the following steps:
● Product modification
● Entry in the new market
● Promoting frequent use
● Developing different usage
● Use of modern advertising and sales promotion techniques
3. Branding Decisions: A trademark is a unique symbol or word(s)
used to represent a business or its products. Once registered, that same
symbol or series of words cannot be used by any other organization,
forever, as long as it remains in use and proper paperwork and fees are
paid.
The term trademark refers to a recognizable insignia, phrase, word, or
symbol that denotes a specific product and legally differentiates it from all
other products of its kind. A trademark exclusively identifies a product as
belonging to a specific company and recognizes the company's
ownership of the brand. Trademarks are generally considered a form of
intellectual property and may or may not be registered.
Generic /No brand: The first decision regarding branding is whether to
brand or not. The scales of non-branded products are increasing
particularly in retail stores, the reason being ihe availability of these
products as lower prices. These are also available in a number of sizes
and models.

Branded products: Global companies normally go for branding. The

customers of different countries find it easy to identify the branded
products and they are aware of the ingredients and utility of the branded
products. Eg. Colgate-Palmolive, Pepsi or Coke, etc.
Private Brand: Most of the exporting companies go for dealer’s brand or private
brand. The advantages include: easy in giving dealer’s acceptance, possibility of
getting larger market share, less promotional expenses, etc. It is more appropriate
for the small companies who export to various countries.
Manufacturers own brand: The manufacturer sells the products in his own brand.
Advantages: better price, better control of products, retention of brand loyalty, etc
Single Brand: The global company goes for a single brand for all its exports to the
same country. Advantages are better impact on marketing, brand receives full
attention, reduction in cost of promotion, etc.
Multiple brands: Exporter uses multiple branding decisions when marketing
conditions and the customers vary widely from one region to the other in the
same country. It helps to meet the needs of all segments.
Local Brands: In order to give the impression of cultural compatibility of the local
market, global companies use the local brands. Advantage elimination of difficulty in
pronunciation and negative connotations, avoidance of taxation, etc.
Global brands: Exporters normally go for global brands. Advantages reduction of
advertising costs, elimination of brand confusion, better marketing impact, status for
prestigious brands, etc.
4. Packaging Decisions:
Packaging serves two functions:
a) Protecting the products
b) Promotion

Protecting the product: When the product is exported to various foreign

countries, extra protection is needed due to time, distance, climatic
conditions, preference of the people to buy larger packages and legal
requirements of the country.

Promotion: Packaging is also used to promote the products. Preference

of the people has to be taken into consideration.
Promotion : Avon perfumes
in beautiful bottles
B. Price : Price is an integral part of the product. The study of
international pricing includes:

1. Pricing decisions
2. Pricing Policies
3. Factors affecting International Pricing
4. Price Quotations
5. Dumping
6. Counter trade
1. Pricing Decisions: These can be studied from the following
approaches:

● Supply and demand

● Cost
● Elasticity or Cross Elasticity of Demand
● Exchange Rates
● Market Share
● Tariffs and Distribution Costs
● Culture
● Purchasing Power
2. Pricing Policies: The international companies follow these pricing
policies:
1. Standard price policy: The international company sells the product at
the same price for the customers of any country.
2. Two-tiered pricing: The international company sells the product at two
prices i.e. one price for domestic sales and another price for the
foreign sales.
3. Market pricing: The international company customise their prices on
market-by market basis in order to maximise their profits in each
market.
4. Alternative pricing strategy: The international company may follow
one of the following strategies:
● Discounts (Cash, quantity, functional, …)
● Financing or credit terms
● Bundle or Unbundle
3. Factors affecting International Pricing: A number of factors affect the
international pricing:

● Cost
● Competition
● Product Differentiation
● Exchange Rate
● Economic Conditions of the Importing Country
● Government Factors
4. Price Quotations: Quotation describes several aspects of the product to be
sold. The important among them are: Product specification, price, delivery
time, delivery location, time of shipment, payment terms, terms of sales, etc.
Price quotations:
● Exworks/Ex-named Point of Origin
● Free Alongside Ship
● Free on Rail/Free on Truck
● Freight or Carriage Paid
● Free on Board
● Cost and Freight
● Cost, Insurance & Freight
● Ex-Ship
● Ex-Dock
● Ex-Quay
● Delivery Duty Paid
5. Dumping: Dumping is a form of price discrimination. Under dumping
the international company charges different prices for the same product in
different markets.
1. Sporadic dumping: Manufactures practice sporadic dumping to get rid
of excess merchandise. A manufacturer with unsold inventories avoids
starting a price war in the home market to preserve his competitive position.
Excess supplies are destroyed. Example, Asian farmers dumped small
chickens into the sea. Another method is to have the excess supply
dumped in a foreign market where the product is normally not sold. Thus,
sporadic dumping is aimed at liquidating excess stocks that may arise
occasionally.
2. Predatory dumping (Intermittent dumping): While sporadic dumping
is occasional, predatory dumping is permanent. Predatory dumping is
also known as intermittent dumping. It involves sale of goods in
overseas markets at a price lower than the home market price. This is
selling at a loss to gain access to a market and eliminate competition.
After the competition is eliminated, the company becomes a monopolist.
Monopoly position is then used to increase the price. Anyway, there is a
disadvantage that former competitors may rejoin the market because of
high profit margins.
Example,
● Hitachi was accused of following predatory dumping for its EPROM
(electrically programmable read only memory) chips.
3. Persistent dumping (Long period dumping): Persistent dumping as
the name itself implies is the most permanent type of dumping. It
involves consistent selling at lower prices in one market than in the rest
of the market. This practice is based on the fact that markets vary in
terms of overhead costs and demand characteristics. In persistent
dumping, the firm may use marginal cost pricing abroad while using
full cost pricing (covering fixed costs at home) in domestic market.
Japan, for example, sold consumer electronics at high prices in its own
country. This is because it has no foreign competition. But it lowered
prices in the U.S market in order to maintain market share.
4. Reverse dumping: Reverse dumping is followed in the overseas
markets where the demand is less elastic. Such markets tolerate a higher
price. Thus, dumping is done in the manufacturer’s home market by
selling locally at a lower price.
Anti dumping measures: In view of the negative effects of dumping, the
importing country imposes anti-dumping measures like:
● Tariff Duty
● Import Quota
● Import Embargo
● Voluntary Export Restraint
6. Counter trade:
Types of Counter trade:

1. Barter countertrade
2. Counter purchase
3. Compensation trade
4. Switch trading
5. Offset
6. Clearing agreement
Switch trading: It involves a triangular trade agreement. When the goods
are not wanted by one country, a third party enters the agreement by
taking those goods and paying hard dcash.
Offset: A company is allowed to sell its products in a foreign country with a
condition to purchase local products.
An offset agreement is a stipulation made between a foreign supplier and a
company which requires the supplier to purchase a certain amount of
goods from that country in exchange for a contract. These agreements can
be direct or indirect, depending on what raw materials the country may
have. These agreements are often required in order to award a foreign
contract to a large company producing valuable goods.
C. Place/Distribution:
International companies either sell directly or indirectly.
Direct selling: Foreign company develops its own overseas marketing
department or foreign marketing intermediaries and sells the product in
the foreign market.
Indirect selling: It is through market intermediaries.
International Market Intermediaries are middleman or intermediaries
who act as channel members in the product distribution channel. They
facilitate the sales process buy linking buyers with sellers.
International Market Intermediaries are responsible for seeking
potential buyers/sellers , negotiating terms of trade and
importing/exporting the products to the end user.
Types of International Market Intermediaries
The Various types of International Market Intermediaries are as follows:

Foreign distributor – It refers to a foreign company having exclusive rights

to distribute a company’s product in the foreign market or specific area.

Foreign retailer – It is a retailing company in a foreign country engaged by

the foreign distributor concerning dealing and selling of a company`s
products. Foreign retailers deal in products meant for consumers.

State-controlled trading company – It is a government owned company

authorised to deal and sell the products/services of foreign companies.
Generally utility and telecommunication equipment are sold to state
controlled companies by manufacturers. Example – State Trading
Corporation of India.
Export Broker – An export broker is engaged in exporting goods for a domestic
company by charging a fee. Export brokers act as a representative of a
manufacturer and are responsible for bringing together buyers and sellers and
negotiating the terms for the seller. The export broker may operate under its own
name or that of the manufacturer.

Manufacturer’s Export agent / sales representative – It is an independent firm

exclusively engaged to take up all export activities of a domestic manufacturer. An
export agent operates under his own name and charges a commission for seeking
potential buyers and selling the domestic manufacturer`s product.

Export Management Company – It is a company that manages the entire export

activities of a domestic company on a contract. It may function as an export
department for a manufacturer therefore it is also known as a Combination Export
Manager (CEM).
Cooperative Exporter – Manufactures of a particular product in the
domestic country form a cooperative union to manage their export
activities. Example – Singer, Borg Warner
Webb-Pomerene Association – It is an export cartel jointly formed
by two or more domestic manufacturers to market their product
overseas.
Purchasing/Buying agent – It is an agency of a foreign
buyer/importer company which appoints agents to arrange for buying
products from other countries.
Country controlled buying agent – It is a government agency
involved in locating and buying products for its country.
Resident Buyer – A resident buyer is an independent agent located near a
highly centralized production industry involved in buying products on behalf
of an importer.

Export Merchant – An export merchant is a person who buys products in

domestic country to sell them in foreign country.

Export Drop Shipper – A person who links exporters and importers. An

export drop shipper is also known as a desk jobber or cable merchant.

Export Distributor – A company which is granted exclusive rights to

represent the manufacturer in selling the products in foreign country. The
company may use his own name or manufacturer’s name to sell the
product.
D. Promotion: It plays a vital role in providing information of the product to
the foreign customers. It also creates the desirability of the product
among foreign potential buyers. Foreign companies desire to
communicate with their marketing intermediaries and potential buyers to
ensure favourable sentiment towards themselves and their products.
Promotion is more culture bound than other Ps. Hence, Promotion mix
includes:

1. Advertising
2. Personal Selling
3. Sales Promotion
4. Public Relations
1. Advertising: It plays crucial role in international marketing,
particularly for consumer goods and consumer durables. The
international firm while formulating advertising strategy should
consider --

● Message
● Medium
● Extent of global advertising efforts (Global versus local
advertising)
2. Personal Selling: The importance of personal selling varies from
industrial products to consumer durables and to consumer products. For
industrial products, computers, etc., personal selling is essential to provide
technical information of the product. Personal selling plays vital role even
for consumer goods as the firm and its products are new to the foreign
markets.

3. Sales promotion: This includes specialised marketing efforts like in-store

promotions, sampling, direct mail campaigns and trade fair attendance.
International companies attend trade shows. Most of the Airlines
companies use sales promotion to lure customers.
4. Public Relations: It include efforts aimed at enhancing a firm’s
reputation and image with the general public. The consequence of public
relations is that the firm is a ‘good corporate citizen’.This image in its turn
enhances company sales.